AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 1996
FILE NO. 33-87376
811-8914
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [x]
and/or
REGISTRATION STATEMENT
Under
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
(Check appropriate box or boxes.)
---------------------
PHL Variable Accumulation Account
(Exact Name of Registrant)
PHL Variable Insurance Company
(Name of Depositor)
---------------------
One American Row, Hartford, Connecticut 06102-5056
(Address of Depositor's Principal Executive Offices) (Zip Code)
(800) 447-4312
(Depositor's Telephone Number, Including Area Code)
---------------------
Dona D. Young, Esq.
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06102-5056
(Name and Address of Agent for Service)
---------------------
Copies to:
James F. Jorden, Esq. Richard J. Wirth, Esq.
Jorden Burt Berenson & Johnson LLP PHL Variable
1025 Thomas Jefferson Street N.W. Insurance Company
Washington, D.C. 20007-0805 One American Row
Hartford, CT 06102-5056
---------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on pursuant to paragraph (a)(i) of Rule 485
[ ] on pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
REGISTRANT HAS CHOSEN TO REGISTER AN INDEFINITE NUMBER OF SECURITIES IN
ACCORDANCE WITH RULE 24F-2. THE RULE 24F-2 NOTICE OF REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON FEBRUARY 27, 1996.
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<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
REGISTRATION
STATEMENT ON FORM N-4
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS
AND STATEMENT OF ADDITIONAL INFORMATION
AS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
FORM N-4 ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page ............................................... Cover Page
2. Definitions .............................................. Special Terms
3. Synopsis.................................................. Summary of Expenses; Summary
4. Condensed Financial Information .......................... Financial Highlights
5. General Description of Registrant, Depositor, and PHL Variable Insurance Company and the PHL Variable
Portfolio Companies.................................... Accumulation Account; The Fund; Voting Rights
6. Deductions and Charges ................................... Deductions and Charges; Sales of Variable Accumulation
Contracts
7. General Description of Variable Annuity Contracts......... The Variable Accumulation Annuity; Purchase of Contracts;
The Accumulation Period; Miscellaneous Provisions
8. Annuity Period ........................................... The Annuity Period
9. Death Benefits............................................ Payment Upon Death Before Maturity Date; Payment Upon
Death After Maturity Date
10. Purchases and Contract Value ............................. Purchase of Contracts; The Accumulation Period; Variable
Account Valuation Procedures; Sales of Variable
Accumulation Contracts
11. Redemptions............................................... Surrender of Contracts; Partial Withdrawals; Free Look
Period
12. Taxes .................................................... Federal Income Taxes
13. Legal Proceeding.......................................... Litigation
14. Table of Contents of Statement of Additional Information.. Statement of Additional Information
15. Cover Page ............................................... Cover Page
16. Table of Contents ........................................ Table of Contents
17. General Information and History .......................... Not Applicable
18. Services.................................................. Not Applicable
19. Purchase of Securities Being Offered...................... Appendix
20. Underwriters ............................................. Underwriter
21. Calculation of Yield Quotations of Money Market
Sub-accounts........................................... Calculation of Yield and Return
22. Annuity Payments.......................................... Calculation of Annuity Payments
23. Financial Statements ..................................... Financial Statements
</TABLE>
<PAGE>
PROSPECTUS
PHL VARIABLE ACCUMULATION ACCOUNT
Variable Accumulation Annuity Contract
issued by
PHL VARIABLE INSURANCE COMPANY
VARIABLE PRODUCTS OPERATIONS
101 MUNSON STREET
P.O. BOX 942
GREENFIELD, MASSACHUSETTS 01302-0942
TELEPHONE: (800) 447-4312
FOR TAX QUALIFIED AND NON-TAX QUALIFIED ANNUITY PLANS
This Prospectus describes a deferred variable accumulation annuity contract
("Contract") issued by PHL Variable Insurance Company ("PHL Variable"). The
Contract provides for both an Accumulation Period and an Annuity Period. Premium
payments under the Contract are flexible.
Generally, a minimum initial purchase payment of $1,000 is required and each
subsequent purchase payment must be at least $25. If the bank draft investment
program ("check-o-matic" as described under "Purchase of Contracts") is elected,
the minimum initial purchase payment required is $25. Generally, a Contract may
not be purchased with respect to a proposed Annuitant who is eighty-one years of
age or older.
Purchase payments are allocated to one or more of the available Sub-accounts
of the PHL Variable Accumulation Account (the "Account") and/or to the
Guaranteed Interest Account (see Appendix A) as specified by the Contract Owner
in the application for the Contract. The Account is divided into Sub-accounts,
each of which invests in a corresponding series of The Phoenix Edge Series Fund
or Wanger Advisors Trust (collectively, the "Funds").
You may surrender a Contract for any reason within 10 days after its receipt
and receive in cash the adjusted value of the initial purchase payment. You may
receive more or less than the initial payment depending on investment experience
within the Sub-account during the 10-day period, unless the Contract was issued
with the Temporary Money Market Allocation Amendment, in which case your initial
purchase payment is refunded. If the initial purchase payment, or any portion
thereof, was allocated to the Guaranteed Interest Account, that payment (or
portion) and any earned interest is refunded. (See "Free Look Period.")
This Prospectus provides information a prospective investor ought to know
before investing and should be kept for future reference. It is accompanied by
current Prospectuses for the Funds. No offer is being made of a Contract funded
by any Fund for which a current Prospectus has not been delivered.
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, CREDIT UNION OR AFFILIATED ENTITY AND ARE NOT FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY AND INVOLVE INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
Additional information about the Account has been filed with the Securities
and Exchange Commission in a Statement of Additional Information, dated May 1,
1996, which is incorporated herein by reference. The Statement of Additional
Information, the table of contents of which is set forth in this Prospectus, is
available without charge upon request by writing or telephoning PHL Variable at
the address or telephone number set forth above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
MAY 1, 1996
1
<PAGE>
TABLE OF CONTENTS
Heading Page
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SUMMARY OF EXPENSES.................................... 3
FINANCIAL HIGHLIGHTS................................... 4
PERFORMANCE HISTORY.................................... 5
SPECIAL TERMS.......................................... 6
SUMMARY................................................ 6
THE VARIABLE ACCUMULATION ANNUITY...................... 9
PHL VARIABLE AND THE PHL VARIABLE
ACCUMULATION ACCOUNT................................ 9
THE PHOENIX EDGE SERIES FUND........................... 9
WANGER ADVISORS TRUST.................................. 10
PURCHASE OF CONTRACTS.................................. 10
DEDUCTIONS AND CHARGES................................. 11
Premium Tax......................................... 11
Sales Charges....................................... 11
Charges for Mortality and Expense Risks............. 11
Charges for Administrative Services................. 11
Other Charges....................................... 12
THE ACCUMULATION PERIOD................................ 12
Accumulation Units.................................. 12
Accumulation Unit Values............................ 12
Transfers .......................................... 13
Surrender of Contract; Partial Withdrawals.......... 13
Lapse of Contract................................... 14
Payment Upon Death Before Maturity Date ............ 14
THE ANNUITY PERIOD .................................... 14
Variable Accumulation Annuity Contracts............. 14
Annuity Options .................................... 15
Option A--Life Annuity With Specified Period Certain 15
Option B--Non-Refund Life Annuity................... 15
Option D--Joint and Survivor Life Annuity........... 15
Option E--Installment Refund Life Annuity........... 15
Option F--Joint and Survivor Life Annuity with
10 Year Period Certain ........................... 15
Option G--Payments for Specified Period............. 15
Option H--Payments of Specified Amount.............. 15
Option I--Variable Payment Life Annuity with 10 Year
Period Certain ................................... 15
Option J--Joint Survivor Variable Payment Life Annuity
with 10 Year Period Certain ...................... 16
Option K--Variable Payment Annuity for a Specified
Period ........................................... 16
Option L--Variable Payment Life Expectancy Annuity 16
Option M--Unit Refund Variable Payment Life Annuity 16
Heading Page
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Option N--Variable Payment Non-Refund Life Annuity 16
Other Options and Rates............................. 16
Other Conditions.................................... 16
Payment Upon Death After Maturity Date.............. 16
VARIABLE ACCOUNT VALUATION PROCEDURES.................. 16
MISCELLANEOUS PROVISIONS............................... 17
Assignment.......................................... 17
Deferment of Payment ............................... 17
Free Look Period.................................... 17
Amendments to Contracts............................. 17
Substitution of Fund Shares......................... 17
Ownership of the Contract........................... 17
FEDERAL INCOME TAXES................................... 18
Introduction........................................ 18
Tax Status.......................................... 18
Taxation of Annuities in General--Non-Qualified Plans 18
Surrenders or Withdrawals Prior to the Contract
Maturity Date.................................. 18
Surrenders or Withdrawals On or After the Contract
Maturity Date.................................. 18
Penalty Tax on Certain Surrenders and Withdrawals 18
Additional Considerations........................... 19
Diversification Standards .......................... 20
Qualified Plans..................................... 20
Tax Sheltered Annuities .......................... 20
Keogh Plans....................................... 21
Individual Retirement Accounts.................... 21
Corporate Pension and Profit-Sharing Plans........ 21
Deferred Compensation Plans with Respect to
Service for State and Local Governments and
Tax-Exempt Organizations....................... 21
Seek Tax Advice................................... 21
SALES OF VARIABLE ACCUMULATION CONTRACTS .............. 21
STATE REGULATION ...................................... 22
REPORTS ............................................... 22
VOTING RIGHTS ......................................... 22
TEXAS OPTIONAL RETIREMENT PROGRAM ..................... 22
LITIGATION ............................................ 22
LEGAL MATTERS ......................................... 22
STATEMENT OF ADDITIONAL INFORMATION.................... 22
APPENDIX A ............................................ 23
APPENDIX B ............................................ 24
2
<PAGE>
SUMMARY OF EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES ALL SUB-ACCOUNTS
Sales Load Imposed on Purchases None
Deferred Sales Load (as a percentage of amount surrendered)*:
Age of Deposit in Complete Years 0-1........................ 7%
Age of Deposit in Complete Years 1-2........................ 6%
Age of Deposit in Complete Years 2-3........................ 5%
Age of Deposit in Complete Years 3-4........................ 4%
Age of Deposit in Complete Years 4-5........................ 3%
Age of Deposit in Complete Years 5-6........................ 2%
Age of Deposit in Complete Years 6-7........................ 1%
Age of Deposit in Complete Years 7 and thereafter........... None
Exchange Fee
Current Fee................................................. None
Maximum Allowable Charge Per Exchange:...................... $10
ANNUAL CONTRACT FEE
Current..................................................... $35
Maximum..................................................... $35
SEPARATE ACCOUNT EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Fees............................. 1.25%
Account Fees and Expenses
Daily Administrative Fee................................. 0.125%
Total Separate Account Annual Expenses...................... 1.375%
<TABLE>
<CAPTION>
WANGER WANGER
MULTI- TOTAL MONEY REAL STRATEGIC U.S. SMALL INT'L SMALL
SUB-ACCOUNTS GROWTH SECTOR RETURN MARKET INT'L BALANCED ESTATE THEME+ CAP CAP
- ------------ ------ ------ ------ ------ ----- -------- ------ ----- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
Management Fees..................... .65% .50% .59% .40% .75% .55% .75% .75% 1.00% 1.30%
Other Expenses
(After Expense Reimbursement)**..... .10% .15% .08% .13% .32% .10% .25% .25% .35% .50%
Total Fund Annual Expenses.............. .75% .65% .67% .53% 1.07% .65% 1.00% 1.00% 1.35% 1.80%
EXAMPLE
If you surrender your Contract at the end of the applicable time period:
You would pay the following expenses on a $1,000 investment assuming 5%
annual return on assets:
1 year.......................... $ 79 $ 78 $ 78 $ 77 $ 82 $ 78 $ 81 $ 81 $ 84 $ 89
3 years......................... 111 108 108 104 120 108 118 118 128 141
5 years......................... 143 138 139 132 159 138 155 155 172 194
10 years......................... 261 251 253 238 293 251 286 286 321 363
If you annuitize your Contract at the end of the applicable
time period:
You would pay the following expenses on a $1,000 investment assuming 5%
annual return on assets:
1 year.......................... $ 79 $ 78 $ 78 $ 77 $ 82 $ 78 $ 81 $81 $ 84 $ 89
3 years......................... 111 108 108 104 120 108 118 118 128 141
5 years......................... 122 117 118 111 139 117 135 135 152 174
10 years......................... 261 251 253 238 293 251 286 286 321 363
If you do not surrender your Contract:
You would pay the following expenses on a $1,000 investment assuming 5%
annual return on assets:
1 year.......................... $ 23 $ 22 $ 22 $ 21 $ 26 $ 22 $ 26 $26 $ 29 $ 34
3 years......................... 72 69 69 65 81 69 79 79 90 103
5 years......................... 122 117 118 111 139 117 135 135 152 174
10 years......................... 261 251 253 238 293 251 286 286 321 363
</TABLE>
* A sales charge is taken from the proceeds when a Contract is surrendered
or when an amount is withdrawn, if assets have not been held under the Contract
for a certain period of time. An amount up to 10% of the Contract Value may be
withdrawn each year without a sales charge. (See "Deductions and Charges--Sales
Charges.")
**Each Series pays a portion or all of its total operating expenses other
than the management fee. The Growth, Multi-Sector, Total Return, Money Market
and Balanced Series will pay up to .15%; the International Series will pay up to
.40%; the Real Estate and Strategic Theme Series will pay up to .25%; the Wanger
U.S. Small Cap Series will pay up to .50%; and the Wanger International Small
Cap Series will pay up to .60%. Absent expense reimbursement, total fund
operating expenses were (or expected to be) .73%, 1.98%, 1.33%, 2.35% and 4.20%,
for Multi-Sector, Real Estate, Strategic Theme, Wanger U.S. Small Cap and
Wanger Int'l Small Cap, respectively. Wanger "Other Expenses" are estimates for
the current year and are not based on past experience since these funds have not
completed a full year of operation. Expenses may be higher or lower than those
shown but are subject to expense limitations as noted.
+The inclusion of this Sub-account began on January 29, 1996. Accordingly,
annualized expenses have been projected for the fiscal period ending December
31, 1996.
The purpose of the tables set forth above is to assist the Contract Owner in
understanding the various costs and expenses that a Contract Owner will bear
directly or indirectly. The table reflects expenses of the Account as well as
the Funds. (See "Deductions and Charges" in this Prospectus and in the Fund
Prospectuses.)
Premium taxes, which are not reflected in the table above, may apply. Any
premium or other taxes levied by any governmental entity with respect to the
Contract will be charged against the Contract Values based on a percentage of
premiums paid. Premium taxes are currently imposed by certain states on the
Contracts and range from 0% to 3.5% of premiums paid. (See "Deductions and
Charges--Premium Tax.")
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. The $35
annual administrative charge is reflected in the Example as $1.75 since the
average Contract account size is greater than $1,000 and the expense effect is
reduced accordingly. (See "Deductions and Charges.")
3
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
ACCUMULATION UNIT VALUES
(SELECTED DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE INDICATED
PERIOD)
Following are financial highlights for the indicated.
<TABLE>
<CAPTION>
MONEY MARKET MULTI-SECTOR SUB-ACCOUNT
SUB-ACCOUNT GROWTH SUB-ACCOUNT (FORMERLY THE "BOND" SUB-ACCOUNT)
----------- ------------------ ---------------------------------
FROM FROM FROM
INCEPTION INCEPTION INCEPTION
7/31/95 TO 7/31/95 TO 7/31/95 TO
12/31/95 12/31/95 12/31/95
<S> <C> <C> <C>
Unit value, beginning of period. $1.000000 $1.000000 $1.000000
Unit value, end of period....... $1.014954 $1.082876 $1.051781
========= ========= =========
Number of units outstanding (000) 5,893 3,037 319
TOTAL RETURN SUB-ACCOUNT INTERNATIONAL SUB-ACCOUNT BALANCED SUB-ACCOUNT
------------------------ ------------------------- --------------------
FROM FROM FROM
INCEPTION INCEPTION INCEPTION
7/31/95 TO 7/31/95 TO 7/31/95 TO
12/31/95 12/31/95 12/31/95
Unit value, beginning of period. $1.000000 $1.000000 $1.000000
Unit value, end of period....... $1.042018 $1.009660 $1.047597
========= ========= =========
Number of units outstanding (000) 2,919 133 719
WANGER INT'L SMALL CAP WANGER U.S. SMALL CAP
REAL ESTATE SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------------- ----------- -----------
FROM FROM FROM
INCEPTION INCEPTION INCEPTION
7/31/95 TO 7/31/95 TO 7/31/95 TO
12/31/95 12/31/95 12/31/95
Unit value, beginning of period. $1.000000 $1.000000 $1.000000
Unit value, end of period....... $1.050105 $1.088168 $0.951679
========= ========= =========
Number of units outstanding (000) 226 257 1,313
</TABLE>
4
<PAGE>
PERFORMANCE HISTORY
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From time to time the Account may include the performance history of any or
all Sub-accounts in advertisements, sales literature or reports. PERFORMANCE
INFORMATION ABOUT EACH SUB-ACCOUNT IS BASED ON PAST PERFORMANCE ONLY AND IS NOT
AN INDICATION OF FUTURE PERFORMANCE. Performance information may be expressed as
yield and effective yield of the Money Market Sub-account, as yield of the
Multi-Sector Sub-account and as total return of any Sub-account. For the
Multi-Sector Sub-account, 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 the net investment income by the maximum offering
price per unit on the last day of the period.
When a Sub-account advertises its total return, it will usually be
calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for at least ten years. Total return is
measured by comparing the value of a hypothetical $1,000 investment in the
Sub-account 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 all applicable Contract
charges except for premium taxes (which vary by state) at the beginning of the
relevant period.
For those Sub-accounts within the Account that have not been available for
one of the quoted periods, the standardized average annual total return
quotations may show the investment performance such Sub-account would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 12/31/95
COMMENCEMENT
DATE OF CORRE-
SUB-ACCOUNT SPONDING FUND 1 YEAR 5 YEARS10 YEARS LIFE OF FUND
- ----------- ------------- ------ --------------- ------------
Multi-Sector... 1/1/83 15.12% 10.17% 8.83% 9.29%
Balanced....... 5/1/92 14.94 N/A N/A 7.36
Total Return... 9/17/84 10.15 11.03 10.44 11.27
Growth......... 1/1/83 21.98 17.95 15.16 17.11
International.. 5/1/90 2.10 7.61 N/A 4.88
Money Market... 10/10/82 (1.57) 2.42 4.38 5.03
Wanger U.S..... 5/2/95 N/A N/A N/A 7.73
Wanger Int'l... 5/2/95 N/A N/A N/A 24.95
Real Estate.... 5/2/95 N/A N/A N/A 9.39
ANNUAL TOTAL RETURN*
MULTI- TOTAL
YEAR SECTOR BALANCED RETURN GROWTH INTERNATIONAL
- ---- ------ -------- ------ ------ -------------
1983........... 4.56% N/A N/A 31.10% N/A
1984........... 9.82 N/A (1.51)% 9.16 N/A
1985........... 18.97 N/A 25.61 33.09 N/A
1986........... 17.67 N/A 14.11 18.83 N/A
1987........... (0.30) N/A 11.02 5.47 N/A
1988........... 8.98 N/A 0.94 2.50 N/A
1989........... 6.76 N/A 18.28 34.35 N/A
1990........... 3.78 N/A 4.32 2.62 (8.98)%
1991........... 17.96 N/A 27.56 40.81 18.11
1992........... 8.58 8.43% 9.15 8.79 (14.03)
1993........... 14.35 7.13 9.50 18.08 36.59
1994........... (6.78) (4.17) (2.75) 0.08 (1.31)
1995........... 21.89 21.69 16.63 29.13 8.12
MONEY WANGER WANGER REAL
YEAR MARKET U.S. INT'L ESTATE
- ---- ------ ---- ----- ------
1983............ 6.85% N/A N/A N/A
1984............ 8.72 N/A N/A N/A
1985............ 6.56 N/A N/A N/A
1986............ 5.06 N/A N/A N/A
1987............ 5.05 N/A N/A N/A
1988............ 5.98 N/A N/A N/A
1989............ 7.71 N/A N/A N/A
1990............ 6.74 N/A N/A N/A
1991............ 4.53 N/A N/A N/A
1992............ 2.16 N/A N/A N/A
1993............ 1.47 N/A N/A N/A
1994............ 2.42 N/A N/A N/A
1995............ 4.23 14.97% 33.35% 16.75%
* Sales charges have not been deducted from the Annual Total Returns
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE
OF FUTURE PERFORMANCE
Current yield for the Money Market Sub-account is based upon the income
earned by the Sub-account over a seven-day 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 stated as a percentage of the investment. Effective yield is
calculated similarly but when annualized, the income earned by the investment is
assumed to be reinvested in Sub-account Units and thus compounded in the course
of a 52-week period. Yield and effective yield reflect the recurring charges on
the Account level including the annual administrative fee.
Yield calculations of the Money Market Sub-account used for illustration
purposes are based on the consideration of a hypothetical participant's account
having a balance of exactly one Unit at the beginning of a seven-day period,
which period will end on the date of the most recent financial statements. The
yield for the Sub-account during this seven-day period will be the change in the
value of the hypothetical participant's account's original Unit. The following
is an example of this yield quotation for the money market Sub-account based on
a seven-day period ending December 31, 1995.
Example:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period: 1.014121
Value of the same account (excluding capital changes) at the
end of the seven-day period: 1.014954
Calculation:
Ending account value 1.014954
Less beginning account value 1.014121
Net change in account value 0.000833
Base period return:
(adjusted change/beginning account value) 0.000821
Current yield = return x (365/7) = 4.28%
Effective yield = [(1 + return)365/7] -1 = 4.37%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to charges which
will be deducted on the Account level.
A Sub-account's performance may be compared to that of the Consumer Price
Index or various unmanaged equity or bond indices such as the Dow Jones
Industrial Average, the Standard & Poor's 500
5
<PAGE>
Stock Index, and the Europe Australia Far East Index, and may also be compared
to the performance of the other variable annuity accounts as reported by
services such as Lipper Analytical Services, Inc. ("Lipper"), CDA Investment
Technologies, Inc. ("CDA") and Morningstar, Inc. or in other various
publications. Lipper and CDA are widely recognized independent rating/ranking
services. A Sub-account's performance may also be compared to that of other
investment or savings vehicles.
Each Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of the Funds and a comparison of that
performance to a securities market index.
SPECIAL TERMS
- -------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT: PHL Variable Accumulation Account.
ACCUMULATION UNIT: A standard of measurement with respect to each Sub-account
used in determining the value of a Contract and the interest in the Sub-accounts
prior to the commencement of annuity payments.
ACCUMULATION VALUE: The value of a Contract on or prior to its Maturity Date,
equal to the sum of the products obtained by multiplying the number of
Accumulation Units in each Sub-account then credited to the Contract by the
appropriate Accumulation Unit Value.
ANNUITANT: The person whose life is used as the measuring life under the
Contract. The primary Annuitant as shown on the Contract's Schedule Page while
the primary Annuitant is living, and then the contingent Annuitant designated on
the application for the Contract or as later changed by the Owner, if the
contingent Annuitant is living at the death of the primary Annuitant.
ANNUITY OPTION: The provisions under which a series of annuity is made to the
Annuitant or other payee, such as Life with Ten Years Certain. (See "Annuity
Options.")
ANNUITY UNIT: A standard of measurement used in determining the amount of each
variable income payment under the variable payment Annuity Options I, J, K, M
and N.
CONTRACT: The deferred variable accumulation annuity contract described in this
Prospectus.
CONTRACT VALUE: Prior to the Maturity Date, the sum of the value under a
Contract of all Accumulation Units held in the Sub-accounts of the Account and
the value held in the Guaranteed Interest Account.
FIXED PAYMENT ANNUITY: A benefit providing periodic payments of a fixed dollar
amount throughout the Annuity Period that does not vary with or reflect the
investment performance of any Sub-account.
FUNDS: The Phoenix Edge Series Fund and the Wanger Advisors Trust.
GUARANTEED INTEREST ACCOUNT (GIA): An allocation option under which premium
amounts are guaranteed to earn a fixed rate of interest. Excess interest may
also be credited, in the sole discretion of PHL Variable Insurance Company.
ISSUE DATE: The date that the initial purchase payment is invested under a
Contract.
MATURITY DATE: The date elected by the Owner pursuant to the Contract as of
which annuity payments will commence. The Maturity Date shall be no earlier than
the fifth Contract anniversary and no later than the Annuitant's 95th birthday.
The election is subject to certain conditions described in "THE ANNUITY PERIOD."
MINIMUM INITIAL PURCHASE PAYMENT: The amount which must be paid when a Contract
is purchased. Minimum initial purchase payments of $1,000, $25, $25, and $1,000
annually are required for non-qualified, IRA, bank draft program, and qualified
plan contracts, respectively.
MINIMUM SUBSEQUENT PAYMENT: The amount which must be paid when any subsequent
payments are made, after the minimum initial purchase payment has been made (see
above). The minimum subsequent payment for all Contracts is $25.
OWNER: The person or entity, usually the one to whom the Contract is issued, who
has the sole right to exercise all rights and privileges under the Contract
except as otherwise provided in the Contract. The Owner may be the Annuitant, an
employer, a trust or any other individual or entity specified in the application
for the Contract. However, under Contracts used with certain tax qualified
plans, the Owner must be the Annuitant. A husband and wife may be designated as
joint owners, and if such a joint owner dies, the other joint owner becomes the
sole Owner of the Contract. If no Owner is named, the Annuitant will be the
Owner.
PAYMENT UPON DEATH: The obligation of PHL Variable under a Contract to make a
payment on the death of the Owner or Annuitant at any time before the Maturity
Date of a Contract (see "Payment Upon Death Before Maturity Date") or after the
Maturity Date of a Contract (see "Payment Upon Death After Maturity Date").
PHL VARIABLE: PHL Variable Insurance Company.
VARIABLE PAYMENT ANNUITY: An annuity providing payments that vary in amount
after the first payment is made, in accordance with the investment experience of
the selected Sub-accounts.
VARIABLE PRODUCTS OPERATIONS: The Variable Products
Operations Division of PHL Variable Insurance Company.
SUMMARY
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The individual deferred accumulation annuity contract ("Contract") described
in this Prospectus presents a dynamic concept in retirement planning designed to
give you maximum flexibility in attaining your investment goals. There are no
deductions from your purchase payments so that your entire payment is put to
work in the investment portfolio(s) of your choice. Currently, the PHL Variable
Accumulation Account ("Account") consists of several Sub-accounts, which invest
their assets in specified Series of The Phoenix Edge Series Fund and the Wanger
Advisors Trust (collectively, the "Funds"). Each Series has a distinct
investment objective. You choose the Sub-account or Sub-accounts you wish to
invest in among the available Sub-accounts and/or the Guaranteed Interest
Account when you make your purchase payments under the Contract. You may also
transfer amounts held under the Contract among the available Sub-accounts
and/or the
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Guaranteed Interest Account. When the accumulation period ends, the then
Contract Value will be applied to furnish a Variable Payment Annuity unless a
Fixed Payment Annuity is elected. If a Fixed Payment Annuity is elected,
payments will, thereafter, be fixed and guaranteed by PHL Variable Insurance
Company.
The Contract is eligible for purchase as non-tax qualified retirement
plans by individuals. Contracts are also eligible for use in connection with
(1) pension or profit-sharing plans qualified under the Self-Employed
Individuals Tax Retirement Act of 1962, known as "HR 10" or "Keogh" plans, (2)
pension or profit-sharing plans qualified under Sections 401(a) and 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code"), known as "corporate
plans," (3) annuity purchase plans adopted under the provisions of Section
403(b) of the Code by public school systems and certain other tax-exempt
organizations (TSA), (4) individual retirement account plans satisfying the
requirements of Section 408 of the Code (IRA), and (5) government plans and
deferred compensation plans maintained by a state or political subdivision
thereof under Section 457 of the Code. These plans are sometimes referred to in
this Prospectus as "tax qualified plans."
HOW ARE PAYMENTS MADE UNDER THE CONTRACTS?
A Contract Owner may make payments at any time until the Maturity Date
selected by the Owner pursuant to the terms of the Contract. The payments
purchase Accumulation Units of the Sub-account(s) and/or are deposited in the
Guaranteed Interest Account, as chosen by the Owner. (See "PURCHASE OF
CONTRACTS" and "THE ACCUMULATION PERIOD.")
IS THERE A GUARANTEED OPTION?
Yes. A Contract Owner may elect to have payments allocated to the
Guaranteed Interest Account. Amounts allocated to the GIA earn a fixed rate of
interest and PHL Variable may also, in its sole discretion, credit excess
interest. (See Appendix A.)
WHAT ARE THE INVESTMENT OBJECTIVES OF THE SERIES OF THE FUNDS?
THE PHOENIX EDGE SERIES FUND
The investment objective of the MULTI-SECTOR FIXED INCOME SERIES
("Multi-Sector Series," formerly the Bond Series) is to seek long-term total
return by investing in a diversified portfolio of high yield (high risk) and
high quality fixed income securities.
The investment objective of the MONEY MARKET SERIES is to provide maximum
current income consistent with capital preservation and liquidity. The Money
Market Series will invest exclusively in high quality money market instruments.
The investment objective of the GROWTH SERIES is to achieve intermediate and
long-term growth of capital, with income as a secondary consideration. The
Growth Series will invest principally in common stocks of corporations believed
by management to offer growth potential.
The investment objective of the TOTAL RETURN SERIES is to realize as high a
level of total rate of return over an extended period of time as is considered
consistent with prudent investment risk. The Total Return Series will invest in
stocks, bonds and money market instruments in accordance with the Investment
Adviser's appraisal of investments most likely to achieve the highest total rate
of return.
The investment objective of the INTERNATIONAL SERIES is to seek a high total
return consistent with reasonable risk. The International Series intends to
invest primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions.
The investment objective of the BALANCED SERIES is to seek reasonable
income, long-term capital growth and conservation of capital. The Balanced
Series intends to invest based on combined considerations of risk, income,
capital enhancement and protection of capital value.
The investment objective of the REAL ESTATE SERIES is to seek capital
appreciation and income with approximately equal emphasis. It intends under
normal circumstances to invest in marketable securities of publicly traded real
estate investment trusts (REITs) and companies that operate, develop, manage
and/or invest in real estate located primarily in the United States.
The investment objective of the STRATEGIC THEME SERIES is to seek long-term
appreciation of capital. This Series seeks to identify securities benefiting
from long-term trends present in the U.S. and abroad. The Series intends to
invest primarily in common stocks believed by the Adviser to have substantial
potential for capital growth. Since many trends may be early in their
development and no history growth patterns are available, securities owned may
present a high degree of risk.
WANGER ADVISORS TRUST
The investment objective of the WANGER U.S. SMALL CAP SERIES
("U.S. Small Cap Series") is to provide long-term growth. The U.S.
Small Cap Series will invest primarily in securities of U.S. companies
with total common stock market capitalization of less than $1 billion.
The investment objective of the WANGER INTERNATIONAL SMALL CAP SERIES
("International Small Cap Series") is to provide long-term growth. The
International Small Cap Series will invest primarily in securities of non-U.S.
companies with total common stock market capitalization of less than $1 billion.
FOR ADDITIONAL INFORMATION CONCERNING THE FUNDS, SEE THE ACCOMPANYING FUND
PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
WHAT SALES COSTS ARE CHARGED TO PURCHASE PAYMENTS UNDER THE CONTRACTS?
No deductions are made from purchase payments. A deduction for sales charges
may be taken from the proceeds when a Contract is surrendered or when an amount
is withdrawn, if assets have not been held under the Contract for a certain
period of time. However, no deduction for sales charges will be taken after the
Annuity Period has begun, unless unscheduled withdrawals are made under Annuity
Options K or L. If a sales charge is imposed, it is imposed on a first-in,
first-out basis.
If a withdrawal or surrender is made during the first year that a Contract
is in existence, a sales charge will apply to the total amount
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that is withdrawn. After the first year, 10% of the value of the Contract at the
last anniversary may be withdrawn each year free of sales charge. A deduction
for sales charges expressed as a percentage of the amount withdrawn in excess of
the 10% allowable amount is as follows:
Age of Deposit in
Complete Years: 0 1 2 3 4 5 6 7 and over
Sales Charge to be
Applied: 7% 6% 5% 4% 3% 2% 1% 0%
In the event that the Annuitant dies before the date that annuity payments
will commence, no sales charge will be imposed.
The total deferred sales charges on a Contract will never exceed 9% of the
total purchase payments (see "Sales Charges").
WHAT FEES ARE CHARGED TO THE ACCOUNT?
There is a mortality and expense risk fee and a daily administrative fee and
an annual administrative charge assessed against the Account. The mortality and
expense risk fee is 1.25% (approximately 0.40% for mortality risks and
approximately 0.85% for expense risks). The daily administrative fee is equal to
0.125% on an annual basis.
The mortality and expense risk fee and the daily administrative fee are
deducted from the aggregate average daily accumulated values of the Sub-accounts
but are not deducted from values held in the Guaranteed Interest Account.
The Annual Administrative Charge is generally $35 and is deducted each year
(or any part thereof) under each Contract. A reduced annual administrative
charge may apply. This charge is deducted on the Contract Anniversary Date from
each Sub-account and/or the Guaranteed Interest Account on a pro-rata basis, and
is not subject to increase, but may be subject to decrease.
ARE THERE ANY OTHER CHARGES OR DEDUCTIONS?
In most states, premium taxes are imposed when a Contract is annuitized
rather than when premium payments are made by the Contract Owner. PHL Variable
will reimburse itself on the date of a partial withdrawal, surrender of the
Contract, Maturity Date or payment of death proceeds (see "Premium Tax"). For a
more complete description of the fees chargeable to the Account, see "DEDUCTIONS
AND CHARGES."
In addition, certain charges are deducted from the assets of the Funds. For
investment management services, each Series of a Fund pays the investment
manager a separate monthly fee calculated on the basis of its average daily net
assets during the year.
Each Series pays a portion or all of its total operating expenses other than
the management fee. The Growth, Multi-Sector, Total Return, Money Market and
Balanced Series will pay up to .15%; the International Series will pay up to
.40%; the Real Estate and Strategic Theme Series will pay up to .25%; the U.S.
Small Cap Series will pay up to .50%; and the International Small Cap Series
will pay up to .60% of its total net assets.
WHAT ARE THE MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS?
For non-tax qualified plans and IRA's, the following minimum purchase
payments apply (unless investments are made pursuant to a bank draft investment
program):
Initial minimum per Contract: $1,000
Subsequent minimum per Contract: $ 25
For Contracts issued in connection with Individual Retirement Accounts or
pursuant to a bank draft investment program, the following minimum purchase
payments apply:
Initial minimum per Contract: $ 25
Subsequent minimum per Contract: $ 25
For contracts issued under tax-qualified or employer sponsored plans other
than individual retirement accounts, a minimum annual premium of $1,000 must be
paid.
MAY I ALLOCATE MY PURCHASE PAYMENTS AMONG AVAILABLE OPTIONS?
Yes. You may choose the amount of each purchase payment to be directed to
each Sub-account and/or to the Guaranteed Interest Account, provided that the
minimum initial purchase payment requirements have been met (see "PURCHASE OF
CONTRACTS").
MAY I TRANSFER AMOUNTS ALLOCATED TO A SUB-ACCOUNT OR THE GUARANTEED INTEREST
ACCOUNT?
Yes. You may transfer some or all of the Contract Value among one or more
available Sub-accounts and/or the Guaranteed Interest Account provided that the
minimum initial purchase payment requirements have been met. Also, if elected,
the Temporary Money Market Allocation Amendment provides that no transfers may
be made until the termination of the Free Look Period. PHL Variable may limit
the number of transfers allowed during a Contract year, but in no event will the
limit be less than six transfers per year (see "Transfers"). However, there are
additional restrictions on transfers from the Guaranteed Interest Account as
described in Appendix A.
DOES THE CONTRACT PROVIDE FOR PAYMENT UPON DEATH?
The Contract provides that if the Owner and the Annuitant are the same and
the Owner/Annuitant dies before annuity payments begin and there is no surviving
joint Owner, payment to the Owner/Annuitant's beneficiary will be made and no
surrender charge will be imposed. The Contract also provides for payment upon
death after the Contract Maturity Date (see "Payment Upon Death Before Maturity
Date" and "Payment Upon Death After Maturity Date").
IS THERE A SHORT-TERM CANCELLATION RIGHT?
An Owner may surrender a Contract for any reason within 10 days after its
receipt and receive in cash the adjusted value of the initial purchase payment.
The Owner may receive more or less than the initial payment depending on
investment experience within the Sub-account during the 10-day period, unless
the Contract is issued with a Temporary Money Market Allocation Amendment, in
which case the initial purchase payment is refunded. If the initial purchase
payment, or any portion thereof, was allocated to the Guaranteed Interest
Account, that payment (or portion) and any earned interest is refunded (see
"Free Look Period").
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HOW WILL THE ANNUITY PAYMENTS BE DETERMINED ON THE MATURING OF A CONTRACT?
The Owner and Annuitant bear the risk of the investment performance during
the Accumulation Period unless the Guaranteed Interest Account is selected. Once
annuity payments commence, investment in the Account will continue and the Owner
and Annuitant will continue to bear the risk of investment unless a Fixed
Payment Annuity is elected. If a Fixed Payment Annuity is elected, payments will
be fixed, and guaranteed by the general assets of PHL Variable. The fixed
payment schedule is a part of the Contract and the Owner may also be given the
opportunity to choose another annuity option available from PHL Variable at the
maturity of the Contract. If the current practice settlement rates in effect for
Contracts are more favorable than the applicable rates guaranteed under the
Contract, the current rates shall be applied (see "The Annuity Period").
CAN MONEY BE WITHDRAWN FROM THE CONTRACT?
If the Annuitant is living, amounts held under the Contract may be withdrawn
in whole or in part prior to the Maturity Date, or after the Maturity Date under
Annuity Options K or L. Certain limitations apply to Contracts held under 403(b)
plans (see "Qualified Plans; Tax-Sheltered Annuities"). There may be a penalty
assessed in connection with withdrawals (see "FEDERAL INCOME TAXES").
CAN THE CONTRACT LAPSE?
If on any Valuation Date the total Contract Value equals zero, or, the
premium tax reimbursement due on a surrender or partial withdrawal is greater
than or equal to the Contract Value, the Contract will immediately terminate and
lapse without value.
The foregoing summary information should be read in conjunction with the
detailed information appearing elsewhere in this Prospectus.
THE VARIABLE ACCUMULATION ANNUITY
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The individual deferred variable accumulation annuity contract (the
"Contract") issued by PHL Variable may be significantly different from a fixed
annuity contract in that, unless the Guaranteed Interest Account is selected, it
is the Owner and Annuitant under a Contract who assume the risk of investment
gain or loss rather than PHL Variable. To the extent that payments are not
allocated to the Guaranteed Interest Account, the amounts which will be
available for annuity payments under a Contract will depend on the investment
performance of the amounts allocated to the Sub-accounts of the PHL Variable
Accumulation Account (the "Account"). Upon the maturity of a Contract, the
amounts held under a Contract will continue to be invested in the Account and
monthly annuity payments will vary in accordance with the investment experience
of the selected Sub-accounts. However, a fixed annuity may be elected, in which
case PHL Variable will guarantee specified monthly annuity payments.
The Owner selects the investment objective of each Contract on a continuing
basis by directing the allocation of purchase payments and accumulated value
among the Guaranteed Interest Account or the Multi-Sector Sub-account, Money
Market Sub-account, Growth Sub-account, Total Return Sub-account, International
Sub-account, Balanced Sub-account, Real Estate Sub-account, Strategic Theme
Sub-account, U.S. Small Cap Sub-account and the International Small Cap
Sub-account.
PHL VARIABLE AND THE PHL VARIABLE
ACCUMULATION ACCOUNT
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PHL Variable is a wholly-owned indirect subsidiary of Phoenix Home Life
Mutual Insurance Company. Its Executive Office is located at One American Row,
Hartford, Connecticut 06102 and its main administrative office is located at
100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. PHL Variable is a
Connecticut stock company formed on April 24, 1981. On December 31, 1995 it
had total assets of $36.9 million. PHL Variable sells variable annuity
contracts through its own field force of agents and through brokers. Its
operations are currently conducted in 36 states.
On December 7, 1994, PHL Variable established the Account, a separate
account created under the insurance laws of Connecticut. The Account is
registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act") and
it meets the definition of a "separate account" under the 1940 Act. Registration
under the 1940 Act does not involve supervision of the management or investment
practices or policies of the Account or PHL Variable.
Under Connecticut law, all income, gains or losses of the Account, whether
realized or not, must be credited to or charged against the amounts placed in
the Account without regard to the other income, gains and losses of PHL
Variable. The assets of the Account may not be charged with liabilities arising
out of any other business that PHL Variable may conduct. Obligations under the
Contracts are obligations of PHL Variable.
Contributions to the Guaranteed Interest Account are not invested in the
Account; rather, they become part of the general account of PHL Variable (the
"General Account"). The General Account supports all insurance and annuity
obligations of PHL Variable and is made up of all of its general assets other
than those allocated to any separate account such as the Account. For more
complete information concerning the Guaranteed Interest Account, see Appendix A.
THE PHOENIX EDGE SERIES FUND
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Certain Sub-accounts of the Account invest in corresponding Series of The
Phoenix Edge Series Fund. The investment adviser of all of the Series (except
the Real Estate Sub-account) is Phoenix Investment Counsel, Inc. ("PIC"). The
investment adviser of the Real Estate Series is Phoenix Realty Securities, Inc.
("PRS"). The fundamental investment objective of each of the Series of the Fund
is as follows:
(1) MULTI-SECTOR FIXED INCOME SERIES: The investment objective of the
Multi-Sector Series is to seek long-term total return by investing in a
diversified portfolio of high yield (high risk) and high quality fixed
income securities. For a discussion of the risks associated with
investing in high yield bonds, please see the accompanying Fund
prospectus.
(2) MONEY MARKET SERIES: The investment objective of the Money Market
Series is to provide maximum current income
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consistent with capital preservation and liquidity. The Money Market
Series will invest exclusively in high quality money market
instruments.
(3) GROWTH SERIES: The investment objective of the Growth Series is to
achieve intermediate and long-term growth of capital, with income as a
secondary consideration. The Growth Series will invest principally in
common stocks of corporations believed by management to offer growth
potential.
(4) TOTAL RETURN SERIES: The investment objective of the Total
Return Series is to realize as high a level of total rate of
return over an extended period of time as is considered
consistent with prudent investment risk. The Total Return
Series will invest in stocks, bonds and money market
instruments in accordance with the Investment Adviser's
appraisal of investments most likely to achieve the highest
total rate of return.
(5) INTERNATIONAL SERIES: The International Series seeks as its
investment objective a high total return consistent with
reasonable risk. It intends to achieve its objective by investing
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. Investments may be
made for capital growth or for income or any combination
thereof for the purpose of achieving a high overall return.
(6) BALANCED SERIES: The investment objective of the Balanced Series is to
seek reasonable income, long-term capital growth and conservation of
capital. The Balanced Series intends to invest based on combined
considerations of risk, income, capital enhancement and protection of
capital value.
(7) REAL ESTATE SERIES: The investment objective of the Real
Estate Series is to seek capital appreciation and income with
approximately equal emphasis. It intends under normal
circumstances to invest in marketable securities of publicly
traded real estate investment trust (REITs) and companies
that operate, develop, manage and/or invest in real estate
located primarily in the United States.
(8) STRATEGIC THEME SERIES: The investment objective of the Strategic Theme
Series is to seek long-term appreciation of capital through investing
in securities of companies that the adviser believes are particularly
well positioned to benefit from cultural, demographic, regulatory,
social or technological changes worldwide.
WANGER ADVISORS TRUST
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The investment adviser of the U.S. Small Cap and International Small Cap
Series is Wanger Asset Management, L.P. The fundamental investment objective of
each of the Series is as follows:
(1) U.S. SMALL CAP SERIES: The investment objective of the U.S.
Small Cap Series is to provide long-term growth. The U.S.
Small Cap Series will invest primarily in securities of U.S.
companies with total common stock market capitalization of
less than $1 billion.
(2) INTERNATIONAL SMALL CAP SERIES: The investment objective of the
International Small Cap Series is to provide long-term growth. The
International Small Cap Series will invest primarily in securities of
non-U.S. companies with total common stock market capitalization of
less than $1 billion.
Each Series will be subject to the market fluctuations and risks inherent in
the ownership of any security and there can be no assurance that any Series'
stated investment objective will be realized.
Shares of the Funds may be sold to other separate accounts of PHL Variable
or its affiliates or of other insurance companies funding variable annuity or
variable life insurance contracts. It is conceivable that it may be
disadvantageous for variable life insurance separate accounts and variable
annuity separate accounts to invest in the Funds simultaneously. Although
neither PHL Variable nor the Funds currently foresee any such disadvantages
either to variable annuity Contract Owners or to variable life insurance
policyowners, the Funds' Trustees intend to monitor events in order to identify
any material conflict between variable annuity Contract Owners and variable life
insurance policyowners and to determine what action, if any, should be taken in
response thereto. Material conflicts could result from, for example, (1) changes
in state insurance laws, (2) changes in Federal income tax laws, (3) changes in
the investment management of any portfolio of a Fund, or (4) differences in
voting instructions between those given by variable life insurance policyowners
and those given by variable annuity Contract Owners.
FOR ADDITIONAL INFORMATION CONCERNING THE FUNDS, PLEASE SEE THE ACCOMPANYING
FUND PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
PURCHASE OF CONTRACTS
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The minimum initial purchase payment for each Contract purchased is $1,000.
However, for contracts purchased in connection with Individual Retirement
Accounts (IRAs), the minimum initial purchase payment is $25 and for contracts
purchased in connection with tax-qualified or employer sponsored plans, a
minimum annual payment of $1,000 is required. In addition, a Contract Owner may
authorize his bank to draw $25 or more from his personal checking account
monthly to purchase Units in any available Sub-account or in the Guaranteed
Interest Account. The amount the Contract Owner designates will be automatically
invested on the date the bank draws on his account. If this "check-o-matic"
privilege is elected, the minimum initial purchase payment is $25. This payment
must accompany the application. Each subsequent purchase payment under a
Contract must be at least $25.
Generally, a Contract may not be purchased with respect to a proposed
Annuitant who is eighty-one years of age or older. Total purchase payments in
excess of $1,000,000 cannot be made without the permission of PHL Variable.
While the Annuitant is living and the Contract is in force, purchase payments
may be resumed at any time before the Maturity Date of a Contract.
Purchase payments received under the Contracts will be allocated to any
Sub-account or to the Guaranteed Interest Account, or a
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combination thereof, in the proportion specified in the application for the
Contract or as indicated by the Owner from time to time. Changes in the
allocation of purchase payments will be effective as of receipt by Variable
Products Operations of notice of election in a form satisfactory to PHL
Variable and will apply to any purchase payments accompanying such notice or
made subsequent to the receipt of the notice, unless otherwise requested by
the Contract Owner.
DEDUCTIONS AND CHARGES
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PREMIUM TAX
Whether or not a premium tax is imposed will depend upon, among other
things, the Owner's state of residence, the Annuitant's state of residence, the
status of PHL Variable within those states and the insurance tax laws of those
states. PHL Variable will pay any premium tax due and will only reimburse itself
upon the earlier of partial withdrawal, surrender of the Contract, Maturity Date
or payment of death proceeds. For a list of states and premium taxes, see
Appendix B to this Prospectus.
SALES CHARGES
A deduction for sales charges (also referred to in this Prospectus as
surrender charges) for this Contract may be taken from proceeds of withdrawals
from, or complete surrender of, the Contract if assets are not held under the
Contract for a certain period of time (see chart below). No sales charge will be
taken after the Annuity Period has begun except with respect to unscheduled
withdrawals under Annuity Option K or L below (see "Annuity Options"). Any sales
charge is imposed on a first-in, first-out basis.
With respect to withdrawals or surrenders, up to 10% of the Contract Value
may be withdrawn in a Contract year, either in a lump sum or by multiple
scheduled or unscheduled partial surrenders, without the imposition of a sales
charge. During the first Contract year, the 10% withdrawal without a sales
charge is only available on Contracts issued on or after May 1, 1996 and will be
determined based on the Contract Value at the time of the first partial
withdrawal. In all subsequent years, the 10% will be based on the previous
Contract anniversary value. The deduction for sales charges, expressed as a
percentage of the amount redeemed in excess of the 10% allowable amount, is as
follows:
AGE OF DEPOSIT IN CONTINGENT DEFERRED
COMPLETE YEARS FROM SALES CHARGE AS A
PAYMENT DATE UNIT PERCENTAGE OF AMOUNT
RELEASED WAS CREDITED WITHDRAWN
---------------------- ----------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and over 0%
In the event that the Annuitant dies before the Maturity Date of the
Contract, the sales charge described in the table above will not apply.
The total deferred sales charges on a Contract will never exceed 9% of the
total purchase payments, and the applicable level of sales charge cannot be
changed with respect to outstanding Contracts. Sales charges imposed in
connection with partial surrenders will be deducted from the Sub-accounts and
the Guaranteed Interest Account on a pro-rata basis. Any distribution costs not
paid for by sales charges will be paid by PHL Variable from the assets of the
General Account.
CHARGES FOR MORTALITY AND EXPENSE RISKS
While fixed annuity payments to Annuitants will reflect the investment
performance of the applicable Series of the Funds during the Accumulation
Period, the amount of such payments will not be decreased because of adverse
mortality experience of Annuitants as a class or because of an increase in
actual expenses of PHL Variable over the expense charges provided for in the
Contract. PHL Variable assumes the risk that Annuitants as a class may live
longer than expected (necessitating a greater number of annuity payments) and
that its expenses may be higher than the deductions for such expenses.
In assuming the mortality risk, PHL Variable agrees to continue life annuity
payments, determined in accordance with the annuity tables and other provisions
of the Contract, to the Annuitant or other payee for as long as he or she may
live.
PHL Variable charges each Sub-account the daily equivalent of 1.25% on an
annual basis of the current value of the Sub-account's net assets for mortality
and expense risks assumed. (See the Contract's Schedule Pages). No mortality
and expense risk charge is deducted from the Guaranteed Interest Account. If the
percentage charges prove insufficient to cover actual insurance underwriting
costs and excess administrative costs, then the loss will be borne by PHL
Variable; conversely, if the amount deducted proves more than sufficient, the
excess will be a profit to PHL Variable. Any such profit may be used, as a part
of PHL Variable General Account's assets, to meet sales expenses, if any,
which are in excess of sales commission revenue generated from any sales
charges. PHL Variable has concluded that there is a reasonable likelihood that
the distribution financing arrangement being used in connection with the
Contract will benefit the Account and the Contract Owners.
CHARGES FOR ADMINISTRATIVE SERVICES
PHL Variable is responsible for administering the Contract. In this
connection, PHL Variable, among other things, maintains an account for each
Owner and Annuitant, makes all disbursements of benefits, furnishes
administrative and clerical services for each Contract, makes disbursements to
pay obligations chargeable to the Account, maintains the accounts, records, and
other documents relating to the business of the Account required by regulatory
authorities, causes the maintenance of the registration and qualification of the
Account under laws administered by the Securities and Exchange Commission,
prepares and distributes notices and reports to Owners, and the like. PHL
Variable also reimburses Phoenix Equity Planning Corporation for any expenses
incurred by it as "principal underwriter." All organizational expenses of the
Account are paid by PHL Variable.
To cover its fixed cost of administration, such as preparation of billings
and statements of account, PHL Variable charges each Contract $35 each year
prior to the Contract's Maturity Date. A reduced charge may apply. For
Contracts issued under a tax-qualified plan other than an IRA, a reduced annual
administrative charge of $15 may apply. For Contracts with a Contract Value of
at least $50,000
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there is no annual administrative charge. This cost-based charge is deducted
from each Sub-account and/or the Guaranteed Interest Account holding the assets
of the Owner or on a pro-rata basis from two or more Sub-accounts or the
Guaranteed Interest Account in relation to their values under the Contract, and
is not subject to increase but may be subject to decrease. This charge is
deducted on the Contract anniversary date for services rendered since the
preceding Contract anniversary date. Upon surrender of a Contract, the entire
annual administrative charge of $35 is deducted regardless of when the
surrender occurs.
PHL Variable also charges each Sub-account available through a Contract the
daily equivalent of 0.125% on an annual basis of the accumulated value of the
Sub-account to cover its variable costs of administration, such as printing and
distribution of Contract Owner meetings. This cost-based fee is not deducted
from the Guaranteed Interest Account.
PHL Variable may reduce the annual administrative charges for Contracts
issued under group or sponsored arrangements such as Internal Revenue Code
Section 403(b) or 457 Plans. Generally, administrative costs per Contract 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 Contracts are purchased and other factors. The amounts of
reductions will be considered on a case-by-case basis but will be applied in a
uniform, nondiscriminatory manner that reflects the reduced administrative costs
expected as a result of sales to a particular group or sponsored arrangement.
No sales or annual administrative charges will be deducted for Contracts
sold to registered representatives of the principal underwriter or to officers,
directors and employees of PHL Variable or its affiliates and their spouses; or
to employees or agents who retire from PHL Variable or its affiliates or Phoenix
Equity Planning Corporation, or its affiliates or to registered representatives
of broker/dealers with whom Phoenix Equity Planning Corporation has selling
agreements, regardless as to their state of residence.
OTHER CHARGES
As compensation for investment management services, the Advisers are
entitled to a fee, payable monthly and based on an annual percentage of the
average aggregate daily net asset values of each Series as summarized in the
table below:
PHOENIX INVESTMENT COUNSEL, INC.
RATE FOR FIRST RATE FOR NEXT RATE FOR EXCESS OVER
SERIES $250,000,000 $250,000,000 $500,000,000
Money Market....... .40% .35% .30%
Multi-Sector....... .50% .45% .40%
Balanced........... .55% .50% .45%
Total Return....... .60% .55% .50%
Growth............. .70% .65% .60%
International...... .75% .70% .65%
Strategic Theme.... .75% .70% .65%
PHOENIX REALTY SECURITIES, INC.
RATE FOR FIRST RATE FOR NEXT RATE FOR EXCESS OVER
SERIES $1,000,000,000 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------
Real Estate...... .75% .70% .65%
WANGER ASSET MANAGEMENT, L.P.
RATE FOR FIRST RATE FOR NEXT RATE FOR EXCESS OVER
SERIES $100,000,000 $150,000,000 $250,000,000
- ------ ------------ ------------ --------------
U.S. Small Cap... 1.00% .95% .90%
International 1.30% 1.20% 1.10%
Small Cap........
Each Series pays a portion or all of its total operating expenses other than
the management fee; the Growth, Multi-Sector, Total Return, Money Market and
Balanced Series will pay up to .15%; the International Series will pay up to
.40%; the Real Estate and Strategic Theme Series will pay up to .25%; the U.S.
Small Cap Series will pay up to .50%; and the International Small Cap Series
will pay up to .60% of its total net assets.
These Fund charges and other expenses are described more fully in the
accompanying Fund prospectuses.
THE ACCUMULATION PERIOD
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ACCUMULATION UNITS
Initial purchase payments will be applied within two days if the application
for a Contract is complete. If an incomplete application is completed within
five business days of receipt by Variable Products Operations, the initial
purchase payment will be applied within two days of the completion of the
application. In the event that Variable Products Operations does not accept the
application within five business days or if an order form is not completed
within five business days of receipt by Variable Products Operations, then the
purchase payment will be immediately returned. If the Guaranteed Interest
Account is chosen, additional purchase payments are deposited on the date of
receipt of such purchase payment at Variable Products Operations. If one or more
of the Sub-accounts is chosen, additional purchase payments are applied to the
purchase of Accumulation Units of the Sub-account(s) chosen, at the value of
such Units next determined after the receipt of such purchase payment at
Variable Products Operations. The number of Accumulation Units of a Sub-account
purchased with a specific purchase payment will be determined by dividing the
applied purchase payment by the value of an Accumulation Unit in that
Sub-account next determined after receipt of the purchase payment. The value of
the Accumulation Units of a Sub-account will vary depending upon the investment
performance of the applicable Series of the Funds, the fee of the Fund's
investment adviser and the charges and deductions made against the Sub-account.
ACCUMULATION UNIT VALUES
At any date prior to the Maturity Date of the Contract, the total value of
the Accumulation Units in a Sub-account which has been credited under a Contract
can be computed by multiplying the number of such Units by the appropriate value
of an Accumulation Unit in effect for such date. The value of an Accumulation
Unit on a day other than a Valuation Date is the value of the Accumulation Unit
on the next Valuation Date. The number of Accumulation Units in each
Sub-account credited under each Contract and their current value will be
reported to the Owner at least annually.
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TRANSFERS
A Contract Owner may, at any time but no later than 30 days prior to the
Maturity Date of a Contract, elect to transfer all or any part of the Contract
Value among one or more Sub-accounts or the Guaranteed Interest Account. Any
such transfer from a Sub-account will result in the redemption of Accumulation
Units and, if another Sub-account is selected, in the purchase of Accumulation
Units on the basis of the respective values next determined after the receipt by
Variable Products Operations of written notice of election in a form
satisfactory to PHL Variable. A transfer among Sub-accounts or the Guaranteed
Interest Account does not automatically change the payment allocation schedule
of a contract.
A Contract Owner may also request transfers and changes in payment
allocations among available Sub-accounts or the Guaranteed Interest Account by
calling 800-447-4312 between the hours of 8:30 A.M. and 4:00 P.M. Eastern Time.
Unless the Contract Owner elects in writing not to authorize telephone transfers
or allocation changes, telephone transfer orders and allocation changes will
also be accepted on behalf of the Contract Owner from his or her registered
representative. Telephone transfer instructions and change in payment
allocation instructions will be recorded on tape; however, PHL Variable will not
be able to verify the authenticity of any order received and will not be liable
for any loss incurred as a result of acting upon telephone transfer or change in
payment allocation instructions unless such loss results from the erroneous
processing of a telephone instruction. These telephone privileges may be
modified or terminated at any time and during times of extreme market
volatility, may be difficult to exercise. In such cases a Contract Owner should
submit a written request.
A Contract Owner may also elect to transfer funds automatically among the
Sub-accounts or the Guaranteed Interest Account on a monthly, quarterly,
semi-annual or annual basis under the Systematic Transfer Program for Dollar
Cost Averaging ("Systematic Transfer Program"). Under this Systematic Transfer
Program, the minimum initial and subsequent transfer amounts are $25 monthly,
$75 quarterly, $150 semi-annually, or $300 annually. A Contract Owner must have
an initial value of $2,000 in the Guaranteed Interest Account or the Sub-account
that funds will be transferred from, and if the value in that Sub-account or the
Guaranteed Interest Account drops below the elected transfer amount, the entire
remaining balance will be transferred and no more systematic transfers will be
processed. Funds may be transferred from only one Sub-account or the
Guaranteed Interest Account, but may be allocated to multiple Sub-accounts.
Under the Systematic Transfer Program, Contract Owners may transfer
approximately equal amounts from the Guaranteed Interest Account over a
minimum 18-month period.
All transfers under the Systematic Transfer Program will be executed on the
basis of the respective values as of the first of the month rather than on the
basis of the respective values next determined after receipt of the transfer
request. If the first of the month falls on a holiday or weekend, then the
transfer will be processed on the next succeeding business day.
Unless PHL Variable agrees otherwise or the Systematic Transfer Program has
been elected, a Contract Owner may make only one transfer per Contract year from
the Guaranteed Interest Account. Non-systematic transfers from the Guaranteed
Interest Account will be effectuated on the date of receipt by Variable Products
Operations except as otherwise may be requested by the Contract Owner. For
non-systematic transfers, the amount that may be transferred from the Guaranteed
Interest Account at any one time cannot exceed the greater of $1,000 or 25% of
the Contract Value in the Guaranteed Interest Account at the time of transfer.
PHL Variable reserves the right not to accept transfer instructions from
registered representatives acting under powers of attorney for multiple Contract
Owners unless the registered representative's broker-dealer and PHL Variable
have entered into a third party transfer service agreement.
No sales charge will be assessed when a transfer is made. The date a payment
was credited for the purpose of calculating the sales charge will remain the
same notwithstanding the transfer. Currently, there is no charge for transfers;
however, the Account reserves the right to charge a transfer fee of $10.00 per
transfer after the first two in each Contract year to defray administrative
costs. Currently, unlimited transfers are permitted; however, the Account
reserves the right to limit the number of transfers made during each Contract
year a Contract is in existence. When the temporary Money Market Allocation
Amendment has been elected, no transfers may be made until the end of the free
look period (See "Free Look Period"). However, Contract Owners will be permitted
at least six transfers during each Contract year. THERE ARE ADDITIONAL
RESTRICTIONS ON TRANSFERS FROM THE GUARANTEED INTEREST ACCOUNT AS DESCRIBED
ABOVE AND IN APPENDIX A.
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
If the Annuitant is living, amounts held under the Contract may be withdrawn
in whole or in part prior to the Maturity Date, or after the Maturity Date under
Annuity Options K or L. Prior to the Maturity Date, the Contract Owner may
withdraw up to 10% of the Contract Value in a Contract year, either in a lump
sum or by multiple scheduled or unscheduled partial surrenders, without the
imposition of a sales charge. During the first Contract year, the 10% withdrawal
without a sales charge is only available on Contracts issued on or after May 1,
1996 and will be determined based on the Contract Value at the time of the first
partial withdrawal. In all subsequent years, the 10% will be based on the
previous Contract anniversary value. A signed written request for withdrawal
must be sent to Variable Products Operations. If the Contract Owner has not yet
reached age 59 1/2, a 10% penalty tax will apply on taxable income withdrawn
(see "Federal Income Taxes"). The appropriate number of Accumulation Units of a
Sub-account will be redeemed at their value next determined after the receipt by
Variable Products Operations of a written notice in a form satisfactory to PHL
Variable. Unless the Owner designates otherwise, Accumulation Units redeemed in
a partial withdrawal will be redeemed in each Sub-account in the same proportion
as the value of the Accumulation Units of the Contract is then allocated among
the Sub-accounts. Also, Contract Values in the Guaranteed Interest Account will
be withdrawn in a partial withdrawal in the same proportion as the Contract
Value is then allocated to the Guaranteed Interest Account, unless the Owner
designates otherwise. The redemption value of Accumulation Units may be more or
less than the purchase payments applied under the Contract to purchase the
Accumulation Units, depending upon the investment performance in each
Sub-account. The resulting cash
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<PAGE>
payment will be made in a single sum, ordinarily within seven days after
receipt of such notice. However, redemption and payment may be delayed under
certain circumstances (see "Deferment of Payment"). There may be adverse tax
consequences to certain surrenders and partial withdrawals (see "Surrenders or
Withdrawals Prior to the Contract Maturity Date"). Certain restrictions on
redemptions are imposed on Contracts used in connection with Internal Revenue
Code Section 403(b) plans (see "Qualified Plans"; "Tax-Sheltered Annuities"). A
deduction for sales charges may be imposed on partial withdrawals from, and
complete surrender of, a Contract (see "Sales Charges"). Any sales charge is
imposed on a first-in, first-out basis.
Any request for a withdrawal from, or complete surrender of, a Contract
should be mailed to Variable Products Operations, PHL Variable Insurance
Company, 101 Munson Street, PO Box 942, Greenfield, Massachusetts 01302-0942.
LAPSE OF CONTRACT
If on any Valuation Date the Contract Value is zero, or the premium tax
reimbursement due on surrender or partial withdrawal is greater than or equal to
the Contract Value, the Contract will immediately terminate and lapse without
value. Within 30 days after this Valuation Date, PHL Variable will notify the
Contract Owner in writing that the Contract has lapsed.
PAYMENT UPON DEATH BEFORE MATURITY DATE
If the Owner is the Annuitant and dies before the Contract Maturity Date,
the death benefit will be paid under the Contract to the Owner/Annuitant's
beneficiary. If the Owner and the Annuitant are not the same and the Annuitant
dies prior to the Maturity Date, the contingent Annuitant becomes the Annuitant.
If there is no contingent Annuitant, the death benefit will be paid to the
Annuitant's beneficiary. The death benefit is calculated according to the
following method. If the death occurred prior to the first Contract anniversary
following the Annuitant's 85th birthday and during the first 7 years, this
payment would be equal to the greater of: (a) the sum of all purchase payments
made under the Contract less any prior partial withdrawals (see "Surrender of
Contract; Partial Withdrawals"); or (b) the Contract Value next determined
following receipt of a certified copy of the death certificate at Variable
Products Operations. If the death occurred prior to the first Contract
anniversary following the Annuitant's 85th birthday and during Contract years 8
through 14 (or during any subsequent 7-year period), this payment would be equal
to the greater of: (a) the death benefit that would have been payable at the end
of the immediately preceding 7-year period, plus any purchase payments made and
less any partial withdrawals since such date; or (b) the Contract Value next
determined following receipt of a certified copy of the death certificate at
Variable Products Operations. In Contract years following the Annuitant's 85th
birthday, the death benefit is the Contract Value next determined following
receipt of a certified copy of the death certificate at Variable Products
Operations.
If the Owner and the Annuitant are not the same and the Owner dies prior to
the Maturity Date and there is no surviving joint Owner, upon receipt of due
proof of death, PHL Variable will fully surrender the Contract and pay the Cash
Surrender Value (Contract Value less any applicable sales charge) to the Owner's
beneficiary (see "Sales Charges").
Payments will be made in a single sum to the beneficiary designated by the
Owner prior to the Annuitant's death unless an optional method of settlement had
been elected by the Owner. If an optional method of settlement had not been
elected by the Owner, the beneficiary may elect an optional method of
settlement in lieu of a single sum. No deduction is made for sales or other
expenses upon such election (see "Sales Charges"). Notwithstanding the
foregoing, if the amount to be paid is less than $2,000, it will be paid in a
single sum (see "Annuity Options"). Depending upon state law, the payment to the
beneficiary may avoid probate and the death benefit may be reduced by any
premium tax due (see "Premium Tax").
THE ANNUITY PERIOD
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VARIABLE ACCUMULATION ANNUITY CONTRACTS
Annuity payments will commence on the Contract's Maturity Date if the
Annuitant is then living and the Contract is then in force. On the Maturity Date
and thereafter, investment in the Account is continued unless a Fixed Payment
Annuity is elected. No sales charge is taken. Each Contract will provide, at the
time of its issuance, for a Variable Payment Life Annuity with 10 Year Period
Certain unless a different annuity option is elected by the Owner (see "Annuity
Options"). Under a Variable Payment Life Annuity with 10 Year Period Certain,
annuity payments, which may vary in amount based on the performance of the
Sub-account selected, are made monthly for life and, if the Annuitant dies
within ten years after the Maturity Date, the Annuitant's beneficiary will be
paid the payments remaining in the 10-year period. A different form of annuity
may be elected by the Owner prior to the Maturity Date. Once annuity payments
have commenced, the Annuity Option may not be changed.
If the amount to be applied on the Maturity Date is less than $2,000, PHL
Variable may pay such amount in one lump sum in lieu of providing an annuity. If
the initial monthly annuity payment under an Annuity Option would be less than
$20, PHL Variable may also make a single sum payment equal to the total Contract
Value on the date the initial payment would be payable, in place of all other
benefits provided by the Contract, or, make periodic payments quarterly,
semi-annually or annually in place of monthly payments.
Each Contract specifies a provisional Maturity Date at the time of its
issuance. The Owner may subsequently elect a different Maturity Date. The
Maturity Date shall not be earlier than the fifth Contract anniversary or later
than the Contract anniversary nearest the Annuitant's ninety-fifth birthday
unless the Contract is issued in connection with certain qualified plans. Under
qualified plans, the Maturity Date must be such that distributions begin no
later than April 1st following the Annuitant's attained age 70 1/2, unless you
and PHL Variable agree otherwise.
The Maturity Date election shall be made by written notice and must be
received by Variable Products Operations thirty days before the provisional
Maturity Date. If a Maturity Date, which is different from the provisional
Maturity Date of the Contract, is not elected by the Owner, the provisional
Maturity Date becomes the Maturity Date. Particular care should be taken in
electing the Maturity Date of a Contract issued under a Tax-Sheltered Annuity, a
Keogh Plan or an Individual Retirement Account (IRA) plan. (See "Tax-Sheltered
Annuities," "Keogh Plans," and "Individual Retirement Accounts.")
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<PAGE>
ANNUITY OPTIONS
Unless an alternative annuity payment option is elected on or before the
Maturity Date, the amounts held under a Contract on the Maturity Date will
automatically be applied to provide a 10-year period certain variable payment
monthly life annuity based on the life of the Annuitant under Option I described
below. Any annuity payments falling due after the death of the Annuitant during
the period certain will be paid to the Annuitant's beneficiary. Each annuity
payment will be based upon the value of the Annuity Units credited to the
Contract. The number of Annuity Units in each Sub-account to be credited is
based on the value of the Accumulation Units in that Sub-account and the
applicable annuity purchase rate. The purchase rate differs according to the
payment option selected and the age of the Annuitant. The value of the Annuity
Units will vary with the investment performance of each Sub-account to which
Annuity Units are credited based on an assumed investment return of 4 1/2% per
year. This rate is a fulcrum rate around which Variable Annuity payments will
vary to reflect whether actual investment experience of the Sub-account is
better or worse than the assumed investment return. The assumed investment rate
and the calculation of variable income payments for such 10-year period certain
variable payment life annuity and for Options J and K described below are
described in more detail in the Contract and in the Statement of Additional
Information.
In lieu of the 10-year period certain variable payment life annuity (see
"Option I--Variable Payment Life Annuity with 10 Year Period Certain"), the
Owner may, by written request received by Variable Products Operations on or
before the Maturity Date of the Contract, elect any of the other annuity payment
options described below. No surrender charge will be assessed under any annuity
option, unless unscheduled withdrawals are made under Annuity Options K or L.
The level of annuity payments payable under the following options is based
upon the option selected and, depending on the option chosen, such factors as
the age at which payments begin, the form of annuity, annuity purchase rates,
assumed investment return (for variable payment annuities), and the frequency of
payments.
PHL Variable deducts a daily charge for mortality and expense risks and a
daily administrative fee from Contract Values held in the Sub-accounts (see
"Charges For Mortality and Expense Risks").
Therefore, electing Option K will result in a deduction being made even though
PHL Variable assumes no mortality risk under that option.
OPTION A--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN
Provides a monthly income for the life of the Annuitant. In the event of
death of the Annuitant, the annuity income will be paid to the beneficiary until
the end of the specified period certain. For example, a 10-year period certain
will provide a total of 120 monthly payments. The certain period may be 5, 10,
or 20 years.
OPTION B--NON-REFUND LIFE ANNUITY
Provides a monthly income for the lifetime of the Annuitant. No income is
payable after the death of the Annuitant.
OPTION C--DISCONTINUED
OPTION D--JOINT AND SURVIVOR LIFE ANNUITY
Provides a monthly income for the lifetimes of both the Annuitant and a
joint annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. The amount to be continued to the survivor is 100% of the amount
of the joint annuity payment, as elected at the time the annuity option is
chosen. No income is payable after the death of the survivor annuitant.
Under Option D, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION E--INSTALLMENT REFUND LIFE ANNUITY
Provides a monthly income for the life of the Annuitant. In the event of the
Annuitant's death, the annuity income will continue to the Annuitant's
beneficiary until the amount applied to purchase the annuity has been
distributed.
OPTION F--JOINT AND SURVIVOR LIFE ANNUITY WITH 10 YEAR
PERIOD CERTAIN
Provides a monthly income for the lifetime of both the Annuitant and a joint
annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue to the survivor.
If the survivor dies prior to the end of the 10-year period, the annuity income
will continue to the named beneficiary until the end of the 10-year period
certain.
Under Option F, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION G--PAYMENTS FOR SPECIFIED PERIOD
Provides equal income installments for a specified period of years whether
the Annuitant lives or dies. Any specified whole number of years from 5 to 30
years may be elected.
OPTION H--PAYMENTS OF SPECIFIED AMOUNT
Provides equal installments of a specified amount over a period of at least
5 years. The specified amount may not be greater than the total annuity amount
divided by five annual installment payments. If the Annuitant dies prior to the
end of the elected period certain, annuity payments will continue to the
Annuitant's beneficiary until the end of the elected period certain.
OPTION I--VARIABLE PAYMENT LIFE ANNUITY WITH 10 YEAR
PERIOD CERTAIN
Unless another annuity option has been elected, this option will
automatically apply to any Contract proceeds payable on the Maturity Date. It
provides a variable payout monthly annuity based on the life of the Annuitant.
In the event of the death of the Annuitant, the annuity payments are made to the
Annuitant's beneficiary until the end of the 10-year period. The 10-year
period provides a total of 120 monthly payments. Payments will vary as to dollar
amount, based on the investment experience of the Sub-accounts to which proceeds
are applied.
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<PAGE>
OPTION J--JOINT SURVIVOR VARIABLE PAYMENT LIFE ANNUITY
WITH 10 YEAR PERIOD CERTAIN
Provides a variable payout monthly annuity while the Annuitant and the
designated joint annuitant are living and continues thereafter during the
lifetime of the survivor or, if later, until the end of a 10-year period
certain. Payments will vary as to dollar amount, based on the investment
experience of the Sub-accounts to which proceeds are applied. The joint
annuitant must be named at the time the option is elected and cannot be changed.
The joint annuitant must have reached an adjusted age of 40, as defined in the
Contract.
OPTION K--VARIABLE PAYMENT ANNUITY FOR A SPECIFIED PERIOD
Provides variable payout monthly income installments for a specified period
of time, whether the Annuitant lives or dies. The period certain specified must
be in whole numbers of years from 5 to 30. However, the period certain selected
by the beneficiary of any death benefit under the Contract may not extend beyond
the life expectancy of such beneficiary. A Contract Owner may request an
unscheduled withdrawal representing part or all of the remaining Contract Value
less any applicable contingent deferred sales charge at any time.
OPTION L--VARIABLE PAYMENT LIFE EXPECTANCY ANNUITY
Provides a variable payout monthly income payable over the Annuitant's
annually recalculated life expectancy or the annually recalculated life
expectancy of the Annuitant and joint annuitant. A Contract Owner may request an
unscheduled withdrawal representing part or all of the remaining Contract Value
less any applicable contingent deferred sales charge at anytime. Upon the death
of the Annuitant (and joint annuitant, if there is a joint annuitant), the
remaining Contract Value will be paid in a lump sum to the Annuitant's
beneficiary.
OPTION M--UNIT REFUND VARIABLE PAYMENT LIFE ANNUITY
Provides variable monthly payments as long as the Annuitant lives. If the
Annuitant dies, the Annuitant's beneficiary will receive the value of the
remaining Annuity Units in a lump sum.
OPTION N--VARIABLE PAYMENT NON-REFUND LIFE ANNUITY
Provides a variable monthly income for the life of the Annuitant. No income
or payment to a beneficiary is paid after the death of the Annuitant.
OTHER OPTIONS AND RATES
PHL Variable may offer other annuity options at the Maturity Date of a
Contract. In addition, in the event that current settlement rates for Contracts
are more favorable than the applicable rates guaranteed under the Contract, the
current settlement rates shall be used in determining the amount of any annuity
payment under the Annuity Options above.
OTHER CONDITIONS
Federal income tax requirements currently applicable to Keogh and Individual
Retirement Account plans provide that the period of years guaranteed under joint
and survivorship annuities with specified periods certain (see "Option F" and
"Option J" above) cannot be any greater than the joint life expectancies of the
payee and his or her spouse.
Federal income tax requirements also provide that participants in qualified
plans or IRAs must begin minimum distributions by April 1 of the year following
the year in which they attain age 70 1/2. The distributions must be such that
the full amount in the contract will be distributed over a period not greater
than the participant's life expectancy, or the combined life expectancy of the
participant and his or her spouse or designated beneficiary. Distributions made
under this method are generally referred to as Life Expectancy Distributions
(LEDs). An LED program is available to participants in qualified plans or IRAs.
Requests to elect this program must be made in writing.
Under an LED, if a distribution is required in the first Contract year, the
amount of the distribution will be subtracted from the first year payments. In
subsequent Contract years, under the LED program, amounts up to the required
minimum distribution may be withdrawn without a deduction for sales charges,
even if the minimum distribution exceeds the 10% allowable amount (see "Sales
Charges"). In any Contract year, any amounts withdrawn that have not been held
under a Contract for at least six years and are in excess of the greater of the
minimum distribution and the 10% free available amount will be subject to any
applicable sales charge.
If the initial monthly annuity payment under an Annuity Option would be less
than $20, PHL Variable may make a single sum payment equal to the Contract Value
on the date the initial payment would be payable, in place of all other benefits
provided by the Contract, or, may make periodic payments quarterly,
semi-annually or annually in place of monthly payments.
PAYMENT UPON DEATH AFTER MATURITY DATE
If an Owner who is also the Annuitant dies on or after the Maturity Date,
except as may otherwise be provided under any supplementary contract between the
Owner and PHL Variable, PHL Variable will pay to the Owner/Annuitant's
beneficiary any annuity payments due during any applicable period certain under
the Annuity Option in effect on the Annuitant's death. If the Annuitant who is
not the Owner dies on or after the Maturity Date, PHL Variable will pay any
remaining annuity payments to the Annuitant's beneficiary according to the
payment option in effect at the time of the Annuitant's death. If an Owner who
is not the Annuitant dies on or after the Maturity Date, PHL Variable will pay
any remaining annuity payments to the Owner's beneficiary according to the
payment option in effect at the time of the Owner's death.
VARIABLE ACCOUNT VALUATION PROCEDURES
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VALUATION DATE--A Valuation Date is every day the New York Stock Exchange is
open for trading. The New York Stock Exchange is scheduled to be closed for
trading on the following days: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Board of Directors of the Exchange reserves the right to change this
schedule as conditions warrant. On each Valuation Date, the value of the
Separate Account is determined at the close of the New York Stock Exchange
(currently 4:00 p.m. Eastern Time).
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VALUATION PERIOD--Valuation Period is that period of time from the beginning of
the day following a Valuation Date to the end of the next following Valuation
Date.
ACCUMULATION UNIT VALUE--The value of one Accumulation Unit was set at $1.0000
on the date assets were first allocated to each Sub-account. The value of one
Accumulation Unit on any subsequent Valuation Date is determined by multiplying
the immediately preceding Accumulation Unit Value by the applicable Net
Investment Factor for the Valuation Period ending on such Valuation Date.
NET INVESTMENT FACTOR--The Net Investment Factor for any Valuation Period is
equal to 1.000000 plus the applicable net investment rate for such Valuation
Period. A Net Investment Factor may be more or less than 1.000000. To determine
the net investment rate for any Valuation Period for the funds allocated to each
Sub-account, the following steps are taken: (a) the aggregate accrued investment
income and capital gains and losses, whether realized or unrealized, of the
Sub-account for such Valuation Period is computed, (b) the amount in (a) is then
adjusted by the sum of the charges and credits for any applicable income taxes
and the deductions at the beginning of the Valuation Period for mortality and
expense risk charges and daily administration fee, and (c) the results of (a) as
adjusted by (b) are divided by the aggregate Unit Values in the Sub-account at
the beginning of the Valuation Period.
MISCELLANEOUS PROVISIONS
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ASSIGNMENT
Owners of Contracts issued in connection with non-tax qualified plans may
assign their interest in the Contract without the consent of the beneficiary. A
written notice of such assignment must be filed with Variable Products
Operations before it will be honored.
A pledge or assignment of a Contract is treated as payment received on
account of a partial surrender of a Contract. (See "Surrenders or Withdrawals
Prior to the Contract Maturity Date.")
In order to qualify for favorable tax treatment, Contracts issued in
connection with tax qualified plans may not be sold, assigned, discounted or
pledged as collateral for a loan or as security for the performance of an
obligation, or for any other purpose, to any person other than PHL Variable.
DEFERMENT OF PAYMENT
Payment of the Contract Value in a single sum upon a withdrawal from, or
complete surrender of, a Contract will ordinarily be made within seven days
after receipt of the written request by Variable Products Operations. However,
payment of the value of any Accumulation Units may be postponed at times (a)
when the New York Stock Exchange is closed, other than customary weekend and
holiday closings, (b) when trading on the Exchange is restricted, (c) when an
emergency exists as a result of which disposal of securities in the Fund is not
reasonably practicable or it is not reasonably practicable to determine the
Contract Value or (d) when a governmental body having jurisdiction by order
permits such suspension. Rules and regulations of the Securities and Exchange
Commission ("SEC"), if any, are applicable and will govern as to whether
conditions described in (b), (c) or (d) exist.
FREE LOOK PERIOD
PHL Variable may mail the Contract to the Owner or it may be delivered in
person. An Owner may surrender a Contract for any reason within 10 days after
its receipt and receive in cash the adjusted value of the initial purchase
payment. (A longer free look period may be provided in the Contract Owner's
State.) The Owner may receive more or less than the initial payment depending on
investment experience within the Sub-account during the free look period, unless
the Contract was issued with a Temporary Money Market Allocation Amendment, in
which case the initial purchase payment will be refunded.
If the Contract Owner elected on the application to have the Temporary Money
Market Allocation Amendment issued with the Contract, or resides in a State that
requires the Contract to be issued with the Temporary Money Market Allocation
Amendment, PHL Variable temporarily allocates the initial purchase payment to
the Money Market Sub-account. Under this Amendment, if the Contract Owner
surrenders the Contract during the Free Look Period, the initial purchase
payment is refunded. At the expiration of the Free Look Period, the value of the
Accumulation Units held in the Money Market Sub-account is allocated among the
available Sub-accounts of the VA Account or the Guaranteed Interest Account in
accordance with the Contract Owner's allocation instructions on the application.
If the initial purchase payment, or any portion thereof, was allocated to
the Guaranteed Interest Account, that payment (or portion) and any earned
interest is refunded.
AMENDMENTS TO CONTRACTS
Contracts may be amended to conform to changes in applicable law or
interpretations of applicable law, or to accommodate design changes. Changes in
the Contract may need to be approved by Contract Owners and state insurance
departments. A change in the Contract which necessitates a corresponding change
in the Prospectus or the Statement of Additional Information must be filed with
the SEC.
SUBSTITUTION OF FUND SHARES
Although PHL Variable believes it to be highly unlikely, it is possible that
in the judgment of its management, one or more of the Series of the Funds may
become unsuitable for investment by Contract Owners because of a change in
investment policy, or a change in the tax laws, or because the shares are no
longer available for investment. In that event, PHL Variable may seek to
substitute the shares of another Series or the shares of an entirely different
mutual fund. Before this can be done, the approval of the SEC, and possibly one
or more state insurance departments, will be required.
OWNERSHIP OF THE CONTRACT
Ordinarily, the purchaser of a Contract is both the Owner and the Annuitant
and is entitled to exercise all the rights under the Contract. However, the
Owner may be an individual or entity other than the Annuitant. Spouses may own a
Contract as joint Owners. Transfer of the ownership of a Contract may involve
Federal income tax conse quences, and a qualified adviser should be consulted
before any such transfer is attempted.
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FEDERAL INCOME TAXES
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INTRODUCTION
The Contracts are designed for use with retirement plans which may or may
not be tax-qualified plans ("Qualified Plans") under the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). The ultimate effect of
Federal income taxes on the amounts held under a Contract, on annuity payments,
and on the economic benefits of the Contract Owner, Annuitant or beneficiary
depends on PHL Variable Insurance Company's tax status, on the type of
retirement plan for which the Contract is purchased, and upon the tax and
employment status of the individual concerned.
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any estate or inheritance taxes or any applicable state,
local or other tax laws. Moreover, the discussion is based upon PHL Variable
Insurance Company's understanding of the Federal income tax laws as they are
currently interpreted. No representation is made regarding the likelihood of
continuation of the Federal income tax laws or the current interpretations by
the Internal Revenue Service (the "Service"). For a discussion of Federal income
taxes as they relate to the Funds, please see the accompanying Prospectuses for
the Funds.
TAX STATUS
PHL Variable is taxed as a life insurance company under Part I of
Sub-chapter L of the Code. Since the Account is not a separate entity from PHL
Variable and its operations form a part of PHL Variable, it will not be taxed
separately as a "regulated investment company" under Sub-chapter M of the Code.
Investment income and realized capital gains on the assets of the Account are
reinvested and taken into account in determining the Contract Value. Under
existing Federal income tax law, the Account's investment income, including
realized net capital gains, is not taxed to PHL Variable. PHL Variable reserves
the right to make a deduction for taxes should they be imposed with respect to
such items in the future.
TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value of the Units held under a Contract
until some form of distribution is made under the Contract. However, in certain
cases the increase in value may be subject to tax currently. In the case of
Contracts not owned by natural persons, see "Contracts Owned by Non-Natural
Persons." In the case of Contracts not meeting the diversification
requirements, see "Diversification Standards."
1. SURRENDERS OR WITHDRAWALS PRIOR TO THE CONTRACT
MATURITY DATE.
Code Section 72 provides that a total or partial surrender from a
Contract prior to the Contract Maturity Date will be treated as taxable
income to the extent the amounts held under the Contract exceed the
"investment in the Contract." The "investment in the Contract" is that
portion, if any, of purchase payments (premiums paid) by or on behalf of an
individual under a Contract that is not excluded from the individual's gross
income. However, under certain types of Qualified Plans there may be no
investment in the Contract within the meaning of Code Section 72, so that
the total amount of all payments received will be taxable. The taxable
portion is taxed as ordinary income in an amount equal to the value of the
Contract or portion thereof that is pledged or assigned. For purposes of
this rule, a pledge or assignment of a Contract is treated as a payment
received on account of a partial surrender of a Contract. Similar rules do
not apply to amounts received under Qualified Plans in most cases.
2. SURRENDERS OR WITHDRAWALS ON OR AFTER THE CONTRACT
MATURITY DATE.
Upon receipt of a lump sum payment under the Contract, the recipient
is taxed on the portion of the payment that exceeds the investment in the
Contract. Ordinarily, such taxable portion is taxed as ordinary income.
Under certain circumstances, the proceeds of a surrender of a Contract may
qualify for "lump sum distribution" treatment under Qualified Plans. See
your tax adviser if you think you may qualify for "lump sum distribution"
treatment.
For fixed annuity payments, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the total
expected amount of annuity payments for the term of the Contract. That ratio
is then applied to each payment to determine the non-taxable portion of the
payment. The remaining portion of each payment is taxed as ordinary income.
For variable annuity payments, the taxable portion is determined by a
formula that establishes a specific dollar amount of each payment that is
not taxed. The dollar amount is determined by dividing the investment in the
Contract by the total number of expected periodic payments. The remaining
portion of each payment is taxed as ordinary income. Once the excludable
portion of annuity payments equals the investment in the Contract, the
balance of the annuity payments will be fully taxable.
Withholding of Federal income taxes on all distributions may be
required unless the recipient elects not to have any amounts withheld and
properly notifies Variable Products Operations of that election.
3. PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS.
With respect to amounts surrendered or distributed before the taxpayer
reaches age 59 1/2, a penalty tax is imposed equal to ten percent (10%) of
the portion of such amount that is includable in gross income. However, the
penalty tax will not apply to withdrawals: (i) made on or after the death of
the Contract Owner (or where the Contract Owner is not an individual, the
death of the "Primary Annuitant," who is defined as the individual the
events in whose life are of primary importance in affecting the timing and
amount of the payout under the Contract); (ii) attributable to the
taxpayer's becoming totally disabled within the meaning of Code Section
72(m)(7); (iii) which are part of a series of substantially equal periodic
payments made (not less frequently than annually) for the life (or life
expectancy) of the taxpayer, or the joint lives (or joint life expectancies)
of the taxpayer and his beneficiary; (iv) from certain qualified plans (such
distributions may, however, be subject to a similar penalty under Code
Section 72(t) relating to distributions from qualified retirement
plans); (v) allocable to investment in the contract before August 14, 1982;
(vi) under a
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qualified funding asset (as defined in Code Section 130(d)); (vii) under an
immediate annuity contract (as defined in Code Section 72(u)(4)); or (viii)
that are purchased by an employer on termination of certain types of
qualified plans and which are held by the employer until the employee
separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the
first year when the modification occurs will be increased by an amount
(determined by the Treasury regulations) equal to the tax that would have
been imposed but for item (iii) above, plus interest for the deferral
period, but only if the modification takes place: (a) before the close of
the period which is 5 years from the date of the first payment and after the
taxpayer attains age 59 1/2, or (b) before the taxpayer reaches age 59 1/2.
ADDITIONAL CONSIDERATIONS
1. DISTRIBUTION-AT-DEATH RULES.
In order to be treated as an annuity contract for Federal income tax
purposes, a Contract must provide the following two distribution rules: (A)
if the Contract Owner dies on or after the Contract Maturity Date, and
before the entire interest in the Contract has been distributed, the
remainder of the Contract Owner's interest will be distributed at least as
quickly as the method in effect on the Contract Owner's death; and (B) if a
Contract Owner dies before the Contract Maturity Date, the Contract Owner's
entire interest must generally be distributed within five (5) years after
the date of death, or if payable to a designated beneficiary may be
annuitized over the life of that beneficiary or over a period not extending
beyond the life expectancy of that beneficiary, and must commence within one
(1) year after the Contract Owner's date of death. If the beneficiary is the
spouse of the Contract Owner, the Contract (together with the deferral of
tax on the accrued and future income thereunder) may be continued in the
name of the spouse as Contract Owner. These distribution requirements do not
apply to annuity contracts under Qualified Plans (other than Code Section
457 Plans).
If the Annuitant, who is not the Contract Owner, dies before the
Maturity Date and there is no Contingent Annuitant, the Annuitant's
beneficiary must elect within 60 days whether to receive the death benefit
in a lump sum or in periodic payments commencing within one (1) year.
If the Contract Owner is not an individual, the death of the Annuitant,
is considered to be the death of the Contract Owner. In addition, when the
Contract Owner is not an individual, a change in the primary Annuitant is
treated as the death of the Contract Owner. Finally, in the case of
non-spousal joint Contract Owners the distribution will be required at the
death of the first of the Contract Owners.
2. TRANSFER OF ANNUITY CONTRACTS.
Transfers of non-qualified Contracts prior to the Maturity Date for
less than full and adequate consideration to the Contract Owner at the time
of such transfer, will trigger tax on the gain in the Contract, with the
transferee getting a step-up in basis for the amount included in the
Contract Owner's income. This provision does not apply to transfers between
spouses or incident to a divorce.
3. CONTRACTS OWNED BY NON-NATURAL PERSONS.
If the Contract is held by a non-natural person (for example, a
corporation) the income on that Contract (generally the increase in the net
surrender value less the premium paid) is includable in income each year.
The rule does not apply where the non-natural person is the nominal owner of
a Contract and the beneficial owner is a natural person. The rule also does
not apply where the annuity contract is acquired by the estate of a
decedent, where the Contract is held under a qualified plan, a TSA program,
or an IRA, where the Contract is a qualified funding asset for structured
settlements, where the Contract is purchased on behalf of an employee upon
termination of a qualified plan, and in the case of an immediate annuity.
4. SECTION 1035 EXCHANGES.
Code Section 1035 provides, in general, that no gain or loss shall be
recognized on the exchange of one annuity contract for another. A
replacement contract obtained in a tax-free exchange of contracts generally
succeeds to the status of the surrendered contract. If the surrendered
contract was issued prior to August 14, 1982, the tax rules that formerly
provided that the surrender was taxable only to the extent the amount
received exceeds the Contract Owner's investment in the Contract, will
continue to apply. In contrast, Contracts issued on or after January 19,
1985, in a Code Section 1035 exchange, are treated as new Contracts for
purposes of the distribution-at-death rules. Special rules and procedures
apply to Code Section 1035 transactions. Prospective Contract Owners wishing
to take advantage of Code Section 1035 should consult their tax advisers.
5. MULTIPLE CONTRACTS.
Code Section 72(e)(11)(A)(ii) provides that for Contracts entered into
after October 21, 1988, for purposes of determining the amount of any
distribution under Code Section 72(e) (amounts not received as annuities)
that is includable in gross income, all non-qualified deferred annuity
contracts issued by the same insurer (or affiliate) to the same Contract
Owner during any calendar year are to be aggregated and treated as one
contract. Thus, any amount received under any such contract prior to the
Contract Maturity Date, such as a withdrawal, dividend or loan, will be
taxable (and possibly subject to the 10% penalty tax) to the extent of the
combined income in all such contracts.
The Treasury Department has specific authority to issue regulations that
prevent the avoidance of Code Section 72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be situations where the
Treasury may conclude that it would be appropriate to aggregate two or more
contracts purchased by the same Contract Owner. Accordingly, a Contract Owner
should consult a competent tax adviser before purchasing more than one Contract
or other annuity contracts.
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DIVERSIFICATION STANDARDS
1. DIVERSIFICATION REGULATIONS.
To comply with the diversification regulations under Code Section
817(h) ("Diversification Regulations"), after a start-up period, each
Series of the Funds will be required to diversify its investments. The
Diversification Regulations generally require that, on the last day of each
quarter of a calendar year no more than 55% of the value of the assets of
the Funds are represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four
investments. A "look-through" rule applies to treat a pro-rata portion of
each asset of the Funds as an asset of the Account, and each Series of the
Funds are tested for compliance with the percentage limitations. All
securities of the same issuer are treated as a single investment. As a
result of the 1988 Act, each Government agency or instrumentality will be
treated as a separate issuer for purposes of these limitations.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning
the extent to which Contract Owners may direct their investments to
particular divisions of a separate account. Regulations or a revenue ruling
in this regard may be issued in the future. It is not clear, at this time,
what these regulations or the revenue ruling will provide. It is possible
that when issued, the Contract may need to be modified to comply with such
rules. For these reasons, PHL Variable reserves the right to modify the
Contract, as necessary, to prevent the Contract Owner from being considered
the owner of the assets of the Account.
PHL Variable has represented that it intends to comply with the
Diversification Regulations to assure that the Contracts continue to be
treated as annuity contracts for Federal income tax purposes.
2. DIVERSIFICATION REGULATIONS AND QUALIFIED PLANS.
Code Section 817(h) applies to a variable annuity contract other than a
pension plan contract. The Diversification Regulations reiterate that the
diversification requirements do not apply to a pension plan contract. All of
the Qualified Plans (described below) are defined as pension plan contracts
for these purposes. Notwithstanding the exception of Qualified Plan
Contracts from application of the diversification rules, all investments of
the PHL Variable Qualified Plan Contracts (i.e. the Funds) will be
structured to comply with the diversification standards because the Funds
serve as the investment vehicle for non-qualified Contracts as well as
Qualified Plan Contracts.
QUALIFIED PLANS
The Contracts may be used with several types of Qualified Plans. TSAs,
Keoghs, Individual Retirement Accounts ("IRAs"), Corporate Pension and
Profit-Sharing Plans and State Deferred Compensation Plans will be treated, for
purposes of this discussion, as Qualified Plans. The tax rules applicable to
participants in such Qualified Plans vary according to the type of plan and the
terms and conditions of the plan itself. No attempt is made herein to provide
more than general information about the use of the Contracts with the various
types of Qualified Plans. Participants under such Qualified Plans as well as
Contract Owners, Annuitants, and beneficiaries, are cautioned that the rights of
any person to any benefits under such Qualified Plans may be subject to the
terms and conditions of the plans themselves or limited by applicable law,
regardless of the terms and conditions of the Contract issued in connection
therewith. For example, PHL Variable will accept beneficiary designations and
payment instructions under the terms of the Contract without regard to any
spousal consents that may be required under the Retirement Equity Act (REA).
Consequently, a Contract Owner's beneficiary designation or elected payment
option may not be enforceable.
Effective January 1, 1993, Section 3405 of the Internal Revenue Code was
amended to change the rollover rules applicable to the taxable portions of
distributions from qualified pension and profit-sharing plans and Section 403(b)
TSA arrangements. Taxable distributions eligible to be rolled-over will
generally be subject to 20 percent income tax withholding. Mandatory withholding
can only be avoided if the employee arranges for a direct rollover to another
qualified pension or profit-sharing plan or to an IRA.
The new mandatory withholding rules apply to all taxable distributions from
qualified plans or TSA's, except a) distributions required under the Code, and
b) substantially equal distributions made over the life (or life expectancy) of
the employee, or for a term certain of 10 years or more.
Numerous changes have been made to the income tax rules governing Qualified
Plans as a result of legislation enacted during the past several years,
including rules with respect to: coverage, participation, maximum
contributions; required distributions; penalty taxes on early or insufficient
distributions, and income tax withholding on distributions. The following are
brief descriptions of the various types of Qualified Plans and of the use of the
contracts in connection therewith.
1. TAX-SHELTERED ANNUITIES.
Code Section 403(b) permits public school systems and certain types of
charitable, educational and scientific organizations, generally specified
in Code Section 501(c)(3) to purchase annuity contracts on behalf of their
employees and, subject to certain limitations, allows employees of those
organizations to exclude the amount of purchase payments from gross income
for Federal income tax purposes. These annuity contracts are commonly
referred to as "TSAs."
For taxable years beginning after December 31, 1988, Code Section
403(b)(11) imposes certain restrictions on a Contract Owner's ability to
make partial withdrawals from, or surrenders of, Code Section 403(b)
Contracts, if the cash withdrawn is attributable to purchase payments made
under a salary reduction agreement. Specifically, Code Section 403(b)(11)
allows a Contract Owner to make a surrender or partial withdrawal only (A)
when the employee attains age 59 1/2, separates from service, dies, or
becomes disabled (as defined in the Code), or (B) in the case of hardship.
In the case of hardship, the amount distributable cannot include any income
earned under the Contract.
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The 1988 Act amended the effective date of Code Section 403(b)(11), so
that it applies only with respect to distributions from Code Section 403(b)
Contracts which are attributable to assets other than assets held as of the
close of the last year beginning before January 1, 1989. Thus, the
distribution restrictions do not apply to assets held as of December 31,
1988.
In addition, in order for certain types of contributions under a Code
Section 403(b) Contract to be excluded from taxable income, the employer
must comply with certain nondiscrimination requirements. Contract Owners
should consult their employers to determine whether the employer has
complied with these rules.
2. KEOGH PLANS.
The Self-Employed Individual Tax Retirement Act of 1962, as amended,
permits self-employed individuals to establish "Keoghs," or qualified plans
for themselves and their employees. The tax consequences to participants
under such a plan depend upon the terms of the plan. In addition, such
plans are limited by law with respect to the maximum permissible
contributions, distribution dates, nonforfeitability of interests, and tax
rates applicable to distributions. In order to establish such a plan, a
plan document must be adopted and implemented by the employer, as well as
approved by the Internal Revenue Service.
3. INDIVIDUAL RETIREMENT ACCOUNTS.
Code Section 408 permits eligible individuals to contribute to an
individual retirement program known as an "IRA." These IRAs are subject to
limitations on the amount which may be contributed, the persons who may be
eligible, and on the time when distributions may commence. In addition,
distributions from certain other types of Qualified Plans may be placed on a
tax-deferred basis into an IRA.
4. CORPORATE PENSION AND PROFIT-SHARING PLANS.
Code Section 401(a) permits corporate employers to establish various
types of retirement plans for employees. Such retirement plans may permit
the purchase of Contracts to provide benefits thereunder.
As a general rule, the maximum amount which an employer may contribute
on behalf of a Participant to a defined benefit plan is the amount necessary
to fund an annual benefit equal to the lesser of 100% of compensation or
$120,000. If the plan is a defined contribution plan, the maximum
contribution is the lesser of 25% of compensation or $30,000 for each
Participant. If the plan is a profit-sharing plan, the amount which the
employer may deduct cannot exceed 15% of the compensation otherwise paid to
participating employees in the taxable year. Under a profit-sharing plan
which includes a cash or deferral provision described in Section 401(k) of
the Code, elective deferral contributions are limited to $9,500 a year,
or less in the case of a highly compensated employee (as defined by the
code) where certain non-discriminatory percentage tests require a lower
limit.
5. DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE
FOR STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
Code Section 457 provides for certain deferred compensation plans with
respect to service for state and local governments and certain other
entities. The Contracts may be used in connection with these plans;
however, under these plans the Contract Owner is the plan sponsor, and the
individual participants in the plans are the Annuitants. Under such
Contracts, the rights of individual plan participants are governed solely by
their agreements with the plan sponsor and not by the terms of the
Contracts.
6. SEEK TAX ADVICE.
The above description of Federal income tax consequences of the
different types of Qualified Plans which may be funded by the Contracts
offered by this Prospectus is only a brief summary and is not intended as
tax advice. The rules governing the provisions of Qualified Plans are
extremely complex and often difficult to comprehend. Anything less than
full compliance with the applicable rules, all of which are subject to
change, may have adverse tax consequences. A prospective Contract Owner
considering adoption of a Qualified Plan and purchase of a Contract in
connection therewith should first consult a qualified tax adviser, with
regard to the suitability of the Contract as an investment vehicle for the
Qualified Plan.
SALES OF VARIABLE ACCUMULATION CONTRACTS
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The principal underwriter of the Contracts is Phoenix Equity Planning
Corporation ("PEPCO"). Contracts may be purchased through registered
representatives of W.S. Griffith & Company, Inc. ("W.S. Griffith") licensed to
sell PHL Variable annuity contracts. W.S. Griffith is an indirect wholly-owned
subsidiary of Phoenix Home Life Mutual Insurance Company. PEPCO is an
indirect, majority owned subsidiary of Phoenix Home Life Mutual Insurance
Company. Contracts may also be purchased through other broker-dealers or
entities registered under or exempt under the Securities Exchange Act of 1934,
whose representatives are authorized by applicable law to sell Contracts under
terms of agreement provided by PEPCO and terms of agreement provided by PHL
Variable.
Although the Glass-Steagall Act prohibits banks and bank affiliates from
engaging in the business of underwriting securities, banking regulators have not
indicated that such institutions are prohibited from purchasing variable annuity
contracts upon the order and for the account of their customers. In addition to
reimbursing PEPCO for its expenses, PHL Variable pays PEPCO an amount equal to
up to 7.25% of the purchase payments made under the Contract. PEPCO pays any
qualified distribution organization an amount which may not exceed up to 7.25%
of the purchase payments under the Contract. Any such amount paid with respect
to Contracts sold through other broker/dealers will be paid by PHL Variable to
or through PEPCO. The amounts paid are not deducted from the purchase payments.
Deductions for sales charges (as described under "Sales Charges") may be used as
reimbursement for commission payments.
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PHL Variable through PEPCO will sponsor sales contests, training and
educational meetings and provide to all qualifying dealers, from its own profits
and resources, additional compensation in the form of trips, merchandise or
expense reimbursement. Brokers and dealers other than PEPCO may also make
customary additional charges for their services in effecting purchases, if they
notify the Funds of their intention to do so.
STATE REGULATION
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PHL Variable is subject to the provisions of the Connecticut insurance laws
applicable to life insurance companies and to regulation and supervision by the
Connecticut Superintendent of Insurance. PHL Variable is also subject to the
applicable insurance laws of all the other states and jurisdictions in which it
does an insurance business.
State regulation of PHL Variable includes certain limitations on the
investments which may be made for its General Account and separate accounts,
including the Account. It does not include, however, any supervision over the
investment policies of the Account.
REPORTS
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Reports showing the Contract Value and containing the financial statements
of the Account will be furnished at least annually to Contract Owners.
VOTING RIGHTS
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As stated above, all of the assets held in an available Sub-account will be
invested in shares of a corresponding Series of the Funds. PHL Variable is the
legal owner of those shares and as such has the right to vote to elect the Board
of Trustees of the Funds, to vote upon certain matters that are required by
the Investment Company Act of 1940 ("1940 Act") to be approved or ratified by
the shareholders of a mutual fund and to vote upon any other matter that may be
voted upon at a shareholders' meeting. However, PHL Variable intends to vote the
shares of the Funds at regular and special meetings of the shareholders of the
Funds in accordance with instructions received from Owners of the Contracts.
PHL Variable currently intends to vote Fund shares attributable to any PHL
Variable assets and Fund shares held in each Sub-account for which no timely
instructions from Owners are received in the same proportion as those shares in
that Sub-account for which instructions are received. In the future, to the
extent applicable Federal securities laws or regulations permit PHL Variable to
vote some or all shares of the Fund in its own right, it may elect to do so.
Matters on which Owners may give voting instructions may include the
following: (1) election of the Board of Trustees of a Fund; (2) ratification
of the independent accountant for a Fund; (3) approval or amendment of the
investment advisory agreement for the Series of the Fund corresponding to the
Owner's selected Sub-account(s); (4) any change in the fundamental investment
policies or restrictions of each such Series; and (5) any other matter requiring
a vote of the Shareholders of a Fund. With respect to amendment of any invest
ment advisory agreement or any change in a Series' fundamental investment
policy, Owners participating in such Series will vote separately on the matter,
pursuant to the requirements of the 1940 Act.
The number of votes that a Contract Owner has the right to cast will be
determined by applying the Contract Owner's percentage interest in a Sub-account
to the total number of votes attributable to the Sub-account. In determining the
number of votes, fractional shares will be recognized. The number of votes for
which each Owner may give PHL Variable instructions will be determined as of
the record date for Fund shareholders chosen by the Board of Trustees of a
Fund. PHL Variable will furnish Owners with proper forms and proxies to enable
them to give these instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
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Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contract, or apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public institutions of higher education,
death or total disability. Such proceeds may, however, be used to fund another
eligible retirement vehicle.
LITIGATION
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PHL Variable Insurance Company, the Account and PEPCO are not parties to any
litigation that would have a material adverse effect upon the Account or the
Contracts.
LEGAL MATTERS
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Legal matters involving Federal securities and income tax laws in connection
with the Contracts described in this Prospectus have been passed upon by Jorden
Burt Berenson & Johnson LLP, Washington, D.C.
STATEMENT OF ADDITIONAL INFORMATION
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The Statement of Additional Information contains more specific information
and financial statements relating to the Account and PHL Variable Insurance
Company. The Table of Contents of the Statement of Additional Information is set
forth below:
Underwriter
Calculation of Yield and Return
Calculation of Annuity Payments
Experts
Financial Statements
Contract Owner inquiries and requests for a Statement of Additional
Information should be directed to Variable Products Operations in writing at 101
Munson Street, P.O. Box 942, Greenfield, Massachusetts 01302-0942, or by
calling Variable Products Operations at (800) 447-4312.
22
<PAGE>
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the Guaranteed Interest Account under the Contract and
transfers to the Guaranteed Interest Account become part of the general account
of PHL Variable Insurance Company (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 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 Guaranteed Interest
Account. Disclosures regarding the Guaranteed Interest Account 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 PHL Variable
Insurance Company other than those allocated to any separate account. Premium
payments will be allocated to the Guaranteed Interest Account and, therefore,
the General Account, as elected by the Owner at the time of purchase or as
subsequently changed. PHL Variable 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 PHL Variable and the contracts
participating in the General Account, in accordance with the terms of such
contracts.
Fixed annuity payments made to Annuitants under the Contract will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. PHL Variable assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract that cannot be
changed. In addition, PHL Variable guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the General Account allocated to PHL Variable
includes compensation for mortality and expense risks borne by it in connection
with General Account contracts.
The amount of investment income allocated to the Contracts will vary from
year to year in the sole discretion of PHL Variable. However, PHL Variable
guarantees that it will credit interest at a rate of not less than 4% per year
compounded annually, to amounts allocated to the Guaranteed Interest Account.
PHL Variable may credit interest at a rate in excess of these rates; however, it
is not obligated to credit any interest in excess of these rates.
Bi-weekly, PHL Variable will set the excess interest rate, if any, that will
apply to amounts deposited to the Guaranteed Interest Account. That rate will
remain in effect for such deposits for an initial guarantee period of one full
year from the date of deposit. Upon expiration of the initial one-year guarantee
period (and each subsequent one-year guarantee period thereafter), the rate to
be applied to any deposits whose guaranteed period has just ended will be the
same rate as is applied to new deposits allocated to the Guaranteed Interest
Account at that time. This rate will likewise remain in effect for a guarantee
period of one full year from the date the new rate is applied.
Excess interest, if any, will be determined by PHL Variable based on
information as to expected investment yields. Some of the factors that PHL
Variable may consider in determining whether to credit excess interest to
amounts allocated to the Guaranteed Interest Account 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 GUARANTEED INTEREST ACCOUNT IN
EXCESS OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF PHL VARIABLE
AND WITHOUT REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER ASSUMES THE RISK
THAT INTEREST CREDITED TO GUARANTEED INTEREST ACCOUNT ALLOCATIONS MAY NOT EXCEED
THE MINIMUM GUARANTEE FOR ANY GIVEN YEAR.
PHL Variable 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 PHL Variable's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
policyholders and contract owners.
Excess interest, if any, will be credited on the Guaranteed Interest Account
Contract Value. PHL Variable guarantees that, at any time, the Guaranteed
Interest Account Contract Value will not be less than the amount of purchase
payments allocated to the Guaranteed Interest Account, plus interest at the rate
of 4% per year, compounded annually, plus any additional interest which PHL
Variable may, in its discretion, credit to the Guaranteed Interest Account, less
the sum of all annual administrative or surrender charges, any applicable
premium taxes, and less any amounts surrendered. If the Owner surrenders the
Contract, the amount available from the Guaranteed Interest Account will be
reduced by any applicable surrender charge and annual administration charge (see
"Deductions and Charges").
IN GENERAL, ONE TRANSFER PER CONTRACT YEAR IS ALLOWED FROM THE GUARANTEED
INTEREST ACCOUNT. THE AMOUNT WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER
OF $1,000 AND 25% OF THE CONTRACT VALUE IN THE GUARANTEED INTEREST ACCOUNT.
UNDER THE SYSTEMATIC TRANSFER PROGRAM, TRANSFERS OF APPROXIMATELY EQUAL AMOUNTS
MAY BE MADE OVER A MINIMUM 18-MONTH PERIOD. NON-SYSTEMATIC TRANSFERS FROM THE
GUARANTEED INTEREST ACCOUNT WILL BE EFFECTUATED ON THE DATE OF RECEIPT BY
VARIABLE PRODUCTS OPERATIONS, UNLESS OTHERWISE REQUESTED BY THE CONTRACT OWNER.
23
<PAGE>
APPENDIX B
<TABLE>
DEDUCTIONS FOR STATE PREMIUM TAXES
QUALIFIED AND NON-QUALIFIED ANNUITY CONTRACTS
<CAPTION>
UPON UPON
STATE PURCHASE(1) ANNUITIZATION NON-QUALIFIED QUALIFIED
<S> <C> <C> <C> <C>
California .......................................... X 2.35% 0.50%
D.C.................................................. X 2.25 2.25
Kansas............................................... X 2.00
Kentucky............................................. X 2.00 2.00
Maine................................................ X 2.00
Nevada............................................. X 3.50
South Dakota....................................... X 1.25
West Virginia........................................ X 1.00 1.00
Wyoming.............................................. X 1.00
</TABLE>
NOTE: The above premium tax deduction rates are as of January 1, 1996. No
premium tax deductions are made for states not listed above. However,
premium tax statutes are subject to amendment by legislative act and
to judicial and administrative interpretation, which may affect both
the above list of states and the applicable tax rates. Consequently,
the company reserves the right to deduct premium tax when necessary
to reflect changes in state tax laws or interpretation.
For a more detailed explanation of the assessment of Premium Taxes see
"Deductions and Charges, Premium Tax."
(1) "Purchase" in this chart refers to the earlier of partial withdrawal,
surrender of the Contract, payment of death proceeds or Maturity Date.
24
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
VARIABLE ACCUMULATION ANNUITY CONTRACTS
ISSUED BY
PHL VARIABLE INSURANCE COMPANY
101 Munson St.
P.O. Box 910
Greenfield, Massachusetts 03102-0910
Telephone (800) 447-4312
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus, dated May 1, 1996, which is available
without charge by contacting PHL Variable Insurance Company at the above address
or at the above telephone number.
May 1, 1996
-------------------
TABLE OF CONTENTS
Page
----
Underwriter.......................................................... B-2
Calculation of Yield and Return ..................................... B-2
Calculation of Annuity Payments ..................................... B-3
Experts ............................................................. B-4
Financial Statements................................................. B-5
B-1
<PAGE>
UNDERWRITER
The offering of Contracts is made on a continuous basis by Phoenix Equity
Planning Corporation ("PEPCO"), an affiliate of PHL Variable. For sales of
Contracts, during the fiscal year ended December 31, 1995, PEPCO was paid
$967,884 and retained $0.00.
CALCULATION OF YIELD AND RETURN
Yield of the Money Market Sub-account. As summarized in the Prospectus under
the heading "Performance History," the yield of the Money Market Sub-account
for a seven-day period (the "base period") will be computed by determining the
"net change in value" (calculated as set forth below) of a hypothetical account
having a balance of one share at the beginning of the period, dividing the net
change in account value by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by 365/7 with the resulting yield figure carried to the nearest hundredth of one
percent. Net changes in value of a hypothetical account will include net
investment income of the account (accrued daily dividends as declared by the
underlying funds, less daily expense charges of the account) for the period, but
will not include realized gains or losses or unrealized appreciation or
depreciation on the underlying fund shares. A mortality and expense risk charge
of 1.25% (approximately 0.40% for mortality and 0.85% for expense) and a daily
administrative fee of 0.125% are reflected.
The Money Market Sub-account yield and effective yield will vary in response
to fluctuations in interest rates and in the expenses of the Sub-account.
The current yield and effective yield reflect recurring charges at the
Account level, including the maximum annual administrative fee.
Example:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period 1.014121
Value of the same account (excluding capital change) at the
end of the seven day period: 1.014954
Calculation:
Ending account value 1.014954
Less beginning account value 1.014121
Net change in account value 0.000833
Base period return:
(adjusted change/beginning account value) 0.000821
Current yield = return x (365/7) = 4.28%
Effective yield = [(1 + return)365/7] -1 = 4.37%
At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results will
continue.
Calculation of Total Return. As summarized in the Prospectus under the
heading, "Performance History," total return is a measure of the change in
value of an investment in a Sub-account over the period covered and is computed
by finding the average annual compounded rates of return over the 1-, 5- and
10-year periods that would equate the initial amount invested to the ending
redeemable value according to a formula. The formula for total return used
herein includes four steps: (1) assuming a hypothetical $1,000 initial
investment in the Sub-account; (2) calculating the value of the hypothetical
initial investment of $1,000 as of the end of the period by multiplying the
total number of units owned at the end of the period by the unit value per unit
on the last trading day of the period; (3) assuming redemption at the end of the
period and deducting any recurring fees and any applicable contingent deferred
sales charge and (4) dividing this account value for the hypothetical investor
by the initial $1,000 investment. Total return will be calculated for one year,
five years and ten years or some other relevant periods if a Sub-account has not
been in existence for at least ten years.
PERFORMANCE INFORMATION
Advertisements, sale literature and other communications may contain
information about any Series or Adviser's current investment strategies and
management style. Current strategies and style may change to allow any Series to
respond quickly to changing market and economic conditions. From time to time
the Funds may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Funds may
separate its cumulative and average annual returns into income and capital gains
components; or cite separately as a return figure the equity or bond portion of
a portfolio; or compare a Series' equity or bond return figure to well-known
indices of market performance, including, but not limited to: the S&P 500 Index,
Dow Jones Industrial Average, First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
Each Sub-account may from time to time include its yield and total return in
advertisements or information furnished to present or prospective Contract
Owners. Each Sub-account may from time to time include in advertisements
containing total return (and yield in the case of certain Sub-accounts) the
ranking of those performance figures relative to such figures for groups of
mutual funds categorized as having the same investment objectives as Lipper
Analytical Services, CDA Investment Technologies, Inc., Weisenberger Financial
Services, Inc., Morningstar, Inc. and Tillinghast. Additionally, the Fund may
compare a Series' performance results to other investment or savings vehicles
(such as certificates of deposit) and may refer to results published in various
publications such as Changing Times, Forbes, Fortune, Money, Barrons, Business
Week, Investor's Daily, The Stanger Register, Stanger's Investment Adviser, The
Wall Street Journal, The New York Times, Consumer Reports, Registered
Representative, Financial Planning, Financial Services Weekly, Financial World,
U.S. News and World Report, Standard & Poor's The Outlook, and Personal
Investor. The Fund may from time to time illustrate the benefits of tax deferral
by comparing taxable investments to investments made through tax-deferred
retirement plans.
The total return and yield may also be used to compare the performance of
the Sub-accounts against certain widely acknowledged outside standards or
indices for stock and bond market performance. The Standard & Poor's Composite
Index of 500 Stocks (the "S&P 500") is a market value-weighted and unmanaged
index showing the changes in the aggregate market value of 500 stocks relative
to the base period 1941-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the New York Stock Exchange, although the common
stocks of a few companies listed on the American Stock Exchange or traded
B-2
<PAGE>
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 80% of the market value of all issues traded on the New York
Stock Exchange.
The manner in which total return and yield will be calculated is described
above.
The following table summarizes the calculation of total return and yield for
each Sub-account, from inception through December 31, 1995.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIOD ENDED 12/31/95
COMMENCEMENT
DATE OF CORRE-
SUB-ACCOUNT SPONDING FUND 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
- ----------- ------------- ------ ------- -------- ------------
Multi-Sector . . . . 1/1/83 15.12% 10.17% 8.83% 9.29%
Balanced . . . . . . 5/1/92 14.94 N/A N/A 7.36
Total Return . . . . 9/17/84 10.15 11.03 10.44 11.27
Growth . . . . . . . 1/1/83 21.98 17.95 15.16 17.11
International . . . 5/1/90 2.10 7.61 N/A 4.88
Money Market . . . . 10/10/82 (1.57) 2.42 4.38 5.03
Wanger U.S. . . . . 5/2/95 N/A N/A N/A 7.73
Wanger Int'l . . . . 5/2/95 N/A N/A N/A 24.95
Real Estate . . . . 5/2/95 N/A N/A N/A 9.39
CALCULATION OF ANNUITY PAYMENTS
VARIABLE ANNUITY PAYMENTS
Unless an alternative annuity payment option is elected on or before the
Contract Maturity Date, the Accumulation Value of the Contract on the Maturity
Date will automatically be applied to provide a Variable Payment Life Annuity
with 10 Year Period Certain based on the Annuitant's life under annuity payment
Option I as described in the Prospectus. Any annuity payments falling due after
the Annuitant's death during the period certain will be paid to the Beneficiary.
If the amount to be applied on the Maturity Date is less than $2,000 or
would result in monthly payments of less than $20, PHL Variable Insurance
Company shall have the right to pay such amount in one lump sum in lieu of
providing the annuity payments. PHL Variable Insurance Company will also have
the right to change the annuity payment frequency to annually if the monthly
annuity payment would otherwise be less than $20.
Under the Variable Payment Life Annuity with 10 Year Period Certain
(payment Option I), the first monthly income payment is due on the Maturity
Date. Thereafter, payments are due on the same day of the month as the first
payment was due, or if such date does not fall within a particular month, then
the future payment is due on the first Valuation Date to occur in the following
month. Payments will continue during the lifetime of the Annuitant, or, if
later, until the end of the Ten Year Period Certain starting with the date the
first payment is due.
The Variable Income Table below shows the minimum amount of the first
monthly payment for each $1,000 of Accumulation Value applied. The minimum first
payments shown are based on the 1983 table, an annuity table projected to the
year 2040 with Projection Scale G, and with Projection Scale G thereafter, and
an effective assumed investment return of 4 1/2%. The actual payments will be
based on the monthly payment rate PHL Variable Insurance Company is using when
the first payment is due. They will not be less than those shown in the Variable
Income Table.
VARIABLE INCOME TABLE
Minimum Monthly Payment Rate for First Payment for Each $1,000 Applied.
Based on 4 1/2% Assumed Investment Return.
ADJUSTED AGE* MALE FEMALE
------------- ---- ------
40 $4.15 $4.02
45 4.29 4.12
50 4.40 4.27
55 4.73 4.46
60 5.06 4.71
65 5.51 5.05
70 6.08 5.52
75 6.79 6.17
80 7.65 6.99
85 8.57 7.98
* Age on birthday nearest due date of the first payment. Monthly payment
rates for ages not shown will be furnished on request.
In determining the amount of the first payment, the amounts held under the
Variable Payment Option in each Sub-account are multiplied by the rates PHL
Variable Insurance Company is using for the Option on the first Payment
Calculation Date. The Payment Calculation Date is the earliest Valuation Date
that is not more than 10 days before the due date of the payment. The first
payment equals the total of such figures determined for each Sub-account.
Future payments are measured in Annuity Units and are determined by
multiplying the Annuity Units in each Sub-account with assets under the Variable
Payment Option by the Annuity Unit Value for each Sub-account on the Payment
Calculation Date that applies. The number of Annuity Units in each Sub-account
with assets under a Variable Payment Option is equal to the portion of the first
payment provided from that Sub-account divided by the Annuity Unit Value for
that Sub-account on the first Payment Calculation Date. The payment will equal
the sum of such amounts from each Sub-account.
All Annuity Unit Values in each Sub-account were set at $1.000000 on the
first Valuation Date selected by PHL Variable Insurance Company. The value of an
Annuity Unit on any date thereafter is equal to (a) the Net Investment Factor
for that Sub-account for the Valuation Period divided by (b) the sum of 1.000000
and the rate of interest for the number of days in the Valuation Period, based
on an effective annual rate of interest equal to the assumed investment return,
and multiplied by (c) the corresponding Annuity Unit Value on the preceding
Valuation Date. The assumed investment return of 4 1/2% per year is the annual
interest rate assumed in determining the first payment. The amount of each
subsequent payment from each Sub-account will depend on the relationship between
the assumed investment return and the actual investment performance of the
Sub-account. If a 4 1/2% rate would result in a first variable payment larger
than that permitted under applicable state law, we will select a lower rate that
will comply with such law.
B-3
<PAGE>
No partial or full surrenders, withdrawals, transfers or additional premium
payments may be made with respect to any assets held under Variable Payment
Options I and J. Although no transfers or additional premium payments may be
made with respect to assets held under Option K, under this option partial or
full surrenders may be made.
FIXED ANNUITY PAYMENTS
Fixed monthly annuity payments under a Contract are determined by applying
the Contract Value to the respective annuity purchase rates on the Maturity Date
of a Contract or other date elected for commencement of fixed annuity payments.
Under a Contract, the amount of the fixed annuity payment is calculated by
first multiplying the number of the Sub-accounts' Accumulation Units credited to
the Contract on the Maturity Date by the appropriate Unit Value for each
Sub-account on the Maturity Date. The dollar value for all Sub-accounts'
Accumulation Units is then aggregated, along with the dollar value of any
investment in the Guaranteed Interest Account. For each Contract the resulting
dollar value is then multiplied by the applicable annuity purchase rate, which
reflects the age (and sex for non-tax qualified plans) of the Annuitant
specified in the Contract for the Fixed Payment Annuity Option selected. This
computation determines the amount of PHL Variable Insurance Company's fixed
monthly annuity payment to the Annuitant.
The mortality table used as a basis for the applicable annuity purchase
rates is the a-49 Individual Annuity Mortality Table projected to 1985 at
Projection Scale B. An interest rate of 3 3/8% for 5- and 10- year certain
periods under Option A, for the 10-year period under Option F and for Option E;
an interest rate of 3 1/4% for the 20-year certain period under Options A and F;
an interest rate of 3 1/2% under Option B and D. Under Options G and H the
guaranteed interest rate is 3%. More favorable rates may be available on the
Maturity Date or other dates elected for commencement of fixed annuity payments.
EXPERTS
The financial statements of PHL Variable Insurance Company as of December
31, 1995 have been examined by Price Waterhouse LLP, independent public
accountants, whose reports are set forth herein, and the financial statements
have been included upon the authority of said firm as experts in accounting and
auditing. Price Waterhouse LLP, whose address is One Financial Plaza, Hartford,
Connecticut, also provides other accounting and tax-related services as
requested by PHL Variable from time to time.
Legal matters involving Federal securities laws in connection with the
Contracts have been passed upon by Jorden Burt Berenson & Johnson LLP,
Washington, D.C.
Legal matters relating to the validity of the securities being issued have
been passed upon by Richard J. Wirth, Counsel, Phoenix Home Life Mutual
Insurance Company, Hartford, CT.
B-4
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
FINANCIAL STATEMENTS
FROM INCEPTION JULY 31, 1995 TO DECEMBER 31, 1995
B-5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
Assets
Investments at cost $5,983,319 $3,540,155 $ 336,469
=========== ========== ===========
Investment in The Phoenix
Edge Series Fund, at market $5,983,319 $3,291,580 $ 335,905
----------- ---------- -----------
Total assets 5,983,319 3,291,580 335,905
Liabilities
Accrued expenses to related
party 2,181 3,005 207
----------- ---------- -----------
Net assets $5,981,138 $3,288,575 $ 335,698
=========== ========== ===========
Accumulation units outstanding 5,893,015 3,036,889 319,171
=========== ========== ===========
Unit value $ 1.014954 $ 1.082876 $1.051781
=========== ========== ===========
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
Assets
Investments at cost $3,169,652 $ 132,940 $ 755,114
=========== ========== ===========
Investment in The Phoenix
Edge Series Fund, at market $3,044,400 $ 134,374 $ 753,665
----------- ---------- -----------
Total assets 3,044,400 134,374 753,665
Liabilities
Accrued expenses to related
party 2,936 110 679
----------- ---------- -----------
Net assets $3,041,464 $ 134,264 $ 752,986
=========== ========== ===========
Accumulation units outstanding 2,918,821 132,979 718,774
=========== ========== ===========
Unit value $ 1.042018 $1.009660 $1.047597
=========== ========== ===========
Wanger
International Wanger U.S.
Real Estate Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
Assets
Investments at cost $ 236,962 $ 272,420 $1,269,914
=========== ========== ===========
Investment in The Phoenix
Edge Series Fund, at market $ 237,701 $ -- $ --
Investment in The Wanger
Advisors Trust, at market -- 280,194 1,250,499
----------- ---------- -----------
Total assets 237,701 280,194 1,250,499
Liabilities
Accrued expenses to related
party 46 141 1,138
----------- ---------- -----------
Net assets $ 237,655 $ 280,053 $1,249,361
=========== ========== ===========
Accumulation units outstanding 226,316 257,362 1,312,796
=========== ========== ===========
Unit value $1.050105 $1.088168 $ 0.951679
=========== ========== ===========
See Notes to Financial Statements
B-6
<PAGE>
STATEMENT OF OPERATIONS
From inception July 31, 1995 through December 31, 1995
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
Investment income
Distributions $20,806 $ 6,347 $6,976
Expenses
Mortality and expense risk
charges 4,988 7,160 332
----------- ---------- -----------
Net investment income (loss) 15,818 (813) 6,644
----------- ---------- -----------
Net realized gain (loss) from
share transactions -- (397) 9
Net realized gain distribution
from Fund -- 346,480 --
Net unrealized depreciation on
investment -- (248,575) (564)
----------- ---------- -----------
Net gain (loss) on investments -- 97,508 (555)
----------- ---------- -----------
Net increase in net assets
resulting from operations $15,818 $ 96,695 $6,089
=========== ========== ===========
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
Investment income
Distributions $ 33,388 $ 33 $ 6,165
Expenses
Mortality and expense risk
charges 7,680 243 1,168
----------- ---------- -----------
Net investment income (loss) 25,708 (210) 4,997
----------- ---------- -----------
Net realized gain (loss) from
share transactions 380 (305) (40)
Net realized gain distribution
from Fund 178,778 191 13,825
Net unrealized appreciation
(depreciation) on investment (125,252) 1,434 (1,449)
----------- ---------- -----------
Net gain on investments 53,906 1,320 12,336
----------- ---------- -----------
Net increase in net assets
resulting from operations $ 79,614 $1,110 $17,333
=========== ========== ===========
Wanger Wanger
International U.S.
Real Estate Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
Investment income
Distributions $2,705 $ -- $ --
Expenses
Mortality and expense risk
charges 86 260 3,079
----------- ---------- -----------
Net investment income (loss) 2,619 (260) (3,079)
----------- ---------- -----------
Net realized gain (loss) from
share transactions 242 (6) 29
Net realized gain distribution
from Fund 556 -- --
Net unrealized appreciation
(depreciation) on investment 739 7,774 (19,415)
----------- ---------- -----------
Net gain (loss) on investments 1,537 7,768 (19,386)
----------- ---------- -----------
Net increase (decrease) in net
assets resulting from
operations $4,156 $7,508 $(22,465)
=========== ========== ===========
See Notes to Financial Statements
B-7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
From inception July 31, 1995 through December 31, 1995
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
From operations
Net investment income (loss) $ 15,818 $ (813) $ 6,644
Net realized gain -- 346,083 9
Net unrealized depreciation -- (248,575) (564)
----------- ---------- -----------
Net increase in net assets
resulting from operations 15,818 96,695 6,089
----------- ---------- -----------
From accumulation unit
transactions
Participant deposits 7,285,767 2,481,750 226,998
Participant transfers (1,318,515) 713,637 102,628
Participant withdrawals (1,932) (3,507) (17)
----------- ---------- -----------
Net increase in net assets
resulting from participant
transactions 5,965,320 3,191,880 329,609
----------- ---------- -----------
Net increase in net assets 5,981,138 3,288,575 335,698
Net assets
Beginning of period 0 0 0
----------- ---------- -----------
End of period $ 5,981,138 $3,288,575 $335,698
=========== ========== ===========
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
From operations
Net investment income (loss) $ 25,708 $ (210) $ 4,997
Net realized gain (loss) 179,158 (114) 13,785
Net unrealized appreciation
(depreciation) (125,252) 1,434 (1,449)
----------- ---------- -----------
Net increase in net assets
resulting from operations 79,614 1,110 17,333
----------- ---------- -----------
From accumulation unit
transactions
Participant deposits 2,580,979 93,558 656,615
Participant transfers 381,238 39,596 82,588
Participant withdrawals (367) -- (3,550)
----------- ---------- -----------
Net increase in net assets
resulting from participant
transactions 2,961,850 133,154 735,653
----------- ---------- -----------
Net increase in net assets 3,041,464 134,264 752,986
Net assets
Beginning of period 0 0 0
----------- ---------- -----------
End of period $3,041,464 $134,264 $752,986
=========== ========== ===========
Wanger Wanger
International U.S.
Real Estate Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
------------ ----------- ------------
From operations
Net investment income (loss) $ 2,619 $ (260) $ (3,079)
Net realized gain (loss) 798 (6) 29
Net unrealized appreciation
(depreciation) 739 7,774 (19,415)
----------- ---------- -----------
Net increase (decrease) in
net assets resulting from
operations 4,156 7,508 (22,465)
----------- ---------- -----------
From accumulation unit
transactions
Participant deposits 227,039 214,634 940,831
Participant transfers 6,466 58,021 331,307
Participant withdrawals (6) (110) (312)
----------- ---------- -----------
Net increase in net assets
resulting from participant
transactions 233,499 272,545 1,271,826
----------- ---------- -----------
Net increase in net assets 237,655 280,053 1,249,361
Net assets
Beginning of period 0 0 0
----------- ---------- -----------
End of period $237,655 $280,053 $1,249,361
=========== ========== ===========
See Notes to Financial Statements
B-8
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a unit outstanding throughout the indicated period)
(Unaudited)
Money Market Growth Bond
Sub-Account Sub-Account Sub-Account
---------------- ---------------- -----------------
Unit value,
beginning of
period $1.000000 $1.000000 $1.000000
Income from
investment
operations
Net investment
income (loss) 0.014954 (0.000697) 0.056501
Net realized and
unrealized gain
(loss) -- 0.083573 (0.004720)
-------------- -------------- ---------------
Total from
investment
operations 0.014954 0.082876 0.051781
-------------- -------------- ---------------
Unit value, end
of period $1.014954 $ 1.082876 $ 1.051781
============== ============== ===============
Total return 1.50%((1)) 8.29%((1)) 5.18%((1))
Net assets, end
of period (000) $ 5,981 $ 3,289 $ 336
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
---------------- ---------------- -----------------
Unit value,
beginning of
period $1.000000 $1.000000 $1.000000
Income from
investment
operations
Net investment
income (loss) 0.013568 (0.001828) 0.013722
Net realized and
unrealized gain 0.028450 0.011488 0.033875
-------------- -------------- ---------------
Total from
investment
operations 0.042018 0.009660 0.047597
-------------- -------------- ---------------
Unit value, end
of period $1.042018 $ 1.009660 $1.047597
============== ============== ===============
Total return 4.20%((1)) 0.97%((1)) 4.76%((1))
Net assets, end
of period (000) $ 3,041 $ 134 $ 753
Wanger
International Wanger U.S.
Real Estate Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
---------------- ---------------- -----------------
Unit value,
beginning of
period $1.000000 $1.000000 $1.000000
Income from
investment
operations
Net investment
income (loss) 0.031575 (0.003053) (0.006623)
Net realized and
unrealized gain
(loss) 0.018530 0.091221 (0.041698)
-------------- -------------- ---------------
Total from
investment
operations 0.050105 0.088168 (0.048321)
-------------- -------------- ---------------
Unit value, end
of period $1.050105 $ 1.088168 $ 0.951679
============== ============== ===============
Total return 5.01%((1)) 8.82%((1)) (4.83%)((1))
Net assets, end
of period (000) $ 238 $ 280 $ 1,249
((1)) Unannualized
See Notes to Financial Statements
B-9
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
Note 1--Organization
PHL Variable Accumulation Account (the Account) is a separate investment
account of PHL Variable Insurance Company (PHL Variable). The Account is
organized as a unit investment trust and currently consists of seven
Sub-accounts, which invest solely in a designated portfolio of The Phoenix
Edge Series Fund and two Sub-accounts which invest in the Wanger Advisors
Trust (the "Funds"). The Account is offered as The Big Edge Choice to
individuals (VA4). Contract holders may also direct the allocation of their
investments between the Account and the Guaranteed Interest Account of the
general account of PHL Variable through participant transfers.
Each Series has distinct investment objectives. The Money Market Series is a
pooled short-term investment fund, the Growth Series is a growth common stock
fund, the Bond Series is a long-term debt fund, the Total Return Series
invests in equity securities and long and short-term debt, the International
Series invests primarily in an internationally diversified portfolio of
equity securities, the Balanced Series is a balanced fund which invests in
growth stocks and at least 25% of its assets in fixed income senior
securities, the Real Estate Series invests in marketable securities of
publicly traded real estate investment trusts ("REITs") and companies that
operate, manage, develop or invest in real estate, 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 and the Wanger International Small Cap
Series invests in securities of non-U.S. companies with a stock market
capitalization of less than $1 billion.
Note 2--Significant Accounting Policies
A. Valuation of Investments: Investments are made exclusively in the Funds
and are valued at the net asset values per share of the respective Series.
B. Investment transactions and related income: Realized gains and losses
include capital gain distributions from the Funds as well as gains and losses
on sales of shares in the funds determined on the LIFO (last in, first out)
basis.
C. Income taxes: The Account is not a separate entity from PHL Variable and
under current federal income tax law, income in the Account is not taxed
since reserves are established equivalent to such income. Therefore, no
provision for related federal or state income taxes is required.
D. Distributions: Distributions are recorded as investment income on the
ex-dividend date.
Note 3--Purchases and Sales of Shares of The Funds
Purchases and sales of shares of the Funds for the period ended December 31,
1995 aggregated the following:
Sub-Account Purchases Sales
------------------------- ---------------- ----------------
Phoenix Edge Series Fund:
Money Market $9,961,762 $3,978,443
Growth 3,614,692 74,140
Bond 337,332 872
Total Return 3,260,332 91,060
International 144,019 10,774
Balanced 818,485 63,331
Real Estate 236,988 26
Wanger Advisors Trust:
International Small Cap. 277,416 4,990
U.S. Small Cap. 1,302,018 32,133
B-10
<PAGE>
Note 4--Participant Accumulation Unit Transactions (in units)
<TABLE>
<CAPTION>
Sub-Account
-------------------------------------------------------------------
Money Total
Market Growth Bond Return International Balanced
---------- -------- ------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
VA4
Units
outstanding,
beginning of
period 0 0 0 0 0 0
Participant
deposits 7,198,116 2,364,199 220,375 2,545,096 93,055 642,806
Participant
transfers (1,303,172) 675,945 98,812 374,097 39,924 79,427
Participant
withdrawals (1,929) (3,255) (16) (372) 0 (3,459)
--------- ------- ----- ------- ---------- ------
Units
outstanding,
end of period 5,893,015 3,036,889 319,171 2,918,821 132,979 718,774
========= ======= ===== ======= ========== ======
</TABLE>
Wanger
International Wanger U.S.
Real Estate Small Cap Small Cap
----------- ----------------- -----------
Units
outstanding,
beginning of
period 0 0 0
Participant
deposits 219,733 201,477 965,791
Participant
transfers 6,589 55,992 347,311
Participant
withdrawals (6) (107) (306)
---------- ---------------- ----------
Units
outstanding,
end of period 226,316 257,362 1,312,796
========== ================ ==========
Note 5--Investment Advisory Fees and Related Party Transactions
PHL Variable and its affiliate, Phoenix Equity Planning Corporation, a
registered broker/dealer in securities, provide all services to the Account.
PHL Variable assumes the risk that annuitants as a class may live longer than
expected and that its expenses may be higher than its deductions for such
expenses. In return for the assumption of these mortality and expense risks,
PHL Variable charges the Sub-accounts the daily equivalent of 0.40%, 0.85%
and 0.125% on an annual basis for mortality, expense risks and daily
administrative fees, respectively.
As compensation for administrative services provided to the Account, PHL
Variable additionally receives $35 per year from each contract, which is
deducted from the Sub-account holding the assets of the participant, or on a
pro rata basis from two or more Sub-accounts in relation to their values
under the contract. The $35 charge is waived on account values of more than
$50,000. There were no fees for administrative services collected for the
period ended December 31, 1995 that are funded by and included in participant
withdrawals.
Phoenix Equity Planning Corporation is the principal underwriter and
distributor for the Account. PHL Variable reimburses Phoenix Equity Planning
Corporation for expenses incurred as underwriter. On surrender of a contract,
contingent deferred sales charges, which vary from 0-7% depending upon the
duration of each contract deposit, are deducted from the proceeds and are
paid to PHL Variable as reimbursement for services provided. Contingent
deferred sales charges deducted and paid to PHL Variable aggregated $432 for
the period ended December 31, 1995.
Note 6--Distribution of Net Income
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of withdrawals of amounts in the form of surrenders,
death benefits, transfers or annuity payments in excess of net purchase
payments.
Note 7--Diversification Requirements
Under the provisions of Section 817(h) of the Internal Revenue Code (the
Code), a variable annuity contract, other than a contract issued in
connection with certain types of employee benefit plans, will not be treated
as an annuity 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 the Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. PHL Variable believes that the Account satisfies the current
requirements of the regulations, and it intends that the Account will
continue to meet such requirements.
B-11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[Price Waterhouse LLP logo] [Price Waterhouse circle logo]
To the Participants of
PHL Variable Accumulation Account
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly,
in all material respects, the financial position of the Money Market
Sub-Account, Growth Sub-Account, Bond Sub-Account, Total Return Sub-Account,
International Sub-Account, Balanced Sub-Account, Real Estate Sub-Account,
Wanger International Small Cap Sub-Account and Wanger U.S. Small Cap
Sub-Account (constituting the PHL Variable Accumulation Account, hereafter
referred to as the "Account") at December 31, 1995, the results of each of
their operations for the period then ended and the changes in each of their
net assets for the period indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Account's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, CT 06103
February 13, 1996
B-12
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
PHL Variable 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
Custodian
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
International Series Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Real Estate Series Custodian
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
Independent Accountants
Price Waterhouse LLP
One Financial Plaza
Hartford, Connecticut 06103
B-13
<PAGE>
PHL VARIABLE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
B-14
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Reports of Independent Accountants ...................................B-16-B-18
Balance Sheet ...........................................................B-19
Statement of Operations .................................................B-20
Statement of Changes in Stockholder's Equity.............................B-21
Statement of Cash Flows .................................................B-22
Notes to Financial Statements .......................................B-23-B-28
B-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[logo: Price Waterhouse LLP Price Waterhouse circle logo]
February 14, 1996
To the Board of Directors
and Stockholder of
PHL Variable Insurance Company
In our opinion, the accompanying balance sheet and the related
statements of operations, of changes in stockholder's equity and of
cash flows present fairly, in all material respects, the financial
position of PHL Variable Insurance Company (the Company), at
December 31, 1995 and 1994 and the results of its operations and its
cash flows for the year ended December 31, 1995 and the period from
June 1, 1994 through December 31, 1994 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/Price Waterhouse LLP
B-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[logo: Price Waterhouse LLP Price Waterhouse circle logo]
February 14, 1995
To the Board of Directors
and Stockholder of
PHL Variable Insurance Company
(formerly Dreyfus Consumer Life Insurance Company)
In our opinion, the accompanying statements of operations, of
changes in stockholder's equity and of cash flows present fairly, in
all material respects, the results of operations and cash flows of
Dreyfus Consumer Life Insurance Company (Predecessor or the
Company), for the period from January 1, 1994 through May 31, 1994
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for the opinion expressed above. The financial
statements of the Dreyfus Consumer Life Insurance Company for the
year ended December 31, 1993 were audited by other independent
accountants whose report is presented herein.
As discussed in Note 2 to the financial statements, the Company
adopted Statement of Financial Accounting Standard No. 115,
Accounting for Certain Investments in Debt and
Equity Securities, in 1994.
/s/Price Waterhouse LLP
B-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
[logo: Ernst & Young LLP]
Stockholder and Board of Directors
Dreyfus Consumer Life Insurance Company
We have audited the statement of operations, changes in
stockholder's equity, and cash flows of Dreyfus Consumer Life
Insurance Company for the year ended December 31, 1993. 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 audit.
We concluded our audit in accordance with generally accepted
auditing standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of operations, changes
in stockholder's equity and cash flows of Dreyfus Consumer Life
Insurance Company in conformity with generally accepted accounting
principles.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
January 27, 1994
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
DECEMBER 31,
1995 1994
ASSETS
Bonds
Available for sale, at fair value
(amortized cost of $10,640,720
and $9,419,531) $ 11,022,720 $ 9,250,723
Cash and cash equivalents 8,445,431 89,896
--------------- ---------------
Total cash and invested assets 19,468,151 9,340,619
Accrued investment income 165,031 157,863
Deferred acquisition costs 1,061,226
Deferred income taxes 55,119
Goodwill 858,500 960,500
Other assets 44,287
Separate account assets 15,311,637
--------------- ---------------
Total assets $ 36,908,832 $ 10,514,101
--------------- ---------------
LIABILITIES
Contractholders' funds at interest $ 3,496,977
Federal and state income taxes payable 72,246 $ 62,174
Deferred income taxes 51,895
Intercompany payable to affiliate 1,291,948 108,108
Accrued expenses 2,767
Separate account liabilities 15,311,637
--------------- ---------------
Total liabilities 20,227,470 170,282
--------------- ---------------
STOCKHOLDER'S EQUITY
Common stock, $1 par value,
2,500,000 and 2,000,000 shares authorized,
issued and outstanding 2,500,000 2,000,000
Additional paid-in capital 13,864,486 8,364,486
Net unrealized appreciation (depreciation)
on investments 221,095 (109,725)
Retained earnings 95,781 89,058
--------------- ---------------
Total stockholder's equity 16,681,362 10,343,819
--------------- ---------------
Total liabilities and
stockholder's equity $ 36,908,832 $ 10,514,101
=============== ===============
The accompanying notes are an integral part of these statements.
B-19
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUCCESSOR
PERIOD FROM PREDECESSOR
SUCCESSOR JUNE 1, 1994 PERIOD FROM PREDECESSOR
YEAR ENDED TO JANUARY 1, 1994 YEAR ENDED
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1994 MAY 31, 1994 1993
<S> <C> <C> <C> <C>
REVENUES
Fee income $ 132,714
Net investment income 828,227 $ 352,037 $ 136,991 $ 405,407
Realized investment gains (losses) 244 (29,100)
------------ ------------ ------------ ------------
Total revenues 961,185 322,937 136,991 405,407
------------ ------------ ------------ ------------
EXPENSES
Interest on contract funds 54,220
Interest in excess of amortization of
deferred acquisition costs (42,324)
General and administrative expenses 862,966 108,239 13,147 53,333
Amortization of goodwill 102,000 59,500 10,510 25,225
------------ ------------ ------------ ------------
Total expenses 976,862 167,739 23,657 78,558
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES (15,677) 155,198 113,334 326,849
(Benefit) provision for income taxes (22,400) 66,140 (12,964) 51,000
------------ ------------ ------------ ------------
NET INCOME $ 6,723 $ 89,058 $ 126,298 $ 275,849
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
B-20
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREDECESSOR
PERIOD FROM JANUARY 1, 1993
TO MAY 31, 1994
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C>
Balances at January 1, 1993 $ 2,000,000 $ 4,477,588 $ 2,883,976 $ 9,361,564
Net income 275,849 275,849
------------ ------------ ------------ ------------
Balances at December 31, 1993 2,000,000 4,477,588 3,159,825 9,637,413
Adoption of FAS 115 (174,332) (174,332)
Net income 126,298 126,298
------------ ------------ ------------ ------------
Balances at May 31, 1994 $ 2,000,000 $ 4,477,588 $ 3,111,791 $ 9,589,379
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR
PERIOD FROM MAY 31, 1994
TO DECEMBER 31, 1995
NET
ADDITIONAL UNREALIZED TOTAL
COMMON PAID-IN RETAINED APPRECIATION STOCKHOLDER'S
STOCK CAPITAL EARNINGS (DEPRECIATION) EQUITY
<S> <C> <C> <C> <C> <C>
Balances at May 31, 1994 $ 2,000,000 $ 4,477,588 $ 3,111,791 $ 9,589,379
Acquisition adjustment 3,886,898 (3,111,791) 775,107
------------ ------------ ------------ ------------
Balances at June 1, 1994 2,000,000 8,364,486 10,364,486
Net income 89,058 89,058
Net unrealized depreciation $ (109,725) (109,725)
------------ ------------ ------------ ------------ ------------
Balances at December 31, 1994 2,000,000 8,364,486 89,058 (109,725) 10,343,819
Capital contribution from parent 500,000 5,500,000 6,000,000
Net income 6,723 6,723
Net unrealized appreciation 330,820 330,820
------------ ------------ ------------ ------------ ------------
Balances at December 31, 1995 $ 2,500,000 $ 13,864,486 $ 95,781 $ 221,095 $ 16,681,362
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
B-21
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUCCESSOR
PERIOD FROM PREDECESSOR
SUCCESSOR JUNE 1, 1994 PERIOD FROM PREDECESSOR
YEAR ENDED TO JANUARY 1, 1994 YEAR ENDED
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1994 MAY 31, 1994 1993
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 6,723 $ 89,058 $ 126,298 $ 275,849
------------- -------------- -------------- --------------
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Amortization of premium and
discount on bonds 9,100 (2,423)
Realized investment (gains) losses (244) 29,100
Amortization of goodwill 102,000 59,500 10,510 25,225
Amortization of bond premium 6,000
(INCREASE) DECREASE IN ASSETS:
Accrued investment income (7,168) (67,030) 23,898 (47,721)
Deferred acquisition costs (1,061,226)
Deferred income taxes and
other assets (202,414) (55,119) 10,846 (1,059)
INCREASE (DECREASE) IN LIABILITIES:
Contract holders' funds at interest 3,496,977
Income taxes payable 10,072 62,174 (67,000)
Payables to former affiliate (112,304) 16,779
Intercompany payable to affiliate 1,183,840 108,108
Accrued expenses 2,767 (12,845) (1,738)
------------- -------------- -------------- --------------
Cash provided by operating activities 3,537,327 225,791 55,503 197,912
------------- -------------- -------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES
Investment purchases (2,714,000) (44,044,597) (2,724,420) (7,887,954)
Proceeds from investment maturities 1,532,452 43,473,572 2,023,472 7,767,645
------------- -------------- -------------- --------------
Cash used in investing activities (1,181,792) (571,025) (700,948) (120,309)
------------- -------------- -------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contribution from parent 6,000,000
-------------
Cash provided by financing activities 6,000,000
-------------
Net increase (decrease) in cash and
cash equivalents 8,355,535 (345,234) (645,445) 77,603
Cash and cash equivalents, at beginning
of period 89,896 435,130 1,080,575 1,002,972
------------- -------------- -------------- --------------
Cash and cash equivalents, at end
of period $ 8,445,431 $ 89,896 $ 435,130 $ 1,080,575
------------- -------------- -------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Income taxes paid, net of refunds $ 12,545 $ 63,725 $ 32,403 $ 113,500
------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these statements.
B-22
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. OPERATIONS
On May 31, 1994, PM Holdings, Inc. (PM Holdings) acquired Dreyfus Consumer
Life Insurance Company from The Dreyfus Corporation and renamed the
company, PHL Variable Insurance Company (PHL Variable or the Company). PM
Holdings accounted for the acquisition of the Company under the purchase
method of accounting. The assets and liabilities of the Company were
recorded at their fair value as of the date of acquisition and goodwill
was pushed-down to the Company from PM Holdings. The Company has obtained
licensing in 36 states and began offering variable annuities to the public
in 1995. PHL Variable's parent, PM Holdings, is a wholly-owned subsidiary
of Phoenix Home Life Mutual Insurance Company (Phoenix Home Life).
During 1995, PM Holdings contributed $6 million in capital to PHL Variable.
Phoenix Home Life provides services and facilities to the Company and is
reimbursed through a cost allocation process. Investment related expenses
are allocated to the Company from PM Holdings.
Effective January 1, 1995, the money management businesses of Phoenix Home
Life were transferred to Phoenix Securities Group, Inc. (Phoenix
Securities Group), a wholly-owned subsidiary of PM Holdings. Phoenix
Securities Group entered into contracts to manage the general account and
separate account investments of PHL Variable. On November 1, 1995, PM
Holdings merged Phoenix Securities Group into Duff & Phelps Corporation,
forming Phoenix Duff & Phelps Corporation (PDP). PM Holdings owns
approximately 60% of the outstanding PDP common stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies which are used by the Company in the
preparation of its financial statements are described below.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles (GAAP).
The financial statements as of December 31, 1995 and 1994 and for the
period from June 1, 1994 through December 31, 1994 are those of PHL
Variable (the Successor). The financial statements for the period from
January 1, 1994 through May 31, 1994 and the year ended December 31, 1993
are those of Dreyfus Consumer Life Insurance Company (the Predecessor)
before its business and net assets were acquired by PM Holdings.
The preparation of financial statements in conformity with GAAP requires
the use of estimates. Accordingly, certain amounts in the financial
statements contain estimates by management. Actual results may differ from
these estimates.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" was recently issued and will be adopted by PHL Variable in its
fiscal year 1996. SFAS No. 121 mandates specific methodologies to be used
for identifying and measuring the impairment of long-lived assets. Adoption
of SFAS No. 121 is not expected to materially impact PHL Variable's
financial statements.
B-23
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Effective January 1, 1995, the Company adopted the provisions of Statement
of Position 94-6 (SOP 94-6), Disclosure of Certain Significant Risks and
Uncertainties. SOP 94-6 requires disclosure about the nature of a reporting
entity's operations and the use of estimates in the preparation of
financial statements.
In 1994, PHL Variable adopted SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. This statement required PHL
Variable to segregate its debt securities into three categories: held to
maturity, available for sale or trading. All debt securities held by the
Company at December 31, 1995 and 1994 are classified as available for sale
and are recorded at their fair value with corresponding changes in fair
value recorded through stockholder's equity. The effect of implementing
SFAS No. 115 resulted in a decrease in investment assets and stockholder's
equity of $174,332. Such bonds were previously carried at amortized cost.
CASH AND CASH EQUIVALENTS
Short-term investments with a maturity of three months or less at the time
of purchase are reported as cash equivalents.
GOODWILL
Effective June 1, 1994, goodwill arising from the acquisition of the
Company is amortized using the straight-line method over a period of 10
years, the expected period of benefit from the acquisition. Prior to June
1, 1994, goodwill was amortized over a period of 20 years. Management
periodically reevaluates the propriety of the carrying value of assets.
Assets are considered impaired if the carrying value exceeds the expected
future undiscounted cash flows. Such analyses are performed at least
annually or more frequently if warranted by events or circumstances
affecting PHL Variable's business. At this time, management believes that
no significant impairment of the remaining goodwill asset has occurred and
that no reduction of the estimated useful lives is warranted.
INVESTMENTS
At December 31, 1995 and 1994, investments in bonds were generally
available for sale and carried at fair value.
Realized investment gains and losses are determined using the specific
identification method.
DEFERRED ACQUISITION COSTS
Acquisition costs consist of commissions and other costs primarily related
to the production of revenues. Acquisition costs are deferred and
amortized in proportion to total estimated gross profits over the expected
life of the contracts. Deferred acquisition costs are reviewed to
determine if they are recoverable from future income, including
investment income. If such costs are determined to be unrecoverable, they
are expensed at the time of determination.
B-24
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNTS
Separate account assets are funds of separate account contract holders
segregated into accounts with specific investment objectives. The
assets are generally carried at market value. An offsetting liability is
maintained to the extent of contract holders' interests in the assets.
Contract holders' interest in net investment income and realized and
unrealized capital gains and losses on separate account assets are not
reflected in operations.
FEE INCOME
Revenues for investment-related products consist of investment advisory
fees, mortality and expense fees, and contract charges assessed against
the fund values during the period.
INCOME TAXES
For the period January 1, 1994 through May 31, 1994 and the year ended
December 31, 1993, the former Dreyfus Consumer Life Insurance Company
(DCLIC) was included in the consolidated federal income tax return filed by
The Dreyfus Corporation (the Corporation). All participants in the
consolidated federal income tax return were severally liable for the full
amount of any taxes payable by the group. In accordance with an income tax
apportionment agreement with the Corporation, the provision for DCLIC's
federal income tax was computed on a separate return basis.
PHL Variable is included in a life/nonlife consolidated federal income
tax return with Phoenix Home Life and its eligible affiliates for the year
ended December 31, 1995 and the period June 1, 1994 through December 31,
1994. The Company entered into a federal income tax allocation agreement
with PM Holdings which requires the Company's tax provision be determined
based upon income taxes that would be paid or refunded if the Company filed
separate federal income tax returns except that losses and credits utilized
in the consolidated tax return will be reimbursed to the Company.
CONTRACT HOLDERS' FUNDS AT INTEREST
ontract holders' funds at interest are investment-related liabilities
which consist of deposits received from customers and investment earnings
on their fund balances, less administrative charges. Contract holders'
funds at interest were $3.5 million at December 31, 1995.
3. INVESTMENTS
Additional information pertaining to the Company's investments and realized
investment gains and losses follows:
BONDS
Bonds classified as available for sale are carried at fair value. Fair
value on bonds includes amounts for publicly traded bonds that are based
on quoted market prices, where available, or quoted market prices on
comparable instruments.
B-25
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The gross unrealized appreciation (depreciation) as of December 31, 1995 for
investments in bonds is set forth below.
AMORTIZED APPRECIATION FAIR
COST (DEPRECIATION) VALUE
BONDS (IN THOUSANDS)
U.S. Treasury bonds and
obligations of
U.S. Government
corporations and agencies $ 7,786 $ 354 $ 8,140
Obligations of states and
political subdivisions
- non-taxable 141 (1) 140
Mortgage-backed securities 2,714 29 2,743
-------- -------- ---------
TOTAL BONDS $ 10,641 $ 382 $ 11,023
======== ======== =========
The gross unrealized (depreciation) as of December 31, 1994 for investments in
bonds is set forth below.
AMORTIZED FAIR
COST (DEPRECIATION) VALUE
BONDS (IN THOUSANDS)
U.S. Treasury bonds and
obligations of
U.S. Government
corporations and agencies $ 9,247 $ (166) $ 9,081
Obligations of states and
political subdivisions
- non-taxable 173 (3) 170
-------- -------- ---------
TOTAL BONDS $ 9,420 $ (169) $ 9,251
======== ======== =========
The fair value and amortized cost basis of bonds at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties. The bond
issuers have the right to prepay obligations in some instances without
prepayment penalties.
FAIR AMORTIZED
VALUE COST
(IN THOUSANDS)
Due after one year through five years $ 8,025 $ 7,669
Due after five years through ten years 140 141
Due after ten years 115 117
Mortgage-backed securities 2,743 2,714
-------- --------
$ 11,023 $ 10,641
======== ========
B-26
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Investments in bonds at fair value held by various state insurance departments
to satisfy statutory requirements at December 31, 1995 and 1994 were $5,691,500
and $950,000, respectively.
Investment in mortgage-backed securities, excluding U.S. Government
guaranteed investments consist of commercial mortgage-backed securities
which have reasonably predictable cash flows and a relatively high degree
of prepayment protection.
NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
Net unrealized appreciation (depreciation) of $382,000 and ($168,808) as of
December 31, 1995 and 1994, respectively, on investments that are carried
at fair value is included as a separate component of stockholder's equity,
net of deferred income tax expense (benefit) of $119,051 and $(59,083) and
deferred acquisition costs of $41,854 and $0, respectively.
NET INVESTMENT INCOME
Net investment income is composed primarily of interest on investments in
bonds and short term investments included as cash and cash equivalents.
4. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses are summarized below.
<TABLE>
<CAPTION>
SUCCESSOR
PERIOD FROM PREDECESSOR
SUCCESSOR JUNE 1, 1994 PERIOD FROM PREDECESSOR
YEAR ENDED TO JANUARY 1, 1994 YEAR ENDED
DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1995 1994 MAY 31, 1994 1993
<S> <C> <C> <C> <C>
License renewal, filing and
examination fees $ 39,718 $ 38,857 $ 13,147 $ 24,835
Legal, accounting and
consulting expense 94,314 64,399 13,742
Data processing 122,111
Allocated operational charges 448,711
Other, various 158,112 4,983 14,756
--------- --------- --------- ---------
$ 862,966 $ 108,239 $ 13,147 $ 53,333
========= ========= ========= =========
</TABLE>
5. GOODWILL
Upon acquisition of the Company by PM Holdings on May 31, 1994, the
excess purchase price over the fair value of the Company's net assets of
$1,020,000 was recorded as goodwill by the Company.
6. STOCKHOLDER'S EQUITY
At December 31, 1995 and 1994, stockholder's equity determined in
accordance with statutory accounting practices aggregated $15,705,764 and
$7,477,718, respectively. There were no practices not prescribed by the
Insurance Department of the State of Connecticut. The Connecticut Insurance
Holding Act limits the maximum
B-27
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
(FORMERLY DREYFUS CONSUMER LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
amount of annual dividends or other distributions available to stockholders
of Connecticut insurance companies without prior approval of the Insurance
Commissioner. Under current law, the maximum dividend distribution which
may be made by the Company during 1996 without prior approval is subject to
restrictions relating to statutory surplus.
7. INCOME TAXES
For the year ended December 31, 1995 and the period from June 1, 1994
through December 31, 1994, the Successor recognized income tax (benefits)
expenses of $(22,400) and $66,140, respectively. For the period from
January 1, 1994 through May 31, 1994 and the year ended December 31, 1993,
the Predecessor recognized income tax (benefits) expenses of $(12,964)and
$51,000, respectively. The Company's current income tax liabilities at
December 31, 1995 and 1994 were $72,246 and $62,174, respectively.
The Company's federal tax return is not currently being examined.
Management does not believe that there are pending tax matters which will
have a material adverse effect on the financial statements.
The tax effect of temporary differences which give rise to deferred income
taxes as of December 31, were as follows:
1995 1994
Surrender charges $ 372,050
Policy benefits 87,621
Goodwill 20,358 $ 6,941
Deferred acquisition costs (386,078)
Market discount on bonds (26,795) (10,905)
Unrealizable (appreciation)
depreciation of investments (119,051) 59,083
---------- ---------
Total deferred income taxes $ (51,895) $ 55,119
---------- ---------
Reconciling items between the reported amount of income tax (benefit) and
the amount of income tax (benefit) that would result from applying federal
statutory tax rates relate primarily to state taxes and goodwill
amortization.
8. PHOENIX HOME LIFE GUARANTEE
Effective June 20, 1994, Phoenix Home Life guaranteed the net worth of the
Company for the period it remains a wholly-owned subsidiary or until such
earlier time as: (1) the Company requests a separate rating from the rating
agencies; or (2) any of such rating agencies on their own initiative
determine that the Company requires a separate rating.
B-28
<PAGE>
PART C
OTHER INFORMATION
Registrant hereby represents that, in imposing certain restrictions upon
withdrawals from some annuity contracts, it is relying upon the no-action letter
given to the American Council of Life Insurance (publicly available November 28,
1988) (Ref. No. 1P-6-88) regarding compliance with Section 403(b) (ii) of the
Internal Revenue Code and that it is in compliance with the conditions for
reliance upon that letter set forth therein.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The financial statements, are included in Part B and consolidated
financial information is included in Part A.
(b) Exhibits
(1) Resolution of the Board of Directors of PHL Variable
Insurance Company establishing the PHL Variable Accumulation
Account is incorporated by reference to registrant's
Registration Statement on Form N-4 dated December 14, 1994.
(2) Not Applicable.
(3) Distribution of Policies
(a) Form of Underwriting Agreement between PHL Variable
Insurance Company and Phoenix Equity Planning
Corporation is incorporated by reference to
registrant's Pre-Effective Amendment No. 1 to its Form
N-4 Registration Statement dated July 20, 1995.
(b) Form of Agreement between Phoenix Equity Planning
Corporation with respect to the sale of Contracts is
incorporated by reference to registrant's Pre-Effective
Amendment No. 1 to its Form N-4 Registration Statement
dated July 20, 1995.
(4) Form of Variable Annuity Contract is incorporated by
reference to registrant's Registration Statement on Form N-4
dated December 14, 1994.
(5) Form of Application is incorporated by reference to
registrant's Pre-Effective Amendment No. 1 to its Form N-4
Registration Statement dated July 20, 1995.
(6) (a) Charter of PHL Variable Insurance Company is
incorporated by reference to registrant's Registration
Statement on Form N-4 dated December 14, 1994.
(b) By-Laws of PHL Variable Insurance Company is
incorporated by reference to registrant's Registration
Statement on Form N-4 dated December 14, 1994.
(7) Not Applicable.
(8) Not Applicable.
(9) See Item 10(c) below.
(10)(a) Written Consent of Jorden Burt Berenson & Johnson, LLP*
(10)(b) Written Consent of Price Waterhouse LLP*
(10)(c) Written Consent of Counsel as to Legality of Securities
Being Registered*
(11) Not Applicable.
(12) Not Applicable.
(13) (a) Explanation of Yield and Effective Yield Calculation*
(b) Explanation of Total Return Calculation*
(14) Not Yet Applicable.
(15) Powers of Attorney*
* Filed herewith.
C-1
<PAGE>
ITEM 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR
<S> <C> <C>
Richard H. Booth* Director and Executive
Vice President
Robert W. Fiondella* Director, Chairman and
President
Joseph E. Kelleher** Director and Senior
Vice President
Philip R. McLoughlin* Director and Executive
Vice President
Charles J. Paydos** Director and Executive
Vice President
David W. Searfoss* Director, Executive Vice
President, Chief Financial
Officer and Treasurer
Simon Y. Tan* Director and Senior Vice
President
Dona D. Young* Director and Executive
Vice President
Robert G. Lautensack* Senior Vice President
Lisa-Lynn Bassi* Vice President
</TABLE>
* The principal business address of each of these individuals is PHL Variable
Insurance Company, One American Row, Hartford, Connecticut 06115.
** The principal business address of each of these individuals is PHL Variable
Insurance Company, 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200.
ITEM 26. NOT APPLICABLE
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 30, 1996, 1,376 Contracts have been sold.
ITEM 28. INDEMNIFICATION
Section 5.9 of the Connecticut Corporation Law & Practice, 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 III Section 14 of the By-Laws of the Company provides: "Each
Director, officer or employee of the Company, and his heirs, executors or
administrators, shall be indemnified or reimbursed by the Company for all
expenses necessarily incurred by him in connection with the defense or
reasonable settlement of any action, suit or proceeding in which he is made a
party by reason of his being or having been a Director, officer or employee of
the Company, or of any other company which he was serving as a Director or
officer at the request of the Company, except in relation to matters as to which
such Director, officer or employee is finally adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of his
duties as such Director, officer or employee. The foregoing right of
indemnification or reimbursement shall not be exclusive of any other rights to
which he may be entitled under any statute, by-law, agreement, vote of
shareholders or otherwise."
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
C-2
<PAGE>
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.
ITEM 29. PRINCIPAL UNDERWRITER
1. Phoenix Equity Planning Corporation ("PEPCO")
(a) PEPCO currently distributes securities of the Phoenix Duff &
Phelps Funds, Phoenix Funds, and Phoenix Home Life Variable
Universal Life Account and Phoenix Home Life Variable
Accumulation Account in addition to those of the Registrant.
(b) Directors and Officers of PEPCO
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
- ---------------- ----------------
Martin J. Gavin*** Director and Executive Vice President
Michael E. Haylon*** Director
Philip R. McLoughlin* Director and President
Leonard J. Saltiel** Senior Vice President
William R. Moyer** Senior Vice President, Finance,
and Treasurer
William J. Newman*** Senior Vice President
G. Jeffrey Bohne**** Vice President, Transfer Agent Operations
Nancy G. Curtiss*** Vice President, Fund Accounting
James M. Dolan** Vice President and Compliance Officer;
Assistant Secretary
Elizabeth R. Sadowinski** Vice President, Field and Investor Services
Maris Lambergs** Vice President/National Sales Manager
Thomas J. Steenburg* Secretary
Eugene A. Charon** Controller
- -----------
* The principal business address of each of these individuals is One
American Row, Hartford, Connecticut 06102-5056.
** The principal business address of each of these individuals is 100
Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
*** The principal business address of each of these individuals is 56
Prospect Street, Hartford, Connecticut 06115-0480.
**** The principal business address is 101 Munson Street, Greenfield,
Massachusetts 01302-0810.
(C) Compensation received by PEPCO during Registrant's last fiscal
year:
<TABLE>
<CAPTION>
NAME OF NET UNDERWRITING COMPENSATION BROKERAGE
PRINCIPAL UNDERWRITER DISCOUNTS AND COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
PEPCO 967,884 0 0 0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 are maintained at the administrative
offices of PHL Variable Insurance Company located at 100 Bright Meadow
Boulevard, Enfield, Connecticut 06083-2200 and 101 Munson Street, Greenfield,
Massachusetts 01302-0810.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
C-3
<PAGE>
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements contained therein are never more than 16 months old for
so long as payments under the Contracts may be accepted;
(b) to include as part of any application to purchase a Contract offered
by the prospectus, a space that an applicant can check to request a
Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this form promptly
upon written or oral request.
C-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Registration Statement and
has caused this Amendment to its Registration Statement to be signed on its
behalf, in the City of Hartford and State of Connecticut on this 19th day of
April, 1996.
PHL VARIABLE INSURANCE COMPANY
By: *Robert W. Fiondella
----------------------------
Robert W. Fiondella
President
PHL VARIABLE ACCUMULATION ACCOUNT
By: *Robert W. Fiondella
-----------------------------
Robert W. Fiondella
President
of PHL Variable Insurance Company
As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed below by the following persons in the
capacities indicated with PHL Variable Insurance Company on this 19th day of
April, 1996.
Signature Title
--------- -----
- ----------------------------- Director
*Richard H. Booth
Director, Chairman and
President
- ----------------------------- (Principal Executive Officer)
*Robert W. Fiondella
- ----------------------------- Director
*Joseph E. Kelleher
- ----------------------------- Director
*Philip R. McLoughlin
- ----------------------------- Director
*Charles J. Paydos
- ----------------------------- Director
*David W. Searfoss
- ----------------------------- Director
*Simon Y. Tan
- ----------------------------- Director
*Dona D. Young
By:/S/ RICHARD J. WIRTH
- -----------------------------------------------
*RICHARD J. WIRTH, as Attorney in Fact Pursuant to Powers of Attorney, copies
of which are filed herewith.
S-1(c)
<PAGE>
EXHIBIT 10(A)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
JORDEN BURT BERENSON & JOHNSON LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, DC 20007-0805
(202) 965-8100
Telecopier (202) 965-8104
April 19, 1996
PHL Variable Insurance Company
One American Row
Hartford, CT 06115
Re: PHL Variable Insurance Company
PHL Variable Accumulation Account
Post-Effective Amendment No. 1 to Form N-4
File No. 33-87376
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4 for PHL Variable Insurance Company and PHL
Variable Accumulation Account filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 and Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson LLP
JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
EXHIBIT 10(B)
WRITTEN CONSENT OF PRICE WATERHOUSE LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the registration
statement on Form N-4 (the "Registration Statement") of our reports dated
February 13, 1996 and February 14, 1996, relating to the financial statements of
PHL Variable Accumulation Account and the financial statements of PHL Variable
Insurance Company, respectively, which appear in such Statement of Additional
Information, and to the incorporation by reference of our reports into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Statement of
Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Hartford, Connecticut
April 17, 1996
<PAGE>
EXHIBIT 10(C)
WRITTEN CONSENT OF COUNSEL AS TO
LEGALITY OF SECURITIES BEING REGISTERED
<PAGE>
April 19, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: PHL VARIABLE ACCUMULATION ACCOUNT
REGISTRATION NOS. 33-87376 AND 811-8914
Dear Sirs:
As Counsel to PHL Variable Insurance Company, depositor named in the
herein referenced Registration Statement, and in order to render the within
opinion, we have reviewed those certain variable annuity contracts (the
"Contracts") which are the subject of the above-captioned registration, the Form
N-4 Registration Statement filed contemporaneously herewith, the Charter and
By-Laws of PHL Variable Insurance Company effective as of the date hereof,
relevant proceedings of the Board of Directors thereof, and the provisions of
Connecticut insurance law effective as of the date hereof, as we have deemed to
be relevant to the issuance of the Contracts.
Based upon the foregoing, we are of the opinion that each of the
Contracts, when issued, will have been validly issued, and will, subject to
governing law and judicial interpretations thereof, constitute a legal and
binding obligation of PHL Variable Insurance Company.
We further consent to the use of this opinion as an exhibit to the
herein described Registration Statement and to the undersigned's being named as
an expert under "Experts" therein.
Very truly yours,
/s/ Richard J. Wirth
Richard J. Wirth, Counsel
PHL Variable Insurance Company
<PAGE>
EXHIBIT 13 (A)
EXPLANATION OF YIELD AND
EFFECTIVE YIELD CALCULATION
<PAGE>
EXPLANATION OF YIELD AND EFFECTIVE YIELD CALCULATION
MONEY MARKET SUB-ACCOUNT
The following is an example of this yield calculation for the Sub-account
based on a seven-day period ending December 31, 1995.
CONTRACTS
ASSESSING
.85% EXPENSE
CHARGE
Assumptions:
Value of a hypothetical pre-existing account with
exactly one unit at the beginning of the period............ 1.014121
Value of the same account (excluding capital changes)
at the end of the seven day period......................... 1.014954
Calculation:
Ending account value.......................................... 1.014954
Less beginning account value.................................. 1.014121
Net change in account value................................... 0.000833
Base period return:
(adjusted change/beginning account value)...................... 0.000821
Current yield = return x (365/7) =................................. 4.28%
Effective yield = [(1 + return) 365/7] - I =....................... 4.37%
<PAGE>
EXHIBIT 13(B)
EXPLANATION OF TOTAL RETURN CALCULATION
<PAGE>
<TABLE>
<CAPTION>
EXPLANATION OF TOTAL RETURN CALCULATION
BIG EDGE CHOICE
TOTAL RETURN SUB-ACCOUNT
NUMBER OF UNITS WITHDRAWN ENDING AVERAGE
BEGINNING INITIAL OFFERING UNITS PER TO PAY ANNUAL 12/31/95 12/31/95 SURRENDER REAR END REDEMPTION CUM ANNUAL
DATE INVESTMENT PRICE INITIAL PMT POLICY FEE(A) TOTAL SHARES NAV VALUE LOAD(B) VALUE RETURN RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/90 1,000.00 0.602591 1,659.500 10.43803 1,649.062 1.042018 1,718.35 30.93 1,687.42 68.74% 11.03%
</TABLE>
Computation of Average annual return:
R = ((ERV/II) (1/n))-1 where,
R = average annual total return
ERV = ending redeemable value
II = initial investment
N = number of years
(a) Represents the average charge for administrative fees per $1,000 invested.
For this example, the administrative fee is $1.75 which equals the $35
annual fee divided by average account dollars x $1,000. Fees are paid
each year through the redemption of units.
(b) Assumes rear end load of 2% in year five. For this example, the year 5
load is $30.93 or 2% on 90% of the surrender value. See "Sales Charges"
section in the prospectus.
<PAGE>
EXHIBIT 15
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer,
Richard J. Wirth and Dona D. Young or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to variable annuity contracts issued or
sold by PHL Variable Insurance Company or any of its separate accounts, and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/Richard H. Booth , Director March 21, 1996
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Richard H. Booth
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer,
Richard J. Wirth and Dona D. Young or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to variable annuity contracts issued or
sold by PHL Variable Insurance Company or any of its separate accounts, and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/Robert W. Fiondella , Chairman of the Board March 21, 1996
- -------------------------------
Robert W. Fiondella and President
PHL Variable Insurance Company
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer,
Richard J. Wirth and Dona D. Young or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to variable annuity contracts issued or
sold by PHL Variable Insurance Company or any of its separate accounts, and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/Joseph E. Kelleher , Director March 21, 1996
- -------------------------------
Joseph E. Kelleher
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer,
Richard J. Wirth and Dona D. Young or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to variable annuity contracts issued or
sold by PHL Variable Insurance Company or any of its separate accounts, and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/Philip R. McLoughlin , Director March 21, 1996
- -----------------------------
Philip R. McLoughlin
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer,
Richard J. Wirth and Dona D. Young or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to variable annuity contracts issued or
sold by PHL Variable Insurance Company or any of its separate accounts, and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/Charles J. Paydos , Director March 21, 1996
- --------------------------------
Charles J. Paydos
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer,
Richard J. Wirth and Dona D. Young or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to variable annuity contracts issued or
sold by PHL Variable Insurance Company or any of its separate accounts, and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/David W. Searfoss , Director March 21, 1996
- ------------------------------
David W. Searfoss
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer,
Richard J. Wirth and Dona D. Young or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to variable annuity contracts issued or
sold by PHL Variable Insurance Company or any of its separate accounts, and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/Simon Y. Tan , Director March 21, 1996
- -------------------------------
Simon Y. Tan
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Directors of PHL Variable Insurance
Company, hereby constitute and appoint Patricia O. McLaughlin, Lewis A. Singer
and Richard J. Wirth or either of them as my true and lawful attorneys and
agents with full power to sign for me in the capacity indicated below, any or
all Registration Statements or amendments thereto filed with the Securities and
Exchange Commission under the Securities Act of 1933 and/or the Investment
Company Act of 1940 relating to variable annuity contracts issued or sold by PHL
Variable Insurance Company or any of its separate accounts, and hereby ratify
and confirm my signature as it may be signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said PHL Variable Insurance Company, provided that this
revocation shall not affect the exercise of such prior powers prior to the date
hereof.
WITNESS my hand and seal on the date set forth below.
/s/Dona D. Young , Director March 21, 1996
- ----------------------------
Dona D. Young
