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As filed with Securities and Exchange Commission on
April 26, 1996
Registration No. 33-88082
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 1
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.
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NEW ENGLAND VARIABLE LIFE
INSURANCE COMPANY
Flexible Premium Adjustable
Variable Life Insurance Policies
Issued by
New England Variable Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual Flexible Premium Adjustable Variable
Life Insurance Policies (the "Policies") offered by New England Variable Life
Insurance Company ("NEVLICO"), a wholly-owned subsidiary of New England Mutual
Life Insurance Company ("The New England"). 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.
Each Policy provides premium flexibility together with two types of death
benefit guarantees as long as the total amount of premiums paid with interest,
less any partial surrenders with interest, at least equals certain minimum
amounts and there is no policy loan. (Policies issued in New York offer one
death benefit guarantee.)
You may choose between two death benefit options, one of which provides a
fixed death benefit equal to the Policy's face amount and one of which
provides a variable death benefit which may vary daily with the net investment
experience of one or more mutual fund portfolios. Under either of the death
benefit options, the minimum death benefit guarantee(s) will be available. The
cash value of the Policy generally will increase with the payment of each
premium but will vary daily with the investment experience of the mutual fund
portfolios. There is no guaranteed minimum cash value for investments in the
mutual fund portfolios.
You may cancel the Policy during the "right to return the Policy" period.
The first net premium for the Policy will be allocated to the Zenith Money
Market Sub-Account until the later of 45 days after the date Part 1 of the
application is signed or 10 days after NEVLICO mails the Notice of Withdrawal
Right. Thereafter, the Policy's cash value will be invested according to your
instructions.
You may, within limits, allocate premiums to one or more of the 16
investment Sub-Accounts of NEVLICO's Variable Life Separate Account (the
"Variable Account") or to NEVLICO's Fixed Account, after certain deductions
have been made. Each Sub-Account of the Variable Account invests in the shares
of one of the Eligible Funds. The Eligible Funds are: the Back Bay Advisors
Money Market Series, the Back Bay Advisors Bond Income Series, the Capital
Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors Managed
Series, the Westpeak Value Growth Series, the Loomis Sayles Avanti Growth
Series, the Loomis Sayles Small Cap Series, the Alger Equity Growth Series,
the Loomis Sayles Balanced Series, the Venture Value Series and the Draycott
International Equity Series of the New England Zenith Fund (the "Zenith
Fund"); the Equity-Income Portfolio, Overseas Portfolio and High Income
Portfolio of the Variable Insurance Products Fund ("VIP Fund"); and the Asset
Manager Portfolio of the Variable Insurance Products Fund II ("VIP Fund II").
The Series of the Zenith Fund are advised by affiliates of The New England.
The VIP Fund and VIP Fund II are advised by Fidelity Management & Research
Company.
SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE OUT OF THE FIXED ACCOUNT.
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It may not be advantageous to replace existing insurance with the Policy
described in this prospectus. (See "Charges and Expenses".)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE
CURRENT PROSPECTUSES OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE
INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE
ATTACHED AT THE END OF THIS PROSPECTUS. THESE PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES ARE OFFERED FOR SALE IN THE COMMONWEALTH OF PUERTO RICO
PURSUANT TO REGISTRATION WITH THE SECURITIES OFFICE OF THE DEPARTMENT OF THE
TREASURY, BUT SUCH REGISTRATION DOES NOT CONSTITUTE A FINDING THAT THIS
PROSPECTUS IS TRUE, COMPLETE, AND NOT MISLEADING, NOR HAS THE SECURITIES
OFFICE OF THE DEPARTMENT OF THE TREASURY PASSED IN ANY WAY UPON THE MERITS OF,
RECOMMENDED, OR GIVEN APPROVAL TO SUCH SECURITIES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
MAY 1, 1996
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TABLE OF CONTENTS
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GLOSSARY.................................................................................................................... A-4
INTRODUCTION TO THE POLICIES................................................................................................ A-6
The Policies.............................................................................................................. A-6
Availability of the Policy................................................................................................ A-8
Policy Charges............................................................................................................ A-8
How the Policy Works...................................................................................................... A-10
Receipt of Communications and Payments at NEVLICO's Administrative Office................................................. A-11
NEVLICO and The New England............................................................................................... A-11
POLICY VALUES AND BENEFITS.................................................................................................. A-12
Death Benefit............................................................................................................. A-12
Minimum Guaranteed Death Benefit.......................................................................................... A-12
Adjustments to the Death Proceeds Payable................................................................................. A-14
Change in Death Benefit Option............................................................................................ A-14
Cash Value................................................................................................................ A-14
Net Investment Experience................................................................................................. A-14
Allocation of Net Premiums................................................................................................ A-15
Amount Provided for Investment under the Policy........................................................................... A-15
Right to Return the Policy................................................................................................ A-16
CHARGES AND EXPENSES........................................................................................................ A-16
Deductions from Premiums.................................................................................................. A-16
Surrender Charge.......................................................................................................... A-17
Monthly Deduction from Cash Value......................................................................................... A-19
Charges Against the Eligible Funds and the Sub-Accounts of the Variable Account........................................... A-21
Group or Sponsored Arrangements........................................................................................... A-21
PREMIUMS.................................................................................................................... A-21
Flexible Premiums......................................................................................................... A-21
Lapse and Reinstatement................................................................................................... A-23
OTHER POLICY FEATURES....................................................................................................... A-23
Increase in Face Amount................................................................................................... A-23
Loan Provision............................................................................................................ A-24
Surrender................................................................................................................. A-26
Partial Surrender......................................................................................................... A-26
Reduction in Face Amount.................................................................................................. A-26
Investment Options........................................................................................................ A-27
Transfer Option........................................................................................................... A-27
Substitute of Insured Person.............................................................................................. A-28
Payment of Proceeds....................................................................................................... A-28
24 Month Right............................................................................................................ A-28
Payment Options........................................................................................................... A-29
Additional Benefits by Rider.............................................................................................. A-30
Policy Owner and Beneficiary.............................................................................................. A-31
THE VARIABLE ACCOUNT........................................................................................................ A-31
Investments of the Variable Account....................................................................................... A-31
Investment Management..................................................................................................... A-34
THE FIXED ACCOUNT........................................................................................................... A-36
General Description....................................................................................................... A-36
Values and Benefits....................................................................................................... A-37
Policy Transactions....................................................................................................... A-37
NEVLICO'S DISTRIBUTION AND OTHER AGREEMENTS................................................................................. A-38
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LIMITS TO NEVLICO'S RIGHT TO CHALLENGE THE POLICY........................................................................ A-38
Misstatement of Age or Sex............................................................................................. A-39
Suicide................................................................................................................ A-39
TAX CONSIDERATIONS....................................................................................................... A-39
Policy Proceeds........................................................................................................ A-39
Charge for NEVLICO's Income Taxes...................................................................................... A-42
MANAGEMENT............................................................................................................... A-43
VOTING RIGHTS............................................................................................................ A-44
RIGHTS RESERVED BY NEVLICO............................................................................................... A-44
TOLL-FREE NUMBERS........................................................................................................ A-45
REPORTS.................................................................................................................. A-45
ADVERTISING PRACTICES.................................................................................................... A-45
LEGAL MATTERS............................................................................................................ A-45
REGISTRATION STATEMENT................................................................................................... A-45
EXPERTS.................................................................................................................. A-46
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES AND ACCUMULATED PREMIUMS....................... A-47
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................................................................ A-57
APPENDIX C: LONG TERM MARKET TRENDS...................................................................................... A-73
APPENDIX D: USES OF LIFE INSURANCE....................................................................................... A-75
APPENDIX E: TAX INFORMATION.............................................................................................. A-76
FINANCIAL STATEMENTS..................................................................................................... A-78
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GLOSSARY
ACCOUNT. A sub-account of the Variable Account or the Fixed Account.
ACTUAL INVESTMENT RETURN. This term appears in the Policy only. The Actual
Investment Return of a sub-account is the same as its net investment
experience. (See "Net Investment Experience".)
AGE. For purposes of this prospectus, the age of an insured refers to the
insured's age at his or her nearest birthday.
CASH VALUE. A Policy's cash value includes the amount of its cash value held
in the Variable Account, the amount held in the Fixed Account and, if there is
an outstanding policy loan, the amount of its cash value held in NEVLICO's
general account as a result of the loan. (See "Cash Value".)
COST OF INSURANCE CHARGE. This charge for providing insurance protection is
deducted on the Policy Date and on the first day of each policy month. The
cost of insurance for a policy month is equal to the amount at risk multiplied
by the cost of insurance rate for that month. Cost of insurance rates vary
monthly. (See "Monthly Deduction from Cash Value".)
DEATH BENEFIT OPTION 1. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) a percentage, determined in accordance with
federal income tax laws, of the Policy's cash value, including the pro rata
portion of any Monthly Deduction made for a period beyond the date of death.
(See "Death Benefit".)
DEATH BENEFIT OPTION 2. Death Benefit equals the greater of (i) the face
amount of the Policy plus the Policy's cash value and (ii) a percentage,
determined in accordance with federal income tax laws, of the Policy's cash
value, including the pro rata portion of any Monthly Deduction made for a
period beyond the date of death. (See "Death Benefit".)
ELIGIBLE FUNDS. Each Sub-Account of the Variable Account invests in the
shares of one of the Eligible Funds. The Eligible Funds are: the Back Bay
Advisors Money Market Series, the Back Bay Advisors Bond Income Series, the
Capital Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors
Managed Series, the Westpeak Value Growth Series, the Loomis Sayles Avanti
Growth Series, the Loomis Sayles Small Cap Series, the Alger Equity Growth
Series, the Loomis Sayles Balanced Series, the Venture Value Series and the
Draycott International Equity Series of the Zenith Fund; the Equity-Income
Portfolio, Overseas Portfolio and the High Income Portfolio of the VIP Fund;
and the Asset Manager Portfolio of VIP Fund II. (See "The Variable Account".)
EXCESS POLICY LOAN. The situation when policy loans plus accrued interest
exceed the Policy's cash value less the applicable Surrender Charge. (See
"Loan Provision".)
FIXED ACCOUNT. The Fixed Account is a part of NEVLICO's general account to
which net premiums may be allocated. NEVLICO provides guarantees of principal
and interest with respect to amounts allocated to the Fixed Account. (See "The
Fixed Account".)
INVESTMENT START DATE. This is the latest of the date NEVLICO first receives
a premium payment for the Policy, the date Part II of the Policy application
is signed and the Policy Date. It is the date when an amount is first provided
for investment under the Policy. (See "Amount Provided for Investment under
the Policy".)
MATURITY DATE. The Policy anniversary on which the insured is (or would have
been) age 100.
MINIMUM GUARANTEED DEATH BENEFIT A. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if the
total of: (1) premiums paid in each prior Policy year accumulated at a 4% rate
from the first day of the year of payment to the most recent Policy
anniversary, less partial surrenders accumulated at a 4% rate from the date of
surrender to the most recent Policy anniversary, plus (2) premiums paid less
partial surrenders in the current Policy year, is at least equal to: the
amount shown in the Table of Guaranteed Death Benefit A Premiums Accumulated
at 4% for the prior Policy year plus 1/12 of the Benefit A Premium for each
Policy month of the current year up to and including the month for which the
Monthly Deduction is being processed, and there is no outstanding Policy loan.
Generally, NEVLICO determines whether this benefit is in effect on the first
day of each Policy month. However, certain Policy transactions could terminate
this guarantee. This guarantee is not available under Policies issued in New
------------------------------------------------------------
York. (See "Minimum Guaranteed Death Benefit".)
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MINIMUM GUARANTEED DEATH BENEFIT B. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if the
total of: (1) premiums paid in each prior Policy year accumulated at a 4% rate
from the first day of the year of payment to the most recent Policy
anniversary, less partial surrenders accumulated at a 4% rate from the date of
surrender to the most recent Policy anniversary, plus (2) premiums paid less
partial surrenders in the current Policy year, is at least equal to: the
amount shown in the Table of Guaranteed Death Benefit B Premiums Accumulated
at 4% for the prior Policy year plus 1/12 of the Benefit B Premium for each
Policy month of the current year up to and including the month for which
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the Monthly Deduction is being processed, and there is no outstanding Policy
loan. Generally, NEVLICO determines whether this benefit is in effect on the
first day of each Policy month prior to the later of: the date when the
insured attains age 80, and 20 years from the Policy Date, but no later than
the Maturity Date. However, certain Policy transactions could terminate this
guarantee. (See "Minimum Guaranteed Death Benefit".)
MINIMUM PREMIUM. Generally, the Minimum Premium is that amount which, if
timely paid, guarantees that the Policy will not lapse during the first three
Policy years even if the Policy's net cash value is insufficient to pay the
Monthly Deduction in any month. The Minimum Premium amount may be recalculated
following certain Policy transactions. In addition, no three-year Minimum
Premium death benefit guarantee will apply to the Policy following certain
other Policy transactions. (See "Premiums".)
MONTHLY DEDUCTION. The Monthly Deduction is the amount of charges deducted
from the Policy's cash value each month and includes the monthly cost of
insurance, the monthly cost of any benefits provided by riders, the monthly
policy fee, the monthly administrative charge and the monthly minimum death
benefit guarantee charge. (See "Monthly Deduction from Cash Value".)
MORTALITY AND EXPENSE RISK CHARGE. This charge is made daily from the value
of each Sub-Account's assets that come from the Policies. The charge is
currently at an annual rate of .75% of the Sub-Accounts' assets, and is
guaranteed not to exceed .90% of the Sub-Accounts' assets. The mortality risk
NEVLICO assumes is that insureds may live for shorter periods of time than
estimated. The expense risk NEVLICO assumes is that the costs of issuing and
administering Policies may be more than estimated. (See "Charges Against the
Eligible Funds and the Sub-Accounts of the Variable Account".)
NET CASH VALUE. The amount you may obtain upon surrender of the Policy and
which is equal to the Policy's cash value reduced by any Surrender Charge that
would apply on surrender and by any outstanding policy loan and accrued
interest on the loan. (See "Cash Value".)
NET INVESTMENT EXPERIENCE. For any period, a Sub-Account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares for the same period, reduced by the amount of charges against the Sub-
Account for that period. (See "Net Investment Experience".)
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you
choose in an effort to meet your future goals under the Policy. The Planned
Premium is a level amount that is subject to certain limits under the Policy.
Payments in addition to any Planned Premium are referred to in the Policy as
unscheduled payments and can be paid at any time, subject to certain limits.
(See "Premiums".)
PREMIUMS. Premiums include all payments under the Policy, whether a Planned
Premium or an unscheduled payment. (See "Premiums".)
POLICY DATE. If you make a premium payment with the application, the Policy
Date is generally the later of the date Part II of the application was signed
and receipt of the premium payment. If you choose to pay the initial premium
upon delivery of the Policy, the Policy will be issued with a Policy Date
which is generally five days after issue. (See "Amount Provided for Investment
under the Policy".)
TABLE OF GUARANTEED DEATH BENEFIT A PREMIUMS ACCUMULATED AT 4%. The Table of
Guaranteed Death Benefit A Premiums Accumulated at 4%, which appears in the
Policy, is a measurement used to determine if the Minimum Guaranteed Death
Benefit A is in effect. This Table assumes the Guaranteed Death Benefit A
Premium that appears in the Policy is paid on the first day of each Policy
year. The Table shows the value of those premiums accumulated at 4% per year.
This Table is not applicable to Policies issued in New York. (See "Minimum
Guaranteed Death Benefit".)
TABLE OF GUARANTEED DEATH BENEFIT B PREMIUMS ACCUMULATED AT 4%. The Table of
Guaranteed Death Benefit B Premiums Accumulated at 4%, which appears in the
Policy, is a measurement used to determine if the Minimum Guaranteed Death
Benefit B is in effect. This Table assumes the Guaranteed Death Benefit B
Premium that appears in the Policy is paid on the first day of each Policy
year. The Table shows the value of those premiums accumulated at 4% per year.
(See "Minimum Guaranteed Death Benefit".)
TARGET PREMIUM. The Target Premium is used to determine the amount of
Deferred Sales Charge that may apply in the event of a surrender, partial
surrender, lapse or face amount reduction. It varies by issue age, sex and
underwriting class of the insured and the Policy's face amount. The Target
Premium is less than or equal to 75% of the annual premium necessary to
maintain a fixed benefit whole life insurance Policy for the same face amount
on the life of the insured. The annual whole life premium is calculated using
an assumed interest rate of 4%, guaranteed cost of insurance charges and the
current level of other Policy charges. (See "Surrender Charge".)
YOU. When used in this prospectus, "you" refers to the Policy Owner.
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INTRODUCTION TO THE POLICIES
This prospectus describes Policies under which net premiums are allocated to
the Variable Account. If the Fixed Account is available in your state, you may
choose to allocate or transfer all or part of your funds to that account.
NEVLICO provides guarantees of principal and interest with respect to the
Fixed Account which is part of NEVLICO's general account. Amounts in the Fixed
Account are backed by NEVLICO's general account, rather than the Variable
Account. For a description of the Fixed Account, see "The Fixed Account" which
appears later in this prospectus.
THE POLICIES
The individual Flexible Premium Adjustable Variable Life Insurance Policies
offered by this prospectus are designed to provide lifetime insurance
coverage. They are not offered primarily as an investment.
The following is a brief listing of the basic features of the Policy. These
and other features of the Policy are explained in detail throughout the
prospectus. You should be sure to read the entire prospectus for more complete
information.
-- You may choose to make premium payments under the Policy based on a
schedule you determine, subject to certain limits. NEVLICO can limit or
prohibit unscheduled payments in certain situations, including cases where
the insured is in a substandard risk class. (See "Premiums".)
-- Net premiums are invested according to your instructions in one or more of
the Sub-Accounts of the Variable Account corresponding to mutual fund
portfolios, or the Fixed Account, after an initial period in the Zenith
Back Bay Advisors Money Market Sub-Account. (See "Allocation of Net
Premiums" and "Investment Options".)
-- The mutual fund portfolios available to you under the Policy include
several common stock funds, including funds which invest primarily in
foreign securities, two bond funds, two managed funds, a balanced fund,
and a money market fund. You may allocate your Policy's cash value to a
maximum of ten accounts (including the Fixed Account) at any one time.
(See "Investments of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. NEVLICO provides guarantees of Fixed Account
principal and interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE
-----------------------------------------------
FROM THE FIXED ACCOUNT. NEVLICO also reserves the right to restrict
-----------------------
transfers of cash value and allocations of premiums into the Fixed
Account. (See "The Fixed Account".)
-- The cash value of the Policy will vary daily based on, among other things,
the net investment experience of the Sub-Accounts to which amounts have
been allocated and the amount of interest credited to any of the Policy's
cash value in the Fixed Account. (See "Cash Value", "Charges and
Expenses", "Premiums", "Loan Provision" and "Partial Surrender".)
-- The portion of the cash value which you invest in the Sub-Accounts is not
guaranteed. You bear the investment risk on this portion of the cash
value. (See "Cash Value".)
-- You may choose between two death benefit options under the Policy. The
level option provides a death benefit equal to the Policy's face amount.
The variable option provides a death benefit equal to the face amount plus
any cash value, which varies with the net investment experience of the
Sub-Accounts to which amounts have been allocated and the rate of interest
credited on any cash value in the Fixed Account. Under either of these
options the death benefit could be increased to satisfy tax law
requirements if the cash value reaches certain levels. (See "Death
Benefit".)
-- You may increase (after the first Policy year) or decrease the Policy's
face amount. The increase or decrease will be reflected in the Policy's
charges. (See "Increase in Face Amount" and "Reduction in Face Amount.")
-- Regardless of investment experience, each form of death benefit is
guaranteed not to be less than the Policy's face amount, as long as the
total amount of premiums paid, with interest, less any partial surrenders,
with interest, at least equals certain minimum amounts and there is no
outstanding Policy loan. (See "Death Benefit" and "Minimum Guaranteed
Death Benefit".)
-- If the insured is alive and the Policy is in force on the Maturity Date,
the Policy will then terminate. The net cash value as of the Maturity Date
will be paid to you.
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-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- After the "right to return the Policy" period, you may transfer portions
of the Policy's cash value among the Sub-Accounts and, generally, to the
Fixed Account up to four times per policy year (twelve times per policy
year for Policies issued in New York) without NEVLICO's consent. NEVLICO
currently allows 12 transfers per policy year in all states. Transfers and
allocations involving the Fixed Account are subject to certain limits.
(See "Transfer Option" and "The Fixed Account--Policy Transactions".)
-- A loan privilege is available under the Policy. A partial surrender
feature is also available. (See "Loan Provision" and "Partial Surrender".)
-- Death benefits paid to the beneficiary under the Policy generally are not
subject to Federal income tax. Under current law, undistributed increases
in cash value generally are not taxable to you. (See "Tax
Considerations".)
-- Loans, assignments and other pre-death distributions under the Policy may
have tax consequences depending primarily on the amount which you have
paid into the Policy but also on any "material change" in the terms or
benefits of the Policy or any death benefit reduction. If premium
payments, a death benefit reduction, or a material change in the terms or
benefits of the Policy cause it to become a "modified endowment contract",
then pre-death distributions (including loans) will be included in income
on an income first basis, and a 10% penalty tax may be imposed on income
distributed before the Policy Owner attains age 59 1/2. Tax considerations
may therefore influence the amount and timing of premium payments and
certain Policy transactions which you choose to make. (See "Tax
Considerations".)
-- If the Policy is not a modified endowment contract, NEVLICO believes that
loans under the Policy will not be taxable to you as long as the Policy
has not lapsed, been surrendered or terminated. With certain exceptions,
other pre-death distributions under a Policy that is not a modified
endowment contract are includible in income only to the extent they exceed
the investment in the Policy. (See "Tax Considerations".)
-- You have an opportunity during the "right to return the Policy" period to
return the Policy for a refund. You also have the right for a limited
period to cancel an increase in the Policy's face amount which you have
requested. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue or the effective date of a
face amount increase, you may exercise the Policy's 24 Month Right, which
will result in the allocation of all or part of your Policy's cash value
and future premiums to the Fixed Account. The purpose of the 24 Month
Right is to provide you with fixed Policy values and benefits. (See "24
Month Right" for a description of this provision generally and for a
description of the variation which applies to Policies issued in the state
of Maryland.)
In many respects the Policies are similar to fixed-benefit universal life
insurance. Like universal life insurance, the Policies offer death benefits
and provide flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit universal life insurance in
that the death benefit may, and the cash value will, vary to reflect the
investment experience of the selected Sub-Accounts of the Variable Account.
The variable universal life insurance policies offered by NEVLICO are
designed to provide insurance protection. Although the underlying mutual fund
portfolios invest in securities similar to those in which mutual funds
available directly to the public invest, in many ways the Policies differ from
mutual fund investments. The main differences are:
-- The Policy provides a death benefit based on NEVLICO's assumption of an
actuarially calculated risk.
-- If the net cash value is not sufficient to pay a Monthly Deduction, the
Policy may lapse with no value unless additional premiums are paid. If the
Policy lapses when Policy loans are outstanding, adverse tax consequences
may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values of
the Policy. These charges include various insurance, risk, administrative
and premium tax charges. (See "Charges and Expenses".)
-- The Variable Account, not the Policy Owner, owns the mutual fund shares.
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-- Federal income tax liability on any earnings is deferred until you receive
a distribution from the Policy. Transfers from one underlying fund
portfolio to another are accomplished without tax liability under current
law.
-- Dividends and capital gains are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses
of Life Insurance".
AVAILABILITY OF THE POLICY
Generally, the Policies may be issued on the lives of insureds from the age
of one to 80 on an underwritten basis, and on the lives of insureds from the
age of 20 to 70 on an automatic issue basis. With NEVLICO's consent, the
Policies may be issued on the lives of insureds less than the age of one. All
persons must meet NEVLICO's underwriting and other criteria for issuance.
Generally, the minimum face amount available is $250,000 unless NEVLICO
consents to a lower amount. However, the minimum face amount available is
$50,000 in business situations (situations in which two or more Policies, on
more than one life, are totally or partially funded, directly or indirectly,
by an employer) where either (1) the average face amount is at least $250,000
or (2) the Policies are issued on the lives of at least 25 persons and the
average face amount is at least $150,000. The Policies are not available to
employee benefit plans qualified under Section 401 of the Internal Revenue
Code, except with NEVLICO's consent.
POLICY CHARGES
PREMIUM-BASED CHARGES. NEVLICO deducts the following charges from premiums:
-- A maximum sales charge of 4%. NEVLICO currently intends to waive this
charge on premiums paid after the first 20 policy years. (If you increase
your Policy's face amount, NEVLICO currently intends to waive this charge
on the portion of premiums attributable to the face amount increase after
20 years from the date of the increase.) A 3% sales charge will apply to
certain larger Policies and to Policies sold in certain larger business
situations;
-- A state premium tax charge of 2.5%;
-- A charge for federal taxes of 1%.
SURRENDER CHARGE. The Surrender Charge includes:
-- A deferred sales charge. This charge applies to a lapse, total or partial
surrender or reduction in face amount during Policy years one through
eleven. The maximum Deferred Sales Charge is imposed for Policies which
cover insureds whose issue age is 55 or less at issue, if you lapse or
surrender the Policy, or reduce its face amount, in Policy years three
through five. The maximum Deferred Sales Charge in those years equals 45%
of one Target Premium plus 13.5% of a second Target Premium and 13.5% of a
third Target Premium. After the fifth Policy year, the maximum Deferred
Sales Charge declines on a monthly basis until it reaches 0% in the last
month of the eleventh Policy year. If you lapse or surrender the Policy,
or reduce its face amount, in the first two Policy years, the maximum
Deferred Sales Charge in the first Policy year will be 25% of one Target
Premium and in the second Policy year will be 25% of one Target Premium
plus 5% of a second Target Premium.
-- A deferred administrative charge. This charge applies to a lapse, total or
partial surrender or reduction in face amount during Policy years one
through eleven. This charge is $2.50 per $1,000 of face amount for the
first Policy year, and then reduces monthly until it reaches 0 at the end
of the 11th Policy year. The charge will be less if the issue age is
greater than 65.
-- If you increase your Policy's face amount, a new Surrender Charge period
and a separate Target Premium amount will apply to the portion of the
Policy resulting from the face amount increase, starting with the date of
the increase.
The Surrender Charge is deducted from the Policy's available cash value,
regardless of whether that cash value is derived from premiums or investment
experience.
MONTHLY DEDUCTION FROM CASH VALUE. NEVLICO deducts certain charges from the
cash value:
-- Monthly charge for the cost of insurance and for any benefits provided by
rider;
-- Monthly administrative charge, currently equal to $0.06 per $1,000 of face
amount for the first Policy year and $0.02 per $1,000 thereafter
(guaranteed not to exceed $0.08 per $1,000 of face amount in the first
Policy year and $0.04 per
A-8
<PAGE>
$1,000 thereafter). On a current basis, NEVLICO intends not to charge more
than $40 per month for the monthly administrative charge in Policy years
two and after. For certain larger Policies and Policies sold in certain
larger business situations the monthly administrative charge for the first
Policy year currently equals $0.05 per $1,000 of face amount rather than
$0.06;
-- Monthly minimum death benefit guarantee charge of $0.01 per $1,000 of face
amount;
-- Monthly policy fee, currently equal to $4.50 per month (guaranteed not to
exceed $7.00 per month).
CHARGE FOR FACE AMOUNT INCREASES. If you increase your Policy's face amount
and medical underwriting is required for the increase, a charge of $2.50 per
$1,000 of face amount increase will be deducted from your Policy's cash value
on the date the increase takes effect. NEVLICO currently limits this charge to
a maximum of $200.
CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT AND THE ELIGIBLE FUNDS. The
following charges are deducted from the Variable Account and Eligible Fund
assets:
-- Daily charge against the Sub-Account assets for NEVLICO's mortality and
expense risk, currently equal to an annual rate of .75% (guaranteed not to
exceed .90%);
-- Daily charges against the Eligible Fund portfolios for investment advisory
services and fund operating expenses.
Currently, no charge is made to the Variable Account for federal income taxes
that may be attributable to the Variable Account. NEVLICO may, however, impose
such a charge in the future.
See "Charges and Expenses" and "Other Policy Features--Increase in Face
Amount".
A-9
<PAGE>
HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
Premium Payments
. Flexible
. Planned premium options
-Minimum premium (in first three Policy years)
-Guaranteed Death Benefit B Premium (to age 80)
-Guaranteed Death Benefit A Premium (to age 100)(not
available under Policies issued in New York)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Charges from Premium Payments
. Sales Load: 4% (3% for certain larger Policies and Policies sold
in certain business situations). NEVLICO intends to waive after
20 policy yrs. and after 20 years for premiums relating to a face
amount increase
. State Premium Tax Charge: 2.5%
. Charge for Federal Taxes: 1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loans
. After the free look period, you may borrow a portion of your
cash value
. Loan interest charge is 5.5%. Loaned funds are transferred out
of the Eligible Funds into the General Account where they are
credited with not less than 4.0% interest
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Retirement Benefits
. Fixed settlement options are available for policy proceeds
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash Values
. Net premium payments invested in your choice of Eligible Fund
investments or the Fixed Account (after an initial period in the
Zenith Money Market Sub-Account)
. The cash value reflects investment experience, interest, premium
payments, policy charges and any distributions from the Policy
. The cash value invested in mutual funds is not guaranteed
. Any earnings are accumulated free of any current income taxes
. You may change the allocation of future net premiums at any
time. You may currently transfer funds among investment
options (and to the Fixed Account) up to 12 times per policy year,
after the free look period.
Transfers from (and, in certain circumstances, to) the Fixed
Account are limited as to timing, frequency and amount
. Your cash value may be allocated among a maximum of ten
accounts at any one time
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Death Benefit
. Level or Variable Death Benefit Options
. Guaranteed not to be less than initial face amount if Death
Benefit Guarantee is in effect
. Income tax free to named beneficiary
. Face amount may be increased, subject to a processing fee
of $2.50 per $1,000 face amount and any necessary underwriting
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Daily Deductions from Assets
. Mortality and expense risk charges of .75% (guaranteed not to
exceed .90%) on an annual basis are deducted from the cash
value daily
. Investment advisory fees and other expenses are deducted from
the Eligible Fund values daily
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beginning of Month Charges
. The cost of insurance protection (reflecting any substandard risk
or automatic issue rating) is deducted from the cash value each month
. Any Rider Charges
. Policy Fee: $4.50 (not to exceed $7.00) per month
. Minimum Death Benefit Guarantee Charge: $.01 per $1000 face amount monthly
. Administrative Charge: $.06 (guaranteed not to exceed $.08) per
$1000 face amount monthly (first year) and $.02 (guaranteed not
to exceed $.04) per $1000 face amount monthly (after first year).
For certain larger Policies and Policies sold in certain business
situations charge is currently $.05 per $1,000 in first year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Surrender Charges
. Consist of Deferred Sales Charge and Deferred Administrative
Charge (see page A-17)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Living Benefits
. If policyholder has elected and qualified for benefits for
disability and becomes totally disabled, company will waive
monthly charges during the period of disability up to certain
limits.
. Policy may be surrendered at any time for its cash surrender
value
. Deferred income taxes, including taxes on amounts borrowed,
become payable upon surrender
. Grace period for lapsing with no value is 62 days from the first
date in which Monthly Deduction was not paid due to
insufficient cash value
. Subject to NEVLICO's rules, a lapsed Policy may be reinstated
within seven years of date of lapse if it has not been surrendered
- --------------------------------------------------------------------------------
A-10
<PAGE>
Receipt of Communications and Payments at Nevlico's Administrative Office
NEVLICO will treat your request for a Policy transaction, or your submission
of a payment, as received at the Administrative Office if it is received there
before the close of regular trading on the New York Stock Exchange on that
day. If it is received after that time, or if the New York Stock Exchange is
not open that day, then it will be treated as received on the next day when
the New York Stock Exchange is open.
Nevlico and The New England
NEVLICO was organized as a stock life insurance company in Delaware in 1980
and is licensed to sell life insurance in all states, the District of Columbia
and Puerto Rico. NEVLICO's Home Office is in Wilmington, Delaware and its
Administrative Office is at 501 Boylston Street, Boston, Massachusetts 02116.
NEVLICO's mailing address is: P.O. Box 9116, Boston, Massachusetts 02117.
NEVLICO is a wholly-owned subsidiary of The New England, which was organized
in Massachusetts in 1835. The New England is the oldest chartered mutual life
insurance company in the United States. On December 31, 1995, The New England
had over $16 billion of assets and over $62 billion of life insurance in
force. As of December 31, 1995, The New England and its affiliates had over
$86 billion in assets under management.
As of December 31, 1995, the value of The New England's investment in
NEVLICO was $142.7 million. It is expected that The New England may from time
to time contribute additional amounts to NEVLICO; however, The New England is
under no obligation to do so, and its assets do not support the benefits under
the Policies. NEVLICO may reinsure a portion of a Policy's death benefit with
The New England.
The 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.
The following chart illustrates the relationship of NEVLICO, the Fixed
Account, the Variable Account and the Eligible Funds.
-------------------------------------------------------
NEVLICO
-------------------------------------------------------
(Insurance company subsidiary of The New England)
Charges are deducted.
Net premiums and net unscheduled payments are allocated
to the Policy Owner's choice of sub-accounts in the
Variable Account or to the Fixed Account.
<TABLE>
<CAPTION>
Premiums ------------------------------------------------------------------------------------------------------------
and VARIABLE ACCOUNT
Unscheduled -----------------------------------------------------------------------------------------------------------
Payments <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith
Fixed Capital Bond Money Man- Stock Value Avanti Small Bal- Equity Venture Inter-
Account Growth Income Market aged Index Growth Growth Cap anced Growth Value national
Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Equity
Account Account Account Account Account Account Account Account Account Account Account Sub-
Account
-----------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity- Over- High Asset
Income Seas Income Man-
Sub- Sub- Sub- ager
Account Account Account Sub-
Account
-----------------------------------------------------------------------------------------------------------
</TABLE>
Sub-Accounts by
shares of the
Eligible Funds.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
NEW ENGLAND ZENITH FUND
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Back Bay Back Bay Back Bay Westpeak Westpeak Loomis Loomis Loomis Alger Venture Draycott
Growth Advisors Advisors Advisors Stock Value Sayles Sayles Sayles Equity Value Inter-
Series Bond Money Managed Index Growth Avanti Small Bal- Growth Series national
Income Market Series Series Series Growth Cap anced Series Equity
Series Series Series Series Series Series
--------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------
VIP
FUND
VIP FUND II
-------------------------
<S> <C> <C> <C>
Equity Over- High Asset
Income seas Income Man-
Port- Port- Port- ager
folio folio folio Port-
folio
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Eligible Funds buy portfolio investments to support values and benefits of
the Policies.
A-11
<PAGE>
POLICY VALUES AND BENEFITS
DEATH BENEFIT
If the insured dies before the Maturity Date, NEVLICO will pay a death
benefit to the beneficiary.
DEATH BENEFIT OPTIONS. When you apply for a Policy, you may choose between
two death benefit options.
The Option 1 (Face Amount) death benefit provides a death benefit equal to
the face amount of the Policy. The Option 1 death benefit is fixed, subject to
increases required by the Internal Revenue Code.
The Option 2 (Face Amount Plus Cash Value) death benefit provides a death
benefit equal to the face amount of the Policy plus the amount, if any, of the
Policy's cash value. The Option 2 death benefit is also subject to increases
required by the Internal Revenue Code.
In order to meet the Internal Revenue Code's definition of life insurance,
the Policies provide that the death benefit will not be less than a percentage
of the Policy's cash value, including the pro rata portion of any Monthly
Deduction made for a period beyond the date of death, as set forth in Table I
below. This means that, if the cash value grows to certain levels, the death
benefit will be increased to satisfy the tax law requirements. At that point,
any payment you make into the Policy will increase the death benefit by more
than it increases the cash value. (See "Premiums".)
TABLE I
<TABLE>
<CAPTION>
AGE OF AGE OF
INSURED AT START OF PERCENTAGE OF INSURED AT START OF PERCENTAGE OF
THE POLICY YEAR CASH VALUE* THE POLICY YEAR CASH VALUE*
------------------- ------------- ------------------- -------------
<S> <C> <C> <C>
0 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 through 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 through 99 101
59 134 100 100
60 130
</TABLE>
- ----------
* including the pro rata portion of any Monthly Deduction made for a period
beyond the date of death.
MINIMUM GUARANTEED DEATH BENEFIT
The Policy provides two Minimum Guaranteed Death Benefits. (One of these,
Minimum Guaranteed Death Benefit A, is not available under Policies issued in
New York.) If either Minimum Guaranteed Death Benefit is in effect, as
determined on the first day of each Policy month, the Policy will not lapse
even if the net cash value is insufficient to cover the Monthly Deduction due
for that month. The death benefit will be adjusted as described below before
the proceeds are paid.
If premiums are paid in certain amounts, then a Minimum Guaranteed Death
Benefit may be in effect unless you make certain Policy transactions. These
premiums are shown in Section 1 of your Policy and also appear in your
personalized
A-12
<PAGE>
illustration. See Appendix A. Generally, if you pay premiums in the amount
specified for a Minimum Guaranteed Death Benefit each year, that Minimum
Guaranteed Death Benefit will apply to your Policy in accordance with its
terms. (For this purpose, a premium paid within 20 days prior to a Policy
anniversary is treated as if paid in the next Policy year.) If you do not pay
one of these premiums in a Policy year, or if you make certain Policy
transactions, you could lose the Minimum Guaranteed Death Benefit on either a
temporary or permanent basis.
For example, no Minimum Guaranteed Death Benefit will apply to your Policy
while a Policy loan is outstanding, regardless of your premium payments.
However, if the total premiums you have paid, adjusted for interest and any
partial surrenders, as described below under "Minimum Guaranteed Death Benefit
A" and "Minimum Guaranteed Death Benefit B", are sufficient, the applicable
Minimum Guaranteed Death Benefit will apply to the Policy once the loan is
repaid.
In addition, if you reduce the Policy's face amount or make a partial
surrender which reduces the face amount, or reduce or delete a rider benefit
from your Policy, or if your Policy's rating classification is improved, you
may lose the death benefit guarantee. Whether a guarantee still applies will
depend on the total premiums you have paid and the amount you have withdrawn
from the Policy by means of partial surrenders, as described below under
"Minimum Guaranteed Death Benefit A" and "Minimum Guaranteed Death Benefit B".
The applicable minimum death benefit premiums shown in Section 1 of your
Policy will be recalculated following each of these transactions and also
following an increase in the Policy's face amount or in the amount of coverage
provided by riders. (See "Premiums" below.) Federal tax law limits the amount
of premiums that can be paid into the Policy, and if, following one of these
transactions, the Federal tax law limits the minimum death benefit premium for
your Policy to an amount less than zero, your Policy will lose its death
benefit guarantee permanently.
If you do not pay a minimum death benefit premium in a Policy year, a
Minimum Guaranteed Death Benefit may still apply to your Policy, depending on
the total premiums paid and partial surrenders made, as described below under
"Minimum Guaranteed Death Benefit A" and "Minimum Guaranteed Death Benefit B".
However, once a death benefit guarantee is lost due to insufficient premium
payments, Federal tax law limits may prevent you from paying sufficient
premiums in future Policy years to regain the guarantee. Although it may be
possible to regain the Guaranteed Minimum Death Benefit B, it is unlikely that
Federal tax law limits will permit you to pay sufficient premiums in future
years to regain the Guaranteed Minimum Death Benefit A.
MINIMUM GUARANTEED DEATH BENEFIT A. NEVLICO will determine if Minimum
Guaranteed Death Benefit A is in effect on the first day of each Policy month
the Policy is in force, until the Maturity Date. This Benefit is in effect if
the total of: (1) premiums paid under the Policy in each prior Policy year
accumulated at a 4% rate from the first day of the year of payment to the most
recent Policy anniversary, less partial surrenders accumulated at a 4% rate
from the date of surrender to the most recent Policy anniversary, plus (2)
premiums paid less partial surrenders in the current Policy year, is at least
equal to: the applicable amount shown in the Table of Guaranteed Death Benefit
A Premiums Accumulated at 4% for the prior Policy year plus 1/12 of the
Benefit A Premium for each Policy month of the current policy year up to and
including the month for which the Monthly Deduction is being processed, and
there is no outstanding Policy loan. For these purposes, premiums paid within
20 days prior to a Policy anniversary are treated as if paid in the next
Policy year.
The Table of Guaranteed Death Benefit A Premiums Accumulated at 4% assumes
that the Guaranteed Death Benefit A Premium that appears in your Policy is
paid on the first day of each Policy year and accumulates at a 4% rate per
year.
The Minimum Guaranteed Death Benefit A is not available under Policies
----------------------------------------------------------------------
issued in New York.
- -------------------
MINIMUM GUARANTEED DEATH BENEFIT B. NEVLICO will determine if Minimum
Guaranteed Death Benefit B is in effect on the first day of each Policy month
the Policy is in force, until the later of: the date the insured attains age
80, or 20 years from the Policy Date, but no later than the Maturity Date of
the Policy. This Benefit is in effect if the total of: (1) premiums paid under
the Policy in each prior Policy year accumulated at a 4% rate from the first
day of the year of payment to the most recent Policy anniversary, less partial
surrenders accumulated at a 4% rate from the date of surrender to the most
recent Policy anniversary, plus (2) premiums paid less partial surrenders in
the current Policy year, is at least equal to: the amount shown in the Table
of Guaranteed Death Benefit B Premiums Accumulated at 4% for the prior Policy
year plus 1/12 of the Benefit B Premium for each Policy month of the current
Policy year up to and including the month for which the Monthly Deduction is
being processed, and there is no outstanding Policy loan. For these purposes,
premiums paid within 20 days prior to a Policy anniversary are treated as if
paid in the next Policy year.
The Table of Guaranteed Death Benefit B Premiums Accumulated at 4% assumes
that the Guaranteed Death Benefit B Premium that appears in your Policy is
paid on the first day of each Policy year and accumulates at a 4% rate per
year.
The Minimum Guaranteed Death Benefit B is referred to as the "No Lapse
Guarantee Death Benefit" under Policies issued in New York.
A-13
<PAGE>
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the death
benefit in effect on the date of the insured's death reduced by any
outstanding loan and accrued loan interest as of that date and by the portion
of any unpaid Monthly Deduction for the period prior to that date. The death
proceeds will be increased (1) by any rider benefits payable and (2) by any
portion of a Monthly Deduction made for a period beyond the date of death,
unless this amount was already included in the death benefit calculation as a
result of Federal tax law requirements (see "Death Benefit Options" above).
The death proceeds may also be adjusted if the insured's age or sex was
misstated in the application, if death results from the insured's suicide
within two years (or less if provided by state law) from the Policy's date of
issue or within two years (or less if provided by state law) from an increase
in the Policy's face amount, or if limits on the death benefit are imposed by
rider. (See "Limits to NEVLICO's Right to Challenge the Policy".)
CHANGE IN DEATH BENEFIT OPTION
At any time after the first Policy year, you may change your death benefit
option by sending your written request for change to NEVLICO's Administrative
Office. The request will be effective on the date it is received at NEVLICO's
Administrative Office. A change in death benefit option may result in tax
consequences to you. (See "Tax Considerations".)
If you change from Option 1 (Face Amount) to Option 2 (Face Amount Plus Cash
Value), the Policy's face amount will be reduced by the amount necessary for
the death benefit to be the same immediately before and after the change. The
face amount reduction will apply to the Policy's initial face amount and any
prior increases in face amount on a pro rata basis. A face amount reduction
below $250,000 is permitted only with NEVLICO's consent; however, special
rules apply for certain business situations. Any rider benefits under the
Policy may also have to be decreased. In some circumstances a partial
surrender of cash value may be necessary in order to comply with Federal tax
law limits on the amount of premiums that can be paid into the Policy. No
Surrender Charge will be assessed in connection with a face amount reduction
or partial surrender resulting from a change from Option 1 to Option 2.
If you change from Option 2 (Face Amount Plus Cash Value) to Option 1 (Face
Amount), the Policy's face amount will be increased, if necessary, for the
death benefit to be the same immediately before and after the change. The
resulting increase in face amount will be applied to the Policy's initial face
amount and any prior increase in face amount on a pro rata basis.
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account, in
the Fixed Account and, if you have an outstanding policy loan, in NEVLICO's
general account as a result of the loan. The cash value reflects net premium
payments, the net investment experience of the Policy's Sub-Accounts, interest
credited on its cash value in the Fixed Account and on amounts held in the
general account as a result of a loan, the death benefit option chosen,
amounts deducted for Policy charges (including Monthly Deductions and any
Surrender Charge that applies if you reduce the Policy's face amount or make a
partial surrender), amounts surrendered and transfers among the Policy's Sub-
Accounts and the Fixed Account.
Your Policy's net cash value is the amount you will receive if you surrender
the Policy. The net cash value is the cash value reduced by any outstanding
policy loan (and accrued interest) and by any applicable Surrender Charge. The
net cash value is increased by the portion of any cost of insurance charge
deducted that applies to the period beyond the date of surrender. If you
surrender the Policy during the grace period, the net cash value you receive
is reduced by an amount to cover the Monthly Deduction to the date of
surrender. (See "Loan Provision", "Surrender Charge" and "Monthly Deduction
from Cash Value".)
The Policy's cash value in the Variable Account may increase or decrease
daily depending on the net investment experience of the Policy's Sub-Accounts.
Unfavorable investment experience can reduce the net cash value to zero.
Because there is no guaranteed minimum cash value in the Variable Account, you
bear the entire investment risk with respect to the cash value. The premium
payment schedule you choose will also affect the Policy's net cash value.
NET INVESTMENT EXPERIENCE
The net investment experience of the Policy's Sub-Accounts will affect the
Policy's cash value and, in some circumstances, the death benefit. The net
investment experience of the Sub-Accounts is determined as of the close of
regular trading on the New York Stock Exchange on each day when the Exchange
is open for trading.
A-14
<PAGE>
A Sub-Account's net investment experience for any period reflects the
investment experience of the underlying Eligible Fund shares for the same
period, reduced by the charges against the Sub-Account for that period.
(Currently the Sub-Accounts are charged only for NEVLICO's mortality and
expense risk, but in the future NEVLICO may impose a charge against the Sub-
Accounts for taxes if appropriate. See "Charges Against the Eligible Funds and
the Sub-Accounts of the Variable Account" and "Charge for NEVLICO's Income
Taxes".)
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during
the period. Dividends and capital gains distributions on Eligible Fund shares
are reinvested in additional shares of the Eligible Fund and affect subsequent
investment experience.
A sub-account's net investment experience is referred to in the Policy as
the sub-account's "Actual Investment Return".
ALLOCATION OF NET PREMIUMS
As of the "investment start date", the net premium will be allocated to the
Zenith Money Market Sub-Account until the later of 45 days after the date Part
I of the application is signed or 10 days after NEVLICO mails the Notice of
Withdrawal Right. (See "Right to Return the Policy". For the definition of the
"investment start date", see "Amount Provided for Investment under the
Policy".) Thereafter, the cash value (which will reflect at least one Monthly
Deduction) is allocated to the Sub-Accounts and/or the Fixed Account according
to your instructions. (See "Investment Options" and "Monthly Deduction from
Cash Value".) Therefore, your selection of accounts does not take effect until
after the initial period described above, when the cash value is allocated to
the Zenith Money Market Sub-Account. If the face amount of the Policy is
increased, the portion of net premiums attributable to the increase will be
allocated among accounts in accordance with your current allocation
instructions. Allocations can be made to a maximum of ten accounts (including
the Fixed Account) at any one time.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
An amount is first invested under the Policy as of the investment start
date. That is the latest of: the date when NEVLICO first receives a premium
payment for the Policy, the date Part II of the Policy application is signed
and the Policy Date. (For this purpose, receipt of the premium payment means
receipt by a NEVLICO agent or, if a broker-dealer other than New England
Securities is involved, by a NEVLICO agency.)
If you make a premium payment with the application, the Policy Date is
generally the later of the date Part II of the application is signed and
receipt of the premium payment. In this case the Policy Date and investment
start date are the same. The amount of premium paid with the application must
be at least 10% of the annual Planned Premium for the Policy. Only one premium
payment may be made before the Policy is issued.
If you make a premium payment with the application, the insured will be
covered under a temporary insurance agreement for a limited period that is
described in the temporary insurance agreement form. Generally, coverage under
the temporary insurance agreement begins on the later of the date when NEVLICO
receives the premium for the Policy and the date when Part II of the
application is signed. The maximum amount of coverage provided is the lesser
of the amount of insurance applied for and $500,000 for standard and preferred
risks ($250,000 for substandard risks and $50,000 for persons who are
determined to be uninsurable). There may be variations to these provisions
required by state law.
If a Policy is issued, Monthly Deductions, including cost of insurance
charges, begin as of the Policy Date, even if the Policy's issuance was
delayed due to underwriting requirements; and will be in amounts based on the
face amount of the Policy issued, even if the temporary insurance coverage
received during the underwriting period was for a lesser amount. If NEVLICO
declines an application, it will refund the premium payment made plus interest
at the rate currently in use by NEVLICO.
If you choose to pay the initial premium upon delivery of the Policy, the
Policy will have a Policy Date which is generally five days after issue. The
investment start date will be the later of the Policy Date and the date the
premium is received. Monthly Deductions will begin on the Policy Date.
Interest at a 4% net rate will be credited on the applicable net Minimum
Premium for the period, if any, between the Policy Date and the investment
start date. Insurance coverage under the Policy will begin upon receipt of the
portion of the Minimum Premium due for the first quarter (or, upon receipt of
the number of monthly payments due under The New England's Master Service
Account arrangement.)
Under limited circumstances, NEVLICO may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
Backdating may be desirable, for example, so that you can purchase a
particular Policy face
A-15
<PAGE>
amount for lower cost of insurance rates, based on a younger insurance age.
Backdating in some cases may result in a Policy with a higher Surrender Charge
if the backdating results in the Surrender Charge being based on a lower age
bracket. (See "Surrender Charge".) For a backdated Policy, you must also pay
the Minimum Premium payable for the period between the Policy Date and the
investment start date. As of the investment start date, NEVLICO will allocate
to the Policy those net premiums, adjusted for monthly Policy charges and
interest at a 4% net rate, for the period between the Policy Date and the
investment start date.
The amount provided for investment in the Policy is adjusted as of each day
the New York Stock Exchange is open to reflect the net investment experience
of the Sub-Accounts for that day.
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 45 days after the date Part 1 of the
application is signed, within 10 days (or more where required by applicable
state insurance law) after you receive the Policy or within 10 days after
NEVLICO mails the Notice of Withdrawal Right, whichever is latest. The Policy
may be returned to NEVLICO or its agent. Insurance coverage ends as soon as
the Policy is returned (as determined by its postmark, if the Policy is
mailed). If you choose to cancel the Policy, NEVLICO will refund any premiums
paid (or any other amount that is required by state insurance law and
permitted by the Securities and Exchange Commission) with interest at the rate
currently in use by NEVLICO.
You may cancel an increase in face amount which you have requested within 45
days after the date Part 1 of the application for the increased coverage is
signed, within 10 days (or more where required by state law) after you receive
the adjusted Policy, or within 10 days after NEVLICO mails the Notice of
Withdrawal Right for the face amount increase, whichever is latest. You may
return the face amount increase to NEVLICO or its agent. The face amount
increase will be canceled from its beginning and any Monthly Deduction and
Face Amount Increase Administrative Charge deducted in connection with the
face amount increase will be returned to your cash value.
CHARGES AND EXPENSES
DEDUCTIONS FROM PREMIUMS
SALES CHARGE. NEVLICO deducts 4% from each premium (whether a Planned
Premium or an unscheduled payment) as a sales charge. NEVLICO intends to waive
this charge on premiums after the 20th policy year and on the portion of
premiums attributable to a face amount increase after 20 years from the
effective date of the increase. The Policy does not, however, guarantee this
waiver. In addition, NEVLICO reserves the right to reimpose the sales charge
after it has been waived. For Policies that are not used in a business
situation and which have a face amount of at least $500,000, the sales charge
deducted from premiums will be 3% rather than 4%. In addition, for Policies
used in a business situation (a situation in which two or more Policies, on
more than one life, are totally or partially funded, directly or indirectly,
by an employer) where either (1) the average face amount is $500,000 or (2)
the Policies are issued on the lives of at least 25 persons and the average
face amount is at least $250,000, the sales charge deducted from premiums will
be 3% rather than 4%.
During the first 11 Policy years, if you surrender or lapse the Policy,
reduce the face amount or make a partial surrender that reduces the face
amount, a Deferred Sales Charge also applies. (For insureds whose issue age is
56 to 65 at issue of the Policy, the period when the Deferred Sales Charge
applies is 10 years, for insureds whose issue age is 66 to 75, 9 years, and
for insureds whose issue age is 76 to 80, 5 years. See "Surrender Charge"
below.)
The sales charges under a Policy in a given Policy year are not necessarily
related to NEVLICO's actual sales expenses for that year. NEVLICO expects that
total revenues from the sales charges will fall short of its total
distribution expenses, and the excess will be recovered from NEVLICO's surplus
and other revenues, including mortality gains and any profit realized from the
minimum death benefit guarantee charge or mortality and expense risk charge.
Sales charges for Policies sold in certain group or sponsored arrangements
may be reduced. NEVLICO may reduce or eliminate the sales charge, when you
purchase a Policy, on cash value transferred in the first year, from life
insurance policies issued by The New England that meet certain premium, cash
value and/or face amount minimums, as currently published by NEVLICO.
NEVLICO's normal issuance criteria, including reinsurance and other
limitations, as well as certain other eligibility requirements, would also
apply in these situations. NEVLICO may, however, waive underwriting
requirements in these situations. NEVLICO may also reduce the Surrender Charge
on such policies. Your NEVLICO agent can advise you regarding the availability
of this feature.
A-16
<PAGE>
STATE PREMIUM TAX CHARGE. NEVLICO deducts 2.5% from each premium to cover
state premium taxes and administrative expenses. Premium taxes vary from state
to state and the 2.5% charge reflects an average. Administrative expenses
covered by this charge include those related to premium tax and certain other
state filings. This charge is not intended to produce a profit.
The stated premium tax rates in the jurisdictions where NEVLICO transacts
business range from .75% to 4.00%. However, because of the effect of
retaliatory tax law provisions, the actual premium tax rates imposed on
NEVLICO range from slightly less than 2.00% to 4.00%.
FEDERAL PREMIUM TAX CHARGE. NEVLICO deducts 1% from each premium to recover
a portion of that part of NEVLICO's federal income tax liability that is
determined solely by the amount of life insurance premiums it receives. The
federal premium tax charge is a factor NEVLICO must use when computing the
maximum sales load chargeable under SEC rules.
EXAMPLE: The following chart shows the net amount that would be allocated to
the Variable Account, assuming a premium payment of $2,000.
<TABLE>
<CAPTION>
NET
PREMIUM PREMIUM
------- -------
<C> <C> <S>
$2,000 $1,850 (7.5% X 2,000 = total sales and premium tax charge)
</TABLE>
NEVLICO may waive the 4% sales charge on premiums paid after the 20th Policy
year. In that case, the net premium in this example would be $2,000 - $70
(3.5% X 2,000), or $1,930.)
SURRENDER CHARGE
If, during the first eleven policy years, a Policy is totally surrendered or
lapses, the face amount is reduced, or a partial surrender reduces the face
amount, NEVLICO deducts a Surrender Charge from the cash value. (For insureds
whose issue age is 66 to 75 at issue of the Policy, the Surrender Charge
period is nine years, and for insureds whose issue age is 76 to 80, five
years.) The Surrender Charge includes a Deferred Sales Charge and a Deferred
Administrative Charge. The maximum Surrender Charge is set forth in your
Policy.
A new Surrender Charge period and a separate Target Premium will apply to
each portion of the Policy resulting from a face amount increase, starting
with the effective date of the increase.
Any Surrender Charge deducted upon lapse is credited back to the Policy's
cash value upon reinstatement. The Surrender Charge on the date of
reinstatement will be the same as it was on the date of lapse. For purposes of
determining the Surrender Charge on any date after reinstatement, the period
the Policy was lapsed will not count.
DEFERRED SALES CHARGE. The Deferred Sales Charge is based on a percentage of
the Target Premium. The Target Premium is used to determine the amount of the
Deferred Sales Charge and is less than or equal to 75% of the annual premium
necessary to maintain a fixed benefit whole life insurance policy for the same
face amount on the life of the insured. The annual whole life premium on which
the Target Premium is based is calculated using an assumed interest rate of
4%, guaranteed cost of insurance charges and the current level of other Policy
charges. The Target Premium varies by issue age, sex and underwriting class of
the insured and the Policy's face amount. (For purposes of determining the
Target Premium, all non-smoker underwriting classes use the nonsmoker
aggregate or nonsmoker substandard classes, as applicable. See "Monthly
Charges for the Cost of Insurance" below.) If you increase the Policy's face
amount, a separate Target Premium amount will apply to the face amount
increase, based on the insured's age and underwriting class at the time of the
increase.
For Policies which cover insureds whose issue age is 55 or less at issue,
the greatest Deferred Sales Charge is paid if you lapse or surrender, or
reduce the face amount, in Policy years three through five. The Deferred Sales
Charge in these years equals 45% of actual premiums paid up to one Target
Premium, plus 13.5% of additional premiums paid in excess of one Target
Premium up to a second Target Premium, plus 13.5% of additional premiums paid
in excess of two Target Premiums up to a third Target Premium. After the fifth
Policy year, the maximum Deferred Sales Charge declines on a monthly basis
until it reaches 0% in the last month of the eleventh Policy year.
The Deferred Sales Charge that applies during the first Policy year is equal
to 25% of premiums paid up to one Target Premium. The Deferred Sales Charge
during the second Policy year is equal to 25% of premiums paid up to one
Target Premium plus 5% of additional premiums paid up to a second Target
Premium. As described above, after the second Policy year, the maximum
Deferred Sales Charge increases substantially.
A-17
<PAGE>
The table below shows the maximum Deferred Sales Charge that applies to
Policies covering insureds whose issue age is 55 or less at issue, and assumes
that one Target Premium per year is paid under the Policy. The table shows the
charge, expressed as a percentage of total Target Premiums paid to date, if
the lapse, surrender or face reduction occurs at the end of each of the Policy
years shown. During Policy years six through eleven, the Deferred Sales Charge
declines on a monthly basis.
<TABLE>
<CAPTION>
THE MAXIMUM DEFERRED
SALES CHARGE IS THE FOLLOWING
PERCENTAGE OF TOTAL TARGET
FOR POLICIES WHICH ARE PREMIUMS PAID TO DATE OF
SURRENDERED, LAPSED OR SURRENDER, LAPSE, OR
REDUCED DURING FACE AMOUNT REDUCTION
---------------------- -----------------------------
<S> <C> <C>
Entire Policy Year 3 24.00%
4 18.00%
5 14.40%
Last Month of Policy
Years 6 10.00%
7 6.86%
8 4.50%
9 2.67%
10 1.20%
11 0.00%
</TABLE>
For insureds whose issue age is above 55 at issue, the Deferred Sales Charge
percentages are less than or equal to those described above, with the maximum
charge occurring in Policy years 3 through 5 for insureds with an issue age up
through 65, in Policy years 2 through 4 for insureds with an issue age from 66
through 75, and in Policy year 2 for insureds with an issue age above 75.
In the case of a partial surrender or reduction in face amount, any Deferred
Sales Charge that applies is deducted from the Policy's cash value in an
amount proportional to the amount of the Policy's face amount surrendered.
(See "Partial Surrender".) The charge is deducted from the Policy's cash value
in the Sub-Accounts and the Fixed Account in proportion to the amount of the
Policy's cash value in each. In no event will the Deferred Sales Charge exceed
limits established by the Investment Company Act of 1940 and regulations
thereunder.
DEFERRED ADMINISTRATIVE CHARGE. The Table below shows the Deferred
Administrative Charge deducted if you totally or partially surrender, lapse or
reduce the face amount of the Policy during the first eleven Policy years or
during the first eleven Policy years following an increase in face amount (see
"Surrender Charge" above).
<TABLE>
<CAPTION>
FOR POLICIES WHICH ARE
SURRENDERED, LAPSED DEFERRED ADMINISTRATIVE
OR REDUCED DURING THE CHARGE PER $1,000 OF
POLICY YEAR SHOWN FACE AMOUNT
---------------------- -----------------------
<S> <C> <C>
Entire Policy year 1 $2.50
Last Month of Policy Year* 2 2.25
3 2.00
4 1.75
5 1.50
6 1.25
7 1.00
8 0.75
9 0.50
10 0.25
11 0.00
</TABLE>
- ----------
* The charge declines monthly after the end of the first Policy year.
The applicable Deferred Administrative Charge will be deducted from the
Policy's available cash value, regardless of whether that cash value is
derived from premiums or investment experience.
For insureds whose issue age is above 65 at issue, the Deferred
Administrative Charge is less than or equal to that in the table above.
A-18
<PAGE>
The Deferred Administrative Charge partially covers the administrative costs
of processing surrenders, lapses, and reductions in face amount, as well as
legal, actuarial, systems, mailing, and other overhead costs connected with
NEVLICO's variable life insurance operations. This charge has been designed to
cover actual costs and is not intended to produce a profit.
MONTHLY DEDUCTION FROM CASH VALUE
On the first day of each Policy month, starting with the Policy Date,
NEVLICO deducts the "Monthly Deduction" from your cash value. If a Minimum
Guaranteed Death Benefit is in effect, or if the Policy is protected against
lapse by payment of the Minimum Premium during the first three Policy years,
the Monthly Deduction is made, whether or not premiums are paid, until the
cash value equals zero. Otherwise, the Monthly Deduction is made, whether or
not premiums are paid, as long as the net cash value is sufficient to cover
the entire Monthly Deduction. If the net cash value is insufficient to cover
the entire Monthly Deduction and no Minimum Guaranteed Death Benefit or
Minimum Premium guarantee is in effect, the Policy will be in default and may
lapse. (See "Lapse and Reinstatement".) The Monthly Deduction reduces the cash
value in each Sub-Account of the Variable Account and in the Fixed Account in
proportion to the cash value in each.
The Monthly Deduction includes the following charges:
POLICY FEE. The Policy fee is currently equal to $4.50 per month (guaranteed
not to exceed $7.00 per month).
ADMINISTRATIVE CHARGE. The Administrative Charge is currently equal to $0.06
per $1,000 of Policy face amount in the first Policy year and $0.02 per $1,000
of Policy face amount thereafter (guaranteed not to exceed $0.08 per $1,000 of
face amount in the first Policy year and $0.04 per $1,000 of Policy face
amount thereafter). On a current basis, NEVLICO intends not to charge more
than $40 per month for the Administrative Charge in Policy years two and
after. For Policies not used in a business situation and which have a face
amount of at least $500,000, the monthly administrative charge for the first
Policy year is currently $0.05 per $1,000 of face amount rather than $0.06. In
addition, for Policies issued in business situations where either (1) the
average face amount is at least $500,000 or (2) the Policies are issued on the
lives of at least 25 persons and the average face amount is at least $250,000,
the monthly administrative charge for the first Policy year is currently $0.05
per $1,000 of face amount rather than $0.06.
The Policy Fee and the Administrative Charge together cover the cost of
administering the Policies (such as the cost of processing Policy
transactions, issuing Policy Owner statements and reports, and record
keeping), as well as legal, actuarial, systems, mailing and other overhead
costs connected with NEVLICO's variable life insurance operations. These
charges have been designed to cover actual costs and are not intended to
produce a profit.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE. The minimum death benefit guarantee
charge is $0.01 per $1,000 of Policy face amount. This charge compensates
NEVLICO for its guarantee that, regardless of the investment experience of the
Policy's Sub-Accounts, the Policy's death benefit will never be less than the
face amount, provided that the total amount of premiums paid with interest,
less any partial surrenders with interest, equals or exceeds the applicable
amount derived from the Table(s) of Minimum Guaranteed Death Benefit Premiums
Accumulated at 4% for the Policy. (See "Minimum Guaranteed Death Benefit" and
"Adjustments to the Death Proceeds Payable".)
MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of
providing insurance protection under your Policy. The cost of insurance charge
for a Policy month is equal to the "amount at risk" under the Policy,
multiplied by the cost of insurance rate for that Policy month. The amount at
risk is determined on the first day of the Policy month after any applicable
Monthly Deduction has been processed and is the amount by which the death
benefit (discounted at the monthly equivalent of 4% per year) exceeds the
Policy's cash value. The cost of insurance rate for your Policy changes from
month to month.
If a Policy loan is outstanding and your Policy's net cash value is not
large enough to cover the cost of insurance charge for a policy month, the
difference between the net cash value available and the cost of insurance
charge is treated as an excess policy loan and the Policy may terminate. (See
"Loan Provision".)
The guaranteed cost of insurance rates for a Policy depend on the insured's
underwriting class, age on the first day of the Policy year and sex (if the
Policy is sex-based). The current cost of insurance rates will also depend on
the insured's age at issue of the Policy and on the duration of the Policy. In
addition, for Policies not sold in a business situation, current cost of
insurance rates will also depend on the face amount; for Policies sold in a
business situation, current cost of insurance rates will also depend on the
average face amount of Policies sold to the group and may also depend on the
number of lives in the group. For non-juvenile insureds (those who are age 20
or more at issue) the rates are guaranteed not to be higher than rates based
on the 1980 Commissioners Standard Ordinary Mortality Tables with
smoker/nonsmoker modifications (the "1980 CSO Tables"). For juvenile insureds,
the rates are guaranteed not to be higher than rates based on the 1980
Commissioners
A-19
<PAGE>
Standard Ordinary Mortality Tables. The rates actually used may be lower than
these maximum rates, depending on NEVLICO's expectations regarding future
mortality and expense experience, lapse rates and investment earnings. NEVLICO
reviews the adequacy of its current cost of insurance rates annually and may
adjust their level periodically. Any change in the current cost of insurance
rates will be applied prospectively only and will be on a non-discriminatory
basis. The current cost of insurance rate for a Policy is set forth in the
Policy Owner's annual statement. (For information regarding a Policy's cost of
insurance rates following a face amount increase, see "Increase in Face
Amount".)
The underwriting classes used for determining cost of insurance rates for
insureds other than juveniles are smoker standard, smoker substandard,
nonsmoker preferred, nonsmoker standard, nonsmoker aggregate, nonsmoker
substandard and automatic issue. For juvenile insureds the underwriting
classes are standard and substandard. Substandard and automatic issue ratings
result in higher cost of insurance deductions. The guaranteed maximum
mortality charges for substandard ratings are based on multiples of the 1980
CSO Tables. (For information regarding a Policy's underwriting classification
following a face amount increase, see "Increase in Face Amount".)
For fully underwritten Policies with a face amount of $250,000 or more, the
nonsmoker underwriting classes (other than nonsmoker substandard) are
nonsmoker preferred and nonsmoker standard; for Policies with a face amount
less than $250,000 (available only in business situations) the only nonsmoker
underwriting class (other than nonsmoker substandard) is nonsmoker aggregate.
Among these three nonsmoker classes, the nonsmoker preferred class generally
offers the most favorable rates on a current basis and the nonsmoker standard
class generally offers the least favorable rates on a current basis.
Cost of insurance rates are generally more favorable for nonsmoker than for
smoker insureds and generally more favorable for female than for male
insureds. Within a given underwriting class, cost of insurance rates are
generally more favorable for insureds with lower issue ages. Where required by
state law, and for Policies sold in connection with certain employee benefit
plans, cost of insurance rates (and Policy values and benefits) do not vary
based on the sex of the insured.
Currently, for underwritten Policies that are not issued in a business
situation, cost of insurance rates will be more favorable under Policies with
a face amount of at least $500,000 than for policies with a lower face amount
on the same insured. Currently, for underwritten Policies issued in a business
situation, cost of insurance rates will be more favorable for a Policy issued
on a given insured with a given face amount where either (1) the average face
amount for Policies covering the group (at issue) is at least $500,000, or (2)
the Policies are issued on the lives of at least 25 persons and the average
face amount (at issue) is at least $250,000.
NEVLICO may offer Policies on an automatic issue basis to certain group or
sponsored arrangements. If an eligible group or sponsored arrangement
purchases Policies on an automatic issue basis, the Policies will be issued up
to a predetermined face amount limit, with only minimum evidence of
insurability. Automatic issue Policies provide substantial benefit to such
arrangements in that minimal time and effort is necessary to qualify an entire
group of persons for coverage without extensive applications or medical
examinations. Because only limited underwriting information is obtained,
NEVLICO has determined that the issuance of Policies on an automatic issue
basis may present additional mortality cost to NEVLICO relative to Policies
issued to individuals in the smoker standard class. Therefore, NEVLICO will
deduct an additional insurance charge from the cash value of automatic issue
Policies. The additional charge will vary based on the issue age of the
insured and, for certain group or sponsored arrangements, may vary based on
the size of the group, the total premium to be paid by the group and certain
characteristics of its members. The overall guaranteed maximum monthly cost of
insurance charges, including the additional charge for automatic issue status,
will exceed charges based on 100% of the 1980 CSO Tables.
Policies issued on an automatic issue basis will have underlying cost of
insurance rates that vary depending on whether the insured is a smoker or
nonsmoker. Nonsmokers will be treated as a group in that no preferred
nonsmoker rates will be available. The underlying cost of insurance rates for
automatic issue Policies will not vary according to the face amount of an
individual Policy; however, currently the rates may be lower if the Policy is
issued to a group or sponsored arrangement where its members have certain
characteristics, the Policies are issued on the lives of at least 25 persons,
the face amount of each individual Policy is at least $100,000 and the average
face amount is at least $250,000. Generally the overall monthly cost of
insurance charges, including the additional charge for automatic issue status,
will be higher than they would be for the same insured under a fully
underwritten Policy, if the insured is not a substandard risk.
Eligible group or sponsored arrangements may also elect to purchase Policies
on a simplified underwriting basis, either as an alternative to automatic
issue or for amounts of insurance which exceed NEVLICO's automatic issue
limits, but may not elect automatic issue for some members of the group and
simplified underwriting for others. Policies issued on a simplified
underwriting basis will have the same cost of insurance rates as fully
underwritten Policies.
A-20
<PAGE>
CHARGES FOR ADDITIONAL BENEFITS AND SERVICES. NEVLICO imposes charges for
the cost of any additional rider benefits as described in the rider form.
NEVLICO also 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.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE
ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. NEVLICO charges the Sub-Accounts of the
Variable Account for the mortality and expense risks that NEVLICO assumes.
Currently, the charge is made daily at an annual rate of .75% of the Sub-
Accounts' assets. NEVLICO reserves the right to increase the charge, up to a
maximum annual rate of .90%. The mortality risk NEVLICO assumes is that
insureds may live for shorter periods of time than NEVLICO estimated. The
expense risk is that NEVLICO's costs of issuing and administering the Policies
may be more than NEVLICO estimated.
If all the money NEVLICO collects from this charge is not needed to cover
death benefits and expenses, the money is contributed to NEVLICO's general
account. Conversely, even if the money NEVLICO collects is insufficient,
NEVLICO will provide for all death benefits and expenses.
CHARGES FOR INCOME TAXES. NEVLICO currently makes no charge for income taxes
against the Variable Account, but in the future NEVLICO may impose such a
charge, if appropriate. NEVLICO reserves the right to make a charge for any
taxes imposed on the Policies by any governmental body in the future. (See
"Charge for NEVLICO's Income Taxes".)
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds. (See "Investment
Management".)
GROUP OR SPONSORED ARRANGEMENTS
The Policies may be issued to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals. An example of such an arrangement is a non-tax qualified
deferred compensation plan. A "sponsored arrangement" includes a program under
which an employer permits group solicitation of its employees or an
association permits group solicitation of its members for the purchase of the
Policies on an individual basis.
For Policies issued in connection with group or sponsored arrangements,
NEVLICO may waive or reduce one or more of the following charges: the sales
charge, Surrender Charge, monthly charge for the cost of insurance including
any additional charge for automatic issue status, mortality and expense risk
charge, administrative charges, Policy Fee, Face Amount Increase
Administrative Charge, and/or federal and state premium tax charges described
in "Charges and Expenses". (In addition, the interest rate credited on amounts
taken from the sub-accounts as a result of a Policy loan may be increased for
these Policies.) NEVLICO will waive or reduce these charges according to its
rules in effect when the Policy application is approved. To qualify for a
waiver or reduction, a group or sponsored arrangement must satisfy certain
criteria as to, for example, size and number of years in existence. Generally,
the sales contacts and effort, administrative costs and mortality cost per
Policy vary based on such factors as the size of the group or sponsored
arrangement, its stability, the purposes for which the Policies are purchased
and certain characteristics of its members. The amount of reduction and the
criteria for qualification will reflect the reduced sales and administrative
effort resulting from sales to qualifying group or sponsored arrangements.
NEVLICO may modify from time to time both the amounts of reductions and the
criteria for qualification. Reductions in or waiver of these charges will not
be unfairly discriminatory against any person, including the affected Policy
Owners and all other Policy Owners of Policies funded by the Variable Account.
The waiver or reduction of Policy charges for group or sponsored arrangements
described above will not apply to Policies issued in the state of New York,
other than Policies issued to non-tax qualified deferred compensation plans.
The United States Supreme Court has held that certain insurance policies
providing values and benefits that vary with the sex of the insured may not be
used to fund certain employee benefit programs. Therefore, NEVLICO offers
Policies that do not vary based on the sex of the insured for use in
connection with certain employee benefit programs. NEVLICO recommends that any
employer proposing to offer the Policies to employees under a group or
sponsored arrangement consult its attorney before doing so.
PREMIUMS
FLEXIBLE PREMIUMS
Within the limits described below, you may choose the amount and frequency
of premium payments. You may select a Planned Premium schedule, which is a
level amount. This schedule, which must be within NEVLICO's minimum and
maximum
A-21
<PAGE>
limits, appears in your Policy. It is not necessarily designed to keep your
Policy in force, and you may skip Planned Premium payments or make additional
payments. Additional payments could be subject to underwriting. No payment can
be less than $25 ($10 for payments made pursuant to the Master Service Account
arrangement, described below), and the total of Planned Premiums and other
payments will be limited to NEVLICO's published maximum.
Planned Premiums can be paid on an annual, semi-annual or quarterly schedule
or, with NEVLICO's consent, monthly. You can change your Planned Premium
schedule by sending your request to NEVLICO's Administrative Office. However,
the amount of your Planned Premium cannot be increased except with the consent
of the Company, and underwriting may be required. Cash values and death
benefits are permanently affected by the amount and frequency of premium
payments.
You may make payments by check or money order. NEVLICO will send premium
notices for annual, semi-annual or quarterly Planned Premiums. You may also
choose to have The New England withdraw your premium payments from your bank
checking account or TNE Cash Management Trust account. (This is known as the
Master Service Account arrangement.)
NEVLICO offers three types of premium payment levels that can protect your
Policy against lapse over specified time periods. (One of the three is not
available under Policies issued in New York, as described below.)
First, NEVLICO determines a three-year Minimum Premium amount based on the
Policy's face amount, the age, sex (unless unisex rates apply) and
underwriting class of the insured, the current level of Policy charges and any
rider benefit selected. Generally, during this three-year period, as long as
the Minimum Premium amount is timely paid, the Policy is guaranteed not to
lapse even if the Policy's net cash value is insufficient to pay the Monthly
Deduction in any month. (To determine whether the Policy will lapse, NEVLICO
compares (a) the total monthly Minimum Premiums for the Policy from the Policy
Date to that Policy month, to (b) the total premiums paid to date, less all
partial surrenders and any outstanding Policy loan balance. If (b) is greater
than or equal to (a), the Policy will not lapse.) However, no three-year
Minimum Premium death benefit guarantee will apply if you increase the Policy
face amount, substitute the insured or reinstate the Policy in the first three
Policy years. The Minimum Premium will be recalculated if you reduce the face
amount or make a partial surrender that reduces the face amount, or add,
reduce or delete a rider benefit, or if the rating classification of your
Policy is improved in the first three Policy years.
Second, NEVLICO also determines a guaranteed minimum death benefit premium
(to maturity) which will guarantee that the Policy will mature for the net
cash value at age 100 of the insured. Insufficient premium payments, a
reduction in the face amount or partial surrender that reduces the face
amount, reduction or deletion of a rider benefit, or improvement in rating
classification of the Policy could terminate this guarantee. See "Minimum
Guaranteed Death Benefit". This guaranteed minimum death benefit premium is
based on the Policy's face amount, the age, sex (unless unisex rates apply)
and underwriting class of the insured, the death benefit option chosen, the
guaranteed level of cost of insurance charges, the current level of other
Policy charges and any rider benefit selected. The premium is recalculated
following the type of Policy transactions described above in connection with a
recalculation of the three-year Minimum Premium amount, as well as following
an increase in face amount or in rider coverage. This guaranteed minimum death
-----------------------------
benefit premium (to maturity) does not apply under Policies issued in New
- -------------------------------------------------------------------------
York.
- -----
Third, the Policy's guaranteed minimum death benefit premium (to age 80)
guarantees that the Policy will stay in force until the later of age 80 of the
insured, or 20 years after issue, but no later than the Maturity Date of the
Policy. This premium is based on factors similar to the guaranteed minimum
death benefit premium (to maturity), but is based on the guaranteed level of
both cost of insurance and other Policy charges and is actuarially determined
to provide guaranteed coverage to the earlier age. NEVLICO limits this premium
so that it will be less than or equal to the guaranteed minimum death benefit
premium (to maturity). Insufficient premium payments, a reduction in the face
amount or a partial surrender that reduces the face amount, reduction or
deletion of a rider benefit, or improvement in the rating classification of
the Policy could also terminate this guarantee, although termination for
insufficient premium payments is less likely here than in the case of the
guaranteed minimum death benefit premium (to maturity). The guaranteed minimum
death benefit premium (to age 80) is recalculated following the type of Policy
transactions described above in connection with a recalculation of the three-
year Minimum Premium amount, as well as following an increase in face amount
or in rider coverage.
Federal tax law limits the amount of premiums that can be paid under the
Policy. In addition, if any payments under the Policy exceed the "7-pay test"
under Federal tax law, you may be taxed on certain distributions. (See "Tax
Considerations".) NEVLICO's consent is required if, in order to satisfy tax
law requirements, any payment would increase the Policy's death benefit by
more than it would increase cash value. NEVLICO may require evidence of
insurability before accepting the payment.
NEVLICO allocates net payments to your Policy's Sub-Accounts as of the date
the payment is received at NEVLICO's Administrative Office. (See "Receipt of
Communications and Payments at NEVLICO's Administrative Office".)
A-22
<PAGE>
A payment is treated first as a Planned Premium, second as repayment of
Policy loan interest, third as repayment of a Policy loan, and last as an
unscheduled payment, unless you designate otherwise in writing to NEVLICO.
(For Policies issued in New York, a payment will be treated as a Planned
Premium when a Policy loan is outstanding only if the payment is in the exact
amount of the Planned Premium next due; otherwise, it will be treated first as
repayment of Policy loan interest, second as repayment of a Policy loan, third
as a Planned Premium, and last as an unscheduled payment.) If you have a
Policy loan, it may be more advantageous to repay the loan than to make a
premium payment, because the premium payment is subject to sales and tax
charges, whereas the loan repayment is not subject to any charges; however,
repayment of the loan in place of a premium payment could cause your Policy to
lose its eligibility for a death benefit guarantee. (See "Loan Provision",
"Deductions from Premiums" and "Death Benefit".)
LAPSE AND REINSTATEMENT
LAPSE. Unless either Minimum Guaranteed Death Benefit is in effect (or,
during the first three Policy years, unless the Minimum Premium requirements
described under "Premiums" have been met), in any month that there is
insufficient net cash value to pay a Monthly Deduction the Policy will be in
default. The Policy provides a 62 day grace period for payment of a premium
sufficient to permit the Monthly Deduction to be made (as well as applicable
deductions from the premium). NEVLICO will notify you of the amount due.
During the grace period insurance coverage continues under your Policy, but if
the insured dies before the premium is paid, NEVLICO will deduct from the
death proceeds the portion of the unpaid Monthly Deduction for the period
prior to the date of death.
REINSTATEMENT. If your Policy has lapsed, it may be reinstated within 7
years after the date of lapse. If more than 7 years have passed, or if you
have surrendered the Policy, NEVLICO's consent is required to reinstate.
Reinstatement in all cases is subject to payment of certain charges described
in the Policy and generally requires evidence of insurability that is
satisfactory to NEVLICO.
Any Surrender Charge deducted upon lapse is credited to the Policy's cash
value upon reinstatement. The Surrender Charge on the date of reinstatement is
the same as it was on the date of lapse. For purposes of determining the
Surrender Charge and other charges that vary by duration of the Policy
(unlike, for example, cost of insurance charges that vary by age of the
insured) on any date after reinstatement, the period the Policy was lapsed
does not count.
OTHER POLICY FEATURES
INCREASE IN FACE AMOUNT
After the first Policy year you may increase the face amount of your Policy.
The request for an increase will be subject to NEVLICO's underwriting rules
and requirements, including proof of insurability. The amount of the increase
must be at least $10,000. A Face Amount Increase Administrative Charge of
$2.50 per $1,000 of the face amount increase will be deducted on the date the
increase takes effect from the Policy's cash value in the sub-accounts and the
Fixed Account, in proportion to the amount of cash value in each. This charge
will not apply if the increase in face amount was not medically underwritten.
NEVLICO currently limits the charge to a maximum of $200.
After a face amount increase, NEVLICO will attribute a portion of each
premium payment you make to the face amount increase, even if you do not
increase the amount or frequency of your premiums. NEVLICO will calculate the
portion of the premium that is attributable to the face amount increase in
accordance with SEC regulations.
A new Surrender Charge period will apply to each portion of the Policy
resulting from an increase in face amount, starting with the effective date of
the increase. A separate Target Premium will apply to the face amount
increase, based on the insured's age and underwriting class at the time of the
increase. (The insured's age at the time of the increase will be the insured's
age at the start of that Policy year.) A sales charge will be deducted from
the portion of each premium that is attributable to the face amount increase
for at least 20 years from the date of the increase. See "Charges and
Expenses" for a description of the Surrender Charges and sales charges that
will apply. The Monthly Deduction applicable to the Policy will be adjusted
beginning with the effective date of the increase to reflect the new face
amount and amount at risk under the Policy. In addition, cost of insurance
charges will reflect any change in risk classification of the insured if the
face amount increase was medically underwritten. Generally, if the insured's
risk classification improved as a result of the underwriting, future cost of
insurance rates for the entire Policy will be based on the new underwriting
class. If the insured is determined to be in a worse risk classification
A-23
<PAGE>
than at issue of the Policy (or at the time of a previous face amount
increase), then only the portion of the cost of insurance charge that is
applied to the net amount at risk associated with the increase in face amount
will be based on the new underwriting class. If the Policy was issued to a
juvenile insured and the face amount increase occurs when the insured is age
20 or older, cost of insurance rates for the original face amount will
continue to be based on juvenile underwriting classes and cost of insurance
rates for the face amount increase will be based on non-juvenile underwriting
classes. In that situation, cost of insurance rates for the original face
amount will be guaranteed not to be higher than rates based on the 1980 CSO
Tables, and cost of insurance rates for the face amount increase will be
guaranteed not to be higher than rates based on the 1980 CSO Tables with
smoker/nonsmoker modifications. (See "Charges and Expenses--Monthly Deduction
from Cash Value.")
NEVLICO determines the net amount at risk associated with a face amount
increase by calculating the face amount increase as a percentage of the
Policy's total net amount at risk immediately following the increase. The
resulting percentage of the Policy's total net amount at risk is applicable to
the face amount increase. The remaining percentage of the Policy's total net
amount at risk is applicable to the initial face amount. (For example, if the
Policy's face amount is increased by $100,000 and the total net amount at risk
immediately following the increase in $250,000, then 40% of the total net
amount at risk applies to the face amount increase. The remaining 60% applies
to the initial face amount.) On each monthly processing day, the net amount at
risk used to determine the cost of insurance charge associated with the face
amount increase is the Policy's total net amount at risk at that time,
multiplied by the percentage calculated as described above. This percentage
remains fixed until there is another face amount increase.
An increase in face amount will take effect on the first day of the Policy
month following NEVLICO's approval of your application for the increase. You
can contact NEVLICO's Administrative Office or a NEVLICO agent to determine
the procedures for requesting a face amount increase. You have a limited time
in which you may cancel a face amount increase. (See "Right to Return the
Policy".)
Only one face amount increase can be processed on a processing date.
Therefore, if your Policy has a Level Term Insurance rider, and you request an
exchange of the term insurance rider for a face amount increase as well as an
additional face amount increase, the two requests will be combined and
processed as one adjustment if the same underwriting class would be applicable
to each; otherwise, the additional face amount increase will be processed
first, and the exchange of term insurance will be processed one month later.
In connection with Policies issued in certain business situations on an
automatic issue basis, NEVLICO may offer annual face amount increases which
are related to increases in salary or which are based on a fixed annual
percentage (the "Salary Refresh" program). Limits on the annual and/or total
amount of face increases per Policy that will be permitted on an automatic
issue basis will be determined at issue of the Policies. Increases which
exceed this limit will require underwriting. The Salary Refresh program is not
available for Policies with the Option 2 death benefit.
NEVLICO may also offer the Salary Refresh program in connection with
Policies issued on an underwritten basis in certain business situations. Any
Salary Refresh face amount increases under such Policies will be underwritten
in connection with the application for the initial face amount of the
Policies, and will be subject to limits determined at that time.
The terms and conditions of the Salary Refresh program are contained in
NEVLICO's published rules which are furnished at the time of application.
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after
the Right to Return the Policy period. NEVLICO will make the loan as of the
date when a loan request is received at NEVLICO's Administrative Office. (See
"Receipt of Communications and Payments at NEVLICO's Administrative Office".)
You should contact NEVLICO's Administrative Office or a NEVLICO agent for
information regarding the procedures to follow for requesting a loan.
The Policy's loan value is equal to (i) 90% of the Policy's cash value
projected using current Policy charges and a 4% annual rate to the next Policy
anniversary or, if earlier, to the next Planned Premium due date; less (ii)
the Surrender Charge that would apply upon surrender on the next Planned
Premium due date or, if greater, on the date the loan is made; less (iii) loan
interest to the next loan interest due date. If required by state law, the
Policy's loan value may be a greater percentage of the cash value, as
described in your Policy. The amount of loan value available to be borrowed at
any time is reduced by the amount of any outstanding Policy loan plus accrued
interest.
A-24
<PAGE>
The example below illustrates how the loan value is determined.
- -------------------------------------------------------------------------------
EXAMPLE: Using the Policy illustrated on page A-49 assume that the Policy's
Planned Premiums have been paid and that the Policy's Sub-Accounts have earned
a constant 6% hypothetical gross annual rate of return (equal to a constant
net annual rate of return of 4.39%). After the premium payment on the 10th
Policy anniversary, the maximum amount that could be borrowed would be
determined as follows under (i) an annual premium payment schedule and (ii) a
quarterly premium payment schedule:
<TABLE>
<CAPTION>
ANNUAL QUARTERLY
------- ---------
<S> <C> <C>
(1) Cash Value after Premium Payment on 10th Policy Anni-
versary.............................................. $43,056 $40,265
(2) Cash Value Projected at a Constant Annual Rate of Re-
turn of 4% to the
(a) 11th Policy Anniversary........................... 44,045
(b) Next Planned Premium Due Date..................... 40,479
(3) 90% of Amount Calculated in (2)...................... 39,641 36,431
(4) Amount Calculated in (3), Reduced by the Applicable
Surrender Charge..................................... 39,376 36,166
(5) Amount Calculated in (4), Reduced by Loan Interest to
the Next Interest Due Date........................... 37,323 34,281
</TABLE>
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A Policy loan reduces the Policy's cash value in the Sub-Accounts by the
amount of the loan. A loan repayment increases the cash value in the Sub-
Accounts by the amount of the repayment. Unless you request otherwise, Policy
loans are attributed first to the Sub-Accounts of the Variable Account in
proportion to the cash value in each, and then the Fixed Account. All loan
repayments are allocated first to the outstanding loan balance attributed to
the Fixed Account and then to the Sub-Accounts of the Variable Account in
proportion to the cash value in each.
The interest rate charged on Policy loans is an effective rate of 5.5% per
year (using simple interest during the year), accrues daily, and is due on the
Policy anniversary. If not paid at that time, the interest accrued on the loan
is added to the loan, and an amount equal to the unpaid interest is deducted
from the Policy's cash value in the Sub-Accounts and the Fixed Account in
proportion to the amount in each. The amount taken from the Policy's Sub-
Accounts as a result of the loan earns interest (compounded daily) at an
effective rate of not less than 4% per year. The rate currently credited is 4%
per year. This interest earned is credited to the Policy's Sub-Accounts
annually, in proportion to the cash value in each.
The amount taken from the Policy's Sub-Accounts as a result of a loan does
not participate in the investment experience of the Sub-Accounts. Therefore,
the death benefit and cash value of the Policy can be permanently affected by
a Policy loan, even if it is repaid. In addition, any proceeds payable under a
Policy are reduced by the amount of any outstanding loan plus accrued
interest.
Any payment received while a Policy loan is outstanding is treated first as
a Planned Premium, second as repayment of Policy loan interest, third as
repayment of a Policy loan, and last as an unscheduled payment, unless you
designate otherwise in writing to NEVLICO. (For Policies issued in New York, a
payment will be treated as a Planned Premium when a Policy loan is outstanding
only if the payment is in the exact amount of the Planned Premium; otherwise,
it will be treated first as repayment of Policy loan interest, second as
repayment of a Policy loan, third as a Planned Premium, and last as an
unscheduled payment.) If a Policy loan is outstanding, it may be more
advantageous to repay the loan than to pay a premium, because the payment is
subject to sales and premium tax charges, and the loan repayment is not
subject to charges; however, repayment of the loan in place of a premium
payment could cause your Policy to lose its eligibility for a death benefit
guarantee. (See "Deductions from Premiums" and "Death Benefit".)
If Policy loans plus accrued interest exceed the Policy's cash value less
the Surrender Charge on the next Policy loan interest due date (or, if the
Surrender Charge would be greater, on the date the calculation is made),
NEVLICO will notify you that the Policy is going to terminate. (This situation
is referred to as an "excess policy loan".) The Policy will terminate without
value 62 days after the notice is mailed unless the excess amount is paid to
NEVLICO within that time. If the Policy lapses with a loan outstanding,
adverse tax consequences may result. (See "Tax Considerations" below.)
Department of Labor ("DOL") regulations set forth requirements for
participant loans under retirement plans subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"). Generally, the DOL regulations will
apply to plans that qualify under Sections 401(a) and 401(k) of the Internal
Revenue Code (the "Code"). If the retirement plan is subject to ERISA, the
plan fiduciary authorized to oversee/direct the plan loan program must fulfill
the requirements of the regulations including charging a "commercially
reasonable" rate of interest. The policy loan interest rate may not be
considered "commercially
A-25
<PAGE>
reasonable" within the meaning of the DOL regulations. In addition, the DOL
regulations require that a plan loan be adequately secured but provide that
not more than 50% of the participant's vested account balance (including the
Policy cash value) be used as security for the loan. The DOL regulations and
applicable tax law may also contain other requirements for plan loans.
Therefore, plan loan provisions may differ from Policy loan provisions. If you
are a participant in a retirement plan subject to ERISA, you should consult
with the fiduciary administering the plan loan program. Failure of the plan
loan program to comply with the requirements of the DOL regulations and of tax
law may result in tax penalties under the Code and under ERISA.
SURRENDER
You may surrender a Policy for its net cash value at any time while the
insured is living by a request conforming to NEVLICO's administrative
procedures. The net cash value of the surrendered Policy is determined as of
the date when a surrender request is received at NEVLICO's Administrative
Office. The net cash value equals the cash value reduced by any Policy loan
and accrued interest and by any applicable Surrender Charge. (See "Surrender
Charge".) The net cash value paid on surrender is increased by the portion of
any cost of insurance charge deducted that applies to the period beyond the
date of surrender. If you surrender the Policy during the grace period, (that
is, at a time when the net cash value was not sufficient to cover the Monthly
Deduction and no Minimum Guaranteed Death Benefit or three year Minimum
Premium guarantee applies to the Policy), the net cash value you receive is
reduced by an amount to cover the Monthly Deduction to the date of surrender.
You may elect in writing to have all or part of the net cash value applied to
a payment option. (See "Payment Options".) A surrender may result in adverse
tax consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER
You may make a partial surrender of the Policy after the Right to Return the
Policy period, to receive a portion of its net cash value. A partial surrender
will cause a reduction in the Policy's death benefit and may cause a reduction
in the Policy's face amount if necessary in order that the amount at risk
under the Policy not increase. Any reduction in the face amount causes a
proportionate reduction in the Policy's Target Premium, on which any future
Surrender Charges are based. Rider benefits may also be reduced. For purposes
of calculating the applicable Surrender Charge and any future cost of
insurance charges, any face amount reduction will apply to the initial face
amount and to any prior increase in face amount on a pro rata basis. No
partial surrender may reduce the face amount below the Policy's required
minimum except with NEVLICO's consent; special rules apply for Policies sold
in business situations.
Partial surrenders in any one Policy year are limited, except with NEVLICO's
consent, to 20% of the Policy's net cash value as of the date of the first
partial surrender for the Policy year or, if less, the Policy's available loan
value. Currently, NEVLICO permits partial surrenders of up to 75% of the
Policy's net cash value per year, assuming sufficient available loan value.
(In certain business situations NEVLICO may permit a higher percentage of the
net cash value to be withdrawn.)
Any Surrender Charge that applies to a partial surrender is deducted from
the Policy's cash value in an amount proportional to the amount of the
Policy's face amount surrendered. The Surrender Charge applied reduces any
remaining Surrender Charge that can be applied under your Policy.
You should be aware that cash value paid upon partial surrender may not be
reinvested in the Policy except as premium payments, which are subject to the
charges described under "Deductions From Premiums". A partial surrender could
terminate your Policy's Minimum Guaranteed Death Benefit. See "Minimum
Guaranteed Death Benefit".
A partial surrender first reduces the Policy's cash value in the Sub-
Accounts of the Variable Account, in proportion to the amount of cash value in
each, and then the Fixed Account, unless you request otherwise. (See "The
Fixed Account" below.) The amount of net cash value paid upon partial
surrender is determined as of the date when a request conforming to NEVLICO's
administrative procedures is received at NEVLICO's Administrative Office.
NEVLICO's administrative procedures can be determined by contacting a NEVLICO
agent or the Administrative Office.
A reduction in the death benefit as a result of a partial surrender may
cause the Policy to become a "modified endowment contract". If you are
contemplating a partial surrender, you should consult your tax advisor
regarding the tax consequences of the transaction. (See "Tax Considerations".)
REDUCTION IN FACE AMOUNT
You may reduce the face amount of your Policy without receiving a
distribution of any of the Policy's cash value. (This feature differs from a
partial surrender in that a partial surrender causes part of the Policy's cash
value to be distributed to you.)
A-26
<PAGE>
If you decrease the face amount of your Policy, the Target Premium, on which
any future Surrender Charges are based, is also decreased. Your Policy's
actual cash value is not reduced except by the amount of any applicable
Surrender Charge. Generally, the Policy's death benefit is decreased.
(However, if the death benefit is being increased in accordance with federal
income tax laws, the death benefit will not be decreased unless a Surrender
Charge was deducted from the cash value in connection with the face amount
reduction. A reduction in face amount in this situation is not advisable,
because it will not reduce your death benefit or cost of insurance charges and
may result in a Surrender Charge.) Any rider benefits attached to the Policy
may also have to be decreased. For purposes of calculating the applicable
Surrender Charge and future cost of insurance charges, a face amount reduction
will apply to the initial face amount and to any prior increase in face amount
on a pro rata basis. The face amount remaining after a reduction has to meet
NEVLICO's minimum face amount requirements for issue, except with NEVLICO's
consent; special rules apply in business situations.
A reduction in the face amount of your Policy will reduce the Federal tax
law limitations on the amount of premiums that can be paid under the Policy.
In these cases, a partial surrender of cash value may be required to comply
with Federal tax law. This could result in termination of your Policy's
Minimum Guaranteed Death Benefit. See "Minimum Guaranteed Death Benefit".
A face amount reduction takes effect as of the date when NEVLICO has
received a request at its Administrative Office meeting NEVLICO's
administrative requirements. You can determine NEVLICO's administrative
requirements by contacting a NEVLICO agent or the Administrative Office.
A reduction in the face amount of a Policy that causes a death benefit
reduction may cause the Policy to become a "modified endowment contract". If
you are contemplating a reduction in face amount, you should consult your tax
advisor regarding the tax consequences of the transaction. (See "Tax
Considerations".)
INVESTMENT OPTIONS
You may allocate your Policy's premiums among the Sub-Accounts of the
Variable Account and the Fixed Account in any combination, provided that
allocations can be made to a maximum of 10 accounts (including the Fixed
Account) at any time. A minimum of 10% of the premium must be allocated to
each Sub-Account selected. Percentages allocated must be in whole numbers.
Your Policy's cash value may be distributed among no more than 10 accounts
(including the Fixed Account) at any one time.
You make the initial premium allocation when you apply for a Policy. You may
change the allocation of future premiums at any time thereafter. The change
will be effective for premiums applied on or after the date when NEVLICO
receives your request. You may request the change by telephone or by written
request in a form satisfactory to NEVLICO. (See "Receipt of Communications and
Payments at NEVLICO's Administrative Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
TRANSFER OPTION
After the Right to Return the Policy period, you may transfer your Policy's
cash value between Sub-Accounts up to four times in a policy year (twelve
times per policy year for Policies issued in New York) without NEVLICO's
consent. NEVLICO currently allows 12 Sub-Account transfers per policy year
under all Policies. Transfers out of the Fixed Account are not counted against
this limit. All Sub-Account transfer requests made at the same time will be
treated as a single request. The transfer will be effective as of the date
when NEVLICO receives the transfer request at its Administrative Office. (See
"Receipt of Communications and Payments at NEVLICO's Administrative Office".)
For special rules regarding transfers involving the Fixed Account, see "The
Fixed Account". Your Policy's cash value may be distributed among no more than
10 accounts (including the Fixed Account) at any one time.
You may request a Sub-Account transfer or reallocation of future premiums by
written request (which may be telecopied) to NEVLICO's Administrative Office
or by telephoning The New England. To request a transfer or reallocation by
telephone, you should contact your registered representative or contact The
New England at 1-800-200-2214. Requests for transfers (up to NEVLICO's current
limit per policy year) or reallocations by telephone will be automatically
permitted. NEVLICO and The New England will use reasonable procedures, such as
requiring certain identifying information from the caller, tape recording the
telephone instructions, and providing written confirmation of the transaction,
in order to confirm that instructions communicated by telephone are genuine.
Any telephone instructions reasonably believed by The New England and NEVLICO
to be genuine will be your responsibility, including losses arising from any
errors in the communication of instructions. As a result of this policy,
A-27
<PAGE>
you will bear the risk of loss. If NEVLICO and The New England do not employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, they may be liable for any losses due to unauthorized or
fraudulent instructions.
SUBSTITUTION OF INSURED PERSON
Subject to state insurance department approval, NEVLICO offers a rider
benefit that will allow you to substitute the insured person under your
Policy, if you provide satisfactory evidence that the person proposed to be
insured is insurable. The right to substitute the insured person is subject to
certain restrictions and may also result in a cost or credit to you. A
substitution of the insured person will result in a taxable exchange. In
addition, a substitution of the insured person could reduce the amount of
premiums allowed to be paid into the Policy under Federal tax law and, as a
result, may require a partial surrender of cash value. No Surrender Charge
will be assessed in that situation. This rider may not be approved in every
state and therefore may not be available in every state. Your NEVLICO agent
can provide current information on the availability of the rider. Since
substituting the insured person may be a taxable event, you should consult
your tax advisor before substituting the insured person under your Policy.
PAYMENT OF PROCEEDS
NEVLICO will ordinarily pay any net cash value, loan value or death benefit
proceeds payable from the Sub-Accounts within seven days after receipt at the
Administrative Office of a request, or proof of death of the insured, in a
form satisfactory to NEVLICO. (See "Receipt of Communications and Payments at
NEVLICO's Administrative Office".) However, NEVLICO may delay payment (except
when a loan is made to pay a premium to NEVLICO) or transfers from the Sub-
Accounts: (i) if the New York Stock Exchange is closed for other than weekends
or holidays, or if trading on the New York Stock Exchange is restricted, (ii)
if the SEC determines that a state of emergency exists that makes payments or
Sub-Account transfers impractical, or (iii) at any other time when the
Eligible Funds or the Variable Account have the legal right to suspend
payment. NEVLICO may withhold payment of surrender or loan proceeds to the
extent that those proceeds are derived from a Policy Owner's check, or from a
Master Service Account premium transaction, which has not yet cleared. In
those cases, NEVLICO will process the surrender or loan to the extent of
policy values for which the Policy Owner has made full payment. The balance of
the surrender or loan proceeds will be paid when the Policy Owner's check, or
the Master Service Account premium transaction, has cleared. NEVLICO may also
delay payment if it considers whether to contest the Policy. NEVLICO will pay
interest on the death benefit proceeds from the date they become payable to
the date they are paid in one sum or, if a payment option was selected, to the
effective date of the option. (See "Payment Options".)
Death benefit proceeds may be paid pursuant to NEVLICO's Access Plus
program. If the Access Plus program is elected, an Access Plus account will be
established at State Street Bank & Trust Company at the time that death
benefit proceeds are payable. The Access Plus account provides convenient
access to proceeds, which are maintained in NEVLICO's general account, through
checkbook privileges with State Street. A beneficiary may elect to have death
benefit proceeds paid through the Access Plus program at any time prior to the
payment of death benefit proceeds.
Payments of cash value, or of any loan value available, from cash value in
the Fixed Account will normally be paid promptly. However, NEVLICO has the
right to delay such payments for up to six months from the date of the request
(to the extent allowed by state insurance law). NEVLICO will pay interest in
accordance with state insurance law requirements on payments that are delayed.
24 MONTH RIGHT
GENERAL RIGHT. Generally, during the first 24 months after the Policy's
issue date, and during the first 24 months after the effective date of an
increase in face amount, you may convert this Policy, or a portion thereof, to
fixed benefit coverage by transferring all or a portion of your Policy's cash
value, and allocating all or a portion of future premiums, to the Fixed
Account. The request to convert to fixed benefit coverage must be in written
form satisfactory to NEVLICO.
This privilege may be exercised only once within 24 months after issue, and
only once within 24 months after each increase in face amount. Transfers into
the Fixed Account pursuant to this right will not count toward the limit on
the number of cash value transfers permitted under the Policy each year. Cash
value that is transferred to the Fixed Account, and future premium amounts
allocated to the Fixed Account, may subsequently be transferred back to one or
more Sub-Accounts of the Variable Account, subject to the Policy's general
limits on transfers from the Fixed Account (see "The Fixed Account").
A-28
<PAGE>
The Policy generally permits NEVLICO to limit allocations to the Fixed
Account under certain circumstances. (See "The Fixed Account.") If NEVLICO
limits such allocations and you subsequently wish to exercise the 24 Month
Right, your right will be limited to (i) the Policy's cash value prior to any
face amount increase plus that portion of future premiums attributable to the
Policy's face amount prior to any increase, if the right is exercised during
the first 24 months after issue, or (ii) that portion of the Policy's cash
value and future premiums attributable to the face amount increase, if the
right is exercised within 24 months after a face amount increase. After
exercising the 24 Month Right, you may continue to allocate to the Fixed
Account only the percentage of premiums that was allocated to the Fixed
Account pursuant to your most recent exercise of the 24 Month Right. In
addition, if you have exercised this right, and NEVLICO subsequently limits
such allocations, then you may continue to allocate to the Fixed Account only
the lowest percentage of premiums that was allocated to the Fixed Account at
any time since your most recent exercise of the 24 Month Right.
FOR POLICIES ISSUED IN MARYLAND. Under Policies issued in Maryland, you can
exchange the initial face amount of your Policy, and any increase in face
amount of your Policy, for a fixed benefit, flexible premium life insurance
policy issued by The New England provided that (1) the Policy has not lapsed
and (2) the exchange is made within 24 months after the Policy's issue date
or, if you are exchanging an increase in face amount, within 24 months after
the effective date of the increase. If you exercise this option, you will have
to make up any investment loss you had that is attributable to the portion of
the variable life insurance policy being exchanged.
The exchange will be made without evidence of insurability. The new policy
will have, at the option of the policyholder, either the same death benefit or
the same net amount at risk as that being exchanged. For the exchange of the
initial face amount of the variable life policy, the new policy will have the
same issue age, underwriting class and policy date as the variable life policy
had. For the exchange of an increase in face amount, the new policy will have
the same issue age of the insured as the age of the insured on the effective
date of the increase, the same underwriting class as the underwriting class on
the effective date of the increase, and a policy date equal to the effective
date of the increase. Any riders to the original Policy will be attached to
the new policy if they are available.
Following the merger of MetLife and NEVLICO, depending on state insurance
regulatory approvals and requirements, your Policy may be issued or amended
with an endorsement providing for an exchange right to a fixed benefit policy
issued by NEVLICO (if such a policy was available for an exchange on the
Policy Date of your variable life Policy or on the effective date of a face
amount increase, if applicable), or otherwise, to a fixed benefit policy
issued by MetLife. If your Policy does not have such an endorsement, the
exchange right will be to a fixed benefit policy issued by MetLife or, at your
option, to a fixed benefit policy issued by NEVLICO if such a policy was
available for an exchange on the Policy Date of your variable life Policy or
on the effective date of a face amount increase, if applicable.
The exchange will be effective on the date when NEVLICO receives written
notice at its Administrative Office in a form satisfactory to NEVLICO, the
Policy and payment to NEVLICO of any cost to exchange. (See "Receipt of
Communications and Payments at NEVLICO's Administrative Office".) The exchange
may result in a cost or credit to you. The cost or credit will reflect any
differences in cash values and charges between the exchanged portion of the
variable life policy and the new policy. Upon the exchange, you may also need
to make an immediate premium payment on the new policy in order to keep it in
force. Any policy loan outstanding must be repaid on or before the effective
date of the exchange.
GROUP OR SPONSORED ARRANGEMENTS. For a Policy issued in connection with
certain group or sponsored arrangements, NEVLICO offers the additional option
of exchanging the entire Policy at any time during the first 36 months after
the Policy's issue date, if the Policy has not lapsed, to a fixed-benefit term
life insurance policy issued by NEVLICO or an affiliate. (Availability of this
feature depends on state insurance department approval.) The exchange will be
made without evidence of insurability. The new term insurance policy will have
the same face amount, policy date, issue age and risk classification for the
insured as the variable life Policy had. For the exchange of a face amount
increase, special rules may apply. Policy Owners should refer to the rider
providing this option. Premiums for the new term insurance policy will be
based on the premium rates for comparable fixed-benefit term life insurance
policies issued by The New England which were in effect on the Policy Date of
the original Policy. Any riders to the original Policy will be attached to the
new policy if they are available. If you exercise this option, you will bear
any investment loss you had under the variable life insurance policy. If your
Policy has this feature, upon surrender of the Policy in the first 36 months,
you will receive the greater of the Policy's net cash value and the value
which you would receive upon exercise of the exchange to term insurance
option. Your NEVLICO agent can advise you as to the availability of this
feature.
PAYMENT OPTIONS
The Policy's death benefit and net cash value will be paid in one sum unless
the Policy Owner or payee chooses to put all or part of the proceeds under a
payment option. You can choose a combination of payment options. The selection
of a payment
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<PAGE>
option and the naming of a payee must be in written form satisfactory to
NEVLICO. You can make, change or revoke the selection before the death of the
insured. The payment options available are fixed benefit options only;
therefore, proceeds applied to an option will no longer be affected by the
investment experience of the Variable Account. The guaranteed mortality
assumptions used in determining payment levels under the options will not vary
based on sex. (For Policies issued in New York and Oregon, however, and which
are not issued for use in connection with certain employee benefit plans and
fringe benefit programs, the mortality assumptions will vary based on sex. See
"Group or Sponsored Arrangements".) Once payments under an option begin,
withdrawal rights may be restricted.
The following payment options are available:
(i) INCOME FOR A SPECIFIED NUMBER OF YEARS. Proceeds are paid in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.5% a year, compounded yearly. Additional interest paid by
NEVLICO for any year will be added to the monthly payments for that
year.
(ii) LIFE INCOME. Proceeds are paid in equal monthly installments (i)
during the life of the payee, (ii) for the longer of the life of the
payee or 10 years, or (iii) for the longer of the life of the payee or
20 years.
(iii) LIFE INCOME WITH REFUND. Proceeds are paid in equal monthly
installments during the life of the payee. At the payee's death, any
unpaid proceeds remaining are paid either in one sum or in equal
monthly installments until the total proceeds have been paid.
(iv) INTEREST. Proceeds are held for the life of the payee or another
agreed upon period. Interest of at least 3.5% a year is paid monthly
or added to the principal annually. At the death of the payee, or at
the end of the period agreed to, the balance of principal and any
interest will be paid in one sum.
(v) SPECIFIED AMOUNT OF INCOME. Proceeds plus accrued interest of at least
3.5% a year are paid in an amount and at a frequency elected until
total proceeds have been paid. Any amounts unpaid at the death of the
payee will be paid in one sum.
(vi) LIFE INCOME FOR TWO LIVES. Proceeds will be paid in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the surviving payee or 10 years, or (iii) while the two
payees are living and, after the death of one payee, two-thirds of the
monthly amount for the life of the surviving payee will be paid.
NEVLICO's consent to use of an option is required if the installment
payments would be less than $20.
ADDITIONAL BENEFITS BY RIDER
A Policy can include additional benefits provided by rider to the Policy,
subject to NEVLICO's underwriting and issuance standards. These additional
benefits usually require an additional charge as part of the Monthly Deduction
from cash value. The rider benefits available with the Policies provide fixed
benefits that do not vary with the investment experience of the Variable
Account.
There may be circumstances in which it will be to your economic advantage to
include a significant portion or percentage of your insurance coverage under a
term rider. In many other circumstances, it may be in your interest to obtain
a Policy without term rider coverage. These circumstances depend on many
factors, including the premium levels and amount and duration of coverage you
choose, as well as the age, sex and risk classification of the insured.
Reductions in or elimination of term rider coverage do not trigger the
imposition of a Surrender Charge, and use of a term rider generally reduces
sales compensation. Your NEVLICO agent can provide you more information on the
uses of term rider coverage.
The following riders are available:
LEVEL TERM INSURANCE, which provides term insurance.
WAIVER OF MONTHLY DEDUCTION, which provides for waiver of Monthly
Deductions upon the disability of the insured.
GUARANTEED INCOME BENEFIT RIDER, which provides a monthly income payment
(subject to a $1,000 maximum) directly to the Policy Owner in the event of
the total disability of the insured. The Policy Owner must also purchase
the Waiver of Monthly Deduction Rider in order to purchase this rider.
(NEVLICO plans to make this rider available in the future. Availability of
the rider is also subject to state insurance department approval.)
A-30
<PAGE>
TEMPORARY TERM INSURANCE, which provides for insurance from the date of
issue to the Policy Date.
CHILDREN'S INSURANCE, which provides insurance on the life of the insured's
children.
Not all riders may be available to you and riders in addition to those
listed above may be made available. You should consult your NEVLICO agent
regarding the availability of particular riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time to
time. At the death of the Policy Owner, his or her estate will become the
Policy Owner unless a successor Policy Owner has been named. The Policy
Owner's rights (except for rights to payment of benefits) terminate at the
death of the insured.
The beneficiary is also named in the application. The beneficiary of the
Policy may be changed at any time before the death of the insured. The
beneficiary has no rights under the Policy until the death of the insured and
must survive the insured in order to receive the death proceeds. If no named
beneficiary survives the insured, the proceeds will be paid to the Policy
Owner.
A change of Policy Owner or beneficiary must be in written form satisfactory
to NEVLICO and must be dated and signed by the Policy Owner making the change.
The change will be subject to all payments made and actions taken by NEVLICO
under the Policy before the signed change form is received by NEVLICO at its
Administrative Office.
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary
to the assignee. A collateral assignment of the Policy does not change the
Policy Owner or beneficiary, but their rights will be subject to the terms of
the assignment. Assignments will be subject to all payments made and actions
taken by NEVLICO under the Policy before a signed copy of the assignment form
is received at NEVLICO's Administrative Office. NEVLICO will not be
responsible for determining whether or not an assignment is valid. Changing
the Policy Owner or assigning the Policy may have tax consequences. (See "Tax
Considerations" below.)
THE VARIABLE ACCOUNT
The Variable Account was established as a separate investment account of
NEVLICO on January 31, 1983 under Delaware Insurance Law. The Variable Account
is the funding vehicle for other NEVLICO variable life insurance policies in
addition to the Policies. The Variable Account meets the definition of a
"separate account" under Federal securities laws. The Variable Account is a
type of investment company called a unit investment trust and is registered
with the Securities and Exchange Commission (the "SEC") under the Investment
Company Act of 1940. Registration with the SEC does not involve supervision by
the SEC of the management or investment practices or policies of the Variable
Account. However, both NEVLICO and the Variable Account are subject to
regulation by the Delaware Insurance Commissioner and to the insurance laws
and regulations in every jurisdiction where the Policies are sold.
Although the assets of the Variable Account are owned by NEVLICO, applicable
law provides that the portion of the Variable Account assets equal to the
reserves and other liabilities of the Variable Account may not be charged with
liabilities that arise out of any other business NEVLICO may conduct. NEVLICO
believes this means that the assets of the Variable Account equal to the
reserves and other liabilities of the Variable Account are not available to
meet the claims of NEVLICO's general creditors, and may only be used to
support the cash values under its variable life insurance policies issued by
the Variable Account. But NEVLICO may transfer to its general account assets
which exceed the reserves and other liabilities of the Variable Account.
Before making any such transfer, NEVLICO will consider any possible adverse
impact the transfer might have on the Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of
NEVLICO's other income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 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
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<PAGE>
--The Zenith Bond Income Sub-Account, which invests in the Back Bay
Advisors Bond Income Series of the Zenith Fund
--The Zenith Capital Growth Sub-Account, which invests in the Capital
Growth Series of the Zenith Fund
--The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
--The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
--The Zenith Value Growth Sub-Account, which invests in the Westpeak Value
Growth Series of the Zenith Fund
--The Zenith Avanti Growth Sub-Account, which invests in the Loomis Sayles
Avanti Growth Series of the Zenith Fund
--The Zenith Small Cap Sub-Account, which invests in the Loomis Sayles
Small Cap Series of the Zenith Fund
--The 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 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 Fund is an open-end diversified management investment company,
more commonly known as a mutual fund. The Zenith Fund was established by The
New England as an investment vehicle for separate investment accounts of
NEVLICO and of other life insurance companies. Currently the Zenith Fund is
the funding vehicle for the Variable Account and for separate accounts of The
New England and NEVLICO that issue variable annuity contracts.
The VIP Fund and VIP Fund II are open-end, diversified management investment
companies (mutual funds) that serve as the investment vehicles for variable
life insurance and variable annuity separate accounts of various insurance
companies. The VIP Fund and VIP Fund II were organized by Fidelity Management
& Research Company.
Shares of the Eligible Funds are purchased and sold by the Variable Account
at their net asset value (without a deduction for sales load) determined as of
the close of regular trading on the New York Stock Exchange on each day when
the exchange is open for trading.
The investment objectives of the Eligible Funds' portfolios are described
briefly below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, including their investment
objectives and policies, expenses, and risks of investing in the Eligible
Funds, is contained in the attached Eligible Fund prospectuses, as well as in
the Zenith Fund's Statement of Additional Information, which is referenced in
the Zenith Fund prospectus, and in the Statement of Additional Information for
the VIP Fund and VIP Fund II, which is referenced in those Funds' prospectus.
The Zenith Back Bay Advisors Money Market Series' investment objective is
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
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<PAGE>
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.
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 a
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
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.
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<PAGE>
The basic objective of the Policy is to provide benefits which increase in
value when the investment experience of the Policy's sub-accounts is
favorable. Historically, the investment performance of common stocks over the
long term has generally been superior to that of long or short term debt
securities, although common stocks have been subject to more dramatic changes
in value over short periods of time. The Zenith Capital Growth, Zenith Avanti
Growth, Zenith Equity Growth, Zenith Venture Value, Zenith Value Growth,
Zenith Stock Index, Zenith International Equity or Zenith Small Cap Sub-
Accounts, or the Equity-Income or Overseas Sub-Accounts, or some combination
of these sub-accounts, may, therefore, be a more desirable selection for
Policy Owners who are willing to accept such risks of short term fluctuations
in value. For a demonstration of certain of these market trends, see Appendix
C: Long Term Market Trends. Historically, the investment performance of "small
cap" stocks over the long term has generally been superior to stocks of large
capitalization companies, although "small cap" stocks have been substantially
more volatile. Historically, having a small percentage of a portfolio invested
in overseas stocks and the rest in domestic stocks has produced a portfolio
that has less, although still substantial, volatility than a completely
domestic portfolio. Equity investors should recognize that overseas and "small
cap" funds traditionally involve more risk than most domestic stock funds.
The performance of the various financial markets over shorter periods of
time has sometimes differed from their long term historical results. Short
term interest rates were very high in the late 1970's and early 1980's, but
are now lower. Long term bond values continue to fluctuate, and common stock
prices, which have risen substantially at times, have also had periods of
volatility. Policy Owners who seek somewhat greater protection against loss of
principal in the short term than that afforded by a stock fund may prefer the
High Income Sub-Account or the Zenith Bond Income Sub-Account. However,
because the High Income Portfolio invests in higher yielding, lower rated and
unrated fixed income securities (including bonds commonly referred to as
"junk" bonds), it has a higher degree of risk associated with it relative to
more conservative fixed income funds. Those who seek even greater safety of
principal may select the Zenith Money Market Sub-Account, although it is
subject to possible rapid changes in short term interest rates. Those who
primarily seek safety of principal should consider fixed life insurance as an
alternative to variable life insurance.
NEVLICO guarantees the principal invested in the Fixed Account, although
this guarantee is subject to NEVLICO's claims paying ability.
You may wish to consider diversifying your investments by allocating the
Policy's cash value among two or more sub-accounts.
Policy Owners may also diversify by selecting the Zenith Managed Sub-
Account, Zenith Balanced Sub-Account or the Asset Manager Sub-Account, since
each generally invests its assets at most times in a combination of bonds,
stocks and short term instruments, in varying proportions depending upon the
investment adviser's evaluation of the economy and financial markets. The
Asset Manager Portfolio has the ability to invest its stock portfolio more
aggressively than the Back Bay Advisors Managed Series. You may also wish to
diversify your cash value by country. The Overseas Sub-Account and Zenith
International Equity Sub-Account allow you to participate primarily in
companies and economies outside the United States.
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types
of investments you have and your own assessment of future economic and
financial market conditions.
INVESTMENT MANAGEMENT
The adviser and sub-adviser for each series of the Zenith Fund are listed in
the chart below. TNE Advisers, which is a subsidiary of The New England, and
each of the sub-advisers are registered with the SEC as investment advisers
under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------- -----------
<S> <C> <C>
Capital Growth Capital Growth Management Limited
Partnership ("CGM")*
Back Bay Advisors Money Market TNE Advisers, Inc. Back Bay Advisors, L.P.**
Back Bay Advisors Bond Income TNE Advisers, Inc. Back Bay Advisors, L.P.**
Back Bay Advisors Managed TNE Advisers, Inc. Back Bay Advisors, L.P.**
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 Growth TNE Advisers, Inc. Loomis, Sayles & Company, L.P.**
</TABLE>
A-34
<PAGE>
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------- -----------
<S> <C> <C>
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 Eq- TNE Advisers, Inc. Draycott Partners, Ltd.
uity
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-
advisers, 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>
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>
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<PAGE>
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 EXPENSE 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.
THE FIXED ACCOUNT
A FIXED ACCOUNT OPTION IS AVAILABLE UNDER THE POLICY IN STATES WHERE IT HAS
BEEN APPROVED BY THE STATE INSURANCE DEPARTMENT. THE FIXED ACCOUNT MAY NOT BE
APPROVED BY EVERY STATE INSURANCE DEPARTMENT AND THEREFORE IT MAY NOT BE
AVAILABLE IN EVERY STATE.
You may allocate net premiums for your Policy, and may transfer your
Policy's cash value, to the Fixed Account, which is part of NEVLICO's general
account. Because of exemptive and exclusionary provisions in the Federal
securities laws, interests in the Fixed Account have not been registered under
the Securities Act of 1933, and neither the Fixed Account nor the general
account has been registered as an investment company under the Investment
Company Act of 1940. Therefore, neither the Fixed Account, the general account
nor any interests therein are generally subject to the provisions of these
Acts, and NEVLICO has been advised that the staff of the SEC does not review
disclosures relating to the general account. Disclosures regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the Federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
GENERAL DESCRIPTION
NEVLICO's general account includes all the assets owned by NEVLICO, other
than the assets in the Variable Account or in any other separate accounts that
NEVLICO may establish. NEVLICO has sole discretion over the investment of
assets in the general account, including the Fixed Account. Policy Owners who
allocate cash value to the Fixed Account will not share in the actual
investment experience of the Fixed Account. Instead, NEVLICO guarantees that
cash values in the Fixed Account will earn interest at an annual rate of at
least 4%. NEVLICO may from time to time credit interest at a higher rate than
4%, but it is under no obligation to do so. NEVLICO declares the current
interest rate for the Fixed Account periodically. Your Policy cash values that
are in the Fixed Account will earn interest daily.
NEVLICO may vary the way in which it credits interest in the Fixed Account
from time to time. The following is a description of NEVLICO's current method
for crediting interest to cash value in the Fixed Account. All of your
Policy's cash value in the Fixed Account on a Policy anniversary will earn
interest at the declared annual rate in effect on the anniversary. It will
earn interest at this rate until the next Policy anniversary, when it will be
credited with the current rate declared by NEVLICO. (Although NEVLICO's
current practice is to credit your entire Fixed Account cash value on a Policy
anniversary with the most
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recently declared annual rate until the next anniversary, NEVLICO can select
any portion, from 0% to 100%, of your Fixed Account cash value on a Policy
anniversary to earn interest at the most recently declared rate until the next
Policy anniversary. For Policies issued in New Jersey, NEVLICO will always
credit the Policy's entire Fixed Account cash value on a Policy anniversary
with the most recently declared annual rate until the next anniversary.) Any
net premiums allocated or any portion of your Policy's cash value transferred
to the Fixed Account from the Variable Account on a date other than a Policy
anniversary will earn interest at NEVLICO's most recently declared rate until
the next Policy anniversary. Any loan repayment allocated to the Fixed Account
will be credited with the lesser of the most recently declared interest rate
and the effective interest rate for your Policy's cash value in the Fixed
Account on the date of the repayment. The effective interest rate credited at
any time to your cash value in the Fixed Account will be a weighted average of
all the Fixed Account rates for your Policy.
VALUES AND BENEFITS
The Policy's cash value in the Fixed Account reflects the net premiums
allocated to the Fixed Account, interest credited to cash value in the Fixed
Account, any loans, partial surrenders made from the Fixed Account cash value,
charges deducted, and any transfers of cash value to or from the Variable
Account. Charges will be deducted from the Policy's cash value in the Fixed
Account and in the Policy's Sub-Accounts in proportion to the amount of the
Policy's cash value in each. (See "Monthly Deduction from Cash Value".) A
Policy's total cash value will include its cash value in the Variable Account,
its cash value in the Fixed Account, and any of its cash value held in
NEVLICO's general account (but outside of the Fixed Account) as a result of a
Policy loan.
The amount of the Policy's cash value in the Fixed Account will be taken
into account in the calculation of the Policy's death benefit in the same
manner as the cash value in the Variable Account. (See "Death Benefit".)
POLICY TRANSACTIONS
NEVLICO reserves the right to restrict allocations to the Fixed Account if
the effective annual rate of interest that would apply to the amount allocated
is the minimum 4% rate. Otherwise, allocations of net premiums to the Fixed
Account are subject to the same percentage requirements that apply to the
Variable Account. (See "Allocation of Net Premiums".)
Except as described below, amounts in the Fixed Account are subject to the
same rights and limitations regarding transfers, loans, surrenders and partial
surrenders that apply to amounts in the Variable Account. (See "Other Policy
Features".) The following special rules apply to transactions involving
amounts in the Fixed Account.
TRANSFERS OF AMOUNTS FROM THE FIXED ACCOUNT TO THE VARIABLE ACCOUNT WILL BE
ALLOWED ONLY ONCE IN EACH POLICY YEAR. A TRANSFER OF CASH VALUE FROM THE FIXED
ACCOUNT WILL BE PROCESSED ONLY IF NEVLICO RECEIVES THE TRANSFER REQUEST WITHIN
THE 30 DAY PERIOD AFTER THE POLICY ANNIVERSARY, AND THE TRANSFER WILL BE
EFFECTED AS OF THE DATE THE TRANSFER REQUEST IS RECEIVED AT NEVLICO'S
ADMINISTRATIVE OFFICE. THE AMOUNT OF CASH VALUE WHICH MAY BE TRANSFERRED FROM
THE FIXED ACCOUNT IS LIMITED TO THE GREATER OF 25% OF THE POLICY'S CASH VALUE
IN THE FIXED ACCOUNT ON THE TRANSFER DATE OR THE AMOUNT OF CASH VALUE
TRANSFERRED FROM THE FIXED ACCOUNT IN THE PRECEDING POLICY YEAR. Regardless of
these limits, if a transfer of cash value from the Fixed Account would reduce
the remaining cash value in the Fixed Account below $100, you may transfer the
entire amount of cash value from the Fixed Account. The total number of
transfers among Sub-Accounts and from the Sub-Accounts to the Fixed Account
may not exceed four in one Policy year without NEVLICO's consent. NEVLICO
currently allows 12 such transfers per Policy year. Transfers out of the Fixed
Account will not be counted against this limit. NEVLICO reserves the right to
restrict transfers of cash value into the Fixed Account, if the effective
annual rate of interest that would apply to the amount transferred is the
minimum 4% rate.
Unless you request otherwise, a Policy loan will reduce the Policy's cash
value in the Sub-Accounts and not the cash value in the Fixed Account. If
there is not enough cash value in the Policy's Sub-Accounts to provide the
amount of the loan, however, the balance of the loan will be taken from the
cash value in the Fixed Account. All loan repayments will be allocated first
to the outstanding loan balance attributable to the Fixed Account. The amount
removed from the Policy's Sub-Accounts and the Fixed Account as a result of a
loan will earn interest at not less than 4% per year, which will be credited
annually to the Policy's cash value in the Sub-Accounts and the Fixed Account
in proportion to the Policy's cash value in each on the day it is credited.
Unless you request otherwise, partial surrenders will be taken only from the
Policy's Sub-Accounts and not the Fixed Account. If there is not enough cash
value in the Policy's subaccounts to provide the full amount requested, the
balance of the partial surrender will be taken from the Fixed Account.
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NEVLICO has the right to delay transfers, surrenders, and Policy loans from
the Fixed Account for up to six months (to the extent allowed by state
insurance law). Loans to pay premiums on policies issued by NEVLICO will not
be delayed.
NEVLICO'S DISTRIBUTION AND OTHER AGREEMENTS
NEVLICO sells the Policies through agents who are licensed by state
insurance officials to sell NEVLICO's variable life insurance policies. These
agents are also registered representatives of New England Securities. New
England Securities, a Massachusetts corporation organized in 1968, is
registered with the SEC as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers,
Inc.
New England Securities, whose principal business address is 399 Boylston
Street, Boston, Massachusetts 02116, serves as the principal underwriter for
the Policies under a Distribution Agreement between NEVLICO and New England
Securities.
Under the Distribution Agreement, NEVLICO pays the following sales expenses:
general agent and agency manager's compensation, agents' training allowances,
deferred compensation and insurance benefits of agents, general agents and
agency managers and advertising expenses and all other expenses of
distributing the Policies.
NEVLICO pays the following commissions and/or service fees to the selling
agent: a maximum of 50% of the Target Premium (plus any additional portion of
a premium which NEVLICO attributes to certain riders for commission paying
purposes) paid in the first Policy year, and a maximum of 3% thereafter.
Agents receive a maximum commission of 3% of each payment in excess of the
Target Premium (plus any additional portion of a premium which NEVLICO
attributes to certain riders for commission paying purposes) in any year. For
Policies sold to certain group or sponsored arrangements the maximum 50% first
year commission may be paid in installments over a period of years rather than
all in the first Policy year. Agents who meet certain productivity and
persistency standards in selling policies issued by NEVLICO and The New
England may be eligible for additional compensation. Non-cash forms of
compensation may also be paid in compliance with applicable state law. Sales
expenses in any year are not equal to the deduction for sales load in that
year.
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. It is the principal underwriter for the
Zenith Fund; The New England Variable Account; New England Retirement
Investment Account; New England Variable Annuity Separate Account; and New
England Variable Annuity Fund I. New England Securities also sells interests
in various investment partnerships.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life
insurance policies. Under the agreements with those broker-dealers, the
commission paid to the broker-dealer will not exceed 50% of the Target Premium
(plus any additional portion of a premium which NEVLICO attributes to certain
riders for commission paying purposes) in the first Policy year, 3%
thereafter, and 3% of all payments in excess of the Target Premium (plus any
additional portion of a premium which NEVLICO attributes to certain riders for
commission paying purposes) in any year. Commissions will be paid through the
registered broker-dealer, which may also be reimbursed for portions of
expenses incurred in connection with the sale of the Policies.
Under a Services Agreement between NEVLICO, The New England and New England
Securities, The New England performs underwriting, issuance and other
administrative services for NEVLICO'S variable life insurance policies.
NEVLICO paid The New England approximately $49.4 million in 1995 for services
provided under this agreement.
LIMITS TO NEVLICO'S RIGHT TO CHALLENGE THE POLICY
Generally, NEVLICO can challenge the validity of your Policy or a rider to
your Policy during the insured's lifetime for two years (or less, if required
by state law) from the date of issue, based on misrepresentations made in the
application. NEVLICO can challenge the portion of the death benefit resulting
from payment of an underwritten premium payment for two years during the
insured's lifetime from the date the premium payment was received and can
challenge the portion of the death benefit resulting from an increase in face
amount for two years during the insured's lifetime from the effective date of
the increase. However, if the insured dies within two years of the date of
issue, NEVLICO can challenge all or part of the Policy at any time with
respect to misrepresentations in the application. If the insured dies within
two years of the effective date of an increase in face amount, NEVLICO can
challenge the portion of the death benefit resulting from the face amount
increase at any time with respect to misrepresentation.
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<PAGE>
MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated in the application, the Policy's
death benefit will be the amount that the most recent Monthly Deduction which
was made would have provided, based on the insured's correct age and, if the
Policy is sex-based, on the insured's correct sex.
SUICIDE
If the insured commits suicide within two years (or less, if required by
state law) from the date of issue set forth in the Policy, the death benefit
will be limited to the amount of the premiums paid, less any policy loan
balance, and less any partial surrenders. If the insured commits suicide more
than two years from the issue date of the Policy but within two years from the
effective date of an increase in face amount, the death benefit for the
increase in face amount will be limited to the Monthly Deductions and any Face
Amount Increase Administrative Charge made to pay for that increase. (Where
required by state law, NEVLICO will determine the death benefit under this
provision by using the greater of: the reserve of the insurance which is
subject to the provision; and the amounts used to purchase the insurance which
is subject to the provision.)
TAX CONSIDERATIONS
POLICY PROCEEDS
The following discussion of Federal income tax issues relating to the
Policies is general in nature and is not intended as tax advice. It describes
what NEVLICO believes is the Federal income tax treatment of the Policies in
the most commonly occurring circumstances and does not reflect the effect of
Federal income taxes in all situations. In addition, there is no guarantee
that the Federal income tax laws and regulations or interpretation of them
will not change. Therefore, NEVLICO recommends that you consult your own tax
advisor for more complete information and advice.
DEFINITION OF LIFE INSURANCE. Section 7702 of the Internal Revenue Code of
1986, as amended ("Code") defines a life insurance contract for Federal income
tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the Policy is not
directly addressed by Section 7702 or proposed regulations issued under that
section. The presence of these Policy features, the absence of final
regulations, and the lack of other pertinent interpretations of Section 7702,
thus creates some uncertainty about the application of Section 7702 to the
Policy.
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 excludible 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 and
automatic issue 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"). Whether a Policy will be classified as a modified endowment
contract will depend upon the amount and timing of payments made under the
Policy.
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NEVLICO believes any Policy loans received under such
Policies will be treated as indebtedness of the Policy Owner and will not be
treated as
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taxable income to you. This assumes that the Policy has not lapsed, been
surrendered or terminated. As a general rule, Policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of your Policy if
the net cash surrender value of the Policy is greater than the investment in
the Policy less prior distributions from the Policy that were not taxed. If a
Policy has a Policy loan and is surrendered or lapses, the Policy loan is
treated as a distribution and would be taxable if there is a gain in the
Policy. In that case, the gain in the Policy would be taxable even if the
Policy has no net cash surrender value. If you incur a loss upon the surrender
it is not likely to be deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you
unless it is greater than the investment in the Policy less the untaxed
portions of any prior distributions. The Code does provide, however, that in
certain situations in the first 15 years of the Policy partial surrenders may
be taxable, in whole or in part, if the cash value is greater than the total
investment in the Policy. In this case, an amount may be taxable even if the
amount of the partial surrender is less than the investment in the Policy.
MODIFIED ENDOWMENT CONTRACTS. A modified endowment contract is a life
insurance contract which fails to satisfy a "7-pay test". In general, a Policy
will fail to satisfy the 7-pay test if the total amount paid under the Policy
at any time during the first seven Policy years exceeds the sum of the net
level premiums that would have been paid on or before such time if the Policy
provided for paid up future benefits after the payment of seven level annual
premiums. (The amount of premiums payable under the 7-pay test are calculated
based upon certain assumptions regarding the Policy's earnings and the use of
a reasonable mortality charge. Variable Account investment experience above a
4% net rate of return does not affect whether or not a Policy will become a
modified endowment contract.) Riders to the Policy are considered part of the
Policy for purposes of applying the 7-pay test. If there is a reduction in the
Policy's death benefit (for example, as a result of a partial surrender or
face amount reduction) at any time during the first seven Policy years or
within seven years of a face amount increase or "material change" (see below),
the 7-pay test will be applied back to issue (or to the date of the most
recent face amount increase or material change, whichever is latest), as if
the Policy's coverage were equal to the reduced face amount at that time. If
there is a reduction in rider or other benefits during the first seven Policy
years, the 7-pay test will be applied as if the Policy had originally been
issued at the reduced benefit amount. Any Policy received in exchange for a
modified endowment contract will also be a modified endowment contract.
Your agent can provide you with information about the maximum amount of
premiums which you can make under your Policy during the first seven Policy
years and still satisfy the 7-pay test. This information will be based upon
NEVLICO's current understanding of the Federal tax law. As is the case with
any provision of the Internal Revenue Code, there is no assurance that the
Internal Revenue Service will agree with NEVLICO's interpretation. NEVLICO
will monitor any IRS announcements or rulings concerning compliance with the
7-pay test.
MATERIAL CHANGES. If a "material change" in the benefits or other Policy
terms occurs under a Policy which has satisfied the 7-pay test, the Policy may
be treated as a new Policy entered into on the day on which the material
change occurred. The Policy will be retested under the 7-pay test, after
making certain adjustments to reflect the Policy's existing cash value. Any
increase in future benefits under the Policy may constitute a material change
if the increase is not due to the payment of premiums necessary to fund the
Policy's lowest death benefit payable in the first seven Policy years, or the
crediting of interest or other earnings with respect to such premiums. A
material change would also occur if certain Policy changes occurred.
If you do not wish to have the Policy become a modified endowment contract,
you may be required to limit the payment of premiums under the Policy at some
point. The point at which you may have to limit the payment of premiums will
depend upon the issue age, sex and underwriting class of the insured,
investment experience and the amount of your previous payments.
If you exchange your policy 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. (See "Exchange of
Policy During First 24 Months.")
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent
the cash value of the Policy exceeds your investment in the Policy (i.e.,
will be treated as income first).
(b) Loans are considered distributions. Your investment in the Policy
will be increased by the amount of any prior loan that was included in your
gross income.
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(c) A Policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the
Policy, the collateral assignment is a distribution which will subject any
gain that accrues in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by
NEVLICO or its affiliates to the same Policy Owner during any 12 month
period must be treated as one modified endowment contract.
Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy) or for the
joint lives (or life expectancies) of you and your beneficiary.
If a Policy becomes a modified endowment contract, distributions made during
the Policy year in which it becomes a modified endowment contract,
distributions in any subsequent Policy year and distributions within two years
before the Policy becomes a modified endowment contract will be subject to the
tax treatment described above. This means that a distribution from a Policy
that is not a modified endowment contract could later become taxable as a
distribution from a modified endowment contract. In addition, regulations or
other interpretations may be issued which will apply similar tax treatment to
other distributions made in anticipation of a Policy becoming a modified
endowment contract.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy plus the cost of insurance protection
for the year. Regulations specifying the diversification requirements have
been issued by the Department of Treasury, and NEVLICO believes it complies
fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of 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.
In the event that a Policy is owned by the trustee under a pension or profit
sharing plan, or similar deferred compensation arrangement, the Federal, state
and estate tax consequences of ownership or receipt of proceeds under the
Policy could differ from the principles stated herein. However, if ownership
of such Policy is transferred from the plan to a plan participant (upon
termination of employment, for example), the Policy will be subject to all of
the rules described above relating to Federal tax treatment, including the
rules regarding modified endowment contracts. Policies owned by the trustee
under the plans described above may be subject to restrictions under ERISA.
You should consult a qualified tax advisor regarding any applicable
requirements of ERISA.
If the Policy is owned as part of a pension or profit-sharing plan qualified
under Section 401 of the Code, the current cost of insurance for the net
amount at risk is treated as a "current fringe benefit" and is required to be
included annually in the
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plan participant's gross income. This cost (generally referred to as the "P.S.
58" cost) is reported to the participant annually. If the plan participant
dies while covered by the plan and the Policy proceeds are paid to the
participant's beneficiary, then the excess of the death benefit over the cash
value will not be subject to Federal income tax. However, the cash value will
generally be taxable to the extent it exceeds the sum of $5,000 plus the
participant's cost basis in the Policy. The participant's cost basis will
generally include the costs of insurance previously reported as income to the
participant. Special rules may apply if the participant had borrowed from his
cash value or was an owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased
by a tax qualified plan.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans,
retiree medical benefit plans and others. The tax consequences of such plans
may vary depending on the particular facts and circumstances of each
individual arrangement. Therefore, if you are contemplating the use of the
Policies in any arrangement the value of which depends in part on its tax
consequences, you should be sure to consult a qualified tax advisor regarding
the tax attributes of the particular arrangement and the suitability of this
product for the arrangement.
NEVLICO believes that Policies subject to the provisions of the Puerto Rican
tax law will generally receive the same tax treatment as that described above
for Policies subject to the Internal Revenue Code. You should note that
Policies governed by the Puerto Rican tax law are not currently subject to the
above described rules regarding modified endowment contracts. If such a Policy
becomes subject to the Internal Revenue Code, however, the rules regarding
modified endowment contracts will apply, and they may apply retroactively. You
should consult your tax advisor if a Policy governed by the Puerto Rican tax
law subsequently becomes subject to the Internal Revenue Code.
CHARGE FOR NEVLICO'S INCOME TAXES
Under current Federal income tax law no tax is imposed on NEVLICO as a
result of the operations of the Variable Account. Thus, no charge is being
made currently to the Variable Account for company Federal income taxes,
except for the charge for federal taxes that is deducted from premiums.
NEVLICO reserves its rights to charge the Variable Account for company Federal
income taxes in the future.
Under current laws NEVLICO may incur state and local taxes (in addition to
premium taxes) in several states. At present these taxes are not significant
and, accordingly, NEVLICO is not currently making a charge for them. If they
increase, however, charges for such taxes attributable to the Variable Account
may be made.
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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
NAME THE 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, 1988 to 1994, of The New
England; 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. Zimmerman 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
NAME THE 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.
A-43
<PAGE>
VOTING RIGHTS
NEVLICO is the legal owner of the Eligible Fund shares held in the Variable
Account and has the right to vote those shares at meetings of the Eligible
Fund shareholders. However, to the extent required by applicable Federal
securities law, NEVLICO will give you, as Policy Owner, the right to instruct
NEVLICO how to vote the shares that are attributable to your Policy.
The Policy Owners who are entitled to give voting instructions and the
number of shares attributable to their Policies will be determined as of the
record date for the meeting. All Eligible Fund shares held in any Sub-Account
of the Variable Account, or in any other registered (or to the extent voting
privileges are granted by the issuing insurance company, unregistered)
separate account of NEVLICO or an affiliate, and for which timely instructions
are not received, will be voted in the same proportion as (i) the aggregate
cash value of policies giving instructions, respectively, to vote, for,
against, or withhold votes on a proposition, bears to (ii) the total cash
value in that Sub-Account for all policies for which voting instructions are
received. No voting privileges apply with respect to cash value removed from
the Variable Account as a result of a Policy loan.
All Zenith Fund shares held by the general account (or any unregistered
separate account for which voting privileges were not extended) of NEVLICO or
its affiliates will be voted in the same proportion as the total of (i) shares
for which voting instructions were received and (ii) shares that are voted in
proportion to such voting instructions.
The SEC requires the Eligible Funds' Boards of Trustees to monitor events to
identify conflicts that may arise from the sale of Eligible Fund shares to
variable life and variable annuity separate accounts of affiliated and, if
applicable, unaffiliated insurance companies. Conflicts could arise as a
result of changes in state insurance law or Federal income tax law, changes in
investment management of any portfolio of the Eligible Funds, or differences
in voting instructions given by variable life and variable annuity contract
owners, for example. If there is a material conflict, the Board of Trustees
will have an obligation to determine what action should be taken, including
the removal of the affected Sub-Accounts from the Eligible Fund(s), if
necessary. If NEVLICO believes any Eligible Fund action is insufficient,
NEVLICO will consider taking other action to protect Policy Owners. There
could, however, be unavoidable delays or interruptions of operations of the
Variable Account that NEVLICO may be unable to remedy.
If required by state insurance authorities, NEVLICO may disregard voting
instructions if they would require that shares be voted to cause a change in
the investment objectives of the portfolios of the Eligible Funds or to
approve or disapprove an investment advisory or underwriting contract for a
portfolio. In addition, NEVLICO may disregard voting instructions in favor of
changes, initiated by a Policy Owner or an Eligible Fund's Board of Trustees,
in the investment policy, investment adviser or principal underwriter of the
Eligible Fund portfolio if NEVLICO (i) reasonably disapproves of the changes
and (ii) in the case of a change in investment policy or investment adviser,
makes a good faith determination that the proposed change is contrary to state
law or is prohibited by state regulatory authorities or that the change would
be inconsistent with a Sub-Account's investment objectives or would result in
the purchase of securities which vary from the general quality and nature of
investments and investment techniques utilized by other separate accounts of
NEVLICO or of an affiliated life insurance company, which separate accounts
have investment objectives similar to those of the Sub-Account. If NEVLICO
does disregard voting instructions, a summary of that action and the reasons
for it will be included in the next semiannual report to Policy Owners.
RIGHTS RESERVED BY NEVLICO
NEVLICO and The New England may change the voting procedures described
above, and may vote Eligible Fund shares in their own right without
instructions from Policy Owners, if the applicable Federal securities laws or
regulations or interpretations of them change. NEVLICO also reserves the
right: (1) to create new investment accounts; (2) to combine any two or more
separate investment accounts including the Variable Account; (3) to make
available additional Sub-Accounts of the Variable Account investing in
additional Eligible Fund portfolios or in portfolios of other mutual funds;
(4) to invest the assets of the Variable Account in securities other than
Eligible Fund shares or in shares of a different series of the Eligible Funds
as a substitute for such shares already purchased or as the securities to be
purchased in the future, to withdraw the availability of a series of the
Eligible Funds as an investment option under the Policies, or to transfer
assets to NEVLICO's general account as permitted by applicable law; (5) to
operate the Variable Account as a management investment company under the
Investment Company Act of 1940 or in any other form permitted by law; and (6)
to deregister the Variable Account under the Investment Company Act of 1940 if
registration is no longer required. NEVLICO will exercise these rights in
accordance with applicable law, including approval of Policy Owners if
required. NEVLICO will notify you if exercise of any of these rights would
result in a material change in the Variable Account or its investments.
A-44
<PAGE>
TOLL-FREE NUMBERS
For information about historical values of the Variable Account Sub-
Accounts, call the toll-free number 1-800-333-2501.
For Sub-Account transfers or premium reallocations, call the toll-free
number 1-800-200-2214.
REPORTS
NEVLICO will send you a statement annually showing your Policy's death
benefit, cash value and any outstanding Policy loan principal. NEVLICO will
also confirm Policy loans, subaccount transfers, lapses, surrenders and other
Policy transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
NEVLICO may from time to time receive endorsements of the Policies from
professional organizations. NEVLICO may refer to or use such endorsements in
advertisements or sales material for the Policies. NEVLICO may also pay the
professional organization making the endorsement for the use of its customer
or mailing lists in order to distribute promotional materials regarding the
Policies. An endorsement of the Policies by a third party is not necessarily
indicative of the future performance or results which may be obtained by
persons who purchase the Policies.
From time to time, articles discussing the Variable Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to Lipper Analytical Services, Inc. and
Morningstar, Inc.) may publish their own rankings or performance reviews of
variable contract separate accounts, including the Variable Account.
References to, reprints or portions of reprints of such articles or rankings
may be used by NEVLICO as sales literature or advertising material and may
include rankings that indicate the names of other variable contract separate
accounts and their investment experience.
Articles and releases, developed by NEVLICO, the Eligible Funds and other
parties, about the Variable Account or the Eligible Funds regarding individual
Eligible Funds' and fund groups' asset levels and sales volumes, statistics
and analyses of industry sales volume and asset levels, and other
characteristics may appear in various publications. References to or reprints
of such articles may be used in promotional literature for the Policies or the
Variable Account. Such literature may refer to personnel of the advisers, who
have portfolio management responsibility, and their investment style. The
reference may allude to or include excerpts from articles appearing in the
media.
The advertising and sales literature for the Policies and the Variable
Account may refer to historical, current and prospective economic trends.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and
prospective Policy Owners. These materials may include, but are not limited
to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by H. James Wilson, General Counsel and Secretary of
NEVLICO. Sutherland, Asbill & Brennan, of Washington, D.C., has provided
advice on certain matters relating to 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.
A-45
<PAGE>
EXPERTS
The financial statements of New England Variable Life Insurance Company and
of the Variable Account included in this 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.
Actuarial matters included in this prospectus have been examined by Rodney
J. Chandler, F.S.A., M.A.A.A., Chief Actuary of NEVLICO, as stated in his
opinion filed as an exhibit to the Registration Statement.
A-46
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
NET CASH VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash value and cash value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.,
investment income and capital gains and losses, realized or unrealized) for
the Variable Account equal to constant after tax annual rates of 0%, 6% and
12%. The tables are based on face amounts of $250,000 and $500,000 for a male
aged 40. The insured is assumed to be in the nonsmoker preferred risk
classification. The Tables assume no rider benefits and assume that no
allocations are made to the Fixed Account. Values are first given based on
current mortality and other Policy charges and then based on guaranteed
mortality and other Policy charges. The illustrations for the $500,000 face
amount reflect the lower sales charge and, in the illustrations based on
current charges, the lower cost of insurance and first-year administrative
charges that would apply to the Policy if issued in the personal market or if
issued in business situations which qualify for those lower charges. (See
"Charges and Expenses".) In addition, each illustration is given for a Policy
with an Option 1 and an Option 2 death benefit. These tables may assist in the
comparison of death benefits, net cash values and cash values for the Policies
with those under other variable life insurance policies which may be issued by
NEVLICO or other companies.
Death benefits, net cash values and cash values for a Policy would be
different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period, if
premiums were paid in other amounts or at other than annual intervals. They
would also be different depending on the allocation of cash value among the
Variable Account's Sub-Accounts, if the actual gross rate of return for all
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average
for individual Sub-Accounts. They would also differ if any policy loan or
partial surrender were made during the period of time illustrated, if the
insured were female or in another risk classification, or if the Policies were
issued at unisex rates.
The death benefits, net cash values and cash values shown in the tables
reflect the fact that: (i) deductions have been made from premiums for the
sales charge and state and federal premium tax charge; and (ii) a Monthly
Deduction (consisting of a Policy fee, an administrative charge, a minimum
death benefit guarantee charge and a charge for the cost of insurance) are
deducted from the cash value on the first day of each Policy month. The net
cash values shown in the tables reflect the fact that a Surrender Charge
(consisting of a Deferred Sales Charge and a Deferred Administrative Charge)
is deducted from the cash value upon surrender, face reduction or lapse during
the first 11 Policy years. The death benefits, net cash values and cash values
also reflect a daily charge assessed against the Variable Account for
mortality and expense risks equivalent to an annual charge of .75% (on a
current basis) and .90% (on a guaranteed basis) 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 are based on an average of the
investment advisory fees and operating expenses incurred by the Eligible
Funds, at an annual rate of .78% of the average daily net assets of the
Eligible Funds. This average reflects voluntary expense cap and expense
deferral arrangements between TNE Advisers and the Zenith Fund, under which
TNE Advisers bears operating expenses of the Zenith Fund Series (other than
the Capital Growth Series) that exceed certain amounts. TNE Advisers could
terminate the expense cap and expense deferral arrangements at any time. If
TNE Advisers terminates these arrangements, the values illustrated on the
following pages could be less. (See "Charges Against the Eligible Funds and
the Sub-Accounts of the Variable Account" and "Investment Management".)
Taking account of the charges for mortality and expense risks in the
Variable Account and the average investment advisory fee and operating
expenses of the Eligible Funds, the gross annual rates of return of 0%, 6% and
12% correspond to net investment experience at constant annual rates of -
1.52%, 4.39% and 10.30%, respectively, based on NEVLICO's current charge for
mortality and expense risks, and -1.67%, 4.23% and 10.13%, respectively, based
on NEVLICO's guaranteed maximum charge for mortality and expense risks. (See
"Net Investment Experience".)
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are
currently made. If any such charges are imposed in the future, the gross
annual rate of return would have to exceed the rates shown by an amount
sufficient to cover the tax charges, in order to produce the death benefits,
net cash values and cash values illustrated. (See "Charges for NEVLICO's
Income Taxes".)
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
A-47
<PAGE>
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated
premiums could have been invested outside the Policy to arrive at the death
benefit of the Policy. The internal rate of return is compounded annually, and
the premiums are assumed to be paid at the beginning of each Policy year.
NEVLICO will furnish upon request a personalized illustration reflecting the
proposed insured's age, sex, underwriting classification, and the face amount
or premium payment schedule requested. Where applicable, NEVLICO will also
furnish upon request an illustration for a Policy which is not affected by the
sex of the insured.
A-48
<PAGE>
MALE ISSUE AGE 40
$4,025 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 4,226 250,000 250,000 250,000 1,892 2,090 2,289 2,990 3,188 3,387 -53.00% -48.07% -43.13%
2 8,664 250,000 250,000 250,000 4,914 5,500 6,110 6,044 6,630 7,241 -28.72 -22.86 -17.03
3 13,323 250,000 250,000 250,000 7,163 8,335 9,603 9,026 10,198 11,466 -23.93 -17.42 -11.02
4 18,215 250,000 250,000 250,000 10,116 12,075 14,281 11,916 13,876 16,081 -17.75 -11.18 -4.74
5 23,352 250,000 250,000 250,000 13,014 15,969 19,428 14,752 17,706 21,165 -14.19 -7.61 -1.17
6 28,746 250,000 250,000 250,000 16,085 20,248 25,318 17,533 21,696 26,766 -11.51 -5.02 1.35
7 34,409 250,000 250,000 250,000 19,082 24,674 31,763 20,241 25,832 32,921 -9.76 -3.32 3.00
8 40,356 250,000 250,000 250,000 22,043 29,290 38,856 22,912 30,159 39,725 -8.50 -2.11 4.16
9 46,600 250,000 250,000 250,000 24,926 34,063 46,625 25,505 34,643 47,204 -7.59 -1.23 5.01
10 53,156 250,000 250,000 250,000 27,773 39,044 55,184 28,063 39,333 55,473 -6.88 -.55 5.67
15 91,194 250,000 250,000 250,000 40,283 66,183 111,872 40,283 66,183 111,872 -5.25 1.14 7.38
20 139,741 250,000 250,000 265,903 50,613 98,883 204,541 50,613 98,883 204,541 -4.67 1.92 8.23
25 201,701 250,000 250,000 427,665 58,575 139,194 356,387 58,575 139,194 356,387 -4.47 2.41 8.73
30 280,780 250,000 250,000 691,729 62,229 188,801 601,503 62,229 188,801 601,503 -4.72 2.74 9.03
35 381,706 250,000 264,858 1,048,044 59,204 252,246 998,137 59,204 252,246 998,137 -5.55 3.03 9.23
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,111.35% 6,111.35% 6,111.35%
2 639.71 639.71 639.71
3 257.64 257.64 257.64
4 148.47 148.47 148.47
5 100.09 100.09 100.09
6 73.55 73.55 73.55
7 57.05 57.05 57.05
8 45.91 45.91 45.91
9 37.94 37.94 37.94
10 32.00 32.00 32.00
15 16.39 16.39 16.39
20 9.88 9.88 10.39
25 6.44 6.44 9.89
30 4.35 4.35 9.74
35 2.99 3.37 9.43
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-49
<PAGE>
MALE ISSUE AGE 40
$4,025 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 4,226 250,000 250,000 250,000 1,797 1,993 2,188 2,895 3,091 3,286 -55.34% -50.49% -45.63%
2 8,664 250,000 250,000 250,000 4,550 5,119 5,711 5,680 6,249 6,841 -32.50 -26.64 -20.81
3 13,323 250,000 250,000 250,000 6,520 7,642 8,858 8,383 9,504 10,720 -27.79 -21.19 -14.71
4 18,215 250,000 250,000 250,000 9,197 11,056 13,152 10,997 12,856 14,952 -21.18 -14.48 -7.93
5 23,352 250,000 250,000 250,000 11,789 14,571 17,836 13,526 16,309 19,574 -17.32 -10.58 -4.00
6 28,746 250,000 250,000 250,000 14,515 18,412 23,172 15,963 19,860 24,620 -14.40 -7.70 -1.18
7 34,409 250,000 250,000 250,000 17,147 22,353 28,975 18,305 23,511 30,134 -12.45 -5.79 .70
8 40,356 250,000 250,000 250,000 19,682 26,395 35,293 20,550 27,264 36,161 -11.07 -4.44 2.04
9 46,600 250,000 250,000 250,000 22,118 30,542 42,178 22,697 31,122 42,757 -10.07 -3.43 3.03
10 53,156 250,000 250,000 250,000 24,449 34,792 49,687 24,739 35,082 49,977 -9.31 -2.67 3.80
15 91,194 250,000 250,000 250,000 33,099 56,354 97,934 33,099 56,354 97,934 -7.97 -.87 5.84
20 139,741 250,000 250,000 250,000 37,231 79,632 175,272 37,231 79,632 175,272 -8.10 -.10 6.94
25 201,701 250,000 250,000 361,801 34,846 104,303 301,501 34,846 104,303 301,501 -9.60 .28 7.66
30 280,780 250,000 250,000 575,644 20,816 129,145 500,560 20,816 129,145 500,560 -16.13 .43 8.08
35 381,706 250,000 250,000 856,830 0 152,855 816,028 0 152,855 816,028 -- .45 8.37
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,111.35% 6,111.35% 6,111.35%
2 639.71 639.71 639.71
3 257.64 257.64 257.64
4 148.47 148.47 148.47
5 100.09 100.09 100.09
6 73.55 73.55 73.55
7 57.05 57.05 57.05
8 45.91 45.91 45.91
9 37.94 37.94 37.94
10 32.00 32.00 32.00
15 16.39 16.39 16.39
20 9.88 9.88 9.88
25 6.44 6.44 8.83
30 4.35 4.35 8.81
35 2.99 2.99 8.58
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-50
<PAGE>
MALE ISSUE AGE 40
$4,025 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 4,226 252,984 253,182 253,381 1,886 2,084 2,283 2,984 3,182 3,381 -53.14% -48.22% -43.29%
2 8,664 256,027 256,612 257,220 4,897 5,481 6,090 6,027 6,612 7,220 -28.90 -23.04 -17.22
3 13,323 258,992 260,158 261,421 7,129 8,296 9,559 8,992 10,158 11,421 -24.13 -17.63 -11.24
4 18,215 261,857 263,805 265,997 10,056 12,005 14,197 11,857 13,805 15,997 -17.96 -11.40 -4.97
5 23,352 264,661 267,593 271,026 12,923 15,856 19,288 14,661 17,593 21,026 -14.42 -7.84 -1.41
6 28,746 267,402 271,528 276,552 15,954 20,080 25,104 17,402 21,528 26,552 -11.74 -5.25 1.11
7 34,409 270,063 275,594 282,604 18,904 24,436 31,446 20,063 25,594 32,604 -9.99 -3.56 2.75
8 40,356 272,680 279,836 289,278 21,812 28,967 38,409 22,680 29,836 39,278 -8.74 -2.36 3.91
9 46,600 275,209 284,214 296,586 24,629 33,634 46,007 25,209 34,214 46,586 -7.83 -1.49 4.75
10 53,156 277,696 288,781 304,644 27,406 38,491 54,355 27,696 38,781 54,644 -7.13 -.81 5.40
15 91,194 289,468 314,682 359,094 39,468 64,682 109,094 39,468 64,682 109,094 -5.53 .86 7.09
20 139,741 298,957 345,200 446,208 48,957 95,200 196,208 48,957 95,200 196,208 -5.02 1.57 7.89
25 201,701 305,204 380,174 585,227 55,204 130,174 335,227 55,204 130,174 335,227 -5.01 1.93 8.34
30 280,780 305,767 417,533 805,346 55,767 167,533 555,346 55,767 167,533 555,346 -5.61 2.04 8.62
35 381,706 297,678 453,973 1,153,513 47,678 203,973 903,513 47,678 203,973 903,513 -7.27 1.97 8.80
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,185.49% 6,190.41% 6,195.34%
2 649.13 650.04 650.98
3 262.39 263.00 263.65
4 151.84 152.38 152.99
5 102.84 103.38 104.00
6 75.96 76.51 77.17
7 59.24 59.82 60.53
8 47.95 48.56 49.35
9 39.87 40.52 41.38
10 33.84 34.53 35.47
15 18.00 18.91 20.34
20 11.33 12.49 14.52
25 7.74 9.14 11.84
30 5.47 7.14 10.51
35 3.83 5.79 9.83
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-51
<PAGE>
MALE ISSUE AGE 40
$4,025 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 4,226 252,890 253,085 253,280 1,792 1,987 2,182 2,890 3,085 3,280 -55.48% -50.64% -45.79%
2 8,664 255,660 256,226 256,816 4,530 5,096 5,686 5,660 6,226 6,816 -32.72 -26.87 -21.05
3 13,323 258,339 259,454 260,663 6,477 7,592 8,801 8,339 9,454 10,663 -28.06 -21.47 -15.00
4 18,215 260,922 262,766 264,845 9,122 10,966 13,045 10,922 12,766 14,845 -21.47 -14.78 -8.24
5 23,352 263,409 266,163 269,395 11,671 14,426 17,657 13,409 16,163 19,395 -17.64 -10.90 -4.33
6 28,746 265,793 269,641 274,340 14,345 18,193 22,892 15,793 19,641 24,340 -14.73 -8.04 -1.53
7 34,409 268,070 273,196 279,714 16,912 22,038 28,556 18,070 23,196 29,714 -12.79 -6.14 .34
8 40,356 270,238 276,828 285,557 19,369 25,959 34,688 20,238 26,828 35,557 -11.44 -4.81 1.65
9 46,600 272,292 280,534 291,910 21,713 29,955 41,331 22,292 30,534 41,910 -10.45 -3.83 2.63
10 53,156 274,225 284,308 298,815 23,936 34,018 48,525 24,225 34,308 48,815 -9.72 -3.08 3.37
15 91,194 281,730 303,837 343,285 31,730 53,837 93,285 31,730 53,837 93,285 -8.57 -1.45 5.27
20 139,741 284,234 322,822 409,562 34,234 72,822 159,562 34,234 72,822 159,562 -9.10 -.96 6.14
25 201,701 279,172 337,748 507,313 29,172 87,748 257,313 29,172 87,748 257,313 -11.64 -1.07 6.63
30 280,780 261,734 341,447 648,944 11,734 91,447 398,944 11,734 91,447 398,944 -25.54 -1.86 6.90
35 381,706 0 321,408 850,508 0 71,408 600,508 0 71,408 600,508 -- -4.20 7.04
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,183.16% 6,187.98% 6,192.84%
2 648.56 649.44 650.36
3 262.05 262.63 263.26
4 151.58 152.09 152.67
5 102.61 103.12 103.70
6 75.74 76.26 76.88
7 59.03 59.57 60.24
8 47.74 48.31 49.04
9 39.66 40.26 41.06
10 33.62 34.25 35.13
15 17.70 18.53 19.85
20 10.93 11.95 13.85
25 7.16 8.39 10.95
30 4.61 6.07 9.42
35 -- 4.20 8.55
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-52
<PAGE>
MALE ISSUE AGE 40
$7,916 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 8,312 500,000 500,000 500,000 4,092 4,497 4,903 6,288 6,693 7,099 -48.31% -43.19% -38.06%
2 17,039 500,000 500,000 500,000 10,387 11,593 12,849 12,647 13,854 15,109 -25.01 -19.06 -13.14
3 26,202 500,000 500,000 500,000 15,150 17,568 20,185 18,875 21,294 23,910 -20.85 -14.33 -7.91
4 35,824 500,000 500,000 500,000 21,341 25,393 29,951 24,941 28,993 33,551 -15.17 -8.63 -2.21
5 45,927 500,000 500,000 500,000 27,425 33,545 40,702 30,900 37,020 44,177 -11.99 -5.46 .93
6 56,534 500,000 500,000 500,000 33,859 42,492 52,997 36,755 45,388 55,893 -9.60 -3.17 3.14
7 67,673 500,000 500,000 500,000 40,160 51,766 66,464 42,477 54,083 68,781 -8.06 -1.70 4.55
8 79,368 500,000 500,000 500,000 46,378 61,433 81,278 48,116 63,171 83,016 -6.97 -.67 5.53
9 91,648 500,000 500,000 500,000 52,459 71,454 97,527 53,617 72,613 98,685 -6.19 .06 6.22
10 104,542 500,000 500,000 500,000 58,466 81,908 115,421 59,046 82,488 116,000 -5.59 .62 6.76
15 179,351 500,000 500,000 500,000 84,043 138,021 233,047 84,043 138,021 233,047 -4.46 1.86 8.05
20 274,830 500,000 500,000 551,851 104,556 204.959 424,501 104,556 204,959 424,501 -4.14 2.40 8.68
25 396,687 500,000 500,000 884,659 119,972 287,161 737,216 119,972 287,161 737,216 -4.11 2.75 9.06
30 552,210 500,000 500,000 1,428,306 126,848 388,640 1,242,005 126,848 388,640 1,242,005 -4.43 3.01 9.28
35 750,703 500,000 544,216 2,161,772 120,450 518,301 2,058,831 120,450 518,301 2,058,831 -5.30 3.25 9.43
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,216.50% 6,216.50% 6,216.50%
2 646.34 646.34 646.34
3 259.89 259.89 259.89
4 149.69 149.69 149.69
5 100.90 100.90 100.90
6 74.15 74.15 74.15
7 57.52 57.52 57.52
8 46.30 46.30 46.30
9 38.28 38.28 38.28
10 32.29 32.29 32.29
15 16.58 16.58 16.58
20 10.02 10.02 10.82
25 6.55 6.55 10.20
30 4.45 4.45 9.99
35 3.07 3.48 9.63
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-53
<PAGE>
MALE ISSUE AGE 40
$7,916 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 8,312 500,000 500,000 500,000 3,873 4,271 4,670 6,069 6,468 6,866 -51.07% -46.04% -41.00%
2 17,039 500,000 500,000 500,000 9,414 10,575 11,785 11,675 12,836 14,046 -30.03 -24.06 -18.14
3 26,202 500,000 500,000 500,000 13,389 15,676 18,156 17,114 19,402 21,881 -26.03 -19.37 -12.84
4 35,824 500,000 500,000 500,000 18,777 22,561 26,829 22,377 26,161 30,429 -19.84 -13.11 -6.52
5 45,927 500,000 500,000 500,000 23,994 29,652 36,293 27,470 33,127 39,768 -16.24 -9.48 -2.88
6 56,534 500,000 500,000 500,000 29,480 37,396 47,069 32,376 40,292 49,965 -13.49 -6.79 -.26
7 67,673 500,000 500,000 500,000 34,777 45,343 58,790 37,094 47,660 61,107 -11.67 -5.01 1.48
8 79,368 500,000 500,000 500,000 39,880 53,497 71,552 41,617 55,235 73,290 -10.39 -3.76 2.71
9 91,648 500,000 500,000 500,000 44,785 61,863 85,465 45,944 63,022 86,623 -9.46 -2.84 3.62
10 104,542 500,000 500,000 500,000 49,480 70,439 100,641 50,059 71,018 101,220 -8.76 -2.13 4.32
15 179,351 500,000 500,000 500,000 66,941 114,007 198,224 66,941 114,007 198,224 -7.58 -.51 6.17
20 274,830 500,000 500,000 500,000 75,371 161,158 354,794 75,371 161,158 354,794 -7.76 .17 7.18
25 396,687 500,000 500,000 732,092 70,792 211,349 610,077 70,792 211,349 610,077 -9.25 .50 7.84
30 552,210 500,000 500,000 1,164,442 42,988 262,368 1,012,558 42,988 262,368 1,012,558 -15.47 .64 8.23
35 750,703 500,000 500,000 1,732,929 0 312,204 1,650,409 0 312,204 1,650,409 -- .65 8.49
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,216.50% 6,216.50% 6,216.50%
2 646.34 646.34 646.34
3 259.89 259.89 259.89
4 149.69 149.69 149.69
5 100.90 100.90 100.90
6 74.15 74.15 74.15
7 57.52 57.52 57.52
8 46.30 46.30 46.30
9 38.28 38.28 38.28
10 32.29 32.29 32.29
15 16.58 16.58 16.58
20 10.02 10.02 10.02
25 6.55 6.55 9.01
30 4.45 4.45 8.95
35 3.07 3.07 8.70
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-54
<PAGE>
MALE ISSUE AGE 40
$7,916 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 8,312 506,280 506,685 507,090 4,083 4,488 4,894 6,280 6,685 7,090 -48.41% -43.30% -38.17%
2 17,039 512,623 513,827 515,080 10,362 11,566 12,819 12,623 13,827 15,080 -25.14 -19.19 -13.27
3 26,202 518,825 521,236 523,845 15,100 17,511 20,120 18,825 21,236 23,845 -20.99 -14.48 -8.06
4 35,824 524,854 528,890 533,428 21,253 25,289 29,828 24,854 28,890 33,428 -15.32 -8.79 -2.37
5 45,927 530,766 536,853 543,973 27,291 33,378 40,498 30,766 36,853 43,973 -12.15 -5.63 .77
6 56,534 536,564 545,141 555,577 33,668 42,245 52,681 36,564 45,141 55,577 -9.76 -3.34 2.97
7 67,673 542,214 553,732 568,313 39,897 51,415 65,997 42,214 53,732 68,313 -8.22 -1.87 4.37
8 79,368 547,773 562,694 582,357 46,036 60,956 80,619 47,773 62,694 82,357 -7.14 -.85 5.35
9 91,648 553,179 571,978 597,772 52,021 70,820 96,614 53,179 71,978 97,772 -6.36 -.12 6.04
10 104,542 558,502 581,670 614,776 57,923 81,091 114,197 58,502 81,670 114,776 -5.77 .44 6.57
15 179,351 582,655 635,496 728,424 82,655 135,496 228,424 82,655 135,496 228,424 -4.68 1.63 7.82
20 274,830 601,404 698,050 909,174 101,404 198,050 409,174 101,404 198,050 409,174 -4.47 2.09 8.37
25 396,687 613,284 769,395 1,197,290 113,284 269,395 697,290 113,284 269,395 697,290 -4.62 2.30 8.70
30 552,210 613,840 845,848 1,653,987 113,840 345,848 1,153,987 113,840 345,848 1,153,987 -5.30 2.32 8.90
35 750,703 597,134 920,881 2,377,203 97,134 420,881 1,877,203 97,134 420,881 1,877,203 -6.98 2.21 9.04
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,295.83% 6,300.96% 6,306.08%
2 656.29 657.23 658.21
3 264.88 265.51 266.19
4 153.23 153.79 154.42
5 103.79 104.35 104.99
6 76.68 77.25 77.94
7 59.83 60.43 61.17
8 48.45 49.08 49.90
9 40.31 40.98 41.87
10 34.23 34.95 35.92
15 18.25 19.20 20.68
20 11.52 12.71 14.80
25 7.88 9.33 12.08
30 5.58 7.29 10.72
35 3.93 5.93 10.03
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-55
<PAGE>
MALE ISSUE AGE 40
$7,916 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL 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 8,312 506,061 506,459 506,857 3,865 4,263 4,661 6,061 6,459 6,857 -51.17% -46.15% -41.12%
2 17,039 511,636 512,793 513,999 9,375 10,533 11,739 11,636 12,793 13,999 -30.23 -24.28 -18.36
3 26,202 517,028 519,303 521,769 13,303 15,578 18,044 17,028 19,303 21,769 -26.30 -19.65 -13.12
4 35,824 522,227 525,982 530,217 18,626 22,382 26,616 22,227 25,982 30,217 -20.13 -13.41 -6.83
5 45,927 527,234 532,835 539,409 23,759 29,360 35,934 27,234 32,835 39,409 -16.55 -9.80 -3.20
6 56,534 532,034 539,851 549,401 29,138 36,955 46,505 32,034 39,851 49,401 -13.82 -7.13 -.60
7 67,673 536,621 547,025 560,262 34,304 44,709 57,945 36,621 47,025 60,262 -12.02 -5.37 1.12
8 79,368 540,987 554,355 572,072 39,249 52,617 70,334 40,987 54,355 72,072 -10.76 -4.13 2.33
9 91,648 545,126 561,836 584,914 43,967 60,678 83,755 45,126 61,836 84,914 -9.84 -3.23 3.22
10 104,542 549,023 569,455 598,873 48,443 68,875 98,293 49,023 69,455 98,873 -9.17 -2.55 3.90
15 179,351 564,175 609,920 688,825 64,175 108,929 188,825 64,175 108,920 188,825 -8.17 -1.09 5.61
20 274,830 569,315 647,391 823,017 69,315 147,391 323,017 69,315 147,391 323,017 -8.75 -.69 6.39
25 396,687 559,313 677,858 1,021,174 59,313 177,858 521,174 59,313 177,858 521,174 -11.24 -.83 6.82
30 552,210 524,548 686,014 1,308,739 24,548 186,014 808,739 24,548 186,014 808,739 -24.38 -1.63 7.06
35 750,703 0 646,870 1,718,849 0 146,870 1,218,849 0 146,870 1,218,849 -- -3.89 7.18
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,293.08% 6,298.11% 6,303.14%
2 655.51 656.42 657.36
3 264.41 265.01 265.65
4 152.86 153.39 153.98
5 103.47 103.98 104.58
6 76.38 76.90 77.54
7 59.53 60.08 60.76
8 48.16 48.73 49.48
9 40.02 40.62 41.44
10 33.93 34.58 35.46
15 17.90 18.73 20.07
20 11.07 12.11 14.02
25 7.28 8.52 11.10
30 4.72 6.18 9.54
35 -- 4.31 8.66
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NEVLICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-56
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
The information contained in this Appendix gives hypothetical illustrations
of the Variable Account's and the Policy's investment experience based on the
historical investment experience of the Eligible Funds. It does not represent
what may happen in the future.
The Policies were not available until August, 1995. The Zenith Fund and the
Variable Account commenced operations on August 26, 1983. The Westpeak Stock
Index and Back Bay Advisors Managed Series of the Zenith Fund commenced
operations on May 1, 1987. The Westpeak Value Growth Series and Loomis Sayles
Avanti Growth Series of the Zenith Fund commenced operations on April 30,
1993. The Loomis Sayles Small Cap Series of the Zenith Fund commenced
operations on May 2, 1994. The remaining Zenith Fund Series commenced
operations on October 31, 1994. The Equity-Income Portfolio and Overseas
Portfolio of the VIP Fund commenced operations on October 9, 1986 and January
28, 1987, respectively. The High Income Portfolio of the VIP Fund and the
Asset Manager Portfolio of the VIP Fund II commenced operations on September
19, 1985 and September 6, 1989, respectively.
The illustrations are based on the actual investment experience of the
relevant Eligible Funds for the periods shown (net of actual charges and
expenses incurred by the Eligible Funds), and reflect a charge for mortality
and expense risks against the Variable Account's assets at an annual rate of
.75%. The illustrations assume that premiums are paid at the beginning of each
year and that no loans, transfers or other Policy Owner transactions were made
during the periods shown.
VARIABLE ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account which invests in the
Eligible Funds. The investment experience of the Sub-Account or Sub-Accounts
you choose will affect the values and benefits of your Policy.
Many factors in addition to investment experience will affect the actual
values and benefits of your Policy. For instance, these investment experience
figures do not reflect the charges deducted from Premiums and Monthly
Deductions from the cash value. (See "Charges and Expenses".)
NET RATES OF RETURN
The annual net rate is the effective earnings rate at which the investment
Sub-Accounts increased or decreased over a one-year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated
by taking the difference between the Sub-Accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the Sub-Accounts increased or decreased since
the inception dates of the Sub-Accounts. For each Sub-Account, the rate is
calculated by taking the difference between the Sub-Account's ending value and
the value on the date of its inception and dividing it by the value on the
date of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which,
if compounded annually, would equal the total net rate of return since
inception.
A-57
<PAGE>
SUB-ACCOUNT INVESTING IN ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
----------- 8/26/83- -----------------------------------------------------------------------
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital
Growth*...... 8.58% -1.11% 66.84% 93.75% 51.56% -9.47% 31.88% -5.73% 52.83%
Bond
Income....... 2.77% 11.93 17.87 13.98 1.50 7.56 11.46 7.28 17.08
Money
Market....... 3.03% 9.80 7.45 6.01 5.73 6.71 8.44 7.38 5.42
<CAPTION>
----------------------------------- 8/26/83- 8/28/93-
SUB-ACCOUNT 12/31/95 12/31/95
----------- ----------------------------------- TOTAL EFFECTIVE
12/31/92 12/31/93 12/31/94 12/31/95 RETURN ANNUAL
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital
Growth*...... -6.75% 14.11% -7.76% 37.00% 1,116.88% 22.44%
Bond
Income....... 7.37 11.77 -4.08 20.29 227.05 10.08
Money
Market....... 3.02 2.20 3.20 4.91 103.43 5.92
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------- 5/1/87- 5/1/87-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/95 12/31/95
----------- 5/1/87- ----------------------------------------------------------------------- TOTAL EFFECTIVE
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 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <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% .36% 35.90% 153.87% 11.35%
Managed........... -1.15% 8.67 18.20 2.44 19.28 5.90 9.82 -1.85 30.28 130.69 10.13
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------- 4/30/93- 4/30/93-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/95 12/31/95
----------- 4/30/93- ----------------------------- TOTAL EFFECTIVE
12/31/93 12/31/94 12/31/95 RETURN ANNUAL
--------- ------------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Value Growth............ 13.67% -1.94% 35.45% 50.97% 16.72%
Avanti Growth........... 14.16 -1.01 29.38 46.21 15.33
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------- 5/2/94- 5/2/94-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/95 12/31/95
----------- 5/2/94- ------------------- TOTAL EFFECTIVE
12/31/934 12/31/95 RETURN ANNUAL
--------- ------------------- --------- ---------
<S> <C> <C> <C> <C>
Small Cap............... -3.71% 27.88% 23.14% 13.37%
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------
FOR ONE YEAR ENDING 10/31/94- 10/31/94-
------------------- 12/31/95 12/31/95
10/31/94- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/934 12/31/95 RETURN ANNUAL
----------- --------- ------------------- --------- ---------
<S> <C> <C> <C> <C>
Equity Growth........... -4.32% 47.59% 41.22% 34.63%
Balanced................ -.22 23.86 23.59 20.02
Venture Value........... -3.62 38.25 33.24 28.05
International Equity.... 2.48 5.44 8.05 6.90
</TABLE>
- --------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
SUB-ACCOUNTS INVESTING IN VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------------------------- 10/9/86- 10/9/86-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/95 12/31/95
----------- 10/9/86- -------------------------------------------------------------------------------- TOTAL EFFECTIVE
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 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income... .03% -1.87% 21.79% 16.47% -15.93% 30.46% 16.01% 17.41% 6.27% 34.09% 196.41% 12.51%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------- 1/28/87- 1/28/87-
FOR ONE YEAR ENDING 12/31/95 12/31/95
1/28/87- ----------------------------------------------------------------------- TOTAL EFFECTIVE
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 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas.......... -6.03% 7.32% 25.34% -2.40% 7.19% -11.39% 36.33% .97% 8.86% 75.57% 6.71%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------------------- 9/19/85-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/95
----------- 9/19/85- ----------------------------------------------------------------------------------------- TOTAL
12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..... 6.15% 16.80% 0.46% 10.81% -4.89% -2.97% 34.07% 22.24% 19.50% -2.28% 19.71% 191.82%
<CAPTION>
9/19/85-
SUB-ACCOUNT 12/31/95
----------- EFFECTIVE
ANNUAL
---------
<S> <C>
High Income..... 10.99%
</TABLE>
SUB-ACCOUNT INVESTING IN VARIABLE INSURANCE PRODUCTS FUND II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------- 9/6/89- 9/6/89-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/95 12/31/95
----------- 9/6/89- ----------------------------------------------------- TOTAL EFFECTIVE
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager.......... .57% 5.92% 21.64% 10.88% 20.33% -6.79% 16.08% 87.06% 10.43%
</TABLE>
A-58
<PAGE>
POLICY PERFORMANCE
The material below assumes a Policy was issued with a $250,000 and $500,000
face amount, respectively, with annual premiums paid on August 26 of each year
(May 1 in the case of the Zenith Stock Index, Zenith Managed and Zenith Small
Cap Sub-Accounts; October 31 in the case of the Zenith Balanced, Zenith
International Equity, Zenith Venture Value and Zenith Equity Growth Sub-
Accounts; October 9 in the case of the Equity-Income Sub-Account, January 28
in the case of the Overseas Sub-Account; April 30 in the case of the Zenith
Value Growth and Zenith Avanti Growth Sub-Accounts; September 19 in the case
of the High Income Sub-Account; September 6 in the case of the Asset Manager
Sub-Account), to a male age 40 in the nonsmoker preferred risk category.
Values and benefits are shown first for Policies with the Option 1 death
benefit and then for Policies with the Option 2 death benefit. The death
benefits, cash values and internal rates of return assume in each instance
that the entire Policy value was invested in the particular Sub-Account for
the period shown. These illustrations of policy investment experience reflect
all Policy charges based on NEVLICO's current rates. The illustrations for the
$500,000 face amount reflect the lower sales charge, cost of insurance and
first-year administrative charges that would apply to the Policy if issued in
the personal market or if issued in business situations which qualify for
those lower charges. (See "Charges and Expenses".) (See Appendix A for the
definition of the internal rate of return.)
MALE NONSMOKER PREFERRED RISK, AGE 40
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1983....... 4,025 250,000 250,000 3,755 2,657 -69.68% --
December 31, 1984....... 8,050 250,000 250,000 6,772 5,605 -36.71 1,965.76%
December 31, 1985....... 12,075 250,000 250,000 15,095 13,196 6.70 432.72
December 31, 1986....... 16,100 250,000 250,000 32,306 30,469 36.70 206.04
December 31, 1987....... 20,124 250,000 250,000 51,343 49,569 40.04 127.04
December 31, 1988....... 24,149 250,000 250,000 49,653 48,036 24.31 88.73
December 31, 1989....... 28,174 250,000 250,000 67,613 66,286 25.32 66.61
December 31, 1990....... 32,199 250,000 250,000 67,424 66,386 18.40 52.41
December 31, 1991....... 36,224 250,000 250,000 106,605 105,857 23.73 42.60
December 31, 1992....... 40,249 250,000 250,000 102,916 102,457 18.41 35.48
December 31, 1993....... 44,274 250,000 250,000 120,805 120,636 17.72 30.09
December 31, 1994....... 48,299 250,000 250,000 113,549 113,549 13.82 25.89
December 31, 1995....... 52,324 250,000 274,717 160,653 160,653 16.42 23.83
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1983....... 4,025 250,000 250,000 3,540 2,442 -76.23% --
December 31, 1984....... 8,050 250,000 250,000 7,300 6,133 -28.64 1,965.76%
December 31, 1985....... 12,075 250,000 250,000 11,923 10,024 -13.34 432.72
December 31, 1986....... 16,100 250,000 250,000 16,773 14,936 -4.03 206.04
December 31, 1987....... 20,124 250,000 250,000 20,150 18,376 -3.86 127.04
December 31, 1988....... 24,149 250,000 250,000 24,817 23,200 -1.41 88.73
December 31, 1989....... 28,174 250,000 250,000 30,817 29,489 1.36 66.61
December 31, 1990....... 32,199 250,000 250,000 36,287 35,250 2.34 52.41
December 31, 1991....... 36,224 250,000 250,000 45,801 45,053 4.96 42.60
December 31, 1992....... 40,249 250,000 250,000 52,237 51,779 5.11 35.48
December 31, 1993....... 44,274 250,000 250,000 61,440 61,271 5.94 30.09
December 31, 1994....... 48,299 250,000 250,000 61,819 61,819 4.14 25.89
December 31, 1995....... 52,324 250,000 250,000 77,797 77,797 6.05 22.54
</TABLE>
A-59
<PAGE>
<TABLE>
<CAPTION>
ZENITH MONEY MARKET SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1983....... 4,025 250,000 250,000 3,547 2,449 -76.02% --
December 31, 1984....... 8,050 250,000 250,000 7,077 5,910 -32.03 1,965.76%
December 31, 1985....... 12,075 250,000 250,000 10,818 8,919 -21.24 432.72
December 31, 1986....... 16,100 250,000 250,000 14,626 12,790 -12.21 206.04
December 31, 1987....... 20,124 250,000 250,000 18,607 16,832 -7.57 127.04
December 31, 1988....... 24,149 250,000 250,000 23,015 21,398 -4.25 88.73
December 31, 1989....... 28,174 250,000 250,000 28,084 26,756 -1.54 66.61
December 31, 1990....... 32,199 250,000 250,000 33,261 32,223 .02 52.41
December 31, 1991....... 36,224 250,000 250,000 38,150 37,401 .73 42.60
December 31, 1992....... 40,249 250,000 250,000 42,352 41,893 .82 35.48
December 31, 1993....... 44,274 250,000 250,000 46,330 46,161 .78 30.09
December 31, 1994....... 48,299 250,000 250,000 50,892 50,892 .89 25.89
December 31, 1995....... 52,324 250,000 250,000 56,484 56,484 1.20 22.54
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1987....... 4,025 250,000 250,000 2,859 1,761 -70.97% --
December 31, 1988....... 8,050 250,000 250,000 6,624 5,473 -29.01 1,028.86%
December 31, 1989....... 12,075 250,000 250,000 12,510 10,627 -7.48 327.26
December 31, 1990....... 16,100 250,000 250,000 14,825 13,004 -9.65 173.58
December 31, 1991....... 20,124 250,000 250,000 22,612 20,853 1.34 112.36
December 31, 1992....... 24,149 250,000 250,000 27,373 25,829 2.12 80.63
December 31, 1993....... 28,174 250,000 250,000 33,095 31,840 3.33 61.58
December 31, 1994....... 32,199 250,000 250,000 36,353 35,387 2.26 49.02
December 31, 1995....... 36,224 250,000 250,000 53,557 52,882 7.99 40.19
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1987....... 4,025 250,000 250,000 3,241 2,143 -61.04% --
December 31, 1988....... 8,050 250,000 250,000 6,807 5,655 -26.84 1,029.86%
December 31, 1989....... 12,075 250,000 250,000 11,707 9,824 -11.91 327.26
December 31, 1990....... 16,100 250,000 250,000 15,218 13,397 -8.32 173.58
December 31, 1991....... 20,124 250,000 250,000 21,570 19,811 -.59 112.36
December 31, 1992....... 24,149 250,000 250,000 26,183 24,638 .63 80.63
December 31, 1993....... 28,174 250,000 250,000 31,982 30,727 2.36 61.58
December 31, 1994....... 32,199 250,000 250,000 34,501 33,535 .97 49.02
December 31, 1995....... 36,224 250,000 250,000 48,863 48,187 6.04 40.19
ZENITH VALUE GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1993....... 4,025 250,000 250,000 3,692 2,594 -48.04% --
December 31, 1994....... 8,050 250,000 250,000 6,768 5,622 -27.18 1,024.16%
December 31, 1995....... 12,075 250,000 250,000 13,081 11,203 -4.42 326.55
</TABLE>
A-60
<PAGE>
<TABLE>
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1993....... 4,025 250,000 250,000 3,710 2,612 -47.50% --
December 31, 1994....... 8,050 250,000 250,000 6,836 5,690 -26.37 1,024.16%
December 31, 1995....... 12,075 250,000 250,000 12,746 10,868 -6.18 326.55
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 250,000 3,114 2,016 -64.60% --
December 31, 1995....... 8,050 250,000 250,000 7,783 6,632 -15.57 1,033.60%
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 250,000 3,540 2,442 -94.97% --
December 31, 1995....... 8,050 250,000 250,000 7,585 6,408 -30.72 3,253.36%
ZENITH INTERNATIONAL EQUITY SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 250,000 3,627 2,529 -93.80% --
December 31, 1995....... 8,050 250,000 250,000 7,116 5,939 -39.51 3,253.36%
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 250,000 3,430 2,332 -96.18% --
December 31, 1995....... 8,050 250,000 250,000 7,918 6,741 -24.47 3,253.36%
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 250,000 3,347 2,249 -96.93% --
December 31, 1995....... 8,050 250,000 250,000 7,923 6,746 -24.37 3,253.36%
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1986....... 4,025 250,000 250,000 3,557 2,458 -88.56% --
December 31, 1987....... 8,050 250,000 250,000 5,990 4,813 -55.93 2,709.25%
December 31, 1988....... 12,075 250,000 250,000 10,333 8,423 -27.47 488.44
December 31, 1989....... 16,100 250,000 250,000 15,179 13,332 -10.76 221.13
December 31, 1990....... 20,124 250,000 250,000 15,991 14,206 -15.56 133.47
December 31, 1991....... 24,149 250,000 250,000 24,131 22,466 -2.65 92.16
December 31, 1992....... 28,174 250,000 250,000 31,392 30,016 1.96 68.70
December 31, 1993....... 32,199 250,000 250,000 39,895 38,809 4.96 53.79
December 31, 1994....... 36,224 250,000 250,000 45,359 44,562 4.84 43.58
December 31, 1995....... 40,249 250,000 250,000 64,420 63,913 9.49 36.19
</TABLE>
A-61
<PAGE>
<TABLE>
<CAPTION>
OVERSEAS SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1987....... 4,025 250,000 250,000 2,867 1,769 -58.95% --
December 31, 1988....... 8,050 250,000 250,000 6,691 5,561 -23.36 705.23%
December 31, 1989....... 12,075 250,000 250,000 12,012 10,150 -8.77 271.30
December 31, 1990....... 16,100 250,000 250,000 14,848 13,048 -8.49 153.68
December 31, 1991....... 20,124 250,000 250,000 19,258 17,520 -4.71 102.71
December 31, 1992....... 24,149 250,000 250,000 19,719 18,271 -8.10 75.09
December 31, 1993....... 28,174 250,000 250,000 31,013 29,854 1.48 58.04
December 31, 1994....... 32,199 250,000 250,000 34,123 33,254 .73 46.60
December 31, 1995....... 36,224 250,000 250,000 41,087 40,508 2.26 38.44
HIGH INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1985....... 4,025 250,000 250,000 3,714 2,616 -78.27% --
December 31, 1986....... 8,050 250,000 250,000 7,554 6,382 -26.82 2,325.76%
December 31, 1987....... 12,075 250,000 250,000 10,684 8,780 -23.43 461.69
December 31, 1988....... 16,100 250,000 250,000 14,983 13,141 -11.21 214.04
December 31, 1989....... 20,124 250,000 250,000 17,186 15,406 -11.64 130.47
December 31, 1990....... 24,149 250,000 250,000 19,709 18,068 -10.48 90.57
December 31, 1991....... 28,174 250,000 250,000 29,587 28,236 .07 67.74
December 31, 1992....... 32,199 250,000 250,000 39,218 38,156 4.45 53.16
December 31, 1993....... 36,224 250,000 250,000 50,071 49,298 7.07 43.13
December 31, 1994....... 40,249 250,000 250,000 51,983 51,500 5.07 35.86
December 31, 1995....... 44,274 250,000 250,000 65,454 65,261 7.14 30.38
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... 4,025 250,000 250,000 3,666 2,568 -- --
December 31, 1989....... 4,025 250,000 250,000 3,534 2,436 -79.41% --
December 31, 1990....... 8,050 250,000 250,000 6,993 5,822 -34.52 2,119.26%
December 31, 1991....... 12,075 250,000 250,000 11,755 9,850 -14.87 445.60
December 31, 1992....... 16,100 250,000 250,000 16,251 14,409 -6.04 209.64
December 31, 1993....... 20,124 250,000 250,000 22,832 21,052 1.95 128.59
December 31, 1994....... 24,149 250,000 250,000 24,141 22,500 -2.51 89.56
December 31, 1995....... 28,174 250,000 250,000 31,355 30,003 1.89 67.12
OPTION 2 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1983....... 4,025 250,000 253,753 3,753 2,655 -69.77% --
December 31, 1984....... 8,050 250,000 256,761 6,761 5,594 -36.88 2,008.52%
December 31, 1985....... 12,075 250,000 265,053 15,053 13,154 6.45 447.47
December 31, 1986....... 16,100 250,000 282,164 32,164 30,328 36.41 218.99
December 31, 1987....... 20,124 250,000 301,021 51,021 49,247 39.73 138.82
December 31, 1988....... 24,149 250,000 299,256 49,256 47,639 24.01 96.62
December 31, 1989....... 28,174 250,000 316,942 66,942 65,614 25.02 74.55
December 31, 1990....... 32,199 250,000 316,626 66,626 65,588 18.09 58.76
December 31, 1991....... 36,224 250,000 355,123 105,123 104,375 23.42 50.52
December 31, 1992....... 40,249 250,000 351,269 101,269 100,811 18.10 42.07
December 31, 1993....... 44,274 250,000 368,605 118,605 118,436 17.41 36.70
December 31, 1994....... 48,299 250,000 361,226 111,226 111,226 13.50 31.48
December 31, 1995....... 52,324 250,000 407,040 157,040 157,040 16.10 29.23
</TABLE>
A-62
<PAGE>
<TABLE>
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1983....... 4,025 250,000 253,537 3,537 2,439 -76.30% --
December 31, 1984....... 8,050 250,000 257,288 7,288 6,121 -28.82 2,011.85%
December 31, 1985....... 12,075 250,000 261,891 11,891 9,992 -13.56 444.42
December 31, 1986....... 16,100 250,000 266,706 16,706 14,870 -4.27 212.90
December 31, 1987....... 20,124 250,000 270,044 20,044 18,270 -4.11 131.88
December 31, 1988....... 24,149 250,000 274,651 24,651 23,034 -1.66 92.83
December 31, 1989....... 28,174 250,000 280,565 30,565 29,238 1.11 70.44
December 31, 1990....... 32,199 250,000 285,934 35,934 34,897 2.08 56.00
December 31, 1991....... 36,224 250,000 295,278 45,278 44,530 4.69 46.34
December 31, 1992....... 40,249 250,000 301,543 51,543 51,084 4.84 39.10
December 31, 1993....... 44,274 250,000 310,502 60,502 60,334 5.66 33.77
December 31, 1994....... 48,299 250,000 310,757 60,757 60,757 3.85 29.19
December 31, 1995....... 52,324 250,000 326,314 76,314 76,314 5.76 26.20
</TABLE>
<TABLE>
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1983....... 4,025 250,000 253,545 3,545 2,446 -76.09% --
December 31, 1984....... 8,050 250,000 257,065 7,065 5,899 -32.21 2,010.45%
December 31, 1985....... 12,075 250,000 260,789 10,789 8,890 -21.46 443.35
December 31, 1986....... 16,100 250,000 264,570 14,570 12,734 -12.44 212.04
December 31, 1987....... 20,124 250,000 268,512 18,512 16,737 -7.81 131.52
December 31, 1988....... 24,149 250,000 272,867 22,867 21,250 -4.50 92.54
December 31, 1989....... 28,174 250,000 277,862 27,862 26,535 -1.79 70.12
December 31, 1990....... 32,199 250,000 282,947 32,947 31,910 -.23 55.72
December 31, 1991....... 36,224 250,000 287,727 37,727 36,979 .47 45.76
December 31, 1992....... 40,249 250,000 291,810 41,810 41,352 .56 38.46
December 31, 1993....... 44,274 250,000 295,656 45,656 45,487 .50 32.94
December 31, 1994....... 48,299 250,000 300,061 50,061 50,061 .61 28.66
December 31, 1995....... 52,324 250,000 305,468 55,468 55,468 .91 25.29
</TABLE>
<TABLE>
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1987....... 4,025 250,000 252,855 2,855 1,757 -71.05% --
December 31, 1988....... 8,050 250,000 256,610 6,610 5,459 -29.18 1,047.57%
December 31, 1989....... 12,075 250,000 262,471 12,471 10,587 -7.69 335.99
December 31, 1990....... 16,100 250,000 264,760 14,760 12,939 -9.87 178.57
December 31, 1991....... 20,124 250,000 272,481 22,481 20,722 1.10 117.09
December 31, 1992....... 24,149 250,000 277,175 27,175 25,630 1.88 84.70
December 31, 1993....... 28,174 250,000 282,803 32,803 31,548 3.08 65.36
December 31, 1994....... 32,199 250,000 285,974 35,974 35,009 2.00 52.39
December 31, 1995....... 36,224 250,000 302,904 52,904 52,228 7.73 44.27
</TABLE>
<TABLE>
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1987....... 4,025 250,000 253,238 3,238 2,139 -61.15% --
December 31, 1988....... 8,050 250,000 256,792 6,792 5,641 -27.01 1,048.08%
December 31, 1989....... 12,075 250,000 261,670 11,670 9,787 -12.12 335.44
December 31, 1990....... 16,100 250,000 265,152 15,152 13,331 -8.55 178.70
December 31, 1991....... 20,124 250,000 271,446 21,446 19,688 -.82 116.87
December 31, 1992....... 24,149 250,000 275,995 25,995 24,451 .39 84.53
December 31, 1993....... 28,174 250,000 281,703 31,703 30,448 2.11 65.24
December 31, 1994....... 32,199 250,000 284,146 34,146 33,180 .72 52.23
December 31, 1995....... 36,224 250,000 298,275 48,275 47,600 5.79 43.94
</TABLE>
A-63
<PAGE>
<TABLE>
<CAPTION>
ZENITH VALUE GROWTH SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1993....... 4,025 250,000 253,687 3,687 2,589 -48.19% --
December 31, 1994....... 8,050 250,000 256,752 6,752 5,606 -27.37 1,043.15%
December 31, 1995....... 12,075 250,000 263,037 13,037 11,159 -4.65 335.65
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1993....... 4,025 250,000 253,705 3,705 2,607 -47.65% --
December 31, 1994....... 8,050 250,000 256,820 6,820 5,674 -26.56 1,043.35%
December 31, 1995....... 12,075 250,000 262,703 12,703 10,825 -6.41 335.42
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 253,111 3,111 2,012 64.70% --
December 31, 1995....... 8,050 250,000 257,766 7,766 6,615 -15.76 1,055.69%
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 253,538 3,538 2,440 -94.99% --
December 31, 1995....... 8,050 250,000 257,574 7,574 6,397 -30.92 3,342.44%
ZENITH INTERNATIONAL EQUITY SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 253,626 3,626 2,528 -93.82% --
Decmber 31, 1995........ 8,050 250,000 257,107 7,107 5,929 -39.69 3,336.95%
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 253,429 3,429 2,331 -96.20% --
Decmber 31, 1995........ 8,050 250,000 257,907 7,907 6,730 -24.68 3,346.35%
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1994....... 4,025 250,000 253,346 3,346 2,247 -96.94% --
December 31, 1995....... 8,050 250,000 257,912 7,912 6,735 -24.59 3,346.40%
</TABLE>
A-64
<PAGE>
<TABLE>
<CAPTION>
EQUITY-INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1986....... 4,025 250,000 253,555 3,555 2,457 -88.59% --
December 31, 1987....... 8,050 250,000 255,982 5,982 4,805 -56.07 2,765.47%
December 31, 1988....... 12,075 250,000 260,309 10,309 8,399 -27.68 500.21
December 31, 1989....... 16,100 250,000 265,125 15,125 13,278 -10.99 227.89
December 31, 1990....... 20,124 250,000 265,918 15,918 14,133 -15.79 137.55
December 31, 1991....... 24,149 250,000 273,989 23,989 22,324 -2.89 96.31
December 31, 1992....... 28,174 250,000 281,160 31,160 29,785 1.72 72.72
December 31, 1993....... 32,199 250,000 289,533 39,533 38,447 4.72 57.83
December 31, 1994....... 36,224 250,000 294,868 44,868 44,072 4.58 47.36
December 31, 1995....... 40,249 250,000 313,596 63,596 63,089 9.23 40.66
OVERSEAS SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1987....... 4,025 250,000 252,862 2,862 1,764 -59.08% --
December 31, 1988....... 8,050 250,000 256,673 6,673 5,542 -23.55 717.01%
December 31, 1989....... 12,075 250,000 261,967 11,967 10,104 -8.99 278.00
December 31, 1990....... 16,100 250,000 264,772 14,772 12,971 -8.73 158.03
December 31, 1991....... 20,124 250,000 269,133 19,133 17,395 -4.95 106.38
December 31, 1992....... 24,149 250,000 269,563 19,563 18,115 -8.35 77.84
December 31, 1993....... 28,174 250,000 280,724 30,724 29,566 1.23 61.39
December 31, 1994....... 32,199 250,000 283,749 33,749 32,881 .47 49.62
December 31, 1995....... 36,224 250,000 290,567 40,567 39,988 2.00 41.50
HIGH INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... 4,025 250,000 253,666 3,666 2.568 -- --
December 31, 1985....... 4,025 250,000 253,712 3,712 2,614 -78.33% --
December 31, 1986....... 8,050 250,000 257,542 7,542 6,371 -27.01 2,384.47%
December 31, 1987....... 12,075 250,000 260,657 10,657 8,753 -23.64 473.05
December 31, 1988....... 16,100 250,000 264,927 14,927 13,086 -11.44 220.47
December 31, 1989....... 20,124 250,000 267,101 17,101 15,321 -11.88 134.75
December 31, 1990....... 24,149 250,000 269,588 19,588 17,947 -10.72 93.93
December 31, 1991....... 28,174 250,000 279,361 29,361 28,010 -.18 71.49
December 31, 1992....... 32,199 250,000 288,852 38,852 37,790 4.20 57.08
December 31, 1993....... 36,224 250,000 299,514 49,514 48,742 6.82 47.23
December 31, 1994....... 40,249 250,000 301,308 51,308 50,825 4.80 39.51
December 31, 1995....... 44,274 250,000 314,474 64,474 64,281 6.87 34.32
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... 4,025 250,000 253,666 3,666 2,568 -- --
December 31, 1989....... 4,025 250,000 253,532 3,532 2,434 -79.47% --
December 31, 1990....... 8,050 250,000 256,983 6,983 5,811 -34.69 2,167.73%
December 31, 1991....... 12,075 250,000 261,725 11,725 9,821 -15.09 457.56
December 31, 1992....... 16,100 250,000 266,191 16,191 14,349 -6.27 216.43
December 31, 1993....... 20,124 250,000 272,715 22,715 20,936 1.71 134.13
December 31, 1994....... 24,149 250,000 273,984 23,984 22,343 -2.76 93.60
December 31, 1995....... 28,174 250,000 281,104 31,104 29,753 1.64 71.05
</TABLE>
- ----------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
A-65
<PAGE>
MALE NONSMOKER PREFERRED RISK, AGE 40
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1983....... 7,916 500,000 500,000 7,612 5,415 -66.41% --
December 31, 1984....... 15,832 500,000 500,000 13,959 11,625 -32.03 1,992.57%
December 31, 1985....... 23,747 500,000 500,000 31,219 27,421 10.96 436.92
December 31, 1986....... 31,663 500,000 500,000 66,949 63,275 40.06 207.81
December 31, 1987....... 39,579 500,000 500,000 106,498 102,950 42.60 128.08
December 31, 1988....... 47,495 500,000 500,000 103,031 99,797 26.28 89.45
December 31, 1989....... 55,410 500,000 500,000 140,392 137,737 26.96 67.17
December 31, 1990....... 63,326 500,000 500,000 140,030 137,955 19.78 52.86
December 31, 1991....... 71,242 500,000 500,000 221,446 219,950 24.92 42.98
December 31, 1992....... 79,158 500,000 500,000 213,775 212,858 19.46 35.80
December 31, 1993....... 87,073 500,000 500,000 250,931 250,593 18.66 30.37
December 31, 1994....... 94,989 500,000 500,000 235,843 235,843 14.66 26.14
December 31, 1995....... 102,905 500,000 570,409 333,573 333,573 17.17 24.58
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1983....... 7,916 500,000 500,000 7,183 4,986 -73.51% --
December 31, 1984....... 15,832 500,000 500,000 15,027 12,694 -23.76 1,992.57%
December 31, 1985....... 23,747 500,000 500,000 24,639 20,841 -9.45 436.92
December 31, 1986....... 31,663 500,000 500,000 34,745 31,072 -1.02 207.81
December 31, 1987....... 39,579 500,000 500,000 41,819 38,271 -1.43 128.08
December 31, 1988....... 47,495 500,000 500,000 51,576 48,342 .62 89.45
December 31, 1989....... 55,410 500,000 500,000 64,129 61,474 3.09 67.17
December 31, 1990....... 63,326 500,000 500,000 75,589 73,514 3.85 52.86
December 31, 1991....... 71,242 500,000 500,000 95,484 93,988 6.28 42.98
December 31, 1992....... 79,158 500,000 500,000 108,983 108,065 6.30 35.80
December 31, 1993....... 87,073 500,000 500,000 128,250 127,912 7.00 30.37
December 31, 1994....... 94,989 500,000 500,000 129,072 129,072 5.12 26.14
December 31, 1995....... 102,905 500,000 500,000 162,358 162,358 6.92 22.77
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1983....... 7,916 500,000 500,000 7,198 5,002 -73.26% --
December 31, 1984....... 15,832 500,000 500,000 14,572 12,238 -27.28 1,992.57%
December 31, 1985....... 23,747 500,000 500,000 22,357 18,558 -17.47 436.92
December 31, 1986....... 31,663 500,000 500,000 30,307 26,634 -9.22 207.81
December 31, 1987....... 39,579 500,000 500,000 38,637 35,089 -5.11 128.08
December 31, 1988....... 47,495 500,000 500,000 47,867 44,633 -2.18 89.45
December 31, 1989....... 55,410 500,000 500,000 58,488 55,833 .23 67.17
December 31, 1990....... 63,326 500,000 500,000 69,345 67,270 1.57 52.86
December 31, 1991....... 71,242 500,000 500,000 79,608 78,112 2.11 42.98
December 31, 1992....... 79,158 500,000 500,000 88,453 87,535 2.06 35.80
December 31, 1993....... 87,073 500,000 500,000 96,835 96,497 1.91 30.37
December 31, 1994....... 94,989 500,000 500,000 106,414 106,414 1.92 26.14
December 31, 1995....... 102,905 500,000 500,000 118,037 118,037 2.13 22.77
</TABLE>
A-66
<PAGE>
<TABLE>
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1987....... 7,916 500,000 500,000 5,884 3,687 -68.11% --
December 31, 1988....... 15,832 500,000 500,000 13,728 11,426 -25.02 1,040.86%
December 31, 1989....... 23,747 500,000 500,000 25,958 22,191 -4.01 330.25
December 31, 1990....... 31,663 500,000 500,000 30,813 27,171 -6.95 175.03
December 31, 1991....... 39,579 500,000 500,000 47,067 43,550 3.60 113.27
December 31, 1992....... 47,495 500,000 500,000 57,031 53,942 4.02 81.29
December 31, 1993....... 55,410 500,000 500,000 69,003 66,493 4.96 62.09
December 31, 1994....... 63,326 500,000 500,000 75,844 73,914 3.69 49.44
December 31, 1995....... 71,242 500,000 500,000 111,790 110,438 9.24 40.55
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1987....... 7,916 500,000 500,000 6,667 4,471 -57.46% --
December 31, 1988....... 15,832 500,000 500,000 14,097 11,795 -22.82 1,040.86%
December 31, 1989....... 23,747 500,000 500,000 24,284 20,517 -8.54 330.25
December 31, 1990....... 31,663 500,000 500,000 31,617 27,976 -5.64 175.03
December 31, 1991....... 39,579 500,000 500,000 44,880 41,363 1.66 113.27
December 31, 1992....... 47,495 500,000 500,000 54,529 51,439 2.52 81.29
December 31, 1993....... 55,410 500,000 500,000 66,664 64,155 3.99 62.09
December 31, 1994....... 63,326 500,000 500,000 71,968 70,037 2.41 49.44
December 31, 1995....... 71,242 500,000 500,000 101,987 100,635 7.30 40.55
ZENITH VALUE GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1993....... 7,916 500,000 500,000 7,614 5,418 -43.16% --
December 31, 1994....... 15,832 500,000 500,000 14,031 11,740 -23.10 1,036.09%
December 31, 1995....... 23,747 500,000 500,000 27,140 23,383 -.92 329.54
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1993....... 7,916 500,000 500,000 7,650 5,454 -42.60% --
December 31, 1994....... 15,832 500,000 500,000 14,168 11,877 -22.29 1,036.09%
December 31, 1995....... 23,747 500,000 500,000 26,435 22,678 -2.73 329.54
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1994....... 7,916 500,000 500,000 6,416 4,220 -61.13% --
December 31, 1995....... 15,832 500,000 500,000 16,123 13,821 -11.13 1,045.67%
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1994....... 7,916 500,000 500,000 7,124 4,928 -94.13% --
December 31, 1995....... 15,832 500,000 500,000 15,553 13,199 -25.03 3,303.18%
</TABLE>
A-67
<PAGE>
ZENITH INTERNATIONAL EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1994....... 7,916 500,000 500,000 7,299 5,103 -92.77% --
December 31, 1995....... 15,832 500,000 500,000 14,590 12,236 -34.22 3,303.18%
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1994....... 7,916 500,000 500,000 6,905 4,709 -95.53% --
December 31, 1995....... 15,832 500,000 500,000 16,242 13,888 -18.46 3,303.18%
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1994....... 7,916 500,000 500,000 6,738 4,542 -96.40% --
December 31, 1995....... 15,832 500,000 500,000 16,261 13,907 -18.28 3,303.18%
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1986....... 7,916 500,000 500,000 7,156 4,959 -87.21% --
December 31, 1987....... 15,832 500,000 500,000 12,283 9,929 -51.87 2,749.05%
December 31, 1988....... 23,747 500,000 500,000 21,309 17,490 -23.56 493.31
December 31, 1989....... 31,663 500,000 500,000 31,413 27,719 -7.62 223.05
December 31, 1990....... 39,579 500,000 500,000 33,133 29,564 -13.04 134.57
December 31, 1991....... 47,495 500,000 500,000 50,108 46,777 -.56 92.91
December 31, 1992....... 55,410 500,000 500,000 65,265 62,514 3.72 69.27
December 31, 1993....... 63,326 500,000 500,000 83,041 80,869 6.48 54.25
December 31, 1994....... 71,242 500,000 500,000 94,489 92,896 6.18 43.96
December 31, 1995....... 79,158 500,000 500,000 134,301 133,287 10.67 36.52
OVERSEAS SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1987....... 7,916 500,000 500,000 6,021 3,825 -54.51% --
December 31, 1988....... 15,832 500,000 500,000 13,967 11,706 -19.44 712.72%
December 31, 1989....... 23,747 500,000 500,000 25,053 21,328 -5.49 273.69
December 31, 1990....... 31,663 500,000 500,000 30,989 27,389 -5.90 154.95
December 31, 1991....... 39,579 500,000 500,000 40,215 36,739 -2.54 103.54
December 31, 1992....... 47,495 500,000 500,000 41,234 38,338 -6.23 75.70
December 31, 1993....... 55,410 500,000 500,000 64,831 62,514 3.07 58.53
December 31, 1994....... 63,326 500,000 500,000 71,368 69,630 2.14 47.00
December 31, 1995....... 71,242 500,000 500,000 85,968 84,810 3.52 38.78
</TABLE>
A-68
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1985....... 7,916 500,000 500,000 7,505 5,309 -75.73% --
December 31, 1986....... 15,832 500,000 500,000 15,512 13,168 -21.74 2,358.75%
December 31, 1987....... 23,747 500,000 500,000 22,032 18,223 -19.66 466.24
December 31, 1988....... 31,663 500,000 500,000 30,992 27,309 -8.20 215.89
December 31, 1989....... 39,579 500,000 500,000 35,634 32,076 -9.17 131.55
December 31, 1990....... 47,495 500,000 500,000 40,955 37,673 -8.36 91.31
December 31, 1991....... 55,410 500,000 500,000 61,594 58,891 1.85 68.30
December 31, 1992....... 63,326 500,000 500,000 81,730 79,606 5.99 53.61
December 31, 1993....... 71,242 500,000 500,000 104,415 102,871 8.41 43.51
December 31, 1994....... 79,158 500,000 500,000 108,464 107,498 6.27 36.19
December 31, 1995....... 87,073 500,000 500,000 136,645 136,259 8.21 30.67
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... 7,916 500,000 500,000 7,317 5,121 -- --
December 31, 1989....... 7,916 500,000 500,000 7,141 4,945 -77.24% --
December 31, 1990....... 15,832 500,000 500,000 14,373 12,029 -29.89 2,148.68%
December 31, 1991....... 23,747 500,000 500,000 24,263 20,455 -11.01 449.96
December 31, 1992....... 31,663 500,000 500,000 33,634 29,951 -3.04 211.44
December 31, 1993....... 39,579 500,000 500,000 47,356 43,797 4.38 129.65
December 31, 1994....... 47,495 500,000 500,000 50,143 46,861 -.48 90.30
December 31, 1995....... 55,410 500,000 500,000 65,228 62,525 3.63 67.68
OPTION 2 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1983....... 7,916 500,000 507,608 7,608 5,411 -66.48% --
December 31, 1984....... 15,832 500,000 513,942 13,942 11,609 -32.15 2,037.21%
December 31, 1985....... 23,747 500,000 531,158 31,158 27,360 10.79 452.29
December 31, 1986....... 31,663 500,000 566,741 66,741 63,068 39.85 221.29
December 31, 1987....... 39,579 500,000 606,026 106,026 102,478 42.39 140.34
December 31, 1988....... 47,495 500,000 602,448 102,448 99,214 26.07 97.66
December 31, 1989....... 55,410 500,000 639,406 139,406 136,751 26.75 75.41
December 31, 1990....... 63,326 500,000 638,857 138,857 136,781 19.57 59.46
December 31, 1991....... 71,242 500,000 719,265 219,265 217,769 24.71 51.19
December 31, 1992....... 79,158 500,000 711,350 211,350 210,433 19.24 42.64
December 31, 1993....... 87,073 500,000 747,692 247,692 247,354 18.44 37.23
December 31, 1994....... 94,989 500,000 732,408 232,408 232,408 14.44 31.94
December 31, 1995....... 102,905 500,000 828,164 328,164 328,164 16.95 29.70
</TABLE>
A-69
<PAGE>
<TABLE>
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1983....... 7,916 500,000 507,179 7,179 4,983 -73.56% --
December 31, 1984....... 15,832 500,000 515,010 15,010 12,676 -23.90 2,040.62%
December 31, 1985....... 23,747 500,000 524,591 24,591 20,793 -9.61 449.09
December 31, 1986....... 31,663 500,000 534,648 34,648 30,975 -1.19 214.96
December 31, 1987....... 39,579 500,000 541,663 41,663 38,115 -1.60 133.13
December 31, 1988....... 47,495 500,000 551,333 51,333 48,099 .44 93.73
December 31, 1989....... 55,410 500,000 563,759 63,759 61,104 2.91 71.16
December 31, 1990....... 63,326 500,000 575,069 75,069 72,993 3.67 56.61
December 31, 1991....... 71,242 500,000 594,712 94,712 93,216 6.09 46.88
December 31, 1992....... 79,158 500,000 607,957 107,957 107,040 6.11 39.58
December 31, 1993....... 87,073 500,000 626,866 126,866 126,528 6.81 34.22
December 31, 1994....... 94,989 500,000 627,494 127,494 127,494 4.92 29.59
December 31, 1995....... 102,905 500,000 660,107 160,107 160,107 6.72 26.58
</TABLE>
<TABLE>
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1983....... 7,916 500,000 507,195 7,195 4,998 -73.32% --
December 31, 1984....... 15,832 500,000 514,554 14,554 12,221 -27.41 2,039.16%
December 31, 1985....... 23,747 500,000 522,314 22,314 18,516 -17.62 447.98
December 31, 1986....... 31,663 500,000 530,225 30,225 26,552 -9.38 214.06
December 31, 1987....... 39,579 500,000 538,497 38,497 34,949 -5.28 132.75
December 31, 1988....... 47,495 500,000 547,649 47,649 44,415 -2.35 93.43
December 31, 1989....... 55,410 500,000 558,161 58,161 55,507 .05 70.83
December 31, 1990....... 63,326 500,000 568,882 68,882 66,807 1.39 56.32
December 31, 1991....... 71,242 500,000 578,985 78,985 77,488 1.92 46.27
December 31, 1992....... 79,158 500,000 587,653 87,653 86,735 1.87 38.92
December 31, 1993....... 87,073 500,000 595,839 95,839 95,501 1.72 33.35
December 31, 1994....... 94,989 500,000 605,179 105,179 105,179 1.73 29.04
December 31, 1995....... 102,905 500,000 616,490 116,490 116,490 1.93 25.64
</TABLE>
<TABLE>
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1987....... 7,916 500,000 505,879 5,879 3,682 -68.17% --
December 31, 1988....... 15,832 500,000 513,708 13,708 11,406 -25.14 1,060.45%
December 31, 1989....... 23,747 500,000 525,901 25,901 22,134 -4.16 339.38
December 31, 1990....... 31,663 500,000 530,717 30,717 27,075 -7.11 180.25
December 31, 1991....... 39,579 500,000 546,874 46,874 43,358 3.43 118.21
December 31, 1992....... 47,495 500,000 556,739 56,739 53,650 3.85 85.54
December 31, 1993....... 55,410 500,000 568,573 68,573 66,063 4.79 66.04
December 31, 1994....... 63,326 500,000 575,286 75,286 73,355 3.51 52.96
December 31, 1995....... 71,242 500,000 610,825 110,825 109,474 9.06 44.81
</TABLE>
<TABLE>
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1987....... 7,916 500,000 506,661 6,661 4,465 -57.54% --
December 31, 1988....... 15,832 500,000 514,076 14,076 11,774 -22.95 1,060.98%
December 31, 1989....... 23,747 500,000 524,230 24,230 20,463 -8.69 338.80
December 31, 1990....... 31,663 500,000 531,520 31,520 27,878 -5.80 180.38
December 31, 1991....... 39,579 500,000 544,698 44,698 41,181 1.49 117.99
December 31, 1992....... 47,495 500,000 554,253 54,253 51,164 2.35 85.36
December 31, 1993....... 55,410 500,000 566,254 66,254 63,744 3.81 65.92
December 31, 1994....... 63,326 500,000 571,445 71,445 69,514 2.23 52.79
December 31, 1995....... 71,242 500,000 601,119 101,119 99,768 7.12 44.46
</TABLE>
A-70
<PAGE>
<TABLE>
ZENITH VALUE GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1993....... 7,916 500,000 507,607 7,607 5,410 -43.27% --
December 31, 1994....... 15,832 500,000 514,009 14,009 11,717 -23.23 1,055.99%
December 31, 1995....... 23,747 500,000 527,075 27,075 23,319 -1.09 339.04
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1993....... 7,916 500,000 507,643 7,643 5,446 -42.71% --
December 31, 1994....... 15,832 500,000 514,145 14,145 11,854 -22.42 1,056.19%
December 31, 1995....... 23,747 500,000 526,372 26,372 22,615 -2.90 338.80
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1994....... 7,916 500,000 506,410 6,410 4,214 -61.21% --
December 31, 1995....... 15,832 500,000 516,099 16,099 13,797 -11.26 1,068.79%
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1994....... 7,916 500,000 507,122 7,122 4,926 -94.15% --
December 31, 1995....... 15,832 500,000 515,538 15,538 13,184 -25.18 3,395.87%
ZENITH INTERNATIONAL EQUITY SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1994....... 7,916 500,000 507,297 7,297 5,100 -92.79% --
December 31, 1995....... 15,832 500,000 514,577 14,577 12,222 -34.35 3,390.14%
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1994....... 7,916 500,000 506,903 6,903 4,707 -95.54% --
December 31, 1995....... 15,832 500,000 516,226 16,226 13,872 -18.62 3,399.96%
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1994....... 7,916 500,000 506,736 6,736 4,540 -96.41% --
December 31, 1995....... 15,832 500,000 516,244 16,244 13,890 -18.45 3,400.07%
</TABLE>
A-71
<PAGE>
<TABLE>
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... 7,915 500,000 507,316 7,316 5,120 -- --
December 31, 1986....... 7,916 500,000 507,153 7,153 4,957 -87.23% --
December 31, 1987....... 15,832 500,000 512,271 12,271 9,917 -51.98 2,807.50%
December 31, 1988....... 23,747 500,000 521,273 21,273 17,455 -23.71 505.54
December 31, 1989....... 31,663 500,000 531,334 31,334 27,640 -7.78 230.08
December 31, 1990....... 39,579 500,000 533,026 33,026 29,457 -13.20 138.82
December 31, 1991....... 47,495 500,000 549,898 49,898 46,568 -.72 97.24
December 31, 1992....... 55,410 500,000 564,924 64,924 62,173 3.55 73.46
December 31, 1993....... 63,326 500,000 582,507 82,507 80,335 6.31 58.45
December 31, 1994....... 71,242 500,000 593,765 93,765 92,172 6.00 47.91
December 31, 1995....... 79,158 500,000 633,084 133,084 132,070 10.48 41.18
OVERSEAS SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1987....... 7,916 500,000 506,013 6,013 3,817 -54.61% --
December 31, 1988....... 15,832 500,000 513,940 13,940 11,680 -19.58 725.13%
December 31, 1989....... 23,747 500,000 524,986 24,986 21,261 -5.64 280.72
December 31, 1990....... 31,663 500,000 530,877 30,877 27,277 -6.06 159.50
December 31, 1991....... 39,579 500,000 540,031 40,031 36,556 -2.71 107.38
December 31, 1992....... 47,495 500,000 541,004 41,004 38,108 -6.40 78.59
December 31, 1993....... 55,410 500,000 564,406 64,406 62,089 2.90 62.04
December 31, 1994....... 63,326 500,000 570,817 70,817 69,079 1.96 50.16
December 31, 1995....... 71,242 500,000 585,200 85,200 84,042 3.34 41.99
HIGH INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... 7,915 500,000 507,316 7,316 5,120 -- --
December 31, 1985....... 7,916 500,000 507,502 7,502 5,306 -75.78% --
December 31, 1986....... 15,832 500,000 515,495 15,495 13,151 -21.88 2,419.84%
December 31, 1987....... 23,747 500,000 521,992 21,992 18,184 -19.81 478.04
December 31, 1988....... 31,663 500,000 530,912 30,912 27,228 -8.36 222.57
December 31, 1989....... 39,579 500,000 535,510 35,510 31,951 -9.34 136.00
December 31, 1990....... 47,495 500,000 540,777 40,777 37,495 -8.53 94.81
December 31, 1991....... 55,410 500,000 561,262 61,262 58,559 1.68 72.21
December 31, 1992....... 63,326 500,000 581,191 81,191 79,067 5.81 57.70
December 31, 1993....... 71,242 500,000 603,594 103,594 102,050 8.23 47.79
December 31, 1994....... 79,158 500,000 607,466 107,466 106,501 6.08 39.99
December 31, 1995....... 87,073 500,000 635,198 135,198 134,812 8.02 34.78
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... 7,916 500,000 507,316 7,316 5,120 -- --
December 31, 1989....... 7,916 500,000 507,139 7,139 4,942 -77.28% --
December 31, 1990....... 15,832 500,000 514,358 14,358 12,014 -30.00 2,199.14%
December 31, 1991....... 23,747 500,000 524,220 24,220 20,411 -11.17 462.39
December 31, 1992....... 31,663 500,000 533,546 33,546 29,862 -3.21 218.51
December 31, 1993....... 39,579 500,000 547,184 47,184 43,626 4.21 135.42
December 31, 1994....... 47,495 500,000 549,912 49,912 46,630 -.65 94.50
December 31, 1995....... 55,410 500,000 564,859 64,859 62,157 3.45 71.77
</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 and its current advisory fee
schedule thereafter.
A-72
<PAGE>
APPENDIX C
LONG TERM MARKET TRENDS
The information below is a comparison of the average annual returns of
common stock, high grade corporate bonds and 30-day U.S. Treasury bills over
20-year and 30-year holding periods.* The average annual returns assume the
reinvestment of dividends, capital gains and interest. This is an historical
record and is not intended as a projection of future performance. Charges
associated with a variable life policy are not reflected.
The data indicates that, historically, the investment performance of common
stocks over long periods of time has been positive and has generally been
superior to that of long-term, high grade debt securities. Common stocks have,
however, been subject to more dramatic market adjustments over short periods
of time. These trends indicate the potential advantages of holding a variable
life insurance policy for a long period of time.
Over the 51 20-year time periods beginning in 1926 and ending in 1995 (i.e.,
1926-1945, 1927-1946, and so on through 1976-1995):
--The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 48 of the 51 periods.
--The average annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 51 periods.
--Common stock average annual returns exceeded the average annual rate of
inflation in each of the 51 periods.
Over the 41 30-year periods beginning in 1926 and ending in 1995, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 41
periods.
From 1926 through 1995 the average annual return for common stocks was
10.5%, compared to 5.7% for high grade, long-term corporate bonds, 3.7% for
U.S. Treasury bills and 3.1% for the Consumer Price Index.
- ----------
* Source: Stocks, Bonds, Bills and Inflation 1996 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
----------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR
SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index with dividends reinvested, over one-year, five-year and
twenty-year periods beginning in 1926 and ending 1995.
The chart shows that, historically, the longer that a portfolio matching the
S&P 500 Stock Index was held, the less likely was the chance of a loss.
Conversely, the shorter the holding period of such a portfolio, the more
likely was the chance of a loss. The chart also shows that shorter term
results tend to be more extreme than longer term results.
The chart is not a projection or representation of future stock market
results. It cannot be taken as representative of the performance of any one
fund. Rather it shows the historic performance of a broad index of stocks.
----------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
THAN
HOLDING NEGATIVE 0-5.00% 5.01-10.00% 10.01-15.00% 15.01-20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
- ------- -------- ------- ----------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
1 year......... 29% 4% 11% 7% 11% 37%
5 years........ 11% 15% 15% 32% 18% 9%
10 years........ 3% 10% 34% 25% 25% 2%
20 years........ 0% 6% 33% 55% 6% 0%
</TABLE>
- ----------
Source: Stocks, Bonds, Bills and Inflation 1996 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
A-73
<PAGE>
DOLLAR COST AVERAGING
Dollar cost averaging allows a person to take advantage of the historical
long-term stock market results, assuming that they continue, although it does
not guarantee a profit or protect against a loss. If an investor follows a
program of dollar cost averaging on a long-term basis, and the stock fund
selected performs at least as well as the S&P 500 has historically, it is
likely although not guaranteed that the price at which shares are surrendered,
for whatever reason, will be higher than the average cost per share.
An investor using dollar cost averaging invests the same amount of money in
the same professionally managed fund at regular intervals over a long period
of time. Dollar cost averaging keeps an investor from investing too much when
the price of shares is high and too little when the price is low. When the
price of shares is low, the money invested buys more shares. When it is high,
the money invested buys fewer shares. If the investor has the ability and
desire to maintain this program over a long period of time (for example, 20
years), and the stock fund chosen follows the historical upward market trends,
the price at which the shares are sold should be higher than their average
cost. This price could be lower, however, if the fund chosen does not follow
these historical trends.
Investors contemplating the use of dollar cost averaging should consider
their ability to continue the on-going purchases so that they can take
advantage of periods of low price levels.
A-74
<PAGE>
APPENDIX D
USES OF LIFE INSURANCE
The following are examples of ways in which the Policy can be used to
address certain financial objectives.
FAMILY INCOME PROTECTION
Life insurance may be purchased on the lives of the family income earners to
provide a death benefit to cover final expenses, and continue the current
income to the family. The amount of insurance purchased should be an amount
which will provide a death benefit that when invested outside the policy at a
reasonable interest rate, will generate enough money to replace the
individual's income.
ESTATE PROTECTION
Life insurance may be purchased by a trust on the life of the person whose
estate will incur federal estate taxes upon the person's death. The amount of
insurance purchased would equal the amount of the estimated estate tax
liability. Upon the insured's death, the trustee could make the death proceeds
available to the estate for the payment of estate tax costs.
EDUCATION FUNDING
Life insurance may be purchased on the life of the parent(s) or primary
person funding an education. The amount of insurance purchased should equal
the total education cost projected at a reasonable inflation rate.
In the event of death, the guaranteed death benefit is available to help pay
the education costs. If the insured lives through the education years, the
cash value accumulations may be accessed to help offset the remaining
education costs. Any cash value loans or surrenders will reduce the policy
death benefit.
MORTGAGE PROTECTION
Life insurance may be purchased on the life of the person responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed
late in the mortgage term to help make the remaining mortgage payments. Any
cash value loans or surrenders will reduce the policy death benefit.
KEY PERSON PROTECTION
Life insurance may be purchased by the business on the life of the key
person in an amount equal to the key person's value, considering salary,
benefits, and contribution to business profits. Upon the key person's death,
the business uses the death benefit to ease the interruption of business
operations and/or to provide a replacement fund for hiring a new executive.
BUSINESS CONTINUATION PROTECTION
Life insurance may be purchased on the life of each business owner in an
amount equal to the value of each owner's business interest. In the event of
death, the guaranteed death benefit may provide the funds needed to carry out
the purchase of the deceased's business interest by the business, or surviving
owners, from the deceased owner's heirs.
RETIREMENT INCOME
Life insurance may be purchased on the life of a family income earner during
his or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any cash value loans or surrenders will reduce the policy
death benefit.
Because the Policy provides a death benefit and for the accumulation of cash
value, the Policy can be used for various individual and business planning
purposes. Purchasing the Policy in part for such purposes entails certain
risks, particularly if the Policy's cash value, as opposed to its death
benefit, will be the principal Policy feature used for such planning purposes.
If the investment performance of the Sub-Accounts to which cash value is
allocated is poorer than expected, or if sufficient premiums are not paid or
cash values maintained, the Policy may lapse or may not accumulate sufficient
cash value or net cash value to fund the purpose for which the Policy was
purchased. Because the Policy is designed to provide benefits on a long-term
basis, before purchasing a Policy for a specialized purpose, a purchaser
should consider whether the long-term nature of the Policy is consistent with
the purpose for which it is being considered. If you wish to access your
Policy's cash value, through loans, surrenders or withdrawals, you should
consult your tax advisor about possible tax consequences. (See "Tax
Considerations".)
A-75
<PAGE>
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products"
in March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax
Treatment of Life Insurance Products and Other Retirement Savings Plans".
Because it is a convenient summary of the relevant tax characteristics of
these products and plans, we have reprinted it here, and added footnotes to
reflect exceptions to the general rules.
---------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND
OTHER RETIREMENT SAVINGS PLANS
<TABLE>
<CAPTION>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Annual Contribution Limits No No Yes Yes
Income Eligibility Limits No No Yes** No
Borrowing Treated as No* Yes Loans not Yes,
Distributions allowed beyond
$50,000
Income Ordering Rules (Income No* Yes Yes Yes
included in First
Distribution)
Early Withdrawal Penalties No* Yes*** Yes*** Yes***
Minimum Distribution Rules by No No Yes Yes
Age 70 1/2
Maximum Annual Distribution No No Yes Yes
Rules
Anti-discrimination Rules No No No Yes
</TABLE>
- ----------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
The foregoing information is not intended as tax advice. You should consult
with your own tax advisor for more complete information.
A-76
<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
A-77
<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
A-78
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
VALUE SMALL EQUITY INTERNATIONAL VENTURE
GROWTH CAP BALANCED GROWTH EQUITY VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
$12,342,406 $8,236,512 $502,489 $6,864,734 $1,193,985 $4,003,624
2,518 4,782 569 44,168 12,311 25,838
-- -- -- -- -- --
- ----------- ---------- -------- ---------- ---------- ----------
12,344,924 8,241,294 503,058 6,908,902 1,206,296 4,029,462
2,034,446 1,696,298 84,847 1,196,404 252,448 643,022
- ----------- ---------- -------- ---------- ---------- ----------
2,034,446 1,696,298 84,847 1,196,404 252,448 643,022
- ----------- ---------- -------- ---------- ---------- ----------
$10,310,478 $6,544,996 $418,211 $5,712,498 $ 953,848 $3,386,440
=========== ========== ======== ========== ========== ==========
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
----------------------------------- -----------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
$55,237,060 $46,025,022 $2,044,035 $2,528,288 $704,002,546
15,623 2,545 437 789 1,620,173
-- -- -- -- 96,763
----------- ----------- ---------- ---------- ------------
55,252,683 46,027,567 2,044,472 2,529,077 705,719,482
7,899,831 7,645,348 301,979 556,084 93,085,198
----------- ----------- ---------- ---------- ------------
7,899,831 7,645,348 301,979 556,084 93,085,198
----------- ----------- ---------- ---------- ------------
$47,352,852 $38,382,219 $1,742,493 $1,972,993 $612,634,284
=========== =========== ========== ========== ============
</TABLE>
See Notes to Financial Statements
A-79
<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>
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
A-80
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
VALUE SMALL EQUITY INTERNATIONAL VENTURE
GROWTH CAP BALANCED GROWTH EQUITY VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
----------- ----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 606,696 $ 365,015 $17,538 $195,436 $12,460 $ 86,716
52,633 24,746 743 11,686 2,165 7,251
---------- ---------- ------- -------- ------- --------
554,063 340,269 16,795 183,750 10,295 79,465
1,918 4,662 -- -- -- --
2,105,777 768,552 3,769 65,901 24,089 171,931
---------- ---------- ------- -------- ------- --------
2,103,859 763,890 3,769 65,901 24,089 171,931
9,493 1,325 223 237 (34) 203
---------- ---------- ------- -------- ------- --------
2,113,352 765,215 3,992 66,138 24,055 172,134
---------- ---------- ------- -------- ------- --------
$2,667,415 $1,105,484 $20,787 $249,888 $34,350 $251,599
========== ========== ======= ======== ======= ========
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ------------------------------------ ---------- ------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
$ 2,284,557 $ 282,520 $ 8,412 $ 11,896 $ 67,367,395
233,864 240,253 6,639 9,537 3,305,646
----------- ---------- -------- -------- ------------
2,050,693 42,267 1,773 2,359 64,061,749
149,659 260,895 213 (1,503) 7,542,202
9,642,454 4,022,725 167,043 269,255 101,153,516
----------- ---------- -------- -------- ------------
9,492,795 3,761,830 166,830 270,758 93,611,314
61,089 32,279 2,817 4,661 1,804,392
----------- ---------- -------- -------- ------------
9,553,884 3,794,109 169,647 275,419 95,415,706
----------- ---------- -------- -------- ------------
$11,604,577 $3,836,376 $171,420 $277,778 $159,477,455
=========== ========== ======== ======== ============
</TABLE>
See Notes to Financial Statements
A-81
<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
A-82
<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 AVANTI VALUE EQUITY-
CAPITAL INCOME MARKET STOCK MANAGED GROWTH GROWTH INCOME OVERSEAS
GROWTH SUB- SUB- INDEX SUB- SUB- SUB- SUB- SUB-
SUB-ACCOUNT ACCOUNT ACCOUNT SUB-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
A-83
<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
A-84
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VALUE SMALL EQUITY INTERNATIONAL VENTURE
GROWTH CAP BALANCED GROWTH EQUITY VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT*
- ----------- ----------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
$ 554,063 $ 340,269 $ 16,795 $ 183,750 $ 10,295 $ 79,465
2,113,352 765,215 3,992 66,138 24,055 172,134
- ----------- ----------- -------- ----------- --------- ----------
2,667,415 1,105,484 20,787 249,888 34,350 251,599
3,473,273 2,237,626 81,978 1,048,361 241,835 625,044
2,645,617 4,814,141 409,874 5,735,744 948,764 3,228,499
(2,568,808) (1,803,085) (94,428) (1,321,495) (271,101) (718,702)
- ----------- ----------- -------- ----------- --------- ----------
3,550,082 5,248,682 397,424 5,462,610 919,498 3,134,841
- ----------- ----------- -------- ----------- --------- ----------
6,217,497 6,354,166 418,211 5,712,498 953,848 3,386,440
4,092,981 190,830 -- -- -- --
- ----------- ----------- -------- ----------- --------- ----------
$10,310,478 $6,544,996 $418,211 $ 5,712,498 $ 953,848 $3,386,440
=========== =========== ======== =========== ========= ==========
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
------------------------------------- ------------ --------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
$ 2,050,693 $ 42,267 $ 1,773 $ 2,359 $ 64,061,749
9,553,884 3,794,109 169,647 275,419 95,415,706
----------- ----------- ---------- ------------ --------------
11,604,577 3,836,376 171,420 277,778 159,477,455
13,985,879 17,076,602 395,370 696,227 202,985,540
12,483,761 (2,007,296) 1,503,857 1,507,606 --
(9,853,532) (8,392,295) (358,576) (709,312) (115,320,001)
----------- ----------- ---------- ------------ -------------
16,616,108 6,677,011 1,540,651 1,494,521 87,665,539
----------- ----------- ---------- ------------ --------------
28,220,685 10,513,387 1,712,071 1,772,299 247,142,994
19,132,167 27,868,832 30,422 200,694 365,491,290
----------- ----------- ---------- ------------ --------------
47,352,852 $38,382,219 $1,742,493 $1,972,993 $612,634,284
=========== =========== ========== ============ ==============
</TABLE>
See Notes to Financial Statements
A-85
<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
A-86
<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
A-87
<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.
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.
A-88
<PAGE>
<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.
A-89
<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>
A-90
<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>
A-91
<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>
A-92
<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>
A-93
<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.
A-94
<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
A-95
<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 Com-
pany........................................... 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 Compa-
ny............................................. 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.
A-96
<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.
A-97
<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.
A-98
<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
StandardsNo. 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.
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.
A-99
<PAGE>
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
A-100
<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>
A-101
<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.
A-102
<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.
A-103
<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 103 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:
H. James Wilson, Esq. (see Exhibit 3(i) below)
Rodney J. Chandler, F.S.A., M.A.A.A. (see Exhibit 3(ii)
below)
Sutherland, Asbill & Brennan (see Exhibit 6 below)
Independent Auditors (see Exhibit 11 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+++
(ii) Form of contract between NEVLICO and its
Agents+++
(c) Commission Schedule for Policies###
(d) Form of contract among NES, TNE, NEVLICO
and other broker dealers++
(4) None
(5) (a) Specimen of Policy##
(b) Riders and Endorsements ##
(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++
II - 1
<PAGE>
(c) Amended By-Laws dated October 12, 1983++
(7) None
(8) Services Agreement among New England Life,
NEVLICO and NELESCO***
(9) None
(10) Specimen of Applications for Policy##
2. See Exhibit 3(i)
3.(i) Opinion and Consent of H. James Wilson,
Esquire###
(ii) Opinion and Consent of Rodney J. Chandler,
F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland, Asbill & Brennan
7. (i) Powers of Attorney#
(ii) Power of Attorney####
8. Notice of Withdrawal Right for Policies###
9. Form of reinsurance agreement between
NEVLICO and New England Life****
10. Computation of basis for exchange right
pursuant to Rule 6e-3(T)(b)(13)(v) under
the Investment Company Act of 1940
11. Consent of Independent Auditors
12. Schedule for computation of performance
quotations+
13. Consolidated memorandum describing certain
procedures, filed pursuant to Rule
6e-2(b)12(ii) and
Rule 6e-3(T)(b)(12)(iii)@@
14. (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###
15. Representations, Description, and Undertaking
Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)###
27. Financial Data Schedule
___________
* Incorporated herein 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.
II - 2
<PAGE>
** Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 2-82838, filed April 4, 1983.
*** Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-19540, filed January 8, 1988.
****Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-19540,
filed May 13, 1988.
+ Incorporated herein by reference to Post-Effective Amendment No. 2 to the
Variable Account's Form S-6 Registration Statement, File No. 33-19540,
filed April 28, 1989.
++ Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-52050, filed September 16, 1992.
+++ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed January 12, 1993.
++++Incorporated herein 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. 6 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 28, 1995.
# 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 the Variable Account's Form S-6
Registration Statement, File No. 33-88082, filed December 30, 1994.
### 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 it 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*
- -------------- ----- --------------
3. (ii) Opinion and Consent of Rodney J.
Chandler, F.S.A., M.A.A.A.
6. Consent of Sutherland, Asbill &
Brennan
10. Computation of basis for exchange
right pursuant to
Rule 6e-3(T)(b)(13)(v)under the
Investment Company Act of 1940
11. 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 3(ii)
April 24, 1996
New England Variable Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Gentlemen:
In my capacity as Chief Actuary of New England Variable Life insurance Company
(the "Company"), I have provided actuarial advice concerning:
The preparation of Post-Effective Amendment No. 1 to the registration
statement on Form S-6 (File No. 33-88082) filed by New England Variable
Life Separate Account and the Company with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to variable life
insurance policies (the "Registration Statement"); and
The preparation of policy forms for the variable life insurance policies
described in the Registration Statement (the "Policies").
It is my professional opinion that:
1. The percentage of sales load under a Policy will never exceed (1) the sum
of 30% of aggregate payments less than or equal to one guideline annual
premium (as defined in Rule 6e-3(T)(c)(8), plus 10% of aggregate payments
greater than one guideline annual premium but not more than two guideline
annual premiums and (2) 9% of each payment made in excess of two guideline
annual premiums, for surrender, face amount reduction or lapse in the first
two policy years, and will not exceed 9% of the sum of guideline premium
payments that would be paid for the period equal to the lesser of 20 years
or the anticipated life expectancy of the insured, and 9% of payments in
excess of that amount.
2. The illustrations of death benefits, net cash values, accumulated premiums,
internal rates of return on net cash values and internal rates of return on
death benefits shown in Appendix A of the Prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies. The rate structure of the Policies has not been designed
so as to make the relationship between premiums and benefits, as shown in
the illustrations, appear to be correspondingly more favorable to
prospective
<PAGE>
purchasers of Policies for male insureds, aged 40 in the underwriting class
illustrated than to prospective purchasers of Policies for insureds of
other sexes or ages. Insureds in other underwriting classes may have higher
cost of insurance charges.
3. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the Appendix,
is consistent with the provisions of the Policies.
4. The illustration of net premiums shown under the heading "Charges and
Expenses-Deductions from Premiums" in the Prospectus contains the net
premium amounts allocated to the Variable Account for a $2,000 premium
under a Policy.
5. The information contained in the example of how the maximum loanable amount
is determined under the heading "Other Policy Features-Loan Provision" in
the Prospectus is consistent with the provisions of the Policies.
I hereby consent to the filing of this opinion as an Exhibit to this Post-
Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler, F.S.A., M.A.A.A.
Chief Actuary
2
<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. 1 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. 33-88082). 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 10
EXPLANATION OF EXCHANGE COST OR CREDIT
NEV 9-Q
The variable life insurance ("VUL") policies issued by New England Variable Life
Insurance Company ("NEVLICO") provide, in accordance with Rule 6e-2(b)
(13) (v) (B) under the 1940 Act, that within 24 months of issuance of a Policy
or within 24 months after any increase in Face Amount, while the Policy is in
full force, the owner may convert the Policy or an increase in Face Amount,
without submission of new evidence of insurability, to a permanent fixed benefit
insurance policy offered by the New England Mutual Life Insurance Company
("TNE"). The new policy will have a fixed amount of coverage equal to the Face
Amount of the coverage being exchanged. The new policy may be issued on a plan
of flexible premium life insurance with a level face amount issued by TNE on the
Policy Date of the original Policy. This conversion privilege is designed to
permit a VUL policyholder to change his mind ab initio and to obtain a fixed
-- ------
benefit policy based on the original issue age for the original Policy or the
age on the Adjustment Date of an increase in Face Amount -- just as if the
policyholder had originally decided to buy fixed benefit insurance.
This conversion will be subject to an equitable adjustment to reflect the
difference, if any, in the cash value of the original policy (or portion being
exchanged in the case of an increase in Face Amount) and the new policy.
Premiums paid under the original policy (or portion being exchanged in the case
of an increase in Face Amount) will be credited to the new policy as of the date
that they were paid; cost of insurance, monthly deductions, and expense loadings
will be deducted; and policy interest will be credited (to the effective date of
conversion). If the resulting cash value is greater than the cash value of the
original policy (or portion being exchanged in the case of an increase in Face
Amount), the increase in cash value will be paid by the policyholder on or
before the effective date of the new policy. If the resulting cash value is
less, NEVLICO will pay the policyholder in cash. Additionally, if premiums
under the original policy (or portion being exchanged in the case of an increase
in Face Amount) are insufficient to satisfy the minimum premium requirement of
the new policy, the difference will be paid by the policyholder on or before the
effective date of the new policyholder, and credited to the new policy.
Once the conversion takes effect, there will be an appropriate transfer of funds
between NEVLICO and TNE to reflect the assumption of the risk by TNE. At the
same time, NEVLICO will transfer assets from the separate account to the general
account in an amount equal to the policy cash value held in the separate
account.
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 33-88082) 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
