As filed with the Securities and Exchange Commission on December 29, 2000
File No. 333-48140
811-08914
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 [X]
(Check appropriate box or boxes.)
----------------------
PHL Variable Accumulation Account
(Exact Name of Registrant)
PHL Variable Insurance Company
(Name of Depositor)
----------------------
One American Row, Hartford, Connecticut 06102-5056
(Address of Depositor's Principal Executive Offices) (Zip Code)
(800) 447-4312
(Depositor's Telephone Number, Including Area Code)
----------------------
Dona D. Young, Esq.
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06102-5056
(Name and Address of Agent for Service)
----------------------
Copy to:
Edwin L. Kerr, Esq.
PHL Variable Insurance Company
One American Row
Hartford, CT 06102-5056
----------------------
Approximate date of proposed public offering:
December 29, 2000 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.
----------------------
================================================================================
<PAGE>
PHOENIX HOME LIFE 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
PART A INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
FORM N-4 ITEM PROSPECTUS CAPTION
------------- ------------------
<S> <C>
1. Cover Page ..................................................... Cover Page
2. Definitions ..................................................... Special Terms
3. Synopsis ..................................................... Summary of Expenses; Contract Summary
4. Condensed Financial Information ................................... Financial Highlights
5. General Description of Registrant, Depositor and Portfolio
Companies ..................................................... PHL Variable and the Account; Investments of the
Account; Voting Rights
6. Deductions and Expenses ........................................... Deductions and Charges; Sales of Immediate Variable
Annuity Contracts
7. General Description of Variable Annuity Contracts.................. The Immediate Variable Annuity; Purchase of Contracts;
Miscellaneous Provisions
8. Annuity Period .................................................... The Annuity Period
9. Death Benefits..................................................... Payment Upon Death
10. Purchases and Contract Value ...................................... Purchase of Contracts; Sales of Immediate Variable
Annuity Contracts
11. Redemptions ..................................................... Surrender of Contract; Partial Withdrawals; Free Look
Period
12. Taxes ..................................................... Federal Income Taxes
13. Legal Proceedings.................................................. Legal Matters
14. Table of Contents of the Statement of Additional Information....... SAI
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
FORM N-4 ITEM SAI CAPTION
------------- -----------
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 INCOME
ADVANTAGE(SM)
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 DECEMBER 29, 2000
This prospectus describes a single premium immediate fixed and variable annuity
contract. The contract is designed to provide you with retirement income. The
contract offers a variety of variable and fixed payment options.
You may allocate your premium and contract value to one or more of the
subaccounts of the PHL Variable Accumulation Account ("Account") and the Fixed
Income Allocation ("FIA"). The assets of each subaccount will be used to
purchase, at net asset value, shares of a series in the following designated
funds. The portion of your premium allocated to the FIA will purchase fixed
annuity payments.
THE PHOENIX EDGE SERIES FUND
----------------------------
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Aberdeen New Asia Series
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Bankers Trust Nasdaq 100-Index(R) Series
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Engemann Small & Mid-Cap Growth Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Sanford Bernstein Global Value Series
[diamond] Phoenix-Sanford Bernstein Mid-Cap Value Series
[diamond] Phoenix-Sanford Bernstein Small-Cap Value Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme Series
THE ALGER AMERICAN FUND
-----------------------
[diamond] Alger American Leveraged AllCap Portfolio
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
-----------------------------------
[diamond] EAFE(R) Equity Index Fund
FEDERATED INSURANCE SERIES
--------------------------
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
---------------------------------------
[diamond] VIP Contrafund(R) Portfolio
[diamond] VIP Growth Opportunities Portfolio
[diamond] VIP Growth Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
----------------------------------------------------
[diamond] Mutual Shares Securities Fund -- Class 2
[diamond] Templeton Asset Strategy Fund -- Class 2
[diamond] Templeton Developing Markets Securities Fund -- Class 2
[diamond] Templeton Growth Securities Fund -- Class 2
[diamond] Templeton International Securities Fund -- Class 2
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
---------------------------------------
[diamond] Technology Portfolio
WANGER ADVISORS TRUST
---------------------
[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 income tax liability.
1
<PAGE>
This prospectus is valid only if accompanied or preceded by current prospectuses
for the funds. 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 ("FDIC") 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 is valid only if accompanied or
preceded by current fund prospectuses. These prospectuses 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 Annuity
Operations at 800/541-0171.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
--------------------------------------------------------------------
SPECIAL TERMS............................................ 4
SUMMARY OF EXPENSES...................................... 5
CONTRACT SUMMARY......................................... 10
FINANCIAL HIGHLIGHTS..................................... 11
PERFORMANCE HISTORY...................................... 11
THE IMMEDIATE FIXED AND VARIABLE ANNUITY................. 11
PHL VARIABLE AND THE ACCOUNT ............................ 11
INVESTMENTS OF THE ACCOUNT............................... 11
The Phoenix Edge Series Fund......................... 11
The Alger American Fund.............................. 13
Deutsche Asset Management VIT Funds.................. 13
Federated Insurance Series........................... 13
Fidelity Variable Insurance Products................. 13
Franklin Templeton Variable Insurance
Products Trust ..................................... 13
The Universal Institutional Funds, Inc............... 14
Wanger Advisors Trust................................ 14
Investment Advisors.................................. 14
Services of the Advisors............................. 15
FIA...................................................... 15
PURCHASE OF CONTRACTS.................................... 16
Payment Upon Death Before the Annuity Date........... 16
ADDITIONAL RIDER BENEFITS................................ 16
Guaranteed Minimum Payment Rider................... 16
OPTIONAL PROGRAMS AND BENEFITS 16
Transfers.......................................... 16
DEDUCTIONS AND CHARGES................................... 16
Deductions from the Separate Account................. 16
Tax................................................ 16
Surrender Charges.................................. 16
Risk and Administrative Fee........................ 16
Payment Charge..................................... 16
Reduced Charges or Credit Additional Amounts......... 16
Other Charges........................................ 17
THE ANNUITY PERIOD....................................... 17
PAYMENT OPTIONS ..................................... 17
Option A--Single Life Annuity...................... 17
Option B--Single Life Annuity with Period Certain. 17
Option C--Joint Survivor Life Annuity ............. 17
Option D--Joint Survivor Life Annuity with
Period Certain.................................. 17
Option E--Annuity for a Specified Period........... 17
Option F--Life Expectancy Annuity ................. 17
Option G--Unit Refund Life Annuity................. 17
Other Options and Rates............................ 18
Other Conditions................................... 18
Payment Upon Death After the Annuity Date............ 18
Surrender of Contract: Withdrawals................... 19
LAPSE OF CONTRACT........................................ 20
VARIABLE ACCOUNT VALUATION PROCEDURES.................... 20
MISCELLANEOUS PROVISIONS................................. 20
Assignment........................................... 20
Deferment of Payment ................................ 20
Free Look Period..................................... 20
Amendments to Contracts.............................. 21
Substitution of Fund Shares.......................... 21
Ownership of the Contract............................ 21
FEDERAL INCOME TAXES..................................... 21
Introduction......................................... 21
Income Tax Status.................................... 21
Taxation of Annuities in General--Non- 21
Qualified Plans......................................
Surrenders or Withdrawals.......................... 21
Penalty Tax on Certain Surrenders and Withdrawals.. 22
Additional Considerations............................ 22
Diversification Standards ........................... 22
Individual Retirement Annuity........................ 23
IRAs............................................... 23
Penalty Tax on Certain Surrenders and
Withdrawals from IRAs............................. 23
Seek Tax Advice.................................... 24
SALES OF CONTRACTS....................................... 24
STATE REGULATION......................................... 24
REPORTS.................................................. 24
VOTING RIGHTS............................................ 24
LEGAL MATTERS............................................ 25
SAI...................................................... 25
APPENDIX A--PERFORMANCE HISTORY........................... 26
APPENDIX B--DEDUCTIONS FOR PREMIUM TAXES.................. 28
APPENDIX C--ILLUSTRATION OF VALUES........................ 29
3
<PAGE>
SPECIAL TERMS
--------------------------------------------------------------------------------
The following is a list of terms and their meanings when used in this
prospectus.
ACCOUNT: PHL Variable Accumulation Account.
ACCUMULATION UNIT: A standard of measurement for the Phoenix-Goodwin Money
Market Subaccount used to determine the value of a contract prior to the annuity
date during the free look period.
ACCUMULATION UNIT VALUE: The value of one accumulation unit was set to 1.0000 on
the date assets were first allocated to the Phoenix-Goodwin Money Market
Subaccount. The value of one accumulation unit on any subsequent valuation date
is determined by multiplying the immediately preceding accumulation unit value
by the applicable net investment factor for the valuation period ending on such
valuation date.
ANNUITANT: The primary person whose life is used as the measuring life under the
contract. Also, see Joint Annuitant.
ANNUITY DATE: The date we calculate and make the first annuity payment.
ANNUITY PAYMENT: The amount we pay on each payment calculation date. It is the
sum of the fixed annuity payment and the variable annuity payment.
ANNUITY UNIT: A standard of measurement used in determining the amount of each
variable annuity payment.
ASSUMED INTEREST RATE: The rate used to determine the variable annuity payment.
COMMUTED VALUE: The present value of any remaining guaranteed annuity payments.
This amount is calculated using the assumed interest rate for variable annuity
payments or the underlying interest rate for fixed annuity payments.
CONTRACT: The single premium immediate fixed and variable 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: The sum of the total value of the subaccounts and the FIA on
any valuation date.
FIA: The Fixed Income Allocation is an investment option within our general
account.
FIXED ANNUITY PAYMENT: 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, The Alger American Fund, Deutsche Asset
Management VIT Funds, Federated Insurance Series, Franklin Templeton Variable
Insurance Products Trust, Fidelity(R) Variable Insurance Products, The Universal
Institutional Funds, Inc. and Wanger Advisors Trust.
JOINT ANNUITANT: A person other than the annuitant on whose life annuity
payments may also be based.
ISSUE DATE: The date that the initial premium is invested under a contract.
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.
NET PREMIUM: The premium less any applicable tax.
PAYEE: The person you designate to receive annuity payments.
PAYMENT CALCULATION DATE: The date we calculate annuity payments. The first
payment calculation date is the annuity date. After the first payment
calculation date, we will calculate payments on the same date each month. We use
the previous valuation date if such date is not a valuation date.
PAYMENT OPTION: The provisions under which we make a series of annuity payments
to the annuitant or other payee, such as a single life annuity. See "Payment
Options."
PAYMENT UPON DEATH: The obligation of PHL Variable under a contract to make a
payment on the death of annuitant.
PHL VARIABLE (OUR, US, WE, COMPANY): PHL Variable Insurance Company.
PREMIUM: The amount you pay when you purchase a contract. Generally, we require
a minimum premium of $35,000.
SERIES: A separate investment portfolio of a fund.
SURRENDER VALUE: The commuted value less any applicable surrender charge.
VAO: Variable Annuity Operations.
VALUATION DATE: A valuation date is every day the New York Stock Exchange
("NYSE") is open for trading.
VARIABLE ANNUITY PAYMENT: An annuity providing payments that vary in amount,
according to the investment experience of the selected subaccounts.
4
<PAGE>
VPMO: The Variable Products Mail Operations division of PHL Variable that
receives and processes incoming mail for VAO.
5
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
Surrender Charges(1) (as a percentage of amount withdrawn):
<S> <C>
Age of Premium in Complete Years 0-1............................................ 7%
Age of Premium in Complete Years 1-2............................................ 6%
Age of Premium in Complete Years 2-3............................................ 5%
Age of Premium in Complete Years 3-4............................................ 4%
Age of Premium in Complete Years 4-5............................................ 3%
Age of Premium in Complete Years 5-6............................................ 2%
Age of Premium in Complete Years 6-7............................................ 1%
Age of Premium in Complete Years 7 and thereafter .............................. None
Subaccount Transfer Charge(2)....................................................... None
ANNUAL PAYMENT CHARGE
Maximum......................................................................... $24
ANNUAL SEPARATE ACCOUNT EXPENSES (as a percentage of average account value)
Maximum Risk and Administrative Fee............................................. 1.40%
Maximum Guaranteed Minimum Payment Rider Risk and Administrative Fee............ 1.00%
</TABLE>
----------------------------
(1) A surrender charge is taken from the proceeds when a contract is surrendered
or when an amount is withdrawn if the premium has not been held under the
contract for a certain period of time. See "Deductions and Charges--Surrender
Charges."
(2) Currently, there is no transfer charge; however, we reserve the right to
charge a fee of up to $20 per transfer after the first 10 transfers each
contract year.
6
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
----------------------------------------------------------------------------------------------------------------------------------
Other Expenses Total Expenses Total Expenses
Management Rule 12b-1 Before Before After
Series Fees Fees Reimbursement(1) Reimbursement Reimbursement(2)
----------------------------------------------------------------------------------------------------------------------------------
THE PHOENIX EDGE SERIES FUND
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International .75% N/A .26% 1.01% 1.01%
Phoenix-Aberdeen New Asia 1.00% N/A 1.39% 2.39% 1.25%
Phoenix-Bankers Trust Dow 30 .35% N/A 1.40%(3) 1.75%(3) .50%
Phoenix-Bankers Trust Nasdaq-100 Index(R) .35% N/A .45% .80% .50%
Phoenix-Duff & Phelps Real Estate Securities .75% N/A .56% 1.31% 1.00%
Phoenix-Engemann Capital Growth .62% N/A .06% .68% .68%
Phoenix-Engemann Nifty Fifty .90% N/A .53% 1.43% 1.05%
Phoenix-Engemann Small & Mid-Cap Growth .90% N/A .70% 1.60% 1.15%
Phoenix-Federated U.S. Government Bond .60% N/A 1.70%(3) 2.30%(3) .75%
Phoenix-Goodwin Money Market .40% N/A .17% .57% .55%
Phoenix-Goodwin Multi-Sector Fixed Income .50% N/A .21% .71% .65%
Phoenix-Hollister Value Equity .70% N/A 1.33% 2.03% .85%
Phoenix-J.P. Morgan Research Enhanced Index .45% N/A .30% .75% .55%
Phoenix-Janus Equity Income .85% N/A 1.40%(3) 2.25%(3) 1.00%
Phoenix-Janus Flexible Income .80% N/A 1.65%(3) 2.45%(3) .95%
Phoenix-Janus Growth .85% N/A 1.05%(3) 1.90%(3) 1.00%
Phoenix-Morgan Stanley Focus Equity .85% N/A 1.30%(3) 2.15%(3) 1.00%
Phoenix-Oakhurst Balanced .54% N/A .16% .70% .70%
Phoenix-Oakhurst Growth and Income .70% N/A .31% 1.01% .85%
Phoenix-Oakhurst Strategic Allocation .58% N/A .12% .70% .70%
Phoenix-Sanford Bernstein Global Value .90% N/A .85%(3) 1.75%(3) 1.05%
Phoenix-Sanford Bernstein Mid-Cap Value 1.05% N/A 1.53% 2.58% 1.20%
Phoenix-Sanford Bernstein Small-Cap Value 1.05% N/A .85%(3) 1.90%(3) 1.20%
Phoenix-Seneca Mid-Cap Growth .80% N/A 1.24% 2.04% 1.05%
Phoenix-Seneca Strategic Theme .75% N/A .22% .97% .97%
----------------------------------------------------------------------------------------------------------------------------------
(1) Each series pays a portion or all of its expenses other than the management fee. The Phoenix-J.P. Morgan Research Enhanced
Index Series will pay up to .10%; the Phoenix-Engemann Capital Growth, Phoenix-Goodwin Multi-Sector Fixed Income,
Phoenix-Oakhurst Strategic Allocation, Phoenix-Goodwin Money Market, Phoenix-Oakhurst Balanced, Phoenix-Engemann Nifty
Fifty, Phoenix-Oakhurst Growth and Income, Phoenix-Hollister Value Equity, Phoenix-Sanford Bernstein Mid-Cap Value,
Phoenix-Bankers Trust Dow 30, Phoenix-Federated U.S. Government, Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income,
Phoenix-Janus Growth, Phoenix-Morgan Stanley Focus Equity, Phoenix-Sanford Bernstein Global Value and Phoenix-Sanford
Bernstein Small-Cap Value Series will pay up to .15%; the Phoenix-Duff & Phelps Real Estate Securities, Phoenix-Seneca
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%.
(2) Reflects the effect of any management fee waivers and reimbursement of expenses by the investment advisor.
(3) These figures are estimates; these series have been available for less than 12 months as of the date of this prospectus.
</TABLE>
7
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
----------------------------------------------------------------------------------------------------------------------------------
Other Expenses Total Expenses Total Expenses
Management Rule 12b-1 Before Before After
Series Fees Fees Reimbursement Reimbursement Reimbursement(2)
----------------------------------------------------------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Leveraged AllCap Portfolio .85% N/A .08%(4,7) .93%(4) .93%
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
----------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund .45% N/A .69% 1.15% .65%
FEDERATED INSURANCE SERIES
----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II .60% N/A .24% .84% .84%
Federated High Income Bond Fund II .60% N/A .19% .79% .79%
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
----------------------------------------------------------------------------------------------------------------------------------
VIP Contrafund(R) Portfolio(8) .58% N/A .10%(4) .78%(4) .75%(10)
VIP Growth Opportunities Portfolio(9) .58% N/A .11%(4) .79%(4) .78%(10)
VIP Growth Portfolio(9) .58% N/A .09%(4) .77%(4) .75%(10)
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund--Class 2(6) .60% .25%(3) .19% 1.04% 1.04%
Templeton Asset Strategy Fund--Class 2(5,6) .60% .25%(3) .18% 1.03% 1.03%
Templeton Developing Markets Securities Fund--
Class 2(5,6) 1.25% .25%(3) .31% 1.81% 1.81%
Templeton Growth Securities Fund--Class 2(6) .83% .25%(3) .05% 1.13% 1.13%
Templeton International Securities Fund--
Class 2(5,6) .69% .25%(3) .19% 1.13% 1.13%
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio .80% N/A 1.85%(4) 2.65%(4) 1.15%
WANGER ADVISORS TRUST
----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 1.00% N/A 2.45%(1) 3.45% 1.45%
Wanger International Small Cap 1.25% N/A .24%(1) 1.49% 1.49%
Wanger Twenty .95% N/A 1.17%(1) 2.12% 1.35%
Wanger U.S. Small Cap .95% N/A .07%(1) 1.02% 1.02%
----------------------------------------------------------------------------------------------------------------------------------
(1) Each series pays a portion or all of its expenses other than the management fee. The Wanger Foreign Forty will pay up to
.45%, the Wanger U.S. Small Cap Series will pay up to.50%, the Wanger International Small Cap Series will pay up to .60%
and the Wanger Twenty Series will pay up to .40%.
(2) Reflects the effect of any management fee waivers and reimbursement of expenses by the investment advisor.
(3) The fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in the fund's prospectus.
(4) These figures are estimates; these series have been available for less than 12 months as of the date of this prospectus.
(5) On 2/8/00, shareholders approved a merger and reorganization that combined the fund with a similar fund of the Franklin
Templeton Variable Insurance Products Trust, effective 5/1/00.
(6) The table shows total expenses based on the new fees and assets as of 12/31/99 and not the assets of the combined funds.
The following table estimates what the total expenses would be based on the assets of the combined funds as of 5/1/00:
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
MANAGEMENT RULE 12b-1 OTHER TOTAL OPERATING
ESTIMATED ANNUAL EXPENSES FROM 5/1/00 FEES FEES EXPENSES EXPENSES
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Shares Securities Fund - Class 2 .60% .25% .19% 1.04%
------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund - Class 2 .60% .25% .14% .99%
------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund - 1.25% .25% .29% 1.79%
Class 2
------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund - Class 2 .80% .25% .05% 1.10%
------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund - Class 2 .65% .25% .20% 1.10%
------------------------------------------------------------------------------------------------------------------------
(7) Included in "Other Expenses" is .01% of interest expense.
(8) Effective November 3, 1997, the advisor has voluntarily agreed to reimburse the fund to the extent that total operating
expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary
expenses), as a percentage of its average net assets, exceed 1.10%. This arrangement can be discontinued at any time.
(9) Effective November 3, 1997, the advisor has voluntarily agreed to reimburse the fund to the extent that total operating
expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary
expenses), as a percentage of its average net assets, exceed 1.60%. This arrangement can be discontinued at any time.
(10) A portion of the brokerage commissions that the fund pays is used to reduce the fund's expenses. In addition, through
arrangements with the fund's custodian, credits realized as a result of uninvested cash balances are used to reduce
custodian expenses.
</TABLE>
8
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
It is impossible to show you what expenses you would incur if you purchased a
contract because there are so many different factors that 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.
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-Aberdeen International Series $105 $157 $211 $376
Phoenix-Aberdeen New Asia Series $119 $196 $274 $490
Phoenix-Bankers Trust Dow 30 Series $114 $184 N/A N/A
Phoenix-Bankers Trust Nasdaq 100-Index(R) Series $103 $151 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series $108 $166 $225 $402
Phoenix-Engemann Capital Growth Series $102 $147 $195 $346
Phoenix-Engemann Nifty Fifty Series $109 $169 $231 $413
Phoenix-Engemann Small & Mid-Cap Growth Series $111 $174 N/A N/A
Phoenix-Federated U.S. Government Bond Series $125 $215 N/A N/A
Phoenix-Goodwin Money Market Series $101 $144 $190 $336
Phoenix-Goodwin Multi-Sector Fixed Income Series $102 $148 $197 $349
Phoenix-Hollister Value Equity Series $115 $186 $258 $462
Phoenix-J.P. Morgan Research Enhanced Index Series $103 $149 $199 $353
Phoenix-Janus Equity Income Series $130 $228 N/A N/A
Phoenix-Janus Flexible Income Series $124 $213 N/A N/A
Phoenix-Janus Growth Series $114 $182 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series $126 $218 N/A N/A
Phoenix-Oakhurst Balanced Series $102 $148 $196 $348
Phoenix-Oakhurst Growth and Income Series $105 $157 $211 $376
Phoenix-Oakhurst Strategic Allocation Series $102 $148 $196 $348
Phoenix-Sanford Bernstein Global Value Series $112 $178 N/A N/A
Phoenix-Sanford Bernstein Mid-Cap Value Series $121 $202 $282 $504
Phoenix-Sanford Bernstein Small-Cap Value Series $114 $182 N/A N/A
Phoenix-Seneca Mid-Cap Growth Series $115 $186 $259 $463
Phoenix-Seneca Strategic Theme Series $105 $156 $209 $373
Alger American Leveraged AllCap $104 $155 N/A N/A
EAFE(R) Equity Index Fund $106 $161 N/A N/A
Federated Fund for U.S. Government Securities II $103 $152 N/A N/A
Federated High Income Bond Fund II $103 $151 N/A N/A
VIP Contrafund(R) Portfolio $103 $150 N/A N/A
VIP Growth Opportunities Portfolio $103 $151 N/A N/A
VIP Growth Portfolio $103 $150 N/A N/A
Mutual Shares Securities Fund-Class 2 $105 $158 $212 $379
Templeton Asset Strategy Fund-Class 2 $105 $158 $212 $378
Templeton Developing Markets Securities Fund-Class 2 $113 $180 $248 $444
Templeton Growth Securities Fund-Class 2 $106 $160 $217 $387
Templeton International Securities Fund-Class 2 $106 $160 $217 $387
Technology Portfolio $121 $203 N/A N/A
Wanger Foreign Forty $129 $225 N/A N/A
Wanger International Small Cap $110 $171 $233 $418
Wanger Twenty $116 $189 $262 $469
Wanger U.S. Small Cap $105 $157 $211 $377
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you do not surrender your contract, 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-Aberdeen International Series $35 $107 $181 $376
Phoenix-Aberdeen New Asia Series $49 $146 $244 $490
Phoenix-Bankers Trust Dow 30 Series $44 $134 N/A N/A
Phoenix-Bankers Trust Nasdaq 100-Index(R) Series $33 $101 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series $38 $116 $195 $402
Phoenix-Engemann Capital Growth Series $32 $97 $165 $346
Phoenix-Engemann Nifty Fifty Series $39 $119 $201 $413
Phoenix-Engemann Small & Mid-Cap Growth Series $41 $124 N/A N/A
Phoenix-Federated U.S. Government Bond Series $55 $165 N/A N/A
Phoenix-Goodwin Money Market Series $31 $94 $160 $336
Phoenix-Goodwin Multi-Sector Fixed Income Series $32 $98 $167 $349
Phoenix-Hollister Value Equity Series $45 $136 $228 $462
Phoenix-J.P. Morgan Research Enhanced Index Series $33 $99 $169 $353
Phoenix-Janus Equity Income Series $60 $178 N/A N/A
Phoenix-Janus Flexible Income Series $54 $163 N/A N/A
Phoenix-Janus Growth Series $44 $132 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series $56 $168 N/A N/A
Phoenix-Oakhurst Balanced Series $32 $98 $166 $348
Phoenix-Oakhurst Growth and Income Series $35 $107 $181 $376
Phoenix-Oakhurst Strategic Allocation Series $32 $98 $166 $348
Phoenix-Sanford Bernstein Global Value Series $42 $128 N/A N/A
Phoenix-Sanford Bernstein Mid-Cap Value Series $51 $152 $252 $504
Phoenix-Sanford Bernstein Small-Cap Value Series $44 $132 N/A N/A
Phoenix-Seneca Mid-Cap Growth Series $45 $136 $229 $463
Phoenix-Seneca Strategic Theme Series $35 $106 $179 $373
Alger American Leveraged AllCap $34 $105 N/A N/A
EAFE(R) Equity Index Fund $36 $111 N/A N/A
Federated Fund for U.S. Government Securities II $33 $102 N/A N/A
Federated High Income Bond Fund II $33 $101 N/A N/A
VIP Contrafund(R) Portfolio $33 $100 N/A N/A
VIP Growth Opportunities Portfolio $33 $101 N/A N/A
VIP Growth Portfolio $33 $100 N/A N/A
Mutual Shares Securities Fund-Class 2 $35 $108 $182 $379
Templeton Asset Strategy Fund-Class 2 $35 $108 $182 $378
Templeton Developing Markets Securities Fund-Class 2 $43 $130 $218 $444
Templeton Growth Securities Fund-Class 2 $36 $110 $187 $387
Templeton International Securities Fund-Class 2 $36 $110 $187 $387
Technology Portfolio $51 $153 N/A N/A
Wanger Foreign Forty $59 $175 $289 $566
Wanger International Small Cap $40 $121 $203 $418
Wanger Twenty $46 $139 $232 $469
Wanger U.S. Small Cap $35 $107 $181 $377
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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, 1999, except as indicated. The tables reflect Account
expenses, including the fee for the Guaranteed Minimum Payment Rider, as well as
the funds. See "Deductions and Charges" in this prospectus and the fund
prospectuses.
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 the premium.
Certain states currently impose premium taxes on the contracts ranging from 0%
to 3.5% of the premium. See "Deductions and Charges--Tax" and Appendix B.
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."
10
<PAGE>
CONTRACT SUMMARY
--------------------------------------------------------------------------------
This summary describes the general provisions of the contract.
Certain provisions of the contract described in this prospectus may differ
in a particular state because of specific state requirements.
If there is ever a difference between the provisions described within this
prospectus and the provisions of the contract, the contract provisions will
prevail.
OVERVIEW
The contract is designed to provide regular income payments from an annuity
contract. It offers a combination of variable and fixed payments. If variable
annuity payments are elected, second and subsequent payments will vary based
upon the performance of the underlying funds.
INVESTMENT FEATURES
MINIMUM CONTRIBUTION
[diamond] Generally, the minimum premium is $35,000.
ALLOCATION OF PREMIUM AND CONTRACT VALUE
[diamond] You may choose where your premium is invested: in one or more of the
subaccounts or in the FIA.
[diamond] Transfers between the subaccounts and to the FIA can be made.
[diamond] If all or part of the premium is invested in one or more of the
subaccounts, the contract value will vary with the investment
performance of the subaccounts and is not guaranteed.
WITHDRAWALS
[diamond] You may make withdrawals under payment options B, D, E and F or fully
surrender the contract for its surrender value less any applicable tax
under payment options E and F. No withdrawals may be made under any
other payment options. Please refer to "Deductions and Charges--
Surrender Charges" for a complete description.
DEATH BENEFIT
[diamond] The death benefit is calculated differently under each payment option
and the amount varies based on the option selected.
DEDUCTIONS AND CHARGES
FROM THE PREMIUM
[diamond] Taxes--currently ranges 0% to 3.5% (varies by state).
FROM THE CONTRACT VALUE
[diamond] A deduction for surrender charges may occur when you surrender your
contract or request a withdrawal if the assets have not been held
under the contract for a specified period of time.
[diamond] No surrender charges are taken upon the death of the annuitant.
[diamond] A declining surrender charge is assessed on withdrawals based on the
date the premium is deposited:
--------------------------------------------------------------
Percent 7% 6% 5% 4% 3% 2% 1% 0%
--------------------------------------------------------------
Age of Premium in 0 1 2 3 4 5 6 7+
Complete Years
--------------------------------------------------------------
o The total surrender charges on a contract will never exceed 9% of
the premium.
[diamond] Payment Charge--maximum of $24 each year.
FROM THE ACCOUNT
[diamond] Risk and administrative fee-- varies based on the election of the
Guaranteed Minimum Payment Rider. See "Deductions and Charges - Risk
and Administrative Fee"
OTHER CHARGES OR DEDUCTIONS
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 20 days after you receive it and cancel the contract. You will
receive the contract value in cash. However, if applicable state law requires,
we will return the premium paid less any withdrawals made during the free look
period. See "Free Look Period" for a detailed discussion.
MINIMUM PAYMENT
If on any valuation date the annuity payment due is less than $20, we may
make such settlement as is equitable to the payee.
LAPSE
If on any valuation date the contract value is zero, the contract will
immediately terminate and lapse without value.
11
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The subaccounts of this contract commenced operations as of the date of this
prospectus; therefore, data 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 IMMEDIATE VARIABLE AND FIXED ANNUITY
--------------------------------------------------------------------------------
The immediate variable and fixed annuity contract is issued by PHL Variable.
If variable annuity payments are elected, the amounts held under a contract will
be invested in the Account and variable annuity payments will vary in accordance
with the investment experience of the investment options selected. It is the
owner and annuitant under a contract who bear the risk of investment gain or
loss rather than PHL Variable. However, amounts may be allocated to the FIA, in
which case PHL Variable will guarantee specified fixed annuity payments.
You control the investment objective of the contract on an ongoing basis by
reallocating the contract value among the subaccounts or from the subaccounts to
the FIA.
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 and our main administrative office is located at 100
Bright Meadow Boulevard, Enfield, Connecticut. 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 FIA 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 FIA, see the "FIA" section of this prospectus.
INVESTMENTS OF THE ACCOUNT
--------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
The following subaccounts invest in corresponding series of The Phoenix Edge
Series Fund:
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
series provides a means for investors to invest a portion of their assets
outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: the series seeks long-term capital
appreciation. The series invests primarily in a diversified portfolio of equity
securities of issuers organized and principally operating in Asia, excluding
Japan.
PHOENIX-BANKERS TRUST DOW 30 SERIES: the series seeks to track the total
return of the Dow Jones Industrial Average(SM) before fund expenses.
PHOENIX-BANKERS TRUST NASDAQ-100 INDEX(R) SERIES: this non-diversified
series seeks to track the total return of the Nasdaq-100 Index(R) ("Index")
before fund expenses. The series is "passively" managed (it invests in the same
companies in the same proportions as the Index). The series may invest in equity
equivalents in an attempt to improve cash flow and reduce transaction costs,
while replicating investments in the Index.
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.
12
<PAGE>
PHOENIX-ENGEMANN CAPITAL 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 series invests principally in common stocks of
corporations believed by management to offer growth potential.
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 that 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-ENGEMANN SMALL & MID-CAP GROWTH SERIES: the series seeks to achieve
its objective of long-term growth of capital by normally investing at least 65%
of assets in equities of "small-cap" and "mid-cap" companies (market
capitalization under $1.5 billion). Expected emphasis will be on investments in
common stocks of U.S. corporations that have rapidly growing earnings per share.
Stocks are generally sold when characteristics such as growth rate, competitive
advantage, or price, render the stock unattractive. The advisor may change the
asset allocation or temporarily take up a defensive investment strategy
depending on market conditions.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES: seeks to maximize total
return by investing primarily in debt obligations of the U.S. Government, its
agencies and instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: the investment objective of the series
is to provide maximum current income consistent with capital preservation and
liquidity. The series invests exclusively in high quality money market
instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: seeks long-term total
return. It invests in a diversified portfolio of high yield and high quality
fixed income securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: has a primary investment objective of
the series is long-term capital appreciation and a secondary investment
objective of current income. The series invests 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-J.P. MORGAN 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-JANUS EQUITY INCOME SERIES: the investment objective of the series
is to seek current income and long-term growth of capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: the investment objective of the series
is to seek to obtain maximum total return, consistent with preservation of
capital.
PHOENIX-JANUS GROWTH SERIES: the investment objective of the series is to
seek long-term growth of capital, in a manner consistent with the preservation
of capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: the investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: the investment objective of the series is
to seek reasonable income, long-term capital growth and conservation of capital.
The series invests based on combined considerations of risk, income, capital
enhancement and protection of capital value.
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 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-OAKHURST 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 series
invests in stocks, bonds and money market instruments in accordance with the
investment advisor's appraisal of investments most likely to achieve the highest
total return.
PHOENIX-SANFORD BERNSTEIN GLOBAL VALUE SERIES seeks long-term capital
appreciation through investing in foreign and domestic equity securities. The
advisor uses a value-oriented approach with a focus on non-U.S. companies in
developed countries in Europe and the Far East, Australia and Canada. The
advisor may invest a portion of the series' assets in developing market
companies.
13
<PAGE>
PHOENIX-SANFORD BERNSTEIN 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 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-SANFORD BERNSTEIN SMALL-CAP VALUE SERIES seeks long-term capital
appreciation by investing primarily in small-capitalization stocks the advisor
believes are undervalued.
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.
PHOENIX-SENECA 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
series invests primarily in common stocks believed to have substantial potential
for capital growth.
THE ALGER AMERICAN FUND
The following subaccount invests in the corresponding portfolio of The Alger
American Fund:
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO: The investment objective of the
portfolio is long-term capital appreciation. It invests primarily in equity
securities, such as common or preferred stocks, which are listed on U.S.
exchanges or in the over-the-counter market. The portfolio invests primarily in
"growth" stocks. Under normal circumstances, the portfolio invests in the equity
securities of companies of any size, which demonstrate promising growth
potential. The portfolio can leverage, that is, borrow money, up to one-third of
its total assets to buy additional securities.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
The following subaccount invests in a corresponding fund of Deutsche Asset
Management VIT Funds:
EAFE(R) EQUITY INDEX FUND: The fund seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The fund invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain subaccounts invest in a corresponding fund of the Federated
Insurance Series. The following funds are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the fund is to seek current 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 fund is
to seek high current income by investing primarily in a diversified portfolio of
high-yield, lower-rated corporate bonds.
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
The following subaccounts invest in corresponding portfolios of the
Fidelity(R) Variable Insurance Products:
VIP CONTRAFUND(R) PORTFOLIO: The investment objective of the portfolio is to
seek long-term capital appreciation. Principal investment strategies include:
o Normally investing primarily in common stocks.
o Investing in securities of companies whose value it believes is not fully
recognized by the public.
o Investing in domestic and foreign issuers.
o Investing in either "growth" stocks or "value" stocks or both.
o Using fundamental analysis of each issuer's financial condition and industry
position and market and economic conditions to select investments.
VIP GROWTH OPPORTUNITIES PORTFOLIO: The investment objective of the
portfolio is to seek to provide capital growth. Principal investment strategies
include:
o Normally investing primarily in common stocks.
o Potentially investing in other types of securities, including bonds which
may be lower-quality debt securities.
o Investing in domestic and foreign issuers.
o Investing in either "growth" stocks or "value" stocks or both.
o Using fundamental analysis of each issuer's financial condition and industry
position and market and economic conditions to select investments.
VIP GROWTH PORTFOLIO: The investment objective of the portfolio is to seek
to achieve long-term capital appreciation. Principal investment strategies
include:
o Normally investing primarily in common stocks.
o Investing in companies that it believes have above-average growth potential.
o Investing in securities of domestic and foreign issuers.
o Using fundamental analysis of each issuer's financial condition and industry
position and market and economic conditions to select investments.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
The following subaccounts invest in Class 2 shares of the corresponding fund
of the Franklin Templeton Variable Insurance Products Trust:
14
<PAGE>
MUTUAL SHARES SECURITIES FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Securities Fund invests primarily in domestic equity securities that the manager
believes are significantly undervalued.
TEMPLETON ASSET STRATEGY FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Strategy Fund 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, including emerging market countries.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND: The investment objective of
the fund is long-term capital appreciation. The Templeton Developing Markets
Securities Fund invests primarily in emerging market equity securities.
TEMPLETON INTERNATIONAL SECURITIES FUND: The investment objective of the
fund is long-term capital growth. The Templeton International Securities Fund
invests primarily in stocks of companies located outside the United States,
including emerging markets.
TEMPLETON GROWTH SECURITIES FUND: The investment objective of the fund is
long-term capital growth. The Templeton Growth Securities Fund invests primarily
in common stocks issued by companies in various nations throughout the world,
including the U.S. and emerging markets.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding portfolio of The Universal
Institutional Funds, Inc. The following portfolio is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the portfolio is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the investment advisor expects to benefit from their involvement
in technology and technology-related industries.
WANGER ADVISORS TRUST
The following subaccounts invest in corresponding series of the Wanger
Advisors Trust:
WANGER FOREIGN FORTY: The investment objective of the series is to seek
long-term capital growth. The Wanger Foreign Forty 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 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 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 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 ADVISORS
The following are the investment advisors and subadvisors for the variable
investment options:
--------------------------------------------------------------------------------
PHOENIX INVESTMENT COUNSEL, INC. ("PIC")
--------------------------------------------------------------------------------
Phoenix-Aberdeen International
Phoenix-Engemann Capital Growth
Phoenix-Engemann Nifty Fifty
Phoenix-Engemann Small & Mid-Cap Growth
Phoenix-Goodwin Money Market
--------------------------------------------------------------------------------
15
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--------------------------------------------------------------------------------
PHOENIX INVESTMENT COUNSEL, INC. ("PIC")
--------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income
Phoenix-Hollister Value Equity
Phoenix-Oakhurst Balanced
Phoenix-Oakhurst Growth and Income
Phoenix-Oakhurst Strategic Allocation
Phoenix-Seneca Mid-Cap Growth
Phoenix-Seneca Strategic Theme
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PIC SUBADVISORS
--------------------------------------------------------------------------------
Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International
Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth
o Phoenix-Engemann Nifty Fifty
o Phoenix-Engemann Small & Mid-Cap Growth
Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth
o Phoenix-Seneca Strategic Theme
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PHOENIX VARIABLE ADVISORS, INC. ("PVA")
--------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30
Phoenix-Bankers Trust Nasdaq-100 Index(R)
Phoenix-Federated U.S. Government Bond
Phoenix-J.P. Morgan Research Enhanced Index
Phoenix-Janus Equity Income
Phoenix-Janus Flexible Income
Phoenix-Janus Growth
Phoenix-Morgan Stanley Focus Equity
Phoenix-Sanford Bernstein Global Value
Phoenix-Sanford Bernstein Mid-Cap Value
Phoenix-Sanford Bernstein Small Cap Value
Phoenix-Oakhurst Strategic Allocation
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PVA SUBADVISORS
--------------------------------------------------------------------------------
Bankers Trust Company
o Phoenix-Bankers Trust Dow 30
o Phoenix-Bankers Trust Nasdaq-100 Index(R)
Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond
J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan Research Enhanced Index
Janus Capital Corporation
o Phoenix-Janus Equity Income
o Phoenix-Janus Flexible Income
o Phoenix-Janus Growth
Morgan Stanley Asset Management
o Phoenix-Morgan Stanley Focus Equity
Alliance Capital Management L.P.
o Phoenix-Sanford Bernstein Global Value
o Phoenix-Sanford Bernstein Mid-Cap Value
o Phoenix-Sanford Bernstein Small Cap Value
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DUFF & PHELPS INVESTMENT MANAGEMENT CO. ("DPIM")
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Phoenix-Duff & Phelps Real Estate Securities
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PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC ("PAIA")
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Phoenix-Aberdeen New Asia
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Based on subadvisory agreements with the fund, PIC and PVA as investment
advisors delegate certain investment decisions and research functions to
subadvisors.
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. PVA is a wholly
owned subsidiary of PM Holdings, Inc.
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OTHER ADVISORS
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Fred Alger Management, Inc.
o Alger American Leveraged AllCap Portfolio
Bankers Trust Company
o EAFE(R) Equity Index Fund
Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
Fidelity Management and Research Company
o VIP Contrafund(R) Portfolio
o VIP Growth Opportunities Portfolio
o VIP Growth Portfolio
Franklin Mutual Advisers, LLC
o Mutual Shares Securities Fund
Morgan Stanley Asset Management
o Technology Portfolio
Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
Templeton Global Advisors Limited
o Templeton Growth Securities Fund
Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities Fund
Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
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SERVICES OF THE ADVISORS
The advisors continually 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 advisors and subadvisors, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the funds.
FIA
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In addition to the Account, you may allocate the premium to the FIA. The
amount of premium you allocate
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to the FIA will become part of PHL Variable's general account assets. You do not
share in the investment experience of those assets. Rather, we guarantee a 3%
rate of return on your allocated amount. Although we are not obligated to credit
interest at a higher rate than the minimum, we will credit any excess interest
as determined by us based on expected investment yield information.
Because of exemptive and exclusionary provisions, we have not registered
interests in our general account under the Securities Act of 1933. Also, we have
not registered our general account as an investment company under the Investment
Company Act of 1940, as amended. Therefore, neither the general account nor any
of its interests are subject to these Acts, and the Securities and Exchange
Commission has not reviewed the general account disclosures. These disclosures
may, however, be subject to certain provisions of the federal securities law
regarding accuracy and completeness of statements made in this prospectus.
PURCHASE OF CONTRACTS
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MINIMUM PREMIUM
Generally, we require a minimum premium of $35,000:
In certain circumstances we may reduce the premium amount we accept for a
contract. Factors in determining qualifications for any such reduction include:
(1) the make-up and size of the prospective group;
(2) the amount of compensation to be paid to registered representatives on the
premium.
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 is received. We reserve the right to change these rules from time to
time.
PREMIUM ALLOCATION
The net premium received under the contract will be allocated in any
combination to any subaccount or the FIA in the proportion specified when you
purchased the contract.
GENERAL
Usually, a contract may not be purchased for a proposed annuitant who is 90
years of age or older. A premium in excess of $1,000,000 cannot be made without
our permission.
PAYMENT UPON DEATH BEFORE THE ANNUITY DATE
On the death of any owner, annuitant or joint annuitant before the annuity
date, the death benefit equals the contract value on the date we receive due
proof of death.
DEATH OF OWNER
If the contract is held by a single owner who dies before the annuity date,
we will pay the death benefit to the beneficiary. If the beneficiary has
predeceased the owner, the owner's estate will be the beneficiary. If the
beneficiary is the spouse of the sole owner, the beneficiary may elect to
continue the contract and exercise the rights of the owner.
If the contract is held by multiple owners and one or more owners die before
the annuity date, we will pay the death benefit to the surviving owner(s), if
any, who will be deemed to be the beneficiary(ies). If the only owners of the
contract are spouses of each other, the surviving spouse may elect to continue
the contract.
DISTRIBUTION ON DEATH OF OWNER
Any beneficiary who is a natural person, may, within one year after we
receive due proof of death, elect to receive a payment option. The payment
option selected may not extend beyond such beneficiary's life or life expectancy
and the payments must begin within one year after death. If a payment option is
not elected or the beneficiary is a non-natural person, the entire contract
value will be distributed in a lump sum no later than five years after the date
of death.
DEATH OF ANNUITANT OR JOINT ANNUITANT
If the annuitant or joint annuitant die before the annuity date, we will pay
the death benefit to the owner(s) who will be deemed to be the beneficiary(ies).
If there is no surviving owner(s), we will pay the death benefit to the
beneficiary(ies). Payment will be made as described above in "Distribution on
Death of Owner."
ADDITIONAL RIDER BENEFITS
--------------------------------------------------------------------------------
You may elect additional benefits that are available under your contract. A
charge may be deducted from your contract value for each additional rider
benefit chosen. More details will be included in the form of a rider to your
contract if any of these benefits is chosen. The following benefits are
currently available (if approved in your state). Additional riders also may be
available as described in your policy.
GUARANTEED MINIMUM PAYMENT RIDER
This rider is only available if you elect it when you purchase your
contract. It guarantees that the each annuity payment will never be less than
the initial annuity payment as long as no withdrawals are taken. If a withdrawal
is taken, then the annuity payment will be reduced proportionately by the
withdrawal amount.
The charge for this rider is taken in the form of an additional risk and
administrative fee of up to 1.00%. We reserve the right to limit the subaccounts
available when this rider is elected.
OPTIONAL PROGRAMS AND BENEFITS
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TRANSFERS
You may transfer all or a portion of the value of the subaccounts of this
contract between and among the subaccounts and from the subaccounts to the FIA.
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No transfers may be made from the FIA to the subaccounts. Transfers may be made
by telephone or written request. We reserve the right to limit the number of
transfers you may make each contract year. However, you may make up to at least
twelve transfers per contract year among the subaccounts. Once each contract
year, you may transfer all or a portion of the value of the subaccounts from the
subaccounts to the FIA. Transfers from the subaccounts to the FIA will affect
the amount of future fixed annuity payments. The amount of future fixed annuity
payments will be determined by the contract value of the FIA on the date of the
transfer, the amount transferred to the FIA, and the annuity payment rate in
effect on the date of the transfer for the payment option selected when you
purchased your contract. Any transfer charge will be deducted from the
subaccounts from which the amounts are to be transferred with each such
subaccount bearing a pro rata share of the transfer charge. The value of each
subaccount will be determined on the valuation date that coincides with the date
of transfer.
You may also request transfers among available subaccounts or from the
subaccounts to the FIA by calling VAO at 800/541-0171 between the hours of 8:30
a.m. and 4:00 p.m. Eastern Time on any valuation date. Unless you elect in
writing not to authorize telephone transfers, telephone transfer orders 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 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 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.
Because excessive trading can hurt fund performance and harm all contract
owners, we reserve the right to temporarily or permanently terminate exchange
privileges or reject any specific order from anyone whose transactions seem to
follow a timing pattern, including those who request more than one exchange out
of a subaccount within any 30-day period. We will not accept batch transfer
instructions from registered representatives (acting under powers of attorney
for multiple contract owners), unless we have entered into a third-party
transfer service agreement with the registered representative's broker-dealer
firm.
No surrender charge will be assessed when a transfer is made. Currently,
there is no charge for transfers. You are permitted at least one free transfer
each month. We reserve the right to impose a transfer charge after the first
free transfer made in each month, upon prior written notice to you. In no event,
however, will such transfer charge exceed $20 per transaction. 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 twelve transfers during each contract year among
the subaccounts. Once each contract year, you may transfer all or a portion of
the value of the subaccounts from the subaccounts to the FIA. No transfers
may be made from the FIA.
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.
DEDUCTIONS AND CHARGES
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DEDUCTIONS FROM THE PREMIUM
TAX
Whether or not a 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. Taxes on the
premium currently range from 0% to 3.5%. We will pay any tax due upon the
receipt of the premium. For a list of states and premium taxes, see Appendix B
to this prospectus.
DEDUCTIONS FROM THE CONTRACT VALUE
SURRENDER CHARGES
A deduction for surrender charges for this contract may be taken from
proceeds of withdrawals from, or complete surrender of the contract. The amount
(if any) of a surrender charge depends on whether your premium is held under the
contract for a certain period of time. No surrender charge will be taken from
death proceeds. The deduction for surrender charges is as follows:
---------------------------------------------------------------
Percent 7% 6% 5% 4% 3% 2% 1% 0%
---------------------------------------------------------------
Age of Premium in 0 1 2 3 4 5 6 7+
Complete Years
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The total surrender charges on a contract will never exceed 9% of the
premium, and the applicable level of surrender charge cannot be changed with
respect to outstanding contracts. Any distribution costs not paid for by
surrender charges will be paid by PHL Variable from the assets of the general
account.
PAYMENT CHARGE
We deduct a payment charge from each annuity payment. This charge is used to
reimburse us for some of
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the administrative expenses we incur in establishing and maintaining the
contracts.
The maximum payment charge under a contract is $24 each year. It is deducted
from each annuity payment in equal amounts. If you fully surrender your
contract, the full payment charge if applicable, will be deducted at the time of
withdrawal.
DEDUCTIONS FROM THE ACCOUNT
RISK AND ADMINISTRATIVE FEE
We make a daily deduction from each subaccount for the risk and
administrative fee. The fee is based on an annual rate of up to 1.40% for the
base contract plus up to 1.00% for the Guaranteed Minimum Payment Rider if
elected. It is taken against the daily net assets of the subaccounts. Although
you bear the investment risk of the series in which you invest, 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.
No risk and administrative fee is deducted from the FIA. 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.
REDUCED CHARGES OR CREDIT ADDITIONAL AMOUNTS
We may reduce or eliminate the risk and administrative fee, the surrender or
payment charge or credit additional amounts 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 the premium;
(3) whether there is a pre-existing 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;
(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; and
(5) the amount of compensation to be paid to registered representatives on the
premium.
Any reduction or elimination of charges will not be unfairly discriminatory
against any person. We will make any such adjustment according to our own rules
in effect at the time the contract is issued. We reserve the right to change
these rules from time to time.
OTHER CHARGES
As compensation for investment management services, the advisors 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 ANNUITY PERIOD
--------------------------------------------------------------------------------
The annuity period is that period of time beginning on the annuity date and
during which payments to you are made.
PAYMENT OPTIONS
When you purchase the contract, you must choose among the available payment
options. The options allow you to choose:
[diamond] Payments Options A, B, C, D, E, F, and G. Variable annuity payments
attributed to premium allocated to the subaccounts depend on
subaccount investment performance. Any payments attributed to premium
allocated to the FIA will provide fixed annuity payments while either
the annuitant or joint annuitant is living. The minimum payment due
must be at least $20.
The annuity payments begin on the annuity date. The level of annuity
payments will depend on the option selected and such factors as the age of the
annuitant, the form of annuity, annuity payment rates, and the frequency of
payments. The contract and the SAI provide additional information on the methods
used for calculating annuity payments.
The assumed interest rate for the variable annuity payments is 3.0%, 5.0% or
6.0% on an annual basis (subject to state availability). The assumed rate is
selected when you purchase the contract. It is used to calculate the first
variable annuity payment and is the smallest net rate of investment return
required to ensure that the dollar amount of variable annuity payments does not
decrease. The amount of subsequent variable annuity payments will depend on the
relationship between the assumed interest rate and the actual investment
performance of each subaccount. Although choosing a higher assumed interest rate
will generate a higher first variable annuity payment than choosing a lower
assumed interest rate, a contract with a higher assumed interest rate must earn
a higher net rate of investment return than a contract with a lower assumed
interest rate to ensure that the dollar amount of subsequent variable annuity
payments does not decrease. The contract will not be issued with variable
annuity payments if you do not select an assumed interest rate.
We make daily deductions from contract values held in subaccounts for the
risk and administrative fee. These charges affect all variable annuity payments.
The following descriptions should allow you to compare the basic differences
of the currently available payment options.
OPTION A--SINGLE LIFE ANNUITY
Provides annuity payments based on the life of the annuitant. No income or
payment to a beneficiary is paid after the death of the annuitant.
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OPTION B--SINGLE LIFE ANNUITY WITH PERIOD CERTAIN
Provides annuity payments 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, 15, or 20-year period selected.
OPTION C--JOINT SURVIVOR LIFE ANNUITY
Provides annuity payments while the annuitant and the designated joint
annuitant are living and continues thereafter during the lifetime of the
survivor at a level of 100% or 50% of the original level elected when you
purchased your contract. 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 D--JOINT SURVIVOR LIFE ANNUITY WITH PERIOD CERTAIN
Provides annuity payments 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 the 10, 15 or 20-year period certain at
a level of 100% or 50% of the original level elected when you purchased your
contract. 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--ANNUITY FOR SPECIFIED PERIOD
Provides annuity payments 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, but may not be greater than 100 minus the age of the
annuitant. 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.
OPTION F--LIFE EXPECTANCY ANNUITY
Provides annuity payments over the annuitant's annually recalculated life
expectancy. A contract owner may at anytime request withdrawals representing
part or all of the remaining contract value less any applicable surrender
charge. Upon the death of the annuitant, the remaining contract value will be
paid in a lump sum to the annuitant's beneficiary. This option is available only
if 100% of the net premium is allocated to the FIA.
OPTION G--UNIT REFUND LIFE ANNUITY
Provides annuity payments for the lifetime of the annuitant. If the
annuitant dies, the annuitant's beneficiary will receive in a lump sum (1) the
value of the annuity units on the annuity date less the sum of any variable
annuity payments made prior to the annuitant's death plus (2) the total amount
applied to the FIA on the annuity date less the sum of any fixed annuity
payments made prior to the annuitant's death.
OTHER OPTIONS AND RATES
We may offer other payment options at the time of application. 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 annuity payment rates shall be used in determining the amount of any
annuity payments under the payment options above.
OTHER CONDITIONS
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. 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 Distributions
("LEDs"). A LED program is available to IRA participants. Any payment options
elected under regular or SIMPLE IRA contracts must also meet federal income tax
distribution requirements. Requests to elect this program must be made in
writing.
Under the LED program, regardless of contract year, amounts up to the
required minimum distribution may be withdrawn without a deduction for surrender
charges. See "Surrender Charges." Any amounts withdrawn that have not been held
under a contract for at least seven years and are in excess of the minimum
distribution will be subject to any applicable surrender charge.
If the monthly annuity payment under a payment option would be less than
$20, we may make a single sum payment equal to the contract value on the date
the 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.
SURRENDER OF CONTRACT; WITHDRAWALS
If the annuitant is living, withdrawals may be made from amounts held under
payment options B, D, E or F. 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 annuity 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. Annuity units redeemed in a withdrawal from multiple subaccounts will be
redeemed on a pro rata basis unless you designate otherwise.
Under payment options B or D, you may withdraw, less any applicable
surrender charge, amounts equal to the commuted value of the payments that would
have been made during the certain period you chose under the payment option.
If you withdraw the entire commuted value of the annuity payments we would
have made during the certain period, we will not make any annuity payments
during the years remaining in the certain period. If you withdraw only
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<PAGE>
a portion of the commuted value of the annuity payments we would have made
during the certain period, we will reduce the remaining annuity payments during
the years remaining in the certain period. The remaining annuity payments are
reduced by the same percentage as the percentage of the commuted value
surrendered. Variable annuity payments will be commuted at the assumed interest
rate. Fixed annuity payments will be commuted using the underlying interest
rate.
Annuity payments that are to be made after the certain period is over will
not change.
Under payment options E and F, you may withdraw, less any applicable
surrender charge, all or part of the commuted value. Withdrawals under payment
options E and F will affect the amount of future annuity payments.
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 withdrawals. See "Federal
Income Taxes." A deduction for surrender charges may be imposed on withdrawals
or complete surrender of a contract. See "Surrender Charges." 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 o The minimum payment due is less than
$20. PHL Variable will notify you in writing that the contract has
lapsed.
PAYMENT UPON DEATH AFTER THE ANNUITY DATE
If an owner dies after the annuity date and there is no surviving owner, any
remaining payments will be paid to the beneficiary under the payment option in
effect on the date of death. Payments may not be deferred or otherwise extended.
If there is a surviving owner, the payments continue as if there had been no
death.
If the annuitant and joint annuitant, if any, dies and is survived by any
owner, any remaining guaranteed payments will be paid to such owner(s). If no
owner survives, any remaining guaranteed payments will be paid to the
beneficiary. Payments will continue under the payment option in effect at the
date of death and may not be deferred or otherwise extended. Alternatively, the
surviving owner(s), or beneficiary if no owner survives, may elect to take the
commuted value of any remaining guaranteed payments in a lump sum.
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.
ANNUITY UNIT VALUE
The value of one annuity unit was set at $1.0000 on the date assets were
first allocated to a subaccount. The value of one annuity unit on any subsequent
valuation date is determined by multiplying the immediately preceding annuity
unit value by the applicable net investment factor for the valuation period
ending on such valuation date divided by 1.000000 plus the rate of interest for
the number of days in the valuation period based on the assumed interest rate.
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 risk and administrative 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.
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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 withdrawal of a contract. See "Surrenders of Contracts;
Withdrawals."
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 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 the processing of any
such transactions 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.
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 20 days and receive, in cash, the
adjusted value of your premium. You may receive more or less than your premium
depending on investment experience of the Phoenix-Goodwin Money Market
Subaccount during the free look period. If applicable state law requires, we
will return the full amount of the premium we received. (A longer free look
period may be required by your state.)
Your premium will temporarily be applied to the Phoenix-Goodwin Money Market
Subaccount. On the annuity date, the then value of this contract's share in the
Phoenix-Goodwin Money Market Subaccount will automatically be reallocated to the
various subaccounts and the FIA in accordance with your instructions for the
allocation of premium provided when you purchased the
contract.
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 that necessitates a corresponding change
in the prospectus or the SAI must be filed with the SEC.
SUBSTITUTION OF FUND SHARES
Although we believe it to be highly unlikely, it is possible that in the
judgment of our management, one or more of the series of the funds may become
unsuitable for investment by contract owners because of a change in investment
policy, or a change in the tax laws, or because the shares are no longer
available for investment. In that event, we may seek to substitute the shares of
another series or the shares of an entirely different fund. Before this can be
done, the approval of the SEC, and possibly one or more state insurance
departments, will be required.
OWNERSHIP OF THE CONTRACT
Ordinarily, the purchaser of a contract is both the owner and the annuitant
and is entitled to exercise all the rights under the contract. However, the
owner may be an individual or entity other than the annuitant. Spouses may own a
contract as joint owners. Transfer of the ownership of a contract may involve
federal income tax consequences, and a qualified advisor should be consulted
before any such transfer is attempted.
FEDERAL INCOME TAXES
--------------------------------------------------------------------------------
INTRODUCTION
The contracts are designed for use with retirement plans which may or may
not be tax-qualified plans under the provisions of the Internal Revenue Code of
1986, (the "Code"). The contracts may be used to establish regular, SIMPLE and
Roth IRAs. The contracts will not be issued in connection with other
tax-qualified plans such as employer-sponsored or tax-sheltered annuity plans.
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 income tax status, on the type of
retirement plan for which the contract is purchased, and upon the income tax and
employment status of the individual concerned.
The following discussion is general in nature and is not intended as income
tax advice. The income tax rules are complicated and this discussion can only
make you aware of the issues. Each person concerned should consult a
professional tax advisor. No attempt is made to consider any estate or
inheritance taxes or any applicable state, local or other income 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 income tax status of the contracts. Purchasers bear the complete risk that
the contracts may not be treated as "annuity contracts" under
22
<PAGE>
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.
INCOME 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 not meeting the diversification requirements, see
"Diversification Standards."
SURRENDERS OR WITHDRAWALS
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 regular IRAs and all SIMPLE IRAs, 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) allocable to
investment in the contract before August 14, 1982; (v) under a qualified funding
asset (as defined in Code Section 130(d)); (vi) under an immediate annuity
contract (as defined in Code Section 72(u)(4)); or (vii) 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 U.S. 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 IRAs. See "Penalty Tax on
Surrenders and Withdrawals from IRAs."
ADDITIONAL CONSIDERATIONS
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 a non-natural person (for example, a corporation) holds the contract the
income on that contract (generally the increase in the net surrender value less
the premium) 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 an IRA, where the contract is a qualified funding
23
<PAGE>
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.
DIVERSIFICATION STANDARDS
DIVERSIFICATION REGULATIONS
To comply with the diversification regulations under Code Section 817(h)
("Diversification Regulations"), after a start-up period, each series of the
funds will be required to diversify its investments. The Diversification
Regulations generally require that, on the last day of each calendar quarter
that the series' assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
series as an asset of the Account, and each series of the funds are tested for
compliance with the percentage limitations. All securities of the same issuer
are treated as a single investment. As a result of the 1988 Act, each government
agency or instrumentality will be treated as a separate issuer for purposes of
these limitations.
The U.S. 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. The IRAs
(described below) are defined as "pension plan contracts" for these purposes.
Notwithstanding the exception of IRA contracts from application of the
diversification rules, all investments of the PHL Variable IRA 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 IRA contracts.
INDIVIDUAL RETIREMENT ANNUITY
The contract may be used with several types of IRAs. The tax rules
applicable to IRAs vary according to the type of IRAs. No attempt is made here
to provide more than general information about the use of the contracts with the
various types of IRAs.
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 IRAs which are considered sponsored by an employer for its
employees 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.
24
<PAGE>
IRAs
Code Sections 408 and 408A permit eligible individuals to contribute to an
individual retirement program known as an "IRA." These IRAs are subject to
limitations on the amount which may be contributed, the persons who may be
eligible and on the time when distributions may commence. In addition,
distributions from certain other types of qualified plans may be placed on a
tax-deferred basis into an IRA. Effective January 1, 1997, employers may
establish a new type of IRA called SIMPLE (Savings Incentive Match Plan for
Employees). Special rules apply to participants' contributions to and
withdrawals from SIMPLE IRAs. Also effective January 1, 1997, salary reduction
IRAs (SARSEP) no longer may be established. Effective January 1, 1998,
individuals may establish Roth IRAs. Special rules also apply to contributions
to and withdrawals from Roth IRAs.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM IRAs
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion
of certain early distribution from IRAs qualified under Code 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 IRA or 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) 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 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; (e) 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. This exception will no longer
apply after the contract owner has been reemployed for at least 60 days and (f)
distributions 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.
Roth IRAs are subject to the early distribution penalties described above.
In addition, Roth IRAs, which contain amounts converted from regular or SIMPLE
IRAs, are subject to a 10% penalty if made prior to the expiration of the
five-year holding period beginning with the year of the conversion.
Generally, distributions from regular and SIMPLE IRAs must commence no later
than April 1 of the calendar year following the year in which the contract owner
attains age 70 1/2. The required distribution rules do not apply to Roth IRAs
provided Roth IRA rules regarding age and holding periods have been met.
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 IRAs which may be funded by the contracts offered by this prospectus is
only a brief summary meant to alert you to the issues and is not intended as tax
advice. The rules governing the provisions of IRAs 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 an IRA 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 IRA.
SALES OF 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. We will pay any such amount paid with respect to
contracts sold through other broker-dealers 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.
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<PAGE>
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 that 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 shareholder' 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.
LEGAL MATTERS
--------------------------------------------------------------------------------
Edwin L. Kerr, Counsel, and Brian A. Giontonio, Counsel, Phoenix Home Life
Mutual Insurance Company, have 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 follows:
o Underwriter
o Calculation of Yield and Return
o Calculation of Annuity Payments
o Experts
o 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 VAO at 800/541-0171.
26
<PAGE>
APPENDIX A
PERFORMANCE HISTORY FOR CONTRACTS
--------------------------------------------------------------------------------
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 1 year, 5 years and 10 years or since inception if the subaccount has not
been in existence for at least 10 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 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.
THE SUBACCOUNTS FOR THIS CONTRACT COMMENCED OPERATIONS AS OF THE DATE OF
THIS PROSPECTUS; THEREFORE, TOTAL RETURN DATA IS NOT AVAILABLE.
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 7 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 payment charge.
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 1 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 how these yield quotations are calculated.
Example:
Value of hypothetical pre-existing account with
exactly one unit at the beginning of the period:.. $1.000000
Value of the same account (excluding capital
changes) at the end of the 7-day period:.......... 1.001003
Calculation:
Ending account value.............................. 1.001003
Less beginning account value...................... 1.000000
Net change in account value....................... 0.001003
Base period return:
(adjusted change/beginning account value)......... 0.001003
Current yield = return x (365/7) =.................. 5.23%
Effective yield = [(1 + return)(365/7)] -1 =........ 5.37%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to charges which
will be deducted on the Account level.
A 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(SM), 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 advisors' 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(SM), First Boston
27
<PAGE>
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.
28
<PAGE>
APPENDIX B
DEDUCTIONS FOR PREMIUM TAXES
QUALIFIED AND NON-QUALIFIED ANNUITY CONTRACTS
--------------------------------------------------------------------------------
STATE NON-QUALIFIED QUALIFIED
California ................................... 2.35% 0.50%
Kentucky(1)...................................
Maine......................................... 2.00
Nevada........................................ 3.50
South Dakota.................................. 1.25
West Virginia................................. 1.00 1.00
Wyoming....................................... 1.00
Commonwealth of Puerto Rico................... 1.00% 1.00%
NOTE: The above premium tax deduction rates are as of January 1, 2000. 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 taxes, see "Deductions and
Charges--Tax."
(1) Effective January 1, 2000, Kentucky no longer imposes premium tax on
variable annuities.
29
<PAGE>
APPENDIX C
ILLUSTRATIONS OF ANNUITY PAYMENTS ASSUMING HYPOTHETICAL RATES OF RETURN
--------------------------------------------------------------------------------
The following illustrations have been prepared to show how investment
performance affects variable annuity payments over time. The monthly annuity
payments reflect three different assumptions for a constant investment return
before all expenses: 0%, 6%, and 12%. These are hypothetical rates of return and
we do not guarantee that the contract would earn these returns for any one year
or sustained period of time. The tables are for illustrative purposes only and
do not represent past or future investment returns.
The monthly annuity payments may be more or less than shown if the actual
returns of the subaccounts are different than those illustrated. Since it is
very likely that investment returns will fluctuate over time, the amount of
variable annuity payments will also fluctuate. The total amount of annuity
payments ultimately received will depend on cumulative investments returns and
how long the annuitant lives and the payment option chosen.
The assumed interest rate will also affect the amount of variable annuity
payments. Payments will increase from one payment calculation date to the next
if the net investment factor is greater than the assumed interest rate, and will
decrease if the net investment factor is less than the assumed interest rate.
Each of the following illustrations have a different assumed interest rate.
The assumed interest rates of 3%, 5% and 6% are highlighted on each illustration
page.
The monthly annuity payments reflect the deduction of all fees and expenses.
Actual fund fees and expenses will vary from year to year and may be higher or
lower than the assumed rate. The illustrations assume that each fund will incur
expenses at an average annual rate of 0.83% of the average daily net assets.
This is a weighted average of the fund expenses shown in the fund annual expense
table on pages 7 and 8. While the expense reimbursement arrangements described
on pages 7 and 8 are expected to continue at least through 2001, discontinuing
one or more of such arrangements will increase the expenses of the fund.
Increased fund expenses will reduce performance and reduce monthly payments. The
risk and administrative fee is calculated in aggregate, at an annual rate of
1.40% of the average daily net assets of the subaccounts. After taking these
fees and expenses into account, the illustrated gross investment returns of 0%,
6% and 12% are approximately equal to net rates of -2.23%, 3.77% and 9.77%,
respectively. The $24 annual payment charge is taken as a $2 deduction from each
variable annuity payment.
30
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PHOENIX INCOME ADVANTAGE
<S> <C>
INITIAL ANNUITY DATE: 1/1/2001
INITIAL VARIABLE ANNUITY PAYMENT AMOUNT: $1,000
PAYMENT OPTION: 20 YEAR SPECIFIED PERIOD
FREQUENCY OF ANNUITY INCOME: MONTHLY
ASSUMED INTEREST RATE: 3.0%
AVERAGE MGMT FEE: 0.83%
RISK AND ADMINISTRATIVE FEE: 1.40%
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ANNUAL RATE OF INTEREST BEFORE EXPENSES: 0.00% 6.00% 12.00%
ANNUAL RATE OF INTEREST AFTER EXPENSES: -2.23% 3.77% 9.77%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT CALCULATION DATE: MONTHLY PAYMENTS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
January 1, 2001 $1,000 $1,000 $1,000
January 1, 2002 $949 $1,006 $1,064
January 1, 2003 $901 $1,013 $1,131
January 1, 2004 $856 $1,019 $1,203
January 1, 2005 $812 $1,026 $1,278
January 1, 2006 $771 $1,033 $1,361
January 1, 2007 $732 $1,039 $1,447
January 1, 2008 $695 $1,046 $1,539
January 1, 2009 $660 $1,053 $1,636
January 1, 2010 $626 $1,060 $1,740
January 1, 2011 $595 $1,066 $1,851
January 1, 2012 $564 $1,073 $1,968
January 1, 2013 $536 $1,080 $2,093
January 1, 2014 $509 $1,087 $2,226
January 1, 2015 $483 $1,094 $2,367
January 1, 2016 $458 $1,101 $2,517
January 1, 2017 $435 $1,108 $2,677
January 1, 2018 $413 $1,115 $2,847
January 1, 2019 $392 $1,123 $3,028
January 1, 2020 $372 $1,130 $3,220
------------------------------------------------------------------------------------------------------------------
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT
PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN SHOWN AND ARE BASED ON
MANY FACTORS.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PHOENIX INCOME ADVANTAGE
<S> <C>
INITIAL ANNUITY DATE: 1/1/2001
INITIAL VARIABLE ANNUITY PAYMENT AMOUNT: $1,000
PAYMENT OPTION: 20 YEAR SPECIFIED PERIOD
FREQUENCY OF ANNUITY INCOME: MONTHLY
ASSUMED INTEREST RATE: 5.0%
AVERAGE MGMT FEE: 0.83%
RISK AND ADMINISTRATIVE FEE: 1.40%
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ANNUAL RATE OF INTEREST BEFORE EXPENSES: 0.00% 6.00% 12.00%
ANNUAL RATE OF INTEREST AFTER EXPENSES: -2.23% 3.77% 9.77%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT CALCULATION DATE: MONTHLY PAYMENTS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
January 1, 2001 $1,000 $1,000 $1,000
January 1, 2002 $931 $987 $1,043
January 1, 2003 $867 $975 $1,088
January 1, 2004 $808 $962 $1,135
January 1, 2005 $752 $950 $1,184
January 1, 2006 $700 $938 $1,236
January 1, 2007 $652 $926 $1,289
January 1, 2008 $607 $914 $1,345
January 1, 2009 $565 $902 $1,403
January 1, 2010 $526 $891 $1,463
January 1, 2011 $490 $879 $1,527
January 1, 2012 $456 $868 $1,593
January 1, 2013 $425 $857 $1,661
January 1, 2014 $396 $846 $1,733
January 1, 2015 $368 $835 $1,808
January 1, 2016 $343 $825 $1,886
January 1, 2017 $319 $814 $1,968
January 1, 2018 $297 $804 $2,053
January 1, 2019 $277 $793 $2,141
January 1, 2020 $258 $783 $2,234
------------------------------------------------------------------------------------------------------------------
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT
PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN SHOWN AND ARE BASED ON
MANY FACTORS.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PHOENIX INCOME ADVANTAGE
<S> <C>
INITIAL ANNUITY DATE: 1/1/01
INITIAL VARIABLE ANNUITY PAYMENT AMOUNT: $1,000
PAYMENT OPTION: 20 YEAR SPECIFIED PERIOD
FREQUENCY OF ANNUITY INCOME: MONTHLY
ASSUMED INTEREST RATE: 6.0%
AVERAGE MGMT FEE: 0.83%
RISK AND ADMINISTRATIVE FEE: 1.40%
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ANNUAL RATE OF INTEREST BEFORE EXPENSES: 0.00% 6.00% 12.00%
ANNUAL RATE OF INTEREST AFTER EXPENSES: -2.23% 3.77% 9.77%
</TABLE>
<TABLE>
<CAPTION>
PAYMENT CALCULATION DATE: MONTHLY PAYMENTS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
January 1, 2001 $1,000 $1,000 $1,000
January 1, 2002 $922 $978 $1,033
January 1, 2003 $851 $956 $1,068
January 1, 2004 $785 $935 $1,103
January 1, 2005 $724 $914 $1,140
January 1, 2006 $668 $894 $1,178
January 1, 2007 $616 $875 $1,218
January 1, 2008 $568 $855 $1,258
January 1, 2009 $524 $836 $1,300
January 1, 2010 $483 $818 $1,344
January 1, 2011 $446 $800 $1,388
January 1, 2012 $411 $782 $1,435
January 1, 2013 $379 $765 $1,483
January 1, 2014 $350 $748 $1,532
January 1, 2015 $322 $731 $1,583
January 1, 2016 $297 $715 $1,636
January 1, 2017 $274 $699 $1,690
January 1, 2018 $253 $684 $1,747
January 1, 2019 $233 $669 $1,805
January 1, 2020 $215 $654 $1,865
------------------------------------------------------------------------------------------------------------------
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED TO REPRESENT
PAST OR FUTURE INVESTMENT PERFORMANCE.ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN SHOWN AND ARE BASED ON
MANY FACTORS.
</TABLE>
33
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
PHOENIX INCOME ADVANTAGE(SM)
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS ("VPMO")
Hartford, Connecticut P.O. Box 8027
Boston, Massachusetts 02266-8027
PHL VARIABLE INSURANCE COMPANY
PHL VARIABLE ACCUMULATION ACCOUNT
SINGLE PREMIUM IMMEDIATE FIXED AND VARIABLE ANNUITY CONTRACT
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus, dated December 29, 2000. You may obtain a
copy of the prospectus without charge by contacting PHL Variable Insurance
Company at the above address and telephone number.
TABLE OF CONTENTS
PAGE
----
Underwriter.............................................................. B-2
Calculation of Yield and Return.......................................... B-2
Calculation of Annuity Payments ......................................... B-3
Experts ................................................................. B-4
Financial Statements..................................................... B-5
B-1
<PAGE>
UNDERWRITER
--------------------------------------------------------------------------------
PEPCO, an affiliate of PHL Variable, offers these contracts on a continuous
basis. Because the contract was not available until December 29, 2000, no
contracts were sold during fiscal years ended 1997, 1998 and 1999; therefore
PEPCO was not paid for sales of these contracts and retained $0.
CALCULATION OF YIELD AND RETURN
--------------------------------------------------------------------------------
Yield of the Phoenix-Goodwin Money Market Subaccount. We summarize the following
information in the prospectus under the heading "Performance History." We
calculate the yield of the Phoenix-Goodwin Money Market Subaccount for a 7-day
"base period" by determining the "net change in value" of a hypothetical
pre-existing account. We assume the hypothetical account had an initial balance
of one share at the beginning of the base period. We then determine what the
value of the hypothetical account would have been at the end of the 7-day base
period. The end value minus the initial value gives us the net change in value
for the hypothetical account. The net change in value can then be divided by the
initial value giving us the base period return (one week's return). To find the
equivalent annual return we multiply the base period return by 365/7. The
equivalent effective annual yield differs from the annual return because we
assume all returns are reinvested in the subaccount. We carry results to the
nearest hundredth of one percent.
The net change in value of the hypothetical account includes the daily net
investment income of the account (after expenses), but does not include realized
gains or losses or unrealized appreciation or depreciation on the underlying
fund shares.
The yield/return calculations include a risk and administrative fee equal to
1.40% on an annual basis.
The Phoenix-Goodwin Money Market Subaccount return and effective yield will vary
in response to fluctuations in interest rates and in the expenses of the
subaccount.
We do not include the maximum annual administrative fee in calculating the
current return and effective yield. Should such a fee apply to your account,
current return and/or effective yield for your account could be reduced.
Example Calculation:
The following is an example of how return/yield calculations for the
Phoenix-Goodwin Money Market Subaccount are calculated:
Value of hypothetical pre-existing account with exactly one
Unit at the beginning of the period: $1.000000
Value of the same account (excluding capital 1.001003
changes) at the end of the 7-day period:......
Calculation:
Ending account value.......................... 1.001003
Less beginning account value.................. 1.000000
Net change in account value................... 0.001003
Base period return:
(adjusted change/beginning account value)..... 0.001003
Current yield = return x (365/7) =............... 5.23%
Effective yield = [(1 + return)(365/7)] -1 =..... 5.37%
Yields and total returns may be higher or lower than in the past and there is no
assurance that any historical results will continue.
Calculation of Total Return. We summarize the following information in the
prospectus under the heading, "Performance History." Total return measures the
change in value of a subaccount investment over a stated period. We compute
total returns 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
includes the following steps:
(1) We assume a hypothetical $1,000 initial investment in the subaccount;
(2) We determine the value the hypothetical initial investment would have were
it redeemed at the end of each period. All recurring fees and any applicable
contingent deferred sales charge are deducted. This figure is the ending
redeemable value (ERV in the formula given below);
(3) We divide this value by the initial $1,000 investment, resulting in ratio of
the ending redeemable value to the initial value for that period;
(4) To get the average annual total return we take the n(th) root of the ratio
from step (3), where n equals the number of years in that period (e.g. 1, 5,
10), and subtract one.
B-2
<PAGE>
The formula in mathematical terms is:
R = ((ERV / II)(1/n)) - 1
Where:
II = a hypothetical initial payment of $1,000
R = average annual total return for the period
n = number of years in the period
ERV = ending redeemable value of the hypothetical
$1,000 for the period [see (2) and (3) above]
We normally calculate total return for 1-year, 5-year and 10-year periods for
each subaccount. If a subaccount has not been available for at least 10 years,
we will provide total returns for other relevant periods.
PERFORMANCE INFORMATION
Advertisements, sale literature and other communications may contain information
about series' or advisor's current investment strategies and management style.
An advisor may alter investment strategies and style in response to changing
market and economic conditions. A fund may wish to make known a series' specific
portfolio holdings or holdings in specific industries. A fund may also
separately illustrate the income and capital gain portions of a series' total
return. Performance might also be advertised by breaking down returns into
equity and debt components. A series may compare its equity or bond return
figure to any of a number of well-known benchmarks of market performance,
including, but not limited to:
The Dow Jones Industrial Average(SM)(1)
First Boston High Yield Index
Salomon Brothers Corporate Index
Salomon Brothers Government Bond Index
The Standard & Poor's 500 Index (S&P 500)(2)
Each subaccount may include its yield and total return in advertisements or
communications with current or prospective contract owners. Each subaccount may
also include in such advertisements, its ranking or comparison to similar mutual
funds by such organizations as:
Lipper Analytical Services
Morningstar, Inc.
Thomson Financial
A fund may also compare a series' performance to other investment or savings
vehicles (such as certificates of deposit) and may refer to results published in
such publications as:
Barrons
Business Week
Changing Times
Forbes
Fortune
Consumer Reports
Investor's Business Daily
Financial Planning
Financial Services Weekly
Financial World
Money
The New York Times
Personal Investor
Registered Representative
U.S. News and World Report
The Wall Street Journal
A fund may also illustrate the benefits of tax deferral by comparing taxable
investments with investments through tax-deferred retirement plans.
The total return and yield may be used to compare the performance of the
subaccounts with certain commonly used standards for stock and bond market
performance. Such indexes include, but are not limited to:
The Dow Jones Industrial Average(SM)(1)
First Boston High Yield Index
Salomon Brothers Corporate Index
Salomon Brothers Government Bond Index
The S&P 500(2)
We may use historical performance of the subaccounts, the S&P 500, or other
recognized investment benchmark portfolio to illustrate periodic annuity income
amounts. We will reflect the 1.40% Risk and Administrative Fee and actual or
assumed subaccount expenses in all illustrations.
CALCULATION OF ANNUITY PAYMENTS
--------------------------------------------------------------------------------
See your prospectus in the section titled "The Annuity Period" for a description
of the payment options.
You elect a payment option when you purchase your contract as described in your
prospectus. You may not change the payment option you elect.
FIXED ANNUITY PAYMENTS
On the Annuity Date, a stream of Annuity Payments is purchased. The amount of
the Fixed Annuity Payment will be the value in the Contract allocated to the
FIA, divided by $1,000, then multiplied by the appropriate factor for the
Payment Option selected.
Under Options A-E, guaranteed rates are based on the a-49 Annuity Table(4)
projected to 1985 with Projection Scale B. We use the minimum assumed interest
rate of 3%. If our rates in effect on the annuity date are more favorable (i.e.
higher-paying), we will use those rates.
B-3
<PAGE>
VARIABLE ANNUITY PAYMENTS
Variable Annuity Payments after the first payment will vary with the investment
experience of the Subaccounts. Payments may be either higher or lower than the
first payment.
Under Payment Options A, B, C, D, E and G, We determine the first payment by
multiplying the value in the contract 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.
Under Option F, We determine the amount of the initial distribution by dividing
the amount of value in the contract held under this option by the life
expectancy of the Annuitant.
Under all payment options, the first payment is based on an assumed interest
rate of either 3% or 6%. All subsequent payments may be higher or lower
depending on investment experience of the subaccounts.
The applicable rate used to determine the first variable annuity payment amount
will not be less than the rate based on the 1983 Table A (1983 IAM)(4) projected
with Projection Scale G to the year 2040, and with continued projection
thereafter, and on the assumed interest rate. If our rates in effect on the
annuity date are more favorable (i.e. higher-paying), we will use those rates.
We deduct a daily charge for risk and administrative fee from contract values
held in the subaccounts. See your prospectus in the section titled "Deductions
and Charges".
EXPERTS
--------------------------------------------------------------------------------
The financial statements of PHL Variable Insurance Company as of December 31,
1999 and 1998 and for each of the three years in the period ended December 31,
1999 included in this prospectus have been so included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
Edwin L. Kerr, Counsel, and Brian A. Giantonio, Counsel, Phoenix Home Life
Mutual Insurance Company, have provided advice on certain matters relating to
the federal securities and income tax laws in connection with the contracts
described in this prospectus.
(1)The Dow Jones Industrial Average(SM) (DJIA(SM)) is an unweighted(3) index of
30 industrial "blue chip" U.S. stocks. It is the oldest continuing U.S.
market index. The 30 stocks now in the DJIA(SM) are both widely-held and a
major influence in their respective industries. The average is computed in
such a way as to preserve its historical continuity and account for such
factors as stock splits and periodic changes in the components of the index.
The editors of The Wall Street Journal select the component stocks of the
DJIA(SM).
(2)The S&P 500 is a market-value weighted(3) index composed of 500 stocks chosen
for market size, liquidity, and industry group representation. It is one of
the most widely used indicators of U.S. Stock Market performance. As of
December 31, 1999 it contained 376 industrial, 41 utility, 72 financial and
11 transportation issues. The composition of the S&P 500 changes from time to
time. Standard & Poor's Index Committee makes all decisions about the S&P
500.
(3)Weighted and unweighted indexes: A market-value, or capitalization, weighted
index uses relative market value (share price multiplied by the number of
shares outstanding) to "weight" the influence of a stock's price on the
index. Simply put, larger companies' stock prices influence the index more
than smaller companies' stock prices. An unweighted index (such as the Dow
Jones Industrial Average(SM)) uses stock price alone to determine the index
value. A company's relative size has no bearing on its impact on the index.
(4)The Society of Actuaries developed these tables to provide payment rates for
annuities based on a set of mortality tables acceptable to most regulating
authorities.
B-4
<PAGE>
PHL VARIABLE
ACCUMULATION ACCOUNT
FINANCIAL STATEMENTS
AS OF DECEMBER 29, 2000, THERE HAVE BEEN NO DEPOSITS TO THIS ACCOUNT;
THEREFORE, FINANCIAL STATEMENTS ARE NOT AVAILABLE.
6
<PAGE>
PHL VARIABLE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999
F-1
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
TABLE OF CONTENTS
--------------------------------------------------------------------------------
PAGE
Report of Independent Accountants .........................................F-3
Balance Sheet at December 31, 1999 and 1998 ...............................F-4
Statement of Income, Comprehensive Income and Equity for the Years Ended
December 31, 1999, 1998 and 1997 .........................................F-5
Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 .........................................F-6
Notes to Financial Statements .....................................F-7 - F-18
F-2
<PAGE>
[logo]PRICEWATERHOUSECOOPERS
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone(860) 241 7000
Facsimile(860) 241 7590
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 cash flows present fairly, in all
material respects, the financial position of PHL Variable Insurance Company at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States, 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
PricewaterhouseCoopers LLP
February 15, 2000
F-3
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
BALANCE SHEET
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 10,298 $ 3,840
Available-for-sale debt securities, at fair value 55,840 36,480
Policy loans 522 249
Other invested assets 1,052 1,064
----------- ---------
Total investments 67,712 41,633
Cash and cash equivalents 23,039 7,320
Accrued investment income 786 511
Deferred policy acquisition costs 61,806 36,686
Deferred income taxes 2,178
Deferred and uncollected premiums 6,300 1,872
Other assets 4,394 1,860
Goodwill 451 553
Separate account assets 1,257,947 782,496
----------- ---------
Total assets $ 1,422,435 $ 875,109
=========== =========
LIABILITIES
Contractholders' funds at interest $ 64,230 $ 39,690
Reserves for future policy benefits 13,910 2,736
Deferred income taxes 209
Other liabilities 7,950 6,077
Separate account liabilities 1,257,947 782,496
----------- ---------
Total liabilities 1,344,246 830,999
----------- ---------
EQUITY
Common stock, $5,000 par value (1,000
shares authorized, 500 shares issued and outstanding) 2,500 2,500
Additional paid-in capital 64,864 35,864
Retained earnings 11,538 5,539
Accumulated other comprehensive (loss) income (713) 207
----------- ---------
Total equity 78,189 44,110
----------- ---------
Total liabilities and equity $ 1,422,435 $ 875,109
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 9,838 $ 6,280 $ 230
Insurance and investment product fees 20,948 10,998 5,050
Net investment income 3,891 2,458 1,543
Net realized investment gains 7 40
---------- ----------- ---------
Total revenues 34,684 19,776 6,823
---------- ----------- ---------
BENEFITS, LOSSES AND EXPENSES
Policy benefits and payments 9,248 3,964 1,092
Policy acquisition expenses 5,126 4,006 1,310
Other operating expenses 11,081 5,359 2,915
---------- ----------- ---------
Total benefits, losses and expenses 25,455 13,329 5,317
---------- ----------- ---------
INCOME BEFORE INCOME TAXES 9,229 6,447 1,506
Income taxes 3,230 2,257 553
---------- ----------- ---------
NET INCOME 5,999 4,190 953
---------- ----------- ---------
OTHER COMPREHENSIVE (LOSS) INCOME,
NET OF INCOME TAXES
Unrealized (losses) gains on securities
arising during period (913) 166 37
Reclassification adjustment for
losses included in net income (7) (40)
---------- ----------- ---------
Total other comprehensive (loss) income (920) 126 37
---------- ----------- ---------
COMPREHENSIVE INCOME 5,079 4,316 990
Capital contributions 29,000 17,000 5,000
---------- ----------- ---------
NET INCREASE IN EQUITY 34,079 21,316 5,990
EQUITY, BEGINNING OF YEAR 44,110 22,794 16,804
---------- ----------- ---------
EQUITY, END OF YEAR $ 78,189 $ 44,110 $ 22,794
========= =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 5,999 $ 4,190 $ 953
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH USED FOR OPERATING ACTIVITIES
Net realized investment gains (7) (40)
Amortization 102 107 96
Deferred income taxes 2,883 (987) (916)
Increase in accrued investment income (275) (254) (49)
Increase in deferred policy acquisition costs (24,137) (15,815) (11,453)
Increase (decrease) in other assets/liabilities 6,085 1,881 (973)
Other, net (209)
---------- --------- ---------
Net cash used for operating activities (9,350) (10,918) (12,551)
---------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales, maturities or repayments of
available-for-sale debt securities 11,664 14,133 4,665
Proceeds from maturities or repayments of
held-to-maturity debt securities 623 634 212
Purchase of available-for-sale debt securities (33,397) (28,360) (11,003)
Purchase of held-to-maturity debt securities (7,000) (1,216) (1,529)
Increase in policy loans (273) (249)
Investment in separate accounts (1,000)
Other, net (88) (177)
---------- --------- ---------
Net cash used for investing activities (28,471) (15,235) (8,655)
---------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contributions from parent 29,000 17,000 5,000
Increase in contractholder funds 24,540 14,759 16,098
---------- --------- ---------
Net cash provided by financing activities 53,540 31,759 21,098
---------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,719 5,606 (108)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,320 1,714 1,822
---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 23,039 $ 7,320 $ 1,714
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 3,338 $ 1,711 $ 2,044
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<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 (PHL Variable) offers variable annuity and
non-participating 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
(Phoenix).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States (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 revenues and expenses during the reporting period. Actual
results could differ from those estimates. Significant estimates used in
determining insurance and contractholder liabilities, related reinsurance
recoverables, income taxes and valuation allowances for investment assets
are discussed throughout the Notes to Financial Statements. Certain
reclassifications have been made to the 1998 and 1997 amounts to conform
with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. 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 include cash on hand and money market
instruments.
F-7
<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 new business, 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.
For universal life insurance policies, limited pay and investment type
contracts, 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 estimates of
future undiscounted cash flows to the assets. Assets are considered
impaired if the carrying value exceeds the expected future undiscounted
cash flows.
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 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.
CONTRACTHOLDERS' FUNDS AT INTEREST
Contractholder deposit funds consist of deposits received from customers
and investment earnings on their fund balances, less administrative
charges.
F-8
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
INVESTMENT PRODUCT FEES
Revenues for investment-type products consist of net investment income and
contract charges assessed against the fund values (fees). 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 insurance
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.
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, 1999, PHL Variable will file a separate
federal income tax return as required under Internal Revenue Code Section
1504(c). PHL Variable has been filing on a separate company basis since
December 31, 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.
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
non-vested accumulated plan benefits, and the net assets of the plans
available for benefits is omitted,
F-9
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
as the information is not separately calculated for PHL Variable's
participation in the plans. The amount of such allocated benefits is not
significant 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, 1999, the date of the most recent actuarial valuation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133." Because of the complexities associated with transactions
involving derivative instruments and their prevalent use as hedging
instruments and, because of the difficulties associated with the
implementation of Statement 133, the effective date of SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" was delayed
until fiscal years beginning after June 15, 2000. SFAS No. 133, initially
issued on June 15, 1998, requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
For fair-value hedge transactions in which PHL Variable is hedging changes
in an asset's, liability's or firm commitment's fair value, changes in the
fair value of the derivative instrument will generally be offset in the
income statement by changes in the hedged item's fair value. For cash-flow
hedge transactions, in which PHL Variable is hedging the variability of
cashflows related to a variable-rate asset, liability, or a forecasted
transaction, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The gains and losses on the
derivative instrument that are reported in other comprehensive income will
be reclassified as earnings in the period in which earnings are impacted by
the variability of the cash flows of the hedged item. The ineffective
portion of all hedges will be recognized in current period earnings.
PHL Variable has not yet determined the impact that the adoption of SFAS
No. 133 will have on its earnings or statement of financial position.
PHL Variable adopted 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.
On January 1, 1999, PHL Variable adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on the Company's results from operations or financial position.
In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles guidance, which will replace the current Accounting Practices
and Procedures manual as the NAIC's primary guidance on statutory
accounting. The Codification provides guidance for areas where statutory
accounting has been silent and changes current statutory accounting in some
areas, e.g., deferred income taxes are recorded.
F-10
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The State of Connecticut Insurance Department has adopted the Codification
guidance, effective January 1, 2001. The Company has not estimated the
potential effect of the Codification guidance.
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, 1999 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 $ 10,298 $ 136 $ (169) $ 10,265
========= ======= ======== =========
AVAILABLE-FOR-SALE:
U.S. government and agency bonds $ 6,475 $ 3 $ (156) $ 6,322
State and political subdivision bonds 10,366 (343) 10,023
Corporate securities 16,637 (983) 15,654
Mortgage-backed or
asset-backed securities 24,194 (353) 23,841
--------- ------- -------- ---------
Total $ 57,672 $ 3 $ (1,835) $ 55,840
========= ======= ======== =========
</TABLE>
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> <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 or
asset-backed securities 6,308 80 (5) 6,383
-------- ------- -------- --------
Total $ 35,913 $ 683 $ (116) $ 36,480
======== ======= ======== ========
</TABLE>
F-11
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The amortized cost and fair value of debt securities, by contractual
maturity, as of December 31, 1999 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 $ 1,732 $ 1,726 $ 500 $ 500
Due after one year through five years 6,676 6,654 14,282 13,737
Due after five years through ten years 1,890 1,884 9,903 9,664
Due after ten years 8,793 8,098
Mortgage-backed or
asset-backed securities 24,194 23,841
--------- --------- --------- ---------
Total $ 10,298 $ 10,264 $ 57,672 $ 55,840
========= ========= ========= =========
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 3,362 $ 2,142 $ 1,301
Policy loans 7 1
Other invested assets 20 9
Short-term investments 561 344 269
-------- -------- --------
3,950 2,496 1,570
Less investment expenses 59 38 27
-------- -------- --------
Net investment income $ 3,891 $ 2,458 $ 1,543
======== ======== ========
</TABLE>
F-12
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Net unrealized (losses) gains and on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (2,399) $ 333 $ 87
Deferred policy acquisition costs 983 (139) (30)
Deferred income taxes (benefits) (496) 68 20
--------- ------- -------
Net unrealized investment (losses) gains
on securities available-for-sale $ (920) $ 126 $ 37
========= ======= =======
</TABLE>
The proceeds from sales of available-for-sale debt securities for the years
ended December 31, 1999, 1998 and 1997 were $6.0 million, $10.0 million and
$0.2 million, respectively. The gross realized gains or losses associated
with these sales were $7.4 thousand, $37.7 thousand and ($0.3) thousand in
1999, 1998 and 1997, respectively.
4. GOODWILL
PHL Variable 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 was as follows:
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Goodwill $ 1,020 $ 1,020
Accumulated amortization (569) (467)
-------- --------
Total $ 451 $ 553
======== ========
F-13
<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:
1999 1998 1997
Income taxes:
Current $ 347 $ 3,244 $ 1,469
Deferred 2,883 (987) (916)
-------- --------- --------
Total $ 3,230 $ 2,257 $ 553
======== ========= ========
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 (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $3,230 35% $2,256 35% $ 527 35%
Dividend received deduction and (1) 0% 0% 1 0%
tax-exempt interest
State income tax expense
Other, net 1 0% 1 0% 25 2%
------ ------ -----
Income taxes $3,230 35% $2,257 35% $ 553 37%
====== ====== =====
</TABLE>
The deferred income tax liability (asset) represents the tax effects of
temporary differences. The components as of December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 17,775 $ 10,953
Surrender charges (17,597) (11,886)
Investments 104 72
Future policyholder benefits 376 (1,374)
Other (65) (54)
--------- ---------
593 (2,289)
Net unrealized investment (losses) gains (384) 111
--------- ---------
Deferred tax liability (asset), net $ 209 $ (2,178)
========= =========
</TABLE>
F-14
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Gross deferred income tax assets totaled $18.1 million and $13.3 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $18.3 million and $11.1 million at December 31, 1999
and 1998, 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 income tax assets at December 31, 1999
and 1998, will be realized.
PHL Variable's income tax return is not currently being examined; however,
income tax years 1996 through 1998 remain open for examination. Management
does not believe that there will be a material adverse effect on the
financial statements as a result of pending income tax matters.
6. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
(loss) income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE ARISING DURING PERIOD:
Before-tax amount $ (1,405) $ 256 $ 57
Income tax (benefit) expense (492) 90 20
--------- ------- -------
Totals (913) 166 37
--------- ------- -------
RECLASSIFICATION ADJUSTMENT FOR (LOSSES)
REALIZED IN NET INCOME:
Before-tax amount (11) (62)
Income tax (benefit) (4) (22)
--------- ------- -------
Totals (7) (40)
--------- ------- -------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (1,416) 194 57
Income tax (benefit) expense (496) 68 20
--------- ------- -------
Totals $ (920) $ 126 $ 37
========= ======= =======
</TABLE>
The following table summarizes accumulated other comprehensive (loss)
income balances:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year $ 207 $ 81
Change during period (920) 126
-------- -------
Balance, end of year $ (713) $ 207
======== =======
</TABLE>
F-15
<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 by PHL Variable during 1999, 1998 and 1997 were
$1,114 thousand, $668 thousand and $259 thousand, respectively, less claims
of $22 thousand, $13 thousand and $1 thousand in 1999, 1998 and 1997,
respectively.
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, 1999, PHL Variable had approximately $661.5 million of net
insurance in force, including $6.5 billion of direct in force less $5.8
billion of reinsurance ceded. 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 1999, 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
recoverables were $0 thousand as of December 31, 1999 and $455 thousand and
as of December 31, 1998. The claims recovered were $455 thousand for 1999
and $0 for 1998 and 1997, respectively.
8. RELATED PARTY TRANSACTIONS
Phoenix provides services and facilities to the Company and is reimbursed
through a cost allocation process. Investment services are provided for a
fee by a Phoenix registered investment advisor.
9. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
1999 1998
(IN THOUSANDS)
Balance at beginning of year $ 36,686 $ 21,010
Acquisition expense deferred 28,884 19,791
Amortized to expense during the year (4,747) (3,976)
Adjustment to equity during the year 983 (139)
--------- ---------
Balance at end of year $ 61,806 $ 36,686
========= =========
F-16
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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.
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.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten
year Treasury rate, except for policy loans with a variable policy loan
rate. Variable policy loans have an interest rate that is reset annually
based upon market rates and therefore, book value is a reasonable
approximation of fair value.
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, 1999 and 1998
were $64.2 million and $39.7 million, respectively.
OTHER INVESTED ASSETS
Other invested assets consist of the Company's interest in the separate
accounts which are carried at fair value.
F-17
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
11. STATUTORY FINANCIAL INFORMATION
The life insurance subsidiaries of Phoenix 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, 1999,
there were no material practices not prescribed by the State of Connecticut
Insurance Department. Statutory equity differs from 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:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ (1,655) $ 1,542 $ 937
Deferred policy aquisition costs 24,136 15,815 11,483
Future policy benefits (13,496) (14,056) (12,271)
Deferred income taxes (2,882) 987 899
Other, net (104) (98) (95)
--------- -------- -------
Net income, as reported $ 5,999 $ 4,190 $ 953
========= ======== =======
</TABLE>
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,
1999 1998
(IN THOUSANDS)
Statutory surplus and AVR $ 66,354 $ 41,268
Deferred policy acquisition costs, net 61,072 36,686
Future policy benefits (48,391) (37,155)
Investment valuation allowances (1,089) 568
Deferred income taxes (208) 2,178
Other, net 451 565
--------- ---------
Equity, as reported $ 78,189 $ 44,110
========= =========
The Connecticut Insurance Holding Act limits the maximum amount of annual
dividends or other distributions available to stockholders of Connecticut
domiciled insurance companies without prior approval of the Insurance
Commissioner. Under current law, the maximum dividend distribution that may
be made by PHL Variable during 1999 without prior approval is subject to
restrictions relating to statutory surplus.
F-18
<PAGE>
PART C
OTHER INFORMATION
<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 (No. 33-87376) 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) Form of Variable Annuity Contract filed herewith.
(5) Form of Application filed 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 herewith.
(10) (a) Written Consent of Edwin L. Kerr, Esq. filed herewith.
(b) Written Consent of Brian A. Giantonio, Esq. filed
herewith.
(c) Written Consent of PricewaterhouseCoopers LLP filed
herewith.
(11) Not Applicable.
(12) Not Applicable.
(13) (a) Explanation of Yield and Effective Yield Calculation is
incorporated by reference to Registrant's Post-Effective
Amendment No. 1 to its Form N-4 Registration Statement
(File No. 33-87376) filed via Edgar on April 19, 1996.
(b) Explanation of Total Return Calculation is incorporated
by reference to Registrant's N-4 Registration Statement
(File No. 333-95611) filed via Edgar on January 29, 2000
(Accession Number 0000949377-00-000035).
Powers of Attorney of Messrs. Fiondella, Kelleher, McLoughlin,
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. 033-87376) filed via Edgar on
April 30, 1998.
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<PAGE>
ITEM 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR
---- -------------------------- -----------------------
Carl T. Chadburn* Director
Robert W. Fiondella* Director and Chairman
Michael J. Gilotti* Executive Vice President
Joseph E. Kelleher** Director and Senior
Vice President
Philip R. McLoughlin* Director, Executive Vice President
and Chief Investment Officer
David W. Searfoss* Director, Executive Vice President
and Chief Financial Officer
Simon Y. Tan* Director and President
Dona D. Young* Director and Executive
Vice President
Robert G. Lautensack, Jr.* Senior Vice President
</TABLE>
* The principal business address of this individual is PHL Variable
Insurance Company, One American Row, Hartford, Connecticut.
** The principal business address of this individual is PHL Variable
Insurance Company, 100 Bright Meadow Boulevard, Enfield, Connecticut.
ITEM 26. NOT APPLICABLE
ITEM 27. NUMBER OF CONTRACT OWNERS
No contracts have been sold to date.
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
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<PAGE>
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> <C>
Michael E. Haylon** Director
Philip R. McLoughlin** Director, President and Chairman
William R. Moyer* Director, Executive Vice President, Chief Financial Officer
and Treasurer
John F. Sharry* Executive Vice President, Retail Distribution
Paul A. Atkins** Senior Vice President
Nancy G. Curtiss** Vice President and Treasurer, Fund Accounting
Nancy J. Engberg** Vice President, Counsel and Secretary
Michael Kearney* Senior Vice President, Operations and Service
Robert R. Tousignant* Senior Vice President and National Sales Manager
</TABLE>
* The principal business address of this individual is 100 Bright Meadow
Boulevard, Enfield, Connecticut.
** The principal business address of this individual is 56 Prospect Street,
Hartford, Connecticut.
(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 $0 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.
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<PAGE>
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.
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<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, PHL Variable Accumulation Account has duly caused this
Registration Statement to be signed on its behalf, in the City of Hartford,
State of Connecticut on this 29th day of December, 2000.
PHL VARIABLE INSURANCE COMPANY
By: *Simon Tan
---------------------
Simon Tan
President
PHL VARIABLE ACCUMULATION ACCOUNT
By: *Simon Tan
---------------------
Simon Tan
President
PHL Variable Insurance Company
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
with PHL Variable Insurance Company on this 29th day of December, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
-------------------------------------------------------- Director
Carl T. Chadburn
Director and Chairman
(Principal Executive Officer)
--------------------------------------------------------
*Robert W. Fiondella
Director and Senior Vice President
--------------------------------------------------------
*Joseph E. Kelleher
Director, Executive Vice President and
--------------------------------------------------------
*Philip R. McLoughlin Chief Investment Officer
Director, Executive Vice President and
--------------------------------------------------------
*David W. Searfoss Chief Financial Officer
Director and President
*Simon Y. Tan
/s/ Dona D. Young Director and Executive Vice President
-----------------------------------------
*Dona D. Young
By:/s/ Dona D. Young
------------------------------------
</TABLE>
*Dona D. Young, as Attorney in Fact pursuant to Powers of Attorney, copies of
which were previously filed.
