As filed with the Securities and Exchange Commission on November 4, 1997
Registration No. 333-12989
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Pre-Effective Amendment No. 2
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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PHOENIX LIFE AND ANNUITY VARIABLE UNIVERSAL LIFE ACCOUNT
(EXACT NAME OF TRUST)
PHOENIX LIFE AND ANNUITY COMPANY
(NAME OF DEPOSITOR)
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ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06115
(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 06115
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
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COPIES TO:
MICHAEL BERENSON, ESQ. EDWIN L. KERR, ESQ.
JORDEN BURT 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 06115
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Title and amount of securities being registered:
Flexible premium variable life insurance policies.
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration
Statement.
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Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has chosen to register an indefinite amount of securities being offered.
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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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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
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1 The VUL Account
2 Phoenix Life and Annuity Company
3 Not Applicable
4 Sales of Policies
5 The VUL Account
6 The VUL Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 The Policy
11 Investments of the VUL Account
12 Investments of the VUL Account
13 Charges and Deductions; Investments of the VUL Account
14 Premium Payment; Allocation of Issue Premium; Right to
Cancel Period
15 Allocation of Issue Premium; Transfer of Policy Value
16 Investments of the VUL Account
17 Surrenders
18 Allocation of Issue Premium; Transfer of Policy Value;
Reinvestment and Redemption
19 Voting Rights; Reports
20 Not Applicable
21 Policy Loans
22 Not Applicable
23 Safekeeping of the VUL Account's Assets
24 Not Applicable
25 Phoenix Life and Annuity Company
26 Charges and Other Deductions; Investments of the VUL Account
27 Phoenix Life and Annuity Company
28 Phoenix Life and Annuity Company; The Directors and
Executive Officers of Phoenix Life and Annuity Company
29 Not Applicable
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Phoenix Life and Annuity Company
36 Not Applicable
37 Not Applicable
38 Sales of Policies
39 Sales of Policies
40 Not Applicable
41 Sales of Policies
42 Not Applicable
43 Not Applicable
44 Determination of Subaccount Values
45 Not Applicable
46 Determination of Subaccount Values
47 Allocation of Issue Premium; Determination of Subaccount
Values
48 Not Applicable
49 Not Applicable
50 Not Applicable
N-8B-2 ITEM CAPTION IN PROSPECTUS
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51 Phoenix Life and Annuity Company; The Policy; Charges and
Deductions
52 Investments of the VUL Account
53 Federal Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Not Applicable
HOME OFFICE: PHOENIX LIFE AND ANNUITY COMPANY PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, CT 06115 PO Box 8027
Boston, MA 02266-8027
VARIABLE LIFE INSURANCE POLICY
PROSPECTUS
November 10, 1997
This Prospectus describes Flexible Premium Variable Life Insurance Policies
(the "Policy" or "Policies"), offered by Phoenix Life and Annuity Company
("Phoenix"). An applicant chooses the amount of Issue Premium desired and it is
then shown in the Policy. Generally, the minimum Issue Premium Phoenix will
accept is 1/6 of the Planned Annual Premium. Phoenix may, in some cases, accept
less than that amount. The amount and payment frequency of Planned Annual
Premiums are as shown in the Policy. If too much is paid in premium in the early
Policy Years, the Policy could become a "modified endowment contract." This
would cause loans and other amounts received under the Policy to be subject to
tax and/or penalties. Currently, Phoenix notifies a Policyowner when a Policy
becomes a modified endowment contract.
Premium payments are allocated to one or more of the Subaccounts of the
Phoenix Life and Annuity Variable Universal Life Account (the "VUL Account") or
to the Guaranteed Interest Account ("GIA"), as specified in the applicant's
application for insurance. The VUL Account is divided into Subaccounts, each of
which invests in a corresponding series of The Phoenix Edge Series Fund (the
"Fund"). For certain Policyowners, the Issue Premium is first allocated to the
Money Market Subaccount before being allocated according to the instructions in
the application.
There is no guaranteed minimum Policy Value except for that portion of
Policy Value invested in the GIA, which has a 4% minimum interest rate
guarantee. The Policy Value not invested in the GIA will vary to reflect the
investment experience of the Subaccounts of the VUL Account to which premiums
have been allocated. A Policyowner bears the investment risk for all amounts so
allocated. The Policy will remain in effect so long as the Policy Value or Cash
Surrender Value is sufficient to pay certain monthly charges imposed in
connection with the Policy.
The death benefit under the Policy equals the Policy's face amount on the
date of the Insured's death or, if greater, the Policy Value on the date of
death increased by the applicable percentage set forth in the Policy. Other
death benefit options also are available.
A Policyowner may cancel the Policy within 10 days (or longer in some
states), after the Policyowner receives it or 10 days after Phoenix mails or
delivers a written notice of withdrawal right to the Policyowner, or within 45
days of completing the application, whichever is latest.
It may not be advantageous to purchase a Policy as a replacement for your
current life insurance or to supplement an existing life insurance policy.
This Prospectus is valid only if accompanied by or preceded by current
prospectuses for the Funds. This Prospectus and the prospectuses for the Funds
should be read and retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
TABLE OF CONTENTS
Heading Page
- ------------------------------------------------------------
VARIABLE LIFE INSURANCE POLICY ........................ 1
TABLE OF CONTENTS ..................................... 2
SPECIAL TERMS ........................................ 3
SUMMARY ............................................... 4
PHOENIX AND THE VUL ACCOUNT............................ 5
Phoenix ............................................ 5
The VUL Account .................................... 5
The GIA ............................................ 6
THE POLICY ............................................ 6
Introduction ....................................... 6
Eligible Purchasers ................................ 6
Premium Payment .................................... 6
Allocation of Issue Premium ........................ 7
Right to Cancel Period ............................. 7
Temporary Insurance Coverage ....................... 7
Transfer of Policy Value ........................... 7
Determination of Subaccount Values ................. 8
Death Benefit ...................................... 8
Surrenders ......................................... 9
Policy Loans ....................................... 10
Lapse .............................................. 10
Payment of Premiums During Period of Disability .... 11
Additional Insurance Options ....................... 11
Additional Rider Benefits .......................... 11
INVESTMENTS OF THE VUL ACCOUNT ........................ 12
Participating Mutual Funds......................... 12
Investment Advisers to The Phoenix Edge Series Fund. 13
Services of the Adviser............................. 13
Reinvestment and Redemption ........................ 13
Substitution of Investments ........................ 13
CHARGES AND DEDUCTIONS ............................... 14
Monthly Deduction ............................... 14
Premium Taxes ................................... 14
Federal Tax Charge............................... 14
Mortality and Expense Risk Charge ............... 14
Investment Management Charge .................... 15
Other Charges ................................... 15
GENERAL PROVISIONS .................................... 16
Postponement of Payments ........................... 16
Payment by Check ................................... 16
The Contract ....................................... 16
Suicide ............................................ 16
Incontestability ................................... 16
Change of Owner or Beneficiary ..................... 16
Assignment ......................................... 16
Misstatement of Age or Sex ......................... 16
PAYMENT OF PROCEEDS ................................... 17
Surrender and Death Benefit Proceeds ............... 17
Payment Options .................................... 17
FEDERAL TAX CONSIDERATIONS ............................ 17
Introduction ....................................... 17
Phoenix's Tax Status ............................... 18
Policy Benefits .................................... 18
Business-Owned Policies............................. 18
Modified Endowment Contracts ....................... 19
Limitations on Unreasonable Mortality
and Expense Charges ............................. 19
Qualified Plans .................................... 19
Diversification Standards .......................... 19
Change of Ownership or Insured or Assignment ....... 20
Other Taxes ........................................ 20
VOTING RIGHTS ......................................... 20
The Fund ........................................... 20
Phoenix............................................. 20
THE DIRECTORS AND EXECUTIVE OFFICERS OF
PHOENIX ............................................... 21
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............... 21
SALES OF POLICIES ..................................... 21
STATE REGULATION ...................................... 21
REPORTS ............................................... 21
LEGAL PROCEEDINGS ..................................... 22
LEGAL MATTERS ......................................... 22
REGISTRATION STATEMENT ................................ 22
FINANCIAL STATEMENTS .................................. 22
APPENDIX A ............................................ 56
APPENDIX B ............................................ 57
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.
2
SPECIAL TERMS
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As used in this Prospectus, the following terms have the indicated meanings:
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.
FUND: The Phoenix Edge Series Fund.
GENERAL ACCOUNT: The general asset account of Phoenix.
GIA (GUARANTEED INTEREST ACCOUNT): An allocation option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest also
may be credited, in the sole discretion of Phoenix.
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 the issue of 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.
OWNER (POLICYOWNER, YOU, YOUR): The person(s) who purchase(s) a Policy.
PAYMENT DATE: The Valuation Date on which a premium payment or loan repayment is
received at Phoenix, unless it is received after the close of the New York Stock
Exchange ("NYSE"), in which case it will be the next Valuation Date.
PHOENIX: Phoenix Life and Annuity 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
required for the face amount of insurance selected and must 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 Policy Years and Policy Anniversaries are measured.
POLICY MONTH: The period from one Monthly Calculation Day up to but not
including the next Monthly Calculation Day.
POLICYOWNER (OWNER): The owner of 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 one-year period from the Policy Date
up to, but not including, the first Policy Anniversary. Each succeeding Policy
Year is the one-year period from the Policy Anniversary up to but not including
the next Policy Anniversary.
PROPORTIONATE (PRO RATA): Amounts allocated to Subaccounts on a proportionate
basis are allocated by increasing (or decreasing) a Policy's share in the value
of the affected Subaccounts so that such shares maintain the same ratio to each
other before and after the allocation.
SERIES: A separate investment portfolio of the Fund.
SUBACCOUNTS: Accounts within the VUL Account to which non-loaned assets under a
Policy are allocated.
UNIT: A standard of measurement used in determining 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.
VALUATION DATE: For any Subaccount, each date on which the net asset value of
the Fund is determined.
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 Phoenix that receives and
processes incoming mail for VULA.
VUL ACCOUNT: Phoenix Life and Annuity Variable Universal Life Account.
VULA: Variable and Universal Life Administration Division of Phoenix.
3
SUMMARY
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1. WHAT IS THE DIFFERENCE BETWEEN THE POLICY AND A
CONVENTIONAL FIXED BENEFIT LIFE INSURANCE POLICY?
Like conventional fixed benefit life insurance, so long as the Policy
remains In Force, the Policy will provide for: (1) the payment of a death
benefit to a Beneficiary upon the Insured's death; (2) the accumulation of cash
value; and (3) surrender rights and Policy loan privileges.
The Policy differs from conventional fixed benefit life insurance by
allowing Policyowners to allocate premiums to one or more Subaccounts of the VUL
Account or to the GIA. Each Subaccount invests exclusively in a designated
portfolio of the Fund. Also, under the Policy, the Policy Value invested in the
VUL Account is not guaranteed and may increase or decrease depending upon the
investment experience of the Subaccounts of the VUL Account. Accordingly, the
Policyowner bears the investment risk of any depreciation in value of the
underlying assets but reaps the benefits of any appreciation in value. See
"Policy Value."
In addition, unlike conventional fixed benefit life insurance, a
Policyowner also has the flexibility to make additional premium payments and to
thereby adjust the Policy Value. However, unlike conventional fixed benefit
life insurance, the Policy does not require a Policyowner to adhere to a fixed
premium payment schedule. Moreover, after the payment of the Issue Premium, the
failure to make additional premium payments will not in itself cause the Policy
to lapse. Conversely, the payment of additional premiums will not guarantee
that the Policy will remain In Force. Generally, lapse will occur when the Cash
Surrender Value is insufficient to pay certain charges deducted on the Monthly
Calculation Day, and a grace period expires without payment of the additional
amount required. See "Lapse."
If a Whole Life Exchange Option Rider is attached to the Policy, the Policy
may be exchanged for a fixed benefit whole life policy. (See "Additional Rider
Benefits.")
2. IS THERE A GUARANTEED ACCOUNT OPTION?
Yes. A Policyowner may elect to have premium payments allocated to the GIA.
Amounts allocated to the GIA earn a fixed rate of interest and Phoenix also may,
in its sole discretion, credit excess interest. (See Appendix A.)
3. WHAT IS THE DEATH BENEFIT UNDER THE POLICY?
The Policy provides for the payment of benefits upon the death of the
Insured. Upon application for a Policy, an applicant designates an Issue
Premium. The Policy indicates the face amount of insurance. The death benefit
will equal the face amount on the date of the Insured's death or, if greater,
the Policy Value on the date of the Insured's death increased by the applicable
percentage set forth in the Policy. If the increased death benefit option is
selected, the death benefit will equal the face amount on the date of the
Insured's death plus the Policy Value or, if greater, the Policy Value on the
date of the Insured's death increased by the applicable percentage set forth in
the Policy. Guaranteed death benefit and living benefits riders also are
available. See "Death Benefit."
4. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy will lapse only when the Cash Surrender Value is
insufficient to pay the monthly deduction (see "Charges and Deductions--Monthly
Deductions"), and a grace period expires without payment of the additional
amount required. In this respect, the Policy differs in two important respects
from a conventional fixed benefit life insurance Policy. First, the failure to
pay additional premiums will not automatically cause the Policy to lapse.
Second, the payment of premiums of any prespecified amount does not guarantee
that the Policy will remain In Force. A rider is available to ensure that
premium payments will continue during a period of disability.
5. WHAT CHARGES ARE THERE IN CONNECTION WITH THE POLICY? MONTHLY DEDUCTION:
A deduction is made each Policy Month from the Policy Value (excluding the
value of the loaned portion of the GIA) to pay the cost of insurance provided
under the Policy; the cost of any rider benefits provided; any unpaid balance of
the Issue Expense Charge; and an administrative charge as shown on the Schedule
Page of the Policy. The administrative charge may vary but in no event will it
exceed $10 per month. Currently, the administrative charge is $5 per month.
OTHER CHARGES: A fee equal to the lesser of $25 or 2% of the partial
surrender amount paid is deducted from the Policy Value for each partial
surrender. A partial surrender charge equal to a pro rata portion of the
applicable surrender charge that would apply to a full surrender, determined by
applying a formula, also is assessed against the VUL Account Subaccounts or the
GIA when a partial surrender is made.
No charges are currently made from the VUL Account or the GIA for federal or
state income taxes. If Phoenix determines that such taxes may be imposed, it may
make deductions from the VUL Account to pay these taxes.
Phoenix charges each Subaccount of the VUL Account the daily equivalent of
.80% for the first 15 years and then 0.25% on an annual basis of the current
value of the Subaccount's net assets for its assumption of certain mortality and
expense risks incurred in connection with the Policy.
Premium amounts also are reduced by any applicable premium tax, a federal
tax charge of 1.50% and, for payments made during a grace period, by the amount
needed to cover any monthly deductions made during the grace period.
In addition, certain charges are deducted from the assets of the Funds. For
investment advisory services, each Series of a Fund pays the adviser a separate
monthly fee calculated on the basis of its average daily net assets during the
year. See "Charges and Deductions--Other Charges."
4
6. IS THERE A RIGHT TO CANCEL PERIOD?
Yes. The Policyowner may cancel the Policy within 10 days after the
Policyowner receives it (or longer in some states), or 10 days after Phoenix
mails or delivers a written notice of withdrawal right to the Policyowner, or
within 45 days of completing the application, whichever is latest.
7. HOW ARE PREMIUMS ALLOCATED?
If the applicant elects the Temporary Money Market Allocation Amendment in
the application, Phoenix will allocate the entire Issue Premium, less applicable
charges, to the Money Market Subaccount of the VUL Account. Phoenix requires
this election for all applicants in certain states and for applicants in certain
states who indicate on their application that they intend the Policy to replace
existing insurance. At the expiration of the Right to Cancel Period for such
Policyowners, the Policy Value will be allocated among the Subaccounts of the
VUL Account or to the GIA in accordance with the Policyowner's allocation
instructions in the application for insurance. All other Policyowners will have
their Issue Premium, less applicable charges, allocated according to the
instructions in the application on the date it is received without first having
the premium placed in the Money Market Subaccount. The Policy Value may be
allocated among the available Subaccounts of the VUL Account, each of which
invests in shares of a designated portfolio of the Fund, or to the GIA.
8. AFTER THE INITIAL ALLOCATION, MAY I CHANGE THE ALLOCATION OF POLICY VALUE?
Yes. A Policyowner may transfer amounts among the Subaccounts of the VUL
Account or the GIA. Only one transfer per Policy Year is permitted from the
unloaned portion of the GIA. The amount of that transfer is limited to the
higher of $1,000 or 25% of the value of the Policy in the unloaned portion of
the GIA. Also, Phoenix reserves the right to require that transfers be made by
written request. Phoenix further reserves the right to permit transfers of less
than $500 only if the entire balance in the Subaccount of the VUL Account or the
GIA is transferred. A systematic transfer program also is available. See
"Transfer of Policy Value."
9. MAY THE POLICY BE SURRENDERED?
Yes. A Policyowner may totally surrender the Policy at any time and receive
the Cash Surrender Value. Subject to certain limitations, the Policyowner also
may partially surrender the Policy at any time prior to the Maturity Date. In
the future, Phoenix may set a minimum partial surrender amount, not to exceed
$500. See "Surrenders--Partial Surrenders." A partial surrender will result in a
decrease in the death benefit under the Policy. See "Death Benefit." If the
Policy is totally or partially surrendered during the first 10 Policy Years, a
Surrender Charge will apply. See "Surrender Charge." In addition, there may be
certain tax consequences as the result of a surrender. For example, a Policy may
be a "modified endowment contract" if the amount of premium paid during the
first seven Policy Years is more than the amount that would have been paid if
the Policy had provided for paid-up benefits after the payment of seven level
annual premiums. Distributions such as loans and full or partial surrenders
under a modified endowment contract may be taxable income to the extent they
exceed the premiums paid. If such income is distributed before the Policyowner
attains age 59 1/2, a 10% penalty tax may be imposed. See "Federal Tax
Considerations."
10. WHAT IS THE POLICY'S LOAN PRIVILEGE?
A Policyowner may obtain Policy loans in an amount up to 90% of the result
of subtracting the remaining Surrender Charge from the Policy Value. The
interest rate on a loan is at an effective annual rate as stated in the Policy,
compounded daily and payable on each Policy Anniversary in arrears. The
requested loan amount is transferred from the VUL Account to the loaned portion
of the GIA and is credited with interest at an effective annual rate as stated
in the Policy. Phoenix reserves the right not to allow loans of less than $500
unless the loans are to pay premiums on another policy issued by Phoenix. See
"The Policy--Policy Loans."
The proceeds of Policy loans may be subject to federal income tax under
certain circumstances. See "Federal Tax Considerations."
11. HOW ARE INSURANCE BENEFITS PAID?
Surrender and death benefits under the Policy may be paid in a lump sum or
under one of the payment options set forth in the Policy. See "Payment Options."
PHOENIX AND THE VUL ACCOUNT
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PHOENIX
Phoenix is an indirect subsidiary of Phoenix Home Life Mutual Insurance
Company. Its executive office is located at One American Row, Hartford,
Connecticut 06115, and its main administrative office is located at 100 Bright
Meadow Boulevard, Enfield, Connecticut 06083-1900. Phoenix is a Connecticut
stock company formed to write life insurance and annuity contracts. Formerly, it
was Savers Life Insurance Company of America, chartered in Missouri in 1981. It
was redomesticated to Connecticut in April, 1997. Phoenix sells insurance
policies through its own field force of full time agents and through brokers.
Its operations are conducted in 22 states.
THE VUL ACCOUNT
The VUL Account is a separate account of Phoenix, formed on July 1, 1996 and
governed under the laws of Connecticut. It is registered as a unit investment
trust under the Investment Company Act of 1940, as amended, and it meets the
definition of a "separate account" under that Act. Such registration does not
involve supervision of the management of the VUL Account or Phoenix by the
Securities and Exchange Commission.
The VUL Account is divided into Subaccounts each of which is available for
allocation of Policy Value. If, in the future, Phoenix determines that marketing
needs and investment conditions warrant, Phoenix may establish additional
Subaccounts which will be made available to existing Policyowners to the extent
and on a basis determined by Phoenix. Each Subaccount will invest solely in
shares of the Funds allocable to one of the available portfolios, each having
the specified investment objective set
5
forth under "Investments of the VUL Account--Participating Mutual Fund."
Phoenix 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 VUL Account is administered and accounted for as part of the general
business of Phoenix, but the income, gains, or losses of the VUL Account are
credited to or charged against the assets held in the VUL Account without regard
to other income, gains, or losses of any other business Phoenix may conduct.
Under Connecticut law, the assets of the VUL Account are not chargeable with
liabilities arising out of any other business Phoenix may conduct. Nevertheless
all obligations arising under the Policy are general corporate obligations of
Phoenix.
THE GIA
The GIA is not part of the VUL Account. It is accounted for as part of the
General Account. Phoenix reserves the right to limit cumulative deposits,
including transfers, to the unloaned portion of the GIA to no more than $250,000
during any one-week period. Phoenix will credit interest daily on the amounts
allocated under the Policy to the GIA. The credited rate will be uniform by
class. The loaned portion of the GIA will be credited interest at an effective
annual fixed rate of 2%. Interest on the unloaned portion of the GIA will be
credited at an effective annual rate of not less than 4%.
Bi-weekly, Phoenix sets the interest rate that will apply to any net premium
or transferred amounts deposited to the unloaned portion of the GIA. That rate
will remain in effect for such deposits for an initial guarantee period of one
full year from the date of deposit. Upon expiration of the initial one-year
guarantee period (and each subsequent one-year guarantee period thereafter), the
rate to be applied to any deposits whose guarantee period has just ended shall
be the same rate as is applied to new deposits allocated to the GIA at the time
that the guarantee period expired. This rate will likewise remain in effect for
a guarantee period of one full year from the date the new rate is applied. For
more complete information concerning the GIA, see Appendix A.
THE POLICY
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INTRODUCTION
The Policy is a flexible premium variable life insurance policy. The Policy
has a death benefit, Cash Surrender Value, and loan privilege such as is
associated with a traditional fixed benefit whole life policy. The Policy
differs from a fixed benefit whole life policy, however, because the Policyowner
specifies into which of several Subaccounts of the VUL Account or the GIA net
premium is to be allocated. 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 Policy Value has
been allocated.
ELIGIBLE PURCHASERS
Any person up to the age of 75 is eligible to be insured under a newly
purchased Policy after providing acceptable evidence of insurability. A person
can purchase a Policy to insure the life of another person provided that the
Policyowner has an insurable interest in the life of the Insured, and the
Insured consents.
PREMIUM PAYMENT
The minimum Issue Premium for a Policy is generally 1/6 of the Planned
Annual Premium. The Issue Premium 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.
All premiums are payable at VPMO, except that the Issue Premium may be paid to
an authorized agent of Phoenix for forwarding to the Underwriting Department of
Phoenix.
Any premium payments will be reduced by the applicable premium tax and by a
federal tax charge of 1.50%. The Issue Premium also will be reduced by the Issue
Expense Charge on a pro rata basis in equal monthly installments over a 12-month
period. Any unpaid balance of the Issue Expense Charge will be paid to Phoenix
upon policy lapse or termination.
Premium payments received during a grace period also will be reduced by the
amount needed to cover any monthly deductions during the grace period. The
remainder 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 as later changed. The allocation schedule for
premium payments may be changed by calling VULA or writing to VPMO. Allocations
to the VUL Account Subaccounts or to the GIA must be expressed in terms of whole
percentages.
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.
A Policyowner may increase or decrease the planned premium amount or payment
frequency at any time by written notice to VPMO. Phoenix reserves 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.
A Policyholder also may 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 Phoenix's receipt of proof that the
Insured is totally disabled and that the disability occurred while the rider was
In Force.
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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. The amount to be taken from each
Subaccount or the GIA will be allocated in the same manner as provided for
monthly deductions unless the Policyowner requests otherwise in writing. The
total premium limit may be exceeded if additional premium is needed to prevent
lapse or if Phoenix determines that additional premium would be permitted by
federal laws or regulations.
A Policyowner may authorize his bank to draw $25 or more from his/her
personal checking account monthly to purchase Units in any available Subaccount.
The amount the Policyowner designates will be automatically invested in the
Subaccount of his/her choice on the date the bank draws on his account.
Policies sold to officers, directors and employees of Phoenix (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
also is available to career agents of Phoenix (and their spouses and children).
ALLOCATION OF ISSUE PREMIUM
Phoenix 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, Phoenix temporarily allocates the entire Issue
Premium paid less applicable charges (along with any other premiums paid during
the Right to Cancel Period) to the Money Market Subaccount of the VUL Account,
and, at the expiration of the Right to Cancel Period, the Policy Value of the
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.
RIGHT TO CANCEL PERIOD
A Policy may be returned by mailing or delivering it to Phoenix within 10
days after the Policyowner receives it (or longer in some states); within 10
days after Phoenix mails or delivers a written notice of withdrawal right to the
Policyowner; or within 45 days after the applicant signs the application for
insurance, whichever occurs latest (the "Right to Cancel Period"). The returned
Policy is treated as if Phoenix never issued the Policy and, except for Policies
issued with a Temporary Money Market Allocation Amendment, Phoenix will return
the sum of the following as of the date Phoenix receives the returned Policy:
(i) the then current Policy Value less any unpaid loans and loan interest; plus
(ii) any monthly deductions, partial surrender fees, and other charges made
under the Policy, including investment advisory fees, or any Fund expenses
deducted. The amount returned for Policies issued with the Amendment will equal
any premiums paid less any unrepaid loans and loan interest, and less any
partial surrender amounts paid.
Phoenix reserves the right to disapprove an application for processing
within seven days of receipt at Phoenix of the completed application for
insurance, in which event Phoenix will return the premium paid. Even after
approval of the application for processing, Phoenix reserves the right to
decline issuance of the Policy, in which event Phoenix will refund the applicant
the same amount as would have been refunded under the Policy had it been issued
but returned for refund during the Right to Cancel Period.
TEMPORARY INSURANCE COVERAGE
On the date the application for a Policy is signed and submitted with the
Issue Premium, Phoenix issues a Temporary Insurance Receipt (the "Receipt") in
connection with the application. Under the Receipt, the insurance protection
applied for (subject to the limits of liability and in accordance with 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
A Policyowner may elect to transfer funds automatically among the
Subaccounts or the unloaned portion of the GIA on a monthly, quarterly,
semi-annual or annual basis under the Systematic Transfer Program for Dollar
Cost Averaging ("Systematic Transfer Program"). Under this Systematic Transfer
Program, the minimum initial and subsequent transfer amounts are $25 monthly,
$75 quarterly, $150 semi-annually or $300 annually. You must have an initial
value of $1,000 in the GIA or the Subaccount that funds will be transferred from
("Sending Subaccount") and if the value in that Subaccount or the GIA drops
below the elected transfer amount, the entire remaining balance will be
transferred and no more systematic transfers will be processed. Funds may be
transferred from only one Sending Subaccount or the GIA, but may be allocated to
multiple Subaccounts ("Receiving Subaccounts"). Under the Systematic Transfer
Program, Policyowners may make more than one transfer per Policy Year from the
GIA, in approximately equal amounts over a minimum 18-month period.
Only one Systematic Transfer Program can be active per Policy. After the
completion of the Systematic Transfer Program, you can call VPO at
1-800-892-4885 to begin a new Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be executed on the
basis of the respective values as of the first of the month following receipt of
the transfer request. If the first of the month falls on a holiday or weekend,
then the transfer will be processed on the next succeeding business day.
Enrollment in the Systematic Transfer Program may or may not be in the
Policyowner's best interest.
NON-SYSTEMATIC TRANSFERS
Transfers among available Subaccounts or the GIA and changes in premium
payment allocations may be requested in
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writing or by calling 1-800-892-4885, between the hours of 8:30 a.m. and 4:00
p.m. Eastern Time. Written requests will be executed on the date the request is
received at Variable and Universal Life Administration, except as noted below.
Unless the Policyowner elects in writing not to authorize telephone transfers or
allocation changes, telephone transfer orders and allocation changes also will
be accepted on behalf of the Policyowner from his/her registered representative.
Phoenix and Phoenix Equity Planning Corporation ("PEPCO") 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 the Policyowner.
To the extent that procedures reasonably designed to prevent unauthorized
transfers are not followed, Phoenix and PEPCO may be liable for following
telephone instructions for transfers that prove to be fraudulent. However, the
Policyowner would bear the risk of loss resulting from instructions entered by
an unauthorized third party that Phoenix and PEPCO reasonably believe to be
genuine. These telephone privileges may be modified or terminated at any time
and, during times of extreme market volatility, may be difficult to exercise. In
such cases, the Policyowner should submit a written request.
Phoenix reserves the right to permit transfers of less than $500 only if the
entire balance in the Subaccount or the GIA is transferred or if the Systematic
Transfer Program has been elected.
Phoenix reserves the right to prohibit a transfer to any Subaccount of the
VUL Account where the resultant value of the Policy's share in that Subaccount
immediately after the transfer would be less than $500. It further reserves the
right to require that the entire balance of a Subaccount or the GIA be
transferred if the share of the Policy in the value of that Subaccount would,
immediately after the transfer, be less than $500.
Unless Phoenix agrees otherwise or the Systematic Transfer Program has been
elected, a Policyowner may make only one transfer per Policy Year from the
unloaned portion of the GIA and the amount that may be transferred cannot exceed
the greater of $1,000 or 25% of the value of the Policy in the unloaned portion
of the GIA at the time of the transfer. Non-systematic transfers from the
unloaned portion of the GIA will be effectuated on the date of receipt by VPMO.
Phoenix reserves the right to limit the number of Subaccounts you may elect
to a total of 18 at any one time and/or over the life of the Policy unless
required to be less to comply with changes in federal and/or state regulation,
including tax, securities and insurance law. As of the date of this Prospectus,
this limitation has no effect because fewer than 18 Subaccounts are offered.
For policies issued with the Temporary Money Market Allocation Amendment,
transfers may not be made until termination of the Right to Cancel Period.
DETERMINATION OF SUBACCOUNT VALUES
The unit value of each Subaccount of the VUL Account was set by Phoenix on
the first Valuation Date of each such Subaccount. The unit value of a Subaccount
of the VUL Account 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 of the VUL Account 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 of the VUL Account on a
Valuation Date is determined at the end of that day.
The Net Investment Factor for each Subaccount of the VUL Account 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 equal to item (D) below
subtracted from the result of dividing the sum of items (A) and (B) by item (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 of
all transactions 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 Insured's death 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 Insured's death plus the Policy Value. Under either Option,
the minimum death benefit is the Policy Value on the date of death of the
Insured increased by the applicable percentage from the table contained in the
Policy, 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.
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GUARANTEED DEATH BENEFIT OPTION
For Policies with a face amount of at least $50,000, a guaranteed death
benefit rider may be purchased. Under this Policy rider, if a Policyowner pays
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 increases or decreases. In
order 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, a Policyowner 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 Phoenix requires 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. Phoenix will deduct any
charges associated with the increase (the increases in cost of insurance
charges), from the Policy Value, whether or not the Policyowner pays 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 Right to Cancel Period (see "The Policy--Right to
Cancel 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. With a decrease in face
amount, the death benefit under a Policy would be reduced on the next Monthly
Calculation Day. With 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
A Policyowner may request a decrease in face amount at any time after the
first Policy Year. Unless Phoenix agrees otherwise, the decrease must at least
equal $10,000 and the face amount remaining after the decrease must at least
equal $25,000. All face amount decrease requests must be in writing and will be
effective on the first Monthly Calculation Day following the date Phoenix
approves 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 (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, the Policyowner may partially or fully surrender the Policy by sending a
written release and surrender in a form satisfactory to Phoenix to VPMO, along
with the Policy if Phoenix so requires. 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, Phoenix generally will pay the amount
surrendered to the Policyowner within seven days after Phoenix receives 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 Phoenix. A Policyowner may elect to have the amount paid in a
lump sum or under a payment option. See "Surrender Charge" and "Payment
Options."
PARTIAL SURRENDERS
A Policyowner may obtain a partial surrender of the Policy by requesting
that part of the Policy's Cash Surrender Value be paid. The Policyowner may do
this at any time during the lifetime of the Insured while the Policy is In Force
with a written request to VPMO. Phoenix reserves the right to require that the
Policy be returned 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. Surrender proceeds may be applied under any of the payment options
described under "Payment of Proceeds--Payment Options."
Phoenix reserves 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 (reduced as a result of a partial surrender) would be, immediately after the
partial surrender, less than $500, Phoenix reserves the right to require that as
part of any partial surrender, the entire remaining balance in that Subaccount
or the GIA be surrendered.
Upon a partial surrender, the Policy Value will be reduced by the sum of the
following:
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(i) 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 assessment to each Subaccount will be
made in the same manner as that provided for monthly deductions.
(ii) 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.
(iii)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 also will be
reduced by the same amount as the Policy Value is reduced as described above.
POLICY LOANS
While the Policy is In Force, a loan may be obtained against the Policy up
to the available loan value. The loan value on any day is 90% of the result of
subtracting the then remaining surrender charge from the Policy Value. 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%,
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 Phoenix during a grace period
will be reduced to cover any overdue monthly deductions and only the balance
will be applied to reduce the Debt. Such balance, in excess of any outstanding
accrued loan interest, will be applied to reduce the loaned portion of the GIA
and will be transferred to the unloaned portion of the GIA to the extent that
loaned amounts taken from such Account have not been previously repaid.
Otherwise, such balance will be transferred among the Subaccounts as the
Policyowner requests upon repayment and, if no allocation request is made,
according to the most recent premium allocation schedule on file.
While there is outstanding Debt on the Policy, any payments received by
Phoenix for the Policy will be applied directly to reduce the Debt unless
specified as a premium payment by the Policyowner. 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 except as otherwise provided under the terms of the Policy concerning
the grace period and lapse.
The proceeds of Policy loans may be subject to federal income tax under
certain circumstances. See "Federal Tax Considerations."
In the future, Phoenix may not allow Policy loans of less than $500, unless
such loan is used to pay a premium on another Phoenix policy.
The Policyowner will pay interest on the loan at an effective annual rate,
compounded daily and payable in arrears. The loan interest rates in effect are
as follows:
4% for Policy Years 1 through 10 (or the Insured's
age 65 if earlier)
3% for Policy Years 11 through 15
2 1/2% for Policy Years 16 and thereafter
At the end of each Policy Year, any interest due on the Debt will be
treated as a loan and will be offset by a transfer from the Policyowner's values
to the value of 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 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, Policy Value does
not increase as rapidly as it would have had no loan been made. If the
Subaccounts or the unloaned portion of the GIA earn less than the annual
interest rate for funds held in the loaned portion of the GIA, Policy Value is
greater than it would have been had no loan been made. A Policy loan, whether or
not repaid, also has an 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 two Policy Years, the
Policy Value is insufficient to cover the monthly deduction, a grace period of
61 days will be allowed for the
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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 has 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, 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.
The Policy will continue In Force during any such grace period although
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 before 30 days have elapsed since Phoenix mailed
written notice to the Policyowner. If a premium payment for the additional
amount is received by Phoenix during the grace period, any amount of premium
over what is required to prevent lapse will be allocated among the Subaccounts
of the VUL Account or to the GIA in accordance with the then current premium
allocation schedule. In determining the amount of "excess" premium to be applied
to the Subaccounts or the GIA, Phoenix 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
A Policyholder also may 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 Phoenix's 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. Phoenix 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 "Purchase Protection Plan
Riders.")
In addition, once each Policy Year a Policyowner 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 Phoenix's receipt of
adequate evidence of insurability. A Right to Cancel Period as described in "The
Policy" section of this Prospectus applies to each increase in face amount.
ADDITIONAL RIDER BENEFITS
A Policyowner may purchase additional benefits under a Policy. These
benefits are cancellable by the Policyowner at any time. 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; however, additional riders may be available as described in
the Policy.
O DISABILITY WAIVER OF SPECIFIED PREMIUM RIDER
Phoenix waives 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), unless premiums have been waived
continuously during the entire five years prior to such date in which case
the waiver will continue beyond that date. The premium will be waived upon
Phoenix's receipt of proof that the Insured is totally disabled and that the
disability occurred while the rider was In Force.
O ACCIDENTAL DEATH BENEFIT RIDER
An additional death benefit will be paid if the Insured dies from bodily
injury that results from an accident if the Insured dies no later than 90
days after injury and before the Policy Anniversary nearest the Insured's
75th birthday.
O 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 later may be increased or
decreased by the Policyholder, provided that certain minimum premiums are
paid. Unless Phoenix agrees 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 is 20. Three (3) Death Benefit Guarantee
periods are available in all states except New York. 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:
LEVEL: EXPIRY DATE OF DEATH BENEFIT GUARANTEED,
THE LATER OF:
1 The Policy Anniversary nearest the Insured's 70th
birthday or the 7th Policy Year
2 The Policy Anniversary nearest the Insured's 80th
birthday or the 10th Policy Year
3 The Policy Anniversary nearest the Insured's 95th birthday.
Level 1 or 2 guarantees may be extended provided that the Policy's Cash
Surrender Value is sufficient and the Policyowner pays the new Minimum
Required Premium.
O WHOLE LIFE EXCHANGE OPTION RIDER
This rider permits the Policyowner to exchange his 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.
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O PURCHASE PROTECTION PLAN RIDER
Under this rider a Policyowner may, at predetermined future dates, purchase
additional insurance protection without evidence of insurability.
O 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.
O CASH VALUE ACCUMULATION RIDER
This rider generally permits a Policyowner 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.
INVESTMENTS OF THE VUL ACCOUNT
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PARTICIPATING MUTUAL FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts of the VUL Account invest in corresponding Series of The
Phoenix Edge Series Fund. The Fund currently has the following Series available
through the Policies:
MONEY MARKET SERIES: The investment objective of the Money Market Series is
to provide maximum current income consistent with capital preservation and
liquidity.
GROWTH SERIES: The investment objective of the Growth Series is to achieve
intermediate and long-term growth of capital, with income as a secondary
consideration.
MULTI-SECTOR FIXED INCOME ("MULTI-SECTOR") SERIES: The investment objective
of the Multi-Sector Series is to seek long-term total return by investing in a
diversified portfolio of high yield (high risk) and high quality fixed income
securities. For a discussion of the risks associated with investing in high
yield bonds, please see the accompanying Fund prospectus.
STRATEGIC ALLOCATION ("ALLOCATION") SERIES: The investment objective of the
Allocation Series is to realize as high a level of total rate of return over an
extended period of time as is considered consistent with prudent investment risk
(total rate of return consists of capital appreciation, current income,
including dividends and interest, possible premiums and short-term gains from
purchasing and selling options and financial futures).
INTERNATIONAL SERIES: The investment objective of the International Series
is to seek a high total return consistent with reasonable risk. The
International Series intends to invest 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 International Series provides a means for
investors to invest a portion of their assets outside the United States.
BALANCED SERIES: The investment objective of the Balanced Series is to seek
reasonable income, long-term capital growth and conservation of capital. The
Balanced Series intends to invest based on combined considerations of risk,
income, capital enhancement and protection of capital value.
REAL ESTATE SECURITIES ("REAL ESTATE") SERIES: The investment objective of
the Real Estate Series is to seek capital appreciation and income with
approximately equal emphasis. It intends under normal circumstances to invest 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.
STRATEGIC THEME ("THEME") SERIES: The investment objective of the Strategic
Theme 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 Strategic Theme Series intends to invest primarily in common stocks
believed to have substantial potential for capital growth.
ABERDEEN NEW ASIA ("ASIA") SERIES: The investment objective of the Asia
Series is to seek long-term capital appreciation. The Asia Series will invest
primarily in a diversified portfolio of equity securities of issuers organized
and principally operating in Asia, excluding Japan.
RESEARCH ENHANCED INDEX ("ENHANCED INDEX") SERIES: The investment objective
of the Enhanced Index 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. It is
intended that the Series will invest 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.
Each Series will be subject to the market fluctuations and risks inherent in
the ownership of any security and there can be no assurance that any Series'
stated investment objective will be realized.
In addition to being sold to the VUL Account, shares of the Fund also may be
sold to other separate accounts of Phoenix or its affiliates or of other
insurance companies.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Fund simultaneously. Although neither Phoenix nor the Fund
currently foresees 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 thereto. Material
conflicts could result from, for example, (1) changes in state insurance laws,
(2) changes in federal income tax laws, (3) changes in the investment management
of any portfolio of the Fund or (4) differences in voting instructions between
those given by variable life insurance Policyowners and those given by variable
annuity Contract
12
Owners. Phoenix will, at its own expense, remedy such material conflict
including, if necessary, segregating the assets underlying the variable life
insurance policies and the variable annuity contracts and establishing a new
registered investment company.
INVESTMENT ADVISERS TO THE PHOENIX EDGE SERIES FUND
The Phoenix Edge Series Fund's investment advisers are Phoenix Investment
Counsel, Inc. ("PIC"), Phoenix Realty Securities, Inc. ("PRS") and
Phoenix-Aberdeen International Advisors, LLC ("PAIA"); collectively, the
"Advisers," which are located at 56 and 38 Prospect Street and One American Row,
respectively, Hartford, Connecticut 06115.
PIC was originally organized in 1932 as John P. Chase, Inc. In addition to
the Fund, it serves as investment adviser to the Phoenix Series Fund, Phoenix
Total Return Fund, Inc., Phoenix Multi-Portfolio Fund, Phoenix Strategic
Equity Series Fund, Phoenix Equity Series Fund and Phoenix Investment Trust 97
and as subadviser to Chubb America Fund, Inc. and Sun America Series Trust. PIC
also serves as subadviser to the Asia Series.
All of the outstanding stock of PIC is owned by PEPCO, an indirect
subsidiary of Phoenix Duff & Phelps Corporation (PD&P). Phoenix Home Life Mutual
Insurance Company owns a controlling interest in PD&P. PEPCO also performs
bookkeeping, pricing and administrative services for the Fund. PEPCO is
registered as a broker-dealer in 50 states. The executive offices of Phoenix
Home Life Mutual Insurance Company are located at One American Row, Hartford,
Connecticut 06115, the executive offices of PD&P are located at 56 Prospect
Street, Hartford, Connecticut 06115 and the principal offices of PEPCO are
located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200.
PRS was formed in 1994 as an indirect subsidiary of Phoenix Home Life Mutual
Insurance Company. In addition to the Fund, it serves as investment adviser to
the Real Estate Securities Portfolio of the Phoenix Multi-Portfolio Fund, the
Real Estate Equity Securities Portfolio of Phoenix Duff & Phelps Institutional
Mutual Funds and to the American Phoenix Investment Portfolio. As of December
31, 1996, PRS had $1.4 billion in assets under management.
PAIA, a Delaware limited liability company formed in 1996 and jointly owned
and managed by PM Holdings, Inc., is a direct subsidiary of Phoenix and Aberdeen
Fund Managers, Inc., a wholly-owned subsidiary of Aberdeen Asset Management plc.
Aberdeen Fund Managers, Inc. has its principal offices located at 1 Financial
Plaza, Suite 2210, NationsBank Tower, Fort Lauderdale, Florida 33394. While many
of the officers and directors of the Adviser have extensive experience as
investment professionals, due to its recent formation, the Adviser has no prior
operating history. Aberdeen Fund Managers, Inc. also serves as subadviser to the
Asia Series.
Aberdeen Asset Management was founded in 1983 and through subsidiaries
operating from offices in Aberdeen, Scotland; London, England; Singapore; and
Fort Lauderdale, Florida, provides investment management services to unit and
investment trusts, segregated pension funds and other institutional and private
portfolios. As of February 28, 1997, Aberdeen Asset Management, and its advisory
subsidiaries, had approximately $4.8 billion in assets under management.
Duff & Phelps Investment Management Co. ("DPIM"), an affiliate of the
Adviser, serves as subadviser to the Real Estate Series. DPIM is a subsidiary of
PD&P, an affiliate of the Adviser, and is located at 55 East Monroe Street,
Suite 3600, Chicago, Illinois 60603. PD&P is a NYSE traded company that provides
investment management and related services to institutional investors,
corporations and individuals through operating subsidiaries. As of December 31,
1996, DPIM had approximately $14 billion in assets under management on a
discretionary basis.
SERVICES OF THE ADVISER
The Adviser furnishes continuously an investment program for each Series and
manages the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. A more detailed
discussion of the Adviser and the Investment Advisory Agreements is contained in
the accompanying prospectus for the Fund.
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; all
capital gains distributions of the Fund, if any, are likewise reinvested at the
net asset value on the record date. Phoenix redeems Fund shares at their net
asset value to the extent necessary to make payments under the Policy.
SUBSTITUTION OF INVESTMENTS
Phoenix reserves the right, subject to compliance with the law as currently
applicable or subsequently changed, to make additions to, deletions from, or
substitutions for the investments held by the VUL Account. In the future,
Phoenix 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. These portfolios will be established if, and
when, in the sole discretion of Phoenix, marketing needs and investment
conditions warrant, and will be made available under existing Policies to the
extent and on a basis to be determined by Phoenix.
If shares of any of the portfolios of the Fund should no longer be available
for investment, or if in the judgment of Phoenix's management further investment
in shares of any of the portfolios should become inappropriate in view of the
objectives of the Policy, then Phoenix may substitute shares of another mutual
fund for shares already purchased, or to be purchased in the future, under the
Policy. 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 the Policyowner. In the event of a substitution, the Policyowner will
be given the option of transferring the Policy Value of the Subaccount in which
the substitution is to occur to another Subaccount.
13
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
Charges are deducted in connection with the Policy to compensate Phoenix
for: (1) incurring expenses in distributing the Policy; (2) issuing the Policy;
(3) state and federal tax charge incurred on premiums received; (4) providing
the insurance benefits set forth in the Policy; and (5) assuming certain risks
in connection with the Policy. The nature and amount of these charges are
described more fully below.
1. MONTHLY DEDUCTION
A charge is deducted monthly from the Policy Value under a Policy ("monthly
deduction") to pay: the cost of insurance provided under the Policy, the cost of
any rider benefits provided, any unpaid balance of the Issue Expense Charge, and
an administrative charge. This administrative charge is currently set at $5 per
month but it is guaranteed not to exceed $10 per month. The monthly deduction is
deducted on each Monthly Calculation Day. It is allocated among the Subaccounts
of the VUL Account and the unloaned portion of the GIA based on the allocation
schedule for monthly deductions specified by the applicant in the application
for a Policy or as later changed by the Policyowner. In the event that the
Policy's share in the value of the Subaccounts or the unloaned portion of the
GIA is insufficient to permit the withdrawal of the full monthly deduction, the
remainder will be taken on a proportionate basis from the Policy's share of each
of the other Subaccounts and the unloaned portion of the GIA. The number of
units deducted will be determined by dividing the portion of the monthly
deduction allocated to each Subaccount or to the unloaned portion of the GIA by
the unit value on the Monthly Calculation Day. Because portions of the monthly
deduction, such as the cost of insurance, can vary from month to month, the
monthly deduction itself may vary in amount from month to month.
(A) ISSUE EXPENSE CHARGE. A cost-based issue administration charge is
assessed on a pro rata basis in equal monthly installments over a
12-month period to compensate Phoenix for underwriting and start-up
expenses in connection with issuing a Policy. The issue administrative
charge is $1.50 per $1,000 of face amount, up to a maximum charge of
$600. Phoenix may reduce or eliminate the Issue Expense Charge for
Policies issued under group or sponsored arrangements. 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 characteristics of its members, 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.
(B) COST OF INSURANCE. In order to calculate the monthly cost of insurance
charge, Phoenix multiplies the applicable cost of insurance rate by the
difference between the death benefit selected (death benefit Option 1 if
no selection is made) and the Policy Value. Generally, cost of insurance
rates are based on the sex, issue age, duration and risk class. 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 cost of insurance rates are based on Phoenix's
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
Commissioner's 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, issue age and risk class whose Policies have been In Force for the
same length of time. The risk class of an Insured may affect the cost of
insurance rate. Phoenix currently places Insureds into a preferred or
standard risk class or a risk class involving a higher mortality risk,
depending upon the health of the Insured as determined by medical
information that Phoenix requests. In an otherwise identical Policy,
Insureds in the preferred or standard risk class will have a lower cost
of insurance than those in the risk class with the higher mortality
risk. The standard risk class also is divided into categories: smokers,
nonsmokers and those who have never smoked. Non-smokers will generally
incur a lower cost of insurance than similarly situated Insureds who
smoke.
2. PREMIUM TAXES
Various states and subdivisions impose a tax on premiums received by
insurance companies. Premium taxes vary from state to state. Currently, such
taxes range from 0.75% to 4% of premiums paid. Moreover, certain municipalities,
in states such as Louisiana, Kentucky and South Carolina, also impose taxes on
premiums paid, in addition to the state taxes imposed. Phoenix charges an
average premium tax charge of 2.25%. The premium tax charge represents an amount
Phoenix considers necessary to pay all premium taxes imposed by such states and
any subdivisions thereof, and Phoenix does not expect to derive a profit from
this charge. These taxes are deducted from the Issue Premium, and from each
subsequent premium payment.
3. 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 Phoenix of the federal income tax
treatment of deferred acquisition costs.
4. MORTALITY AND EXPENSE RISK CHARGE
Phoenix will deduct a daily charge from the VUL Account at an annual rate of
0.80% of the average daily net assets of the VUL Account to compensate for
certain risks assumed in connection with the Policy. A reduced annual rate of
.25% will apply after the 15th Policy Year. This charge is not deducted from the
GIA.
The mortality risk assumed by Phoenix is that Insureds may live for a
shorter time than projected because of inaccuracies in that projecting process
and, accordingly, that an aggregate amount of death benefits greater than that
projected will be payable. The expense risk assumed is that expenses incurred in
14
issuing 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, Phoenix may profit
from this charge. Phoenix also assumes risks with respect to other contingencies
including the incidence of Policy loans, which may cause Phoenix to incur
greater costs than anticipated when designing the Policies. To the extent
Phoenix profits from this charge, it 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.
5. INVESTMENT MANAGEMENT CHARGE
As compensation for investment management services to the Funds, the
Advisers 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 prospectus.
6. OTHER CHARGES
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, consisting of a contingent deferred sales
charge designed to recover expenses for the distribution of Policies that are
terminated by surrender before distribution expenses have been recouped, and a
contingent deferred issue charge designed to recover expenses for the
administration of Policies that are terminated by surrender before
administrative expenses have been recouped. 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.
During the first 10 Policy Years, the full surrender charge as described
below will apply if the Policyowner either surrenders the Policy for its Cash
Surrender Value or lets the Policy lapse. The applicable surrender charge in any
Policy Month is the full surrender charge minus any surrender charges that have
been previously paid. There is no surrender charge after the 10th Policy Year.
During the first two Policy Years the maximum surrender charge that a
Policyowner could pay while he/she owns the Policy is equal to either A plus B
(as defined below) or the amount shown in the Policy's Surrender Charge
Schedule, whichever is less. After the first two Policy Years 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 Securities and Exchange Commission rule);
plus
2) 8.50% 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.
As an example, the following illustrates the maximum surrender charge on a
$100,000 Policy for a male age 35 who has never smoked, who has paid $3,000 in
premium payments, and who surrenders the Policy in the 70th Policy Month. The
Policy's Surrender Charge Schedule would show that the maximum surrender charge
to be paid would be equal to either A plus B (shown below) or the amount shown
in the chart in the Policy (also shown below), whichever is less:
Example: If this Policyowner surrenders his policy in the 70th
Policy month his surrender charge will be $1,186.78, as given in
the table.
Example: If this Policyowner surrenders his policy in the first two years he
may be eligible to receive a refund of a portion of the surrender charge,
depending on the amount of premium paid, or, in other words, his surrender
charge may be reduced. The surrender charge in the first 2 years would be equal
to the lesser of the amount in the surrender charge table and the sum of the
following:
1) 28.5% of premiums paid up to $1,076.72, plus
2) 8.5% of premiums paid in excess of $1,076.72 but not greater than
$2,153.43, plus
3) 7.5% of premiums paid in excess of $2,153.43, plus
$500
If this Policyowner surrendered his policy in the 2nd year after paying
$2,000 of premiums his surrender charge would be the lesser of $1,307.54 from
the table, and $385.34, thus equaling $385.34. Thus, in this case, the
Policyowner would pay less surrender charge if he surrenders his policy in the
first two Policy Years.
SURRENDER CHARGE TABLE
----------------------
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
15
Phoenix may reduce the surrender charges for Policies issued under group or
sponsored arrangements. The amount of reduction will be considered on a
case-by-case basis and will reflect the reduced costs to Phoenix expected as a
result of sales to a particular group or sponsored arrangement.
PARTIAL SURRENDER FEE
A fee equal to the lesser of $25 or 2% of the amount withdrawn from the
Policy is deducted from the Policy Value upon a partial surrender of the Policy
to recover the actual costs of processing the partial surrender request. The
assessment to each Subaccount or to the GIA will be made in the same manner as
provided for the partial surrender amount paid. That is, that the Policy's share
in the value of each Subaccount or the GIA will be reduced based on the
allocation made at the time of the partial surrender. If no allocation request
is made, the assessment to each Subaccount and to the GIA will be made in the
same manner as provided for monthly deductions.
PARTIAL SURRENDER CHARGE
A charge as described below is deducted from the Policy Value upon a partial
surrender of the Policy. The 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
Subaccounts or the GIA in the same manner as provided for with respect to the
partial surrender amount paid.
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).
TAXES
Currently no charge is made to the VUL Account for federal income taxes that
may be attributable to the VUL Account. Phoenix may, however, make such a charge
in the future. Charges for other taxes, if any, attributable to the VUL Account
also may be made. See "Charges and Deductions--Other Charges."
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: (i) for up to six months from the date of the request, for any
transactions dependent upon the value of the GIA; (ii) whenever the New York
Stock Exchange is closed other than for customary weekend and holiday closings,
or trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission; or (iii) whenever an emergency exists, as
determined by the Commission 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. 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 the Policyowner's bank.
THE CONTRACT
The Policy and the copy of the application attached thereto 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 Phoenix can agree to change or waive any provisions of the Policy.
SUICIDE
If the Insured commits suicide within two years after the Policy's Date of
Issue, Phoenix will pay only the Policy Value adjusted by the addition of any
monthly deductions and other fees and charges made under the Policy and the
subtraction of any debt owed to Phoenix under the Policy.
INCONTESTABILITY
Phoenix cannot contest the Policy or any rider attached to it after it has
been In Force during the lifetime of the Insured for two 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 Policyowner, the
benefits payable at the Insured's death will be paid to the Policyowner's
estate.
As long as the Policy is In Force, the Policyowner and the Beneficiary may
be changed by written request, satisfactory to Phoenix. A change in Beneficiary
will take effect as of the date the notice is signed, whether or not the Insured
is living when the notice is received by Phoenix. Phoenix will not, however, be
liable for any payment made or action taken before receipt of the notice.
ASSIGNMENT
The Policy may be assigned. Phoenix will not be bound by the assignment
until a written copy has been received and will not be liable with respect to
any payment made prior to receipt. Phoenix assumes 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.
16
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 Phoenix receives the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death benefit proceeds usually will be made in
one lump-sum within seven days, unless another payment option has been elected.
Payment of the death benefit proceeds, however, may be delayed if the claim for
payment of the death benefit 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. In addition, 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, the Policyowner may elect a payment option for
payment of the death benefit proceeds to the Beneficiary. The Policyowner may
revoke or change a prior election before the Insured's death, unless such right
has been waived. The Beneficiary may make or change an election prior to payment
of the death benefit proceeds, unless the Policyowner has made an election which
does not permit such further election or changes by the Beneficiary.
A written form satisfactory to Phoenix 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 income option is $1,000.
If the Policy is assigned as collateral security, Phoenix 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 Phoenix may choose to make
available in the future.
OPTION 1--LUMP SUM.
Payment in one lump sum.
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 income 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: (A) The death of
the payee; (B) 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 may be chosen are as follows: (A) Ten years;
(B) Twenty years; (C) Until the installments paid refund the amount applied
under this option; and 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, Phoenix will deem the longer period
certain as having been elected. Any life annuity provided under Option 4 is
calculated using an interest rate guaranteed to be no less than 3 3/8% per year,
except that any life annuity providing a period certain of 20 years or more is
calculated 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 calculated 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 principal
sum remaining at a rate guaranteed to equal 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 one 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 income
installments are paid until the latest of: (A) The end of the 10-year period
certain; (B) The death of the Insured; (C) The death of the other named
annuitant. The other annuitant must be named at the time this option is elected
and cannot later be changed. The other annuitant must have an attained age of at
least 40. Any joint survivorship annuity as may be provided under this option is
calculated using an interest rate guaranteed to be no less than 3 3/8% per year.
For additional information concerning the above payment options, see the
Policy.
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to the Policyowner or Beneficiary depends on
Phoenix's tax status and upon the tax status of the individual concerned. The
discussion contained
17
herein is general in nature and is not intended as tax advice. For complete
information on federal and state tax considerations, a qualified tax adviser
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 Phoenix's understanding of federal income tax laws as they are
currently interpreted, Phoenix cannot guarantee the tax status of any Policy. No
representation is made regarding the likelihood of continuation of current
federal income tax laws, Treasury regulations, or of the current interpretations
by the Internal Revenue Service. Phoenix reserves the right to make changes to
the Policy in order to assure that it will continue to qualify as a life
insurance contract for federal income tax purposes.
PHOENIX'S TAX STATUS
Phoenix is taxed as a life insurance company under the Internal Revenue Code
of 1986, as amended (the "Code"). For federal income tax purposes, neither the
VUL Account nor the GIA is a separate entity from Phoenix and their operations
form a part of Phoenix.
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 Phoenix. Due to Phoenix's tax status under
current provisions of the Code, no charge currently will be made to the VUL
Account for Phoenix's federal income taxes which may be attributable to the VUL
Account. Phoenix reserves the right to make a deduction for taxes if the federal
tax treatment of Phoenix is determined to be other than what Phoenix currently
believes it to be, if changes are made affecting the tax treatment to Phoenix of
variable life insurance contracts, or if changes occur in Phoenix's 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 the discussion on modified endowment contracts below),
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, the Policyowner should not be
deemed to be in constructive receipt of the Policy Value, including increments
thereon. See, however, 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 Benefit 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. Phoenix intends to monitor the premiums to assure
compliance with such conditions. However, in the event that the premium
limitation is exceeded during the year, Phoenix 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 Surrender
Value, the excess, if any, of the Policy 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 which 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. Phoenix suggests you consult with your tax adviser 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 rules affecting "modified
endowment contracts." The benefit payment under the Living Benefits Rider is not
considered a partial surrender.
LOANS. Phoenix believes that any loan received under a Policy will be
treated as indebtedness of the Policyowner. 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" below. If the Policy is not a "modified endowment
contract," Phoenix believes that no part of any loan under a Policy will
constitute income to the Policyowner.
The deductibility by the Policyowner of loan interest under a Policy may be
limited under Code Section 264, depending on the circumstances. Any Policyowner
intending to fund premium payments through borrowing should consult a tax
adviser 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 adviser for further
guidance.
BUSINESS-OWNED POLICIES
If the Policy is owned by a business or a corporation, 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.
18
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 Policy Value over premiums paid).
Policies are "modified endowment contracts" if they meet the definition of life
insurance, but fail the "7-pay test." This test essentially provides that the
cumulative premiums paid under the Policy at any time during the Policy's first
seven years cannot exceed the sum of the net level premiums that would have been
paid on or before that time had the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. In addition, a modified
endowment contract includes any life insurance contract that is received in
exchange for a modified endowment contract. Premiums paid during a Policy Year
that are returned by Phoenix (with interest) within 60 days after the end of the
Policy Year will not cause the Policy to fail the 7-pay test.
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS. If there is a reduction
in benefits during the first seven Policy Years, the premiums are redetermined
for purposes of the 7-pay test as if the Policy had originally been issued at
the reduced death benefit level and the new limitation is applied to the
cumulative amount paid for each of the first seven 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 death benefit reduction takes effect and all subsequent Policy Years.
However, distributions made in anticipation of such failure (there is a
presumption that distributions made within two 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 seven 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 percent excise tax, with certain exceptions.
This additional tax will not apply in the case of distributions: (i) made on or
after the taxpayer attains age 59 1/2; (ii) which are attributable to the
taxpayer's disability (within the meaning of Code Section 72(m)(7)); or (iii)
which are part of a series of substantially equal periodic payments (not less
frequently 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 two exceptions. 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 with respect to these premiums, the
"increase" does not constitute a material change. 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 (1)
the cost-of-living determination period does not exceed the remaining premium
payment period under the Policy, and (2) 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 seven years or thereafter), and future taxation of
distributions or loans would turn on 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 one
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 adviser
should be consulted about the tax consequences of the purchase of more than one
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 calculate 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.
Phoenix intends to comply with the limitations in calculating the premium it is
permitted to receive from the Policyowner.
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, a purchaser should not use the Policy in
conjunction with a qualified plan until he has consulted a competent pension
consultant or tax adviser.
DIVERSIFICATION STANDARDS
To comply with the diversification regulations under Code Section 817(h),
("Diversification Regulations") each Series of the Fund is required to diversify
its investments. The Diversification Regulations generally require that on the
last day of each quarter of a calendar year no more than 55% of the value of a
Series' assets is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four 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 of the Fund will
19
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 United States
Treasury securities, and for purposes of determining whether assets other than
United States Treasury securities are adequately diversified, the generally
applicable percentage limitations are increased based on the value of the VUL
Account's investment in United States Treasury securities. Notwithstanding this
modification of the general diversification requirements, the portfolios of the
Fund will be structured to comply with the general diversification standards
because they serve as an investment vehicle for certain variable annuity
contracts which must comply with these standards.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning the
extent to which Policyowners may direct their 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,
Phoenix reserves the right to modify the Policy, as necessary, to prevent the
Policyowner from being considered the owner of the assets of the VUL Account.
Phoenix intends 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. Phoenix recommends 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. Phoenix does not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
- --------------------------------------------------------------------------------
THE FUND
Phoenix will vote the Funds' shares held by the Subaccounts of the VUL
Account at any regular and special meetings of shareholders of the Fund. To the
extent required by law, such voting will be in accordance with instructions
received from the Policyowner. However, if the Investment Company Act of 1940 or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result Phoenix determines that it is permitted
to vote the Fund shares at its own discretion, it may elect to do so.
The number of votes that a Policyowner has the right to cast will be
determined by applying the Policyowner's 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 Phoenix in proportion to the voting instructions
that are received with respect to all Policies participating in that Subaccount.
Voting instructions to abstain on any item to be voted upon will be applied to
reduce the votes eligible to be cast by Phoenix.
Each Policyowner will receive proxy materials, reports, and other materials
relating to the Funds.
Phoenix 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, Phoenix itself may
disregard voting instructions in favor of changes initiated by a Policyowner in
the investment policies or the Investment Adviser of the Funds if Phoenix
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 Phoenix determined that the change would have an adverse effect
on the General Account because the proposed investment policy for a portfolio
may result in overly speculative or unsound investments. In the event Phoenix
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.
PHOENIX
A Policyowner (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 Phoenix
Policyholders for the election of members of the Board of Directors of Phoenix
and on other corporate matters, if any, where a Policyholder's vote is taken. At
meetings of all of the Phoenix Policyholders, a Policyholder (or payee) may cast
only one vote as the holder of a Policy, irrespective of Policy Value or the
number of the Policies held.
20
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX
- --------------------------------------------------------------------------------
Phoenix is managed by its Board of Directors, the members
of which are elected by its Policyholders, including Owners of the
Policies. See "Voting Rights."
The following are the Directors and Executive Officers of Phoenix:
NAME AND TITLE PRINCIPAL OCCUPATION
- -------------- --------------------
Robert William Fiondella, Chairman of the Board,
Chairman and President President and Chief Executive
Officer
Richard Henry Booth, Executive Vice President,
Director and Executive Strategic Development;
Vice President formerly President, Traveler's
Insurance Company
Robert Gerald Chipkin Senior Vice President and
Director Corporate Actuary
Philip Robert McLoughlin, Executive Vice President and
Director and Executive Chief Investment Officer
Vice President
Charles J. Paydos, Executive Vice President
Director and Executive
Vice President
David William Searfoss, Executive Vice President and
Director and Executive Chief Financial Officer
Vice President, CFO &
Treasurer
Dona Davis Young, Executive Vice President,
Director and Executive Individual Insurance and
Vice President General Counsel
Joseph Edward Kelleher, Senior Vice President
Director and Senior
Vice President
Robert George Lautensack, Senior Vice President
Director and Senior
Vice President
Simon Yeh-Cheng Tan, Senior Vice President,
Director and Senior Individual Market
Vice President Development
The above positions listed under Principal Occupation are held in the
Company's parent, Phoenix Home Life Mutual Insurance Company (except where
otherwise indicated) and reflect the last held position in the organization
during the past five years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
The assets of the VUL Account are held by Phoenix. The assets of the VUL
Account are kept physically segregated and held separate and apart from the
general account of Phoenix. Phoenix maintains records of all purchases and
redemptions of shares of the Fund.
SALES OF POLICIES
- --------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("W. S. Griffith"), a corporation formed under the laws of the state
of New York on August 7, 1970, licensed to sell Phoenix insurance policies, as
well as policies, annuity contracts and funds of companies affiliated with
Phoenix. W. S. Griffith, an indirect subsidiary of Phoenix Home Life Mutual
Insurance Company, is registered as a broker-dealer with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. Policies also may be
purchased from other broker-dealers registered under the Securities Exchange Act
of 1934 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 received by Phoenix under these
Policies. Total sales commission of a maximum of 50% of premiums will be paid by
Phoenix to PEPCO. To the extent that the sales charge under the Policies is less
than the sales commissions paid with respect to the Policies, Phoenix will pay
the shortfall from its general account assets, which will include any profits it
may derive under the Policies.
Phoenix through PEPCO will sponsor sales contests, training and educational
meetings and provide to all qualifying dealers, from its own profits and
resources, additional compensation in the form of trips, merchandise or expense
reimbursement. Brokers and dealers other than PEPCO also may make customary
additional charges for their services in effecting purchases, if they notify the
Fund of their intention to do so.
STATE REGULATION
- --------------------------------------------------------------------------------
Phoenix is subject to the provisions of the Connecticut insurance laws
applicable to stock life insurance companies and to regulation and supervision
by the Connecticut Superintendent of Insurance. Phoenix also is subject to the
applicable insurance laws of all the other states and jurisdictions in which it
does an insurance business.
State regulation of Phoenix includes certain limitations on the investments
which it may make, including investments for the VUL Account and the GIA. It
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
Investment Company Act of 1940 and regulations promulgated thereunder, or under
any other applicable law or regulation.
21
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The VUL Account is not engaged in any litigation. Phoenix is not involved in
any litigation that would have a material adverse effect on the ability of
Phoenix to meet its obligations under the Policies.
LEGAL MATTERS
- --------------------------------------------------------------------------------
The organization of Phoenix, its authority to issue variable life insurance
Policies, and the validity of the Policy have been passed upon by Richard J.
Wirth, Counsel, Phoenix. Legal matters relating to the federal securities and
income tax laws have been passed upon for Phoenix by Jorden Burt Berenson &
Johnson, LLP.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
securities offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is made for further
information concerning the VUL Account, Phoenix and the Policy. Statements
contained in this Prospectus as to the content of the Policy and other legal
instruments are summaries. For a complete statement of the terms thereof,
reference is made to such instruments as filed.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The consolidated financial statements of Phoenix contained herein should be
considered only as bearing upon Phoenix'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. The Subaccounts of the VUL Account commenced
operations as of the date of this Prospectus; therefore financial statements are
not yet available.
22
PHOENIX LIFE AND
ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF
PM HOLDINGS, INC. AS OF
MARCH 29, 1996)
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
23
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996.............25
Statements of Income for the Six Months Ended
June 30, 1997 and 1996 (unaudited) ........................................26
Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1996 (unaudited) .......................................27
Notes to Condensed Financial Statements (unaudited) ..........................28
24
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
BALANCE SHEETS
- --------------------------------------------------------------------------------
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
(IN THOUSANDS)
ASSETS
Available-for-sale fixed maturity
investments, at fair value $ 5,500 $ 5,530
Short-term investments 5,090 4,707
------------------ ------------------
Total investments 10,590 10,237
Cash (overdraft) and cash equivalents (17) 155
Accrued investment income 119 118
Current income taxes recoverable 6
Deferred income taxes 13
Goodwill 941 995
------------------ ------------------
Total assets $ 11,646 $ 11,511
================== ==================
LIABILITIES
Current income taxes payable $ 22 $
Deferred income taxes 22
Other liabilities 50 49
------------------ ------------------
Total liabilities 72 71
------------------ ------------------
EQUITY
Common stock, $100 par value, 25,000
shares authorized, issued and outstanding 2,500 2,500
Additional paid-in-capital 8,673 8,673
Retained earnings 382 222
Net unrealized investment gains 19 45
------------------ ------------------
Total equity 11,574 11,440
------------------ ------------------
Total liabilities and equity $ 11,646 $ 11,511
================== ==================
The accompanying notes are an integral part of these statements.
25
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
STATEMENTS OF INCOME (UNAUDITED)
PERIODS FROM MARCH 30, 1996 FORWARD (SUCCESSOR PERIODS)
AND JANUARY 1, 1996 TO MARCH 29, 1996 (PREDECESSOR PERIOD)
- --------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996
SUCCESSOR SUCCESSOR PREDECESSOR
PERIOD PERIOD PERIOD
(IN THOUSANDS)
REVENUES
Net investment income $ 306 $ 119 $ 95
---------------- ----------------- ----------------
Total revenues 306 119 95
---------------- ----------------- ----------------
EXPENSES
Amortization of goodwill 54 27
Other operating expenses (3)
---------------- ----------------- ----------------
Total expenses 54 27 (3)
---------------- ----------------- ----------------
INCOME BEFORE INCOME TAXES 252 92 98
Income taxes 92 34
---------------- ----------------- ----------------
NET INCOME $ 160 $ 58 $ 98
================ ================= ================
The accompanying notes are an integral part of these statements.
26
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
STATEMENTS OF CASH FLOWS (UNAUDITED)
PERIODS FROM MARCH 30, 1996 FORWARD (SUCCESSOR PERIOD)
AND JANUARY 1, 1996 TO MARCH 29, 1996 (PREDECESSOR PERIOD)
- --------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996
SUCCESSOR SUCCESSOR PREDECESSOR
PERIOD PERIOD PERIOD
(IN THOUSANDS)
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 160 $ 58 $ 98
Adjustments to reconcile net income
to net cash provided by operations
Goodwill amortization 54 27
Deferred income taxes (35) (15)
(Increase) in accrued investment income (1) (101) (9)
Decrease in receivable from affiliate 899
Other 33 (57)
--------------- ---------------- ---------------
Net cash provided by (used for) operating activities 211 (88) 988
--------------- ---------------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of available-for-sale fixed maturity investments (4,201)
Change in short-term investments, net (383) (1,805)
--------------- ----------------
Net cash used for investing activities (383) (6,006)
--------------- ----------------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contribution from parent 4,000
--------------- ----------------
Net cash provided by financing activities - 4,000
--------------- ----------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (172) (2,094) 988
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 155 2,145 1,157
--------------- ---------------- ---------------
CASH (OVERDRAFT) AND CASH EQUIVALENTS, END OF PERIOD $ (17) $ 51 $ 2,145
=============== ================ ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 85 $ 62
=============== ================
The accompanying notes are an integral part of these statements.
27
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The condensed financial statements include the accounts of Phoenix Life and
Annuity Company (PLAC or the Company). These condensed financial statements have
been prepared in accordance with generally accepted accounting principles
(GAAP). The information furnished includes all adjustments and accruals
consisting only of normal, recurring accrual adjustments which are, in the
opinion of management, necessary for a fair statement of results for the interim
period.
The results of operations for any interim period are not necessarily indicative
of results for the full year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have
been condensed or omitted. The June 30, 1997 Condensed Financial Statements
should be read in conjunction with the accompanying December 31, 1996 Financial
Statements.
The financial statements for the period subsequent to the March 29, 1996
acquisition are sometimes referred to as the "successor period." The financial
statements for the period prior to the acquisition are sometimes referred to as
the "predecessor period."
28
PHOENIX LIFE AND
ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF
PM HOLDINGS, INC. AS OF
MARCH 29, 1996)
FINANCIAL STATEMENTS
DECEMBER 31, 1996
29
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants .......................................... 31
Balance Sheet................................................................ 32
Statement of Income.......................................................... 33
Statement of Equity.......................................................... 34
Statement of Cash Flows...................................................... 35
Notes to Financial Statements ............................................36-39
30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Phoenix Life and Annuity Company
In our opinion, the accompanying balance sheet and the related statements of
income, of equity and of cash flows present fairly, in all material respects,
the financial position of Phoenix Life and Annuity Company (formerly Savers Life
Insurance Company of America and a wholly-owned subsidiary of PM Holdings, Inc.
as of March 29, 1996) at December 31, 1996, and the results of its operations
and its cash flows for the periods from January 1, 1996 to March 29, 1996 and
from March 30, 1996 to December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Hartford, CT
February 12, 1997
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
BALANCE SHEET
DECEMBER 31, 1996 (IN THOUSANDS)
- --------------------------------------------------------------------------------
ASSETS
Available-for-sale fixed maturity
investments, at fair value $ 5,530
Short-term investments 4,707
---------------
Total investments 10,237
Cash and cash equivalents 155
Accrued investment income 118
Current income taxes recoverable 6
Goodwill 995
---------------
Total assets $ 11,511
===============
LIABILITIES
Deferred income taxes $ 22
Other liabilities 49
---------------
Total liabilities 71
---------------
EQUITY
Common stock, $100 par value, 25,000
shares authorized, issued and outstanding 2,500
Additional paid-in-capital 8,673
Retained earnings 222
Net unrealized investment gains 45
---------------
Total equity 11,440
---------------
Total liabilities and equity $ 11,511
===============
The accompanying notes are an integral part of these statements.
32
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
STATEMENT OF INCOME
PERIODS FROM MARCH 30, 1996 TO DECEMBER 31, 1996 (SUCCESSOR PERIOD)
AND JANUARY 1, 1996 TO MARCH 29, 1996 (PREDECESSOR PERIOD)
- --------------------------------------------------------------------------------
SUCCESSOR PREDECESSOR
PERIOD PERIOD
(IN THOUSANDS)
REVENUES
Net investment income $ 433 $ 95
Net realized investment losses (1)
--------------- --------------
Total revenues 432 95
--------------- --------------
EXPENSES
Amortization of goodwill 81
Other operating expenses (3)
--------------- --------------
Total expenses 81 (3)
--------------- --------------
INCOME BEFORE INCOME TAXES 351 98
Income taxes 129
--------------- --------------
NET INCOME $ 222 $ 98
=============== ==============
The accompanying notes are an integral part of these statements.
33
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
STATEMENT OF EQUITY
PERIODS FROM JANUARY 1, 1996 TO MARCH 29, 1996
AND FROM MARCH 30, 1996 TO DECEMBER 31, 1996
- --------------------------------------------------------------------------------
NET
ADDITIONAL UNREALIZED
COMMON PAID-IN RETAINED INVESTMENT TOTAL
STOCK CAPITAL EARNINGS GAINS EQUITY
(IN THOUSANDS)
BALANCES, DECEMBER 31, 1995 $ 2,000 $ 3,999 $ 5,999
Net income 98 98
Stock dividend 500 (500) -
--------------- -------------- -------------
BALANCES, MARCH 29, 1996 2,500 3,597 6,097
Acquisition adjustment to record
purchase price $ 4,673 (3,597) 1,076
Capital contribution from parent 4,000 4,000
Net income 222 222
Net unrealized investment gains $ 45 45
--------------- ------------- -------------- --------------- -------------
BALANCES, DECEMBER 31, 1996 $ 2,500 $ 8,673 $ 222 $ 45 $ 11,440
=============== ============= ============== =============== =============
The accompanying notes are an integral part of these statements.
34
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
STATEMENT OF CASH FLOWS
PERIODS FROM MARCH 30, 1996 TO DECEMBER 31, 1996 (SUCCESSOR PERIOD)
AND JANUARY 1, 1996 TO MARCH 29, 1996 (PREDECESSOR PERIOD)
- --------------------------------------------------------------------------------
SUCCESSOR PREDECESSOR
PERIOD PERIOD
(IN THOUSANDS)
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 222 $ 98
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATIONS
Goodwill amortization 81
Deferred income taxes (2)
(Increase) in accrued investment income (104) (9)
Decrease in receivable from affiliate 899
Other (18)
----------------- ---------------
Net cash provided by operating activities 179 988
----------------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of available-for-sale fixed maturity investments (5,167)
Change in short-term investments, net (1,002)
-----------------
Net cash used for investing activities (6,169)
-----------------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contribution from parent 4,000
-----------------
Net cash provided by financing activities 4,000
-----------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,990) 988
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,145 1,157
----------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 155 $ 2,145
================= ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 113
=================
The accompanying notes are an integral part of these statements.
35
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Life and Annuity Company is a life insurance company domiciled in
the State of Connecticut and is licensed in 32 states. On March 29, 1996,
PM Holdings, Inc. acquired Savers Life Insurance Company of America from
Central United Life Insurance Company, renamed the acquired company Phoenix
Life and Annuity Company and redomiciled the company from Missouri to
Connecticut. PM Holdings accounted for the acquisition of Phoenix Life and
Annuity under the purchase method of accounting. The assets and liabilities
of Phoenix Life and Annuity were recorded at their fair value as of the
date of acquisition and intangible assets associated with the acquisition
were recorded in the accounts of the acquired company. 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 generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The financial statements for the period subsequent to the March 29, 1997
acquisition are sometimes referred to as the "successor period." The
financial statements for the period prior to the acquisition are sometimes
referred to as the "predecessor period."
VALUATION OF INVESTMENTS
Fixed maturity investments include U.S. government and agency bonds.
Phoenix Life and Annuity classifies all its fixed maturity investments as
available-for-sale. These investments are presented at fair value with
unrealized gains or losses included as a separate component of equity.
Fixed maturity investments 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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
GOODWILL
Goodwill represents the excess of the cost of the business acquired on
March 29, 1996 over the fair value of its tangible net assets. Goodwill is
being amortized using 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 long-lived
assets including goodwill. Assets are considered impaired if the carrying
value exceeds the expected future undiscounted cash flows. Such analyses
are performed at least annually or more frequently if warranted by events
or circumstances affecting Phoenix Life and Annuity's business. At this
time, management believes that no impairment of goodwill has occurred and
that no reduction of the carrying value is warranted.
FEDERAL INCOME TAXES
For the successor tax period ended December 31, 1996, Phoenix Life and
Annuity plans to file a consolidated income tax return with Phoenix.
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 unrealized
gains or losses on investments.
36
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. INVESTMENTS
Information pertaining to Phoenix Life and Annuity's investments, net
investment income and unrealized investment gains and losses follows:
FIXED MATURITY INVESTMENTS
At December 31, 1996, all fixed maturity investments were in U.S.
government and agency bonds.
The amortized cost and fair value of these investments, by contractual
maturity, as of December 31, 1996 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
Phoenix Life and Annuity may have the right to put or sell the obligations
back to the issuers.
AMORTIZED FAIR
COST VALUE
(IN THOUSANDS)
Due after one year through five years $ 881 $ 883
Due after five years through ten years 4,580 4,647
------------- -------------
Total $ 5,461 $ 5,530
============= =============
NET INVESTMENT INCOME
The components of net investment income for the period from March 30, 1996
to December 31, 1996 (successor period) and January 1, 1996 to March 29,
1996 (predecessor period) were as follows:
SUCCESSOR PREDECESSOR
PERIOD PERIOD
(IN THOUSANDS)
Fixed maturity investments $ 226
Short-term investments 214 $ 95
-------------- --------------
440 95
Less investment expenses 7
-------------- --------------
Net investment income $ 433 $ 95
============== ==============
37
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
UNREALIZED INVESTMENT GAINS AND LOSSES
Unrealized gains on investments carried at fair value at December 31, 1996
were as follows (in thousands):
Unrealized investment gains $ 69
Deferred income taxes 24
---------------
Net unrealized investment gains $ 45
===============
4. INCOME TAXES
A summary of income taxes in the statement of income for the period from
March 30, 1996 to December 31, 1996 (successor period) is presented below
(in thousands). No income taxes were recorded for the period from January
1, 1996 to March 29, 1996 (predecessor period).
Current income taxes $ 131
Deferred income taxes (2)
-------------
Total $ 129
=============
The income taxes attributable to the successor and predecessor periods are
different than the amounts determined by multiplying income before taxes by
the statutory income tax rate. In the predecessor period, Savers Life was a
consolidated subsidiary of a thrift under the control of the Resolution
Trust Corporation. During the predecessor period, an interagency agreement
between the Resolution Trust Corporation and the Internal Revenue Service
stated that the Internal Revenue Service would not impose income taxes on
consolidated subsidiaries of thrifts under Resolution Trust Corporation
control. Accordingly, no provision for the predecessor period was recorded.
The sources and the tax effect of the differences between the provision and
the result of multiplying the income before taxes by the statutory federal
income tax rate for the periods from March 30, 1996 to December 31, 1996
(successor period) and January 1, 1996 to March 29, 1996 (predecessor
period) were as follows (dollar amounts in thousands):
SUCCESSOR PREDECESSOR
PERIOD PERIOD
Income tax expense at statutory rates $ 123 35 % $ 34 35 %
Goodwill 7 2 %
Other (1) (34) (35)%
------------------- ------------
Income taxes $ 129 37 % $ - 0 %
=================== ============
38
PHOENIX LIFE AND ANNUITY COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC. AS OF MARCH 29, 1996)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability as of December 31, 1996 represents the
tax effects of temporary differences. The components were as follows (in
thousands):
Net unrealized investment gains $ 24
Investments 4
Goodwill (6)
-----------------
Deferred tax liability, net $ 22
=================
5. RELATED PARTY TRANSACTIONS
Phoenix and its affiliates provide services and facilities to Phoenix Life
and Annuity and are reimbursed through a cost allocation process.
Investment related expenses are allocated to Phoenix Life and Annuity from
PM Holdings.
Phoenix Investment Counsel, Inc., a wholly-owned subsidiary of Phoenix Duff
& Phelps Corporation entered into a contract to manage the general account
investments of Phoenix Life and Annuity. PM Holdings owns approximately 60%
of the outstanding common stock of Phoenix Duff & Phelps.
6. STATUTORY FINANCIAL INFORMATION
Phoenix's insurance subsidiaries are required to file annual statements
with state regulatory authorities prepared on an accounting basis
prescribed or permitted by such authorities. As of December 31, 1996,
Phoenix Life and Annuity had no material practices that were not prescribed
by the Insurance Department of the State of Connecticut. Statutory equity
differs from equity reported in accordance with generally accepted
accounting principles for life insurance companies primarily because
investment reserves are based on different assumptions and income tax
expense reflects only taxes paid or currently payable.
The following reconciles the statutory equity and asset valuation reserve
of Phoenix Life and Annuity as reported to regulatory authorities to equity
as reported in these financial statements at December 31, 1996 (in
thousands):
Statutory equity and asset valuation reserve $ 10,398
Goodwill 995
Investment valuation allowances 69
Deferred income tax liability (22)
---------------
Equity, as reported $ 11,440
===============
7. INDEMNIFICATION
Prior to the acquisition, Savers Life had reinsurance contracts with three
unaffiliated reinsurers which it had assumed between 1986 and 1989 and
which it assigned to Winterthur Life Re Insurance Company in October 1995.
Phoenix considers any liability to Phoenix Life and Annuity as a result of
these contracts to be remote and has indemnified Phoenix Life and Annuity.
In addition, under the terms of the stock purchase agreement, Central
United Life has indemnified Phoenix for any liability in excess of $15,000
resulting from these reinsurance contracts.
39
SAVERS LIFE INSURANCE
COMPANY OF AMERICA
REPORT AND FINANCIAL STATEMENTS
STATUTORY BASIS
DECEMBER 31, 1995 AND 1994
40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder and Board of Directors
of Savers Life Insurance Company of America
We have audited the accompanying statements of admitted assets, liabilities and
capital and surplus (statutory basis) of Savers Life Insurance Company of
America as of December 31, 1995 and 1994, and the related statements of income,
of changes in capital and surplus, and of cash flows (statutory basis) for the
years then ended. 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 in accordance with generally accepted auditing
standards. The standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 2, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the State of Missouri
Department of Insurance, which practices differ from generally accepted
accounting principles. The effects on the financial statements of the variances
between the statutory basis of accounting and generally accepted accounting
principles, although not reasonably determinable, are presumed to be material.
Although the Company prepared certain 1994 income statement information in
accordance with generally accepted accounting principles, we were not engaged to
audit, and we did not audit, the effects on the 1994 income statement of those
variances, which are described in Note 11.
In our opinion, because of the effects of the matters referred to in the
preceding paragraph, the financial statements audited by us do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of Savers Life Insurance Company of America at December 31,
1995 and 1994, and the results of its operations and its cash flows for the
years then ended.
Also, in our opinion, the financial statements audited by us present fairly, in
all material respects, the admitted assets, liabilities and capital and surplus
of Savers Life Insurance Company of America at December 31, 1995 and 1994, and
the results of its operations and its cash flows for the years then ended, on
the basis of accounting described in Note 2.
/s/ Price Waterhouse LLP
Kansas City, Missouri
May 24, 1996
SAVERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF ADMITTED ASSETS, LIABILITIES
AND CAPITAL AND SURPLUS - STATUTORY BASIS
- --------------------------------------------------------------------------------
DECEMBER 31,
1995 1994
ADMITTED ASSETS
Cash and investments (Note 3):
Bonds, at amortized cost $ 877,938 $ 118,487,303
Preferred stocks, at cost - 5,365,000
Policy loans - 24,382,991
Cash 1,156,846 10,931,741
Short term investments 3,119,274 17,473,957
------------- -------------
5,154,058 176,640,992
Accrued investment income 5,276 3,230,993
Premiums deferred and uncollected (Note 5) - 2,076,601
Receivable from affiliate (Note 8) 899,598 -
Other assets 1,501 5,883
------------- -------------
Total admitted assets $ 6,060,443 $ 181,954,469
============= =============
LIABILITIES AND CAPITAL AND SURPLUS
Reserves for future policy benefits (Note 4) $ - $ 136,737,303
Policy and contract claims - 991,667
Policyholders' dividend accumulations - 597,758
Dividends payable to policyholders - 105,395
Premium deposits and unearned premiums - 599,464
Amounts withheld or unallocated - 1,818,715
Unearned investment income - 36,258
Amounts payable on reinsurance contracts (Note 4) - 1,584
Accounts payable and accrued expenses 61,830 891,170
Interest maintenance reserve - 6,683,233
Asset valuation reserve - 1,121,895
-------------
-------------
Total liabilities 61,830 149,584,442
------------- -------------
Capital and surplus (Note 6)
Common stock, $100 par, 40,000 shares authorized, 20,000
shares issued and outstanding 2,000,000 2,000,000
Additional paid-in surplus - 38,994,673
Unassigned surplus 3,998,603 (8,624,646)
------------- -------------
Total capital and surplus 5,998,603 32,370,027
------------- -------------
Commitments and contingencies (Notes 4 and 9)
Total liabilities and capital and surplus $ 6,060,433 $ 181,954,469
============= =============
See accompanying notes to financial statements
42
SAVERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF INCOME - STATUTORY BASIS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
Revenues:
Premiums and other considerations $ 10,074,610 $ 12,578,751
Net investment income (Note 3) 7,566,078 10,470,516
Commissions and expense allowances on
reinsurance ceded 5,848,599 87,918
Amortization of interest maintenance reserve 481,218 634,924
Adjustment for liability released from the interest
maintenance reserve 6,179,934 -
Other - 7,812
------------- -------------
Total revenues 30,150,439 23,779,921
------------- -------------
Benefits and expenses:
Death benefits 6,071,374 6,643,367
Accident and health benefits 136,096 195,051
Surrender and other policy benefits 9,066,311 10,054,134
Increase (decrease) in reserves for future policy
benefits (Note 4) (4,994,042) 881,488
Increase in other policyholder funds 101,967 12,268
Commissions and expense allowances on reinsurance
assumed (Note 4) 914,697 1,187,262
General insurance expenses 1,938,053 2,226,458
Insurance taxes, licenses and fees 56,166 317,837
Other 68,378 (111,040)
------------- -------------
Total benefits and expenses $ 13,359,000 $ 21,406,825
============= =============
Income before dividends to policyholders,
realized losses and provision for federal
income tax 16,791,439 ` 2,373,096
Dividends to policyholders 134,883 111,283
Net realized capital losses (2,301) -
Provision for federal income tax (Note 7) - (1,142,428)
------------- -------------
Net income $ 16,654,255 $ 3,404,241
============= =============
See accompanying notes to financial statements
43
SAVERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF CHANGES IN CAPITAL AND SURPLUS - STATUTORY BASIS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
Common stock:
Beginning and end of year $ 2,000,000 $ 2,000,000
------------- -------------
Additional paid-in surplus:
Beginning of year 38,994,673 35,994,673
(Distribution) contribution of surplus (38,994,673) 3,000,000
------------- -------------
End of year - 38,994,673
------------- -------------
Unassigned surplus:
Beginning of year (8,624,646) (11,643,033)
Net income 16,654,255 3,404,241
Increase (decrease) in surplus:
Change in unrealized gain (loss) 224,296 (156,162)
Change in nonadmitted assets 1,028,943 (98,684)
Change in asset valuation reserve 1,121,895 18,621
Change in reserve valuation basis - (149,629)
Dividends to stockholders (6,005,327) -
Other (400,813) -
------------- -------------
End of year 3,998,603 (8,624,646)
------------- -------------
Total capital and surplus end of year $ 5,998,603 $ 32,370,027
============= =============
See accompanying notes to financial statements
44
SAVERS LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF CASH FLOWS - STATUTORY BASIS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
Premiums and other considerations $ 10,807,621 $ 13,170,548
Commissions and expense allowances on reinsurance
ceded 56,479 80,459
Investment income received 8,923,793 11,431,377
Other income received - 7,812
------------- -------------
Total receipts from operations 19,787,893 24,690,196
------------- -------------
Life and accident and health claims paid 6,052,984 7,826,266
Surrender and other benefits paid 9,122,209 10,014,197
Commissions, other expenses and taxes paid 3,662,022 3,739,107
Federal income taxes refunded - (400,222)
Decrease in policy loans (24,866,605) (1,929,048)
------------- -------------
Total payments from operations (6,029,390) 19,250,300
------------- -------------
Net cash from operations 25,817,283 5,439,896
------------- -------------
Proceeds from investments sold:
Bonds 116,944,146 8,096,094
Preferred stocks 5,733,750 8,423,055
Other invested assets - 266,361
Capital and surplus (distribution) contribution (38,994,673) 3,000,000
Other cash provided 446,457 906,937
------------- -------------
Total cash provided 84,129,680 20,692,447
------------- -------------
Cost of investments acquired:
Bonds 876,753 5,509,771
Preferred stocks - 1,322,500
Other cash applied, net 133,199,788 935,091
------------- -------------
Total cash applied 134,076,541 7,767,362
------------- -------------
Net change in cash and short-term investments (24,129,578) 18,364,981
Cash and short-term investments beginning of year 28,405,698 10,040,717
------------- -------------
Cash and short-term investments end of year $ 4,276,120 $ 28,405,698
============= =============
See accompanying notes to financial statements
45
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Savers Life Insurance Company of America (the Company) was incorporated on
November 2, 1981 as a stock life insurance company under the laws of the
State of Missouri. Prior to October 1995, all of the outstanding stock of
the Company was owned by Franklin Insurance Incorporated (FII) which, prior
to July 16, 1992, was an indirect wholly-owned subsidiary of Franklin
Savings Association (Franklin). On July 16, 1992, Franklin Federal Savings
Association was organized as successor to Franklin. The Resolution Trust
Corporation (RTC), an agency of the United States Government, was
conservator and receiver of Franklin. On October 30, 1995, all of the
common stock of the Company was sold to Central United Life Insurance
Company (Central). At closing, the Company assigned all of its rights,
duties and obligations under all of its existing reinsurance agreements to
an unaffiliated company (see Note 4).
On February 1, 1996, Central executed a stock purchase agreement to sell
all of the common stock of the Company to an unaffiliated party. The sale
was approved and closed in March 1996. Concurrent with the sale, all
Central officers and directors resigned. Subsequently, the Company amended
its corporate by-laws and articles of incorporation to change its name to
Phoenix Life and Annuity Company.
The Company is licensed to market life, annuity and accident and health
products in 31 states and the District of Columbia and is subject to their
regulatory requirements in the conduct of its business.
2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
The significant accounting practices reflected in, and the basis of
presenting, the statutory financial statements of the Company are
summarized below.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of admitted
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts and
expenses during the reporting period. Actual results could differ from
those estimates.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
the accounting practices prescribed or permitted by the State of Missouri
Department of Insurance. These accounting practices differ in some respects
from principles used in determining financial position and results of
operations in accordance with generally accepted accounting principles
(GAAP). These differences include:
A. Commissions and other policy acquisition costs are charged to
operations as incurred instead of being deferred and amoritized against
the related policy premiums which are taken into income over the period
covered by the policies.
B. The provision for income tax expense represents federal income taxes
currently payable. In certain cases, items of income and expense are
reported in different accounting periods for statutory reporting
purposes than for federal income tax purposes. The tax effects of these
"temporary differences" are not reported in the accompanying financial
statements.
C. Debt securities are classified into three categories under GAAP; held
to maturity, available for sale and trading. Fixed maturities held to
maturity are stated at amortized cost; fixed maturities available for
sale are stated at market value and the resulting unrealized gains or
losses, net of applicable income taxes, are credited or charged to
equity; and fixed maturities held for trading are reported at market
value and the resulting unrealized gains or losses are reported in
earnings. Under statutory accounting practices, all fixed maturity
securities are stated at amoritized cost.
46
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
D. An asset valuation reserve (AVR) is required under statutory
accounting principles; no such reserve is required under GAAP. This
reserve, if any, is recorded as a liability and is provided by a direct
charge to surplus.
E. Pursuant to statutory accounting practices, interest-related realized
capital gains and losses on fixed income investments, net of the
related federal income tax, are deferred and amoritized over the
remaining lives of the applicable investments, as if the investments
were still owned. Net deferred realized gains and losses are recorded
as the interest maintenance reserve (IMR). If the net IMR balance is an
asset, the amount is recorded as a non-admitted asset. No such reserve
is required under GAAP.
F. Policy reserves are based on statutory mortality and interest
requirements and without consideration of withdrawals, which may differ
from GAAP reserves based on more realistic estimates of mortality,
interest and withdrawals.
G. The balance sheet is reported net of reinsurance; under GAAP, the
balance sheet reflects reserve credits or reinsurance coded as assets
under GAAP. In addition, certain transactions are accounted for as
deposits and not as reinsurance.
H. Certain assets designated as nonadmitted assets are charged against
surplus versus capitalization of these costs and depreciation over the
assets' estimated lives.
I. Unrealized investment gains and losses are credited or charged directly
to unassigned surplus without provision for deferred federal income
taxes.
J. The provision for participating policy dividends is contractually
required by the ceding company plus a provision for such dividends
expected to be paid in the following year, rather than being provided
for ratably over the premium-paying period in accordance with dividend
scales contemplated at the time the policies were issued.
REVENUE RECOGNITION AND RELATED EXPENSES
Premium income is recorded as earned when received, adjusted for advance
premiums and premiums deferred and uncollected. Premium income includes
reinsurance assumed and is reduced for premiums ceded. Increases in policy
benefit reserves and policy acquisition and other period expenses are
charged operations as incurred. Reinsurance commissions and expense
allowances are recognized as revenue when realized in accordance with the
contract terms.
INVESTMENTS
Investments are valued as prescribed by the NAIC. Bonds and short-term
investments are generally carried at amortized cost, preferred stocks in
good standing at cost and policy loans at the unpaid principal amount.
The aggregate market value of the bond portfolio is greater than amortized
cost at December 31, 1995. No provision, other than the AVR, has been made
for possible losses as management believes declines in market value, if
any, are temporary. Investments with an aggregate carrying value of
$1,845,990 were on deposit with regulatory agencies of certain states as of
December 31, 1995.
Realized and unrealized capital gains and losses on investments are
determined on the basis of identified original cost for stocks and
identified amortized cost for bonds. Bond premiums and discounts are
amortized by the scientific (yield) method and are charged or credited to
net investment income.
In 1995 and 1994, amortization of IMR was determined using the group
method.
47
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
RESERVE FOR FUTURE POLICY BENEFITS
Policy reserves for life insurance policies are based on actuarial
mortality and interest tables which have been approved by the State of
Missouri Department of Insurance. The mortality tables and interest
assumptions used vary from the 1941 CSO table with 3% interest to the 1980
CSO table with 6% interest. The Company computes life insurance reserves
primarily on a modified reserve basis. The effect of the use of a modified
reserve basis is to partially offset the effect of immediately expensing
acquisition costs by providing a policy reserve increase in the first
policy year which is generally less than the reserve increase in renewal
years.
The Company waives the deduction of deferred fractional premiums upon death
of the insured. Surrender values are not guaranteed in excess of the
legally computed reserves. Substandard reserves are determined by computing
the regular mean reserve for the plan of the rated age and holding an
additional one-half of extra substandard premium.
In response to an actuarial guideline issued in 1994, the Company recorded
20% of the total additional reserve associated with the immediate payment
of claims on life insurance contracts in both 1994 and 1995.
POLICY AND CONTRACT CLAIMS
The liability for unpaid claims is based upon estimates of payments to be
made for individual claims reported but not settled prior to year-end. An
additional liability is estimated on the basis of experience for incurred
but not reported claims at year-end.
REINSURANCE
Premiums, expenses, policy and contract claims, and the reserve for future
policy benefits include amounts related to reinsurance assumed and are
stated net after deduction of amounts ceded.
PARTICIPATING POLICIES
Participating life insurance policies represent less than 1% of the
ordinary life insurance inforce at December 31, 1994. The dividends paid
and accrued are calculated in accordance with the terms of the reinsurance
agreement (see Note 4).
NONADMITTED ASSETS
Certain assets designated as nonadmitted assets are excluded from the
statutory statements in accordance with the laws and regulations of the
State of Missouri Department of Insurance. These assets totaling
approximately $0.1 million and $1.2 million at December 31, 1995 and 1994,
respectively, were principally comprised of unsecured receivables and other
assets not readily convertible to cash. Changes in nonadmitted assets are
credited or charged directly to unassigned surplus.
INCOME TAXES
The provision for income tax expense represents income taxes currently
payable.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair values
of each class of financial instrument. The Company does not anticipate that
any significant assets will be disposed at those estimated fair values.
Bonds: Fair values are based on quoted market prices, where available.
Preferred stocks: Fair values are based on quoted market prices.
Policy loans: Policy loans are generally issued with coupon rates below
market rates and are considered early payment on the life benefit. As such,
the carrying amount of these financial instruments is a reasonable estimate
of their fair value.
48
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
Cash and short-term investments: The carrying amounts for these instruments
approximate fair value.
The estimated fair values of the Company's financial instruments at
December 31 are as follows:
1995 1994
-------------------------------- ----------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
Financial assets:
Bonds $ 877,938 $ 891,000 $ 118,487,303 $ 107,630,275
Preferred stocks - - 5,365,000 5,492,500
Policy loans - - 24,382,991 24,382,991
Cash 1,156,846 1,156,846 10,931,741 10,931,741
Short-term investments 3,119,274 3,119,274 17,473,957 17,473,957
3. INVESTMENT SECURITIES
The carrying value and estimated market value of investments in bonds and
preferred stocks at December 31, are summarized below:
1995
--------------------------------------------------------------------------
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
Government securities $ 877,938 $ 13,062 $ - $ 891,000
============= ============== ============== =============
1994
--------------------------------------------------------------------------
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED MARKET
VALUE GAINS LOSSES VALUE
Government securities $ 11,768,278 $ 2,072 $ 377,981 $ 11,392,369
Mortgage-backed
securities 60,184,380 130 6,306,570 53,877,940
Corporate securities 46,534,645 67,973 4,242,652 42,359,966
------------- -------------- -------------- -------------
$ 118,487,303 $ 70,175 $ 10,927,203 $ 107,630,275
============= ============== ============== =============
Preferred stocks $ 5,365,000 $ 457,500 $ 330,000 $ 5,492,500
============= ============== ============== =============
The carrying value and estimated market value of bonds at December 31,
1995, by contractual maturity, as 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.
ESTIMATED
CARRYING MARKET
VALUE VALUE
Due after one year through five years $ 877,938 $ 891,000
============= =============
49
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
Proceeds from the sales of investments during 1995 and 1994 and the related
realized gains and losses thereon, are as follows:
1995
--------------------------------------------------------------------------
REALIZED REALIZED
PROCEEDS GAINS LOSSES NET
Bonds $ 16,726,332 $ - $ (390,831) $ (390,831)
Preferred stocks 1,467,500 368,750 - 368,750
Short-term investments - - (2,301) (2,301)
Less net realized
losses transferred to
IMR 22,081
-------------
$ (2,301)
=============
1994
--------------------------------------------------------------------------
REALIZED REALIZED
PROCEEDS GAINS LOSSES NET
Bonds $ 8,096,094 $ - $ - $ -
Preferred stocks 8,423,055 2,648,680 18,750 2,629,930
Other invested assets 266,361 - 216,155 (216,155)
Less net realized
gains transferred to
IMR (2,413,775)
-------------
$ -
=============
Net investment income for years ended December 31, is comprised of the
following:
1995 1994
Bonds $ 5,446,434 $ 7,458,894
Preferred stocks 281,549 633,774
Policy loans 668,269 1,697,196
Short-term investments 380,340 429,111
Cash and other 875,754 337,247
------------- --------------
Total investment income 7,652,346 10,556,222
Less investment expenses (86,268) (85,706)
------------- --------------
Net investment income $ 7,566,078 $ 10,470,516
============= ==============
4. RESERVES AND REINSURANCE
The reserve for future policy benefits at December 31, is comprised of the
following:
1995 1994
Life insurance $ - $ 139,282,494
Accident and health - 4,414,084
Less reinsurance - Life - (2,680,993)
Less reinsurance - A&H - (4,278,282)
------------- --------------
$ - $ 136,737,303
============= ==============
50
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
Effective September 28, 1989, the Company entered into a 100% coinsurance
agreement (the Agreement) with SunAmerica Life Insurance Company
(SunAmerica). At December 31, 1994, reserves assumed under the Agreement
comprise 93% of total reserves. The Company has two other 100% coinsurance
agreements, effective in 1986, which comprise the remainder of the reserves
assumed through indemnity reinsurance at December 31, 1994. The Company's
indemnity reinsurance agreements are collectively referred to as the
Coinsurance Agreements.
In October 1995, the Company entered into a series of transactions (the
Transfer) to assign the Coinsurance Agreements to Winterthur Life Re
Insurance Company (Winterthur). The Company, SunAmerica and Winterthur
entered into an agreement to assign the rights, duties and obligations
under the Agreement. In addition, the Company and Winterthur entered into a
separate agreement to assign the rights, duties and obligations under the
remaining indemnity reinsurance agreements. Under the terms of the
agreements, the Company transferred policyholder benefit reserves and other
insurance related liabilities totaling $135,808,246. Concurrently, the
Company transferred cash, securities and other insurance related assets
totaling $141,013,760. In return, the Company received $11,000,000 in cash
and recorded a $5,794,487 gain on the assignment of Coinsurance Agreements.
The gain was recorded as commissions and expense allowances on reinsurance
ceded in the Company's statement of income. The assignments were recorded
as if the Coinsurance Agreements were terminated and the Company was
released from any future duties or obligations therein. Management believes
the Company has no further liabilities or obligations with respect to the
Coinsurance Agreements.
The following summarizes amounts for reinsurance assumed and ceded as of
December 31:
1995 1994
-------------------------------- ----------------------------------
ASSUMED CEDED ASSUMED CEDED
Premiums deferred and
uncollected $ - $ - $ 2,041,204 $ (35,397)
Reserves for future
policy benefits - - 143,696,578 6,959,275
Policy and contract claim
liability - - 1,148,893 157,226
Premiums and other
considerations 12,023,147 1,611,019 14,708,939 2,130,188
Death and accident
and health benefits 8,826,608 2,577,616 9,216,298 2,377,880
Insurance in force subject
to reinsurance (in 000's) - - 1,452,073 344,994
The Company is liable for reinsurance ceded to other companies in the event
such companies are unable to pay their portion of the policy benefits.
5. PREMIUMS DEFERRED AND UNCOLLECTED
Below is a summary of premiums deferred and uncollected as of December 31:
1995 1994
Gross $ - $ 2,072,432
Loading - 4,169
------------- --------------
Net $ - $ 2,076,601
============= ==============
51
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
6. CAPITAL AND SURPLUS AND RESTRICTIONS
Under the insurance laws of the State of Missouri Department of Insurance,
the Company is required to maintain minimum statutory capital and surplus
of $1,200,000. Prior to the transfer, the Company was required to maintain
minimum capital and surplus equal to the greater of 125% of NAIC Company
Action Level Risk Based Capital and the minimum capital and surplus
requirements of any jurisdiction in which there were policies in force. The
Company determined this amount to be $6.0 million (based upon Florida
requirements) at the end of 1994. Dividend distributions to the stockholder
exceeding the greater of statutory net gain from operations during the
preceding year or 10% of capital and surplus of the preceding year are
subject to the prior approval of the State of Missouri Department of
Insurance.
The NAIC adopted the "Risk Based Capital for Life and/or Health Insurers
Model Act" (RBC) which became effective December 31, 1993, to evaluate the
adequacy of statutory capital and surplus in relation to a company's
investment and insurance risks. The RBC formula will be used by the states
as an early warning tool to identify weakly capitalized companies for the
purpose of initiating regulatory action. The NAIC's RBC model act provides
for four levels of potential involvement by state regulators for
inadequately capitalized insurance companies as follows: (1) Company Action
Level, (2) Regulatory Action Level, (3) Authorized Control Level, and (4)
Mandatory Control Level. Generally, action will be triggered when the ratio
of a company's total adjusted capital (defined as the total of its
statutory capital, surplus and AVR to its RBC) falls below 200%. Based upon
the Company's calculations, its RBC ratio exceeded 200% at December 31,
1995.
The American Institute of Certified Public Accountants Statement of
Position (SOP) 94-5. "Disclosure of Certain Matters in the Financial
Statements of Insurance Enterprises," requires insurance enterprises to
disclose permitted statutory accounting practices which have a material
effect on capital and surplus or RBC. Permitted practices encompass those
practices not prescribed by state laws, regulations and administrative
rules or by existing NAIC authoritative literature. The Company does not
have any statutory accounting practices which are required to be disclosed
under SOP 94-5.
During 1995, the Company paid $45,000,000 of extraordinary dividends to
FII. The dividends were approved by the State of Missouri Department of
Insurance.
7. INCOME TAXES
Prior to July 1, 1993, a written tax sharing agreement existed between FII
and the Company, whereby the Company agreed to pay its parent, FII, the
entire amount of tax liability as determined on a separate company basis.
The tax sharing agreement was canceled effective July 1, 1993 as a result
of an interagency agreement between the RTC and the IRS. In general, the
interagency agreement stated that the IRS would not collect tax liabilities
from consolidated subsidiaries of thrifts under RTC control. Uncertainty
surrounding certain provisions of the interagency agreement led the Company
to record its tax provision for the last two quarters of 1993 as if the tax
allocation agreement remained in effect. In January 1995, evidence was
obtained which mitigated the uncertainties surrounding the interagency
agreement; accordingly, the federal income tax provision on gains from
operations and capital gains related to the last two quarters of 1993, in
the amount of $1.1 million was reversed into fourth quarter 1994
operations. Accordingly, the Company recorded no federal income taxes for
the year ended December 31, 1994 and through the date of the Transfer.
The Company will file a separate federal income tax return in 1995.
8. RELATED PARTIES
Receivable from affiliate at December 31, 1995 primarily consists of
amounts due from Central for certain processing costs incurred by the
Company on behalf of Central. The receivable was liquidated in January
1996.
52
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
The Company has been named as defendant in lawsuits and arbitration arising
from the normal course of business. Management does not expect that these
actions will result in a material loss to the Company.
10. RECONCILIATION OF ANNUAL STATEMENT
The following is a reconciliation of statutory capital and surplus as
reported in the Company's 1994 NAIC Annual Statement to that reported in
the accompanying financial statements:
1994
Capital and surplus as reported in the
NAIC Annual Statement $ 32,440,508
Reserve related adjustment to net income 9,145
Policy contract claim related adjustment
to net income 200,000
Premium suspense related adjustment
to net income 287,811
Deferred premium related adjustment
to net income 149,930
Nonadmitted policy overloans (259,318)
Nonadmitted due premium (308,420)
Change in valuation basis (149,629)
---------------
Capital and surplus as reported in the
accompanying financial statements $ 32,370,027
===============
53
SAVERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS - STATUTORY BASIS
- --------------------------------------------------------------------------------
11. RECONCILIATION OF 1994 NET INCOME (UNAUDITED)
The following is an unaudited reconciliation of net income as reported in
these financial statements to unaudited net income in accordance with
generally accepted accounting principles.
Net income as reported in the accompanying
financial statements $ 3,404,241
Unaudited adjustments to conform with
generally accepted accounting principles:
Amortization of prepaid reinsurance commission and
expense allowances (2,561,073)
Change in reserves for future policy benefits 2,977,656
Change in deferred premium accrual (41,295)
Realized gain 1,864,557
Other (1,858)
-----------------
As reported in accordance with generally accepted
accounting principles (unaudited) $ 5,624,228
-----------------
12. SUBSEQUENT EVENTS
On January 23, 1996, the Company declared a common stock dividend of 5,000
shares to Central. The Company transferred $500,000 from unassigned surplus
to common stock and issued 5,000 previously authorized shares of common
stock. The net effect was a $500,000 decrease in unassigned surplus and a
corresponding increase in common stock.
On February 1, 1996, Central executed a stock purchase agreement to sell
all of the common stock of the Company to an unaffiliated party. The sale
was approved and closed in March 1996. Concurrent with the sale, all
Central officers and directors resigned. Subsequently, the Company amended
its corporate by-laws and articles of incorporation to change its name to
Phoenix Life and Annuity Company.
54
PHOENIX LIFE AND
ANNUITY COMPANY
VARIABLE UNIVERSAL LIFE ACCOUNT
THE EFFECTIVE DATE OF THE PHOENIX LIFE AND ANNUITY VARIABLE UNIVERSAL LIFE
ACCOUNT IS THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, THEREFORE,
FINANCIAL DATA IS NOT AVAILABLE.
55
APPENDIX A
THE GUARANTEED INTEREST ACCOUNT
Contributions to the Guaranteed Interest Account ("GIA") under the Policy
and transfers to the GIA become part of the Phoenix General Account (the
"General Account"), which supports insurance and annuity obligations. Because of
exemptive and exclusionary provisions, interest in the General Account has not
been registered under the Securities Act of 1933 ("1933 Act") nor is the General
Account registered as an investment company under the Investment Company Act of
1940 ("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 Securities and Exchange Commission 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 Phoenix 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. Phoenix 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 Phoenix and
the contracts participating in the General Account, in accordance with the terms
of such contracts.
Investment income from the General Account allocated to Phoenix 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 Phoenix. However, Phoenix 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%.
Phoenix 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.
Bi-weekly, Phoenix will set the excess interest rate, if any, that will
apply to amounts deposited to the GIA. That rate will remain in effect for such
deposits for an initial guarantee period of one full year from the date of
deposit. Upon expiration of the initial one-year guarantee period (and each
subsequent one-year guarantee period thereafter), the rate to be applied to any
deposits whose guaranteed period has just ended will be the same rate as is
applied to new deposits allocated at that time to the GIA. This rate will
likewise remain in effect for a guarantee period of one full year from the date
the new rate is applied.
Excess interest, if any, will be determined by Phoenix based on information
as to expected investment yields. Some of the factors that Phoenix 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 PHOENIX 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.
Phoenix 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 Phoenix'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. Phoenix
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 Phoenix 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, ONE TRANSFER PER CONTRACT YEAR IS ALLOWED FROM THE GIA. THE AMOUNT
WHICH CAN BE TRANSFERRED IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
CONTRACT VALUE IN THE GIA AT THE TIME OF THE TRANSFER. UNDER THE SYSTEMATIC
TRANSFER PROGRAM, TRANSFERS OF APPROXIMATELY EQUAL AMOUNTS MAY BE MADE OVER A
MINIMUM 18-MONTH PERIOD. NON-SYSTEMATIC TRANSFERS FROM THE GIA WILL BE
EFFECTUATED ON THE DATE OF RECEIPT BY VPMO, UNLESS OTHERWISE REQUESTED BY THE
CONTRACT OWNER.
56
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.
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 (or .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 .72%
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 .21%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Adviser 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, 1996,
total operating expenses for the Growth, Multi-Sector, Allocation, Money Market,
Balanced, Real Estate, Theme, Asia and International Series would have been
approximately .72%, .67%, .70%, .55%, .68%, 1.43%, 1.28%, 2.87% and 1.04%,
respectively, of the average net assets of the Series. (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 -1.72%, 4.23% and 10.19%, respectively (applicable for
the first 15 Policy Years and -1.18%, 4.81% and 10.79% respectively after the
15th Policy Year). For individual illustrations, interest rates ranging between
0% and 12% may be selected in place of the 0%, 6% and 12% rates.
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 Charges--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.
57
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 1 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
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 1,282 397 100,000 1,414 529 100,000 1,551 666 100,000
3 1,000 3,310 1,968 661 100,000 2,231 924 100,000 2,517 1,210 100,000
4 1,000 4,526 2,632 1,325 100,000 3,074 1,767 100,000 3,571 2,264 100,000
5 1,000 5,802 3,273 1,966 100,000 3,940 2,633 100,000 4,721 3,414 100,000
6 1,000 7,142 3,890 2,727 100,000 4,830 3,668 100,000 5,976 4,814 100,000
7 1,000 8,549 4,481 3,463 100,000 5,743 4,726 100,000 7,345 6,328 100,000
8 1,000 10,027 5,046 4,174 100,000 6,680 5,807 100,000 8,840 7,968 100,000
9 1,000 11,578 5,584 5,149 100,000 7,640 7,204 100,000 10,472 10,037 100,000
10 1,000 13,207 6,096 6,096 100,000 8,624 8,624 100,000 12,256 12,256 100,000
11 1,000 14,917 6,585 6,585 100,000 9,637 9,637 100,000 14,213 14,213 100,000
12 1,000 16,713 7,051 7,051 100,000 10,682 10,682 100,000 16,361 16,361 100,000
13 1,000 18,599 7,495 7,495 100,000 11,758 11,758 100,000 18,720 18,720 100,000
14 1,000 20,579 7,916 7,916 100,000 12,868 12,868 100,000 21,314 21,314 100,000
15 1,000 22,657 8,314 8,314 100,000 14,012 14,012 100,000 24,167 24,167 100,000
16 1,000 24,840 8,738 8,738 100,000 15,276 15,276 100,000 27,459 27,459 100,000
17 1,000 27,132 9,138 9,138 100,000 16,587 16,587 100,000 31,104 31,104 100,000
18 1,000 29,539 9,510 9,510 100,000 17,944 17,944 100,000 35,141 35,141 100,000
19 1,000 32,066 9,854 9,854 100,000 19,349 19,349 100,000 39,615 39,615 100,000
20 1,000 34,719 10,166 10,166 100,000 20,802 20,802 100,000 44,576 44,576 100,000
@ 65 1,000 69,761 10,629 10,629 100,000 38,040 38,040 100,000 136,375 136,375 166,378
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 2 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
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 0 100,000 556 0 100,000 599 0 100,000
2 1,000 2,153 1,157 272 100,000 1,281 396 100,000 1,410 525 100,000
3 1,000 3,310 1,782 475 100,000 2,028 721 100,000 2,294 987 100,000
4 1,000 4,526 2,385 1,078 100,000 2,795 1,488 100,000 3,258 1,951 100,000
5 1,000 5,802 2,966 1,659 100,000 3,583 2,276 100,000 4,308 3,001 100,000
6 1,000 7,142 3,524 2,362 100,000 4,392 3,230 100,000 5,452 4,290 100,000
7 1,000 8,549 4,056 3,039 100,000 5,219 4,202 100,000 6,698 5,681 100,000
8 1,000 10,027 4,563 3,691 100,000 6,066 5,193 100,000 8,057 7,184 100,000
9 1,000 11,578 5,044 4,608 100,000 6,931 6,496 100,000 9,537 9,102 100,000
10 1,000 13,207 5,497 5,497 100,000 7,816 7,816 100,000 11,154 11,154 100,000
11 1,000 14,917 5,921 5,921 100,000 8,717 8,717 100,000 12,918 12,918 100,000
12 1,000 16,713 6,314 6,314 100,000 9,635 9,635 100,000 14,843 14,843 100,000
13 1,000 18,599 6,675 6,675 100,000 10,568 10,568 100,000 16,946 16,946 100,000
14 1,000 20,579 7,003 7,003 100,000 11,517 11,517 100,000 19,246 19,246 100,000
15 1,000 22,657 7,294 7,294 100,000 12,478 12,478 100,000 21,762 21,762 100,000
16 1,000 24,840 7,591 7,591 100,000 13,528 13,528 100,000 24,654 24,654 100,000
17 1,000 27,132 7,846 7,846 100,000 14,595 14,595 100,000 27,839 27,839 100,000
18 1,000 29,539 8,052 8,052 100,000 15,675 15,675 100,000 31,349 31,349 100,000
19 1,000 32,066 8,205 8,205 100,000 16,765 16,765 100,000 35,221 35,221 100,000
20 1,000 34,719 8,298 8,298 100,000 17,858 17,858 100,000 39,494 39,494 100,000
@ 65 1,000 69,761 4,144 4,144 100,000 27,807 27,807 100,000 118,357 118,357 144,396
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 1 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
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 0 100,000 695 0 100,000
2 1,000 2,153 1,335 481 100,000 1,470 616 100,000 1,611 757 100,000
3 1,000 3,310 2,046 851 100,000 2,317 1,122 100,000 2,611 1,415 100,000
4 1,000 4,526 2,736 1,541 100,000 3,191 1,995 100,000 3,703 2,508 100,000
5 1,000 5,802 3,402 2,207 100,000 4,090 2,894 100,000 4,895 3,700 100,000
6 1,000 7,142 4,045 2,981 100,000 5,015 3,951 100,000 6,197 5,133 100,000
7 1,000 8,549 4,661 3,729 100,000 5,965 5,032 100,000 7,618 6,686 100,000
8 1,000 10,027 5,253 4,452 100,000 6,941 6,140 100,000 9,171 8,370 100,000
9 1,000 11,578 5,820 5,420 100,000 7,944 7,545 100,000 10,870 10,470 100,000
10 1,000 13,207 6,363 6,363 100,000 8,977 8,977 100,000 12,731 12,731 100,000
11 1,000 14,917 6,888 6,888 100,000 10,047 10,047 100,000 14,777 14,777 100,000
12 1,000 16,713 7,395 7,395 100,000 11,155 11,155 100,000 17,028 17,028 100,000
13 1,000 18,599 7,884 7,884 100,000 12,303 12,303 100,000 19,505 19,505 100,000
14 1,000 20,579 8,356 8,356 100,000 13,492 13,492 100,000 22,233 22,233 100,000
15 1,000 22,657 8,810 8,810 100,000 14,725 14,725 100,000 25,238 25,238 100,000
16 1,000 24,840 9,297 9,297 100,000 16,091 16,091 100,000 28,707 28,707 100,000
17 1,000 27,132 9,767 9,767 100,000 17,516 17,516 100,000 32,554 32,554 100,000
18 1,000 29,539 10,219 10,219 100,000 19,001 19,001 100,000 36,821 36,821 100,000
19 1,000 32,066 10,652 10,652 100,000 20,549 20,549 100,000 41,553 41,553 100,000
20 1,000 34,719 11,065 11,065 100,000 22,163 22,163 100,000 46,806 46,806 100,000
@ 65 1,000 69,761 13,892 13,892 100,000 42,753 42,753 100,000 144,062 144,062 175,757
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 2 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
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 1,326 472 100,000 1,457 604 100,000
3 1,000 3,310 1,844 648 100,000 2,095 900 100,000 2,368 1,173 100,000
4 1,000 4,526 2,466 1,271 100,000 2,887 1,691 100,000 3,361 2,165 100,000
5 1,000 5,802 3,066 1,871 100,000 3,699 2,504 100,000 4,442 3,247 100,000
6 1,000 7,142 3,642 2,578 100,000 4,533 3,470 100,000 5,622 4,558 100,000
7 1,000 8,549 4,193 3,260 100,000 5,387 4,455 100,000 6,906 5,974 100,000
8 1,000 10,027 4,718 3,917 100,000 6,262 5,461 100,000 8,307 7,506 100,000
9 1,000 11,578 5,219 4,819 100,000 7,159 6,759 100,000 9,837 9,437 100,000
10 1,000 13,207 5,695 5,695 100,000 8,079 8,079 100,000 11,511 11,511 100,000
11 1,000 14,917 6,147 6,147 100,000 9,024 9,024 100,000 13,342 13,342 100,000
12 1,000 16,713 6,574 6,574 100,000 9,992 9,992 100,000 15,349 15,349 100,000
13 1,000 18,599 6,975 6,975 100,000 10,985 10,985 100,000 17,547 17,547 100,000
14 1,000 20,579 7,348 7,348 100,000 12,002 12,002 100,000 19,957 19,957 100,000
15 1,000 22,657 7,693 7,693 100,000 13,043 13,043 100,000 22,602 22,602 100,000
16 1,000 24,840 8,053 8,053 100,000 14,187 14,187 100,000 25,646 25,646 100,000
17 1,000 27,132 8,382 8,382 100,000 15,364 15,364 100,000 29,010 29,010 100,000
18 1,000 29,539 8,677 8,677 100,000 16,572 16,572 100,000 32,727 32,727 100,000
19 1,000 32,066 8,932 8,932 100,000 17,810 17,810 100,000 36,838 36,838 100,000
20 1,000 34,719 9,149 9,149 100,000 19,080 19,080 100,000 41,390 41,390 100,000
@ 65 1,000 69,761 8,644 8,644 100,000 33,735 33,735 100,000 125,895 125,895 153,592
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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%.
61
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 1 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
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 0 100,620 665 0 100,665
2 1,000 2,153 1,279 393 101,279 1,410 525 101,410 1,547 661 101,547
3 1,000 3,310 1,961 654 101,961 2,223 916 102,223 2,507 1,200 102,508
4 1,000 4,526 2,619 1,312 102,620 3,058 1,751 103,059 3,553 2,246 103,554
5 1,000 5,802 3,253 1,946 103,254 3,915 2,608 103,916 4,691 3,384 104,692
6 1,000 7,142 3,861 2,699 103,862 4,793 3,631 104,794 5,930 4,768 105,930
7 1,000 8,549 4,442 3,424 104,442 5,691 4,673 105,691 7,276 6,259 107,276
8 1,000 10,027 4,995 4,122 104,995 6,608 5,735 106,608 8,740 7,868 108,741
9 1,000 11,578 5,518 5,082 105,518 7,543 7,107 107,543 10,332 9,897 110,333
10 1,000 13,207 6,011 6,011 106,012 8,496 8,496 108,497 12,065 12,065 112,065
11 1,000 14,917 6,480 6,480 106,481 9,473 9,473 109,474 13,957 13,957 113,957
12 1,000 16,713 6,924 6,924 106,925 10,474 10,474 110,475 16,023 16,023 116,024
13 1,000 18,599 7,343 7,343 107,344 11,500 11,500 111,501 18,282 18,282 118,282
14 1,000 20,579 7,737 7,737 107,738 12,551 12,551 112,551 20,751 20,751 120,752
15 1,000 22,657 8,105 8,105 108,106 13,626 13,626 113,626 23,452 23,452 123,453
16 1,000 24,840 8,495 8,495 108,496 14,809 14,809 114,809 26,554 26,554 126,555
17 1,000 27,132 8,857 8,857 108,858 16,025 16,025 116,025 29,966 29,966 129,967
18 1,000 29,539 9,188 9,188 109,188 17,271 17,271 117,272 33,718 33,718 133,718
19 1,000 32,066 9,486 9,486 109,487 18,548 18,548 118,549 37,844 37,844 137,844
20 1,000 34,719 9,748 9,748 109,749 19,853 19,853 119,853 42,381 42,381 142,381
@ 65 1,000 69,761 9,374 9,374 109,374 33,499 33,499 133,499 121,494 121,494 221,495
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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%.
62
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 2 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
MALE 35 NEVERSMOKE
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 0 100,512 554 0 100,555 598 0 100,598
2 1,000 2,153 1,154 269 101,155 1,277 392 101,278 1,406 521 101,406
3 1,000 3,310 1,775 468 101,775 2,019 712 102,020 2,285 978 102,285
4 1,000 4,526 2,373 1,066 102,374 2,781 1,474 102,781 3,241 1,934 103,241
5 1,000 5,802 2,948 1,640 102,948 3,560 2,253 103,561 4,279 2,972 104,280
6 1,000 7,142 3,497 2,335 103,498 4,357 3,195 104,358 5,408 4,246 105,408
7 1,000 8,549 4,020 3,002 104,020 5,170 4,152 105,170 6,632 5,615 106,633
8 1,000 10,027 4,515 3,643 104,516 5,998 5,126 105,999 7,963 7,090 107,963
9 1,000 11,578 4,981 4,546 104,982 6,840 6,405 106,841 9,406 8,971 109,407
10 1,000 13,207 5,419 5,419 105,419 7,696 7,696 107,697 10,975 10,975 110,975
11 1,000 14,917 5,824 5,824 105,824 8,563 8,563 108,564 12,676 12,676 112,677
12 1,000 16,713 6,195 6,195 106,195 9,439 9,439 109,439 14,523 14,523 114,524
13 1,000 18,599 6,531 6,531 106,532 10,322 10,322 110,323 16,527 16,527 116,528
14 1,000 20,579 6,831 6,831 106,831 11,211 11,211 111,212 18,703 18,703 118,704
15 1,000 22,657 7,091 7,091 107,091 12,102 12,102 112,102 21,063 21,063 121,064
16 1,000 24,840 7,352 7,352 107,352 13,,066 13,066 113,066 23,757 23,757 123,758
17 1,000 27,132 7,566 7,566 107,566 14,031 14,031 114,032 26,696 26,696 126,696
18 1,000 29,539 7,726 7,726 107,727 14,991 14,991 114,991 29,897 29,897 129,898
19 1,000 32,066 7,829 7,829 107,829 15,938 15,938 115,938 33,384 33,384 133,385
20 1,000 34,719 7,864 7,864 107,865 16,863 16,863 116,863 37,178 37,178 137,178
@ 65 1,000 69,761 2,894 2,894 102,894 22,504 22,504 122,504 98,872 98,872 198,872
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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%.
63
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 1 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
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 0 100,648 693 0 100,694
2 1,000 2,153 1,332 478 101,332 1,466 612 101,467 1,607 753 101,607
3 1,000 3,310 2,040 845 102,041 2,310 1,115 102,310 2,602 1,407 102,603
4 1,000 4,526 2,725 1,530 102,725 3,177 1,982 103,178 3,687 2,492 103,688
5 1,000 5,802 3,385 2,189 103,385 4,068 2,873 104,069 4,869 3,673 104,869
6 1,000 7,142 4,019 2,956 104,020 4,982 3,919 104,983 6,156 5,092 106,156
7 1,000 8,549 4,626 3,694 104,627 5,918 4,986 105,918 7,556 6,624 107,557
8 1,000 10,027 5,206 4,405 105,207 6,876 6,075 106,876 9,081 8,280 109,082
9 1,000 11,578 5,759 5,360 105,760 7,857 7,457 107,857 10,744 10,344 110,744
10 1,000 13,207 6,286 6,286 106,287 8,862 8,862 108,863 12,558 12,558 112,558
11 1,000 14,917 6,793 6,793 106,794 9,899 9,899 109,900 14,545 14,545 114,546
12 1,000 16,713 7,281 7,281 107,281 10,969 10,969 110,969 16,724 16,724 116,724
13 1,000 18,599 7,748 7,748 107,749 12,072 12,072 112,072 19,112 19,112 119,113
14 1,000 20,579 8,196 8,196 108,196 13,209 13,209 113,209 21,731 21,731 121,731
15 1,000 22,657 8,624 8,624 108,624 14,382 14,382 114,382 24,603 24,603 124,604
16 1,000 24,840 9,081 9,081 109,082 15,677 15,677 115,678 27,908 27,908 127,908
17 1,000 27,132 9,519 9,519 109,520 17,021 17,021 117,021 31,554 31,554 131,555
18 1,000 29,539 9,937 9,937 109,937 18,412 18,412 118,413 35,578 35,578 135,578
19 1,000 32,066 10,331 10,331 110,331 19,852 19,852 119,853 40,016 40,016 140,017
20 1,000 34,719 10,703 10,703 110,703 21,343 21,343 121,344 44,915 44,915 144,916
@ 65 1,000 69,761 12,890 12,890 112,890 39,275 39,275 139,275 132,920 132,920 232,921
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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%.
64
PHOENIX LIFE AND ANNUITY COMPANY
PAGE 2 OF 2
FACE AMOUNT: $100,000
INITIAL ANNUAL PREMIUM: $1,000
FEMALE 35 NEVERSMOKE
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 0 100,533 577 0 100,577 621 0 100,621
2 1,000 2,153 1,196 342 101,197 1,322 468 101,323 1,454 600 101,454
3 1,000 3,310 1,837 642 101,838 2,088 893 102,088 2,360 1,164 102,360
4 1,000 4,526 2,455 1,260 102,456 2,874 1,678 102,874 3,345 2,150 103,346
5 1,000 5,802 3,049 1,854 103,050 3,678 2,483 102,679 4,417 3,221 104,417
6 1,000 7,142 3,618 2,554 103,618 4,502 3,483 104,502 5,581 4,517 105,582
7 1,000 8,549 4,159 3,226 104,159 5,342 4,410 105,342 6,845 5,913 106,846
8 1,000 10,027 4,673 3,872 104,673 6,199 5,398 106,200 8,219 7,419 108,220
9 1,000 11,578 5,160 4,760 105,160 7,074 6,674 107,075 9,715 9,315 109,715
10 1,000 13,207 5,621 5,621 105,622 7,968 7,968 107,968 11,343 11,343 111,343
11 1,000 14,917 6,055 6,055 106,056 8,880 8,880 108,880 13,117 13,117 113,117
12 1,000 16,713 6,462 6,462 106,463 9,810 9,810 109,810 15,051 15,051 115,051
13 1,000 18,599 6,840 6,840 106,841 10,757 10,757 110,757 17,158 17,158 117,159
14 1,000 20,579 7,188 7,188 107,189 11,719 11,719 111,720 19,455 19,455 119,456
15 1,000 22,657 7,505 7,505 107,506 12,697 12,697 112,698 21,960 21,960 121,960
16 1,000 24,840 7,833 7,833 107,833 13,764 13,764 113,764 24,826 24,826 124,827
17 1,000 27,132 8,126 8,126 108,126 14,850 14,850 114,850 27,970 27,970 127,971
18 1,000 29,539 8,380 8,380 108,380 15,952 15,952 115,953 31,416 31,416 131,416
19 1,000 32,066 8,591 8,591 108,591 17,065 17,065 117,066 35,190 35,190 135,191
20 1,000 34,719 8,757 8,757 108,758 18,189 18,189 118,190 39,328 39,328 139,328
@ 65 1,000 69,761 7,497 7,497 107,497 29,438 29,438 129,439 111,012 111,012 211,012
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 1.73%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% 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%.
65
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 351.355 of the General and Business Corporation Law of Missouri,
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 VII of the By-Laws of Phoenix Life and Annuity Company provides
that: "Each person who is or was a director, officer or employee of the
Corporation, or is or was serving at the written request of the Corporation as a
director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise shall be indemnified by the Corporation in
the manner and to the fullest extent that the Corporation has power to indemnify
such person under...the General and Business Corporation Law of Missouri..."
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, Phoenix Life and Annuity 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 Phoenix Life and Annuity Company.
II-1
CONTENTS OF REGISTRATION STATEMENT
This Form S-6 Registration Statement comprises the following papers and
documents:
The facing sheet.
The cross-reference sheet to Form N-8B-2.
The Prospectus describing Phoenix Life and Annuity Company Policy Form V604
and riders thereto ("Flex Edge Success"), consisting of 65 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, filed via Edgar with the Registration Statement on
September 27, 1996 and incorporated herein by reference.
Written consents of the following persons:
(a) Edwin L. Kerr, Esq.
(b) Jorden Burt Berenson & Johnson LLP
(c) Price Waterhouse, LLP
(d) 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 the Registration Statement
on September 27, 1996 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
October 27, 1997, filed via Edgar.*
(b) Form of Broker Dealer Supervisory and Service Agreement
between Phoenix Equity Planning Corporation and Independent
Brokers with respect to the sale of Policies.*
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen Policies with optional riders.
Flexible Premium Variable Universal Life Insurance Policy Form
Number V604 of Depositor filed via Edgar with Pre-Effective
Amendment No. 1 on March 14, 1997 and incorporated herein by
reference.
(6) (a) Charter of Phoenix Life and Annuity Company, filed via Edgar
with the Registration Statement on September 27, 1996 and
incorporated herein by reference.
(1) Certificate of Incorporation dated November 2, 1981.
(2) Certificate of Amendment of its Articles of Incorporation
dated March 16, 1984.
(3) Certificate of Amendment of its Articles of Incorporation
dated April 18, 1985.
(4) Certificate of Amendment of its Articles of Incorporation
dated December 3, 1992.
(5) Certificate of Amendment of its Articles of Incorporation
dated May 9, 1996.
(b) Certificate of Redomestication and Amended and Restated
Certificate of Incorporation dated April 21, 1997 filed via
Edgar.*
(c) By-Laws of Phoenix Life and Annuity Company, filed via Edgar
with the Registration Statement on September 27, 1996 and
incorporated herein by reference.
II-2
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Form of application for Flex Edge Success filed via Edgar with
Pre-Effective Amendment No. 1 on March 14, 1997 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
Pre-Effective Amendment No. 1 on March 14, 1997 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 number 8 below.)
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 Jorden Burt Berenson & Johnson, LLP.*
7. Consent of Price Waterhouse, LLP.*
8. Opinion and Consent of Edwin L. Kerr, Esq.*
9. 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,
Phoenix Life and Annuity 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 4th day
of November, 1997.
PHOENIX LIFE AND ANNUITY VARIABLE UNIVERSAL LIFE ACCOUNT
--------------------------------------------------------
(Registrant)
By: PHOENIX LIFE AND ANNUITY COMPANY
---------------------------------------------
(Depositor)
By: /s/ Dona D. Young
---------------------------------------------
*Dona D. Young, Executive Vice President,
Individual Insurance and General Counsel
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 4th day of November, 1997.
SIGNATURE TITLE
--------- -----
Director
- ---------------------------------------
*Richard H. Booth
Director
- ---------------------------------------
*Robert G. Chipkin
Chairman of the Board, President and Chief
- ---------------------------------------
*Robert W. Fiondella Executive Officer (Principal Executive Officer)
Director
- ---------------------------------------
*Joseph E. Kelleher
Director
- ---------------------------------------
*Robert G. Lautensack
Director
- ---------------------------------------
*Philip R. McLoughlin
Director
- ---------------------------------------
*Charles J. Paydos
Director, Executive Vice President, Chief
- ---------------------------------------
*David W. Searfoss Financial Officer and Treasurer (Principal
Accounting and Financial Officer)
Director
- ---------------------------------------
*Simon Y. Tan
Director
- ---------------------------------------
*Dona D. Young
By: /s/ Dona D. Young
---------------------------------
* Dona D. Young as Attorney-in-Fact pursuant to Powers of Attorney, copies of
which were previously filed.
S-1(c)