<PAGE>
As filed with Securities and Exchange Commission on
April 30, 1997
Registration No. 33-10954
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
POST-EFFECTIVE AMENDMENT NO. 12
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND 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 Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH
Sutherland, Asbill & Brennan, L.L.P.
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, 1997 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 25,
1997.
<PAGE>
NEW ENGLAND LIFE
INSURANCE COMPANY
ZENITH LIFE--VARIABLE LIFE INSURANCE POLICIES
ZENITH LIFE ONE--SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
SUPPLEMENT DATED MAY 1, 1997 TO
PROSPECTUS DATED MAY 1, 1988
INTRODUCTION
This supplement updates certain information contained in the prospectus
dated May 1, 1988, as supplemented February 1, 1989, May 1, 1991, May 1, 1992,
May 1, 1993, May 1, 1994, May 1, 1995 and May 1, 1996. You should read and
retain this supplement with your Policy. NELICO will send you an additional
copy of the prospectus as supplemented, without charge, on written request.
The Zenith Life and Zenith Life One Policies are no longer available for sale.
NELICO is an indirect wholly-owned subsidiary of Metropolitan Life Insurance
Company ("MetLife").
NELICO's Home Office is 501 Boylston Street, Boston, Massachusetts 02116.
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 SUPPLEMENT IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE CURRENT
PROSPECTUS OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE INSURANCE
PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE ATTACHED AT
THE END OF THIS SUPPLEMENT. THE SUPPLEMENT AND PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
<PAGE>
INTRODUCTION TO THE POLICIES
NELICO
This section is modified as follows:
NELICO 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. Before August 30, 1966, NELICO was a wholly-owned subsidiary
of New England Mutual Life Insurance Company ("The New England"). Effective
August 30, 1996, The New England merged into MetLife, a mutual life insurance
company whose principal office is One Madison Avenue, New York, NY 10010. With
the merger, The New England's separate corporate existence ended, and MetLife
became the parent of NELICO. In connection with the merger, NELICO changed its
name from "New England Variable Life Insurance Company" to "New England Life
Insurance Company", and changed its domicile from the State of Delaware to the
Commonwealth of Massachusetts. NELICO's Home Office is now at 501 Boylston
Street, Boston, Massachusetts 02116. NELICO's mailing address is: P.O. Box
9116, Boston, Massachusetts 02117.
All references in the prospectus to NELICO's "Administrative Office" are
changed to NELICO's "Home Office".
PRINCIPAL POLICY FEATURES
PREMIUMS
The following sentence is added to the Zenith Life Prospectus:
Payments made through the Master Service Account Arrangement may be
maintained by NELICO or an affiliate in the general account pending crediting.
OTHER POLICY FEATURES
PAYMENT OF PROCEEDS
The following is added:
Death benefit proceeds may be paid pursuant to NELICO'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 MetLife'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.
THE VARIABLE ACCOUNT
INVESTMENTS OF THE VARIABLE ACCOUNT
The variable account became subject to Massachusetts law when NELICO changed
its domicile to Massachusetts on August 30, 1996.
The Variable Account currently has 16 sub-accounts, each of which invests in
a series of an Eligible Fund. The sub-accounts of the Variable Account are:
--The Zenith Money Market Sub-Account, which invests in the Back Bay
Advisors Money Market Series of the Zenith Fund
--The Zenith Bond Income Sub-Account, which invests in the Back Bay
Advisors Bond Income Series of the Zenith Fund
--The Zenith Capital Growth Sub-Account, which invests in the Capital
Growth Series of the Zenith Fund
--The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
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--The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
--The Zenith Growth and Income Sub-Account, which invests in the Westpeak
Growth and Income 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 Davis Venture
Value Series of the Zenith Fund
--The Zenith International Magnum Equity Sub-Account, which invests in the
Morgan Stanley International Magnum 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 as an
investment vehicle for separate investment accounts of NELICO and of other
life insurance companies. Currently the Zenith Fund is the funding vehicle for
the Variable Account and for separate accounts of NELICO and MetLife that
issue variable annuity contracts.
The VIP Fund and VIP Fund II are open-end, diversified management investment
companies (mutual funds) that serve as the investment vehicles for variable
life insurance and variable annuity separate accounts of various insurance
companies. The VIP Fund and VIP Fund II were organized by Fidelity Management
& Research Company.
Shares of the Eligible Funds are purchased and sold by the Variable Account
at their net asset value (without a deduction for sales load) determined as of
the close of regular trading on the New York Stock Exchange on each day when
the exchange is open for trading.
The investment objectives of the Eligible Funds' portfolios are described
briefly below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, including their investment
objectives and policies, expenses, and the risks of investing in the Eligible
Funds, is contained in the attached Eligible Fund prospectuses, as well as in
the Zenith Fund's Statement of Additional Information, which is referenced in
the Zenith Fund prospectus, and in the Statement of Additional Information for
the VIP Fund and VIP Fund II, which is referenced in those Funds' prospectus.
The Zenith Back Bay Advisors Money Market Series' investment objective is
the highest possible level of current income consistent with preservation of
capital through investment in a managed portfolio of high quality money market
instruments. Money market funds are neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Series will maintain a
stable net asset value of $100 per share.
The Zenith Back Bay Advisors Bond Income Series' investment objective is to
provide a high level of current income consistent with protection of capital
and moderate investment risk through investment primarily in U.S. Government
and corporate bonds.
The Zenith Capital Growth Series' investment objective is long-term growth
of capital through investment primarily in equity securities of companies
whose earnings are expected to grow at a faster rate than the U.S. economy.
The Zenith Westpeak Stock Index Series' investment objective is to provide
investment results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The Series
currently seeks to achieve its objective by attempting to duplicate the
composite price and yield performance of the Standard & Poor's 500 Composite
Stock Price Index.
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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 Growth and Income Series' investment objective is long-
term total return (capital appreciation and dividend income) through
investment in equity securities. Emphasis will be given to both undervalued
securities ("value" style) and securities of companies with growth potential
("growth" style).
The Zenith Loomis Sayles Avanti Growth Series' investment objective is long-
term growth of capital. The Series normally will invest primarily in equity
securities of companies with medium and large capitalization (capitalization
of $1 billion to $5 billion and over $5 billion, respectively) but will also
invest a portion of its assets in equity securities of companies with
relatively small market capitalization (under $1 billion).
The Zenith Loomis Sayles Small Cap Series' investment objective is long-term
capital growth from investments in common stocks or their equivalent. The
Series invests primarily in stocks of small cap companies with good earnings
growth potential that Loomis Sayles believes are undervalued by the market.
Typically, such companies have market capitalization of less than $1 billion,
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 Morgan Stanley International Magnum Equity Series' investment
objective is long-term capital appreciation through investment primarily in
equity securities of non-U.S. issuers, in accordance with the EAFE country
weightings determined by the series' sub-advisor. Under normal circumstances
at least 65% of the total assets of the series will be invested in equity
securities of issuers in at least three countries outside the United States.
The Zenith Davis 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. Foreign
investments involve greater risks than U.S. investments, including political
and economic risks and the risks of currency fluctuation.
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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INVESTMENT MANAGEMENT
The adviser and sub-adviser for each series of the Zenith Fund are listed in
the chart below. TNE Advisers, which is an indirect, wholly-owned subsidiary
of NELICO, CGM and each of the sub-advisers are registered with the SEC as
investment advisers under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------- -----------
<S> <C> <C>
Capital Growth Capital Growth
Management Limited
Partnership ("CGM")*
Back Bay Advisors Money TNE Advisers, Inc. Back Bay Advisors, L.P.*
Market
Back Bay Advisors Bond TNE Advisers, Inc. Back Bay Advisors, L.P.*
Income
Back Bay Advisors Man- TNE Advisers, Inc. Back Bay Advisors, L.P.*
aged
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors,
L.P.*
Westpeak Growth and In- TNE Advisers, Inc. Westpeak Investment Advisors,
come 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.*
Morgan Stanley TNE Advisers, Inc. Morgan Stanley Asset Management
International Magnum Inc.
Equity
Davis Venture Value TNE Advisers, Inc. Davis Selected Advisers, L.P.
Alger Equity Growth TNE Advisers, Inc. Fred Alger Management, Inc.
</TABLE>
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*An affiliate 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 Growth and Income 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 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 Morgan
Stanley International Magnum Equity Series' sub-advisor was Draycott Partners,
Ltd. until May 1, 1997, when Morgan Stanley Asset Management Inc. became the
sub-advisor.
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 Growth and Income 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 up until two years after the end of the fiscal year
in which the expense was incurred. The expense cap and expense deferral
arrangement may be terminated at any time.
The following table shows the annual operating expenses for each series,
based on actual expenses 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 WESTPEAK LOOMIS LOOMIS
ADVISORS ADVISORS BAY WESTPEAK GROWTH SAYLES SAYLES
CAPITAL BOND MONEY ADVISORS STOCK AND AVANTI SMALL
GROWTH INCOME MARKET MANAGED INDEX INCOME GROWTH CAP
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------- -------- -------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .63% .40% .35% .50% .25% .70% .70% 1.00%
Other Expenses.......... .06% .12% .15% .12% .15% .15% .15% --
---- ---- ---- ---- ---- ---- ---- -----
Total Series Operating
Expenses.............. .69% .52% .50% .62% .40% .85% .85% 1.00%
</TABLE>
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ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE DEFERRAL)
<TABLE>
<CAPTION>
LOOMIS MORGAN STANLEY DAVIS ALGER
SAYLES INTERNATIONAL VENTURE EQUITY
BALANCED MAGNUM VALUE GROWTH
SERIES EQUITY SERIES SERIES SERIES
-------- -------------- ------- ------
<S> <C> <C> <C> <C>
Management Fee.......................... .70% .90% .75% .74%
Other Expenses.......................... .15% .40% .15% .16%
---- ----- ---- ----
Total Series Operating Expenses........ .85% 1.30% .90% .90%
</TABLE>
For more information about the Series' advisory agreements, see the Zenith
Fund prospectus attached at the end of this prospectus and the Zenith Fund's
Statement of Additional Information.
The investment adviser for the VIP Fund and VIP Fund II is Fidelity
Management & Research Company, a registered investment adviser under the
Investment Advisers Act of 1940. The Portfolios of the VIP Fund and VIP Fund
II, as part of their operating expenses, pay investment management fees to
Fidelity Management & Research Company. The Portfolios also bear certain other
expenses. For the year ended December 31, 1996, the total operating expenses
incurred by the Portfolios, as a percentage of Portfolio average net assets,
were as follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ------------
<S> <C> <C> <C>
Equity-Income .51% .07% .58%*
Overseas .76% .17% .93%*
High Income .59% .12% .71%
Asset Manager .64% .10% .74%*
</TABLE>
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*Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. Had these
reductions been included, total annual expenses would have been .56% for
Equity-Income Portfolio, .92% for Overseas Portfolio and .73% for Asset
Manager Portfolio.
Affiliates of Fidelity Management & Research Company may compensate NELICO
or an affiliate for administrative, distribution, or other services relating
to these Portfolios of VIP Fund and VIP Fund II. Such compensation is based on
assets of the Portfolios attributable to the Policies and certain other
variable insurance products issued by NELICO and its affiliates.
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
POLICY TRANSACTIONS
The following section is revised:
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 if NELICO receives the transfer request no more than
30 days before the Policy anniversary, and the transfer will be effected as of
the date the transfer request is received at NELICO's Home Office; however,
you may request a transfer from the Fixed Account within 30 days after a
Policy anniversary if you have not requested such a transfer in the 30 day
period before the anniversary. 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.
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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 NELICO 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, NELICO recommends that you consult your own tax
advisor for more complete information and advice.
DEFINITION OF LIFE INSURANCE. Section 7702 of the Internal Revenue Code
defines a life insurance contract for Federal income tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the Policy is not
directly addressed by Section 7702 or proposed regulations issued under that
section. The presence of these Policy features, the absence of final
regulations, and the lack of other pertinent interpretations of Section 7702,
thus create some uncertainty about the application of Section 7702 to the
Policy.
Nevertheless, NELICO believes that the Policy qualifies as a life insurance
contract for federal income tax purposes. This means that:
. the death benefit should be fully excludable from the gross income of
the beneficiary under Section 101(a) (1) of the Code; and
. the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
Because of the absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether substandard risk Policies or
Policies with term riders added will, in all cases, meet the statutory life
insurance contract definition. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
most of the tax advantages normally provided by a life insurance contract.
NELICO thus reserves the right to make changes in the Policy if such changes
are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes.
TAX LAW EFFECTS ON CERTAIN PRE-DEATH DISTRIBUTIONS. Section 7702A of the
Code contains provisions affecting the tax treatment of any loan, assignment
or other pre-death distribution from a life insurance policy which is also a
"modified endowment contract" (defined below under "Modified Endowment
Contracts").
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NELICO believes any policy loans received under such
Policies will be treated as indebtedness of the owner and will not be treated
as taxable income to you. This assumes that the Policy has not lapsed, been
surrendered or terminated. As a general rule, policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of your Policy if
the net cash surrender value of the Policy is greater than the investment in
the Policy less prior distributions from the Policy that were not taxed. If a
Policy has a policy loan and is surrendered or lapses, the policy loan is
treated as a distribution and would be taxable if there is a gain in the
Policy. In that case, the gain in the Policy would be taxable even if the
Policy has no net cash surrender value. If you incur a loss upon the surrender
it is not likely to be deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you
unless it is greater than the investment in the Policy less the untaxed
portions of any prior distributions. The Internal Revenue Code does provide,
however, that in certain situations in the first 15 years of the Policy
partial surrenders may be taxable, in whole or in part, if the net cash
surrender value is greater than the total investment in the Policy less the
previous untaxed distributions. This may be the case even if the amount of the
partial surrender is less than the investment in the Policy.
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MODIFIED ENDOWMENT CONTRACT. In general, a modified endowment contract is a
life insurance contract issued or materially changed on or after June 21,
1988, which fails to satisfy a "7-pay test". A life insurance policy will fail
to satisfy the 7-pay test if the cumulative amount paid under the policy at
any time during the first seven policy years exceeds the sum of the net level
premiums that would have been paid on or before such time had the policy
provided for paid up future benefits after the payment of seven level annual
premiums. Riders to the policy are considered part of the policy for purposes
of applying the 7-pay test. Any policy received in exchange for a modified
endowment contract will also be a modified endowment contract.
1. ZENITH LIFE POLICIES
Normally, payment of the Policy's premiums will not cause it to be a
modified endowment contract. If, however, the Policy's face amount is reduced
in the first seven policy years, either as a result of a partial surrender or
because the Policy Owner allows the Policy to lapse to Paid-up Insurance, the
7-pay test may be applied as if the Policy had originally been issued at the
reduced face amount. In that event, the Policy could fail the 7-pay test and
be classified as a modified endowment contract.
If a "material change" in the benefits or other Policy terms occurs under a
Policy which has satisfied the 7-pay test, the Policy will be treated as a new
Policy entered into on the day on which the material change occurred.
The Policy will be retested under the 7-pay test, after making certain
adjustments to reflect the Policy's existing cash value. For this purpose,
only the addition of a rider to the Policy will constitute a material change
requiring a retesting under the 7-pay test. A Policy subject to retesting in
this manner could fail the 7-pay test.
It is important to be aware that the addition of a rider to any Policy, even
a Policy issued before June 21, 1988, could be a material change which
requires the Policy to be tested under the 7-pay test.
Regardless of when it was issued, if a Policy described in the Zenith Life
prospectus is exchanged on or after June 21, 1988 for another life insurance
policy, the new insurance policy should be reviewed to determine how the rules
regarding modified endowment contracts may apply to the new policy.
2. ZENITH LIFE ONE POLICIES
ALL POLICIES DESCRIBED IN THE ZENITH LIFE ONE PROSPECTUS WHICH WERE ENTERED
INTO ON OR AFTER JUNE 21, 1988 ARE CONSIDERED MODIFIED ENDOWMENT CONTRACTS AND
ARE SUBJECT TO THE TAX TREATMENT OF DISTRIBUTIONS DISCUSSED BELOW UNDER
"DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS". IN ADDITION, ANY INSURANCE
POLICY RECEIVED IN EXCHANGE FOR A MODIFIED ENDOWMENT CONTRACT WILL ALSO BE A
MODIFIED ENDOWMENT CONTRACT.
Regardless of when it was issued, if a Policy described in the Zenith Life
One prospectus is exchanged on or after June 21, 1988 for another life
insurance policy, the new insurance policy should be reviewed to determine how
the rules regarding modified endowment contracts may apply to the new policy.
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent
the cash value of the Policy exceeds your investment in the Policy (i.e.
will be treated as income first.)
(b) Loans (including any unpaid interest) are considered distributions
even if the amount borrowed is retained by NELICO as a premium. Your
investment in the Policy will be increased by the amount of any prior loan
that was included in your gross income.
(c) A policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the
Policy, the collateral assignment is a distribution which will subject any
gain in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by
NELICO or its affiliates to the same Policy Owner during any calendar year
must be treated as one modified endowment contract.
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Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy).
If a Policy becomes a modified endowment contract, distributions made during
the year in which it becomes a modified endowment contract, distributions in
any subsequent policy year and distributions within two years before the
Policy becomes a modified endowment contract will be subject to the tax
treatment described above. This means that a distribution from a Policy that
is not a modified endowment contract could later become taxable as a
distribution from a modified endowment contract. In addition, regulations or
other interpretations may be issued which will apply similar tax treatment to
other distributions made in anticipation of a Policy becoming a modified
endowment contract.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy. Regulations specifying the
diversification requirements have been issued by the Department of Treasury,
and NELICO 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, NELICO does not know what standards will be set
forth in the additional guidance which the Treasury has stated it expects to
be issued. NELICO therefore reserves the right to modify the Policy as
necessary to attempt to prevent the Policy Owner from being considered the
owner of the assets of the Separate Account.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of the Policies in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
CHARGE FOR NELICO'S INCOME TAXES
Under current Federal income tax law no tax is imposed on NELICO 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. NELICO
reserves its right to charge the Variable Account for company Federal income
taxes in the future.
Under current laws NELICO may incur state and local taxes (in addition to
premium taxes) in several states. At present these taxes are not significant
and, accordingly, NELICO is not currently making a charge for them. If they
increase, however, charges for such taxes attributable to the Variable Account
may be made.
A-9
<PAGE>
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
---------------- --------------------------
<C> <S>
Robert A. Shafto Chairman, President and Chief Executive
Officer of NELICO since 1996. Formerly,
Chairman, President and Chief Executive
Officer of The New England 1993-1996;
President and Chief Executive Officer, 1992
to 1993, President and Chief Operating
Officer, 1990 to 1992, of The New England.
Susan C. Crampton Director of NELICO since 1996; serves as
127 Tarbox Road Principal of The Vermont Partnership, a
Jericho, VT 05465 business consulting firm located in Jericho,
Vermont since 1989. Formerly, Director of The
New England 1989-1996.
Edward A. Fox Director of NELICO since 1996; Private
RR Box 67-15 Investor, Harborside, ME. Formerly, Director
Harborside, ME 04642 of The New England 1994-1996; Dean of The
Amos Tuck School of Business Administration
at Dartmouth College from 1990-1994.
George J. Goodman Director of NELICO since 1996; Author,
Adam Smith's Money World television journalist, and editor.
50th Floor Drill Capital
General Motors Building
767 Fifth Avenue
New York, NY 10153
Dr. Paul E. Gray Director of NELICO since 1996; Chairman of the
MIT Corporation of the Massachusetts Institute of
77 Massachusetts Avenue Technology (MIT) since 1990. Formerly,
Cambridge, MA 02139 Director of The New England 1973-1996.
Dr. Evelyn E. Handler Director of NELICO since 1996; Executive
California Academy of Sciences Director and Chief Executive Officer of the
Golden Gate Park California Academy of Sciences since 1994.
San Francisco, CA 94118 Formerly, Director of The New England 1987-
1996; Research Fellow and an Associate of the
Graduate School of Education at Harvard
University and a Senior Fellow at The
Carnegie Foundation for the Advancement of
Teaching, 1991-1994.
Philip K. Howard, Esq. Director of NELICO since 1996; Partner of the
Howard, Darby & Levin law firm of Howard, Darby & Levin in New York
1330 Avenue of the Americas City.
New York, NY 10019
Harry P. Kamen Director of NELICO since 1996; Chairman,
Metropolitan Life President, and Chief Executive Officer of
One Madison Avenue Metropolitan Life Insurance Company since
New York, NY 10010 1995. Formerly, Chairman and CEO of MetLife
1993-1995; Senior Executive Vice President
1991-1993.
Terence Lennon Director of NELICO since 1996; Senior Vice
Metropolitan Life President of Metropolitan Life Insurance
One Madison Avenue Company since 1994. Formerly, Assistant
New York, NY 10010 Deputy Superintendent and Chief Examiner of
the New York Insurance Department 1984-1994.
Bernard A. Leventhal Director of NELICO since 1996; Vice Chairman
Burlington Industries of the Board of Directors of Burlington
1345 Avenue of the Americas Industries, Inc. Formerly, President of the
New York, NY 10105 Burlington Menswear Division since 1978.
Corporate Group Vice President since 1985 and
Director since 1990.
</TABLE>
A-10
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
---------------- --------------------------
<C> <S>
Thomas J. May Director of NELICO since 1996; Chairman,
Boston Edison Company President and Chief Executive Officer of Boston
800 Boylston Street Edison Company since 1994. Formerly, Director
Boston, MA 02199 of The New England 1994-1996; President and
Chief Operating Officer of Boston Edison Co.,
1993-1994; Executive Vice President 1990-1993.
Stewart G. Nagler Director of NELICO since 1996; Senior Executive
Metropolitan Life Vice President and Chief Financial Officer of
One Madison Avenue Metropolitan Life Insurance Company since 1986.
New York, NY 10010
Rand N. Stowell Director of NELICO since 1996; President of
United Timber Corp. United Timber Corp. of Dixfield, Maine.
P.O. Box 650 Formerly, Director of The New England 1990-
Pine Street 1996.
Dixfield, ME 04224
Alexander B. Trowbridge Director of NELICO since 1996; President of
Trowbridge Partners Inc. Trowbridge Partners, Inc. in Washington, D.C.
1317 F Street, N.W. Formerly, Director of The New England 1983-
Suite 500 1996.
Washington, D.C. 20004
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- --------------------------
<C> <S>
Robert A. Shafto See Directors above.
David W. Allen Senior Vice President of NELICO since 1996.
Formerly, Senior Vice President 1994-1996; Vice
President 1990-1994 of The New England.
James P. Bossert Vice President and Controller of NELICO since
1996. Formerly, Vice President and Controller
1993-1996; Vice President 1991-1993 of The New
England.
Thom A. Faria President, Career Agency System (a business unit
of NELICO) since 1996. Formerly, Executive Vice
President in 1996; Senior Vice President, 1993-
1996; Vice President, 1986-1993 of The New
England.
Chester R. Frost Senior Vice President and Treasurer of NELICO
since 1996. Formerly, Senior Vice President
since 1980 and Treasurer since 1996 of The New
England.
Anne M. Goggin Senior Vice President and Associate General
Counsel of NELICO since 1997. Formerly, Vice
President and Counsel of NELICO in 1996; Vice
President and Counsel 1994-1996 and Second Vice
President and Counsel 1988-1994 of The New
England.
Edward C. Hall President, New England Services (a business unit
of NELICO) since 1996. Formerly, President, New
England Services (a business unit of The New
England) 1994-1996, Executive Vice President--
Client Services, 1988 to 1994, of The New
England.
Daniel D. Jordan Second Vice President, Counsel and Secretary of
NELICO since 1996. Formerly, Counsel and
Assistant Secretary of The New England, 1985-
1996.
Richard D. Keidan Senior Vice President of NELICO since 1996.
Formerly, Vice President of Metropolitan Life
1994-1996 (Chief Marketing Officer of MetLife
Brokerage); Regional Sales and Marketing
Manager of Phoenix Home Life until 1994.
Alan C. Leland, Jr. Senior Vice President of NELICO since 1996.
Formerly, Vice President of The New England
1984-1996.
</TABLE>
A-11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- --------------------------
<C> <S>
Bruce C. Long President, New England Annuities (a business unit of
NELICO) since 1996. Formerly, President, New England
Annuities (a business unit of The New England) 1994-
1996; Senior Vice President, New England Annuities in
1994; Vice President, Keyport Life Insurance 1992-
1994; General Director, John Hancock Insurance 1990-
1992.
George J. Maloof Senior Vice President of NELICO since 1996. Formerly,
Vice President of The New England 1991-1996.
Eileen T. McCarthy Senior Vice President of NELICO since 1996. Formerly,
Senior Vice President 1995-1996; Vice President 1989-
1995 of The New England.
Thomas W. McConnell Senior Vice President of NELICO since 1996. Director,
Chief Executive Officer and President of New England
Securities Corporation since 1993. Formerly, National
Sales Manager of Alliance Fund Distributors in 1993;
National Sales Manager of Equitable Capital
Securities 1992-1993.
Thomas W. Moore Senior Vice President of NELICO since 1996. Formerly,
Vice President of The New England 1990-1996.
Robert W. Powell President, Life Brokerage (a business unit of NELICO)
since 1996. Formerly, Officer-in-Charge of MetLife
Brokerage (a subsidiary of Metropolitan Life
Insurance Company) 1994-1996; Marketing Vice
President 1988-1994.
Gregory A. Ross President, TNE Information Services (a business unit
of NELICO) since 1996. Formerly, President, TNE
Information Services (a business unit of The New
England) and Chief Information Officer of The New
England, 1994-1996; Senior Vice President and Chief
Information Officer 1993-1994; Vice President, 1991-
1993 of The New England. President of TNE Information
Services, Inc.
Robert E. Schneider Executive Vice President and Chief Financial Officer
of NELICO since 1996. Formerly, Director, Executive
Vice President and Chief Financial Officer, 1993 to
1996; Executive Vice President and Chief Financial
Officer, 1990-1993, of The New England.
John G. Small, Jr. Senior Vice President of NELICO since 1996. Formerly,
Senior Vice President of The New England 1990-1996.
Ellen D. Sullivan Senior Vice President and Associate General Counsel of
NELICO since 1997. Formerly, Vice President and
Counsel of NELICO in 1996; Vice President and Counsel
1994-1996 and Second Vice President and Counsel 1985-
1994 of The New England.
H. James Wilson Executive Vice President and General Counsel of NELICO
since 1996. Formerly, Executive Vice President and
General Counsel of The New England, 1993-1996; Senior
Vice President and General Counsel, 1992 to 1993,
Senior Vice President and Associate General Counsel,
1990 to 1992, of The New England.
John W. Wright President, New England Employee Benefits Group (a
business unit of NELICO) since 1996. Formerly,
President, New England Employee Benefits Group (a
business unit of The New England), 1993-1996; Senior
Vice President of New England Employee Benefits
Group, 1989-1993 of The New England.
Frederick K. Zimmermann Executive Vice President and Chief Investment Officer
of NELICO since 1996. Formerly, Executive Vice
President and Chief Investment Officer of The New
England 1993-1996; Senior Vice President--
Investments, 1989 to 1993, of The New England.
</TABLE>
The principal business address for each of the directors and executive
officers is the same as NELICO's except where indicated otherwise.
A-12
<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, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call the toll-free number 1-
800-200-2214.
You may also call our Client TeleService Center toll-free at 1-800-388-4000
to request current information about your Policy values, to change or update
Policy information such as your address, billing mode, beneficiary or
ownership, or to request Policy loans of less than $25,000. Requests must be
in writing if the Policy is owned by a corporation or a pension trust.
For all other types of Policy changes, please contact your registered
representative.
EXPERTS
The financial statements of New England Variable Life Separate Account of
New England Life Insurance Company ("NELICO") (formerly New England Variable
Life Insurance Company) and the consolidated financial statements of NELICO
and subsidiaries as of and for the year ended December 31, 1996 included in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein (whose reports express
unqualified opinions and, with respect to NELICO, includes an explanatory
paragraph referring to the change in the basis of accounting and the change in
corporate organization), and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The adjustments that were applied to restate the 1995 and 1994
financial statements to reflect the effects of the changes for adoption of
generally accepted accounting principles and the changes in corporate
organization have also been audited by Deloitte & Touche LLP.
The statutory balance sheets of New England Variable Life Insurance Company
and New England Pension and Annuity Company as of December 31, 1995, and the
related statutory statements of operations, surplus, and cash flows for each
of the two years in the period ended December 31, 1995 (not included herein),
have been incorporated herein in reliance on the reports (which reports
include adverse opinions as to generally accepted accounting principles and
unqualified opinions as to statutory accounting practices prescribed or
permitted by the Insurance Department of the State of Delaware) of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing. The statutory balance sheet of Exeter
Reassurance Company, Ltd. as at December 31, 1995, and the related statutory
statements of income, capital and surplus, and cash flows for the year then
ended (not included herein), have been incorporated herein in reliance on the
report (which report includes an adverse opinion as to generally accepted
accounting principles and an unqualified opinion as to conformity with The
Insurance Act 1978, amendments thereto and related regulations) of Coopers &
Lybrand, chartered accountants, given on the authority of that firm as experts
in accounting and auditing.
The consolidated statement of financial condition of New England Securities
Corporation as of December 31, 1995, and the related consolidated statements
of operations, shareholder's equity, and cash flows for the year then ended
(not included herein); the balance sheet of TNE Advisers, Inc. as of December
31, 1995, and the related statements of operations, changes in shareholder's
equity (deficit), and cash flows for the year ended December 31, 1995 and for
the period August 26, 1994 (commencement of operations) through December 31,
1994 (not included herein, have been incorporated herein in reliance on the
reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm of experts in accounting and auditing. The balance
sheet of Newbury Insurance Company, Limited as of December 31, 1995, and the
related statements of earnings and retained earnings, and cash flows for the
years ended December 31, 1995 and 1994 (not included herein), have been
incorporated herein in reliance on the reports of Coopers & Lybrand, chartered
accountants, given on the authority of that firm as experts in accounting and
auditing.
The statements of operations and changes in net assets of New England
Variable Life Separate Account for the periods ended December 31, 1995 and
1994, have been incorporated herein in reliance on the reports of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
A-13
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Policy Owners and Board of Directors of New England 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, Growth and Income
Sub-Account (formerly Value Growth Sub-Account), Small Cap Sub-Account, U.S.
Government Sub-Account, Balanced Sub-Account, Equity Growth Sub-Account,
International Equity Sub-Account, Venture Value Sub-Account, Bond
Opportunities Sub-Account, Equity-Income Sub-Account, Overseas Sub-Account,
High Income Sub-Account and Asset Manager Sub-Account) of New England Life
Insurance Company (formerly New England Variable Life Insurance Company) as of
December 31, 1996, and the related statements of operations and changes in net
assets for the year then ended for all Sub-Accounts, except for U.S.
Government Sub-Account and Bond Opportunities Sub-Account which are for the
period July 1, 1996 (Commencement of Operations) through December 31, 1996.
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. The financial statements of New England Variable Life
Separate Account for the years ended December 31, 1995 and 1994 were audited
by other auditors whose report, dated February 6, 1996, expressed an
unqualified opinion on those statements.
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 the respective aforementioned
sub-accounts comprising the New England Variable Life Separate Account of New
England Life Insurance Company as of December 31, 1996, and the results of
their operations and changes in their net assets for the period then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 18, 1997
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Policy Owners and Board of Directors of New England Variable Life
Separate Account of New England Variable Life Insurance Company:
We have audited the statements of operations and changes in net assets of New
England Variable Life Separate Account, comprised of Capital Growth Sub-
Account, Bond Income Sub-Account, Money Market Sub-Account, Stock Index Sub-
Account, Managed Sub-Account, Avanti Growth Sub-Account, Value Growth Sub-
Account, Small Cap Sub-Account, Equity-Income Sub-Account, Overseas Sub-
Account, High Income Sub-Account and Asset Manager Sub-Account for each of the
periods ended December 31, 1995 and 1994, and also comprised of the Balanced
Sub-Account, Equity Growth Sub-Account, International Equity Sub-Account, and
Venture Value Sub-Account for the period May 1, 1995 (commencement of
operations) through December 31, 1995, of New England Variable Life Insurance
Company. 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 statements of operation and
changes in net assets are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of operation and changes in net assets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statements
of operation and changes in net assets. We believe that our audits of the
statements of operation and changes in net assets provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and changes in net assets of
the respective aforementioned sub-accounts comprising New England Variable
Life Separate Account of New England Variable Life Insurance Company for each
of the aforementioned periods ending December 31, 1995 and 1994, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 6, 1996
F-2
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-3
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in New England Zenith Fund,
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at
value (Note 2)......................... $583,330,618 $36,866,420 $32,121,040 $35,364,494 $31,136,621 $26,636,623 $20,118,907
<CAPTION>
SHARES COST
--------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth
Series......... 1,365,890 $445,321,213
Back Bay
Advisors Bond
Income Series.. 349,015 36,825,901
Back Bay
Advisors Money
Market Series.. 321,210 32,121,040
Westpeak Stock
Index Series... 295,640 27,731,481
Back Bay
Advisors
Managed Series. 182,770 24,998,992
Loomis Sayles
Avanti Growth
Series......... 168,672 21,813,307
Westpeak Growth
and Income
Series......... 132,562 17,011,817
Loomis Sayles
Small Cap
Series......... 173,260 21,938,318
Salomon Bros.
U.S. Government
Series......... 4,330 47,709
Loomis Sayles
Balanced
Series......... 277,182 3,519,191
Alger Equity
Growth Series.. 1,694,286 24,312,591
Draycott
International
Equity Series.. 441,122 4,844,072
Davis Venture
Value Series... 1,191,836 16,778,624
Salomon Bros.
Bond
Opportunities
Series......... 2,345 28,407
VIP Equity-
Income Series.. 3,994,844 67,601,587
VIP Overseas
Series......... 3,251,652 51,758,903
VIP High Income
Series......... 370,017 4,270,016
VIP II Asset
Manager Series. 244,107 3,585,079
Amount due and accrued (payable) from
policy-related transactions, net....... 378,429 37,297 1,495,891 73,267 36,326 69,074 23,180
Dividends receivable.................... -- -- 135,927 -- -- -- --
------------ ----------- ----------- ----------- ----------- ----------- -----------
Total Assets......................... 583,709,047 36,903,717 33,752,858 35,437,761 31,172,947 26,705,697 20,142,087
LIABILITIES
Due New England Life Insurance Company.. 58,709,427 4,152,861 3,940,579 4,110,599 2,587,943 4,214,337 2,970,391
------------ ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities.................... 58,709,427 4,152,861 3,940,579 4,110,599 2,587,943 4,214,337 2,970,391
------------ ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS FOR VARIABLE LIFE INSURANCE
POLICIES................................ $524,999,620 $32,750,856 $29,812,279 $31,327,162 $28,585,004 $22,491,360 $17,171,696
============ =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- -------------------------------------------------------------------------- ------------- -----------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------- ----------- ----------- ----------- ------------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$24,997,883 $46,890 $3,755,816 $26,396,980 $4,980,263 $19,176,647 $27,254 $84,011,576 $61,261,119 $4,632,616
49,863 (56) 446 33,786 (6,452) 90,311 -- 39,225 91,476 388
-- -- -- -- -- -- -- -- -- --
- ----------- ------- ---------- ----------- ---------- ----------- ------- ----------- ----------- ----------
25,047,746 46,834 3,756,262 26,430,766 4,973,811 19,266,958 27,254 84,050,801 61,352,595 4,633,004
3,525,015 797 522,853 4,360,484 735,836 2,604,988 486 11,691,229 9,943,254 534,363
- ----------- ------- ---------- ----------- ---------- ----------- ------- ----------- ----------- ----------
3,525,015 797 522,853 4,360,484 735,836 2,604,988 486 11,691,229 9,943,254 534,363
- ----------- ------- ---------- ----------- ---------- ----------- ------- ----------- ----------- ----------
$21,522,731 $46,037 $3,233,409 $22,070,282 $4,237,975 $16,661,970 $26,768 $72,359,572 $51,409,341 $4,098,641
=========== ======= ========== =========== ========== =========== ======= =========== =========== ==========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ------------ --------------
ASSET
MANAGER
SUB-ACCOUNT TOTAL
- ------------ --------------
<S> <C>
$4,132,726 $ 998,994,493
(5,236) 2,407,215
-- 135,927
- ------------ --------------
4,127,490 1,001,537,635
547,395 115,152,837
- ------------ --------------
547,395 115,152,837
- ------------ --------------
$3,580,095 $ 886,384,798
============ ==============
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
Dividends............... $32,991,113 $2,579,133 $1,306,712 $ 841,454 $2,942,415 $1,494,679 $1,804,344
EXPENSE
Mortality and expense
risk charge (Note 3)... 2,981,244 192,456 160,903 168,590 158,607 137,775 100,738
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income
(loss)................. 30,009,869 2,386,677 1,145,809 672,864 2,783,808 1,356,904 1,703,606
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized
appreciation
(depreciation) on
investments:
Beginning of period.... 71,963,590 997,195 -- 2,853,587 5,216,548 2,881,100 2,105,777
End of period.......... 138,009,405 40,519 -- 7,633,013 6,137,629 4,823,316 3,107,090
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net change in unrealized
appreciation
(depreciation)......... 66,045,815 (956,676) -- 4,779,426 921,081 1,942,216 1,001,313
Net realized gain (loss)
on investments......... 985,421 299 -- 1,808 69,775 27,429 18,964
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net realized and
unrealized gain (loss)
on investments......... 67,031,236 (956,377) -- 4,781,234 990,856 1,969,645 1,020,277
----------- ---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $97,041,105 $1,430,300 $1,145,809 $5,454,098 $3,774,664 $3,326,549 $2,723,883
=========== ========== ========== ========== ========== ========== ==========
</TABLE>
* For the period July 1, 1996 (Commencement of Operations) through December 31,
1996.
See Notes to Financial Statements
F-6
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
------------------------------------------------------------------------------------------------------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ----------- ----------- ------------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,624,708 $ 702 $104,939 $ 44,863 $ 71,347 $ 444,012 $ 1,218 $ 2,662,990 $1,164,550 $199,463
90,146 28 11,713 104,685 19,385 64,656 40 428,473 325,346 19,551
---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
1,534,562 674 93,226 (59,822) 51,962 379,356 1,178 2,234,517 839,204 179,912
768,552 -- 3,769 65,901 24,089 171,931 -- 9,642,454 4,022,725 167,043
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153) 16,409,989 9,502,216 362,600
---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
2,291,013 (819) 232,856 2,018,488 112,102 2,226,092 (1,153) 6,767,535 5,479,491 195,557
31,570 -- 2,318 11,723 159 4,907 -- 27,750 44,049 1,942
---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
2,322,583 (819) 235,174 2,030,211 112,261 2,230,999 (1,153) 6,795,285 5,523,540 197,499
---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
$3,857,145 $(145) $328,400 $1,970,389 $164,223 $2,610,355 $ 25 $ 9,029,802 $6,362,744 $377,411
========== ===== ======== ========== ======== ========== ======= =========== ========== ========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ----------- ------------
ASSET
MANAGER
SUB-ACCOUNT TOTAL
- ----------- ------------
<S> <C>
$174,907 $ 50,453,549
20,483 4,984,819
- ----------- ------------
154,424 45,468,730
269,255 101,153,516
547,647 194,486,245
- ----------- ------------
278,392 93,332,729
4,122 1,232,236
- ----------- ------------
282,514 94,564,965
- ----------- ------------
$436,938 $140,033,695
=========== ============
</TABLE>
See Notes to Financial Statements
F-7
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND 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
F-8
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
------------------------------------------------------------------------------ ----------------------------------- -----------
GROWTH
AND SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH ASSET
INCOME CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ------------ ------------ ------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 606,696 $ 365,015 $17,538 $195,436 $12,460 $ 86,716 $ 2,284,557 $ 282,520 $ 8,412 $ 11,896
52,633 24,746 743 11,686 2,165 7,251 233,864 240,253 6,639 9,537
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
554,063 340,269 16,795 183,750 10,295 79,465 2,050,693 42,267 1,773 2,359
1,918 4,662 -- -- -- -- 149,659 260,895 213 (1,503)
2,105,777 768,552 3,769 65,901 24,089 171,931 9,642,454 4,022,725 167,043 269,255
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
2,103,859 763,890 3,769 65,901 24,089 171,931 9,492,795 3,761,830 166,830 270,758
9,493 1,325 223 237 (34) 203 61,089 32,279 2,817 4,661
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
2,113,352 765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647 275,419
---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
$2,667,415 $1,105,484 $20,787 $249,888 $34,350 $251,599 $11,604,577 $3,836,376 $171,420 $277,778
========== ========== ======= ======== ======= ======== =========== ========== ======== ========
<CAPTION>
- ------------
TOTAL
- ------------
<S>
$ 67,367,395
3,305,646
- ------------
64,061,749
7,542,202
101,153,516
- ------------
93,611,314
1,804,392
- ------------
95,415,706
- ------------
$159,477,455
============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND SMALL
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME CAP
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT*
------------ ---------- -------- ---------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
F-10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-11
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING
ACTIVITIES
Net investment income
(loss)................. $ 30,009,869 $ 2,386,677 $ 1,145,809 $ 672,864 $ 2,783,808 $ 1,356,904 $ 1,703,606
Net realized and
unrealized gain (loss)
on investments......... 67,031,236 (956,377) -- 4,781,234 990,856 1,969,645 1,020,277
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 97,041,105 1,430,300 1,145,809 5,454,098 3,774,664 3,326,549 2,723,883
FROM POLICY-RELATED
TRANSACTIONS
Net premiums transferred
from New England Life
Insurance Company (Note
4)..................... 111,194,198 8,517,031 79,806,482 6,566,717 5,631,293 7,140,375 5,201,936
Net transfers (to) from
other sub-accounts..... (1,541,352) 1,894,963 (61,482,739) 5,875,439 1,412,522 2,859,556 2,274,270
Net transfers to New
England Life Insurance
Company................ (76,528,987) (5,770,575) (9,089,129) (5,144,242) (4,232,475) (5,172,577) (3,338,871)
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net increase in net
assets resulting from
policy related
transactions........... 33,123,859 4,641,419 9,234,614 7,297,914 2,811,340 4,827,354 4,137,335
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net increase in net
assets................. 130,164,964 6,071,719 10,380,423 12,752,012 6,586,004 8,153,903 6,861,218
NET ASSETS, AT BEGINNING
OF THE PERIOD.......... 394,834,656 26,679,137 19,431,856 18,575,150 21,999,000 14,337,457 10,310,478
------------ ----------- ------------ ----------- ----------- ----------- -----------
NET ASSETS, AT END OF
THE PERIOD............. $524,999,620 $32,750,856 $ 29,812,279 $31,327,162 $28,585,004 $22,491,360 $17,171,696
============ =========== ============ =========== =========== =========== ===========
</TABLE>
* For the period July 1, 1996 (Commencement of Operations) through December 31,
1996.
See Notes to Financial Statements
F-12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
- ----------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
$1,534,562 $ 674 $ 93,226 $ (59,822) $ 51,962 $ 379,356 $ 1,178
2,322,583 (819) 235,174 2,030,211 112,261 2,230,999 (1,153)
- ----------- ------- ---------- ----------- ----------- ----------- -------
3,857,145 (145) 328,400 1,970,389 164,223 2,610,355 25
5,440,860 -- 811,932 9,286,073 1,454,605 4,876,053 --
10,060,122 46,951 2,383,695 11,496,667 2,908,047 9,510,686 27,190
(4,380,392) (769) (708,829) (6,395,345) (1,242,748) (3,721,564) (447)
- ----------- ------- ---------- ----------- ----------- ----------- -------
11,120,590 46,182 2,486,798 14,387,395 3,119,904 10,665,175 26,743
- ----------- ------- ---------- ----------- ----------- ----------- -------
14,977,735 46,037 2,815,198 16,357,784 3,284,127 13,275,530 26,768
6,544,996 -- 418,211 5,712,498 953,848 3,386,440 --
- ----------- ------- ---------- ----------- ----------- ----------- -------
$21,522,731 $46,037 $3,233,409 $22,070,282 $ 4,237,975 $16,661,970 $26,768
=========== ======= ========== =========== =========== =========== =======
<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>
$ 2,234,517 $ 839,204 $ 179,912 $ 154,424 $ 45,468,730
6,795,285 5,523,540 197,499 282,514 94,564,965
- ------------- ------------- ------------ ------------ --------------
9,029,802 6,362,744 377,411 436,938 140,033,695
20,426,731 17,135,189 970,763 1,258,847 285,719,085
9,029,810 1,051,463 1,631,762 560,948 --
(13,479,623) (11,522,274) (623,788) (649,631) (152,002,266)
- ------------- ------------- ------------ ------------ --------------
15,976,918 6,664,378 1,978,737 1,170,164 133,716,819
- ------------- ------------- ------------ ------------ --------------
25,006,720 13,027,122 2,356,148 1,607,102 273,750,514
47,352,852 38,382,219 1,742,493 1,972,993 612,634,284
- ------------- ------------- ------------ ------------ --------------
$ 72,359,572 $ 51,409,341 $4,098,641 $3,580,095 $ 886,384,798
============= ============= ============ ============ ==============
</TABLE>
See Notes to Financial Statements
F-13
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND 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 OPERATING
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
resulting from
operations............ 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 Life
Insurance Company (Note
4)..................... 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 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
resulting 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
F-14
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- ------------------------------------------------------------------------------- -------------------------------------
GROWTH
AND SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH
INCOME CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------- ----------- ------------ ------------ ------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 554,063 $ 340,269 $ 16,795 $ 183,750 $ 10,295 $ 79,465 $ 2,050,693 $ 42,267 $ 1,773
2,113,352 765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
2,667,415 1,105,484 20,787 249,888 34,350 251,599 11,604,577 3,836,376 171,420
3,473,273 2,237,626 81,978 1,048,361 241,835 625,044 13,985,879 17,076,602 395,370
2,645,617 4,814,141 409,874 5,735,744 948,764 3,228,499 12,483,761 (2,007,296) 1,503,857
(2,568,808) (1,803,085) (94,428) (1,321,495) (271,101) (718,702) (9,853,532) (8,392,295) (358,576)
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
3,550,082 5,248,682 397,424 5,462,610 919,498 3,134,841 16,616,108 6,677,011 1,540,651
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
6,217,497 6,354,166 418,211 5,712,498 953,848 3,386,440 28,220,685 10,513,387 1,712,071
4,092,981 190,830 -- -- -- -- 19,132,167 27,868,832 30,422
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
$10,310,478 $ 6,544,996 $418,211 $ 5,712,498 $ 953,848 $3,386,440 $47,352,852 $38,382,219 $1,742,493
=========== =========== ======== =========== ========= ========== =========== =========== ==========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ------------ --------------
ASSET
MANAGER
SUB-ACCOUNT TOTAL
- ------------ --------------
<S> <C>
$ 2,359 $ 64,061,749
275,419 95,415,706
- ------------ --------------
277,778 159,477,455
696,227 202,985,540
1,507,606 --
(709,312) (115,320,001)
- ------------ --------------
1,494,521 87,665,539
- ------------ --------------
1,772,299 247,142,994
200,694 365,491,290
- ------------ --------------
$1,972,993 $ 612,634,284
============ ==============
</TABLE>
See Notes to Financial Statements
F-15
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------------------------------------
CAPITAL BOND STOCK GROWTH SMALL
GROWTH INCOME MONEY INDEX AVANTI AND CAP
SUB- SUB- MARKET SUB- MANAGED GROWTH INCOME SUB-
ACCOUNT ACCOUNT SUB- ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ACCOUNT*
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING
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
resulting from
operations...... (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 Life
Insurance Company
(Note 4)......... 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 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 resulting
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 OPERATING
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
resulting from
operations...... 650,232 (503,803) 207 (1,537) (24,408,254)
FROM POLICY-
RELATED
TRANSACTIONS
Net premiums
transferred from
New England Life
Insurance Company
(Note 4)......... 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 Life
Insurance
Company.......... (4,905,512) (8,836,370) (5,935) (30,973) (89,600,956)
------------ ------------ --------- ---------- -------------
Increase in net
assets resulting
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
F-16
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS. New England Variable Life Separate Account (the
"Account") of New England Life Insurance Company ("NELICO"), formerly New
England Variable Life Insurance Company ("NEVLICO"), was established by
NELICO's Board of Directors on January 31, 1983 in accordance with the
regulations of the Delaware Insurance Department and is now operating in
accordance with the regulations of the Commonwealth of Massachusetts Division
of Insurance. The Account is registered as a unit investment trust under the
Investment Company Act of 1940. The assets of the Account are owned by NELICO.
The net assets of the Account are restricted from use in the ordinary business
of NELICO.
Effective with the merger on August 30, 1996 of New England Mutual Life
Insurance Company ("NEMLICO") and Metropolitan Life Insurance Company ("MLI"),
NEMLICO ceased to exist, with MLI the surviving company of the merger. NELICO
then became an indirect wholly-owned subsidiary of MLI.
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 disclosures 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. SUB-ACCOUNTS. The Account has eighteen investment sub-accounts each of
which invest 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 the 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 eighteen 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
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. Charges
for investment advisory fees and other expenses are reflected in the carrying
value of the assets of the Eligible Funds.
3. MORTALITY AND EXPENSE RISK CHARGES. NELICO charges the Account for the
mortality and expense risk NELICO assumes. The mortality risk assumed by
NELICO is the risk that insureds may live for shorter periods of time than
NELICO estimated when setting its cost of insurance charges. The expense risk
assumed by NELICO is the risk that the deductions for sales and administrative
charges may prove insufficient to cover actual cost. If these deductions are
insufficient to cover the cost of the mortality and expense risk assumed by
NELICO, NELICO absorbs the resulting losses and makes sufficient transfers to
the Fund from its general assets. Conversely, if those deductions are more
than sufficient after the establishment of any contingency reserves deemed
prudent or required by law, the excess is retained by NELICO. Currently, the
charges are made daily at an annual rate of .35% of the Account assets
attributable to fixed premium ("Zenith Life") variable 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 Account assets attributable to flexible
premium ("Zenith Flexible Life") variable policies. For the modified single
premium ("American Gateway") variable life policies mortality and expense risk
charges are not charged against the sub-account assets but are deducted from
the policy cash values monthly at an annual rate of .90%.
4. NET PREMIUM TRANSFERS AND DEDUCTIONS FROM CASH VALUE. Certain deductions
are made from each premium payment paid to NELICO to arrive at a net premium
that is transferred to the Account. Certain deductions are made from cash
values in the sub-accounts. These deductions, depending on the policy, could
include sales loads,
F-17
<PAGE>
administrative charges, premium tax charges, risk charges, cost of insurance
charges, and charges for rider benefits and special risk charges.
5. FEDERAL INCOME TAXES. For federal income tax purposes the Account's
operations are included with those of NELICO. NELICO intends to make
appropriate charges against the Account in the future if and when tax
liabilities arise.
6. INVESTMENT ADVISERS. 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 NELICO, and each of the sub-advisers are registered with the SEC
as investment advisers under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------------------------- ---------------------------------------
<S> <C> <C>
Capital Growth Capital Growth
Management, L.P. ("CGM")*
Back Bay Advisors Money TNE Advisers, Inc.** Back Bay Advisors, L.P.*
Market
Back Bay Advisors Bond TNE Advisers, Inc.** Back Bay Advisors, L.P.*
Income
Back Bay Advisors TNE Advisers, Inc.** Back Bay Advisors, L.P.*
Managed
Westpeak Stock Index TNE Advisers, Inc.** Westpeak Investment Advisors, L.P.*
Westpeak Growth and TNE Advisers, Inc.** Westpeak Investment Advisors, L.P.*
Income
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
Davis Venture Value TNE Advisers, Inc.** Davis Selected Advisers, Inc.
Alger Equity Growth TNE Advisers, Inc.** Fred Alger Management, Inc.
Salomon Brothers U.S. TNE Advisers, Inc.** Salomon Brothers Asset Management, Inc.
Government
Salomon Brothers TNE Advisers, Inc.** Salomon Brothers Asset Management, Inc.
Strategic Bond
Opportunities
</TABLE>
* An affiliate of NELICO
** A subsidiary of NELICO
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 Growth and Income 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. NEMLICO, the former parent of NELICO, 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 its 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.
On January 22, 1997, the Board of Trustees of New England Zenith Fund approved
a new subadvisory agreement relating to the Draycott International Equity
Series between TNE Advisers, Inc. and Morgan Stanley Asset Management Inc.
("MSAM"). This new agreement, is expected to become effective May 1, 1997
(subject to shareholder approval, if necessary). Under this new agreement MSAM
would become subadviser of the Series, succeeding Draycott Partners, Ltd. and
would be responsible for the day to day management of the Series. The new name
of the Series will be Morgan Stanley International Magnum Equity Series.
F-18
<PAGE>
7. INVESTMENT PURCHASES AND SALES. The following table shows the aggregate cost
of Eligible Fund shares purchased and proceeds from the sales of Eligible Fund
shares for each sub-account for the year ended December 31, 1996:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Capital Growth Series $192,435,910 $125,337,191
Back Bay Advisors Money Market Series 98,065,488 87,200,674
Back Bay Advisors Bond Income Series 18,719,861 11,239,097
Back Bay Advisors Managed Series 13,159,539 7,382,329
Westpeak Stock Index Series 16,840,737 7,613,106
Westpeak Growth and Income Series 11,290,092 4,514,904
Loomis Sayles Avanti Growth Series 14,804,586 7,554,161
Loomis Sayles Small Cap Series 20,487,120 6,016,762
Loomis Sayles Balanced Series 3,720,239 699,768
Draycott International Equity Series 5,234,589 1,560,413
Davis Venture Value Series 16,761,770 3,814,839
Alger Equity Growth Series 25,051,802 7,538,044
Salomon Brothers U.S. Government Series* 47,709 --
Salomon Brothers Strategic Bond Opportunities
Series* 28,407 --
VIP Equity-Income Series 40,788,600 18,781,619
VIP Overseas Series 29,417,696 19,661,090
VIP High Income Series 3,849,778 1,456,754
VIP II Asset Manager Series 2,822,409 1,496,363
</TABLE>
* For the period July 1, 1996 (Commencement of Operations of the sub-account)
through December 31, 1996.
F-19
<PAGE>
8. NET INVESTMENT RETURNS. 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, where applicable, for each
type of variable life insurance policy shown (in the case of the American
Gateway Series, the mortality and expense risk charge is deducted monthly from
cash values rather than daily from sub-account assets and, therefore, does not
impact sub-account net investment returns). These figures do not reflect
charges deducted from premiums and the 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
------------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 52.17% (9.11%) 30.30% (3.82%) 53.45% (6.38%) 14.57% (7.39%) 37.55% 20.65%
Bond Income............. 1.91% 7.99% 11.91% 7.71% 17.55% 7.80% 12.22% (3.70%) 20.78% 4.24%
Money Market............ 6.16% 7.14% 8.87% 7.81% 5.84% 3.43% 2.61% 3.61% 5.33% 4.76%
<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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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% 22.04%
Managed................. (0.89%) 9.10% 18.67% 2.85% 19.75% 6.33% 10.26% (1.46%) 30.81% 14.62%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Avanti Growth................................................................. 14.47% (0.62%) 29.90% 17.20%
Growth and Income............................................................. 13.97% (1.55%) 35.99% 17.68%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity-Income................................................................. 9.29% 6.69% 34.62% 13.88%
Overseas...................................................................... 14.57% 1.37% 9.30% 12.82%
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
Small Cap.............................................................................. (3.45%) 28.40% 30.22%
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
High Income............................................................................ (0.58%) 20.18% 13.63%
Asset Manager.......................................................................... (4.41%) 16.55% 14.20%
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- --------
<S> <C> <C>
Equity Growth................................................................................... 24.84% 12.78%
Balanced........................................................................................ 13.75% 16.50%
International Equity............................................................................ 3.85% 6.30%
Venture Value................................................................................... 21.64% 25.40%
</TABLE>
F-20
<PAGE>
SINGLE PREMIUM ("ZENITH LIFE ONE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------
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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 52.02% (9.20%) 30.17% (3.91%) 53.29% (6.47%) 14.46% (7.38%) 37.41% 20.53%
Bond Income............. 1.81% 7.88% 11.79% 7.60% 17.43% 7.69% 12.10% (3.80%) 20.66% 4.14%
Money Market............ 6.05% 7.03% 8.77% 7.71% 5.74% 3.33% 2.51% 3.35% 5.23% 4.65%
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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% 21.91%
Managed................. (0.96%) 8.99% 18.55% 2.75% 19.63% 6.22% 10.15% (1.56%) 30.67% 14.51%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Avanti Growth................................................................. 14.39% (0.72%) 29.77% 17.08%
Growth and Income............................................................. 13.90% (1.65%) 35.85% 17.56%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity-Income................................................................. 9.22% 6.59% 34.49% 13.77%
Overseas...................................................................... 14.49% 1.27% 9.19% 12.70%
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
Small Cap.............................................................................. (3.52%) 28.27% 30.09%
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
High Income............................................................................ (0.61%) 20.06% 13.52%
Asset Manager.......................................................................... (4.45%) 16.43% 14.09%
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- --------
<S> <C> <C>
Equity Growth................................................................................... 24.76% 12.66%
Balanced........................................................................................ 13.67% 16.39%
International Equity............................................................................ 3.79% 6.19%
Venture Value................................................................................... 21.56% 25.27%
</TABLE>
F-21
<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
------------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 51.79% (9.34%) 29.98% (4.06%) 53.06% (6.61%) 14.28% (7.62%) 37.21% 20.34%
Bond Income............. 1.65% 7.72% 11.63% 7.44% 17.25% 7.53% 11.94% (3.94%) 20.47% 3.98%
Money Market............ 5.89% 6.87% 8.60% 7.54% 5.58% 3.18% 2.36% 3.35% 5.07% 4.50%
<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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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% 21.73%
Managed................. (1.06%) 8.83% 18.37% 2.59% 19.45% 6.06% 9.99% (1.70%) 30.48% 14.34%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Avanti Growth................................................................. 14.28% (0.87%) 29.57% 16.90%
Growth and Income............................................................. 13.78% (1.80%) 35.65% 17.38%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity-Income................................................................. 9.11% 6.43% 34.29% 13.59%
Overseas...................................................................... 14.38% 1.12% 9.02% 12.53%
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
Small Cap.............................................................................. (3.61%) 28.08% 29.90%
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
High Income............................................................................ (0.66%) 19.88% 13.35%
Asset Manager.......................................................................... (4.49%) 16.26% 13.91%
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- --------
<S> <C> <C>
Equity Growth................................................................................... 24.64% 12.49%
Balanced........................................................................................ 13.56% 16.21%
International Equity............................................................................ 3.68% 6.03%
Venture Value................................................................................... 21.44% 25.08%
</TABLE>
F-22
<PAGE>
VARIABLE SURVIVORSHIP ("ZENITH SURVIVORSHIP LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------
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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 51.34% (9.61%) 29.59% (4.35%) 52.61% (6.90%) 13.94% (7.90%) 36.80% 19.98%
Bond Income............. 1.35% 7.40% 11.29% 7.11% 16.90% 7.21% 11.60% (4.23%) 20.12% 3.67%
Money Market............ 5.57% 6.55% 8.28% 7.22% 5.26% 2.87% 2.05% 3.04% 4.75% 4.18%
<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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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% 21.36%
Managed................. (1.26%) 8.50% 18.02% 2.28% 19.10% 5.74% 9.69% (2.00%) 30.09% 13.99%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Avanti Growth................................................................. 14.05% (1.16%) 29.19% 16.55%
Growth and Income............................................................. 13.55% (2.09%) 35.25% 17.03%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity-Income................................................................. 8.89% 6.11% 33.89% 13.25%
Overseas...................................................................... 14.15% 0.82% 8.70% 12.19%
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
Small Cap.............................................................................. (3.80%) 27.69% 29.50%
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
High Income............................................................................ (0.76%) 19.53% 13.00%
Asset Manager.......................................................................... (4.59%) 15.91% 13.57%
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- --------
<S> <C> <C>
Equity Growth................................................................................... 24.39% 12.15%
Balanced........................................................................................ 13.33% 15.86%
International Equity............................................................................ 3.48% 5.71%
Venture Value................................................................................... 21.20% 24.71%
</TABLE>
F-23
<PAGE>
FLEXIBLE PREMIUM ("ZENITH FLEXIBLE LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------
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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 51.56% (9.47%) 31.88% (5.73%) 52.83% (6.75%) 14.11% (7.76%) 37.00% 20.16%
Bond Income............. 1.50% 7.56% 11.46% 7.28% 17.08% 7.37% 11.77% (4.08%) 20.29% 3.82%
Money Market............ 5.73% 6.71% 8.44% 7.38% 5.42% 3.02% 2.20% 3.20% 4.91% 4.34%
<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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<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% 21.55%
Managed................. (1.15%) 8.67% 18.20% 2.44% 19.28% 5.90% 9.82% (1.85%) 30.28% 14.16%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Avanti Growth................................................................. 14.16% (1.01%) 29.38% 16.72%
Growth and Income............................................................. 13.67% (1.94%) 35.45% 17.21%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity-Income................................................................. 9.00% 6.27% 34.09% 13.42%
Overseas...................................................................... 14.26% 0.97% 8.86% 12.36%
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
Small Cap.............................................................................. (3.71%) 27.88% 29.70%
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- --------
<S> <C> <C> <C>
High Income............................................................................ (0.71%) 19.71% 13.17%
Asset Manager.......................................................................... (4.54%) 16.08% 13.74%
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- --------
<S> <C> <C>
Equity Growth................................................................................... 24.51% 12.32%
Balanced........................................................................................ 13.44% 16.03%
International Equity............................................................................ 3.58% 5.87%
Venture Value................................................................................... 21.32% 24.89%
</TABLE>
F-24
<PAGE>
MODIFIED SINGLE PREMIUM ("AMERICAN GATEWAY") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-------------------------------------------------------------------------------------------
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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Income............. 2.27% 8.37% 12.30% 8.09% 17.96% 8.18% 12.61% (3.36%) 21.20% 4.61%
Money Market............ 6.53% 7.52% 9.25% 8.19% 6.21% 3.80% 2.97% 3.97% 5.70% 5.13%
<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- 1/1/96-
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 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (12.20%) 16.34% 30.15% (4.14%) 30.43% 7.30% 9.72% 1.12% 36.92% 22.47%
Managed................. (0.66%) 9.48% 19.08% 3.21% 20.17% 6.70% 10.65% (1.11%) 31.26% 15.03%
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- --------- -------- --------
<S> <C> <C> <C> <C>
Avanti Growth................................................................. 14.74% (0.27%) 30.35% 17.61%
Growth and Income............................................................. 14.24% (1.21%) 36.47% 18.10%
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- --------- -------- --------
<S> <C> <C> <C>
Small Cap.............................................................................. (3.23%) 28.84% 30.68%
<CAPTION>
10/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- --------- -------- --------
<S> <C> <C> <C>
Equity Growth.......................................................................... (4.20%) 48.69% 13.17%
Balanced............................................................................... (0.10%) 24.79% 16.91%
International Equity................................................................... 2.60% 6.23% 6.67%
Venture Value.......................................................................... (3.50%) 39.28% 25.84%
U.S. Government........................................................................ 0.60% 15.02% 3.31%
Strategic Bond Opportunities........................................................... (1.40%) 19.38% 14.36%
</TABLE>
The net investment return of a sub-account is calculated by taking the
difference between the sub-account's ending value and the beginning value for
the period and dividing it by the beginning value for the period.
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
New England Life Insurance Company:
We have audited the accompanying consolidated balance sheet of New England
Life Insurance Company (formally New England Variable Life Insurance Company)
and subsidiaries as of December 31, 1996, and the related consolidated
statement of earnings, equity, and cash flows for the year 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1996 consolidated financial statements present fairly, in
all material respects, the financial position of the New England Life
Insurance Company and subsidiaries as of December 31, 1996 and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
In 1996, as discussed in Note 1 to the financial statements, the Company (1)
has adopted all applicable generally accepted accounting principles as
required for mutual life insurance enterprises (or wholly-owned stock life
insurance company subsidiaries of mutual life insurance enterprises) by
Interpretation No. 40, Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises, and Statement of
Financial Accounting Standards No. 120, Accounting and Reporting by Mutual
Life Insurance Enterprises and by Insurance Enterprises for Certain Long
Duration Participating Policies; and (2) has reflected the effects of the
changes in corporate organization.
The consolidated balance sheet of the Company and subsidiaries as of December
31, 1995 and the related consolidated statements of earnings, equity, and cash
flows for the periods ended December 31, 1995 and 1994 present the combination
of the individual financial statements of New England Variable Life Insurance
Company and other entities listed in Note 1. Such individual financial
statements were audited by other auditors before the applicable effects of the
changes described in the paragraph above and their reports on the financial
statements of each of the insurance entities listed in Note 1 expressed an
adverse opinion as to the conformity with generally accepted accounting
principles and an unqualified opinion as to conformity with statutory
principles and their reports on the financial statements of each of the other
entities expressed an unqualified opinion. We have audited the adjustments
that were applied to restate the 1995 and 1994 financial statements to reflect
the effects of the changes for the adoption of generally accepted accounting
principles and the changes in corporate organization as described in Note 1.
In our opinion, such adjustments are appropriate and have been properly
applied.
Deloitte & Touche LLP
February 18, 1997
Boston, Massachusetts
F-26
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
NOTES 1996 1995
----- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investments:
Fixed Maturities:
Available for Sale, at Estimated Fair
Value................................... 2,11 $ 524,284,643 $ 575,834,866
Held to Maturity, at Amortized Cost...... 29,666,318 36,550,618
Mortgage Loans on Real Estate............ 2,11 -- 2,210,153
Policy Loans............................. 11 76,262,779 58,210,498
Real Estate.............................. 1,701,981 --
Short-Term Investments................... 11 156,559,460 20,828,254
Other Invested Assets.................... 12,956,434 206,000
-------------- --------------
Total Investments........................ 801,431,615 693,840,389
Cash and Cash Equivalents................ 11 49,147,342 35,129,015
Deferred Policy Acquisition Costs........ 434,636,666 353,809,245
Accrued Investment Income................ 13,712,748 14,621,811
Premiums and Other Receivables........... 4 5,941,433 10,311,027
Other Assets............................. 95,106,160 11,148,103
Separate Account Assets.................. 1,206,959,498 748,184,716
-------------- --------------
Total Assets........................... $2,606,935,462 $1,867,044,306
============== ==============
LIABILITIES AND EQUITY
LIABILITIES
Future Policy Benefits..................... 4 $ 464,888,914 $ 446,687,020
Policyholder Account Balances.............. 4,11 181,594,090 138,831,391
Other Policyholder Funds................... 11 2,071,162 2,353,586
Policyholder Dividends Payable............. 9,018,002 7,346,500
Short and Long-Term Debt................... 8,11 84,056,337 79,347,546
Income Taxes Payable: 5
Current.................................. 6,272,302 9,179,749
Deferred................................. 39,463,081 54,981,645
Other Liabilities.......................... 62,190,384 25,629,031
Separate Account Liabilities............... 1,206,959,498 748,184,716
-------------- --------------
Total Liabilities...................... 2,056,513,770 1,512,541,184
-------------- --------------
Commitments and Contingencies (Notes 2, 4,
8 and 9)..................................
EQUITY
Common Stock............................... 2,500,000 2,500,000
Contributed Capital........................ 497,945,598 289,099,450
Retained Earnings.......................... 46,248,721 36,547,252
Net Unrealized Investment Gains............ 3 3,727,373 26,356,420
-------------- --------------
Total Equity........................... 550,421,692 354,503,122
-------------- --------------
Total Liabilities and Equity............... $2,606,935,462 $1,867,044,306
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
NOTES 1996 1995 1994
----- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Premiums, net.................... 4 $ 37,410,040 $ 38,565,735 $206,099,650
Universal Life and Investment-
Type Product Policy Fee Income.. 101,755,632 79,371,437 63,349,660
Net Investment Income............ 3 49,628,343 41,815,075 4,069,355
Investment Gains (Losses), Net... 3 15,979,267 21,979,906 (64,081)
Commissions, Fees and Other In-
come............................ 44,929,609 34,554,617 264,883,323
------------ ------------ ------------
Total Revenues................... 249,702,891 216,286,770 538,337,907
BENEFITS AND OTHER DEDUCTIONS
Policyholder Benefits, net....... 4 65,520,519 55,810,172 435,150,792
Interest Credited to Policyholder
Account Balances................ 5,557,652 2,564,651 904,003
Policyholder Dividends........... 14,829,641 13,953,664 7,232,042
Other Operating Costs and Ex-
penses.......................... 151,043,021 110,890,061 83,725,839
------------ ------------ ------------
Total Benefits and Other Deduc-
tions........................... 236,950,833 183,218,548 527,012,676
------------ ------------ ------------
Earnings from Continuing
Operations before Income Taxes.. 12,752,058 33,068,222 11,325,231
Income Taxes..................... 5 3,050,589 12,302,605 4,188,483
------------ ------------ ------------
NET EARNINGS..................... $ 9,701,469 $ 20,765,617 $ 7,136,748
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NET
COMMON UNREALIZED
STOCK & INVESTMENT
CONTRIBUTED RETAINED GAINS
CAPITAL EARNINGS (LOSSES) TOTAL
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCES AT JANUARY 1,
1994..................... $175,028,227 $ 8,644,887 $ 104,801 $183,777,915
Net Earnings.............. 7,136,748 7,136,748
Change in Net Unrealized
Investment Gains
(Losses)................. (774,432) (774,432)
Contributed Capital....... 53,028,000 53,028,000
------------ ----------- ------------ ------------
BALANCES AT DECEMBER 31,
1994..................... 228,056,227 15,781,635 (669,631) 243,168,231
Net Earnings.............. 20,765,617 20,765,617
Change in Net Unrealized
Investment Gains
(Losses)................. 27,026,051 27,026,051
Contributed Capital....... 63,543,223 63,543,223
------------ ----------- ------------ ------------
BALANCES AT DECEMBER 31,
1995..................... 291,599,450 36,547,252 26,356,420 354,503,122
Net Earnings.............. 9,701,469 9,701,469
Change in Net Unrealized
Investment Gains
(Losses)................. (22,629,047) (22,629,047)
Contributed Capital....... 208,846,148 208,846,148
------------ ----------- ------------ ------------
BALANCES AT DECEMBER 31,
1996..................... $500,445,598 $46,248,721 $ 3,727,373 $550,421,692
============ =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
NET CASH USED IN OPERATING
ACTIVITIES....................... $ (85,673,871) $(111,833,907) $ (46,062,592)
------------- ------------- -------------
Cash Flows from Investing
Activities:
Sales, Maturities and Repayments
of:
Available for Sale Fixed
Maturities................... 276,420,158 538,296,916 13,480,392
Held to Maturity Fixed
Maturities................... 10,519,220 625,000 --
Mortgage Loans on Real Estate. 2,210,152 11,789 8,000
Purchases of:
Available for Sale Fixed
Maturities................... (259,713,146) (983,517,566) (121,490,180)
Real Estate................... (480,007) -- --
Fixed Asset Property and
Equipment.................... (3,786,192) -- --
Other Assets.................. (11,024,000) (15,000) (32,000)
Net Change in Short-Term
Investments.................... (135,731,206) 379,325,026 13,737,203
Net Change in Policy Loans...... (18,052,280) (14,243,155) (13,293,625)
Other, Net...................... 66,820 (114,000) 2,255,589
------------- ------------- -------------
NET CASH USED IN INVESTING
ACTIVITIES....................... (139,570,481) (79,630,990) (105,334,621)
------------- ------------- -------------
Cash Flows from Financing
Activities:
Common Stock....................
Capital Contributions........... 159,162,170 9,515,000 52,698,000
Borrowed Money.................. 25,000,000 50,000,000
Policyholder Account Balances:
Deposits...................... 482,551,966 281,761,424 201,732,909
Withdrawals................... (364,932,882) (148,402,748) (108,766,575)
Financial Reinsurance
Receivables.................... (37,518,575) -- --
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES....................... 239,262,679 167,873,676 195,664,334
------------- ------------- -------------
Change in Cash and Cash
Equivalents...................... 14,018,327 (23,591,221) 44,267,121
Cash and Cash Equivalents,
Beginning of Year................ 35,129,015 58,720,236 14,453,115
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF
YEAR............................. $ 49,147,342 $ 35,129,015 $ 58,720,236
============= ============= =============
Supplemental Cash Flow
Information:
Interest Paid................... $ 1,523,134 $ 1,277,033 $ --
============= ============= =============
Income Taxes Paid............... $ 4,720,928 $ 6,764,653 $ 132,000
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
NET EARNINGS..................... $ 9,701,469 $ 20,765,617 $ 7,136,748
Adjustments to Reconcile Net
Earnings to Net Cash Provided by
(Used in) Operating Activities:
Change in Deferred Policy
Acquisition Costs, Net........ (68,626,162) (45,823,425) (128,219,002)
Change in Accrued Investment
Income........................ 909,063 (11,507,438) (87,020)
Change in Premiums and Other
Receivables................... 4,369,594 (4,072,681) (1,494,680)
Investment (Gains) Losses, Net. (15,979,267) (21,979,906) 64,081
Depreciation and Amortization
Expenses...................... 4,119,881 5,724,945 99,912
Change in Transfer to Separate
Account....................... (2,242,885) 1,412,264 105,477
Interest Credited to
Policyholder Account Balances. 5,557,652 2,564,651 904,003
Universal Life and Investment-
Type Product Policy Fee
Income........................ (101,755,632) (79,371,437) (63,349,660)
Change in Future Policy
Benefits...................... 18,201,894 14,538,593 125,898,745
Change in Other Policyholder
Funds......................... (282,879) 1,789,475 156,400
Change in Policyholder
Dividends Payable............. 1,671,502 114,458 7,232,042
Change in Income Taxes Payable. (6,633,789) 10,210,526 10,337,032
Other, Net..................... 65,315,688 (6,199,549) (4,846,670)
------------- ------------- -------------
NET CASH USED IN OPERATING
ACTIVITIES...................... $ (85,673,871) $(111,833,907) $ (46,062,592)
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
New England Life Insurance Company and its subsidiaries (the "Company") is a
wholly-owned stock life insurance subsidiary of Metropolitan Life Insurance
Company (MetLife). The Company principally provides variable life insurance
and variable annuity products through a network of general agencies located
throughout the United States.
Prior to the merger of New England Mutual Life Insurance Company (NEMLICO)
with MetLife on August 31, 1996, New England Life Insurance Company (NELICO),
formerly known as New England Variable Life Insurance Company (NEVLICO), was a
subsidiary of NEMLICO. NEMLICO was merged directly into MetLife and ceased to
exist as a separate mutual life insurance company. In conjunction with the
merger, NEVLICO became a subsidiary of MetLife and changed its name to New
England Life Insurance Company. NELICO has continued after the merger to
conduct its existing businesses and is also administering the business
activities for the former parent NEMLICO. (Note 13)
NELICO is headquartered in Boston, Massachusetts and became a Massachusetts
chartered company through a legal process known as redomestication. Prior to
the merger, NEVLICO was organized under Delaware law. The capital structure of
NELICO continues in the same form subsequent to the merger with common stock
authorized at 50,000 shares and 20,000 shares issued and outstanding with a
par value of $125 per share. MetLife made an additional statutory capital
contribution to NELICO at the merger date totaling $208,003,770 consisting of
$128,412,170 of cash and $79,591,600 of bonds, real estate, mortgages, common
stock of affiliates and furniture and equipment. Prior to the merger, NELICO
received a capital contribution from NEMLICO for $20,000,000 in cash. The
total contributed capital for 1996 equaled $228,003,770.
Certain companies that were subsidiaries of NEMLICO became subsidiaries of
NELICO as of the merger. The principal subsidiaries of which NELICO owns 100%
of the outstanding common stock are Exeter Reassurance Company, Ltd., New
England Pension and Annuity Company and Newbury Insurance Company Limited for
insurance operations and New England Securities Corporation and TNE Advisers,
Inc. for other operations. The principal business activities of the
subsidiaries are disclosed below.
Exeter Reassurance Company, Ltd., (Exeter) was incorporated in Bermuda on
November 15, 1994, and registered as an insurer under The Insurance Act 1978
(Bermuda). Exeter engages in financial reinsurance of life insurance and
annuity policies.
New England Pension and Annuity Company (NEPA) was incorporated under the laws
of the State of Delaware on September 12, 1980. NEPA holds licenses in 20
states, but is currently not actively engaged in the sale or distribution of
insurance products.
New England Securities Corporation (NES), a National Association of Securities
Dealers ("NASD") registered broker/dealer, conducts business as a wholesale
distributor of investment products through the sales force of NELICO.
Established in 1968, NES offers a range of investment products including
mutual funds, investment partnerships, and individual securities. In 1994, NES
became a Registered Investment Advisor with the Securities and Exchange
Commission ("SEC") and now offers individually managed portfolios. NES is the
national distributor for variable annuity and variable life products issued by
NELICO. NES is the sole owner of Hereford Insurance Agency, Inc.
Newbury Insurance Company, Limited (Newbury) was incorporated in Bermuda on
May 1, 1987, and is registered as a Class 2 insurer under The Insurance Act
1978 (Bermuda). Newbury provides professional liability and personal injury
coverage to the agents of NELICO through a facultative reinsurance agreement
with Lexington Insurance Company. The policy applies to claims made during the
policy period or during the discovery period with limits of $1,000,000 each
claim, $1,000,000 annual aggregate each insured, $3,500,000 and $3,000,000
annual aggregate all insured in 1996 and 1995 respectively.
F-32
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
TNE Advisers, Inc. was incorporated on August 26, 1994, and is registered as
an investment adviser with the SEC, under the Investment Advisers Act of 1940.
TNE Advisers, Inc. was organized to serve as an investment adviser to certain
mutual funds of the New England Zenith Fund and does not intend to engage in
any business activities other than providing investment management and
administrative services.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP"), and include
the accounts of NELICO and its subsidiaries in which NELICO has control and a
majority economic interest. The consolidated financial statements have been
prepared as though the current reporting entity had always existed.
Significant intercompany transactions and balances have been eliminated in
consolidation.
Prior to 1996, NELICO, as a wholly owned stock life insurance subsidiary of a
mutual life insurance company, prepared its financial statements in conformity
with accounting practices prescribed or permitted by the Insurance Department
of the State of Delaware (statutory financial statements), which accounting
practices were considered to be GAAP. In 1996, NELICO adopted Interpretation
No. 40, Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises (the "Interpretation") and Statement of
Financial Accounting Standards ("SFAS") No. 120, Accounting and Reporting by
Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Long Duration Participating Policies (the "Standard"), of the Financial
Accounting Standards Board ("FASB"). The Interpretation and Standard required
mutual life insurance companies to adopt all standards promulgated by the FASB
in their general purpose financial statements. The financial statements of
NELICO for 1995 and 1994 have been retroactively restated to reflect the
adoption of all applicable authoritative GAAP pronouncements. The cumulative
effect of such adoption as of January 1, 1994 has been reflected in an
adjustment of equity at January 1, 1994 (see Note 12).
As of December 31, 1993, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", which expanded the use of fair value accounting for those
securities that a company does not have positive intent and ability to hold to
maturity. Implementation of SFAS No. 115 increased consolidated equity by
$104,801, net of deferred income taxes and adjustments of deferred policy
acquisition costs and future policy benefits.
VALUATION OF INVESTMENTS
Fixed maturity securities for which the Company has the positive intent and
ability to hold to maturity are stated principally at amortized cost and
include bonds and redeemable preferred stock. All other fixed maturity
securities are classified as available for sale and are reported at estimated
fair market value. Unrealized holding gains and losses on fixed maturity
securities available for sale are reported as a separate component of equity.
Such amounts are net of related deferred income taxes and adjustments of
deferred policy acquisition costs and future policy benefits relating to
unrealized gains on available for sale securities. Amortized cost of fixed
maturity securities is adjusted for impairments in value deemed to be other
than temporary. All securities are recorded on a trade date basis.
The Company's mortgage loan on real estate was carried at outstanding
principal balance. Mortgage loans are considered impaired when, based on
current information and events, it is probable that the Company will be unable
to collect all amounts due according to the contract terms of the loan
agreement. The mortgage loan was in good standing at December 31, 1995 and no
allowance for loss was required.
Real estate is considered held for sale by management and is reported at the
lower of cost or estimated fair market value less allowances for the estimated
cost of sales. No impairment allowance is required on the property.
F-33
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost which approximates fair
value.
Cash and cash equivalents includes cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less. These are carried at cost, which approximates fair value.
INVESTMENT RESULTS
Realized investment gains and losses are determined by specific identification
and are presented as a component of revenues.
PROPERTY AND EQUIPMENT
Property and equipment and leasehold improvements are included in other assets
and are stated at cost, less accumulated depreciation and amortization.
Depreciation, including charges relating to capitalized leases, is provided
using the straight line method over the estimated useful lives of the assets
which generally range from 4 to 15 years or the term of the lease, if shorter.
Amortization of leasehold improvements is provided using the straight line
method over the lesser of the term of the leases or the estimated useful life
of the improvements.
Accumulated depreciation and amortization on property and equipment and
leasehold improvements was $3,117,743 and $0 at December 31, 1996 and 1995,
respectively. Related depreciation and amortization expense was $3,117,743, $0
and $0 for the years ended December 31, 1996, 1995 and 1994, respectively.
RECOGNITION OF INCOME AND EXPENSES
Premiums from traditional life policies are recognized generally as income
when due. Benefits and expenses are matched with such income so as to result
in the recognition of profits over the life of the contract. This match is
accomplished by means of the provision for liabilities for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs.
Reinsurance allowances for individual non-medical health contracts are
recognized as income when due.
Premiums from variable life, universal life and investment-type contracts are
reported as deposits to policyholder account balances. Revenues from these
contracts consist of amounts assessed during the period against policyholder
account balances for mortality charges, policy administration charges and
surrender charges. Policy benefits and claims that are charged to expense
include benefit claims incurred in the period in excess of related
policyholder account balances and interest credited to policyholder account
balances.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, agency and
policy issue expenses, all of which vary with and are primarily related to the
production of new business, have been deferred. Deferred policy acquisition
costs are subject to recoverability testing at the time of policy issue and
loss recognition testing at the end of each accounting period.
Deferred policy acquisition costs are amortized over a period up to 40 years
for traditional life, variable life, universal life products and for
investment-type products as a constant percentage of estimated gross margins
or profits arising principally from surrender charges and interest, mortality
and expense margins based on historical and anticipated future experience,
updated regularly. The effects of revisions to experience on previous
amortization of deferred policy acquisition costs are reflected in earnings in
the period estimated gross margins or profits are revised.
F-34
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
For non-medical health insurance contracts, deferred policy acquisition costs
are amortized over the life of the contracts (generally between 10 and 30
years) in proportion to anticipated reinsurance allowances.
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES
Future policy benefit liabilities for participating traditional life insurance
policies are equal to the aggregate of net level premium reserve for death and
endowment policy benefits and the liability for terminal dividends. The net
level premium reserve is calculated based on the dividend fund interest rate
and mortality rates guaranteed in calculating the cash surrender values
described in such contracts. Interest rates used in establishing future policy
benefit liabilities range from 4 percent to 5 percent for life insurance
policies.
Policyholder account balances for variable life, universal life and
investment-type contracts are equal to the policy account values. The policy
account values represent an accumulation of gross premium payments plus
credited interest less expense and mortality charges and withdrawals.
Benefit liabilities for non-medical health insurance are calculated as the net
GAAP liability plus the unamortized deferred acquisition costs. Benefit
liabilities for disabled lives are estimated using the present value of
benefits method and experience assumptions as to claim terminations, expenses
and interest.
INCOME TAXES
NELICO files a consolidated Federal Income Tax return with Exeter Reassurance
Company, Ltd. The future tax consequences of temporary differences between
financial reporting and tax basis of assets and liabilities are measured as of
the balance sheet dates and are recorded as deferred tax assets or
liabilities.
SEPARATE ACCOUNT OPERATIONS
Separate Accounts are established in conformity with the state insurance laws
and are generally not chargeable with liabilities that arise from any other
business of the Company. Separate Account assets are subject to general
account claims only to the extent the value of such assets exceed the Separate
Account liabilities.
Investments held in the Separate Accounts (stated at estimated fair market
value) and liabilities of the Separate Accounts (including participants'
corresponding equity in the Separate Accounts) are reported separately as
assets and liabilities. Deposits to Separate Accounts are reported as
increases in Separate Account liabilities and are not reported in revenues.
Mortality, policy administration and surrender charges to all Separate
Accounts are included in revenues.
POLICYHOLDER DIVIDENDS
The amount of policyholder dividends to be paid is determined annually by the
Board of Directors. The aggregate amount of policyholder dividends is related
to actual interest, mortality, morbidity and expense experience for the year
and management's judgment as to the appropriate level of statutory surplus to
be retained by the Company.
CONSOLIDATED STATEMENTS OF CASH FLOWS--NON CASH TRANSACTIONS
For the years ended December 31, 1996 and 1995, respectively, the Company
received capital contributions in the form of transfer of assets of
$49,683,978 and $54,028,223. In 1994, $296,815,969 of bonds were received in
support of the coinsurance treaty with NEMLICO.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-35
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
2. INVESTMENTS
DEBT SECURITIES
The carrying value, gross unrealized gain (loss) and estimated fair value of
fixed securities, by category, as of December 31, 1996 and 1995 are shown
below.
HELD TO MATURITY SECURITIES
<TABLE>
<CAPTION>
GROSS UNREALIZED
ESTIMATED ---------------------- AMORTIZED
FAIR VALUE GAIN LOSS COST
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
1996
Fixed Maturities:
Bonds:
U.S. Treasury Securities and
obligations of
U.S. government
corporations and agencies.. $ 7,344,149 $ 51,289 $ 6,095 $ 7,298,955
States and political subdi-
visions.................... 517,770 38,031 479,739
Corporate................... 22,648,666 860,180 99,138 21,887,624
------------ ----------- ---------- ------------
Total Fixed Maturities........ $ 30,510,585 $ 949,500 $ 105,233 $ 29,666,318
============ =========== ========== ============
HELD TO MATURITY SECURITIES
<CAPTION>
GROSS UNREALIZED
ESTIMATED ---------------------- AMORTIZED
FAIR VALUE GAIN LOSS COST
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
1995
Fixed Maturities:
Bonds:
U.S. Treasury Securities and
obligations of
U.S. government
corporations and agencies.. $ 9,695,983 $ 179,024 $ $ 9,516,959
States and political subdi-
visions.................... 530,650 60,604 470,046
Corporate................... 26,599,841 257,222 170,994 26,513,613
Other....................... 50,000 50,000
------------ ----------- ---------- ------------
Total Fixed Maturities........ $ 36,876,474 $ 496,850 $ 170,994 $ 36,550,618
============ =========== ========== ============
AVAILABLE FOR SALE SECURITIES
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
------------ ----------- ---------- ------------
<S> <C> <C> <C> <C>
1996
Fixed Maturities:
Bonds:
U.S. Treasury Securities and
obligations of
U.S. government
corporations and agencies.. $ 5,464,659 $ 46,737 $ 24,580 $ 5,486,816
Foreign governments......... 1,577,439 1,147 57,272 1,521,314
Corporate................... 505,682,553 18,637,259 7,092,856 517,226,956
Mortgage-backed securities.. 48,759 798 49,557
------------ ----------- ---------- ------------
Total Fixed Maturities........ $512,773,410 $18,685,941 $7,174,708 $524,284,643
============ =========== ========== ============
</TABLE>
F-36
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
AVAILABLE FOR SALE SECURITIES
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED -------------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
------------ ----------- -------- ------------
<S> <C> <C> <C> <C>
1995
Fixed Maturities:
Bonds:
U.S. Treasury Securities and
obligations of
U.S. government corporations
and agencies................. $ 1,991,186 $ 746 $ 1,135 $ 1,990,797
Foreign governments........... 3,017,691 178,111 3,195,802
Corporate..................... 512,320,546 58,440,764 183,844 570,577,466
Mortgage-backed securities.... 69,877 924 70,801
------------ ----------- -------- ------------
Total Fixed Maturities.......... $517,399,300 $58,620,545 $184,979 $575,834,866
============ =========== ======== ============
</TABLE>
Included in net unrealized appreciation (deprection) of investments are
unrealized gains on foreign currency investments as well as unrealized gains
on the associated forward foreign exchange contracts. Unrealized appreciation
(depreciation) of investments consists of the following:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Net unrealized gains on investments....................... $ 8,213 $372,881
Unrealized gains (losses) on the maturity of forward con-
tracts................................................... 13,665 (76,214)
------- --------
$21,878 $296,667
======= ========
</TABLE>
The estimated fair value and amortized cost of bonds classified as held to
maturity, by contractual maturity, at December 31, 1996 are shown below.
<TABLE>
<CAPTION>
ESTIMATED AMORTIZED
FAIR VALUE COST
----------- -----------
<S> <C> <C>
Due in one year or less............................. $ 3,792,488 $ 3,783,539
Due after one year through five years............... 8,714,767 8,791,593
Due after five years through ten years.............. 17,503,330 16,591,186
Due after ten years................................. 500,000 500,000
----------- -----------
Total............................................. $30,510,585 $29,666,318
=========== ===========
</TABLE>
The amortized cost and estimated fair value of bonds classified as available
for sale, by contractual maturity, at December 31, 1996 are shown below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
------------ ------------
<S> <C> <C>
Due in one year or less........................... $ $
Due after one year through five years............. 23,380,259 23,820,548
Due after five years through ten years............ 51,941,867 51,169,921
Due after ten years............................... 437,402,525 449,244,617
------------ ------------
Subtotal........................................ 512,724,651 524,235,086
Mortgage-backed securities........................ 48,759 49,557
------------ ------------
Total......................................... $512,773,410 $524,284,643
============ ============
</TABLE>
Bonds not due at a single maturity date have been included in the above tables
in the year of final maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without prepayment penalties.
F-37
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ASSETS HELD IN TRUST FOR THE BENEFIT OF OTHER PARTIES
Exeter has deposited in a trust for the benefit of MetLife certain assets for
the purpose of allowing MetLife to record a reserve credit as permitted by
regulations of the State of New York. Under the terms of the Trust Agreement
MetLife enjoys broad powers to withdraw funds from the trust for the payment
of policyholder claims incurred by Exeter under its reinsurance treaty and to
direct the investment of funds held in the trust. The Trust Agreement limits
the types of investments that may be held in trust to cash and certificates of
deposit, U.S. Government bonds and notes and publicly traded securities of
U.S. companies having a National Association of Insurance Commissioners (NAIC)
rating of 1. At December 31, 1996, the trust held $786,828 of cash and
$468,847,351 of bonds and short-term investments, and at December 31, 1995
$487,268,195 of bonds and short-term investments.
MORTGAGE LOANS
As of December 31, 1995 the mortgage loan investment was collateralized by
industrial property in Baltimore, Maryland.
ASSETS ON DEPOSIT
As of December 31, 1996 and 1995, the Company had assets on deposit with
regulatory agencies of $5,884,253 and $6,486,794, respectively.
3. INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of investment income are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Fixed maturities......................... $44,629,921 $39,264,322 $1,597,939
Mortgage loans on real estate............ 110,037 233,974 235,138
Real estate.............................. 55,149
Policy loans............................. 3,734,183 2,831,097 1,996,359
Cash, cash equivalents and short-term in-
vestments............................... 3,656,448 1,173,815 597,425
Other investment income.................. 37,135
----------- ----------- ----------
Gross investment income.................. 52,222,873 43,503,208 4,426,861
Investment expenses...................... 2,594,530 1,688,133 357,506
----------- ----------- ----------
Investment income, net................... $49,628,343 $41,815,075 $4,069,355
=========== =========== ==========
</TABLE>
Investment gains (losses) are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- --------
<S> <C> <C> <C>
Fixed maturities......................... $15,467,124 $21,981,201 $(64,090)
Other.................................... 512,143 (1,295) 9
----------- ----------- --------
Investment gains (losses), net........... $15,979,267 $21,979,906 $(64,081)
=========== =========== ========
</TABLE>
Proceeds from the sales of bonds classified as available for sale during 1996,
1995 and 1994 were $275,008,306, $518,416,727 and $13,127,940 respectively.
During 1996, 1995 and 1994, respectively, gross gains of $19,109,340,
$22,557,997 and $77,319, and gross losses of $3,878,497, $576,796, and
$141,409 were realized on those sales.
F-38
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Proceeds from the call of direct issue bonds classified as held to maturity
during 1996, 1995 and 1994 were $5,290,796, $0, and $0, respectively. During
1996, 1995 and 1994, respectively, gross gains of $236,280, $0 and $0, and
gross losses of $0, $0, and $0 were realized due to prepayment premiums
received. There were no sales of fixed maturities classified as held to
maturity.
The unrealized investment gains (losses), which are included in the
consolidated balance sheets as a component of equity and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ---------
<S> <C> <C> <C>
Year ended December 31
Balance, beginning of year.......... $ 26,356,420 $ (669,631) $ 104,801
Change in unrealized investment
gains (losses)................... (46,851,102) 58,946,561 --
Effect of adopting SFAS No. 115... -- -- (931,481)
Change in unrealized investment
gains (losses) attributable to:
Deferred policy acquisition cost
allowances..................... 12,210,988 (17,883,703) 98,294
Deferred income tax (expense)
benefit........................ 12,011,067 (14,036,807) 58,755
------------ ------------ ---------
Balance, end of year................ $ 3,727,373 $ 26,356,420 $(669,631)
------------ ------------ ---------
December 31
Balance, end of year, comprises:
Unrealized investment gains (loss-
es) on:
Fixed maturities.................. $11,524,866 $ 58,369,351 $(574,586)
Other............................. (4,327) 2,290 (334)
------------ ------------ ---------
11,520,539 58,371,641 (574,920)
Amounts of unrealized investment
gains (loss)
attributable to:
Deferred policy acquisition cost
allowances....................... (5,755,640) (17,966,628) (82,925)
Deferred income taxes............. (2,037,526) (14,048,593) (11,786)
------------ ------------ ---------
Balance, end of year................ $ 3,727,373 $ 26,356,420 $(669,631)
============ ============ =========
</TABLE>
Net unrealized investment gains at December 31, 1996, before deferred Federal
income tax, reflects gross unrealized gains of $18,685,941 and gross
unrealized losses of $7,174,708.
4. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
In the normal course of business, the Company assumes and cedes reinsurance
with other insurance companies. The accompanying consolidated statements of
earnings are presented net of reinsurance ceded.
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -------------
<S> <C> <C> <C>
Direct premiums................... $ 2,681,689 $ 2,794,103 $ 329,113
Reinsurance assumed............... 67,482,752 69,329,831 402,121,966
Reinsurance ceded................. (32,754,401) (33,558,199) (196,351,429)
------------ ------------ -------------
Net premiums earned............... $ 37,410,040 $ 38,565,735 $ 206,099,650
============ ============ =============
</TABLE>
F-39
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Policyholder benefits in the accompanying consolidated statements of earnings
are presented net of reinsurance recoveries of $23,961,773, $22,577,080 and
$4,948,808 for the years ended December 31, 1996, 1995 and 1994, respectively.
Premiums and other receivables in the accompanying consolidated balance sheets
include reinsurance recoveries of $0.2 million and $0 million at December 31,
1996 and 1995, respectively.
A contingent liability exists with respect to reinsurance ceded should the
reinsurers be unable to meet their obligations.
5. INCOME TAXES
Income tax expense for U.S. operations has been calculated in accordance with
the provisions of the Internal Revenue Code, as amended.
NELICO and its eligible subsidiary file a consolidated U.S. income tax return
and other subsidiaries file separate income tax returns as required. The
Company uses the liability method of accounting for income taxes. Income tax
provisions are based on income reported for financial statement purposes.
Deferred income taxes arise from the recognition of temporary differences
between income determined for financial reporting purposes and income tax
purposes.
A summary of income tax expense (benefit) in the consolidated statements of
earnings is shown below:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
1996
Federal............................... $ 5,333,391 $(1,531,395) $ 3,801,996
State and Local....................... (751,407) (751,407)
----------- ----------- -----------
Total................................. $ 5,333,391 $(2,282,802) $ 3,050,589
=========== =========== ===========
1995
Federal............................... $ 5,503,644 $ 6,354,610 $11,858,254
State and Local....................... 444,351 444,351
----------- ----------- -----------
Total................................. $ 5,503,644 $ 6,798,961 $12,302,605
=========== =========== ===========
1994
Federal............................... $(1,960,017) $ 5,557,870 $ 3,597,853
State and Local....................... 590,630 590,630
----------- ----------- -----------
Total................................. $(1,960,017) $ 6,148,500 $ 4,188,483
=========== =========== ===========
</TABLE>
Reconciliations of the differences between income taxes computed at the
federal statutory tax rates and consolidated provisions for income taxes are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Income before taxes................. $ 12,752,058 $33,068,222 $11,325,231
Income tax rate..................... 35% 35% 35%
------------ ----------- -----------
Expected income tax expense at
federal statutory
income tax rate.................... 4,463,220 11,573,878 3,963,831
Tax effect of:
Change in valuation allowance..... (13,948,000) (413,000) (402,850)
NOL benefit write-off............. 13,012,000 -- --
State and local income taxes...... (488,415) 288,828 383,910
Tax credits.......................
Other, net........................ 11,784 852,899 243,592
------------ ----------- -----------
Income Tax Expense (Benefit)........ $ 3,050,589 $12,302,605 $ 4,188,483
============ =========== ===========
</TABLE>
F-40
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The deferred tax asset or liability recorded represents the net temporary
differences between the tax bases of assets and liabilities and their amounts
for financial reporting. The components of the net deferred tax asset or
liability at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Deferred tax assets:
Policyholder liabilities.................... $ 83,303,973 $ 69,491,980
Net operating loss carryforward............. 12,547,940 13,012,000
Other....................................... 14,690,260 9,890,697
------------- -------------
Total gross assets............................ 110,542,173 92,394,677
Less valuation allowance.................... (13,948,000)
------------- -------------
Asset, net of valuation allowance............. 110,542,173 78,446,677
------------- -------------
Deferred tax liabilities
Investments................................. (2,526,047) (7,185,868)
Deferred policy acquisition costs........... (132,964,603) (106,477,179)
Net unrealized capital gains................ (2,037,526) (14,048,593)
Other....................................... (12,477,078) (5,716,682)
------------- -------------
Total gross liabilities....................... (150,005,254) (133,428,322)
------------- -------------
Net deferred tax liability.................... $ (39,463,081) $ (54,981,645)
============= =============
</TABLE>
The sources of the deferred tax expense (benefit) and their tax effects are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Policyholder liabilities............ $(17,818,264) $(4,109,738) $(25,551,114)
Net operating loss carryforward..... 464,060
Deferred policy acquisition costs... 21,827,603 13,877,584 32,756,212
Other, net.......................... (6,756,201) (2,968,885) (1,056,598)
------------ ----------- ------------
Total............................... $ (2,282,802) $ 6,798,961 $ 6,148,500
============ =========== ============
</TABLE>
6. EMPLOYEE BENEFIT PLANS
The Home Office Retirement Plan and related Select Employees' Supplemental
Retirement Plan (together the "Plan") cover substantially all of the Company's
employees. Retirement benefits are based primarily on years of service and the
employee's average salary. The Company's funding policy is to contribute
annually an amount that can be deducted for federal income tax purposes using
a different actuarial cost method and different assumptions from those used
for financial reporting purposes. The net pension cost charged to income in
1996, 1995, and 1994 was $159,000, $150,000, and $145,000, respectively. These
amounts are not representative of the net pension cost that can be expected to
be charged to income in future years, because substantially all the Company's
employees were employed by NEMLICO prior to the merger, and, correspondingly,
substantially all net pension cost was incurred by NEMLICO. The amounts of net
periodic pension cost disclosed below are more indicative of the net pension
cost that will be incurred in future years.
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Service cost...................... $ 5,761,000 $ 4,797,000 $ 6,575,000
Interest cost on projected benefit
obligation....................... 12,489,000 11,012,000 10,590,000
Actual return on assets........... (15,468,000) (21,221,000) 2,121,000
Net amortization and deferrals.... 6,009,000 13,059,000 (10,002,000)
------------ ------------ ------------
Net periodic pension cost......... $ 8,791,000 $ 7,647,000 $ 9,284,000
============ ============ ============
</TABLE>
The assumed long-term rate of return on assets used in determining the net
periodic pension cost was 8.5 percent.
F-41
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The following information for the plan includes amounts relating to NEMLICO.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Actuarial present value of accumulated plan ben-
efits.......................................... $133,000,000 $119,000,000
============ ============
Projected benefit obligation.................... 182,000,000 168,000,000
============ ============
Net assets available for plan benefits.......... 130,992,000 116,000,000
============ ============
Unrecognized prior service cost................. 224,000 3,954,000
============ ============
Unrecognized net (loss) from past experience
difference from that assumed................... (37,327,000) (47,300,000)
============ ============
Unamortized transition gains.................... $ 4,015,000 $ 5,185,000
============ ============
</TABLE>
The weighted average discount rate was 7.5%, 8.0% and 7.5% in 1996, 1995 and
1994, respectively. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit was 5.0% for
1996, 1995 and 1994. Plan assets consist of bonds, stocks, real estate, and
insurance contracts and have an assumed long-term rate of return of 8.5% for
1996, 1995 and 1994.
OTHER POSTRETIREMENT BENEFITS
In addition to pension benefits, the Company provides certain health care and
life insurance benefits for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age while working
for the Company.
The following sets forth the plan's fiscal year end funded status reconciled
with amounts reported in the financial statements of MetLife. Subsequent to
the merger, substantially all employees covered by the plan are employed by
the Company. Accordingly, in future years these disclosures will reconcile to
amounts reported on the Company's balance sheet and income statement.
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.......................................... $28,566,000 $31,696,000
Fully eligible active plan participants........... 5,482,000 7,075,000
All other actives................................. 11,098,000 14,200,000
----------- -----------
Total............................................... 45,146,000 52,971,000
plus: unrecognized net gain......................... 19,997,000 12,654,000
----------- -----------
Accrued postretirement benefit liability............ $65,143,000 $65,625,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
The components of net postretirement
benefit cost were:
Service cost...................... $ 876,000 $ 876,000 $1,070,000
Interest cost..................... 3,183,000 3,768,000 3,926,000
Amortization of gain.............. (1,155,000) (1,043,000) (922,000)
----------- ----------- ----------
Net periodic postretirement benefit
cost............................... $ 2,904,000 $ 3,601,000 $4,074,000
=========== =========== ==========
</TABLE>
Net periodic postretirement benefit costs for the years ended December 31,
1996 and 1995, includes the cost of benefits earned by active employees,
interest cost, gains and losses arising from differences between actuarial
assumptions and actual experience, and amortization of the transition
obligation. The discount rate used to determine the net periodic
postretirement benefit cost was 7.25%, 8.5% and 8.0% for 1996, 1995 and 1994,
respectively. The Company made contributions to the plan of $3,386,000 in
1996, $3,700,000 in 1995 and $3,579,000 in 1994, as claims were incurred.
F-42
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.50% and 7.25% as of December 31, 1996 and 1995 respectively.
The health care cost trend rate was 8.2% graded to 5.0% over 8 years for 1996,
and 8.6% graded to 5.5% over 8 years for 1995. The health care cost trend rate
assumption has a minimal impact on the amounts reported, since the Company has
capped its contributions at 200% of 1993 levels.
7. LEASES
LEASE EXPENSE
The Company has entered into various lease agreements for office space, data
processing and other equipment. Future gross minimum rental payments under
non-cancelable leases for 1997 and the succeeding four years are $10,942,951,
$10,690,820, $10,919,215, $9,269,160 and $8,686,613, respectively, and
$51,208,079 thereafter. Minimum future sub-lease rental income on these
noncancelable leases is $3,202,010, $3,336,379, $3,336,379, $3,336,379 and
$3,336,379 for 1997 and the succeeding four years, respectively, and
$16,518,626 thereafter.
8. DEBT
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, 5.7% at December 31, 1996 and 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.
Exeter privately placed $75,118,152 aggregate principal amount, subordinated
notes payable (the "Notes"), on December 30, 1994 which are due December 30,
2004, with no interest payments for the first five years and semiannual
interest payments thereafter. The Notes have been discounted to yield 8.45%
for the first five years and pay interest at 8.845% thereafter. The Notes are
expressly subordinated in right of payment to the insurance liabilities of
Exeter. The Notes are not subject to redemption by Exeter or through the
operation of a sinking fund prior to maturity. Proceeds of the issuance of the
Notes, net of discount, amounted to $50,000,000. The issue costs of the Notes
of $130,000 were deducted from Notes, net of discount, to arrive at net
subordinated notes payable of $49,870,000. The issue cost will be amortized
over the life of the Notes. The Notes are held by MetLife, and the carrying
value of the loan approximates its fair value.
9. CONTINGENCIES
The Company has no contingent liabilities which might materially affect the
financial position of the Company or the results of its operations. There are
no pending legal proceedings which are beyond the ordinary course of business
which could have a material financial effect.
10. OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Compensation costs................ $ 36,172,270 $ 23,629,621 $ 18,807,641
Commissions....................... 51,616,356 37,476,445 37,220,361
Debt expense...................... 6,261,153 5,658,756 --
Amortization of policy acquisition
costs............................ 29,390,090 32,664,723 23,130,743
Capitalization of policy
acquisition costs................ (98,016,252) (65,850,148) (63,779,884)
Rent expense, net of sub-lease
income of
$119,272, $0 and $0.............. 3,060,243 1,609,487 1,288,197
Other............................. 122,559,161 75,701,177 67,058,781
------------ ------------ ------------
Total............................. $151,043,021 $110,890,061 $ 83,725,839
============ ============ ============
</TABLE>
F-43
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
11. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments presented below have
been determined by the Company using market information available as of
December 31, 1996 and 1995 and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value for financial instruments for which there
are no available market value quotations.
The use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
DECEMBER 31, 1996: VALUE FAIR VALUE
- ------------------ ------------ ------------
<S> <C> <C>
Assets
Fixed Maturities................................... $553,950,961 $554,795,228
Policy loans....................................... 76,262,779 76,262,779
Short-term investments............................. 156,559,460 156,559,460
Cash and cash equivalents.......................... 49,147,342 49,147,342
Separate Account Assets............................ 192,632,348 192,632,348
Liabilities
Policyholder account balances...................... 6,269,574 6,031,664
Other policyholder funds........................... 2,071,162 2,071,162
Short and long-term debt........................... 84,056,337 84,056,337
Separate Account Balances.......................... 208,269,567 192,632,348
<CAPTION>
CARRYING ESTIMATED
DECEMBER 31, 1995: VALUE FAIR VALUE
- ------------------ ------------ ------------
<S> <C> <C>
Assets
Fixed Maturities................................... $612,385,484 $612,711,339
Mortgage loans..................................... 2,210,153 2,210,153
Policy loans....................................... 58,210,498 58,210,498
Short-term investments............................. 20,828,254 20,828,254
Cash and cash equivalents.......................... 35,129,015 35,129,015
Separate Account Assets............................ 39,701,263 39,701,263
Liabilities
Policyholder account balances...................... 2,582,913 2,382,538
Other policyholder funds........................... 2,353,586 2,353,586
Short and long-term debt........................... 79,347,546 79,347,546
Separate Account Balances.......................... 42,297,885 39,701,263
</TABLE>
For bonds that are publicly traded, estimated fair value was obtained from an
independent market pricing service. Publicly traded bonds represented
approximately 96 percent of the carrying value and estimated fair value of the
total bonds as of December 31, 1996 and 71 percent of the carrying value and
estimated fair value of the total bonds as of December 31, 1995. For all other
bonds, estimated fair value was determined by management, based primarily on
interest rates, maturity, credit quality and average life. Estimated fair
values of mortgage loans were generally based on discounted projected cash
flows using interest rates offered for loans to borrowers with comparable
credit ratings and for the same maturities. Estimated fair values of policy
loans were based on discounted projected cash flows using U.S. Treasury rates
to approximate interest rates and Company experience to project patterns of
loan accrual and repayment. For cash and cash equivalents and short-term
investments, the carrying amount is a reasonable estimate of fair value.
F-44
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The fair values for policyholder account balances are estimated using
discounted projected cash flows, based on interest rates being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued. Other policyholder funds include liabilities without
defined durations such as policy proceeds and dividends left with the Company.
The estimated fair value of such liabilities, which generally are of short
duration or have periodic adjustments of interest rates, approximates their
carrying value.
The estimated fair value of short and long-term debt was determined using
rates currently available to the Company for debt with similar terms and
remaining maturities.
12. STATUTORY FINANCIAL INFORMATION
The Interpretation and Standard required life insurance companies to adopt all
standards promulgated by the FASB in their general purpose financial
statements. The effect of all adjustments of initially applying the
Interpretation and Standard has been presented as an adjustment to the 1994
opening balance of equity. The components of such adjustments are as follows:
<TABLE>
<S> <C>
JANUARY 1, 1994:
NELICO Historical.............................................. $ 94,378,654
Other Subsidiaries Combined Historical......................... 13,965,944
------------
108,344,598
Adjustments to GAAP for life insurance companies:
Future policy benefits and policyholder account balances..... (92,581,713)
Deferred policy acquisition costs............................ 197,723,446
Deferred federal income taxes................................ (28,204,895)
Valuation of investments..................................... 116,100
Statutory investment valuation reserves...................... 206,448
Statutory interest maintenance reserve....................... 75,672
Other, net................................................... (1,901,741)
------------
Equity......................................................... $183,777,915
============
</TABLE>
The following reconciles statutory net income and statutory surplus and
reflects the corporate reorganization described in Note 1 determined in
accordance with accounting practices prescribed or permitted by insurance
regulatory authorities with net earnings and equity on a GAAP basis.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Statutory net income (loss)........ $(46,020,586) $ 374,833 $(56,208,918)
Adjustments to GAAP for life
insurance companies:
Future policy benefits and
policyholders account balances.. (41,173,515) (9,616,060) (51,901,361)
Deferred policy acquisition
costs........................... 68,626,162 45,823,425 128,219,002
Deferred Federal Income taxes.... 2,282,802 (6,798,961) (6,148,500)
Statutory interest maintenance
reserve......................... 231,011 (744) (221)
Other, net....................... 25,755,595 (9,016,876) (6,823,254)
------------ ----------- ------------
Net GAAP Earnings.................. $ 9,701,469 $20,765,617 $ 7,136,748
============ =========== ============
</TABLE>
F-45
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Statutory surplus.............. $ 355,853,248 $ 203,373,628 $ 142,727,150
Adjustments to GAAP for life
insurance companies:
Future policy benefits and
policyholders account
balances.................... (195,272,649) (154,099,134) (144,483,074)
Deferred policy acquisition
costs....................... 434,636,395 353,809,245 325,859,523
Deferred Federal Income tax-
es.......................... (40,185,081) (55,200,949) (34,365,181)
Valuation of investments..... 11,502,988 58,062,684 114,109
Statutory interest mainte-
nance reserve............... 305,720 74,707 75,451
Statutory investment valua-
tion reserves............... 3,334,658 372,954 137,202
Surplus notes................ (58,910,797) (54,210,173) (49,870,000)
Receivables from reinsurance
transactions................ 26,029,575 -- --
Other, net................... 13,127,635 2,320,160 2,973,051
------------- ------------- -------------
GAAP Equity.................... $ 550,421,692 $ 354,503,122 $ 243,168,231
============= ============= =============
</TABLE>
13. RELATED PARTY TRANSACTIONS
Prior to the merger NELICO operated under a service agreement with its parent
NEMLICO to receive all executive, legal, clerical and other personnel
services. Subsequent to the merger, the Company has entered into a Service
Agreement to provide all administrative, accounting, legal and similar
services to MetLife for certain Administered Contracts, which are life
insurance and annuity contracts issued by NEMLICO prior to the merger of
NEMLICO and MetLife and those policies and contracts defined in the Service
Agreement as Transition Policies which were sold by the Company's field force
post-merger.
The Company charged MetLife $88,043,274 including accruals for administrative
services on NEMLICO administered contracts for the period of September 1, 1996
through December 31, 1996. Prior to the merger, the Company paid $62,643,521
to NEMLICO for administrative services on variable-life and variable-annuity
contracts for the period of January 1, 1996 through August 31, 1996. In 1995,
the Company paid $50,875,006 to NEMLICO for administrative services. These
services were charged based upon direct costs incurred. Service fees are
recorded by NELICO as a reduction in operating expenses.
In 1996, MetLife made a non-cash capital contribution to the Company of common
stock of affiliated companies consisting of Exeter, NEPA, NES, Newbury, Omega
Reinsurance Corp., TNE Advisers Inc., and TNE Information Services Inc. with a
total estimated statutory fair value of $29,557,626. MetLife also made non-
cash capital contributions of home-office properties of $10,301,481, socially-
responsible investments with a book value of $11,916,278, furniture, equipment
and leasehold improvements of $27,816,216 and a cash contribution of
$128,412,170. Prior to the merger, NEMLICO made a cash contribution to NELICO
of $20,000,000.
In 1995, NEMLICO made a non-cash capital contribution to NELICO of publicly-
traded debt securities and private-placement obligations with an estimated
fair value of $54,028,223. NELICO received cash contributions from NEMLICO of
$8,215,000 and $11,648,000 in 1995 and 1994, respectively.
The Company entered into a lease agreement with MetLife on August 30, 1996 for
the home-office building which it occupies on 501 Boylston Street in Boston,
Massachusetts. The Company paid $780,160 for lease payments to MetLife for
1996.
Commissions earned by NES from sales of New England Funds (NEF) shares, a
subsidiary of MetLife, amounted to $14,791,000 in 1996. Included in accrued
income at December 31, 1996, were amounts receivable for assets-based
F-46
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
commissions from NEF totaling $226,000. In 1996, NES earned asset based income
of $7,605,000 on average assets of approximately $3.5 billion under management
with NEF.
Exeter has a privately-placed subordinated notes payable to MetLife for
$58,910,797 at December 31, 1996 and $54,210,173 at December 31, 1995.
On June 21, 1996, NEMLICO purchased a mortgage from NELICO for $2,216,703
which included principal of $2,203,774, and interest of $12,929.
Stockholder dividends or other distributions proposed to be paid by NELICO
must be approved by the Massachusetts Commissioner of Insurance if such
dividends or distributions, together with other dividends or distributions
made within the preceding 12 months, exceeds the greater of (1) 10% of
NELICO's statutory surplus as regards policyholders as of the previous
December 31, or (2) NELICO's statutory net gain from operations for the 12
month period ending the previous December 31.
Of the statutory profits earned by NELICO on participating policies and
contracts, the portion which shall inure to the benefit of NELICO's
stockholder shall not exceed the larger of (1) 10% of such statutory profits,
or (2) fifty cents per year per thousand dollars of participating life
insurance other than group term insurance in force at the end of the year.
F-47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
New England Variable Life Insurance Company:
We have audited the statutory balance sheet of New England Variable Life
Insurance Company (a wholly-owned subsidiary of New England Mutual Life
Insurance Company) as of December 31, 1995, and the related statutory
statements of operations, surplus, and cash flows for each of the two years in
the period ended December 31, 1995. These statutory financial statements (not
presented separately herein) 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.
As described more fully in Note 1 to the aforementioned financial statements,
the Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware
(SAP), which practices after 1996 (upon issuance of 1996 financial statements)
differ from generally accepted accounting principles (GAAP).
In our report dated March 8, 1996, we expressed our opinion that the 1995 and
1994 financial statements, prepared using SAP, presented fairly, in all
material respects the financial position of New England Variable Life
Insurance Company as of December 31, 1995, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1995 in conformity with GAAP. As described in Note 1 to the financial
statements, financial statements of wholly-owned subsidiaries of mutual life
insurance enterprises prepared in accordance with SAP are no longer considered
to be presented in conformity with GAAP. Accordingly, our present opinion on
the 1995 and 1994 financial statements is different from that expressed in our
previous report.
In our opinion, because of the effects of the matter discussed in the two
preceding paragraphs, the financial statements referred to above (and not
included herein) do not present fairly, in conformity with GAAP, the financial
position of New England Variable Life Insurance Company as of December 31,
1995, or the results of its operations or its cash flows for each of the two
years in the period ended December 31, 1995.
In our opinion, the statutory financial statements referred to above (and not
included herein) present fairly, in all material respects, the financial
condition of New England Variable Life Insurance Company as of December 31,
1995, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995, on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
Delaware.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 6, 1996, except for the
information in the penultimate
paragraph under "Basis of
Presentation and Principles of
Consolidation" of Note 1, for which
the date is February 18, 1997
F-48
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
New England Pension and Annuity Company:
We have audited the statutory balance sheet of New England Pension and Annuity
Company (a wholly-owned subsidiary of New England Mutual Life Insurance
Company) as of December 31, 1995, and the related statutory statements of
operations and surplus, and cash flows for each of the two years in the period
ended December 31, 1995. These statutory financial statements (not presented
separately herein) 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.
As described more fully in Note 1 to the aforementioned financial statements,
the Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware
(SAP), which practices after 1996 (upon issuance of 1996 financial statements)
differ from generally accepted accounting principles (GAAP).
In our report dated March 8, 1996, we expressed our opinion that the 1995 and
1994 financial statements, prepared using SAP, presented fairly, in all
material respects the financial position of New England Pension and Annuity
Company as of December 31, 1995, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1995 in
conformity with GAAP. As described in Note 1 to the financial statements,
financial statements of wholly-owned subsidiaries of mutual life insurance
enterprises prepared in accordance with SAP are no longer considered to be
presented in conformity with GAAP. Accordingly, our present opinion on the
1995 and 1994 financial statements is different from that expressed in our
previous report.
In our opinion, because of the effects of the matter discussed in the two
preceding paragraphs, the financial statements referred to above (and not
included herein) do not present fairly, in conformity with GAAP, the financial
position of New England Pension and Annuity Company as of December 31, 1995,
or the results of its operations or its cash flows for each of the two years
in the period ended December 31, 1995.
In our opinion, the statutory financial statements referred to above (and not
included herein) present fairly, in all material respects, the financial
condition of New England Pension and Annuity Company as of December 31, 1995,
and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 1995, on the basis of accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 6, 1996, except for the
information in the penultimate
paragraph under "Basis of Presentation
and Principles of Consolidation" of
Note 1, for which the date is February
18, 1997
F-49
<PAGE>
April 23, 1996
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Shareholder of
Exeter Reassurance Company, Ltd.
We have audited the statutory balance sheet of Exeter Reassurance Company,
Ltd. (a wholly-owned subsidiary of New England Mutual Life Insurance Company)
as of December 31, 1995 and the related statutory statements of operations and
surplus, and cash flows for the year then ended. These statutory financial
statements (not presented separately herein) are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The statutory financial statements have been prepared in conformity with The
Insurance Act 1978, amendments thereto and related regulations and are not
intended to be presented in conformity with accounting principles generally
accepted in the United States of America ("U.S. GAAP").
In our opinion, because of the effects of the matter discussed in the
preceding paragraph, the financial statements referred to above (and not
included herein) do not present fairly in conformity with U.S. GAAP, the
financial position of Exeter Reassurance Company, Ltd. as of December 31,
1995, or the results of its operations or its cash flows for the year then
ended. In our opinion, the statutory financial statements referred to above
(and not included herein) present fairly, in all material respects, the
financial condition of Exeter Reassurance Company, Ltd. as of December 31,
1995, and the results of its operations and its cash flows for the year then
ended in conformity with the Insurance Act 1978, amendments thereto and
related regulations.
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS
F-50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New England Securities Corporation:
We have audited the consolidated statement of financial condition of New
England Securities Corporation as of December 31, 1995, and the related
consolidated statements of operations, shareholder's equity, and cash flows
for the year then ended. These financial statements (not presented separately
herein) are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above (and not included
herein) present fairly, in all material respects, the consolidated financial
position of New England Securities Corporation as of December 31, 1995, and
the consolidated results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 9, 1996
F-51
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
TNE Advisers, Inc.:
We have audited the balance sheet of TNE Advisers, Inc. as of December 31,
1995, and the related statements of operations, changes in shareholder's
equity (deficit), and cash flows for the year ended December 31, 1995, and for
the period August 26, 1994 (commencement of operations) through December 31,
1994. These financial statements (not presented separately herein) 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 (and not included
herein) present fairly, in all material respects, the financial position of
TNE Advisers, Inc. as of December 31, 1995, and the results of its operations
and its cash flows for the year ended December 31, 1995, and for the period
August 26, 1994 (commencement of operations) through December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 29, 1996
F-52
<PAGE>
March 14, 1996
INDEPENDENT AUDITORS' REPORT
To The Shareholders of
Newbury Insurance Company, Limited
We have audited the accompanying balance sheets of Newbury Insurance Company,
Limited as of December 31, 1995, and the related statements of earnings and
retained earnings and cash flows for each of the two years in the period ended
December 31, 1995 (not presented separately herein). 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.
Except as discussed in the following paragraph, we conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. 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.
The provision for losses incurred but not reported is calculated in the manner
described in note 3(b). We have not reviewed the underlying information used
in the calculation of the provision and therefore we have been unable to
determine whether the provisions for the years ended December 31, 1995 and
1994 are adequate, deficient or excessive.
In our opinion, except for the effects of such adjustments, if any, that might
have been determined to be necessary had we been able to assess fully the
matter described in the preceding paragraph, the financial statements referred
to above (and not included herein) present fairly, in all material respects,
the financial position of Newbury Insurance Company, Limited as of December
31, 1995, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1995 and 1994, in conformity with
accounting principles generally accepted in the United States of America.
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS
F-53
<PAGE>
This registration statement incorporates by reference the prospectus dated
May 1, 1988 and the supplement dated February 1, 1989 to the prospectus dated
May 1, 1988 for the policies, each as filed in Post-Effective Amendment No. 11
to the Registration Statement on Form S-6 (File No. 33-10954).
<PAGE>
Part II
RULE 484 UNDERTAKING
Section 9 of NELICO's By-Laws provides that NELICO shall, to the
extent legally permissible, indemnify its directors and officers against
liabilities and expenses relating to lawsuits and proceedings based on such
persons' roles as directors or officers. However, Section 9 further provides
that no such indemnification shall be made with respect to any matter as to
which a director or officer is adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interest of the
corporation. Section 9 also provides that in the event a matter is disposed of
by a settlement payment by a director or officer, indemnification will be
provided only if the settlement is approved as in the best interest of the
corporation by (a) a disinterested majority of the directors then in office, (b)
a majority of the disinterested directors then in office, or (c) the holders of
a majority of outstanding voting stock (exclusive of any stock owned by any
interested director or officer).
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
NELICO pursuant to the foregoing provisions, or otherwise, NELICO has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by NELICO of expenses incurred or paid by a
director, officer, or controlling person of NELICO in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered. NELICO
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the variable ordinary life insurance policies described
in this registration statement, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
II - 1
<PAGE>
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 66 pages.
The undertaking to file reports.****
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
The signatures.
Written consents of the following persons:
Edward N. Wadsworth, Esq. (see Exhibit 3(a)(ii) below)
Robert E. Schneider, F.S.A. (see Exhibit 3(b) below)
Sutherland, Asbill & Brennan (see Exhibit 6 below)
Independent Auditors (see Exhibit 12 below)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of Directors of
NEVLICO*
(2) None
(3) (a) Distribution Agreement between NEVLICO and NELESCO**
(b)(i) Form of Contract between NEVLICO and its General Agents**
(c) Commission Schedule for Variable Life Policies*****
(d) Form of Independent Contract Agreement Concerning
Insurance Product Sales***
(5) (a) Specimen Policy****
(b) Fixed Account Endorsement+++
(c) Acceleration of Benefit Rider#####
(6) (a) Amended and restated Articles of Incorporation and
amended and restated By-Laws of NELICO####
(7) None
(8) None
(9) None
(10) The Form of Application*
2. See Exhibit 1.A. (10)
3. (a)(i) Opinion of Edward N. Wadsworth, Esquire****
(ii) Consent of Edward N. Wadsworth, Esquire+
II - 2
<PAGE>
(b) Opinion and Consent of Robert E. Schneider, F.S.A.++
6. Consent of Sutherland, Asbill & Brennan, L.L.P.
7. Powers of Attorney####
10. Notice of Withdrawal Right for Variable Life Policies*****
11. Inapplicable
12. Consent of Independent Auditors
13. Schedule for computation of performance quotations++
14. Consolidated memorandum describing certain procedures,
filed pursuant to Rule 6e-2(b)(12)(ii) and Rule
6e-3(T)(b)(12)(iii)#
15. (i) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and New England
Variable Life Insurance Company##
(ii) Amendment No. 1 to Participation Agreement among Variable
Insurance Products Fund, Fidelity Distributors
Corporation and New England Variable Life Insurance
Company###
(iii) Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and New
England Variable Life Insurance Company###
27. Financial Data Schedule
__________
* Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 2-82838, filed April 4, 1983.
** Incorporated by reference to Pre-Effective Amendment No. 1 to the Variable
Account's Form S-6 Registration Statement, File No. 2-82838, filed
July 28, 1983.
*** Incorporated by reference to Post-Effective Amendment No. 5 to the Variable
Account's Form S-6 Registration Statement, File No. 2-82838, filed
April 30, 1985.
**** Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 33-10954, filed December 19, 1986.
II - 3
<PAGE>
*****Incorporated by reference to Pre-Effective Amendment No. 1 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed
April 1, 1987.
+ Incorporated by reference to Post-Effective Amendment No. 2 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed
March 7, 1988.
++ Incorporated by reference to Post-Effective Amendment No. 3 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed
May 3, 1988.
+++ Incorporated by reference to Post-Effective Amendment No. 4 to the Variable
Account's Form S-6 Registration Statement, File No. 33-10954, filed
May 1, 1991.
# Incorporated by reference to Post-Effective Amendment No. 6 to the Variable
Account's Form S-6 Registration Statement, File No. 33-52050, filed
April 28, 1995.
## Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 33-64170, filed June 9, 1993.
### Incorporated herein by reference to 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 the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
#####Incorporated herein by reference to Post-Effective Amendment No. 8 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 30, 1997.
II - 4
<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 amendment to the 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 29th day of April, 1997.
New England Variable Life Separate
Account
(Registrant)
By: New England Life Insurance
Company
(Depositor)
By: /s/ Chester R. Frost
-------------------------------
Chester R. Frost
Senior Vice President and
Treasurer
Attest:
/s/ Marie C. Swift
- -------------------
Marie C. Swift
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, New England
Life Insurance Company certifies that it meets all of the requirements for
effectiveness of this amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
the 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 29th day of
April, 1997.
New England Life Insurance Company
(Seal)
Attest:/s/ Marie C. Swift By: /s/ Chester R. Frost
------------------- ------------------------
Marie C. Swift Chester R. Frost
Senior Vice President and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on April 29, 1997.
_______*______________ Chairman, President and
Robert A. Shafto Chief Executive Officer
_______*______________ Director
Susan C. Crampton
Senior Vice President and
_______*______________ Treasurer,
Chester R. Frost Chief Accounting Officer
_______*______________ Director
Edward A. Fox
_______*______________ Director
George J. Goodman
_______*______________ Director
Paul E. Gray
_______*______________ Director
Evelyn E. Handler
_______*______________ Director
Philip K. Howard
_______*______________ Director
Harry P. Kamen
_______*_______________ Director
Terence Lennon
<PAGE>
_______*______________ Director
Bernard A. Leventhal
_______*______________ Director
Thomas J. May
_______*______________ Director
Stewart G. Nagler
_______*______________ Executive Vice President and
Robert E. Schneider Chief Financial Officer
_______*______________ Director
Rand N. Stowell
__________*____________ Director
Alexander B. Trowbridge
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. 333-21767, on February 13, 1997.
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
6. (ii) Consent of Sutherland, Asbill
& Brennan
12. Consents of Independent Auditors
27. Financial Data Schedule
________________
* Page numbers inserted on manually-signed copy only.
<PAGE>
Exhibit 6
Sutherland, Asbill & Brennan, L.L.P.
CONSENT OF SUTHERLAND, ASBILL & BRENNAN, L.L.P.
We consent to the reference to our firm under the heading "Legal Matters"
in the prospectus included in Post-Effective Amendment No. 12 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 Life
Insurance Company (File No. 33-10954). In giving this consent, we do not admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
Washington, D.C.
April 28, 1997
<PAGE>
Exhibit 12
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No. 12 to the
Registration Statement No. 33-10954 of New England Variable Life Separate
Account (the "Separate Account") of New England Life Insurance Company (the
"Company") of our reports dated February 18, 1997, on the financial statements
of the Separate Account and the Company for the year ended December 31, 1996,
appearing the Supplement, which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Supplement.
Deloitte & Touche LLP
Boston, Massachusetts
April 28, 1997
<PAGE>
Exhibit 12
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 12 to the
Registration Statement on Form S-6 (File No. 33-10954) of our reports, which
include adverse opinions as to generally accepted accounting principles and
unqualified opinions as to statutory accounting practices prescribed or
permitted by the Insurance Department of the state of Delaware, dated March 8,
1996, except as to the information in the penultimate paragraph under "Basis of
Presentation and Principles of Consolidation" of Note 1, for which the date is
February 18, 1997, on our audits of the statutory financial statements of New
England Variable Life Insurance Company and New England Pension and Annuity
Company, and our report dated February 6, 1996, on our audit of New England
Variable Life Separate Account of New England Variable Life Insurance Company.
We also consent to the inclusion in this Registration Statement of our report,
which includes an adverse opinion as to generally accepted accounting principles
and an unqualified opinion as to conformity with The Insurance Act 1978, dated
April 23, 1996, except as to the information in the penultimate paragraph under
"Basis of Presentation and Principles of Consolidation" of Note 1, for which the
date is February 18, 1997, on our audit of the statutory financial statements of
Exeter Reassurance Company, Ltd., and our report dated February 9, 1996, on our
audit of New England Securities Corporation, and our report dated February 29,
1996, on our audit of TNE Advisers, Inc., and our report dated March 14, 1996,
on our audit of Newbury Insurance Company, Limited. 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 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 804,508,248
<INVESTMENTS-AT-VALUE> 998,994,493
<RECEIVABLES> 2,543,142
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,001,537,635
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 115,152,837
<TOTAL-LIABILITIES> 115,152,837
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 886,384,798
<DIVIDEND-INCOME> 50,453,549
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,984,819
<NET-INVESTMENT-INCOME> 45,468,730
<REALIZED-GAINS-CURRENT> 1,232,236
<APPREC-INCREASE-CURRENT> 93,332,729
<NET-CHANGE-FROM-OPS> 140,033,695
<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> 273,750,514
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
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</TABLE>
