TABLE OF CONTENTS
PHL VARIABLE ACCUMULATION ACCOUNT
MONEY MARKET SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
GROWTH SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
MULTI-SECTOR FIXED INCOME SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
STRATEGIC ALLOCATION SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
INTERNATIONAL SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
BALANCED SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
REAL ESTATE SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
STRATEGIC THEME SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
ABERDEEN NEW ASIA SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 6
ENHANCED INDEX SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 7
ENGEMANN NIFTY FIFTY SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 7
SENECA MID-CAP GROWTH SUBACCOUNT
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 7
GROWTH AND INCOME SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 7
VALUE EQUITY SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 7
SCHAFER MID-CAP SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 7
WANGER U.S. SMALL CAP SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 7
WANGER INTERNATIONAL SMALL CAP SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 7
TEMPLETON STOCK SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 7
TEMPLETON ASSET ALLOCATION SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 8
TEMPLETON INTERNATIONAL SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 8
TEMPLETON DEVELOPING MARKETS SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 8
MUTUAL SHARES INVESTMENTS SUBACCOUNT
Statement of Assets and Liabilities...... 3
Statement of Operations.................. 5
Statement of Changes in Net Assets....... 8
NOTES TO FINANCIAL STATEMENTS............... 11
<PAGE>
This annual report for the PHL
VARIABLE ACCUMULATION ACCOUNT
for the period ended December 31, 1998
contains the financial statements for the
Account's various annuity contracts.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments at cost................................................ $55,114,888 $211,320,119 $ 67,158,789
=========== ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $55,114,888 $249,896,777 $ 60,247,914
----------- ------------ ------------
Total assets.................................................... 55,114,888 249,896,777 60,247,914
LIABILITIES
Accrued expenses to related party.................................. 62,321 268,314 69,525
----------- ------------ ------------
NET ASSETS............................................................ $55,052,567 $249,628,463 $ 60,178,389
=========== ============ ============
Accumulation units outstanding........................................ 48,674,234 135,635,690 49,806,212
=========== ============ ============
Unit value............................................................ $ 1.131041 $ 1.840434 $ 1.208247
=========== ============ ============
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $56,580,812 $ 27,192,460 $ 39,337,719
=========== ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $60,732,441 $ 25,900,165 $ 42,648,281
----------- ------------ ------------
Total assets.................................................... 60,732,441 25,900,165 42,648,281
LIABILITIES
Accrued expenses to related party.................................. 66,882 28,173 46,795
----------- ------------ ------------
NET ASSETS............................................................ $60,665,559 $ 25,871,992 $ 42,601,486
=========== ============ ============
Accumulation units outstanding........................................ 38,139,430 15,693,887 27,300,065
=========== ============ ============
Unit value............................................................ $ 1.590626 $ 1.648539 $ 1.560490
=========== ============ ============
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $13,887,186 $ 20,796,160 $ 3,612,783
=========== ============ ============
Investment in The Phoenix Edge Series Fund, at market.............. $11,517,263 $ 26,737,697 $ 2,477,797
----------- ------------ ------------
Total assets.................................................... 11,517,263 26,737,697 2,477,797
LIABILITIES
Accrued expenses to related party.................................. 9,264 28,268 2,825
----------- ------------ ------------
NET ASSETS............................................................ $11,507,999 $ 26,709,429 $ 2,474,972
=========== ============ ============
Accumulation units outstanding........................................ 8,918,625 15,013,367 3,949,257
=========== ============ ============
Unit value............................................................ $ 1.290333 $ 1.779043 $ 0.626694
=========== ============ ============
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $19,538,633 $ 4,318,527 $ 2,016,030
=========== ============ ============
Investment in the Phoenix Edge Series Fund, at market.............. $21,700,695 $ 5,070,740 $ 2,344,381
----------- ------------ ------------
Total assets.................................................... 21,700,695 5,070,740 2,344,381
LIABILITIES
Accrued expenses to related party.................................. 30,212 5,207 2,322
----------- ------------ ------------
NET ASSETS............................................................ $21,670,483 $ 5,065,533 $ 2,342,059
=========== ============ ============
Accumulation units outstanding........................................ 16,025,516 4,057,158 1,938,415
=========== ============ ============
Unit value............................................................ $ 1.352249 $ 1.248542 $ 1.208253
=========== ============ ============
</TABLE>
See Notes to Financial Statements
2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
GROWTH SCHAFER
AND INCOME VALUE EQUITY MID-CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments at cost................................................ $15,157,949 $ 2,901,101 $ 2,861,639
=========== =========== ===========
Investment in The Phoenix Edge Series Fund, at market.............. $17,044,927 $ 3,189,425 $ 2,720,658
----------- ----------- -----------
Total assets.................................................... 17,044,927 3,189,425 2,720,658
LIABILITIES
Accrued expenses to related party.................................. 17,971 3,550 2,939
----------- ----------- -----------
NET ASSETS............................................................ $17,026,956 $ 3,185,875 $ 2,717,719
=========== =========== ===========
Accumulation units outstanding........................................ 14,293,673 2,908,981 3,101,501
=========== =========== ===========
Unit value............................................................ $ 1.191224 $ 1.095185 $ 0.876259
=========== =========== ===========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
ASSETS
Investments at cost................................................ $ 94,490,797 $40,553,144 $14,222,362
============ =========== ===========
Investment in Wanger Advisors Trust, at market..................... $110,474,081 $44,395,078 $ --
Investment in Templeton Variable Products Series Fund, at market... -- -- 13,094,877
------------ ----------- -----------
Total assets.................................................... 110,474,081 44,395,078 13,094,877
LIABILITIES
Accrued expenses to related party.................................. 119,129 48,751 14,752
------------ ----------- -----------
NET ASSETS............................................................ $110,354,952 $44,346,327 $13,080,125
============ =========== ===========
Accumulation units outstanding........................................ 58,567,957 28,055,647 12,575,896
============ =========== ===========
Unit value............................................................ $ 1.884220 $ 1.580656 $ 1.040037
============ =========== ===========
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT
---------- ----------
ASSETS
Investments at cost................................................ $10,368,940 $13,123,770
=========== ===========
Investment in Templeton Variable Products Series Fund, at market... $10,360,621 $13,217,084
----------- -----------
Total assets.................................................... 10,360,621 13,217,084
LIABILITIES
Accrued expenses to related party.................................. 11,795 14,886
----------- -----------
NET ASSETS............................................................ $10,348,826 $13,202,198
=========== ===========
Accumulation units outstanding........................................ 9,285,468 11,361,055
=========== ===========
Unit value............................................................ $ 1.114519 $ 1.162057
=========== ===========
TEMPLETON MUTUAL SHARES
DEVELOPING MARKETS INVESTMENTS
SUBACCOUNT SUBACCOUNT
---------- ----------
ASSETS
Investments at cost................................................ $ 4,404,724 $ 280,893
=========== ===========
Investment in Templeton Variable Products Series Fund, at market... $ 2,967,754 $ 284,968
----------- -----------
Total assets.................................................... 2,967,754 284,968
LIABILITIES
Accrued expenses to related party.................................. 3,406 333
----------- -----------
NET ASSETS............................................................ $ 2,964,348 $ 284,635
=========== ===========
Accumulation units outstanding........................................ 5,744,071 280,810
=========== ===========
Unit value............................................................ $ 0.516071 $ 1.01362
=========== ===========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
STATEMENT OF OPERATIONS
For the period ended December 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Investment income
Distributions.................................................... $ 1,868,314 $ 186,124 $ 4,028,356
Expenses
Mortality, expense risk and administrative charges............... 514,481 2,362,897 711,259
----------- ----------- -----------
Net investment income (loss)........................................ 1,353,833 (2,176,773) 3,317,097
----------- ----------- -----------
Net realized loss from share transactions........................... -- (64,068) (280,883)
Net realized gain distribution from Fund............................ -- 7,232,605 322,402
Net unrealized appreciation (depreciation) on investment............ -- 40,711,364 (6,611,129)
----------- ----------- -----------
Net gain (loss) on investments...................................... -- 47,879,901 (6,569,610)
----------- ----------- -----------
Net increase in net assets resulting from operations................ $ 1,353,833 $45,703,128 $(3,252,513)
=========== =========== ===========
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
Investment income
Distributions.................................................... $ 836,597 $ -- $ 714,432
Expenses
Mortality, expense risk and administrative charges............... 570,579 223,825 353,295
----------- ----------- -----------
Net investment income (loss)........................................ 266,018 (223,825) 361,137
----------- ----------- -----------
Net realized gain (loss) from share transactions.................... 280 (8,732) (37,069)
Net realized gain distribution from Fund............................ 3,342,580 4,278,438 908,682
Net unrealized depreciation on investment........................... 4,788,074 (1,160,370) 3,660,354
----------- ----------- -----------
Net gain on investments............................................. 8,130,934 3,109,336 4,531,967
----------- ----------- -----------
Net increase in net assets resulting from operations................ $ 8,396,952 $ 2,885,511 $ 4,893,104
=========== =========== ===========
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
Investment income
Distributions.................................................... $ 591,780 $ 12,507 $ 10,482
Expenses
Mortality, expense risk and administrative charges............... 170,588 241,984 31,139
----------- ----------- -----------
Net investment income (loss)........................................ 421,192 (229,477) (20,657)
----------- ----------- -----------
Net realized gain (loss) from share transactions.................... (43,432) (50,253) 135,313
Net realized gain distribution from Fund............................ 14,376 1,535,888 --
Net unrealized appreciation (depreciation) on investment............ (3,623,946) 5,999,185 (99,199)
----------- ----------- -----------
Net gain (loss) on investments...................................... (3,653,002) 7,484,820 36,114
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations..... $(3,231,810) $ 7,255,343 $ 15,457
=========== =========== ===========
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
---------- ------------- -------------
Investment income
Distributions.................................................... $ 153,832 $ 1,982 $ 1,922
Expenses
Mortality, expense risk and administrative charges............... 162,402 21,865 9,909
----------- ----------- -----------
Net investment income (loss) ....................................... (8,570) (19,883) (7,987)
----------- ----------- -----------
Net realized gain (loss) from share transactions.................... (9,613) (1,634) 7,176
Net realized gain (loss) distribution from Fund..................... 916,620 -- --
Net unrealized appreciation (depreciation) on investment............ 2,101,347 752,213 328,351
----------- ----------- -----------
Net gain (loss) on investments...................................... 3,008,354 750,579 335,527
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations..... $ 2,999,784 $ 730,696 $ 327,540
=========== =========== ===========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 6, 1998 to December 31, 1998
See Notes to Financial Statements
4
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
GROWTH VALUE SCHAFER
AND INCOME EQUITY MID-CAP
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(4)
------------- ------------- -------------
<S> <C> <C> <C>
Investment income
Distributions.................................................... $ 65,903 $ 12,266 $ 7,987
Expenses
Mortality, expense risk and administrative charges............... 77,617 14,913 16,332
---------- ----------- ---------
Net investment gain (loss).......................................... (11,714) (2,647) (8,345)
---------- ----------- ---------
Net realized gain (loss) from share transactions.................... 6,819 (280) (7,021)
Net unrealized appreciation (depreciation) on investment............ 1,886,978 288,324 (140,981)
---------- ----------- ---------
Net gain (loss) on investments...................................... 1,893,797 288,044 (148,002)
---------- ----------- ---------
Net increase (decrease) in net assets resulting from operations..... $1,882,083 $ 285,397 $(156,347)
========== =========== =========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
Investment income
Distributions.................................................... $3,637,381 $ 371,781 $ 862,179
Expenses
Mortality, expense risk and administrative charges............... 1,146,921 503,717 138,207
---------- ----------- ---------
Net investment income (loss)........................................ 2,490,460 (131,936) 723,972
---------- ----------- ---------
Net realized gain (loss) from share transactions.................... (49,812) 6,202 2,702
Net unrealized appreciation (depreciation) on investment............ 2,708,319 4,290,225 (926,656)
---------- ----------- ---------
Net gain (loss) on investments...................................... 2,658,507 4,296,427 (923,954)
---------- ----------- ---------
Net increase (decrease) in net assets resulting from operations..... $5,148,967 $ 4,164,491 $(199,982)
========== =========== =========
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT
---------- ----------
Investment income
Distributions.................................................... $ 332,953 $ 378,372
Expenses
Mortality, expense risk and administrative charges............... 103,384 110,029
---------- -----------
Net investment income (loss)........................................ 229,569 268,343
---------- -----------
Net realized gain (loss) from share transactions.................... (8,982) (45,779)
Net unrealized appreciation (depreciation) on investment............ 117,718 198,521
---------- -----------
Net gain (loss) on investments...................................... 108,736 152,742
---------- -----------
Net increase (decrease) in net assets resulting from operations..... $ 338,305 $ 421,085
========== ===========
TEMPLETON MUTUAL SHARES
DEVELOPING MARKETS INVESTMENTS
SUBACCOUNT SUBACCOUNT(5)
---------- -------------
Investment income
Distributions.................................................... $ 79,640 $ --
Expenses
Mortality, expense risk and administrative charges............... 38,715 333
---------- -----------
Net investment income (loss)........................................ 40,925 (333)
---------- -----------
Net realized gain (loss) from share transactions.................... (66,545) 11
Net unrealized appreciation (depreciation) on investment............ (669,032) 4,075
---------- -----------
Net gain (loss) on investments...................................... (735,577) 4,086
---------- -----------
Net increase (decrease) in net assets resulting from operations..... $ (694,652) $ 3,753
========== ===========
</TABLE>
(3) From inception March 3, 1998 to December 31, 1998
(4) From inception March 5, 1998 to December 31, 1998
(5) From inception November 10, 1998 to December 31, 1998
See Notes to Financial Statements
5
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 1,353,833 $ (2,176,773) $ 3,317,097
Net realized gain (loss)......................................... -- 7,168,537 41,519
Net unrealized appreciation (depreciation)....................... -- 40,711,364 (6,611,129)
------------ ------------ -----------
Net increase (decrease) in net assets resulting from operations.. 1,353,833 45,703,128 (3,252,513)
------------ ------------ -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 125,616,752 78,101,472 18,461,011
Participant transfers............................................ (103,376,500) 22,515,676 8,621,611
Participant withdrawals.......................................... (3,475,843) (8,478,068) (990,062)
------------ ------------ -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 18,764,409 92,139,080 26,092,560
------------ ------------ -----------
Net increase (decrease) in net assets............................ 20,118,242 137,842,208 22,840,047
NET ASSETS
Beginning of period.............................................. 34,934,325 111,786,255 37,338,342
------------ ------------ -----------
End of period.................................................... $ 55,052,567 $249,628,463 $60,178,389
============ ============ ===========
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 266,018 $ (223,825) $ 361,137
Net realized gain (loss)......................................... 3,342,860 4,269,706 871,613
Net unrealized appreciation (depreciation)....................... 4,788,074 (1,160,370) 3,660,354
----------- ------------ -----------
Net increase (decrease) in net assets resulting from operations.. 8,396,952 2,885,511 4,893,104
----------- ------------ -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 20,072,167 11,680,840 16,485,939
Participant transfers............................................ 5,190,185 3,508,669 9,137,878
Participant withdrawals.......................................... (2,475,051) (1,463,457) (1,238,514)
----------- ------------ -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 22,787,301 13,726,052 24,385,303
----------- ------------ -----------
Net increase (decrease) in net assets............................ 31,184,253 16,611,563 29,278,407
NET ASSETS
Beginning of period.............................................. 29,481,306 9,260,429 13,323,079
----------- ------------ -----------
End of period.................................................... $60,665,559 $ 25,871,992 $42,601,486
=========== ============ ===========
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 421,192 $ (229,477) $ (20,657)
Net realized gain (loss)......................................... (29,056) 1,485,635 135,313
Net unrealized appreciation (depreciation)....................... (3,623,946) 5,999,185 (99,199)
----------- ------------ -----------
Net increase (decrease) in net assets resulting from operations.. (3,231,810) 7,255,343 15,457
----------- ------------ -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,605,932 5,340,925 656,526
Participant transfers............................................ (3,130) 2,163,134 (412,937)
Participant withdrawals.......................................... (708,742) (723,987) (214,657)
----------- ------------ -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 1,894,060 6,780,072 28,932
----------- ------------ -----------
Net increase (decrease) in net assets............................ (1,337,750) 14,035,415 44,389
NET ASSETS
Beginning of period.............................................. 12,845,749 12,674,014 2,430,583
----------- ------------ -----------
End of period.................................................... $11,507,999 $ 26,709,429 $ 2,474,972
=========== ============ ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
SENECA
ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
---------- ------------- -------------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ (8,570) $ (19,883) $ (7,987)
Net realized gain (loss)......................................... 907,007 (1,634) 7,176
Net unrealized appreciation (depreciation)....................... 2,101,347 752,213 328,351
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 2,999,784 730,696 327,540
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 7,441,283 2,122,770 1,185,565
Participant transfers............................................ 7,574,525 2,316,662 928,054
Participant withdrawals.......................................... (465,786) (104,595) (99,100)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 14,550,022 4,334,837 2,014,519
----------- ----------- -----------
Net increase (decrease) in net assets............................ 17,549,806 5,065,533 2,342,059
NET ASSETS
Beginning of period.............................................. 4,120,677 0 0
----------- ----------- -----------
End of period.................................................... $21,670,483 $ 5,065,533 $ 2,342,059
=========== =========== ===========
GROWTH SCHAFER
AND INCOME VALUE EQUITY MID-CAP
SUBACCOUNT(1) SUBACCOUNT(3) SUBACCOUNT(3)
------------- ------------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ (11,714) $ (2,647) $ (8,345)
Net realized gain (loss)......................................... 6,819 (280) (7,021)
Net unrealized appreciation (depreciation)....................... 1,886,978 288,324 (140,981)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,882,083 285,397 (156,347)
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 7,671,677 1,424,609 1,361,421
Participant transfers............................................ 7,859,371 1,558,019 1,636,075
Participant withdrawals.......................................... (386,175) (82,150) (123,430)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 15,144,873 2,900,478 2,874,066
----------- ----------- -----------
Net increase (decrease) in net assets............................ 17,026,956 3,185,875 2,717,719
NET ASSETS
Beginning of period.............................................. 0 0 0
----------- ----------- -----------
End of period.................................................... $17,026,956 $ 3,185,875 $ 2,717,719
=========== =========== ===========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 2,490,460 $ (131,936) $ 723,972
Net realized gain (loss)......................................... (49,812) 6,202 2,702
Net unrealized appreciation (depreciation)....................... 2,708,319 4,290,225 (926,656)
------------ ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 5,148,967 4,164,491 (199,982)
------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 29,311,834 11,404,825 5,229,388
Participant transfers............................................ 17,732,499 2,647,809 2,057,675
Participant withdrawals.......................................... (3,288,961) (1,916,016) (375,613)
------------ ----------- -----------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 43,755,372 12,136,618 6,911,450
------------ ----------- -----------
Net increase (decrease) in net assets............................ 48,904,339 16,301,109 6,711,468
NET ASSETS
Beginning of period.............................................. 61,450,613 28,045,218 6,368,657
------------ ----------- -----------
End of period.................................................... $110,354,952 $44,346,327 $13,080,125
============ =========== ===========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 6, 1998 to December 31, 1998
(3) From inception March 5, 1998 to December 31, 1998
See Notes to Financial Statements
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT
---------- ----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 229,569 $ 268,343
Net realized gain (loss)......................................... (8,982) (45,779)
Net unrealized appreciation (depreciation)....................... 117,718 198,521
----------- -----------
Net increase (decrease) in net assets resulting from operations.. 338,305 421,085
----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 4,400,047 3,049,253
Participant transfers............................................ 1,466,339 5,744,509
Participant withdrawals.......................................... (777,852) (390,717)
----------- -----------
transactions.................................................. 5,088,534 8,403,045
----------- -----------
Net increase (decrease) in net assets............................ 5,426,839 8,824,130
NET ASSETS
Beginning of period.............................................. 4,921,987 4,378,068
----------- -----------
End of period.................................................... $10,348,826 $13,202,198
=========== ===========
TEMPLETON
DEVELOPING MUTUAL SHARES
MARKETS INVESTMENTS
SUBACCOUNT SUBACCOUNT(6)
---------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 40,925 $ (333)
Net realized gain (loss)......................................... (66,545) 11
Net unrealized appreciation (depreciation)....................... (669,032) 4,075
------------ ---------
Net increase (decrease) in net assets resulting from operations.. (694,652) 3,753
------------ ---------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 988,703 54,314
Participant transfers............................................ 584,701 226,683
Participant withdrawals.......................................... (84,435) (115)
------------ ---------
Net increase (decrease) in net assets resulting from participant
transactions.................................................. 1,488,969 280,882
------------ ---------
Net increase (decrease) in net assets............................ 794,317 284,635
NET ASSETS
Beginning of period.............................................. 2,170,031 0
------------ ---------
End of period.................................................... $ 2,964,348 $ 284,635
============ =========
(6) From inception November 10, 1998 to December 31, 1998
</TABLE>
See Notes to Financial Statements
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MULTI-SECTOR
MONEY MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 907,338 $ (630,385) $ 1,567,964
Net realized gain (loss)......................................... (11) 16,315,938 844,434
Net unrealized appreciation (depreciation)....................... 1 (1,781,965) (162,539)
------------ ------------ -----------
Net increase in net assets resulting from operations............. 907,328 13,903,588 2,249,859
------------ ------------ -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 129,791,265 19,020,238 6,621,512
Participant transfers............................................ (118,052,959) 30,883,327 14,037,050
Participant withdrawals.......................................... (994,507) (2,970,576) (1,026,256)
------------ ------------ -----------
Net increase in net assets resulting from participant transactions 10,743,799 46,932,989 19,632,306
------------ ------------ -----------
Net increase in net assets....................................... 11,651,127 60,836,577 21,882,165
NET ASSETS
Beginning of period.............................................. 23,283,198 50,949,678 15,456,177
------------ ------------ -----------
End of period.................................................... $ 34,934,325 $111,786,255 $37,338,342
============ ============ ===========
STRATEGIC
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 191,375 $ (20,595) $ 169,468
Net realized gain ............................................... 3,577,012 821,216 1,374,236
Net unrealized depreciation...................................... (230,816) (256,669) (214,179)
----------- ----------- -----------
Net increase in net assets resulting from operations............. 3,537,571 543,952 1,329,525
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 4,491,372 1,958,885 3,065,921
Participant transfers............................................ 7,178,160 3,245,739 3,096,312
Participant withdrawals.......................................... (575,990) (145,413) (584,926)
----------- ----------- -----------
Net increase in net assets resulting from participant transactions 11,093,542 5,059,211 5,577,307
----------- ----------- -----------
Net increase in net assets....................................... 14,631,113 5,603,163 6,906,832
NET ASSETS
Beginning of period.............................................. 14,850,193 3,657,266 6,416,247
----------- ----------- -----------
End of period.................................................... $29,481,306 $ 9,260,429 $13,323,079
=========== =========== ===========
ABERDEEN
REAL ESTATE STRATEGIC THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 173,760 $ (82,267) $ 63,876
Net realized gain (loss)......................................... 426,416 1,442,937 (22,564)
Net unrealized appreciation (depreciation)....................... 954,191 (205,450) (1,037,281)
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,554,367 1,155,220 (995,969)
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,913,014 2,055,321 979,395
Participant transfers............................................ 6,386,122 5,362,519 1,374,336
Participant withdrawals.......................................... (135,526) (269,975) (57,020)
----------- ----------- -----------
Net increase in net assets resulting from participant transactions 9,163,610 7,147,865 2,296,711
----------- ----------- -----------
Net increase in net assets....................................... 10,717,977 8,303,085 1,300,742
NET ASSETS
Beginning of period.............................................. 2,127,772 4,370,929 1,129,841
----------- ----------- -----------
End of period.................................................... $12,845,749 $12,674,014 $ 2,430,583
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997
(CONTINUED)
<TABLE>
<CAPTION>
WANGER WANGER
ENHANCED INTERNATIONAL U.S.
INDEX SMALL CAP SMALL CAP
SUBACCOUNT(1) SUBACCOUNT SUBACCOUNT
------------- ---------- ----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income ........................................... $ 8,446 $ 111,397 $ 88,444
Net realized gain ............................................... 6,513 2,114 8,063
Net unrealized appreciation (depreciation)....................... 60,714 (1,519,831) 10,309,844
----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations.. 75,673 (1,406,320) 10,406,351
----------- ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 1,672,794 6,103,151 9,172,386
Participant transfers............................................ 2,390,678 10,427,408 20,534,319
Participant withdrawals.......................................... (18,468) (1,015,981) (1,728,149)
----------- ----------- -----------
Net increase in net assets resulting from participant transactions 4,045,004 15,514,578 27,978,556
----------- ----------- -----------
Net increase in net assets....................................... 4,120,677 14,108,258 38,384,907
NET ASSETS
Beginning of period.............................................. 0 13,936,960 23,065,706
----------- ----------- -----------
End of period.................................................... $ 4,120,677 $28,045,218 $61,450,613
=========== =========== ===========
TEMPLETON TEMPLETON
STOCK ASSET ALLOCATION
SUBACCOUNT(2) SUBACCOUNT(3)
------------- -------------
FROM OPERATIONS
Net investment loss.............................................. $ (26,216) $ (21,060)
Net realized gain (loss)......................................... 121 (615)
Net unrealized depreciation...................................... (200,829) (126,037)
----------- -----------
Net decrease in net assets resulting from operations............. (226,924) (147,712)
----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,039,079 2,964,700
Participant transfers............................................ 4,594,725 2,135,147
Participant withdrawals.......................................... (38,223) (30,148)
----------- -----------
Net increase in net assets resulting from participant transactions 6,595,581 5,069,699
----------- -----------
Net increase in net assets....................................... 6,368,657 4,921,987
NET ASSETS
Beginning of period.............................................. 0 0
----------- -----------
End of period.................................................... $ 6,368,657 $ 4,921,987
=========== ===========
TEMPLETON TEMPLETON
INTERNATIONAL DEVELOPING MARKETS
SUBACCOUNT(2) SUBACCOUNT(2)
------------- -------------
FROM OPERATIONS
Net investment loss.............................................. $ (17,298) $ (11,121)
Net realized gain (loss)......................................... 2,484 (12,846)
Net unrealized depreciation...................................... (105,208) (767,938)
----------- -----------
Net decrease in net assets resulting from operations............. (120,022) (791,905)
----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,136,967 1,308,608
Participant transfers............................................ 2,385,768 1,662,130
Participant withdrawals.......................................... (24,645) (8,802)
----------- -----------
Net increase in net assets resulting from participant transactions 4,498,090 2,961,936
----------- -----------
Net increase in net assets....................................... 4,378,068 2,170,031
NET ASSETS
Beginning of period.............................................. 0 0
----------- -----------
End of period.................................................... $ 4,378,068 $ 2,170,031
=========== ===========
</TABLE>
(1) From inception July 22, 1997 to December 31, 1997
(2) From inception May 5, 1997 to December 31, 1997
(3) From inception May 6, 1997 to December 31, 1997
See Notes to Financial Statements
10
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
PHL Variable Accumulation Account (the "Account") is a separate investment
account of PHL Variable Insurance Company ("PHL Variable"). The Account is
organized as a unit investment trust and currently consists of 22 Subaccounts,
and invests in corresponding series (the "Series") of The Phoenix Edge Series
Fund, Wanger Advisors Trust and the Templeton Variable Products Series Fund (the
"Funds"). The Account is offered as The Big Edge Choice to individuals (VA4).
Each Series has distinct investment objectives. The Money Market Series seeks
to provide maximum current income consistent with capital preservation and
liquidity. The Growth Series seeks to achieve intermediate and long-term growth
of capital, with income as a secondary consideration. The Multi-Sector Fixed
Income Series seeks to provide long-term total return by investing in a
diversified portfolio of high yield and high quality fixed income securities.
The Strategic Allocation Series seeks to realize as high a level of total rate
of return over an extended period of time as is considered consistent with
prudent investment risk by investing in three market segments: stocks, bonds and
money market instruments. The International Series seeks as its investment
objective a high total return consistent with reasonable risk by investing
primarily in an internationally diversified portfolio of equity securities. The
Balanced Series seeks to provide reasonable income, long-term growth and
conservation of capital. The Real Estate Series seeks to achieve capital
appreciation and income with approximately equal emphasis through investments in
real estate investment trusts and companies that operate, manage, develop or
invest in real estate. The Strategic Theme Series seeks long-term appreciation
of capital by investing in securities that the adviser believes are well
positioned to benefit from cultural, demographic, regulatory, social or
technological changes worldwide. The Aberdeen New Asia Series seeks to provide
long-term capital appreciation by investing primarily in diversified equity
securities of issuers organized and principally operating in Asia, excluding
Japan. The Enhanced Index Series seeks high total return by investing in a
broadly diversified portfolio of equity securities of large and medium
capitalization companies within market sectors reflected in the Standard &
Poor's 500 Composite Stock Price Index. The Engemann Nifty Fifty Series seeks to
achieve long-term capital appreciation investing in approximately 50 different
securities which offer the potential for long-term growth of capital. The Seneca
Mid-Cap Growth Series seeks capital appreciation primarily through investments
in equity securities of companies that have the potential for above average
market appreciation. The Growth and Income Series seeks as its investment
objective, dividend growth, current income and capital appreciation by investing
in common stocks. The Value Equity Series seeks to achieve long-term capital
appreciation and income by investing in a diversified portfolio of common stocks
which meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. The Schafer Mid-Cap Series
seeks to achieve long-term capital appreciation with current income as the
secondary investment objective by investing in common stocks of established
companies having a strong financial position and a low stock market valuation at
the time of purchase which are believed to offer the possibility of increase in
value. The Wanger U.S. Small Cap Series invests in growth common stock of U.S.
companies with stock market capitalization of less than $1 billion. The Wanger
International Small Cap Series invests in securities of non-U.S. companies with
a stock market capitalization of less than $1 billion. The Templeton Stock
Series is a capital growth common stock fund. The Templeton Asset Allocation
Series invests in stocks and debt obligations of companies and governments and
money market instruments seeking high total return. The Templeton International
Series invests in stocks and debt obligations of companies and governments
outside the United States. The Templeton Developing Markets Series seeks
long-term capital appreciation by investing in equity securities of issuers in
countries having developing markets. The Mutual Shares Investments Series is a
capital appreciation fund with income as a secondary objective. Contract owners
also may direct the allocation of their investments between the Account, the
Market Value Adjusted Guaranteed Interest Account ("MVA") and the Guaranteed
Interest Account.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS: Investments are made exclusively in the Funds and
are valued at the net asset values per share of the respective Series.
B. INVESTMENT TRANSACTIONS AND RELATED INCOME: Realized gains and losses include
capital gain distributions from the Funds as well as gains and losses on sales
of shares in the Funds determined on the LIFO (last in, first out) basis.
C. INCOME TAXES: The Account is not a separate entity from PHL Variable and,
under current federal income tax law, income arising from the Account is not
taxed since reserves are established equivalent to such income. Therefore, no
provision for related federal taxes is required.
D. DISTRIBUTIONS: Distributions are recorded on the ex-dividend date.
11
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3--PURCHASES AND SALES OF SHARES OF THE FUNDS
Purchases and sales of shares of the Funds for the period ended December 31,
1998 aggregated the following:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
<S> <C> <C>
The Phoenix Edge Series Fund:
Money Market................................................................... $96,459,138 $76,317,595
Growth......................................................................... 102,507,380 5,169,511
Multi-Sector Fixed Income...................................................... 36,425,312 6,665,085
Strategic Allocation........................................................... 30,437,554 4,007,377
International.................................................................. 19,453,924 1,655,916
Balanced....................................................................... 27,685,004 1,998,679
Real Estate.................................................................... 5,877,277 3,552,747
Strategic Theme................................................................ 9,933,095 1,832,474
Aberdeen New Asia.............................................................. 8,775,937 8,767,486
Enhanced Index................................................................. 19,314,868 3,830,743
Engemann Nifty Fifty........................................................... 4,615,152 294,991
Seneca Mid-Cap Growth.......................................................... 2,372,914 364,060
Growth and Income.............................................................. 15,983,532 832,402
Value Equity .................................................................. 2,940,098 38,717
Schafer Mid-Cap................................................................ 3,052,956 184,296
Wanger Advisors Trust:
U.S. Small Cap................................................................. 51,235,276 4,939,562
International Small Cap........................................................ 14,141,464 2,120,848
Templeton Variable Products Series Fund:
Stock.......................................................................... 8,426,961 783,788
Asset Allocation............................................................... 6,516,639 1,192,222
International.................................................................. 18,146,021 9,464,534
Developing Markets............................................................. 12,751,857 11,220,963
Mutual Shares Investments...................................................... 300,307 19,425
</TABLE>
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS (IN UNITS)
<TABLE>
<CAPTION>
SUBACCOUNT
--------------------------------------------------------------------------------------
MONEY MULTI-SECTOR STRATEGIC
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED
--------- -------- ------------ ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
VA4
Units outstanding, beginning of period 32,019,323 77,819,024 29,244,694 22,084,578 7,089,271 10,023,529
Participant deposits................. 112,965,256 48,748,867 15,044,301 14,196,660 7,291,828 11,497,090
Participant transfers................ (93,198,970) 14,335,882 7,860,913 3,739,586 2,224,815 6,658,688
Participant withdrawals.............. (3,111,375) (5,268,083) (2,343,696) (1,881,394) (912,027) (879,242)
----------- ----------- ---------- ---------- ---------- ----------
Units outstanding, end of period..... 48,674,234 135,635,690 49,806,212 38,139,430 15,693,887 27,300,065
=========== =========== ========== ========== ========== ==========
SENECA
STRATEGIC ABERDEEN ENHANCED ENGEMANN MID-CAP
REAL ESTATE THEME NEW ASIA INDEX NIFTY FIFTY GROWTH
---------- -------- ----------- ---------- ----------- ---------
Units outstanding, beginning of period 7,736,970 10,168,688 3,654,619 3,958,413 -- --
Participant deposits................. 1,736,467 3,837,744 1,108,753 6,170,512 1,967,399 1,111,031
Participant transfers................ (65,802) 1,527,766 (447,063) 6,289,731 2,194,982 921,606
Participant withdrawals.............. (489,010) (520,831) (367,052) (393,140) (105,223) (94,222)
---------- --------- --------- ---------- ---------- ----------
Units outstanding, end of period..... 8,918,625 15,013,367 3,949,257 16,025,516 4,057,158 1,938,415
========== ========= ========= ========== ========== ==========
WANGER WANGER
GROWTH VALUE SCHAFER U.S. INTERNATIONAL TEMPLETON
AND INCOME EQUITY MID-CAP SMALL CAP SMALL CAP STOCK
---------- -------- ---------- ---------- ----------- ---------
Units outstanding, beginning of period -- -- -- 34,965,994 20,360,563 6,099,799
Participant deposits................. 7,221,850 1,430,775 1,471,490 15,784,867 7,324,032 4,980,494
Participant transfers................ 7,428,719 1,558,670 1,767,475 9,613,817 1,590,924 1,853,451
Participant withdrawals.............. (356,896) (80,464) (137,464) (1,796,721) (1,219,872) (357,848)
---------- --------- --------- ---------- ---------- ----------
Units outstanding, end of period..... 14,293,673 2,908,981 3,101,501 58,567,957 28,055,647 12,575,896
========== ========= ========= ========== ========== ==========
</TABLE>
12
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS (IN UNITS) (CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
---------- ------------- ------- -----------
<S> <C> <C> <C> <C>
VA4
Units outstanding, beginning of period 4,622,079 4,072,117 3,274,727 0
Participant deposits................. 4,100,010 2,615,978 1,784,210 54,850
Participant transfers................ 1,261,633 5,006,422 824,844 226,074
Participant withdrawals.............. (698,254) (333,462) (139,710) (114)
--------- ---------- --------- -------
Units outstanding, end of period..... 9,285,468 11,361,055 5,744,071 280,810
========= ========== ========= =======
</TABLE>
NOTE 5--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
PHL Variable and its affiliate, Phoenix Equity Planning Corporation, a
registered broker/dealer in securities, provide all services to the Account.
PHL Variable assumes the risk that annuitants as a class may live longer than
expected (necessitating a greater number of annuity payments) and that its
expenses may be higher than its deductions for such expenses. In return for the
assumption of these mortality and expense risks, PHL Variable charges the
Subaccounts the daily equivalent of 0.40%, 0.85% and 0.125% on an annual basis
for mortality, expense risks and daily administrative fees, respectively.
As compensation for administrative services provided to the Account, PHL
Variable additionally receives $35 per year from each contract, which is
deducted from the Subaccount holding the assets of the participant, or on a pro
rata basis from two or more Subaccounts in relation to their values under the
contract. Such fees aggregated $259,018 for the period ended December 31, 1998.
Phoenix Equity Planning Corporation is the principal underwriter and
distributor for the Account. PHL Variable reimburses Phoenix Equity Planning
Corporation for expenses incurred as underwriter.
On surrender of a contract, contingent deferred sales charges, which vary
from 0-7% depending upon the duration of each contract deposit, are deducted
from the proceeds and are paid to PHL Variable as reimbursement for services
provided. Contingent deferred sales charges deducted and paid to PHL Variable
aggregated $499,342 for the period ended December 31, 1998.
NOTE 6--DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of withdrawals of amounts in the form of surrenders, death
benefits, transfers or annuity payments in excess of net purchase payments.
NOTE 7--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable annuity contract, other than a contract issued in connection
with certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments of
the segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of the Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. PHL Variable believes that the Account satisfies the current
requirements of the regulations, and it intends that the Account will continue
to meet such requirements.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PricewaterhouseCoopers Logo]
To the Board of Directors of PHL Variable Insurance Company and Participants of
PHL Variable Accumulation Account:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts: Money
Market, Growth, Multi-Sector Fixed Income, Strategic Allocation, International,
Balanced, Real Estate, Strategic Theme, Aberdeen New Asia, Enhanced Index,
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Growth and Income, Value Equity,
Schafer Mid-Cap, Wanger U.S. Small Cap, Wanger International Small Cap,
Templeton Stock, Templeton Asset Allocation, Templeton International, Templeton
Developing Markets and Mutual Shares Investments (constituting the PHL Variable
Accumulation Account, hereafter referred to as the "Account") at December 31,
1998, and the results of each of their operations and the changes in each of
their net assets for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Account's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1998 by
correspondence with fund custodians or transfer agents, provide a reasonable
basis for the opinion expressed above.
[PricewaterhouseCoopers Signature]
PricewaterhouseCoopers LLP
Hartford, Connecticut
February 17, 1999
14
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06115
UNDERWRITER
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
CUSTODIANS
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Financial Plaza
Hartford, Connecticut 06103
