AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1998
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. 6 [X]
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 7 [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)
--------------------
COPY TO:
EDWIN L. KERR, ESQ.
PHL VARIABLE INSURANCE COMPANY
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
[ ] on pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on May 1, 1999 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.
--------------------
================================================================================
<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
Subaccounts............................................ Calculation of Yield and Return
22. Annuity Payments.......................................... Calculation of Annuity Payments
23. Financial Statements ..................................... Financial Statements
</TABLE>
<PAGE>
THE BIG EDGE CHOICE
Variable Annuity
issued by
Phoenix Home Life Mutual
Insurance Company
If you have any questions, please contact:
[envelope] Phoenix Variable Products Mail Operations
PO Box 8027
Boston, MA 02266-8027
[phone] Tel. 800/541-0170
PROSPECTUS May 1, 1999
This Prospectus describes a variable accumulation deferred annuity contract.
This Contract is designed to provide you with retirement income in the future.
The Contract offers a variety of variable and fixed investment options.
The Contract is not a deposit or obligation of, underwritten or guaranteed by,
any financial institution, credit union or affiliate. It is not federally
insured by the Federal Deposit Insurance Corporation or any other state or
federal agency. Contract investments are subject to risk, including the
fluctuation of Contract Values and possible loss of principal.
The Securities and Exchange Commission ("SEC") has not approved or disapproved
these securities, nor passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
THE PHOENIX EDGE SERIES FUND
MANAGED BY PHOENIX INVESTMENT COUNCIL, INC.
[diamond] Balanced
[diamond] Engemann Nifty Fifty
[diamond] Growth
[diamond] International
[diamond] Money Market
[diamond] Multi-Sector Fixed Income
[diamond] Phoenix Growth & Income
[diamond] Phoenix Value Equity
[diamond] Research Enhanced Index
[diamond] Schafer Mid-Cap Value
[diamond] Seneca Mid-Cap Growth
[diamond] Strategic Allocation
[diamond] Strategic Theme
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISOR, LLC
[diamond] Aberdeen New
Asia
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Real Estate Securities
TEMPLETON VARIABLE PRODUCTS SERIES FUND
MANAGED BY TEMPLETON INVESTMENT COUNCIL, INC.
[diamond] Templeton Asset Allocation
[diamond] Templeton International
[diamond] Templeton Stock
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets
MANAGED BY FRANKLIN MUTUAL ADVISERS, INC.
[diamond] Mutual Shares Investments
WANGER ADVISORS TRUST
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
It may not be in your best interest to purchase a Contract to replace an
existing annuity contract or life insurance policy. You must understand the
basic features of the proposed Contract and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any taxes.
This Prospectus is valid only if accompanied or preceded by current
prospectuses for the Funds. You should read and keep these prospectuses for
future reference.
1
<PAGE>
TABLE OF CONTENTS
Heading Page
- ----------------------------------------------------------------
SPECIAL TERMS............................................. 3
SUMMARY OF EXPENSES....................................... 4
SUMMARY................................................... 8
FINANCIAL HIGHLIGHTS...................................... 10
PERFORMANCE HISTORY....................................... 14
THE VARIABLE ACCUMULATION ANNUITY......................... 14
PHL VARIABLE AND THE ACCOUNT ............................. 14
INVESTMENTS OF THE ACCOUNT................................ 14
The Phoenix Edge Series Fund........................... 14
Wanger Advisors Trust.................................. 15
Templeton Variable Products Series Fund................ 15
Investment Advisers.................................... 16
Services of the Advisers............................... 16
MVA....................................................... 16
PURCHASE OF CONTRACTS..................................... 17
DEDUCTIONS AND CHARGES.................................... 17
Premium Tax............................................ 17
Sales Charges.......................................... 17
Charges for Mortality and Expense Risks................ 17
Charges for Administrative Services.................... 18
Market Value Adjustment................................ 18
Other Charges.......................................... 18
THE ACCUMULATION PERIOD................................... 18
Accumulation Units..................................... 18
Accumulation Unit Values............................... 19
Transfers ............................................. 19
Surrender of Contract; Partial Withdrawals............. 19
Lapse of Contract...................................... 20
Payment Upon Death Before Maturity Date ............... 20
THE ANNUITY PERIOD ....................................... 21
Variable Accumulation Annuity Contracts................ 21
Annuity Options ....................................... 21
Option A--Life Annuity with Specified Period Certain. 21
Option B--Non-Refund Life Annuity.................... 21
Option D--Joint and Survivor Life Annuity............ 22
Option E--Installment Refund Life Annuity............ 22
Option F--Joint and Survivor Life Annuity with
10-Year Period Certain .......................... 22
Option G--Payments for Specified Period.............. 22
Option H--Payments of Specified Amount............... 22
Option I--Variable Payment Life Annuity with 10-Year
Period Certain .................................. 22
Option J--Joint Survivor Variable Payment Life Annuity
with 10-Year Period Certain ..................... 22
Option K--Variable Payment Annuity for a Specified
Period .......................................... 22
Option L--Variable Payment Life Expectancy Annuity... 22
Option M--Unit Refund Variable Payment Life Annuity.. 22
Option N--Variable Payment Non-Refund Life Annuity... 22
Other Options and Rates.............................. 22
Other Conditions..................................... 22
Payment Upon Death After Maturity Date................. 23
VARIABLE ACCOUNT VALUATION PROCEDURES..................... 23
Valuation Date......................................... 23
Valuation Period....................................... 23
Accumulation Unit Value................................ 23
Net Investment Factor.................................. 23
MISCELLANEOUS PROVISIONS.................................. 23
Assignment............................................. 23
Deferment of Payment .................................. 23
Free Look Period....................................... 24
Amendments to Contracts................................ 24
Substitution of Fund Shares............................ 24
Ownership of the Contract.............................. 24
FEDERAL INCOME TAXES...................................... 24
Introduction........................................... 24
Tax Status............................................. 24
Taxation of Annuities in General--Non-Qualified Plans.. 24
Surrenders or Withdrawals Prior to the Contract
Maturity Date..................................... 25
Surrenders or Withdrawals On or After the Contract
Maturity Date..................................... 25
Penalty Tax on Certain Surrenders and Withdrawals.... 25
Additional Considerations.............................. 25
Diversification Standards ............................. 26
Qualified Plans........................................ 27
Tax Sheltered Annuities ("TSAs") .................... 27
Keogh Plans.......................................... 28
Individual Retirement Accounts....................... 28
Corporate Pension and Profit-Sharing Plans........... 28
Deferred Compensation Plans with Respect to
Service for State and Local Governments and
Tax Exempt Organizations.......................... 28
Penalty Tax on Certain Surrenders and Withdrawals
from Qualified Contracts.......................... 28
Seek Tax Advice...................................... 29
SALES OF VARIABLE ACCUMULATION CONTRACTS ................. 29
STATE REGULATION ......................................... 29
REPORTS .................................................. 30
VOTING RIGHTS ............................................ 30
TEXAS OPTIONAL RETIREMENT PROGRAM ........................ 30
LEGAL MATTERS ............................................ 30
SAI....................................................... 30
APPENDIX A ............................................... 31
APPENDIX B ............................................... 34
APPENDIX C................................................ 35
2
<PAGE>
Special Terms
- --------------------------------------------------------------------------------
The following is a list of terms and their meanings when used in this
prospectus.
ACCOUNT: PHL Variable Accumulation Account.
ACCOUNT VALUE: The value of all assets held in the Account.
ACCUMULATION UNIT: A standard of measurement for each Subaccount used in
determining the value of a Contract and the interest in the
Subaccounts prior to the start of annuity payments.
ACCUMULATION UNIT VALUE: The value of one Accumulation Unit was set at $1.0000
on the date assets were first allocated to each Subaccount. 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.
ANNUITANT: The person whose life is used as the measuring life under the
Contract. The annuitant will be the primary Annuitant as shown on the Contract's
Schedule Page while that person is living, and will then be the contingent
Annuitant, if that person is living at the death of the primary Annuitant.
ANNUITY OPTION: The provisions under which we make a series of annuity payments
to the Annuitant or other payee, such as Life Annuity 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 OWNER (OWNER, YOU, YOUR): The person or entity, usually the one to whom
we issue the Contract. The Contract Owner has the sole right to exercise all
rights and privileges under the Contract as provided in the Contract. The Owner
may be the Annuitant, an employer, a trust or any other individual or entity
specified in the Contract application. 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 in the
application, the Annuitant will be the Owner.
CONTRACT VALUE: Prior to the Maturity Date, the sum of all Accumulation Units
held in the Subaccounts of the Account and the value held in the GIA and/or MVA.
For 403(b) plans with loans, the Contract Value is the sum of all Accumulation
Units held in the Subaccounts of the Account and the value held in the GIA
and/or MVA plus the value held in the Loan Security Account, and less any Loan
Debt.
FIXED PAYMENT ANNUITY: A benefit providing periodic payments of a fixed dollar
amount throughout the Annuity Period. This benefit does not vary with or reflect
the investment performance of any Subaccount.
FUNDS: The Phoenix Edge Series Fund, Wanger Advisors Trust and the Templeton
Variable Products Series Fund.
GIA: An investment option under which premium amounts are guaranteed to earn a
fixed rate of interest.
ISSUE DATE: The date that the initial payment is invested under a Contract.
LOAN DEBT: Loan Debt is equal to the sum of the outstanding loan balance plus
any accrued loan interest.
LOAN SECURITY ACCOUNT: The Loan Security Account is part of the general account
and is the sole security for 403(b) loans. It is increased with all loan amounts
taken and reduced by all repayments of loan principal.
MVA: An account that pays interest at a guaranteed rate if held to maturity. If
amounts are withdrawn, transferred or applied to an annuity option before the
end of the guarantee period we will make a market adjustment to the value of
that account. Assets allocated to the MVA are not part of the assets allocated
to the Account or the general account of PHL Variable. The MVA is described in a
separate prospectus.
MATURITY DATE: The date elected by the Owner as of which annuity payments will
begin. The Maturity Date will not be any 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 PAYMENT: The amount that you pay when you purchase a Contract.
We require minimum initial payments of:
[diamond] Non-qualified plans--$1,000
[diamond] IRA--$1,000
[diamond] Bank draft program--$25
[diamond] Qualified plans--$1,000
MINIMUM SUBSEQUENT PAYMENT: The least amount that you may pay when you make any
subsequent payments, after the minimum initial payment (see above). The minimum
subsequent payment for all Contracts is $25.
NET ASSET VALUE: Net asset value of a Series' shares is computed by dividing the
value of the net assets of the Series by the total number of Series outstanding
shares.
PAYMENT UPON DEATH: The obligation of PHL Variable under a Contract to make a
payment on the death of the Owner or Annuitant anytime: (a) before the Maturity
Date of a Contract (see "Payment Upon Death Before Maturity Date") or (b) after
the Maturity Date of a Contract (see "Payment Upon Death After Maturity Date").
PHL VARIABLE (OUR, US, WE, COMPANY): PHL Variable Insurance Company.
SERIES: A separate investment portfolio of a Fund.
VALUATION DATE: A Valuation Date is every day the New York Stock Exchange
("NYSE") is open for trading and PHL Variable is open for business.
VARIABLE PAYMENT ANNUITY: An annuity providing payments that vary in amounts,
according to the investment experience of the selected Subaccounts.
VPMO: The Variable Products Mail Operation division of PHL Variable that
receives and processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
3
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
<S> <C>
Sales Charges Imposed on Purchases.................................................. None
Deferred Sales Charges (as a percentage of amount withdrawn):1
Age of Payment in Complete Years 0-1............................................ 7%
Age of Payment in Complete Years 1-2............................................ 6%
Age of Payment in Complete Years 2-3............................................ 5%
Age of Payment in Complete Years 3-4............................................ 4%
Age of Payment in Complete Years 4-5............................................ 3%
Age of Payment in Complete Years 5-6............................................ 2%
Age of Payment in Complete Years 6-7............................................ 1%
Age of Payment in Complete Years 7 and thereafter............................... None
Exchange Fee-- Maximum Allowable Charge Per Exchange................................ $10
ANNUAL ADMINISTRATIVE CHARGE
Maximum......................................................................... $35
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Mortality and Expense Risk Fee................................................... 1.25%
Daily Administrative Fee......................................................... 0.125%
Total Separate Account Annual Expenses.............................................. 1.375%
</TABLE>
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses2
Rule 12b-1 (before expense Total Annual2
Series Management Fees Fees reimbursement) Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Phoenix Edge Series Fund
Aberdeen New Asia............................................... 1.00% N/A .25% 1.25%
Balanced........................................................ .55% N/A .15% .70%
Engemann Nifty Fifty............................................ .90% N/A .15% 1.05%
Growth.......................................................... .63% N/A .11% .74%
International .................................................. .75% N/A .26% 1.01%
Money Market.................................................... .40% N/A .15% .55%
Multi-Sector Fixed Income....................................... .50% N/A .15% .65%
Phoenix Growth & Income......................................... .70% N/A .15% .85%
Phoenix Value Equity............................................ .70% N/A .15% .85%
Real Estate Securities.......................................... .75% N/A .25% 1.00%
Research Enhanced Index......................................... .45% N/A .10% .55%
Schafer Mid-Cap Value........................................... 1.05% N/A .15% 1.20%
Seneca Mid-Cap Growth........................................... .80% N/A .25% 1.05%
Strategic Allocation ........................................... .58% N/A .13% .71%
Strategic Theme................................................. .75% N/A .25% 1.00%
</TABLE>
1 A sales charge is taken from the proceeds when a Contract is surrendered or
when an amount is withdrawn, if the payments have not been held under the
Contract for a certain period of time. However, each year an amount up to 10%
of the Contract Value as of the end of the previous Contract year may be
withdrawn without a sales charge. See "Deductions and Charges--Sales
Charges."
2 Each Series pays a portion or all of its total annual expenses other than the
management fee. The Research Enhanced Index Series will pay up to .10%; the
Growth, Multi-Sector Fixed Income, Strategic Allocation, Money Market,
Balanced, Engemann Nifty Fifty, Phoenix Growth & Income, Phoenix Value Equity
and Schafer Mid-Cap Series will pay up to .15%; the Real Estate Securities,
Strategic Theme, Aberdeen New Asia, and Seneca Mid-Cap Series will pay up to
.25%; and the International Series will pay up to .40%. With expense
reimbursement, Total Annual Expenses for the year ending December 31, 1998
<TABLE>
<CAPTION>
were as follows:
<S> <C> <C>
____% for Aberdeen New Asia ____% for Balanced ____% for Engemann Nifty Fifty
____% for Growth ____% for International ____% for Money Market
____% for Multi-Sector Fixed Income ____% for Phoenix Growth & Income ____% for the Phoenix Value Equity
____% for the Real Estate Series ____% for the Schafer Mid-Cap Value ____% for the Seneca Mid-Cap Growth
____% for the Strategic Allocation ____% for the Strategic Theme Series
</TABLE>
4
<PAGE>
SUMMARY OF EXPENSES (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES
RULE 12B-1 (BEFORE EXPENSE TOTAL ANNUAL
SERIES MANAGEMENT FEES FEES REIMBURSEMENT) EXPENSES
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Mutual Shares Investments-- Class 22............................ .40% .25% .60% 1.25%
Templeton Stock-- Class 22...................................... .69% .25% .19% 1.13%
Templeton Asset Allocation-- Class 22........................... .60% .25% .18% 1.03%
Templeton International-- Class 22.............................. .69% .25% .19% 1.13%
Templeton Developing Markets-- Class 22......................... 1.25% .25% .33% 1.83%
WANGER ADVISORS TRUST
Wanger Foreign Forty1........................................... 1.00% N/A .45% 1.45%
Wanger International Small Cap1................................. 1.28% N/A .32% 1.60%
Wanger Twenty1.................................................. .95% N/A .40% 1.35%
Wanger U.S. Small Cap1.......................................... .97% N/A .09% 1.06%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Each Series pays a portion or all of its total annual expenses other than the
management fee. The Wanger Foreign Forty will pay up to .45%, the Wanger U.S.
Small Cap Series will pay up to .50%, the Wanger International Small Cap
Series will pay up to .60%, and the Wanger Twenty will pay up to .40%. With
expense reimbursement, Total Annual Expenses were ____% for Wanger Foreign
Forty, ____% for Wanger International Small Cap, ____% for Wanger Twenty and
____% for the Wanger U.S. Small Cap Series for the year ending December 31,
1999. See the Fund prospectus for details.
2Class 2 shares of the Templeton Variable Products Series Fund have a
distribution plan or "12b-1 Plan" which is described in the Fund's
prospectus. Actual Management Fees and Total Annual Expenses during 1998 were
lower. With expense reimbursement, Total Annual Expenses were ____% for
Mutual Shares Investments, ____% for Templeton Stock, ____% for Templeton
Asset Allocation, ____% for Templeton International and ____% for the
Templeton Developing Markets Series for the year ending December 31, 1998.
See the Fund prospectus for details.
It is impossible to show you what expenses you would incur if you purchased
a Contract because there are so many different factors which affect expenses.
However, the following three tables are meant to help demonstrate how certain
decisions or choices by you could result in different levels of expense.
EXAMPLES:
If you surrender your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 investment. We have assumed a
constant 5% annual return on the invested assets for all of the Series.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Aberdeen New Asia...............................................
Balanced........................................................
Engemann Nifty Fifty............................................
Growth..........................................................
International...................................................
Money Market....................................................
Multi-Sector Fixed Income.......................................
Mutual Shares Investments -- Class 2............................
Phoenix Growth & Income.........................................
Phoenix Value Equity............................................
Real Estate Securities.......................................... (To be filed by Amendment)
Research Enhanced Index.........................................
Schafer Mid-Cap Value...........................................
Seneca Mid-Cap Growth...........................................
Strategic Allocation............................................
Strategic Theme.................................................
Templeton Asset Allocation -- Class 2...........................
Templeton Developing Markets -- Class 2.........................
Templeton International -- Class 2..............................
Templeton Stock -- Class 2......................................
Wanger Foreign Forty1...........................................
Wanger International Small Cap..................................
Wanger Twenty1..................................................
Wanger U.S. Small Cap...........................................
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on February 1, 1999.
5
<PAGE>
SUMMARY OF EXPENSES (continued)
If you annuitize your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 investment. We have assumed a
constant 5% annual return on the invested assets for all of the Series.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Aberdeen New Asia...............................................
Balanced........................................................
Engemann Nifty Fifty ...........................................
Growth..........................................................
Internationals..................................................
Money Market....................................................
Multi-Sector Fixed Income.......................................
Mutual Shares Investments -- Class 2............................
Phoenix Growth & Income.........................................
Phoenix Value Equity............................................
Real Estate Securities.......................................... (To be filed by Amendment)
Research Enhanced Index.........................................
Schafer Mid-Cap Value...........................................
Seneca Mid-Cap Growth...........................................
Strategic Allocation............................................
Strategic Theme.................................................
Templeton Asset Allocation -- Class 2...........................
Templeton Developing Markets -- Class 2.........................
Templeton International -- Class 2..............................
Templeton Stock -- Class 2......................................
Wanger Foreign Forty1...........................................
Wanger International Small Cap..................................
Wanger Twenty1..................................................
Wanger U.S. Small Cap...........................................
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
If you leave your premiums in the Contract and you do not surrender or
annuitize it, after each of these time periods you will have paid the following
expenses on a $1,000 investment. We have assumed a constant 5% annual return on
the invested assets for all of the Series.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Aberdeen New Asia...............................................
Balanced........................................................
Engemann Nifty Fifty ...........................................
Growth..........................................................
International...................................................
Money Market....................................................
Multi-Sector Fixed Income.......................................
Mutual Shares Investments -- Class 2............................
Phoenix Growth & Income.........................................
Phoenix Value Equity............................................
Real Estate Securities.......................................... (To be filed by Amendment)
Research Enhanced Index.........................................
Schafer Mid-Cap Value...........................................
Seneca Mid-Cap Growth...........................................
Strategic Allocation............................................
Strategic Theme.................................................
Templeton Asset Allocation -- Class 2...........................
Templeton Developing Markets -- Class 2.........................
Templeton International -- Class 2..............................
Templeton Stock -- Class 2......................................
Wanger Foreign Forty(1).........................................
Wanger International Small Cap..................................
Wanger Twenty(1)................................................
Wanger U.S. Small Cap...........................................
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on February 1, 1999.
6
<PAGE>
The purpose of the tables above is to assist you in understanding the
various costs and expenses that your Contract will bear directly or indirectly.
It is based on historical Fund expenses, as a percentage of net assets for the
year ended December 31, 1998, except as indicated. The tables reflect 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. We
will charge any premium or other taxes levied by any governmental entity with
respect to your Contract against the Contract Values based on a percentage of
premiums paid. Certain states currently impose premium taxes on the Contracts
and range from 0% to 3.5% of premiums paid. See "Deductions and Charges--Premium
Tax" and Appendix C.
The Examples should not be considered a representation of future expenses.
Actual expenses may be greater or less than those shown. See "Deductions and
Charges."
7
<PAGE>
Summary
- --------------------------------------------------------------------------------
You should read the following summary along with the detailed information
appearing elsewhere in this Prospectus.
OVERVIEW
The Contract offers a dynamic idea in retirement planning. It's designed to
give you maximum flexibility in obtaining your investment goals.
The Contract offers a combination of investment options both variable and
fixed. Investments in the Subaccounts provide returns that are variable and
depend upon the performance of the underlying Funds. Allocations to either the
GIA or MVA produce guaranteed interest earnings subject to certain conditions.
You also may select from many different variable and fixed annuity payout
options, some of which offer retirement income payments that you cannot outlive.
See "The Annuity Period--Annuity Options."
INVESTMENT FEATURES
FLEXIBLE PAYMENTS
[diamond] You may make payments anytime until the Maturity Date.
[diamond] You can vary the amount and frequency of your payments.
[diamond] Other than the Minimum Initial Payment, there are no required
payments.
MINIMUM CONTRIBUTION
[diamond] Generally, the Minimum Initial Payment is $1,000.
ALLOCATION OF PREMIUMS AND CONTRACT VALUE
[diamond] Payments are invested in one or more of the Subaccounts, the GIA
and the MVA.
[diamond] Transfers between the Subaccounts and into the GIA can be made
anytime. Transfers from the GIA are subject to rules discussed in
Appendix B and in "The Accumulation Period--Transfers."
[diamond] Transfers from the MVA may be subject to market value adjustments
and are subject to certain rules. See the MVA prospectus.
[diamond] The Contract Value varies with the investment performance of the
Funds and is not guaranteed.
[diamond] The Contract Value allocated to the GIA will depend on deductions
taken from the GIA and interest accumulation at rates set by us
(minimum-- 4%).
WITHDRAWALS [diamond] You may partially or fully surrender the Contract anytime
for its Contract Value less any applicable sales charge and premium
tax.
[diamond] After the first Contract Year, you can withdraw up to 10% of the
Contract Value without a sales charge.
DEATH BENEFIT
The Contract provides for payment on the death of the Owner or the Annuitant
anytime before the Maturity Date of the Contract.
DEDUCTIONS AND CHARGES
GENERALLY
[diamond] No deductions are made from payments.
[diamond] A deduction for sales charges may occur when you surrender your
Contract or request a withdrawal if the assets have not been held
under the Contract for a specified period.
[diamond] No deduction for sales charges after the Annuity Period has begun,
unless you make unscheduled withdrawals under Annuity Options K
or L.
[diamond] If we impose a sales charge, it is on a first-in, first-out basis
[diamond] No sales charge is imposed if the Annuitant or Owner dies before
the date that annuity payments will begin.
[diamond] The total deferred sales charges on a Contract will never exceed 9%
of the total payments.
See "Deductions and Charges--Sales Charges" for a detailed discussion.
FROM THE ACCOUNT
[diamond] Mortality and expense risk fee--1.25% annually. See "Charges for
Mortality and Expense Risks."
[diamond] The daily administrative fee --.125% annually. See "Charges for
Administrative Services."
OTHER CHARGES OR DEDUCTIONS
[diamond] Premium Taxes--taken from the Contact Value upon annuitization.
o PHL Variable will reimburse itself for such taxes on the date of a
partial withdrawal, surrender of the Contract, Maturity Date or payment
of death proceeds. See "Premium Tax."
[diamond] Administrative Fee--$35 each year.
See "Deductions and Charges" for a detailed description of Contract
charges."
In addition, certain charges are deducted from the assets of the Funds for
investment management services. See the prospectuses for the Funds for more
information.
ADDITIONAL INFORMATION
FREE LOOK PERIOD
You have the right to review the Contract. If you are not satisfied with it,
you may return and cancel the Contract:
[diamond] Within 10 days after its receipt and receive in cash the adjusted
value of the initial payment; or
[diamond] You may receive more or less than the initial payment
depending on investment experience within the Subaccounts during
the 10-day period; or
[diamond] If the Contract is issued with a Temporary Money Market Allocation
Amendment, we will refund the initial payment.
8
<PAGE>
See "Free Look Period" for a detailed discussion.
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.
VARIATIONS
The Contract is subject to laws and regulations in every state where the
Contract is sold. Therefore, the terms of the Contract may vary from state to
state.
9
<PAGE>
THE FOLLOWING TABLE SHOWS HOW THE VALUE OF ONE UNIT OF EACH SUBACCOUNT
CHANGED DURING EACH OF THE YEARS 1995 THROUGH 1998. AS YOU WILL NOTE NOT ALL
SUBACCOUNTS WERE OPERATING IN ALL OF THOSE YEARS. ALL UNITS BEGAN WITH A VALUE
OF 1.000000. THEREAFTER, THE UNIT VALUE REFLECTS THE CUMULATIVE INVESTMENT
EXPERIENCE OF THE SUBACCOUNT. THESE TABLES ARE HIGHLIGHTS ONLY, YOU MAY OBTAIN
MORE DETAILED INFORMATION IN THE FINANCIAL STATEMENTS CONTAINED IN THE STATEMENT
OF ADDITIONAL INFORMATION.
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 period indicated.
<TABLE>
<CAPTION>
MONEY MARKET SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
<S> <C> <C> <C>
Unit value, beginning of period.............................. $1.051525 $1.014954 $1.000000
Unit value, end of period.................................... $1.091039 $1.051525 $1.014954
--------- --------- ---------
Number of units outstanding (000)............................ 32,019 22,142 5,893
PHOENIX GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
Unit value, beginning of period.............................. $1.202623 $1.082876 $1.000000
Unit value, end of period.................................... $1.436490 $1.202623 $1.082876
========= ========= =========
Number of units outstanding (000)............................ 77,819 42,365 3,037
MULTI-SECTOR FIXED INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
Unit value, beginning of period.............................. $1.166339 $1.051781 $1.000000
Unit value, end of period.................................... $1.276756 $1.166339 $1.051781
========= ========= =========
Number of units outstanding (000)............................ 29,245 13,252 319
STRATEGIC ALLOCATION SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
Unit value, beginning of period.............................. $1.120864 $1.042018 $1.000000
Unit value, end of period.................................... $1.334927 $1.120864 $1.042018
========= ========= =========
Number of units outstanding (000)............................ 22,085 13,249 2,919
International Subaccount
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
Unit value, beginning of period.............................. $1.181847 $1.009660 $1.000000
Unit value, end of period.................................... $1.306260 $1.181847 $1.009660
========= ========= =========
Number of units outstanding (000)............................ 7,089 3,095 133
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
BALANCED SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
<S> <C> <C> <C>
Unit value, beginning of period.............................. $1.142528 $1.047597 $1.000000
Unit value, end of period.................................... $1.329181 $1.142528 $1.047597
========= ========= =========
Number of units outstanding (000)............................ 10,024 5,616 719
REAL ESTATE SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
Unit value, beginning of period.............................. $1.378845 $1.050105 $1.000000
Unit value, end of period.................................... $1.660307 $1.378845 $1.050105
========= ========= =========
Number of units outstanding (000)............................ 7,737 1,543 226
WANGER INTERNATIONAL SMALL CAP SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
Unit value, beginning of period.............................. $1.417188 $1.088168 $1.000000
Unit value, end of period.................................... $1.377428 $1.417188 $1.088168
========= ========= =========
Number of units outstanding (000)............................ 20,361 9,834 257
WANGER U.S. SMALL CAP SUBACCOUN
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
---------------------- 7/31/95 TO
1998 1997 1996 12/31/95
---- ---- ---- --------
Unit value, beginning of period.............................. $1.376482 $0.951679 $1.000000
Unit value, end of period.................................... $1.757439 $1.376482 $0.951679
========= ========= =========
Number of units outstanding (000)............................ 34,966 16,757 1,313
STRATEGIC THEME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 1/29/96 TO
1998 1997 12/31/96
---- ---- --------
Unit value, beginning of period............................................ $1.078271 $1.000000
Unit value, end of period.................................................. $1.246377 $1.078271
========= =========
Number of units outstanding (000).......................................... 10,169 4,054
ABERDEEN NEW ASIA SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 1/29/96 TO
1998 1997 12/31/96
---- ---- --------
Unit value, beginning of period............................................ $0.997488 $1.000000
Unit value, end of period.................................................. $0.665071 $0.997488
========= =========
Number of units outstanding (000).......................................... 3,655 1,133
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
RESEARCH ENHANCED INDEX SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED 5/1/97 TO
12/31/98 12/31/97
-------- --------
<S> <C>
Unit value, beginning of period.......................................................... $1.000000
Unit value, end of period................................................................ $1.040992
=========
Number of units outstanding (000)........................................................ 3,958
TEMPLETON STOCK SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED 5/1/97 TO
12/31/98 12/31/97
-------- --------
Unit value, beginning of period.......................................................... $1.000000
Unit value, end of period................................................................ $1.044077
=========
Number of units outstanding (000)........................................................ 6,100
TEMPLETON ASSET ALLOCATION SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED 5/1/97 TO
12/31/98 12/31/97
-------- --------
Unit value, beginning of period.......................................................... $1.000000
Unit value, end of period................................................................ $1.064886
=========
Number of units outstanding (000)........................................................ 4,622
TEMPLETON INTERNATIONAL SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED 5/1/97 TO
12/31/98 12/31/97
-------- --------
Unit value, beginning of period.......................................................... $1.000000
Unit value, end of period................................................................ $1.075133
=========
Number of units outstanding (000)........................................................ 4,072
TEMPLETON DEVELOPING MARKETS SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED 5/1/97 TO
12/31/98 12/31/97
-------- --------
Unit value, beginning of period.......................................................... $1.000000
Unit value, end of period................................................................ $0.662660
=========
Number of units outstanding (000)........................................................ 3,275
ENGEMANN NIFTY FIFTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
2/3/98 TO
12/31/98
--------
Unit value, beginning of period...........................................................................
$1.000000
Unit value, end of period.................................................................................
Number of units outstanding (000).........................................................................
PHOENIX GROWTH & INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
2/3/98 TO
12/31/98
--------
Unit value, beginning of period........................................................................... $1.000000
Unit value, end of period.................................................................................
Number of units outstanding (000).........................................................................
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PHOENIX VALUE EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
2/3/98 TO
12/31/98
--------
<S> <C>
Unit value, beginning of period........................................................................... $1.000000
Unit value, end of period.................................................................................
Number of units outstanding (000).........................................................................
SENECA MID-CAP GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
2/3/98 TO
12/31/98
--------
Unit value, beginning of period........................................................................... $1.000000
Unit value, end of period.................................................................................
Number of units outstanding (000).........................................................................
SCHAFER MID-CAP VALUE SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
2/3/98 TO
12/31/98
--------
Unit value, beginning of period........................................................................... $1.000000
Unit value, end of period.................................................................................
Number of units outstanding (000).........................................................................
MUTUAL SHARES INVESTMENTS SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/2/98 TO
12/31/98
--------
Unit value, beginning of period........................................................................... $1.000000
Unit value, end of period.................................................................................
Number of units outstanding (000).........................................................................
</TABLE>
WANGER TWENTY SUBACCOUNT AND WANGER FOREIGN FORTY SUBACCOUNT
These Subaccounts commenced operations on February 1, 1999; accordingly,
data for these Subaccounts is not yet available.
13
<PAGE>
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
We may include the performance history of the Subaccounts in advertisements,
sales literature or reports. Performance information about each Subaccount is
based on past performance only and is not an indication of future performance.
See Appendix A for more information.
THE VARIABLE ACCUMULATION ANNUITY
- --------------------------------------------------------------------------------
The individual deferred variable accumulation annuity contract (the
"Contract") issued by PHL Variable is significantly different from a fixed
annuity contract in that, unless the GIA is selected, it is the Owner and
Annuitant under a Contract who bear the risk of investment gain or loss rather
than PHL Variable. To the extent that payments are not allocated to the GIA or
MVA, the amounts which will be available for annuity payments under a Contract
will depend on the investment performance of the amounts allocated to the
Subaccounts. Upon the maturity of a Contract, the amounts held under a Contract
will continue to be invested in the Account or the GIA and monthly annuity
payments will vary in accordance with the investment experience of the
investment options selected. However, a fixed annuity may be elected, in which
case PHL Variable will guarantee specified monthly annuity payments.
You select the investment objective of each Contract on a continuing basis
by directing the allocation of payments and the reallocation of the Contract
Value among the Subaccounts, GIA or MVA.
PHL VARIABLE AND THE ACCOUNT
- --------------------------------------------------------------------------------
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, 1997, it had
assets of $428 million. PHL Variable sells variable annuity contracts through
its own field force of agents and through brokers. Its operations are currently
conducted in 45 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 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
by the SEC of the management or investment practices or policies of the Account
or of PHL Variable.
Under Connecticut law, all income, gains or losses of the Account must be
credited to or charged against the amounts placed in the Account without regard
to the other income, gains and losses from any other business or activity of PHL
Variable. The assets of the Account may not be used to pay liabilities arising
out of any other business that PHL Variable may conduct. Obligations under the
Contracts are obligations of PHL Variable.
Contributions to the GIA 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 GIA, see Appendix A.
INVESTMENTS OF THE ACCOUNT
- --------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts of the Account invest in corresponding Series of The
Phoenix Edge Series Fund. The Fund currently has the following Series available
through the Contracts:
MONEY MARKET SERIES: The investment objective of the Money Market Series is
to provide maximum current income consistent with capital preservation and
liquidity. The Money Market Series invests exclusively in high quality money
market instruments.
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 invests principally in common stocks of
corporations believed by management to offer growth potential.
MULTI-SECTOR FIXED INCOME ("MULTI-SECTOR") SERIES: The investment objective
of the Multi-Sector Series is to seek long-term total return. The Multi-Sector
Series seeks to achieve its investment objective by investing in a diversified
portfolio of high yield and high quality fixed income securities.
STRATEGIC ALLOCATION ("ALLOCATION") SERIES: The investment objective of the
Allocation Series is to realize as high a level of total return over an extended
period of time as is considered consistent with prudent investment risk. The
Allocation Series invests in stocks, bonds and money market instruments in
accordance with the Investment Adviser's appraisal of investments most likely to
achieve the highest total return.
INTERNATIONAL SERIES: The investment objective of the International Series
is to seek a high total return consistent with reasonable risk. The
International Series invests primarily in an internationally diversified
portfolio of equity securities. It intends to reduce its risk by engaging in
hedging transactions involving options, futures contracts and foreign currency
transactions. The International Series provides a means for investors to invest
a portion of their assets outside the United States.
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 invests based on combined considerations of risk, income,
capital enhancement and protection of capital value.
14
<PAGE>
REAL ESTATE SECURITIES ("REAL ESTATE") SERIES: The investment objective of
the Real Estate Series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
STRATEGIC THEME ("THEME") SERIES: The investment objective of the Theme
Series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Theme Series invests primarily in common stocks believed to have substantial
potential for capital growth.
ABERDEEN NEW ASIA ("ASIA") SERIES: The investment objective of the Asia
Series is to seek long-term capital appreciation. The Asia Series invests
primarily in a diversified portfolio of equity securities of issuers organized
and principally operating in Asia, excluding Japan.
RESEARCH ENHANCED INDEX ("ENHANCED INDEX") SERIES: The investment objective
of the Enhanced Index Series is to seek high total return by investing in a
broadly diversified portfolio of equity securities of large and medium
capitalization companies within market sectors reflected in the S&P 500. The
Enhanced Index Series invests in a portfolio of undervalued common stocks and
other equity securities which appear to offer growth potential and an overall
volatility of return similar to that of the S&P 500.
ENGEMANN NIFTY FIFTY ("NIFTY FIFTY") SERIES: The investment objective of the
Nifty Fifty Series is to seek long-term capital appreciation by investing in
approximately 50 different securities which offer the best potential for
long-term growth of capital. At least 75% of the Series' assets will be invested
in common stocks of high quality growth companies. The remaining portion will be
invested in common stocks of small corporations with rapidly growing earnings
per share or common stocks believed to be undervalued.
SENECA MID-CAP GROWTH ("SENECA MID-CAP") SERIES: The investment objective of
the Seneca Mid-Cap Series is to seek capital appreciation primarily through
investments in equity securities of companies that have the potential for above
average market appreciation. The Series seeks to outperform the Standard &
Poor's Mid-Cap 400 Index.
PHOENIX GROWTH AND INCOME ("GROWTH & INCOME") SERIES: The investment
objective of the Growth & Income Series is to seek dividend growth, current
income and capital appreciation by investing in common stocks. The Growth &
Income Series seeks to achieve its objective by selecting securities primarily
from equity securities of the 1,000 largest companies traded in the United
States, ranked by market capitalization.
PHOENIX VALUE EQUITY ("VALUE") SERIES: The primary investment objective of
the Value Series is long-term capital appreciation, with a secondary investment
objective of current income. The Value Series seeks to achieve its objective by
investing in a diversified portfolio of common stocks that meet certain
quantitative standards that indicate above average financial soundness and
intrinsic value relative to price.
SCHAFER MID-CAP VALUE ("SCHAFER MID-CAP") SERIES: The primary investment
objective of the Schafer Mid-Cap Series is to seek long-term capital
appreciation, with current income as the secondary investment objective. The
Schafer Mid-Cap Series will invest in common stocks of established companies
having a strong financial position and a low stock market valuation at the time
of purchase which are believed to offer the possibility of increase in value.
WANGER ADVISORS TRUST
Certain Subaccounts of the Account invest in corresponding Series of the
Wanger Advisors Trust. The following Series are currently available through the
Contracts:
WANGER U.S. SMALL CAP ("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 invests primarily in securities of U.S. companies with total common stock
market capitalization of less than $1 billion.
WANGER INTERNATIONAL SMALL CAP ("INTERNATIONAL SMALL CAP") SERIES: The
investment objective of the International Small Cap Series is to provide
long-term growth. The International Small Cap Series invests primarily in
securities of non-U.S. companies with total common stock market capitalization
of less than $1 billion.
WANGER TWENTY (TWENTY) SERIES: The investment objective of the Twenty Series
is to seek long-term capital growth. The Twenty Series invests primarily in the
stocks of U.S. companies with market capitalization of $1 billion to $10 billion
and ordinarily focuses its investments in 20 to 25 U.S. companies.
WANGER FOREIGN FORTY (FOREIGN) SERIES: The investment objective of the
Foreign Series is to seek long-term capital growth. The Foreign Series invests
primarily in equity securities of foreign companies with market capitalization
of $1 billion to $10 billion and focuses its investments in 40 to 60 companies
in the developed markets.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Certain Subaccounts of the Account invest in corresponding Series of the
Templeton Variable Products Series Fund. The following Series are currently
available through the Contracts:
TEMPLETON STOCK ("STOCK") SERIES: The investment objective of the Stock
Series is to provide capital growth. The Stock Series invests primarily in
common stocks issued by companies, large and small, in various nations
throughout the world.
TEMPLETON ASSET ALLOCATION ("TPT ALLOCATION") SERIES: The investment
objective of the TPT Allocation Series is to seek a high level of total return
through a flexible investment policy. The TPT Allocation Series invests in
stocks of companies of any nation, debt securities of companies and governments
of any nation and in money market instruments. Changes in the asset mix will be
made in an attempt to capitalize on total return potential produced by changing
economic conditions throughout the world.
15
<PAGE>
TEMPLETON INTERNATIONAL ("TPT INTERNATIONAL") SERIES: The investment
objective of the TPT International Series is to seek long-term capital growth
through a flexible policy of investing. The TPT International Series invests in
stocks and debt obligations of companies and governments outside the United
States. Any income realized will be incidental. Although the Series generally
invests in common stock, it also may invest in preferred stocks and certain debt
securities such as convertible bonds which are rated in any category by S&P or
Moody's or which are unrated by any rating agency.
TEMPLETON DEVELOPING MARKETS ("DEVELOPING MARKETS") SERIES: The investment
objective of the Developing Markets Series is to seek long-term capital
appreciation. The Developing Markets Series invests primarily in equity
securities of issuers in countries having developing markets.
MUTUAL SHARES INVESTMENTS ("SHARES") SERIES: The primary investment
objective of the Shares Series is to seek capital appreciation with income as a
secondary objective. The Shares Series invests in domestic equity securities and
domestic debt obligations.
Each Series will be subject to market fluctuations and the risks that come
with the ownership of any security and there can be no assurance that any Series
will achieve its stated investment objective.
In addition to being sold to the Account, shares of the Funds
also are sold to the PHLVIC Variable Universal Life Account, a separate account
used by PHL Variable to receive and invest premiums paid under certain variable
universal life policies issued by PHL Variable. Shares of the Funds also may be
sold to other separate accounts of PHL Variable or its affiliates or to the
separate accounts of other insurance companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund(s) simultaneously. Although neither PHL Variable nor the
Fund(s) currently foresees any such disadvantages either to variable life
insurance Policyowners or to variable annuity Contract Owners, the Funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance Policyowners and variable annuity Contract
Owners and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from (1) changes in
state insurance laws, (2) changes in federal income tax laws, (3) changes in the
investment management of any portfolio of the Fund(s) or (4) differences in
voting instructions between those given by variable life insurance Policyowners
and those given by variable annuity Contract Owners. PHL Variable will, at its
own expense, remedy such material conflicts including, if necessary, segregating
the assets underlying the variable life insurance policies and the variable
annuity contracts and establishing a new registered investment company.
INVESTMENT ADVISERS
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser to all
Series in The Phoenix Edge Series Fund except the Real Estate and Asia Series.
Based on subadvisory agreements with the Fund, PIC delegates certain investment
decisions and research functions to subadvisers for the following Series:
ENHANCED INDEX SERIES J.P. Morgan Investment Management, Inc.
NIFTY FIFTY SERIES Roger Engemann & Associates, Inc. ("Engemann")
SENECA MID-CAP SERIES Seneca Capital Management, LLC ("Seneca")
SCHAFER MID-CAP SERIES Schafer Capital Management, Inc.
The investment adviser to the REAL ESTATE SERIES is Duff & Phelps Investment
Management Co. ("DPIM").
The investment adviser to the ASIA SERIES is Phoenix-Aberdeen International
Advisors LLC ("PAIA"). Pursuant to subadvisory agreements with the Fund, PAIA
delegates certain investment decisions and research functions with respect to
the Asia Series to PIC and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix, and Aberdeen Fund Managers, Inc.
The other investment advisers are:
WANGER ADVISORS TRUST Wanger Asset Management, L.P.
TPT ASSET ALLOCATION Templeton Investment
TPT INTERNATIONAL Counsel, Inc.
TPT STOCK
TEMPLETON DEVELOPING Templeton Asset Management,
MARKETS Ltd.
MUTUAL SHARES Franklin Mutual Advisers, Inc.
INVESTMENTS
SERVICES OF THE ADVISERS
The Advisers continuously furnish an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisers and subadvisers, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the Funds.
MVA
- --------------------------------------------------------------------------------
The MVA is an account that pays interest at a guaranteed rate if held to
maturity. If amounts are withdrawn, transferred or applied to an annuity option
before the end of the guarantee period, a market value adjustment will be made.
Assets allocated to the MVA are not part of the assets allocated to the Account
or to the general account of PHL Variable. The MVA is more fully described in a
separate prospectus.
FOR ADDITIONAL INFORMATION CONCERNING THE FUNDS AND THE MVA, PLEASE SEE THE
ACCOMPANYING PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
16
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PURCHASE OF CONTRACTS
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The minimum initial payment for each Contract is $1,000. However, if
contracts purchased in connection with tax-qualified or employer sponsored
plans, a minimum annual payment of $1,000 is required. In addition, you may
authorize your bank to draw $25 or more from your personal checking account
monthly to purchase Units in any available Subaccount, or for deposit in the GIA
or MVA. The amount you designate will be automatically invested on the date the
bank draws on your account. If this "check-o-matic" privilege is elected, the
minimum initial payment is $25. This payment must accompany the application.
Each subsequent payment under a Contract must be at least $25.
Generally, a Contract may not be purchased for a proposed Annuitant who is
81 years of age or older. Total 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, payments may be made anytime before the Maturity Date
of a Contract.
Payments received under the Contracts will be allocated in any combination
to any Subaccount, GIA or MVA, in the proportion specified in the application
for the Contract or as otherwise indicated by you from time to time. Initial
payments may, under certain circumstances, be allocated to the Money Market
Subaccount. See "Free Look Period." Changes in the allocation of payments will
be effective as of receipt by VPMO of notice of election in a form satisfactory
to PHL Variable and will apply to any payments accompanying such notice or made
subsequent to the receipt of the notice, unless otherwise requested by you.
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 reimburse itself only
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 C 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 partial
withdrawals from, or complete surrender of the Contract. The amount (if any) of
a sales charge depends on whether your payments are held under the Contract for
a certain period of time. The sales charge schedule is shown in the chart below.
No sales charge will be taken from death proceeds. 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.
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 amounts without the
imposition of a sales charge. During the first Contract year, the 10% withdrawal
without a sales charge will be determined based on the Contract Value at the
time of the first partial withdrawal. In 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 withdrawn in excess of the 10% allowable
amount, is as follows:
AGE OF PAYMENT DEFERRED
IN COMPLETE YEARS FROM SALES CHARGE AS A
PAYMENT DATE UNTIL PERCENTAGE OF
RELEASE WAS CREDITED AMOUNT WITHDRAWN
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0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and over 0%
If the Annuitant or Owner 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 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 Subaccounts, GIA and MVA 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 you bear the investment risk of the Series in which you invest, once
the Contract has been converted to a fixed annuity, the annuity payments are
guaranteed by us. We assume the risk that Annuitants as a class may live longer
than expected (necessitating a greater number of annuity payments) and that our
expenses may be higher than the deductions for such expenses.
In assuming the mortality risk, we agree 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.
To compensate for assuming these risks, we charge each Subaccount
the daily equivalent of .40% annually of the current value of the Subaccount's
net assets for mortality risks assumed and the daily equivalent of .85% annually
for expense risks assumed. (See the Contract Schedule Pages.) No mortality and
expense risk charge is deducted from the GIA or MVA. If the charges prove
insufficient to cover actual insurance underwriting costs and excess
administrative costs, then the loss will be borne by we; 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 part of our General
Account's assets, to meet sales expenses, if any, which are in excess of sales
commission revenue generated
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from any sales charges. We have 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
We are responsible for administering the Contract. In doing so, we maintain
an account for each Owner and Annuitant, make all disbursements of benefits,
furnish administrative and clerical services for each Contract. We also make
disbursements to pay obligations chargeable to the Account, maintain the
accounts, records and other documents relating to the business of the Account
required by regulatory authorities, cause the maintenance of the registration
and qualification of the Account under laws administered by the SEC, prepare and
distribute notices and reports to Owners, and the like. We also reimburse
Phoenix Equity Planning Corporation for any expenses incurred by it as
"principal underwriter."
To cover certain of its costs of administration, such as preparation of
billings and statements of account, PHL Variable generally charges each Contract
$35 each year prior to the Contract's Maturity Date. A reduced charge may apply
in certain situations. This charge is deducted from each Subaccount, GIA and MVA
in which you are invested on a pro rata basis. This charge may be decreased but
will never increase. This charge is deducted on the Contract anniversary date
for services rendered during the preceding Contract Year. Upon surrender of a
Contract, the entire annual administrative charge of $35 is deducted regardless
of when the surrender occurs.
If you elect Payment Options I, J, K, M or N, the annual administrative
charge after the Maturity Date will be deducted from each annuity payment in
equal amounts.
We may reduce the annual administrative charges for Contracts
issued under tax-qualified plans other than IRAs, and for 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 amount of reduction 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.
We also charge each Subaccount the daily equivalent of 0.125% annually to
cover its variable costs of administration (such as printing and distribution of
materials pertaining to Contract Owner meetings). This fee is not deducted from
the GIA or MVA.
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 ("PEPCO"), or its affiliates or to registered
representatives of broker-dealers with whom PEPCO has selling agreements.
MARKET VALUE ADJUSTMENT
Any withdrawal from your MVA will be subject to a market value adjustment.
See the accompanying MVA prospectus for information relating to this option.
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 daily net asset values of each Series. These Fund charges and other Fund
expenses are described more fully in the accompanying Fund prospectuses.
THE ACCUMULATION PERIOD
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The accumulation period is that time before annuity payments begin that your
payments into the Contract remain invested.
Accumulation Units
Your Initial payments will be applied within two days of our receipt if the
application for a Contract is complete. If an incomplete application is
completed within five business days of receipt by VPMO, your payment will be
applied within two days of the completion of the application. If VPMO does not
accept the application within five business days or if an order form is not
completed within five business days of receipt by VPMO, then your payment will
be immediately returned unless you request us to hold it while the application
is completed. Additional payments allocated to the GIA or MVA are deposited on
the date of receipt of payment at VPMO. Additional payments allocated to
Subaccounts are used to purchase Accumulation Units of the Subaccount(s), at the
value of such Units next determined after the receipt of the payment at VPMO.
The number of Accumulation Units of a Subaccount purchased with a specific
payment will be determined by dividing the payment by the value of an
Accumulation Unit in that Subaccount next determined after receipt of the
payment. The value of the Accumulation Units of a Subaccount will vary depending
upon the investment performance of the applicable Series of the Funds, the
expenses charged against the Fund and the charges and deductions made against
the Subaccount.
ACCUMULATION UNIT VALUES
On any date before the Maturity Date of the Contract, the total value of the
Accumulation Units in a Subaccount can be computed by multiplying the number of
such Units by the value of an Accumulation Unit on that 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
credited to you in each Subaccount and their current value will be reported to
you at least annually.
TRANSFERS
You may, anytime up to 30 days prior to the Maturity Date of your
Contract, elect to transfer all or any part of the Contract
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Value among one or more Subaccounts, the GIA or MVA. A transfer from a
Subaccount will result in the redemption of Accumulation Units and, if another
Subaccount is selected, in the purchase of Accumulation Units. The exchange will
be based on the values of the Accumulation Units next determined after the
receipt by VPMO of written notice of election in a form satisfactory to us. A
transfer among Subaccounts, the GIA or MVA does not automatically change the
payment allocation schedule of your contract.
You may also request transfers and changes in payment allocations among
available Subaccounts, the GIA or MVA by calling VPO at 800-541-0171 between the
hours of 8:30 a.m. and 4:00 p.m. Eastern Time. Unless you elect in writing not
to authorize telephone transfers or allocation changes, telephone transfer
orders and allocation changes will also be accepted on your behalf from your
registered representative. We will employ reasonable procedures to confirm that
telephone instructions are genuine. We will require verification of account
information and will record telephone instructions on tape. All telephone
transfers and allocation changes will be confirmed in writing to you. To the
extent that procedures reasonably designed to prevent unauthorized transfers are
not followed, we may be liable for following telephone instructions for
transfers that prove to be fraudulent. However, you will bear the risk of loss
resulting from instructions entered by an unauthorized third party we reasonably
believe to be genuine. These telephone exchange and allocation change privileges
may be modified or terminated at any time. In particular, during times of
extreme market volatility, telephone privileges may be difficult to exercise. In
such cases you should submit written instructions.
You also may elect to transfer funds automatically among the Subaccounts or
GIA on a monthly, quarterly, semiannual or annual basis under the Systematic
Transfer Program for Dollar Cost Averaging ("Systematic Transfer Program").
Under this Systematic Transfer Program, the minimum initial and subsequent
transfer amounts are $25 monthly, $75 quarterly, $150 semiannually or $300
annually. You must have an initial value of $2,000 in the GIA or in the
Subaccount from which funds will be transferred (sending Subaccount), and if the
value in that Subaccount or the GIA drops below the amount to be transferred,
the entire remaining balance will be transferred and no more systematic
transfers will be processed. Funds may be transferred from only one sending
Subaccount or from the GIA but may be allocated to multiple receiving
Subaccounts. Under the Systematic Transfer Program, you may transfer
approximately equal amounts from the GIA over a minimum 18-month period.
Transfers under the Systematic Transfer Program are not subject to the general
restrictions on transfers from the GIA. This program is not available for the
MVA.
Upon completion of the Systematic Transfer Program, you must notify VPO at
(800) 541-0171 or in writing to VPMO to implement another Systematic Transfer
Program.
All transfers under the Systematic Transfer Program will be executed on the
basis of values as of the first of the month rather than on the basis of 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 we otherwise agree or unless the Systematic Transfer Program has been
elected, you may make only one transfer per Contract year from the GIA.
Non-systematic transfers from the GIA and MVA will be made on the date of
receipt by VPMO except as you may otherwise request. For non-systematic
transfers, the amount that may be transferred from the GIA at any one time
cannot exceed the greater of $1,000 or 25% of the Contract Value in the GIA at
the time of transfer. For non-systematic transfers from the MVA, the market
value adjustment may be applied. See the accompanying MVA prospectus for more
information.
Because excessive trading can hurt Fund performance and harm all Contract
Owners, we reserve the right to temporarily or permanently terminate exchange
privileges or reject any specific order from anyone whose transactions seem to
follow a timing pattern, including those who request more than one exchange out
of a Subaccount within any 30-day period. We will not accept batch transfer
instructions from registered representatives (acting under powers of attorney
for multiple Contract Owners), unless we have entered into a third-party
transfer service agreement with the registered representative's broker-dealer
firm.
No sales charge will be assessed when a transfer is made. The date a payment
was originally credited for the purpose of calculating the sales charge will
remain the same. Currently, there is no charge for transfers; however, we
reserve the right to charge a transfer fee of $10 per transfer after the first
two transfers in each Contract year to defray administrative costs. Currently,
unlimited transfers are permitted; however, we reserve the right to change our
policy to limit the number of transfers made during each Contract year. If the
Temporary Money Market Allocation Amendment is in effect, no transfers may be
made until the end of the free look period. See "Free Look Period." However, you
will be permitted at least six transfers during each Contract year. THERE ARE
ADDITIONAL RESTRICTIONS ON TRANSFERS FROM THE GIA AS DESCRIBED ABOVE AND IN
APPENDIX B. See the MVA prospectus for information regarding transfers from the
MVA.
We reserve the right to limit the number of Subaccounts you may elect to a
total of 18 over the life of the Contract unless changes in federal and/or state
regulation, including tax, securities and insurance law require us to impose a
lower limit.
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, you 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 withdrawals, without the imposition of a sales
charge. During the first Contract year, the 10% withdrawal without a sales
charge is available only 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
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anniversary value. A signed written request for withdrawal must be sent
to VPMO. If you has not yet reached age 59 1/2, a 10% penalty tax may apply on
taxable income withdrawn. See "Federal Income Taxes." The appropriate number of
Accumulation Units of a Subaccount will be redeemed at their value next
determined after the receipt by VPMO of a written notice in a form satisfactory
to us. Accumulation Units redeemed in a partial withdrawal from multiple
Subaccounts will be redeemed on a pro rata basis unless you designate otherwise.
Contract Values in the GIA or MVA will also be withdrawn on a pro rata basis
unless you designate otherwise. Withdrawals from the MVA may be subject to the
market value adjustment. See the MVA prospectus. The resulting cash 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. Although loans are available under 403(b) plans only, certain
limitations may apply. 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 Phoenix Variable Products Mail Operations, PO Box 8027,
Boston, Massachusetts 02266-8027.
LAPSE OF CONTRACT
If on any Valuation Date the Contract Value is zero, or if the premium tax
reimbursement due on surrender or partial withdrawal is greater than or equal to
the Contract Value (unless any Contract Value has been applied under one of the
variable payment options) the Contract will immediately terminate and lapse
without value. Within 30 days after this Valuation Date, PHL Variable will
notify you in writing that the Contract has lapsed.
PAYMENT UPON DEATH BEFORE MATURITY DATE
If the Owner/Annuitant 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. Upon the death of the Annuitant or of an Owner/Annuitant who has
not yet attained age 85, the death benefit (less any deferred premium tax) is
calculated according to the following method:
1. Death occurring in the first Contract year -- the greater of:
a. 100% of payments, less any withdrawals; and
b. the Contract Value next determined following receipt of a certified
copy of the death certificate at VPMO.
2. Death occurring in subsequent Contract years -- the greater of:
a. the death benefit at the end of the previous Contract year, plus 100%
of payments, less any withdrawals made since that date; and
b. the Contract Value next determined following receipt of a certified
copy of the death certificate at VPMO.
After the Annuitant's age 85, the death benefit (less any deferred premium
tax) equals the Contract Value (no surrender charge is imposed) next determined
following receipt of a certified copy of the death certificate at VPMO.
Upon the death of an Owner who is not the Annuitant, provided that there is
no surviving joint Owner, the death proceeds will be paid to the Owner's
beneficiary. The amount of death benefit payable is equal to the greater of:
a. 100% of payments, less withdrawals; and
b. the Contract Value next determined following receipt of a certified
copy of the death certificate at VPMO.
If the Owner or Owner/Annuitant's beneficiary elects to defer payment of the
death proceeds for a period longer than one Contract year, the death proceeds
that will be payable upon distribution is equal to the greater of:
a. 100% of payments, less withdrawals; and
b. the Contract Value next determined following receipt at VPMO of both
written authorization for distribution and a certified copy of the
death certificate.
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." However, 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." See also
"Distribution at Death" under "Federal Income Taxes."
THE ANNUITY PERIOD
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The annuity period is that period of time beginning after the end of the
accumulation period and during which payments to you are made.
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Annuity payments will begin on the Contract's Maturity Date if the Annuitant
is alive and the Contract is still in force. Beginning on the Maturity Date,
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 you. 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 Subaccount
selected, are made monthly for life and, if the Annuitant dies within 10 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
you 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, we 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, we may
make a single sum payment equal to the total Contract Value on the date the
initial payment would be payable, or make periodic payments quarterly,
semiannually or annually in place of monthly payments.
Each Contract specifies a provisional Maturity Date at the time of its
issuance. You may subsequently elect a different Maturity Date. The Maturity
Date may not be earlier than the fifth Contract anniversary or later than the
Contract anniversary nearest the Annuitant's 95th birthday unless the Contract
is issued in connection with certain qualified plans. Generally, under qualified
plans, the Maturity Date must be such that distributions begin no later than
April 1st of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an IRA.
The Maturity Date election must be made by written notice and must be
received by VPMO 30 days before the provisional Maturity Date. If a Maturity
Date, which is different from the provisional Maturity Date, is not elected by
you, 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 (TSA), a Keogh Plan or an IRA plan. See "Tax Sheltered
Annuities," "Keogh Plans" and "Individual Retirement Accounts."
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 Subaccount to be credited is based
on the value of the Accumulation Units in that Subaccount 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 Subaccount to which Annuity Units are
credited. The initial payment will be calculated based on an assumed investment
return of 4 1/2% per year. This rate is a fulcrum return around which variable
annuity payments will vary to reflect whether actual investment experience of
the Subaccount is better or worse than the assumed investment return. The
assumed investment return 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 SAI.
Instead of the 10-year period certain variable payment life annuity (see
"Option I--Variable Payment Life Annuity with 10-Year Period Certain"), you may,
by written request received by VPMO 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. In addition, 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 will effect the
level of annuity payments.
We deduct a daily charge for mortality and expense risks and a daily
administrative fee from Contract Values held in the Subaccounts. See "Charges
For Mortality and Expense Risks" and "Charges for Administrative Services."
Therefore, electing Option K will result in a deduction being made even though
we assume no mortality risk under that option.
The following are descriptions of the annuity options available under a
Contract. These descriptions should allow you to understand the basic
differences between the options, HOWEVER, YOU SHOULD CONTACT VPMO WELL IN
ADVANCE OF THE DATE YOU WISH TO ELECT AN OPTION TO OBTAIN ESTIMATES OF PAYMENTS
UNDER EACH 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 paid 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 surviving annuitant.
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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 for the life of
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
five 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 Subaccounts in which proceeds
are invested.
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 Subaccounts in which proceeds are invested. 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. This option is not available for payment of any death benefit under
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 at anytime request
unscheduled withdrawals representing part or all of the remaining Contract Value
less any applicable contingent deferred sales charge.
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 at anytime
request unscheduled withdrawals representing part or all of the remaining
Contract Value less any applicable contingent deferred sales charge. 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
We may offer other annuity options at the time a Contract reaches its
Maturity Date. In addition, in the event that settlement rates for Contracts are
at that time more favorable than the applicable rates guaranteed under the
Contract, the then 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 most qualified 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 regular or
SIMPLE IRAs must begin minimum distributions by April 1 of the year following
the year in which they attain age 70 1/2. Minimum distribution requirements do
not apply to Roth IRAs. Distributions from qualified plans generally must begin
by the later of actual retirement or April 1 of the year following the year
participants attain age 70 1/2. Any required minimum 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.
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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 the LED program, regardless of Contract year, 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." Any amounts withdrawn that have not been held under a Contract
for at least six years and are in excess of both 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, we 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, semiannually
or annually in place of monthly payments.
PAYMENT UPON DEATH AFTER MATURITY DATE
If an Owner who also is the Annuitant dies on or after the Maturity Date,
except as may otherwise be provided under any supplementary contract between the
Owner and us, we 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, we 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, we 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 NYSE is open for trading and we are open
for business. The NYSE is scheduled to be closed on the following days: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Board
of Directors of the NYSE reserves the right to change this schedule as
conditions warrant. On each Valuation Date, the value of the Account is
determined at the close of the NYSE (currently 4:00 p.m. Eastern Time).
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 a Subaccount. 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. After the first Valuation
Period, the Accumulation Unit Value reflects the cumulative investment
experience of that Subaccount.
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 depending on whether the assets gained
or lost value that day. To determine the net investment rate for any Valuation
Period for the Funds allocated to each Subaccount, the following steps are
taken: (a) the aggregate accrued investment income and capital gains and losses,
whether realized or unrealized, of the Subaccount 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 Subaccount 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 VPMO 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 to us.
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 VPMO. However, we may postpone payment
of the value of any Accumulation Units at times (a) when the NYSE is closed,
other than customary weekend and holiday closings, (b) when trading on the NYSE
is restricted, (c) when an emergency
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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 over us by order permits
such suspension. Rules and regulations of the SEC, if any, are applicable and
will govern as to whether conditions described in (b), (c) or (d) exist.
FREE LOOK PERIOD
We may mail the Contract to you or we may deliver it to you in person. You
may surrender a Contract for any reason within 10 days after you receive it and
receive in cash the adjusted value of your initial payment. (A longer Free Look
Period may be required by your state.) You may receive more or less than the
initial payment depending on investment experience within the Subaccounts during
the Free Look Period. If a portion or all of your initial payment has been
allocated to the GIA, we also will refund any earned interest. If a portion or
all of your initial payment has been allocated to the MVA, we will apply the
Market Value Adjustment which can increase or decrease your initial payment.
If the Temporary Money Market Allocation Amendment was elected on the
application or you reside in a state that requires the full refund of premium,
we will temporarily allocate those portions of your initial payment designated
for the Subaccounts to the Money Market Subaccount and those portions designated
for the GIA and MVA will be allocated to those Accounts. If you surrender the
Contract, then your initial payment is refunded. At the expiration of the Free
Look Period, the value of the Accumulation Units held in the Money Market
Subaccount is allocated among the available Subaccounts in accordance with your
allocation instructions on the application.
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 SAI must be filed with the SEC.
SUBSTITUTION OF FUND SHARES
Although we believe it to be highly unlikely, it is possible that in the
judgment of our 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, we may seek to substitute the shares of
another Series or the shares of an entirely different 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 consequences, and a qualified adviser should be consulted
before any such transfer is attempted.
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, (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
our 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. The tax rules are complicated and this discussion can only make you
aware of the issues. 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 our 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 "IRS"). We do not guarantee the tax status of the
Contracts. Purchasers bear the complete risk that the Contracts may not be
treated as "annuity contracts" under federal income tax laws. 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 1 of Subchapter
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 Subchapter 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. We reserve the right to make a deduction for taxes
should they be imposed on us 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. 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."
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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 payments
(premiums paid) by or on behalf of an individual under a Contract that have not
been 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 amount received on account of a total or partial surrender of a
Contract. 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.
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. The 5-year
averaging rule for lump sum distribution has been repealed for tax years
beginning after 1999.
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. For certain types of qualified plans, there may be no investment in the
Contract resulting in the full amount of the payments being taxable. A
simplified method of determining the exclusion ratio is effective with respect
to qualified plan annuities starting after November 18, 1996.
Withholding of federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies VPMO of that election.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS
Amounts surrendered or distributed before the taxpayer reaches age 59 1/2
are subject to a penalty tax 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 or her 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 and to a special penalty of 25% applicable specifically to
SIMPLE IRAs or other special penalties applicable to Roth IRAs); (v) allocable
to investment in the Contract before August 14, 1982; (vi) under a 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) within 5 years from the date of the first payment,
or (b) before the taxpayer reaches age 59 1/2.
Separate tax withdrawal penalties apply to Qualified Plans. See "Penalty Tax
on Surrenders and Withdrawals from Qualified Contracts."
ADDITIONAL CONSIDERATIONS
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 generally must
be distributed within five (5) years after the date of death, or if payable to a
designated beneficiary, may be annuitized over the life or life expectancy of
that beneficiary and payments must begin 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.
Similar distribution requirements apply to annuity contracts under Qualified
Plans (other than Code Section 457 Plans). However, a number of restrictions,
limitations and special rules apply to qualified plans and Contract Owners
should consult with their tax adviser.
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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 primary
Annuitant is treated as 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, distribution will be required at the death of the first
of the Contract Owners.
If the Contract Owner or a Joint Contract Owner dies on or after the
Maturity Date, the remaining payments, if any, under the Annuity Option selected
will be made at least as rapidly as under the method of distribution in effect
at the time of death.
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.
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, or where the Contract is
purchased on behalf of an employee upon termination of a qualified plan, and nor
if the annuity contract is an immediate annuity.
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 are, in a Code Section 1035 exchange,
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.
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.
DIVERSIFICATION STANDARDS
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 calendar quarter
that the Series' assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
Series as an asset of the 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.
The Treasury Department has indicated that the Diversification Regulations
do not provide guidance regarding the circumstances in which Contract Owner
control of the investments of the Account will cause the Contract Owner to be
treated as the owner of the assets of the Account, thereby resulting in the loss
of favorable tax treatment for the Contract. At this time, it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance. The amount of Contract Owner control which may be
exercised under the Contract is different in some respects from the situations
addressed in published rulings issued by the IRS in which was held that the
policyowner was not the owner of the assets of the separate account. It is
unknown whether these differences, such as the Contract Owner's ability to
transfer among investment choices or the number and type of investment choices
available, would cause the Contract Owner to be considered as the Owner of the
assets of the Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
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In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling generally will be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Contract
Owner being retroactively determined to be the Owner of the assets of the
Account.
Due to the uncertainty in this area, we reserve the right to modify the
Contract in an attempt to maintain favorable tax treatment.
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.
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, 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 here 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 roll-over 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 generally
will be subject to 20 percent income tax withholding. Mandatory withholding can
be avoided only 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 TSAs (not including IRAs), except (a) distributions required
under the Code, (b) substantially equal distributions made over the life (or
life expectancy) of the employee, or for a term certain of 10 years or more and
(c) the portion of distributions not includable in gross income (i.e., return of
after-tax contributions).
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by PHL Variable in connection
with certain Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables also will be available
for use in connection with certain non-qualified deferred compensation plans.
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 general descriptions
of the various types of Qualified Plans and of the use of the contracts in
connection therewith.
TAX SHELTERED ANNUITIES ("TSAS")
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 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 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.
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.
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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. Contract Owner loans are not allowed under the Contracts.
Effective May 4, 1998, loans may be made available under Internal Revenue
Code Section 403(b) tax-sheltered annuity programs. If the program permits
loans, a loan from the participant's contract value may be requested. The loan
must at least $1,000 and the maximum loan amount is the greater of: (a) 90% of
the first $10,000 of Contract Value minus any contingent deferred sales charge;
and (b) 50% of the Contract Value minus any contingent deferred sales charge.
The maximum loan amount is $50,000. If loans are outstanding from any other
tax-qualified plan then the maximum loan amount of the contract may be reduced
from the amount stated above in order to comply with the maximum loan amount
requirements under Section 72(p) of the Internal Revenue Code. Amounts borrowed
from the GIA are subject to the same limitations as applies to transfers from
the GIA; thus no more than the greater of $1000 and 25% of the contract value in
the GIA may be borrowed at any one time. Amounts borrowed from the Market Value
Adjustment ("MVA") account are subject to the same market value adjustment as
applies to transfers from the MVA.
Loan repayments will first pay any accrued loan interest. The balance will
be applied to reduce the outstanding loan balance and will also reduce the
amount of the Loan Security Account by the same amount that the outstanding loan
balance is reduced. The balance of loan repayments, after payment of accrued
loan interest, will be credited to the Subaccounts of the Separate Account or
the GIA in accordance with the participant's most recent premium allocation on
file with Us, except that no amount will be transferred to the MVA.
If a loan repayment is not received by Us before 90 days after the payment
was due, then the entire loan balance plus accrued interest will be in default.
In the case of default, the outstanding loan balance plus accrued interest will
be deemed a distribution for income tax purposes, and will be reported as such
to the extent required by law. At the time of such deemed distribution, interest
will continue to accrue until such time as an actual distribution occurs under
the Contract.
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 IRS.
INDIVIDUAL RETIREMENT ACCOUNTS
Code Sections 408 and 408A permit 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. Effective January 1, 1997, employers may
establish a new type of IRA called SIMPLE (Savings Incentive Match Plan for
Employees). Special rules apply to participants' contributions to and
withdrawals from SIMPLE IRAs. Also effective January 1, 1997, salary reduction
IRAs (SARSEP) no longer may be established. Effective January 1, 1998,
individuals may establish Roth IRAs.
Special rules also apply to contributions to and withdrawals from Roth IRAs.
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.
These retirement plans may permit the purchase of the Contracts to provide
benefits under the Plan. Contributions to the Plan for the benefit of employees
will not be includible in the gross income of the employee until distributed
from the Plan. The tax consequences to participants may vary depending upon the
particular Plan design. However, the Code places limitations and restrictions on
all Plans, including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Participant loans are not allowed under the Contracts purchased in
connection with these Plans. Purchasers of Contracts for use with Corporate
Pension or Profit-sharing Plans should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
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 if issued to tax exempt organizations, 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. Effective in 1997 for new state and local
government plans, such plans must be funded through a tax exempt annuity
contract held for the exclusive benefit of plan participants.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM QUALIFIED PLANS
In the case of a withdrawal under a Qualified Plan, a ratable portion of the
amount received is taxable, generally based on the
28
<PAGE>
ratio of the individual's cost basis to the individual's total accrued
benefit under the retirement plan. Special tax rules may be available for
certain distributions from a Qualified Plan. Section 72(t) of the Code imposes a
10% penalty tax on the taxable portion of any distribution from qualified
retirement plans, including Contracts issued and qualified under Code Sections
401 (Keogh and Corporate Pension and Profit-sharing Plans), Tax-Sheltered
Annuities and Individual Retirement Annuities other than Roth IRAs. The penalty
is increased to 25% instead of 10% for SIMPLE IRAs if distribution occurs within
the first two years of the Contract Owner's participation in the SIMPLE IRA. To
the extent amounts are not includible in gross income because they have been
properly rolled over to an IRA or to another eligible Qualified Plan, no tax
penalty will be imposed. The tax penalty will not apply to the following
distributions: (a) if distribution is made on or after the date on which the
Contract Owner or Annuitant (as applicable) reaches age 59 1/2; (b)
distributions following the death or disability of the Contract Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Contract Owner or Annuitant
(as applicable) or the joint lives (or joint life expectancies) of such Contract
Owner or Annuitant (as applicable) and his or her designated beneficiary; (d)
distributions to a Contract Owner or Annuitant (as applicable) who has separated
from service after he has attained age 55; (e) distributions made to the
Contract Owner or Annuitant (as applicable) to the extent such distributions do
not exceed the amount allowable as a deduction under Code Section 213 to the
Contract Owner or Annuitant (as applicable) for amounts paid during the taxable
year for medical care; (f) distributions made to an alternate payee pursuant to
a qualified domestic relations order; (g) distributions from an IRA for the
purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code)
for the Contract Owner and his or her spouse and dependents if the Contract
Owner has received unemployment compensation for at least 12 weeks; and (h)
distributions from IRAs for first-time home purchase expenses (maximum $10,000)
or certain qualified educational expenses of the Contract Owner, spouse,
children or grandchildren of the Contract Owner. This exception will no longer
apply after the Contract Owner has been reemployed for at least 60 days. The
exceptions stated in items (d) and (f) above do not apply in the case of an IRA.
The exception stated in item (c) applies to an IRA without the requirement that
there be a separation from service.
Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to a regular or SIMPLE IRA and
the required distribution rules do not apply to Roth IRAs. Required
distributions must be over a period not exceeding the life expectancy of the
individual or the joint lives or life expectancies of the individual and his or
her designated beneficiary. If the required minimum distributions are not made,
a 50% penalty tax is imposed as to the amount not distributed.
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 meant to alert you to the issues 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
- --------------------------------------------------------------------------------
The principal underwriter of the Contracts is PEPCO. Contracts may be
purchased through registered representatives of W.S. Griffith & Company, Inc.
("WSG") who are licensed to sell PHL Variable annuity contracts. WSG 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 also may 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.
In addition to reimbursing PEPCO for its expenses, we pay PEPCO an amount
equal to up to 7.25% of the payments made under the Contract. PEPCO pays any
qualified distribution organization an amount which may not exceed 7.25% of the
payments under the Contract. Any such amount paid with respect to Contracts sold
through other broker-dealers will be paid by us to or through PEPCO. The amounts
paid are not deducted from the payments. Deductions for sales charges (as
described under "Sales Charges") may be used as reimbursement for commission
payments.
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.
STATE REGULATION
- -------------------------------------------------------------------------------
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 also is 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
29
<PAGE>
include, however, any supervision over the investment policies of the Account.
REPORTS
- -------------------------------------------------------------------------------
Reports showing the Contract Value and containing the financial statements
of the Account will be furnished to you at least annually.
VOTING RIGHTS
- -------------------------------------------------------------------------------
As stated above, all of the assets held in an available Subaccount 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, we intend 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.
We currently intend to vote Fund shares attributable to any of our assets
and Fund shares held in each Subaccount for which no timely instructions from
Owners are received in the same proportion as those shares in that Subaccount
for which instructions are received. In the future, to the extent applicable
federal securities laws or regulations permit us 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 Subaccount(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
investment advisory agreement or any change in a Series' fundamental investment
policy, Owners participating in such Series will vote separately on the matter.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
The number of votes for which you may give us
instructions will be determined as of the record date for Fund shareholders
chosen by the Board of Trustees of a Fund. We will furnish you with proper forms
and proxies to enable them to give these instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
- -------------------------------------------------------------------------------
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, however, may be used to fund another
eligible retirement vehicle.
LEGAL MATTERS
- -------------------------------------------------------------------------------
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the Contracts described in this Prospectus.
SAI
- -------------------------------------------------------------------------------
The SAI contains more specific information and financial statements relating
to the Account and PHL Variable. The Table of Contents of the SAI is set forth
below:
Underwriter
Calculation of Yield and Return
Calculation of Annuity Payments
Experts
Financial Statements
Contract Owner inquiries and requests for a SAI should be directed, in
writing, to Phoenix Variable Products Mail Operations at P.O. Box 8027, Boston,
Massachusetts 02266-8027, or by calling VPO at (800) 541-0171.
30
<PAGE>
APPENDIX A
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
From time to time, the Account may include the performance history of any or
all Subaccounts in advertisements, sales literature or reports. Performance
information about each Subaccount is based on past performance only and is not
an indication of future performance. Performance information may be expressed as
yield and effective yield of the Money Market Subaccount, as yield of the
Multi-Sector Subaccount and as total return of any Subaccount. For the
Multi-Sector Subaccount, quotations of yield will be based on all investment
income per unit earned during a given 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income") and
are computed by dividing the net investment income by the maximum offering price
per unit on the last day of the period.
When a Subaccount advertises its total return, it usually will be calculated
for one year, five years and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $1,000 investment in the Subaccount at the
beginning of the relevant period to the value of the investment at the end of
the period, assuming the reinvestment of all distributions at net asset value
and the deduction of all applicable Contract charges except for premium taxes
(which vary by state) at the beginning of the relevant period.
For those Subaccounts 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 Subaccount would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
<TABLE>
<CAPTION>
Average Annual Total Return
for the Period Ended 12/31/98
------------------------------------------------------
Subaccount Inception Date 1 Year 5 Years 10 Years Since Inception
- ---------- -------------- ------ ------- -------- ---------------
<S> <C> <C> <C> <S>
Aberdeen New Asia........................ 9/17/96
Balanced................................. 5/1/92
Engemann Nifty Fifty..................... 3/2/98
Growth................................... 1/1/83
International............................ 5/1/90
Money Market............................. 10/10/82
Multi-Sector Fixed Income................ 1/1/83
Mutual Shares Investments................ 11/2/98
Phoenix Growth & Income.................. 3/2/98
Phoenix Value Equity..................... 3/2/98
Real Estate Securities................... 5/1/95
Research Enhanced Index.................. 7/15/97
Schafer Mid-Cap Value.................... 3/2/98
Seneca Mid-Cap Growth.................... 3/2/98
Strategic Allocation..................... 9/17/84 [To be filed by Amendment]
Strategic Theme.......................... 1/29/96
Templeton Asset Allocation............... 11/28/88
Templeton Developing Markets............. 9/15/96
Templeton International.................. 5/1/92
Templeton Stock.......................... 11/4/88
Wanger Foreign Forty..................... 2/1/99
Wanger International Small Cap........... 5/1/95
Wanger Twenty............................ 2/1/99
Wanger U.S. Small Cap.................... 5/1/95
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN*
- -----------------------------------------------------------------------------------------------------------------------------------
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aberdeen New Asia
- -----------------------------------------------------------------------------------------------------------------------------------
Balanced
- -----------------------------------------------------------------------------------------------------------------------------------
Engemann Nifty Fifty
- -----------------------------------------------------------------------------------------------------------------------------------
Growth
- -----------------------------------------------------------------------------------------------------------------------------------
International
- -----------------------------------------------------------------------------------------------------------------------------------
Money Market
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments [To be filed by Amendment]
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix Growth & Income
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix Value Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Real Estate Securities
- -----------------------------------------------------------------------------------------------------------------------------------
Research Enhanced Index
- -----------------------------------------------------------------------------------------------------------------------------------
Schafer Mid-Cap Value
- -----------------------------------------------------------------------------------------------------------------------------------
Seneca Mid-Cap Growth
- -----------------------------------------------------------------------------------------------------------------------------------
Strategic Allocation
- -----------------------------------------------------------------------------------------------------------------------------------
Strategic Theme
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton International
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Sales Charges have not been deducted from the Annual Total Return.
** From Inception.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
32
<PAGE>
Current yield for the Money Market Subaccount is based upon the income
earned by the Subaccount 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 Subaccount Units and thus compounded in the course
of a 52-week period. Yield and effective yield reflect the recurring charges on
the Account level excluding the annual administrative fee.
Yield calculations of the Money Market Subaccount used for illustration
purposes are based on the consideration of a hypothetical Contract Owner's
account having a balance of exactly one Unit at the beginning of a 7-day period,
which period will end on the date of the most recent financial statements. The
yield for the Subaccount during this 7-day period will be the change in the
value of the hypothetical Contract Owner's account's original unit. The
following is an example of this yield quotation for the Money Market Subaccount
based on a 7-day period ending December 31, 1998.
Example:
Value of hypothetical pre-existing account with
exactly one unit
at the beginning of the period:...................
Value of the same account (excluding capitalchanges) (To be filed by
at the end of the 7-day period:................... Amendment)
Calculation:
Ending account value..............................
Less beginning account value......................
Net change in account value.......................
Base period return:
(adjusted change/beginning account value).........
Current yield = return x (365/7) =.....................
Effective yield = [(1 + return)365/7] -1 =.............
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 Subaccount'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 Composite Stock Price Index ("S&P
500"), and the Europe Australia Far East Index, and also may 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 Subaccount's
performance also may be compared to that of other investment or savings
vehicles.
Advertisements, sales literature and other communications may contain
information about any Series' or Advisers' current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the Series may
discuss specific portfolio holdings or industries in such communications. To
illustrate components of overall performance, the Series may separate their
cumulative and average annual returns into income results and capital gains or
losses; or cite separately as a return figure the equity or bond portion of a
Series' portfolio; or compare a Series' equity or bond return figure to
well-known indices of market performance including, but not limited to, the S&P
500, Dow Jones Industrial Average, First Boston High Yield Index and Solomon
Brothers Corporate and Government Bond Indices.
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.
33
<PAGE>
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
- --------------------------------------------------------------------------------
<PAGE>
Contributions to the GIA under the Contract and transfers to the GIA 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 SEC has not
reviewed the disclosures in this Prospectus concerning the GIA. Disclosures
regarding the GIA and the General Account, however, may be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
The General Account is made up of all of the general assets of PHL Variable
Insurance Company other than those allocated to any separate account. Payments
will be allocated to the GIA 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 GIA. 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.
Biweekly, PHL Variable will set the excess interest rate, if any, that will
apply to amounts deposited to the GIA. That rate will remain in effect for such
deposits for an initial guarantee period of one full year from the date of
deposit. Upon 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 GIA 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 GIA and the amount thereof, are general economic
trends, rates of return currently available and anticipated on investments,
regulatory and tax requirements and competitive factors. ANY INTEREST CREDITED
TO AMOUNTS ALLOCATED TO THE GIA IN EXCESS OF 4% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF PHL VARIABLE AND WITHOUT REGARD TO ANY SPECIFIC FORMULA.
THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO GIA ALLOCATIONS
MAY NOT EXCEED THE MINIMUM GUARANTEE 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, Contract Owners and shareholders.
Excess interest, if any, will be credited on the GIA Contract Value. PHL
Variable guarantees that, at any time, the GIA Contract Value will not be less
than the amount of payments allocated to the GIA, 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 GIA, 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 GIA will be reduced by any applicable surrender charge and annual
administration charge. See "Deductions and Charges."
For 403(b) plans with loans, amounts borrowed from the GIA will be treated
as transfers to the Loan Security Account and subject to the same limitations as
applies to transfers from the GIA (see "Qualified Plans").
<PAGE>
IN GENERAL, ONE TRANSFER PER CONTRACT YEAR IS ALLOWED FROM THE GIA. THE
AMOUNT WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER OF $1,000 OR 25% OF
THE CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. UNDER THE SYSTEMATIC
TRANSFER PROGRAM, TRANSFERS OF APPROXIMATELY EQUAL AMOUNTS MAY BE MADE OVER A
MINIMUM 18-MONTH PERIOD. NON-SYSTEMATIC TRANSFERS FROM THE GIA WILL BE
EFFECTUATED ON THE DATE OF RECEIPT BY VPMO, UNLESS OTHERWISE REQUESTED BY THE
CONTRACT OWNER.
34
<PAGE>
APPENDIX C
DEDUCTIONS FOR STATE PREMIUM TAXES
QUALIFIED AND NON-QUALIFIED ANNUITY CONTRACTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UPON UPON
STATE PURCHASE(1) ANNUITIZATION NON-QUALIFIED QUALIFIED
- ----- ----------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
California ...................... X 2.35% 0.50%
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, 1999. 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.
35
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
PHL VARIABLE INSURANCE COMPANY
Home Office: Phoenix Variable Products
One American Row Mail Operations ("VPMO"):
Hartford, Connecticut P.O. Box 8027
Boston, Massachusetts 02266-8027
PHL VARIABLE ACCUMULATION ACCOUNT
VARIABLE ACCUMULATION DEFERRED ANNUITY CONTRACT
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus, dated May 1, 1999, which is
available without charge by contacting PHL Variable Insurance Company at the
above address or at the above telephone number.
----------
Table of Contents
Page
Underwriter....................................................... B-2
Calculation of Yield and Return................................... B-2
Calculation of Annuity Payments .................................. B-3
Year 2000 Issue................................................... B-4
Experts .......................................................... B-4
Financial Statements.............................................. B-5
B-1
<PAGE>
UNDERWRITER
- --------------------------------------------------------------------------------
The offering of Contracts is made on a continuous basis by PEPCO, an
affiliate of PHL Variable. For sales of Contracts, during the fiscal years ended
December 31, 1996, 1997 and 1998, PEPCO was paid $7,750,042, $11,883,955 and
$____________, respectively, and retained $0.
CALCULATION OF YIELD AND RETURN
- -------------------------------------------------------------------------------
Yield of the Money Market Subaccount. As summarized in the Prospectus under
the heading "Performance History," the yield of the Money Market Subaccount for
a 7-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 Subaccount yield and effective yield will vary in response
to fluctuations in interest rates and in the expenses of the Subaccount.
The current yield and effective yield reflect recurring charges at the
Account level, excluding the maximum annual administrative fee.
Example:
The following is an example of this yield calculation for the Money Market
Subaccount based on a 7-day period ending December 31, 1997
Value of hypothetical pre-existing account with exactly one To be filed
unit at the beginning of the period:......................... by Amendment
Value of the same account (excluding capital changes)
at the end of the 7-day period:...............................
Calculation:
Ending account value..........................................
Less beginning account value..................................
Net change in account value...................................
Base period return:
(adjusted change/beginning account value).....................
Current yield = return H (365/7) =...............................
Effective yield = [(1 + return)(365/7)] B1 =.....................
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 Subaccount 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 Subaccount; (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 Subaccount 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, Dow
Jones Industrial Average, First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
Each Subaccount may, from time to time, include its yield and total return
in advertisements or information furnished to present or prospective Contract
Owners. Each Subaccount may, from time to time, include in advertisements
containing total return (and yield in the case of certain Subaccounts) 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 Business Daily, The Stanger Register, Stanger's Investment
Adviser, The Wall Street Journal, The New York Times, Consumer Reports,
Registered Representative, Financial Planning, Financial Services Weekly,
Financial World, U.S. News and World Report, Standard & Poor's The Outlook 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 Subaccounts against certain widely acknowledged outside standards or indices
for stock and bond market performance. 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
B-2
<PAGE>
listed on the NYSE, although the common stocks of a few companies listed on the
American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40 financial
services concerns. The S&P 500 represents about 80% of the market value of all
issues traded on the NYSE.
The manner in which total return and yield will be calculated is described
above.
Calculation of Annuity Payments
- -------------------------------------------------------------------------------
VARIABLE ANNUITY PAYMENTS
Unless an alternative annuity payment option is elected on or before the
Contract Maturity Date, the Contract Value on the Maturity Date automatically
will 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 Subaccount 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 Subaccount.
Future payments are measured in Annuity Units and are determined by
multiplying the Annuity Units in each Subaccount with assets under the Variable
Payment Option by the Annuity Unit Value for each Subaccount on the Payment
Calculation Date that applies. The number of Annuity Units in each Subaccount
with assets under a Variable Payment Option is equal to the portion of the first
payment provided from that Subaccount divided by the Annuity Unit Value for that
Subaccount on the first Payment Calculation Date. The payment will equal the sum
of such amounts from each Subaccount.
All Annuity Unit Values in each Subaccount 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 Subaccount 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 Subaccount will depend on the relationship between
the assumed investment return and the actual investment performance of the
Subaccount. 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.
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 Subaccounts' Accumulation Units credited to
the Contract on the Maturity Date by the appropriate Unit Value for each
Subaccount on the Maturity Date. The dollar value for all Subaccounts'
Accumulation Units is then aggregated, along with the dollar value of any
investment in the GIA. 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
B-3
<PAGE>
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 33/ 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.
Year 2000 Issue
- --------------------------------------------------------------------------------
Many existing computer programs use only two digits to identify the year in
a date field. Commonly referred to as the "Year 2000 Issue," companies must
consider the impact of the upcoming change in the century on their computer
systems. The Year 2000 Issue, if not adequately addressed, could result in
computer system failures or miscalculations causing disruptions of operations
and the possible inability of companies to process transactions. PHL Variable
believes that the Year 2000 Issue is an important business priority requiring
careful analysis of every business system in order to be assured that all
information systems applications are century compliant.
PHL Variable's ultimate parent, Phoenix Home Life Mutual Insurance Company
("Phoenix") has been addressing the Year 2000 Issue in earnest since 1995 when,
with consultants, a comprehensive inventory and assessment of all business
systems, including those of its subsidiaries, was conducted. Phoenix has
identified and is now actively pursuing a number of strategies to address the
issue, including:
-- upgrading systems with compliant versions;
-- developing or acquiring new systems to replace those that are obsolete;
-- and remediating existing systems by converting code or hardware.
Based on current assessments, Phoenix expects to have its computer systems,
and those of its subsidiaries, compliant by the end of 1998, with testing to
continue through 1999. In addition, Phoenix is examining the status of its
third-party vendors, obtaining assurances that their software and hardware
products will be century compliant by 1999.
Experts
- --------------------------------------------------------------------------------
The financial statements of PHL Variable Insurance Company and the Account
have been audited by Price Waterhouse LLP, independent 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.
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the Contracts described in this Prospectus.
B-4
<PAGE>
PHL Variable
Accumulation Account
Financial Statements
December 31, 1998
(To be filed by Amendment)
B-5
<PAGE>
PHL Variable
Insurance Company
Financial Statements
December 31, 1998 and 1997
(To be filed by Amendment)
B-6
<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 condensed
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) Master Service and Distribution Compliance Agreement
between registrant and Phoenix Equity Planning
Corporation dated December 31, 1996 is incorporated by
reference to Registrant's Post-Effective Amendment No.
3, filed via Edgar on April 30, 1997.
(b) Form of Agreement between Phoenix Equity Planning
Corporation and Registered Broker-Dealers 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 Exhibit 10(a).
(10) (a) Written Opinion and Consent of Edwin L. Kerr, Esq. filed via
Edgar.*
(b) Written Consent of Price Waterhouse LLP filed via Edgar.*
(11) Not Applicable.
(12) Not Applicable.
(13) (a) Explanation of Yield and Effective Yield Calculation
is incorporated by reference to registrant's
Post-Effective Amendment No. 1 to its Form N-4
Registration Statement filed via Edgar on April 19,
1996.
(b) Explanation of Total Return Calculation is incorporated
by reference to registrant's Post-Effective Amendment
No. 1 to its Form N-4 Registration Statement filed via
Edgar on April 19, 1996.
(14) Not Applicable.
(15) (a) Powers of Attorney of Messrs. Booth, Chipkin,
Fiondella, Kelleher, McLoughlin, Paydos, Searfoss and
Tan, and Ms. Young are incorporated by reference to
registrant's Post-Effective Amendment No. 5 to its Form
N-4 Registration Statement filed via Edgar on April 30,
1998.
* To be filed by Amendment.
C-1
<PAGE>
ITEM 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR
---- -------------------------- -----------------------
<S> <C>
Richard H. Booth* Director and Executive
Vice President
Robert G. Chipkin* Director
Robert W. Fiondella* Director, Chairman and
President
Joseph E. Kelleher** Director and Senior
Vice President
Philip R. McLoughlin* Director and Executive
Vice President
David W. Searfoss* Director, Executive Vice President
and Chief Financial Officer
Simon Y. Tan* Director and Senior Vice
President
Dona D. Young* Director and Executive
Vice President
Bruce M. Jones* Senior Vice President and Chief
Operating Officer
Robert G. Lautensack, Jr.* Senior 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 December 31, 1998, 18,235Contracts 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,
C-2
<PAGE>
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 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, Phoenix Home Life Variable Accumulation
Account and Phoenix Life and Annuity Variable Universal Life
Account in addition to those of the Registrant.
(b) Directors and Officers of PEPCO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
---------------- ----------------
<S> <C> <C>
Michael E. Haylon*** Director
Philip R. McLoughlin* Director and President
William R. Moyer** Director, Senior Vice President and Chief Financial Officer
John F. Sharry* Executive Vice President, Retail Distribution
Paul Atkins*** Senior Vice President and Sales Manager
Leonard J. Saltiel** Managing Director, Operations and Service
G. Jeffrey Bohne**** Vice President, Mutual Fund Customer Service
Eugene A. Charon** Vice President and Corporate Controller
Nancy G. Curtiss*** Vice President and Treasurer, Fund Accounting
Thomas N. Steenburg* Vice President, Counsel and Secretary
</TABLE>
- ----------
* 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 To be filed by Amendment 0 0 0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
C-3
<PAGE>
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.
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.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, PHL Variable Insurance Company represents that the fees and charges
deducted under the Contracts, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred and the risks to be
assumed thereunder by PHL Variable Insurance Company.
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 29th day of Jasnuary, 1999.
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 by the following persons in the
capacities indicated with PHL Variable Insurance Company on this 29th day of
January, 1999.
Signature Title
--------- -----
Director
- ----------------------
*Richard H. Booth
Director
- ----------------------
*Robert G. Chipkin
Director, Chairman and
President
(Principal Executive Officer)
- ----------------------
*Robert W. Fiondella
Director
- ----------------------
*Joseph E. Kelleher
Director
- ----------------------
*Philip R. McLoughlin
Director
- ----------------------
*David W. Searfoss
Director
- ----------------------
*Simon Y. Tan
/s/ Dona D. Young Director
- ----------------------
*Dona D. Young
By:/s/ Dona D. Young
- ----------------------
*DONA D. YOUNG, as Attorney in Fact pursuant to Powers of Attorney, copies of
which are filed herewith.
S-1(c)
