[Front Cover]
PHOENIX
THE BIG EDGE CHOICE (R)
PHL VARIABLE
ACCUMULATION ACCOUNT
PHOENIX EDGE SERIES FUND
WANGER ADVISORS TRUST
December 31, 1996
[PHOENIX LOGO] PHOENIX
PHL Variable Insurance Company
<PAGE>
TABLE OF CONTENTS
PHL VARIABLE ACCUMULATION ACCOUNT
Money Market Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 4
Growth Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 4
Multi-Sector Fixed Income Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 4
Total Return Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 4
International Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 4
Balanced Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 4
Real Estate Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 5
Strategic Theme Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 5
Aberdeen New Asia Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 5
Wanger International Small Cap Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 5
Wanger U.S. Small Cap Sub-Account
Statement of Assets and Liabilities 2
Statement of Operations 3
Statement of Changes in Net Assets 5
Notes to Financial Statements 7
THE PHOENIX EDGE SERIES FUND
Money Market Series
Schedule of Investments 2-2
Statement of Assets and Liabilities 2-4
Statement of Operations 2-4
Statement of Changes in Net Assets 2-5
Financial Highlights 2-5
Growth Series
Schedule of Investments 2-7
Statement of Assets and Liabilities 2-9
Statement of Operations 2-9
Statement of Changes in Net Assets 2-10
Financial Highlights 2-10
Multi-Sector Fixed Income Series
Schedule of Investments 2-12
Statement of Assets and Liabilities 2-15
Statement of Operations 2-15
Statement of Changes in Net Assets 2-16
Financial Highlights 2-16
Total Return Series
Schedule of Investments 2-18
Statement of Assets and Liabilities 2-22
Statement of Operations 2-22
Statement of Changes in Net Assets 2-23
Financial Highlights 2-23
International Series
Schedule of Investments 2-25
Statement of Assets and Liabilities 2-28
Statement of Operations 2-28
Statement of Changes in Net Assets 2-29
Financial Highlights 2-29
Balanced Series
Schedule of Investments 2-31
Statement of Assets and Liabilities 2-35
Statement of Operations 2-35
Statement of Changes in Net Assets 2-36
Financial Highlights 2-36
Real Estate Series
Schedule of Investments 2-38
Statement of Assets and Liabilities 2-40
Statement of Operations 2-40
Statement of Changes in Net Assets 2-41
Financial Highlights 2-41
Strategic Theme Series
Schedule of Investments 2-43
Statement of Assets and Liabilities 2-45
Statement of Operations 2-45
Statement of Changes in Net Assets 2-46
Financial Highlights 2-46
Aberdeen New Asia Series
Schedule of Investments 2-48
Statement of Assets and Liabilities 2-50
Statement of Operations 2-50
Statement of Changes in Net Assets 2-51
Financial Highlights 2-51
Notes to Financial Statements 2-52
WANGER ADVISORS TRUST
Wanger International Small Cap Advisor
Schedule of Investments 3-12
Statement of Assets and Liabilities 3-17
Statement of Operations 3-18
Statement of Changes in Net Assets 3-19
Financial Highlights 3-21
Notes to Financial Statements 3-22
Wanger U.S. Small Cap Advisor
Schedule of Investments 3-8
Statement of Assets and Liabilities 3-17
Statement of Operations 3-18
Statement of Changes in Net Assets 3-19
Financial Highlights 3-20
Notes to Financial Statements 3-22
<PAGE>
This annual report for the PHL Variable Accumulation Account for the year
ended December 31, 1996 contains the financial statements for the Account's
various annuity contracts. This report also contains a list of portfolio
holdings, management's discussion of performance and investment strategy and
financial statements for each of the mutual funds that comprise the Phoenix
Edge Series Fund and the Wanger Advisors Trust.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
--------------- -------------- ---------------
<S> <C> <C> <C>
Assets
Investments at cost $23,307,062 $51,360,038 $15,609,618
============= ============ ==============
Investment in The Phoenix Edge Series Fund, at market $23,307,062 $51,007,296 $15,472,411
------------- ------------ --------------
Total assets 23,307,062 51,007,296 15,472,411
Liabilities
Accrued expenses to related party 23,864 57,618 16,234
------------- ------------ --------------
Net assets $23,283,198 $50,949,678 $15,456,177
============= ============ ==============
Accumulation units outstanding 22,142,319 42,365,475 13,251,869
============= ============ ==============
Unit value $ 1.051525 $ 1.202623 $ 1.166339
============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
--------------- ---------------- --------------
<S> <C> <C> <C>
Assets
Investments at cost $15,272,702 $3,536,508 $6,559,097
============= ============== ============
Investment in The Phoenix Edge Series Fund, at market $14,867,073 $3,661,253 $6,423,484
------------- -------------- ------------
Total assets 14,867,073 3,661,253 6,423,484
Liabilities
Accrued expenses to related party 16,880 3,987 7,237
------------- -------------- ------------
Net assets $14,850,193 $3,657,266 $6,416,247
============= ============== ============
Accumulation units outstanding 13,248,885 3,094,533 5,615,835
============= ============== ============
Unit value $ 1.120864 $ 1.181847 $ 1.142528
============= ============== ============
</TABLE>
<TABLE>
<CAPTION>
Strategic Aberdeen
Real Estate Theme New Asia
Sub-Account Sub-Account Sub-Account
--------------- -------------- ---------------
<S> <C> <C> <C>
Assets
Investments at cost $1,830,010 $4,229,473 $1,129,455
============= ============ ==============
Investment in The Phoenix Edge Series Fund, at market $2,129,843 $4,377,275 $1,130,949
------------- ------------ --------------
Total assets 2,129,843 4,377,275 1,130,949
Liabilities
Accrued expenses to related party 2,071 6,346 1,108
------------- ------------ --------------
Net assets $2,127,772 $4,370,929 $1,129,841
============= ============ ==============
Accumulation units outstanding 1,543,156 4,053,646 1,132,687
============= ============ ==============
Unit value $ 1.378845 $ 1.078271 $ 0.997488
============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Wanger
International Wanger U.S.
Small Cap Small Cap
Sub-Account Sub-Account
-------------- ---------------
<S> <C> <C>
Assets
Investments at cost $12,880,413 $20,124,073
============ =============
Investment in Wanger Advisors Trust, at market $13,951,952 $23,089,194
------------ -------------
Total assets 13,951,952 23,089,194
Liabilities
Accrued expenses to related party 14,992 23,488
------------ -------------
Net assets $13,936,960 $23,065,706
============ =============
Accumulation units outstanding 9,834,236 16,756,995
============ =============
Unit value $ 1.417188 $ 1.376482
============ =============
</TABLE>
See Notes to Financial Statements
2
<PAGE>
STATEMENT OF OPERATIONS
For the period ended December 31, 1996
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
--------------- -------------- ---------------
<S> <C> <C> <C>
Investment income
Distributions $623,817 $ 307,075 $ 555,468
Expenses
Mortality and expense risk charges 174,827 358,276 82,192
------------- ------------ --------------
Net investment income (loss) 448,990 (51,201) 473,276
------------- ------------ --------------
Net realized gain (loss) from share transactions -- 4,620 (372)
Net realized gain distribution from Fund -- 3,215,671 445,721
Net unrealized depreciation on investment -- (104,167) (136,643)
------------- ------------ --------------
Net gain on investments -- 3,116,124 308,706
------------- ------------ --------------
Net increase in net assets resulting from operations $448,990 $3,064,923 $ 781,982
============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
--------------- -------------- ---------------
<S> <C> <C> <C>
Investment income
Distributions $ 205,785 $ 44,455 $ 106,947
Expenses
Mortality and expense risk charges 124,491 21,153 46,448
------------- ------------ --------------
Net investment income 81,294 23,302 60,499
------------- ------------ --------------
Net realized gain (loss) from share transactions (20,714) (48) 4,019
Net realized gain distribution from Fund 876,124 77,451 460,553
Net unrealized appreciation (depreciation) on investment (280,377) 123,310 (134,164)
------------- ------------ --------------
Net gain on investments 575,033 200,713 330,408
------------- ------------ --------------
Net increase in net assets resulting from operations $ 656,327 $224,015 $ 390,907
============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account(1) Sub-Account(2)
--------------- --------------- ---------------
<S> <C> <C> <C>
Investment income
Distributions $ 36,227 $ 18,463 $ 5,646
Expenses
Mortality and expense risk charges 11,221 30,154 2,138
------------- ------------- --------------
Net investment income (loss) 25,006 (11,691) 3,508
------------- ------------- --------------
Net realized gain (loss) from share transactions 2,267 12,195 (2,679)
Net realized gain distribution from Fund 21,853 -- --
Net unrealized appreciation on investment 299,093 147,802 1,494
------------- ------------- --------------
Net gain (loss) on investments 323,213 159,997 (1,185)
------------- ------------- --------------
Net increase in net assets resulting from operations $348,219 $148,306 $ 2,323
============= ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Wanger Wanger
International U.S.
Small Cap Small Cap
Sub-Account Sub-Account
--------------- --------------
<S> <C> <C>
Investment income
Distributions $ 4,923 $ 5,736
Expenses
Mortality and expense risk charges 88,983 130,868
------------- ------------
Net investment loss (84,060) (125,132)
------------- ------------
Net realized gain (loss) from share transactions (7,606) 2,035
Net unrealized appreciation on investment 1,063,766 2,984,536
------------- ------------
Net gain on investments 1,056,160 2,986,571
------------- ------------
Net increase in net assets resulting from operations $ 972,100 $2,861,439
============= ============
</TABLE>
(1)From inception February 15, 1996 to December 31, 1996
(2)From inception September 19, 1996 to December 31, 1996
See Notes to Financial Statements
3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
--------------- -------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income (loss) $ 448,990 $ (51,201) $ 473,276
Net realized gain -- 3,220,291 445,349
Net unrealized depreciation -- (104,167) (136,643)
------------- ------------ --------------
Net increase in net assets resulting from operations 448,990 3,064,923 781,982
------------- ------------ --------------
From accumulation unit transactions
Participant deposits 100,807,056 16,137,985 3,658,318
Participant transfers (83,156,951) 28,719,551 10,819,170
Participant withdrawals (797,035) (261,356) (138,991)
------------- ------------ --------------
Net increase in net assets resulting from participant
transactions 16,853,070 44,596,180 14,338,497
------------- ------------ --------------
Net increase in net assets 17,302,060 47,661,103 15,120,479
Net assets
Beginning of period 5,981,138 3,288,575 335,698
------------- ------------ --------------
End of period $ 23,283,198 $50,949,678 $15,456,177
============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
--------------- ---------------- --------------
<S> <C> <C> <C>
From operations
Net investment income $ 81,294 $ 23,302 $ 60,499
Net realized gain 855,410 77,403 464,572
Net unrealized appreciation (depreciation) (280,377) 123,310 (134,164)
------------- -------------- ------------
Net increase in net assets resulting from operations 656,327 224,015 390,907
------------- -------------- ------------
From accumulation unit transactions
Participant deposits 3,603,086 1,016,275 1,688,276
Participant transfers 7,602,197 2,297,094 3,646,583
Participant withdrawals (52,881) (14,382) (62,505)
------------- -------------- ------------
Net increase in net assets resulting from participant
transactions 11,152,402 3,298,987 5,272,354
------------- -------------- ------------
Net increase in net assets 11,808,729 3,523,002 5,663,261
Net assets
Beginning of period 3,041,464 134,264 752,986
------------- -------------- ------------
End of period $14,850,193 $3,657,266 $6,416,247
============= ============== ============
</TABLE>
See Notes to Financial Statements
4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1996
(Continued)
<TABLE>
<CAPTION>
Aberdeen
Real Estate Strategic Theme New Asia
Sub-Account Sub-Account(1) Sub-Account(2)
-------------- --------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income (loss) $ 25,006 $ (11,691) $ 3,508
Net realized gain (loss) 24,120 12,195 (2,679)
Net unrealized appreciation 299,093 147,802 1,494
------------ ------------- --------------
Net increase in net assets resulting from operations 348,219 148,306 2,323
------------ ------------- --------------
From accumulation unit transactions
Participant deposits 537,771 1,162,846 190,675
Participant transfers 1,009,485 3,078,265 937,753
Participant withdrawals (5,358) (18,488) (910)
------------ ------------- --------------
Net increase in net assets resulting from participant
transactions 1,541,898 4,222,623 1,127,518
------------ ------------- --------------
Net increase in net assets 1,890,117 4,370,929 1,129,841
Net assets
Beginning of period 237,655 0 0
------------ ------------- --------------
End of period $2,127,772 $4,370,929 $1,129,841
============ ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Wanger Wanger
International U.S.
Small Cap Small Cap
Sub-Account Sub-Account
--------------- ---------------
<S> <C> <C>
From operations
Net investment loss $ (84,060) $ (125,132)
Net realized gain (loss) (7,606) 2,035
Net unrealized appreciation 1,063,766 2,984,536
------------- --------------
Net increase in net assets resulting from operations 972,100 2,861,439
------------- --------------
From accumulation unit transactions
Participant deposits 4,661,212 5,084,461
Participant transfers 8,094,139 13,945,437
Participant withdrawals (70,544) (74,992)
------------- --------------
Net increase in net assets resulting from participant
transactions 12,684,807 18,954,906
------------- --------------
Net increase in net assets 13,656,907 21,816,345
Net assets
Beginning of period 280,053 1,249,361
------------- --------------
End of period $13,936,960 $23,065,706
============= ==============
</TABLE>
(1)From inception February 15, 1996 to December 31, 1996
(2)From inception September 19, 1996 to December 31, 1996
See Notes to Financial Statements
5
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
From inception July 31, 1995 through December 31, 1995
<TABLE>
<CAPTION>
Multi-Sector
Money Market Growth Fixed Income
Sub-Account Sub-Account Sub-Account
--------------- -------------- ---------------
<S> <C> <C> <C>
From operations
Net investment income (loss) $ 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
============= ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Total Return International Balanced
Sub-Account Sub-Account Sub-Account
--------------- ---------------- --------------
<S> <C> <C> <C>
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
============= ============== ============
</TABLE>
<TABLE>
<CAPTION>
Wanger Wanger
International U.S.
Real Estate Small Cap Small Cap
Sub-Account Sub-Account Sub-Account
--------------- --------------- ---------------
<S> <C> <C> <C>
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
============= ============= ==============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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 eleven
Sub-Accounts, each of which invest solely in a designated portfolio of The
Phoenix Edge Series Fund and Wanger Advisors Trust (the "Funds"). The Account is
offered as The Big Edge Choice to individuals (VA4). Contract owners 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 Multi-Sector Fixed Income (formerly 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 are principally engaged in the real estate industry, the
Strategic Theme Series invests in securities of companies believed to benefit
from specific trends, the Aberdeen New Asia Series invests primarily in a
diversified equity securities of issuers organized and principally operating in
Asia, excluding Japan, the Wanger International Small Cap Series invests in
securities of non-U.S. companies with a stock market capitalization of less than
$1 billion and the Wanger U.S. Small Cap Series invests in growth common stock
of U.S. companies with stock market capitalization of less than $1 billion.
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 arising from 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, 1996 aggregated the following:
Sub-Account Purchases Sales
- ----------- --------- -------
The Phoenix Edge Series Fund:
Money Market $47,361,699 $30,037,956
Growth 49,376,746 1,561,483
Multi-Sector Fixed Income 16,228,014 954,493
Total Return 13,924,742 1,800,978
International 3,637,577 233,961
Balanced 6,341,288 541,324
Real Estate 1,768,284 177,503
Strategic Theme 6,201,342 1,984,064
Aberdeen New Asia 1,249,699 117,565
Wanger Advisors Trust:
International Small Cap 13,230,315 614,716
U.S. Small Cap 19,706,676 854,552
7
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Note 4--Participant Accumulation Unit Transactions (in units)
<TABLE>
<CAPTION>
Sub-Account
----------------------------------------------------------------------------------------
Money Multi-Sector Total
Market Growth Fixed Income Return International Balanced
--------------- ------------ --------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
VA4
Units outstanding,
beginning of period 5,893,015 3,036,889 319,171 2,918,821 132,979 718,774
Participant deposits 97,324,646 14,293,357 3,323,373 3,351,407 918,654 1,566,608
Participant transfers (80,299,873) 25,257,731 9,730,770 7,026,404 2,055,621 3,387,854
Participant withdrawals (775,469) (222,502) (121,445) (47,747) (12,721) (57,401)
------------- ---------- ------------- ----------- ------------- ----------
Units outstanding, end
of period 22,142,319 42,365,475 13,251,869 13,248,885 3,094,533 5,615,835
============= ========== ============= =========== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
Aberdeen Wanger International Wanger U.S.
Real Estate Strategic Theme New Asia Small Cap Small Cap
-------------- ---------------- ------------ --------------------- -------------
<S> <C> <C> <C> <C> <C>
Units outstanding,
beginning of period 226,316 0 0 257,362 1,312,796
Participant deposits 467,866 1,093,699 191,613 3,505,396 4,182,044
Participant transfers 853,440 2,977,544 941,998 6,122,656 11,320,032
Participant withdrawals (4,466) (17,597) (924) (51,178) (57,877)
------------ -------------- ---------- ------------------- -------------
Units outstanding, end of
period 1,543,156 4,053,646 1,132,687 9,834,236 16,756,995
============ ============== ========== ==================== ============
</TABLE>
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 (necessitating a greater number of annuity payments) 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. Such fees aggregated $11,077 for the period ended December 31, 1996.
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 $27,251 for the period ended December 31, 1996.
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.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGOTYPE] PRICE WATERHOUSE LLP [LOGO]
To the Board of Directors of PHL Variable Insurance Company and
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, Multi-Sector Fixed Income Sub-Account
(formerly the Bond Sub-Account), Total Return Sub-Account, International
Sub-Account, Balanced Sub-Account, Real Estate Sub-Account, Strategic Theme
Sub-Account, Aberdeen New Asia 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, 1996, the results of each of their operations for the periods
then ended and the changes in each of their net assets for each of the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Account's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments at December 31, 1996
by correspondence with the Funds, provide a reasonable basis for the opinion
expressed above.
/s/Price Waterhouse LLP
Hartford, Connecticut
February 12, 1997
<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
Custodians
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
(International Series, Aberdeen New Asia Series)
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
(Real Estate Series)
P.O. Box 351
Boston, Massachusetts 02101
Independent Accountants
Price Waterhouse LLP
One Financial Plaza
Hartford, Connecticut 06103
<PAGE>
[Back Cover]
[Phoenix Logo] Phoenix ---------------
BULK RATE
PHL Variable Insurance Company U.S. Postage
PAID
Permit No. 444
Springfield, MA
---------------
Phoenix Home Life Mutual Insurance Company
101 Munson Street
Greenfield, MA 01301
PHL Variable Insurance Company
Statutory Home Office: Hartford, Connecticut
OL 2232 A (2/97) (c) 1997 Phoenix Home Life Mutual Insurance Company
700.04
[recycle logo] Printed on Recycled Paper.
