AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
FILE NO. 333-78761
811-8914
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 1 [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. [ ]
(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
-------------------------
Approximate date of proposed public offering:
July 23rd or as soon thereafter as possible
-------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-------------------------
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<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
REGISTRATION
STATEMENT ON FORM N-4
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
<TABLE>
<CAPTION>
Form N-4 Item Prospectus Caption
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<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 Expenses ..................................... 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 Proceedings............................................ Litigation
14. Table of Contents of the 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 Performance Data.............................. Calculation of Yield and Return
22. Annuity Payments............................................. Calculation of Annuity Payments
23. Financial Statements ........................................ Financial Statements
</TABLE>
<PAGE>
PHOENIX RETIREMENT
PLANNER'S EDGE
VARIABLE ANNUITY
Issued by
PHL VARIABLE INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS JULY 23, 1999
This Prospectus describes a variable accumulation deferred annuity contract. The
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.
This Prospectus provides important information that a prospective investor ought
to know before investing. This Prospectus should be kept for future reference. A
Statement of Additional Information ("SAI") has been filed with the SEC and is
available free of charge by calling Variable Products Operations at
800/541-0171.
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix Research Enhanced Index Series
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Balanced Series
[diamond] Phoenix-Goodwin Growth Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Goodwin Strategic Allocation Series
[diamond] Phoenix-Goodwin Strategic Theme Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
BT INSURANCE FUNDS TRUST
- ------------------------
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE[registered trademark] Equity Index Fund
FEDERATED INSURANCE SERIES
- --------------------------
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- ---------------------------------------
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Allocation Fund -- Class 2
[diamond] Templeton International Fund -- Class 2
[diamond] Templeton Stock Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Investments Fund -- Class 2
WANGER ADVISORS TRUST
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
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 tax liability.
This Prospectus is valid only if accompanied or preceded by current
prospectuses for the Funds and MVA. You should read and keep these prospectuses
for future reference.
1
<PAGE>
TABLE OF CONTENTS
Heading Page
- -------------------------------------------------------------------
SPECIAL TERMS............................................. 3
SUMMARY OF EXPENSES....................................... 5
CONTRACT SUMMARY.......................................... 9
FINANCIAL HIGHLIGHTS...................................... 10
PERFORMANCE HISTORY....................................... 10
THE VARIABLE ACCUMULATION ANNUITY......................... 10
PHL VARIABLE AND THE ACCOUNT ............................. 10
INVESTMENTS OF THE ACCOUNT................................ 10
The Phoenix Edge Series Fund........................... 10
BT Insurance Funds Trust............................... 11
Federated Insurance Series ............................ 11
Templeton Variable Products Series Fund................ 12
Wanger Advisors Trust.................................. 12
Investment Advisers.................................... 12
Services of the Advisers............................... 13
MVA....................................................... 13
PURCHASE OF CONTRACTS..................................... 13
DEDUCTIONS AND CHARGES.................................... 14
Daily Deductions from the Separate Account............. 14
Premium Tax.......................................... 14
Mortality and Expense Risk Fee....................... 14
Administrative Fee................................... 14
Administrative Charge................................ 14
Reduction or Elimination of Charges.................... 14
Market Value Adjustment.............................. 15
Other Charges........................................ 15
THE ACCUMULATION PERIOD................................... 15
Accumulation Units..................................... 15
Accumulation Unit Values............................... 15
Transfers ............................................. 15
Surrender of Contract; Partial Withdrawals............. 16
Lapse of Contract...................................... 16
Payment Upon Death Before Maturity Date ............... 17
THE ANNUITY PERIOD........................................ 17
Variable Accumulation Annuity Contracts................ 17
Annuity Options ....................................... 18
Option A--Life Annuity with Specified Period Certain.. 18
Option B--Non-Refund Life Annuity..................... 18
Option D--Joint and Survivor Life Annuity............. 18
Option E--Installment Refund Life Annuity............. 18
Option F--Joint and Survivor Life Annuity with
10-Year Period Certain ............................ 19
Option G--Payments for Specified Period............... 19
Option H--Payments of Specified Amount................ 19
Option I--Variable Payment Life Annuity with
10-Year Period Certain ............................ 19
Option J--Joint Survivor Variable Payment Life
Annuity with 10-Year Period Certain ............... 19
Option K--Variable Payment Annuity for a Specified
Period ............................................ 19
Option L--Variable Payment Life Expectancy
Annuity............................................ 19
Option M--Unit Refund Variable Payment Life
Annuity............................................ 19
Option N--Variable Payment Non-Refund Life
Annuity............................................ 19
Other Options and Rates.............................. 19
Other Conditions..................................... 19
Payment Upon Death After Maturity Date................. 20
VARIABLE ACCOUNT VALUATION PROCEDURES..................... 20
Valuation Date......................................... 20
Valuation Period....................................... 20
Accumulation Unit Value................................ 20
Net Investment Factor.................................. 20
MISCELLANEOUS PROVISIONS.................................. 20
Assignment............................................. 20
Deferment of Payment .................................. 20
Free Look Period....................................... 21
Amendments to Contracts................................ 21
Substitution of Fund Shares............................ 21
Ownership of the Contract.............................. 21
FEDERAL INCOME TAXES...................................... 21
Introduction........................................... 21
Tax Status............................................. 21
Taxation of Annuities in General--Non-Qualified Plans... 21
Surrenders or Withdrawals Prior to the Contract
Maturity Date..................................... 22
Surrenders or Withdrawals On or After the Contract
Maturity Date..................................... 22
Penalty Tax on Certain Surrenders and Withdrawals.... 22
Additional Considerations.............................. 22
Diversification Standards ............................. 23
Qualified Plans........................................ 24
Tax Sheltered Annuities ("TSAs") .................... 25
Keogh Plans.......................................... 25
Individual Retirement Accounts....................... 25
Corporate Pension and Profit-Sharing Plans........... 26
Deferred Compensation Plans with Respect to
Service for State and Local Governments and
Tax Exempt Organizations.......................... 26
Penalty Tax on Certain Surrenders and Withdrawals
from Qualified Contracts.......................... 26
Seek Tax Advice...................................... 26
SALES OF VARIABLE ACCUMULATION CONTRACTS.................. 27
STATE REGULATION.......................................... 27
REPORTS................................................... 27
VOTING RIGHTS............................................. 27
TEXAS OPTIONAL RETIREMENT PROGRAM......................... 28
LEGAL MATTERS............................................. 28
SAI....................................................... 28
APPENDIX A--PERFORMANCE HISTORY............................ 29
APPENDIX B--THE GUARANTEED INTEREST ACCOUNT................ 32
APPENDIX C--DEDUCTIONS FOR STATE PREMIUM TAXES............. 33
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 to
determine 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.
ADJUSTED PARTIAL WITHDRAWALS: The result of multiplying the ratio of the partial
withdrawal to the Contract Value and the death benefit (prior to the withdrawal)
on the date of the withdrawal.
ANNUAL STEP-UP AMOUNT (STEP-UP AMOUNT): In the first Contract year the Step-up
Amount is the greater of (1) 100% of purchase payments less Adjusted Partial
Withdrawals; or (2) the Contract Value. After that, in any following Contract
year the Step-up Amount equals the greater of (1) the Step-up Amount at the end
of the prior Contract year, plus 100% of premium payments, less Adjusted Partial
Withdrawals made since the end of the last Contract year; or (2) the Contract
Value.
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
periodic payment under the variable payment Annuity Options I, J, K, M and N.
CLAIM DATE: The Valuation Date following receipt of a certified copy of the
death certificate at VPMO.
CONTRACT: The deferred variable accumulation annuity contract described in this
Prospectus.
CONTRACT OWNER (OWNER, YOU, YOUR): Usually the person or entity 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 Tax-sheltered Annuity plans (as described in Internal Revenue Code (IRC)
403(b)) 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, BT Insurance Funds Trust, Federated
Insurance Series, Templeton Variable Products Series Fund and Wanger Advisors
Trust.
GIA: An investment option under which premium amounts are guaranteed to earn a
fixed rate of interest.
ISSUE DATE: The date that the initial premium 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 Tax-sheltered Annuity (as described in IRC 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 to when 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 unless you and we
agree otherwise. 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:
3
<PAGE>
[diamond] Non-qualified plans--$20,000
[diamond] Individual Retirement Annuity (Rollover IRA only)--$20,000
[diamond] Bank draft program--$500
[diamond] Qualified plans--$20,000 annually
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 $500.
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.
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.
4
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF EXPENSES
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
---------------
Sales Charges Imposed on Purchases.................................................. None
Deferred Surrender Charges.......................................................... None
Subaccount Transfer Charge.......................................................... None
ANNUAL ADMINISTRATIVE CHARGE
Maximum......................................................................... $35
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Mortality and Expense Risk Fee.................................................. 1.275%
Daily Administrative Fee........................................................ .125%
------
Total Separate Account Annual Expenses.......................................... 1.40%
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================================
RULE 12B-1 OTHER EXPENSES(1) TOTAL ANNUAL
SERIES MANAGEMENT FEES FEES (BEFORE EXPENSE REIMBURSEMENT) EXPENSES(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THE PHOENIX EDGE SERIES FUND
Phoenix Research Enhanced Index Series .45% N/A .37% .82%
Phoenix-Aberdeen International Series .75% N/A .23% .98%
Phoenix-Aberdeen New Asia Series 1.00% N/A 1.50% 2.50%
Phoenix-Duff & Phelps Real Estate Securities Series .75% N/A .26% 1.01%
Phoenix-Engemann Nifty Fifty Series .90% N/A 1.68% 2.58%
Phoenix-Goodwin Balanced Series .55% N/A .13% .68%
Phoenix-Goodwin Growth Series .62% N/A .07% .69%
Phoenix-Goodwin Money Market Series .40% N/A .15% .55%
Phoenix-Goodwin Multi-Sector Fixed Income Series .50% N/A .14% .64%
Phoenix-Goodwin Strategic Allocation Series .58% N/A .10% .68%
Phoenix-Goodwin Strategic Theme Series .75% N/A .24% .99%
Phoenix-Hollister Value Equity Series .70% N/A 1.76% 2.46%
Phoenix-Oakhurst Growth and Income Series .70% N/A .76% 1.46%
Phoenix-Schafer Mid-Cap Value Series 1.05% N/A 1.72% 2.77%
Phoenix-Seneca Mid-Cap Growth Series .80% N/A 2.01% 2.81%
===================================================================================================================================
</TABLE>
(1)Each Series pays a portion or all of its expenses other than the management
fee. The Phoenix Research Enhanced Index Series will pay up to .10%; the
Phoenix-Goodwin Growth, Phoenix-Goodwin Multi-Sector Fixed Income,
Phoenix-Goodwin Strategic Allocation, Phoenix-Goodwin Money Market,
Phoenix-Goodwin Balanced, Phoenix-Engemann Nifty Fifty, Phoenix-Oakhurst
Growth and Income, Phoenix-Hollister Value Equity and Phoenix-Schafer Mid-Cap
Value Series will pay up to .15%; the Phoenix-Duff & Phelps Real Estate
Securities, Phoenix-Goodwin Strategic Theme, Phoenix-Aberdeen New Asia, and
Phoenix-Seneca Mid-Cap Growth Series will pay up to .25%; and the
Phoenix-Aberdeen International Series will pay up to .40%. For those Series
with expense reimbursement, the Actual Total Annual Expenses for the year
ending December 31, 1998 were as follows:
<TABLE>
<S> <C> <C>
.55% Phoenix Research Enhanced Index .85% Phoenix-Oakhurst Growth and Income
1.25% Phoenix-Aberdeen New Asia 1.20% Phoenix-Schafer Mid-Cap Value
1.00% Phoenix-Duff & Phelps Real Estate Securities 1.05% Phoenix-Seneca Mid-Cap Growth
.85% Phoenix-Hollister Value Equity
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF EXPENSES (CONTINUED)
====================================================================================================================================
RULE 12B-1 OTHER EXPENSES TOTAL ANNUAL
SERIES MANAGEMENT FEES FEES(1) (BEFORE EXPENSE REIMBURSEMENT) EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BT INSURANCE FUNDS TRUST
EAFE[registered trademark] Equity Index Fund .45% N/A 1.21% 1.66%
FEDERATED INSURANCE SERIES
Federated Fund for U.S. Government Securities II .52% N/A .33% .85%
Federated High Income Bond Fund II .60% N/A .18% .78%
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Mutual Shares Investments Fund-- Class 2(1,2) .60% .25% 2.27% 3.12%
Templeton Asset Allocation Fund-- Class 2(1) .60% .25% .18% 1.03%
Templeton Developing Markets Fund-- Class 2(1) 1.25% .25% .41% 1.91%
Templeton International Fund-- Class 2(1) .69% .25% .17% 1.11%
Templeton Stock Fund-- Class 2(1) .70% .25% .19% 1.14%
WANGER ADVISORS TRUST
Wanger Foreign Forty .95% N/A .50% 1.45%
Wanger International Small Cap 1.27% N/A .28% 1.55%
Wanger Twenty .90% N/A .45% 1.35%
Wanger U.S. Small Cap .96% N/A .06% 1.02%
====================================================================================================================================
</TABLE>
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>
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series.......................... $ 25 $ 76 $130 $278
Phoenix-Aberdeen International Series........................... 26 81 138 293
Phoenix-Aberdeen New Asia Series................................ 41 125 211 431
Phoenix-Duff & Phelps Real Estate Securities Series............. 27 82 140 296
Phoenix-Engemann Nifty Fifty Series............................. 42 128 214 437
Phoenix-Goodwin Balanced Series................................. 23 72 123 264
Phoenix-Goodwin Growth Series................................... 23 72 124 265
Phoenix-Goodwin Money Market Series............................. 22 68 116 250
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 23 71 121 260
Phoenix-Goodwin Strategic Allocation Series..................... 23 72 123 264
Phoenix-Goodwin Strategic Theme Series.......................... 26 81 139 294
Phoenix-Hollister Value Equity Series........................... 41 124 209 427
Phoenix-Oakhurst Growth and Income Series....................... 31 95 162 339
Phoenix-Schafer Mid-Cap Value Series............................ 44 133 223 453
Phoenix-Seneca Mid-Cap Growth Series............................ 44 134 225 456
EAFE[registered trademark] Equity Index Fund(4)................. 33 101 N/A N/A
Federated Fund for U.S. Government Securities II(4)............. 25 77 N/A N/A
Federated High Income Bond Fund II(4)........................... 24 75 N/A N/A
Mutual Shares Investments Fund-- Class 2........................ 47 143 N/A N/A
Templeton Asset Allocation Fund-- Class 2....................... 27 82 141 298
Templeton Developing Markets Fund-- Class 2..................... 36 108 183 380
Templeton International Fund-- Class 2.......................... 28 85 144 306
Templeton Stock Fund-- Class 2.................................. 28 86 146 309
Wanger Foreign Forty(3)......................................... 31 95 N/A N/A
Wanger International Small Cap.................................. 32 98 166 348
Wanger Twenty(3)................................................ 30 92 N/A N/A
Wanger U.S. Small Cap........................................... 27 82 140 297
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Class 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.
(2)Figures reflect expenses from the Fund's inception on May 1, 1998 and are
annualized. The Adviser agreed in advance to limit Management Fees and make
certain payments to reduce Fund expenses so that the Actual Total Annual
Expenses did not exceed 1.25% in 1998 for the Mutual Shares Investments Fund.
The Adviser is contractually obligated to continue this arrangement. See the
Fund prospectus for details.
(3)Inclusion of this Subaccount began on February 1, 1999.
(4)Inclusion of this Subaccount began on July 23, 1999.
6
<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>
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix Research Enhanced Index................................. $ 25 $ 76 $130 $278
Phoenix-Aberdeen International.................................. 26 81 138 293
Phoenix-Aberdeen New Asia....................................... 41 125 211 431
Phoenix-Duff & Phelps Real Estate Securities.................... 27 82 140 296
Phoenix-Engemann Nifty Fifty.................................... 42 128 214 437
Phoenix-Goodwin Balanced........................................ 23 72 123 264
Phoenix-Goodwin Growth.......................................... 23 72 124 265
Phoenix-Goodwin Money Market.................................... 22 68 116 250
Phoenix-Goodwin Multi-Sector Fixed Income....................... 23 71 121 260
Phoenix-Goodwin Strategic Allocation............................ 23 72 123 264
Phoenix-Goodwin Strategic Theme................................. 26 81 139 294
Phoenix-Hollister Value Equity.................................. 41 124 209 427
Phoenix-Oakhurst Growth and Income.............................. 31 95 162 339
Phoenix-Schafer Mid-Cap Value................................... 44 133 223 453
Phoenix-Seneca Mid-Cap Growth................................... 44 134 225 456
EAFE[registered trademark] Equity Index Fund(2)................. 33 101 N/A N/A
Federated Fund for U.S. Government Securities II(2)............. 25 77 N/A N/A
Federated High Income Bond Fund II(2)........................... 24 75 N/A N/A
Mutual Shares Investments-- Class 2............................. 47 143 N/A N/A
Templeton Asset Allocation-- Class 2............................ 27 82 141 298
Templeton Developing Markets-- Class 2.......................... 36 108 183 380
Templeton International-- Class 2............................... 28 85 144 306
Templeton Stock-- Class 2....................................... 28 86 146 309
Wanger Foreign Forty(1)......................................... 31 95 N/A N/A
Wanger International Small Cap.................................. 32 98 166 348
Wanger Twenty(1)................................................ 30 92 N/A N/A
Wanger U.S. Small Cap........................................... 27 82 140 297
- ------------------------------------------------------------------------------------------------------------------------------------
</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>
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix Research Enhanced Index................................. $ 25 $ 76 $130 $278
Phoenix-Aberdeen International.................................. 26 81 138 293
Phoenix-Aberdeen New Asia....................................... 41 125 211 431
Phoenix-Duff & Phelps Real Estate Securities.................... 27 82 140 296
Phoenix-Engemann Nifty Fifty.................................... 42 128 214 437
Phoenix-Goodwin Balanced........................................ 23 72 123 264
Phoenix-Goodwin Growth.......................................... 23 72 124 265
Phoenix-Goodwin Money Market.................................... 22 68 116 250
Phoenix-Goodwin Multi-Sector Fixed Income....................... 23 71 121 260
Phoenix-Goodwin Strategic Allocation............................ 23 72 123 264
Phoenix-Goodwin Strategic Theme................................. 26 81 139 294
Phoenix-Hollister Value Equity.................................. 41 124 209 427
Phoenix-Oakhurst Growth and Income.............................. 31 95 162 339
Phoenix-Schafer Mid-Cap Value................................... 44 133 223 453
Phoenix-Seneca Mid-Cap Growth................................... 44 134 225 456
EAFE[registered trademark] Equity Index Fund(2)................. 33 101 N/A N/A
Federated Fund for U.S. Government Securities II(2)............. 25 77 N/A N/A
Federated High Income Bond Fund II(2)........................... 24 75 N/A N/A
Mutual Shares Investments-- Class 2............................. 47 143 N/A N/A
Templeton Asset Allocation-- Class 2............................ 27 82 141 298
Templeton Developing Markets-- Class 2.......................... 36 108 183 380
Templeton International-- Class 2............................... 28 85 144 306
Templeton Stock-- Class 2....................................... 28 86 146 309
Wanger Foreign Forty(1)......................................... 31 95 N/A N/A
Wanger International Small Cap.................................. 32 98 166 348
Wanger Twenty(1)................................................ 30 92 N/A N/A
Wanger U.S. Small Cap........................................... 27 82 140 297
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inclusion of this Subaccount began on February 1, 1999.
(2) Inclusion of this Subaccount began on July 23, 1999.
7
<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."
8
<PAGE>
CONTRACT 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
provide you with retirement income at a future date, while allowing maximum
flexibility in obtaining your investment goals.
The Contract offers a combination of investment options, both variable and
fixed. Investments in the variable options provide results which vary and depend
upon the performance of the underlying Fund, while investments in the GIA or MVA
provide guaranteed interest earnings subject to certain conditions. Please refer
to "Appendix B" for a detailed discussion of the GIA.
The Contract also provides for the payment of a death benefit upon the death
of either the Owner or the Annuitant anytime before the Contract matures.
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 $20,000.
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--3%).
WITHDRAWALS
[diamond] You may partially or fully surrender the Contract anytime for its
Contract Value less any applicable premium tax.
DEATH BENEFIT
The Contract provides for payment on the death of the Owner or the Annuitant
at anytime prior to the Maturity Date. The amount payable differs depending on
whether the Annuitant or Owner/Annuitant has reached age 80. See "Payment Upon
Death Before Maturity."
DEDUCTIONS AND CHARGES
FROM THE ACCOUNT
[diamond] Mortality and expense risk fee--1.275% 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.
[bullet] 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--maximum of $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 you may
return it within 10 days after you receive it and cancel the Contract. You will
receive in cash the adjusted value of the initial payment unless you temporarily
allocated your initial premium payment to the Phoenix-Goodwin Money Market
Subaccount.
In that case, your Contract is issued with a Temporary Money Market
Allocation Amendment and we will refund the initial payment.
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>
PHL VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
ACCUMULATION UNIT VALUES
(SELECTED DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT
THE INDICATED PERIOD)
The Subaccounts commenced operations as of the date of this Prospectus;
therefore, data for these Subaccounts is not yet available.
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 that 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
- --------------------------------------------------------------------------------
We are a wholly-owned indirect subsidiary of Phoenix Home Life Mutual
Insurance Company. Our executive office is located at One American Row,
Hartford, Connecticut 06102 and our 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. PHL Variable sells variable
annuity contracts through its own field force of agents and through brokers.
On December 7, 1994, we 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 we 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 invest in corresponding Series of The Phoenix Edge
Series Fund. The following Series are currently available:
PHOENIX RESEARCH ENHANCED INDEX SERIES: The investment objective of the
Series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The Series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
Series is to seek a high total return consistent with reasonable risk. The
Series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the Series is
to seek long-term capital
10
<PAGE>
appreciation. The Series invests primarily in a diversified portfolio of equity
securities of issuers organized and principally operating in Asia, excluding
Japan.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the Series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the Series
is to seek long-term capital appreciation by investing in approximately 50
different securities which offer the best potential for long-term growth of
capital. At least 75% of the Series' assets will be invested in common stocks of
high quality growth companies. The remaining portion will be invested in common
stocks of small corporations with rapidly growing earnings per share or common
stocks believed to be undervalued.
PHOENIX-GOODWIN BALANCED SERIES: The investment objective of the Series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Goodwin Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-GOODWIN GROWTH SERIES: The investment objective of the Series is to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin Growth Series invests principally in common
stocks of corporations believed by management to offer growth potential.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the Series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the Series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-GOODWIN STRATEGIC ALLOCATION SERIES: The investment objective of the
Series is to realize as high a level of total return over an extended period of
time as is considered consistent with prudent investment risk. The
Phoenix-Goodwin Strategic 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.
PHOENIX-GOODWIN STRATEGIC THEME SERIES: The investment objective of the
Series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Goodwin Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the Series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
Series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the Series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series will
invest in common stocks of established companies having a strong financial
position and a low stock market valuation at the time of purchase which are
believed to offer the possibility of increase in value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the Series
is to seek capital appreciation primarily through investments in equity
securities of companies that have the potential for above average market
appreciation. The Series seeks to outperform the Standard & Poor's Mid-Cap 400
Index.
BT INSURANCE FUNDS TRUST
A certain Subaccount invests in a corresponding Series of the BT Insurance
Funds Trust. The following Series is currently available:
EAFE[registered trademark] EQUITY INDEX FUND: The Series seeks to match the
performance of the Morgan Stanley Capital International EAFE[registered
trademark] Index ("EAFE[registered trademark] Index"), which emphasizes major
market stock performance of companies in Europe, Australia and the Far East. The
Series invests in a statistically selected sample of the securities found in the
EAFE[registered trademark] Index.
FEDERATED INSURANCE SERIES
Certain Subaccounts invest in corresponding Series of the Federated
Insurance Series. The following Series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the Series is to seek current
11
<PAGE>
income by investing primarily in U.S. government securities, including
mortgage-backed securities issued by U.S. government agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the Series
is to seek high current income by investing primarily in a diversified portfolio
of high-yield, lower-rated corporate bonds.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Certain Subaccounts invest in Class 2 shares of the corresponding Series of
the Templeton Variable Products Series Fund. The following Series are currently
available:
MUTUAL SHARES INVESTMENTS FUND: The primary investment objective of the
Series is capital appreciation with income as a secondary objective. The Mutual
Shares Investments Series invests primarily in domestic equity securities that
the manager believes are significantly undervalued.
TEMPLETON ASSET ALLOCATION FUND: The investment objective of the Series is a
high level of total return. The Templeton Asset Allocation Series invests in
stocks of companies of any nation, bonds of companies and governments of any
nation and in money market instruments. Changes in the asset mix will be made in
an attempt to capitalize on total return potential produced by changing economic
conditions throughout the world.
TEMPLETON DEVELOPING MARKETS FUND: The investment objective of the Series is
long-term capital appreciation. The Templeton Developing Markets Series invests
primarily in emerging market equity securities.
TEMPLETON INTERNATIONAL FUND: The investment objective of the Series is
long-term capital. The Templeton International Series invests primarily in
stocks of companies located outside the United States, including emerging
markets. Any income realized will be incidental. It also may invest in debt
securities of governments and companies located anywhere in the world.
TEMPLETON STOCK FUND: The investment objective of the Series is long-term
capital growth. The Templeton Stock Series invests primarily in common stocks
issued by companies in various nations throughout the world, including the U.S.
and emerging markets.
WANGER ADVISORS TRUST
Certain Subaccounts invest in corresponding Series of the Wanger Advisors
Trust. The following Series are currently available:
WANGER FOREIGN FORTY: The investment objective of the Series is to seek
long-term capital growth. The Wanger Foreign Forty Series invests primarily in
equity securities of foreign companies with market capitalization of $1 billion
to $10 billion and focuses its investments in 40 to 60 companies in the
developed markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the Series is to
seek long-term capital growth. The Wanger International Small Cap Series invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the Series is to seek long-term
capital growth. The Wanger Twenty Series invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the Series is to seek
long-term capital growth. The Wanger U.S. Small Cap Series invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
Each Series will be subject to market fluctuations and the risks that come
with the ownership of any security, and there can be no assurance that any
Series will achieve its stated investment objective.
In addition to being sold to the Account, shares of the Funds also may be
sold to other separate accounts of Phoenix or its affiliates or to the separate
accounts of other insurance companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund(s) simultaneously. Although neither we nor the Fund(s)
trustees currently foresee any such disadvantages either to variable life
insurance Policyowners or to variable annuity Contract Owners, the Funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance Policyowners and variable annuity Contract
Owners and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from (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. We will, at our 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 Phoenix-Duff & Phelps Real
Estate Securities and Phoenix-Aberdeen New Asia Series. Based on subadvisory
agreements with the Fund, PIC delegates certain investment decisions and
research functions to subadvisers for the following Series:
[diamond] J.P. Morgan Investment Management, Inc.
[bullet] Phoenix Research Enhanced Index Series
12
<PAGE>
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
[bullet] Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
[bullet] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Schafer Capital Management, Inc.
[bullet] Phoenix-Schafer Mid-Cap Value Series
The investment adviser to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment adviser to the Phoenix-Aberdeen New 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 Phoenix-Aberdeen New Asia Series to PIC
and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix, and by Aberdeen Fund Managers, Inc.
The other investment advisers are:
[diamond] Bankers Trust Company
[bullet] EAFE[registered trademark] Equity Index Fund
[diamond] Federated Investment Management Company
[bullet] Federated Fund for U.S. Government Securities II
[bullet] Federated High Income Bond Fund II
[diamond] Templeton Investment Counsel, Inc.
[bullet] Templeton Asset Allocation Fund
[bullet] Templeton International Fund
[bullet] Templeton Stock Fund
[diamond] Templeton Asset Management, Ltd.
[bullet] Templeton Developing Markets Fund
[diamond] Franklin Mutual Advisers, LLC
[bullet] Mutual Shares Investments Fund
[diamond] Wanger Asset Management, L.P.
[bullet] Wanger Foreign Forty
[bullet] Wanger International Small Cap
[bullet] Wanger Twenty
[bullet] Wanger U.S. Small Cap
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.
PURCHASE OF CONTRACTS
- --------------------------------------------------------------------------------
Generally, we require minimum initial payments of:
[diamond] Non-qualified plans--$20,000
[diamond] Individual Retirement Annuity (Rollover IRAs only)--$20,000
[diamond] Bank draft program--$500
[bullet] You may authorize your bank to draw $500 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 Check-o-matic is elected, the minimum initial
payment is $500. This payment must accompany the application (if
any). Each subsequent payment under a Contract must be at least
$500.
[diamond] Qualified plans--$20,000 annually
[bullet] If Contracts are purchased in connection with tax-qualified or
employer-sponsored plans, a minimum annual payment of $20,000 is
required.
Generally, a Contract may not be purchased for a proposed Annuitant who is
86 years of age or older. Total payments in excess of $1,000,000 cannot be made
without our permission. 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 Phoenix-Goodwin
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 us (either in writing or by telephone) and will apply to any
payments accompanying such notice or made subsequent to the receipt of the
notice, unless otherwise requested by you.
In certain circumstances we may reduce the initial or subsequent premium
payment amount we accept for a Contract. Factors in determining qualifications
for any such reduction includes:
(1) the make-up and size of the prospective group; or
13
<PAGE>
(2) the method and frequency of premium payments; and
(3) the amount of compensation to be paid to Registered Representatives on
each premium payment.
Any reduction will not unfairly discriminate against any person. We will
make any such reduction according to our own rules in effect at the time the
premium payment is received. We reserve the right to change these rules from
time to time.
DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
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, our
status within those states and the insurance tax laws of those states. Premium
Taxes on Contracts currently range from 0% to 3.5%. We will pay any premium tax
due and will reimburse ourselves only upon the earlier of either full or partial
surrender of the Contract, the Maturity Date or payment of death proceeds. For a
list of states and premium taxes, see Appendix C to this Prospectus.
MORTALITY AND EXPENSE RISK FEE
We make a daily deduction from each Subaccount for the mortality and expense
risk charge. The fee is based on an annual rate of 1.275% and is taken against
the net assets of the Subaccounts.
Although you bear the investment risk of the Series in which you invest,
once you begin receiving annuity payments that carry life contingencies the
annuity payments are guaranteed by us to continue for as long as the Annuitant
lives. We assume the risk that Annuitants as a class may live longer than
expected (requiring a greater number of annuity payments) and that our actual
expenses may be higher than the expense charges provided for in the Contract.
In assuming the mortality risk, we promise to make these lifetime annuity
payments to the Owner or other payee for as long as the Annuitant lives
according to the annuity tables and other provisions of the Contract.
No mortality and expense risk charge is deducted from the GIA or MVA. If the
charges prove insufficient to cover actual administrative costs, then the loss
will be borne by us; conversely, if the amount deducted proves more than
sufficient, the excess will be a profit to us. Any such profit may be used, as
part of our General Account assets, to meet sales expenses, if any, which are in
excess of sales commission revenue generated from any surrender 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.
ADMINISTRATIVE FEE
We make a daily deduction from the Account Value to cover the costs of
administration. This fee is based, on an annual rate of .125% and is taken
against the net assets of the Subaccounts. It compensates the Company for
administrative expenses that exceed revenues from the Administrative Charge
described below. (This fee is not deducted from the GIA or MVA.)
ADMINISTRATIVE CHARGE
We deduct an administrative charge from the Contract Value. This charge is
used to reimburse us for some of the administrative expenses we incur in
establishing and maintaining the Contracts.
The maximum administrative maintenance charge under a Contract is $35. This
charge is deducted annually on the Contract anniversary date. It is deducted on
a pro rata basis from the Subaccounts, GIA or MVA in which you have an interest.
If you fully surrender your Contract, the full administrative fee if applicable,
will be deducted at the time of withdrawal. The administrative charge will not
be deducted (either annually or upon withdrawal) if your Contract Value is
$50,000 or more on the day the administrative charge is due. This charge may be
decreased but will never increase. 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.
REDUCTION OR ELIMINATION OF CHARGES
We may reduce or eliminate the mortality and expense risk fee and annual
administrative charge when sales of the Contracts are made to certain
individuals or groups of individuals that result in savings of sales expenses.
We will consider the following characteristics:
(1) the size and type of the group of individuals to whom the Contract is
offered;
(2) the amount of anticipated premium payments;
(3) whether there is a preexisting relationship with the Company such as being
an employee of the Company or its affiliates and their spouses; or to
employees or agents who retire from the Company or its affiliates or Phoenix
Equity Planning Corporation ("PEPCO"), or its affiliates or to registered
representatives of the principal underwriter and registered representatives
of broker-dealers with whom PEPCO has selling agreements; and
(4) internal transfers from other contracts issued by the Company or an
affiliate, or making transfers of amounts held under qualified plans
sponsored by the Company or an affiliate.
Any reduction or elimination of surrender or administrative charge will not
be unfairly discriminatory against any person. We will make any reduction
according to our own rules in effect at the time the Contract is issued.
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We reserve the right to change these rules from time to time.
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 during
which 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 at anytime prior to the Maturity Date of your Contract, elect to
transfer all or any part of the Contract 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 provided the NYSE is open for
trading. 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 may also 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
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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.
Nonsystematic transfers from the GIA and MVA will be made on the date of receipt
by VPMO except as you may otherwise request. For nonsystematic 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 nonsystematic 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) and timing services, unless we have entered into a
third-party transfer service agreement with the registered representative's
broker-dealer firm.
No surrender charge will be assessed when a transfer is made. The date a
payment was originally credited for the purpose of calculating the surrender
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. However, you will be permitted at least six transfers during each Contract
year. Transfers under the Systematic Transfer Program will not be counted
against any limitation. 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." 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.
Currently, however, transfers between Subaccounts are not permitted once a
variable payment annuity option has been elected.
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 the
Contract Value in either a lump sum or by multiple scheduled or unscheduled
partial withdrawals. A signed written request for withdrawal must be sent to
VPMO. If you have 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."
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
The Contract will terminate and lapse without value, if on any Valuation
Date:
[diamond] The Contract Value is zero; or
[diamond] The annual Administrative Charge or premium tax reimbursement due on
either a full or partial surrender is greater than or equal to the
Contract Value (unless any Contract Value has been applied under one
of the variable payment options).
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PHL Variable will notify you in writing that the Contract has lapsed.
PAYMENT UPON DEATH BEFORE MATURITY DATE
[diamond] Who Receives Payment
[bullet] DEATH OF AN OWNER/ANNUITANT
If the Owner/Annuitant dies before the Contract Maturity Date,
the death benefit will be paid under the Contract to the
Annuitant's beneficiary.
[bullet] DEATH OF AN ANNUITANT WHO IS NOT THE OWNER
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.
[bullet] SPOUSAL BENEFICIARY CONTRACT CONTINUANCE
If the spousal beneficiary continues the Contract at the death
of the an Owner/Annuitant or Owner who is not also the Annuitant,
the spousal beneficiary becomes the Annuitant. The Benefit Option
in effect at the death of an Owner/Annuitant or an Owner will also
apply to the spousal beneficiary.
[bullet] CONTINGENT ANNUITANT CONTRACT CONTINUANCE
Upon the death of the Annuitant who is not the Owner provided
a contingent Annuitant was named prior to the death of the
Annuitant the contract will continue with the contingent Annuitant
becoming the Annuitant. The Benefit Option in effect at the death
of the Annuitant will also apply to the contingent Annuitant.
[bullet] QUALIFIED CONTRACTS
Under Qualified Contracts, the death benefit is paid at the
death of the participant who is the Annuitant under the Contract.
Death benefit payments must satisfy distribution rules (See "Qualified
Plans" for a detailed discussion.)
[bullet] OWNERSHIP OF THE CONTRACT BY A NON-NATURAL PERSON
If the Owner is not an individual, the death of the Annuitant
is treated as the death of the Owner.
[diamond] Payment Amount
Upon the Death of the Annuitant or Owner/Annuitant who has not yet
Reached Age 80.
[bullet] 100% of payments, less adjusted partial withdrawals; or
[bullet] the contract value on the claim date; and
[bullet] the annual step-up amount on the claim date.
After the Annuitant's 80th birthday, the death benefit (less any deferred
premium tax) equals the Contract Value (no surrender charge is imposed) on the
Claim Date.
[diamond] DEATH OF AN OWNER WHO IS NOT THE ANNUITANT
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:
[bullet] 100% of payments, less withdrawals; and
[bullet] the Contract Value on the Claim Date.
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. Each Contract will provide, at the time of its issuance, for a Variable
Payment Life Expectancy Annuity (Option L) unless a different annuity option is
elected by you. See "Annuity Options." Under a Variable Payment Life Expectancy
Annuity, payments are made on a monthly basis 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. 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.
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 and is elected by you in the application. 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
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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 be
applied to provide a Variable Payment Life Expectancy Annuity (Option L) as
described below. Upon the death of the Annuitant and joint annuitant if any, the
remaining Contract Value will be paid in a lump sum to the Annuitant's
beneficiary.
With the exception of the Fixed Payment Options and Option L--Variable
Payment Life Expectancy Annuity, 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 payment rate. The Contract
is issued with guaranteed minimum annuity payment rates, however, if the current
rate is higher, we'll apply the higher rate. The payment rate differs according
to the payment option selected and the age of the Annuitant. The annuity payment
rate is applied and will determine all payments for the fixed annuity payment
options and the first payment for the variable annuity payment options. 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 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 Variable Payment Life Expectancy Annuity, (see "Option L"
below), you may, by written request received by VPMO on or before the Maturity
Date, elect any of the other annuity payment options described below.
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 payment rates, assumed investment rate (for
variable payment annuities) and the frequency of payments will effect the level
of annuity payments. The assumed investment rate is 4.5% per year. We use this
rate to determine the first payment under Variable Payment Annuity Options I, J,
K, M and N.
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.
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.
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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.
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. 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 annuity payment 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.
Distributions made under this method are generally referred to as Life
Expectancy
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Distributions ("LEDs"). An LED program is available to participants in qualified
plans or IRAs. Requests to elect this program must be made in writing.
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.
Currently, transfers between Subaccounts are not available for amounts
allocated to any of the variable payment annuity options.
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. 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 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.
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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 you elect the Temporary Money Market Allocation Amendment 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 Phoenix-Goodwin 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 Phoenix-Goodwin
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 infrequent, 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 or because of
poor performance. In that event, we may seek to substitute or merge 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
We are 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 us. 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
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not meeting the diversification requirements, see "Diversification Standards."
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
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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.
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
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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.
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.
We represent that we intend 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.
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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 distribution amount
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.
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 be 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 surrender
charge; and (b) 50% of the Contract Value minus any contingent deferred
surrender 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 $1,000 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,
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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 includable 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 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
includable 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
26
<PAGE>
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 surrender charges (as
described under "Surrender 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
- --------------------------------------------------------------------------------
We are 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. We also are subject to the applicable
insurance laws of all the other states and jurisdictions in which it does an
insurance business.
State regulation of PHL Variable includes certain limitations on the
investments which may be made for its General Account and separate accounts,
including the Account. It does not include, however, any supervision over the
investment policies of the Account.
REPORTS
- --------------------------------------------------------------------------------
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. We are 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.
27
<PAGE>
TEXAS OPTIONAL RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contract, or apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public institutions of higher education,
death or total disability. Such proceeds, 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.
28
<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 Phoenix-Goodwin Money Market Subaccount, as
yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total
return of any Subaccount. For the Phoenix-Goodwin Multi-Sector Fixed Income
Subaccount, quotations of yield will be based on all investment income per unit
earned during a given 30-day period (including dividends and interest), less
expenses accrued during the period ("net investment income") and are computed by
dividing 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 DECEMBER 31, 1998(1,3,4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SINCE
INCEPTION DATE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix Research Enhanced Index Series 7/15/97 29.66% N/A N/A N/A 23.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series 5/1/90 25.98% 17.71% 11.54% N/A 9.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series 9/17/96 -5.96% N/A N/A N/A -18.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series 5/1/95 -22.46% 7.08% N/A N/A 10.16%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series 3/2/98 N/A N/A N/A N/A 24.81%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series 5/1/92 17.17% 14.17% 11.48% N/A 10.95%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 1/1/83 28.01% 19.34% 16.87% 18.42% 17.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 10/10/82 3.46% 3.64% 3.34% 3.84% 4.73%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 1/1/83 -5.66% 4.70% 5.28% 7.63% 8.38%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series 9/17/84 18.92% 15.11% 11.40% 12.38% 12.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series 1/29/96 42.48% N/A N/A N/A 22.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series 3/2/98 N/A N/A N/A N/A 9.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series 3/2/98 N/A N/A N/A N/A 19.09%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series 3/2/98 N/A N/A N/A N/A -12.40%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series 3/2/98 N/A N/A N/A N/A 20.37%
- ------------------------------------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund 8/22/97 19.73% N/A N/A N/A 8.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 3/28/94 5.98% N/A N/A N/A 5.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 3/1/94 1.10% N/A N/A N/A 7.81%
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2) 5/1/98 N/A N/A N/A N/A 2.34%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2) 11/28/88 4.45% 11.62% 9.70% 10.22% 10.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class 2(2) 9/15/96 -22.31% N/A N/A N/A -23.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2) 5/1/92 7.39% 13.54% 9.57% N/A 11.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2) 11/4/88 -0.59% 9.69% 9.21% 10.28% 9.99%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 2/1/99 N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap 5/1/95 14.54% 13.22% N/A N/A 19.56%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty 2/1/99 N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap 5/1/95 7.00% 25.52% N/A N/A 24.95%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average annual total return is the annual compound return that results
from holding an initial investment of $1,000 for the time period indicated.
Returns are net of investment management fees, daily and annual
administrative fees, and mortality and expense risk charges and deferred
sales charges of 6% and 2% deducted from redemptions after 1 and 5 years,
respectively. Surrender charges are based on the age of the deposit. The
investment return and principal value of the variable contract will
fluctuate so that the accumulated value, when redeemed, may be worth more or
less than the original cost.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(3) Performance data quoted represents the investment return of the appropriate
series adjusted for Retirement Planner's Edge charges had the subaccount
started on the inception date of the appropriate series.
(4) Rates are net of the investment management fee, daily administrative fees,
and mortality and expense risk charges of the Retirement Planner's Edge
subaccounts. Percent change does not include the effect of the surrender
charges or annual administrative fees.
29
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3,4)
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES 1983 1984 1985 1986 1987 1988 1989 1990
=============================================================================================================
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 31.06% 9.13% 33.05% 18.80% 5.44% 2.47% 34.30% 2.59%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 6.87% 8.69% 6.53% 5.03% 5.02% 5.95% 7.68% 6.71%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 4.53% 9.79% 18.93% 17.63% -0.32% 8.95% 6.74% 3.75%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series N/A N/A 25.57% 14.08% 10.99% 0.92% 18.24% 4.29%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 11.46% -9.50%
- -------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Templeton Stock-- Class 2(2) N/A N/A N/A N/A N/A N/A 12.81% -12.52%
- -------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3,4)
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES 1991 1992 1993 1994 1995 1996 1997 1998
=============================================================================================================
Phoenix Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A 29.86%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series 18.07% -14.05% 36.54% -1.33% 8.07% 17.00% 10.49% 26.16%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A -33.35% -5.78%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A 31.26% 20.37% -22.30%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Balanced Series N/A N/A 7.10% -4.19% 21.64% 9.02% 16.31% 17.37%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Growth Series 40.76% 8.76% 18.04% 0.06% 29.07% 11.01% 19.41% 28.22%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 4.51% 2.13% 1.44% 2.40% 4.23% 3.56% 3.72% 3.64%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 17.93% 8.54% 14.31% -6.80% 21.83% 10.85% 9.55% -5.49%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Allocation Series 27.52% 9.12% 9.47% -2.77% 16.57% 7.53% 19.07% 19.12%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Strategic Theme Series N/A N/A N/A N/A N/A N/A 15.54% 42.71%
- -------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
EAFE[registered trademark] Equity Index Fund N/A N/A N/A N/A N/A N/A N/A 19.92%
- -------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A 0.00% 7.26% 2.74% 7.07% 6.16%
- -------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A 0.00% 18.71% 12.71% 12.25% 1.27%
- -------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2) 25.67% 6.33% 24.12% -4.57% 20.57% 16.93% 13.67% 4.63%
- -------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A -30.38% -22.14%
- -------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2) N/A N/A 44.43% -4.21% 13.46% 21.57% 11.93% 7.56%
- -------------------------------------------------------------------------------------------------------------
Templeton Stock-- Class 2(2) 25.47% 5.38% 31.89% -3.82% 23.23% 20.43% 10.05% -0.42%
- -------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A 30.19% -2.83% 14.72%
- -------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A 44.57% 27.63% 7.18%
=============================================================================================================
</TABLE>
(1) Rates are net of the investment management fee, daily
administrative fees, and mortality and expense risk charges of the
Subaccounts. Percent change doesn't include the effect of the surrender
charges or the annual administrative fees.
(2) Because Class 2 shares were not offered until May 1, 1997
(November 10, 1998 for Mutual Shares Investments), performance shown for
periods prior to that date represent the historical results of Class 1
shares. Performance since that date reflect Class 2's high annual fees and
expenses resulting from its Rule 12b-1 plan. Maximum annual plan expenses
are 0.25%.
(3) Performance data quoted represents the investment return of the
appropriate series adjusted for Retirement Planner's Edge charges had the
subaccount started on the inception date of the appropriate series.
(4) Rates are net of the investment management fee, daily
administrative fees, and mortality and expense risk charges of the
Retirement Planner's Edge subaccounts. Percent change does not include the
effect of the surrender charges or annual administrative fees.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
30
<PAGE>
Current yield for the Phoenix-Goodwin Money Market Subaccount is based upon
the income earned by the Subaccount over a 7-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 Phoenix-Goodwin 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
Phoenix-Goodwin 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:.................... 2.302819
Value of the same account (excluding capital
changes) at the
end of the 7-day period:................................. 2.304141
Calculation:
Ending account value..................................... 2.304141
Less beginning account value............................. 2.302819
Net change in account value.............................. 0.001322
Base period return:
(adjusted change/beginning account value)................ 0.000574079
Current yield = return x (365/7) =......................... 2.99%
Effective yield = [(1 + return)(365/7)] -1 =............... 3.04%
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.
31
<PAGE>
APPENDIX B
THE GUARANTEED INTEREST ACCOUNT
- --------------------------------------------------------------------------------
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 3% 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.
On the last business day of each calendar week, 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 3% 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
3% 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").
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $2,000 OR 25% OF THE
CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE
SYSTEMATIC TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT
OF THE GIA OVER A MINIMUM 18-MONTH PERIOD. ALSO, THE TOTAL CONTRACT VALUE
ALLOCATED TO THE GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE
SUBACCOUNTS OF THE ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE
FOLLOWING ANNUALLY RENEWABLE SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33% YEAR THREE: 50% YEAR FOUR: 100%
32
<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,
we reserve 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.
33
<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
July 23, 1999
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus, dated July 23, 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-3
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. There have been no sales of these Contracts, during
the fiscal years ended December 31, 1996, 1997 and 1998; therefore PEPCO was not
paid anything for sales of these Contracts 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, 1998
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:....................... 2.302819
Value of the same account (excluding capital changes) at
the end of the 7-day period:............................... 2.304141
Calculation:
Ending account value.................................... 2.304141
Less beginning account value............................ 2.302819
Net change in account value............................. 0.001322
Base period return:
(adjusted change/beginning account value)............... 0.000574
Current yield = return x (365/7) =......................... 2.99%
Effective yield = [(1 + return)(365/7)] -1 =............... 3.04%
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.
B-2
<PAGE>
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 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
Maturity Date, the amounts held under a Contract on the Maturity Date will be
applied to provide a Variable Payment Life Expectancy Annuity (Option L) as
described below. Upon the death of the Annuitant and joint annuitant if any, the
remaining Contract Value will be paid in a lump sum to the Annuitant's
beneficiary.
With the exception of the Fixed Payment Options and Option L--Variable
Payment Life Expectancy Annuity, 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 payment rate. The Contract
is issued with guaranteed minimum annuity payment rates, however, if the current
rate is higher, we'll apply the higher rate. The payment rate differs according
to the payment option selected and the age of the Annuitant. The annuity payment
rate is applied and will determine all payments for the fixed annuity payment
options and the first payment for the variable annuity payment options. 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 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 Variable Payment Life Expectancy Annuity, (see "Option L"
below), you may, by written request received by VPMO on or before the Maturity
Date, elect any of the other annuity payment options described below.
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 payment rates, assumed investment rate (for
variable payment annuities) and the frequency of payments will effect the level
of annuity payments. The assumed investment rate is 4.5% per year. We use this
rate to determine the first payment under Variable Payment Annuity Options I, J,
K, M and N.
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.
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
the Fixed Payment Annuity Option selected. This computation determines the
amount of PHL Variable Insurance Company's fixed monthly annuity payment to the
Annuitant.
The mortality table used as a basis for the applicable annuity purchase
rates is the a-49 Individual Annuity Mortality Table projected to 1985 at
Projection Scale B. An interest rate of 3-3/8% for 5- and 10-year certain
periods under Option A, for the 10-year period under Option F and for Option E;
an interest rate of 3-1/4 for the 20-year certain period under Options A and F;
an interest rate of 3-1/2% under Option B and D. Under Options G and H the
guaranteed interest rate is 3%. More favorable rates may be available on the
Maturity Date or other dates elected for commencement of fixed annuity payments.
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
B-3
<PAGE>
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 pursued a number of strategies to address the issue, including:
[diamond] upgrading systems with compliant versions;
[diamond] developing or acquiring new systems to replace those that are
obsolete;
[diamond] repairing existing systems by converting code or hardware; and
[diamond] preparing contingency plans to address difficulties that may arise.
Based on current assessments, those computer systems deemed critical to
customer service and business continuity are compliant. Testing will continue
through 1999. Additionally, Phoenix has obtained Year 2000 assurances from our
business partners.
THE BOTTOM LINE IS THAT PHOENIX WILL BE BOTH READY AND TESTED FOR THE NEW
MILLENNIUM.
More details about our Year 2000 program are available on our Web site,
www.phl.com.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of PHL Variable Insurance Company have been audited
by PricewaterhouseCoopers LLP, independent accountants, whose report is set
forth herein, and the financial statements have been included upon the authority
of said firm as experts in accounting and auditing. PricewaterhouseCoopers 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
THE SUBACCOUNTS COMMENCED OPERATIONS AS OF THE
DATE OF THIS PROSPECTUS; THEREFORE, DATA FOR THESE
SUBACCOUNTS IS NOT YET AVAILABLE.
B-5
<PAGE>
PHL VARIABLE
INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
B-6
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Balance Sheets at March 31, 1999 (unaudited) and December 31, 1998...........B-8
Statement of Income, Comprehensive Income and Equity for the
Three Months Ended March 31, 1999 and 1998 (unaudited)......................B-9
Statement of Cash Flows for the Three Months Ended
March 31, 1999 and 1998 (unaudited) .......................................B-10
Notes to Condensed Financial Statements (unaudited) ........................B-11
B-7
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 3,555 $ 3,840
Available-for-sale debt securities, at fair value 40,910 36,480
Other invested assets 1,369 1,313
------------- -------------
Total investments 45,834 41,633
Cash and cash equivalents 19,392 7,320
Accrued investment income 677 511
Deferred policy acquisition costs 40,122 36,686
Deferred income taxes 2,192 2,178
Deferred and uncollected premium 3,095 1,872
Other assets 2,122 1,860
Goodwill 527 553
Separate account assets 854,232 782,496
------------- -------------
Total assets $ 968,193 $ 875,109
============= =============
LIABILITIES
Contractholders' funds at interest $ 42,939 $ 39,690
Reserves for future policy benefits 4,936 2,736
Other liabilities 9,021 6,077
Separate account liabilities 854,232 782,496
------------- -------------
Total liabilities 911,128 830,999
------------- -------------
EQUITY
Common stock, $5,000 par value, 1,000 shares
authorized, 500 shares issued and outstanding 2,500 2,500
Additional paid-in-capital 47,864 35,864
Retained earnings 6,692 5,539
Accumulated other comprehensive income 9 207
------------- -------------
Total equity 57,065 44,110
------------- -------------
Total liabilities and equity $ 968,193 $ 875,109
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
B-8
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
REVENUES
Premiums $ 832 $ 574
Insurance and investment product fees 4,253 2,161
Net investment income 779 567
Net realized investment (losses) gains (5) 14
------------- -------------
Total revenues 5,859 3,316
------------- -------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits and payments 908 575
Policy acquisition expenses 1,660 870
Other operating expenses 1,517 288
------------- -------------
Total benefits, losses and expenses 4,085 1,733
------------- -------------
INCOME BEFORE INCOME TAXES 1,774 1,583
Income tax expense 622 547
------------- -------------
NET INCOME 1,152 1,036
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX
Unrealized (losses) gains on securities
arising during period (202) 7
Reclassification adjustment for
losses (gains) included in net income 5 (14)
------------- -------------
Total other comprehensive income (loss) (197) (7)
------------- -------------
COMPREHENSIVE INCOME 955 1,029
Capital contribution 12,000 12,000
------------- -------------
NET INCREASE IN EQUITY 12,955 13,029
EQUITY, BEGINNING OF PERIOD 44,110 22,794
------------- -------------
EQUITY, END OF PERIOD $ 57,065 $ 35,823
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
B-9
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 1,152 $ 1,036
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATIONS
Net realized investment losses (gains) 5 (14)
Amortization 26 27
Deferred income taxes (14) (692)
Increase in accrued investment income (166) (282)
Increase in deferred policy acquisition costs (3,196) (2,651)
Decrease in other assets/liabilities 3,730 4,791
------------- -------------
Net cash provided by operating activities 1,537 2,215
------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales, maturities or repayments of
available-for-sale debt securities 1,986 6,508
Proceeds from maturities or repayments of
held-to-maturity debt securities 342 352
Purchase of available-for-sale debt securities (6,972) (17,090)
Increase in policy loans (70)
------------- -------------
Net cash used for investing activities (4,714) (10,230)
------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contribution from parent 12,000 12,000
Increase in contractholder funds 3,249 776
------------- -------------
Net cash provided by financing activities 15,249 12,776
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,072 4,761
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,320 1,714
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,392 $ 6,475
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 686 $ 0
</TABLE>
The accompanying notes are an integral part of these statements.
B-10
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The condensed unaudited financial statements include the accounts of PHL
Variable Insurance Company. These condensed financial statements have been
prepared in accordance with generally accepted accounting principles (GAAP). The
information furnished includes adjustments and accruals consisting only of
normal, recurring accrual adjustments which are, in the opinion of management,
necessary for a fair presentation of results for the interim periods.
The results of operations for any interim period are not necessarily indicative
of results for the full year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have
been condensed or omitted. Certain reclassifications have been made to prior
year amounts to conform with current year presentation. The March 31, 1999
Condensed Financial Statements should be read in conjunction with the
accompanying December 31, 1998 Financial Statements.
B-11
<PAGE>
PHL VARIABLE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1998
B-12
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants...........................................B-14
Balance Sheet at December 31, 1998 and 1997 ................................B-15
Statement of Income, Comprehensive Income and Equity for the Years Ended
December 31, 1998, 1997 and 1996...........................................B-16
Statement of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996...........................................B-17
Notes to Financial Statements........................................B-18 - B-28
B-13
<PAGE>
[PricewaterhouseCoopers Logo and Address]
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder of
PHL Variable Insurance Company
In our opinion, the accompanying balance sheet and the related statements of
income, comprehensive income and equity and of cash flows present fairly, in all
material respects, the financial position of PHL Variable Insurance Company at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
February 11, 1999
B-14
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
BALANCE SHEET
- --------------------------------------------------------------------------------
DECEMBER 31,
1998 1997
(IN THOUSANDS)
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 3,840 $ 3,144
Available-for-sale debt securities, at fair value 36,480 21,859
Other invested assets 1,313 1,024
-------- --------
Total investments 41,633 26,027
Cash and cash equivalents 7,320 1,714
Accrued investment income 511 257
Deferred policy acquisition costs 36,686 21,010
Deferred income taxes 2,178 1,259
Deferred and uncollected premium 1,872 122
Other assets 1,860 929
Goodwill 553 660
Separate account assets 782,496 376,046
-------- --------
Total assets $875,109 $428,024
======== ========
LIABILITIES
Contractholders' funds at interest $ 39,690 $ 27,563
Reserves for future policy benefits 2,736 104
Other liabilities 6,077 1,517
Separate account liabilities 782,496 376,046
-------- --------
Total liabilities 830,999 405,230
-------- --------
EQUITY
Common stock, $5,000 par value, 1,000
shares authorized, 500 shares issued and outstanding 2,500 2,500
Additional paid-in-capital 35,864 18,864
Retained earnings 5,539 1,349
Accumulated other comprehensive income 207 81
-------- --------
Total equity 44,110 22,794
-------- --------
Total liabilities and equity $875,109 $428,024
======== ========
The accompanying notes are an integral part of these statements.
B-15
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN THOUSANDS)
REVENUES
Premiums $ 6,280 $ 230
Insurance and investment product fees 10,998 5,050 $ 1,491
Net investment income 2,458 1,543 1,097
Net realized investment gains (losses) 40 (18)
------- ------- -------
Total revenues 19,776 6,823 2,570
------- ------- -------
BENEFITS, LOSSES AND EXPENSES
Policy benefits and payments 3,964 1,092 397
Policy acquisition expenses 4,006 1,310 578
Other operating expenses 5,359 2,915 1,124
------- ------- -------
Total benefits, losses and expenses 13,329 5,317 2,099
------- ------- -------
INCOME BEFORE INCOME TAXES 6,447 1,506 471
Income taxes 2,257 553 171
------- ------- -------
NET INCOME 4,190 953 300
------- ------- -------
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX
Unrealized gains (losses) on securities
arising during period 166 37 (195)
Reclassification adjustment for
(gains) losses included in net income (40) 18
------- ------- -------
Total other comprehensive income (loss) 126 37 (177)
------- ------- -------
COMPREHENSIVE INCOME 4,316 990 123
Capital contribution 17,000 5,000
------- ------- -------
NET INCREASE IN EQUITY 21,316 5,990 123
EQUITY, BEGINNING OF YEAR 22,794 16,804 16,681
------- ------- -------
EQUITY, END OF YEAR $44,110 $22,794 $16,804
======= ======= =======
The accompanying notes are an integral part of these statements.
B-16
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 4,190 $ 953 $ 300
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH USED FOR OPERATIONS
Net realized investment (gains) losses (40) 18
Amortization 107 96 106
Deferred income taxes (987) (916) (319)
Increase in accrued investment income (254) (49) (43)
Increase in deferred policy acquisition costs (15,815) (11,453) (8,496)
(Increase) decrease in other assets/liabilities 1,881 (973) 116
Other, net (209) (131)
-------- -------- --------
Net cash used for operating activities (10,918) (12,551) (8,449)
-------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales, maturities or repayments of
available-for-sale debt securities 14,133 4,665 3,219
Proceeds from sales, maturities or repayments of
held-to-maturity debt securities 634 212
Purchase of available-for-sale debt securities (28,360) (11,003) (7,638)
Purchase of held-to-maturity debt securities (1,216) (1,529) (1,827)
Increase in policy loans (249)
Investment in separate accounts (1,000)
Other, net (177)
-------- -------- --------
Net cash used for investing activities (15,235) (8,655) (6,246)
-------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contributions from parent 17,000 5,000
Increase in contractholder funds 14,759 16,098 8,072
-------- -------- --------
Net cash provided by financing activities 31,759 21,098 8,072
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,606 (108) (6,623)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,714 1,822 8,445
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,320 $ 1,714 $ 1,822
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 1,711 $ 2,044 $ 569
</TABLE>
The accompanying notes are an integral part of these statements.
B-17
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
PHL Variable Insurance Company offers variable annuity and nonparticipating
life insurance products in the United States. PHL Variable is a wholly-owned
subsidiary of PM Holdings, Inc. PM Holdings is a wholly-owned subsidiary of
Phoenix Home Life Mutual Insurance Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with generally
accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates used in determining contractholder
liabilities, income taxes and valuation allowances for investment assets are
discussed throughout the Notes to Financial Statements. Certain
reclassifications have been made to the 1997 and 1996 amounts to conform
with the 1998 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds and asset-backed securities
including collateralized mortgage obligations. PHL Variable classifies its
debt securities as either held-to-maturity or available-for-sale
investments. Debt securities held-to-maturity consist of private placement
bonds reported at amortized cost, net of impairments, that management
intends and has the ability to hold until maturity. Debt securities
available-for-sale are reported at fair value with unrealized gains or
losses included in equity and consist of public bonds that management may
not hold until maturity. Debt securities are considered impaired when a
decline in value is considered to be other than temporary.
Short-term investments are carried at amortized cost, which approximates
fair value.
Realized investment gains and losses, other than those related to separate
accounts for which PHL Variable does not bear the investment risk, are
determined by the specific identification method and reported as a component
of revenue. A realized investment loss is recorded when an investment
valuation reserve is determined. Valuation reserves are netted against the
asset categories to which they apply and changes in the valuation reserves
are included in realized investment gains and losses. Unrealized investment
gains and losses on debt securities available-for-sale are included as a
separate component of equity, net of deferred income taxes and deferred
policy acquisition costs.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, money market instruments
and short-term investments purchased with a maturity of less than three
months.
B-18
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of revenues, are deferred. Deferred
policy acquisition costs are subject to recoverability testing at the time
of policy issue and loss recognition at the end of each accounting period.
Deferred policy acquisition costs are amortized in proportion to total
estimated gross profits over the expected average life of the contracts
using estimated gross margins arising principally from investment, mortality
and expense margins and surrender charges based on historical and
anticipated experience, updated at the end of each accounting period.
GOODWILL
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. The costs are amortized on the straight-line
method over a period of 10 years, the expected period of benefit from the
acquisition. Management periodically reevaluates the propriety of the
carrying value of goodwill by comparing expected future undiscounted cash
flows to the carrying value. Such analyses are performed at least annually
or more frequently if warranted by events or circumstances affecting PHL
Variable's business. Goodwill is considered impaired if its carrying value
exceeds its expected future undiscounted cash flows. At this time,
management believes that no impairment of the remaining goodwill asset has
occurred and that no reduction of the estimated useful lives is warranted.
SEPARATE ACCOUNTS
Separate account assets and liabilities are funds maintained in accounts to
meet specific investment objectives of contractholders who can either choose
to bear the full investment risk or can choose guaranteed investment
earnings subject to certain conditions.
For contractholders who bear the investment risk, investment income and
investment gains and losses accrue directly to such contractholders. The
assets of each account are legally segregated and are not subject to claims
that arise out of any other business of PHL Variable. The assets and
liabilities are carried at market value. Net investment income and realized
investment gains and losses for these accounts are excluded from revenues,
and the related liability increases are excluded from benefits and expenses.
Amounts assessed to the contractholders for management services are included
in PHL Variable's revenues.
For Market Value Adjusted (MVA) separate accounts, contractholders receive
interest at a guaranteed rate if the account is held until maturity. In
these separate accounts, appreciation or depreciation of assets,
undistributed net investment income and investment or other sundry expenses
is reflected as net income or loss in PHL Variable's interest in the
separate accounts. Contractholders receive a distribution of interest at a
guaranteed interest rate on this annuity option provided funds are not
withdrawn from the separate account before the end of their elected
guarantee period.
B-19
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTRACTHOLDERS' FUNDS AT INTEREST
Contractholder deposit funds consist of deposits received from customers and
investment earnings on their fund balances, less administrative charges.
INVESTMENT PRODUCT FEES
Revenues for investment-related products consist of net investment income
and contract charges assessed against the fund values. Related benefit
expenses primarily consist of net investment income credited to the fund
values after deduction for investment and risk charges.
POLICY LIABILITIES AND ACCRUALS
Reserves for future policy benefits are liabilities for life products. Such
liabilities are established in amounts adequate to meet the estimated future
obligations of policies in force. Policy liabilities for traditional life
insurance are computed using the net level premium method on the basis of
actuarial assumptions as to assumed rates of interest, mortality, morbidity
and withdrawals. Liabilities for universal life policies include deposits
received from customers and investment earnings on their fund balances, less
administrative charges. Universal life fund balances are also assessed
mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
amounts estimated to cover incurred losses. These liabilities, included in
other liabilities, are based on individual case estimates for reported
losses and estimates of unreported losses based on past experience.
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Term life insurance premiums are recorded as premium revenue on a pro rata
basis over each policy year. Benefits, losses and related expenses are
matched with premiums over the related contract periods. Revenues for
variable annuity products consist of net investment income and contract
charges assessed against the fund values. Related benefit expenses primarily
consist of net investment income credited to the fund values after deduction
for investment and risk charges. Revenues for universal life products
consist of net investment income and mortality, administration and surrender
charges assessed against the fund values during the period. Related benefit
expenses include universal life benefit claims in excess of fund values and
net investment income credited to universal life fund values.
INCOME TAXES
For the tax year ended December 31, 1998, PHL Variable will file a separate
federal income tax return. PHL Variable filed separate federal income tax
returns for the years ended December 31, 1997 and 1996.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities, accruals and surrenders, policy acquisition expenses and
unrealized gains or losses on investments.
B-20
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPLOYEE BENEFIT PLANS
Phoenix sponsors pension and savings plans for its employees and agents, and
those of its subsidiaries. The multi-employer qualified plans comply with
requirements established by the Employee Retirement Income Security Act of
1974 (ERISA) and excess benefit plans provide for that portion of pension
obligations which is in excess of amounts permitted by ERISA. Phoenix also
provides certain health care and life insurance benefits for active and
retired employees. PHL Variable incurs applicable employee benefit expenses
through the process of cost allocation by Phoenix.
Applicable information regarding the actuarial present value of vested and
nonvested accumulated plan benefits, and the net assets of the plans
available for benefits is omitted, as the information is not separately
calculated for PHL Variable's participation in the plans. The amount of such
allocated benefits is immaterial to the financial statements. However, with
respect to the Phoenix Home Life Mutual Insurance Company employee pension
plan, the total assets of the plan exceeded the actuarial present value of
vested benefits at January 1, 1998, the date of the most recent actuarial
valuation.
RECENT ACCOUNTING PRONOUNCEMENTS
Phoenix adopted Statement of Financial Accounting Standard (SFAS) No. 130,
"Reporting Comprehensive Income," as of January 1, 1998. This statement
establishes standards for the reporting and display of comprehensive income
and its components in a full set of financial statements. This statement
defines the components of comprehensive income as those items that were
previously reported only as components of equity and were excluded from net
income.
3. INVESTMENTS
Information pertaining to PHL Variable's investments, net investment income
and realized and unrealized investment gains and losses follows:
DEBT SECURITIES
The amortized cost and fair value of investments in debt securities as of
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
Corporate securities $ 3,840 $ 27 $ (126) $ 3,741
======= ======= ======== =======
AVAILABLE-FOR-SALE:
U.S. government and agency bonds $ 6,515 $ 290 $ (9) $ 6,796
State and political subdivision bonds 9,485 126 (21) 9,590
Corporate securities 13,605 187 (81) 13,711
Mortgage-backed securities 6,308 80 (5) 6,383
------- ------- -------- -------
Total $35,913 $ 683 $ (116) $36,480
======= ======= ======== =======
</TABLE>
B-21
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt securities as of
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
Corporate securities $ 3,144 $ 13 $ (187) $ 2,970
======= ======= ======= =======
AVAILABLE-FOR-SALE:
U.S. government and agency bonds $ 5,997 $ 190 $ 6,187
State and political subdivision bonds 3,020 12 3,032
Corporate securities 3,480 4 $ (19) 3,465
Mortgage-backed securities 9,127 48 9,175
------- ------- ------- -------
Total $21,624 $ 254 $ (19) $21,859
======= ======= ======= =======
</TABLE>
The amortized cost and fair value of debt securities, by contractual
maturity, as of December 31, 1998 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
PHL Variable may have the right to put or sell the obligations back to the
issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 281 $ 274 $ 5,550 $ 5,653
Due after one year through five years 3,559 3,467 13,811 13,817
Due after five years through ten years 1,946 2,143
Due after ten years 8,298 8,484
Mortgage-backed securities 6,308 6,383
------- ------- ------- -------
Total $ 3,840 $ 3,741 $35,913 $36,480
======= ======= ======= =======
</TABLE>
B-22
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $2,142 $1,301 $ 949
Policy loans 1
Other invested assets 9
Short-term investments 344 269 167
------ ------ ------
2,496 1,570 1,116
Less: investment expenses 38 27 19
------ ------ ------
Net investment income $2,458 $1,543 $1,097
====== ====== ======
</TABLE>
INVESTMENT GAINS AND LOSSES
Unrealized gains and losses on investments carried at fair value at
December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized investment gains (losses):
Debt securities $ 333 $ 87 $ (233)
Deferred policy acquisition costs (139) (30) (40)
Deferred income taxes (benefits) 68 20 (96)
----- ----- ------
Net unrealized investment gains (losses) $ 126 $ 37 $ (177)
===== ===== ======
</TABLE>
The proceeds from sales of available-for-sale debt securities for the years
ended December 31, 1998, 1997 and 1996 were $10.0 million, $.2 million and
$3.1 million, respectively. The gross realized gains or losses associated
with these sales were $37,654, ($304) and ($18,044) in 1998, 1997 and 1996,
respectively.
4. GOODWILL
PHL Variable, formerly Dreyfus Consumer Life Insurance Company, was acquired
by way of a stock purchase agreement on May 31, 1994 and was accounted for
under the purchase method of accounting. The assets and liabilities were
recorded at fair value as of the date of acquisition and the goodwill of
$1.02 million was pushed-down to PHL Variable from PM Holdings.
Goodwill as of December 31, was as follows:
1998 1997
(IN THOUSANDS)
Goodwill $1,020 $1,020
Accumulated amortization (467) (360)
------ ------
Total $ 553 $ 660
====== ======
B-23
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. INCOME TAXES
A summary of income taxes (benefits) in the Statement of Income,
Comprehensive Income and Equity for the year ended December 31, is as
follows:
1998 1997 1996
(IN THOUSANDS)
Income taxes:
Current $3,244 $1,469 $ 490
Deferred (987) (916) (319)
------ ------ -----
Total $2,257 $ 553 $ 171
====== ====== =====
The income taxes attributable to the results of operations are different
than the amounts determined by multiplying income before taxes by the
statutory income tax rate. The sources of the difference and the tax effects
of each for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income tax expense (benefit) at statutory rate $ 2,256 35% $ 527 35% $ 165 35%
Dividend received deduction and 1 0% (4) (1%)
tax-exempt interest
State income tax expense 6 1%
Other, net 1 0% 25 2% 4 1%
------- ------ ------
Income taxes (benefit) $ 2,257 35% $ 553 37% $ 171 36%
======= ====== ======
</TABLE>
The deferred income tax asset (liability) represents the tax effects of
temporary differences. The components were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $(10,953) $ (6,770)
Surrender charges 11,886 6,291
Investments (72) (51)
Future policyholder benefits 1,374 1,793
Other 54 39
-------- --------
2,289 1,302
Net unrealized investment losses (111) (43)
-------- --------
Deferred tax asset, net $ 2,178 $ 1,259
======== ========
</TABLE>
Gross deferred income tax assets totaled $13.3 million and $8.1 million at
December 31, 1998 and 1997, respectively. Gross deferred income tax
liabilities totaled $11.1 million and $6.9 million at December 31, 1998 and
1997, respectively. It is management's assessment, based on PHL Variable's
earnings and projected future taxable income, that it is more likely than
not that the deferred tax assets at December 31, 1998 and 1997, will be
realized.
B-24
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Internal Revenue Service is currently examining PHL Variable's tax
return for 1995, which was included in Phoenix's consolidated return.
Subsequent tax years were filed on a separate company basis and are not
currently under examination. Management does not believe that there will be
a material adverse effect on the financial statements as a result of pending
tax matters.
6. COMPREHENSIVE INCOME
The components of, and related tax effects for, other comprehensive income
for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED GAINS (LOSSES) ON SECURITIES
AVAILABLE-FOR-SALE ARISING DURING PERIOD:
Before-tax amount $ 256 $ 57 $(299)
Tax expense (benefit) 90 20 (104)
----- ----- -----
Net-of-tax amount 166 37 (195)
----- ----- -----
RECLASSIFICATION ADJUSTMENT FOR GAINS OR LOSSES
REALIZED IN NET INCOME:
Before-tax amount (62) 28
Tax expense (benefit) (22) 10
----- ----- -----
Net-of-tax amount (40) 18
----- ----- -----
NET UNREALIZED GAINS (LOSSES) ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount 194 57 (271)
Tax expense (benefit) 68 20 (94)
----- ----- -----
Net-of-tax amount $ 126 $ 37 $(177)
===== ===== =====
</TABLE>
The following table summarizes accumulated other comprehensive income
balances:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
(IN THOUSANDS)
<S> <C> <C>
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 81 $ 44
Change during period 126 37
---- ----
Balance, end of year $207 $ 81
==== ====
</TABLE>
B-25
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. REINSURANCE
PHL Variable entered into a reinsurance treaty in 1996 that cedes death
benefits to a reinsurer in excess of account balances on variable contracts.
Premiums paid during 1998, 1997 and 1996 were $668 thousand, $259 thousand
and $49 thousand, respectively, less claims of $13 thousand and $1 thousand
in 1998 and 1997, respectively. There were no claims for 1996.
In connection with PHL Variable's life insurance products, automatic
treaties have been established with four reinsurers and their subsidiaries,
covering 90% of the net amount at risk, on a first dollar basis. As of
December 31, 1998, PHL Variable had approximately $271.6 million of net
insurance in force, including $2.7 billion of direct in force less $2.4
billion of reinsurance ceded. As of December 31, 1997, PHL Variable had
approximately $9.1 million of net insurance in force, including $80.7
million of direct in force less $71.6 million of reinsurance ceded. No
claims were recovered in 1998 or 1997.
For PHL Variable's life insurance products, a stop loss treaty between
Phoenix and PHL Variable was introduced in 1998. The reinsurance recoverable
as of December 31, 1998 was $455 thousand. There were no recoverables as of
December 31, 1997.
8. RELATED PARTY TRANSACTIONS
Phoenix and its affiliates provide services and facilities to PHL Variable
and are reimbursed through a cost allocation process. Investment related
expenses are allocated to PHL Variable from PM Holdings.
9. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
1998 1997
(IN THOUSANDS)
Balance at beginning of year $21,010 $ 9,557
Acquisition expense deferred 19,791 12,664
Amortized to expense during the year (3,976) (1,181)
Adjustment to equity during the year (139) (30)
------- -------
Balance at end of year $36,686 $21,010
======= =======
10. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure requirements
(insurance contracts are excluded) are carried in the financial statements
at amounts that approximate fair value. The fair values presented for
certain financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of
fair value are based on discounted cash flow analyses that utilize current
interest rates for similar financial instruments which have comparable terms
and credit quality.
B-26
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
INVESTMENT CONTRACTS
Variable annuity contracts have guarantees of less than one year for which
interest credited is closely tied to rates earned on owned assets. For such
liabilities, fair value is assumed to be equal to the stated liability
balances. The contract liability balances for December 31, 1998 and 1997
were $39.7 million and $27.6 million, respectively.
11. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries are required to file annual statements with state
regulatory authorities prepared on an accounting basis prescribed or
permitted by such authorities. As of December 31, 1998, there were no
material practices not prescribed by the Insurance Department of the State
of Connecticut. Statutory equity differs from stockholder's equity reported
in accordance with GAAP for life insurance companies primarily because
policy acquisition costs are expensed when incurred, investment reserves are
based on different assumptions, postretirement benefit costs are based on
different assumptions and reflect a different method of adoption, life
insurance reserves are based on different assumptions and income tax expense
reflects only taxes paid or currently payable.
The following reconciles the statutory net income of PHL Variable as
reported to regulatory authorities to the net income as reported in these
financial statements for the year ended December 31:
1998 1997 1996
(IN THOUSANDS)
Statutory net income $ 1,542 $ 937 $ 1,073
Deferred policy acquisition costs 15,815 11,483 8,536
Future policy benefits (14,056) (12,271) (9,515)
Deferred income taxes 987 899 310
Other, net (98) (95) (104)
-------- -------- --------
Net income, as reported $ 4,190 $ 953 $ 300
======== ======== ========
B-27
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of PHL Variable as reported to regulatory authorities to equity as
reported in these financial statements:
DECEMBER 31,
1998 1997
(IN THOUSANDS)
Statutory surplus and AVR $ 41,268 $ 22,727
Deferred policy acquisition costs, net 36,686 21,010
Future policy benefits (37,155) (23,098)
Investment valuation allowances 568 125
Deferred income taxes 2,178 1,259
Other, net 565 771
-------- --------
Equity, as reported $ 44,110 $ 22,794
======== ========
The Connecticut Insurance Holding Act limits the maximum amount of annual
dividends or other distributions available to stockholders of Connecticut
insurance companies without prior approval of the Insurance Commissioner.
Under current law, the maximum dividend distribution that may be made by PHL
Variable during 1998 without prior approval is subject to restrictions
relating to statutory surplus.
B-28
<PAGE>
PART C
OTHER INFORMATION
Registrant hereby represents that, in imposing certain restrictions upon
withdrawals from some annuity contracts, it is relying upon the no-action letter
given to the American Council of Life Insurance (publicly available November 28,
1988) (Ref. No. 1P-6-88) regarding compliance with Section 403(b) (ii) of the
Internal Revenue Code and that it is in compliance with the conditions for
reliance upon that letter set forth therein.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The financial statements are included in Part B and 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 Form N-4 (File No. 33-87376)
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 (File No. 33-87376)
dated July 20, 1995.
(4) (a) Form of Variable Annuity Contract (Phoenix
Retirement Planner's Edge) filed via Edgar herewith.
(5) (a) Form of Application (Phoenix Retirement Planner's
Edge) filed via Edgar herewith.
(6) (a) Charter of PHL Variable Insurance Company is
incorporated by reference to Registrant's Registration
Statement (File No. 33-87376) 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 (File No. 33-87376) on Form N-4 dated
December 14, 1994.
(7) Not Applicable.
(8) Not Applicable.
(9) Written Opinion of Edwin L. Kerr, Esq., filed via Edgar
herewith.
(10) (a) Written Consent of Edwin L. Kerr, Esq. filed via Edgar
herewith.
(b) Written Consent of PricewaterhouseCoopers LLP filed via
Edgar herewith.
(11) Not Applicable.
(12) Not Applicable.
C-1
<PAGE>
(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 (File No. 33-87376) 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 (File No. 33-87376) 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 (File No. 33-87376) filed via
Edgar on April 30, 1998.
ITEM 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR
<S> <C> <C>
Director and Executive
Richard H. Booth* Vice President
Robert G. Chipkin* Director
Director, Chairman and
Robert W. Fiondella* President
Director and Senior
Joseph E. Kelleher** Vice President
Director and Executive
Philip R. McLoughlin* Vice President
Director, Executive Vice President
David W. Searfoss* and Chief Financial Officer
Director and Senior Vice
Simon Y. Tan* President
Director and Executive
Dona D. Young* Vice President
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
06102-5056.
** 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
C-2
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of May 18, 1999, no Contracts have been sold.
ITEM 28. INDEMNIFICATION
Section 5.9 of the Connecticut Corporation Law & Practice, provides that a
corporation may indemnify any director or officer of the corporation made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article III Section 14 of the By-laws of the Company provides: "Each
Director, officer or employee of the Company, and his heirs, executors or
administrators, shall be indemnified or reimbursed by the Company for all
expenses necessarily incurred by him in connection with the defense or
reasonable settlement of any action, suit or proceeding in which he is made a
party by reason of his being or having been a Director, officer or employee of
the Company, or of any other company which he was serving as a Director or
officer at the request of the Company, except in relation to matters as to which
such Director, officer or employee is finally adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of his
duties as such Director, officer or employee. The foregoing right of
indemnification or reimbursement shall not be exclusive of any other rights to
which he may be entitled under any statute, by-law, agreement, vote of
shareholders or otherwise."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or 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 Executive Officers of PEPCO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Michael E. Haylon*** Director
Philip R. McLoughlin* Director, President and Chairman
Director, Senior Vice President, Chief Financial Officer and
William R. Moyer** Treasurer
John F. Sharry* Executive Vice President, Retail Distribution
Leonard J. Saltiel** Senior Vice President, Operations and Service
Nancy G. Curtiss*** Vice President and Treasurer, Fund Accounting
Nancy J. Engberg* 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.
C-3
<PAGE>
(c) Compensation received by PEPCO during Registrant's last fiscal
year:
<TABLE>
<CAPTION>
NAME OF
PRINCIPAL NET UNDERWRITING COMPENSATION BROKERAGE
UNDERWRITER DISCOUNTS AND COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
- ----------- ------------------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
PEPCO $12,611,281 0 0 0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 are maintained at the administrative
offices of PHL Variable Insurance Company located at 100 Bright Meadow
Boulevard, Enfield, Connecticut 06083-2200 and 101 Munson Street, Greenfield,
Massachusetts 01302-0810.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
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 has duly caused this Pre-Effective Amendment No. 1 to
its Registration Statement to be signed on its behalf, in the City of Hartford
and State of Connecticut on this 23rd day of July, 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 Pre-Effective Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated with PHL Variable Insurance Company on this 23rd day of
July, 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 were previously filed.
S-1
Exhibit 4(a)
Form of Variable Annuity Contract
<PAGE>
[LOGO] PHOENIX
- --------------------------------------------------------------------------------
Primary Annuitant: John Doe 35 Male :Age and Sex
Contract Number: 13000000 December 12, 1994 :Contract Date
Initial Premium: $10,000.00 July 1, 2029 :Maturity Date
Dear Contract Owner:
Thank You for purchasing this annuity contract from PHL Variable Insurance
Company. We agree to pay the benefits of this contract in accordance with
its provisions.
IT IS IMPORTANT TO US THAT YOU ARE SATISFIED WITH YOUR CONTRACT AND THAT IT
MEETS YOUR FINANCIAL GOALS. IF FOR ANY REASON YOU ARE NOT SATISFIED WITH
THIS CONTRACT, YOU MAY RETURN IT WITHIN 10 DAYS AFTER WE DELIVER IT TO YOU
FOR A REFUND OF THE CONTRACT VALUE PLUS ANY CHARGES MADE UNDER THIS
CONTRACT. YOU MAY RETURN IT TO EITHER THE AGENT THROUGH WHOM IT WAS
PURCHASED OR TO US AT THE FOLLOWING ADDRESS:
PHL Variable Insurance Company
Variable Products Mail Operations
P.O. Box 8027
Boston, MA 02266-8027
Telephone (800) 447-4312
WE WILL DETERMINE THE CONTRACT VALUE AS OF THE NEAREST VALUATION DATE
FOLLOWING RECEIPT OF THE RETURNED CONTRACT AT OUR VARIABLE PRODUCTS MAIL
OPERATIONS.
This contract provides for a series of annuity payments. The annuity
payments will be based on the Contract Value on the Maturity Date, the
annuity purchase rates stated herein, and the investment experience of the
Subaccounts during the annuity payout period. The Contract Value will
depend on the rate of interest credited to the Guaranteed Interest Account
and the investment experience of the Subaccounts.
Signed for PHL Variable Insurance Company at its Home Office, One American
Row, Hartford, Connecticut 06102-5056.
Sincerely yours,
PHL VARIABLE INSURANCE COMPANY
/s/Nancy Engberg /s/Robert W. Fiondella
Secretary Chief Executive Officer
Registrar
FLEXIBLE PREMIUM VARIABLE ACCUMULATION DEFERRED ANNUITY
ALL VALUES AND BENEFITS BASED ON THE INVESTMENT EXPERIENCE OF THE
SUBACCOUNTS OF THE SEPARATE ACCOUNT MAY INCREASE OR DECREASE AND ARE
VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. SEE PART 7 FOR A
DESCRIPTION OF HOW THE CONTRACT VALUES ARE DETERMINED, AND PART 9 FOR A
DESCRIPTION OF HOW THE DEATH BENEFITS ARE DETERMINED.
NOT ELIGIBLE FOR ANNUAL DIVIDENDS
D603
<PAGE>
SCHEDULE PAGE
Primary Annuitant: [John Doe] [35 Male] :Age and Sex
Contract Number: [13000000] [December 12, 1994] :Contract Date
Initial Premium: [$10,000.00] [July 1, 2029] :Maturity Date
Contingent Annuitant: [None]
Owner: [John Doe]
Beneficiaries: [Jane Doe]
Subsequent Premiums: [Flexible]
Payment Intervals: [Flexible]
SUBACCOUNT FEES
Mortality and Expense Risk Fee: [.00377% (Based on an annual rate of 1.275%)]
Daily Administrative Fee: [.00034% (Based on an annual rate of .125%)]
Daily Tax Fee: [.0000%]
CONTRACT FEES AND CHARGES
Premium Tax: [.000% of each premium payment]
Annual Administrative Charge: [$35]
Transfer Charge: [Currently there is no charge for transfers. However, we
reserve the right to impose a Transfer Charge after the first two transfers made
in each Contract Year, upon prior Written Notice to the Owner. In no event,
however, will such Transfer Charge exceed $20 per transaction.]
PREMIUM ALLOCATION SCHEDULE
[Money Market #122 100.00%]
D603
<PAGE>
SCHEDULE PAGE (CONTINUED)
Annuitant: John Doe 13000000 :Contract Number
GUARANTEED The Guaranteed Interest Account is not part
INTEREST ACCOUNT of the Separate Account. It is accounted for
as part of Our General Account. We reserve
the right to limit premium payments to the
Guaranteed Interest Account during any
one-week period to not more than $250,000.
We will credit interest daily on any amounts
held under the Guaranteed Interest Account
at such rates as We shall determine but in
no event will the effective annual rate of
interest be less than 3%. On the last
working day of each calendar week, We will
set the interest rate that will apply to any
premium made to the Guaranteed Interest
Account during the following calendar week.
That rate will remain in effect for such
premiums, or their resulting Adjusted
Premiums, for an initial guaranteed period
of one full year. Upon expiry of the initial
one-year guarantee period, and for any
premiums or Adjusted Premiums whose
guarantee has just ended shall be the same
rate that applies to new premiums made
during the calendar week in which the
guarantee period expired. Such rate shall
likewise remain in effect for such Adjusted
Premiums for a subsequent guarantee period
of one full year.
D603
<PAGE>
SCHEDULE PAGE (CONTINUED)
Annuitant: John Doe 13000000 :Contract Number
GUARANTEED INTEREST ACCOUNTS
GUARANTEED The GIA account with 1-year guarantee is not
INTEREST ACCOUNT part of the Separate Account. It is
WITH 1-YEAR accounted for as part of Our General
GUARANTEE Account. We reserve the right to limit
(GIA) cumulative premium payments to the GIA
account during any one-week period to not
more than $250,000. We will credit interest
daily on any amounts held under the GIA
account at such rates as We shall determine
but in no event will the effective annual
rate of interest be less than 3%. On the
last working day of each calendar week, We
will set the interest rate that will apply
to any premium made to the GIA account
during the following calendar week. That
rate will remain in effect for such
premiums, or their resulting Adjusted
Premiums, for an initial guaranteed period
of one full year. Upon expiry of the initial
one-year guarantee period, and for any
premiums or Adjusted Premiums whose
guarantee has just ended shall be the same
rate that applies to new premiums made
during the calendar week in which the
guarantee period expired. Such rate shall
likewise remain in effect for such Adjusted
Premiums for a subsequent guarantee period
of one full year. No market value adjustment
is applied to withdrawals from the GIA
account.
MARKET VALUE The MVA account provides four choices of
ADJUSTED interest rate guarantee periods; 3-year,
GUARANTEED 5-year, 7-year, and 10-year. The MVA
INTEREST ACCOUNT account is accounted for as a non-unitized
(MVA) separate account. We will credit interest
daily on any amounts held under the MVA
account at such rates as We shall determine
but in no event will the effective annual
rate of interest be less than 3%. On the
last working day of each calendar week, We
will set the interest rate that will apply
to any new premiums made during the
following calendar week to each of these
accounts. The applicable rate will remain in
effect until the end of the Guarantee Period
selected by you, the Contract Owner. Upon
expiry of the selected Guarantee Period,
unless you elect to transfer funds to
another Guarantee Period or Subaccount, or
elect to withdraw funds, We will begin
another Guarantee Period of the same
duration as the one that just ended, and
will credit interest at the then current
rate for that new Guarantee Period. If your
original Guarantee Period is no longer
available or if you choose a Guarantee
Period that is no longer available We will
use the Guarantee Period with the next
longest duration. To the extent permitted by
law, We reserve the right to discontinue
Guarantee Periods and to offer other
Guarantee Periods that differ from those
available at the time your contract was
issued. Any withdrawals or transfers from
the MVA will be subject to a market value
adjustment, except that funds may be
withdrawn or transferred from this account
without a market value adjustment in the
30-day Window Period from 15 days before to
15 days after the Guarantee Period expiry
date. We reserve the right to limit
cumulative premiums made to any one of these
accounts during any one-week period to not
more than $250,000.
D603
<PAGE>
TABLE OF CONTENTS
PART PAGE
- ---------------------------------------------------------------
SCHEDULE PAGES
CONTRACT SUMMARY
TABLE OF CONTENTS
1. DEFINITIONS.............................................1
2. ABOUT THIS CONTRACT.....................................4
The Effective Date......................................4
The Contract and Application............................4
Required Proof of Age and Survival......................5
Adjustment for Misstatement of
Age or Sex............................................5
Assignments.............................................5
Statement of Account....................................5
3. RIGHTS OF OWNER...........................................5
Who Is the Owner........................................5
What Are the Rights of the Owner.......................5
How to Change the Owner Designation
Of Contingent Annuitant..............................6
Designation of Contingent Annuitant.....................6
4. ACCUMULATION PROVISIONS...................................7
Premium Payments........................................7
Premium Payment Allocation..............................7
Accumulation Units......................................7
Additional Subaccounts..................................8
Substitution of Subaccounts.............................8
5. TRANSFERS, WITHDRAWALS AND LAPSE..........................8
Transfers among Subaccounts and the
Guaranteed Interest Account...........................8
Withdrawals and Full Surrender..........................9
Lapse...................................................9
Rules and Limitations...................................9
Deferral of Payment.....................................9
6. EXPENSE CHARGES..........................................10
Premium Tax............................................10
Transfer Charge........................................11
Annual Administrative Charge...........................11
Mortality and Expense Risk Fee.........................11
Daily Tax Fee..........................................11
Daily Administrative Fee...............................11
7. DETERMINING THE CONTRACT AND
ACCUMULATION UNIT VALUES................................11
Crediting of Subaccount Units and
Premiums.............................................11
Determination of the Contract Value....................12
The Valuation of Subaccounts and
Guaranteed Interest Account..........................12
8. ANNUITY BENEFITS.........................................12
9. DEATH BENEFITS...........................................13
Death Before Maturity Date.............................13
Death Benefit..........................................14
Adjusted Partial Withdrawals...........................14
Annual Step-up Amount..................................14
Distribution at Death Requirements.....................15
Death on or after the Maturity Date....................16
The Beneficiary........................................16
What Are the Rights of the Beneficiary.................16
How to Change the Beneficiary..........................16
10. PAYMENT OPTIONS.........................................17
Calculation of Fixed Annuity Payments..................17
Calculation of Variable Annuity Payments...............17
Option A - Life Annuity with Specified
Period Certain.......................................18
Option B - Non-Refund Life Annuity.....................18
Option D - Joint and Survivorship
Life Annuity.........................................18
Option E - Installment Refund Life Annuity.............18
Option F - Joint and Survivorship Life
Annuity with 10-Year Period Certain..................18
Option G - Payments for a Specified Period.............19
Option H - Payments of a Specified Amount..............19
Option I - Variable Life Annuity with
10-Year Period Certain...............................19
Option J - Joint Survivorship Variable
Life Annuity with 10-Year Period Certain.............19
Option K - Variable Annuity for
Specified Period.....................................19
Option L - Variable Life
Expectancy Annuity...................................19
Option M - Unit Refund Variable
Life Annuity.........................................20
Option N - Variable Non-Refund
Life Annuity.........................................20
Other Options..........................................20
11. TABLES OF PAYMENT OPTION AMOUNTS........................20
D603
<PAGE>
CONTRACT SUMMARY
ABOUT THIS SUMMARY This summary briefly highlights some of the
major contract provisions. Since this is
only a summary, the detailed provisions of
the contract will control. See those
provisions for full information and any
limits or restrictions that apply. A Table
of Contents is provided to help You find
specific provisions. Your contract is a
legal contract between You and Us. You
should, therefore, READ YOUR CONTRACT
CAREFULLY.
Check the Schedule Page of this contract to
make sure it reflects the premium allocation
requested. Please call Your agent or Us any
time You have questions about Your contract.
THE TYPE OF CONTRACT This contract provides for payment of a
variable life annuity. The amount of each
annuity payment will be based on the
Contract Value on the Maturity Date, the
annuity purchase rates stated herein, and
the investment experience of the Subaccounts
during the annuity payout period. Other
Annuity Payment Options are available.
ALLOCATION OF The values that accumulate under this
PREMIUM PAYMENTS contract prior to the Maturity Date are
based on the premium payments made, the
rates of interest credited on any premium
payments allocated to the Guaranteed
Interest Account, any expense charges, and
the investment experience of the Subaccounts
within the Separate Account on any premium
payments allocated to the Subaccounts.
Except for the Guaranteed Interest Account
which is part of Our General Account, the
Subaccounts are part of PHL Variable
Insurance Company's Variable Accumulation
Separate Account (VA Account) and have
differing investment objectives. Subject to
the terms of this contract, You may transfer
the Contract's Value between and among the
various Subaccounts and Guaranteed Interest
Account.
The VA Account is a Separate Account
established by Our company under Connecticut
Law and is registered as a unit investment
trust under the Investment Company Act of
1940. All income, gains and losses, realized
and unrealized, of the VA Account are
credited to or charged against the amounts
placed in the VA Account without reference
to other income, gains and losses of Our
General Account. The assets of the VA
Account are owned solely by Us and We are
not a trustee with respect to such assets.
These assets are not chargeable with
liabilities arising out of any other
business that We may conduct.
D603
<PAGE>
We use the assets of the VA Account to buy
shares of the Fund(s) of this contract
according to Your most recent allocation
instruction on file with Us at Our Variable
Products Operations. The Fund(s) are
registered under the 1940 Act as an
open-end, diversified management investment
company. The Fund(s) have separate Series
that correspond to the Subaccounts of the VA
Account. Assets of each Subaccount are
invested in shares of the corresponding Fund
Series.
This contract also contains a Guaranteed
Interest Account to which premium payments
may be allocated. The Guaranteed Interest
Account is not part of the Separate Account.
It is accounted for as part of Our General
Account. We will credit interest on the
amount in the Guaranteed Interest Account at
such rate(s) as provided under the terms of
this contract. We reserve the right to add
other Guaranteed Interest Accounts subject
to approval (as required by some states) by
the insurance supervisory official of states
where this contract is delivered.
WITHDRAWAL PRIVILEGE Before the Maturity Date, You may withdraw
all or part of the Contract Value. After the
Maturity Date, You may only withdraw from
the remaining value under Variable Payment
Options K or L.
OTHER BENEFITS This contract provides for the payment of
death proceeds in the event of the death of
either the Owner or the Annuitant prior to
the Maturity Date. The amount of the death
proceeds will depend upon whether it is the
Owner or the Annuitant whose death has
occurred. The amount of the death proceeds
is determined as described in Part 9 of this
Contract.
D603
<PAGE>
PART 1: DEFINITIONS
YOU (YOUR) The Owner of this contract.
WE (OUR, US) PHL Variable Insurance Company
ACCUMULATION UNIT A standard of measurement as described in
Part 4, used to determine the value of a
Contract and its interest in the Subaccounts
prior to the Maturity Date and for amounts
held under Payment Option L.
ACCUMULATION UNIT VALUE On the first Valuation Date selected by Us,
We set all Accumulation Unit Values of each
Subaccount of the Separate Account at
1.000000. The Accumulation Unit Value on any
subsequent Valuation Date is determined by
multiplying the Accumulation Unit Value of
the Subaccount on the immediately preceding
Valuation Date by the Net Investment Factor
for that Subaccount for the Valuation Period
just ended.
ADJUSTED PREMIUM Any premium to the Guaranteed Interest
Account, as adjusted to include any interest
credited on and any contract charges or
withdrawals deducted from such premium
payment.
ANNUITANT On or prior to the Maturity Date, the term
"Annuitant" as used in this contract refers
to the Primary Annuitant as shown on the
Schedule Page, while such Primary Annuitant
is living, and then the Contingent
Annuitant, if any, or as later changed by
You by Written Request, provided such
Contingent Annuitant is living at the death
of the Primary Annuitant. After the Maturity
Date, the term "Annuitant" shall mean the
Annuitant under this contract determined as
of the Maturity Date.
ANNUITANT'S BENEFICIARY The beneficiary entitled to receive payment
of any amounts payable under this contract
upon death of the Annuitant.
ANNUITY A contract promising a periodic series of
payments.
ANNUITY UNIT A standard of measurement used to determine
the amount of each periodic payment made
under the Variable Payment Options I, J, K,
M and N. The number of Annuity Units in each
Subaccount with assets under the chosen
option is equal to the portion of the first
payment provided by that Subaccount divided
by the Annuity Unit Value for that
Subaccount on the first Payment Calculation
Date.
D603 1
<PAGE>
ANNUITY UNIT VALUE On the first Valuation Date selected by Us,
We set all Annuity Unit Values in each
Subaccount of the Separate Account at
$1.000000. The Annuity Unit Value on any
subsequent Valuation Date is equal to the
Annuity Unit Value of the Subaccount on the
immediately preceding Valuation Date
multiplied by the Net Investment Factor for
that Subaccount for the Valuation Period
divided by 1.000000 plus the rate of
interest for the number of days in the
Valuation Period based on the Assumed
Investment Rate.
ASSIGNS Any person to whom You assign an interest in
this contract if We have Written Notice of
the assignment in accordance with the
provisions stated in Part 2.
ASSUMED INVESTMENT RATE The Assumed Investment Rate is 4.5% per
year. We use this rate to determine the
first payment under Variable Payment Annuity
Options I, J, K, M and N. Future payment
amounts under these options will depend on
the relationship between the Assumed
Investment Rate and the actual investment
performance of each Subaccount as reflected
in the Subaccount's Annuity Unit Value. The
Assumed Investment Rate is the annual
investment return that will need to be
earned by each Subaccount of the Separate
Account for there to be no reduction in the
amount of the monthly payments under these
options.
CONTRACT ANNIVERSARY The same date each year as the Contract
Date.
CONTRACT DATE The Contract Date shown on the Schedule
Page. It is the date from which Contract
Years and anniversaries are measured.
CONTRACT VALUE The sum of the values under a Contract of
all Accumulation Units held in the
Subaccounts and the Adjusted Premium
Payments held in the Guaranteed Interest
Account.
CONTRACT YEAR The first Contract Year is the one-year
period from the Contract Date. Following
Contract Years run from one Contract
Anniversary to the next.
FIXED PAYMENT ANNUITY An annuity providing payments which do not
vary in amount after the first payment is
made.
MATURITY DATE The Maturity Date shown on the Schedule Page
or such changed Maturity Date as may result
from death of the Primary Annuitant while a
Contingent Annuitant is living or as We may
later agree in writing. The Maturity Date
may not be earlier than the fifth Contract
Anniversary, or later than the Contract
Anniversary nearest the
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Annuitant's 95th birthday unless We agree
otherwise. If a Contingent Annuitant becomes
the Annuitant as the result of death of the
Primary Annuitant prior to the Maturity
Date, the Maturity Date will change to the
Contract Anniversary nearest the Contingent
Annuitant's 95th birthday unless You and We
agree otherwise.
NET INVESTMENT FACTOR The Net Investment Factor for each
Subaccount of the Separate Account is
determined by the investment performance of
the assets underlying the Subaccount for the
Valuation Period just ended. The Net
Investment Factor is equal to 1.000000 plus
the applicable net investment rate for the
Valuation Period. The net investment rate is
determined by:
a. taking the sum of the accrued net
investment income and capital gains
and losses, realized or unrealized, of
the Subaccount for the Valuation
Period. The net investment income is
affected by an investment advisory
expense fee which is deducted from the
Funds in which the assets of the
Subaccounts of the Separate Account
are invested; and
b. dividing the result of (a) by the
Subaccount's share of the Separate
Account at the beginning of the
Valuation Period; and
c. for each calendar day in the Valuation
Period subtracting from the result of
(a) divided by (b), an amount equal to
the Mortality and Expense Risk Fee
plus the Daily Administrative Fee and
any daily tax fee.
OWNER/ANNUITANT An individual who is both the Owner and
Annuitant under the contract.
OWNER'S BENEFICIARY The beneficiary entitled to receive payment
of any amounts payable under this contract
upon death of the Owner.
PAYMENT CALCULATION DATE The date We calculate annuity payments under
a Variable Payment Annuity Option. The first
Payment Calculation Date is the Valuation
Date on or next following the Settlement
Date unless We agree otherwise.
After the first Payment Calculation Date, We
will calculate payments on the same date
each month. We use the next following
Valuation Date if such date is not a
Valuation Date.
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PREMIUM PAYMENT DATE The Valuation Date on which a premium
payment is received at Our Variable Products
Operations unless it is received after the
close of the New York Stock Exchange, in
which case it will be the next Valuation
Date.
SETTLEMENT DATE The date contract proceeds are applied to an
annuity payment option. Unless We agree
otherwise, for death benefits, the
Settlement Date is the date that We receive
a certified copy of the Annuitant's
certificate of death; for proceeds payable
on the Maturity Date, it is the Maturity
Date; and for proceeds payable upon a
surrender, it is the effective date of the
surrender.
SUBACCOUNT(S) The account(s) within Our Separate Account
to which assets under the contract may be
allocated.
SURRENDER VALUE Contract Value less any premium tax.
VALUATION DATE Every day the New York Stock Exchange is
open for trading.
VALUATION PERIOD The period in days beginning with the day
following the last Valuation Date and ending
on the next succeeding Valuation Date.
VARIABLE PAYMENT ANNUITY An annuity where each payment will vary with
the investment experience of the
Subaccounts.
VPMO Our Variable Products Mail Operations
division. The address is shown on the cover
page of this contract.
WRITTEN REQUEST A request We receive in writing at VPMO in a
(AND WRITTEN NOTICE) form satisfactory to Us.
PART 2: ABOUT THIS CONTRACT
THE EFFECTIVE DATE This contract will begin in effect on the
Contract Date provided the initial premium
due is paid while the Annuitant is alive.
THE CONTRACT This contract and application, if any, which
AND APPLICATION is attached to this contract, is the entire
contract between You and Us. Any change in
terms of this contract, to be in effect,
must be signed by one of Our executive
officers and countersigned by Our registrar
or one of Our executive officers. This
contract is issued at Our Home Office in
Hartford, Connecticut. Any benefits payable
under this contract are payable at VPMO.
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REQUIRED PROOF We may require proof of the Annuitant's age
OF AGE AND SURVIVAL before any annuity payments will begin. We
also have the right to require proof of the
identity, age and survival of any person
entitled to any payment under this contract
or upon whose life any payments depend.
ADJUSTMENT FOR If the age or sex of the Annuitant has been
MISSTATEMENT OF misstated, any benefits payable will be
AGE OR SEX adjusted to the amount that the Contract
Value would have purchased based on the
Annuitant's correct age and sex. Any
over payment(s) and under payment(s) made by
Us will be charged or credited against
future payments to be made under the
contract.
ASSIGNMENTS We will not be considered to have notice of
any assignment of an interest in this
contract until We receive the original or
copy of the written assignment at VPMO. In
no event will We be responsible for its
validity.
STATEMENT OF ACCOUNT We will send You a statement of the Contract
Value of this contract at least annually. We
will also provide You with a statement of
the investments held by each Subaccount.
After the Maturity Date, We will provide You
with an annual Statement of Account if You
elect any of the variable payment options.
PART 3: RIGHTS OF OWNER
WHO IS THE OWNER The Owner may be the Annuitant, an employer,
a trust or any other individual or entity.
If no Owner is named, the Annuitant will be
the Owner. Under contracts used with certain
tax qualified plans, the Owner must be the
Annuitant. A husband and wife may be
designated as Joint Owners. If one of such a
Joint Owners dies, the other Joint Owner
becomes the sole Owner of the Contract.
WHAT ARE THE RIGHTS You control this contract during the
OF THE OWNER Annuitant's lifetime but not until the
Contract Date. Unless You and We agree
otherwise, You may exercise all rights
provided under this contract without the
consent of anyone else. Your rights include
the right to:
a. Receive any amounts payable under this
contract during the Annuitant's
lifetime.
b. Change the Owner.
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c. Change the premium payment amounts and
intervals. See Part 4.
d. Change the allocation schedule for
premium payments. See Part 4.
e. Transfer Contract Values between and
among the various Subaccounts and the
Guaranteed Interest Account. See Part
5.
f. Make withdrawals from the various
Subaccounts and the Guaranteed
Interest Account or fully surrender
the contract for its Surrender Value.
See Part 5.
g. Select a Payment Option for amounts
payable upon a withdrawal or full
surrender.
h. Select an alternative Payment Option
to commence on the Maturity Date. See
Part 8.
i. Change the Owner's or Annuitant's
Beneficiary.
j. Assign, subject to the restrictions
stated in Part 2, release, or
surrender any interest in this
contract. See Parts 2 and 5.
k. Change the Contingent Annuitant any
time prior to the death of the Primary
Annuitant.
You may exercise these rights only while the
Annuitant is alive. Your exercise of any
rights will, to the extent thereof, assign,
release, or surrender the interest of the
Annuitant and all beneficiaries and Owners
under this contract.
HOW TO CHANGE THE OWNER To change the Owner, you must submit a
Written Request.
DESIGNATION OF Prior to the death of the Annuitant, You may
CONTINGENT ANNUITANT designate or change the Contingent Annuitant
by sending a Written Request with the name,
date of birth, sex, Social Security Number
and address of the new Contingent Annuitant.
If You are an Owner/Annuitant and Your
spouse is Your beneficiary under this
Contract, Your surviving spouse will
automatically be the Contingent Annuitant.
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PART 4: PREMIUM PAYMENTS AND ALLOCATION
PREMIUM PAYMENTS The initial premium payment is due on the
Contract Date and must at least equal
$20,000 unless We agree otherwise. The
Annuitant must be alive when the initial
premium payment is made. Thereafter, the
premium payment amount and intervals are as
shown on the Schedule Page unless later
changed as described below. All premium
payments are payable at VPMO, except that
the initial premium payment may be given to
an authorized agent for forwarding to VPMO.
No benefit associated with any such premium
payment will be provided until it is
actually received by Us at VPMO.
You may vary the amount and interval for
subsequent premium payments, and additional
premium payments may be made within the
following limits:
a. Each premium payment must at least
equal $500.
b. No more than $1,000,000 in total
premium payments may be paid on this
contract, unless We agree otherwise.
c. The premium payment intervals may be
unscheduled or changed to monthly,
quarterly, semi-annual, annual, or any
other arrangement agreed to by Us.
d. Additional premium payments may only
be made while an Annuitant is living,
prior to the Maturity Date.
We reserve the right to waive the limits in
a & b above.
PREMIUM The premium payment will be applied on its
PAYMENT ALLOCATION Premium Payment Date to the various
Subaccounts and the Guaranteed Interest
Account in accordance with Your instructions
for the allocation of premium payments.
You may change the allocation schedule with
respect to subsequent premium payments by
written or telephone request. We reserve the
right to waive the requirement of written
notice.
ACCUMULATION UNITS The number of Accumulation Units credited to
each Subaccount of the Separate Account will
be determined by dividing the premium
payment applied to that Subaccount by the
Accumulation Unit Value of that Subaccount
on the Premium Payment Date. The amount
deposited to the Guaranteed Interest Account
will equal the amount of any premium payment
applied on the Premium Payment Date.
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ADDITIONAL SUBACCOUNTS We have the right to add Subaccounts of the
Separate Account subject to approval by the
Securities and Exchange Commission and,
where required, other regulatory authority.
We further reserve the right to add other
Guaranteed Interest Accounts.
SUBSTITUTION OF SUBACCOUNTS If the shares of the Funds of this contract
should no longer be available for investment
by the Separate Account or if in Our
judgment further investment in such Funds
becomes inappropriate for use with this
contract, We reserve the right to substitute
Accumulation Units of another Subaccount for
Accumulation Units already purchased or to
be purchased in the future by premium
payments under this contract. Any such
change will be subject to approval by the
Securities and Exchange Commission and,
where required, by the insurance supervisory
official of the state where this contract is
issued.
PART 5: TRANSFERS, WITHDRAWALS AND LAPSE
TRANSFERS AMONG You may transfer all or a portion of the
SUBACCOUNTS AND THE Contract Value of this contract among one
GUARANTEED INTEREST ACCOUNT or more of the Subaccounts and the
Guaranteed Interest Account. Transfers may
be made by telephone or Written Request. You
can make up to six transfers per Contract
Year from the Subaccounts and only one
transfer per Contract Year from the
Guaranteed Interest Account unless the
Systematic Transfer Program is elected.
Under the Systematic Transfer Program, funds
may be transferred automatically among the
Subaccounts on a monthly, quarterly,
semi-annual or annual basis. Unless We agree
otherwise, the minimum initial and
subsequent transfer amounts are $25 monthly,
$75 quarterly, $150 semiannually or $300
annually. Except as otherwise provided under
the Systematic Transfer Program, the amount
that may be transferred from the Guaranteed
Interest Account at any one time cannot
exceed the higher of $1000 or 25% of the
value of the Guaranteed Interest Account.
The transfer charge is as shown on the
Schedule Page. Any such charge will be
deducted from the Subaccounts or Guaranteed
Interest Account from which the amounts are
to be transferred with each such Subaccount
or Guaranteed Interest Account bearing a
pro rata share of the transfer charge. The
value of each Subaccount
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will be determined on the Valuation Date
that coincides with the date of transfer.
Any Accumulation Units held under a
Subaccount of the Separate Account or
Adjusted Premiums held under the Guaranteed
Interest Account as the result of any
transfer shall retain its original Premium
Payment Date.
WITHDRAWALS AND FULL You may withdraw in cash the Contract Value
SURRENDER of this contract, less any applicable
deferred premium tax, in whole or in part
any time prior to the Maturity Date or at
any time for amounts held under Variable
Payment Annuity Options K or L. Such
withdrawals must be by Written Request and
must include such tax withholding
information as We may reasonably require.
The portion withdrawn from any Subaccount
will be taken by the surrender and release
of such number of Accumulation Units in such
Subaccount required to make the withdrawal,
including any deferred premium tax
applicable to such withdrawal. Any portion
withdrawn from the Guaranteed Interest
Account will be taken by the release of
Adjusted Premiums in the amount needed to
make the withdrawal, including any deferred
premium tax applicable to such withdrawal.
If no Contract Value remains under this
contract as the result of a withdrawal, the
contract will be deemed fully surrendered
and have no further value or effect. The
Contract Value will be determined on the
Valuation Date that coincides with the date
of the withdrawal.
You may elect to apply the amount withdrawn
or surrendered to the various Payment
Options described in Part 10.
LAPSE If on any Valuation Date the Contract Value
becomes zero, the contract will immediately
terminate and lapse without value unless any
Contract Value has been applied under one of
the variable payment options within 30 days
after any such Valuation Date. We will mail
a written notice of lapse to You at Your
most recent post office address on file with
Us at VPMO.
RULES AND LIMITATIONS The Accumulation Units and Adjusted Premiums
released for transfer or withdrawal will be
determined on a First-In, First-Out (FIFO)
basis based on Premium Payment Date. No
withdrawals, or full surrender may be made
after commencement of an annuity on the
Maturity Date except for any Contract Value
remaining under Options K or L. Also, You
may not transfer any assets under Option M,
unless We agree otherwise.
DEFERRAL OF PAYMENT With the exception of transfers and
withdrawals from the Guaranteed Interest
Account, as described above under Transfers
Among Subaccounts, transfers, withdrawals,
or a request for a full
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surrender will usually be processed within 7
days after We receive the written request at
VPMO. However, We may postpone the
processing of any such transactions for any
of the following reasons (as provided under
the Investment Company Act of 1940):
a. when the New York Stock Exchange is
closed, other than customary weekend
and holiday closings;
b. when trading on the exchange is
restricted by the Securities and
Exchange Commission;
c. when the Securities and Exchange
Commission declares that an emergency
exists as a result of which disposal
of securities in the Fund is not
reasonably practicable or it is not
reasonably practicable to determine
the value of the Units in the
Subaccounts of the Separate Account;
or
d. when a governmental body having
jurisdiction over the VA Account by
order permits such suspension.
Rules and regulations of the Securities and
Exchange Commission, if any, are applicable
and will govern as to whether conditions
described in (b) or (c) or (d) exist.
For withdrawals from the Guaranteed Interest
Account, We may defer payment for up to six
months from the date VPMO receives the
Written Request. If payment is delayed 30
days or more, We will add interest at an
annual rate of 4%.
PART 6: EXPENSE CHARGES
Charges to cover expenses incurred by Us in
the distribution and administration of this
contract are made in the manner described
below.
PREMIUM TAX A premium tax may be required based on the
laws of the state of issue or the state
where the Owner resides when a premium
payment is applied. The premium tax rate, if
any, as of the Contract Date, is shown on
the Schedule Page. This rate may change for
subsequent premium payments in accordance
with applicable state law. We will pay any
premium tax due and will only reimburse
ourselves upon the earlier of partial
withdrawal, surrender of the Contract,
payment of death proceeds or the Maturity
Date. At the time of reimbursement, We will
deduct the tax proportionately from the
Subaccounts and
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Guaranteed Interest Account based on their
proportionate Contract Value. On partial
withdrawals, We will deduct a pro rata
amount of the tax based upon the ratio of
the amount withdrawn to the Contract Value.
TRANSFER CHARGE A transfer charge is as shown on the
Schedule Page.
ANNUAL ADMINISTRATIVE A portion of the administrative expense
CHARGE incurred by Us is assessed in the form of an
annual charge as shown on the Schedule Page.
We reserve the right to lower such charge.
Such charge will be deducted at the end of
each Contract Year from the total Contract
Value with each Subaccount and Guaranteed
Interest Account bearing a pro rata share of
such expense based on the proportionate
Contract Value of each of the Subaccounts
and Guaranteed Interest Account. By
agreement with Us, You may, instead, elect
to pay this charge in cash.
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 proportionately equal
amounts.
MORTALITY AND The mortality and expense risk charge is
EXPENSE RISK FEE taken in the form of a daily fee against
each Subaccount as shown on the Schedule
Page. We reserve the right to lower such
fee.
DAILY TAX FEE A daily tax fee is taken by Us in the form
of a daily fee against each Subaccount as
shown on the Schedule Page.
DAILY ADMINISTRATIVE FEE A portion of the administrative expense
incurred by Us is assessed in the form of a
daily fee against each Subaccount shown on
the Schedule Page.
PART 7: DETERMINING THE CONTRACT AND
ACCUMULATION UNIT VALUES
CREDITING OF SUBACCOUNT We will apply any premium payments We
UNITS AND PREMIUMS receive on the Premium Payment Date to
credit Accumulation Units to one or more
Subaccounts or to credit premiums to the
Guaranteed Interest Account in accordance
with the most recent allocation schedule on
file with Us. The number of Accumulation
Units credited to each Subaccount will be
determined by dividing the premium payment,
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applied to that Subaccount by the then
current Accumulation Unit Value of that
Subaccount. The Accumulation Unit Value of
each Subaccount on a Valuation Date is
determined at the end of that day.
DETERMINATION OF THE Prior to the Maturity Date, the value of a
CONTRACT VALUE Subaccount of the Separate Account is
determined by multiplying the total number
of Accumulation Units under this contract
for that Subaccount by the current
Accumulation Unit Value of that Subaccount.
The Contract Value for amounts held under
Variable Payment Annuity Option L is
determined in the same manner. The value of
the Guaranteed Interest Account equals the
total value of the Adjusted Premiums. The
total Contract Value under this contract
equals the sum of the values of each of the
Subaccounts and the Adjusted Premiums.
THE VALUATION OF The values and benefits of the Guaranteed
SUBACCOUNTS AND GUARANTEED Interest Account are not less than those
INTEREST ACCOUNT required by the laws of the state in which
it is delivered.
The values of the assets in each Subaccount
will be calculated in accordance with
applicable law and accepted procedures.
We guarantee that expense and mortality
results shall not adversely affect the
dollar amount of variable benefits and other
contractual payments and values.
PART 8: ANNUITY BENEFITS
On or before the Maturity Date, You may
elect any one of the Payment Options as
described in Part 10. If you do not select a
Payment Option on or before the Maturity
Date, We will apply the Contract Value less
any premium tax due to provide You a
variable life annuity under Payment Option L
as described in Part 10. Any annuity
payments falling due after the Annuitant's
death during the period certain will be paid
to the Annuitant's 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, We shall
have the right to pay such amount to You in
one lump sum in lieu of providing such
annuity. We also have the right to change
the annuity payment frequency to annual if
the monthly annuity payment would otherwise
be less than $20.
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PART 9: DEATH BENEFITS
The death benefits provided under this
contract are not less than the minimum
benefits required under the laws of the
state where this contract is delivered.
DEATH BEFORE For deaths occurring prior to the Maturity
MATURITY DATE Date, We will pay the death proceeds upon
receipt of due proof of death as follows:
1. Death of an Owner/Annuitant:
If an Owner/Annuitant dies before
the Maturity Date, We will pay
the Annuitant's Beneficiary the
death proceeds provided by the
Death Benefit as described below.
2. Death of an Owner who is not the
Annuitant:
If an Owner who is not the
Annuitant dies before the
Maturity Date, we will pay the
Owner's Beneficiary the death
proceeds (less any deferred
premium tax) equal to the greater
of:
a. 100% of premium payments less
"Adjusted Partial Withdrawals"
(as defined below); or
b. the Contract Value next
determined following receipt
of a certified copy of the
death certificate at VPMO.
3. Death of an Annuitant who is not the
Owner:
If an Annuitant who is not the Owner
dies before the Maturity Date, We will
pay the Annuitant's Beneficiary the
death proceeds provided by the Death
Benefit as described below.
In lieu of receiving the death
proceeds in one lump sum, the
beneficiary may elect to apply the
death proceeds under any of the
Payment Options described in Part 10
subject to the following limitations:
a. Options D, F and J are not
available for death benefits;
b. Under Options A, E, G, H and K
the period specified must be at
least 5 years, but not beyond the
life expectancy of such
beneficiary.
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DEATH BENEFIT Upon the death of the Annuitant or an
Owner/Annuitant who has not yet attained
age 80, the death benefit (less any
deferred premium tax) is equal to the
greater of:
1. 100% of premium payments less
"Adjusted Partial Withdrawals"
(as defined below); or
2. the "Annual Step-up Amount"
(as defined below); or
3. the Contract Value next
determined following receipt of a
certified copy of the death
certificate at VPMO.
On and after the Annuitant's attained
age 80, the death benefit (less any
deferred premium tax) equals the
Contract Value next determined
following receipt of a certified copy
of the death certificate at VPMO.
ADJUSTED PARTIAL WITHDRAWALS The sum of all Adjusted Partial Withdrawals
when each is calculated for each partial
withdrawal as the product of (a) times
(b) where:
a. is the ratio of the amount of the
partial withdrawal to the Contract
Value on the date of (but prior to)
the partial withdrawal; and
b. is the death benefit on the date of
(but prior to) the partial withdrawal.
ANNUAL STEP-UP AMOUNT In the first Contract Year the Annual
Step-up Amount is equal to the greater of:
a. 100% of premium payments less
"Adjusted Partial Withdrawals"; or
b. the Contract Value.
In the second Contract Year or any
subsequent Contract Year the Annual Step-up
Amount is equal to the greater of:
a. the Annual Step-up Amount at the
end of the previous Contract
Year, plus 100% of premium
payments made since the end of
the previous Contract Year, less
"Adjusted Partial Withdrawals"
made since the end of the
previous Contract Year; or
b. the Contract Value next
determined following receipt of a
certified copy of the death
certificate at VPMO.
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DISTRIBUTION AT DEATH If the Owner/Annuitant dies before the
REQUIREMENTS Maturity Date, then the Annuitant's
Beneficiary must elect within 60 days of
Our receipt of due proof of death to
receive the death proceeds in a lump sum or
elect to apply the death proceeds due under
a Payment Option, provided that the payments
begin within one year of the date of death
of the Annuitant. If the Annuitant's
Beneficiary is the surviving spouse, the
surviving spouse may elect to continue the
Contract as new Owner/Annuitant as if no
death had occurred.
If the Owner who is not the Annuitant dies
before the Maturity Date and the Owner's
surviving spouse is not the Joint Owner or
the Owner's Beneficiary, the Owner's entire
interest in this Contract must be
distributed within five years of the date of
the Owner's death, provided that the Owner's
Beneficiary may elect to apply the death
proceeds to a Payment Option not extending
beyond the life (or life expectancy) of the
Owner's Beneficiary and the payments begin
within one year after the Owner's death. If
the Owner's surviving spouse is a Joint
Owner, the Contract will continue with the
surviving Joint Owner becoming the sole
Owner. If the Owner's Beneficiary is the
surviving spouse, the surviving spouse may
elect to continue the Contract as the new
Owner as if no death had occurred.
If the Annuitant who is not the Owner dies
before the Maturity Date and there is no
Contingent Annuitant, then the Annuitant's
Beneficiary must elect within 60 days of Our
receipt of due proof of death to receive the
death proceeds in a lump sum or elect to
apply the death proceeds due under a Payment
Option, provided that the payments begin
within one year of the date of death of the
Annuitant. If there is a Contingent
Annuitant, the Contract will continue with
the Contingent Annuitant becoming the new
Annuitant.
If the Annuitant dies before the Maturity
Date and the Owner is not an individual, the
entire interest in this contract must be
distributed within five years of the date of
the Annuitant's death. However, the
Annuitant's Beneficiary may elect to apply
the death proceeds to a Payment Option not
extending beyond the life (or life
expectancy) of such Annuitant's Beneficiary
and the payments begin within one year after
the Annuitant's death. If the Annuitant's
Beneficiary is the surviving spouse, the
surviving spouse may elect to continue the
Contract as new Annuitant as if no death had
occurred.
We shall have the right to first require
return of the contract to us so that we may
amend it to reflect these changes.
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DEATH ON OR AFTER THE If either the Owner/Annuitant, Annuitant, or
MATURITY DATE Owner dies on or after the Maturity Date,
any remaining income payments will be
continued to the Annuitant's or Owner's
Beneficiary respectively. Under Payment
Option M, the sum of the number of remaining
Annuity Units for each Subaccount multiplied
by the current Annuity Unit Value for that
Subaccount will be paid to the Annuitant's
or Owner's Beneficiary in a lump sum, (see
"Option M - Unit Refund Variable Life
Annuity" in Part 10).
THE BENEFICIARY The Annuitant's Beneficiary:
----------------------------
Any death proceeds payable to the
Annuitant's Beneficiary will be paid
to the Owner or the Owner's estate if
the Annuitant's Beneficiary is not
living when such death proceeds
become payable.
The Owner's Beneficiary:
------------------------
Any death proceeds payable to the
Owner's Beneficiary will be paid to
the Owner's estate if the Owner's
Beneficiary is not living when such
death proceeds become payable.
In the case of the death of an
Owner/Annuitant where conflicting Owner and
Annuitant's Beneficiaries have been named,
any death proceeds payable will be paid to
the Annuitant's Beneficiary.
The naming of an Owner's or Annuitant's
beneficiary by familial relationship (such
as Mother, Father, etc.) shall be understood
to be their relationship to the Owner or
Annuitant making such designation.
WHAT ARE THE RIGHTS The Annuitant's Beneficiary and Owner's
OF THE BENEFICIARY Beneficiary may exercise the following
rights with respect to the death proceeds
they are entitled to receive:
1. Receive the death proceeds payable
under this contract; or
2. Select a Payment Option for the death
proceeds; or
3. Transfer the amount of any deferred
death proceeds between and among the
various Subaccounts. See Part 5.
HOW TO CHANGE THE At any time prior to the death of the last
BENEFICIARY Annuitants under this contract, you may
change the Owner's Beneficiary or the
Annuitant's Beneficiary. The change must be
made by Written Notice signed by You. When
we receive it, the change will be effective
as of the date it was signed by you.
However, the change will be subject to any
payment made or actions taken by us before
we received the notice at VPMO.
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PART 10: PAYMENT OPTIONS
You must elect a payment option by Written
Request. We reserve the right to require
that the election of a payment option be in
the form of a supplementary contract
distributed by Us reflecting the terms of
the payment option elected. We have the
right to require proof of age and sex of any
person on whose life payments depend, as
well as proof of the continued survival of
any such person. After the first Payment
Calculation Date, You may not change the
Payment Option You elected. As regards the
election of a Payment Option by the
beneficiary of any death proceeds payable
under this contract, limited as described in
Part 9, the term "Annuitant" as used below
shall refer to such beneficiary.
CALCULATION OF The guaranteed annuity payment rates under
FIXED ANNUITY the following options will be based on the
PAYMENTS Annuitant's age and sex, and will be no
less favorable than the following:
Under Options A, B, D, E and F rates
are based on the a-49 Annuity Table
projected to 1985 with Projection Scale
B. We use an interest rate of 3-3/8%
for 5- and 10-year certain periods under
Option A, for the 10-year certain
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
Options B and D. Under Options G and H
the guaranteed interest rate is 3%.
If Our rates in effect on the
Settlement Date are more favorable, We
will use those rates.
CALCULATION OF Under the following options, all payments
VARIABLE ANNUITY after the first payment will vary with
PAYMENTS the investment experience of the
Subaccounts. Payments may be either higher
or lower than the first payment.
Under Options I, J, K, M and N, We determine
the first payment by multiplying the amounts
held under the selected option in each
Subaccount by the applicable Payment Option
rate. The first payment equals the total of
such amounts determined for each Subaccount.
We determine future payments under these
options by multiplying the number of Annuity
Units in each Subaccount by the Annuity Unit
Value for each Subaccount on the Payment
Calculation Date. The payment will equal the
sum of the amounts provided by each
Subaccount.
D603 17
<PAGE>
Under Option L, We determine the amount of
the annual distribution by dividing the
amount of Contract Value held under this
option on December 31 of the previous year
by the life expectancy of the Annuitant or
the joint life expectancy of the Annuitant
and Joint Annuitant at that time.
Under Options I, J, M and N, the applicable
option rate used to determine the first
payment amount will not be less than the
rate based on the 1983 Table A (1983 IAM)
projected with Projection Scale G to the
year 2040, and with continued projection
thereafter, and on the Assumed Investment
Rate. Under Option K, the rate will be based
on the number of payments to be made during
the specified period and the Assumed
Investment Rate.
OPTION A - A fixed payout annuity payable monthly
LIFE ANNUITY while the Annuitant is living or, if later,
WITH SPECIFIED the end of the specified period certain.
PERIOD CERTAIN The period certain may be specified as
5, 10, or 20 years. The period certain must
be elected at the time this option is
elected.
OPTION B - A fixed payout annuity payable monthly
NON-REFUND while the Annuitant is living and ending
LIFE ANNUITY with the last Life payment due preceding
the date of the Annuitant's death.
OPTION D - A fixed payout annuity payable monthly
JOINT AND SURVIVORSHIP while the Annuitant and the designated
LIFE ANNUITY Joint Annuitant are living, and continuing
thereafter during the lifetime of the
survivor. The amount to be continued to the
survivor is 100% of the joint annuity
payment, as specified at the time this
option is elected. The designated Joint
Annuitant must be designated at the time
this option is elected and must have an
adjusted age of at least 40. The adjusted
age is the person's age on his or her
birthday nearest the Settlement Date.
OPTION E - A fixed payout annuity payable monthly
INSTALLMENT REFUND while the Annuitant is living or, if later,
LIFE ANNUITY the date the annuity payments made under
this option total an amount which refunds
the entire amount applied under this option.
If the Annuitant is not living when the
final payment falls due, that payment will
be limited to the amount which needs to be
added to the payments already made to equal
the entire amount applied under this option.
OPTION F - A fixed payout annuity payable monthly
JOINT AND SURVIVORSHIP while either the Annuitant or designated
LIFE ANNUITY WITH Joint Annuitant is living, or if later, the
10-YEAR PERIOD CERTAIN end of 10 years. The designated Joint
Annuitant must be designated at the time
this option is elected and must have an
adjusted age of at least 40 years. The
adjusted age is the person's age on his or
her birthday nearest the settlement date.
D603 18
<PAGE>
OPTION G - Equal income installments for a specified
PAYMENTS FOR A period of years are paid whether the payee
SPECIFIED PERIOD lives or dies. The period certain specified
must be in whole numbers of years from 5
to 30.
OPTION H - Equal income installments of a specified
PAYMENTS OF A amount are paid until the principal sum
SPECIFIED AMOUNT remaining under this option from the amount
applied is less than the amount of the
installment. When that happens, the
principal sum remaining will be paid as a
final payment. The amount specified must
provide for payments for a period of at
least 5 years.
OPTION I - This option provides variable monthly
VARIABLE LIFE ANNUITY payments that will continue during the
WITH 10-YEAR lifetime of the Annuitant or for ten
PERIOD CERTAIN years, if longer. If the beneficiary of
any death benefits payable under this
contract elects this payment option, the
term "Annuitant" as used in the preceding
paragraph shall refer to such beneficiary
and the period certain will equal 10 years,
or the life expectancy of such beneficiary,
if shorter.
OPTION J - This option provides variable monthly
JOINT SURVIVORSHIP VARIABLE payments while the Annuitant and the
LIFE ANNUITY WITH designated Joint Annuitant are living.
10-YEAR PERIOD CERTAIN Payments will continue during the life of
the survivor or until the end of 10 years if
later. You must designate the Joint
Annuitant at the time You elect this option.
The designated Joint Annuitant must be at
least age 40 on the birthday nearest the
first Payment Calculation Date. This option
is not available for the payment of any
death benefit under this contract.
OPTION K - This option provides variable monthly
VARIABLE ANNUITY payments through the release of a fixed
FOR SPECIFIED PERIOD number of Annuity Units over a specified
period of time. Payment continues whether
the Annuitant lives or dies. The specified
period must be in whole numbers of years
from 5 to 30. However, the period selected
by the beneficiary may not extend beyond the
life expectancy of such beneficiary. This
option also provides for unscheduled
withdrawals. An unscheduled withdrawal will
reduce the number of remaining annuity
units. Thus, the specified period will be
reduced to the period that the remaining
annuity units can provide.
OPTION L - This option provides a variable income
VARIABLE LIFE which is payable over the Annuitant's
EXPECTANCY ANNUITY annually recalculated life expectancy or
the annually recalculated life expectancy
of the Annuitant and Joint Annuitant. This
option also provides for unscheduled
withdrawals. An unscheduled withdrawal will
reduce the Contract Value. This will thus
affect the amount of future payments. 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.
D603 19
<PAGE>
OPTION M - This option provides variable monthly
UNIT REFUND payments as long as the Annuitant lives.
VARIABLE LIFE ANNUITY In the event of the death of the Annuitant,
the income will stop and the Annuitant's
Beneficiary will receive in a lump sum the
value of the remaining Annuity Units. This
value is equal to the sum of the number of
remaining Annuity Units for each Subaccount
multiplied by the current Annuity Unit Value
for that Subaccount. The number of remaining
Annuity Units for each Subaccount will be
calculated as follows:
(1) the net amount in the Subaccount
applied under this option on the
first Payment Calculation Date
divided by the corresponding Annuity
Unit Value on that date minus
(2) the sum of the Annuity Units
released from the Subaccount to
make the payments under this
option.
OPTION N - This option provides a variable monthly
VARIABLE NON- income for the lifetime of the Annuitant.
REFUND LIFE ANNUITY No income is payable after the death of
the Annuitant.
OTHER OPTIONS We may offer other payment options or
alternative versions of the options listed
above.
PART 11: TABLES OF PAYMENT
OPTION AMOUNTS
The tables that follow show the guaranteed
minimum monthly payments for Options A-G,
and the minimum initial payment for the
Variable Payment Options I, J, K M and N for
each $1,000 applied. If Our rates in effect
at the Settlement Date are more favorable,
We will use those rates. Subsequent monthly
payments for the Variable Payment Options
will vary and may be higher or lower than
the first payment. Amounts for payment
frequencies, periods or ages not shown will
be furnished upon request.
The term "age" as used in the tables refers
to the adjusted age. The adjusted age is
defined as the age of the Annuitant on the
Annuitant's birthday nearest the effective
date of the payment option elected.
D603 20
<PAGE>
<TABLE>
<CAPTION>
OPTIONS A & E -- LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN; INSTALLMENT REFUND LIFE ANNUITY
- ------------ --------------------------- ------------------------- --------------------------
AGE OF
PAYEE INSTALLMENT REFUND 10 YEARS CERTAIN 20 YEARS CERTAIN
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
MALE FEMALE MALE FEMALE MALE FEMALE
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
40 $3.80 $3.64 $3.86 $3.60 $3.74 $3.54
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
45 4.05 3.85 4.14 3.82 3.99 3.74
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
50 4.36 4.12 4.50 4.10 4.28 3.99
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
55 4.76 4.47 4.95 4.47 4.61 4.31
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
60 5.28 4.93 5.54 4.96 4.97 4.67
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
65 5.97 5.54 6.30 5.63 5.29 5.06
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
70 6.91 6.39 7.24 6.50 5.43 5.31
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
75 8.21 7.57 8.26 7.56 5.44 5.40
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
80 10.04 9.26 9.12 8.60 5.46 5.46
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
85 12.61 11.68 9.60 9.31 5.46 5.46
- ------------ ------------- ------------- ------------ ------------ ------------- ------------
</TABLE>
OPTION B -- NON-REFUND LIFE
ANNUITY
- --------------- ------------ ------------
AGE OF PAYEE MALE FEMALE
- --------------- ------------ ------------
40 $ 3.95 $ 3.75
- --------------- ------------ ------------
45 4.24 3.98
- --------------- ------------ ------------
50 4.62 4.28
- --------------- ------------ ------------
55 5.12 4.68
- --------------- ------------ ------------
60 5.79 5.24
- --------------- ------------ ------------
65 6.75 6.04
- --------------- ------------ ------------
70 8.15 7.22
- --------------- ------------ ------------
75 10.26 9.03
- --------------- ------------ ------------
80 13.54 11.88
- --------------- ------------ ------------
85 18.72 16.54
- --------------- ------------ ------------
OPTION D -- JOINT AND SURVIVORSHIP LIFE ANNUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
FEMALE MALE
--------------------------------------------------------------------------------------
AGE 40 45 50 55 60 65 70 75
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 $3.49 $ 3.55 $ 3.59 $ 3.62 $ 3.64 $ 3.65 $ 3.66 $ 3.67
- -------------------------------------------------------------------------------------------------
45 3.58 3.67 3.74 3.80 3.83 3.86 3.88 3.89
- -------------------------------------------------------------------------------------------------
50 3.65 3.79 3.90 4.00 4.07 4.12 4.16 4.18
- -------------------------------------------------------------------------------------------------
55 3.72 3.89 4.06 4.22 4.35 4.44 4.51 4.56
- -------------------------------------------------------------------------------------------------
60 3.77 3.97 4.20 4.43 4.65 4.83 4.96 5.05
- -------------------------------------------------------------------------------------------------
65 3.80 4.04 4.31 4.62 4.94 5.25 5.51 5.71
- -------------------------------------------------------------------------------------------------
70 3.83 4.08 4.34 4.77 5.20 5.67 6.13 6.52
- -------------------------------------------------------------------------------------------------
75 3.85 4.12 4.46 4.88 5.40 6.04 6.75 7.46
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION F -- JOINT AND SURVIVORSHIP LIFE ANNUITY WITH 10-YEAR PERIOD CERTAIN
- -------------------------------------------------------------------------------------------------
FEMALE MALE
--------------------------------------------------------------------------------------
AGE 40 45 50 55 60 65 70 75
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40 $ 3.49 $ 3.55 $ 3.59 $ 3.62 $ 3.64 $ 3.65 $ 3.66 $ 3.67
- -------------------------------------------------------------------------------------------------
45 3.58 3.67 3.74 3.80 3.83 3.86 3.88 3.89
- -------------------------------------------------------------------------------------------------
50 3.65 3.78 3.90 4.00 4.07 4.12 4.15 4.17
- -------------------------------------------------------------------------------------------------
55 3.72 3.89 4.06 4.22 4.34 4.44 4.50 4.54
- -------------------------------------------------------------------------------------------------
60 3.77 3.97 4.19 4.43 4.64 4.82 4.95 5.03
- -------------------------------------------------------------------------------------------------
65 3.80 4.03 4.31 4.61 4.93 5.23 5.45 5.65
- -------------------------------------------------------------------------------------------------
70 3.83 4.08 4.39 4.75 5.18 5.63 6.07 6.41
- -------------------------------------------------------------------------------------------------
75 3.85 4.11 4.45 4.86 5.36 5.96 6.62 7.21
- -------------------------------------------------------------------------------------------------
</TABLE>
D603 21
<PAGE>
OPTION G -- PAYMENTS FOR A SPECIFIED PERIOD
- -------------------- ----------------- ------------------
ANNUAL MONTHLY
NUMBER OF YEARS INSTALLMENT INSTALLMENT
- -------------------- ----------------- ------------------
5 $ 211.99 $ 17.91
- -------------------- ----------------- ------------------
6 179.22 15.14
- -------------------- ----------------- ------------------
7 155.83 13.16
- -------------------- ----------------- ------------------
8 138.31 11.68
- -------------------- ----------------- ------------------
9 24.69 10.53
- -------------------- ----------------- ------------------
10 13.82 9.61
- -------------------- ----------------- ------------------
11 104.93 8.86
- -------------------- ----------------- ------------------
12 97.54 8.24
- -------------------- ----------------- ------------------
13 91.29 7.71
- -------------------- ----------------- ------------------
14 85.95 7.26
- -------------------- ----------------- ------------------
15 81.33 6.87
- -------------------- ----------------- ------------------
16 77.29 6.53
- -------------------- ----------------- ------------------
17 73.74 6.23
- -------------------- ----------------- ------------------
18 70.59 5.96
- -------------------- ----------------- ------------------
19 67.78 5.73
- -------------------- ----------------- ------------------
20 65.26 5.51
- -------------------- ----------------- ------------------
25 55.76 4.71
- -------------------- ----------------- ------------------
30 49.53 4.18
- -------------------- ----------------- ------------------
OPTION I -- VARIABLE PAYMENT LIFE ANNUITY WITH 10-YEAR PERIOD CERTAIN
- --------------- ------------ ------------
AGE OF PAYEE 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
- --------------- ------------ ------------
<TABLE>
<CAPTION>
OPTION J -- JOINT SURVIVOR VARIABLE PAYMENT LIFE ANNUITY WITH 10-YEAR PERIOD CERTAIN
- -----------------------------------------------------------------------------------------------
FEMALE MALE
------------------------------------------------------------------------------------
AGE 40 45 50 55 60 65 70 75
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 $ 3.92 $ 3.94 $ 3.96 $ 3.98 $ 3.99 $ 4.00 $ 4.00 $ 4.01
- -----------------------------------------------------------------------------------------------
45 3.96 4.00 4.03 4.06 4.08 4.09 4.10 4.11
- -----------------------------------------------------------------------------------------------
50 4.00 4.05 4.10 4.15 4.18 4.21 4.23 4.24
- -----------------------------------------------------------------------------------------------
55 4.03 4.10 4.18 4.24 4.30 4.35 4.39 4.41
- -----------------------------------------------------------------------------------------------
60 4.06 4.15 4.25 4.34 4.43 4.52 4.58 4.63
- -----------------------------------------------------------------------------------------------
65 4.09 4.19 4.31 4.44 4.57 4.70 4.81 4.90
- -----------------------------------------------------------------------------------------------
70 4.11 4.22 4.36 4.53 4.70 4.89 5.07 5.22
- -----------------------------------------------------------------------------------------------
75 4.12 4.75 4.41 4.60 4.82 5.07 5.34 5.59
- -----------------------------------------------------------------------------------------------
</TABLE>
D603 22
<PAGE>
OPTION K -- VARIABLE PAYMENT ANNUITY FOR A SPECIFIED PERIOD
- -------------------- ----------------- ------------------
ANNUAL MONTHLY
NUMBER OF YEARS INSTALLMENT INSTALLMENT
- -------------------- ----------------- ------------------
5 $217.98 $18.53
- -------------------- ----------------- ------------------
6 185.53 15.77
- -------------------- ----------------- ------------------
7 162.39 13.81
- -------------------- ----------------- ------------------
8 145.08 12.34
- -------------------- ----------------- ------------------
9 131.65 11.19
- -------------------- ----------------- ------------------
10 120.94 10.28
- -------------------- ----------------- ------------------
11 112.20 9.54
- -------------------- ----------------- ------------------
12 104.94 8.92
- -------------------- ----------------- ------------------
13 98.83 8.40
- -------------------- ----------------- ------------------
14 93.61 7.96
- -------------------- ----------------- ------------------
15 89.10 7.58
- -------------------- ----------------- ------------------
16 85.18 7.24
- -------------------- ----------------- ------------------
17 81.74 6.95
- -------------------- ----------------- ------------------
18 78.70 6.69
- -------------------- ----------------- ------------------
19 75.99 6.46
- -------------------- ----------------- ------------------
20 73.57 6.25
- -------------------- ----------------- ------------------
25 64.53 5.49
- -------------------- ----------------- ------------------
30 58.75 5.00
- -------------------- ----------------- ------------------
OPTION M -- VARIABLE PAYMENT LIFE ANNUITY WITH UNIT REFUND
- --------------- ------------ ------------
AGE OF PAYEE MALE FEMALE
- --------------- ------------ ------------
40 $ 4.12 $ 4.01
- --------------- ------------ ------------
45 4.25 4.11
- --------------- ------------ ------------
50 4.42 4.24
- --------------- ------------ ------------
55 4.64 4.41
- --------------- ------------ ------------
60 4.92 4.64
- --------------- ------------ ------------
65 5.28 4.94
- --------------- ------------ ------------
70 5.74 5.33
- --------------- ------------ ------------
75 6.32 5.86
- --------------- ------------ ------------
80 7.07 6.55
- --------------- ------------ ------------
85 8.01 7.43
- --------------- ------------ ------------
OPTION N -- VARIABLE PAYMENT LIFE ANNUITY
- --------------- ------------ ------------
AGE OF PAYEE MALE FEMALE
- --------------- ------------ ------------
40 $ 4.15 $ 4.02
- --------------- ------------ ------------
45 4.30 4.13
- --------------- ------------ ------------
50 4.50 4.27
- --------------- ------------ ------------
55 4.76 4.47
- --------------- ------------ ------------
60 5.11 4.73
- --------------- ------------ ------------
65 5.60 5.09
- --------------- ------------ ------------
70 6.29 5.60
- --------------- ------------ ------------
75 7.20 6.34
- --------------- ------------ ------------
80 8.49 7.41
- --------------- ------------ ------------
85 10.30 8.98
- --------------- ------------ ------------
D603 23
<PAGE>
[LOGO] PHOENIX
FLEXIBLE PREMIUM VARIABLE ACCUMULATION DEFERRED ANNUITY
ALL VALUES AND BENEFITS BASED ON THE INVESTMENT EXPERIENCE OF THE
SUBACCOUNTS OF THE SEPARATE ACCOUNT MAY INCREASE OR DECREASE AND ARE
VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. SEE PART 7 FOR A
DESCRIPTION OF HOW THE CONTRACT VALUES ARE DETERMINED, AND PART 9 FOR A
DESCRIPTION OF HOW THE DEATH BENEFITS ARE DETERMINED.
NOT ELIGIBLE FOR ANNUAL DIVIDENDS
D603
Exhibit 5(a)
Form of Application
<PAGE>
[phoenix graphic] PHOENIX
VARIABLE ANNUITY APPLICATION
<TABLE>
<S> <C> <C>
[] Phoenix Home Life Mutual Insurance Company [] Phoenix Life and Annuity Company [] Phoenix National Insurance Company
[] Phoenix Life Insurance Company [] PHL Variable Insurance Company
</TABLE>
Please Note: If application is taken in state where selected insurer has not
been admitted to do business, it is void and will be rejected.
________________________________________________________________________________
CONTRACT NAME ______________________
TYPE OF CONTRACT:
[] NONQUALIFIED
[] 1035 Exchange
[] QUALIFIED
[] Regular Contributory IRA
[] Roth IRA
[] IRA Direct Rollover
[] Simple IRA
[] SEP IRA
[] Tax year ___________
[] Owner acknowledges receipt of PHL
Disclosure Statement
403(b) TSA - Employer must sign as Applicant and states that it is an
educational organization as described in Internal Revenue Section 170(b)(1)(A)
(ii); a tax exempt organization as described in Code section 501(c)(3); or a
State, political subdivision of a State or an agency or instrumentality of one
of the foregoing.
(The Employer further states that only amounts deferred by the
Owner/Annuitant under a salary reduction agreement with the Employer will be
applied to this Annuity contract.)
Section 457 Deferred Compensation Plan - Owner states that it is an "eligible
Employer" as defined in [section]457 (E)(1) of The Internal Revenue Code, and
will remain the sole owner of any contract issued under this application until
distributed under the terms of the plan.
BENEFIT OPTION:
[] Benefit Option 1
[] Benefit Option 2
[] Benefit Option 3
Death Benefit and expenses will vary depending on the contract and Benefit
Option chosen. Please refer to your prospectus for further details on Options
available under the contract.
ANNUITANT, PRIMARY
Name____________________________________________________________________________
Address_________________________________________________________________________
City, State, ZIP Code___________________________________________________________
Phone________________________ Sex: [] Male [] Female
Social Security Number____________________ Date of Birth______________________
CONTINGENT ANNUITANT (If Annuitant and Owner are different)
Name____________________________________________________________________________
Address_________________________________________________________________________
City, State, ZIP Code___________________________________________________________
Phone________________________ Sex: [] Male [] Female
Social Security Number____________________ Date of Birth______________________
CONTRACT OWNER (Complete only if different from Annuitant - Joint Owners
between spouses only)
Name____________________________________________________________________________
Address_________________________________________________________________________
City, State, ZIP Code___________________________________________________________
Phone________________________ Sex: [] Male [] Female
Social Security Number____________________ Date of Birth______________________
BENEFICIARY DESIGNATIONS:
LEGAL NAME RELATIONSHIP
- --------------------------------------------------------------------------------
Annuitant's Primary Beneficiary
- --------------------------------------------------------------------------------
Annuitant's Contingent Beneficiary
- --------------------------------------------------------------------------------
Owner's Primary Beneficiary
(Required only if Owner and
Annuitant are different)
- --------------------------------------------------------------------------------
Owner's Contingent Beneficiary
- --------------------------------------------------------------------------------
[] Deferred [] Immediate Payment Option ______________________
Initial Purchase Payment: $ _______________ Maturity Date __________________
Subsequent purchase payments will be flexible unless otherwise noted as follows:
$_________
[] Annual [] Semi-Annual [] Quarterly [] Monthly [] Check-O-Matic*
BILLING NOTICES ARE REQUESTED. SEND BILLS TO:
Name____________________________________________________________________________
Address_________________________________________________________________________
City, State, ZIP Code___________________________________________________________
*If Check-O-Matic elected, please complete authorization form and include a void
check.
OL2744 5-99
<PAGE>
DOLLAR COST AVERAGING
All transfers will be executed on the first of the month following receipt of
the dollar cost averaging request.
Transfer amount: $__________
($2,000 minimum balance in sending subaccount)
Frequency:
[] Monthly [] Quarterly
[] Semi-Annual [] Annual
Sending Subaccount (choose one):
[] Money Market
[] Guaranteed Interest Account
[] Other ____________________________
Receiving Subaccounts:
Subaccount Transfer Amount
_______________ _________________
_______________ _________________
_______________ _________________
_______________ _________________
_______________ _________________
_______________ _________________
TELEPHONE TRANSFERS AND CHANGE IN
PAYMENT ALLOCATION:
[] Yes [] No
Telephone transfers and changes in payment allocation are subject to the terms
of the Prospectus. If you check the "yes" box, telephone orders will be accepted
from you and your registered representative and you agree that, because we
cannot verify the authenticity of telephone instructions, we will not be liable
for any loss caused by our acting on telephone instructions, unless caused by
our gross negligence.
SEND COMPLETED FORM WITH A CHECK PAYABLE TO "PHOENIX" TO:
Phoenix Variable Products Mail Operations
PO Box 8027
Boston MA 02266-8027
REGISTERED REPRESENTATIVE ELECTION
Choose One:
[] Option 1
[] Option 2
[] Option 3
SUBACCOUNT ALLOCATION (Use full percentages - Must equal 100%)
<TABLE>
<S> <C> <C> <C>
_____ Phoenix-Aberdeen International _____ Templeton Asset Allocation
_____ Phoenix-Aberdeen New Asia _____ Templeton Developing Markets
_____ Phoenix-Duff & Phelps Real Estate Securities _____ Templeton International
_____ Phoenix-Engemann Nifty-Fifty _____ Mutual Shares Investments (Templeton)
_____ Phoenix-Goodwin Balanced _____ Templeton Stock
_____ Phoenix-Goodwin Growth _____ Wanger Foreign Forty
_____ Phoenix-Goodwin Money Market _____ Wanger International Small Cap
_____ Phoenix-Goodwin Multi-Sector Fixed Income _____ Wanger Twenty
_____ Phoenix-Goodwin Strategic Allocation _____ Wanger US Small Cap
_____ Phoenix-Goodwin Strategic Theme _____ Guaranteed Interest Account
_____ Phoenix-Hollister Value Equity _____ MVA - 3 Year
_____ Phoenix-Oakhurst Growth and Income _____ MVA - 5 Year
_____ Phoenix-Seneca Mid-Cap Growth _____ MVA - 7 Year
_____ Phoenix Research Enhanced Index _____ MVA - 10 Year
_____ Phoenix-Schafer Mid-Cap Value _____ Other ___________________________
</TABLE>
TEMPORARY MONEY MARKET ALLOCATION
If the state of issue does not require refund of premium during the Right To
Cancel Period, you may elect to temporarily allocate your premiums to the
Phoenix-Goodwin Money Market Subaccount until the end of the Right to Cancel
Period as stated in the policy. Indicate: [] Yes [] No
MISCELLANEOUS INSTRUCTIONS/COMMENTS
________________________________________________________________________________
________________________________________________________________________________
STATEMENT OF OWNER/APPLICANT AND ANNUITANT
Will the proposed contract replace any existing annuity or life insurance?
[] Yes [] No
If Yes, list company name, plan and year issued.
WE HEREBY REPRESENT THE ANSWERS TO THE ABOVE QUESTIONS TO BE ACCURATE AND
COMPLETE. WE HEREBY VERIFY OUR UNDERSTANDING THAT ALL PAYMENTS AND VALUES
PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF THE FUND, ARE
VARIABLE AND NOT GUARANTEED. WE ACKNOWLEDGE RECEIPT OF CURRENT PROSPECTUSES FOR
THE VARIABLE ANNUITY AND THE FUND.
[] Statement of Additional Information Requested
Signed at___________________________________________ On ________________________
(City, State) (Date)
Under penalty of perjury, I (owner) certify that my Social Security/Taxpayer ID
number is correct as it appears on this application.
Signature of Owner/Applicant____________________________________________________
Signature of Witness____________________________________________________________
Signature of Annuitant (if other than Owner)____________________________________
STATEMENT OF REGISTERED REPRESENTATIVE
<TABLE>
<S> <C> <C>
Will this contract replace any existing insurance or annuity? [] Yes [] No
This replacement is meant to be a tax-free exchange under Section 1035: [] Yes [] No
</TABLE>
If yes, please give details in the Miscellaneous Section.
The Agent hereby certifies that the Owner signed the application in his/her
presence; he/she has truly and accurately recorded on this form the information
supplied by the proposed annuitant; and that he/she is qualified and authorized
to discuss the contract herein applied for.
(Use full percentages - must equal 100%)
____________________________ ____________ _____________________ ______ _________
Representative's Signature Date Broker-Dealer Firm Rep # % Share
____________________________ ____________ _____________________ ______ _________
Representative's Signature Date Broker-Dealer Firm Rep # % Share
____________________________ ____________ _____________________ ______ _________
Representative's Signature Date Broker-Dealer Firm Rep # % Share
COMPLETE ONLY IF AN EXCEPTION TO YOUR BROKER-DEALER'S OPTION ELECTION IS
REQUESTED
Broker-Dealer hereby elects to permit an Option Exception for this
Contract and representative(s) as noted above and as confirmed by Signature
below.
Broker-Dealer Firm______________________________________________________________
Broker-Dealer's Signature_______________________________________________________
Print Name & Title_____________________________Broker-Dealer Number ____________
Exhibit 9
Written Opinion of Edwin L. Kerr, Esq.
<PAGE>
July 21, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: PHL Variable Accumulation Account
PHL Variable Insurance Company
Pre-Effective Amendment No. 1 to Form N-4
File Nos. 333-78761 and 811-8914
Dear Sirs:
As Counsel to the depositor, I have participated in the development of
and am familiar with the variable annuity, Phoenix Retirement Planner's Edge
("Contracts"), which is the subject of the above-captioned Registration
Statement on Form N-4.
In connection with this opinion, I have reviewed the Contracts, the
Registration Statement, the Charter and By-Laws of the company, relevant
proceedings of the Board of Directors, and the provisions of New York insurance
law relevant to the issuance of the Contracts.
Based upon this review, I am of the opinion that the Contracts, when
issued, will be validly issued, and will constitute a legal and binding
obligation of PHL Variable Insurance Company.
I further consent to the use of this opinion as an exhibit to the
above-captioned Registration Statement and to my being named as an expert under
"Experts" therein.
Very truly yours,
/s/ Edwin L. Kerr
------------------------------
Edwin L. Kerr, Counsel
PHL Variable Insurance Company
Exhibit 10(a)
Consent of Edwin L. Kerr, Esq.
<PAGE>
To Whom It May Concern:
I hereby consent to the reference to my name under the caption "Legal
Matters" in the Prospectus contained in Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File No. 333-78761) filed by PHL Variable
Accumulation Account with the Securities and Exchange Commission under the
Securities Act of 1933.
Very truly yours,
Dated: July 21, 1999 /s/ Edwin L. Kerr
-----------------------------------
Edwin L. Kerr, Counsel
PHL Variable Insurance Company
Exhibit 10(b)
Consent of Independent Accountants
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated
February 11, 1999, relating to the financial statements of PHL Variable
Insurance Company, which appears in such Statement of Additional Information,
and to the incorporation by reference of our report into the Prospectus which
constitutes part of this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Statement of Additional
Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
July 23, 1999
