<PAGE>
To Our Contract Owners:
February 6, 1997
I am pleased to provide you with your Annual Report for New England Variable
Annuity Fund I. This report reviews the 1996 performance of the fund and lists
the holdings in the portfolio as of December 31, 1996. The report also contains
the complete investment history of this twenty-six year old fund on both a year
by year and cumulative basis.
The proven long-term investment record of this fund is most impressive. For
example, over the ten year period ended December 31, 1996, the value of an
accumulation unit rose from 6.156190 to 20.079854--a total return of 226.2%.
In addition to the performance of the fund, there are a number of other benefits
to owning your variable annuity. It is ideally suited for retirement planning
since you are provided with a hedge against inflation, a guaranteed minimum
death benefit and variable and fixed payout options, including options that
provide payments for your lifetime. Your annuity contract will also provide for
immediate payment of death proceeds to your named beneficiary without incurring
the long delays of probate.
If you are looking for an opportunity to diversify your investments, you may
want to consider the American Growth Series variable annuity. This product
offers greater diversification through a choice of eleven funds, including
common stock funds from some of the most respected fund managers in the
industry, such as Fred Alger Management and Davis Selected Advisers. In
addition, the American Growth Series offers balanced, bond and money market
funds as well as a Fixed Account. The American Growth Series has no front-end
sales load and accepts transfers from your present contract at no charge. (The
American Growth Series is not yet available for certain employer-sponsored
retirement plans that qualify for special tax benefits under the Internal
Revenue Code. The American Growth Series is not yet available for sale in
Michigan.) If you would like more information about this investment opportunity,
please contact your New England representative.
Sincerely,
/s/ Bruce C. Long
Bruce C. Long
President
New England Annuities
NOTE: Investment performance results contained in this report are not a
prediction of future returns and, except for the average annual total returns,
do not reflect the deduction of the maximum 6% sales load, the maximum 3%
administrative charge or 2% premium tax, if applicable. If included, these
charges would reduce performance figures. The investment return on and principal
value of your investment will fluctuate, so that your contract may be worth more
or less than you invested.
For more complete information about the American Growth Series, including
charges and expenses, send for a prospectus from New England Annuities,
Marketing, 501 Boylston Street, Boston, MA 02116. Read it carefully before you
invest or send money.
1
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
INVESTMENT RECORD
PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
New England
Variable Annuity
Fund I
<S> <C>
25 years 9 months ended December 31, 1996 . . . +1,635.1%
20 years ended December 31, 1996 . . . . . . . . +1,649.9%
15 years ended December 31, 1996 . . . . . . . . +880.9%
10 years ended December 31, 1996 . . . . . . . . +226.2%
5 years ended December 31, 1996 . . . . . . . . +69.7%
1 year ended December 31, 1996 . . . . . . . . +21.5%
</TABLE>
* The percentage figures for the Fund are based upon beginning accumulation unit
values for the periods shown of $1.157298, $1.147484, $2.046992, $6.156190,
$11.835525 and $16.523266, respectively.
The periods selected cover the period since the Fund first commenced business,
the last twenty years, the last fifteen years, the last ten years, the last five
years and the past year. The results should be considered in light of the Fund's
investment objective and policies, the characteristics and quality of its
portfolio securities, and the periods selected. Inasmuch as the Fund does not
distribute investment income, the investment record reflects reinvestment of
such income. The investment record for the Fund also reflects charges, at an
effective annual rate of approximately 1.26%, made for investment management and
mortality and expense risks. It also reflects certain other expenses to the
Fund, currently at an annual rate of .08%.
- --------------------------------------------------------------------------------
ACCUMULATION UNIT VALUE TABLE
<TABLE>
<CAPTION>
Accumulation % Accumulation %
Date Unit Value Change Date Unit Value Change
<S> <C> <C> <C> <C> <C>
March 25, 1971 . . $1.157298 -- December 31, 1984 . $ 3.572709 - 9.4
December 31,
1971 . . . . . . 1.180085 + 2.0 December 31, 1985 . 4.823900 +35.0
December 31,
1972 . . . . . . 1.324345 +12.2 December 31, 1986 . 6.156190 +27.6
December 31,
1973 . . . . . . 1.144645 -13.6 December 31, 1987 . 7.017161 +14.0
December 31,
1974 . . . . . . 0.786512 -31.3 December 31, 1988 . 6.745649 - 3.9
December 31,
1975 . . . . . . 0.981727 +24.8 December 31, 1989 . 7.984578 +18.4
December 31,
1976 . . . . . . 1.147484 +16.9 December 31, 1990 . 8.383448 + 5.0
December 31,
1977 . . . . . . 1.077867 - 6.1 December 31, 1991 . 11.835525 +41.2
December 31,
1978 . . . . . . 1.180390 + 9.5 December 31, 1992 . 11.576959 - 2.2
December 31,
1979 . . . . . . 1.356685 +14.9 December 31, 1993 . 12.850577 +11.0
December 31,
1980 . . . . . . 1.907809 +40.6 December 31, 1994 . 11.899473 - 7.4
December 31,
1981 . . . . . . 2.046992 + 7.3 December 31, 1995 . 16.523266 +38.9
December 31,
1982 . . . . . . 3.254033 +59.0 December 31, 1996 . 20.079854 +21.5
December 31,
1983 . . . . . . 3.943886 +21.2
</TABLE>
The above table indicates the accumulation unit value of the Fund on March 25,
1971, the date of the first sale, and on the last valuation date of each twelve
month period from December 31, 1971 through December 31, 1996, together with the
percentage change in accumulation unit values during each such period.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
The average annual total return of the Fund on a single purchase payment of
$1,000 for the 1, 5 and 10 year periods ending December 31, 1996 was 9.5%, 8.9%
and 11.4%, respectively, assuming deduction of the 2% maximum premium tax.
Assuming no premium tax deduction, the average annual total return on a $1,000
purchase payment for the same periods was 11.8%, 9.3% and 11.6%, respectively.
These performance results represent past performance. These results reflect the
deduction of the maximum sales and administrative load of 9% of the first $46
and 8% of the balance of the purchase payment (after premium tax, if any).
- --------------------------------------------------------------------------------
2
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
PORTFOLIO REVIEW
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TEN LARGEST COMMON STOCK HOLDINGS
AS OF DECEMBER 31, 1996
Market Percent of
Company Value Total Net Assets
<S> <C> <C>
Citicorp . . . . . . . . . . . . . . . . . . . $5,047,000 7.7%
Intel Corp.. . . . . . . . . . . . . . . . . . 3,928,125 6.0
Allstate Corp. . . . . . . . . . . . . . . . . 3,819,750 5.9
American International Group, Inc. . . . . . . 3,756,275 5.8
Philip Morris Companies, Inc. . . . . . . . . 3,716,625 5.7
Halliburton Co. . . . . . . . . . . . . . . . 3,615,000 5.5
Schlumberger, LTD . . . . . . . . . . . . . . 3,595,500 5.5
Chase Manhattan Corp. . . . . . . . . . . . . 3,337,950 5.1
Boeing Co. . . . . . . . . . . . . . . . . . . 3,297,625 5.1
Texaco, Inc. . . . . . . . . . . . . . . . . . 3,287,188 5.0
- --------------------------------------------------------------------------------
</TABLE>
PORTFOLIO CHANGES
Six Months ended December 31, 1996
<TABLE>
<CAPTION>
NEW SECURITIES ADDED
Shares
--------
<S> <C>
Aetna Inc. . . . . . . . . . . . . . 20,000
Aon Corp. . . . . . . . . . . . . . . 10,000
Baker Hughes, Inc. . . . . . . . . . 42,000
British Petroleum Co. PLC . . . . . . 21,000
Compaq Computer Corp. . . . . . . . . 17,000
Dell Computer Corp. . . . . . . . . . 15,000
Hershey Foods Corp. . . . . . . . . . 60,000
Intel Corp. . . . . . . . . . . . . . 30,000
International Business Machines
Corp. . . . . . . . . . . . . . . . 7,300
Procter & Gamble Co. . . . . . . . . 14,000
Seagate Technology . . . . . . . . . 74,000
Texaco, Inc. . . . . . . . . . . . . 33,500
United Technologies Corp. . . . . . . 9,600
</TABLE>
<TABLE>
<CAPTION>
SECURITIES ELIMINATED
Shares
---------
<S> <C>
AMR Corp. . . . . . . . . . . . . 21,000
Cisco System Inc. . . . . . . . . 53,000
Circus Circus Enterprises, Inc. . 22,000
Computer Associates International,
Inc.. . . . . . . . . . . . . . . 29,900
Eastman Kodak Co. . . . . . . . . 10,000
Hilton Hotels Corp. . . . . . . . 26,500
K-Mart Corp. . . . . . . . . . . . 210,000
Microsoft Corp. . . . . . . . . . 18,500
Northwest Airlines Corp. . . . . . 51,500
PepsiCo, Inc. . . . . . . . . . . 102,000
Sears, Roebuck & Co. . . . . . . . 60,000
</TABLE>
3
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
INVESTMENTS AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCKS--95.1% OF TOTAL NET ASSETS
Value
Shares (Note 2)
------ ------------
<S> <C> <C>
AEROSPACE--5.1%
31,000 Boeing Co. . . . . . . . . . . . . . . . . . . . . . . $3,297,625
----------
AIRLINES--2.3%
24,000 UAL Corp.* . . . . . . . . . . . . . . . . . . . . . . 1,500,000
----------
BANKS--MONEY CENTER--12.8%
37,400 Chase Manhattan Corp. . . . . . . . . . . . . . . . . . 3,337,950
49,000 Citicorp . . . . . . . . . . . . . . . . . . . . . . . 5,047,000
----------
8,384,950
----------
BEVERAGES & TOBACCO--4.0%
66,000 Anheuser Busch Companies, Inc. . . . . . . . . . . . . 2,640,000
-----------
COMPUTER SOFTWARE & SERVICES--3.2%
17,000 Compaq Computer Corp.* . . . . . . . . . . . . . . . . 1,262,250
15,000 Dell Computer Corp.* . . . . . . . . . . . . . . . . . 796,875
----------
2,059,125
----------
ELECTRONIC COMPONENTS--6.0%
30,000 Intel Corp. . . . . . . . . . . . . . . . . . . . . . . 3,928,125
----------
FOOD--RETAILERS/WHOLESALERS--9.7%
60,000 Hershey Foods Corp. . . . . . . . . . . . . . . . . . . 2,625,000
33,000 Philip Morris Companies, Inc. . . . . . . . . . . . . . 3,716,625
----------
6,341,625
-----------
HOME PRODUCTS & COSMETICS--2.3%
14,000 Procter & Gamble Co. . . . . . . . . . . . . . . . . . 1,505,000
----------
INSURANCE--15.0%
20,000 Aetna Inc. . . . . . . . . . . . . . . . . . . . . . . 1,600,000
66,000 Allstate Corp. . . . . . . . . . . . . . . . . . . . . 3,819,750
34,700 American International Group, Inc. . . . . . . . . . . 3,756,275
10,000 Aon Corp. . . . . . . . . . . . . . . . . . . . . . . . 621,250
----------
9,797,275
----------
MISCELLANEOUS--5.6%
51,000 Nike, Inc. . . . . . . . . . . . . . . . . . . . . . . 3,047,250
9,600 United Technologies Corp. . . . . . . . . . . . . . . . 633,600
----------
3,680,850
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
INVESTMENTS -- Continued
<TABLE>
<CAPTION>
COMMON STOCKS -- CONTINUED
Value
Shares (Note 2)
------ -------------
<S> <C> <C>
OFFICE EQUIPMENT & SUPPLIES--1.7%
7,300 International Business Machines Corp. . . . . . . $ 1,102,300
-----------
OIL--MAJOR INTEGRATED--9.6%
21,000 British Petroleum Co. PLC . . . . . . . . . . . . 2,968,875
33,500 Texaco, Inc. . . . . . . . . . . . . . . . . . . . 3,287,188
------------
6,256,063
------------
OIL--SERVICE--13.3%
42,000 Baker Hughes, Inc. . . . . . . . . . . . . . . . . 1,449,000
60,000 Halliburton Co. . . . . . . . . . . . . . . . . . 3,615,000
36,000 Schlumberger, LTD . . . . . . . . . . . . . . . . 3,595,500
-----------
8,659,500
-----------
PERIPHERALS--4.5%
74,000 Seagate Technology* . . . . . . . . . . . . . . . 2,923,000
-----------
TOTAL COMMON STOCKS
(average cost $47,877,709) . . . . . . . . . . . . 62,075,438
-----------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE SHORT-TERM NOTES--4.7% OF TOTAL NET
Face ASSETS
Amount
------
<S> <C> <C>
$3,080,000 American Express Credit Corp., 6.55% due 1/2/97 . 3,080,000
-----------
TOTAL CORPORATE SHORT-TERM NOTES
(average cost $3,080,000) . . . . . . . . . . . . 3,080,000
-----------
TOTAL INVESTMENTS--99.8%
(average cost $50,957,709) . . . . . . . . . . . . 65,155,438
-----------
Receivable for investments sold . . . . . . . . . 674,185
Dividends and interest receivable . . . . . . . . 80,861
Receivable from contractholders . . . . . . . . . 3,272
Liabilities . . . . . . . . . . . . . . . . . . . (631,044)
-----------
TOTAL NET ASSETS--100% . . . . . . . . . . . . . . $65,282,712
===========
* Non-income producing security.
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
STATEMENT OF
ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in common stocks at
market (average cost $47,877,709)
(Note 2) . . . . . . . . . . . . $62,075,438
Corporate short-term notes (at cost
which approximates market) . . . 3,080,000
-----------
Total investments . . . . . . 65,155,438
-----------
Receivable for investments
sold . . . . . . . . . . . . . . 674,185
Dividends and interest
receivable . . . . . . . . . . . 80,861
Receivable from
contractholders . . . . . . . . . 3,272
-----------
Total assets . . . . . . . . . 65,913,756
-----------
LIABILITIES
Payable for investments
purchased . . . . . . . . . . . . 173,430
Payable for investment advisory
fees (Note 4) . . . . . . . . . . 17,813
Payable for mortality and expense
risks (Note 5) . . . . . . . . . 54,618
Payable for other direct
expenses . . . . . . . . . . . . 35,169
Payable to contractholders . . . . 230
Payable to bank . . . . . . . . . 349,784
-----------
Total liabilities . . . . . . 631,044
-----------
NET ASSETS . . . . . . . . . . . $65,282,712
===========
Net assets attributable to variable
annuity contractholders 3,012,611
accumulation units at $20.08 per
unit . . . . . . . . . . . . . . . $60,492,792
Annuity reserves (Note 2) . . . . 4,789,920
------------
$65,282,712
===========
</TABLE>
STATEMENT OF
OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME (Note 2)
<S> <C>
INCOME
Dividends . . . . . . . . . . $ 892,129
Interest . . . . . . . . . . . 39,777
Other income . . . . . . . . . 28,214
-----------
Total income . . . . . . . 960,120
-----------
EXPENSES
Mortality and expense risks
(Notes 2 and 5) . . . . . . 580,983
Investment advisory fee
(Note 4) . . . . . . . . . . 189,501
Other direct expenses
(Note 4) . . . . . . . . . . 53,036
-----------
Total expenses . . . . . . 823,520
-----------
NET INVESTMENT INCOME . . . . . 136,600
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (Note 3)
Realized net gain from
investments sold . . . . . . 6,318,302
Change in unrealized
appreciation of
investments . . . . . . . . 5,603,280
-----------
Net gain on
investments . . . . . . . 11,921,582
-----------
Increase in net assets resulting
from operations . . . . . . . . $12,058,182
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended
December 31,
-------------------------
1996 1995
------------ --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income . . . . . . . . . . . . . $ 136,600 $ 197,800
Realized net gain from investments sold . . . . 6,318,302 10,912,465
Change in unrealized appreciation of
investments . . . . . . . . . . . . . . . . . 5,603,280 7,289,902
----------- -----------
Increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . . 12,058,182 18,400,167
----------- -----------
CHANGES FROM PRINCIPAL TRANSACTIONS
Purchase payments, less sales and administrative
expenses and applicable premium taxes
(Note 4) . . . . . . . . . . . . . . . . . . . 259,763 312,538
Contract terminations . . . . . . . . . . . . . (6,873,884) (8,858,774)
Annuity payments . . . . . . . . . . . . . . . (586,217) (537,648)
Adjustments to annuity reserves (Note 2) . . . (158,377) 11,172
----------- -----------
Decrease in net assets resulting from principal
transactions . . . . . . . . . . . . . . . . . (7,358,715) (9,072,712)
----------- -----------
Total increase . . . . . . . . . . . . . . . . 4,699,467 9,327,455
NET ASSETS
Beginning of year . . . . . . . . . . . . . . . 60,583,245 51,255,790
----------- -----------
End of year . . . . . . . . . . . . . . . . . . $65,282,712 $60,583,245
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
SUPPLEMENTARY INFORMATION --
Selected Per Unit Data and Ratios
Selected data for an accumulation unit outstanding throughout each year and
ratios are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of
period . . . . . . . $16.52 $11.90 $12.85 $11.58 $11.84
--------- --------- --------- --------- ---------
Per unit data
Investment income . .28 .24 .29 .16 .25
Expenses . . . . . . .24 .19 .16 .15 .14
--------- --------- --------- --------- ---------
Net investment
income . . . . . . .04 .05 .13 .01 .11
Net realized and
unrealized gain
(loss) on
investments . . . . 3.52 4.57 (1.08) 1.26 (.37)
--------- --------- --------- --------- ---------
Net increase
(decrease) in net
asset value . . . . 3.56 4.62 (.95) 1.27 (.26)
--------- --------- --------- --------- ---------
Net Asset Value, end
of period . . . . . $20.08 $16.52 $11.90 $12.85 $11.58
========= ========= ========= ========= =========
Total Return (%) . . 21.5 38.9 (7.4) 11.0 (2.2)
Ratios
Ratio of operating
expenses to average
net assets (%) . . 1.34 1.35 1.26 1.26 1.25
Ratio of investment
income--net to
average net assets
(%) . . . . . . . . .22 .34 1.06 .11 .98
Portfolio
turnover (%) . . . . 196.25 228.26 139.43 154.15 171.55
Number of accumulation
units outstanding at
end of period . . . 3,012,611 3,399,132 4,038,331 4,410,741 5,103,553
</TABLE>
8
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
NOTES TO FINANCIAL STATEMENTS
1. Nature of Operations
New England Variable Annuity Fund I (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund is sold for use with various retirement
plans that are qualified under the Internal Revenue Code, for individual use,
and for use with plans and trusts that are not qualified under the Internal
Revenue Code. The operations of the Fund are part of Metropolitan Life Insurance
Company (the "Insurance Company"). Prior to August 30, 1996, the Fund was a part
of New England Mutual Life Insurance Company ("The New England"). Effective
August 30, 1996, The New England merged into the Insurance Company. New England
Life Insurance Company, a subsidiary of the Insurance Company, is the designated
office for contractholder services. No new contracts are being offered at this
time, but holders of existing flexible payment deferred contracts may continue
to make purchase payments.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund.
A. Security valuation. Investments in common stocks traded on a national
securities exchange or on the NASDAQ national market system are valued at
their last reported sales prices on the principal exchange, on December 31,
1996, or if there was no reported sale during the day and for over-the-
counter securities not so listed, at the last reported bid prices on that
date. Corporate short-term notes are stated at cost, which approximates fair
market value.
B. Security transactions and related investment income. Security transactions
are accounted for on the trade date (the date the order to buy or sell is
executed), and dividend income is recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Net investment income and net real-
ized and unrealized gain (loss) on investments are allocated to the contracts
on each valuation date based on each contract's pro rata share of the net
assets of the Fund as of the beginning of the valuation period.
C. Federal income taxes. The Fund is not taxed separately because the operations
of the Fund are part of the total operations of the Insurance Company. The
Insurance Company is taxed as a life insurance company under the Internal
Revenue Code. The Fund will not be taxed as a regulated investment company
under subchapter M of the Code. Under existing federal income tax law, no
taxes are payable on the investment income or on the capital gains of the
Fund.
D. Annuity reserves. Annuity reserves are computed for currently payable
contracts according to the Progressive Annuity Mortality Table. The assumed
interest rate is 3.5% unless the annuitant elects otherwise, in which case
the rate may vary from 0-5%, as regulated by the laws of the respective
states. Charges to annuity reserves for mortality and expense risks
experience are reimbursed to the Insurance Company if the reserves required
are less than originally estimated. If additional reserves are required, the
Insurance Company reimburses the variable annuity account.
E. Use of estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
3. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments (other
than short-term securities) for the year ended December 31, 1996 were
$118,866,657 and $128,838,564, respectively. Gains and losses from sales of
investments are computed on the basis of average cost.
4. Advisory and Service Fees With Affiliates
During the year ended December 31, 1996, the Fund incurred investment management
fees of $189,501, payable to the Fund's investment adviser, Capital Growth
Management Limited Partnership, an affiliate of
9
<PAGE>
NEW ENGLAND VARIABLE ANNUITY FUND I
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
the Insurance Company. The advisory agreement provides for a fee at the annual
rate of 0.3066% of the average net assets of the Fund. Deductions from purchase
payments for sales and administrative expenses, which for the year ended
December 31, 1996, amounted to $17,197 and $6,484, respectively, were retained
by The New England and the Insurance Company.
Effective January 1, 1995, the audit and managers fees were borne by the Fund.
These expenses amounted to $53,036 for the year ended December 31, 1996.
5. Mortality and Expense Risks and Deductions
Although variable annuity payments differ according to the investment
performance of the Fund, they are not affected by mortality or expense
experience because the Insurance Company assumes the expense risk and the
mortality risk under the contracts. The Insurance Company charges the Fund
assets for assuming those risks. During 1996, the mortality and expense risk
charges totaled $580,983.
The expense risk assumed by the Insurance Company is the risk that the
deductions for sales and administrative expenses and for investment advisory
services provided for in the variable annuity contract may prove insufficient to
cover the cost of those items.
The mortality risk assumed by the Insurance Company has two elements: a life
annuity mortality risk and, for deferred annuity contracts, a minimum death
refund risk.
The life annuity mortality risk results from a provision in the contract in
which the Insurance Company agrees to make annuity payments regardless of how
long a particular annuitant or other payee lives and how long all annuitants or
other payees as a class live if payment options involving life contingencies are
chosen. Those annuity payments are determined in accordance with annuity
purchase rate provisions established at the time the contracts are issued.
Under deferred annuity contracts, the Insurance Company also assumes a minimum
death refund risk by providing that there will be payable, on the death of the
annuitant during the accumulation period, an amount equal to the greater of (1)
the aggregate purchase payments made, without interest, reduced by any partial
surrender, and (2) the value of the contract as of the death valuation date.
If those deductions are insufficient to cover the cost of the expense and
mortality risks assumed by the Insurance Company, the Insurance Company absorbs
the resulting losses and makes sufficient transfers to the Fund from its general
assets. Conversely, if those deductions are more than sufficient after the
establishment of any contingency reserves deemed prudent or required by law, the
excess is transferred to the Insurance Company.
6. Related Parties
Two members of the Board of Managers of the Fund are officers of New England
Life Insurance Company. Both members are affiliated with the principal
underwriter, one as an officer and one as a director.
7. Increase (Decrease) in Accumulation Units
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------
1996 1995
---- ----
<S> <C> <C>
Units purchased . . . . . . . . . . . . 14,895 23,935
Units redeemed . . . . . . . . . . . . (401,416) (663,134)
--------- ---------
Net decrease . . . . . . . . . . . . . (386,521) (639,199)
Units at beginning of year . . . . . . . 3,399,132 4,038,331
--------- ---------
Units at end of year . . . . . . . . . . 3,012,611 3,399,132
========= =========
</TABLE>
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers and the Contract Owners of New England Variable Annuity
Fund I
We have audited the accompanying statement of assets and liabilities of New
England Variable Annuity Fund I, including the schedule of portfolio
investments, as of December 31, 1996, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and selected per unit data and ratios for
each of the five years in the period then ended. These financial statements and
selected per unit data and ratios are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and selected per unit data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected per
unit data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and selected per unit data and ratios
referred to above present fairly, in all material respects, the financial
position of New England Variable Annuity Fund I as of December 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and selected per unit data
and ratios for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 31, 1997
11
<PAGE>
New England Variable Annuity Fund I
is a separate account of
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Board of Managers
Frederick K. Zimmermann, Chairman
John J. Arena
John W. Flynn
Anne M. Goggin
Nancy Hawthorne
Joseph M. Hinchey
Richard S. Humphrey, Jr.
Robert B. Kittredge
John T. Ludes
Laurens MacLure
Dale Rogers Marshall
Joseph F. Turley
Designated Office for Contractholder Services
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116-3700
(617) 578-2000
Investment Adviser
Capital Growth Management Limited Partnership
One International Place
Boston, Massachusetts 02110
Distributor
New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116
Legal Counsel
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Auditor
Coopers & Lybrand L.L.P.
One International Place
Boston, Massachusetts 02110
This report has been prepared for the contract owners of the Fund and is
authorized for distribution to prospective investors in the Fund when it is
accompanied or preceded by a current prospectus.
- ----------------------------------------
EQUAL OPPORTUNITY EMPLOYER M/F
(C) 1997 New England Life Insurance Company
[LOGO OF NEW ENGLAND ANNUITIES APPEARS HERE]
- ----------------------------------------
NEW ENGLAND
VARIABLE ANNUITY
FUND I
Twenty-Sixth Annual Report
December 31, 1996
