As filed with the Securities and Exchange Commission on May 15, 2000
REGISTRATION NO. 333-65823
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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PHLVIC VARIABLE UNIVERSAL LIFE ACCOUNT
(EXACT NAME OF TRUST)
PHL VARIABLE INSURANCE COMPANY
(NAME OF DEPOSITOR)
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ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06102-5056
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DONA D. YOUNG, ESQUIRE
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
PHOENIX LIFE AND ANNUITY COMPANY
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06102-5056
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
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COPIES TO:
MICHAEL BERENSON, ESQ. EDWIN L. KERR, ESQ.
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP COUNSEL
1025 THOMAS JEFFERSON ST. N.W. PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
SUITE 400 EAST ONE AMERICAN ROW
WASHINGTON, D.C. 20007-0805 HARTFORD, CONNECTICUT 06102-5056
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Approximate date of proposed public offering:
May 15, 2000 or as soon thereafter as possible
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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FLEX EDGE SUCCESS(R)
VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
Issued by
PHL VARIABLE INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS MAY __, 2000
This prospectus describes a flexible premium variable universal life
insurance policy. The policy provides lifetime insurance protection.
You instruct us to allocate your premiums and policy values among the
Guaranteed Interest Account ("GIA") and/or the subaccounts of the PHLVIC
Variable Universal Life Account ("VUL Account"). The subaccounts purchase, at
net asset value, shares of a series of the following funds or series:
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[dimamond] Phoenix-Aberdeen International Series
[dimamond] Phoenix-Engemann Capital Growth Series
[dimamond] Phoenix-Engemann Nifty Fifty Series
[dimamond] Phoenix-Goodwin Money Market Series
[dimamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[dimamond] Phoenix-Hollister Value Equity Series
[dimamond] Phoenix-Oakhurst Balanced Series
[dimamond] Phoenix-Oakhurst Growth and Income Series
[dimamond] Phoenix-Oakhurst Strategic Allocation Series
[dimamond] Phoenix-Seneca Mid-Cap Growth Series
[dimamond] Phoenix-Seneca Strategic Theme Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[dimamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[dimamond] Phoenix-Duff & Phelps Real Estate Securities Series
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[dimamond] Phoenix-Bankers Trust Dow 30 Series
[dimamond] Phoenix-Federated U.S. Government Bond Series
[dimamond] Phoenix-J.P. Morgan Research Enhanced Index Series
[dimamond] Phoenix-Janus Equity Income Series
[dimamond] Phoenix-Janus Growth Series
[dimamond] Phoenix-Morgan Stanley Focus Equity Series
[dimamond] Phoenix-Schafer Mid-Cap Value Series
DEUTSCHE ASSET MANAGEMENT VIT FUND
- ----------------------------------
MANAGED BY BANKERS TRUST COMPANY
[dimamond] EAFE(R) Equity Index Fund
FEDERATED INSURANCE SERIES
- --------------------------
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[dimamond] Federated Fund for U.S. Government Securities II
[dimamond] Federated High Income Bond Fund II
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ---------------------------------------
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
[dimamond] Technology Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
- ----------------------------------------------------
MANAGED BY TEMPLETON GLOBAL ADVISORS LIMITED
[dimamond] Templeton Growth Securities Fund-- Class 2
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[dimamond] Templeton Asset Strategy Fund-- Class 2
[dimamond] Templeton International Securities Fund-- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[dimamond] Templeton Developing Markets Securities Fund-- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[dimamond] Mutual Shares Securities Fund-- Class 2
WANGER ADVISORS TRUST
- ---------------------
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[dimamond] Wanger Foreign Forty
[dimamond] Wanger International Small Cap
[dimamond] Wanger Twenty
[dimamond] Wanger U.S. Small Cap
1
It may not be in your best interest to purchase a policy to replace an
existing life insurance policy or annuity contract. You must understand the
basic features of the proposed policy and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any income taxes.
The policy is not a deposit or obligation of, underwritten or guaranteed by, any
financial institution or credit union. It is not federally insured or endorsed
by the Federal Deposit Insurance Corporation or any other state or federal
agency. Policy investments are subject to risk, including the fluctuation of
policy values and possible loss of principal invested or premiums paid.
The Securities and Exchange Commission 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 and should be kept for future reference.
This prospectus is valid only if accompanied or preceded by current prospectuses
for the funds. You should read and keep these prospectuses for future reference.
2
TABLE OF CONTENTS
Heading Page
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SPECIAL TERMS ......................................... 4
SUMMARY ............................................... 6
PHL VARIABLE AND THE VUL ACCOUNT....................... 11
PHL Variable ....................................... 11
The VUL Account .................................... 11
THE POLICY ............................................ 11
Introduction ....................................... 11
Eligible Purchasers ................................ 11
Flexible Premiums .................................. 11
Allocation of Issue Premium ........................ 12
Free Look Period ................................... 12
Temporary Insurance Coverage ....................... 13
Transfer of Policy Value ........................... 13
Systematic Transfer Program....................... 13
Nonsystematic Transfers .......................... 13
Determination of Subaccount Values ................. 14
Death Benefit ...................................... 14
Surrenders ......................................... 15
Policy Loans ....................................... 16
Lapse .............................................. 17
Payment of Premiums During Period of Disability .... 17
Additional Insurance Options ....................... 17
Additional Rider Benefits .......................... 17
INVESTMENTS OF THE VUL ACCOUNT ........................ 18
Participating Investment Funds...................... 18
Investment Advisors................................. 21
Services of the Advisors ........................... 22
Reinvestment and Redemption ........................ 22
Substitution of Investments ........................ 22
CHARGES AND DEDUCTIONS ................................ 22
General............................................. 22
Charges Deducted Once .............................. 22
Premium Tax Charge ............................... 22
Federal Tax Charge................................ 22
Periodic Charges.................................... 23
Conditional Charges................................. 23
Investment Management Charge........................ 24
Other Taxes ........................................ 24
GENERAL PROVISIONS .................................... 24
Postponement of Payments ........................... 24
Payment by Check ................................... 25
The Contract ....................................... 25
Suicide ............................................ 25
Incontestability ................................... 25
Change of Owner or Beneficiary ..................... 25
Assignment ......................................... 25
Misstatement of Age or Sex ......................... 25
Surplus............................................. 25
PAYMENT OF PROCEEDS ................................... 25
Surrender and Death Benefit Proceeds ............... 25
Payment Options .................................... 25
FEDERAL INCOME TAX CONSIDERATIONS ..................... 26
Introduction ....................................... 26
PHL Variable's Income Tax Status ................... 26
Policy Benefits .................................... 27
Business-Owned Policies............................. 27
Modified Endowment Contracts ....................... 27
Limitations on Unreasonable Mortality
and Expense Charges .............................. 28
Qualified Plans .................................... 28
Diversification Standards .......................... 29
Change of Ownership or Insured or Assignment ....... 29
Other Taxes ........................................ 29
VOTING RIGHTS ......................................... 29
PHL Variable........................................ 30
THE DIRECTORS AND EXECUTIVE OFFICERS
OF PHL VARIABLE..................................... 30
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............... 30
SALES OF POLICIES ..................................... 30
STATE REGULATION ...................................... 30
REPORTS ............................................... 31
LEGAL PROCEEDINGS ..................................... 31
LEGAL MATTERS ......................................... 31
REGISTRATION STATEMENT ................................ 31
FINANCIAL STATEMENTS .................................. 31
APPENDIX A--THE GUARANTEED INTEREST ACCOUNT ........... 51
APPENDIX B--ILLUSTRATIONS AT DEATH BENEFITS,
POLICY VALUE AND CASH SURRENDER VALUES ............. 52
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
3
SPECIAL TERMS
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The following is a list of terms and their meanings when used in this
prospectus.
ATTAINED AGE: The age of the Insured on the birthday nearest the most recent
policy anniversary.
BENEFICIARY: The person or persons specified by the policyowner as entitled to
receive the death benefits under a policy.
CASH SURRENDER VALUE: The policy value less any surrender charge that would
apply on the date of surrender and less any debt.
DEATH BENEFIT GUARANTEE: An additional benefit rider available with the policy
that guarantees a death benefit equal to the initial face amount or the face
amount as later increased or decreased, provided that Minimum Required Premiums
are paid. See "Additional Rider Benefits."
DEBT: Outstanding loans against a policy, plus accrued interest.
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.
GENERAL ACCOUNT: The general asset account of PHL Variable.
GIA (GUARANTEED INTEREST ACCOUNT): An investment option under which premium
payment amounts are guaranteed to earn a fixed rate of interest. Excess interest
also may be credited, at the sole discretion of PHL Variable.
IN FORCE: Conditions under which the coverage under a policy is in effect and
the Insured's life remains insured.
INSURED: The person upon whose life the policy is issued.
ISSUE PREMIUM: The premium payment made in connection with issuing the policy.
MINIMUM REQUIRED PREMIUM: The required premium as specified in the policy. An
increase or decrease in the face amount of the policy will change the minimum
required premium amount.
MONTHLY CALCULATION DAY: The first monthly calculation day is the same day as
the policy date. Subsequent monthly calculation days are the same day of each
month thereafter or, if such day does not fall within a given month, the last
day of that month will be the monthly calculation day.
NET ASSET VALUE: The worth of one share of a series of a fund at the end of a
valuation period. Net asset value is computed by adding the value of a series'
holdings plus other assets, minus liabilities and then dividing the result by
the number of shares outstanding.
PAYMENT DATE: The valuation date on which we receive a premium payment or loan
repayment, unless it is received after the close of the New York Stock Exchange
("NYSE"), in which case it will be the next valuation date.
PHL VARIABLE (COMPANY, OUR, US, WE): PHL Variable Insurance Company, Hartford,
Connecticut.
PLANNED ANNUAL PREMIUM: The premium amount that the policyowner agrees to pay
each policy year. It must be at least equal to the minimum required premium for
the face amount of insurance selected but may be no greater than the maximum
premium allowed for the face amount selected.
POLICY ANNIVERSARY: Each anniversary of the policy date.
POLICY DATE: The policy date as shown on the schedule page of the policy. It is
the date from which we measure policy years and policy anniversaries.
POLICY MONTH: The period from one monthly calculation day up to, but not
including, the next monthly calculation day.
POLICYOWNER (OWNER, YOU, YOUR): The person(s) who purchase(s) a policy.
POLICY VALUE: The sum of a policy's share in the values of each subaccount of
the VUL Account plus the policy's share in the values of the GIA.
POLICY YEAR: The first policy year is the 1-year period from the policy date up
to, but not including, the first policy anniversary. Each succeeding policy year
is the 1-year period from the policy anniversary up to, but not including, the
next policy anniversary.
PROPORTIONATE (PRO RATA): Amounts allocated to subaccounts on a pro rata basis
are allocated by increasing or decreasing a policy's share in the value of the
affected subaccounts and GIA so that such shares maintain the same ratio to each
other before and after the allocation.
SERIES: A separate investment portfolio of the funds.
SUBACCOUNTS: Accounts within the VUL Account to which nonloaned assets under a
policy are allocated.
UNIT: A standard of measurement used to set the value of a policy. The value of
a unit for each subaccount will reflect the investment performance of that
subaccount and will vary in dollar amount.
4
VALUATION DATE: For any subaccount, each date on which we calculate the net
asset value of a fund.
VALUATION PERIOD: For any subaccount, the period in days from the end of one
valuation date through the next.
VPMO: Variable Products Mail Operations division of PHL Variable that receives
and processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
VUL ACCOUNT (ACCOUNT): PHLVIC Variable Universal Life Account, a separate
account of the company.
VULA: Variable and Universal Life Administration division of PHL Variable.
5
SUMMARY
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This is a summary of the policy and does not contain all of the detailed
information that may be important to you. You should carefully read the entire
prospectus before making any decision.
INVESTMENT FEATURES
FLEXIBLE PREMIUMS
The only premiums you have to pay are the issue premium and any payments
required to prevent the policy from lapse. See "Flexible Premiums" and "Lapse."
ALLOCATION OF PREMIUMS AND POLICY VALUE
After we deduct certain charges from your premium payment, we will invest
the balance in one or more of the subaccounts of the VUL Account and/or the GIA
as you will have instructed us.
You may make transfers into the GIA and among the subaccounts at anytime.
Transfers from the GIA are subject to the rules discussed in "Appendix B" and
under "Transfer of Policy Value."
The policy value varies with the investment performance of the funds and is
not guaranteed.
The policy value allocated to the GIA will depend on deductions taken from
the GIA to pay expenses and will accumulate interest at rates we periodically
establish, but never less than 4%.
LOANS AND SURRENDERS
[diamond] Generally, you may take loans against 90% of the policy's cash
surrender value subject to certain conditions. See "Policy Loans."
[diamond] You may partially surrender any part of the policy anytime. A partial
surrender fee of the lesser of $25 or 2% of the partial surrender
amount will apply. A separate surrender charge also may be imposed.
See "Surrenders."
[diamond] You may fully surrender this policy anytime for its cash surrender
value. A surrender charge may be imposed. See "Surrenders."
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
[diamond] Both a fixed and variable benefit is available under the policy.
o The fixed benefit is equal to the policy's face amount (Option 1)
o The variable benefit equals the face amount plus the policy value
(Option 2)
[diamond] After the first year, you may reduce the face amount. Certain
restrictions apply, and generally, the minimum face amount is
$25,000.
[diamond] The death benefit is payable when the insured dies. See "Death
Benefit."
DEATH BENEFIT GUARANTEE
You may elect a guaranteed death benefit. The guaranteed death benefit is
equal to the initial face amount or the face amount as later changed by
increases or decreases regardless of investment performance. The death benefit
guarantee may not be available in some states.
ADDITIONAL BENEFITS
The following additional benefits are available by rider:
[dimamond] Disability Waiver of Specified Premium
[dimamond] Accidental Death Benefit
[dimamond] Death Benefit Protection
[dimamond] Whole Life Exchange Option
[dimamond] Purchase Protection Plan
[dimamond] Living Benefits Option
[dimamond] Cash Value Accumulation
[dimamond] Child Term
[dimamond] Family Term
[dimamond] Business Term
Availability of these riders depends upon state approval and may involve an
extra cost.
CHARGES UNDER THE POLICY
We deduct certain charges from your policy to compensate us for:
1. our expenses in selling the policy;
2. underwriting and issuing the policy;
3. premium and federal taxes incurred on premiums received;
4. providing insurance benefits under your policy; and
5. assuming certain risks in connection with the policy.
These charges are summarized in Chart 1.
DEDUCTIONS FROM PREMIUMS
Before we allocate your premium to the subaccounts or the Guaranteed
Interest Account, we deduct a sales charge, a state premium tax and a federal
tax to cover the estimated cost to us for deferred acquisition costs.
SALES CHARGE
We deduct a sales charge from your premium for the costs we incur in the
sales and distribution of the policies.
STATE PREMIUM TAX CHARGE
States assess premium taxes at various rates. We deduct the applicable state
rate from each premium to cover the cost of the premium taxes assessed against
us by the state.
We may increase or decrease this charge if there is a change in the tax or
change of residence.
6
FEDERAL TAX CHARGE
This tax is associated with our federal tax liability under Internal Revenue
Code Section 848.
POLICY VALUE CHARGES
On each monthly calculation day, we deduct the following charges from your
policy value:
1. administrative charge,
2. cost of insurance charge,
3. mortality and expense risk fee and
4. a charge for the cost of riders if applicable.
The amount deducted is allocated among the subaccounts and the unloaned
portion of the Guaranteed Interest Account based on an allocation schedule
specified by you. You initially select this schedule in your application.
1. ISSUE EXPENSE CHARGE
Deducted in the first Policy Year only and payable in 12 monthly
installments.
2. ADMINISTRATIVE CHARGE
We assess a monthly charge for the expenses we incur in administering the
policy. This charge reimburses us for the cost of daily administration of
services such as billing and collections, monthly processing, updating daily
values, producing confirmations and periodic statements, and communicating with
policyholders.
3. COST OF INSURANCE CHARGE
We deduct a charge to cover the cost of insurance coverage on each monthly
calculation day. This charge is based on:
[diamond] Insured's gender;
[diamond] Insured's age at issue;
[diamond] policy year in which we make the deduction;
[diamond] Insured's tobacco use classification;
[diamond] rating class of the policy; and
[diamond] underwriting classification of the case.
To determine the monthly cost of insurance, we multiply the appropriate cost
of insurance rate by the difference between your policy's death benefit and the
policy value. Any change in the cost of insurance rates will apply to all
persons of the same sex, insurance age and risk class whose policies have been
in force for the same length of time.
4. MORTALITY AND EXPENSE RISK CHARGE
We charge the subaccounts for the mortality and expense risks we assume.
This charge is deducted from the value of each subaccount's assets attributable
to the policies.
The mortality risk we assume is that the group of lives we insure under our
policies may, on average, live for a shorter period of time than we estimated.
The expense risk we assume is that our cost of issuing and administering the
policies may be more than we estimated.
If all the money we collect from this charge is not required to cover the
cost of death benefits and other expenses, it will be a gain to us. If the money
we collect is not enough to cover our costs, we will still provide for death
benefits and expenses.
5. RIDER CHARGE
We will deduct any applicable monthly rider charges for the additional
benefit provided to you by the rider.
FUND CHARGES
Please refer to Chart 2 for a listing of fund charges.
OTHER CHARGES
PARTIAL SURRENDER FEE
We reserve the right to deduct a charge from each withdrawal.
SURRENDER CHARGE
Applied on full surrenders for cash value or if the policy lapses. No charge
after 10 complete policy years.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
You have the right to review the Policy. If you are not satisfied with it,
you may cancel the Policy:
[diamond] within 10 days after you receive the Policy, or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel, or
[diamond] within 45 days of completing the application,
whichever is latest.
See "Free Look Period."
RISK OF LAPSE
The Policy will remain in force as long as the cash surrender value is
enough to pay the necessary monthly charges incurred under the Policy. When the
cash surrender value is no longer enough, the policy lapses, or ends. We will
let you know of an impending lapse situation. We will give you the opportunity
(a "grace period") to keep the Policy in force by paying a specified amount.
Please see "Lapse" for more detail.
7
TAX EFFECTS
Generally, under current federal income tax law, death benefits are not
subject to income tax. Earnings on the premiums invested in the VUL Account or
the GIA are not subject to income tax until there is a distribution from the
Policy. Loans, partial surrenders or Policy termination may result in
recognition of income for tax purposes.
VARIATIONS
The Policy is subject to laws and regulations in every state where the
Policy is sold. Therefore, the terms of the Policy may vary from state to state.
8
CHART 1 CHARGES UNDER THE POLICY
DEDUCTIONS FROM STATE PREMIUM TAX 2.25% of each premium
PREMIUMS
------------------------- -------------------------------------------------------------------------------
FEDERAL TAX CHARGE 1.5% of each premium
- ----------------------- ------------------------- --------------------------------------- ---------------------------------------
POLICY VALUE CHARGES ISSUE EXPENSE CHARGE $1.50 per $1,000 of face Not to exceed $600
amount paid $600 in the first
12 policy months
------------------------- --------------------------------------- ---------------------------------------
ADMINISTRATIVE CHARGE $5 per month ($60 annually) $10 per month ($120 annually)
------------------------- --------------------------------------- ---------------------------------------
COST OF INSURANCE CHARGE A per thousand rate multiplied The maximum monthly cost of insurance
by the amount at risk each charge for each $1,000 of insurance is
month. This charge varies by shown on your policy's schedule pages.
the Insured's issue age,
policy duration, gender and
underwriting class.
------------------------- --------------------------------------- ---------------------------------------
MORTALITY AND EXPENSE 0.80% annually in policy years 1-15
RISK CHARGE
0.25% annually in policy years 16+
------------------------- --------------------------------------- ---------------------------------------
FUND CHARGES See Fund Charge Table
- ----------------------- ------------------------- --------------------------------------- ---------------------------------------
OTHER CHARGES PARTIAL SURRENDER FEE 2.0% of the amount withdrawn Not greater than $25
------------------------- --------------------------------------- ---------------------------------------
TRANSFERS BETWEEN None $10 per transfer after the first 2
SUBACCOUNTS transfers in any given policy year
------------------------- --------------------------------------- ---------------------------------------
LOAN INTEREST RATE The rates in effect before the Insured reaches age 65 in all states except
CHARGED New Jersey are:
Policy year 1 - 10: 4%
Policy year 11 - 15: 3%
Policy year 16+: 2 1/2%
The rates in effect before the Insured reaches age 65 in New Jersey are:
Policy year 1 - 10: 6%
Policy year 11 - 15: 5%
Policy year 16+: 4 1/2%
------------------------- -------------------------------------------------------------------------------
SURRENDER CHARGE Policy years 1-2: The lesser of:
o 28.5% of premiums paid through limit stated in the policy; plus
o 8.5% of premiums in excess of the limit through twice the stated policy
limit; plus
o 7.5% of premiums paid in excess of twice the stated policy limit; plus
o $5 per $1000 of face amount; OR
o the amount shown in your policy's Surrender Charge Schedule.
Policy years 2-10: the amount shown in your policy's Surrender Charge Schedule.
Policy years 11+: no surrender charge.
- ----------------------- ------------------------- -------------------------------------------------------------------------------
9
CHART 2 FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
---------------------------------------------------------------------------------------------------------------------------------
SERIES MANAGEMENT RULE 12b-1 OTHER EXPENSES TOTAL EXPENSES TOTAL EXPENSES
FEES FEES BEFORE BEFORE AFTER
REIMBURSEMENT(1) REIMBURSEMENT REIMBURSEMENT(2)
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THE PHOENIX EDGE SERIES FUND
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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
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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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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:
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ESTIMATED ANNUAL EXPENSES FROM 5/1/00 MANAGEMENT FEES RULE 12b-1 FEES OTHER EXPENSES TOTAL OPERATING EXPENSES
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Mutual Shares Securities Fund - Class 2 .60% .25% .19% 1.04%
Templeton Asset Strategy Fund - Class 2 .60% .25% .14% .99%
Templeton Developing Markets Securities Fund - 1.25% .25% .29% 1.79%
Class 2
Templeton Growth Securities Fund - Class 2 .80% .25% .05% 1.10%
Templeton International Securities Fund - Class 2 .65% .25% .20% 1.10%
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10
PHL VARIABLE AND THE VUL ACCOUNT
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PHL VARIABLE
PHL Variable is a wholly-owned indirect subsidiary of Phoenix Home Life
Mutual Insurance Company ("Phoenix"). Its executive office is located at One
American Row, Hartford, Connecticut 06102, and its main administrative office is
located at 100 Bright Meadow Boulevard, Enfield, Connecticut 06082. PHL
Variable is a Connecticut stock company formed on April 24, 1981. We offer
flexible premium variable universal life policies, term life insurance policies
and variable annuities through our own field force of agents and through
brokers.
THE VUL ACCOUNT
On September 10, 1998, PHL Variable established the VUL Account, a separate
account created under the insurance laws of Connecticut. The VUL 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
of the management or investment practices or policies of the VUL Account or PHL
Variable.
Under Connecticut law, all income, gains or losses of the VUL Account,
whether realized or not, must be credited to or charged against the amounts
placed in the VUL Account without regard to the other income, gains and losses
of PHL Variable. The assets of these accounts may not be charged with
liabilities arising out of any other business that PHL Variable may conduct.
Obligations under the Policies are obligations of PHL Variable.
Contributions to the GIA are not invested in the VUL 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 VUL Account. For more complete information
concerning the GIA, see Appendix A.
The VUL Account is divided into subaccounts, each of which is available for
allocation of Policy Value. In the future, if we determine that marketing needs
and investment conditions warrant, we may establish additional subaccounts,
which will be made available to existing policyowners to the extent and on a
basis determined by us. Each subaccount will invest solely in shares of the
funds allocable to one of the available series, each having the specified
investment objective set forth under "Investments of the VUL
Account--Participating Investment Funds."
PHL Variable does not guarantee the investment performance of the VUL
Account or any of its subaccounts. The Policy Value allocated to the VUL Account
depends on the investment performance of the fund. Thus, the policyowner bears
the full investment risk for all monies invested in the VUL Account.
THE POLICY
- --------------------------------------------------------------------------------
INTRODUCTION
The policy is a flexible premium variable universal life insurance policy.
It has a death benefit, cash surrender value and loan privilege as does a
traditional fixed benefit whole life policy. The policy differs from a fixed
benefit whole life policy, however, because you can allocate your premium into
one or more of several subaccounts of the VUL Account or the GIA. Each
subaccount of the VUL Account, in turn, invests its assets exclusively in a
portfolio of the funds. The policy value varies according to the investment
performance of the series to which premiums have been allocated.
ELIGIBLE PURCHASERS
Any person up to the age of 75 is eligible to be insured under a newly
purchased policy after providing suitable evidence of insurability. You can
purchase a policy to insure the life of another person provided that you have an
insurable interest in that life and the prospective Insured consents.
FLEXIBLE PREMIUMS
The issue premium required depends on a number of factors, such as:
[diamond] age;
[diamond] sex;
[diamond] rate class of proposed insured;
[diamond] desired face amount;
[diamond] supplemental benefit; and
[diamond] planned premiums
The minimum issue premium for a policy is generally 1/6 of the planned
annual premium and is due on the policy date. The Insured must be alive when the
issue premium is paid. Thereafter, the amount and payment frequency of planned
premiums are as shown on the schedule page of the policy. The issue premium
payment should be delivered to your registered representative for forwarding to
our Underwriting Department. Additional payments should be sent to VPMO.
11
Premium payments received by us will be reduced by applicable state premium
tax and by 1.50% for federal tax charges. The issue premium also will be reduced
by the issue expense charge deducted in equal monthly installments over a
12-month period. Any unpaid balance of the issue expense charge will be paid to
PHL Variable upon policy lapse or termination.
Premium payments received during a grace period, after deduction of state
and federal tax charges and any sales charge, will first be used to cover any
monthly deductions during the grace period. Any balance will be applied on the
payment date to the various subaccounts of the VUL Account or to the GIA, based
on the premium allocation schedule elected in the application for the policy or
by your most recent instructions. See "Transfer of Policy Value--Nonsystematic
Transfers."
The number of units credited to a subaccount of the VUL Account will be
determined by dividing the portion of the net premium applied to that subaccount
by the unit value of the subaccount on the payment date.
You may increase or decrease the planned premium amount (within limits) or
payment frequency at any time by writing to VPMO. We reserve the right to limit
increases to such maximums as may be established from time to time. Additional
premium payments may be made at any time. Each premium payment must at least
equal $25 or, if made during a grace period, the payment must equal the amount
needed to prevent lapse of the policy.
You also may elect a Waiver of Premium Rider. This rider provides for the
waiver of certain premium payments under certain conditions during a period of
total disability of the Insured. Under its terms, the specified premium will be
waived upon our receipt of proof that the Insured is totally disabled and that
the disability occurred while the rider was in force.
The policy contains a total premium limit as shown on the schedule page.
This limit is applied to the sum of all premiums paid under the policy. If the
total premium limit is exceeded, the policyowner will receive the excess, with
interest at an annual rate of not less than 4%, not later than 60 days after the
end of the policy year in which the limit was exceeded. The policy value will
then be adjusted to reflect the refund. To pay such refund, amounts taken from
each subaccount or the GIA will be done in the same manner as for monthly
deductions. You may write to us and give us different instructions. The total
premium limit may be exceeded if additional premium is needed to prevent lapse
or if we subsequently determine that additional premium would be permitted by
federal laws or regulations.
You may authorize your bank to draw $25 or more from your personal checking
account to be allocated among the available subaccounts or the GIA. Your monthly
payment will be invested according to your most recent instructions on file at
VPO.
Policies sold to officers, directors and employees of PHL Variable (and
their spouses and children) will be credited with an amount equal to the
first-year commission that would apply on the amount of premium contributed.
This option is also available to career agents of PHL Variable (and their
spouses and children).
ALLOCATION OF ISSUE PREMIUM
We will generally allocate the issue premium less applicable charges to the
VUL Account or to the GIA upon receipt of a completed application, in accordance
with the allocation instructions in the application for a policy. However,
policies issued in certain states and policies issued in certain states pursuant
to applications which state the policy is intended to replace existing
insurance, are issued with a Temporary Money Market Allocation Amendment. Under
this Amendment, we temporarily allocate the entire issue premium paid less
applicable charges (along with any other premiums paid during the Free Look
Period) to the Phoenix-Goodwin Money Market Subaccount of the VUL Account and,
at the expiration of the right to cancel period, the policy value of the
Phoenix-Goodwin Money Market Subaccount is allocated among the subaccounts of
the VUL Account or to the GIA in accordance with the applicant's allocation
instructions in the application for insurance.
FREE LOOK PERIOD
You have the right to review the policy. If you are not satisfied with it,
you may cancel the policy:
[diamond] by mailing it to us within 10 days after you receive it (or longer in
some states); or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel; or
[diamond] within 45 days after completing the application; or
[diamond] whichever occurs latest (the "Free Look Period").
We treat a returned policy as if we never issued it and, except for policies
issued with a Temporary Money Market Allocation Amendment, we will return the
sum of the following as of the date we receive the returned policy:
(1) the current policy value less any unpaid loans and loan interest; plus
(2) any monthly deductions, partial surrender fees and other charges made under
the policy.
12
For policies issued with the Temporary Money Market Amendment, the amount
returned will equal any premiums paid less any unrepaid loans and loan interest
and less any partial surrender amounts paid.
We retain the right to decline to process an application within 7 days of
our receipt of the completed application for insurance. If we decline to process
the application, we will return the premium paid. Even if we have approved the
application for processing, we retain the right to decline to issue the policy.
If we decline to issue the policy, we will refund to you the same amount as
would have been refunded under the policy had it been issued but returned for
refund during the Free Look Period.
TEMPORARY INSURANCE COVERAGE
On the date the application for a policy is signed and submitted with the
issue premium, we issue a temporary insurance receipt. Under the temporary
insurance receipt, the insurance protection applied for (subject to the limits
of liability and subject to the terms set forth in the policy and in the
receipt) takes effect on the date of the application.
TRANSFER OF POLICY VALUE
SYSTEMATIC TRANSFER PROGRAM
You may elect to transfer funds automatically among the subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semiannual or annual basis
under the Systematic Transfer Program for Dollar Cost Averaging ("Systematic
Transfer Program"). Under this Systematic Transfer Program, the minimum transfer
amounts are $25 monthly, $75 quarterly, $150 semiannually or $300 annually. You
must have an initial value of $1,000 in the GIA or 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 all systematic transfers stop. Funds
may be transferred from only one sending subaccount or the GIA, but may be
allocated to more than one subaccount ("receiving subaccounts"). Under the
Systematic Transfer Program, policyowners may make more than one transfer per
policy year from the GIA. These transfers must be in approximately equal amounts
and made over a minimum 18-month period.
Only one Systematic Transfer Program can be active at any time. After the
completion of the Systematic Transfer Program, you can call VULA at 800/541-0171
to begin a new Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be made on the
basis of the GIA and subaccount on the first day of the month following our
receipt of the transfer request. If the first day of the month falls on a
holiday or weekend, then the transfer will be processed on the next business
day.
NONSYSTEMATIC TRANSFERS
Transfers among available subaccounts or the GIA and changes in premium
payment allocations may be requested in writing or by calling 800/541-0171,
between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time. Written requests for
transfers will be executed on the date we receive the request. Telephone
transfers will be effective on the date the request is made except as noted
below. Unless you elect in writing not to authorize telephone transfers or
premium allocation changes, telephone transfer orders and premium allocation
changes also will be accepted on your behalf from your registered
representative. PHL Variable and Phoenix Equity Planning Corporation ("PEPCO"),
the national distributor for PHL Variable, will employ reasonable procedures to
confirm that telephone instructions are genuine. They will require verification
of account information and will record telephone instructions on tape. All
telephone transfers will be confirmed in writing to you. To the extent that PHL
Variable and PEPCO fail to follow procedures reasonably designed to prevent
unauthorized transfers, PHL Variable and PEPCO may be liable for following
telephone instructions for transfers that prove to be fraudulent. However, you
bear the risk of loss resulting from instructions entered by an unauthorized
third party that PHL Variable and PEPCO reasonably believe to be genuine. The
telephone transfer and allocation change privileges may be modified or
terminated at any time. During times of extreme market volatility, these
privileges may be difficult to exercise. In such cases, you should submit a
written request.
Although currently there is no charge for transfers, in the future we may
charge a fee of $10 for each transfer after the first 2 transfers in a policy
year. Transfers under the Systematic Transfer Program do not count against these
limitations.
We reserve the right to refuse to transfer amounts less than $500 unless:
[diamond] the entire balance in the subaccount or the GIA is being transferred;
or
[diamond] the transfer is part of the Systematic Transfer Program.
We also reserve the right to prohibit a transfer to any subaccount of the
VUL Account if the value of your investment in that subaccount immediately after
the transfer would be less than $500. We further reserve the right to require
that the entire balance of a subaccount or the GIA be transferred if the value
of your investment in that subaccount would be less than $500 immediately after
the transfer.
You may make only 1 transfer per policy year from the unloaned portion of
the GIA unless:
(1) the transfer(s) are made as part of a Systematic Transfer Program, or
(2) we agree to make an exception to this rule.
13
The amount you may transfer cannot exceed the greater of $1,000 or 25% of
the value of the unloaned portion of the GIA at the time of the transfer. In
addition, you may transfer the total value allocated to the unloaned portion of
the GIA out of the GIA to 1 or more of the subaccounts over a consecutive 4-year
period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of the remaining value
[diamond] Year Three: 50% of the remaining value
[diamond] Year Four: 100% of the remaining value
A nonsystematic transfer from the unloaned portion of the GIA will be
processed on the day such request is received by VPMO.
Transfers into the GIA and among the subaccounts may be made anytime. We
reserve the right to limit the number of subaccounts in which you may invest to
a total of 18 at any one time or over the life of the policy. We may limit you
to less than 18 if we are required to do so by any federal or state law.
Because excessive exchanges between subaccounts can hurt fund performance,
we reserve the right to temporarily or even permanently terminate exchange
privileges or reject any specific exchange order from anyone whose transactions
appear 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
batched transfer instructions from registered representatives (acting under
powers of attorney for multiple policyowners), unless the registered
representative's broker-dealer firm and PHL Variable have entered into a
third-party transfer service agreement.
If a policy has been issued with a Temporary Money Market Allocation
Amendment, no transfers may be made until the end of the Free Look Period.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each subaccount of
the VUL Account on the first valuation date of that subaccount. The unit value
of a subaccount on any other valuation date is determined by multiplying the
unit value of that subaccount on the just prior valuation date by the net
investment factor for that subaccount for the then current valuation period. The
unit value of each subaccount on a day other than a valuation date is the unit
value on the next valuation date. Unit values are carried to 6 decimal places.
The unit value of each subaccount on a valuation date is determined at the end
of that day.
The net investment factor for each subaccount is determined by the
investment performance of the assets held by the subaccount during the valuation
period. Each valuation will follow applicable law and accepted procedures. The
net investment factor is determined by the formula:
(A) + (B)
_________ - (D) where:
(C)
(A)= the value of the assets in the subaccount on the current valuation date,
including accrued net investment income and realized and unrealized
capital gains and losses, but excluding the net value of any transactions
during the current valuation period;
(B)= the amount of any dividend (or, if applicable, any capital gain
distribution) received by the subaccount if the "ex-dividend" date for
shares of the fund occurs during the current valuation period;
(C)= the value of the assets in the subaccount as of the just prior valuation
date, including accrued net investment income and realized and unrealized
capital gains and losses, and including the net value amount of any
deposits and withdrawals made during the valuation period ending on that
date;
(D)= the sum of the following daily charges multiplied by the number of days in
the current valuation period:
1. the mortality and expense risk charge; and
2. the charge, if any, for taxes and reserves for
taxes on investment income, and realized and unrealized capital gains.
DEATH BENEFIT
GENERAL
The death benefit under Option 1 equals the policy's face amount on the date
of the death of the Insured or, if greater, the minimum death benefit on the
date of death.
Under Option 2, the death benefit equals the policy's face amount on the
date of the death of the Insured, plus the policy value or, if greater, the
minimum death benefit on that date.
Under either Option, the minimum death benefit is the policy value on the
date of death of the Insured increased by a percentage determined from a table
contained in the policy. This percentage will be based on the Insured's attained
age at the beginning of the policy year in which the death occurs. If no option
is elected, Option 1 will apply.
14
GUARANTEED DEATH BENEFIT OPTION
A guaranteed death benefit rider is available. Under this policy rider, if
you pay the required premium each year as specified in the rider, the death
benefit selected will be guaranteed for a certain specified number of years,
regardless of the investment performance of the policy, and will equal either
the initial face amount or the face amount as later changed by decreases. To
keep this guaranteed death benefit in force, there may be limitations on the
amount of partial surrenders or decreases in face amount permitted.
LIVING BENEFITS OPTION
In the event of a terminal illness of the Insured, an accelerated payment of
up to 75% of the policy's death benefit (up to a maximum of $250,000) is
available if a Living Benefits Rider has been purchased. The minimum face amount
of the policy after any such accelerated benefit payment is $10,000.
REQUESTS FOR INCREASE IN FACE AMOUNT
Any time after the first policy anniversary, you may request an increase in
the face amount of insurance provided under the policy. Requests for face amount
increases must be made in writing, and we require additional evidence of
insurability. The effective date of the increase generally will be the policy
anniversary following approval of the increase. The increase may not be less
than $25,000 and no increase will be permitted after the Insured's age 75. The
charge for the increase is $1.50 per $1,000 of face amount increase requested
subject to a maximum of $600. No additional monthly administration charge will
be assessed for face amount increases. We will deduct any charges associated
with the increase (the increases in cost of insurance charges), from the policy
value, whether or not you pay an additional premium in connection with the
increase. The surrender charge applicable to the policy also will increase. At
the time of the increase, the cash surrender value must be sufficient to pay the
monthly deduction on that date, or additional premiums will be required to be
paid on or before the effective date. Also, a new Free Look Period (see "The
Policy--Free Look Period") will be established for the amount of the increase.
For a discussion of possible implications of a material change in the policy
resulting from the increase, see "Material Change Rules."
PARTIAL SURRENDER AND DECREASES IN FACE AMOUNT: EFFECT
ON DEATH BENEFIT
A partial surrender or a decrease in face amount generally decreases the
death benefit. Upon a decrease in face amount or partial surrender, a partial
surrender charge will be deducted from policy value based on the amount of the
decrease or partial surrender. If the change is a decrease in face amount, the
death benefit under a policy would be reduced on the next monthly calculation
day. If the change is a partial surrender, the death benefit under a policy
would be reduced immediately. A decrease in the death benefit may have certain
tax consequences. See "Federal Tax Considerations."
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in face amount at any time after the first policy
year. Unless we agree otherwise, the decrease must be at least equal to $10,000
and the face amount remaining after the decrease must be at least $25,000. All
face amount decrease requests must be in writing and will be effective on the
first monthly calculation day following the date we approve the request. A
partial surrender charge will be deducted from the policy value based on the
amount of the decrease. The charge will equal the applicable surrender charge
that would apply to a full surrender multiplied by a fraction (which is equal to
the decrease in face amount divided by the face amount of the policy before the
decrease).
SURRENDERS
GENERAL
At any time during the lifetime of the Insured and while the policy is in
force, you may partially or fully surrender the policy by sending to VPMO a
written release and surrender in a form satisfactory to us. We may also require
you to send the policy to us. The amount available for surrender is the cash
surrender value at the end of the valuation period during which the surrender
request is received at VPMO.
Upon partial or full surrender, we generally will pay to you the amount
surrendered within 7 days after we receive the written request for the
surrender. Under certain circumstances, the surrender payment may be postponed.
See "General Provisions--Postponement of Payments." For the federal tax effects
of partial and full surrenders, see "Federal Tax Considerations."
FULL SURRENDERS
If the policy is being fully surrendered, the policy itself must be returned
to VPMO, along with the written release and surrender of all claims in a form
satisfactory to us. You may elect to have the amount paid in a lump sum or under
a payment option. See "Conditional Charges--Surrender Charge" and "Payment
Options."
PARTIAL SURRENDERS
You may obtain a partial surrender of the policy by requesting payment of
the policy's cash surrender value. It is possible to do this at any time during
the lifetime of the Insured, while the policy is in force, with a written
request to VPMO. We may require the return of the policy before payment is made.
A partial surrender will be effective on the date the written request is
received or, if required, the date the policy is received by us. Surrender
proceeds may be applied under any of the payment options described under
"Payment of Proceeds--Payment Options."
15
We reserve the right not to allow partial surrenders of less than $500. In
addition, if the share of the policy value in any subaccount or in the GIA is
reduced as a result of a partial surrender and is less than $500, we reserve the
right to require surrender of the entire remaining balance in that subaccount or
the GIA.
Upon a partial surrender, the policy value will be reduced by the sum of the
following:
[diamond] The partial surrender amount paid--this amount comes from a reduction
in the policy's share in the value of each subaccount or the GIA
based on the allocation requested at the time of the partial
surrender. If no allocation request is made, the withdrawals from
each subaccount will be made in the same manner as that provided for
monthly deductions.
[diamond] The partial surrender fee--this fee is the lesser of $25 or 2% of the
partial surrender amount paid. The assessment to each subaccount or
the GIA will be made in the same manner as provided for the partial
surrender amount paid.
[diamond] A partial surrender charge--this charge is equal to a pro rata
portion of the applicable surrender charge that would apply to a full
surrender, determined by multiplying the applicable surrender charge
by a fraction (equal to the partial surrender amount payable divided
by the result of subtracting the applicable surrender charge from the
policy value). This amount is assessed against the subaccount or the
GIA in the same manner as provided for the partial surrender amount
paid.
The cash surrender value will be reduced by the partial surrender amount
paid plus the partial surrender fee. The face amount of the policy will be
reduced by the same amount as the policy value is reduced as described above.
POLICY LOANS
Generally, while the policy is in force, a loan may be taken against the
policy up to the available loan value. The loan value on any day is 90% of the
policy value reduced by an amount equal to the surrender charge. The available
loan value is the loan value on the current day less any outstanding debt.
The amount of any loan will be added to the loaned portion of the GIA and
subtracted from the policy's share of the subaccounts or the unloaned portion of
the GIA, based on the allocation requested at the time of the loan. The total
reduction will equal the amount added to the loaned portion of the GIA.
Allocations generally must be expressed in terms of whole percentages. If no
allocation request is made, the amount subtracted from the share of each
subaccount or the unloaned portion of the GIA will be determined in the same
manner as provided for monthly deductions. Interest will be credited and the
loaned portion of the GIA will increase at an effective annual rate of 2% (4% in
New York and New Jersey only), compounded daily and payable in arrears. At the
end of each policy year and at the time of any debt repayment, interest credited
to the loaned portion of the GIA will be transferred to the unloaned portion of
the GIA.
Debt may be repaid at any time during the lifetime of the Insured while the
policy is in force. Any debt repayment received by us during a grace period will
be reduced to pay any overdue monthly deductions and only the balance will be
applied to reduce the debt. Such balance will first be used to pay any
outstanding accrued loan interest, and then will be applied to reduce the loaned
portion of the GIA. The unloaned portion of the GIA will be increased by the
same amount the loaned portion is decreased. If the amount of a loan repayment
exceeds the remaining loan balance and accrued interest, the excess will be
allocated among the subaccounts as you may request at the time of the repayment
and, if no allocation request is made, according to the most recent premium
allocation schedule on file.
Payments received by us for the policy will be applied directly to reduce
outstanding debt unless specified as a premium payment by you. Until the debt is
fully repaid, additional debt repayments may be made at any time during the
lifetime of the Insured while the policy is in force.
Failure to repay a policy loan or to pay loan interest will not terminate
the policy unless the policy value becomes insufficient to maintain the policy
in force.
The proceeds of policy loans may be subject to federal income tax. See
"Federal Income Tax Considerations."
In the future, we may not allow policy loans of less than $500, unless such
loan is used to pay a premium on another PHL Variable policy.
[diamond] In all states except New Jersey, the rates in effect before the
Insured reaches age 65 will be:
o Policy years 1-10 : 4%
o Policy years 11-15: 3%
o Policy years 16 and thereafter: 2 1/2%
[diamond] In New Jersey only, the rates in effect before the Insured reaches
age 65 will be:
o Policy years 1-10 6%
o Policy years 11-15: 5%
o Policy years 16 and thereafter: 4 1/2%
You will pay interest on the loan at the noted effective annual rates,
compounded daily and payable in arrears.
At the end of each policy year, any interest due on the debt will be treated
as a new loan and will be offset by a transfer from your subaccounts and the
unloaned portion of the GIA to the loaned portion of the GIA.
A policy loan, whether or not repaid, has a permanent effect on the policy
value because the investment results of
16
the subaccounts or unloaned portion of the GIA will apply only to the amount
remaining in the subaccounts or the unloaned portion of the GIA. The longer a
loan is outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If the subaccounts or the unloaned portion of the GIA
earn more than the annual interest rate for funds held in the loaned portion of
the GIA, the policy value does not increase as rapidly as it would have had no
loan been made. If the subaccounts or the GIA earn less than the annual interest
rate for funds held in the loaned portion of the GIA, the policy value is
greater than it would have been had no loan been made. A policy loan, whether or
not repaid, also has a similar effect on the policy's death benefit due to any
resulting differences in cash surrender value.
LAPSE
Unlike conventional life insurance policies, the payment of the issue
premium, no matter how large, or the payment of additional premiums will not
necessarily continue the Policy in force to its maturity date.
If on any monthly calculation day during the first 3 policy years, the
policy value is insufficient to cover the monthly deduction, a grace period of
61 days will be allowed for the payment of an amount equal to three times the
required monthly deduction. If on any monthly calculation day during any
subsequent policy year, the cash surrender value (which should have become
positive) is less than the required monthly deduction, a grace period of 61 days
will be allowed for the payment of an amount equal to three times the required
monthly deduction. However, during the first five policy years or until the cash
surrender value becomes positive for the first time, the Policy will not lapse
as long as all premiums planned at issue have been paid.
During the grace period, the Policy will continue in force but subaccount
transfers, loans, partial or full surrenders will not be permitted. Failure to
pay the additional amount within the grace period will result in lapse of the
Policy, but not until 30 days has passed after we have mailed a written notice
to you. If a premium payment for the additional amount is received by us during
the grace period, any amount of premium over what is required to prevent lapse
will be allocated among the subaccounts or to the GIA according to the current
premium allocation schedule. In determining the amount of "excess" premium to be
applied to the subaccounts or the GIA, we will deduct the premium tax and the
amount needed to cover any monthly deductions made during the grace period. If
the Insured dies during the grace period, the death benefit will equal the
amount of the death benefit immediately prior to the commencement of the grace
period.
PAYMENT OF PREMIUMS DURING PERIOD OF DISABILITY
You may also elect a Waiver of Premium Rider. This rider provides for the
waiver of certain premium payments under the policy under certain conditions
during a period of total disability of the Insured. Under its terms, the
specified premium will be waived upon our receipt of proof that the Insured is
totally disabled and that the disability occurred while the rider was in force.
The terms of this rider may vary by state.
ADDITIONAL INSURANCE OPTIONS
While the policy is in force and the Insured is insurable, the policyowner
will have the option to purchase additional insurance on the same Insured with
the same guaranteed rates as the policy without being assessed an issue expense
charge. We will require evidence of insurability and charges will be adjusted
for the Insured's new attained age and any change in risk classification.
However, if elected on the application, the policyowner may, at predetermined
future dates, purchase additional insurance protection on the same Insured
without evidence of insurability. See "Additional Rider Benefits--Purchase
Protection Plan Rider."
In addition, once each policy year you may request an increase in face
amount. This request should be made within 90 days prior to the policy
anniversary and is subject to an issue expense charge of $1.50 per $1,000 of
increase in face amount, up to a maximum of $600, and to our receipt of adequate
insurability evidence. A Free Look Period as described in "The Policy" section
of this prospectus applies to each increase in face amount.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under a policy, and you may cancel these
benefits at anytime. A charge will be deducted monthly from the policy value for
each additional rider benefit chosen except where noted below. More details will
be included in the form of a rider to the policy if any of these benefits is
chosen. The following benefits are currently available and additional riders may
be available as described in the policy (if approved in your state).
[diamond] DISABILITY WAIVER OF SPECIFIED PREMIUM RIDER. We waive the specified
premium if the Insured becomes totally disabled and the disability
continues for at least six months. Premiums will be waived to the
policy anniversary nearest the Insured's 65th birthday (provided that
the disability continues). If premiums have been waived continuously
during the entire 5 years prior to such date, the waiver will
continue beyond that date. The premium will be waived upon our
receipt of notice that the Insured is totally disabled and that the
disability occurred while the rider was in force.
17
[diamond] ACCIDENTAL DEATH BENEFIT RIDER. An additional death benefit will be
paid before the policy anniversary nearest the Insured's 75th
birthday, if:
o the Insured dies from bodily injury that results from an accident;
and
o the Insured dies no later than 90 days after injury.
[diamond] DEATH BENEFIT PROTECTION RIDER. The purchase of this rider provides
that the death benefit will be guaranteed. The amount of the
guaranteed death benefit is equal to the initial face amount, or the
face amount that you may increase or decrease, provided that certain
minimum premiums are paid. Unless we agree otherwise, the initial
face amount and the face amount remaining after any decrease must at
least equal $50,000 and the minimum issue age of the Insured must be
20. Three death benefit guarantee periods are available. The minimum
premium required to maintain the guaranteed death benefit is based on
the length of the guarantee period as elected on the application. The
three available guarantee periods are:
1) death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 70th birthday or policy year 7;
2) death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 80th birthday or policy year 10;
3) death benefit guaranteed until the later of the policy anniversary
nearest the Insured's 95th birthday.
Death benefit guarantee periods 1 or 2 may be extended provided that
the policy's cash surrender value is sufficient and you pay the new
minimum required premium.
[diamond] WHOLE LIFE EXCHANGE OPTION RIDER. This rider permits you to exchange
the policy for a fixed benefit whole life policy at the later of age
65 or policy year 15. There is no charge for this rider.
[diamond] PURCHASE PROTECTION PLAN RIDER. Under this rider you may, at
predetermined future dates, purchase additional insurance protection
without evidence of insurability.
[diamond] LIVING BENEFITS RIDER. Under certain conditions, in the event of the
terminal illness of the Insured, an accelerated payment of up to 75%
of the policy's death benefit (up to a maximum of $250,000) is
available. The minimum face amount of the policy after any such
accelerated benefit payment is $10,000. There is no charge for this
rider.
[diamond] CASH VALUE ACCUMULATION RIDER. This rider generally permits you to
pay more in premium than otherwise would be permitted. This rider
must be elected before the policy is issued. There is no charge for
this rider.
[diamond] CHILD TERM RIDER. This rider provides annually renewable term
coverage on children of the Insured who are between 14 days old and
age 18. The term insurance is renewable to age 25. Each child will be
insured under a separate rider and the amount of insurance must be
the same. Coverage may be converted to a new whole life or variable
insurance policy at any time prior to the policy anniversary nearest
insured child's 25th birthday.
[diamond] FAMILY TERM RIDER. This rider provides annually renewable term
insurance coverage to age 70 on the Insured or members of the
Insured's immediate family who are at least 18 years of age. The
rider is fully convertible through age 65 for each Insured to either
a fixed benefit or variable policy.
[diamond] BUSINESS TERM RIDER. This rider provides annually renewable term
insurance coverage to age 95 on the life of the Insured under the
base policy. The face amount of the term insurance may be level or
increasing. The initial rider death benefit cannot exceed 6 times the
initial base policy. This rider is available only for policies sold
in the corporate-owned life insurance market, employer-sponsored life
insurance market or other business-related life insurance markets.
INVESTMENTS OF THE VUL ACCOUNT
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PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain subaccounts invest in corresponding series of The Phoenix Edge
Series Fund. The following series are currently available:
PHOENIX RESEARCH ENHANCED INDEX SERIES: The investment objective of the
series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
series is to seek a high total return consistent with reasonable risk. The
series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
18
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 Average(SM) (the "DJIA(SM")) 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 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-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.
19
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
This subaccount invests in a corresponding fund of the Deutsche Asset
Management VIT Funds. The following fund is currently available:
EAFE(R) EQUITY INDEX FUND: The fund seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The fund invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain subaccounts invest in 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 a 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 markets 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 Series invests primarily in
equity securities of foreign companies with market capitalization of $1 billion
to $10 billion and focuses its investments in 40 to 60 companies in the
developed markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the series is to
seek long-term capital growth. The Wanger International Small Cap Series invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the series is to seek long-term
capital growth. The Wanger Twenty Series invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the series is to seek
long-term capital growth. The Wanger U.S. Small Cap Series invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
20
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 PHL Variable or its affiliates or to the
separate accounts of other insurance companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the funds simultaneously. Although neither PHL Variable nor the funds'
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:
[diamond] changes in state insurance laws;
[diamond] changes in federal income tax laws;
[diamond] changes in the investment management of any portfolio of the funds;
or
[diamond] differences in voting instructions between those given by variable
life insurance policyowners and those given by variable annuity
contract owners.
We will, at our 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:
[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
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 Inc.
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 Inc.
o Technology Portfolio
21
[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.
REINVESTMENT AND REDEMPTION
All dividend distributions of the fund are automatically reinvested in
shares of the fund at their net asset value on the date of distribution.
Likewise, all capital gains distributions of the fund, if any, are reinvested at
the net asset value on the record date. We redeem fund shares at their net asset
value to the extent necessary to make payments under the policy.
SUBSTITUTION OF INVESTMENTS
We reserve the right to make additions to, deletions from, or substitutions
for the investments held by the VUL Account, subject to compliance with the law
as currently applicable or as subsequently changed. In the future, we may
establish additional subaccounts within the VUL Account, each of which will
invest in shares of a designated portfolio of the fund with a specified
investment objective. If and when marketing needs and investment conditions
warrant, and at our discretion, we may establish additional portfolios. These
will be made available under existing policies to the extent and on a basis
determined by us.
If shares of any of the portfolios of the fund should no longer be available
for investment or, if in the judgment of our management, further investment in
shares of any of the portfolios become inappropriate due to policy objectives,
we may then substitute shares of another mutual fund for shares already
purchased, or to be purchased in the future. No substitution of mutual fund
shares held by the VUL Account may take place without prior approval of the
Securities and Exchange Commission and prior notice to you. In the event of a
change, you will be given the option of transferring the policy value of the
subaccount in which the substitution is to occur to another subaccount.
CHARGES AND DEDUCTIONS
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GENERAL
Charges are deducted in connection with the policy to compensate us for:
[diamond] our expenses in selling the policy;
[diamond] underwriting and issuing the policy;
[diamond] premium and federal taxes incurred on premiums received;
[diamond] providing the insurance benefits set forth in the policy; and
[diamond] assuming certain risks in connection with the policy.
The nature and amount of these charges are more fully described in sections
below.
When we issue policies under group or sponsored arrangements, we may reduce
or eliminate the:
[diamond] issue expense charge; and/or
[diamond] surrender charge.
Sales to a group or through sponsored arrangement often result in lower per
policy costs and often involve a greater stability of premiums paid into the
policies. Under such circumstances, PHL Variable tries to pass these savings
onto the purchasers. The amount of reduction will be determined on a
case-by-case basis and will reflect the cost reduction we expect as a result of
these group or sponsored sales.
Certain charges are deducted only once, others are deducted periodically,
while certain others are deducted only if certain events occur.
CHARGES DEDUCTED ONCE
[diamond] PREMIUM TAX CHARGE. Various states (and countries and cities) impose
a tax on premiums received by insurance companies. Premium taxes vary
from state to state. Currently, these taxes range from 0.62% to 4% of
premiums paid. Moreover, certain municipalities in Louisiana,
Kentucky, Alabama and South Carolina also impose taxes on premiums
paid, in addition to the state taxes imposed. The premium tax charge
represents an amount we consider necessary to pay all premium taxes
imposed by these taxing authorities, and we do not expect to derive a
profit from this charge. Policies will be assessed a tax charge equal
to 2.25% of the premiums paid. These charges are deducted from each
premium payment.
[diamond] FEDERAL TAX CHARGE. A charge equal to 1.50% of each premium will be
deducted from each premium payment to cover the estimated cost to us
of the federal income tax treatment of deferred acquisition costs.
22
PERIODIC CHARGES
MONTHLY
[diamond] ISSUE EXPENSE CHARGE. This charge is to reimburse PHL Variable for
underwriting and start-up expenses in connection with issuing a
policy. The issue expense charge is $1.50 per $1,000 of face amount
up to a maximum of $600.
Rather than deduct the full amount at once, the issue expense charge
is deducted in equal monthly installments over the first 12 months of
the policy. Generally, administrative costs per policy vary with the
size of the group or sponsored arrangement, its stability as
indicated by its term of existence and certain member
characteristics, the purposes for which the policies are purchased
and other factors. The amounts of any reductions will be considered
on a case-by-case basis and will reflect the reduced administration
costs expected as a result of sales to a particular group or
sponsored arrangement.
[diamond] ADMINISTRATIVE CHARGE. The administrative charge is currently set at
$5 per month and is guaranteed not to exceed $10 per month. This
charge is to reimburse PHL Variable for daily administration, monthly
processing, updating daily values and for annual/quarterly
statements.
[diamond] COST OF INSURANCE. To determine this expense, we multiply the
appropriate cost of insurance rate by the difference between your
policy's death benefit and the policy value. Generally, cost of
insurance rates are based on the sex, attained age, duration and risk
class of the Insured. However, in certain states and for policies
issued in conjunction with certain qualified plans, cost of insurance
rates are not based on sex. The actual monthly costs of insurance
rates are based on our expectations of future mortality experience.
They will not, however, be greater than the guaranteed cost of
insurance rates set forth in the policy. These guaranteed maximum
rates are equal to 100% of the 1980 Commissioners Standard Ordinary
("CSO") Mortality Table, with appropriate adjustment for the
insured's risk classification. Any change in the cost of insurance
rates will apply to all persons of the same sex, insurance age and
risk class whose policies have been in force for the same length of
time. Your risk class may affect your cost of insurance rate. We
currently place insureds into a standard risk class or a risk class
involving a lower mortality risk, depending upon the health of the
insureds as determined by medical information that we request. For
otherwise identical policies, insureds in the standard risk class
will have a higher cost of insurance than those in the risk class
with the lower mortality risk. The standard risk class is for
smokers. There are three risk classes for nonsmokers. Nonsmokers will
generally incur a lower cost of insurance than similarly situated
insureds who smoke.
[diamond] COST OF ANY RIDERS TO YOUR POLICY. Certain policy riders require the
payment of additional premiums to pay for the benefit provided by the
rider.
Monthly deductions are made on each monthly calculation day. The amount
deducted is allocated among subaccounts and the unloaned portion of the GIA
based on an allocation schedule specified by you.
You initially select this schedule in your application, and you can change
it later from time to time. If any subaccount or the unloaned portion of the GIA
is insufficient to permit the full withdrawal of the monthly deduction, the
withdrawals from the other subaccounts or GIA will be proportionally increased.
DAILY
[diamond] MORTALITY AND EXPENSE RISK CHARGE. A charge at an annual rate of
0.80% is deducted daily from the VUL Account. After the 15th policy
year, the charge is reduced to an annual rate of 0.25%. No portion of
this charge is deducted from the GIA.
The mortality risk assumed by us is that collectively our insureds
may live for a shorter time than projected because of inaccuracies in
the projecting process and, therefore, the total amount of death
benefits that we pay out will be greater than what we expected. The
expense risk assumed is that expenses incurred in issuing and
maintaining the policies may exceed the limits on administrative
charges set in the policies. If the expenses do not increase to an
amount in excess of the limits, or if the mortality projecting
process proves to be accurate, we may profit from this charge. We
also assume risks with respect to other contingencies including the
incidence of policy loans, which may cause us to incur greater costs
than expected when we designed the policies. To the extent we profit
from this charge, we may use those profits for any proper purpose,
including the payment of sales expenses or any other expenses that
may exceed income in a given year.
CONDITIONAL CHARGES
These are other charges that are imposed only if certain events occur.
[diamond] SURRENDER CHARGE. During the first 10 policy years, there is a
difference between the amount of policy value and the amount of cash
surrender value of the Policy. This difference is the surrender
charge, which is a contingent deferred sales charge. The surrender
charge is designed to recover the expense of distributing Policies
that are terminated before distribution expenses have been recouped
from revenue generated by these policies. These are contingent
charges because they are paid only if the Policy is surrendered (or
the face amount is reduced or the Policy lapses) during this period.
They are deferred charges because they are not deducted from
premiums.
23
During the first 10 Policy years, the surrender charge described below will
apply if you either surrender the Policy for its cash surrender value or let
the Policy lapse. There is no surrender charge after the 10th policy year.
During the first two policy years on Single Life Policies and during the
first 10 policy years on Multiple Life Policies, the maximum surrender
charge that a Policyowner could pay while he or she owns the Policy is the
amount shown in the Policy's surrender charge Schedule, or equal to either A
plus B (as defined below), whichever is less. After the first two policy
years on Single Life Policies, the maximum surrender charge that a
Policyowner could pay is based on the amount shown in the Policy's Surrender
Charge Schedule.
A. The contingent deferred sales charge is equal to:
1. 28.5% of all premiums paid (up to and including the amount stated in
the Policy's Surrender Charge Schedule, which is calculated according
to a formula contained in a SEC rule); plus
2. 8.5% of all premiums paid in excess of this amount but not greater
than twice this amount; plus
3. 7.5% of all premiums paid in excess of twice this amount.
B. The contingent deferred issue charge is equal to $5 per $1,000 of
initial face amount.
SURRENDER CHARGE SCHEDULE
-------------------------
POLICY SURRENDER POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE MONTH CHARGE
----- ------ ----- ------ ----- ------
1-60 $1307.54 80 $1066.03 100 $727.09
61 1295.46 81 1053.95 101 690.65
62 1283.39 82 1041.88 102 654.22
63 1271.31 83 1029.80 103 617.78
64 1259.24 84 1017.73 104 581.35
65 1247.16 85 1005.65 105 544.91
66 1235.08 86 993.58 106 508.48
67 1223.01 87 981.50 107 472.05
68 1210.93 88 969.43 108 435.61
69 1198.86 89 957.35 109 399.18
70 1186.78 90 945.28 110 362.74
71 1174.71 91 933.20 111 326.31
72 1162.63 92 921.13 112 289.97
73 1150.56 93 909.05 113 253.44
74 1138.48 94 896.97 114 217.01
75 1126.41 95 884.90 115 180.57
76 1114.33 96 872.82 116 144.14
77 1102.26 97 836.39 117 107.70
78 1090.18 98 799.95 118 71.27
79 1078.10 99 763.52 119 34.83
120 .00
[diamond] PARTIAL SURRENDER FEE. In the case of a partial surrender, an
additional fee is imposed. This fee is equal to 2% of the amount
withdrawn but not more than $25. It is intended to recover the actual
costs of processing the partial surrender request and will be
deducted from each subaccount and GIA in the same proportion as the
withdrawal is allocated. If no allocation is made at the time of the
request for the partial surrender, withdrawal allocation will be made
in the same manner as are monthly deductions.
[diamond] PARTIAL SURRENDER CHARGE. If less than all of the policy is
surrendered, the amount withdrawn is a "partial surrender." A charge
as described below is deducted from the policy value upon a partial
surrender of the policy. The charge is a pro rata portion of the
applicable surrender charge that would apply to a full surrender,
determined by multiplying the applicable surrender charge by a
fraction which is equal to the partial surrender amount payable
divided by the result of subtracting the applicable surrender charge
from the policy value. This amount is assessed against the
subaccounts and the GIA in the same proportion as the withdrawal is
allocated.
A partial surrender charge also is deducted from policy value upon a
decrease in face amount. The charge is equal to the applicable
surrender charge multiplied by a fraction equal to the decrease in
face amount divided by the face amount of the policy prior to the
decrease.
INVESTMENT MANAGEMENT CHARGE
As compensation for investment management services to the funds, the
advisors are entitled to fees, payable monthly and based on an annual percentage
of the average aggregate daily net asset values of each series.
These fund charges and other expenses are described more fully in the
accompanying fund prospectuses.
OTHER TAXES
Currently no charge is made to the VUL Account for federal income taxes that
may be attributable to the VUL Account. We may, however, make such a charge in
the future for these or any other taxes attributable to the VUL Account.
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
GENERAL
Payment of any amount upon complete or partial surrender, policy loan or
benefits payable at death (in excess of the initial face amount) or maturity may
be postponed:
[diamond] for up to 6 months from the date of the request, for any transactions
dependent upon the value of the GIA;
[diamond] whenever the NYSE is closed other than for customary weekend and
holiday closings or trading on the NYSE is restricted as determined
by the SEC; or
[diamond] whenever an emergency exists, as decided by the SEC as a result of
which disposal of securities is not reasonably practicable or it is
not reasonably practicable to determine the value of the VUL
Account's net assets.
24
Transfers also may be postponed under these circumstances.
PAYMENT BY CHECK
Payments under the policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared your bank.
THE CONTRACT
The policy and attached copy of the application are the entire contract.
Only statements in the application can be used to void the policy. The
statements are considered representations and not warranties. Only an executive
officer of PHL Variable can agree to change or waive any provisions of the
policy.
SUICIDE
If the Insured commits suicide within 2 years after the policy's date of
issue, the policy will stop and become void. We will pay you the policy value
adjusted by the addition of any monthly deductions and other fees and charges,
minus any debt owed to us under the policy.
INCONTESTABILITY
We cannot contest this policy or any attached rider after it has been in
force during the Insured's lifetime or for 2 years from the policy date.
CHANGE OF OWNER OR BENEFICIARY
The beneficiary, as named in the policy application or subsequently changed,
will receive the policy benefits at the Insured's death. If the named
beneficiary dies before the Insured, the contingent beneficiary, if named,
becomes the beneficiary. If no beneficiary survives the Insured, the death
benefit payable under the policy will be paid to your estate.
As long as the policy is in force, the policyowner and the beneficiary may
be changed in writing, satisfactory to us. A change in beneficiary will take
effect as of the date the notice is signed, whether or not the Insured is living
when we receive the notice. We will not, however, be liable for any payment made
or action taken before receipt of the notice.
ASSIGNMENT
The policy may be assigned. We will not be bound by the assignment until a
written copy has been received and we will not be liable with respect to any
payment made prior to receipt. We assume no responsibility for determining
whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated, the death benefit will
be adjusted based on what the cost of insurance charge for the most recent
monthly deduction would have purchased based on the correct age and sex.
SURPLUS
You may share in the divisible surplus of PHL Variable to the extent decided
annually by the Board of Directors. However, it is not currently expected that
the Board will authorize these payments since you will be participating directly
in investment results.
PAYMENT OF PROCEEDS
- --------------------------------------------------------------------------------
SURRENDER AND DEATH BENEFIT PROCEEDS
Death benefit proceeds and the proceeds of full or partial surrenders will
be processed at unit values next computed after we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within 7 days, unless another payment option has been elected. Payment of
the death proceeds, however, may be delayed if the claim for payment of the
death proceeds needs to be investigated, e.g., to ensure payment of the proper
amount to the proper payee. Any such delay will not be beyond that reasonably
necessary to investigate such claims consistent with insurance practices
customary in the life insurance industry.
Under certain conditions, in the event of the terminal illness of the
Insured, an accelerated payment of up to 75% of the policy's death benefit (up
to maximum of $250,000), is available under the Living Benefits Rider. The
minimum face amount remaining after any such accelerated benefit payment is
$10,000.
While the Insured is living, you may elect a payment option for payment of
the death proceeds to the beneficiary. You may revoke or change a prior
election, unless such right has been waived. The beneficiary may make or change
an election before payment of the death proceeds, unless you have made an
election that does not permit such further election or changes by the
beneficiary.
A written request in a form satisfactory to us is required to elect, change
or revoke a payment option.
The minimum amount of surrender or death benefit proceeds that may be
applied under any payment option is $1,000.
If the policy is assigned as collateral security, we will pay any amount due
the assignee in one lump sum. Any remaining proceeds will remain under the
option elected.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a policy may be applied
under one or more of the following payment options or such other payment options
or alternative versions of the options listed as we may choose to make available
in the future.
OPTION 1--LUMP SUM
Payment in one lump sum.
25
OPTION 2--LEFT TO EARN INTEREST
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD
Equal installments are paid for a specified period of years whether the
payee lives or dies. The first payment will be on the date of settlement. The
assumed interest rate on the unpaid balance is guaranteed not to be less than 3%
per year.
OPTION 4--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN
Equal installments are paid until the later of:
[diamond] the death of the payee; or
[diamond] the end of the period certain.
The first payment will be on the date of settlement.
The period certain must be chosen at the time this option is elected. The
periods certain that you may choose from are as follows:
[diamond] 10 years;
[diamond] 20 years; or
[diamond] until the installments paid refund the amount applied under this
option.
If the payee is not living when the final payment falls due, that payment
will be limited to the amount which needs to be added to the payments already
made to equal the amount applied under this option.
If, for the age of the payee, a period certain is chosen that is shorter
than another period certain paying the same installment amount, we will consider
the longer period certain as having been elected.
Any life annuity provided under Option 4 is computed using an interest rate
guaranteed to be no less than 3/8% per year, but any life annuity providing a
period certain of 20 years or more is computed using an interest rate guaranteed
to be no less than 3 1/4% per year.
OPTION 5--LIFE ANNUITY
Equal installments are paid only during the lifetime of the payee. The first
payment will be on the date of settlement. Any life annuity as may be provided
under Option 5 is computed using an interest rate guaranteed to be no less than
3 1/2% per year.
OPTION 6--PAYMENTS OF A SPECIFIED AMOUNT
Equal installments of a specified amount, out of the principal sum and
interest on that sum, are paid until the principal sum remaining is less than
the amount of the installment. When that happens, the principal sum remaining
with accrued interest will be paid as a final payment. The first payment will be
on the date of settlement. The payments will include interest on the remaining
principal at a guaranteed rate of at least 3% per year. This interest will be
credited at the end of each year. If the amount of interest credited at the end
of the year exceeds the income payments made in the last 12 months, that excess
will be paid in 1 sum on the date credited.
OPTION 7--JOINT SURVIVORSHIP ANNUITY WITH 10-YEAR PERIOD CERTAIN
The first payment will be on the date of settlement. Equal installments are
paid until the latest of:
[diamond] the end of the 10-year period certain;
[diamond] the death of the Insured; or
[diamond] the death of the other named annuitant.
The other annuitant must have attained age 40, must be named at the time
this option is elected and cannot later be changed. Any joint survivorship
annuity that may be provided under this option is computed using a guaranteed
interest rate to equal at least 3/8% per year.
For additional information concerning the above payment options, see the
policy.
FEDERAL INCOME TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to you or your beneficiary depends on our income tax
status and upon the income tax status of the individual concerned. The
discussion contained herein is general in nature and is not intended as income
tax advice. For complete information on federal and state income tax
considerations, a qualified income tax advisor should be consulted. No attempt
is made to consider any estate and inheritance taxes, or any state, local or
other tax laws. Because the discussion herein is based upon our understanding of
federal income tax laws as they are currently interpreted, we cannot guarantee
the income tax status of any policy. The Internal Revenue Service (the "IRS")
makes no representation regarding the likelihood of continuation of current
federal income tax laws, Treasury regulations or of the current interpretations.
We reserve the right to make changes to the policy to assure that it will
continue to qualify as a life insurance contract for federal income tax
purposes.
PHL VARIABLE'S INCOME TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986 (the "Code"), as amended. For federal income tax purposes, neither the VUL
Account nor the GIA is a separate entity from PHL Variable and their operations
form a part of PHL Variable.
Investment income and realized capital gains on the assets of the VUL
Account are reinvested and taken into account in determining the value of the
VUL Account. Investment income of the VUL Account, including realized net
capital gains, is not taxed to us. Due to our income tax status under current
provisions of the Code, no
26
charge currently will be made to the VUL Account for our federal income taxes
which may be attributable to the VUL Account. We reserve the right to make a
deduction for income taxes if our federal income tax treatment is determined to
be other than what we currently believe it to be, if changes are made affecting
the income tax treatment to our variable life insurance contracts, or if changes
occur in our income tax status. If imposed, such charge would be equal to the
federal income taxes attributable to the investment results of the VUL Account.
POLICY BENEFITS
DEATH BENEFIT PROCEEDS
The policy, whether or not it is a modified endowment contract (see
"Modified Endowment Contracts"), should be treated as meeting the definition of
a life insurance contract for federal income tax purposes under Section 7702 of
the Code. As such, the death benefit proceeds thereunder should be excludable
from the gross income of the beneficiary under Code Section 101(a)(1). Also, a
policyowner should not be considered to be in constructive receipt of the cash
value, including investment income. However, see the sections below on possible
taxation of amounts received under the policy, via full surrender, partial
surrender or loan. In addition, a benefit paid under a Living Benefits Rider may
be taxable as income in the year of receipt.
Code Section 7702 imposes certain conditions with respect to premiums
received under a policy. We monitor the premiums to assure compliance with such
conditions. However, if the premium limitation is exceeded during the year, we
may return the excess premium, with interest, to the policyowner within 60 days
after the end of the policy year, and maintain the qualification of the policy
as life insurance for federal income tax purposes.
FULL SURRENDER
Upon full surrender of a policy for its cash value, the excess, if any, of
the cash value (unreduced by any outstanding indebtedness) over the premiums
paid will be treated as ordinary income for federal income tax purposes. The
full surrender of a policy that is a modified endowment contract may result in
the imposition of an additional 10% tax on any income received.
PARTIAL SURRENDER
If the policy is a modified endowment contract, partial surrenders are fully
taxable to the extent of income in the policy and are possibly subject to an
additional 10% tax. See the discussion on modified endowment contracts below. If
the policy is not a modified endowment contract, partial surrenders still may be
taxable, as follows. Code Section 7702(f)(7) provides that where a reduction in
death benefits occurs during the first 15 years after a policy is issued and
there is a cash distribution associated with that reduction, the policyowner may
be taxed on all or a part of the amount distributed. A reduction in death
benefits may result from a partial surrender. After 15 years, the proceeds will
not be subject to tax, except to the extent such proceeds exceed the total
amount of premiums paid but not previously recovered. We suggest you consult
with your tax advisor in advance of a proposed decrease in death benefits or a
partial surrender as to the portion, if any, which would be subject to tax, and
in addition as to the impact such partial surrender might have under the new
rules affecting modified endowment contracts. The benefit payment under the
Living Benefits Rider is not considered a partial surrender.
LOANS
We believe that any loan received under a policy will be treated as your
indebtedness. If the policy is a modified endowment contract, loans are fully
taxable to the extent of income in the policy and are possibly subject to an
additional 10% tax. See the discussion on modified endowment contracts. If the
policy is not a modified endowment contract, we believe that no part of any loan
under a policy will constitute income to you.
The deductibility by a policyowner of loan interest under a policy may be
limited under Code Section 264, depending on the circumstances. A policyowner
intending to fund premium payments through borrowing should consult a tax
advisor with respect to the tax consequences thereof. Under the "personal"
interest limitation provisions of the Code, interest on policy loans used for
personal purposes is not tax deductible. Other rules may apply to allow all or
part of the interest expense as a deduction if the loan proceeds are used for
"trade or business" or "investment" purposes. See your tax advisor for further
guidance.
BUSINESS-OWNED POLICIES
If a business or a corporation owns the policy, the Code may impose
additional restrictions. The Code limits the interest deduction on
business-owned policy loans and may impose tax upon the inside build-up of
corporate-owned life insurance policies through the corporate alternative
minimum tax.
MODIFIED ENDOWMENT CONTRACTS
GENERAL
Pursuant to Code Section 72(e), loans and other amounts received under
modified endowment contracts will, in general, be taxed to the extent of
accumulated income (generally, the excess of cash value over premiums paid).
Life insurance policies can be modified endowment contracts if they fail to meet
what is known as "the 7-pay test." The measuring stick for this test is a
hypothetical life insurance policy of equal face amount which requires 7 equal
annual premiums but which, after the seventh year is "fully paid-up," continuing
to provide a level death benefit without the need for any further premiums. A
policy becomes a modified endowment contract if, at any time during the first 7
years, the cumulative premium paid on
27
the policy exceeds the cumulative premium that would have been paid under the
hypothetical policy. The Code provides that premiums paid during a policy year
but which are returned by us with interest within 60 days after the end of the
policy year will be excluded from the 7-pay test. Consistant with applicable
federal securities law, however, we return such excess premium within 7 days of
its receipt. A life insurance policy received in exchange for a modified
endowment contract will be treated as a modified endowment contract.
REDUCTION IN BENEFITS DURING THE FIRST 7 YEARS
If there is a reduction in death benefits during the first 7 policy years,
the premiums are redetermined for purposes of the 7-pay test as if the policy
originally had been issued at the reduced death benefit level and the new
limitation is applied to the cumulative amount paid for each of the first 7
policy years.
DISTRIBUTIONS AFFECTED
If a policy fails to meet the 7-pay test, it is considered a modified
endowment contract only as to distributions in the year in which the test is
failed and all subsequent policy years. However, distributions made in
anticipation of such failure (there is a presumption that distributions made
within 2 years prior to such failure were "made in anticipation") also are
considered distributions under a modified endowment contract. If the policy
satisfies the 7-pay test for 7 years, distributions and loans generally will not
be subject to the modified endowment contract rules.
PENALTY TAX
Any amounts taxable under the modified endowment contract rule will be
subject to an additional 10% excise tax, with certain exceptions. This
additional tax will not apply in the case of distributions that are:
[diamond] made on or after the taxpayer attains age 59 1/2;
[diamond] attributable to the taxpayer's disability (within the meaning of Code
Section 72(m)(7)); or
[diamond] part of a series of substantially equal periodic payments (not less
often than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or life expectancies) of the taxpayer
and his beneficiary.
MATERIAL CHANGE RULES
Any determination of whether the policy meets the 7-pay test will begin
again any time the policy undergoes a "material change," which includes any
increase in death benefits or any increase in or addition of a qualified
additional benefit, with the following 2 exceptions.
[diamond] First, if an increase is attributable to premiums paid "necessary to
fund" the lowest death benefit and qualified additional benefits
payable in the first seven policy years or to the crediting of
interest or dividends with respect to these premiums, the "increase"
does not constitute a material change.
[diamond] Second, to the extent provided in regulations, if the death benefit
or qualified additional benefit increases as a result of a
cost-of-living adjustment based on an established broad-based index
specified in the policy, this does not constitute a material change
if:
o the cost-of-living determination period does not exceed the
remaining premium payment period under the policy; and
o the cost-of-living increase is funded ratably over the remaining
premium payment period of the policy.
A reduction in death benefits is not considered a material change unless
accompanied by a reduction in premium payments.
A material change may occur at any time during the life of the policy
(within the first 7 years or thereafter), and future taxation of distributions
or loans would depend upon whether the policy satisfied the applicable 7-pay
test from the time of the material change. An exchange of policies is considered
to be a material change for all purposes.
SERIAL PURCHASE OF MODIFIED ENDOWMENT CONTRACTS
All modified endowment contracts issued by the same insurer (or affiliated
companies of the insurer) to the same policyowner within the same calendar year
will be treated as 1 modified endowment contract in determining the taxable
portion of any loans or distributions made to the policyowner. The Treasury has
been given specific legislative authority to issue regulations to prevent the
avoidance of the new distribution rules for modified endowment contracts. A
qualified tax advisor should be consulted about the tax consequences of the
purchase of more than 1 modified endowment contract within any calendar year.
LIMITATIONS ON UNREASONABLE MORTALITY AND EXPENSE CHARGES
The Code imposes limitations on unreasonable mortality and expense charges
for purposes of ensuring that a policy qualifies as a life insurance contract
for federal income tax purposes. The mortality charges taken into account to
compute permissible premium levels may not exceed those charges required to be
used in determining the federal income tax reserve for the policy, unless
Treasury regulations prescribe a higher level of charge. In addition, the
expense charges taken into account under the guideline premium test are required
to be reasonable, as defined by the Treasury regulations. We will comply with
the limitations for calculating the premium we are permitted to receive from
you.
QUALIFIED PLANS
A policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, you should not use the policy in
conjunction with a qualified plan until you have consulted a competent pension
consultant or tax advisor.
28
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each series is required to diversify its
investments. The Diversification Regulations generally require that on the last
day of each calendar quarter 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 VUL Account; therefore, each series will be tested for
compliance with the percentage limitations. For purposes of these
diversification rules, all securities of the same issuer are treated as a single
investment, but each United States government agency or instrumentality is
treated as a separate issuer.
The general diversification requirements are modified if any of the assets
of the VUL Account are direct obligations of the United States Treasury. In this
case, there is no limit on the investment that may be made in Treasury
securities, and for purposes of determining whether assets other than Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the VUL Account's investment in
Treasury securities. Notwithstanding this modification of the general
diversification requirements, the portfolios of the funds will be structured to
comply with the general diversification standards because they serve as an
investment vehicle for certain variable annuity contracts that must comply with
these standards.
In connection with the issuance of the Diversification Regulations, the
United States Treasury announced that such regulations do not provide guidance
concerning the extent to which you may direct your investments to particular
divisions of a separate account. It is possible that a revenue ruling or other
form of administrative pronouncement in this regard may be issued in the near
future. It is not clear, at this time, what such a revenue ruling or other
pronouncement will provide. It is possible that the policy may need to be
modified to comply with such future Treasury announcements. For these reasons,
we reserve the right to modify the policy, as necessary, to prevent you from
being considered the owner of the assets of the VUL Account.
We intend to comply with the Diversification Regulations to assure that the
policies continue to qualify as a life insurance contract, for federal income
tax purposes.
CHANGE OF OWNERSHIP OR INSURED OR ASSIGNMENT
Changing the policyowner or the Insured or an exchange or assignment of the
policy may have tax consequences depending on the circumstances. Code Section
1035 provides that a life insurance contract can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or other property is received in the exchange, and that the policies relate to
the same Insured. If the surrendered policy is subject to a policy loan, this
may be treated as the receipt of money on the exchange. We recommend that any
person contemplating such actions seek the advice of a qualified tax consultant.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of policy proceeds depend on the
circumstances of each policyowner or beneficiary. We do not make any
representations or guarantees regarding the tax consequences of any policy with
respect to these types of taxes.
VOTING RIGHTS
- --------------------------------------------------------------------------------
We will vote the funds' shares held by the subaccounts at any regular and
special meetings of shareholders of the funds. To the extent required by law,
such voting will be pursuant to instructions received from you. However, if the
1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result, we decide that we are
permitted to vote the funds' shares at our own discretion, we may elect to do
so.
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.
Funds' shares held in a subaccount for which no timely instructions are
received, and funds' shares which are not otherwise attributable to
policyowners, will be voted by PHL Variable in proportion to the voting
instructions that are received with respect to all policies participating in
that subaccount. Instructions to abstain on any item to be voted upon will be
applied to reduce the votes eligible to be cast by Phoenix.
You will receive proxy materials, reports and other materials related to the
funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the subclassification or investment objective of one or
more of the portfolios of the funds or to approve or disapprove an investment
advisory contract for the funds. In addition, PHL Variable itself may disregard
voting instructions in favor of changes initiated by a policyowner
29
in the investment policies or the Investment Advisor of the funds if PHL
Variable reasonably disapproves of such changes. A change would be disapproved
only if the proposed change is contrary to state law or prohibited by state
regulatory authorities or we decide that the change would have an adverse effect
on the General Account because the proposed investment policy for a series may
result in overly speculative or unsound investments. In the event PHL Variable
does disregard voting instructions, a summary of that action and the reasons for
such action will be included in the next periodic report to policyowners.
PHL VARIABLE
You (or the payee entitled to payment under a payment option if a different
person) will have the right to vote at annual meetings of all PHL Variable
policyholders for the election of members of the Board of Directors of PHL
Variable and on other corporate matters, if any, where a policyholder's vote is
taken. At meetings of all the PHL Variable policyholders, you (or payee) may
cast only 1 vote as the holder of a policy, irrespective of policy value or the
number of the policies you hold.
THE DIRECTORS AND
EXECUTIVE OFFICERS OF PHL VARIABLE
- --------------------------------------------------------------------------------
PHL Variable is managed by its Board of Directors. The following are the
Directors and Executive Officers of Phoenix:
NAME POSITION
---- --------
Carl T. Chadburn Director
Robert W. Fiondella Director and Chairman
Joseph E. Kelleher Director and Senior Vice
President
Philip R. McLoughlin Director and Executive Vice
President
David W. Searfoss Director, Executive Vice
President and Chief Financial
Officer
Simon Y. Tan Director and President
Dona D. Young Director and Executive Vice
President
EXECUTIVE OFFICERS POSITION
------------------ --------
Robert W. Fiondella Chairman of the Board and Chief
Executive Officer
Simon Y. Tan President
Michael J. Gilotti Senior Vice President
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer
David W. Searfoss Executive Vice President and
Chief Financial Officer
Dona D. Young Executive Vice President
Joseph E. Kelleher Senior Vice President
Robert G. Lautensack, Jr. Senior Vice President
The above listing reflects the positions held at PHL Variable during the
last 5 years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
We hold the assets of the VUL Account. The assets of the VUL Account are
kept physically segregated and held separate and apart from our General Account.
We maintain records of all purchases and redemptions of shares of the funds.
SALES OF POLICIES
- --------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("WSG"), a New York corporation incorporated on August 7, 1970,
licensed to sell PHL Variable insurance policies as well as policies, annuity
contracts and funds of companies affiliated with PHL Variable. WSG, an indirect
subsidiary of Phoenix, is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and is a member of the National
Association of Securities Dealers, Inc. PEPCO serves as national distributor of
the policies pursuant to an underwriting agreement dated December 31, 1996.
PEPCO, a Connecticut corporation incorporated on July 16, 1968, is an indirect
subsidiary of Phoenix Investment Partners, Ltd. ("PXP"), in which Phoenix owns
a majority interest.
Policies also may be purchased from other broker-dealers registered under
the 1934 Act whose representatives are authorized by applicable law to sell
policies under terms of agreements provided by PEPCO. Sales commissions will be
paid to registered representatives on purchase payments we receive under these
policies. PHL Variable will pay a maximum total sales commission of 50% of
premiums to PEPCO. To the extent that the sales charge under the policies is
less than the sales commissions paid with respect to the policies, we will pay
the shortfall from our General Account assets, which will include any profits we
may derive under the policies.
STATE REGULATION
- --------------------------------------------------------------------------------
We are subject to the provisions of the Connecticut insurance laws
applicable to mutual 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 we
do insurance business.
30
State regulation of PHL Variable includes certain limitations on the
investments which we may make, including investments for the VUL Account and the
GIA. This regulation does not include, however, any supervision over the
investment policies of the VUL Account.
REPORTS
- --------------------------------------------------------------------------------
All policyowners will be furnished with those reports required by the 1940
Act and related regulations or by any other applicable law or regulation.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The VUL Account is not engaged in any litigation. PHL Variable is not
involved in any litigation that would have a material adverse effect on our
ability to meet our obligations under the policies.
LEGAL MATTERS
- --------------------------------------------------------------------------------
Edwin L. Kerr, Counsel of Phoenix Home Life Mutual Insurance Company, has
passed upon the organization of PHL Variable, its authority to issue variable
life insurance policies and the validity of the policy, and upon legal matters
relating to the federal securities and income tax laws for PHL Variable.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A registration statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") with respect to the securities offered. This prospectus
is a summary of the contents of the policy and other legal documents and does
not contain all the information set forth in the registration statement and its
exhibits. We refer you to the registration statement and its exhibits for
further information concerning the VUL Account, PHL Variable and the policy.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of PHL Variable contained herein should be
considered only as bearing upon PHL Variable's ability to meet its obligations
under the policy, and they should not be considered as bearing on the investment
performance of the VUL Account. There are no financial statements of the VUL
Account subaccounts for the period ended December 31, 1999 and no sales occurred
during this period.
31
PHLVIC VARIABLE
UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
THE SUBACCOUNTS COMMENCED OPERATIONS
AS OF THE DATE OF THIS PROSPECTUS, THEREFORE, DATA
FOR THESE SUBACCOUNTS IS NOT YET AVAILABLE.
32
PHL VARIABLE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999
33
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants ............................................35
Balance Sheet at December 31, 1999 and 1998 ..................................36
Statement of Income, Comprehensive Income and Equity for the Years Ended
December 31, 1999, 1998 and 1997 ............................................37
Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ............................................38
Notes to Financial Statements ............................................39-50
34
PRICEWATERHOUSECOOPERS [logo]
- --------------------------------------------------------------------------------
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
February 15, 2000
35
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
BALANCE SHEET
- --------------------------------------------------------------------------------
DECEMBER 31,
1999 1998
(IN THOUSANDS)
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
=========== =========
The accompanying notes are an integral part of these statements.
36
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
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
========= =========== =========
The accompanying notes are an integral part of these statements.
37
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
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
The accompanying notes are an integral part of these statements.
38
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.
39
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.
40
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,
41
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.
42
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:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
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
========= ======= ======== =========
The amortized cost and fair value of investments in debt securities as of
December 31, 1998 were as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
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
======== ======= ======== ========
43
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.
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
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
========= ========= ========= =========
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
1999 1998 1997
(IN THOUSANDS)
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
======== ======== ========
44
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:
1999 1998 1997
(IN THOUSANDS)
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
========= ======= =======
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
======== ========
45
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):
1999 1998 1997
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%
====== ====== =====
The deferred income tax liability (asset) represents the tax effects of
temporary differences. The components as of December 31, were as follows:
1999 1998
(IN THOUSANDS)
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)
========= =========
46
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:
1999 1998 1997
(IN THOUSANDS)
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
========= ======= =======
The following table summarizes accumulated other comprehensive (loss)
income balances:
DECEMBER 31,
1999 1998
(IN THOUSANDS)
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year $ 207 $ 81
Change during period (920) 126
-------- -------
Balance, end of year $ (713) $ 207
======== =======
47
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
========= =========
48
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.
49
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:
1999 1998 1997
(IN THOUSANDS)
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
========= ======== =======
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.
50
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
- --------------------------------------------------------------------------------
Contributions to the GIA under the Policy and transfers to the GIA become
part of 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 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
other than those allocated to any separate account. Premium payments will be
allocated to the GIA and, therefore, the General Account, as elected by the
policyowner 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.
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 policies will vary from
year to year in the sole discretion of PHL Variable. However, PHL Variable
guarantees that it will credit interest at a rate of not less than 4% per year,
compounded annually, to amounts allocated to the unloaned portion of the GIA.
The loaned portion of the GIA will be credited interest at an effective annual
rate of 2% (4% in New Jersey). PHL Variable may credit interest at a rate in
excess of 4% per year; however, it is not obligated to credit any interest in
excess of 4% per year.
On the last business day of each calendar week, PHL Variable will set the
excess interest rate, if any, that will apply to premium payments made to the
GIA. That rate will remain in effect for such premium payments for an initial
guarantee period of 1 full year from the date of premium payment. Upon
expiration of the initial 1-year guarantee period (and each subsequent 1-year
guarantee period thereafter), the rate to be applied to any premium payment
whose guaranteed period has just ended will be the same rate as is applied to
new premium payment allocated at that time to the GIA. This rate will likewise
remain in effect for a guarantee period of 1 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 interest to amounts
allocated to the GIA and the amount thereof, are general economic trends, rates
of return currently available and anticipated on investments, regulatory and tax
requirements and competitive factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED
TO THE GIA IN EXCESS OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF
PHL VARIABLE AND WITHOUT REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER
ASSUMES THE RISK THAT INTEREST CREDITED TO GIA ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 4% 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 and contract owners.
Excess interest, if any, will be credited on the GIA Policy Value. PHL
Variable guarantees that, at any time, the GIA Policy Value will not be less
than the amount of premium payments allocated to the GIA, plus interest at the
rate of 4% per year, compounded annually, plus any additional interest which PHL
Variable may, in its discretion, credit to the GIA, less the sum of all annual
administrative or surrender charges, any applicable premium taxes, and less any
amounts surrendered or loaned. If the policyowner surrenders the policy, the
amount available from the GIA will be reduced by any applicable surrender charge
and annual administration charge. See "Deductions and Charges."
IN GENERAL, YOU CAN MAKE ONLY 1 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
POLICY VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE SYSTEMATIC
TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT OF THE GIA
OVER A MINIMUM 18-MONTH PERIOD. ALSO, THE TOTAL POLICY VALUE ALLOCATED TO THE
GIA MAY BE TRANSFERRED OUT OF THE GIA TO 1 OR MORE OF THE SUBACCOUNTS OF THE VUL
ACCOUNT OVER A CONSECUTIVE 4-YEAR PERIOD ACCORDING TO THE FOLLOWING ANNUALLY
RENEWABLE SCHEDULE:
YEAR 1: 25% YEAR 2: 33%
YEAR 3: 50% YEAR 4: 100%
51
APPENDIX B
ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES ("ACCOUNT VALUES") AND CASH
SURRENDER VALUES
- --------------------------------------------------------------------------------
The tables on the following pages illustrate how a Policy's death benefits,
account values and Cash Surrender Value could vary over time assuming constant
hypothetical gross (after tax) annual investment returns of 0%, 6% and 12%. The
Policy benefits will differ from those shown in the tables if the annual
investment returns are not absolutely constant. That is, the figures will be
different if the returns averaged 0%, 6% or 12% over a period of years but went
above or below those figures in individual Policy Years. The Policy benefits
also will differ, depending on your premium allocations to each subaccount of
the VUL Account, if the overall actual rates of return averaged 0%, 6% or 12%,
but went above or below those figures for the individual subaccounts. The tables
are for standard risk males and females who have never smoked. In states where
cost of insurance rates are not based on the Insured's sex, the tables
designated "male" apply to all standard risk insureds who have never smoked.
Account values and Cash Surrender Values may be lower for smokers or former
smokers or for risk classes involving higher mortality risk. Planned premium
payments are assumed to be paid at the beginning of each Policy Year. The
difference between the Policy Value and the Cash Surrender Value in the first 10
years is the surrender charge. Tables are included for death benefit Option 1
and Option 2. The death benefit, account value and Cash Surrender Value amounts
reflect the following current charges:
1. Issue charge of $150.
2. Monthly administrative charge of $5 per month ($10 per month guaranteed
maximum).
3. Premium tax charge of 2.25%.
4. A federal tax charge of 1.5%.
5. Cost of insurance charge. The tables illustrate cost of insurance at both the
current rates and at the maximum rates guaranteed in the Policies. (See
"Charges and Deductions--Cost of Insurance.")
6. Mortality and expense risk charge, which is a daily charge equivalent to .80%
on an annual basis for the first 15 Policy Years, then .25% on an annual
basis after the 15th Policy Year), against the VUL Account for mortality and
expense risks.
(See "Charges and Deductions--Mortality and Expense Risk Charge.")
These illustrations also assume an average investment advisory fee of .75%
on an annual basis, of the average daily net asset value of each of the Series
of the Funds. These illustrations also assume other ongoing average Fund
expenses of .22%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Advisor or Phoenix. Management may decide
to limit the amount of expense reimbursement in the future. If expense
reimbursement had not been in place for the fiscal year ended December 31, 1999,
average total operating expenses for the Series would have been approximately
.1.44% of the average net assets. See "Charges and Deductions--Investment
Management Charge."
Taking into account the mortality and expense risk charge and the investment
advisory fees and expenses, the gross annual investment return rates of 0%, 6%
and 12% on the Funds' assets are equivalent to net annual investment return
rates of approximately -1.76%, 4.19% and 10.15%, respectively and -1.22%, 4.69%
and 10.75%, respectively, after the 15th Policy Year. For individual
illustrations, interest rates ranging between 0% and 12% may be selected in
place of the 6% rate.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. (See "Charges and
Deductions--Other Taxes.")
The second column of each table shows the amount that would accumulate if an
amount equal to the premiums paid were invested to earn interest, after taxes,
at 5% compounded annually. These tables show that if a Policy is returned in its
very early years for payment of its Cash Surrender Value, that Cash Surrender
Value may be low in comparison to the amount of the premiums accumulated with
interest. Thus, the cost of owning a Policy for a relatively short time may be
high.
On request, we will furnish the Policyowner with a comparable illustration
based on the age and sex of the proposed insured person(s), standard risk
assumptions and the initial face amount and planned premium chosen.
52
PHL VARIABLE INSURANCE COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 575 0 100,000 620 0 100,000 666 0 100,000
2 1,000 2,153 1,281 396 100,000 1,413 528 100,000 1,550 665 100,000
3 1,000 3,310 1,966 659 100,000 2,230 923 100,000 2,515 1,208 100,000
4 1,000 4,526 2,629 1,322 100,000 3,070 1,763 100,000 3,568 2,261 100,000
5 1,000 5,802 3,268 1,961 100,000 3,935 2,628 100,000 4,715 3,408 100,000
6 1,000 7,142 3,884 2,722 100,000 4,823 3,661 100,000 5,968 4,806 100,000
7 1,000 8,549 4,473 3,456 100,000 5,733 4,716 100,000 7,333 6,316 100,000
8 1,000 10,027 5,037 4,164 100,000 6,667 5,795 100,000 8,824 7,951 100,000
9 1,000 11,578 5,573 5,137 100,000 7,624 7,188 100,000 10,450 10,015 100,000
10 1,000 13,207 6,082 6,082 100,000 8,604 8,604 100,000 12,228 12,228 100,000
11 1,000 14,917 6,568 6,568 100,000 9,613 9,613 100,000 14,176 14,176 100,000
12 1,000 16,713 7,032 7,032 100,000 10,652 10,652 100,000 16,314 16,314 100,000
13 1,000 18,599 7,473 7,473 100,000 11,722 11,722 100,000 18,662 18,662 100,000
14 1,000 20,579 7,891 7,891 100,000 12,825 12,825 100,000 21,242 21,242 100,000
15 1,000 22,657 8,286 8,286 100,000 13,962 13,962 100,000 24,078 24,078 100,000
16 1,000 24,840 8,707 8,707 100,000 15,218 15,218 100,000 27,350 27,350 100,000
17 1,000 27,132 9,103 9,103 100,000 16,519 16,519 100,000 30,972 30,972 100,000
18 1,000 29,539 9,471 9,471 100,000 17,866 17,866 100,000 34,981 34,981 100,000
19 1,000 32,066 9,811 9,811 100,000 19,259 19,259 100,000 39,423 39,423 100,000
20 1,000 34,719 10,119 10,119 100,000 20,699 20,699 100,000 44,346 44,346 100,000
@ 65 1,000 69,761 10,539 10,539 100,000 37,717 37,717 100,000 135,252 135,252 165,008
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
34.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.22% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
53
PHL VARIABLE INSURANCE COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 512 0 100,000 555 0 100,000 599 0 100,000
2 1,000 2,153 1,157 271 100,000 1,280 395 100,000 1,409 524 100,000
3 1,000 3,310 1,780 473 100,000 2,026 719 100,000 2,292 985 100,000
4 1,000 4,526 2,383 1,076 100,000 2,792 1,485 100,000 3,255 1,948 100,000
5 1,000 5,802 2,962 1,655 100,000 3,579 2,272 100,000 4,302 2,995 100,000
6 1,000 7,142 3,519 2,356 100,000 4,385 3,223 100,000 5,444 4,282 100,000
7 1,000 8,549 4,049 3,032 100,000 5,210 4,193 100,000 6,687 5,669 100,000
8 1,000 10,027 4,555 3,682 100,000 6,054 5,182 100,000 8,041 7,169 100,000
9 1,000 11,578 5,033 4,598 100,000 6,916 6,481 100,000 9,517 9,082 100,000
10 1,000 13,207 5,485 5,485 100,000 7,797 7,797 100,000 11,128 11,128 100,000
11 1,000 14,917 5,906 5,906 100,000 8,694 8,694 100,000 12,884 12,884 100,000
12 1,000 16,713 6,297 6,297 100,000 9,607 9,607 100,000 14,800 14,800 100,000
13 1,000 18,599 6,655 6,655 100,000 10,535 10,535 100,000 16,893 16,893 100,000
14 1,000 20,579 6,980 6,980 100,000 11,478 11,478 100,000 19,180 19,180 100,000
15 1,000 22,657 7,269 7,269 100,000 12,433 12,433 100,000 21,681 21,681 100,000
16 1,000 24,840 7,563 7,563 100,000 13,475 13,475 100,000 24,554 24,554 100,000
17 1,000 27,132 7,814 7,814 100,000 14,533 14,533 100,000 27,718 27,718 100,000
18 1,000 29,539 8,017 8,017 100,000 15,604 15,604 100,000 31,203 31,203 100,000
19 1,000 32,066 8,167 8,167 100,000 16,683 16,683 100,000 35,045 35,045 100,000
20 1,000 34,719 8,256 8,256 100,000 17,765 17,765 100,000 39,284 39,284 100,000
@ 65 1,000 69,761 4,071 4,071 100,000 27,518 27,518 100,000 117,325 117,325 143,137
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
34.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.22% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
54
PHL VARIABLE INSURANCE COMPANY PAGE 1 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 602 0 100,000 648 0 100,000 694 0 100,000
2 1,000 2,153 1,334 480 100,000 1,469 615 100,000 1,610 756 100,000
3 1,000 3,310 2,045 849 100,000 2,315 1,120 100,000 2,609 1,413 100,000
4 1,000 4,526 2,733 1,538 100,000 3,187 1,992 100,000 3,699 2,504 100,000
5 1,000 5,802 3,398 2,203 100,000 4,085 2,889 100,000 4,889 3,694 100,000
6 1,000 7,142 4,039 2,975 100,000 5,008 3,944 100,000 6,189 5,125 100,000
7 1,000 8,549 4,654 3,721 100,000 5,955 5,022 100,000 7,606 6,673 100,000
8 1,000 10,027 5,243 4,442 100,000 6,928 6,127 100,000 9,154 8,353 100,000
9 1,000 11,578 5,808 5,408 100,000 7,928 7,528 100,000 10,847 10,447 100,000
10 1,000 13,207 6,348 6,348 100,000 8,957 8,957 100,000 12,701 12,701 100,000
11 1,000 14,917 6,870 6,870 100,000 10,021 10,021 100,000 14,738 14,738 100,000
12 1,000 16,713 7,375 7,375 100,000 11,124 11,124 100,000 16,979 16,979 100,000
13 1,000 18,599 7,862 7,862 100,000 12,266 12,266 100,000 19,444 19,444 100,000
14 1,000 20,579 8,330 8,330 100,000 13,448 13,448 100,000 22,158 22,158 100,000
15 1,000 22,657 8,781 8,781 100,000 14,673 14,673 100,000 25,146 25,146 100,000
16 1,000 24,840 9,264 9,264 100,000 16,031 16,031 100,000 28,595 28,595 100,000
17 1,000 27,132 9,730 9,730 100,000 17,446 17,446 100,000 32,417 32,417 100,000
18 1,000 29,539 10,179 10,179 100,000 18,920 18,920 100,000 36,655 36,655 100,000
19 1,000 32,066 10,607 10,607 100,000 20,455 20,455 100,000 41,354 41,354 100,000
20 1,000 34,719 11,016 11,016 100,000 22,056 22,056 100,000 46,567 46,567 100,000
@ 65 1,000 69,761 13,794 13,794 100,000 42,416 42,416 100,000 142,897 142,897 174,335
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
39.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.22% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
55
PHL VARIABLE INSURANCE COMPANY PAGE 2 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 534 0 100,000 578 0 100,000 622 0 100,000
2 1,000 2,153 1,199 345 100,000 1,325 471 100,000 1,457 603 100,000
3 1,000 3,310 1,842 647 100,000 2,093 898 100,000 2,366 1,171 100,000
4 1,000 4,526 2,464 1,268 100,000 2,884 1,688 100,000 3,357 2,162 100,000
5 1,000 5,802 3,062 1,867 100,000 3,695 2,500 100,000 4,437 3,242 100,000
6 1,000 7,142 3,637 2,573 100,000 4,527 3,463 100,000 5,614 4,550 100,000
7 1,000 8,549 4,186 3,253 100,000 5,378 4,446 100,000 6,895 5,962 100,000
8 1,000 10,027 4,709 3,908 100,000 6,250 5,449 100,000 8,291 7,490 100,000
9 1,000 11,578 5,208 4,808 100,000 7,144 6,744 100,000 9,816 9,417 100,000
10 1,000 13,207 5,682 5,682 100,000 8,060 8,060 100,000 11,483 11,483 100,000
11 1,000 14,917 6,131 6,131 100,000 9,000 9,000 100,000 13,307 13,307 100,000
12 1,000 16,713 6,556 6,556 100,000 9,964 9,964 100,000 15,304 15,304 100,000
13 1,000 18,599 6,954 6,954 100,000 10,952 10,952 100,000 17,492 17,492 100,000
14 1,000 20,579 7,324 7,324 100,000 11,962 11,962 100,000 19,889 19,889 100,000
15 1,000 22,657 7,667 7,667 100,000 12,997 12,997 100,000 22,518 22,518 100,000
16 1,000 24,840 8,023 8,023 100,000 14,132 14,132 100,000 25,543 25,543 100,000
17 1,000 27,132 8,349 8,349 100,000 15,300 15,300 100,000 28,885 28,885 100,000
18 1,000 29,539 8,640 8,640 100,000 16,499 16,499 100,000 32,577 32,577 100,000
19 1,000 32,066 8,893 8,893 100,000 17,726 17,726 100,000 36,657 36,657 100,000
20 1,000 34,719 9,105 9,105 100,000 18,984 18,984 100,000 41,173 41,173 100,000
@ 65 1,000 69,761 8,564 8,564 100,000 33,436 33,436 100,000 124,835 124,835 152,299
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
39.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.25% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
56
PHL VARIABLE INSURANCE COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 574 0 100,574 619 0 100,619 664 0 100,665
2 1,000 2,153 1,278 393 101,278 1,409 524 101,409 1,546 660 101,546
3 1,000 3,310 1,959 652 101,959 2,221 914 102,222 2,505 1,198 102,506
4 1,000 4,526 2,617 1,310 102,617 3,055 1,748 103,056 3,550 2,243 103,550
5 1,000 5,802 3,249 1,942 103,249 3,910 2,603 103,911 4,686 3,379 104,686
6 1,000 7,142 3,856 2,694 103,856 4,787 3,624 104,787 5,921 4,759 105,922
7 1,000 8,549 4,434 3,417 104,435 5,681 4,664 105,682 7,264 6,247 107,264
8 1,000 10,027 4,985 4,113 104,986 6,596 5,723 106,596 8,724 7,852 108,725
9 1,000 11,578 5,506 5,071 105,507 7,527 7,092 107,527 10,311 9,875 110,311
10 1,000 13,207 5,998 5,998 105,998 8,477 8,477 108,477 12,037 12,037 112,037
11 1,000 14,917 6,464 6,464 106,464 9,449 9,449 109,450 13,920 13,920 113,921
12 1,000 16,713 6,905 6,905 106,906 10,445 10,445 110,446 15,977 15,977 115,978
13 1,000 18,599 7,322 7,322 107,322 11,465 11,465 111,466 18,225 18,225 118,225
14 1,000 20,579 7,713 7,713 107,714 12,509 12,509 112,510 20,681 20,681 120,682
15 1,000 22,657 8,078 8,078 108,079 13,578 13,578 113,578 23,366 23,366 123,366
16 1,000 24,840 8,465 8,465 108,465 14,753 14,753 114,753 26,449 26,449 126,450
17 1,000 27,132 8,823 8,823 108,824 15,959 15,959 115,960 29,839 29,839 129,839
18 1,000 29,539 9,151 9,151 109,151 17,196 17,196 117,197 33,565 33,565 133,565
19 1,000 32,066 9,446 9,446 109,446 18,462 18,462 118,463 37,661 37,661 137,661
20 1,000 34,719 9,704 9,704 109,705 19,755 19,755 119,756 42,163 42,163 142,163
@ 65 1,000 69,761 9,294 9,294 109,295 33,214 33,214 133,214 120,450 120,450 220,450
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
33.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.22% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
57
PHL VARIABLE INSURANCE COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 511 0 100,511 554 0 100,554 597 0 100,598
2 1,000 2,153 1,153 268 101,154 1,276 391 101,277 1,405 520 101,406
3 1,000 3,310 1,773 466 101,774 2,018 711 102,018 2,283 976 102,284
4 1,000 4,526 2,371 1,064 102,371 2,778 1,471 102,779 3,238 1,931 103,238
5 1,000 5,802 2,944 1,637 102,944 3,556 2,249 103,556 4,274 2,967 104,275
6 1,000 7,142 3,492 2,330 103,493 4,351 3,189 104,352 5,400 4,238 105,401
7 1,000 8,549 4,013 2,996 104,013 5,161 4,144 105,162 6,621 5,604 106,622
8 1,000 10,027 4,507 3,634 104,507 5,987 5,114 105,987 7,948 7,075 107,948
9 1,000 11,578 4,971 4,535 104,971 6,826 6,390 106,826 9,386 8,951 109,387
10 1,000 13,207 5,406 5,406 105,407 7,678 7,678 107,679 10,949 10,949 110,949
11 1,000 14,917 5,809 5,809 105,809 8,541 8,541 108,541 12,643 12,643 112,644
12 1,000 16,713 6,178 6,178 106,178 9,412 9,412 109,413 14,481 14,481 114,482
13 1,000 18,599 6,512 6,512 106,512 10,290 10,290 110,291 16,475 16,475 116,476
14 1,000 20,579 6,809 6,809 106,809 11,173 11,173 111,174 18,639 18,639 118,639
15 1,000 22,657 7,066 7,066 107,067 12,058 12,058 112,058 20,985 20,985 120,985
16 1,000 24,840 7,324 7,324 107,325 13,015 13,015 113,015 23,662 23,662 123,662
17 1,000 27,132 7,535 7,535 107,536 13,972 13,972 113,973 26,580 26,580 126,580
18 1,000 29,539 7,693 7,693 107,694 14,923 14,923 114,923 29,758 29,758 129,759
19 1,000 32,066 7,793 7,793 107,793 15,861 15,861 115,861 33,218 33,218 133,218
20 1,000 34,719 7,825 7,825 107,826 16,775 16,775 116,776 36,980 36,980 136,980
@ 65 1,000 69,761 2,834 2,834 102,834 22,265 22,265 122,265 97,952 97,952 197,952
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
33.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.22% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
58
PHL VARIABLE INSURANCE COMPANY PAGE 1 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 601 0 100,601 647 0 100,647 693 0 100,694
2 1,000 2,153 1,331 477 101,332 1,465 612 101,466 1,606 752 101,606
3 1,000 3,310 2,038 843 102,039 2,308 1,113 102,308 2,600 1,405 102,601
4 1,000 4,526 2,722 1,527 102,722 3,174 1,979 103,175 3,683 2,488 103,684
5 1,000 5,802 3,381 2,185 103,381 4,063 2,868 104,064 4,863 3,668 104,863
6 1,000 7,142 4,014 2,950 104,014 4,975 3,911 104,976 6,147 5,083 106,148
7 1,000 8,549 4,619 3,686 104,619 5,908 4,976 105,909 7,544 6,611 107,544
8 1,000 10,027 5,197 4,396 105,197 6,863 6,062 106,864 9,064 8,263 109,065
9 1,000 11,578 5,747 5,348 105,748 7,841 7,441 107,841 10,721 10,322 110,722
10 1,000 13,207 6,272 6,272 106,272 8,842 8,842 108,842 12,529 12,529 112,529
11 1,000 14,917 6,776 6,776 106,777 9,874 9,874 109,874 14,508 14,508 114,508
12 1,000 16,713 7,261 7,261 107,262 10,938 10,938 110,939 16,676 16,676 116,677
13 1,000 18,599 7,726 7,726 107,726 12,035 12,035 112,036 19,053 19,053 119,053
14 1,000 20,579 8,170 8,170 108,171 13,166 13,166 113,166 21,657 21,657 121,658
15 1,000 22,657 8,595 8,595 108,596 14,331 14,331 114,332 24,514 24,514 124,514
16 1,000 24,840 9,049 9,049 109,050 15,619 15,619 115,619 27,799 27,799 127,799
17 1,000 27,132 9,484 9,484 109,484 16,952 16,952 116,953 31,422 31,422 131,422
18 1,000 29,539 9,898 9,898 109,898 18,334 18,334 118,334 35,418 35,418 135,419
19 1,000 32,066 10,288 10,288 110,288 19,762 19,762 119,763 39,825 39,825 139,825
20 1,000 34,719 10,656 10,656 110,657 21,241 21,241 121,241 44,687 44,687 144,688
@ 65 1,000 69,761 12,801 12,801 112,801 38,968 38,968 138,968 131,817 131,817 231,817
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
38.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.22% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
59
PHL VARIABLE INSURANCE COMPANY PAGE 2 OF 2
FEMALE 35 NEVERSMOKE FACE AMOUNT:$100,000
INITIAL ANNUAL PREMIUM:$1,000
THE FLEX EDGE SUCCESS--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1 1,000 1,050 533 0 100,533 576 0 100,577 621 0 100,621
2 1,000 2,153 1,195 341 101,196 1,321 467 101,322 1,453 599 101,453
3 1,000 3,310 1,836 640 101,836 2,086 891 102,087 2,358 1,162 102,358
4 1,000 4,526 2,453 1,258 102,453 2,871 1,675 102,871 3,342 2,147 103,342
5 1,000 5,802 3,045 1,850 103,046 3,674 2,479 103,674 4,411 3,216 104,412
6 1,000 7,142 3,612 2,549 103,613 4,495 3,432 104,496 5,573 4,509 105,574
7 1,000 8,549 4,152 3,219 104,152 5,333 4,401 105,334 6,834 5,902 106,835
8 1,000 10,027 4,664 3,863 104,664 6,187 5,386 106,188 8,204 7,403 108,205
9 1,000 11,578 5,149 4,749 105,150 7,059 6,659 107,060 9,694 9,294 109,694
10 1,000 13,207 5,608 5,608 105,609 7,949 7,949 107,950 11,316 11,316 111,317
11 1,000 14,917 6,040 6,040 106,040 8,857 8,857 108,857 13,083 13,083 113,083
12 1,000 16,713 6,445 6,445 106,445 9,782 9,782 109,783 15,008 15,008 115,008
13 1,000 18,599 6,820 6,820 106,821 10,724 10,724 110,724 17,104 17,104 117,105
14 1,000 20,579 7,165 7,165 107,166 11,681 11,681 111,681 19,389 19,389 119,389
15 1,000 22,657 7,480 7,480 107,480 12,652 12,652 112,652 21,878 21,878 121,879
16 1,000 24,840 7,804 7,804 107,805 13,711 13,711 113,711 24,728 24,728 124,728
17 1,000 27,132 8,094 8,094 108,094 14,789 14,789 114,789 27,850 27,850 127,851
18 1,000 29,539 8,345 8,345 108,346 15,882 15,882 115,882 31,272 31,272 131,272
19 1,000 32,066 8,553 8,553 108,553 16,985 16,985 116,986 35,018 35,018 135,019
20 1,000 34,719 8,716 8,716 108,717 18,098 18,098 118,099 39,123 39,123 139,123
@ 65 1,000 69,761 7,426 7,426 107,427 29,177 29,177 129,177 110,039 110,039 210,039
Based on 0% interest rate and guaranteed charges, the Policy will lapse in year
38.
Death benefit, account value and Cash Surrender Value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no Policy
loans or withdrawals, and are calculated at the end of the Policy Year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the Policy
Year. Payment of premiums shown other than in full at the beginning of the
Policy Year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.77%
for 15 years, then 1.22% thereafter (includes mortality and expense risk charge
of 0.8% for 15 years, then 0.25% and average fund operating expenses of .97%
applicable to the investment Subaccounts of the VUL Separate Account).
Hypothetical gross interest rates are presented for illustrative purposes only
to illustrate funds allocated entirely to the investment Subaccounts of the VUL
Separate Account and do not in any way represent actual results or suggest that
such results will be achieved in the future. Actual values will differ from
those shown whenever actual investment results differ from hypothetical gross
interest rates illustrated. A GIA providing interest at a minimum guaranteed
rate of 4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
60
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
RULE 484 UNDERTAKING
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 V of the Bylaws of the Company provides that: "Each person who is or
was a director or officer of the Company (including the heirs, executors,
administrators or estate of such person) shall be indemnified by the Company as
of right to full extent permitted or authorized by the laws of the State of
Connecticut against any liability, cost or expense asserted against him and
incurred by him by reason of his capacity as a director or officer, or arising
out of his status as a director or officer."
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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) UNDER THE INVESTMENT
COMPANY ACT OF 1940.
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 Policies, 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.
II-1
CONTENTS OF REGISTRATION STATEMENT
This Form S-6 Registration Statement comprises the following papers and
documents:
The facing sheet.
The Prospectus describing Policy Form V605 ("Flex Edge Success"), consisting
of 60 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A) under the Investment Company
Act of 1940.
The signature page.
The powers of attorney.
Written consents of the following persons:
(a) Edwin L. Kerr, Esq. *
(b) PricewaterhouseCoopers LLP*
(c) Paul M. Fischer, FSA, CLU, ChFC*
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Depositor establishing the
VUL Account filed via Edgar with Initial Registration Statement on
Form S-6 on October 16, 1998 and incorporated herein by reference.
(2) Not Applicable.
(3) Distribution of Policies:
(a) Master Service and Distribution Compliance Agreement between
Depositor and Phoenix Equity Planning Corporation, dated
December 31, 1996, filed via Edgar with Post-Effective
Amendment No. 3 on Form N-4 (File No. 33-37376) on April 30,
1997 and incorporated herein by reference.
(b) Form of Broker Dealer Supervisory and Service Agreement
between Phoenix Equity Planning Corporation and Independent
Brokers with respect to the sale of Policies, filed via Edgar
with Pre-effective Amendment No. 2 for the Phoenix Life and
Annuity Variable Universal Life Account, Form S-6 (File No.
33-12989) on November 4, 1997 and incorporated herein by
reference.
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen Policy.
Flexible Premium Variable Universal Life Insurance Policy Form
Number V605 of Depositor, filed via Edgar with Initial
Registration Statement on Form S-6 on October 16, 1998 and
incorporated herein by reference.
(6) (a) Charter of PHL Variable Insurance Company, filed via Edgar
with the PHL Variable Accumulation Account, Form N-4
Registration Statement (File No. 33-87376) on December 14,
1994 and incorporated herein by reference.
(b) By-Laws of PHL Variable Insurance Company filed via Edgar with
the PHL Variable Accumulation Account, Form N-4 Registration
Statement (File No. 33-87376) on December 14, 1994, and
incorporated herein by reference.
(7) Not Applicable.
(8) (a) Participation Agreement(s) between PHL Variable Insurance
Company and Wanger Advisors Trust, filed via Edgar with
Initial Registration Statement on Form S-6 on October 16, 1998
and incorporated herein by reference.
II-2
(b) Participation Agreement between PHL Variable Insurance Company
and Franklin Templeton Distributors, Inc., filed via Edgar
with Initial Registration Statement on Form S-6 on October 16,
1998 and incorporated herein by reference.
(9) Not Applicable.
(10) Form of application for Flex Edge Success, filed via Edgar with
Initial Registration Statement on Form S-6 on October 16, 1998 and
incorporated herein by reference.
(11) Memorandum describing transfer and redemption procedures and
method of computing adjustments in payments and cash values upon
conversion to fixed benefit policies, filed via Edgar with Initial
Registration Statement on Form S-6 on October 16, 1998 and
incorporated herein by reference.
2.Opinion of Edwin L. Kerr, Esq., Counsel of Depositor, as to the legality of
the securities being registered, see Exhibit 7.
3.Not Applicable. No financial statement will be omitted from the Prospectus
pursuant to Instruction 1(b) or (c) of Part I.
4.Not Applicable.
5.Not Applicable.
6.Consent of PricewaterhouseCoopers LLP.*
7.Opinion and Consent of Edwin L. Kerr, Esq.*
8.Consent of Paul M. Fischer, FSA, CLU, ChFC.*
--------------
* Filed herewith.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
PHLVIC Variable Universal Life Account has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Hartford, State of Connecticut on the 12th day of
May, 2000.
PHLVIC VARIABLE UNIVERSAL LIFE ACCOUNT
--------------------------------------
(Registrant)
By: PHL VARIABLE INSURANCE COMPANY
------------------------------
(Depositor)
By: /s/ Simon Y. Tan
--------------------------------------
*Simon Y.Tan, President
ATTEST: /s/ Emily J. Poriss
--------------------------------------
Emily J. Poriss, Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 12th day of May, 2000.
SIGNATURE TITLE
--------- -----
Director
- ----------------------------------------
Carl T. Chadburn
Director and Chairman of the Board
- ----------------------------------------
*Robert W. Fiondella
Director, Senior Vice President
- ----------------------------------------
*Joseph E. Kelleher
Director, Executive Vice President
- ----------------------------------------
*Philip R. McLoughlin
Director, Executive Vice
- ---------------------------------------- President, Chief Financial Officer
*David W. Searfoss
Director and President
- ----------------------------------------
*Simon Y. Tan
Director, Executive Vice President
- ----------------------------------------
*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(c)