<PAGE>
As filed with Securities and Exchange Commission on
April 26, 1996
Registration No. 33-10954
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 11
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
__________________
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
__________________
MARIE C. SWIFT
Counsel
New England Variable Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
__________________
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2, an indefinite amount of securities has been registered
under the Securities Act of 1933. A Rule 24f-2 Notice was filed on February 22,
1996.
<PAGE>
NEW ENGLAND VARIABLE LIFE
INSURANCE COMPANY
ZENITH LIFE--VARIABLE LIFE INSURANCE POLICIES
ZENITH LIFE ONE--SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
SUPPLEMENT DATED MAY 1, 1996 TO
PROSPECTUS DATED MAY 1, 1988
INTRODUCTION
This supplement updates certain information contained in the prospectus
dated May 1, 1988, as supplemented February 1, 1989, May 1, 1991, May 1, 1992,
May 1, 1993, May 1, 1994 and May 1, 1995. You should read and retain this
supplement with your Policy. NEVLICO will send you an additional copy of the
prospectus as supplemented, without charge, on written request. The Zenith
Life and Zenith Life One Policies are no longer available for sale.
NEVLICO 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.
NEVLICO's Principal Administrative Office is 501 Boylston Street, Boston,
Massachusetts 02116.
THIS SUPPLEMENT IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE CURRENT
PROSPECTUS 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 SUPPLEMENT. THE SUPPLEMENT AND PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
<PAGE>
INTRODUCTION TO THE POLICIES
NEVLICO AND THE NEW ENGLAND
The following paragraph is added:
The New England and 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. If the merger is
consummated, NEVLICO will become an indirect wholly owned subsidiary of
MetLife. NEVLICO is not expected to be affected by the merger except to the
extent that assets of The New England may be transferred to NEVLICO in
connection with consummation of the merger.
CHARGES AND EXPENSES
The following section is added:
CHARGES FOR ADDITIONAL SERVICES. NEVLICO reserves the right to charge Policy
Owners a nominal fee, which will be billed directly to the Policy Owner, in
the event that a Policy re-issue or re-dating is requested.
OTHER POLICY FEATURES
LOAN PROVISION
This section is revised to indicate that the interest rate charged on policy
loans is an effective rate of 5% per year (using simple interest during the
year). The amount taken from the Policy's sub-accounts as a result of the loan
will earn interest (compounded daily) at an effective rate of 4% per year.
TRANSFER OPTION
This section is modified to indicate that transfers of cash value between
sub-accounts are now permitted by telephone under Policies issued in New York.
(The New York Insurance Department previously required sub-account transfer
requests to be in writing.) The telephone number for such transfer requests is
1-800-200-2214.
THE VARIABLE ACCOUNT
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 16 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
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--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
--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 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 Venture 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
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 the 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
the highest possible level of current income consistent with preservation of
capital 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 protection of capital
and moderate investment risk through investment primarily in U.S. Government
and corporate bonds.
The Zenith Capital Growth Series' investment objective is long-term growth
of capital through investment primarily in equity securities of companies
whose earnings are expected to grow at a faster rate than the U.S. economy.
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 of common stocks and fixed income securities.
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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).
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 stocks or their equivalent. The
Series invests primarily in stocks of small cap companies with good earnings
growth potential that Loomis Sayles believes are undervalued by the market.
Typically, such companies range in size from $100 million to $500 million in
market capitalization, have better than average growth rates at below average
price/earnings ratios, and have strong balance sheets and cash flow.
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. The Series invests at
least 25% of its assets in fixed income senior securities and, under normal
market conditions, more than 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,
primarily through investment in international equity securities. Normally the
series will invest at least 65% of its total assets in equity securities of
issuers headquartered outside the U.S., and substantially all of its assets
(other than cash and short-term investments) in such equity securities or
equity securities of issuers that derive a substantial part of their revenues
or profits 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 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, primarily of
companies having a total market capitalization of $1 billion or greater.
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 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.
4
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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>
Capital Growth Capital Growth Management
Limited
Partnership ("CGM")*
Back Bay Advisors Money TNE Advisers, Inc. Back Bay Advisors, L.P.**
Market
Back Bay Advisors Bond TNE Advisers, Inc. Back Bay Advisors, L.P.**
Income
Back Bay Advisors Man- TNE Advisers, Inc. Back Bay Advisors, L.P.**
aged
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors,
L.P.**
Westpeak Value Growth TNE Advisers, Inc. Westpeak Investment Advisors,
L.P.**
Loomis Sayles Avanti TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Growth
Loomis Sayles Small Cap TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Loomis Sayles Balanced TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Draycott International TNE Advisers, Inc. Draycott Partners, Ltd.
Equity
Venture Value TNE Advisers, Inc. Davis Selected Advisers, L.P.
Alger Equity Growth TNE Advisers, Inc. Fred Alger Management, Inc.
</TABLE>
- --------
*An affiliate of The New England
**An indirect subsidiary of The New England
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 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 (other than
the Capital Growth 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 anticipated expenses for 1996, after giving effect to the applicable
expense cap or expense deferral arrangement.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY 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.......... .64% .40% .35% .50% .25% .70% .70% 1.00%
Other Expenses.......... .06% .15% .15% .14% .15% .15% .15% --
---- ---- ---- ---- ---- ---- ---- -----
Total Series Operating
Expenses.............. .70% .55% .50% .64% .40% .85% .85% 1.00%
</TABLE>
5
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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% .75%
Other Expenses........................... .15% .40% .15% .15%
---- ----- ---- ----
Total Series Operating Expenses......... .85% 1.30% .90% .90%
</TABLE>
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. The Portfolios also bear certain other
expenses. For the year ended December 31, 1995, the total operating expenses
incurred by 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 .51% .10% .61%
Overseas .76% .15% .91%
High Income .60% .11% .71%
Asset Manager .71% .08% .79%*
</TABLE>
- --------
*A portion of the brokerage commissions the portfolio paid was used to reduce
its other expenses for the year ended December 31, 1995. Without this
reduction total operating expenses would have been .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. 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.
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
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.
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Nevertheless, NEVLICO believes 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 substandard risk Policies or
Policies with term riders added will, in all cases, meet the statutory life
insurance contract definition. 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").
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 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 Internal Revenue 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 net cash
surrender value is greater than the total investment in the Policy less the
previous untaxed distributions. This may be the case even if the amount of the
partial surrender is less than the investment in the Policy.
MODIFIED ENDOWMENT CONTRACT. In general, a modified endowment contract is a
life insurance contract issued or materially changed on or after June 21,
1988, which fails to satisfy a "7-pay test". A life insurance policy will fail
to satisfy the 7-pay test if the cumulative 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 had the policy
provided for paid up future benefits after the payment of seven level annual
premiums. Riders to the policy are considered part of the policy for purposes
of applying the 7-pay test. Any policy received in exchange for a modified
endowment contract will also be a modified endowment contract.
1. ZENITH LIFE POLICIES
Normally, payment of the Policy's premiums will not cause it to be a
modified endowment contract. If, however, the Policy's face amount is reduced
in the first seven policy years, either as a result of a partial surrender or
because the Policy Owner allows the Policy to lapse to Paid-up Insurance, the
7-pay test may be applied as if the Policy had originally been issued at the
reduced face amount. In that event, the Policy could fail the 7-pay test and
be classified as a modified endowment contract.
If a "material change" in the benefits or other Policy terms occurs under a
Policy which has satisfied the 7-pay test, the Policy will be treated as a new
Policy entered into on the day on which the material change occurred.
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<PAGE>
The Policy will be retested under the 7-pay test, after making certain
adjustments to reflect the Policy's existing cash value. For this purpose,
only the addition of a rider to the Policy will constitute a material change
requiring a retesting under the 7-pay test. A Policy subject to retesting in
this manner could fail the 7-pay test.
It is important to be aware that the addition of a rider to any Policy, even
a Policy issued before June 21, 1988, could be a material change which
requires the Policy to be tested under the 7-pay test.
Regardless of when it was issued, if a Policy described in the Zenith Life
prospectus is exchanged on or after June 21, 1988 for another life insurance
policy, the new insurance policy should be reviewed to determine how the rules
regarding modified endowment contracts may apply to the new policy.
2. ZENITH LIFE ONE POLICIES
ALL POLICIES DESCRIBED IN THE ZENITH LIFE ONE PROSPECTUS WHICH WERE ENTERED
INTO ON OR AFTER JUNE 21, 1988 ARE CONSIDERED MODIFIED ENDOWMENT CONTRACTS AND
ARE SUBJECT TO THE TAX TREATMENT OF DISTRIBUTIONS DISCUSSED BELOW UNDER
"DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS". IN ADDITION, ANY INSURANCE
POLICY RECEIVED IN EXCHANGE FOR A MODIFIED ENDOWMENT CONTRACT WILL ALSO BE A
MODIFIED ENDOWMENT CONTRACT.
Regardless of when it was issued, if a Policy described in the Zenith Life
One prospectus is exchanged on or after June 21, 1988 for another life
insurance policy, the new insurance policy should be reviewed to determine how
the rules regarding modified endowment contracts may apply to the new policy.
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.)
(b) Loans are considered distributions even if the amount borrowed is
retained by NEVLICO as a premium. 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 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).
If a Policy becomes a modified endowment contract, distributions made during
the 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.
8
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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. 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 additional
guidance 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. 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 additional guidance 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, 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.
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.
NEVLICO reserves its right 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.
9
<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>
Chester R. Frost Senior Vice President and Treasurer of The New England
since 1996; formerly, Senior Vice President, 1984 to
1996, of The New England; Vice President--Controller
and Treasurer of NEVLICO
Edward C. Hall President--New England Services (a business unit of
The New England) since 1994; formerly, Executive Vice
President--Client Services of The New England, 1988
to 1994; Vice President--Administration of NEVLICO
Kernan F. King Director of The New England and President--New England
Life (a business unit of The New England) since 1994;
formerly, Director, Executive Vice President and
Chief Marketing Officer, 1992 to 1994; 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, of The New England
Robert A. Shafto Chairman, President and Chief Executive Officer of The
New England 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
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>
William A. Campagna Vice President--Broker/Dealer Distribution of The New
England since 1995; formerly Senior Vice President of
Insurance Products of Putnam Investments, 1993 to
1995; Vice President--Product Manager of Putnam
Investments, 1992 to 1993; Vice President--Insurance
Products of Merrill Lynch & Co., 1987 to 1992; Vice
President--Broker/Dealer Distribution of NEVLICO.
Rodney J. Chandler Second Vice President and Actuary of The New England
since 1990; Chief Actuary of NEVLICO
Chester R. Frost See Directors above
John F. Guthrie Vice President of The New England since 1983; Vice
President--Portfolio Strategy of NEVLICO
Kenneth J. Schweiger Vice President--Bank Distribution of The New England
since 1995; formerly Regional Vice President of
Annuity Sales & New Business Development of Keyport
Life Insurance Company, 1990 to 1995; Vice
President--Bank Distribution 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
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.
10
<PAGE>
EXPERTS
The financial statements of New England Variable Life Insurance Company and
of the Variable Account included in this supplement to the prospectus, have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
11
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
12
<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 the New England Variable Life
Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
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, Balanced Sub-Account, Equity Growth Sub-
Account, International Equity Sub-Account, Venture Value 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, 1995, 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 also 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 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 the New England Variable Life Separate Account of the
New England Variable Life Insurance Company as of December 31, 1995, 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 6, 1996
13
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
--------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI
GROWTH INCOME MARKET INDEX MANAGED GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in New England Zenith Fund,
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at market
value (Note 2)............................... $450,186,084 $30,342,331 $21,256,226 $21,357,438 $24,438,331 $17,443,981
<CAPTION>
SUB-ACCOUNT SHARES COST
- ----------------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth......... 1,201,682 $378,222,494
Bond Income............ 279,215 29,345,136
Money Market........... 212,562 21,256,226
Stock Index............ 213,382 18,503,851
Managed................ 149,452 19,221,783
Avanti Growth.......... 122,465 14,562,881
Value Growth........... 87,343 10,236,629
Small Cap.............. 69,343 7,467,960
Balanced............... 42,049 498,720
Equity Growth.......... 497,442 6,798,833
International Equity... 111,068 1,169,896
Venture Value.......... 305,620 3,831,693
Equity-Income.......... 2,866,479 45,594,606
Overseas............... 2,699,415 42,002,297
High Income............ 169,629 1,876,992
Asset Manager.......... 160,120 2,259,033
Amount due and accrued from policy-related
transactions................................. (47,335) 15,247 1,541,106 785 (4,041) 4,831
Dividends receivable.......................... -- -- 96,763 -- -- --
------------ ----------- ----------- ----------- ----------- -----------
Total assets................................ 450,138,749 30,357,578 22,894,095 21,358,223 24,434,290 17,448,812
LIABILITIES
Due New England Variable Life Insurance
Company...................................... 55,304,093 3,678,441 3,462,239 2,783,073 2,435,290 3,111,355
------------ ----------- ----------- ----------- ----------- -----------
Total liabilities........................... 55,304,093 3,678,441 3,462,239 2,783,073 2,435,290 3,111,355
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS FOR VARIABLE LIFE INSURANCE
POLICIES..................................... $394,834,656 $26,679,137 $19,431,856 $18,575,150 $21,999,000 $14,337,457
============ =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
14
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- -------------------------------------------------------------------------- ----------------------------------- -----------
VALUE SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH ASSET
GROWTH CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT 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> <C>
$12,342,406 $8,236,512 $502,489 $6,864,734 $1,193,985 $4,003,624 $55,237,060 $46,025,022 $2,044,035 $2,528,288
2,518 4,782 569 44,168 12,311 25,838 15,623 2,545 437 789
-- -- -- -- -- -- -- -- -- --
- ----------- ---------- -------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
12,344,924 8,241,294 503,058 6,908,902 1,206,296 4,029,462 55,252,683 46,027,567 2,044,472 2,529,077
2,034,446 1,696,298 84,847 1,196,404 252,448 643,022 7,899,831 7,645,348 301,979 556,084
- ----------- ---------- -------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
2,034,446 1,696,298 84,847 1,196,404 252,448 643,022 7,899,831 7,645,348 301,979 556,084
- ----------- ---------- -------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
$10,310,478 $6,544,996 $418,211 $5,712,498 $ 953,848 $3,386,440 $47,352,852 $38,382,219 $1,742,493 $1,972,993
=========== ========== ======== ========== ========== ========== =========== =========== ========== ==========
<CAPTION>
TOTAL
------------
<C>
$704,002,546
1,620,173
96,763
------------
705,719,482
93,085,198
------------
93,085,198
------------
$612,634,284
============
</TABLE>
See Notes to Financial Statements
15
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
--------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI
GROWTH INCOME MARKET INDEX MANAGED GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME
Dividends ........................ $ 58,318,276 $1,844,411 $1,109,838 $ 627,118 $1,061,289 $ 535,217
EXPENSE
Mortality and expense risk charge
(Note 3) ........................ 2,173,846 143,873 112,033 95,240 113,501 77,636
------------ ---------- ---------- ---------- ---------- ----------
Net investment income............. 56,144,430 1,700,538 997,805 531,878 947,788 457,581
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized appreciation
(depreciation) on investments:
Beginning of period ............. 9,892,073 (2,028,893) -- (1,645,744) 703,242 205,680
End of period ................... 71,963,590 997,195 -- 2,853,587 5,216,548 2,881,100
------------ ---------- ---------- ---------- ---------- ----------
Net change in unrealized
appreciation (depreciation) ..... 62,071,517 3,026,088 -- 4,499,331 4,513,306 2,675,420
Net realized gain (loss) on
investments ..................... 1,613,390 7,382 -- 7,637 42,457 21,233
------------ ---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain
on investments .................. 63,684,907 3,033,470 -- 4,506,968 4,555,763 2,696,653
------------ ---------- ---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ....... $119,829,337 $4,734,008 $ 997,805 $5,038,846 $5,503,551 $3,154,234
============ ========== ========== ========== ========== ==========
</TABLE>
* For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
See Notes to Financial Statements
16
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
----------------------------------------------------------------------------------------------------------------- -----------
Value Small Equity International Venture Equity- High Asset
Growth Cap Balanced Growth Equity Value Income Overseas Income Manager
Sub-Account Sub-Account 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> <C>
$ 606,696 $ 365,015 $17,538 $195,436 $12,460 $ 86,716 $ 2,284,557 $ 282,520 $ 8,412 $ 11,896
52,633 24,746 743 11,686 2,165 7,251 233,864 240,253 6,639 9,537
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
554,063 340,269 16,795 183,750 10,295 79,465 2,050,693 42,267 1,773 2,359
1,918 4,662 -- -- -- -- 149,659 260,895 213 (1,503)
2,105,777 768,552 3,769 65,901 24,089 171,931 9,642,454 4,022,725 167,043 269,255
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
2,103,859 763,890 3,769 65,901 24,089 171,931 9,492,795 3,761,830 166,830 270,758
9,493 1,325 223 237 (34) 203 61,089 32,279 2,817 4,661
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
2,113,352 765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647 275,419
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
$2,667,415 $1,105,484 $20,787 $249,888 $34,350 $251,599 $11,604,577 $3,836,376 $171,420 $277,778
========== ========== ======= ======== ======= ======== =========== ========== ======== ========
<CAPTION>
- ------------------------------------------------------------------------------ ------------
Total
------------
<S> <C>
$ 67,367,395
3,305,646
------------
64,061,749
7,542,202
101,153,516
------------
93,611,314
1,804,392
------------
95,415,706
------------
$159,477,455
============
</TABLE>
See Notes to Financial Statements
17
<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 MONEY AVANTI VALUE SMALL
GROWTH BOND MARKET STOCK MANAGED GROWTH GROWTH CAP
SUB- INCOME SUB- INDEX SUB- SUB- SUB- SUB-
ACCOUNT SUB-ACCOUNT ACCOUNT SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT 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- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT** 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 August 31, 1994 (Commencement of Operations) through December
31, 1994.
See Notes to Financial Statements
18
<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>
VARIABLE
INSURANCE
NEW ENGLAND ZENITH FUND PRODUCTS FUND
-------------------------------------------------------------------------- ------------------ -----------
BOND MONEY STOCK AVANTI VALUE EQUITY-
CAPITAL INCOME MARKET INDEX MANAGED GROWTH GROWTH INCOME OVERSEAS
GROWTH SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT* TOTAL
----------- ---------- -------- ---------- ---------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <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 $ 46,757 $-- $17,719,039
EXPENSE
Mortality and
expense risk
charge (Note 3). 1,317,363 89,763 74,167 40,270 73,721 5,506 3,166 7,615 17,666 1,629,237
----------- ---------- -------- ---------- ---------- -------- ------- -------- -------- -----------
Net investment
income (loss)... 13,090,465 1,631,730 341,165 246,247 705,102 25,675 27,942 39,142 (17,666) 16,089,802
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 -- -- -- -- 25,310,909
End of period... 46,100,393 41,284 -- (1,457,732) 1,602,795 143,154 67,310 93,013 700,341 47,290,558
----------- ---------- -------- ---------- ---------- -------- ------- -------- -------- -----------
Net change in
unrealized
appreciation.... 19,969,901 103,304 -- 405,742 496,884 143,154 67,310 93,013 700,341 21,979,649
Net realized gain
(loss) on
investments..... 436,493 84,686 -- (4,995) 93,335 (88) 64 (59) 729 610,165
----------- ---------- -------- ---------- ---------- -------- ------- -------- -------- -----------
Net realized and
unrealized gain
on investments.. 20,406,394 187,990 -- 400,747 590,219 143,066 67,374 92,954 701,070 22,589,814
----------- ---------- -------- ---------- ---------- -------- ------- -------- -------- -----------
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 $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
19
<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, 1995
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI
GROWTH INCOME MARKET INDEX MANAGED GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES
Net investment
income............... $ 56,144,430 $ 1,700,538 $ 997,805 $ 531,878 $ 947,788 $ 457,581
Net realized and
unrealized gain on
investments.......... 63,684,907 3,033,470 -- 4,506,968 4,555,763 2,696,653
------------ ----------- ------------ ----------- ----------- -----------
Increase in net
assets derived from
investment
activities......... 119,829,337 4,734,008 997,805 5,038,846 5,503,551 3,154,234
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from New
England Variable
Life Insurance
Company.............. 100,611,223 7,330,838 40,457,027 4,559,195 4,757,562 5,407,500
Net transfers (to)
from other sub-
accounts............. (7,820,362) 2,481,090 (32,083,917) 2,734,513 286,111 3,131,998
Net transfers to New
England Variable
Life Insurance
Company.............. (67,280,279) (4,616,930) (6,819,802) (3,436,368) (3,307,802) (3,767,486)
------------ ----------- ------------ ----------- ----------- -----------
Increase in net
assets derived from
policy related
transactions....... 25,510,582 5,194,998 1,553,308 3,857,340 1,735,871 4,772,012
------------ ----------- ------------ ----------- ----------- -----------
Net increase in net
assets............... 145,339,919 9,929,006 2,551,113 8,896,186 7,239,422 7,926,246
NET ASSETS, AT
BEGINNING OF THE
PERIOD ............... 249,494,737 16,750,131 16,880,743 9,678,964 14,759,578 6,411,211
------------ ----------- ------------ ----------- ----------- -----------
NET ASSETS, AT END OF
THE PERIOD ........... $394,834,656 $26,679,137 $ 19,431,856 $18,575,150 $21,999,000 $14,337,457
============ =========== ============ =========== =========== ===========
</TABLE>
*For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
See Notes to Financial Statements
20
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- ------------------------------------------------------------------------------- -------------------------------------
VALUE SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH
GROWTH CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME
SUB-ACCOUNT 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>
$ 554,063 $ 340,269 $ 16,795 $ 183,750 $ 10,295 $ 79,465 $ 2,050,693 $ 42,267 $ 1,773
2,113,352 765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
2,667,415 1,105,484 20,787 249,888 34,350 251,599 11,604,577 3,836,376 171,420
3,473,273 2,237,626 81,978 1,048,361 241,835 625,044 13,985,879 17,076,602 395,370
2,645,617 4,814,141 409,874 5,735,744 948,764 3,228,499 12,483,761 (2,007,296) 1,503,857
(2,568,808) (1,803,085) (94,428) (1,321,495) (271,101) (718,702) (9,853,532) (8,392,295) (358,576)
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
3,550,082 5,248,682 397,424 5,462,610 919,498 3,134,841 16,616,108 6,677,011 1,540,651
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
6,217,497 6,354,166 418,211 5,712,498 953,848 3,386,440 28,220,685 10,513,387 1,712,071
4,092,981 190,830 -- -- -- -- 19,132,167 27,868,832 30,422
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
$10,310,478 $6,544,996 $418,211 $ 5,712,498 $ 953,848 $3,386,440 $47,352,852 $38,382,219 $1,742,493
=========== =========== ======== =========== ========= ========== =========== =========== ==========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ----------------------------
ASSET
MANAGER
SUB-ACCOUNT TOTAL
------------ --------------
<C> <C>
$ 2,359 $ 64,061,749
275,419 95,415,706
------------ --------------
277,778 159,477,455
696,227 202,985,540
1,507,606 --
(709,312) (115,320,001)
------------ --------------
1,494,521 87,665,539
------------ --------------
1,772,299 247,142,994
200,694 365,491,290
------------ --------------
$1,972,993 $ 612,634,284
============ ==============
</TABLE>
See Notes to Financial Statements
21
<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 STOCK AVANTI VALUE SMALL
GROWTH BOND MONEY INDEX GROWTH GROWTH CAP
SUB- INCOME MARKET SUB- MANAGED SUB- SUB- SUB-
ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ACCOUNT SUB-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
----------------------------------- ---------- -------------
HIGH ASSET
EQUITY- INCOME MANAGER
INCOME OVERSEAS SUB- SUB-
SUB-ACCOUNT SUB-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 August 31, 1994 (Commencement of Operations) through December
31, 1994.
See Notes to Financial Statements
22
<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,
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,
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
23
<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.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. The Account has sixteen investment sub-accounts each of which invests in
the shares of one portfolio of the 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 the Variable Insurance Products Fund II are
diversified, open-end management investment companies. The Account purchases
or redeems shares of the sixteen 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. EST) 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,
state 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 annual rate of .35% of the Account
assets attributable to fixed premium ("Zenith Life") variable life policies,
.45% of the Account assets attributable to single premium ("Zenith Life One")
variable life policies, .60% of the Account assets attributable to variable
ordinary ("Zenith Life Plus" and "Zenith Life Plus II") life policies and
limited payment ("Zenith Life Executive 65") variable life policies, .90% of
the Account assets attributable to variable survivorship ("Zenith Survivorship
Life") life policies, and .75% of the Accounts assets attributable to flexible
premium ("Zenith Flexible Life") variable 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.
24
<PAGE>
5. The adviser and sub-adviser for each series of the Zenith Fund are listed
in the chart below. TNE Advisers, Inc. 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>
Capital Growth Capital Growth Management, L.P. ("CGM")*
Back Bay Advisors Money TNE Advisers, Inc. Back Bay Advisors, L.P.**
Market
Back Bay Advisors Bond TNE Advisers, Inc. Back Bay Advisors, L.P.**
Income
Back Bay Advisors Man- TNE Advisers, Inc. Back Bay Advisors, L.P.**
aged
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors, L.P.**
Westpeak Value Growth TNE Advisers, Inc. Westpeak Investment Advisors, L.P.**
Loomis Sayles Avanti TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Growth
Loomis Sayles Small Cap TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Loomis Sayles Balanced TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
Draycott International TNE Advisers, Inc. Draycott Partners, Ltd.
Equity
Venture Value TNE Advisers, Inc. Davis Selected Advisers, Inc.
Alger Equity Growth TNE Advisers, Inc. Fred Alger Management, Inc.
</TABLE>
*An affiliate of The New England
**An indirect subsidiary of The New England
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 Series 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 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.
6. The following table shows the aggregate cost of shares purchased and
proceeds from sales of each sub-account for the year ended December 31, 1995:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Capital Growth..................................... $200,281,232 $116,993,476
Bond Income........................................ 16,076,440 9,010,606
Money Market....................................... 51,706,425 48,778,431
Stock Index........................................ 10,217,009 5,126,128
Managed............................................ 9,702,729 6,752,145
Avanti Growth...................................... 11,720,650 5,095,439
Value Growth....................................... 8,339,177 3,233,834
Small Cap.......................................... 8,289,292 1,036,546
Balanced*.......................................... 543,509 44,789
Equity Growth*..................................... 7,457,885 659,051
International Equity*.............................. 1,311,245 141,349
Venture Value*..................................... 4,190,213 358,520
Equity-Income...................................... 35,035,388 12,369,269
Overseas........................................... 29,153,622 21,467,284
High Income........................................ 2,512,442 671,600
Asset Manager...................................... 2,693,521 662,285
</TABLE>
*For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
25
<PAGE>
7. The following table shows the net investment return of the sub-account 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 have been restated to conform with
the current calculation of net investment return to provide greater
comparability with industry convention.
FIXED PREMIUM ("ZENITH LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------
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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 94.53% 52.17% (9.11%) 30.30% (3.82%) 53.45% (6.38%) 14.57% (7.39%) 37.55%
Bond Income............. 14.43% 1.91% 7.99% 11.91% 7.71% 17.55% 7.80% 12.22% (3.70%) 20.78%
Money Market............ 6.43% 6.16% 7.14% 8.87% 7.81% 5.84% 3.43% 2.61% 3.61% 5.33%
<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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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% 0.76% 36.44%
Managed.......................... (.89%) 9.10% 18.67% 2.85% 19.75% 6.33% 10.26% (1.46%) 30.81%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth.......................................................................... 14.47% (0.62%) 29.90%
Value Growth........................................................................... 13.97% (1.55%) 35.99%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income.......................................................................... 9.29% 6.69% 34.62%
Overseas............................................................................... 14.57% 1.37% 9.30%
<CAPTION>
5/2/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap....................................................................................... (3.45%) 28.40%
<CAPTION>
8/31/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..................................................................................... (0.58%) 20.18%
Asset Manager................................................................................... (4.41%) 16.55%
<CAPTION>
5/1/95-
SUB-ACCOUNT 12/31/95
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth............................................................................................ 24.84%
Balanced................................................................................................. 13.75%
International Equity..................................................................................... 3.85%
Venture Value............................................................................................ 21.64%
</TABLE>
26
<PAGE>
SINGLE PREMIUM ("ZENITH LIFE ONE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------
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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 94.33% 52.02% (9.20%) 30.17% (3.91%) 53.29% (6.47%) 14.46% (7.38%) 37.41%
Bond Income............. 14.32% 1.81% 7.88% 11.79% 7.60% 17.43% 7.69% 12.10% (3.80%) 20.66%
Money Market............ 6.32% 6.05% 7.03% 8.77% 7.71% 5.74% 3.33% 2.51% 3.35% 5.23%
<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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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% 0.66% 36.30%
Managed.......................... (.96%) 8.99% 18.55% 2.75% 19.63% 6.22% 10.15% (1.56%) 30.67%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth.......................................................................... 14.39% (0.72%) 29.77%
Value Growth........................................................................... 13.90% (1.65%) 35.85%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income.......................................................................... 9.22% 6.59% 34.49%
Overseas............................................................................... 14.49% 1.27% 9.19%
<CAPTION>
5/2/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap....................................................................................... (3.52%) 28.27%
<CAPTION>
8/31/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..................................................................................... (0.61%) 20.06%
Asset Manager................................................................................... (4.45%) 16.43%
<CAPTION>
5/1/95-
SUB-ACCOUNT 12/31/95
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth............................................................................................ 24.76%
Balanced................................................................................................. 13.67%
International Equity..................................................................................... 3.79%
Venture Value............................................................................................ 21.56%
</TABLE>
27
<PAGE>
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
------------------------------------------------------------------------------------------
1/1/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 94.04% 51.79% (9.34%) 29.98% (4.06%) 53.06% (6.61%) 14.28% (7.62%) 37.21%
Bond Income............. 14.15% 1.65% 7.72% 11.63% 7.44% 17.25% 7.53% 11.94% (3.94%) 20.47%
Money Market............ 6.16% 5.89% 6.87% 8.60% 7.54% 5.58% 3.18% 2.36% 3.35% 5.07%
<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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index...................... (12.55%) 15.65% 29.37% (4.72%) 29.65% 6.65% 9.07% 0.51% 36.10%
Managed.......................... (1.06%) 8.83% 18.37% 2.59% 19.45% 6.06% 9.99% (1.70%) 30.48%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth.......................................................................... 14.28% (0.87%) 29.57%
Value Growth........................................................................... 13.78% (1.80%) 35.65%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income.......................................................................... 9.11% 6.43% 34.29%
Overseas............................................................................... 14.38% 1.12% 9.02%
<CAPTION>
5/2/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap....................................................................................... (3.61%) 28.08%
<CAPTION>
8/31/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..................................................................................... (0.66%) 19.88%
Asset Manager................................................................................... (4.49%) 16.26%
<CAPTION>
5/1/95-
SUB-ACCOUNT 12/31/95
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth............................................................................................ 24.64%
Balanced................................................................................................. 13.56%
International Equity..................................................................................... 3.68%
Venture Value............................................................................................ 21.44%
</TABLE>
28
<PAGE>
VARIABLE SURVIVORSHIP ("ZENITH SURVIVORSHIP LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------
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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 93.46% 51.34% (9.61%) 29.59% (4.35%) 52.61% (6.90%) 13.94% (7.90%) 36.80%
Bond Income............. 13.81% 1.35% 7.40% 11.29% 7.11% 16.90% 7.21% 11.60% (4.23%) 20.12%
Money Market............ 5.85% 5.57% 6.55% 8.28% 7.22% 5.26% 2.87% 2.05% 3.04% 4.75%
<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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index...................... (12.73%) 15.30% 28.99% (5.01%) 29.27% 6.33% 8.74% 0.21% 35.69%
Managed.......................... (1.26%) 8.50% 18.02% 2.28% 19.10% 5.74% 9.69% (2.00%) 30.09%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth.......................................................................... 14.05% (1.16%) 29.19%
Value Growth........................................................................... 13.55% (2.09%) 35.25%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income.......................................................................... 8.89% 6.11% 33.89%
Overseas............................................................................... 14.15% 0.82% 8.70%
<CAPTION>
5/2/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap....................................................................................... (3.80%) 27.69%
<CAPTION>
8/31/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..................................................................................... (0.76%) 19.53%
Asset Manager................................................................................... (4.59%) 15.91%
</TABLE>
29
<PAGE>
FLEXIBLE PREMIUM ("ZENITH FLEXIBLE LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------
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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 93.75% 51.56% (9.47%) 31.88% (5.73%) 52.83% (6.75%) 14.11% (7.76%) 37.00%
Bond Income............. 13.98% 1.50% 7.56% 11.46% 7.28% 17.08% 7.37% 11.77% (4.08%) 20.29%
Money Market............ 6.01% 5.73% 6.71% 8.44% 7.38% 5.42% 3.02% 2.20% 3.20% 4.91%
<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- 1/1/95-
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 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock-Index...................... (13.06%) 15.47% 29.18% (4.86%) 29.46% 6.49% 8.90% 0.36% 35.90%
Managed.......................... (1.15%) 8.67% 18.20% 2.44% 19.28% 5.90% 9.82% (1.85%) 30.28%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avanti Growth.......................................................................... 14.16% (1.01%) 29.38%
Value Growth........................................................................... 13.67% (1.94%) 35.45%
<CAPTION>
4/30/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income.......................................................................... 9.00% 6.27% 34.09%
Overseas............................................................................... 14.26% 0.97% 8.86%
<CAPTION>
5/2/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap....................................................................................... (3.71%) 27.88%
<CAPTION>
8/31/94- 1/1/95-
SUB-ACCOUNT 12/31/94 12/31/95
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..................................................................................... (0.71%) 19.71%
Asset Manager................................................................................... (4.54%) 16.08%
<CAPTION>
5/1/95-
SUB-ACCOUNT 12/31/95
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth............................................................................................ 24.51%
Balanced................................................................................................. 13.44%
International Equity..................................................................................... 3.58%
Venture Value............................................................................................ 21.32%
</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.
30
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL 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, 1995 and 1994, 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, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with the
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
March 8, 1996
31
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
-------------- ------------
<S> <C> <C>
Bonds............................................ $ 60,779,522 $ 7,828,833
Mortgage loan.................................... 2,210,153 2,221,942
Policy loans..................................... 58,210,498 43,967,343
Cash and short-term investments.................. 32,416,437 10,669,045
Accrued investment income........................ 3,102,970 1,377,286
Premiums deferred and uncollected................ 8,897,630 6,892,888
Due from separate account, net................... 95,638,637 79,549,258
Due from New England Mutual Life Insurance Compa-
ny.............................................. 4,706,831 1,889,855
Other assets..................................... 554,844 814,991
Separate account assets.......................... 748,184,716 445,040,547
-------------- ------------
Total assets................................. $1,014,702,238 $600,251,988
============== ============
LIABILITIES AND SURPLUS
Policy reserves.................................. $ 79,511,870 $ 44,648,304
Due to New England Mutual Life Insurance Company. 6,239,406 3,219,350
Borrowed money and accrued interest.............. 25,137,373 --
Income taxes payable............................. 5,487,501 4,611,653
Accrued expenses................................. 6,663,644 4,746,096
Asset valuation reserve.......................... 372,954 137,202
Other liabilities................................ 4,767,424 1,120,620
Separate account liabilities..................... 748,184,716 445,040,547
-------------- ------------
Total liabilities............................ 876,364,888 503,523,772
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........... 171,738,031 117,709,808
Unassigned surplus............................... (35,900,681) (23,481,592)
-------------- ------------
Total surplus................................ 138,337,350 96,728,216
-------------- ------------
Total liabilities and surplus.............. $1,014,702,238 $600,251,988
============== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Income:
Premiums......................................... $279,517,998 $201,732,909
Net investment income............................ 3,250,606 3,093,033
Considerations for supplementary contracts....... 2,243,426 --
------------ ------------
285,012,030 204,825,942
Expenses:
Death and other benefits......................... 41,689,601 23,345,664
Increase in policy reserves...................... 34,863,564 17,743,158
Commissions...................................... 40,691,028 37,220,361
Net transfers to separate account................ 120,149,836 87,853,704
General and administrative....................... 54,105,390 43,395,223
------------ ------------
291,499,419 209,558,110
------------ ------------
Loss from operations before provision for income
taxes............................................. (6,487,389) (4,732,168)
Provision for income taxes......................... 5,516,062 2,968,375
------------ ------------
Net loss........................................... $(12,003,451) $ (7,700,543)
============ ============
</TABLE>
STATEMENTS OF SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Surplus, beginning of year.......................... $ 96,728,216 $94,378,654
Net loss............................................ (12,003,451) (7,700,543)
Change in non-admitted assets....................... (179,886) (19,141)
Change in asset valuation reserve................... (235,752) 69,246
Capital contribution from New England Mutual Life
Insurance Company.................................. 54,028,223 10,000,000
------------ -----------
Surplus, end of year................................ $138,337,350 $96,728,216
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Premiums and other considerations.............. $ 277,077,189 $ 199,670,506
Net investment income.......................... 1,719,860 2,773,220
Benefits....................................... (39,541,592) (23,510,882)
Expenses and taxes............................. (95,265,433) (80,900,670)
Net transfers to separate account.............. (136,239,215) (103,547,077)
Net increase in policy loans................... (14,243,155) (13,293,625)
Other income and disbursements, net............ 2,191,111 (1,972,032)
------------- -------------
Net cash flows used in operating activities.. (4,301,235) (20,780,560)
Cash flows from investing activities:
Proceeds from investments sold, matured or re-
paid.......................................... 715,484 166,942
Cost of investments acquired................... 333,143 (11)
------------- -------------
Net cash flows from investing activities..... 1,048,627 166,931
Cash flows from financing activities:
Capital contribution from New England Mutual
Life Insurance Company........................ -- 10,000,000
Borrowed money................................. 25,000,000 --
------------- -------------
Net cash flows from financing activities..... 25,000,000 10,000,000
Net cash flows................................... 21,747,392 (10,613,629)
Cash and short-term investments, beginning of
year............................................ 10,669,045 21,282,674
------------- -------------
Cash and short-term investments, end of year..... $ 32,416,437 $ 10,669,045
============= =============
Non-cash financing activities:
Capital contribution from New England Mutual
Life Insurance Company........................ $ 54,028,223 $ --
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
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 sells variable life insurance and
variable annuity products through a network of general agencies located
throughout the United States.
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. 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. Permitted and prescribed statutory
accounting practices are currently considered generally accepted accounting
principles (GAAP) for wholly-owned stock life insurance subsidiaries of a
mutual life insurance company.
The Financial Accounting Standards Board 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 the Company's 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 1994 financial statements have been reclassified to
conform with the 1995 presentation.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in accordance with permitted and
prescribed statutory accounting practices requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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 at amortized cost.
The Company's mortgage loan on real estate is carried at outstanding
principal balance. The estimated fair value of this loan is determined using
an internal matrix based on market rates and a credit rating system.
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.
35
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
Investment income is recognized on the accrual basis. Realized gains and
losses on the sales of investments are determined on the specific
identification method. Unrealized gains and losses are accounted for as direct
increases or decreases in surplus.
SEPARATE ACCOUNT
Separate account assets represent managed funds held for the benefit of
variable life and variable annuity policyholders and are reported at fair
value. Since the policyholders receive the full benefit and bear the full risk
of the separate account investments, the investment results are reflected in
the liabilities related to the separate account. The statements of operations
include the general account business and the net transfers to the separate
account.
VARIABLE LIFE RESERVES
Reserves for variable life insurance policies are developed using the 1958
and 1980 Commissioners' Standard Ordinary Mortality Table 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,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Account values in excess of reserves................ $93,318,010 $75,718,686
Policy charges...................................... 2,320,627 3,830,572
----------- -----------
Total............................................. $95,638,637 $79,549,258
=========== ===========
</TABLE>
RECOGNITION OF PREMIUM REVENUE AND RELATED EXPENSES
Variable life premium revenue is recognized during the premium paying
period. Annuity considerations and deposits are recognized as revenue when
received. 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 and mortgage loans.
36
<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
amounted to $74,707 and $75,451 as of December 31, 1995 and 1994,
respectively. The amortization of the IMR into net income net of federal
income tax for 1995 and 1994 was $3,117 and $2,702, respectively.
4. INVESTMENTS:
The carrying value and estimated fair values of debt securities excluding
separate account assets are as follows:
<TABLE>
<CAPTION>
1995
GROSS UNREALIZED
CARRYING ----------------- ESTIMATED
VALUE GAINS LOSSES FAIR VALUE
-------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of
U.S. government
corporations and agencies.. $ 3,847 $ 61 $ -- $ 3,908
Corporate securities........ 56,393 1,353 (355) 57,391
Mortgage-backed securities.. 70 1 -- 71
Other....................... 470 61 -- 531
------- -------- ------- -------
Totals...................... $60,780 $ 1,476 $ (355) $61,901
======= ======== ======= =======
<CAPTION>
1994
GROSS UNREALIZED
CARRYING ----------------- ESTIMATED
VALUE GAINS LOSSES FAIR 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 -- (3) 89
------- -------- ------- -------
Totals...................... $ 7,829 $ 187 $ (70) $ 7,946
======= ======== ======= =======
</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, 1995, 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>
CARRYING ESTIMATED
VALUE FAIR VALUE
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Due in 1 year or less.................................... $ 4,775 $ 4,826
Due after 1 year through 5 years......................... 27,217 27,911
Due after 5 years through 10 years....................... 27,119 27,267
Due after 10 years....................................... 1,599 1,826
Mortgage-backed securities............................... 70 71
------- -------
Totals................................................... $60,780 $61,901
======= =======
</TABLE>
37
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Gross realized gains from sale of debt securities were $3,651 and $3,817 in
1995 and 1994, respectively. There were no gross realized losses in 1995 and
1994. Net realized gains of $2,373 and $2,481 in 1995 and 1994, respectively,
were transferred to the IMR.
There are no significant concentrations of bonds by issuer or by industry.
The estimated fair value of the Company's mortgage loan was $2,210,000 and
$2,241,000 at December 31, 1995 and 1994, respectively.
Components of Net Investment Income are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
-------------
1995 1994
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Debt securities.................................................. $ 897 $ 619
Short-term investments........................................... 1,140 597
Mortgage loans................................................... 234 235
Policy loans..................................................... 2,832 1,996
------ ------
Total investment income........................................ 5,103 3,447
Investment expenses including interest of $1,160,000 on borrowed
money (see Note 5).............................................. 1,852 354
------ ------
Net investment income............................................ $3,251 $3,093
====== ======
</TABLE>
5. BORROWED MONEY
In 1995, the Company borrowed $25,000,000 from a bank, bearing interest at a
variable rate, equal to the greater of the bank's base rate or money market
rates plus .6% per annum payable monthly (5.8% at December 31, 1995). The loan
is collateralized by sales loads and surrender charges collected on a defined
block of variable life insurance policies issued by the Company. Repayment is
structured in a manner to result in repayment over a term of five years. The
carrying value of the loan approximates its fair value.
6. 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 $50,875,006 and $40,071,822 in 1995 and
1994, respectively.
All of the officers and directors of the Company are officers of The New
England.
In 1995, The New England made a noncash capital contribution to the Company
of publicly traded debt securities and private placement obligations with an
estimated fair value of $54,028,223. In 1994, The New England made a cash
capital contribution of $10,000,000.
The Company also reinsures certain risks with The New England. (See Note 8).
7. 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.
38
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Below is a reconciliation of income before federal income taxes to taxable
gain from operations.
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Operating loss before federal income taxes.............. $ (6,487) $ (4,732)
Deferred acquisition costs.............................. 13,451 11,035
Expense related differences............................. 11,030 3,816
Other income related differences........................ (2,234) (1,639)
-------- --------
Taxable gain from operations............................ 15,760 8,480
-------- --------
Federal income taxes @ 35%.............................. $ 5,516 $ 2,968
======== ========
</TABLE>
The Internal Revenue Service has completed its examination of the Company's
income tax returns through 1991 and is currently examining the income tax
returns for 1992 to 1993. 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.
8. REINSURANCE:
The Company's practice on individual products is to retain not more than
$250,000 of risk on any person, excluding accidental death benefits. Prior to
January 1, 1995, this retention limit had been $75,000 of risk on any person
excluding accidental death benefits. Total individual life premiums ceded were
$6.3 million and $13.8 million at December 31, 1995 and 1994, respectively. In
1995, $1.3 million of the $6.3 million premiums ceded were ceded to The New
England, and in 1994, $9.5 million of the $13.8 million premiums ceded were
ceded to The New England.
The individual life insurance inforce ceded was $4.0 billion and $9.7
billion at December 31, 1995 and 1994, respectively.
The Company is contingently liable with respect to ceded insurance should
any reinsurer be unable to meet the obligations assumed by it.
9. SUBSEQUENT EVENTS:
The New England and Metropolitan Life Insurance Company (MetLife) have
entered into a definitive agreement, effective as of August 16, 1995, pursuant
to which The New England would be merged with and into MetLife. The closing of
the merger is subject to various conditions, including but not limited to the
obtaining of various regulatory approvals and the necessary approvals of the
policyholders of both companies. It is currently anticipated that the merger
will be consummated no later than the third quarter of 1996.
39
<PAGE>
ZENITH LIFE ONE
Single Premium Variable Life Insurance Policies
Issued by
New England Variable Insurance Company
Supplement dated February 1, 1989
to
Prospectus dated May 1, 1988
THE FIXED ACCOUNT
NEVLICO anticipates making available a Fixed Account option under the
Policies prior to May 1, 1989. Once the Fixed Account is available, it will be
offered in a state when that state's insurance department has approved the
Fixed Account policy provision. The Fixed Account policy provision may not be
approved by every state insurance department and thus may not be available in
every state, but NEVLICO intends to seek its approval in all states.
The Policy Owner may allocate all or part of the Policy's cash value to the
Fixed Account, which is part of NEVLICO's general account. Because of
exemptive and exclusionary provisions. 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 general
account, the Fixed Account nor any interests therein are generally subject to
the provisions of these Acts, and NEVLICO has been advised that the staff of
the Securities and Exchange Commission 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 consists of all assets owned by NEVLICO other than
those in the Variable Account and any other separate accounts which NEVLICO
may establish. NEVLICO has sole discretion over the investment of assets in
the general account, including those in the Fixed Account. Policy Owners do
not share in the actual investment experience of the assets in the Fixed
Account. Instead, NEVLICO guarantees that cash value in the Fixed Account will
accrue interest at an effective annual net rate of at least 4%. NEVLICO is not
obligated to credit interest at a rate higher than 4%, although in its sole
discretion it may do so. Cash value in the Fixed Account will earn interest
daily at an effective annual rate that NEVLICO declares periodically.
NEVLICO's current method of crediting interest is as follows, although
NEVLICO may modify this method in the future. All cash value of a Policy in
the Fixed Account on a policy anniversary will earn interest at the declared
annual rate in effect on the anniversary. The cash value will earn interest at
this rate until the next policy anniversary, when it will be credited with the
current rate declared by NEVLICO. Any portion of the 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.
If the Policy Owner selects the Fixed Account on the application, the
Policy's cash value will not be allocated to the Fixed 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. Until then, the net premium will
be allocated to the Money Market Sub-Account. (See "Investment and Transfer
Options" in the prospectus.) The cash value transferred from the Money Market
Sub-Account to the Fixed Account will be credited with NEVLICO's most recently
declared rate of interest as of the date of the transfer until the next policy
anniversary.
VALUES AND BENEFITS
The Policy's cash value in the Fixed Account will reflect the amount of net
interest credited to the cash value in the Fixed Account, any loans made
against the Fixed Account cash value, any charges deducted from cash value in
the Fixed Account, any transfers to or from the Variable Account and any
partial surrenders from the Fixed Account cash value. 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
1
<PAGE>
Policy's cash value in each. (See "Administrative Charge and Deferred Charge"
and "Cost of Insurance Charges" in the prospectus.) 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 the Fixed Account) as a result of a policy loan.
The amount of the Policy's actual investment return on cash value in the
Fixed Account will be taken into account in the calculation of the Policy's
Variable Death Benefit in the same manner as the actual investment return on
cash value in the Variable Account. The Policy's actual investment return on
cash value in the Fixed Account for any period will equal the dollar amount of
interest credited to that cash value during that period. (See "The Policy's
Actual Investment Return" and "Variable Death Benefit" in the prospectus.)
POLICY TRANSACTIONS
NEVLICO reserves the right to restrict allocations to the Fixed Account.
Otherwise, the amount of cash value initially allocated to the Fixed Account
on the application is subject to the same percentage requirements as the
amount of cash value initially allocated to the Variable Account. (See
"Investment and Transfer Options" in the prospectus.)
Except as described below, amounts in the Fixed Account are subject to the
same rights and limitations as are amounts in the Variable Account with
respect to transfers, loans and surrenders. (See "Cash Value and Net Cash
Surrender Value of the Policy", "Loan Provision" and "Investment and Transfer
Options" in the prospectus.) 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 effected 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 Principal
Administrative Office. The amount of cash value which may be transferred from
the Fixed Account is limited to the greater of 15% of the Policy's cash value
in the Fixed Account 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, the Policy Owner may elect to 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. 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.
Unless the Policy Owner requests otherwise, a policy loan will reduce the
Policy's cash value in the sub-accounts and not the cash value allocated to
the Fixed Account. In the event that the cash value in the Policy's sub-
accounts is insufficient to provide the amount of the loan, 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 4%,
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
date it is credited.
Unless the Policy Owner requests otherwise, partial surrenders will be taken
only from the Policy's sub-accounts and not the Fixed Account. In the event
that the cash value in the Policy's sub-accounts is insufficient to provide
the full amount requested, the balance of the partial surrender will be taken
from the Fixed Account.
NEVLICO reserves the right to delay transfers and surrenders from, and
policy loans attributable to, the Fixed Account for up to six months. Loans to
pay premiums on policies issued by NEVLICO will not be delayed.
NEW TAX LAW
The following discussion of Federal income tax issues relating to the
Policies is general in nature and is not intended as tax advice. NEVLICO
recommends that Policy Owners consult their own tax advisors for more complete
information and advice.
The Technical and Miscellaneous Revenue Act of 1988 (passed by Congress on
October 21, 1988, and signed into law by the President on November 10, 1988)
contains provisions altering the tax treatment of any loan or other pre-death
distribution from a new category of life insurance policies called "modified
endowment contracts". ALL POLICIES DESCRIBED IN THE ZENITH LIFE
2
<PAGE>
ONE PROSPECTUS WHICH WERE ENTERED INTO ON OR AFTER JUNE 21, 1988 ARE
CONSIDERED MODIFIED ENDOWMENT CONTRACTS AND ARE SUBJECT TO THE NEW TAX
TREATMENT OF DISTRIBUTIONS DISCUSSED BELOW. IN ADDITION, ANY INSURANCE POLICY
RECEIVED IN EXCHANGE FOR A MODIFIED ENDOWMENT CONTRACT WILL ALSO BE A MODIFIED
ENDOWMENT CONTRACT.
Regardless of when it was issued, if a Policy described in the Zenith Life
One prospectus is exchanged on or after June 21, 1988 for another life
insurance policy, including a fixed-benefit policy pursuant to the twenty-four
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 Policy" in the prospectus.)
DISTRIBUTIONS
If a Policy is a modified endowment contract, then pre-death distributions
under the contract, including policy loans, will be includible in the Policy
Owner's gross income to the extent the cash value of the Policy exceeds the
Policy Owner's investment in the Policy. Any additional amounts received other
than policy loans will be treated as a return of capital to the Policy Owner
and will reduce the Policy Owner's investment in the Policy. The Policy
Owner's investment in the Policy will be increased by the amount of any prior
loan that was included in the Policy Owner's gross income. 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 shall be treated as one
modified endowment contract.
The amount of any taxable distribution will be subject to an additional tax
equal to 10% of the taxable income realized on the distribution unless the
distribution is:
(a)made on or after the date the Policy Owner attains age 59 1/2;
(b)is attributable to the Policy Owner's becoming disabled; or,
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for the life (or life expectancy) of the
Policy Owner.
NON-MODIFIED ENDOWMENT CONTRACTS
For Policies not classified as modified endowment contracts, the tax
treatment of various pre-death distributions under the Policies remains
unchanged. As a result, NEVLICO believes any policy loans received under such
Policies will not be treated as income to the Policy Owner. If a distribution
under such a Policy occurs which has the net effect of reducing future
benefits (such as future death benefits), all or part of the distribution may
be taxable to the Policy Owner to the extent of any investment earnings in the
Policy.
NEW REQUIREMENTS FOR CERTAIN POLICIES ISSUED
ON OR AFTER SEPTEMBER 1, 1988
For Policies issued in Massachusetts on or after September 1, 1988, cost of
insurance rates will not vary based on the sex of the insured. (See "How are
Changes in the Variable Death Benefit and cash value different for a preferred
risk Policy, a female insured's Policy and a non-sex based Policy?")
3
<PAGE>
NEW ENGLAND VARIABLE LIFE
INSURANCE COMPANY
Single Premium Variable Life Insurance Policies
Issued by
New England Variable Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(617) 578-2000
This prospectus describes individual Single Premium Variable Life Insurance
Policies (the "Policies") offered by New England Variable Life Insurance
Company ("NEVLICO"), a stock life insurance company that is a wholly-owned
subsidiary of New England Mutual Life Insurance Company ("The New England").
Each Policy Owner may allocate the cash value for his or her Policy among one
or more of the five investment sub-accounts of NEVLICO's Variable Life
Separate Account (the "Variable Account").
Each Policy is designed to provide lifetime insurance protection for the
insured named in the Policy. Each Policy also provides for a net cash
surrender value while the insured is living. The death benefits and cash
values can vary based on investments made in one or more sub-accounts of
NEVLICO's Variable Account. A Policy's death benefit can vary monthly,
depending on the investment experience of the sub-accounts to which the Policy
Owner allocates the Policy's cash value. NEVLICO guarantees that a Policy's
death benefit will never be less than a guaranteed minimum amount, which is
the initial face amount specified in the Policy (with the proceeds payable
reduced by any outstanding policy loan plus accrued interest). A Policy's cash
value can vary with investment experience. There is no guaranteed minimum cash
value.
Each sub-account of NEVLICO's Variable Account invests in the shares of the
New England Zenith Fund, a mutual fund in series form. Each portfolio of the
New England Zenith Fund uses the investment advisory services of either Back
Bay Advisors, Inc., an indirect wholly-owned subsidiary of New England Mutual
Life Insurance Company, or Loomis Sayles & Company, Incorporated, an affiliate
of The New England and one of the largest and oldest investment counsel firms
in the United States.
The Money Market Sub-Account invests in shares of the Money Market Series.
The Bond Income Sub-Account invests in shares of the Bond Income Series. The
Capital Growth Sub-Account invests in shares of the Capital Growth Series. The
Stock Index Sub-Account invests in shares of the Stock Index Series. The
Managed Sub-Account invests in shares of the Managed Series.
The Policy Owner may cancel the Policy during the "free look" period. As of
the "investment start date", the net premium for the Policy will be allocated
to the Money Market Sub-Account until the later of 45 days after the date Part
I of the application is signed or 10 days after mailing by NEVLICO of the
Notice of Withdrawal Right.
It may not be advantageous to replace existing insurance with a Policy. (See
"Charges Deducted from Premiums" and Appendix B--"Calculation of Change in
Variable Death Benefit".)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE CURRENT
PROSPECTUS OF THE NEW ENGLAND ZENITH FUND WHICH IS ATTACHED AT THE END OF THIS
PROSPECTUS. THESE PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
MAY 1, 1988
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION TO POLICIES................................................... 4
What is single premium variable life insurance?.......................... 4
Who are NEVLICO and The New England?..................................... 5
How is NEVLICO regulated?................................................ 5
Under what conditions are the Policies available?........................ 5
How is the premium determined?........................................... 5
How is the premium invested and what charges are deducted?............... 5
What is the Guaranteed Minimum Death Benefit?............................ 6
How does the death benefit vary?......................................... 6
What is a Policy's actual investment return?............................. 6
How does the cash value vary?............................................ 7
How are changes in the Variable Death Benefit and cash value different
for a preferred risk Policy, a female insured's Policy and a non-sex
based Policy?........................................................... 7
What is the loan provision, what loan interest rate is available, and how
does a policy loan affect the death benefit and cash value?............. 7
What are the Money Market, Bond Income, Capital Growth, Stock Index and
Managed Sub-Accounts of the Variable Account?........................... 7
How are amounts allocated to each sub-account of the Variable Account?... 8
Are there charges against the sub-accounts of the Variable Account and
against the New England Zenith Fund?.................................... 8
What commissions are paid to agents?..................................... 8
Is there a short-term cancellation right, or "free look"?................ 8
Can a Policy be exchanged for a fixed-benefit life insurance policy?..... 9
When are communications and payments deemed received at NEVLICO's Princi-
pal Administrative Office?.............................................. 9
Are the benefits under a Policy subject to Federal income tax?........... 9
THE VARIABLE ACCOUNT....................................................... 9
Investments of the Variable Account...................................... 10
Investment Management.................................................... 11
CHARGES AND EXPENSES....................................................... 12
Administrative Charge and Deferred Charge................................ 12
Charges Against the New England Zenith Fund and the Sub-Accounts of the
Variable Account........................................................ 12
Cost of Insurance Charges................................................ 13
Guarantee of Certain Charges............................................. 13
Group or Sponsored Arrangements.......................................... 13
PRINCIPAL POLICY FEATURES.................................................. 13
The Policy's Actual Investment Return.................................... 13
Death Benefit............................................................ 14
Guaranteed Minimum Death Benefit......................................... 14
Variable Death Benefit................................................... 14
Amount Provided for Investment in a Policy's Sub-Accounts................ 15
Cash Value and Net Cash Surrender Value of the Policy.................... 16
Loan Provision........................................................... 16
Payment of Proceeds...................................................... 17
Investment and Transfer Options.......................................... 18
Exchange of Policy....................................................... 18
Payment Options.......................................................... 18
Other Policy Features.................................................... 19
DISTRIBUTION AGREEMENT AND OTHER CONTRACTUAL ARRANGEMENTS.................. 20
LIMITS TO NEVLICO's RIGHT TO CHALLENGE THE POLICY.......................... 20
Misstatement of Age or Sex............................................... 21
Suicide.................................................................. 21
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
TAX CONSIDERATIONS......................................................... 21
Policy Proceeds.......................................................... 21
Charge for NEVLICO's Income Taxes........................................ 21
MANAGEMENT................................................................. 22
VOTING RIGHTS.............................................................. 23
RIGHTS RESERVED BY NEVLICO................................................. 23
REPORTS.................................................................... 24
LEGAL MATTERS.............................................................. 24
REGISTRATION STATEMENT..................................................... 24
EXPERTS.................................................................... 24
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH
SURRENDER VALUES AND ACCUMULATED PREMIUMS................................. 25
APPENDIX B: CALCULATION OF CHANGE IN VARIABLE DEATH BENEFIT................ 34
APPENDIX C: COST OF INSURANCE FACTORS...................................... 36
APPENDIX D: INVESTMENT EXPERIENCE INFORMATION.............................. 37
FINANCIAL STATEMENTS....................................................... 41
</TABLE>
3
<PAGE>
THE PURPOSE OF THE POLICIES IS TO PROVIDE INSURANCE PROTECTION FOR THE
BENEFICIARY NAMED IN A POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN ANY
WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
You are urged to examine this prospectus carefully. Except as otherwise
stated, the discussion assumes there is no outstanding policy loan.
THE INTRODUCTION TO POLICIES briefly describes NEVLICO and the Single
Premium Variable Life Insurance Policies. More detailed information is found
later in the prospectus. Variations from the information appearing in this
prospectus due to individual state requirements are generally described in
endorsements to the Policy, as appropriate.
INTRODUCTION TO POLICIES
WHAT IS SINGLE PREMIUM VARIABLE LIFE INSURANCE?
The single premium variable life insurance being offered by NEVLICO is, in
many respects, similar to traditional "fixed-benefit" single premium life
insurance. In other respects, it is quite different.
The main similarities are:
-- The Policy provides a death benefit which is payable to the beneficiary
upon the insured's death.
-- A minimum death benefit is guaranteed.
-- The Policy has a net cash surrender value that the Policy Owner may
obtain by surrendering the Policy. The Policy Owner may obtain a portion
of the cash value by taking a policy loan.
The main differences are:
-- The Policy Owner may allocate the Policy's cash value among one or more
of the five investment sub-accounts of the Variable Account. These sub-
accounts are the Money Market, Bond Income, Capital Growth, Stock Index
and Managed Sub-Accounts. Each sub-account invests in the shares of a
distinct portfolio of the New England Zenith Fund.
-- The death benefit under a Policy can increase or decrease monthly
depending on the investment experience of the investment sub-accounts to
which the Policy's cash value is allocated; but the death benefit will
never decrease below the initial face amount of the Policy (with the
proceeds payable reduced by any outstanding policy loan plus accrued
interest).
-- The Policy offers the opportunity for appreciation of its net cash
surrender value based upon investment results. The cash value may
increase or decrease as of each day the New York Stock Exchange is open
for trading. It is possible, if investment results are unfavorable, for
the cash value to decrease to zero; the Policy Owner bears the total
risk of decreases in the cash value, since no minimum amount is
guaranteed.
The variable life insurance policies offered by NEVLICO are designed to
provide insurance protection. The net premium under the Policies is invested
by NEVLICO in shares of mutual fund portfolios. The investment experience
credited to the Policy is based on the investment experience of the mutual
fund shares, but reflects certain additional charges associated with the
Policies. 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.
-- 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 Life Separate Account, and not the Policy Owner, owns the
mutual fund shares.
-- Federal income tax liability on any earnings is deferred until the
Policy Owner receives a distribution from the Policy. Transfers from one
underlying fund portfolio to another are accomplished without tax
liability.
-- Dividend and capital gains distributions are automatically reinvested.
4
<PAGE>
WHO ARE NEVLICO AND THE NEW ENGLAND?
New England Variable Life Insurance Company was organized as a stock life
insurance company in 1980 under Delaware law as New England Pension and
Annuity Company. Its current name was adopted on January 7, 1983. As of
January 1, 1988, NEVLICO was authorized to transact a life insurance business
in Delaware and in 49 other jurisdictions. NEVLICO intends to seek licensing
and approval to sell the Policies in all United States jurisdictions where
variable life insurance may be sold. The Home Office of NEVLICO is in
Wilmington, Delaware and its Principal Administrative Office is at 501
Boylston Street, 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, 1987 The New England had over $14 billion of assets and over
$64 billion of life insurance in force.
As of December 31, 1987 The New England had invested $12.5 million in
NEVLICO in connection with NEVLICO's organization and initial operations, and
it is anticipated that The New England will from time to time make additional
capital contributions to NEVLICO to enable it to meet its initial reserve
requirements and expenses in connection with its business. However, The New
England is not legally required to make such contributions and The New
England's assets do not support the benefits payable under the Policies. (See
financial statements of NEVLICO under "Financial Statements".)
HOW IS NEVLICO REGULATED?
NEVLICO is subject to regulation and supervision by the Delaware Insurance
Commissioner. In addition, NEVLICO is subject to the applicable insurance laws
and regulations of all jurisdictions in which it is authorized to do business.
NEVLICO submits annual reports of its operations and finances to insurance
officials in jurisdictions in which it does business.
The Policy described in this prospectus has been filed with, and approved,
where required, by insurance officials in those jurisdictions where it is
sold.
UNDER WHAT CONDITIONS ARE THE POLICIES AVAILABLE?
A Policy may be issued to a standard risk insured from the ages of 0 to 75
and to a preferred risk insured from the ages of 20 to 75. All persons must
meet certain health and other criteria. All Policies will have charges for the
cost of insurance protection deducted from their cash values. These charges
are guaranteed never to be higher than those based on the 1958 Commissioners'
Standard Ordinary Mortality Table ("1958 CSO Table"). The cost of insurance
charges actually deducted may be lower than those based on the 1958 CSO Table,
and the actual level of such charges will vary depending on the insured's sex
(if the Policy is sex-based), age and underwriting class, and on whether the
Policy is a non-sex based Policy. (See "How does the death benefit vary?",
"Group or Sponsored Arrangements" and Appendix C.)
HOW IS THE PREMIUM DETERMINED?
The Policy Owner makes a single premium payment, the amount of which depends
on the Policy's face amount and the insured's age and underwriting class. The
minimum single premium is $5,000. For certain group or sponsored arrangements,
the minimum single premium required may be reduced. Upon conversion from
certain term insurance issued by New England Mutual Life Insurance Company,
the Policy Owner will receive a credit toward the premium payment for the
Policy.
HOW IS THE PREMIUM INVESTED AND WHAT CHARGES ARE DEDUCTED?
NEVLICO deducts from the premium an administrative charge equal to $250.
NEVLICO also deducts the following three charges, which are referred to as the
"deferred charge". (Each charge is expressed as a percentage of the net
premium, which is equal to the single premium minus the administrative
charge.)
-- A charge for sales load equal to 4% of the net premium;
-- A charge for state premium taxes equal to 2% of the net premium; and
-- A minimum death benefit risk charge equal to 1.2% of the net premium for
a preferred risk Policy and 1.5% of the net premium for a standard risk
Policy. (See "Administrative Charge and Deferred Charge.")
The net premium is the amount first provided for investment in the Variable
Account. (See "Amount Provided for Investment in a Policy's Sub-Accounts".)
The premium minus the administrative charge and deferred charge is used to
determine the face amount.
5
<PAGE>
NEVLICO allocates to the Variable Account the net premium, which includes
the deferred charge, so as to increase the Policy's cash value by the amount
of the deferred charge. On each of the first 10 policy anniversaries, NEVLICO
will deduct from a Policy's cash value an amount equal to 10% of the total
deferred charge. (See "Variable Death Benefit" and "Cash Value of the
Policy".) The full amount of any unrecovered deferred charge will be deducted
from the cash value upon surrender of the Policy. The amount of cash value
available upon surrender of the Policy is referred to as the net cash
surrender value. (See "Cash Value and Net Cash Surrender Value of the
Policy.")
NEVLICO imposes a daily charge, at an effective annual rate of .45% of the
value of each sub-account's assets that come from the Policies, for the
mortality and expense risks NEVLICO assumes NEVLICO deducts charges from
policy cash values for the cost of providing insurance protection. Charges for
investment advisory and other operating expenses are deducted from the assets
of the New England Zenith Fund. (See "Charges and Expenses".)
WHAT IS THE GUARANTEED MINIMUM DEATH BENEFIT?
NEVLICO guarantees that the death benefit under a Policy will never be less
than its initial face amount regardless of the investment experience of the
Variable Account, as long as there is no outstanding policy loan. This amount
is the Guaranteed Minimum Death Benefit. (See "Guaranteed Minimum Death
Benefit" and "Loan Provision".)
HOW DOES THE DEATH BENEFIT VARY?
The death benefit payable with respect to a particular Policy is the greater
of the Guaranteed Minimum Death Benefit and the Variable Death Benefit,
subject to certain adjustments. (See "Death Benefit" and "Variable Death
Benefit".)
The Variable Death Benefit can increase or decrease on a monthly basis,
depending on the investment experience of the investment sub-account or sub-
accounts of the Variable Account in which the Policy Owner selected to have
the Policy's cash value invested (the "Policy's Sub-Accounts"). Once
established each month as of a "Monthly Valuation Date", the Variable Death
Benefit will not vary until the next succeeding Monthly Valuation Date. In the
first policy month, the Variable Death Benefit equals the face amount of the
Policy. Thereafter, the Variable Death Benefit will equal the Policy's initial
face amount, increased or decreased based on the Policy's actual investment
return. (See "The Policy's Actual Investment Return" and "Variable Death
Benefit".)
If, for a policy month, the dollar amount of the Policy's actual investment
return on its cash value, plus any cost of insurance adjustment for the
Policy, is greater than a return on the cash value less any unrecovered
deferred charge at the monthly equivalent of 4% per year, the Variable Death
Benefit will increase. If the dollar amount of the actual investment return on
the cash value, plus any cost of insurance adjustment, is less than a return
on the cash value less any unrecovered deferred charge at the monthly
equivalent of 4% per year, the Variable Death Benefit will decrease. The cost
of insurance adjustment for a Policy, if any, is equal to the difference
between the maximum guaranteed cost of insurance and the actual cost of
insurance for the Policy. Any increase or decrease in the Variable Death
Benefit will not bear a dollar-for-dollar relationship to the actual
investment return under the Policy. (See "Variable Death Benefit".)
The difference between the Policy's actual investment return on the cash
value (plus any cost of insurance adjustment) and a return of 4% on the cash
value less any unrecovered deferred charge is used to purchase (or cancel)
amounts of Variable Death Benefit at net single premium rates for the
insured's age at that time, as adjusted by a survivorship factor. (See
Appendix B.)
Increases and decreases in the Variable Death Benefit are cumulative, so
they carry into each succeeding policy month. Therefore, if there is an
increase in the Variable Death Benefit, a further actual investment return
(plus any cost of insurance adjustment) which exceeds a 4% annual return on
the cash value less any unrecovered deferred charge will produce a further
increase in the Variable Death Benefit. During some periods, the Variable
Death Benefit may be below the Guaranteed Minimum Death Benefit. In such
cases, the Variable Death Benefit will not exceed the Guaranteed Minimum Death
Benefit until the Policy has earned actual investment returns which, together
with any cost of insurance adjustment, exceed a return at an annual rate of 4%
for a sufficient period of time to more than offset the amount by which the
Variable Death Benefit is lower than the Guaranteed Minimum Death Benefit.
WHAT IS A POLICY'S ACTUAL INVESTMENT RETURN?
The actual investment return under a Policy reflects, for each sub-account
in which the Policy's cash value is invested, the investment performance of
the New England Zenith Fund shares held by the sub-account, reduced by the
amount of charges against the sub-account for the policy month. The Policy's
actual investment return also reflects interest credited on any loans under
the Policy. (See "The Policy's Actual Investment Return".)
6
<PAGE>
HOW DOES THE CASH VALUE VARY?
The cash value may vary as of each day that the New York Stock Exchange is
open for trading, depending upon the Policy's actual investment return.
Although NEVLICO guarantees a minimum death benefit. NEVLICO does not
guarantee a minimum amount of cash value. Accordingly, the Policy Owner will
bear the entire investment risk with respect to the amount of the cash value.
(See "Cash Value of the Policy" and Appendix A.)
HOW ARE CHANGES IN THE VARIABLE DEATH BENEFIT AND CASH VALUE DIFFERENT FOR A
PREFERRED RISK POLICY, A FEMALE INSURED'S POLICY AND A NON-SEX BASED POLICY?
The Policy provides for both guaranteed maximum cost of insurance rates and
actual cost of insurance rates. The actual charges will generally be more
favorable for a preferred risk or female insured than for a male standard risk
insured. Therefore, any change in the Variable Death Benefit or cash value
discussed above will generally be more favorable to the owner of a preferred
risk Policy or a female insured's Policy than for a comparable male insured's
standard risk Policy. However, for Policies sold in connection with certain
employer-sponsored benefit plans and fringe benefit programs, such changes
will be the same for both male and female insureds' Policies. Therefore, the
hypothetical Policy values shown throughout this prospectus for a male
insured's standard risk Policy would, in most cases, be somewhat different for
a Policy sold in connection with such plans and programs and which Policy does
not vary based on sex. (See "Group or Sponsored Arrangements" and Appendix C.)
For all Policies sold in Montana, changes in the Variable Death Benefit or
cash value will be the same for both male and female insured's Policies.
WHAT IS THE LOAN PROVISION, WHAT LOAN INTEREST RATE IS AVAILABLE, AND HOW DOES
A POLICY LOAN AFFECT THE DEATH BENEFIT AND CASH VALUE?
After the end of the "free look" period, the Policy Owner may obtain a loan
of up to 90% (or more if required by applicable state insurance law) of the
Policy's cash value, adjusted in the manner described in "Loan Provision".
Interest accrues daily at an annual rate of 5%. Interest is due on premium
anniversaries and is added to the amount of the policy loan if not paid when
due. A policy loan may be repaid in whole or in part at any time. If an
"excess policy loan" exists, the Policy may terminate. (See "Loan Provision".)
While a policy loan is outstanding, an amount of cash value equal to the
loan is removed from the Policy's Sub-Accounts and is held in NEVLICO's
general account. The amount held in the general account is credited with
interest at a net annual rate of 4% rather than at a rate determined by the
Variable Account's investment experience. This means that a policy loan
affects cash value and, in addition, that the amount borrowed cannot
contribute to any possible increase or decrease in the Policy's Variable Death
Benefit. The future cash value and Variable Death Benefit can be permanently
affected by any policy loan, whether or not the policy loan is repaid in whole
or in part. Also, the death benefit and cash value otherwise payable are
reduced by the amount of any outstanding policy loan and interest accrued
thereon. (See "Loan Provision".)
WHAT ARE THE MONEY MARKET, BOND INCOME, CAPITAL GROWTH, STOCK INDEX AND
MANAGED SUB-ACCOUNTS OF THE VARIABLE ACCOUNT?
NEVLICO's Variable Account has five sub-accounts which support the benefits
payable under the Policies -- a Money Market Sub-Account, a Bond Income Sub-
Account, a Capital Growth Sub-Account, a Stock Index Sub-Account and a Managed
Sub-Account. Each such investment sub-account of the Variable Account will
invest only in the shares of single portfolio of the New England Zenith Fund
(formerly the NEL Series Fund, Inc.)
The Money Market Sub-Account invests in shares of the Money Market Series,
which in turn purchases money market instruments with maturities of one year
or less. Its investment objective is to provide the highest possible level of
current income consistent with preservation of capital.
The Bond Income Sub-Account invests in shares of the Bond Income Series,
which in turn invests primarily in an investment quality bond portfolio. Its
investment objective is to provide a high level of current income consistent
with protection of capital and moderate investment risk.
The Capital Growth Sub-Account invests in shares of the Capital Growth
Series, which in turn invests primarily in common stocks of companies that are
considered to have the potential for capital appreciation. Its investment
objective is long-term growth of capital. (See "Investment of the Variable
Account".)
The Stock Index Sub-Account invests in shares of the Stock Index Series,
which in turn invests primarily in common stocks. Its investment objective is
to provide investment results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The Managed Sub-
Account invests in shares of the Managed Series, which in turn may
7
<PAGE>
invest in (i) common stocks, (ii) notes and bonds and (iii) money market
instruments. Its investment objective is to provide a favorable total
investment return through investment in a diversified portfolio.
The New England Zenith Fund is an open-end diversified management investment
company which has served as the investment medium for NEVLICO's Variable
Account since they commenced operations. Back Bay Advisors, Inc. ("Back Bay
Advisors"), a wholly-owned subsidiary of New England Life Companies, Inc.
("NELC"), which is a wholly-owned subsidiary of The New England, acts as
investment adviser to the New England Zenith Fund's Money Market Series, Bond
Income Series, Stock Index Series and Managed Series. Loomis, Sayles &
Company, Incorporated ("Loomis Sayles"), acts as investment adviser to the
Capital Growth Series. The New England indirectly owns a controlling interest
in Loomis Sayles. Back Bay Advisors and Loomis Sayles are paid fees by the New
England Zenith Fund for rendering such investment advice. (See "Investment
Management", the New England Zenith Fund prospectus attached at the end of
this prospectus and the Statement of Additional Information which is available
upon request).
HOW ARE AMOUNTS ALLOCATED TO EACH SUB-ACCOUNT OF THE VARIABLE ACCOUNT?
As of the "investment start date," the net premium will be allocated to the
Money Market Sub-Account until the later of 45 days after the date Part I of
the application is signed or 10 days after mailing by NEVLICO of the Notice of
Withdrawal Right. (See "Is there a short-term cancellation right, or "free
look'?" and "Amount provided for investment in a Policy's Sub-Accounts." For
the definition of the "investment start date," see "Amount Provided for
Investment in a Policy's Sub-Accounts.") The Policy Owner will designate on
the application what percentage of the cash value will be invested thereafter
in NEVLICO's Money Market, Bond Income, Capital Growth, Stock Index or Managed
Sub-Accounts. The percentage initially allocated to any one sub-account may
not be less than 10% of the cash value, and must be a whole number. A Policy
Owner may redistribute the Policy's cash value among sub-accounts up to four
times in a policy year without the consent of NEVLICO. (See "Investment and
Transfer Options".)
ARE THERE CHARGES AGAINST THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT AND AGAINST
THE NEW ENGLAND ZENITH FUND?
NEVLICO charges the sub-accounts of the Variable Account for the mortality
and expense risks NEVLICO assumes. The charge is made daily at an effective
annual rate of .45% of the value of each sub-account's assets that come from
Single Premium Variable Life Insurance Policies. NEVLICO also makes a monthly
charge for the cost of insurance with respect to each Policy. Charges for
investment advisory expenses are deducted from the assets of the New England
Zenith Fund at the following maximum annual percentage rates of the current
daily net asset value of each respective portfolio: .35% for the Money Market
Series, .40% for the Bond Income Series, .70% for the Capital Growth Series,
.25% for the Stock Index Series and .50% for the Managed Series. (See "Charges
Against the New England Zenith Fund and the Sub-Accounts of the Variable
Account".)
NEVLICO is a relatively new life insurance company and does not expect to
incur any substantial Federal income tax liabilities for a number of years. In
addition, under current Federal income tax law no tax is imposed upon 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
attributable to operations of the Variable Account. If changes are made in the
Federal income tax treatment of variable life insurance at the company level,
NEVLICO reserves its rights to charge the Variable Account for company Federal
income taxes.
WHAT COMMISSIONS ARE PAID TO AGENTS?
The Policies are sold through agents who are licensed by state authorities
to sell NEVLICO's insurance policies and who are also registered
representatives of New England Securities Corporation ("New England
Securities"), the principal underwriter of the Variable Account. New England
Securities is a wholly-owned subsidiary of NELC. The Policies may also be sold
through other broker-dealers which have a selling agreement with New England
Securities and whose representatives are authorized by applicable law to sell
variable life insurance policies. Commissions to registered representatives
are not more than 3% of the premium paid. NEVLICO general agents will also
receive override payments and reimbursement for portions of expenses incurred
in connection with the sale of the Policies.
IS THERE A SHORT-TERM CANCELLATION RIGHT, OR "FREE LOOK"?
The Policy Owner may cancel the Policy within 45 days after the date Part I
of the application is signed, within 10 days after receipt of the Policy by
the Policy Owner or within 10 days after mailing by NEVLICO of the Notice of
Withdrawal Right, whichever is latest. The Policy may be returned to NEVLICO
or its agent. Within 7 days after receipt of the returned Policy at NEVLICO's
Principal Administrative Office. NEVLICO will refund any premium paid before
cancellation plus interest on the premium from the date of receipt of the
premium at a rate established by NEVLICO from time to time. (See "When are
communications and payments deemed received at NEVLICO's Principal
Administrative Office?") Immediately upon refund of the premium, the Policy
shall be deemed void from the beginning.
8
<PAGE>
CAN A POLICY BE EXCHANGED FOR A FIXED-BENEFIT LIFE INSURANCE POLICY?
Within 24 months after a Policy's date of issue, the Policy may be exchanged
for a fixed-benefit single premium policy on the life of the insured which is
issued by New England Mutual Life Insurance Company. This exchange may be made
without the submission of evidence of insurability. The new policy will have
the same face amount as the Policy. For Policies issued in New York, the
Policy Owner has the option of exchanging to a new policy with a face amount
equal to the current death benefit of the exchanged Policy. If the investment
policy of the Variable Account is changed, a Policy Owner will have the right
to exchange the Policy for a fixed-benefit single premium policy issued by New
England Mutual Life Insurance Company. The request for exchange must be made
within 60 days of the later of (i) the effective date of the investment policy
change and (ii) the date the Policy Owner receives the notice of such change
from NEVLICO. (See "Exchange of Policy".)
WHEN ARE COMMUNICATIONS AND PAYMENTS DEEMED RECEIVED AT NEVLICO'S PRINCIPAL
ADMINISTRATIVE OFFICE?
A Policy Owner's request for a particular transaction (other than a policy
loan) or a Policy Owner's submission of an item (for example, a return Policy)
is deemed received at NEVLICO's Principal Administrative Office on any day
when the New York Stock Exchange is open if received there before the closing
of the Exchange (currently 4:00 p.m.) on such day. A request for a policy loan
is deemed received at NEVLICO's Principal Administrative Office on a day when
the New York Stock Exchange is open if received at NEVLICO's Principal
Administrative Office before 7:00 p.m. New York City time on such day.
However, if any such item is received at or after the above-specified times,
the request will be deemed received as of the next such day.
ARE THE BENEFITS UNDER A POLICY SUBJECT TO FEDERAL INCOME TAX?
Section 7702 of the Internal Revenue Code (hereinafter "Code") provides for
a definition of a life insurance contract for Federal income tax purposes.
This definition applies to the Policies discussed herein and NEVLICO believes
these Policies meet the definition.
NEVLICO believes the death benefits received under its Single Premium
Variable Life Insurance Policies are excludable from the gross income of the
beneficiary pursuant to the provisions of Section 101(a) of the Code.
Furthermore, NEVLICO believes Policy Owners will not be deemed to be in
constructive receipt of the cash values, including increments thereon, under
such Policies until their actual surrender. In the event of a distribution
under the Policies which has the net effect of reducing future benefits (such
as future death benefits) under the Policies, the distribution may be taxable
of the Policy Owner as ordinary income to the extent of any investment
earnings in the Policy. In addition, NEVLICO believes that loans received
under a Policy will not be treated as taxable income to the Policy Owner. (See
"Tax Considerations".)
Since tax consequences depend on the individual circumstances of the Policy
Owner or beneficiary of a Policy, NEVLICO recommends that each prospective
Policy Owner consult his or her own tax advisor before purchasing a Policy.
THE VARIABLE ACCOUNT
NEVLICO's Variable Account was established as a separate investment account
of NEVLICO on January 31, 1983 by NEVLICO's Board of Directors in accordance
with the provisions of Section 2932 of the Delaware Insurance Code. If acts as
the funding vehicle for certain variable life insurance policies issued by
NEVLICO in addition to the Policies.
NEVLICO's Variable Account is registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940 as a unit
investment trust. A unit investment trust is a type of investment company
which invests its assets in specified securities, such as the shares of one or
more investment companies, rather than in a portfolio of unspecified
securities. Registration under the Investment Company Act of 1940 does not
involve supervision by the SEC of the management or investment practices or
policies of NEVLICO's Variable Account or of NEVLICO. Under Delaware law,
however, both NEVLICO and NEVLICO's Variable Account are subject to regulation
by the Delaware Insurance Commissioner. NEVLICO and its variable life
insurance operations, including the investment of assets held by NEVLICO's
Variable Account, are also subject to the insurance laws and regulations of
all jurisdictions in which NEVLICO is authorized to do business.
Although the assets of NEVLICO's Variable Account are owned by NEVLICO, that
portion of NEVLICO's Variable Account assets equal to the reserves and other
liabilities of the NEVLICO's Variable Account may not be used to satisfy any
obligations that may arise out of any other business NEVLICO may conduct. But
NEVLICO may transfer to its general account assets which exceed the reserves
and other liabilities of NEVLICO's Variable Account. Before making any such
transfer, NEVLICO will consider any possible adverse impact the transfer might
have on the NEVLICO's Variable Account.
9
<PAGE>
Income and realized and unrealized capital gains and losses of NEVLICO's
Variable Account are credited to NEVLICO's Variable Account without regard to
any of NEVLICO's other income or realized and unrealized capital gains and
losses.
NEVLICO may accumulate in NEVLICO's Variable Account the charge for expense
and mortality risks, mortality gains and losses and investment results
applicable to those assets that are in excess of net assets supporting the
Policies.
INVESTMENTS OF THE VARIABLE ACCOUNT
NEVLICO's Variable Account has five investment sub-accounts, each of which
invests in the shares of one portfolio of the New England Zenith Fund. The
sub-accounts of the Variable Account, that are available in connection with a
Policy, are:
-- The Money Market Sub-Account--Amounts credited to this sub-account are
invested in shares of the Money Market Series.
-- The Bond Income Sub-Account--Amounts credited to this sub-account are
invested in shares of the Bond Income Series.
-- The Capital Growth Sub-Account--Amounts credited to this sub-account are
invested in shares of the Capital Growth Series.
-- The Stock Index Sub-Account--Amounts credited to this sub-account are
invested in shares of the Stock Index Series.
-- The Managed Sub-Account--Amounts credited to this sub-account are
invested in shares of the Managed Series.
The New England Zenith Fund is an open-end, diversified management
investment company organized by The New England for the purpose of providing a
vehicle for the investment of assets held in various separate investment
accounts, including NEVLICO's Variable Account, established by NEVLICO or by
other life insurance companies, to the extent legally permissible.
For each day when the New York Stock Exchange is open for trading, the
Variable Account purchases or redeems shares of the New England Zenith Fund
portfolios based on, among other things, the amount of a Policy's net premium
invested in the Variable Account, transfers among sub-accounts of the Variable
Account, policy loans, policy loan repayments, surrender payments and death
benefit payments to be effected on that day. Such purchases and redemptions
are effected at the net asset value per share for each New England Zenith Fund
portfolio determined as of 4:00 p.m. New York City time, on that same day.
The investment objectives of the New England Zenith Fund's five portfolios
currently available to Policy Owners through each corresponding sub-account
are set forth below. There is, of course, no assurance that these objectives
will be met.
The Money Market Sub-Account invests in shares of the New England Zenith
Fund's Money Market Series. Its investment objective is to provide the highest
possible level of current income consistent with preservation of capital. The
Money Market Series seeks to achieve its objective through investment in a
managed portfolio of money market instruments.
The Bond Income Sub-Account invests in shares of the New England Zenith
Fund's Bond Income Series. Its investment objective is to provide a high level
of current income consistent with protection of capital and moderate
investment risk. The Bond Income Series seeks to achieve its objective through
investment primarily in an investment quality bond portfolio.
The Capital Growth Sub-Account invests in shares of the New England Zenith
Fund's Capital Growth Series. Its investment objective is long-term growth of
capital through investment primarily in common stocks of companies that are
considered to have the potential for capital appreciation.
The Stock Index Sub-Account invests in shares of the New England Zenith
Fund's Stock Index Series. Its investment objective is to provide investment
results that correspond to the composite price and yield performance of United
States publicly traded common stocks. The Stock Index Series currently seeks
to achieve its investment objective by attempting to duplicate the composite
price and yield performance of the Standard & Poor's 500 Composite Stock Price
Index.
The Managed Sub-Account invests in shares of the New England Zenith Fund's
Managed Series. Its investment objective is to provide a favorable total
investment return through investment in a diversified portfolio. The Managed
Series portfolio is expected to include (i) common stocks, (ii) notes and
bonds and (iii) money market instruments.
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<PAGE>
The basic objective of the Policy is to provide benefits which will increase
in value if 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 Capital Growth or Stock Index Sub-
Account may, therefore, be a more desirable selection for Policy Owners who
are willing to accept such risks of short-term fluctuations in value.
The performance of the various financial markets over the past several
years, however, has differed from their long-term historical results. Short-
term interest rates were very high at one time but have recently been much
lower. Long-term bond values have fluctuated to a much greater extent than in
the past, and common stock prices, which have risen substantially at times,
have recently been quite volatile. Policy Owners who seek somewhat greater
protection against loss of principal than that afforded by a stock fund may
prefer the Bond Income Sub-Account. Those who seek even greater safety of
principal may select the Money Market Sub-Account, even though it is subject
to possible rapid changes in the level of short term interest rates.
A Policy Owner may wish to diversify his or her investments by allocating
the Policy's cash value among two or more sub-accounts. Policy Owners who
diversify by selecting the Managed Sub-Account thereby obtain the services of
a professional investment adviser in achieving an asset mix. The selection of
a Policy's sub-accounts is a matter of each Policy Owner's own choice and
should depend on that Policy Owner's willingness to accept investment risks,
the manner in which the Policy Owner's other assets are invested, and the
Policy Owner's own assessment of future economic and financial market
conditions.
A full description of the New England Zenith Fund, its investment
objectives, policies and restrictions, its expenses and other aspects of its
operation, as well as a full description of risks related to investment in the
New England Zenith Fund, is contained in the attached New England Zenith Fund
prospectus, which should be read and retained together with this prospectus,
as well as in the New England Zenith Fund's Statement of Additional
Information which may be obtained free of charge from New England Securities.
INVESTMENT MANAGEMENT
Back Bay Advisors, an indirect wholly-owned subsidiary of The New England,
acts as investment adviser to the Money Market Series, the Bond Income Series,
the Stock Index Series and the Managed Series, and Loomis Sayles acts as
investment adviser to the Capital Growth Series, both pursuant to investment
advisory agreements with the New England Zenith Fund. Both Back Bay Advisors
and Loomis Sayles are registered investment advisers under the Investment
Advisers Act of 1940. The New England formerly served as investment adviser to
the Money Market Series and the Bond Income Series. Effective September 10,
1986, with the approval of the Board of Directors of the New England Zenith
Fund, Back Bay Advisors assumed the responsibilities of The New England under
the advisory agreement with The New England with respect to those Series. Back
Bay Advisors was formed by The New England in order to house its investment
advisory activities in a separate corporate entity for administrative and
regulatory purposes. Loomis Sayles, an affiliate of The New England, is one of
the largest and oldest investment counsel firms in the United States. For its
investment management and advisory services, each investment adviser is paid a
fee through a daily charge to the separate portfolios. The fee is calculated
by applying the daily equivalent of annual percentage rates specified in the
advisory agreements to the current daily net asset value of each respective
portfolio, as follows:
<TABLE>
<CAPTION>
ANNUAL
PERCENTAGE DAILY NET
PORTFOLIO ADVISER RATE ASSET VALUE LEVELS
- --------- ------- ---------- ------------------
<S> <C> <C> <C>
Money Market Series Back Bay Advisors .35% of the first $500 million
.30% of the next $500 million
.25% of amounts in excess of $1 billion
Bond Income Series Back Bay Advisors .40% of the first $400 million
.35% of the next $300 million
.30% of the next $300 million
.25% of amounts in excess of $1 billion
Capital Growth Series Loomis Sayles .70% of the first $200 million
.65% of the next $300 million
.60% of amounts in excess of $500 million
Stock Index Series Back Bay Advisors .25% of net asset value
Managed Series Back Bay Advisors .50% of net asset value
</TABLE>
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<PAGE>
Back Bay Advisors and Loomis Sayles also perform investment advisory
services for a number of other accounts and clients, including a number of
mutual and variable funds and certain subsidiaries of The New England. If the
total ordinary business expenses of a particular portfolio exceed certain
limitations for a given fiscal year, the portfolio's investment adviser will
pay such excess. Certain of the New England Zenith Fund's operating expenses
will be paid by the New England Zenith Fund. (See "Charges Against the New
England Zenith Fund and the Sub-Accounts of the Variable Account".) The
remainder of such expenses will be borne by The New England. For a discussion
of other provisions of the advisory agreements, see the New England Zenith
Fund prospectus attached at the end of this prospectus and the New England
Zenith Fund's Statement of Additional Information.
CHARGES AND EXPENSES
ADMINISTRATIVE CHARGE AND DEFERRED CHARGE
ADMINISTRATIVE CHARGE. NEVLICO deducts an administrative charge from the
single premium of $250. This charge covers the cost of: (i) processing
applications; (ii) conducting medical examinations; (iii) establishing Policy
records; (iv) determining insurability and assigning the insured to a risk
classification; (v) processing claims, paying net cash surrender values upon
surrender and making Policy changes; (vi) recordkeeping; (vii) communicating
with Policy Owners; and (viii) other expenses, such as communicating with
agents.
The determination of the amount of the single premium payment involves
calculations which may require rounding. The administrative charge may be
reduced, to the extent necessary, to compensate for the effect of rounding the
single premium payment. In no event will this rounding process result in
adverse consequences to the Policy Owner.
The premium less the administrative charge equals the net premium, which
determines the initial amount provided for investment in the Variable Account.
The sales charge, minimum death benefit risk charge, and state premium tax
charge described below are referred to as the deferred charge and are included
in the amount initially provided for investment in the Variable Account.
Thereafter the deferred charge is subtracted from the Policy's cash value in
equal installments on each of the first 10 policy anniversaries. The premium
minus the administrative charge and deferred charge is used to determine the
face amount.
SALES CHARGE. The charge for sales load made by NEVLICO will equal 4% of the
new Premium. The amount of the sales charge cannot be specifically related to
NEVLICO's sales expenses. To the extent sales expenses are not covered by the
sales charge, they will be recovered from surplus and other funds. Sales
charges for Policies sold under certain group or sponsored arrangements may be
lower than for Policies sold otherwise. (See "Group or Sponsored
Arrangements.")
NEVLICO expects that revenues from the sales charge will fall short of
covering total distribution expenses. NEVLICO will realize a gain if the
minimum death benefit risk charge or the mortality and expense risk charge is
more than sufficient to cover its actual cost of such death benefit and
expense commitments. Any such excess may be used to cover distribution costs.
MINIMUM, DEATH BENEFIT RISK CHARGE. NEVLICO charges 1.2% of the net premium
for a preferred risk Policy and 1.5% of the net premium for a standard risk
Policy to provide for the possibility that the insured will die at a time when
the Variable Death Benefit would be less than the Guaranteed Minimum Death
Benefit of the Policy.
STATE PREMIUM TAX CHARGE. NEVLICO deducts 2% of the net premium to cover
state premium taxes. These taxes vary from state to state and the 2% rate is
an average.
CHARGES AGAINST THE NEW ENGLAND ZENITH FUND AND THE SUB-ACCOUNTS OF THE
VARIABLE ACCOUNT
Charges for investment advisory expenses, SEC registration expenses and
independent trustees' compensation and fees of legal counsel to the
independent trustees are deducted from the assets of the New England Zenith
Fund. (See "Investment Management" and Appendix A.)
NEVLICO charges the sub-accounts of the Variable Account for the mortality
and expense risks NEVLICO assumes. The charge is made daily at an effective
annual rate of .45% of the value of each sub-account's assets that come from
Single Premium Variable Life Insurance Policies. The mortality risk NEVLICO
assumes is that insureds may live for shorter periods of time than NEVLICO
estimated. The expense risk NEVLICO assumes is that NEVLICO's costs of issuing
and administering Policies may be more than NEVLICO estimated.
If all the money NEVLICO collected from this charge is not needed to cover
death benefits and expenses, the money will be contributed to NEVLICO's
general account. Conversely, even if the money NEVLICO collects is
insufficient. NEVLICO will provide for all death benefits and expenses.
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<PAGE>
In the future, if appropriate, NEVLICO will impose a charge for certain
income taxes incurred in connection with the Variable Account. (See "Charge
for NEVLICO's Income Taxes".)
COST OF INSURANCE CHARGES
The cost of providing insurance protection for a Policy is deducted on the
last day of each policy month. A prorated charge for the cost of insurance
protection is deducted on the date the Policy is surrendered. If it is other
than the last day of a Policy month. (See Appendix C.)
GUARANTEE OF CERTAIN CHARGES
NEVLICO guarantees, and may not increase, the amount of the charges deducted
from premiums and charges to the subaccounts of the Variable Account for
mortality and expense risks. For a discussion of the extent to which the cost
of providing insurance protection is guaranteed, reference should be made of
Appendix C.
GROUP OR SPONSORED ARRANGEMENTS
Policies may be purchased under 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 on a group basis. 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
Policies on an individual basis.
The charge for sales load described in "Administrative Charge and Deferred
Charge" may be reduced for Policies issued in connection with group or
sponsored arrangements. NEVLICO will reduce the sales charge in accordance
with its rules in effect as of the date an application for a Policy is
approved. To qualify for such a 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 per Policy vary based on
such factors as the size of the group or sponsored arrangement, its stability
as indicated by its term of existence, the purposes for which Policies are
purchased and certain characteristics of its members. The amount of reduction
and the criteria for qualification will reflect the reduced sales effort
resulting from sales to qualifying groups and sponsored arrangements.
NEVLICO may modify from time to time on a uniform basis, both the amounts of
reductions and the criteria for qualification. In no event, however, will
group or sponsored arrangements established for the sole purpose of purchasing
Policies, of which have been in existence for less than six months, qualify
for such reductions. Reductions in 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.
In 1983 the United States Supreme Court held that certain insurance
policies, the benefits under which vary based on sex, may not be used to fund
certain employer-sponsored benefit plans and fringe benefit programs.
Therefore, NEVLICO offers Policies which do not vary based on sex for use in
connection with certain employer-sponsored benefit plans and fringe benefit
programs. NEVLICO recommends that any employer proposing to offer the Policies
to employees under a group or sponsored arrangement consult his or her
attorney before doing so. (See Appendix C.)
PRINCIPAL POLICY FEATURES
The benefits payable under the Single Premium Variable Life Insurance
Policies sold by NEVLICO are funded by NEVLICO's Variable Account. A Policy's
cash value is allocated to one or more of the Variable Account's five sub-
accounts, each of which invests, in turn, in the shares of a distinct
portfolio of the New England Zenith Fund. Policies are non-participating
policies and have no right to share in NEVLICO's earnings or surplus.
THE POLICY'S ACTUAL INVESTMENT RETURN
The actual investment return for a Policy affects the amount of the Policy's
Variable Death Benefit and cash value. For the purpose of calculating Variable
Death Benefits, the actual investment return of a Policy is determined as of
each Monthly Valuation Date, and for the purpose of calculating cash values,
it is determined as of each day the New York Stock Exchange is open for
trading. (See "How does the death benefit vary?", and "How does the cash value
vary?") For both purposes, the
13
<PAGE>
calculation is made as of the closing of the New York Stock Exchange
(currently 4:00 p.m. New York City time) on the day as of which the
calculation is made. A Policy's actual investment return with respect to cash
value held in a sub-account for any period equals the investment performance
of the underlying New England Zenith Fund shares for the same period, reduced
by the amount of the charges against the sub-account for such period. The
investment performance of the underlying New England Zenith Fund shares is the
increase or decrease in the net asset value (which takes into account the
amount of advisory fees charged against the Fund) of such shares during the
period, increased by the amount of any dividends or capital gains
distributions on such shares during the period. Such dividends and
distributions will be reinvested in New England Zenith Fund shares and will
thereby affect subsequent investment performance. Charges against the Policy's
Sub-Accounts initially will be made only for the mortality and expense risks
NEVLICO assumes. In the future, NEVLICO will also impose a charge against the
sub-accounts for income taxes, if appropriate. (See "Charges Against the New
England Zenith Fund and the Sub-Accounts of the Variable Account" and "Charge
for NEVLICO's Income Taxes".)
DEATH BENEFIT
Subject to the adjustments referred to below, the death benefit will equal
the greater of the Variable Death Benefit and the Guaranteed Minimum Death
Benefit as of the date of death of the insured. Whether a Policy's Variable
Death Benefit is higher than the Guaranteed Minimum Death Benefit depends on
the Policy's actual investment return. (See Appendix A.)
The amount of death benefit actually paid to the insured's beneficiary will
be reduced by any outstanding policy loan plus accrued interest. (See
"Variable Death Benefit", "Loan Provision" and "Limits On NEVLICO's Right to
Challenge the Policy".) The death benefit will reflect any adjustments
necessary as a result of: (i) misstatement of the insured's age or sex made in
the application for insurance; (ii) the insured's suicide within two years
from the Policy's date of issue (or less as required by the applicable state
law); (iii) exercise of NEVLICO's right to challenge the validity of the
Policy within two years from the date of issue; or (iv) any limits imposed by
rider on the amount of death proceeds payable under a Policy. (See "Limits to
NEVLICO's Right to Challenge the Policy".)
Interest will be paid from the date of death to the date of payment at a
rate determined each year by NEVLICO in accordance with applicable state law.
(See "Payment Options" and "Payment of Proceeds".)
GUARANTEED MINIMUM DEATH BENEFIT
The Guaranteed Minimum Death Benefit equals the initial face amount
specified in a Policy, regardless of the actual investment return of the
Policy's Sub-Accounts (with the proceeds payable reduced by any outstanding
policy loan plus accrued interest).
VARIABLE DEATH BENEFIT
The Variable Death Benefit reflects all past actual investment returns of
the Policy's Sub-Accounts. In the first policy month, a Policy's Variable
Death Benefit equals the initial face amount specified in the Policy. After
the first policy month, the Policy's Variable Death Benefit may change
depending on the actual investment return of the Policy's Sub-Accounts and on
the sex, age and underwriting class of the insured. If, for a policy month,
the dollar amount of the Policy's actual investment return on its cash value,
plus any cost of insurance adjustment for the Policy, is greater than a return
on the cash value less any unrecovered deferred charge at the monthly
equivalent of 4% per year (a "positive net investment factor"), the Variable
Death Benefit will increase. If the dollar amount of the actual investment
return on the cash value plus any cost of insurance adjustment is less than a
return on the cash value less any unrecovered deferred charge at the monthly
equivalent of 4% per year (a "negative net investment factor"), the Variable
Death Benefit will decrease. (The return on the cash value less any
unrecovered deferred charge at the monthly equivalent of 4% per year is
referred to in the Policy as the "Base Investment Return".) The cost of
insurance adjustment for a Policy, if any, is equal to the difference between
the maximum guaranteed cost of insurance and the actual cost of insurance for
the Policy. The amount of this difference will vary with the sex (if the
Policy is sex-based), age and underwriting class of the insured.
The amount of the positive (or negative) net investment factor is used to
purchase (or cancel) amounts of paid-up life insurance at net single premium
rates described in the policy for the insured's age. Such rates are adjusted
by a survivorship factor. The survivorship factor accounts for the fact that
the actual investment return of the immediately preceding policy month is
allocated to the Variable Death Benefits only of Policies whose insureds
survive until that Monthly Valuation Date. The survivorship factor equals one
minus the cost of insurance rate for the insured. (See Appendix B.) The amount
of increase or decrease in the Variable Death Benefit will generally be more
favorable for the Policy of a preferred risk or (except in the case of
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<PAGE>
a non-sex-based Policy) female insured than for the comparable Policy of a
standard risk male insured. (See Appendix B and Appendix C.) The net single
premium rates used to purchase increases or decreases in the Variable Death
Benefit rise as the insured grows older. (See Appendix B.)
During the first ten policy years, in calculating the net investment factor,
the Policy's actual investment return is reduced by a 4% annual rate of return
only on the portion of cash value which is exclusive of any unrecovered
deferred charge.
A Policy's Variable Death Benefit is determined monthly as of the Policy's
Monthly Valuation Date. Once determined, the Variable Death Benefit for a
Policy remains the same for the following policy month. The Policy Owner
foregoes any increase and avoids any decrease in the Variable Death Benefit
until the next Monthly Valuation Date. (See "How does the death benefit
vary?")
The Variable Death Benefit for a Policy is cumulative. Increases and
decreases in the Variable Death Benefit are carried into each succeeding
policy month. The Variable Death Benefit for a Policy can be higher or lower
than the Guaranteed Minimum Death Benefit. If the Variable Death Benefit is
higher than the Guaranteed Minimum Death Benefit, a subsequent positive net
investment factor will produce a larger Variable Death Benefit. If the
Variable Death Benefit is lower than the Guaranteed Minimum Death Benefit,
subsequent positive net investment factors must first offset the amount by
which the Variable Death Benefit is lower than the Guaranteed Minimum Death
Benefit: the Variable Death Benefit will then become higher than the
Guaranteed Minimum Death Benefit if the Policy's Sub-Accounts experience
further positive net investment factors.
EXAMPLE: Using the Policy illustrated on page 30 assume a hypothetical
constant gross annual rate of return for the Policy's Sub-Accounts of 0% for
the first 5 policy years. This results in a Variable Death Benefit below the
Guaranteed Minimum Death Benefit. Actual investment returns at a constant
annual rate of approximately 8.7% in policy years 6-10 would be necessary to
offset the amount by which the Variable Death Benefit is lower than the
Guaranteed Minimum Death Benefit so that they would be equal at the end of the
tenth year. Any subsequent actual investment returns at an annual rate in
excess of 4% would produce a Variable Death Benefit higher than the Guaranteed
Minimum Death Benefit.
AMOUNT PROVIDED FOR INVESTMENT IN A POLICY'S SUB-ACCOUNTS
An amount is first provided for investment in a Policy's Sub-Accounts as of
the "investment start date", which is the latest of the date NEVLICO receives
the premium for the Policy, the date Part II of the Policy application is
signed and the policy date. If the premium has been paid with the application,
the policy date is the later of the date Part II of the application has been
signed and receipt of the premium, and, in such cases, is the same as the
investment start date. In such cases, the amount provided for investment is
equal to the Policy's net premium.
The insured is covered under the terms of a temporary insurance agreement
during any period between (i) the date by which NEVLICO receives both the
premium for the Policy and Part II of the application and (ii) the date
variable life insurance coverage commences. The temporary insurance agreement
provides insurance coverage in limited amounts, depending on the amount of
insurance applied for and the risk classification of the insured. The maximum
amount of coverage available under the agreement for a standard or preferred
risk is $500,000 or the amount of insurance applied for, if less. The maximum
coverage available under the agreement for a substandard risk is the lesser of
$250,000 and the amount of insurance applied for. The maximum coverage
available if the insured is determined to be uninsurable if $50,000. Coverage
under the agreement terminates on the earliest of: (i) the date the variable
life policy is delivered to the applicant: (ii) the date of which NEVLICO
notifies the applicant of termination of the agreement and refunds the premium
paid, and (iii) 60 days after the date Part II of the Policy application is
signed. If a Policy is issued and accepted, cost of insurance charges will
accrue from the policy date even if the Policy issuance was delayed due to
underwriting requirements, will be deducted at the end of each policy month,
and will be in amounts based on the face amount of the Policy issued,
regardless of the limitations on coverage under the temporary insurance
agreement. Upon declining an application, NEVLICO will refund the premium paid
plus interest on the premium at a rate established by NEVLICO from time to
time.
If the premium is to be paid upon delivery of the Policy, the Policy will be
issued with 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 cost of insurance deductions will accrue from the
policy date. Interest at a 4% rate will be credited to the Policy for the
period, if any, between the policy date and the investment start date.
Insurance coverage will begin upon receipt of the premium.
Under limited circumstances, NEVLICO may backdate a policy, upon request, by
deeming the policy date earlier than the date the application is signed. For a
backdated policy, the net premium is reduced by the accumulated cost of
insurance
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<PAGE>
deductions for the period from the policy date to the investment start date
and increased by interest on such adjusted premium at 4% for the same period.
As of each day the New York Stock Exchange is open for trading ("Valuation
Date"), the amount provided for investment in a Policy's Sub-Accounts will be
adjusted to reflect the net investment experience of those sub-accounts for
that day.
CASH VALUE AND NET CASH SURRENDER VALUE OF THE POLICY
The cash value of a Policy for a given day is equal to the net premium plus
or minus any accumulated actual investment returns for the Policy adjusted
through the most recent Valuation Date; plus any interest payable by NEVLICO
on amounts transferred to its general account as a result of a policy loan;
minus any portion of the deferred charge which has been deducted from the cash
value; minus accumulated deductions for the cost of insurance. The cost of
insurance is deducted from the cash value on the last day of each policy
month, and a prorated charge for the cost of insurance protection is deducted
on the date the Policy is surrendered, if it is other than the last day of the
policy month. The net premium includes the deferred charge. On each of the
first 10 policy anniversaries, NEVLICO will reduce a Policy's cash value in
equal installments of 10% of the total deferred charge. The deferred charge is
removed from the Policy's Sub-Accounts in proportion to the Policy's cash
value then in each such Sub-Account. (See "How are amounts allocated to each
sub-account of the Variable Account?", "Administrative Charge and Deferred
Charge", and Appendix C.)
The net cash surrender value is the amount which the Policy Owner may obtain
upon surrender of the Policy. (The net cash surrender value is referred to in
the Policy as the "Net Cash Value".) The net cash surrender value of a Policy
is its cash value on the date of surrender; minus any outstanding policy loan
and accrued interest; and minus the amount of any unrecovered deferred charge
remaining in the cash value. The net cash surrender value of a Policy may
increase or decrease on each Valuation Date, depending on the net investment
experience of the Policy's Sub-Accounts. The Policy Owner bears the entire
risk for a reduction of the net cash surrender value since there is no
guaranteed minimum cash value.
SURRENDER. A Policy may be surrendered in whole or in part for its net cash
surrender value while the insured is living. Surrendering a Policy in part
involves splitting a Policy into two Policies; one is surrendered for its net
cash surrender value; the other is continued in force. The continued Policy
must meet minimum issue requirements. For certain group or sponsored
arrangements, the minimum issue requirements may be reduced.
To surrender a Policy in whole, the Policy Owner must send a written
request, signed by the Policy Owner, to NEVLICO's Principal Administrative
Office. To surrender a Policy in part, the Policy Owner must send a written
request, signed by the Policy Owner, together with the Policy to NEVLICO's
Principal Administrative Office. The net cash surrender value of a surrendered
Policy will be determined as of the date of receipt of the necessary
documentation at NEVLICO's Principal Administrative Office. (See "Payment of
Proceeds".)
Upon partial surrender, a portion of the unrecovered deferred charge will be
deducted in an amount derived by applying the proportion of the dollar amount
of the Policy cash value surrendered to the total Policy cash value at the
time of the partial surrender. Thereafter, the unrecovered deferred charge to
be applied against the remaining Policy cash value in annual installments will
be reduced by the amount deducted at the time of the partial surrender.
LOAN PROVISION
A Policy Owner may borrow all or part of the Policy's "loan value" at any
time after the end of the "free look" period. The Policy will be security for
the policy loan. The amount available to be borrowed at any time is equal to
the loan value less any outstanding policy loan and accrued interest. NEVLICO
will make a policy loan as of the policy loan date -- the date as of which a
loan request is received at NEVLICO's Principal Administrative Office. (See
"When are communications and payments deemed received at NEVLICO's Principal
Administrative Office?")
The Policy's loan value is equal to 90% (or more if required by applicable
state insurance law) of: the Policy's cash value as of the date of receipt of
the loan request at NEVLICO's Principal Administrative Office, projected
(assuming a constant annual rate of return of 4%) to the next policy
anniversary; minus any unrecovered deferred charge; and discounted at the
interest rate (5%) charged on the policy loan. A fixed loan interest rate of
5% per year is charged on policy loans, accrues daily, and is due on premium
anniversaries. Any interest remaining unpaid when due will be added to the
outstanding policy loan. (See "Payment of Proceeds".)
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EXAMPLE: Using the policy illustrated on page 30, assume a constant 8%
hypothetical gross annual rate of return for the Policy's Sub-Accounts (which
equals an actual investment return at a constant annual rate of 7.02%.)
Immediately following the 5th policy anniversary, the maximum amount that
could be borrowed would be determined as follows:
<TABLE>
<C> <S> <C>
(1) Cash value immediately following the 5th anniversary........ $12,851.42
(2) Cash value above projected to 6th anniversary assuming a
constant annual rate of return of 4%....................... 13,273.71
(3) Projected cash value less unrecovered deferred charge....... 12,922.71
Above value (3) discounted at 5% to immediately following
(4) the 5th anniversary........................................ 12,307.34
(5) Maximum amount borrowable: 90% of the discounted value...... 11,076.61
</TABLE>
EFFECT OF POLICY LOAN. The amount provided for investment in a Policy's Sub-
Accounts is reduced by the amount of a policy loan, as of the date of the
policy loan. Repayment of the policy loan causes this amount provided for
investment to increase by the amount of the repayment, as of the date of the
repayment. (See "When are communications and payments deemed received at
NEVLICO's Principal Administrative Office".) NEVLICO attributes a policy loan
to the Policy's Sub-Accounts in proportion to the cash value then in each such
sub-account, unless the Policy Owner requests otherwise. Similarly, NEVLICO
attributes repayment of a policy loan to the Policy's Sub-Accounts in
proportion to the amount then provided for investment in each, unless the
Policy Owner requests otherwise.
The amount removed from the Policy's Sub-Accounts as a result of a policy
loan will earn interest at 4%, which will be credited to the Policy's Sub-
Accounts annually in proportion to the Policy's cash value in each such Sub-
Account as of the date of crediting.
EXAMPLE: Using the Policy illustrated on page 30, assume a constant 8%
hypothetical gross annual rate of return for the Policy's Sub-Accounts (which
equals an actual investment return at a constant annual rate of 7.02%). If the
insured takes a policy loan for $2,000 at the end of the 5th policy year, it
will affect the Variable Death Benefit and cash value less any unrecovered
deferred charge (before subtracting the amount of the policy loan with loan
interest) at the end of the 6th policy year as follows:
<TABLE>
<CAPTION>
WITHOUT POLICY LOAN WITH POLICY LOAN
------------------- ----------------
<S> <C> <C>
Variable Death Benefit................. $34,733 $34,576
Cash Value less unrecovered Deferred
Charge................................ 13,305 13,245
</TABLE>
The difference results from the fact that the portion of the cash value equal
to the amount of policy loan is transferred from the Variable Account to the
general account. The net annual return on the amount transferred is reduced to
4% a year, rather than the Variable Account's annual actual investment return
of 7.02%.
The amount removed from the Policy's Sub-Accounts as a result of a policy
loan is not affected by the investment experience of those sub-accounts from
which the amount provided for investment was withdrawn. Therefore, the
Variable Death Benefit and the net cash surrender value can be permanently
affected by the existence of any policy loan, whether or not repaid in whole
or in part. The amount of any outstanding policy loan, plus interest accrued
thereon, is subtracted from the amount otherwise payable when the Policy
proceeds become payable.
If a Policy loan plus accrued interest exceeds the Policy's cash value less
any remaining deferred charge, NEVLICO will notify the Policy Owner of pending
termination. (This situation is referred to as an "excess policy loan". See
"Administrative Charge and Deferred Charge" for a description of the deferred
charge.) The Policy will terminate 31 days after such notice has been mailed,
unless NEVLICO has received sufficient repayment to eliminate the excess
policy loan. (See "When are communications and payments deemed received at
NEVLICO's Principal Administrative Office?") If the insured dies after notice
but before expiration of the 31-day period, NEVLICO will pay the beneficiary
the death benefit proceeds. (See "Death Benefit".) Once a Policy has
terminated, it may not be reinstated.
PAYMENT OF PROCEEDS
NEVLICO will ordinarily pay any net cash surrender value, policy loan or
death benefit proceeds within 7 days after receipt at NEVLICO's Principal
Administrative Office or a signed request for surrender of a Policy, a request
to make a policy loan or proof
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<PAGE>
of death of the insured, respectively, in a form satisfactory to NEVLICO. (See
"When are communications and payments deemed received at NEVLICO's Principal
Administrative Office?" and "Limits to NEVLICO's Right to Challenge the
Policy".) However, NEVLICO reserves the right to suspend or postpone the
payment of such proceeds or the transfer of the Policy's cash value between
sub-accounts for any period: (i) when the New York Stock Exchange is closed
for trading, (ii) when the SEC determines that a state of emergency exists
which may make payment or transfer impractical or (iii) at any other time when
the New England Zenith Fund may, under applicable laws and regulations,
suspend payment on the redemption of its shares.
The payee may elect to receive death benefit or net cash surrender value
proceeds in a lump sum or under other payment options. (See "Payment
Options".)
INVESTMENT AND TRANSFER OPTIONS
The net premium for the Policy is initially allocated to the Money Market
Sub-Account until the later of 45 days after the date Part I of the
application is signed or 10 days after mailing by NEVLICO of the Notice of
Withdrawal Right. (See "Amount Provided for Investment in a Policy's Sub-
Accounts".) The Policy Owner has the option to allocate the amount thereafter
provided for investment among the sub-accounts of the Variable Account in any
combination. Any portion of such amount initially allocated to one of the
Policy's Sub-Accounts must be at least 10% of the cash value on the date the
allocation takes effect. Percentages allocated must be in whole numbers. This
election must be made by the Policy Owner at the time of completion of the
application for the Policy.
The Policy Owner may redistribute the amount provided for investment in the
Policy's Sub-Account up to four times in each policy year without NEVLICO's
consent. Any consent given by NEVLICO for additional transfers will not be
unfairly discriminatory against any person. All sub-account transfer requests
made at the same time will be treated as a single redistribution. Requests
will be effective at net asset value as of the date of receipt of the transfer
request at NEVLICO's Principal Administrative Office. (See "When are
communications and payments deemed received at NEVLICO's Principal
Administrative Office?")
The Policy Owner may request a transfer by written request to NEVLICO's
Principal Administrative Office or by telephoning New England Securities. To
request a transfer by telephone, the Policy Owner should contact his or her
registered representative or contact New England Securities at 1-800-442-4096
(inside Massachusetts) or 1-800-451-5004 (outside Massachusetts). NEVLICO and
New England Securities are not responsible for the authenticity of transfer
instructions received by telephone.
EXCHANGE OF POLICY
At any time during the first 24 months after the date of issue shown in the
Policy, the Policy Owner may exchange the Policy without evidence of
insurability for a fixed-benefit single premium life insurance policy. The new
policy will have the same face amount, policy date, issue age and risk
classification for the insured as the Single Premium Variable Life Insurance
Policy, but will be issued by New England Mutual Life Insurance Company. For
Policies issued in New York, the Policy Owner has the option of exchanging to
a new policy with a face amount equal to the current death benefit of the
exchanged Policy.
The exchange will be effective on the date of receipt of written notice at
NEVLICO's Principal Administrative Office in a form satisfactory to NEVLICO,
together with the Policy and payment to NEVLICO of any cost to exchange as
described below. (See "When are communications and payments deemed received at
NEVLICO's Principal Administrative Office?")
The exchange shall be subject to an equitable adjustment to reflect
variances, if any, in the net cash surrender value, cost of insurance
deductions, administrative charge and deferred charge under the Policy and the
premium less dividends payable to date (both accumulated with interest) under
the new fixed-benefit policy. For this purpose, cash value of a Policy is
determined as of the effective date of the exchange. Any outstanding policy
loan must be repaid on or before the effective date of the exchange.
If the investment policy of the Variable Account is changed, NEVLICO will
give Policy Owners written notice of the change. A Policy Owner may then
exchange the Policy for a fixed-benefit single premium life insurance policy
issued by New England Mutual Life Insurance Company. The exchange will be on
the same basis as that described above for exchanges which take place during
the first 24 months after the date of issue of a Policy. The request for
exchange must be made within 60 days of the later of (i) the effective date of
the investment policy change and (ii) the date the Policy Owner receives the
notice of change.
PAYMENT OPTIONS
The death benefit or net cash surrender value proceeds of a Policy can be
paid in a lump sum, or the Policy Owner or payee can choose to apply all or a
part of the proceeds under one of the payment options described below. NEVLICO
will pay interest
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<PAGE>
on the death benefit proceeds from the date they become payable to the date of
payment in a lump sum or to the effective date of the elected payment option,
as stated in the election. A combination of payment options can be elected.
Proceeds applied under a payment option will no longer be affected by
investment experience of the sub-accounts. The guaranteed mortality assumption
used in determining payments under an option 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 employer-sponsored benefit plans and fringe
benefit programs, such mortality assumption will vary based on sex. See "Group
or Sponsored Arrangements").
(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.
(ii) LIFE INCOME. Proceeds are paid in equal monthly installments (i)
during the life of the payee, but not after the death 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. If, at the death of the
payee, unpaid proceeds remain, they 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 on the payee or another
agreed upon period. Interest, at a rate of not less than 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 accrued interest will be paid in one sum.
(v) SPECIFIED AMOUNT OF INCOME. Proceeds plus interest accrued thereon at a
rate of not less than 3.5% annually, are paid in an amount elected at
the frequency elected until total proceeds have been paid. Any of such
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 life 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.
If installments under a payment option would be less than $20 each, proceeds
can be applied to a payment option only with the consent of NEVLICO.
OTHER POLICY FEATURES
POLICY OWNER. The Policy Owner is named in the application for the Policy;
however, the Policy Owner can be changed from time to time. The new Policy
Owner will succeed to all of the rights of the former Policy Owner, including
the right to make a further change of Policy Owner. At the death of the Policy
Owner, his or her estate will be the Policy Owner, unless a successor Policy
Owner has been named. The rights of the Policy Owner will terminate at the
death of the insured, except the rights to payment of benefits.
BENEFICIARY. The beneficiary is named in the application for the Policy;
however, the beneficiary can be changed from time to time before the death of
the insured. The beneficiary has no rights in the Policy until the death of
the insured. An individual must survive the insured to qualify as beneficiary;
if none survives, the proceeds will be paid to the Policy Owner.
CHANGE OF POLICY OWNER OR BENEFICIARY. 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 who is 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 Principal
Administrative Office.
ASSIGNMENTS: An absolute assignment of the Policy by the Policy Owner is a
change of Policy Owner and beneficiary to the assignee. A collateral
assignment of the Policy by the Policy Owner is not a change of Policy Owner
or beneficiary; however, their rights will be subject to the terms of the
assignment. Assignments will be subject to all payments made and actions taken
by NEVLICO before a signed copy of the assignment form is received by NEVLICO
at its Principal Administrative Office. NEVLICO will not be responsible for
determining whether or not an assignment is valid.
19
<PAGE>
DISTRIBUTION AGREEMENT AND OTHER CONTRACTUAL ARRANGEMENTS
Applications for the Policies are solicited by agents who are licensed by
state insurance authorities to sell NEVLICO's Variable Life Insurance Policies
and who are also registered representatives of New England Securities. New
England Securities, a Massachusetts corporation organized in 1968, is
registered with the SEC under the Securities Exchange Act of 1934 as a broker-
dealer and is a member of the National Association of Securities Dealers, Inc.
Applications for the Policies are submitted to NEVLICO's Principal
Administrative Office, and under a Services Agreement between NEVLICO, The New
England and New England Securities. The New England performs selection and
insurance underwriting and determines whether to accept or reject the
application for the Policy and the insured's risk classification and performs
other administrative services for the Policy. Pursuant to the Services
Agreement, for the year ending December 31, 1987. The New England was paid
$2,422,457.
New England Securities, whose principal business address is 501 Boylston
Street, Boston, Massachusetts 02117, acts as the principal underwriter, as
defined in the 1940 Act, of the Policies for the Variable Account pursuant to
a Distribution Agreement to which NEVLICO and New England Securities are
parties. New England Securities is not obligated to sell any specific number
of Policies. The Distribution Agreement took effect on July 25, 1983 and will
continue in full force and effect until terminated upon sixty days' written
notice by either party.
In accordance with the Distribution Agreement, NEVLICO will pay the
following sales expenses: general agent and agency managers compensation,
agents' training allowances, agency expense allowances, deferred compensation
and insurance benefits of agents, general agents and agency managers and
advertising expenses and all other expenses of distributing the Policies.
Also, a commission of 3% of the single premium will be paid by NEVLICO to
the agent involved in the sale of a Policy. These commissions do not represent
a charge against a Policy in addition to the other charges and deductions
described in this prospectus. For the years ending December 31, 1985, 1986 and
1987, gross premiums paid by owners of variable life insurance policies funded
by NEVLICO's Variable Account amounted to $1,358,241, $2,554,989 and
$34,974,569, respectively. For the same period, net premiums on those policies
amounted to $862,910, $1,766,587 and $30,822,676, respectively.
New England Securities is engaged in the business of underwriting the shares
of open-end investment companies and variable annuity contracts. New England
Securities is principal underwriter for Loomis-Sayles Capital Development
Fund; Loomis-Sayles Mutual Fund; The New England Funds; New England Cash
Management Trust; New England Tax Exempt Money Market Trust; New England Life
Retirement Investment Account; and New England Variable Annuity Fund I. New
England Securities also sells interests in various tax-oriented and similarly
structured investment programs.
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 any such broker-dealers, the
commission paid to their registered representatives will equal 3%. 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.
Officers and employees of NEVLICO are covered by an insurance company
blanket bond issued by National Union Fire Insurance Company of Pittsburgh,
Pa. to The New England in the amount of $10 million subject to a $250,000
deductible. The bond insures against dishonest and fraudulent acts of officers
and employees. New England Securities is covered by a stockbroker's blanket
bond maintained by Loomis Sayles, which provides similar insurance protection
in the amount of $9 million. Both bonds are renegotiated periodically.
NEVLICO's maximum retention on any one life under a Policy will not exceed
$75,000. It is anticipated that amounts in excess of the maximum retention
will be reinsured, on a yearly renewable term basis, with The New England.
LIMITS TO NEVLICO'S RIGHT TO CHALLENGE THE POLICY
NEVLICO generally cannot challenge the validity of the Policy after it has
been in effect during the insured's lifetime for two years from the date of
issue. However, NEVLICO can, of course, challenge at any time any claim
believed to have been improperly submitted under the Policy.
20
<PAGE>
MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated in the Policy application, the
Policy's cash value and death benefit will be what the premium paid would have
purchased based on the insured's true age and sex.
SUICIDE
If the insured commits suicide within two years from the Policy's date of
issue (or less as required by the applicable state law), the death benefit
will be limited to the premium paid minus any outstanding policy loan and
accrued interest.
TAX CONSIDERATIONS
POLICY PROCEEDS
Section 7702 of the Internal Revenue Code provides a definition of a life
insurance contract for Federal income tax purposes. This definition applies to
the Policies discussed herein and NEVLICO believes these Policies meet the
definition.
NEVLICO believes the death benefits received under its variable life
insurance policies are excludable from the gross income of the beneficiary
pursuant to the provisions of Section 101(a) of the Code. Furthermore, NEVLICO
believes owners of its Policies will not be deemed to be in constructive
receipt of the cash values, including increments thereon, under such Policies
until their actual surrender. In the event of a distribution under the
Policies which has the net effect of reducing future benefits (such as future
death benefits) under the Policies, all or part of the distribution may be
taxable to the Policy owner as ordinary income to the extent of any investment
earnings in the Policy. Under present law, NEVLICO believes any policy loans
received under a Policy constitute indebtedness of the Policy owner and no
part of a policy loan will be treated as income to the Policy owner. No
deduction is allowed under Federal income tax law for policy loan interest
incurred under a single premium life insurance policy.
The United States Congress has in the past and may in the future consider
legislation that, if enacted, could adversely affect the tax treatment of life
insurance policies, including loans and other distributions and undistributed
appreciation. A bill with retroactive effect adversely altering the tax
treatment of loans and pre-death distributions under life insurance policies
was introduced in the House of Representatives in 1987. There is no way of
predicting whether, when or in what form Congress will enact this bill or any
other legislation affecting life insurance policies. Please consult your tax
adviser or attorney.
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, the Policy Owner may be subjected to immediate taxation on the
incremental increases in cash value of the Policy. Temporary regulations
specifying the diversification requirements have been released by the
Department of Treasury and NEVLICO fully intends to comply with such
requirements. NEVLICO believes that the Policy meets other existing
requirements relating to the degree of Policy Owner control over investments,
including premium allocation and transfer privileges. However, the Secretary
of the Treasury has not issued regulations on this subject. Such regulations,
if adopted, could include additional requirements that are not reflected in
the Policy. NEVLICO believes any such additional requirements would apply
prospectively.
NEVLICO recommends each prospective owner of a Policy consult his/her own
tax advisor prior to purchasing a Policy.
CHARGE FOR NEVLICO'S INCOME TAXES
NEVLICO is a relatively new life insurance company and does not expect to
incur any substantial Federal income tax liabilities for a number of years. In
addition, 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
attributable to operations of the Variable Account. If changes are made in the
Federal income tax treatment of variable life insurance at the company level,
NEVLICO reserves its rights to charge the Variable Account for company Federal
income taxes.
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.
21
<PAGE>
MANAGEMENT
The Directors and Executive Officers of NEVLICO and their principal business
experience during the past five years are as follows:
DIRECTORS OF NEVLICO
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE DURING
NAME THE PAST FIVE YEARS
- ---- ------------------------------------
<S> <C>
John A. Fibiger Vice Chairman of the Board since 1988 and President and Chief Operating
Officer of The New England since 1984; formerly, President, 1981 to
1984, of the New England; Chairman of NEVLICO
Edward C. Hall Senior Vice President--Clients Services of The New England since 1982;
Vice President--Administration of NEVLICO
Edward E. Phillips Chairman of the Board and Chief Executive Officer of The New England
since 1978
Robert E. Schneider Senior Vice President of The New England since 1984; formerly, Vice
President and Actuary, 1982 to 1984, of The New England; Vice President
and Chief Actuary of NEVLICO
Robert A. Shafto President--Insurance and Personal Financial Services of The New England
since 1988; formerly, Executive Vice President--Insurance and Employee
Benefits Operations, 1982 to 1988, of The New England; President of
NEVLICO
Daniel J. Toran Senior Vice President--Agencies of The New England since 1986; formerly,
Vice President, Agency Operations, 1983 to 1986, Second Vice President,
Pension Administrative Services, 1980 to 1983, of The New England
Ralph F. Verni President--Institutional Investment Group of The New England since 1988;
formerly, Executive Vice President--Financial Operations, 1982 to 1988,
of The New England
</TABLE>
EXECUTIVE OFFICERS OF NEVLICO
OTHER THAN DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE DURING
NAME THE PAST FIVE YEARS
- ---- ------------------------------------
<S> <C>
F. Brooks Cowgill Vice President and Treasurer of The New England since 1979; Vice
President and Treasurer of NEVLICO
Chester R. Frost Senior Vice President of The New England since 1984; formerly, Vice
President and Controller of The New England, 1980 to 1984; Vice
President--Controller of NEVLICO
John F. Guthrie Vice President of The New England since 1983; Vice President--
Investments of NEVLICO
Kernan F. King Senior Vice President, Secretary and General Counsel of The New England
since 1984; formerly, Vice President and Secretary, 1979 to 1983, and
Counsel, 1977 to 1983, of The New England; Secretary of NEVLICO
Francis J. Malone Senior Vice President of The New England since 1987; formerly, Vice
President of The New England, 1966 to 1987; Vice President--Marketing
of NEVLICO
John G. Small Vice President of The New England since 1986; formerly, Second Vice
President of The New England, 1982 to 1986; Vice President and Chief
Underwriter of NEVLICO
Philip G. Sullivan Second Vice President and Medical Director of The New England since
1974; Vice President and Medical Director of NEVLICO
Edward N. Wadsworth Senior Vice President and Associate General Counsel of The New England
since 1984; formerly, Vice President and Counsel of The New England,
1979 to 1983; General Counsel and Assistant Secretary of NEVLICO
</TABLE>
The principal business address for each of the Directors and Executive
Officers is the same as NEVLICO's.
22
<PAGE>
VOTING RIGHTS
NEVLICO is the legal owner of all Variable Account assets, which consist
primarily of the New England Zenith Fund shares held in the investment sub-
accounts of the Variable Account. As such, NEVLICO is the legal owner of such
shares with the corresponding right to vote them. However, in accordance with
NEVLICO's view of the present applicable law, the Policy Owner will be
permitted to give instructions as to how shares of each New England Zenith
Fund portfolio in which such Policy Owner has an interest through the Policy's
Sub-Accounts should be voted at meetings of shareholders.
Those Policy Owners permitted to give instructions and the number of shares
for which instructions may be given will be determined as of the record date
for the meeting. All New England Zenith Fund shares held in any sub-account of
the Variable Account or of any other registered (or, to the extent granted by
the issuing insurance company, unregistered) separate account of NEVLICO or
any affiliate that are or are not attributable to life insurance policies
(including the Policies) or annuity contracts and for which no timely
instructions are received will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date
cash value held in such sub-account, including the amount of unrecovered
deferred charges, for policies or contracts giving instructions, respectively,
to vote for, against, or withhold votes on such proposition, bears to (ii) the
aggregate record date cash value held in that sub-account, including the
amount of unrecovered deferred charges, for all policies or contracts for
which voting instructions are received.
All New England Zenith Fund shares held by the general investment 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 aggregate of (i) the shares for which voting instructions are received and
(ii) the shares that are voted in proportion to such voting instructions.
Pursuant to conditions imposed in connection with regulatory relief granted
by the SEC, the New England Zenith Fund's Board of Trustees has an obligation
to monitor events to identify conflicts that may arise from the sale of shares
to other variable life or variable annuity separate accounts, for example
changes in state insurance law or Federal income tax law, changes in
investment management of any portfolio of the New England Zenith Fund, or
differences between voting instructions given by variable life contract
owners. The Board of Trustees will have an obligation to determine what action
should be taken, up to and including the establishment of a new fund at
NEVLICO's expense. If NEVLICO believes any New England Zenith Fund action is
insufficient, NEVLICO will see to it that appropriate action is taken 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.
NEVLICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the investment objectives of the portfolios
of the New England Zenith Fund or to approve or disapprove an investment
advisory or underwriting contract for such a portfolio. In addition, NEVLICO
itself may disregard voting instructions in favor of changes initiated by a
Policy Owner or the New England Zenith Fund's Board of Trustees in the
investment policy, investment adviser or principal underwriter of a New
England Zenith Fund Portfolio if NEVLICO (i) reasonably disapproves of such
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 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. In
the event NEVLICO does disregard voting instructions, a summary of that action
and the reasons for such action will be included in the next semiannual report
to Policy Owners.
RIGHTS RESERVED BY NEVLICO
The voting procedures described in this prospectus are based on NEVLICO's
and The New England's current understanding of requirements under applicable
Federal securities laws or regulations or interpretations of such laws or
regulations. In the future, if the Federal securities laws or regulations or
interpretations of them change so that NEVLICO or The New England are
permitted to vote any New England Zenith Fund shares in their own right,
NEVLICO or The New England may elect to do so. NEVLICO also reserves the
right, subject to compliance with applicable law, including approval of Policy
Owners if so required, (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 and divisions of the Variable
Account investing in additional New England Zenith Fund
23
<PAGE>
portfolios; (4) to invest the assets of the Variable Account in securities
other than New England Zenith Fund shares as a substitute for such shares
already purchased or as the securities to be purchased in the future or to
transfer assets to NEVLICO's general account; (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 in the event such
registration is no longer required. Policy Owner approval would probably not
be required for NEVLICO to exercise most of these rights. However, NEVLICO
will notify a Policy Owner if any such exercise of rights were to result in a
material change in the Variable Account or its investments, although notice
may not be legally required in all cases. Except as set forth above and as
required by Federal or state law or regulation, NEVLICO will not take any
action adversely affecting the rights of Policy Owners without their consent.
REPORTS
Annually, as of the policy anniversary, NEVLICO will send a statement to the
Policy Owner setting forth the death benefit, net cash value of the Policy and
any outstanding policy loan principal. NEVLICO will also send confirmations of
significant financial activities, such as policy loans, reallocations among
sub-accounts and surrenders, when the transactions occur.
Policy Owners will be sent semiannually a report containing the financial
statements of the Variable Account and the New England Zenith Fund.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by Edward N. Wadsworth, General Counsel of NEVLICO.
Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have acted as
special counsel 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 examined 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 Robert
E. Schneider, F.S.A., Chief Actuary of NEVLICO, as stated in his opinion filed
as an exhibit to the Registration Statement.
24
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS.
CASH VALUES, NET CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash surrender 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)
equivalent to constant after tax annual rates of 0%, 4%, 6%, 8% and 12%. The
tables are based on single premiums of $5,000 and $10,000 for males aged 25
and 40, respectively. The males aged 25 and 40 are assumed to be in a
preferred risk classification. Values are first given based on current
mortality charges and then based on guaranteed mortality charges. These tables
may assist in the comparison of death benefits, net cash surrender 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 surrender values and cash values for a Policy would
be different from the amounts shown if the actual gross rates of return
averaged 0%, 4%, 6%, 8% or 12%, but varied above and below that average for
the period. 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%, 4%, 6%, 8% or 12%, but varied above
or below that average for individual sub-accounts. They would also differ if
any policy loan were made during the period of time illustrated, if the
insured were female, or if the Policies were issued at unisex rates.
The death benefits, net cash surrender values and cash values shown in the
tables reflect the fact that an administrative charge is deducted from the
single premium and that a deferred charge (consisting of a charge for sales
load, a charge for state premium taxes, and a minimum death benefit risk
charge) is deducted from the cash value on the first ten policy anniversaries.
They also reflect a daily charge assessed against the Variable Account for
mortality and expense risks equivalent to an annual charge of .45% 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 New England Zenith Fund, at a projected annual rate (based on
historical costs) of .465% of the average daily net assets of the New England
Zenith Fund. (See "Charges Against the New England Zenith Fund and the Sub-
Accounts of the Variable Account".)
Taking account of the charges for expense and mortality risks in the
Variable Account and the average investment advisory fee and operating
expenses of the New England Zenith Fund, the gross annual rates of return of
0%, 4%, 6%, 8% and 12% correspond to net investment experience at constant
annual rates of--.91%, 3.05%, 5.03%, 7.02%, and 10.98%, respectively. (See
"The Policy's Actual Investment Return".)
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 surrender values and cash values illustrated. (See "Charge for
NEVLICO's Income Taxes".)
The second column of each table shows the amount which would accumulate if an
amount equal to the single premium were invested to earn interest, after
taxes, of 4% or 5% per year, compounded annually.
The internal rate of return on net cash surrender value is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated single
premium could have been invested to arrive at the net cash surrender value of
the Policy. The internal rate of return is compounded annually.
NEVLICO will furnish upon request an illustration reflecting the proposed
insured's age, sex, and the face amount or premium amount requested. If the
Policy is proposed to be issued in Montana or in connection with certain
employer-sponsored benefit plans and fringe benefit programs. NEVLICO will
also furnish upon request an illustration for a Policy which does not vary
based on the sex of the insured.
25
<PAGE>
MALE ISSUE AGE 25
$5,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$22,486 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
RETURN ON
NET CASH NET CASH
DEATH BENEFIT SURRENDER VALUE SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 4% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ----------------------- ---------------------- ------------------------ ----------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8% 0% 4% 8% 0% 4% 8%
- ------ ----------- -- -- -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,200 $22,486 $22,486 $23,277 $4,334 $ 4,521 $ 4,708 -13.31% -9.57% -5.82% $4,642 $ 4,829 $ 5,016
2 5,408 22,486 22,486 24,075 4,263 4,637 5,027 -7.66 -3.70 0.27 4,536 4,910 5,300
3 5,624 22,486 22,486 24,882 4,193 4,755 5,363 -5.69 -1.66 2.37 4,433 4,994 5,603
4 5,849 22,486 22,486 25,699 4,126 4,875 5,719 -4.69 -0.63 3.42 4,331 5,081 5,925
5 6,083 22,486 22,486 26,527 4,060 4,998 6,096 -4.08 -0.01 4.05 4,231 5,169 6,267
6 6,327 22,486 22,486 27,367 3,996 5,124 6,495 -3.66 0.41 4.46 4,133 5,260 6,632
7 6,580 22,486 22,486 28,221 3,934 5,251 6,918 -3.37 0.70 4.75 4,037 5,354 7,021
8 6,843 22,486 22,486 29,089 3,874 5,382 7,366 -3.14 0.93 4.96 3,942 5,450 7,435
9 7,116 22,486 22,486 29,973 3,815 5,515 7,841 -2.96 1.10 5.13 3,849 5,549 7,876
10 7,401 22,486 22,486 30,875 3,757 5,651 8,345 -2.82 1.23 5.26 3,757 5,651 8,345
15 9,005 22,486 22,486 35,763 3,481 6,370 11,366 -2.38 1.63 5.63 3,481 6,370 11,366
20 10,955 22,486 22,486 41,494 3,213 7,152 15,419 -2.19 1.81 5.79 3,213 7,152 15,419
25 13,329 22,486 22,486 48,377 2,955 8,005 20,853 -2.08 1.90 5.88 2,955 8,005 20,853
30 16,217 22,486 22,486 56,843 2,712 8,937 28,130 -2.02 1.95 5.93 2,712 8,937 28,130
35 19,730 22,486 22,486 67,439 2,482 9,955 37,864 -1.98 1.99 5.96 2,482 9,955 37,864
40 24,005 22,486 22,486 81,120 2,272 11,090 50,974 -1.95 2.01 5.98 2,272 11,090 50,974
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0%, 4%, AND 8% 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
26
<PAGE>
MALE ISSUE AGE 25
$5,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$22,486 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
RETURN ON
NET CASH NET CASH
DEATH BENEFIT SURRENDER VALUE SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF 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% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $22,486 $22,812 $ 24,201 $4,334 $ 4,614 $ 4,895 -13.31% -7.70% -2.08% $4,642 $ 4,922 $ 5,203
2 5,512 22,486 23,130 26,008 4,263 4,829 5,430 -7.66 -1.72 4.22 4,536 5,103 5,704
3 5,788 22,486 23,441 27,915 4,193 5,053 6,017 -5.69 0.35 6.37 4,433 5,292 6,256
4 6,077 22,486 23,744 29,929 4,126 5,284 6,661 -4.69 1.39 7.44 4,331 5,490 6,866
5 6,381 22,486 24,041 32,060 4,060 5,525 7,368 -4.08 2.02 8.06 4,231 5,696 7,539
6 6,700 22,486 24,332 34,315 3,996 5,775 8,145 -3.66 2.43 8.47 4,133 5,912 8,281
7 7,035 22,486 24,618 36,706 3,934 6,035 8,999 -3.37 2.73 8.76 4,037 6,138 9,101
8 7,387 22,486 24,900 39,243 3,874 6,305 9,938 -3.14 2.94 8.97 3,942 6,374 10,006
9 7,757 23,486 25,177 41,936 3,815 6,586 10,971 -2.96 3.11 9.12 3,849 6,621 11,005
10 8,144 22,486 25,451 44,798 3,757 6,879 12,108 -2.82 3.24 9.25 3,757 6,879 12,108
15 10,395 22,486 26,837 62,236 3,481 8,529 19,780 -2.38 3.63 9.60 3,481 8,529 19,780
20 13,266 22,486 28,347 86,608 3,213 10,533 32,184 -2.19 3.80 9.76 3,213 10,533 32,184
25 16,932 22,486 30,085 121,114 2,955 12,968 52,206 -2.08 3.89 9.84 2,955 12,968 52,206
30 21,609 22,486 32,180 170,699 2,712 15,925 84,473 -2.02 3.94 9.88 2,712 15,925 84,473
35 27,580 22,486 34,753 242,930 2,482 19,512 136,393 -1.98 3.97 9.91 2,482 19,512 136,393
40 35,200 22,486 38,053 350,535 2,272 23,911 220,268 -1.95 3.99 9.93 2,272 23,911 220,268
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
27
<PAGE>
MALE ISSUE AGE 25
$5,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$22,486 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
RETURN ON
NET CASH NET CASH
DEATH BENEFIT SURRENDER VALUE SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 4% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ----------------------- --------------------- ------------------------ ---------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8% 0% 4% 8% 0% 4% 8%
- ------ ----------- -- -- -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,200 $22,486 $22,486 $23,257 $4,330 $4,517 $ 4,705 -13.38% -9.65% -5.90% $4,638 $4,825 $ 5,012
2 5,408 22,486 22,486 24,036 4,256 4,629 5,018 -7.74 -3.77 -0.19 4,529 4,903 5,292
3 5,624 22,486 22,486 24,824 4,183 4,744 5,351 -5.77 -1.74 2.29 4,423 4,983 5,590
4 5,849 22,486 22,486 25,620 4,113 4,860 5,702 -4.76 -0.70 3.34 4,318 5,066 5,907
5 6,083 22,486 22,486 26,427 4,045 4,979 6,073 -4.15 -0.08 3.97 4,216 5,150 6,244
6 6,327 22,486 22,486 27,246 3,978 5,101 6,467 -3.74 0.33 4.38 4,115 5,237 6,603
7 6,580 22,486 22,486 28,077 3,914 5,224 6,883 -3.44 0.63 4.67 4,016 5,327 6,986
8 6,843 22,486 22,486 28,921 3,851 5,350 7,324 -3.21 0.85 4.89 3,919 5,419 7,392
9 7,116 22,486 22,486 29,780 3,790 5,479 7,791 -3.03 1.02 5.05 3,824 5,513 7,825
10 7,401 22,486 22,486 30,654 3,730 5,610 8,285 -2.89 1.16 5.18 3,730 5,610 8,285
15 9,005 22,486 22,486 35,375 3,443 6,300 11,243 -2.46 1.55 5.55 3,443 6,300 11,243
20 10,955 22,486 22,486 40,824 3,160 7,036 15,170 -2.27 1.72 5.71 3,160 7,036 15,170
25 13,329 22,486 22,486 47,115 2,877 7,795 20,309 -2.19 1.79 5.77 2,877 7,795 20,309
30 16,217 22,486 22,486 54,379 2,593 8,547 26,910 -2.16 1.80 5.77 2,593 8,547 26,910
35 19,730 22,486 22,486 62,769 2,308 9,261 35,241 -2.18 1.78 5.74 2,308 9,261 35,241
40 24,005 22,486 22,486 72,463 2,027 9,899 45,534 -2.23 1.72 5.68 2,027 9,899 45,534
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0%, 4%, AND 8% 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
28
<PAGE>
MALE ISSUE AGE 25
$5,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$22,486 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
NET CASH RETURN ON
SURRENDER VALUE NET CASH
DEATH BENEFIT ASSUMING SURRENDER VALUE
PREMIUMS ASSUMING HYPOTHETICAL HYPOTHETICAL ASSUMING HYPOTHETICAL CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL
END OF AT 5% RATE OF RETURN OF 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% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 5,250 $22,486 $22,793 $ 24,181 $4,330 $ 4,611 $ 4,891 -13.38% -7.78% -2.16% $4,638 $ 4,918 $ 5,199
2 5,512 22,486 23,093 25,966 4,256 4,822 5,422 -7.74 -1.80 4.13 4,529 5,095 5,695
3 5,788 22,486 23,385 27,850 4,183 5,041 6,003 -5.77 0.27 6.29 4,423 5,280 6,242
4 6,077 22,486 23,671 29,838 4,113 5,268 6,641 -4.76 1.32 7.35 4,318 5,473 6,846
5 6,381 22,486 23,951 31,940 4,045 5,504 7,340 -4.15 1.94 7.98 4,216 5,675 7,511
6 6,700 22,486 24,224 34,164 3,978 5,749 8,109 -3.74 2.36 8.39 4,115 5,886 8,246
7 7,035 22,486 24,492 36,520 3,914 6,004 8,953 -3.44 2.65 8.68 4,016 6,107 9,055
8 7,387 22,486 24,755 39,017 3,851 6,269 9,881 -3.21 2.87 8.89 3,919 6,337 9,949
9 7,757 22,486 25,014 41,667 3,790 6,544 10,900 -3.03 3.04 9.05 3,824 6,578 10,935
10 8,144 22,486 25,268 44,479 3,730 6,829 12,022 -2.89 3.17 9.17 3,730 6,829 12,022
15 10,395 22,486 26,545 61,564 3,443 8,437 19,567 -2.46 3.55 9.52 3,443 8,437 19,567
20 13,266 22,486 27,888 85,218 3,160 10,363 31,667 -2.27 3.71 9.67 3,160 10,363 31,667
25 16,932 22,486 29,298 117,971 2,877 12,629 50,851 -2.19 3.78 9.72 2,877 12,629 50,851
30 21,609 22,486 30,781 163,338 2,593 15,232 80,830 -2.16 3.78 9.72 2,593 15,232 80,830
35 27,580 22,486 32,339 226,200 2,308 18,157 127,000 -2.18 3.75 9.68 2,308 18,157 127,000
40 35,200 22,486 33,979 313,356 2,027 21,351 196,905 -2.23 3.70 9.62 2,027 21,351 196,905
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
29
<PAGE>
MALE ISSUE AGE 40
$10,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$28,468 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
RETURN ON
NET CASH NET CASH
DEATH BENEFIT SURRENDER VALUE SURRENDER VALUE CASH VALUE
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 4% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ----------------------- ---------------------- ------------------------ ---------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8% 0% 4% 8% 0% 4% 8%
- ------ ----------- -- -- -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $10,400 $28,468 $28,468 $29,470 $8,900 $ 9,284 $ 9,669 -10.99% -7.15% -3.30% $9,532 $9,916 $10,301
2 10,816 28,468 28,468 30,486 8,754 9,522 10,323 -6.44 -2.42 1.60 9,315 10,084 10,885
3 11,249 28,468 28,468 31,518 8,609 9,762 11,011 -4.87 -0.80 3.26 9,101 10,254 11,503
4 11,699 28,468 28,468 32,567 8,466 10,004 11,736 -4.08 0.01 4.08 8,887 10,425 12,157
5 12,167 28,468 28,468 33,638 8,325 10,248 12,500 -3.60 0.49 4.56 8,676 10,599 12,851
6 12,653 28,468 28,468 34,733 8,185 10,494 13,305 -3.28 0.81 4.87 8,466 10,775 13,586
7 13,159 28,468 28,468 35,855 8,048 10,743 14,154 -3.05 1.03 5.09 8,258 10,954 14,364
8 13,686 28,468 28,468 37,008 7,913 10,994 15,049 -2.88 1.19 5.24 8,053 11,135 15,190
9 14,233 28,468 28,468 38,195 7,780 11,248 15,994 -2.75 1.32 5.36 7,850 11,318 16,065
10 14,802 28,468 28,468 39,419 7,649 11,504 16,992 -2.64 1.41 5.44 7,649 11,504 16,992
15 18,009 28,468 28,468 46,318 7,018 12,843 22,921 -2.33 1.68 5.69 7,018 12,843 22,921
20 21,911 28,468 28,468 54,952 6,424 14,306 30,853 -2.19 1.81 5.79 6,424 14,306 30,853
25 26,658 28,468 28,468 66,100 5,881 15,937 41,535 -2.10 1.88 5.86 5,881 15,937 41,535
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0%, 4%, AND 8% 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
30
<PAGE>
MALE ISSUE AGE 40
$10,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$28,486 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
RETURN ON
NET CASH NET CASH
DEATH BENEFIT SURRENDER VALUE SURRENDER VALUE CASH VALUE
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF 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% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $10,500 $28,468 $28,882 $ 30,640 $8,900 $ 9,476 $ 10,053 -10.99% -5.23% 0.54% $9,532 $10,108 $ 10,685
2 11,025 28,468 29,289 32,934 8,754 9,918 11,152 -6.44 -0.41 5.60 9,315 10,479 11,713
3 11,576 28,468 29,692 35,359 8,609 10,373 12,354 -4.87 1.23 7.30 9,101 10,865 12,845
4 12,155 28,468 30,090 37,929 8,466 10,843 13,668 -4.08 2.05 8.13 8,887 11,264 14,089
5 12,763 28,468 30,486 40,655 8,325 11,328 15,107 -3.60 2.53 8.60 8,676 11,679 15,458
6 13,401 28,468 30,881 43,553 8,185 11,829 16,684 -3.28 2.84 8.91 8,466 12,110 16,964
7 14,071 28,468 31,277 46,638 8,048 12,347 18,411 -3.05 3.06 9.11 8,258 12,557 18,621
8 14,775 28,468 31,677 49,928 7,913 12,881 20,304 -2.88 3.22 9.26 8,053 13,022 20,444
9 15,513 28,468 32,081 53,443 7,780 13,434 22,380 -2.75 3.34 9.36 7,850 13,504 22,450
10 16,289 28,468 32,492 57,201 7,649 14,006 24,656 -2.64 3.43 9.44 7,649 14,006 24,656
15 20,789 28,468 34,755 80,620 7,018 17,199 39,896 -2.33 3.68 9.66 7,018 17,199 39,896
20 26,533 28,468 37,534 114,734 6,424 21,073 64,417 -2.19 3.80 9.76 6,424 21,073 64,417
25 33,684 28,468 41,097 165,555 5,881 25,824 104,031 -2.10 3.87 9.82 5,881 25,824 104,031
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
31
<PAGE>
MALE ISSUE AGE 40
$10,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$28,468 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
RETURN ON
NET CASH NET CASH
DEATH BENEFIT SURRENDER VALUE SURRENDER VALUE CASH VALUE
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 4% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ----------------------- ---------------------- ------------------------ ----------------------
YEAR PER YEAR 0% 4% 8% 0% 4% 8% 0% 4% 8% 0% 4% 8%
- ------ ----------- -- -- -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $10,400 $28,468 $28,468 $29,445 $8,892 $ 9,276 $ 9,661 -11.07% -7.23% -3.39% $9,524 $ 9,908 $10,293
2 10,816 28,468 28,468 30,431 8,738 9,505 10,304 -6.52 -2.50 1.51 9,300 10,067 10,866
3 11,249 28,468 28,468 31,428 8,584 9,734 10,980 -4.96 -0.89 3.17 9,076 10,226 11,471
4 11,699 28,468 28,468 32,437 8,432 9,964 11,689 -4.17 -0.09 3.98 8,853 10,385 12,110
5 12,167 28,468 28,468 33,459 8,280 10,193 12,434 -3.70 0.38 4.45 8,631 10,544 12,785
6 12,653 28,468 28,468 34,496 8,128 10,422 13,214 -3.39 0.69 4.76 8,409 10,703 13,495
7 13,159 28,468 28,468 35,549 7,978 10,651 14,033 -3.17 0.91 4.96 8,189 10,861 14,244
8 13,686 28,468 28,468 36,619 7,828 10,878 14,891 -3.01 1.06 5.10 7,968 11,018 15,032
9 14,233 28,468 28,468 37,707 7,679 11,103 15,790 -2.89 1.17 5.21 7,749 11,174 15,860
10 14,802 28,468 28,468 38,815 7,530 11,327 16,731 -2.80 1.25 5.28 7,530 11,327 16,731
15 18,009 28,468 28,468 44,800 6,785 12,419 22,170 -2.55 1.46 5.45 6,785 12,419 22,170
20 21,911 28,468 28,468 51,712 6,040 13,457 29,033 -2.49 1.50 5.47 6,040 13,457 29,033
25 26,658 28,468 28,468 59,698 5,304 14,383 37,513 -2.50 1.46 5.43 5,304 14,383 37,513
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0%, 4%, AND 8% 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE>
MALE ISSUE AGE 40
$10,000 SINGLE PREMIUM FOR PREFERRED UNDERWRITING RISK
$28,468 FACE AMOUNT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
RETURN ON
NET CASH NET CASH
DEATH BENEFIT SURRENDER VALUE SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF 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% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $10,500 $28,486 $28,857 $ 30,614 $8,892 $ 9,648 $10,044 -11.07% -5.32% 0.45% $9,524 $10,100 $10,676
2 11,025 28,468 29,237 32,875 8,738 9,900 11,132 -6.52 -0.50 5.51 9,300 10,461 11,694
3 11,576 28,468 29,607 35,260 8,584 10,344 12,319 -4.96 1.13 7.20 9,076 10,835 12,810
4 12,155 28,468 29,969 37,778 8,432 10,800 13,614 -4.17 1.94 8.02 8,853 11,221 14,035
5 12,763 28,468 30,323 40,441 8,280 11,268 15,028 -3.70 2.42 8.49 8,631 11,619 15,379
6 13,401 28,468 30,670 43,258 8,128 11,748 16,571 -3.39 2.72 8.78 8,409 12,029 16,852
7 14,071 28,468 31,009 46,243 7,978 12,241 18,255 -3.17 2.93 8.98 8,189 12,452 18,465
8 14,775 28,468 31,343 49,408 7,828 12,746 20,092 -3.01 3.08 9.11 7,968 12,886 20,232
9 15,513 28,468 31,670 52,765 7,679 13,262 22,096 -2.89 3.19 9.21 7,749 13,332 22,166
10 16,289 28,468 31,993 56,330 7,530 13,790 24,281 -2.80 3.27 9.28 7,530 13,790 24,281
15 20,789 28,468 33,612 77,992 6,785 16,633 38,596 -2.55 3.45 9.42 6,785 16,633 38,596
20 26,533 28,468 35,314 108,009 6,040 19,827 60,641 -2.49 3.48 9.43 6,040 19,827 60,641
25 33,684 28,468 37,104 149,625 5,304 23,315 94,021 -2.50 3.44 9.38 5,304 23,315 94,021
</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 AND THE INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH
BENEFIT, CASH VALUE AND NET CASH SURRENDER 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 NEW
ENGLAND ZENITH FUND THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE>
APPENDIX B
CALCULATION OF CHANGE IN VARIABLE DEATH BENEFIT
The amount by which the Variable Death Benefit will increase or decrease for
any month is the amount of paid-up life insurance which would be purchased
(using the net single premium rates described in the Policy for the insured's
age) by the dollar amount of the excess or shortfall of the Policy's actual
investment return plus any cost of insurance adjustment over a return of the
monthly equivalent of a 4% annual rate on the cash value less any unrecovered
deferred charge.
To calculate the change in the Variable Death Benefit, the excess or
shortfall described above for the preceding policy month is divided by the
product of a survivorship factor and a net single premium per $1 of paid-up
life insurance based on the insured's age as of the date of the calculation.
(See table of net single premiums and survivorship factors below.)
EXAMPLE: Using the Policy illustrated on page 30 for a male preferred risk
insured and assuming a constant 8% hypothetical gross annual rate of return
(equivalent to actual investment returns at a constant annual rate of 7.02%),
the following example illustrates how the change in the Variable Death Benefit
is calculated at the end of the 61st policy month.
<TABLE>
<C> <S> <C>
Cash Value less Unrecovered Deferred Charge at Beginning
(1) of Policy Month 61....................................... $12,500.42
(2) Unrecovered Deferred Charge at Beginning of Policy Month
61....................................................... 351.00
----------
(3) Amounted Allocated to Policy's Sub-Accounts at Beginning
of Policy Month 61: (1) + (2)............................ 12,851.42
(4) Actual Investment Return for Policy Month 61:
(3) X .005670............................................ 72.868
(5) Cost of Insurance Based on 1958 CSO...................... 9.424
(6) Cost of Insurance for Preferred Male..................... 7.803
(7) Cost of Insurance Adjustment: (5) - (6).................. 1.621
(8) Monthly equivalent of a 4% annual return on Cash Value
less any Unrecovered Deferred Charge..................... 40.923
(9) Excess: (4) + (7) - (8).................................. 33.566
(10) Net Single Premium at End of Policy Month 61............. .37255
(11) Survivorship Factor at End of Policy Month 61............ .99963
(12) Change in Variable Death Benefit: (9) - ((10) X (11)).... 90.13
</TABLE>
NET SINGLE PREMIUM. Net single premiums are used to convert the actual
investment return of a Policy into increases or decreases in the Variable
Death Benefit. Net single premiums do not depend upon the sex or underwriting
classification of the insured or any changes in the insured's health after a
Policy is issued. The net single premium increases as the insured advances in
age; thus, larger dollar amounts of excess investment performance plus cost of
insurance adjustments are required each policy month to result in the same
increases in the Variable Death Benefit.
34
<PAGE>
TABLE OF NET SINGLE PREMIUMS
PER $1 OF PAID-UP LIFE INSURANCE
<TABLE>
<CAPTION>
ATTAINED AGE NET SINGLE PREMIUM
------------ ------------------
<S> <C>
5 .10668
15 .14423
25 .19603
35 .27029
45 .37161
55 .49487
65 .62838
75 .75072
85 .84957
95 .93140
</TABLE>
SURVIVORSHIP FACTOR. The Variable Death Benefit is not affected by the
actual investment return of the Policy's Sub-Accounts between Monthly
Valuation Dates: therefore, on a Monthly Valuation Date the actual investment
return of the immediately preceding policy month is allocated to the Variable
Death Benefits only of Policies whose insureds survive until that Monthly
Valuation Date. This procedure is accounted for by adjusting the net single
premium by the survivorship factor. The survivorship factor is based on the
cost of insurance rate used to calculate the cost of insurance during the
given policy month. The survivorship factor equals 1 minus the cost of
insurance rate for the insured. (See Appendix C.) This factor varies by the
sex (if the Policy is sex-based), risk classification and age of the insured
and increases the change in the Variable Death Benefit otherwise calculated.
35
<PAGE>
APPENDIX C
COST OF INSURANCE FACTORS
For preferred risk, female and, at some ages, male standard insured's
Policies, the Variable Death Benefit otherwise calculated on the Policy's
Monthly Valuation Date will be adjusted to reflect a cost of insurance factor.
If the actual investment return on the Policy's cash value in the Variable
Account is greater than the monthly equivalent of the Policy's Assumed
Interest Rate on the cash value less any unrecovered deferred charge, the
adjustment will increase the amount by which the Variable Death Benefit would
otherwise increase. If the actual investment return on the Policy's cash value
in the Variable Account is less than the monthly equivalent of the Policy's
Assumed Interest Rate on the cash value less any unrecovered deferred charge,
the adjustment will reduce the amount by which the Variable Death Benefit
would otherwise decrease, or occasionally cause the Variable Death Benefit to
increase slightly when it would otherwise decrease.
The amount of the adjustment is the cost of insurance factor divided by the
net single premium for the insured's age. (See "Cash Value of the Policy" and
Appendix B.) The cost of insurance factor equals the difference between (i)
the hypothetical cost of insurance deducted from the Policy's cash value,
calculated using the 1958 CSO cost of insurance rate for an insured of the
same attained age as the given insured and (ii) the actual cost of insurance
deducted from the Policy's cash value, calculated using the respective cost of
insurance rate for the given insured at his or her attained age.
The following table illustrates monthly standard and preferred cost of
insurance rates per $1 of the amount at risk for a Policy. As of a Policy's
Monthly Valuation Date, the Policy's amount at risk equals the Policy's
Variable Death Benefit minus the Policy's cash value less any unrecovered
deferred policy charge.
SINGLE PREMIUM VARIABLE LIFE POLICY
COST OF INSURANCE RATES
<TABLE>
<CAPTION>
CURRENT
-----------------------------------------------------
MALE FEMALE UNISEX
----------------- ----------------- -----------------
AGE GUARANTEED STD. PREF. STD. PREF. STD. PREF.
- --- ---------- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
5 .0001125 .0001125 -- .0001069 -- .0001117 --
15 .0001217 .0001217 -- .0001156 -- .0001208 --
25 .0001608 .0001608 .0001435 .0001528 .0001351 .0001596 .0001423
35 .0002092 .0002092 .0001867 .0002071 .0001757 .0002089 .0001850
45 .0004458 .0004458 .0003691 .0004235 .0003344 .0004425 .0003639
55 .0010833 .0010833 .0006977 .0007042 .0005417 .0010265 .0006743
65 .0026458 .0022490 .0012171 .0013229 .0009790 .0021101 .0011814
75 .0061142 .0042799 .0036771 .0027514 .0026291 .0040506 .0035199
85 .0134283 .0107427 .0104204 .0087284 .0079227 .0104405 .0100457
95 .0292700 .0270747 .0269723 .0248795 .0245868 .0267455 .0266145
</TABLE>
Congress has under consideration legislation which would prohibit insurance
premiums from varying based on sex. Also, in 1983 the United States Supreme
Court held that certain insurance policies, the benefits under which vary
based on sex, may not be used to fund certain employer-sponsored benefit plans
and fringe benefit programs. (See "Group or Sponsored Arrangements".)
36
<PAGE>
APPENDIX D
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 New England Zenith Fund. It does not
represent what may happen in the future.
During the periods shown, the Policies were not available. The New England
Zenith Fund and the Variable Account commenced operations on August 26, 1983.
The Stock Index and Managed Series of the New England Zenith Fund commenced
operations on May 1, 1987. The illustrations are based on the actual
investment experience of the New England Zenith Fund for the periods shown
(and reflect actual charges and expenses incurred by the New England Zenith
Fund), and reflect a charge for mortality and expense risks against the
Variable Account's assets at an annual rate of .45%. The illustrations assume
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 New
England Zenith Fund. The investment experience of the sub-account or sub-
accounts chosen by Policy Owners will affect the values and benefits of their
Policies.
Many factors in addition to investment experience will affect the actual
values and benefits of a particular Policy. For instance, these investment
experience figures do not reflect the administrative charge, deferred charge
and cost of insurance charges. (See "Administrative Charge and Deferred
Charge" and "How are Changes in the Variable Death Benefit and cash value
different for a preferred risk Policy, a female insured's Policy and a non-
sex-based Policy?")
NET RATES OF RETURN
The annual net rate of return is the effective earnings rate at which the
investment sub-accounts have increased or decreased over a one year peirod.
The rate is calculated by taking the difference between the sub-account's
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.
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN 8/26/83- 8/26/83-
----------------------------------- 12/31/87- 12/31/87-
1/1/84- 1/1/85- 1/1/86- 1/1/87- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/84 12/31/85 12/31/86 12/31/87 RETURN ANNUAL
- ----------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital Growth.......... -0.81% 67.34% 94.33% 52.02% 433.01% 46.91%
Bond Income............. 12.27% 18.23% 14.32% 1.81% 58.93% 11.24%
Money Market............ 10.12% 7.78% 6.32% 6.05% 38.02% 7.69%
</TABLE>
<TABLE>
<CAPTION>
5/1/87-
12/31/87
TOTAL
SUB-ACCOUNT RETURN
- ----------- --------
<S> <C>
Stock Index............................................................ -12.46%
Managed................................................................ -0.96%
</TABLE>
37
<PAGE>
POLICY PERFORMANCE
The material below assumes, in the first example, a Policy was issued with a
$53,284 face amount for a $25,000 single premium, to a preferred risk male,
age 50. The second example assumes a Policy was issued with a $53,284 face
amount for a $25,000 single premium to a female, age 50. The death benefits,
cash values, net cash surrender 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 and that current cost of insurance rates were
charged. These illustrations of Policy investment experience also reflect all
charges applicable to the Policy, including current cost of insurance charges
for insureds of the age, sex and risk classification shown as if the Policy
were available as of that date. (See Appendix A for the definition of the
internal rate of return.)
PREFERRED RISK MALE, AGE 50
CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
August 26, 1983................... $53,284 $ 53,284 $ 24,750 $ 22,968 --
December 31, 1983................. 53,284 57,905 26,844 25,062 0.71%
December 31, 1984................. 53,284 55,522 26,247 24,643 -1.06%
December 31, 1985................. 53,284 88,515 43,399 41,973 24.69%
December 31, 1986................. 53,284 176,648 83,556 82,309 42.75%
December 31, 1987................. 53,284 253,057 125,855 124,786 44.74%
</TABLE>
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
August 26, 1983.................... $53,284 $53,284 $24,750 $22,968 --
December 31, 1983.................. 53,284 54,598 25,402 23,620 -15.06%
December 31, 1984.................. 53,284 59,279 28,120 26,516 4.46%
December 31, 1985.................. 53,284 68,034 32,813 31,387 10.18%
December 31, 1986.................. 53,284 75,987 37,044 35,797 11.32%
December 31, 1987.................. 53,284 74,063 37,235 36,166 8.86%
</TABLE>
MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
August 26, 1983.................... $53,284 $53,284 $24,750 $22,968 --
December 31, 1983.................. 53,284 54,324 25,464 23,682 -14.41%
December 31, 1984.................. 53,284 58,122 27,656 26,052 3.11%
December 31, 1985.................. 53,284 60,714 29,403 27,977 4.91%
December 31, 1986.................. 53,284 62,502 30,842 29,595 5.17%
December 31, 1987.................. 53,284 64,150 32,272 31,203 5.23%
</TABLE>
38
<PAGE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
May 1, 1987....................... $53,284 $ 53,284 $ 24,750 $ 22,968 --
December 31, 1987................. 53,284 41,710 21,567 19,785 -29.53%
MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
May 1, 1987....................... $53,284 $ 53,284 $ 24,750 $ 22,968 --
December 31, 1987................. 53,284 50,054 24,406 22,624 -13.88%
FEMALE, AGE 50
CAPITAL GROWTH SUB-ACCOUNT*
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
August 26, 1983................... $53,284 $ 53,284 $ 24,750 $ 22,968 --
December 31, 1983................. 53,284 57,931 26,855 25,073 0.84%
December 31, 1984................. 53,284 55,625 26,293 24,689 -0.92%
December 31, 1985................. 53,284 88,801 43,534 42,108 24.86%
December 31, 1986................. 53,284 177,471 83,939 82,692 42.95%
December 31, 1987................. 53,284 254,673 126,653 125,584 44.95%
BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
August 26, 1983................... $53,284 $ 53,294 $ 24,750 $ 22,968 --
December 31, 1983................. 53,284 54,623 25,413 23,631 -14.94%
December 31, 1984................. 53,284 59,388 28,169 26,565 4.61%
December 31, 1985................. 53,284 68,260 32,917 31,491 10.33%
December 31, 1986................. 53,284 76,360 37,220 35,973 11.48%
December 31, 1987................. 53,284 74,556 37,475 36,406 9.03%
</TABLE>
39
<PAGE>
MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
August 26, 1983.................... $53,284 $53,284 $24,750 $22,968 --
December 31, 1983.................. 53,284 54,349 25,475 23,693 -14.30%
December 31, 1984.................. 53,284 58,229 27,704 26,100 3.25%
December 31, 1985.................. 53,284 60,918 29,497 28,071 5.06%
December 31, 1986.................. 53,284 62,813 30,989 29,742 5.32%
December 31, 1987.................. 53,284 64,580 32,481 31,412 5.39%
STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
May 1, 1987........................ $53,284 $53,284 $24,750 $11,968 --
December 31, 1987.................. 53,284 41,747 21,584 19,802 -29.44%
MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL
RATE OF
RETURN ON
MINIMUM VARIABLE NET CASH NET CASH
DEATH DEATH CASH SURRENDER SURRENDER
DATE BENEFIT BENEFIT VALUE VALUE VALUE
- ---- ------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
May 1, 1987........................ $53,284 $53,284 $24,750 $22,968 --
December 31, 1987.................. 53,284 50,095 24,424 22,642 -13.77%
</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. Beginning January 1, 1988, the
maximum investment advisory fee of the Capital Growth Series is .70% of
average daily net assets.
40
<PAGE>
NEW ENGLAND VARIABLE LINE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Policy Owners
of New England Variable Life Insurance Company:
We have examined the statement of assets and liabilities of New England
Variable Life Insurance Company Variable Life Separate Account as of December
31, 1987 and the related statement of operations for the year then ended and
the statement of changes in net assets for each of the two years in the period
then ended. Our examinations were made in accordance with generally accepted
auditing standards and, accordingly, included such tests of the accounting
records and such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the financial statements referred to above present fairly the
net assets of New England Variable Life Insurance Company Variable Life
Separate Account at December 31, 1987, the results of its operations for the
year then ended and the changes in its net assets for each of the two years in
the period then ended in conformity with generally accepted accounting
principles applied on a consistent basis.
Coopers & Lybrand
Boston, Massachusetts
February 17, 1988
41
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1987
<TABLE>
<CAPTION>
BOND MONEY
CAPITAL INCOME MARKET STOCK MANAGED
GROWTH SUB- SUB- INDEX SUB-
SUB-ACCOUNT ACCOUNT ACCOUNT SUB-ACCOUNT ACCOUNT TOTAL
----------- ------- ------- ----------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in The New
England Zenith Fund,
Inc. at market value
(Note 2)............... $24,200,395 $1,239,791 $5,081,788 $243,261 $2,710,142 $33,475,377
Capital Growth Sub-
Account at
cost......$26,184,708
Bond Income Sub-
Account at
cost......$ 1,358,753
Money Market Sub-
Account at
cost......$ 5,081,788
Stock Index Sub-
Account at
cost......$ 306,516
Managed Sub-Account at
cost......$ 2,917,445
Amount due & accrued
from policy-related
transactions........... (8,492) (646) 393 33 16,854 8,142
Dividends receivable.... -- -- 27,016 -- -- 27,016
----------- ---------- ---------- -------- ---------- -----------
Total assets........ 24,131,903 1,239,145 5,109,197 243,294 2,726,996 33,510,535
LIABILITIES
Due New England Variable
Life Insurance Company. 2,443,328 193,777 673,803 25,618 224,817 3,561,343
----------- ---------- ---------- -------- ---------- -----------
Total liabilities... 2,443,328 193,777 673,803 25,618 224,817 3,561,343
----------- ---------- ---------- -------- ---------- -----------
NET ASSETS for Variable
Life Insurance
Policies............... $21,748,575 $1,045,368 $4,435,394 $217,676 $2,502,179 $29,949,192
=========== ========== ========== ======== ========== ===========
</TABLE>
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1987
<TABLE>
<CAPTION>
CAPITAL BOND MONEY STOCK
GROWTH INCOME MARKET INDEX MANAGED
SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
---------- -------- -------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
INCOME
Dividends............... $3,554,895 $174,490 $143,196 $ 7,350 $ 74,471 $3,954,402
EXPENSES
Mortality and expense
risk charge (Note 3)... 44,869 2,545 9,035 365 3,245 60,059
---------- -------- -------- -------- --------- ----------
Net income.............. 3,510,026 171,945 134,161 6,985 71,226 3,894,343
NET REALIZED AND
UNREALIZED LOSS ON
INVESTMENTS
Net unrealized
depreciation on
investments
Beginning of period... 1,332,298 30,304 -- -- -- 1,362,602
End of period......... (1,984,313) (118,962) -- (63,255) (207,303) (2,373,833)
---------- -------- -------- -------- --------- ----------
Unrealized depreciation. (3,316,611) (149,266) -- (63,255) (207,303) (3,736,435)
Realized gain (loss) on
investments............ 3,179 (1,503) -- (10,988) (12,214) (21,526)
---------- -------- -------- -------- --------- ----------
Net realized and
unrealized loss on
investments............ (3,313,432) (150,769) -- (74,243) (219,517) (3,757,961)
---------- -------- -------- -------- --------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $ 196,594 $ 21,176 $134,161 $(67,258) $(148,291) $ 136,382
========== ======== ======== ======== ========= ==========
</TABLE>
See Notes to Financial Statements.
42
<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, 1986 AND 1987
<TABLE>
<CAPTION>
BOND
CAPITAL INCOME MONEY STOCK MANAGED
GROWTH SUB- MARKET INDEX SUB-
SUB-ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ACCOUNT TOTAL
----------- ------- ----------- ----------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS DECEMBER 31,
1985................... $ 1,009,795 $ 94,679 $ 233,921 -- -- $ 1,338,395
=========== ========== ============ ======== ========== ===========
FROM INVESTMENT
ACTIVITIES
Net income............. 265,251 21,281 25,441 -- -- 311,973
Net realized/unrealized
gain on investments... 979,268 18,322 -- -- -- 997,590
----------- ---------- ------------ -------- ---------- -----------
Increase in net assets
derived from
investment
activities........... 1,244,519 39,603 25,441 -- -- 1,309,563
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from
New England Variable
Life Insurance
Company............... 1,396,613 174,961 195,012 -- -- 1,766,586
Net transfers (to) from
other sub account..... (91,422) 82,107 9,315 -- -- --
Net transfers to New
England Variable Life
Insurance Company..... (748,382) (85,413) (132,704) -- -- (966,499)
----------- ---------- ------------ -------- ---------- -----------
Increase in net assets
derived from policy-
related transactions. 556,809 171,655 71,623 -- -- 800,087
----------- ---------- ------------ -------- ---------- -----------
Net increase in net
assets................ 1,801,328 211,258 97,064 -- -- 2,109,650
----------- ---------- ------------ -------- ---------- -----------
NET ASSETS DECEMBER 31,
1986................... $ 2,811,123 $ 305,937 $ 330,985 -- -- $ 3,448,045
=========== ========== ============ ======== ========== ===========
FROM INVESTMENT
ACTIVITIES
Net income............. 3,510,026 171,945 134,161 6,985 71,226 3,894,343
Net realized/unrealized
loss on investments... (3,313,432) (150,769) -- (74,243) (219,517) (3,757,961)
----------- ---------- ------------ -------- ---------- -----------
Increase (decrease) in
net assets derived
from investment
activities........... 196,594 21,176 134,161 (67,258) (148,291) 136,382
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from
New England Variable
Life Insurance
Company............... 5,474,107 471,750 24,824,358 -- 55,569 30,825,784
Net transfers (to) from
other sub accounts.... 16,781,234 414,155 (20,337,778) 316,572 2,825,817 --
Net transfers to New
England Variable Life
Insurance Company..... (3,514,483) (167,650) (516,332) (31,638) (230,916) (4,461,019)
----------- ---------- ------------ -------- ---------- -----------
Increase in net assets
derived from policy-
related transactions. 18,740,858 718,255 3,970,248 284,934 2,650,470 26,364,765
----------- ---------- ------------ -------- ---------- -----------
Net increase in net
assets................ 18,937,452 739,431 4,104,409 217,676 2,502,179 26,501,147
----------- ---------- ------------ -------- ---------- -----------
NET ASSETS DECEMBER 31,
1987................... $21,748,575 $1,045,368 $ 4,435,394 $217,676 $2,502,179 $29,949,192
=========== ========== ============ ======== ========== ===========
</TABLE>
See Notes to Financial Statements.
43
<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 and may not be used to
satisfy any obligations that may arise out of any other business NEVLICO may
conduct.
2. The Account has five investment sub-accounts each of which invests in the
shares of one portfolio of The New England Zenith Fund, Inc. ("Zenith Fund").
The Zenith Fund is an open-end, diversified management investment company. The
Account purchases or redeems shares of the five portfolios of the Zenith Fund
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 Zenith Fund portfolios are
determined by the Zenith Fund as of 4:00 p.m. (New York City time) on each day
the New York Stock Exchange is open for trading and on each day during which
there is a sufficient degree of trading in the relevant Zenith portfolio
securities that the current net asset value of the Zenith shares might be
affected by the change in the value of such portfolio securities. Realized
gains and losses on the sale of the Zenith Fund shares are computed on the
basis of identified cost.
3. Certain deductions are made from each premium payment paid to NEVLICO to
arrive at a net premium that is transferred to the Account. These deductions
include sales load, administrative expenses, a risk charge and state premium
taxes. Charges for investment advisory fees. SEC registration expenses and
independent directors' compensation are deducted from the assets of the Zenith
Fund.
NEVLICO charges the Account for mortality and expense risks NEVLICO assumes.
The charge is made daily at an effective annual rate of .35% of the Account
assets attributable to fixed premium variable life policies and .45% of the
Account assets attributable to single premium variable life policies. In
addition, the cost of providing insurance protection is deducted monthly.
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.
44
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of New England Variable Life
Insurance Company:
We have examined the balance sheets of New England Variable Life Insurance
Company (a wholly-owned subsidiary of New England Mutual Life Insurance
Company) as of December 31, 1986 and 1987, and the related summaries of
operations, statements of stockholder's equity and cash flows for the years
then ended. Our examinations were made in accordance with generally accepted
auditing standards and, accordingly, included such tests of the accounting
records and such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the financial statements referred to above present fairly the
financial position of New England Variable Life Insurance Company at December
31, 1986 and 1987, and the results of its operations and 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
practices are considered to be generally accepted accounting principles for
stock life subsidiaries of mutual life insurance companies, applied on a
consistent basis.
Coopers & Lybrand
Boston, Massachusetts
February 17, 1988
45
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
FINANCIAL STATEMENTS
BALANCE SHEETS
DECEMBER 31, 1986 AND 1987
ASSETS
<TABLE>
<CAPTION>
1986 1987
---- ----
<S> <C> <C>
Bonds.................................................. $ 6,894,533 $ 6,973,481
Cash and short-term investments........................ 1,567,752 17,896
Policy loans........................................... 298,753 1,140,650
Accrued investment income.............................. 214,829 227,777
Premiums deferred and uncollected...................... 1,234,776 4,204,647
Separate account assets................................ 4,158,691 33,510,535
Due from separate account, net......................... 708,502 3,561,343
Other assets........................................... 54,918 70,881
----------- -----------
Total assets....................................... $15,132,754 $49,707,210
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<S> <C> <C>
Policy reserves....................................... $ 1,433,403 $ 4,131,119
Due New England Mutual Life Insurance Company......... 445,932 1,016,696
Federal income taxes payable.......................... 305,973 --
Separate account liabilities.......................... 4,158,691 33,510,535
Accrued expenses...................................... 8,543 914,325
Other liabilities..................................... 34,942 818,134
----------- -----------
Total liabilities................................. 6,387,484 40,390,809
Mandatory securities valuation reserve................ 56,017 29,000
Stockholder's equity:
Common stock (shares authorized: 50,000; issued and
outstanding:
20,000 shares; par value $125)..................... 2,500,000 2,500,000
Paid-in capital in excess of par value.............. 5,000,000 10,000,000
Unassigned surplus.................................. 1,189,253 (3,212,599)
----------- -----------
Total stockholder's equity........................ 8,689,253 9,287,401
----------- -----------
Total liabilities and stockholder's equity........ $15,132,754 $49,707,210
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
SUMMARIES OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1986 AND 1987
<TABLE>
<CAPTION>
1986 1987
---- ----
<S> <C> <C>
Revenues:
Insurance premiums.................................. $3,630,826 $39,231,707
Annuity deposits.................................... 29,966 40,080
Gross investment income............................. 880,022 831,092
---------- -----------
4,540,814 40,102,879
Expenses:
Death and surrender benefits........................ 230,474 475,369
Increase in policy reserves......................... 629,017 2,697,716
Management fees..................................... 448,004 2,422,457
Commissions......................................... 1,037,004 6,237,461
Net transfers to separate accounts.................. 788,661 26,296,568
General and administrative.......................... 971,249 6,608,029
---------- -----------
4,104,409 44,737,600
---------- -----------
Gain (loss) before provision (credit) for taxes....... 436,405 (4,634,721)
Provision for (benefit of) federal income taxes....... 151,727 (305,973)
---------- -----------
Net gain (loss) from operations....................... $ 284,678 $(4,328,748)
========== ===========
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1986 AND 1987
<CAPTION>
1986 1987
---- ----
<S> <C> <C>
Stockholder's equity--beginning of period............. $8,413,529 $ 8,689,253
Net gain (loss) gain from operations.................. 284,678 (4,328,748)
Transfer (to) from mandatory securities valuation
reserve.............................................. (1,499) 27,017
Change in non-admitted assets......................... (7,455) (100,121)
Paid-in capital....................................... -- 5,000,000
---------- -----------
Stockholder's equity--end of period................... $8,689,253 $ 9,287,401
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1986 AND 1987
<TABLE>
<CAPTION>
1986 1987
---- ----
<S> <C> <C>
Cash flows from operating activities:
Premiums.......................................... $ 2,587,081 $ 35,014,649
Investment income................................. 797,969 533,641
Benefits.......................................... (233,909) (433,716)
Expenses and taxes................................ (1,997,304) (12,780,933)
Net transfers to separate account................. (1,058,933) (29,149,409)
Net increase in policy loans...................... (244,350) (841,897)
Other income (disbursements), net................. 163,729 1,184,372
----------- ------------
Net cash flows from operating activities........ 14,283 (6,473,293)
Cash flows from investing activities:
Proceeds of long-term investments sold, matured or
repaid (net of tax).............................. 500,000 500,000
Cost of long-term investments acquired............ (500,000) (576,563)
----------- ------------
Net cash flows from investing activities........ -- (76,563)
Cash flows from financing activities:
Additional paid-in surplus........................ -- 5,000,000
----------- ------------
Net cash flow....................................... 14,283 (1,549,856)
Cash and short-term investments, beginning of year.. 1,553,469 1,567,752
----------- ------------
Cash and short-term investments, end of year........ $ 1,567,752 $ 17,896
=========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<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
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:
The Company's financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Insurance Department of
the State of Delaware, which practices, in the case of a wholly-owned stock
life insurance subsidiary of a mutual life insurance company, are also
considered to be in conformity with generally accepted accounting principles.
Certain reclassifications have been made to amounts previously reported in the
1986 financial statements to conform with the 1987 presentation. The
significant accounting practices followed by the Company are as follows:
INVESTMENTS
Values of bonds and short-term investments have been determined in
accordance with methods and values adopted by the National Association of
Insurance Commissioners. Bonds are carried at amortized cost. Short-term
investments are carried at cost.
Capital gains and losses, realized and unrealized, are reflected as direct
credits or charges to unassigned surplus. Realized capital gains or losses are
reflected net of applicable capital gains tax or benefit.
The mandatory securities valuation reserve is a required reserve established
to stabilize unassigned surplus from fluctuations in the market valuation of
securities. Changes in the reserve are accounted for as direct increases or
decreases in unassigned surplus.
SEPARATE ACCOUNT ASSETS
Assets (valued at market) and liabilities held in the separate account are
included as separate captions on the balance sheet. The summaries 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. This presentation has no effect on
unassigned surplus.
POLICY RESERVES
Reserves for variable life insurance policies are maintained principally
using the Commissioners' Reserve Valuation Method with an assumed interest
rate of 4%.
Reserves held for funds accumulated prior to the purchase of annuities are
equal to the accumulated balance of the funds. Reserves for purchased
annuities are based on the 1951 Group Annuity Table projected by Scale C to
the year 2000 at 3 1/2% interest.
REVENUES AND EXPENSE
Annuity deposits are recognized as revenue when received. Expenses,
including commissions and other policy acquisition, maintenance and settlement
costs, are charged to operations as incurred.
Variable life premium revenues are recognized over the premium paying
period, while expenses, including the cost of new business, are charged to
operations as incurred.
49
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 and other affiliated life
insurance companies. Pursuant to a tax allocated agreement with The New
England, the Company provides for federal income taxes on a separate return
basis, with the Company receiving benefit for net operating loss carryforwards
recognized only to the extent they can be utilized on a separate company
basis.
3. 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
management fees for such services amounted to $448,004 in 1986 and $2,422,457
in 1987.
All of the officers and directors of the Company are officers of The New
England.
On December 22, 1987, The New England contributed $5,000,000 of capital to
the Company.
4. FEDERAL INCOME TAXES:
A tax net operating loss carryforward of $4,818,000 arose in 1987.
Approximately $810,000 of this loss was utilized in 1987 to recover taxes
previously provided. At December 31, 1987, the net operating loss carryforward
available to offset future taxable income is approximately $4,008,000. The net
operating loss will expire in 2002.
50
<PAGE>
Part II
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus with
the items of Form N-8B-2.****
The prospectus consisting of 92 pages.
The undertaking to file reports.****
The undertaking pursuant to Rule 484(b) under the Securities Act of
1933.****
The signatures.
Written consents of the following persons:
Edward N. Wadsworth, Esq. (see Exhibit 3(a)(ii) below)
Robert E. Schneider, F.S.A. (see Exhibit 3(b) below)
Sutherland, Asbill & Brennan (see Exhibit 6 below)
Independent Auditors (see Exhibit 12 below)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of
Directors of NEVLICO*
(2) None
(3) (a) Distribution Agreement between NEVLICO and
NELESCO**
(b)(i) Form of Contract between NEVLICO and its
General Agents**
(c) Commission Schedule for Variable Life
Policies*****
(d) Form of Independent Contract Agreement
Concerning Insurance Product Sales***
(5) (a) Specimen Policy****
(b) Fixed Account Endorsement++++
(6) (a) Certificate of Incorporation and By-Laws of
NEVLICO*
(b) Amended Certificates of Incorporation dated
April 10, 1984, July 25, 1984 and October
9, 1986+
(c) Amended By-Laws dated October 12, 1983+
(8) Services Agreement among New England Life,
NEVLICO and NELESCO++
II - 1
<PAGE>
(10) The Form of Application*
2. See Exhibit 1.A. (10)
3.(a) (i) Opinion of Edward N. Wadsworth, Esquire****
(ii) Consent of Edward N. Wadsworth, Esquire++
(b) Opinion and Consent of Robert E. Schneider,
F.S.A.+++
6. Consent of Sutherland, Asbill & Brennan
7. (i) Powers of Attorney###
(ii) Power of Attorney#####
10. Notice of Withdrawal Right for Variable Life
Policies*****
11. Computation of basis for exchange right
pursuant to Rule 6e-2(b)(13)(v) under the
Investment Company Act of 1940*****
12. Consent of Independent Auditors
13. Schedule for computation of performance
quotations+++
14. Consolidated memorandum describing certain
procedures, filed pursuant to Rule
6e-2(b)(12)(ii) and
Rule 6e-3(T)(b)(12)(iii)#
15. (i) Participation Agreement among
Variable Insurance Products Fund, Fidelity
Distributors Corporation and New England
Variable Life Insurance Company##
(ii) Amendment No. 1 to Participation Agreement
among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England
Variable Life Insurance Company####
(iii) Participation Agreement among Variable
Insurance Products Fund II, Fidelity
Distributors Corporation and New England
Variable Life Insurance Company####
27. Financial Data Schedule
___________
* Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 2-82838, filed April 4, 1983.
** Incorporated by reference to Pre-Effective Amendment No. 1 to the Variable
Account's Form S-6 Registration Statement, File No. 2-82838, filed July 28,
1983.
*** Incorporated by reference to Post-Effective Amendment No. 5 to the Variable
Account's Form S-6 Registration Statement, File No. 2-82838, filed April
30, 1985.
**** Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 33-10954, filed December 19, 1986.
II - 2
<PAGE>
*****Incorporated by reference to Pre-Effective Amendment No. 1 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed April
1, 1987.
++ Incorporated by reference to Post-Effective Amendment No. 2 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed March
7, 1988.
+++ Incorporated by reference to Post-Effective Amendment No. 3 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed May 3,
1988.
++++ Incorporated by reference to Post-Effective Amendment No. 4 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed May 1,
1991.
+ Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 33-52050, filed September 16, 1992.
# Incorporated by reference to Post-Effective Amendment No. 6 to the Variable
Account's Form S-6 Registration Statement, File No. 33-52050, filed April
28, 1995.
## Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 33-64170, filed June 9, 1993.
### Incorporated herein by reference to Post-Effective Amendment No. 4 to the
Variable Account's Form S-6 Registration Statement, File No. 33-66864,
filed March 2, 1995.
#### Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed June 22, 1995.
#####Incorporated herein by reference to Post-Effective Amendment No. 7 to
the Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 26, 1996.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
New England Variable Life Separate Account, certifies that it meets all of the
requirements for effectiveness of this amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this amended registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the city of Boston, and the Commonwealth of Massachusetts, on
the 24th day of April, 1996.
New England Variable Life Separate
Account
(Registrant)
By: New England Variable Life
Insurance Company
(Depositor)
By: /s/Rodney J. Chandler
---------------------
Rodney J. Chandler
Chief Actuary
Attest:
/s/ Marie C. Swift
- ------------------
Marie C. Swift
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, New England
Variable Life Insurance Company certifies that it meets all of the requirements
for effectiveness of this amendment to the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amended
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
city of Boston, and the Commonwealth of Massachusetts, on the 24th day of April,
1996.
New England Variable Life
(Seal) Insurance Company
Attest: /s/Marie C. Swift By: /s/ Rodney J. Chandler
----------------- -----------------------
Marie C. Swift Rodney J. Chandler
Chief Actuary
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed below by the following persons in the
capacities indicated on this 24th day of April, 1996.
Signature Title
--------- -----
Chairman; President; Director;
Robert A. Shafto* Chief Executive Officer
- -----------------
Robert A. Shafto
Director; Vice President-
Chester R. Frost* Controller; Treasurer;
- ----------------- Principal Financial Officer;
Chester R. Frost Principal Accounting Officer
Edward C. Hall* Director
- ---------------
Edward C. Hall
Kernan F. King* Director
- ---------------
Kernan F. King
Robert E. Schneider* Director
- --------------------
Robert E. Schneider
H. James Wilson* Director; General Counsel;
- ---------------- Secretary
H. James Wilson
<PAGE>
Frederick K. Zimmermann* Director
- ------------------------
Frederick K. Zimmermann
By: /s/ Anne M. Goggin
------------------
Anne M. Goggin, Esq.
Attorney-in-fact
* Executed by Anne M. Goggin, Esquire on behalf of those indicated pursuant
to powers of attorney filed with the Variable Account's Form S-6
Registration Statement, File No. 33-66864, on March 2, 1995 and File No.
33-52050, on April 26, 1996.
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
6. Consent of Sutherland, Asbill
& Brennan
12. Consent of Independent Auditors
27. Financial Data Schedule
________________
* Page numbers inserted on manually-signed copy only.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 602,849,030
<INVESTMENTS-AT-VALUE> 704,002,546
<RECEIVABLES> 1,716,936
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 705,719,482
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,085,198
<TOTAL-LIABILITIES> 93,085,198
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 612,634,284
<DIVIDEND-INCOME> 67,367,395
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3,305,646
<NET-INVESTMENT-INCOME> 64,061,749
<REALIZED-GAINS-CURRENT> 1,804,392
<APPREC-INCREASE-CURRENT> 93,611,314
<NET-CHANGE-FROM-OPS> 159,477,455
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 247,142,994
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 6
[SUTHERLAND, ASBILL & BRENNAN]
CONSENT OF SUTHERLAND, ASBILL & BRENNAN
We consent to the reference to our firm under the heading "Legal Matters"
in the prospectus included in Post-Effective Amendment No. 11 to the
Registration Statement on Form S-6 for certain variable life insurance policies
issued through New England Variable Life Separate Account of New England
Variable Life Insurance Company (File No. 33-10954). In giving this consent, we
do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
/s/ Sutherland, Asbill & Brennan
SUTHERLAND, ASBILL & BRENNAN
Washington, D.C.
April 24, 1996
<PAGE>
Exhibit 12
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 11 to the
Registration Statement on Form S-6 (File No. 33-10954) of our report dated
February 6, 1996, on our audits of the financial statements of New England
Variable Life Separate Account of New England Variable Life Insurance Company as
of December 31, 1995 and for each of the periods indicated therein. We also
consent to the inclusion of our report dated March 8, 1996, on our audits of the
financial statements of New England Variable Life Insurance Company as of
December 31, 1995 and 1994, and for each of the two years in the period ended
December 31, 1995. We also consent to the reference to our Firm under the
caption "Experts" in this Post-Effective Amendment.
Coopers & Lybrand, L.L.P.
Boston, Massachusetts
April 24, 1996
