AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000
FILE NO. 033-87376
811-8914
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT
NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 10 |X|
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 10 |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
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06102-5056
(Name and Address of Agent for Service)
-------------------------
Copy to:
Edwin L. Kerr, Esq.
PHL Variable Insurance Company
One American Row
Hartford, CT 06102-5056
-------------------------
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
| | on ____________ pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on ____________ pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
-------------------------
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<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
REGISTRATION
STATEMENT ON FORM N-4
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form N-4
Form N-4 Item Prospectus/Statement of Additional Information
Caption
PART A - INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
<S> <C>
1. Cover Page .............................................. Cover Page
2. Definitions ............................................. Special Terms
3. Synopsis................................................. Summary of Expenses; Summary
4. Condensed Financial Information ......................... Financial Highlights
5. General Description of Registrant, Depositor and......... PHL Variable Insurance Company and the PHL Variable
Portfolio Companies................................... Accumulation Account; The Fund; Voting Rights
6. Deductions and Expenses ................................. Deductions and Charges; Sales of Variable Accumulation
Contracts
7. General Description of Variable Annuity Contracts........ The Variable Accumulation Annuity; Purchase of Contracts;
The Accumulation Period; Miscellaneous Provisions
8. Annuity Period .......................................... The Annuity Period
9. Death Benefits........................................... Payment Upon Death Before Maturity Date; Payment Upon
Death After Maturity Date
10. Purchases and Contract Value ............................ Purchase of Contracts; The Accumulation Period; Variable
Account Valuation Procedures; Sales of Variable
Accumulation Contracts
11. Redemptions.............................................. Surrender of Contracts; Partial Withdrawals; Free Look
Period
12. Taxes ................................................... Federal Income Taxes
13. Legal Proceedings........................................ Legal Matters
14. Table of Contents of the Statement of Additional
Information........................................... SAI
PART B - INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
15. Cover Page .............................................. Cover Page
16. Table of Contents ....................................... Table of Contents
17. General Information and History ......................... Not Applicable
18. Services................................................. Not Applicable
19. Purchase of Securities Being Offered..................... Appendix
20. Underwriters ............................................ Underwriter
21. Calculation of Performance Data.......................... Calculation of Yield and Return
22. Annuity Payments......................................... Calculation of Annuity Payments
23. Financial Statements .................................... Financial Statements
</TABLE>
Note: This Registration Statement contains two prospectuses (Versions A and B).
This Registration Statement also contains two Statements of Additional
Information, each corresponding to its respective prospectus.
<PAGE>
[VERSION A]
THE BIG EDGE CHOICE(R)
VARIABLE ANNUITY
Issued by
PHL VARIABLE INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS MAY 1, 2000
This Prospectus describes a variable accumulation deferred annuity contract. The
Contract is designed to provide you with retirement income in the future. The
Contract offers a variety of variable and fixed investment options.
You may allocate payments and contract value to one or more of the subaccounts
of the VA Account, the Guaranteed Interest Account ("GIA"), and the MVA. The
assets of each subaccount will be used to purchase, at net asset value, shares
of a series in the following designated funds:
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond 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-Schafer Mid-Cap Value Series
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
- -----------------------------------
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE(R) Equity Index Fund
FEDERATED INSURANCE SERIES
- --------------------------
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ---------------------------------------
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
[diamond] Technology Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
- ----------------------------------------------------
MANAGED BY TEMPLETON GLOBAL ADVISORS LIMITED
[diamond] Templeton Growth Securities Fund -- Class 2
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Strategy Fund -- Class 2
[diamond] Templeton International Securities Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Securities Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Securities Fund-- Class 2
WANGER ADVISORS TRUST
- ---------------------
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
1
<PAGE>
It may not be in your best interest to purchase a Contract to replace an
existing annuity contract or life insurance policy. You must understand the
basic features of the proposed Contract and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any taxes.
The Contract is not a deposit or obligations of, underwritten or guaranteed
by, any financial institution, credit union or affiliate. It is not federally
insured by the Federal Deposit Insurance Corporation or any other state or
federal agency. Contract investments are subject to risk, including the
fluctuation of Contract Values and possible loss of principal.
The Securities and Exchange Commission ("SEC") has not approved or disapproved
these securities, nor passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
This Prospectus is valid only if accompanied or preceded by current prospectuses
for the Funds and the MVA. You should read and keep these prospectuses for
future reference.
This prospectus provides important information that a prospective investor ought
to know before investing. This prospectus should be kept for future reference. A
Statement of Additional Information ("SAI") has been filed with the SEC and is
available free of charge by calling Variable Annuity Operations at 800/541-0171.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
- --------------------------------------------------------------------------------
SPECIAL TERMS............................................. 4
SUMMARY OF EXPENSES....................................... 6
CONTRACT SUMMARY.......................................... 11
FINANCIAL HIGHLIGHTS...................................... 13
PERFORMANCE HISTORY....................................... 18
THE VARIABLE ACCUMULATION ANNUITY......................... 18
PHL VARIABLE AND THE ACCOUNT ............................. 18
INVESTMENTS OF THE ACCOUNT................................ 18
The Phoenix Edge Series Fund........................... 18
Deutsche Asset Management VIT Funds.................... 19
Federated Insurance Series............................. 20
The Universal Institutional Funds, Inc................. 20
Franklin Templeton Variable Insurance Products Trust... 20
Wanger Advisors Trust.................................. 20
Investment Advisors.................................... 21
Services of the Advisors............................... 21
MVA....................................................... 21
PURCHASE OF CONTRACTS..................................... 22
DEDUCTIONS AND CHARGES.................................... 22
Premium Tax............................................ 22
Surrender Charges...................................... 22
Charges for Mortality and Expense Risks................ 23
Charges for Administrative Services.................... 23
Market Value Adjustment................................ 23
Other Charges.......................................... 23
THE ACCUMULATION PERIOD................................... 23
Accumulation Units..................................... 23
Accumulation Unit Values............................... 24
Transfers ............................................. 24
Optional Programs & Benefits........................... 25
Dollar Cost Averaging Program....................... 25
Asset Rebalancing Program........................... 25
Surrender of Contract; Partial Withdrawals............. 25
Lapse of Contract...................................... 25
Payment Upon Death Before Maturity Date ............... 26
THE ANNUITY PERIOD ....................................... 26
Variable Accumulation Annuity Contracts................ 26
Annuity Options ....................................... 27
Option A--Life Annuity with Specified Period Certain. 27
Option B--Non-Refund Life Annuity.................... 27
Option D--Joint and Survivor Life Annuity............ 27
Option E--Installment Refund Life Annuity............ 28
Option F--Joint and Survivor Life Annuity with
10-Year Period Certain .......................... 28
Option G--Payments for Specified Period.............. 28
Option H--Payments of Specified Amount............... 28
Option I--Variable Payment Life Annuity with
10-Year Period Certain .......................... 28
Option J--Joint Survivor Variable Payment Life
Annuity with 10-Year Period Certain ............. 28
Option K--Variable Payment Annuity for a
Specified Period ................................ 28
Option L--Variable Payment Life Expectancy
Annuity.......................................... 28
Option M--Unit Refund Variable Payment Life
Annuity.......................................... 28
Option N--Variable Payment Non-Refund Life
Annuity........................................... 28
Other Options and Rates.............................. 28
Other Conditions..................................... 28
Payment Upon Death After Maturity Date................. 29
VARIABLE ACCOUNT VALUATION PROCEDURES..................... 29
Valuation Date......................................... 29
Valuation Period....................................... 29
Accumulation Unit Value................................ 29
Net Investment Factor.................................. 29
MISCELLANEOUS PROVISIONS.................................. 29
Assignment............................................. 29
Deferment of Payment .................................. 29
Free Look Period....................................... 30
Amendments to Contracts................................ 30
Substitution of Fund Shares............................ 30
Ownership of the Contract.............................. 30
FEDERAL INCOME TAXES...................................... 30
Introduction........................................... 30
Income Tax Status...................................... 30
Taxation of Annuities in General--Non-Qualified Plans.. 31
Surrenders or Withdrawals Prior to the Contract
Maturity Date..................................... 31
Surrenders or Withdrawals On or After the Contract
Maturity Date..................................... 31
Penalty Tax on Certain Surrenders and Withdrawals.... 31
Additional Considerations.............................. 32
Diversification Standards ............................. 33
Qualified Plans........................................ 33
Tax Sheltered Annuities ("TSAs") .................... 34
Keogh Plans.......................................... 34
Individual Retirement Accounts....................... 34
Corporate Pension and Profit-Sharing Plans........... 35
Deferred Compensation Plans with Respect to
Service for State and Local Governments and
Tax Exempt Organizations.......................... 35
Penalty Tax on Certain Surrenders and Withdrawals
from Qualified Plans.............................. 35
Seek Tax Advice...................................... 36
SALES OF VARIABLE ACCUMULATION CONTRACTS ................. 36
STATE REGULATION ......................................... 36
REPORTS .................................................. 36
VOTING RIGHTS ............................................ 36
TEXAS OPTIONAL RETIREMENT PROGRAM ........................ 37
LEGAL MATTERS ............................................ 37
SAI....................................................... 37
APPENDIX A - PERFORMANCE HISTORY.......................... 38
APPENDIX B - THE GUARANTEED INTEREST ACCOUNT.............. 41
APPENDIX C - DEDUCTIONS FOR PREMIUM TAXES................. 42
3
<PAGE>
SPECIAL TERMS
- --------------------------------------------------------------------------------
The following is a list of terms and their meanings when used in this
prospectus.
ACCOUNT: PHL Variable Accumulation Account.
ACCOUNT VALUE: The value of all assets held in the Account.
ACCUMULATION UNIT: A standard of measurement for each Subaccount used to
determine the value of a Contract and the interest in the Subaccounts prior to
the start of annuity payments.
ACCUMULATION UNIT VALUE: The value of one Accumulation Unit was set at $1.000000
on the date assets were first allocated to each Subaccount. The value of one
Accumulation Unit on any subsequent Valuation Date is determined by multiplying
the immediately preceding Accumulation Unit Value by the applicable Net
Investment Factor for the Valuation Period ending on such Valuation Date.
ANNUITANT: The person whose life is used as the measuring life under the
Contract. The annuitant will be the primary Annuitant as shown on the Contract's
Schedule Page while that person is living, and will then be the contingent
Annuitant, if that person is living at the death of the primary Annuitant.
ANNUITY OPTION: The provisions under which we make a series of annuity payments
to the Annuitant or other payee, such as Life Annuity with Ten Years Certain.
See "Annuity Options."
ANNUITY UNIT: A standard of measurement used in determining the amount of each
periodic payment under the variable payment Annuity Options I, J, K, M and N.
CLAIM DATE: The Contract Value next determined following receipt of due proof.
CONTRACT: The deferred variable accumulation annuity contract described in this
Prospectus.
CONTRACT OWNER (OWNER, YOU, YOUR): Usually the person or entity, to whom we
issue the Contract. The Contract Owner has the sole right to exercise all rights
and privileges under the Contract as provided in the Contract. The Owner may be
the Annuitant, an employer, a trust or any other individual or entity specified.
However, under Contracts used with certain tax-qualified plans, the Owner must
be the Annuitant. A husband and wife may be designated as joint owners, and if
such a joint owner dies, the other joint owner becomes the sole Owner of the
Contract. If no Owner is named in the application, the Annuitant will be the
Owner.
CONTRACT VALUE: Prior to the Maturity Date, the sum of all Accumulation Units
held in the Subaccounts of the Account and the value held in the GIA and/or MVA.
For Tax-sheltered Annuity plans (as described in Internal Revenue Code (IRC)
403(b)) with loans, the Contract Value is the sum of all Accumulation Units held
in the Subaccounts of the Account and the value held in the GIA and/or MVA plus
the value held in the Loan Security Account, and less any Loan Debt.
FIXED PAYMENT ANNUITY: A benefit providing periodic payments of a fixed dollar
amount throughout the Annuity Period. This benefit does not vary with or reflect
the investment performance of any Subaccount.
FUNDS: The Phoenix Edge Series Fund, Deutsche Asset Management VIT Funds,
Federated Insurance Series, Franklin Templeton Variable Insurance Products
Trust, The Universal Institutional Funds, Inc., and Wanger Advisors Trust.
GIA: An investment option under which premium amounts are guaranteed to earn a
fixed rate of interest.
ISSUE DATE: The date that the initial payment is invested under a Contract.
LOAN DEBT: Loan Debt is equal to the sum of the outstanding loan balance plus
any accrued loan interest.
LOAN SECURITY ACCOUNT: The Loan Security Account is part of the general account
and is the sole security for Tax-sheltered Annuity (as described in IRC 403(b))
loans. It is increased with all loan amounts taken and reduced by all repayments
of loan principal.
MVA: An account that pays interest at a guaranteed rate if held to maturity. If
amounts are withdrawn, transferred or applied to an annuity option before the
end of the guarantee period we will make a market adjustment to the value of
that account. Assets allocated to the MVA are not part of the assets allocated
to the Account or the general account of PHL Variable. The MVA is described in a
separate prospectus.
MATURITY DATE: The date elected by the Owner when annuity payments will begin.
The Maturity Date will not be any earlier than the fifth Contract anniversary
and no later than the Annuitant's 95th birthday. The election is subject to
certain conditions described in "The Annuity Period."
MINIMUM INITIAL PAYMENT: The amount that you pay when you purchase a Contract.
We require minimum initial payments of:
[diamond] Non-qualified plans--$1,000
[diamond] Individual Retirement Annuity--$1,000
[diamond] Bank draft program--$25
[diamond] Qualified plans--$1,000 annually
MINIMUM SUBSEQUENT PAYMENT: The least amount that you may pay when you make any
subsequent payments, after the minimum initial payment (see above). The minimum
subsequent payment for all Contracts is $25.
NET ASSET VALUE: Net asset value of a Series' shares is computed by dividing the
value of the net assets of the Series by the total number of Series' outstanding
shares.
PAYMENT UPON DEATH: The obligation of PHL Variable under a Contract to make a
payment on the death of the Owner or Annuitant anytime: (a) before the Maturity
4
<PAGE>
Date of a Contract (see "Payment Upon Death Before Maturity Date") or (b) after
the Maturity Date of a Contract (see "Payment Upon Death After Maturity Date").
PHL VARIABLE (OUR, US, WE, COMPANY): PHL Variable Insurance Company.
SERIES: A separate investment portfolio of a Fund.
VALUATION DATE: A Valuation Date is every day the New York Stock Exchange
("NYSE") is open for trading and PHL Variable is open for business.
VAO: Variable Annuity Operations.
VARIABLE PAYMENT ANNUITY: An annuity providing payments that vary in amounts,
according to the investment experience of the selected Subaccounts.
VPMO: The Variable Products Mail Operation division of PHL Variable that
receives and processes incoming mail for Variable Annuity Operations.
5
<PAGE>
SUMMARY OF EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
Sales Charges Imposed on Purchases...................................... None
Deferred Surrender Charges (as a percentage of amount withdrawn):(1)
Age of Payment in Complete Years 0-1................................ 7%
Age of Payment in Complete Years 1-2................................ 6%
Age of Payment in Complete Years 2-3................................ 5%
Age of Payment in Complete Years 3-4................................ 4%
Age of Payment in Complete Years 4-5................................ 3%
Age of Payment in Complete Years 5-6................................ 2%
Age of Payment in Complete Years 6-7................................ 1%
Age of Payment in Complete Years 7 and thereafter................... None
Exchange Fee-- Maximum Allowable Charge Per Exchange.................... $10
ANNUAL ADMINISTRATIVE CHARGE
Maximum............................................................. $35
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
Mortality and Expense Risk Fee...................................... 1.25%
Daily Administrative Fee............................................ 0.125%
------
Total Separate Account Annual Expenses.................................. 1.375%
1 A surrender charge is taken from the proceeds when a Contract is surrendered
or when an amount is withdrawn, if the payments have not been held under the
Contract for a certain period of time. However, each year an amount up to 10%
of the Contract Value as of the end of the previous Contract year may be
withdrawn without a surrender charge. See "Deductions and Charges--Surrender
Charges."
6
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<TABLE>
<CAPTION>
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES TOTAL EXPENSES TOTAL EXPENSES
SERIES MANAGEMENT RULE 12B-1 BEFORE BEFORE AFTER
FEES FEES REIMBURSEMENT1 REIMBURSEMENT REIMBURSEMENT(2)
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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%(4) 1.75%(4) .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-Federated U.S. Government Bond .60% N/A 1.70%(4) 2.30%(4) .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%(4) 2.25%(4) 1.00%
Phoenix-Janus Flexible Income .80% N/A 1.65%(4) 2.45%(4) .95%
Phoenix-Janus Growth .85% N/A 1.05%(4) 1.90%(4) 1.00%
Phoenix-Morgan Stanley Focus Equity .85% N/A 1.30%(4) 2.15%(4) 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-Schafer Mid-Cap Value 1.05% N/A 1.53% 2.58% 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%
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%
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio .80% N/A 1.85%(4) 2.65%(4) 1.15%
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%
WANGER ADVISORS TRUST
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 1.00% N/A 2.45% 3.45% 1.45%
Wanger International Small Cap 1.25% N/A .24% 1.49% 1.49%
Wanger Twenty .95% N/A 1.17% 2.12% 1.35%
Wanger U.S. Small Cap .95% N/A .07% 1.02% 1.02%
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</TABLE>
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-Schafer Mid-Cap Value,
Phoenix-Bankers Trust Dow 30, Phoenix-Federated U.S. Government, Phoenix-Janus
Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth and
Phoenix-Morgan Stanley Focus Equity 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%. 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 will pay up to .60%, and the
Wanger Twenty will pay up to .40%.
2 Reflects the effect of any management fee waivers and reimbursement of
expenses.
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 six 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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RULE 12B-1
ESTIMATED ANNUAL EXPENSES FROM 5/1/00 MANAGEMENT FEES FEES OTHER EXPENSES TOTAL OPERATING 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 - Class 2 1.25% .25% .29% 1.79%
Templeton Growth Securities Fund - Class 2 .80% .25% .05% 1.10%
Templeton International Securities Fund - Class 2 .65% .25% .20% 1.10%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<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.
EXAMPLES:
If you surrender your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 investment assuming 5% annual
return on assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... $ 90 $128 $166 $288
Phoenix-Aberdeen New Asia Series................................ 103 166 230 414
Phoenix-Bankers Trust Dow 30 Series(2).......................... 97 148 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 93 136 180 317
Phoenix-Engemann Capital Growth Series.......................... 87 118 150 255
Phoenix-Engemann Nifty Fifty Series............................. 94 139 186 328
Phoenix-Federated U.S. Government Bond Series(2)................ 102 164 N/A N/A
Phoenix-Goodwin Money Market Series............................. 86 115 144 244
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 87 119 151 258
Phoenix-Hollister Value Equity Series........................... 100 156 214 383
Phoenix-J.P. Morgan Research Enhanced Index Series ............. 88 120 153 262
Phoenix-Janus Equity Income Series(2)........................... 102 162 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 104 168 N/A N/A
Phoenix-Janus Growth Series(2).................................. 99 153 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series2..................... 101 160 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 87 119 151 257
Phoenix-Oakhurst Growth and Income Series....................... 90 128 166 288
Phoenix-Oakhurst Strategic Allocation Series.................... 87 119 151 257
Phoenix-Schafer Mid-Cap Value Series............................ 105 171 239 430
Phoenix-Seneca Mid-Cap Growth Series............................ 100 157 214 384
Phoenix-Seneca Strategic Theme Series........................... 90 126 164 284
EAFE(R)Equity Index Fund(1)..................................... 92 132 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 89 123 N/A N/A
Federated High Income Bond Fund II(1)........................... 88 121 N/A N/A
Technology Portfolio(2)......................................... 106 173 N/A N/A
Mutual Shares Securities Fund -- Class 2........................ 91 128 167 291
Templeton Asset Strategy Fund -- Class 2........................ 90 128 167 290
Templeton Developing Markets Securities Fund -- Class 2......... 98 150 204 364
Templeton Growth Securities Fund -- Class 2..................... 91 131 172 300
Templeton International Securities Fund -- Class 2.............. 91 131 172 300
Wanger Foreign Forty............................................ 113 195 276 499
Wanger International Small Cap.................................. 95 141 189 334
Wanger Twenty................................................... 101 159 218 391
Wanger U.S. Small Cap........................................... 90 128 166 289
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
8
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you annuitize your Contract the end of the applicable time periods: You
would pay the following expenses on a $1,000 investment assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... $ 90 $128 $135 $288
Phoenix-Aberdeen New Asia Series................................ 103 166 202 414
Phoenix-Bankers Trust Dow 30 Series(2).......................... 97 148 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 93 136 150 317
Phoenix-Engemann Capital Growth Series.......................... 87 118 119 255
Phoenix-Engemann Nifty Fifty Series............................. 94 139 156 328
Phoenix-Federated U.S. Government Bond Series(2)................ 102 164 N/A N/A
Phoenix-Goodwin Money Market Series............................. 86 115 113 244
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 87 119 120 258
Phoenix-Hollister Value Equity Series........................... 100 156 185 383
Phoenix-J.P. Morgan Research Enhanced Index Series ............. 88 120 122 262
Phoenix-Janus Equity Income Series(2)........................... 102 162 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 104 168 N/A N/A
Phoenix-Janus Growth Series(2).................................. 99 153 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 101 160 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 87 119 120 257
Phoenix-Oakhurst Growth and Income Series....................... 90 128 135 288
Phoenix-Oakhurst Strategic Allocation Series.................... 87 119 120 257
Phoenix-Schafer Mid-Cap Value Series............................ 105 171 210 430
Phoenix-Seneca Mid-Cap Growth Series............................ 100 157 185 384
Phoenix-Seneca Strategic Theme Series........................... 90 126 133 284
EAFE(R)Equity Index Fund(1)..................................... 92 132 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 89 123 N/A N/A
Federated High Income Bond Fund II(1)........................... 88 121 N/A N/A
Technology Portfolio(2)......................................... 106 173 N/A N/A
Mutual Shares Securities Fund -- Class 2........................ 91 128 137 291
Templeton Asset Strategy Fund -- Class 2........................ 90 128 136 290
Templeton Developing Markets Securities Fund -- Class 2......... 98 150 174 364
Templeton Growth Securities Fund -- Class 2..................... 91 131 141 300
Templeton International Securities Fund -- Class 2.............. 91 131 141 300
Wanger Foreign Forty............................................ 113 195 249 499
Wanger International Small Cap.................................. 95 141 159 334
Wanger Twenty................................................... 101 159 189 391
Wanger U.S. Small Cap........................................... 90 128 136 289
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
9
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you do not surrender your Contract: You would pay the following expenses
on a $1,000 investment assuming 5% annual return on assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... $ 26 $ 79 $135 $288
Phoenix-Aberdeen New Asia Series................................ 39 120 202 414
Phoenix-Bankers Trust Dow 30 Series(2).......................... 33 101 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 29 88 150 317
Phoenix-Engemann Capital Growth Series.......................... 22 69 119 255
Phoenix-Engemann Nifty Fifty Series............................. 30 92 156 328
Phoenix-Federated U.S. Government Bond Series(2)................ 39 117 N/A N/A
Phoenix-Goodwin Money Market Series............................. 21 66 113 244
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 23 70 120 258
Phoenix-Hollister Value Equity Series........................... 36 109 185 383
Phoenix-J.P. Morgan Research Enhanced Index Series ............. 23 71 122 262
Phoenix-Janus Equity Income Series(2)........................... 38 116 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 40 121 N/A N/A
Phoenix-Janus Growth Series(2).................................. 35 105 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 37 113 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 23 70 120 257
Phoenix-Oakhurst Growth and Income Series....................... 26 79 135 288
Phoenix-Oakhurst Strategic Allocation Series.................... 23 70 120 257
Phoenix-Schafer Mid-Cap Value Series............................ 41 125 210 430
Phoenix-Seneca Mid-Cap Growth Series............................ 36 110 185 384
Phoenix-Seneca Strategic Theme Series........................... 25 78 133 284
EAFE(R)Equity Index Fund(1)..................................... 27 83 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 24 74 N/A N/A
Federated High Income Bond Fund II(1)........................... 24 73 N/A N/A
Technology Portfolio(2)........................................... 42 127 N/A N/A
Mutual Shares Securities Fund -- Class 2......................... 26 80 137 291
Templeton Asset Strategy Fund -- Class 2......................... 26 80 136 290
Templeton Developing Markets Securities Fund -- Class 2.......... 34 103 174 364
Templeton Growth Securities Fund -- Class 2...................... 27 83 141 300
Templeton International Securities Fund -- Class 2............... 27 83 141 300
Wanger Foreign Forty............................................ 50 150 249 499
Wanger International Small Cap.................................. 31 93 159 334
Wanger Twenty................................................... 37 112 189 391
Wanger U.S. Small Cap........................................... 26 79 136 289
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
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 expenses
of the Account as well as of the Funds. See "Deductions and Charges" in this
Prospectus and in the Fund Prospectuses.
Premium taxes, which are not reflected in the table above, may apply. We
will charge any premium or other taxes levied by any governmental entity with
respect to your Contract against the Contract Values based on a percentage of
premiums paid. Certain states currently impose premium taxes on the Contracts
and range from 0% to 3.5% of premiums paid. See "Deductions and Charges--Premium
Tax" and Appendix C.
The Examples should not be considered a representation of future expenses.
Actual expenses may be greater or less than those shown. See "Deductions and
Charges."
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 within this prospectus
and the provisions of the contract, the contract provisions will control.
OVERVIEW
The Contract offers a dynamic idea in retirement planning. It's designed to
give you maximum flexibility in obtaining your investment goals.
The Contract offers a combination of investment options both variable and
fixed. Investments in the Subaccounts provide returns that are variable and
depend upon the performance of the underlying Funds. Allocations to either the
GIA or MVA produce guaranteed interest earnings subject to certain conditions.
You also may select from many different variable and fixed annuity payout
options, some of which offer retirement income payments that you cannot outlive.
See "The Annuity Period--Annuity Options."
INVESTMENT FEATURES
FLEXIBLE PAYMENTS
[diamond] You may make payments anytime until the Maturity Date.
[diamond] You can vary the amount and frequency of your payments.
[diamond] Other than the Minimum Initial Payment, there are no required
payments.
MINIMUM CONTRIBUTION
[diamond] Generally, the Minimum Initial Payment is $1,000.
ALLOCATION OF PREMIUMS AND CONTRACT VALUE
[diamond] Payments are invested in one or more of the Subaccounts, the GIA and
the MVA.
[diamond] Transfers between the Subaccounts and into the GIA can be made
anytime. Transfers from the GIA are subject to rules discussed in
Appendix B and in "The Accumulation Period--Transfers."
[diamond] Transfers from the MVA may be subject to market value adjustments and
are subject to certain rules. See the MVA prospectus.
[diamond] The Contract Value varies with the investment performance of the Funds
and is not guaranteed.
[diamond] The Contract Value allocated to the GIA will depend on deductions
taken from the GIA and interest accumulation at rates set by us
(minimum--4%).
WITHDRAWALS
[diamond] You may partially or fully surrender the Contract anytime for its
Contract Value less any applicable surrender charge and premium tax.
[diamond] During the first Contract Year, you may withdraw up to
10% of the Contract Value as of the date of the first partial
surrender without a surrender charge. After that, you can surrender up
to 10% of the Contract Value as of the last Contract Anniversary
without a surrender charge.
DEATH BENEFIT
The Contract provides for payment on the death of the Owner or the Annuitant
anytime before the Maturity Date of the Contract.
DEDUCTIONS AND CHARGES
GENERALLY
[diamond] No deductions are made from payments.
[diamond] A deduction for 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.
[diamond] No deduction for surrender charges after the Annuity Period has begun,
unless you make unscheduled withdrawals under Annuity Options K or L.
[diamond] If we impose a surrender charge, it is on a first-in, first-out basis.
[diamond] No surrender charge is imposed if the Annuitant or Owner dies before
the date that annuity payments will begin.
[diamond] A declining surrender charge is assessed on withdrawals in excess of
10% of the Account Value, based on the date the payments are
deposited:
===============================================================
Percent 7% 6% 5% 4% 3% 2% 1% 0%
- ---------------------------------------------------------------
Age of Payment in 0 1 2 3 4 5 6 7+
Complete Years
===============================================================
[diamond] The total deferred surrender charges on a Contract will never exceed
9% of the total payments.
See "Deductions and Charges--Surrender Charges" for a detailed discussion.
FROM THE ACCOUNT
[diamond] Mortality and expense risk fee--1.25% annually. See "Charges for
Mortality and Expense Risks."
[diamond] The daily administrative fee--.125% annually. See "Charges for
Administrative Services."
OTHER CHARGES OR DEDUCTIONS
[diamond] Premium Taxes--taken from the Contact Value upon annuitization.
o PHL Variable will reimburse itself for such taxes on the date of
a partial withdrawal, surrender of the
11
<PAGE>
Contract, Maturity Date or payment of death proceeds. See "Premium
Tax."
[diamond] Administrative Fee--$35 each year.
See "Deductions and Charges" for a detailed description of Contract
charges."
In addition, certain charges are deducted from the assets of the Funds for
investment management services. See the prospectuses for the Funds for more
information.
ADDITIONAL INFORMATION
FREE LOOK PERIOD
You have the right to review the Contract. If you are not satisfied you may
return it within 10 days after you receive it and cancel the Contract. You will
receive in cash the adjusted value of the initial payment, however, if
applicable state law requires, we will return the full amount of the initial
payment.
See "Free Look Period" for a detailed discussion.
LAPSE
If on any Valuation Date the total Contract Value equals zero, or, the
premium tax reimbursement due on a surrender or partial withdrawal is greater
than or equal to the Contract Value, the Contract will immediately terminate and
lapse without value.
12
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
ACCUMULATION UNIT VALUES
(SELECTED DATA FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE
INDICATED PERIOD)
The following tables show how the value of one unit of each Subaccount
changed during each of the years 1995 through 1999. As you will note not all
Subaccounts were operating in all of those years. All units began with a value
of 1.000000. Thereafter, the unit value reflects the cumulative investment
experience of the Subaccount. These tables are highlights only, you may obtain
more detailed information in the financial statements contained in the Statement
of Additional Information.
Following are financial highlights for the period indicated.
<TABLE>
<CAPTION>
PHOENIX-ABERDEEN INTERNATIONAL SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.648539 $1.306260 $1.181847 $1.009660 $1.000000
Unit value, end of period.................................. $2.106066 $1.648539 $1.306260 $1.181847 $1.009660
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 21,574 15,694 7,089 3,095 133
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-ABERDEEN NEW ASIA SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED DECEMBER 31, 1/29/96 TO
1999 1998 1997 12/31/96
---- ---- ---- --------
<S> <C> <C> <C> <C>
Unit value, beginning of period........................................... $0.626694 $0.665071 $0.997488 $1.000000
Unit value, end of period................................................. $0.933392 $0.626694 $0.665071 $0.997488
========= ========= ========= =========
Number of units outstanding (000)......................................... 5,775 3,949 3,655 1,133
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-BANKERS TRUST DOW 30 SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/29/99
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.019949
=========
Number of units outstanding (000).................................................................................... 0.181
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.290333 $1.660307 $1.378845 $1.050105 $1.000000
Unit value, end of period.................................. $1.333608 $1.290333 $1.660307 $1.378845 $1.050105
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 7,522 8,919 7,737 1,543 226
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-ENGEMANN CAPITAL GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.840434 $1.436190 $1.202623 $1.082876 $1.000000
Unit value, end of period.................................. $2.354304 $1.840434 $1.436490 $1.202623 $1.082876
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 158,997 135,636 77,819 42,365 3,037
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-ENGEMANN NIFTY FIFTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 3/3/98 TO
1999 12/31/98
------ --------
<S> <C> <C>
Unit value, beginning of period......................................................................... $1.248542 $1.000000
Unit value, end of period............................................................................... $1.627772 $1.248542
========= =========
Number of units outstanding (000)....................................................................... 15,352 4,057
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/22/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.003595
=========
Number of units outstanding (000).................................................................................... 36.7
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-GOODWIN MONEY MARKET SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.131041 $1.091039 $1.051525 $1.014954 $1.000000
Unit value, end of period.................................. $1.169442 $1.131041 $1.091039 $1.051525 $1.014954
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 53,089 48,674 32,019 22,142 5,893
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.208247 $1.276756 $1.166339 $1.051781 $1.000000
Unit value, end of period.................................. $1.256810 $1.208247 $1.276756 $1.166339 $1.051781
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 47,251 49,806 29,245 13,252 319
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-HOLLISTER VALUE EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 3/5/98 TO
1999 12/31/98
---- --------
<S> <C> <C>
Unit value, beginning of period......................................................................... $1.095185 $1.000000
Unit value, end of period............................................................................... $1.343166 $1.095185
========= =========
Number of units outstanding (000)....................................................................... 4,394 2,909
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED DECEMBER 31, 5/1/97 TO
1999 1998 12/31/97
---- ---- ---------
<S> <C> <C> <C>
Unit value, beginning of period.......................................................... $1.352249 $1.040992 $1.000000
Unit value, end of period................................................................ $1.585133 $1.352249 $1.040992
========= ========= =========
Number of units outstanding (000)........................................................ 28,345 16,026 3,958
PHOENIX-JANUS EQUITY INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/20/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.084151
=========
Number of units outstanding (000).................................................................................... 65.6
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-JANUS FLEXIBLE INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/22/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.000901
=========
Number of units outstanding (000).................................................................................... 98.3
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-JANUS GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/20/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.084861
=========
Number of units outstanding (000).................................................................................... 282
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-MORGAN STANLEY FOCUS EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/24/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.028828
=========
Number of units outstanding (000).................................................................................... 29.0
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-OAKHURST BALANCED SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.560490 $1.329181 $1.142528 $1.047597 $1.000000
Unit value, end of period.................................. $1.717434 $1.560490 $1.329181 $1.142528 $1.047597
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 33,400 27,300 10,024 5,616 719
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-OAKHURST GROWTH AND INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 3/3/98 TO
1999 12/31/98
---- --------
<S> <C> <C>
Unit value, beginning of period......................................................................... $1.191224 $1.000000
Unit value, end of period............................................................................... $1.374925 $1.191224
========= =========
Number of units outstanding (000)....................................................................... 34,387 14,294
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-OAKHURST STRATEGIC ALLOCATION SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.590626 $1.334927 $1.120864 $1.042018 $1.000000
Unit value, end of period.................................. $1.745695 $1.590626 $1.334927 $1.120864 $1.042018
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 43,750 38,139 22,085 13,249 2,919
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-SCHAFER MID-CAP VALUE SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 3/5/98 TO
1999 12/31/98
---- ---------
<S> <C> <C>
Unit value, beginning of period......................................................................... $0.876259 $1.000000
Unit value, end of period............................................................................... $0.775369 $0.876259
========= =========
Number of units outstanding (000)....................................................................... 3,352 3,102
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-SENECA MID-CAP GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 3/3/98 TO
1999 12/31/98
---- --------
<S> <C> <C>
Unit value, beginning of period......................................................................... $1.208253 $1.000000
Unit value, end of period............................................................................... $1.735901 $1.208253
========= =========
Number of units outstanding (000)....................................................................... 4,186 1,938
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-SENECA STRATEGIC THEME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
YEAR ENDED DECEMBER 31, 1/29/96 TO
1999 1998 1997 12/31/96
---- ---- ---- --------
<S> <C> <C> <C> <C>
Unit value, beginning of period........................................... $1.779043 $1.246377 $1.078271 $1.000000
Unit value, end of period................................................. $2.720219 $1.779043 $1.246377 $1.078271
========= ========= ========= =========
Number of units outstanding (000)......................................... 25,555 15,013 10,169 4,054
</TABLE>
<TABLE>
<CAPTION>
EAFE(R) EQUITY INDEX FUND SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
7/26/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.426819
=========
Number of units outstanding (000).................................................................................... 186
</TABLE>
<TABLE>
<CAPTION>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
7/21/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $1.986211
=========
Number of units outstanding (000).................................................................................... 883
</TABLE>
<TABLE>
<CAPTION>
FEDERATED HIGH INCOME BOND FUND II SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
7/27/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $1.969219
=========
Number of units outstanding (000).................................................................................... 602
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY PORTFOLIO SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.052307
=========
Number of units outstanding (000).................................................................................... 323
</TABLE>
<TABLE>
<CAPTION>
MUTUAL SHARES SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 11/10/98 TO
1999 12/31/98
---- --------
<S> <C> <C>
Unit value, beginning of period......................................................................... $1.013620 $1.000000
Unit value, end of period............................................................................... $1.092822 $1.013620
========= =========
Number of units outstanding (000)....................................................................... 1,734 281
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON ASSET STRATEGY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED FROM
INCEPTION
DECEMBER 31, 5/1/97 TO
1999 1998 12/31/97
---- ---- --------
<S> <C> <C> <C>
Unit value, beginning of period.......................................................... $1.114519 $1.064886 $1.000000
Unit value, end of period................................................................ $1.347267 $1.114519 $1.064886
========= ========= =========
Number of units outstanding (000)........................................................ 9,617 9,285 4,622
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
TEMPLETON DEVELOPING MARKETS SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 5/1/97 TO
1999 1998 12/31/97
---- ---- --------
<S> <C> <C> <C>
Unit value, beginning of period.......................................................... $0.516071 $0.662660 $1.000000
Unit value, end of period................................................................ $0.780362 $0.516071 $0.662660
========= ========= =========
Number of units outstanding (000)........................................................ 7,915 5,744 3,275
TEMPLETON GROWTH SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 5/1/97 TO
1999 1998 12/31/97
---- ---- --------
<S> <C> <C> <C>
Unit value, beginning of period.......................................................... $1.040037 $1.044077 $1.000000
Unit value, end of period................................................................ $1.321426 $1.040037 $1.044077
========= ========= =========
Number of units outstanding (000)........................................................ 22,477 12,576 6,100
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON INTERNATIONAL SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED INCEPTION
DECEMBER 31, 5/1/97 TO
1999 1998 12/31/97
---- ---- --------
<S> <C> <C> <C>
Unit value, beginning of period.......................................................... $1.162057 $1.075133 $1.000000
Unit value, end of period................................................................ $1.412684 $1.162057 $1.075133
========= ========= =========
Number of units outstanding (000)........................................................ 12,940 11,361 4,072
</TABLE>
<TABLE>
<CAPTION>
WANGER FOREIGN FORTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
2/8/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $1.000000
Unit value, end of period............................................................................................ $1.873914
=========
Number of units outstanding (000).................................................................................... 910
</TABLE>
<TABLE>
<CAPTION>
WANGER INTERNATIONAL SMALL CAP SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.580656 $1.377428 $1.417188 $1.088168 $1.000000
Unit value, end of period.................................. $3.531918 $1.580656 $1.377428 $1.417188 $1.088168
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 30,517 28,056 20,361 9,834 257
</TABLE>
<TABLE>
<CAPTION>
WANGER TWENTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
2/8/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $1.000000
Unit value, end of period............................................................................................ $1.364058
=========
Number of units outstanding (000).................................................................................... 1,654
</TABLE>
<TABLE>
<CAPTION>
WANGER U.S. SMALL CAP SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
YEAR ENDED DECEMBER 31, INCEPTION
----------------------- 7/31/95 TO
1999 1998 1997 1996 12/31/95
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period............................ $1.884220 $1.757439 $1.376482 $0.951679 $1.000000
Unit value, end of period.................................. $2.324695 $1.884220 $1.757439 $1.376482 $0.951679
========= ========= ========= ========= =========
Number of units outstanding (000).......................... 60,367 58,568 34,966 16,757 1,313
</TABLE>
17
<PAGE>
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
We may include the performance history of the Subaccounts in advertisements,
sales literature or reports. Performance information about each Subaccount is
based on past performance only and is not an indication of future performance.
See Appendix A for more information.
THE VARIABLE ACCUMULATION ANNUITY
- --------------------------------------------------------------------------------
The individual deferred variable accumulation annuity contract (the
"Contract") issued by PHL Variable is significantly different from a fixed
annuity contract in that, unless the GIA is selected, it is the Owner and
Annuitant under a Contract who bear the risk of investment gain or loss rather
than PHL Variable. To the extent that payments are not allocated to the GIA or
MVA, the amounts that will be available for annuity payments under a Contract
will depend on the investment performance of the amounts allocated to the
Subaccounts. Upon the maturity of a Contract, the amounts held under a Contract
will continue to be invested in the Account or the GIA and monthly annuity
payments will vary in accordance with the investment experience of the
investment options selected. However, a fixed annuity may be elected, in which
case PHL Variable will guarantee specified monthly annuity payments.
You select the investment objective of each Contract on a continuing basis
by directing the allocation of payments and the reallocation of the Contract
Value among the Subaccounts, GIA or MVA.
PHL VARIABLE AND THE ACCOUNT
- --------------------------------------------------------------------------------
PHL Variable is a wholly-owned indirect subsidiary of Phoenix Home Life
Mutual Insurance Company. Our executive office is located at One American Row,
Hartford, Connecticut 06102-5056 and our main administrative office is located
at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. PHL Variable is
a Connecticut stock company formed on April 24, 1981.
On December 7, 1994, PHL Variable established the Account, a separate
account created under the insurance laws of Connecticut. The Account is
registered with the SEC as a unit investment trust under the Investment Company
Act of 1940 (the "1940 Act") and it meets the definition of a "separate account"
under the 1940 Act. Registration under the 1940 Act does not involve supervision
by the SEC of the management or investment practices or policies of the Account
or of PHL Variable.
Under Connecticut law, all income, gains or losses of the Account must be
credited to or charged against the amounts placed in the Account without regard
to the other income, gains and losses from any other business or activity of PHL
Variable. The assets of the Account may not be used to pay liabilities arising
out of any other business that PHL Variable may conduct. Obligations under the
Contracts are obligations of PHL Variable.
Contributions to the GIA are not invested in the Account; rather, they
become part of the general account of PHL Variable (the "General Account"). The
General Account supports all insurance and annuity obligations of PHL Variable
and is made up of all of its general assets other than those allocated to any
separate account such as the Account. For more complete information concerning
the GIA, see Appendix A.
INVESTMENTS OF THE ACCOUNT
- --------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts invest in corresponding series of The Phoenix Edge
Series Fund. The Fund currently has the following series available:
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
series is to seek a high total return consistent with reasonable risk. The
series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the series is
to seek long-term capital 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 AverageSM (the "DJIASM") before fund
expenses.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN 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 Phoenix-Engemann Capital Growth 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
18
<PAGE>
securities which offer the best potential for long-term growth of capital. At
least 75% of the series' assets will be invested in common stocks of high
quality growth companies. The remaining portion will be invested in common
stocks of small corporations with rapidly growing earnings per share or common
stocks believed to be undervalued.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES: The investment objective of
the series is 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 Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-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 Phoenix-Oakhurst Balanced 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 Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-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
Phoenix-Oakhurst Strategic Allocation 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-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series will
invest in common stocks of established companies having a strong financial
position and a low stock market valuation at the time of purchase which are
believed to offer the possibility of increase in value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the series
is to seek capital appreciation primarily through investments in equity
securities of companies that have the potential for above average market
appreciation. The series seeks to outperform the Standard & Poor's Mid-Cap 400
Index.
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
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
A certain subaccount invests in a corresponding series of the Deutsche Asset
Management VIT Funds. The following series is currently available:
EAFE(R) EQUITY INDEX FUND: The series 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 series invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
19
<PAGE>
FEDERATED INSURANCE SERIES
Certain subaccounts invest in corresponding series of the Federated
Insurance Series. The following series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the series is to seek current income by investing primarily in U.S.
government securities, including mortgage-backed securities issued by U.S.
government agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the series
is to seek high current income by investing primarily in a diversified portfolio
of high-yield, lower-rated corporate bonds.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding series
of The Universal Institutional Funds, Inc. The following series is currently
available:
TECHNOLOGY PORTFOLIO: The investment objective of the series 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.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Certain subaccounts invest in Class 2 shares of the corresponding fund of
the Franklin Templeton Variable Insurance Products Trust. The following funds
are currently available:
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 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.
TEMPLETON INTERNATIONAL SECURITIES FUND: The investment objective of the
fund is long-term capital growth. The Templeton International Fund invests
primarily in stocks of companies located outside the United States, including
emerging markets.
WANGER ADVISORS TRUST
Certain subaccounts invest in corresponding series of the Wanger Advisors
Trust. The following series are currently available:
WANGER FOREIGN FORTY: The investment objective of the series is to seek
long-term capital growth. The Wanger Foreign Forty 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)
20
<PAGE>
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
Phoenix Investment Counsel, Inc. ("PIC") is an investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series
Based on subadvisory agreements with the fund, PIC as an investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Janus Capital Corporation
o Phoenix-Janus Equity Income Series
o Phoenix-Janus Flexible Income Series
o Phoenix-Janus Growth Series
[diamond] Morgan Stanley Asset Management
o Phoenix-Morgan Stanley Focus Equity Series
[diamond] Schafer Capital Management, Inc.
o Phoenix-Schafer Mid-Cap Value Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is PAIA.
Pursuant to subadvisory agreements with the fund, PAIA delegates certain
investment decisions and research functions with respect to the Phoenix-Aberdeen
New Asia Series to PIC and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect less
than wholly owned subsidiaries of Phoenix. PAIA is jointly owned and managed by
PM Holdings, Inc., a subsidiary of Phoenix, and by Aberdeen Fund Managers, Inc.
PVA is a wholly owned subsidiary of PM Holdings, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares Securities Fund
[diamond] Morgan Stanley Asset Management
o Technology Portfolio
[diamond] Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
[diamond] Templeton Global Advisors Limited
o Templeton Growth Securities Fund
[diamond] Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities Fund
[diamond] Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
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.
MVA
- --------------------------------------------------------------------------------
The MVA is an account that pays interest at a guaranteed rate if held to
maturity. If amounts are withdrawn, transferred or applied to an annuity option
before the end of the guarantee period, a market value adjustment will be made.
Assets allocated to the MVA are not part of the assets allocated to the Account
or to the general account of PHL Variable. The MVA is more fully described in a
separate prospectus.
21
<PAGE>
FOR ADDITIONAL INFORMATION CONCERNING THE FUNDS AND THE MVA, PLEASE SEE THE
ACCOMPANYING PROSPECTUSES, WHICH SHOULD BE READ CAREFULLY BEFORE INVESTING.
PURCHASE OF CONTRACTS
- --------------------------------------------------------------------------------
We require minimum initial payments of:
[diamond] Non-qualified plans--$1,000
[diamond] Individual Retirement Annuity--$1,000
[diamond] Bank draft program--$25
o You may authorize your bank to draw $25 or more from your personal
checking account monthly to purchase Units in any available
Subaccount, or for deposit in the GIA or MVA. The amount you
designate will be automatically invested on the date the bank draws
on your account. If Check-o-matic is elected, the minimum initial
payment is $25. This payment must accompany the application. Each
subsequent payment under a Contract must be at least $25.
[diamond] Qualified plans--$1,000 annually
o Contracts purchased in connection with tax-qualified or
employer-sponsored plans, a minimum annual payment of $1,000 is
required.
Generally, a Contract may not be purchased for a proposed Annuitant who is
81 years of age or older. Total payments in excess of $1,000,000 cannot be made
without the permission of PHL Variable. While the Annuitant is living and the
Contract is in force, payments may be made anytime before the Maturity Date of a
Contract.
Payments received under the Contracts will be allocated in any combination
to any Subaccount, GIA or MVA, in the proportion specified in the application
for the Contract or as otherwise indicated by you from time to time. Initial
payments may, under certain circumstances, be allocated to the Money Market
Subaccount. See "Free Look Period." Changes in the allocation of payments will
be effective as of receipt by VPMO of notice of election in a form satisfactory
to PHL Variable and will apply to any payments accompanying such notice or made
subsequent to the receipt of the notice, unless otherwise requested by you.
In certain circumstances, we may reduce the initial or subsequent payment
amount we accept for a Contract. Qualifications for such reduction follow:
[diamond] the makeup and size of the prospective group; or
[diamond] the method and frequency of payments; and
[diamond] the amount of compensation to be paid to Registered Representative(s)
on each payment.
Any reduction will not unfairly discriminate against any person. We will
make any such reduction according to our own rules in effect at the time the
payment is received. We reserve the right to change these rules from time to
time.
DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
PREMIUM TAX
Whether or not a premium tax is imposed will depend upon, among other
things, the Owner's state of residence, the Annuitant's state of residence, the
status of PHL Variable within those states and the insurance tax laws of those
states. We will pay any premium tax due and will reimburse ourself only upon the
earlier of partial withdrawal, surrender of the Contract, Maturity Date or
payment of death proceeds. For a list of states and premium taxes, see Appendix
C to this Prospectus.
SURRENDER CHARGES
A deduction for surrender charges for this Contract may be taken from
proceeds of partial withdrawals from, or complete surrender of the Contract. The
amount (if any) of a surrender charge depends on whether your payments are held
under the Contract for a certain period of time. The surrender charge schedule
is shown in the chart below. No surrender charge will be taken from death
proceeds. No surrender charge will be taken after the Annuity Period has begun
except with respect to unscheduled withdrawals under Annuity Option K or L
below. See "Annuity Options." Any surrender charge is imposed on a first-in,
first-out basis.
Up to 10% of the Contract Value may be withdrawn in a Contract year, either
in a lump sum or by multiple scheduled or unscheduled amounts without the
imposition of a surrender charge. During the first Contract year, the 10%
withdrawal without a surrender charge will be determined based on the Contract
Value at the time of the first partial withdrawal. In subsequent years, the 10%
will be based on the previous Contract anniversary value. The deduction for
surrender charges, expressed as a percentage of the amount withdrawn in excess
of the 10% allowable amount, is as follows:
===============================================================
Percent 7% 6% 5% 4% 3% 2% 1% 0%
- ---------------------------------------------------------------
Age of Payment in 0 1 2 3 4 5 6 7+
Complete Years
===============================================================
If the Annuitant or Owner dies before the Maturity Date of the Contract, the
surrender charge described in the table above will not apply.
The total deferred surrender charges on a Contract will never exceed 9% of
total payments, and the applicable level of surrender charge cannot be changed
with respect to outstanding Contracts. Surrender charges imposed in connection
with partial surrenders will be deducted from the Subaccounts, GIA and MVA on a
pro rata basis. Any distribution costs not paid for by surrender charges will be
paid by PHL Variable from the assets of the General Account.
22
<PAGE>
CHARGES FOR MORTALITY AND EXPENSE RISKS
While you bear the investment risk of the Series in which you invest, once
the Contract has been converted to a fixed annuity, the annuity payments are
guaranteed by us. We assume the risk that Annuitants as a class may live longer
than expected (necessitating a greater number of annuity payments) and that our
expenses may be higher than the deductions for such expenses.
In assuming the mortality risk, we agree to continue life annuity payments,
determined in accordance with the annuity tables and other provisions of the
Contract, to the Annuitant or other payee for as long as he or she may live.
To compensate for assuming these risks, we charge each Subaccount the daily
equivalent of .40% annually of the current value of the Subaccount's net assets
for mortality risks assumed and the daily equivalent of .85% annually for
expense risks assumed. (See the Contract Schedule Pages.) No mortality and
expense risk charge is deducted from the GIA or MVA. If the charges prove
insufficient to cover actual insurance underwriting costs and excess
administrative costs, then the loss will be borne by us; conversely, if the
amount deducted proves more than sufficient, the excess will be a profit to PHL
Variable. Any such profit may be used, as part of our General Account assets, to
meet sales expenses, if any, which are in excess of sales commission revenue
generated from any surrender charges.
We have concluded that there is a reasonable likelihood that the
distribution financing arrangement being used in connection with the Contract
will benefit the Account and the Contract Owners.
CHARGES FOR ADMINISTRATIVE SERVICES
We are responsible for administering the Contract. In doing so, we maintain
an account for each Owner and Annuitant, make all disbursements of benefits,
furnish administrative and clerical services for each Contract. We also make
disbursements to pay obligations chargeable to the Account, maintain the
accounts, records and other documents relating to the business of the Account
required by regulatory authorities, cause the maintenance of the registration
and qualification of the Account under laws administered by the SEC, prepare and
distribute notices and reports to Owners, and the like. We also reimburse
Phoenix Equity Planning Corporation for any expenses incurred by it as
"principal underwriter."
To cover certain of its costs of administration, such as preparation of
billings and statements of account, PHL Variable generally charges each Contract
$35 each year prior to the Contract's Maturity Date. A reduced charge may apply
in certain situations. This charge is deducted from each Subaccount, GIA and MVA
in which you are invested on a pro rata basis. This charge may be decreased but
will never increase. This charge is deducted on the Contract anniversary date
for services rendered during the preceding Contract Year. Upon surrender of a
Contract, the entire annual administrative charge of $35 is deducted regardless
of when the surrender occurs.
If you elect Payment Options I, J, K, M or N, the annual administrative
charge after the Maturity Date will be deducted from each annuity payment in
equal amounts.
We may reduce the annual administrative charges for Contracts issued under
tax-qualified plans other than IRAs, and for group or sponsored arrangements
such as Internal Revenue Code Section 403(b) or 457 Plans. Generally,
administrative costs per Contract vary with the size of the group or sponsored
arrangement, its stability as indicated by its term of existence and certain
characteristics of its members, the purposes for which the Contracts are
purchased and other factors. The amount of reduction will be considered on a
case-by-case basis but will be applied in a uniform, nondiscriminatory manner
that reflects the reduced administrative costs expected as a result of sales to
a particular group or sponsored arrangement.
We also charge each Subaccount the daily equivalent of 0.125% annually to
cover its variable costs of administration (such as printing and distribution of
materials pertaining to Contract Owner meetings). This fee is not deducted from
the GIA or MVA.
No surrender or annual administrative charges will be deducted for Contracts
sold to registered representatives of the principal underwriter or to officers,
directors and employees of PHL Variable or its affiliates and their spouses; or
to employees or agents who retire from PHL Variable or its affiliates or Phoenix
Equity Planning Corporation ("PEPCO"), or its affiliates or to registered
representatives of broker-dealers with whom PEPCO has selling agreements.
MARKET VALUE ADJUSTMENT
Any withdrawal from your MVA will be subject to a market value adjustment.
See the accompanying MVA prospectus for information relating to this option.
OTHER CHARGES
As compensation for investment management services, the Advisers are
entitled to a fee, payable monthly and based on an annual percentage of the
average daily net asset values of each Series. These Fund charges and other Fund
expenses are described more fully in the accompanying Fund prospectuses.
THE ACCUMULATION PERIOD
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The accumulation period is that time before annuity payments begin that your
payments into the Contract remain invested.
ACCUMULATION UNITS
Your initial payments will be applied within two days of our receipt if the
application for a Contract is complete. If an incomplete application is
completed within five business
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days of receipt by VPMO, your payment will be applied within two days of the
completion of the application. If VPMO does not accept the application within
five business days or if an order form is not completed within five business
days of receipt by VPMO, then your payment will be immediately returned unless
you request us to hold it while the application is completed. Additional
payments allocated to the GIA or MVA are deposited on the date of receipt of
payment at VPMO. Additional payments allocated to Subaccounts are used to
purchase Accumulation Units of the Subaccount(s), at the value of such Units
next determined after the receipt of the payment at VPMO. The number of
Accumulation Units of a Subaccount purchased with a specific payment will be
determined by dividing the payment by the value of an Accumulation Unit in that
Subaccount next determined after receipt of the payment. The value of the
Accumulation Units of a Subaccount will vary depending upon the investment
performance of the applicable Series of the Funds, the expenses charged against
the Fund and the charges and deductions made against the Subaccount.
ACCUMULATION UNIT VALUES
On any date before the Maturity Date of the Contract, the total value of the
Accumulation Units in a Subaccount can be computed by multiplying the number of
such Units by the value of an Accumulation Unit on that date. The value of an
Accumulation Unit on a day other than a Valuation Date is the value of the
Accumulation Unit on the next Valuation Date. The number of Accumulation Units
credited to you in each Subaccount and their current value will be reported to
you at least annually.
TRANSFERS
You may at anytime prior to the Maturity Date of your Contract, elect to
transfer all or any part of the Contract Value among one or more Subaccounts,
the GIA or MVA. A transfer from a Subaccount will result in the redemption of
Accumulation Units and, if another Subaccount is selected, in the purchase of
Accumulation Units. The exchange will be based on the values of the Accumulation
Units next determined after the receipt by VPMO of written notice of election in
a form satisfactory to us. A transfer among Subaccounts, the GIA or MVA does not
automatically change the payment allocation schedule of your contract.
You may also request transfers and changes in payment allocations among
available Subaccounts, the GIA or MVA by calling 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 or allocation changes,
telephone transfer orders and allocation changes will also be accepted on your
behalf from your registered representative. We will employ reasonable procedures
to confirm that telephone instructions are genuine. We will require verification
of account information and will record telephone instructions on tape. All
telephone transfers and allocation changes will be confirmed in writing to you.
To the extent that procedures reasonably designed to prevent unauthorized
transfers are not followed, we may be liable for following telephone
instructions for transfers that prove to be fraudulent. However, you will bear
the risk of loss resulting from instructions entered by an unauthorized third
party we reasonably believe to be genuine. These telephone exchange and
allocation change privileges may be modified or terminated at any time. In
particular, during times of extreme market volatility, telephone privileges may
be difficult to exercise. In such cases you should submit written instructions.
Unless we otherwise agree or unless the Dollar Cost Averaging Program has
been elected, (see below), you may make only one transfer per Contract year
from the GIA. Nonsystematic transfers from the GIA and MVA will be made on the
date of receipt by VPMO except as you may otherwise request. For nonsystematic
transfers, the amount that may be transferred from the GIA at any one time
cannot exceed the greater of $1,000 or 25% of the Contract Value in the GIA at
the time of transfer. For nonsystematic transfers from the MVA, the market value
adjustment may be applied. See the accompanying MVA prospectus for more
information.
Because excessive trading can hurt Fund performance and therefore be
detrimental to 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. The date a
payment was originally credited for the purpose of calculating the surrender
charge will remain the same. Currently, there is no charge for transfers;
however, we reserve the right to charge a transfer fee of $10 per transfer after
the first two transfers in each Contract year to defray administrative costs.
Currently, unlimited transfers are permitted; however, we reserve the right to
change our policy to limit the number of transfers made during each Contract
year. However, you will be permitted at least six transfers during each Contract
year. There are additional restrictions on transfers from the GIA as described
above and in Appendix B. See the MVA prospectus for information regarding
transfers from the MVA.
We reserve the right to limit the number of Subaccounts you may elect to a
total of 18 over the life of the Contract unless changes in federal and/or state
regulation, including tax, securities and insurance law require us to impose a
lower limit.
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Currently, Contracts in the annuity period are not able to make transfers
between Subaccounts.
OPTIONAL PROGRAMS AND BENEFITS
DOLLAR COST AVERAGING PROGRAM
You also may elect to transfer funds automatically among the Subaccounts or
GIA on a monthly, quarterly, semiannual or annual basis under the Dollar Cost
Averaging Program. Generally, the minimum initial and subsequent transfer
amounts are $25 monthly, $75 quarterly, $150 semiannually or $300 annually. You
must have an initial value of $2,000 in the GIA or in the Subaccount from which
funds will be transferred (sending Subaccount), and if the value in that
Subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and no more systematic transfers will be
processed. Also, payments of $1,000,000 or more require our approval before we
will accept them for processing. Funds may be transferred from only one sending
Subaccount or from the GIA but may be allocated to multiple receiving
Subaccounts. Under the Dollar Cost Averaging Program, you may transfer
approximately equal amounts from the GIA over a period of 6 months or longer.
Transfers under the Dollar Cost Averaging Program are not subject to the general
restrictions on transfers from the GIA. This program is not available for the
MVA.
Upon completion of the Dollar Cost Averaging Program, you must notify VAO at
800/541-0171 or in writing to VAO to start another Dollar Cost Averaging
Program.
All transfers under the Dollar Cost Averaging Program will be executed on
the basis of values as of the first of the month rather than on the basis of
values next determined after receipt of the transfer request. If the first of
the month falls on a holiday or weekend, then the transfer will be processed on
the next succeeding business day.
The Dollar Cost Averaging Program is not available to individuals who invest
via a Bank draft program or while the Asset Rebalancing Program is in effect.
The Dollar Cost Averaging does not ensure a profit nor guarantee against a
loss in a declining market. There is no cost associated with participating in
this program.
ASSET REBALANCING PROGRAM
Under the Asset Rebalancing Program, we transfer funds among the Subaccounts
to maintain the percentage allocation you have selected among these Subaccounts.
At your election, we will make these transfers on a monthly, quarterly,
semi-annual or annual basis.
Asset Rebalancing does not permit transfers to or from the GIA or the MVA.
The Asset Rebalancing Program does not ensure a profit nor guarantee against
a loss in a declining market. There is no cost associated with participating in
this program.
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
If the Annuitant is living, amounts held under the Contract may be withdrawn
in whole or in part prior to the Maturity Date, or after the Maturity Date under
Annuity Options K or L. Prior to the Maturity Date, you may withdraw up to 10%
of the Contract Value in a Contract year, either in a lump sum or by multiple
scheduled or unscheduled partial withdrawals, without the imposition of a
surrender charge. During the first Contract year, the 10% withdrawal without a
surrender charge is available only on Contracts issued on or after May 1, 1996,
and will be determined based on the Contract Value at the time of the first
partial withdrawal. In all subsequent years, the 10% will be based on the
previous Contract anniversary value. A signed written request for withdrawal
must be sent to VPMO. If you have not yet reached age 59 1/2, a 10% penalty tax
may apply on taxable income withdrawn. See "Federal Income Taxes." The
appropriate number of Accumulation Units of a Subaccount will be redeemed at
their value next determined after the receipt by VPMO of a written notice in a
form satisfactory to us. Accumulation Units redeemed in a partial withdrawal
from multiple Subaccounts will be redeemed on a pro rata basis unless you
designate otherwise. Contract Values in the GIA or MVA will also be withdrawn on
a pro rata basis unless you designate otherwise. Withdrawals from the MVA may be
subject to the market value adjustment. See the MVA prospectus. The resulting
cash payment will be made in a single sum, ordinarily within seven days after
receipt of such notice. However, redemption and payment may be delayed under
certain circumstances. See "Deferment of Payment." There may be adverse tax
consequences to certain surrenders and partial withdrawals. See "Surrenders or
Withdrawals Prior to the Contract Maturity Date." Certain restrictions on
redemptions are imposed on Contracts used in connection with Internal Revenue
Code Section 403(b) plans. Although loans are available under 403(b) plans only,
certain limitations may apply. See "Qualified Plans"; "Tax Sheltered Annuities."
A deduction for surrender charges may be imposed on partial withdrawals from,
and complete surrender of, a Contract. See "Surrender Charges." Any surrender
charge is imposed on a first-in, first-out basis.
Any request for a withdrawal from, or complete surrender of, a Contract
should be mailed to Phoenix Variable Products Mail Operations, PO Box 8027,
Boston, Massachusetts 02266-8027.
LAPSE OF CONTRACT
The Contract will terminate and lapse without value, if on any Valuation
Date:
[diamond] the Contract Value is zero; or
[diamond] the premium tax reimbursement due on surrender or partial withdrawals
is greater than or equal to the Contract Value (unless any Contract
Value has been applied under one of the variable payment options).
PHL Variable will notify you in writing that the Contract has lapsed.
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PAYMENT UPON DEATH BEFORE MATURITY DATE
WHO RECEIVES PAYMENT
[diamond] DEATH OF AN OWNER/ANNUITANT
If the Owner/Annuitant dies before the Contract Maturity Date, the
death benefit will be paid under the Contract to the Annuitant's
beneficiary.
[diamond] DEATH OF AN ANNUITANT WHO IS NOT THE OWNER
If the Owner and the Annuitant are not the same and the Annuitant dies
prior to the Maturity Date, the contingent Annuitant becomes the
Annuitant. If there is no contingent Annuitant, the death benefit will
be paid to the Annuitant's beneficiary.
[diamond] SPOUSAL BENEFICIARY CONTRACT CONTINUANCE
If the spousal beneficiary continues the Contract at the death of the
Owner/Annuitant or Owner who is not also the Annuitant, the spousal
beneficiary becomes the Annuitant.
[diamond] CONTINGENT ANNUITANT CONTRACT CONTINUANCE
Upon the death of the Annuitant who is not the Owner provided a
contingent Annuitant was named prior to the death of the Annuitant,
the contract will continue with the contingent Annuitant becoming the
Annuitant.
[diamond] QUALIFIED CONTRACTS
Under qualified Contracts, the death benefit is paid at the death of
the participant who is the Annuitant under the Contract.
Death benefit payments must satisfy distribution rules. See "Federal
Income Taxes--Qualified Plans."
[diamond] OWNERSHIP OF THE CONTRACT BY A NON-NATURAL PERSON
If the Owner is not an individual, the death of the Annuitant is
treated as the death of the Owner.
PAYMENT AMOUNT
[diamond] UPON THE DEATH OF THE ANNUITANT OR OWNER/ANNUITANT WHO HAS NOT YET
REACHED AGE 85.
1. Death occurring in the first Contract year--the greater of:
a. 100% of payments, less any withdrawals; or
b. the Contract Value as of the claim date.
2. Death occurring in any subsequent Contract year--the greater of:
a. the death benefit that would have been payable at the end of the
previous Contract year, plus any payments, less any withdrawals
made since that date; or
b. the Contract Value as of the claim date.
[diamond] AFTER THE ANNUITANT'S 85TH BIRTHDAY
The death benefit (less any deferred premium tax) equals the Contract
value (no surrender charge is imposed) on the Claim date.
[diamond] DEATH OF AN OWNER WHO IS NOT THE ANNUITANT
Upon the death of an Owner who is not the Annuitant, provided that
there is no surviving joint Owner, the death proceeds will be paid to
the Owner's beneficiary. The death benefit is the greater of:
a. 100% of payments, less any withdrawals, or
b. the Contract value as of the claim date.
If the death benefit amount to be paid is less than $2,000, it will be paid
in a single lump sum (see "Annuity Options"). Depending upon state law, the
death benefit payment to the beneficiary may avoid probate and the death benefit
may be reduced by any premium tax due. See "Deductions and Charges--Premium
Tax." See also, "Federal Income Taxes--Distribution at Death."
THE ANNUITY PERIOD
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The annuity period is that period of time beginning after the end of the
accumulation period and during which payments to you are made.
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Annuity payments will begin on the Contract's Maturity Date if the Annuitant
is alive and the Contract is still in force. Beginning on the Maturity Date,
investment in the Account is continued unless a Fixed Payment Annuity is
elected. No surrender charge is taken. Each Contract will provide, at the time
of its issuance, for a Variable Payment Life Annuity with 10-Year Period Certain
unless a different annuity option is elected by you. See "Annuity Options."
Under a Variable Payment Life Annuity with 10-Year Period Certain, annuity
payments, which may vary in amount based on the performance of the Subaccount
selected, are made monthly for life and, if the Annuitant dies within 10 years
after the Maturity Date, the Annuitant's beneficiary will be paid the payments
remaining in the 10-year period. A different form of annuity may be elected by
you prior to the Maturity Date. Once annuity payments have commenced, the
Annuity Option may not be changed.
If the amount to be applied on the Maturity Date is less than $2,000, we may
pay such amount in one lump sum in lieu of providing an annuity. If the initial
monthly annuity payment under an Annuity Option would be less than $20, we may
make a single sum payment equal to the total Contract Value on the date the
initial payment would be payable, or make periodic payments quarterly,
semiannually or annually in place of monthly payments.
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Each Contract specifies a provisional Maturity Date at the time of its
issuance. You may subsequently elect a different Maturity Date. The Maturity
Date may not be earlier than the fifth Contract anniversary or later than the
Contract anniversary nearest the Annuitant's 95th birthday unless the Contract
is issued in connection with certain qualified plans. Generally, under qualified
plans, the Maturity Date must be such that distributions begin no later than
April 1st of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an IRA.
The Maturity Date election must be made by written notice and must be
received by VPMO 30 days before the provisional Maturity Date. If a Maturity
Date, which is different from the provisional Maturity Date, is not elected by
you, the provisional Maturity Date becomes the Maturity Date. Particular care
should be taken in electing the Maturity Date of a Contract issued under a Tax
Sheltered Annuity (TSA), a Keogh Plan or an IRA plan. See "Tax Sheltered
Annuities," "Keogh Plans" and "Individual Retirement Accounts."
ANNUITY OPTIONS
Unless an alternative annuity payment option is elected on or before the
Maturity Date, the amounts held under a Contract on the Maturity Date
automatically will be applied to provide a 10-year period certain variable
payment monthly life annuity based on the life of the Annuitant under Option I
described below. Any annuity payments falling due after the death of the
Annuitant during the period certain will be paid to the Annuitant's beneficiary.
Each annuity payment will be based upon the value of the Annuity Units credited
to the Contract. The number of Annuity Units in each Subaccount to be credited
is based on the value of the Accumulation Units in that Subaccount and the
applicable annuity payment rate. The Contract is issued with guaranteed minimum
annuity payment rates, however, if the current rate is higher, we'll apply the
higher rate. The payment rate differs according to the payment option selected
and the age of the Annuitant. The annuity payment rate is applied and will
determine all payments for the fixed annuity payment options and the first
payment for the variable annuity payment options. The value of the Annuity Units
will vary with the investment performance of each Subaccount to which Annuity
Units are credited. The initial payment will be calculated based on an assumed
investment return of 4 1/2% per year. This rate is a fulcrum return around which
variable annuity payments will vary to reflect whether actual investment
experience of the Subaccount is better or worse than the assumed investment
return. The assumed investment return and the calculation of variable income
payments for such 10-year period certain variable payment life annuity and for
Options J and K described below are described in more detail in the Contract and
in the SAI.
Instead of the 10-year period certain variable payment life annuity (see
"Option I--Variable Payment Life Annuity with 10-Year Period Certain"), you may,
by written request received by VPMO on or before the Maturity Date of the
Contract, elect any of the other annuity payment options described below. No
surrender charge will be assessed under any annuity option, unless unscheduled
withdrawals are made under Annuity Options K or L.
The level of annuity payments payable under the following options is based
upon the option selected. In addition, such factors as the age at which payments
begin, the form of annuity, annuity payment rates, assumed investment rate (for
variable payment annuities) and the frequency of payments will effect the level
of annuity payments. The assumed investment rate is 4.5% per year. We use this
rate to determine the first payment under Variable Payment Annuity Options I, J,
K, M and N.
We deduct a daily charge for mortality and expense risks and a daily
administrative fee from Contract Values held in the Subaccounts. See "Charges
For Mortality and Expense Risks" and "Charges for Administrative Services."
Therefore, electing Option K will result in a deduction being made even though
we assume no mortality risk under that option.
The following are descriptions of the annuity options available under a
Contract. These descriptions should allow you to understand the basic
differences between the options, however, you should contact VAO well in advance
of the date you wish to elect an option to obtain estimates of payments under
each option.
OPTION A--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN
Provides a monthly income for the life of the Annuitant. In the event of the
Annuitant's death, the annuity income will be paid to the beneficiary until the
end of the specified period certain. For example, a 10-year period certain will
provide a total of 120 monthly payments. The certain period may be 5, 10 or 20
years.
OPTION B--NON-REFUND LIFE ANNUITY
Provides a monthly income for the lifetime of the Annuitant. No income is
payable after the death of the Annuitant.
OPTION C--DISCONTINUED
OPTION D--JOINT AND SURVIVOR LIFE ANNUITY
Provides a monthly income for the lifetimes of both the Annuitant and a
joint annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. The amount to be paid to the survivor is 100% of the amount of the
joint annuity payment, as elected at the time the annuity option is chosen. No
income is payable after the death of the surviving annuitant.
Under Option D, the joint annuitant must be named at the time the option is
elected and cannot be changed. The
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joint annuitant must have reached an adjusted age of 40, as defined in the
Contract.
OPTION E--INSTALLMENT REFUND LIFE ANNUITY
Provides a monthly income for the life of the Annuitant. In the event of the
Annuitant's death, the annuity income will continue to the Annuitant's
beneficiary until the amount applied to purchase the annuity has been
distributed.
OPTION F--JOINT AND SURVIVOR LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN
Provides a monthly income for the lifetime of both the Annuitant and a joint
annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. If the survivor dies prior to the end of the 10-year period, the
annuity income will continue to the named beneficiary until the end of the
10-year period certain.
Under Option F, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION G--PAYMENTS FOR SPECIFIED PERIOD
Provides equal income installments for a specified period of years whether
the Annuitant lives or dies. Any specified whole number of years from 5 to 30
years may be elected.
OPTION H--PAYMENTS OF SPECIFIED AMOUNT
Provides equal installments of a specified amount over a period of at least
five years. The specified amount may not be greater than the total annuity
amount divided by five annual installment payments. If the Annuitant dies prior
to the end of the elected period certain, annuity payments will continue to the
Annuitant's beneficiary until the end of the elected period certain.
OPTION I--VARIABLE PAYMENT LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN
Unless another annuity option has been elected, this option will
automatically apply to any Contract proceeds payable on the Maturity Date. It
provides a variable payout monthly annuity based on the life of the Annuitant.
In the event of the death of the Annuitant, the annuity payments are made to the
Annuitant's beneficiary until the end of the 10-year period. The 10-year period
provides a total of 120 monthly payments. Payments will vary as to dollar
amount, based on the investment experience of the Subaccounts in which proceeds
are invested.
OPTION J--JOINT SURVIVOR VARIABLE PAYMENT LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN
Provides a variable payout monthly annuity while the Annuitant and the
designated joint annuitant are living and continues thereafter during the
lifetime of the survivor or, if later, until the end of a 10-year period
certain. Payments will vary as to dollar amount, based on the investment
experience of the Subaccounts in which proceeds are invested. The joint
annuitant must be named at the time the option is elected and cannot be changed.
The joint annuitant must have reached an adjusted age of 40, as defined in the
Contract. This option is not available for payment of any death benefit under
the Contract.
OPTION K--VARIABLE PAYMENT ANNUITY FOR A SPECIFIED PERIOD
Provides variable payout monthly income installments for a specified period
of time, whether the Annuitant lives or dies. The period certain specified must
be in whole numbers of years from 5 to 30. However, the period certain selected
by the beneficiary of any death benefit under the Contract may not extend beyond
the life expectancy of such beneficiary. A Contract Owner may at anytime request
unscheduled withdrawals representing part or all of the remaining Contract Value
less any applicable contingent deferred surrender charge.
OPTION L--VARIABLE PAYMENT LIFE EXPECTANCY ANNUITY
Provides a variable payout monthly income payable over the Annuitant's
annually recalculated life expectancy or the annually recalculated life
expectancy of the Annuitant and joint annuitant. A Contract Owner may at anytime
request unscheduled withdrawals representing part or all of the remaining
Contract Value less any applicable contingent deferred surrender charge. Upon
the death of the Annuitant (and joint annuitant, if there is a joint annuitant),
the remaining Contract Value will be paid in a lump sum to the Annuitant's
beneficiary.
OPTION M--UNIT REFUND VARIABLE PAYMENT LIFE ANNUITY
Provides variable monthly payments as long as the Annuitant lives. If the
Annuitant dies, the Annuitant's beneficiary will receive the value of the
remaining Annuity Units in a lump sum.
OPTION N--VARIABLE PAYMENT NON-REFUND LIFE ANNUITY
Provides a variable monthly income for the life of the Annuitant. No income
or payment to a beneficiary is paid after the death of the Annuitant.
OTHER OPTIONS AND RATES
We may offer other annuity options at the time a Contract reaches its
Maturity Date. In addition, in the event that annuity payment rates for
Contracts are at that time more favorable than the applicable rates guaranteed
under the Contract, the current annuity payment rates shall be used in
determining the amount of any annuity payment under the Annuity Options above.
OTHER CONDITIONS
Federal income tax requirements currently applicable
to most qualified plans provide that the period of years guaranteed under joint
and survivorship annuities with specified periods certain (see "Option F" and
"Option J" above) cannot be any greater than the joint life expectancies of the
payee and his or her spouse.
Federal income tax requirements also provide that participants in regular or
SIMPLE IRAs must begin minimum distributions by April 1 of the year following
the
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year in which they attain age 70 1/2. Minimum distribution requirements do
not apply to Roth IRAs. Distributions from qualified plans generally must begin
by the later of actual retirement or April 1 of the year following the year
participants attain age 70 1/2. Any required minimum distributions must be such
that the full amount in the contract will be distributed over a period not
greater than the participant's life expectancy, or the combined life expectancy
of the participant and his or her spouse or designated beneficiary.
Distributions made under this method are generally referred to as Life
Expectancy Distributions ("LEDs"). An LED program is available to participants
in qualified plans or IRAs. Requests to elect this program must be made in
writing.
Under the LED program, regardless of Contract year, amounts up to the
required minimum distribution may be withdrawn without a deduction for surrender
charges, even if the minimum distribution exceeds the 10% allowable amount. See
"Surrender Charges." Any amounts withdrawn that have not been held under a
Contract for at least six years and are in excess of both the minimum
distribution and the 10% free available amount will be subject to any applicable
surrender charge.
If the initial monthly annuity payment under an Annuity Option would be less
than $20, we may make a single sum payment equal to the Contract Value on the
date the initial payment would be payable, in place of all other benefits
provided by the Contract, or, may make periodic payments quarterly, semiannually
or annually in place of monthly payments.
Currently, transfers between Subaccounts are not available for amounts
allocated to any of the variable payment annuity options.
PAYMENT UPON DEATH AFTER MATURITY DATE
If an Owner who also is the Annuitant dies on or after the Maturity Date,
except as otherwise may be provided under any supplementary contract between the
Owner and us, we will pay to the Owner/Annuitant's beneficiary any annuity
payments due during any applicable period certain under the Annuity Option in
effect on the Annuitant's death. If the Annuitant who is not the Owner dies on
or after the Maturity Date, we will pay any remaining annuity payments to the
Annuitant's beneficiary according to the payment option in effect at the time of
the Annuitant's death. If an Owner who is not the Annuitant dies on or after the
Maturity Date, we will pay any remaining annuity payments to the Owner's
beneficiary according to the payment option in effect at the time of the Owner's
death.
VARIABLE ACCOUNT VALUATION PROCEDURES
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VALUATION DATE
A Valuation Date is every day the NYSE is open for trading and we are open
for business. On each Valuation Date, the value of the Account is determined at
the close of the NYSE (currently 4:00 p.m. Eastern Time).
VALUATION PERIOD
Valuation Period is that period of time from the beginning of the day
following a Valuation Date to the end of the next following Valuation Date.
ACCUMULATION UNIT VALUE
The value of one Accumulation Unit was set at $1.0000 on the date assets
were first allocated to a Subaccount. The value of one Accumulation Unit on any
subsequent Valuation Date is determined by multiplying the immediately preceding
Accumulation Unit Value by the applicable Net Investment Factor for the
Valuation Period ending on such Valuation Date. After the first Valuation
Period, the Accumulation Unit Value reflects the cumulative investment
experience of that Subaccount.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is equal to 1.000000 plus
the applicable net investment rate for such Valuation Period. A Net Investment
Factor may be more or less than 1.000000 depending on whether the assets gained
or lost value that day. To determine the net investment rate for any Valuation
Period for the Funds allocated to each Subaccount, the following steps are
taken: (a) the aggregate accrued investment income and capital gains and losses,
whether realized or unrealized, of the Subaccount for such Valuation Period is
computed, (b) the amount in (a) is then adjusted by the sum of the charges and
credits for any applicable income taxes and the deductions at the beginning of
the Valuation Period for mortality and expense risk charges and daily
administration fee, and (c) the results of (a) as adjusted by (b) are divided by
the aggregate Unit Values in the Subaccount at the beginning of the Valuation
Period.
MISCELLANEOUS PROVISIONS
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ASSIGNMENT
Owners of Contracts issued in connection with non-tax qualified plans may
assign their interest in the Contract without the consent of the beneficiary. A
written notice of such assignment must be filed with VPMO before it will be
honored.
A pledge or assignment of a Contract is treated as payment received on
account of a partial surrender of a Contract. See "Surrenders or Withdrawals
Prior to the Contract Maturity Date."
In order to qualify for favorable tax treatment, Contracts issued in
connection with tax qualified plans may not be sold, assigned, discounted or
pledged as collateral for a loan or as security for the performance of an
obligation, or for any other purpose, to any person other than to us.
DEFERMENT OF PAYMENT
Payment of the Contract Value in a single sum upon a withdrawal from, or
complete surrender of, a Contract ordinarily will be made within seven days
after receipt of the
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written request by VPMO. However, we may postpone payment of the value of any
Accumulation Units at times (a) when the NYSE is closed, other than customary
weekend and holiday closings, (b) when trading on the NYSE is restricted, (c)
when an emergency exists as a result of which disposal of securities in the Fund
is not reasonably practicable or it is not reasonably practicable to determine
the Contract Value or (d) when a governmental body having jurisdiction over us
by order permits such suspension. Rules and regulations of the SEC, if any, are
applicable and will govern as to whether conditions described in (b), (c) or (d)
exist.
FREE LOOK PERIOD
We may mail the Contract to you or we may deliver it to you in person. You
may surrender a Contract for any reason within 10 days after you receive it and
receive in cash the adjusted value of your initial payment. (A longer Free Look
Period may be required by your state.) You may receive more or less than the
initial payment depending on investment experience within the Subaccounts during
the Free Look Period. If a portion or all of your initial payment has been
allocated to the GIA, we also will refund any earned interest. If a portion or
all of your initial payment has been allocated to the MVA, we will apply the
Market Value Adjustment which can increase or decrease your initial payment. If
applicable state law requires, we will return the full amount of any payments we
received.
During periods of extreme market volatility, we reserve the right to make
the Temporary Money Market Allocation Amendment available. In states that
require return of premium during the Free Look Period, we will allocate those
portions of your initial payment designated for the Subaccounts to the
Phoenix-Goodwin Money Market Subaccount and those portions designated for the
GIA and MVA will be allocated to those Accounts. At the expiration of the Free
Look Period, the value of the Accumulation Units held in the Phoenix-Goodwin
Money Market Subaccount will be allocated among the available Subaccounts in
accordance with your allocation instructions on the application.
AMENDMENTS TO CONTRACTS
Contracts may be amended to conform to changes in applicable law or
interpretations of applicable law, or to accommodate design changes. Changes in
the Contract may need to be approved by Contract Owners and state insurance
departments. A change in the Contract which necessitates a corresponding change
in the Prospectus or the SAI must be filed with the SEC.
SUBSTITUTION OF FUND SHARES
Although we believe it to be highly unlikely, it is possible that in the
judgment of our management, one or more of the Series of the Funds may become
unsuitable for investment by Contract Owners because of a change in investment
policy, or a change in the tax laws, or because the shares are no longer
available for investment. In that event, we may seek to substitute the shares of
another Series or the shares of an entirely different fund. Before this can be
done, the approval of the SEC, and possibly one or more state insurance
departments, will be required.
OWNERSHIP OF THE CONTRACT
Ordinarily, the purchaser of a Contract is both the Owner and the Annuitant
and is entitled to exercise all the rights under the Contract. However, the
Owner may be an individual or entity other than the Annuitant. Spouses may own a
Contract as joint Owners. Transfer of the ownership of a Contract may involve
federal income tax consequences, and a qualified adviser should be consulted
before any such transfer is attempted.
FEDERAL INCOME TAXES
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INTRODUCTION
The Contracts are designed for use with retirement plans which may or may
not be tax-qualified plans ("Qualified Plans") under the provisions of the
Internal Revenue Code of 1986, (the "Code"). The ultimate effect of federal
income taxes on the amounts held under a Contract, on annuity payments and on
the economic benefits of the Contract Owner, Annuitant or beneficiary depends on
our tax status, on the type of retirement plan for which the Contract is
purchased, and upon the tax and employment status of the individual concerned.
The following discussion is general in nature and is not intended as tax
advice. The 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 tax laws. Moreover, the discussion is based
upon our understanding of the federal income tax laws as they are currently
interpreted. No representation is made regarding the likelihood of continuation
of the federal income tax laws or the current interpretations by the Internal
Revenue Service (the "IRS"). We do not guarantee the tax status of the
Contracts. Purchasers bear the complete risk that the Contracts may not be
treated as "annuity contracts" under federal income tax laws. For a discussion
of federal income taxes as they relate to the Funds, please see the accompanying
prospectuses for the Funds.
INCOME TAX STATUS
PHL Variable is taxed as a life insurance company under Part 1 of Subchapter
L of the Code. Since the Account is not a separate entity from PHL Variable and
its operations form a part of PHL Variable, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Account are reinvested and taken
into account in determining the Contract Value. Under existing federal income
tax law, the Account's investment income,
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including realized net capital gains, is not taxed to PHL Variable. We reserve
the right to make a deduction for taxes should they be imposed on us with
respect to such items in the future.
TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value of the Units held under a Contract
until some form of distribution is made. However, in certain cases the increase
in value may be subject to tax currently. In the case of Contracts not owned by
natural persons, see "Contracts Owned by Non-Natural Persons." In the case of
Contracts not meeting the diversification requirements, see "Diversification
Standards."
SURRENDERS OR WITHDRAWALS PRIOR TO THE CONTRACT
MATURITY DATE
Code Section 72 provides that a total or partial surrender from a Contract
prior to the Contract Maturity Date will be treated as taxable income to the
extent the amounts held under the Contract exceed the "investment in the
Contract." The "investment in the Contract" is that portion, if any, of payments
(premiums paid) by or on behalf of an individual under a Contract that have not
been excluded from the individual's gross income. However, under certain types
of Qualified Plans there may be no investment in the Contract within the meaning
of Code Section 72, so that the total amount of all payments received will be
taxable. The taxable portion is taxed as ordinary income in an amount equal to
the value of the amount received on account of a total or partial surrender of a
Contract. For purposes of this rule, a pledge or assignment of a Contract is
treated as a payment received on account of a partial surrender of a Contract.
SURRENDERS OR WITHDRAWALS ON OR AFTER THE CONTRACT
MATURITY DATE
Upon receipt of a lump sum payment under the Contract, the recipient is
taxed on the portion of the payment that exceeds the investment in the Contract.
Ordinarily, such taxable portion is taxed as ordinary income. Under certain
circumstances, the proceeds of a surrender of a Contract may qualify for "lump
sum distribution" treatment under Qualified Plans. See your tax adviser if you
think you may qualify for "lump sum distribution" treatment. The 5-year
averaging rule for lump sum distribution has been repealed for tax years
beginning after 1999.
For fixed annuity payments, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. The remaining
portion of each payment is taxed as ordinary income. For variable annuity
payments, the taxable portion is determined by a formula that establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the investment in the Contract by the total number of
expected periodic payments. The remaining portion of each payment is taxed as
ordinary income. Once the excludable portion of annuity payments equals the
investment in the Contract, the balance of the annuity payments will be fully
taxable. For certain types of qualified plans, there may be no investment in the
Contract resulting in the full amount of the payments being taxable. A
simplified method of determining the exclusion ratio is effective with respect
to qualified plan annuities starting after November 18, 1996.
Withholding of federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies VPMO of that election.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS
Amounts surrendered or distributed before the taxpayer reaches age 59 1/2
are subject to a penalty tax equal to ten percent (10%) of the portion of such
amount that is includable in gross income. However, the penalty tax will not
apply to withdrawals: (i) made on or after the death of the Contract Owner (or
where the Contract Owner is not an individual, the death of the "Primary
Annuitant," who is defined as the individual the events in whose life are of
primary importance in affecting the timing and amount of the payout under the
Contract); (ii) attributable to the taxpayer's becoming totally disabled within
the meaning of Code Section 72(m)(7); (iii) which are part of a series of
substantially equal periodic payments made (not less frequently than annually)
for the life (or life expectancy) of the taxpayer, or the joint lives (or joint
life expectancies) of the taxpayer and his or her beneficiary; (iv) from certain
qualified plans (such distributions may, however, be subject to a similar
penalty under Code Section 72(t) relating to distributions from qualified
retirement plans and to a special penalty of 25% applicable specifically to
SIMPLE IRAs or other special penalties applicable to Roth IRAs); (v) allocable
to investment in the Contract before August 14, 1982; (vi) under a qualified
funding asset (as defined in Code Section 130(d)); (vii) under an immediate
annuity contract (as defined in Code Section 72(u)(4)); or (viii) that are
purchased by an employer on termination of certain types of qualified plans and
which are held by the employer until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the first
year when the modification occurs will be increased by an amount (determined by
the Treasury regulations) equal to the tax that would have been imposed but for
item (iii) above, plus interest for the deferral period, but only if the
modification takes place: (a) within 5 years from the date of the first payment,
or (b) before the taxpayer reaches age 59 1/2.
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Separate tax withdrawal penalties apply to Qualified Plans. See "Penalty Tax
on Surrenders and Withdrawals from Qualified Contracts."
ADDITIONAL CONSIDERATIONS
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract for federal income tax
purposes, a Contract must provide the following two distribution rules: (a) if
the Contract Owner dies on or after the Contract Maturity Date, and before the
entire interest in the Contract has been distributed, the remainder of the
Contract Owner's interest will be distributed at least as quickly as the method
in effect on the Contract Owner's death; and (b) if a Contract Owner dies before
the Contract Maturity Date, the Contract Owner's entire interest generally must
be distributed within five (5) years after the date of death, or if payable to a
designated beneficiary, may be annuitized over the life or life expectancy of
that beneficiary and payments must begin within one (1) year after the Contract
Owner's date of death. If the beneficiary is the spouse of the Contract Owner,
the Contract (together with the deferral of tax on the accrued and future income
thereunder) may be continued in the name of the spouse as Contract Owner.
Similar distribution requirements apply to annuity contracts under Qualified
Plans (other than Code Section 457 Plans). However, a number of restrictions,
limitations and special rules apply to qualified plans and Contract Owners
should consult with their tax adviser.
If the Annuitant, who is not the Contract Owner, dies before the Maturity
Date and there is no Contingent Annuitant, the Annuitant's beneficiary must
elect within 60 days whether to receive the death benefit in a lump sum or in
periodic payments commencing within one (1) year.
If the Contract Owner is not an individual, the death
of the primary Annuitant is treated as the death of the Contract Owner. In
addition, when the Contract Owner is not an individual, a change in the primary
Annuitant is treated as the death of the Contract Owner. Finally, in the case of
non-spousal joint Contract Owners, distribution will be required at the death of
the first of the Contract Owners.
If the Contract Owner or a Joint Contract Owner dies on or after the
Maturity Date, the remaining payments, if any, under the Annuity Option selected
will be made at least as rapidly as under the method of distribution in effect
at the time of death.
TRANSFER OF ANNUITY CONTRACTS
Transfers of non-qualified Contracts prior to the Maturity Date for less
than full and adequate consideration to the Contract Owner at the time of such
transfer, will trigger tax on the gain in the Contract, with the transferee
getting a step-up in basis for the amount included in the Contract Owner's
income. This provision does not apply to transfers between spouses or incident
to a divorce.
CONTRACTS OWNED BY NON-NATURAL PERSONS
If the Contract is held by a non-natural person (for example, a corporation)
the income on that Contract (generally the increase in the net surrender value
less the premium paid) is includable in income each year. The rule does not
apply where the non-natural person is the nominal owner of a Contract and the
beneficial owner is a natural person. The rule also does not apply where the
annuity contract is acquired by the estate of a decedent, where the Contract is
held under a qualified plan, a TSA program or an IRA, where the Contract is a
qualified funding asset for structured settlements, or where the Contract is
purchased on behalf of an employee upon termination of a qualified plan, and nor
if the annuity contract is an immediate annuity.
SECTION 1035 EXCHANGES
Code Section 1035 provides, in general, that no gain or loss shall be
recognized on the exchange of one annuity contract for another. A replacement
contract obtained in a tax-free exchange of contracts generally succeeds to the
status of the surrendered contract. If the surrendered contract was issued prior
to August 14, 1982, the tax rules that formerly provided that the surrender was
taxable only to the extent the amount received exceeds the Contract Owner's
investment in the Contract, will continue to apply. In contrast, Contracts
issued on or after January 19, 1985 are, in a Code Section 1035 exchange,
treated as new Contracts for purposes of the distribution-at-death rules.
Special rules and procedures apply to Code Section 1035 transactions.
Prospective Contract Owners wishing to take advantage of Code Section 1035
should consult their tax advisers.
MULTIPLE CONTRACTS
Code Section 72(e)(11)(A)(ii) provides that for Contracts entered into after
October 21, 1988, for purposes of determining the amount of any distribution
under Code Section 72(e) (amounts not received as annuities) that is includable
in gross income, all non-qualified deferred annuity contracts issued by the same
insurer (or affiliate) to the same Contract Owner during any calendar year are
to be aggregated and treated as one contract. Thus, any amount received under
any such contract prior to the Contract Maturity Date, such as a withdrawal,
dividend or loan, will be taxable (and possibly subject to the 10% penalty tax)
to the extent of the combined income in all such contracts.
The Treasury Department has specific authority to issue regulations that
prevent the avoidance of Code Section 72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be situations where the
Treasury may conclude that it would be appropriate to aggregate two or more
contracts purchased by the same Contract Owner. Accordingly, a Contract Owner
should consult a competent tax adviser before purchasing more than one Contract
or other annuity contracts.
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DIVERSIFICATION STANDARDS
DIVERSIFICATION REGULATIONS
To comply with the diversification regulations under Code Section 817(h)
("Diversification Regulations"), after a start-up period, each Series of the
Funds will be required to diversify its investments. The Diversification
Regulations generally require that, on the last day of each calendar quarter
that the Series' assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
Series as an asset of the Account, and each Series of the Funds are tested for
compliance with the percentage limitations. All securities of the same issuer
are treated as a single investment. As a result of the 1988 Act, each government
agency or instrumentality will be treated as a separate issuer for purposes of
these limitations.
The Treasury Department has indicated that the Diversification Regulations
do not provide guidance regarding the circumstances in which Contract Owner
control of the investments of the Account will cause the Contract Owner to be
treated as the owner of the assets of the Account, thereby resulting in the loss
of favorable tax treatment for the Contract. At this time, it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance. The amount of Contract Owner control which may be
exercised under the Contract is different in some respects from the situations
addressed in published rulings issued by the IRS in which was held that the
policyowner was not the owner of the assets of the separate account. It is
unknown whether these differences, such as the Contract Owner's ability to
transfer among investment choices or the number and type of investment choices
available, would cause the Contract Owner to be considered as the Owner of the
assets of the Account resulting in the imposition of federal income tax to the
Contract Owner with respect to earnings allocable to the Contract prior to
receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling generally will be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Contract
Owner being retroactively determined to be the Owner of the assets of the
Account.
Due to the uncertainty in this area, we reserve the right to modify the
Contract in an attempt to maintain favorable tax treatment.
PHL Variable has represented that it intends to comply with the
Diversification Regulations to assure that the Contracts continue to be treated
as annuity contracts for federal income tax purposes.
DIVERSIFICATION REGULATIONS AND QUALIFIED PLANS
Code Section 817(h) applies to a variable annuity contract other than a
pension plan contract. The Diversification Regulations reiterate that the
diversification requirements do not apply to a pension plan contract. All of the
Qualified Plans (described below) are defined as pension plan contracts for
these purposes. Notwithstanding the exception of Qualified Plan Contracts from
application of the diversification rules, all investments of the PHL Variable
Qualified Plan Contracts (i.e., the Funds) will be structured to comply with the
diversification standards because the Funds serve as the investment vehicle for
non-qualified Contracts as well as Qualified Plan Contracts.
QUALIFIED PLANS
The Contracts may be used with several types of Qualified Plans. TSAs,
Keoghs, IRAs, Corporate Pension and Profit-sharing Plans and State Deferred
Compensation Plans will be treated, for purposes of this discussion, as
Qualified Plans. The tax rules applicable to participants in such Qualified
Plans vary according to the type of plan and the terms and conditions of the
plan itself. No attempt is made here to provide more than general information
about the use of the Contracts with the various types of Qualified Plans.
Participants under such Qualified Plans as well as Contract Owners, Annuitants
and beneficiaries, are cautioned that the rights of any person to any benefits
under such Qualified Plans may be subject to the terms and conditions of the
plans themselves or limited by applicable law, regardless of the terms and
conditions of the Contract issued in connection therewith. For example, PHL
Variable will accept beneficiary designations and payment instructions under the
terms of the Contract without regard to any spousal consents that may be
required under the Retirement Equity Act (REA). Consequently, a Contract Owner's
beneficiary designation or elected payment option may not be enforceable.
Effective January 1, 1993, Section 3405 of the Internal Revenue Code was
amended to change the roll-over rules applicable to the taxable portions of
distributions from qualified pension and profit-sharing plans and Section 403(b)
TSA arrangements. Taxable distributions eligible to be rolled over generally
will be subject to 20% income tax withholding. Mandatory withholding can be
avoided only if the employee arranges for a direct rollover to another qualified
pension or profit-sharing plan or to an IRA.
The new mandatory withholding rules apply to all taxable distributions from
qualified plans or TSAs (not including IRAs), except (a) distributions required
under the Code, (b) substantially equal distributions made over the life (or
life expectancy) of the employee, or for a term certain of 10 years or more and
(c) the portion of distributions not includable in gross income (i.e., return of
after-tax contributions).
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On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by PHL Variable in connection
with certain Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables also will be available
for use in connection with certain non-qualified deferred compensation plans.
Numerous changes have been made to the income tax rules governing Qualified
Plans as a result of legislation enacted during the past several years,
including rules with respect to: coverage, participation, maximum contributions,
required distributions, penalty taxes on early or insufficient distributions and
income tax withholding on distributions. The following are general descriptions
of the various types of Qualified Plans and of the use of the contracts in
connection therewith.
TAX SHELTERED ANNUITIES ("TSAS")
Code Section 403(b) permits public school systems and certain types of
charitable, educational and scientific organizations, generally specified in
Code Section 501(c)(3) to purchase annuity contracts on behalf of their
employees and, subject to certain limitations, allows employees of those
organizations to exclude the amount of payments from gross income for federal
income tax purposes. These annuity contracts are commonly referred to as TSAs.
For taxable years beginning after December 31, 1988, Code Section 403(b)(11)
imposes certain restrictions on a Contract Owner's ability to make partial
withdrawals from, or surrenders of, Code Section 403(b) Contracts, if the cash
withdrawn is attributable to payments made under a salary reduction agreement.
Specifically, Code Section 403(b)(11) allows a Contract Owner to make a
surrender or partial withdrawal only (a) when the employee attains age 59 1/2,
separates from service, dies or becomes disabled (as defined in the Code), or
(b) in the case of hardship. In the case of hardship, the distribution amount
cannot include any income earned under the Contract.
The 1988 Act amended the effective date of Code Section 403(b)(11), so that
it applies only with respect to distributions from Code Section 403(b) Contracts
which are attributable to assets other than assets held as of the close of the
last year beginning before January 1, 1989. Thus, the distribution restrictions
do not apply to assets held as of December 31, 1988.
In addition, in order for certain types of contributions under a Code
Section 403(b) Contract to be excluded from taxable income, the employer must
comply with certain nondiscrimination requirements. Contract Owners should
consult their employers to determine whether the employer has complied with
these rules. Contract Owner loans are not allowed under the Contracts.
Effective May 4, 1998, loans may be made available under Internal Revenue
Code Section 403(b) tax-sheltered annuity programs. If the program permits
loans, a loan from the participant's Contract Value may be requested. The loan
must be at least $1,000 and the maximum loan amount is the greater of: (a) 90%
of the first $10,000 of Contract Value minus any contingent deferred surrender
charge; and (b) 50% of the Contract Value minus any contingent deferred
surrender charge. The maximum loan amount is $50,000. If loans are outstanding
from any other tax-qualified plan then the maximum loan amount of the Contract
may be reduced from the amount stated above in order to comply with the maximum
loan amount requirements under Section 72(p) of the Internal Revenue Code.
Amounts borrowed from the IA are subject to the same limitations as applies to
transfers from the GIA; thus no more than the greater of $1,000 and 25% of the
Contract Value in the GIA may be borrowed at any one time. Amounts borrowed from
the Market Value Adjustment ("MVA") account are subject to the same market value
adjustment as applies to transfers from the MVA.
Loan repayments will first pay any accrued loan interest. The balance will
be applied to reduce the outstanding loan balance and also will reduce the
amount of the Loan Security Account by the same amount that the outstanding loan
balance is reduced. The balance of loan repayments, after payment of accrued
loan interest, will be credited to the Subaccounts of the Separate Account or
the GIA in accordance with the participant's most recent premium allocation on
file with Us, except that no amount will be transferred to the MVA.
If a loan repayment is not received by Us before 90 days after the payment
was due, then the entire loan balance plus accrued interest will be in default.
In the case of default, the outstanding loan balance plus accrued interest will
be deemed a distribution for income tax purposes, and will be reported as such
to the extent required by law. At the time of such deemed distribution-interest
will continue to accrue until such time as an actual distribution occurs under
the Contract.
KEOGH PLANS
The Self-Employed Individual Tax Retirement Act of 1962, as amended, permits
self-employed individuals to establish "Keoghs" or qualified plans for
themselves and their employees. The tax consequences to participants under such
a plan depend upon the terms of the plan. In addition, such plans are limited by
law with respect to the maximum permissible contributions, distribution dates,
nonforfeitability of interests, and tax rates applicable to distributions. In
order to establish such a plan, a plan document must be adopted and implemented
by the employer, as well as approved by the IRS.
INDIVIDUAL RETIREMENT ACCOUNTS
Code Sections 408 and 408A permit eligible individuals to contribute to an
individual retirement program known as an "IRA." These IRAs are subject to
limitations on the amount which may be contributed, the persons who may be
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eligible and on the time when distributions may commence. In addition,
distributions from certain other types of Qualified Plans may be placed on a
tax-deferred basis into an IRA. Effective January 1, 1997, employers may
establish a new type of IRA called SIMPLE (Savings Incentive Match Plan for
Employees). Special rules apply to participants' contributions to and
withdrawals from SIMPLE IRAs. Also effective January 1, 1997, salary reduction
IRAs (SARSEP) no longer may be established. Effective January 1, 1998,
individuals may establish Roth IRAs. Special rules also apply to contributions
to and withdrawals from Roth IRAs.
CORPORATE PENSION AND PROFIT-SHARING PLANS
Code Section 401(a) permits corporate employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of Contracts to provide benefits thereunder.
These retirement plans may permit the purchase of the Contracts to provide
benefits under the Plan. Contributions to the Plan for the benefit of employees
will not be includable in the gross income of the employee until distributed
from the Plan. The tax consequences to participants may vary depending upon the
particular Plan design. However, the Code places limitations and restrictions on
all Plans, including on items such as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Participant loans are not allowed under the Contracts purchased in
connection with these Plans. Purchasers of Contracts for use with Corporate
Pension or Profit-sharing Plans should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE FOR STATE AND LOCAL
GOVERNMENTS AND TAX EXEMPT ORGANIZATIONS
Code Section 457 provides for certain deferred compensation plans with
respect to service for state and local governments and certain other entities.
The Contracts may be used in connection with these plans; however, under these
plans if issued to tax exempt organizations, the Contract Owner is the plan
sponsor, and the individual participants in the plans are the Annuitants. Under
such Contracts, the rights of individual plan participants are governed solely
by their agreements with the plan sponsor and not by the terms of the Contracts.
Effective in 1997 for new state and local government plans, such plans must be
funded through a tax exempt annuity contract held for the exclusive benefit of
plan participants.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM QUALIFIED PLANS
In the case of a withdrawal under a Qualified Plan, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Plan. Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion
of any distribution from qualified retirement plans, including Contracts issued
and qualified under Code Sections 401 (Keogh and Corporate Pension and
Profit-sharing Plans), Tax-Sheltered Annuities and Individual Retirement
Annuities other than Roth IRAs. The penalty is increased to 25% instead of 10%
for SIMPLE IRAs if distribution occurs within the first two years of the
Contract Owner's participation in the SIMPLE IRA. To the extent amounts are not
includable in gross income because they have been properly rolled over to an IRA
or to another eligible Qualified Plan, no tax penalty will be imposed. The tax
penalty will not apply to the following distributions: (a) if distribution is
made on or after the date on which the Contract Owner or Annuitant (as
applicable) reaches age 59 1/2; (b) distributions following the death or
disability of the Contract Owner or Annuitant (as applicable) (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (c) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the Contract Owner or Annuitant (as applicable) or the joint
lives (or joint life expectancies) of such Contract Owner or Annuitant (as
applicable) and his or her designated beneficiary; (d) distributions to a
Contract Owner or Annuitant (as applicable) who has separated from service after
he has attained age 55; (e) distributions made to the Contract Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Contract Owner or
Annuitant (as applicable) for amounts paid during the taxable year for medical
care; (f) distributions made to an alternate payee pursuant to a qualified
domestic relations order; (g) distributions from an IRA for the purchase of
medical insurance (as described in Section 213(d)(1)(D) of the Code) for the
Contract Owner and his or her spouse and dependents if the Contract Owner has
received unemployment compensation for at least 12 weeks; and (h) distributions
from IRAs for first-time home purchase expenses (maximum $10,000) or certain
qualified educational expenses of the Contract Owner, spouse, children or
grandchildren of the Contract Owner. This exception will no longer apply after
the Contract Owner has been reemployed for at least 60 days. The exceptions
stated in items (d) and (f) above do not apply in the case of an IRA. The
exception stated in item (c) applies to an IRA without the requirement that
there be a separation from service.
Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to a regular or SIMPLE IRA and
the required distribution rules do not apply to Roth IRAs. Required
distributions must be over a period not exceeding the life expectancy of
35
<PAGE>
the individual or the joint lives or life expectancies of the individual and his
or her designated beneficiary. If the required minimum distributions are not
made, a 50% penalty tax is imposed as to the amount not distributed.
SEEK TAX ADVICE
The above description of federal income tax consequences of the different
types of Qualified Plans which may be funded by the Contracts offered by this
Prospectus is only a brief summary meant to alert you to the issues and is not
intended as tax advice. The rules governing the provisions of Qualified Plans
are extremely complex and often difficult to comprehend. Anything less than full
compliance with the applicable rules, all of which are subject to change, may
have adverse tax consequences. A prospective Contract Owner considering adoption
of a Qualified Plan and purchase of a Contract in connection therewith should
first consult a qualified tax adviser, with regard to the suitability of the
Contract as an investment vehicle for the Qualified Plan.
SALES OF VARIABLE ACCUMULATION CONTRACTS
- --------------------------------------------------------------------------------
The principal underwriter of the Contracts is PEPCO. Contracts may be
purchased through registered representatives of W.S. Griffith & Company, Inc.
("WSG") who are licensed to sell PHL Variable annuity contracts. WSG is an
indirect wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company.
PEPCO is an indirect, majority owned subsidiary of Phoenix Home Life Mutual
Insurance Company. Contracts also may be purchased through other broker-dealers
or entities registered under or exempt under the Securities Exchange Act of
1934, whose representatives are authorized by applicable law to sell Contracts
under terms of agreement provided by PEPCO and terms of agreement provided by
PHL Variable.
In addition to reimbursing PEPCO for its expenses, we pay PEPCO an amount
equal to up to 7.25% of the payments made under the Contract. PEPCO pays any
qualified distribution organization an amount which may not exceed 7.25% of the
payments under the Contract. Any such amount paid with respect to Contracts sold
through other broker-dealers will be paid by us to or through PEPCO. The amounts
paid are not deducted from the payments. Deductions for surrender charges (as
described under "Surrender Charges") may be used as reimbursement for commission
payments.
Although the Glass-Steagall Act prohibits banks and bank affiliates from
engaging in the business of underwriting securities, banking regulators have not
indicated that such institutions are prohibited from purchasing variable annuity
contracts upon the order and for the account of their customers.
STATE REGULATION
- --------------------------------------------------------------------------------
We are subject to the provisions of the Connecticut insurance laws
applicable to life insurance companies and to regulation and supervision by the
Connecticut Superintendent of Insurance. We are also subject to the applicable
insurance laws of all the other states and jurisdictions in which we do
insurance business.
State regulation of PHL Variable includes certain limitations on the
investments which may be made for its General Account and separate accounts,
including the Account. It does not include, however, any supervision over the
investment policies of the Account.
REPORTS
- --------------------------------------------------------------------------------
Reports showing the Contract Value and containing the financial statements
of the Account will be furnished to you at least annually.
VOTING RIGHTS
- --------------------------------------------------------------------------------
As stated above, all of the assets held in an available Subaccount will be
invested in shares of a corresponding Series of the Funds. We are the legal
owner of those shares and as such have the right to vote to elect the Board of
Trustees of the Funds, to vote upon certain matters that are required by the
Investment Company Act of 1940 ("1940 Act") to be approved or ratified by the
shareholders of a mutual fund and to vote upon any other matter that may be
voted upon at a shareholders' meeting. However, we intend to vote the shares of
the Funds at regular and special meetings of the shareholders of the Funds in
accordance with instructions received from Owners of the Contracts.
We currently intend to vote Fund shares attributable to any of our assets
and Fund shares held in each Subaccount for which no timely instructions from
Owners are received in the same proportion as those shares in that Subaccount
for which instructions are received. In the future, to the extent applicable
federal securities laws or regulations permit us to vote some or all shares of
the Fund in its own right, it may elect to do so.
Matters on which Owners may give voting instructions may include the
following: (1) election of the Board of Trustees of a Fund; (2) ratification of
the independent accountant for a Fund; (3) approval or amendment of the
investment advisory agreement for the Series of the Fund corresponding to the
Owner's selected Subaccount(s); (4) any change in the fundamental investment
policies or restrictions of each such Series; and (5) any other matter requiring
a vote of the Shareholders of a Fund. With respect to amendment of any
investment advisory agreement or any change in a Series' fundamental investment
policy, Owners participating in such Series will vote separately on the matter.
36
<PAGE>
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized. The number of votes for which you may give us
instructions will be determined as of the record date for Fund shareholders
chosen by the Board of Trustees of a Fund. We will furnish you with proper forms
and proxies to enable them to give these instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contract, or apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public institutions of higher education,
death or total disability. Such proceeds, however, may be used to fund another
eligible retirement vehicle.
LEGAL MATTERS
- --------------------------------------------------------------------------------
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the Contracts described in this Prospectus.
SAI
- --------------------------------------------------------------------------------
The SAI contains more specific information and financial statements relating
to the Account and PHL Variable. The Table of Contents of the SAI is set forth
below:
Underwriter
Calculation of Yield and Return
Calculation of Annuity Payments
Experts
Financial Statements
Contract Owner inquiries and requests for a SAI should be directed, in
writing, to Phoenix Variable Products Mail Operations at PO Box 8027, Boston,
Massachusetts 02266-8027, or by calling VAO at 800/541-0171.
37
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
PERFORMANCE HISTORY
From time to time, the Account may include the performance history of any or
all Subaccounts in advertisements, sales literature or reports. PERFORMANCE
INFORMATION ABOUT EACH SUBACCOUNT IS BASED ON PAST PERFORMANCE ONLY AND IS NOT
AN INDICATION OF FUTURE PERFORMANCE. Performance information may be expressed as
yield and effective yield of the Phoenix-Goodwin Money Market Subaccount, as
yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total
return of any Subaccount. For the Phoenix-Goodwin Multi-Sector Fixed Income
Subaccount, quotations of yield will be based on all investment income per unit
earned during a given 30-day period (including dividends and interest), less
expenses accrued during the period ("net investment income") and are computed by
dividing the net investment income by the maximum offering price per unit on the
last day of the period.
When a Subaccount advertises its total return, it usually will be calculated
for one year, five years and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $1,000 investment in the Subaccount at the
beginning of the relevant period to the value of the investment at the end of
the period, assuming the reinvestment of all distributions at net asset value
and the deduction of all applicable Contract charges except for premium taxes
(which vary by state) at the beginning of the relevant period.
For those Subaccounts within the Account that have not been available for
one of the quoted periods, the standardized average annual total return
quotations may show the investment performance such Subaccount would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
<TABLE>
<CAPTION>
==================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1,3)
==================================================================================================================================
INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series.......................... 7/31/95 19.54% N/A N/A 16.84%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series............................... 9/17/96 39.39% N/A N/A -3.57%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series............................ 12/15/99 N/A N/A N/A -3.99%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series............ 7/31/95 -3.32% N/A N/A 6.73%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series......................... 7/31/95 19.70% N/A N/A 19.75%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series............................ 3/2/98 22.00% N/A N/A 25.90%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series.................. 12/15/99 N/A N/A N/A -7.73%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series............................ 7/31/95 -3.28% N/A N/A 2.64%
----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series............... 7/31/95 -2.70% N/A N/A 4.87%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series.......................... 3/2/98 14.75% N/A N/A 13.40%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series............. 7/14/97 9.67% N/A N/A 18.28%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series............................. 12/15/99 N/A N/A N/A -0.87%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series........................... 12/15/99 N/A N/A N/A -6.33%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series.................................... 12/15/99 N/A N/A N/A -0.74%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series..................... 12/15/99 N/A N/A N/A -0.45%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series............................... 7/31/95 2.96% N/A N/A 12.73%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series...................... 3/2/98 7.99% N/A N/A 14.82%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series................... 7/31/95 2.67% N/A N/A 12.27%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series........................... 3/2/98 -17.25% N/A N/A -16.00%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series........................... 3/2/98 34.45% N/A N/A 30.24%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series.......................... 1/29/96 43.11% N/A N/A 27.73%
---------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund....................................... 8/22/97 17.80 N/A N/A 12.77%
---------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II............... 7/31/95 -8.28% N/A N/A 3.25%
---------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II............................. 7/31/95 -5.60% N/A N/A 6.21%
---------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio........................................... 11/30/99 N/A N/A N/A 15.87%
---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund-- Class 2(2)..................... 11/2/98 0.86% N/A N/A 2.96%
-------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund-- Class 2(2)..................... 7/31/95 13.11% N/A N/A 12.63%
-------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund-- Class 2(2)...... 9/27/96 41.52% N/A N/A -7.10%
-------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2).................. 7/31/95 18.89% N/A N/A 12.33%
-------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2)........... 7/31/95 13.75% N/A N/A 13.48%
---------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty........................................... 2/1/99 N/A N/A N/A 70.27%
---------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap................................. 7/31/95 109.21% N/A N/A 32.75%
---------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty.................................................. 2/1/99 N/A N/A N/A 24.33%
---------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap.......................................... 7/31/95 15.44% N/A N/A 21.20%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The average annual total return is the annual compound return that results
from holding an initial investment of $1,000 for the time period indicated.
Returns are net of investment management fees, daily and annual administrative
fees, and mortality and expense risk charges and deferred sales charges of 7%
and 3% deducted from redemptions after 1 and 5 years, respectively. Surrender
charges are based on the age of the deposit. The investment return and
principal value of the variable contract will fluctuate so that the
accumulated value, when redeemed, may be worth more or less than the original
cost.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's higher annual fees and expenses resulting from
its Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
38
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3)
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1983 1984 1985 1986 1987 1988 1989 1990
==================================================================================================================
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 31.08% 9.15% 33.08% 18.83% 5.47% 2.50% 34.33% 2.62%
-----------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 6.85% 8.72% 6.56% 5.06% 5.05% 5.98% 7.71% 6.74%
-----------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 4.56% 9.82% 18.96% 17.66% -0.30% 8.98% 6.76% 3.78%
-----------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series N/A N/A 25.60% 14.11% 11.02% 0.94% 18.27% 4.32%
-----------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund--Class 2(2) N/A N/A N/A N/A N/A N/A 11.49% -9.47%
-----------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities N/A N/A N/A N/A N/A N/A N/A N/A
Fund--Class 2(2)
-----------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A 12.83% -12.50%
-----------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
=================================================================================================================
ANNUAL TOTAL RETURN(1,3)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1991 1992 1993 1994 1995 1996 1997 1998 1999
===========================================================================================================================
Phoenix-Aberdeen International Series 18.10% -14.03% 36.57% -1.31% 8.12% 17.05% 10.53% 26.20% 27.75%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A -33.33% -5.77% 48.84%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities N/A N/A N/A N/A N/A 31.31% 20.41% -22.28% 3.35%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 40.80% 8.79% 18.07% 0.08% 29.12% 11.06% 19.45% 28.12% 27.92%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A 30.37%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 4.53% 2.16% 1.47% 2.42% 4.23% 3.60% 3.76% 3.67% 3.40%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 17.96% 8.57% 14.34% -6.78% 21.84% 10.89% 9.57% -5.46% 4.02%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A 22.64%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A 29.90% 17.22%
-------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A 7.13% -4.17% 21.69% 9.06% 16.34% 17.40% 10.06%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A 15.42%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 27.55% 9.15% 9.50% -2.75% 16.65% 7.57% 19.10% 19.15% 9.75%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A -11.51%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A 43.67%
--------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A 15.59% 42.74% 52.90%
--------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A 19.95% 25.89%
--------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A 7.28% 2.78% 7.10% 6.19% -1.94%
--------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A 18.74% 12.75% 12.28% 1.30% 0.92%
--------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A 7.81%
-------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund--Class 2(2) 25.70% 6.36% 24.15% -4.55% 20.60% 16.96% 13.74% 4.66% 20.89%
--------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities N/A N/A N/A N/A N/A N/A -30.35% -22.12% 51.21%
Fund--Class 2(2)
--------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund--Class 2(2) 25.50% 5.41% 31.92% -3.80% 23.26% 20.47% 10.10% -0.39% 27.06%
--------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund--Class 2(2) N/A N/A 45.01% -3.83% 13.91% 22.06% 12.12% 8.08% 21.57%
-------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A 30.24% -2.81% 14.75% 123.45%
--------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A 44.64% 27.68% 7.21% 23.38%
==========================================================================================================================
</TABLE>
1 Rates are net of the investment management fee, daily administrative fees,
and mortality and expense risk charges of the Subaccounts. Percent change
doesn't include the effect of the surrender charges or the annual
administrative fees.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's higher annual fees and expenses resulting from
its Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
39
<PAGE>
Current yield for the Phoenix-Goodwin Money Market Subaccount is based upon
the income earned by the Subaccount over a 7-day period and then annualized,
i.e., the income earned in the period is assumed to be earned every seven days
over a 52-week period and stated as a percentage of the investment. Effective
yield is calculated similarly but when annualized, the income earned by the
investment is assumed to be reinvested in Subaccount Units and thus compounded
in the course of a 52-week period. Yield and effective yield reflect the
recurring charges on the Account level excluding the annual administrative fee.
Yield calculations of the Phoenix-Goodwin Money Market Subaccount used for
illustration purposes are based on the consideration of a hypothetical Contract
Owner's account having a balance of exactly one Unit at the beginning of a 7-day
period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical Contract Owner's account's original
unit. The following is an example of this yield quotation for the
Phoenix-Goodwin Money Market Subaccount based on a 7-day period ending December
31, 1999.
Example:
Value of hypothetical pre-existing account with
exactly one
unit at the beginning of the period:.............. $1.168581
Value of the same account (excluding capital 1.169442
Calculation:
Ending account value.............................. 1.169442
Less beginning value.............................. 1.168581
Net change in account value....................... 0.000861
Base period return:
(adjusted change/beginning account value)......... 0.000737
Current yield = return x (365/7).................... 3.84%
Effective yield = [(1 + return) ]365/7 -1........... 3.92%
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 AverageSM, 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 AverageSM, First Boston High Yield Index and Solomon
Brothers Corporate and Government Bond Indices.
EACH FUND'S ANNUAL REPORT, AVAILABLE UPON REQUEST AND WITHOUT CHARGE,
CONTAINS A DISCUSSION OF THE PERFORMANCE OF THE FUNDS AND A COMPARISON OF THAT
PERFORMANCE TO A SECURITIES MARKET INDEX.
40
<PAGE>
APPENDIX B
THE GUARANTEED INTEREST ACCOUNT
- --------------------------------------------------------------------------------
Contributions to the GIA under the Contract and transfers to the GIA become
part of the general account of PHL Variable Insurance Company (the "General
Account"), which supports insurance and annuity obligations. Because of
exemptive and exclusionary provisions, interest in the General Account has not
been registered under the Securities Act of 1933 ("1933 Act") nor is the General
Account registered as an investment company under the 1940 Act. Accordingly,
neither the General Account nor any interest therein is specifically subject to
the provisions of the 1933 or 1940 Acts and the staff of the SEC has not
reviewed the disclosures in this Prospectus concerning the GIA. Disclosures
regarding the GIA and the General Account, however, may be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
The General Account is made up of all of the general assets of PHL Variable
Insurance Company other than those allocated to any separate account. Payments
will be allocated to the GIA and, therefore, the General Account, as elected by
the Owner at the time of purchase or as subsequently changed. We will invest the
assets of the General Account in assets chosen by it and allowed by applicable
law. Investment income from General Account assets is allocated between us and
the Contracts participating in the General Account, in accordance with the terms
of such Contracts.
Fixed annuity payments made to Annuitants under the Contract will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. We assume this "mortality risk" by virtue
of annuity rates incorporated in the Contract that cannot be changed. In
addition, we guarantee that it will not increase charges for maintenance of the
Contracts regardless of its actual expenses.
Investment income from the General Account allocated to us includes
compensation for mortality and expense risks borne by it in connection with
General Account contracts.
The amount of investment income allocated to the Contracts will vary from
year to year in the sole discretion of PHL Variable. However, we guarantee that
it will credit interest at a rate of not less than 4% per year compounded
annually, to amounts allocated to the GIA. We may credit interest at a rate in
excess of these rates; however, it is not obligated to credit any interest in
excess of these rates.
On the last business day of each calendar week, we will set the excess
interest rate, if any, that will apply to amounts deposited to the GIA. That
rate will remain in effect for such deposits for an initial guarantee period of
one full year from the date of deposit. Upon expiration of the initial one-year
guarantee period (and each subsequent one-year guarantee period thereafter), the
rate to be applied to any deposits whose guaranteed period has just ended will
be the same rate as is applied to new deposits allocated to the GIA at that
time. This rate will likewise remain in effect for a guarantee period of one
full year from the date the new rate is applied.
Excess interest, if any, will be determined by us based on information as to
expected investment yields. Some of the factors that we may consider in
determining whether to credit excess interest to amounts allocated to the GIA
and the amount thereof, are general economic trends, rates of return currently
available and anticipated on investments, regulatory and tax requirements and
competitive factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE GIA IN
EXCESS OF 4% PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION AND WITHOUT
REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO GIA ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE FOR
ANY GIVEN YEAR.
We are is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in PHL Variable's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
policyholders, Contract Owners and shareholders.
Excess interest, if any, will be credited on the GIA Contract Value. We
guarantee that, at any time, the GIA Contract Value will not be less than the
amount of payments allocated to the GIA, plus interest at the rate of 4% per
year, compounded annually, plus any additional interest which we may, in our
discretion, credit to the GIA, less the sum of any applicable annual
administrative or surrender charges, any applicable premium taxes, and less any
amounts surrendered. If the Owner surrenders the Contract, the amount available
from the GIA will be reduced by any applicable surrender charge and annual
administration charge. See "Deductions and Charges."
For 403(b) plans with loans, amounts borrowed from the GIA will be treated
as transfers to the Loan Security Account and will be subject to the same
limitations as applies to transfers from the GIA (see "Qualified Plans").
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE
SYSTEMATIC TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT
OF THE GIA OVER A PERIOD OF 6 MONTHS OR LONGER. ALSO, THE TOTAL CONTRACT VALUE
ALLOCATED TO THE GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE
SUBACCOUNTS OF THE ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE
FOLLOWING ANNUALLY RENEWABLE SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33% YEAR THREE: 50% YEAR FOUR: 100%
41
<PAGE>
APPENDIX C
DEDUCTIONS FOR PREMIUM TAXES
QUALIFIED AND NON-QUALIFIED ANNUITY CONTRACTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
UPON UPON
STATE PURCHASE1 ANNUITIZATION NON-QUALIFIED QUALIFIED
<S> <C> <C> <C>
California .......................................... X 2.35% 0.50%
Kentucky(2)..........................................
Maine................................................ X 2.00
Nevada............................................... X 3.50
South Dakota......................................... X 1.25
West Virginia........................................ X 1.00 1.00
Wyoming.............................................. X 1.00
Commonwealth of Puerto Rico.......................... X 1.00% 1.00%
</TABLE>
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 Premium Taxes, see
"Deductions and Charges--Premium Tax."
1 "Purchase" in this chart refers to the earlier of partial withdrawal,
surrender of the Contract, payment of death proceeds or Maturity Date.
2 Effective January 1, 2000, Kentucky no longer imposes Premium Tax on variable
annuities.
42
<PAGE>
[Version B]
THE PHOENIX EDGE(R)-VA
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
[phone] Tel. 800/541-0171
PROSPECTUS MAY 1, 2000
This Prospectus describes a variable accumulation deferred annuity contract. The
Contract is designed to provide you with retirement income in the future. The
Contract offers a variety of variable and fixed investment options.
You may allocate payments and Contract Value to one or more of the Subaccounts
of the VA Account, the MVA Account ("MVA") and the Guaranteed Interest Account
("GIA"). The assets of each Subaccount will be used to purchase, at Net Asset
Value, shares of a series in the following designated Funds.
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond 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-Schafer Mid-Cap Value Series
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
- -----------------------------------
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE(R) Equity Index Fund
FEDERATED INSURANCE SERIES
- --------------------------
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ---------------------------------------
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT
[diamond] Technology Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
- ----------------------------------------------------
MANAGED BY TEMPLETON GLOBAL ADVISORS LIMITED
[diamond] Templeton Growth Securities Fund -- Class 2
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Strategy Fund -- Class 2
[diamond] Templeton International Securities Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Securities Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Securities Fund -- Class 2
WANGER ADVISORS TRUST
- ---------------------
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
1
<PAGE>
It may not be in your best interest to purchase a Contract to replace an
existing annuity contract or life insurance policy. You must understand the
basic features of the proposed Contract and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any tax liability.
This Prospectus is valid only if accompanied or preceded by current prospectuses
for the Funds and MVA. You should read and keep these prospectuses for future
reference.
The Contract is not a deposit or obligation of, underwritten or guaranteed by,
any financial institution, credit union or affiliate. It is not federally
insured by the Federal Deposit Insurance Corporation or any other state or
federal agency. Contract investments are subject to risk, including the
fluctuation of Contract Values and possible loss of principal.
The Securities and Exchange Commission ("SEC") has not approved or disapproved
these securities, nor passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
This Prospectus provides important information that a prospective investor ought
to know before investing. This Prospectus should be kept for future reference. A
Statement of Additional Information ("SAI") has been filed with the SEC and is
available free of charge by calling Variable Annuity Operations at 800/541-0171.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
- -----------------------------------------------------------------
SPECIAL TERMS............................................. 4
SUMMARY OF EXPENSES....................................... 6
CONTRACT SUMMARY.......................................... 17
FINANCIAL HIGHLIGHTS...................................... 20
PERFORMANCE HISTORY....................................... 35
THE VARIABLE ACCUMULATION ANNUITY......................... 35
PHL VARIABLE AND THE ACCOUNT ............................. 35
INVESTMENTS OF THE ACCOUNT................................ 35
The Phoenix Edge Series Fund........................... 35
Deutsche Asset Management VIT Funds.................... 36
Federated Insurance Series............................. 37
The Universal Institutional Funds, Inc................. 37
Franklin Templeton Variable Insurance
Products Trust....................................... 37
Wanger Advisors Trust.................................. 37
Investment Advisors.................................... 38
Services of the Advisors............................... 38
MVA....................................................... 38
PURCHASE OF CONTRACTS..................................... 39
DEDUCTIONS AND CHARGES.................................... 39
Deductions from the Separate Account................... 39
Premium Tax.......................................... 39
Surrender Charges.................................... 39
Mortality and Expense Risk Fee....................... 40
Administrative Fee................................... 40
Administrative Charge................................ 40
Reduced Charges, Credits and Bonus
Guaranteed Interest Rates............................ 41
Market Value Adjustment................................ 41
Other Charges.......................................... 41
THE ACCUMULATION PERIOD................................... 41
Accumulation Units..................................... 41
Accumulation Unit Values............................... 41
Transfers ............................................. 41
Optional Programs and Benefits......................... 42
Dollar Cost Averaging Program........................ 42
Asset Rebalancing Program............................ 43
Enhanced Option 1 Rider.............................. 43
Nursing Home Waiver.................................. 43
Surrender of Contract; Partial Withdrawals............. 43
Lapse of Contract...................................... 43
Payment Upon Death Before Maturity Date ............... 44
THE ANNUITY PERIOD........................................ 45
Variable Accumulation Annuity Contracts................ 45
Annuity Options ....................................... 45
Option A--Life Annuity with Specified Period Certain. 46
Option B--Non-Refund Life Annuity.................... 46
Option D--Joint and Survivor Life Annuity............ 46
Option E--Installment Refund Life Annuity............ 46
Option F--Joint and Survivor Life Annuity with
10-Year Period Certain ............................ 46
Option G--Payments for Specified Period.............. 46
Option H--Payments of Specified Amount............... 46
Option I--Variable Payment Life Annuity with
10-Year Period Certain ............................ 46
Option J--Joint Survivor Variable Payment Life
Annuity with 10-Year Period Certain ............... 47
Option K--Variable Payment Annuity for a
Specified Period .................................. 47
Option L--Variable Payment Life Expectancy
Annuity............................................ 47
Option M--Unit Refund Variable Payment Life
Annuity............................................ 47
Option N--Variable Payment Non-Refund Life
Annuity............................................ 47
Other Options and Rates.............................. 47
Other Conditions..................................... 47
Payment Upon Death After Maturity Date................. 47
VARIABLE ACCOUNT VALUATION PROCEDURES..................... 48
Valuation Date......................................... 48
Valuation Period....................................... 48
Accumulation Unit Value................................ 48
Net Investment Factor.................................. 48
MISCELLANEOUS PROVISIONS.................................. 48
Assignment............................................. 48
Deferment of Payment .................................. 48
Free Look Period....................................... 48
Amendments to Contracts................................ 49
Substitution of Fund Shares............................ 49
Ownership of the Contract.............................. 49
FEDERAL INCOME TAXES...................................... 49
Introduction........................................... 49
Income Tax Status...................................... 49
Taxation of Annuities in General--Non-Qualified Plans.. 49
Surrenders or Withdrawals Prior to the Contract
Maturity Date...................................... 49
Surrenders or Withdrawals On or After the Contract
Maturity Date...................................... 50
Penalty Tax on Certain Surrenders and Withdrawals.... 50
Additional Considerations.............................. 50
Diversification Standards ............................. 51
Qualified Plans........................................ 52
Tax Sheltered Annuities ("TSAs") .................... 52
Keogh Plans.......................................... 53
Individual Retirement Accounts....................... 53
Corporate Pension and Profit-Sharing Plans........... 53
Deferred Compensation Plans with Respect to
Service for State and Local Governments and
Tax Exempt Organizations........................... 54
Penalty Tax on Certain Surrenders and Withdrawals
from Qualified Contracts........................... 54
Seek Tax Advice...................................... 54
SALES OF VARIABLE ACCUMULATION CONTRACTS.................. 54
STATE REGULATION.......................................... 55
REPORTS................................................... 55
VOTING RIGHTS............................................. 55
TEXAS OPTIONAL RETIREMENT PROGRAM......................... 55
LEGAL MATTERS............................................. 55
SAI....................................................... 56
APPENDIX A--PERFORMANCE HISTORY FOR
CONTRACTS WITH:
BENEFIT OPTION 1..................................... 57
BENEFIT OPTION 2..................................... 60
BENEFIT OPTION 3..................................... 63
APPENDIX B--THE GUARANTEED INTEREST ACCOUNT............... 66
APPENDIX C--DEDUCTIONS FOR PREMIUM TAXES.................. 67
3
<PAGE>
SPECIAL TERMS
- --------------------------------------------------------------------------------
The following is a list of terms and their meanings when used in this
Prospectus.
ACCOUNT (VA ACCOUNT): PHL Variable Accumulation Account.
ACCOUNT VALUE: The value of all assets held in the Account.
ACCUMULATION UNIT: A standard of measurement for each Subaccount used to
determine the value of a Contract and the interest in the Subaccounts prior to
the start of annuity payments.
ACCUMULATION UNIT VALUE: The value of one Accumulation Unit was set at $1.0000
on the date assets were first allocated to each Subaccount. The value of one
Accumulation Unit on any subsequent Valuation Date is determined by multiplying
the immediately preceding Accumulation Unit Value by the applicable Net
Investment Factor for the Valuation Period ending on such Valuation Date.
ADJUSTED PARTIAL WITHDRAWALS: The result of multiplying the ratio of the partial
withdrawal to the Contract Value and the death benefit (prior to the withdrawal)
on the date of the withdrawal.
ANNUAL ROLL-UP AMOUNT (ROLL-UP AMOUNT): In the first Contract year the Annual
Roll-up Amount is equal to the initial premium payment. After that, in any
following Contract year the Annual Roll-up Amount is equal to the Roll-up Amount
at the end of the last Contract year multiplied by a factor of 1.05, plus 100%
of premium payments, less Adjusted Partial Withdrawals made since the end of the
prior Contract year. The Roll-up Amount may not be greater than 200% of total
premium payments less Adjusted Partial Withdrawals.
ANNUAL STEP-UP AMOUNT (STEP-UP AMOUNT): In the first Contract year the Step-up
Amount is the greater of (1) 100% of purchase payments less Adjusted Partial
Withdrawals; or (2) the Contract Value. After that, in any following Contract
year the Step-up Amount equals the greater of (1) the Step-up Amount at the end
of the prior Contract year, plus 100% of premium payments, less Adjusted Partial
Withdrawals made since the end of the last Contract year; or (2) the Contract
Value.
ANNUITANT: The person whose life is used as the measuring life under the
Contract. The annuitant will be the primary Annuitant as shown on the Contract's
Schedule Page while that person is living, and will then be the contingent
Annuitant, if that person is living at the death of the primary Annuitant.
ANNUITY OPTION: The provisions under which we make a series of annuity payments
to the Annuitant or other payee, such as Life Annuity with Ten Years Certain.
See "Annuity Options."
ANNUITY UNIT: A standard of measurement used in determining the amount of each
periodic payment under the variable payment Annuity Options I, J, K, M and N.
BENEFIT OPTIONS (BENEFIT OPTION, OPTION): The form of Contract selected which
determines the method of death benefit calculation and the amount of mortality
and expense risk charge.
CLAIM DATE: The Valuation Date following receipt of a certified copy of the
death certificate at VPMO.
CONTRACT: The deferred variable accumulation annuity contract described in this
Prospectus.
CONTRACT OWNER (OWNER, YOU, YOUR): Usually the person or entity to whom we issue
the Contract. The Contract Owner has the sole right to exercise all rights and
privileges under the Contract as provided in the Contract. The Owner may be the
Annuitant, an employer, a trust or any other individual or entity specified in
the Contract application. However, under Contracts used with certain
tax-qualified plans, the Owner must be the Annuitant. A husband and wife may be
designated as joint owners, and if such a joint owner dies, the other joint
owner becomes the sole Owner of the Contract. If no Owner is named in the
application, the Annuitant will be the Owner.
CONTRACT VALUE: Prior to the Maturity Date, the sum of all Accumulation Units
held in the Subaccounts of the Account and the value held in the GIA and/or MVA.
For Tax-sheltered Annuity plans (as described in Internal Revenue Code (IRC)
403(b)) with loans, the Contract Value is the sum of all Accumulation Units held
in the Subaccounts of the Account and the value held in the GIA and/or MVA plus
the value held in the Loan Security Account, and less any Loan Debt.
FIXED PAYMENT ANNUITY: A benefit providing periodic payments of a fixed dollar
amount throughout the Annuity Period. This benefit does not vary with or reflect
the investment performance of any Subaccount.
FUNDS: The Phoenix Edge Series Fund, Deutsche Asset Management VIT Funds,
Federated Insurance Series, The Universal Institutional Funds, Inc., Franklin
Templeton Variable Insurance Products Trust and Wanger Advisors Trust.
GIA: An investment option under which premium amounts are guaranteed to earn a
fixed rate of interest.
ISSUE DATE: The date that the initial premium payment is invested under a
Contract.
LOAN DEBT: Loan Debt is equal to the sum of the outstanding loan balance plus
any accrued loan interest.
LOAN SECURITY ACCOUNT: The Loan Security Account is part of the general account
and is the sole security for Tax-sheltered Annuity (as described in IRC 403(b))
loans. It is increased with all loan amounts taken and reduced by all repayments
of loan principal.
4
<PAGE>
MVA: An account that pays interest at a guaranteed rate if held to maturity. If
amounts are withdrawn, transferred or applied to an annuity option before the
end of the guarantee period we will make a market adjustment to the value of
that account. Assets allocated to the MVA are not part of the assets allocated
to the Account or the general account of PHL Variable. The MVA is described in a
separate prospectus.
MATURITY DATE: The date elected by the Owner as to when annuity payments will
begin. The Maturity Date will not be any earlier than the fifth Contract
anniversary and no later than the Annuitant's 95th birthday. The election is
subject to certain conditions described in "The Annuity Period."
MINIMUM INITIAL PAYMENT: The amount that you pay when you purchase a Contract.
We require minimum initial payments of:
[diamond] Non-qualified plans--$1,000
[diamond] Individual Retirement Annuity--$1,000
[diamond] Bank draft program--$25
[diamond] Qualified plans--$1,000 annually
MINIMUM SUBSEQUENT PAYMENT: The least amount that you may pay when you make any
subsequent payments, after the minimum initial payment (see above). The minimum
subsequent payment for all Contracts is $25.
NET ASSET VALUE: Net asset value of a Series' shares is computed by dividing the
value of the net assets of the Series by the total number of Series outstanding
shares.
PAYMENT UPON DEATH: The obligation of PHL Variable under a Contract to make a
payment on the death of the Owner or Annuitant anytime: (a) before the Maturity
Date of a Contract (see "Payment Upon Death Before Maturity Date") or (b) after
the Maturity Date of a Contract (see "Payment Upon Death After Maturity Date").
PHL VARIABLE (OUR, US, WE, COMPANY): PHL Variable Insurance Company.
SEVEN YEAR STEP-UP AMOUNT (7 YEAR STEP-UP AMOUNT): In the first seven Contract
years, the 7 Year Step-up Amount equals 100% of purchase payments less Adjusted
Partial Withdrawals. In any subsequent 7 year period, the 7 Year Step-up Amount
equals the 7 Year Step-up Amount that would have been paid on the prior seventh
Contract anniversary plus 100% of payments less Adjusted Partial Withdrawals
made since the prior seventh Contract anniversary.
SERIES: A separate investment portfolio of a Fund.
VALUATION DATE: A Valuation Date is every day the New York Stock Exchange
("NYSE") is open for trading.
VAO: Variable Annuity Operations.
VARIABLE PAYMENT ANNUITY: An annuity providing payments that vary in amounts,
according to the investment experience of the selected Subaccounts.
VPMO: The Variable Products Mail Operations division of PHL Variable that
receives and processes incoming mail for Variable Annuity Operations.
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES ALL SUBACCOUNTS
---------------
<S> <C>
Sales Charges Imposed on Purchases........................................................................ None
Deferred Surrender Charges (as a percentage of amount withdrawn):(1)
Age of Payment in Complete Years 0-1.................................................................. 7%
Age of Payment in Complete Years 1-2.................................................................. 7%
Age of Payment in Complete Years 2-3.................................................................. 6%
Age of Payment in Complete Years 3-4.................................................................. 6%
Age of Payment in Complete Years 4-5.................................................................. 5%
Age of Payment in Complete Years 5-6.................................................................. 4%
Age of Payment in Complete Years 6-7.................................................................. 3%
Age of Payment in Complete Years 7 and thereafter..................................................... None
Subaccount Transfer Charge................................................................................ None
ANNUAL ADMINISTRATIVE CHARGE
Maximum............................................................................................... $35
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
[diamond] Option 1--Return of Premium
Mortality and Expense Risk Fee........................................................................ .775%
Daily Administrative Fee.............................................................................. .125%
------
Total Separate Account Annual Expenses................................................................ .90 %
[diamond] Option 2--Annual Step-up
Mortality and Expense Risk Fee............................................................................ 1.125%
------
Daily Administrative Fee.................................................................................. .125%
Total Separate Account Annual Expenses.................................................................... 1.25 %
[diamond] Option 3--5% Roll-up
Mortality and Expense Risk Fee............................................................................ 1.225%
------
Daily Administrative Fee.................................................................................. .125%
Total Separate Account Annual Expenses.................................................................... 1.35 %
</TABLE>
1 A surrender charge is taken from the proceeds when a Contract is surrendered
or when an amount is withdrawn, if the payments have not been held under the
Contract for a certain period of time. However, each year an amount up to 10%
of the Contract Value as of the end of the previous Contract year may be
withdrawn without a surrender charge. See "Deductions and Charges--Surrender
Charges."
6
<PAGE>
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES TOTAL EXPENSES TOTAL EXPENSES
SERIES MANAGEMENT RULE 12B-1 BEFORE BEFORE AFTER
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%(4) 1.75%(4) .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-Federated U.S. Government Bond .60% N/A 1.70%(4) 2.30%(4) .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%(4) 2.25%(4) 1.00%
Phoenix-Janus Flexible Income .80% N/A 1.65%(4) 2.45%(4) .95%
Phoenix-Janus Growth .85% N/A 1.05%(4) 1.90%(4) 1.00%
Phoenix-Morgan Stanley Focus Equity .85% N/A 1.30%(4) 2.15%(4) 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-Schafer Mid-Cap Value 1.05% N/A 1.53% 2.58% 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%
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%
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio .80% N/A 1.85%(4) 2.65%(4) 1.15%
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%
WANGER ADVISORS TRUST
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 1.00% N/A 2.45% 3.45% 1.45%
Wanger International Small Cap 1.25% N/A .24% 1.49% 1.49%
Wanger Twenty .95% N/A 1.17% 2.12% 1.35%
Wanger U.S. Small Cap .95% N/A .07% 1.02% 1.02%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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-Schafer Mid-Cap
Value, Phoenix-Bankers Trust Dow 30, Phoenix-Federated U.S. Government,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus
Growth and Phoenix-Morgan Stanley Focus Equity 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%. 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 will
pay up to .60%, and the Wanger Twenty will pay up to .40%.
2 Reflects the effect of any management fee waivers and reimbursement of
expenses.
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
six 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>
<CAPTION>
- ------------------------------------------------------- ----------------- ---------------- --------------- -------------------------
ESTIMATED ANNUAL EXPENSES FROM 5/1/00 MANAGEMENT FEES RULE 12B-1 FEES OTHER EXPENSES TOTAL OPERATING 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 - Class 2 1.25% .25% .29% 1.79%
Templeton Growth Securities Fund - Class 2 .80% .25% .05% 1.10%
Templeton International Securities Fund - Class 2 .65% .25% .20% 1.10%
- ------------------------------------------------------- ----------------- ---------------- --------------- -------------------------
</TABLE>
7
<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 which affect expenses.
However, the following three tables are meant to help demonstrate how certain
decisions or choices by you could result in different levels of expense.
EXAMPLES FOR BENEFIT OPTION 1 CONTRACTS:
If you surrender your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 initial investment. We have assumed
a constant 5% annual return on the invested assets for all of the Series. Please
note that the .05% charge for the Enhanced Option 1 Rider is not included.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... $ 86 $123 $163 $239
Phoenix-Aberdeen New Asia Series................................ 99 162 227 372
Phoenix-Bankers Trust Dow 30 Series(2).......................... 93 144 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 89 132 177 270
Phoenix-Engemann Capital Growth Series.......................... 83 114 147 204
Phoenix-Engemann Nifty Fifty Series............................. 90 135 183 282
Phoenix-Federated U.S. Government Bond Series(2)................ 98 160 N/A N/A
Phoenix-Goodwin Money Market Series............................. 82 111 141 192
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 83 115 148 207
Phoenix-Hollister Value Equity Series........................... 95 152 211 339
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 83 116 150 212
Phoenix-Janus Equity Income Series(2)........................... 97 158 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 99 164 N/A N/A
Phoenix-Janus Growth Series(2).................................. 94 149 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 96 156 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 83 115 148 206
Phoenix-Oakhurst Growth and Income Series....................... 86 123 163 239
Phoenix-Oakhurst Strategic Allocation Series.................... 83 115 148 206
Phoenix-Schafer Mid-Cap Value Series............................ 100 167 236 389
Phoenix-Seneca Mid-Cap Growth Series............................ 95 153 212 340
Phoenix-Seneca Strategic Theme Series........................... 85 122 161 235
EAFE(R)Equity Index Fund(1)...................................... 87 127 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 84 119 N/A N/A
Federated High Income Bond Fund II(1)........................... 84 117 N/A N/A
Technology Portfolio(2)......................................... 101 169 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 86 124 164 242
Templeton Asset Strategy Fund-- Class 2......................... 86 124 164 241
Templeton Developing Markets Securities Fund-- Class 2.......... 93 146 201 319
Templeton Growth Securities Fund-- Class 2...................... 87 127 169 251
Templeton International Securities Fund-- Class 2............... 87 127 169 251
Wanger Foreign Forty............................................ 108 191 274 461
Wanger International Small Cap.................................. 90 137 186 288
Wanger Twenty................................................... 96 155 215 348
Wanger U.S. Small Cap........................................... 86 124 163 240
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
8
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you annuitize your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 initial investment. We have assumed
a constant 5% annual return on the invested assets for all of the Series. Please
note that the .05% charge for the Enhanced Option 1 Rider is not included.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... $ 86 $123 $111 $239
Phoenix-Aberdeen New Asia Series................................ 99 162 179 372
Phoenix-Bankers Trust Dow 30 Series(2).......................... 93 144 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 89 132 126 270
Phoenix-Engemann Capital Growth Series.......................... 83 114 94 204
Phoenix-Engemann Nifty Fifty Series............................. 90 135 132 282
Phoenix-Federated U.S. Government Bond Series(2)................ 98 160 N/A N/A
Phoenix-Goodwin Money Market Series............................. 82 111 88 192
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 83 115 95 207
Phoenix-Hollister Value Equity Series........................... 95 152 162 339
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 83 116 97 212
Phoenix-Janus Equity Income Series(2)........................... 97 158 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 99 164 N/A N/A
Phoenix-Janus Growth Series(2).................................. 94 149 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 96 156 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 83 115 95 206
Phoenix-Oakhurst Growth and Income Series....................... 86 123 111 239
Phoenix-Oakhurst Strategic Allocation Series.................... 83 115 95 206
Phoenix-Schafer Mid-Cap Value Series............................ 100 167 188 389
Phoenix-Seneca Mid-Cap Growth Series............................ 95 153 212 340
Phoenix-Seneca Strategic Theme Series........................... 85 122 109 235
EAFE(R)Equity Index Fund(1)...................................... 87 127 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 84 119 N/A N/A
Federated High Income Bond Fund II(10........................... 84 117 N/A N/A
Technology Portfolio(2)......................................... 101 169 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 86 124 112 242
Templeton Asset Strategy Fund-- Class 2......................... 86 124 112 241
Templeton Developing Markets Securities Fund-- Class 2.......... 93 146 151 319
Templeton Growth Securities Fund-- Class 2...................... 87 127 117 251
Templeton International Securities Fund-- Class 2............... 87 127 117 251
Wanger Foreign Forty............................................ 108 191 228 461
Wanger International Small Cap.................................. 90 137 135 288
Wanger Twenty................................................... 96 155 166 348
Wanger U.S. Small Cap........................................... 86 124 111 240
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
9
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you leave your premiums in the Contract and you do not surrender or
annuitize it, after each of these time periods you will have paid the following
expenses on a $1,000 initial investment. We have assumed a constant 5% annual
return on the invested assets for all of the Series. Please note that the .05%
charge for the Enhanced Option 1 Rider is not included.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Phoenix-Aberdeen International Series........................... $21 $ 65 $111 $239
Phoenix-Aberdeen New Asia Series................................ 35 106 179 372
Phoenix-Bankers Trust Dow 30 Series(2).......................... 28 87 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 24 74 126 270
Phoenix-Engemann Capital Growth Series.......................... 18 54 94 204
Phoenix-Engemann Nifty Fifty Series............................. 25 77 132 282
Phoenix-Federated U.S. Government Bond Series(2)................ 34 103 N/A N/A
Phoenix-Goodwin Money Market Series............................. 16 51 88 192
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 18 55 95 207
Phoenix-Hollister Value Equity Series........................... 31 95 162 339
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 18 57 97 212
Phoenix-Janus Equity Income Series(2)........................... 33 102 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 35 107 N/A N/A
Phoenix-Janus Growth Series(2).................................. 30 91 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 32 99 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 18 55 95 206
Phoenix-Oakhurst Growth and Income Series....................... 21 65 111 239
Phoenix-Oakhurst Strategic Allocation Series.................... 18 55 95 206
Phoenix-Schafer Mid-Cap Value Series............................ 37 111 188 389
Phoenix-Seneca Mid-Cap Growth Series............................ 31 95 162 340
Phoenix-Seneca Strategic Theme Series........................... 21 63 109 235
EAFE(R)Equity Index Fund(1)..................................... 22 69 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 19 59 N/A N/A
Federated High Income Bond Fund II(1)........................... 19 58 N/A N/A
Technology Portfolio(2)......................................... 37 113 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 21 65 112 242
Templeton Asset Strategy Fund-- Class 2......................... 21 65 112 241
Templeton Developing Markets Securities Fund-- Class 2.......... 29 89 151 319
Templeton Growth Securities Fund-- Class 2...................... 22 68 117 251
Templeton International Securities Fund-- Class 2............... 22 68 117 251
Wanger Foreign Forty............................................ 45 136 228 461
Wanger International Small Cap.................................. 26 79 135 288
Wanger Twenty................................................... 32 98 166 348
Wanger U.S. Small Cap........................................... 21 65 111 240
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
10
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
EXAMPLES FOR BENEFIT OPTION 2 CONTRACTS:
If you surrender your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 initial 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........................... $ 89 $133 $180 $275
Phoenix-Aberdeen New Asia Series................................ 102 172 243 403
Phoenix-Bankers Trust Dow 30 Series(2).......................... 96 154 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 92 142 194 304
Phoenix-Engemann Capital Growth Series.......................... 86 124 164 241
Phoenix-Engemann Nifty Fifty Series............................. 93 145 199 316
Phoenix-Federated U.S. Government Bond Series(2)................ 101 169 N/A N/A
Phoenix-Goodwin Money Market Series............................. 85 121 158 230
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 86 125 165 244
Phoenix-Hollister Value Equity Series........................... 99 162 227 371
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 87 126 167 248
Phoenix-Janus Equity Income Series(2)........................... 101 168 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 102 173 N/A N/A
Phoenix-Janus Growth Series(2).................................. 97 158 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 100 165 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 86 125 165 243
Phoenix-Oakhurst Growth and Income Series....................... 89 133 180 275
Phoenix-Oakhurst Strategic Allocation Series.................... 86 125 165 243
Phoenix-Schafer Mid-Cap Value Series............................ 104 177 251 419
Phoenix-Seneca Mid-Cap Growth Series............................ 99 162 227 372
Phoenix-Seneca Strategic Theme Series........................... 89 132 178 271
EAFE(R)Equity Index Fund(1)..................................... 90 137 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 87 129 N/A N/A
Federated High Income Bond Fund II(1)........................... 87 127 N/A N/A
Technology Portfolio(2)......................................... 104 179 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 89 134 181 278
Templeton Asset Strategy Fund-- Class 2......................... 89 134 181 277
Templeton Developing Markets Securities Fund-- Class 2.......... 97 156 217 351
Templeton Growth Securities Fund-- Class 2...................... 90 137 185 287
Templeton International Securities Fund-- Class 2............... 90 137 185 287
Wanger Foreign Forty............................................ 112 200 289 489
Wanger International Small Cap.................................. 94 147 202 321
Wanger Twenty................................................... 99 164 231 379
Wanger U.S. Small Cap........................................... 89 134 180 276
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
11
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you annuitize your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 initial 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........................... $ 89 $133 $129 $275
Phoenix-Aberdeen New Asia Series................................ 102 172 195 403
Phoenix-Bankers Trust Dow 30 Series(2).......................... 96 154 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 92 142 143 304
Phoenix-Engemann Capital Growth Series.......................... 86 124 112 241
Phoenix-Engemann Nifty Fifty Series............................. 93 145 149 316
Phoenix-Federated U.S. Government Bond Series(2)................ 101 169 N/A N/A
Phoenix-Goodwin Money Market Series............................. 85 121 106 230
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 86 125 113 244
Phoenix-Hollister Value Equity Series........................... 99 162 178 371
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 87 126 115 248
Phoenix-Janus Equity Income Series(2)........................... 101 168 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 102 173 N/A N/A
Phoenix-Janus Growth Series(2).................................. 97 158 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 100 165 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 86 125 113 243
Phoenix-Oakhurst Growth and Income Series....................... 89 133 129 275
Phoenix-Oakhurst Strategic Allocation Series.................... 86 125 113 243
Phoenix-Schafer Mid-Cap Value Series............................ 104 177 204 419
Phoenix-Seneca Mid-Cap Growth Series............................ 99 162 179 372
Phoenix-Seneca Strategic Theme Series........................... 89 132 127 271
EAFE(R)Equity Index Fund(1)..................................... 90 137 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 87 129 N/A N/A
Federated High Income Bond Fund II(1)........................... 87 127 N/A N/A
Technology Portfolio(2)......................................... 104 179 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 89 134 130 278
Templeton Asset Strategy Fund-- Class 2......................... 89 134 130 277
Templeton Developing Markets Securities Fund-- Class 2.......... 97 156 168 351
Templeton Growth Securities Fund-- Class 2...................... 90 137 135 287
Templeton International Securities Fund-- Class 2............... 90 137 135 287
Wanger Foreign Forty............................................ 112 200 243 489
Wanger International Small Cap.................................. 94 147 152 321
Wanger Twenty................................................... 99 164 183 379
Wanger U.S. Small Cap........................................... 89 134 129 276
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
12
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you leave your premiums in the Contract and you do not surrender or
annuitize it, after each of these time periods you will have paid the following
expenses on a $1,000 initial 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........................... $24 $ 75 $129 $275
Phoenix-Aberdeen New Asia Series................................ 38 116 195 403
Phoenix-Bankers Trust Dow 30 Series(2).......................... 32 97 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 27 84 143 304
Phoenix-Engemann Capital Growth Series.......................... 21 65 112 241
Phoenix-Engemann Nifty Fifty Series............................. 29 88 149 316
Phoenix-Federated U.S. Government Bond Series(2)................ 37 113 N/A N/A
Phoenix-Goodwin Money Market Series............................. 20 62 106 230
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 21 66 113 244
Phoenix-Hollister Value Equity Series........................... 35 105 178 371
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 22 67 115 248
Phoenix-Janus Equity Income Series(2)........................... 37 112 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 39 118 N/A N/A
Phoenix-Janus Growth Series(2).................................. 33 102 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 36 109 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 21 66 113 243
Phoenix-Oakhurst Growth and Income Series....................... 24 75 129 275
Phoenix-Oakhurst Strategic Allocation Series.................... 21 66 113 243
Phoenix-Schafer Mid-Cap Value Series............................ 40 121 204 419
Phoenix-Seneca Mid-Cap Growth Series............................ 35 106 179 372
Phoenix-Seneca Strategic Theme Series........................... 24 74 127 271
EAFE(R)Equity Index Fund(1)..................................... 26 79 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 23 70 N/A N/A
Federated High Income Bond Fund II(1)........................... 22 69 N/A N/A
Technology Portfolio(2)......................................... 41 123 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 25 76 130 278
Templeton Asset Strategy Fund-- Class 2......................... 25 76 130 277
Templeton Developing Markets Securities Fund-- Class 2.......... 32 99 168 351
Templeton Growth Securities Fund-- Class 2...................... 26 79 135 287
Templeton International Securities Fund-- Class 2............... 26 79 135 287
Wanger Foreign Forty............................................ 49 146 243 489
Wanger International Small Cap.................................. 29 89 152 321
Wanger Twenty................................................... 35 108 183 379
Wanger U.S. Small Cap........................................... 25 75 129 276
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
13
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
EXAMPLES FOR BENEFIT OPTION 3 CONTRACTS:
If you surrender your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 initial 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........................... $ 90 $136 $184 $285
Phoenix-Aberdeen New Asia Series................................ 103 174 248 411
Phoenix-Bankers Trust Dow 30 Series(2).......................... 97 157 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 93 145 199 314
Phoenix-Engemann Capital Growth Series.......................... 87 127 169 251
Phoenix-Engemann Nifty Fifty Series............................. 94 148 204 325
Phoenix-Federated U.S. Government Bond Series(2)................ 102 172 N/A N/A
Phoenix-Goodwin Money Market Series............................. 86 124 163 240
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 87 128 170 254
Phoenix-Hollister Value Equity Series........................... 99 165 232 380
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 88 129 172 258
Phoenix-Janus Equity Income Series(2)........................... 102 171 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 103 176 N/A N/A
Phoenix-Janus Growth Series(2).................................. 98 161 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 101 168 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 87 127 170 253
Phoenix-Oakhurst Growth and Income Series....................... 90 136 184 285
Phoenix-Oakhurst Strategic Allocation Series.................... 87 127 170 253
Phoenix-Schafer Mid-Cap Value Series............................ 105 180 256 427
Phoenix-Seneca Mid-Cap Growth Series............................ 100 165 232 381
Phoenix-Seneca Strategic Theme Series........................... 90 135 183 281
EAFE(R)Equity Index Fund(1)..................................... 91 140 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 88 131 N/A N/A
Federated High Income Bond Fund II(1)........................... 88 130 N/A N/A
Technology Portfolio(2)......................................... 105 181 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 90 137 186 288
Templeton Asset Strategy Fund-- Class 2......................... 90 137 185 287
Templeton Developing Markets Securities Fund-- Class 2.......... 97 159 222 360
Templeton Growth Securities Fund-- Class 2...................... 91 140 190 296
Templeton International Securities Fund-- Class 2............... 91 140 190 296
Wanger Foreign Forty............................................ 113 203 293 496
Wanger International Small Cap.................................. 94 150 207 331
Wanger Twenty................................................... 100 167 236 388
Wanger U.S. Small Cap........................................... 90 137 185 286
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
14
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you annuitize your Contract at the end of one of these time periods, you
would pay the following expenses on a $1,000 initial 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........................... $ 90 $136 $134 $285
Phoenix-Aberdeen New Asia Series................................ 103 174 200 411
Phoenix-Bankers Trust Dow 30 Series(2).......................... 97 157 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 93 145 148 314
Phoenix-Engemann Capital Growth Series.......................... 87 127 117 251
Phoenix-Engemann Nifty Fifty Series............................. 94 148 154 325
Phoenix-Federated U.S. Government Bond Series(2)................ 102 172 N/A N/A
Phoenix-Goodwin Money Market Series............................. 86 124 111 240
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 87 128 118 254
Phoenix-Hollister Value Equity Series........................... 99 165 183 380
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 88 129 120 258
Phoenix-Janus Equity Income Series(2)........................... 102 171 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 103 176 N/A N/A
Phoenix-Janus Growth Series(2).................................. 98 161 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(20................... 101 168 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 87 127 118 253
Phoenix-Oakhurst Growth and Income Series....................... 90 136 134 285
Phoenix-Oakhurst Strategic Allocation Series.................... 87 127 118 253
Phoenix-Schafer Mid-Cap Value Series............................ 105 180 209 427
Phoenix-Seneca Mid-Cap Growth Series............................ 100 165 184 381
Phoenix-Seneca Strategic Theme Series........................... 90 135 132 281
EAFE(R)Equity Index Fund(1)..................................... 91 140 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 88 131 N/A N/A
Federated High Income Bond Fund II(1)........................... 88 130 N/A N/A
Technology Portfolio(2)......................................... 105 181 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 90 137 135 288
Templeton Asset Strategy Fund-- Class 2......................... 90 137 135 287
Templeton Developing Markets Securities Fund-- Class 2.......... 97 159 173 360
Templeton Growth Securities Fund-- Class 2...................... 91 140 140 296
Templeton International Securities Fund-- Class 2............... 91 140 140 296
Wanger Foreign Forty............................................ 113 203 248 496
Wanger International Small Cap.................................. 94 150 157 331
Wanger Twenty................................................... 100 167 187 388
Wanger U.S. Small Cap........................................... 90 137 134 286
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
15
<PAGE>
SUMMARY OF EXPENSES (CONTINUED)
If you leave your premiums in the Contract and you do not surrender or
annuitize it, after each of these time periods you will have paid the following
expenses on a $1,000 initial 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........................... $25 $ 78 $134 $285
Phoenix-Aberdeen New Asia Series................................ 39 119 200 411
Phoenix-Bankers Trust Dow 30 Series(2).......................... 33 100 N/A N/A
Phoenix-Duff & Phelps Real Estate Securities Series............. 28 87 148 314
Phoenix-Engemann Capital Growth Series.......................... 22 68 117 251
Phoenix-Engemann Nifty Fifty Series............................. 30 91 154 325
Phoenix-Federated U.S. Government Bond Series(2)................ 38 116 N/A N/A
Phoenix-Goodwin Money Market Series............................. 21 65 111 240
Phoenix-Goodwin Multi-Sector Fixed Income Series................ 22 69 118 254
Phoenix-Hollister Value Equity Series........................... 36 108 183 380
Phoenix-J.P. Morgan Research Enhanced Index Series.............. 23 70 120 258
Phoenix-Janus Equity Income Series(2)........................... 38 115 N/A N/A
Phoenix-Janus Flexible Income Series(2)......................... 40 120 N/A N/A
Phoenix-Janus Growth Series(2).................................. 34 104 N/A N/A
Phoenix-Morgan Stanley Focus Equity Series(2)................... 37 112 N/A N/A
Phoenix-Oakhurst Balanced Series................................ 22 69 118 253
Phoenix-Oakhurst Growth and Income Series....................... 25 78 134 285
Phoenix-Oakhurst Strategic Allocation Series.................... 22 69 118 253
Phoenix-Schafer Mid-Cap Value Series............................ 41 124 209 427
Phoenix-Seneca Mid-Cap Growth Series............................ 36 109 184 381
Phoenix-Seneca Strategic Theme Series........................... 25 77 132 281
EAFE(R)Equity Index Fund(1)..................................... 27 82 N/A N/A
Federated Fund for U.S. Government Securities II(1)............. 24 73 N/A N/A
Federated High Income Bond Fund II(1)........................... 23 72 N/A N/A
Technology Portfolio(2)......................................... 42 126 N/A N/A
Mutual Shares Securities Fund-- Class 2......................... 26 79 135 288
Templeton Asset Strategy Fund-- Class 2......................... 26 79 135 287
Templeton Developing Markets Securities Fund-- Class 2.......... 33 102 173 360
Templeton Growth Securities Fund-- Class 2...................... 27 82 140 296
Templeton International Securities Fund-- Class 2............... 27 82 140 296
Wanger Foreign Forty............................................ 50 149 248 496
Wanger International Small Cap.................................. 30 92 157 331
Wanger Twenty................................................... 36 111 187 388
Wanger U.S. Small Cap........................................... 26 78 134 286
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Inclusion of this Subaccount began on July 15, 1999.
2 Inclusion of this Subaccount began on December 20, 1999.
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 expenses
of the Account as well as the Funds. See "Deductions and Charges" in this
Prospectus and in the Fund Prospectuses. Please note that the .05% charge for
the Enhanced Option 1 Rider is not included in the tables above.
Premium taxes, which are not reflected in the table above, may apply. We
will charge any premium or other taxes levied by any governmental entity with
respect to your Contract against the Contract Values based on a percentage of
premiums paid. Certain states currently impose premium taxes on the Contracts
ranging from 0% to 3.5% of premiums paid. See "Deductions and Charges--Premium
Tax" and Appendix C.
The Examples should not be considered a representation of future expenses.
Actual expenses may be greater or less than those shown. See "Deductions and
Charges."
16
<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 within this prospectus
and the provisions of the Contract, the Contract provisions will control.
OVERVIEW
The Contract offers a dynamic idea in retirement planning. It's designed to
give you maximum flexibility in obtaining your investment goals.
The Contract offers a combination of investment options, both variable and
fixed. Investments in the variable options provide results which vary and depend
upon the performance of the underlying Fund, while investments in the GIA or MVA
provide guaranteed interest earnings subject to certain conditions. Please refer
to "Appendix B" for a detailed discussion of the GIA.
You also select a Benefit Option which is suitable in meeting your financial
objectives. Each Benefit Option differs in the amount of mortality and expense
risk charge, how the death benefit is calculated, and in the amount of Contract
Value you may withdraw without surrender charges each Contract Year. See "The
Accumulation Period--Payment Upon Death Before the Maturity Date" for a complete
description.
INVESTMENT FEATURES
FLEXIBLE PAYMENTS
[diamond] You may make payments anytime until the Maturity Date.
[diamond] You can vary the amount and frequency of your payments.
[diamond] Other than the Minimum Initial Payment, there are no required
payments.
MINIMUM CONTRIBUTION
[diamond] Generally, the Minimum Initial Payment is $1,000.
ALLOCATION OF PREMIUMS AND CONTRACT VALUE
[diamond] Payments are invested in one or more of the Subaccounts, the GIA and
the MVA.
[diamond] Transfers between the Subaccounts and into the GIA can be made
anytime. Transfers from the GIA are subject to rules discussed in
Appendix B and in "The Accumulation Period--Transfers."
[diamond] Transfers from the MVA may be subject to market value adjustments and
are subject to certain rules. See the MVA prospectus.
[diamond] The Contract Value varies with the investment performance of the
Funds and is not guaranteed.
[diamond] The Contract Value allocated to the GIA will depend on deductions
taken from the GIA and interest accumulation at rates set by us
(minimum--3%).
WITHDRAWALS
[diamond] You may partially or fully surrender the Contract anytime for its
Contract Value less any applicable surrender charge and premium tax.
[diamond] Each year you may withdraw part of your Contract Value free of any
surrender charges. During the first Contract Year, you may withdraw
up to 10% of the Contract Value as of the date of the first partial
withdrawal without surrender charges. After that, depending on the
Benefit Option selected, any unused percentage of the free withdrawal
amount from prior years may be carried forward to the current
Contract Year (up to a maximum of 30% of your Contract Value as of
the last Contract anniversary). Please refer to "Deductions and
Charges - Surrender Charges" for a complete description.
DEATH BENEFIT
The death benefit is calculated differently under each Benefit Option and
the amount varies based on the Option selected.
DEDUCTIONS AND CHARGES
FROM THE CONTRACT VALUE o No deductions are made from payments.
[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] If we impose a surrender charge, it is on a first-in, first-out
basis.
[diamond] No surrender charges are taken upon the death of the Annuitant or
Owner before the Maturity Date.
[diamond] A declining surrender charge is assessed on withdrawals in excess of
the free withdrawal amount, based on the date the payments are
deposited:
- ---------------------------------------------------------------
Percent 7% 7% 6% 6% 5% 4% 3% 0%
- ---------------------------------------------------------------
Age of Payment in 0 1 2 3 4 5 6 7+
Complete Years
- ---------------------------------------------------------------
[diamond] The total deferred surrender charges on a Contract will never exceed
9% of total premium payments.
[diamond] Administrative Charge--maximum of $35 each year.
[diamond] Enhanced Option 1 Rider is an optional benefit that provides
additional guaranteed benefits. The charge
17
<PAGE>
for the Enhanced Option 1 Rider is .05% on an annual basis. This
charge is assessed against the initial payment at issue and then
taken against the Contract Value at the beginning of each Contract
year on the Contract anniversary. See "Optional Programs and
Benefits" for complete details.
FROM THE ACCOUNT
[diamond] Mortality and expense risk fee--varies based on the Benefit Option
selected. See "Charges for Mortality and Expense Risks."
[diamond] The daily administrative fee--0.125% annually. See "Charges for
Administrative Services."
OTHER CHARGES OR DEDUCTIONS
[diamond] Premium Taxes--taken from the Contact Value upon annuitization.
o PHL Variable will reimburse itself for such taxes on the date of a
partial withdrawal, surrender of the Contract, Maturity Date or
payment of death proceeds. See "Premium Tax."
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.
BENEFIT OPTIONS
[diamond] The Contract offers three Benefit Options. You select a Benefit
Option that best meets your financial needs. Each Benefit Option
varies in the method of death benefit calculation, the amount of
mortality and expense risk charge, and the amount of money you can
withdraw from your Contract each year free of surrender charges (free
withdrawal amount).
The components of each Benefit Option are on the Benefit Options chart on
the next page.
ADDITIONAL INFORMATION
FREE LOOK PERIOD
You have the right to review the Contract. If you are not satisfied you may
return it within 10 days after you receive it and cancel the Contract. You will
receive in cash the adjusted value of the initial payment, however, if
applicable state law requires, we will return the full amount of the initial
payment.
See "Free Look Period" for a detailed discussion.
LAPSE
If on any Valuation Date the total Contract Value equals zero, or, the
premium tax reimbursement due on a surrender or partial withdrawal is greater
than or equal to the Contract Value, the Contract will immediately terminate and
lapse without value.
18
<PAGE>
<TABLE>
<CAPTION>
BENEFIT OPTIONS CHART
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
OPTION 1 OPTIONAL BENEFITS OPTION 2 OPTION 3
- -----------------------------------------------------------------------------------------------------------------------------------
COMPONENT RETURN OF ENHANCED ANNUAL 5% ROLL-UP
PREMIUM OPTION 1 RIDER STEP-UP
- -----------------------------------------------------------------------------------------------------------------------------------
Mortality & Expense .775% N/A 1.125% 1.225%
Risk Fee1
- -----------------------------------------------------------------------------------------------------------------------------------
Rider Charge N/A .05% N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Free Withdrawal Amount CONTRACT YEAR 1: CONTRACT YEAR 1: CONTRACT YEAR 1: CONTRACT YEAR 1:
10% of the Contract 10% of the Contract 10% of the Contract 10% of the Contract Value
Value as of the date of Value as of the date of Value as of the date of as of the date of
withdrawal withdrawal withdrawal withdrawal
CONTRACT YEARS 2 AND
CONTRACT YEARS 2 AND CONTRACT YEARS 2 AND CONTRACT YEARS 2 AND GREATER:
GREATER: GREATER: GREATER: 10% of the last Contract
10% of the last 10% of the last Contract 10% of the last Contract 10% of the last Contract
Contract anniversary anniversary value plus any anniversary value plus any anniversary value plus any
date unused percentage from unused percentage from unused percentage from
prior years may be carried prior years may be carried prior years may be carried
forward to the then current forward to the then current forward to the then current
Contract Year, up to a Contract Year, up to a Contract Year, up to a
maximum of 30% of your maximum of 30% of your maximum of 30% of your
Contract Value as of the Contract Value as of the Contract Value as of the
last Contract anniversary last Contract anniversary last Contract anniversary
- -----------------------------------------------------------------------------------------------------------------------------------
Death Benefit(2) on THE GREATER OF: THE GREATEST OF: THE GREATEST OF: THE GREATEST OF:
the date of death of 1. the sum of 1. the sum of 100% of 1. the sum of 100% of 1. the sum of 100% of
the Annuitant who has 100% of premium premium payments less premium payments less premium payments less
not yet attained payments less Adjusted Partial Adjusted Partial Adjusted Partial
age 80 Adjusted Partial Withdrawals on the Withdrawals on the Withdrawals on the
Withdrawals on the Claim Date; or Claim Date; or Claim Date; or
Claim Date; or 2. the Contract Value on 2. the Contract Value on 2. the Contract Value on
2. the Contract Value on the Claim Date; or the Claim Date; or the Claim Date; or
the Claim Date 3. the 7 Year Step-up 3. the Annual Step-up 3. the Annual Step-up
Amount on the Claim Amount on the Claim Amount on the Claim
Date. Date. Date; or
4. the Annual Roll-up Amount
on the Claim Date.
- -----------------------------------------------------------------------------------------------------------------------------------
Death Benefit(2) on THE GREATER OF: THE GREATER OF: THE GREATER OF: THE GREATER OF:
the date of death of 1. the sum of 100% of 1. the death benefit in 1. the death benefit in 1. the death benefit in
the Annuitant who has premium payments less effect at the end of effect at the end of effect at the end of the
attained age 80 Adjusted Partial the last 7-year period the immediately immediately preceding
Withdrawals on the prior to the Annuitant preceding Contract Contract year prior to
Claim Date; or turning age 80, plus year prior to the the Annuitant turning age
2. the Contract the sum of 100% of Annuitant turning age 80, plus the sum of 100%
Value on the Claim premium payments less 80, plus the sum of of premium payments less
Date Adjusted Partial 100% of premium Adjusted Partial
Withdrawals made since payments less Adjusted Withdrawals made since
the Contract Year that Partial Withdrawals the Contract Year that
the Annuitant reached made since the the Annuitant reached Age
Age 80; or Contract Year that the 80; or
2. the Contract Value Annuitant reached Age 2. the Contract Value on the
on the Claim Date 80; or Claim Date
2. the Contract Value on
the Claim Date
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 See the "Summary of Expenses" and "Deductions and Charges--Mortality and
Expense Risk Charge" for complete details.
2 See "The Accumulation Period--Payment Upon Death Before Maturity Date" for
complete details.
19
<PAGE>
<TABLE>
<CAPTION>
PHL VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
ACCUMULATION UNIT VALUES
(SELECTED DATA FOR AN ACCUMULATION UNIT OUTSTANDING UNDER OPTION 1 THROUGHOUT THE INDICATED PERIOD)
PHOENIX-ABERDEEN INTERNATIONAL SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/20/99 TO
12/31/99
--------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.365315
=========
Number of units outstanding (000).................................................................................... 281
PHOENIX-ABERDEEN NEW ASIA SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/22/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.340593
=========
Number of units outstanding (000).................................................................................... 41.5
PHOENIX-BANKERS TRUST DOW 30 SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.007667
=========
Number of units outstanding (000).................................................................................... .150
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.145861
=========
Number of units outstanding (000).................................................................................... 6.72
PHOENIX-ENGEMANN CAPITAL GROWTH SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/24/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.422059
=========
Number of units outstanding (000).................................................................................... 773
PHOENIX-ENGEMANN NIFTY FIFTY SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/1/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.394208
=========
Number of units outstanding (000).................................................................................... 350
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/28/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.001138
=========
Number of units outstanding (000).................................................................................... 2.12
PHOENIX-GOODWIN MONEY MARKET SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/11/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.032225
=========
Number of units outstanding (000).................................................................................... 1,283
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/13/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.059187
=========
Number of units outstanding (000).................................................................................... 186
PHOENIX-HOLLISTER VALUE EQUITY SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.461708
=========
Number of units outstanding (000).................................................................................... 65.2
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/1/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.152444
=========
Number of units outstanding (000).................................................................................... 530
PHOENIX-JANUS EQUITY INCOME SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.011467
=========
Number of units outstanding (000).................................................................................... .150
PHOENIX-JANUS FLEXIBLE INCOME SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-JANUS GROWTH SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/28/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.024556
=========
Number of units outstanding (000).................................................................................... 19.4
PHOENIX-MORGAN STANLEY FOCUS EQUITY SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.008733
=========
Number of units outstanding (000).................................................................................... .150
PHOENIX-OAKHURST BALANCED SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/1/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.178883
=========
Number of units outstanding (000).................................................................................... 125
PHOENIX-OAKHURST GROWTH AND INCOME SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.171854
=========
Number of units outstanding (000).................................................................................... 397
PHOENIX-OAKHURST STRATEGIC ALLOCATION SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/1/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.190912
=========
Number of units outstanding (000).................................................................................... 202
PHOENIX-SCHAFER MID-CAP VALUE SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.021489
=========
Number of units outstanding (000).................................................................................... 12.1
PHOENIX-SENECA MID-CAP GROWTH SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/3/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.770900
=========
Number of units outstanding (000).................................................................................... 59.1
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-SENECA STRATEGIC THEME SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.625507
=========
Number of units outstanding (000).................................................................................... 285
EAFE(R) EQUITY INDEX FUND SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/14/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.319071
=========
Number of units outstanding (000).................................................................................... 25.7
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/2/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.022829
=========
Number of units outstanding (000).................................................................................... 71.1
FEDERATED HIGH INCOME BOND FUND II SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/14/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.038011
=========
Number of units outstanding (000).................................................................................... 44.0
TECHNOLOGY SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.022800
=========
Number of units outstanding (000).................................................................................... .150
MUTUAL SHARES SECURITIES SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/2/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.018859
=========
Number of units outstanding (000).................................................................................... 16.2
TEMPLETON ASSET STRATEGY SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/4/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.203086
=========
Number of units outstanding (000).................................................................................... 13.4
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
TEMPLETON DEVELOPING MARKETS SECURITIES SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.434374
=========
Number of units outstanding (000).................................................................................... 29.9
TEMPLETON GROWTH SECURITIES SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/2/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.282009
=========
Number of units outstanding (000).................................................................................... 40.9
TEMPLETON INTERNATIONAL SECURITIES SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.207390
=========
Number of units outstanding (000).................................................................................... 108
WANGER FOREIGN FORTY SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/25/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $3.063495
=========
Number of units outstanding (000).................................................................................... 15.4
WANGER INTERNATIONAL SMALL CAP SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/30/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $3.171485
=========
Number of units outstanding (000).................................................................................... 248
WANGER TWENTY SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/11/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.295209
=========
Number of units outstanding (000).................................................................................... 21.2
WANGER U.S. SMALL CAP SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/14/99 TO
12/31/99
---------
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.308487
=========
Number of units outstanding (000).................................................................................... 398
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
PHL VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
ACCUMULATION UNIT VALUES
(SELECTED DATA FOR AN ACCUMULATION UNIT OUTSTANDING UNDER OPTION 2 THROUGHOUT THE INDICATED PERIOD)
PHOENIX-ABERDEEN INTERNATIONAL SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/7/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.309215
=========
Number of units outstanding (000).................................................................................... 125
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-ABERDEEN NEW ASIA SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/17/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.320013
=========
Number of units outstanding (000).................................................................................... 34.0
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-BANKERS TRUST DOW 30 SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/8/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.124550
=========
Number of units outstanding (000).................................................................................... 25.7
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-ENGEMANN CAPITAL GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/7/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.421174
=========
Number of units outstanding (000).................................................................................... 664
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-ENGEMANN NIFTY FIFTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/8/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.358727
=========
Number of units outstanding (000).................................................................................... 439
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.000299
=========
Number of units outstanding (000).................................................................................... 2.51
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-GOODWIN MONEY MARKET SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/27/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.026725
=========
Number of units outstanding (000).................................................................................... 997
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/30/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.054561
=========
Number of units outstanding (000).................................................................................... 200
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-HOLLISTER VALUE EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/7/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.393845
=========
Number of units outstanding (000).................................................................................... 31.9
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/7/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.120324
=========
Number of units outstanding (000).................................................................................... 450
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-JANUS EQUITY INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-JANUS FLEXIBLE INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.000275
=========
Number of units outstanding (000).................................................................................... 2.51
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-JANUS GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.063552
=========
Number of units outstanding (000).................................................................................... 26.5
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-MORGAN STANLEY FOCUS EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period $--
===
Number of units outstanding (000).................................................................................... --
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-OAKHURST BALANCED SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/20/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.153759
=========
Number of units outstanding (000).................................................................................... 94.3
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-OAKHURST GROWTH AND INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/8/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.141528
=========
Number of units outstanding (000).................................................................................... 544
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-OAKHURST STRATEGIC ALLOCATION SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/8/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.146978
=========
Number of units outstanding (000).................................................................................... 54.0
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-SCHAFER MID-CAP VALUE SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/8/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.185002
=========
Number of units outstanding (000).................................................................................... 7.92
</TABLE>
<TABLE>
<CAPTION>
PHOENIX-SENECA MID-CAP GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/12/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.358727
=========
Number of units outstanding (000).................................................................................... 55.1
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-SENECA STRATEGIC THEME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/8/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.582732
=========
Number of units outstanding (000).................................................................................... 538
</TABLE>
<TABLE>
<CAPTION>
EAFE(R) EQUITY INDEX FUND SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.267153
=========
Number of units outstanding (000).................................................................................... 44.8
</TABLE>
<TABLE>
<CAPTION>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/27/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $1.985997
=========
Number of units outstanding (000).................................................................................... 145
</TABLE>
<TABLE>
<CAPTION>
FEDERATED HIGH INCOME BOND FUND II SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.045922
=========
Number of units outstanding (000).................................................................................... 43.7
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.052387
=========
Number of units outstanding (000).................................................................................... 8.98
</TABLE>
<TABLE>
<CAPTION>
MUTUAL SHARES SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/7/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $1.995911
=========
Number of units outstanding (000).................................................................................... 39.8
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON ASSET STRATEGY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.220287
=========
Number of units outstanding (000).................................................................................... 28.6
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
TEMPLETON DEVELOPING MARKETS SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.433400
=========
Number of units outstanding (000).................................................................................... 7.79
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON GROWTH SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/30/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.339821
=========
Number of units outstanding (000).................................................................................... 77.5
</TABLE>
<TABLE>
<CAPTION>
TEMPLETON INTERNATIONAL SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/30/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.262905
=========
Number of units outstanding (000).................................................................................... 97.9
</TABLE>
<TABLE>
<CAPTION>
WANGER FOREIGN FORTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.996933
=========
Number of units outstanding (000).................................................................................... 19.6
</TABLE>
<TABLE>
<CAPTION>
WANGER INTERNATIONAL SMALL CAP SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/17/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $3.095959
=========
Number of units outstanding (000).................................................................................... 177
</TABLE>
<TABLE>
<CAPTION>
WANGER TWENTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/28/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.248648
=========
Number of units outstanding (000).................................................................................... 48.1
</TABLE>
<TABLE>
<CAPTION>
WANGER U.S. SMALL CAP SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/17/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.287562
=========
Number of units outstanding (000).................................................................................... 338
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PHL VARIABLE ACCUMULATION ACCOUNT
FINANCIAL HIGHLIGHTS
ACCUMULATION UNIT VALUES
(SELECTED DATA FOR AN ACCUMULATION UNIT OUTSTANDING UNDER OPTION 3 THROUGHOUT THE INDICATED PERIOD)
PHOENIX-ABERDEEN INTERNATIONAL SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.192338
=========
Number of units outstanding (000).................................................................................... 2.34
PHOENIX-ABERDEEN NEW ASIA SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
PHOENIX-BANKERS TRUST DOW 30 SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/3/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.029296
=========
Number of units outstanding (000).................................................................................... .819
PHOENIX-ENGEMANN CAPITAL GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/3/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.409693
=========
Number of units outstanding (000).................................................................................... 92.0
PHOENIX-ENGEMANN NIFTY FIFTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/6/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.383432
=========
Number of units outstanding (000).................................................................................... 60.9
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
PHOENIX-GOODWIN MONEY MARKET SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
8/30/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.025010
=========
Number of units outstanding (000).................................................................................... 339
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
PHOENIX-HOLLISTER VALUE EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.151593
=========
Number of units outstanding (000).................................................................................... .229
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/3/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.106858
=========
Number of units outstanding (000).................................................................................... 13.4
PHOENIX-JANUS EQUITY INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.061818
=========
Number of units outstanding (000).................................................................................... 10.2
PHOENIX-JANUS FLEXIBLE INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.000211
=========
Number of units outstanding (000).................................................................................... 10.2
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-JANUS GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.063500
=========
Number of units outstanding (000).................................................................................... 10.2
PHOENIX-MORGAN STANLEY FOCUS EQUITY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.073075
=========
Number of units outstanding (000).................................................................................... 10.2
PHOENIX-OAKHURST BALANCED SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/3/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.139688
=========
Number of units outstanding (000).................................................................................... 12.1
PHOENIX-OAKHURST GROWTH AND INCOME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
10/22/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.227552
=========
Number of units outstanding (000).................................................................................... 54.0
PHOENIX-OAKHURST STRATEGIC ALLOCATION SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/3/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.130633
=========
Number of units outstanding (000).................................................................................... 27.3
PHOENIX-SCHAFER MID-CAP VALUE SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
PHOENIX-SENECA MID-CAP GROWTH SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/20/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.236413
=========
Number of units outstanding (000).................................................................................... .004
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
PHOENIX-SENECA STRATEGIC THEME SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/3/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.596857
=========
Number of units outstanding (000).................................................................................... 134
EAFE(R) EQUITY INDEX FUND SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
FEDERATED HIGH INCOME BOND FUND II SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
TECHNOLOGY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/21/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.052328
=========
Number of units outstanding (000).................................................................................... 10.2
MUTUAL SHARES SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.049767
=========
Number of units outstanding (000).................................................................................... .488
TEMPLETON ASSET STRATEGY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
TEMPLETON DEVELOPING MARKETS SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
12/20/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.103448
=========
Number of units outstanding (000).................................................................................... .001
TEMPLETON GROWTH SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
TEMPLETON INTERNATIONAL SECURITIES SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Unit value, beginning of period...................................................................................... $--
Unit value, end of period............................................................................................ $--
===
Number of units outstanding (000).................................................................................... --
WANGER FOREIGN FORTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.996379
=========
Number of units outstanding (000).................................................................................... 1.98
WANGER INTERNATIONAL SMALL CAP SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/16/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $3.089088
=========
Number of units outstanding (000).................................................................................... 6.97
WANGER TWENTY SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
11/1/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.205925
=========
Number of units outstanding (000).................................................................................... 2.15
WANGER U.S. SMALL CAP SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
FROM
INCEPTION
9/16/99 TO
12/31/99
---------
<S> <C>
Unit value, beginning of period...................................................................................... $2.000000
Unit value, end of period............................................................................................ $2.307720
=========
Number of units outstanding (000).................................................................................... 8.63
</TABLE>
34
<PAGE>
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
We may include the performance history of the Subaccounts in advertisements,
sales literature or reports. Performance information about each Subaccount is
based on past performance only and is not an indication of future performance.
See Appendix A for more information.
THE VARIABLE ACCUMULATION ANNUITY
- --------------------------------------------------------------------------------
The individual deferred variable accumulation annuity contract (the
"Contract") issued by PHL Variable is significantly different from a fixed
annuity contract in that, unless the GIA is selected, it is the Owner and
Annuitant under a Contract who bear the risk of investment gain or loss rather
than PHL Variable. To the extent that payments are not allocated to the GIA or
MVA, the amounts that will be available for annuity payments under a Contract
will depend on the investment performance of the amounts allocated to the
Subaccounts. Upon the maturity of a Contract, the amounts held under a Contract
will continue to be invested in the Account or the GIA and monthly annuity
payments will vary in accordance with the investment experience of the
investment options selected. However, a fixed annuity may be elected, in which
case PHL Variable will guarantee specified monthly annuity payments.
You select the investment objective of each Contract on a continuing basis
by directing the allocation of payments and the reallocation of the Contract
Value among the Subaccounts, GIA or MVA.
PHL VARIABLE AND THE ACCOUNT
- --------------------------------------------------------------------------------
We are a wholly-owned indirect subsidiary of Phoenix Home Life Mutual
Insurance Company. Our executive office is located at One American Row,
Hartford, Connecticut 06102 and our main administrative office is located at 100
Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. PHL Variable is a
Connecticut stock company formed on April 24, 1981. PHL Variable sells variable
annuity contracts through its own field force of agents and through brokers.
On December 7, 1994, we established the Account, a separate account created
under the insurance laws of Connecticut. The Account is registered with the SEC
as a unit investment trust under the Investment Company Act of 1940 (the "1940
Act") and it meets the definition of a "separate account" under the 1940 Act.
Registration under the 1940 Act does not involve supervision by the SEC of the
management or investment practices or policies of the Account or of PHL
Variable.
Under Connecticut law, all income, gains or losses of the Account must be
credited to or charged against the amounts placed in the Account without regard
to the other income, gains and losses from any other business or activity of PHL
Variable. The assets of the Account may not be used to pay liabilities arising
out of any other business that we may conduct. Obligations under the Contracts
are obligations of PHL Variable.
Contributions to the GIA are not invested in the Account; rather, they
become part of the general account of PHL Variable (the "General Account"). The
General Account supports all insurance and annuity obligations of PHL Variable
and is made up of all of its general assets other than those allocated to any
separate account such as the Account. For more complete information concerning
the GIA, see Appendix A.
INVESTMENTS OF THE ACCOUNT
- --------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts invest in corresponding series of The Phoenix Edge
Series Fund. The following series are currently available:
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
series is to seek a high total return consistent with reasonable risk. The
series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the series is
to seek long-term capital 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 AverageSM (the "DJIASM") before fund
expenses.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests in
marketable securities of publicly traded real estate investment trusts (REITs)
and companies that operate, develop, manage and/or invest in real estate located
primarily in the United States.
PHOENIX-ENGEMANN 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 Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
35
<PAGE>
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the series
is to seek long-term capital appreciation by investing in approximately 50
different securities which offer the best potential for long-term growth of
capital. At least 75% of the series' assets will be invested in common stocks of
high quality growth companies. The remaining portion will be invested in common
stocks of small corporations with rapidly growing earnings per share or common
stocks believed to be undervalued.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES: The investment objective of
the series is 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 Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity Series seeks to
achieve its objective by investing in a diversified portfolio of common stocks
that meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
PHOENIX-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 Phoenix-Oakhurst Balanced 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 Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-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
Phoenix-Oakhurst Strategic Allocation 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-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series will
invest in common stocks of established companies having a strong financial
position and a low stock market valuation at the time of purchase which are
believed to offer the possibility of increase in value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the series
is to seek capital appreciation primarily through investments in equity
securities of companies that have the potential for above average market
appreciation. The series seeks to outperform the Standard & Poor's Mid-Cap 400
Index.
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
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
A certain subaccount invests in a corresponding series of the Deutsche Asset
Management VIT Funds. The following series is currently available:
EAFE(R) EQUITY INDEX FUND: The series seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
36
<PAGE>
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The series invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain subaccounts invest in corresponding series of the Federated
Insurance Series. The following series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II:
The investment objective of the series is to seek current income by
investing primarily in U.S. government securities, including mortgage-backed
securities issued by U.S. government agencies.
FEDERATED HIGH INCOME BOND FUND II:
The investment objective of the series is to seek high current income by
investing primarily in a diversified portfolio of high-yield, lower-rated
corporate bonds.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding series
of the The Universal Institutional Funds, Inc. The following series is currently
available:
TECHNOLOGY PORTFOLIO: The investment objective of the series 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.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Certain subaccounts invest in Class 2 shares of the corresponding fund of
the Franklin Templeton Variable Insurance Products Trust. The following funds
are currently available:
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 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.
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.
WANGER ADVISORS TRUST
Certain subaccounts invest in corresponding series of the Wanger Advisors
Trust. The following series are currently available:
WANGER FOREIGN FORTY: The investment objective of the series is to seek
long-term capital growth. The Wanger Foreign Forty 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
37
<PAGE>
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
Phoenix Investment Counsel, Inc. ("PIC") is an investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series
Based on subadvisory agreements with the fund, PIC as an investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan Research Enhanced Index Series
[diamond] Janus Capital Corporation
o Phoenix-Janus Equity Income Series
o Phoenix-Janus Flexible Income Series
o Phoenix-Janus Growth Series
[diamond] Morgan Stanley Asset Management
o Phoenix-Morgan Stanley Focus Equity Series
[diamond] Schafer Capital Management, Inc.
o Phoenix-Schafer Mid-Cap Value Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is PAIA.
Pursuant to subadvisory agreements with the fund, PAIA delegates certain
investment decisions and research functions with respect to the Phoenix-Aberdeen
New Asia Series to PIC and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect less than wholly owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix, and by Aberdeen Fund Managers, Inc. PVA is a wholly
owned subsidiary of PM Holdings, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares Securities Fund
[diamond] Morgan Stanley Asset Management
o Technology Portfolio
[diamond] Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
[diamond] Templeton Global Advisors Limited
o Templeton Growth Securities Fund
[diamond] Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities Fund
[diamond] Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
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.
MVA
- --------------------------------------------------------------------------------
The MVA is an account that pays interest at a guaranteed rate if held to
maturity. If amounts are
38
<PAGE>
withdrawn, transferred or applied to an annuity option before the end of the
guarantee period, a market value adjustment will be made. Assets allocated to
the MVA are not part of the assets allocated to the Account or to the general
account of PHL Variable. The MVA is more fully described in a separate
prospectus.
For additional information concerning the Funds and the MVA, please see the
accompanying Prospectuses, which should be read carefully before investing.
PURCHASE OF CONTRACTS
- --------------------------------------------------------------------------------
Generally, we require minimum initial payments of:
[diamond] Non-qualified plans--$1,000
[diamond] Individual Retirement Annuity--$1,000
[diamond] Bank draft program--$25
o You may authorize your bank to draw $25 or more from your personal
checking account monthly to purchase Units in any available
Subaccount, or for deposit in the GIA or MVA. The amount you
designate will be automatically invested on the date the bank draws
on your account. If Check-o-matic is elected, the minimum initial
payment is $25. This payment must accompany the application (if
any). Each subsequent payment under a Contract must be at least
$25.
[diamond] Qualified plans--$1,000 annually
o If Contracts are purchased in connection with tax-qualified or
employer-sponsored plans, a minimum annual payment of $1,000 is
required.
Generally, a Contract may not be purchased for a proposed Annuitant who is
81 years of age or older. Total payments in excess of $1,000,000 cannot be made
without our permission. While the Annuitant is living and the Contract is in
force, payments may be made anytime before the Maturity Date of a Contract.
Payments received under the Contracts will be allocated in any combination
to any Subaccount, GIA or MVA, in the proportion specified in the application
for the Contract or as otherwise indicated by you from time to time. Changes in
the allocation of payments will be effective as of receipt by VPMO of notice of
election in a form satisfactory to us (either in writing or by telephone) and
will apply to any payments accompanying such notice or made subsequent to the
receipt of the notice, unless otherwise requested by you.
In certain circumstances we may reduce the initial or subsequent premium
payment amount we accept for a Contract. Factors in determining qualifications
for any such reduction include:
(1) the make-up and size of the prospective group;
(2) the method and frequency of premium payments; and
(3) the amount of compensation to be paid to Registered Representatives on each
premium payment.
Any reduction will not unfairly discriminate against any person. We will
make any such reduction according to our own rules in effect at the time the
premium payment is received. We reserve the right to change these rules from
time to time.
DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
DEDUCTIONS FROM THE SEPARATE ACCOUNT
PREMIUM TAX
Whether or not a premium tax is imposed will depend upon, among other
things, the Owner's state of residence, the Annuitant's state of residence, our
status within those states and the insurance tax laws of those states. Premium
taxes on Contracts currently range from 0% to 3.5%. We will pay any premium tax
due and will reimburse Phoenix only upon the earlier of either full or partial
surrender of the Contract, the Maturity Date or payment of death proceeds. For a
list of states and premium taxes, see Appendix C to this Prospectus.
SURRENDER CHARGES
A deduction for surrender charges for this Contract may be taken from
proceeds of partial withdrawals from, or complete surrender of the Contract. The
amount (if any) of a surrender charge depends on whether your premium payments
are held under the Contract for a certain period of time. The surrender charge
schedule is shown in the chart below. No surrender charge will be taken from
death proceeds. No surrender charge will be taken after the Annuity Period has
begun except with respect to unscheduled withdrawals under Annuity Option K or L
below. See "Annuity Options." Any surrender charge is imposed on a first-in,
first-out basis.
Each year you may withdraw part of your Contract Value free of any surrender
charges. During the first Contract Year, you may withdraw up to 10% of the
Contract Value as of the date of the first partial withdrawal without surrender
charges. After that, depending on the Benefit Option selected or any optional
benefits you may elect, any unused percentage of the free withdrawal amount from
prior years may be carried forward to the current Contract Year (up to a maximum
of 30% of your Contract Value as of the last Contract anniversary).
The amount of free withdrawal available depends on the Benefit Option you
select as follows:
o OPTION 1
CONTRACT YEAR 1:
10% of the Contract Value as of the date of withdrawal
CONTRACT YEARS 2 AND GREATER:
10% of the last Contract anniversary value
39
<PAGE>
o ENHANCED OPTION 1 RIDER
CONTRACT YEAR 1:
10% of the Contract Value as of the date of withdrawal
CONTRACT YEARS 2 AND GREATER:
10% of the last Contract anniversary value PLUS any unused percentage from prior
years may be carried forward to the then current Contract Year, up to a maximum
of 30% of your Contract Value as of the last Contract anniversary.
This rider is available at an annual cost of .05%.
This charge is assessed against the initial payment at issue and subsequently is
taken against the Contract Value at the beginning of each Contract Year on the
Contract anniversary.
o OPTION 2
CONTRACT YEAR 1:
10% of the Contract Value as of the date of withdrawal
CONTRACT YEARS 2 AND GREATER:
10% of the last Contract anniversary value PLUS any unused percentage from prior
years may be carried forward to the then current Contract Year, up to a maximum
of 30% of your Contract Value as of the last Contract anniversary
o OPTION 3
CONTRACT YEAR 1:
10% of the Contract Value as of the date of withdrawal
CONTRACT YEARS 2 AND GREATER:
10% of the last Contract anniversary value PLUS any unused percentage from prior
years may be carried forward to the then current Contract Year, up to a maximum
of 30% of your Contract Value as of the last Contract anniversary
The deduction for surrender charges, expressed as a percentage of the amount
withdrawn in excess of the 10% allowable amount, is as follows:
=============================================================
Percent 7% 7% 6% 6% 5% 4% 3% 0%
- -------------------------------------------------------------
Age of Payment in 0 1 2 3 4 5 6 7+
Complete Years
=============================================================
If the Annuitant or Owner dies before the Maturity Date of the Contract, the
surrender charge described in the table above will not apply.
The total deferred surrender charges on a Contract will never exceed 9% of
total payments, and the applicable level of surrender charge cannot be changed
with respect to outstanding Contracts. Surrender charges imposed in connection
with partial surrenders will be deducted from the Subaccounts, GIA and MVA on a
pro rata basis. Any distribution costs not paid for by surrender charges will be
paid by PHL Variable from the assets of the General Account.
MORTALITY AND EXPENSE RISK FEE
We make a daily deduction from each Subaccount for the mortality and expense
risk charge. The charge is assessed against the daily net assets of the
Subaccounts and varies based on the Benefit Option you selected. The charge
under each Benefit Option is equal, on an annual basis to the following
percentages:
-----------------------------------------------------------
OPTION 1 - RETURN OPTION 2 - ANNUAL OPTION 3 - 5%
OF PREMIUM STEP-UP ROLL-UP
-----------------------------------------------------------
0.775% 1.125% 1.225%
-----------------------------------------------------------
Although you bear the investment risk of the Series in which you invest,
once you begin receiving annuity payments that carry life contingencies the
annuity payments are guaranteed by us to continue for as long as the Annuitant
lives. We assume the risk that Annuitants as a class may live longer than
expected (requiring a greater number of annuity payments) and that our actual
expenses may be higher than the expense charges provided for in the Contract.
In assuming the mortality risk, we promise to make these lifetime annuity
payments to the Owner or other payee for as long as the Annuitant lives
according to the annuity tables and other provisions of the Contract
No mortality and expense risk charge is deducted from the GIA or MVA. If the
charges prove insufficient to cover actual administrative costs, then the loss
will be borne by us; conversely, if the amount deducted proves more than
sufficient, the excess will be a profit to us. Any such profit may be used, as
part of our General Account assets, to meet sales expenses, if any, which are in
excess of sales commission revenue generated from any surrender charges.
We have concluded that there is a reasonable likelihood that the
distribution financing arrangement being used in connection with the Contract
will benefit the Account and the Contract Owners.
ADMINISTRATIVE FEE
We make a daily deduction from Account Value to cover the costs of
administration. This fee is based on an annual rate of 0.125% and is taken
against the net assets of the Subaccounts. It compensates the Company for
administrative expenses that exceed revenues from the Administrative Charge
described below. (This fee is not deducted from the GIA or MVA.)
ADMINISTRATIVE CHARGE
We deduct an administrative charge from the Contract Value. This charge is
used to reimburse us for some of the administrative expenses we incur in
establishing and maintaining the Contracts.
The maximum administrative maintenance charge under a Contract is $35. This
charge is deducted annually on the Contract anniversary date. It is deducted on
a pro rata basis from the Subaccounts, GIA or MVA in which you have an
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<PAGE>
interest. If you fully surrender your Contract, the full administrative fee if
applicable, will be deducted at the time of withdrawal. The administrative
charge will not be deducted (either annually or upon withdrawal) if your
Contract Value is $50,000 or more on the day the administrative charge is due.
This charge may be decreased but will never increase. If you elect Payment
Options I, J, K, M or N, the annual administrative charge after the Maturity
Date will be deducted from each annuity payment in equal amounts.
REDUCED CHARGES, CREDITS AND BONUS GUARANTEED INTEREST RATES
We may reduce or eliminate the mortality and expense risk fee and the
surrender or annual administrative charge, credit additional amounts, or grant
bonus Guaranteed Interest Rates when sales of the Contracts are made to certain
individuals or groups of individuals that result in savings of sales expenses.
We will consider the following characteristics:
(1) the size and type of the group of individuals to whom the Contract is
offered;
(2) the amount of anticipated premium payments;
(3) whether there is a preexisting relationship with the Company such as being
an employee of the Company or its affiliates and their spouses; or to
employees or agents who retire from the Company or its affiliates or Phoenix
Equity Planning Corporation ("PEPCO"), or its affiliates or to registered
representatives of the principal underwriter and registered representatives
of broker-dealers with whom PEPCO has selling agreements; and
(4) internal transfers from other contracts issued by the Company or an
affiliate, or making transfers of amounts held under qualified plans
sponsored by the Company or an affiliate.
Any reduction or elimination of surrender or administrative charge will not
be unfairly discriminatory against any person. We will make any reduction
according to our own rules in effect at the time the Contract is issued. We
reserve the right to change these rules from time to time.
MARKET VALUE ADJUSTMENT
Any withdrawal from your MVA will be subject to a market value adjustment.
See the accompanying MVA prospectus for information relating to this option.
OTHER CHARGES
As compensation for investment management services, the Advisers are
entitled to a fee, payable monthly and based on an annual percentage of the
average daily net asset values of each Series. These Fund charges and other Fund
expenses are described more fully in the accompanying Fund prospectuses.
THE ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
The accumulation period is that time before annuity payments begin during
which your payments into the Contract remain invested.
ACCUMULATION UNITS
Your Initial payments will be applied within two days of our receipt if the
application for a Contract is complete. If an incomplete application is
completed within five business days of receipt by VPMO, your payment will be
applied within two days of the completion of the application. If VPMO does not
accept the application within five business days or if an order form is not
completed within five business days of receipt by VPMO, then your payment will
be immediately returned unless you request us to hold it while the application
is completed. Additional payments allocated to the GIA or MVA are deposited on
the date of receipt of payment at VPMO. Additional payments allocated to
Subaccounts are used to purchase Accumulation Units of the Subaccount(s), at the
value of such Units next determined after the receipt of the payment at VPMO.
The number of Accumulation Units of a Subaccount purchased with a specific
payment will be determined by dividing the payment by the value of an
Accumulation Unit in that Subaccount next determined after receipt of the
payment. The value of the Accumulation Units of a Subaccount will vary depending
upon the investment performance of the applicable Series of the Funds, the
expenses charged against the Fund and the charges and deductions made against
the Subaccount.
ACCUMULATION UNIT VALUES
On any date before the Maturity Date of the Contract, the total value of the
Accumulation Units in a Subaccount can be computed by multiplying the number of
such Units by the value of an Accumulation Unit on that date. The value of an
Accumulation Unit on a day other than a Valuation Date is the value of the
Accumulation Unit on the next Valuation Date. The number of Accumulation Units
credited to you in each Subaccount and their current value will be reported to
you at least annually.
TRANSFERS
You may at anytime prior to the Maturity Date of your Contract, elect to
transfer all or any part of the Contract Value among one or more Subaccounts,
the GIA or MVA. A transfer from a Subaccount will result in the redemption of
Accumulation Units and, if another Subaccount is selected, in the purchase of
Accumulation Units. The exchange will be based on the values of the Accumulation
Units next determined after the receipt by VPMO of written notice of election in
a form satisfactory to us. A transfer among Subaccounts, the GIA or MVA does not
automatically change the payment allocation schedule of your contract.
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You may also request transfers and changes in payment allocations among
available Subaccounts, the GIA or MVA 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 or allocation changes,
telephone transfer orders and allocation changes will also be accepted on your
behalf from your registered representative. We will employ reasonable procedures
to confirm that telephone instructions are genuine. We will require verification
of account information and will record telephone instructions on tape. All
telephone transfers and allocation changes will be confirmed in writing to you.
To the extent that procedures reasonably designed to prevent unauthorized
transfers are not followed, we may be liable for following telephone
instructions for transfers that prove to be fraudulent. However, you will bear
the risk of loss resulting from instructions entered by an unauthorized third
party we reasonably believe to be genuine. These telephone exchange and
allocation change privileges may be modified or terminated at any time. In
particular, during times of extreme market volatility, telephone privileges may
be difficult to exercise. In such cases you should submit written instructions.
Unless we otherwise agree or unless the Dollar Cost Averaging Program has
been elected, (see below) , you may make only one transfer per Contract year
from the GIA. Nonsystematic transfers from the GIA and MVA will be made on the
date of receipt by VPMO except as you may otherwise request. For nonsystematic
transfers, the amount that may be transferred from the GIA at any one time
cannot exceed the greater of $1,000 or 25% of the Contract Value in the GIA at
the time of transfer. For nonsystematic transfers from the MVA, the market value
adjustment may be applied. See the accompanying MVA prospectus for more
information.
Because excessive trading can hurt Fund performance and therefore be
detrimental to 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. The date a
payment was originally credited for the purpose of calculating the surrender
charge will remain the same. Currently, there is no charge for transfers;
however, we reserve the right to charge a transfer fee of $10 per transfer after
the first two transfers in each Contract year to defray administrative costs.
Currently, unlimited transfers are permitted; however, we reserve the right to
change our policy to limit the number of transfers made during each Contract
year. However, you will be permitted at least six transfers during each Contract
year. There are additional restrictions on transfers from the GIA as described
above and in Appendix B. See the MVA prospectus for information regarding
transfers from the MVA.
We reserve the right to limit the number of Subaccounts you may elect to a
total of 18 over the life of the Contract unless changes in federal and/or state
regulation, including tax, securities and insurance law require us to impose a
lower limit.
Currently, Contracts in the annuity period are not able to make transfers
between Subaccounts.
OPTIONAL PROGRAMS AND BENEFITS
DOLLAR COST AVERAGING PROGRAM
You also may elect to transfer funds automatically among the Subaccounts or
GIA on a monthly, quarterly, semiannual or annual basis under the Dollar Cost
Averaging Program. Generally, the minimum initial and subsequent transfer
amounts are $25 monthly, $75 quarterly, $150 semiannually or $300 annually. You
must have an initial value of $2,000 in the GIA or in the Subaccount from which
funds will be transferred (sending Subaccount), and if the value in that
Subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and no more systematic transfers will be
processed. Also, payments of $1,000,000 or more require our approval before we
will accept them for processing. Funds may be transferred from only one sending
Subaccount or from the GIA but may be allocated to multiple receiving
Subaccounts. Under the Dollar Cost Averaging Program, you may transfer
approximately equal amounts from the GIA over a period of 6 months or longer.
Transfers under the Dollar Cost Averaging Program are not subject to the general
restrictions on transfers from the GIA. This program is not available for the
MVA.
Upon completion of the Dollar Cost Averaging Program, you must notify VAO at
800/541-0171 or in writing to VPMO to start another Dollar Cost Averaging
Program.
All transfers under the Dollar Cost Averaging Program will be executed on
the basis of values as of the first of the month rather than on the basis of
values next determined after receipt of the transfer request. If the first of
the month falls on a holiday or weekend, then the transfer will be processed on
the next succeeding business day.
The Dollar Cost Averaging Program is not available to individuals who invest
via a Bank draft program or while the Asset Rebalancing Program is in effect.
The Dollar Cost Averaging does not ensure a profit nor guarantee against a
loss in a declining market. There is no charge associated with participating in
this program.
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ASSET REBALANCING PROGRAM
Under the Asset Rebalancing Program, we transfer funds among the Subaccounts
to maintain the percentage allocation you have selected among these Subaccounts.
At your election, we will make these transfers on a monthly, quarterly,
semi-annual or annual basis.
Asset Rebalancing does not permit transfers to or from the GIA or the MVA.
The Asset Rebalancing Program does not ensure a profit nor guarantee against
a loss in a declining market. There is no cost associated with participating in
this program.
ENHANCED OPTION 1 RIDER
Enhanced Option 1 Rider is an optional benefit that if elected, provides the
following additional benefits:
1. CUMULATIVE FREE WITHDRAWALS: After the first Contract Year, the free
withdrawal amount equals 10% of the last Contract anniversary value PLUS
any unused percentage from prior years may be carried forward to the then
current Contract Year to a maximum of 30% of your Contract Value as of
the last Contract anniversary.
2. 7 YEAR STEP-UP IN THE DEATH BENEFIT: PRIOR TO THE ANNUITANT'S 80TH
BIRTHDAY, THE DEATH BENEFIT EQUALS:
THE GREATEST OF:
a. the sum of 100% of premium payments less Adjusted Partial Withdrawals
on the Claim Date; or
b. the Contract Value on the Claim Date; or
c. the 7 Year Step-up Amount on the Claim Date.
3. MINIMUM DEATH BENEFIT PAST THE ANNUITANT'S 80TH BIRTHDAY. THE DEATH
BENEFIT IS EQUAL TO:
THE GREATER OF:
a. the death benefit in effect at the end of the last 7-year period prior
to the Annuitant turning age 80, plus the sum of 100% of premium
payments less Adjusted Partial Withdrawals made since the Contract
Year that the Annuitant reached Age 80; or
b. the Contract Value on the Claim Date.
There is a charge of .05% on an annual basis for the Enhanced Option 1
Rider. This charge is assessed against the initial payment at issue and then
taken against the Contract Value at the beginning of each Contract year on the
Contract anniversary.
NURSING HOME WAIVER
After the first Contract Year, the Nursing Home Waiver provides for the
waiver of surrender charges provided the Annuitant is confined to a licensed
nursing home facility for at least 120 days. The withdrawal request must be
within 2 years of the Annuitant's admission to the licensed nursing home
facility.
There is no charge for this additional benefit.
SURRENDER OF CONTRACT; PARTIAL WITHDRAWALS
If the Annuitant is living, amounts held under the Contract may be withdrawn
in whole or in part prior to the Maturity Date, or after the Maturity Date under
Annuity Options K or L. Prior to the Maturity Date, you may withdraw up to 10%
of the Contract Value in a Contract year, either in a lump sum or by multiple
scheduled or unscheduled partial withdrawals, without the imposition of a
surrender charge. During the first Contract year, the 10% withdrawal without a
surrender charge will be determined based on the Contract Value at the time of
the first partial withdrawal. In all subsequent years, the 10% will be based on
the previous Contract anniversary value. A signed written request for withdrawal
must be sent to VPMO. If you have not yet reached age 59 1/2, a 10% penalty tax
may apply on taxable income withdrawn. See "Federal Income Taxes." The
appropriate number of Accumulation Units of a Subaccount will be redeemed at
their value next determined after the receipt by VPMO of a written notice in a
form satisfactory to us. Accumulation Units redeemed in a partial withdrawal
from multiple Subaccounts will be redeemed on a pro rata basis unless you
designate otherwise. Contract Values in the GIA or MVA will also be withdrawn on
a pro rata basis unless you designate otherwise. Withdrawals from the MVA may be
subject to the market value adjustment. See the MVA prospectus. The resulting
cash payment will be made in a single sum, ordinarily within seven days after
receipt of such notice. However, redemption and payment may be delayed under
certain circumstances. See "Deferment of Payment." There may be adverse tax
consequences to certain surrenders and partial withdrawals. See "Surrenders or
Withdrawals Prior to the Contract Maturity Date." Certain restrictions on
redemptions are imposed on Contracts used in connection with Internal Revenue
Code Section 403(b) plans. Although loans are available under 403(b) plans only,
certain limitations may apply. See "Qualified Plans"; "Tax Sheltered Annuities."
A deduction for surrender charges may be imposed on partial withdrawals from,
and complete surrender of, a Contract. See "Surrender Charges." Any surrender
charge is imposed on a first-in, first-out basis.
Any request for a withdrawal from, or complete surrender of, a Contract
should be mailed to Phoenix Variable Products Mail Operations, PO Box 8027,
Boston, Massachusetts 02266-8027.
LAPSE OF CONTRACT
The Contract will terminate and lapse without value, if on any Valuation
Date:
[diamond] The Contract Value is zero; or
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[diamond] The annual Administrative Charge or premium tax reimbursement due on
either a full or partial surrender is greater than or equal to the
Contract Value (unless any Contract Value has been applied under one
of the variable payment options)
PHL Variable will notify you in writing that the Contract has lapsed.
PAYMENT UPON DEATH BEFORE MATURITY DATE
WHO RECEIVES PAYMENT
[diamond] DEATH OF AN OWNER/ANNUITANT
If the Owner/Annuitant dies before the Contract Maturity Date, the
death benefit will be paid under the Contract to the Annuitant's
beneficiary.
[diamond] DEATH OF AN ANNUITANT WHO IS NOT THE OWNER
If the Owner and the Annuitant are not the same and the Annuitant
dies prior to the Maturity Date, the contingent Annuitant becomes the
Annuitant. If there is no contingent Annuitant, the death benefit will
be paid to the Annuitant's beneficiary.
[diamond] SPOUSAL BENEFICIARY CONTRACT CONTINUANCE
If the spousal beneficiary continues the Contract at the death of the
an Owner/Annuitant or Owner who is not also the Annuitant, the spousal
beneficiary becomes the Annuitant. The Benefit Option in effect at the
death of an Owner/Annuitant or an Owner will also apply to the spousal
beneficiary.
[diamond] CONTINGENT ANNUITANT CONTRACT CONTINUANCE
Upon the death of the Annuitant who is not the Owner provided a
contingent Annuitant was named prior to the death of the Annuitant the
contract will continue with the contingent Annuitant becoming the
Annuitant. The Benefit Option in effect at the death of the Annuitant
will also apply to the contingent Annuitant.
[diamond] QUALIFIED CONTRACTS
Under Qualified Contracts, the death benefit is paid at the death of
the participant who is the Annuitant under the Contract.
Death benefit payments must satisfy distribution rules (See
"Qualified Plans" for a detailed discussion.)
[diamond] OWNERSHIP OF THE CONTRACT BY A NON-NATURAL PERSON
If the Owner is not an individual, the death of the Annuitant is
treated as the death of the Owner.
PAYMENT AMOUNT BEFORE AGE 80
Upon the Death of the Annuitant or Owner/Annuitant who has not yet Reached
Age 80.
[diamond] OPTION 1--RETURN OF PREMIUM The greater of:
a) 100% of payments, less Adjusted Partial Withdrawals; and
b) the Contract Value on the Claim Date.
[diamond] OPTION 2--ANNUAL STEP-UP The greater of:
a) 100% of payments, less Adjusted Partial Withdrawals; or
b) the Contract Value on the Claim Date; and
c) the Annual Step-up Amount on the Claim Date.
[diamond] OPTION 3--5% ROLL-UP The greater of:
a) 100% of payments, less Adjusted Partial Withdrawals; or
b) the Contract Value on the Claim Date; or
c) the Annual Step-up Amount on the Claim Date; and
d) the Annual Roll-up Amount on the Claim Date.
PAYMENT AMOUNT AFTER AGE 80
After the Annuitant's 80th birthday, the death benefit (less any deferred
premium tax) equals:
[diamond] OPTION 1--RETURN OF PREMIUM The greater of:
1. the sum of 100% of premium payments less Adjusted Partial
Withdrawals on the Claim Date; or
2. the Contract Value on the Claim Date.
[diamond] ENHANCED OPTION 1 RIDER
After the Annuitant's 80th birthday, if the Enhanced Option 1 Rider
has been elected, the death benefit (less any deferred premium tax)
equals:
The greater of:
1. the death benefit in effect at the end of the last 7-year period
prior to the Annuitant turning age 80, plus the sum of 100% of
premium payments less Adjusted Partial Withdrawals made since the
Contract Year that the Annuitant reached Age 80; or
2. the Contract Value on the Claim Date.
This rider is be available at an annual cost of .05%.
This charge is assessed against the initial payment at issue and
subsequently is taken against the Contract Value at the beginning of each
Contract Year on the Contract anniversary.
[diamond] OPTION 2--ANNUAL STEP-UP The greater of:
1. the death benefit in effect prior to the Annuitant turning age 80,
plus the sum of 100% of premium payments less Adjusted Partial
Withdrawals made since the Contract Year that the Annuitant reached
Age 80; or
2. the Contract Value on the Claim Date.
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[diamond] OPTION 3--5% ROLL-UP The greater of:
1. the death benefit in effect prior to the Annuitant turning age 80,
plus the sum of 100% of premium payments less Adjusted Partial
Withdrawals made since the Contract Year that the Annuitant reached
Age 80; or
2. the Contract Value on the Claim Date.
[diamond] DEATH OF AN OWNER WHO IS NOT THE ANNUITANT
Upon the death of an Owner who is not the Annuitant, provided that
there is no surviving joint Owner, the death proceeds will be paid to
the Owner's beneficiary. The amount of death benefit payable is equal
to the greater of:
o 100% of payments, less withdrawals; and
o the Contract Value on the Claim Date.
BECAUSE THE DEATH BENEFIT IN THIS SITUATION EQUALS THE GREATER OF
PREMIUMS PAID AND THE CONTRACT VALUE, AN OWNER WHO IS NOT THE
ANNUITANT SHOULD SERIOUSLY CONSIDER WHETHER BENEFIT OPTIONS 2 OR 3 ARE
SUITABLE FOR THEIR CIRCUMSTANCES.
Depending upon state law, the payment to the beneficiary may avoid probate
and the death benefit may be reduced by any premium tax due. See "Premium Tax."
See also "Distribution at Death" under "Federal Income Taxes."
We reserve the right to discontinue offering any one of the available death
benefit options in the future.
THE ANNUITY PERIOD
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The annuity period is that period of time beginning after the end of the
accumulation period and during which payments to you are made.
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Annuity payments will begin on the Contract's Maturity Date if the Annuitant
is alive and the Contract is still in force. Beginning on the Maturity Date,
investment in the Account is continued unless a Fixed Payment Annuity is
elected. No surrender charge is taken. Each Contract will provide, at the time
of its issuance, for a Variable Payment Life Expectancy Annuity (Option L)
unless a different annuity option is elected by you. See "Annuity Options."
Under a Variable Payment Life Expectancy Annuity, annuity payments are made on a
monthly basis over the Annuitant's annually recalculated life expectancy or the
annually recalculated life expectancy of the Annuitant and joint annuitant. A
Contract Owner may at anytime request unscheduled withdrawals representing part
or all of the remaining Contract Value. Upon the death of the Annuitant (and
joint annuitant, if there is a joint annuitant), the remaining Contract Value
will be paid in a lump sum to the Annuitant's beneficiary.
If the amount to be applied on the Maturity Date is less than $2,000, we may
pay such amount in one lump sum in lieu of providing an annuity. If the initial
monthly annuity payment under an Annuity Option would be less than $20, we may
make a single sum payment equal to the total Contract Value on the date the
initial payment would be payable, or make periodic payments quarterly,
semiannually or annually in place of monthly payments.
Each Contract specifies a provisional Maturity Date at the time of its
issuance. You may subsequently elect a different Maturity Date. The Maturity
Date may not be earlier than the fifth Contract anniversary or later than the
Contract anniversary nearest the Annuitant's 95th birthday unless the Contract
is issued in connection with certain qualified plans. Generally, under qualified
plans, the Maturity Date must be such that distributions begin no later than
April 1st of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an IRA.
The Maturity Date election must be made by written notice and must be
received by VPMO 30 days before the provisional Maturity Date. If a Maturity
Date, which is different from the provisional Maturity Date, is not elected by
you, the provisional Maturity Date becomes the Maturity Date. Particular care
should be taken in electing the Maturity Date of a Contract issued under a Tax
Sheltered Annuity (TSA), a Keogh Plan or an IRA plan. See "Tax Sheltered
Annuities," "Keogh Plans" and "Individual Retirement Accounts."
ANNUITY OPTIONS
Unless an alternative annuity payment option is elected on or before the
Maturity Date, the amounts held under a Contract on the Maturity Date will be
applied to provide a Variable Payment Life Expectancy Annuity (Option L) as
described below. Upon the death of the Annuitant and joint annuitant if any, the
remaining Contract Value will be paid in a lump sum to the Annuitant's
beneficiary.
With the exception of the Fixed Payment Options and Option L--Variable
Payment Life Expectancy Annuity, each annuity payment will be based upon the
value of the Annuity Units credited to the Contract. The number of Annuity Units
in each Subaccount to be credited is based on the value of the Accumulation
Units in that Subaccount and the applicable annuity payment rate. The Contract
is issued with guaranteed minimum annuity payment rates, however, if the current
rate is higher, we'll apply the higher rate. The payment rate differs according
to the payment option selected and the age of the Annuitant. The annuity payment
rate is applied and will determine all payments for the fixed annuity payment
options and the first payment for the variable annuity payment options. The
value of the Annuity Units will vary with the investment performance of each
Subaccount to which Annuity Units are credited. The initial payment will be
calculated based on an assumed investment
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return of 4 1/2% per year. This rate is a fulcrum return around which variable
annuity payments will vary to reflect whether actual investment experience of
the Subaccount is better or worse than the assumed investment return. The
assumed investment return and the calculation of variable income payments for
10-year period certain variable payment life annuity and for Options J and K
described below are described in more detail in the Contract and in the SAI.
Instead of the Variable Payment Life Expectancy Annuity, (see "Option L"
below), you may, by written request received by VPMO on or before the Maturity
Date of the Contract, elect any of the other annuity payment options described
below. No surrender charge will be assessed under any annuity option, unless
unscheduled withdrawals are made under Annuity Options K or L.
The level of annuity payments payable under the following options is based
upon the option selected. In addition, such factors as the age at which payments
begin, the form of annuity, annuity payment rates, assumed investment rate (for
variable payment annuities) and the frequency of payments will effect the level
of annuity payments. The assumed investment rate is 4.5% per year. We use this
rate to determine the first payment under Variable Payment Annuity Options I, J,
K, M and N.
We deduct a daily charge for mortality and expense risks and a daily
administrative fee from Contract Values held in the Subaccounts. See "Charges
For Mortality and Expense Risks" and "Charges for Administrative Services."
Therefore, electing Option K will result in a deduction being made even though
we assume no mortality risk under that option.
The following are descriptions of the annuity options available under a
Contract. These descriptions should allow you to understand the basic
differences between the options, however, you should contact VPMO well in
advance of the date you wish to elect an option to obtain estimates of payments
under each option.
OPTION A--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN
Provides a monthly income for the life of the Annuitant. In the event of
death of the Annuitant, the annuity income will be paid to the beneficiary until
the end of the specified period certain. For example, a 10-year period certain
will provide a total of 120 monthly payments. The certain period may be 5, 10 or
20 years.
OPTION B--NON-REFUND LIFE ANNUITY
Provides a monthly income for the lifetime of the Annuitant. No income is
payable after the death of the Annuitant.
OPTION C--DISCONTINUED
OPTION D--JOINT AND SURVIVOR LIFE ANNUITY
Provides a monthly income for the lifetimes of both the Annuitant and a
joint annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. The amount to be paid to the survivor is 100% of the amount of the
joint annuity payment, as elected at the time the annuity option is chosen. No
income is payable after the death of the surviving annuitant.
Under Option D, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION E--INSTALLMENT REFUND LIFE ANNUITY
Provides a monthly income for the life of the Annuitant. In the event of the
Annuitant's death, the annuity income will continue to the Annuitant's
beneficiary until the amount applied to purchase the annuity has been
distributed.
OPTION F--JOINT AND SURVIVOR LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN
Provides a monthly income for the lifetime of both the Annuitant and a joint
annuitant as long as either is living. In the event of the death of the
Annuitant or joint annuitant, the annuity income will continue for the life of
the survivor. If the survivor dies prior to the end of the 10-year period, the
annuity income will continue to the named beneficiary until the end of the
10-year period certain.
Under Option F, the joint annuitant must be named at the time the option is
elected and cannot be changed. The joint annuitant must have reached an adjusted
age of 40, as defined in the Contract.
OPTION G--PAYMENTS FOR SPECIFIED PERIOD
Provides equal income installments for a specified period of years whether
the Annuitant lives or dies. Any specified whole number of years from 5 to 30
years may be elected.
OPTION H--PAYMENTS OF SPECIFIED AMOUNT
Provides equal installments of a specified amount over a period of at least
five years. The specified amount may not be greater than the total annuity
amount divided by five annual installment payments. If the Annuitant dies prior
to the end of the elected period certain, annuity payments will continue to the
Annuitant's beneficiary until the end of the elected period certain.
OPTION I--VARIABLE PAYMENT LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN
Unless another annuity option has been elected, this option will
automatically apply to any Contract proceeds payable on the Maturity Date. It
provides a variable payout monthly annuity based on the life of the Annuitant.
In the event of the death of the Annuitant, the annuity payments are made to the
Annuitant's beneficiary until the end of the 10-year period. The 10-year period
provides a total of 120 monthly payments. Payments will vary as to dollar
amount, based on the investment experience of the Subaccounts in which proceeds
are invested.
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OPTION J--JOINT SURVIVOR VARIABLE PAYMENT LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN
Provides a variable payout monthly annuity while the Annuitant and the
designated joint annuitant are living and continues thereafter during the
lifetime of the survivor or, if later, until the end of a 10-year period
certain. Payments will vary as to dollar amount, based on the investment
experience of the Subaccounts in which proceeds are invested. The joint
annuitant must be named at the time the option is elected and cannot be changed.
The joint annuitant must have reached an adjusted age of 40, as defined in the
Contract. This option is not available for payment of any death benefit under
the Contract.
OPTION K--VARIABLE PAYMENT ANNUITY FOR A SPECIFIED PERIOD
Provides variable payout monthly income installments for a specified period
of time, whether the Annuitant lives or dies. The period certain specified must
be in whole numbers of years from 5 to 30. However, the period certain selected
by the beneficiary of any death benefit under the Contract may not extend beyond
the life expectancy of such beneficiary. A Contract Owner may at anytime request
unscheduled withdrawals representing part or all of the remaining Contract Value
less any applicable contingent deferred surrender charge.
OPTION L--VARIABLE PAYMENT LIFE EXPECTANCY ANNUITY
Provides a variable payout monthly income payable over the Annuitant's
annually recalculated life expectancy or the annually recalculated life
expectancy of the Annuitant and joint annuitant. A Contract Owner may at anytime
request unscheduled withdrawals representing part or all of the remaining
Contract Value less any applicable contingent deferred surrender charge. Upon
the death of the Annuitant (and joint annuitant, if there is a joint annuitant),
the remaining Contract Value will be paid in a lump sum to the Annuitant's
beneficiary.
OPTION M--UNIT REFUND VARIABLE PAYMENT LIFE ANNUITY
Provides variable monthly payments as long as the Annuitant lives. If the
Annuitant dies, the Annuitant's beneficiary will receive the value of the
remaining Annuity Units in a lump sum.
OPTION N--VARIABLE PAYMENT NON-REFUND LIFE ANNUITY
Provides a variable monthly income for the life of the Annuitant. No income
or payment to a beneficiary is paid after the death of the Annuitant.
OTHER OPTIONS AND RATES
We may offer other annuity options at the time a Contract reaches its
Maturity Date. In addition, in the event that annuity payment rates for
Contracts are at that time more favorable than the applicable rates guaranteed
under the Contract, the then current settlement rates shall be used in
determining the amount of any annuity payment under the Annuity Options above.
OTHER CONDITIONS
Federal income tax requirements currently applicable to most qualified plans
provide that the period of years guaranteed under joint and survivorship
annuities with specified periods certain (see "Option F" and "Option J" above)
cannot be any greater than the joint life expectancies of the payee and his or
her spouse.
Federal income tax requirements also provide that participants in regular or
SIMPLE IRAs must begin minimum distributions by April 1 of the year following
the year in which they attain age 70 1/2. Minimum distribution requirements do
not apply to Roth IRAs. Distributions from qualified plans generally must begin
by the later of actual retirement or April 1 of the year following the year
participants attain age 70 1/2. Any required minimum distributions must be such
that the full amount in the contract will be distributed over a period not
greater than the participant's life expectancy, or the combined life expectancy
of the participant and his or her spouse or designated beneficiary.
Distributions made under this method are generally referred to as Life
Expectancy Distributions ("LEDs"). An LED program is available to participants
in qualified plans or IRAs. Requests to elect this program must be made in
writing.
Under the LED program, regardless of Contract year, amounts up to the
required minimum distribution may be withdrawn without a deduction for surrender
charges, even if the minimum distribution exceeds the 10% allowable amount. See
"Surrender Charges." Any amounts withdrawn that have not been held under a
Contract for at least six years and are in excess of both the minimum
distribution and the 10% free available amount will be subject to any applicable
surrender charge.
If the initial monthly annuity payment under an Annuity Option would be less
than $20, we may make a single sum payment equal to the Contract Value on the
date the initial payment would be payable, in place of all other benefits
provided by the Contract, or, may make periodic payments quarterly, semiannually
or annually in place of monthly payments.
Currently, transfers between Subaccounts are not available for amounts
allocated to any of the variable payment annuity options.
PAYMENT UPON DEATH AFTER MATURITY DATE
If an Owner who also is the Annuitant dies on or after the Maturity Date,
except as may otherwise be provided under any supplementary contract between the
Owner and us, we will pay to the Owner/Annuitant's beneficiary any annuity
payments due during any applicable period certain under the Annuity Option in
effect on the Annuitant's death. If the Annuitant who is not the Owner dies on
or after the Maturity Date, we will pay any remaining annuity payments to the
Annuitant's beneficiary according to the payment option in effect at the time of
the Annuitant's
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death. If an Owner who is not the Annuitant dies on or after the Maturity Date,
we will pay any remaining annuity payments to the Owner's beneficiary according
to the payment option in effect at the time of the Owner's death.
VARIABLE ACCOUNT VALUATION PROCEDURES
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VALUATION DATE
A Valuation Date is every day the NYSE is open for trading. The NYSE is
scheduled to be closed on the following days: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Board of Directors of the
NYSE reserves the right to change this schedule as conditions warrant. On each
Valuation Date, the value of the Account is determined at the close of the NYSE
(currently 4:00 p.m. Eastern Time).
VALUATION PERIOD
Valuation Period is that period of time from the beginning of the day
following a Valuation Date to the end of the next following Valuation Date.
ACCUMULATION UNIT VALUE
The value of one Accumulation Unit was set at $1.0000 on the date assets
were first allocated to a Subaccount. The value of one Accumulation Unit on any
subsequent Valuation Date is determined by multiplying the immediately preceding
Accumulation Unit Value by the applicable Net Investment Factor for the
Valuation Period ending on such Valuation Date. After the first Valuation
Period, the Accumulation Unit Value reflects the cumulative investment
experience of that Subaccount.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is equal to 1.000000 plus
the applicable net investment rate for such Valuation Period. A Net Investment
Factor may be more or less than 1.000000 depending on whether the assets gained
or lost value that day. To determine the net investment rate for any Valuation
Period for the Funds allocated to each Subaccount, the following steps are
taken: (a) the aggregate accrued investment income and capital gains and losses,
whether realized or unrealized, of the Subaccount for such Valuation Period is
computed, (b) the amount in (a) is then adjusted by the sum of the charges and
credits for any applicable income taxes and the deductions at the beginning of
the Valuation Period for mortality and expense risk charges and daily
administration fee, and (c) the results of (a) as adjusted by (b) are divided by
the aggregate Unit Values in the Subaccount at the beginning of the Valuation
Period.
MISCELLANEOUS PROVISIONS
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ASSIGNMENT
Owners of Contracts issued in connection with non-tax qualified plans may
assign their interest in the Contract without the consent of the beneficiary. A
written notice of such assignment must be filed with VPMO before it will be
honored.
A pledge or assignment of a Contract is treated as payment received on
account of a partial surrender of a Contract. See "Surrenders or Withdrawals
Prior to the Contract Maturity Date."
In order to qualify for favorable tax treatment, Contracts issued in
connection with tax qualified plans may not be sold, assigned, discounted or
pledged as collateral for a loan or as security for the performance of an
obligation, or for any other purpose, to any person other than to us.
DEFERMENT OF PAYMENT
Payment of the Contract Value in a single sum upon a withdrawal from, or
complete surrender of, a Contract will ordinarily be made within seven days
after receipt of the written request by VPMO. However, we may postpone payment
of the value of any Accumulation Units at times (a) when the NYSE is closed,
other than customary weekend and holiday closings, (b) when trading on the NYSE
is restricted, (c) when an emergency exists as a result of which disposal of
securities in the Fund is not reasonably practicable or it is not reasonably
practicable to determine the Contract Value or (d) when a governmental body
having jurisdiction over us by order permits such suspension. Rules and
regulations of the SEC, if any, are applicable and will govern as to whether
conditions described in (b), (c) or (d) exist.
FREE LOOK PERIOD
We may mail the Contract to you or we may deliver it to you in person. You
may surrender a Contract for any reason within 10 days after you receive it and
receive in cash the adjusted value of your initial payment. (A longer Free Look
Period may be required by your state.) You may receive more or less than the
initial payment depending on investment experience within the Subaccounts during
the Free Look Period. If a portion or all of your initial payment has been
allocated to the GIA, we also will refund any earned interest. If a portion or
all of your initial payment has been allocated to the MVA, we will apply the
Market Value Adjustment which can increase or decrease your initial payment. If
applicable state law requires, we will return the full amount of any payments we
received.
During periods of extreme market volatility, we reserve the right to make
the Temporary Money Market Allocation Amendment available. In states that
require return of premium during the Free Look Period, we will allocate those
portions of your initial payment designated for the Subaccounts to the
Phoenix-Goodwin Money Market
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Subaccount and those portions designated for the GIA and MVA will be allocated
to those Accounts. At the expiration of the Free Look Period, the value of the
Accumulation Units held in the Phoenix-Goodwin Money Market Subaccount will be
allocated among the available Subaccounts in accordance with your allocation
instructions on the application.
AMENDMENTS TO CONTRACTS
Contracts may be amended to conform to changes in applicable law or
interpretations of applicable law, or to accommodate design changes. Changes in
the Contract may need to be approved by Contract Owners and state insurance
departments. A change in the Contract which necessitates a corresponding change
in the Prospectus or the SAI must be filed with the SEC.
SUBSTITUTION OF FUND SHARES
Although we believe it to be highly unlikely, it is possible that in the
judgment of our management, one or more of the Series of the Funds may become
unsuitable for investment by Contract Owners because of a change in investment
policy, or a change in the tax laws, or because the shares are no longer
available for investment. In that event, we may seek to substitute the shares of
another Series or the shares of an entirely different fund. Before this can be
done, the approval of the SEC, and possibly one or more state insurance
departments, will be required.
OWNERSHIP OF THE CONTRACT
Ordinarily, the purchaser of a Contract is both the Owner and the Annuitant
and is entitled to exercise all the rights under the Contract. However, the
Owner may be an individual or entity other than the Annuitant. Spouses may own a
Contract as joint Owners. Transfer of the ownership of a Contract may involve
federal income tax consequences, and a qualified adviser should be consulted
before any such transfer is attempted.
FEDERAL INCOME TAXES
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INTRODUCTION
The Contracts are designed for use with retirement plans which may or may
not be tax-qualified plans ("Qualified Plans") under the provisions of the
Internal Revenue Code of 1986, (the "Code"). The ultimate effect of federal
income taxes on the amounts held under a Contract, on annuity payments and on
the economic benefits of the Contract Owner, Annuitant or beneficiary depends on
our tax status, on the type of retirement plan for which the Contract is
purchased, and upon the income tax and employment status of the individual
concerned.
The following discussion is general in nature and is not intended as 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 tax laws. Moreover, the discussion is based
upon our understanding of the federal income tax laws as they are currently
interpreted. No representation is made regarding the likelihood of continuation
of the federal income tax laws or the current interpretations by the Internal
Revenue Service (the "IRS"). We do not guarantee the tax status of the
Contracts. Purchasers bear the complete risk that the Contracts may not be
treated as "annuity contracts" under federal income tax laws. For a discussion
of federal income taxes as they relate to the Funds, please see the accompanying
prospectuses for the Funds.
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 PRIOR TO THE CONTRACT
MATURITY DATE
Code Section 72 provides that a total or partial surrender from a Contract
prior to the Contract Maturity Date will be treated as taxable income to the
extent the amounts held under the Contract exceed the "investment in the
Contract." The "investment in the Contract" is that portion, if any, of payments
(premiums paid) by or on behalf of an individual under a Contract that have not
been excluded from the individual's gross income. However, under certain types
of Qualified Plans there may be no investment in the Contract within the meaning
of Code Section 72, so that the total amount of all payments received will be
taxable. The taxable portion is taxed as ordinary income in an amount equal to
the value of the amount received on account of a total or partial surrender of a
Contract. For purposes of this rule, a pledge or assignment of a Contract is
treated as a payment received on account of a partial surrender of a Contract.
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SURRENDERS OR WITHDRAWALS ON OR AFTER THE CONTRACT
MATURITY DATE
Upon receipt of a lump sum payment under the Contract, the recipient is
taxed on the portion of the payment that exceeds the investment in the Contract.
Ordinarily, such taxable portion is taxed as ordinary income. Under certain
circumstances, the proceeds of a surrender of a Contract may qualify for "lump
sum distribution" treatment under Qualified Plans. See your tax adviser if you
think you may qualify for "lump sum distribution" treatment. The 5-year
averaging rule for lump sum distribution has been repealed for tax years
beginning after 1999.
For fixed annuity payments, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the non-taxable portion of the payment. The remaining
portion of each payment is taxed as ordinary income. For variable annuity
payments, the taxable portion is determined by a formula that establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the investment in the Contract by the total number of
expected periodic payments. The remaining portion of each payment is taxed as
ordinary income. Once the excludable portion of annuity payments equals the
investment in the Contract, the balance of the annuity payments will be fully
taxable. For certain types of qualified plans, there may be no investment in the
Contract resulting in the full amount of the payments being taxable. A
simplified method of determining the exclusion ratio is effective with respect
to qualified plan annuities starting after November 18, 1996.
Withholding of federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies VPMO of that election.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS
Amounts surrendered or distributed before the taxpayer reaches age 59 1/2
are subject to a penalty tax equal to ten percent (10%) of the portion of such
amount that is includable in gross income. However, the penalty tax will not
apply to withdrawals: (i) made on or after the death of the Contract Owner (or
where the Contract Owner is not an individual, the death of the "Primary
Annuitant," who is defined as the individual the events in whose life are of
primary importance in affecting the timing and amount of the payout under the
Contract); (ii) attributable to the taxpayer's becoming totally disabled within
the meaning of Code Section 72(m)(7); (iii) which are part of a series of
substantially equal periodic payments made (not less frequently than annually)
for the life (or life expectancy) of the taxpayer, or the joint lives (or joint
life expectancies) of the taxpayer and his or her beneficiary; (iv) from certain
qualified plans (such distributions may, however, be subject to a similar
penalty under Code Section 72(t) relating to distributions from qualified
retirement plans and to a special penalty of 25% applicable specifically to
SIMPLE IRAs or other special penalties applicable to Roth IRAs); (v) allocable
to investment in the Contract before August 14, 1982; (vi) under a qualified
funding asset (as defined in Code Section 130(d)); (vii) under an immediate
annuity contract (as defined in Code Section 72(u)(4)); or (viii) that are
purchased by an employer on termination of certain types of qualified plans and
which are held by the employer until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the first
year when the modification occurs will be increased by an amount (determined by
the Treasury regulations) equal to the tax that would have been imposed but for
item (iii) above, plus interest for the deferral period, but only if the
modification takes place: (a) within 5 years from the date of the first payment,
or (b) before the taxpayer reaches age 59 1/2.
Separate tax withdrawal penalties apply to Qualified Plans. See "Penalty Tax
on Surrenders and Withdrawals from Qualified Contracts."
ADDITIONAL CONSIDERATIONS
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract for federal income tax
purposes, a Contract must provide the following two distribution rules: (a) if
the Contract Owner dies on or after the Contract Maturity Date, and before the
entire interest in the Contract has been distributed, the remainder of the
Contract Owner's interest will be distributed at least as quickly as the method
in effect on the Contract Owner's death; and (b) if a Contract Owner dies before
the Contract Maturity Date, the Contract Owner's entire interest generally must
be distributed within five (5) years after the date of death, or if payable to a
designated beneficiary, may be annuitized over the life or life expectancy of
that beneficiary and payments must begin within one (1) year after the Contract
Owner's date of death. If the beneficiary is the spouse of the Contract Owner,
the Contract (together with the deferral of tax on the accrued and future income
thereunder) may be continued in the name of the spouse as Contract Owner.
Similar distribution requirements apply to annuity contracts under Qualified
Plans (other than Code Section 457 Plans). However, a number of restrictions,
limitations and special rules apply to qualified plans and Contract Owners
should consult with their tax adviser.
If the Annuitant, who is not the Contract Owner, dies before the Maturity
Date and there is no Contingent Annuitant, the Annuitant's beneficiary must
elect within 60 days whether to receive the death benefit in a lump sum or in
periodic payments commencing within one (1) year.
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If the Contract Owner is not an individual, the death of the primary
Annuitant is treated as the death of the Contract Owner. In addition, when the
Contract Owner is not an individual, a change in the primary Annuitant is
treated as the death of the Contract Owner. Finally, in the case of non-spousal
joint Contract Owners, distribution will be required at the death of the first
of the Contract Owners.
If the Contract Owner or a Joint Contract Owner dies on or after the
Maturity Date, the remaining payments, if any, under the Annuity Option selected
will be made at least as rapidly as under the method of distribution in effect
at the time of death.
TRANSFER OF ANNUITY CONTRACTS
Transfers of non-qualified Contracts prior to the Maturity Date for less
than full and adequate consideration to the Contract Owner at the time of such
transfer, will trigger tax on the gain in the Contract, with the transferee
getting a step-up in basis for the amount included in the Contract Owner's
income. This provision does not apply to transfers between spouses or incident
to a divorce.
CONTRACTS OWNED BY NON-NATURAL PERSONS
If the Contract is held by a non-natural person (for example, a corporation)
the income on that Contract (generally the increase in the net surrender value
less the premium paid) is includable in income each year. The rule does not
apply where the non-natural person is the nominal owner of a Contract and the
beneficial owner is a natural person. The rule also does not apply where the
annuity contract is acquired by the estate of a decedent, where the Contract is
held under a qualified plan, a TSA program or an IRA, where the Contract is a
qualified funding asset for structured settlements, or where the Contract is
purchased on behalf of an employee upon termination of a qualified plan, and nor
if the annuity contract is an immediate annuity.
SECTION 1035 EXCHANGES
Code Section 1035 provides, in general, that no gain or loss shall be
recognized on the exchange of one annuity contract for another. A replacement
contract obtained in a tax-free exchange of contracts generally succeeds to the
status of the surrendered contract. If the surrendered contract was issued prior
to August 14, 1982, the tax rules that formerly provided that the surrender was
taxable only to the extent the amount received exceeds the Contract Owner's
investment in the Contract, will continue to apply. In contrast, Contracts
issued on or after January 19, 1985 are, in a Code Section 1035 exchange,
treated as new Contracts for purposes of the distribution-at-death rules.
Special rules and procedures apply to Code Section 1035 transactions.
Prospective Contract Owners wishing to take advantage of Code Section 1035
should consult their tax advisers.
MULTIPLE CONTRACTS
Code Section 72(e)(11)(A)(ii) provides that for Contracts entered into after
October 21, 1988, for purposes of determining the amount of any distribution
under Code Section 72(e) (amounts not received as annuities) that is includable
in gross income, all non-qualified deferred annuity contracts issued by the same
insurer (or affiliate) to the same Contract Owner during any calendar year are
to be aggregated and treated as one contract. Thus, any amount received under
any such contract prior to the Contract Maturity Date, such as a withdrawal,
dividend or loan, will be taxable (and possibly subject to the 10% penalty tax)
to the extent of the combined income in all such contracts.
The Treasury Department has specific authority to issue regulations that
prevent the avoidance of Code Section 72(e) through the serial purchase of
annuity contracts or otherwise. In addition, there may be situations where the
Treasury may conclude that it would be appropriate to aggregate two or more
contracts purchased by the same Contract Owner. Accordingly, a Contract Owner
should consult a competent tax adviser before purchasing more than one Contract
or other annuity contracts.
DIVERSIFICATION STANDARDS
DIVERSIFICATION REGULATIONS
To comply with the diversification regulations under Code Section 817(h)
("Diversification Regulations"), after a start-up period, each Series of the
Funds will be required to diversify its investments. The Diversification
Regulations generally require that, on the last day of each calendar quarter
that the Series' assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
Series as an asset of the Account, and each Series of the Funds are tested for
compliance with the percentage limitations. All securities of the same issuer
are treated as a single investment. As a result of the 1988 Act, each government
agency or instrumentality will be treated as a separate issuer for purposes of
these limitations.
The Treasury Department has indicated that the Diversification Regulations
do not provide guidance regarding the circumstances in which Contract Owner
control of the investments of the Account will cause the Contract Owner to be
treated as the owner of the assets of the Account, thereby resulting in the loss
of favorable tax treatment for the Contract. At this time, it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance. The amount of Contract Owner control which may be
exercised under the Contract is different in some respects from the situations
addressed in published rulings issued by the IRS in which was held that the
policyowner was not the owner
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of the assets of the separate account. It is unknown whether these differences,
such as the Contract Owner's ability to transfer among investment choices or the
number and type of investment choices available, would cause the Contract Owner
to be considered as the Owner of the assets of the Account resulting in the
imposition of federal income tax to the Contract Owner with respect to earnings
allocable to the Contract prior to receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling generally will be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Contract
Owner being retroactively determined to be the Owner of the assets of the
Account.
Due to the uncertainty in this area, we reserve the right to modify the
Contract in an attempt to maintain favorable tax treatment.
We represent that we intend to comply with the Diversification Regulations
to assure that the Contracts continue to be treated as annuity contracts for
federal income tax purposes.
DIVERSIFICATION REGULATIONS AND QUALIFIED PLANS
Code Section 817(h) applies to a variable annuity contract other than a
pension plan contract. The Diversification Regulations reiterate that the
diversification requirements do not apply to a pension plan contract. All of the
Qualified Plans (described below) are defined as pension plan contracts for
these purposes. Notwithstanding the exception of Qualified Plan Contracts from
application of the diversification rules, all investments of the PHL Variable
Qualified Plan Contracts (i.e., the Funds) will be structured to comply with the
diversification standards because the Funds serve as the investment vehicle for
non-qualified Contracts as well as Qualified Plan Contracts.
QUALIFIED PLANS
The Contracts may be used with several types of Qualified Plans. TSAs,
Keoghs, IRAs, Corporate Pension and Profit-sharing Plans and State Deferred
Compensation Plans will be treated, for purposes of this discussion, as
Qualified Plans. The tax rules applicable to participants in such Qualified
Plans vary according to the type of plan and the terms and conditions of the
plan itself. No attempt is made here to provide more than general information
about the use of the Contracts with the various types of Qualified Plans.
Participants under such Qualified Plans as well as Contract Owners, Annuitants
and beneficiaries, are cautioned that the rights of any person to any benefits
under such Qualified Plans may be subject to the terms and conditions of the
plans themselves or limited by applicable law, regardless of the terms and
conditions of the Contract issued in connection therewith. For example, PHL
Variable will accept beneficiary designations and payment instructions under the
terms of the Contract without regard to any spousal consents that may be
required under the Retirement Equity Act (REA). Consequently, a Contract Owner's
beneficiary designation or elected payment option may not be enforceable.
Effective January 1, 1993, Section 3405 of the Internal Revenue Code was
amended to change the roll-over rules applicable to the taxable portions of
distributions from qualified pension and profit-sharing plans and Section 403(b)
TSA arrangements. Taxable distributions eligible to be rolled over generally
will be subject to 20 percent income tax withholding. Mandatory withholding can
be avoided only if the employee arranges for a direct rollover to another
qualified pension or profit-sharing plan or to an IRA.
The new mandatory withholding rules apply to all taxable distributions from
qualified plans or TSAs (not including IRAs), except (a) distributions required
under the Code, (b) substantially equal distributions made over the life (or
life expectancy) of the employee, or for a term certain of 10 years or more and
(c) the portion of distributions not includable in gross income (i.e., return of
after-tax contributions).
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by PHL Variable in connection
with certain Qualified Plans will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables also will be available
for use in connection with certain non-qualified deferred compensation plans.
Numerous changes have been made to the income tax rules governing Qualified
Plans as a result of legislation enacted during the past several years,
including rules with respect to: coverage, participation, maximum contributions,
required distributions, penalty taxes on early or insufficient distributions and
income tax withholding on distributions. The following are general descriptions
of the various types of Qualified Plans and of the use of the contracts in
connection therewith.
TAX SHELTERED ANNUITIES ("TSAS")
Code Section 403(b) permits public school systems and certain types of
charitable, educational and scientific organizations, generally specified in
Code Section 501(c)(3) to purchase annuity contracts on behalf of their
employees and, subject to certain limitations, allows employees of those
organizations to exclude the amount of payments from gross income for federal
income tax purposes. These annuity contracts are commonly referred to as TSAs.
For taxable years beginning after December 31, 1988, Code Section 403(b)(11)
imposes certain restrictions on a Contract Owner's ability to make partial
withdrawals from,
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or surrenders of, Code Section 403(b) Contracts, if the cash withdrawn is
attributable to payments made under a salary reduction agreement. Specifically,
Code Section 403(b)(11) allows a Contract Owner to make a surrender or partial
withdrawal only (a) when the employee attains age 59 1/2, separates from
service, dies or becomes disabled (as defined in the Code), or (b) in the case
of hardship. In the case of hardship, the distribution amount cannot include any
income earned under the Contract.
The 1988 Act amended the effective date of Code Section 403(b)(11), so that
it applies only with respect to distributions from Code Section 403(b) Contracts
which are attributable to assets other than assets held as of the close of the
last year beginning before January 1, 1989. Thus, the distribution restrictions
do not apply to assets held as of December 31, 1988.
In addition, in order for certain types of contributions under a Code
Section 403(b) Contract to be excluded from taxable income, the employer must
comply with certain nondiscrimination requirements. Contract Owners should
consult their employers to determine whether the employer has complied with
these rules. Contract Owner loans are not allowed under the Contracts.
Effective May 4, 1998, loans may be made available under Internal Revenue
Code Section 403(b) tax-sheltered annuity programs. If the program permits
loans, a loan from the participant's contract value may be requested. The loan
must be at least $1,000 and the maximum loan amount is the greater of: (a) 90%
of the first $10,000 of Contract Value minus any contingent deferred surrender
charge; and (b) 50% of the Contract Value minus any contingent deferred
surrender charge. The maximum loan amount is $50,000. If loans are outstanding
from any other tax-qualified plan then the maximum loan amount of the contract
may be reduced from the amount stated above in order to comply with the maximum
loan amount requirements under Section 72(p) of the Internal Revenue Code.
Amounts borrowed from the GIA are subject to the same limitations as applies to
transfers from the GIA; thus no more than the greater of $1000 and 25% of the
contract value in the GIA may be borrowed at any one time. Amounts borrowed from
the Market Value Adjustment ("MVA") account are subject to the same market value
adjustment as applies to transfers from the MVA.
Loan repayments will first pay any accrued loan interest. The balance will
be applied to reduce the outstanding loan balance and will also reduce the
amount of the Loan Security Account by the same amount that the outstanding loan
balance is reduced. The balance of loan repayments, after payment of accrued
loan interest, will be credited to the Subaccounts of the Separate Account or
the GIA in accordance with the participant's most recent premium allocation on
file with Us, except that no amount will be transferred to the MVA.
If a loan repayment is not received by Us before 90 days after the payment
was due, then the entire loan balance plus accrued interest will be in default.
In the case of default, the outstanding loan balance plus accrued interest will
be deemed a distribution for income tax purposes, and will be reported as such
to the extent required by law. At the time of such deemed distribution-interest
will continue to accrue until such time as an actual distribution occurs under
the Contract.
KEOGH PLANS
The Self-Employed Individual Tax Retirement Act of 1962, as amended, permits
self-employed individuals to establish "Keoghs" or qualified plans for
themselves and their employees. The tax consequences to participants under such
a plan depend upon the terms of the plan. In addition, such plans are limited by
law with respect to the maximum permissible contributions, distribution dates,
nonforfeitability of interests, and tax rates applicable to distributions. In
order to establish such a plan, a plan document must be adopted and implemented
by the employer, as well as approved by the IRS.
INDIVIDUAL RETIREMENT ACCOUNTS
Code Sections 408 and 408A permit eligible individuals to contribute to an
individual retirement program known as an "IRA." These IRAs are subject to
limitations on the amount which may be contributed, the persons who may be
eligible and on the time when distributions may commence. In addition,
distributions from certain other types of Qualified Plans may be placed on a
tax-deferred basis into an IRA. Effective January 1, 1997, employers may
establish a new type of IRA called SIMPLE (Savings Incentive Match Plan for
Employees). Special rules apply to participants' contributions to and
withdrawals from SIMPLE IRAs. Also effective January 1, 1997, salary reduction
IRAs (SARSEP) no longer may be established. Effective January 1, 1998,
individuals may establish Roth IRAs. Special rules also apply to contributions
to and withdrawals from Roth IRAs.
CORPORATE PENSION AND PROFIT-SHARING PLANS
Code Section 401(a) permits corporate employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of Contracts to provide benefits thereunder.
These retirement plans may permit the purchase of the Contracts to provide
benefits under the Plan. Contributions to the Plan for the benefit of employees
will not be includable in the gross income of the employee until distributed
from the Plan. The tax consequences to participants may vary depending upon the
particular Plan design. However, the Code places limitations and restrictions on
all Plans, including on such items as: amount of allowable contributions; form,
manner and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. Participant loans are not allowed under the Contracts purchased in
connection with
53
<PAGE>
these Plans. Purchasers of Contracts for use with Corporate Pension or
Profit-sharing Plans should obtain competent tax advice as to the tax treatment
and suitability of such an investment.
DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE FOR STATE AND LOCAL
GOVERNMENTS AND TAX EXEMPT ORGANIZATIONS
Code Section 457 provides for certain deferred compensation plans with
respect to service for state and local governments and certain other entities.
The Contracts may be used in connection with these plans; however, under these
plans if issued to tax exempt organizations, the Contract Owner is the plan
sponsor, and the individual participants in the plans are the Annuitants. Under
such Contracts, the rights of individual plan participants are governed solely
by their agreements with the plan sponsor and not by the terms of the Contracts.
Effective in 1997 for new state and local government plans, such plans must be
funded through a tax exempt annuity contract held for the exclusive benefit of
plan participants.
PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM QUALIFIED PLANS
In the case of a withdrawal under a Qualified Plan, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement plan.
Special tax rules may be available for certain distributions from a Qualified
Plan. Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion
of any distribution from qualified retirement plans, including Contracts issued
and qualified under Code Sections 401 (Keogh and Corporate Pension and
Profit-sharing Plans), Tax-Sheltered Annuities and Individual Retirement
Annuities other than Roth IRAs. The penalty is increased to 25% instead of 10%
for SIMPLE IRAs if distribution occurs within the first two years of the
Contract Owner's participation in the SIMPLE IRA. To the extent amounts are not
includable in gross income because they have been properly rolled over to an IRA
or to another eligible Qualified Plan, no tax penalty will be imposed. The tax
penalty will not apply to the following distributions: (a) if distribution is
made on or after the date on which the Contract Owner or Annuitant (as
applicable) reaches age 59 1/2; (b) distributions following the death or
disability of the Contract Owner or Annuitant (as applicable) (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (c) after separation
from service, distributions that are part of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the Contract Owner or Annuitant (as applicable) or the joint
lives (or joint life expectancies) of such Contract Owner or Annuitant (as
applicable) and his or her designated beneficiary; (d) distributions to a
Contract Owner or Annuitant (as applicable) who has separated from service after
he has attained age 55; (e) distributions made to the Contract Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Contract Owner or
Annuitant (as applicable) for amounts paid during the taxable year for medical
care; (f) distributions made to an alternate payee pursuant to a qualified
domestic relations order; (g) distributions from an IRA for the purchase of
medical insurance (as described in Section 213(d)(1)(D) of the Code) for the
Contract Owner and his or her spouse and dependents if the Contract Owner has
received unemployment compensation for at least 12 weeks; and (h) distributions
from IRAs for first-time home purchase expenses (maximum $10,000) or certain
qualified educational expenses of the Contract Owner, spouse, children or
grandchildren of the Contract Owner. This exception will no longer apply after
the Contract Owner has been reemployed for at least 60 days. The exceptions
stated in items (d) and (f) above do not apply in the case of an IRA. The
exception stated in item (c) applies to an IRA without the requirement that
there be a separation from service.
Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to a regular or SIMPLE IRA and
the required distribution rules do not apply to Roth IRAs. Required
distributions must be over a period not exceeding the life expectancy of the
individual or the joint lives or life expectancies of the individual and his or
her designated beneficiary. If the required minimum distributions are not made,
a 50% penalty tax is imposed as to the amount not distributed.
SEEK TAX ADVICE
The above description of federal income tax consequences of the different
types of Qualified Plans which may be funded by the Contracts offered by this
Prospectus is only a brief summary meant to alert you to the issues and is not
intended as tax advice. The rules governing the provisions of Qualified Plans
are extremely complex and often difficult to comprehend. Anything less than full
compliance with the applicable rules, all of which are subject to change, may
have adverse tax consequences. A prospective Contract Owner considering adoption
of a Qualified Plan and purchase of a Contract in connection therewith should
first consult a qualified tax adviser, with regard to the suitability of the
Contract as an investment vehicle for the Qualified Plan.
SALES OF VARIABLE ACCUMULATION CONTRACTS
- --------------------------------------------------------------------------------
The principal underwriter of the Contracts is PEPCO. Contracts may be
purchased through registered representatives of W.S. Griffith & Company, Inc.
("WSG") who are licensed to sell PHL Variable annuity contracts. WSG is an
indirect wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company.
PEPCO is an indirect, majority owned subsidiary of Phoenix Home Life Mutual
Insurance Company. Contracts also may be
54
<PAGE>
purchased through other broker-dealers or entities registered under or exempt
under the Securities Exchange Act of 1934, whose representatives are authorized
by applicable law to sell Contracts under terms of agreement provided by PEPCO
and terms of agreement provided by PHL Variable.
In addition to reimbursing PEPCO for its expenses, we pay PEPCO an amount
equal to up to 7.25% of the payments made under the Contract. PEPCO pays any
qualified distribution organization an amount which may not exceed 7.25% of the
payments under the Contract. Any such amount paid with respect to Contracts sold
through other broker-dealers will be paid by us to or through PEPCO. The amounts
paid are not deducted from the payments. Deductions for surrender charges (as
described under "Surrender Charges") may be used as reimbursement for commission
payments.
Although the Glass-Steagall Act prohibits banks and bank affiliates from
engaging in the business of underwriting securities, banking regulators have not
indicated that such institutions are prohibited from purchasing variable annuity
contracts upon the order and for the account of their customers.
STATE REGULATION
- --------------------------------------------------------------------------------
We are subject to the provisions of the Connecticut insurance laws
applicable to life insurance companies and to regulation and supervision by the
Connecticut Superintendent of Insurance. We also are subject to the applicable
insurance laws of all the other states and jurisdictions in which it does an
insurance business.
State regulation of PHL Variable includes certain limitations on the
investments which may be made for its General Account and separate accounts,
including the Account. It does not include, however, any supervision over the
investment policies of the Account.
REPORTS
- --------------------------------------------------------------------------------
Reports showing the Contract Value and containing the financial statements
of the Account will be furnished to you at least annually.
VOTING RIGHTS
- --------------------------------------------------------------------------------
As stated above, all of the assets held in an available Subaccount will be
invested in shares of a corresponding Series of the Funds. We are the legal
owner of those shares and as such has the right to vote to elect the Board of
Trustees of the Funds, to vote upon certain matters that are required by the
Investment Company Act of 1940 ("1940 Act") to be approved or ratified by the
shareholders of a mutual fund and to vote upon any other matter that may be
voted upon at a shareholders' meeting. However, we intend to vote the shares of
the Funds at regular and special meetings of the shareholders of the Funds in
accordance with instructions received from Owners of the Contracts.
We currently intend to vote Fund shares attributable to any of our assets
and Fund shares held in each Subaccount for which no timely instructions from
Owners are received in the same proportion as those shares in that Subaccount
for which instructions are received. In the future, to the extent applicable
federal securities laws or regulations permit us to vote some or all shares of
the Fund in its own right, it may elect to do so.
Matters on which Owners may give voting instructions may include the
following: (1) election of the Board of Trustees of a Fund; (2) ratification of
the independent accountant for a Fund; (3) approval or amendment of the
investment advisory agreement for the Series of the Fund corresponding to the
Owner's selected Subaccount(s); (4) any change in the fundamental investment
policies or restrictions of each such Series; and (5) any other matter requiring
a vote of the Shareholders of a Fund. With respect to amendment of any
investment advisory agreement or any change in a Series' fundamental investment
policy, Owners participating in such Series will vote separately on the matter.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized. The number of votes for which you may give us
instructions will be determined as of the record date for Fund shareholders
chosen by the Board of Trustees of a Fund. We will furnish you with proper forms
and proxies to enable them to give these instructions.
TEXAS OPTIONAL RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
Participants in the Texas Optional Retirement Program may not receive the
proceeds of a withdrawal from, or complete surrender of, a Contract, or apply
them to provide annuity options prior to retirement except in the case of
termination of employment in the Texas public institutions of higher education,
death or total disability. Such proceeds, however, may be used to fund another
eligible retirement vehicle.
LEGAL MATTERS
- --------------------------------------------------------------------------------
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the Contracts described in this Prospectus.
55
<PAGE>
SAI
- --------------------------------------------------------------------------------
The SAI contains more specific information and financial statements relating
to the Account and PHL Variable. The Table of Contents of the SAI is set forth
below:
Underwriter
Calculation of Yield and Return
Calculation of Annuity Payments
Experts
Financial Statements
Contract Owner inquiries and requests for a SAI should be directed, in
writing, to Phoenix Variable Products Mail Operations at P.O. Box 8027, Boston,
Massachusetts 02266-8027, or by calling VAO at 800/541-0171.
56
<PAGE>
APPENDIX A-1
PERFORMANCE HISTORY FOR CONTRACTS WITH BENEFIT OPTION 1
- --------------------------------------------------------------------------------
From time to time, the Account may include the performance history of any or
all Subaccounts in advertisements, sales literature or reports. Performance
information about each Subaccount is based on past performance only and is not
an indication of future performance. Performance information may be expressed as
yield and effective yield of the Phoenix-Goodwin Money Market Subaccount, as
yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total
return of any Subaccount. For the Phoenix-Goodwin Multi-Sector Fixed Income
Subaccount, quotations of yield will be based on all investment income per unit
earned during a given 30-day period (including dividends and interest), less
expenses accrued during the period ("net investment income") and are computed by
dividing the net investment income by the maximum offering price per unit on the
last day of the period.
When a Subaccount advertises its total return, it usually will be calculated
for one year, five years and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $1,000 investment in the Subaccount at the
beginning of the relevant period to the value of the investment at the end of
the period, assuming the reinvestment of all distributions at net asset value
and the deduction of all applicable Contract charges except for premium taxes
(which vary by state) at the beginning of the relevant period.
For those Subaccounts within the Account that have not been available for
one of the quoted periods, the standardized average annual total return
quotations may show the investment performance such Subaccount would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1,2)
----------------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series 7/15/99 N/A N/A N/A 11.14%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series 7/15/99 N/A N/A N/A 3.72%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series 12/15/99 N/A N/A N/A -3.82%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series 7/15/99 N/A N/A N/A -8.92%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 7/15/99 N/A N/A N/A 10.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series 7/15/99 N/A N/A N/A 6.07%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series 12/15/99 N/A N/A N/A -7.70%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7/15/99 N/A N/A N/A -4.41%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 7/15/99 N/A N/A N/A -3.83%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series 7/15/99 N/A N/A N/A 9.16%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series 7/15/99 N/A N/A N/A -4.73%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series 12/15/99 N/A N/A N/A -0.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series 12/15/99 N/A N/A N/A -6.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series 12/15/99 N/A N/A N/A -0.34%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series 12/15/99 N/A N/A N/A -0.03%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series 7/15/99 N/A N/A N/A -1.88%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series 7/15/99 N/A N/A N/A -4.06%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 7/15/99 N/A N/A N/A -2.03%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series 7/15/99 N/A N/A N/A -17.58%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series 7/15/99 N/A N/A N/A 27.53%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series 7/15/99 N/A N/A N/A 18.43%
- ----------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund Series 7/15/99 N/A N/A N/A 11.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 7/15/99 N/A N/A N/A -6.61%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 7/15/99 N/A N/A N/A -8.13%
- ----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio 11/30/99 N/A N/A N/A 17.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund-- Class 2 7/15/99 N/A N/A N/A -12.47%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund-- Class 2 7/15/99 N/A N/A N/A 0.53%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund-- Class 2 7/15/99 N/A N/A N/A 0.15%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2 7/15/99 N/A N/A N/A 3.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2 7/15/99 N/A N/A N/A 1.72%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 7/15/99 N/A N/A N/A 47.35%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap 7/15/99 N/A N/A N/A 66.51%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty 7/15/99 N/A N/A N/A -2.78%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap 7/15/99 N/A N/A N/A 1.84%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The average annual total return is the annual compound return that results
from holding an initial investment of $1,000 for the time period indicated.
Returns are net of investment management fees, daily and annual administrative
fees, and mortality and expense risk charges and deferred sales charges of 7%
and 4% deducted from redemptions after 1 and 5 years, respectively. Surrender
charges are based on the age of the deposit. The investment return and
principal value of the variable contract will fluctuate so that the
accumulated value, when redeemed, may be worth more or less than the original
cost. Returns do not include the .05% charge for the Enhanced Option 1 Rider.
2 Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
57
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3)
====================================================================================================================================
Series 1983 1984 1985 1986 1987 1988 1989 1990
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 31.64% 9.62% 33.65% 19.33% 5.92% 2.93% 34.90% 3.06%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7.35% 9.18% 7.01% 5.51% 5.50% 6.43% 8.17% 7.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 5.00% 10.29% 19.47% 18.16% 0.13% 9.44% 7.21% 4.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series N/A N/A 26.14% 14.59% 11.49% 1.37% 18.77% 4.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 11.96 -9.09%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 13.31% -12.12%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
====================================================================================================================================
ANNUAL TOTAL RETURN(1,3) (continued)
====================================================================================================================================
Series 1991 1992 1993 1994 1995 1996 1997 1998 1999
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series 18.60% -13.66% 37.16% -0.89% 8.56% 17.53% 10.99% 26.73% 28.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A -33.05% -5.35% 49.59%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A 31.86% 20.91% -21.95% 3.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 41.40% 9.25% 18.57% 0.51% 29.65% 11.52% 19.94% 28.79% 28.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A 30.94%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 4.98% 2.60% 1.90% 2.86% 4.70% 4.03% 4.19% 4.10% 3.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 18.46% 9.04% 14.83% -6.38% 22.37% 11.35% 10.04% -5.06% 4.47%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A 23.17%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A 30.45% 17.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A 7.59% -3.76% 22.18% 9.52% 16.83% 17.90% 10.54%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A 15.93%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 28.10% 9.61% 9.96% -2.33% 17.09% 8.02% 19.60% 19.66% 10.24%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A -11.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A 44.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A 16.06% 43.35% 53.57%
- ------------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A 20.46% 26.42%
- ------------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A 7.74% 3.21% 7.55% 6.64% -1.52%
- ------------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A 19.25% 13.22% 12.76% 1.73% 1.36%
- ------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A 8.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2) 26.23% 6.81% 24.68% -4.14% 21.11% 17.46% 14.18% 5.10% 21.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A -30.06% -21.79% 51.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2) 26.03% 5.86% 32.48% -3.39% 23.78% 20.98% 10.54% 0.03% 27.56%
- ------------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2) N/A N/A 45.08% -3.78% 13.97% 22.12% 12.44% 8.05% 22.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A 30.78% -2.39% 15.24% 124.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A 45.23% 28.20% 7.66% 23.92%
====================================================================================================================================
</TABLE>
1 Rates are net of the investment management fee, daily administrative fees, and
mortality and expense risk charges of the Subaccounts. Percent change doesn't
include the effect of the surrender charges or the annual administrative fees.
Returns do not include the .05% charge for the Enhanced Option 1 Rider.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's higher annual fees and expenses resulting from
its Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
58
<PAGE>
Current yield for the Phoenix-Goodwin Money Market Subaccount is based upon
the income earned by the Subaccount over a 7-day period and then annualized,
i.e., the income earned in the period is assumed to be earned every seven days
over a 52-week period and stated as a percentage of the investment. Effective
yield is calculated similarly but when annualized, the income earned by the
investment is assumed to be reinvested in Subaccount Units and thus compounded
in the course of a 52-week period. Yield and effective yield reflect the
recurring charges on the Account level excluding the annual administrative fee.
Yield calculations of the Phoenix-Goodwin Money Market Subaccount used for
illustration purposes are based on the consideration of a hypothetical Contract
Owner's account having a balance of exactly one Unit at the beginning of a 7-day
period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical Contract Owner's account's original
unit. The following is an example of this yield quotation for the
Phoenix-Goodwin Money Market Subaccount based on a 7-day period ending December
31, 1999.
Example:
Value of hypothetical pre-existing account with
exactly one unit at the beginning of the period:.... $2.030543
Value of the same account (excluding capital
changes) at the end of the 7-day period:............ 2.032225
Calculation:
Ending account value.............................. 2.032225
Less beginning value.............................. 2.030543
Net change in account value....................... 0.001682
Base period return:
(adjusted change/beginning account value)......... 0.000828
Current yield = return x (365/7).................... 4.32%
Effective yield = [(1 + return)365/7] -1............ 4.41%
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 AverageSM, 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 AverageSM, First Boston High Yield Index and Solomon
Brothers Corporate and Government Bond Indices.
EACH FUND'S ANNUAL REPORT, AVAILABLE UPON REQUEST AND WITHOUT CHARGE,
CONTAINS A DISCUSSION OF THE PERFORMANCE OF THE FUNDS AND A COMPARISON OF THAT
PERFORMANCE TO A SECURITIES MARKET INDEX.
59
<PAGE>
APPENDIX A-2
PERFORMANCE HISTORY FOR CONTRACTS WITH BENEFIT OPTION 2
- --------------------------------------------------------------------------------
From time to time, the Account may include the performance history of any or
all Subaccounts in advertisements, sales literature or reports. Performance
information about each Subaccount is based on past performance only and is not
an indication of future performance. Performance information may be expressed as
yield and effective yield of the Phoenix-Goodwin Money Market Subaccount, as
yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total
return of any Subaccount. For the Phoenix-Goodwin Multi-Sector Fixed Income
Subaccount, quotations of yield will be based on all investment income per unit
earned during a given 30-day period (including dividends and interest), less
expenses accrued during the period ("net investment income") and are computed by
dividing the net investment income by the maximum offering price per unit on the
last day of the period.
When a Subaccount advertises its total return, it usually will be calculated
for one year, five years and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $1,000 investment in the Subaccount at the
beginning of the relevant period to the value of the investment at the end of
the period, assuming the reinvestment of all distributions at net asset value
and the deduction of all applicable Contract charges except for premium taxes
(which vary by state) at the beginning of the relevant period.
For those Subaccounts within the Account that have not been available for
one of the quoted periods, the standardized average annual total return
quotations may show the investment performance such Subaccount would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
<TABLE>
<CAPTION>
==================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1,2)
==================================================================================================================================
INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series 7/15/99 N/A N/A N/A 10.96%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series 7/15/99 N/A N/A N/A 3.55%
- ----------------------------------------------------------------------------------------------------------------------------------
hoenix-Bankers Trust Dow 30 Series 12/15/99 N/A N/A N/A -3.84%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series 7/15/99 N/A N/A N/A -9.05%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 7/15/99 N/A N/A N/A 10.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series 7/15/99 N/A N/A N/A 5.96%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series 12/15/99 N/A N/A N/A -7.73%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7/15/99 N/A N/A N/A -4.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 7/15/99 N/A N/A N/A -3.99%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series 7/15/99 N/A N/A N/A 8.98%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series 7/15/99 N/A N/A N/A -4.89%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series 12/15/99 N/A N/A N/A -0.50%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series 12/15/99 N/A N/A N/A -6.33%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series 12/15/99 N/A N/A N/A -0.36%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series 12/15/99 N/A N/A N/A -0.50%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series 7/15/99 N/A N/A N/A -2.04%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series 7/15/99 N/A N/A N/A -4.20%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 7/15/99 N/A N/A N/A -2.16%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series 7/15/99 N/A N/A N/A -17.71%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series 7/15/99 N/A N/A N/A 27.33%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series 7/15/99 N/A N/A N/A 18.26%
- ----------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund Series 7/15/99 N/A N/A N/A 11.21%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 7/15/99 N/A N/A N/A -6.76%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 7/15/99 N/A N/A N/A -8.28%
- ----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio 11/30/99 N/A N/A N/A 17.37%
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2 7/15/99 N/A N/A N/A -12.62%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2 7/15/99 N/A N/A N/A 0.36%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2 7/15/99 N/A N/A N/A -0.01%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2 7/15/99 N/A N/A N/A 3.17%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2 7/15/99 N/A N/A N/A 1.55%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 7/15/99 N/A N/A N/A 46.98%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap 7/15/99 N/A N/A N/A 66.26%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty 7/15/99 N/A N/A N/A -2.95%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap 7/15/99 N/A N/A N/A 1.69%
==================================================================================================================================
</TABLE>
1 The average annual total return is the annual compound return that results
from holding an initial investment of $1,000 for the time period indicated.
Returns are net of investment management fees, daily and annual administrative
fees, and mortality and expense risk charges and deferred sales charges of 7%
and 4% deducted from redemptions after 1 and 5 years, respectively. Surrender
charges are based on the age of the deposit. The investment return and
principal value of the variable contract will fluctuate so that the
accumulated value, when redeemed, may be worth more or less than the original
cost.
2 Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
60
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1983 1984 1985 1986 1987 1988 1989 1990
===================================================================================================================================
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 31.19% 9.23% 33.18% 18.92% 5.55% 2.57% 34.44% 2.69%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 6.97% 8.80% 6.63% 5.14% 5.13% 6.06% 7.79% 6.82%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 4.64% 9.90% 19.05% 17.75% -0.22% 9.06% 6.84% 3.86%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series N/A N/A 25.70% 14.19% 11.10% 1.02% 18.36% 4.40%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 11.57% -9.40%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 12.92% -12.43%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3) (continued)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1991 1992 1993 1994 1995 1996 1997 1998 1999
===================================================================================================================================
Phoenix-Aberdeen International Series 18.19% -13.96% 36.68% -1.23% 8.18% 17.12% 10.60% 26.29% 27.86%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A -33.28% -5.68% 49.07%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A 31.39% 20.49%-22.22% 3.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 40.90% 8.87% 18.16% 0.16% 29.20% 11.13% 19.53% 28.34% 28.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A 30.57%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 4.61% 2.24% 1.55% 2.50% 4.34% 3.66% 3.83% 3.74% 3.50%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 18.05% 8.65% 14.43% -6.71% 21.95% 10.96% 9.65% -5.39% 4.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A 22.74%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A 29.99% 17.33%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A 7.21% -4.09 21.76% 9.13% 16.42% 17.48% 10.16%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A 15.56%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 27.65% 9.23% 9.58% -2.67% 16.68% 7.64% 19.18% 19.24% 9.90%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A -11.43%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A 43.79%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A 15.66% 42.85% 53.08%
- -----------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A 20.04% 25.98%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A 7.37% 2.85% 7.18% 6.27% -1.87%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A 18.83% 12.83% 12.36% 1.37% 1.01%
- -----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A 7.90%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2) 25.79% 6.44% 24.24% -4.48% 20.69% 17.05% 13.78% 4.73% 20.99%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A -30.31%-22.07% 51.36%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2) 25.59% 5.49% 32.02% -3.73% 23.35% 20.56% 10.16% -0.32% 27.16%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2) N/A N/A 44.58% -4.11% 13.57% 21.69% 12.05% 7.67% 21.68%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A 30.32% -2.74% 14.83% 123.65%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A 44.72% 27.76% 7.29% 23.50%
===================================================================================================================================
</TABLE>
1Rates are net of the investment management fee, daily administrative fees, and
mortality and expense risk charges of the Subaccounts. Percent change doesn't
include the effect of the surrender charges or the annual administrative fees.
2Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that date
represents the historical results of Class 1 shares. Performance since that
date reflects Class 2's higher annual fees and expenses resulting from its Rule
12b-1 plan. Maximum annual plan expenses are 0.25%.
3Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
61
<PAGE>
Current yield for the Phoenix-Goodwin Money Market Subaccount is based upon
the income earned by the Subaccount over a 7-day period and then annualized,
i.e., the income earned in the period is assumed to be earned every seven days
over a 52-week period and stated as a percentage of the investment. Effective
yield is calculated similarly but when annualized, the income earned by the
investment is assumed to be reinvested in Subaccount Units and thus compounded
in the course of a 52-week period. Yield and effective yield reflect the
recurring charges on the Account level excluding the annual administrative fee.
Yield calculations of the Phoenix-Goodwin Money Market Subaccount used for
illustration purposes are based on the consideration of a hypothetical Contract
Owner's account having a balance of exactly one Unit at the beginning of a 7-day
period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical Contract Owner's account's original
unit. The following is an example of this yield quotation for the
Phoenix-Goodwin Money Market Subaccount based on a 7-day period ending December
31, 1999.
Example:
Value of hypothetical pre-existing account with
exactly one unit at the beginning of the period:.... $2.025183
Value of the same account (excluding capital
changes) at the end of the 7-day period:............ 2.026725
Calculation:
Ending account value.............................. 2.026725
Less beginning value.............................. 2.025183
Net change in account value....................... 0.001542
Base period return:
(adjusted change/beginning account value)......... 0.000761
Current yield = return x (365/7).................... 3.97%
Effective yield = [(1 + return)(365/7)] -1.......... 4.05%
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 AverageSM, 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 AverageSM, First Boston High Yield Index and Solomon
Brothers Corporate and Government Bond Indices.
EACH FUND'S ANNUAL REPORT, AVAILABLE UPON REQUEST AND WITHOUT CHARGE, CONTAINS A
DISCUSSION OF THE PERFORMANCE OF THE FUNDS AND A COMPARISON OF THAT PERFORMANCE
TO A SECURITIES MARKET INDEX.
62
<PAGE>
APPENDIX A-3
PERFORMANCE HISTORY FOR CONTRACTS WITH BENEFIT OPTION (3)
- --------------------------------------------------------------------------------
From time to time, the Account may include the performance history of any or
all Subaccounts in advertisements, sales literature or reports. Performance
information about each Subaccount is based on past performance only and is not
an indication of future performance. Performance information may be expressed as
yield and effective yield of the Phoenix-Goodwin Money Market Subaccount, as
yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount and as total
return of any Subaccount. For the Phoenix-Goodwin Multi-Sector Fixed Income
Subaccount, quotations of yield will be based on all investment income per unit
earned during a given 30-day period (including dividends and interest), less
expenses accrued during the period ("net investment income") and are computed by
dividing the net investment income by the maximum offering price per unit on the
last day of the period.
When a Subaccount advertises its total return, it usually will be calculated
for one year, five years and ten years or since inception if the Subaccount has
not been in existence for at least ten years. Total return is measured by
comparing the value of a hypothetical $1,000 investment in the Subaccount at the
beginning of the relevant period to the value of the investment at the end of
the period, assuming the reinvestment of all distributions at net asset value
and the deduction of all applicable Contract charges except for premium taxes
(which vary by state) at the beginning of the relevant period.
For those Subaccounts within the Account that have not been available for
one of the quoted periods, the standardized average annual total return
quotations may show the investment performance such Subaccount would have
achieved (reduced by the applicable charges) had it been available to invest in
shares of the Fund for the period quoted.
<TABLE>
<CAPTION>
==================================================================================================================================
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1,2)
==================================================================================================================================
INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series 7/15/99 N/A N/A N/A 10.88%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series 7/15/99 N/A N/A N/A 3.46%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series 12/15/99 N/A N/A N/A -3.84%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series 7/15/99 N/A N/A N/A -9.11%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 7/15/99 N/A N/A N/A 10.03%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series 7/15/99 N/A N/A N/A 5.82%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series 12/15/99 N/A N/A N/A -7.73%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 7/15/99 N/A N/A N/A -4.64%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 7/15/99 N/A N/A N/A -4.06%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series 7/15/99 N/A N/A N/A 8.89%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series 7/15/99 N/A N/A N/A -4.94%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series 12/15/99 N/A N/A N/A -0.50%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series 12/15/99 N/A N/A N/A -6.33%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series 12/15/99 N/A N/A N/A -0.36%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series 12/15/99 N/A N/A N/A -0.05%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series 7/15/99 N/A N/A N/A -2.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series 7/15/99 N/A N/A N/A -4.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 7/15/99 N/A N/A N/A -2.25%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series 7/15/99 N/A N/A N/A -17.77%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series 7/15/99 N/A N/A N/A 27.30%
- ----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series 7/15/99 N/A N/A N/A 18.17%
- ----------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund Series 7/15/99 N/A N/A N/A 11.13%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II 7/15/99 N/A N/A N/A -6.82%
- ----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 7/15/99 N/A N/A N/A -8.33%
- ----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio 11/30/99 N/A N/A N/A 17.36%
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2 7/15/99 N/A N/A N/A -12.68%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2 7/15/99 N/A N/A N/A 0.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2 7/15/99 N/A N/A N/A -0.18%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2 7/15/99 N/A N/A N/A 3.10%
- ----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2 7/15/99 N/A N/A N/A 1.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 7/15/99 N/A N/A N/A 46.88%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap 7/15/99 N/A N/A N/A 66.14%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty 7/15/99 N/A N/A N/A -3.01%
- ----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap 7/15/99 N/A N/A N/A 1.61%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The average annual total return is the annual compound return that results
from holding an initial investment of $1,000 for the time period indicated.
Returns are net of investment management fees, daily and annual administrative
fees, and mortality and expense risk charges and deferred sales charges of 7%
and 4% deducted from redemptions after 1 and 5 years, respectively. Surrender
charges are based on the age of the deposit. The investment return and
principal value of the variable contract will fluctuate so that the
accumulated value, when redeemed, may be worth more or less than the original
cost.
2 Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
63
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1983 1984 1985 1986 1987 1988 1989 1990
===================================================================================================================================
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 31.00% 9.07% 32.98% 18.74% 5.39% 2.42% 34.24% 2.54%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 6.82% 8.63% 6.47% 4.98% 4.97% 5.90% 7.63% 6.66%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 4.48% 9.74% 18.87% 17.57% -0.37% 8.90% 6.68% 3.70%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series N/A N/A 25.51% 14.02% 10.94% 0.87% 18.18% 4.24%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund Series N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 11.40% -9.54%
---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A 12.75% -12.56%
---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
=================================================================================================================================
ANNUAL TOTAL RETURN(1,3) (continued)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1991 1992 1993 1994 1995 1996 1997 1998 1999
===================================================================================================================================
Phoenix-Aberdeen International Series 18.01% -14.09% 36.47% -1.38% 8.02% 16.94% 10.44% 26.10% 27.67%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A -33.38% -5.83% 48.83%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A 31.20% 20.31% -22.34% 3.30%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 40.69% 8.71% 17.98% 0.01% 29.01% 10.96% 19.35% 28.15% 27.87%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A 30.30%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 4.45% 2.08% 1.39% 2.35% 4.18% 3.51% 3.67% 3.58% 3.34%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 17.87% 8.49% 14.25% -6.85% 21.77% 10.79% 9.49% -5.53% 3.96%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A 22.55%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A 29.80% 17.18%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A 7.05% -4.24% 21.58% 8.97% 16.25% 17.31% 10.02%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A 15.36%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 27.46% 9.06% 9.41% -2.82% 16.51% 7.48% 19.01% 19.06% 9.71%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A -11.56%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A 43.64%
---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A 15.48% 42.64% 52.84%
---------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund Series N/A N/A N/A N/A N/A N/A N/A 19.86% 25.80%
---------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A 7.21% 2.69% 7.02% 6.11% -2.01%
---------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A 18.65% 12.66% 12.19% 1.22% 0.86%
---------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A 7.73%
---------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fun -- Class 2(2) 25.60% 6.28% 24.05% -4.62% 20.51% 16.87% 13.61% 4.58% 20.81%
---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund -- Class 2(2) N/A N/A N/A N/A N/A N/A -30.41% -22.18% 50.99%
-------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2(2) 25.40% 5.33% 31.82% -3.87% 23.17% 20.37% 9.99% -0.47% 26.97%
---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(2) N/A N/A 44.36% -4.26% 13.40% 21.51% 11.88% 7.51% 21.50%
-------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A 30.12% -2.88% 14.66% 123.32%
---------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A 44.50% 27.57% 7.12% 23.32%
===================================================================================================================================
</TABLE>
1 Rates are net of the investment management fee, daily administrative fees, and
mortality and expense risk charges of the Subaccounts. Percent change doesn't
include the effect of the surrender charges or the annual administrative fees.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's higher annual fees and expenses resulting from
its Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Returns reflect the effect of any applicable management fee waivers and
reimbursements, which may increase total return.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
64
<PAGE>
Current yield for the Phoenix-Goodwin Money Market Subaccount is based upon
the income earned by the Subaccount over a 7-day period and then annualized,
i.e., the income earned in the period is assumed to be earned every seven days
over a 52-week period and stated as a percentage of the investment. Effective
yield is calculated similarly but when annualized, the income earned by the
investment is assumed to be reinvested in Subaccount Units and thus compounded
in the course of a 52-week period. Yield and effective yield reflect the
recurring charges on the Account level excluding the annual administrative fee.
Yield calculations of the Phoenix-Goodwin Money Market Subaccount used for
illustration purposes are based on the consideration of a hypothetical Contract
Owner's account having a balance of exactly one Unit at the beginning of a 7-day
period, which period will end on the date of the most recent financial
statements. The yield for the Subaccount during this 7-day period will be the
change in the value of the hypothetical Contract Owner's account's original
unit. The following is an example of this yield quotation for the
Phoenix-Goodwin Money Market Subaccount based on a 7-day period ending December
31, 1999.
Example:
Value of hypothetical pre-existing account with
exactly one unit at the beginning of the period:.... $2.023510
Value of the same account (excluding capital
changes) at the end of the 7-day period:............ 2.025010
Calculation:
Ending account value.............................. 2.025010
Less beginning value.............................. 2.023510
Net change in account value....................... 0.001500
Base period return:
(adjusted change/beginning account value)......... 0.000741
Current yield = return x (365/7).................... 3.87%
Effective yield = [(1 + return)365/7] -1............ 3.94%
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 AverageSM, 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 AverageSM, First Boston High Yield Index and Solomon
Brothers Corporate and Government Bond Indices.
EACH FUND'S ANNUAL REPORT, AVAILABLE UPON REQUEST AND WITHOUT CHARGE,
CONTAINS A DISCUSSION OF THE PERFORMANCE OF THE FUNDS AND A COMPARISON OF THAT
PERFORMANCE TO A SECURITIES MARKET INDEX.
65
<PAGE>
APPENDIX B
THE GUARANTEED INTEREST ACCOUNT
- --------------------------------------------------------------------------------
Contributions to the GIA under the Contract and transfers to the GIA become
part of the general account of PHL Variable Insurance Company (the "General
Account"), which supports insurance and annuity obligations. Because of
exemptive and exclusionary provisions, interest in the General Account has not
been registered under the Securities Act of 1933 ("1933 Act") nor is the General
Account registered as an investment company under the 1940 Act. Accordingly,
neither the General Account nor any interest therein is specifically subject to
the provisions of the 1933 or 1940 Acts and the staff of the SEC has not
reviewed the disclosures in this Prospectus concerning the GIA. Disclosures
regarding the GIA and the General Account, however, may be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
The General Account is made up of all of the general assets of PHL Variable
Insurance Company other than those allocated to any separate account. Payments
will be allocated to the GIA and, therefore, the General Account, as elected by
the Owner at the time of purchase or as subsequently changed. PHL Variable will
invest the assets of the General Account in assets chosen by it and allowed by
applicable law. Investment income from General Account assets is allocated
between PHL Variable and the Contracts participating in the General Account, in
accordance with the terms of such Contracts.
Fixed annuity payments made to Annuitants under the Contract will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. PHL Variable assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract that cannot be
changed. In addition, PHL Variable guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the General Account allocated to PHL Variable
includes compensation for mortality and expense risks borne by it in connection
with General Account contracts.
The amount of investment income allocated to the Contracts will vary from
year to year in the sole discretion of PHL Variable. However, PHL Variable
guarantees that it will credit interest at a rate of not less than 3% per year
compounded annually, to amounts allocated to the GIA. PHL Variable may credit
interest at a rate in excess of these rates; however, it is not obligated to
credit any interest in excess of these rates.
On the last business day of each calendar week, PHL Variable will set the
excess interest rate, if any, that will apply to amounts deposited to the GIA.
That rate will remain in effect for such deposits for an initial guarantee
period of one full year from the date of deposit. Upon expiration of the initial
one-year guarantee period (and each subsequent one-year guarantee period
thereafter), the rate to be applied to any deposits whose guaranteed period has
just ended will be the same rate as is applied to new deposits allocated to the
GIA at that time. This rate will likewise remain in effect for a guarantee
period of one full year from the date the new rate is applied.
Excess interest, if any, will be determined by PHL Variable based on
information as to expected investment yields. Some of the factors that PHL
Variable may consider in determining whether to credit excess interest to
amounts allocated to the GIA and the amount thereof, are general economic
trends, rates of return currently available and anticipated on investments,
regulatory and tax requirements and competitive factors. ANY INTEREST CREDITED
TO AMOUNTS ALLOCATED TO THE GIA IN EXCESS OF 3% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF PHL VARIABLE AND WITHOUT REGARD TO ANY SPECIFIC FORMULA.
THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO GIA ALLOCATIONS
MAY NOT EXCEED THE MINIMUM GUARANTEE FOR ANY GIVEN YEAR.
PHL Variable is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in PHL Variable's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
policyholders, Contract Owners and shareholders.
Excess interest, if any, will be credited on the GIA Contract Value. PHL
Variable guarantees that, at any time, the GIA Contract Value will not be less
than the amount of payments allocated to the GIA, plus interest at the rate of
3% per year, compounded annually, plus any additional interest which PHL
Variable may, in its discretion, credit to the GIA, less the sum of any
applicable annual administrative or surrender charges, any applicable premium
taxes, and less any amounts surrendered. If the Owner surrenders the Contract,
the amount available from the GIA will be reduced by any applicable surrender
charge and annual administration charge. See "Deductions and Charges."
For 403(b) plans with loans, amounts borrowed from the GIA will be treated
as transfers to the Loan Security Account and subject to the same limitations as
applies to transfers from the GIA (see "Qualified Plans").
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE DOLLAR
COST AVERAGING PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT OF
THE GIA OVER A PERIOD OF 6 MONTHS OR LONGER. ALSO, THE TOTAL CONTRACT VALUE
ALLOCATED TO THE GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE
SUBACCOUNTS OF THE ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE
FOLLOWING ANNUALLY RENEWABLE SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33% YEAR THREE: 50% YEAR FOUR: 100%
66
<PAGE>
APPENDIX C
DEDUCTIONS FOR PREMIUM TAXES
QUALIFIED AND NON-QUALIFIED ANNUITY CONTRACTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
UPON UPON
STATE PURCHASE(1) ANNUITIZATION NON-QUALIFIED QUALIFIED
<S> <C> <C> <C> <C>
California .......................................... X 2.35% 0.50%
Kentucky(2)..........................................
Maine................................................ X 2.0
Nevada............................................... X 3.50
South Dakota......................................... X 1.25
West Virginia........................................ X 1.00 1.00
Wyoming.............................................. X 1.00
Commonwealth of Puerto Rico.......................... X 1.00% 1.00%
</TABLE>
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 Premium Taxes, see
"Deductions and Charges--Premium Tax."
1"Purchase" in this chart refers to the earlier of partial withdrawal, surrender
of the Contract, payment of death proceeds or Maturity Date. 2Effective January
1, 2000, Kentucky no longer imposes Premium Tax on variable annuities.
67
<PAGE>
PART B
INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
PHL VARIABLE INSURANCE COMPANY [VERSION A]
HOME OFFICE: PHOENIX VARIABLE ANNUITY
One American Row MAIL OPERATIONS ("VAMO")
Hartford, Connecticut P.O. Box 8027
Boston, Massachusetts 02266-8027
PHL VARIABLE ACCUMULATION ACCOUNT
VARIABLE ACCUMULATION DEFERRED ANNUITY CONTRACT
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus, dated May 1, 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. During the fiscal years ended December 31, 1997, 1998 and 1999, PEPCO was
paid $11.8, $12.6 and $13.3 million, respectively, and retained $0 for sales of
these contracts.
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 mortality and expense risk charge
equal to 1.25% on an annual basis, and a daily administrative fee equal to
0.125% 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 example of a return/yield calculation for the Phoenix-Goodwin
Money Market Subaccount was based on the 7-day period ending December 31, 1999:
Value of hypothetical pre-existing account with
exactly one Unit at the beginning of the period: $1.168581
Value of the same account (excluding capital
changes) at the end of the 7-day period:...... 1.169442
Calculation:
Ending account value.......................... 1.169442
Less beginning account value.................. 1.168581
Net change in account value................... 0.000861
Base period return:
(adjusted change/beginning account value)..... 0.000737
Current yield = return x (365/7) =............... 3.84%
Effective yield = [(1 + return)(365/7)] -1 =..... 3.92%
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 nth 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
Stanger's Investment Adviser
The Stanger Register
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)
CALCULATION OF ANNUITY PAYMENTS
- --------------------------------------------------------------------------------
See your prospectus in the section titled "The Annuity Period" for a
description of the annuity options and restrictions.
You may elect a payment option by written request as described in your
prospectus. If you do not elect an option, amounts held under the contract will
be applied to provide a Variable Payment Life Annuity 10-year period certain
(Option I) on the maturity date. You may not change your election after the
first annuity payment.
FIXED ANNUITY PAYMENTS
Fixed annuity payments are determined by the total dollar value for all
subaccounts' accumulation units, all amounts held in the GIA and the MVA
Account. For each contract the resulting dollar value is then multiplied by the
applicable annuity purchase rate, which reflects the age (and sex for
nontax-qualified plans) of the annuitant or annuitants, for the fixed payment
annuity option selected. The guaranteed annuity payment rates will be no less
favorable than the following:
Under Options A, B, D, E and F rates are based on the a-49 Annuity Table(4)
projected to 1985 with Projection Scale B. We use an interest rate of 3-3/8% for
5- and 10-year certain periods under Option A, for the 10-year certain period
under Option F, and for Option E; an interest rate of 3-1/4% for the 20-year
certain period under Options A and F; an interest rate of 3-1/2% under Options B
and D. Under Options G and H the guaranteed interest rate is 3%.
It is possible that we may have more favorable (i.e. higher-paying) rates in
effect on the maturity date.
B-3
<PAGE>
VARIABLE ANNUITY PAYMENTS
Under all variable options except Option L, the first payment is based on an
assumed annual investment rate of 4-1/2%. Should the assumed rate result in a
first payment larger than permitted by state law, we will select a lower rate.
All subsequent payments may be higher or lower depending on investment
experience of the subaccounts.
Under Options I, J, K, M and N, we determine the first payment by
multiplying the amounts held under the selected option in each subaccount by the
applicable payment option rate, which reflects the age (and sex for
nontax-qualified plans) of the annuitant or annuitants. The first payment equals
the total of such amounts determined for each subaccount. We determine future
payments under these options by multiplying the contract value in each
subaccount (Number of Annuity Units times the Annuity Unit Value) by the
applicable payment option's rate on the payment calculation date. The payment
will equal the sum of the amounts provided by each subaccount investment.
Under Option L, we determine the amount of the annual distribution by
dividing the amount of contract value held under this option on December 31 of
the previous year by the life expectancy of the annuitant or the joint life
expectancy of the annuitant and joint annuitant at that time.
Under Options I, J, M and N, the applicable options rate used to determine
the first 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 investment rate. Under
Option K, the rate will be based on the number of payments to be made during the
specified period and the assumed investment rate.
We deduct a daily charge for mortality and expense risks and a daily
administrative fee from contract values held in the subaccounts. See your
prospectus in the section titled "Deductions and Charges." Electing Option K
will result in a mortality risk deduction being made even though we assume no
mortality risk under that option.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of PHL Variable Accumulation Account as of December
31, 1999 and for the year then ended and 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 herein have been so
included in reliance on the respective reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
PricewaterhouseCoopers LLP, whose address is 100 Pearl Street, Hartford,
Connecticut 06103, also provides other accounting and tax-related services as
requested by PHL Variable from time to time.
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the contracts described in this prospectus.
1The 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).
2The 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.
3Weighted 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.
4The 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
DECEMBER 31, 1999
B-5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
GOODWIN MULTI- OAKHURST
GOODWIN MONEY ENGEMANN SECTOR FIXED STRATEGIC ABERDEEN
MARKET CAPITAL GROWTH INCOME ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost $ 62,156,746 $ 280,431,716 $68,105,826 $70,005,841 $42,931,730
============ ============= =========== =========== ===========
Investments at market $ 62,156,746 $ 374,747,208 $59,455,163 $76,461,657 $45,485,987
------------ ------------- ----------- ----------- -----------
Total assets 62,156,746 374,747,208 59,455,163 76,461,657 45,485,987
LIABILITIES
Accrued expenses to related party 72,374 420,870 69,857 88,133 50,638
------------ ------------- ----------- ----------- -----------
NET ASSETS $ 62,084,372 $ 374,326,338 $59,385,306 $76,373,524 $45,435,349
============ ============= =========== =========== ===========
Accumulation units outstanding 53,088,877 158,996,631 47,250,817 43,749,631 21,573,562
============ ============= =========== =========== ===========
Unit value $ 1.169442 $ 2.354304 $ 1.256810 $ 1.745695 $ 2.106066
============ ============= =========== =========== ===========
DUFF & PHELPS SENECA RESEARCH
OAKHURST REAL ESTATE STRATEGIC ABERDEEN ENHANCED
BALANCED SECURITIES THEME NEW ASIA INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 51,567,039 $ 12,146,813 $50,406,148 $ 5,068,391 $39,497,092
============ ============= =========== =========== ===========
Investments at market $ 57,429,112 $ 10,041,898 $69,590,336 $ 5,396,137 $44,982,006
------------ ------------- ----------- ----------- -----------
Total assets 57,429,112 10,041,898 69,590,336 5,396,137 44,982,006
LIABILITIES
Accrued expenses to related party 66,351 11,143 75,734 6,084 51,293
------------ ------------- ----------- ----------- -----------
NET ASSETS $ 57,362,761 $ 10,030,755 $69,514,602 $ 5,390,053 $44,930,713
============ ============= =========== =========== ===========
Accumulation units outstanding 33,400,269 7,521,519 25,554,777 5,774,693 28,345,074
============ ============= =========== =========== ===========
Unit value $ 1.717434 $ 1.333608 $ 2.720219 $ 0.933392 $ 1.585133
============ ============= =========== =========== ===========
OAKHURST
ENGEMANN SENECA MID- GROWTH AND HOLLISTER SCHAFER MID-
NIFTY FIFTY CAP GROWTH INCOME VALUE EQUITY CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 19,536,325 $ 5,078,206 $40,568,421 $ 4,889,081 $ 3,071,867
============ ============= =========== =========== ===========
Investments at market $ 25,017,297 $ 7,273,932 $47,333,975 $ 5,907,830 $ 2,602,196
------------ ------------- ----------- ----------- -----------
Total assets 25,017,297 7,273,932 47,333,975 5,907,830 2,602,196
LIABILITIES
Accrued expenses to related party 28,045 7,301 54,941 6,600 3,030
------------ ------------- ----------- ----------- -----------
NET ASSETS $ 24,989,252 $ 7,266,631 $47,279,034 $ 5,901,230 $ 2,599,166
============ ============= =========== =========== ===========
Accumulation units outstanding 15,351,809 4,186,086 34,386,620 4,393,522 3,352,167
============ ============= =========== =========== ===========
Unit value $ 1.627772 $ 1.735901 $ 1.374925 $ 1.343166 $ 0.775369
============ ============= =========== =========== ===========
WANGER TEMPLETON
WANGER U.S. INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $107,245,347 $ 45,504,505 $27,041,771 $12,350,496 $16,527,973
============ ============= =========== =========== ===========
Investments at market $140,490,309 $ 107,896,575 $29,735,834 $12,970,740 $18,302,445
------------ ------------- ----------- ----------- -----------
Total assets 140,490,309 107,896,575 29,735,834 12,970,740 18,302,445
LIABILITIES
Accrued expenses to related party 156,097 113,454 33,477 14,693 21,806
------------ ------------- ----------- ----------- -----------
NET ASSETS $140,334,212 $ 107,783,121 $29,702,357 $12,956,047 $18,280,639
============ ============= =========== =========== ===========
Accumulation units outstanding 60,366,719 30,516,885 22,477,499 9,616,538 12,940,357
============ ============= =========== =========== ===========
Unit value $ 2.324695 $ 3.531918 $ 1.321426 $ 1.347267 $ 1.412684
============ ============= =========== =========== ===========
</TABLE>
See Notes to Financial Statements
B-6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER EAFE EQUITY
MARKETS INVESTMENTS TWENTY FOREIGN FORTY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost $ 5,815,692 $ 1,865,530 $ 2,000,068 $ 1,113,463 $ 408,298
============ ============= =========== =========== ===========
Investments at market $ 6,183,573 $ 1,896,955 $ 2,258,010 $ 1,707,003 $ 450,982
------------ ------------- ----------- ----------- -----------
Total assets 6,183,573 1,896,955 2,258,010 1,707,003 450,982
LIABILITIES
Accrued expenses to related party 6,994 1,711 2,475 1,658 487
------------ ------------- ----------- ----------- -----------
NET ASSETS $ 6,176,579 $ 1,895,244 $ 2,255,535 $ 1,705,345 $ 450,495
============ ============= =========== =========== ===========
Accumulation units outstanding 7,915,015 1,734,265 1,653,547 910,044 185,632
============ ============= =========== =========== ===========
Unit value $ 0.780362 $ 1.092822 $ 1.364058 $ 1.873914 $ 2.426819
============ ============= =========== =========== ===========
FEDERATED U.S. FEDERATED
BANKERS TRUST GOV'T. HIGH INCOME FEDERATED U.S. JANUS EQUITY
DOW 30 SECURITIES II BOND FUND II GOV'T BOND INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 362 $ 1,752,488 $ 1,178,018 $ 73,748 $ 135,469
============ ============= =========== =========== ===========
Investments at market $ 366 $ 1,754,719 $ 1,185,399 $ 73,633 $ 136,749
------------ ------------- ----------- ----------- -----------
Total assets 366 1,754,719 1,185,399 73,633 136,749
LIABILITIES
Accrued expenses to related party 0 1,888 590 4 14
------------ ------------- ----------- ----------- -----------
NET ASSETS $ 366 $ 1,752,831 $ 1,184,809 $ 73,629 $ 136,735
============ ============= =========== =========== ===========
Accumulation units outstanding 181 882,500 601,665 36,748 65,607
============ ============= =========== =========== ===========
Unit value $ 2.019949 $ 1.986211 $ 1.969219 $ 2.003595 $ 2.084151
============ ============= =========== =========== ===========
MORGAN
JANUS FLEXIBLE STANLEY FOCUS TECHNOLOGY
JANUS GROWTH INCOME EQUITY PORTFOLIO
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 579,580 $ 196,950 $ 58,357 $ 650,364
============ ============= =========== ===========
Investments at market $ 587,425 $ 196,665 $ 58,889 $ 663,142
------------ ------------- ----------- -----------
Total assets $ 587,425 $ 196,665 $ 58,889 $ 663,142
LIABILITIES
Accrued expenses to related party 91 61 9 121
------------ ------------- ----------- -----------
NET ASSETS $ 587,334 $ 196,604 $ 58,880 $ 663,021
============ ============= =========== ===========
Accumulation units outstanding 281,714 98,258 29,022 323,061
============ ============= =========== ===========
Unit value $ 2.084861 $ 2.000901 $ 2.028828 $ 2.052307
============ ============= =========== ===========
</TABLE>
See Notes to Financial Statements
B-7
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ENGEMANN GOODWIN MULTI- OAKHURST
GOODWIN CAPITAL SECTOR FIXED STRATEGIC
MONEY MARKET GROWTH INCOME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
Investment income
Distributions $ 2,839,596 $ 725,503 $ 4,960,786 $ 1,591,555
Expenses
Mortality, expense risk and
administrative charges 827,598 4,073,838 835,686 951,940
------------ ----------- ----------- -----------
Net investment income (loss) 2,011,998 (3,348,335) 4,125,100 639,615
------------ ----------- ----------- -----------
Net realized gain (loss) from share transactions - 530,954 (36,949) 89,562
Net realized gain distribution from Fund - 28,171,102 - 3,723,363
Net unrealized appreciation (depreciation)
on investment - 55,738,834 (1,739,788) 2,304,187
------------ ----------- ----------- -----------
Net gain (loss) on investments - 84,440,890 (1,776,737) 6,117,112
------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 2,011,998 $ 81,092,555 $ 2,348,363 $ 6,756,727
============ ============ =========== ===========
DUFF & PHELPS SENECA
ABERDEEN OAKHURST REAL ESTATE STRATEGIC
INTERNATIONAL BALANCED SECURITIES THEME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
Investment income
Distributions $ 875,292 $ 1,290,520 $ 524,545 $ -
Expenses
Mortality, expense risk and
administrative charges 470,045 706,711 144,819 612,565
------------ ----------- ----------- -----------
Net investment income (loss) 405,247 583,809 379,726 (612,565)
------------ ----------- ----------- -----------
Net realized gain (loss) from share transactions 21,393 82,910 (357,657) 6,054
Net realized gain distribution from Fund 5,174,723 1,978,590 - 8,508,874
Net unrealized appreciation (depreciation)
on investment 3,846,552 2,551,511 260,875 13,242,651
------------ ----------- ----------- -----------
Net gain (loss) on investments 9,042,668 4,613,011 (96,782) 21,757,579
------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 9,447,915 $ 5,196,820 $ 282,944 $21,145,014
============ ============ =========== ===========
RESEARCH
ABERDEEN ENHANCED ENGEMANN SENECA MID-
NEW ASIA INDEX NIFTY FIFTY CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
Investment income
Distributions $ 36,364 $ 337,186 $ - $ -
Expenses
Mortality, expense risk and
administrative charges 49,769 486,549 205,222 48,579
------------ ----------- ----------- -----------
Net investment income (loss) (13,404) (149,363) (205,222) (48,579)
------------ ----------- ----------- -----------
Net realized gain (loss) from share transactions 32,583 110,350 43,661 3,041
Net realized gain distribution from Fund - 2,231,711 - 171,998
Net unrealized appreciation (depreciation)
on investment 1,462,732 3,322,852 4,728,759 1,867,375
------------ ----------- ----------- -----------
Net gain (loss) on investments 1,495,315 5,664,913 4,772,420 2,042,414
------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 1,481,910 $ 5,515,550 $ 4,567,198 $ 1,993,835
============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements
B-8
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
OAKHURST
GROWTH AND HOLLISTER VALUE SCHAFER MID- WANGER U.S.
INCOME EQUITY CAP VALUE SMALL CAP
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C>
Investment income
Distributions $ 245,067 $ 16,043 $ 35,916 $ -
Expenses
Mortality, expense risk and
administrative charges 469,257 55,999 37,257 1,603,830
------------ ------------ ---------- -----------
Net investment income (loss) (224,190) (39,957) (1,341) (1,603,830)
------------ ------------ ---------- -----------
Net realized gain (loss) from share transactions 21,981 11,571 (38,925) 87,851
Net realized gain distribution from Fund 587,617 323,317 - 10,381,485
Net unrealized appreciation (depreciation)
on investment 4,878,576 730,425 (328,690) 17,261,644
------------ ------------ ---------- -----------
Net gain (loss) on investments 5,488,174 1,065,313 (367,615) 27,730,981
------------ ------------ ---------- -----------
Net increase (decrease) in net assets
resulting from operations $ 5,263,984 $ 1,025,357 $ (368,956) $26,127,151
============ ============ ========== ===========
WANGER TEMPLETON
INTERNATIONAL TEMPLETON ASSET TEMPLETON
SMALL CAP STOCK ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
Investment income
Distributions $ 773,963 $ 192,001 $ 206,642 $ 327,255
Expenses
Mortality, expense risk and
administrative charges 836,189 247,706 147,958 212,487
------------ ------------ ---------- -----------
Net investment income (loss) (62,225) (55,705) 58,684 114,768
------------ ------------ ---------- -----------
Net realized gain (loss) from share transactions 251,858 149,039 149,829 67,923
Net realized gain distribution from Fund - 1,017,166 1,270,597 1,217,523
Net unrealized appreciation (depreciation)
on investment 58,550,136 3,821,548 628,563 1,681,158
------------ ------------ ---------- -----------
Net gain (loss) on investments 58,801,994 4,987,753 2,048,989 2,966,604
------------ ------------ ---------- -----------
Net increase (decrease) in net assets
resulting from operations $ 58,739,769 $ 4,932,048 $2,107,673 $ 3,081,372
============ ============ ========== ===========
TEMPLETON
DEVELOPING MUTUAL SHARES WANGER WANGER
MARKETS INVESTMENTS TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
Investment income
Distributions $ 44,167 $ 950 $ - $ -
Expenses
Mortality, expense risk and
administrative charges 71,321 11,599 15,357 7,043
------------ ------------ ---------- -----------
Net investment income (loss) (27,155) (10,649) (15,357) (7,043)
------------ ------------ ---------- -----------
Net realized gain (loss) from share transactions 149,364 2,718 60,992 15,590
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation)
on investment 1,802,794 27,350 257,942 593,540
------------ ------------ ---------- -----------
Net gain (loss) on investments 1,952,158 30,068 318,934 609,129
------------ ------------ ---------- -----------
Net increase (decrease) in net assets
resulting from operations $ 1,925,003 $ 19,419 $ 303,577 $ 602,086
============ ============ ========== ===========
</TABLE>
(1) From inception February 8, 1999 to December 31, 1999
(2) From inception February 8, 1999 to December 31, 1999
See Notes to Financial Statements
B-9
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
FEDERATED U.S. FEDERATED
EAFE EQUITY BANKERS TRUST GOV'T HIGH INCOME
INDEX DOW 30 SECURITIES II BOND FUND II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5) SUBACCOUNT(6)
<S> <C> <C> <C> <C>
Investment income
Distributions $ 6,990 $ 0 $ - $ -
Expenses
Mortality, expense risk and
administrative charges 1,215 0 5,009 1,960
------------ ------------- ----------- -----------
Net investment income (loss) 5,775 0 (5,009) (1,960)
------------ ------------- ----------- -----------
Net realized gain (loss) from share transactions 23 - (415) (1,859)
Net realized gain distribution from Fund 13,058 - - -
Net unrealized appreciation (depreciation)
on investment 42,684 4 2,231 7,381
------------ ------------- ----------- -----------
Net gain (loss) on investments 55,765 4 1,816 5,522
------------ ------------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 61,540 $ 4 $ (3,193) $ 3,562
============ ============= =========== ===========
FEDERATED U.S. JANUS EQUITY JANUS FLEXIBLE
GOV'T BOND INCOME JANUS GROWTH INCOME
SUBACCOUNT(7) SUBACCOUNT(8) SUBACCOUNT(9) SUBACCOUNT(10)
Investment income
Distributions $ 111 $ - $ - $ 413
Expenses
Mortality, expense risk and
administrative charges 4 14 92 61
------------ ------------- ----------- -----------
Net investment income (loss) 107 (14) (92) 352
------------ ------------- ----------- -----------
Net realized gain (loss) from share transactions - - - -
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation)
on investment (115) 1,280 7,845 (284)
------------ ------------- ----------- -----------
Net gain (loss) on investments (115) 1,280 7,845 (284)
------------ ------------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ (8) $ 1,266 $ 7,753 $ 68
============ ============= =========== ===========
MORGAN
STANLEY FOCUS TECHNOLOGY
EQUITY PORTFOLIO
SUBACCOUNT(11) SUBACCOUNT(12)
Investment income
Distributions $ - $ -
Expenses
Mortality, expense risk and
administrative charges 9 120
------------ -------------
Net investment income (loss) (9) (120)
------------ -------------
Net realized gain (loss) from share transactions - -
Net realized gain distribution from Fund - -
Net unrealized appreciation (depreciation)
on investment 532 12,778
------------ -------------
Net gain (loss) on investments 532 12,778
------------ -------------
Net increase (decrease) in net assets
resulting from operations $ 523 $ 12,658
============ =============
</TABLE>
(3) From inception July 26, 1999 to December 31, 1999
(4) From inception December 29, 1999 to December 31, 1999
(5) From inception July 21, 1999 to December 31, 1999
(6) From inception July 27, 1999 to December 31, 1999
(7) From inception December 22, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 20, 1999 to December 31, 1999
(10) From inception December 22, 1999 to December 31, 1999
(11) From inception December 24, 1999 to December 31, 1999
(12) From inception December 21, 1999 to December 31, 1999
See Notes to Financial Statements
B-10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ENGEMANN GOODWIN MULTI-
GOODWIN CAPITAL SECTOR FIXED
MONEY MARKET GROWTH INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 2,011,998 $ (3,348,335) $ 4,125,100
Net realized gain (loss) - 28,702,056 (36,949)
Net unrealized appreciation
(depreciation) - 55,738,834 (1,739,788)
------------ ------------- ------------
Net increase (decrease)
resulting from operations 2,011,998 81,092,555 2,348,363
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 96,619,265 52,566,509 6,443,791
Participant transfers (81,630,928) 12,382,553 (3,161,032)
Participant withdrawals (9,968,530) (21,343,741) (6,424,206)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 5,019,807 43,605,320 (3,141,447)
------------ ------------- ------------
Net increase (decrease) in net assets 7,031,805 124,697,875 (793,084)
NET ASSETS
Beginning of period 55,052,567 249,628,464 60,178,390
------------ ------------- ------------
End of period $ 62,084,372 $ 374,326,338 $ 59,385,306
============ ============= ============
OAKHURST
STRATEGIC ABERDEEN OAKHURST
ALLOCATION INTERNATIONAL BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
FROM OPERATIONS
Net investment income (loss) $ 639,615 $ 405,247 $ 583,809
Net realized gain (loss) 3,812,925 5,196,116 2,061,500
Net unrealized appreciation
(depreciation) 2,304,187 3,846,552 2,551,511
------------ ------------- ------------
Net increase (decrease)
resulting from operations 6,756,727 9,447,915 5,196,820
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 12,809,303 8,830,207 10,913,866
Participant transfers 2,252,352 3,692,073 3,942,234
Participant withdrawals (6,110,415) (2,406,838) (5,291,645)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 8,951,240 10,115,442 9,564,455
------------ ------------- ------------
Net increase (decrease) in net assets 15,707,967 19,563,357 14,761,275
NET ASSETS
Beginning of period 60,665,557 25,871,992 42,601,486
------------ ------------- ------------
End of period $ 76,373,524 $ 45,435,349 $ 57,362,761
============ ============= ============
DUFF & PHELPS SENECA
REAL ESTATE STRATEGIC ABERDEEN NEW
SECURITIES THEME ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
FROM OPERATIONS
Net investment income (loss) $ 379,726 $ (612,565) $ (13,404)
Net realized gain (loss) (357,657) 8,514,928 32,583
Net unrealized appreciation
(depreciation) 260,875 13,242,651 1,462,732
------------ ------------- ------------
Net increase (decrease)
resulting from operations 282,944 21,145,014 1,481,910
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 1,240,752 10,463,519 571,375
Participant transfers (2,222,163) 14,203,611 995,184
Participant withdrawals (778,777) (3,006,971) (133,389)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions (1,760,188) 21,660,159 1,433,170
------------ ------------- ------------
Net increase (decrease) in net assets (1,477,244) 42,805,173 2,915,081
NET ASSETS
Beginning of period 11,507,999 26,709,429 2,474,972
------------ ------------- ------------
End of period $ 10,030,755 $ 69,514,602 $ 5,390,053
============ ============= ============
</TABLE>
See Notes to Financial Statements
B-11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
RESEARCH
ENHANCED ENGEMANN SENECA MID-
INDEX NIFTY FIFTY CAP GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (149,363) $ (205,222) $ (48,579)
Net realized gain (loss) 2,342,061 43,661 175,039
Net unrealized appreciation
(depreciation) 3,322,852 4,728,759 1,867,375
------------ ------------- ------------
Net increase (decrease)
resulting from operations 5,515,550 4,567,198 1,993,835
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 7,468,104 5,849,604 824,342
Participant transfers 13,808,676 10,835,387 2,377,074
Participant withdrawals (3,532,099) (1,328,470) (270,679)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 17,744,681 15,356,521 2,930,737
------------ ------------- ------------
Net increase (decrease) in net assets 23,260,231 19,923,719 4,924,572
NET ASSETS
Beginning of period 21,670,482 5,065,533 2,342,059
------------ ------------- ------------
End of period $ 44,930,713 $ 24,989,252 $ 7,266,631
============ ============= ============
OAKHURST
GROWTH AND HOLLISTER VALUE SCHAFER MID-
INCOME EQUITY CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT
FROM OPERATIONS
Net investment income (loss) $ (224,190) $ (39,957) $ (1,341)
Net realized gain (loss) 609,598 334,888 (38,925)
Net unrealized appreciation
(depreciation) 4,878,576 730,425 (328,690)
------------ ------------- ------------
Net increase (decrease)
resulting from operations 5,263,984 1,025,357 (368,956)
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 11,370,933 643,873 475,739
Participant transfers 15,646,906 1,444,961 9,987
Participant withdrawals (2,029,745) (398,836) (235,323)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 24,988,094 1,689,998 250,403
------------ ------------- ------------
Net increase (decrease) in net assets 30,252,078 2,715,355 (118,553)
NET ASSETS
Beginning of period 17,026,956 3,185,875 2,717,719
------------ ------------- ------------
End of period $ 47,279,034 $ 5,901,230 $ 2,599,166
============ ============= ============
WANGER
WANGER U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
FROM OPERATIONS
Net investment income (loss) $ (1,603,830) $ (62,225) $ (55,705)
Net realized gain (loss) 10,469,336 251,858 1,166,205
Net unrealized appreciation
(depreciation) 17,261,644 58,550,136 3,821,548
------------ ------------- ------------
Net increase (decrease)
resulting from operations 26,127,151 58,739,769 4,932,048
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 13,215,588 6,689,406 15,025,337
Participant transfers (2,320,368) 1,611,660 (1,816,291)
Participant withdrawals (7,043,110) (3,604,041) (1,518,863)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 3,852,110 4,697,025 11,690,183
------------ ------------- ------------
Net increase (decrease) in net assets 29,979,261 63,436,794 16,622,232
NET ASSETS
Beginning of period 110,354,952 44,346,327 13,080,125
------------ ------------- ------------
End of period $140,334,212 $ 107,783,121 $ 29,702,357
============ ============= ============
</TABLE>
See Notes to Financial Statements
B-12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
ASSET TEMPLETON DEVELOPING
ALLOCATION INTERNATIONAL MARKETS
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 58,684 $ 114,768 $ (27,155)
Net realized gain (loss) 1,420,426 1,285,445 149,364
Net unrealized appreciation
(depreciation) 628,563 1,681,158 1,802,794
------------ ------------- ------------
Net increase (decrease)
resulting from operations 2,107,673 3,081,372 1,925,003
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 3,232,701 3,496,781 819,245
Participant transfers (2,060,597) (42,897) 768,885
Participant withdrawals (672,556) (1,456,815) (300,903)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 499,548 1,997,069 1,287,227
------------ ------------- ------------
Net increase (decrease) in net assets 2,607,221 5,078,441 3,212,230
NET ASSETS
Beginning of period 10,348,826 13,202,198 2,964,349
------------ ------------- ------------
End of period $ 12,956,047 $ 18,280,639 $ 6,176,579
============ ============= ============
MUTUAL SHARES WANGER WANGER
INVESTMENTS TWENTY FOREIGN FORTY
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
FROM OPERATIONS
Net investment income (loss) $ (10,649) $ (15,357) $ (7,043)
Net realized gain (loss) 2,718 60,992 15,590
Net unrealized appreciation
(depreciation) 27,350 257,942 593,540
------------ ------------- ------------
Net increase (decrease)
resulting from operations 19,419 303,577 602,086
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 463,962 635,348 218,841
Participant transfers 1,159,823 1,376,570 890,253
Participant withdrawals (32,595) (59,960) (5,835)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 1,591,190 1,951,958 1,103,259
------------ ------------- ------------
Net increase (decrease) in net assets 1,610,609 2,255,535 1,705,345
NET ASSETS
Beginning of period 284,635 - -
------------ ------------- ------------
End of period $ 1,895,244 $ 2,255,535 $ 1,705,345
============ ============= ============
FEDERATED U.S.
EAFE EQUITY BANKERS TRUST GOV'T
INDEX DOW 30 SECURITIES II
SUBACCOUNT(3) SUBACCOUNT(4) SUBACCOUNT(5)
FROM OPERATIONS
Net investment income (loss) $ 5,775 $ 0 $ (5,009)
Net realized gain (loss) 13,081 - (415)
Net unrealized appreciation
(depreciation) 42,684 4 2,231
------------ ------------- ------------
Net increase (decrease)
resulting from operations 61,540 4 (3,193)
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 51,126 - 203,645
Participant transfers 338,971 362 1,560,905
Participant withdrawals (1,142) - (8,526)
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 388,955 362 1,756,024
------------ ------------- ------------
Net increase (decrease) in net assets 450,495 366 1,752,831
NET ASSETS
Beginning of period - - -
------------ ------------- ------------
End of period $ 450,495 $ 366 $ 1,752,831
============ ============= ============
</TABLE>
See Notes to Financial Statements
B-13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
FEDERATED
HIGH INCOME FEDERATED U.S. JANUS EQUITY
BOND FUND II GOV'T BOND INCOME
SUBACCOUNT(6) SUBACCOUNT(7) SUBACCOUNT(8)
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,960) $ 107 $ (14)
Net realized gain (loss) (1,859) - -
Net unrealized appreciation
(depreciation) 7,381 (115) 1,280
------------ ------------- ------------
Net increase (decrease)
resulting from operations 3,562 (8) 1,266
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 81,055 23,232 -
Participant transfers 1,152,543 50,405 135,469
Participant withdrawals (52,350) - -
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 1,181,248 73,637 135,469
------------ ------------- ------------
Net increase (decrease) in net assets 1,184,809 73,629 136,735
NET ASSETS
Beginning of period - - -
------------ ------------- ------------
End of period $ 1,184,809 $ 73,629 $ 136,735
MORGAN
JANUS FLEXIBLE STANLEY FOCUS
JANUS GROWTH INCOME EQUITY
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11)
FROM OPERATIONS
Net investment income (loss) $ (92) $ 352 $ (9)
Net realized gain (loss) - - -
Net unrealized appreciation
(depreciation) 7,845 (284) 532
------------ ------------- ------------
Net increase (decrease)
resulting from operations 7,753 68 523
------------ ------------- ------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits - - -
Participant transfers 579,581 196,536 58,357
Participant withdrawals - - -
------------ ------------- ------------
Net increase (decrease) in net assets
resulting from participant
transactions 579,581 196,536 58,357
------------ ------------- ------------
Net increase (decrease) in net assets 587,334 196,604 58,880
NET ASSETS
Beginning of period - - -
------------ ------------- ------------
End of period $ 587,334 $ 196,604 $ 58,880
TECHNOLOGY
PORTFOLIO
SUBACCOUNT(12)
FROM OPERATIONS
Net investment income (loss) $ (120)
Net realized gain (loss) -
Net unrealized appreciation
(depreciation) 12,778
------------
Net increase (decrease)
resulting from operations 12,658
------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 38,044
Participant transfers 612,320
Participant withdrawals -
------------
Net increase (decrease) in net assets
resulting from participant
transactions 650,364
------------
Net increase (decrease) in net assets 663,021
NET ASSETS
Beginning of period -
------------
End of period $ 663,021
============
</TABLE>
See Notes to Financial Statements
B-14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
Footnotes for Statement of Changes in Net Assets
For the period ended December 31, 1999
(1) From inception February 8, 1999 to December 31, 1999
(2) From inception February 8, 1999 to December 31, 1999
(3) From inception July 26, 1999 to December 31, 1999
(4) From inception December 29, 1999 to December 31, 1999
(5) From inception July 21, 1999 to December 31, 1999
(6) From inception July 27, 1999 to December 31, 1999
(7) From inception December 22, 1999 to December 31, 1999
(8) From inception December 20, 1999 to December 31, 1999
(9) From inception December 20, 1999 to December 31, 1999
(10) From inception December 22, 1999 to December 31, 1999
(11) From inception December 24, 1999 to December 31, 1999
(12) From inception December 21, 1999 to December 31, 1999
See Notes to Financial Statements
B-15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOODWIN
GOODWIN MONEY ENGEMANN CAPITAL MULTI-SECTOR
MARKET GROWTH FIXED INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 1,353,833 $ (2,176,773) $ 3,317,097
Net realized gain (loss)......................................... -- 7,168,537 41,519
Net unrealized appreciation (depreciation)....................... -- 40,711,364 (6,611,129)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,353,833 45,703,128 (3,252,513)
----------- ------------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 125,616,752 78,101,472 18,461,011
Participant transfers............................................ (103,376,500) 22,515,676 8,621,611
Participant withdrawals.......................................... (3,475,843) (8,478,068) (990,062)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 18,764,409 92,139,080 26,092,560
----------- ------------- -----------
Net increase (decrease) in net assets............................ 20,118,242 137,842,208 22,840,047
NET ASSETS
Beginning of period.............................................. 34,934,325 111,786,255 37,338,342
----------- ------------- -----------
End of period.................................................... $55,052,567 $ 249,628,463 $60,178,389
=========== ============= ===========
OAKHURST STRATEGIC ABERDEEN
ALLOCATION INTERNATIONAL OAKHURST BALANCED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 266,018 $ (223,825) $ 361,137
Net realized gain (loss)......................................... 3,342,860 4,269,706 871,613
Net unrealized appreciation (depreciation)....................... 4,788,074 (1,160,370) 3,660,354
----------- ------------- -----------
Net increase (decrease) in net assets resulting from operations.. 8,396,952 2,885,511 4,893,104
----------- ------------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 20,072,167 11,680,840 16,485,939
Participant transfers............................................ 5,190,185 3,508,669 9,137,878
Participant withdrawals.......................................... (2,475,051) (1,463,457) (1,238,514)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 22,787,301 13,726,052 24,385,303
----------- ------------- -----------
Net increase (decrease) in net assets............................ 31,184,253 16,611,563 29,278,407
NET ASSETS
Beginning of period.............................................. 29,481,306 9,260,429 13,323,079
----------- ------------- -----------
End of period.................................................... $60,665,559 $25,871,992 $42,601,486
=========== =========== ===========
DUFF & PHELPS
REAL ESTATE SENECA STRATEGIC ABERDEEN
SECURITIES THEME NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ 421,192 $ (229,477) $ (20,657)
Net realized gain (loss)......................................... (29,056) 1,485,635 135,313
Net unrealized appreciation (depreciation)....................... (3,623,946) 5,999,185 (99,199)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from operations.. (3,231,810) 7,255,343 15,457
----------- ------------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 2,605,932 5,340,925 656,526
Participant transfers............................................ (3,130) 2,163,134 (412,937)
Participant withdrawals.......................................... (708,742) (723,987) (214,657)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 1,894,060 6,780,072 28,932
----------- ------------- -----------
Net increase (decrease) in net assets............................ (1,337,750) 14,035,415 44,389
NET ASSETS
Beginning of period.............................................. 12,845,749 12,674,014 2,430,583
----------- ------------- -----------
End of period.................................................... $11,507,999 $26,709,429 $ 2,474,972
=========== =========== ===========
</TABLE>
B-16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
SENECA
RESEARCH ENHANCED ENGEMANN MID-CAP
INDEX NIFTY FIFTY GROWTH
SUBACCOUNT SUBACCOUNT(1) SUBACCOUNT(2)
---------- ------------- -------------
FROM OPERATIONS
<S> <C> <C> <C>
Net investment income (loss)..................................... $ (8,570) $ (19,883) $ (7,987)
Net realized gain (loss)......................................... 907,007 (1,634) 7,176
Net unrealized appreciation (depreciation)....................... 2,101,347 752,213 328,351
----------- ------------- -----------
Net increase (decrease) in net assets resulting from operations.. 2,999,784 730,696 327,540
----------- ------------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 7,441,283 2,122,770 1,185,565
Participant transfers............................................ 7,574,525 2,316,662 928,054
Participant withdrawals.......................................... (465,786) (104,595) (99,100)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 14,550,022 4,334,837 2,014,519
----------- ------------- -----------
Net increase (decrease) in net assets............................ 17,549,806 5,065,533 2,342,059
NET ASSETS
Beginning of period.............................................. 4,120,677 0 0
----------- ------------- -----------
End of period.................................................... $21,670,483 $ 5,065,533 $ 2,342,059
=========== ============= ===========
OAKHURST GROWTH HOLLISTER VALUE SCHAFER
AND INCOME EQUITY MID-CAP VALUE
SUBACCOUNT(1) SUBACCOUNT(3) SUBACCOUNT(3)
------------- ------------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ (11,714) $ (2,647) $ (8,345)
Net realized gain (loss)......................................... 6,819 (280) (7,021)
Net unrealized appreciation (depreciation)....................... 1,886,978 288,324 (140,981)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from operations.. 1,882,083 285,397 (156,347)
----------- ------------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 7,671,677 1,424,609 1,361,421
Participant transfers............................................ 7,859,371 1,558,019 1,636,075
Participant withdrawals.......................................... (386,175) (82,150) (123,430)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 15,144,873 2,900,478 2,874,066
----------- ------------- -----------
Net increase (decrease) in net assets............................ 17,026,956 3,185,875 2,717,719
NET ASSETS
Beginning of period.............................................. 0 0 0
----------- ------------- -----------
End of period.................................................... $17,026,956 $ 3,185,875 $ 2,717,719
=========== ============= ===========
WANGER WANGER
U.S. INTERNATIONAL TEMPLETON
SMALL CAP SMALL CAP STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------
FROM OPERATIONS
Net investment income (loss)..................................... $ (1,146,921) $ (131,936) $ 21,961
Net realized gain (loss)......................................... 3,587,569 6,202 704,713
Net unrealized appreciation (depreciation)....................... 2,708,319 4,290,225 (926,656)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from operations.. 5,148,967 4,164,491 (199,982)
----------- ------------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 29,311,834 11,404,825 5,229,388
Participant transfers............................................ 17,732,499 2,647,809 2,057,675
Participant withdrawals.......................................... (3,288,961) (1,916,016) (375,613)
----------- ------------- -----------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 43,755,372 12,136,618 6,911,450
----------- ------------- -----------
Net increase (decrease) in net assets............................ 48,904,339 16,301,109 6,711,468
NET ASSETS
Beginning of period.............................................. 61,450,613 28,045,218 6,368,657
----------- ------------- -----------
End of period.................................................... $110,354,952 $ 44,346,327 $13,080,125
============ ============= ===========
</TABLE>
(1) From inception March 3, 1998 to December 31, 1998
(2) From inception March 6, 1998 to December 31, 1998
(3) From inception March 5, 1998 to December 31, 1998
B-17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
(CONTINUED)
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON
ASSET ALLOCATION INTERNATIONAL
SUBACCOUNT SUBACCOUNT
---------- ----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................................... $ 59,280 $ 22,539
Net realized gain (loss)......................................... 161,307 200,025
Net unrealized appreciation (depreciation)....................... 117,718 198,521
----------- -------------
Net increase (decrease) in net assets resulting from operations.. 338,305 421,085
----------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 4,400,047 3,049,253
Participant transfers............................................ 1,466,339 5,744,509
Participant withdrawals.......................................... (777,852) (390,717)
----------- -------------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 5,088,534 8,403,045
----------- -------------
Net increase (decrease) in net assets............................ 5,426,839 8,824,130
NET ASSETS
Beginning of period.............................................. 4,921,987 4,378,068
----------- -------------
End of period.................................................... $10,348,826 $ 13,202,198
=========== =============
TEMPLETON
DEVELOPING MUTUAL SHARES
MARKETS INVESTMENTS
SUBACCOUNT SUBACCOUNT(6)
---------- -------------
FROM OPERATIONS
Net investment income (loss)..................................... $ 9,069 $ (333)
Net realized gain (loss)......................................... (34,689) 11
Net unrealized appreciation (depreciation)....................... (669,032) 4,075
----------- -------------
Net increase (decrease) in net assets resulting from operations.. (694,652) 3,753
----------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits............................................. 988,703 54,314
Participant transfers............................................ 584,701 226,683
Participant withdrawals.......................................... (84,435) (115)
----------- -------------
Net increase (decrease) in net assets resulting from participant
Transactions.................................................. 1,488,969 280,882
----------- -------------
Net increase (decrease) in net assets............................ 794,317 284,635
NET ASSETS
Beginning of period.............................................. 2,170,031 0
----------- -------------
End of period.................................................... $ 2,964,348 $ 284,635
============ =============
</TABLE>
(6) From inception November 10, 1998 to December 31, 1998
B-18
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
PHL Variable Accumulation Account (the "Account") is a separate investment
account of PHL Variable Insurance Company ("PHL Variable"). The Account is
organized as a unit investment trust and currently consists of 34 Subaccounts,
and invests in a corresponding series (the "Series") of The Phoenix Edge Series
Fund, Wanger Advisors Trust, the Templeton Variable Products Series Fund, BT
Insurance Funds Trust, Federated Insurance Series, and Morgan Stanley Dean
Witter Universal Funds, Inc. (the "Funds"). The Account is offered as The Big
Edge Choice to individuals (VA4).
Each Series has distinct investment objectives. The Phoenix-Goodwin Money
Market Series seeks to provide maximum current income consistent with capital
preservation and liquidity. The Phoenix-Engemann Capital Growth Series seeks to
achieve intermediate and long-term growth of capital, with income as a secondary
consideration. The Phoenix-Goodwin Multi-Sector Fixed Income Series seeks to
provide long-term total return by investing in a diversified portfolio of high
yield and high quality fixed income securities. The Phoenix-Oakhurst Strategic
Allocation Series seeks to realize as high a level of total rate of return over
an extended period of time as is considered consistent with prudent investment
risk by investing in three market segments: stocks, bonds and money market
instruments. The Phoenix-Aberdeen International Series seeks as its investment
objective a high total return consistent with reasonable risk by investing
primarily in an internationally diversified portfolio of equity securities. The
Phoenix-Oakhurst Balanced Series seeks to provide reasonable income, long-term
growth and conservation of capital. The Phoenix-Duff & Phelps Real Estate
Securities Series seeks to achieve capital appreciation and income with
approximately equal emphasis through investments in real estate investment
trusts and companies that operate, manage, develop or invest in real estate. The
Phoenix-Seneca Strategic Theme Series seeks long-term appreciation of capital by
investing in securities that the adviser believes are well positioned to benefit
from cultural, demographic, regulatory, social or technological changes
worldwide. The Phoenix-Aberdeen New Asia Series seeks to provide long-term
capital appreciation by investing primarily in diversified equity securities of
issuers organized and principally operating in Asia, excluding Japan. The
Phoenix Research Enhanced Index Series seeks high total return by investing in a
broadly diversified portfolio of equity securities of large and medium
capitalization companies within market sectors reflected in the Standard &
Poor's 500 Composite Stock Price Index. The Phoenix-Engemann Nifty Fifty Series
seeks to achieve long-term capital appreciation investing in approximately 50
different securities which offer the potential for long-term growth of capital.
The Phoenix-Seneca Mid-Cap Growth Series seeks capital appreciation primarily
through investments in equity securities of companies that have the potential
for above average market appreciation. The Phoenix-Oakhurst Growth and Income
Series seeks as its investment objective, dividend growth, current income and
capital appreciation by investing in common stocks. The Phoenix-Hollister Value
Equity Series seeks to achieve long-term capital appreciation and income by
investing in a diversified portfolio of common stocks which meet certain
quantitative standards that indicate above average financial soundness and
intrinsic value relative to price. The Phoenix-Schafer Mid-Cap Value Series
seeks to achieve long-term capital appreciation with current income as the
secondary investment objective by investing in common stocks of established
companies having a strong financial position and a low stock market valuation at
the time of purchase which are believed to offer the possibility of increase in
value. The Wanger U.S. Small Cap Series invests in growth common stock of U.S.
companies with stock market capitalization of less than $1 billion. The Wanger
International Small Cap Series invests in securities of non-U.S. companies with
a stock market capitalization of less than $1 billion. The Templeton Stock Fund
is a capital growth common stock fund. The Templeton Asset Allocation Fund
invests in stocks and debt obligations of companies and governments and money
market instruments seeking high total return. The Templeton International Fund
invests in stocks and debt obligations of companies and governments outside the
United States. The Templeton Developing Markets Fund seeks long-term capital
appreciation by investing in equity securities of issuers in countries having
developing markets. The Mutual Shares Investments Fund is a capital appreciation
fund with income as a secondary objective. The Wanger Twenty Series invests in
growth common stock of U.S. companies with market capitalizations of $1 billion
to $10 billion, focusing its investments in 20 to 25 U.S. companies. The Wanger
Foreign Forty Series invests in equity securities of foreign companies with
market capitalizations of $1 billion to $10 billion, focusing its investments in
40 to 60 companies in the develpoed markets. The EAFE(R) Equity Index Fund seeks
to match the performance of the Morgan Stanley Capital International EAFE(R)
Index, by investing in a statistically selected sample of the securities found
in the matching fund. The Phoenix-Bankers Trust Dow 30 Series seeks to track the
total return of the Dow Jones Industrial Average[SM] before fund expenses. The
Federated Fund for U.S. Government Securities II Series seeks high current
income by investing in U.S. government securities, including mortgage-backed
securities issued by U.S. government agencies. The Federated High Income Bond
Fund II Series seeks high current income by investing in a diversified portfolio
of high-yield, lower-rated corporate bonds. The Phoenix-Federated U.S.
Government Bond Series seeks to maximize total return by investing in debt
obligations of the U.S. Government, its agencies and instrumentalities. The
Phoenix-Janus Equity Income Series seeks current income and long-term capital
growth. The Phoenix-Janus Growth Series seeks long-term capital growth,
consistent with the preservation of capital. The Phoenix-Janus Flexible Income
Series seeks to obtain maximum total return, consistent with the preservation of
capital. The Phoenix-Morgan Stanley Focus Equity Series seeks capital
appreciation by investing in equity securities. The Technology Portfolio seeks
long-term capital appreciation by investing in equity securities involved with
technology and technology-related industries. Contract owners also may direct
the allocation of their investments between the Account, the Market Value
Adjusted Guaranteed Interest Account ("MVA") and the Guaranteed Interest
Account.
B-19
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS: Investments are made exclusively in the Funds
and are valued at the net asset values per share of the respective Series.
B. INVESTMENT TRANSACTIONS AND RELATED INCOME: Investment transactions are
recorded on the trade date. Realized gains and losses include capital gain
distributions from the Funds as well as gains and losses on sales of shares in
the Funds determined on the LIFO (last in, first out) basis.
C. INCOME TAXES: The Account is not a separate entity from PHL Variable
Insurance Company and, under current federal income tax law, income arising from
the Account is not taxed since reserves are established equivalent to such
income. Therefore, no provision for related federal taxes is required.
D. DISTRIBUTIONS: Distributions from the Funds are recorded on the
ex-dividend date.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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.
F. RECLASSIFICATION: Certain prior year amounts have been reclassified to
conform with the current year presentation.
B-20
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3----PURCHASES AND SALES OF SHARES OF THE FUNDS Purchases and sales of
shares of the Funds for the period ended December 31, 1999 aggregated
the following:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
<S> <C> <C>
The Phoenix Edge Series Fund:
Goodwin Money Market $ 77,487,212 $ 70,445,355
Engemann Capital Growth 82,890,645 14,310,002
Goodwin Multi-Sector Fixed Income 13,902,730 12,918,744
Oakhurst Strategic Allocation 18,826,617 5,491,151
Aberdeen International 20,122,630 4,404,754
Oakhurst Balanced 17,940,785 5,794,375
Duff & Phelps Real Estate Securities 1,649,452 3,032,168
Seneca Strategic Theme 31,941,672 2,337,738
Aberdeen New Asia 4,053,917 2,630,891
Research Enhanced Index 25,165,550 5,317,441
Engemann Nifty Fifty 18,392,840 3,218,703
Seneca Mid-Cap Growth 3,572,037 512,902
Oakhurst Growth and Income 27,922,154 2,533,663
Hollister Value Equity 2,812,682 836,273
Schafer Mid-Cap Value 1,145,950 896,797
Wanger Advisors Trust:
Wanger U.S. Small Cap 24,569,913 11,903,213
Wanger International Small Cap 12,423,010 7,723,507
Templeton Variable Products Series Fund:
Templeton Stock 16,644,589 3,974,219
Templeton Asset Allocation 4,856,947 3,025,219
Templeton International 9,502,809 6,166,528
Templeton Developing Markets 6,814,269 5,552,665
Mutual Shares Investments 1,792,619 210,700
Wanger Advisors Trust:
Wanger Twenty 2,296,982 357,907
Wanger Foreign Forty 1,240,186 142,312
BT Insurance Funds Trust:
EAFE Equity Index 418,710 10,435
The Phoenix Edge Series Fund:
Bankers Trust Dow 30 362 -
Federated Insurance Series:
Federated U.S. Gov't Securities II 1,803,132 50,228
Federated High Income Bond Fund II 1,332,784 152,907
The Phoenix Edge Series Fund:
Federated U.S. Gov't Bond 73,748 -
Janus Equity Income 135,469 -
Janus Growth 579,580 -
Janus Flexible Income 196,950 -
Morgan Stanley Focus Equity 58,357 -
Morgan Stanley Dean Witter Universal Funds, Inc.:
Technology Portfolio 650,364 -
</TABLE>
B-21
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4----PARTICIPANT ACCUMULATION UNIT TRANSACTIONS FOR THE PERIOD ENDED
DECEMBER 31, 1999 (IN UNITS)
<TABLE>
<CAPTION>
SUBACCOUNT
----------------------------------------------------------------------------------------------
GOODWIN ENGEMANN GOODWIN OAKHURST
MONEY CAPITAL MULTI-SECTOR STRATEGIC ABERDEEN OAKHURST
MARKET GROWTH FIXED INCOME ALLOCATION INTERNATIONAL BALANCED
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of
period 48,674,234 135,635,690 49,806,211 38,139,430 15,693,887 27,300,065
Participant deposits 84,254,469 27,553,294 5,265,717 7,914,427 5,078,586 6,887,327
Participant transfers (71,162,481) 6,681,942 (2,582,761) 1,439,548 2,159,666 2,523,726
Participant withdrawals (8,677,345) (10,874,295) (5,238,350) (3,743,774) (1,358,577) (3,310,849)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end
of period 53,088,877 158,996,631 47,250,817 43,749,631 21,573,562 33,400,269
============ ============ ============ ============ ============ ============
DUFF & PHELPS SENECA RESEARCH ENGEMANN SENECA
REAL ESTATE STRATEGIC ABERDEEN ENHANCED NIFTY MID-CAP
SECURITIES THEME NEW ASIA INDEX FIFTY GROWTH
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, beginning of
period 8,918,625 15,013,368 3,949,257 16,025,516 4,057,157 1,938,415
Participant deposits 941,657 5,093,582 742,308 5,095,319 4,324,775 667,675
Participant transfers (1,744,961) 6,839,538 1,258,683 9,575,522 7,937,719 1,781,521
Participant withdrawals (593,802) (1,391,711) (175,555) (2,351,283) (967,842) (201,525)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end
of period 7,521,519 25,554,777 5,774,693 28,345,074 15,351,809 4,186,086
============ ============ ============ ============ ============ ============
OAKHURST HOLLISTER WANGER
GROWTH AND VALUE SCHAFER MID- WANGER U.S. INTERNATIONAL TEMPLETON
INCOME EQUITY CAP VALUE SMALL CAP SMALL CAP STOCK
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, beginning of 14,293,673 2,908,981 3,101,501 58,567,957 28,055,647 12,575,896
period
Participant deposits 9,047,623 569,889 580,014 6,870,762 3,505,506 12,896,588
Participant transfers 12,634,119 1,254,197 12,177 (1,526,795) 700,498 (1,667,423)
Participant withdrawals (1,588,795) (339,545) (341,525) (3,545,205) (1,744,766) (1,327,562)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end
of period 34,386,620 4,393,522 3,352,167 60,366,719 30,516,885 22,477,499
============ ============ ============ ============ ============ ============
TEMPLETON
ASSET TEMPLETON MUTUAL WANGER
ALLOCATION TEMPLETON DEVELOPING SHARES WANGER FOREIGN
MARKETS INTERNATIONAL MARKETS INVESTMENTS TWENTY FORTY
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, beginning of
period 9,285,468 11,361,055 5,744,071 280,810 - -
Participant deposits 2,644,181 2,768,640 1,253,951 420,918 524,276 176,566
Participant transfers (1,756,091) (33,688) 1,375,161 1,057,086 1,174,475 738,274
Participant withdrawals (557,020) (1,155,650) (458,168) (24,549) (45,204) (4,796)
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end
of period 9,616,538 12,940,357 7,915,015 1,734,265 1,653,547 910,044
============ ============ ============ ============ ============ ============
BANKERS FEDERATED FEDERATED FEDERATED JANUS
EAFE EQUITY TRUST U.S. GOV'T HIGH INCOME U.S. GOV'T EQUITY
INDEX DOW 30 SECURITIES II BOND FUND II BOND INCOME
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, beginning of
period - - - -
Participant deposits 24,060 102,168 41,723 11,601 -
Participant transfers 162,100 181 784,571 586,470 25,147 65,607
Participant withdrawals (528) - (4,239) (26,528) - -
------------ ------------ ------------ ------------ ------------ ------------
Units outstanding, end
of period 185,632 181 882,500 601,665 36,748 65,607
============ ============ ============ ============ ============ ============
JANUS MORGAN
JANUS FLEXIBLE STANLEY TECHNOLOGY
GROWTH INCOME FOCUS EQUITY PORTFOLIO
------------ ------------ ------------ ------------
Units outstanding, beginning of
period - -
Participant deposits - - 18,554
Participant transfers 281,714 98,258 29,022 304,507
Participant withdrawals - - -
------------ ------------ ------------ ------------
Units outstanding, end
of period 281,714 98,258 29,022 323,061
============ ============ ============ ============
</TABLE>
B-22
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 5--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
PHL Variable and its affiliate, Phoenix Equity Planning Corporation
("PEPCO"), a registered broker/dealer in securities, provide all services to the
Account.
PHL Variable assumes the risk that annuitants as a class may live longer than
expected (necessitating a greater number of annuity payments) and that its
expenses may be higher than its deductions for such expenses. In return for the
assumption of these mortality and expense risks, PHL Variable charges the
Subaccounts the daily equivalent of 0.40%, 0.85% and 0.125% on an annual basis
for mortality, expense risks and daily administrative fees, respectively.
As compensation for administrative services provided to the Account, PHL
Variable additionally receives $35 per year from each contract, which is
deducted from the Subaccount holding the assets of the participant, or on a pro
rata basis from two or more Subaccounts in relation to their values under the
contract. Such fees aggregated $392,473 for the period ended December 31, 1999.
PEPCO is the principal underwriter and distributor for the Account. PHL
Variable reimburses PEPCO for expenses incurred as underwriter.
On surrender of a contract, contingent deferred sales charges, which vary
from 0-7% depending upon the duration of each contract deposit, are deducted
from the proceeds and are paid to PHL Variable as reimbursement for services
provided. Contingent deferred sales charges deducted and paid to PHL Variable
aggregated $1,624,213 for the period ended December 31, 1999.
NOTE 6--DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of withdrawals of amounts in the form of surrenders, death
benefits, transfers or annuity payments in excess of net purchase payments.
NOTE 7--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable annuity contract, other than a contract issued in connection
with certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments of
the segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of the Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. PHL Variable believes that the Account satisfies the current
requirements of the regulations, and it intends that the Account will continue
to meet such requirements.
B-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[logo] PRICEWATERHOUSECOOPERS
To the Board of Directors of PHL Variable Insurance Company and Participants of
PHL Variable Accumulation Account:
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts:
Goodwin Money Market, Engemann Capital Growth, Goodwin Multi-Sector Fixed
Income, Oakhurst Strategic Allocation, Aberdeen International, Oakhurst
Balanced, Duff & Phelps Real Estate Securities, Seneca Strategic Theme, Aberdeen
New Asia, Research Enhanced Index, Engemann Nifty Fifty, Seneca Mid-Cap Growth,
Oakhurst Growth and Income, Hollister Value Equity, Schafer Mid-Cap Value,
Wanger U.S. Small Cap, Wanger International Small Cap, Templeton Stock,
Templeton Asset Allocation, Templeton International, Templeton Developing
Markets, Mutual Shares Investments, Wanger Twenty, Wanger Foreign Forty, EAFE
Equity Index, Bankers Trust Dow 30, Federated U.S. Government Securities II,
Federated High Income Bond Fund II, Federated U.S. Government Bond, Janus Equity
Income, Janus Growth, Janus Flexible Income, Morgan Stanley Focus Equity and
Technology Portfolio (constituting the PHL Variable Accumulation Account,
hereafter referred to as the "Account") at December 31, 1999, and the results of
each of their operations and the changes in each of their net assets for each of
the periods indicated, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Account's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with 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, which included confirmation of investments at December 31, 1999 by
correspondence with fund custodians or transfer agents, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 10, 2000
B-24
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06115
UNDERWRITER
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
CUSTODIANS
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, Connecticut 06103
________________________________
B-25
PHL VARIABLE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999
B-26
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants .........................................B-28
Balance Sheet at December 31, 1999 and 1998 ...............................B-29
Statement of Income, Comprehensive Income and Equity for the Years Ended
December 31, 1999, 1998 and 1997 .........................................B-30
Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 .........................................B-31
Notes to Financial Statements .......................................B-32-B-43
B-27
<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
B-28
<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.
B-30
<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.
B-31
<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.
B-32
<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.
B-32
<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.
B-33
<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,
B-34
<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.
B-35
<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>
B-36
<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>
B-37
<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
======== ========
B-38
<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>
B-39
<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>
B-40
<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
========= =========
B-41
<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.
B-42
<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.
B-43
<PAGE>
[Version B]
PHL VARIABLE INSURANCE COMPANY
HOME OFFICE: PHOENIX VARIABLE ANNUITY
One American Row MAIL OPERATIONS ("VAMO")
Hartford, Connecticut P.O. Box 8027
Boston, Massachusetts 02266-8027
PHL VARIABLE ACCUMULATION ACCOUNT
VARIABLE ACCUMULATION DEFERRED ANNUITY CONTRACT
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus, dated May 1, 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. During the fiscal years ended December 31, 1997, 1998 and 1999, PEPCO was
paid $0, $0 and $1,913,559, respectively, and retained $0 or sales of these
contracts.
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 mortality and expense risk charge
equal to either .775% (Option 1), 1.125% (Option 2) or 1.225% (Option 3) on an
annual basis, and a daily administrative fee equal to 0.125% 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 Calculations:
The following examples of a return/yield calculations for the
Phoenix-Goodwin Money Market Subaccount were based on the 7-day period ending
December 31, 1999:
CONTRACTS WITH BENEFIT OPTION 1
Value of hypothetical pre-existing account with
exactly one Unit at the beginning of the period: $2.030543
Value of the same account (excluding capital
changes) at the end of the 7-day period:...... 2.032225
Calculation:
Ending account value.......................... 2.032225
Less beginning account value.................. 2.030543
Net change in account value................... 0.001682
Base period return:
(adjusted change/beginning account value)..... 0.000828
Current yield = return x (365/7) =............... 4.32%
Effective yield = [(1 + return)365/7] -1 =....... 4.41%
EXAMPLE FOR CONTRACTS WITH BENEFIT OPTION 2:
Value of hypothetical pre-existing account with
exactly one
unit at the beginning of the period:............. $2.025183
Value of the same account (excluding capital
changes) at the end of the 7-day period:...... 2.026725
Calculation:
Ending account value.......................... 2.023725
Less beginning account value.................. 2.025183
Net change in account value................... 0.001542
Base period return:
(adjusted change/beginning account value)..... 0.000761
Current yield = return x (365/7) =............... 3.97%
Effective yield = [(1 + return)365/7] -1 =....... 4.05%
EXAMPLE FOR CONTRACTS WITH BENEFIT OPTION 3:
Value of hypothetical pre-existing account with
exactly one unit at the beginning of the period: $2.023510
Value of the same account (excluding capital
changes) at the end of the 7-day period:...... 2.025010
Calculation:
Ending account value.......................... 2.025010
Less beginning account value.................. 2.023510
Net change in account value................... 0.001500
Base period return:
(adjusted change/beginning account value)..... 0.000741
Current yield = return x (365/7) =............... 3.87%
Effective yield = [(1 + return)365/7] -1 =....... 3.94%
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:
B-2
<PAGE>
(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 nth 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.
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 AverageSM (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
Stanger's Investment Adviser
The Stanger Register
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 AverageSM (1)
First Boston High Yield Index
Salomon Brothers Corporate Index
Salomon Brothers Government Bond Index
The S&P 500(2)
CALCULATION OF ANNUITY PAYMENTS
- -------------------------------------------------------------------------------
See your prospectus in the section titled "The Annuity Period" for a
description of the annuity options.
You may elect a payment option by written request as described in your
prospectus. If you do not elect an option, amounts held under the contract will
be applied to provide a Variable Payment Life Expectancy Annuity (Option L) on
the maturity date. You may not change your election after the first annuity
payment.
FIXED ANNUITY PAYMENTS
Fixed annuity payments are determined by the total dollar value for all
subaccounts' accumulation units, all amounts held in the GIA and the MVA
Account. For each contract the resulting dollar value is then multiplied by the
applicable annuity purchase rate, which reflects the age (and sex for
nontax-qualified plans) of the annuitant or annuitants, for the
B-3
<PAGE>
fixed payment annuity option selected. The guaranteed annuity payment rates will
be no less favorable than the following:
Under Options A, B, D, E and F rates are based on the a-49 Annuity Table(4)
projected to 1985 with Projection Scale B. We use an interest rate of 3-3/8% for
5- and 10-year certain periods under Option A, for the 10-year certain period
under Option F, and for Option E; an interest rate of 3-1/4% for the 20-year
certain period under Options A and F; an interest rate of 3-1/2% under Options B
and D. Under Options G and H the guaranteed interest rate is 3%.
It is possible that we may have more favorable (i.e. higher-paying)
rates in effect on the maturity date.
VARIABLE ANNUITY PAYMENTS
Under all variable options except Option L, the first payment is based on an
assumed annual investment rate of 4-1/2%. All subsequent payments may be higher
or lower depending on investment experience of the subaccounts.
Under Options I, J, K, M and N, we determine the first payment by
multiplying the amounts held under the selected option in each subaccount by the
applicable payment option rate, which reflects the age (and sex for
nontax-qualified plans) of the annuitant or annuitants. The first payment equals
the total of such amounts determined for each subaccount. We determine future
payments under these options by multiplying the contract value in each
subaccount (Number of Annuity Units times the Annuity Unit Value) by the
applicable payment option's rate on the payment calculation date. The payment
will equal the sum of the amounts provided by each subaccount investment.
Under Option L, we determine the amount of the annual distribution by
dividing the amount of contract value held under this option on December 31 of
the previous year by the life expectancy of the annuitant or the joint life
expectancy of the annuitant and joint annuitant at that time.
Under Options I, J, M and N, the applicable options rate used to determine
the first 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 investment rate. Under
Option K, the rate will be based on the number of payments to be made during the
specified period and the assumed investment rate.
We deduct a daily charge for mortality and expense risks and a daily
administrative fee from contract values held in the subaccounts. See your
prospectus in the section titled "Deductions and Charges." Electing Option K
will result in a mortality risk deduction being made even though we assume no
mortality risk under that option.
EXPERTS
- -------------------------------------------------------------------------------
The financial statements of PHL Variable Accumulation Account as of December
31, 1999 and for the year then ended and 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 herein have been so
included in reliance on the respective reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
PricewaterhouseCoopers LLP, whose address is 100 Pearl Street, Hartford,
Connecticut 06103, also provides other accounting and tax-related services as
requested by PHL Variable from time to time.
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company, has
provided advice on certain matters relating to the federal securities and income
tax laws in connection with the contracts described in this prospectus.
1The Dow Jones Industrial AverageSM (DJIASM) 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 DJIASM 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 DJIASM.
2The 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.
3Weighted 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 AverageSM) uses stock price alone to determine the index value. A
company's relative size has no bearing on its impact on the index.
4The 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
DECEMBER 31, 1999
B-5
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
OAKHURST
ENGEMANN NIFTY SENECA MID- HOLLISTER GROWTH AND SCHAFER MID-
FIFTY CAP GROWTH VALUE EQUITY INCOME CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost $ 763,710 $ 142,024 $ 155,045 $ 831,713 $ 24,290
=========== ========== ============ =========== ===========
Investments at market $ 837,837 $ 163,831 $ 160,635 $ 863,062 $ 24,561
----------- ---------- ------------ ----------- -----------
Total assets 837,837 163,831 160,635 863,062 24,561
LIABILITIES
Accrued expenses
to related party 533 94 98 549 9
----------- ---------- ------------ ----------- -----------
NET ASSETS $ 837,304 $ 163,737 $ 160,537 $ 862,513 $ 24,552
=========== ========== ============ =========== ===========
Accumulation units outstanding 349,721 59,092 65,214 397,132 12,146
=========== ========== ============ =========== ===========
Unit value $ 2.394208 $ 2.770900 $ 2.461708 $ 2.171854 $ 2.021489
=========== ========== ============ =========== ===========
DUFF & PHELPS
ENGEMANN OAKHURST REAL ESTATE ABERDEEN ABERDEEN
CAPITAL GROWTH BALANCED SECURITIES INTERNATIONAL NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 1,843,040 $ 268,433 $ 13,682 $ 682,238 $ 87,094
=========== ========== ============ =========== ===========
Investments at market $ 1,872,892 $ 271,643 $ 14,420 $ 664,032 $ 97,140
----------- ---------- ------------ ----------- -----------
Total assets 1,872,892 271,643 14,420 664,032 97,140
LIABILITIES
Accrued expenses
to related party 979 181 9 242 65
----------- ---------- ------------ ----------- -----------
NET ASSETS $ 1,871,913 $ 271,462 $ 14,411 $ 663,790 $ 97,075
=========== ========== ============ =========== ===========
Accumulation units outstanding 772,860 124,588 6,716 280,635 41,474
=========== ========== ============ =========== ===========
Unit value $ 2.422059 $ 2.178883 $ 2.145861 $ 2.365315 $ 2.340593
=========== ========== ============ =========== ===========
SENECA OAKHURST GOODWIN GOODWIN RESEARCH
STRATEGIC STRATEGIC MONEY MULTI-SECTOR ENHANCED
THEME ALLOCATION MARKET FIXED INCOME INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 714,366 $ 453,197 $ 2,608,950 $ 390,420 $ 1,143,790
=========== ========== ============ =========== ===========
Investments at market $ 748,958 $ 442,910 $ 2,608,950 $ 383,544 $ 1,141,653
----------- ---------- ------------ ----------- -----------
Total assets 748,958 442,910 2,608,950 383,544 1,141,653
LIABILITIES
Accrued expenses
to related party 478 263 1,834 184 591
----------- ---------- ------------ ----------- -----------
NET ASSETS $ 748,480 $ 442,647 $ 2,607,116 $ 383,360 $ 1,141,062
=========== ========== ============ =========== ===========
Accumulation units outstanding 285,080 202,038 1,282,887 186,171 530,124
=========== ========== ============ =========== ===========
Unit value $ 2.625507 $ 2.190912 $ 2.032225 $ 2.059187 $ 2.152444
=========== ========== ============ =========== ===========
WANGER
WANGER U.S. INTERNATIONAL WANGER WANGER TEMPLETON
SMALL CAP SMALL CAP TWENTY FOREIGN FORTY STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 863,146 $ 598,055 $ 45,678 $ 39,364 $ 88,673
=========== ========== ============ =========== ===========
Investments at market $ 919,929 $ 787,434 $ 48,640 $ 47,201 $ 93,310
----------- ---------- ------------ ----------- -----------
Total assets 919,929 787,434 48,640 47,201 93,310
LIABILITIES
Accrued expenses
to related party 472 456 29 22 29
----------- ---------- ------------ ----------- -----------
NET ASSETS $ 919,457 $ 786,978 $ 48,611 $ 47,179 $ 93,281
=========== ========== ============ =========== ===========
Accumulation units outstanding 398,294 248,142 21,179 15,400 40,877
=========== ========== ============ =========== ===========
Unit value $ 2.308487 $ 3.171485 $ 2.295209 $ 3.063495 $ 2.282009
=========== ========== ============ =========== ===========
</TABLE>
See Notes to Financial Statements
B-6
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(CONTINUED)
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES EAFE EQUITY
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost $ 27,550 $ 223,263 $ 63,644 $ 31,766 $ 56,914
=========== ========== ============ =========== ===========
Investments at market $ 29,556 $ 238,029 $ 72,753 $ 32,631 $ 59,684
----------- ---------- ------------ ----------- -----------
Total assets 29,556 238,029 72,753 32,631 59,684
LIABILITIES
Accrued expenses
to related party 19 123 49 21 30
----------- ---------- ------------ ----------- -----------
NET ASSETS $ 29,537 $ 237,906 $ 72,704 $ 32,610 $ 59,654
=========== ========== ============ =========== ===========
Accumulation units outstanding 13,407 107,777 29,866 16,153 25,723
=========== ========== ============ =========== ===========
Unit value $ 2.203086 $ 2.207390 $ 2.434374 $ 2.018859 $ 2.319071
=========== ========== ============ =========== ===========
FEDERATED U.S. FEDERATED FEDERATED
BANKERS TRUST GOV'T HIGH INCOME U.S. GOV'T JANUS EQUITY
DOW 30 SECURITIES II BOND FUND II BOND INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 300 $ 144,142 $ 88,853 $ 4,244 $ 300
=========== ========== ============ =========== ===========
Investments at market $ 301 $ 143,817 $ 89,691 $ 4,244 $ 302
----------- ---------- ------------ ----------- -----------
Total assets 301 143,817 89,691 4,244 302
LIABILITIES
Accrued expenses
to related party 0 89 56 - 0
----------- ---------- ------------ ----------- -----------
NET ASSETS $ 301 $ 143,728 $ 89,635 $ 4,244 $ 302
=========== ========== ============ =========== ===========
Accumulation units outstanding 150 71,053 43,981 2,121 150
=========== ========== ============ =========== ===========
Unit value $ 2.007667 $ 2.022829 $ 2.038011 $ 2.001138 $ 2.011467
=========== ========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MORGAN
STANLEY FOCUS TECHNOLOGY
JANUS GROWTH EQUITY PORTFOLIO
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
ASSETS
Investments at cost $ 38,875 $ 300 $ 300
=========== ========== ============
Investments at market $ 39,351 $ 301 $ 303
----------- ---------- ------------
Total Assets 39,351 301 303
LIABILITIES
Accrued expenses
to related party 3 0 0
----------- ---------- ------------
NET ASSETS $ 39,348 $ 301 $ 303
=========== ========== ============
Accumulation units outstanding 19,436 150 150
=========== ========== ============
Unit value $ 2.024556 $ 2.008733 $ 2.022800
=========== ========== ============
</TABLE>
See Notes to Financial Statements
B-7
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
OAKHURST
ENGEMANN SENECA MID- HOLLISTER GROWTH AND
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME
SUBACCOUNT (1) SUBACCOUNT (2) SUBACCOUNT (3) SUBACCOUNT (4)
<S> <C> <C> <C> <C>
Investment income
Distributions $ - $ - $ 340 $ 3,857
Expenses
Mortality, expense risk and
administrative charges 1,034 143 175 1,096
---------- ------------ ----------- -----------
Net investment income (loss) (1,034) (143) 165 2,761
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions 14 (0) 131 69
Net realized gain distribution from Fund - 3,919 8,827 10,026
Net unrealized appreciation (depreciation)
on investment 74,127 21,807 5,590 31,349
---------- ------------ ----------- -----------
Net gain (loss) on investments 74,141 25,726 14,548 41,444
---------- ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from operations $ 73,107 $ 25,583 $ 14,713 $ 44,205
========== ============ =========== ===========
ENGEMANN DUFF &PHELPS
SCHAFER MID- CAPITAL OAKHURST REAL ESTATE
CAP VALUE GROWTH BALANCED SECURITIES
SUBACCOUNT (5) SUBACCOUNT (6) SUBACCOUNT (7) SUBACCOUNT (8)
Investment income
Distributions $ 307 $ 1,879 $ 1,886 $ 316
Expenses
Mortality, expense risk
and administrative charges 31 1,570 289 10
---------- ------------ ----------- -----------
Net investment income (loss) 276 309 1,597 306
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions (1) (4) 716 -
Net realized gain distribution from Fund - 119,567 7,607 -
Net unrealized appreciation (depreciation)
on investment 271 29,852 3,210 738
---------- ------------ ----------- -----------
Net gain (loss) on investments 270 149,415 11,533 738
---------- ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from operations $ 546 $ 149,724 $ 13,130 $ 1,044
========== ============ =========== ===========
SENECA OAKHURST
ABERDEEN ABERDEEN STRATEGIC STRATEGIC
INTERNATIONAL NEW ASIA THEME ALLOCATION
SUBACCOUNT (9) SUBACCOUNT (10) SUBACCOUNT (11) SUBACCOUNT (12)
Investment income
Distributions $ 6,204 $ 95 $ - $ 3,904
Expenses
Mortality, expense risk
and administrative charges 463 130 862 357
---------- ------------ ----------- -----------
Net investment income (loss) 5,741 (35) (862) 3,547
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions 0 140 5 (80)
Net realized gain distribution from Fund 53,886 - 71,077 17,673
Net unrealized appreciation (depreciation)
on investment (18,206) 10,046 34,592 (10,287)
---------- ------------ ----------- -----------
Net gain (loss) on investments 35,680 10,186 105,674 7,306
---------- ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from operations $ 41,421 $ 10,151 $ 104,812 $ 10,853
========== ============ =========== ===========
</TABLE>
(1) From inception September 1, 1999 to December 31, 1999
(2) From inception September 3, 1999 to December 31, 1999
(3) From inception August 30, 1999 to December 31, 1999
(4) From inception August 30, 1999 to December 31, 1999
(5) From inception August 30, 1999 to December 31, 1999
(6) From inception August 24, 1999 to December 31, 1999
(7) From inception September 1, 1999 to December 31, 1999
(8) From inception November 1, 1999 to December 31, 1999
(9) From inception October 20, 1999 to December 31, 1999
(10) From inception September 22,1999 to December 31, 1999
(11) From inception September 1, 1999 to December 31, 1999
(12) From inception October 1, 1999 to December 31, 1999
See Notes to Financial Statements
B-8
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
GOODWIN RESEARCH
GOODWIN MULTI-SECTOR ENHANCED WANGER U.S.
MONEY MARKET FIXED INCOME INDEX SMALL CAP
SUBACCOUNT (13) SUBACCOUNT (14) SUBACCOUNT (15) SUBACCOUNT (16)
<S> <C> <C> <C> <C>
Investment income
Distributions $ 30,560 $ 8,965 $ 5,641 $ -
Expenses
Mortality, expense risk
and administrative charges 5,355 288 1,246 813
---------- ------------ ----------- -----------
Net investment income (loss) 25,205 8,677 4,395 (813)
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions - 731 (525) 0
Net realized gain distribution from Fund - - 53,998 -
Net unrealized appreciation (depreciation)
on investment - (6,876) (2,137) 56,783
---------- ------------ ----------- -----------
Net gain (loss) on investments - (6,145) 51,336 56,783
---------- ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from operations $ 25,205 $ 2,532 $ 55,731 $ 55,970
========== ============ =========== ===========
WANGER
INTERNATIONAL WANGER WANGER TEMPLETON
SMALL CAP TWENTY FOREIGN FORTY STOCK
SUBACCOUNT (17) SUBACCOUNT (18) SUBACCOUNT (19) SUBACCOUNT (20)
Investment income
Distributions $ - $ - $ - $ -
Expenses
Mortality, expense risk
and administrative charges 795 41 26 79
---------- ------------ ----------- -----------
Net investment income (loss) (795) (41) (26) (79)
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions 650 215 - 78
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation)
on investment 189,379 2,962 7,837 4,637
---------- ------------ ----------- -----------
Net gain (loss) on investments 190,029 3,177 7,837 4,715
---------- ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from operations $ 189,234 $ 3,136 $ 7,811 $ 4,636
========== ============ =========== ===========
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
SUBACCOUNT (21) SUBACCOUNT (22) SUBACCOUNT (23) SUBACCOUNT (24)
Investment income
Distributions $ - $ - $ - $ -
Expenses
Mortality, expense risk
and administrative charges 32 210 63 31
---------- ------------ ----------- -----------
Net investment income (loss) (32) (210) (63) (31)
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions 0 1 0 (0)
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation)
on investment 2,006 14,766 9,109 865
---------- ------------ ----------- -----------
Net gain (loss) on investments 2,006 14,767 9,109 865
---------- ------------ ----------- -----------
Net increase (decrease) in net
assets resulting from operations $ 1,974 $ 14,557 $ 9,046 $ 834
========== ============ =========== ===========
</TABLE>
(13) From inception August 11, 1999 to December 31, 1999
(14) From inception September 13, 1999 to December 31, 1999
(15) From inception September 1, 1999 to December 31, 1999
(16) From inception September 14, 1999 to December 31, 1999
(17) From inception August 30, 1999 to December 31, 1999
(18) From inception October 11, 1999 to December 31, 1999
(19) From inception October 25, 1999 to December 31, 1999
(20) From inception September 2, 1999 to December 31, 1999
(21) From inception October 4, 1999 to December 31, 1999
(22) From inception August 30, 1999 to December 31, 1999
(23) From inception November 1, 1999 to December 31, 1999
(24) From inception September 2, 1999 to December 31, 1999
See Notes to Financial Statements
B-9
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED FEDERATED
EAFE EQUITY BANKERS U.S. GOV'T HIGH INCOME
INDEX TRUST DOW 30 SECURITIES II BOND FUND II
SUBACCOUNT (25) SUBACCOUNT (26) SUBACCOUNT (27) SUBACCOUNT (28)
<S> <C> <C> <C> <C>
Investment income
Distributions $ 748 $ - $ - $ -
Expenses
Mortality, expense risk and
administrative charges 55 0 149 79
---------- ------------ ----------- -----------
Net investment income (loss) 693 (0) (149) (79)
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions 0 - (2) 1
Net realized gain distribution from Fund 1,397 - - -
Net unrealized appreciation (depreciation)
on investment 2,770 1 (325) 838
---------- ------------ ----------- -----------
Net gain (loss) on investments 4,167 1 (327) 839
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 4,860 $ 1 $ (476) $ 760
========== ============ =========== ===========
MORGAN
FEDERATED U.S. JANUS EQUITY JANUS STANLEY
GOV'T BOND INCOME GROWTH FOCUS EQUITY
SUBACCOUNT (29) SUBACCOUNT (30) SUBACCOUNT (31) SUBACCOUNT (32)
Investment income
Distributions $ 0 $ - $ - $ -
Expenses
Mortality, expense risk and
administrative charges - 0 3 0
---------- ------------ ----------- -----------
Net investment income (loss) 0 (0) (3) (0)
---------- ------------ ----------- -----------
Net realized gain (loss) from share transactions - - - -
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation)
on investment (0) 2 476 1
---------- ------------ ----------- -----------
Net gain (loss) on investments (0) 2 476 1
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 0 $ 2 $ 473 $ 1
========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY
PORTFOLIO
SUBACCOUNT (33)
<S> <C>
Investment income
Distributions $ -
Expenses
Mortality, expense risk and
administrative charges 0
----------
Net investment income (loss) (0)
----------
Net realized gain (loss) from share transactions -
Net realized gain distribution from Fund -
Net unrealized appreciation (depreciation)
on investment 3
----------
Net gain (loss) on investments 3
----------
Net increase (decrease) in net assets
resulting from operations $ 3
==========
</TABLE>
(25) From inception October 14, 1999 to December 31, 1999
(26) From inception December 30, 1999 to December 31, 1999
(27) From inception September 2, 1999 to December 31, 1999
(28) From inception October 14, 1999 to December 31, 1999
(29) From inception December 28, 1999 to December 31, 1999
(30) From inception December 30, 1999 to December 31, 1999
(31) From inception December 28, 1999 to December 31, 1999
(32) From inception December 30, 1999 to December 31, 1999
(33) From inception December 30, 1999 to December 31, 1999
See Notes to Financial Statements
B-10
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
OAKHURST
ENGEMANN SENECA MID- HOLLISTER GROWTH AND
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(3) SUBACCOUNT(4)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,034) $ (143) $ 165 $ 2,761
Net realized gain (loss) 14 3,919 8,958 10,095
Net unrealized appreciation (depreciation) 74,127 21,807 5,590 31,349
---------- ------------ ----------- -----------
Net increase (decrease) resulting from
operations 73,107 25,583 14,713 44,205
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 616,304 83,178 84,409 528,959
Participant transfers 151,092 55,017 61,415 292,778
Participant withdrawals (3,199) (41) - (3,429)
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant transactions 764,197 138,154 145,824 818,308
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 837,304 163,737 160,537 862,513
NET ASSETS
Beginning of period - - - -
---------- ------------ ----------- -----------
End of period $ 837,304 $ 163,737 $ 160,537 $ 862,513
========== ============ =========== ===========
ENGEMANN DUFF & PHELPS
SCHAFER MID- CAPITAL OAKHURST REAL ESTATE
CAP VALUE GROWTH BALANCED SECURITIES
SUBACCOUNT(5) SUBACCOUNT(6) SUBACCOUNT(7) SUBACCOUNT(8)
FROM OPERATIONS
Net investment income (loss) $ 276 $ 309 $ 1,597 $ 306
Net realized gain (loss) (1) 119,563 8,323 -
Net unrealized appreciation (depreciation) 271 29,852 3,210 738
---------- ------------ ----------- -----------
Net increase (decrease) resulting from
operations 546 149,724 13,130 1,044
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 1,560 733,706 135,964 11,588
Participant transfers 22,446 990,777 128,507 1,779
Participant withdrawals - (2,294) (6,139) -
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant Transactions 24,006 1,722,189 258,332 13,367
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 24,552 1,871,913 271,462 14,411
NET ASSETS
Beginning of period - - - -
---------- ------------ ----------- -----------
End of period $ 24,552 $ 1,871,913 $ 271,462 $ 14,411
========== ============ =========== ===========
SENECA OAKHURST
ABERDEEN ABERDEEN STRATEGIC STRATEGIC
INTERNATIONAL NEW ASIA THEME ALLOCATION
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11) SUBACCOUNT(12)
FROM OPERATIONS
Net investment income (loss) $ 5,741 $ (35) $ (862) $ 3,547
Net realized gain (loss) 53,886 140 71,082 17,593
Net unrealized appreciation (depreciation) (18,206) 10,046 34,592 (10,287)
---------- ------------ ----------- -----------
Net increase (decrease) resulting from
operations 41,421 10,151 104,812 10,853
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 256,456 34,116 361,979 125,022
Participant transfers 368,002 53,014 283,784 306,772
Participant withdrawals (2,089) (206) (2,095) -
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant transactions 622,369 86,924 643,668 431,794
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 663,790 97,075 748,480 442,647
NET ASSETS
Beginning of period - - - -
---------- ------------ ----------- -----------
End of period $ 663,790 $ 97,075 $ 748,480 $ 442,647
========== ============ =========== ===========
</TABLE>
See Notes to Financial Statements
B-11
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
GOODWIN RESEARCH
GOODWIN MULTI-SECTOR ENHANCED WANGER U.S.
MONEY MARKET FIXED INCOME INDEX SMALL CAP
SUBACCOUNT(13) SUBACCOUNT(14) SUBACCOUNT(15) SUBACCOUNT(16)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 25,205 $ 8,677 $ 4,395 $ (813)
Net realized gain (loss) - 731 53,473 0
Net unrealized appreciation (depreciation) - (6,876) (2,137) 56,783
---------- ------------ ----------- -----------
Net increase (decrease) resulting
from operations 25,205 2,532 55,731 55,970
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 7,037,305 177,192 457,793 474,276
Participant transfers (4,449,838) 209,586 632,610 391,035
Participant withdrawals (5,556) (5,950) (5,072) (1,824)
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant transactions 2,581,911 380,828 1,085,331 863,487
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 2,607,116 383,360 1,141,062 919,457
NET ASSETS
Beginning of period - - - -
End of period $2,607,116 $ 383,360 $ 1,141,062 $ 919,457
========== ============ =========== ===========
WANGER
NTERNATIONAL WANGER WANGER TEMPLETON
SMALL CAP TWENTY FOREIGN FORTY STOCK
SUBACCOUNT(17) SUBACCOUNT(18) SUBACCOUNT(19) SUBACCOUNT(20)
FROM OPERATIONS
Net investment income (loss) $ (795) $ (41) $ (26) $ (79)
Net realized gain (loss) 650 215 - 78
Net unrealized appreciation (depreciation) 189,379 2,962 7,837 4,637
---------- ------------ ----------- -----------
Net increase (decrease) resulting
from operations 189,234 3,136 7,811 4,636
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 345,288 33,080 26,318 86,744
Participant transfers 253,767 12,395 13,050 1,901
Participant withdrawals (1,311) - - -
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant transactions 597,744 45,475 39,368 88,645
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 786,978 48,611 47,179 93,281
NET ASSETS
Beginning of period - - - -
---------- ------------ ----------- -----------
End of period $ 786,978 $ 48,611 $ 47,179 $ 93,281
========== ============ =========== ===========
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
SUBACCOUNT(21) SUBACCOUNT(22) SUBACCOUNT(23) SUBACCOUNT(24)
FROM OPERATIONS
Net investment income (loss) $ (32) $ (210) $ (63) $ (31)
Net realized gain (loss) 0 1 0 (0)
Net unrealized appreciation (depreciation) 2,006 14,766 9,109 865
---------- ------------ ----------- -----------
Net increase (decrease) resulting
from operations 1,974 14,557 9,046 834
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 20,304 175,301 42,201 21,526
Participant transfers 7,259 48,048 21,457 10,250
Participant withdrawals - - - -
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant transactions 27,563 223,349 63,658 31,776
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 29,537 237,906 72,704 32,610
NET ASSETS
Beginning of period - - - -
---------- ------------ ----------- -----------
End of period $ 29,537 $ 237,906 $ 72,704 $ 32,610
========== ============ =========== ===========
</TABLE>
See Notes to Financial Statements
B-12
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED FEDERATED
EAFE EQUITY BANKERS U.S. GOV'T HIGH INCOME
INDEX TRUST DOW 30 SECURITIES II BOND FUND II
SUBACCOUNT(25) SUBACCOUNT(26) SUBACCOUNT(27) SUBACCOUNT(28)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 693 $ (0) $ (149) $ (79)
Net realized gain (loss) 1,397 - (2) 1
Net unrealized appreciation (depreciation) 2,770 1 (325) 838
---------- ------------ ----------- -----------
Net increase (decrease) resulting
from operations 4,860 1 (476) 760
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 9,455 300 49,991 42,460
Participant transfers 45,376 - 96,234 46,415
Participant withdrawals (37) - (2,021) -
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant transactions 54,794 300 144,204 88,875
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 59,654 301 143,728 89,635
NET ASSETS
Beginning of period - - - -
---------- ------------ ----------- -----------
End of period $ 59,654 $ 301 $ 143,728 $ 89,635
========== ============ =========== ===========
MORGAN
FEDERATED U.S. JANUS EQUITY JANUS STANLEY
GOV'T BOND INCOME GROWTH FOCUS EQUITY
SUBACCOUNT(29) SUBACCOUNT(30) SUBACCOUNT(31) SUBACCOUNT(32)
FROM OPERATIONS
Net investment income (loss) $ 0 $ (0) $ (3) $ (0)
Net realized gain (loss) - - - -
Net unrealized appreciation (depreciation) (0) 2 476 1
---------- ------------ ----------- -----------
Net increase (decrease) resulting
from operations 0 2 473 1
---------- ------------ ----------- -----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 4,244 300 500 300
Participant transfers - - 38,375 -
Participant withdrawals - - - -
---------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from participant transactions 4,244 300 38,875 300
---------- ------------ ----------- -----------
Net increase (decrease) in net assets 4,244 302 39,348 301
NET ASSETS
Beginning of period - - - -
---------- ------------ ----------- -----------
End of period $ 4,244 $ 302 $ 39,348 $ 301
========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY
PORTFOLIO
SUBACCOUNT(33)
<S> <C>
FROM OPERATIONS
Net investment income (loss) $ (0)
Net realized gain (loss) -
Net unrealized appreciation (depreciation) 3
----------
Net increase (decrease) resulting
from operations 3
----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 300
Participant transfers -
Participant withdrawals -
----------
Net increase (decrease) in net assets
resulting from participant transactions 300
----------
Net increase (decrease) in net assets 303
NET ASSETS
Beginning of period -
----------
End of period $ 303
==========
</TABLE>
See Notes to Financial Statements
B-13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
Footnotes for Statement of Changes in Net Assets
For the period ended December 31, 1999
(1) From inception September 1, 1999 to December 31, 1999
(2) From inception September 3, 1999 to December 31, 1999
(3) From inception August 30, 1999 to December 31, 1999
(4) From inception August 30, 1999 to December 31, 1999
(5) From inception August 30, 1999 to December 31, 1999
(6) From inception August 24, 1999 to December 31, 1999
(7) From inception September 1, 1999 to December 31, 1999
(8) From inception November 1, 1999 to December 31, 1999
(9) From inception October 20, 1999 to December 31, 1999
(10) From inception September 22, 1999 to December 31, 1999
(11) From inception September 1, 1999 to December 31, 1999
(12) From inception October 1, 1999 to December 31, 1999
(13) From inception August 11, 1999 to December 31, 1999
(14) From inception September 13, 1999 to December 31, 1999
(15) From inception September 1, 1999 to December 31, 1999
(16) From inception September 14, 1999 to December 31, 1999
(17) From inception August 30, 1999 to December 31, 1999
(18) From inception October 11, 1999 to December 31, 1999
(19) From inception October 25, 1999 to December 31, 1999
(20) From inception September 2, 1999 to December 31, 1999
(21) From inception October 4, 1999 to December 31, 1999
(22) From inception August 30, 1999 to December 31, 1999
(23) From inception November 1, 1999 to December 31, 1999
(24) From inception September 2, 1999 to December 31, 1999
(25) From inception October 14, 1999 to December 31, 1999
(26) From inception December 30, 1999 to December 31, 1999
(27) From inception September 2, 1999 to December 31, 1999
(28) From inception October 14, 1999 to December 31, 1999
(29) From inception December 28, 1999 to December 31, 1999
(30) From inception December 30, 1999 to December 31, 1999
(31) From inception December 28, 1999 to December 31, 1999
(32) From inception December 30, 1999 to December 31, 1999
(33) From inception December 30, 1999 to December 31, 1999
See Notes to Financial Statements
B-14
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
PHL Variable Accumulation Account (the "Account") is a separate investment
account of PHL Variable Insurance Company ("PHL Variable"). The Account is
organized as a unit investment trust and currently consists of 34 Subaccounts,
and invests in a corresponding series (the "Series") of The Phoenix Edge Series
Fund, Wanger Advisors Trust, the Templeton Variable Products Series Fund, BT
Insurance Funds Trust, Federated Insurance Series, and Morgan Stanley Dean
Witter Universal Funds, Inc. (the "Funds"). As of December 31, 1999, 33 of the
available 34 Subaccounts were invested in a corresponding series.
Each Series has distinct investment objectives. The Phoenix-Engemann Nifty
Fifty Series seeks to achieve long-term capital appreciation investing in
approximately 50 different securities which offer the potential for long-term
growth of capital. The Phoenix-Seneca Mid-Cap Growth Series seeks capital
appreciation primarily through investments in equity securities of companies
that have the potential for above average market appreciation. The
Phoenix-Hollister Value Equity Series seeks to achieve long-term capital
appreciation and income by investing in a diversified portfolio of common stocks
which meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. The Phoenix-Oakhurst Growth and
Income Series seeks as its investment objective, dividend growth, current income
and capital appreciation by investing in common stocks. The Phoenix-Schafer
Mid-Cap Value Series seeks to achieve long-term capital appreciation with
current income as the secondary investment objective by investing in common
stocks of established companies having a strong financial position and a low
stock market valuation at the time of purchase which are believed to offer the
possibility of increase in value. The Phoenix-Engemann Capital Growth Series
seeks to achieve intermediate and long-term growth of capital, with income as a
secondary consideration. The Phoenix-Oakhurst Balanced Series seeks to provide
reasonable income, long-term growth and conservation of capital. The
Phoenix-Duff & Phelps Real Estate Securities Series seeks to achieve capital
appreciation and income with approximately equal emphasis through investments in
real estate investment trusts and companies that operate, manage, develop or
invest in real estate. The Phoenix-Aberdeen International Series seeks as its
investment objective a high total return consistent with reasonable risk by
investing primarily in an internationally diversified portfolio of equity
securities. The Phoenix-Aberdeen New Asia Series seeks to provide long-term
capital appreciation by investing primarily in diversified equity securities of
issuers organized and principally operating in Asia, excluding Japan. The
Phoenix-Seneca Strategic Theme Series seeks long-term appreciation of capital by
investing in securities that the adviser believes are well positioned to benefit
from cultural, demographic, regulatory, social or technological changes
worldwide. The Phoenix-Oakhurst Strategic Allocation Series seeks to realize as
high a level of total rate of return over an extended period of time as is
considered consistent with prudent investment risk by investing in three market
segments: stocks, bonds and money market instruments. The Phoenix-Goodwin Money
Market Series seeks to provide maximum current income consistent with capital
preservation and liquidity. The Phoenix-Goodwin Multi-Sector Fixed Income Series
seeks to provide long-term total return by investing in a diversified portfolio
of high yield and high quality fixed income securities. The Phoenix-Research
Enhanced Index Series seeks high total return by investing in a broadly
diversified portfolio of equity securities of large and medium capitalization
companies within market sectors reflected in the Standard & Poor's 500 Composite
Stock Price Index. The Wanger U.S. Small Cap Series invests in growth common
stock of U.S. companies with stock market capitalization of less than $1
billion. The Wanger International Small Cap Series invests in securities of
non-U.S. companies with a stock market capitalization of less than $1 billion.
The Wanger Twenty Series invests in growth common stock of U.S. companies with
market capitalizations of $1 billion to $10 billion, focusing its investments in
20 to 25 U.S. companies. The Wanger Foreign Forty Series invests in equity
securities of foreign companies with market capitalizations of $1 billion to $10
billion, focusing its investments in 40 to 60 companies in the developed
markets. The Templeton Stock Fund is a capital growth common stock fund. The
Templeton Asset Allocation Fund invests in stocks and debt obligations of
companies and governments and money market instruments seeking high total
return. The Templeton International Fund invests in stocks and debt obligations
of companies and governments outside the United States. The Templeton Developing
Markets Fund seeks long-term capital appreciation by investing in equity
securities of issuers in countries having developing markets. The Mutual Shares
Investments Fund is a capital appreciation fund with income as a secondary
objective. The EAFE(R) Equity Index Fund seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index, by investing in a
statistically selected sample of the securities found in the matching fund. The
Phoenix-Bankers Trust Dow 30 Series seeks to track the total return of the Dow
Jones Industrial AverageSM before fund expenses. The Federated Fund for U.S.
Government Securities II Series seeks high current income by investing in U.S.
government securities, including mortgage-backed securities issued by U.S.
government agencies. The Federated High Income Bond Fund II Series seeks high
current income by investing in a diversified portfolio of high-yield,
lower-rated corporate bonds. The Phoenix-Federated U.S. Government Bond Series
seeks to maximize total return by investing in debt obligations of the U.S.
Government, its agencies and instrumentalities. The Phoenix-Janus Equity Income
Series seeks current income and long-term capital growth. The Phoenix-Janus
Growth Series seeks long-term capital growth, consistent with the preservation
of capital. The Phoenix-Morgan Stanley Focus Equity Series seeks capital
appreciation by investing in equity securities. The Technology Portfolio seeks
long-term capital appreciation by investing in equity securities involved with
technology and technology-related industries. The Phoenix-Janus Flexible Income
Series seeks to obtain maximum total return, consistent with the preservation of
capital. Additionally, policyowners also may direct the allocation of their
investments between the Account and the Guaranteed Interest Account of the
general account of Phoenix.
B-15
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS: Investments are made exclusively in the Funds
and are valued at the net asset values per share of the respective Series.
B. INVESTMENT TRANSACTIONS AND RELATED INCOME: Investment transactions are
recorded on the trade date. Realized gains and losses include capital gain
distributions from the Funds as well as gains and losses on sales of shares in
the Funds determined on the LIFO (last in, first out) basis.
C. INCOME TAXES: The Account is not a separate entity from PHL Variable
Insurance Company and, under current federal income tax law, income arising from
the Account is not taxed since reserves are established equivalent to such
income. Therefore, no provision for related federal taxes is required.
D. DISTRIBUTIONS: Distributions from the Funds are recorded on the
ex-dividend date.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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.
B-16
<PAGE>
<TABLE>
<CAPTION>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3----PURCHASES AND SALES OF SHARES OF THE FUNDS
Purchases and sales of shares of the Funds for the period ended December
31, 1999 aggregated the following:
<S> <C> <C>
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
The Phoenix Edge Series Fund:
Engemann Nifty Fifty $ 764,999 $ 1,303
Seneca Mid-Cap Growth 142,076 52
Hollister Value Equity 166,391 11,477
Oakhurst Growth and Income 847,407 15,763
Schafer Mid-Cap Value 24,313 22
Engemann Capital Growth 1,847,555 4,511
Oakhurst Balanced 1,351,100 1,083,383
Duff & Phelps Real Estate Securities 13,682 -
Aberdeen International 682,343 105
Aberdeen New Asia 96,882 9,928
Seneca Strategic Theme 714,940 579
Oakhurst Strategic Allocation 465,697 12,420
Goodwin Money Market 6,494,060 3,885,110
Goodwin Multi-Sector Fixed Income 461,571 71,882
Research Enhanced Index 1,442,738 298,423
Wanger Advisors Trust:
Wanger U.S. Small Cap 863,246 100
Wanger International Small Cap 623,824 26,419
Wanger Twenty 53,260 7,797
Wanger Foreign Forty 39,369 5
Templeton Variable Products Series Fund:
Templeton Stock 109,622 21,027
Templeton Asset Allocation 27,563 13
Templeton International 223,496 234
Templeton Developing Markets 63,657 13
Mutual Shares Investments 31,812 46
BT Insurance Funds Trust:
EAFE Equity Index 56,961 47
The Phoenix Edge Series Fund:
Bankers Trust Dow 30 300 -
Federated Insurance Series:
Federated U.S. Gov't Securities II 144,665 521
Federated High Income Bond Fund II 89,354 502
The Phoenix Edge Series Fund:
Federated U.S. Gov't Bond 4,244 -
Janus Equity Income 300 -
Janus Growth 38,875 -
Morgan Stanley Focus Equity 300 -
Morgan Stanley Dean Witter Universal Funds, Inc.:
Technology Portfolio 300 -
</TABLE>
B-17
<PAGE>
<TABLE>
<CAPTION>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4--PARTICIPANT ACCUMULATION UNIT TRANSACTIONS FOR THE PERIOD ENDED DECEMBER 31, 1999 (IN UNITS)
SUBACCOUNT
-----------------------------------------------------------------------------------------
OAKHURST ENGEMANN
ENGEMANN SENECA MID- HOLLISTER GROWTH AND SCHAFER MID- CAPITAL
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME CAP VALUE GROWTH
------------ ---------- ------------ ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, beginning of period - - - - - -
Participant deposits 280,543 35,307 36,852 257,614 812 333,056
Participant transfers 70,565 23,785 28,362 141,231 11,334 440,855
Participant withdrawals (1,387) - - (1,713) - (1,051)
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period 349,721 59,092 65,214 397,132 12,146 772,860
========= ========= ========= ========= ========= =========
DUFF & PHELPS SENECA OAKHURST
OAKHURST REAL ESTATE ABERDEEN ABERDEEN STRATEGIC STRATEGIC
BALANCED SECURITIES INTERNATIONAL NEW ASIA THEME ALLOCATION
--------- ------------ ------------ -------- --------- ----------
Units outstanding, beginning of period - - - - - -
Participant deposits 63,521 5,808 121,272 16,142 160,939 58,193
Participant transfers 63,949 908 160,311 25,479 125,314 143,845
Participant withdrawals (2,882) - (948) (147) (1,173) -
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period 124,588 6,716 280,635 41,474 285,080 202,038
========= ========= ========= ========= ========= =========
GOOGWIN MULTI- RESEARCH WANGER
GOODWIN SECTOR FIXED ENHANCED WANGER U.S. INTERNATIONAL WANGER
MONEY MARKET INCOME INDEX SMALL CAP SMALL CAP TWENTY
------------ ------------- -------- ---------- ------------- ------
Units outstanding, beginning of period - - - - - -
Participant deposits 3,486,035 87,237 227,314 220,402 140,190 15,280
Participant transfers (2,199,277) 101,931 305,252 178,846 108,881 5,899
Participant withdrawals (3,871) (2,997) (2,442) (954) (929) -
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period 1,282,887 186,171 530,124 398,294 248,142 21,179
========= ========= ========= ========= ========= =========
WANGER TEMPLETON TEMPLETON
FOREIGN TEMPLETON ASSET TEMPLETON DEVELOPING MUTUAL SHARES
FORTY STOCK ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
------- --------- ---------- ------------- ---------- -------------
Units outstanding, beginning of period - - - - - -
Participant deposits 9,747 39,953 9,911 84,076 19,758 10,898
Participant transfers 5,653 924 3,496 23,701 10,108 5,255
Participant Withdrawals - - - - - -
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period 15,400 40,877 13,407 107,777 29,866 16,153
========= ========= ========= ========= ========= =========
FEDERATED FEDERATED FEDERATED
EAFE EQUITY BANKERS TRUST U.S. GOV'T HIGH INCOME U.S. GOV'T JANUS EQUITY
INDEX DOW 30 SECURITIES II BOND FUND II BOND INCOME
----------- ------------ ------------- ------------ ---------- ------------
Units outstanding, beginning of period - - - - - -
Participant deposits 4,368 150 24,628 20,981 2,121 150
Participant transfers 21,372 - 47,412 23,000 - -
Participant withdrawals (17) - (987) - - -
--------- --------- --------- --------- --------- ---------
Units outstanding, end of period 25,723 150 71,053 43,981 2,121 150
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
MORGAN
STANLEY FOCUS TECHNOLOGY
JANUS GROWTH EQUITY PORTFOLIO
------------ ------------- ----------
<S> <C> <C> <C>
Units outstanding, beginning of period - - -
Participant deposits 248 150 150
Participant transfers 19,188 - -
Participant withdrawals - - -
--------- --------- ---------
Units outstanding, end of period 19,436 150 150
========= ========= =========
</TABLE>
B-18
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 5--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
PHL Variable Insurance Company and its indirect affiliate, Phoenix Equity
Planning Corporation ("PEPCO"), a registered broker/dealer in securities,
provide all services to the Account.
PHL Variable Insurance Company assumes the risk that annuitants as a class
may live longer than expected (necessitating a greater number of annuity
payments) and that its expenses may be higher than the deductions for such
expenses. In return for the assumption of these mortality and expense risks, PHL
Variable Insurance Company charges each Subaccount the daily equivalent of
0.40%, 0.375% and 0.125% on an annual basis for mortality, expense risks and
daily administrative fees, respectively.
As compensation for administrative services provided to the Account,
Phoenix additionally receives $35 per year from each contract, which is deducted
from the Subaccount holding the assets of the participant, or on a pro-rata
basis from two or more Subaccounts in relation to their values under the
contract. Such costs aggregated $0 during the period ended December 31, 1999.
PEPCO is the principal underwriter and distributor for the Account. PEPCO
is reimbursed for its distribution and underwriting expenses by PHL Variable
Insurance Company.
On surrender of a contract, no contingent deferred sales charges apply.
NOTE 6--DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of withdrawals of amounts in the form of surrenders, death
benefits, transfers or annuity payments in excess of net purchase payments.
NOTE 7--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable annuity contract, other than a contract issued in connection
with certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments of
the segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. PHL Variable Insurance Company believes that the Account satisfies the
current requirements of the regulations, and it intends that the Account will
continue to meet such requirements.
B-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO] PricewaterhouseCoopers LLP
To the Board of Directors of PHL Variable Insurance Company and
Participants of PHL Variable Accumulation Account:
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts:
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Hollister Value Equity, Oakhurst
Growth and Income, Schafer Mid-Cap Value, Engemann Capital Growth, Oakhurst
Balanced, Duff & Phelps Real Estate Securities, Aberdeen International, Aberdeen
New Asia, Seneca Strategic Theme, Oakhurst Strategic Allocation, Goodwin Money
Market, Goodwin Multi-Sector Fixed Income, Research Enhanced Index, Wanger U.S.
Small Cap, Wanger International Small Cap, Wanger Twenty, Wanger Foreign Forty,
Templeton Stock, Templeton Asset Allocation, Templeton International, Templeton
Developing Markets, Mutual Shares Investments, EAFE Equity Index, Bankers Trust
Dow 30, Federated U.S. Government Securities II, Federated High Income Bond Fund
II, Federated U.S. Government Bond, Janus Equity Income, Janus Growth, Morgan
Stanley Focus Equity and Technology Portfolio (constituting the PHL Variable
Accumulation Account, hereafter referred to as the "Account") at December 31,
1999, and the results of each of their operations and the changes in each of
their net assets for the period then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Account's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these financial 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 audit, which included confirmation of investments at
December 31, 1999 by correspondence with fund custodians or transfer agents,
provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 10, 2000
B-20
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06115
UNDERWRITER
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
CUSTODIANS
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, Connecticut 06103
- ----------------------
B-21
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
SENECA HOLLISTER OAKHURST SCHAFER
ENGEMANN MID-CAP VALUE GROWTH AND MID-CAP
NIFTY FIFTY GROWTH EQUITY INCOME VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost $ 932,766 $ 129,354 $ 69,613 $1,096,988 $ 16,925
========== ========== ========= ========== =========
Investments at market $1,037,073 $ 151,560 $ 76,527 $1,165,181 $ 17,317
---------- ---------- --------- ---------- ---------
Total assets 1,037,073 151,560 76,527 1,165,181 17,317
---------- ---------- --------- ---------- ---------
LIABILITIES
Accrued expenses to related
party 1,000 123 73 1,100 18
---------- ---------- --------- ---------- ---------
NET ASSETS $1,036,073 $ 151,437 $ 76,454 $1,164,081 $ 17,299
========== ========== ========= ========== =========
Accumulation units outstanding 439,251 55,089 31,938 543,575 7,917
========== ========== ========= ========== =========
Unit value $ 2.358727 $ 2.358727 $2.393845 $ 2.141528 $2.185002
========== ========== ========= ========== =========
ENGEMANN DUFF & PHELPS
CAPITAL OAKHURST REAL ESTATE ABERDEEN ABERDEEN
GROWTH BALANCED SECURITIES INTERNATIONAL NEW ASIA
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $1,509,458 $ 203,055 $ 51,987 $ 288,996 $ 72,187
========== ========== ========= ========== =========
Investments at market $1,609,549 $ 203,285 $ 54,551 $ 289,316 $ 79,023
---------- ---------- --------- ---------- ---------
Total assets 1,609,549 203,285 54,551 289,316 79,023
---------- ---------- --------- ---------- ---------
LIABILITIES
Accrued expenses to related
party 1,403 184 54 217 69
---------- ---------- --------- ---------- ---------
NET ASSETS $1,608,146 $ 203,101 $ 54,497 $ 289,099 $ 78,954
========== ========== ========= ========== =========
Accumulation units outstanding 664,201 94,301 25,651 125,194 34,032
========== ========== ========= ========== =========
Unit value $ 2.421174 $ 2.153759 $2.124550 $ 2.309215 $2.320013
========== ========== ========= ========== =========
SENECA OAKHURST GOODWIN GOODWIN RESEARCH
STRATEGIC STRATEGIC MONEY MULTI-SECTOR ENHANCED
THEME ALLOCATION MARKET FIXED INCOME INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $1,355,913 $ 116,473 $2,021,852 $ 414,266 $ 951,933
========== ========== ========= ========== =========
Investments at market 1,391,301 $ 115,933 $2,021,852 $ 411,922 $ 953,967
---------- ---------- --------- ---------- ---------
Total assets 1,391,301 115,933 2,021,852 411,922 953,967
LIABILITIES
Accrued expenses to related
party 1,131 100 1,549 377 761
NET ASSETS $1,390,170 $ 115,833 $2,020,303 $ 411,545 $ 953,206
========== ========== ========= ========== =========
Accumulation units outstanding 538,255 53,952 996,831 200,308 449,557
========== ========== ========= ========== =========
Unit value $ 2.582732 $ 2.146978 $2.026725 2.054561 $2.120324
========== ========== ========= ========== =========
WANGER
WANGER U.S. INTERNATIONAL WANGER WANGER TEMPLETON
SMALL CAP SMALL CAP TWENTY FOREIGN FORTY STOCK
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 712,557 $ 417,062 $ 99,839 $ 39,974 $ 155,884
========== ========== ========= ========== =========
Investments at market $ 773,843 $ 548,285 $ 108,244 $ 58,885 $ 181,626
---------- ---------- --------- ---------- ---------
Total assets 773,843 548,285 108,244 58,885 181,626
LIABILITIES
Accrued expenses to related
party 613 417 116 54 186
---------- ---------- --------- ---------- ---------
NET ASSETS $ 773,230 $ 547,868 $ 108,128 $ 58,831 $ 181,440
========== ========== ========= ========== =========
Accumulation units outstanding 338,015 176,962 48,086 19,630 77,545
========== ========== ========= ========== =========
Unit value $ 2.287562 $ 3.095959 $2.248648 $ 2.996933 $2.339821
========== ========== ========= ========== =========
</TABLE>
See Notes to Financial Statements
B-22
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(CONTINUED)
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES EAFE
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS EQUITY INDEX
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost $ 58,716 $ 198,324 $ 16,559 $ 76,612 $ 95,937
========== ========== ========= ========== =========
Investments at market $ 63,669 $ 221,662 $ 18,968 $ 79,444 $ 101,625
---------- ---------- --------- ---------- ---------
Total assets 63,669 221,662 18,968 79,444 101,625
LIABILITIES
Accrued expenses to related
party 61 216 18 53 95
---------- ---------- --------- ---------- ---------
NET ASSETS $ 63,608 $ 221,446 $ 18,950 $ 79,391 $ 101,530
========== ========== ========= ========== =========
Accumulation units outstanding 28,649 97,859 7,787 39,777 44,783
========== ========== ========= ========== =========
Unit value $ 2.220287 $ 2.262905 $2.433400 $ 1.995911 $2.267153
========== ========== ========= ========== =========
FEDERATED
FEDERATED HIGH FEDERATED JANUS
U.S. GOV'T INCOME U.S. GOV'T JANUS FLEXIBLE
SECURITIES II BOND FUND II BOND GROWTH INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 288,531 $ 87,406 $ 5,034 $ 54,140 $ 5,030
========== ========== ========= ========== =========
Investments at market $ 287,457 $ 89,524 $ 5,022 $ 54,742 $ 5,022
---------- ---------- --------- ---------- ---------
Total assets 287,457 89,524 5,022 54,742 5,022
LIABILITIES
Accrued expenses to related part 291 94 2 7 2
---------- ---------- --------- ---------- ---------
NET ASSETS $ 287,166 $ 89,430 $ 5,020 $ 54,735 $ 5,020
========== ========== ========= ========== =========
Accumulation units outstanding 144,595 43,711 2,510 26,525 2,510
========== ========== ========= ========== =========
Unit value $ 1.985997 $ 2.045922 $2.000299 $ 2.063552 $2.000275
========== ========== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY
PORTFOLIO
SUBACCOUNT
<S> <C>
ASSETS
Investments at cost $ 18,197
==========
Investments at market $ 18,423
----------
Total assets 18,423
LIABILITIES
Accrued expenses to related part 2
----------
NET ASSETS $ 18,421
==========
Accumulation units outstanding 8,975
==========
Unit value $ 2.052387
==========
</TABLE>
See Notes to Financial Statements
B-23
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
ENGEMANN SENECA HOLLISTER OAKHURST
NIFTY MID-CAP VALUE GROWTH AND
FIFTY GROWTH EQUITY INCOME
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(3) SUBACCOUNT(4)
<S> <C> <C> <C> <C>
Investment income
Distributions $ - $ - $ 162 $ 5,235
Expenses
Mortality, expense risk and administrative charges 1,788 192 150 2,411
---------- --------- --------- ----------
Net investment income (loss) (1,788) (192) 12 2,824
---------- --------- --------- ----------
Net realized gain (loss) from share transactions 291 80 40 11
Net realized gain distribution from Fund - 3,628 4,205 13,720
Net unrealized appreciation (depreciation) on investment 104,307 22,206 6,914 68,193
---------- --------- --------- ----------
Net gain (loss) on investments 104,598 25,914 11,159 81,924
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from operations $ 102,810 $ 25,722 $ 11,171 $ 84,748
========== ========= ========= ==========
ENGEMANN DUFF & PHELPS
SCHAFER MID- CAPITAL OAKHURST REAL ESTATE
CAP VALUE GROWTH BALANCED SECURITIES
SUBACCOUNT(5) SUBACCOUNT(6) SUBACCOUNT(7) SUBACOUNT(8)
Investment income
Distributions $ 217 $ 1,584 $ 1,523 $ 1,197
Expenses
Mortality, expense risk and Administrative charges 33 2,852 295 102
---------- --------- --------- ----------
Net investment income (loss) 184 (1,268) 1,228 1,095
---------- --------- --------- ----------
Net realized gain (loss) from share transactions (0) 735 113 23
Net realized gain distribution from
Net unrealized appreciation (depreciation) on investment 392 100,091 230 2,564
---------- --------- --------- ----------
Net gain (loss) on investments 392 201,657 6,036 2,587
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from operations $ 576 $ 200,389 $ 7,264 $ 3,682
========== ========= ========= ==========
SENECA OAKHURST
ABERDEEN ABERDEEN STRATEGIC STRATEGIC
INTERNATIONAL NEW ASIA THEME ALLOCATION
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11) SUBACCOUNT(12)
Investment income $ 2,700 $ 78 $ - $ 1,066
Distributions
Expenses
Mortality, expense risk and Administrative charges 360 110 1,782 185
---------- --------- --------- ----------
Net investment income (loss) 2,300 (32) (1,782) 881
---------- --------- --------- ----------
Net realized gain (loss) from share transactions (0) 90 316 32
Net realized gain distribution from Fund 23,454 - 134,590 4,627
Net unrealized appreciation (depreciation) on investment 320 6,836 35,388 (540)
---------- --------- --------- ----------
Net gain (loss) on investments 23,774 6,926 170,294 4,119
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from operation $ 26,114 $ 6,894 $ 168,512 $ 5,000
========== ========= ========= ==========
</TABLE>
(1) From inception September 8, 1999 to December 31, 1999
(2) From inception October 12,1999 to December 31, 1999
(3) From inception September 7, 1999 to December 31, 1999
(4) From inception September 8, 1999 to December 31, 1999
(5) From inception October 8, 1999 to December 31, 1999
(6) From inception September 7,1999 to December 31, 1999
(7) From inception September 20, 1999 to December 31, 1999
(8) From inception October 8,1999 to December 31, 1999
(9) From inception October 7,1999 to December 31, 1999
(10) From inception September 17, 1999 to December 31, 1999
(11) From inception September 8,1999 to December 31, 1999
(12) From inception September 8, 1999 to December 31, 1999
See Notes to Financial Statements
B-24
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
GOODWIN RESEARCH
GOODWIN MULTI-SECTOR ENHANCED WANGER U.S.
MONEY MARKET FIXED INCOME INDEX SMALL CAP
SUBACCOUNT(13) SUBACCOUNT(14) SUBACCOUNT(15) SUBACCOUNT(16)
<S> <C> <C> <C> <C>
Investment income
Distributions $ 17,702 $ 9,479 $ 4,674 $ -
Expenses
Mortality, expense risk and administrative charges 4,232 801 1,526 1,061
---------- --------- --------- ----------
Net investment income (loss) 13,470 8,678 3,148 (1,061)
---------- --------- --------- ----------
Net realized gain (loss) from share transations - 2 (9) 11
Net realized gain distribution from Fund - - 45,142 -
Net unrealized appreciation (depreciation) on investment - (2,344) 2,034 61,286
---------- --------- --------- ----------
Net gain (loss) on investments - (2,342) 47,167 61,297
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from operations $ 13,470 $ 6,336 $ 50,315 $ 60,236
========== ========= ========= ==========
WANGER
INTERNATIONAL WANGER WANGER TEMPLETON
SMALL CAP TWENTY FOREIGN FORTY STOCK
SUBACCOUNT(17) SUBACCOUNT(18) SUBACCOUNT(19) SUBACCOUNT(20)
Investment income
Distributions $ - $ - $ - $ -
Expenses
Mortality, expense risk and administrative charges 718 162 92 496
---------- --------- --------- ----------
Net investment income (loss) (718) (162) (92) (496)
---------- --------- --------- ----------
Net realized gain (loss) from share transactions (12) 968 0 118
Net realized gain distribution from Fund
Net unrealized appreciation (depreciation) on investment 131,223 8,405 18,911 25,742
---------- --------- --------- ----------
Net gain (loss) on investments 131,211 9,373 18,911 25,860
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from operations $ 130,493 $ 9,211 $ 18,819 $ 25,364
========== ========= ========= ==========
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
SUBACCOUNT(21) SUBACCOUNT(22) SUBACCOUNT(23)SUBACCOUNT(24)
Investment income
Distributions $ - $ - $ - $ -
Expenses
Mortality, expense risk and administrative charges 96 527 26 87
---------- --------- --------- ----------
Net investment income (loss) (96) (527) (26) (87)
---------- --------- --------- ----------
Net realized gain (loss) from share transactions 0 3 0 (1)
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation) on investment 4,953 23,338 2,409 2,832
---------- --------- --------- ----------
Net gain (loss) on investments 4,953 23,341 2,409 2,831
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from operations $ 4,857 $ 22,814 $ 2,383 $ 2,744
========== ========= ========= ==========
</TABLE>
(13) From inception August 27, 1999 to December 31, 1999
(14) From inception September 30, 1999 to December 31, 1999
(15) From inception September 7, 1999 to December 31, 1999
(16) From inception September 17, 1999 to December 31, 1999
(17) From inception September 17, 1999 to December 31, 1999
(18) From inception October 28, 1999 to December 31, 1999
(19) From inception November 1, 1999 to December 31, 1999
(20) From inception September 30, 1999 to December 31, 1999
(21) From inception November 1, 1999 to December 31, 1999
(22) From inception September 30, 1999 to December 31, 1999
(23) From inception November 1, 1999 to December 31, 1999
(24) From inception September 7, 1999 to December 31, 1999
See Notes to Financial Statements
B-25
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED FEDERATED FEDERATED
EAFE EQUITY U.S. GOV'T HIGH INCOME U.S.GOV'T
INDEX SECURITIES II BOND FUND II BOND
SUBACCOUNT(25) SUBACCOUNT(26) SUBACCOUNT(2) SUBACCOUNT(28)
<S> <C> <C> <C> <C>
Investment income
Distributions $ 1,616 $ - $ - $ 14
Expenses
Mortality, expense risk and administrative charges 156 712 177 2
---------- --------- --------- ----------
Net investment income (loss) 1,460 (712) (177) 12
---------- --------- --------- ----------
Net realized gain (loss) from share transactions 0 (17) 1 -
Net realized gain distribution from Fund 3,018 - - -
Net unrealized appreciation (depreciation) on investment 5,688 (1,074) 2,118 (12)
---------- --------- --------- ----------
Net gain (loss) on investments 8,706 (1,091) 2,119 (12)
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from operations $ 10,166 $ (1,803) $ 1,942 -
========== ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
JANUS
FLEXIBLE TECHNOLOGY
JANUS GROWTH INCOME PORTFOLIO
SUBACCOUNT(29) SUBACCOUNT(30) SUBACCOUNT(31)
<S> <C> <C> <C>
Investment income
Distributions $ - $ 11 $ -
Expenses
Mortality, expense risk and administrative charges 7 2 2
---------- --------- ---------
Net investment income (loss) (7) 9 (2)
---------- --------- ---------
Net realized gain (loss) from share transactions - - -
Net realized gain distribution from Fund - - -
Net unrealized appreciation (depreciation) on investment 602 (8) 226
---------- --------- ---------
Net gain (loss) on investments 602 (8) 226
---------- --------- ---------
Net increase (decrease) in net assets resulting from operations $ 595 $ 1 $ 224
========== ========= =========
</TABLE>
(25) From inception November 1, 1999 to December 31, 1999
(26) From inception September 27, 1999 to December 31, 1999
(27) From inception November 1, 1999 to December 31, 1999
(28) From inception December 21, 1999 to December 31, 1999
(29) From inception December 21, 1999 to December 31, 1999
(30) From inception December 21, 1999 to December 31, 1999
(31) From inception December 21, 1999 to December 31, 1999
See Notes to Financial Statements
B-26
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
OAKHURST
ENGEMANN SENECA MID- HOLLISTER GROWTH AND
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(3) SUBACCOUNT(4)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,788) $ 192 $ 12 $ 2,824
Net realized gain (loss) 291 3,708 4,245 13,731
Net unrealized appreciation (depreciation) 104,307 22,206 6,914 68,193
---------- --------- --------- ----------
Net increase (decrease) resulting from operations 102,810 25,722 11,171 84,748
---------- --------- --------- ----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 647,573 56,273 40,690 641,134
Participant transfers 290,149 69,442 24,920 445,203
Participant withdrawals (4,459) - (327) (7,004)
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from
participant transactions 933,263 125,715 65,283 1,079,333
---------- --------- --------- ----------
Net increase (decrease) in net assets 1,036,073 151,437 76,454 1,164,081
NET ASSETS
Beginning of period - - - -
---------- --------- --------- ----------
End of period $1,036,073 $ 151,437 $ 76,454 $1,164,081
========== ========= ========= ==========
ENGEMANN DUFF & PHELPS
SCHAFER MID- CAPITAL OAKHURST REALESTATE
CAP VALUE GROWTH BALANCED SECURITIES
SUBACCOUNT(5) SUBACCOUNT(6) SUBACCOUNT(7)SUBACCOUNT(8)
FROM OPERATIONS
Net investment income (loss) $ 184 $ (1,268) $ 1,228 $ 1,095
Net realized gain (loss) (0) 101,566 5,806 23
Net unrealized appreciation (depreciation) 392 100,091 230 2,564
---------- --------- --------- ----------
Net increase (decrease) resulting from operations 576 200,389 7,264 3,682
---------- --------- --------- ----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 11,642 979,825 145,985 12,726
Participant transfers 5,081 433,228 50,014 38,089
Participant withdrawals - (5,296) (162) -
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from
participant transactions 16,723 1,407,757 195,837 50,815
---------- --------- --------- ----------
Net increase (decrease) in net assets 17,299 1,608,146 203,101 54,497
NET ASSETS
Beginning of period - - - -
---------- --------- --------- ----------
End of period $ 17,299 $1,608,146 $ 203,101 $ 54,497
========== ========= ========= ==========
SENECA OAKHURST
ABERDEEN ABERDEEN STRATEGIC STRATEGIC
INTERNATIONAL NEW ASIA THEME ALLOCATION
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11) SUBACCOUNT(12)
FROM OPERATIONS
Net investment income (loss) $ 2,340 $ (32) $ (1,782) $ 881
Net realized gain (loss) 23,454 90 134,906 4,659
Net unrealized appreciation (depreciation) 320 6,836 35,388 (540)
---------- --------- --------- ----------
Net increase (decrease) resulting from operations 26,114 6,894 168,512 5,000
---------- --------- --------- ----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 121,951 54,459 862,478 61,704
Participant transfers 141,084 17,601 362,478 49,129
Participant withdrawals (50) - (3,533) -
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from
participant transactions 262,985 72,060 1,221,658 110,833
---------- --------- --------- ----------
Net increase (decrease) in net assets 289,099 78,954 1,390,170 115,833
---------- --------- --------- ----------
NET ASSETS
Beginning of period - - - -
---------- --------- --------- ----------
End of period $ $289,099 $ 78,954 $1,390,170 $ 115,833
========== ========= ========= ==========
</TABLE>
See Notes to Financial Statements
B-27
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
GOODWIN RESEARCH
GOODWIN MULTI-SECTOR ENHANCED WANGER U.S.
MONEY MARKET FIXEDINCOME INDEX SMALL CAP
SUBACCOUNT(13) SUBACCOUNT(14) SUBACCOUNT(15) SUBACCOUNT(16)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 13,470 $ 8,678 $ 3,148 $ (1,061)
Net realized gain (loss) - 2 45,133 11
Net unrealized appreciation (depreciation) - (2,344) 2,034 61,286
---------- --------- --------- ----------
Net increase (decrease) resulting from operations 13,470 6,336 50,315 60,236
---------- --------- --------- ----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 5,140,994 297,184 516,148 467,233
Participant transfers (3,094,671) 110,361 389,595 248,655
Participant withdrawals (39,490) (2,336) (2,852) (2,894)
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from
participant transactions 2,006,833 405,209 902,891 712,994
---------- --------- --------- ----------
Net increase (decrease) in net assets 2,020,303 411,545 953,206 773,230
NET ASSETS
Beginning of period - - - -
---------- --------- --------- ----------
End of period $2,020,303 $ 411,545 $ 953,206 $ 773,230
========== ========= ========= ==========
WANGER
INTERNATIONAL WANGER WANGER TEMPLETON
SMALL CAP TWENTY FOREIGN FORTY STOCK
SUBACCOUNT(17) SUBACCOUNT(18) SUBACCOUNT(19) SUBACCOUNT(20)
FROM OPERATIONS
Net investment income (loss) $ (718) $ (162) $ (92) $ (496)
Net realized gain (loss) (12) 968 0 118
Net unrealized appreciation (depreciation) 131,223 8,405 18,911 25,742
---------- --------- --------- ----------
Net increase (decrease) resulting from operations 130,493 9,211 18,819 25,364
---------- --------- --------- ----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 284,150 87,568 3,401 158,502
Participant transfers 133,756 11,349 36,611 -
Participant withdrawals (531) - (0) (2,426)
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from
participant transactions 417,375 98,917 40,012 156,076
---------- --------- --------- ----------
Net increase (decrease) in net assets 547,868 108,128 58,831 181,440
NET ASSETS
Beginning of period - - - -
---------- --------- --------- ----------
End of period $ 547,868 $ 108,128 $ 58,831 $ 181,440
========== ========= ========= ==========
TEMPLETON TEMPLETON MUTUAL
ASSET TEMPLETON DEVELOPING SHARES
ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
SUBACCOUNT(21) SUBACCOUNT(22) SUBACCOUNT(23) SUBACCOUNT(24)
FROM OPERATIONS
Net investment income (loss) $ (96) $ (527) $ (26) $ (87)
Net realized gain (loss) 0 3 0 (1)
Net unrealized appreciation (depreciation) 4,953 23,338 2,409 2,832
---------- --------- --------- ----------
Net increase (decrease) resulting from operations 4,857 22,814 2,383 2,744
---------- --------- --------- ----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 23,168 181,789 15,988 74,147
Participant transfers 35,583 19,207 579 2,500
Participant withdrawals - (2,364) (0) -
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from
participant transactions 58,751 198,632 16,567 76,647
---------- --------- --------- ----------
Net increase (decrease) in net assets 63,608 221,446 18,950 79,391
NET ASSETS
Beginning of period - - - -
---------- --------- --------- ----------
End of period $ 63,608 $ 221,446 $ 18,950 $ 79,391
========== ========= ========= ==========
</TABLE>
See Notes to Financial Statements
B-28
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
FEDERATED FEDERATED FEDERATED
EAFE EQUITY U.S. GOV'T HIGH INCOME U.S.GOV'T
INDEX SECURITIES II BOND FUND II BOND
SUBACCOUNT(25) SUBACCOUNT(26) SUBACCOUNT(27) SUBACCOUNT(28)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,460 $ (712) $ (177) $ 12
Net realized gain (loss) 3,018 (17) 1 -
Net unrealized appreciation (depreciation) 5,688 (1,074) 2,118 (12)
---------- --------- --------- ----------
Net increase (decrease) resulting from operations 10,166 (1,803) 1,942 -
---------- --------- --------- ----------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 18,003 179,525 28,000 -
Participant transfers 73,361 113,325 59,488 5,020
Participant withdrawals (0) (3,881) - -
---------- --------- --------- ----------
Net increase (decrease) in net assets resulting from
participant transactions 91,364 288,969 87,488 5,020
---------- --------- --------- ----------
Net increase (decrease) in net assets 101,530 287,166 89,430 5,020
NET ASSETS
Beginning of period - - - -
---------- --------- --------- ----------
End of period $ 101,530 $ 287,166 $ 89,430 $ 5,020
========== ========= ========= ==========
JANUS
JANUS FLEXIBLE TECHNOLOGY
GROWTH INCOME PORTFOLIO
SUBACCOUNT(29) SUBACCOUNT(30) SUBACCOUNT(31)
FROM OPERATIONS
Net investment income (loss) $ (7) $ 9 $ (2)
Net realized gain (loss) - - -
Net unrealized appreciation (depreciation) 602 (8) 226
---------- --------- ---------
Net increase (decrease) resulting from operations 595 1 224
---------- --------- ---------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits - - -
Participant transfers 54,140 5,019 18,197
Participant withdrawals - - -
---------- --------- ---------
Net increase (decrease) in net assets resulting from
participant transactions 54,140 5,019 18,197
---------- --------- ---------
Net increase (decrease) in net assets 54,735 5,020 18,421
NET ASSETS
Beginning of period - - -
---------- --------- ---------
End of period $ 54,735 $ 5,020 $ 18,421
========== ========= =========
</TABLE>
See Notes to Financial Statements
B-29
<PAGE>
Footnotes for Statement of Changes in Net Assets
For the period ended December 31, 1999
(1) From inception September 8, 1999 to December 31, 1999
(2) From inception October 12, 1999 to December 31, 1999
(3) From inception September 7, 1999 to December 31, 1999
(4) From inception September 8, 1999 to December 31, 1999
(5) From inception October 8, 1999 to December 31, 1999
(6) From inception Sepember 7, 1999 to December 31, 1999
(7) From inception September 20, 1999 to December 31, 1999
(8) From inception October 8, 1999 to December 31, 1999
(9) From inception October 7, 1999 to December 31, 1999
(10) From inception September 17, 1999 to December 31, 1999
(11) From inception September 8, 1999 to December 31, 1999
(12) From inception September 8, 1999 to December 31, 1999
(13) From inception August 27, 1999 to December 31, 1999
(14) From inception September 30, 1999 to December 31, 1999
(15) From inception September 7, 1999 to December 31, 1999
(16) From inception September 17, 1999 to December 31, 1999
(17) From inception September 17, 1999 to December 31, 1999
(18) From inception October 28, 1999 to December 31, 1999
(19) From inception November 1, 1999 to December 31, 1999
(20) From inception September 30, 1999 to December 31, 1999
(21) From inception November 1, 1999 to December 31, 1999
(22) From inception September 30, 1999 to December 31, 1999
(23) From inception November 1, 1999 to December 31, 1999
(24) From inception September 7, 1999 to December 31, 1999
(25) From inception November 1, 1999 to December 31, 1999
(26) From inception September 27, 1999 to December 31, 1999
(27) From inception November 1, 1999 to December 31, 1999
(28) From inception December 21, 1999 to December 31, 1999
(29) From inception December 21, 1999 to December 31, 1999
(30) From inception December 21, 1999 to December 31, 1999
(31) From inception December 21, 1999 to December 31, 1999
See Notes to Financial Statements
B-30
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
PHL Variable Accumulation Account (the "Account") is a separate investment
account of PHL Variable Insurance Company ("PHL Variable"). The Account is
organized as a unit investment trust and currently consists of 34 Subaccounts,
and invests in a corresponding series (the "Series") of The Phoenix Edge Series
Fund, Wanger Advisors Trust, the Templeton Variable Products Series Fund, BT
Insurance Funds Trust, Federated Insurance Series, and Morgan Stanley Dean
Witter Universal Funds, Inc. (the "Funds"). As of December 31, 1999, 31 of the
available 34 Subaccounts were invested in a corresponding series.
Each Series has distinct investment objectives. The Phoenix-Engemann Nifty
Fifty Series seeks to achieve long-term capital appreciation investing in
approximately 50 different securities which offer the potential for long-term
growth of capital. The Phoenix-Seneca Mid-Cap Growth Series seeks capital
appreciation primarily through investments in equity securities of companies
that have the potential for above average market appreciation. The
Phoenix-Hollister Value Equity Series seeks to achieve long-term capital
appreciation and income by investing in a diversified portfolio of common stocks
which meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. The Phoenix-Oakhurst Growth and
Income Series seeks as its investment objective, dividend growth, current income
and capital appreciation by investing in common stocks. The Phoenix-Schafer
Mid-Cap Value Series seeks to achieve long-term capital appreciation with
current income as the secondary investment objective by investing in common
stocks of established companies having a strong financial position and a low
stock market valuation at the time of purchase which are believed to offer the
possibility of increase in value. The Phoenix-Engemann Capital Growth Series
seeks to achieve intermediate and long-term growth of capital, with income as a
secondary consideration. The Phoenix-Oakhurst Balanced Series seeks to provide
reasonable income, long-term growth and conservation of capital. The
Phoenix-Duff & Phelps Real Estate Securities Series seeks to achieve capital
appreciation and income with approximately equal emphasis through investments in
real estate investment trusts and companies that operate, manage, develop or
invest in real estate. The Phoenix-Aberdeen International Series seeks as its
investment objective a high total return consistent with reasonable risk by
investing primarily in an internationally diversified portfolio of equity
securities. The Phoenix-Aberdeen New Asia Series seeks to provide long-term
capital appreciation by investing primarily in diversified equity securities of
issuers organized and principally operating in Asia, excluding Japan. The
Phoenix-Seneca Strategic Theme Series seeks long-term appreciation of capital by
investing in securities that the adviser believes are well positioned to benefit
from cultural, demographic, regulatory, social or technological changes
worldwide. The Phoenix-Oakhurst Strategic Allocation Series seeks to realize as
high a level of total rate of return over an extended period of time as is
considered consistent with prudent investment risk by investing in three market
segments: stocks, bonds and money market instruments. The Phoenix-Goodwin Money
Market Series seeks to provide maximum current income consistent with capital
preservation and liquidity. The Phoenix-Goodwin Multi-Sector Fixed Income Series
seeks to provide long-term total return by investing in a diversified portfolio
of high yield and high quality fixed income securities. The Phoenix-Research
Enhanced Index Series seeks high total return by investing in a broadly
diversified portfolio of equity securities of large and medium capitalization
companies within market sectors reflected in the Standard & Poor's 500 Composite
Stock Price Index. The Wanger U.S. Small Cap Series invests in growth common
stock of U.S. companies with stock market capitalization of less than $1
billion. The Wanger International Small Cap Series invests in securities of
non-U.S. companies with a stock market capitalization of less than $1 billion.
The Wanger Twenty Series invests in growth common stock of U.S. companies with
market capitalizations of $1 billion to $10 billion, focusing its investments in
20 to 25 U.S. companies. The Wanger Foreign Forty Series invests in equity
securities of foreign companies with market capitalizations of $1 billion to $10
billion, focusing its investments in 40 to 60 companies in the developed
markets. The Templeton Stock Fund is a capital growth common stock fund. The
Templeton Asset Allocation Fund invests in stocks and debt obligations of
companies and governments and money market instruments seeking high total
return. The Templeton International Fund invests in stocks and debt obligations
of companies and governments outside the United States. The Templeton Developing
Markets Fund seeks long-term capital appreciation by investing in equity
securities of issuers in countries having developing markets. The Mutual Shares
InvSestments Fund is a capital appreciation fund with income as a secondary
objective. The EAFE(R) Equity Index Fund seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index, by investing in a
statistically selected sample of the securities found in the matching fund. The
Federated Fund for U.S. Government Securities II Series seeks high current
income by investing in U.S. government securities, including mortgage-backed
securities issued by U.S. government agencies. The Federated High Income Bond
Fund II Series seeks high current income by investing in a diversified portfolio
of high-yield, lower-rated corporate bonds. The Phoenix-Federated U.S.
Government Bond Series seeks to maximize total return by investing in debt
obligations of the U.S. Government, its agencies and instrumentalities. The
Phoenix-Janus Growth Series seeks long-term capital growth, consistent with the
preservation of capital. The Phoenix-Janus Flexible Income Series seeks to
obtain maximum total return, consistent with the preservation of capital. The
Technology Portfolio seeks long-term capital appreciation by investing in equity
securities involved with technology and technology-related industries. The
Phoenix-Bankers Trust Dow 30 Series seeks to track the total return of the Dow
Jones Industrial AverageSM before fund expenses. The Phoenix-Janus Equity Income
Series seeks current income and long-term capital growth. The Phoenix-Morgan
Stanley Focus Equity Series seeks capital appreciation by investing in equity
securities. Additionally, policyowners also may direct the allocation of their
investments between the Account and the Guaranteed Interest Account of the
general account of Phoenix.
B-31
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS: Investments are made exclusively in the Funds
and are valued at the net asset values per share of the respective Series.
B. INVESTMENT TRANSACTIONS AND RELATED INCOME: Investment transactions are
recorded on the trade date. Realized gains and losses include capital gain
distributions from the Funds as well as gains and losses on sales of shares in
the Funds determined on the LIFO (last in, first out) basis.
C. INCOME TAXES: The Account is not a separate entity from PHL Variable
Insurance Company and, under current federal income tax law, income arising from
the Account is not taxed since reserves are established equivalent to such
income. Therefore, no provision for related federal taxes is required.
D. DISTRIBUTIONS: Distributions from the Funds are recorded on the
ex-dividend date.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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.
B-32
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3----PURCHASES AND SALES OF SHARES OF THE FUNDS
Purchases and sales of shares of the Funds for the period ended December
31, 1999 aggregated the following:
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
The Phoenix Edge Series Fund:
Engemann Nifty Fifty 953,468 $ 20,993
Seneca Mid-Cap Growth 132,868 3,594
Hollister Value Equity 73,220 3,647
Oakhurst Growth and Income 1,099,155 2,178
Schafer Mid-Cap Value 16,941 16
Engemann Capital Growth 1,546,019 37,296
Oakhurst Balanced 223,210 20,268
Duff & Phelps Real Estate Securities 54,556 2,592
Aberdeen International 289,139 143
Aberdeen New Asia 92,371 20,274
Seneca Strategic Theme 1,370,684 15,087
Oakhurst Strategic Allocation 131,429 14,988
Goodwin Money Market 4,989,376 2,967,524
Goodwin Multi-Sector Fixed Income 417,844 3,580
Research Enhanced Index 960,267 8,325
Wanger Advisors Trust:
Wanger U.S. Small Cap 713,186 640
Wanger International Small Cap 418,237 1,163
Wanger Twenty 137,983 39,112
Wanger Foreign Forty 39,976 2
Templeton Variable Products Series Fund:
Templeton Stock 158,503 2,737
Templeton Asset Allocation 58,751 35
Templeton International 200,603 2,282
Templeton Developing Markets 16,570 11
Mutual Shares Investments 76,655 42
BT Insurance Funds Trust:
EAFE Equity Index 96,001 64
Federated Insurance Series:
Federated U.S. Gov't Securities II 292,638 4,090
Federated High Income Bond Fund II 87,489 84
The Phoenix Edge Series Fund:
Federated U.S. Gov't Bond 5,034 -
Janus Growth 54,140 -
Janus Flexible Income 5,030 -
Morgan Stanley Dean Witter Universal Funds, Inc.:
Technology Portfolio 18,197 -
B-33
<PAGE>
<TABLE>
<CAPTION>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4----PARTICIPANT ACCUMULATION UNIT TRANSACTIONS FOR THE PERIOD ENDED DECEMBER 31, 1999 (IN UNITS)
SUBACCOUNT
-------------------------------------------------------------------------------------
OAKHURST ENGEMANN
ENGEMANN SENECA MID- HOLLISTER GROWTH AND SCHAFER MID- CAPITAL
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME CAP VALUE GROWTH
------------ ----------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding, begining of period - - - - - -
Participant deposits 302,425 24,183 20,072 325,838 5,397 456,993
Participant transfers 138,536 30,906 12,021 221,230 2,520 209,811
Participant withdrawals (1,710) - (155) (3,493) - (2,603)
---------- --------- ---------- --------- --------- ---------
Units outstanding, end of period 439,251 55,089 31,938 543,575 7,917 664,201
========== ========= ========== ========= ========= =========
DUFF & PHELPS SENECA OAKHURST
OAKHURST REAL ESTATE ABERDEEN ABERDEEN STRATEGIC STRATEGIC
BALANCED SECURITIES INTERNATIONAL NEW ASIA THEME ALLOCATION
------------ ----------- ------------ ---------- ------------ ----------
Units outstanding, beginning of period - - - - - -
Participant deposits 70,113 6,475 57,878 25,579 377,274 29,735
Participant transfers 24,188 19,176 67,339 8,453 162,083 24,217
Participant withdrawals - - (23) - (1,102) -
---------- --------- ---------- --------- --------- ---------
Units outstanding, end of period 94,301 25,651 125,194 34,032 538,255 53,952
========== ========= ========== ========= ========= =========
GOODWIN MULTI- RESEARCH WANGER
GOODWIN SECTOR FIXED ENHANCED WANGER U.S. INTERNATIONAL WANGER
MONEY MARKET INCOME INDEX SMALL CAP SMALL CAP TWENTY
------------ ----------- ------------ ---------- ------------ ----------
Units outstanding, beginning of period - - - - - -
Participant deposits 2,552,185 146,837 254,926 222,944 125,270 41,786
Participant transfers (1,535,912) 54,618 195,888 116,172 51,964 6,300
Participant withdrawals (19,442) (1,147) (1,257) (1,101) (272) -
---------- --------- ---------- --------- --------- ---------
Units outstanding, end of period 996,831 200,308 449,557 338,015 176,962 48,086
========== ========= ========== ========= ========= =========
TEMPLETON TEMPLETON MUTUAL
WANGER TEMPLETON ASSET TEMPLETON DEVELOPING SHARES
FOREIGN FORTY STOCK ALLOCATION INTERNATIONAL MARKETS INVESTMENTS
-------------- ----------- ------------ ---------- ------------ ----------
Units outstanding, beginning of period - - - - - -
Participant deposits 1,388 78,683 10,857 89,910 7,519 38,493
Participant transfers 18,242 - 17,792 9,091 268 1,284
Participant withdrawals - (1,138) - (1,142) - -
---------- --------- ---------- --------- --------- ---------
Units outstanding, end of period 19,630 77,545 28,649 97,859 7,787 39,777
========== ========= ========== ========= ========= =========
FEDERATED FEDERATED FEDERATED JANUS
EAFE EQUITY U.S. GOV'T HIGH INCOME U.S. GOV'T JANUS FLEXIBLE
INDEX SECURITIES II BOND FUND II BOND GROWTH INCOME
------------ ----------- ------------ ---------- ------------ ----------
Units outstanding, beginning of period - - - - - -
Participant deposits 9,001 89,832 14,000 - - -
Participant transfers 35,782 56,711 29,711 2,510 26,525 2,510
Participant withdrawals - (1,948) - - - -
---------- --------- ---------- --------- --------- ---------
Units outstanding, end of period 44,783 144,595 43,711 2,510 26,525 2,510
========== ========= ========== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY
PORTFOLIO
<S> <C>
Units outstanding, beginning of period -
Participant deposits -
Participant transfers 8,975
Participant withdrawals -
----------
Units outstanding, end of period 8,975
==========
</TABLE>
B-34
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 5--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
PHL Variable Insurance Company and its indirect affiliate, Phoenix Equity
Planning Corporation ("PEPCO"), a registered broker/dealer in securities,
provide all services to the Account.
PHL Variable Insurance Company assumes the risk that annuitants as a class
may live longer than expected (necessitating a greater number of annuity
payments) and that its expenses may be higher than the deductions for such
expenses. In return for the assumption of these mortality and expense risks, PHL
Variable Insurance Company charges each Subaccount the daily equivalent of
0.40%, 0.725% and 0.125% on an annual basis for mortality, expense risks and
daily administrative fees, respectively.
As compensation for administrative services provided to the Account, Phoenix
additionally receives $35 per year from each contract, which is deducted from
the Subaccount holding the assets of the participant, or on a pro-rata basis
from two or more Subaccounts in relation to their values under the contract.
Such costs aggregated $0 during the period ended December 31, 1999.
PEPCO is the principal underwriter and distributor for the Account. PEPCO is
reimbursed for its distribution and underwriting expenses by PHL Variable
Insurance Company.
On surrender of a contract, no contingent deferred sales charges apply.
NOTE 6--DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of withdrawals of amounts in the form of surrenders, death
benefits, transfers or annuity payments in excess of net purchase payments.
NOTE 7--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable annuity contract, other than a contract issued in connection
with certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments of
the segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. PHL Variable Insurance Company believes that the Account satisfies the
current requirements of the regulations, and it intends that the Account will
continue to meet such requirements.
B-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[GRAPHIC OMITTED][GRAPHIC OMITTED]
To the Board of Directors of PHL Variable Insurance Company and
Participants of PHL Variable Accumulation Account:
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts:
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Hollister Value Equity, Oakhurst
Growth and Income, Schafer Mid-Cap Value, Engemann Capital Growth, Oakhurst
Balanced, Duff & Phelps Real Estate Securities, Aberdeen International, Aberdeen
New Asia, Seneca Strategic Theme, Oakhurst Strategic Allocation, Goodwin Money
Market, Goodwin Multi-Sector Fixed Income, Research Enhanced Index, Wanger U.S.
Small Cap, Wanger International Small Cap, Wanger Twenty, Wanger Foreign Forty,
Templeton Stock, Templeton Asset Allocation, Templeton International, Templeton
Developing Markets, Mutual Shares Investments, EAFE Equity Index, Federated U.S.
Government Securities II, Federated High Income Bond Fund II, Federated U.S.
Government Bond, Janus Growth, Janus Flexible Income and Technology Portfolio
(constituting the PHL Variable Accumulation Account, hereafter referred to as
the "Account") at December 31, 1999, and the results of each of their operations
and the changes in each of their net assets for the period then ended, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Account's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial 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 audit, which included confirmation
of investments at December 31, 1999 by correspondence with fund custodians or
transfer agents, provides a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 10, 2000
B-36
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06115
UNDERWRITER
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
CUSTODIANS
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, Connecticut 06103
- --------
B-37
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
OAKHURST ENGEMANN
ENGEMANN SENECA MID- HOLLISTER GROWTH AND CAPITAL
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost $ 139,181 $ 8 $ 486 $ 115,752 $ 216,658
============= ============= ============= ============ =============
Investments at market $ 145,160 $ 8 $ 494 $ 120,350 $ 221,867
------------- ------------- ------------- ------------ -------------
Total assets 145,160 8 494 120,350 221,867
LIABILITIES
Accrued expenses to
related party 108 - 1 87 161
------------- ------------- ------------- ------------ -------------
NET ASSETS $ 145,052 $ 8 $ 493 $ 120,263 $ 221,706
============= ============= ============= ============ =============
Accumulation units
outstanding 60,858 4 229 53,989 92,006
============= ============= ============= ============ =============
Unit value $ 2.383432 $ 2.236413 $ 2.151593 $ 2.227552 $ 2.409693
============= ============= ============= ============ =============
DUFF & PHELPS SENECA OAKHURST
OAKHURST REAL ESTATE ABERDEEN STRATEGIC STRATEGIC
BALANCED SECURITIES INTERNATIONAL THEME ALLOCATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 24,796 $ 1,678 $ 5,319 $ 351,112 $ 56,164
============= ============= ============= ============ =============
Investments at market $ 25,899 $ 1,663 $ 5,135 $ 348,968 $ 58,128
------------- ------------- ------------- ------------ -------------
Total assets 25,899 1,663 5,135 348,968 58,128
LIABILITIES
Accrued expenses to
related party 30 2 4 225 66
------------- ------------- ------------- ------------ -------------
NET ASSETS $ 25,869 $ 1,661 $ 5,131 $ 348,743 $ 58,062
============= ============= ============= ============ =============
Accumulation units
outstanding 12,090 819 2,340 134,294 27,251
============= ============= ============= ============ =============
Unit value $ 2.139688 $ 2.029296 $ 2.192338 $ 2.596857 $ 2.130633
============= ============= ============= ============ =============
GOODWIN RESEARCH WANGER
MONEY ENHANCED WANGER U.S. INTERNATIONAL WANGER
MARKET INDEX SMALL CAP SMALL CAP TWENTY
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 687,380 $ 28,769 $ 18,642 $ 14,847 $ 4,422
============= ============= ============= ============ =============
Investments at market $ 687,380 $ 28,335 $ 19,936 $ 21,543 $ 4,757
------------- ------------- ------------- ------------ -------------
Total assets 687,380 28,335 19,936 21,543 4,757
LIABILITIES
Accrued expenses to
related party 890 110 18 23 5
------------- ------------- ------------- ------------ -------------
NET ASSETS $ 686,490 $ 28,225 $ 19,918 $ 21,520 $ 4,752
============= ============= ============= ============ =============
Accumulation units
outstanding 339,006 13,397 8,631 6,967 2,154
============= ============= ============= ============ =============
Unit value $ 2.025010 $ 2.106858 $ 2.307720 $ 3.089088 $ 2.205925
============= ============= ============= ============ =============
TEMPLETON MUTUAL
WANGER DEVELOPING SHARES JANUS EQUITY JANUS
FOREIGN FORTY MARKETS INVESTMENTS INCOME GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
ASSETS
Investments at cost $ 4,422 $ 2 $ 975 $ 20,492 $ 20,492
============= ============= ============= ============ =============
Investments at market $ 5,950 $ 2 $ 1,001 $ 21,133 $ 21,151
------------- ------------- ------------- ------------ -------------
Total assets 5,950 2 1,001 21,133 21,151
LIABILITIES
Accrued expenses to
related party 6 - 1 7 8
------------- ------------- ------------- ------------ -------------
NET ASSETS $ 5,944 $ 2 $ 1,000 $ 21,126 $ 21,143
============= ============= ============= ============ =============
Accumulation units
outstanding 1,984 1 488 10,246 10,246
============= ============= ============= ============ =============
Unit value $ 2.996379 $ 2.103448 $ 2.049767 $ 2.061818 $ 2.063500
============= ============= ============= ============ =============
</TABLE>
See Notes to Financial Statements
B-38
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
MORGAN
JANUS FLEXIBLE STANLEY TECHNOLOGY
INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT SUBACCOUNT SUBACCOUNT
<S> <C> <C> <C>
ASSETS
Investments at cost $ 20,535 $ 20,492 $ 20,492
============= ============= =============
Investments at market $ 20,502 $ 21,249 $ 21,036
------------- ------------- -------------
Total assets 20,502 21,249 21,036
LIABILITIES
Accrued expenses to
related party 8 8 8
------------- ------------- -------------
NET ASSETS $ 20,494 $ 21,241 $ 21,028
============= ============= =============
Accumulation units
outstanding 10,246 10,246 10,246
============= ============= =============
Unit value $ 2.000211 $ 2.073075 $ 2.052328
============= ============= =============
</TABLE>
See Notes to Financial Statements
B-39
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
OAKHURST
ENGEMANN SENECA MID- HOLLISTER GROWTH AND
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(3) SUBACCOUNT(4)
<S> <C> <C> <C> <C>
Investment income
Distributions $ - $ - $ 1 $ 541
Expenses
Mortality, expense risk and administrative
charges 133 - 1 156
------------- ------------- ------------- -------------
Net investment income (loss) (133) - 0 385
------------- ------------- ------------- -------------
Net realized gain (loss) from share transactions 391 - - 1
Net realized gain distribution from Fund - 0 27 1,418
Net unrealized appreciation (depreciation) on investment 5,979 - 8 4,598
------------- ------------- ------------- -------------
Net gain (loss) on investments 6,370 - 35 6,017
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations $ 6,237 $ - $ 35 $ 6,402
============= ============= ============= =============
ENGEMANN DUFF & PHELPS
CAPITAL OAKHURST REAL ESTATE ABERDEEN
GROWTH BALANCED SECURITIES INTERNATIONAL
SUBACCOUNT(5) SUBACCOUNT(6) SUBACCOUNT(7) SUBACCOUNT(8)
Investment income
Distributions $ 221 $ 216 $ 53 $ 49
Expenses
Mortality, expense risk and administrative
charges 271 72 6 3
------------- ------------- ------------- -------------
Net investment income (loss) (50) 144 47 46
Net realized gain (loss) from share transactions 272 215 (0) -
Net realized gain distribution from Fund 14,096 725 - 426
Net unrealized appreciation (depreciation) on investment 5,209 1,103 (15) (184)
------------- ------------- ------------- -------------
Net gain (loss) on investments 19,577 2,043 (15) 242
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations $ 19,527 $ 2,187 $ 32 $ 288
============= ============= ============= =============
SENECA OAKHURST GOODWIN RESEARCH
STRATEGIC STRATEGIC MONEY ENHANCED
THEME ALLOCATION MARKET INDEX
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11) SUBACCOUNT(12)
Investment income
Distributions $ - $ 521 $ 9,210 $ 136
Expenses
Mortality, expense risk and administrative
charges 322 143 2,445 153
------------- ------------- ------------- -------------
Net investment income (loss) (322) 378 6,765 (17)
------------- ------------- ------------- -------------
Net realized gain (loss) from share transactions (0) 20 - 567
Net realized gain distribution from Fund 33,758 2,320 - 1,341
Net unrealized appreciation (depreciation) on investment (2,144) 1,964 - (434)
------------- ------------- ------------- -------------
Net gain (loss) on investments 31,614 4,304 - 1,474
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations $ 31,292 $ 4,682 $ 6,765 $ 1,457
============= ============= ============= =============
</TABLE>
(1) From inception September 16, 1999 to December 31, 1999
(2) From inception December 20, to December 31, 1999
(3) From inception December 1, 1999 to December 31, 1999
(4) From inception October 22, 1999 to December 31, 1999
(5) From inception September 3, to December 31, 1999
(6) From inception September 3, to December 31, 1999
(7) From inception September 3, to December 31, 1999
(8) From inception December 1, 1999 to December 31, 1999
(9) From inception September 3, to December 31, 1999
(10) From inception September 3, to December 31, 1999
(11) From inception August 30, 1999 to December 31, 1999
(12) From inception September 3, 1999 to December 31, 1999
See Notes to Financial Statements
B-40
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
WANGER
WANGER U.S. INTERNATIONAL WANGER WANGER
SMALL CAP SMALL CAP TWENTY FOREIGN FORTY
SUBACCOUNT(13) SUBACCOUNT(14) SUBACCOUNT(15) SUBACCOUNT(16)
<S> <C> <C> <C> <C>
Investment income
Distributions $ - $ - $ - $ -
Expenses
Mortality, expense risk and administrative
charges 39 45 7 8
------------- ------------- ------------- -------------
Net investment income (loss) (39) (45) (7) (8)
------------- ------------- ------------- -------------
Net realized gain (loss) from share transactions 477 424 0 (0)
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation) on investment 1,294 6,696 335 1,528
------------- ------------- ------------- -------------
Net gain (loss) on investments 1,771 7,120 335 1,528
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations $ 1,732 $ 7,075 $ 328 $ 1,520
============= ============= ============= =============
TEMPLETON MUTUAL
DEVELOPING SHARES JANUS EQUITY JANUS
MARKETS INVESTMENTS INCOME GROWTH
SUBACCOUNT(17) SUBACCOUNT(18) SUBACCOUNT(19) SUBACCOUNT(19)
Investment income
Distributions $ - $ - $ - $ -
Expenses
Mortality, expense risk and administrative
charges - 1 7 8
------------- ------------- ------------- -------------
Net investment income (loss) - (1) (7) (8)
------------- ------------- ------------- -------------
Net realized gain (loss) from share transactions - - - -
Net realized gain distribution from Fund - - - -
Net unrealized appreciation (depreciation) on investment 0 26 641 659
------------- ------------- ------------- -------------
Net gain (loss) on investments 0 26 641 659
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations $ 0 $ 25 $ 634 $ 651
============= ============= ============= =============
MORGAN
JANUS FLEXIBLE STANLEY TECHNOLOGY
INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT(19) SUBACCOUNT(19) SUBACCOUNT(19)
Investment income
Distributions $ 43 $ - $ -
Expenses
Mortality, expense risk and administrative
charges 8 8 8
------------- ------------- -------------
Net investment income (loss) 35 (8) (8)
------------- ------------- -------------
Net realized gain (loss) from share transactions - - -
Net realized gain distribution from Fund - - -
Net unrealized appreciation (depreciation) on investment (33) 757 544
------------- ------------- -------------
Net gain (loss) on investments (33) 757 544
------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations $ 2 $ 749 $ 536
============= ============= =============
</TABLE>
(13) From inception September 16, 1999 to December 31, 1999
(14) From inception September 16, to December 31, 1999
(15) From inception November 1, 1999 to December 31, 1999
(16) From inception November 1, 1999 to December 31, 1999
(17) From inception December 20, to December 31, 1999
(18) From inception December 1, 1999 to December 31, 1999
(19) From inception December 21, to December 31, 1999
See Notes to Financial Statements
B-41
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
OAKHURST
ENGEMANN SENECA MID- HOLLISTER GROWTH AND
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME
SUBACCOUNT(1) SUBACCOUNT(2) SUBACCOUNT(3) SUBACCOUNT(4)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (133) $ - $ 0 $ 385
Net realized gain (loss) 391 0 27 1,419
Net unrealized appreciation
(depreciation) 5,979 - 8 4,598
------------- ------------- ------------- -------------
Net increase (decrease) resulting from
operations 6,237 - 35 6,402
------------- ------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 108,913 8 - 55,400
Participant transfers 37,771 - 458 58,461
Participant withdrawals (7,869) - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from participant transactions 138,815 8 458 113,861
------------- ------------- ------------- -------------
Net increase (decrease) in net assets 145,052 8 493 120,263
NET ASSETS
Beginning of period - - - -
------------- ------------- ------------- -------------
End of period $ 145,052 $ 8 $ 493 $ 120,263
============= ============= ============= =============
ENGEMANN DUFF & PHELPS
CAPITAL OAKHURST REAL ESTATE ABERDEEN
GROWTH BALANCED SECURITIES INTERNATIONAL
SUBACCOUNT(5) SUBACCOUNT(6) SUBACCOUNT(7) SUBACCOUNT(8)
FROM OPERATIONS
Net investment income (loss) $ (50) $ 144 $ 47 $ 46
Net realized gain (loss) 14,368 940 (0) 426
Net unrealized appreciation
(depreciation) 5,209 1,103 (15) (184)
------------- ------------- ------------- -------------
Net increase (decrease) resulting from
operations 19,527 2,187 32 288
------------- ------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 59,439 20,625 1,502 3,009
Participant transfers 150,754 9,119 127 1,834
Participant withdrawals (8,014) (6,062) - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from participant transactions 202,179 23,682 1,629 4,843
------------- ------------- ------------- -------------
Net increase (decrease) in net assets 221,706 25,869 1,661 5,131
NET ASSETS
Beginning of period - - - -
------------- ------------- ------------- -------------
End of period $ 221,706 $ 25,869 $ 1,661 $ 5,131
============= ============= ============ =============
SENECA OAKHURST GOODWIN RESEARCH
STRATEGIC STRATEGIC MONEY ENHANCED
THEME ALLOCATION MARKET INDEX
SUBACCOUNT(9) SUBACCOUNT(10) SUBACCOUNT(11) SUBACCOUNT(12)
FROM OPERATIONS
Net investment income (loss) $ (322) $ 378 $ 6,765 $ (17)
Net realized gain (loss) 33,758 2,340 - 1,908
Net unrealized appreciation
(depreciation) (2,144) 1,964 - (434)
------------- ------------- ------------- -------------
Net increase (decrease) resulting from
operations 31,292 4,682 6,765 1,457
------------- ------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 163,446 32,364 1,186,996 4,754
Participant transfers 154,005 21,016 (489,910) 22,014
Participant withdrawals - - (17,361) -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from participant transactions 317,451 53,380 679,725 26,768
------------- ------------- ------------- -------------
Net increase (decrease) in net assets 348,743 58,062 686,490 28,225
NET ASSETS
Beginning of period - - - -
------------- ------------- ------------- -------------
End of period $ 348,743 $ 58,062 $ 686,490 $ 28,225
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements
B-42
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
WANGER
WANGER U.S. INTERNATIONAL WANGER WANGER
SMALL CAP SMALL CAP TWENTY FOREIGN FORTY
SUBACCOUNT(13) SUBACCOUNT(14) SUBACCOUNT(15) SUBACCOUNT(16)
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (39) $ (45) $ (7) $ (8)
Net realized gain (loss) 477 424 0 (0)
Net unrealized appreciation
(depreciation) 1,294 6,696 335 1,528
------------- ------------- ------------- -------------
Net increase (decrease) resulting from
operations 1,732 7,075 328 1,520
------------- ------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 13,374 11,035 572 572
Participant transfers 12,621 7,916 3,852 3,852
Participant withdrawals (7,809) (4,506) - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from participant transactions 18,186 14,445 4,424 4,424
------------- ------------- ------------- -------------
Net increase (decrease) in net assets 19,918 21,520 4,752 5,944
NET ASSETS
Beginning of period - - - -
------------- ------------- ------------- -------------
End of period $ 19,918 $ 21,520 $ 4,752 $ 5,944
============= ============= ============= =============
TEMPLETON MUTUAL
DEVELOPING SHARES JANUS EQUITY JANUS
MARKETS INVESTMENTS INCOME GROWTH
SUBACCOUNT(17) SUBACCOUNT(18) SUBACCOUNT(19) SUBACCOUNT(19)
FROM OPERATIONS
Net investment income (loss) $ - $ (1) $ (7) $ (8)
Net realized gain (loss) - - - -
Net unrealized appreciation
(depreciation) 0 26 641 659
------------- ------------- ------------- -------------
Net increase (decrease) resulting from
operations 0 25 634 651
------------- ------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits 2 - - -
Participant transfers - 975 20,492 20,492
Participant withdrawals - - - -
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from participant transactions 2 975 20,492 20,492
------------- ------------- ------------- -------------
Net increase (decrease) in net assets 2 1,000 21,126 21,143
NET ASSETS
Beginning of period - - - -
------------- ------------- ------------- -------------
End of period $ 2 $ 1,000 $ 21,126 $ 21,143
============= ============= ============= =============
MORGAN
JANUS FLEXIBLE STANLEY TECHNOLOGY
INCOME FOCUS EQUITY PORTFOLIO
SUBACCOUNT(19) SUBACCOUNT(19) SUBACCOUNT(19)
FROM OPERATIONS
Net investment income (loss) $ 35 $ (8) $ (8)
Net realized gain (loss) - - -
Net unrealized appreciation
(depreciation) (33) 757 544
------------- ------------- -------------
Net increase (decrease) resulting from
operations 2 749 536
------------- ------------- -------------
FROM ACCUMULATION UNIT TRANSACTIONS
Participant deposits - - -
Participant transfers 20,492 20,492 20,492
Participant withdrawals - - -
------------- ------------- -------------
Net increase (decrease) in net assets
resulting from participant transactions 20,492 20,492 20,492
------------- ------------- -------------
Net increase (decrease) in net assets 20,494 21,241 21,028
NET ASSETS
Beginning of period - - -
------------- ------------- -------------
End of period $ 20,494 $ 21,241 $ 21,028
============= ============= =============
</TABLE>
See Notes to Financial Statements
B-43
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1999
(CONTINUED)
Footnotes for Statement of Changes in Net Assets
For the period ended December 31, 1999
(1) From inception September 16, 1999 to December 31, 1999
(2) From inception December 20, 1999 to December 31, 1999
(3) From inception December 1, 1999 to December 31, 1999
(4) From inception October 22, 1999 to December 31, 1999
(5) From inception September 3, 1999 to December 31, 1999
(6) From inception September 3, 1999 to December 31, 1999
(7) From inception September 3, 1999 to December 31, 1999
(8) From inception December 1, 1999 to December 31, 1999
(9) From inception September 3, 1999 to December 31, 1999
(10) From inception September 3, 1999 to December 31, 1999
(11) From inception August 30, 1999 to December 31, 1999
(12) From inception September 3, 1999 to December 31, 1999
(13) From inception September 16, 1999 to December 31, 1999
(14) From inception September 16, 1999 to December 31, 1999
(15) From inception November 1, 1999 to December 31, 1999
(16) From inception November 1, 1999 to December 31, 1999
(17) From inception December 20, 1999 to December 31, 1999
(18) From inception December 1, 1999 to December 31, 1999
(19) From inception December 21, 1999 to December 31, 1999
See Notes to Financial Statements
B-44
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION
PHL Variable Accumulation Account (the "Account") is a separate investment
account of PHL Variable Insurance Company ("PHL Variable"). The Account is
organized as a unit investment trust and currently consists of 34 Subaccounts,
and invests in a corresponding series (the "Series") of The Phoenix Edge Series
Fund, Wanger Advisors Trust, the Templeton Variable Products Series Fund, BT
Insurance Funds Trust, Federated Insurance Series, and Morgan Stanley Dean
Witter Universal Funds, Inc. (the "Funds"). As of December 31, 1999, 23 of the
available 34 Subaccounts were invested in a corresponding series.
Each Series has distinct investment objectives. The Phoenix-Engemann Nifty
Fifty Series seeks to achieve long-term capital appreciation investing in
approximately 50 different securities which offer the potential for long-term
growth of capital. The Phoenix-Seneca Mid-Cap Growth Series seeks capital
appreciation primarily through investments in equity securities of companies
that have the potential for above average market appreciation. The
Phoenix-Hollister Value Equity Series seeks to achieve long-term capital
appreciation and income by investing in a diversified portfolio of common stocks
which meet certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. The Phoenix-Oakhurst Growth and
Income Series seeks as its investment objective, dividend growth, current income
and capital appreciation by investing in common stocks. The Phoenix-Engemann
Capital Growth Series seeks to achieve intermediate and long-term growth of
capital, with income as a secondary consideration. The Phoenix-Oakhurst Balanced
Series seeks to provide reasonable income, long-term growth and conservation of
capital. The Phoenix-Duff & Phelps Real Estate Securities Series seeks to
achieve capital appreciation and income with approximately equal emphasis
through investments in real estate investment trusts and companies that operate,
manage, develop or invest in real estate. The Phoenix-Aberdeen International
Series seeks as its investment objective a high total return consistent with
reasonable risk by investing primarily in an internationally diversified
portfolio of equity securities. The Phoenix-Seneca Strategic Theme Series seeks
long-term appreciation of capital by investing in securities that the adviser
believes are well positioned to benefit from cultural, demographic, regulatory,
social or technological changes worldwide. The Phoenix-Oakhurst Strategic
Allocation Series seeks to realize as high a level of total rate of return over
an extended period of time as is considered consistent with prudent investment
risk by investing in three market segments: stocks, bonds and money market
instruments. The Phoenix-Goodwin Money Market Series seeks to provide maximum
current income consistent with capital preservation and liquidity. The
Phoenix-Research Enhanced Index Series seeks high total return by investing in a
broadly diversified portfolio of equity securities of large and medium
capitalization companies within market sectors reflected in the Standard &
Poor's 500 Composite Stock Price Index. The Wanger U.S. Small Cap Series invests
in growth common stock of U.S. companies with stock market capitalization of
less than $1 billion. The Wanger International Small Cap Series invests in
securities of non-U.S. companies with a stock market capitalization of less than
$1 billion. The Wanger Twenty Series invests in growth common stock of U.S.
companies with market capitalizations of $1 billion to $10 billion, focusing its
investments in 20 to 25 U.S. companies. The Wanger Foreign Forty Series invests
in equity securities of foreign companies with market capitalizations of $1
billion to $10 billion, focusing its investments in 40 to 60 companies in the
developed markets. The Templeton Developing Markets Fund seeks long-term capital
appreciation by investing in equity securities of issuers in countries having
developing markets. The Mutual Shares Investments Fund is a capital appreciation
fund with income as a secondary objective. The Phoenix-Janus Equity Income
Series seeks current income and long-term capital growth. The Phoenix-Janus
Growth Series seeks long-term capital growth, consistent with the preservation
of capital. The Phoenix-Janus Flexible Income Series seeks to obtain maximum
total return, consistent with the preservation of capital. The Phoenix-Morgan
Stanley Focus Equity Series seeks capital appreciation by investing in equity
securities. The Technology Portfolio seeks long-term capital appreciation by
investing in equity securities involved with technology and technology-related
industries. The Phoenix-Schafer Mid-Cap Value Series seeks to achieve long-term
capital appreciation with current income as the secondary investment objective
by investing in common stocks of established companies having a strong financial
position and a low stock market valuation at the time of purchase which are
believed to offer the possibility of increase in value. The Phoenix-Aberdeen New
Asia Series seeks to provide long-term capital appreciation by investing
primarily in diversified equity securities of issuers organized and principally
operating in Asia, excluding Japan. The Phoenix-Goodwin Multi-Sector Fixed
Income Series seeks to provide long-term total return by investing in a
diversified portfolio of high yield and high quality fixed income securities.
The Templeton Stock Fund is a capital growth common stock fund. The Templeton
Asset Allocation Fund invests in stocks and debt obligations of companies and
governments and money market instruments seeking high total return. The
Templeton International Fund invests in stocks and debt obligations of companies
and governments outside the United States. The EAFE(R) Equity Index Fund seeks
to match the performance of the Morgan Stanley Capital International EAFE(R)
Index, by investing in a statistically selected sample of the securities found
in the matching fund. The Federated Fund for U.S. Government Securities II
Series seeks high current income by investing in U.S. government securities,
including mortgage-backed securities issued by U.S. government agencies. The
Federated High Income Bond Fund II Series seeks high current income by investing
in a diversified portfolio of high-yield, lower-rated corporate bonds. The
Phoenix-Federated U.S. Government Bond Series seeks to maximize total return by
investing in debt obligations of the U.S. Government, its agencies and
instrumentalities. The Phoenix-Bankers Trust Dow 30 Series seeks to track the
total return of the Dow Jones Industrial AverageSM before fund expenses.
Additionally, policyowners also may direct the allocation of their investments
between the Account and the Guaranteed Interest Account of the general account
of Phoenix.
B-45
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS: Investments are made exclusively in the Funds
and are valued at the net asset values per share of the respective Series.
B. INVESTMENT TRANSACTIONS AND RELATED INCOME: Investment transactions are
recorded on the trade date. Realized gains and losses include capital gain
distributions from the Funds as well as gains and losses on sales of shares in
the Funds determined on the LIFO (last in, first out) basis.
C. INCOME TAXES: The Account is not a separate entity from PHL Variable
Insurance Company and, under current federal income tax law, income arising from
the Account is not taxed since reserves are established equivalent to such
income. Therefore, no provision for related federal taxes is required.
D. DISTRIBUTIONS: Distributions from the Funds are recorded on the
ex-dividend date.
E. USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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.
B-46
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 3----PURCHASES AND SALES OF SHARES OF THE FUNDS
Purchases and sales of shares of the Funds for the period ended December 31,
1999 aggregated the following:
<TABLE>
<CAPTION>
SUBACCOUNT PURCHASES SALES
- ---------- --------- -----
<S> <C> <C>
The Phoenix Edge Series Fund:
Engemann Nifty Fifty $ 158,689 $ 19,899
Seneca Mid-Cap Growth 8 -
Hollister Value Equity 486 -
Oakhurst Growth and Income 115,820 69
Engemann Capital Growth 248,502 32,116
Oakhurst Balanced 54,685 30,104
Duff & Phelps Real Estate Securities 1,683 5
Aberdeen International 5,319 -
Seneca Strategic Theme 363,204 12,092
Oakhurst Strategic Allocation 80,231 24,087
Goodwin Money Market 1,545,977 858,597
Research Enhanced Index 156,114 127,912
Wanger Advisors Trust:
Wanger U.S. Small Cap 26,206 8,041
Wanger International Small Cap 20,029 5,606
Wanger Twenty 4,424 2
Wanger Foreign Forty 4,424 2
Templeton Variable Products Series Fund:
Templeton Developing Markets 2 -
Mutual Shares Investments 975 -
The Phoenix Edge Series Fund:
Janus Equity Income 20,492 -
Janus Growth 20,492 -
Janus Flexible Income 20,535 -
Morgan Stanley Focus Equity 20,492 -
Morgan Stanley Dean Witter Universal Funds, Inc.:
Technology Portfolio 20,492 -
</TABLE>
B-47
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 4----PARTICIPANT ACCUMULATION UNIT TRANSACTIONS FOR THE PERIOD ENDED
DECEMBER 31, 1999 (IN UNITS)
<TABLE>
<CAPTION>
SUBACCOUNT
-----------------------------------------------------------------------------------------
OAKHURST ENGEMANN
ENGEMANN SENECA MID- HOLLISTER GROWTH AND CAPITAL
NIFTY FIFTY CAP GROWTH VALUE EQUITY INCOME GROWTH
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Units outstanding, beginning of period - - - - -
Participant deposits 47,190 4 - 25,241 27,197
Participant transfers 17,289 - 229 28,748 68,541
Participant withdrawals (3,621) - - - (3,732)
------------- ------------- ------------- ------------- -------------
Units outstanding, end of period 60,858 4 229 53,989 92,006
============= ============= ============= ============= =============
DUFF & PHELPS SENECA OAKHURST
OAKHURST REAL ESTATE ABERDEEN STRATEGIC STRATEGIC
BALANCED SECURITIES INTERNATIONAL THEME ALLOCATION
------------- ------------- ------------- ------------- -------------
Units outstanding, beginning of period - - - - -
Participant deposits 10,504 751 1,448 66,057 16,870
Participant transfers 4,538 68 892 68,237 10,381
Participant withdrawals (2,952) - - - -
------------- ------------- ------------- ------------- -------------
Units outstanding, end of period 12,090 819 2,340 134,294 27,251
============= ============= ============= ============= =============
RESEARCH WANGER
GOODWIN ENHANCED WANGER U.S. INTERNATIONAL WANGER
MONEY MARKET INDEX SMALL CAP SMALL CAP TWENTY
------------- ------------- ------------- ------------- -------------
Units outstanding, beginning of period - - - - -
Participant deposits 590,589 2,354 6,166 5,281 275
Participant transfers (243,065) 11,043 6,093 3,718 1879
Participant withdrawals (8,518) - (3,628) (2,032) -
------------- ------------- ------------- ------------- -------------
Units outstanding, end of period 339,006 13,397 8,631 6,967 2,154
============= ============= ============= ============= =============
TEMPLETON MUTUAL JANUS
WANGER DEVELOPING SHARES JANUS EQUITY FLEXIBLE
FOREIGN FORTY MARKETS INVESTMENTS INCOME INCOME
------------- ------------- ------------- ------------- -------------
Units outstanding, beginning of period - - - -
Participant deposits 255 1 - -
Participant transfers 1,729 0 488 10,246 10,246
Participant withdrawals - - - - -
------------- ------------- ------------- ------------- -------------
Units outstanding, end of period 1,984 1 488 10,246 10,246
============= ============= ============= ============= =============
MORGAN
STANLEY FOCUS TECHNOLOGY
JANUS GROWTH EQUITY PORTFOLIO
------------- ------------- -------------
Units outstanding, beginning of period - -
Participant deposits - -
Participant transfers 10,246 10,246 10,246
Participant withdrawals - -
------------- ------------- -------------
Units outstanding, end of period 10,246 10,246 10,246
============= ============= =============
</TABLE>
B-48
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
NOTES TO FINANCIAL STATEMENTS
NOTE 5--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
PHL Variable Insurance Company and its indirect affiliate, Phoenix Equity
Planning Corporation ("PEPCO"), a registered broker/dealer in securities,
provide all services to the Account.
PHL Variable Insurance Company assumes the risk that annuitants as a class
may live longer than expected (necessitating a greater number of annuity
payments) and that its expenses may be higher than the deductions for such
expenses. In return for the assumption of these mortality and expense risks, PHL
Variable Insurance Company charges each Subaccount the daily equivalent of
0.40%, 0.825% and 0.125% on an annual basis for mortality, expense risks and
daily administrative fees, respectively.
As compensation for administrative services provided to the Account, Phoenix
additionally receives $35 per year from each contract, which is deducted from
the Subaccount holding the assets of the participant, or on a pro-rata basis
from two or more Subaccounts in relation to their values under the contract.
Such costs aggregated $0 during the period ended December 31, 1999.
PEPCO is the principal underwriter and distributor for the Account. PEPCO is
reimbursed for its distribution and underwriting expenses by PHL Variable
Insurance Company.
On surrender of a contract, no contingent deferred sales charges apply.
NOTE 6--DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from
accumulated net income. The accumulated net income is distributed to
participants as part of withdrawals of amounts in the form of surrenders, death
benefits, transfers or annuity payments in excess of net purchase payments.
NOTE 7--DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the
"Code"), a variable annuity contract, other than a contract issued in connection
with certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period for which the investments of
the segregated asset account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. PHL Variable Insurance Company believes that the Account satisfies the
current requirements of the regulations, and it intends that the Account will
continue to meet such requirements.
B-49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[logo] PRICEWATERHOUSECOOPERS
To the Board of Directors of PHL Variable Insurance Company and
Participants of PHL Variable Accumulation Account:
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts:
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Hollister Value Equity, Oakhurst
Growth and Income, Engemann Capital Growth, Oakhurst Balanced, Duff & Phelps
Real Estate Securities, Aberdeen International, Seneca Strategic Theme, Oakhurst
Strategic Allocation, Goodwin Money Market, Research Enhanced Index, Wanger U.S.
Small Cap, Wanger International Small Cap, Wanger Twenty, Wanger Foreign Forty,
Templeton Developing Markets, Mutual Shares Investments, Janus Equity Income,
Janus Growth, Janus Flexible Income, Morgan Stanley Focus Equity and Technology
Portfolio (constituting the PHL Variable Accumulation Account, hereafter
referred to as the "Account") at December 31, 1999, and the results of each of
their operations and the changes in each of their net assets for the period then
ended, in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Account's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
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
audit, which included confirmation of investments at December 31, 1999 by
correspondence with fund custodians or transfer agents, provides a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCooopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
March 10, 2000
B-50
<PAGE>
PHL VARIABLE ACCUMULATION ACCOUNT
PHL Variable Insurance Company
One American Row
Hartford, Connecticut 06115
UNDERWRITER
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
CUSTODIANS
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, Connecticut 06103
_______________________________
B-51
<PAGE>
PHL VARIABLE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999
B-52
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants .........................................B-54
Balance Sheet at December 31, 1999 and 1998 ...............................B-55
Statement of Income, Comprehensive Income and Equity for the Years Ended
December 31, 1999, 1998 and 1997 .........................................B-56
Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 .........................................B-57
Notes to Financial Statements .......................................B-58-B-69
B-53
<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
B-54
<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.
B-55
<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.
B-56
<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.
B-57
<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.
B-58
<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.
B-59
<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,
B-60
<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.
B-61
<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>
B-62
<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>
B-63
<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
======== ========
B-64
<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>
B-65
<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>
B-66
<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
========= =========
B-67
<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.
B-68
<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.
B-69
<PAGE>
PART C
OTHER INFORMATION
Registrant hereby represents that, in imposing certain restrictions upon
withdrawals from some annuity contracts, it is relying upon the no-action letter
given to the American Council of Life Insurance (publicly available November 28,
1988) (Ref. No. 1P-6-88) regarding compliance with Section 403(b) (ii) of the
Internal Revenue Code and that it is in compliance with the conditions for
reliance upon that letter set forth therein.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The financial statements are included in Part B and condensed
financial information is included in Part A.
(b) Exhibits
(1) Resolution of the Board of Directors of PHL Variable
Insurance Company establishing the PHL Variable Accumulation
Account is incorporated by reference to registrant's
Registration Statement on Form N-4 dated December 14, 1994.
(2) Not Applicable.
(3) Distribution of Policies
(a) Master Service and Distribution Compliance Agreement
between registrant and Phoenix Equity Planning
Corporation dated December 31, 1996 is incorporated by
reference to Registrant's Post-Effective Amendment No.
3, filed via Edgar on April 30, 1997.
(b) Form of Agreement between Phoenix Equity Planning
Corporation and Registered Broker-Dealers with respect
to the sale of Contracts is incorporated by reference
to registrant's Pre-Effective Amendment No. 1 to its
Form N-4 Registration Statement dated July 20, 1995.
(4) (a) Form of Variable Annuity Contract (Big Edge Choice)
is incorporated by reference to registrant's
Registration Statement on Form N-4 dated December 14,
1994.
(b) Form of Variable Annuity Contract (Big Edge Choice II)
is incorporated by reference to registrant's
Post-Effective Amendment No. 9 to its Form N-4
Registration Statement on July 15, 1999 (Accession
Number 0000949377-99-000237).
(5) (a) Form of Application (Big Edge Choice) is incorporated by
reference to registrant's Pre-Effective Amendment No. 1
to its Form N-4 Registration Statement dated July 20,
1995.
(b) Form of Application (Big Edge Choice II) is incorporated
by reference to registrant's Post-Effective Amendment
No. 9 to its Form N-4.
(6) (a) Charter of PHL Variable Insurance Company is
incorporated by reference to registrant's Registration
Statement on Form N-4 dated December 14, 1994.
(b) By-laws of PHL Variable Insurance Company is
incorporated by reference to registrant's Registration
Statement on Form N-4 dated December 14, 1994.
(7) Not Applicable.
(8) Not Applicable.
(9) Opinion of Edwin L. Kerr, Esq., previously filed.
(10) (a) Written Consent of Edwin L. Kerr, Esq.
(b) Written Consent of PricewaterhouseCoopers LLP.
(11) Not Applicable.
(12) Not Applicable.
C-1
<PAGE>
(13) (a) Explanation of Yield and Effective Yield Calculation
is incorporated by reference to registrant's
Post-Effective Amendment No. 1 to its Form N-4
Registration Statement filed via Edgar on April 19,
1996.
(b) Explanation of Total Return Calculation is incorporated
by reference to registrant's Post-Effective Amendment
No. 1 to its Form N-4 Registration Statement filed via
Edgar on April 19, 1996.
ITEM 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR
<S> <C> <C>
Carl T. Chadburn* Director
Robert W. Fiondella* Director and Chairman
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
Michael J. Gilotti* Executive Vice President
Robert G. Lautensack, Jr.* Senior Vice President
</TABLE>
* The principal business address of each of these individuals is PHL Variable
Insurance Company, One American Row, Hartford, Connecticut 06102-5056.
** The principal business address of each of these individuals is PHL Variable
Insurance Company, 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200.
ITEM 26. NOT APPLICABLE
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 2000 there were 24,034 contract owners.
C-2
<PAGE>
ITEM 28. INDEMNIFICATION
Section 5.9 of the Connecticut Corporation Law & Practice, provides that a
corporation may indemnify any director or officer of the corporation made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article III Section 14 of the By-laws of the Company provides: "Each
Director, officer or employee of the Company, and his heirs, executors or
administrators, shall be indemnified or reimbursed by the Company for all
expenses necessarily incurred by him in connection with the defense or
reasonable settlement of any action, suit or proceeding in which he is made a
party by reason of his being or having been a Director, officer or employee of
the Company, or of any other company which he was serving as a Director or
officer at the request of the Company, except in relation to matters as to which
such Director, officer or employee is finally adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of his
duties as such Director, officer or employee. The foregoing right of
indemnification or reimbursement shall not be exclusive of any other rights to
which he may be entitled under any statute, by-law, agreement, vote of
shareholders or otherwise."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITER
1. Phoenix Equity Planning Corporation ("PEPCO")
(a) PEPCO currently distributes securities of the Phoenix Duff &
Phelps Funds, Phoenix Funds, and Phoenix Home Life Variable
Universal Life Account, Phoenix Home Life Variable Accumulation
Account and Phoenix Life and Annuity Variable Universal Life
Account in addition to those of the Registrant.
(b) Directors and Executive Officers of PEPCO
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
Michael E. Haylon** Director
Philip R. McLoughlin** Director and Chairman
William R. Moyer* Director, Executive Vice President,
Chief Financial Officer and Treasurer
Barry Mandinach** Executive Vice President, Chief Marketing
Officer, Retail Division
John F. Sharry* President, Retail Distribution
Robert R. Tousignant* Executive Vice President and Chief Sales
Officer, Retail Division
* The principal business address of each of these individuals is 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
** The
principal business address of each of these individuals is 56 Prospect Street,
Hartford, Connecticut 06115-0480.
C-3
<PAGE>
(c) Compensation received by PEPCO during Registrant's last fiscal year:
<TABLE>
<CAPTION>
NAME OF
PRINCIPAL NET UNDERWRITING COMPENSATION BROKERAGE
UNDERWRITER DISCOUNTS AND COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
- ----------- ------------------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
PEPCO $15.2 million 0 0 0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 are maintained at the administrative
offices of PHL Variable Insurance Company located at 100 Bright Meadow
Boulevard, Enfield, Connecticut 06083-2200 and 101 Munson Street, Greenfield,
Massachusetts 01302-0810.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements contained therein are never more than 16 months old for so
long as payments under the Contracts may be accepted;
(b) to include as part of any application to purchase a Contract offered
by the Prospectus, a space that an applicant can check to request a
Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this form promptly
upon written or oral request.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, PHL Variable Insurance Company represents that the fees and charges
deducted under the Contracts, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred and the risks to be
assumed thereunder by PHL Variable Insurance Company.
C-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Registration Statement and has caused
this Amendment to its Registration Statement to be signed on its behalf, in the
City of Hartford and State of Connecticut on this 1st day of May, 2000.
PHL VARIABLE INSURANCE COMPANY
By: *Simon Y. Tan
Simon Y. Tan
President
PHL VARIABLE ACCUMULATION ACCOUNT
By: *Simon Y. Tan
Simon Y. Tan
President
of PHL Variable Insurance Company
As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed by the following persons in the
capacities indicated with PHL Variable Insurance Company on this 1st day of
May, 2000.
SIGNATURE TITLE
--------- -----
- -------------------------------------------- Director
*Carl T. Chadburn
Director, Chairman
(Principal Executive
Officer)
- --------------------------------------------
*Robert W. Fiondella
- -------------------------------------------- Director
*Joseph E. Kelleher
- -------------------------------------------- Director
*Philip R. McLoughlin
- -------------------------------------------- Director
*David W. Searfoss
- -------------------------------------------- Director
*Simon Y. Tan
/s/ Dona D. Young Director
- --------------------------------------------
*Dona D. Young
By:/s/ Dona D. Young
- --------------------------------------------
*Dona D. Young, as Attorney in Fact pursuant to Powers of Attorney, copies of
which were previously filed.
S-1
EXHIBIT 10(A)
WRITTEN CONSENT OF
EDWIN L. KERR, ESQ
<PAGE>
To Whom It May Concern:
I hereby consent to the reference to my name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 10 to the
Registration Statement on Form N-4 (File No. 33-87376) filed by PHL Variable
Accumulation Account with the Securities and Exchange Commission under the
Securities Act of 1933.
Very truly yours,
Dated May 1, 2000 /s/ Edwin L. Kerr
-----------------
Edwin L. Kerr, Counsel
PHL Variable Insurance Company
EXHIBIT 10(B)
WRITTEN CONSENT OF
PRICEWATERHOUSECOOPERS LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Post-Effective Amendment No. 10 to the
registration statement on Form N-4 ("Registration Statement") of our reports
dated March 10, 2000 and February 15, 2000, relating to the financial
statements of PHL Variable Accumulation Account and the financial statements
of PHL Variable Insurance Company, respectively, which appear in such
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
April 21, 2000
