<PAGE>
As filed with Securities and Exchange Commission on July 16, 1997
Registration No. 333-21767
----------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
PRE-EFFECTIVE AMENDMENT NO. 1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------------------
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, ESQ.
Counsel
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH, ESQ.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
---------------------------
Variable Ordinary Life Insurance Policies-
(Title, amount and proposed maximum offering price of
securities being registered)
Registration of an Indefinite Amount of Securities
Pursuant to Rule 24f-2 under the Investment Company Act of 1940
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting pursuant
to Section 8(a), may determine.
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NEW ENGLAND LIFE
INSURANCE COMPANY
Variable Ordinary Life Insurance Policies
Issued by
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual Variable Ordinary Life Insurance
Policies (the "Policies") offered by New England Life Insurance Company
("NELICO"), an indirect, wholly-owned subsidiary of Metropolitan Life
Insurance Company ("MetLife").
Each Policy provides a guaranteed minimum death benefit equal to the
Policy's face amount, as long as required scheduled premiums are paid when due
and there is no "excess policy loan." (See "Loan Provision.") Scheduled
premium payments are generally required until the insured reaches age 100.
Under certain circumstances, however, you may skip a scheduled premium
payment. You may also make additional payments, subject to certain
restrictions.
You may choose either a fixed death benefit equal to the Policy's face
amount or a variable death benefit which may vary daily with the net
investment experience of one or more mutual fund portfolios. Under both death
benefit options, the minimum death benefit guarantee will apply. The cash
value of the Policy generally increases with the payment of each premium and
varies daily with the investment experience of the mutual fund portfolios.
There is no guaranteed minimum cash value for investments in the mutual fund
portfolios.
You may cancel the Policy during the "right to return the Policy" period.
The first net scheduled premium for the Policy, plus any unscheduled payment
made, will be allocated to the Zenith Money Market Sub-Account until 15 days
after NELICO mails the confirmation for the initial premium. Thereafter, the
Policy's cash value will be invested according to your instructions.
You may allocate scheduled premiums and unscheduled payments to one or more
of the 16 investment sub-accounts of NELICO's Variable Life Separate Account
(the "Variable Account") or to NELICO's Fixed Account, after certain
deductions have been made. Each sub-account of the Variable Account invests in
the shares of one of the Eligible Funds. The Eligible Funds are: the Back Bay
Advisors Money Market Series, the Back Bay Advisors Bond Income Series, the
Capital Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors
Managed Series, the Westpeak Growth and Income Series, the Loomis Sayles
Avanti Growth Series, the Loomis Sayles Small Cap Series, the Alger Equity
Growth Series, the Loomis Sayles Balanced Series, the Davis Venture Value
Series, and the Morgan Stanley International Magnum Equity Series of the New
England Zenith Fund (the "Zenith Fund"); the Equity-Income Portfolio, Overseas
Portfolio and High Income Portfolio of the Variable Insurance Products Fund
("VIP Fund"); and the Asset Manager Portfolio of the Variable Insurance
Products Fund II ("VIP Fund II").
SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE OUT OF THE FIXED ACCOUNT.
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus. (See "Charges and Expenses").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE
CURRENT PROSPECTUSES OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE
INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE
ATTACHED AT THE END OF THIS PROSPECTUS. THESE PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
SHARES OF THE ZENITH FUND, THE VIP FUND AND THE VIP FUND II, AND INTERESTS
IN THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, A BANK, AND THE SHARES AND INTERESTS ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
JULY , 1997
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TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY.................................................................. A-4
INTRODUCTION TO THE POLICIES.............................................. A-6
The Policies............................................................. A-6
Availability of the Policy............................................... A-8
Policy Charges........................................................... A-8
How the Policy Works..................................................... A-10
Receipt of Communications and Payments at NELICO's Home Office........... A-11
NELICO .................................................................. A-11
POLICY VALUES AND BENEFITS................................................ A-12
Death Benefit............................................................ A-12
Guaranteed Minimum Death Benefit......................................... A-13
Adjustments to the Death Proceeds Payable................................ A-13
Tabular Cash Value....................................................... A-13
Cash Value............................................................... A-13
Net Investment Experience................................................ A-14
Allocation of Net Premiums............................................... A-14
Amount Provided for Investment under the Policy.......................... A-14
Right to Return the Policy............................................... A-15
CHARGES AND EXPENSES...................................................... A-15
Deductions from Premiums and Unscheduled Payments........................ A-15
Surrender Charge......................................................... A-17
Deductions from Cash Value............................................... A-18
Charges Against the Eligible Funds and the Sub-Accounts of the Variable
Account................................................................. A-20
Group or Sponsored Arrangements.......................................... A-21
PREMIUMS.................................................................. A-21
Scheduled Premiums....................................................... A-21
Unscheduled Payments..................................................... A-22
Special Premium Option................................................... A-24
Automatic Premium Loan................................................... A-25
Default and Lapse Options................................................ A-25
OTHER POLICY FEATURES..................................................... A-27
Loan Provision........................................................... A-27
Surrender................................................................ A-28
Partial Surrender and Partial Withdrawal................................. A-28
Reduction in Face Amount................................................. A-30
Acceleration of Death Benefit Rider...................................... A-30
Investment Options....................................................... A-31
Transfer Option.......................................................... A-31
Substitution of Insured Person........................................... A-31
Payment of Proceeds...................................................... A-32
Exchange of Policy During First 24 Months................................ A-32
Payment Options.......................................................... A-33
Additional Benefits by Rider............................................. A-33
Policy Owner and Beneficiary............................................. A-34
THE VARIABLE ACCOUNT...................................................... A-35
Investments of the Variable Account...................................... A-35
Investment Management.................................................... A-39
THE FIXED ACCOUNT......................................................... A-39
General Description...................................................... A-40
Values and Benefits...................................................... A-40
Policy Transactions...................................................... A-41
</TABLE>
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<TABLE>
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NELICO'S DISTRIBUTION AGREEMENT........................................... A-41
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY.......................... A-42
Misstatement of Age or Sex............................................... A-42
Suicide.................................................................. A-42
TAX CONSIDERATIONS........................................................ A-43
Policy Proceeds.......................................................... A-43
Charge for NELICO's Income Taxes......................................... A-47
MANAGEMENT................................................................ A-48
VOTING RIGHTS............................................................. A-51
RIGHTS RESERVED BY NELICO................................................. A-51
TOLL-FREE NUMBERS......................................................... A-52
REPORTS................................................................... A-52
ADVERTISING PRACTICES..................................................... A-52
LEGAL MATTERS............................................................. A-53
REGISTRATION STATEMENT.................................................... A-53
EXPERTS................................................................... A-53
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES
AND
ACCUMULATED SCHEDULED PREMIUMS........................................... A-55
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................. A-65
APPENDIX C: LONG TERM MARKET TRENDS....................................... A-86
APPENDIX D: USES OF LIFE INSURANCE........................................ A-88
APPENDIX E: TAX INFORMATION............................................... A-90
FINANCIAL STATEMENTS...................................................... A-90
</TABLE>
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GLOSSARY
ACCOUNT. A sub-account of the Variable Account or the Fixed Account.
AUTOMATIC PREMIUM LOAN OPTION. If you elect this option, the Policy's loan
value will be used to pay a scheduled premium, if you have not paid the
scheduled premium by the end of the grace period. (See "Scheduled Premiums".)
BASIC SCHEDULED PREMIUM. Scheduled premium minus (i) charges for any
supplementary benefits provided by rider; (ii) any extra premiums paid for a
Policy in a substandard risk classification or for an automatic issue Policy;
and (iii) the portion of the annual Policy administrative charge that is due
with the premium. (See "Deductions from Premiums and Unscheduled Payments".)
CASH VALUE. A Policy's cash value includes the amount of its cash value held
in the Variable Account, the amount held in the Fixed Account and, if there is
an outstanding policy loan, the amount of its cash value held in NELICO's
general account as a result of the loan. (See "Cash Value".)
COST OF INSURANCE CHARGE. This charge for providing insurance protection is
deducted on the Policy Date and on the first day of each policy month. The
cost of insurance for a policy month is equal to the amount at risk multiplied
by the cost of insurance rate for that month. Cost of insurance rates vary
monthly. (See "Deductions from Cash Value".)
DEATH BENEFIT OPTION 1. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) the Policy's cash value divided by the net
single premium per $1 of death benefit at the insured's attained age. (See
"Death Benefit".)
DEATH BENEFIT OPTION 2. Death Benefit equals the greater of (i) the face
amount of the Policy plus any excess of the Policy's cash value over its
"tabular cash value" and (ii) the Policy's cash value divided by the net
single premium per $1 of death benefit at the insured's attained age. (See
"Death Benefit".)
ELIGIBLE FUNDS. Each sub-account of the Variable Account invests in the
shares of one of the Eligible Funds. The Eligible Funds are: the Back Bay
Advisors Money Market Series, the Back Bay Advisors Bond Income Series, the
Capital Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors
Managed Series, the Westpeak Growth and Income Series, the Loomis Sayles
Avanti Growth Series, the Loomis Sayles Small Cap Series, the Alger Equity
Growth Series, the Loomis Sayles Balanced Series, the Davis Venture Value
Series, and the Morgan Stanley International Magnum Equity Series of the
Zenith Fund; the Equity-Income Portfolio, the Overseas Portfolio and the High
Income Portfolio of the VIP Fund; and the Asset Manager Portfolio of VIP Fund
II.
EXCESS POLICY LOAN. The situation when policy loans plus accrued interest
exceed the Policy's cash value less the applicable Surrender Charge. (See
"Loan Provision".)
FIXED ACCOUNT. The Fixed Account is a part of NELICO's general account to
which net premiums and net unscheduled payments may be allocated and which
provides guarantees of principal and interest. (See "Fixed Account".)
GUARANTEED MINIMUM DEATH BENEFIT. The death benefit is guaranteed not to be
less than the Policy's face amount, regardless of the investment experience of
the Policy's sub-accounts, as long as scheduled premiums have been paid when
due or are not required to be paid, pursuant to the Special Premium Option.
(See "Guaranteed Minimum Death Benefit".)
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INVESTMENT START DATE. This is the latest of the date NELICO receives a
premium payment for the Policy, the date Part II of the Policy application is
signed and the Policy Date and is the date when an amount is first provided
for investment under the Policy. (See "Amount Provided for Investment under
the Policy".)
MORTALITY AND EXPENSE RISK CHARGE. This charge is made daily from the value
of each sub-account's assets that come from the Policies. Currently the charge
is at an annual rate of .60% of the sub-accounts' assets, and is guaranteed
not to exceed .90% of the sub-accounts' assets. The mortality risk NELICO
assumes is that insureds may live for shorter periods of time than estimated.
The expense risk NELICO assumes is that the costs of issuing and administering
Policies may be more than estimated. (See "Charges Against the Eligible Funds
and the Sub-Accounts of the Variable Account".)
NET CASH VALUE. The amount you may obtain upon surrender of the Policy and
which is equal to the Policy's cash value reduced by any outstanding policy
loan and accrued interest; reduced by any applicable Surrender Charge; and
increased by the portion of any cost of insurance charge deducted for the
period beyond the date of surrender. (See "Cash Value".)
NET INVESTMENT EXPERIENCE. For any period, a sub-account's net investment
experience equals the investment experience of the underlying Eligible Funds
shares for the same period, reduced by the amount of charges against the sub-
account for that period. (See "Net Investment Experience".)
NET SCHEDULED PREMIUM. The amount allocated to the Variable Account and/or
the Fixed Account and which is equal to the basic scheduled premium less the
sales charge, state premium tax charge and federal premium tax charge. (See
"Deductions from Premiums and Unscheduled Payments".)
NET UNSCHEDULED PAYMENT. The amount allocated to the Variable Account and/or
the Fixed Account and which is equal to the unscheduled payment less the sales
charge, state premium tax charge and federal premium tax charge. (See
"Deductions From Premiums and Unscheduled Payments".)
POLICY DATE. If you make a premium payment with the application, the Policy
Date is the later of the date Part II of the application has been signed and
receipt of the premium payment. If you choose to pay the initial premium upon
delivery of the Policy, the Policy will be issued with a Policy Date which is
generally five days after issue. (See "Amount Provided for Investment under
the Policy".)
PREMIUM DUE DATE. The date on which a scheduled premium is payable. Net
scheduled premiums, after the first, are allocated to a Policy's sub-accounts
on the premium due dates. (See "Premiums".)
SPECIAL PREMIUM OPTION. If you elect this option, you may not be required to
pay a scheduled premium or premiums under certain circumstances. (See "Special
Premium Option".)
TABULAR CASH VALUE. The tabular cash value is the value which the Policy
would have if: (i) all scheduled premiums were paid when due; (ii) no
unscheduled payments and no loans or other withdrawals of cash value were
made; (iii) the Policy's sub-accounts earned a 4.5% annual net rate of return;
and (iv) maximum Policy charges were deducted from the cash value. (See
"Tabular Cash Value".)
YOU. When used in this prospectus, "you" refers to the Policy Owner.
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INTRODUCTION TO THE POLICIES
This prospectus describes Policies under which net scheduled premiums and
net unscheduled payments are allocated to the Variable Account. If the Fixed
Account is available in your state, you may choose to allocate or transfer all
or part of your funds to that account. NELICO provides guarantees of principal
and interest with respect to the Fixed Account which is part of NELICO's
general account. Amounts in the Fixed Account are backed by NELICO's general
account, rather than the Variable Account. For a description of the Fixed
Account, see "The Fixed Account" which appears later in this prospectus.
THE POLICIES
The individual Variable Ordinary Life Insurance Policies offered by this
prospectus are designed to provide lifetime insurance coverage. They are not
offered primarily as an investment.
The following is a brief listing of the basic features of the Policy. These
and other features of the Policy are explained in detail throughout the
prospectus. You should be sure to read the prospectus for more complete
information.
-- The Policy requires payment of scheduled premiums. (See "Scheduled
Premiums".)
-- You may choose to make additional, unscheduled payments under the
Policy. NELICO can limit or prohibit unscheduled payments in certain
situations, including cases where the insured is in a substandard risk
class. (See "Unscheduled Payments".)
-- Net scheduled premiums and net unscheduled payments are invested
according to your instructions in one or more of the sub-accounts of the
Variable Account corresponding to mutual fund portfolios, or the Fixed
Account, after an initial period in the Zenith Money Market Sub-Account.
(See "Allocation of Net Premiums" and "Investment Options".)
-- The mutual fund portfolios available to you under the Policy include
several common stock funds, including funds which invest primarily in
foreign securities, two bond funds, two managed funds, a balanced fund,
and a money market fund. You may allocate your Policy's cash value to a
maximum of ten accounts (including the Fixed Account) at any one time.
(See "Investments of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. NELICO provides guarantees of Fixed Account
principal and interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE
FROM THE FIXED ACCOUNT. NELICO also reserves the right to restrict
transfers of cash value and allocations of premiums into the Fixed
Account. (See "The Fixed Account".)
-- The cash value of the Policy will vary daily based on, among other
things, the net investment experience of the sub-accounts to which
amounts have been allocated and the amount of interest credited to any
of the Policy's cash value in the Fixed Account. (See "Cash Value",
"Charges and Expenses", "Premiums", "Loan Provision", and "Partial
Surrender and Partial Withdrawal".)
-- The portion of the cash value which you invest in the sub-accounts is
not guaranteed. You bear the investment risk on this portion of the cash
value. (See "Cash Value".)
-- You may choose between two forms of death benefit options under the
Policy. One option provides a death benefit equal to the Policy's face
amount. The other option provides a death benefit which varies with the
net investment experience of the sub-accounts to which amounts have been
allocated and the rate of interest credited on any cash value in the
Fixed Account. Under both options the death benefit could be increased
to satisfy tax law requirements if the cash value reaches certain
levels. (See "Death Benefit".)
-- Regardless of investment experience, each form of death benefit is
guaranteed never to be less than the Policy's face amount, as long as
the required scheduled premiums are paid when due. (See "Death
Benefit".)
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-- If you elect the "Special Premium Option", you can under certain
circumstances miss a scheduled premium payment without causing the
Policy to lapse. In that case, the Policy will keep its minimum death
benefit guarantee. (See "Special Premium Option".)
-- You may change your allocation of future net scheduled premiums and net
unscheduled payments at any time. (See "Allocation of Net Premiums" and
"Investment Options".)
-- After the "right to return the Policy" period, you may transfer portions
of the Policy's cash value among the sub-accounts and, generally, to the
Fixed Account up to four times per policy year without NELICO's consent.
NELICO currently allows 12 transfers per policy year. Transfers and
allocations involving the Fixed Account are subject to certain limits.
(See "Transfer Option" and "The Fixed Account--Policy Transactions".)
-- A loan privilege is available under the Policy. Partial withdrawal and
partial surrender features are also available. (See "Loan Provision" and
"Partial Surrender and Partial Withdrawal".)
-- Death benefits paid to the beneficiary under the Policy are not subject
to Federal income tax. Under current law, undistributed increases in
cash value generally are not taxable to you. (See "Tax Considerations".)
-- Loans, assignments and other pre-death distributions under the Policy
may have tax consequences depending primarily on the amount which you
have paid into the Policy but also on any "material change" in the terms
or benefits of the Policy. If premium payments or a material change in
the terms or benefits of the Policy cause it to become a "modified
endowment contract", then pre-death distributions will be includible in
income on an income first basis, and a 10% penalty tax may be imposed on
income distributed before the Policy Owner attains age 59 1/2. Tax
considerations may therefore influence the amount and timing of premiums
and unscheduled payments and certain Policy transactions which you
choose to make. (See "Tax Considerations".)
-- If the Policy is not a modified endowment contract, NELICO believes that
loans under the Policy will not be taxable to you as long as the Policy
has not lapsed, been surrendered or terminated. With certain exceptions,
other pre-death distributions under a Policy that is not a modified
endowment contract are includible in income only to the extent they
exceed the investment in the Policy. (See "Tax Considerations".)
-- You have an opportunity during the "right to return the Policy" period
to return the Policy for a refund. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue, you may exchange the
Policy, without evidence of insurability, for a fixed-benefit policy
issued by NELICO or an affiliate on the life of the insured. If you
exercise this option, you will have to make up any investment loss. (See
"Exchange of Policy During First 24 Months".)
In many respects the Policies are similar to traditional fixed-benefit whole
life insurance. Like whole life insurance, the Policies provide for a
guaranteed minimum death benefit, scheduled premiums, a cash value, and loan
privileges.
The Policies are different from traditional, fixed-benefit whole life
insurance in that the death benefit may, and the cash value will, vary to
reflect the investment experience of the selected sub-accounts of the Variable
Account. In addition, you can elect an option under the Policy which will
allow you, under certain circumstances, to skip a particular scheduled premium
or premiums and still keep the Policy in force on a premium paying basis.
The variable life insurance policies offered by NELICO are designed to
provide insurance protection. Although the underlying mutual fund portfolios
invest in securities similar to those in which mutual funds available directly
to the public invest, in many ways the Policies differ from mutual fund
investments. The main differences are:
-- The Policy provides a death benefit based on NELICO's assumption of an
actuarially calculated risk.
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-- If scheduled premiums are not paid according to the requirements of the
Policy, the Policy may lapse. If the Policy lapses when Policy loans are
outstanding, adverse tax consequences may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values
of the Policy. These charges include various insurance, risk,
administrative and premium tax charges. (See "Charges and Expenses".)
-- The Variable Account, not the Policy Owner, owns the mutual fund shares.
-- Federal income tax liability on any earnings is deferred until you
receive a distribution from the Policy. Transfers from one underlying
fund portfolio to another are accomplished without tax liability under
current law.
-- Dividends and capital gains are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses
of Life Insurance".
AVAILABILITY OF THE POLICY
Underwritten Policies may be issued to insureds from the age of 15 to 80 if
issued in a business situation, or to a pension plan qualified under Section
401 of the Internal Revenue Code (a "tax-qualified pension plan"), and
otherwise to insureds from the age of zero to 80. (A "business situation" is
where two or more Policies, on more than one life, are totally or partially
funded, directly or indirectly, by an employer.) Automatic issue Policies are
available in certain situations to insureds from the age of 15 to 70. In all
cases, the availability of issue ages below one and from 76 to 80 is subject
to NELICO's consent. All persons must meet NELICO's underwriting and other
requirements for issuance. Generally, the minimum Policy face amount available
is $5,000 for tax-qualified pension plans and $25,000 in all other situations,
unless NELICO consents to a lower amount.
POLICY CHARGES
PREMIUM-BASED CHARGES. NELICO deducts the following charges:
-- From scheduled premiums
(i) an annual administrative charge ($55 for annual premium Policies, up to
a total of $57.75, or $14.4375 per quarter and $4.8125 per month, for
Policies that are billed on a quarterly or monthly basis or that use
NELICO's Master Service Account arrangement), plus any extra premiums
for riders, substandard risk or automatic issue class;
(ii) a sales charge of 5.5%. NELICO currently intends to waive this charge
on scheduled premiums paid after the first 15 policy years under
Policies with a face amount of at least $250,000 and smaller Policies
sold in certain business situations or to certain tax-qualified
pension plans;
(iii) a state premium tax charge of 2.5%;
(iv) a charge for federal taxes of 1%.
-- From unscheduled payments
(i) a sales charge of 5.5% in all policy years;
(ii) a state premium tax charge of 2.5%;
(iii) a charge for federal taxes of 1%.
SURRENDER CHARGE. During the first 11 policy years, a Surrender Charge will
apply if the Policy is totally or partially surrendered or lapses or the face
amount is reduced. The Surrender Charge is a percentage of annualized basic
scheduled premiums. The maximum dollar amount of the charge applies in policy
years two through four and
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is the equivalent of 55% of two annualized basic scheduled premiums. If the
applicable Surrender Charge amount exceeds the available cash value, there
will be no proceeds paid to you on surrender or lapse.
The Surrender Charge is deducted from the Policy's available cash value,
regardless of whether that cash value is derived from scheduled premiums,
unscheduled payments, or investment experience.
CHARGES DEDUCTED FROM CASH VALUE. NELICO deducts certain charges from the
cash value:
-- Monthly charge for the cost of insurance;
-- Monthly administrative charge, currently equal to $0.10 per $1,000 of
face amount (guaranteed not to exceed $0.12 per $1,000 of face amount).
For Policies with a face amount of at least $250,000 and smaller
Policies sold in certain business situations or to certain tax-qualified
pension plans the monthly administrative charge currently equals $0.06
per $1,000 of face amount rather than $0.10;
-- Monthly minimum death benefit guarantee charge of $0.01 per $1,000 of
face amount;
In addition, if you use the Special Premium Option to skip a scheduled
premium payment, NELICO will deduct from your cash value 91% of the portion of
the annual $55 administrative charge, and of any rider, substandard risk or
automatic issue premium, that was due with the skipped premium.
CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT AND THE ZENITH FUND. The
following charges are deducted from the Variable Account and Eligible Fund
assets:
-- Daily charge against the sub-account assets for NELICO's mortality and
expense risk, currently equal to an annual rate of .60% (guaranteed not
to exceed .90%);
-- Daily charges against the Eligible Fund portfolios for investment
advisory services and fund operating expenses.
See "Charges and Expenses".
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HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
Premium Payments
. Guaranteed not to increase
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Charges from Premium
. Any rider premiums
. Annual Admin Charge-$55
. Substandard Risk Premium
. Automatic Issue Premium
. Sales Load (5.5%*) Company intends to waive after 15 policy yrs under Policies
with a face amount of at least $250,000 and smaller Policies sold in certain
business situations or to certain tax-qualified pension plans
. State Premium Tax Charge (2.5%*)
. Charge for Federal Taxes (1%*)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Unscheduled Payments
. Sales Load (5.5%)
. State Premium Tax Charge (2.5%)
. Charge for Federal Taxes (1%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Special Premium Option
. If used, charges for Annual Admin. Charge and any riders or substandard risk
or automatic issue premium are deducted from cash value
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loans
. After the free look period, you may borrow up to 90% of the adjusted cash
value (100% in Alabama)
. The loan interest charge is 6%. Loaned funds are transferred out of the
Eligible Funds into the General Account where they are credited with not less
than 4.5% interest
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Retirement Benefits
. Fixed settlement options are available for policy proceeds
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash Values
. Net scheduled premiums or net unscheduled payments invested in your choice of
Eligible Fund investments or the Fixed Account after an initial period in the
Zenith Money Market Sub-Account
. The cash value reflects investment experience, interest, payments and policy
charges
. The cash value invested in mutual funds is not guaranteed
. Any earnings are accumulated free of any current income taxes
. You may change the allocation of future net premiums at any time. You may
currently transfer funds among investment options up to 12 times per policy
year, after the free look period
. Your cash value may be allocated among a maximum of ten accounts at any one
time
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Death Benefit
. Level or Variable Death Benefit Options
. Guaranteed not to be less than initial face amount net of any loan balance
. Income tax free to named beneficiary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Daily Deductions from Assets
. Mortality and expense risk charges of 0.60% (guaranteed not to exceed .90%) on
an annual basis are deducted from the cash value daily
. Investment advisory fees and other expenses are deducted from the Eligible
Fund values daily
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beginning of Month Charges
. The cost of insurance protection is deducted from the cash value each month
. Minimum Death Benefit Guarantee Charge of $.01 per $1000 face amount monthly
. Admin. Charge $.10 (guaranteed not to exceed $.12) per $1000 face amount
monthly. For Policies with a face amount of at least $250,000 and smaller
Policies sold in certain business situations or to certain tax-qualified
pension plans charge is currently $.06 per $1000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Surrender Charges
. Consists of Deferred Sales Charge and Deferred Administrative Charge (see page
A-17)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Living Benefits
. If policyholder has elected and qualified for disability waiver of premium
rider and becomes totally disabled, company will waive premiums during the
period of disability. Unscheduled payments are not covered by the waiver of
premium rider
. Policy may be surrendered at any time for its cash surrender value
. Deferred income taxes, including taxes on amounts borrowed, become payable
upon surrender
. Grace period for scheduled premiums is 31 days from due date. Nonforfeiture
options are fixed extended term insurance and fixed or variable paid-up
insurance
. Subject to company rules, a lapsed policy may be reinstated within seven years
of date of lapse if it has not been surrendered
- --------------------------------------------------------------------------------
* Percent of Premium after deducting Annual Admin. Charge, Rider Premiums and
Substandard Risk and Automatic Issue Premiums
A-10
<PAGE>
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME OFFICE
NELICO will treat your request for a Policy transaction, or your submission
of a payment, as received at the Home Office if it is received there before
the close of regular trading on the New York Stock Exchange on that day. If it
is received after that time, or if the New York Stock Exchange is not open
that day, then it will be treated as received on the next day when the New
York Stock Exchange is open.
NELICO
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, 1996, 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 Metropolitan Life Insurance
Company ("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.
A-11
<PAGE>
The following chart illustrates the relationship of NELICO, the Fixed
Account, the Variable Account and the Eligible Funds.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NELICO
- ------------------------------------------------------------------------------------------------------------------------------------
(Insurance company subsidiary of MetLife)
Charges are deducted.
Net premiums and net unscheduled payments are allocated to the Policy Owner's choice of sub-
accounts in the Variable Account or to the Fixed Account.
Premiums ---------------------------------------------------------------------------------------------------------
and VARIABLE ACCOUNT
Unscheduled ---------------------------------------------------------------------------------------------------------
Payments.... Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith
Fixed Capital Bond Money Man- Stock Growth Avanti Small Bal- Equity Venture Inter-
Account Growth Income Market aged Index and Growth Cap anced Growth Value national
Sub- Sub- Sub- Sub- Sub- Income Sub- Sub- Sub- Sub- Sub- Magnum
Account Account Account Account Account Sub- Account Account Account Account Account Equity
Account Sub-
Account
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Premiums ----------------------------------
and VARIABLE ACCOUNT
Unscheduled ----------------------------------
Payments.... Equity- Over- High Asset
Income seas Income Man-
Sub- Sub- Sub- ager
Account Account Account Sub-
Account
----------------------------------
<S> <C> <C> <C> <C>
</TABLE>
Sub-accounts buy
shares of the
Eligible Funds.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------------------------------
Capital Back Bay Back Bay Back Bay Westpeak Westpeak Loomis Loomis Loomis Alger Davis Morgan
Growth Advisors Advisors Advisors Stock Growth Sayles Sayles Sayles Equity Venture Stanley
Series Bond Money Managed Index and Avanti Small Balanced Growth Value Inter-
Income Market Series Series Income Growth Cap Series Series Series national
Series Series Series Series Series Magnum
Equity
Series
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
VIP
FUND
VIP FUND II
- --------------------------------------------------------
Equity Overseas High Asset
Income Portfolio Income Manager
Portfolio Portfolio Portfolio
- --------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
Eligible Funds buy portfolio investments to support values and benefits of the
Policies.
POLICY VALUES AND BENEFITS
DEATH BENEFIT
DEATH BENEFIT OPTIONS. When you apply for a Policy, you may choose between
two death benefit options. The death benefit option under a Policy may not be
changed.
The Option 1 death benefit provides a death benefit equal to the face amount
of the Policy. Except as described below, the Option 1 death benefit is fixed.
The Option 2 death benefit provides a death benefit equal to the face amount
of the Policy plus the amount, if any, by which the Policy's cash value
exceeds its "tabular cash value". The Policy's tabular cash value is a
hypothetical value and is described in detail under "Tabular Cash Value"
below.
Generally, the Option 2 death benefit may exceed the face amount if the
Policy's sub-accounts (and the cash value in the Fixed Account) have earned
greater than a 4.5% net return, if you have paid more than the scheduled
premiums, or if less than the maximum charges were deducted.
A-12
<PAGE>
In order to meet the Internal Revenue Code's definition of life insurance,
the Policies provide that the death benefit will not be less than the Policy's
cash value divided by the net single premium per dollar of death benefit at
the insured's attained age. This means that under both death benefit options,
if the cash value grows to certain levels the death benefit will be increased
to satisfy the tax law requirements. At that point, any payment you make into
the Policy will increase the death benefit by more than it increases the cash
value.
GUARANTEED MINIMUM DEATH BENEFIT
Under both death benefit options, the death benefit is guaranteed not to be
less than the Policy's face amount regardless of the investment experience of
the Policy's sub-accounts, as long as scheduled premiums have been paid when
due or, under the Special Premium Option, are not required to be paid. (See
"Scheduled Premiums" and "Special Premium Option".) The death benefit will be
adjusted as described below before the proceeds are paid. However, if an
"excess policy loan" exists, the Policy may terminate even if all scheduled
premiums have been paid. (See "Loan Provision" for a definition of "excess
policy loan".)
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the death
benefit reduced by any outstanding loan and accrued loan interest and by the
portion of any unpaid scheduled premium for the period prior to the date of
death. The death proceeds will be increased by any rider benefits payable and
by the portion of any scheduled premium paid for a period beyond the date of
death.
The death proceeds may also be adjusted if the insured's age or sex was
misstated in the application, if death results from the insured's suicide
within two years (or less if provided by state law) from the Policy's date of
issue, or if limits on the death benefit are imposed by rider. (See "Limits to
NELICO's Right to Challenge the Policy".)
TABULAR CASH VALUE
The Policy's tabular cash value is a hypothetical value that is used to
determine the Option 2 death benefit, whether a scheduled premium payment can
be skipped under the Special Premium Option, and how much cash value is
available to be withdrawn from the Policy. (See "Death Benefit", "Special
Premium Option" and "Partial Surrender and Partial Withdrawal".)
The tabular cash value is the value the Policy would have if the cash value
in the Policy's sub-accounts (and cash value in the Fixed Account) earned a
4.5% net return, all scheduled premiums were paid, no unscheduled payments and
no loans or other withdrawals of cash value were made, and maximum Policy
charges were deducted.
Your premium payment schedule will affect the amount of the tabular cash
value. The tabular cash value on any day will be calculated as if the current
payment schedule had always been in effect.
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account, in
the Fixed Account and, if you have an outstanding policy loan, in NELICO's
general account as a result of the loan. The cash value reflects scheduled
premiums and unscheduled payments, the net investment experience of the
Policy's sub-accounts, interest credited on its cash value in the Fixed
Account and on amounts held in the general account as a result of a loan,
amounts deducted for Policy charges (including amounts deducted when you use
the Special Premium Option to skip a scheduled premium), and amounts withdrawn
or surrendered.
Your Policy's net cash value is the amount you will receive if you surrender
the Policy. The net cash value is the cash value reduced by any outstanding
policy loan (and accrued interest) and by any applicable surrender charge. The
net cash value is increased by the portion of any cost of insurance charge
deducted that applies to the period
A-13
<PAGE>
beyond the date of surrender. (See "Loan Provision", "Surrender Charge" and
"Monthly Charges for the Cost of Insurance".)
The Policy's net cash value in the Variable Account may increase or decrease
daily depending on the net investment experience of the Policy's sub-accounts.
Unfavorable investment experience can reduce the net cash value to zero.
Because there is no guaranteed minimum cash value in the Variable Account, you
bear the entire investment risk with respect to the cash value. The premium
payment schedule you choose will also affect the Policy's net cash value.
NET INVESTMENT EXPERIENCE
The net investment experience of the Policy's sub-accounts will affect the
Policy's cash value and, in some circumstances, the death benefit. The net
investment experience of the sub-accounts is determined as of the close of
regular trading on the New York Stock Exchange on each day when the Exchange
is open for trading.
A sub-account's net investment experience for any period reflects the
investment experience of the underlying Eligible Fund shares for the same
period, reduced by the charges against the sub-account for that period.
(Currently the sub-accounts are charged only for NELICO's mortality and
expense risk, but in the future NELICO may impose a charge against the sub-
accounts for taxes if appropriate. See "Charges Against the Eligible Funds and
the Sub-Accounts of the Variable Account" and "Charge for NELICO's Income
Taxes".)
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during
the period. Dividends and capital gains distributions on Eligible Fund shares
are reinvested in additional shares of the Fund and affect subsequent
investment experience.
ALLOCATION OF NET PREMIUMS
As of the "investment start date", the net scheduled premium (and any net
unscheduled payment) will be allocated to the Zenith Money Market Sub-Account
until 15 days after NELICO mails the confirmation for the initial premium.
(See "Right to Return the Policy". For the definition of the "investment start
date", see "Amount Provided for Investment under a Policy".) Thereafter, the
cash value (which will reflect at least one Monthly Deduction and one cost of
insurance deduction) will be allocated to the sub-accounts and/or the Fixed
Account according to your instructions. Therefore, your selection of accounts
will not take effect until after the initial period, described above, when the
cash value is allocated to the Zenith Money Market Sub-Account.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
INITIAL AMOUNT. An amount is first provided for investment under the Policy
as of the investment start date. That is the latest of: the date when NELICO
first receives a premium payment for the Policy, the date Part II of the
Policy application is signed and the Policy Date. (For this purpose, receipt
of the premium payment means receipt by your registered representative, if the
payment is made with the application; otherwise, it means receipt by a NELICO
agency or, in the case of a Policy sold through MetLife Brokerage, receipt by
MetLife Brokerage at its Princeton, New Jersey office.)
If you make a premium payment with the application, the Policy Date is
generally the later of the date Part II of the application is signed and
receipt of the premium payment. In that case the Policy Date and investment
start date are the same. The amount of premium paid with the application must
be at least 10% of the annual scheduled premium for the Policy or one monthly
scheduled premium. Only one premium payment may be made before the Policy is
issued. (A premium payment made before issue will be maintained by NELICO or
an affiliate in the general account, and will not earn interest prior to the
investment start date.) The amount provided for investment on the investment
start date is generally equal to the first net scheduled premium plus any net
unscheduled payment made as part of the premium payment.
If you make a premium payment with the application, the insured will be
covered under a temporary insurance agreement for a limited period that is
described in the temporary insurance agreement form. Coverage under the
temporary insurance agreement will begin on the later of the date when NELICO
receives the premium for the Policy
A-14
<PAGE>
and the date when Part II of the application is signed. The maximum amount of
coverage provided is the lesser of the amount of insurance applied for and
$500,000 for standard risks ($250,000 for substandard risks and $50,000 for
persons who are determined to be uninsurable).
If a Policy is issued, monthly Policy charges, including cost of insurance
charges, will begin as of the Policy Date, even if the Policy's issuance was
delayed due to underwriting requirements, and will be in amounts based on the
face amount of the Policy issued, even if the temporary insurance coverage
received during the underwriting period was for a lesser amount. If NELICO
declines an application, it will refund the premium payment made and any
unscheduled payment made plus interest on the unscheduled payment at the rate
currently in use by NELICO. Generally, no premium payment may be submitted
with an application for a Policy to be used in connection with a tax-qualified
pension plan.
If you choose to pay the initial premium upon delivery of the Policy, the
Policy will have a Policy Date which is generally five days after issue. The
investment start date will be the later of the Policy Date and the date the
premium is received. Monthly Policy charges will begin on the Policy Date.
Interest at a 4.5% net rate will be credited to the Policy for the period, if
any, between the Policy Date and the investment start date. Insurance coverage
will begin upon receipt of the premium.
Under limited circumstances, NELICO may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
Backdating may be desirable, for example, so that you can purchase a
particular Policy face amount for a lower premium, based on a younger
insurance age. However, backdating in some cases may cause the insured to be
treated as a juvenile which could result in higher cost of insurance rates
under the Policy than if the insured had been assigned to a nonsmoker class.
For a backdated Policy, you must also pay the scheduled premiums payable for
the period between the Policy Date and the investment start date. As of the
investment start date, NELICO will allocate to the Policy those net scheduled
premiums, adjusted for monthly Policy charges and interest at a 4.5% net rate
for the period between the Policy Date and the investment start date.
SUBSEQUENT AMOUNTS. Although your Policy's cash value reflects only the
scheduled premiums you have actually paid, on each premium due date NELICO
transfers to your Policy's sub-accounts the amount of the net scheduled
premium due, even if it has not yet been paid. Therefore, the amount provided
for investment on the premium due date includes the Policy's cash value on
that date, calculated as if premiums were paid to but not including that date,
plus the net scheduled premium due on that date. If you use the Special
Premium Option to skip a scheduled premium or if you do not pay a required
scheduled premium and the Policy lapses, NELICO will withdraw the unpaid net
scheduled premium from the Variable Account, adjusted for the net investment
experience of the sub-accounts since the due date. (If you do not pay a
required scheduled premium, the Policy may lapse. See "Default and Lapse
Options".)
The amount provided for investment in the Policy is adjusted as of each day
the New York Stock Exchange is open to reflect the net investment experience
of the sub-accounts for that day.
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 10 days (or more where required by
applicable state insurance law) after you receive the Policy. The Policy may
be returned to NELICO or your registered representative. Insurance coverage
ends as soon as the Policy is returned (as determined by its postmark, if the
Policy is mailed). If you choose to cancel the Policy, NELICO will refund any
scheduled premium paid (or any other amount that is required by state
insurance law and permitted by the Securities and Exchange Commission) and any
unscheduled payments made, with interest on the unscheduled payments at the
rate currently in use by NELICO.
CHARGES AND EXPENSES
DEDUCTIONS FROM PREMIUMS AND UNSCHEDULED PAYMENTS
NELICO deducts certain charges from your scheduled premiums and unscheduled
payments before allocating the net scheduled premiums and net unscheduled
payments to the Variable Account and Fixed Account.
A-15
<PAGE>
NELICO deducts the following amounts from scheduled premiums to arrive at
the Policy's BASIC scheduled premium:
(i) charges for any rider benefits under your Policy;
(ii) extra premiums due if your Policy is in a substandard risk or
automatic issue class;
(iii) the portion of the annual Policy administrative charge that is due
with that scheduled premium payment.
The total charge is $55 per year for Policies that pay premiums once a year
and increases as the premium payment frequency increases. The amount of the
charge for other premium frequencies is as follows:
<TABLE>
<CAPTION>
AMOUNT AMOUNT
PAYMENT FREQUENCY PER PAYMENT PER YEAR
----------------- ----------- --------
<S> <C> <C>
Semi-annual......................................... $28.325 $56.65
Quarterly........................................... $14.4375 $57.75
Master Service Account.............................. $ 4.8125 $57.75
Monthly............................................. $ 4.8125 $57.75
</TABLE>
If an automatic issue Policy and an underwritten Policy are both issued on
the same insured (because the total coverage exceeds NELICO's automatic issue
limits), NELICO will waive the annual Policy administrative charge on the
automatic issue Policy.
The charges described above are not deducted from unscheduled payments.
All of the administrative charges under the Policies cover the cost of
administering the Policies, as well as distribution, legal, actuarial,
systems, mailing and other overhead costs connected with NELICO's variable
life insurance operations.
SALES CHARGE. NELICO deducts a sales charge from each scheduled premium and
unscheduled payment. The charge is 5.5% of each BASIC scheduled premium and
5.5% of each unscheduled payment. NELICO currently intends to waive this
charge on basic scheduled premiums after the 15th policy year (1) for all
Policies with a face amount of at least $250,000 and (2) for Policies issued
in a business situation or to a tax-qualified pension plan if either the
average face amount for the group is at least $250,000 (where fewer than 25
persons are covered) or the average face amount is at least $150,000 (where 25
or more persons are covered). However, NELICO retains the right not to waive
the charge, or to reimpose it once it has been waived. The sales charge will
apply to unscheduled payments made in all policy years.
During the first 11 policy years, if you surrender or lapse the Policy, take
a partial surrender or reduce the face amount, a Surrender Charge will also
apply. (See "Surrender Charge" below.)
The sales charges under a Policy in a given policy year are not necessarily
related to NELICO's actual sales expenses for that year.
Sales charges for Policies sold in certain group or sponsored arrangements
may be reduced. NELICO may reduce or eliminate the sales charge, when you
purchase a Policy, on cash value transferred, as an unscheduled payment in the
first year, from certain fixed-benefit life insurance policies that were
issued by The New England, NELICO or NELICO's affiliates that meet certain
premium, cash value and/or face amount minimums, as currently published by
NELICO. NELICO's normal issuance criteria, including reinsurance and other
limitations, as well as certain other eligibility requirements, will also
apply in these situations. NELICO may waive underwriting requirements in these
situations. NELICO may also reduce the Surrender Charge on such Policies. Your
registered representative can advise you regarding the availability of this
feature.
STATE PREMIUM TAX CHARGE. NELICO deducts 2.5% from each BASIC scheduled
premium and each unscheduled payment to cover state premium taxes and
administrative expenses. These taxes vary from state to state and the 2.5%
rate reflects an average. Administrative expenses covered by this charge
include those related to premium tax and certain other state filings.
A-16
<PAGE>
FEDERAL PREMIUM TAX CHARGE. NELICO deducts 1% from each BASIC scheduled
premium and each unscheduled payment to recover a portion of its federal
income tax liability that is determined solely by the amount of life insurance
premiums it receives.
- -------------------------------------------------------------------------------
EXAMPLE: The following chart shows the net amount that would be allocated to
the Variable Account under a Policy with no riders and which is not a
substandard or automatic issue Policy. The example assumes an annual scheduled
premium payment of $2,000 and unscheduled payment of $2,000.
<TABLE>
<CAPTION>
SCHEDULED NET SCHEDULED
PREMIUM PREMIUM
--------- -------------
<S> <C> <C>
$2,000 $ 2,000
-55 (administrative charge)
---------
$ 1,945 (BASIC scheduled premium)
$ 1,945
-175.05 (9% X 1,945 = total sales and premium tax charges)
---------
$1,769.95
---------
</TABLE>
NELICO may waive the 5.5% sales charge on scheduled premiums paid after the
15th policy year under Policies with a face amount of at least $250,000 and
smaller Policies sold in certain business situations or to certain tax-
qualified pension plans. In that case, the net scheduled premium in this
example would be $1,945 -68.08 (3.5% X 1,945), or $1,876.92.
<TABLE>
<CAPTION>
NET
UNSCHEDULED UNSCHEDULED
PAYMENT PAYMENT
----------- -----------
<S> <C> <C>
$2,000 $2,000
-180 (9% X 2,000 = total sales and premium tax charges)
------
$1,820
------
</TABLE>
- -------------------------------------------------------------------------------
SURRENDER CHARGE
If you totally or partially surrender your Policy, or allow it to lapse, or
reduce its face amount, in the first 11 policy years, a Surrender Charge will
be deducted from the cash value.
The Surrender Charge is a percentage of basic scheduled premiums, as shown
in the chart below. In each policy year, the charge will be applied to the
total annualized basic scheduled premiums for the Policy through the policy
year in which the total or partial surrender, lapse or face amount reduction
occurs, up to a maximum of four annualized basic scheduled premiums. This
means that even if you have not yet paid the full amount of the annualized
basic scheduled premiums to which the Surrender Charge applies at any point in
time, you will be treated as if you have paid those premiums for the purpose
of calculating the charge.
The Surrender Charge rate that applies in each policy year is indicated
below:
<TABLE>
<CAPTION>
POLICY YEAR PERCENTAGE APPLIED TO
----------- ---------- ----------
<S> <C> <C>
1 55.00% One Annualized Basic Scheduled Premium
2 55.00% Two Annualized Basic Scheduled Premiums
3 36.67% Three Annualized Basic Scheduled Premiums
4 27.50% Four Annualized Basic Scheduled Premiums
5* 26.25% Four Annualized Basic Scheduled Premiums
6* 25.00% Four Annualized Basic Scheduled Premiums
7* 20.00% Four Annualized Basic Scheduled Premiums
8* 15.00% Four Annualized Basic Scheduled Premiums
9* 10.00% Four Annualized Basic Scheduled Premiums
10* 5.00% Four Annualized Basic Scheduled Premiums
11* 0.00% Four Annualized Basic Scheduled Premiums
</TABLE>
- --------
*End of Policy Year
A-17
<PAGE>
For the first four policy years the Surrender Charge rate that applies in a
particular year remains level throughout that year. Beginning in the fifth
policy year, the Surrender Charge rate declines on a monthly basis to the end
of year rates shown in the table above.
The dollar amount of the Surrender Charge is also limited to an amount per
$1,000 of your Policy's face amount. These limits are:
<TABLE>
<CAPTION>
POLICY YEAR
-------------------------------------------
1 2 3 4 5 6 7 8 9 10 11
--- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Surrender Charge per $1,000
of Face Amount.................... $47 $44 $42 $39 $37 $35 $33 $31 $29 $27 $25
</TABLE>
In all cases, the annualized premium amount to which the Surrender Charge
applies is calculated based on the premium payment frequency you are using at
the time. Therefore, if you are paying your basic scheduled premiums in
quarterly installments rather than annually at the time you surrender your
Policy, the dollar amount of your Surrender Charge may be higher because the
dollar amount of an annual basic scheduled premium is somewhat higher if you
pay it in installments rather than once a year.
In the case of a partial surrender or reduction in face amount, the
Surrender Charge is deducted from the Policy's cash value in an amount
proportional to the amount of the face amount surrendered. (See "Partial
Surrender" and "Partial Withdrawal".)
The Surrender Charge is deducted from the Policy's available cash value,
regardless of whether the cash value comes from scheduled premiums,
unscheduled payments, or investment experience. If the applicable Surrender
Charge amount exceeds the available cash value, there will be no proceeds paid
to you on surrender or lapse.
The Surrender Charge covers the following expenses: developmental costs
associated with the Policies (such as actuarial, legal, systems and other
overhead costs), underwriting, and marketing and other distribution expenses.
DEDUCTIONS FROM CASH VALUE
MONTHLY DEDUCTION. On the first day of each policy month, starting with the
Policy Date, NELICO will make a deduction (the "Monthly Deduction") from your
cash value for these charges:
(i) an administrative charge, currently equal to $0.10 per $1,000 of Policy
face amount (guaranteed not to exceed $0.12 per $1,000 of face amount). For
all Policies with a face amount of at least $250,000 and for Policies issued
in a business situation or to a tax-qualified pension plan if either the
average face amount for the group is at least $250,000 (where fewer than 25
persons are covered) or the average face amount is at least $150,000 (where 25
or more persons are covered), the monthly administrative charge is currently
$0.06 per $1,000 of face amount rather than $0.10; and
(ii) a minimum death benefit guarantee charge of $0.01 per $1,000 of Policy
face amount. This charge compensates NELICO for its guarantee that, regardless
of the investment experience of the Policy's sub-accounts, the Policy's death
benefit will never be less than the face amount, provided that all required
scheduled premiums have been paid when due. (See "Adjustments to the Death
Proceeds Payable".)
If there is an outstanding loan under your Policy and the net cash value is
not large enough to cover the full amount of the Monthly Deduction in any
month, the difference will be treated as an excess policy loan and the Policy
may terminate. (See "Loan Provision".)
A-18
<PAGE>
MONTHLY CHARGES FOR THE COST OF INSURANCE. The cost of providing insurance
protection under your Policy is deducted from your Policy's cash value at the
beginning of each policy month, beginning with the Policy Date. The cost of
insurance charge for a policy month is equal to the "amount at risk" under the
Policy, multiplied by the cost of insurance rate for that policy month. The
amount at risk is determined on the first day of the policy month after the
Monthly Deduction has been processed and is the amount by which the death
benefit (discounted at the monthly equivalent of 4.5% per year) exceeds the
Policy's cash value. The cost of insurance rate for your Policy will change
from month to month.
If a Policy loan is outstanding and your Policy's net cash value is not
large enough to cover the cost of insurance charge for a policy month, the
difference between the net cash value available and the cost of insurance
charge will be treated as an excess policy loan and the Policy may terminate.
(See "Loan Provision".)
The guaranteed cost of insurance rates for a Policy depend on the insured's
underwriting class, age on the first day of the Policy year and sex (if the
Policy is sex-based). The current cost of insurance rates for a given Policy
will also depend on the insured's issue age and the Policy's face amount at
issue and duration. In addition, for Policies sold in a business situation or
to a tax-qualified pension plan, current cost of insurance rates may depend on
the average face amount of Policies sold to the group and on the number of
lives in the group. The rates are guaranteed not to be higher than rates based
on the 1980 Commissioners Standard Ordinary Mortality Tables (the "1980 CSO
Tables"), with smoker/nonsmoker modifications. For Policies issued on juvenile
insureds, the rates are guaranteed not to be higher than rates based on the
1980 CSO Tables. The rates actually used may be lower than these maximum
rates, depending on NELICO's expectations regarding future mortality and
expense experience, lapse (or other termination) rates and investment
earnings. NELICO reviews the adequacy of its current cost of insurance rates
annually and may adjust their level periodically. Any change in the current
cost of insurance rates will be applied prospectively only and will be on a
non-discriminatory basis. The current cost of insurance rate for a Policy is
set forth in the Policy Owner's annual statement.
For standard issues, the underwriting classes used for determining current
cost of insurance rates are smoker, nonsmoker, nonsmoker preferred, nonsmoker
residual and, for Policies issued on juvenile insureds (that is, insureds with
an issue age of zero through 19), standard. Substandard Policies and automatic
issue Policies use the same smoker and nonsmoker standard rates and, for
juveniles, standard rates, but require an extra premium as part of the
Policy's total scheduled premium.
Availability of the three nonsmoker classes varies. For fully underwritten
Policies with a face amount of $250,000 or more and where the insured's issue
age is 20 through 75, the standard nonsmoker underwriting classes are
nonsmoker preferred and nonsmoker residual. For all other underwritten
Policies (including any Policy where the insured's issue age is above 75),
only the nonsmoker class is used. Among these three nonsmoker classes, the
nonsmoker preferred class generally offers the most favorable rates on a
current basis and the nonsmoker residual class generally offers the least
favorable rates on a current basis.
Cost of insurance rates are generally more favorable for nonsmoker than for
smoker insureds and generally more favorable for female than for male
insureds. Within a given underwriting class, cost of insurance rates are
generally more favorable for insureds with lower issue ages. Where required by
state law, and for Policies sold in connection with certain employee benefit
plans, cost of insurance rates (and Policy values and benefits) will not vary
based on the sex of the insured.
Currently, cost of insurance rates will be more favorable for a Policy if
the face amount is at least $250,000, unless, in the case of an underwritten
Policy, the insured is assigned to the nonsmoker residual class. In addition,
for Policies with a face amount below $250,000 which are issued in a business
situation or to a tax-qualified pension plan, current cost of insurance rates
will be more favorable if either (1) the average face amount for the group is
at least $250,000, where fewer than 25 persons are covered, or (2) the average
face amount is at least $150,000, where 25 or more persons are covered.
NELICO offers Policies on an automatic issue basis to certain group or
sponsored arrangements. If an eligible group or sponsored arrangement
purchases Policies on an automatic issue basis, the Policies will be issued up
to
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a predetermined face amount limit, with only minimal evidence of insurability.
Because only limited underwriting information is obtained, NELICO has
determined that Policies issued on an automatic issue basis may present
additional mortality cost to NELICO compared to underwritten Policies. NELICO
will charge an additional premium for automatic issue Policies. The amount of
the premium will depend on the issue age of the insured and the death benefit
option chosen, and may also depend on the size of the group and the total
premium to be paid by the group. Generally, the additional premium will be
higher if the Policy is sold to a tax-qualified pension plan than otherwise.
The additional premium will be deducted from the scheduled premium in the same
manner as under a substandard risk Policy before the net scheduled premium is
allocated to the Variable Account. Under automatic issue Policies, the overall
charges for insurance protection, including the extra premium, will be higher
than under a comparable underwritten Policy issued in a standard class. This
means that an insured may be able to obtain individual, underwritten insurance
coverage at a lower overall cost. The overall guaranteed maximum monthly cost
of insurance charges, including the extra premium, will exceed charges based
on 100% of the 1980 CSO Tables.
Eligible group or sponsored arrangements may choose to purchase Policies on
a simplified underwriting basis either as an alternative to automatic issue or
for amounts of insurance which exceed NELICO's automatic issue limits, but may
not choose automatic issue for some members of the group and simplified
underwriting for others. Policies issued on a simplified underwriting basis
will have the same cost of insurance rates and basic scheduled premiums as
fully underwritten Policies. Currently NELICO does not intend to charge an
additional premium for coverage issued on a simplified issue basis unless the
insured is in a substandard risk class.
CHARGES UNDER THE SPECIAL PREMIUM OPTION. If you use the Special Premium
Option to skip a scheduled premium payment, NELICO will deduct from the
Policy's cash value the amount of the Policy's annual administrative charge
that was due with the scheduled premium, as well as any premiums due for rider
benefits and substandard risk or automatic issue status. The amount deducted
for all of these charges will be 91% of the amount that was due with the
scheduled premium payment. (See "Special Premium Option".) These charges will
be deducted from the Policy's sub-accounts in proportion to the Policy's cash
value in each sub-account.
CHARGES FOR ADDITIONAL SERVICES. NELICO reserves the right to charge Policy
Owners a nominal fee, which will be billed directly to the Policy Owner, in
the event that a Policy re-issue or re-dating is requested.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE
ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. NELICO charges the sub-accounts of the
Variable Account for the mortality and expense risks that NELICO assumes.
Currently, the charge is made daily at an annual rate of .60% of the sub-
accounts' assets. NELICO reserves the right to increase the charge, up to a
maximum annual rate of .90%. The mortality risk NELICO assumes is that
insureds may live for shorter periods of time than NELICO estimated. The
expense risk is that NELICO's costs of issuing and administering the Policies
may be more than NELICO estimated.
CHARGES FOR INCOME TAXES. NELICO currently makes no charge for income taxes
against the Variable Account, but in the future NELICO may impose such a
charge, if appropriate. (See "Charge for NELICO's Income Taxes".)
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds.
The Zenith Fund Series incur charges for advisory fees and certain other
expenses. The series (other than the Capital Growth Series) are advised by TNE
Advisers, Inc., an affiliate of NELICO. 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
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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>
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>
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>
- --------
* 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.
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<PAGE>
GROUP OR SPONSORED ARRANGEMENTS
The Policies may be issued to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals on a group basis. Examples of such arrangements are
employer-sponsored benefit plans which are tax-qualified pension plans and
non-tax qualified deferred compensation plans. A "sponsored arrangement"
includes a program under which an employer permits group solicitation of its
employees or an association permits group solicitation of its members for the
purchase of the Policies on an individual basis.
For Policies issued in connection with group or sponsored arrangements,
NELICO may waive or reduce one or more of the following charges: the sales
charge, Surrender Charge, charges for the cost of insurance (including
automatic issue premiums), mortality and expense risk charge, administrative,
minimum death benefit guarantee, and/or federal and state premium tax charges
described in "Charges and Expenses". (In addition, the interest rate credited
on amounts taken from the sub-accounts as a result of a Policy loan may be
increased for these Policies.) NELICO will waive or reduce these charges
according to its rules in effect when the Policy application is approved. To
qualify for a waiver or reduction, a group or sponsored arrangement must
satisfy certain criteria as to, for example, size and number of years in
existence. Generally, the sales contacts and effort, administrative costs and
mortality cost per Policy vary based on such factors as the size of the group
or sponsored arrangement, its stability, the purposes for which the Policies
are purchased and certain characteristics of its members. The amount of
reduction and the criteria for qualification will reflect the reduced sales
and administrative effort resulting from sales to qualifying group or
sponsored arrangements. NELICO may modify from time to time both the amounts
of reductions and the criteria for qualification. Reductions in or waiver of
these charges will not be unfairly discriminatory against any person,
including the affected Policy Owners and all other Policy Owners of Policies
funded by the Variable Account.
The United States Supreme Court has held that certain insurance policies
providing values and benefits that vary with the sex of the insured may not be
used to fund certain employee benefit programs. Therefore, NELICO offers
Policies that do not vary based on the sex of the insured for use in
connection with certain employee benefit programs. NELICO recommends that any
employer proposing to offer the Policies to employees under a group or
sponsored arrangement consult its attorney before doing so.
PREMIUMS
SCHEDULED PREMIUMS
Scheduled premium payments for the Policy are generally required until the
insured reaches age 100. The scheduled premium amount will depend on the
Policy's face amount, the age, sex (unless unisex rates apply) and
underwriting class of the insured, the premium payment schedule you select,
and any rider benefit premiums.
The underwriting classes used for setting the scheduled premium amount are
smoker standard, smoker substandard, nonsmoker standard, nonsmoker
substandard, automatic issue and, for juvenile insureds, standard and
substandard. Scheduled premiums for substandard and automatic issue classes
reflect additional premiums that are charged for Policies in those categories.
Scheduled premiums are generally higher for males than for females and
generally higher for smokers than for nonsmokers. Scheduled premiums are also
generally higher for Policies issued on older insureds.
Scheduled premiums can be paid on an annual, semi-annual or quarterly
schedule or, with NELICO's consent, monthly. The premium payment schedule you
select will affect the total amount of premium you pay in a policy year. The
total premium paid is highest if you select the monthly frequency and lowest
if you select the annual frequency. The payment schedule will also affect the
Policy's cash value and tabular cash value and, therefore, may affect the
death benefit.
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<PAGE>
You can change your premium payment schedule at any time by sending your
request for change to NELICO's Home Office. If you change to a less frequent
payment schedule (e.g. from quarterly to annual), the change will go into
effect on the next premium due date under the new schedule. Until then, you
will continue to make payments under the old schedule; NELICO will not accept
an advance payment of the remaining scheduled premiums due for the policy year
under the old schedule, that is, you cannot pay the balance of any premium
mode. If you change to a more frequent payment schedule (e.g. from annual to
quarterly), the change will go into effect on the next premium due date under
the original schedule. (See "Receipt of Communications and Payments at
NELICO's Home Office".)
You may make scheduled payments by check or money order. You may also choose
to have NELICO withdraw your scheduled premium payments from your bank
checking account or TNE Cash Management Trust account. (This service is known
as the Master Service Account arrangement, or "MSA". Scheduled payments made
through MSA may be maintained by NELICO or an affiliate in the general account
pending their due date.)
Scheduled premiums are due at NELICO's Home Office or a NELICO agency on or
before their due dates. NELICO will allocate net scheduled premiums, after the
first, to your Policy's sub-accounts on the premium due dates, not when they
are received. If you use the Special Premium Option to skip a scheduled
premium payment or if you miss a required scheduled premium payment, however,
NELICO will withdraw from the Variable Account the net scheduled premium that
it advanced, adjusted for the net investment experience of the Policy's sub-
accounts since the due date. (If you do not pay a required scheduled premium,
the Policy may lapse. See "Default and Lapse Options".)
A credit will be applied to the initial scheduled premium under a Policy
converted from certain term insurance that was issued by The New England,
NELICO or NELICO's affiliates and also to scheduled premiums under a Policy
issued to a Home Office employee of NELICO on the life of the employee, if the
employee has worked for NELICO and/or The New England for at least one year.
UNSCHEDULED PAYMENTS
Within the limits described below, you may make unscheduled payments as long
as the Policy has not lapsed. NELICO may require satisfactory evidence of
insurability before accepting the payment. In addition, NELICO's consent is
required if, in order to satisfy tax law requirements, the payment would
increase the Policy's death benefit by more than it would increase the cash
value. NELICO will not accept an unscheduled payment if the Policy's scheduled
premiums are being waived under a waiver of premium rider. (See "Additional
Benefits by Rider".) NELICO also reserves the right to prohibit or limit the
amount of unscheduled payments under a Policy covering a substandard risk
insured or under an automatic issue Policy. An unscheduled payment must be at
least $10 if made pursuant to the Master Service Account arrangement, and
otherwise must be at least $25.
You may ask NELICO to include on your premium notice for the policy
anniversary a planned unscheduled payment amount in addition to the scheduled
premium, subject to NELICO's rules. Subject to NELICO's rules, you may choose
to have NELICO withdraw unscheduled payments from your bank checking account
or TNE Cash Management Trust account (i.e. the Master Service Account
arrangement) if you are using this facility to pay scheduled premiums under
the Policy.
If your Policy has a level term insurance rider and you are paying premiums
on the annual mode or by means of the Master Service Account arrangement, you
may choose to have NELICO bill you (or deduct from your bank checking account
or TNE Cash Management Trust account) a single level amount (the "Annual Level
Billing Option") each year that is sufficient to cover the scheduled premium
due plus the increasing premium for the level term insurance rider. Under the
Annual Level Billing Option, a portion of the level billing amount will be
allocated to your Policy as an unscheduled payment. The amount that is
allocated as an unscheduled payment will decrease each year as the cost of the
level term insurance rider goes up. You may need to recalculate your Annual
Level Billing Amount as the premium for the level term insurance rider
increases.
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<PAGE>
Under any of these billing options, the total of all premiums and payments
made could cause the Policy to become a "modified endowment contract". You
should consider the potential tax consequences before planning a series of
unscheduled payments. (See "Tax Considerations".)
NELICO will allocate an unscheduled payment to your Policy's sub-accounts as
of the date the payment is received at NELICO's Home Office. (See "Receipt of
Communications and Payments at NELICO's Home Office".)
RULES FOR CREDITING PAYMENTS TO THE VARIABLE ACCOUNT. NELICO will treat
payments made under the Policy in the following way. Payments accompanied by a
premium notice, and payments received by NELICO during the period from 25 days
before the premium due date to 31 days after the due date, whether or not
accompanied by a premium notice, will be applied first to payment of the
scheduled premium due, next to pay any loan interest due, and any balance will
be applied as an unscheduled payment as of the date it was received. (However,
any payment which is less than the amount of the scheduled premium due will be
treated as an unscheduled payment.) All other payments will be treated as
unscheduled payments. If the Policy lapses and you made an unscheduled payment
during the grace period which was insufficient to pay the premium due, the
unscheduled payment will be refunded to you.
If you pay premiums monthly, including by means of the Master Service
Account arrangement, payments will be credited as agreed by you and NELICO.
Payments made through the MSA arrangement may be maintained by NELICO or an
affiliate in the general account pending crediting. Billing and crediting
procedures for certain group or sponsored arrangements may differ from those
used for other Policy Owners.
If you have a policy loan, it may be more advantageous to repay the loan
than to make an unscheduled payment, because the unscheduled payment is
subject to sales and tax charges, whereas the loan repayment is not subject to
any charges. (See "Loan Provision" and "Deductions from Premiums and
Unscheduled Payments".) A payment will not be treated as repayment of a policy
loan unless so designated by you.
SPECIAL PREMIUM OPTION
When you apply for a Policy, or at a later date while the Policy is not
lapsed, you may elect the Special Premium Option. This feature allows you to
skip a scheduled premium payment or payments after the first policy year,
under the following conditions.
If the scheduled premium has not been paid by the end of the grace period,
the Policy will not lapse if the Policy's cash value on the premium due date
(before NELICO advanced the net premium due) exceeded the tabular cash value
by at least the amount of the scheduled premium due, including any rider and
substandard risk or automatic issue premiums due. The Special Premium Option
may not be used, however, if, immediately afterward, the amount of any
outstanding policy loan plus accrued interest would exceed the Policy's loan
value.
If the Special Premium Option is used, it will reduce the Policy's cash
value (and loan value) because NELICO will deduct from the cash value, as of
the premium due date, 91% of the portion of the annual administrative charge,
and of any rider, substandard risk or automatic issue premiums, that were due.
These amounts will be deducted from the Policy's sub-accounts in proportion to
the Policy's cash value in each. (NELICO will also withdraw the net scheduled
premium that it advanced to the Policy, adjusted for the net investment
experience of the Policy's sub-accounts since the due date.)
If you have elected both the Special Premium Option and the automatic
premium loan feature, NELICO will first determine whether the Special Premium
Option can be used to satisfy the premium payment before attempting to pay the
premium by means of an automatic premium loan. (See "Automatic Premium Loan".)
You may cancel the Special Premium Option and, generally, re-elect it at any
time. The Special Premium Option is not available to you, however, while you
are paying premiums by means of the Master Service Account arrangement.
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<PAGE>
AUTOMATIC PREMIUM LOAN
You may elect an automatic premium loan feature. Under this feature, if you
have not paid a required scheduled premium by the end of the grace period,
your Policy's available loan value will be used to pay the scheduled premium
to the next due date, if possible, but at least to the next quarterly due
date. However, no premium loan will be made if the Policy's loan value is not
adequate to pay at least a quarterly premium. Interest on the loan will be
charged from the premium due date. Like other policy loans, an automatic
premium loan can result in an excess policy loan. (See "Loan Provision".) An
automatic premium loan will not be made if you have elected the Special
Premium Option and can skip the scheduled premium payment under that option.
DEFAULT AND LAPSE OPTIONS
If you have not paid a required scheduled premium by the due date, then the
premium is in default, but the Policy provides a 31 day grace period for
payment of the scheduled premium due. During the grace period insurance
coverage continues under your Policy, but if the insured dies before the
premium is paid, NELICO will deduct from the death proceeds the portion of the
unpaid premium for the period prior to the date of death.
For 60 days after the due date of a premium in default, NELICO will not make
the usual Monthly Deductions and cost of insurance deductions from the
Policy's cash value. If the premium in default is paid, these deductions will
be made retroactively. If you surrender the Policy while the premium is in
default, the full Monthly Deduction and a prorated cost of insurance charge
will be deducted from the proceeds.
There are three lapse options that may be available to you under your
Policy. They are: Fixed Extended Term Insurance, Fixed Paid-Up Insurance and
Variable Paid-Up Insurance.
Fixed Extended Term Insurance is fixed benefit life insurance for a limited
term with no further premiums due. The death benefit under this option will be
the same as the amount of your Policy's death benefit on the due date of the
premium in default. The term of the insurance coverage is determined by
applying the Policy's NET cash value as of the due date of the premium in
default (that is, the cash value reduced by any applicable Surrender Charge
and by any outstanding policy loan plus accrued interest but before the
Monthly Deduction and cost of insurance charge), less any partial surrenders
or partial withdrawals made during the grace period. Policy loans are not
available under a Policy continued as Fixed Extended Term Insurance. Fixed
Extended Term Insurance is not available if your Policy is in a substandard or
automatic issue class, or is used in connection with a tax-qualified pension
plan.
If Fixed Extended Term Insurance is available under your Policy, it is the
lapse option which will automatically apply upon lapse unless you have elected
Fixed or Variable Paid-Up Insurance. Even if you have elected Fixed Extended
Term Insurance, however, if Fixed Paid-Up Insurance would provide a greater
death benefit, that is the lapse option which will apply.
Paid-Up Insurance is permanent life insurance with no further premiums due.
The amount of insurance provided is determined by applying the Policy's NET
cash value as of the due date of the premium in default (that is, the cash
value reduced by any applicable Surrender Charge, and by any outstanding
policy loan plus accrued interest but before the Monthly Deduction and cost of
insurance charge), less any partial surrenders or partial withdrawals made
during the grace period, as a net single premium at the current age of the
insured. Loans are available under a Policy continued as Paid-Up Insurance.
You may select a lapse option, or change your selection, by written request
to NELICO's Home Office at any time up to 60 days after the due date of the
premium in default. Certain conditions apply to the selection of Variable
Paid-Up Insurance. (See "Variable Paid-Up Insurance" below.)
VARIABLE PAID-UP INSURANCE. Variable Paid-Up Insurance is available as a
lapse option (with NELICO's consent) if the NET cash value of your Policy as
of the due date of the premium in default (that is, the cash value
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<PAGE>
reduced by any applicable Surrender Charge and by any outstanding policy loan
plus accrued interest but before the Monthly Deduction and cost of insurance
charge) less any partial surrenders or partial withdrawals made during the
grace period, is sufficient, when used as a net single premium at the
insured's current age, to purchase paid-up insurance with an initial face
amount at least equal to $5,000. If you have elected Variable Paid-Up
Insurance and your Policy's net cash value is not adequate to purchase this
minimum amount of insurance, then Fixed Paid-Up Insurance will be provided
instead. Variable Paid-Up Insurance is not available under Policies in a
substandard or automatic issue class unless NELICO consents.
The death benefit under Variable Paid-Up Insurance can vary monthly and the
cash value can vary daily, depending on the net investment experience of the
Policy's sub-accounts (and on the interest earned on any of the Policy's cash
value in the Fixed Account). The death benefit will never be less than the
initial amount of the Variable Paid-Up Insurance, however, if there is no
outstanding policy loan. There is no minimum guaranteed cash value for a
Policy continued as Variable Paid-Up Insurance.
The death benefit provided under Variable Paid-Up Insurance is predetermined
at the end of each policy month for the following policy month. The death
benefit is the greater of the initial face amount of Variable Paid-Up
Insurance and the Variable Death Benefit. The Variable Death Benefit can
increase or decrease at the end of each policy month, depending on how the
Policy's actual investment experience for the month (plus any cost of
insurance adjustment) compares to investment experience at the monthly
equivalent of 4.5% per year. If the actual investment experience of the
Policy's sub-accounts (and the net interest earned on any of the Policy's cash
value in the Fixed Account), plus any cost of insurance adjustment, is greater
than the monthly equivalent of 4.5% per year, the Variable Death Benefit will
increase. If it is less, the Variable Death Benefit will decrease. The change
in the Variable Death Benefit will equal this difference between the actual
return (plus any cost of insurance adjustment) and the assumed return, divided
by the net single premium per dollar of death benefit at the current age of
the insured. The cost of insurance adjustment reflects any difference between
the actual and the guaranteed maximum cost of insurance charges under the
Policy. Thus, changes in the Variable Death Benefit will depend on the age,
sex (unless the Policy is unisex) and underwriting class of the insured as
well as on net investment experience.
Although the death benefit provided by Variable Paid-Up Insurance will not
be less than the initial amount of insurance under the option regardless of
investment experience, the Variable Death Benefit can be higher or lower than
the initial amount. Changes in the Variable Death Benefit are carried forward
to succeeding policy months, so that if investment experience has reduced the
Variable Death Benefit below the initial amount of Variable Paid-Up Insurance,
subsequent favorable investment experience must first restore the Variable
Death Benefit to the initial amount before it can cause the Variable Death
Benefit to exceed the initial amount of Variable Paid-Up Insurance.
The initial cash value of a Policy continued as Variable Paid-Up Insurance
is its NET cash value as of the due date of the premium in default, reduced by
any partial surrenders or partial withdrawals made during the grace period.
Thereafter, the cash value is determined in the same manner as it is prior to
lapse, except that the charge for the cost of insurance is deducted at the end
of the policy month rather than at the beginning, and there is no Monthly
Deduction. Since there are no Monthly Deductions, generally the cost of
insurance rates actually charged under a Policy continued as Variable Paid-Up
Insurance are somewhat higher than they are under the Policy prior to lapse.
Cost of insurance rates under a Policy continued as Variable Paid-Up Insurance
depend on the insured's underwriting class, attained age and sex (if the
Policy is sex-based).
No partial withdrawals, premium payments or unscheduled payments may be made
under a Policy continued as Variable Paid-Up Insurance. You may surrender the
Policy for its net cash value, which is its cash value reduced by any
outstanding loan (and accrued interest) and by a pro rated charge for the cost
of insurance, if the surrender occurs on a day other than the last day of the
policy month. The amount available for a policy loan under a Policy continued
as Variable Paid-Up Insurance is determined in the same way as prior to lapse.
An excess policy loan may cause a Policy continued as Variable Paid-Up
Insurance to lapse. (See "Loan Provision".) You may transfer the cash value of
a Variable Paid-Up Insurance Policy among the sub-accounts up to four times in
a policy year without NELICO's consent. NELICO currently allows 12 sub-account
transfers per policy year.
A-26
<PAGE>
REINSTATEMENT. If your Policy has lapsed, it may be reinstated within 7
years after the date of default. If more than 7 years have passed, or if you
have surrendered the Policy, NELICO's consent is required to reinstate.
Reinstatement in all cases is subject to payment of certain charges described
in the Policy and generally will require evidence of insurability that is
satisfactory to NELICO.
OTHER POLICY FEATURES
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" once 15 days have
passed since the date NELICO mailed the confirmation of the first premium.
NELICO will make the loan as of the date when a loan request is received at
NELICO's Home Office. (See "Receipt of Communications and Payments at NELICO's
Home Office".) You should contact NELICO's Home Office or your registered
representative for information regarding the procedures to follow for
requesting a loan. Policy loans are not available under a Policy continued as
Fixed Extended Term Insurance.
The Policy's loan value is equal to 90% of the Policy's cash value,
projected at a 4.5% annual rate to the next policy anniversary (or to the next
premium due date, if earlier); less the Surrender Charge on the next loan
interest due date or, if greater, on the date the loan was made; and
discounted at the loan interest rate (6%). If required by state law, the
Policy's loan value may be a greater percentage of the cash value, as
described in your Policy. The amount of loan value available to be borrowed at
any time is reduced by the amount of any outstanding policy loan plus accrued
interest.
The example below illustrates how the loan value is determined.
- -------------------------------------------------------------------------------
EXAMPLE: Using the Policy illustrated on page A-57 assume that the Policy's
premiums have been paid when due and that the Policy's sub-accounts have
earned a constant 6% hypothetical gross annual rate of return (equal to a
constant net annual rate of return of 4.56%). After the premium payment on the
10th policy anniversary, the maximum amount that could be borrowed would be
determined as follows under (i) an annual premium payment schedule and (ii) a
quarterly premium payment schedule:
<TABLE>
<CAPTION>
ANNUAL QUARTERLY
------- ---------
<C> <S> <C> <C>
(1) Cash Value after Premium Payment on 10th Policy
Anniversary......................................... $15,492 $14,388
(2) Cash Value Projected at a Constant Annual Rate of
Return of 4.5% to the
(a) 11th Policy Anniversary.......................... 15,653
(b) Next Premium Due Date............................ 14,414
(3) 90% of Amount Calculated in (2)...................... 14,088 12,973
(4) Amount Calculated in (3), Reduced by the Applicable
Surrender Charge.................................... 13,786 12,671
(5) Amount Calculated in (4), Discounted at an Annual
Rate of 6% Back to the 10th Policy Anniversary...... 13,005 12,483
</TABLE>
- -------------------------------------------------------------------------------
A policy loan reduces the Policy's cash value in the sub-accounts by the
amount of the loan. A loan repayment increases the cash value in the sub-
accounts by the amount of the repayment. Unless you request otherwise, policy
loans and loan repayments are attributed to the sub-accounts in proportion to
the cash value in each.
The interest rate charged on policy loans is an effective rate of 6% per
year (using simple interest during the year) and is due on the policy
anniversary. If not paid, the interest accrued on the loan is added to the
loan, and an amount equal to the unpaid interest is deducted from the Policy's
cash value in the sub-accounts. The amount taken from the Policy's sub-
accounts as a result of the loan will earn interest (compounded daily) at an
effective rate of not less than 4.5% per year. The rate currently credited is
4.75% per year. This interest earned is credited to the Policy's sub-accounts
annually, in proportion to the cash value in each.
A-27
<PAGE>
The amount taken from the Policy's sub-accounts as a result of a loan does
not participate in the investment experience of the sub-accounts. Therefore,
the death benefit and cash value of the Policy can be permanently affected by
a policy loan, even if it is repaid. In addition, any proceeds payable under a
Policy are reduced by the amount of any outstanding loan plus accrued
interest.
If a Policy loan is outstanding, it may be more advantageous to repay the
loan than to make an unscheduled payment, because the unscheduled payment is
subject to sales and premium tax charges, and the loan repayment is not
subject to charges. (See "Deductions from Premiums and Unscheduled Payments".)
If policy loans plus accrued interest exceed the Policy's cash value less
the Surrender Charge on the next policy loan interest due date (or, if
greater, on the date the calculation is made), NELICO will notify you that the
Policy is going to terminate. (This situation is referred to as an "excess
policy loan". NELICO tests for an excess Policy loan on each monthly
processing date and any time a loan-related transaction is made.) The Policy
will terminate without value 31 days after the notice is mailed unless the
excess amount is paid to NELICO within that time. (See "Default and Lapse
Options".) If the Policy lapses with a loan outstanding, adverse tax
consequences may result. (See "Tax Considerations" below.)
Department of Labor ("DOL") regulations set forth requirements for
participant loans under retirement plans subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"). Generally, the DOL regulations will
apply to plans that qualify under Sections 401(a) and 401(k) of the Internal
Revenue Code (the "Code"). If the retirement plan is subject to ERISA, the
plan fiduciary authorized to oversee/direct the plan loan program must fulfill
the requirements of the regulations including charging a "commercially
reasonable" rate of interest. The policy loan interest rate may not be
considered "commercially reasonable" within the meaning of the DOL
regulations. In addition, the DOL regulations require that a plan loan be
adequately secured but provide that not more than 50% of the participant's
vested account balance (including the Policy cash value) be used as security
for the loan. The DOL regulations and applicable tax law may also contain
other requirements for plan loans. Therefore, plan loan provisions may differ
from Policy loan provisions. If you are a participant in a retirement plan
subject to ERISA, you should consult with the fiduciary administering the plan
loan program. Failure of the plan loan program to comply with the requirements
of the DOL regulations and of tax law may result in tax penalties under the
Code and under ERISA.
SURRENDER
You may surrender a Policy for its net cash value at any time while the
insured is living by a signed written request conforming to NELICO's
administrative procedures. The net cash value of the surrendered Policy will
be determined as of the date when a surrender request is received at NELICO's
Home Office. The net cash value equals the cash value reduced by any policy
loan and accrued interest and by any applicable Surrender Charge. (See
"Surrender Charge".) You may elect in writing to have all or part of the net
cash value applied to a payment option. (See "Payment Options".) A surrender
may result in adverse tax consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER AND PARTIAL WITHDRAWAL
You may make a partial surrender of the Policy to receive a portion of its
net cash value. A partial surrender will cause a proportionate reduction in
the Policy's face amount, tabular cash value, death benefit and basic
scheduled premium. No partial surrender may reduce the face amount below the
Policy's required minimum except with NELICO's consent.
Any Surrender Charge that applies to a partial surrender will be deducted
from the Policy's cash value in an amount proportional to the amount of the
Policy's face amount surrendered. The Surrender Charge applied will reduce any
remaining Surrender Charge under your Policy.
If your Policy has the Option 2 death benefit, you may make a partial
withdrawal of the amount by which the Policy's cash value exceeds its tabular
cash value. If there is a policy loan outstanding, the amount of the partial
withdrawal will also be limited to prevent the policy loan plus accrued
interest from exceeding the Policy's loan value. (See "Loan Provision".) A
partial withdrawal will reduce the Policy's Option 2 death benefit and cash
value but will not affect its face amount or scheduled premium level. No
Surrender Charge will apply.
A-28
<PAGE>
- -------------------------------------------------------------------------------
EXAMPLE: Using the Policy illustrated on page A-58, assume that the Policy's
premiums have been paid when due and that the Policy's sub-accounts have
earned constant hypothetical gross annual rates of return of 0%, 6% and 12%.
These hypothetical rates are illustrative only and may not reflect the rates
of return you would realize under the Policy. Before the premium payment on
the 20th policy anniversary, the maximum amount that can be withdrawn is as
follows:
<TABLE>
<CAPTION>
AT HYPOTHETICAL AT HYPOTHETICAL AT HYPOTHETICAL
0% RETURN 6% RETURN 12% RETURN
--------------- --------------- ---------------
<C> <S> <C> <C> <C>
(1) Cash Value at the 20th
anniversary, before
premium payment........ $17,202 $34,467 $71,585
(2) Tabular Cash Value...... 31,093 31,093 31,093
(3) Maximum
Withdrawal = (1) - (2). 0 3,374 40,492
</TABLE>
The death benefit immediately after the withdrawal is temporarily reduced to
the initial face amount. However, the death benefit will increase above the
face amount if the cash value exceeds the tabular value after the premium
payment due on the 20th policy anniversary is paid and monthly charges are
deducted.
- -------------------------------------------------------------------------------
If you have a Policy with the Option 2 death benefit and you request a
portion of the cash value, unless you specify that you wish a partial
surrender only, the request will be treated as a partial withdrawal first. Any
portion of the cash value requested that cannot be provided by means of a
partial withdrawal will be supplied by means of a partial surrender. In this
way your Surrender Charge costs will be minimized.
If you have a Policy with the Option 1 death benefit, you may make a partial
withdrawal only if the death benefit has increased above the face amount to
satisfy tax law requirements. The amount you may withdraw is limited to the
cash value, less the face amount multiplied by the net single premium per $1
of death benefit at the insured's current age. If there is a policy loan
outstanding, the partial withdrawal will also be limited to prevent the policy
loan plus accrued interest from exceeding the Policy's loan value. (See "Loan
Provision".) A partial withdrawal under a Policy with the Option 1 death
benefit will reduce the Policy's death benefit (but not below the face amount)
and cash value but will not reduce its face amount or affect its scheduled
premium level. A partial withdrawal under a Policy with the Option 1 death
benefit will always reduce the death benefit by more than the cash value is
reduced. No Surrender Charge will apply.
- -------------------------------------------------------------------------------
EXAMPLE: Using the Policy with $100,000 face amount illustrated on page A-57
assume that the Policy's premiums have been paid when due and that the
Policy's sub-accounts have earned constant hypothetical gross annual rates of
return of 0%, 6% and 12%. These hypothetical rates are illustrative only and
may not reflect the rates of return you would realize under the policy. The
amount available for withdrawal is calculated as of the 20th policy
anniversary.
At the hypothetical 0% and 6% returns, no portion of the cash value may be
withdrawn.
At the hypothetical 12% return, before the premium payment on the 20th
policy anniversary, the maximum amount that can be withdrawn is as follows:
<TABLE>
<C> <S> <C>
(1) Cash Value at the 20th anniversary, before premium payment.... $72,667
(2) Net Single Premium per $1 at age 60........................... .47737875
(3) Face Amount X .47737875....................................... $47,738
(4) Maximum Withdrawal = (1) - (3)................................ $24,929
</TABLE>
The death benefit immediately after the withdrawal is temporarily reduced to
the initial face amount. However, the premium payment due on the 20th policy
anniversary increases the death benefit above the face amount in order to
satisfy Federal tax law requirements.
- -------------------------------------------------------------------------------
A-29
<PAGE>
The total number of partial surrenders and partial withdrawals you may make
in one policy year is limited to four, unless NELICO consents to more. You
should be aware that amounts withdrawn may not be reinvested in the Policy
except as scheduled premiums or unscheduled payments, which are subject to the
charges described under "Deductions From Premiums and Unscheduled Payments".
A partial withdrawal or partial surrender will reduce the Policy's cash
value in the sub-accounts in proportion to the amount of cash value in each,
unless you request otherwise. The amount of net cash value paid upon partial
surrender or partial withdrawal will be determined as of the date when a
request conforming to NELICO's administrative procedures is received at
NELICO's Home Office. NELICO's administrative procedures can be determined by
contacting your registered representative or the Home Office.
A death benefit reduction may cause a Policy to become a "modified endowment
contract". If you are contemplating a partial surrender or partial withdrawal,
you should consult your tax advisor regarding the tax consequences of the
transaction. (See "Tax Considerations".)
REDUCTION IN FACE AMOUNT
The Policies offer a feature (in states where it has been approved by the
State insurance department) that allows you to reduce the face amount of your
Policy without receiving a distribution of any of the Policy's cash value.
(This feature differs from a partial surrender in that a partial surrender
causes part of the Policy's cash value to be distributed to you.)
If you decrease the face amount of your Policy, the premiums and tabular
cash value will also be decreased. Your Policy's actual cash value will not be
reduced except by the amount of any applicable Surrender Charge. Generally,
the Policy's death benefit will be decreased. However, if the death benefit at
the time you elect a face amount reduction is being determined by dividing the
cash value by the net single premium per dollar of death benefit, the death
benefit will not be decreased unless a Surrender Charge was deducted from the
cash value in connection with the face amount reduction. Any rider benefits
attached to the Policy may also have to be decreased. The face amount
remaining after a reduction will have to meet NELICO's minimum face amount
requirements for issue, except with NELICO's consent.
A face amount reduction will take effect as of the date when NELICO has
received a request at its Home Office meeting NELICO's administrative
requirements. You can determine NELICO's administrative requirements by
contacting your registered representative or the Home Office.
A death benefit reduction may cause a Policy to become a "modified endowment
contract". (See "Tax Considerations".)
ACCELERATION OF DEATH BENEFIT RIDER
NELICO may offer in the future a rider benefit that will allow you to
receive an accelerated payment of your Policy's death benefit. This advance
payment of the death benefit will be available where certain special
circumstances exist, as described briefly below. The right to exercise the
rider will be subject to certain conditions contained in the rider.
NELICO WILL MAKE THE ACCELERATED BENEFITS RIDER AVAILABLE TO YOU ONLY IF:
(1) YOUR STATE INSURANCE DEPARTMENT HAS APPROVED THE RIDER, AND (2) NELICO
BELIEVES THAT THE RIDER WILL MEET THE DEFINITION OF AN ACCELERATED DEATH
BENEFIT FOR FEDERAL INCOME TAX PURPOSES AND (3) THE AVAILABILITY OF THE RIDER
WILL NOT JEOPARDIZE THE QUALIFICATION OF THE POLICY AS LIFE INSURANCE UNDER
FEDERAL INCOME TAX LAW.
If the accelerated benefits rider is offered, it is expected to provide that
if the insured is diagnosed as terminally ill, as defined in the rider and by
the Internal Revenue Code, you may request an accelerated payment of
A-30
<PAGE>
the Policy's death benefit. The payment may be subject to discounting and
charges. Payment will be subject to evidence satisfactory to NELICO.
See "Tax Considerations", below, for a discussion of the tax consequences
associated with the accelerated benefits rider.
INVESTMENT OPTIONS
You may allocate your Policy's scheduled premiums and unscheduled payments
among the sub-accounts of the Variable Account in any combination. A minimum
of 10% of the premium or payment must be allocated to each sub-account
selected. Percentages allocated must be in whole numbers. Your Policy's cash
value may be distributed among no more than ten accounts (including the Fixed
Account) at any one time.
You will make the initial allocation when you apply for a Policy. You may
change the allocation of future premiums and payments at any time thereafter.
The change will be effective for scheduled premiums due and unscheduled
payments applied after the date when NELICO receives your request. You may
request the change by telephone or by written request in a form satisfactory
to NELICO. (See "Receipt of Communications and Payments at NELICO's Home
Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
TRANSFER OPTION
Once 15 days have passed since the date NELICO mailed the confirmation of
the first premium, you may transfer your Policy's cash value between sub-
accounts up to four times in a policy year without NELICO's consent. NELICO
currently allows 12 sub-account transfers per policy year. All sub-account
transfer requests made at the same time will be treated as a single request.
The transfer will be effective as of the date when NELICO receives the
transfer request at its Home Office. (See "Receipt of Communications and
Payments at NELICO's Home Office".) For special rules regarding transfers
involving the Fixed Account, see "The Fixed Account". Your Policy's cash value
may be distributed among no more than ten accounts (including the Fixed
Account) at any one time.
You may request a sub-account transfer or reallocation of future premiums by
written request (which may be telecopied) to NELICO's Home Office or by
telephoning NELICO. To request a transfer or reallocation by telephone, you
should contact your registered representative or contact NELICO at 1-800-200-
2214. Requests for transfers (up to NELICO's current limit per policy year) or
reallocations by telephone will be automatically permitted. NELICO will use
reasonable procedures such as requiring certain identifying information from
the caller, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone are genuine. Any telephone instructions reasonably
believed by NELICO to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. As a result of
this policy, you will bear the risk of loss. If NELICO does not employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, it may be liable for any losses due to unauthorized or fraudulent
instructions.
SUBSTITUTION OF INSURED PERSON
Subject to state insurance department approval, NELICO offers a rider
benefit under certain Policies that will allow you to substitute the insured
person under your Policy, if you provide satisfactory evidence that the person
proposed to be insured is insurable. The right to substitute the insured
person is subject to certain restrictions and may also result in a cost or
credit to you. This rider may not be approved in every state and therefore may
not be available in every state. Your registered representative can provide
current information on the availability of the rider. Since substituting the
insured person may be a taxable event, you should consult your tax advisor
before substituting the insured person under your Policy.
A-31
<PAGE>
PAYMENT OF PROCEEDS
NELICO will ordinarily pay any net cash value, loan value or death benefit
proceeds from the sub-accounts within seven days after receipt at the Home
Office of a request, or proof of death of the insured, in a form satisfactory
to NELICO. (See "Receipt of Communications and Payments at NELICO's Home
Office".) However, NELICO may delay payment or transfers from the sub-
accounts: (i) if the New York Stock Exchange is closed for other than weekends
or holidays, or if trading on the New York Stock Exchange is restricted, (ii)
if the SEC determines that a state of emergency exists that makes payments or
sub-account transfers impractical, or (iii) at any other time when the
Eligible Funds or the Variable Account have the legal right to suspend
payment. NELICO may withhold payment of surrender or loan proceeds to the
extent that those proceeds are derived from a Policy Owner's check, or from a
Master Service Account premium transaction, which has not yet cleared. In
those cases, NELICO will process the surrender or loan to the extent of policy
values for which the Policy Owner has made full payment. The balance of the
surrender or loan proceeds will be paid when the Policy Owner's check, or the
Master Service Account premium transaction, has cleared. NELICO may also delay
payment if it considers whether to contest the Policy. NELICO will pay
interest on the death benefit proceeds from the date they become payable to
the date they are paid in one sum or, if a payment option was selected, to the
effective date of the option. (See "Payment Options".)
Death benefit proceeds may be paid pursuant to 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.
Payments of net cash value, or of any loan value available, under a fixed-
benefit lapse option or from cash value in the Fixed Account will normally be
paid promptly. However, NELICO has the right to delay such payments for up to
six months from the date of the request. NELICO will pay interest in
accordance with state insurance law requirements on payments that are delayed.
EXCHANGE OF POLICY DURING FIRST 24 MONTHS
During the first 24 months after the issue date of the Policy, if the Policy
has not lapsed, you may exchange it for a fixed-benefit life insurance policy
issued by NELICO or MetLife, as described below. The new policy will be issued
on any plan of whole life or endowment insurance with a level face amount
issued by NELICO on the Policy Date. If you exercise this option, you will
have to make up any investment loss you had under the variable life insurance
policy.
The exchange will be made without evidence of insurability. The new policy
will have the same face amount, policy date, issue age and risk classification
for the insured as the variable life Policy had. For Policies issued in New
York, you have the option of exchanging for a new, fixed-benefit policy with a
face amount equal to the current death benefit of the exchanged Variable Life
Policy. Premiums for the new policy will be based on the premium rates for
comparable fixed-benefit life insurance policies issued by NELICO which were
in effect on the Policy Date of the original Policy. Any riders to the
original Policy will be attached to the new policy if they are available. If
NELICO does not have a policy available for an exchange, the new policy will
be issued by MetLife. (To be available for the exchange, the new policy must
have been available on the Policy Date of your variable life Policy.)
The exchange will be effective on the date when NELICO receives written
notice at its Home Office in a form satisfactory to NELICO, the Policy and
payment to NELICO of any cost to exchange. (See "Receipt of Communications and
Payments at NELICO's Home Office".) The cost to exchange will reflect any
differences in premiums and cash values between the two policies. Any policy
loan outstanding must be repaid on or before the effective date of the
exchange.
A-32
<PAGE>
For a Policy issued in connection with certain group or sponsored
arrangements, you may (if approved in your state) have the additional option
of exchanging at any time during the first 36 months after the Policy's issue
date, if the Policy has not lapsed, to a fixed-benefit term life insurance
policy issued by NELICO or an affiliate. The terms and conditions applicable
to the 24 month exchange option will also be applicable to this option. If
your Policy has this feature, upon surrender of the Policy in the first 36
months, you will receive the greater of the Policy's net cash value and the
value which you would receive upon exercise of the exchange to term insurance
option.
PAYMENT OPTIONS
The Policy's death benefit and net cash value will be paid in one sum,
unless the Policy Owner or payee chooses to put all or part of the proceeds
under a payment option. You can choose a combination of payment options. The
selection of a payment option and the naming of a payee must be in written
form satisfactory to NELICO. You can make, change or revoke the selection
before the death of the insured. The payment options available are fixed
benefit options only; therefore, proceeds applied to an option will no longer
be affected by the investment experience of the Variable Account. The
guaranteed mortality assumptions used in determining payment levels under the
options will not vary based on sex. (For Policies issued in New York and
Oregon, however, and which are not issued for use in connection with certain
employee benefit plans and fringe benefit programs, the mortality assumptions
will vary based on sex. See "Group or Sponsored Arrangements".) Once payments
under an option begin, withdrawal rights may be restricted.
The following payment options are available:
(i) INCOME FOR A SPECIFIED NUMBER OF YEARS. Proceeds are paid in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.5% a year, compounded yearly. Additional interest paid by
NELICO for any year will be added to the monthly payments for that
year.
(ii) LIFE INCOME. Proceeds are paid in equal monthly installments (i)
during the life of the payee, (ii) for the longer of the life of the
payee or 10 years, or (iii) for the longer of the life of the payee or
20 years.
(iii) LIFE INCOME WITH REFUND. Proceeds are paid in equal monthly
installments during the life of the payee. At the payee's death, any
unpaid proceeds remaining are paid either in one sum or in equal
monthly installments until the total proceeds have been paid.
(iv) INTEREST. Proceeds are held for the life of the payee or another
agreed upon period. Interest of at least 3.5% a year is paid monthly
or added to the principal annually. At the death of the payee, or at
the end of the period agreed to, the balance of principal and any
interest will be paid in one sum.
(v) SPECIFIED AMOUNT OF INCOME. Proceeds plus accrued interest of at least
3.5% a year are paid in an amount and at a frequency elected until
total proceeds have been paid. Any amounts unpaid at the death of the
payee will be paid in one sum.
(vi) LIFE INCOME FOR TWO LIVES. Proceeds will be paid in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the surviving payee or 10 years, or (iii) while the two
payees are living and, after the death of one payee, two-thirds of the
monthly amount for the life of the surviving payee will be paid.
NELICO's consent to use of an option is required if the installment payments
would be less than $20.
ADDITIONAL BENEFITS BY RIDER
A Policy can include additional benefits provided by rider to the Policy,
subject to NELICO's underwriting and issuance standards. These additional
benefits usually require an additional premium. The rider benefits available
with the Policies provide fixed benefits that do not vary with the investment
experience of the Variable Account.
There may be circumstances in which it will be to your economic advantage to
include a significant portion or percentage of your insurance coverage under a
term rider. In many other circumstances, it may be in your interest
A-33
<PAGE>
to obtain a Policy without term rider coverage. These circumstances depend on
many factors, including the premium levels and amount and duration of coverage
you choose, as well as the age, sex and risk classification of the insured.
Reductions in or elimination of term rider coverage does not trigger the
imposition of a surrender charge, and use of a term rider generally reduces
sales compensation. Your registered representative can provide you more
information on the uses of term rider coverage.
LEVEL TERM INSURANCE, which provides term insurance;
ACCIDENTAL DEATH BENEFIT, which provides additional insurance if death
results from accidental bodily injury;
OPTION TO PURCHASE ADDITIONAL LIFE INSURANCE, which provides the right to
purchase additional insurance on the life of the insured at certain times,
without proof of insurability;
GUARANTEED INCOME BENEFIT RIDER, which provides a monthly income payment
(subject to a $1,000 maximum) directly to the Policy Owner in the event of
the total disability of the insured. The Policy Owner must also purchase
the Waiver of Scheduled Premiums--Disability of Insured Rider in order to
purchase this rider. (NELICO plans to make this rider available in the
future. Availability of the rider is also subject to state insurance
department approval.)
WAIVER OF SCHEDULED PREMIUMS--DISABILITY OF INSURED, which provides for
waiver of scheduled premiums for the total disability of the insured;
WAIVER OF SCHEDULED PREMIUMS--DISABILITY OF APPLICANT, which provides for
waiver of scheduled premiums for the total disability of the applicant;
WAIVER OF SCHEDULED PREMIUMS--DEATH OF APPLICANT, which provides for
waiver of scheduled premiums for a limited period upon the death of the
applicant;
WAIVER OF SCHEDULED PREMIUMS--DEATH OR DISABILITY OF APPLICANT, which
provides for waiver of scheduled premiums for a limited period upon the
death or disability of the applicant;
TEMPORARY TERM INSURANCE, which provides for term insurance from the date
of issue to the Policy Date;
CHILDREN'S INSURANCE, which provides for insurance on the life of the
insured's children for a defined period.
Certain riders are available only for sex based Policies. Not all riders may
be available to you and riders in addition to those listed above may be made
available. You should consult your registered representative regarding the
availability of particular riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time to
time. At the death of the Policy Owner, his or her estate will become the
Policy Owner unless a successor Policy Owner has been named. The Policy
Owner's rights (except for rights to payment of benefits) terminate when the
insured dies.
The beneficiary is also named in the application. The beneficiary of the
Policy may be changed at any time before the death of the insured. The
beneficiary has no rights under the Policy until the death of the insured and
must survive the insured in order to receive the death proceeds. If no named
beneficiary survives the insured, the proceeds will be paid to the Policy
Owner.
A change of Policy Owner or beneficiary must be in written form satisfactory
to NELICO and must be dated and signed by the Policy Owner making the change.
The change will be subject to all payments made and actions taken by NELICO
under the Policy before the signed change form is received by NELICO at its
Home Office.
A-34
<PAGE>
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary
to the assignee. A collateral assignment of the Policy does not change the
Policy Owner or beneficiary, but their rights will be subject to the terms of
the assignment. Assignments will be subject to all payments made and actions
taken by NELICO under the Policy before a signed copy of the assignment form
is received at NELICO's Home Office. NELICO will not be responsible for
determining whether or not an assignment is valid. Changing the Policy Owner
or assigning the Policy may have tax consequences. (See "Tax Considerations"
below.)
THE VARIABLE ACCOUNT
The Variable Account was established as a separate investment account of
NELICO on January 31, 1983 under Delaware law and became subject to
Massachusetts law when NELICO changed its domicile to Massachusetts on August
30, 1996. The Variable Account is the funding vehicle for other NELICO
variable life insurance policies in addition to the Policies. The Variable
Account meets the definition of a "separate account" under Federal securities
laws. The Variable Account is registered with the Securities and Exchange
Commission (the "SEC") as a unit investment trust under the Investment Company
Act of 1940. Registration with the SEC does not involve supervision by the SEC
of the management or investment practices or policies of the Variable Account.
However, both NELICO and the Variable Account are subject to regulation by the
Massachusetts Insurance Commissioner and to the insurance laws and regulations
in every jurisdiction where the Policies are sold.
Although the assets of the Variable Account are owned by NELICO, applicable
law provides that the portion of the Variable Account assets equal to the
reserves and other liabilities of the Variable Account may not be charged with
liabilities that arise out of any other business NELICO may conduct. NELICO
believes this means that the assets of the Variable Account equal to the
reserves and other liabilities of the Variable Account are not available to
meet the claims of NELICO's general creditors, and may only be used to support
the cash values under its variable life insurance policies issued by the
Variable Account. But NELICO may transfer to its general account assets which
exceed the reserves and other liabilities of the Variable Account. Before
making any such transfer, NELICO will consider any possible adverse impact the
transfer might have on the Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of NELICO's
other income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 16 sub-accounts, each of which invests in
a series of an Eligible Fund. The sub-accounts of the Variable Account are:
-- The Zenith Money Market Sub-Account, which invests in the Back Bay
Advisors Money Market Series of the Zenith Fund
-- The Zenith Bond Income Sub-Account, which invests in the Back Bay
Advisors Bond Income Series of the Zenith Fund
-- The Zenith Capital Growth Sub-Account, which invests in the Capital
Growth Series of the Zenith Fund
-- The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
-- The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
-- The Zenith 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
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-- 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 flows.
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-adviser. 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.
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<PAGE>
The VIP Fund II Asset Manager Portfolio's investment objective is to seek
high total return with reduced risk over the long-term by allocating its
assets among domestic and foreign stocks, bonds and short-term fixed-income
instruments.
The basic objective of the Policy is to provide benefits which increase in
value when the investment experience of the Policy's sub-accounts is
favorable. Historically, the investment performance of common stocks over the
long term has generally been superior to that of long or short term debt
securities, although common stocks have been subject to more dramatic changes
in value over short periods of time. The Zenith Capital Growth, Zenith Avanti
Growth, Zenith Equity Growth, Zenith Venture Value, Zenith Growth and Income,
Zenith Stock Index, Zenith International Magnum Equity or Zenith Small Cap
Sub-Accounts, or the Equity-Income or Overseas Sub-Accounts, or some
combination of these sub-accounts, may, therefore, be a more desirable
selection for Policy Owners who have a long term time horizon and/or are
willing to accept such risks of short term fluctuations in value. For a
demonstration of certain of these market trends, see Appendix C: Long Term
Market Trends. Historically, the investment performance of "small cap" stocks
over the long term has generally been superior to stocks of large
capitalization companies, although "small cap" stocks have been substantially
more volatile than "large cap" stocks. Historically, having a small percentage
of a portfolio invested in overseas stocks and the rest in domestic stocks has
produced a portfolio that has less, although still substantial, volatility
than a completely domestic portfolio. Equity investors should recognize that
overseas and "small cap" funds taken alone traditionally involve more risk
than most domestic stock funds.
The performance of the various financial markets over shorter periods of
time has sometimes differed from their long term historical results. Short
term interest rates were very high in the late 1970's and early 1980's, but
are now lower. Long term bond values continue to fluctuate and could lose
value if interest rates rise. Common stock prices, which have risen
substantially at times, have also had periods of significant negative returns.
Policy Owners who seek somewhat greater protection against loss of principal
in the short term than that afforded by a stock fund may prefer the High
Income Sub-Account or the Zenith Bond Income Sub-Account. However, because the
High Income Portfolio invests in higher yielding, lower rated and unrated
fixed income securities (including bonds commonly referred to as "junk"
bonds), it has a higher degree of risk associated with it relative to more
conservative fixed income funds. Those who seek even greater safety of
principal may select the Zenith Money Market Sub-Account, although it is
subject to possible rapid changes in short term interest rates. Those who
primarily seek safety of principal should consider fixed life insurance as an
alternative to variable life insurance.
NELICO guarantees the principal invested in the Fixed Account, although this
guarantee is subject to NELICO's claims paying ability.
You may wish to consider diversifying your investments by allocating the
Policy's cash value among two or more sub-accounts.
Policy Owners may also diversify by selecting the Zenith Managed Sub-
Account, Zenith Balanced Sub-Account or the Asset Manager Sub-Account, since
each generally invests its assets at most times in a combination of bonds,
stocks and short term instruments, in varying proportions depending upon the
investment adviser's evaluation of the economy and financial markets. The
Asset Manager Portfolio has the ability to invest its stock portfolio more
aggressively than the Back Bay Advisors Managed Series. You may also wish to
diversify your cash value by country. The Overseas Sub-Account and Zenith
International Magnum Equity Sub-Account allow you to participate primarily in
companies and economies outside the United States.
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types
of investments you have and your own assessment of future economic and
financial market conditions.
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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
Market TNE Advisers, Inc. Back Bay Advisors, L.P.*
Back Bay Advisors Bond In-
come TNE Advisers, Inc. Back Bay Advisors, L.P.*
Back Bay Advisors Managed TNE Advisers, Inc. Back Bay Advisors, L.P.*
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
Westpeak Growth and Income TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
Loomis Sayles Avanti Growth TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
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
International Magnum
Equity TNE Advisers, Inc. Morgan Stanley Asset Management, Inc.
Davis Venture Value TNE Advisers, Inc. Davis Selected Advisers, L.P.
Alger Equity Growth TNE Advisers, Inc. Fred Alger Management, Inc.
</TABLE>
- --------
*An affiliate 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. 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-adviser was Draycott Partners,
Ltd. until May 1, 1997, when Morgan Stanley Asset Management became the sub-
adviser. 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.
Fidelity Management & Research Company, the investment adviser for the VIP
Fund and VIP Fund II, is the original Fidelity company and was founded in
1946. It provides a number of mutual funds and other clients with investment
research and portfolio management services. It maintains a large staff of
experienced investment personnel and a full complement of related support
facilities. For more information regarding the Equity-Income, Overseas, High
Income, and Asset Manager Portfolios and Fidelity Management & Research
Company, see the VIP Fund and VIP Fund II prospectus attached at the end of
this prospectus and their Statement of Additional Information.
THE FIXED ACCOUNT
A FIXED ACCOUNT OPTION IS AVAILABLE UNDER THE POLICY IN STATES WHERE IT HAS
BEEN APPROVED BY THE STATE INSURANCE DEPARTMENT. THE FIXED ACCOUNT MAY NOT BE
APPROVED BY EVERY STATE INSURANCE DEPARTMENT AND THEREFORE IT MAY NOT BE
AVAILABLE IN EVERY STATE.
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You may allocate net premiums and net unscheduled payments for your Policy,
and may transfer your Policy's cash value, to the Fixed Account, which is part
of NELICO's general account. Because of exemptive and exclusionary provisions
in the Federal securities laws, interests in the Fixed Account have not been
registered under the Securities Act of 1933, and neither the Fixed Account nor
the general account has been registered as an investment company under the
Investment Company Act of 1940. Therefore, neither the Fixed Account, the
general account nor any interests therein are generally subject to the
provisions of these Acts, and NELICO has been advised that the staff of the
SEC does not review disclosures relating to the general account. Disclosures
regarding the Fixed Account may, however, be subject to certain generally
applicable provisions of the Federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
GENERAL DESCRIPTION
NELICO's general account includes all the assets owned by NELICO, other than
the assets in the Variable Account or in any other separate accounts that
NELICO may establish. NELICO has sole discretion over the investment of assets
in the general account, including the Fixed Account. Policy Owners who
allocate cash value to the Fixed Account will not share in the actual
investment experience of the Fixed Account. Instead, NELICO guarantees that
cash values in the Fixed Account will earn interest at an effective annual
rate of at least 4.5%. NELICO may from time to time credit interest at a
higher rate than 4.5%, but it is under no obligation to do so. NELICO declares
the current interest rate for the Fixed Account periodically. Your Policy cash
values that are in the Fixed Account will earn interest daily.
NELICO may vary the way in which it credits interest in the Fixed Account
from time to time. The following is a description of NELICO's current method
for crediting interest to cash value in the Fixed Account. All of your
Policy's cash value in the Fixed Account on a policy anniversary will earn
interest at the declared annual rate in effect on the anniversary. It will
earn interest at this rate until the next policy anniversary, when it will be
credited with the current rate declared by NELICO. (Although NELICO's current
practice is to credit your entire Fixed Account cash value on a policy
anniversary with the most recently declared annual rate until the next
anniversary, NELICO can select any portion, from 0% to 100%, of your Fixed
Account cash value on a policy anniversary to earn interest at the most
recently declared rate until the next policy anniversary.) Any net premiums or
net unscheduled payments allocated or any portion of your Policy's cash value
transferred to the Fixed Account on a date other than a policy anniversary
will earn interest at NELICO's most recently declared rate until the next
policy anniversary. The effective interest rate credited at any time to your
cash value in the Fixed Account will be a weighted average of all the Fixed
Account rates for your Policy.
If you select the Fixed Account on the application, your Policy's cash value
will not be allocated to the Fixed Account until 15 days after NELICO mails
the confirmation of the initial premium. Until then, the net scheduled premium
and any net unscheduled payment will be allocated to the Money Market Sub-
Account. (See "Allocation of Net Premiums" and "Right to Return the Policy".)
The cash value transferred from the Money Market Sub-Account to the Fixed
Account will be credited with NELICO's most recently declared rate of interest
as of the date of the transfer until the next policy anniversary.
VALUES AND BENEFITS
The Policy's cash value in the Fixed Account reflects the net premiums and
net unscheduled payments allocated to the Fixed Account, net interest credited
to cash value in the Fixed Account, any loans, partial surrenders or partial
withdrawals made from the Fixed Account cash value, charges deducted, and any
transfers of cash value to or from the Variable Account. Charges will be
deducted from the Policy's cash value in the Fixed Account and in the Policy's
sub-accounts in proportion to the amount of the Policy's cash value in each.
(See "Deductions from Cash Value".) A Policy's total cash value will include
its cash value in the Variable Account, its cash value in the Fixed Account,
and any of its cash value held in NELICO's general account (but outside of the
Fixed Account) as a result of a policy loan.
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The amount of the Policy's cash value in the Fixed Account will be taken
into account in the calculation of the Policy's death benefit in the same
manner as the cash value in the Variable Account. The Policy's tabular cash
value will be calculated based on the assumption that the Policy's sub-
accounts earned, and the Fixed Account credited, a 4.5% annual net rate of
return. (See "Death Benefit" and "Tabular Cash Value".)
POLICY TRANSACTIONS
NELICO reserves the right to restrict allocations to the Fixed Account if
the effective annual rate of interest that would apply to the amount allocated
is 4.5%. Otherwise, allocations of net premiums and net unscheduled payments
to the Fixed Account are subject to the same percentage requirements that
apply to the Variable Account. (See "Allocations of Net Premiums".)
Except as described below, amounts in the Fixed Account are subject to the
same rights and limitations regarding transfers, loans, surrenders and partial
withdrawals that apply to amounts in the Variable Account. (See "Other Policy
Features".) The following special rules apply to transactions involving
amounts in the Fixed Account.
TRANSFERS OF AMOUNTS FROM THE FIXED ACCOUNT TO THE VARIABLE ACCOUNT WILL BE
ALLOWED ONLY ONCE IN EACH POLICY YEAR. A TRANSFER OF CASH VALUE FROM THE FIXED
ACCOUNT WILL BE PROCESSED ONLY IF NELICO RECEIVES THE TRANSFER REQUEST NO MORE
THAN 30 DAYS AFTER THE POLICY ANNIVERSARY, AND THE TRANSFER WILL BE EFFECTED
AS OF THE DATE THE TRANSFER REQUEST IS RECEIVED AT NELICO'S HOME OFFICE. THE
AMOUNT OF CASH VALUE WHICH MAY BE TRANSFERRED FROM THE FIXED ACCOUNT IS
LIMITED TO THE GREATER OF 25% OF THE POLICY'S CASH VALUE IN THE FIXED ACCOUNT
ON THE TRANSFER DATE OR THE AMOUNT OF CASH VALUE TRANSFERRED FROM THE FIXED
ACCOUNT IN THE PRECEDING POLICY YEAR. Regardless of these limits, if a
transfer of cash value from the Fixed Account would reduce the remaining cash
value in the Fixed Account below $100, you may transfer the entire amount of
cash value from the Fixed Account. The total number of transfers among sub-
accounts and from the sub-accounts to the Fixed Account may not exceed four in
one policy year without NELICO's consent. NELICO currently allows 12 such
transfers per policy year. Transfers out of the Fixed Account will not be
counted against this limit. NELICO reserves the right to restrict transfers of
cash value into the Fixed Account, if the effective annual rate of interest
that would apply to the amount transferred is 4.5%.
Unless you request otherwise, a policy loan will reduce the Policy's cash
value in the sub-accounts and not the cash value in the Fixed Account. If
there is not enough cash value in the Policy's sub-accounts to provide the
amount of the loan, however, the balance of the loan will be taken from the
cash value in the Fixed Account. All loan repayments will be allocated first
to the outstanding loan balance attributable to the Fixed Account. The amount
removed from the Policy's sub-accounts and the Fixed Account as a result of a
loan will earn interest at not less than 4.5% per year (currently 4.75% per
year), which will be credited annually to the Policy's cash value in the sub-
accounts and the Fixed Account in proportion to the Policy's cash value in
each on the day it is credited.
Unless you request otherwise, partial surrenders and partial withdrawals
will be taken only from the Policy's sub-accounts and not the Fixed Account.
If there is not enough cash value in the Policy's sub-accounts to provide the
full amount requested, the balance of the partial surrender or partial
withdrawal will be taken from the Fixed Account.
NELICO has the right to delay transfers, withdrawals, surrenders, and policy
loans from the Fixed Account for up to six months. Loans to pay premiums on
policies issued by NELICO will not be delayed.
NELICO'S DISTRIBUTION AGREEMENT
NELICO sells the Policies through agents who are licensed by state insurance
officials to sell NELICO's variable life insurance policies. These agents are
also registered representatives of New England Securities Corporation ("New
England Securities"). New England Securities, a Massachusetts corporation
organized in 1968 and an
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indirect, wholly-owned subsidiary of NELICO, is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc.
New England Securities, whose principal business address is 399 Boylston
Street, Boston, Massachusetts 02116, serves as the principal underwriter for
the Policies under a Distribution Agreement between NELICO and New England
Securities.
Under the Distribution Agreement, NELICO pays the following sales expenses:
general agent and agency manager's compensation, agents' training allowances,
deferred compensation and insurance benefits of agents, general agents and
agency managers and advertising expenses and all other expenses of
distributing the Policies.
NELICO pays the following commissions and/or service fees to the selling
agent: a maximum of 50% of the scheduled premium paid in the first policy
year; a maximum of 5% of scheduled premiums in policy years two through ten;
and a maximum of 2% of scheduled premiums paid thereafter. Agents receive a
commission of 3% of each unscheduled payment. NELICO pays commissions for
substandard risk and rider premiums, based on its rules in effect at the time
of payment. Agents with less than four years of service may be compensated
differently. Agents who meet certain productivity and persistency standards in
selling policies issued by NELICO may be eligible for additional compensation.
Non-cash forms of compensation may also be paid. Sales expenses in any year
are not equal to the deduction for sales load in that year.
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. It is the principal underwriter for the
Zenith Fund; The New England Variable Account; New England Retirement
Investment Account; New England Variable Annuity Separate Account; and New
England Variable Annuity Fund I. New England Securities also sells interests
in various investment partnerships.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life
insurance policies. Under the agreements with those broker-dealers, the
commission paid to the broker-dealer will not exceed 50% of the scheduled
premium in the first policy year, 4% in the second through tenth policy years,
2% in the eleventh through twentieth policy years and 3% of unscheduled
payments. Commissions will be paid through the registered broker-dealer, which
may also be reimbursed for portions of expenses incurred in connection with
the sale of the Policies.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
Generally, NELICO can challenge the validity of your Policy or a rider to
your Policy based on misrepresentations made in the application. However,
NELICO cannot challenge the Policy or a rider after it has been in force,
during the insured's lifetime, for two years from the date of issue. NELICO
cannot challenge the portion of the death benefit resulting from payment of an
underwritten unscheduled payment for more than two years (during the insured's
lifetime) from the date the unscheduled payment was received.
MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated in the application, the Policy's
cash value and death benefit will be what the premiums paid and unscheduled
payments made would have purchased, based on the insured's correct age and, if
the Policy is sex-based, on the insured's correct sex.
SUICIDE
If the insured commits suicide within two years from the Policy's date of
issue (or less if required by state law), the death benefit will be limited to
the scheduled premiums paid and unscheduled payments made, reduced by any
outstanding policy loan plus interest and by any partial withdrawals or
partial surrenders made (or such greater amount required by state law).
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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 and
automatic issue Policies or Policies with term riders added will, in all
cases, meet the statutory life insurance contract definition. If a Policy were
determined not to be a life insurance contract for purposes of Section 7702,
such Policy would not provide most of the tax advantages normally provided by
a life insurance contract.
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.
TAXATION OF ACCELERATED BENEFITS RIDER. NELICO believes that payments
received under an accelerated benefits rider it makes available will qualify
as an accelerated death benefit under the Code. (See "Acceleration of Death
Benefit Rider" for more information regarding the rider.) Pursuant to the
recently enacted Health Insurance Portability and Accountability Act of 1996,
a payment that is treated as an accelerated death benefit for federal income
tax purposes should be fully excludable from the gross income of the
beneficiary, as long as the beneficiary is the insured under the Policy. If
such payments do not qualify as an accelerated death benefit, their tax
treatment would depend on whether or not the Policy is a modified endowment
contract. You should consult a qualified tax adviser about the consequences of
adding this rider to a Policy or requesting a payment under this rider.
TAX LAW EFFECTS ON CERTAIN PRE-DEATH DISTRIBUTIONS. Section 7702A of the
Code contains provisions affecting the tax treatment of any loan, assignment
or other pre-death distribution from a life insurance policy which is also a
"modified endowment contract" (defined below under "Modified Endowment
Contracts"). Whether a Policy will be classified as a modified endowment
contract will depend upon the amount and timing of payments made under the
Policy.
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NELICO believes any policy loans received under such
Policies will be treated as indebtedness of the owner and will not be
A-43
<PAGE>
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 cash 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. The exercise of an
accelerated benefits rider, in whole or in part, may be treated as a surrender
or partial surrender.
MODIFIED ENDOWMENT CONTRACTS. A modified endowment contract is a life
insurance contract which fails to satisfy a "7-pay test". In general, a Policy
will fail to satisfy the 7-pay test if the total amount (both scheduled
premiums and unscheduled payments) paid under the Policy at any time during
the first seven policy years exceeds the sum of the net level premiums that
would have been paid on or before such time if the Policy provided for paid up
future benefits after the payment of seven level annual premiums. The amount
of premiums payable under the 7-pay test are calculated based upon certain
assumptions regarding the Policy's earnings and the use of a reasonable
mortality charge. Variable Account investment experience does not affect
whether or not a Policy will become a modified endowment contract. Riders to
the policy are considered part of the Policy for purposes of applying the 7-
pay test. A term rider on the insured issued in New York could cause the
Policy to be treated less favorably for purposes of the 7-pay test. If there
is a reduction in the Policy's future benefits (for example, as a result of a
partial surrender, face amount reduction or partial exercise of the
accelerated benefits rider, or because you allow the Policy to lapse to Paid-
Up Insurance) during the first seven policy years the 7-pay test will be
applied as if the Policy had originally been issued at the reduced face
amount. Any Policy received in exchange for a modified endowment contract will
also be a modified endowment contract.
Your agent can provide you with information about the maximum amount of
scheduled premiums and unscheduled payments which you can make under your
Policy during the first seven policy years and still satisfy the 7-pay test.
This information will be based upon NELICO's current understanding of the
Federal tax law. As is the case with any provision of the Internal Revenue
Code, there is no assurance that the Internal Revenue Service will agree with
NELICO's interpretation. NELICO will monitor any IRS announcements or rulings
concerning compliance with the 7-pay test.
MATERIAL CHANGES. If a "material change" in the benefits or other Policy
terms occurs under a Policy which has satisfied the 7-pay test, the Policy may
be treated as a new Policy entered into on the day on which the material
change occurred. The Policy will be retested under the 7-pay test, after
making certain adjustments to reflect the Policy's existing cash value. Any
increase in future benefits under the Policy may constitute a material change
unless the increase is due to the payment of premiums necessary to fund the
Policy's lowest death benefit payable in the first seven policy years, or the
crediting of interest or other earnings with respect to such premiums. A
material change would also occur if there were a substitution of the insured
person or if certain other Policy changes occurred.
If you do not wish to have the Policy become a modified endowment contract,
you may be required to limit the payment of premiums under the Policy at some
point (or limit your reduction of benefits). This may be the case, when the
insured reaches very high ages, even if no unscheduled payments have been made
for the Policy. The point at which you may have to limit the payment of
scheduled premiums will depend upon the issue age, sex and underwriting class
of the insured, investment experience and the amount of your previous
unscheduled
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<PAGE>
payments. You may limit payment of scheduled premiums by use of the Special
Premium Option, in those situations where it is applicable, or by allowing the
Policy to lapse to paid-up insurance. (See "Special Premium Option" and
"Default and Lapse Options".)
If you exchange your policy for another life insurance policy, including a
fixed-benefit policy pursuant to the 24 month exchange right, the new
insurance policy should be reviewed to determine how the rules regarding
modified endowment contracts may apply to the new policy. (See "Exchange of
Policy During First 24 Months".)
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent
the cash value of the Policy exceeds your investment in the Policy (i.e.
will be treated as income first).
(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.
(e) Payments under the accelerated benefits rider may be treated as
distributions that are subject to taxation under these rules if the
payments are from a Policy that is a modified endowment contract.
Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy).
If a Policy becomes a modified endowment contract, distributions made during
the policy year in which it becomes a modified endowment contract,
distributions in any subsequent policy year and distributions within two years
before the Policy becomes a modified endowment contract will be subject to the
tax treatment described above. This means that a distribution from a Policy
that is not a modified endowment contract could later become taxable as a
distribution from a modified endowment contract. In addition, regulations or
other interpretations may be issued which will apply similar tax treatment to
other distributions made in anticipation of a Policy becoming a modified
endowment contract.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy. Regulations specifying the
diversification requirements have been issued by the Department of Treasury,
and NELICO believes it complies fully with such requirements.
A-45
<PAGE>
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.
In the event that a Policy is owned by the trustee under a pension or profit
sharing plan, or similar deferred compensation arrangement, the Federal, state
and estate tax consequences of ownership or receipt of proceeds under the
Policy could differ from the principles stated herein. However, if ownership
of such Policy is transferred from the plan to a plan participant (upon
termination of employment, for example), the Policy will be subject to all of
the rules described above relating to Federal tax treatment, including the
rules regarding modified endowment contracts. Policies owned by the trustee
under the plans described above may be subject to restrictions under ERISA.
You should consult a qualified tax advisor regarding any applicable
requirements of ERISA.
If the Policy is purchased as part of a pension or profit-sharing plan
qualified under Section 401 of the Code, the current cost of insurance for the
net amount at risk is treated as a "current fringe benefit" and is required to
be included annually in the plan participant's gross income. This cost
(generally referred to as the "P.S. 58" cost) is reported to the participant
annually. If the plan participant dies while covered by the plan and the
Policy proceeds are paid to the participant's beneficiary, then the excess of
the death benefit over the cash value will not be subject to Federal income
tax. However, the cash value will generally be taxable to the extent it
exceeds the participant's cost basis in the Policy. The participant's cost
basis will generally include the costs of insurance previously reported as
income to the participant. Special rules may apply if the participant had
borrowed from his cash value or was an owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased
by a tax qualified plan.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, 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.
NELICO believes that Policies subject to the provisions of the Puerto Rican
tax law will generally receive the same tax treatment, with certain
modifications, as that described above for Policies subject to the Internal
Revenue Code. You should note that Policies governed by the Puerto Rican tax
law are not currently subject to the above-described rules regarding modified
endowment contracts. If such a Policy becomes subject to the Internal Revenue
Code, however, the rules regarding modified endowment contracts will apply,
and they may apply retroactively. You should consult your tax advisor if a
Policy governed by the Puerto Rican tax law subsequently becomes subject to
the Internal Revenue Code.
A-46
<PAGE>
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, except for
the charge for federal taxes that is deducted from scheduled premiums and
unscheduled payments. NELICO reserves its rights 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-47
<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
------------------ -----------------------------
<S> <C>
Robert A. Shafto........ Chairman and Chief Executive Officer of NELICO; formerly,
Chairman, President and Chief Executive Officer 1996-1997
of NELICO and Chairman, President and Chief Executive
Officer 1993-1996 and President and Chief Executive
Officer 1992-1993 of The New England.
James M. Benson......... President and Chief Operating Officer of NELICO since
1997; formerly, President and CEO 1996-1997 of Equitable
Life Assurance Society and COO of Equitable Companies,
Inc. and Senior Vice President 1993-1996 of Equitable
Life Assurance Society and partner 1984-1993 of
Management Compensation Group.
Susan C. Crampton....... Director of NELICO since 1996 and serves as Principal of
127 Tarbox Road The Vermont Partnership, a business consulting firm
Jericho, VT 05465 located in Jericho, Vermont since 1989; formerly,
Director 1989-1996 of The New England.
Edward A. Fox........... Director of NELICO since 1996 and Private Investor,
RR Box 67-15 Harborside, Maine; formerly, Director 1994-1996 of The
Harborside, ME 04642 New England and Dean 1990-1994 of The Amos Tuck School of
Business Administration at Dartmouth College.
George J. Goodman....... Director of NELICO since 1996 and author, television
Adam Smith's Money journalist, and editor.
World
50th Floor Craig Drill
Capital
General Motors Building
767 Fifth Avenue
New York, NY 10153
Dr. Paul E. Gray........ Director of NELICO since 1996 and Professor of Electrical
MIT Engineering and Retired Chairman of the Corporation of
77 Massachusetts Avenue the Massachusetts Institute of Technology (MIT);
Cambridge, MA 02139 formerly, Director 1973-1996 of The New England and
Chairman of the Corporation 1990-1997 of MIT.
Dr. Evelyn E. Handler... Director of NELICO since 1996 and Executive Director and
California Academy of Chief Executive Officer of the California Academy of
Sciences Sciences since 1994; formerly, Director 1987-1996 of The
Golden Gate Park New England and Research Fellow and an Associate 1991-
San Francisco, CA 94118 1994 of the Graduate School of Education at Harvard
University and a Senior Fellow at the Carnegie Foundation
for Advancement of Teaching.
Philip K. Howard, Esq. . Director of NELICO since 1996 and Partner of the law firm
Howard, Darby & Levin of Howard, Darby & Levin in New York City.
1330 Avenue of the
Americas
New York, NY 10019
Harry P. Kamen.......... Director of NELICO since 1996 and Chairman, President, and
Metropolitan Life Chief Executive Officer of Metropolitan Life Insurance
One Madison Avenue Company since 1995; formerly, Chairman and CEO 1993-1995
New York, NY 10010 and Senior Executive Vice President 1991-1993 of MetLife.
Terence Lennon.......... Director of NELICO since 1996 and Senior Vice President of
Metropolitan Life Metropolitan Life Insurance Company since 1994; formerly,
One Madison Avenue Assistant Deputy Superintendent and Chief Examiner 1984-
New York, NY 10010 1994 of the New York Insurance Department.
</TABLE>
A-48
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
Bernard A. Leventhal.... Director of NELICO since 1996 and Vice Chairman of the
Burlington Industries Board of Directors of Burlington Industries, Inc.;
1345 Avenue of the formerly, President since 1978 and Corporate Group Vice
Americas President since 1985 and Director since 1990 of the
New York, NY 10105 Burlington Menswear Division.
Thomas J. May........... Director of NELICO since 1996 and Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since
800 Boylston Street 1994; formerly, Director 1994-1996 of The New England and
Boston, MA 02199 President and Chief Operating Officer 1993-1994 and
Executive Vice President 1990-1993 of Boston Edison Co.
Stewart G. Nagler....... Director of NELICO since 1996 and Senior Executive Vice
Metropolitan Life President and Chief Financial Officer of Metropolitan
One Madison Avenue Life Insurance Company since 1986.
New York, NY 10010
Rand N. Stowell......... Director of NELICO since 1996 and President of United
United Timber Corp. Timber Corp. of Dixfield, Maine; formerly, Director 1990-
P.O. Box 650 1996 of The New England.
Pine Street
Dixfield, ME 04224
Alexander B. Trowbridge. Director of NELICO since 1996 and President of Trowbridge
Trowbridge Partners Partners, Inc. in Washington, D.C.; formerly, Director
Inc. 1983-1996 of The New England.
1317 F Street, N.W.,
Suite 500
Washington, D.C. 20004
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
Robert A. Shafto........ See Directors above.
James M. Benson......... See Directors above.
David W. Allen.......... Senior Vice President of NELICO since 1996; formerly,
Senior Vice President 1994-1996 and Vice President 1990-
1994 of The New England.
Thom A. Faria........... President, Career Agency System (a business unit of
NELICO) since 1996; formerly, Executive Vice President in
1996 and Senior Vice President 1993-1996 and 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
in 1996 of NELICO and Vice President and Counsel 1994-
1996 and Second Vice President and Counsel 1988-1994 of
The New England.
Daniel D. Jordan........ Second Vice President, Counsel and Secretary of NELICO
since 1996; formerly, Counsel and Assistant Secretary
1985-1996 of The New England.
Richard D. Keidan....... Senior Vice President of NELICO since 1996; formerly, Vice
President 1994-1996 of Metropolitan Life (Chief Marketing
Officer of MetLife Brokerage) and Regional Sales and
Marketing Manager 1989-1994 of Phoenix Home Life.
Alan C. Leland, Jr. .... Senior Vice President of NELICO since 1996; formerly, Vice
President 1984-1996 of The New England.
</TABLE>
A-49
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
Bruce C. Long........... President, New England Annuities (a business unit of
NELICO) since 1996; formerly, President 1994-1996 of New
England Annuities (a business unit of The New England)
and Senior Vice President in 1994 of New England
Annuities and Vice President 1992-1994 of Keyport Life
Insurance.
George J. Maloof........ Senior Vice President of NELICO since 1996; formerly, Vice
President 1991-1996 of The New England.
Eileen T. McCarthy...... Senior Vice President of NELICO since 1996; formerly,
Senior Vice President 1995-1996 and Vice President 1989-
1995 of The New England.
Thomas W. McConnell..... Senior Vice President of NELICO since 1996 and Director,
Chief Executive Officer and President of New England
Securities Corporation since 1993; formerly, National
Sales Manager of Alliance Fund Distributors in 1993 and
National Sales Manager 1992-1993 of Equitable Capital
Securities.
Thomas W. Moore......... Senior Vice President of NELICO since 1996; formerly, Vice
President 1990-1996 of The New England.
Robert W. Powell........ President, Life Brokerage (a business unit of NELICO)
since 1996; formerly, Officer-In-Charge 1994-1996 of
MetLife Brokerage (a subsidiary of Metropolitan Life
Insurance Company) and Marketing Vice President 1988-1994
of MetLife.
Gregory A. Ross......... Executive Vice President and Chief Information Officer
since 1997 and 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 1994-1996 and
Senior Vice President and Chief Information Officer 1993-
1994 and 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 1993-1996 and
Executive Vice President and Chief Financial Officer
1990-1993 of The New England.
John G. Small, Jr. ..... President, New England Services (a business unit of
NELICO) since 1997; formerly, Senior Vice President 1996-
1997 of NELICO and Senior Vice President 1990-1996 of The
New England.
Ellen D. Sullivan....... Senior Vice President and Associate General Counsel of
NELICO since 1997; formerly, Vice President and Counsel
of NELICO in 1996 and 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 1993-1996 and Senior Vice President and
General Counsel 1992-1993 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 and 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 1993-1996 and Senior Vice
President--Investments 1989-1993 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-50
<PAGE>
VOTING RIGHTS
NELICO is the legal owner of the Eligible Fund shares held in the Variable
Account and has the right to vote those shares at meetings of the Eligible
Fund shareholders. However, to the extent required by applicable Federal
securities law, NELICO will give you, as Policy Owner, the right to instruct
NELICO how to vote the shares that are attributable to your Policy.
The Policy Owners who are entitled to give voting instructions and the
number of shares attributable to their Policies will be determined as of the
record date for the meeting. All Eligible Fund shares held in any sub-account
of the Variable Account, or in any other registered (or to the extent voting
privileges are granted by the issuing insurance company, unregistered)
separate account of NELICO or an affiliate, and for which timely instructions
are not received, will be voted in the same proportion as (i) the aggregate
cash value of policies giving instructions, respectively, to vote for,
against, or withhold votes on a proposition, bears to (ii) the total cash
value in that sub-account for all policies for which voting instructions are
received. No voting privileges apply to Policies continued under a fixed-
benefit lapse option or with respect to cash value removed from the Variable
Account as a result of a policy loan.
All Zenith Fund shares held by the general account (or any unregistered
separate account for which voting privileges were not extended) of NELICO or
its affiliates will be voted in the same proportion as the total of (i) shares
for which voting instructions were received and (ii) the shares that are voted
in proportion to such voting instructions.
The SEC requires the Eligible Fund Boards of Trustees to monitor events to
identify conflicts that may arise from the sale of Eligible Fund shares to
variable life and variable annuity separate accounts of affiliated and, if
applicable, unaffiliated insurance companies. Conflicts could arise as a
result of changes in state insurance law or Federal income tax law, changes in
investment management of any portfolio of the Eligible Funds, or differences
in voting instructions given by variable life and variable annuity contract
owners, for example. If there is a material conflict, the Board of Trustees
will have an obligation to determine what action should be taken, including
the removal of the affected sub-accounts from the Eligible Fund(s), if
necessary. If NELICO believes any Eligible Fund action is insufficient, NELICO
will consider taking other action to protect Policy Owners. There could,
however, be unavoidable delays or interruptions of operations of the Variable
Account that NELICO may be unable to remedy.
If required by state insurance authorities, NELICO may disregard voting
instructions if they would require that shares be voted to cause a change in
the investment objectives of the portfolios of the Eligible Funds or to
approve or disapprove an investment advisory or underwriting contract for a
portfolio. In addition, NELICO may disregard voting instructions in favor of
changes, initiated by a Policy Owner or an Eligible Fund's Board of Trustees,
in the investment policy, investment adviser or principal underwriter of the
Eligible Fund portfolio if NELICO (i) reasonably disapproves of the changes
and (ii) in the case of a change in investment policy or investment adviser,
makes a good faith determination that the proposed change is contrary to state
law or is prohibited by state regulatory authorities or that the change would
be inconsistent with a sub-account's investment objectives or would result in
the purchase of securities which vary from the general quality and nature of
investments and investment techniques utilized by other separate accounts of
NELICO or of an affiliated life insurance company, which separate accounts
have investment objectives similar to those of the sub-account. If NELICO does
disregard voting instructions, a summary of that action and the reasons for it
will be included in the next semiannual report to Policy Owners.
RIGHTS RESERVED BY NELICO
NELICO and its affiliates may change the voting procedures described above,
and may vote Eligible Fund shares in their own right without instructions from
policy owners, if the applicable Federal securities laws or regulations or
interpretations of them change. NELICO also reserves the right: (1) to create
new investment accounts; (2) to combine any two or more separate investment
accounts including the Variable Account; (3) to make available additional sub-
accounts of the Variable Account investing in additional Eligible Fund
portfolios or in
A-51
<PAGE>
portfolios of other mutual funds; (4) to invest the assets of the Variable
Account in securities other than Eligible Fund shares or in shares of a
different series of the Eligible Funds as a substitute for such shares already
purchased or as the securities to be purchased in the future, to withdraw the
availability of a series of the Eligible Funds as an investment option under
the Policies, or to transfer assets to NELICO's general account as permitted
by applicable law; (5) to operate the Variable Account as a management
investment company under the Investment Company Act of 1940 or in any other
form permitted by law; and (6) to deregister the Variable Account under the
Investment Company Act of 1940 if registration is no longer required. NELICO
will exercise these rights in accordance with applicable law, including
approval of Policy Owners if required. NELICO will notify you if exercise of
any of these rights would result in a material change in the Variable Account
or its investments.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account sub-
accounts, call the toll-free number 1-800-333-2501.
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.
REPORTS
Annually (except while the Policy is under a fixed lapse option or a
settlement option), NELICO will send you a statement showing your Policy's
death benefit, cash value and any outstanding policy loan principal. NELICO
will also confirm policy loans, sub-account transfers, lapses, surrenders and
other policy transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
NELICO may from time to time receive endorsements of the Policies from
professional organizations. NELICO may refer to or use such endorsements in
advertisements or sales material for the Policies. NELICO may also pay the
professional organization making the endorsement for the use of its customer
or mailing lists in order to distribute promotional materials regarding the
Policies. An endorsement of the Policies by a third party is not necessarily
indicative of the future performance or results which may be obtained by
persons who purchase the Policies.
From time to time, articles discussing the Variable Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to Lipper Analytical Services, Inc. and
Morningstar, Inc.) may publish their own rankings or performance reviews of
variable contract separate accounts, including the Variable Account.
References to, reprints or portions of reprints of such articles or rankings
may be used by NELICO as sales literature or advertising material and may
include rankings that indicate the names of other variable contract separate
accounts and their investment experience.
A-52
<PAGE>
Articles and releases, developed by NELICO, the Eligible Funds and other
parties, about the Variable Account or the Eligible Funds regarding individual
Eligible Funds' and fund groups' asset levels and sales volumes, statistics
and analyses of industry sales volume and asset levels, and other
characteristics may appear in various publications. References to or reprints
of such articles may be used in promotional literature for the Policies or the
Variable Account. Such literature may refer to personnel of the advisers, who
have portfolio management responsibility, and their investment style. The
reference may allude to or include excerpts from articles appearing in the
media.
The advertising and sales literature for the Policies and the Variable
Account may refer to historical, current and prospective economic trends.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and
prospective Policy Owners. These materials may include, but are not limited
to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by H. James Wilson, General Counsel of NELICO. Sutherland,
Asbill & Brennan LLP, Washington, D.C., has provided advice on certain matters
relating to the Federal securities laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
EXPERTS
The financial statements of New England Variable Life 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 interim
financial statements of New England Variable Life Separate Account of NELICO
as of March 31, 1997 and for each of the three month periods ended March 31,
1997 and March 31, 1996 have not been audited.
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
A-53
<PAGE>
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 as 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 report (which includes a qualified
opinion as to the provision for losses incurred but not reported, which such
underlying information used on the calculation of the provision was not
reviewed by the independent accountants) 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.
The financial statements of NELICO included in this prospectus are for
periods ending December 31. Financial statements for NELICO prepared in
accordance with generally accepted accounting principles for interim periods
ending after December 31, 1996 are not available and have not been included in
this prospectus. In NELICO's view, any incremental benefit to prospective
investors that might result from preparing and delivering such interim
financial statements would not justify the additional burden that NELICO would
bear in preparing such statements. As of the date of this prospectus, there
have been no adverse changes in the financial condition or operations of
NELICO since December 31, 1996.
Actuarial matters included in this prospectus have been examined by Rodney
J. Chandler, F.S.A., M.A.A.A., Second Vice President and Actuary of NELICO, as
stated in his opinion filed as an exhibit to the Registration Statement.
A-54
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash value and cash value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.
investment income and capital gains and losses, realized or unrealized) for
the Variable Account equal to constant after tax annual rates of 0%, 6% and
12%. The tables are based on face amounts of $100,000 and $250,000 for a male
aged 40. The insured is assumed to be in the nonsmoker standard risk
classification for the $100,000 Policy and in the nonsmoker preferred risk
classification for the $250,000 Policy. Values are first given based on
current mortality and other Policy charges and then based on guaranteed
mortality and other Policy charges. The illustrations based on current charges
for the $250,000 face amount reflect the lower charges that apply to a Policy
of that size. The $100,000 Policy is assumed not to be eligible for NELICO's
currently applicable charge reductions. Each illustration is given first for a
Policy with an Option 1 death benefit and then for a Policy with an Option 2
death benefit. These tables may assist in the comparison of death benefits,
net cash values and cash values for the Policies with those under other
variable life insurance policies which may be issued by NELICO or other
companies. (Substandard risk Policies and automatic issue Policies have the
same basic scheduled premiums and cost of insurance rates as standard smoker
and nonsmoker Policies but require an additional premium.)
Death benefits, net cash values and cash values for a Policy would be
different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period, if
scheduled premiums were paid at other than annual intervals, or if unscheduled
payments were made. They would also be different depending on the allocation
of cash value among the Variable Account's sub-accounts, if the actual gross
rate of return for all sub-accounts averaged 0%, 6% or 12%, but varied above
or below that average for individual sub-accounts. They would also differ if
any policy loan were made during the period of time illustrated, if the
insured were female or in another risk classification, or if the Policies were
issued at unisex rates.
The death benefits, net cash values and cash values shown in the tables
reflect: (i) deductions from annual premiums for the annual administrative
charge, sales charge and state and federal premium tax charge; and (ii) a
monthly deduction (consisting of an administrative charge and a minimum death
benefit guarantee charge) and a charge for the cost of insurance that are
deducted from the cash value on the first day of each policy month. The net
cash values reflect a surrender charge that is deducted from the cash value
upon surrender, face reduction or lapse during the first 11 policy years. The
death benefits, net cash values and cash values also reflect a daily charge
assessed against the Variable Account for mortality and expense risks
equivalent to an annual charge of .60% (on a current basis) and .90% (on a
guaranteed basis) of the average daily value of the assets in the Variable
Account attributable to the Policies. (See "Charges and Expenses".) The
illustrations are based on an average of the investment advisory fees and
operating expenses incurred by the Eligible Funds, at an annual rate of .77%
of the average daily net assets of the Eligible Funds. This average reflects
voluntary expense cap and expense deferral arrangements between TNE Advisers
and the Zenith Fund under which TNE Advisers bears operating expenses of the
Zenith Fund Series (other than the Capital Growth Series) that exceed certain
amounts. TNE Advisers could terminate the expense cap and expense deferral
arrangements at any time. If TNE Advisers terminates these arrangements, the
values illustrated on the following pages could be less. (See "Charges Against
the Eligible Funds and the Sub-Accounts of the Variable Account".)
Taking account of the charges for mortality and expense risks in the
Variable Account and the average investment advisory fee and operating
expenses of the Eligible Funds, the gross annual rates of return of 0%, 6% and
12% correspond to net investment experience at constant annual rates of -
1.36%, 4.56% and 10.48%, respectively, based on NELICO's current charge for
mortality and expense risks, and -1.66%, 4.24% and 10.15%, respectively, based
on NELICO's guaranteed maximum charge for mortality and expense risks. (See
"Net Investment Experience".)
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are
currently made. If any such charges are imposed in the future, the gross
annual
A-55
<PAGE>
rate of return would have to exceed the rates shown by an amount sufficient to
cover the tax charges, in order to produce the death benefits, net cash values
and cash values illustrated. (See "Charges for NELICO's Income Taxes".)
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated
premiums could have been invested outside the Policy to arrive at the death
benefit of the Policy. The internal rate of return is compounded annually, and
the premiums are assumed to be paid at the beginning of each policy year.
NELICO will furnish upon request an illustration reflecting the proposed
insured's age, sex, underwriting classification, and the face amount or
scheduled premium requested. Where applicable, NELICO will also furnish upon
request an illustration for a Policy which is not affected by the sex of the
insured.
A-56
<PAGE>
MALE ISSUE AGE 40
$1,785 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- ------- -------- ------- ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,785 $100,000 $100,000 $100,000 $ 221 $ 299 $ 377 $ 1,126 $ 1,204 $ 1,281 -86.98% -82.42% -77.85%
2 3,659 100,000 100,000 100,000 413 638 872 2,222 2,447 2,682 -79.79 -70.93 -62.64
3 5,627 100,000 100,000 100,000 1,480 1,924 2,406 3,290 3,734 4,215 -50.16 -41.36 -33.12
4 7,694 100,000 100,000 100,000 2,516 3,252 4,084 4,325 5,062 5,893 -35.99 -27.41 -19.39
5 9,863 100,000 100,000 100,000 3,603 4,708 6,005 5,331 6,435 7,732 -27.34 -19.08 -11.37
6 12,141 100,000 100,000 100,000 4,657 6,207 8,101 6,302 7,852 9,746 -22.07 -14.05 -6.55
7 14,533 100,000 100,000 100,000 5,924 7,998 10,638 7,240 9,314 11,954 -17.52 -9.95 -2.80
8 17,045 100,000 100,000 100,000 7,155 9,834 13,389 8,142 10,821 14,376 -14.52 -7.26 -.35
9 19,682 100,000 100,000 100,000 8,355 11,724 16,382 9,013 12,382 17,040 -12.42 -5.38 1.36
10 22,452 100,000 100,000 100,000 9,521 13,666 19,642 9,850 13,995 19,971 -10.89 -4.01 2.61
15 38,518 100,000 100,000 100,000 13,395 22,824 39,709 13,395 22,824 39,709 -8.58 -1.40 5.36
20 59,023 100,000 100,000 151,357 17,202 34,561 72,667 17,202 34,561 72,667 -7.06 .16 6.78
25 85,193 100,000 100,000 224,546 19,877 48,774 124,882 19,877 48,774 124,882 -6.51 1.04 7.53
30 118,593 100,000 104,940 326,896 20,939 66,181 207,107 20,939 66,181 207,107 -6.61 1.63 7.98
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 5,782.38% 5,782.38% 5,782.38%
2 618.59 618.59 618.59
3 250.44 250.44 250.44
4 144.56 144.56 144.56
5 97.48 97.48 97.48
6 71.62 71.62 71.62
7 55.51 55.51 55.51
8 44.64 44.64 44.64
9 36.86 36.86 36.86
10 31.05 31.05 31.05
15 15.80 15.80 15.80
20 9.44 9.44 12.79
25 6.08 6.08 11.24
30 4.05 4.32 10.31
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-57
<PAGE>
MALE ISSUE AGE 40
$1,785 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- ------- -------- ------- ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,785 $100,000 $100,030 $100,101 $ 221 $ 299 $ 376 $ 1,126 $ 1,204 $ 1,281 -86.98% -82.42% -77.86%
2 3,659 100,000 100,062 100,283 413 638 872 2,222 2,447 2,681 -79.79 -70.94 -62.66
3 5,627 100,000 100,096 100,555 1,480 1,924 2,404 3,290 3,733 4,213 -50.16 -41.37 -33.15
4 7,694 100,000 100,133 100,931 2,516 3,252 4,079 4,325 5,061 5,889 -35.99 -27.41 -19.43
5 9,863 100,000 100,173 101,423 3,603 4,707 5,996 5,331 6,434 7,723 -27.34 -19.09 -11.41
6 12,141 100,000 100,216 102,046 4,657 6,205 8,086 6,302 7,850 9,731 -22.07 -14.06 -6.60
7 14,533 100,000 100,263 102,815 5,924 7,995 10,612 7,240 9,311 11,928 -17.52 -9.96 -2.86
8 17,045 100,000 100,312 103,750 7,155 9,830 13,347 8,142 10,817 14,334 -14.52 -7.27 -.42
9 19,682 100,000 100,370 104,874 8,355 11,718 16,317 9,013 12,376 16,975 -12.42 -5.39 1.28
10 22,452 100,000 100,438 106,211 9,521 13,658 19,544 9,850 13,987 19,873 -10.89 -4.02 2.52
15 38,518 100,000 100,904 117,018 13,395 22,793 39,147 13,395 22,793 39,147 -8.58 -1.42 5.19
20 59,023 100,000 103,360 149,103 17,202 34,467 71,585 17,202 34,467 71,585 -7.06 .13 6.65
25 85,193 100,000 107,467 221,447 19,877 48,441 123,158 19,877 48,441 123,158 -6.51 .99 7.44
30 118,593 100,000 114,123 322,583 20,939 65,142 204,374 20,939 65,142 204,374 -6.61 1.53 7.91
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 5,782.38% 5,784.12% 5,788.30%
2 618.59 618.83 619.68
3 250.44 250.57 251.17
4 144.56 144.65 145.22
5 97.48 97.57 98.16
6 71.62 71.69 72.23
7 55.51 55.59 56.30
8 44.64 44.71 45.50
9 36.86 36.93 37.81
10 31.05 31.12 32.10
15 15.80 15.90 17.52
20 9.44 9.71 12.67
25 6.08 6.55 11.16
30 4.05 4.79 10.24
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-58
<PAGE>
MALE ISSUE AGE 40
$1,785 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- ------- -------- ------- ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,785 $100,000 $100,000 $100,000 $ 189 $ 266 $ 342 $ 1,094 $ 1,170 $ 1,247 -88.86% -84.38% -79.87%
2 3,659 100,000 100,000 100,000 346 566 796 2,155 2,375 2,605 -82.68 -73.66 -65.26
3 5,627 100,000 100,000 100,000 1,374 1,807 2,277 3,184 3,616 4,087 -52.48 -43.55 -35.21
4 7,694 100,000 100,000 100,000 2,369 3,084 3,893 4,178 4,893 5,702 -37.93 -29.23 -21.11
5 9,863 100,000 100,000 100,000 3,412 4,481 5,739 5,139 6,208 7,466 -28.99 -20.63 -12.82
6 12,141 100,000 100,000 100,000 4,419 5,914 7,746 6,064 7,559 9,391 -23.54 -15.40 -7.82
7 14,533 100,000 100,000 100,000 5,636 7,631 10,177 6,952 8,947 11,493 -18.79 -11.13 -3.91
8 17,045 100,000 100,000 100,000 6,814 9,385 12,803 7,801 10,372 13,790 -15.65 -8.31 -1.34
9 19,682 100,000 100,000 100,000 7,954 11,178 15,645 8,612 11,836 16,303 -13.46 -6.35 .45
10 22,452 100,000 100,000 100,000 9,052 13,008 18,723 9,381 13,337 19,052 -11.88 -4.93 1.75
15 38,518 100,000 100,000 100,000 12,493 21,363 37,285 12,493 21,363 37,285 -9.59 -2.25 4.62
20 59,023 100,000 100,000 136,754 13,912 30,036 65,640 13,912 30,036 65,640 -9.57 -1.20 5.92
25 85,193 100,000 100,000 193,508 12,700 39,009 107,593 12,700 39,009 107,593 -11.28 -.67 6.56
30 118,593 100,000 100,000 265,332 6,758 47,555 168,061 6,758 47,555 168,061 -20.08 -.46 6.88
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 5,782.38% 5,782.38% 5,782.38%
2 618.59 618.59 618.59
3 250.44 250.44 250.44
4 144.56 144.56 144.56
5 97.48 97.48 97.48
6 71.62 71.62 71.62
7 55.51 55.51 55.51
8 44.64 44.64 44.64
9 36.86 36.86 36.86
10 31.05 31.05 31.05
15 15.80 15.80 15.80
20 9.44 9.44 11.97
25 6.08 6.08 10.32
30 4.05 4.05 9.25
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-59
<PAGE>
MALE ISSUE AGE 40
$1,785 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- ------- -------- ------- ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1,785 $100,000 $100,000 $100,067 $ 189 $ 266 $ 342 $ 1,094 $ 1,170 $ 1,247 -88.86% -84.38% -79.88%
2 3,659 100,000 100,000 100,207 346 566 795 2,155 2,375 2,605 -82.68 -73.66 -65.28
3 5,627 100,000 100,000 100,429 1,374 1,807 2,276 3,184 3,616 4,085 -52.48 -43.55 -35.24
4 7,694 100,000 100,000 100,744 2,369 3,084 3,889 4,178 4,893 5,699 -37.93 -29.23 -21.14
5 9,863 100,000 100,000 101,163 3,412 4,481 5,732 5,139 6,208 7,459 -28.99 -20.63 -12.86
6 12,141 100,000 100,000 101,699 4,419 5,914 7,733 6,064 7,559 9,378 -23.54 -15.40 -7.86
7 14,533 100,000 100,000 102,366 5,636 7,631 10,155 6,952 8,947 11,471 -18.79 -11.13 -3.96
8 17,045 100,000 100,000 103,180 6,814 9,385 12,768 7,801 10,372 13,755 -15.65 -8.31 -1.40
9 19,682 100,000 100,000 104,157 7,954 11,178 15,590 8,612 11,836 16,248 -13.46 -6.35 .37
10 22,452 100,000 100,000 105,319 9,052 13,008 18,639 9,381 13,337 18,968 -11.88 -4.93 1.67
15 38,518 100,000 100,000 114,683 12,493 21,363 36,783 12,493 21,363 36,783 -9.59 -2.25 4.45
20 59,023 100,000 100,000 133,998 13,912 30,036 64,317 13,912 30,036 64,317 -9.57 -1.20 5.74
25 85,193 100,000 100,000 189,922 12,700 39,009 105,599 12,700 39,009 105,599 -11.28 -.67 6.44
30 118,593 100,000 100,000 260,666 6,758 47,555 165,105 6,758 47,555 165,105 -20.08 -.46 6.79
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 5,782.38% 5,782.38% 5,786.33%
2 618.59 618.59 619.39
3 250.44 250.44 251.01
4 144.56 144.56 145.09
5 97.48 97.48 98.03
6 71.62 71.62 72.21
7 55.51 55.51 56.17
8 44.64 44.64 45.37
9 36.86 36.86 37.67
10 31.05 31.05 31.95
15 15.80 15.80 17.30
20 9.44 9.44 11.81
25 6.08 6.08 10.20
30 4.05 4.05 9.16
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-60
<PAGE>
MALE ISSUE AGE 40
$4,376 ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,376 $250,000 $250,000 $250,000 $ 812 $ 1,014 $ 1,216 $ 3,074 $ 3,276 $ 3,478
2 8,971 250,000 250,000 250,000 1,555 2,150 2,769 6,079 6,674 7,293
3 13,795 250,000 250,000 250,000 4,494 5,677 6,958 9,017 10,201 11,482
4 18,861 250,000 250,000 250,000 7,361 9,335 11,558 11,885 13,859 16,081
5 24,179 250,000 250,000 250,000 10,366 13,336 16,818 14,684 17,655 21,136
6 29,764 250,000 250,000 250,000 13,296 17,477 22,577 17,409 21,590 26,690
7 35,628 250,000 250,000 250,000 16,768 22,379 29,505 20,058 25,669 32,795
8 41,786 250,000 250,000 250,000 20,163 27,430 37,043 22,631 29,898 39,510
9 48,251 250,000 250,000 250,000 23,489 32,646 45,265 25,134 34,291 46,910
10 55,039 250,000 250,000 250,000 26,743 38,031 54,244 27,565 38,853 55,067
15 94,425 250,000 250,000 269,481 38,383 64,278 110,236 38,383 64,278 110,236
20 144,692 250,000 250,000 421,398 50,053 98,273 202,315 50,053 98,273 202,315
25 208,848 250,000 252,212 625,753 58,582 139,625 348,013 58,582 139,625 348,013
30 290,728 250,000 299,898 910,433 62,839 189,132 576,810 62,839 189,132 576,810
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 -80.52% -75.67% -70.82% 5,898.79% 5,898.79% 5,898.79%
2 -71.06 -62.49 -54.37 626.13 626.13 626.13
3 -43.06 -34.58 -26.56 253.02 253.02 253.02
4 -30.13 -21.89 -14.13 145.96 145.96 145.96
5 -22.43 -14.52 -7.06 98.42 98.42 98.42
6 -17.83 -10.16 -2.91 72.31 72.31 72.31
7 -13.89 -6.63 .28 56.07 56.07 56.07
8 -11.32 -4.35 2.34 45.10 45.10 45.10
9 -9.54 -2.79 3 74 37.25 37.25 37.25
10 -8.26 -1.67 4.74 31.39 31.39 31.39
15 -6.39 .35 6.81 16.01 16.01 16.83
20 -5.16 1.54 7.85 9.60 9.60 13.80
25 -4.79 2.18 8.36 6.21 6.26 12.03
30 -4.92 2.55 8.64 4.16 5.17 10.94
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-61
<PAGE>
MALE ISSUE AGE 40
$4,376 ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,376 $250,154 $250,340 $250,525 $ 812 $ 1,013 $ 1,215 $ 3,074 $ 3,275 $ 3,477
2 8,971 250,145 250,707 251,289 1,555 2,149 2,767 6,079 6,672 7,291
3 13,795 250,000 251,102 252,323 4,493 5,674 6,952 9,017 10,197 11,476
4 18,861 250,000 251,529 253,663 7,361 9,329 11,544 11,885 13,852 16,068
5 24,179 250,000 251,987 255,345 10,365 13,326 16,792 14,683 17,644 21,110
6 29,764 250,000 252,482 257,413 13,296 17,461 22,532 17,408 21,573 26,645
7 35,628 250,000 253,015 259,916 16,768 22,354 29,431 20,058 25,644 32,721
8 41,786 250,000 253,589 262,905 20,163 27,395 36,926 22,630 29,862 39,394
9 48,251 250,000 254,215 266,448 23,489 32,597 45,089 25,134 34,242 46,734
10 55,039 250,000 254,899 270,611 26,742 37,963 53,985 27,565 38,786 54,808
15 94,425 250,000 259,278 303,510 38,383 64,027 108,922 38,383 64,027 108,922
20 144,692 250,000 269,824 416,671 50,053 97,635 200,046 50,053 97,635 200,046
25 208,848 250,000 285,278 619,241 58,581 137,775 344,391 58,581 137,775 344,391
30 290,728 250,000 308,032 901,369 62,838 185,664 571,067 62,838 185,664 571,067
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 -80.52% -75.68% -70.83% 5,902.49% 5,906.95% 5,911.39%
2 -71.06 -62.50 -54.40 626.35 627.22 628.12
3 -43.06 -34.60 -26.60 253.02 253.60 254.25
4 -30.13 -21.92 -14.17 145.96 146.40 147.01
5 -22.43 -14.55 -7.11 98.42 98.80 99.43
6 -17.83 -10.18 -2.97 72.31 72.66 73.35
7 -13.89 -6.66 .22 56.07 56.40 57.16
8 -11.32 -4.38 2.27 45.10 45.43 46.27
9 -9.54 -2.82 3 66 37.25 37.58 38.52
10 -8.26 -1.70 4.66 31.39 31.73 32.78
15 -6.39 .30 6.67 16.01 16.41 18.13
20 -5.16 1.48 7.76 9.60 10.22 13.71
25 -4.79 2.09 8.29 6.21 7.07 11.97
30 -4.92 2.44 8.59 4.16 5.32 10.89
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-62
<PAGE>
MALE ISSUE AGE 40
$4,376 ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ---------------------- ---------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------ ------- ------- ------ ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,376 $250,000 $250,000 $250,000 $ 473 $ 664 $ 855 $2,735 $ 2,926 $ 3,117 -88.64% -84.07% -79.47%
2 8,971 250,000 250,000 250,000 864 1,414 1,989 5,388 5,938 6,513 -82.38 -73.23 -64.72
3 13,795 250,000 250,000 250,000 3,436 4,517 5,693 7,959 9,041 10,217 -51.87 -42.88 -34.47
4 18,861 250,000 250,000 250,000 5,922 7,710 9,731 10,445 12,233 14,255 -37.31 -28.56 -20.41
5 24,179 250,000 250,000 250,000 8,530 11,202 14,347 12,848 15,520 18,665 -28.40 -20.01 -12.19
6 29,764 250,000 250,000 250,000 11,047 14,786 19,365 15,160 18,898 23,477 -22.99 -14.85 -7.26
7 35,628 250,000 250,000 250,000 14,089 19,078 25,443 17,379 22,368 28,733 -18.29 -10.64 3.42
8 41,786 250,000 250,000 250,000 17,035 23,464 32,008 19,503 25,931 34,476 -15.20 -7.87 -.91
9 48,251 250,000 250,000 250,000 19,885 27,945 39,112 21,530 29,590 40,757 -13.04 -5.95 .84
10 55,039 250,000 250,000 250,000 22,630 32,520 46,808 23,453 33,342 47,630 -11.49 -4.57 2.10
15 94,425 250,000 250,000 250,000 31,232 53,406 93,212 31,232 53,406 93,212 -9.31 -2.00 4.85
20 144,692 250,000 250,000 341,885 34,780 75,089 164,100 34,780 75,089 164,100 -9.33 -1.01 6.08
25 208,848 250,000 250,000 483,771 31,751 97,522 268,982 31,751 97,522 268,982 -11.05 -.51 6.69
30 290,728 250,000 250,000 663,331 16,894 118,889 420,152 16,894 118,889 420,152 -19.77 -.33 6.99
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 5,898.79% 5,898.79% 5,898.79%
2 626.13 626.13 626.13
3 253.02 253.02 253.02
4 145.96 145.96 145.96
5 98.42 98.42 98.42
6 72.31 72.31 72.31
7 56.07 56.07 56.07
8 45.10 45.10 45.10
9 37.25 37.25 37.25
10 31.39 31.39 31.39
15 16.01 16.01 16.01
20 9.60 9.60 12.13
25 6.21 6.21 10.44
30 4.16 4.16 9.35
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-63
<PAGE>
MALE ISSUE AGE 40
$4,376 ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,376 $250,000 $250,000 $250,169 $ 473 $ 664 $ 855 $ 2,735 $ 2,926 $ 3,117
2 8,971 250,000 250,000 250,519 864 1,414 1,988 5,388 5,938 6,512
3 13,795 250,000 250,000 251,074 3,436 4,517 5,690 7,959 9,041 10,213
4 18,861 250,000 250,000 251,860 5,922 7,710 9,723 10,445 12,233 14,247
5 24,179 250,000 250,000 252,907 8,530 11,202 14,330 12,848 15,520 18,648
6 29,764 250,000 250,000 254,247 11,047 14,786 19,333 15,160 18,898 23,446
7 35,628 250,000 250,000 255,914 14,089 19,078 25,389 17,379 22,368 28,679
8 41,786 250,000 250,000 257,949 17,035 23,464 31,920 19,503 25,931 34,387
9 48,251 250,000 250,000 260,394 19,885 27,945 38,974 21,530 29,590 40,619
10 55,039 250,000 250,000 263,296 22,630 32,520 46,598 23,453 33,342 47,420
15 94,425 250,000 250,000 286,707 31,232 53,406 91,957 31,232 53,406 91,957
20 144,692 250,000 250,000 334,994 34,780 75,089 160,792 34,780 75,089 160,792
25 208,848 250,000 250,000 474,805 31,751 97,522 263,997 31,751 97,522 263,997
30 290,728 250,000 250,000 651,664 16,894 118,889 412,763 16,894 118,889 412,763
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 -88.64% -84.07% -79.48% 5,898.79% 5,898.79% 5,902.85%
2 -82.38 -73.23 -64.73 626.13 626.13 626.93
3 -51.87 -42.88 -34.50 253.02 253.02 253.59
4 -37.31 -28.56 -20.44 145.96 145.96 146.49
5 -28.40 -20.01 -12.23 98.42 98.42 98.97
6 -22.99 -14.85 -7.31 72.31 72.31 72.91
7 -18.29 -10.64 -3.47 56.07 56.07 56.73
8 -15.20 -7.87 -.97 45.10 45.10 45.83
9 -13.04 -5.95 .77 37.25 37.25 38.06
10 -11.49 -4.57 2.02 31.39 31.39 32.30
15 -9.31 -2.00 4.69 16.01 16.01 17.51
20 -9.33 -1.01 5.91 9.60 9;60 11.97
25 -11.05 -.51 6.57 6.21 6.21 10.32
30 -19.77 -.33 6.89 4.16 4.16 9.26
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-64
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
The information contained in this Appendix gives hypothetical illustrations
of the Variable Account's and the Policy's investment experience based on the
historical investment experience of the Eligible Funds. It does not represent
what may happen in the future.
The policies were not available until , 1997. The Zenith Fund and the
Variable Account commenced operations on August 26, 1983. The Westpeak Stock
Index and Back Bay Advisors Managed Series of the Zenith Fund commenced
operations on May 1, 1987. The Westpeak Growth and Income Series and Loomis
Sayles Avanti Growth Series of the Zenith Fund commenced operations on April
30, 1993. The Loomis Sayles Small Cap Series commenced operations on May 2,
1994 and was made available under the Policies on December 19, 1994. The
remaining Zenith Fund series commenced operations on October 31, 1994 and were
made available under the Policies on May 1, 1995. The Equity-Income Portfolio
and Overseas Portfolio of the VIP Fund commenced operations on October 9, 1986
and January 28, 1987, respectively. They were first made available as
investment options under the Policies on April 30, 1993. The High Income
Portfolio of the VIP Fund and the Asset Manager Portfolio of VIP Fund II
commenced operations on September 19, 1985 and September 6, 1989,
respectively, and were added as investment options on December 19, 1994. The
illustrations are based on the actual investment experience of the relevant
Eligible Funds for the periods shown (and reflect actual charges and expenses
incurred by the Eligible Funds), and reflect a charge for mortality and
expense risks against the Variable Account's assets at an annual rate of .60%.
The illustrations assume that annual scheduled premiums are paid at the
beginning of each year and that no loans, transfers or other Policy Owner
transactions were made during the periods shown.
VARIABLE ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account which invests in the
Eligible Funds. The investment experience of the sub-account or sub-accounts
you choose will affect the values and benefits of your Policy.
Many factors in addition to investment experience will affect the actual
values and benefits of your Policy. For instance, these investment experience
figures do not reflect the charges deducted from premiums and monthly
deductions from the cash value. (See "Charges and Expenses".)
NET RATES OF RETURN
The annual net rate of return is the effective earnings rate at which the
investment sub-accounts increased or decreased over a one year period, based
on the investment experience of the relevant Eligible Funds. The rate is
calculated by taking the difference between the sub-accounts' ending values
and beginning values of the period and dividing it by the beginning values of
the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the sub-accounts increased or decreased since
the inception dates of the sub-accounts. For each sub-account, the rate is
calculated by taking the difference between the sub-account's ending value and
the value on the date of its inception and dividing it by the value on the
date of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which,
if compounded annually, would equal the total net rate of return since
inception.
SUB-ACCOUNT INVESTING IN ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------------
FOR ONE YEAR ENDING
8/26/83- -----------------------------------------------------------------------
SUB-ACCOUNT 12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth*. 8.64% -.96% 67.09% 94.04% 51.79% -9.34% 29.98% -4.06% 53.06%
Bond Income..... 2.83% 12.10 18.05 14.15 1.65 7.72 11.63 7.44 17.25
Money Market.... 3.08% 9.96 7.61 6.16 5.89 6.87 8.60 7.54 5.58
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------- 8/26/83- 8/26/83-
FOR ONE YEAR ENDING 12/31/96 12/31/96
-------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Growth*. -6.61% 14.28% -7.62% 37.21% 20.34% 1,391.81% 22.44%
Bond Income..... 7.53 11.94 -3.94 20.47 3.98 246.43 9.75
Money Market.... 3.18 2.36 3.35 5.07 4.50 116.55 5.96
</TABLE>
A-65
<PAGE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------------------------------- 5/1/87-
FOR ONE YEAR ENDING 12/31/96
5/1/87- -------------------------------------------------------------------------------------- TOTAL
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 RETURN
- ----------- -------- -------- -------- -------- -------- -------- -------- --------- --------- --------- ---------
<S> <C> <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% .51% 36.10% 21.73% 213.08%
Managed......... -1.06 8.83 18.37 2.59 19.45 6.06 9.99 -1.70 30.48 14.34 167.21
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------- 4/30/93-
FOR ONE YEAR ENDING 12/31/96
4/30/93- -------------------------------- TOTAL
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 RETURN
- ----------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Growth and Income..................................................... 13.78% -1.80% 35.65% 17.38% 77.93%
Avanti Growth......................................................... 14.28 -.87 29.57 16.90 71.60
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------- 5/2/94-
FOR ONE YEAR ENDING 12/31/96
5/2/94- ---------------------- TOTAL
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 RETURN
- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Small Cap...................................................................... -3.61% 28.08% 29.90% 60.36%
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------- 10/31/94-
FOR ONE YEAR ENDING 12/31/96
10/31/94- ---------------------- TOTAL
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 RETURN
- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Equity Growth.................................................................. -4.29% 47.81% 12.49% 59.14%
Balanced....................................................................... -.20 24.05 16.21 43.87
Venture Value.................................................................. -3.60 38.45 25.08 66.95
International Equity**......................................................... 2.50 5.60 6.03 14.77
<CAPTION>
5/1/87-
12/31/96
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- ---------
<S> <C>
Stock Index.................................................................... 12.53%
Managed........................................................................ 10.70
<CAPTION>
4/30/93-
12/31/96
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- ---------
<S> <C>
Growth and Income.............................................................. 16.99%
Avanti Growth.................................................................. 15.84
<CAPTION>
5/2/94-
12/31/96
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- ---------
<S> <C>
Small Cap...................................................................... 19.37%
<CAPTION>
10/31/94-
12/31/96
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- ---------
<S> <C>
Equity Growth.................................................................. 23.89%
Balanced....................................................................... 18.26
Venture Value.................................................................. 26.66
International Equity**......................................................... 6.56
</TABLE>
- -------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
** The Morgan Stanley International Magnum Equity Series' sub-adviser was
Draycott Partners until May 1, 1997, when Morgan Stanley Asset Management
became the sub-adviser.
SUB-ACCOUNTS INVESTING IN VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------------------- 10/9/86-
FOR ONE YEAR ENDING 12/31/96
10/9/86- ----------------------------------------------------------------------------------------- TOTAL
SUB-ACCOUNT 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 RETURN
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income... .06% -3.08% 21.98% 16.64% -15.80% 31.07% 16.39% 17.59% 6.43% 34.29% 13.59% 241.39%
<CAPTION>
10/9/86-
12/31/96
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- ---------
<S> <C>
Equity-Income... 12.75%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------------------------- 1/28/87- 1/28/87-
FOR ONE YEAR ENDING 12/31/96 12/31/96
1/28/87- -------------------------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas ... -5.90% 7.48% 25.53% -2.26% 7.79% -11.12% 36.53% 1.12% 9.02% 12.53% 100.24% 7.25%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
9/19/85- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..... 6.20% 16.98% 0.61% 10.97% -4.75% -2.82% 34.27% 22.43% 19.68% -2.13% 19.88% 13.35%
<CAPTION>
9/19/85- 9/19/85-
12/31/96 12/31/96
TOTAL EFFECTIVE
SUB-ACCOUNT RETURN ANNUAL
- ----------- -------- ---------
<S> <C> <C>
High Income..... 235.91% 11.34%
</TABLE>
SUB-ACCOUNT INVESTING IN VARIABLE INSURANCE PRODUCTS FUND II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------- 9/6/89- 9/6/89-
FOR ONE YEAR ENDING 12/31/96 12/31/96
9/6/89- -------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager........... .62% 6.08% 21.83% 11.04% 20.51% -6.65% 16.26% 13.91% 115.11% 11.03%
</TABLE>
A-66
<PAGE>
POLICY PERFORMANCE
The material below assumes, in the first example, a Policy with an Option 1
death benefit was issued with a $100,000 face amount and annual premiums of
$1,785, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith Avanti Growth Sub-Accounts; September 19 in the case of the
High Income Sub-Account; September 6 in the case of the Asset Manager Sub-
Account), to a male nonsmoker standard risk, age 40. The second example
assumes a Policy with an Option 1 death benefit was issued with a $250,000
face amount and annual premiums of $4,376, paid on August 26 of each year (May
1 in the case of the Zenith Stock Index and Managed Sub-Accounts; May 2 in the
case of the Zenith Small Cap Sub-Account; October 31 in the case of the Zenith
Balanced, Zenith International Magnum Equity, Zenith Venture Value and Zenith
Equity Growth Sub-Accounts; October 9 in the case of the Equity-Income Sub-
Account; January 28 in the case of the Overseas Sub-Account; April 30 in the
case of the Zenith Growth and Income and Zenith Avanti Growth Sub-Accounts;
September 19 in the case of the High Income Sub-Account; September 6 in the
case of the Asset Manager Sub-Account), to a male nonsmoker preferred risk,
age 40. The death benefits, cash values and internal rates of return assume in
each instance that the entire policy value was invested in the particular sub-
account for the period shown. These illustrations of Policy investment
experience also reflect all charges applicable to the Policy, including cost
of insurance charges based on NELICO's current rates. (See Appendix A for the
definition of the internal rate of return.)
MALE NONSMOKER STANDARD RISK, AGE 40
OPTION 1--FIXED DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $1,700 $100,000 $100,000 $1,468 $ 563 -- --
December 31, 1983....... 1,700 100,000 100,000 1,478 573 -95.61% --
December 31, 1984....... 3,400 100,000 100,000 2,584 774 -91.70 1,881.12%
December 31, 1985....... 5,100 100,000 100,000 5,667 3,857 -19.67 419.30
December 31, 1986....... 6,800 100,000 100,000 12,056 10,247 23.05 200.35
December 31, 1987....... 8,500 100,000 100,000 19,120 17,344 31.34 123.66
December 31, 1988....... 10,200 100,000 100,000 18,462 16,769 17.51 86.38
December 31, 1989....... 11,900 100,000 100,000 25,090 23,582 20.23 64.82
December 31, 1990....... 13,600 100,000 100,000 24,986 23,807 14.28 50.96
December 31, 1991....... 15,300 100,000 119,119 39,446 38,596 20.53 45.30
December 31, 1992....... 17,000 100,000 112,020 38,026 37,505 15.66 36.61
December 31, 1993....... 18,700 100,000 128,826 44,514 44,323 15.34 33.47
December 31, 1994....... 20,400 100,000 117,689 41,710 41,710 11.64 27.53
December 31, 1995....... 22,100 100,000 156,966 58,754 58,754 14.40 27.98
December 31, 1996....... 23,800 100,000 190,548 71,387 71,387 14.84 27.21
</TABLE>
A-67
<PAGE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1983....... 1,700 100,000 100,000 1,391 486 -97.26% --
December 31, 1984....... 3,400 100,000 100,000 2,792 982 -85.87 1,881.12%
December 31, 1985....... 5,100 100,000 100,000 4,479 2,669 -42.57 419.30
December 31, 1986....... 6,800 100,000 100,000 6,245 4,435 -22.33 200.35
December 31, 1987....... 8,500 100,000 100,000 7,460 5,685 -16.97 123.66
December 31, 1988....... 10,200 100,000 100,000 9,140 7,447 -11.08 86.38
December 31, 1989....... 11,900 100,000 100,000 11,295 9,787 -5.88 64.82
December 31, 1990....... 13,600 100,000 100,000 13,241 12,062 -3.14 50.96
December 31, 1991....... 15,300 100,000 100,000 16,644 15,795 .73 41.39
December 31, 1992....... 17,000 100,000 100,000 18,916 18,395 1.62 34.43
December 31, 1993....... 18,700 100,000 100,000 22,178 21,986 2.99 29.16
December 31, 1994....... 20,400 100,000 100,000 22,235 22,235 1.46 25.06
December 31, 1995....... 22,100 100,000 100,000 27,870 27,870 3.58 21.79
December 31, 1996....... 23,800 100,000 100,000 29,991 29,991 3.30 19.12
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1983....... 1,700 100,000 100,000 1,394 489 -97.21% --
December 31, 1984....... 3,400 100,000 100,000 2,705 896 -88.42 1,881.12%
December 31, 1985....... 5,100 100,000 100,000 4,060 2,250 -52.04 419.30
December 31, 1986....... 6,800 100,000 100,000 5,437 3,627 -32.34 200.35
December 31, 1987....... 8,500 100,000 100,000 6,872 5,097 -21.54 123.66
December 31, 1988....... 10,200 100,000 100,000 8,453 6,760 -14.53 86.38
December 31, 1989....... 11,900 100,000 100,000 10,262 8,754 -9.28 64.82
December 31, 1990....... 13,600 100,000 100,000 12,096 10,917 -5.78 50.96
December 31, 1991....... 15,300 100,000 100,000 13,809 12,959 -3.86 41.39
December 31, 1992....... 17,000 100,000 100,000 15,264 14,743 -2.97 34.43
December 31, 1993....... 18,700 100,000 100,000 16,620 16,428 -2.45 29.16
December 31, 1994....... 20,400 100,000 100,000 18,165 18,165 -2.01 25.06
December 31, 1995....... 22,100 100,000 100,000 20,039 20,039 -1.56 21.79
December 31, 1996....... 23,800 100,000 100,000 21,862 21,862 -1.25 19.12
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1987....... 1,700 100,000 100,000 1,105 201 -95.91% --
December 31, 1988....... 3,400 100,000 100,000 2,493 683 -80.43 990.78%
December 31, 1989....... 5,100 100,000 100,000 4,650 2,841 -31.55 317.67
December 31, 1990....... 6,800 100,000 100,000 5,474 3,665 -26.87 168.91
December 31, 1991....... 8,500 100,000 100,000 8,308 6,553 -9.63 109.40
December 31, 1992....... 10,200 100,000 100,000 10,018 8,345 -6.32 78.50
December 31, 1993....... 11,900 100,000 100,000 12,071 10,645 -3.04 59.92
December 31, 1994....... 13,600 100,000 100,000 13,207 12,110 -2.79 47.67
December 31, 1995....... 15,300 100,000 100,000 19,403 18,635 4.19 39.04
December 31, 1996....... 17,000 100,000 100,000 24,631 24,192 6.71 32.69
</TABLE>
A-68
<PAGE>
ZENITH MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1987....... 1,700 100,000 100,000 1,254 349 -90.62% --
December 31, 1988....... 3,400 100,000 100,000 2,565 756 -77.94 990.78%
December 31, 1989....... 5,100 100,000 100,000 4,354 2,545 -36.74 317.67
December 31, 1990....... 6,800 100,000 100,000 5,623 3,814 -25.23 168.91
December 31, 1991....... 8,500 100,000 100,000 7,930 6,175 -11.81 109.40
December 31, 1992....... 10,200 100,000 100,000 9,586 7,914 -7.99 78.50
December 31, 1993....... 11,900 100,000 100,000 11,666 10,241 -4.10 59.92
December 31, 1994....... 13,600 100,000 100,000 12,531 11,435 -4.19 47.67
December 31, 1995....... 15,300 100,000 100,000 17,690 16,922 2.15 39.04
December 31, 1996....... 17,000 100,000 100,000 21,272 20,833 3.89 32.69
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1993....... 1,700 100,000 100,000 1,431 526 -82.57% --
December 31, 1994....... 3,400 100,000 100,000 2,569 759 -77.71 986.29%
December 31, 1995....... 5,100 100,000 100,000 4,741 2,931 -29.88 316.99
December 31, 1996....... 6,800 100,000 100,000 6,721 4,912 -14.52 168.67
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1993....... 1,700 100,000 100,000 1,424 519 -82.93% --
December 31, 1994....... 3,400 100,000 100,000 2,541 732 -78.64 986.29%
December 31, 1995....... 5,100 100,000 100,000 4,861 3,052 -28.01 316.99
December 31, 1996....... 6,800 100,000 100,000 6,940 5,130 -12.63 168.67
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,203 298 -92.69% --
December 31, 1995....... 3,400 100,000 100,000 2,935 1,126 -65.50 995.30%
December 31, 1996....... 5,100 100,000 100,000 5,095 3,286 -24.38 318.36
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,327 422 -- --
December 31, 1995....... 3,400 100,000 100,000 3,056 1,247 -90.77% 3,096.71%
December 31, 1996....... 5,100 100,000 100,000 4,586 2,776 -46.81 504.22
</TABLE>
A-69
<PAGE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,404 499 -- --
December 31, 1995....... 3,400 100,000 100,000 2,927 1,118 -94.19% 3,096.71%
December 31, 1996....... 5,100 100,000 100,000 4,549 2,740 -47.72 504.22
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,360 455 -- --
December 31, 1995....... 3,400 100,000 100,000 3,056 1,246 -90.79% 3,096.71%
December 31, 1996....... 5,100 100,000 100,000 4,981 3,171 -37.42 504.22
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,439 534 -- --
December 31, 1995....... 3,400 100,000 100,000 2,745 936 -97.57% 3,096.71%
December 31, 1996....... 5,100 100,000 100,000 4,051 2,242 -60.95 504.22
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1986....... 1,700 100,000 100,000 1,411 506 -- --
December 31, 1987....... 3,400 100,000 100,000 2,309 500 -- 2,583.90%
December 31, 1988....... 5,100 100,000 100,000 3,893 2,084 -61.88% 472.91
December 31, 1989....... 6,800 100,000 100,000 5,654 3,845 -31.74 214.97
December 31, 1990....... 8,500 100,000 100,000 5,930 4,141 -32.19 129.91
December 31, 1991....... 10,200 100,000 100,000 8,890 7,184 -12.96 89.71
December 31, 1992....... 11,900 100,000 100,000 11,512 9,949 -5.59 66.85
December 31, 1993....... 13,600 100,000 100,000 14,569 13,336 -.53 52.31
December 31, 1994....... 15,300 100,000 100,000 16,501 15,596 .45 42.34
December 31, 1995....... 17,000 100,000 100,000 23,364 22,788 6.07 35.13
December 31, 1996....... 18,700 100,000 100,000 27,496 27,250 7.00 29.70
</TABLE>
A-70
<PAGE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1987....... 1,700 100,000 100,000 1,082 177 -91.37% --
December 31, 1988....... 3,400 100,000 100,000 2,469 660 -72.43 681.40%
December 31, 1989....... 5,100 100,000 100,000 4,404 2,594 -31.31 263.64
December 31, 1990....... 6,800 100,000 100,000 5,426 3,617 -24.47 149.61
December 31, 1991....... 8,500 100,000 100,000 7,013 5,286 -15.86 100.03
December 31, 1992....... 10,200 100,000 100,000 7,140 5,495 -17.89 73.11
December 31, 1993....... 11,900 100,000 100,000 11,214 9,898 -4.70 56.48
December 31, 1994....... 13,600 100,000 100,000 12,288 11,301 -4.20 45.31
December 31, 1995....... 15,300 100,000 100,000 14,754 14,096 -1.67 37.34
December 31, 1996....... 17,000 100,000 100,000 17,640 17,311 .33 31.41
HIGH INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 1,700 $100,000 $100,000 $1,468 $ 563 -- --
December 31, 1985....... 1,700 100,000 100,000 1,467 562 -98.02% --
December 31, 1986....... 3,400 100,000 100,000 2,905 1,095 -86.54 2,221.74%
December 31, 1987....... 5,100 100,000 100,000 4,031 2,221 -55.54 447.18
December 31, 1988....... 6,800 100,000 100,000 5,592 3,782 -31.50 208.10
December 31, 1989....... 8,500 100,000 100,000 6,370 4,588 -26.80 127.00
December 31, 1990....... 10,200 100,000 100,000 7,252 5,552 -22.20 88.17
December 31, 1991....... 11,900 100,000 100,000 10,819 9,284 -7.64 65.92
December 31, 1992....... 13,600 100,000 100,000 14,282 13,076 -1.04 51.69
December 31, 1993....... 15,300 100,000 100,000 18,173 17,295 2.84 41.90
December 31, 1994....... 17,000 100,000 100,000 18,814 18,265 1.49 34.81
December 31, 1995....... 18,700 100,000 100,000 23,616 23,397 4.17 29.45
December 31, 1996....... 20,400 100,000 100,000 27,729 27,729 5.18 25.29
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 1,700 $100,000 $100,000 $ 1,468 $ 563 -- --
December 31, 1989....... 1,700 $100,000 $100,000 1,395 490 -98.00% --
December 31, 1990....... 3,400 $100,000 $100,000 2,684 875 -90.67 2,026.44%
December 31, 1991....... 5,100 $100,000 $100,000 4,426 2,617 -44.72 431.70
December 31, 1992....... 6,800 $100,000 $100,000 6,061 4,251 -24.89 203.84
December 31, 1993....... 8,500 $100,000 $100,000 8,463 6,681 -10.32 125.18
December 31, 1994....... 10,200 $100,000 $100,000 8,904 7,204 -12.40 87.19
December 31, 1995....... 11,900 $100,000 $100,000 11,503 9,968 -5.37 65.32
December 31, 1996....... 13,600 $100,000 $100,000 14,222 13,016 -1.15 51.29
</TABLE>
A-71
<PAGE>
MALE NONSMOKER PREFERRED RISK, AGE 40
OPTION 1--FIXED DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,469 -- --
December 31, 1983....... 4,167 250,000 250,000 3,804 1,542 -94.26% --
December 31, 1984....... 8,335 250,000 250,000 6,853 2,329 -86.84 1,911.21%
December 31, 1985....... 12,502 250,000 250,000 15,173 10,649 -11.55 424.10
December 31, 1986....... 16,670 250,000 250,000 32,434 27,910 29.28 202.39
December 31, 1987....... 20,837 250,000 250,000 51,557 47,119 36.06 124.87
December 31, 1988....... 25,005 250,000 250,000 49,852 45,619 21.21 87.22
December 31, 1989....... 29,172 250,000 250,000 67,880 64,110 23.30 65.47
December 31, 1990....... 33,340 250,000 250,000 67,677 64,730 16.89 51.48
December 31, 1991....... 37,507 250,000 322,884 106,924 104,799 22.75 47.57
December 31, 1992....... 41,675 250,000 303,714 103,097 101,794 17.62 38.56
December 31, 1993....... 45,842 250,000 349,520 120,772 120,293 17.08 35.19
December 31, 1994....... 50,010 250,000 319,570 113,258 113,258 13.24 29.09
December 31, 1995....... 54,177 250,000 426,741 159,734 159,734 15.85 29.40
December 31, 1996....... 58,345 250,000 518,665 194,314 194,314 16.18 28.51
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1983....... 4,167 250,000 250,000 3,587 1,325 -96.29% --
December 31, 1984....... 8,335 250,000 250,000 7,387 2,863 -79.92 1,911.21%
December 31, 1985....... 12,502 250,000 250,000 11,976 7,452 -34.86 424.10
December 31, 1986....... 16,670 250,000 250,000 16,799 12,276 -16.14 202.39
December 31, 1987....... 20,837 250,000 250,000 20,153 15,715 -11.93 124.87
December 31, 1988....... 25,005 250,000 250,000 24,781 20,549 -6.90 87.22
December 31, 1989....... 29,172 250,000 250,000 30,727 26,957 -2.36 65.47
December 31, 1990....... 33,340 250,000 250,000 36,126 33,179 -.13 51.48
December 31, 1991....... 37,507 250,000 250,000 45,532 43,407 3.33 41.83
December 31, 1992....... 41,675 250,000 250,000 51,874 50,571 3.94 34.81
December 31, 1993....... 45,842 250,000 250,000 60,947 60,467 5.07 29.50
December 31, 1994....... 50,010 250,000 250,000 61,235 61,235 3.41 25.36
December 31, 1995....... 54,177 250,000 250,000 76,916 76,916 5.36 22.06
December 31, 1996....... 58,345 250,000 250,000 82,936 82,936 4.98 19.37
</TABLE>
A-72
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1983....... 4,167 250,000 250,000 3,594 1,333 -96.23% --
December 31, 1984....... 8,335 250,000 250,000 7,161 2,637 -82.93 1,911.21%
December 31, 1985....... 12,502 250,000 250,000 10,861 6,337 -44.40 424.10
December 31, 1986....... 16,670 250,000 250,000 14,637 10,113 -25.96 202.39
December 31, 1987....... 20,837 250,000 250,000 18,590 14,152 -16.32 124.87
December 31, 1988....... 25,005 250,000 250,000 22,955 18,723 -10.19 87.22
December 31, 1989....... 29,172 250,000 250,000 27,966 24,196 -5.62 65.47
December 31, 1990....... 33,340 250,000 250,000 33,066 30,119 -2.65 51.48
December 31, 1991....... 37,507 250,000 250,000 37,861 35,736 -1.12 41.83
December 31, 1992....... 41,675 250,000 250,000 41,965 40,663 -.51 34.81
December 31, 1993....... 45,842 250,000 250,000 45,821 45,341 -.21 29.50
December 31, 1994....... 50,010 250,000 250,000 50,221 50,221 .07 25.36
December 31, 1995....... 54,177 250,000 250,000 55,567 55,567 .40 22.06
December 31, 1996....... 58,345 250,000 250,000 60,807 60,807 .60 19.37
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1987....... 4,167 250,000 250,000 2,913 652 -93.77% --
December 31, 1988....... 8,335 250,000 250,000 6,684 2,161 -73.63 1,004.35%
December 31, 1989....... 12,502 250,000 250,000 12,542 8,018 -24.58 321.10
December 31, 1990....... 16,670 250,000 250,000 14,828 10,304 -21.18 170.58
December 31, 1991....... 20,837 250,000 250,000 22,585 18,198 -5.04 110.46
December 31, 1992....... 25,005 250,000 250,000 27,304 23,123 -2.47 79.27
December 31, 1993....... 29,172 250,000 250,000 32,974 29,410 .22 60.52
December 31, 1994....... 33,340 250,000 250,000 36,164 33,422 .06 48.15
December 31, 1995....... 37,507 250,000 250,000 53,226 51,307 6.63 39.46
December 31, 1996....... 41,675 250,000 250,000 67,666 66,570 8.86 33.05
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1987....... 4,167 250,000 250,000 3,303 1,041 -87.45% --
December 31, 1988....... 8,335 250,000 250,000 6,870 2,346 -71.05 1,004.35%
December 31, 1989....... 12,502 250,000 250,000 11,736 7,212 -29.85 321.10
December 31, 1990....... 16,670 250,000 250,000 15,220 10,696 -19.61 170.58
December 31, 1991....... 20,837 250,000 250,000 21,541 17,154 -7.22 110.46
December 31, 1992....... 25,005 250,000 250,000 26,109 21,928 -4.14 79.27
December 31, 1993....... 29,172 250,000 250,000 31,855 28,291 -.84 60.52
December 31, 1994....... 33,340 250,000 250,000 34,306 31,564 -1.32 48.15
December 31, 1995....... 37,507 250,000 250,000 48,530 46,611 4.61 39.46
December 31, 1996....... 41,675 250,000 250,000 58,458 57,361 6.08 33.05
</TABLE>
A-73
<PAGE>
ZENITH AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1993....... 4,167 250,000 250,000 3,783 1,522 -77.71% --
December 31, 1994....... 8,335 250,000 250,000 6,893 2,369 -70.63 999.79%
December 31, 1995....... 12,502 250,000 250,000 12,776 8,252 -23.07 320.41
December 31, 1996....... 16,670 250,000 250,000 18,184 13,660 -9.00 170.35
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1993....... 4,167 250,000 250,000 3,765 1,503 -78.11% --
December 31, 1994....... 8,335 250,000 250,000 6,824 2,300 -71.58 999.79%
December 31, 1995....... 12,502 250,000 250,000 13,111 8,587 -21.01 320.41
December 31, 1996....... 16,670 250,000 250,000 18,786 14,263 -7.08 170.35
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,175 913 -89.78% --
December 31, 1995....... 8,335 250,000 250,000 7,863 3,339 -57.77 1,008.95%
December 31, 1996....... 12,502 250,000 250,000 13,738 9,214 -17.34 321.80
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,381 1,119 -- --
December 31, 1995....... 8,335 250,000 250,000 8,036 3,512 -84.69% 3,152.30%
December 31, 1996....... 12,502 250,000 250,000 12,195 7,671 -38.38 510.22
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,575 1,313 -- --
December 31, 1995....... 8,335 250,000 250,000 7,687 3,163 -89.46% 3,152.30%
December 31, 1996....... 12,502 250,000 250,000 12,097 7,574 -39.30 510.22
</TABLE>
A-74
<PAGE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,465 1,203 -- --
December 31, 1995....... 8,335 250,000 250,000 8,027 3,504 -84.81% 3,152.30%
December 31, 1996....... 12,502 250,000 250,000 13,243 8,719 -28.96 510.22
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,663 1,401 -- --
December 31, 1995....... 8,335 250,000 250,000 7,208 2,685 -94.71% 3,152.30%
December 31, 1996....... 12,502 250,000 250,000 10,771 6,247 -52.62 510.22
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1986....... 4,167 250,000 250,000 3,592 1,330 -- --
December 31, 1987....... 8,335 250,000 250,000 6,066 1,543 -98.80% 2,628.41%
December 31, 1988....... 12,502 250,000 250,000 10,375 5,851 -53.87 478.46
December 31, 1989....... 16,670 250,000 250,000 15,189 10,665 -25.04 217.17
December 31, 1990....... 20,837 250,000 250,000 15,977 11,504 -26.55 131.19
December 31, 1991....... 25,005 250,000 250,000 24,069 19,802 -8.59 90.59
December 31, 1992....... 29,172 250,000 250,000 31,267 27,360 -1.99 67.52
December 31, 1993....... 33,340 250,000 250,000 39,695 36,610 2.50 52.84
December 31, 1994....... 37,507 250,000 250,000 45,075 42,813 3.10 42.79
December 31, 1995....... 41,675 250,000 250,000 63,974 62,534 8.36 35.51
December 31, 1996....... 45,842 250,000 250,000 75,410 74,793 9.04 30.03
OVERSEAS SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1987....... 4,167 250,000 250,000 2,945 684 -85.89% --
December 31, 1988....... 8,335 250,000 250,000 6,725 2,201 -64.07 689.91%
December 31, 1989....... 12,502 250,000 250,000 12,007 7,483 -24.45 266.39
December 31, 1990....... 16,670 250,000 250,000 14,825 10,301 -18.94 151.07
December 31, 1991....... 20,837 250,000 250,000 19,197 14,879 -11.32 100.99
December 31, 1992....... 25,005 250,000 250,000 19,616 15,503 -13.85 73.82
December 31, 1993....... 29,172 250,000 250,000 30,816 27,526 -1.48 57.04
December 31, 1994....... 33,340 250,000 250,000 33,846 31,379 -1.37 45.77
December 31, 1995....... 37,507 250,000 250,000 40,706 39,061 .82 37.74
December 31, 1996....... 41,675 250,000 250,000 48,755 47,933 2.56 31.76
</TABLE>
A-75
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1985....... 4,167 250,000 250,000 3,757 1,496 -97.35% --
December 31, 1986....... 8,335 250,000 250,000 7,650 3,126 -80.69 2,258.71%
December 31, 1987....... 12,502 250,000 250,000 10,735 6,212 -47.93 452.37
December 31, 1988....... 16,670 250,000 250,000 15,003 10,479 -25.14 210.23
December 31, 1989....... 20,837 250,000 250,000 17,180 12,725 -21.44 128.25
December 31, 1990....... 25,005 250,000 250,000 19,659 15,409 -17.58 89.03
December 31, 1991....... 29,172 250,000 250,000 29,460 25,621 -3.97 66.57
December 31, 1992....... 33,340 250,000 250,000 39,004 35,988 2.01 52.22
December 31, 1993....... 37,507 250,000 250,000 49,745 47,552 5.47 42.35
December 31, 1994....... 41,675 250,000 250,000 51,602 50,231 3.85 35.19
December 31, 1995....... 45,842 250,000 250,000 64,912 64,363 6.26 29.79
December 31, 1996....... 50,010 250,000 250,000 76,353 76,353 7.08 25.29
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 4,167 $250,000 $250,000 $ 3,691 $ 1,429 -- --
December 31, 1989....... 4,167 250,000 250,000 3,575 1,313 -97.36% --
December 31, 1990....... 8,335 250,000 250,000 7,080 2,556 -85.84 2,059.44%
December 31, 1991....... 12,502 250,000 250,000 11,810 7,287 -37.06 436.67
December 31, 1992....... 16,670 250,000 250,000 16,277 11,753 -18.69 205.92
December 31, 1993....... 20,837 250,000 250,000 22,839 18,383 -5.39 126.40
December 31, 1994....... 25,005 250,000 250,000 24,114 19,864 -8.19 88.04
December 31, 1995....... 29,172 250,000 250,000 31,271 27,433 -1.86 65.97
December 31, 1996....... 33,340 250,000 250,000 38,766 35,750 1.82 51.82
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
The material below assumes, in the first example, a Policy with an Option 2
death benefit was issued with a $100,000 face amount and annual premiums of
$1,785, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith Avanti Growth Sub-Accounts; September 19 in the case of the
High Income Sub-Account; September 6 in the case of the Asset Manager Sub-
Account), to a male nonsmoker standard risk, age 40. The second example
assumes a Policy with an Option 2 death benefit was issued with a $250,000
face amount and annual premiums of $4,376, paid on August 26 of each year (May
1 in the case of the Zenith Stock Index and Managed Sub-Accounts; May 2 in the
case of the Zenith Small Cap Sub-Account; October 31 in the case of the Zenith
Balanced, Zenith International Magnum Equity, Zenith Venture Value and Zenith
Equity Growth Sub-Accounts; October 9 in the case of the Equity-Income Sub-
Account; January 28 in the case of the Overseas Sub-Account; April 30 in the
case of the Zenith Growth and Income and Zenith Avanti Growth Sub-Accounts;
September 19 in the case of the High Income Sub-Account; September 6 in the
case of the Asset Manager Sub-Account), to a male nonsmoker preferred risk,
age 40. The death benefits, cash values and internal rates of return assume in
each instance that the entire policy value was invested in the particular sub-
account for the period shown. These illustrations of Policy investment
experience also reflect all charges applicable to the Policy, including cost
of insurance charges based on NELICO's current rates. (See Appendix A for the
definition of the internal rate of return.)
A-76
<PAGE>
MALE NONSMOKER STANDARD RISK, AGE 40
OPTION 2--VARIABLE DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1983....... 1,700 100,000 100,126 1,478 573 -95.61% --
December 31, 1984....... 3,400 100,000 100,061 2,584 774 -91.70 1,882.05%
December 31, 1985....... 5,100 100,000 101,737 5,664 3,855 -19.71 423.52
December 31, 1986....... 6,800 100,000 107,187 12,034 10,225 22.92 207.62
December 31, 1987....... 8,500 100,000 112,448 19,049 17,273 31.15 130.98
December 31, 1988....... 10,200 100,000 110,601 18,364 16,671 17.30 90.74
December 31, 1989....... 11,900 100,000 115,146 24,909 23,401 20.01 69.48
December 31, 1990....... 13,600 100,000 114,206 24,759 23,580 14.04 54.50
December 31, 1991....... 15,300 100,000 126,147 39,020 38,170 20.28 46.60
December 31, 1992....... 17,000 100,000 123,601 37,565 37,044 15.42 38.52
December 31, 1993....... 18,700 100,000 129,108 43,958 43,766 15.12 33.50
December 31, 1994....... 20,400 100,000 125,108 41,177 41,177 11.44 28.46
December 31, 1995....... 22,100 100,000 154,966 58,006 58,006 14.22 27.80
December 31, 1996....... 23,800 100,000 188,175 70,498 70,498 14.68 27.05
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1983....... 1,700 100,000 100,039 1,391 486 -97.26% --
December 31, 1984....... 3,400 100,000 100,249 2,791 982 -85.88 1,884.92%
December 31, 1985....... 5,100 100,000 100,700 4,477 2,668 -42.60 421.01
December 31, 1986....... 6,800 100,000 101,237 6,240 4,431 -22.38 201.63
December 31, 1987....... 8,500 100,000 101,086 7,452 5,677 -17.03 124.33
December 31, 1988....... 10,200 100,000 101,466 9,127 7,434 -11.15 87.00
December 31, 1989....... 11,900 100,000 102,180 11,274 9,766 -5.94 65.53
December 31, 1990....... 13,600 100,000 102,683 13,210 12,031 -3.21 51.67
December 31, 1991....... 15,300 100,000 104,493 16,593 15,743 .66 42.37
December 31, 1992....... 17,000 100,000 105,369 18,840 18,319 1.53 35.43
December 31, 1993....... 18,700 100,000 107,109 22,061 21,869 2.89 30.33
December 31, 1994....... 20,400 100,000 105,596 22,095 22,095 1.36 25.89
December 31, 1995....... 22,100 100,000 109,210 27,656 27,656 3.46 23.00
December 31, 1996....... 23,800 100,000 109,795 29,714 29,714 3.17 20.30
</TABLE>
A-77
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1983....... 1,700 100,000 100,032 1,394 489 -97.22% --
December 31, 1984....... 3,400 100,000 100,158 2,705 896 -88.43 1,883.53%
December 31, 1985....... 5,100 100,000 100,288 4,059 2,250 -52.06 420.00
December 31, 1986....... 6,800 100,000 100,401 5,435 3,625 -32.36 200.77
December 31, 1987....... 8,500 100,000 100,532 6,869 5,094 -21.57 123.99
December 31, 1988....... 10,200 100,000 100,757 8,447 6,754 -14.56 86.70
December 31, 1989....... 11,900 100,000 101,175 10,252 8,744 -9.31 65.21
December 31, 1990....... 13,600 100,000 101,579 12,080 10,901 -5.82 51.38
December 31, 1991....... 15,300 100,000 101,820 13,786 12,936 -3.90 41.79
December 31, 1992....... 17,000 100,000 101,759 15,232 14,711 -3.02 34.76
December 31, 1993....... 18,700 100,000 101,549 16,580 16,388 -2.50 29.42
December 31, 1994....... 20,400 100,000 101,474 18,116 18,116 -2.05 25.28
December 31, 1995....... 22,100 100,000 101,695 19,979 19,979 -1.61 22.02
December 31, 1996....... 23,800 100,000 101,830 21,788 21,788 -1.30 19.35
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1987....... 1,700 100,000 100,000 1,105 200 -95.91% --
December 31, 1988....... 3,400 100,000 100,000 2,492 683 -80.44 990.78%
December 31, 1989....... 5,100 100,000 100,820 4,649 2,839 -31.58 319.10
December 31, 1990....... 6,800 100,000 100,393 5,471 3,662 -26.90 169.24
December 31, 1991....... 8,500 100,000 101,299 8,300 6,546 -9.68 110.10
December 31, 1992....... 10,200 100,000 102,230 10,003 8,330 -6.38 79.36
December 31, 1993....... 11,900 100,000 102,873 12,045 10,619 -3.11 60.78
December 31, 1994....... 13,600 100,000 102,392 13,170 12,074 -2.87 48.25
December 31, 1995....... 15,300 100,000 107,340 19,330 18,563 4.11 40.54
December 31, 1996....... 17,000 100,000 111,503 24,502 24,063 6.61 34.69
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1987....... 1,700 100,000 100,000 1,254 349 -90.62% --
December 31, 1988....... 3,400 100,000 100,082 2,565 755 -77.94 991.34%
December 31, 1989....... 5,100 100,000 100,599 4,353 2,544 -36.76 318.71
December 31, 1990....... 6,800 100,000 100,553 5,621 3,811 -25.26 169.38
December 31, 1991....... 8,500 100,000 101,152 7,924 6,169 -11.84 110.02
December 31, 1992....... 10,200 100,000 101,759 9,574 7,902 -8.04 79.18
December 31, 1993....... 11,900 100,000 102,561 11,645 10,219 -4.16 60.69
December 31, 1994....... 13,600 100,000 101,806 12,502 11,405 -4.25 48.11
December 31, 1995....... 15,300 100,000 105,635 17,635 16,867 2.08 40.20
December 31, 1996....... 17,000 100,000 108,071 21,180 20,742 3.81 34.11
</TABLE>
A-78
<PAGE>
ZENITH AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $1,700 $100,000 $100,002 $1,468 $ 563 -- --
December 31, 1993....... 1,700 100,000 100,180 1,431 526 -82.58% --
December 31, 1994....... 3,400 100,000 100,148 2,568 759 -77.72 987.30%
December 31, 1995....... 5,100 100,000 101,053 4,738 2,929 -30.02 318.82
December 31, 1996....... 6,800 100,000 101,805 6,714 4,905 -14.58 170.20
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $1,700 $100,000 $100,002 $1,468 $ 563 -- --
December 31, 1993....... 1,700 100,000 100,176 1,424 519 -82.94% --
December 31, 1994....... 3,400 100,000 100,100 2,541 731 -78.66 986.98%
December 31, 1995....... 5,100 100,000 101,174 4,859 3,049 -28.05 319.02
December 31, 1996....... 6,800 100,000 102,065 6,933 5,123 -12.69 170.42
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $1,700 $100,000 $100,002 $1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,203 298 -92.69% --
December 31, 1995....... 3,400 100,000 100,374 2,935 1,125 -65.52 997.89%
December 31, 1996....... 5,100 100,000 101,244 5,093 3,283 -24.42 320.52
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $1,700 $100,000 $100,002 $1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,327 422 -- --
December 31, 1995....... 3,400 100,000 100,465 3,056 1,246 -90.79% 3,109.77%
December 31, 1996....... 5,100 100,000 100,776 4,583 2,774 -46.87 506.58
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $1,700 $100,000 $100,002 $1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,404 499 -- --
December 31, 1995....... 3,400 100,000 100,336 2,927 1,117 -94.20% 3,106.16%
December 31, 1996....... 5,100 100,000 100,740 4,548 2,738 -47.46 506.47
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $1,700 $100,000 $100,002 $1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,000 1,360 455 -- --
December 31, 1995....... 3,400 100,000 100,464 3,055 1,246 -90.81% 3,109.77%
December 31, 1996....... 5,100 100,000 101,170 4,978 3,169 -37.48 507.78
</TABLE>
A-79
<PAGE>
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1994....... 1,700 100,000 100,027 1,439 534 -- --
December 31, 1995....... 3,400 100,000 100,154 2,745 936 -97.57% 3,101.04%
December 31, 1996....... 5,100 100,000 100,243 4,051 2,241 -60.97 504.96
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1986....... 1,700 100,000 100,046 1,411 506 -- --
December 31, 1987....... 3,400 100,000 100,000 2,309 500 -- 2,583.90%
December 31, 1988....... 5,100 100,000 100,115 3,893 2,083 -61.90% 473.23
December 31, 1989....... 6,800 100,000 100,494 5,652 3,843 -31.77 215.52
December 31, 1990....... 8,500 100,000 100,000 5,928 4,139 -32.22 129.91
December 31, 1991....... 10,200 100,000 100,525 8,886 7,179 -12.98 89.95
December 31, 1992....... 11,900 100,000 102,190 11,501 9,938 -5.62 67.59
December 31, 1993....... 13,600 100,000 103,856 14,544 13,310 -.58 53.34
December 31, 1994....... 15,300 100,000 104,153 16,456 15,551 .38 43.27
December 31, 1995....... 17,000 100,000 109,987 23,270 22,694 5.99 36.99
December 31, 1996....... 18,700 100,000 112,611 27,339 27,092 6.90 31.74
OVERSEAS SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1987....... 1,700 100,000 100,000 1,082 177 -91.38% 8,152.29%
December 31, 1988....... 3,400 100,000 100,038 2,469 660 -72.44 681.56
December 31, 1989....... 5,100 100,000 100,794 4,403 2,593 -31.33 264.75
December 31, 1990....... 6,800 100,000 100,514 5,423 3,613 -24.50 149.99
December 31, 1991....... 8,500 100,000 100,728 7,008 5,280 -15.89 100.38
December 31, 1992....... 10,200 100,000 100,000 7,134 5,489 -17.92 73.11
December 31, 1993....... 11,900 100,000 102,196 11,202 9,886 -4.73 57.10
December 31, 1994....... 13,600 100,000 101,882 12,267 11,280 -4.25 45.75
December 31, 1995....... 15,300 100,000 102,642 14,721 14,063 -1.72 37.87
December 31, 1996....... 17,000 100,000 103,988 17,588 17,259 .28 32.10
</TABLE>
A-80
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1985....... 1,700 100,000 100,059 1,467 562 -98.02% --
December 31, 1986....... 3,400 100,000 100,306 2,904 1,095 -86.55 2,227.47%
December 31, 1987....... 5,100 100,000 100,166 4,029 2,220 -55.57 447.62
December 31, 1988....... 6,800 100,000 100,505 5,589 3,779 -31.54 208.65
December 31, 1989....... 8,500 100,000 100,000 6,366 4,584 -26.84 127.00
December 31, 1990....... 10,200 100,000 100,000 7,248 5,548 -22.22 88.17
December 31, 1991....... 11,900 100,000 101,643 10,811 9,276 -7.67 66.46
December 31, 1992....... 13,600 100,000 103,678 14,260 13,054 -1.09 52.66
December 31, 1993....... 15,300 100,000 106,080 18,125 17,247 2.78 43.24
December 31, 1994....... 17,000 100,000 105,124 18,743 18,195 1.41 35.78
December 31, 1995....... 18,700 100,000 108,856 23,497 23,277 4.08 30.90
December 31, 1996....... 20,400 100,000 110,738 27,545 27,545 5.07 26.85
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 1,700 $100,000 $100,002 $ 1,468 $ 563 -- --
December 31, 1989....... 1,700 100,000 100,003 1,395 490 -98.00% --
December 31, 1990....... 3,400 100,000 100,087 2,684 875 -90.67 2,027.90%
December 31, 1991....... 5,100 100,000 100,466 4,425 2,616 -44.75 432.88
December 31, 1992....... 6,800 100,000 100,967 6,057 4,248 -24.93 204.86
December 31, 1993....... 8,500 100,000 101,920 8,455 6,673 -10.38 126.36
December 31, 1994....... 10,200 100,000 101,434 8,891 7,191 -12.47 87.81
December 31, 1995....... 11,900 100,000 102,474 11,482 9,946 -5.44 66.13
December 31, 1996....... 13,600 100,000 103,818 14,187 12,980 -1.22 52.30
MALE NONSMOKER PREFERRED RISK, AGE 40
OPTION 2--VARIABLE DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1983....... 4,167 250,000 250,426 3,804 1,542 -94.26% --
December 31, 1984....... 8,335 250,000 250,547 6,852 2,328 -86.84 1,914.60%
December 31, 1985....... 12,502 250,000 255,319 15,166 10,642 -11.60 429.30
December 31, 1986....... 16,670 250,000 270,303 32,384 27,860 29.17 210.61
December 31, 1987....... 20,837 250,000 284,848 51,404 46,966 35.91 133.05
December 31, 1988....... 25,005 250,000 280,218 49,641 45,409 21.05 92.18
December 31, 1989....... 29,172 250,000 292,941 67,495 63,725 23.12 70.72
December 31, 1990....... 33,340 250,000 290,800 67,197 64,250 16.70 55.52
December 31, 1991....... 37,507 250,000 323,689 106,070 103,945 22.57 47.63
December 31, 1992....... 41,675 250,000 317,214 102,233 100,930 17.46 39.41
December 31, 1993....... 45,842 250,000 346,621 119,771 119,291 16.94 35.05
December 31, 1994....... 50,010 250,000 322,295 112,338 112,338 13.11 29.22
December 31, 1995....... 54,177 250,000 423,338 158,461 158,461 15.74 29.29
December 31, 1996....... 58,345 250,000 514,617 192,797 192,797 16.08 28.42
</TABLE>
A-81
<PAGE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1983....... 4,167 250,000 250,208 3,587 1,325 -96.29% --
December 31, 1984....... 8,335 250,000 251,031 7,386 2,862 -79.93 1,917.59%
December 31, 1985....... 12,502 250,000 252,528 11,971 7,448 -34.90 426.58
December 31, 1986....... 16,670 250,000 254,283 16,787 12,263 -16.19 204.16
December 31, 1987....... 20,837 250,000 254,211 20,131 15,693 -11.99 125.91
December 31, 1988....... 25,005 250,000 255,596 24,745 20,513 -6.97 88.18
December 31, 1989....... 29,172 250,000 257,925 30,669 26,899 -2.43 66.49
December 31, 1990....... 33,340 250,000 259,713 36,040 33,092 -.19 52.50
December 31, 1991....... 37,507 250,000 265,107 45,393 43,268 3.26 43.14
December 31, 1992....... 41,675 250,000 267,991 51,670 50,367 3.86 36.14
December 31, 1993....... 45,842 250,000 273,280 60,643 60,163 4.98 31.01
December 31, 1994....... 50,010 250,000 269,656 60,870 60,870 3.31 26.51
December 31, 1995....... 54,177 250,000 280,205 76,366 76,366 5.25 23.63
December 31, 1996....... 58,345 250,000 282,437 82,229 82,229 4.86 20.90
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1983....... 4,167 250,000 250,190 3,594 1,333 -96.23% --
December 31, 1984....... 8,335 250,000 250,792 7,160 2,636 -82.94 1,916.11%
December 31, 1985....... 12,502 250,000 251,429 10,857 6,334 -44.43 425.50
December 31, 1986....... 16,670 250,000 252,044 14,630 10,106 -26.00 203.24
December 31, 1987....... 20,837 250,000 252,735 18,578 14,140 -16.36 125.55
December 31, 1988....... 25,005 250,000 253,706 22,934 18,702 -10.23 87.86
December 31, 1989....... 29,172 250,000 255,234 27,930 24,161 -5.67 66.15
December 31, 1990....... 33,340 250,000 256,757 33,011 30,064 -2.70 52.19
December 31, 1991....... 37,507 250,000 257,863 37,781 35,656 -1.17 42.52
December 31, 1992....... 41,675 250,000 258,172 41,856 40,554 -.56 35.42
December 31, 1993....... 45,842 250,000 258,104 45,682 45,202 -.26 30.04
December 31, 1994....... 50,010 250,000 258,438 50,047 50,047 .01 25.86
December 31, 1995....... 54,177 250,000 259,633 55,347 55,347 .34 22.58
December 31, 1996....... 58,345 250,000 260,634 60,532 60,532 .54 19.89
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1987....... 4,167 250,000 250,000 2,913 651 93.77% --
December 31, 1988....... 8,335 250,000 250,426 6,684 2,160 -73.63 1,005.54%
December 31, 1989....... 12,502 250,000 252,941 12,537 8,013 -24.61 323.16
December 31, 1990....... 16,670 250,000 252,102 14,818 10,294 -21.22 171.30
December 31, 1991....... 20,837 250,000 254,903 22,562 18,175 -5.09 111.52
December 31, 1992....... 25,005 250,000 257,801 27,261 23,080 -2.53 80.47
December 31, 1993....... 29,175 250,000 259,945 32,903 29,339 .15 61.71
December 31, 1994....... 33,340 250,000 259,046 36,065 33,323 -.01 49.04
December 31, 1995....... 37,507 250,000 273,052 53,036 57,117 6.55 41.32
December 31, 1996....... 41,675 250,000 284,964 67,340 66,243 8.77 35.45
</TABLE>
A-82
<PAGE>
ZENITH MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1987....... 4,167 250,000 250,017 3,302 1,041 -87.45% --
December 31, 1988....... 8,335 250,000 250,660 6,869 2,346 -71.06 1,006.19%
December 31, 1989....... 12,502 250,000 252,336 11,732 7,208 -29.88 322.74
December 31, 1990....... 16,670 250,000 252,522 15,211 10,687 -19.65 171.44
December 31, 1991....... 20,837 250,000 254,487 21,521 17,134 -7.27 111.43
December 31, 1992....... 25,005 250,000 256,498 26,073 21,892 -4.19 80.27
December 31, 1993....... 29,172 250,000 259,074 31,793 28,229 -.90 61.60
December 31, 1994....... 33,340 250,000 257,430 34,222 31,480 -1.38 48.88
December 31, 1995....... 37,507 250,000 268,366 48,377 46,458 4.54 40.96
December 31, 1996....... 41,675 250,000 257,533 58,213 57,117 6.00 34.83
ZENITH AVANTI GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1993....... 4,167 250,000 250,656 3,783 1,521 -77.72% --
December 31, 1994....... 8,335 250,000 250,845 6,891 2,367 -70.65 1,002.13%
December 31, 1995....... 12,502 250,000 253,555 12,769 8,245 -23.11 322.89
December 31, 1996....... 16,670 250,000 255,902 18,165 13,641 -9.06 172.35
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1993....... 4,167 250,000 250,647 3,765 1,503 -78.12% --
December 31, 1994....... 8,335 250,000 250,722 6,822 2,299 -71.60 1,001.79%
December 31, 1995....... 12,502 250,000 253,890 13,103 8,580 -21.05 323.12
December 31, 1996....... 16,670 250,000 256,617 18,767 14,243 -7.14 172.59
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,175 913 -89.78% --
December 31, 1995....... 8,335 250,000 251,443 7,861 3,338 -57.79 1,012.99%
December 31, 1996....... 12,502 250,000 254,082 13,730 9,206 -17.39 324.66
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,381 1,119 -- --
December 31, 1995....... 8,335 250,000 251,556 8,034 3,510 -84.72% 3,170.09%
December 31, 1996....... 12,502 250,000 252,669 12,188 7,665 -38.44 513.50
</TABLE>
A-83
<PAGE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,028 $ 3,691 $1,429 -- --
December 31, 1994....... 4,167 250,000 250,044 3,575 1,313 -- --
December 31, 1995....... 8,335 250,000 251,208 7,686 3,162 -89.47% 3,166.11%
December 31, 1996....... 12,502 250,000 252,573 12,093 7,569 -39.35 513.38
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,028 $ 3,691 $1,429 -- --
December 31, 1994....... 4,167 250,000 250,000 3,465 1,203 -- --
December 31, 1995....... 8,335 250,000 251,548 8,026 3,502 -84.83% 3,170.00%
December 31, 1996....... 12,502 250,000 253,717 13,236 8,712 -29.01 514.78
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 4,167 $250,000 $250,028 $ 3,691 $1,429 -- --
December 31, 1994....... 4,167 250,000 250,132 3,663 1,401 -- --
December 31, 1995....... 8,335 250,000 250,730 7,208 2,684 -94.72% 3,160.65%
December 31, 1996....... 12,502 250,000 251,249 10,768 6,245 -52.64 511.76
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 4,167 $250,000 $250,028 $ 3,691 $1,429 -- --
December 31, 1986....... 4,167 250,000 250,181 3,592 1,330 -- --
December 31, 1987....... 8,335 250,000 250,000 6,066 1,542 -98.80% 2,628.41%
December 31, 1988....... 12,502 250,000 250,933 10,372 5,849 -53.90 479.52
December 31, 1989....... 16,670 250,000 252,268 15,182 10,658 -25.08 218.20
December 31, 1990....... 20,837 250,000 250,108 15,969 11,496 -26.58 131.22
December 31, 1991....... 25,005 250,000 253,014 24,052 19,785 -8.62 91.13
December 31, 1992....... 29,172 250,000 257,903 31,231 27,324 -2.03 68.57
December 31, 1993....... 33,340 250,000 262,857 39,619 36,535 2.44 54.21
December 31, 1994....... 37,507 250,000 264,114 44,952 42,690 3.04 44.04
December 31, 1995....... 41,675 250,000 280,566 63,729 62,289 8.28 37.78
December 31, 1996....... 45,842 250,000 288,265 75,016 74,399 8.94 32.49
</TABLE>
A-84
<PAGE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1987....... 4,167 250,000 250,000 2,945 683 -85.89% --
December 31, 1988....... 8,335 250,000 250,633 6,724 2,200 -64.09 691.01%
December 31, 1989....... 12,502 250,000 252,984 12,003 7,479 -24.48 268.06
December 31, 1990....... 16,670 250,000 252,542 14,814 10,290 -18.98 151.83
December 31, 1991....... 20,837 250,000 253,471 19,179 14,861 -11.36 101.67
December 31, 1992....... 25,005 250,000 250,566 19,594 15,481 -13.89 73.90
December 31, 1993....... 29,172 250,000 258,259 30,772 27,482 -1.52 57.98
December 31, 1994....... 33,340 250,000 257,833 33,776 31,309 -1.42 46.50
December 31, 1995....... 37,507 250,000 260,374 40,601 38,956 .77 38.56
December 31, 1996....... 41,675 250,000 264,568 48,594 47,772 2.50 32.76
HIGH INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1985....... 4,167 250,000 250,237 3,757 1,496 -97.35% --
December 31, 1986....... 8,335 250,000 251,148 7,648 3,124 -80.71 2,267.42%
December 31, 1987....... 12,502 250,000 251,062 10,731 6,208 -47.97 453.50
December 31, 1988....... 16,670 250,000 252,278 14,994 10,471 -25.18 211.22
December 31, 1989....... 20,837 250,000 251,227 17,168 12,712 -21.48 128.56
December 31, 1990....... 25,005 250,000 250,187 19,645 15,396 -17.62 89.06
December 31, 1991....... 29,172 250,000 256,486 29,431 25,592 -4.01 67.43
December 31, 1992....... 33,340 250,000 262,461 38,937 35,921 1.96 53.53
December 31, 1993....... 37,507 250,000 269,479 49,613 47,419 5.40 44.04
December 31, 1994....... 41,675 250,000 267,331 51,414 50,004 3.78 36.49
December 31, 1995....... 45,842 250,000 278,094 64,603 64,055 6.18 31.61
December 31, 1996....... 50,010 250,000 283,820 75,887 75,887 6.98 27.53
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 4,167 $250,000 $250,028 $ 3,691 $ 1,429 -- --
December 31, 1989....... 4,167 250,000 250,094 3,575 1,313 -97.36% --
December 31, 1990....... 8,335 250,000 250,583 7,079 2,556 -85.85 2,063.39%
December 31, 1991....... 12,502 250,000 251,881 11,807 7,283 -37.09 438.59
December 31, 1992....... 16,670 250,000 253,533 16,267 11,743 -18.73 207.41
December 31, 1993....... 20,837 250,000 256,439 22,815 18,359 -5.44 128.00
December 31, 1994....... 25,005 250,000 255,484 24,078 19,828 -8.25 88.99
December 31, 1995....... 29,172 250,000 258,706 31,212 27,374 -1.92 67.10
December 31, 1996....... 33,340 250,000 262,775 38,670 35,654 1.75 53.15
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
A-85
<PAGE>
APPENDIX C
LONG TERM MARKET TRENDS
The information below is a comparison of the average annual returns of
common stock, high grade corporate bonds and 30-day U.S. Treasury bills over
20-year and 30-year holding periods.* The average annual returns assume the
reinvestment of dividends, capital gains and interest. This is an historical
record and is not intended as a projection of future performance. Charges
associated with a variable life policy are not reflected.
The data indicates that, historically, the investment performance of common
stocks over long periods of time has been positive and has generally been
superior to that of long-term, high grade debt securities. Common stocks have,
however, been subject to more dramatic market adjustments over short periods
of time. These trends indicate the potential advantages of holding a variable
life insurance policy for a long period of time.
Over the 52 20-year time periods beginning in 1926 and ending in 1996 (i.e.
1926-1945, 1927-1946, and so on through 1977-1996):
--The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 49 of the 52 periods.
--The average annual return of common stocks surpassed that of U.S. Treasury
bills in each of the 52 periods.
--Common stock average annual returns exceeded the average annual rate of
inflation in each of the 52 periods.
Over the 42 30-year time periods beginning in 1926 and ending in 1996, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 42
periods.
From 1926 through 1996 the average annual return for common stocks was
10.7%, compared to 5.6% for high grade, long-term corporate bonds, 3.7% for
U.S. Treasury bills and 3.1% for the Consumer Price Index.
- --------
* Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook(TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
----------------
SUMMARY TABLE: HISTORIC S&P 500 STOCK INDEX RESULTS FOR SPECIFIC HOLDING
PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index, with dividends reinvested, over one-year, five-year,
ten-year and twenty-year periods beginning in 1926 and ending in 1996.
The chart shows that historically, the longer that a portfolio matching the
S&P 500 Stock Index was held, the less likely was the chance of a loss.
Conversely, the shorter the holding period of such a portfolio, the more
likely was the chance of a loss. The chart also shows that shorter term
results tend to be more extreme than longer term results.
The chart is not a projection or representation of future stock market
results. It cannot be taken as representative of the performance of any one
fund. Rather it shows the historic performance of a broad index of stocks.
----------------
A-86
<PAGE>
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 0-5.00% 10.00% 15.00% 20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
------- -------- ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
1 year 28% 4% 11% 7% 11% 38%
5 years 10% 15% 15% 31% 19% 9%
10 years 3% 10% 34% 24% 26% 2%
20 years 0% 6% 32% 56% 6% 0%
</TABLE>
- --------
Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook(TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
DOLLAR COST AVERAGING
Dollar cost averaging allows a person to take advantage of the historical
long-term stock market results, assuming that they continue, although it does
not guarantee a profit or protect against a loss. If an investor follows a
program of dollar cost averaging on a long-term basis, and the stock fund
selected performs at least as well as the S&P 500 has historically, it is
likely although not guaranteed that the price at which shares are surrendered,
for whatever reason, will be higher than the average cost per share.
An investor using dollar cost averaging invests the same amount of money in
the same professionally managed fund at regular intervals over a long period
of time. Dollar cost averaging keeps an investor from investing too much when
the price of shares is high and too little when the price is low. When the
price of shares is low, the money invested buys more shares. When it is high,
the money invested buys fewer shares. If the investor has the ability and
desire to maintain this program over a long period of time (for example, 20
years), and the stock fund chosen follows the historical upward market trends,
the price at which the shares are sold should be higher than their average
cost. This price could be lower, however, if the fund chosen does not follow
these historical trends.
Investors contemplating the use of dollar cost averaging should consider
their ability to continue the on-going purchases so that they can take
advantage of periods of low price levels.
A-87
<PAGE>
APPENDIX D
USES OF LIFE INSURANCE
The following are examples of ways in which the Policy can be used to
address certain financial objectives.
FAMILY INCOME PROTECTION
Life insurance may be purchased on the lives of the family income earners to
provide a death benefit to cover final expenses, and continue the current
income to the family. The amount of insurance purchased should be an amount
which will provide a death benefit that when invested outside the policy at a
reasonable interest rate, will generate enough money to replace the
individual's income.
ESTATE PROTECTION
Life insurance may be purchased by a trust on the life of the person whose
estate will incur federal estate taxes upon the person's death. The amount of
insurance purchased would equal the amount of the estimated estate tax
liability. Upon the insured's death, the trustee could make the death proceeds
available to the estate for the payment of estate tax costs.
EDUCATION FUNDING
Life insurance may be purchased on the life of the parent(s) or primary
person funding an education. The amount of insurance purchased should equal
the total education cost projected at a reasonable inflation rate.
In the event of death, the guaranteed death benefit is available to help pay
the education costs. If the insured lives through the education years, the
cash value accumulations may be accessed to help offset the remaining
education costs. Any cash value loans or surrenders will reduce the policy
death benefit.
MORTGAGE PROTECTION
Life insurance may be purchased on the life of the person responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed
late in the mortgage term to help make the remaining mortgage payments. Any
cash value loans or surrenders will reduce the policy death benefit.
KEY PERSON PROTECTION
Life insurance may be purchased by the business on the life of the key
person in an amount equal to the key person's value, considering salary,
benefits, and contribution to business profits. Upon the key person's death,
the business uses the death benefit to ease the interruption of business
operations and/or to provide a replacement fund for hiring a new executive.
BUSINESS CONTINUATION PROTECTION
Life insurance may be purchased on the life of each business owner in an
amount equal to the value of each owner's business interest. In the event of
death, the guaranteed death benefit may provide the funds needed to carry out
the purchase of the deceased's business interest by the business, or surviving
owners, from the deceased owner's heirs.
A-88
<PAGE>
RETIREMENT INCOME
Life insurance may be purchased on the life of a family income earner during
his or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any cash value loans or surrenders will reduce the policy
death benefit.
Because the Policy provides a death benefit and for the accumulation of cash
value, the Policy can be used for various individual and business planning
purposes. Purchasing the Policy in part for such purposes entails certain
risks, particularly if the Policy's cash value, as opposed to its death
benefit, will be the principal Policy feature used for such planning purposes.
If the investment performance of the Sub-Accounts to which cash value is
allocated is poorer than expected, or if sufficient premiums are not paid or
cash values maintained, the Policy may lapse or may not accumulate sufficient
cash value or net cash value to fund the purpose for which the Policy was
purchased. Because the Policy is designed to provide benefits on a long-term
basis, before purchasing a Policy for a specialized purpose, a purchaser
should consider whether the long-term nature of the Policy is consistent with
the purpose for which it is being considered. If you wish to access your
Policy's cash value, through loans, surrenders or withdrawals, you should
consult your tax advisor about possible tax consequences. (See "Tax
Considerations".)
A-89
<PAGE>
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products"
in March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax
Treatment of Life Insurance Products and Other Retirement Savings Plans".
Because it is a convenient summary of the relevant tax characteristics of
these products and plans, we have reprinted it here, and added footnotes to
reflect exceptions to the general rules.
---------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND
OTHER RETIREMENT SAVINGS PLANS
<TABLE>
<CAPTION>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- -------- ---------
<S> <C> <C> <C> <C>
Annual Contribution Limits No No Yes Yes
Income Eligibility Limits No No Yes** No
Borrowing Treated as Distribu- No* Yes Loans Yes,
tions not beyond
allowed $50,000
Income Ordering Rules (Income
included in First
Distribution) No* Yes Yes Yes
Early Withdrawal Penalties No* Yes*** Yes*** Yes***
Minimum Distribution Rules by No No Yes Yes
Age 70 1/2
Maximum Annual Distribution No No Yes Yes
Rules
Anti-discrimination Rules No No No Yes
</TABLE>
- --------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
The foregoing information is not intended as tax advice. You should consult
your own tax advisor for more complete information.
A-90
<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 operations 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 operations 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 operations and changes in net assets. We believe that our audits of the
statements of operations 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> <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
- ----------------------------------------
SMALL ASSET
CAP MANAGER
SUB-ACCOUNT SUB-ACCOUNT TOTAL
- ------------ ------------ --------------
<S> <C> <C>
$24,997,883 $4,132,726 $ 998,994,493
49,863 (5,236) 2,407,215
-- -- 135,927
- ------------ ------------ --------------
25,047,746 4,127,490 1,001,537,635
3,525,015 547,395 115,152,837
- ------------ ------------ --------------
3,525,015 547,395 115,152,837
- ------------ ------------ --------------
$21,522,731 $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 ASSETS AND LIABILITIES
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI GROWTH 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> <C> <C>
ASSETS
Investments in New England Zenith Fund,
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at
value (Note 2)........................ $603,069,507 $37,489,359 $35,771,473 $39,700,886 $32,258,773 $26,751,368 $21,723,125
<CAPTION>
SHARES COST
------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth
Series......... 1,376,400 $449,928,194
Back Bay
Advisors Bond
Income Series.. 355,754 37,542,143
Back Bay
Advisors Money
Market Series.. 357,715 35,771,473
Westpeak Stock
Index Series... 323,587 31,280,639
Back Bay
Advisors
Managed Series. 185,822 25,518,609
Loomis Sayles
Avanti Growth
Series......... 177,656 23,278,137
Westpeak Growth
and Income
Series......... 140,730 18,313,622
Loomis Sayles
Small Cap
Series......... 208,786 27,127,093
Salomon Bros.
U.S. Government
Series......... 5,065 55,794
Loomis Sayles
Balanced
Series......... 355,818 4,601,623
Alger Equity
Growth Series.. 1,906,109 27,761,426
Draycott
International
Equity Series.. 484,115 5,311,019
Davis Venture
Value Series... 1,570,919 23,234,010
Salomon Bros.
Bond
Opportunities
Series......... 19,142 225,520
VIP Equity-
Income Series.. 4,634,995 80,451,660
VIP Overseas
Series......... 3,680,592 59,297,216
VIP High Income
Series......... 451,605 5,254,543
VIP II Asset
Manager Series. 294,306 4,379,522
Amount due and accrued from policy-
related transactions, net............. 477,894 32,354 50,405 91,890 30,442 136,778 30,067
Dividends receivable................... -- -- 134,080 -- -- -- --
------------ ----------- ----------- ----------- ----------- ----------- -----------
Total Assets........................... 603,547,401 37,521,713 35,955,958 39,792,776 32,289,215 26,888,146 21,753,192
LIABILITIES
Due New England Life Insurance Company. 62,895,752 4,593,377 3,839,831 5,165,964 3,049,788 4,409,378 3,432,265
------------ ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities...................... 62,895,752 4,593,377 3,839,831 5,165,964 3,049,788 4,409,378 3,432,265
------------ ----------- ----------- ----------- ----------- ----------- -----------
Net Assets for Variable Life Insurance
Policies............................... $540,651,649 $32,928,336 $32,116,127 $34,626,812 $29,239,427 $22,478,768 $18,320,927
============ =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
---------------------------------------------------------------------------------------------------------------------------
U.S. EQUITY HIGH
SMALL GOVERNMENT BALANCED GROWTH INTERNATIONAL VENTURE BOND EQUITY- INCOME
CAP SUB- SUB- SUB- EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS SUB-
SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ACCOUNT
------------ ---------- ---------- ----------- ------------- ----------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$29,656,005 $54,907 $4,785,749 $29,544,686 $5,330,104 $25,778,782 $223,963 $88,852,848 $65,404,124 $5,211,526
237,657 -- 24,979 211,337 25,298 133,030 8,051 202,958 108,601 19,491
-- -- -- -- -- -- -- -- -- --
----------- -------- ---------- ----------- ---------- ----------- -------- ----------- ----------- ----------
29,893,662 54,907 4,810,728 29,756,023 5,355,402 25,911,812 232,014 89,055,806 65,512,725 5,231,017
4,721,267 3,032 712,021 5,324,333 936,780 3,827,799 5,528 13,302,976 11,197,843 736,607
----------- -------- ---------- ----------- ---------- ----------- -------- ----------- ----------- ----------
4,721,267 3,032 712,021 5,324,333 936,780 3,827,799 5,528 13,302,976 11,197,843 736,607
----------- -------- ---------- ----------- ---------- ----------- -------- ----------- ----------- ----------
$25,172,395 $51,875 $4,098,707 $24,431,690 $4,418,622 $22,084,013 $226,486 $75,752,830 $54,314,882 $4,494,410
=========== ======== ========== =========== ========== =========== ======== =========== =========== ==========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- -----------------------------------------
ASSET
SMALL MANAGER
CAP SUB-
SUB-ACCOUNT ACCOUNT TOTAL
- --------------- ---------- --------------
<S> <C> <C>
$29,656,005 $4,391,038 $1,055,998,223
237,657 7,883 1,829,115
-- -- 134,080
-------------- ---------- --------------
29,893,662 4,398,921 1,057,961,418
4,721,267 572,370 128,726,911
-------------- ---------- --------------
4,721,267 572,370 128,726,911
-------------- ---------- --------------
$25,172,395 $3,826,551 $ 929,234,507
============== ========== ==============
</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, 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-8
<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
- --------------------------------------
SMALL ASSET
CAP MANAGER
SUB-ACCOUNT SUB-ACCOUNT TOTAL
- ------------- ----------- ------------
<S> <C> <C>
$1,624,708 $174,907 $ 50,453,549
90,146 20,483 4,984,819
- ------------- ----------- ------------
1,534,562 154,424 45,468,730
768,552 269,255 101,153,516
3,059,565 547,647 194,486,245
- ------------- ----------- ------------
2,291,013 278,392 93,332,729
31,570 4,122 1,232,236
- ------------- ----------- ------------
2,322,583 282,514 94,564,965
- ------------- ----------- ------------
$3,857,145 $436,938 $140,033,695
============= =========== ============
</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, 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-10
<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>
- --------------------------
GROWTH
AND
INCOME
SUB-ACCOUNT TOTAL
- ------------- ------------
<S> <C>
$ 606,696 $ 67,367,395
52,633 3,305,646
- ------------- ------------
554,063 64,061,749
1,918 7,542,202
2,105,777 101,153,516
- ------------- ------------
2,103,859 93,611,314
9,493 1,804,392
- ------------- ------------
2,113,352 95,415,706
- ------------- ------------
$2,667,415 $159,477,455
============= ============
</TABLE>
See Notes to Financial Statements
F-11
<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-12
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-13
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
----------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI GROWTH 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............... $ -- $ -- $412,321 $ -- $ -- $ -- $ --
EXPENSE
Mortality and expense
risk charge (Note 3)... 900,993 54,992 53,388 59,926 47,755 41,819 34,298
------------ --------- -------- ---------- ---------- ----------- ----------
Net investment income
(loss)................. (900,993) (54,992) 358,933 (59,926) (47,755) (41,819) (34,298)
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized
appreciation
(depreciation) on
investments:
Beginning of period.... 138,009,405 40,519 -- 7,633,013 6,137,629 4,823,316 3,107,090
End of period.......... 153,141,313 (52,784) -- 8,420,247 6,740,164 3,473,231 3,409,503
------------ --------- -------- ---------- ---------- ----------- ----------
Net change in unrealized
appreciation
(depreciation)......... 15,131,908 (93,303) -- 787,234 602,535 (1,350,085) 302,413
Net realized gain (loss)
on investments......... -- -- -- -- -- -- --
------------ --------- -------- ---------- ---------- ----------- ----------
Net realized and
unrealized gain (loss)
on investments......... 15,131,908 (93,303) -- 787,234 602,535 (1,350,085) 302,413
------------ --------- -------- ---------- ---------- ----------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $ 14,230,915 $(148,295) $358,933 $ 727,308 $ 554,780 $(1,391,904) $ 268,115
============ ========= ======== ========== ========== =========== ==========
</TABLE>
See Notes to Financial Statements
F-14
<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>
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 8,872,794 $ 5,434,055 $ 393,295
44,079 301 8,520 46,253 8,754 38,400 571 136,519 95,951 7,791
---------- ----- -------- ---------- ---------- ---------- ------- ------------ ----------- ---------
(44,079) (301) (8,520) (46,253) (8,754) (38,400) (571) 8,736,275 5,338,104 385,504
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153) 16,409,989 9,502,216 362,600
2,528,912 (887) 184,126 1,783,260 19,085 2,544,772 (1,557) 8,401,186 6,106,908 (43,017)
---------- ----- -------- ---------- ---------- ---------- ------- ------------ ----------- ---------
(530,653) (68) (52,499) (301,129) (117,106) 146,749 (404) (8,008,803) (3,395,308) (405,617)
-- -- -- -- -- -- -- -- -- --
---------- ----- -------- ---------- ---------- ---------- ------- ------------ ----------- ---------
(530,653) (68) (52,499) (301,129) (117,106) 146,749 (404) (8,008,803) (3,395,308) (405,617)
---------- ----- -------- ---------- ---------- ---------- ------- ------------ ----------- ---------
$(574,732) $(369) $(61,019) $ (347,382) $(125,860) $ 108,349 $ (975) $ 727,472 $ 1,942,796 $ (20,113)
========== ===== ======== ========== ========== ========== ======= ============ =========== =========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ---------------------------------------
SMALL ASSET
CAP MANAGER
SUB-ACCOUNT SUB-ACCOUNT TOTAL
- -------------- ----------- ------------
<S> <C> <C>
$ -- $ 528,401 $ 15,640,866
44,079 6,661 1,586,971
- -------------- ----------- ------------
(44,079) 521,740 14,053,895
3,059,565 547,647 194,486,245
2,528,912 11,516 196,665,978
- -------------- ----------- ------------
(530,653) (536,131) 2,179,733
-- -- --
- -------------- ----------- ------------
(530,653) (536,131) 2,179,733
- -------------- ----------- ------------
$(574,732) $(14,391) $ 16,233,628
============== =========== ============
</TABLE>
See Notes to Financial Statements
F-15
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<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............... $ -- $ -- $293,261 $ -- $ -- $ --
EXPENSE
Mortality and expense
risk charge (Note 3)... 667,857 43,959 35,106 33,021 35,106 27,645
------------ --------- -------- ---------- ---------- ----------
Net investment income
(loss)................. (667,857) (43,959) 258,155 (33,021) (35,106) (27,645)
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized apprecia-
tion (depreciation) on
investments:
Beginning of period.... 71,963,590 997,195 -- 2,853,587 5,216,548 2,881,100
End of period.......... 103,561,180 315,527 -- 3,988,308 5,787,273 3,613,023
------------ --------- -------- ---------- ---------- ----------
Net change in unrealized
appreciation (deprecia-
tion).................. 31,597,590 (681,668) -- 1,134,721 570,725 731,923
Net realized gain (loss)
on investments......... -- -- -- -- -- --
------------ --------- -------- ---------- ---------- ----------
Net realized and
unrealized gain (loss)
on investments......... 31,597,590 (681,668) -- 1,134,721 570,725 731,923
------------ --------- -------- ---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $ 30,929,733 $(725,627) $258,155 $1,101,700 $ 535,619 $ 704,278
============ ========= ======== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
F-16
<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>
$ -- $ -- $ -- $ -- $ -- $ -- $2,662,990 $1,164,550 $ 199,463 $ 174,907
20,040 13,562 1,160 13,716 2,517 7,877 88,458 71,188 3,667 4,203
---------- ---------- ------- -------- ------- -------- ---------- ---------- --------- -----------
(20,040) (13,562) (1,160) (13,716) (2,517) (7,877) 2,574,532 1,093,362 195,796 170,704
2,105,777 768,552 3,769 65,901 24,089 171,931 9,642,454 4,022,725 167,043 269,255
2,674,005 1,472,578 21,255 396,987 72,233 430,660 9,480,093 4,611,993 (551,890) (780,848)
---------- ---------- ------- -------- ------- -------- ---------- ---------- --------- -----------
568,228 704,026 17,486 331,086 48,144 258,729 (162,361) 589,268 (718,933) (1,050,103)
-- -- -- -- -- -- -- -- -- --
---------- ---------- ------- -------- ------- -------- ---------- ---------- --------- -----------
568,228 704,026 17,486 331,086 48,144 258,729 (162,361) 589,268 (718,933) (1,050,103)
---------- ---------- ------- -------- ------- -------- ---------- ---------- --------- -----------
$ 548,188 $ 690,464 $16,326 $317,370 $45,627 $250,852 $2,412,171 $1,682,630 $(523,137) $ (879,399)
========== ========== ======= ======== ======= ======== ========== ========== ========= ===========
<CAPTION>
- ---------------------------
GROWTH AND
INCOME
SUB-ACCOUNT TOTAL
----------- ------------
<S> <C>
$ -- $ 4,495,171
20,040 1,069,082
- -------------- ------------
(20,040) 3,426,089
2,105,777 101,153,516
2,674,005 135,092,377
- -------------- ------------
568,228 33,938,861
-- --
- -------------- ------------
568,228 33,938,861
- -------------- ------------
$ 548,188 $ 37,364,950
============== ============
</TABLE>
See Notes to Financial Statements
F-17
<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-18
<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
- ---------------------------------------------------------------------------------
SMALL EQUITY- HIGH ASSET
CAP INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
- ------------ ------------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
$1,534,562 $ 2,234,517 $ 839,204 $ 179,912 $ 154,424 $ 45,468,730
2,322,583 6,795,285 5,523,540 197,499 282,514 94,564,965
- ------------ ------------- ------------- ------------ ------------ --------------
3,857,145 9,029,802 6,362,744 377,411 436,938 140,033,695
5,440,860 20,426,731 17,135,189 970,763 1,258,847 285,719,085
10,060,122 9,029,810 1,051,463 1,631,762 560,948 --
(4,380,392) (13,479,623) (11,522,274) (623,788) (649,631) (152,002,266)
- ------------ ------------- ------------- ------------ ------------ --------------
11,120,590 15,976,918 6,664,378 1,978,737 1,170,164 133,716,819
- ------------ ------------- ------------- ------------ ------------ --------------
14,977,735 25,006,720 13,027,122 2,356,148 1,607,102 273,750,514
6,544,996 47,352,852 38,382,219 1,742,493 1,972,993 612,634,284
- ------------ ------------- ------------- ------------ ------------ --------------
$21,522,731 $ 72,359,572 $ 51,409,341 $4,098,641 $3,580,095 $ 886,384,798
============ ============= ============= ============ ============ ==============
</TABLE>
See Notes to Financial Statements
F-19
<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
------------ ----------- ------------ ----------- ----------- -----------
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
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)
------------ ----------- ------------ ----------- ----------- -----------
Net 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-20
<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
- ---------------------------------------
GROWTH
AND ASSET
INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT TOTAL
- ------------ ------------ --------------
<S> <C> <C>
$ 554,063 $ 2,359 $ 64,061,749
2,113,352 275,419 95,415,706
- ------------ ------------ --------------
2,667,415 277,778 159,477,455
3,473,273 696,227 202,985,540
2,645,617 1,507,606 --
(2,568,808) (709,312) (115,320,001)
- ------------ ------------ --------------
3,550,082 1,494,521 87,665,539
- ------------ ------------ --------------
6,217,497 1,772,299 247,142,994
4,092,981 200,694 365,491,290
- ------------ ------------ --------------
$10,310,478 $1,972,993 $ 612,634,284
============ ============ ==============
</TABLE>
See Notes to Financial Statements
F-21
<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
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
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
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)
------------ ----------- ------------ ----------- ----------- ----------- ----------- --------
Net 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)
------------ ------------ --------- ---------- -------------
Net 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)
------------ ------------ --------- ---------- -------------
Net 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-22
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-23
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI GROWTH AND SMALL
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING
ACTIVITIES
Net investment
income (loss)... $ (900,993) $ (54,992) $ 358,933 $ (59,926) $ (47,755) $ (41,819) $ (34,298) $ (44,079)
Net realized and
unrealized gain
(loss) on
investments..... 15,131,908 (93,303) -- 787,234 602,535 (1,350,085) 302,413 (530,653)
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) in
net assets
resulting from
operations..... 14,230,915 (148,295) 358,933 727,308 554,780 (1,391,904) 268,115 (574,732)
FROM POLICY-
RELATED
TRANSACTIONS
Net premiums
transferred from
New England Life
Insurance
Company (Note
4).............. 28,014,580 2,199,642 23,099,255 2,057,572 1,439,000 2,029,690 1,403,484 2,614,881
Net transfers
(to) from other
sub-accounts.... (91,496) 107,865 (18,114,943) 2,988,353 387,696 717,709 789,760 3,712,376
Net transfers to
New England Life
Insurance
Company......... (26,501,970) (1,981,732) (3,039,397) (2,473,583) (1,727,053) (1,368,087) (1,312,128) (2,102,861)
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase in
net assets
resulting from
policy related
transactions... 1,421,114 325,775 1,944,915 2,572,342 99,643 1,379,312 881,116 4,224,396
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) in
net assets...... 15,652,029 177,480 2,303,848 3,299,650 654,423 (12,592) 1,149,231 3,649,664
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 524,999,620 32,750,856 29,812,279 31,327,162 28,585,004 22,491,360 17,171,696 21,522,731
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS, AT
END OF THE
PERIOD.......... $540,651,649 $32,928,336 $32,116,127 $34,626,812 $29,239,427 $22,478,768 $18,320,927 $25,172,395
============ =========== =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-24
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ----------------------------------------------------------------------------- ------------------------------------ ----------
U.S. EQUITY INTERNATIONAL VENTURE EQUITY- HIGH ASSET
GOVERNMENT BALANCED GROWTH EQUITY VALUE BOND INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- OPPORTUNITIES SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------- ---------- ----------- ------------- ----------- ------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ (301) $ (8,520) $ (46,253) $ (8,754) $ (38,400) $ (571) $ 8,736,275 $ 5,338,104 $ 385,504 $ 521,740
(68) (52,499) (301,129) (117,106) 146,749 (404) (8,008,803) (3,395,308) (405,617) (536,131)
------- ---------- ----------- ---------- ----------- -------- ----------- ----------- ---------- ----------
(369) (61,019) (347,382) (125,860) 108,349 (975) 727,472 1,942,796 (20,113) (14,391)
-- 479,012 3,485,633 537,259 2,235,369 -- 6,078,065 4,309,590 471,412 458,555
8,141 790,576 1,437,554 184,460 5,101,599 205,164 1,195,723 296,427 344,865 (61,829)
(1,934) (343,271) (2,214,397) (415,212) (2,023,274) (4,471) (4,608,002) (3,643,272) (400,395) (135,879)
------- ---------- ----------- ---------- ----------- -------- ----------- ----------- ---------- ----------
6,207 926,317 2,708,790 306,507 5,313,694 200,693 2,665,786 962,745 415,882 260,847
------- ---------- ----------- ---------- ----------- -------- ----------- ----------- ---------- ----------
5,838 865,298 2,361,408 180,647 5,422,043 199,718 3,393,258 2,905,541 395,769 246,456
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 3,580,095
------- ---------- ----------- ---------- ----------- -------- ----------- ----------- ---------- ----------
$51,875 $4,098,707 $24,431,690 $4,418,622 $22,084,013 $226,486 $75,752,830 $54,314,882 $4,494,410 $3,826,551
======= ========== =========== ========== =========== ======== =========== =========== ========== ==========
<CAPTION>
- -------------------------
U.S.
GOVERNMENT
SUB-
ACCOUNT TOTAL
- ----------- -------------
<S> <C>
$ (301) $ 14,053,895
(68) 2,179,733
- ----------- -------------
(369) 16,233,628
-- 80,912,999
8,141 --
(1,934) (54,296,918)
- ----------- -------------
6,207 26,616,081
- ----------- -------------
5,838 42,849,709
46,037 886,384,798
- ----------- -------------
$51,875 $929,234,507
=========== =============
</TABLE>
See Notes to Financial Statements
F-25
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<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
(loss)................. $ (667,857) $ (43,959) $ 258,155 $ (33,021) $ (35,106) $ (27,645)
Net realized and
unrealized gain (loss)
on investments......... 31,597,590 (681,668) -- 1,134,721 570,725 731,923
------------ ----------- ------------ ----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 30,929,733 (725,627) 258,155 1,101,700 535,619 704,278
FROM POLICY-RELATED
TRANSACTIONS
Net premiums transferred
from New England Life
Insurance Company (Note
4)..................... 26,409,330 1,986,945 16,392,043 1,243,132 1,168,338 1,474,031
Net transfers (to) from
other sub-accounts..... 462,481 329,828 (13,415,699) 924,964 51,032 471,289
Net transfers to New
England Life Insurance
Company................ (19,506,518) (1,149,332) (2,276,400) (927,816) (915,975) (1,045,530)
------------ ----------- ------------ ----------- ----------- -----------
Net increase in net
assets derived from
policy related
transactions.......... 7,365,293 1,167,441 699,944 1,240,280 303,395 899,790
------------ ----------- ------------ ----------- ----------- -----------
Net increase in net
assets................. 38,295,026 441,814 958,099 2,341,980 839,014 1,604,068
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
------------ ----------- ------------ ----------- ----------- -----------
NET ASSETS, AT END OF
THE PERIOD............. $433,129,682 $27,120,951 $ 20,389,955 $20,917,130 $22,838,014 $15,941,525
============ =========== ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-26
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ----------------------------------------------------------------------------- ------------------------------------- -----------
GROWTH SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH ASSET
AND 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>
$ (20,040) $ (13,562) $ (1,160) $ (13,716) $ (2,517) $ (7,877) $ 2,574,532 $ 1,093,362 $ 195,796 $ 170,704
568,228 704,026 17,486 331,086 48,144 258,729 (162,361) 589,268 (718,933) (1,050,103)
- ----------- ---------- -------- ----------- ---------- ---------- ----------- ----------- ---------- -----------
548,188 690,464 16,326 317,370 45,627 250,852 2,412,171 1,682,630 (523,137) (879,399)
1,117,792 878,227 109,076 1,516,841 258,904 693,519 4,597,074 4,116,847 866,101 1,255,596
672,237 822,826 401,787 3,521,035 707,545 1,886,079 2,620,884 (205,627) 498,433 250,906
(561,606) (734,777) (51,791) (1,397,846) (209,019) (674,908) (2,936,273) (2,552,778) (103,688) (206,274)
- ----------- ---------- -------- ----------- ---------- ---------- ----------- ----------- ---------- -----------
1,228,423 966,276 459,072 3,640,030 757,430 1,904,690 4,281,685 1,358,442 1,260,846 1,300,228
- ----------- ---------- -------- ----------- ---------- ---------- ----------- ----------- ---------- -----------
1,776,611 1,656,740 475,398 3,957,400 803,057 2,155,542 6,693,856 3,041,072 737,709 420,829
10,310,478 6,544,996 418,211 5,712,498 953,848 3,386,440 47,352,852 38,382,219 1,742,493 1,972,993
- ----------- ---------- -------- ----------- ---------- ---------- ----------- ----------- ---------- -----------
$12,087,089 $8,201,736 $893,609 $ 9,669,898 $1,756,905 $5,541,982 $54,046,708 $41,423,291 $2,480,202 $ 2,393,822
=========== ========== ======== =========== ========== ========== =========== =========== ========== ===========
<CAPTION>
- ---------------------------
GROWTH
AND INCOME
SUB-ACCOUNT TOTAL
- ----------- -------------
<S> <C>
$ (20,040) $ 3,426,089
568,228 33,938,861
- ------------- -------------
548,188 37,364,950
1,117,792 64,083,796
672,237 --
(561,606) (35,250,531)
- ------------- -------------
1,228,423 28,833,265
- ------------- -------------
1,776,611 66,198,215
10,310,478 612,634,284
- ------------- -------------
$12,087,089 $678,832,499
============= =============
</TABLE>
See Notes to Financial Statements
F-27
<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-28
<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-29
<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-30
<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> <C> <C> <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> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <C> <C> <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-31
<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> <C> <C> <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> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <C> <C> <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-32
<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> <C> <C> <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> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <C> <C> <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-33
<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> <C> <C> <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> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <C> <C> <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-34
<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> <C> <C> <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> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <C> <C> <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-35
<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> <C> <C> <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> <C> <C> <C> <C> <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> <C> <C> <C> <C> <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-36
<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-37
<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-38
<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-39
<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-40
<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:
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-41
<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-42
<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-43
<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-44
<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-45
<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-46
<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-47
<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 (depreciation) 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-48
<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-49
<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-50
<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-51
<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-52
<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-53
<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-54
<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-55
<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 policyholders' 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-56
<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 asset-based
F-57
<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-58
<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 8, 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-59
<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 8, 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-60
<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-61
<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-62
<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-63
<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-64
<PAGE>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
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.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus with the
items of Form N-8B-2.###
The prospectus consisting of 86 pages.
The undertaking to file reports.
The Rule 484 Undertaking.
The signatures.
Written consents of the following persons:
Independent Auditors
H. James Wilson, Esq.
Rodney J. Chandler, F.S.A., M.A.A.A.
Sutherland, Asbill & Brennan LLP
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of Directors of NEVLICO**
(2) None
(3) (a) Distribution Agreement between NEVLICO and NELESCO*
(b)(i) Form of Contract between NEVLICO and its General Agents+++
(ii) Form of contract between NEVLICO and its Agents+++
(c) Commission Schedule for Policies
(d) Specimen of contract among NES, NELICO and other broker dealers
(4) None
(5) (a) Specimen of Policy ###
(b) Riders +++,++++
(c) Acceleration of Benefits Rider ####
(d) Benefits for Disability of Insured Rider
(6) (a) Amended and restated Articles of Incorporation of NELICO ###
(b) Amended and restated By-Laws
(7) None
(8) None
(9) None
(10) Specimen of Application for Policy ###
2. See Exhibit 3(i)
3.(i) Opinion and Consent of H. James Wilson, Esquire
(ii) Opinion and Consent of Rodney J. Chandler, F.S.A., M.A.A.A.
4. None
5. Inapplicable
II-2
<PAGE>
6. Consent of Sutherland, Asbill & Brennan LLP
7. Power of Attorney (Additional Powers of Attorney ###)
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consents of Independent Auditors
12. Schedule for computation of performance quotations+
13. Consolidated memorandum describing certain procedures, filed
pursuant to Rule 6e-2(b)(12)(iii) and Rule 6e-3(T)(b)(12)(iii)#
14.(i) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England Variable Life
Insurance Company @
(ii) Amendment No. 1 to Participation Agreement among Variable
Insurance Products Fund, Fidelity Distributors Corporation and
New England Variable Life Insurance Company ##
(iii) Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and New England Variable Life
Insurance Company ##
27. Financial Data Schedule
* Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 2-82838, filed
July 28, 1983.
** Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 2-82838, filed April 4, 1983.
+ Incorporated herein by reference to Post-Effective Amendment No. 2 to the
Variable Account's Form S-6 Registration Statement, File No. 33-19540,
filed April 28, 1989.
++ Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-52050, filed September 16, 1992.
+++ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed January 12, 1993.
++++ Incorporated herein by reference to Post-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed February 23, 1993.
@ Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-64170, filed June 9, 1993.
# Incorporated herein by reference to Post-Effective Amendment No. 6 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 28, 1995.
## Incorporated herein by reference to 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 33-52050, filed
April 30, 1997.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, New England Variable Life Separate Account, has duly caused this
amended Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the city of Boston, and the Commonwealth of
Massachusetts, on the 15th day of July, 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, New England
Life Insurance Company has duly caused this amended Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in the city of Boston, and the
Commonwealth of Massachusetts, on the 15th day of July, 1997.
New England Life Insurance Company
(Seal)
By: /s/ Chester R. Frost
--------------------
Chester R. Frost
Senior Vice President and Treasurer
Attest: /s/ Marie C. Swift
---------------------
Marie C. Swift
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities indicated on the date(s) set forth below.
<TABLE>
<CAPTION>
<S> <C> <C>
* President and Chief Operating July 15, 1997
- ---------------------- Officer
James M. Benson
* Director July 15, 1997
- ----------------------
Susan C. Crampton
* Senior Vice President and July 15, 1997
- ---------------------- Treasurer,
Chester R. Frost Chief Accounting Officer
* Director July 15, 1997
- ----------------------
Edward A. Fox
* Director July 15, 1997
- ----------------------
George J. Goodman
* Director July 15, 1997
- ----------------------
Paul E. Gray
* Director July 15, 1997
- ----------------------
Evelyn E. Handler
* Director July 15, 1997
- ----------------------
Philip K. Howard
* Director July 15, 1997
- ----------------------
Harry P. Kamen
* Director July 15, 1997
- ----------------------
Terence Lennon
* Director July 15, 1997
- ----------------------
Bernard A. Leventhal
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
* Director July 15, 1997
- ------------------------
Thomas J. May
* Director July 15, 1997
- ------------------------
Stewart G. Nagler
* Chairman and Chief Executive July 15, 1997
- ------------------------ Officer
Robert A. Shafto
* Executive Vice President and July 15, 1997
- ------------------------ Chief Financial Officer
Robert E. Schneider
* Director July 15, 1997
- ------------------------
Rand N. Stowell
* Director July 15, 1997
- ------------------------
Alexander B. Trowbridge
</TABLE>
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 herewith and with the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed on February 13, 1997.
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
1.A.(3)(c) Commission Schedule
1.A.(3)(d) Contract Between NES, NELICO and other broker dealers
1.A.(5)(d) Benefit of Disability of Insured Riders
1.A.(6)(b) Amended and restated By-Laws
3(i) Opinion and Consent of H. James Wilson, Esq.
3(ii) Opinion and Consent of Rodney J. Chandler, F.S.A., M.A.A.A.
6. Consent of Sutherland, Asbill & Brennan LLP
7. Power of Attorney
11. Consents of Independent Auditors
27. Financial Data Schedule
_________
* Page numbers inserted on manually-signed copy only.
<PAGE>
Exhibit 1.A(3)(c)
Commission Schedule
The following maximum percentages of the scheduled premium paid for each
policy year will be paid to the NELICO agent/New England Securities registered
representative involved in the sale of a Policy:
<TABLE>
<CAPTION>
Policy Year Maximum Percentages
----------- -------------------
<S> <C>
1 50%
2-10 5%
11 and later 2%
</TABLE>
Such agents/registered representatives will also receive a
commission of 3% of each unscheduled payment made.
The amount of commissions for extra premiums for a Policy covering an
insured in a substandard risk classification and for rider premiums will be
determined by NELICO's rules and practices current at the time such premiums are
charged.
Agents with fewer than four years of service may be compensated
differently. Agents who meet certain productivity and persistency standards
with respect to policies sold by NELICO may be eligible for additional
compensation.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities and Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life insurance
policies. Under the agreement with any such broker-dealers, the commission paid
to the broker-dealer will not exceed 50% of the scheduled premium in the first
policy year, 4% in the second through tenth policy years, 2% in the eleventh
through twentieth policy years, and 3% of unscheduled payments. Commissions
will be paid through the registered broker-dealer, which may also be reimbursed
for portions of expenses incurred in connection with the sale of the Policies.
Increases in the maximum percentages contained in this commission schedule
will be reflected in the prospectus.
<PAGE>
Exhibit 1.A.(3)(d)
NEW ENGLAND SECURITIES CORPORATION
VARIABLE PRODUCT SALES AGREEMENT
This Agreement is made and entered into as of _____, 199_, by and among New
England Securities Corporation ("NES"), a Massachusetts corporation, New England
Life Insurance Company ("NELICO"), a Massachusetts corporation and ___________
corporation, ("Contractor").
NES, principal underwriter of the Variable Products, hereby authorizes
Contractor to solicit applications for the purchase of such Variable Products,
in consideration of and subject to the following terms and conditions:
1. Definitions. For the purposes of this Agreement the following terms
-----------
are as defined:
1.1 "Variable Products" shall mean the variable life insurance policies
and/or variable annuity contracts issued by NELICO.
1.2 "Insurance Company" shall mean NELICO.
1.3 "Prospectus" shall mean the then-current prospectus for the Insurance
Company separate investment account that issues the Variable Product
together with the prospectus for any underlying mutual fund in which
the separate investment account may invest, and any supplements or
"stickers" to each such prospectus.
1.4 "Registered Representative" shall mean an individual who is duly
registered with the National Association of Securities Dealers, Inc.
("NASD") in compliance with the Securities Exchange Act of 1934, as
amended (the "1934 Act") and who is licensed as a life insurance
agent for the sale of variable life insurance and variable annuity
contracts in the jurisdictions in which applications are to be
solicited.
1.5 "Insurance Subsidiary" shall mean a subsidiary of the Contractor
formed as a domestic corporation that has obtained insurance agent or
broker licenses under applicable state law.
2. Licensing and Registration. Contractor represents that it is a
--------------------------
properly registered securities broker and/or dealer under applicable
federal and state securities laws and regulations. Each party hereto
represents that it is a member in good standing of the NASD, and
agrees to notify immediately the other should it cease to be either a
member in good standing of the NASD, and/or should it cease to be a
member of the NASD. It is further agreed that all rules and/or
regulations of the NASD now in effect or hereafter adopted, which are
binding upon underwriters and dealers in the distribution of variable
life insurance products and variable annuity contracts and such other
regulations applicable to Contractor and NES, shall be deemed to be a
part of this Agreement to the same extent as if set forth herein.
3. Contract Relationship. Throughout the term of this Agreement, the
---------------------
relationship of Contractor to NES shall be that of an independent
contractor. Contractor, and its employees, representatives and agents,
if any, are not and shall not be employees of NES.
1
<PAGE>
To preserve such independent contractor relationship, the parties
agree that Contractor at all times shall:
3.1 Pay all of its own overhead expenses, including but without
limitation, expenses for clerical assistance, rent, postage,
telephone and similar expenses, and federal and state income taxes
and payroll taxes under the Federal Insurance Contribution Act and
any applicable state unemployment, disability or other laws with
respect to its income.
3.2 Maintain such policies of workers compensation insurance as are
customary.
3.3 Not in any way hold itself out to any of its customers or potential
customers as being affiliated with NES.
3.4 Control the mode of conducting its business with complete discretion,
except as otherwise expressly provided in this Agreement.
3.5 Not enter into any agreement for or on behalf of NES, or create any
obligation, express or implied, by or in favor of NES.
3.6 Not accept payment for services for or on behalf of NES.
3.7 Not accept service of process for NES.
3.8 Not be a principal underwriter with respect to the Variable Products
or shares of the New England Zenith Fund.
4. Compensation.
------------
4.1 The Contractor, or if required by state law, the Insurance
Subsidiary, shall receive compensation with respect to sales of
Variable Products in transactions solicited by Registered
Representatives in accordance with the terms and conditions of NES'
then current distribution agreements applicable to sales of such
Variable Products, and in accordance with the terms and conditions
contained in the applicable Insurance Company broker-dealer insurance
marketing agreements, as may be amended from time to time. Such
compensation shall be remitted to Contractor or the Insurance
Subsidiary, as the case may be, through a General Agent of the
Insurance Company who is a Registered Representative of NES or by such
other procedures as NES shall specify. NES or such General Agent may
offset against any compensation payable to Contractor or the Insurance
Subsidiary any indebtedness owing from Contractor or the Insurance
Subsidiary to NES, the Insurance Company, or such General Agent.
4.2 Compensation shall be refunded by Contractor or the Insurance
Subsidiary, as the case may be, to NES, or its agent, in accordance
with the terms and conditions of the applicable Insurance Company
broker-dealer insurance marketing agreement, as amended from time to
time. Such refund may be effected, at NES' option, by deduction by NES
from other moneys to be paid to Contractor or the Insurance
Subsidiary.
5. Covenants of Contractor. Contractor covenants and agrees that,
-----------------------
during the term of this Agreement:
2
<PAGE>
5.1 Contractor is, and at all times during the term of this Agreement
shall be, a securities broker registered and in good standing with
the Securities and Exchange Commission ("SEC") as a broker-dealer
pursuant to Section 15(a) of the 1934 Act, a member in good standing
of the NASD, and a registered broker-dealer under state law to the
extent required in order to provide the services discussed in this
Agreement.
5.2 Contractor shall at all times conduct its business solely in
accordance with the rules and regulations of the SEC, the NASD, any
other appropriate self-regulatory organization and all appropriate
state insurance and securities authorities. Contractor shall assume
full responsibility for the securities activities of, and for
securities law compliance by, any "person associated" (as that term
is defined in Section 3(a)(18) of the 1934 Act) with Contractor,
including, as applicable, compliance with rules and regulations of
the NASD and with federal and state laws and regulations. Contractor
understands that if failure to comply with the rules, regulations,
and requirements of applicable state and federal law results in
disciplinary action against it by the NASD and any other regulatory
authority having jurisdiction, that such failure may result in the
suspension by NES, in the sole discretion of NES, of Contractor's
authority to represent NES or in the termination of this Agreement by
NES.
5.3 Contractor or the Insurance Subsidiary, as the case may be, shall
instruct purchasers to remit all premiums directly to the Insurance
Company or shall forward any premiums received from purchasers
directly to the Insurance Company.
5.4 Contractor agrees that NES will act as Contractor's agent in
providing customer confirmations pursuant to Rule l0b-10 under the
1934 Act.
5.5 Contractor will itself be, or will select persons associated with it
who are, trained and qualified to solicit applications for purchase
of the Variable Products in conformance with applicable state and
federal laws. Any such person shall be a Registered Representative of
Contractor in accordance with the rules of the NASD, be licensed to
offer the Variable Products in accordance with the insurance laws of
any jurisdiction in which such person solicits applications and be
licensed with and appointed by the applicable Insurance Company as an
insurance agent to solicit applications for the Variable Products.
The activities of all Registered Representatives of Contractor
referred to in this paragraph will be under the direct supervision
and control of Contractor. The right of such Registered
Representatives to solicit applications for the purchase of Variable
Products is subject to their continued compliance with the rules and
procedures which may be established by Contractor, NES or the
Insurance Companies, including those set forth in this Agreement.
5.6 Contractor and its Registered Representatives shall solicit
applications for the Variable Products in accordance with applicable
state insurance law requirements and other applicable federal and
state laws and regulations. Neither Contractor nor its Registered
Representatives shall offer the Variable Products for sale in any
state where such products are not qualified for sale under applicable
laws and regulations, where neither Contractor nor its Registered
Representatives is authorized to sell such Variable Products, or
where Contractor is not qualified to act as a broker-dealer.
3
<PAGE>
5.7 Contractor shall be responsible for the training, supervision and
control of all non-registered personnel of any Insurance Subsidiary
and generally shall be responsible for supervising and inspecting
each such Insurance Subsidiary.
5.8 Contractor shall use its best efforts to maximize sales of the
Variable Products contemplated by this Agreement, but shall not be
required to devote its exclusive efforts thereto.
5.9 Contractor shall provide or shall cause its Registered
Representatives to provide a Prospectus whenever required by
applicable law in connection with the sale or delivery of Variable
Products pursuant to the provisions of this Agreement, and shall
fully explain or shall cause its Registered Representatives to
explain to a prospective customer or customers the terms of any
Variable Product offered or sold to such customers.
5.10 Contractor shall not make, nor permit its Registered Representatives
to make, any untrue or misleading statement or representation, and
shall not omit, nor permit its Registered Representatives to omit, to
state any material information or fact, pertaining to any aspect of
an offer or sale of Variable Products to a prospective customer or
customers.
5.11 Contractor shall not use, nor permit its Registered Representatives
to use, any Prospectus, prospecting material, advertising, sales
material, or related materials in connection with offers and sales of
the Variable Products, unless the same have been provided or approved
in advance in writing by NES. Contractor shall comply with such
instructions relating to the sale of Variable Products as may
reasonably be requested by NES.
5.12 Contractor shall at all times use its best efforts to obtain and
maintain in full force and effect policies of professional liability
insurance against errors and omissions in such amounts and on such
terms as are customary in the securities industry for a broker of
Contractor's size and type. Contractor shall allow NES to review such
policies from time to time upon NES' request in writing. Contractor
agrees promptly to notify NES of any change in any such policy.
Contractor understands that Contractor is not covered under any
insurance policy, including but not limited to any errors and
omissions coverage, maintained by NES or any affiliate of NES.
5.13 Contractor agrees to furnish to NES such information as may from time
to time be requested by NES for the purpose of complying with the
applicable provisions of federal or state securities laws and the
by-laws, rules or regulations of the NASD or any other securities
regulatory authority. Contractor also agrees to furnish to NES such
information as may from time to time be requested by NES for the
purpose of updating the financial and other information supplied by
Contractor to NES prior to entering this Agreement. Contractor shall
immediately notify the Compliance Department of NES of any
proceeding, suit or action, whether criminal, civil or
administrative, or the commencement by the NASD or any other
securities regulatory authority or any other state or federal
authority of any investigation, if such proceeding, suit, action or
investigation arises out of or in connection with Contractor's
activities as broker or dealer with respect to Variable Products.
Contractor shall promptly notify NES if it becomes the subject of any
disciplinary or license revocation proceeding, or if it is the
subject of any governmental order, that affects its right or ability
to perform broker-dealer services. Contractor shall also immediately
notify the Compliance Department of NES of any complaint by a
prospect or customer or regulatory authority regarding the Variable
4
<PAGE>
Products or Contractor's activities as broker or dealer. NES and the
Insurance Company reserve the right to resolve any such complaints
involving the Variable Products by a prospect or customer or
regulatory authority. Any response by NES or the Insurance Company to
a complaint will be sent to Contractor for approval not less than
five business days before its being sent to the prospect, customer or
regulatory authority except that if a more prompt response is
required, the proposed response shall be communicated by telephone.
Contractor shall not be liable to NES or the Insurance Company on
account of any settlement of any claim or action effected without the
consent of Contractor.
5.14 Contractor shall advise NES of any claim or demand, including without
limitation, any pending or threatened litigation for which NES or the
Insurance Company would be entitled to indemnity or contribution
pursuant to paragraph 7 of this Agreement.
5.15 All covenants of Contractor contained in this Agreement shall be
deemed to be continuing representations and warranties of Contractor
which shall survive the termination of this Agreement.
6. Covenants of NES. NES covenants and agrees that, during the term of
----------------
this Agreement:
6.1 NES is, and at all times during the term of this Agreement shall be,
a securities broker registered and in good standing with the SEC as a
broker-dealer pursuant to Section 15(a) of the 1934 Act and a member
in good standing of the NASD.
6.2 NES shall at all times conduct its business solely in accordance
with the rules and regulations of the SEC, the NASD, any other
appropriate self-regulatory organization and all appropriate state
securities authorities.
6.3 NES shall advise Contractor of any claim or demand, including without
limitation, any pending or threatened litigation, for which
Contractor would be entitled to indemnity or contribution pursuant to
paragraph 7 of this Agreement.
6.4 All covenants of NES contained in this Agreement shall be deemed to
be continuing representations and warranties of NES which shall
survive the termination of this Agreement.
7. Indemnification. Contractor and NES agree as follows:
---------------
7.1 Contractor agrees to indemnify and hold NES and the Insurance Company
harmless from any and all cost, expense and liability, including
reasonable attorneys' fees, resulting from any claims, demands,
liabilities, losses, damages or expenses (collectively, "Claims")
arising out of or relating to (a) any offers and/or sales by
Contractor of securities other than the Variable Products
contemplated by this Agreement, (b) any business or activity of
Contractor not expressly contemplated by this Agreement, and (c) any
applications for Variable Products, solicitations of applications for
the Variable Products or offers to sell or sales of Variable Products
to the extent such Claims result from acts or omissions by
Contractor, its representatives, agents, sub-agents or any Insurance
Subsidiary. For purposes of this sub-paragraph 7.1, NES shall be
deemed to include its "controlling persons" as defined in Section 15
of the Securities Act of 1933 and Section 20(a) of the 1934 Act.
5
<PAGE>
7.2 NES agrees to indemnify and hold Contractor harmless from any and all
cost, expense and liability, including reasonable attorneys' fees,
resulting from any Claims arising out of or relating to any offer to
sell or sales of Variable Products made pursuant to this Agreement to
the extent such Claims result from acts or omissions by persons other
than the Contractor or persons with respect to whose activities the
Contractor is responsible. For purposes of this sub-paragraph 7.2,
Contractor shall be deemed to include its "controlling persons" as
defined in Section 15 of the Securities Act of 1933 and Section 20(a)
of the 1934 Act.
8. Application Procedures. Contractor shall comply with all procedures
----------------------
established by the Insurance Company and NES for the handling of
applications, initial premiums, and insurance policy proceeds. The
Insurance Company shall have the unqualified right to refuse any
application for a Variable Product.
9. Sales Material. No person is authorized to make any representations
--------------
concerning the Variable Products except those contained in the
currently applicable Prospectus and in sales literature issued and
approved by NES supplemental to such Prospectus. NES shall furnish
without charge additional copies of the current Prospectus and such
sales literature and other releases and information issued by NES in
reasonable quantities upon request. Contractor agrees that it shall in
all respects duly conform with all laws and regulations applicable to
the sale of the Variable Products. In the offer and sale of the
Variable Products, Contractor may not use any prospectus or
advertising, prospecting, or sales material not provided or approved
in writing by NES.
10. Confirmations: Books and Records. NES shall confirm or cause to be
--------------------------------
confirmed to customers of Contractor all policy transactions, as and
to the extent legally required. Contractor shall maintain all books
and records as required by Rules 17a-3 and 17a-4 under the 1934 Act,
except to the extent that NES may agree to maintain any such records
on Contractor's behalf. Records subject to any such agreement shall be
maintained by NES, either directly or through the services of NELICO
or an affiliate of NELICO, as agent for Contractor in compliance with
said rules, and such records shall be and remain the property of
Contractor and be at all times subject to inspection by the SEC in
accordance with Section 17(a) of the 1934 Act. Except for those books
and records maintained by or on behalf of Contractor in accordance
with Rules 17a-3 and 17a-4 under the 1934 Act, all books, documents,
prospectuses, application forms, or other materials or supplies in the
possession of Contractor which pertain to the Variable Products or to
the business of NES shall be the property of NES or the Insurance
Company, as the case may be, which at any and all times shall be open
to inspection by any duly authorized representative of NES or the
Insurance Company and at the termination of this Agreement shall be
returned to NES. All records and information obtained by Contractor
pursuant to this Agreement shall be deemed to be confidential in
nature, and Contractor shall not disclose or use any such records or
information in any manner whatsoever except as expressly authorized in
writing by NES or as required by federal or state regulatory
authorities or court order. Contractor shall submit to all regulatory
and administrative bodies having jurisdiction over the operations of
NES, the Insurance Company, or Contractor any information, reports or
other material obtained pursuant to this Agreement which any such body
may request or require pursuant to applicable laws or regulations.
6
<PAGE>
11. Assignments. No assignment of this Agreement or of commissions
-----------
payable hereunder shall be made by Contractor without the prior
written consent of NES. Any such assignment of commissions is also
subject to the requirement and limitations thereon contained in any
applicable Insurance Company broker dealer insurance marketing
agreements.
12. Miscellaneous. This Agreement supersedes and cancels any prior
-------------
agreement between Contractor and NES with respect to the sale of the
Variable Products. Either party to this Agreement may cancel this
Agreement without cause at any time by written notice to the other.
13. Any notice to NES shall be given if mailed or telegraphed to it at
the address specified below, or at such other address as NES gives
notice of to Contractor:
Compliance Department
New England Securities Corporation
501 Boylston Street, 10th Floor
Boston, MA 02116
Any notice to Contractor shall be duly given if mailed or telegraphed
to it at the address specified below, or at such other address as
Contractor gives notice of to NES:
--------------------------------------------
--------------------------------------------
--------------------------------------------
14. Governing Law. This Agreement shall be governed by the laws of The
-------------
Commonwealth of Massachusetts.
15. No Hire. Contractor and NELICO acknowledge that each will have access
-------
to the names of the other's Registered Representatives as a result of
performing their respective obligations under this Agreement, and that
each may establish close working relationships with such persons.
Therefore, Contractor and NELICO agree that while Registered
Representatives maintain their affiliation with each and for twelve
(12) months after their termination of the affiliation:
(a) Contractor and NELICO will not hire any Registered
Representatives of the other.
(b) Contractor and NELICO acknowledge that their Registered
Representatives hold important contractual and business
relationships with each and agree that each shall not interfere
in any way with the relationships, contractual or otherwise,
between the other and its Registered Representatives. Contractor
and NELICO shall not induce or encourage, or attempt to induce or
encourage, any Registered Representative of the other to
terminate or change his or her relationship with the other.
7
<PAGE>
The parties hereto have executed this Agreement as a sealed instrument as of the
date first above written.
CONTRACTOR: NEW ENGLAND SECURITIES
CORPORATION
By: By:
--------------------------- ---------------------------
Title: Title:
--------------------------- ---------------------------
NEW ENGLAND
LIFE INSURANCE COMPANY
By:
---------------------------
Title:
---------------------------
8
<PAGE>
Exhibit 1.A.(5)(d)
Rider: Benefits for Disability of Insured
The Company agrees to pay to the Owner of the Policy monthly income benefits on
receipt of proof that total disability of the Insured:
. Started while this Rider was in force; and
. Has continued for at least six months.
But total disability may be the result of a sickness which began or an injury
which occurred either before or after this Rider was issued.
Definitions
"Total disability" means disability of the Insured:
. Which results from sickness or accidental bodily injury; and
. Which continuously prevents the Insured from working for pay or profit.
During the first 36 months of disability, "working" means engaging in the
occupation which was the regular occupation of the Insured when total disability
started; and thereafter means engaging in any occupation for which the Insured
is or becomes fit by education, training or experience.
"Working for pay or profit" includes attending school or college as a full time
student, if that was the main occupation of the Insured when the disability
started.
Total disability will be presumed if, as the result of a sickness or an
accidental bodily injury, the Insured has a total loss, which begins while this
Rider is in force, of:
. Speech; or sight in both eyes; or hearing in both ears; or
. Use of both hands; or use of both feet; or use of one hand and one foot.
Total disability will be presumed as long as the loss continues, even if the
Insured is working for pay or profit.
Exclusion
This Rider does not provide benefits for total disability which results from: a
sickness caused by war or an act of war; or an injury caused by war or an act of
war.
Monthly Income Benefit
After total disability has continued for at least six months, a monthly income
benefit will be paid for each month of the benefit period. The benefit period:
. Starts on the first day of the policy month in which total disability
started; and
<PAGE>
. Ends at the end of the second full policy month after total disability
ends; but
. In no event will benefits be paid beyond the policy anniversary on which
the Insured is age 65.
When the Company approves a claim for benefits, an initial benefit will be paid
to the Owner. The initial benefit will be equal to: one Monthly Income Benefit;
times the number of policy months which have started and ended during the period
of total disability. Thereafter, proof of total disability should be submitted
(see Proof of Disability) for each completed month of total disability; the
Company will pay benefits without delay once proof is received by the Company at
its Home Office.
Amount of Monthly Income Benefits
The Monthly Income Benefit is shown in Section 1.
Proof of Disability
The Company will not be liable for any monthly income benefits under this Rider
unless written proof of total disability is mailed or delivered to the Company
at its Home Office within 90 days after the end of the period for which that
benefit is provided.
Benefits will not be denied or reduced because of delay in furnishing proof of
total disability if it was not reasonably possible for you to provide proof
within this time limit; but proof must be furnished within one year from the
time proof is required, except in the absence of legal capacity.
The Company has the right, in connection with proof of total disability, to
require examination of the Insured by a medical doctor chosen by the Company, at
the Company's expense. This right will be exercised at reasonable times and
places convenient to the Insured.
Premiums for This Rider
Premiums for this Rider are due with the premiums for the Policy. The annual
premiums for the Rider are shown in the Policy Schedule.
Date of Issue
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule. The
effective date of this Rider is its Date of Issue.
Not Contestable After Two Years
This Rider will not be contestable after it has been in force during the life of
the Insured, and without the occurrence of
<PAGE>
total disability of the Insured, for two years from the Date of Issue of the
Rider.
Contract
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule.
Termination
This Rider will terminate upon the earliest of:
. The end of the grace period of any unpaid premium for the Policy or for the
Rider;
. Termination or maturity of the Policy;
. Termination of the Waiver of Premiums rider on the Policy;
. Request by the Owner to continue the Policy in force under a lapse option;
. Death of the Insured; or
. Receipt by the Company at its Home Office of written election signed by the
Owner of the Policy to terminate the Rider.
The Rider can be reinstated only with the consent of the Company.
New England Life Insurance Company
501 Boylston Street, Boston, Massachusetts
President Secretary
<PAGE>
Exhibit 1.A.6(b)
AMENDED AND RESTATED BY-LAWS
----------------------------
of
NEW ENGLAND LIFE INSURANCE COMPANY
(Effective June 1, 1997)
Section 1. ARTICLES OF ORGANIZATION
The name and purposes of the corporation shall be as set forth in the
Articles of Organization. These By-laws, the powers of the corporation and of
its directors and stockholders, or of any class of stockholders if there shall
be more than one class of stock, and all matters concerning the conduct and
regulation of the business and affairs of the corporation shall be subject to
such provisions in regard thereto, if any, as are set forth in the Articles of
Organization as from time to time in effect.
Section 2. STOCKHOLDERS
2.1. Annual Meeting. The annual meeting of stockholders shall be
--------------
held at 10:00 A.M. on the third Tuesday in March in each year (unless that day
be a legal holiday at the place where the meeting is to be held in which case
the meeting shall be held at the same hour on the next succeeding day not a
legal holiday) or at such other date and time as shall be determined from time
to time by the board of directors. Purposes for which an annual meeting is to
be held, additional to those prescribed by law, by the Articles of Organization
or by these By-laws, may be specified by the president or by the directors.
2.2 Special Meetings. A special meeting of the stockholders may be
----------------
called at any time by the president or by the directors. A special meeting of
the stockholders shall be called by the secretary upon the written request,
stating the purpose of the meeting, of stockholders who together own of record
25% or more of the outstanding stock of any class entitled to vote at such
meeting. Each call of a meeting shall state the place, date, hour and purposes
of the meeting.
2.3. Place of Meetings. All meetings of the stockholders shall be
-----------------
held at the principal office of the corporation in Massachusetts or, to the
extent permitted by the Articles of Organization, at such other place within the
United States as shall be fixed by the president or the directors. Any
adjourned session of any meeting of the stockholders shall be held at the same
city or town as the initial session, or within Massachusetts, in either case at
the place designated in the vote of adjournment.
<PAGE>
2.4. Notice of Meetings. A written notice of each meeting of
------------------
stockholders, stating the place, date and hour and the purposes of the meeting,
shall be given at least seven days before the meeting to each stockholder
entitled to vote thereat and to each stockholder who, by law, by the Articles of
Organization or by these By-laws, is entitled to notice, by leaving such notice
with him or at his residence or usual place of business, or by mailing it,
postage prepaid, addressed to such stockholder at his address as it appears in
the records of the corporation. Such notice shall be given by the secretary or
an assistant secretary or by an officer designated by the directors. Whenever
notice of a meeting is required to be given to a stockholder under any provision
of the Business Corporation Law of the Commonwealth of Massachusetts or of the
Articles of Organization or these By-laws, a written waiver thereof, executed
before or after the meeting by such stockholder or his attorney thereunto
authorized and filed with the records of the meeting, shall be deemed equivalent
to such notice.
2.5. Quorum of Stockholders. At any meeting of the stockholders, a
----------------------
quorum as to any matter shall consist of a majority of the votes entitled to be
cast on the matter, except when a larger quorum is required by law, by the
Articles of Organization or by these By-laws. Stock owned directly or
indirectly by the corporation, if any, shall not be deemed outstanding for this
purpose. Any meeting may be adjourned from time to time by a majority of the
votes properly cast upon the question, whether or not a quorum is present, and
the meeting may be held as adjourned without further notice.
2.6. Action by Vote. When a quorum is present at any meeting, a
--------------
plurality of the votes properly cast for election to any office shall elect to
such office, and a majority of the votes properly cast upon any question other
than an election to an office shall decide the question, except when a larger
vote is required by law, by the Articles of Organization or by these By-laws.
No ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.7. Voting. Stockholders entitled to vote shall have one vote for
------
each share of stock entitled to vote held by them of record according to the
records of the corporation, unless otherwise provided by the Articles of
Organization. The corporation shall not, directly or indirectly, vote any share
of its own stock.
2.8. Action by Writing. Any action required or permitted to be taken
-----------------
at any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Such consents shall be treated for all purposes as a vote at a meeting.
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<PAGE>
2.9. Proxies. To the extent permitted by law, stockholders entitled
-------
to vote may vote either in person or by proxy. Except to the extent permitted
by law, no proxy dated more than six months before the meeting named therein
shall be valid. Unless otherwise specifically limited by their terms, such
proxies shall entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of such meeting.
Section 3. BOARD OF DIRECTORS
3.1. Number. At the annual meeting of stockholders such stockholders
------
as have the right to vote for the election of directors shall fix the number of
directors at not less than seven nor more than twenty directors and shall elect
the number of directors so fixed. The number of directors may be increased or
decreased to any number permitted by law at any time or from time to time only
by vote of a majority of the stockholders having the right to vote thereon. No
director need be a stockholder.
3.2. Tenure. Except as otherwise provided by law, by the Articles of
------
Organization or by these By-laws, each director shall hold office until the next
annual meeting of the stockholders and thereafter until his successor is duly
elected and qualified, or until he sooner dies, resigns, is removed or becomes
disqualified.
Any director who is not an officer of the corporation or of an
affiliate of the corporation shall retire as a director not later than the date
of the next annual meeting of stockholders of the corporation following the
director's seventieth birthday, and shall be ineligible to serve as a director
after the date of such meeting. Any director who is an officer of the
corporation or of an affiliate of the corporation shall retire as a director not
later than the time he ceases to be such an officer, except that the person who
held the office of chief executive officer of the corporation on February 19,
1997 may at the discretion of the board of directors (and subject to annual
election by the stockholders) continue to serve as a director after he ceases to
be chief executive officer, but in no event beyond the date of the next annual
meeting of stockholders of the corporation following his seventieth birthday or
such earlier date as the board of directors may establish.
3.3. Powers. Except as reserved to the stockholders by law, by the
------
Articles of Organization or by these By-laws, the business of the corporation
shall be managed under the direction of the directors, who shall have and may
exercise all the powers of the corporation. In particular, and without limiting
the generality of the foregoing, the directors may at any time issue all or from
time to time any part of the unissued capital stock of the corporation from time
to time authorized under the Articles of Organization and may determine, subject
to any requirements of law, the consideration for which stock is to be issued
and the manner of allocating such consideration between capital and surplus.
3.4. Committees. The directors may, by vote of a Supermajority (as
----------
defined in Section 3.12 hereof) of the directors then in office, elect from
their number an executive
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<PAGE>
committee and other committees and delegate to any such committee or committees
some or all of the powers of the directors except those which by law, by the
Articles of Organization or by these By-laws they are prohibited from
delegating. Except as the directors may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the directors or such rules, its business shall be conducted as nearly as may be
in the same manner as is provided by these By-laws for the conduct of business
by the directors. Notwithstanding any provision herein to the contrary, no such
committee shall have power or authority in reference to amending the Articles of
Organization of the corporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of
dissolution, amending these By-laws or taking any actions set forth in Section
3.12 hereof.
3.5. Regular Meetings. Regular meetings of the directors may be held
----------------
without call or notice at such places and at such times as the directors may
from time to time determine, provided that reasonable notice of the first
regular meeting following any such determination shall be given to absent
directors. A regular meeting of the directors may be held without call or
notice immediately after and at the same place as the annual meeting of the
stockholders.
3.6. Special Meetings. Special meetings of the directors may be held
----------------
at any time and at any place designated in the call of the meeting, when called
by the chairman of the board, if any, the president or the secretary, reasonable
notice thereof being given to each director by the secretary or an assistant
secretary, or by the officer calling the meeting.
3.7. Notice. It shall be sufficient notice to a director of a
------
meeting of the directors (1) to send notice by mail at least four days or by
telegram at least twenty-four hours before the meeting addressed to him at his
usual or last known business or residence address, (2) to give notice to him in
person or by telephone at least twenty-four hours before the meeting or (3) to
give him notice by such other means, and within such other time, as shall be
reasonable in the circumstances. Notice of a meeting need not be given to any
director if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any director who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.8 Quorum. At any meeting of the directors, a Supermajority (as
------
defined in Section 3.12 hereof) of the directors then in office (or such other
greater number as may be required by law) shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
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<PAGE>
3.9. Action by Vote. When a quorum is present at any meeting, a
--------------
majority of the directors present may take any action, except when a larger vote
is required by law, by the Articles of Organization or by these By-laws.
3.10. Action by Writing. Unless the Articles of Organization
-----------------
otherwise provide, any action required or permitted to be taken at any meeting
of the directors may be taken without a meeting if all the directors consent to
the action in writing and the written consents are filed with the records of the
meetings of the directors. Such consents shall be treated for all purposes as a
vote taken at a meeting.
3.11. Presence Through Communications Equipment. Unless otherwise
-----------------------------------------
provided by law or the Articles of Organization, members of the board of
directors may participate in a meeting of such board by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
3.12. Approval of Certain Matters. Notwithstanding any provision
---------------------------
herein to the contrary, the affirmative vote of a Supermajority of the directors
then in office shall be required in order to authorize or undertake or cause the
corporation to: (i) adopt or materially modify the business plan of the
corporation; (ii) appoint or remove the chief executive officer; (iii) acquire,
or invest or make any capital contribution in excess of Twenty-Five Million
Dollars ($25,000,000) in, any subsidiary; (iv) create, incur, assume, issue or
guarantee any indebtedness (directly or through any of the corporation's
subsidiaries) for borrowed money in excess of Twenty-Five Million Dollars
($25,000,000); (v) enter into any joint venture or partnership with any person
or organization (other than a wholly owned subsidiary of the corporation); (vi)
adopt or modify any proposal for the sale, merger, consolidation, liquidation,
reorganization, rehabilitation, conservation or dissolution of, or the sale,
lease, assignment or other disposition of all or substantially all of the assets
of, the corporation or any of its subsidiaries; (vii) issue new shares of
capital stock of the corporation or any of its subsidiaries, grant any option to
acquire such stock or make any other changes in the capitalization of the
corporation or any of its subsidiaries; (viii) adopt or modify any stock option
plan; (ix) adopt or modify any agreement with any officer or director of the
corporation; (x) elect committees of the directors and delegate powers thereto
(as provided in Section 3.4 hereof); (xi) elect the chairman of the board or
designate any other officer who shall have general charge and supervision of the
business of the corporation (as provided in Sections 4.5 and 4.6 hereof); (xii)
remove a director from office (as provided in Section 5 hereof); (xiii) fix the
compensation of the directors (as provided in Article 6.8 of the Articles of
Organization); or (xiv) take any of the actions set forth in Article 6.6 of the
Articles of Organization. As used in these By-laws and in the Articles of
Organization, a "Supermajority" shall mean sixty-five percent.
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<PAGE>
Section 4. OFFICERS AND AGENTS
4.1. Enumeration; Qualification. (a) The officers of the
--------------------------
corporation shall be (1) a president, a treasurer, a clerk and a secretary, (2)
such other officers as the directors from time to time may in their discretion
elect or appoint, (3) such senior vice presidents as the Personnel Committee of
the board of directors may in its discretion elect or appoint pursuant to
paragraph (b) of this Section 4.1 and (4) such other officers as the chief
executive officer of the corporation may, pursuant to paragraph (b) of this
Section 4.1, appoint. The corporation may also have such agents, if any, as the
directors from time to time may in their discretion appoint. Any officer may be
but none need be a director or stockholder. Any two or more offices may be held
by the same person. Any officer may be required by the directors to give bond
for the faithful performance of his duties to the corporation in such amount and
with such sureties as the directors may determine.
(b) Without limiting the authority or discretion of the directors to
elect or appoint persons to hold any such office, (1) the chief executive
officer shall have the authority to appoint, in his discretion, persons to hold
any office with the corporation other than offices ranking in authority at the
level of senior vice president or higher (that is, the offices of president,
chief executive officer, chairman of the board, chief operating officer,
president of a business unit of the corporation, executive vice president,
senior vice president or any other office that the directors shall from time to
time designate as ranking in authority at the level of senior vice president or
higher), treasurer, clerk or secretary, and (2) the Personnel Committee of the
board of directors shall have the authority in its discretion to appoint or
elect persons to the office of senior vice president of the corporation. With
respect to each such appointment by the chief executive officer or appointment
or election by the Personnel Committee of the board of directors, the chief
executive officer or the Personnel Committee of the board of directors (as the
case may be) shall, at or before the next regular meeting of the board of
directors following such appointment or election, give notice to the board of
directors of such appointment or election; provided, however, that failure to
give such notice shall not affect or impair the validity of such appointment or
election or the authority of any officer so appointed or elected.
4.2. Powers. Subject to law, to the Articles of Organization and to
------
the other provisions of these By-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such duties and powers as the directors (or (1) the
chief executive officer, in the case of any officer other than the treasurer,
the secretary, the clerk or any officer ranking in authority at the level of
senior vice president or higher or (2) the Personnel Committee of the board of
directors, in the case of any senior vice president) may from time to time
designate.
4.3. Election. The president, the treasurer, the secretary and the
--------
clerk shall be elected annually by the directors. Other officers, if any, may
be elected or appointed by the board of directors (or, to the extent permitted
by Section 4.1 hereof, appointed by the chief executive
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<PAGE>
officer or appointed or elected by the Personnel Committee of the board of
directors) at any other time.
4.4. Tenure. Except as otherwise provided by law or by the Articles
------
of Organization or by these By-laws, the president, the treasurer, the
secretary, the clerk and each other officer shall hold office until their
respective successors are chosen and qualified, unless a shorter period shall
have been specified by the terms of his election or appointment, or in each case
until he sooner dies, resigns, is removed or becomes disqualified.
4.5. Chief Executive Officer. The chief executive officer of the
-----------------------
corporation shall be designated by the affirmative vote of a Supermajority (as
defined in Section 3.12 hereof) of the directors then in office and shall,
subject to the control of the directors, have general charge and supervision of
the business of the corporation. Unless the board of directors otherwise
specifies, if there is no chairman of the board, the chief executive officer
shall preside, or designate the person who shall preside, at all meetings of the
stockholders and of the board of directors.
4.6. Chairman of the Board. The directors may, by affirmative vote
---------------------
of a Supermajority (as defined in Section 3.12 hereof) of the directors then in
office, elect one of their number as chairman of the board. If a chairman of
the board of directors is elected, he shall have the duties and powers specified
in these By-laws and shall have such other duties and powers as may be
determined by the directors. Unless the board of directors otherwise specifies,
the chairman of the board shall preside, or designate the person who shall
preside, at all meetings of the stockholders and of the board of directors.
4.7. President and Vice Presidents. The president shall have the
-----------------------------
duties and powers specified in these By-laws and shall have such other duties
and powers as may be determined by the directors. Any president of a business
unit of the corporation shall have the duties and powers specified in these By-
laws and shall have such other duties and powers as may be determined by the
directors.
Any vice presidents (including any vice presidents with designations
such as "executive vice president," "senior vice president," "first vice
president," "second vice president" or "assistant vice president") shall have
such duties and powers as shall be designated from time to time by the directors
(or, (1) in the case of any senior vice president, by the Personnel Committee of
the board of directors or (2) except in the case of any vice president ranking
in authority at the level of senior vice president or higher, by the chief
executive officer).
4.8. Treasurer and Assistant Treasurers. Except as the directors
----------------------------------
shall otherwise determine, the treasurer shall be the chief financial and
accounting officer of the corporation and shall be in charge of its funds and
valuable papers, books of account and accounting records, and shall have such
other duties and powers as may be designated from time to time by the directors.
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<PAGE>
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the directors or by the chief executive officer.
4.9. Secretary and Assistant Secretary. The secretary shall record
---------------------------------
all proceedings of the stockholders in a book or series of books to be kept
therefor, which book or books shall be kept at the principal office of the
corporation or at the office of its transfer agent or of its secretary and shall
be open at all reasonable times to the inspection of any stockholder. In the
absence of the secretary from any meeting of stockholders, an assistant
secretary, or if there be none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof in the aforesaid book.
Unless a transfer agent has been appointed, the secretary shall keep or cause to
be kept the stock and transfer records of the corporation, which shall contain
the names and record addresses of all stockholders and the amount of stock held
by each. The secretary shall keep a true record of the proceedings of all
meetings of the directors and in his absence from any such meeting an assistant
secretary, or if there be none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof.
Any assistant secretaries shall have such other duties and powers as
shall be designated from time to time by the directors or by the chief executive
officer.
4.10. Certain Powers. The chief executive officer, the chairman of
--------------
the board, the president, any president of any business unit, or any one of the
vice presidents, including any executive vice president, senior vice president,
second vice president or assistant vice president, and such other employees of
the corporation specifically authorized by the chief executive officer shall
have authority to transfer securities, to execute releases, extensions, partial
releases, and assignments without recourse of mortgages, and to execute deeds
and other instruments or documents on behalf of the corporation, and whenever
necessary to affix the seal of the corporation to the same. The chief executive
officer, the chairman of the board, the president, any president of any business
unit or any executive vice president, senior vice president, vice president,
second vice president or assistant vice president may, whenever necessary,
delegate authority to perform any of the acts referred to in this paragraph to
any person pursuant to a special power of attorney.
The treasurer shall have charge of all moneys and securities of the
corporation and shall collect all proceeds from investments which the
corporation's records establish to be due.
The treasurer or an assistant treasurer shall have authority to
transfer securities; to execute releases, extensions, partial releases, and
assignments without recourse of mortgages, to execute deeds and other
instruments or documents on behalf of the corporation, and whenever necessary to
affix the seal of the corporation to the same; and shall have power to vote, on
behalf of the corporation, in any case where the corporation, as holder of any
security, is entitled to vote.
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<PAGE>
Section 5. RESIGNATIONS AND REMOVALS
Any director or officer may resign at any time by delivering his
resignation in writing to the chairman of the board, if any, the president, the
treasurer or the secretary. In addition, a director may resign by delivering
his resignation in writing to a meeting of the directors. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. A director (including persons elected by directors to fill vacancies in
the board) may be removed from office with or without cause by the vote of the
holders of a majority of the shares issued and outstanding and entitled to vote
in the election of directors, provided that the directors of a class elected by
a particular class of stockholders may be removed only by the vote of the
holders of a majority of the shares of such class. The directors may remove any
officer with or without cause by the vote of a Supermajority (as defined in
Section 3.12 hereof) of the directors then in office. No director or officer
who is removed shall have any right to any compensation as such director or
officer for any period following his removal, or any right to damages on account
of such removal, whether his compensation be by the month or by the year or
otherwise; unless the body acting on the removal shall in its discretion provide
for compensation.
Section 6. VACANCIES
Any vacancy in the board of directors, including a vacancy resulting
from the enlargement of the board as the result of an action taken by the
stockholders in accordance with Section 3.1 hereof, may be filled by the
stockholders or, in the absence of stockholder action, by the directors by vote
of a Supermajority (as defined in Section 3.12 hereof) of the directors then in
office. The directors shall elect a successor if the office of the president,
treasurer, secretary or clerk becomes vacant; if any other office becomes
vacant, a successor may be appointed (1) by the directors, (2) by the Personnel
Committee of the board of directors, in the case of a vacancy in the office of
senior vice president or (3) except in the case of a vacancy in an office
ranking in authority at the level of senior vice president or higher, by the
chief executive officer. Each such successor shall hold office for the
unexpired term and in the case of the president, treasurer, secretary and clerk
until his successor is chosen and qualified, or in each case until he sooner
dies, resigns, is removed or becomes disqualified. The directors shall have and
may exercise all their powers notwithstanding the existence of one or more
vacancies in their number.
Section 7. CAPITAL STOCK
7.1. Number and Par Value. The total number of shares and the par
--------------------
value, if any, of each class of stock which the corporation is authorized to
issue shall be as stated in the Articles of Organization.
7.2. Shares Represented by Certificates and Uncertificated Shares.
------------------------------------------------------------
The board of directors may provide by resolution that some or all of any or all
classes and series of shares
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<PAGE>
shall be uncertificated shares. Unless such a resolution has been adopted, a
stockholder shall be entitled to a certificate stating the number and the class
and the designation of the series, if any, of the shares held by him, in such
form as shall, in conformity to law, be prescribed from time to time by the
directors. Such certificate shall be signed by the chairman of the board, if
any, the president or a vice president and by the treasurer or an assistant
treasurer. Such signatures may be facsimiles if the certificate is signed by a
transfer agent, or by a registrar, other than a director, officer or employee of
the corporation. In case any officer who has signed or whose facsimile signature
has been placed on such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the time of its issue.
7.3. Loss of Certificates. In the case of the alleged loss or
--------------------
destruction or the mutilation of a certificate of stock, a duplicate certificate
may be issued in place thereof, upon such conditions as the directors may
prescribe.
Section 8. TRANSFER OF SHARES OF STOCK
8.1. Transfer on Books. Subject to the restrictions, if any, stated
-----------------
or noted on the stock certificates, shares of stock may be transferred on the
books of the corporation by the surrender to the corporation or its transfer
agent of the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
directors or the transfer agent of the corporation may reasonably require.
Except as may be otherwise required by law, by the Articles of Organization or
by these By-laws, the corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to receive notice and to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock until the shares have been transferred on the books of the
corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
8.2. Record Date and Closing Transfer Books. The directors may fix
--------------------------------------
in advance a time, which shall not be more than sixty days before the date of
any meeting of stockholders or the date for the payment of any dividend or
making of any distribution to stockholders or the last day on which the consent
or dissent of stockholders may be effectively expressed for any purpose, as the
record date for determining the stockholders having the right to notice of and
to vote at such meeting and any adjournment thereof or the right to receive such
dividend or distribution or the right to give such consent or dissent, and in
such case only stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the corporation after the
record date; or without fixing such record date the
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<PAGE>
directors may for any of such purposes close the transfer books for all or any
part of such period. If no record date is fixed and the transfer books are not
closed:
(1) The record date for determining stockholders having the right to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the date next preceding the day on which notice is given.
(2) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors acts with respect thereto.
Section 9. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the extent legally permissible, indemnify
each of its directors and officers (including persons who serve at its request
as directors, officers or trustees of another organization, or in any capacity
with respect to any employee benefit plan) against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees, reasonably incurred by him in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having been
such a director or officer, except with respect to any matter as to which he
shall have been adjudicated in any proceeding not to have acted in good faith in
the reasonable belief that his action was in the best interest of the
corporation (any person serving another organization in one or more of the
indicated capacities at the request of the corporation who shall have acted in
good faith in the reasonable belief that his action was in the best interest of
such other organization to be deemed as having acted in such manner with respect
to the corporation) or, to the extent that such matter relates to service with
respect to any employee benefit plan, in the best interest of the participants
or beneficiaries of such employee benefit plan; provided, however, that as to
any matter disposed of by a compromise payment by such director or officer,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless such compromise shall
be approved as in the best interest of the corporation, after notice that it
involves such indemnification: (a) by a disinterested majority of the directors
then in office; or (b) by a majority of the disinterested directors then in
office, provided that there has been obtained an opinion in writing of
independent legal counsel to the effect that such director or officer appears to
have acted in good faith in the reasonable belief that his action was in the
best interest of the corporation; or (c) by the holders of a majority of the
outstanding stock at the time entitled to vote for directors, voting as a single
class, exclusive of any stock owned by any interested director or officer.
Expenses, including counsel fees, reasonably incurred by any director or officer
in connection with the defense or disposition of any such action, suit or other
proceeding may be paid from time to time by the corporation in advance of the
final disposition thereof upon receipt of an undertaking by such director or
officer to repay the amounts so paid to the corporation if it is ultimately
determined that indemnification for such expenses is not authorized under this
section. The right of indemnification hereby provided
-11-
<PAGE>
shall not be exclusive of or affect any other rights to which any director or
officer may be entitled. As used in this section, the terms "director" and
"officer" include the relevant individual's heirs, executors and administrators,
and an "interested" director or officer is one against whom in such capacity the
proceedings in question or another proceeding on the same or similar grounds is
then pending. Nothing contained in this section shall affect any rights to
indemnification to which corporate personnel other than directors and officers
may be entitled by contract or otherwise under law.
Section 10. CORPORATE SEAL
The seal of the corporation shall, subject to alteration by the
directors, consist of a flat-faced circular die with the word "Massachusetts",
together with the name of the corporation and the year of its organization, cut
or engraved thereon.
Section 11. FISCAL YEAR
The fiscal year of the corporation shall end on December 31.
Section 12. AMENDMENTS
These By-laws may be altered, amended or repealed at any annual or
special meeting of the stockholders called for the purpose, of which the notice
shall specify the subject matter of the proposed alteration, amendment or repeal
or the sections to be affected thereby, by vote of the stockholders.
-12-
<PAGE>
New England Life Insurance Company
501 Boylston Street
Boston, MA 02117
Exhibit 3(i)
July 14, 1997
New England Variable Life Separate Account
New England Life Insurance Company
501 Boylston Street
Boston, MA 02117
Gentlemen and Ladies:
In my capacity as General Counsel of New England Life Insurance Company
(the "Company"), I am rendering the following opinion in connection with the
filing with the Securities and Exchange Commission of a registration statement
on Form S-6 under the Securities Act of 1933. This Registration Statement is
being filed with respect to individual Variable Ordinary Life Insurance Policies
(the "Policies") issued by New England Variable Life Separate Account (the
"Account").
It is my professional opinion that:
1. The Account is a separate investment account of the Company and is
validly existing pursuant to the laws of the Commonwealth of
Massachusetts.
2. The Variable Ordinary Life Insurance Policies, when issued in accordance
with the prospectus contained in the Registration Statement and in
compliance with applicable local law, are and will be legal and binding
obligations of the Company in accordance with their terms.
3. Assets attributable to reserves and other contract liabilities and held
in the Account will not be chargeable with liabilities arising out of
any other business the Company may conduct.
In forming this opinion, I have made such examination of law and examined
such records and other documents as in my judgment are necessary and
appropriate.
<PAGE>
I consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the prospectus contained in the Registration Statement.
Very truly yours,
H. James Wilson
General Counsel
<PAGE>
Exhibit 3(ii)
July 15,1997
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Gentlemen:
In my capacity as Second Vice President and Actuary of New England Life
insurance Company (the "Company"), I have provided actuarial advice concerning:
The preparation of Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 (File No. 333-21767) filed by New England Variable
Life Separate Account and the Company with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to variable life
insurance policies (the "Registration Statement"); and
The preparation of policy forms for the variable life insurance policies
described in the Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated premium,
internal rates of return on net cash values and internal rates of return on
death benefits shown in Appendix A of the Prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies. The rate structure of the Policies has not been designed
so as to make the relationship between premiums and policy benefits, as
shown in the illustrations, appear to be correspondingly more favorable to
prospective purchasers of Policies for male insureds aged 40 in the
underwriting classes illustrated than to prospective purchasers of Policies
for males at other ages or for females. Insureds in other underwriting
classes may have higher cost of insurance charges and premiums.
2. The information contained in the description of historical investment
experience in Appendix B, based on the
<PAGE>
assumptions stated in the Appendix, is consistent with the provisions of
the Policies.
3. The illustration of net scheduled premiums and net unscheduled payments
shown under the heading "Charges and Expenses-Deductions from Premiums and
Unscheduled Payments" in the Prospectus contains the net scheduled premium
and net unscheduled payment amounts allocated to the Variable Account for
scheduled premiums and unscheduled payments of $2,000 each under a Policy
with no riders and covering an insured who is not in a substandard risk or
automatic issue classification.
4. The information contained in the example of how the maximum loanable amount
is determined under the heading "Other Policy Features-Loan Provision" in
the Prospectus is consistent with the Provisions of the Policies.
5. The information contained in the examples of how the maximum amount of cash
available for withdrawal is determined, under the heading "Partial
Surrender and Partial Withdrawal" in the Prospectus, is consistent with the
provisions of the Policies.
I hereby consent to the filing of this opinion as an Exhibit to this Pre-
Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler,
F.S.A., M.A.A.A.
<PAGE>
Exhibit 6
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
July 14, 1997
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
Re: New England Variable Life Separate Account
------------------------------------------
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus included in Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 for certain individual variable ordinary life
insurance policies issued through New England Variable Life Separate Account of
New England Life Insurance Company (File No. 333-21767). 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.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN LLP
By: /s/ Kimberly J. Smith
<PAGE>
Exhibit 7
POWER OF ATTORNEY
I, the President and Chief Operating Officer and a director of New England
Life Insurance Company, a Massachusetts corporation, hereby constitute and
appoint Anne M. Goggin, Rodney J. Chandler, Maura A. Murphy, Marie C. Swift and
H. James Wilson, each of them singly, my true and lawful attorneys, with full
power to them and each of them to sign for me and in my name and in the
capacities indicated below, the Registration Statements filed with the
Securities and Exchange Commission for the purpose of registering New England
Variable Life Separate Account established by New England Life Insurance Company
on January 31, 1983 as a unit investment trust under the Investment Company Act
of 1940 and the variable life policies issued by said separate account under the
Securities Act of 1933, and any and all amendments thereto, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to said
Registration Statements and any and all amendments thereto.
In addition, I, the President and Chief Operating Officer and a director of
New England Life Insurance Company, a Massachusetts corporation, hereby
constitute and appoint Anne M. Goggin, Rodney J. Chandler, Maura A. Murphy,
Marie C. Swift and H. James Wilson, each of them singly, my true and lawful
attorneys, with full power to them and each of them to sign for me and in my
name and in the capacities indicated below, the Registration Statements filed
with the Securities and Exchange Commission for the purpose of registering New
England Variable Annuity Separate Account established by New England Life
Insurance Company on July 1, 1994 as a unit investment trust under the
Investment Company Act of 1940 and the variable annuity contracts issued by said
separate account under the Securities Act of 1933, and any and all amendments
thereto, hereby ratifying and confirming my signature as it may be signed by my
said attorneys to said Registration Statements and any and all amendments
thereto.
Witness my hand on the 8th of July, 1997.
/s/ James M. Benson
Director, President and
Chief Operating Officer
<PAGE>
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-21767 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 in the
Prospectus, which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche LLP
Boston, Massachusetts
July 14, 1997
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6 (File No. 333-21767) 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 Advisors, 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 Pre-Effective
Amendment.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
July 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 859,332,244
<INVESTMENTS-AT-VALUE> 1,055,998,223
<RECEIVABLES> 1,963,195
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,057,961,418
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 128,726,911
<TOTAL-LIABILITIES> 128,726,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 929,234,507
<DIVIDEND-INCOME> 15,640,866
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,586,971
<NET-INVESTMENT-INCOME> 14,053,895
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 2,179,733
<NET-CHANGE-FROM-OPS> 16,233,628
<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> 42,849,709
<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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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<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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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 886,384,798
<DIVIDEND-INCOME> 50,453,549
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<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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<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
