<PAGE>
As filed with Securities and Exchange Commission on February 27, 1997
Registration No. 33-65263
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 1
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND 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, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
-----------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on May 1, 1997 pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2, an indefinite amount of securities has been registered
under the Securities Act of 1933. A Rule 24f-2 Notice was filed on February 25,
1997.
<PAGE>
NEW ENGLAND LIFE
INSURANCE COMPANY
Modified Single Premium Variable Life Insurance Policies
Issued by
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual modified single premium variable life
insurance policies (the "Policies") offered by New England Life Insurance
Company ("NELICO"), a wholly-owned subsidiary of Metropolitan Life Insurance
Company ("MetLife").
The Policies are issued in two forms: Single Insured and Last Survivor. A
Single Insured Policy pays a death benefit on the death of a single named
insured; a Last Survivor Policy pays a death benefit on the last of two named
insureds to die. The death benefit provided by a Policy is the greater of the
variable death benefit and the minimum guaranteed death benefit. The variable
death benefit on any day is the amount determined by dividing the Policy's cash
value by the applicable net single premium. The initial minimum guaranteed death
benefit is based on premium payments made.
You purchase the Policy with an initial premium. The minimum premium to
purchase the Policy is $10,000. Additional payments may be made after the first
Policy Year, subject to certain restrictions. You may, within limits, allocate
premiums (net of any charges) to one or more of the 13 investment Sub-Accounts
of NELICO's Variable Life Separate Account (the "Variable Account"). Each
Sub-Account of the Variable Account invests in shares of one of the following
series of the New England Zenith Fund (the "Zenith Fund"):
Loomis Sayles Small Cap Series Back Bay Advisors Managed Series
Morgan Stanley International Magnum Loomis Sayles Balanced Series
Equity Series Salomon Brothers Strategic Bond
Alger Equity Growth Series Opportunities Series*
Loomis Sayles Avanti Growth Series Back Bay Advisors Bond Income Series
Davis Venture Value Series Salomon Brothers U.S. Government Series*
Westpeak Stock Index Series Back Bay Advisors Money Market Series
Westpeak Growth and Income Series
- ---------
*(availability subject to any necessary state insurance department approvals)
Partial surrenders and Policy loans may be taken from time to time, subject to
certain restrictions. In almost all cases, the Policies will be modified
endowment contracts for federal income tax purposes. (See "Tax Treatment of
Loans and Other Distributions.")
A LOAN, DISTRIBUTION OR OTHER AMOUNT RECEIVED FROM A MODIFIED ENDOWMENT
CONTRACT DURING THE LIFE OF AN INSURED WILL BE TAXED TO THE EXTENT OF ANY
ACCUMULATED INCOME IN THE POLICY. ANY AMOUNTS THAT ARE TAXABLE WITHDRAWALS WILL
BE SUBJECT TO A 10% ADDITIONAL TAX, WITH CERTAIN EXCEPTIONS, INCLUDING AN
EXCEPTION FOR DISTRIBUTIONS MADE ON OR AFTER THE DATE WHEN THE POLICY OWNER
ATTAINS AGE 59 1/2.
The cash value of a Policy will vary daily with the investment experience of
the mutual fund portfolios in which cash value in the Sub-Accounts is invested.
There is no guaranteed minimum for cash value in the Sub-Accounts.
You may cancel the Policy during the "right to return the Policy" period,
which in most states is the 10-day period after you receive your Policy. The
initial premium for the Policy will be invested in the 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 in the Sub-Accounts
according to your instructions.
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus.
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 MUST BE ACCOMPANIED OR PRECEDED BY THE CURRENT PROSPECTUS OF THE
NEW ENGLAND ZENITH FUND. THESE PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
THESE SECURITIES ARE OFFERED FOR SALE IN THE COMMONWEALTH OF PUERTO RICO
PURSUANT TO REGISTRATION WITH THE SECURITIES OFFICE OF THE DEPARTMENT OF THE
TREASURY, BUT SUCH REGISTRATION DOES NOT CONSTITUTE A FINDING THAT THIS
PROSPECTUS IS TRUE, COMPLETE, AND NOT MISLEADING, NOR HAS THE SECURITIES OFFICE
OF THE DEPARTMENT OF THE TREASURY PASSED IN ANY WAY UPON THE MERITS OF,
RECOMMENDED, OR GIVEN APPROVAL TO SUCH SECURITIES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE ZENITH FUND 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.
MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
INTRODUCTION TO THE POLICIES . . . . . . . . . . . . . . . . . . . . A-6
The Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
Availability of the Policy . . . . . . . . . . . . . . . . . . . . A-10
Policy Charges . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
NELICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
Applying for a Policy . . . . . . . . . . . . . . . . . . . . . . . A-13
Premium Payments . . . . . . . . . . . . . . . . . . . . . . . . . A-13
Right to Return the Policy . . . . . . . . . . . . . . . . . . . . A-14
Lapse and Reinstatement . . . . . . . . . . . . . . . . . . . . . . A-14
ALLOCATION OF PREMIUM PAYMENTS AND TRANSFER OF CASH VALUE . . . . . A-14
Allocation of Premium Payments . . . . . . . . . . . . . . . . . . A-14
Amount Provided for Investment under the Policy . . . . . . . . . . A-15
Transfer Option . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
Dollar Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . A-16
Asset Rebalancing . . . . . . . . . . . . . . . . . . . . . . . . . A-17
Transfer and Reallocation Requests . . . . . . . . . . . . . . . . A-17
DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
How the Death Benefit is Determined . . . . . . . . . . . . . . . . A-18
Minimum Guaranteed Death Benefit . . . . . . . . . . . . . . . . . A-18
Adjustments to the Death Proceeds Payable . . . . . . . . . . . . . A-18
Payment of Death Benefit Proceeds . . . . . . . . . . . . . . . . . A-18
CASH VALUE AND CASH VALUE BENEFITS . . . . . . . . . . . . . . . . . A-19
Cash Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
Net Investment Experience . . . . . . . . . . . . . . . . . . . . . A-19
Loan Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
Effect of Policy Loan . . . . . . . . . . . . . . . . . . . . . . . A-20
Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
Partial Surrenders . . . . . . . . . . . . . . . . . . . . . . . . A-21
Effect of Partial Surrender on Cash Value and Death Benefit . . . . A-21
Special Rules for Policies Purchased for a TSA Plan . . . . . . . . A-22
Acceleration of Death Benefit Rider . . . . . . . . . . . . . . . . A-22
Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . A-22
Payment Options . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . A-23
Deductions from Initial Premium . . . . . . . . . . . . . . . . . . A-23
Deductions from Additional Payments . . . . . . . . . . . . . . . . A-23
Monthly Deduction Deducted from Cash Value . . . . . . . . . . . . A-24
Daily Charges Deducted from the Variable Account Assets . . . . . . A-24
Charges Deducted from Eligible Fund Assets . . . . . . . . . . . . A-24
Charges Deducted on Surrender or Partial Surrender . . . . . . . . A-24
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
Surrender Charge . . . . . . . . . . . . . . . . . . . . . . . . . A-25
State Premium Tax Charge . . . . . . . . . . . . . . . . . . . . . A-26
Charges under Policies Issued to New York Residents . . . . . . . . A-26
Cost of Insurance Charge . . . . . . . . . . . . . . . . . . . . . A-26
Administrative Charge . . . . . . . . . . . . . . . . . . . . . . . A-28
Monthly Maintenance Charge . . . . . . . . . . . . . . . . . . . . A-28
Mortality and Expense Risk Charge . . . . . . . . . . . . . . . . . A-28
Eligible Fund Expenses . . . . . . . . . . . . . . . . . . . . . . A-28
Charges for Additional Services . . . . . . . . . . . . . . . . . . A-28
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Charges for Income Taxes . . . . . . . . . . . . . . . . . . . . . . A-28
Group or Sponsored Arrangements . . . . . . . . . . . . . . . . . . . A-28
THE VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . A-29
Investments of the Variable Account . . . . . . . . . . . . . . . . . A-29
Investment Management . . . . . . . . . . . . . . . . . . . . . . . . A-32
OTHER POLICY FEATURES . . . . . . . . . . . . . . . . . . . . . . . . A-33
Policy Owner and Beneficiary . . . . . . . . . . . . . . . . . . . . A-33
Exchange of Policy . . . . . . . . . . . . . . . . . . . . . . . . . A-33
NELICO'S DISTRIBUTION AND OTHER AGREEMENTS . . . . . . . . . . . . . . A-34
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY . . . . . . . . . . . A-34
Misstatement of Age or Sex . . . . . . . . . . . . . . . . . . . . . A-34
Suicide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
Policy Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . A-35
Definition of Life Insurance . . . . . . . . . . . . . . . . . . . . A-35
Tax Treatment of Loans and Other Distributions . . . . . . . . . . . A-36
Taxation of Accelerated Benefits Rider . . . . . . . . . . . . . . . A-36
Special Treatment of Loans on the Policy . . . . . . . . . . . . . . A-37
Aggregation of Modified Endowment Contracts . . . . . . . . . . . . . A-37
Other Policy Owner Tax Matters . . . . . . . . . . . . . . . . . . . A-37
Charge for NELICO's Income Taxes . . . . . . . . . . . . . . . . . . A-38
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
RIGHTS RESERVED BY NELICO . . . . . . . . . . . . . . . . . . . . . . A-42
TOLL-FREE NUMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
ADVERTISING PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . A-42
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . A-43
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH
VALUES AND ACCUMULATED PREMIUMS . . . . . . . . . . . . . . . . . . . A-44
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION . . . . . . . . . . . . A-56
APPENDIX C: EXAMPLE OF EFFECT OF NEGATIVE INVESTMENT PERFORMANCE ON
CALCULATION OF SURRENDER CHARGES; EXAMPLE OF ADJUSTMENT TO PREMIUM TAX
CHARGE RESULTING FROM ADDITIONAL PAYMENTS . . . . . . . . . . . . . . A-78
APPENDIX D: EXAMPLES OF EFFECT OF SURRENDERS AND PARTIAL SURRENDERS ON
OPERATION OF POLICY . . . . . . . . . . . . . . . . . . . . . . . . . A-79
APPENDIX E: LONG-TERM MARKET TRENDS . . . . . . . . . . . . . . . . . A-81
</TABLE>
A-3
<PAGE>
GLOSSARY
ADMINISTRATIVE CHARGE. This charge for administering the Policy is deducted
from your cash value on each Monthly Deduction Date after the Policy Date, as
part of the Monthly Deduction. (See "Charges and Expenses.")
AGE. For purposes of this prospectus, the age of an insured refers to the
insured's age at his or her last birthday. Joint insureds are assigned the same
"joint equal age," which reflects the anticipated mortality of both insureds.
CASH VALUE. A Policy's cash value is the sum of the amount of its cash value
held in the Variable 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 from cash value on each Monthly Deduction Date after the Policy Date,
as part of the Monthly Deduction. No cost of insurance charge is deducted on or
after the Policy Anniversary when the age of the insured(s) is equal to 100.
(See "Charges and Expenses.")
ELIGIBLE FUNDS. Each Sub-Account of the Variable Account invests in the shares
of one of the Eligible Funds. The Eligible Funds are: Loomis Sayles Small Cap
Series, Morgan Stanley International Magnum Equity Series, Alger Equity Growth
Series, Loomis Sayles Avanti Growth Series, Davis Venture Value Series, Westpeak
Stock Index Series, Westpeak Growth and Income Series, Back Bay Advisors Managed
Series, Loomis Sayles Balanced Series, Salomon Brothers Strategic Bond
Opportunities Series, Back Bay Advisors Bond Income Series, Salomon Brothers
U.S. Government Series, and Back Bay Advisors Money Market Series, all of which
are series of the Zenith Fund. The availability of the Salomon Brothers U.S.
Government Series and Salomon Brothers Strategic Bond Opportunities Series is
subject to any necessary state insurance department approvals. (See "The
Variable Account.")
FACE AMOUNT. The amount of the initial premium.
HOME OFFICE. NELICO's office at 501 Boylston Street, Boston, Massachusetts
02116, (617) 578-2000.
INVESTMENT START DATE. This is the latest of the date NELICO receives the
initial premium for the Policy, the date when the last Part II of the Policy
application or the Supplement to the Part I Application is signed, if any is
required, and the Policy Date. It is the date when an amount is first provided
for investment under the Policy. (See "Amount Provided for Investment Under the
Policy.")
ISSUE AGE. The age of an insured as of the last birthday on or before the
Policy Date. In the case of a Last Survivor Policy, "issue age" refers to the
joint equal age assigned to both insureds.
LAST SURVIVOR POLICY. A Policy providing for the payment of a death benefit on
the last of two named insureds to die.
MINIMUM GUARANTEED DEATH BENEFIT. The minimum guaranteed death benefit on any
day is the greater of total premiums paid or the cash value as of the most
recent five-year anniversary of the Policy Date, as adjusted for any interim
premium payments or withdrawals. See "Death Benefit."
MONTHLY DEDUCTION. The Monthly Deduction is the aggregate amount of charges
deducted from the Policy's cash value on each Monthly Deduction Date and
includes the monthly cost of insurance charge, the monthly administrative
charge, the monthly maintenance charge for certain Policies, the mortality and
expense risk charge, and during the first ten Policy Years, the monthly sales
charge and monthly state premium tax charge. Upon surrender, lapse or partial
surrender, the applicable portion of the Monthly Deduction will also be deducted
from the cash value. (See "Charges and Expenses.")
A-4
<PAGE>
MONTHLY DEDUCTION DATE. The last day of each Policy Month.
NET ADDITIONAL PAYMENT. Each net additional payment is equal to the additional
payment made less the applicable sales charge and state premium tax charge.
NET CASH VALUE. On any day, the Policy's net cash value is equal to the cash
value for that day, reduced by any outstanding Policy loan balance and also
reduced by any Surrender Charge that would apply on 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 Fund's
shares for the same period. (See "Net Investment Experience.")
POLICY DATE. If you submit the initial premium payment with the application or
during the underwriting process, the Policy Date is generally the later of the
date when the last Part II of the application or the Supplement to the Part I
Application is signed, if any is required, and receipt of the premium payment.
If you do not submit the initial premium with the application or during the
underwriting process, the Policy Date will generally be the date NELICO receives
the initial premium payment for the Policy. The Policy Date is the date used to
determine all future cyclical periods under the Policy, e.g., Policy Months and
Policy Years.
POLICY LOAN BALANCE. Policy loans outstanding plus interest accrued to date.
PREFERRED SURRENDER AMOUNT. This amount may be surrendered from the Policy's
cash value during the Surrender Charge Period free of any Surrender Charge. This
amount is equal to the greater of (a) cash value in excess of initial premium
paid (minus any previous partial surrenders attributable to the initial premium)
and (b) 10% of the initial premium paid (minus previous partial surrenders in
that Policy Year).
PREMIUMS. Premiums include all payments you make under the Policy other than
loan repayments. (See "Premiums.")
RIGHT TO RETURN THE POLICY PERIOD. Within 10 days (or more where required by
applicable state insurance law) after you receive the Policy, you may cancel the
Policy by returning the Policy to NELICO or its agent. If you choose to cancel
the Policy, NELICO will refund any premiums paid (or any other amount that is
required by state insurance law) with interest at the rate currently in use by
NELICO.
SINGLE INSURED POLICY. A Policy providing for the payment of a death benefit
on the death of the insured named in the Policy.
STATE PREMIUM TAX CHARGE. This charge for state premium taxes is deducted from
your cash value on each Monthly Deduction Date for the first ten Policy Years,
as part of the Monthly Deduction. If you make an additional payment, a charge
for state premium taxes is deducted from the payment before allocation to the
Sub-Accounts. (See "Charges and Expenses.")
SURRENDER CHARGE. If, during the Surrender Charge Period, a Policy is totally
surrendered or lapses or a partial surrender (other than a preferred partial
surrender) is made, a Surrender Charge is taken from the cash value. The
surrender charge is a deferred sales charge attributable to the initial premium.
(See "Surrender Charge.")
SURRENDER CHARGE PERIOD. The Surrender Charge Period is the first nine Policy
Years.
YOU. When used in this prospectus, "you" refers to the Policy Owner.
ZENITH FUND. The New England Zenith Fund.
A-5
<PAGE>
INTRODUCTION TO THE POLICIES
THE POLICIES
The individual modified single premium variable life insurance policies
offered by this prospectus are designed to provide lifetime insurance coverage
for the insured(s) named in the Policy. They are not offered primarily as an
investment.
The following list provides a brief description of the basic features of the
Policy. These and other features of the Policy are explained in more detail
throughout the prospectus. You should be sure to read the entire prospectus for
more complete information.
-- PREMIUM PAYMENTS. You must pay an initial premium at least equal to our
minimum single premium requirements. After the first Policy Year, you may
make additional payments, subject to certain restrictions and limitations.
-- INVESTMENT OF PREMIUMS. After an initial period in the Money Market
Sub-Account, your initial premium is invested according to your
instructions in one or more of the Sub-Accounts of the Variable Account
corresponding to mutual fund portfolios. (See "Amount Provided for
Investment In the Policy.") Any net additional payments will be invested
according to your instructions in the Sub-Accounts. (See "Allocation of
Premiums" and "Investment Options.")
-- AVAILABLE PORTFOLIOS. The mutual fund portfolios available to you under the
Policy include several common stock funds, including a fund which invests
primarily in foreign securities, three bond funds, one managed fund, a
balanced fund, and a money market fund, subject to any necessary state
insurance department approvals. (See "Investments of the Variable
Account.")
-- LIMITS ON ALLOCATIONS. You may allocate your Policy's cash value to a
maximum of 10 Sub-Accounts.
-- TRANSFERS. Once fifteen days have passed after we mail the confirmation for
the initial premium payment, you may transfer portions of the Policy's cash
value among the Sub-Accounts. Currently, you are permitted twelve transfers
each Policy Year without NELICO's consent. You will never be permitted less
than four transfers each Policy Year without NELICO's consent (except for
Policies issued in New York, where the minimum number of transfers
permitted each Policy Year will never be less than twelve). (See "Transfer
Option.")
-- FLUCTUATING CASH VALUE. 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. The cash value is not guaranteed. You
bear the investment risk with respect to the cash value. (See "Cash Value"
and "Charges and Expenses.")
-- DEATH BENEFIT. The death benefit is the greater of the variable death
benefit and the minimum guaranteed death benefit. (See "Death Benefit.")
-- POLICY LOANS AND PARTIAL SURRENDERS. A loan privilege is available under
the Policy. Partial surrenders also are allowed. (See "Loan Privilege" and
"Partial Surrenders.")
-- FEDERAL INCOME TAX CONSEQUENCES. Death benefits paid to the beneficiary
under a life insurance contract generally are not subject to Federal income
tax. Under current law, undistributed increases in cash value of a life
insurance contract generally are not taxable. (See "Tax Considerations.")
In almost all situations, the Policies are expected to be treated as
modified endowment contracts. (See "Tax Treatment of Loans and Other
Distributions.") Pre-death distributions (including partial surrenders and
loans) from a modified endowment contract are included in income on an
income first basis, and a 10% penalty tax may be imposed on income
distributed before the Policy Owner attains age 59 1/2. (See "Tax
Considerations.")
COMPARISON TO OTHER POLICIES AND OTHER INVESTMENTS
In many respects the Policies are similar to fixed-benefit life insurance.
Like fixed-benefit life insurance, the Policies offer a death benefit and
provide a cash value, loan privileges and surrender values.
A-6
<PAGE>
The Policies are different from fixed-benefit life insurance in that the death
benefit will in most cases, and the cash value will always, vary to reflect the
investment experience of the selected Sub-Accounts of the Variable Account.
The Policies are designed to provide insurance protection. Although the
underlying mutual fund portfolios to which cash value may be allocated 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.
-- If the net cash value is not sufficient to pay a Monthly Deduction because
there is an excess Policy loan, the Policy will lapse with no value unless
a payment is made. 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 values of the Policy and from any
additional premiums. These charges include various insurance, risk,
administrative and state 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 on the mutual fund investment
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.
The chart on the following pages shows how the Policy operates.
A-7
<PAGE>
DIAGRAM OF POLICY
- -------------------------------------------------------------------------------
PREMIUM PAYMENTS
-- Minimum initial premium required is $10,000.
-- Additional payments may be paid after the first Policy Year,
within limits. See page A-13.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DEDUCTIONS FROM PREMIUMS BEFORE ALLOCATION
-- From initial premium: NONE
-- From additional payments:
-- 6.5% charge for sales load expense (reduced to 5.10% for
additional payments on Policies with initial premiums of $1,000,000 or
more).
-- 2.5% charge for state premium tax. See page A-23.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENT OF PREMIUMS
-- You direct the allocation of initial premiums and any net
additional payments among 13 Sub-Accounts of the Variable Account. See
page A-14 for rules and limits on allocations.
-- The Sub-Accounts invest in corresponding portfolios of the New
England Zenith Fund. See page A-29.
Portfolios available are:
Loomis Sayles Small Cap Westpeak Growth and Income Series
Series Back Bay Advisors Managed Series
Morgan Stanley Loomis Sayles Balanced Series
International Magnum Salomon Brothers Strategic Bond Opportunities
Equity Series Series*
Alger Equity Growth Series Back Bay Advisors Bond Income Series
Loomis Sayles Avanti Salomon Brothers U.S. Government Series*
Growth Series Back Bay Advisors Money Market Series
Davis Venture Value Series
Westpeak Stock Index
Series
---------
*(availability subject to any necessary state insurance department
approvals)
- -------------------------------------------------------------------------------
A-8
<PAGE>
- -------------------------------------------------------------------------------
CASH VALUE
- -- Cash value is equal to the initial premium and any net additional payments,
as adjusted each day the New York Stock Exchange is open to reflect
Sub-Account net investment experience, charges deducted and other Policy
transactions (such as transfers and partial surrenders). See page A-19.
- -- Cash value varies from day to day. There is no minimum guaranteed cash
value. The Policy may lapse if there is a Policy loan. See page A-19.
- -- Cash value can be transferred among the Sub-Accounts. See page A-15 for
rules and limits. Policy loans reduce the amount available for allocations
and transfers.
- -- Dollar cost averaging and asset rebalancing programs are available. See
pages A-16 and A-17.
- -- Cash value is the starting point for calculating certain values under a
Policy, such as the net cash value and the death benefit.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DEDUCTIONS FROM CASH VALUE
- -- Monthly Deduction from cash value for:
-- cost of insurance (currently calculated as a percentage of cash value
at an annual rate, depending on the issue age and risk class of the
insured, ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class (0.70%
to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class (0.40%
to 1.60% for substandard risk class)
-- Administrative charge, calculated as a percentage of cash value at an
annual rate of 0.35% (currently reducing to 0.10% after ten years).*
-- During first ten Policy Years, sales charge and state premium tax
charge, calculated as percentages of cash value at annual rates of
0.40% and 0.25%, respectively.*
-- Mortality and expense risk charge, calculated as a percentage of cash
value at an annual rate of 0.90%.
-- For Policies with cumulative premiums less than $50,000, a Monthly
Maintenance Charge of $2.50 per month also is included in the Monthly
Deduction.
---------
*For Policies with initial premiums of $1,000,000 or more, the 0.40% sales
charge and the 0.25% state premium tax charge will be waived, and the 0.35%
Administrative Charge currently will be waived after the tenth Policy Year.
See page A-24.
- -- Investment advisory fees and fund expenses are deducted from the assets of
each Eligible Fund. See pages A-10 to A-11.
- -------------------------------------------------------------------------------
- -------------------------------------- ------------------------------------
CASH VALUE BENEFITS DEATH BENEFITS
-- Loans may be taken for amounts -- Income tax free to
up to 90% of net cash value at Beneficiary. (See "Tax
a net interest rate charge of Considerations.")
0.75%. Preferred loans are -- Available as lump sum or under
currently available (with a a variety of payment options.
net interest rate charge of -- Greater of variable death
0%). See page A-19 to A-20 for benefit or minimum guaranteed
rules and limits. death benefit.
-- The Policy may be surrendered -- Variable death benefit is
in full at any time for its determined by dividing the
net cash value, less the cash value by the
Monthly Deduction to the date applicable net single
of surrender. A declining premium. See page A-18.
sales charge of up to 8.0% of -- Minimum guaranteed death
the initial premium will apply benefit guarantees the
to a full surrender made initial premium plus
during the first nine Policy additional payments, less
Years. Federal taxes and a tax adjustments for partial
penalty also may apply. See surrenders, as long as
page A-21. there is not an excess
-- Partial surrenders may be Policy loan. See page A-18.
made. A pro rata portion of On each five-year
the Surrender Charge may apply anniversary of the Policy
on partial surrenders made Date up to age 75, the
during the first nine Policy minimum guaranteed death
Years. Federal taxes and a tax benefit will be reset as
penalty also may apply. See the greater of the minimum
page A-21 for rules and guaranteed death benefit
limits. before the recalculation,
-- Preferred surrender amounts and the cash value on that
(with no surrender charges date. See page A-18.
applicable) are available. Proceeds paid will be
-- Payment options available. See reduced by any Policy loan
page A-23. balance.
- -------------------------------------- ------------------------------------
A-9
<PAGE>
AVAILABILITY OF THE POLICY
Generally, the Policies may be issued on the lives of insureds from the issue
ages of 20 to 80. In the case of a Single Insured Policy, the proposed insured
must meet NELICO's underwriting and other criteria for issuance. In the case of
a Last Survivor Policy, both of the insureds must meet those criteria. (See
"Applying for a Policy.")
The Policies are currently intended for individual use and for use with
certain retirement plans that qualify for tax benefited treatment under Section
401(a) (but not Section 401(k)) of the Internal Revenue Code (the "Code") or
Section 403(b) of the Code ("TSA Plans").
POLICY CHARGES
-- DEDUCTIONS FROM INITIAL PREMIUM. NELICO deducts no charges from the initial
premium before allocation to the Variable Account, although a monthly sales
charge and state premium tax charge are deducted as part of the Monthly
Deduction during the first ten Policy Years, and a Surrender Charge applies
during the Surrender Charge Period (the first nine Policy Years).
-- DEDUCTIONS FROM ADDITIONAL PAYMENTS. NELICO will deduct the following
charges from an additional payment before allocation of the net additional
payment to the Sub-Accounts you select:
-- 6.5% sales charge (reduced to 5.10% for Policies with Initial Premiums
of $1,000,000 or more).
-- 2.5% state premium tax charge.
-- MONTHLY DEDUCTION DEDUCTED FROM CASH VALUE. NELICO deducts a charge from
the cash value on each Monthly Deduction Date after the Policy Date. This
charge is the aggregate of the following charges, shown below at their
current annual rates:
-- Cost of insurance charge,* currently ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class (0.70%
to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class (0.40%
to 1.60% for substandard risk class)
-- 0.35% Administrative Charge (currently reduced to 0.10% after the first
ten Policy Years)**
-- 0.40% sales charge (deducted during the first ten Policy Years only)**
-- 0.25% state premium tax charge (deducted during the first ten Policy
Years only)**
-- 0.90% mortality and expense risk charge
-- For Policies with cumulative premiums less than $50,000, a $2.50 Monthly
Maintenance Charge also is included in the Monthly Deduction
- ---------
* No cost of insurance charge is deducted on or after the Policy Anniversary
when the age of the insured(s) is equal to 100.
** For Policies with initial premiums of $1,000,000 or more, the 0.40% sales
charge and 0.25% premium tax charge for the initial premium will be waived,
and the 0.35% Administrative Charge currently will be waived after the tenth
Policy Year.
Each charge, except the $2.50 Monthly Maintenance Charge, is calculated as a
percentage of cash value on the Monthly Deduction Date. Each charge is deducted
pro rata from the cash value in the Sub-Accounts.
The charges shown above may be changed to the following extent. The current
cost of insurance charges are guaranteed not to exceed the maximum cost of
insurance charges permitted under the 1980 Commissioners' Standard Ordinary
Smoker/Nonsmoker Tables (or multiples of or additives to, in the case of
substandard classifications). The rate of the state premium tax charge deducted
as part of the Monthly Deduction will be adjusted downward proportionately if
cash value increases as a result of an additional payment. The sales charge also
will be monitored so that the total dollar amount deducted, as part of the
Monthly Deduction and any Surrender Charge, does not exceed 9.0% of the initial
premium. The Administrative Charge is guaranteed not to exceed an annual rate of
0.35% of cash value. The $2.50 Monthly Maintenance Charge will apply only if
cumulative premiums paid are less than $50,000, and will terminate if cumulative
premiums paid exceed $50,000.
-- CHARGES DEDUCTED FROM ELIGIBLE FUND ASSETS. The value of shares of the
Eligible Funds reflect charges and deductions from assets for investment
advisory services and fund operating expenses.
A-10
<PAGE>
ANNUAL SERIES OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE CAP OR EXPENSE DEFERRAL)*
<TABLE>
<CAPTION>
LOOMIS MORGAN LOOMIS WESTPEAK
SAYLES STANLEY ALGER SAYLES DAVIS WESTPEAK GROWTH
SMALL INTERNATIONAL EQUITY AVANTI VENTURE STOCK AND
CAP MAGNUM GROWTH GROWTH VALUE INDEX INCOME
SERIES EQUITY SERIES SERIES SERIES SERIES SERIES SERIES
------ ------------- ------ ------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee . . . 1.00% .90% .75% .70% .75% .25% .70%
Other Expenses . . . -- .40% .15% .15% .15% .15% .15%
----- ----- ---- ---- ---- ---- ----
Total Operating
Expenses. . . . . 1.00% 1.30% .90% .85% .90% .40% .85%
===== ===== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
SALOMON
BROTHERS BACK BAY SALOMON BACK BAY
BACK BAY LOOMIS STRATEGIC ADVISORS BROTHERS ADVISORS
ADVISORS SAYLES BOND BOND U.S. MONEY
MANAGED BALANCED OPPORTUNITIES INCOME GOVERNMENT MARKET
SERIES SERIES SERIES SERIES SERIES SERIES
-------- -------- ------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management Fee . . . .50% .70% .65% .40% .55% .35%
Other Estimated
Expenses . . . . . . .12% .15% .20% .12% .15% .15%
---- ---- ---- ---- ---- ----
Total Estimated
Operating
Expenses . . . . .62% .85% .85% .52% .70% .50%
==== ==== ==== ==== ==== ====
</TABLE>
- ---------
* The Total Series Operating Expenses are based on the amount of such expenses
applied against assets at December 31, 1996, after giving effect to a
voluntary expense cap or expense deferral in effect for 1997. For the Loomis
Sayles Small Cap Series, Total Series Operating Expenses take into account a
voluntary cap on expenses by TNE Advisers, Inc. ("TNE Advisers"), the Series'
investment adviser, which will bear all expenses that exceed 1.00% of average
daily net assets. In the absence of this cap or any other expense
reimbursement arrangement, Total Series Operating Expenses for the Loomis
Sayles Small Cap Series for the year ended December 31, 1996 would have been
1.29 %. Total Series Operating Expenses for the Loomis Sayles Avanti Growth,
Westpeak Stock Index, Westpeak Growth and Income, Back Bay Advisors Managed,
Back Bay Advisors Bond Income and Back Bay Advisors Money Market Series are
after giving effect to a voluntary expense cap. For each of these Series, TNE
Advisers will bear those expenses (other than the management fee) that exceed
0.15% of average daily net assets. Without this cap or any other expense
reimbursement arrangement, Total Series Operating Expenses for the Loomis
Sayles Avanti Growth, Westpeak Stock Index and Westpeak Growth and Income
Series for the year ending December 31, 1996 would have been 0.92 %, 0.50% and
0.91%, respectively. For the six other Series shown, the Total Series
Operating Expenses are after giving effect to a voluntary expense deferral.
Under the deferral, expenses that exceed a certain limit are paid by TNE
Advisers in the year in which they are incurred and transferred to the Series
in a future year when actual expenses of the Series are below the limit. The
limit on expenses for each of these Series is: 1.30% of average daily net
assets for the Morgan Stanley International Magnum Equity Series; .90% of
average daily net assets for the Alger Equity Growth and Davis Venture Value
Series; .85% of average daily net assets for the Loomis Sayles Balanced and
Salomon Brothers Strategic Bond Opportunities Series; and .70% of average
daily net assets for the Salomon Brothers U.S. Government Series. Absent the
expense deferral, Total Series Operating Expenses for these Series for the
year ended December 31, 1996 would have been: 1.66 % for Morgan Stanley
International Magnum Equity Series, 0.96 % for Davis Venture Value Series,
0.99 % for Loomis Sayles Balanced Series, 1.19 % for Salomon Brothers
Strategic Bond Opportunities Series and 1.37 % for Salomon Brothers U.S.
Government Series. The expense cap and expense deferral arrangements are
voluntary and may be terminated at any time. (See attached prospectus of the
New England Zenith Fund for more complete information.)
-- SURRENDER CHARGE. If the Policy is surrendered or lapses or a partial
surrender is taken during the first nine Policy Years (the Surrender Charge
Period), a Surrender Charge may be deducted. The Surrender Charge is a
deferred sales charge. The amount of this charge declines over the course
of the Surrender Charge Period. The table below shows the Surrender Charge
as a percentage of the portion of the amount surrendered subject to the
Surrender Charge:
A-11
<PAGE>
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
- ----------- --------
<S> <C>
1 . . . . . . . . . . . . 8.0%
2 . . . . . . . . . . . . 8.0%
3 . . . . . . . . . . . . 7.0%
4 . . . . . . . . . . . . 6.0%
5 . . . . . . . . . . . . 5.0%
6 . . . . . . . . . . . . 4.0%
7 . . . . . . . . . . . . 3.0%
8 . . . . . . . . . . . . 2.0%
9 . . . . . . . . . . . . 1.0%
10 . . . . . . . . . . . . 0.0%
</TABLE>
The Surrender Charge is deducted from the amount surrendered.
During the Surrender Charge period, a partial surrender is taken first from
the "preferred surrender amount" free of any Surrender Charge and then from the
cash value subject to the Surrender Charge. The "preferred surrender amount" is
equal to the greater of (a) cash value on the date of surrender in excess of the
initial premium paid (minus any previous partial surrenders attributable to the
initial premium) and (b) 10% of the initial premium paid (minus previous partial
surrenders in that Policy Year). If you make a full surrender during the
Surrender Charge Period, the preferred surrender amount will be deducted from
the amount of the full surrender before the Surrender Charge is calculated.
For more information concerning the Surrender Charge, see "Surrender Charge."
For more information concerning the charges and expenses associated with the
Policy, see "Charges and Expenses."
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 its agent. Insurance coverage ends as soon as the Policy is returned
(as determined by its postmark, if the Policy is mailed). If you choose to
cancel the Policy, NELICO will refund any premiums paid (or any other amount
that is required by state insurance law) with interest at the rate currently in
use by NELICO.
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NEVLICO'S ADMINISTRATIVE 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. NELICO was formerly a wholly-owned subsidiary of New England Mutual
Life Insurance Company ("The New England"). Effective August 30, 1996, The New
England merged into MetLife, a mutual insurance company whose principal office
is on Madison Avenue, New York, NY 10010. With the merger, The New England's
separate corporate existence ended, and MetLife became the parent of
A-12
<PAGE>
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 501 Boylston Street, Boston,
Massachusetts 02116. NELICO's mailing address is: P.O. Box 9116, Boston,
Massachusetts 02117.
PREMIUMS
APPLYING FOR A POLICY
Individuals wishing to purchase a Policy must submit an application and
provide evidence of insurability of the proposed insured(s). The initial premium
also must be paid before the Policy is issued. A Single Life Policy will be
issued for an insured only if the insured is between the issue ages of 20 to 80
and satisfies our insurability requirements. A Last Survivor Policy will be
issued on two insureds only if each of them is between the issue ages of 20 and
80 and each of them satisfies our insurability requirements. The ages of the two
insureds may not be more than nine years apart on the Policy Date.
Before accepting an application, NELICO conducts underwriting to determine
insurability. The amount of the initial premium and the age of the insured(s)
determines whether the insured initially may qualify for "simplified
underwriting" at issue, which entails completion of a written questionnaire
concerning the insured's health but does not entail a medical examination, or
more detailed underwriting.
NELICO reserves the right to reject an application or premium for any reason.
If a Policy is not issued, any premium payment submitted will be returned to you
plus interest at the rate currently in use by NELICO. If a Policy is issued, the
Policy will be effective on the Policy Date.
PREMIUM PAYMENTS
The minimum initial premium for a Policy is $10,000. You may purchase a Policy
with the proceeds of another life insurance policy, provided that the following
conditions are met. First, the applicable application forms must be completed.
Second, if the value to be applied from the existing policy to a Policy is
subject to a policy loan, then an additional amount of at least $10,000 (above
the amount of the policy loan) must be submitted as part of the initial premium,
and any loan remaining against the new Policy cannot exceed 40% of the cash
value of the Policy at issue. It may not be advantageous to replace existing
insurance with a Policy.
Additional payments may be made until the age of the insured(s) is equal to
100, subject to our underwriting requirements and the following rules. Except
with respect to additional payments required in a grace period (see "Lapse and
Reinstatement"), an additional payment must be at least $1,000, and only one
additional payment may be made each Policy Year beginning with the second Policy
Year. You may pay premiums by check or money order. A payment received after
issuance of the Policy while a loan is outstanding generally is treated first as
repayment of Policy loan interest, second as repayment of a Policy loan, and
last as an additional payment, unless you designate otherwise in writing when
submitting the payment to NELICO. (See "Effect of Policy Loan.") If you have a
Policy loan, it may be more advantageous to repay the loan than to make an
additional payment, because an additional payment is subject to sales and state
premium tax charges, whereas the loan repayment is not subject to any charges.
(See "Loan Privilege" and "Deductions from Premiums.")
No additional payments may be made on or after age 100 of the insured(s),
except as may be required in a grace period. (See "Lapse and Reinstatement.")
The tax consequences associated with continuing a Policy beyond age 100 of the
insured(s) are unclear. A tax advisor should be consulted on this issue.
If acceptance of an additional payment would immediately increase the death
benefit by more than it would increase the cash value, we will require
satisfactory evidence of insurability before accepting it. If the payment would
not so affect the death benefit, we will accept it without underwriting.
However, we reserve the right to reject
A-13
<PAGE>
an additional payment for any reason. If an additional payment is accepted,
NELICO will credit your net additional payment, after deductions for sales and
state premium tax charges, to your Policy's cash value as of the date the
payment is received at NELICO's Home Office, if underwriting was not required,
or the date underwriting was completed if underwriting was required. (See
"Allocation of Premiums," "Charges and Expenses," and "Receipt of Communications
and Payments at NELICO's Home Office.")
If an additional payment is accepted, a proportional downward adjustment will
be made in the rate of the state premium tax charge deducted as part of the
Monthly Deduction. (See "Charges and Expenses" and Appendix C.)
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 its agent. Insurance coverage ends as soon as the Policy is returned
(as determined by its postmark, if the Policy is mailed). If you choose to
cancel the Policy, NELICO will refund any premiums paid (or any other amount
that is required by state insurance law) with interest at the rate currently in
use by NELICO.
LAPSE AND REINSTATEMENT
As a single premium policy, the Policy is designed to be fully paid-up when
issued. Accordingly, it will not lapse, regardless of adverse investment
experience, unless there are excessive Policy loans. See "Policy Loans." If a
Policy loan is outstanding, and the net cash value on a Monthly Deduction Day is
not enough to cover the entire Monthly Deduction for that Policy Month, the
Policy will be in default. NELICO will notify you of the amount due to continue
the Policy. The Policy provides a 62-day grace period from the date the Monthly
Deduction was due (unless otherwise provided by state law) for paying an
additional payment in an amount sufficient to cover three months of Monthly
Deductions and loan interest due after the notice is sent. During the grace
period, insurance coverage continues under your Policy, but if the insured dies
(in the case of a Last Survivor Policy, if the last surviving insured dies)
before the grace period payment is made, NELICO will deduct from the death
proceeds the portion of the unpaid Monthly Deduction(s) for the period prior to
the date of death.
If your Policy has lapsed, it may be reinstated within seven years after the
date of lapse. If more than seven 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 requires evidence of insurability that is satisfactory to NELICO. If a
Policy lapses and is reinstated, the period the Policy was lapsed will not count
for purposes of determining (i) the Surrender Charge on any date after
reinstatement; (ii) whether the ten-year period during which the Monthly
Deduction includes deductions for sales charges and state premium taxes is in
effect; and (iii) whether the ten-year period during which higher administrative
charges are deducted is in effect. For the purpose of determining the dates on
which the minimum guaranteed death benefit will be recalculated, the period the
Policy was lapsed will count. If the minimum guaranteed death benefit would have
been recalculated during the period the Policy was lapsed, it will be
recalculated upon reinstatement.
ALLOCATION OF PREMIUM PAYMENTS AND TRANSFER OF CASH VALUE
ALLOCATION OF PREMIUM PAYMENTS
The initial premium will be allocated to the Money Market Sub-Account as of
the latest of the Policy Date, the date when the last Part II of the application
for the Policy or the Supplement to the Part I Application is signed, if any is
required, and the date the initial premium is received by NELICO. NELICO will
mail you a confirmation for the initial premium (see "Right to Return the
Policy") when your application for the Policy has been approved and the initial
premium has been received, and fifteen days after the confirmation has been
mailed, the cash value in the Money Market Sub-Account will be allocated to the
Sub-Accounts according to your instructions. (See "Investment
A-14
<PAGE>
Options.") Therefore, your selection of Sub-Accounts in the application does not
take effect until after the end of the initial period described above, during
which the cash value is allocated to the Money Market Sub-Account.
Allocations of premium can be made to a maximum of 10 Sub-Accounts at any one
time. A minimum of 10% of the premium must be allocated to each Sub-Account
selected. Percentages allocated must be whole numbers.
You select the initial premium allocation when you apply for a Policy. This
allocation will be used for any additional payments, unless you specify
otherwise when submitting the payment. You also may change the allocation
instructions for future payments at any time thereafter, provided that your
Policy's cash value is distributed among no more than 10 Sub-Accounts at any one
time. The change will be effective for additional payments accepted on or after
the date when NELICO receives your instructions. The portion of an additional
payment to be applied to each Sub-Account chosen must be a whole percent not
less than 10. You may change your instructions by telephone or by written
request in a form satisfactory to NELICO. (See "Receipt of Communications and
Payments at NELICO's Home Office.") See "Requests" below for information on how
to request a transfer or reallocation by telephone.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
The initial premium is first invested under the Policy as of the investment
start date. The investment start date is the latest of: the date when NELICO
first receives the premium for the Policy, the date when the last Part II of the
Policy application or the Supplement to the Part I Application is signed, if any
is required, and the Policy Date. (For this purpose only, receipt of the premium
means receipt by a NELICO agent or, if a broker-dealer other than New England
Securities Corporation ("New England Securities") is involved, by NELICO.)
If you pay the initial premium with the application or during the underwriting
process, the Policy Date is the later of the date when the last Part II of the
application or the Supplement to the Part I Application is signed, if any is
required, and receipt of the premium payment. In this case the Policy Date and
investment start date are the same. (In such cases, the initial premium will be
maintained by NELICO or an affiliate in the general account, and will not earn
interest prior to the investment start date.)
If you pay the initial premium with the application, the insured will be
covered under a temporary insurance agreement for a limited period that is
described in the temporary insurance agreement form. Generally, coverage under
the temporary insurance agreement begins on the later of the date when NELICO
receives the premium payment for the Policy and the date when the last Part II
of the application or the Supplement to the Part I Application is signed, if any
is required. The maximum amount of coverage provided is the lesser of the amount
of insurance applied for and $500,000 for standard and preferred risks ($250,000
for substandard risks and $50,000 for persons who are determined to be
uninsurable). There may be variations to these provisions required by state law.
If a Policy is issued, Monthly Deductions, including cost of insurance
charges, begin as of the first Monthly Deduction 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 plus
interest at the rate currently in use by NELICO.
If you do not submit the initial premium with the application or during the
underwriting process, the Policy Date will generally be the date NELICO receives
the initial premium payment for the Policy and will be the same as the
investment start date. However, at your request and under limited circumstances,
NELICO may assign your Policy a Policy Date that is prior to the investment
start date in this situation. No charges will be deducted and no interest will
be credited to the Policy for the period between the Policy Date and the
investment start date.
TRANSFER OPTION
Beginning fifteen days after NELICO mails the confirmation for the initial
premium, you may transfer your Policy's cash value among the Sub-Accounts.
Currently, you are permitted twelve transfers each Policy Year without
A-15
<PAGE>
NELICO's consent. You will never be permitted less than four transfers each
Policy Year without NELICO's consent (except for Policies issued in New York,
where the minimum number of transfers permitted each Policy Year will never be
less than twelve). Currently, NELICO's rules for transfers require that the
amount transferred from any Sub-Account must be at least $100. (If the full
amount of cash value in a Sub-Account is less than $100, that full amount may be
transferred). Currently, all transfers are subject to a maximum of $500,000 per
transfer. In applying the $500,000 limit, NELICO will treat as one transfer all
transfers that you request on the same day for all Policies you own. If the
$500,000 limitation is exceeded for multiple transfers requested on the same day
that are treated as a single transfer, no amount of the transfer will be
executed by NELICO.
A 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.") However, you should be aware that because transfer
limitations may prevent you from making a transfer on the date you want to, your
Policy's cash value may in the future be lower than it would have been had the
transfer been made on the desired date.
For transfers that NELICO determines to be based on "market-timing" (e.g.,
transfers under different Policies that are being requested under Powers of
Attorney with a common attorney-in-fact or that are in NELICO's determination
based on the recommendation of a common investment adviser or broker-dealer),
the current transfer limitation is one transfer every 30 days, each transfer
subject to a maximum of $500,000. In applying the limitation of one $500,000
transfer every 30 days, NELICO will treat as one transfer all transfers
requested under different Policies that are being requested under Powers of
Attorney with a common attorney-in-fact or that are, in NELICO's determination,
based on the recommendation of a common investment adviser or broker-dealer. If
the $500,000 limitation is exceeded for multiple transfers requested on the same
day that are treated as a single transfer, no amount of the transfer will be
executed by NELICO. If a transfer is executed under one Policy and, within the
next 30 days, a transfer request for another Policy is determined by NELICO to
be related to the executed transfer under this paragraph's rules, the transfer
request will not be executed by NELICO. (In order for it to be executed, it
would need to be requested again after the 30-day period and it, along with any
other transfer requests that are collectively treated as a single transfer,
would need to total no more than $500,000).
NELICO's interest in applying these limitations on the maximum number and size
of transfers is to protect the interests of both Policy Owners who are not
engaging in significant transfer activity and Policy Owners who are engaging in
such activity. NELICO has determined that the actions of Policy Owners engaging
in significant transfer activity among Sub-Accounts may cause an adverse effect
on the performance of the underlying Eligible Funds. The movement of significant
Sub-Account values from one Sub-Account to another may prevent the appropriate
Eligible Fund from taking advantage of investment opportunities because it must
maintain a significant cash position in order to handle redemptions. Such
movement may also cause a substantial increase in Eligible Fund transaction
costs that must be indirectly borne by Policy Owners.
Policy Owners will be notified, in advance, of any change in the limitation on
the number or amount of transfers.
See "Transfer and Reallocation Requests" for information regarding transfers
made by written request and by telephone.
Your Policy's cash value may be distributed among no more than ten
Sub-Accounts at any one time.
DOLLAR COST AVERAGING
NELICO offers an automated transfer privilege referred to here as dollar cost
averaging. The main objective of dollar cost averaging is to shield investments
from short term price fluctuations. Since the same dollar amount is transferred
to selected Sub-Accounts each month, over time more purchases of Eligible Fund
shares are made when the value of those shares is low, and fewer shares are
purchased when the value is high. As a result, a lower
A-16
<PAGE>
than average cost of purchases may be achieved over the long term. This plan of
investing allows Owners to take advantage of investment fluctuations, but does
not assure a profit or protect against a loss in declining markets.
Under this feature you may request that a certain amount of your cash value be
transferred on any selected business day of each month (or if not a day when the
New York Stock Exchange is open, the next such day), from any one Sub-Account to
one or more of the other Sub-Accounts, subject to the limitation that cash value
may not be allocated to more than 10 of the Sub-Accounts at any one time. A
minimum of $100 must be transferred to each Sub-Account that you select under
this feature. Currently, transfers made under the dollar cost averaging program
will not be counted against the 12 transfers that may be made each year. You may
select a dollar cost averaging program when you apply for the Policy or at a
later date by contacting NELICO's Administrative Office. You may not participate
in the dollar cost averaging program while you are participating in the asset
rebalancing program. (See "Asset Rebalancing" below). You may cancel your use of
the dollar cost averaging program at any time prior to the monthly transfer
date. Transfers will continue until you notify us to stop making transfers or
there no longer is sufficient cash value in the Sub-Account from which you are
transferring cash value.
ASSET REBALANCING
NELICO offers an asset rebalancing program for cash value. Cash value
allocated to the Sub-Accounts can be expected to increase or decrease at
different rates. An asset rebalancing program automatically reallocates your
cash value among the Sub-Accounts each quarter to return the allocation to the
allocation percentages you specify. Asset rebalancing is intended to transfer
cash value from those Sub-Accounts that have increased in value to those that
have declined, or not increased as much, in value. Over time, this method of
investing may help a Policy Owner "buy low and sell high," although there can be
no assurance that this objective will be achieved. Asset rebalancing does not
guarantee profits, nor does it assure that an Owner will not have losses.
You may select an asset rebalancing program when you apply for the Policy or
at a later date by contacting NELICO's Home Office. You specify the percentage
allocations according to which your cash value will be reallocated among the
Sub-Accounts. You may not participate in the asset rebalancing program while you
are participating in the dollar cost averaging program. (See "Dollar Cost
Averaging" above). On the last day of each calendar quarter on which the New
York Stock Exchange is open, we will transfer cash value among the Sub-Accounts
to the extent necessary to return the allocation to your specifications. Asset
rebalancing will continue until a written or telephone request to terminate is
received at NELICO's Home Office. Currently, transfers made under an asset
rebalancing program are not counted for purposes of the transfer rules described
above.
TRANSFER AND REALLOCATION REQUESTS
You may request a Sub-Account transfer or change the allocation of net
additional payments 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 each
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.
DEATH BENEFIT
If the insured under a Single Insured Policy dies, NELICO will pay a death
benefit to the beneficiary. In the case of a Last Survivor Policy, no death
benefit will be paid unless and until both insureds have died.
A-17
<PAGE>
HOW THE DEATH BENEFIT IS DETERMINED. The death benefit payable on any day is
the greater of the variable death benefit and the minimum guaranteed death
benefit. The variable death benefit is determined by dividing the Policy's cash
value by the applicable net single premium set by the Internal Revenue Code. Net
single premiums are based on the age, sex and smoker/nonsmoker status of the
insured at the time of the calculation and decline over time. Set forth below
are net single premiums for selected ages of male and female, nonsmoker
insureds.
<TABLE>
<CAPTION>
NET SINGLE PREMIUM
--------------------------------
AGE MALE NONSMOKER FEMALE NONSMOKER
- --- -------------- ------------------
<S> <C> <C>
30 . . . . . .19992 .17824
40 . . . . . .27992 .24926
50 . . . . . .38723 .34338
60 . . . . . .52085 .46422
70 . . . . . .66655 .61117
</TABLE>
As an example of how the variable death benefit is calculated, assume that the
cash value of a Policy held by a 40-year-old male nonsmoker is $10,000. The
variable death benefit would be $35,724 ($10,000 divided by the applicable net
single premium of .27992).
MINIMUM GUARANTEED DEATH BENEFIT
The minimum guaranteed death benefit guarantees, regardless of investment
performance, that as long as there is not an "excess Policy loan," the death
benefit will never be less than the initial premium paid plus additional
payments, less adjustments for partial surrenders. On the Policy Date, the
minimum guaranteed death benefit is equal to the initial premium paid.
Thereafter, the minimum guaranteed death benefit will be increased by each
additional payment, and decreased proportionately by any partial surrenders. The
reduction at the time of a partial surrender will be based on the ratio of the
cash value after the surrender to the cash value before the surrender. (See
Appendix D for an example illustrating the effect of a partial surrender on a
Policy.) At the end of the fifth Policy Year and every five years thereafter
until the insured is (or insureds are) age 75, the guaranteed death benefit will
be recalculated. On each of these days, the guaranteed death benefit is equal to
the greater of: (i) the guaranteed death benefit before the recalculation; and
(ii) the cash value on the date of recalculation.
If, however, an "excess Policy loan" exists, the Policy may terminate. (See
"Loan Privilege" for the definition of "excess Policy loan.")
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the amount of
the death benefit determined on the date of the insured's death, reduced by any
Policy loan balance as of that date and by a pro rata portion of the Monthly
Deduction for the portion of the Policy month elapsed since the last deduction
prior to that date.
The death proceeds may also be adjusted if the insured's age (or an insured's
age under a Last Survivor Policy) was misstated in the application, if death
results from the insured's suicide (or an insured's suicide under a Last
Survivor Policy) 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.")
PAYMENT OF DEATH BENEFIT PROCEEDS
Death benefit proceeds 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. (See
"Payment of Proceeds" and "Payment Options.") Death benefit proceeds also 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.
A-18
<PAGE>
CASH VALUE AND CASH VALUE BENEFITS
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account and,
if you have an outstanding Policy loan, in NELICO's general account as a result
of the loan. (See "Loan Privilege.") The cash value reflects premium payments,
the net investment experience of the Policy's Sub-Accounts, interest credited on
amounts held in the general account as a result of a loan, amounts deducted for
Policy charges (including Monthly Deductions and any Surrender Charge that
applies if you make a partial surrender), partial surrenders and transfers among
the Policy's Sub-Accounts.
Your Policy's net cash value is the cash value on any day, reduced by any
Policy loan balance and also reduced by any applicable Surrender Charge. (See
"Loan Privilege," "Surrender Charge," and "Monthly Deduction Deducted from Cash
Value".) If you surrender your Policy, the net cash value will be reduced by the
applicable portion of the Monthly Deduction for the period from the last
deduction to the date of surrender.
The amount provided for investment in the Policy (i.e., the cash value) 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. The Policy's cash value
in the Variable Account may increase or decrease daily depending on the net
investment experience of the Policy's Sub-Accounts. Unfavorable investment
experience can reduce the net cash value to zero. Because there is no guaranteed
minimum cash value in the Variable Account, you bear the entire investment risk
with respect to cash value in the Variable Account.
NET INVESTMENT EXPERIENCE. The net investment experience of the Policy's
Sub-Accounts will affect the Policy's cash value and, in most 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. Currently, NELICO does not deduct any charges
from the Variable Account for federal or state income taxes with respect to
earnings or capital gains that may be attributable to the Variable Account.
Should NELICO determine that this type of tax will be imposed, NELICO may make
deductions from the Variable Account to pay these taxes. The imposition of such
taxes would result in a reduction of your cash value. See "Daily Charges
Deducted from Variable Account Assets" and "Charges Deducted from Eligible Fund
Assets.")
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during the
period. Dividends and capital gains distributions on Eligible Fund shares are
reinvested in additional shares of the Eligible Fund and affect subsequent
investment experience.
LOAN PRIVILEGE
You may borrow all or part of the Policy's "loan value" once fifteen days have
elapsed after we mail the confirmation for the initial premium. NELICO will make
the loan as of the date when a loan request is received at its Home Office. (See
"Receipt of Communications and Payments at NELICO's Home Office.") You should
contact NELICO's Home Office or a NELICO agent for information regarding the
procedures to follow for requesting a loan.
The Policy's loan value is equal to 90% (or more where required by state law)
of: the Policy's cash value minus the surrender charge. The amount of loan value
available to be borrowed at any time is reduced by the amount of any Policy loan
balance.
A Policy loan may result in adverse tax consequences. (See "Tax
Considerations.")
A-19
<PAGE>
EFFECT OF POLICY LOAN. When Policy loan proceeds are paid to you, cash value
in the amount of the loan is taken from the Sub-Accounts and transferred to
NELICO's general account as collateral for the loan. When you make a loan
repayment, cash value held as collateral is transferred from the general account
back to the Sub-Accounts, and thereby increases the cash value in the
Sub-Accounts by the amount of the repayment. Unless you specify a different
allocation, cash value transferred for a Policy loan is taken from the
Sub-Accounts of the Variable Account in proportion to the cash value in each.
All loan repayments are allocated, unless you request otherwise, to repay the
loans made against the Sub-Accounts of the Variable Account in proportion to the
cash value in each.
The interest rate charged on Policy loans is 6.0% per year, accrues daily, and
is due on the Policy Anniversary. If not paid at that time, the interest accrued
on the loan is added to the loan, and an amount equal to the unpaid interest is
deducted from the Policy's cash value in the Sub-Accounts in proportion to the
amount in each. Amounts taken as collateral for a loan earn interest at not less
than a 5.25% rate per year. Currently, on preferred loans, the rate credited is
a 6.0% annual rate. "Preferred loans" are loans that represent an amount less
than or equal to the excess of cash value over premiums paid (as adjusted for
any partial surrenders). Interest earned on amounts held in NELICO's general
account as collateral for a Policy loan is credited to the Policy's Sub-Accounts
on the Policy Anniversary, in proportion to the cash value in each.
The amount taken from the Policy's Sub-Accounts as a result of a loan does not
participate in the investment experience of the Sub-Accounts. Therefore, the
death benefit and cash value of the Policy can be permanently affected by a
Policy loan, even if it is repaid. In addition, any proceeds payable under a
Policy are reduced by the amount of any outstanding Policy loan balance.
The following procedures will be applied to payments received while a Policy
loan is outstanding. Such a payment is treated first as a repayment of Policy
loan interest, then as repayment of a Policy loan, and last as an additional
payment (if no previous additional payment has been made in that Policy Year),
unless you designate otherwise in writing to NELICO. (If a previous additional
payment has been made in that Policy Year, the portion of the payment in excess
of any outstanding Policy loan balance will be returned). If a Policy loan is
outstanding, it may be more advantageous to repay the loan than to make an
additional payment, because an additional payment is subject to sales and state
premium tax charges, and the loan repayment is not subject to charges.
If a Policy loan is outstanding, and the net cash value on a Monthly Deduction
Day is not enough to cover the entire Monthly Deduction for the Policy Month,
NELICO will notify you that the Policy is going to terminate unless a sufficient
payment is made within the 62-day grace period. (This situation is referred to
as an "excess Policy loan.") The Policy will terminate without value 62 days
after the notice is mailed (unless otherwise provided by state law) unless a
sufficient amount is paid to NELICO within that time. (See "Lapse and
Reinstatement.") If the Policy lapses with a loan outstanding, adverse tax
consequences may result. (See "Tax Considerations" below.)
If you purchase a Policy with the proceeds of another life insurance policy
that has an outstanding policy loan (see "Premium Payments"), the following
conditions must be met. First, the applicable application forms must be
completed. Second, if the value to be applied from the existing policy to a
Policy is subject to a policy loan, then an additional amount of at least
$10,000 (above the amount of the policy loan) must be submitted as part of the
initial premium, and any loan remaining against the new Policy cannot exceed 40%
of the cash value of the Policy at issue. It may not be advantageous to replace
existing insurance with a Policy.
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") and certain TSA Plans qualifying under Section 403(b) of 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
A-20
<PAGE>
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, less the applicable portion
of the Monthly Deduction to the date of surrender, at any time while the insured
(or at least one insured under a Last Survivor Policy) is living by submitting a
request conforming to NELICO's administrative procedures. The net cash value of
the surrendered Policy is determined as of the date when a surrender request is
received at NELICO's Home Office. (See "Receipt of Communications and Payments
at NELICO's Home Office.") The net cash value equals the cash value, reduced by
any Policy loan balance and also reduced by any applicable Surrender Charge (see
"Surrender Charge"). Upon surrender, the applicable portion of the Monthly
Deduction will be deducted from net cash value. (See "Monthly Deduction Deducted
from Cash Value.") You may elect in writing to have all or part of the surrender
amount applied to a payment option. (See "Payment Options.") A surrender may
result in adverse tax consequences. (See "Tax Considerations.")
When you make a full surrender, the requested surrender amount is taken first
from the preferred surrender amount. For more information about the preferred
surrender amount, see "Surrender Charge."
PARTIAL SURRENDERS
You may make a partial surrender of cash value once fifteen days have passed
after we mail the confirmation for the initial premium payment, subject to the
following rules and limits. In each Policy Year, partial surrenders will be
limited, except with the consent of NELICO, to: 20% of the net cash value on the
day the first partial surrender is made for the Policy Year; or, if less, the
Policy's loan value less the amount of any Policy loan balance on that day. The
minimum amount for a partial surrender is $500. Currently, NELICO does not limit
the maximum amount of a partial surrender as long as the cash value immediately
after the partial surrender is at least $10,000. A partial surrender made in
excess of the preferred surrender amount may be subject to a Surrender Charge.
(See "Surrender Charge" and "Monthly Deduction.") If any charges apply, they
will be deducted from the amount requested to be surrendered. There are no
limits on the number of partial surrenders that may be made during a Policy
Year. However, there are tax consequences. (See "Tax Considerations.")
When you make a partial surrender, the requested surrender amount is taken
first from the preferred surrender amount. For more information about the
preferred surrender amount, see "Surrender Charge."
EFFECT OF PARTIAL SURRENDER ON CASH VALUE AND DEATH BENEFIT. A partial
surrender reduces the minimum guaranteed death benefit based on the ratio of the
cash value immediately after the partial surrender to the cash value just before
the partial surrender. See "Death Benefit" and Appendix D.
You should be aware that the net cash value paid upon a partial surrender may
not be reinvested in the Policy except as additional payments, which are subject
to the charges described under "Charges and Expenses."
The amount paid to you as the result of a partial surrender is equal to the
amount requested to be surrendered less any amount deducted for the Surrender
Charge. The applicable portion of the Monthly Deduction (based on the portion of
the Policy Month elapsed and on the proportion of cash value withdrawn) will be
deducted from the cash value remaining. (See "Surrender Charge" and "Monthly
Deduction Deducted from Cash Value.") Unless you specify a different allocation,
the partial surrender is effected by reducing the Policy's cash value in the
Sub-Accounts in proportion to the amount of cash value in each. The amount of
net cash value paid upon partial surrender is 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
a NELICO
A-21
<PAGE>
agent or the Home Office. (See "Receipt of Communications and Payments at
NELICO's Home Office," "Payment of Proceeds," and "Payment Options.")
SPECIAL RULES FOR POLICIES PURCHASED FOR A TSA PLAN
A Policy may be purchased for a tax-sheltered annuity program under Section
403(b) of the Internal Revenue Code ("TSA Plan"). To satisfy the provisions of
Section 403(b), certain restrictions will apply to the surrender and Policy loan
benefits described in this prospectus. In particular, the owner will not be
permitted to make withdrawals prior to age 59 1/2, except in the situation where
the Owner terminates employment, becomes disabled (as defined by the Code),
encounters financial hardship or dies. Also, at the later of retirement of the
Owner or April 1 of the calendar year following the year in which the Owner
attains age 70 1/2, the Owner will be required to surrender the Policy or apply
the cash value to a settlement option or other distribution method. Special
rules also apply to distributions made upon the Owner's death.
In addition, any Policy loans taken generally must be repaid within 5 years
from the date of the loan on a level basis (a longer repayment period is
permitted if the loan is to acquire a principal residence); otherwise the loans
may be treated as taxable distributions includible in gross income in the year
in which the loan proceeds are received. The amount that may be borrowed is
limited. 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) 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 or permanently confined to a
nursing care facility, as defined in the rider and by the Internal Revenue Code,
you may request an accelerated payment of the Policy's death benefit. The
payment may be subject to discounting and charges. Payment will be subject to
evidence satisfactory to NELICO.
PAYMENT OF PROCEEDS
NELICO will ordinarily pay any surrender, partial surrender, loan or death
benefit proceeds payable from the Sub-Accounts within seven days after receipt
at the Home Office of a request, or proof of death of an insured, in a form
satisfactory to NELICO. (See "Receipt of Communications and Payments at NELICO's
Home Office.") However, NELICO may delay payment (except when a loan is made to
pay a premium to NELICO) 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) if the SEC orders the Variable Account or orders the
Zenith Fund or its successor or any other Eligible Fund to postpone payment or
transfer of variable benefits.
NELICO may withhold payment of surrender, partial surrender or loan proceeds
to the extent that those proceeds are derived from a Policy Owner's check that
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, partial surrender or loan proceeds will be paid
when the Policy Owner's check 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.")
A-22
<PAGE>
PAYMENT OPTIONS
The Policy's death benefit and any partial surrender or surrender of 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:
(1) INCOME FOR A SPECIFIED NUMBER OF YEARS. Proceeds are paid in 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) LIFE INCOME FOR TWO LIVES. Proceeds will be paid in equal monthly
installments (i) while either of two payees is living, (ii) for the longer
of the life of the surviving payee or 10 years, or (iii) while the two
payees are living and, after the death of one payee, two-thirds of the
monthly amount for the life of the surviving payee will be paid.
NELICO's consent to use of an option is required if the installment payments
would be less than $20.
CHARGES AND EXPENSES
The following describes the various charges deducted under the Policy.
DEDUCTIONS FROM INITIAL PREMIUM. NELICO deducts no charges from the initial
premium before allocation to the Variable Account, although the Monthly
Deduction includes deductions for the first ten Policy Years for sales charges
and state premium taxes attributable to the initial premium, and a Surrender
Charge based on the initial premium may apply to surrenders or partial
surrenders during the Surrender Charge Period.
DEDUCTIONS FROM ADDITIONAL PAYMENTS. NELICO will deduct the following charges
from an additional payment before allocation of the net additional payment to
the Sub-Accounts you select:
-- 6.5% sales charge (reduced to 5.10% for Policies with initial premiums of
$1,000,000 or more).
-- 2.5% state premium tax charge.
A-23
<PAGE>
MONTHLY DEDUCTION DEDUCTED FROM CASH VALUE. NELICO deducts a charge from the
cash value on each Monthly Deduction Date after the Policy Date. This charge is
the aggregate of the following charges, shown below at their current annual
rates:
-- Cost of insurance charge,* currently ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class (0.70% to
1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class (0.40% to
1.60% for substandard risk class)
-- 0.35% Administrative Charge (currently reduced to 0.10% after the first ten
Policy Years)**
-- 0.40% sales charge (deducted during the first ten Policy Years only)**
-- 0.25% state premium tax charge (deducted during the first ten Policy Years
only)**
-- 0.90% mortality and expense risk charge
-- For Policies with cumulative premiums less than $50,000, a $2.50 Monthly
Maintenance Charge also is included in the Monthly Deduction.
- ---------
* No cost of insurance charge is deducted on or after the Policy Anniversary
when the age of the insured(s) is equal to 100.
** For Policies with initial premiums of $1,000,000 or more, the 0.40% sales
charge and 0.25% premium tax charge will be waived, and the 0.35%
Administrative Charge currently will be waived after the tenth Policy Year.
Each charge, except the $2.50 Monthly Maintenance Charge, is calculated as a
percentage of cash value (including cash value transferred to the general
account as collateral for Policy loans) in the following manner: first, all
charges, other than the cost of insurance charge, are calculated, based on the
cash value on the Monthly Deduction Date (before monthly charges are deducted,
but reflecting daily charges deducted from Eligible Fund Assets), and then
deducted. The cost of insurance charge is then calculated based on the cash
value for that date, as reduced by all other charges deducted that day. The
Monthly Deduction is deducted pro rata from the cash value in the Sub-Accounts.
DAILY CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT ASSETS. Currently, NELICO
does not deduct any charges from the Variable Account for federal or state
income taxes with respect to earnings or capital gains that may be attributable
to the Variable Account. Should NELICO determine that this type of tax will be
imposed, NELICO may make deductions from the Variable Account to pay these
taxes. The imposition of such taxes would result in a reduction of your cash
value.
CHARGES DEDUCTED FROM ELIGIBLE FUND ASSETS. The value of shares of the
Eligible Funds reflect charges and deductions from assets for investment
advisory services and fund operating expenses. See "Investment Management" and
the prospectus for the Zenith Fund for more information.
CHARGES DEDUCTED ON SURRENDER OR PARTIAL SURRENDER. If the Policy is
surrendered or lapses or a partial surrender is taken during the Surrender
Charge Period (the first nine Policy Years), a Surrender Charge may be deducted.
The Surrender Charge is a deferred sales charge. This charge declines over the
course of the Surrender Charge period. (See "Surrender Charge.") The Surrender
Charge is deducted from the Policy's available cash value, regardless of whether
that cash value is derived from premiums or investment experience.
Upon surrender, lapse or partial surrender, the applicable portion of the
Monthly Deduction (based on the portion of the Policy Month elapsed, and, in the
case of a partial surrender, on the proportion of cash value withdrawn) will
also be deducted from the cash value.
A-24
<PAGE>
The following section provides more information about the various charges
identified above.
SALES CHARGES. No sales charges are deducted from the initial premium before
allocation to the Sub-Accounts. However, except for certain Policies described
below, the Monthly Deduction includes a deduction taken during the first ten
Policy Years for sales charges attributable to the initial premium. This charge
is calculated as a percentage of cash value on each Monthly Deduction Date at an
annual rate of 0.40%. Also, if, during the first nine Policy years, you
surrender or lapse the Policy, or make a partial surrender, NELICO deducts a
Surrender Charge. (See "Surrender Charge.") In no event will the aggregate
amount deducted as part of the Monthly Deduction for sales charges plus the
Surrender Charge exceed 9% of the initial premium.
For Policies with initial premiums of $1,000,000 or more, the 0.40% sales
charge will be waived.
If a Policy lapses and is reinstated, the period the Policy was lapsed will
not count towards the ten-year period during which the Monthly Deduction
includes a deduction for sales charges.
If you make an additional payment, a maximum charge in the amount of 6.5% is
deducted from each additional payment for sales charges before allocation of the
net additional payment to the Sub-Accounts. For Policies with initial premiums
of $1,000,000 or more, this charge is reduced to 5.10%.
The sales charges deducted under a Policy 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 in the future reduce or eliminate the sales charge, when
you purchase a Policy, on cash value transferred in the first year, from life
insurance policies that were issued by The New England, NELICO or NELICO's
affiliates and 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, would also apply in these
situations. NELICO may, however, waive underwriting requirements in these
situations. NELICO may also reduce the Surrender Charge on such policies. Your
NELICO agent can advise you regarding the availability of this feature.
SURRENDER CHARGE. If, during the first nine Policy Years, a Policy is totally
surrendered or lapses or a partial surrender (other than a preferred partial
surrender) is made, NELICO deducts a Surrender Charge from the amount requested
to be surrendered. This charge is based on the portion of the initial premium
deemed to be surrendered in accordance with the following rules. When you make a
full or partial surrender, the requested surrender amount is taken first from
the preferred surrender amount. The "preferred surrender amount" is equal to the
greater of (a) cash value calculated on the date of surrender in excess of
initial premium paid (minus any previous partial surrenders attributable to the
initial premium) and (b) 10% of the initial premium paid (minus previous partial
surrenders in that Policy Year). No Surrender Charge applies to the preferred
surrender amount. If there has been negative investment performance under your
Policy (that is, cash value is less than your total premium payments because net
investment experience of the Sub-Accounts has not been at least equal to total
charges or has been negative), any Surrender Charge will be calculated by
deeming additional payments to have been reduced before the initial premium. If
negative investment performance has been deemed to completely reduce additional
payments and to further reduce initial premium, any subsequent increase in cash
value (from earnings or net additional payments) will be deemed to increase
initial premium before additional payments. Appendix C provides an example of
the effect of negative investment performance on Surrender Charges. The balance
of the requested surrender amount is subject to a Surrender Charge, which is
determined by multiplying the balance by the applicable percentage for the
Policy Year. The Surrender Charge period and the amount of the Surrender Charge
are shown in the following table:
A-25
<PAGE>
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
- ----------- --------
<S> <C>
1 . . . . . . . . . . . . 8.0%
2 . . . . . . . . . . . . 8.0%
3 . . . . . . . . . . . . 7.0%
4 . . . . . . . . . . . . 6.0%
5 . . . . . . . . . . . . 5.0%
6 . . . . . . . . . . . . 4.0%
7 . . . . . . . . . . . . 3.0%
8 . . . . . . . . . . . . 2.0%
9 . . . . . . . . . . . . 1.0%
10 . . . . . . . . . . . . 0.0%
</TABLE>
Any Surrender Charge deducted upon lapse is credited back to the Policy's cash
value upon reinstatement. The Surrender Charge on the date of reinstatement will
be the same as it was on the date of lapse. For purposes of determining the
Surrender Charge on any date after reinstatement, the period the Policy was
lapsed will not count.
STATE PREMIUM TAX CHARGE. Except for certain Policies described below, this
charge is deducted from your cash value in the Sub-Accounts on each Monthly
Deduction Date after the Policy Date for the first ten Policy Years, as part of
the Monthly Deduction. The annual rate of this charge is 0.25% of cash value. If
you make an additional payment, a charge in the amount of 2.5% is deducted from
the payment before allocation to the Sub-Accounts. Because the net additional
payment will have the immediate effect of increasing the cash value, the monthly
charge for state premium tax is proportionately adjusted downward to take into
account this increase. This adjustment in the rate for the monthly charge for
state premium taxes effectively means that it is not assessed against cash value
attributable to additional premiums. Appendix C provides an example illustrating
the effect of such an additional payment.
For Policies with initial premiums of $1,000,000 or more, the 0.25% monthly
charge for premium tax will be waived.
If a Policy lapses and is reinstated, the period the Policy was lapsed will
not count towards the ten-year period during which the Monthly Deduction
includes a deduction for state premium taxes.
The state premium tax charge is designed to reimburse NELICO for state premium
taxes and administrative expenses. Premium taxes vary from state to state and
the 2.5% charge reflects an average. Administrative expenses covered by this
charge include those related to premium tax and certain other state filings.
CHARGES UNDER POLICIES ISSUED TO NEW YORK RESIDENTS. The charges described
above apply to Policies issued to New York residents except as follows. No
deductions are made from additional payments for sales charge or premium tax.
However, the state premium tax charge deducted as part of the Monthly Deduction
is not adjusted after an additional premium is paid, and the surrender charge is
based on total premiums paid, rather than just the initial premium. With regard
to the surrender charge, the preferred surrender amount is the greater of (a)
cash value calculated on the date of surrender in excess of total premiums paid
(minus previous partial surrenders) and (b) 10% of premiums paid (minus previous
partial surrenders in that Policy Year). In any event, the total amount deducted
for sales charges will not exceed 9% of total premiums paid.
COST OF INSURANCE CHARGE. This charge is deducted from the Policy's cash value
in the Sub-Accounts on each Monthly Deduction Date after the Policy Date, as
part of the Monthly Deduction. This charge is not deducted on or after the
Policy Anniversary when the age of the insured(s) is equal to 100.
The cost of insurance charge covers the cost of providing insurance protection
under your Policy. Currently, the amount of this charge is based on the risk
class and issue age of the insured(s). (It does not currently vary by sex of the
insured(s), although it may in the future.) NELICO assigns insureds to risk
classes based on underwriting conducted when NELICO receives an application for
a Policy. Currently, NELICO assigns insureds to the following risk classes:
standard nonsmoker, standard smoker, substandard nonsmoker and substandard
smoker. Once a Policy is
A-26
<PAGE>
issued, an insured's risk class does not change except in the following
circumstances. If an additional payment is submitted that, if accepted, will
have the effect of increasing the death benefit, acceptance of the payment is
subject to underwriting review to determine whether the insured(s) qualify for
the same or a better risk class.
If the new risk class is better and has lower cost of insurance rates than the
original risk class, the risk class for the additional payment will be used for
cost of insurance charges under the entire Policy. If, however, the new risk
class has higher cost of insurance rates than the original risk class, NELICO
will decline the additional payment.
Currently, the cost of insurance charge for a Policy is calculated as a
percentage of the cash value on the Monthly Deduction Date. For a Single Life
Policy, the current charge is calculated based on whether the issue age is 70 or
less, or over 70, is a smoker or non-smoker, and has been assigned to a standard
or substandard risk class. The current monthly rates for these classes are
equivalent to the annual percentage rates shown in the following table:
<TABLE>
<CAPTION>
RATING CLASS AND ISSUE AGE NONSMOKER SMOKER
- -------------------------- --------- --------
<S> <C> <C>
Standard issue age 70 or less . . . . . . . . . . . 0.45% 0.75%
Standard over issue age 70 . . . . . . . . . . . . . 0.85% 1.25%
Substandard issue age 70 or less . . . . . . . . . . 0.70% 1.15%
Substandard over issue age 70 . . . . . . . . . . . 1.30% 1.90%
</TABLE>
In the case of a Last Survivor Policy, the current charge is calculated based
on whether the joint equal issue age is 70 or less, or over 70, the
smoker/nonsmoker status of each insured, and whether at least one insured is
substandard.
<TABLE>
<CAPTION>
NONSMOKER NONSMOKER SMOKER
RATING CLASS AND ISSUE AGE NONSMOKER SMOKER SMOKER
- -------------------------- --------- --------- --------
<S> <C> <C> <C>
Standard issue age 70 or less . . . . . . . 0.25% 0.40% 0.55%
Standard over issue age 70 . . . . . . . . . 0.65% 0.85% 1.05%
Substandard issue age 70 or less . . . . . . 0.40% 0.60% 0.85%
Substandard over issue age 70 . . . . . . . 1.00% 1.30% 1.60%
</TABLE>
For purposes of determining the current cost of insurance charge on a Monthly
Deduction Date, all other charges included in the Monthly Deduction are
calculated and deducted from the Policy's cash value, and then the applicable
cost of insurance percentage is applied to the cash value, as reduced by the
other charges.
The cost of insurance charge deducted on a Monthly Deduction Date is
guaranteed not to exceed the amount calculated using the guaranteed cost of
insurance rates set forth in the Policy for that date. The cost of insurance
charge for a Monthly Deduction Date determined using the guaranteed cost of
insurance rates is equal to the "net amount at risk" under the Policy,
multiplied by the cost of insurance rate for that date. The net amount at risk
is determined on the last day of the Policy Month. The net amount at risk equals
the death benefit on the first day of the month, minus the cash value on the
first day of the month, accumulated with interest at the monthly equivalent of
4.0% per year, and reduced by the guaranteed cost of insurance charge.
The guaranteed cost of insurance rate for a Monthly Deduction Date under a
Policy depends on the insured's sex, risk class, and age on the first day of a
Policy Year. Guaranteed cost of insurance rates applicable to joint insureds
under a Last Survivor policy depend on the sex of each insured, their joint
equal issue age, their risk classes, and the Policy Year. The guaranteed cost of
insurance rate for a Policy changes from month to month. The risk classes used
for determining guaranteed cost of insurance rates for insureds are smoker
standard, smoker substandard, nonsmoker standard, nonsmoker substandard.
Substandard ratings result in higher cost of insurance charges. The guaranteed
cost of insurance rates for substandard ratings are based on multiples of or
additives to the guaranteed standard rates provided by the 1980 Commissioners
Standard Ordinary Mortality Tables.
Cost of insurance rates--whether current or guaranteed--are generally more
favorable for nonsmoker than for smoker insureds. Within a given rating class,
guaranteed cost of insurance rates are generally more favorable for insureds of
lower ages than for insureds of higher ages.
A-27
<PAGE>
If a Policy loan is outstanding, and the net cash value on a Monthly Deduction
Date is not enough to cover the entire Monthly Deduction for the Policy Month,
NELICO will notify you that the Policy is going to terminate unless a sufficient
payment is made within the 62-day grace period. (See "Effect of a Policy Loan.")
Eligible group or sponsored arrangements may also elect to purchase Policies
on a simplified underwriting basis above the underwriting limits applicable to
other purchasers. Policies issued on a simplified underwriting basis will have
the same cost of insurance rates as fully underwritten Policies.
ADMINISTRATIVE CHARGE. This charge is deducted from your Policy's cash value
in the Sub-Accounts on each Monthly Deduction Date after the Policy Date, as
part of the Monthly Deduction. Except for certain Policies described below, this
charge is currently set at an annual rate of 0.35% of cash value on each Monthly
Deduction Date, and is intended to be decreased to 0.10% after the first 10
Policy Years. It is guaranteed never to exceed an amount equivalent to an annual
rate of 0.35% of cash value. This charge is for the cost of administering the
Policies (such as the cost of processing Policy transactions, issuing Policy
Owner statements and reports, and record keeping), as well as legal, actuarial,
systems, mailing and other overhead costs connected with NELICO's variable life
insurance operations.
For Policies with initial premiums of $1,000,000 or more, the Administrative
Charge currently will be waived after the tenth Policy Year.
For purposes of calculating the 10-year period after which the Administrative
Charge is intended to be reduced to 0.10%, the period that a Policy was lapsed
will not count.
MONTHLY MAINTENANCE CHARGE. If the initial premium paid for the Policy is less
than $50,000, a $2.50 fee is deducted from cash value on each Monthly Deduction
Date to cover administrative expenses. This fee is in addition to the
administrative charge. This monthly fee will continue to be deducted until
cumulative premium payments made are at least $50,000. After cumulative premium
payments of at least $50,000 have been made, the Monthly Maintenance Charge will
not be charged even if the Policy's cash value is reduced to less than $50,000
as a result of investment performance or partial surrenders.
MORTALITY AND EXPENSE RISK CHARGE. NELICO deducts a charge from your cash
value in the Sub-Accounts on each Monthly Deduction Date after the Policy Date
for the mortality and expense risks that NELICO assumes. This charge is
currently set at an annual rate of 0.90% of cash value on each Monthly Deduction
Date. 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.
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds. (See "Investment
Management.")
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 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. NELICO reserves the right to make a charge for any taxes imposed
on the Policies by any governmental body in the future. (See "Charge for
NELICO's Income Taxes.")
GROUP OR SPONSORED ARRANGEMENTS
The Policies may be issued to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals. An example of such an arrangement is a non-tax qualified
deferred compensation plan. A "sponsored arrangement" includes a program under
which an employer permits group solicitation of its employees or an association
permits group solicitation of its members for the purchase of the Policies on an
individual basis.
A-28
<PAGE>
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, monthly cost of insurance charge, mortality and expense risk
charge, administrative charges, Monthly Maintenance Charge, and/or state premium
tax charge 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.
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. 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 13 Sub-Accounts available under the Policy,
each of which invests in an Eligible Fund. The Sub-Accounts of the Variable
Account are:
-- The Small Cap Sub-Account, which invests in the Loomis Sayles Small Cap
Series of the Zenith Fund
-- The International Magnum Equity Sub-Account, which invests in the Morgan
Stanley International Magnum Equity Series of the Zenith Fund
A-29
<PAGE>
-- The Equity Growth Sub-Account, which invests in the Alger Equity Growth
Series of the Zenith Fund
-- The Avanti Growth Sub-Account, which invests in the Loomis Sayles Avanti
Growth Series of the Zenith Fund
-- The Venture Value Sub-Account, which invests in the Davis Venture Value
Series of the Zenith Fund
-- The Stock Index Sub-Account, which invests in the Westpeak Stock Index
Series of the Zenith Fund
-- The Growth and Income Sub-Account, which invests in the Westpeak Growth and
Income Series of the Zenith Fund
-- The Managed Sub-Account, which invests in the Back Bay Advisors Managed
Series of the Zenith Fund
-- The Balanced Sub-Account, which invests in the Loomis Sayles Balanced
Series of the Zenith Fund
-- The Strategic Bond Opportunities Sub-Account, which invests in the Salomon
Brothers Strategic Bond Opportunities Series of the Zenith Fund*
-- The Bond Income Sub-Account, which invests in the Back Bay Advisors Bond
Income Series of the Zenith Fund
-- The U.S. Government Sub-Account, which invests in the Salomon Brothers U.S.
Government Series of the Zenith Fund*
-- The Money Market Sub-Account, which invests in the Back Bay Advisors Money
Market Series of the Zenith Fund
- ---------
* (subject to any necessary state insurance department approvals)
The Zenith Fund is an open-end diversified management investment company, more
commonly known as a mutual fund. The Zenith Fund was established 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 certain separate accounts of NELICO and MetLife that
issue variable annuity contracts.
Shares of the Eligible Funds are purchased and sold by the Variable Account at
their net asset value (without a deduction for sales load) determined as of the
close of regular trading on the New York Stock Exchange on each day when the
exchange is open for trading.
The investment objectives of the Eligible Funds' portfolios are described
briefly below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, including their investment
objectives and policies, expenses, and risks of investing in the Eligible Funds,
is contained in the attached Zenith Fund prospectus, as well as in the Zenith
Fund's Statement of Additional Information, which is referenced in the Zenith
Fund prospectus.
The ZENITH LOOMIS SAYLES SMALL CAP SERIES' investment objective is long-term
capital growth from investments in common stock or their equivalent. The Series
invests primarily in stocks of small cap companies with good earnings growth
potential that Loomis Sayles believes are undervalued by the market. Typically,
such companies have market capitalization of less than $1 billion, have better
than average growth rates at below average price/earnings ratios, and have
strong balance sheets and cash flow.
The ZENITH MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES' investment
objective is to seek long-term capital appreciation through investment primarily
in international equity securities. Under normal circumstances, at least 65% of
the total assets of the Series will be invested in equity securities of at least
three different countries outside the United States.
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.
A-30
<PAGE>
The ZENITH LOOMIS SAYLES AVANTI GROWTH SERIES' investment objective is
long-term growth of capital. The Series normally will invest primarily in equity
securities of companies with medium and large capitalization (capitalization of
$1 billion to $5 billion and over $5 billion, respectively) but will also invest
a portion of its assets in equity securities of companies with a relatively
small market capitalization (under $1 billion).
The ZENITH 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 WESTPEAK STOCK INDEX SERIES' investment objective is to provide
investment results that correspond to the composite price and yield performance
of United States publicly traded common stocks. The Series currently seeks to
achieve its objective by attempting to duplicate the composite price and yield
performance of the Standard & Poor's 500 Composite Stock Price Index.
The ZENITH 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 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 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 SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES' investment
objective is to seek a high level of total return consistent with preservation
of capital.
The ZENITH BACK BAY ADVISORS BOND INCOME SERIES' investment objective is to
provide a high level of current income consistent with preservation of capital
and moderate investment risk through investment primarily in U.S. Government and
corporate bonds.
The ZENITH SALOMON BROTHERS U.S. GOVERNMENT SERIES' investment objective is to
provide a high level of current income consistent with preservation of capital
and maintenance of liquidity.
The ZENITH BACK BAY ADVISORS MONEY MARKET SERIES' investment objective is to
provide the highest possible level of current income consistent with
preservation of capital 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 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 Small Cap, International Magnum Equity, Equity Growth,
Avanti Growth, Venture Value, Stock Index or Growth and Income Sub-Accounts, or
some combination of these sub-accounts, may, therefore, be a more desirable
selection for Policy Owners who are willing to accept such risks of short term
fluctuations in value. For a demonstration of certain of these market trends,
see Appendix E: Long Term Market Trends.
A-31
<PAGE>
Historically, the investment performance of "small cap" stocks over the long
term has generally been superior to stocks of large capitalization companies,
although "small cap" stocks have been substantially more volatile. Historically,
having a small percentage of a portfolio invested in overseas stocks and the
rest in domestic stocks has produced a portfolio that has less, although still
substantial, volatility than a completely domestic portfolio. Equity investors
should recognize that overseas and "small cap" funds traditionally involve more
risk than most domestic stock funds.
The performance of the various financial markets over shorter periods of time
has sometimes differed from their long term historical results. Short term
interest rates were very high in the late 1970's and early 1980's, but are now
lower. Long term bond values continue to fluctuate, and common stock prices,
which have risen substantially at times, have also had periods of volatility.
Policy Owners who seek somewhat greater protection against loss of principal
in the short term than that afforded by a stock fund may prefer the Strategic
Bond Opportunities Sub-Account, the Bond Income Sub-Account or the U.S.
Government Sub-Account. However, because the Zenith Salomon Brothers Strategic
Bond Opportunities Series may invest in below-investment-grade securities, which
are considered high-yield, high-risk securities, commonly known as "junk bonds,"
this series 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 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.
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 Managed Sub-Account or the Balanced 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. You may
also wish to diversify your cash value by country. The International Magnum
Equity Sub-Account allows you to participate primarily in companies and
economies outside the United States.
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types of
investments you have and your own assessment of future economic and financial
market conditions.
INVESTMENT MANAGEMENT
TNE Advisers, which is an indirect, wholly-owned subsidiary of NELICO, is the
investment adviser of each of the Series. The chart below lists the sub-adviser
of each Series. TNE Advisers and each of the sub-advisers are registered with
the SEC as investment advisers under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES SUB-ADVISER
- ------ -----------
<S> <C>
Zenith Loomis Sayles Small Cap Series Loomis, Sayles & Company,
L.P.*
Zenith Morgan Stanley International Magnum Morgan Stanley Asset
Equity Series Management Inc.
Zenith Alger Equity Growth Series Fred Alger Management, Inc.
Zenith Loomis Sayles Avanti Growth Series Loomis, Sayles & Company,
L.P.*
Zenith Davis Venture Value Series Davis Selected Advisers, L.P.
Zenith Westpeak Stock Index Series Westpeak Investment Advisors,
L.P.*
Zenith Westpeak Growth and Income Series Westpeak Investment Advisors,
L.P.*
Zenith Back Bay Advisors Managed Series Back Bay Advisors, L.P.*
Zenith Loomis Sayles Balanced Series Loomis, Sayles & Company,
L.P.*
Zenith Salomon Brothers Strategic Bond Salomon Brothers Asset
Opportunities Series Management, Inc.
Zenith Back Bay Advisors Bond Income Series Back Bay Advisors, L.P.*
Zenith Salomon Brothers U.S. Government Series Salomon Brothers Asset
Management, Inc.
Zenith Back Bay Advisors Money Market Series Back Bay Advisors, L.P.*
</TABLE>
- ---------
* An affiliate of NELICO
A-32
<PAGE>
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak 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-advisers, 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
Morgan Stanley International Magnum Equity Series' sub-adviser was Draycott
Partners until May 1, 1997, when Morgan Stanley Asset Management became the
sub-adviser.
The tables on pages A-10 and A-11 show the annual operating expenses of each
Series.
For more information about the Series' advisory agreements, see the Zenith
Fund prospectus attached at the end of this prospectus and the Zenith Fund's
Statement of Additional Information.
OTHER POLICY FEATURES
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time to
time. At the death of the Policy Owner, his or her estate will become the Policy
Owner unless a successor Policy Owner has been named. The Policy Owner's rights
(except for rights to payment of benefits) terminate at the death of the insured
(or the second death under a Last Survivor Policy).
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, or before the
second death under a Last Survivor Policy. The beneficiary has no rights under
the Policy until the death of the insured (or until the second death in the case
of a Last Survivor Policy) and must survive the insured(s) in order to receive
the death proceeds. If no named beneficiary survives the insured(s), 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.
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.)
EXCHANGE OF POLICY
Within 24 months after the Date of Issue, the Policy Owner can exchange the
Policy, if the Policy is in force, for a policy that provides fixed benefit
insurance. The new policy will be issued by NELICO or MetLife, as described
below, on any plan of whole life or endowment insurance (or, if the Policy
exchanged is a Last Survivor Policy, on any plan of survivorship insurance) with
a level face amount issued by NELICO or MetLife on the Policy Date.
The new policy will be issued with the same insured(s), Face Amount, Policy
Date, and risk class(es) as this Policy, with the age of the insured(s) on the
Policy Date, and with a rider that purchases paid-up additions issued by
A-33
<PAGE>
NELICO or MetLife on the Policy Date, if the cash value of the Policy is more
than is required to purchase the new policy. The new policy will be issued
subject to any cost or credit and the repayment of any Policy loan balance, and
subject to any assignments of this Policy.
Following the merger of MetLife and The New England, depending on state
insurance regulatory approvals and requirements, your Policy may be issued or
amended with an endorsement providing for an exchange right to a fixed benefit
policy issued by NELICO (if such a policy was available on the Policy Date of
your variable life Policy), or otherwise, to a fixed benefit policy issued by
MetLife. If your Policy does not have such an endorsement, the exchange right
will be to a fixed benefit policy issued by MetLife or, at your option, to a
fixed benefit policy issued by NELICO if such a policy was available on the
Policy Date of your variable life Policy.
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. New England
Securities, the principal underwriter of the variable life insurance policies,
is a Massachusetts corporation organized in 1968 and an indirect, wholly-owned
subsidiary of NELICO. New England Securities 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 intends
to 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. In some states,
Policies may be sold by representatives or employees of banks that may be acting
as broker-dealers without separate registration under the Securities Exchange
Act of 1934, pursuant to legal and regulatory exemptions.
NELICO will pay compensation to the New England Securities registered
representatives or other broker-dealers or banks involved in the sale of a
Policy. Such compensation will generally have a present value that does not
exceed 8% of premiums under the Policy (although a lower amount may be paid in
certain circumstances, such as sales of the Policies to a person over age 75),
and such compensation may be paid either as a percentage of premiums at the time
NELICO receives them, as a percentage of cash value on an ongoing basis, or in
some combination of both.
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.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
NELICO can challenge that amount of the death benefit that results from the
initial premium for two years during an insured's lifetime from the Date of
Issue, based on misrepresentations made in the application. NELICO can challenge
any amount of the death benefit that results from an additional payment for
which proof of insurability is required for two years during an insured's
lifetime from the date that payment is received. However, if an insured dies
within two years of the Date of Issue, NELICO can challenge all or part of the
Policy at any time with respect to misrepresentations in the application. If an
insured dies within two years of the receipt of an additional payment for which
proof of insurability is required, NELICO can challenge any amount of the death
benefit resulting from that additional payment at any time with respect to
misrepresentation.
MISSTATEMENT OF AGE OR SEX
If the insured's age (or either insured's age under a Last Survivor Policy) is
misstated in the application, the Policy's death benefit will be the amount that
the most recent Monthly Deduction which was made would have provided, based on
the insured's correct age(s) and sex(es).
A-34
<PAGE>
SUICIDE
Single Insured Policies. If the Insured dies by suicide while sane or insane
within two years (or less, if required by state law) from the Date of Issue (or
the Policy Date, if earlier, if required by state law) set forth in the Policy,
the Death Benefit will be limited to: the amount of the initial premium; plus
any additional payments made; less any outstanding Policy Loan Balance; and less
any partial surrenders (or such greater amount, if required by state law).
Last Survivor Policies. If either of the Insureds dies by suicide while sane
or insane within two years (or less, if required by state law) from the Date of
Issue (or the Policy Date, if earlier, if required by state law) set forth in
the Policy, the Death Benefit will be limited to: the amount of the initial
premium; plus any additional payments made; less any outstanding Policy Loan
Balance; and less any partial surrenders (or such greater amount, if required by
law). The Policy will terminate as of the first death by suicide.
Within 60 days after the first death by suicide under a Last Survivor Policy,
the Owner can purchase new life insurance on an Eligible Insured without
evidence of insurability. For purposes of this provision, an Eligible Insured is
a surviving Insured on whom NELICO would have issued a single life policy on the
Policy Date of this Policy. The new policy will be issued on a plan of single
life variable life insurance agreed to and issued by NELICO on the Policy Date
of the new policy, if the issue age on the new policy is age 75 or younger; and
on a single life Ordinary Life plan with a level face amount issued by NELICO or
MetLife on the Policy Date of the new policy, if the issue age on the new policy
is greater than 75. The new policy will be issued: with a Face Amount equal to
the Face Amount of this Policy plus the amount of any single life term rider for
the Eligible Insured under this Policy: based on the underwriting class to which
the Eligible Insured was assigned by NELICO on the Policy Date of this Policy;
with a Policy Date equal to the date of the suicidal death; and premiums must be
paid from the policy date. The single life variable life insurance policy can be
exchanged for an ordinary life policy, if desired, using any exchange provision
of the new policy.
If an Eligible Insured dies within the 60 day period and before submitting an
application, the death benefit will be paid as if the new policy had been issued
and if the new policy is a variable life policy, assuming all premiums for the
new policy were allocated to the Money Market Sub-Account and the death benefit
option in effect would result in the smallest amount of death proceeds.
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 of
1986, as amended ("Code") defines a life insurance contract for Federal income
tax purposes.
The Section 7702 definition can be met if a life insurance contract satisfies
either one of two tests set forth in that section. The manner in which these
tests should be applied to certain features of the Policy is not directly
addressed by Section 7702 or proposed regulations issued under that section. The
presence of these Policy features, the absence of final regulations, and the
lack of other pertinent interpretations of Section 7702, thus create some
uncertainty about the application of Section 7702 to the Policy.
A-35
<PAGE>
Nevertheless, NELICO believes that it is reasonable to conclude that the
Policy qualifies as a life insurance contract for federal tax purposes, so that:
-- the death benefit should be fully excludible from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
-- the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
If a Policy were determined not to be a life insurance contract for purposes
of Section 7702, such Policy would not provide most of the tax advantages
normally provided by a life insurance contract. NELICO thus reserves the right
to make changes in the Policy if such changes are deemed necessary to attempt to
assure its qualification as a life insurance contract for tax purposes.
TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS. Federal tax law establishes a
class of life insurance policies referred to as modified endowment contracts. In
almost all cases, this Policy will be a modified endowment contract. (See,
however, the discussion below on a Policy issued in exchange for another life
insurance policy.) A life insurance contract will generally be classified as a
modified endowment contract if it fails to meet the "7-pay" test set forth in
the Code. A contract generally fails to meet the 7-pay test if the accumulated
amount paid under the contract at any time during the first seven contract years
exceeds the sum of the net level premiums which would have been paid on or
before such time if the contract provided for paid up future benefits after the
payment of seven level annual premiums. Except as specifically noted, the
remainder of this discussion assumes that this Policy will be a modified
endowment contract. Loans and partial withdrawals from, as well as collateral
assignments of, modified endowment contracts will be treated as distributions to
the Policy Owner. All pre-death distributions (including loans, partial
surrenders and collateral assignments) from these Policies will be included in
gross income on an income-first basis to the extent of any income in the Policy
immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless
such amounts are distributed on or after the date when the taxpayer attains age
59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized interest will be treated as
an additional distribution subject to income tax as well as the 10% penalty tax,
if applicable, to the extent of income in the Policy.
Any Policy issued in exchange for a modified endowment contract will be
subject to the tax treatment accorded to modified endowment contracts. However,
NELICO believes that any Policy issued in exchange for a life insurance policy
that is not a modified endowment contract will generally not be treated as a
modified endowment contract if the death benefit of the Policy is greater than
or equal to the death benefit of the policy being exchanged. The payment of any
premiums at the time of or after the exchange may, however, cause the Policy to
become a modified endowment contract. A Policy Owner may, of course, choose not
to exercise the right to make additional payments in order to prevent a Policy
from being treated as a modified endowment contract.
If a Policy that was not a modified endowment contract at issue subsequently
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.
TAXATION OF ACCELERATED BENEFITS RIDER. NELICO believes that payments received
under any accelerated benefits rider it makes available will qualify as an
accelerated death benefit under the Internal Revenue Code. (See
A-36
<PAGE>
"Acceleration of Death Benefit Rider" for more information regarding the rider.)
Payments under any accelerated benefits rider may also be treated as
distributions that are subject to taxation. See "Tax Treatment of Loans and
Other Distributions."
SPECIAL TREATMENT OF LOANS ON THE POLICY. If there is any borrowing against
the Policy, the interest paid on loans may not be tax deductible.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS. In the case of a pre-death
distribution (including a loan, partial surrender, collateral assignment or full
surrender) from a Policy that is treated as a modified endowment contract, a
special aggregation requirement may apply for purposes of determining the amount
of the income on the Policy. Specifically, if NELICO or any of its affiliates
issues to the same Policy Owner more than one modified endowment contract within
a calendar year, then for purposes of measuring the income on the Policy with
respect to a distribution from any of those policies, the income on the policy
for all those policies will be aggregated and attributed to that distribution.
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.
The Policy may continue after the insured(s) attain age 100. The tax
consequences associated with continuing a Policy beyond age 100 are unclear. A
tax advisor should be consulted on this issue.
Section 817(h) of the Code requires the investments of the Variable Account to
be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy plus the cost of insurance protection for
the year. Regulations specifying the diversification requirements have been
issued by the Department of Treasury, and NELICO believes it complies fully with
such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of additional
guidance prescribing the circumstances in which an owner's control of the
investments of a separate account may cause a Policy Owner, rather than the
insurance company, to be treated as the owner of the assets in the separate
account. If a Policy Owner is considered the owner of the assets of the Separate
Account, income and gains from the Account would be included in the Owner's
gross income.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the Internal Revenue Service in rulings in
which it determined that the owners were not owners of separate account assets.
For example, a Policy Owner has additional flexibility in allocating payments
and cash values. These differences could result in the owner being treated as
the owner of a pro rata share of the assets of the Separate Account. In
addition, NELICO does not know what standards will be set forth in the
additional guidance which the Treasury has reserved the right to issue. 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 or a TSA Plan qualified under Section
403(b) of the Code, the current cost of insurance for the net amount at risk is
A-37
<PAGE>
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 or a TSA Plan.
Complex rules, in addition to those discussed above, apply whenever life
insurance is purchased by a tax qualified plan. Distributions or withdrawals
from a pension or profit-sharing plan or TSA Plan prior to age 59 1/2 may be
subject to a 10% penalty tax on the amount included in income. You should
consult a qualified tax advisor regarding these rules.
The Policies may be used in various arrangements, including non-qualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree
medical benefit plans and others. The tax consequences of such plans may vary
depending on the particular facts and circumstances of each individual
arrangement. Therefore, if you are contemplating the use of the Policies in any
arrangement the value of which depends in part on its tax consequences, you
should be sure to consult a qualified tax advisor regarding the tax attributes
of the particular arrangement and the suitability of this product for the
arrangement.
NELICO believes that Policies subject to the provisions of the Puerto Rican
tax law will generally receive the same tax treatment as that described above
for Policies subject to the Internal Revenue Code. You should note that Policies
governed by the Puerto Rican tax law are not currently subject to the above
described rules regarding modified endowment contracts. If such a Policy becomes
subject to the Internal Revenue Code, however, the rules regarding modified
endowment contracts will apply, and they may apply retroactively. You should
consult your tax advisor if a Policy governed by the Puerto Rican tax law
subsequently becomes subject to the Internal Revenue Code.
CHARGE FOR 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 NELICO's Federal income taxes. 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-38
<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, President and Chief Executive Officer of
NELICO since 1996. Formerly, Chairman, President and
Chief Executive Officer of The New England 1993-1996;
President and Chief Executive Officer, 1992 to 1993,
President and Chief Operating Officer, 1990 to 1992,
of The New England.
Susan C. Crampton . . Director of NELICO since 1996; serves as Principal of
127 Tarbox Road The Vermont Partnership, a business consulting firm
Jericho, VT 05465 located in Jericho, Vermont since 1989. Formerly,
Director of The New England 1989-1996.
Edward A. Fox . . . . Director of NELICO since 1996; Private Investor,
RR Box 67-15 Harborside, ME. Formerly, Director of The New England
Harborside, ME 04642 1994-1996; Dean of The Amos Tuck School of Business
Administration at Dartmouth College from 1990-1994.
George J. Goodman . . Director of NELICO since 1996; Author, television
Adam Smith's Money journalist, and editor.
World
45 W. 45th Street
New York, NY
10036-4602
Dr. Paul E. Gray . . Director of NELICO since 1996; Chairman of the
MIT Corporation of the Massachusetts Institute of
77 Massachusetts Technology (MIT) since 1990. Formerly, Director of The
Avenue New England 1973-1996.
Cambridge, MA 02139
Dr. Evelyn E.
Handler . . . . . . Director of NELICO since 1996; Executive Director and
California Academy of Chief Executive Officer of the California Academy of
Sciences Sciences since 1991. Formerly, Director of The New
Golden Gate Park England 1987-1996.
San Francisco, CA
94118
Philip K. Howard,
Esq. . . . . . . . . Director of NELICO since 1996; 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; Chairman, President, and
Metropolitan Life Chief Executive Officer of Metropolitan Life Insurance
One Madison Avenue Company since 1995. Formerly, Chairman and CEO of
New York, NY 10010 MetLife 1993-1995; Senior Executive Vice President
1991-1993.
Terence Lennon . . . Director of NELICO since 1996; Senior Vice President of
Metropolitan Life Metropolitan Life Insurance Company since 1994.
One Madison Avenue Formerly, Assistant Deputy Superintendent and Chief
New York, NY 10010 Examiner of the New York Insurance Department
1984-1994.
Bernard A.
Leventhal . . . . . Director of NELICO since 1996; Vice Chairman of the
Burlington Industries Board of Directors of Burlington Industries, Inc.
1345 Avenue of the Formerly, President of the Burlington Menswear
Americas Division since 1978. Corporate Group Vice President
New York, NY 10105 since 1985 and Director since 1990.
Thomas J. May . . . . Director of NELICO since 1996; Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since
800 Boylston Street 1994. Formerly, Director of The New England 1994-1996;
Boston, MA 02199 President and Chief Operating Officer of Boston Edison
Co., 1993-1994; Executive Vice President 1990-1993.
</TABLE>
A-39
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
Stewart G. Nagler . . Director of NELICO since 1996; 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; President of United
United Timber Corp. Timber Corp. of Dixfield, Maine. Formerly, Director of
P.O. Box 650 The New England 1990-1996.
Pine Street
Dixfield, ME 04224
Alexander B.
Trowbridge . . . . . Director of NELICO since 1996; President of Trowbridge
Trowbridge Partners Partners, Inc. in Washington, D.C. Formerly, Director
Inc. of The New England 1983-1996.
1317 F Street, N.W.,
Suite 500
Washington, D.C.
20004
</TABLE>
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
Robert A. Shafto . . See Directors above.
James P. Bossert . . Vice President and Controller of NELICO since 1996.
Formerly, Vice President and Controller 1993-1996;
Vice President 1991-1993 of The New England.
Rodney J. Chandler . Second Vice President and Actuary of NELICO since 1996.
Formerly, Second Vice President and Actuary of The New
England since 1990.
Thom A. Faria . . . . President, Career Agency System (a business unit of
NELICO) since 1996. Formerly, Executive Vice President
in 1996; Senior Vice President, 1993-1996; Vice
President, 1986-1993 of The New England.
Chester R. Frost . . Senior Vice President and Treasurer of NELICO since
1996. Formerly, Senior Vice President since 1980 and
Treasurer since 1996 of The New England.
Edward C. Hall . . . President, New England Services (a business unit of
NELICO) since 1996. Formerly, President, New England
Services (a business unit of The New England)
1994-1996, Executive Vice President--Client Services,
1988 to 1994, of The New England.
Daniel D. Jordan . . Second Vice President, Counsel and Secretary since
1996. Formerly, Counsel and Assistant Secretary of The
New England, 1990-1996.
Bruce C. Long . . . . President, New England Annuities (a business unit of
NELICO) since 1996. Formerly, President, New England
Annuities (a business unit of The New England)
1994-1996; Senior Vice President, New England
Annuities in 1994; Vice President, Keyport Life
Insurance 1992-1994; General Director, John Hancock
Insurance 1990-1992.
Robert W. Powell . . President, Life Brokerage (a business unit of NELICO)
since 1996. Formerly, Officer-In-Charge of MetLife
Brokerage (a subsidiary of Metropolitan Life Insurance
Company) 1994-1996; Marketing Vice President
1988-1994.
Gregory A. Ross . . . President, TNE Information Services (a business unit of
NELICO) since 1996. Formerly, President, TNE
Information Services (a business unit of The New
England) and Chief Information Officer of The New
England, 1994-1996; Senior Vice President and Chief
Information Officer 1993-1994; Vice President,
1991-1993 of The New England. President of TNE
Information Services, Inc.
</TABLE>
A-40
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
Robert E. Schneider . Executive Vice President and Chief Financial Officer of
NELICO since 1996. Formerly, Director, Executive Vice
President and Chief Financial Officer, 1993 to 1996;
Executive Vice President and Chief Financial Officer,
1990-1993, of The New England.
H. James Wilson . . . Executive Vice President and General Counsel of NELICO
since 1996. Formerly, Executive Vice President and
General Counsel of The New England, 1993-1996; Senior
Vice President and General Counsel, 1992 to 1993,
Senior Vice President and Associate General Counsel,
1990 to 1992, of The New England.
John W. Wright . . . President, New England Employee Benefits Group (a
business unit of NELICO) since 1996. Formerly,
President, New England Employee Benefits Group (a
business unit of The New England), 1993-1996; Senior
Vice President of New England Employee Benefits Group,
1989-1993 of The New England.
Frederick K.
Zimmermann . . . . . Executive Vice President and Chief Investment Officer
of NELICO since 1996. Formerly, Executive Vice
President and Chief Investment Officer of The New
England 1993-1996; Senior Vice President--Investments,
1989 to 1993, of The New England.
</TABLE>
The principal business address for each of the directors and executive
officers is the same as NELICO's except where indicated otherwise.
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
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) shares that are
voted in proportion to such voting instructions.
The SEC requires the Eligible Funds' Board 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 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.
A-41
<PAGE>
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 invest some or all of the
assets of the Variable Account other than in the Zenith Fund; (4) to invest some
or all of the assets of the Variable Account in any other investment company
chosen by NELICO; (5) to remove a portfolio in which the Sub-Account is invested
or to substitute a different portfolio; (6) 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 (7) 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 or premium reallocations, call the toll-free number
1-800-200-2214.
REPORTS
NELICO will send you a statement at least annually showing your Policy's death
benefit, cash value and any outstanding Policy loan balance. NELICO will also
confirm Policy loans, sub-account transfers, lapses, surrenders and other Policy
transactions.
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
A-42
<PAGE>
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.
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, L.L.P., of 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 Life Insurance Company and of the
Variable Account included in this prospectus have been audited by ,
independent auditors, as stated in their opinions appearing herein and have been
so included in reliance upon their authority as experts in accounting and
auditing.
Actuarial matters included in this prospectus have been examined by ,
F.S.A., M.A.A.A., Chief Actuary of NELICO, as stated in his opinion filed as an
exhibit to the Registration Statement.
A-43
<PAGE>
APPENDIX A:
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash value and cash value could vary over an extended
period of time assuming hypothetical gross rates of return (i.e., investment
income and capital gains and losses, realized or unrealized) for the Variable
Account equal to constant after tax annual rates of 0%, 6% and 12%. The tables
are based on an initial premium of $50,000 and also show the initial death
benefit based on that premium. The insureds are assumed to be in the standard
nonsmoker underwriting class. Values are first given based on current Policy
charges and then based on guaranteed Policy charges. (See "Charges and
Expenses.") The issue ages represented in the illustrations are age 70 or less;
if an issue age were over age 70, the death benefit, net cash value and cash
value in the illustrations based on current Policy charges would be lower, all
other things being equal, because the current cost of insurance charge under the
Policy increases for issue ages over 70. 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 that may be issued by
NELICO or other companies.
Death benefits, net cash values and cash values for a Policy would be
different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period, if the
initial premium was paid in another amount, or additional 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 or partial
surrender were made during the period of time illustrated, or if the insured
were in another risk class.
The death benefits, net cash values and cash values shown in the tables
reflect a Monthly Deduction (consisting of an administrative charge, a charge
for the cost of insurance, a mortality and expense risk charge, and, during the
first ten Policy Years, a sales charge and state premium tax charge) from cash
value on each Monthly Deduction Date. (Because an initial premium of $50,000 has
been assumed for purposes of these illustrations, no Monthly Maintenance Charge
is reflected in the illustrations. If an initial premium of less than $50,000
had been assumed, a $2.50 Monthly Maintenance Charge would apply.) The net cash
values shown in the tables reflect the fact that a Surrender Charge (consisting
of a deferred sales charge) is deducted from cash value upon surrender or lapse
during the first nine Policy Years. (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 .79% 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 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 and Expenses.")
Taking account of 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 -.78%,
5.17%, and 11.12%, respectively. (See "Net Investment Experience.")
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the death benefits, net cash values and cash
values illustrated. (See "Charge for NELICO's Income Taxes.")
The second column of each table shows the amount which would accumulate if the
initial premium of $50,000 were invested to earn interest, after taxes, of 5%
per year, compounded annually.
A-44
<PAGE>
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the initial premium 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 initial premium could have
been invested outside the Policy to arrive at the death benefit of the Policy.
The internal rate of return is compounded annually.
NELICO will furnish upon request a personalized illustration reflecting the
proposed insured's age, sex, and underwriting classification. Where applicable,
NELICO will also furnish upon request an illustration for a Policy which is not
affected by the sex of the insured.
A-45
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$129,122 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUM 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 52,500 121,586 128,890 136,182 44,452 47,363 50,269 48,452 51,363 54,269
2 55,125 114,221 128,356 143,291 42,952 48,763 54,902 46,952 52,763 58,902
3 57,881 107,337 127,867 150,820 41,999 50,701 60,431 45,499 54,201 63,931
4 60,775 100,905 127,427 158,804 41,090 52,678 66,389 44,090 55,678 69,389
5 63,814 94,897 127,039 167,278 40,225 54,696 72,812 42,725 57,196 75,312
6 67,005 89,285 126,706 176,278 39,402 56,755 79,742 41,402 58,755 81,742
7 70,355 84,040 126,427 185,842 38,621 58,856 87,221 40,121 60,356 88,721
8 73,873 79,135 126,200 196,003 37,879 61,002 95,295 38,879 62,002 96,295
9 77,566 74,548 126,027 206,808 37,175 63,191 104,016 37,675 63,691 104,516
10 81,445 70,258 125,911 218,306 36,509 65,428 113,439 36,509 65,428 113,439
15 103,946 55,083 132,148 301,694 32,634 78,293 178,743 32,634 78,293 178,743
20 132,665 50,000 140,817 423,313 29,171 93,688 281,638 29,171 93,688 281,638
25 169,318 50,000 152,615 604,095 26,076 112,111 443,768 26,076 112,111 443,768
30 216,097 50,000 168,702 879,288 23,309 134,156 699,230 23,309 134,156 699,230
35 275,801 50,000 189,513 1,300,621 20,835 160,536 1,101,752 20,835 160,536 1,101,752
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL GROSS ANNUAL
END OF RATE OF RETURN OF RATE OF RETURN OF
POLICY ------------------------ ------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -------- ------- ----- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 (11.10) (5.27) .54 143.17 157.78 172.36
2 (7.32) (1.24) 4.79 51.14 60.22 69.29
3 (5.65) .47 6.52 29.00 36.75 44.49
4 (4.79) 1.31 7.34 19.19 26.35 33.50
5 (4.26) 1.81 7.81 13.67 20.50 27.32
6 (3.89) 2.13 8.09 10.15 16.76 23.37
7 (3.62) 2.36 8.27 7.70 14.17 20.63
8 (3.41) 2.52 8.40 5.91 12.27 18.62
9 (3.24) 2.64 8.48 4.54 10.82 17.09
10 (3.10) 2.73 8.54 3.46 9.68 15.88
15 (2.80) 3.03 8.86 .65 6.69 12.73
20 (2.66) 3.19 9.03 0 5.31 11.27
25 (2.57) 3.28 9.13 0 4.56 10.48
30 (2.51) 3.34 9.19 0 4.14 10.03
35 (2.47) 3.39 9.24 0 3.88 9.76
</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, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-46
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$129,122 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM 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 52,500 121,167 128,451 135,723 44,285 47,188 50,086 48,285 51,188 54,086 (11.43) (5.62) .17
2 55,125 113,401 127,445 142,284 42,615 48,388 54,488 46,615 52,388 58,488 (7.68) (1.62) 4.39
3 57,881 106,133 126,447 149,163 41,488 50,099 59,728 44,988 53,599 63,228 (6.03) .07 6.11
4 60,775 99,329 125,457 156,373 40,401 51,818 65,326 43,401 54,818 68,326 (5.19) .90 6.91
5 63,814 92,962 124,474 163,933 39,354 53,541 71,306 41,854 56,041 73,806 (4.68) 1.38 7.36
6 67,005 87,002 123,498 171,857 38,344 55,268 77,692 40,344 57,268 79,692 (4.33) 1.68 7.62
7 70,355 81,425 122,530 180,165 37,372 56,996 84,511 38,872 58,496 86,011 (4.07) 1.89 7.79
8 73,873 76,204 121,570 188,875 36,439 58,727 91,793 37,439 59,727 92,793 (3.88) 2.03 7.89
9 77,566 71,318 120,617 198,007 35,543 60,457 99,568 36,043 60,957 100,068 (3.72) 2.13 7.95
10 81,445 66,746 119,671 207,579 34,683 62,185 107,865 34,683 62,185 107,865 (3.59) 2.20 7.99
15 103,946 50,000 118,856 271,548 29,328 70,418 160,882 29,328 70,418 160,882 (3.49) 2.31 8.10
20 132,665 50,000 118,044 355,247 23,335 78,537 236,353 23,335 78,537 236,353 (3.74) 2.28 8.08
25 169,318 50,000 117,226 464,738 14,101 86,114 341,396 14,101 86,114 341,396 (4.94) 2.20 7.99
30 216,097 50,000 116,417 608,041 0 92,577 483,528 0 92,577 483,528 -- 2.07 7.86
35 275,801 50,000 115,608 795,556 0 97,931 673,912 0 97,931 673,912 -- 1.94 7.71
<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>
1 142.33 156.90 171.45
2 50.60 59.65 68.69
3 28.52 36.24 43.96
4 18.72 25.86 32.98
5 13.21 20.01 26.81
6 9.67 16.26 22.85
7 7.21 13.66 20.10
8 5.41 11.75 18.07
9 4.02 10.28 16.52
10 2.93 9.12 15.30
15 0 5.94 11.94
20 0 4.39 10.30
25 0 3.47 9.33
30 0 2.86 8.68
35 0 2.42 8.23
</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, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-47
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$145,611 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUM 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 52,500 137,136 145,375 153,599 44,452 47,363 50,269 48,452 51,363 54,269
2 55,125 128,844 144,789 161,636 42,952 48,763 54,902 46,952 52,763 58,902
3 57,881 121,083 144,242 170,135 41,999 50,701 60,431 45,499 54,201 63,931
4 60,775 113,820 143,735 179,129 41,090 52,678 66,389 44,090 55,678 69,389
5 63,814 107,018 143,265 188,643 40,225 54,696 72,812 42,725 57,196 75,312
6 67,005 100,646 142,829 198,709 39,402 56,755 79,742 41,402 58,755 81,742
7 70,355 94,671 142,420 209,351 38,621 58,856 87,221 40,121 60,356 88,721
8 73,873 89,062 142,031 220,590 37,879 61,002 95,295 38,879 62,002 96,295
9 77,566 83,791 141,653 232,450 37,175 63,191 104,016 37,675 63,691 104,516
10 81,445 78,840 141,290 244,972 36,509 65,428 113,439 36,509 65,428 113,439
15 103,946 61,083 146,543 334,558 32,634 78,293 178,743 32,634 78,293 178,743
20 132,665 50,000 153,627 461,823 29,171 93,688 281,638 29,171 93,688 281,638
25 169,318 50,000 162,889 644,764 26,076 112,111 443,768 26,076 112,111 443,768
30 216,097 50,000 176,118 917,943 23,309 134,156 699,230 23,309 134,156 699,230
35 275,801 50,000 194,153 1,332,469 20,835 160,536 1,101,752 20,835 160,536 1,101,752
<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 (11.10) (5.27) .54 174.27 190.75 207.20
2 (7.32) (1.24) 4.79 60.53 70.17 79.80
3 (5.65) .47 6.52 34.29 42.36 50.41
4 (4.79) 1.31 7.34 22.83 30.21 37.58
5 (4.26) 1.81 7.81 16.44 23.43 30.42
6 (3.89) 2.13 8.09 12.37 19.12 25.86
7 (3.62) 2.36 8.27 9.55 16.13 22.70
8 (3.41) 2.52 8.40 7.48 13.94 20.39
9 (3.24) 2.64 8.48 5.90 12.27 18.62
10 (3.10) 2.73 8.54 4.66 10.95 17.22
15 (2.80) 3.03 8.86 1.34 7.43 13.51
20 (2.66) 3.19 9.03 0 5.77 11.76
25 (2.57) 3.28 9.13 0 4.84 10.77
30 (2.51) 3.34 9.19 0 4.29 10.19
35 (2.47) 3.39 9.24 0 3.95 9.83
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-48
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$145,611 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUM 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 52,500 136,637 144,851 153,052 44,276 47,178 50,075 48,276 51,178 54,075
2 55,125 127,881 143,719 160,453 42,601 48,373 54,471 46,601 52,373 58,471
3 57,881 119,685 142,594 168,211 41,473 50,082 59,708 44,973 53,582 63,208
4 60,775 112,014 141,479 176,344 40,391 51,804 65,310 43,391 54,804 68,310
5 63,814 104,835 140,372 184,870 39,354 53,541 71,306 41,854 56,041 73,806
6 67,005 98,116 139,274 193,810 38,362 55,293 77,727 40,362 57,293 79,727
7 70,355 91,828 138,185 203,183 37,416 57,062 84,607 38,916 58,562 86,107
8 73,873 85,943 137,106 213,010 36,517 58,852 91,986 37,517 59,852 92,986
9 77,566 80,436 136,035 223,313 35,666 60,665 99,908 36,166 61,165 100,408
10 81,445 75,281 134,972 234,114 34,861 62,502 108,412 34,861 62,502 108,412
15 103,946 55,842 134,064 306,271 29,835 71,626 163,630 29,835 71,626 163,630
20 132,665 50,000 133,162 400,682 24,988 81,207 244,352 24,988 81,207 244,352
25 169,318 50,000 132,250 524,165 18,712 91,023 360,764 18,712 91,023 360,764
30 216,097 50,000 131,336 685,718 7,862 100,043 522,336 7,862 100,043 522,336
35 275,801 50,000 130,418 897,078 0 107,836 741,749 0 107,836 741,749
<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 (11.45) (5.64) .15 173.27 189.70 206.10
2 (7.69) (1.64) 4.38 59.93 69.54 79.14
3 (6.04) .05 6.09 33.77 41.81 49.84
4 (5.20) .89 6.91 22.34 29.70 37.04
5 (4.68) 1.38 7.36 15.96 22.93 29.89
6 (4.32) 1.69 7.63 11.89 18.62 25.33
7 (4.06) 1.91 7.80 9.07 15.63 22.18
8 (3.85) 2.06 7.92 7.01 13.44 19.86
9 (3.68) 2.17 7.99 5.42 11.76 18.09
10 (3.54) 2.26 8.05 4.18 10.44 16.69
15 (3.38) 2.43 8.22 .74 6.80 12.84
20 (3.41) 2.45 8.26 0 5.02 10.97
25 (3.86) 2.43 8.23 0 3.97 9.86
30 (5.98) 2.34 8.13 0 3.27 9.12
35 -- 2.22 8.01 0 2.78 8.60
</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, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-49
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$75,013 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM 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 52,500 71,284 75,567 79,842 44,452 47,363 50,269 48,452 51,363 54,269 (11.10) (5.27) .54
2 55,125 67,664 76,038 84,885 42,952 48,763 54,902 46,952 52,763 58,902 (7.32) (1.24) 4.79
3 57,881 64,278 76,573 90,318 41,999 50,701 60,431 45,499 54,201 63,931 (5.65) .47 6.52
4 60,775 61,116 77,179 96,184 41,090 52,678 66,389 44,090 55,678 69,389 (4.79) 1.31 7.34
5 63,814 58,161 77,860 102,522 40,225 54,696 72,812 42,725 57,196 75,312 (4.26) 1.81 7.81
6 67,005 55,396 78,614 109,371 39,402 56,755 79,742 41,402 58,755 81,742 (3.89) 2.13 8.09
7 70,355 52,805 79,438 116,770 38,621 58,856 87,221 40,121 60,356 88,721 (3.62) 2.36 8.27
8 73,873 50,369 80,325 124,754 37,879 61,002 95,295 38,879 62,002 96,295 (3.41) 2.52 8.40
9 77,566 50,000 81,272 133,366 37,175 63,191 104,016 37,675 63,691 104,516 (3.24) 2.64 8.48
10 81,445 50,000 82,276 142,651 36,509 65,428 113,439 36,509 65,428 113,439 (3.10) 2.73 8.54
15 103,946 50,000 92,425 211,006 32,634 78,293 178,743 32,634 78,293 178,743 (2.80) 3.03 8.86
20 132,665 50,000 105,513 317,184 29,171 93,688 281,638 29,171 93,688 281,638 (2.66) 3.19 9.03
25 169,318 50,000 120,171 475,675 26,076 112,111 443,768 26,076 112,111 443,768 (2.57) 3.28 9.13
<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 42.57 51.13 59.68
2 16.33 23.32 30.30
3 8.73 15.27 21.79
4 5.15 11.46 17.77
5 3.07 9.26 15.44
6 1.72 7.83 13.93
7 .78 6.84 12.88
8 .09 6.10 12.11
9 0 5.55 11.52
10 0 5.11 11.05
15 0 4.18 10.07
20 0 3.80 9.68
25 0 3.57 9.43
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-50
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$75,013 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM 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 52,500 70,329 74,561 78,786 43,803 46,679 49,551 47,803 50,679 53,551 (12.39) (6.64) (.90)
2 55,125 65,816 73,974 82,595 41,670 47,331 53,313 45,670 51,331 57,313 (8.71) (2.71) 3.26
3 57,881 61,591 73,391 86,588 40,096 48,449 57,790 43,596 51,949 61,290 (7.09) (1.04) 4.94
4 60,775 57,637 72,812 90,773 38,580 49,528 62,485 41,580 52,528 65,485 (6.28) (.24) 5.73
5 63,814 53,936 72,238 95,162 37,121 50,566 67,406 39,621 53,066 69,906 (5.78) .23 6.16
6 67,005 50,473 71,668 99,762 35,722 51,564 72,561 37,722 53,564 74,561 (5.45) .51 6.40
7 70,355 50,000 71,103 104,587 34,303 52,524 77,964 35,803 54,024 79,464 (5.24) .71 6.55
8 73,873 50,000 70,543 109,645 32,689 53,451 83,633 33,689 54,451 84,633 (5.17) .84 6.64
9 77,566 50,000 69,988 114,949 30,828 54,349 89,584 31,328 54,849 90,084 (5.23) .93 6.69
10 81,445 50,000 69,438 120,511 28,654 55,218 95,833 28,654 55,218 95,833 (5.42) 1.00 6.72
15 103,946 50,000 68,955 157,675 6,794 58,412 133,566 6,794 58,412 133,566 (12.46) 1.04 6.77
20 132,665 50,000 68,480 206,328 0 60,805 183,205 0 60,805 183,205 -- .98 6.71
25 169,318 50,000 68,041 270,122 0 63,477 252,003 0 63,477 252,003 -- .96 6.68
<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 40.66 49.12 57.57
2 14.73 21.63 28.53
3 7.20 13.65 20.09
4 3.62 9.85 16.08
5 1.53 7.64 13.74
6 .16 6.18 12.20
7 0 5.16 11.12
8 0 4.40 10.31
9 0 3.81 9.69
10 0 3.34 9.20
15 0 2.17 7.96
20 0 1.58 7.34
25 0 1.24 6.98
</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, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-51
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$81,811 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM 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 52,500 77,454 82,107 86,752 44,452 47,363 50,269 48,452 51,363 54,269 (11.10) (5.27) .54
2 55,125 73,205 82,265 91,837 42,952 48,763 54,902 46,952 52,763 58,902 (7.32) (1.24) 4.79
3 57,881 69,235 82,477 97,282 41,999 50,701 60,431 45,499 54,201 63,931 (5.65) .47 6.52
4 60,775 65,530 82,753 103,130 41,090 52,678 66,389 44,090 55,678 69,389 (4.79) 1.31 7.34
5 63,814 62,077 83,102 109,424 40,225 54,696 72,812 42,725 57,196 75,312 (4.26) 1.81 7.81
6 67,005 58,857 83,525 116,203 39,402 56,755 79,742 41,402 58,755 81,742 (3.89) 2.13 8.09
7 70,355 55,850 84,019 123,504 38,621 58,856 87,221 40,121 60,356 88,721 (3.62) 2.36 8.27
8 73,873 53,037 84,581 131,363 37,879 61,002 95,295 38,879 62,002 96,295 (3.41) 2.52 8.40
9 77,566 50,401 85,205 139,820 37,175 63,191 104,016 37,675 63,691 104,516 (3.24) 2.64 8.48
10 81,445 50,000 85,893 148,922 36,509 65,428 113,439 36,509 65,428 113,439 (3.10) 2.73 8.54
15 103,946 50,000 94,688 216,173 32,634 78,293 178,743 32,634 78,293 178,743 (2.80) 3.03 8.86
20 132,665 50,000 106,516 320,202 29,171 93,688 281,638 29,171 93,688 281,638 (2.66) 3.19 9.03
25 169,318 50,000 120,327 476,291 26,076 112,111 443,768 26,076 112,111 443,768 (2.57) 3.28 9.13
<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 54.91 64.21 73.50
2 21.00 28.27 35.53
3 11.46 18.16 24.84
4 7.00 13.42 19.84
5 4.42 10.70 16.96
6 2.76 8.93 15.09
7 1.59 7.70 13.79
8 .74 6.79 12.83
9 .09 6.10 12.10
10 0 5.56 11.53
15 0 4.35 10.25
20 0 3.85 9.73
25 0 3.58 9.43
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-52
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$81,811 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL NET CASH VALUE ASSUMING ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL HYPOTHETICAL 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 52,500 76,731 81,346 85,954 44,000 46,887 49,769 48,000 50,887 53,769 (12.00) (6.23) (.46)
2 55,125 71,810 80,708 90,110 42,057 47,764 53,794 46,057 51,764 57,794 (8.29) (2.26) 3.72
3 57,881 67,203 80,073 94,466 40,663 49,121 58,580 44,163 52,621 62,080 (6.66) (.59) 5.42
4 60,775 62,890 79,443 99,032 39,314 50,451 63,631 42,314 53,451 66,631 (5.83) .22 6.21
5 63,814 58,854 78,817 103,818 38,007 51,747 68,954 40,507 54,247 71,454 (5.34) .69 6.64
6 67,005 55,077 78,196 108,835 36,743 53,006 74,560 38,743 55,006 76,560 (5.00) .98 6.89
7 70,355 51,541 77,580 114,096 35,526 54,230 80,463 37,026 55,730 81,963 (4.77) 1.17 7.03
8 73,873 50,000 76,969 119,612 34,334 55,422 86,681 35,334 56,422 87,681 (4.59) 1.30 7.12
9 77,566 50,000 76,363 125,396 33,026 56,582 93,235 33,526 57,082 93,735 (4.50) 1.38 7.17
10 81,445 50,000 75,762 131,460 31,545 57,711 100,138 31,545 57,711 100,138 (4.50) 1.44 7.19
15 103,946 50,000 75,233 171,980 17,389 62,206 142,202 17,389 62,206 142,202 (6.80) 1.47 7.22
20 132,665 50,000 74,710 225,018 0 65,712 197,918 0 65,712 197,918 -- 1.38 7.12
25 169,318 50,000 74,219 294,532 0 69,151 274,420 0 69,151 274,420 -- 1.31 7.05
<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 53.46 62.69 71.91
2 19.84 27.05 34.25
3 10.36 17.00 23.62
4 5.90 12.27 18.63
5 3.31 9.53 15.73
6 1.62 7.74 13.84
7 .43 6.48 12.51
8 0 5.54 11.52
9 0 4.82 10.76
10 0 4.24 10.15
15 0 2.76 8.58
20 0 2.03 7.81
25 0 1.59 7.35
</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, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-53
<PAGE>
LAST SURVIVOR POLICY
MALE ISSUE AGE 65
FEMALE ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$114,909 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUM 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 52,500 107,901 114,384 120,855 44,658 47,581 50,499 48,658 51,581 54,499
2 55,125 100,988 113,486 126,691 43,325 49,182 55,370 47,325 53,182 59,370
3 57,881 94,516 112,596 132,809 42,499 51,298 61,135 45,999 54,798 64,635
4 60,775 88,459 111,711 139,222 41,679 53,424 67,319 44,679 56,424 70,319
5 63,814 82,822 110,877 145,999 40,883 55,578 73,975 43,383 58,078 76,475
6 67,005 77,605 110,133 153,224 40,124 57,780 81,170 42,124 59,780 83,170
7 70,355 72,775 109,483 160,937 39,402 60,033 88,952 40,902 61,533 90,452
8 73,873 68,305 108,931 169,186 38,715 62,336 97,371 39,715 63,336 98,371
9 77,566 64,170 108,485 178,026 38,062 64,693 106,483 38,562 65,193 106,983
10 81,445 60,350 108,156 187,527 37,443 67,104 116,349 37,443 67,104 116,349
15 103,946 50,000 113,563 259,270 33,806 81,106 185,170 33,806 81,106 185,170
20 132,665 50,000 123,152 370,218 30,523 98,031 294,699 30,523 98,031 294,699
25 169,318 50,000 137,951 546,062 27,558 118,486 469,015 27,558 118,486 469,015
30 216,097 50,000 157,448 820,649 24,881 143,210 746,440 24,881 143,210 746,440
35 275,801 50,000 178,645 1,226,063 22,464 173,094 1,187,963 22,464 173,094 1,187,963
<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 (10.68) (4.84) 1.00 115.80 128.77 141.71
2 (6.91) (.82) 5.23 42.12 50.66 59.18
3 (5.27) .86 6.93 23.65 31.07 38.49
4 (4.45) 1.67 7.72 15.33 22.26 29.18
5 (3.95) 2.14 8.15 10.62 17.27 23.90
6 (3.60) 2.44 8.41 7.60 14.07 20.52
7 (3.35) 2.65 8.58 5.51 11.85 18.18
8 (3.15) 2.79 8.69 3.98 10.22 16.46
9 (2.99) 2.90 8.76 2.81 8.99 15.15
10 (2.85) 2.99 8.81 1.90 8.02 14.13
15 (2.58) 3.28 9.12 0 5.62 11.60
20 (2.44) 3.42 9.27 0 4.61 10.53
25 (2.35) 3.51 9.37 0 4.14 10.04
30 (2.30) 3.57 9.43 0 3.90 9.78
35 (2.26) 3.61 9.47 0 3.71 9.57
</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, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-54
<PAGE>
LAST SURVIVOR POLICY
MALE ISSUE AGE 65
FEMALE ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$114,909 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM 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 52,500 107,901 114,384 120,855 44,658 47,581 50,499 48,658 51,581 54,499 (10.68) (4.84) 1.00
2 55,125 100,988 113,486 126,691 43,325 49,182 55,370 47,325 53,182 59,370 (6.91) (.82) 5.23
3 57,881 94,516 112,596 132,809 42,499 51,298 61,135 45,999 54,798 64,635 (5.27) .86 6.93
4 60,775 88,459 111,711 139,222 41,679 53,424 67,319 44,679 56,424 70,319 (4.45) 1.67 7.72
5 63,814 82,789 110,834 145,945 40,865 55,555 73,947 43,365 58,055 76,447 (3.95) 2.13 8.14
6 67,005 77,482 109,962 152,992 40,057 57,688 81,044 42,057 59,688 83,044 (3.63) 2.41 8.38
7 70,355 72,515 109,097 160,379 39,256 59,816 88,638 40,756 61,316 90,138 (3.40) 2.59 8.52
8 73,873 67,865 108,239 168,123 38,459 61,934 96,753 39,459 62,934 97,753 (3.23) 2.71 8.60
9 77,566 63,513 107,386 176,240 37,667 64,032 105,410 38,167 64,532 105,910 (3.10) 2.79 8.64
10 81,445 59,439 106,539 184,749 36,878 66,101 114,625 36,878 66,101 114,625 (3.00) 2.83 8.65
15 103,946 50,000 105,782 241,600 31,272 75,549 172,550 31,272 75,549 172,550 (3.08) 2.79 8.61
20 132,665 50,000 105,027 315,984 21,836 83,603 251,527 21,836 83,603 251,527 (4.06) 2.60 8.41
25 169,318 50,000 104,273 413,312 0 89,561 354,995 0 89,561 354,995 -- 2.36 8.16
30 216,097 50,000 103,561 540,854 0 94,196 491,946 0 94,196 491,946 -- 2.13 7.92
35 275,801 50,000 102,851 707,716 0 99,655 685,724 0 99,655 685,724 -- 1.99 7.77
<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>
1 115.80 128.77 141.71
2 42.12 50.66 59.18
3 23.65 31.07 38.49
4 15.33 22.26 29.18
5 10.61 17.26 23.89
6 7.57 14.04 20.49
7 5.45 11.79 18.12
8 3.89 10.14 16.37
9 2.69 8.86 15.03
10 1.74 7.86 13.96
15 0 5.12 11.07
20 0 3.78 9.66
25 0 2.98 8.82
30 0 2.46 8.26
35 0 2.08 7.87
</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, WHETHER
ADDITIONAL PAYMENTS ARE MADE, 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 OR
PARTIAL SURRENDER 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-55
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
The information contained in Appendix B 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 July, 1996. 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 of the Zenith Fund commenced operations
on May 2, 1994. The remaining Zenith Fund Series commenced operations on October
31, 1994.
The illustrations are based on the actual investment experience of the
relevant Eligible Funds for the periods shown (net of actual charges and
expenses incurred by the Eligible Funds). The illustrations assume that an
initial premium of $50,000 was paid and that no loans, transfers or other Policy
Owner transactions were made during the periods shown.
SUB-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 additional Premiums and the
Monthly Deductions from the cash value. (See "Charges and Expenses.")
NET RATES OF RETURN
A Sub-Account's investment experience is expressed below as a net rate of
return. The annual net rate is the effective earnings rate at which the
Sub-Accounts increased or decreased over a one-year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated by
taking the difference between the Sub-Accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the Sub-Accounts increased or decreased since
the inception dates of the Sub-Accounts. For each Sub-Account, the rate is
calculated by taking the difference between the Sub-Account's ending value and
the value on the date of its inception and dividing it by the value on the date
of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which, if
compounded annually, would equal the total net rate of return since inception.
A-56
<PAGE>
SUB-ACCOUNTS INVESTING IN NEW ENGLAND ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
8/26/83- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Income . 3.20% 12.61% 18.76% 14.83% 2.27% 8.37% 12.30% 8.09% 17.96% 8.18% 12.61%
Money
Market . . . 3.20 10.73 8.26 6.80 6.53 7.52 9.25 8.19 6.21 3.80 2.97
<CAPTION>
8/26/83 8/28/83-
12/31/96 12/31/96
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Bond Income . (3.36%) 21.20%
Money
Market . . . 3.97 5.70
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
5/1/87- ----------------------------------------------------------------------------------------
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%
Managed . . . . . . . (0.66) 9.48 19.08 3.21 20.17 6.70 10.65 (1.11) 31.26
<CAPTION>
5/1/87- 5/1/87-
12/31/96 12/31/96
TOTAL EFFECTIVE
SUB-ACCOUNT RETURN ANNUAL
- ----------- -------- ---------
<S> <C> <C>
Stock Index . . . . .
Managed . . . . . . .
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------- 4/30/93- 4/30/93-
FOR ONE YEAR ENDING 12/31/96 12/31/96
4/30/93- ---------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income . . . . . . . . . . . . . . . . . . . . . . . . 14.24% (1.21%) 36.47%
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74 (.27) 30.35
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------- 5/2/94- 5/2/94
FOR ONE YEAR ENDING 12/31/96 12/31/
5/2/94- -------------------- TOTAL EFFECTI
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 RETURN ANNUA
- ----------- -------- --------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.23%) 28.84%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------ 10/31/94- 10/31/9
FOR ONE YEAR ENDING 12/31/96 12/31/9
10/31/94- -------------------- TOTAL EFFECTI
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- --------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.20%) 48.69%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.10) 24.79
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.50) 39.28
International Magnum Equity* . . . . . . . . . . . . . . . . . . . . . . . . . . 2.60 6.23
U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60 15.02
Strategic Bond Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . (1.40) 19.38
</TABLE>
- ---------
* 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.
A-57
<PAGE>
POLICY PERFORMANCE
The material below assumes a Policy was issued with an initial premium of
$50,000 paid on August 26, 1983, in the case of the Bond Income and Money Market
Sub-Accounts (May 1, 1987, in the case of the Stock Index and Managed
Sub-Accounts; April 30, 1993, in the case of the Growth and Income and Avanti
Growth Sub-Accounts; May 2, 1994, in the case of the Small Cap Sub-Account;
October 31, 1994, in the case of the Balanced, International Magnum Equity,
Equity Growth, Venture Value, U.S. Government and Strategic Bond Opportunities
Sub-Accounts), to a male age 50 in the standard nonsmoker risk category. The
death benefits, cash values and internal rates of return assume in each instance
that the entire Policy value was invested in the particular Sub-Account for the
period shown. These illustrations of policy investment experience reflect all
Policy charges (except for the $2.50 Monthly Maintenance Charge) based on
NELICO's current rates. (See Appendix A for the definition of the internal rate
of return.)
MALE STANDARD NON SMOKER, ISSUE AGE 50
$50,000 INITIAL PREMIUM
$129,122 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 130,654 51,122 47,122 (15.66)% --
December 31,
1984 . . . . . . 50,000 50,000 139,494 56,311 52,311 3.41 114.08%
December 31,
1985 . . . . . . 50,000 50,000 156,886 65,320 61,820 9.46 62.75
December 31,
1986 . . . . . . 50,000 50,000 170,674 73,266 70,266 10.70 44.30
December 31,
1987 . . . . . . 50,000 50,000 165,419 73,185 70,685 8.29 31.68
December 31,
1988 . . . . . . 50,000 75,767 169,828 77,406 75,406 7.99 25.69
December 31,
1989 . . . . . . 50,000 75,767 180,973 84,942 83,442 8.40 22.46
December 31,
1990 . . . . . . 50,000 75,767 185,675 89,706 88,706 8.11 19.55
December 31,
1991 . . . . . . 50,000 75,767 207,916 103,356 102,856 9.02 18.62
December 31,
1992 . . . . . . 50,000 75,767 213,612 109,212 109,212 8.72 16.81
December 31,
1993 . . . . . . 50,000 120,283 229,245 120,487 120,487 8.87 15.85
December 31,
1994 . . . . . . 50,000 120,283 212,033 114,506 114,506 7.57 13.58
December 31,
1995 . . . . . . 50,000 120,283 247,171 137,081 137,081 8.51 13.82
December 31,
1996 . . . . . .
</TABLE>
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 . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 130,974 51,247 47,247 (15.02)% --
December 31,
1984 . . . . . . 50,000 50,000 137,164 55,371 51,371 2.03 111.42%
December 31,
1985 . . . . . . 50,000 50,000 140,631 58,552 55,052 4.19 55.34
December 31,
1986 . . . . . . 50,000 50,000 142,293 61,083 58,083 4.58 36.67
December 31,
1987 . . . . . . 50,000 50,000 143,656 63,557 61,057 4.70 27.47
December 31,
1988 . . . . . . 50,000 65,444 146,543 66,793 64,793 4.97 22.27
December 31,
1989 . . . . . . 50,000 65,444 151,824 71,260 69,760 5.39 19.12
December 31,
1990 . . . . . . 50,000 65,444 155,804 75,274 74,274 5.53 16.73
December 31,
1991 . . . . . . 50,000 65,444 157,095 78,093 77,593 5.41 14.70
December 31,
1992 . . . . . . 50,000 65,444 154,861 79,175 79,175 5.04 12.86
December 31,
1993 . . . . . . 50,000 79,450 151,970 79,872 79,872 4.63 11.34
December 31,
1994 . . . . . . 50,000 79,450 151,626 81,883 81,883 4.44 10.27
December 31,
1995 . . . . . . 50,000 79,450 153,789 85,291 85,291 4.42 9.53
December 31,
1996 . . . . . .
</TABLE>
A-58
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 124,238 48,993 44,993 (14.60)% --
December 31,
1988 . . . . . . 50,000 50,000 128,321 52,204 48,204 (2.17) 75.93%
December 31,
1989 . . . . . . 50,000 50,000 146,503 61,467 57,967 5.70 49.61
December 31,
1990 . . . . . . 50,000 50,000 142,039 61,437 58,437 4.34 32.92
December 31,
1991 . . . . . . 50,000 50,000 161,786 72,115 69,615 7.35 28.60
December 31,
1992 . . . . . . 50,000 70,177 163,688 75,159 73,159 6.95 23.27
December 31,
1993 . . . . . . 50,000 70,177 171,814 81,230 79,730 7.25 20.33
December 31,
1994 . . . . . . 50,000 70,177 161,126 78,405 77,405 5.86 16.49
December 31,
1995 . . . . . . 50,000 70,177 202,017 101,135 100,635 8.40 17.48
December 31,
1996 . . . . . .
</TABLE>
AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 142,840 56,477 52,477 7.47% --
December 31,
1994 . . . . . . 50,000 50,000 133,421 54,419 50,419 .50 79.91%
December 31,
1995 . . . . . . 50,000 50,000 166,943 70,222 66,722 11.41 57.04
December 31,
1996 . . . . . .
</TABLE>
SMALL-CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 120,049 47,342 43,342 (19.32)% --
December 31,
1995 . . . . . . 50,000 50,000 147,654 60,069 56,069 7.12 91.57%
December 31,
1996 . . . . . .
</TABLE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 127,694 49,705 45,705 (41.58)% --
December 31,
1995 . . . . . . 50,000 50,000 151,641 60,900 56,900 11.71 158.73%
December 31,
1996 . . . . . .
</TABLE>
A-59
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 130,766 50,900 46,900 (31.81)% --
December 31,
1995 . . . . . . 50,000 50,000 132,641 53,270 49,270 (1.25) 130.69%
December 31,
1996 . . . . . .
</TABLE>
EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 120,911 47,065 43,065 (59.08)% --
December 31,
1995 . . . . . . 50,000 50,000 172,803 69,399 65,399 25.86 189.37%
December 31,
1996 . . . . . .
</TABLE>
GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 142,221 56,232 52,232 6.72% --
December 31,
1994 . . . . . . 50,000 50,000 132,620 54,093 50,093 .11 79.26%
December 31,
1995 . . . . . . 50,000 50,000 172,204 72,435 68,935 12.77 58.88
December 31,
1996 . . . . . .
</TABLE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 109,807 43,303 39,303 (30.24)% --
December 31,
1988 . . . . . . 50,000 50,000 119,943 48,796 44,796 (6.38) 68.95%
December 31,
1989 . . . . . . 50,000 50,000 151,676 63,637 60,137 7.16 51.57
December 31,
1990 . . . . . . 50,000 50,000 135,410 58,570 55,570 2.92 31.20
December 31,
1991 . . . . . . 50,000 50,000 167,404 74,619 72,119 8.16 29.54
December 31,
1992 . . . . . . 50,000 73,892 170,317 78,203 76,203 7.72 24.14
December 31,
1993 . . . . . . 50,000 73,892 177,273 83,811 82,311 7.76 20.90
December 31,
1994 . . . . . . 50,000 73,892 170,021 82,733 81,733 6.62 17.30
December 31,
1995 . . . . . . 50,000 73,892 222,827 111,553 111,053 9.64 18.81
December 31,
1996 . . . . . .
</TABLE>
A-60
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 123,857 48,211 44,211 (52.11)% --
December 31, 1995 . 50,000 50,000 163,803 65,784 61,784 19.88 176.41%
December 31, 1996 .
</TABLE>
U.S. GOVERNMENT SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 128,589 50,053 46,053 (38.86)% --
December 31, 1995 . 50,000 50,000 140,033 56,238 52,238 3.82 141.67%
December 31, 1996 .
</TABLE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 125,905 49,008 45,008 (46.71)% --
December 31, 1995 . 50,000 50,000 142,849 57,369 53,369 5.75 145.82%
December 31, 1996 .
</TABLE>
A-61
<PAGE>
FEMALE STANDARD NON SMOKER, ISSUE AGE 50
$50,000 INITIAL PREMIUM
$145,611 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 147,348 51,122 47,122 (15.66)% --
December 31,
1984 . . . . . . 50,000 50,000 157,343 56,311 52,311 3.41 134.08%
December 31,
1985 . . . . . . 50,000 50,000 176,975 65,320 61,820 9.46 71.32
December 31,
1986 . . . . . . 50,000 50,000 192,526 73,266 70,266 10.70 49.59
December 31,
1987 . . . . . . 50,000 50,000 186,573 73,185 70,685 8.29 35.37
December 31,
1988 . . . . . . 50,000 75,767 191,487 77,406 75,406 7.99 28.54
December 31,
1989 . . . . . . 50,000 75,767 203,947 84,942 83,442 8.40 24.79
December 31,
1990 . . . . . . 50,000 75,767 209,082 89,706 88,706 8.11 21.50
December 31,
1991 . . . . . . 50,000 75,767 233,873 103,356 102,856 9.02 20.30
December 31,
1992 . . . . . . 50,000 75,767 239,936 109,212 109,212 8.72 18.27
December 31,
1993 . . . . . . 50,000 120,283 257,039 120,487 120,487 8.87 17.14
December 31,
1994 . . . . . . 50,000 120,283 237,248 114,506 114,506 7.57 14.71
December 31,
1995 . . . . . . 50,000 120,283 275,927 137,081 137,081 8.51 14.84
December 31,
1996 . . . . . .
</TABLE>
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 . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 147,709 51,247 47,247 (15.02)% --
December 31,
1984 . . . . . . 50,000 50,000 154,715 55,371 51,371 2.03 131.17%
December 31,
1985 . . . . . . 50,000 50,000 158,639 58,552 55,052 4.19 63.52
December 31,
1986 . . . . . . 50,000 50,000 160,511 61,083 58,083 4.58 41.68
December 31,
1987 . . . . . . 50,000 50,000 162,028 63,557 61,057 4.70 31.05
December 31,
1988 . . . . . . 50,000 65,444 165,232 66,793 64,793 4.97 25.05
December 31,
1989 . . . . . . 50,000 65,444 171,098 71,260 69,760 5.39 21.38
December 31,
1990 . . . . . . 50,000 65,444 175,446 75,274 74,274 5.53 18.63
December 31,
1991 . . . . . . 50,000 65,444 176,708 78,093 77,593 5.41 16.33
December 31,
1992 . . . . . . 50,000 65,444 173,946 79,175 79,175 5.04 14.27
December 31,
1993 . . . . . . 50,000 79,450 170,395 79,872 79,872 4.63 12.58
December 31,
1994 . . . . . . 50,000 79,450 169,657 81,883 81,883 4.44 11.37
December 31,
1995 . . . . . . 50,000 79,450 171,681 85,291 85,291 4.42 10.51
December 31,
1996 . . . . . .
</TABLE>
A-62
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 140,118 48,993 44,993 (14.60)% --
December 31,
1988 . . . . . . 50,000 50,000 144,745 52,204 48,204 (2.17) 89.09%
December 31,
1989 . . . . . . 50,000 50,000 165,263 61,467 57,967 5.70 56.52
December 31,
1990 . . . . . . 50,000 50,000 160,222 61,437 58,437 4.34 37.36
December 31,
1991 . . . . . . 50,000 50,000 182,464 72,115 69,615 7.35 31.95
December 31,
1992 . . . . . . 50,000 70,177 184,543 75,159 73,159 6.95 25.91
December 31,
1993 . . . . . . 50,000 70,177 193,592 81,230 79,730 7.25 22.51
December 31,
1994 . . . . . . 50,000 70,177 181,395 78,405 77,405 5.86 18.30
December 31,
1995 . . . . . . 50,000 70,177 227,163 101,135 100,635 8.40 19.08
December 31,
1996 . . . . . .
</TABLE>
AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 161,101 56,477 52,477 7.47% --
December 31,
1994 . . . . . . 50,000 50,000 150,498 54,419 50,419 .50 93.35%
December 31,
1995 . . . . . . 50,000 50,000 188,321 70,222 66,722 11.41 64.29
December 31,
1996 . . . . . .
</TABLE>
SMALL-CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 135,395 47,362 43,342 (19.32)% --
December 31,
1995 . . . . . . 50,000 50,000 166,551 60,069 56,069 7.12 105.93%
December 31,
1996 . . . . . .
</TABLE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 144,006 49,705 45,705 (41.58)% --
December 31,
1995 . . . . . . 50,000 50,000 171,041 60,900 56,900 11.71 186.84%
December 31,
1996 . . . . . .
</TABLE>
A-63
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 147,469 50,900 46,900 (31.81)% --
December 31,
1995 . . . . . . 50,000 50,000 149,611 53,270 49,270 (1.25) 155.76%
December 31,
1996 . . . . . .
</TABLE>
EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 136,356 47,065 43,065 (59.08)% --
December 31,
1995 . . . . . . 50,000 50,000 194,910 69,399 65,399 25.86 220.82%
December 31,
1996 . . . . . .
</TABLE>
GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 160,403 56,232 52,232 6.72% --
December 31,
1994 . . . . . . 50,000 50,000 149,594 54,093 50,093 .11 92.66%
December 31,
1995 . . . . . . 50,000 50,000 194,256 72,435 68,935 12.77 66.21
December 31,
1996 . . . . . .
</TABLE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 123,843 43,303 39,303 (30.24)% --
December 31,
1988 . . . . . . 50,000 50,000 135,293 48,796 44,796 (6.38) 81.59%
December 31,
1989 . . . . . . 50,000 50,000 171,099 63,637 60,137 7.16 58.57
December 31,
1990 . . . . . . 50,000 50,000 152,745 58,570 55,570 2.92 35.58
December 31,
1991 . . . . . . 50,000 50,000 188,801 74,619 72,119 8.16 32.92
December 31,
1992 . . . . . . 50,000 73,892 192,017 78,203 76,203 7.72 26.79
December 31,
1993 . . . . . . 50,000 73,892 199,743 83,811 82,311 7.76 23.08
December 31,
1994 . . . . . . 50,000 73,892 191,409 82,733 81,733 6.62 19.13
December 31,
1995 . . . . . . 50,000 73,892 250,564 111,553 111,053 9.64 20.43
December 31,
1996 . . . . . .
</TABLE>
A-64
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 139,678 48,211 44,211 (52.11)% --
December 31, 1995 . 50,000 50,000 184,758 65,784 61,784 19.88 206.45%
December 31, 1996 .
</TABLE>
U.S. GOVERNMENT SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 145,014 50,053 46,053 (38.86)% --
December 31, 1995 . 50,000 50,000 157,948 56,238 52,238 3.82 167.93%
December 31, 1996 .
</TABLE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 141,987 49,008 45,008 (46.71)% --
December 31, 1995 . 50,000 50,000 161,124 57,369 53,369 5.75 172.53%
December 31, 1996 .
</TABLE>
A-65
<PAGE>
MALE STANDARD NON SMOKER, ISSUE AGE 70
$50,000 INITIAL PREMIUM
$75,013 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 76,157 51,122 47,122 (15.66)% --
December 31,
1984 . . . . . . 50,000 50,000 82,136 56,311 52,311 3.41 44.52%
December 31,
1985 . . . . . . 50,000 50,000 93,357 65,320 61,820 9.46 30.47
December 31,
1986 . . . . . . 50,000 50,000 102,688 73,266 70,266 10.70 23.98
December 31,
1987 . . . . . . 50,000 50,000 100,681 73,185 70,685 8.29 17.47
December 31,
1988 . . . . . . 50,000 75,767 104,513 77,406 75,406 7.99 14.80
December 31,
1989 . . . . . . 50,000 75,767 112,870 84,942 83,442 8.40 13.69
December 31,
1990 . . . . . . 50,000 75,767 117,286 89,706 88,706 8.11 12.30
December 31,
1991 . . . . . . 50,000 75,767 133,050 103,356 102,856 9.02 12.44
December 31,
1992 . . . . . . 50,000 75,767 138,501 109,212 109,212 8.72 11.52
December 31,
1993 . . . . . . 50,000 75,767 150,616 120,487 120,487 8.87 11.24
December 31,
1994 . . . . . . 50,000 75,767 141,178 114,506 114,506 7.57 9.58
December 31,
1995 . . . . . . 50,000 75,767 166,804 137,081 137,081 8.51 10.25
December 31,
1996 . . . . . .
</TABLE>
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 . $50,000 $50,000 $ 75,013 $50,000 $46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 76,344 51,247 47,247 (15.02)% --
December 31,
1984 . . . . . . 50,000 50,000 80,764 55,371 51,371 2.03 42.72%
December 31,
1985 . . . . . . 50,000 50,000 83,684 58,552 55,052 4.19 24.53
December 31,
1986 . . . . . . 50,000 50,000 85,612 61,083 58,083 4.58 17.43
December 31,
1987 . . . . . . 50,000 50,000 87,435 63,557 61,057 4.70 13.72
December 31,
1988 . . . . . . 50,000 65,444 90,269 66,793 64,793 4.97 11.68
December 31,
1989 . . . . . . 50,000 65,444 94,690 71,260 69,760 5.39 10.58
December 31,
1990 . . . . . . 50,000 65,444 98,417 75,274 74,274 5.53 9.65
December 31,
1991 . . . . . . 50,000 65,444 100,528 78,093 77,593 5.41 8.73
December 31,
1992 . . . . . . 50,000 65,444 100,408 79,175 79,175 5.04 7.74
December 31,
1993 . . . . . . 50,000 65,444 99,846 79,872 79,872 4.63 6.91
December 31,
1994 . . . . . . 50,000 65,444 100,957 81,883 81,883 4.44 6.39
December 31,
1995 . . . . . . 50,000 65,444 103,785 85,291 85,291 4.42 6.09
December 31,
1996 . . . . . .
</TABLE>
A-66
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 72,598 48,993 44,993 (14.60)% --
December 31,
1988 . . . . . . 50,000 50,000 75,754 52,204 48,204 (2.17) 28.28%
December 31,
1989 . . . . . . 50,000 50,000 87,415 61,467 57,967 5.70 23.29
December 31,
1990 . . . . . . 50,000 50,000 85,703 61,437 58,437 4.34 15.82
December 31,
1991 . . . . . . 50,000 50,000 98,762 72,115 69,615 7.35 15.70
December 31,
1992 . . . . . . 50,000 70,177 101,141 75,159 73,159 6.95 13.23
December 31,
1993 . . . . . . 50,000 70,177 107,496 81,230 79,730 7.25 12.16
December 31,
1994 . . . . . . 50,000 70,177 102,108 78,405 77,405 5.86 9.76
December 31,
1995 . . . . . . 50,000 70,177 129,698 101,135 100,635 8.40 11.62
December 31,
1996 . . . . . .
</TABLE>
AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $75,013 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 83,538 56,477 52,477 7.47% --
December 31,
1994 . . . . . . 50,000 50,000 78,833 54,419 50,419 .50 31.32%
December 31,
1995 . . . . . . 50,000 50,000 99,702 70,222 66,722 11.41 29.48
December 31,
1996 . . . . . .
</TABLE>
SMALL-CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $75,013 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 70,151 47,342 43,342 (19.32)% --
December 31,
1995 . . . . . . 50,000 50,000 87,167 60,069 56,069 7.12 39.61%
December 31,
1996 . . . . . .
</TABLE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $75,013 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 74,308 49,705 45,705 (41.58)% --
December 31,
1995 . . . . . . 50,000 50,000 89,133 60,900 56,900 11.71 64.10%
December 31,
1996 . . . . . .
</TABLE>
A-67
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 76,095 50,900 46,900 (31.81)% --
December 31,
1995 . . . . . . 50,000 50,000 77,966 53,270 49,270 (1.25) 46.32%
December 31,
1996 . . . . . .
</TABLE>
EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 70,361 47,065 43,065 (59.08)% --
December 31,
1995 . . . . . . 50,000 50,000 101,572 69,399 65,399 25.86 83.54%
December 31,
1996 . . . . . .
</TABLE>
GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 83,176 56,232 52,232 6.72% --
December 31,
1994 . . . . . . 50,000 50,000 78,360 54,093 50,093 .11 30.84%
December 31,
1995 . . . . . . 50,000 50,000 102,844 72,435 68,935 12.77 30.99
December 31,
1996 . . . . . .
</TABLE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 64,166 43,303 39,303 30.24% --
December 31,
1988 . . . . . . 50,000 50,000 70,808 48,796 44,796 (6.38) 23.19%
December 31,
1989 . . . . . . 50,000 50,000 90,502 63,637 60,137 7.16 24.90
December 31,
1990 . . . . . . 50,000 50,000 81,703 58,570 55,570 2.92 14.32
December 31,
1991 . . . . . . 50,000 50,000 102,192 74,619 72,119 8.16 16.55
December 31,
1992 . . . . . . 50,000 73,892 105,237 78,203 76,203 7.72 14.03
December 31,
1993 . . . . . . 50,000 73,892 110,912 83,811 82,311 7.76 12.69
December 31,
1994 . . . . . . 50,000 73,892 107,745 82,733 81,733 6.62 10.53
December 31,
1995 . . . . . . 50,000 73,892 143,059 111,553 111,053 9.64 12.89
December 31,
1996 . . . . . .
</TABLE>
A-68
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . $50,000 $50,000 $75,013 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 72,075 48,211 44,211 (52.11)% --
December 31, 1995 . 50,000 50,000 96,282 65,784 61,784 19.88 75.32%
December 31, 1996 .
</TABLE>
U.S. GOVERNMENT SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . $50,000 $50,000 $75,013 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 74,828 50,053 46,053 (38.86)% --
December 31, 1995 . 50,000 50,000 82,311 56,238 52,238 3.82 53.28%
December 31, 1996 .
</TABLE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . $50,000 $50,000 $75,013 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 73,266 49,008 45,008 (46.71)% --
December 31, 1995 . 50,000 50,000 83,966 57,369 53,369 5.75 55.92%
December 31, 1996 .
</TABLE>
A-69
<PAGE>
FEMALE STANDARD NON SMOKER, ISSUE AGE 70
$50,000 INITIAL PREMIUM
$81,811 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 82,947 51,122 47,122 (15.66)% --
December 31,
1984 . . . . . . 50,000 50,000 89,088 56,311 52,311 3.41 53.50%
December 31,
1985 . . . . . . 50,000 50,000 100,818 65,320 61,820 9.46 34.81
December 31,
1986 . . . . . . 50,000 50,000 110,400 73,266 70,266 10.70 26.69
December 31,
1987 . . . . . . 50,000 50,000 107,750 73,185 70,685 8.29 19.31
December 31,
1988 . . . . . . 50,000 75,767 111,447 77,406 75,406 7.99 16.17
December 31,
1989 . . . . . . 50,000 75,767 119,699 84,942 83,442 8.40 14.74
December 31,
1990 . . . . . . 50,000 75,767 123,826 89,706 88,706 8.11 13.14
December 31,
1991 . . . . . . 50,000 75,767 139,851 103,356 102,856 9.02 13.11
December 31,
1992 . . . . . . 50,000 75,767 144,956 109,212 109,212 8.72 12.06
December 31,
1993 . . . . . . 50,000 75,767 156,979 120,487 120,487 8.87 11.69
December 31,
1994 . . . . . . 50,000 75,767 146,552 114,506 114,506 7.57 9.94
December 31,
1995 . . . . . . 50,000 75,767 172,489 137,081 137,081 8.51 10.55
December 31,
1996 . . . . . .
</TABLE>
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 . $50,000 $50,000 $ 81,811 $50,000 $46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 83,150 51,247 47,247 (15.02)% --
December 31,
1984 . . . . . . 50,000 50,000 87,600 55,371 51,371 2.03 51.59%
December 31,
1985 . . . . . . 50,000 50,000 90,373 58,552 55,052 4.19 28.67
December 31,
1986 . . . . . . 50,000 50,000 92,042 61,083 58,083 4.58 19.99
December 31,
1987 . . . . . . 50,000 50,000 93,574 63,557 61,057 4.70 15.51
December 31,
1988 . . . . . . 50,000 65,444 96,167 66,793 64,793 4.97 13.01
December 31,
1989 . . . . . . 50,000 65,444 100,419 71,260 69,760 5.39 11.61
December 31,
1990 . . . . . . 50,000 65,444 103,905 75,274 74,274 5.53 10.47
December 31,
1991 . . . . . . 50,000 65,444 105,667 78,093 77,593 5.41 9.38
December 31,
1992 . . . . . . 50,000 65,444 105,088 79,175 79,175 5.04 8.27
December 31,
1993 . . . . . . 50,000 65,444 104,064 79,872 79,872 4.63 7.34
December 31,
1994 . . . . . . 50,000 65,444 104,800 81,883 81,883 4.44 6.74
December 31,
1995 . . . . . . 50,000 65,444 107,322 85,291 85,291 4.42 6.38
December 31,
1996 . . . . . .
</TABLE>
A-70
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 78,989 48,993 44,993 (14.60)% --
December 31,
1988 . . . . . . 50,000 50,000 82,078 52,204 48,204 (2.17) 34.59%
December 31,
1989 . . . . . . 50,000 50,000 94,297 61,467 57,967 5.70 26.84
December 31,
1990 . . . . . . 50,000 50,000 92,035 61,437 58,437 4.34 18.09
December 31,
1991 . . . . . . 50,000 50,000 105,576 72,115 69,615 7.35 17.36
December 31,
1992 . . . . . . 50,000 70,177 107,626 75,159 73,159 6.95 14.48
December 31,
1993 . . . . . . 50,000 70,177 113,873 81,230 79,730 7.25 13.14
December 31,
1994 . . . . . . 50,000 70,177 107,683 78,405 77,405 5.86 10.52
December 31,
1995 . . . . . . 50,000 70,177 136,181 101,135 100,635 8.40 12.25
December 31,
1996 . . . . . .
</TABLE>
AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 90,861 56,477 52,477 7.47% --
December 31,
1994 . . . . . . 50,000 50,000 85,382 54,419 50,419 .50 37.74%
December 31,
1995 . . . . . . 50,000 50,000 107,511 70,222 66,722 11.41 33.19
December 31,
1996 . . . . . .
</TABLE>
SMALL-CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $81,811 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 76,327 47,342 43,342 (19.32)% --
December 31,
1995 . . . . . . 50,000 50,000 94,443 60,069 56,069 7.12 46.49%
December 31,
1996 . . . . . .
</TABLE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $81,811 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 80,987 49,705 45,705 (41.58)% --
December 31,
1995 . . . . . . 50,000 50,000 96,746 60,900 56,900 11.71 76.04%
December 31,
1996 . . . . . .
</TABLE>
A-71
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $81,811 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 82,935 50,900 46,900 (31.81)% --
December 31,
1995 . . . . . . 50,000 50,000 84,624 53,270 49,270 (1.25) 56.96%
December 31,
1996 . . . . . .
</TABLE>
EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $ 81,811 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 76,685 47,065 43,065 (59.08)% --
December 31,
1995 . . . . . . 50,000 50,000 110,247 69,399 65,399 25.86 96.89%
December 31,
1996 . . . . . .
</TABLE>
GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $ 81,811 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 90,467 56,232 52,232 6.72% --
December 31,
1994 . . . . . . 50,000 50,000 84,870 54,093 50,093 .11 37.24%
December 31,
1995 . . . . . . 50,000 50,000 110,899 72,435 68,935 12.77 34.74
December 31,
1996 . . . . . .
</TABLE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 69,815 43,303 39,303 (30.24)% --
December 31,
1988 . . . . . . 50,000 50,000 76,718 48,796 44,796 (6.38) 29.25%
December 31,
1989 . . . . . . 50,000 50,000 97,627 63,637 60,137 7.16 28.50
December 31,
1990 . . . . . . 50,000 50,000 87,740 58,570 55,570 2.92 16.57
December 31,
1991 . . . . . . 50,000 50,000 109,242 74,619 72,119 8.16 18.22
December 31,
1992 . . . . . . 50,000 73,892 111,985 78,203 76,203 7.72 15.29
December 31,
1993 . . . . . . 50,000 73,892 117,491 83,811 82,311 7.76 13.67
December 31,
1994 . . . . . . 50,000 73,892 113,627 82,733 81,733 6.62 11.30
December 31,
1995 . . . . . . 50,000 73,892 150,209 111,553 111,053 9.64 13.53
December 31,
1996 . . . . . .
</TABLE>
A-72
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $ 81,811 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 78,554 48,211 44,211 (52.11)% --
December 31, 1995 . 50,000 50,000 104,505 65,784 61,784 19.88 88.07%
December 31, 1996 .
</TABLE>
U.S. GOVERNMENT SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $81,811 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 81,555 50,053 46,053 (38.86)% --
December 31, 1995 . 50,000 50,000 89,340 56,238 52,238 3.82 64.43%
December 31, 1996 .
</TABLE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $81,811 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 79,852 49,008 45,008 (46.71)% --
December 31, 1995 . 50,000 50,000 91,137 57,369 53,369 5.75 67.26%
December 31, 1996 .
</TABLE>
A-73
<PAGE>
MALE STANDARD NON SMOKER, ISSUE AGE 65
FEMALE STANDARD NON SMOKER, ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM
$114,909 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 116,136 51,194 47,194 (15.29)% --
December 31,
1984 . . . . . . 50,000 50,000 123,559 56,620 52,620 3.86 95.65%
December 31,
1985 . . . . . . 50,000 50,000 138,437 65,906 62,406 9.90 54.30
December 31,
1986 . . . . . . 50,000 50,000 149,980 74,131 71,131 11.10 38.83
December 31,
1987 . . . . . . 50,000 50,000 144,723 74,216 71,716 8.65 27.69
December 31,
1988 . . . . . . 50,000 76,937 147,943 78,654 76,654 8.32 22.49
December 31,
1989 . . . . . . 50,000 76,937 157,032 86,484 84,984 8.72 19.76
December 31,
1990 . . . . . . 50,000 76,937 160,543 91,517 90,517 8.41 17.21
December 31,
1991 . . . . . . 50,000 76,937 179,230 105,654 105,154 9.31 16.52
December 31,
1992 . . . . . . 50,000 76,937 183,685 111,864 111,864 9.00 14.93
December 31,
1993 . . . . . . 50,000 123,368 196,769 123,659 123,659 9.14 14.16
December 31,
1994 . . . . . . 50,000 123,368 181,797 117,756 117,756 7.84 12.05
December 31,
1995 . . . . . . 50,000 123,368 211,855 141,254 141,254 8.77 12.40
December 31,
1996 . . . . . .
</TABLE>
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 . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31,
1983 . . . . . . 50,000 50,000 116,420 51,320 47,320 (14.64)% --
December 31,
1984 . . . . . . 50,000 50,000 121,496 55,674 51,674 2.47 93.22%
December 31,
1985 . . . . . . 50,000 50,000 124,093 59,077 55,577 4.61 47.28
December 31,
1986 . . . . . . 50,000 50,000 125,037 61,803 58,803 4.96 31.49
December 31,
1987 . . . . . . 50,000 50,000 125,682 64,451 61,951 5.05 23.61
December 31,
1988 . . . . . . 50,000 66,453 127,657 67,868 65,868 5.29 19.16
December 31,
1989 . . . . . . 50,000 66,453 131,737 72,553 71,053 5.69 16.49
December 31,
1990 . . . . . . 50,000 66,453 134,714 76,793 75,793 5.82 14.44
December 31,
1991 . . . . . . 50,000 66,453 135,418 79,828 79,328 5.68 12.68
December 31,
1992 . . . . . . 50,000 66,453 133,164 81,096 81,096 5.31 11.05
December 31,
1993 . . . . . . 50,000 81,486 130,440 81,975 81,975 4.89 9.71
December 31,
1994 . . . . . . 50,000 81,486 130,002 84,207 84,207 4.70 8.78
December 31,
1995 . . . . . . 50,000 81,486 131,814 87,887 87,887 4.67 8.17
December 31,
1996 . . . . . .
</TABLE>
A-74
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 110,338 49,114 45,114 (14.26)% --
December 31,
1988 . . . . . . 50,000 50,000 113,557 52,538 48,538 (1.76) 63.50%
December 31,
1989 . . . . . . 50,000 50,000 129,144 62,065 58,565 6.10 42.70
December 31,
1990 . . . . . . 50,000 50,000 124,677 62,198 59,198 4.71 28.28
December 31,
1991 . . . . . . 50,000 50,000 141,388 73,167 70,667 7.96 24.94
December 31,
1992 . . . . . . 50,000 71,261 142,449 76,409 74,409 7.27 20.29
December 31,
1993 . . . . . . 50,000 71,261 148,947 82,746 81,246 7.55 17.78
December 31,
1994 . . . . . . 50,000 71,261 139,206 80,028 79,028 6.15 14.28
December 31,
1995 . . . . . . 50,000 71,261 174,028 103,435 102,935 8.69 15.47
December 31,
1996 . . . . . .
</TABLE>
AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 126,824 56,636 52,636 7.96% --
December 31,
1994 . . . . . . 50,000 50,000 118,034 54,784 50,784 .94 67.19%
December 31,
1995 . . . . . . 50,000 50,000 147,115 70,924 67,424 11.84 49.78
December 31,
1996 . . . . . .
</TABLE>
SMALL-CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUM 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 . . . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 106,618 47,459 43,459 (18.99)% --
December 31,
1995 . . . . . . 50,000 50,000 130,666 60,454 56,454 7.56 78.01%
December 31,
1996 . . . . . .
</TABLE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 113,571 49,740 45,740 (41.31)% --
December 31,
1995 . . . . . . 50,000 50,000 134,404 61,196 57,196 12.21 133.32%
December 31,
1996 . . . . . .
</TABLE>
A-75
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 116,303 50,936 46,936 (31.50)% --
December 31,
1995 . . . . . . 50,000 50,000 117,564 53,529 49,529 (.81) 108.03%
December 31,
1996 . . . . . .
</TABLE>
EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31,
1994 . . . . . . 50,000 50,000 107,538 47,098 43,098 (58.89)% --
December 31,
1995 . . . . . . 50,000 50,000 153,160 69,736 65,736 26.42 160.95%
December 31,
1996 . . . . . .
</TABLE>
GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . . . . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31,
1993 . . . . . . 50,000 50,000 126,274 56,391 52,391 7.21% --
December 31,
1994 . . . . . . 50,000 50,000 117,325 54,455 50,455 .54 66.59%
December 31,
1995 . . . . . . 50,000 50,000 151,752 73,160 69,660 13.22 51.53
December 31,
1996 . . . . . .
</TABLE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . . . $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31,
1987 . . . . . . 50,000 50,000 97,521 43,409 39,409 (29.96)% --
December 31,
1988 . . . . . . 50,000 50,000 106,142 49,107 45,107 (5.99) 57.01%
December 31,
1989 . . . . . . 50,000 50,000 133,705 64,257 60,757 7.58 44.57
December 31,
1990 . . . . . . 50,000 50,000 118,857 59,295 56,295 3.29 26.62
December 31,
1991 . . . . . . 50,000 50,000 146,300 75,709 73,209 8.51 25.86
December 31,
1992 . . . . . . 50,000 75,033 148,219 79,503 77,503 8.04 21.13
December 31,
1993 . . . . . . 50,000 75,033 153,680 85,376 83,876 8.07 18.34
December 31,
1994 . . . . . . 50,000 75,033 146,891 84,446 83,446 6.91 15.09
December 31,
1995 . . . . . . 50,000 75,033 191,956 114,091 113,591 9.93 16.79
December 31,
1996 . . . . . .
</TABLE>
A-76
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 110,158 48,245 44,245 (51.89)% --
December 31, 1995 . 50,000 50,000 145,183 66,104 62,104 20.41 149.26%
December 31, 1996 .
</TABLE>
U.S. GOVERNMENT SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 114,367 50,088 46,088 (38.58)% --
December 31, 1995 . 50,000 50,000 124,115 56,512 52,512 4.29 117.93%
December 31, 1996 .
</TABLE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED 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 . $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31, 1994 . 50,000 50,000 111,979 49,043 45,043 (46.46)% --
December 31, 1995 . 50,000 50,000 126,611 57,648 53,648 6.22 121.68%
December 31, 1996 .
</TABLE>
A-77
<PAGE>
APPENDIX C
EXAMPLE OF EFFECT OF NEGATIVE INVESTMENT PERFORMANCE
ON CALCULATION OF SURRENDER CHARGES
As described under "Charges and Expenses," if there has been negative
investment performance under your Policy (that is, cash value is less than your
total premium payments because net investment experience of the Sub-Accounts has
not been at least equal to total charges or has been negative), any Surrender
Charge will be calculated by deeming additional payments to have been reduced
before the initial premium. If negative investment performance has been deemed
to completely reduce additional payments and to further reduce initial premium,
any subsequent increase in cash value (from earnings or net additional payments)
will be deemed to increase initial premium before additional payments.
For example, assume that an initial premium of $30,000 and a net additional
payment of $20,000 have been paid, so that the amount of total net premium
payments equals $50,000. Assume further that because of negative investment
performance, cash value is equal to $40,000, or $10,000 less than total net
premium payments. For purposes of calculating the Surrender Charge upon a
surrender, the amount of additional payments at this time would be deemed to be
equal to $10,000, and the amount of the initial premium would be equal to
$30,000. If, because of negative investment performance, cash value were equal
to $20,000, the negative investment performance would be deemed to have
completely reduced additional payments, and the initial premium remaining would
be deemed to be $20,000. If, in this last situation, there was a subsequent
increase in cash value (from earnings or net additional payments) of $15,000
occurring after the negative investment performance, $10,000 would be deemed to
increase the initial premium first back to $30,000, and the remaining $5,000
would be deemed then to increase additional payments to $5,000.
EXAMPLE OF ADJUSTMENT TO PREMIUM TAX CHARGE RESULTING FROM ADDITIONAL PAYMENTS
As described under "Charges and Expenses," if an additional payment is
accepted, a proportional adjustment will be made in the rate of the state
premium tax charge deducted as part of the Monthly Deduction.
For example, assume that the cash value immediately before acceptance of the
additional payment is $30,000, and the net additional payment would increase the
cash value to $50,000. As a result, the state premium tax charge deducted
monthly as part of the Monthly Deduction would be 60% of what it was originally,
resulting in deductions thereafter at an annual rate of 0.15% for the state
premium tax charge.
A-78
<PAGE>
APPENDIX D
EXAMPLES OF EFFECT OF SURRENDERS AND PARTIAL
SURRENDERS ON OPERATION OF POLICY
The following examples assume that an initial premium of $40,000 was paid. The
examples further assume that no additional payments have been made and that
there have been no partial surrenders.
Based on these hypothetical assumptions, the examples demonstrate the effect
of surrenders and partial surrenders on a hypothetical Policy at the beginning
of Policy Year 5, assuming that current cash value is either $60,000 or $30,000.
THE HYPOTHETICAL CURRENT CASH VALUES OF $60,000 AND $30,000 ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT
PERFORMANCE.
SURRENDER CHARGE ON FULL SURRENDER
$60,000 current cash value:
Preferred Surrender
Amount: $20,000
[The maximum of (1) $20,000 (cash value calculated on
the date of surrender, or $60,000, in excess of the
initial premium paid, or $40,000); and (2) $4,000 (10%
of the initial premium paid, or $40,000)]
Surrender Charge
Imposed: $2,000
[5% of $40,000 ($60,000, the amount being surrendered,
less $20,000, the preferred surrender amount)]
Surrender Proceeds: $58,000
[$60,000, the cash value of the Policy, less $2,000,
the Surrender Charge]
$30,000 current cash value:
Preferred Surrender
Amount: $4,000
[The maximum of (1)--$10,000 (cash value calculated on
the date of surrender, or $30,000, in excess of the
initial premium paid, or $40,000); and (2) $4,000 (10%
of the initial premium paid, or $40,000)]
Surrender Charge
Imposed: $1,300
[5% of $26,000 ($30,000, or the amount being
surrendered, less $4,000, the preferred surrender
amount)]
Surrender Proceeds: $28,700
[$30,000, the cash value of the Policy, less $1,300,
the Surrender Charge]
SURRENDER CHARGE ON PARTIAL SURRENDER AND EFFECT ON CASH VALUE
$60,000 current cash value:
Partial Surrender: $30,000
Preferred Surrender
Amount: $20,0000
The maximum of (1) $20,000 (cash value calculated on
the date of surrender, or $60,000, in excess of the
initial premium paid, or $40,000); and (2) $4,000 (10%
of the initial premium paid, or $40,000)]
Surrender Charge
Imposed: $500
[5% of $10,000 ($30,000, the amount being surrendered,
less $20,000, the preferred surrender amount)]
A-79
<PAGE>
Surrender Proceeds: $29,500 ($30,000, the amount being surrendered, less
$500, the Surrender Charge being imposed)
Remaining Cash Value: $30,000
Remaining Initial
Premium: $30,000
Remaining Surrender
Charge: $1,500 [5% of $30,000]
Remaining Cash
Surrender Value: $28,500
$30,000 current cash value:
Partial Surrender: $20,000
Preferred Surrender
Amount: $4,000
[The maximum of (1)--$10,000 (cash value calculated on
the date of surrender, or $30,000, in excess of the
initial premium paid, or $40,000); and (2) $4,000 (10%
of the initial premium paid, or $40,000)]
Surrender Charge
Imposed: $800
[5% of $16,000 ($20,000, or the amount being
surrendered, less $4,000, the preferred surrender
amount)]
Surrender Proceeds: $19,200
[$20,000, the amount being surrendered, less $800, the
surrender charge being imposed]
Remaining Cash Value: $10,000
Remaining Initial
Premium: $20,000
Remaining Surrender
Charge: $1,000 [5% of $20,000]
Remaining Cash
Surrender Value: $9,000
EFFECT OF PARTIAL SURRENDER ON GUARANTEED DEATH BENEFIT
Making a partial surrender will reduce the amount of the minimum guaranteed
death benefit on a proportionate basis, based on the amount of the reduction in
cash value (including any Surrender Charge) resulting from the partial
surrender, as compared to the cash value before the reduction (but not more than
the partial surrender amount).
Cash Value: $60,000
Partial Surrender: $15,000
Cash Value after
Surrender: $45,000
Minimum Guaranteed
Death Benefit
before partial
surrender: $40,000
[Initial premium paid]
Minimum Guaranteed
Death Benefit
after partial
surrender: $30,000
[$40,000, or the minimum guaranteed death benefit
before partial surrender, multiplied by $45,000, the
cash value after the partial surrender, divided by
$60,000, the cash value before the partial surrender]
A-80
<PAGE>
APPENDIX E
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 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 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 10.5%,
compared to 5.7% for high grade, long-term corporate bonds, 3.7% for U.S.
Treasury bills and 3.1% for the Consumer Price Index.
- ---------
*Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
-----------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index with dividends reinvested, over one-year, five-year and
twenty-year periods beginning in 1926 and ending 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-81
<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 29% 4% 11% 7% 11% 37%
5 years 11% 15% 15% 32% 18% 9%
10 years 3% 10% 34% 25% 25% 2%
20 years 0% 6% 33% 55% 6% 0%
</TABLE>
- ---------
Source: Stocks, Bonds, Bills and Inflation 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.
FINANCIAL STATEMENTS
To be filed by amendment
A-82
<PAGE>
PART II
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and charges
deducted under the modified single premium variable life insurance policies
described in this registration statement, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
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 82 pages.
The undertaking to file reports.#
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.#
The signatures.
Written consents of the following persons:
H. James Wilson, Esq. (see Exhibit 3(i) below)
, F.S.A., M.A.A.A. (see Exhibit 3(ii) below)
Sutherland, Asbill & Brennan, L.L.P. (see Exhibit 6 below)
Independent Auditors (see Exhibit 11 below)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of Directors of
NEVLICO**
(2) None
II-1
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
(3)(a) Distribution Agreement between NEVLICO and NELESCO*
(b)(i) Form of Contract between NEVLICO and its General Agents+++
(ii) Form of contract between NEVLICO and its AGENTS+++
(c) Commission Schedule for Policies###
(d) Form of contract among NES, TNE, NEVLICO and other broker
dealers++
(4) None
(5)(a) Specimens of Policy#
(6)(a) Amended and restated Articles of Incorporation and amended and
restated
By-Laws of NELICO####
(7) None
(8) None
(9) None
(10) Specimen of Applications for Policy#
2. See Exhibit 3(i)
3.(i) Opinion and Consent of H. James Wilson, Esquire###
(ii) Opinion and Consent of F.S.A., M.A.A.A. (to be filed by
amendment)
4. None
5. Inapplicable
6. Consent of Sutherland, Asbill & Brennan, L.L.P. (to be filed by
amendment)
7. Powers of Attorney####
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditors (to be filed by amendment)
12. Schedule for computation of performance quotations+
13. Consolidated memorandum describing certain procedures, filed
pursuant to
Rule 6e-3(T)(b)(12)(iii)##
27. Financial Data Schedule (to be filed by amendment)
</TABLE>
II-2
<PAGE>
- ---------
* 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 the Variable Account's Form S-6
Registration Statement, File No. 33-65263, filed December 21, 1995.
## 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. 33-65263,
filed June 10, 1996.
#### Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 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 amendment to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the city of Boston, and the Commonwealth of Massachusetts, on the 27th day of
February, 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
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, New England Life
Insurance Company has duly caused this amendment to the Registration Statement
to be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the city of Boston, and the
Commonwealth of Massachusetts, on the 27th day of February, 1997.
New England Life Insurance Company
(Seal)
Attest: /s/ Marie C. Swift By: /s/ Chester R. Frost
-------------------------------- --------------------------------
Marie C. Swift Chester R. Frost
Senior Vice President and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on February 27, 1997.
* Chairman, President and
- ------------------------------------- Chief Executive Officer
Robert A. Shafto
* Director
- -------------------------------------
Susan C. Crampton
* Senior Vice President and
- ------------------------------------- Treasurer,
Chester R. Frost Chief Accounting Officer
* Director
- -------------------------------------
Edward A. Fox
* Director
- -------------------------------------
George J. Goodman
* Director
- -------------------------------------
Paul E. Gray
* Director
- -------------------------------------
Evelyn E. Handler
* Director
- -------------------------------------
Philip K. Howard
* Director
- -------------------------------------
Harry P. Kamen
* Director
- -------------------------------------
Terence Lennon
II-5
<PAGE>
* Director
- -------------------------------------
Bernard A. Leventhal
* Director
- -------------------------------------
Thomas J. May
* Director
- -------------------------------------
Stewart G. Nagler
* Executive Vice President and
- ------------------------------------- Chief Financial Officer
Robert E. Schneider
* Director
- -------------------------------------
Rand N. Stowell
* Director
- -------------------------------------
Alexander B. Trowbridge
By: /s/ Anne M. Goggin
------------------------------
Anne M. Goggin, Esq.
Attorney-in-fact
* Executed by Anne M. Goggin, Esquire on behalf of those indicated pursuant to
powers of attorney filed with the Variable Account's Form S-6 Registration
Statement, File No. 333-21767, on February 13, 1997.
II-6
