-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, McgkqZjXtYx4vow0MO8yjZD0RjGvQd9eJH0OpMrE5wlMLoqfDnJqcv66UJpAu0BS EPYqSzFHpph0j6kfLrFEbQ== 0000949377-05-000971.txt : 20051216 0000949377-05-000971.hdr.sgml : 20051216 20051216163102 ACCESSION NUMBER: 0000949377-05-000971 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20051216 DATE AS OF CHANGE: 20051216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHL VARIABLE INSURANCE CO /CT/ CENTRAL INDEX KEY: 0001031223 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-130397 FILM NUMBER: 051270092 BUSINESS ADDRESS: STREET 1: C/O PHOENIX LIFE INSURANCE COMPANY STREET 2: ONE AMERICAN ROW CITY: HARTFORD STATE: CT ZIP: 06116 BUSINESS PHONE: 8604035788 MAIL ADDRESS: STREET 1: ONE AMERICAN ROW STREET 2: C/O PHOENIX LIFE INSURANCE COMPANY CITY: HARTFORD STATE: CT ZIP: 06116 FORMER COMPANY: FORMER CONFORMED NAME: PHL VARIABLE SEPARATE ACCOUNT MVA1 DATE OF NAME CHANGE: 19970123 S-1 1 eia75125_s-1.txt INITIAL REGISTRATION As filed with the Securities and Exchange Commission on December 16, 2005 File No. ___-_____ ================================================================================
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM S-1 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 PHL VARIABLE INSURANCE COMPANY -------------------------------------------------------- (Exact name of registrant as specified in its charter) CONNECTICUT 06-1045829 --------------------------------- -------------------------------- ------------------------- (State or other jurisdiction of (Primary Standard Industrial (IRS Employer incorporation or organization) Classification Code Number) Identification Number) ONE AMERICAN ROW HARTFORD, CT 06102 (800) 447-4312 -------------------------------------------------------- (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) JOHN H. BEERS, ESQ. PHL VARIABLE INSURANCE COMPANY ONE AMERICAN ROW HARTFORD, CT 06102-5056 (860) 403-5050 --------------------------------------------------------- (Name, address, including zip code, and telephone number, including area code, of agent for service) If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ X ] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ Proposed maximum Proposed maximum Title of each class of Amount to be offering price per aggregate offering Amount of securities to be registered registered unit price registration fee - --------------------------------- --------------------- ----------------------- ----------------------- ---------------------- Phoenix Foundations Equity Index * * $200,000,000 $21,400 Annuity Contracts - ------------------------------------------------------------------------------------------------------------------------------
* The maximum aggregate offering price is estimated solely for the purpose of determining the registration fee. The amount to be registered and the proposed maximum offering price per unit are not applicable in that these contracts are not issued in predetermined amounts or units. 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), SHALL DETERMINE. ================================================================================ ================================================================================ PHOENIX FOUNDATIONS EQUITY INDEX ANNUITY ================================================================================ ISSUED BY: PHL VARIABLE INSURANCE COMPANY ("PHL VARIABLE") (A WHOLLY OWNED SUBSIDIARY OF PHOENIX LIFE INSURANCE COMPANY) PROSPECTUS APRIL__, 2006 PHL Variable is offering the Phoenix Foundations Equity Index Annuity, a group and individual single premium deferred equity indexed modified guaranteed annuity contract ("contract"). This prospectus provides important information that a prospective investor should know before investing. This prospectus should be kept for future reference. Contracts are available through Phoenix Equity Planning Corporation ("PEPCO"), the principal underwriter for the contracts.
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT: [envelope] PHL VARIABLE INSURANCE COMPANY Annuity Operations Division PO Box 8027 Boston, MA 02266-8027 [telephone] TEL. 800/541-0171
Neither the Securities and Exchange Commission ("SEC") nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Best efforts offering. PEPCO is not required to sell any specific number or dollar amount of securities but will use its best efforts to sell the securities offered. The contract is not a deposit or obligation of, underwritten or guaranteed by, any financial institution, credit union or affiliate. It is not federally insured by the Federal Deposit Insurance Corporation or any other state or federal agency. Contract investments are subject to risk, including possible loss of principal if surrendered early. It may not be in your best interest to purchase a contract to replace an existing annuity contract or life insurance policy. You must understand the basic features of the proposed contract and your existing coverage before you decide to replace your present coverage. You must also know if the replacement will result in any tax liability. The contract may not be available in all states. 1 TABLE OF CONTENTS Heading Page - ------------------------------------------------------------------ GLOSSARY.................................................. 3 CONTRACT SNAPSHOT ........................................ 4 THE ACCUMULATION PERIOD................................... 5 Contract Value ........................................ 5 Premium ............................................... 5 Premium Allocation..................................... 5 Reallocation of Contract Value ........................ 5 CONTRACT FEATURES ........................................ 5 Death Benefit ......................................... 5 Before Maturity Date................................. 5 After Maturity Date.................................. 5 Fixed Account and Interest Rates....................... 6 Indexed Accounts and Index Credit...................... 6 Indexed Account A.................................... 6 Indexed Account B.................................... 6 Indexed Account C.................................... 7 Nursing Home Waiver.................................... 7 Terminal Illness Waiver................................ 7 Withdrawals and Surrenders............................. 7 CHARGES................................................... 7 Market Value Adjustment................................ 7 Surrender Charges...................................... 8 Tax.................................................... 8 THE ANNUITY PERIOD........................................ 8 Annuity Payments....................................... 8 Annuity Payment Options................................ 9 MISCELLANEOUS PROVISIONS.................................. 10 Amendments to Contracts ............................... 10 Assignment............................................. 10 Free Look Period....................................... 10 Ownership of the Contract.............................. 10 Payment Deferral....................................... 10 Termination............................................ 10 TAXES..................................................... 10 Introduction........................................... 10 Company Income Tax Status.............................. 11 Taxation of Annuities in General--Nonqualified Plans... 11 Additional Considerations.............................. 11 Diversification Standards.............................. 12 Taxation of Annuities in General--Qualified Plans...... 13 MORE INFORMATION.......................................... 16 PHL Variable and the Separate Account.................. 17 Legal Matters.......................................... 18 Distributor............................................ 18 Annual Reports and Other Documents..................... 18 Annual Statements...................................... 18 APPENDIX A--DEDUCTIONS FOR TAXES.......................... A-1 2 GLOSSARY - -------------------------------------------------------------------------------- The following is a list of terms and their meanings when used throughout this prospectus. We have bolded and italicized the first occurrence for each term used after this glossary. ACCOUNT: indexed or fixed account ACCOUNT VALUE: the value available in each account for annuitization or surrender before the application of any surrender charge or market value adjustment. ANNUITANT/JOINT ANNUITANT: the person(s) on whose life the annuity benefit is based upon. There may be one or more annuitants. One is the primary annuitant and the other is considered the joint annuitant, BENEFICIARY: the person who receive the death benefits. If there is no surviving beneficiary, the owner will be the beneficiary. If the owner is not living, the estate of the owner will be the beneficiary. CONTRACT ANNIVERSARY: the same month and date as the contract date in the years following the contract date. If the day does not exist in a month, the last day of the month will be used. CONTRACT DATE: the date that the contract is issued. CONTRACT VALUE: equals the sum of the account value of the accounts. CONTRACT YEAR: the 12-month period beginning on the contract date and each 12-month period after that. FIXED ACCOUNT: interest is credited daily on the account value allocated to this account at rates that are declared annually. FREE WITHDRAWAL AMOUNT: you may withdraw up to 10% of the contract value in a contract year without a market value adjustment or surrender charge. INDEX: the measure used to determine the index credit for an indexed account. INDEX VALUE: the published value of the index, excluding any dividends paid by firms that comprise the index. INDEXED ACCOUNT: each indexed account earns an index credit linked to the performance of an index. MATURITY DATE: the date that annuity payments begin. MARKET VALUE ADJUSTMENT: a calculated amount that is applied to amounts withdrawn or surrendered before the end of the surrender charge period. OWNER (OWNER, OWNERS, YOU, YOUR): usually the person, persons or entity to whom we issue the contract. PHL VARIABLE (OUR, US, WE, COMPANY): PHL Variable Insurance Company. SEPARATE ACCOUNT: PHL Variable Separate Account MVA1. SURRENDER VALUE: the contract value adjusted by any market value adjustments and less any applicable surrender and tax charges. WRITTEN REQUEST (IN WRITING, WRITTEN NOTICE): is a request signed by you and received in a form satisfactory to us. 3 CONTRACT SNAPSHOT - -------------------------------------------------------------------------------- THE FOLLOWING IS A SNAPSHOT OF THE CONTRACT. PLEASE READ THE REST OF THIS PROSPECTUS FOR MORE INFORMATION. THIS PROSPECTUS IS A DISCLOSURE DOCUMENT THAT SUMMARIZES YOUR RIGHTS UNDER THE CONTRACT THAT YOU ARE PURCHASING. AS WITH ANY GUIDE, IT MAY DIFFER IN CERTAIN INSTANCES FROM THE UNDERLYING CONTRACT. YOUR RIGHTS AND OBLIGATIONS UNDER THE CONTRACT WILL BE DETERMINED BY THE LANGUAGE OF THE CONTRACT ITSELF. YOU SHOULD READ YOUR CONTRACT CAREFULLY. [diamond] Single premium payment [diamond] Minimum premium payment of $50,000 for non-qualified contracts and $25,000 for qualified contracts [diamond] Maximum premium payment of $1,000,000 without our approval [diamond] One FIXED ACCOUNT and three INDEXED ACCOUNTS are available for investing [diamond] FREE WITHDRAWAL AMOUNT--10% of CONTRACT VALUE each year free of any surrender charge and MARKET VALUE ADJUSTMENTS [diamond] Market Value Adjustment--applied to any withdrawal or full surrender before the end of the surrender charge schedule except the Free Withdrawal Amount [diamond] Surrender Charges--applied when you surrender your contract or request a withdrawal before the end of the surrender charge schedule except the Free Withdrawal Amount. Two surrender charge schedules are available. There are no fees associated with the election of either the 7-Year or 5-Year Surrender Charge Schedules. [diamond] Taxes--taken from the contract value upon premium payments, withdrawals, surrenders or commencement of annuity payments [diamond] Death Benefit--payable upon owner's death. The Death Benefit equals the contract value at the time of death. Market value adjustments and surrender charges are waived. Applicable tax will be deducted. 4 THE ACCUMULATION PERIOD - -------------------------------------------------------------------------------- The contract can help you save for retirement during the accumulation period. The accumulation period begins on the CONTRACT DATE and continues until you start to receive annuity payments. The contract is available in connection with certain retirement plans that qualify for special federal income tax treatments ("qualified plans"), as well as those that do not qualify for such treatment ("non-qualified plans"). CONTRACT VALUE Your contract value at any time during the accumulation period is equal to the sum of the ACCOUNT VALUE of the fixed and indexed accounts. PREMIUM The amount applied to this contract will be the single premium received minus a deduction for any applicable tax where applicable. No benefit associated with any single premium will be provided until it is actually received by us. Generally, we require a minimum single premium payment of: [diamond] Nonqualified plans--$50,000 [diamond] Qualified plans--$25,000 A contract may not be purchased for a proposed owner who is 86 years of age or older. A premium payment in excess of $1,000,000 requires our prior approval. We reserve the right to reject any application or waive this limitation at our sole discretion. Your premium payment becomes part of the SEPARATE ACCOUNT, which supports our insurance and annuity obligations. For more information, see "PHL Variable and the Separate Account." PREMIUM ALLOCATION Your premium payment will be applied as soon as practicable after its receipt at our Annuity Operations Division if the application or order form is complete. If we do not receive all of the necessary application information, we will hold your premium payment while we attempt to complete the application. If the application is not completed after a reasonable time, we will inform you of the reason for the delay and we will return your premium payment unless you specifically consent to our holding it until the application is complete. Once we have all of your necessary application information, we will apply your premium payment as requested and issue your contract. Please note that prior to the completion of your application or order form, we will hold the premium in a suspense account, which is a non-interest-bearing account. REALLOCATION OF CONTRACT VALUE During the 30-days before each CONTRACT ANNIVERSARY, you may reallocate your contract value among the available ACCOUNTS by written request. We must receive the request prior to the contract anniversary. Your request will be effective as of the contract anniversary. There is no charge for contract value reallocation. CONTRACT FEATURES - -------------------------------------------------------------------------------- DEATH BENEFIT [diamond] BEFORE MATURITY DATE A death benefit is payable when any owner (or primary annuitant when the contract is owned by a non-natural person) dies. > DEATH OF AN OWNER If the owner dies before the maturity date, the death benefit will be paid to the beneficiary. > DEATH OF AN OWNER - MULTIPLE OWNERS If there is more than one owner, a death benefit is payable upon the first owner to die. The death benefit is paid to the surviving owner(s) as the designated beneficiaries. > DEATH OF AN ANNUITANT WHO IS NOT THE OWNER If the owner and the annuitant are not the same individual and the annuitant dies prior to the maturity date, the owner becomes the annuitant, unless the owner appoints a new annuitant. If a joint annuitant dies prior to the maturity date, the owner may appoint a new joint annuitant. However, there may be tax consequences. The death of the annuitant or joint annuitant will not cause the death benefit to be paid. > SPOUSAL BENEFICIARY CONTRACT CONTINUANCE If the spouse of a deceased owner, as designated beneficiary, is entitled to receive all or some portion of the death benefit amount, the spouse may elect to continue the contract as the new owner. This election is only allowed prior to the maturity date and can be elected only one time. When the spouse elects to continue the contract, the death benefit amount that the spouse is entitled to receive will become the new contract value for the continued contract. > OWNERSHIP OF THE CONTRACT BY A NON-NATURAL PERSON If the owner is not an individual, and the primary annuitant dies before the maturity date, we will pay the death benefit to the owner. If a joint annuitant dies, a death benefit will not be paid. The owner may appoint a new joint annuitant. The death benefit amount equals the contract value as of the date of death. No market value adjustment, surrender charge or index credit for the year that the death occurred will be included in the death benefit calculation. The death benefits provided under this contract will not be less than the minimum benefits required by the state where the contract is delivered. [diamond] AFTER MATURITY DATE If an owner dies on or after the maturity date and there is no surviving owner, any remaining certain period annuity payments will be paid to the beneficiary under the annuity payment option in effect on the date of death. Payments may not be deferred or otherwise extended. If there is a surviving owner, the payments continue as if there had been no death. If the annuitant and joint annuitant, if any, die and are survived by any owner(s), any remaining certain period annuity payments will be paid to the owner(s). Payments will 5 continue under the annuity payment option in effect at the date of death and may not be deferred or otherwise extended. FIXED ACCOUNT AND INTEREST RATES The Fixed Account earns interest daily. The fixed interest rate is declared annually and is guaranteed for one year. Subsequent interest rates may be higher or lower than the initial fixed interest rate but will not be lower than the guaranteed minimum interest rate as shown on the contract schedule page when issued. We reserve the right to cease offering the Fixed Account at any time. On the contract date, the account value of the Fixed Account is equal to the portion of the premium allocated to the fixed account. Thereafter, the account value for the Fixed Account equals: 1. the initial allocation and any reallocation to the Fixed Account; plus 2. interest credited; less 3. any reallocation from the fixed account; less 4. withdrawals (including applicable market value adjustments, surrender charges and tax deductions). INDEXED ACCOUNTS AND INDEX CREDIT Currently, there are three different Indexed Accounts. On the contract date, the account value for an Indexed Account equals the portion of the premium allocated the indexed account as of the contract date. On each contract anniversary, the account value equals: 1. the account value immediately preceding the contract anniversary, multiplied by the resulting value of (1 + the applicable index credit); less 2. reallocation, if any, from the indexed account; plus 3. reallocation, if any, to the indexed account; less 4. withdrawals (including applicable market value adjustments, surrender charges and tax deductions). On any other date, the account value for an indexed account equals: 1. the account value for the indexed account on the preceding contract anniversary; less 2. any withdrawals (including applicable market value adjustments, surrender charges and tax deductions) from the Indexed Account since the preceding contract anniversary. For the first contract year, the contract date is considered the preceding contract anniversary. Each of the indexed accounts earn index credits that are linked to the performance of the S&P 500(R) Index(1). The index credit is calculated annually on each contract anniversary and is credited immediately. The index credit will not be lower than the guaranteed minimum index credit as shown on the contract schedule page when issued. The index credit is based on the performance of the index for the last CONTRACT YEAR. Amounts withdrawn or surrendered effective on the contract anniversary will receive the index credit for the past contract year. Amounts withdrawn or surrendered prior to the end of a contract year will not receive the index credit for that contract year. The contract provides for one or more indexed accounts. We reserve the right to add or delete indexed accounts at any time and will give you sufficient written notification prior to any indexed account changes. [diamond] INDEXED ACCOUNT A - Point-to-Point with Cap Indexed Account This account earns an index credit on each contract anniversary that is based on the performance of the Index for the past contract year. The index credit is subject to a maximum crediting percentage ("index cap") and a minimum crediting percentage ("guaranteed minimum index credit"). To determine the index credit, we first calculate the index growth, which equals: (index value on the contract anniversary [division sign] index value on the preceding contract anniversary) - 1 - --------------------- (1) "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Phoenix Life Insurance Company and its affiliates. This annuity is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of purchasing this annuity. 6 The index credit equals the lesser of the index growth and the applicable index cap. The index cap is the maximum index credit percentage that can be applied to the account value in any given contract year. For the first contract year, the initial index cap as shown on the contract schedule page is used. On each subsequent contract anniversary, a new index cap will be declared and guaranteed for the following contract year. The subsequent index caps may be higher or lower than the initial index cap, but will not be lower than the guaranteed minimum index cap as shown on the contract schedule page. [diamond] INDEXED ACCOUNT B - Performance Trigger Indexed Account This account earns an index credit on each contract anniversary that is based on the performance of the Index for the past contract year. The index credit is subject to a minimum crediting percentage ("guaranteed minimum index credit"). To determine the index credit, we first calculate the index growth, which equals: (index value on the contract anniversary [division sign] index value on the preceding contract anniversary) - 1 The index credit equals the triggered rate if the index growth is greater than zero. If the index growth is zero or less, the guaranteed minimum index credit is used. The triggered rate is applied to the account value if the index growth for the contract year is greater than zero. For the first contract year, the triggered rate as shown on the contract schedule page is used. On each subsequent contract anniversary, a new triggered rate will be declared and guaranteed for the following contract year. The subsequent triggered rates may be higher or lower than the initial triggered rate, but will not be lower than the guaranteed minimum triggered rate as shown on the contract schedule page. [diamond] INDEXED ACCOUNT C - Monthly Average with Spread Indexed Account This account earns an index credit on each contract anniversary that is based on the performance of the Index for the past contract year. The index credit is subject to a minimum crediting percentage ("guaranteed minimum index credit"). To determine the index credit, we first calculate the averaged index growth, which equals: ((the sum of the index values on each monthly processing date during the contract year [division sign] 12) [division sign] index value on the preceding contract anniversary)) -1 The index credit equals the averaged index growth less the index spread but will not be lower than the guaranteed minimum index credit as shown on the contract schedule page. Monthly processing date is defined as meaning the same date of each month as the contract date. If the date does not exist in a month, the last date in the month will be used. The index spread is the amount subtracted from the averaged index growth when the index credit is calculated. For the first contract year, the initial index spread as shown on the contract schedule page is used. On each subsequent contract anniversary, a new index spread will be declared and guaranteed for the following contract year. The subsequent index spreads may be higher or lower than the initial index spread, but will not be higher than the guaranteed maximum index spread as shown on the contract schedule page. NURSING HOME WAIVER Prior to the maturity date, you may surrender all or a portion of the contract value, adjusted by any applicable market value adjustment, without a surrender charge, provided that: [diamond] more than one year has elapsed since the contract date; and [diamond] the withdrawal is requested within two years of the owner's admission into a licensed nursing home facility; and [diamond] the owner has been confined to the licensed nursing home facility (as defined below) for at least the preceding 120 days. A licensed nursing home facility is defined as a state licensed hospital or state licensed skilled or intermediate care nursing facility at which medical treatment is available on a daily basis. The owner must provide us with satisfactory evidence of confinement by written notice. There is no fee for this waiver. This waiver is subject to state approval. TERMINAL ILLNESS WAIVER Prior to the maturity date, you may surrender all or a portion of the contract value, adjusted by any applicable market value adjustment, without a surrender charge in the event of the owner's terminal illness. Terminal Illness is defined as an illness or condition that is expected to result in the owner's death within six months. The owner must provide us with a satisfactory written notice of terminal illness by a licensed physician, who is not the owner or a member of the owner's family. We reserve the right to obtain a second medical opinion from a physician of our choosing at our expense. There is no fee for this waiver. This waiver is subject to state approval. WITHDRAWALS AND SURRENDERS You may request a withdrawal or full surrender of the contract ("surrender") from the contract value at any time prior to the maturity date. Requests must be made in writing and should include tax-withholding information. You may withdraw up to 10% of the contract value in a contract year without a market value adjustment or surrender charge. This amount is referred to as the Free Withdrawal Amount. During the first contract year, the Free Withdrawal Amount will be determined based on the contract value at the time of the first withdrawal. In all subsequent years, the Free Withdrawal Amount will be based on the contract value on the previous contract anniversary. Any unused percentages of the free withdrawal amount from prior years may not be carried forward to future contract years. Please note that withdrawal or surrender amounts in excess of the 10% free withdrawal amount before the end of the surrender charge schedule will be subject to a market value adjustment that can result in a loss or gain, a surrender charge and tax deduction(s). CHARGES - -------------------------------------------------------------------------------- MARKET VALUE ADJUSTMENT A market value adjustment is applied to withdrawals or surrenders prior to the end of the surrender charge schedule elected. The market value adjustment may result in a gain or loss to contract value and applies to both fixed and indexed accounts. The market value adjustment equals the contract value withdrawn or surrendered in excess of the free withdrawal amount multiplied by the following: 1+i (n/12) -- -- | ________________ | -1 | | | 1+j+0.0050 | | | -- -- 7 where: i - is the Treasury Constant Maturity yield as published by the Federal Reserve on the business day prior to the contract date for the maturity matching the duration of the surrender charge period; j - is the Treasury Constant Maturity yield as published by the Federal Reserve on the business day prior to the date of withdrawal or surrender for the maturity matching the remaining years in the surrender charge period (fractional years rounded up to the next full year); n - is the number of complete months from the time of withdrawal or surrender to the end of the surrender charge period. If a Treasury Constant Maturity yield for a particular maturity is not published, the yield will be interpolated between the yields for maturities that are published. If the Treasury Constant Maturity yields are no longer published, we will choose a suitable replacement, subject to any regulatory approvals and provide you with notice accordingly. A positive market value adjustment will increase the amount withdrawn or surrendered. There is no limit on a positive market value adjustment. A negative market value adjustment will decrease the amount withdrawn or surrendered. A negative market value adjustment will not decrease the amount withdrawn or surrendered by more than the amount (i) exceeds (ii) if any, where: (i) equals the amount withdrawn or surrendered and (ii) equals the portion of the Premium associated with (i) adjusted by prior withdrawals. The market value adjustment is waived on the free withdrawal amount, on death, and on annuitization if annuitization occurs after five contract years. The market value adjustment is not waived on the nursing home and terminal illness waivers. SURRENDER CHARGES A surrender charge may apply to a withdrawal or full surrender of the contract prior to the end of the surrender charge schedule. The amount of a surrender charge depends on the period of time your premium payment is held under the contract and which surrender schedule you elected (refer to the charts shown below). There is no fee associated with the election of either of the surrender schedules available. However, if you elect the 5-Year Surrender Charge Schedule, you may receive a lower interest rate or index credit than the 7-Year Surrender Charge Schedule. The surrender charge is designed to recover the expense of distributing contracts that are terminated before distribution expenses have been recouped from revenue generated by these contracts. They are deferred charges because they are not deducted from the premium. Surrender charges are waived on the free withdrawal amount and on death benefits. Surrender charges will also be waived when you begin taking annuity payments provided your contract has been in effect for five years. For more information, see "Annuity Payment Options." Any surrender charge imposed is deducted from amount withdrawn. Surrender charges are expressed as a percentage of the amount withdrawn in excess of the 10% free withdrawal amount, adjusted by any applicable market value adjustments, up to the premium payment paid less any prior withdrawals for which a surrender charge was paid. Surrender charge schedules are as follows: 7-Year Surrender Charge Schedule - -------------------------------------------------------------- Percent 7% 7% 7% 6% 6% 5% 5% 0% - -------------------------------------------------------------- Complete Contract Years 0 1 2 3 4 5 6 7+ - -------------------------------------------------------------- 5-Year Surrender Charge Schedule - -------------------------------------------------------------- Percent 7% 7% 7% 6% 6% 0% - -------------------------------------------------------------- Complete Contract Years 0 1 2 3 4 5+ - -------------------------------------------------------------- This contract allows you to choose between two distinct surrender charge schedules. You should consult with a qualified financial advisor before making your election. A surrender charge will be deducted from the affected fixed and indexed accounts on a pro rata basis, unless otherwise agreed upon, after the market value adjustment has been made. PHL Variable will pay any distribution costs not paid for by surrender charges from the assets of the Separate Account. TAX Tax is considered any tax charged by a state or municipality on premium payments, whether or not characterized as premium tax. It is also other state or local taxes imposed or any other governmental fees that may be required based on the laws of the state or municipality of delivery, the owner's state or municipality of residence on the contract date. Taxes on premium payments currently range from 0% to 3.5% and vary from state to state. We will pay any premium payment tax; any other state or local taxes imposed or other governmental fee due and will only reimburse ourselves upon the remittance to the applicable state. For a list of states and taxes, see "Appendix A." No federal income taxes are applicable under present law and we are not presently making any such deduction. THE ANNUITY PERIOD - -------------------------------------------------------------------------------- ANNUITY PAYMENTS Annuity payments will begin on the contract's maturity date if the owner is alive and the contract is still in force. If the amount to be applied on the maturity date is less than $2,000, we may pay such amount in one lump sum in lieu of providing an annuity. If the initial monthly annuity payment under an annuity payment option would be less than $20, we may make a single sum payment equal to the total contract value on the date the initial annuity payment would be payable, or make periodic annuity payments quarterly, semiannually or annually in place of monthly annuity payments. 8 Your contract specifies a maturity date at the time of its issuance. However, you may subsequently elect a different maturity date. The maturity date may not be earlier than the fifth contract anniversary. The latest maturity date is the contract anniversary nearest the annuitant's 95th birthday or ten years from the contract date, whichever is later. Generally, under qualified plans, the maturity date must be such that distributions begin no later than April 1st of the calendar year following the later of: (a) the year in which the employee attains age 70 1/2 or (b) the calendar year in which the employee retires. The date set forth in (b) does not apply to an Individual Retirement Annuity ("IRA"). The maturity date election must be made by written notice and must be received by us 30 days before the provisional maturity date. If you do not elect a maturity date, which is different from the provisional maturity date, the provisional maturity date becomes the maturity date. Particular care should be taken in electing the maturity date of a contract issued under a Tax Sheltered Annuity (TSA), a Keogh plan or an IRA plan. For more information, see "Tax Sheltered Annuities," "Keogh Plans" and "Individual Retirement Accounts." ANNUITY PAYMENT OPTIONS If you have not selected an Annuity Payment Option by the maturity date, the default annuity payment is based on Annuity Payment Option A--Life Annuity with 10-Year Period Certain and as long as the annuitant lives. Instead, you may, by sending a written request to our Annuity Operations Division on or before the maturity date of the contract, elect any of the other Annuity Payment Options. After the first annuity payment, you may not change the elected Annuity Payment Option. The level of annuity payments payable under the following Annuity Payment Options is based upon the option selected. The amount of each annuity payment will be based on the contract value on the maturity date and the annuity purchase rates. In addition, factors such as the age at which annuity payments begin, the form of annuity, annuity payment rates, and the frequency of annuity payments will affect the level of annuity payments. The longer the duration and more frequent the payments, the lower the annuity payment amount. The following are descriptions of the Annuity Payment Options currently available under a contract. These descriptions should allow you to understand the basic differences between the options; however, you should contact our Annuity Operations Division well in advance of the date you wish to elect an option to obtain estimates of annuity payments under each option. [diamond] OPTION A - LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN A fixed payout annuity payable monthly while the Annuitant is living or, if later, the end of the specified period certain. The period certain may be specified as 5, 10 or 20 years. The period certain must be specified at the time this option is elected. [diamond] OPTION B - NON-REFUND LIFE ANNUITY A fixed payout annuity payable monthly while the Annuitant is living. No monthly payment, death benefit or refund is payable after the death of the Annuitant. [diamond] OPTION C - RESERVED [diamond] OPTION D - JOINT AND SURVIVOR LIFE ANNUITY A fixed payout annuity payable monthly while either the annuitant or joint annuitant is living. You must designate the joint annuitant at the time you elect this option. The joint annuitant must be at least age 40 on the first payment calculation date. [diamond] OPTION E - INSTALLMENT REFUND LIFE ANNUITY A fixed payout annuity payable monthly while the Annuitant is living. If the Annuitant dies before the annuity payments made under this option total an amount that refunds the entire amount applied under this option, we will make a lump sum payment equal to the entire amount applied under this option less the sum of payments already made. [diamond] Option F - Joint and Survivor Life Annuity with 10-Year Period Certain A fixed payout annuity payable monthly while either the annuitant or joint annuitant is living, or if later, the end of 10 years. You must designate the joint annuitant at the time you elect this option. The joint annuitant must be at least age 40 on the first payment calculation date. [diamond] OPTION G - PAYMENTS FOR A SPECIFIED PERIOD A fixed payout annuity payable monthly over a specified period. Payments continue whether the Annuitant lives or dies. The specified period must be in whole numbers of years from 5 to 30, but cannot be greater than 100 minus the age of the Annuitant. However, if the Beneficiary of any death benefits payable under this contract elects this Payment Option, the period selected by the Beneficiary may not extend beyond the life expectancy of such Beneficiary. [diamond] OPTION H - PAYMENTS OF A SPECIFIED AMOUNT Equal income installments of a specified amount are paid until the principal sum remaining under this option from the amount applied is less than the amount of the installment. When that happens, the principal sum remaining will be paid as a final payment. The amount specified must provide for payments for a period of at least 5 years. CALCULATION OF FIXED ANNUITY PAYMENTS The guaranteed annuity payment rates will be no less favorable than the following: [diamond] under Annuity Payment Options A, B, D, E and F, rates are based on the 2000 Individual Annuity Mortality Table with a 10-year age setback and an interest rate of 2.5%. [diamond] under Options G and H, the interest rate is 1.5% The Society of Actuaries developed these tables to provide payment rates for annuities based on a set of mortality tables acceptable to most regulating authorities. 9 It is possible that we may have more favorable (i.e., higher-paying) rates in effect on the maturity date. OTHER OPTIONS AND RATES We may offer other annuity payment options or alternative versions of the options listed above. Other values and tables may be used for other payment options that we may make available. OTHER CONDITIONS Federal income tax requirements currently applicable to most qualified plans provide that the period of years guaranteed under joint annuities with specified periods certain (see "Option D" above) could not be any greater than the joint life expectancies of the payee and his or her spouse. Federal income tax requirements also provide that participants in regular or SIMPLE IRAs must begin minimum distributions by April 1 of the year following the year in which they attain age 70 1/2. Minimum distribution requirements do not apply to Roth IRAs. Distributions from qualified plans generally must begin by the later of actual retirement or April 1 of the year following the year participants attain age 70 1/2. Any required minimum distributions must be such that the full amount in the contract will be distributed over a period not greater than the participant's life expectancy or the combined life expectancy of the participant and his or her spouse or designated beneficiary. Distributions made under this method are generally referred to as Life Expectancy Distributions ("LEDs"). An LED program is available to participants in qualified plans or IRAs. Requests to elect this program must be made in writing. Under the LED program, regardless of contract year, amounts up to the required minimum distribution may be withdrawn without a deduction for surrender charges, even if the minimum distribution exceeds the 10% allowable amount. See "Surrender Charges." Any amounts withdrawn that have not been held under a contract for at least six years and are in excess of both the minimum distribution and the 10% free available amount will be subject to any applicable surrender charge. If the initial monthly annuity payment under an annuity payment option would be less than $20, we may make a single sum payment equal to the contract value on the date the initial annuity payment would be payable, in place of all other benefits provided by the contract, or may make periodic annuity payments quarterly, semiannually or annually in place of monthly annuity payments. MISCELLANEOUS PROVISIONS - -------------------------------------------------------------------------------- AMENDMENTS TO CONTRACTS Contracts may be amended to conform to changes in applicable law or interpretations of applicable law, or to accommodate design changes. Changes in the contract may need to be approved by contract owners and state insurance departments. A change in the contract that necessitates a corresponding change in this prospectus must be filed with the SEC. ASSIGNMENT Owners of contracts issued in connection with non-tax qualified plans may assign their interest in the contract to a spouse or a grantor trust. A written notice of such assignment must be filed with our Annuity Operations Division before it will be honored. A pledge or assignment of a contract is treated as payment received on account of a partial surrender of a contract. In order to qualify for favorable tax treatment, contracts issued in connection with tax qualified plans may not be sold, assigned, discounted or pledged as collateral for a loan or as security for the performance of an obligation, or for any other purpose, to any person other than to us. FREE LOOK PERIOD We may mail the contract to you or we may deliver it to you in person. You may return a contract for any reason within ten days after you receive it and receive a refund of your premium payment. A longer Free Look Period may be required by your state. If applicable state law requires, we will return the full amount of the contract value adjusted by any market value adjustment. OWNERSHIP OF THE CONTRACT Ordinarily, the purchaser of a contract is both the owner and the annuitant and is entitled to exercise all the rights under the contract. However, the owner may be an individual or entity other than the annuitant. More than one owner may own a contract as joint owner. Transfer of the ownership of a contract may involve federal income tax consequences, and a qualified advisor should be consulted before any such transfer is attempted. PAYMENT DEFERRAL Payment of the contract value in a single sum upon a withdrawal or full surrender of the contract will ordinarily be made as soon as practicable after receipt of the written request by our Annuity Operations Division. TERMINATION If the contract value becomes zero, the contract will immediately terminate unless determined otherwise by an effective rider, amendment or endorsement. TAXES - -------------------------------------------------------------------------------- INTRODUCTION The contracts are designed for use with retirement plans which may or may not be tax-qualified plans ("qualified plans") under the provisions of the Internal Revenue Code of 1986, (the "Code"). The ultimate effect of federal income taxes on the amounts held under a contract, on annuity payments and on the economic benefits of the contract owner, annuitant or beneficiary depends on our income tax status, on the type of retirement plan for which the contract is purchased, and upon the income tax and employment status of the individual concerned. The following discussion is general in nature and is not intended as tax advice. The income tax rules are complicated and this discussion is intended only to make you aware of the issues. Each person concerned should consult a professional tax advisor. 10 COMPANY INCOME TAX STATUS We are taxed as a life insurance company under Part 1 of Subchapter L of the Code. TAXATION OF ANNUITIES IN GENERAL--NON-QUALIFIED PLANS Section 72 of the Code governs taxation of annuities. In general, an owner is not taxed on increases in value of the units held under a contract until some form of distribution is made. However, in certain cases the increase in value may be subject to tax currently. In the case of contracts not owned by natural persons, see "Contracts Owned by Non-Natural Persons." In the case of contracts not meeting the diversification requirements, see "Diversification Standards." SURRENDERS OR WITHDRAWALS PRIOR TO THE CONTRACT MATURITY DATE Code Section 72 provides that a withdrawal or surrender of the contract prior to the contract maturity date will be treated as taxable income to the extent the amounts held under the contract exceed the "investment in the contract." The "investment in the contract" is that portion, if any, of purchase payments by or on behalf of an individual under a contract that have not been excluded from the individual's gross income. The taxable portion is taxed as ordinary income in an amount equal to the value of the amount received in excess of the "investment in the contract" on account of a withdrawal or surrender of a contract. For purposes of this rule, a pledge or assignment of a contract is treated as a payment received on account of a withdrawal from a contract. SURRENDERS OR WITHDRAWALS ON OR AFTER THE CONTRACT MATURITY DATE Upon receipt of a lump sum payment under the contract, the recipient is taxed on the portion of the payment that exceeds the investment in the contract. Ordinarily, such taxable portion is taxed as ordinary income. For fixed annuity payments, the taxable portion of each payment is determined by using a formula known as the "exclusion ratio," which establishes the ratio that the investment in the contract bears to the total expected amount of annuity payments for the term of the contract. That ratio is then applied to each payment to determine the non-taxable portion of the payment. The remaining portion of each payment is taxed as ordinary income. For certain types of qualified plans, there may be no investment in the contract resulting in the full amount of the payments being taxable. A simplified method of determining the exclusion ratio is effective with respect to qualified plan annuities started after November 18, 1996. Withholding of federal income taxes on all distributions may be required unless the recipient elects not to have any amounts withheld and properly notifies our Annuity Operations Division of that election. PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS Amounts surrendered, withdrawn or distributed before the taxpayer reaches age 59 1/2 are subject to a penalty tax equal to ten percent (10%) of the portion of such amount that is includable in gross income. However, the penalty tax will not apply to withdrawals: (i) made on or after the death of the owner (or where the owner is not an individual, the death of the "primary annuitant," who is defined as the individual the events in whose life are of primary importance in affecting the timing and amount of the payout under the contract); (ii) attributable to the taxpayer's becoming totally disabled within the meaning of Code Section 72(m)(7); (iii) which are part of a Series of substantially equal periodic payments made (not less frequently than annually) for the life (or life expectancy) of the taxpayer, or the joint lives (or joint life expectancies) of the taxpayer and his or her beneficiary; (iv) from certain qualified plans (such distributions may, however, be subject to a similar penalty under Code Section 72(t) relating to distributions from qualified retirement plans and to a special penalty of 25% applicable specifically to SIMPLE IRAs or other special penalties applicable to Roth IRAs); (v) allocable to investment in the contract before August 14, 1982; (vi) under a qualified funding asset (as defined in Code Section 130(d)); (vii) under an immediate annuity contract (as defined in Code Section 72(u)(4)); or (viii) that are purchased by an employer on termination of certain types of qualified plans and which are held by the employer until the employee separates from service. If the penalty tax does not apply to a withdrawal as a result of the application of item (iii) above, and the Series of payments are subsequently modified (other than by reason of death or disability), the tax for the first year when the modification occurs will be increased by an amount (determined by the Treasury regulations) equal to the tax that would have been imposed but for item (iii) above, plus interest for the deferral period, but only if the modification takes place: (a) within 5 years from the date of the first payment, or (b) before the taxpayer reaches age 59 1/2. Separate tax withdrawal penalties apply to qualified plans. See "Penalty Tax on Surrenders and Withdrawals from Qualified Contracts." ADDITIONAL CONSIDERATIONS DISTRIBUTION-AT-DEATH RULES In order to be treated as an annuity contract for federal income tax purposes, a contract must provide the following two distribution rules: (a) if the owner dies on or after the contract maturity date, and before the entire interest in the contract has been distributed, the remainder of the owner's interest will be distributed at least as quickly as the method in effect on the owner's death; and (b) if a owner dies before the contract maturity date, the owner's entire interest generally must be distributed within five (5) years after the date of death, or if payable to a designated beneficiary, may be annuitized over the life or life expectancy of that beneficiary and payments must begin within one (1) year after the owner's date of death. If the beneficiary is the spouse of the owner, the contract (together with the deferral of tax on the accrued and future income hereunder) may be continued in the name of the spouse as owner. Similar distribution requirements apply to annuity contracts under qualified plans (other than Code Section 457 Plans). However, a number of restrictions, limitations and special rules apply to qualified plans and owners should consult with their tax advisor. If the primary annuitant, which is not the owner, dies before the maturity date, the owner will become the annuitant unless the owner appoints another annuitant. If the owner is 11 not an individual, the death of the primary annuitant is treated as the death of the owner. In addition, when the owner is not an individual, however, a change in the primary annuitant is treated as the death of the owner. Finally, in the case of non-spousal joint owners, distribution will be required at the earliest death of any of the owners. If the owner or a joint owner dies on or after the maturity date, the remaining payments, if any, under the Annuity Payment Option selected will be made at least as rapidly as under the method of distribution in effect at the time of death. Any death benefits paid under the contract are taxable to the beneficiary. The rules governing the taxation of payments from an annuity contract, as discussed above, generally apply whether the death benefits are paid as lump sum or annuity payments. Estate taxes may also apply. TRANSFER OF ANNUITY CONTRACTS Transfers of nonqualified contracts prior to the maturity date for less than full and adequate consideration to the owner at the time of such transfer, will trigger tax on the gain in the contract, with the transferee getting a step-up in basis for the amount included in the owner's income. This provision does not apply to transfers between spouses and incident to a divorce. CONTRACTS OWNED BY NON-NATURAL PERSONS If a non-natural person (for example, a corporation) holds the contract, the income on that contract (generally the increase in the net SURRENDER VALUE less the premium payments paid) is includable in income each year. The rule does not apply where the non-natural person is the nominal owner of a contract and the beneficial owner is a natural person. The rule also does not apply where the annuity contract is acquired by the estate of a decedent, where the contract is held under a qualified plan, a TSA program or an IRA, where the contract is a qualified funding asset for structured settlements, or where the contract is purchased on behalf of an employee upon termination of a qualified plan. SECTION 1035 EXCHANGES Code Section 1035 provides, in general, that no gain or loss shall be recognized on the exchange of one annuity contract for another. A replacement contract obtained in a tax-free exchange of contracts generally succeeds to the status of the surrendered contract. If the surrendered contract was issued prior to August 14, 1982, the tax rules that formerly provided that the surrender was taxable only to the extent the amount received exceeds the owner's investment in the contract will continue to apply. In contrast, contracts issued on or after January 19, 1985 are, in a Code Section 1035 exchange, treated as new contracts for purposes of the distribution-at-death rules. Special rules and procedures apply to Code Section 1035 transactions. Prospective owners wishing to take advantage of Code Section 1035 should consult their tax advisors. MULTIPLE CONTRACTS Code Section 72(e)(11)(A)(ii) provides that for contracts entered into after October 21, 1988, for purposes of determining the amount of any distribution under Code Section 72(e) (amounts not received as annuities) that is includable in gross income, all nonqualified annuity contracts issued by the same insurer (or affiliate) to the same owner during any calendar year are to be aggregated and treated as one contract. Thus, any amount received under any such contract prior to the contract maturity date, such as a withdrawal, dividend or loan, will be taxable (and possibly subject to the 10% penalty tax) to the extent of the combined income in all such contracts. The U.S. Treasury Department has specific authority to issue regulations that prevent the avoidance of Code Section 72(e) through the serial purchase of annuity contracts or otherwise. In addition, there may be situations where the Treasury may conclude that it would be appropriate to aggregate two or more contracts purchased by the same contract owner. Accordingly, a contract owner should consult a competent tax advisor before purchasing more than one contract or other annuity contracts. DIVERSIFICATION STANDARDS DIVERSIFICATION REGULATIONS To comply with the diversification regulations under Code Section 817(h) ("Diversification Regulations"), after a start-up period, each Series of the funds will be required to diversify its investments. The Diversification Regulations generally require that, on the last day of each calendar quarter, the Series' assets be invested in no more than: [diamond] 55% in any 1 investment [diamond] 70% in any 2 investments [diamond] 80% in any 3 investments [diamond] 90% in any 4 investments A "look-through" rule applies to treat a pro rata portion of each asset of a Series as an asset of the Separate Account, and each Series of the funds are tested for compliance with the percentage limitations. All securities of the same issuer are treated as a single investment. As a result of the 1988 Act, each government agency or instrumentality will be treated as a separate issuer for purposes of these limitations. The Treasury Department has indicated that the Diversification Regulations do not provide guidance regarding the circumstances in which Owner control of the investments of the Separate Account will cause the owner to be treated as the owner of the assets of the Separate Account, thereby resulting in the loss of favorable tax treatment for the contract. At this time, it cannot be determined whether additional guidance will be provided and what standards may be contained in such guidance. The amount of owner control which may be exercised under the contract is different in some respects from the situations addressed in published rulings issued by the IRS in which it was held that the owner was not the owner of the assets of the Separate Account. It is unknown whether these differences, such as the owner's ability to transfer among investment choices or the number and type of investment choices available, would cause the owner to be considered as the owner of the assets of the Separate Account resulting in the imposition of federal income tax to the owner with respect to earnings allocable to the contract prior to receipt of payments under the contract. In the event any forthcoming guidance or ruling is considered to set forth a new position, such guidance or 12 ruling generally will be applied only prospectively. However, if such ruling or guidance was not considered to set forth a new position, it may be applied retroactively resulting in the owner being determined retroactively to be the owner of the assets of the Separate Account. Due to the uncertainty in this area, we reserve the right to modify the contract in an attempt to maintain favorable tax treatment. We represent that we intend to comply with the Diversification Regulations to assure that the contracts continue to be treated as annuity contracts for federal income tax purposes. DIVERSIFICATION REGULATIONS AND QUALIFIED PLANS Code Section 817(h) applies to a variable annuity contract other than a pension plan contract. The Diversification Regulations reiterate that the diversification requirements do not apply to a pension plan contract. All of the qualified plans (described below) are defined as pension plan contracts for these purposes. Notwithstanding the exception of qualified plan contracts from application of the diversification rules, all investments of the PHL Variable Qualified Plan Contracts (i.e., the funds) will be structured to comply with the diversification standards because the funds serve as the investment vehicle for nonqualified contracts as well as qualified plan contracts. Any death benefits paid under the contract are taxable to the beneficiary. The rules governing the taxation of payments from an annuity contract, as discussed above, generally apply whether the death benefits are paid as lump sum or annuity payments. Estate taxes may also apply. TAXATION OF ANNUITIES IN GENERAL--QUALIFIED PLANS The contracts may be used with several types of qualified plans. TSAs, Keoghs, IRAs, Corporate Pension and Profit-sharing Plans and State Deferred Compensation Plans will be treated, for purposes of this discussion, as qualified plans. The tax rules applicable to participants in such qualified plans vary according to the type of plan and the terms and conditions of the plan itself. No attempt is made here to provide more than general information about the use of the contracts with the various types of qualified plans. PHL Variable reserves the right at any time to discontinue the availability of this contract for use with qualified plans. Participants under such qualified plans as well as owners, annuitants and beneficiaries, are cautioned that the rights of any person to any benefits under such qualified plans may be subject to the terms and conditions of the plans themselves or limited by applicable law, regardless of the terms and conditions of the contract issued in connection therewith. For example, PHL Variable will accept beneficiary designations and payment instructions under the terms of the contract without regard to any spousal consent that may be required under the Retirement Equity Act (REA). Consequently, a owner's beneficiary designation or elected annuity payment option may not be enforceable. Under certain circumstances, the proceeds of a surrender of a contract may qualify for "lump sum distribution" treatment under qualified plans. See your tax advisor if you think you may qualify for "lump sum distribution" treatment. The 5-year averaging rule for lump sum distribution has been repealed for tax years beginning after 1999. Effective January 1, 1993, Section 3405 of the Internal Revenue Code was amended to change the roll-over rules applicable to the taxable portions of distributions from qualified pension and profit-sharing plans and Section 403(b) TSA arrangements. Taxable distributions eligible to be rolled over generally will be subject to 20 percent income tax withholding. Mandatory withholding can be avoided only if the employee arranges for a direct rollover to another qualified pension or profit-sharing plan or to an IRA. The new mandatory withholding rules apply to all taxable distributions from qualified plans or TSAs (not including IRAs), except (a) distributions required under the Code, (b) substantially equal distributions made over the life (or life expectancy) of the employee, or for a term certain of 10 years or more and (c) the portion of distributions not includable in gross income (i.e., return of after-tax contributions). On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE VS. NORRIS that optional annuity benefits provided under an employer's deferred compensation plan could not, under Title VII of the Civil Rights Act of 1964, vary between men and women. The contracts sold by PHL Variable in connection with certain qualified plans will utilize annuity tables that do not differentiate on the basis of sex. Such annuity tables also will be available for use in connection with certain nonqualified deferred compensation plans. Numerous changes have been made to the income tax rules governing qualified plans as a result of legislation enacted during the past several years, including rules with respect to: coverage, participation, maximum contributions, required distributions, penalty taxes on early or insufficient distributions and income tax withholding on distributions. The following are general descriptions of the various types of qualified plans and of the use of the contracts in connection therewith. TAX SHELTERED ANNUITIES (TSAs) Code Section 403(b) permits public school systems and certain types of charitable, educational and scientific organizations, generally specified in Code Section 501(c)(3), to purchase annuity contracts on behalf of their employees and, subject to certain limitations, allows employees of those organizations to exclude the amount of payments from gross income for federal income tax purposes. These annuity contracts are commonly referred to as TSAs. For taxable years beginning after December 31, 1988, Code Section 403(b)(11) imposes certain restrictions on a owner's ability to make withdrawals from, or surrenders of, Code Section 403(b) Contracts, if the cash withdrawn is attributable to payments made under a salary reduction agreement. Specifically, Code Section 403(b)(11) allows a owner to make a surrender or withdrawal only (a) when the employee attains age 59 1/2, separates from service, dies or becomes disabled (as defined in the Code), or (b) in the case of hardship. In the case of hardship, the distribution amount cannot include any income earned under the contract. 13 The 1988 Act amended the effective date of Code Section 403(b)(11), so that it applies only with respect to distributions from Code Section 403(b) Contracts which are attributable to assets other than assets held as of the close of the last year beginning before January 1, 1989. Thus, the distribution restrictions do not apply to assets held as of December 31, 1988. In addition, in order for certain types of contributions under a Code Section 403(b) Contract to be excluded from taxable income, the employer must comply with certain nondiscrimination requirements. Owners should consult their employers to determine whether the employer has complied with these rules. Owner loans are not allowed under the contracts. Effective May 4, 1998, loans may be made available under Internal Revenue Code Section 403(b) tax-sheltered annuity programs. A loan from a participant's contract value may be requested only if we make loans available with the contract and if the employer permits loans under their tax-sheltered annuity program. The loan must be at least $1,000 and the maximum loan amount is the greater of: (a) 90% of the first $10,000 of contract value minus any withdrawal charge; and (b) 50% of the contract value minus any withdrawal charge. The maximum loan amount is $50,000. If loans are outstanding from any other tax-qualified plan, then the maximum loan amount of the contract may be reduced from the amount stated above in order to comply with the maximum loan amount requirements under Section 72(p) of the Internal Revenue Code. Loan repayments will first pay any accrued loan interest. The balance will be applied to reduce the outstanding loan balance and will also reduce the amount of the Loan Security Account by the same amount that the outstanding loan balance is reduced. The Loan Security Account is part of the general account and is the sole security for Tax-sheltered Annuity loans (as described in IRC Section 403(b)) loans. It is increased with all loan amounts taken and reduced by all repayments of loan principal. The balance of loan repayments, after payment of accrued loan interest, will be credited to the Contract Value. If we do not receive a loan repayment before 90 days after the payment was due, then the entire loan balance plus accrued interest will be in default. In the case of default, the outstanding loan balance plus accrued interest will be deemed a distribution for income tax purposes, and will be reported as such to the extent required by law. At the time of such deemed distribution, interest will continue to accrue until such time as an actual distribution occurs under the contract. KEOGH PLANS The Self-Employed Individual Tax Retirement Act of 1962, as amended permits self-employed individuals to establish "Keoghs" or qualified plans for themselves and their employees. The tax consequences to participants under such a plan depend upon the terms of the plan. In addition, such plans are limited by law with respect to the maximum permissible contributions, distribution dates, nonforfeitability of interests, and tax rates applicable to distributions. In order to establish such a plan, a plan document must be adopted and implemented by the employer, as well as approved by the IRS. INDIVIDUAL RETIREMENT ANNUITIES Code Sections 408 and 408A permit eligible individuals to contribute to an individual retirement program known as an "IRA." These IRAs are subject to limitations on the amount that may be contributed, the persons who may be eligible and on the time when distributions may commence. In addition, distributions from certain other types of qualified plans may be placed on a tax-deferred basis into an IRA. Effective January 1, 1997, employers may establish a new type of IRA called SIMPLE (Savings Incentive Match Plan for Employees). Special rules apply to participants' contributions to and withdrawals from SIMPLE IRAs. Also effective January 1, 1997, salary reduction IRAs (SARSEP) no longer may be established. Effective January 1, 1998, individuals may establish Roth IRAs. Special rules also apply to contributions to and withdrawals from Roth IRAs. CORPORATE PENSION AND PROFIT-SHARING PLANS Code Section 401(a) permits corporate employers to establish various types of retirement plans for employees. Such retirement plans may permit the purchase of contracts to provide benefits hereunder. These retirement plans may permit the purchase of the contracts to provide benefits under the Plan. Contributions to the Plan for the benefit of employees will not be includable in the gross income of the employee until distributed from the Plan. The tax consequences to participants may vary depending upon the particular Plan design. However, the Code places limitations and restrictions on all Plans, including on such items as: amount of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions, withdrawals and surrenders. Participant loans are not allowed under the contracts purchased in connection with these Plans. Purchasers of contracts for use with Corporate Pension or Profit-sharing Plans should obtain competent tax advice as to the tax treatment and suitability of such an investment. DEFERRED COMPENSATION PLANS WITH RESPECT TO SERVICE FOR STATE AND LOCAL GOVERNMENTS AND TAX EXEMPT ORGANIZATIONS Code Section 457 provides for certain deferred compensation plans with respect to service for state and local governments and certain other entities. The contracts may be used in connection with these plans; however, under these plans if issued to tax exempt organizations, the owner is the plan sponsor, and the individual participants in the plans are the annuitants. Under such contracts, the rights of individual plan participants are governed solely by their agreements with the plan sponsor and not by the terms of the contracts. Effective in 1997 for new state and local government plans, such plans must be funded through a tax-exempt annuity contract held for the exclusive benefit of plan participants. 14 PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS FROM QUALIFIED PLANS In the case of a withdrawal under a qualified plan, a ratable portion of the amount received is taxable, generally based on the ratio of the individual's cost basis to the individual's total accrued benefit under the retirement plan. Special tax rules may be available for certain distributions from a qualified plan. Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of any distribution from qualified retirement plans, including contracts issued and qualified under Code Sections 401 (Keogh and Corporate Pension and Profit-sharing Plans), Tax-Sheltered Annuities and Individual Retirement Annuities other than Roth IRAs. The penalty is increased to 25% instead of 10% for SIMPLE IRAs if distribution occurs within the first two years of the owner's participation in the SIMPLE IRA. To the extent amounts are not includable in gross income because they have been properly rolled over to an IRA or to another eligible qualified plan, no tax penalty will be imposed. The tax penalty will not apply to the following distributions: (a) if distribution is made on or after the date on which the owner or annuitant (as applicable) reaches age 59 1/2; (b) distributions following the death or disability of the owner or annuitant (as applicable) (for this purpose disability is as defined in Section 72(m)(7) of the Code); (c) after separation from service, distributions that are part of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the owner or annuitant (as applicable) or the joint lives (or joint life expectancies) of such owner or annuitant (as applicable) and his or her designated beneficiary; (d) distributions to a owner or annuitant (as applicable) who has separated from service after he has attained age 55; (e) distributions made to the owner or annuitant (as applicable) to the extent such distributions do not exceed the amount allowable as a deduction under Code Section 213 to the owner or annuitant (as applicable) for amounts paid during the taxable year for medical care; (f) distributions made to an alternate payee pursuant to a qualified domestic relations order; (g) distributions from an IRA for the purchase of medical insurance (as described in Section 213(d)(1)(D) of the Code) for the owner and his or her spouse and dependents if the owner has received unemployment compensation for at least 12 weeks; and (h) distributions from IRAs for first-time home purchase expenses (maximum $10,000) or certain qualified educational expenses of the owner, spouse, children or grandchildren of the owner. This exception will no longer apply after the owner has been reemployed for at least 60 days. The exceptions stated in items (d) and (f) above do not apply in the case of an IRA. The exception stated in item (c) applies to an IRA without the requirement that there be a separation from service. Generally, distributions from a qualified plan must commence no later than April 1 of the calendar year following the later of: (a) the year in which the employee attains age 70 1/2 or (b) the calendar year in which the employee retires. The date set forth in (b) does not apply to a regular or SIMPLE IRA and the required distribution rules do not apply to Roth IRAs. Required distributions must be over a period not exceeding the life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated beneficiary. If the required minimum distributions are not made, a 50% penalty tax is imposed as to the amount not distributed. SEEK TAX ADVICE The above description of federal income tax consequences of the different types of qualified plans which may be funded by the contracts offered by this prospectus is only a brief summary meant to alert you to the issues and is not intended as tax advice. The rules governing the provisions of qualified plans are extremely complex and often difficult to comprehend. Anything less than full compliance with the applicable rules, all of which are subject to change, may have adverse tax consequences. A prospective owner considering adoption of a qualified plan and purchase of a contract in connection therewith should first consult a qualified tax advisor, with regard to the suitability of the contract as an investment vehicle for the qualified plan. PHL VARIABLE - -------------------------------------------------------------------------------- We are PHL Variable Insurance Company, a Connecticut stock life insurance company incorporated on July 15, 1981. We sell life insurance policies and annuity contracts through producers of affiliated distribution companies and through brokers. Our executive and administrative office is located at One American Row, Hartford, Connecticut, 06102-5056. PHL Variable is a wholly owned subsidiary of Phoenix Life Insurance Company ("Phoenix") through its holding company, PM Holdings, Inc. Phoenix is a life insurance company, which is wholly owned by The Phoenix Companies, Inc. ("PNX"), which, is a manufacturer of insurance, annuity and asset management products. SELECTED FINANCIAL DATA The following selected financial data was taken from the financial statements which can be found at the end of this prospectus. You should read the financial statements including the notes. The following table reflects the results of our operations for the years ended December 31, 2004, 2003, and 2002; FOR THE YEAR ENDED DECEMBER 31, ----------------------------- 2004 2003 2002 --------- --------- --------- (in thousands) Revenues: Premiums $ 7,367 $ 5,829 $ 4,372 Insurance and investment product fees 83,300 65,529 46,915 Net investment income 143,862 133,531 92,472 Net realized investment (losses) gains 5,121 768 (16,167) --------- --------- --------- Total revenues 239,650 205,657 127,592 --------- --------- --------- Benefits and expenses: Policy benefits and increase in policy liabilities 136,760 127,311 98,915 Amortization of deferred policy acquisition costs 45,027 20,040 23,182 Other operating expenses 35,683 35,288 27,386 ----------------------------- Total benefits and expenses 217,470 182,639 149,483 ----------------------------- Income (loss) before income taxes 22,180 23,018 (21,891) Income tax expense (benefit) 5,465 8,369 (8,635) ----------------------------- Net income $16,715 $14,649 $(13,256) ============================= 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS Premiums increased 26% in 2004 over 2003 and 33% in 2003 over 2002 due primarily to the increase in sales from term life insurance products. Insurance and investment product fees increased 27% in 2004 over 2003 and 40% in 2003 over 2002 primarily due to growth in fee-based funds on deposit. In addition, in both 2004 and 2003, fee revenue from our assumed variable universal life and variable annuity blocks of business increased over the prior year. Net investment income increased 8% in 2004 over 2003 and 44% in 2003 over 2002 primarily due to an increase in invested assets related to the guaranteed interest account portion of our annuity business. See policy benefit discussion below for additional information on average account balances. Net realized investment gains (losses) increased $4,353 in 2004 over 2003 and improved to a gain of $768 thousand in 2003 from a loss of $16,167 thousand in 2002 due primarily to lower debt security impairments and higher transaction gains on both debt and equity securities. Policy benefits increased 7% in 2004 over 2003 primarily due to an increase in net death benefits partially offset by higher interest credited to funds on deposit. Policy benefits increased 29% in 2003 over 2002 primarily due to higher interest credited from higher average funds on deposit in the guaranteed interest account portion of our variable annuity business. The average guaranteed interest account balance for 2004, 2003 and 2002 was $1,764.8 mill, $1,874.1 million and $1,367.9 million, respectively. Amortization of deferred policy acquisition costs increased 125% for 2004 from 2003 primarily due to a larger block of business in force and adverse market performance. Amortization of deferred policy acquisition costs decreased 14% in 2003 from 2002 primarily as a result of certain annuity amortization charges in 2002, as described below, that did not recur in 2003. This decrease was partially offset by an increase in amortization for universal life and term business from the growth in life insurance inforce. Other operating expenses remained flat in 2004 as compared to 2003. They increased 29% in 2003 over 2002 primarily due to growth in new business. LIQUIDITY AND CAPITAL RESOURCES The company's liquidity requirements are met by anticipating and managing the timing of cash uses and sources provided from insurance operations, investing activities and capital contributions from the parent. The growth in sales has created a need for additional cash in order to cover the acquisition costs incurred in operating activities. These liquidity requirements are currently being met through investing activities and by capital contributed by its parent. PM Holdings made capital contributions of $19 million, $40 million and $259 million in 2004, 2003 and 2002, respectively. SEGMENT INFORMATION As of May 1, 2005, the company offers a variety of annuity and life insurance products. The annuity products include one immediate fixed annuity, one immediate variable and fixed annuity and five deferred fixed and variable annuities. The life products include four level term policies, four universal life policies and seven variable universal life policies. REINSURANCE For contracts written in 1999 or before, the company has various reinsurance agreements in place related to the guaranteed death benefit on its variable deferred annuity contracts. These agreements transfer the payment obligation for the death benefit on variable deferred annuities to the reinsurer in exchange for a reinsurance premium. Reinsurance agreements are also in place for the term and universal life insurance products. For term insurance, these agreements transfer 90% of the life insurance benefit payment obligations to various highly rated reinsurers in exchange for a reinsurance premium. Universal life insurance was reinsured in a similar manner until mid-2002. Policies written since then are still subject to retention limits for all companies within The Phoenix Companies, Inc. The ceding of death benefit payments does not discharge the original insurer from its primary liability to the policyholder. The original insurer would remain liable in those situations where the reinsurer is unable to meet the obligations assumed under the reinsurance agreements. We have established strict standards that govern the placement of reinsurance and monitor the financial strength of the companies assuming our business. COMPETITION The company is engaged in a business that is highly competitive due to the large number of insurance companies and other entities competing in the marketing and sale of insurance and annuity products. The company's competitors include larger and, in some cases, more highly-rated insurance companies and other financial services companies. Many competitors offer similar products, use similar distribution sources, offer less expensive products, have greater access to key distribution channels and have greater resources than us. Competition in our businesses is based on several factors including ratings, investment performance, access to distribution channels, service to advisors and their clients, product features, fees charged and commissions paid. As we continue to focus on the development of our non-affiliated distribution system, we increasingly must compete with other providers of life insurance and annuity products to attract and maintain relationships with productive distributors that have the ability to sell our products. In particular, our ability to attract distributors for our products could be 16 adversely affected if for any reason our products became less competitive or concerns arose about our asset quality or ratings. EMPLOYEES Phoenix employees perform all management and administrative functions. PHL Variable is charged for such services on a time allocation basis. REGULATION PHL Variable is organized as a Connecticut stock life insurance company, and is subject to Connecticut law governing insurance companies. The company is regulated and supervised by the Connecticut Commissioner of Insurance. By March 1st of every year, an annual statement must be prepared and filed in a form prescribed by the Connecticut Insurance Department. This annual statement reports on the company's operating results for the preceding calendar year. A statement of financial condition as of December 31st of the preceding calendar year must also be prepared and filed. The Commissioner and his or her agents have the right at all times to review or examine the company's books and records. A full examination of the company's operations will be conducted periodically according to the rules and practices of the National Association of Insurance Commissioners ("NAIC"). PHL Variable is subject to the insurance laws and various federal and state securities laws and regulations and to regulatory agencies, such as the SEC and the Connecticut Banking Department, which administer those laws and regulations. PHL Variable can be assessed, up to prescribed limits, policyholder losses incurred by insolvent insurers under the insurance guaranty fund laws of most states. The amount of any such future assessments cannot be predicted or estimated. However, the insurance guaranty laws of most states provide for deferring payment or exempting a company from paying such an assessment if it would threaten such insurer's financial strength. Several states, including Connecticut, regulate insurers and their affiliates under insurance holding company laws and regulations. Such regulation is applicable to PHL Variable and its affiliates. Under such laws, intercompany transactions, such as dividend payments to parent companies and transfers of assets, may be subject to prior notice and approval, depending on factors such as the size of the transaction in relation to the financial position of the companies. Currently, the federal government does not directly regulate the business of insurance. However, federal legislative, regulatory and judicial decisions and initiatives often have significant effects on our business. Types of changes that are most likely to affect our business include changes to: (a) the taxation of life insurance companies; (b) the tax treatment of insurance products; (c) the securities laws, particularly as they relate to insurance and annuity products; (d) the "business of insurance" exemption from many of the provisions of the antitrust laws; and (e) any initiatives directed toward improving the solvency of insurance companies. PHL Variable would also be affected by federal initiatives that have impact on the ownership of, or investment in, United States companies by foreign companies or investors. EXECUTIVE COMPENSATION All of the executive officers of PHL Variable also serve as officers of Phoenix and receive no direct compensation from PHL Variable. Allocations have been made as to the officers' time devoted to duties as executive officers of PHL Variable. No officer or Director of PHL Variable received allocated compensation in excess of $100,000. DIRECTORS AND OFFICERS OF PHL VARIABLE [TO BE FILED BY AMENDMENT] - -------------------------------------------------------------------------------- THE SEPARATE ACCOUNT - -------------------------------------------------------------------------------- PHL Variable Separate Account MVA1 ("Separate Account") is a non-unitized separate account established under Connecticut law. Contract values attributable to the premium allocation and terms of the contract do not depend of the performance of the assets in the Separate Account. Under Connecticut law, all income, gains or losses of the Separate Account, whether realized or not, must be credited to or charged against the amount placed in the Separate Account without regard to our other income, gains and losses. The assets of the Separate Account may not be charged with liabilities arising out of any other business that we may conduct. Obligations under the contracts are obligations of PHL Variable. There are no discrete units in the Separate Account. No party with rights under any contract participates in the investment gain or loss from assets belonging to the Separate Account. Such gain or loss accrues solely to us. We retain the risk that the value of the assets in the Separate Account may drop below the reserves and other liabilities it must maintain. If the Separate Account asset value drops below the reserve and other liabilities we must maintain in relation to the contracts supported by such assets, we will transfer assets from our General Account to the Separate Account. Conversely, if the amount we maintain is too much, we may transfer the excess to our General Account. In establishing guaranteed rates for the Fixed Account, we intend to take into account the yields available on the instruments in which we intend to invest the proceeds from the contracts. The company's investment strategy with respect to the proceeds attributable to the contracts generally will be to invest in investment-grade debt instruments having durations tending to match the applicable guarantee periods. Investment-grade debt instruments in which the company intends to invest the proceeds from the contracts include: [diamond] Securities issued by the United States government or its agencies or instrumentalities. [diamond] Debt securities which have a rating, at the time of purchase, within the four highest grades assigned by Moody's Investors Services, Inc. (Aaa, Aa, A or Bb), 17 Standard & Poor's Corporation (AAA, AA, A or BBB) or any other nationally recognized rating service. [diamond] Other debt instruments, although not rated by Moody's or Standard & Poor's, are deemed by the company's management to have an investment quality comparable to securities described above. While the above generally describes our investment strategy with respect to the proceeds attributable to the contracts, we are not obligated to invest the proceeds according to any particular strategy, except as may be required by Connecticut and other state insurance law. LEGAL MATTERS [To be filed by amendment] DISTRIBUTOR Phoenix Equity Planning Corporation ("PEPCO") is the principal underwriter and national distributor of the contracts pursuant to an underwriting agreement dated November 1, 2000. Its principal business address is One American Row, Hartford, Connecticut 06115. PEPCO is a directly wholly owned subsidiary of Phoenix Investment Partners, Inc. ("PXP"). PXP is an indirectly owned subsidiary of The Phoenix Companies, Inc. PEPCO is an affiliated subsidiary of the Separate Account and PHL Variable. Contracts may be purchased from broker-dealers registered under the Securities Exchange Act of 1934 whose representatives are authorized by applicable law to sell contracts under terms of agreements provided by PEPCO. Sales commissions will be paid to registered representatives on purchase payments we receive under these contracts. PHL Variable will pay a maximum total sales commission of 50% of premiums. To the extent that the sales charge under the contracts is less than the sales commissions paid with respect to the policies, we will pay the shortfall from our General Account assets, which will include any profits we may derive under the contracts. To the extent permitted by NASD rules, overrides and promotional incentives or payments also may be provided to broker-dealers based on sales volumes, the assumption of wholesaling functions, or other sales-related criteria. Additional payments may be made for other services not directly related to the sale of the contracts, including the recruitment and training of personnel, production of promotional literature and similar services. ANNUAL REPORTS AND OTHER DOCUMENTS [To be filed by amendment] ANNUAL STATEMENTS At least once a year prior to the maturity date, we will send you a statement containing information about your contract value. For more information, please contact your registered representative or call us at 1-800-541-0171. 18 APPENDIX A -DEDUCTIONS FOR TAXES - QUALIFIED AND NONQUALIFIED ANNUITY CONTRACTS - --------------------------------------------------------------------------------
UPON UPON STATE PREMIUM PAYMENT ANNUITIZATION NONQUALIFIED QUALIFIED - ----- --------------- ------------- ------------ --------- California .......................................... X 2.35% 0.50% Maine................................................ X 2.00* Nevada............................................... X 3.50 South Dakota......................................... X 1.25** West Virginia........................................ X 1.00 1.00 Wyoming.............................................. X 1.00 Commonwealth of Puerto Rico.......................... X 1.00 1.00
NOTE: The above tax deduction rates are as of January 1, 2005. No tax deductions are made for states not listed above. However, tax statutes are subject to amendment by legislative act and to judicial and administrative interpretation, which may affect both the above lists of states and the applicable tax rates. Consequently, we reserve the right to deduct tax when necessary to reflect changes in state tax laws or interpretation. For a more detailed explanation of the assessment of taxes, see Deductions and Charges--Tax." - ------------------- * Maine changed its tax laws affecting annuities in 2003 retroactive to January 1, 1999. Under the revised statute, annuity premium payments are taxed upon premium payment for payments received on or after January 1, 1999. ** South Dakota law provides a lower rate of 0.8% that applies to premium payments received in excess of $500,000 in a single calendar year. A-1 PART II INFORMATION NOT REQUIRED IN A PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Not applicable. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 33-779 of the Connecticut General Statutes states that: "a corporation may provide indemnification of or advance expenses to a director, officer, employee or agent only as permitted by sections 33-770 to 33-778, inclusive." Article VI. Section 6.01. of the Bylaws of the Registrant (as amended and restated effective May 16, 2002) provide that: "Each director, officer or employee of the company, and his heirs, executors or administrators, shall be indemnified or reimbursed by the company for all expenses necessarily incurred by him in connection with the defense or reasonable settlement of any action, suit or proceeding in which he is made a party by reason of his being or having been a director, officer or employee of the company, or of any other company in which he was serving as a director or officer at the request of the company, except in relation to matters as to which such director, officer or employee is finally adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duties as such director, officer or employee. The foregoing right of indemnification or reimbursement shall not be exclusive of any other rights to which he may be entitled under any statute, bylaw, agreement, vote of shareholders or otherwise." Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Not applicable. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 1. Underwriting Agreement - Incorporated by reference to Registrant's Filing on Form S-1, File No. 333-55240 filed via Edgar on February 8, 2001. 2. Not applicable. 3. (i) Articles of Incorporation - Incorporated by reference to Registrant's Filing on Form S-1, File No. 333-55240 filed via Edgar on February 8, 2001. (ii) Bylaws of PHL Variable Insurance Company, effective May 16, 2002 is incorporated by reference to Registrants Filing S-1 File No. 333-87218 filed via Edgar on May 1, 2004. 4. Annuity contract, filed herewith. 5. Opinion regarding legality - Refer to exhibit 23(b). 6. Not applicable. 7. Not applicable. 8. Opinion regarding tax matters - Refer to exhibit 23(b). 9. Not applicable. 10. Not applicable. 11. Not applicable. 12. Not applicable. II-1 13. Annual report to security holders, Form 10-Q and 10-QSB, or quarterly report to security holders, to be filed by amendment. 14. Not applicable. 15. Not applicable. 16. Not applicable. 17. Not applicable. 18. Not applicable. 19. Report furnished to security holders, to be filed by amendment. 20. Not applicable. 21. Not applicable. 22. Not Applicable 23. (a) Consent of Accountants, to be filed by amendment. 23. (b) Opinion and Consent of Kathleen A. McGah, Esq., to be filed by amendment. 24. Powers of attorney on file with Registrant. 25. Not applicable. 26. Not applicable. ITEM 17. UNDERTAKINGS The undersigned registrant hereby undertakes: (1) To file, during any period in which offers of sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) Not applicable. ITEM 18. FINANCIAL STATEMENTS AND SCHEDULES Financial Statements and Schedules conforming to the requirement of Regulation S-X are to be filed by amendment. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant 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 this 16th day of December, 2005. PHL VARIABLE INSURANCE COMPANY By: _____________________________________ * Philip K. Polkinghorn President PHL VARIABLE ACCUMULATION ACCOUNT By: _____________________________________ * Philip K. Polkinghorn President Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE --------- ----- Director, Executive Vice President _____________________________________ and Chief Financial Officer *Michael E. Haylon _____________________________________ Director and Senior Vice President *Mitchell R. Katcher _____________________________________ Director and President *Philip K. Polkinghorn _____________________________________ Director and Senior Vice President *Robert E. Primmer Director, Executive Vice President _____________________________________ and Chief Investment Officer *James D. Wehr By:/s/ Kathleen A. McGah ---------------------- *Kathleen A. McGah, as Attorney-in-Fact pursuant to Powers of Attorney, on file with the Registrant. December 16, 2005 EX-99.16.4 3 eia75125ex16-4.txt CONTRACT PHL VARIABLE INSURANCE COMPANY [LOGO] PHOENIX(R) A STOCK COMPANY - -------------------------------------------------------------------------------- The PHL Variable Insurance Company ("the Company") agrees, subject to the conditions and provisions of this contract, to provide the benefits specified in this contract. If the contract is in force on the Maturity Date, we shall begin to pay a series of annuity payments automatically to the Owner beginning on the Maturity Date for a period certain of 10 years and as long thereafter as the Annuitant lives, unless another option is elected. The amount of each annuity payment, as described in the Annuity Benefits section, will be based on the Contract Value on the Maturity Date and the annuity payment factors. We are issuing the contract in consideration of the application, if any, and our receipt of the Single Premium at our Annuity Operations Division. The provisions of this and the following pages and any attachments make up your contract. RIGHT TO RETURN THIS CONTRACT. THIS CONTRACT MAY BE RETURNED WITHIN 10 DAYS (20 DAYS FOR REPLACEMENTS) AFTER YOU RECEIVE IT FOR A REFUND OF THE SINGLE PREMIUM, LESS ANY WITHDRAWALS MADE UNDER THIS CONTRACT AS OF THE DATE OF CANCELLATION. THIS CONTRACT WILL BE VOID FROM ITS BEGINNING. YOU MAY RETURN THE CONTRACT BY DELIVERING OR MAILING IT TO US AT THE ADDRESS BELOW OR BY RETURNING IT TO THE AGENT OR AGENCY OFFICE THROUGH WHICH IT WAS DELIVERED. PHL VARIABLE INSURANCE COMPANY [Annuity Operations Division PO Box 8027 Boston, MA 02266-8027 Telephone (800) 541-0171] Signed for PHL Variable Insurance Company at One American Row, Hartford, Connecticut 06115. [ /s/ Philip K. Polkinghorn ] [ /s/ John H. Beers ] [ President ] [ Secretary ] READ YOUR CONTRACT CAREFULLY IT IS A LEGAL CONTRACT BETWEEN THE OWNER AND PHL VARIABLE INSURANCE COMPANY. THE CONTRACT VALUE WILL DEPEND ON AMOUNTS CREDITED TO THE FIXED ACCOUNT AND THE INDEXED ACCOUNTS. THE CONTRACT VALUE MAY INCREASE BASED ON THE INDEX CALCULATION DESCRIBED IN THE INDEX ACCOUNT(S) YOU SELECTED. WHILE ACCOUNT VALUE FOR EACH INDEXED ACCOUNT IS AFFECTED BY THE VALUE OF AN OUTSIDE INDEX, THE CONTRACT DOES NOT DIRECTLY PARTICIPATE IN ANY STOCK OR EQUITY INVESTMENT. WITHDRAWALS OR A SURRENDER MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT, WHICH MAY INCREASE OR DECREASE THE AMOUNT WITHDRAWN OR SURRENDERED. WITHDRAWALS OR A SURRENDER MAY BE SUBJECT TO SURRENDER CHARGES. Single Premium Deferred Equity Indexed Modified Guaranteed Annuity Nonparticipating - not eligible for dividends 05FNDEIA TABLE OF CONTENTS Section Provision 1. Schedule Pages 2. Definitions 3. Entire Contract 4. Owner(s) and Beneficiary(ies) 5. Premium, Allocation, and Reallocation 6. Fixed Account, Indexed Accounts 7. Withdrawals, Surrender, Termination 8. Market Value Adjustment Feature 9. Waiver Provisions 10. Death Benefit 11. Assignment 12. Deferral of Determinations 13. Proof Required for Payment 14. Misstatements 15. Change of Maturity Date 16. Statement of Account 17. Annuity Benefits 18. Annuity Payment Options 2
- ------------------------------------------------------------------------------------------------------------------- SECTION 1: SCHEDULE PAGES - ------------------------------------------------------------------------------------------------------------------- Owner: [John Doe] Contract Number: [13000000] Single Premium: [$100,000.00] Contract Date: [February 1, 2006] Maturity Date: [February 1, 2041] Owner's Age: [35] Owner's Sex: [Male] Annuitant: [Jane Doe] Joint Annuitant: [None] Beneficiary: [As specified later in this Section 1] PREMIUM ALLOCATION PERCENTAGES Fixed Account [100.00%] Indexed Account A - Point-to-Point with Cap Indexed Account [000.00%] Indexed Account B - Performance Trigger Indexed Account [000.00%] Indexed Account C - Monthly Average with Spread Indexed Account [000.00%]
3
- ------------------------------------------------------------------------------------------------------------------- SECTION 1: SCHEDULE PAGES (continued) - ------------------------------------------------------------------------------------------------------------------- Owner: [John Doe] Contract Number: [13000000] FIXED ACCOUNT (THE VALUES BELOW APPLY ONLY TO THE FIXED ACCOUNT) Premium Allocation [$100,000.00] Initial Interest Rate [3.00%] Guaranteed Minimum Interest Rate [0.00% for each Contract Year in surrender charge period, 0.00% for each Contract Year thereafter]
INTEREST CREDITING We will credit interest on Account Value allocated to the Fixed Account at rates we declare on an annual effective basis. The initial interest rate applicable to the Fixed Account applies to the first Contract Year only. On each subsequent Contract Anniversary a new interest rate will be declared and will be guaranteed for the following Contract Year. Subsequent interest rates may be higher or lower than the initial interest rate, but in no event lower than the Guaranteed Minimum Interest Rate as shown above. 4
- ------------------------------------------------------------------------------------------------------------------- SECTION 1: SCHEDULE PAGES (continued) - ------------------------------------------------------------------------------------------------------------------- Owner: [John Doe] Contract Number: [13000000] INDEXED ACCOUNT A - POINT-TO-POINT WITH CAP INDEXED ACCOUNT ----------------------------------------------------------- (THE VALUES BELOW APPLY ONLY TO THE POINT-TO-POINT WITH CAP INDEXED ACCOUNT) Premium Allocation [$0.00] Index [S&P 500(R)*] Index Value on the Contract Date [1000.00] Initial Index Cap [6.00%] Guaranteed Minimum Index Cap [0.00% for each Contract Year during surrender charge period, 0.00% for each Contract Year thereafter] Guaranteed Minimum Index Credit [0.00%]
Account Value allocated to the Point-to-Point with Cap Indexed Account earns an Index Credit on each Contract Anniversary that is based on the performance of the Index for the past Contract Year. The Index Credit equals the lesser of the Index Growth, the calculation of which is described below, and the applicable Index Cap, but in no event less than the Guaranteed Minimum Index Credit as shown above. Index Credit will not be calculated or applied anytime other than on the Contract Anniversaries. On each Contract Anniversary the Index Growth is calculated as ((i) divided by (ii)) minus 1, where: (i) is the Index Value on the Contract Anniversary, and (ii) is the Index Value on the preceding Contract Anniversary. On the first Contract Anniversary, the Contract Date is deemed the preceding Contract Anniversary for the purpose of this calculation. INDEX CAP The Index Cap is the maximum Index Credit that can be applied to the Account Value in any given Contract Year. The initial Index Cap applies to the first Contract Year only. On each subsequent Contract Anniversary a new Index Cap will be declared and will be guaranteed for the following Contract Year. Subsequent Index Caps may be higher or lower than the initial Index Cap, but in no event lower than the Guaranteed Minimum Index Cap as shown above. * ["Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Phoenix Life Insurance Company and its affiliates. This annuity is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of purchasing this annuity.] 5
- ------------------------------------------------------------------------------------------------------------------- SECTION 1: SCHEDULE PAGES (continued) - ------------------------------------------------------------------------------------------------------------------- Owner: [John Doe] Contract Number: [13000000] INDEXED ACCOUNT B - PERFORMANCE TRIGGER INDEXED ACCOUNT ------------------------------------------------------- (THE VALUES BELOW APPLY ONLY TO THE PERFORMANCE TRIGGER INDEXED ACCOUNT) Premium Allocation [$0.00] Index [S&P 500(R)*] Index Value on the Contract Date [1000.00] Initial Triggered Rate [5.00%] Guaranteed Minimum Triggered Rate [0.00% for each Contract Year during surrender charge period, 0.00% for each Contract Year thereafter] Guaranteed Minimum Index Credit [0.00%]
Account Value allocated to the Performance Trigger Indexed Account earns an Index Credit on each Contract Anniversary that is based on the performance of the Index for the past Contract Year. On each Contract Anniversary the Index Credit equals the Triggered Rate if the Index Growth, the calculation of which is described below, is greater than zero. The Index Credit equals the Guaranteed Minimum Index Credit as shown above if the Index Growth is less than or equal to zero. Index Credit will not be calculated or applied anytime other than on the Contract Anniversaries. The Index Growth is calculated as ((i) divided by (ii)) minus 1, where: (i) is the Index Value on the Contract Anniversary, and (ii) is the Index Value on the preceding Contract Anniversary. On the first Contract Anniversary, the Contract Date is deemed the preceding Contract Anniversary for the purpose of this calculation. TRIGGERED RATE A Triggered Rate is applied to the Account Value if the Index Growth for the Contract Year is greater than zero. The initial Triggered Rate applies to the first Contract Year only. On each subsequent Contract Anniversary a new Triggered Rate will be declared and will be guaranteed for the following Contract Year. Subsequent Triggered Rates may be higher or lower than the initial Triggered Rate, but in no event lower than the Guaranteed Minimum Triggered Rate as shown above. * ["Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Phoenix Life Insurance Company and its affiliates. This annuity is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of purchasing this annuity.] 6
- ------------------------------------------------------------------------------------------------------------------- SECTION 1: SCHEDULE PAGES (continued) - ------------------------------------------------------------------------------------------------------------------- Owner: [John Doe] Contract Number: [13000000] INDEXED ACCOUNT C - MONTHLY AVERAGE WITH SPREAD INDEXED ACCOUNT --------------------------------------------------------------- (THE VALUES BELOW APPLY ONLY TO THE MONTHLY AVERAGE WITH SPREAD INDEXED ACCOUNT) Premium Allocation [$0.00] Index [S&P 500(R)*] Index Value on the Contract Date [1000.00] Initial Index Spread [2.00%] Guaranteed Maximum Index Spread [10.00% for each Contract Year during surrender charge period, 10.00% for each Contract Year thereafter] Guaranteed Minimum Index Credit [0.00%]
Account Value allocated to the Monthly Average with Spread Indexed Account earns an Index Credit on each Contract Anniversary that is based on the performance of the Index for the past Contract Year. On each Contract Anniversary the Index Credit equals the Averaged Index Growth, the calculation of which is described below, less the Index Spread, but in no event less than the Guaranteed Minimum Index Credit as shown above. Index Credit will not be calculated or applied anytime other than on the Contract Anniversaries. The Averaged Index Growth is calculated as ((i) divided by (ii)) minus 1, where: (i) is the sum of the Index Values on each Monthly Processing Date during the Contract Year, divided by 12, and (ii) is the Index Value on the preceding Contract Anniversary. On the first Contract Anniversary, the Contract Date is deemed the preceding Contract Anniversary for the purpose of this calculation. INDEX SPREAD The Index Spread is the amount subtracted from the Averaged Index Growth when the Index Credit is calculated. The initial Index Spread applies to the first Contract Year only. On each subsequent Contract Anniversary a new Index Spread will be declared and will be guaranteed for the following Contract Year. Subsequent Index Spreads may be higher or lower than the initial Index Spread, but in no event higher than the Guaranteed Maximum Index Spread as shown above. * ["Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Phoenix Life Insurance Company and its affiliates. This annuity is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of purchasing this annuity.] 7 - -------------------------------------------------------------------------------- SECTION 1: SCHEDULE PAGES (continued) - -------------------------------------------------------------------------------- Owner: [John Doe] Contract Number: [13000000] CONTRACT CHARGES [Tax charge: 0.00% of Single Premium payment] Surrender Charge: deducted in accordance with the following Surrender Charge Schedule Surrender Charge Schedule* ---------------------------------------------------------- Complete Contract Surrender Charge Years Percentage ---------------------------- -- -------------------------- [0 7% ---------------------------- -- -------------------------- 1 7% ---------------------------- -- -------------------------- 2 7% ---------------------------- -- -------------------------- 3 6% ---------------------------- -- -------------------------- 4 6% ---------------------------- -- -------------------------- 5 5% ---------------------------- -- -------------------------- 6 5% ---------------------------- -- -------------------------- 7+ 0%] ---------------------------------------------------------- * See Section 7 for a description of how this charge is determined. 8 - -------------------------------------------------------------------------------- SECTION 1: SCHEDULE PAGES (continued) - -------------------------------------------------------------------------------- Owner: [John Doe] Contract Number: [13000000] BENEFICIARY [Jack Doe] 9 - -------------------------------------------------------------------------------- SECTION 2: DEFINITIONS - -------------------------------------------------------------------------------- The term "ACCOUNT" means an Indexed Account or a Fixed Account. The term "ACCOUNT VALUE" means the value available in each Account for annuitization or surrender, before the application of any surrender charge or Market Value Adjustment. The term "ANNUITANT/JOINT ANNUITANT" means the person or persons on whose continuation of life or lives the annuity benefit is based upon for this contract. The Annuitant shown on the Schedule Page when the contract was issued is the Primary Annuitant. Unless otherwise prohibited by the terms of this contract and any attachments, the Annuitant/Joint Annuitant may be changed prior to the Maturity Date. There may, however, be tax consequences. The term "BENEFICIARY" is as defined in Section 4. The term "BUSINESS DAY" means any day that we are open for business and the New York Stock Exchange is open for trading. We will deem each Business Day to end at the close of regularly scheduled trading of the New York Stock Exchange (currently 4:00 p.m. Eastern Time) on that day. The term "CONTRACT ANNIVERSARY" means the same day and month of each year as the Contract Date following the Contract Date. If the day does not exist in a month, the last day of the month will be used. The term "CONTRACT DATE" means the date this Contract is issued and the date from which Contract Years are measured. The Contract Date is shown on the Schedule Pages. The contract will begin in effect on the Contract Date provided the Single Premium is received and the Owner is alive. The term "CONTRACT VALUE" is equal to the sum of the Account Value of each of the Accounts. The term "CONTRACT YEAR" means the 12-month period beginning on the Contract Date and each 12-month period thereafter. The term "GROSS WITHDRAWAl" means the amount deducted from the Contract Value as a consequence of your request for a withdrawal. The term "INDEX" means the measure used to determine the Index Credit for a particular Indexed Account. The Index used for a particular Indexed Account is shown on the Schedule Pages. If the Index is no longer available or if the Index calculation is substantially changed, a suitable replacement index will be used, subject to any required regulatory approval. We will notify you of the change. The term "INDEX VALUE" means the published value of the Index, excluding any dividends that may be paid by the firms that comprise the Index. The Index Value on the Contract Date, Contract Anniversaries, or Monthly Processing Dates will be the Index Value published as of the close of business on the Business Day prior to the Contract Date, Contract Anniversary, or Monthly Processing Date, respectively. If an Index Value is not published on any particular day, the first preceding Index Value will be used. The term "MATURITY DATE" is the date annuity payments commence in the form of an annuity payment option. The Maturity Date is as shown on the Schedule Pages or as later changed. For further details see Section 15. The term "MONTHLY PROCESSING DATe" means the same day of each month as the Contract Date. If the day does not exist in a month, the last day of the month will be used. The term "NET WITHDRAWAL" means the payment you will receive as a consequence of your request for a withdrawal, provided sufficient Contract Value is available. The Net Withdrawal is equal to the Gross Withdrawal, adjusted by any applicable Market Value Adjustment, less any applicable Surrender Charges and taxes. The term "OWNER" or "OWNERS" means the person, persons, or entity with ownership rights in the Contract. The Owner is as shown on the Schedule Pages or as later changed. For further details see Section 4. The term "SURRENDER VALUE" is as defined in Section 7. The terms "WE, US, AND OUR" refer to the Company. The terms "WRITTEN REQUEST" and "WRITTEN NOTICE" mean a request or notice we receive in writing at our Annuity Operations Division in a form satisfactory to us. The terms "YOU" and "YOUR" refer to the Owner(s) of this contract, as defined in Section 4, or the joint Owners of this contract if a joint Owner is named. 10 - -------------------------------------------------------------------------------- SECTION 3: ENTIRE CONTRACT - -------------------------------------------------------------------------------- This contract is an agreement between the Owner(s) and the Company. This contract and any attachments comprise the entire contract. Any change in terms of this contract, as required to conform with law, must be signed by one of our executive officers and countersigned by another one of our executive officers. Any benefits payable under this contract are payable at our Annuity Operations Division. All paid-up annuity, surrender, and death benefits under this contract are not less than the minimum benefits required by any statute of the state where this contract is delivered or issued for delivery. Any additional amounts we credit to the contract will be treated as any other gain in the contract and will increase the paid-up annuity, cash surrender, and death benefits. Paid-up annuity, cash surrender benefits and death benefits will be reduced by any withdrawals. - -------------------------------------------------------------------------------- SECTION 4: OWNER(S) AND BENEFICIARY(IES) - -------------------------------------------------------------------------------- OWNER(S) The Owner is the person, persons, or entity, with sole and absolute power to exercise all rights and privileges without the consent of any other party, except as otherwise provided by this contract or unless you provide otherwise by written notice. If there is more than one Owner, all Owners must consent to any changes. If no Owner is named, the Annuitant will be the Owner. If you are a non-natural Owner, death of the Primary Annuitant will be treated as the death of an Owner. Under contracts used with certain tax-qualified plans, the Owner must be the Annuitant. More than one Owner may be named. If any Owner dies, all rights vest equally in the surviving Owners. If any Owner dies prior to the Maturity Date, the death benefit will be paid as provided in Section 10. BENEFICIARY(IES) The Beneficiary is the person who receives death benefits under this contract. If there is no surviving Beneficiary when the death benefit becomes payable in accordance with Section 10, the Owner will be the Beneficiary. If the Owner is not living, then the estate of the Owner will be the Beneficiary. The Owner(s) and the Beneficiary will be as shown in the contract unless you change them or they are changed by the terms of this section. CHANGES While this contract is in effect, you may change the Beneficiary. You may also change the Owner or Annuitant with our consent. You may only change the Owner by transfering ownership of the entire contract between spouses or to a single grantor trust. If the Owner is a natural person, You may change Annuitant(s) or name a new Annuitant upon the death of the Primary Annuitant prior to the Maturity Date. If you do not name a new Annuitant, and the Owner is a natural person, the Owner will become the Annuitant. A request to make any changes must be made by written request. If there is more than one Owner, all Owners must sign the request. When we receive it, the change will be effective as of the date it was signed by the last Owner to sign, whether or not an Owner or Annuitant is then alive. The change, however, will be subject to the rights of any assignee of record with us and subject to any payment made or other action taken by us before we received and filed the notice. Your exercise of any rights will, to the extent thereof, assign, release, or surrender the interest of the Annuitant and all beneficiaries and Owners under this contract. - -------------------------------------------------------------------------------- SECTION 5: PREMIUM, ALLOCATION, AND REALLOCATION - -------------------------------------------------------------------------------- PREMIUM The amount applied to this contract will be the Single Premium received minus a deduction for any applicable tax including premium tax where applicable. The Single Premium as shown on the Schedule Pages, is payable at Our Annuity Operations Division but may be given to an authorized agent for forwarding to Our Annuity Operations Division. No benefit associated with any such Single Premium will be provided until it is actually received by us at our Annuity Operations Division, and only if received prior to the Contract Date. The Single Premium may not exceed $1,000,000 without our prior approval. 11 TAX Any tax charged by a state or municipality on premium, whether or not characterized as premium tax, any such other state or local taxes imposed or other governmental charge which may be required based on the laws of the state or municipality of delivery, or the state or municipality where the Owner resides. The tax rate, if applicable, is shown on the Schedule Pages. We will pay any tax due and will only reimburse ourselves upon the remittance of the tax to the applicable state or municipality. PREMIUM ALLOCATION On the Contract Date, the Premium will be allocated to the Fixed Account and Indexed Account(s) you elected, as shown on the Schedule Pages. SEPARATE ACCOUNT Assets supporting our liabilities under this contract are held in PHL Variable Separate Account MVA1. PHL Variable Separate Account MVA1 ("Separate Account") is a non-unitized separate account established under Connecticut law. The terms and values of the contract do not depend on the performance of the assets in the Separate Account. There are no discrete units in the Separate Account. REALLOCATION AMONG ACCOUNTS Within 30 days prior to each Contract Anniversary, you may request to reallocate your Account Value among Accounts then available. Reallocation will be effective on such Contract Anniversary. Requests for reallocation must be received in a format satisfactory to us at our Annuity Operations Division prior to the Contract Anniversary for such requests to be effective. - -------------------------------------------------------------------------------- SECTION 6: FIXED ACCOUNT, INDEXED ACCOUNTS - -------------------------------------------------------------------------------- FIXED ACCOUNT The Fixed Account earns interest daily. Fixed Account information is shown on the Schedule Pages. On the Contract Date, the Account Value of the Fixed Account is equal to the portion of the Premium allocated to the Fixed Account as of the Contract Date. Thereafter, the Account Value for the Fixed Account equals: 1. the initial allocation and any reallocations to the Fixed Account, plus 2. interest credited, less 3. any reallocations from the Fixed Account, less 4. any Gross Withdrawals from the Fixed Account. INDEXED ACCOUNTS This contract also provides for one or more Indexed Accounts. Indexed Account information is shown on the Schedule Pages. We reserve the right to add additional Indexed Accounts, or to cease offering one or more of the Indexed Accounts at any time. On the Contract Date, the Account Value of an Indexed Account is equal to the portion of the Premium allocated to such Indexed Account as of the Contract Date. On each Contract Anniversary, the Account Value for an Indexed Account equals: 1. the Account Value immediately preceding the Contract Anniversary, multiplied by the resulting value of (1 + the applicable Index Credit), less 2. any reallocations from the Indexed Account, plus 3. any reallocations to the Indexed Account, less 4. any Gross Withdrawals from the Indexed Account. 12 On any other date, the Account Value for an Indexed Account equals: 1. the Account Value for such Indexed Account on the preceding Contract Anniversary, less 2. any Gross Withdrawals from the applicable Indexed Account since the preceding Contract Anniversary. For the first Contract Year, the Contract Date is deemed to be the preceding Contract Anniversary for purposes of this calculation. An Index Credit is calculated on each Contract Anniversary according to the Indexed Accounts you elected as shown on the Schedule Pages, and vests immediately. Amounts surrendered or withdrawn effective on a Contract Anniversary will receive the Index Credit for the preceding Contract Year. Amounts surrendered or withdrawn prior to the end of a Contract Year will not receive the Index Credit for such Contract Year. - -------------------------------------------------------------------------------- SECTION 7: WITHDRAWALS, SURRENDER, TERMINATION - -------------------------------------------------------------------------------- WITHDRAWALS You may request a withdrawal from the Contract Value at any time prior to the Maturity Date. Such withdrawals must be by written request and must include any tax withholding information we may reasonably require. Applicable Surrender Charges and Market Value Adjustments will be applied as described in this Section 7 and in Section 8. The Account Value of each Account will be reduced proportionately, unless otherwise agreed upon, by the Gross Withdrawal. The payment you will receive is the Net Withdrawal. In each Contract Year, you may withdraw a portion of your Contract Value free of any Surrender Charge or Market Value Adjustment. This portion is called the free withdrawal amount. During the first Contract Year, the free withdrawal amount is 10% of the Contract Value at the time of the first withdrawal. After the first Contract Year, the free withdrawal amount is 10% of the Contract Value on the preceding Contract Anniversary. SURRENDER You may request to withdraw the entire Contract Value at any time prior to the Maturity Date, which is referred to as a surrender. Surrenders must also be by written request and must include any tax withholding information we may reasonably require. Applicable Surrender Charges and Market Value Adjustments will be applied as described in this Section 7 and in Section 8. The payment you will receive is the Surrender Value. The Surrender Value is an amount equal to the Contract Value, adjusted by any applicable Market Value Adjustment, less any applicable Surrender Charge and taxes. SURRENDER CHARGE A Surrender Charge may apply to a withdrawal or surrender, depending on the date and amount of such withdrawal or surrender. The surrender charge schedule you elected at issue is specified on the Schedule Pages. Surrender Charges will be applied on Contract Value surrendered or withdrawn in excess of the free withdrawal amount, and after the application of any Market Value Adjustment, up to the Premium less prior withdrawals for which a Surrender Charge was applied. TERMINATION If the Contract Value becomes zero, the contract will immediately terminate, unless otherwise determined by an attached rider, amendment, or endorsement. We will mail a written notice to you at your most recent post office address on file at our Annuity Operations Division. 13 SECTION 8: MARKET VALUE ADJUSTMENT FEATURE - -------------------------------------------------------------------------------- A Market Value Adjustment ("MVA") is applied to withdrawals or upon surrender before the end of a surrender charge period. The MVA, which may be positive or negative, applies to all Accounts within the contract. The Market Value Adjustment equals the Contract Value withdrawn or surrendered in excess of the free withdrawal amount multiplied by the following: 1+i (n/12) -- -- | _____________ | -1 | 1+j+0.0050 | | | -- -- where: i - is the Treasury Constant Maturity yield as published by the Federal Reserve on the business day prior to the Contract Date for the maturity matching the duration of the surrender charge period; j - is the Treasury Constant Maturity yield as published by the Federal Reserve on the business day prior to the date of withdrawal or surrender for the maturity matching the remaining years in the surrender charge period (fractional years rounded up to the next full year); n - is the number of complete months from the time of withdrawal or surrender to the end of the surrender charge period. If a Treasury Constant Maturity yield for a particular maturity is not published, the yield will be interpolated between the yields for maturities that are published. If the Treasury Constant Maturity yields are no longer published, we will choose a suitable replacement, subject to any regulatory approvals, and provide you with notice accordingly. A positive MVA will increase the amount withdrawn or surrendered. There is no limit on a positive MVA. A negative MVA will decrease the amount withdrawn or surrendered. A negative MVA will not decrease the amount withdrawn or surrendered by more than the amount (i) exceeds (ii), where: (i) equals the amount withdrawn or surrendered, and (ii) equals the portion of the Premium associated with (i), adjusted by prior withdrawals. The MVA is waived on the free withdrawal amount, on death, and on annuitization if annuitization occurs after five Contract Years. The MVA is not waived on nursing home waiver and terminal illness waiver. - -------------------------------------------------------------------------------- SECTION 9: WAIVER PROVISIONS - -------------------------------------------------------------------------------- NURSING HOME WAIVER Prior to the Maturity Date, you may withdraw a portion or surrender all of your Contract Value, adjusted by any applicable Market Value Adjustment, without a Surrender Charge, provided that: a. more than one year has elapsed since the Contract Date, and b. the surrender is requested within two years of the Owner's admission into a Licensed Nursing Home Facility, and c. the Owner has been confined to a Licensed Nursing Home Facility for at least the preceding 120 days. A Licensed Nursing Home Facility is defined as a state licensed hospital or state licensed skilled or intermediate care nursing facility at which medical treatment is available on a daily basis. You must provide us with satisfactory evidence of confinement by written notice. 14 TERMINAL ILLNESS WAIVER Prior to the Maturity Date, you may withdraw a portion or surrender all of your Contract Value, adjusted by any applicable Market Value Adjustment, without a Surrender Charge, provided that we receive proof, satisfactory to us of the Owner's Terminal Illness. Terminal Illness is defined as an illness or condition that is expected to result in the Owner's death within six months. - -------------------------------------------------------------------------------- SECTION 10: DEATH BENEFIT - -------------------------------------------------------------------------------- The death benefit will be determined upon the death of any owner. The death benefit is equal to the Contract Value as of the date of death. No Surrender Charge, Market Value Adjustment or Index Credit for the year in which the death occurred will be included in the death benefit calculation. The death benefits provided under this contract are not less than the minimum benefits required under the laws of the state where this contract is delivered or issued for delivery. DEATH BEFORE MATURITY DATE If the contract is held by a single Owner who dies before the Maturity Date, we will pay the death benefit to the designated Beneficiary upon receipt of a certified death certificate, or any other proof acceptable to us. If there is more than one Owner and one of the Owners dies before the Maturity Date, we will pay the death benefit to the surviving Owner(s), if any, who will be deemed to be the designated Beneficiary(s). If the spouse of a deceased Owner is entitled to receive all or some portion of the death benefit amount, the spouse may elect to continue the contract as the new Owner. This election is only allowed prior to the Maturity Date and can be elected only one time. When the spouse elects to continue the contract, the death benefit that the spouse is entitled to receive will become the new Contract Value for the continued contract. If the contract is owned by a non-natural person, such as a trust, and the Primary Annuitant dies before the Maturity Date, we will pay the death benefit to the Owner. If a Joint Annuitant dies prior to the Maturity Date, a death benefit is not paid. The Owner may appoint a new Joint Annuitant. DISTRIBUTION AT DEATH REQUIREMENTS Any Beneficiary who is a natural person entitled to a death benefit may, within one year after the date of an Owner's death, elect to receive the death benefit in the form of an annuity payment option. If an annuity payment option is selected, it may not extend beyond such Beneficiary's life or life expectancy and the payments must begin within one year after the date of death. If an annuity payment option is not elected or the Beneficiary is a non-natural person, the entire death benefit will be distributed in a lump sum no later than five years after the date of death. DEATH ON OR AFTER THE MATURITY DATE If an Owner dies on or after the Maturity Date and there is no surviving Owner, any remaining annuity payments will be paid to the Beneficiary under the annuity payment option in effect on the date of death. If there is a surviving Owner, the payments continue as if there had been no death. Payments to the Beneficiary or surviving Owner may not be deferred or otherwise extended. If the Annuitant and Joint Annuitant(s), if any, die and are survived by any Owner, any remaining period certain annuity payments will be paid to such Owner. Payments may not be deferred or otherwise extended. - -------------------------------------------------------------------------------- SECTION 11: ASSIGNMENT - -------------------------------------------------------------------------------- You may assign your interest in this contact, except as otherwise provided, without the consent of any person other than an irrevocable Beneficiary. Your interest, any interest of the Annuitant, and of any revocable Beneficiary shall be subject to the terms of the assignment. We will not be considered to have notice of any assignment of an interest in this contract until we receive the original or copy of the written assignment at our Annuity Operations Division. In no event will we be responsible for the validity or sufficiency of any assignment. Any change will be subject to any payment made or actions taken by us before we received the written assignment at our Annuity Operations Division. 15 If this contract is issued in a tax-qualified plan, this contract is subject to assignment restrictions for Federal Income Tax purposes. In such event, this contract shall not be sold, assigned, discounted, or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose, to any person other than us. - -------------------------------------------------------------------------------- SECTION 12: DEFERRAL OF DETERMINATIONS - -------------------------------------------------------------------------------- We may postpone the processing of any withdrawals or surrender for up to six months from the date of request contingent upon approval by the insurance supervisory official in the jurisdiction in which this contract is issued. - -------------------------------------------------------------------------------- SECTION 13: PROOF REQUIRED FOR PAYMENT - -------------------------------------------------------------------------------- We may require proof of the correct age of the Annuitant and Joint Annuitant, if any, before any annuity payments begin. We also have the right to require proof of the identity, age, and survival of any person entitled to any payment under this contract or upon whose life any payments depend. - -------------------------------------------------------------------------------- SECTION 14: MISSTATEMENTS - -------------------------------------------------------------------------------- If the age or sex of the Annuitant or Joint Annuitant has been misstated, any benefits payable will be adjusted to the amount that the Contract Value would have purchased based on the Annuitant's or Joint Annuitant's correct age and sex. Any overpayment(s) and underpayment(s) made by us will be charged or credited against future payments to be made under the contract. We will charge interest on any overpayments and credit interest on any underpayments at the effective annual rate required by the state where this contract is delivered. - -------------------------------------------------------------------------------- SECTION 15: CHANGE OF MATURITY DATE - -------------------------------------------------------------------------------- You may, by written request, change your Maturity Date at any time within 30 days prior to the Maturity Date. The new Maturity Date must be no later than (a) the Contract Anniversary nearest the younger Annuitant's 95th birthday, or (b) ten years from the Contract Date, whichever is later, but in no event earlier than the fifth Contract Anniversary. If no change request is received by us, the Maturity Date will be as shown on the Schedule Pages. - -------------------------------------------------------------------------------- SECTION 16: STATEMENT OF ACCOUNT - -------------------------------------------------------------------------------- We will send you a statement of account annually, or more frequently, as required by law. The statement of account will include the Contract Value, Surrender Value, and withdrawals. The statement of account will show any other information required by the state or Federal laws or regulations. The statement will be mailed to your most recent post office address on file at our Annuity Operations Division. - -------------------------------------------------------------------------------- SECTION 17: ANNUITY BENEFITS - -------------------------------------------------------------------------------- On or before the Maturity Date, you may elect any one of the annuity payment options as described in Section 18. If no election is made, we shall begin to pay a series of annuity payments automatically to the Owner beginning on the Maturity Date for a period certain of 10 years and as long thereafter as the Annuitant lives. The amount of each annuity payment will be equal to the Contract Value on the Maturity Date less any applicable tax, divided by $1,000 and then multiplied by the applicable annuity payment factors. If the amount to be applied on the Maturity Date is less than $2,000 or would result in monthly payments of less than $20, we shall have the right to pay such amount to you in one lump sum in lieu of providing such annuity. We also have the right to change the annuity payment frequency to annual if the monthly annuity payment would otherwise be less than $20. - -------------------------------------------------------------------------------- SECTION 18: ANNUITY PAYMENT OPTIONS - -------------------------------------------------------------------------------- Election of an annuity payment option must be made by written request. We reserve the right to require that the election of a payment option be in the form of a supplementary contract distributed by us reflecting the terms of the payment option elected. You may not change the annuity payment option you elected after the first annuity payment is made. Where the election of an annuity payment option is made 16 by the Beneficiary of any death benefit payable under this contract, limited as described in Section 10, the term "Annuitant" as used below shall refer to such Beneficiary. OPTION A - LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN A fixed payout annuity payable monthly while the Annuitant is living or, if later, the end of the specified period certain. The period certain may be specified as 5, 10, or 20 years. The period certain must be specified at the time this option is elected. OPTION B - NON-REFUND LIFE ANNUITY A fixed payout annuity payable monthly while the Annuitant is living. No monthly payment, death benefit or refund is payable after the death of the Annuitant. Under either Option A or B, the applicable annuity payment option factor used to determine the payment amount will not be less than the rate based on the 2000 Individual Annuity Mortality Table with a 10-year age setback and an interest rate of 2.5%. Other values and tables may be used for other payment options that we may make available. OTHER ANNUITY PAYMENT OPTIONS We may offer other annuity payment options or alternative versions of the options listed above. TABLES OF FIXED ANNUITY PAYMENT FACTORS The tables below provide the minimum annuity payment factors for a monthly life annuity with payments on a fixed basis for each $1,000 applied. If our annuity payment factors in effect on the Maturity Date are more favorable, we will use those rates. Annuity payment factors for payment frequencies, periods, ages and any current rate information not shown here will be provided upon request. OPTIONS A - LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN - ------------------------------------------------------------------------------ 5 YEARS CERTAIN 10 YEARS CERTAIN 20 YEARS CERTAIN - ------------------------------------------------------------------------------ AGE MALE FEMALE MALE FEMALE MALE FEMALE - ------------------------------------------------------------------------------ 40 $2.90 $2.79 $2.89 $2.79 $2.89 $2.78 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 45 3.05 2.92 3.05 2.92 3.03 2.91 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 50 3.24 3.08 3.24 3.08 3.21 3.06 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 55 3.48 3.28 3.47 3.28 3.42 3.25 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 60 3.79 3.54 3.76 3.53 3.67 3.48 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 65 4.17 3.87 4.13 3.85 3.97 3.76 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 70 4.67 4.30 4.61 4.26 4.30 4.09 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 75 5.36 4.88 5.21 4.81 4.63 4.45 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 80 6.28 5.68 5.97 5.51 4.92 4.80 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 85 7.49 6.81 6.82 6.41 5.12 5.07 - -------- ---------- ---------- ---------- ---------- ----------- ------------ 90 9.04 8.38 7.70 7.42 5.22 5.21 - ----------------------------------------------------------------------------- OPTION B - NON-REFUND LIFE ANNUITY ---------------------------------------- AGE MALE FEMALE ---------------------------------------- 40 $2.90 $2.79 ------------ -------------- ------------ 45 3.05 2.92 ------------ -------------- ------------ 50 3.24 3.08 ------------ -------------- ------------ 55 3.49 3.28 ------------ -------------- ------------ 60 3.79 3.54 ------------ -------------- ------------ 65 4.18 3.87 ------------ -------------- ------------ 70 4.69 4.31 ------------ -------------- ------------ 75 5.40 4.90 ------------ -------------- ------------ 80 6.38 5.73 ------------ -------------- ------------ 85 7.73 6.94 ------------ -------------- ------------ 90 9.61 8.73 ---------------------------------------- 17 [LOGO] PHOENIX(R) Single Premium Deferred Equity Indexed Modified Guaranteed Annuity Nonparticipating - not eligible for dividends 05FNDEIA -----END PRIVACY-ENHANCED MESSAGE-----