<PAGE>
ZENITH LIFE
ZENITH LIFE ONE
ZENITH LIFE PLUS
ZENITH LIFE EXECUTIVE 65
ZENITH SURVIVORSHIP LIFE
ZENITH FLEXIBLE LIFE
Supplement dated November 13, 1995
to Prospectus dated May 1, 1995
New England Variable Life Insurance Company (the "Company") is a wholly-owned
subsidiary of New England Mutual Life Insurance Company ("The New England").
The New England and Metropolitan Life Insurance Company ("MetLife") have
entered into an agreement to merge, with MetLife to be the survivor of the
merger. The merger is conditioned upon, among other things, approval by the
policyholders of The New England and MetLife and receipt of certain regulatory
approvals. The merger is not expected to occur until after December 31, 1995.
If the merger is consummated, the Company will become a direct or indirect
wholly-owned subsidiary of MetLife. The Company is not expected to be affected
by the merger except to the extent that assets of The New England may be
transferred to the Company in connection with consummation of the merger.
ZENITH FLEXIBLE LIFE
Under "Toll-Free Numbers" on page A-44, the correct toll-free number for sub-
account transfers or premium reallocations is 1-800-200-2214.
NEW ENGLAND ZENITH FUND
Supplement dated November 13, 1995 to
Prospectus dated May 1, 1995
BACK BAY ADVISORS MONEY MARKET SERIES WESTPEAK VALUE GROWTH SERIES
BACK BAY ADVISORS BOND INCOME SERIES WESTPEAK STOCK INDEX SERIES
BACK BAY ADVISORS MANAGED SERIES DRAYCOTT INTERNATIONAL EQUITY SERIES
LOOMIS SAYLES AVANTI GROWTH SERIES ALGER EQUITY GROWTH SERIES
LOOMIS SAYLES SMALL CAP SERIES VENTURE VALUE SERIES
LOOMIS SAYLES BALANCED SERIES CAPITAL GROWTH SERIES
New England Mutual Life Insurance Company ("The New England") and
Metropolitan Life Insurance Company ("MetLife") have entered into an agreement
to merge, with MetLife to be the survivor of the merger. The merger is
conditioned upon, among other things, approval by the policyholders of The New
England and MetLife and receipt of certain regulatory approvals. The merger is
not expected to occur until after December 31, 1995.
TNE Advisers, Inc. ("TNE Advisers"), investment adviser to each Series of New
England Zenith Fund (the "Fund") except the Capital Growth Series, is a wholly-
owned subsidiary of The New England. The New England owns the sole general
partner of New England Investment Companies, L.P. ("NEIC") and a majority of
the limited partnership interest in NEIC. NEIC is the owner of a majority
limited partnership interest in the Capital Growth Series' investment adviser,
Capital Growth Management Limited Partnership. Also, the subadvisers of nine
Series of the Fund are currently wholly-owned subsidiaries of NEIC. These
subadvisers are Back Bay Advisors, L.P., Loomis Sayles & Company, L.P.,
Westpeak Investment Advisors, L.P. and Draycott Partners, Ltd. The subadvisers
of the remaining two Series offered through this prospectus are not affiliated
with The New England or NEIC.
VL-101-95
<PAGE>
The merger of The New England into MetLife is being treated, for purposes of
the Investment Company Act of 1940 (the "Act"), as an "assignment" of the
existing advisory agreements for each Series and of the subadvisory agreements
of the nine Series that have NEIC subsidiaries as subadvisers. Under the Act,
such an "assignment" will result in an automatic termination of these
agreements. The subadvisory agreements for the other two Series terminate
automatically, by their terms, upon any termination of TNE Advisers' advisory
agreement with the Fund. Thus, those subadvisory agreements will also terminate
at the time of the merger.
Prior to the merger, shareholders of the Series will be asked to approve new
investment advisory and subadvisory agreements, intended to take effect at the
time of the merger. The new agreements are expected to be substantially
identical to the existing agreements. Prior to the shareholder vote regarding
the new agreements, a proxy statement describing them in more detail will be
sent to those Policy Owners who are entitled to give instructions as to how
shares of the Series should be voted.
----------------
DRAYCOTT INTERNATIONAL EQUITY SERIES
Draycott Partners, Ltd. ("Draycott") serves as subadviser to the Draycott
International Equity Series (the "Series"). Draycott's parent, NEIC, has agreed
to sell Draycott to Cursitor Holdings Ltd. U.K. ("Cursitor"). The sale is
expected to occur in late December, 1995. Under the Act, the sale will
constitute a change in control of Draycott, which will terminate the current
subadvisory agreement between Draycott and TNE Advisers. Cursitor,
headquartered at 66 Buckingham Gate, London SW1E 6AU, England, is an investment
advisory holding company that had approximately $9.4 billion under management
at September 30, 1995.
Subsequent to the acquisition of Draycott by Cursitor, Cursitor itself is
expected to be acquired by Alliance Capital Management, L.P. ("Alliance"). This
transaction would result in Draycott becoming a wholly-owned subsidiary of a
new entity, Cursitor Alliance LLC, in which Alliance would own a 93% interest.
Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, Alliance, is an indirect wholly-
owned subsidiary of The Equitable Life Assurance Society of the United States,
which is a wholly-owned subsidiary of The Equitable Companies Incorporated, a
holding company controlled by AXA, a French insurance holding company. If
consummated, the transaction would constitute a further change in control of
Draycott, which would again terminate the subadvisory agreement between
Draycott and TNE Advisers.
No changes in the Series' investment objective or policies, or in the
portfolio management personnel responsible for the Series' day-to-day
investment management, are contemplated in connection with either transaction.
Before either transaction is effected, shareholders of the Series will be asked
to approve new subadvisory agreements intended to take effect in the event the
transactions are consummated. The new subadvisory agreements are expected to be
identical in substance to the existing subadvisory agreement. Prior to the
shareholder vote regarding the new subadvisory agreements, a proxy statement
describing them in more detail will be sent to those Contract Owners who are
entitled to give instructions as to how shares of the Series should be voted.
----------------
ALGER EQUITY GROWTH SERIES
The trustees of the Fund have approved a new investment advisory agreement
between the Fund and TNE Advisers and a new subadvisory agreement between TNE
Advisers and Fred Alger Management, Inc. ("Alger"), both relating to the Alger
Equity Growth Series (the "Series") of the Fund. The new advisory and
subadvisory agreements would increase the fee rates payable by the Series to
TNE Advisers and payable by TNE Advisers to Alger, effective May 1, 1996. The
annual rate of the fee payable by the Series to TNE Advisers under the new
advisory agreement would be 0.75% of the Series' average daily net assets, as
compared to the current fee rate of 0.70%. The annual rate of the fee payable
by TNE Advisers to Alger under the new subadvisory agreement would be 0.45% of
the first $100,000,000 of the Series' average daily net
2
<PAGE>
assets, 0.40% of the next $400,000,000 of such assets and 0.35% of such assets
in excess of $500,000,000. A meeting of the Series' shareholders will be held
for the purpose of voting to approve or disapprove the new agreements. The new
agreements will not take effect unless they are approved by vote of the Series'
shareholders at the meeting. A proxy statement describing the new agreements in
more detail will be sent in advance of the meeting to those Policy Owners who
are entitled to give instructions as to how shares of the Series should be
voted at the meeting.
Effective January 1, 1996, TNE Advisers will modify the expense deferral
arrangement that currently applies to the Series by raising the expense limit
from 0.85% to 0.90% of the Series' net assets. Pursuant to the expense deferral
arrangement, TNE Advisers defers those operating expenses (other than brokerage
costs, interest, taxes and extraordinary expenses) in excess of the expense
limit until a subsequent year, if any, when total expenses are less than the
limit. (See "Expense Deferral Arrangement" under the section of the prospectus
entitled "Management.")
----------------
LOOMIS SAYLES SMALL CAP SERIES
The following information reflects changes in the investment management and
policies of the Loomis Sayles Small Cap Series (the "Series"):
Jeffrey C. Petherick, Vice President of Loomis, Sayles & Company, L.P.
("Loomis Sayles") and New England Zenith Fund, and Mary Champagne, Vice
President of Loomis Sayles, have day-to-day management responsibility for the
Series. Mr. Petherick has co-managed the Series since its inception. Mr.
Petherick was an investment manager at Masco Corporation prior to joining
Loomis Sayles in 1990. Ms. Champagne has co-managed the Series since July 1995.
Prior to joining Loomis Sayles in 1993, Ms. Champagne served as a portfolio
manager at NBD Bank for 10 years.
Loomis Sayles manages the Series by investing primarily in stocks of small
cap companies with good earnings growth potential that Loomis Sayles believes
are undervalued by the market. Loomis Sayles seeks to build a core small cap
portfolio of solid growth companies' stock with a smaller emphasis on special
situations and turnarounds (companies that have experienced significant
business problems but which Loomis Sayles believes have favorable prospects for
recovery), as well as unrecognized stocks.
----------------
VENTURE VALUE SERIES
Selected/Venture Advisers, L.P., sub-adviser to the Venture Value Series (the
"Series"), changed its name to Davis Selected Advisers, L.P. ("Davis Selected")
on October 1, 1995. Venture Advisers, Inc. is the sole general partner of Davis
Selected, which, in turn, is controlled by Shelby M. C. Davis.
Shelby M. C. Davis, a director of Venture Advisers, Inc. since 1968, was
primarily responsible for the day-to-day management of the Series from its
inception through September, 1995. Since October 1995, Mr. Davis and
Christopher C. Davis have co-managed the Series. Christopher C. Davis is a
Portfolio Manager at Davis Selected and a director of Venture Advisers, Inc.
and has been employed by Davis Selected since 1989.
3
<PAGE>
NEW ENGLAND VARIABLE LIFE
INSURANCE COMPANY
Flexible Premium Adjustable
Variable Survivorship Life Insurance Policies
Issued by
New England Variable Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual Flexible Premium Adjustable Variable
Survivorship Life Insurance Policies (the "Policies") offered by New England
Variable Life Insurance Company ("NEVLICO"), a wholly-owned subsidiary of New
England Mutual Life Insurance Company ("The New England").
Each Policy provides premium flexibility together with two types of death
benefit guarantees as long as the total amount of premiums paid with interest,
less any partial surrenders with interest, equals certain minimum amounts and
there is no policy loan. Insurance coverage is provided on the joint lives of
two insureds. The death benefit is payable upon the death of the second to
die.
You may choose among four death benefit options, two of which provide a
fixed death benefit equal to the Policy's face amount and two of which provide
a variable death benefit which may vary daily with the net investment
experience of one or more mutual fund portfolios. Under any of the death
benefit options, the minimum death benefit guarantees will be available. The
cash value of the Policy generally increases with the payment of each premium
and varies daily with the investment experience of the mutual fund portfolios.
There is no guaranteed minimum cash value for investments in the mutual fund
portfolios.
You may cancel the Policy during the "right to return the Policy" period.
The part of the first net premium for the Policy that you direct to the mutual
fund portfolios will be allocated to the Zenith Money Market Sub-Account until
the later of 45 days after the date Part 1 of the application is signed or 10
days after NEVLICO mails the Notice of Withdrawal Right. Thereafter, the
Policy's cash value will be invested according to your instructions.
You may allocate premiums to one or more of the 12 investment sub-accounts
of NEVLICO's Variable Life Separate Account (the "Variable Account") or to
NEVLICO's Fixed Account, after certain deductions have been made. Each sub-
account of the Variable Account invests in the shares of one of the Eligible
Funds. The Eligible Funds are: the Back Bay Advisors Money Market Series, the
Back Bay Advisors Bond Income Series, the Capital Growth Series, the Westpeak
Stock Index Series, the Back Bay Advisors Managed Series, the Westpeak Value
Growth Series, the Loomis Sayles Avanti Growth Series, and the Loomis Sayles
Small Cap Series of the New England Zenith Fund (the "Zenith Fund"); the
Equity-Income Portfolio, Overseas Portfolio and High Income Portfolio of the
Variable Insurance Products Fund ("VIP Fund"); and the Asset Manager Portfolio
of the Variable Insurance Products Fund II ("VIP Fund II").
SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE OUT OF THE FIXED ACCOUNT.
-------------------------------------------------------------------------
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus. (See "Charges and Expenses".)
- ----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE
CURRENT PROSPECTUSES OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE
INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE
ATTACHED AT THE END OF THIS PROSPECTUS. THESE PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES ARE OFFERED FOR SALE IN THE COMMONWEALTH OF PUERTO RICO
PURSUANT TO REGISTRATION WITH THE SECURITIES OFFICE OF THE DEPARTMENT OF THE
TREASURY, BUT SUCH REGISTRATION DOES NOT CONSTITUTE A FINDING THAT THIS
PROSPECTUS IS TRUE, COMPLETE, AND NOT MISLEADING, NOR HAS THE SECURITIES
OFFICE OF THE DEPARTMENT OF THE TREASURY PASSED IN ANY WAY UPON THE MERITS OF,
RECOMMENDED, OR GIVEN APPROVAL TO SUCH SECURITIES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
MAY 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY.................................................................. A-4
INTRODUCTION TO THE POLICIES.............................................. A-6
The Policies............................................................ A-6
Availability of the Policy.............................................. A-7
Policy Charges.......................................................... A-8
How the Policy Works.................................................... A-9
Receipt of Communications and Payments at NEVLICO's Administrative
Office................................................................. A-10
NEVLICO and The New England............................................. A-10
POLICY VALUES AND BENEFITS................................................ A-11
Death Benefit........................................................... A-11
Minimum Guaranteed Death Benefit........................................ A-12
Adjustments to the Death Proceeds Payable............................... A-13
Change in Death Benefit Option.......................................... A-13
Cash Value.............................................................. A-13
Net Investment Experience............................................... A-13
Allocation of Net Premiums.............................................. A-14
Amount Provided for Investment under the Policy......................... A-14
Right to Return the Policy.............................................. A-15
CHARGES AND EXPENSES...................................................... A-15
Deductions from Premiums................................................ A-15
Surrender Charge........................................................ A-16
Monthly Deduction from Cash Value....................................... A-17
Charges Against the Eligible Funds and the Sub-Accounts of the Variable
Account................................................................ A-18
Group or Sponsored Arrangements......................................... A-19
PREMIUMS.................................................................. A-19
Flexible Premiums....................................................... A-19
Lapse and Reinstatement................................................. A-20
OTHER POLICY FEATURES..................................................... A-21
Loan Provision.......................................................... A-21
Surrender............................................................... A-22
Partial Surrender....................................................... A-22
Reduction in Face Amount................................................ A-22
Investment Options...................................................... A-23
Transfer Option......................................................... A-23
Payment of Proceeds..................................................... A-23
Exchange of Policy During First 24 Months............................... A-24
Payment Options......................................................... A-24
Additional Benefits by Rider............................................ A-25
Policy Owner and Beneficiary............................................ A-25
THE VARIABLE ACCOUNT...................................................... A-26
Investments of the Variable Account..................................... A-26
Investment Management................................................... A-29
THE FIXED ACCOUNT......................................................... A-31
General Description..................................................... A-31
Values and Benefits..................................................... A-32
Policy Transactions..................................................... A-32
NEVLICO'S DISTRIBUTION AND OTHER AGREEMENTS............................... A-32
LIMITS TO NEVLICO'S RIGHT TO CHALLENGE THE POLICY......................... A-33
Notification of First Death............................................. A-33
Misstatement of Age or Sex.............................................. A-33
Suicide................................................................. A-34
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
TAX CONSIDERATIONS........................................................ A-34
Policy Proceeds......................................................... A-34
Charge for NEVLICO's Income Taxes....................................... A-37
MANAGEMENT................................................................ A-38
VOTING RIGHTS............................................................. A-38
RIGHTS RESERVED BY NEVLICO................................................ A-39
TOLL-FREE NUMBERS......................................................... A-39
REPORTS................................................................... A-40
ADVERTISING PRACTICES..................................................... A-40
LEGAL MATTERS............................................................. A-40
REGISTRATION STATEMENT.................................................... A-40
EXPERTS................................................................... A-40
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES
AND ACCUMULATED SCHEDULED PREMIUMS....................................... A-41
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................. A-49
APPENDIX C: LONG TERM MARKET TRENDS....................................... A-64
APPENDIX D: USES OF SURVIVORSHIP LIFE INSURANCE........................... A-67
APPENDIX E: TAX INFORMATION............................................... A-68
APPENDIX F: ENHANCED DEATH BENEFIT LIMITATIONS............................ A-69
FINANCIAL STATEMENTS...................................................... A-70
</TABLE>
A-3
<PAGE>
GLOSSARY
ACCOUNT. A sub-account of the Variable Account or the Fixed Account.
ACTUAL INVESTMENT RETURN. This term appears in the Policy only and is the
same as net investment experience. (See "Net Investment Experience".)
AGE. For purposes of this prospectus, the age of an insured refers to the
insured's age at his or her nearest birthday.
BENCHMARK PREMIUM. The Benchmark Premium is used to determine the amount of
Deferred Sales Charge that may apply in the event of a surrender, partial
surrender, lapse or face amount reduction. It is the level premium necessary
to keep a level death benefit Policy, without riders, in-force until age 80 of
the younger insured (or 20 years after issue, if later, but not later than the
Maturity Date) based on certain assumptions. (See "Surrender Charge".)
CASH VALUE. A Policy's cash value includes the amount of its cash value held
in the Variable Account, the amount held in the Fixed Account and, if there is
an outstanding policy loan, the amount of its cash value held in NEVLICO's
general account as a result of the loan. (See "Cash Value".)
COST OF INSURANCE CHARGE. This charge for providing insurance protection is
deducted on the Policy Date and on the first day of each policy month. The
cost of insurance for a policy month is equal to the amount at risk multiplied
by the cost of insurance rate for that month. Cost of insurance rates vary
monthly. (See "Monthly Deduction from Cash Value".)
DEATH BENEFIT OPTION A. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) a percentage, determined in accordance with
federal income tax laws, of the Policy's cash value, multiplied by an
enhancement factor. (See "Death Benefit".)
DEATH BENEFIT OPTION B. Death Benefit equals the greater of (i) the face
amount of the Policy plus the Policy's cash value and (ii) a percentage,
determined in accordance with federal income tax laws, of the Policy's cash
value, multiplied by an enhancement factor. (See "Death Benefit".)
DEATH BENEFIT OPTION C. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) a percentage, determined in accordance with
federal income tax laws, of the Policy's cash value. (See "Death Benefit".)
DEATH BENEFIT OPTION D. Death Benefit equals the greater of (i) the face
amount of the Policy plus the Policy's cash value and (ii) a percentage,
determined in accordance with federal income tax laws, of the Policy's cash
value. (See "Death Benefit".)
ELIGIBLE FUNDS. Each sub-account of the Variable Account invests in the
shares of one of the Eligible Funds. The Eligible Funds are: the Back Bay
Advisors Money Market Series, the Back Bay Advisors Bond Income Series, the
Capital Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors
Managed Series, the Westpeak Value Growth Series, the Loomis Sayles Avanti
Growth Series, and the Loomis Sayles Small Cap Series of the Zenith Fund; the
Equity-Income Portfolio, Overseas Portfolio and the High Income Portfolio of
the VIP Fund; and the Asset Manager Portfolio of VIP Fund II. (See "The
Variable Account".)
EXCESS POLICY LOAN. The situation when policy loans plus accrued interest
exceed the Policy's cash value less the applicable Surrender Charge. (See
"Loan Provision".)
FIXED ACCOUNT. The Fixed Account is a part of NEVLICO's general account to
which net premiums may be allocated and which provides guarantees of principal
and interest. (See "The Fixed Account".)
GUARANTEED DEATH BENEFIT 1 FUND. The Guaranteed Death Benefit 1 Fund is a
measurement used to determine if the Minimum Guaranteed Death Benefit 1 is in
effect. This Fund assumes the Guaranteed Death Benefit 1 Premium that appears
in the Policy is paid on the first day of each Policy year. The Fund equals
the value of those premiums accumulated at 4% per year. The Fund values shown
in your Policy are for the end of each Policy year. (See "Minimum Guaranteed
Death Benefit".)
GUARANTEED DEATH BENEFIT 2 FUND. The Guaranteed Death Benefit 2 Fund is a
measurement used to determine if the Minimum Guaranteed Death Benefit 2 is in
effect. This Fund assumes the Guaranteed Death Benefit 2 Premium that appears
in the Policy is paid on the first day of each Policy year. The Fund equals
the value of those premiums accumulated at 4% per year. The Fund values shown
in your Policy are for the end of each Policy year. (See "Minimum Guaranteed
Death Benefit".)
A-4
<PAGE>
INVESTMENT START DATE. This is the latest of the date NEVLICO receives a
premium payment for the Policy, the date each of the insureds has signed
his/her Part II of the Policy application and the Policy Date and is the date
when an amount is first provided for investment under the Policy. (See "Amount
Provided for Investment under the Policy".)
MATURITY DATE. The Policy anniversary on which the younger insured is (or
would have been) age 100.
MINIMUM PREMIUM. The Minimum Premium is that amount which, if timely paid
(and if you have not made a partial surrender, loan or face amount reduction
or reinstated the Policy), guarantees that the Policy will not lapse during
the first three Policy years even if the Policy's net cash value is
insufficient to pay the Monthly Deduction in any month. The three-year Minimum
Premium is based on the Policy's face amount, the age, sex (unless unisex
rates apply) and underwriting class of each of the insureds, the current level
of Policy charges and any rider benefits selected. Certain Policy transactions
will terminate this guarantee. (See "Premiums".)
MINIMUM GUARANTEED DEATH BENEFIT 1. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if (at
the time of the Monthly Deduction) premiums paid, accumulated at a 4% rate as
if they were paid on the first day of each Policy year, less partial
surrenders, accumulated at a 4% rate per year, is at least equal to the
Guaranteed Death Benefit 1 Fund and there is no outstanding Policy loan.
Generally, NEVLICO determines whether this benefit is in effect on the first
day of each Policy month. Certain Policy transactions can terminate this
guarantee. (See "Minimum Guaranteed Death Benefit".)
MINIMUM GUARANTEED DEATH BENEFIT 2. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if (at
the time of the Monthly Deduction prior to the later of: the date when the
younger insured attains age 80, or would have attained age 80 if that person
died before reaching age 80, and 20 years from the Policy Date, but no later
than the Maturity Date of the Policy) premiums paid, accumulated at a 4% rate
as if they were paid on the first day of each Policy year, less partial
surrenders, accumulated at a 4% rate per year, is at least equal to the
Guaranteed Death Benefit 2 Fund and there is no outstanding Policy loan.
Generally, NEVLICO determines whether this benefit is in effect on the first
day of each Policy month. Certain Policy transactions can terminate this
guarantee. (See "Minimum Guaranteed Death Benefit".)
MONTHLY DEDUCTION. The Monthly Deduction is the amount of charges deducted
from the Policy's cash value each month and includes the monthly cost of
insurance, the monthly cost of any benefits provided by riders, the monthly
policy fee, the monthly administrative charge and the monthly minimum death
benefit guarantee charge. (See "Monthly Deduction from Cash Value".)
MORTALITY AND EXPENSE RISK CHARGE. This charge is made daily from the value
of each sub-account's assets that come from the Policies. The charge is at an
annual rate of .90% of the sub-accounts' assets. The mortality risk NEVLICO
assumes is that insureds may live for shorter periods of time than estimated.
The expense risk NEVLICO assumes is that the costs of issuing and
administering Policies may be more than estimated. (See "Charges Against the
Eligible Funds and the Sub-Accounts of the Variable Account".)
NET CASH VALUE. The amount you may obtain upon surrender of the Policy and
which is equal to the Policy's cash value reduced by any applicable Surrender
Charge and by any outstanding policy loan and accrued interest. (See "Cash
Value".)
NET INVESTMENT EXPERIENCE. For any period, a sub-account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares for the same period, reduced by the amount of charges against the sub-
account for that period. (See "Net Investment Experience".)
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you
choose in an effort to meet your future goals under the Policy. The Planned
Premium can be a fixed amount or can vary over time and is subject to certain
limits under the Policy. Payments in addition to any Planned Premium are
referred to in the Policy as unscheduled payments and can be paid at any time,
subject to certain limits. (See "Premiums".)
PREMIUMS. Premiums include all payments under the Policy, whether a Planned
Premium or an unscheduled payment. (See "Premiums".)
POLICY DATE. If you make a premium payment with the application, the Policy
Date is generally the later of the date each of the insureds has signed
his/her Part II of the application and receipt of the premium payment. If you
choose to pay the initial premium upon delivery of the Policy, the Policy will
be issued with a Policy Date which is generally five days after issue. (See
"Amount Provided for Investment under the Policy".)
YOU. When used in this prospectus, "you" refers to the Policy Owner.
A-5
<PAGE>
INTRODUCTION TO THE POLICIES
This prospectus describes Policies under which net premiums are allocated to
the Variable Account. If the Fixed Account is available in your state, you may
choose to allocate or transfer all or part of your funds to that account.
NEVLICO provides guarantees of principal and interest with respect to the
Fixed Account which is part of NEVLICO's general account. Amounts in the Fixed
Account are backed by NEVLICO's general account, rather than the Variable
Account. For a description of the Fixed Account, see "The Fixed Account" which
appears later in this prospectus.
THE POLICIES
The individual Flexible Premium Adjustable Variable Survivorship Life
Insurance Policies offered by this prospectus are designed to provide lifetime
insurance coverage for two insureds payable upon the death of the second to
die. They are not offered primarily as an investment.
The following is a brief listing of the basic features of the Policy. These
and other features of the Policy are explained in detail throughout the
prospectus. You should be sure to read the prospectus for more complete
information.
-- You may choose to make premium payments under the Policy based on a
schedule you determine, subject to certain limits. NEVLICO can limit or
prohibit unscheduled payments in certain situations, including cases where
an insured is in a substandard risk class. (See "Premiums".)
-- Net premiums are invested according to your instructions in the Fixed
Account or, after an initial period in the Zenith Money Market Sub-
Account, in one or more of the sub-accounts of the Variable Account
corresponding to mutual fund portfolios. (See "Allocation of Net Premiums"
and "Investment Options".)
-- The mutual fund portfolios available to you under the Policy include
several common stock funds, including a fund which invests primarily in
foreign securities, two bond funds, two managed funds, and a money market
fund. You may allocate your Policy's cash value to a maximum of nine
accounts (including the Fixed Account) at any one time. (See "Investments
of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. NEVLICO provides guarantees of Fixed Account
principal and interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE
-----------------------------------------------
FROM THE FIXED ACCOUNT. NEVLICO also reserves the right to restrict
-----------------------
transfers of cash value and allocations of premiums into the Fixed
Account. (See "The Fixed Account".)
-- The cash value of the Policy will vary daily based on, among other things,
the net investment experience of the sub-accounts to which amounts have
been allocated and the amount of interest credited to any of the Policy's
cash value in the Fixed Account. (See "Cash Value", "Charges and
Expenses", "Premiums", "Loan Provision" and "Partial Surrender".)
-- The portion of the cash value which you invest in the sub-accounts is not
guaranteed. You bear the investment risk on this portion of the cash
value. (See "Cash Value".)
-- You may choose among four forms of death benefit options under the Policy.
The two level options provide a death benefit equal to the Policy's face
amount. The two variable options provide a death benefit equal to the face
amount plus any cash value, which varies with the net investment
experience of the sub-accounts to which amounts have been allocated and
the rate of interest credited on any cash value in the Fixed Account.
Under any of these options the death benefit could be increased to satisfy
tax law requirements if the cash value reaches certain levels. One of the
level and one of the variable options provide for an enhanced increase.
(See "Death Benefit".)
-- Regardless of investment experience, each form of death benefit is
guaranteed never to be less than the Policy's face amount, as long as the
total amount of premiums paid, with interest, less any partial surrenders,
with interest, at least equals certain minimum amounts and there is no
outstanding Policy loan. (See "Death Benefit" and "Minimum Guaranteed
Death Benefit".)
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- After the "right to return the Policy" period, you may transfer portions
of the Policy's cash value among the sub-accounts and, generally, to the
Fixed Account up to four times per policy year without NEVLICO's consent.
NEVLICO currently allows 12 transfers per policy year. Transfers and
allocations involving the Fixed Account are subject to certain limits.
(See "Transfer Option" and "The Fixed Account--Policy Transactions".)
A-6
<PAGE>
-- A loan privilege is available under the Policy. A partial surrender
feature is also available. (See "Loan Provision" and "Partial Surrender".)
-- Death benefits paid to the beneficiary under the Policy are not subject to
Federal income tax. Under current law, NEVLICO believes it is reasonable
to conclude that undistributed increases in cash value are not taxable to
you. (See "Tax Considerations".)
-- Loans, assignments and other pre-death distributions under the Policy may
have tax consequences depending primarily on the amount which you have
paid into the Policy but also on any "material change" in the terms or
benefits of the Policy or any death benefit reduction. If premium
payments, a death benefit reduction, or a material change in the terms or
benefits of the Policy cause it to become a "modified endowment contract",
then pre-death distributions (including loans) will be included in income
on an income first basis, and a 10% penalty tax may be imposed on income
distributed before the Policy Owner attains age 59 1/2. Tax considerations
may therefore influence the amount and timing of premium payments and
certain Policy transactions which you choose to make. (See "Tax
Considerations".)
-- If the Policy is not a modified endowment contract, NEVLICO believes that
loans under the Policy will not be taxable to you as long as the Policy
has not lapsed, been surrendered or terminated. With certain exceptions,
other pre-death distributions under a Policy that is not a modified
endowment contract are includible in income only to the extent they exceed
the investment in the Policy. (See "Tax Considerations".)
-- You have an opportunity during the "right to return the Policy" period to
return the Policy for a refund. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue, you may exchange the
Policy, without evidence of insurability, for a comparable fixed-benefit
survivorship life insurance policy issued by The New England on the joint
lives of the insureds. If you exercise this option, you will have to make
up any investment loss. (See "Exchange of Policy During First 24 Months".)
In many respects the Policies are similar to fixed-benefit survivorship
universal life insurance. Like survivorship universal life insurance, the
Policies provide for a death benefit upon the death of the second insured,
flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit survivorship universal life
insurance in that the death benefit may, and the cash value will, vary to
reflect the investment experience of the selected sub-accounts of the Variable
Account.
The variable life insurance policies offered by NEVLICO are designed to
provide insurance protection. Although the underlying mutual fund portfolios
invest in securities similar to those in which mutual funds available directly
to the public invest, in many ways the Policies differ from mutual fund
investments. The main differences are:
-- The Policy provides a death benefit based on NEVLICO's assumption of an
actuarially calculated risk.
-- If the net cash value is not sufficient to pay a Monthly Deduction the
Policy may lapse with no value unless additional premiums are paid. If the
Policy lapses when Policy loans are outstanding, adverse tax consequences
may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values of
the Policy. These charges include various insurance, risk, administrative
and premium tax charges. (See "Charges and Expenses".)
-- The Variable Account, not the Policy Owner, owns the mutual fund shares.
-- Federal income tax liability on any earnings is deferred until you receive
a distribution from the Policy. Transfers from one underlying fund
portfolio to another are accomplished without tax liability under current
law.
-- Dividends and capital gains are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses
of Survivorship Life Insurance".
AVAILABILITY OF THE POLICY
Generally, a Policy may be issued on the lives of Insureds from the age of
20 to 85, and, if NEVLICO consents, to older or younger insureds. All persons
must meet NEVLICO's underwriting and other criteria for issuance. The minimum
face amount available is $100,000 unless NEVLICO consents to a lower amount.
The Policies are not available to employee benefit plans qualified under
Section 401 of the Internal Revenue Code, except with NEVLICO's consent.
A-7
<PAGE>
POLICY CHARGES
PREMIUM-BASED CHARGES. NEVLICO deducts the following charges from premiums:
-- A sales charge of 9%. NEVLICO currently intends to waive this charge on
premiums paid after the first 15 policy years (17 policy years, for
Policies issued in Pennsylvania);
-- A state premium tax charge of 2.5%;
-- A charge for federal taxes of 1%.
SURRENDER CHARGE. The Surrender Charge includes:
-- A deferred administrative charge. This charge applies to a lapse,
surrender, reduction in face amount or partial surrender that reduces the
face amount during Policy years one through fourteen. This charge is $4.00
per $1,000 of face amount for the first five Policy years, and then
reduces monthly until it reaches $2.00 at the end of the tenth Policy year
and 0 at the end of the 14th Policy year. The charge may be less if the
average of the issue ages is greater than 60.
-- A deferred sales charge. This charge applies to a lapse, surrender,
reduction in face amount or partial surrender that reduces the face amount
during Policy years one through fourteen. The maximum Deferred Sales
Charge is imposed for Policies which cover insureds whose average issue
age is 60 or less at issue, if you lapse or surrender the Policy, or
reduce its face amount, in Policy years three through five. The maximum
Deferred Sales Charge in those years equals 41% of one Benchmark Premium
plus 41% of a second Benchmark Premium and 8% of a third Benchmark
Premium. In no event will the Deferred Sales Charge be more than $30 per
$1,000 of face amount. After the fifth Policy year, the maximum Deferred
Sales Charge declines on a monthly basis until it reaches 0% in the last
month of the fourteenth Policy year. If you lapse or surrender the Policy,
reduce its face amount, or make a partial surrender that reduces the face
amount in the first two Policy years, the maximum Deferred Sales Charge
will be 21% of one Benchmark Premium.
The Surrender Charge is deducted from the Policy's available cash value,
regardless of whether that cash value is derived from premiums or investment
experience.
MONTHLY DEDUCTION FROM CASH VALUE. NEVLICO deducts certain charges from the
cash value:
-- Monthly charge for the cost of insurance and for any benefits provided by
rider;
-- Monthly administrative charge, currently equal to $0.12 per $1,000 of face
amount for the first Policy year and $0.06 per $1,000 thereafter
(guaranteed not to exceed $0.16 per $1,000 of face amount in the first
Policy year and $0.10 per $1,000 thereafter);
-- Monthly minimum death benefit guarantee charge of $0.01 per $1,000 of face
amount;
-- Monthly policy fee, currently equal to $5.00 per month (guaranteed not to
exceed $7.50 per month).
CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT AND THE ELIGIBLE FUNDS. The
following charges are deducted from the Variable Account and Eligible Fund
assets:
-- Daily charge against the sub-account assets for NEVLICO's mortality and
expense risk, equal to an annual rate of .90%;
-- Daily charges against the Eligible Fund portfolios for investment advisory
services and fund operating expenses.
See "Charges and Expenses".
A-8
<PAGE>
HOW THE POLICY WORKS
Premium Payments
. Flexible
. Planned premium options
-Minimum premium (in first three Policy years)
-Guaranteed Death Benefit 2 Premium (to age 80)
-Guaranteed Death Benefit 1 Premium (to age 100)
Charges from Premium Payments
. Sales Load: 9.00%. NEVLICO intends to waive after 15 policy
yrs. (17 policy years in PA)
. State Premium Tax Charge: 2.5%
. Charge for Federal Taxes: 1%
Loans
. After the free look period, you may borrow a portion of your
cash value
. Loan interest charge is 5.5%. Loaned funds are transferred out
of the Eligible Funds into the General Account where they are
credited with not less than 4.0% interest
Retirement Benefits
. Fixed settlement options are available for policy proceeds
Cash Values
. Net premium payments invested in your choice of Eligible Fund
investments (after an initial period in the Zenith Money Market
Sub-Account) or the Fixed Account
. The cash value reflects investment experience, interest, premium
payments, policy charges and any distributions from the Policy
. The cash value invested in mutual funds is not guaranteed
. Any earnings are accumulated free of any current income taxes
. You may change the allocation of future net premiums at any
time. You may currently transfer funds among investment
options (and to the Fixed Account) up to 12 times per policy year
after the free look period.
Transfers from the Fixed account are limited as to timing,
frequency and amount
. Your cash value may be allocated among a maximum of nine
accounts at any one time
Death Benefit
. Paid upon the 2nd death
. Level or Variable Death Benefit Options
. Guaranteed not to be less than initial face amount if Death
Benefit Guarantee is in effect
. Income tax free to named beneficiary
Daily Deductions from Assets
. Mortality and expense risk charges of .90% on an annualized
basis are deducted from the cash value daily
. Investment advisory fees and other expenses are deducted from
the Eligible Fund values daily
Beginning of Month Charges
. The cost of insurance protection (reflecting any substandard risk
rating) is deducted from the cash value each month
. Any Rider Charges
. Policy Fee: $5.00 (not to exceed $7.50) per month
. Minimum Death Benefit Guarantee Charge: $.01 per $1000 face
amount monthly
. Administrative Charge: $.12 (guaranteed not to exceed $.16) per
$1000 face amount monthly (first year) and $.06 (guaranteed not
to exceed $.10) per $1000 face amount monthly (after first year)
Surrender Charges
. Consist of Deferred Sales Charge and Deferred Administrative
Charge (see page A-16)
Living Benefits
. If policyholder has elected and qualified for benefits for
disability of covered insured who becomes totally disabled,
company will provide specified premium amounts or waive
monthly charges, depending on the option selected, during the
period of disability up to certain limits.
. Policy may be surrendered at any time for its cash surrender
value
. Deferred income taxes, including taxes on amounts borrowed,
become payable upon surrender
. Grace period for lapsing with no value is 62 days from the first
date in which Monthly Deduction was not paid due to
insufficient cash value
. Subject to NEVLICO's rules, a lapsed Policy may be reinstated
within seven years of date of lapse if it has not been surrendered
A-9
<PAGE>
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NEVLICO'S ADMINISTRATIVE OFFICE
NEVLICO will treat your request for a Policy transaction, or your submission
of a payment, as received at the Administrative Office if it is received there
before the close of regular trading on the New York Stock Exchange on that
day. If it is received after that time, or if the New York Stock Exchange is
not open that day, then it will be treated as received on the next day when
the New York Stock Exchange is open.
NEVLICO AND THE NEW ENGLAND
NEVLICO was organized as a stock life insurance company in Delaware in 1980
and is licensed to sell life insurance in all states, the District of Columbia
and Puerto Rico. NEVLICO's Home Office is in Wilmington, Delaware and its
Administrative Office is at 501 Boylston Street, Boston, Massachusetts 02116.
NEVLICO's mailing address is: P.O. Box 9116, Boston, Massachusetts 02117.
NEVLICO is a wholly-owned subsidiary of The New England, which was organized
in Massachusetts in 1835. The New England is the oldest chartered mutual life
insurance company in the United States. On December 31, 1994, The New England
had over $15 billion of assets and over $69 billion of life insurance in
force. As of December 31, 1994, The New England and its affiliates had over
$65 billion in assets under management.
As of December 31, 1994, the value of The New England's investment in
NEVLICO was $96.7 million. It is expected that The New England may from time
to time contribute additional amounts to NEVLICO; however, The New England is
under no obligation to do so, and its assets do not support the benefits under
the Policies. NEVLICO may reinsure a portion of a Policy's death benefit with
The New England.
The following chart illustrates the relationship of NEVLICO, the Fixed
Account, the Variable Account and the Eligible Funds.
- --------------------------------------------------------------------------------
NEVLICO
- --------------------------------------------------------------------------------
(Insurance company subsidiary of The New England)
Charges are deducted.
Net premiums and net unscheduled payments are allocated to the Policy Owner's
choice of sub-accounts in the Variable Account or to the Fixed Account.
Premiums and Unscheduled Payments
Fixed Account
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Equity- Over- High Asset
Capital Bond Money Man- Stock Value Avanti Small Income seas Income Man-
Growth Income Market aged Index Growth Growth Cap Sub- Sub- Sub- ager
Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Account Account Account Sub-
Account Account Account Account Account Account Account Account Account
- -------------------------------------------------------------------------------------------------
</TABLE>
Sub-accounts by shares of the Eligible Funds.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
VIP
FUND
NEW ENGLAND ZENITH FUND VIP FUND II
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Back Bay Back Bay Back Bay Westpeak Westpeak Loomis Loomis Equity Overseas High Asset
Growth Advisors Advisors Advisors Stock Value Sayles Sayles Income Portfolio Income Manager
Series Bond Money Managed Index Growth Avanti Small Portfolio Portfolio Portfolio
Income Market Series Series Series Growth Cap
Series Series Series Series
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-10
<PAGE>
POLICY VALUES AND BENEFITS
DEATH BENEFIT
DEATH BENEFIT OPTIONS. When you apply for a Policy, you may choose among
four death benefit options. The death benefit is payable to the beneficiary
upon the death of the second insured to die.
The Option A (Enhanced with Face Amount) death benefit provides a death
benefit equal to the face amount of the Policy. The Option A death benefit is
fixed, subject to increases required by the Internal Revenue Code on an
enhanced basis, as described below.
The Option B (Enhanced with Face Amount Plus Cash Value) death benefit
provides a death benefit equal to the face amount of the Policy plus the
amount, if any, of the Policy's cash value. The Option B death benefit is also
subject to increases required by the Internal Revenue Code on an enhanced
basis, as described below. In general, the Option B death benefit does not
significantly exceed the Option D death benefit.
The Option C (Face Amount) death benefit provides a death benefit equal to
the face amount of the Policy. The Option C death benefit, like the Option A
death benefit, is fixed, subject to increases required by the Internal Revenue
Code. In the case of the Option C death benefit, these increases are not
enhanced.
The Option D (Face Amount Plus Cash Value) death benefit provides a death
benefit equal to the face amount of the Policy plus the amount, if any, of the
Policy's cash value. The Option D death benefit is also subject to increases
required by the Internal Revenue Code but, unlike the Option B death benefit,
these increases are not enhanced.
In order to meet the Internal Revenue Code's definition of life insurance,
the Policies provide that the death benefit will not be less than a percentage
of the Policy's cash value as set forth in Table I below. This means that, if
the cash value grows to certain levels, the death benefit will be increased to
satisfy the tax law requirements. At that point, any payment you make into the
Policy will increase the death benefit by more than it increases the cash
value. (See "Premiums".)
TABLE I
<TABLE>
<CAPTION>
AGE OF YOUNGER AGE OF YOUNGER
INSURED AT START OF PERCENTAGE OF INSURED AT START OF PERCENTAGE OF
THE POLICY YEAR CASH VALUE THE POLICY YEAR CASH VALUE
------------------- ------------- ------------------- -------------
<S> <C> <C> <C>
20 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 through 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 through 99 101
59 134 100 100
60 130
</TABLE>
A-11
<PAGE>
In the case of Option A or Option B, the death benefit will be a maximum of
1.45 times the amount required to satisfy tax law requirements, until age 91
of the younger insured, resulting in a higher death benefit than required by
law. After age 91 of the younger insured, the maximum enhancement factor of
1.45 is reduced by .05 each year for nine years, at which time the factor is
1.00. The enhanced death benefit is subject to certain limits that depend in
part on the tabular cash value, set forth in Appendix F, but will never be
less than the amount required to satisfy tax law requirements. Tabular cash
value is a hypothetical value that uses the Guaranteed Death Benefit 1 Premium
(as shown in the Policy), maximum guaranteed charges and a 4% interest rate.
See Appendix F.
MINIMUM GUARANTEED DEATH BENEFIT
The Policy provides two Minimum Guaranteed Death Benefits. If either Minimum
Guaranteed Death Benefit is in effect, as determined on the first day of each
Policy month, the Policy will not lapse even if the net cash value is
insufficient to cover the Monthly Deduction due for that month. If the death
of the second insured occurs while either Minimum Guaranteed Death Benefit is
in effect, the death benefit will be adjusted as described below before the
proceeds are paid. The minimum premiums necessary to maintain either Minimum
Guaranteed Death Benefit in effect under your Policy are shown in your Policy
and also appear in your personalized illustration. See Appendix A.
MINIMUM GUARANTEED DEATH BENEFIT 1. NEVLICO will determine if Minimum
Guaranteed Death Benefit 1 is in effect on the first day of each Policy month
the Policy is in force, until the Maturity Date. This Benefit is in effect at
the end of a Policy year if (1) the total of all premiums paid under the
Policy for each completed Policy year, accumulated at a 4% rate as if they
were paid on the first day of each Policy year, less any partial surrender
under the Policy in each completed Policy year, accumulated at a 4% rate from
the date of surrender, is at least equal to (2) the Guaranteed Death Benefit 1
Fund, and there is no outstanding Policy loan. For these purposes, premiums
paid within 20 days prior to a Policy anniversary are treated as if paid in
the next Policy year.
During a Policy year, the amount of premiums paid in (1) above will include
premiums paid less partial surrenders in the current Policy year, and the
amount in (2) above will be calculated as the Minimum Guaranteed Death Benefit
1 Fund amount shown in your Policy for the prior Policy year end plus 1/12 of
the Guaranteed Death Benefit 1 Premium for each Policy month of the current
Policy year up to and including the current Policy month.
The Guaranteed Death Benefit 1 Fund assumes that the Guaranteed Death
Benefit 1 Premium, that appears in your Policy, is paid on the first day of
each Policy year and accumulates at a 4% rate per year.
If the Guaranteed Minimum Death Benefit 1 is lost due to insufficient
premium payments, it is unlikely because of Federal tax law limitations that
you will be permitted to pay sufficient premiums in future years to regain the
guarantee. Federal tax law limitations also may prevent the payment of
sufficient premiums to maintain the Minimum Guaranteed Death Benefit 1
following: certain reductions in face amount, including certain partial
surrenders that reduce the face amount, reduction or deletion of a rider
benefit, or improvement in your Policy's rating classification (see "Reduction
in Face Amount").
MINIMUM GUARANTEED DEATH BENEFIT 2. NEVLICO will determine if Minimum
Guaranteed Death Benefit 2 is in effect on the first day of each Policy month
the Policy is in force, until the later of: the date the younger insured
attains age 80 (or would have attained age 80, if that person died before
reaching age 80), or 20 years from the Policy Date, but no later than the
Maturity Date of the Policy. This Benefit is in effect at the end of a Policy
year if (1) the total of all premiums paid under the Policy each completed
Policy year, accumulated at a 4% rate as if they were paid on the first day of
each Policy year, less any partial surrender under the Policy in each
completed Policy year, accumulated at a 4% rate from the date of surrender, is
at least equal to (2) the Guaranteed Death Benefit 2 Fund, and there is no
outstanding Policy loan. For these purposes, premiums paid within 20 days
prior to a Policy anniversary are treated as if paid in the next Policy year.
During a Policy year, the amount of premiums paid in (1) above will include
premiums paid less partial surrenders in the current Policy year, and the
amount in (2) above will be calculated as the Minimum Guaranteed Death Benefit
2 Fund amount shown in your Policy for the prior Policy year end plus 1/12 of
the Guaranteed Death Benefit 2 Premium for each Policy month of the current
Policy year up to and including the current Policy month.
The Guaranteed Death Benefit 2 Fund assumes that the Guaranteed Death
Benefit 2 Premium, that appears in your Policy, is paid on the first day of
each Policy year and accumulates at a 4% rate per year.
If the Guaranteed Minimum Death Benefit 2 is lost due to insufficient
premium payments, it may be possible to regain the guarantee in future years.
Federal tax law limitations may prevent the payment of sufficient premiums to
maintain the Minimum
A-12
<PAGE>
Guaranteed Death Benefit 2 following: certain reductions in face amount,
including certain partial surrenders that reduce the face amount, reduction or
deletion of a rider benefit, or improvement in your Policy's rating
classification (see "Reduction in Face Amount").
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the death
benefit in effect on the date of the second insured's death reduced by any
outstanding loan and accrued loan interest as of that date and by the portion
of any unpaid Monthly Deduction for the period prior to that date. The death
proceeds will be increased by any rider benefits payable and by any portion of
a Monthly Deduction made for a period beyond the date of the second insured's
death.
The death proceeds may also be adjusted if either insured's age or sex was
misstated in the application, if death results from either insured's suicide
within two years (or less if provided by state law) from the Policy's date of
issue, or if limits on the death benefit are imposed by rider. (See "Limits to
NEVLICO's Right to Challenge the Policy".)
CHANGE IN DEATH BENEFIT OPTION
At any time after the first Policy year, before or after the death of the
first insured, you may change your death benefit option by sending your
written request for change to NEVLICO's Administrative Office. The request
will be effective on the first day of the Policy month on or after it is
received. A change in death benefit option may result in tax consequences to
you. (See "Tax Considerations".)
If you change from Option A or C (face amount options) to Option B or D
(face amount plus cash value options), the Policy's face amount will be
reduced by the amount necessary for the death benefit to be the same
immediately before and after the change. A face amount reduction below
$100,000 is permitted only with NEVLICO's consent. Any rider benefits under
the Policy may also have to be decreased. In some circumstances a partial
surrender of cash value may be necessary in order to comply with Federal tax
law limits on the amount of premiums that can be paid into the Policy. No
Surrender Charge will be assessed in that situation.
If you change from Option B or D (face amount plus cash value options) to
Option A or C (face amount options), the Policy's face amount may be
increased, if necessary, for the death benefit to be the same immediately
before and after the change.
If you change from Option A or B (enhanced) to Option C or D, the Policy's
death benefit amount in most cases will be reduced, if the Internal Revenue
Code increases are in effect, or will remain the same, if they are not in
effect.
Changes from Option C or D to Option A or B (enhanced) are subject to
underwriting approval, and both insureds must be living if the amount at risk
under the Policy would increase as a result of the change.
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account, in
the Fixed Account and, if you have an outstanding policy loan, in NEVLICO's
general account as a result of the loan. The cash value reflects premium
payments, the net investment experience of the Policy's sub-accounts, interest
credited on its cash value in the Fixed Account and on amounts held in the
general account as a result of a loan, the death benefit option chosen,
amounts deducted for Policy charges (including Monthly Deductions, any
Surrender Charge that applies if you reduce the Policy's face amount or make a
partial surrender and any due and unpaid interest on Policy loans), amounts
surrendered and transfers among the Policy's sub-accounts and the Fixed
Account.
Your Policy's net cash value is the amount you will receive if you surrender
the Policy. The net cash value is the cash value reduced by any outstanding
policy loan (and accrued interest) and by any applicable Surrender Charge.
(See "Loan Provision", "Surrender Charge" and "Monthly Deduction from Cash
Value".)
The Policy's cash value in the Variable Account may increase or decrease
daily depending on the net investment experience of the Policy's sub-accounts.
Unfavorable investment experience can reduce the net cash value to zero.
Because there is no guaranteed minimum cash value in the Variable Account, you
bear the entire investment risk with respect to the cash value. The premium
payment schedule you choose will also affect the Policy's net cash value.
NET INVESTMENT EXPERIENCE
The net investment experience of the Policy's sub-accounts will affect the
Policy's cash value and, in some circumstances, the death benefit. The net
investment experience of the sub-accounts is determined as of the close of
regular trading on the New York Stock Exchange on each day when the Exchange
is open for trading.
A-13
<PAGE>
A sub-account's net investment experience for any period reflects the
investment experience of the underlying Eligible Fund shares for the same
period, reduced by the charges against the sub-account for that period.
(Currently the sub-accounts are charged only for NEVLICO's mortality and
expense risk, but in the future NEVLICO may impose a charge against the sub-
accounts for taxes if appropriate. See "Charges Against the Eligible Funds and
the Sub-Accounts of the Variable Account" and "Charge for NEVLICO's Income
Taxes".)
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during
the period. Dividends and capital gains distributions on Eligible Fund shares
are reinvested in additional shares of the Eligible Fund and affect subsequent
investment experience.
A sub-account's net investment experience is referred to in the Policy as
"Actual Investment Return".
ALLOCATION OF NET PREMIUMS
As of the "investment start date", the net premium to be allocated to any of
the variable sub-accounts is allocated to the Zenith Money Market Sub-Account
until the later of 45 days after the date Part I of the application is signed
or 10 days after NEVLICO mails the Notice of Withdrawal Right. (See "Right to
Return the Policy". For the definition of the "investment start date", see
"Amount Provided for Investment under the Policy".) Thereafter, the cash value
(which will reflect at least one Monthly Deduction) is allocated to the sub-
accounts according to your instructions. (See "Investment Options".)
Therefore, your selection of sub-accounts does not take effect until after the
initial period described above, when the cash value is allocated to the Zenith
Money Market Sub-Account. Amounts to be allocated to the Fixed Account are so
allocated as of the investment start date and are not invested in the Money
Market Sub-Account. Allocations can be made to a maximum of nine accounts
(including the Fixed Account) at any time.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
An amount is first provided for investment under the Policy as of the
investment start date. That is the latest of: the date when NEVLICO first
receives a premium payment for the Policy, the date each of the insureds has
signed his/her Part II of the Policy application and the Policy Date. (For
this purpose, receipt of the premium payment means receipt by a NEVLICO agent
or, if a broker-dealer other than New England Securities is involved, by a
NEVLICO agency.)
If you make a premium payment with the application, the Policy Date is
generally the later of the date each of the insureds has signed his/her Part
II of the application and receipt of the premium payment. In this case the
Policy Date and investment start date are the same. (Under NEVLICO's
administrative rules, a Policy which would be dated the 28th day or later in a
month will receive a Policy Date of the 28th.) The amount of premium paid with
the application must be at least 10% of the annual Planned Premium for the
Policy. Only one premium payment may be made before the Policy is issued.
If you make a premium payment with the application, the insureds will be
covered under a temporary insurance agreement for a limited period that is
described in the temporary insurance agreement form. Generally, coverage under
the temporary insurance agreement begins on the later of the date when NEVLICO
receives the premium for the Policy and the date when each of the insureds has
signed his/her Part II of the application. The maximum amount of coverage
provided is the lesser of the amount of insurance applied for and $500,000
when both insureds are standard risks ($250,000 for when at least one insured
is not a standard risk and $50,000 when both persons are determined to be
uninsurable). There may be variations to these provisions required by state
law.
If a Policy is issued, Monthly Deductions, including cost of insurance
charges, begin as of the Policy Date, even if the Policy's issuance was
delayed due to underwriting requirements; and will be in amounts based on the
face amount of the Policy issued, even if the temporary insurance coverage
received during the underwriting period was for a lesser amount. If NEVLICO
declines an application, it will refund the premium payment made plus interest
at the rate currently in use by NEVLICO.
If you choose to pay the initial premium upon delivery of the Policy, the
Policy will have a Policy Date which is generally five days after issue. The
investment start date will be the later of the Policy Date and the date the
premium is received. Monthly Deductions will begin on the Policy Date.
Interest at a 4% net rate will be credited to the Policy for the period, if
any, between the Policy Date and the investment start date. Insurance coverage
under the Policy will begin upon receipt of the portion of the Minimum Premium
due for the first quarter (or, with NEVLICO's consent, upon receipt of the
number of monthly payments due under The New England's Master Service Account
arrangement. This arrangement is not available under the Policies as of the
date of this prospectus, but NEVLICO plans to make it available in the
future).
A-14
<PAGE>
Under limited circumstances, NEVLICO may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
Backdating may be desirable, for example, so that you can purchase a
particular Policy face amount for lower cost of insurance rates, based on a
younger insurance age. Backdating in some cases may result in a Policy with a
higher Surrender Charge if the backdating results in the Surrender Charge
being based on a lower age bracket. (See "Surrender Charge".) For a backdated
Policy, you must also pay the minimum premium payable for the period between
the Policy Date and the investment start date. As of the investment start
date, NEVLICO will allocate to the Policy those net premiums, adjusted for
monthly Policy charges and interest at a 4% net rate, for the period between
the Policy Date and the investment start date.
The amount provided for investment in the Policy is adjusted as of each day
the New York Stock Exchange is open to reflect the net investment experience
of the sub-accounts for that day.
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 45 days after the date Part 1 of the
application is signed, within 10 days (or more where required by applicable
state insurance law) after you receive the Policy or within 10 days after
NEVLICO mails the Notice of Withdrawal Right, whichever is latest. The Policy
may be returned to NEVLICO or its agent. Insurance coverage ends as soon as
the Policy is returned (as determined by its postmark, if the Policy is
mailed). If you choose to cancel the Policy, NEVLICO will refund any premium
paid (or any other amount that is required by state insurance law and
permitted by the Securities and Exchange Commission) with interest at the rate
currently in use by NEVLICO.
CHARGES AND EXPENSES
DEDUCTIONS FROM PREMIUMS
SALES CHARGE. NEVLICO deducts 9% from each premium (whether a Planned
Premium or an unscheduled payment) as a sales charge. NEVLICO currently
intends to waive this charge on premiums after the 15th policy year (after the
17th policy year, for Policies issued in Pennsylvania); however, NEVLICO
retains the right not to waive the charge, or to reimpose it once it has been
waived.
During the first 14 policy years, if you surrender or lapse the Policy, make
a partial surrender or reduce the face amount, a Deferred Sales Charge also
applies. (For joint insureds whose average issue age was 60 to 70 at issue of
the Policy, the period when the Deferred Sales Charge applies is 9 years, for
insureds whose average issue age was 70 to 80, 6 years, and above 80, 5 years.
See "Surrender Charge" below.)
The sales charges under a Policy in a given Policy year are not necessarily
related to NEVLICO's actual sales expenses for that year. NEVLICO expects that
total revenues from the sales charges will fall short of its total
distribution expenses, and the excess will be recovered from NEVLICO's surplus
and other revenues, including any profit realized from the minimum death
benefit guarantee charge or mortality and expense risk charge.
Sales charges for Policies sold in certain group or sponsored arrangements
may be reduced. NEVLICO may reduce or eliminate the sales charge, when you
purchase a Policy, on cash value transferred in the first year, from life
insurance policies issued by The New England that meet certain premium, cash
value and/or face amount minimums, as currently published by NEVLICO.
NEVLICO's normal issuance criteria, including reinsurance and other
limitations, would also apply in these situations. NEVLICO may, however, waive
underwriting requirements in these situations. NEVLICO may also reduce the
Surrender Charge on such policies. Your NEVLICO agent can advise you regarding
the availability of this feature.
STATE PREMIUM TAX CHARGE. NEVLICO deducts 2.5% from each premium to cover
state premium taxes and administrative expenses. These taxes vary from state
to state and the 2.5% charge reflects an average. Administrative expenses
covered by this charge include those related to premium tax and certain other
state filings. This charge is not intended to produce a profit.
The stated premium tax rates in the jurisdictions where NEVLICO transacts
business range from .75% to 4.00%. However, because of the effect of
retaliatory tax law provisions, the actual premium tax rates imposed on
NEVLICO range from slightly less than 2.00% to 4.00%.
FEDERAL PREMIUM TAX CHARGE. NEVLICO deducts 1% from each premium to recover
a portion of that part of NEVLICO's federal income tax liability that is
determined solely by the amount of life insurance premiums it receives.
NEVLICO believes that this charge is reasonable in relation to its increased
tax burden.
A-15
<PAGE>
EXAMPLE: The following chart shows the net amount that would be allocated to
the Variable Account, assuming a premium payment of $2,000.
<TABLE>
<CAPTION>
NET
PREMIUM PREMIUM
------- -------
<C> <C> <S>
$2,000 $2,000
-250 (12.5% X 2,000 = total sales and premium tax charge)
------
$1,750
======
</TABLE>
NEVLICO may waive the 9% sales charge on premiums paid after the 15th Policy
year (after the 17th Policy year for Policies issued in Pennsylvania). In that
case, the net premium in this example would be $2,000 -70 (3.5% X 2,000), or
$1,930.
SURRENDER CHARGE
If, during the first 14 policy years, a Policy is totally surrendered or
lapses, the face amount is reduced, or a partial surrender reduces the face
amount, a Surrender Charge will be deducted from the cash value. (For joint
insureds whose average issue age is 60 1/2 to 70 at issue of the Policy, the
Surrender Charge period is 9 years, for insureds whose average issue ages are
70 1/2 to 80, 6 years, and above 80, 5 years.) The Surrender Charge includes a
Deferred Sales Charge and a Deferred Administrative Charge. The maximum
Surrender Charge is set forth in your Policy.
Any Surrender Charge deducted upon lapse is credited back to the Policy's
cash value upon reinstatement. The Surrender Charge on the date of
reinstatement will be the same as it was on the date of lapse. For purposes of
determining the Surrender Charge on any date after reinstatement, the period
the Policy was lapsed will not count.
DEFERRED SALES CHARGE. The Deferred Sales Charge is based on a percentage of
the Benchmark Premium. The Policy's Benchmark Premium is used to determine the
amount of the Deferred Sales Charge and equals the level annual premium
necessary to keep a level death benefit Policy, without riders, in-force until
age 80 of the younger insured (or 20 years after issue, if later, but not
later than the Maturity Date) assuming charges are imposed at the guaranteed
levels and a 4% rate of interest.
For Policies which cover insureds whose average issue age is 60 or less at
issue, the maximum Deferred Sales Charge is paid if you lapse or surrender the
Policy, or reduce its face amount, in Policy years three through five. The
Deferred Sales Charge in these years equals 41% of actual premiums paid up to
one Benchmark Premium, plus 41% of additional premiums paid up to a second
Benchmark Premium, plus 8% of additional premiums paid up to a third Benchmark
Premium. In no event will the Deferred Sales Charge exceed $30 per $1,000 of
face amount. After the fifth Policy year, the maximum Deferred Sales Charge
declines on a monthly basis until it reaches 0% in the last month of the
fourteenth Policy year.
The Deferred Sales Charge during either of the first two Policy years for
insureds whose average issue age is 70 or less is equal to 21% of the premiums
paid in the first Policy year. If you paid more than the Benchmark Premium in
the first Policy year the Deferred Sales Charge in the first two Policy years
is 21% of the Benchmark Premium. As described above, after the second Policy
year, the maximum Deferred Sales Charge increases substantially.
The table below shows the maximum Deferred Sales Charge that applies to
Policies covering insureds whose average issue age is 60 or less at issue, and
assumes that one Benchmark Premium per year is paid under the Policy. The
table shows the charge, expressed as a percentage of the Benchmark Premiums
paid to date, if the lapse, surrender or face reduction occurs at the end of
each of the Policy years shown. During Policy years 6 through 14, the maximum
Deferred Sales Charge declines on a monthly basis.
<TABLE>
<CAPTION>
THE MAXIMUM DEFERRED SALES
CHARGE IS THE FOLLOWING
PERCENTAGE OF ONE BENCHMARK
FOR POLICIES WHICH ARE PREMIUM PER YEAR TO DATE
SURRENDERED, LAPSED OF SURRENDER, LAPSE OR
OR REDUCED DURING FACE AMOUNT REDUCTION
---------------------- ---------------------------
<S> <C> <C>
Entire policy year 3 30.00%
4 22.50%
5 18.00%
Last Month of Policy
years 6 13.33%
7 10.00%
8 7.50%
9 5.56%
10 4.00%
11 2.73%
12 1.67%
13 .77%
14 0.00%
</TABLE>
A-16
<PAGE>
For insureds whose average issue age is above 60 at issue, the Deferred
Sales Charge percentages are less than or equal to those described above, with
the maximum charge occurring in Policy year 3, for insureds with an average
issue age up through 70, and in Policy year 1, for insureds with an average
issue age above 70.
In the case of a reduction in face amount or partial surrender that reduces
the face amount, any Deferred Sales Charge that applies is deducted from the
Policy's cash value in an amount proportional to the amount of the Policy's
face amount surrendered. (See "Partial Surrender".) The charge is deducted
from the Policy's cash value in the sub-accounts and the Fixed Account in
proportion to the amount of the Policy's cash value in each. In no event will
the Deferred Sales Charge exceed limits established by the Investment Company
Act of 1940 and regulations thereunder.
DEFERRED ADMINISTRATIVE CHARGE. The Table below shows the Deferred
Administrative Charge deducted if you totally or partially surrender, lapse or
reduce the face amount of the Policy.
<TABLE>
<CAPTION>
FOR POLICIES WHICH ARE
SURRENDERED, LAPSED DEFERRED ADMINISTRATIVE
OR REDUCED DURING THE CHARGE PER $1,000 OF
POLICY YEAR SHOWN FACE AMOUNT
---------------------- -----------------------
<S> <C> <C>
Entire Policy year 1 $4.00
2 4.00
3 4.00
Last Month of Policy year* 4 4.00
5 4.00
6 3.60
7 3.20
8 2.80
9 2.40
10 2.00
11 1.50
12 1.00
13 0.50
14 0.00
</TABLE>
- ----------
* The charge declines monthly after the end of the fifth Policy year.
The applicable Deferred Administrative Charge will be deducted from the
Policy's available cash value, regardless of whether that cash value is
derived from premiums or investment experience.
For insureds whose average issue age is above 60 at issue, the Deferred
Administrative Charge is less than or equal to that in the table above.
MONTHLY DEDUCTION FROM CASH VALUE
On the first day of each Policy month, starting with the Policy Date,
NEVLICO deducts the "Monthly Deduction" from your cash value. If either
Minimum Guaranteed Death Benefit is in effect, or if the Policy is protected
against lapse by payment of the Minimum Premium during the first three Policy
years, the Monthly Deduction is made, whether or not premiums are paid, until
the cash value equals zero. Otherwise, the Monthly Deduction is made, whether
or not premiums are paid, as long as the net cash value is sufficient to cover
the entire Monthly Deduction. If the net cash value is insufficient to cover
the entire Monthly Deduction and no Minimum Guaranteed Death Benefit or
Minimum Premium guarantee is in effect, the Policy will be in default and may
lapse. (See "Lapse and Reinstatement".) The Monthly Deduction reduces the cash
value in each sub-account of the Variable Account and in the Fixed Account in
proportion to the cash value in each.
The Monthly Deduction includes the following charges:
POLICY FEE. The policy fee is currently equal to $5.00 per month (guaranteed
not to exceed $7.50 per month).
ADMINISTRATIVE CHARGE. The Administrative Charge is currently equal to $0.12
per $1,000 of Policy face amount in the first Policy year and $0.06 per $1,000
of Policy face amount thereafter (guaranteed not to exceed $0.16 per $1,000 of
face amount in the first Policy year and $0.10 per $1,000 of Policy face
amount thereafter).
A-17
<PAGE>
The Policy Fee, the Administrative Charge and the Deferred Administrative
Charge together cover the cost of administering the Policies (such as the cost
of processing Policy transactions, issuing Policy Owner statements and
reports, and record keeping), as well as legal, actuarial, systems, mailing
and other overhead costs connected with NEVLICO's variable life insurance
operations. These charges have been designed to cover actual costs and are not
intended to produce a profit.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE. The minimum death benefit guarantee
charge is $0.01 per $1,000 of Policy face amount. This charge compensates
NEVLICO for its guarantee that, regardless of the investment experience of the
Policy's sub-accounts, the Policy's death benefit will never be less than the
face amount, provided that the total amount of premiums paid with interest,
less any partial surrenders with interest, equals or exceeds the applicable
Minimum Guaranteed Death Benefit Fund amount for the Policy. (See "Minimum
Guaranteed Death Benefit" and "Adjustments to the Death Proceeds Payable".)
MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of
providing insurance protection under your Policy. There are no future
mortality charges attributable to an insured from the time he or she reaches
age 100 (or would have reached age 100, if that person died before reaching
age 100). The cost of insurance charge for a Policy month is equal to the
"amount at risk" under the Policy, multiplied by the cost of insurance rate
for that Policy month. The amount at risk is determined on the first day of
the Policy month after any applicable Monthly Deduction has been processed and
is the amount by which the death benefit (discounted at the monthly equivalent
of 4% per year) exceeds the Policy's cash value. The cost of insurance rate
for your Policy changes from month to month.
If a Policy loan is outstanding and your Policy's net cash value is not
large enough to cover the cost of insurance charge for a policy month, the
difference between the net cash value available and the cost of insurance
charge is treated as an excess policy loan and the Policy may terminate. (See
"Loan Provision".)
The guaranteed cost of insurance rates for a Policy depend on each insured's
underwriting class, age on the first day of the Policy year and sex (if the
Policy is sex-based). The current cost of insurance rates for a given Policy
also depend on the insureds' ages at issue of the Policy and on the duration
of the Policy. The joint rates are guaranteed not to be higher than joint
rates based on the 1980 Commissioners Standard Ordinary Mortality Tables with
smoker/nonsmoker modifications (the "1980 CSO Tables"). The rates actually
used may be lower than these maximum rates, depending on NEVLICO's
expectations regarding future mortality and expense experience, lapse rates
and investment earnings. NEVLICO reviews the adequacy of its current cost of
insurance rates annually and may adjust their level periodically. Any change
in the current cost of insurance rates will be applied prospectively only and
will be on a non-discriminatory basis. The current cost of insurance rate for
a Policy is set forth in the Policy Owner's annual statement.
Each insured person is underwritten separately. The underwriting classes
used for determining cost of insurance rates are smoker standard, smoker
substandard, nonsmoker standard and nonsmoker substandard. Substandard ratings
result in higher cost of insurance deductions. The guaranteed maximum
mortality charges for substandard ratings are based on multiples of the 1980
CSO Tables.
Cost of insurance rates are generally more favorable for nonsmoker than for
smoker insureds and generally more favorable for female than for male
insureds. Within a given underwriting class, cost of insurance rates are
generally more favorable for insureds with lower issue ages. Where required by
state law, and for Policies sold in connection with certain employee benefit
plans, cost of insurance rates (and Policy values and benefits) do not vary
based on the sex of the insured.
CHARGES FOR ADDITIONAL BENEFITS. Charges are imposed for the cost of any
additional rider benefits as described in the rider form.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE
ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. NEVLICO charges the sub-accounts of the
Variable Account for the mortality and expense risks that NEVLICO assumes.
Currently, the charge is made daily at an annual rate of .90% of the sub-
accounts' assets. The mortality risk NEVLICO assumes is that insureds may live
for shorter periods of time than NEVLICO estimated. The expense risk is that
NEVLICO's costs of issuing and administering the Policies may be more than
NEVLICO estimated.
If all the money NEVLICO collects from this charge is not needed to cover
death benefits and expenses, the money is contributed to NEVLICO's general
account. Conversely, even if the money NEVLICO collects is insufficient,
NEVLICO will provide for all death benefits and expenses.
CHARGES FOR INCOME TAXES. NEVLICO currently makes no charge for income taxes
against the Variable Account, but in the future NEVLICO may impose such a
charge, if appropriate. NEVLICO reserves the right to make a charge for any
taxes imposed on the Policies by any governmental body in the future. (See
"Charge for NEVLICO's Income Taxes".)
A-18
<PAGE>
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds. (See "Investment
Management".)
GROUP OR SPONSORED ARRANGEMENTS
The Policies may be issued to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals. An example of such an arrangement is a non-tax qualified
deferred compensation plan. A "sponsored arrangement" includes a program under
which an employer permits group solicitation of its employees or an
association permits group solicitation of its members for the purchase of the
Policies on an individual basis. The Policies are not currently available to
group or sponsored arrangements in New York.
For Policies issued in connection with group or sponsored arrangements,
NEVLICO may waive or reduce one or more of the following charges: the sales
charge, Surrender Charge, monthly charge for the cost of insurance, mortality
and expense risk charge, administrative charges, Policy Fee and/or federal and
state premium tax charges described in "Charges and Expenses". (In addition,
the interest rate credited on amounts taken from the sub-accounts as a result
of a Policy loan may be increased for these Policies.) NEVLICO will waive or
reduce these charges according to its rules in effect when the Policy
application is approved. To qualify for a waiver or reduction, a group or
sponsored arrangement must satisfy certain criteria as to, for example, size
and number of years in existence. Generally, the sales contacts and effort,
administrative costs and mortality cost per Policy vary based on such factors
as the size of the group or sponsored arrangement, its stability, the purposes
for which the Policies are purchased and certain characteristics of its
members. The amount of reduction and the criteria for qualification will
reflect the reduced sales and administrative effort resulting from sales to
qualifying group or sponsored arrangements. NEVLICO may modify from time to
time both the amounts of reductions and the criteria for qualification.
Reductions in or waiver of these charges will not be unfairly discriminatory
against any person, including the affected Policy Owners and all other Policy
Owners of Policies funded by the Variable Account.
The United States Supreme Court has held that certain insurance policies
providing values and benefits that vary with the sex of the insured may not be
used to fund certain employee benefit programs. Therefore, NEVLICO offers
Policies that do not vary based on the sex of the insured for use in
connection with certain employee benefit programs. NEVLICO recommends that any
employer proposing to offer the Policies to employees under a group or
sponsored arrangement consult its attorney before doing so.
PREMIUMS
FLEXIBLE PREMIUMS
Within the limits described below, you may choose the amount and frequency
of premium payments. You may select a Planned Premium schedule, which may be a
fixed amount or a varying amount. This schedule, which must be within
NEVLICO's minimum and maximum limits, appears in your Policy form. It is not
necessarily designed to keep your Policy in force, and you may skip Planned
Premium payments or make additional payments. Additional payments could be
subject to underwriting. No payment can be less than $25, and the total of
Planned Premiums and other payments will be limited to NEVLICO's published
maximum.
Planned Premiums can be paid on an annual, semi-annual or quarterly schedule
or, with NEVLICO's consent, monthly. You can change your Planned Premium
schedule at any time by sending your request to NEVLICO's Administrative
Office. Cash values and death benefits are permanently affected by the amount
and frequency of premium payments.
You may make payments by check or money order. NEVLICO will send premium
notices for annual, semi-annual or quarterly Planned Premiums. In the future,
NEVLICO may make available The New England's Master Service Account
arrangement under which you may have The New England withdraw your premium
payments from your bank checking account or TNE Cash Management Trust account.
NEVLICO offers three types of premium payment levels that can protect your
Policy against lapse over specified time periods.
First, NEVLICO determines a three-year Minimum Premium amount based on the
Policy's face amount, the age, sex (unless unisex rates apply) and
underwriting class of each of the insureds, the current level of Policy
charges and any rider benefit selected. Generally, during this three-year
period, as long as the Minimum Premium amount is timely paid, the Policy is
guaranteed not to lapse even if the Policy's net cash value is insufficient to
pay the Monthly Deduction in any month. However, no three-year
A-19
<PAGE>
Minimum Premium death benefit guarantee will apply if you reinstate the
Policy, if you reduce the face amount or make a partial surrender that reduces
the face amount, if you add, reduce or delete a rider benefit, or if the
rating classification of your Policy is improved in the first three Policy
years.
Second, NEVLICO determines a guaranteed minimum death benefit premium (to
maturity) which will guarantee that the Policy will mature for the net cash
value at age 100 of the younger insured. Insufficient premium payments, a
reduction in the face amount or partial surrender that reduces the face
amount, reduction or deletion of a rider benefit, or improvement in rating
classification of the Policy could terminate this guarantee. See "Minimum
Guaranteed Death Benefit". The guaranteed minimum death benefit premium is
based on the Policy's face amount, the age, sex (unless unisex rates apply)
and underwriting class of each of the insureds, the death benefit option
chosen, the guaranteed level of Policy charges and any rider benefit selected.
The premium is recalculated following the Policy transactions described above
(other than insufficient premiums) and is also recalculated following an
increase in rider coverage.
Third, the Policy's guaranteed minimum death benefit premium (to age 80)
guarantees that the Policy will stay in force until the later of age 80 of the
younger insured, or 20 years after issue, but no later than the Maturity Date
of the Policy. This premium is based on factors similar to the guaranteed
minimum death benefit premium (to maturity), but is actuarially determined to
provide guaranteed coverage to the earlier age. Insufficient premium payments,
a reduction in the face amount or a partial surrender that reduces the face
amount, reduction or deletion of a rider benefit, or improvement in the rating
classification of the Policy could also terminate this guarantee, although
termination for insufficient premium payments is less likely here than in the
case of the guaranteed minimum death benefit premium (to maturity). The
guaranteed minimum death benefit premium (to age 80) is recalculated following
these transactions (other than insufficient premiums) and is also recalculated
following an increase in rider coverage.
Federal tax law limits the amount of premiums that can be paid under the
Policy. In addition, if any payments under the Policy exceed the "7-pay test"
under Federal tax law, you may be taxed on certain distributions. (See "Tax
Considerations".) NEVLICO's consent is required if, in order to satisfy tax
law requirements, any payment would increase the Policy's death benefit by
more than it would increase cash value. NEVLICO may require evidence of
insurability before accepting the payment.
NEVLICO allocates payments to your Policy's sub-accounts as of the date the
payment is received at NEVLICO's Administrative Office. (See "Receipt of
Communications and Payments at NEVLICO's Administrative Office".)
A payment is treated first as a Planned Premium, second as repayment of a
Policy loan, and third as an unscheduled payment, unless you designate
otherwise in writing to NEVLICO. If you have a Policy loan, it may be more
advantageous to repay the loan than to make a premium payment, because the
premium payment is subject to sales and tax charges, whereas the loan
repayment is not subject to any charges. (See "Loan Provision" and "Deductions
from Premiums".)
LAPSE AND REINSTATEMENT
LAPSE. Unless either Minimum Guaranteed Death Benefit is in effect (or,
during the first three Policy years, unless the Minimum Premium requirements
described under "Premiums" have been met), in any month that there is
insufficient net cash value to pay a Monthly Deduction the Policy will be in
default. The Policy provides a 62 day grace period for payment of a premium
sufficient to pay the amount in default plus applicable deductions from
premium payments. NEVLICO will notify you of the amount due. During the grace
period insurance coverage continues under your Policy, but if the second
insured dies before the premium is paid, NEVLICO will deduct from the death
proceeds the portion of the unpaid Monthly Deduction for the period prior to
the date of death.
REINSTATEMENT. If your Policy has lapsed, it may be reinstated within 7
years after the date of lapse. If more than 7 years have passed, or if you
have surrendered the Policy, NEVLICO's consent is required to reinstate.
Reinstatement in all cases is subject to payment of certain charges described
in the Policy and generally requires evidence of insurability that is
satisfactory to NEVLICO.
Any Surrender Charge deducted upon lapse is credited to the Policy's cash
value upon reinstatement. The Surrender Charge on the date of reinstatement is
the same as it was on the date of lapse. For purposes of determining the
Surrender Charge and other charges that vary by duration of the Policy (rather
than by age of the insured) on any date after reinstatement, the period the
Policy was lapsed does not count.
A-20
<PAGE>
OTHER POLICY FEATURES
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after
the Right to Return the Policy period. NEVLICO will make the loan as of the
date when a loan request is received at NEVLICO's Administrative Office. (See
"Receipt of Communications and Payments at NEVLICO's Administrative Office".)
You should contact NEVLICO's Administrative Office or a NEVLICO agent for
information regarding the procedures to follow for requesting a loan.
The Policy's loan value is equal to (i) 90% of the Policy's cash value
projected using current Policy charges and a 4% annual rate to the next Policy
anniversary or, if earlier, to the next Planned Premium due date; less (ii)
the Surrender Charge that would apply upon surrender on the next Planned
Premium due date or, if greater, on the date the loan is made; less (iii) loan
interest to the next interest due date. If required by state law, the Policy's
loan value may be a greater percentage of the cash value, as described in your
Policy. The amount of loan value available to be borrowed at any time is
reduced by the amount of any outstanding Policy loan plus accrued interest.
The example below illustrates how the loan value is determined.
- -------------------------------------------------------------------------------
EXAMPLE: Using the Policy illustrated on page A-43 assume that the Policy's
Planned Premiums have been paid and that the Policy's sub-accounts have earned
a constant 6% hypothetical gross annual rate of return (equal to a constant
net annual rate of return of 4.24%). After the premium payment on the 10th
Policy anniversary, the maximum amount that could be borrowed would be
determined as follows under (i) an annual premium payment schedule and (ii) a
quarterly premium payment schedule:
<TABLE>
<CAPTION>
ANNUAL QUARTERLY
-------- ---------
<S> <C> <C>
(1) Cash Value after Premium Payment on 10th Policy An-
niversary........................................... $172,252 $161,752
(2) Cash Value Projected at a Constant Annual Rate of
Return of 4% to the
(a) 11th Policy Anniversary.......................... 177,963
(b) Next Planned Premium Due Date.................... 163,054
(3) 90% of Amount Calculated in (2)..................... 160,167 146,749
(4) Amount Calculated in (3), Reduced by the Applicable
Surrender Charge.................................... 154,350 140,932
(5) Amount Calculated in (4), Reduced by Loan Interest
to the Next Interest Due Date....................... 146,303 133,585
- -------------------------------------------------------------------------------
</TABLE>
A Policy loan reduces the Policy's cash value in the sub-accounts by the
amount of the loan. A loan repayment increases the cash value in the sub-
accounts by the amount of the repayment. Unless you request otherwise, Policy
loans are attributed first to the sub-accounts of the Variable Account in
proportion to the cash value in each, and then the Fixed Account. All loan
repayments are allocated first to the outstanding loan balance attributed to
the Fixed Account and then to the sub-accounts of the Variable Account in
proportion to the cash value in each.
The interest rate charged on Policy loans is 5.5% per year and is due on the
Policy anniversary. If not paid, the interest accrued on the loan is added to
the loan, and an amount equal to the unpaid interest is deducted from the
Policy's cash value in the sub-accounts and the Fixed Account in proportion to
the amount in each. The amount taken from the Policy's sub-accounts as a
result of the loan earns interest at not less than a 4% rate per year. The
rate currently credited is a 4% annual rate. This interest earned is credited
to the Policy's sub-accounts annually, in proportion to the cash value in
each.
The amount taken from the Policy's sub-accounts as a result of a loan does
not participate in the investment experience of the sub-accounts. Therefore,
the death benefit and cash value of the Policy can be permanently affected by
a Policy loan, even if it is repaid. In addition, any proceeds payable under a
Policy are reduced by the amount of any outstanding loan plus accrued
interest.
Any payment received while a Policy loan is outstanding is treated first as
a Planned Premium, second as repayment of a Policy loan, and third as an
unscheduled payment, unless you designate otherwise in writing to NEVLICO. If
a Policy loan is outstanding, it may be more advantageous to repay the loan
than to pay a premium, because the payment is subject to sales and premium tax
charges, and the loan repayment is not subject to charges. (See "Deductions
from Premiums".)
If Policy loans plus accrued interest exceed the Policy's cash value less
the Surrender Charge on the next Policy loan interest due date (or, if the
Surrender Charge would be greater, on the date the calculation is made),
NEVLICO will notify you that the Policy is going to terminate. (This situation
is referred to as an "excess policy loan". NEVLICO tests for an excess policy
loan on each monthly processing date and any time a loan-related transaction
is made.) The Policy will terminate without value 62 days
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after the notice is mailed unless the excess amount is paid to NEVLICO within
that time. (See "Lapse and Reinstatement".) If the Policy lapses with a loan
outstanding, adverse tax consequences may result. (See "Tax Considerations"
below.)
SURRENDER
You may surrender a Policy for its net cash value at any time while either
insured is living by a request conforming to NEVLICO's administrative
procedures. The net cash value of the surrendered Policy is determined as of
the date when a surrender request is received at NEVLICO's Administrative
Office. The net cash value equals the cash value reduced by any Policy loan
and accrued interest and by any applicable Surrender Charge. (See "Surrender
Charge".) You may elect in writing to have all or part of the net cash value
applied to a payment option. (See "Payment Options".) A surrender may result
in adverse tax consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER
You may make a partial surrender of the Policy on the first day of any
Policy month after the first Policy year, to receive a portion of its net cash
value. A partial surrender will cause a reduction in the Policy's death
benefit and may cause a reduction in the Policy's face amount if necessary in
order that the amount at risk under the Policy not increase. Any reduction in
the face amount causes a proportionate reduction in the Policy's Benchmark
Premium, on which any future Surrender Charges are based. Rider benefits may
also be reduced. No partial surrender may reduce the face amount below the
Policy's required minimum except with NEVLICO's consent.
Partial surrenders in any one Policy year are limited, except with NEVLICO's
consent, to 20% of the Policy's net cash value as of the date of the first
partial surrender for the Policy year or, if less, the Policy's available loan
value. Currently, NEVLICO permits partial surrenders of up to 75% of the
Policy's net cash value per year, assuming sufficient available loan value.
Any Surrender Charge that applies to a partial surrender is deducted from
the Policy's cash value in an amount proportional to the amount of the
Policy's face amount surrendered. The Surrender Charge applied reduces any
remaining Surrender Charge under your Policy.
You should be aware that cash value paid upon partial surrender may not be
reinvested in the Policy except as premium payments, which are subject to the
charges described under "Deductions From Premiums". A partial surrender could
terminate your Policy's Minimum Guaranteed Death Benefit 1 or 2. See "Minimum
Guaranteed Death Benefit".
A partial surrender (and any applicable Surrender Charge) first reduces the
Policy's cash value in the sub-accounts of the Variable Account, in proportion
to the amount of cash value in each, and then the Fixed Account, unless you
request otherwise. The amount of net cash value paid upon partial surrender is
determined as of the first day of the Policy month on or after the date when a
request conforming to NEVLICO's administrative procedures is received at
NEVLICO's Administrative Office. NEVLICO's administrative procedures can be
determined by contacting a NEVLICO agent or the Administrative Office.
A reduction in the death benefit as a result of a partial surrender may
cause the Policy to become a "modified endowment contract". If you are
contemplating a partial surrender, you should consult your tax advisor
regarding the tax consequences of the transaction. (See "Tax Considerations".)
REDUCTION IN FACE AMOUNT
You may reduce the face amount of your Policy without receiving a
distribution of any of the Policy's cash value. (This feature differs from a
partial surrender in that a partial surrender causes part of the Policy's cash
value to be distributed to you.)
If you decrease the face amount of your Policy, the Benchmark Premium, on
which any future Surrender Charges are based, is also decreased. Your Policy's
actual cash value is not reduced except by the amount of any applicable
Surrender Charge. Generally, the Policy's death benefit is decreased.
(However, if the death benefit is being increased in accordance with federal
income tax laws (times the enhancement factor, if applicable), the death
benefit will not be decreased unless a Surrender Charge was deducted from the
cash value in connection with the face amount reduction. A reduction in face
amount in this situation is not advisable, because it will not reduce your
death benefit or cost of insurance charges and may result in a Surrender
Charge.) Any rider benefits attached to the Policy may also have to be
decreased. The face amount remaining after a reduction has to meet NEVLICO's
minimum face amount requirements for issue, except with NEVLICO's consent.
A reduction in the face amount of your Policy will reduce the Federal tax
law limitations on the amount of premiums that can be paid under the Policy.
In these cases, a partial surrender of cash value may be required to comply
with Federal tax law. This could result in termination of the Minimum
Guaranteed Death Benefit 1 or 2. See "Minimum Guaranteed Death Benefit".
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A face amount reduction takes effect as of the first day of the Policy month
on or after the date when NEVLICO has received a request at its Administrative
Office meeting NEVLICO's administrative requirements. You can determine
NEVLICO's administrative requirements by contacting a NEVLICO agent or the
Administrative Office.
A reduction in the face amount of a Policy that causes a death benefit
reduction may cause the Policy to become a "modified endowment contract". If
you are contemplating a reduction in face amount, you should consult your tax
advisor regarding the tax consequences of the transaction. (See "Tax
Considerations".)
INVESTMENT OPTIONS
You may allocate your Policy's premiums among the sub-accounts of the
Variable Account and the Fixed Account in any combination, provided that
allocations can be made to a maximum of nine accounts (including the Fixed
Account) at any time. A minimum of 10% of the premium must be allocated to
each sub-account selected. Percentages allocated must be in whole numbers.
Your Policy's cash value may be distributed among no more than nine accounts
(including the Fixed Account) at any one time.
You make the initial allocation when you apply for a Policy. You may change
the allocation of future premiums at any time thereafter. The change will be
effective for premiums applied on or after the date when NEVLICO receives your
request. You may request the change by telephone or by written request in a
form satisfactory to NEVLICO. (See "Receipt of Communications and Payments at
NEVLICO's Administrative Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
TRANSFER OPTION
After the Right to Return the Policy period, you may transfer your Policy's
cash value between sub-accounts up to four times in a policy year without
NEVLICO's consent. NEVLICO currently allows 12 sub-account transfers per
policy year. Transfers out of the Fixed Account are not counted against this
limit. All sub-account transfer requests made at the same time will be treated
as a single request. The transfer will be effective as of the date when
NEVLICO receives the transfer request at its Administrative Office. (See
"Receipt of Communications and Payments at NEVLICO's Administrative Office".)
For special rules regarding transfers involving the Fixed Account, see "The
Fixed Account". Your Policy's cash value may be distributed among no more than
nine accounts (including the Fixed Account) at any one time.
You may request a sub-account transfer or reallocation of future premiums by
written request (which may be telecopied) to NEVLICO's Administrative Office
or by telephoning The New England. To request a transfer or reallocation by
telephone, you should contact your registered representative or contact The
New England at 1-800-200-2214. Requests for transfers (up to NEVLICO's current
limit per policy year) or reallocations by telephone will be automatically
permitted. NEVLICO and The New England will use reasonable procedures such as
requiring certain identifying information from the caller, tape recording the
telephone instructions, and providing written confirmation of the transaction,
in order to confirm that instructions communicated by telephone are genuine.
Any telephone instructions reasonably believed by The New England and NEVLICO
to be genuine will be your responsibility, including losses arising from any
errors in the communication of instructions. As a result of this policy, you
will bear the risk of loss. If NEVLICO and The New England do not employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, they may be liable for any losses due to unauthorized or
fraudulent instructions.
For Policies issued in New York, transfers may be made by written (including
telecopied) request only. The New York Insurance Department does not currently
allow transfer requests to be made by telephone.
PAYMENT OF PROCEEDS
NEVLICO will ordinarily pay any net cash value, loan value or death benefit
proceeds payable from the sub-accounts within seven days after receipt at the
Administrative Office of a request, or proof of death of an insured, in a form
satisfactory to NEVLICO. (See "Receipt of Communications and Payments at
NEVLICO's Administrative Office".) However, NEVLICO may delay payment (except
when a loan is made to pay a premium to NEVLICO) or transfers from the sub-
accounts: (i) if the New York Stock Exchange is closed for other than weekends
or holidays, or if trading on the New York Stock Exchange is restricted, (ii)
if the SEC determines that a state of emergency exists that makes payments or
sub-account transfers impractical, or (iii) at any other time when the
Eligible Funds or the Variable Account have the legal right to suspend
payment. NEVLICO may withhold payment of surrender or loan proceeds to the
extent that those proceeds are derived from a Policy Owner's check, or from a
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Master Service Account premium transaction, which has not yet cleared. In
those cases, NEVLICO will process the surrender or loan to the extent of
policy values for which the Policy Owner has made full payment. The balance of
the surrender or loan proceeds will be paid when the Policy Owner's check, or
the Master Service Account premium transaction, has cleared. NEVLICO may also
delay payment if it considers whether to contest the Policy. NEVLICO will pay
interest on the death benefit proceeds from the date they become payable to
the date they are paid in one sum or, if a payment option was selected, to the
effective date of the option. (See "Payment Options".)
Death benefit proceeds may be paid pursuant to NEVLICO's Access Plus
program. If the Access Plus program is elected, an Access Plus account will be
established at State Street Bank & Trust Company at the time that death
benefit proceeds are payable. The Access Plus account provides convenient
access to proceeds, which are maintained in NEVLICO's general account, through
checkbook privileges with State Street. A beneficiary may elect to have death
benefit proceeds paid through the Access Plus program at any time prior to the
payment of death benefit proceeds.
Payments of net cash value, or of any loan value available, from cash value
in the Fixed Account will normally be paid promptly. However, NEVLICO has the
right to delay such payments for up to six months from the date of the request
(to the extent allowed by state insurance law). NEVLICO will pay interest in
accordance with state insurance law requirements on payments that are delayed.
EXCHANGE OF POLICY DURING FIRST 24 MONTHS
During the first 24 months after the issue date of the Policy, if the Policy
has not lapsed, you may exchange it for a comparable fixed-benefit traditional
survivorship life insurance policy issued by The New England. This exchange is
available to a surviving insured. If you exercise this option, you will have
to make up any investment loss you had under the variable life insurance
policy.
The exchange will be made without evidence of insurability. The new policy
will have the same face amount (or the same net amount at risk) as the
original Policy on the date of the exchange, the same policy date as the
original Policy, the same issue ages as of the Policy Date of the original
Policy and risk classifications based on the actual underwriting classes to
which each insured was assigned by NEVLICO on the date of issue of the
original Policy. For Policies issued in New York, you have the option of
exchanging for a new, fixed-benefit traditional survivorship policy with a
face amount equal to the current death benefit of the exchanged variable life
policy. Premiums for the new policy will be based on the premium rates for
comparable fixed-benefit traditional survivorship life insurance policies
issued by The New England which were in effect on the Policy Date of the
original Policy. Any riders to the original Policy will be attached to the new
policy if they are available.
The exchange will be effective on the date when NEVLICO receives written
notice at its Administrative Office in a form satisfactory to NEVLICO, the
Policy and payment to NEVLICO of any cost to exchange. (See "Receipt of
Communications and Payments at NEVLICO's Administrative Office".) The cost to
exchange will reflect any differences in premiums and cash values between the
two policies. Any Policy loan outstanding must be repaid on or before the
effective date of the exchange.
PAYMENT OPTIONS
The Policy's death benefit and net cash value will be paid in one sum,
unless the Policy Owner or payee chooses to put all or part of the proceeds
under a payment option. You can choose a combination of payment options. The
selection of a payment option and the naming of a payee must be in written
form satisfactory to NEVLICO. You can make, change or revoke the selection
before the last death under the Policy. The payment options available are
fixed benefit options only, therefore, proceeds applied to an option will no
longer be affected by the investment experience of the Variable Account. The
guaranteed mortality assumptions used in determining payment levels under the
options will not vary based on sex. (For Policies issued in New York and
Oregon, however, and which are not issued for use in connection with certain
employee benefit plans and fringe benefit programs, the mortality assumptions
will vary based on sex. See "Group or Sponsored Arrangements".) Once payments
under an option begin, withdrawal rights may be restricted.
The following payment options are available:
(i) INCOME FOR A SPECIFIED NUMBER OF YEARS. Proceeds are paid in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.5% a year, compounded yearly. Additional interest paid by
NEVLICO for any year will be added to the monthly payments for that
year.
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<PAGE>
(ii) LIFE INCOME. Proceeds are paid in equal monthly installments (i) during
the life of the payee, (ii) for the longer of the life of the payee or
10 years, or (iii) for the longer of the life of the payee or 20 years.
(iii) LIFE INCOME WITH REFUND. Proceeds are paid in equal monthly
installments during the life of the payee. At the payee's death, any
unpaid proceeds remaining are paid either in one sum or in equal
monthly installments until the total proceeds have been paid.
(iv) INTEREST. Proceeds are held for the life of the payee or another agreed
upon period. Interest of at least 3.5% a year is paid monthly or added
to the principal annually. At the death of the payee, or at the end of
the period agreed to, the balance of principal and any interest will be
paid in one sum.
(v) SPECIFIED AMOUNT OF INCOME. Proceeds plus accrued interest of at least
3.5% a year are paid in an amount and at a frequency elected until total
proceeds have been paid. Any amounts unpaid at the death of the payee
will be paid in one sum.
(vi) LIFE INCOME FOR TWO LIVES. Proceeds will be paid in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the surviving payee or 10 years, or (iii) while the two
payees are living and, after the death of one payee, two-thirds of the
monthly amount for the life of the surviving payee will be paid.
NEVLICO's consent to use of an option is required if the installment
payments would be less than $20.
ADDITIONAL BENEFITS BY RIDER
A Policy can include additional benefits provided by rider to the Policy,
subject to NEVLICO's underwriting and issuance standards. These additional
benefits usually require an additional charge as part of the Monthly Deduction
from cash value. The rider benefits available with the Policies provide fixed
benefits that do not vary with the investment experience of the Variable
Account.
There may be circumstances in which it will be to your economic advantage to
include a significant portion or percentage of your insurance coverage under a
term rider. In many other circumstances, it may be in your interest to obtain
a Policy without term rider coverage. These circumstances depend on many
factors, including the premium levels and amount and duration of coverage you
choose, as well as the ages, sexes and risk classifications of the insureds.
Reductions in or elimination of term rider coverage does not trigger the
imposition of a surrender charge, and use of a term rider generally reduces
sales compensation. Your NEVLICO agent can provide you more information on the
uses of term rider coverage.
The following riders are available:
TERM RIDER--JOINT LIFE TERM INSURANCE TO AGE 100, which provides joint
life term insurance.
TERM RIDER--JOINT 4 YEAR TERM INSURANCE, which provides joint life term
insurance for four policy years.
TERM RIDER--LEVEL SINGLE LIFE TERM INSURANCE, which provides additional
term insurance on one of the insureds.
TERM RIDER--DECREASING SINGLE LIFE TERM INSURANCE, which provides
additional term insurance on one of the insureds in an amount that decreases
each year to zero over a coverage period of 10, 15 or 20 years.
WAIVER OF MONTHLY DEDUCTION, which provides for waiver of Monthly
Deductions upon the disability of the insured covered by the waiver.
BENEFITS FOR DISABILITY OF COVERED INSUREDS, which provides for waiver of
the cost of the rider itself and for a premium benefit upon the disability
of an insured covered by the rider.
Not all riders may be available and riders in addition to those listed above
may be made available. You should consult your agent regarding the
availability of particular riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time to
time. At the death of the Policy Owner, his or her estate will become the
Policy Owner unless a successor Policy Owner has been named. The Policy
Owner's rights (except for rights to payment of benefits) terminate at the
death of the second insured.
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The beneficiary is also named in the application. The beneficiary of the
Policy may be changed at any time before the death of the second insured. The
beneficiary has no rights under the Policy until the death of the second
insured and must survive the second insured in order to receive the death
proceeds. If no named beneficiary survives the second insured, the proceeds
will be paid to the Policy Owner.
A change of Policy Owner or beneficiary must be in written form satisfactory
to NEVLICO and must be dated and signed by the Policy Owner making the change.
The change will be subject to all payments made and actions taken by NEVLICO
under the Policy before the signed change form is received by NEVLICO at its
Administrative Office.
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary
to the assignee. A collateral assignment of the Policy does not change the
Policy Owner or beneficiary, but their rights will be subject to the terms of
the assignment. Assignments will be subject to all payments made and actions
taken by NEVLICO under the Policy before a signed copy of the assignment form
is received at NEVLICO's Administrative Office. NEVLICO will not be
responsible for determining whether or not an assignment is valid. Changing
the Policy Owner or assigning the Policy may have tax consequences. (See "Tax
Considerations" below.)
THE VARIABLE ACCOUNT
The Variable Account was established as a separate investment account of
NEVLICO on January 31, 1983 under Delaware Insurance Law. The Variable Account
is the funding vehicle for other NEVLICO variable life insurance policies in
addition to the Policies. The Variable Account meets the definition of a
"separate account" under Federal securities laws. The Variable Account is a
type of investment company called a unit investment trust and is registered
with the Securities and Exchange Commission (the "SEC") under the Investment
Company Act of 1940. Registration with the SEC does not involve supervision by
the SEC of the management or investment practices or policies of the Variable
Account. However, both NEVLICO and the Variable Account are subject to
regulation by the Delaware Insurance Commissioner and to the insurance laws
and regulations in every jurisdiction where the Policies are sold.
Although the assets of the Variable Account are owned by NEVLICO, applicable
law provides that the portion of the Variable Account assets equal to the
reserves and other liabilities of the Variable Account may not be charged with
liabilities that arise out of any other business NEVLICO may conduct. NEVLICO
believes this means that the assets of the Variable Account equal to the
reserves and other liabilities of the Variable Account are not available to
meet the claims of NEVLICO's general creditors, and may only be used to
support the cash values under its variable life insurance policies issued by
the Variable Account. But NEVLICO may transfer to its general account assets
which exceed the reserves and other liabilities of the Variable Account.
Before making any such transfer, NEVLICO will consider any possible adverse
impact the transfer might have on the Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of
NEVLICO's other income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 12 sub-accounts, each of which invests in
a series of an Eligible Fund. The sub-accounts of the Variable Account are:
-- The Zenith Money Market Sub-Account, which invests in the Back Bay
Advisors Money Market Series of the Zenith Fund
-- The Zenith Bond Income Sub-Account, which invests in the Back Bay Advisors
Bond Income Series of the Zenith Fund
-- The Zenith Capital Growth Sub-Account, which invests in the Capital Growth
Series of the Zenith Fund
-- The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
-- The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
-- The Zenith Value Growth Sub-Account, which invests in the Westpeak Value
Growth Series of the Zenith Fund
-- The Zenith Avanti Growth Sub-Account, which invests in the Loomis Sayles
Avanti Growth Series of the Zenith Fund
-- The Zenith Small Cap Sub-Account, which invests in the Loomis Sayles Small
Cap Series of the Zenith Fund
-- The Equity-Income Sub-Account, which invests in the Equity-Income
Portfolio of the VIP Fund
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-- The Overseas Sub-Account, which invests in the Overseas Portfolio of the
VIP Fund
-- The High Income Sub-Account, which invests in the High Income Portfolio of
the VIP Fund
-- The Asset Manager Sub-Account, which invests in the Asset Manager
Portfolio of VIP Fund II
The following four sub-accounts of the Variable Account are NOT yet
available as of the date of this Prospectus. NEVLICO anticipates that, subject
to any necessary state insurance department approvals, these sub-accounts will
become available by early 1996 (although one or more sub-accounts may become
available earlier). Policy owners, and persons considering the purchase of a
Policy, should consult with their NEVLICO agent for current information
regarding the availability of these sub-accounts. Persons considering the
purchase of a Policy should not base their decision in whole or in part on the
current availability of these sub-accounts, unless such availability has been
confirmed with an authorized NEVLICO agent.
-- The Zenith Equity Growth Sub-Account, which invests in the Alger Equity
Growth Series of the Zenith Fund*
-- The Zenith Balanced Sub-Account, which invests in the Loomis Sayles
Balanced Series of the Zenith Fund*
-- The Zenith Value Sub-Account, which invests in the Venture Value Series of
the Zenith Fund*
-- The Zenith International Equity Sub-Account, which invests in the Draycott
International Equity Series of the Zenith Fund*
*Availability of these Sub-Accounts is subject to any necessary state
insurance department approvals.
The Zenith Fund is an open-end diversified management investment company,
more commonly known as a mutual fund. The Zenith Fund was established by The
New England as an investment vehicle for separate investment accounts of
NEVLICO and of other life insurance companies. Currently the Zenith Fund is
the funding vehicle for the Variable Account and for separate accounts of The
New England and NEVLICO that issue variable annuity contracts.
The VIP Fund and VIP Fund II are open-end, diversified management investment
companies (mutual funds) that serve as the investment vehicles for variable
life insurance and variable annuity separate accounts of various insurance
companies. The VIP Fund and VIP Fund II were organized by Fidelity Management
& Research Company.
Shares of the Eligible Funds are purchased and sold by the Variable Account
at their net asset value (without a deduction for sales load) determined as of
the close of regular trading on the New York Stock Exchange on each day when
the exchange is open for trading.
The investment objectives of the Eligible Funds' portfolios are described
briefly below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, including their investment
objectives and policies, expenses, and risks of investing in the Eligible
Funds, is contained in the attached Eligible Fund prospectuses, as well as in
the Zenith Fund's Statement of Additional Information, which is referenced in
the Zenith Fund prospectus, and in the Statement of Additional Information for
the VIP Fund and VIP Fund II, which is referenced in those Funds' prospectus.
The Zenith Back Bay Advisors Money Market Series' investment objective is to
provide the highest possible level of current income consistent with
preservation of capital. The Series seeks to achieve its objective through
investment in a managed portfolio of high quality money market instruments.
Money market funds are neither insured nor guaranteed by the U.S. Government
and there can be no assurance that the Series will maintain a stable net asset
value of $100 per share.
The Zenith Back Bay Advisors Bond Income Series' investment objective is to
provide a high level of current income consistent with preservation of capital
and moderate investment risk. The Series seeks to achieve its objective
through investment primarily in an investment quality bond portfolio.
The Zenith Capital Growth Series' investment objective is long-term growth
of capital through investment primarily in equity securities.
The Zenith Westpeak Stock Index Series' investment objective is to provide
investment results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The Series
currently seeks to achieve its objective by attempting to duplicate the
composite price and yield performance of the Standard & Poor's 500 Composite
Stock Price Index.
The Zenith Back Bay Advisors Managed Series' investment objective is to
provide a favorable total investment return through investment in a
diversified portfolio. The Series' portfolio is expected to include (i) common
stocks, (ii) notes and bonds and (iii) money market instruments.
The Zenith Westpeak Value Growth Series' investment objective is long-term
total return (capital appreciation and dividend income) through investment in
equity securities. Emphasis will be given to both undervalued securities
("value" style) and securities of companies with growth potential ("growth"
style).
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The Zenith Loomis Sayles Avanti Growth Series' investment objective is long-
term growth of capital. The Series normally will invest primarily in equity
securities of companies with medium and large capitalization (capitalization
of $1 billion to $5 billion and over $5 billion, respectively), but will also
invest a portion of its assets in equity securities of companies with
relatively small market capitalization (under $1 billion).
The Zenith Loomis Sayles Small Cap Series' investment objective is long-term
capital growth from investments in common stock or their equivalent. The
Series will normally invest at least 65% of its total assets in companies with
market capitalization of less than $500 million.
The VIP Fund Equity-Income Portfolio's investment objective is to seek
reasonable income by investing primarily in income-producing equity
securities. In choosing these securities, the Equity-Income Portfolio will
also consider the potential for capital appreciation.
The VIP Fund Overseas Portfolio's investment objective is long-term growth
of capital primarily through investments in foreign securities. The Overseas
Portfolio provides a means for investors to diversify their own portfolio by
participating in companies and economies outside of the United States.
The VIP Fund High Income Portfolio's investment objective is to obtain a
high level of current income by investing primarily in high-yielding, lower-
rated, fixed-income securities, while also considering growth of capital.
High-yielding, lower-rated debt securities present higher risks of untimely
interest and principal payments, default and price volatility than higher-
rated securities, and may present problems of liquidity and valuation.
The VIP Fund II Asset Manager Portfolio's investment objective is to seek
high total return with reduced risk over the long-term by allocating its
assets among domestic and foreign stocks, bonds and short-term fixed-income
instruments.
The following four sub-accounts of the Variable Account are not yet
available as of the date of this Prospectus. Persons considering the purchase
of a Policy should not base their decision in whole or in part on the current
availability of these sub-accounts, unless such availability has been
confirmed with an authorized NEVLICO agent.
The Zenith Loomis Sayles Balanced Series' investment objective is reasonable
long-term investment return from a combination of long-term capital
appreciation and moderate current income. The Series is "flexibly managed" in
that sometimes it invests more heavily in equity securities and at other times
it invests more heavily in fixed-income securities. Under normal conditions,
the series will invest at least 25% of its assets in bonds and at least 50% of
its assets in common stocks.
The Zenith Draycott International Equity Series' investment objective is to
seek total return from long-term growth of capital and dividend income. The
series will invest primarily in common stocks of issuers either headquartered
outside the U.S. or deriving a substantial part of their revenues from
countries outside of the U.S.
The Zenith Venture Value Series' investment objective is growth of capital.
The Series will primarily invest in domestic common stocks (and securities
convertible into common stock) that the Series' subadviser believes have
capital growth potential due to factors such as undervalued assets or earnings
potential, product development and demand, favorable operating ratios,
resources for expansion, management abilities, reasonableness of market price,
and favorable overall business prospects. The Series will generally invest
predominantly in equity securities of companies with market capitalizations of
at least $250 million.
The Zenith Alger Equity Growth Series' investment objective is to seek long-
term capital appreciation. The Series' assets will be invested primarily in a
diversified, actively managed portfolio of equity securities, with a majority
of issuers having a total market capitalization of $1 billion or greater.
The basic objective of the Policy is to provide benefits which increase in
value when the investment experience of the Policy's sub-accounts is
favorable. Historically, the investment performance of common stocks over the
long term has generally been superior to that of long or short term debt
securities, although common stocks have been subject to more dramatic changes
in value over short periods of time. The Zenith Capital Growth, Zenith Avanti
Growth, Zenith Value Growth, Zenith Stock Index, or Zenith Small Cap Sub-
Accounts, or the Equity-Income or Overseas Sub-Accounts, or some combination
of these sub-accounts, may, therefore, be a more desirable selection for
Policy Owners who are willing to accept such risks of short term fluctuations
in value. For a demonstration of certain of these market trends, see Appendix
C: Long Term Market Trends. Historically, the investment performance of "small
cap" stocks over the long term has generally been superior to stocks of large
capitalization companies, although "small cap" stocks have been substantially
more volatile. Historically, having a small percentage of a portfolio invested
in overseas stocks and the rest in domestic stocks has produced a portfolio
that has less, although still substantial, volatility than a completely
domestic portfolio. Equity investors should recognize that overseas and "small
cap" funds traditionally involve more risk than most domestic stock funds.
A-28
<PAGE>
The performance of the various financial markets over shorter periods of
time has sometimes differed from their long term historical results. Short
term interest rates were very high in the late 1970's and early 1980's, but
are now lower. Long term bond values continue to fluctuate, and common stock
prices, which have risen substantially at times, have also had periods of
volatility. Policy Owners who seek somewhat greater protection against loss of
principal in the short term than that afforded by a stock fund may prefer the
High Income Sub-Account or the Zenith Bond Income Sub-Account. However,
because the High Income Portfolio invests in higher yielding, lower rated and
unrated fixed income securities (including bonds commonly referred to as
"junk" bonds), it has a higher degree of risk associated with it relative to
more conservative fixed income funds. Those who seek even greater safety of
principal may select the Zenith Money Market Sub-Account, although it is
subject to possible rapid changes in short term interest rates. Those who
primarily seek safety of principal should consider fixed life insurance as an
alternative to variable life insurance.
NEVLICO guarantees the principal invested in the Fixed Account, although
this guarantee is subject to NEVLICO's claims paying ability.
You may wish to consider diversifying your investments by allocating the
Policy's cash value among two or more sub-accounts.
Policy Owners may also diversify by selecting the Zenith Managed Sub-Account
or the Asset Manager Sub-Account, since each generally invests its assets at
most times in a combination of bonds, stocks and short term instruments, in
varying proportions depending upon the investment adviser's evaluation of the
economy and financial markets. The Asset Manager Portfolio has the ability to
invest its stock portfolio more aggressively than the Back Bay Advisors
Managed Series. You may also wish to diversify your cash value by country. The
Overseas Sub-Account allows you to participate primarily in companies and
economies outside the United States.
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types
of investments you have and your own assessment of future economic and
financial market conditions.
INVESTMENT MANAGEMENT
The adviser and sub-adviser for each series of the Zenith Fund are listed in
the chart below. TNE Advisers, which is a subsidiary of The New England, and
each of the sub-advisers are registered with the SEC as investment advisers
under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
- -------------- ------- -----------
<S> <C> <C> <C>
Capital Growth Capital Growth Management
Limited Partnership ("CGM")*
Back Bay TNE Advisers, Inc. Back Bay Advisors, L.P.**
Advisors
Money Market
Back Bay Advi- TNE Advisers, Inc. Back Bay Advisors, L.P.**
sors Bond In-
come
Back Bay Advi- TNE Advisers, Inc. Back Bay Advisors, L.P.**
sors Managed
Westpeak Stock TNE Advisers, Inc. Westpeak Investment Advisors, L.P.**
Index
Westpeak Value TNE Advisers, Inc. Westpeak Investment Advisors, L.P.**
Growth
Loomis Sayles TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Avanti Growth
Loomis Sayles TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Small Cap
Series anticipated to be made available under the Policies, subject to any nec-
essary state insurance department approvals, by early 1996***
Loomis Sayles TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Balanced***
Draycott In- TNE Advisers, Inc. Draycott Partners, Ltd.**
ternational
Equity***
Venture Val- TNE Advisers, Inc. Selected/Venture Advisers, L.P.
ue***
Alger Equity TNE Advisers, Inc. Fred Alger Management, Inc.
Growth***
</TABLE>
- --------
* An affiliate of The New England
** An indirect subsidiary of The New England
*** Consult your authorized NEVLICO agent regarding the availability of sub-
accounts that invest in these series.
A-29
<PAGE>
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak Value Growth Series, Loomis Sayles Avanti Growth Series and
Loomis Sayles Small Cap Series, TNE Advisers became the adviser on May 1,
1995. Prior to that date those series were advised by their current sub-
adviser, except as follows. The New England itself served as investment
adviser to the Back Bay Advisors Money Market and Back Bay Advisors Bond
Income Series until September 10, 1986 when Back Bay Advisors assumed The New
England's responsibilities under the investment advisory agreements with those
Series. Back Bay Advisors served as investment adviser to the Westpeak Stock
Index Series until August 2, 1993, when Westpeak became the investment
adviser. The Capital Growth Series was managed by Loomis, Sayles until March
1, 1990, when its Capital Growth Management Division was reorganized into CGM.
The Zenith Fund Series incur charges for advisory fees and certain other
expenses. Under a voluntary expense cap by TNE Advisers for each of the
Capital Growth, Back Bay Advisors Bond Income, Back Bay Advisors Money Market,
Back Bay Advisors Managed, Westpeak Stock Index, Westpeak Value Growth and
Loomis Sayles Avanti Growth Series, TNE Advisers will bear those expenses
(other than the management fee) that exceed 0.15% of average daily net assets;
for the Loomis Sayles Small Cap Series, TNE Advisers will bear all expenses
that exceed 1.00% of average daily net assets. For the remaining Zenith Fund
Series TNE Advisers, under a voluntary expense deferral arrangement, will bear
those expenses (other than the management fee) which exceed a certain limit in
the year in which they are incurred and will charge those expenses to the
series in a future year when actual expenses of the series are below the
limit. The expense cap and expense deferral arrangement may be terminated at
any time.
The following table shows the annual operating expenses for each series,
based on actual expenses incurred for 1994, after giving effect to the
applicable expense cap or expense deferral arrangement.
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE
CAP)
<TABLE>
<CAPTION>
BACK BACK
BAY BAY BACK LOOMIS LOOMIS
ADVISORS ADVISORS BAY WESTPEAK WESTPEAK SAYLES SAYLES
CAPITAL BOND MONEY ADVISORS STOCK VALUE AVANTI SMALL
GROWTH INCOME MARKET MANAGED INDEX GROWTH GROWTH CAP
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------- -------- -------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee .65% .40% .35% .50% .25% .70% .70% 1.00%
Other Expenses .05% .14% .15% .14% .15% .15% .15% --
---- ---- ---- ---- ---- ---- ---- -----
Total Series Operating
Expenses .70% .54% .50% .64% .40% .85% .85% 1.00%
</TABLE>
Series anticipated to be made available under the Policies, subject to any
necessary state insurance department approvals, by early 1996:*
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE
DEFERRAL)
<TABLE>
<CAPTION>
LOOMIS ALGER
SAYLES DRAYCOTT VENTURE EQUITY
BALANCED INTERNATIONAL VALUE GROWTH
SERIES* EQUITY SERIES* SERIES* SERIES*
-------- -------------- ------- -------
<S> <C> <C> <C> <C>
Management Fee .70% .90% .75% .70%
Other Expenses .15% .40% .15% .15%
---- ----- ---- ----
Total Series Operating Expenses .85% 1.30% .90% .85%
</TABLE>
*Consult your authorized NEVLICO agent regarding the availability of sub-
accounts that invest in these series.
For more information about the Series' advisory agreements, see the Zenith
Fund prospectus attached at the end of this prospectus and the Zenith Fund's
Statement of Additional Information.
The investment adviser for the VIP Fund and VIP Fund II is Fidelity
Management & Research Company, a registered investment adviser under the
Investment Advisers Act of 1940. The Portfolios of the VIP Fund and VIP Fund
II, as part of their operating expenses, pay investment management fees to
Fidelity Management & Research Company.
A-30
<PAGE>
The Portfolios also bear certain other expenses. For the year ended December
31, 1994, the total operating expenses of the Portfolios, as a percentage of
Portfolio average net assets, were as follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- ------------- ---------- -------- ------------
<S> <C> <C> <C>
Equity-Income .52% .06% .58%*
Overseas .77% .15% .92%
High Income .61% .10% .71%
Asset Manager .72% .08% .80%*
</TABLE>
- --------
*A portion of the brokerage commissions the portfolio paid was used to reduce
its expenses. Without this reduction total operating expenses would have been
.60% for the Equity-Income Portfolio and .81% for the Asset Manager
Portfolio.
Fidelity Management & Research Company is the original Fidelity company and
was founded in 1946. It provides a number of mutual funds and other clients
with investment research and portfolio management services. It maintains a
large staff of experienced investment personnel and a full complement of
related support facilities. As of December 31, 1994, it advised funds having
more than 22 million shareholder accounts with a total value of more than $250
billion. For more information regarding the Equity-Income, Overseas High
Income and Asset Manager Portfolios and Fidelity Management & Research
Company, see the VIP Fund and VIP Fund II prospectus attached at the end of
this prospectus and their Statement of Additional Information.
THE FIXED ACCOUNT
A FIXED ACCOUNT OPTION IS AVAILABLE UNDER THE POLICY IN STATES WHERE IT HAS
BEEN APPROVED BY THE STATE INSURANCE DEPARTMENT. THE FIXED ACCOUNT MAY NOT BE
APPROVED BY EVERY STATE INSURANCE DEPARTMENT AND THEREFORE IT MAY NOT BE
AVAILABLE IN EVERY STATE.
You may allocate net premiums for your Policy, and may transfer your
Policy's cash value, to the Fixed Account, which is part of NEVLICO's general
account. Because of exemptive and exclusionary provisions in the Federal
securities laws, interests in the Fixed Account have not been registered under
the Securities Act of 1933, and neither the Fixed Account nor the general
account has been registered as an investment company under the Investment
Company Act of 1940. Therefore, neither the Fixed Account, the general account
nor any interests therein are generally subject to the provisions of these
Acts, and NEVLICO has been advised that the staff of the SEC does not review
disclosures relating to the general account. Disclosures regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the Federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
GENERAL DESCRIPTION
NEVLICO's general account includes all the assets owned by NEVLICO, other
than the assets in the Variable Account or in any other separate accounts that
NEVLICO may establish. NEVLICO has sole discretion over the investment of
assets in the general account, including the Fixed Account. Policy Owners who
allocate cash value to the Fixed Account will not share in the actual
investment experience of the Fixed Account. Instead, NEVLICO guarantees that
cash values in the Fixed Account will earn interest at an annual rate of at
least 4%. NEVLICO may from time to time credit interest at a higher rate than
4%, but it is under no obligation to do so. NEVLICO declares the current
interest rate for the Fixed Account periodically. Your Policy cash values that
are in the Fixed Account will earn interest daily.
NEVLICO may vary the way in which it credits interest in the Fixed Account
from time to time. The following is a description of NEVLICO's current method
for crediting interest to cash value in the Fixed Account. All of your
Policy's cash value in the Fixed Account on a Policy anniversary will earn
interest at the declared annual rate in effect on the anniversary. It will
earn interest at this rate until the next Policy anniversary, when it will be
credited with the current rate declared by NEVLICO. (Although NEVLICO's
current practice is to credit your entire Fixed Account cash value on a Policy
anniversary with the most recently declared annual rate until the next
anniversary, NEVLICO can select any portion, from 0% to 100%, of your Fixed
Account cash value on a Policy anniversary to earn interest at the most
recently declared rate until the next Policy anniversary, unless otherwise
required by state law.) Any net premiums allocated or any portion of your
Policy's cash value transferred to the Fixed Account on a date other than a
Policy anniversary will earn interest at NEVLICO's most recently declared rate
until the next Policy anniversary. The effective interest rate credited at any
time to your cash value in the Fixed Account will be a weighted average of all
the Fixed Account rates for your Policy.
A-31
<PAGE>
VALUES AND BENEFITS
The Policy's cash value in the Fixed Account reflects the net premiums
allocated to the Fixed Account, net interest credited to cash value in the
Fixed Account, any loans, partial surrenders made from the Fixed Account cash
value, charges deducted, and any transfers of cash value to or from the
Variable Account. Charges will be deducted from the Policy's cash value in the
Fixed Account and in the Policy's sub-accounts in proportion to the amount of
the Policy's cash value in each. (See "Monthly Deduction from Cash Value".) A
Policy's total cash value will include its cash value in the Variable Account,
its cash value in the Fixed Account, and any of its cash value held in
NEVLICO's general account (but outside of the Fixed Account) as a result of a
Policy loan.
The amount of the Policy's cash value in the Fixed Account will be taken
into account in the calculation of the Policy's death benefit in the same
manner as the cash value in the Variable Account. (See "Death Benefit".)
POLICY TRANSACTIONS
NEVLICO reserves the right to restrict allocations to the Fixed Account if
the effective annual rate of interest that would apply to the amount allocated
is 4%. Otherwise, allocations of net premiums to the Fixed Account are subject
to the same percentage requirements that apply to the Variable Account. (See
"Allocation of Net Premiums".)
Except as described below, amounts in the Fixed Account are subject to the
same rights and limitations regarding transfers, loans, surrenders and partial
surrenders that apply to amounts in the Variable Account. (See "Other Policy
Features".) The following special rules apply to transactions involving
amounts in the Fixed Account.
TRANSFERS OF AMOUNTS FROM THE FIXED ACCOUNT TO THE VARIABLE ACCOUNT WILL BE
ALLOWED ONLY ONCE IN EACH POLICY YEAR. A TRANSFER OF CASH VALUE FROM THE FIXED
ACCOUNT WILL BE PROCESSED ONLY IF NEVLICO RECEIVES THE TRANSFER REQUEST NO
MORE THAN 30 DAYS BEFORE THE POLICY ANNIVERSARY, AND THE TRANSFER WILL BE
EFFECTED AS OF THE DATE THE TRANSFER REQUEST IS RECEIVED AT NEVLICO'S
ADMINISTRATIVE OFFICE. THE AMOUNT OF CASH VALUE WHICH MAY BE TRANSFERRED FROM
THE FIXED ACCOUNT IS LIMITED TO THE GREATER OF 25% OF THE POLICY'S CASH VALUE
IN THE FIXED ACCOUNT ON THE TRANSFER DATE OR THE AMOUNT OF CASH VALUE
TRANSFERRED FROM THE FIXED ACCOUNT IN THE PRECEDING POLICY YEAR. Regardless of
these limits, if a transfer of cash value from the Fixed Account would reduce
the remaining cash value in the Fixed Account below $100, you may transfer the
entire amount of cash value from the Fixed Account. The total number of
transfers among sub-accounts and from the sub-accounts to the Fixed Account
may not exceed four in one Policy year without NEVLICO's consent. NEVLICO
currently allows 12 such transfers per Policy year. Transfers out of the Fixed
Account will not be counted against this limit. NEVLICO reserves the right to
restrict transfers of cash value into the Fixed Account, if the effective
annual rate of interest that would apply to the amount transferred is 4%.
Unless you request otherwise, a Policy loan will reduce the Policy's cash
value in the sub-accounts and not the cash value in the Fixed Account. If
there is not enough cash value in the Policy's sub-accounts to provide the
amount of the loan, however, the balance of the loan will be taken from the
cash value in the Fixed Account. All loan repayments will be allocated first
to the outstanding loan balance attributable to the Fixed Account. The amount
removed from the Policy's sub-accounts and the Fixed Account as a result of a
loan will earn interest at not less than 4% per year, which will be credited
annually to the Policy's cash value in the sub-accounts and the Fixed Account
in proportion to the Policy's cash value in each on the day it is credited.
Unless you request otherwise, partial surrenders will be taken only from the
Policy's sub-accounts and not the Fixed Account. If there is not enough cash
value in the Policy's sub-accounts to provide the full amount requested, the
balance of the partial surrender will be taken from the Fixed Account.
NEVLICO has the right to delay transfers, surrenders, and Policy loans from
the Fixed Account for up to six months (to the extent allowed by state
insurance law). Loans to pay premiums on policies issued by NEVLICO will not
be delayed.
NEVLICO'S DISTRIBUTION AND OTHER AGREEMENTS
NEVLICO sells the Policies through agents who are licensed by state
insurance officials to sell NEVLICO's variable life insurance policies. These
agents are also registered representatives of New England Securities. New
England Securities, a Massachusetts corporation organized in 1968, is
registered with the SEC as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers,
Inc.
A-32
<PAGE>
New England Securities, whose principal business address is 399 Boylston
Street, Boston, Massachusetts 02116, serves as the principal underwriter for
the Policies under a Distribution Agreement between NEVLICO and New England
Securities.
Under the Distribution Agreement, NEVLICO pays the following sales expenses:
general agent and agency manager's compensation, agents' training allowances,
deferred compensation and insurance benefits of agents, general agents and
agency managers and advertising expenses and all other expenses of
distributing the Policies.
NEVLICO pays the following commissions and/or service fees to the selling
agent: a maximum of 50% of the Benchmark Premium (plus any additional portion
of a premium which NEVLICO attributes to certain riders for commission paying
purposes) paid in the first Policy year; 5% in Policy years two through ten
and 4% thereafter. Agents receive a commission of 3% of each payment in excess
of the Benchmark Premium (plus any additional portion of a premium which
NEVLICO attributes to certain riders for commission paying purposes) in any
year. Agents who meet certain productivity and persistency standards in
selling policies issued by NEVLICO and The New England may be eligible for
additional compensation. Non-cash forms of compensation may also be paid.
Sales expenses in any year are not equal to the deduction for sales load in
that year.
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. It is the principal underwriter for the
Zenith Fund; The New England Variable Account; New England Retirement
Investment Account; New England Variable Annuity Separate Account; and New
England Variable Annuity Fund I. New England Securities also sells interests
in various investment partnerships.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life
insurance policies. Under the agreements with those broker-dealers, the
commission paid to the broker-dealer will not exceed 50% of the Benchmark
Premium (plus any additional portion of a premium which NEVLICO attributes to
certain riders for commission paying purposes) in the first Policy year, 5% in
the second through tenth Policy years, 4% thereafter, and 3% of all payments
in excess of the Benchmark Premium (plus any additional portion of a premium
which NEVLICO attributes to certain riders for commission paying purposes) in
any year. Commissions will be paid through the registered broker-dealer, which
may also be reimbursed for portions of expenses incurred in connection with
the sale of the Policies.
Under a Services Agreement between NEVLICO, The New England and New England
Securities, The New England performs underwriting, issuance and other
administrative services for NEVLICO'S variable life insurance policies.
NEVLICO paid The New England approximately $39.6 million in 1994 for services
provided under this agreement.
LIMITS TO NEVLICO'S RIGHT TO CHALLENGE THE POLICY
NOTIFICATION OF FIRST DEATH
Generally, NEVLICO can challenge the validity of your Policy or a rider to
your Policy during either insured's lifetime for two years (or less, if
required by state law) from the date of issue, based on misrepresentations
made in the application. NEVLICO can challenge the portion of the death
benefit resulting from payment of an underwritten premium payment for two
years (during either insured's lifetime) from the date the premium payment was
received. However, if either insured dies within two years of the date of
issue, NEVLICO can challenge all or part of the Policy at any time with
respect to misrepresentations relating to that insured.
NEVLICO should be notified immediately upon the first death of an insured
under the Policy. Even if premiums continue to be paid after the first death,
NEVLICO has the right to contest the Policy or to limit benefits under the
suicide provision (described below) and terminate the Policy at any time, even
beyond the two-year period, if it was not notified of a death that occurred
during the period of contestability.
MISSTATEMENT OF AGE OR SEX
If either insured's age or sex is misstated in the application, the Policy's
death benefit will be the amount that the most recent Monthly Deduction which
was made would have provided, based on the insureds' correct ages and, if the
Policy is sex-based, on the insureds' correct sexes.
A-33
<PAGE>
SUICIDE
If either of the insureds dies by suicide within two years (or less, if
required by state law) from the date of issue set forth in the Policy, the
death benefit will be limited to the amount of the premiums paid, less any
policy loan balance, and less any partial surrenders (or such greater amount
required by state law). The Policy will terminate as of the date of the first
death by suicide.
An eligible insured, if age 75 or younger, can request a new single life
variable life insurance policy, with the same face amount as the original
Policy, within 60 days of the date of the suicide. An eligible insured over
age 75 may request a single life ordinary life policy and not a single life
variable life insurance policy. For these purposes an eligible insured is a
surviving insured on whom NEVLICO would have issued a single life policy on
the Policy Date of the original Policy. The new single life policy is based on
the surviving insured's underwriting class at the time of issue of the
original Policy, with a policy date equal to the date of the suicidal death,
and premiums must be paid from the policy date. The single life variable life
insurance policy can be exchanged for an ordinary life policy, if desired,
using the 24-month exchange provision.
If the eligible surviving insured dies within the 60 day period and before
submitting an application, the death benefit will be paid as if the new policy
had been issued and, if the new policy would have been a variable life policy,
assuming all premiums had been allocated to the Fixed Account and that the
death benefit option chosen equals the face amount of the new policy.
TAX CONSIDERATIONS
POLICY PROCEEDS
The following discussion of Federal income tax issues relating to the
Policies is general in nature and is not intended as tax advice. It describes
what NEVLICO believes is the Federal income tax treatment of the Policies in
the most commonly occurring circumstances and does not reflect the effect of
Federal income taxes in all situations. In addition, there is no guarantee
that the Federal income tax laws and regulations or interpretation of them
will not change. Therefore, NEVLICO recommends that you consult your own tax
advisor for more complete information and advice.
DEFINITION OF LIFE INSURANCE. Section 7702 of the Internal Revenue Code of
1986, as amended ("Code") defines a life insurance contract for Federal income
tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the Policy is not
directly addressed by Section 7702 or proposed regulations issued under that
section. The presence of these Policy features, the absence of final
regulations, and the lack of other pertinent interpretations of Section 7702,
thus create some uncertainty about the application of Section 7702 to the
Policy.
Nevertheless, NEVLICO believes it is reasonable to conclude that the Policy
qualifies as a life insurance contract for federal tax purposes. This means
that:
. the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
. the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
Because of the absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether a Policy will meet the
statutory life insurance definition, particularly if it is a substandard risk
Policy. If a Policy were determined not to be a life insurance contract for
purposes of Section 7702, such Policy would not provide most of the tax
advantages normally provided by a life insurance contract.
NEVLICO thus reserves the right to make changes in the Policy if such
changes are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes.
TAX LAW EFFECTS ON CERTAIN PRE-DEATH DISTRIBUTIONS. Section 7702A of the
Code contains provisions affecting the tax treatment of any loan, assignment
or other pre-death distribution from a life insurance policy which is also a
"modified endowment contract" (defined below under "Modified Endowment
Contracts"). Whether a Policy will be classified as a modified endowment
contract will depend upon the amount and timing of payments made under the
Policy.
A-34
<PAGE>
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NEVLICO believes any Policy loans received under such
Policies will be treated as indebtedness of the Policy Owner and will not be
treated as taxable income to you. This assumes that the Policy has not lapsed,
been surrendered or terminated. As a general rule, Policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of your Policy if
the net cash surrender value of the Policy is greater than the investment in
the Policy less prior distributions from the Policy that were not taxed. If a
Policy has a Policy loan and is surrendered or lapses, the Policy loan is
treated as a distribution and would be taxable if there is a gain in the
Policy. In that case, the gain in the Policy would be taxable even if the
Policy has no net cash surrender value. If you incur a loss upon the surrender
it is not likely to be deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you
unless it is greater than the investment in the Policy less the untaxed
portions of any prior distributions. The Code does provide, however, that in
certain situations in the first 15 years of the Policy partial surrenders may
be taxable, in whole or in part, if the cash value is greater than the total
investment in the Policy. In this case, an amount may be taxable even if the
amount of the partial surrender is less than the investment in the Policy.
MODIFIED ENDOWMENT CONTRACTS. A modified endowment contract is a life
insurance contract which fails to satisfy a "7-pay test". In general, a Policy
will fail to satisfy the 7-pay test if the total amount paid under the Policy
at any time during the first seven Policy years exceeds the sum of the net
level premiums that would have been paid on or before such time if the Policy
provided for paid up future benefits after the payment of seven level annual
premiums. (The amount of premiums payable under the 7-pay test are calculated
based upon certain assumptions regarding the Policy's earnings and the use of
a reasonable mortality charge. Variable Account investment experience above a
4% net rate of return does not affect whether or not a Policy will become a
modified endowment contract.) Riders to the Policy are considered part of the
Policy for purposes of applying the 7-pay test. A joint term rider could cause
the Policy to be treated less favorably for purposes of the 7-pay test. If
there is a reduction in the Policy's death benefit (for example, as a result
of a partial surrender or face amount reduction) at any time during the
Policy's existence the 7-pay test will be applied as if the Policy had
originally been issued at the reduced face amount. If there is a reduction in
rider or other benefits during the first seven Policy years, the 7-pay test
will be applied as if the Policy had originally been issued at the reduced
benefit amount. Any Policy received in exchange for a modified endowment
contract will also be a modified endowment contract.
Your agent can provide you with information about the maximum amount of
premiums which you can make under your Policy during the first seven Policy
years and still satisfy the 7-pay test. This information will be based upon
NEVLICO's current understanding of the Federal tax law. As is the case with
any provision of the Internal Revenue Code, there is no assurance that the
Internal Revenue Service will agree with NEVLICO's interpretation. NEVLICO
will monitor any IRS announcements or rulings concerning compliance with the
7-pay test.
MATERIAL CHANGES. If a "material change" in the benefits or other Policy
terms occurs under a Policy which has satisfied the 7-pay test, the Policy may
be treated as a new Policy entered into on the day on which the material
change occurred. The Policy will be retested under the 7-pay test, after
making certain adjustments to reflect the Policy's existing cash value. Any
increase in future benefits under the Policy may constitute a material change
if the increase is not due to the payment of premiums necessary to fund the
Policy's lowest death benefit payable in the first seven Policy years, or the
crediting of interest or other earnings with respect to such premiums. A
material change would also occur if certain Policy changes occurred.
If you do not wish to have the Policy become a modified endowment contract,
you may be required to limit the payment of premiums under the Policy at some
point. The point at which you may have to limit the payment of premiums will
depend upon the issue age, sex and underwriting class of the insureds,
investment experience and the amount of your previous payments.
If you exchange your policy for another life insurance policy, including a
fixed-benefit policy pursuant to the 24 month exchange right, the new
insurance policy should be reviewed to determine how the rules regarding
modified endowment contracts may apply to the new policy. (See "Exchange of
Policy During First 24 Months.")
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent
the cash value of the Policy exceeds your investment in the Policy (i.e.,
will be treated as income first).
A-35
<PAGE>
(b) Loans are considered distributions. Your investment in the Policy will
be increased by the amount of any prior loan that was included in your gross
income.
(c) A Policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the Policy,
the collateral assignment is a distribution which will subject any gain that
accrues in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by
NEVLICO or its affiliates to the same Policy Owner during any 12 month
period must be treated as one modified endowment contract.
Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy) or for the
joint lives (or life expectancies) of you and your beneficiary.
If a Policy becomes a modified endowment contract, distributions made during
the Policy year in which it becomes a modified endowment contract,
distributions in any subsequent Policy year and distributions within two years
before the Policy becomes a modified endowment contract will be subject to the
tax treatment described above. This means that a distribution from a Policy
that is not a modified endowment contract could later become taxable as a
distribution from a modified endowment contract. In addition, regulations or
other interpretations may be issued which will apply similar tax treatment to
other distributions made in anticipation of a Policy becoming a modified
endowment contract.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy plus the cost of insurance protection
for the year. Regulations specifying the diversification requirements have
been issued by the Department of Treasury, and NEVLICO believes it complies
fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of regulations or
rulings prescribing the circumstances in which an owner's control of the
investments of a separate account may cause a Policy Owner, rather than the
insurance company, to be treated as the owner of the assets in the separate
account. To date, no such regulations or guidance has been issued. If a Policy
Owner is considered the owner of the assets of the Separate Account, income
and gains from the Account would be included in the Owner's gross income.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it determined that the owners were not owners of separate
account assets. For example, a Policy Owner has additional flexibility in
allocating payments and cash values. These differences could result in the
owner being treated as the owner of a pro rata share of the assets of the
Separate Account. In addition, NEVLICO does not know what standards will be
set forth in the regulations or rulings which the Treasury has stated it
expects to be issued. NEVLICO therefore reserves the right to modify the
Policy as necessary to attempt to prevent the Policy Owner from being
considered the owner of the assets of the Separate Account.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans,
retiree medical benefit plans and others. The tax consequences of such plans
may vary depending on the particular facts and circumstances of each
individual arrangement. Therefore, if you are contemplating the use of the
Policies in any arrangement the value of which depends in part on its tax
consequences, you should be sure to consult a qualified tax advisor regarding
the tax attributes of the particular arrangement and the suitability of this
product for the arrangement.
A-36
<PAGE>
NEVLICO believes that Policies subject to the provisions of the Puerto Rican
tax law will generally receive the same tax treatment as that described above
for Policies subject to the Internal Revenue Code. You should note that
Policies governed by the Puerto Rican tax law are not currently subject to the
above-described rules regarding modified endowment contracts. If such a Policy
becomes subject to the Internal Revenue Code, however, the rules regarding
modified endowment contracts will apply, and they may apply retroactively. You
should consult your tax advisor if a Policy governed by the Puerto Rican tax
law subsequently becomes subject to the Internal Revenue Code.
OTHER TAX CONSIDERATIONS. The transfer of the Policy or designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate, and generation-
skipping transfer taxes. For example, the transfer of the Policy to, or the
designation as a beneficiary of, or the payment of proceeds to, a person who
is assigned to a generation which is two or more generations below the
generation assignment of the Policy owner, may have Generation Skipping
Transfer tax considerations under Section 2601 of the Code.
The individual situation of each Policy owner or beneficiary will determine
the extent, if any, to which federal, state, and local transfer taxes may be
imposed. Consult with your tax advisor for specific information in connection
with these taxes.
The particular situation of each Policy owner or beneficiary will determine
how ownership or receipt of Policy proceeds will be treated for purposes of
federal estate tax as well as state and local estate, inheritance, generation
skipping and other taxes.
CHARGE FOR NEVLICO'S INCOME TAXES
Under current Federal income tax law no tax is imposed on NEVLICO as a
result of the operations of the Variable Account. Thus, no charge is being
made currently to the Variable Account for company Federal income taxes,
except for the charge for federal taxes that is deducted from premiums.
NEVLICO reserves its rights to charge the Variable Account for company Federal
income taxes in the future.
Under current laws NEVLICO may incur state and local taxes (in addition to
premium taxes) in several states. At present these taxes are not significant
and, accordingly, NEVLICO is not currently making a charge for them. If they
increase, however, charges for such taxes attributable to the Variable Account
may be made.
A-37
<PAGE>
MANAGEMENT
The directors and executive officers of NEVLICO and their principal business
experience during the past five years are:
DIRECTORS OF NEVLICO
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS
EXPERIENCE DURING THE
NAME PAST FIVE YEARS
---- ------------------------------------------------------
<C> <S>
Edward C. Hall Executive Vice President--Client Services of The New
England since 1988; Vice President--Administration of
NEVLICO
Kernan F. King Director, Executive Vice President and Chief Marketing
Officer of The New England since 1992; formerly,
Director, Executive Vice President--Administration
and General Counsel, 1990 to 1992, of The New England
Robert E. Schneider Director, Executive Vice President and Chief Financial
Officer of The New England since 1993; formerly,
Executive Vice President and Chief Financial Officer,
1990 to 1993, Senior Vice President, 1985 to 1990, of
The New England
Robert A. Shafto Chairman, President and Chief Executive Officer since
1993; formerly, President and Chief Executive
Officer, 1992 to 1993, President and Chief Operating
Officer, 1990 to 1992, of The New England; Chairman,
President and Chief Executive Officer of NEVLICO
Daniel J. Toran Executive Vice President of The New England since
1991; formerly, Senior Vice President--Agencies 1986
to 1991, of The New England
H. James Wilson Executive Vice President and General Counsel of The
New England since 1993; formerly, Senior Vice
President and General Counsel, 1992 to 1993, Senior
Vice President and Associate General Counsel, 1990 to
1992, of The New England; General Counsel and
Secretary of NEVLICO
Frederick K. Zimmermann Executive Vice President and Chief Investment Officer
of The New England since 1993; formerly, Senior Vice
President--Investments, 1989 to 1993, of The New
England; Vice President--Investments of NEVLICO
EXECUTIVE OFFICERS OF NEVLICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS
EXPERIENCE DURING THE
NAME PAST FIVE YEARS
---- ------------------------------------------------------
<C> <S>
Rodney J. Chandler Second Vice President and Actuary of The New England
since 1990; Chief Actuary of NEVLICO
Chester R. Frost Senior Vice President of The New England since 1984;
Vice President--Controller of NEVLICO
John F. Guthrie Vice President of The New England since 1983; Vice
President--Portfolio Strategy of NEVLICO
John G. Small Senior Vice President of The New England since 1990;
Vice President and Chief Underwriter of NEVLICO
Phillip G. Sullivan Second Vice President and Medical Director of The New
England since 1974; Vice President and Medical
Director of NEVLICO
Newton H. Thompson Second Vice President and Treasurer of The New England
since 1993; formerly, Second Vice President and
Assistant Treasurer, 1991 to 1992, and Assistant Vice
President and Assistant Treasurer, 1989 to 1991, of
The New England; Vice President and Treasurer of
NEVLICO
H. James Wilson See Directors above
Frederick K. Zimmermann See Directors above
</TABLE>
The principal business address for each of the directors and executive
officers is the same as NEVLICO's.
VOTING RIGHTS
NEVLICO is the legal owner of the Eligible Fund shares held in the Variable
Account and has the right to vote those shares at meetings of the Eligible
Fund shareholders. However, to the extent required by applicable Federal
securities law, NEVLICO will give you, as Policy Owner, the right to instruct
NEVLICO how to vote the shares that are attributable to your Policy.
A-38
<PAGE>
The Policy Owners who are entitled to give voting instructions and the
number of shares attributable to their Policies will be determined as of the
record date for the meeting. All Eligible Fund shares held in any sub-account
of the Variable Account, or in any other separate account of NEVLICO or an
affiliate, the policyholders of which have rights of instruction with respect
to the Eligible Fund shares, and for which timely instructions are not
received, will be voted in the same proportion as (i) the aggregate cash value
of policies giving instructions, respectively, to vote, for, against, or
withhold votes on a proposition, bears to (ii) the total cash value in that
sub-account for all policies for which voting instructions are received. No
voting privileges apply with respect to cash value removed from the Variable
Account as a result of a Policy loan.
All Zenith Fund shares held by the general account (or any unregistered
separate account for which voting privileges were not extended) of NEVLICO or
its affiliates will be voted in the same proportion as the total of (i) shares
for which voting instructions were received and (ii) shares that are voted in
proportion to such voting instructions.
The SEC requires the Eligible Funds' Boards of Trustees to monitor events to
identify conflicts that may arise from the sale of Eligible Fund shares to
variable life and variable annuity separate accounts of affiliated and, if
applicable, unaffiliated insurance companies. Conflicts could arise as a
result of changes in state insurance law or Federal income tax law, changes in
investment management of any portfolio of the Eligible Funds, or differences
in voting instructions given by variable life and variable annuity contract
owners, for example. If there is a material conflict, the Board of Trustees
will have an obligation to determine what action should be taken, including
the removal of the affected sub-accounts from the Eligible Fund(s), if
necessary. If NEVLICO believes any Eligible Fund action is insufficient,
NEVLICO will consider taking other action to protect Policy Owners. There
could, however, be unavoidable delays or interruptions of operations of the
Variable Account that NEVLICO may be unable to remedy.
If required by state insurance authorities, NEVLICO may disregard voting
instructions if they would require that shares be voted to cause a change in
the investment objectives of the portfolios of the Eligible Funds or to
approve or disapprove an investment advisory or underwriting contract for a
portfolio. In addition, NEVLICO may disregard voting instructions in favor of
changes, initiated by a Policy Owner or an Eligible Fund's Board of Trustees,
in the investment policy, investment adviser or principal underwriter of the
Eligible Fund portfolio if NEVLICO (i) reasonably disapproves of the changes
and (ii) in the case of a change in investment policy or investment adviser,
makes a good faith determination that the proposed change is contrary to state
law or is prohibited by state regulatory authorities or that the change would
be inconsistent with a sub-account's investment objectives or would result in
the purchase of securities which vary from the general quality and nature of
investments and investment techniques utilized by other separate accounts of
NEVLICO or of an affiliated life insurance company, which separate accounts
have investment objectives similar to those of the sub-account. If NEVLICO
does disregard voting instructions, a summary of that action and the reasons
for it will be included in the next semiannual report to Policy Owners.
RIGHTS RESERVED BY NEVLICO
NEVLICO and The New England may change the voting procedures described
above, and may vote Eligible Fund shares in their own right without
instructions from Policy Owners, if the applicable Federal securities laws or
regulations or interpretations of them change. NEVLICO also reserves the
right: (1) to create new investment accounts; (2) to combine any two or more
separate investment accounts including the Variable Account; (3) to make
available additional sub-accounts of the Variable Account investing in
additional Eligible Fund portfolios or in portfolios of other mutual funds;
(4) to invest the assets of the Variable Account in securities other than
Eligible Fund shares or in shares of a different series of the Eligible Funds
as a substitute for such shares already purchased or as the securities to be
purchased in the future, to withdraw the availability of a series of the
Eligible Funds as an investment option under the Policies, or to transfer
assets to NEVLICO's general account as permitted by applicable law; (5) to
operate the Variable Account as a management investment company under the
Investment Company Act of 1940 or in any other form permitted by law; and (6)
to deregister the Variable Account under the Investment Company Act of 1940 if
registration is no longer required. NEVLICO will exercise these rights in
accordance with applicable law, including approval of Policy Owners if
required. NEVLICO will notify you if exercise of any of these rights would
result in a material change in the Variable Account or its investments.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account sub-
accounts, call the toll-free number 1-800-333-2501.
A-39
<PAGE>
For sub-account transfers or premium reallocations, call the toll-free
number 1-800-200-2214. (This number is not available for sub-account transfers
under Policies issued in New York.)
REPORTS
NEVLICO will send you a statement annually showing your Policy's death
benefit, cash value and any outstanding Policy loan principal. NEVLICO will
also confirm Policy loans, sub-account transfers, lapses, surrenders and other
Policy transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
NEVLICO may from time to time receive endorsements of the Policies from
professional organizations. NEVLICO may refer to or use such endorsements in
advertisements or sales material for the Policies. NEVLICO may also pay the
professional organization making the endorsement for the use of its customer
or mailing lists in order to distribute promotional materials regarding the
Policies. An endorsement of the Policies by a third party is not necessarily
indicative of the future performance or results which may be obtained by
persons who purchase the Policies.
From time to time, articles discussing the Variable Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to Lipper Analytical Services, Inc. and
Morningstar, Inc.) may publish their own rankings or performance reviews of
variable contract separate accounts, including the Variable Account.
References to, reprints or portions of reprints of such articles or rankings
may be used by NEVLICO as sales literature or advertising material and may
include rankings that indicate the names of other variable contract separate
accounts and their investment experience.
Articles and releases, developed by NEVLICO, the Eligible Funds and other
parties, about the Variable Account or the Eligible Funds regarding individual
Eligible Funds' and fund groups' asset levels and sales volumes, statistics
and analyses of industry sales volume and asset levels, and other
characteristics may appear in various publications. References to or reprints
of such articles may be used in promotional literature for the Policies or the
Variable Account. Such literature may refer to personnel of the advisers, who
have portfolio management responsibility, and their investment style. The
reference may allude to or include excerpts from articles appearing in the
media.
The advertising and sales literature for the Policies and the Variable
Account may refer to historical, current and prospective economic trends.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and
prospective Policy Owners. These materials may include, but are not limited
to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by H. James Wilson, General Counsel and Secretary of
NEVLICO. Sutherland, Asbill & Brennan, Washington, D.C., has provided advice
on certain matters relating to the Federal securities laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
EXPERTS
The financial statements of New England Variable Life Insurance Company and
of the Variable Account have been audited by Coopers & Lybrand, independent
auditors, as stated in their opinions appearing herein and have been so
included in reliance upon their authority as experts in accounting and
auditing.
Actuarial matters included in this prospectus have been examined by Rodney
J. Chandler, F.S.A., M.A.A.A., Chief Actuary of NEVLICO, as stated in his
opinion filed as an exhibit to the Registration Statement.
A-40
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash value and cash value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.,
investment income and capital gains and losses, realized or unrealized) for
the Variable Account equal to constant after tax annual rates of 0%, 6% and
12%. The tables are based on annual premium payments of $16,000 for a male and
a female, both aged 55. The insureds are each assumed to be in the nonsmoker
standard risk classification. The Tables assume no rider benefits. Values are
first given based on current mortality and other Policy charges and then based
on guaranteed mortality and other Policy charges. In addition, each
illustration is given for a Policy with an Option A death benefit, a Policy
with an Option B death benefit and a Policy with an Option C death benefit. A
Policy with an Option D death benefit, under the circumstances illustrated,
will have the same values as a Policy with an Option B death benefit. These
tables may assist in the comparison of death benefits, net cash values and
cash values for the Policies with those under other variable life insurance
policies which may be issued by NEVLICO or other companies.
Death benefits, net cash values and cash values for a Policy would be
different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period, if
premiums were paid in other amounts or at other than annual intervals. They
would also be different depending on the allocation of cash value among the
Variable Account's sub-accounts, if the actual gross rate of return for all
sub-accounts averaged 0%, 6% or 12%, but varied above or below that average
for individual sub-accounts. They would also differ if any policy loan or
partial surrender were made during the period of time illustrated, if either
or both insureds were in the smoker standard risk classification or a
substandard risk classification, or if the Policies were issued at unisex
rates.
The death benefits, net cash values and cash values shown in the tables
reflect the fact that: (i) deductions have been made from premiums for the
sales charge and state and federal premium tax charge; and (ii) a Monthly
Deduction (consisting of a Policy fee, an administrative charge, a minimum
death benefit guarantee charge, a charge for the cost of insurance and charges
for any additional benefits) are deducted from the cash value on the first day
of each Policy month. The net cash values shown in the tables reflect the fact
that a Surrender Charge (consisting of a Deferred Sales Charge and a Deferred
Administrative Charge) is deducted from the cash value upon surrender, face
reduction or lapse during the first 14 Policy years. The death benefits, net
cash values and cash values also reflect a daily charge assessed against the
Variable Account for mortality and expense risks equivalent to an annual
charge of .90% of the average daily value of the assets in the Variable
Account attributable to the Policies. (See "Charges and Expenses".) The
amounts shown in the table also reflect an average of the investment advisory
fees and operating expenses incurred by the Eligible Funds, at an annual rate
of .775% of the average daily net assets of the Eligible Funds. This average
reflects voluntary expense cap and expense deferral arrangements between TNE
Advisers and the Zenith Fund under which TNE Advisers bear operating expenses
of the Zenith Fund that exceed certain amounts. TNE Advisers could terminate
the expense cap and expense deferral arrangements at any time. If TNE Advisers
terminates these arrangements, the values illustrated on the following pages
could be less. (See "Charges Against the Eligible Funds and the Sub-Accounts
of the Variable Account" and "Investment Management".)
Taking account of the charges for mortality and expense risks in the
Variable Account and the average investment advisory fee and operating
expenses of the Eligible Funds, the gross annual rates of return of 0%, 6% and
12% correspond to net investment experience at constant annual rates of -
1.66%, 4.24% and 10.14%, respectively. (See "Net Investment Experience".)
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are
currently made. If any such charges are imposed in the future, the gross
annual rate of return would have to exceed the rates shown by an amount
sufficient to cover the tax charges, in order to produce the death benefits,
net cash values and cash values illustrated. (See "Charges for NEVLICO's
Income Taxes".)
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate of
A-41
<PAGE>
return on the death benefit is equivalent to an interest rate (after taxes) at
which an amount equal to the illustrated premiums could have been invested
outside the Policy to arrive at the death benefit of the Policy. The internal
rate of return is compounded annually, and the premiums are assumed to be paid
at the beginning of each Policy year.
NEVLICO will furnish upon request a personalized illustration reflecting the
proposed insureds' age, sex, underwriting classification, and the face amount
or premium payment schedule requested. Where applicable, NEVLICO will also
furnish upon request an illustration for a Policy which is not affected by the
sex of the insureds.
The illustrations using current Policy charges assume that the 9% sales
charge is waived after the 15th policy year. For Policies issued in
Pennsylvania, NEVLICO does not intend to waive this charge until after the
17th policy year. Purchasers in Pennsylvania should refer to a personalized
illustration, which will reflect the longer duration of this sales charge.
A-42
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION A (ENHANCED WITH FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ------------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 6,047 $ 6,820 $ 7,594 $ 12,115 $ 12,888 $ 13,662
2 34,440 1,000,000 1,000,000 1,000,000 18,575 20,889 23,295 24,644 26,957 29,364
3 52,962 1,000,000 1,000,000 1,000,000 23,990 28,646 33,677 36,856 41,512 46,543
4 72,410 1,000,000 1,000,000 1,000,000 35,885 43,700 52,480 48,751 56,566 65,346
5 92,831 1,000,000 1,000,000 1,000,000 47,460 59,270 73,066 60,326 72,136 85,932
6 114,272 1,000,000 1,000,000 1,000,000 60,098 76,755 96,997 71,579 88,236 108,478
7 136,786 1,000,000 1,000,000 1,000,000 72,412 94,788 123,083 82,507 104,883 133,179
8 160,425 1,000,000 1,000,000 1,000,000 84,394 113,381 151,539 93,105 122,092 160,250
9 185,246 1,000,000 1,000,000 1,000,000 96,037 132,550 182,601 103,363 139,875 189,926
10 211,309 1,000,000 1,000,000 1,000,000 107,336 152,311 216,535 113,276 158,252 222,475
15 362,520 1,000,000 1,000,000 1,000,000 163,994 266,661 446,788 163,994 266,661 446,788
20 555,508 1,000,000 1,000,000 1,265,687 210,150 401,840 815,783 210,150 401,840 815,783
25 801,815 1,000,000 1,000,000 2,116,936 231,327 553,827 1,390,434 231,327 553,827 1,390,434
30 1,116,173 1,000,000 1,094,750 3,383,012 199,518 719,047 2,222,011 199,518 719,047 2,222,011
35 1,517,381 1,000,000 1,283,644 4,894,600 23,468 843,116 3,214,844 23,468 843,116 3,214,844
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ----------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -62.21% -57.38% -52.54% 6,150.00% 6,150.00% 6,150.00%
2 -31.22 -25.28 -19.39 642.15 642.15 642.15
3 -30.87 -23.68 -16.70 258.47 258.47 258.47
4 -21.85 -14.69 -7.78 148.92 148.92 148.92
5 -16.92 -9.84 -3.01 100.39 100.39 100.39
6 -13.25 -6.36 .30 73.77 73.77 73.77
7 -10.92 -4.17 2.36 57.22 57.22 57.22
8 -9.35 -2.70 3.74 46.06 46.06 46.06
9 -8.23 -1.66 4.72 38.07 38.07 38.07
10 -7.41 -.90 5.43 32.11 32.11 32.11
15 -4.93 1.31 7.44 16.46 16.46 16.46
20 -4.20 2.12 8.26 9.93 9.93 11.84
25 -4.53 2.42 8.61 6.48 6.48 11.25
30 -6.50 2.49 8.65 4.39 4.89 10.78
35 -40.54 2.17 8.33 3.02 4.22 10.11
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-43
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION B (ENHANCED WITH FACE AMOUNT PLUS CASH VALUE)--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,800 $1,012,115 $1,012,888 $1,013,662 $ 6,046 $ 6,819 $ 7,593 $ 12,115 $ 12,888 $ 13,662
2 34,440 1,024,640 1,026,953 1,029,358 18,571 20,884 23,290 24,640 26,953 29,358
3 52,962 1,036,842 1,041,495 1,046,525 23,976 28,629 33,659 36,842 41,495 46,525
4 72,410 1,048,717 1,056,527 1,065,300 35,851 43,661 52,434 48,717 56,527 65,300
5 92,831 1,060,261 1,072,056 1,085,835 47,395 59,190 72,969 60,261 72,056 85,835
6 114,272 1,071,466 1,088,093 1,108,297 59,985 76,612 96,816 71,466 88,093 108,297
7 136,786 1,082,327 1,104,646 1,132,868 72,231 94,550 122,772 82,327 104,646 132,868
8 160,425 1,092,832 1,121,720 1,159,744 84,121 113,009 151,033 92,832 121,720 159,744
9 185,246 1,102,968 1,139,317 1,189,139 95,642 131,991 181,813 102,968 139,317 189,139
10 211,309 1,112,725 1,157,443 1,221,290 106,785 151,502 215,349 112,725 157,443 221,290
15 362,520 1,163,044 1,264,921 1,443,587 163,044 264,921 443,587 163,044 264,921 443,587
20 555,508 1,206,799 1,394,825 1,801,744 206,799 394,825 801,744 206,799 394,825 801,744
25 801,815 1,218,793 1,522,505 2,345,622 218,793 522,505 1,345,622 218,793 522,505 1,345,622
30 1,116,173 1,163,616 1,604,711 3,142,657 163,616 604,711 2,142,657 163,616 604,711 2,142,657
35 1,517,381 1,528,113 4,233,203 528,113 3,233,203 528,113 3,233,203
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ----------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -62.21% -57.38% -52.54% 6,225.72% 6,230.55% 6,235.39%
2 -31.23 -25.29 -19.40 651.81 652.71 653.65
3 -30.90 -23.70 -16.73 263.34 263.95 264.60
4 -21.88 -14.73 -7.82 152.39 152.93 153.54
5 -16.97 -9.88 -3.05 103.22 103.76 104.38
6 -13.31 -6.41 .24 76.24 76.80 77.46
7 -10.99 -4.24 2.30 59.47 60.05 60.77
8 -9.42 -2.78 3.67 48.14 48.76 49.55
9 -8.32 -1.75 4.63 40.04 40.69 41.55
10 -7.51 -.99 5.34 33.98 34.67 35.62
15 -5.01 1.23 7.35 18.11 19.03 20.47
20 -4.37 1.96 8.11 11.46 12.62 14.64
25 -5.04 2.00 8.41 7.77 9.19 11.89
30 -8.30 1.45 8.47 5.23 6.96 10.41
35 -.33 8.35 5.03 9.50
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-44
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION C (FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- -------------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 6,047 $ 6,820 $ 7,594 $ 12,115 $ 12,888 $ 13,662
2 34,440 1,000,000 1,000,000 1,000,000 18,575 20,889 23,295 24,644 26,957 29,364
3 52,962 1,000,000 1,000,000 1,000,000 23,990 28,646 33,677 36,856 41,512 46,543
4 72,410 1,000,000 1,000,000 1,000,000 35,885 43,700 52,480 48,751 56,566 65,346
5 92,831 1,000,000 1,000,000 1,000,000 47,460 59,270 73,066 60,326 72,136 85,932
6 114,272 1,000,000 1,000,000 1,000,000 60,098 76,755 96,997 71,579 88,236 108,478
7 136,786 1,000,000 1,000,000 1,000,000 72,412 94,788 123,083 82,507 104,883 133,179
8 160,425 1,000,000 1,000,000 1,000,000 84,394 113,381 151,539 93,105 122,092 160,250
9 185,246 1,000,000 1,000,000 1,000,000 96,037 132,550 182,601 103,363 139,875 189,926
10 211,309 1,000,000 1,000,000 1,000,000 107,336 152,311 216,535 113,276 158,252 222,475
15 362,520 1,000,000 1,000,000 1,000,000 163,994 266,661 446,788 163,994 266,661 446,788
20 555,508 1,000,000 1,000,000 1,000,000 210,150 401,840 817,020 210,150 401,840 817,020
25 801,815 1,000,000 1,000,000 1,489,944 231,327 553,827 1,418,994 231,327 553,827 1,418,994
30 1,116,173 1,000,000 1,000,000 2,505,257 199,518 722,599 2,385,959 199,518 722,599 2,385,959
35 1,517,381 1,000,000 1,000,000 4,111,413 23,468 923,004 3,915,632 23,468 923,004 3,915,632
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ----------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -62.21% -57.38% -52.54% 6,150.00% 6,150.00% 6,150.00%
2 -31.22 -25.28 -19.39 642.15 642.15 642.15
3 -30.87 -23.68 -16.70 258.47 258.47 258.47
4 -21.85 -14.69 -7.78 148.92 148.92 148.92
5 -16.92 -9.84 -3.01 100.39 100.39 100.39
6 -13.25 -6.36 .30 73.77 73.77 73.77
7 -10.92 -4.17 2.36 57.22 57.22 57.22
8 -9.35 -2.70 3.74 46.06 46.06 46.06
9 -8.23 -1.66 4.72 38.07 38.07 38.07
10 -7.41 -.90 5.43 32.11 32.11 32.11
15 -4.93 1.31 7.44 16.46 16.46 16.46
20 -4.20 2.12 8.27 9.93 9.93 9.93
25 -4.53 2.42 8.74 6.48 6.48 9.05
30 -6.50 2.52 9.02 4.39 4.39 9.27
35 -40.54 2.62 9.17 3.02 3.02 9.38
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-45
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION A (ENHANCED WITH FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 5,541 $ 6,298 $ 7,056 $ 11,610 $ 12,367 $ 13,125
2 34,440 1,000,000 1,000,000 1,000,000 17,565 19,815 22,157 23,634 25,884 28,226
3 52,962 1,000,000 1,000,000 1,000,000 22,463 26,976 31,856 35,329 39,842 44,722
4 72,410 1,000,000 1,000,000 1,000,000 33,811 41,370 49,867 46,677 54,236 62,733
5 92,831 1,000,000 1,000,000 1,000,000 44,791 56,191 69,520 57,657 69,057 82,386
6 114,272 1,000,000 1,000,000 1,000,000 56,758 72,811 92,337 68,239 84,292 103,818
7 136,786 1,000,000 1,000,000 1,000,000 68,292 89,820 117,077 78,388 99,916 127,172
8 160,425 1,000,000 1,000,000 1,000,000 79,340 107,182 143,887 88,051 115,892 152,598
9 185,246 1,000,000 1,000,000 1,000,000 89,835 124,840 172,921 97,161 132,165 180,246
10 211,309 1,000,000 1,000,000 1,000,000 99,692 142,724 204,339 105,633 148,664 210,279
15 362,520 1,000,000 1,000,000 1,000,000 135,060 231,700 403,877 135,060 231,700 403,877
20 555,508 1,000,000 1,000,000 1,088,053 127,020 302,423 701,291 127,020 302,423 701,291
25 801,815 1,000,000 1,000,000 1,704,901 26,002 316,905 1,119,803 26,002 316,905 1,119,803
30 1,116,173 1,000,000 2,386,058 158,067 1,567,197 158,067 1,567,197
35 1,517,381 2,708,638 1,779,073 1,779,073
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ----------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -65.37% -60.64% -55.90% 6,150.00% 6,150.00% 6,150.00%
2 -33.90 -28.00 -22.14 642.15 642.15 642.15
3 -33.43 -26.17 -19.14 258.47 258.47 258.47
4 -23.95 -16.71 -9.74 148.92 148.92 148.92
5 -18.74 -11.55 -4.64 100.39 100.39 100.39
6 -14.86 -7.85 -1.11 73.77 73.77 73.77
7 -12.40 -5.52 1.11 57.22 57.22 57.22
8 -10.76 -3.96 2.59 46.06 46.06 46.06
9 -9.62 -2.87 3.64 38.07 38.07 38.07
10 -8.82 -2.09 4.40 32.11 32.11 32.11
15 -7.60 -.44 6.27 16.46 16.46 16.46
20 -9.95 -.54 6.99 9.93 9.93 10.62
25 -38.09 -1.84 7.22 6.48 6.48 9.91
30 -8.63 6.83 4.39 9.02
35 5.73 7.59
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-46
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION B (ENHANCED WITH FACE AMOUNT PLUS CASH VALUE)--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ---------------------------- --------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,800 $1,011,609 $1,012,366 $1,013,124 $ 5,541 $ 6,297 $ 7,055 $11,609 $12,366 $ 13,124
2 34,440 1,023,629 1,025,879 1,028,220 17,560 19,810 22,151 23,629 25,879 28,220
3 52,962 1,035,313 1,039,824 1,044,702 22,447 26,958 31,836 35,313 39,824 44,702
4 72,410 1,046,640 1,054,192 1,062,682 33,774 41,326 49,816 46,640 54,192 62,682
5 92,831 1,057,582 1,068,966 1,082,275 44,716 56,100 69,409 57,582 68,966 82,275
6 114,272 1,068,103 1,084,119 1,103,601 56,622 72,639 92,120 68,103 84,119 103,601
7 136,786 1,078,158 1,099,615 1,126,780 68,063 89,520 116,684 78,158 99,615 126,780
8 160,425 1,087,686 1,115,396 1,151,926 78,976 106,685 143,215 87,686 115,396 151,926
9 185,246 1,096,603 1,131,378 1,179,139 89,277 124,052 171,813 96,603 131,378 179,139
10 211,309 1,104,806 1,147,454 1,208,511 98,865 141,513 202,570 104,806 147,454 208,511
15 362,520 1,130,961 1,224,406 1,390,791 130,961 224,406 390,791 130,961 224,406 390,791
20 555,508 1,113,777 1,272,253 1,633,043 113,777 272,253 633,043 113,777 272,253 633,043
25 801,815 1,218,496 1,897,578 218,496 897,578 218,496 897,578
30 1,116,173 2,070,984 1,070,984 1,070,984
35 1,517,381 1,873,924 873,924 873,924
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ----------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -65.37% -60.64% -55.90% 6,222.56% 6,227.29% 6,232.03%
2 -33.92 -28.01 -22.15 651.42 652.29 653.20
3 -33.45 -26.19 -19.17 263.14 263.73 264.37
4 -23.99 -16.75 -9.77 152.24 152.77 153.36
5 -18.80 -11.60 -4.70 103.09 103.61 104.22
6 -14.93 -7.92 -1.18 76.13 76.67 77.31
7 -12.48 -5.60 1.02 59.36 59.92 60.62
8 -10.86 -4.06 2.49 48.03 48.62 49.39
9 -9.75 -3.00 3.51 39.92 40.55 41.38
10 -8.98 -2.25 4.25 33.85 34.52 35.43
15 -8.04 -.84 5.88 17.81 18.67 20.06
20 -11.35 -1.57 6.12 10.81 11.88 13.87
25 -5.05 5.76 7.77 10.57
30 4.77 8.29
35 2.35 5.96
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-47
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION C (FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 5,541 $ 6,298 $ 7,056 $ 11,610 $ 12,367 $ 13,125
2 34,440 1,000,000 1,000,000 1,000,000 17,565 19,815 22,157 23,634 25,884 28,226
3 52,962 1,000,000 1,000,000 1,000,000 22,463 26,976 31,856 35,329 39,842 44,722
4 72,410 1,000,000 1,000,000 1,000,000 33,811 41,370 49,867 46,677 54,236 62,733
5 92,831 1,000,000 1,000,000 1,000,000 44,791 56,191 69,520 57,657 69,057 82,386
6 114,272 1,000,000 1,000,000 1,000,000 56,758 72,811 92,337 68,239 84,292 103,818
7 136,786 1,000,000 1,000,000 1,000,000 68,292 89,820 117,077 78,388 99,916 127,172
8 160,425 1,000,000 1,000,000 1,000,000 79,340 107,182 143,887 88,051 115,892 152,598
9 185,246 1,000,000 1,000,000 1,000,000 89,835 124,840 172,921 97,161 132,165 180,246
10 211,309 1,000,000 1,000,000 1,000,000 99,692 142,724 204,339 105,633 148,664 210,279
15 362,520 1,000,000 1,000,000 1,000,000 135,060 231,700 403,877 135,060 231,700 403,877
20 555,508 1,000,000 1,000,000 1,000,000 127,020 302,423 702,106 127,020 302,423 702,106
25 801,815 1,000,000 1,000,000 1,259,080 26,002 316,905 1,199,124 26,002 316,905 1,199,124
30 1,116,173 1,000,000 2,093,644 158,067 1,993,947 158,067 1,993,947
35 1,517,381 3,363,052 3,202,907 3,202,907
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ----------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -65.37% -60.64% -55.90% 6,150.00% 6,150.00% 6,150.00%
2 -33.90 -28.00 -22.14 642.15 642.15 642.15
3 -33.43 -26.17 -19.14 258.47 258.47 258.47
4 -23.95 -16.71 -9.74 148.92 148.92 148.92
5 -18.74 -11.55 -4.64 100.39 100.39 100.39
6 -14.86 -7.85 -1.11 73.77 73.77 73.77
7 -12.40 -5.52 1.11 57.22 57.22 57.22
8 -10.76 -3.96 2.59 46.06 46.06 46.06
9 -9.62 -2.87 3.64 38.07 38.07 38.07
10 -8.82 -2.09 4.40 32.11 32.11 32.11
15 -7.60 -.44 6.27 16.46 16.46 16.46
20 -9.95 -.54 7.00 9.93 9.93 9.93
25 -38.09 -1.84 7.66 6.48 6.48 7.98
30 -8.63 8.10 4.39 8.35
35 8.31 8.52
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-48
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
The information contained in this Appendix gives hypothetical illustrations
of the Variable Account's and the Policy's investment experience based on the
historical investment experience of the Eligible Funds. It does not represent
what may happen in the future.
The Policies were not available until January, 1994. The Zenith Fund and
the Variable Account commenced operations on August 26, 1983. The Westpeak
Stock Index and Back Bay Advisors Managed Series of the Zenith Fund commenced
operations on May 1, 1987. The Westpeak Value Growth Series and Loomis Sayles
Avanti Growth Series of the Zenith Fund commenced operations on April 30,
1993. The Loomis Sayles Small Cap Series commenced operations on May 2, 1994
and was made available under the Policies on December 19, 1994. The remaining
Zenith Fund series commenced operations on October 31, 1994 and are
anticipated to be made available under the Policies, subject to any necessary
state insurance department approvals, by early 1996. The Equity-Income
Portfolio and Overseas Portfolio of the VIP Fund commenced operations on
October 9, 1986 and January 28, 1987, respectively. The High Income Portfolio
of the VIP Fund and the Asset Manager Portfolio of the VIP Fund II commenced
operations on September 19, 1985 and September 6, 1989, respectively, and were
added as investment options on December 19, 1994. The illustrations are based
on the actual investment experience of the relevant Eligible Funds for the
periods shown (and reflect actual charges and expenses incurred by the
Eligible Funds), and reflect a charge for mortality and expense risks against
the Variable Account's assets at an annual rate of .90%. The illustrations
assume that premiums are paid at the beginning of each year and that no loans,
transfers or other Policy Owner transactions were made during the periods
shown.
VARIABLE ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account which invests in the
Eligible Funds. The investment experience of the sub-account or sub-accounts
you choose will affect the values and benefits of your Policy.
Many factors in addition to investment experience will affect the actual
values and benefits of your Policy. For instance, these investment experience
figures do not reflect the charges deducted from premiums and Monthly
Deductions from the cash value. (See "Charges and Expenses".)
NET RATES OF RETURN
The annual net rate is the effective earnings rate at which the investment
sub-accounts increased or decreased over a one year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated
by taking the difference between the sub-accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the sub-accounts increased or decreased since
the inception dates of the sub-accounts. For each sub-account, the rate is
calculated by taking the difference between the sub-account's ending value and
the value on the date of its inception and dividing it by the value on the
date of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which,
if compounded annually, would equal the total net rate of return since
inception.
A-49
<PAGE>
SUB-ACCOUNT INVESTING IN ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
8/26/83- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth*. 8.52% -1.25% 66.59% 93.46% 51.34% -9.63% 30.41% -4.92% 52.61% -6.90% 13.94% -8.57%
Bond Income..... 2.72% 11.77 17.70 13.81 1.35 7.30 11.34 7.16 16.90 7.21 11.60 -4.45
Money Market.... 2.97% 9.63 7.29 5.85 5.57 6.62 8.25 7.18 5.26 2.87 2.05 3.08
<CAPTION>
8/26/83- 8/26/83-
12/31/94 12/31/94
TOTAL EFFECTIVE
SUB-ACCOUNT RETURN ANNUAL
- ----------- -------- ---------
<S> <C> <C>
Capital Growth*. 766.83% 20.96%
Bond Income..... 166.67 9.03
Money Market.... 90.70 5.85
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------- 6/1/87- 5/1/87-
FOR ONE YEAR ENDING 12/31/94 12/31/94
5/1/87- -------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. -12.73% 14.32% 32.33% -6.61% 29.27% 6.33% 8.74% 0.15% 84.56% 8.32%
Managed................. -1.26% 8.10 19.47 1.42 19.10 5.74 9.69 -2.07 74.95 7.57
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------- 4/30/93- 4/30/93-
FOR ONE YEAR ENDING 12/31/94 12/31/94
4/30/93- ---------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/93 12/31/94 RETURN ANNUAL
- ----------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Value Growth............. 13.55% -2.40 10.82% 6.35%
Avanti Growth............ 14.05% -2.24 11.49 6.73
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF
RETURN
--------------------- 5/2/94- 5/2/94-
12/31/94 12/31/94
5/2/94- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 RETURN ANNUAL
- ----------- -------- -------- ---------
<S> <C> <C> <C> <C>
Small Cap.............................. -4.59% -4.59% --
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF
RETURN
---------------------- 10/31/94- 10/31/94-
12/31/94 12/31/94
10/31/94- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 RETURN ANNUAL
- ----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Equity Growth**...................... -5.65% -5.65% --
Balanced**........................... - .36 - .36 --
Value**.............................. -3.35 -3.35 --
International Equity**............... 2.04 2.04 --
</TABLE>
- ----------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
** Consult your authorized NEVLICO agent regarding the availability of these
sub-accounts.
A-50
<PAGE>
SUB-ACCOUNTS INVESTING IN VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------- 10/9/86- 10/9/86-
FOR ONE YEAR ENDING 12/31/94 12/31/94
10/9/86- ----------------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income..... 0.00% -2.02% 20.83% 18.47% -17.06% 30.26% 15.84% 17.23% 5.96% 118.04% 9.94%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------- 5/1/87- 5/1/87-
FOR ONE YEAR ENDING 12/31/94 12/31/94
1/28/87- -------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas................ -6.16% 8.63% 22.86% -2.08% 7.03% -11.52% 36.12% 0.29% 58.54% 5.99%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------------------------- 9/19/85- 9/19/85-
FOR ONE YEAR ENDING 12/31/94 12/31/94
9/19/85- -------------------------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..... 6.11% 16.63% 0.31% 10.52% -4.93% -3.10% 33.87% 22.06% 19.32% -2.34% 140.61% 9.92%
</TABLE>
SUB-ACCOUNT INVESTING IN VARIABLE INSURANCE PRODUCTS FUND II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------- 9/6/89- 9/6/89
FOR ONE YEAR ENDING 12/31/94 12/31/94
9/6/89- -------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager........... 1.02% 5.24% 21.46% 10.71% 20.15% -7.28% 59.27% 9.15%
</TABLE>
A-51
<PAGE>
POLICY PERFORMANCE
The material below assumes a Policy was issued with a $1 million face amount
and annual premiums of $16,000, paid on August 26 of each year (May 1 in the
case of the Zenith Stock Index and Managed Sub-Accounts; May 2 in the case of
the Zenith Small Cap Sub-Account; October 31 in the case of the Zenith
Balanced, Zenith International Equity, Zenith Value and Zenith Equity Growth
Sub-Accounts; October 9 in the case of the Equity-Income Sub-Account, January
28 in the case of the Overseas Sub-Account; April 30 in the case of the Zenith
Value Growth and Zenith Avanti Growth Sub-Accounts; September 19 in the case
of the High Income Sub-Account; September 6 in the case of the Asset Manager
Sub-Account), to a male and a female, both age 55 in the nonsmoker standard
risk category. The first example shows such a Policy with an Option A death
benefit, the second example shows a Policy with an Option B death benefit and
the third example shows a Policy with an Option C death benefit. The death
benefits, cash values and internal rates of return assume in each instance
that the entire policy value was invested in the particular sub-account for
the period shown. These illustrations of policy investment experience also
reflect all Policy charges based on NEVLICO's current rates. (See Appendix A
for the definition of the internal rate of return.)
OPTION A DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,000,000 14,491 8,422 -84.19% --
December 31, 1984....... 32,000 1,000,000 1,000,000 26,856 20,787 -42.50 1,975.63%
December 31, 1985....... 48,000 1,000,000 1,000,000 60,394 47,528 -.73 434.27
December 31, 1986....... 64,000 1,000,000 1,000,000 129,603 116,737 34.44 206.69
December 31, 1987....... 80,000 1,000,000 1,000,000 205,962 193,096 39.09 127.42
December 31, 1988....... 96,000 1,000,000 1,000,000 198,941 186,652 23.49 88.99
December 31, 1989....... 112,000 1,000,000 1,000,000 270,617 259,713 24.89 66.82
December 31, 1990....... 128,000 1,000,000 1,000,000 269,342 259,823 18.01 52.57
December 31, 1991....... 144,000 1,000,000 1,000,000 424,971 416,837 23.52 42.74
December 31, 1992....... 160,000 1,000,000 1,000,000 409,235 402,486 18.18 35.59
December 31, 1993....... 176,000 1,000,000 1,000,000 479,444 474,123 17.53 30.19
December 31, 1994....... 192,000 1,000,000 1,000,000 450,141 446,304 13.64 25.98
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,000,000 13,680 7,611 -88.18% --
December 31, 1984....... 32,000 1,000,000 1,000,000 28,890 22,822 -34.63 1,975.63%
December 31, 1985....... 48,000 1,000,000 1,000,000 47,663 34,797 -22.48 434.27
December 31, 1986....... 64,000 1,000,000 1,000,000 67,356 54,490 -8.59 206.69
December 31, 1987....... 80,000 1,000,000 1,000,000 81,112 68,245 -6.74 127.42
December 31, 1988....... 96,000 1,000,000 1,000,000 99,937 87,648 -3.20 88.99
December 31, 1989....... 112,000 1,000,000 1,000,000 124,057 113,153 .31 66.82
December 31, 1990....... 128,000 1,000,000 1,000,000 145,900 136,381 1.64 52.57
December 31, 1991....... 144,000 1,000,000 1,000,000 183,803 175,669 4.52 42.74
December 31, 1992....... 160,000 1,000,000 1,000,000 209,173 202,424 4.78 35.59
December 31, 1993....... 176,000 1,000,000 1,000,000 245,781 240,459 5.71 30.19
December 31, 1994....... 192,000 1,000,000 1,000,000 247,530 243,694 4.00 25.98
</TABLE>
A-52
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,000,000 13,710 7,642 -88.04% --
December 31, 1984....... 32,000 1,000,000 1,000,000 28,017 21,948 -38.00 1,975.63%
December 31, 1985....... 48,000 1,000,000 1,000,000 43,264 30,398 -31.13 434.27
December 31, 1986....... 64,000 1,000,000 1,000,000 58,797 45,931 -17.46 206.69
December 31, 1987....... 80,000 1,000,000 1,000,000 75,013 62,147 -10.68 127.42
December 31, 1988....... 96,000 1,000,000 1,000,000 92,845 80,556 -6.17 88.99
December 31, 1989....... 112,000 1,000,000 1,000,000 113,251 102,347 -2.70 66.82
December 31, 1990....... 128,000 1,000,000 1,000,000 133,966 124,447 -.73 52.57
December 31, 1991....... 144,000 1,000,000 1,000,000 153,354 145,221 .19 42.74
December 31, 1992....... 160,000 1,000,000 1,000,000 169,848 163,099 .40 35.59
December 31, 1993....... 176,000 1,000,000 1,000,000 185,716 180,395 .46 30.19
December 31, 1994....... 192,000 1,000,000 1,000,000 204,420 200,583 .74 25.98
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,000,000 11,256 5,188 -81.45% --
December 31, 1988....... 32,000 1,000,000 1,000,000 26,542 20,473 -32.91 1,033.28%
December 31, 1989....... 48,000 1,000,000 1,000,000 50,376 37,510 -14.14 328.36
December 31, 1990....... 64,000 1,000,000 1,000,000 59,886 47,020 -13.80 174.11
December 31, 1991....... 80,000 1,000,000 1,000,000 91,460 78,594 -.66 112.69
December 31, 1992....... 96,000 1,000,000 1,000,000 110,640 98,698 .87 80.87
December 31, 1993....... 112,000 1,000,000 1,000,000 133,587 123,030 2.56 61.77
December 31, 1994....... 128,000 1,000,000 1,000,000 146,438 137,266 1.67 49.18
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,000,000 12,752 6,684 -72.90% --
December 31, 1988....... 32,000 1,000,000 1,000,000 27,239 21,170 -30.79 1,033.28%
December 31, 1989....... 48,000 1,000,000 1,000,000 47,116 34,250 -19.04 328.36
December 31, 1990....... 64,000 1,000,000 1,000,000 61,438 48,572 -12.39 174.11
December 31, 1991....... 80,000 1,000,000 1,000,000 87,193 74,327 -2.75 112.69
December 31, 1992....... 96,000 1,000,000 1,000,000 105,767 93,825 -.72 80.87
December 31, 1993....... 112,000 1,000,000 1,000,000 129,080 118,522 1.54 61.77
December 31, 1994....... 128,000 1,000,000 1,000,000 138,970 129,797 .33 49.18
ZENITH VALUE GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1993....... 16,000 1,000,000 1,000,000 14,577 8,508 -60.97% --
December 31, 1994....... 32,000 1,000,000 1,000,000 27,146 21,078 -31.00 1,028.55%
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1993....... 16,000 1,000,000 1,000,000 14,645 8,576 -60.51% --
December 31, 1994....... 32,000 1,000,000 1,000,000 27,406 21,338 -30.21 1,028.55%
</TABLE>
A-53
<PAGE>
ZENITH SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 12,279 6,210 -75.86% --
ZENITH EQUITY GROWTH SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 12,802 6,733 -100.00% --
ZENITH BALANCED SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 13,532 7,464 -98.96% --
ZENITH VALUE SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 13,117 7,049 -100.00% --
ZENITH INTERNATIONAL EQUITY SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 13,863 7,795 -98.65% --
</TABLE>
- --------
** Consult your authorized NEVLICO agent regarding the availability of these
sub-accounts.
A-54
<PAGE>
EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1986....... 16,000 1,000,000 1,000,000 13,590 7,521 -96.38% --
December 31, 1987....... 32,000 1,000,000 1,000,000 23,548 17,479 -63.02 2,723.89%
December 31, 1988....... 48,000 1,000,000 1,000,000 41,197 28,331 -39.03 490.23
December 31, 1989....... 64,000 1,000,000 1,000,000 60,910 48,044 -16.25 221.84
December 31, 1990....... 80,000 1,000,000 1,000,000 64,281 51,415 -19.75 133.88
December 31, 1991....... 96,000 1,000,000 1,000,000 97,173 84,653 -4.62 92.44
December 31, 1992....... 112,000 1,000,000 1,000,000 126,352 115,217 .88 68.91
December 31, 1993....... 128,000 1,000,000 1,000,000 160,443 150,694 4.34 53.96
December 31, 1994....... 144,000 1,000,000 1,000,000 182,079 173,714 4.39 43.72
OVERSEAS SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,000,000 11,596 5,527 -68.38% --
December 31, 1988....... 32,000 1,000,000 1,000,000 27,183 21,115 -25.92 707.99%
December 31, 1989....... 48,000 1,000,000 1,000,000 48,821 35,955 -14.30 272.18
December 31, 1990....... 64,000 1,000,000 1,000,000 60,413 47,547 -11.91 154.15
December 31, 1991....... 80,000 1,000,000 1,000,000 78,294 65,428 -6.81 103.01
December 31, 1992....... 96,000 1,000,000 1,000,000 80,122 68,641 -9.74 75.31
December 31, 1993....... 112,000 1,000,000 1,000,000 125,608 115,513 .79 58.22
December 31, 1994....... 128,000 1,000,000 1,000,000 137,840 129,129 .20 46.75
HIGH INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1985....... 16,000 1,000,000 1,000,000 14,274 8,205 -90.62% --
December 31, 1986....... 32,000 1,000,000 1,000,000 29,761 23,692 -33.71 2,337.90%
December 31, 1987....... 48,000 1,000,000 1,000,000 42,563 29,697 -34.27 463.37
December 31, 1988....... 64,000 1,000,000 1,000,000 60,045 47,179 -16.70 214.72
December 31, 1989....... 80,000 1,000,000 1,000,000 69,113 56,247 -15.33 130.87
December 31, 1990....... 96,000 1,000,000 1,000,000 79,401 66,997 -13.01 90.84
December 31, 1991....... 112,000 1,000,000 1,000,000 119,247 108,228 -1.05 67.95
December 31, 1992....... 128,000 1,000,000 1,000,000 157,896 148,262 3.86 53.32
December 31, 1993....... 144,000 1,000,000 1,000,000 201,189 192,940 6.72 43.27
December 31, 1994....... 160,000 1,000,000 1,000,000 208,379 201,515 4.75 35.98
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1989....... 16,000 1,000,000 1,000,000 13,583 7,514 -90.73% --
December 31, 1990....... 32,000 1,000,000 1,000,000 27,598 21,529 -40.93 2,130.09%
December 31, 1991....... 48,000 1,000,000 1,000,000 46,904 34,038 -24.47 447.21
December 31, 1992....... 64,000 1,000,000 1,000,000 65,176 52,310 -10.91 210.30
December 31, 1993....... 80,000 1,000,000 1,000,000 91,834 78,968 -.56 128.98
December 31, 1994....... 96,000 1,000,000 1,000,000 97,152 84,747 -4.43 89.83
</TABLE>
A-55
<PAGE>
OPTION B DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,014,491 14,491 8,422 -84.19% --
December 31, 1984....... 32,000 1,000,000 1,026,854 26,854 20,785 -42.51 2,018.29%
December 31, 1985....... 48,000 1,000,000 1,060,380 60,380 47,514 -.75 449.10
December 31, 1986....... 64,000 1,000,000 1,129,535 129,535 116,669 34.41 219.75
December 31, 1987....... 80,000 1,000,000 1,205,770 205,770 192,904 39.05 139.32
December 31, 1988....... 96,000 1,000,000 1,198,653 198,653 186,364 23.43 96.96
December 31, 1989....... 112,000 1,000,000 1,270,045 270,045 259,141 24.83 74.82
December 31, 1990....... 128,000 1,000,000 1,268,560 268,560 259,041 17.93 58.97
December 31, 1991....... 144,000 1,000,000 1,423,320 423,320 415,186 23.43 50.71
December 31, 1992....... 160,000 1,000,000 1,407,176 407,176 400,428 18.09 42.22
December 31, 1993....... 176,000 1,000,000 1,476,651 476,651 471,329 17.43 36.83
December 31, 1994....... 192,000 1,000,000 1,447,430 447,430 443,593 13.55 31.60
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,013,680 13,680 7,611 -88.18% --
December 31, 1984....... 32,000 1,000,000 1,028,888 28,888 22,819 -34.64 2,021.51%
December 31, 1985....... 48,000 1,000,000 1,047,652 47,652 34,786 -22.50 446.02
December 31, 1986....... 64,000 1,000,000 1,067,324 67,324 54,458 -8.62 213.62
December 31, 1987....... 80,000 1,000,000 1,081,045 81,045 68,179 -6.78 132.32
December 31, 1988....... 96,000 1,000,000 1,099,811 99,811 87,522 -3.25 93.15
December 31, 1989....... 112,000 1,000,000 1,123,830 123,830 112,926 .25 70.70
December 31, 1990....... 128,000 1,000,000 1,145,530 145,530 136,011 1.57 56.21
December 31, 1991....... 144,000 1,000,000 1,183,177 183,177 175,044 4.44 46.52
December 31, 1992....... 160,000 1,000,000 1,208,239 208,239 201,491 4.68 39.25
December 31, 1993....... 176,000 1,000,000 1,244,514 244,514 239,192 5.61 33.91
December 31, 1994....... 192,000 1,000,000 1,246,235 246,235 242,398 3.91 29.32
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,013,710 13,710 7,641 -88.04% --
December 31, 1984....... 32,000 1,000,000 1,028,015 28,015 21,946 -38.01 2,020.13%
December 31, 1985....... 48,000 1,000,000 1,043,254 43,254 30,388 -31.15 444.95
December 31, 1986....... 64,000 1,000,000 1,058,770 58,770 45,904 -17.49 212.76
December 31, 1987....... 80,000 1,000,000 1,074,953 74,953 62,087 -10.72 131.96
December 31, 1988....... 96,000 1,000,000 1,092,731 92,731 80,442 -6.22 92.86
December 31, 1989....... 112,000 1,000,000 1,113,048 113,048 102,144 -2.76 70.38
December 31, 1990....... 128,000 1,000,000 1,133,632 133,632 124,114 -.80 55.93
December 31, 1991....... 144,000 1,000,000 1,152,843 152,843 144,710 .11 45.93
December 31, 1992....... 160,000 1,000,000 1,169,110 169,110 162,362 .30 38.61
December 31, 1993....... 176,000 1,000,000 1,184,796 184,796 179,474 .36 33.07
December 31, 1994....... 192,000 1,000,000 1,203,402 203,402 199,565 .66 28.79
</TABLE>
A-56
<PAGE>
ZENITH STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,011,256 11,256 5,187 -81.45% --
December 31, 1988....... 32,000 1,000,000 1,026,538 26,538 20,470 -32.92 1,052.13%
December 31, 1989....... 48,000 1,000,000 1,050,361 50,361 37,494 -14.16 337.20
December 31, 1990....... 64,000 1,000,000 1,059,852 59,852 46,986 -13.83 179.18
December 31, 1991....... 80,000 1,000,000 1,091,373 91,373 78,507 -.71 117.50
December 31, 1992....... 96,000 1,000,000 1,110,481 110,481 98,538 .82 85.01
December 31, 1993....... 112,000 1,000,000 1,133,312 133,312 122,755 2.50 65.61
December 31, 1994....... 128,000 1,000,000 1,146,026 146,026 136,854 1.60 52.60
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,012,752 12,752 6,683 -72.91% --
December 31, 1988....... 32,000 1,000,000 1,027,235 27,235 21,167 -30.80 1,052.62%
December 31, 1989....... 48,000 1,000,000 1,047,102 47,102 34,236 -19.06 336.64
December 31, 1990....... 64,000 1,000,000 1,061,403 61,403 48,537 -12.42 179.31
December 31, 1991....... 80,000 1,000,000 1,087,111 87,111 74,245 -2.79 117.29
December 31, 1992....... 96,000 1,000,000 1,105,617 105,617 93,674 -.77 84.84
December 31, 1993....... 112,000 1,000,000 1,128,816 128,816 118,259 1.48 65.49
December 31, 1994....... 128,000 1,000,000 1,138,582 138,582 129,410 .26 52.43
ZENITH VALUE GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1993....... 16,000 1,000,000 1,014,576 14,576 8,508 -60.98% --
December 31, 1994....... 32,000 1,000,000 1,027,143 27,143 21,074 -31.01 1,047.72%
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1993....... 16,000 1,000,000 1,014,645 14,645 8,576 -60.51% --
December 31, 1994....... 32,000 1,000,000 1,027,403 27,403 21,334 -30.23 1,047.90%
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,012,279 12,279 6,210 -75.87% --
ZENITH EQUITY GROWTH SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,012,801 12,801 6,733 -100.00% --
</TABLE>
A-57
<PAGE>
ZENITH BALANCED SUB-ACCOUNT**
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,013,532 13,532 7,463 -98.96% --
ZENITH VALUE SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,013,117 13,117 7,049 -100.00% --
ZENITH INTERNATIONAL EQUITY SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,013,863 13,863 7,794 -98.65% --
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1986....... 16,000 1,000,000 1,013,589 13,589 7,521 -96.38% --
December 31, 1987....... 32,000 1,000,000 1,023,546 23,546 17,477 -63.03 2,779.50%
December 31, 1988....... 48,000 1,000,000 1,041,189 41,189 28,323 -39.05 502.03
December 31, 1989....... 64,000 1,000,000 1,060,885 60,885 48,019 -16.28 228.66
December 31, 1990....... 80,000 1,000,000 1,064,237 64,237 51,371 -19.78 138.00
December 31, 1991....... 96,000 1,000,000 1,097,066 97,066 84,547 -4.67 96.64
December 31, 1992....... 112,000 1,000,000 1,126,145 126,145 115,011 .82 72.98
December 31, 1993....... 128,000 1,000,000 1,160,068 160,068 150,318 4.28 58.04
December 31, 1994....... 144,000 1,000,000 1,181,497 181,497 173,133 4.31 47.54
</TABLE>
- --------
** Consult your authorized NEVLICO agent regarding the availability of these
sub-accounts.
A-58
<PAGE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,011,595 11,595 5,526 -68.38% --
December 31, 1988....... 32,000 1,000,000 1,027,179 27,179 21,110 -25.93 720.03%
December 31, 1989....... 48,000 1,000,000 1,048,802 48,802 35,936 -14.33 279.02
December 31, 1990....... 64,000 1,000,000 1,060,370 60,370 47,504 -11.94 158.60
December 31, 1991....... 80,000 1,000,000 1,078,207 78,207 65,341 -6.85 106.76
December 31, 1992....... 96,000 1,000,000 1,079,990 79,990 68,509 -9.79 78.13
December 31, 1993....... 112,000 1,000,000 1,125,323 125,323 115,227 .72 61.64
December 31, 1994....... 128,000 1,000,000 1,137,413 137,413 128,702 .12 49.82
HIGH INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1985....... 16,000 1,000,000 1,014,274 14,274 8,205 -90.62% --
December 31, 1986....... 32,000 1,000,000 1,029,758 29,758 23,690 -33.72 2,396.09%
December 31, 1987....... 48,000 1,000,000 1,042,554 42,554 29,688 -34.29 474.74
December 31, 1988....... 64,000 1,000,000 1,060,019 60,019 47,153 -16.73 221.19
December 31, 1989....... 80,000 1,000,000 1,069,061 69,061 56,195 -15.37 135.19
December 31, 1990....... 96,000 1,000,000 1,079,309 79,309 66,905 -13.06 94.24
December 31, 1991....... 112,000 1,000,000 1,119,043 119,043 108,024 -1.10 71.75
December 31, 1992....... 128,000 1,000,000 1,157,513 157,513 147,879 3.79 57.30
December 31, 1993....... 144,000 1,000,000 1,200,524 200,524 192,275 6.64 47.42
December 31, 1994....... 160,000 1,000,000 1,207,472 207,472 200,608 4.66 39.67
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31, 1989....... 16,000 1,000,000 1,013,583 13,583 7,514 -90.73% --
December 31, 1990....... 32,000 1,000,000 1,027,596 27,596 21,527 -40.94 2,178.20%
December 31, 1991....... 48,000 1,000,000 1,046,894 46,894 34,028 -24.49 459.19
December 31, 1992....... 64,000 1,000,000 1,065,147 65,147 52,281 -10.94 217.15
December 31, 1993....... 80,000 1,000,000 1,091,762 91,762 78,896 -.60 134.58
December 31, 1994....... 96,000 1,000,000 1,097,034 97,034 84,630 -4.48 93.92
</TABLE>
- ----------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
A-59
<PAGE>
OPTION C DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,000,000 14,491 8,422 -84.19% --
December 31, 1984....... 32,000 1,000,000 1,000,000 26,856 20,787 -42.50 1,975.63%
December 31, 1985....... 48,000 1,000,000 1,000,000 60,394 47,528 -.73 434.27
December 31, 1986....... 64,000 1,000,000 1,000,000 129,603 116,737 34.44 206.69
December 31, 1987....... 80,000 1,000,000 1,000,000 205,962 193,096 39.09 127.42
December 31, 1988....... 96,000 1,000,000 1,000,000 198,941 186,652 23.49 88.99
December 31, 1989....... 112,000 1,000,000 1,000,000 270,617 259,713 24.89 66.82
December 31, 1990....... 128,000 1,000,000 1,000,000 269,342 259,823 18.01 52.57
December 31, 1991....... 144,000 1,000,000 1,000,000 424,971 416,837 23.52 42.74
December 31, 1992....... 160,000 1,000,000 1,000,000 409,235 402,486 18.18 35.59
December 31, 1993....... 176,000 1,000,000 1,000,000 479,444 474,123 17.53 30.19
December 31, 1994....... 192,000 1,000,000 1,000,000 450,141 446,304 13.64 25.98
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,000,000 13,680 7,611 -88.18% --
December 31, 1984....... 32,000 1,000,000 1,000,000 28,890 22,822 -34.63 1,975.63%
December 31, 1985....... 48,000 1,000,000 1,000,000 47,663 34,797 -22.48 434.27
December 31, 1986....... 64,000 1,000,000 1,000,000 67,356 54,490 -8.59 206.69
December 31, 1987....... 80,000 1,000,000 1,000,000 81,112 68,245 -6.74 127.42
December 31, 1988....... 96,000 1,000,000 1,000,000 99,937 87,648 -3.20 88.99
December 31, 1989....... 112,000 1,000,000 1,000,000 124,057 113,153 .31 66.82
December 31, 1990....... 128,000 1,000,000 1,000,000 145,900 136,381 1.64 52.57
December 31, 1991....... 144,000 1,000,000 1,000,000 183,803 175,669 4.52 42.74
December 31, 1992....... 160,000 1,000,000 1,000,000 209,173 202,424 4.78 35.59
December 31, 1993....... 176,000 1,000,000 1,000,000 245,781 240,459 5.71 30.19
December 31, 1994....... 192,000 1,000,000 1,000,000 247,530 243,694 4.00 25.98
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1983....... 16,000 1,000,000 1,000,000 13,710 7,642 -88.04% --
December 31, 1984....... 32,000 1,000,000 1,000,000 28,017 21,948 -38.00 1,975.63%
December 31, 1985....... 48,000 1,000,000 1,000,000 43,264 30,398 -31.13 434.27
December 31, 1986....... 64,000 1,000,000 1,000,000 58,797 45,931 -17.46 206.69
December 31, 1987....... 80,000 1,000,000 1,000,000 75,013 62,147 -10.68 127.42
December 31, 1988....... 96,000 1,000,000 1,000,000 92,845 80,556 -6.17 88.99
December 31, 1989....... 112,000 1,000,000 1,000,000 113,251 102,347 -2.70 66.82
December 31, 1990....... 128,000 1,000,000 1,000,000 133,966 124,447 -.73 52.57
December 31, 1991....... 144,000 1,000,000 1,000,000 153,354 145,221 .19 42.74
December 31, 1992....... 160,000 1,000,000 1,000,000 169,848 163,099 .40 35.59
December 31, 1993....... 176,000 1,000,000 1,000,000 185,716 180,395 .46 30.19
December 31, 1994....... 192,000 1,000,000 1,000,000 204,420 200,583 .74 25.98
</TABLE>
A-60
<PAGE>
ZENITH STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,000,000 11,256 5,188 -81.45% --
December 31, 1988....... 32,000 1,000,000 1,000,000 26,542 20,473 -32.91 1,033.28%
December 31, 1989....... 48,000 1,000,000 1,000,000 50,376 37,510 -14.14 328.36
December 31, 1990....... 64,000 1,000,000 1,000,000 59,886 47,020 -13.80 174.11
December 31, 1991....... 80,000 1,000,000 1,000,000 91,460 78,594 -.66 112.69
December 31, 1992....... 96,000 1,000,000 1,000,000 110,640 98,698 .87 80.87
December 31, 1993....... 112,000 1,000,000 1,000,000 133,587 123,030 2.56 61.77
December 31, 1994....... 128,000 1,000,000 1,000,000 146,438 137,266 1.67 49.18
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,000,000 12,752 6,684 -72.90% --
December 31, 1988....... 32,000 1,000,000 1,000,000 27,239 21,170 -30.79 1,033.28%
December 31, 1989....... 48,000 1,000,000 1,000,000 47,116 34,250 -19.04 328.36
December 31, 1990....... 64,000 1,000,000 1,000,000 61,438 48,572 -12.39 174.11
December 31, 1991....... 80,000 1,000,000 1,000,000 87,193 74,327 -2.75 112.69
December 31, 1992....... 96,000 1,000,000 1,000,000 105,767 93,825 -.72 80.87
December 31, 1993....... 112,000 1,000,000 1,000,000 129,080 118,522 1.54 61.77
December 31, 1994....... 128,000 1,000,000 1,000,000 138,970 129,797 .33 49.18
ZENITH VALUE GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1993....... 16,000 1,000,000 1,000,000 14,577 8,508 -60.97% --
December 31, 1994....... 32,000 1,000,000 1,000,000 27,146 21,078 -31.00 1,028.55%
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1993....... 16,000 1,000,000 1,000,000 14,645 8,576 -60.51% --
December 31, 1994....... 32,000 1,000,000 1,000,000 27,406 21,338 -30.21 1,028.55%
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 12,279 6,210 -75.86% --
ZENITH EQUITY GROWTH SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 12,802 6,733 -100.00% --
</TABLE>
A-61
<PAGE>
ZENITH BALANCED SUB-ACCOUNT**
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 13,532 7,464 -98.96% --
ZENITH VALUE SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 13,117 7,049 -100.00% --
ZENITH INTERNATIONAL EQUITY SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1994....... 16,000 1,000,000 1,000,000 13,863 7,795 -98.65% --
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1986....... 16,000 1,000,000 1,000,000 13,590 7,521 -96.38% --
December 31, 1987....... 32,000 1,000,000 1,000,000 23,548 17,479 -63.02 2,723.89%
December 31, 1988....... 48,000 1,000,000 1,000,000 41,197 28,331 -39.03 490.23
December 31, 1989....... 64,000 1,000,000 1,000,000 60,910 48,044 -16.25 221.84
December 31, 1990....... 80,000 1,000,000 1,000,000 64,281 51,415 -19.75 133.88
December 31, 1991....... 96,000 1,000,000 1,000,000 97,173 84,653 -4.62 92.44
December 31, 1992....... 112,000 1,000,000 1,000,000 126,352 115,217 .88 68.91
December 31, 1993....... 128,000 1,000,000 1,000,000 160,443 150,694 4.34 53.96
December 31, 1994....... 144,000 1,000,000 1,000,000 182,079 173,714 4.39 43.72
</TABLE>
- --------
** Consult your authorized NEVLICO agent regarding the availability of these
sub-accounts.
A-62
<PAGE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1987....... 16,000 1,000,000 1,000,000 11,596 5,527 -68.38% --
December 31, 1988....... 32,000 1,000,000 1,000,000 27,183 21,115 -25.92 707.99%
December 31, 1989....... 48,000 1,000,000 1,000,000 48,821 35,955 -14.30 272.18
December 31, 1990....... 64,000 1,000,000 1,000,000 60,413 47,547 -11.91 154.15
December 31, 1991....... 80,000 1,000,000 1,000,000 78,294 65,428 -6.81 103.01
December 31, 1992....... 96,000 1,000,000 1,000,000 80,122 68,641 -9.74 75.31
December 31, 1993....... 112,000 1,000,000 1,000,000 125,608 115,513 .79 58.22
December 31, 1994....... 128,000 1,000,000 1,000,000 137,840 129,129 .20 46.75
HIGH INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1985....... 16,000 1,000,000 1,000,000 14,274 8,205 -90.62% --
December 31, 1986....... 32,000 1,000,000 1,000,000 29,761 23,692 -33.71 2,337.90%
December 31, 1987....... 48,000 1,000,000 1,000,000 42,563 29,697 -34.27 463.37
December 31, 1988....... 64,000 1,000,000 1,000,000 60,045 47,179 -16.70 214.72
December 31, 1989....... 80,000 1,000,000 1,000,000 69,113 56,247 -15.33 130.87
December 31, 1990....... 96,000 1,000,000 1,000,000 79,401 66,997 -13.01 90.84
December 31, 1991....... 112,000 1,000,000 1,000,000 119,247 108,228 -1.05 67.95
December 31, 1992....... 128,000 1,000,000 1,000,000 157,896 148,262 3.86 53.32
December 31, 1993....... 144,000 1,000,000 1,000,000 201,189 192,940 6.72 43.27
December 31, 1994....... 160,000 1,000,000 1,000,000 208,379 201,515 4.75 35.98
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31, 1989....... 16,000 1,000,000 1,000,000 13,583 7,514 -90.73% --
December 31, 1990....... 32,000 1,000,000 1,000,000 27,598 21,529 -40.93 2,130.09%
December 31, 1991....... 48,000 1,000,000 1,000,000 46,904 34,038 -24.47 447.21
December 31, 1992....... 64,000 1,000,000 1,000,000 65,176 52,310 -10.91 210.30
December 31, 1993....... 80,000 1,000,000 1,000,000 91,834 78,968 -.56 128.98
December 31, 1994....... 96,000 1,000,000 1,000,000 97,152 84,747 -4.43 89.83
</TABLE>
A-63
<PAGE>
APPENDIX C
LONG TERM MARKET TRENDS
The information below is a comparison of the average annual returns of
common stock, high grade corporate bonds and 30-day U.S. Treasury bills over
20-year and 30-year holding periods.* The average annual returns assume the
reinvestment of dividends, capital gains and interest. This is an historical
record and is not intended as a projection of future performance. Charges
associated with a variable life policy are not reflected.
The data indicates that, historically, the investment performance of common
stocks over long periods of time has been positive and has generally been
superior to that of long-term, high grade debt securities. Common stocks have,
however, been subject to more dramatic market adjustments over short periods
of time. These trends indicate the potential advantages of holding a variable
life insurance policy for a long period of time.
Over the 50 20-year time periods beginning in 1926 and ending in 1994 (i.e.,
1926-1945, 1927-1946, and so on through 1975-1994):
-- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 47 of the 50 periods.
-- The average annual return of common stocks surpassed that of U.S. Treasury
bills in each of the 50 periods.
-- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 50 periods.
Over the 40 30-year time periods beginning in 1926 and ending in 1994, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 40
periods.
From 1926 through 1994 the average annual return for common stocks was
10.2%, compared to 5.4% for high grade, long-term corporate bonds, 3.7% for
U.S. Treasury bills and 3.1% for the Consumer Price Index.
- ----------
* Source: Stocks, Bonds, Bills and Inflation 1995 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
A-64
<PAGE>
----------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index, with dividends reinvested, over one-year, five-year
and twenty-year periods beginning in 1926 and ending 1994.
The chart shows that, historically, the longer that a portfolio matching the
S&P 500 Stock Index was held, the less likely was the chance of a loss.
Conversely, the shorter the holding period of such a portfolio, the more
likely was the chance of a loss. The chart also shows that shorter term
results tend to be more extreme than longer term results.
The chart is not a projection or representation of future stock market
results. It cannot be taken as representative of the performance of any one
fund. Rather it shows the historic performance of a broad index of stocks.
----------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
0- 5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 5.00% 10.00% 15.00% 20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
-------------------------------- -------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
1 year......................... 29% 4% 12% 7% 12% 36%
5 years........................ 11% 15% 16% 33% 17% 9%
10 years........................ 3% 12% 36% 22% 25% 2%
20 years........................ 0% 6% 34% 54% 6% 0%
</TABLE>
- ----------
Source: Stocks, Bonds, Bills and Inflation 1995 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
A-65
<PAGE>
DOLLAR COST AVERAGING
Dollar cost averaging allows a person to take advantage of the historical
long-term stock market results, assuming that they continue, although it does
not guarantee a profit or protect against a loss. If an investor follows a
program of dollar cost averaging on a long-term basis, and the stock fund
selected performs at least as well as the S&P 500 has historically, it is
likely although not guaranteed that the price at which shares are surrendered,
for whatever reason, will be higher than the average cost per share.
An investor using dollar cost averaging invests the same amount of money in
the same professionally managed fund at regular intervals over a long period
of time. Dollar cost averaging keeps an investor from investing too much when
the price of shares is high and too little when the price is low. When the
price of shares is low, the money invested buys more shares. When it is high,
the money invested buys fewer shares. If the investor has the ability and
desire to maintain this program over a long period of time (for example, 20
years), and the stock fund chosen follows the historical upward market trends,
the price at which the shares are sold should be higher than their average
cost. This price could be lower, however, if the fund chosen does not follow
these historical trends.
Investors contemplating the use of dollar cost averaging should consider
their ability to continue the on-going purchases so that they can take
advantage of periods of low price levels.
A-66
<PAGE>
APPENDIX D
USES OF SURVIVORSHIP LIFE INSURANCE
The following are examples of ways in which the Policy can be used to
address certain personal, estate and business planning objectives.
ESTATE TAX PAYMENT
Federal estate taxes may be deferred for a married couple until the second
death. At that time, the estate tax liability may exceed 50% of a family's
estate. Survivorship life is especially suited to fund for this liability at
the second death.
EDUCATION AND SUPPORT OF CHILDREN
Often, parents will have sufficient insurance to provide for children if
either of the parents dies. However, few have sufficient insurance to provide
for children in the event both parents die while the children are in need of
education and support. Survivorship life can provide protection against the
extraordinary expenses that arise if both parents die while the children are
dependent.
CHARITABLE GIVING
Life insurance can be used to facilitate charitable giving, and survivorship
life is especially well suited for this purpose. Assets left to charity at
death can be deductible from a decedent's taxable estate. An individual may be
reluctant to give assets to charity if a surviving spouse may need those
assets for support or if the individual may want the children to receive the
value of those assets. Survivorship life can enable a client to defer the
charitable gift until the spouse dies. At the spouse's death, assets that
otherwise would be subject to estate tax can pass to charity. The children can
be provided for using survivorship life, which provides for payment of death
benefit proceeds directly to the children at the same time that the assets in
the spouse's estate pass to charity. Children can receive those life insurance
proceeds free of income and estate taxes.
GIFTS TO GRANDCHILDREN
Grandparents can provide substantial gifts to grandchildren using
survivorship life. For very large estates, survivorship life can take
advantage of exceptions to the generation skipping tax to maximize the gifts
grandchildren will receive.
BUSINESS USES
Survivorship life can be used in business planning to provide benefits or
funding for replacement of key people, for buy-sell agreements and the like.
The policy can cover two owners, a parent and child active in the business,
two related or unrelated key executives, an executive and the executive's
spouse, etc. The policy can be used to accumulate cash to help fund a living
buyout under a buy-sell agreement or a deferred compensation plan for
executives or for directors.
A-67
<PAGE>
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products"
in March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax
Treatment of Life Insurance Products and Other Retirement Savings Plans".
Because it is a convenient summary of the relevant tax characteristics of
these products and plans, we have reprinted it here, and added footnotes to
reflect exceptions to the general rules.
---------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND OTHER RETIREMENT
SAVINGS PLANS
<TABLE>
<CAPTION>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Annual Contribution Limits No No Yes Yes
Income Eligibility Limits No No Yes** No
Borrowing Treated as Distributions No* Yes Loans not Yes,
allowed beyond
$50,000
Income Ordering Rules (Income
included in First Distribution) No* Yes Yes Yes
Early Withdrawal Penalties No* Yes*** Yes*** Yes***
Minimum Distribution Rules by
Age 70 1/2 No No Yes Yes
Maximum Annual Distribution Rules No No Yes Yes
Anti-discrimination Rules No No No Yes
</TABLE>
- ----------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
The foregoing information is not intended as tax advice. You should consult
with your own tax advisor for more complete information.
A-68
<PAGE>
APPENDIX F
ENHANCED DEATH BENEFIT LIMITATIONS
As noted under "Policy Values and Benefits" in the Prospectus, the
enhancement factor that applies to the Option A and B death benefits is
subject to certain limits in order to contain cost of insurance charges
against the Policy. The maximum death benefit under Option A is the lesser of
(i) the percent of the cash value at the age of the younger insured at the
start of the Policy year as shown in Table II below and (ii) the cash value of
the Policy times: the face amount divided by the Tabular Cash Value of the
Policy at the start of the Policy month. The maximum death benefit under
Option B is the lesser of (i) the percent of the cash value at the age of the
younger insured at the start of the Policy year as shown in Table II below and
(ii) the cash value of the Policy times: the sum of the face amount plus the
Tabular Cash Value, divided by the Tabular Cash Value.
In no event will the death benefit be less than the amount required to
satisfy tax law requirements.
The Tabular Cash Value at the start of each Policy month assumes: the
Guaranteed Death Benefit 1 Premium, as shown in the Policy, is paid on the
first day of each Policy year; maximum charges are charged; and the Actual
Investment Return is equivalent to an annual rate of 4% in all policy years.
---------------------
TABLE II
<TABLE>
<CAPTION>
AGE PERCENT AGE PERCENT
--- ------- --- -------
<S> <C> <C> <C>
20 through 40 362.50 63 179.80
41 352.35 64 176.90
42 342.20 65 174.00
43 332.05 66 172.55
44 321.90 67 171.10
45 311.75 68 169.65
46 303.05 69 168.20
47 294.35 70 166.75
48 285.65 71 163.85
49 276.95 72 160.95
50 268.25 73 158.05
51 258.10 74 155.15
52 247.95 75 through 90 152.25
53 237.80 91 150.80
54 227.65 92 144.20
55 217.50 93 137.70
56 211.70 94 131.30
57 205.90 95 126.25
58 200.10 96 121.20
59 194.30 97 116.15
60 188.50 98 111.10
61 185.60 99 106.05
62 182.70 100 100.00
</TABLE>
A-69
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Policy Owners and Board of Directors of New England Variable Life
Insurance Company:
We have audited the accompanying statement of assets and liabilities of New
England Variable Life Separate Account (comprised of Capital Growth Sub-
Account, Bond Income Sub-Account, Money Market Sub-Account, Stock Index Sub-
Account, Managed Sub-Account, Avanti Growth Sub-Account, Value Growth Sub-
Account, Small Cap Sub-Account, Equity-Income Sub-Account, Overseas Sub-
Account, High Income Sub-Account, and Asset Manager Sub-Account) of New
England Variable Life Insurance Company as of December 31, 1994, and the
related statements of operations and changes in net assets for each of the
periods indicated therein. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments held by the custodian as of
December 31, 1994. 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 referred to above present fairly, in
all material respects, the financial position of the respective aforementioned
sub-accounts comprising New England Variable Life Separate Account of New
England Variable Life Insurance Company as of December 31, 1994, and the
results of their operations and changes in their net assets for each of the
periods indicated therein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
A-70
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
--------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI
GROWTH INCOME MARKET INDEX MANAGED GROWTH
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in New England Zenith Fund and
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at
market value (Note 2).................... $304,826,810 $20,250,408 $18,328,233 $11,767,226 $16,974,440 $8,143,351
<CAPTION>
SUB-ACCOUNT SHARES COST
- ----------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth... 976,070 $ 294,934,737
Bond Income...... 211,980 22,279,301
Money Market..... 183,282 18,328,233
Stock Index...... 156,209 13,412,970
Managed.......... 130,272 16,271,198
Avanti Growth.... 72,212 7,937,671
Value Growth..... 47,081 5,131,286
Small Cap........ 2,276 215,214
Equity-Income.... 1,503,462 22,928,486
Overseas......... 2,206,564 34,315,959
High Income...... 3,379 36,150
Asset Manager.... 16,410 227,797
Amount due and accrued from policy-related
transactions............................. 184,202 6,345 1,007,405 3,223 (4,968) 28,694
Dividends receivable...................... -- -- 82,924 -- -- --
------------ ----------- ----------- ----------- ----------- ----------
Total Assets............................ 305,011,012 20,256,753 19,418,562 11,770,449 16,969,472 8,172,045
LIABILITIES
Due New England Variable Life Insurance
Company.................................. 55,516,275 3,506,622 2,537,819 2,091,485 2,209,894 1,760,834
------------ ----------- ----------- ----------- ----------- ----------
Total liabilities....................... 55,516,275 3,506,622 2,537,819 2,091,485 2,209,894 1,760,834
------------ ----------- ----------- ----------- ----------- ----------
NET ASSETS FOR VARIABLE LIFE INSURANCE
POLICIES................................. $249,494,737 $16,750,131 $16,880,743 $ 9,678,964 $14,759,578 $6,411,211
============ =========== ============ ========== =========== ==========
<CAPTION>
VARIABLE
INSURANCE
NEW ENGLAND VARIABLE INSURANCE PRODUCTS
ZENITH FUND PRODUCTS FUND FUND II
--------------------- ----------------------------------- -----------------------
VALUE SMALL EQUITY- HIGH ASSET
GROWTH CAP INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
---------- -------- ----------- ----------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in New England Zenith Fund and
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at
market value (Note 2).................... $5,133,204 $219,876 $23,078,145 $34,576,854 $36,363 $226,294 $443,561,204
<CAPTION>
SUB-ACCOUNT
- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Growth...
Bond Income......
Money Market.....
Stock Index......
Managed..........
Avanti Growth....
Value Growth.....
Small Cap........
Equity-Income....
Overseas.........
High Income......
Asset Manager....
Amount due and accrued from policy-related
transactions............................. 12,591 16,120 72,148 65,247 -- 5,412 1,396,419
Dividends receivable...................... -- -- -- -- -- -- 82,924
---------- -------- ----------- ----------- ------- -------- ------------
Total Assets............................ 5,145,795 235,996 23,150,293 34,642,101 36,363 231,706 445,040,547
LIABILITIES
Due New England Variable Life Insurance
Company.................................. 1,052,814 45,166 4,018,126 6,773,269 5,941 31,012 79,549,257
---------- -------- ----------- ----------- ------- -------- ------------
Total liabilities....................... 1,052,814 45,166 4,018,126 6,773,269 5,941 31,012 79,549,257
---------- -------- ----------- ----------- ------- -------- ------------
NET ASSETS FOR VARIABLE LIFE INSURANCE
POLICIES................................. $4,092,981 $190,830 $19,132,167 $27,868,832 $30,422 $200,694 $365,491,290
========== ======== =========== =========== ======= ======== ============
</TABLE>
See Notes to Financial Statements
A-71
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI VALUE SMALL
GROWTH INCOME MARKET INDEX MANAGED GROWTH GROWTH CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income
Dividends....... $ 13,519,083 $ 1,399,070 $691,932 $ 307,159 $ 678,949 $ 43,109 $ 89,817 $ 327
EXPENSE
Mortality and
expense risk
charge (Note
3)............. 1,637,278 107,252 93,830 59,230 86,049 31,737 18,214 28
------------ ----------- -------- ----------- ---------- -------- -------- ------
Net investment
income (loss).. 11,881,805 1,291,818 598,102 247,929 592,900 11,372 71,603 299
NET REALIZED AND
UNREALIZED GAIN
ON INVESTMENTS
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
period......... 46,100,393 41,284 -- (1,457,732) 1,602,795 143,154 67,310 --
End of period... 9,892,073 (2,028,893) -- (1,645,744) 703,242 205,680 1,918 4,662
------------ ----------- -------- ----------- ---------- -------- -------- ------
Net change in
unrealized
appreciation
(depreciation). (36,208,320) (2,070,177) -- (188,012) (899,553) 62,526 (65,392) 4,662
Net realized
gain (loss) on
investments.... 67,810 1,763 -- 6,200 37,994 542 776 --
------------ ----------- -------- ----------- ---------- -------- -------- ------
Net realized and
unrealized gain
(loss) on
investments.... (36,140,510) (2,068,414) -- (181,812) (861,559) 63,068 (64,616) 4,662
------------ ----------- -------- ----------- ---------- -------- -------- ------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS..... $(24,258,705) $ (776,596) $598,102 $ 66,117 $ (268,659) $ 74,440 $ 6,987 $4,961
============ =========== ======== =========== ========== ======== ======== ======
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
------------------------------------- ------------- -------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT** SUB-ACCOUNT** TOTAL
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Income
Dividends....... $670,101 $ 69,390 $ -- $ -- $ 17,468,937
EXPENSE
Mortality and
expense risk
charge (Note
3)............. 75,586 133,276 6 34 2,242,520
----------- ----------- ------------- ------------- -------------
Net investment
income (loss).. 594,515 (63,886) (6) (34) 15,226,417
NET REALIZED AND
UNREALIZED GAIN
ON INVESTMENTS
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
period......... 93,013 700,341 -- -- 47,290,558
End of period... 149,659 260,895 213 (1,503) 7,542,202
----------- ----------- ------------- ------------- -------------
Net change in
unrealized
appreciation
(depreciation). 56,646 (439,446) 213 (1,503) (39,748,356)
Net realized
gain (loss) on
investments.... (929) (471) -- -- 113,685
----------- ----------- ------------- ------------- -------------
Net realized and
unrealized gain
(loss) on
investments.... 55,717 (439,917) 213 (1,503) (39,634,671)
----------- ----------- ------------- ------------- -------------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS..... $650,232 $(503,803) $207 $(1,537) $(24,408,254)
=========== =========== ============= ============= =============
</TABLE>
*For the period May 2, 1994 (Commencement of Operations) through December 31,
1994.
**For the period December 19, 1994 (Commencement of Operations) through
December 31, 1994.
See Notes to Financial Statements
A-72
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
---------------------------------------------------------------------------------------------
CAPITAL MONEY STOCK AVANTI
GROWTH BOND INCOME MARKET INDEX MANAGED GROWTH VALUE GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT*
----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
Dividends........................ $14,407,828 $1,721,493 $415,332 $ 286,517 $ 778,823 $ 31,181 $31,108
EXPENSE
Mortality and expense risk charge
(Note 3)........................ 1,317,363 89,763 74,167 40,270 73,721 5,506 3,166
----------- ---------- -------- ---------- ---------- -------- -------
Net investment income (loss)..... 13,090,465 1,631,730 341,165 246,247 705,102 25,675 27,942
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net unrealized appreciation
(depreciation) on investments:
Beginning of period............. 26,130,492 (62,020) -- (1,863,474) 1,105,911 -- --
End of period................... 46,100,393 41,284 -- (1,457,732) 1,602,795 143,154 67,310
----------- ---------- -------- ---------- ---------- -------- -------
Net change in unrealized
appreciation.................... 19,969,901 103,304 -- 405,742 496,884 143,154 67,310
Net realized gain (loss) on
investments..................... 436,493 84,686 -- (4,995) 93,335 (88) 64
----------- ---------- -------- ---------- ---------- -------- -------
Net realized and unrealized gain
on investments.................. 20,406,394 187,990 -- 400,747 590,219 143,066 67,374
----------- ---------- -------- ---------- ---------- -------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... $33,496,859 $1,819,720 $341,165 $ 646,994 $1,295,321 $168,741 $95,316
=========== ========== ======== ========== ========== ======== =======
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
-------------------------- -----------
EQUITY-INCOME OVERSEAS
SUB-ACCOUNT* SUB-ACCOUNT* TOTAL
------------- ------------ -----------
<S> <C> <C> <C>
INCOME
Dividends........................ $ 46,757 $ -- $17,719,039
EXPENSE
Mortality and expense risk charge
(Note 3)........................ 7,615 17,666 1,629,237
-------- -------- -----------
Net investment income (loss)..... 39,142 (17,666) 16,089,802
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net unrealized appreciation
(depreciation) on investments:
Beginning of period............. -- -- 25,310,909
End of period................... 93,013 700,341 47,290,558
-------- -------- -----------
Net change in unrealized
appreciation.................... 93,013 700,341 21,979,649
Net realized gain (loss) on
investments..................... (59) 729 610,165
-------- -------- -----------
Net realized and unrealized gain
on investments.................. 92,954 701,070 22,589,814
-------- -------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... $132,096 $683,404 $38,679,616
======== ======== ===========
</TABLE>
* For the period April 30, 1993 (Commencement of Operations) through December
31, 1993.
See Notes to Financial Statements
A-73
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
--------------------------------------------------------------- -----------
CAPITAL BOND MONEY STOCK
GROWTH INCOME MARKET INDEX MANAGED
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME
Dividends............... $ 2,544,247 $1,038,401 $541,442 $2,971,910 $ 521,129 $ 7,617,129
EXPENSE
Mortality and expense
risk charge (Note 3)... 872,975 57,034 75,654 24,160 51,418 1,081,241
------------ ---------- -------- ---------- --------- -----------
Net investment income... 1,671,272 981,367 465,788 2,947,750 469,711 6,535,888
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized
appreciation
(depreciation ) on
investments:
Beginning of period.... 36,250,872 132,914 -- 767,700 1,283,603 38,435,089
End of period.......... 26,130,492 (62,020) -- (1,863,474) 1,105,911 25,310,909
------------ ---------- -------- ---------- --------- -----------
Net change in unrealized
depreciation........... (10,120,380) (194,934) -- (2,631,174) (177,692) (13,124,180)
Net realized gain on
investments............ 3,522 45,768 -- 14,077 350,133 413,500
------------ ---------- -------- ---------- --------- -----------
Net realized and
unrealized gain (loss)
on investments......... (10,116,858) (149,166) -- (2,617,097) 172,441 (12,710,680)
------------ ---------- -------- ---------- --------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $ (8,445,586) $ 832,201 $465,788 $ 330,653 $ 642,152 $(6,174,792)
============ ========== ======== ========== ========= ===========
</TABLE>
See Notes to Financial Statements
A-74
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI VALUE SMALL
GROWTH INCOME MARKET INDEX MANAGED GROWTH GROWTH CAP
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT*
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net investment
income (loss)... $ 11,881,805 $ 1,291,818 $ 598,102 $ 247,929 $ 592,900 $ 11,372 $ 71,603 $ 299
Net realized and
unrealized gain
(loss) on
investments..... (36,140,510) (2,068,414) -- (181,812) (861,559) 63,068 (64,616) 4,662
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
Increase
(decrease) in
net assets
derived from
investment
activities..... (24,258,705) (776,596) 598,102 66,117 (268,659) 74,440 6,987 4,961
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from
New England
Variable Life
Insurance
Company......... 101,802,783 6,362,705 39,544,492 3,600,140 4,112,835 3,173,029 1,762,484 4,323
Net transfers
(to) from other
sub-accounts.... (1,234,289) (822,617) (29,858,294) 718,688 (186,357) 2,527,486 2,012,595 226,677
Net transfers to
New England
Variable Life
Insurance
Company......... (56,761,722) (4,458,223) (6,161,941) (2,075,140) (3,102,454) (2,027,427) (1,190,128) (45,131)
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
Increase in net
assets derived
from policy-
related
transactions.... 43,806,772 1,081,865 3,524,257 2,243,688 824,024 3,673,088 2,584,951 185,869
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
Net increase in
net assets...... 19,548,067 305,269 4,122,359 2,309,805 555,365 3,747,528 2,591,938 190,830
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 229,946,670 16,444,862 12,758,384 7,369,159 14,204,213 2,663,683 1,501,043 --
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
NET ASSETS, AT
END OF THE
PERIOD.......... $249,494,737 $16,750,131 $ 16,880,743 $ 9,678,964 $14,759,578 $ 6,411,211 $ 4,092,981 $190,830
============ =========== ============ =========== =========== =========== =========== ========
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
----------------------------------- ---------- -------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT** ACCOUNT** TOTAL
------------ ------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net investment
income (loss)... $ 594,515 $ (63,886) $ (6) $ (34) $ 15,226,417
Net realized and
unrealized gain
(loss) on
investments..... 55,717 (439,917) 213 (1,503) (39,634,671)
------------ ------------ --------- ---------- -------------
Increase
(decrease) in
net assets
derived from
investment
activities..... 650,232 (503,803) 207 (1,537) (24,408,254)
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from
New England
Variable Life
Insurance
Company......... 9,237,234 11,268,285 102 8,495 180,876,907
Net transfers
(to) from other
sub-accounts.... 9,868,299 16,487,055 36,048 224,709 --
Net transfers to
New England
Variable Life
Insurance
Company......... (4,905,512) (8,836,370) (5,935) (30,973) (89,600,956)
------------ ------------ --------- ---------- -------------
Increase in net
assets derived
from policy-
related
transactions.... 14,200,021 18,918,970 30,215 202,231 91,275,951
------------ ------------ --------- ---------- -------------
Net increase in
net assets...... 14,850,253 18,415,167 30,422 200,694 66,867,697
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 4,281,914 9,453,665 -- -- 298,623,593
------------ ------------ --------- ---------- -------------
NET ASSETS, AT
END OF THE
PERIOD.......... $19,132,167 $27,868,832 $30,422 $200,694 $365,491,290
============ ============ ========= ========== =============
</TABLE>
* For the period May 2, 1994 (Commencement of Operations) through December 31,
1994.
** For the period December 19, 1994 (Commencement of Operations) through
December 31, 1994.
See Notes to Financial Statements
A-75
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI VALUE
GROWTH INCOME MARKET INDEX MANAGED GROWTH GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT*
------------ ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net investment
income (loss).. $ 13,090,465 $ 1,631,730 $ 341,165 $ 246,247 $ 705,102 $ 25,675 $ 27,942
Net realized and
unrealized gain
on investments. 20,406,394 187,990 -- 400,747 590,219 143,066 67,374
------------ ----------- ----------- ---------- ----------- ---------- ----------
Increase in net
assets derived
from investment
activities..... 33,496,859 1,819,720 341,165 646,994 1,295,321 168,741 95,316
FROM POLICY-
RELATED
TRANSACTIONS
Net premiums
transferred
from New
England
Variable Life
Insurance
Company........ 88,880,791 5,429,522 27,439,024 2,696,124 3,325,220 579,106 252,321
Net transfers
(to) from other
sub-accounts... (185,104) 1,155,530 (22,054,415) 1,088,665 1,967,320 2,787,043 1,529,391
Net transfers to
New England
Variable Life
Insurance
Company........ (41,091,866) (2,588,466) (5,031,875) (1,483,033) (1,785,088) (871,207) (375,985)
------------ ----------- ----------- ---------- ----------- ---------- ----------
Increase in net
assets derived
from policy-
related
transactions... 47,603,821 3,996,586 352,734 2,301,756 3,507,452 2,494,942 1,405,727
------------ ----------- ----------- ---------- ----------- ---------- ----------
Net increase in
net assets..... 81,100,680 5,816,306 693,899 2,948,750 4,802,773 2,663,683 1,501,043
NET ASSETS, AT
BEGINNING OF
THE PERIOD..... 148,845,990 10,628,556 12,064,485 4,420,409 9,401,440 -- --
------------ ----------- ----------- ---------- ----------- ---------- ----------
NET ASSETS, AT
END OF THE
PERIOD......... $229,946,670 $16,444,862 $12,758,384 $7,369,159 $14,204,213 $2,663,683 $1,501,043
============ =========== =========== ========== =========== ========== ==========
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
-------------------------- -------------
EQUITY-INCOME OVERSEAS
SUB-ACCOUNT* SUB-ACCOUNT* TOTAL
------------- ------------ -------------
<S> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net investment
income (loss).. $ 39,142 $ (17,666) $ 16,089,802
Net realized and
unrealized gain
on investments. 92,954 701,070 22,589,814
------------- ------------ -------------
Increase in net
assets derived
from investment
activities..... 132,096 683,404 38,679,616
FROM POLICY-
RELATED
TRANSACTIONS
Net premiums
transferred
from New
England
Variable Life
Insurance
Company........ 964,191 1,568,988 131,135,287
Net transfers
(to) from other
sub-accounts... 4,320,708 9,390,862 --
Net transfers to
New England
Variable Life
Insurance
Company........ (1,135,081) (2,189,589) (56,552,190)
------------- ------------ -------------
Increase in net
assets derived
from policy-
related
transactions... 4,149,818 8,770,261 74,583,097
------------- ------------ -------------
Net increase in
net assets..... 4,281,914 9,453,665 113,262,713
NET ASSETS, AT
BEGINNING OF
THE PERIOD..... -- -- 185,360,880
------------- ------------ -------------
NET ASSETS, AT
END OF THE
PERIOD......... $4,281,914 $9,453,665 $298,623,593
============= ============ =============
</TABLE>
* For the period April 30, 1993 (Commencement of Operations) through December
31, 1993.
See Notes to Financial Statements
A-76
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
----------------------------------------------------------------- ------------
CAPITAL BOND MONEY STOCK
GROWTH INCOME MARKET INDEX MANAGED
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
------------ ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net investment income.. $ 1,671,272 $ 981,367 $ 465,788 $ 2,947,750 $ 469,711 $ 6,535,888
Net realized and
unrealized gain (loss)
on investments........ (10,116,858) (149,166) -- (2,617,097) 172,441 (12,710,680)
------------ ----------- ------------ ----------- ----------- ------------
Increase (decrease) in
net assets derived
from investment
activities........... (8,445,586) 832,201 465,788 330,653 642,152 (6,174,792)
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from New
England Variable Life
Insurance Company..... 67,808,576 3,248,052 24,616,186 1,485,555 2,274,457 99,432,826
Net transfers (to) from
other sub-accounts.... 16,957,727 1,845,009 (19,527,266) 849,096 (124,566) --
Net transfers to New
England Variable Life
Insurance Company..... (50,969,349) (2,798,256) (4,457,696) (1,217,417) (1,765,986) (61,208,704)
------------ ----------- ------------ ----------- ----------- ------------
Increase in net assets
derived from policy-
related transactions.. 33,796,954 2,294,805 631,224 1,117,234 383,905 38,224,122
------------ ----------- ------------ ----------- ----------- ------------
Net increase in net
assets................ 25,351,368 3,127,006 1,097,012 1,447,887 1,026,057 32,049,330
NET ASSETS, AT
BEGINNING OF THE
PERIOD................ 123,494,622 7,501,550 10,967,473 2,972,522 8,375,383 153,311,550
------------ ----------- ------------ ----------- ----------- ------------
NET ASSETS, AT END OF
THE PERIOD............ $148,845,990 $10,628,556 $ 12,064,485 $ 4,420,409 $ 9,401,440 $185,360,880
============ =========== ============ =========== =========== ============
</TABLE>
See Notes to Financial Statements
A-77
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. New England Variable Life Separate Account (the "Account") of New England
Variable Life Insurance Company ("NEVLICO"), was established by NEVLICO's
Board of Directors on January 31, 1983 in accordance with the regulations of
the Delaware Insurance Department. NEVLICO is a wholly-owned subsidiary of New
England Mutual Life Insurance Company ("The New England"). The Account is
registered as a unit investment trust under the Investment Company Act of
1940. The assets of the Account are owned by NEVLICO. However, that portion of
the Account assets equal to the reserves and other liabilities of the Account
may not be charged with liabilities that arise out of any other business
NEVLICO may conduct.
2. The Account has twelve investment sub-accounts each of which invests in the
shares of one portfolio of New England Zenith Fund ("Zenith Fund"), the
Variable Insurance Products Fund or the Variable Insurance Products Fund II.
The portfolios of the Zenith Fund, the Variable Insurance Products Fund and
Variable Insurance Products Fund II in which the sub-accounts invest are
referred to herein as the "Eligible Funds." The Zenith Fund, the Variable
Insurance Products Fund and Variable Insurance Products Fund II are
diversified, open-end management investment companies. The Account purchases
or redeems shares of the twelve Eligible Funds based on the amount of net
premiums invested in the Account, transfers among the sub-accounts, policy
loans, surrender payments, and death benefit payments. The values of the
shares of the Eligible Funds are determined as of the close of the New York
Stock Exchange (normally 4:00 p.m. Boston time) on each day the Exchange is
open for trading. Realized gains and losses on the sale of the Eligible Funds'
shares are computed on the basis of identified cost on the trade date. Income
from dividends is recorded on the ex-dividend date.
3. Certain deductions are made from each premium payment paid to NEVLICO to
arrive at a net premium that is transferred to the Account, and certain
deductions are made from the variable life insurance policies' cash value.
These deductions include sales load, administrative expenses, a risk charge,
premium taxes and the cost of providing insurance protection. Charges for
investment advisory fees and other expenses are deducted from the assets of
the Eligible Funds.
NEVLICO charges the Account for mortality and expense risks NEVLICO assumes.
Currently, the charges are made daily at an effective annual rate of .35% of
the Account assets attributable to fixed premium variable life policies, .45%
of the Account assets attributable to single premium variable life policies,
.60% of the Account assets attributable to variable ordinary life policies and
limited payment variable life policies, and .90% of the Account assets
attributable to variable survivorship life policies.
4. For federal income tax purposes the Account's operations are included with
those of NEVLICO. NEVLICO intends to make appropriate charges against the
Account in the future if and when tax liabilities arise.
5. The Back Bay Advisors Bond Income, Back Bay Advisors Money Market and Back
Bay Advisors Managed Series of the Zenith Fund receive investment advice from
Back Bay Advisors, L.P. ("Back Bay Advisors"), an indirect subsidiary of The
New England. Capital Growth Management Limited Partnership ("CGM") serves as
investment adviser to the Capital Growth Series. Loomis, Sayles serves as
investment adviser to the Loomis Sayles Avanti Growth Series and the Loomis
Sayles Small Cap Series, and Westpeak Investment Advisers, L.P. ("Westpeak")
serves as investment adviser to the Westpeak Stock Index Series and the
Westpeak Value Growth Series. Back Bay Advisors served as investment adviser
to the Westpeak Stock Index Series until August 2, 1993, when Westpeak became
the investment adviser pursuant to an advisory agreement that was approved by
shareholders of the Westpeak Stock Index Series on July 14, 1993. Loomis,
Sayles, Westpeak, and CGM are indirect subsidiaries of The New England. The
Equity-Income, Overseas, and High Income Portfolios of the Variable Insurance
Products Fund and the Asset Manager Portfolio of the Variable Insurance
Products Fund II receive investment advice from Fidelity Management & Research
Company.
A-78
<PAGE>
6. The following table shows the aggregate cost of shares purchased and
proceeds from sales of each sub-account as of December 31, 1994:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Capital Growth..................................... $164,839,394 $104,764,194
Bond Income........................................ 12,808,505 9,812,380
Money Market....................................... 55,266,374 50,824,342
Stock Index........................................ 6,625,186 3,854,139
Managed............................................ 8,429,317 6,603,077
Avanti Growth...................................... 7,196,134 2,478,839
Value Growth....................................... 4,869,047 1,506,335
Small Cap.......................................... 231,338 5
Fidelity Equity-Income............................. 24,975,998 7,189,332
Fidelity Overseas.................................. 32,894,034 9,110,672
Fidelity High Income............................... 36,150 --
Fidelity Asset Manager............................. 245,398 6,777
</TABLE>
7. The following tables show the net investment return of the sub-accounts for
each type of variable life insurance policy investing in the Account. The net
investment return reflects the appropriate mortality and expense risk charge
against sub-account assets for each type of variable life insurance policy
shown. These figures do not reflect charges deducted from premiums and cash
values of the policies. Such charges will affect the actual cash values and
benefits of the policies. Certain amounts in 1988, 1989, and 1990 have been
recalculated to conform with the current presentation.
FIXED PREMIUM ("ZENITH LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
1/1/85- 1/1/86- 1/1/87- 1/1/88- 1/1/89 - 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 67.51% 94.53% 52.17% -9.11% 30.30% -3.82% 53.45% -6.38% 14.57% -8.06%
Bond Income............. 18.34% 14.43% 1.91% 7.99% 11.91% 7.71% 17.55% 7.80% 12.22% -3.91%
Money Market............ 7.88% 6.43% 6.16% 7.14% 8.87% 7.81% 5.84% 3.43% 2.61% 3.65%
<CAPTION>
5/1/87- 1/1/88- 1/1/89 - 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock-Index............................... -12.40% 15.93% 29.70% -4.48% 29.98% 6.92% 9.34% 0.71%
Managed................................... -.89% 9.10% 18.67% 2.85% 19.75% 6.33% 10.26% -1.53%
<CAPTION>
4/30/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth................................................................................... 14.47% -1.70%
Value Growth.................................................................................... 13.97% -1.86%
<CAPTION>
1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Equity-Income.......................................................................... 17.88% 6.55%
Fidelity Overseas............................................................................... 36.87% 0.85%
<CAPTION>
5/2/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................................................................ -4.23%
<CAPTION>
1/1/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity High Income..................................................................................... -1.80%
Fidelity Asset Manager................................................................................... -6.76%
</TABLE>
A-79
<PAGE>
SINGLE PREMIUM ("ZENITH LIFE ONE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
1/1/85- 1/1/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 67.34% 94.33% 52.02% -9.20% 30.17% -3.91% 53.29% -6.47% 14.46% -8.16%
Bond Income............. 18.23% 14.32% 1.81% 7.88% 11.79% 7.60% 17.43% 7.69% 12.10% -4.01%
Money Market............ 7.78% 6.32% 6.05% 7.03% 8.77% 7.71% 5.74% 3.33% 2.51% 3.54%
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............................... -12.46% 15.82% 29.57% -4.58% 29.85% 6.81% 9.23% 0.60%
Managed................................... -.96% 8.99% 18.55% 2.75% 19.63% 6.22% 10.15% -1.63%
<CAPTION>
4/30/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth................................................................................... 14.39% -1.80%
Value Growth.................................................................................... 13.90% -1.96%
<CAPTION>
1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Equity-Income.......................................................................... 17.76% 6.44%
Fidelity Overseas............................................................................... 36.74% 0.75%
<CAPTION>
5/2/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................................................................ -4.30%
<CAPTION>
1/1/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity High Income..................................................................................... -1.90%
Fidelity Asset Manager................................................................................... -6.85%
</TABLE>
VARIABLE ORDINARY ("ZENITH LIFE PLUS" AND "ZENITH LIFE PLUS II") AND LIMITED
PAYMENT ("ZENITH LIFE EXECUTIVE 65") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
1/1/85- 1/1/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 67.09% 94.04% 51.79% -9.36% 30.80% -4.64% 53.06% -6.61% 14.28% -8.30%
Bond Income............. 18.05% 14.15% 1.65% 7.63% 11.68% 7.48% 17.25% 7.53% 11.94% -4.16%
Money Market............ 7.61% 6.16% 5.89% 6.94% 8.58% 7.50% 5.58% 3.18% 2.36% 3.39%
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............................... -12.55% 14.67% 32.72% -6.33% 29.65% 6.65% 9.07% 0.45%
Managed................................... -1.06% 8.43% 19.83% 1.72% 19.45% 6.06% 9.99% -1.78%
<CAPTION>
4/30/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth................................................................................... 14.28% -1.94%
Value Growth.................................................................................... 13.78% -2.11%
<CAPTION>
1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Equity-Income.......................................................................... 17.59% 6.28%
Fidelity Overseas............................................................................... 36.53% 0.59%
<CAPTION>
5/2/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................................................................ -4.40%
<CAPTION>
1/1/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity High Income..................................................................................... -2.05%
Fidelity Asset Manager................................................................................... -7.00%
</TABLE>
A-80
<PAGE>
VARIABLE ORDINARY ("ZENITH SURVIVORSHIP LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
1/1/85- 1/1/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 66.59% 93.46% 51.34% -9.63% 30.41% -4.92% 52.61% -6.90% 13.94% -8.57%
Bond Income............. 17.70% 13.81% 1.35% 7.30% 11.34% 7.16% 16.90% 7.21% 11.60% -4.45%
Money Market............ 7.29% 5.85% 5.57% 6.62% 8.25% 7.18% 5.26% 2.87% 2.05% 3.08%
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............................... -12.73% 14.32% 32.33% -6.61% 29.27% 6.33% 8.74% 0.15%
Managed................................... -1.26% 8.10% 19.47% 1.42% 19.10% 5.74% 9.69% -2.07%
<CAPTION>
4/30/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth................................................................................... 14.05% -2.24%
Value Growth.................................................................................... 13.55% -2.40%
<CAPTION>
1/1/93- 1/1/94-
SUB-ACCOUNT 12/31/93 12/31/94
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Equity-Income.......................................................................... 17.23% 5.96%
Fidelity Overseas............................................................................... 36.12% 0.29%
<CAPTION>
5/2/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................................................................ -4.59%
<CAPTION>
1/1/94-
SUB-ACCOUNT 12/31/94
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity High Income..................................................................................... -2.34%
Fidelity Asset Manager................................................................................... -7.28%
</TABLE>
The net investment return of a sub-account is calculated by taking the
difference between the sub-account's ending value and beginning value for the
period and dividing it by the beginning value for the period.
A-81
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of New England Variable Life
Insurance Company:
We have audited the accompanying balance sheets of New England Variable Life
Insurance Company (a wholly-owned subsidiary of New England Mutual Life
Insurance Company) as of December 31, 1994 and 1993, and the related
statements of operations, surplus, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New England Variable Life
Insurance Company as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Insurance Department of
the State of Delaware, which are considered generally accepted accounting
principles for wholly-owned stock life insurance subsidiaries of mutual life
insurance companies.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 24, 1995
A-82
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
---- ----
<S> <C> <C>
Bonds.............................................. $ 7,828,833 $ 7,987,043
Mortgage loan...................................... 2,221,942 2,230,000
Policy loans....................................... 43,967,343 30,673,718
Cash and short-term investments.................... 10,669,045 21,282,674
Accrued investment income.......................... 1,377,286 1,061,822
Premiums deferred and uncollected.................. 6,892,888 5,452,658
Due from separate account, net..................... 79,549,258 63,855,885
Due from New England Mutual Life Insurance Company. 1,889,855 475,007
Other assets....................................... 814,991 1,636,853
Separate account assets............................ 445,040,547 362,479,478
------------ ------------
Total assets................................... $600,251,988 $497,135,138
============ ============
LIABILITIES AND SURPLUS
Policy reserves.................................... $ 44,648,304 $ 26,905,146
Due New England Mutual Life Insurance Company...... 3,219,350 7,917,908
Federal income taxes............................... 4,611,653 1,644,852
Accrued expenses................................... 4,746,096 2,866,665
Other liabilities.................................. 1,120,620 735,987
Separate account liabilities....................... 445,040,547 362,479,478
------------ ------------
Total liabilities.............................. 503,386,570 402,550,036
Surplus:
Common stock (shares authorized: 50,000; issued
and outstanding:
20,000; par value $125)......................... 2,500,000 2,500,000
Paid-in capital in excess of par value........... 117,709,808 107,709,808
Unassigned surplus............................... (23,481,592) (15,831,154)
Asset valuation reserve........................ 137,202 206,448
------------ ------------
Total surplus.................................. 96,865,418 94,585,102
------------ ------------
Total liabilities and surplus.................. $600,251,988 $497,135,138
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-83
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Income:
Premiums......................................... $201,732,909 $146,137,792
Investment income................................ 3,093,024 2,724,046
------------ ------------
204,825,933 148,861,838
Expenses:
Death and other benefits......................... 23,345,664 18,207,816
Increase in policy reserves...................... 17,743,158 5,573,679
Commissions...................................... 37,220,361 29,849,384
Net transfers to separate account................ 87,853,704 58,823,455
General and administrative....................... 43,395,223 31,727,803
------------ ------------
209,558,110 144,182,137
------------ ------------
Income (loss) before provision for taxes........... (4,732,177) 4,679,701
Provision for income taxes......................... 2,968,375 5,066,507
------------ ------------
Net loss from operations before realized capital
losses............................................ (7,700,552) (386,806)
Net realized investment gains (losses) less capital
gains tax of $0 in 1994 and $4,916 in 1993........ 9 (5,780)
------------ ------------
Net loss........................................... $ (7,700,543) $ (392,586)
============ ============
STATEMENTS OF SURPLUS
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Surplus, beginning of year......................... $ 94,585,102 $ 69,988,844
Net loss........................................... (7,700,543) (392,586)
Change in non-admitted assets...................... (19,141) (11,156)
Paid-in capital.................................... 10,000,000 25,000,000
------------ ------------
Surplus, end of year............................... $ 96,865,418 $ 94,585,102
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-84
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1993
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Insurance premiums and other considerations..... $ 199,670,506 $143,259,367
Investment income............................... 2,773,220 2,479,596
Benefits........................................ (23,510,882) (18,036,117)
Expenses and taxes.............................. (80,900,670) (62,011,687)
Net transfers to separate account............... (103,547,077) (72,721,602)
Net increase in policy loans.................... (13,293,625) (9,308,284)
Other disbursements, net........................ (1,972,032) (2,914,732)
------------- ------------
Net cash flows used in operating activities... (20,780,560) (19,253,459)
Cash flows from investing activities:
Proceeds of long-term investments sold, matured
or repaid (net of tax)......................... 166,942 576,687
Cost of long-term investments acquired.......... (11) (922)
------------- ------------
Net cash flows from investing activities...... 166,931 575,765
Cash flows from financing activities:
Paid-in capital................................. 10,000,000 25,000,000
------------- ------------
Net cash flows.................................... (10,613,629) 6,322,306
Cash and short-term investments, beginning of
year............................................. 21,282,674 14,960,368
------------- ------------
Cash and short-term investments, end of year...... $ 10,669,045 $ 21,282,674
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-85
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. GENERAL:
New England Variable Life Insurance Company (the "Company") is a wholly-
owned stock life insurance subsidiary of New England Mutual Life Insurance
Company ("The New England"). The Company is authorized to transact variable
life insurance business.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Company prepares its statutory financial statements, except as to form,
in accordance with accounting practices prescribed or permitted by the
Insurance Department of the State of Delaware, which are currently considered
generally accepted accounting principles (GAAP) for wholly-owned stock life
insurance subsidiaries of a mutual life insurance company. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as state laws,
regulations, and general administrative rules. Permitted accounting practices
encompass all accounting practices not so prescribed.
The Financial Accounting Standards Board (FASB) issued Interpretation No.
40, Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises, and Statement of Financial Accounting
Standards No. 120, Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts. The American Institute of Certified Public
Accountants issued Statement of Position 95-1, Accounting for Certain
Insurance Activities of Mutual Life Insurance Enterprises. Neither of these
groups has a role in establishing regulatory accounting practices. These
pronouncements will require stock life subsidiaries of a mutual life insurance
company parent to modify their financial statements in order for them to
continue to be in accordance with generally accepted accounting principles,
effective for 1996 financial statements. The manner in which policy reserves,
new business acquisition costs, asset valuations and the related tax effects
are recorded will change. Management has not determined the impact of such
changes on its financial statements.
Certain amounts from the 1993 financial statements have been reclassified to
conform with the 1994 presentation.
INVESTED ASSETS
Carrying values of bonds have been determined in accordance with methods and
values adopted by the National Association of Insurance Commissioners. Bonds
are carried primarily at amortized cost.
The Company's mortgage loans on real estate are carried at outstanding
principal balance or amortized cost. The estimated fair value of these loans
is determined using an internal matrix based on market rates and a credit
rating system. The Company establishes investment valuation reserves equal to
the amount by which the admitted value of each mortgage loan that has been
modified, is delinquent 90 days or more, or is in the process of modification,
exceeds the estimated fair value of its underlying collateral. These
investment valuation reserves are adjusted annually based on current
valuations.
Policy loans are carried at the aggregate of the unpaid balances. Policy
loans are an integral part of insurance products and have no maturity dates.
Consequently, it is not practicable to value these instruments.
Short term investments are carried principally at cost, which approximates
fair value, and include securities with a maturity date at purchase of less
than one year.
Realized gains and losses on the sales of investments are determined on the
specific identification method. See Note 3 for accounting treatment of
realized gains and losses attributable to interest rate changes. Unrealized
gains and losses are accounted for as direct increases or decreases in
surplus.
A-86
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
SEPARATE ACCOUNT
Assets and liabilities held in the separate account are included as separate
captions on the balance sheet. The statements of operations include the
general account business and the net transfers to the separate account. The
separate account's net transfers, investment income, realized and unrealized
capital gains and losses, and investment expenses are offset by corresponding
increases or decreases in reserves required to provide for future payments to
policyholders. These assets consist principally of investments in mutual funds
and are carried at fair value.
VARIABLE LIFE RESERVES
Reserves for variable life insurance policies are developed using the 1958
and 1980 Commissioners' Standard Ordinary Mortality Tables on the Net Level
Premium Method, the Net Single Premium Method, or the Modified Full
Preliminary Term Method with assumed interest rates ranging from 4% to 5%.
DUE FROM SEPARATE ACCOUNT, NET
The Company records as a receivable amounts that are due from the separate
account for policy charges (including cost of insurance charges,
administrative charges and minimum death benefit charges), and amounts held
for policy account values in excess of the statutory reserve.
Amounts held in excess of the reserve cannot be transferred unless the
policy is terminated or the policy account value is withdrawn.
Actual transfers from the separate account to the general account for the
policy charges are made on a periodic basis to reduce this receivable. The
components of the amount due from the separate account, net as of December 31,
1994 and December 31, 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Account values in excess of reserves................ $75,718,686 $60,722,683
Policy charges...................................... 3,830,572 3,133,202
----------- -----------
Total............................................. $79,549,258 $63,855,885
=========== ===========
</TABLE>
RECOGNITION OF PREMIUM REVENUE AND RELATED EXPENSES
Variable life premium revenue is recognized during the premium paying
period. Commissions and other expenses in connection with acquiring new
business are charged to current operations as incurred.
FEDERAL INCOME TAXES
The Company's federal income tax return is consolidated with The New
England. The method of allocation between the companies is subject to a tax
sharing agreement, and allocation is based upon separate return calculations
with current credit for net losses. Net operating loss carryforwards to the
extent not previously reimbursed will be utilized as a deduction before
determining the tax liability to The New England.
3. INVESTMENT RESERVES AND INTEREST MAINTENANCE RESERVE:
The Asset Valuation Reserve (AVR) is designed to mitigate the effect of
valuation and credit-related losses on unassigned surplus. The AVR covers all
invested asset classes with risk of loss, including bonds, common stock,
mortgage loans and real estate. This balance has been classified under the
surplus caption within the balance sheet. This presentation differs from the
Company's statutory filing, however, in management's opinion, it is consistent
with industry practice which considers such reserves part of surplus.
A-87
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The Interest Maintenance Reserve (IMR) accumulates realized capital gains
and losses on the sale of all types of fixed income securities which result
from changes in the overall level of interest rates. These gains are amortized
into operating income over the remaining life of each investment sold. The IMR
is included in Other liabilities and amounted to $75,451 and $75,672 as of
December 31, 1994 and 1993, respectively. The amortization of the IMR into net
income net of federal income tax for 1994 and 1993, respectively, was $2,702
and $1,888.
4. INVESTMENTS:
The carrying value and estimated fair values of debt securities in the
general account are as follows:
<TABLE>
<CAPTION>
1994
GROSS UNREALIZED ESTIMATED
CARRYING ------------------ FAIR
VALUE GAINS LOSSES VALUE
-------- ----- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government
corporations and agencies.............. $4,191 $ 62 $ (60) $4,193
Corporate securities.................... 3,546 125 (7) 3,664
Mortgage-backed securities.............. 92 0 (3) 89
------ -------- -------- ------
Total................................... $7,829 $ 187 $ (70) $7,946
====== ======== ======== ======
<CAPTION>
1993
GROSS UNREALIZED ESTIMATED
CARRYING ------------------ FAIR
VALUE GAINS LOSSES VALUE
-------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. government
corporations and agencies.............. $3,727 $ 220 $ 0 $3,947
Corporate securities.................... 4,112 469 (1) 4,580
Mortgage-backed securities.............. 148 3 0 151
------ -------- -------- ------
Total................................... $7,987 $ 692 $ (1) $8,678
====== ======== ======== ======
</TABLE>
Publicly traded debt securities are valued based upon quoted market prices.
The fair values of private placement obligations are determined using an
internal matrix based on market interest rates, the credit rating of the
specific security, and public prices of similar securities.
The carrying value and estimated fair value of debt securities at December
31, 1994, by contractual maturity, are shown below. Stated maturities may
differ from contractual maturities because some borrowers may have the right
to call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Due in 1 year or less........................................ $ 426 $ 426
Due after 1 year through 5 years............................. 5,195 5,142
Due after 5 years through 10 years........................... 467 524
Due after 10 years........................................... 1,649 1,765
Mortgage-backed securities................................... 92 89
------ ------
Total........................................................ $7,829 $7,946
====== ======
</TABLE>
Gross realized gains from sale of debt securities were $3,817 and $44,496,
and gross realized losses were $0 and $770 in 1994 and 1993, respectively. Net
realized gains of $2,481 and $28,422 in 1994 and 1993, respectively, were
transferred to the IMR.
A-88
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The carrying value of the mortgage loan was $2,221,942 and $2,230,000 and
estimated fair value of the mortgage loan was $2,240,539 and $2,371,315 at
December 31, 1994 and December 31, 1993, respectively.
5. RELATED-PARTY TRANSACTIONS:
Under the terms of a service agreement, The New England furnishes all
executive, legal, clerical, and other personnel services to the Company. The
fees for such services amounted to $40,071,822 in 1994 and $29,059,452 in
1993.
All of the officers and directors of the Company are officers of The New
England.
On June 22, 1994 and June 30, 1993, The New England contributed $10,000,000
and $25,000,000 of capital to the Company, respectively.
6. FEDERAL INCOME TAXES:
Federal income taxes are provided on the basis of amounts estimated to be
payable under the Internal Revenue Code. The Company files a consolidated
federal income tax return with The New England.
Below is a reconciliation of income before federal income taxes to taxable
gain from operations:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
----------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Operating gain (loss) before federal income taxes............. $(4,732) $ 4,680
Deferred acquisition costs.................................... 11,035 8,660
Nontaxable income............................................. (25) (38)
Expense-related differences................................... 3,816 3,971
Other income-related differences.............................. (1,614) (2,797)
------- -------
Taxable gain from operations.................................. $ 8,480 $14,476
------- -------
Federal income taxes at 35%................................... $ 2,968 $ 5,067
======= =======
</TABLE>
The Internal Revenue Service has completed its examination of the Company's
income tax returns through 1989 and is currently examining the income tax
returns for 1990 to 1991. The New England is contesting certain issues since
1976. The outcome of these proceedings is not currently determinable but, in
the opinion of management, would not have a materially adverse effect on the
financial statements.
7. REINSURANCE:
The Company's practice on individual products is to retain not more than
$75,000 of risk on any person, excluding accidental death benefits. Total
individual life premiums ceded were $13.8 million and $9.8 million at December
31, 1994 and 1993, respectively. In 1994, $9.5 million of the $13.8 million
premiums were ceded to The New England, and in 1993, $7.6 million of the $9.8
million premiums were ceded to The New England.
The individual life insurance in force ceded was $9.7 billion and $7.0
billion at December 31, 1994 and 1993, respectively.
The Company is contingently liable with respect to ceded insurance should
any reinsurer be unable to meet the obligations assumed by it.
A-89
