As filed with the Securities and Exchange Commission on May 26, 2000
Registration No. 33-6793
811-4721
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST EFFECTIVE AMENDMENT NUMBER 18
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES 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)
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ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06102-5056
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DONA D. YOUNG
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ONE AMERICAN ROW
PO BOX 5056
HARTFORD, CONNECTICUT 06102-5056
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copy to:
EDWIN L. KERR, ESQ.
Phoenix Home Life Mutual Insurance Company
One American Row
PO Box 5053
HARTFORD, CONNECTICUT 06102-5056
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It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 26, 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>
THE PHOENIX EDGE(R)
VARIABLE 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 26, 2000
This prospectus describes a variable life insurance policy which 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 FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Securities Fund-- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Securities Fund-- Class 2
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
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
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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.
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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 ............................................ 7
THE POLICY ............................................ 8
Introduction ....................................... 8
Eligible Purchasers ................................ 8
Premium Payment..................................... 8
Allocation of Issue Premium ........................ 8
Free Look Period ................................... 9
Temporary Insurance Coverage ....................... 9
Transfer of Policy Value ........................... 9
Systematic Transfer Program....................... 9
Nonsystematic Transfers .......................... 9
Determination of Subaccount Values ................. 10
Death Benefit ...................................... 11
Additional Premiums and Partial Surrenders:
Effect on Death Benefit........................... 11
Minimum Face Amount Rider........................... 12
Surrenders ......................................... 12
Policy Loans ....................................... 13
Lapse .............................................. 13
INVESTMENTS OF THE VUL ACCOUNT ........................ 14
Participating Investment Funds...................... 14
Investment Advisors................................. 16
Services of the Advisors ........................... 17
Reinvestment and Redemption ........................ 17
Substitution of Investments ........................ 17
CHARGES AND DEDUCTIONS ................................ 17
General............................................. 17
Acquisition Expense (Acquisition Expense
Allowance) ....................................... 18
Periodic Charges.................................... 18
Conditional Charges................................. 19
Investment Management Charge........................ 19
Other Taxes ........................................ 19
GENERAL PROVISIONS .................................... 19
Postponement of Payments ........................... 19
Payment by Check ................................... 19
The Contract ....................................... 19
Suicide ............................................ 19
Incontestability ................................... 19
Change of Owner or Beneficiary ..................... 19
Assignment ......................................... 20
Misstatement of Age or Sex ......................... 20
Surplus............................................. 20
PAYMENT OF PROCEEDS ................................... 20
Surrender and Death Benefit Proceeds ............... 20
Payment Options .................................... 20
FEDERAL INCOME TAX CONSIDERATIONS ..................... 21
Introduction ....................................... 21
Phoenix's Income Tax Status ........................ 21
Policy Benefits .................................... 21
Business-Owned Policies............................. 22
Penalty Tax......................................... 22
Material Change Rules............................... 22
Serial Purchase of Modified Endowment
Contracts......................................... 23
Limitations on Unreasonable Mortality
and Expense Charges .............................. 23
Qualified Plans .................................... 23
Diversification Standards .......................... 23
Change of Ownership or Insured or Assignment ....... 23
Other Taxes ........................................ 24
VOTING RIGHTS ......................................... 24
Phoenix............................................. 24
THE DIRECTORS AND EXECUTIVE OFFICERS OF
PHOENIX ............................................ 24
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............... 25
SALES OF POLICIES ..................................... 25
STATE REGULATION ...................................... 26
REPORTS ............................................... 26
LEGAL PROCEEDINGS ..................................... 26
LEGAL MATTERS ......................................... 26
REGISTRATION STATEMENT ................................ 26
FINANCIAL STATEMENTS .................................. 26
APPENDIX A ............................................ 87
APPENDIX B ............................................ 91
APPENDIX C............................................. 92
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.
ACQUISITION EXPENSE (ACQUISITION EXPENSE ALLOWANCE): The amount set forth on the
Schedule Pages of the Policy. It equals the aggregate of the sales load, issue
administration charge and premium taxes assessed under the Policy. The
Acquisition Expense (also referred to as Acquisition Expense Allowance) is
deducted from the Issue Premium and recredited to Policy Value. A pro rata
portion of the Acquisition Expense is deducted from Policy Value monthly during
the first 10 Policy Years. Upon Policy lapse or full surrender, any unpaid
Acquisition Expense is paid.
ADDITIONAL NET PREMIUM: Additional premium reduced by the Premium Tax Charge
and, for additional premiums received during a grace period, by the amount
needed to cover any monthly deductions made during the grace period.
BENEFICIARY: The person or persons specified by the Policyowner as entitled to
receive the death benefits under a Policy.
CASH VALUE: The Policy Value less the balance of any unpaid Acquisition Expense
Allowance.
DEATH BENEFIT ADJUSTMENT RATES: Rates used to calculate the variable death
benefit under a Policy as set forth in a table in the Schedule Pages of the
Policy.
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 amounts
deposited 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.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to Phoenix and
delivered to VPMO.
ISSUE PREMIUM: The premium payment made in connection with issuing the Policy.
LOAN ACCOUNT: An account within the General Account to which amounts are
transferred for Policy loans.
MATURITY DATE: The anniversary of the Policy nearest the Insured's 95th
birthday, if the Insured is living.
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.
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 funds.
SUBACCOUNTS: Accounts within the VUL Account
to which nonloaned assets under a Policy are allocated.
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SURRENDER VALUE: The Cash Value less any indebtedness under the Policy.
TARGET FACE AMOUNT: The Target Face Amount as shown in the Schedule Pages of the
Policy or as later changed in accordance with the Partial Surrender Provision.
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 the Fund is determined.
VALUATION PERIOD: For any Subaccount, the period in days from the end of one
Valuation Date through the next.
VPMO: The Variable Products Mail Operation Division of Phoenix that receives and
processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
VUL ACCOUNT (ACCOUNT): Phoenix Home Life Variable Universal Life Account, a
separate account of the company.
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SUMMARY
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This is a summary of the Policy and does not contain all of the detailed
information that may be important to you. You should carefully read the entire
Prospectus before making any decision.
INVESTMENT FEATURES
PREMIUM PAYMENT
The only premium you have to pay is the issue premium (and any payments
required to prevent policy lapse). See "Premium Payment" 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 75%-90% of the Policy's cash
value subject to certain conditions. See "Policy Loans."
[diamond] You may partially surrender any part of the policy anytime. A partial
surrender charge 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 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 During the first policy month, the fixed benefit is equal to the
target face amount
o After the first policy month, the variable benefit equals the
cash value on the last preceding monthly calculation day
multiplied by the applicable Death Benefit Adjustment Rate.
[diamond] The death benefit is payable when the Insured dies. See "Death
Benefit."
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
[diamond] Taxes
o Premium Taxes
See "Charges and Deductions" for a detailed discussion.
FROM POLICY VALUE
[diamond] Issue Administration Charge--1% of the issue premium paid.
[diamond] Sales Charge--5.5% of the issue premium paid.
[diamond] Cost of Insurance--Amount deducted monthly. The rates vary and are
based on certain personal factors such as sex, attained age and risk
class of the Insured.
[diamond] Partial Surrender Charge--may be deducted for partial surrenders.
FROM THE VUL ACCOUNT
[diamond] Mortality and Expense Risk Charge--.50% 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 surrender value is enough to
pay the necessary monthly charges incurred under the Policy. When the 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
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Policy. Loans, partial surrenders or Policy termination may result in
recognition of income for tax purposes.
VARIATIONS
The Policy is subject to laws and regulations in every state where the
Policy is sold. Therefore, the terms of the Policy may vary from state to state.
PERFORMANCE HISTORY
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We may include the performance history of the VUL Account Subaccounts in
advertisements, sales literature or reports. Performance information about each
Subaccount is based on past performance only and is not an indication of future
performance. See "Appendix A" for more information.
PHOENIX AND THE VUL ACCOUNT
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PHOENIX
We are a mutual life insurance company originally chartered in Connecticut
in 1851. We were redomiciled to New York in 1992. Our executive office is
located at One American Row, Hartford, Connecticut 06102, and the main
administrative office is located at 100 Bright Meadow Boulevard, Enfield,
Connecticut 06082. Our New York principal office is located 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 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 does 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 (such as paying death benefits) 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. We reserve the right to limit total deposits, including
transfers, to the GIA to no more than $250,000 during any one-week period. We
will credit interest daily on the amounts you allocate to the GIA at an
effective annual rate of not less than 4%. The credited rate will be the same
for all monies deposited at the same time.
On the last working 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
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 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
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Transfers into the GIA and among the Subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix B" and "Transfer of Policy Value--Systematic Transfer Program."
THE POLICY
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INTRODUCTION
The Policy is a variable life insurance policy issued on the life of the
Insured. The Policy has a death benefit, surrender value and loan privilege as
does a traditional fixed benefit whole life policy. It 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 Funds. The Policy death benefit and cash value vary according
to the investment performance of the Series to which the policy value has been
allocated.
ELIGIBLE PURCHASERS
Any person up to the age of 75 is eligible to be insured under a newly
purchased Policy after providing suitable evidence of insurability. You can
purchase a Policy to insure the life of another person provided that you have
the Insured's consent and a legally-recognized interest for insuring that life.
A Policy could, for example, be purchased on the life of a spouse, family member
or a business partner.
PREMIUM PAYMENT
The minimum issue premium for a Policy is $10,000. After the first policy
year, you may pay, within certain limits, additional premiums if the variable
death benefit on the first day of the policy year is less than the highest
variable death benefit during the previous policy year and less than the current
target face amount. Additional premiums may be paid only during the first 60
days of a policy year.
The maximum amount of an additional premium payment (when permitted) is the
lesser of (i) A minus B or (ii) C, where:
A = the premium payment which would have increased the variable death
benefit at the beginning of the current policy year to the highest
variable death benefit during the previous policy year
B = the amount of any reduction in cash value due to partial surrenders made
during the previous policy year
C = the premium payment which would have increased the variable death
benefit at the beginning of the current policy year to the current
target face amount
Example: Assume that a male age 45, nonsmoker, pays an initial premium of
$10,000 and has a target face amount of $28,236. Assume also a net
investment rate of return of 9% for the first policy year and a net
investment rate of return of 0% for the second and third policy years. At
the beginning of the third policy year, this individual would have a
variable death benefit of $28,952. This variable death benefit is less than
the highest death benefit in the previous year, which would have been
$29,772. However, since $28,952 is higher than the initial target face
amount of $28,236, this individual would not be permitted to pay an
additional premium.
At the beginning of the fourth policy year, this individual would have a
variable death benefit of $27,940. The variable death benefit is less than
the highest death benefit in the previous year, which would have been
$28,952. Also, this death benefit is less than the initial target face
amount of $28,236; therefore, this individual would be permitted to pay an
additional premium. The premium necessary to increase the death benefit to
$28,236 (the initial target face amount) is $105.66 for this individual.
Phoenix also may agree to allow payment of a higher premium amount.
The individual in this example may wish to pay this additional premium to
maintain his originally targeted level of death benefit protection despite
adverse market experience. In addition, some Policyowners may view depressed
market values as an opportunity to buy additional Units at the depressed
value in anticipation of future market improvement.
Additional premium payments are reduced by any applicable state premium tax
based on your last known address on record at VPO. See "Monthly Deduction--
Acquisition Expense." Also, a further deduction is made from additional premiums
when payment is made during a grace period. See "Lapse."
The additional premiums less applicable deductions are called additional net
premium. They are applied to policy value based on the then current premium
allocation schedule.
The payment of additional premiums will have an effect on the Policy's
variable death benefit. See "Death Benefit--Additional Premiums and Partial
Surrenders: Effect on Death Benefit."
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
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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 then
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 to you. 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, 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 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 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 the request is
received at VPMO. Telephone transfers will be effective on the date the request
is made except as noted below. Unless you elect in writing not to authorize
telephone transfers or 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
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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
[diamond] the transfer(s) are made as part of a Systematic Transfer Program, or
[diamond] 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
On each valuation date, the Policy's share in the value of each Subaccount
is determined separately, but the valuation method used is the same for each
Subaccount.
A Policy's share in the value of a Subaccount on any valuation date equals:
(a) the Policy's share in the value of that Subaccount as of the
immediately preceding valuation date multiplied by the "Net Investment
Factor" of that Subaccount for the current valuation period; plus
(b) all amounts transferred to the Policy's share in the value of that
Subaccount from another Subaccount or from the loan account during the
current valuation period; plus
(c) all additional net premiums allocated to that Subaccount during the
current valuation period; minus
(d) all amounts transferred from the Policy's share in the value of that
Subaccount to another Subaccount or to the loan account during the
current valuation period; minus
(e) any portion of the monthly deduction allocated to the Policy's share in
the value of that Subaccount during the current valuation period; minus
(f) all reductions in the policy value allocated to the Policy's share in
the value of that Subaccount due to any partial surrenders made during
the current valuation period.
The net investment factor for each Subaccount for any Valuation Period is
determined by dividing (a) by (b), and subtracting (c) from the result where:
(a) is the result of:
(i) the asset value of the Fund shares held by that Subaccount
determined as of the end of the current valuation period
(exclusive of the net value of any transactions during the
current valuation period); plus
(ii) the amount of any dividend (or, if applicable, any capital gain
distribution) made by the Fund on shares held by that Subaccount
if the "ex-dividend" date occurs during the current valuation
period; plus/minus
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(iii) the charge or credit for any taxes incurred by, or provided for,
in that Subaccount for the current valuation period.
(b) the net asset value of the Fund shares held by that Subaccount
determined as of the end of the immediately preceding valuation period
(c) is a factor, equal to the sum of 0.50% on an annual basis held by that
Subaccount, representing the mortality and expense risk charge deducted
from that Subaccount during the valuation period
The net investment factor may be greater than, less than, or equal to one.
Therefore, the policy value may increase, decrease or remain unchanged.
DEATH BENEFIT
GENERAL
In the application for insurance, an applicant designates an amount as the
Policy's initial target face amount. During the first policy month, the death
benefit equals this target face amount. After the first policy month the death
benefit is equal to the variable death benefit.
During any policy month after the first, the variable death benefit under
the Policy is equal to:
(i) the cash value on the last preceding monthly calculation day,
multiplied by
(ii) the applicable death benefit adjustment rate (as defined below) on the
last preceding monthly calculation day.
The death benefit adjustment rates assume an interest rate ranging from 4%
to 5%. The assumed interest rate used to calculate the death benefit adjustment
rates under a particular Policy depends on the Policy's initial premium and its
target face amount. In the event the net investment rate of return (gross
investment return net of mortality and expense risk charge and investment
management fee) applied to the policy value exceeds the assumed interest rate
used to calculate the death benefit adjustment rates, the variable death benefit
under the Policy will be greater than its target face amount. Conversely, if the
net investment rate of return applied to the policy value is less than the
assumed interest rate, then the variable death benefit will be less than the
target face amount. Finally, if the net investment rate of return applied to the
policy value equals the assumed interest rate, then the variable death benefit
will approximately equal the target face amount.
Example: Death benefit adjustment rates which assume a 4% interest rate
apply to a male age 45 nonsmoker who pays an initial premium of $25,000 and
has a target face amount of $70,591. Five years after the issue date of this
Policy, the following variable death benefits would apply for the specified
net rates of return:
-assuming a 5% net investment
rate of return: $75,144
-assuming a 4% net investment
rate of return: $71,514
-and assuming a 3% net investment
rate of return: $68,019
Example: A male age 45, nonsmoker, pays an initial premium of $10,000. For
this initial premium, this individual can choose an initial target face
amount ranging from $28,236 to $35,980. This range of target face amount
represents death benefit adjustment rates which assume interest rates
ranging from 4% to 5% and a 2% state premium tax. Generally, selection of
the highest target face amount available for a given premium will result in
the highest death benefit adjustment rate, variable death benefit and
resulting cost of insurance charges. Conversely, selection of the lower
target face amount available for a given premium will result in the lowest
death benefit adjustment rate, variable death benefit and resulting cost of
insurance charges.
Assuming that this individual selects an initial target face amount of
$35,980, and that the net rate of return achieved is 5% per year, the
variable death benefit will be $36,826 and cash value will be $36,826 at age
95. The variable death benefit and cash value are slightly larger than the
initial target face amount due to the fact that the acquisition expense is
deducted and then recredited to the individual in this example and taken out
in monthly installments over the first 10 policy years. While a portion of
this acquisition expense allowance remains in the policy value, it also is
earning a net rate of return.
ADDITIONAL PREMIUMS AND PARTIAL SURRENDERS: EFFECT ON DEATH BENEFIT
Additional premium payments are permitted under certain circumstances. See
"The Policy--Premium Payment." Such a payment does not result in an immediate
increase in the variable death benefit. However, on the next monthly calculation
day the variable death benefit will be larger as a consequence of the larger
cash value.
A partial surrender decreases the target face amount and the minimum face
amount (if provided by appropriate rider). The target face amount and minimum
face amount are reduced by a fraction equal to the result of dividing the
partial surrender amount paid plus the partial surrender fee by the cash value
(determined without regard to the partial surrender). Moreover, the death
benefit under a Policy is reduced on the next monthly calculation day due to the
reduced cash value. A partial surrender or decrease in the death benefit may
have certain tax consequences. See "Federal Income Tax Considerations."
In addition, if the Insured dies during any policy month in which additional
premium had been paid, the death proceeds paid will equal the death benefit for
that month
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plus the additional premium paid, minus any premium paid during a grace period
necessary to keep the Policy in effect.
MINIMUM FACE AMOUNT RIDER
You may elect to have a Minimum Face Amount Rider issued in connection with
the Policy. If this Rider is elected, you will designate an amount in the
application as the minimum face amount. The amount designated as the minimum
face amount cannot exceed the Policy's target face amount.
The death benefit under a Policy issued with the Minimum Face Amount Rider
equals the target face amount during the first policy month. Thereafter, the
Policy's death benefit equals the higher of:
[diamond] the variable death benefit, or
[diamond] the minimum face amount.
Under the Minimum Face Amount Rider, when the death benefit is calculated
with reference to the minimum face amount, it may be greater than it otherwise
would have been had the Rider not been issued. Accordingly, when the minimum
face amount is used to calculate the death benefit, there is a greater "net
amount at risk" under the Policy. Therefore, a larger amount is deducted from
policy value to pay for cost of insurance than would be deducted under an
identical Policy without the Rider.
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
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 Income 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:
(1) 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.
(2) 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.
(3) Any Unrepaid Acquisition Expense. The portion of any unrepaid acquisition
expense paid in connection with a partial surrender is equal to the result
of dividing the partial surrender amount paid plus the partial surrender fee
by the cash value (determined without regard to the partial surrender). The
reduction in policy value caused by partial surrenders is deducted from the
Subaccounts of the VUL Account based on the allocation schedule for monthly
deductions, unless you direct otherwise. Cash value is reduced to equal the
resulting policy value less the balance of any remaining unpaid acquisition
expense allowance.
Partial surrenders will decrease the target face amount and the minimum face
amount (if provided by rider), as well as the variable death benefit. See "Death
Benefit--Additional Premiums and Partial Surrenders: Effect on Death Benefit"
and "Federal Income Tax Considerations."
POLICY LOANS
During the first 3 policy years, you may borrow an amount up to 75% of the
cash value under the Policy. Thereafter, you may borrow an amount not exceeding
90% of the cash value. The available loan value is the loan value on the current
day less any outstanding debt.
The amount of any loan will be added to the loaned portion of the GIA and
subtracted from the Policy's share of the Subaccounts or the unloaned portion of
the GIA,
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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 7.25%, compounded daily and
payable in arrears. At the end of each policy year and at the time of any debt
repayment, interest credited to the loaned portion of the GIA will be
transferred to the unloaned portion of the GIA.
Debt may be repaid at any time during the lifetime of the Insured while the
Policy is in force. Any debt repayment received by us during a grace period will
be reduced to pay any overdue monthly deductions and only the balance will be
applied to reduce the debt. Such balance will first be used to pay any
outstanding accrued loan interest, and then will be applied to reduce the loaned
portion of the GIA. The unloaned portion of the GIA will be increased by the
same amount the loaned portion is decreased. If the amount of a loan repayment
exceeds the remaining loan balance and accrued interest, the excess will be
allocated among the Subaccounts as you may request at the time of the repayment
and, if no allocation request is made, according to the most recent premium
allocation schedule on file.
Payments received by us for the Policy will be applied directly to reduce
outstanding debt unless specified as a premium payment by you. Until the debt is
fully repaid, additional debt repayments may be made at any time during the
lifetime of the Insured while the Policy is in force.
Failure to repay a policy loan or to pay loan interest will not terminate
the Policy unless the policy value becomes insufficient to maintain the Policy
in force.
The proceeds of Policy loans may be subject to federal income tax. See
"Federal Income Tax Considerations."
In the future, Phoenix may not allow policy loans of less than $500, unless
such loan is used to pay a premium on another Phoenix policy.
The loan debt will bear interest at an effective annual rate of 8.00%,
compounded daily and payable in arrears. The loan account value is credited with
interest at an effective annual rate of 7.25%, 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
surrender value.
LAPSE
Unlike conventional fixed benefit 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. Lapse
will only occur if the surrender value is insufficient to cover the monthly
deduction and a grace period expires without payment of the additional required
amount. If the surrender value is insufficient to cover the monthly deduction,
you must pay the amount needed to increase the surrender value to equal 3 times
the required monthly deduction during the grace period. See "Charges and
Deductions."
If on any monthly calculation day the surrender value is insufficient to
cover the monthly deduction, we will notify you about the additional required
payment. You will then have a grace period of 61 days, measured from the date
notice is sent to you, to pay the additional amount. Failure to pay the
additional amount within the grace period will result in lapse of the Policy. If
we receive a premium payment for the additional amount during the grace period,
any additional net premium will be allocated among the Subaccounts or the GIA in
accordance with the current premium allocation schedule. To determine the
additional net 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.
INVESTMENTS OF THE VUL ACCOUNT
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PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain subaccounts invest in corresponding series of The Phoenix Edge
Series Fund. The following series are currently available:
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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 AverageSM (the "DJIASM") 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 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
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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 fund of the Funds. The
following fund 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 fund of the Federated Insurance
Series. The following funds are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the fund is to seek current income by investing primarily in U.S. government
securities, including mortgage-backed securities issued by U.S. government
agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the fund is
to seek high current income by investing primarily in a diversified portfolio of
high-yield, lower-rated corporate bonds.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding portfolio of The Universal
Institutional Funds, Inc. The following portfolio is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the portfolio is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the investment advisor expects to benefit from their involvement
in technology and technology-related industries.
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 market equity securities.
TEMPLETON GROWTH SECURITIES: 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.
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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;
[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
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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.
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 taxes incurred on the premium 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.
We may reduce the sales charge or issue administration charge component of
the acquisition expense allowance for Policies issued under group or sponsored
arrangements. Generally, sales and 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 sales or administration costs expected as a result of sales to a
particular group or sponsored arrangement.
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Certain charges are deducted only once, others are deducted periodically,
while certain others are deducted only if certain events occur.
A charge is deducted monthly from the policy value under a Policy ("monthly
deduction") during the first 10 policy years, to repay the acquisition expense
allowance (as described below). A charge also is deducted monthly to compensate
for the cost of insurance. The monthly deduction is deducted on each monthly
calculation day. It is allocated among the Subaccounts of the VUL Account and
the GIA based on the allocation schedule for monthly deductions specified by the
applicant in the application for a Policy or as later changed by the
Policyowner. Because portions of the monthly deduction, such as the cost of
insurance, can vary from month to month, the monthly deduction itself may vary
in amount from month to month.
ACQUISITION EXPENSE (ACQUISITION EXPENSE ALLOWANCE) The acquisition expense
allowance consists of:
[diamond] the sales charge;
[diamond] issue administration charge; and
[diamond] premium taxes.
Charges are deducted from the issue premium and recredited by us as part of
the allocation of the issue premium to the policy value on the date of issue. A
monthly pro rata share of the allowance is repaid to us as part of the monthly
deduction during the first 10 policy years. Any unpaid balance is fully repaid
to us upon Policy lapse or full surrender.
By deducting these charges in monthly installments instead of deducting them
all at once from the issue premium, more funds are available for investment
during the first 10 policy years. As a result, if the net investment factor is
positive, the Policyowner will enjoy greater increases in cash value, but if the
net investment factor is negative, the Policyowner will experience greater
decreases in cash value.
Additional premiums are not subject to an acquisition expense allowance (a
sales or issue administration charge). However, prior to allocation of
additional net premiums among the Subaccounts of the VUL Account or the GIA,
additional premiums paid will be reduced by the premium tax charge and, for
additional premiums paid during a grace period, by the amount needed to cover
any monthly deductions made during the grace period.
PERIODIC CHARGES
MONTHLY
[diamond] SALES CHARGE. A sales charge of 5.5% of the Issue Premium paid is
assessed to compensate Phoenix for distribution expenses incurred in
connection with the Policy. These expenses include agent sales
commissions, the cost of printing prospectuses and sales literature,
and any advertising costs. The sales charge in any Policy is not
necessarily related to actual distribution expenses incurred in the
year the Policy is issued.
[diamond] PREMIUM TAX CHARGE. Various states (and countries and cities) impose
a tax on premiums received by insurance companies. Premium taxes vary
from state to state. Currently, these taxes range from 0.75% to 4% of
premiums paid. Moreover, certain municipalities 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] ISSUE ADMINISTRATION CHARGE. The issue administration charge is 1% of
the issue premium paid and is to compensate us for underwriting and
start-up expenses in connection with issuing a Policy. Rather than
deduct the full amount at once, the issue expense charge is deducted
in equal monthly installments.
[diamond] COST OF INSURANCE. Because the cost of insurance depends upon a
number of variables, this charge can vary from month to month. The
cost of insurance charge is equal to the applicable cost of insurance
rate divided by 1,000 multiplied by the "net amount at risk" for each
Policy Month. The net amount at risk for a Policy Month is
o the death benefit on the monthly calculation day, less
o the cash value on such day.
Cost of insurance rates are based on the sex (in most states),
attained age and risk class of the Insured. The actual monthly cost
of insurance rates are based on our expectations of future
experience. They will not, however, be greater than the guaranteed
cost of insurance rates set forth in the Policy. These guaranteed
rates are based on the 1980 Commissioners Standard Ordinary 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 insurance age, sex and risk class whose
Policies have been in force for the same length of time.
The risk class of an Insured may affect the cost of insurance rate.
We currently place Insureds into a standard risk class or risk
classes involving a higher mortality risk. In an otherwise identical
Policy, Insureds in the standard risk class will have a lower cost of
insurance than those in the risk class with the higher mortality
risk. The standard risk class also is divided into two categories:
smokers and nonsmokers. Nonsmoking Insureds will generally incur a
lower cost of insurance than similarly situated Insureds who smoke.
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<PAGE>
DAILY
[diamond] MORTALITY AND EXPENSE RISK CHARGE. A charge at an annual rate of .50%
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
the projecting process and, therefore, the total amount of death
benefits that will be paid out are greater than 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 such 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] 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 the 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 monthly deductions.
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 may be postponed upon complete or partial surrender,
Policy loan, or benefits payable at death (in excess of the initial face amount)
or maturity:
[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, we will only pay you the cash value plus the acquisition expense,
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.
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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.
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. Upon
death of the payee, payment of the principal amount along with any accrued and
unpaid interest will be made to the Contingent Beneficiary.
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. Upon the death of the named payee, the remaining payments will
continue to the contingent Beneficiary as designated in the written form
electing the options.
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.
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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. Under this option, the payee may
receive only one payment, if the payee dies before the due date for the second
payment; only two payments, if the payee dies before the due date for the third
payment, etc.
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
This payment option is not available for death proceeds. This option is
available only if the Policy is surrendered within six months of the Policy
anniversary nearest the Insured's 55th, 60th or 65th birthday.
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.
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 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 income 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,
U.S. 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 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, which is essentially a single premium policy, is a modified
endowment contract within the meaning of the Code.
GENERAL
Pursuant to Code Section 72(e), loans and other amounts received under
modified endowment contracts will, in general, be taxed to the extent of
accumulated income (generally, the excess of cash value over premiums paid).
Policies are modified endowment contracts if they meet the definition of life
insurance, but fail the 7-pay test. This test essentially provides that the
cumulative amount paid under the Policy at any time during the Policy's first
seven years cannot exceed the sum of the net level premiums that would have been
paid on or before that time had the Policy provided for paid-up future benefits
after the payment of seven level annual premiums.
In addition, a modified endowment contract includes any life insurance
contract that is received in exchange for a modified endowment contract.
Premiums paid during a policy year that are returned by Phoenix (with interest)
within 60 days after the end of the policy year will not cause the Policy to
fail the 7-pay test.
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Classification of the Policy as a modified endowment contract does not
affect the exclusion of death benefit proceeds under the Policy from the gross
income of the Beneficiary under Code Section 101(a)(1) and also does not cause
the Policyowner to be deemed to be in constructive receipt of the cash value,
including increments or "inside buildup" thereon. As such, the death benefit
proceeds thereunder should be excludable from the gross income of the
Beneficiary under Code Section 101(a)(1). Also, the Policyowner should not be
deemed to be in constructive receipt of the cash value, including increments
thereon. Refer to the sections below on possible taxation of amounts actually
received under the Policy, from full surrender, partial surrender or loan.
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS
If there is a reduction in benefits during the first seven Policy Years, the
premiums are redetermined for purposes of the 7-pay test as if the Policy had
originally been issued at the reduced death benefit level and the new limitation
is applied to the cumulative amount paid for each of the first seven policy
years.
DISTRIBUTION AFFECTED
If a Policy fails to meet the 7-pay test, it is considered a modified
endowment contract only as to distributions in the year in which the death
benefit reduction takes effect and all subsequent policy years. However,
distributions made in anticipation of such failure (there is a presumption that
distributions made within two years prior to such failure were "made in
anticipation") also are considered distributions under a modified endowment
contract. If the Policy satisfies the "7-pay test," for seven years,
distributions and loans will generally not be subject to the modified endowment
contract rules.
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
Since the Policy is a modified endowment contract, under Section 7702A of
the Code partial surrenders are fully taxable to the extent of income in the
Policy and are possibly subject to an additional 10% tax. We suggest you consult
with your tax advisor in advance of a partial surrender as to the portion, if
any, which would be subject to tax, and in addition as to the impact such
partial surrender might have under the new rules affecting modified endowment
contracts.
LOANS
We believe that any loan received under a Policy will be treated as your
indebtedness. Since the Policy is a modified endowment contract, loans are fully
taxable to the extent of income in the Policy and possibly will be subject to an
additional 10% tax.
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.
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:
22
<PAGE>
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 U.S. Treasury
("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:
[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 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
23
<PAGE>
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 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;
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, The Fortune Group
New York, New York
Jerry J. Jasinowski President, National Association of
Manufacturers
Washington, D.C.
24
<PAGE>
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, Individual Insurance and
General Counsel, 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,
Strategic Development
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,
General Counsel
Joel D. Sanders Senior Vice President,
Group Sales and Marketing
Frederick W. Sawyer, III Senior Vice President
Jack F. Solan, Jr. Senior Vice President,
Strategic Development
Simon Y. Tan Senior Vice President,
Individual 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 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 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
25
<PAGE>
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 New York insurance laws applicable to
stock 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. We are 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 and
Phoenix are available for the period ended December 31, 1999.
26
<PAGE>
PHOENIX HOME LIFE VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 1999
27
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ENGEMANN GOODWIN OAKHURST
GOODWIN CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN
MONEY MARKET GROWTH MIXED INCOME ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost................ $ 1,217,660 $ 29,143,299 $ 3,787,994 $ 16,712,612 $ 1,307,492
============== =============== ============== =============== ===============
Investments at market.............. $ 1,217,660 $ 50,586,117 $ 3,448,967 $ 20,590,198 $ 1,881,053
-------------- --------------- -------------- --------------- ---------------
Total assets................... 1,217,660 50,586,117 3,448,967 20,590,198 1,881,053
LIABILITIES
Accrued expenses to related party.. 505 20,592 1,463 8,603 756
-------------- --------------- -------------- --------------- ---------------
NET ASSETS.............................. $ 1,217,155 $ 50,565,525 $ 3,447,504 $ 20,581,595 $ 1,880,297
============== =============== ============== =============== ===============
Accumulation units outstanding.......... 640,249 6,983,917 1,341,537 5,351,635 617,993
============== =============== ============== =============== ===============
Unit value.............................. $ 1.901064 $ 7.240281 $ 2.569816 $ 3.845852 $ 3.042588
============== =============== ============== =============== ===============
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................ $ 82,554 $ 73,223 $ 435,439 $ 160,429 $ 399,326
============== =============== ============== =============== ===============
Investments at market.............. $ 116,948 $ 63,001 $ 662,875 $ 190,863 $ 458,944
-------------- --------------- -------------- --------------- ---------------
Total assets................... 116,948 63,001 662,875 190,863 458,944
LIABILITIES
Accrued expenses to related party.. 49 25 265 73 191
-------------- --------------- -------------- --------------- ---------------
NET ASSETS.............................. $ 116,899 $ 62,976 $ 662,610 $ 190,790 $ 458,753
============== =============== ============== =============== ===============
Accumulation units outstanding.......... 49,538 48,481 255,342 153,259 291,793
============== =============== ============== =============== ===============
Unit value.............................. $ 2.359772 $ 1.298988 $ 2.594988 $ 1.244890 $ 1.572187
============== =============== ============== =============== ===============
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................ $ 222,343 $ 4,610 $ 210,904 $ 16,522 $ -
============== =============== ============== =============== ===============
Investments at market.............. $ 288,092 $ 7,172 $ 243,620 $ 19,198 $ -
-------------- --------------- -------------- --------------- ---------------
Total assets................... 288,092 7,172 243,620 19,198 -
LIABILITIES
Accrued expenses to related party.. 119 3 101 8 -
-------------- --------------- -------------- --------------- ---------------
NET ASSETS.............................. $ 287,973 $ 7,169 $ 243,519 $ 19,190 $ -
============== =============== ============== =============== ===============
Accumulation units outstanding.......... 183,456 4,602 188,752 15,036 -
============== =============== ============== =============== ===============
Unit value.............................. $ 1.569707 $ 1.557949 $ 1.290156 $ 1.276294 $ -
============== =============== ============== =============== ===============
WANGER TEMPLETON
WANGER U.S. INTERNATIONAL TEMPLETON DEVELOPING
SMALL CAP SMALL CAP INTERNATIONAL MARKETS WANGER TWENTY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------- --------------- -------------- --------------- ---------------
ASSETS
Investments at cost................ $ 421,480 $ 173,712 $ 63,936 $ 68,011 $ 60,403
============== =============== ============== =============== ===============
Investments at market.............. $ 558,736 $ 339,931 $ 70,657 $ 86,128 $ 77,738
-------------- --------------- -------------- --------------- ---------------
Total assets................... 558,736 339,931 70,657 86,128 77,738
LIABILITIES
Accrued expenses to related party.. 226 125 29 34 31
-------------- --------------- -------------- --------------- ---------------
NET ASSETS.............................. $ 558,510 $ 339,806 $ 70,628 $ 86,094 $ 77,707
============== =============== ============== =============== ===============
Accumulation units outstanding.......... 315,445 129,520 57,039 55,383 58,277
============== =============== ============== =============== ===============
Unit value.............................. $ 1.770546 $ 2.623587 $ 1.238257 $ 1.554526 $ 1.333397
============== =============== ============== =============== ===============
</TABLE>
See Notes to Financial Statements
28
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
GOODWIN ENGEMANN GOODWIN OAKHURST
MONEY CAPITAL MULTI-SECTOR STRATEGIC
MARKET GROWTH FIXED INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Investment income
Distributions....................................... $ 47,787 $ 101,431 $ 279,403 $ 435,445
Expenses
Mortality, expense risk and administrative charges.. 5,042 211,059 17,100 96,921
------------- ------------- --------------- --------------
Net investment income (loss) ............................. 42,745 (109,628) 262,303 338,524
------------- ------------- --------------- --------------
Net realized gain (loss) from share transactions.......... - 142,567 (13,091) 13,025
Net realized gain distribution from Fund.................. - 3,818,535 - 1,006,144
Net unrealized appreciation (depreciation) on investment.. - 7,618,173 (79,576) 648,276
------------- ------------- --------------- --------------
Net gain (loss) on investments............................ - 11,579,275 (92,667) 1,667,445
------------- ------------- --------------- --------------
Net increase (decrease) in net assets resulting from
operations................................................ $ 42,745 $11,469,647 $ 169,636 $ 2,005,969
============= ============= =============== ==============
DUFF & PHELPS SENECA
ABERDEEN OAKHURST REAL ESTATE STRATEGIC
INTERNATIONAL BALANCED SECURITIES THEME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ------------- --------------- --------------
Investment income
Distributions....................................... $ 38,957 $ 2,771 $ 3,202 $ -
Expenses
Mortality, expense risk and administrative charges.. 8,009 569 322 2,265
------------- ------------- --------------- --------------
Net investment income (loss) ............................. 30,948 2,202 2,880 (2,265)
------------- ------------- --------------- --------------
Net realized gain (loss) from share transactions.......... 7,005 1,742 (1,764) 27,036
Net realized gain distribution from Fund.................. 222,523 4,067 - 79,203
Net unrealized appreciation (depreciation) on investment.. 165,847 3,947 1,081 125,434
------------- ------------- --------------- --------------
Net gain (loss) on investments............................ 395,375 9,756 (683) 231,673
------------- ------------- --------------- --------------
Net increase (decrease) in net assets resulting from
operations................................................ $ 426,323 $ 11,958 $ 2,197 $ 229,408
============= ============= =============== ==============
RESEARCH SENECA
ABERDEEN ENHANCED ENGEMANN MID-CAP
NEW ASIA INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------- ------------- --------------- --------------
Investment income
Distributions....................................... $ 1,322 $ 3,212 $ - $ -
Expenses
Mortality, expense risk and administrative charges.. 452 1,575 717 75
------------- ------------- --------------- --------------
Net investment income (loss) ............................. 870 1,637 (717) (75)
------------- ------------- --------------- --------------
Net realized gain (loss) from share transactions.......... (12,803) 15,360 386 4,095
Net realized gain distribution from Fund.................. - 22,408 - 172
Net unrealized appreciation (depreciation) on investment.. 42,949 18,458 51,855 679
------------- ------------- --------------- --------------
Net gain (loss) on investments............................ 30,146 56,226 52,241 4,946
------------- ------------- --------------- --------------
Net increase (decrease) in net assets resulting from
operations................................................ $ 31,016 $ 57,863 $ 51,524 $ 4,871
============= ============= =============== ==============
</TABLE>
See Notes to Financial Statements
29
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
OAKHURST
GROWTH AND HOLLISTER SCHAFER WANGER U.S.
INCOME VALUE EQUITY MID-CAP VALUE SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Investment income
Distributions..................................... $ 1,276 $ 70 $ 8 $ -
Expenses
Mortality, expense risk and administrative charges 1,080 120 29 2,716
---------------- --------------- --------------- --------------
Net investment income (loss) .......................... 196 (50) (21) (2,716
---------------- --------------- --------------- --------------
Net realized gain (loss) from share transactions....... 608 1,877 (1,793) 10,805
Net realized gain distribution from Fund............... 2,869 1,055 - 51,242
Net unrealized appreciation (depreciation) on investment 28,536 2,318 1,156 57,889
---------------- --------------- --------------- --------------
Net gain (loss) on investments......................... )
32,013 5,250 (637 119,936
---------------- --------------- --------------- --------------
Net increase (decrease) in net assets resulting from
operations............................................. $ 32,209 $ 5,200 $ (658) $ 117,220
============== ============= =============== ==============
WANGER TEMPLETON
INTERNATIONAL TEMPLETON DEVELOPING WANGER
SMALL CAP INTERNATIONAL MARKETS TWENTY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT(1)
---------------- --------------- --------------- --------------
Investment income
Distributions..................................... $ 1,717 $ 1,511 $ 131 $ -
Expenses
Mortality, expense risk and administrative charges 801 312 240 256
---------------- --------------- --------------- --------------
Net investment income (loss) .......................... 916 1,199 (111) (256
---------------- --------------- --------------- --------------
Net realized gain (loss) from share transactions....... 4,949 163 (154) 105
Net realized gain distribution from Fund............... - 5,622 - -
Net unrealized appreciation (depreciation) on investment 154,358 6,124 17,919 17,335
---------------- --------------- --------------- --------------
Net gain (loss) on investments......................... 159,307 11,909 17,765 17,440
---------------- --------------- --------------- --------------
Net increase (decrease) in net assets resulting from
operations............................................. $ 160,223 $ 13,108 $ 17,654 $ 17,184
============== ============= =============== ==============
</TABLE>
(1) From inception February 23, 1999 to December 31, 1999
See Notes to Financial Statements
30
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ENGEMANN GOODWIN
GOODWIN MONEY CAPITAL MULTI-SECTOR
MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- --------------- ---------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) .......................... $ 42,745 $ (109,628) $ 262,303
Net realized gain (loss) .............................. - 3,961,102) (13,091
Net unrealized appreciation (depreciation) ............ - 7,618,173 (79,576)
--------------- --------------- ---------------
Net increase (decrease) resulting from operations...... 42,745 11,469,647 169,636
--------------- --------------- ---------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 486,060 10,423 35,713
Participant transfers.................................. 61,006 (363,154) (140,491)
Participant withdrawals................................ (173,778) (1,159,655) (173,638)
--------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from participant transactions..................... 373,288 (1,512,386) (278,416)
--------------- --------------- ---------------
Net increase (decrease) in net assets .............. 416,033 9,957,261 (108,780)
NET ASSETS
Beginning of period.................................... 801,122 40,608,264 3,556,284
--------------- --------------- ---------------
End of period.......................................... $ 1,217,155 $ 50,565,525 $ 3,447,504
=============== =============== ===============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- --------------- ---------------
FROM OPERATIONS
Net investment income (loss) .......................... $ 338,524 $ 30,948 $ 2,202
Net realized gain (loss) .............................. 1,019,169 229,528 5,809
Net unrealized appreciation (depreciation) ............ 648,276 165,847 3,947
--------------- --------------- ---------------
Net increase (decrease) resulting from operations...... 2,005,969 426,323 11,958
--------------- --------------- ---------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... 274 - -
Participant transfers.................................. (156,475) (36,837) -
Participant withdrawals................................ (442,572) (45,710) (8,730)
--------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from participant transactions..................... (598,773) (82,547) (8,730)
--------------- --------------- ---------------
Net increase (decrease) in net assets.................. 1,407,196 343,776 3,228
NET ASSETS
Beginning of period.................................... 19,174,399 1,536,521 113,671
--------------- --------------- ---------------
End of period.......................................... $ 20,581,595 $ 1,880,297 $ 116,899
=============== =============== ===============
DUFF & PHELPS SENECA
REAL ESTATE STRATEGIC ABERDEEN
SECURITIES THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- --------------- ---------------
FROM OPERATIONS
Net investment income (loss)........................... $ 2,880 $ (2,265) $ 870
Net realized gain (loss)............................... (1,764) 106,239 (12,803)
Net unrealized appreciation (depreciation)............. 1,081 125,434 42,949
--------------- --------------- ---------------
Net increase (decrease) resulting from operations...... 2,197 229,408 31,016
--------------- --------------- ---------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................... - - -
Participant transfers.................................. (7,385) 123,557 132,907
Participant withdrawals................................ (903) (101,462) (862)
--------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from participant transactions..................... (8,288) 22,095 132,045
--------------- --------------- ---------------
Net increase (decrease) in net assets.................. (6,091) 251,503 163,061
NET ASSETS
Beginning of period.................................... 69,067 411,107 27,729
--------------- --------------- ---------------
End of period.......................................... $ 62,976 $ 662,610 $ 190,790
=============== =============== ===============
</TABLE>
See Notes to Financial Statements
31
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
RESEARCH SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- -------------- -------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 1,637 $ (717) $ (75)
Net realized gain (loss) ........................................ 37,768 386 4,267
Net unrealized appreciation (depreciation)....................... 18,458 51,855 679
--------------- -------------- -------------
Net increase (decrease) resulting from operations................ 57,863 51,524 4,871
--------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. - - -
Participant transfers............................................ 35,494 162,034 (13,864)
Participant withdrawals.......................................... (6,018) (10,187) (124)
--------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions................................ 29,476 151,847 (13,988)
--------------- -------------- -------------
Net increase (decrease) in net assets............................ 87,339 203,371 (9,117)
NET ASSETS
Beginning of period.............................................. 371,414 84,602 16,286
--------------- -------------- -------------
End of period.................................................... $ 458,753 $ 287,973 $ 7,169
=============== ============== =============
OAKHURST SCHAFER
GROWTH AND HOLLISTER MID-CAP
INCOME VALUE EQUITY VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- -------------- -------------
FROM OPERATIONS
Net investment income (loss) .................................... $ 196 $ (50) $ (21)
Net realized gain (loss) ........................................ 3,477 2,932 (1,793)
Net unrealized appreciation (depreciation) ...................... 28,536 2,318 1,156
--------------- -------------- -------------
Net increase (decrease) resulting from operations................ 32,209 5,200 (658)
--------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. - - -
Participant transfers............................................ 160,466 4,123 (6,563)
Participant withdrawals.......................................... (2,695) (171) (44)
--------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions................................ 157,771 3,952 (6,607)
--------------- -------------- -------------
Net increase (decrease) in net assets............................ 189,980 9,152 (7,265)
NET ASSETS
Beginning of period.............................................. 53,539 10,038 7,265
--------------- -------------- -------------
End of period.................................................... $ 243,519 $ 19,190 $ 0
=============== ============== =============
WANGER
WANGER U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- -------------- -------------
FROM OPERATIONS
Net investment income (loss) .................................... $ (2,716) $ 916 $ 1,199
Net realized gain (loss) ........................................ 62,047 4,949 5,785
Net unrealized appreciation (depreciation) ...................... 57,889 154,358 6,124
--------------- -------------- -------------
Net increase (decrease) resulting from operations................ 117,220 160,223 13,108
--------------- -------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. - - -
Participant transfers............................................ (121,766) 49,732 -
Participant withdrawals.......................................... (9,011) (2,431) (1,111)
--------------- -------------- -------------
Net increase (decrease) in net assets resulting
from participant transactions................................ (130,777) 47,301 (1,111)
--------------- -------------- -------------
Net increase (decrease) in net assets............................ (13,557) 207,524 11,997
NET ASSETS
Beginning of period.............................................. 572,067 132,282 58,631
--------------- -------------- -------------
End of period.................................................... $ 558,510 $ 339,806 $ 70,628
=============== ============== =============
</TABLE>
See Notes to Financial Statements
32
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON
DEVELOPING WANGER
MARKETS TWENTY
SUBACCOUNT SUBACCOUNT(1)
--------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) ....................................... $ (111) $ (256)
Net realized gain (loss) ........................................... (154) 105
Net unrealized appreciation (depreciation) ......................... 17,919 17,335
--------------- --------------
Net increase (decrease) resulting from operations................... 17,654 17,184
--------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits................................................ - -
Participant transfers............................................... 58,912 61,018
Participant withdrawals............................................. (629) (495)
--------------- --------------
Net increase (decrease) in net assets resulting
from participant transactions.................................... 58,283 60,523
--------------- --------------
Net increase (decrease) in net assets............................... 75,937 77,707
NET ASSETS
Beginning of period................................................. 10,157 -
--------------- --------------
End of period....................................................... $ 86,094 $ 77,707
=============== ==============
</TABLE>
(1) From inception February 23, 1999 to December 31, 1999
See Notes to Financial Statements
33
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOODWIN
GOODWIN MONEY ENGEMANN CAPITAL MULTI-SECTOR
MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ------------------ --------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 30,653 $ (131,326) $ 257,723
Net realized gain (loss)......................................... -- 1,574,028 16,937
Net unrealized appreciation (depreciation)....................... -- 7,944,733 (454,168)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from operations.. 30,653 9,387,435 (179,508)
------------- -------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 486,770 88,441 126,281
Participant transfers............................................ 965,687 (693,362) (59,435)
Participant withdrawals.......................................... (1,189,945) (1,369,401) (52,100)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 262,512 (1,974,322) 14,746
------------- -------------- ------------
Net increase (decrease) in net assets............................ 293,165 7,413,113 (164,762)
NET ASSETS
Beginning of period.............................................. 507,957 33,195,151 3,721,046
------------- -------------- ------------
End of period.................................................... $ 801,122 $40,608,264 $3,556,284
============= ============== ============
OAKHURST
STRATEGIC ABERDEEN
ALLOCATION INTERNATIONAL OAKHURST BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ------------------ --------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 243,290 $ (7,050) $ 2,749
Net realized gain (loss)......................................... 1,291,740 270,554 21,219
Net unrealized appreciation (depreciation)....................... 1,781,538 63,522 (363)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from operations.. 3,316,568 327,026 23,605
------------- -------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 172,594 10,726 898
Participant transfers............................................ (707,451) 121,752 (81,691)
Participant withdrawals.......................................... (1,109,396) (128,944) (21,600)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. (1,644,253) 3,534 (102,393)
------------- -------------- ------------
Net increase (decrease) in net assets............................ 1,672,315 330,560 (78,788)
NET ASSETS
Beginning of period.............................................. 17,502,084 1,205,961 192,459
------------- -------------- ------------
End of period.................................................... $ 19,174,399 $ 1,536,521 $ 113,671
============= ============== ============
DUFF & PHELPS
REAL ESTATE SENECA STRATEGIC ABERDEEN
SECURITIES THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
--------------- ------------------ --------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 3,271 $ (1,470) $ (15)
Net realized gain (loss)......................................... 82 29,584 (53)
Net unrealized appreciation (depreciation)....................... (23,427) 115,793 (1,944)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from operations.. (20,074) 143,907 (2,012)
------------- -------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 232 12,934 --
Participant transfers............................................ (21,663) (129,618) 10,000
Participant withdrawals.......................................... (2,485) (43,120) (266)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. (23,916) (159,804) 9,734
------------- -------------- ------------
Net increase (decrease) in net assets............................ (43,990) (15,897) 7,722
NET ASSETS
Beginning of period.............................................. 113,057 427,004 20,007
------------- -------------- ------------
End of period.................................................... $ 69,067 $ 411,107 $ 27,729
============= ============== ============
</TABLE>
See Notes to Financial Statements
34
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
SENECA
RESEARCH ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
--------------- ------------------ --------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 1,511 $ (203) $ (26)
Net realized gain (loss)......................................... 15,910 1,379 (4)
Net unrealized appreciation (depreciation)....................... 40,885 13,894 1,884
------------- -------------- ------------
Net increase (decrease) in net assets resulting from operations.. 58,306 15,070 1,854
------------- -------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 3,734 3,828 2,490
Participant transfers............................................ 254,523 68,638 12,002
Participant withdrawals.......................................... (3,798) (2,934) (60)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 254,459 69,532 14,432
------------- -------------- ------------
Net increase (decrease) in net assets............................ 312,765 84,602 16,286
NET ASSETS
Beginning of period.............................................. 58,649 0 0
------------- -------------- ------------
End of period.................................................... $ 371,414 $ 84,602 $ 16,286
============= ============== ============
OAKHURST GROWTH HOLLISTER VALUE SCHAFER
AND INCOME EQUITY MID-CAP VALUE
SUBACCOUNT(2) SUBACCOUNT(2) SUBACCOUNT(3)
--------------- ------------------ --------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 102 $ 13 $ (2)
Net realized gain (loss)......................................... (7) (4) (9)
Net unrealized appreciation (depreciation)....................... 4,180 357 (1,156)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from operations.. 4,275 366 (1,167)
------------- -------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 7,469 -- --
Participant transfers............................................ 41,999 9,714 8,460
Participant withdrawals.......................................... (204) (42) (28)
------------- -------------- ------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 49,264 9,672 8,432
------------- -------------- ------------
Net increase (decrease) in net assets............................ 53,539 10,038 7,265
NET ASSETS
Beginning of period.............................................. 0 0 0
End of period.................................................... $ 53,539 $ 10,038 $ 7,265
============= ============== ============
WANGER WANGER
U.S. INTERNATIONAL
SMALL CAP SMALL CAP
SUBACCOUNT SUBACCOUNT
--------------- ------------------
FROM OPERATIONS
Net investment income (loss)..................................... $ (2,527) $ 1,036
Net realized gain (loss)......................................... 23,547 (2,560)
Net unrealized appreciation (depreciation)....................... 18,143 20,730
------------- --------------
Net increase (decrease) in net assets resulting from operations.. 39,163 19,206
------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 6,509 142
Participant transfers............................................ 139,320 (31,046)
Participant withdrawals.......................................... (119,121) (2,397)
------------- --------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 26,708 (33,301)
------------- --------------
Net increase (decrease) in net assets............................ 65,871 (14,095)
NET ASSETS
Beginning of period.............................................. 506,196 146,377
------------- --------------
End of period.................................................... $ 572,067 $ 132,282
============= ==============
</TABLE>
(1) From inception April 28, 1998 to December 31, 1998
(2) From inception April 21, 1998 to December 31, 1998
(3) From inception March 13, 1998 to December 31, 1998
See Notes to Financial Statements
35
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON
TEMPLETON DEVELOPING
INTERNATIONAL MARKETS
SUBACCOUNT(4) SUBACCOUNT(5)
--------------- ------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ (30) $ (7)
Net realized gain (loss)......................................... 1 (1)
Net unrealized appreciation (depreciation)....................... 598 199
------------- --------------
Net increase (decrease) in net assets resulting from operations.. 569 191
------------- --------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. -- --
Participant transfers............................................ 58,235 10,000
Participant withdrawals.......................................... (173) (34)
------------- --------------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 58,062 9,966
------------- --------------
Net increase (decrease) in net assets............................ 58,631 10,157
NET ASSETS
Beginning of period.............................................. 0 0
------------- --------------
End of period.................................................... $ 58,631 $ 10,157
============= ==============
</TABLE>
(4) From inception November 23, 1998 to December 31, 1998
(5) From inception November 9, 1998 to December 31, 1998
See Notes to Financial Statements
36
<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 registered as a unit investment trust under the
Investment Company Act of 1940, as amended. Policies offered by the Account have
a death benefit, cash surrender value and loan privileges. 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, 20 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
International Fund invests in stocks and debt obligations of companies and
governments outside of 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 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 Templeton Asset
Allocation Fund seeks to provide a high level of total return through a flexible
investment policy. The Templeton Stock Fund is a capital growth common stock
fund. The Mutual Shares Investments Fund is a capital appreciation fund with
income as a secondary objective. 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 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 Technology Portfolio seeks long-term capital appreciation by
investing in equity securities involved with technology and technology-related
industries. The Phoenix-Bankers Trust Dow 30 Series seeks to track the total
return of the Dow Jones Industrial Average(SM) before fund expenses. 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. The Phoenix-Morgan Stanley Focus Equity Series seeks capital
appreciation by investing primarily in equity securities. Additionally,
policyowners also may direct the allocation of their investments between the
Account and the Guaranteed Interest Account of the general account of Phoenix.
37
<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.
38
<PAGE>
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3--PURCHASES AND SALES OF SHARES OF THE FUNDS
Purchases and sales of shares of the Funds for the period ended December
31, 1999 aggregated the following:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
<S> <C> <C>
The Phoenix Edge Series Fund:
Goodwin Money Market................................................... $1,442,614 $1,026,416
Engemann Capital Growth ............................................... 4,610,290 2,409,382
Goodwin Multi-Sector Fixed Income ..................................... 446,850 463,024
Oakhurst Strategic Allocation ......................................... 1,431,845 685,135
Aberdeen International ................................................ 486,130 315,081
Oakhurst Balanced ..................................................... 6,892 9,351
Duff & Phelps Real Estate Securities .................................. 6,964 12,376
Seneca Strategic Theme ................................................ 296,984 197,848
Aberdeen New Asia ..................................................... 161,635 28,658
Research Enhanced Index ............................................... 250,410 196,968
Engemann Nifty Fifty .................................................. 162,022 10,807
Seneca Mid-Cap Growth ................................................. 172 14,066
Oakhurst Growth and Income ............................................ 173,622 12,707
Hollister Value Equity ................................................ 25,381 20,420
Schafer Mid-Cap Value ................................................. 8 6,639
Wanger Advisors Trust:
Wanger U.S. Small Cap ................................................. 171,897 254,151
Wanger International Small Cap ........................................ 111,652 63,364
Templeton Variable Products Series Fund:
Templeton International ............................................... 7,052 1,342
Templeton Developing Markets .......................................... 64,039 5,840
Wanger Advisors Trust:
Wanger Twenty ......................................................... 60,998 700
</TABLE>
39
<PAGE>
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)
<TABLE>
<CAPTION>
SUBACCOUNT
-------------------------------------------------------------------------------------------
GOODWIN OAKHURST
GOODWIN ENGEMANN MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST
MONEY MARKET CAPITAL GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED
------------ -------------- ------------ ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of period. 439,537 7,236,992 1,452,115 5,519,645 650,739 53,478
Participant deposits................... 258,393 1,716 13,482 80 - -
Participant transfers.................. 35,836 (61,574) (55,681) (43,964) (13,909) -
Participant withdrawals................ (93,517) (193,217) (68,379) (124,126) (18,837) (3,940)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end of period....... 640,249 6,983,917 1,341,537 5,351,635 617,993 49,538
============ ============ ============ ============ ============ ============
DUFF &
PHELPS SENECA RESEARCH SENECA
REAL ESTATE STRATEGIC ABERDEEN NEW ENHANCED ENGEMANN MID-CAP
SECURITIES THEME ASIA INDEX NIFTY FIFTY GROWTH
------------ -------------- ------------ ---------- ------------- --------
Units outstanding, beginning of period. 55,433 244,317 43,139 279,279 70,855 15,148
Participant deposits................... - - - - - -
Participant transfers.................. (6,238) 59,616 110,917 16,673 120,301 (10,428)
Participant withdrawals................ (714) (48,591) (797) (4,159) (7,700) (118)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end of period....... 48,481 255,342 153,259 291,793 183,456 4,602
============ ============ ============ ============ ============ ============
OAKHURST WANGER
GROWTH AND HOLLISTER SCHAFER WANGER U.S. INTERNATIONAL TEMPLETON
INCOME VALUE EQUITY MID-CAP VALUE SMALL CAP SMALL CAP INTERNATIONAL
------------ -------------- ------------- ---------- ------------- -------------
Units outstanding, beginning of period. 48,315 9,730 8,427 402,094 113,611 58,063
Participant deposits................... - - - - - -
Participant transfers.................. 142,651 5,489 (8,372) (80,625) 17,601 -
Participant withdrawals................ (2,214) (183) (55) (6,024) (1,692) (1,024)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end of period....... 188,752 15,036 - 315,445 129,520 57,039
============ ============ ============ ============ ============ ============
TEMPLETON
DEVELOPING
MARKETS WANGER TWENTY
------------ --------------
Units outstanding, beginning of period. 9,966 -
Participant deposits................... - -
Participant transfers.................. 45,898 58,698
Participant withdrawals................ (481) (421)
------------ ------------
Units outstanding, end of period....... 55,383 58,277
============ ============
</TABLE>
40
<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 75% of a policy's cash
value during the first three policy years and up to 90% of cash value
thereafter, with interest of 8% due and payable on each policy anniversary. At
the time a loan is granted, an amount equivalent to the amount of the loan is
transferred from the Account to Phoenix's general account as collateral for the
outstanding loan. These transfers are included in participant withdrawals in the
accompanying financial statements. Amounts in the general account are credited
with interest at 7.25%. 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 $821,704 during the period ended December 31, 1999.
Upon partial surrender of a policy, a surrender fee of the lesser of $25 or
2.0% of the partial surrender amount paid and a fraction of the balance of any
unpaid acquisition expense allowance is deducted from the policy value and paid
to Phoenix.
PEPCO is the principal underwriter and distributor for the Account. PEPCO is
reimbursed for its distribution and underwriting expenses by Phoenix.
An acquisition expense allowance is paid to Phoenix over a ten-year period
from contract inception by a withdrawal of units. The acquisition expense
allowance consists of a sales load of 5.5% of the issue premium to compensate
Phoenix for distribution expenses incurred, an issue administration charge of
1.0% of the issue premium to compensate Phoenix for underwriting and start-up
expenses and premium taxes which currently range from 0.75% to 4.0% of premiums
paid based on the state where the policyowner resides. In the event of a
surrender before ten years, the unpaid balance of the acquisition expense
allowance is deducted and paid to Phoenix.
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 0.50% of the average daily net
assets of the Account for mortality and expense risks assumed.
NOTE 7--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable universal life contract, other than a contract issued in
connection with certain types of employee benefit plans, will not be treated as
a universal life contract for federal tax purposes for any period for which the
investments of the segregated asset account on which the contract is based are
not adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. Phoenix believes that the Account satisfies the current requirements
of the regulations, and it intends that the Account will continue to meet such
requirements.
41
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[logo] PRICEWATERHOUSECOOPERS LLP
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 International,
Templeton Developing Markets and Wanger Twenty (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
42
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
UNDERWRITER
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
CUSTODIANS
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, Connecticut 06103
- ----------------------------
43
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ........................................46
Consolidated Balance Sheet at December 31, 1999 and 1998..................47
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ....................48
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................49
Notes to Consolidated Financial Statements ............................50-86
45
<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
46
<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.
47
<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.
48
<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.
49
<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.
50
<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.
51
<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
52
<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
53
<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.
54
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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
55
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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.
56
<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.
57
<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.
58
<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>
59
<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>
60
<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>
61
<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.
62
<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 $22.3
at December 31, 1999 and 1998, respectively.
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
<TABLE>
<CAPTION>
1999 1998
($ 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.
64
<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>
65
<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.
66
<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>
67
<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.
68
<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>
69
<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>
70
<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.
71
<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.
72
<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.
73
<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>
74
<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>
75
<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>
76
<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.
77
<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.
78
<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>
79
<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.
80
<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 96,256,165 130,436,610
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.
81
<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.
82
<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.
83
<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.
84
<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.
85
<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."
86
<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 1 Unit at the beginning of a
7-day period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical 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
1 unit at the beginning of the period:.............. $1.899347
Value of the same account (excluding capital changes)
at the end of the 7-day period:..................... 1.901064
Calculation:
Ending account value ............................... 1.901064
Less beginning value ............................... 1.899347
Net change in account value ........................ 0.001717
Base period return:
(adjusted change/beginning account value) .......... 0.000904
Current yield = return x (365/7) ..................... 4.71%
Effective yield = [(1 + return)]365/7 - 1 ............ 4.82%
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 1 year, 5 years, and 10 years or since inception if the Subaccount has not
been in existence for at least 10 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 1 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.
87
<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>
<CAPTION>
====================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 19991
====================================================================================================================================
SUBACCOUNT INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series............................ 5/1/90 20.48% 17.09% N/A 11.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series................................. 9/17/96 40.45% N/A N/A -3.21%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series.............................. 12/15/99 N/A N/A N/A -4.16%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series.............. 5/1/95 -2.52% N/A N/A 8.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series........................... 12/31/82 20.65% 22.36% 18.20% 18.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series.............................. 3/2/98 22.95% N/A N/A 25.72%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series.................... 12/15/99 N/A N/A N/A -7.89%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series.............................. 10/8/82 -2.48% 3.24% 3.79% 5.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series................. 12/31/82 -1.89% 7.29% 7.72% 8.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series............................ 3/2/98 15.67% N/A N/A 14.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series............... 7/14/97 10.53% N/A N/A 18.81%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series............................... 12/15/99 N/A N/A N/A -1.04%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series ............................ 12/15/99 N/A N/A N/A -6.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series...................................... 12/15/99 N/A N/A N/A -0.91%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series....................... 12/15/99 N/A N/A N/A -0.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series................................. 5/1/92 3.80% 14.26% N/A 10.98%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series........................ 3/2/98 8.86% N/A N/A 15.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series..................... 9/17/84 3.51% 13.79% 11.91% 12.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series............................. 3/2/98 -16.54% N/A N/A -15.36%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series............................. 3/2/98 35.49% N/A N/A 31.11%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series............................ 1/29/96 44.19% N/A N/A 28.32%
- ------------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund......................................... 8/22/97 18.74% N/A N/A 13.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II................. 3/2/94 -7.52% 3.73% N/A 3.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II............................... 3/1/94 -4.81% 8.46% N/A 6.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio............................................. 11/30/99 N/A N/A N/A 15.70%
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund-- Class 2(2)....................... 11/2/98 1.69% N/A N/A 3.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund-- Class 2(2)....................... 11/28/98 14.02% 14.66% 11.50% 11.51%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund-- Class 2(2)........ 9/27/96 42.61% N/A N/A -6.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2).................... 11/3/98 19.83% 15.11% 11.99% 11.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2)............. 5/11/92 14.66% 14.76% N/A 13.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty............................................. 2/1/99 N/A N/A N/A 71.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap................................... 5/1/95 110.68% N/A N/A 36.11%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty.................................................... 2/1/99 N/A N/A N/A 25.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap............................................ 5/1/95 16.36% N/A N/A 24.20%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Standardized returns are the compounded returns that result from holding an
initial investment of $10,000 for the time period indicated. Returns for
periods greater than 1 year are annualized. Returns are net of 5.5% sales
charge, 1% issue charge, investment management fees and the mortality and
expense risk charges. Subaccounts are assumed to have 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%.
88
<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 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 AverageSM
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.
89
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1983 1984 1985 1986 1987 1988 1989 1990
=======================================================================================================================
Phoenix-Aberdeen International N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 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 32.22% 10.11% 34.24% 19.86% 6.48% 3.39% 35.39% 3.55%
----------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market 7.83% 9.68% 7.49% 5.98% 5.96% 6.90% 8.65% 7.67%
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income 5.47% 10.78% 20.00% 18.69% 0.60% 9.89% 7.70% 4.67%
----------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity 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 N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation N/A N/A 26.69% 15.10% 12.16% 1.83% 19.27% 5.22%
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme 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 Strategy Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 12.46% -8.67%
- -----------------------------------------------------------------------------------------------------------------------
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 13.82% -11.72%
- -----------------------------------------------------------------------------------------------------------------------
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 US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
=======================================================================================================================
</TABLE>
1 Non-Standardized returns are net of the investment management fees and
mortality and expense risk charges of the Phoenix Edge subaccounts. Percent
change does not include the effect of the sales charge or issue charge.
Subaccounts are assumed to have 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%.
These rates of return are not an estimate or guarantee of future performance.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1)
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1991 1992 1993 1994 1995 1996 1997 1998 1999
==============================================================================================================================
Phoenix-Aberdeen International 19.07% -13.26% 37.72% -0.44% 9.04% 18.06% 11.49% 27.30% 28.86%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia N/A N/A N/A N/A N/A N/A -32.73% -4.92% 50.22%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 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 32.60% 21.45% -21.59% 4.26%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth 42.00% 9.75% 19.09% 0.96% 30.23% 12.02% 20.48% 29.37% 29.03%
-----------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty N/A N/A N/A N/A N/A N/A N/A N/A 31.50%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond N/A N/A N/A N/A N/A N/A N/A N/A 31.50%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market 5.45% 3.06% 2.35% 3.31% 5.16% 4.50% 4.66% 4.57% 4.30%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income 18.97% 9.52% 15.33% -5.93% 22.91% 11.86% 10.53% -4.63% 4.93%
-----------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity N/A N/A N/A N/A N/A N/A N/A N/A 23.72%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A 31.03% 18.22%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income N/A N/A N/A N/A N/A N/A N/A N/A 23.72%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced N/A N/A 8.06% -3.32% 22.72% 10.01% 17.35% 18.42% 11.02%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income N/A N/A N/A N/A N/A N/A N/A N/A 16.43%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation 28.64% 10.10% 10.46% -1.89% 17.61% 8.50% 20.13% 20.19% 10.71%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value N/A N/A N/A N/A N/A N/A N/A N/A -10.73%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth N/A N/A N/A N/A N/A N/A N/A N/A 44.90%
- ------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme N/A N/A N/A N/A N/A N/A 16.59% 43.97% 54.22%
- ------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A 21.00% 27.00%
- ------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A 8.23% 3.68% 8.04% 7.12% -1.09%
- ------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A 19.78% 13.74% 13.27% 2.19% 1.81%
- ------------------------------------------------------------------------------------------------------------------------------
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 8.76%
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund-- Class 2(2) 26.80% 7.29% 25.24% -3.71% 21.65% 18.00% 14.71% 5.57% 21.94%
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A -29.74% -21.44% 52.52%
- ------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2) 26.60% 6.34% 33.08% -2.96% 24.34% 21.53% 11.08% 0.49% 28.16%
- ------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund--Class 2(2) N/A N/A 46.28% -2.98% 14.91% 23.14% 13.10% 8.50% 22.63%
-----------------------------------------------------------------------------------------------------------------------------
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 31.54% -1.95% 15.75% 125.33%
- ------------------------------------------------------------------------------------------------------------------------------
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 46.08% 28.78% 8.15% 24.45%
==============================================================================================================================
</TABLE>
1 Non-Standardized returns are net of the investment management fees and
mortality and expense risk charges of the Phoenix Edge subaccounts. Percent
change does not include the effect of the sales charge or issue charge.
Subaccounts are assumed to have 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%.
These rates of return are not an estimate or guarantee of future performance.
90
<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. 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. The loaned portion of the GIA
will be credited interest at an effective annual rate of 7.25%.
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 1 full year from the date of premium payment. Upon expiration of the
initial 1-year guarantee period (and each subsequent 1-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 1 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 1 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 1 OR MORE OF THE SUBACCOUNTS OF THE VUL
ACCOUNT OVER A CONSECUTIVE 4-YEAR PERIOD ACCORDING TO THE FOLLOWING ANNUALLY
RENEWABLE SCHEDULE:
YEAR 1: 25% YEAR 2: 33%
YEAR 3: 50% YEAR 4: 100%
91
<PAGE>
APPENDIX C
ILLUSTRATIONS OF DEATH BENEFITS, ACCUMULATION VALUES,
CASH VALUES AND ACCUMULATED PREMIUMS
- --------------------------------------------------------------------------------
The tables illustrate how a Policy's death benefits, accumulation values and
cash values may vary over time assuming hypothetical gross (after tax)
investment return rates of 0%, 6% and 12%, i.e., the investment income and
capital gains and losses, realized or unrealized of the Fund is equivalent to
the assumed hypothetical gross annual investment return rates of 0%, 6% and 12%.
The tables are based on current or guaranteed mortality charges as indicated,
and on a single premium of $10,000.
1. The illustration on pages 93 and 94 is for a policy issued to a male
nonsmoker age 35 with the maximum amount of insurance under the contract.
2. The illustration on pages 95 and 96 is for a policy issued to a female
nonsmoker age 35 with the maximum amount of insurance under the contract.
3. The illustration on pages 97 and 98 is for a policy issued to a male
nonsmoker age 35 with the minimum amount of insurance under the contract.
4. The illustration on pages 99 and 100 is for a policy issued to a female
nonsmoker age 35 with the minimum amount of insurance under the contract.
The death benefits, accumulation values and cash values would be different
from those shown if the actual gross investment return averaged 0%, 6% or 12%,
but fluctuated above or below the averaged rate at various points in time. These
benefits and values also would change if the assumptions underlying the
illustrations (for example age of the Insured, Insured's smoking status, premium
amount paid or Target Face Amount selected) were different.
The death benefit, accumulation value and cash value amounts reflect the
following current or guaranteed maximum charges:
1. Acquisition Expense Charge (see "Charges and Deductions--Acquisition
Expense").
2. Cost of Insurance Charge (see "Charges and Deductions--Cost of
Insurance").
3. Mortality and Expense Risk Charge, which is equal to .50%, on an annual
basis, of the net asset value of the VUL Account (see "Charges and
Deductions--Mortality and Expense Risk Charge").
These illustrations also assume an average investment advisory fee of .70%
on an annual basis, of the average daily net asset value of each of the Series
of the Funds. These illustrations also assume other ongoing average Fund
expenses of .30%. All other Fund expenses, except capital expenses, are assumed
by the Advisers 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 1.44% of the average net
assets.
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 -1.49%, 4.48% and 10.45%, respectively.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such Tax Charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. (See "Charges and
Deduction--Other Charges--Taxes.")
The second column of each table shows the amount that would accumulate if an
amount equal to the Single Premium were invested to earn interest, after taxes,
at 5% compounded annually.
A comparable illustration based on a proposed Insured's age and sex and a
proposed Death Benefit and single premium is available upon request. 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 are nonsmokers.
92
<PAGE>
Page 1 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $53,815
MINIMUM FACE AMOUNT RIDER: $0
MALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,733 8,991 50,893 10,325 9,583 53,959 10,917 10,175 57,010
2 11,025 9,470 8,810 47,885 10,662 10,003 54,081 11,925 11,266 60,612
3 11,576 9,212 8,635 45,061 11,013 10,436 54,179 13,033 12,456 64,358
4 12,155 8,958 8,463 42,411 11,377 10,882 54,255 14,251 13,757 68,262
5 12,763 8,707 8,295 39,925 11,754 11,342 54,312 15,590 15,178 72,337
6 13,401 8,454 8,124 37,563 12,136 11,806 54,310 17,046 16,716 76,540
7 14,071 8,204 7,957 35,346 12,530 12,283 54,290 18,644 18,397 80,932
8 14,775 7,945 7,780 33,213 12,916 12,751 54,167 20,361 20,196 85,393
9 15,513 7,689 7,606 31,210 13,313 13,231 54,022 22,239 22,157 90,047
10 16,289 7,437 7,437 29,335 13,724 13,724 53,867 24,296 24,296 94,924
11 17,103 7,258 7,258 27,532 14,205 14,205 53,619 26,586 26,586 99,887
12 17,959 7,082 7,082 25,836 14,700 14,700 53,365 29,084 29,084 105,095
13 18,857 6,908 6,908 24,245 15,208 15,208 53,113 31,809 31,809 110,575
14 19,799 6,737 6,737 22,751 15,731 15,731 52,863 34,783 34,783 116,343
15 20,789 6,569 6,569 21,351 16,268 16,268 52,614 38,025 38,025 122,413
16 21,829 6,403 6,403 20,036 16,819 16,819 52,368 41,559 41,559 128,803
17 22,920 6,240 6,240 18,803 17,383 17,383 52,124 45,409 45,409 135,529
18 24,066 6,079 6,079 17,647 17,961 17,961 51,884 49,598 49,598 142,614
19 25,270 5,920 5,920 16,563 18,550 18,550 51,648 54,153 54,153 150,076
20 26,533 5,762 5,762 15,546 19,151 19,151 51,416 59,102 59,102 157,939
@ 65 43,219 4,161 4,161 7,804 26,420 26,420 49,300 150,253 150,253 279,073
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
93
<PAGE>
Page 2 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $53,815
MINIMUM FACE AMOUNT RIDER: $0
MALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,696 8,955 50,706 10,286 9,544 53,760 10,876 10,134 56,800
2 11,025 9,399 8,740 47,517 10,583 9,923 53,667 11,836 11,176 60,150
3 11,576 9,108 8,531 44,534 10,888 10,311 53,548 12,885 12,308 63,613
4 12,155 8,821 8,327 41,743 11,203 10,708 53,406 14,033 13,538 67,199
5 12,763 8,540 8,128 39,132 11,527 11,115 53,242 15,287 14,875 70,920
6 13,401 8,263 7,933 36,689 11,860 11,531 53,058 16,658 16,329 74,785
7 14,071 7,990 7,743 34,404 12,203 11,955 52,856 18,155 17,908 78,805
8 14,775 7,722 7,557 32,266 12,554 12,389 52,637 19,791 19,626 82,993
9 15,513 7,457 7,375 30,265 12,915 12,832 52,402 21,575 21,493 87,360
10 16,289 7,197 7,197 28,393 13,285 13,285 52,153 23,523 23,523 91,918
11 17,103 7,023 7,023 26,639 13,749 13,749 51,897 25,736 25,736 96,694
12 17,959 6,851 6,851 24,994 14,225 14,225 51,642 28,149 28,149 101,718
13 18,857 6,682 6,682 23,450 14,715 14,715 51,389 30,781 30,781 107,004
14 19,799 6,515 6,515 22,002 15,217 15,217 51,137 33,652 33,652 112,563
15 20,789 6,351 6,351 20,643 15,733 15,733 50,886 36,781 36,781 118,412
16 21,829 6,190 6,190 19,368 16,262 16,262 50,637 40,191 40,191 124,565
17 22,920 6,030 6,030 18,171 16,804 16,804 50,388 43,903 43,903 131,037
18 24,066 5,873 5,873 17,049 17,357 17,357 50,141 47,939 47,939 137,846
19 25,270 5,717 5,717 15,996 17,920 17,920 49,895 52,323 52,323 145,008
20 26,533 5,563 5,563 15,008 18,493 18,493 49,651 57,081 57,081 152,542
@ 65 43,219 3,968 3,968 7,443 25,203 25,203 47,037 143,353 143,353 266,303
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
94
<PAGE>
Page 1 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $61,546
MINIMUM FACE AMOUNT RIDER: $0
1035 EXCHANGE FUND APPLIED (INCL. IN PREM.): $0
FEMALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,732 8,990 58,209 10,324 9,582 61,714 10,916 10,174 65,204
2 11,025 9,468 8,808 54,775 10,660 10,000 61,862 11,923 11,263 69,333
3 11,576 9,208 8,631 51,555 11,008 10,431 61,986 13,028 12,451 73,632
4 12,155 8,952 8,457 48,534 11,370 10,875 62,087 14,243 13,748 78,116
5 12,763 8,700 8,287 45,701 11,744 11,332 62,169 15,576 15,164 82,802
6 13,401 8,443 8,114 43,008 12,120 11,790 62,183 17,024 16,695 87,635
7 14,071 8,190 7,943 40,482 12,509 12,261 62,178 18,611 18,364 92,692
8 14,775 7,925 7,761 38,045 12,855 12,720 62,048 20,311 20,147 97,819
9 15,513 7,665 7,582 35,757 13,272 13,189 61,893 22,170 22,087 103,168
10 16,289 7,408 7,408 33,613 13,670 13,670 61,723 24,202 24,202 108,769
11 17,103 7,223 7,223 31,542 14,136 14,136 61,430 26,457 26,457 114,438
12 17,959 7,041 7,041 29,594 14,616 14,616 61,128 28,918 28,918 120,384
13 18,857 6,863 6,863 27,766 15,109 15,109 60,828 31,601 31,601 126,639
14 19,799 6,688 6,688 26,051 15,616 15,616 60,530 34,528 34,528 133,218
15 20,789 6,516 6,516 24,442 16,137 16,137 60,233 37,719 37,719 140,140
16 21,829 6,348 6,348 22,933 16,673 16,673 59,941 41,199 41,199 147,431
17 22,920 6,183 6,183 21,520 17,225 17,225 59,657 44,995 44,995 155,117
18 24,066 6,022 6,022 20,198 17,793 17,793 59,383 49,134 49,134 163,227
19 25,270 5,864 5,864 18,960 18,377 18,377 59,123 53,649 53,649 171,800
20 26,533 5,710 5,710 17,801 18,979 18,979 58,874 58,571 58,571 180,853
@ 65 43,219 4,175 4,175 8,848 26,509 26,509 55,897 150,759 150,759 316,418
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
95
<PAGE>
Page 2 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $61,546
MINIMUM FACE AMOUNT RIDER: $0
1035 EXCHANGE FUND APPLIED (INCL. IN PREM.): $0
FEMALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,695 8,953 57,989 10,285 9,543 61,482 10,874 10,132 64,959
2 11,025 9,395 8,736 54,342 10,578 9,918 61,376 11,830 11,171 68,790
3 11,576 9,101 8,524 50,930 10,879 10,302 61,240 12,875 12,298 72,750
4 12,155 8,811 8,316 47,738 11,189 10,694 61,077 14,015 13,521 76,852
5 12,763 8,525 8,112 44,752 11,506 11,094 60,890 15,260 14,848 81,107
6 13,401 8,243 7,913 41,958 11,832 11,502 60,679 16,618 16,288 85,527
7 14,071 7,965 7,717 39,344 12,164 11,916 60,448 18,097 17,850 90,125
8 14,775 7,690 7,526 36,899 12,503 12,338 60,197 19,710 19,545 94,915
9 15,513 7,420 7,338 34,611 12,851 12,769 59,928 21,469 21,386 99,908
10 16,289 7,155 7,155 32,470 13,208 13,208 59,643 23,387 23,387 105,120
11 17,103 6,976 6,976 30,464 13,658 13,658 59,350 25,565 25,565 110,582
12 17,959 6,801 6,801 28,583 14,121 14,121 59,059 27,943 27,943 116,327
13 18,857 6,628 6,628 26,817 14,597 14,597 58,769 30,536 30,536 122,371
14 19,799 6,459 6,459 25,161 15,087 15,087 58,480 33,364 33,364 128,729
15 20,789 6,293 6,293 23,606 15,590 15,590 58,193 36,448 36,448 135,417
16 21,829 6,130 6,130 22,148 16,107 16,107 57,908 39,808 39,808 142,452
17 22,920 5,970 5,970 20,780 16,637 16,637 57,623 43,467 43,467 149,853
18 24,066 5,813 5,813 19,497 17,180 17,180 57,341 47,451 47,451 157,639
19 25,270 5,658 5,658 18,292 17,735 17,735 57,059 51,782 51,782 165,830
20 26,533 5,505 5,505 17,162 18,302 18,302 56,779 56,493 56,493 174,445
@ 65 43,219 4,016 4,016 8,511 25,509 25,509 53,787 145,094 145,094 304,526
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
96
<PAGE>
Page 1 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $39,392
MINIMUM FACE AMOUNT RIDER: $0
1035 EXCHANGE FUND APPLIED (INCL. IN PREM.): $0
MALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,744 9,002 37,636 10,337 9,595 39,903 10,930 10,188 42,159
2 11,025 9,493 8,833 35,704 10,688 10,028 40,323 11,954 11,294 45,192
3 11,576 9,245 8,668 33,876 11,052 10,475 40,729 13,081 12,503 48,381
4 12,155 9,001 8,506 32,147 11,432 10,937 41,123 14,321 13,826 51,738
5 12,763 8,760 8,348 30,512 11,826 11,414 41,505 15,686 15,273 55,278
6 13,401 8,518 8,189 28,950 12,229 11,899 41,855 17,177 16,847 58,984
7 14,071 8,280 8,033 27,473 12,646 12,399 42,193 18,817 18,569 62,897
8 14,775 8,035 7,870 26,046 13,063 12,898 42,475 20,593 20,428 66,957
9 15,513 7,794 7,711 24,696 13,494 13,412 42,742 22,541 22,459 71,241
10 16,289 7,556 7,556 23,421 13,941 13,941 43,001 24,680 24,680 75,773
11 17,103 7,393 7,393 22,188 14,468 14,468 43,208 27,077 27,077 80,488
12 17,959 7,233 7,233 21,019 15,013 15,013 43,411 29,701 29,701 85,487
13 18,857 7,075 7,075 19,911 15,574 15,574 43,615 32,573 32,573 90,798
14 19,799 6,919 6,919 18,862 16,154 16,154 43,821 35,716 35,716 96,440
15 20,789 6,765 6,765 17,868 16,752 16,752 44,028 39,154 39,154 102,433
6,613
16 21,829 6,613 6,613 16,927 17,368 17,368 44,237 42,915 42,915 108,799
17 22,920 6,463 6,463 16,036 18,003 18,003 44,448 47,024 47,024 115,564
18 24,066 6,315 6,315 15,192 18,655 18,655 44,661 51,513 51,513 122,754
19 25,270 6,168 6,168 14,393 19,325 19,325 44,877 56,412 56,412 130,397
20 26,533 6,022 6,022 13,637 20,012 20,012 45,096 61,756 61,756 138,521
@ 65 43,219 4,519 4,519 7,576 28,687 28,687 47,858 163,136 163,136 270,900
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
97
<PAGE>
Page 2 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $39,392
MINIMUM FACE AMOUNT RIDER: $0
1035 EXCHANGE FUND APPLIED (INCL. IN PREM.): $0
MALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,720 8,978 37,542 10,311 9,569 39,803 10,902 10,160 42,054
2 11,025 9,444 8,785 35,516 10,633 9,974 40,112 11,892 11,233 44,957
3 11,576 9,173 8,596 33,604 10,967 10,390 40,405 12,979 12,401 47,997
4 12,155 8,907 8,412 31,799 11,312 10,817 40,680 14,170 13,675 51,184
5 12,763 8,644 8,232 30,094 11,668 11,256 40,941 15,476 15,063 54,531
6 13,401 8,385 8,055 28,485 12,037 11,707 41,188 16,907 16,577 58,048
7 14,071 8,130 7,883 26,965 12,417 12,169 41,421 18,475 18,227 61,751
8 14,775 7,878 7,714 25,530 12,809 12,644 41,641 20,192 20,027 65,651
9 15,513 7,630 7,548 24,176 13,213 13,131 41,850 22,073 21,990 69,762
10 16,289 7,386 7,386 22,896 13,630 13,630 42,048 24,132 24,132 74,101
11 17,103 7,226 7,226 21,687 14,144 14,144 42,240 26,473 26,473 78,694
12 17,959 7,069 7,069 20,541 14,675 14,675 42,434 29,035 29,035 83,572
13 18,857 6,913 6,913 19,456 15,222 15,222 42,628 31,839 31,839 88,752
14 19,799 6,760 6,760 18,428 15,786 15,786 42,823 34,906 34,906 94,253
15 20,789 6,609 6,609 17,455 16,368 16,368 43,019 38,260 38,260 100,095
16 21,829 6,459 6,459 16,533 16,967 16,967 43,216 41,928 41,928 106,299
17 22,920 6,311 6,311 15,660 17,584 17,584 43,414 45,935 45,935 112,888
18 24,066 6,165 6,165 14,832 18,217 18,217 43,613 50,308 50,308 119,885
19 25,270 6,020 6,020 14,049 18,866 18,866 43,812 55,078 55,078 127,316
20 26,533 5,876 5,876 13,307 19,531 19,531 44,013 60,277 60,277 135,207
@ 65 43,219 4,368 4,368 7,325 27,737 27,737 46,280 157,752 157,752 261,994
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
98
<PAGE>
Page 1 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $44,121
MINIMUM FACE AMOUNT RIDER: $0
1035 EXCHANGE FUND APPLIED (INCL. IN PREM.): $0
FEMALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING CURRENT CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,744 9,002 42,156 10,337 9,595 44,695 10,930 10,188 47,222
2 11,025 9,492 8,832 39,993 10,687 10,027 45,167 11,953 11,293 50,622
3 11,576 9,243 8,666 37,949 11,051 10,474 45,626 13,078 12,501 54,198
4 12,155 8,998 8,504 36,016 11,429 10,934 46,072 14,317 13,822 57,965
5 12,763 8,757 8,345 34,189 11,821 11,409 46,507 15,679 15,267 61,940
6 13,401 8,513 8,183 32,444 12,221 11,891 46,906 17,166 16,837 66,103
7 14,071 8,273 8,025 30,794 12,635 12,388 47,294 18,800 18,553 70,500
8 14,775 8,025 7,860 29,198 13,046 12,882 47,614 20,566 20,401 75,060
9 15,513 7,780 7,698 27,687 13,472 13,389 47,918 22,503 22,421 79,870
10 16,289 7,540 7,540 26,259 13,911 13,911 48,213 24,627 24,627 84,957
11 17,103 7,373 7,373 24,875 14,429 14,429 48,439 27,004 27,004 90,234
12 17,959 7,210 7,210 23,561 14,964 14,964 48,661 29,605 29,605 95,826
13 18,857 7,049 7,049 22,316 15,517 15,517 48,884 32,453 32,453 101,766
14 19,799 6,890 6,890 21,137 16,087 16,087 49,107 35,568 35,568 108,074
15 20,789 6,734 6,734 20,021 16,676 16,676 49,332 38,977 38,977 114,773
16 21,829 6,581 6,581 18,964 17,284 17,284 49,561 42,706 42,706 121,893
17 22,920 6,430 6,430 17,964 17,912 17,912 49,794 46,787 46,787 129,464
18 24,066 6,282 6,282 17,019 18,560 18,560 50,033 51,251 51,251 137,520
19 25,270 6,137 6,137 16,127 19,230 19,230 50,282 56,135 56,135 146,100
20 26,533 5,995 5,995 15,282 19,922 19,922 50,538 61,478 61,478 155,236
@ 65 43,219 4,550 4,550 8,426 28,882 28,882 53,229 164,245 164,245 301,302
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
99
<PAGE>
Page 2 of 2
PREMIUM: $10,000
TARGET FACE AMOUNT: $44,121
MINIMUM FACE AMOUNT RIDER: $0
1035 EXCHANGE FUND APPLIED (INCL. IN PREM.): $0
FEMALE 35 NONSMOKER
<TABLE>
THE PHOENIX EDGE -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING GUARANTEED CHARGES
<CAPTION>
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,719 8,977 42,049 10,310 9,568 44,582 10,902 10,160 47,103
2 11,025 9,443 8,783 39,780 10,632 9,972 44,928 11,891 11,231 50,354
3 11,576 9,170 8,593 37,638 10,963 10,386 45,255 12,974 12,397 53,759
4 12,155 8,902 8,407 35,616 11,306 10,811 45,564 14,162 13,667 57,329
5 12,763 8,637 8,225 33,707 11,659 11,246 45,856 15,463 15,051 61,077
6 13,401 8,375 8,046 31,904 12,022 11,693 46,132 16,887 16,557 65,018
7 14,071 8,117 7,870 30,202 12,397 12,149 46,394 18,445 18,197 69,165
8 14,775 7,862 7,697 28,595 12,782 12,617 46,641 20,149 73,533
9 15,513 7,610 7,528 27,078 13,178 13,096 46,875 22,015 21,932 78,138
10 16,289 7,362 7,362 25,645 13,587 13,587 47,096 24,056 24,056 82,998
11 17,103 7,200 7,200 24,291 14,093 14,093 47,312 26,378 26,378 88,143
12 17,959 7,041 7,041 23,007 14,616 14,616 47,528 28,919 28,919 93,606
13 18,857 6,883 6,883 21,792 15,156 15,156 47,746 31,701 31,701
14 19,799 6,729 6,729 20,641 15,713 15,713 47,965 34,744 34,744 105,570
15 20,789 6,576 6,576 19,551 16,288 16,288 48,184 38,074 38,074 112,114
16 21,829 6,426 6,426 18,518 16,881 16,881 48,405 41,715 41,715 119,063
17 22,920 6,278 6,278 17,540 17,492 17,492 48,626 45,694 45,694 126,443
18 24,066 6,132 6,132 16,613 18,121 18,121 48,849 50,043 50,043 134,280
19 25,270 5,988 5,988 15,736 18,767 18,767 49,073 54,790 54,790 142,603
20 26,533 5,846 5,846 14,904 19,432 19,432 49,297 59,972 59,972 151,442
@ 65 43,219 4,430 4,430 8,205 28,127 28,127 51,837 159,968 159,968 293,456
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.50%
(includes average fund operating expenses of 1.00% and mortality and expense
risk charge of 0.5%). Hypothetical gross percentage rates are illustrative only
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 rates illustrated.
Assumes premium tax of 2.25%.
100
<PAGE>
VERSION B
This filing does not affect The Phoenix Edge(R)-SPVL
<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)(A) OF THE INVESTMENT COMPANY
ACT OF 1940.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, Phoenix Home Life Mutual Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks to be assumed thereunder by Phoenix Home Life Mutual Insurance Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
Facing sheet.
Prospectus, consisting of 100 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A) under the Investment Company
Act of 1940.
Signatures.
The Powers of Attorney.
Written consent 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
June 26, 1986 and is filed via Edgar with Post-Effective
Amendment No. 14 on April 29, 1998, incorporated 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 Post-Effective
Amendment No. 14 on April 29, 1998, incorporated by reference.
(b) Form of Agreement between Phoenix Equity Planning Corporation
and Independent Brokers with respect to the sale of Policies
filed via Edgar with Post-Effective Amendment No. 14 on April
29, 1998, incorporated by reference.
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen policies with optional riders:
(a) The Phoenix Edge - Variable Life Insurance Policy Form Number
5000 (Phoenix Edge) with optional rider (VR101) filed via
Edgar on April 30, 1999, incorporated by reference.
(b) Phoenix Edge SPVL - Specimen Variable Life Insurance Policy
Form filed via Edgar with Post Effective Amendment No. 17 on
May 1, 2000 and incorporated by reference.
(6) (a) Charter of Phoenix Home Life filed with registrant's
Post-Effective Amendment No. 7 on June 22, 1992 and filed via
Edgar with Post-Effective Amendment No. 14 on April 29, 1998,
is incorporated by reference.
(b) By-laws of Phoenix Home Life filed with registrant's
Post-Effective Amendment No. 7 on June 22, 1992 and filed via
Edgar with Post-Effective Amendment No. 14 on April 29, 1998,
is incorporated by reference.
(7) Not Applicable.
(8) Not Applicable.
II-2
<PAGE>
(9) Form of Application for a Variable Life Insurance Policy
(a) The Phoenix Edge - Form filed via Edgar with Post-Effective
Amendment No. 14 on April 29, 1998, incorporated by reference.
(b) Phoenix Edge SPVL - Form filed via Edgar with Post Effective
Amendment No. 17 on May 1, 2000 and incorporated by reference.
(10) Memorandum describing transfer and redemption procedures and method
of computing adjustments in payments and cash values upon
conversion to herein fixed benefit policies filed via Edgar with
Post-Effective Amendment No. 14 on April 29, 1998, and incorporated
by reference.
2. See Exhibit 1.A.(5).
3. Opinion of Counsel as to the legality of the securities being registered
filed via Edgar with Post-Effective Amendment No. 17 on May 1, 2000 and
incorporated by reference.
4. No financial statement will be omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I.
5. Not Applicable.
6. Consent of PricewaterhouseCoopers LLP.*
7. Consent of Edwin L. Kerr, Esq.*
8. Opinion of Paul M. Fischer, FSA, CLU, ChFC.*
- ---------------
* Filed herewith.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Phoenix Home Life Variable Universal Life Account, certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment 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 26th day of May, 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 on
this 26th day of May, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
Director
- ---------------------------------------------------
*Sal H. Alfiero
Director
- ---------------------------------------------------
*J. Carter Bacot
Director
- ---------------------------------------------------
*Arthur P. Byrne
Director
- ---------------------------------------------------
*Richard N. Cooper
Director
- ---------------------------------------------------
*Gordon J. Davis, Esq.
Chairman of the Board and
- --------------------------------------------------- Chief Executive Officer
*Robert W. Fiondella (Principal Executive Officer)
Director
- ---------------------------------------------------
*John E. Haire
Director
- ---------------------------------------------------
*Jerry J. Jasinowski
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C>
Director
- ---------------------------------------------------
*John W. Johnstone
Director
- ---------------------------------------------------
*Marilyn E. LaMarche
Director
- ---------------------------------------------------
*Philip R. McLoughlin
Director
- ---------------------------------------------------
*Indra K. Nooyi
Director
- ---------------------------------------------------
*Robert F. Vizza
Director
- ---------------------------------------------------
*Robert G. Wilson
</TABLE>
By: /s/ Dona D. Young
------------------------------
*Dona D. Young as Attorney in Fact pursuant to Powers of Attorney, copies of
which were filed previously.
S-2
EXHIBIT 6
CONSENT OF PRICEWATERHOUSECOOPERS LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Post-Effective Amendment No. 18 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
May 25, 2000
EXHIBIT 7
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. 18 to the
Registration Statement on Form S-6 (File No. 33-6793) 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 : May 26, 2000 /s/ Edwin L. Kerr
-----------------
Edwin L. Kerr, Counsel
Phoenix Home Life Mutual Insurance Company
EXHIBIT 8
CONSENT OF PAUL M. FISCHER, FSA, CLU, CHFC
<PAGE>
May 26, 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. 33-6793) describes the Policies. The forms of Policies were
prepared under my direction, and I am familiar with the Registration Statement
and Exhibits thereto.
In my opinion, the illustrations of death benefits and cash values included
in the section entitled "Illustrations of Death Benefits, Policy Values
("Account Values"), and Cash Surrender Values" in Appendix B of the
prospectuses, based on the assumptions stated in the illustrations, are
consistent with the provisions of the respective forms of the Policies.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Paul M. Fischer
Paul M. Fischer, FSA, CLU, ChFC
Vice President
