<PAGE>
As filed with Securities and Exchange Commission on
April 30, 1997
Registration No. 33-66864
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
POST-EFFECTIVE AMENDMENT NO. 8
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
-----------------
MARIE C. SWIFT
Counsel
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
-----------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on (May 1, 1997) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to Rule 24f-2, an indefinite amount of securities has been registered
under the Securities Act of 1933. A Rule 24f-2 Notice was filed on February 25,
1997.
<PAGE>
NEW ENGLAND LIFE
INSURANCE COMPANY
Flexible Premium Adjustable
Variable Survivorship Life Insurance Policies
Issued by
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual Flexible Premium Adjustable Variable
Survivorship Life Insurance Policies (the "Policies") offered by New England
Life Insurance Company ("NELICO"), an indirect, wholly-owned subsidiary of
Metropolitan Life Insurance Company ("MetLife").
Each Policy provides premium flexibility together with two types of death
benefit guarantees as long as the total amount of premiums paid with interest,
less any partial surrenders with interest, equals certain minimum amounts and
there is no policy loan. Insurance coverage is provided on the joint lives of
two insureds. The death benefit is payable upon the death of the second to die.
You may choose among four death benefit options, two of which provide a fixed
death benefit equal to the Policy's face amount and two of which provide a
variable death benefit which may vary daily with the net investment experience
of one or more mutual fund portfolios. Under any of the death benefit options,
the minimum death benefit guarantees will be available. The cash value of the
Policy generally increases with the payment of each premium and varies daily
with the investment experience of the mutual fund portfolios. There is no
guaranteed minimum cash value for investments in the mutual fund portfolios.
You may cancel the Policy during the "right to return the Policy" period. The
part of the first net premium for the Policy that you direct to the mutual fund
portfolios will be allocated to the Zenith Money Market Sub-Account until the
later of 45 days after the date Part 1 of the application is signed or 10 days
after NELICO mails the Notice of Withdrawal Right. Thereafter, the Policy's cash
value will be invested according to your instructions.
You may allocate premiums to one or more of the 16 investment sub-accounts of
NELICO's Variable Life Separate Account (the "Variable Account") or to NELICO's
Fixed Account, after certain deductions have been made. Each sub-account of the
Variable Account invests in the shares of one of the Eligible Funds. The
Eligible Funds are: the Back Bay Advisors Money Market Series, the Back Bay
Advisors Bond Income Series, the Capital Growth Series, the Westpeak Stock Index
Series, the Back Bay Advisors Managed Series, the Westpeak Growth and Income
Series, the Loomis Sayles Avanti Growth Series, the Loomis Sayles Small Cap
Series, the Loomis Sayles Balanced Series, the Alger Equity Growth Series, the
Davis Venture Value Series and the Morgan Stanley International Magnum Equity
Series of the New England Zenith Fund (the "Zenith Fund"); the Equity-Income
Portfolio, Overseas Portfolio and High Income Portfolio of the Variable
Insurance Products Fund ("VIP Fund"); and the Asset Manager Portfolio of the
Variable Insurance Products Fund II ("VIP Fund II").
SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE OUT OF THE FIXED ACCOUNT.
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It may not be advantageous to replace existing insurance with the Policy
described in this prospectus. (See "Charges and Expenses".)
- -----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE CURRENT
PROSPECTUSES OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE INSURANCE
PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE ATTACHED AT THE
END OF THIS PROSPECTUS. THESE PROSPECTUSES SHOULD BE READ AND RETAINED FOR
FUTURE REFERENCE.
SHARES OF THE ZENITH FUND, THE VIP FUND AND THE VIP FUND II, AND INTERESTS IN
THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, A
BANK, AND THE SHARES AND INTERESTS ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
INTRODUCTION TO THE POLICIES . . . . . . . . . . . . . . . . . . . . . A-7
The Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
Availability of the Policy . . . . . . . . . . . . . . . . . . . . . A-9
Policy Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
How the Policy Works . . . . . . . . . . . . . . . . . . . . . . . . A-11
Receipt of Communications and Payments at NELICO's Home Office . . . A-12
NELICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
POLICY VALUES AND BENEFITS . . . . . . . . . . . . . . . . . . . . . . A-13
Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
Minimum Guaranteed Death Benefit . . . . . . . . . . . . . . . . . . A-14
Adjustments to the Death Proceeds Payable . . . . . . . . . . . . . . A-15
Change in Death Benefit Option . . . . . . . . . . . . . . . . . . . A-15
Extending the Maturity Date . . . . . . . . . . . . . . . . . . . . . A-16
Cash Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
Net Investment Experience . . . . . . . . . . . . . . . . . . . . . . A-16
Allocation of Net Premiums . . . . . . . . . . . . . . . . . . . . . A-17
Amount Provided for Investment under the Policy . . . . . . . . . . . A-17
Right to Return the Policy . . . . . . . . . . . . . . . . . . . . . A-18
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . A-18
Deductions from Premiums . . . . . . . . . . . . . . . . . . . . . . A-18
Surrender Charge . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
Monthly Deduction from Cash Value . . . . . . . . . . . . . . . . . . A-21
Charges Against the Eligible Funds and the Sub-Accounts of the
Variable Account . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
Group or Sponsored Arrangements . . . . . . . . . . . . . . . . . . . A-23
PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Flexible Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Lapse and Reinstatement . . . . . . . . . . . . . . . . . . . . . . . A-25
OTHER POLICY FEATURES . . . . . . . . . . . . . . . . . . . . . . . . A-26
Loan Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
Partial Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Reduction in Face Amount . . . . . . . . . . . . . . . . . . . . . . A-28
Investment Options . . . . . . . . . . . . . . . . . . . . . . . . . A-29
Transfer Option . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . A-30
Exchange of Policy During First 24 Months . . . . . . . . . . . . . . A-30
Policy Split Rider . . . . . . . . . . . . . . . . . . . . . . . . . A-31
Payment Options . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
Additional Benefits by Rider . . . . . . . . . . . . . . . . . . . . A-32
Policy Owner and Beneficiary . . . . . . . . . . . . . . . . . . . . A-32
THE VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . A-33
Investments of the Variable Account . . . . . . . . . . . . . . . . . A-33
Investment Management . . . . . . . . . . . . . . . . . . . . . . . . A-37
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
General Description . . . . . . . . . . . . . . . . . . . . . . . . . A-38
Values and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . A-38
Policy Transactions . . . . . . . . . . . . . . . . . . . . . . . . . A-39
NELICO'S DISTRIBUTION AGREEMENT . . . . . . . . . . . . . . . . . . . A-39
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY . . . . . . . . . . . A-40
Notification of First Death . . . . . . . . . . . . . . . . . . . . . A-40
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Misstatement of Age or Sex . . . . . . . . . . . . . . . . . . . . . A-40
Suicide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
Policy Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
Charge for NELICO's Income Taxes . . . . . . . . . . . . . . . . . . A-45
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-46
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
RIGHTS RESERVED BY NELICO . . . . . . . . . . . . . . . . . . . . . . A-49
TOLL-FREE NUMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
ADVERTISING PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . A-50
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . A-51
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-51
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH
VALUES AND ACCUMULATED SCHEDULED PREMIUMS . . . . . . . . . . . . . . A-52
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION . . . . . . . . . . . . A-60
APPENDIX C: LONG TERM MARKET TRENDS . . . . . . . . . . . . . . . . . A-79
APPENDIX D: USES OF SURVIVORSHIP LIFE INSURANCE . . . . . . . . . . . A-82
APPENDIX E: TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . A-83
APPENDIX F: ENHANCED DEATH BENEFIT LIMITATIONS . . . . . . . . . . . . A-84
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
A-3
<PAGE>
GLOSSARY
ACCOUNT. A sub-account of the Variable Account or the Fixed Account.
AGE. For purposes of this prospectus, the age of an insured refers to the
insured's age at his or her nearest birthday.
BENCHMARK PREMIUM. The Benchmark Premium is used to determine the amount of
Deferred Sales Charge that may apply in the event of a surrender, partial
surrender, lapse or face amount reduction. It is the level premium necessary to
keep a level death benefit Policy, without riders, in-force until age 80 of the
younger insured (or 20 years after issue, if later, but not later than the
Maturity Date) based on certain assumptions. (See "Surrender Charge".)
CASH VALUE. A Policy's cash value includes the amount of its cash value held
in the Variable Account, the amount held in the Fixed Account and, if there is
an outstanding policy loan, the amount of its cash value held in NELICO's
general account as a result of the loan. (See "Cash Value".)
COST OF INSURANCE CHARGE. This charge for providing insurance protection is
deducted on the Policy Date and on the first day of each policy month. The cost
of insurance for a policy month is equal to the amount at risk multiplied by the
cost of insurance rate for that month. Cost of insurance rates vary monthly.
(See "Monthly Deduction from Cash Value".)
DEATH BENEFIT OPTION A. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) a percentage, determined in accordance with
federal income tax laws, of the Policy's cash value, multiplied by an
enhancement factor. (See "Death Benefit".)
DEATH BENEFIT OPTION B. Death Benefit equals the greater of (i) the face
amount of the Policy plus the Policy's cash value and (ii) a percentage,
determined in accordance with federal income tax laws, of the Policy's cash
value, multiplied by an enhancement factor. (See "Death Benefit".)
DEATH BENEFIT OPTION C. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) a percentage, determined in accordance with
federal income tax laws, of the Policy's cash value. (See "Death Benefit".)
DEATH BENEFIT OPTION D. Death Benefit equals the greater of (i) the face
amount of the Policy plus the Policy's cash value and (ii) a percentage,
determined in accordance with federal income tax laws, of the Policy's cash
value. (See "Death Benefit".)
ELIGIBLE FUNDS. Each sub-account of the Variable Account invests in the shares
of one of the Eligible Funds. The Eligible Funds are: the Back Bay Advisors
Money Market Series, the Back Bay Advisors Bond Income Series, the Capital
Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors Managed
Series, the Westpeak Growth and Income Series, the Loomis Sayles Avanti Growth
Series, the Loomis Sayles Small Cap Series, the Loomis Sayles Balanced Series,
the Alger Equity Growth Series, the Davis Venture Value Series and the Morgan
Stanley International Magnum Equity Series of the Zenith Fund; the Equity-Income
Portfolio, Overseas Portfolio and the High Income Portfolio of the VIP Fund; and
the Asset Manager Portfolio of VIP Fund II. (See "The Variable Account".)
EXCESS POLICY LOAN. The situation when policy loans plus accrued interest
exceed the Policy's cash value less the applicable Surrender Charge. (See "Loan
Provision".)
FIXED ACCOUNT. The Fixed Account is a part of NELICO's general account to
which net premiums may be allocated and which provides guarantees of principal
and interest. (See "The Fixed Account".)
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<PAGE>
GUARANTEED DEATH BENEFIT 1 FUND. The Guaranteed Death Benefit 1 Fund is a
measurement used to determine if the Minimum Guaranteed Death Benefit 1 is in
effect. This Fund assumes the Guaranteed Death Benefit 1 Premium that appears in
the Policy is paid on the first day of each Policy year. The Fund equals the
value of those premiums accumulated at 4% per year. The Fund values shown in
your Policy are for the end of each Policy year. (See "Minimum Guaranteed Death
Benefit".)
GUARANTEED DEATH BENEFIT 2 FUND. The Guaranteed Death Benefit 2 Fund is a
measurement used to determine if the Minimum Guaranteed Death Benefit 2 is in
effect. This Fund assumes the Guaranteed Death Benefit 2 Premium that appears in
the Policy is paid on the first day of each Policy year. The Fund equals the
value of those premiums accumulated at 4% per year. The Fund values shown in
your Policy are for the end of each Policy year. (See "Minimum Guaranteed Death
Benefit".)
INVESTMENT START DATE. This is the latest of the date NELICO receives a
premium payment for the Policy, the date each of the insureds has signed his/her
Part II of the Policy application and the Policy Date and is the date when an
amount is first provided for investment under the Policy. (See "Amount Provided
for Investment under the Policy".)
MATURITY DATE. The Policy anniversary on which the younger insured is (or
would have been) age 100, unless the extended maturity option has been added to
the Policy. (See "Extending the Maturity Date".)
MINIMUM PREMIUM. The Minimum Premium is that amount which, if timely paid (and
if you have not made a partial surrender, loan or face amount reduction or
reinstated the Policy), guarantees that the Policy will not lapse during the
first three Policy years even if the Policy's net cash value is insufficient to
pay the Monthly Deduction in any month. The three-year Minimum Premium is based
on the Policy's face amount, the age, sex (unless unisex rates apply) and
underwriting class of each of the insureds, the current level of Policy charges
and any rider benefits selected. Certain Policy transactions will terminate this
guarantee. (See "Premiums".)
MINIMUM GUARANTEED DEATH BENEFIT 1. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if (at the
time of the Monthly Deduction) premiums paid, accumulated at a 4% rate as if
they were paid on the first day of each Policy year, less partial surrenders,
accumulated at a 4% rate per year, is at least equal to the Guaranteed Death
Benefit 1 Fund and there is no outstanding Policy loan. Generally, NELICO
determines whether this benefit is in effect on the first day of each Policy
month. Certain Policy transactions can terminate this guarantee. (See "Minimum
Guaranteed Death Benefit".)
MINIMUM GUARANTEED DEATH BENEFIT 2. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if (at the
time of the Monthly Deduction prior to the later of: the date when the younger
insured attains age 80, or would have attained age 80 if that person died before
reaching age 80, and 20 years from the Policy Date, but no later than the
Maturity Date of the Policy) premiums paid, accumulated at a 4% rate as if they
were paid on the first day of each Policy year, less partial surrenders,
accumulated at a 4% rate per year, is at least equal to the Guaranteed Death
Benefit 2 Fund and there is no outstanding Policy loan. Generally, NELICO
determines whether this benefit is in effect on the first day of each Policy
month. Certain Policy transactions can terminate this guarantee. (See "Minimum
Guaranteed Death Benefit".)
MONTHLY DEDUCTION. The Monthly Deduction is the amount of charges deducted
from the Policy's cash value each month and includes the monthly cost of
insurance, the monthly cost of any benefits provided by riders, the monthly
policy fee, the monthly administrative charge and the monthly minimum death
benefit guarantee charge. (See "Monthly Deduction from Cash Value".)
MORTALITY AND EXPENSE RISK CHARGE. This charge is made daily from the value of
each sub-account's assets that come from the Policies. The charge is at an
annual rate of .90% of the sub-accounts' assets. The mortality risk NELICO
assumes is that insureds may live for shorter periods of time than estimated.
The expense risk NELICO assumes is that the costs of issuing and administering
Policies may be more than estimated. (See "Charges Against the Eligible Funds
and the Sub-Accounts of the Variable Account".)
A-5
<PAGE>
NET CASH VALUE. The amount you may obtain upon surrender of the Policy and
which is equal to the Policy's cash value reduced by any applicable Surrender
Charge and by any outstanding policy loan and accrued interest. (See "Cash
Value".)
NET INVESTMENT EXPERIENCE. For any period, a sub-account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares for the same period, reduced by the amount of charges against the
sub-account for that period. (See "Net Investment Experience".)
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you
choose in an effort to meet your future goals under the Policy. The Planned
Premium can be a fixed amount or can vary over time and is subject to certain
limits under the Policy. Payments in addition to any Planned Premium are
referred to in the Policy as unscheduled payments and can be paid at any time,
subject to certain limits. (See "Premiums".)
PREMIUMS. Premiums include all payments under the Policy, whether a Planned
Premium or an unscheduled payment. (See "Premiums".)
POLICY DATE. If you make a premium payment with the application, the Policy
Date is generally the later of the date each of the insureds has signed his/her
Part II of the application and receipt of the premium payment. If you choose to
pay the initial premium upon delivery of the Policy, the Policy will be issued
with a Policy Date which is generally five days after issue. (See "Amount
Provided for Investment under the Policy".)
YOU. When used in this prospectus, "you" refers to the Policy Owner.
A-6
<PAGE>
INTRODUCTION TO THE POLICIES
This prospectus describes Policies under which net premiums are allocated to
the Variable Account. If the Fixed Account is available in your state, you may
choose to allocate or transfer all or part of your funds to that account. NELICO
provides guarantees of principal and interest with respect to the Fixed Account
which is part of NELICO's general account. Amounts in the Fixed Account are
backed by NELICO's general account, rather than the Variable Account. For a
description of the Fixed Account, see "The Fixed Account" which appears later in
this prospectus.
THE POLICIES
The individual Flexible Premium Adjustable Variable Survivorship Life
Insurance Policies offered by this prospectus are designed to provide lifetime
insurance coverage for two insureds payable upon the death of the second to die.
They are not offered primarily as an investment.
The following is a brief listing of the basic features of the Policy. These
and other features of the Policy are explained in detail throughout the
prospectus. You should be sure to read the prospectus for more complete
information.
-- You may choose to make premium payments under the Policy based on a
schedule you determine, subject to certain limits. NELICO can limit or
prohibit unscheduled payments in certain situations, including cases where
an insured is in a substandard risk class. (See "Premiums".)
-- Net premiums are invested according to your instructions in the Fixed
Account or, after an initial period in the Zenith Money Market Sub-Account,
in one or more of the sub-accounts of the Variable Account corresponding to
mutual fund portfolios. (See "Allocation of Net Premiums" and "Investment
Options".)
-- The mutual fund portfolios available to you under the Policy include
several common stock funds, including a fund which invests primarily in
foreign securities, two bond funds, two managed funds, a balanced fund, and
a money market fund. You may allocate your Policy's cash value to a maximum
of nine accounts (including the Fixed Account) at any one time. (See
"Investments of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. NELICO provides guarantees of Fixed Account
principal and interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE
-----------------------------------------------
FROM THE FIXED ACCOUNT. NELICO also reserves the right to restrict
-----------------------
transfers of cash value and allocations of premiums into the Fixed Account.
(See "The Fixed Account".)
-- The cash value of the Policy will vary daily based on, among other things,
the net investment experience of the sub-accounts to which amounts have
been allocated and the amount of interest credited to any of the Policy's
cash value in the Fixed Account. (See "Cash Value", "Charges and Expenses",
"Premiums", "Loan Provision" and "Partial Surrender".)
-- The portion of the cash value which you invest in the sub-accounts is not
guaranteed. You bear the investment risk on this portion of the cash value.
(See "Cash Value".)
-- You may choose among four forms of death benefit options under the Policy.
The two level options provide a death benefit equal to the Policy's face
amount. The two variable options provide a death benefit equal to the face
amount plus any cash value, which varies with the net investment experience
of the sub-accounts to which amounts have been allocated and the rate of
interest credited on any cash value in the Fixed Account. Under any of
these options the death benefit could be increased to satisfy tax law
requirements if the cash value reaches certain levels. One of the level and
one of the variable options provide for an enhanced increase. (See "Death
Benefit".)
-- Regardless of investment experience, each form of death benefit is
guaranteed never to be less than the Policy's face amount, as long as the
total amount of premiums paid, with interest, less any partial surrenders,
with interest, at least equals certain minimum amounts and there is no
outstanding Policy loan. (See "Death Benefit" and "Minimum Guaranteed Death
Benefit".)
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<PAGE>
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- After the "right to return the Policy" period, you may transfer portions of
the Policy's cash value among the sub-accounts and, generally, to the Fixed
Account up to four times per policy year (twelve times per policy year for
Policies issued in New York) without NELICO's consent. NELICO currently
allows 12 transfers per policy year in all states. Transfers and
allocations involving the Fixed Account are subject to certain limits. (See
"Transfer Option" and "The Fixed Account--Policy Transactions".)
-- A loan privilege is available under the Policy. A partial surrender feature
is also available. (See "Loan Provision" and "Partial Surrender".)
-- Death benefits paid to the beneficiary under the Policy are not subject to
Federal income tax. Under current law, undistributed increases in cash
value generally are not taxable to you. (See "Tax Considerations".)
-- Loans, assignments and other pre-death distributions under the Policy may
have tax consequences depending primarily on the amount which you have paid
into the Policy but also on any "material change" in the terms or benefits
of the Policy or any death benefit reduction. If premium payments, a death
benefit reduction, or a material change in the terms or benefits of the
Policy cause it to become a "modified endowment contract", then pre-death
distributions (including loans) will be included in income on an income
first basis, and a 10% penalty tax may be imposed on income distributed
before the Policy Owner attains age 59 1/2. Tax considerations may
therefore influence the amount and timing of premium payments and certain
Policy transactions which you choose to make. (See "Tax Considerations".)
-- If the Policy is not a modified endowment contract, NELICO believes that
loans under the Policy will not be taxable to you as long as the Policy has
not lapsed, been surrendered or terminated. With certain exceptions, other
pre-death distributions under a Policy that is not a modified endowment
contract are includible in income only to the extent they exceed the
investment in the Policy. (See "Tax Considerations".)
-- You have an opportunity during the "right to return the Policy" period to
return the Policy for a refund. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue, you may exchange the
Policy, without evidence of insurability, for a comparable fixed-benefit
survivorship life insurance policy issued by NELICO or an affiliate on the
joint lives of the insureds. If you exercise this option, you will have to
make up any investment loss. (See "Exchange of Policy During First 24
Months".)
In many respects the Policies are similar to fixed-benefit survivorship
universal life insurance. Like survivorship universal life insurance, the
Policies provide for a death benefit upon the death of the second insured,
flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit survivorship universal life
insurance in that the death benefit may, and the cash value will, vary to
reflect the investment experience of the selected sub-accounts of the Variable
Account.
The variable life insurance policies offered by NELICO are designed to provide
insurance protection. Although the underlying mutual fund portfolios invest in
securities similar to those in which mutual funds available directly to the
public invest, in many ways the Policies differ from mutual fund investments.
The main differences are:
-- The Policy provides a death benefit based on NELICO's assumption of an
actuarially calculated risk.
-- If the net cash value is not sufficient to pay a Monthly Deduction the
Policy may lapse with no value unless additional premiums are paid. If the
Policy lapses when Policy loans are outstanding, adverse tax consequences
may result.
-- In addition to sales charges, insurance-related charges not associated with
mutual fund investments are deducted from the premiums and values of the
Policy. These charges include various insurance, risk, administrative and
premium tax charges. (See "Charges and Expenses".)
A-8
<PAGE>
-- The Variable Account, not the Policy Owner, owns the mutual fund shares.
-- Federal income tax liability on any earnings is deferred until you receive
a distribution from the Policy. Transfers from one underlying fund
portfolio to another are accomplished without tax liability under current
law.
-- Dividends and capital gains are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses of
Survivorship Life Insurance".
AVAILABILITY OF THE POLICY
Generally, a Policy may be issued on the lives of Insureds from the age of 20
to 85, and, if NELICO consents, to older or younger insureds. All persons must
meet NELICO's underwriting and other criteria for issuance. The minimum face
amount available is $100,000 unless NELICO consents to a lower amount. The
Policies are not available to employee benefit plans qualified under Section 401
of the Internal Revenue Code, except with NELICO's consent.
POLICY CHARGES
PREMIUM-BASED CHARGES. NELICO deducts the following charges from premiums:
-- A sales charge of 9%. NELICO currently intends to waive this charge on
premiums paid after the first 15 policy years (17 policy years, for
Policies issued in Pennsylvania);
-- A state premium tax charge of 2.5%;
-- A charge for federal taxes of 1%.
SURRENDER CHARGE. The Surrender Charge includes:
-- A deferred administrative charge. This charge applies to a lapse,
surrender, reduction in face amount or partial surrender that reduces the
face amount during Policy years one through fourteen. This charge is $4.00
per $1,000 of face amount for the first five Policy years, and then reduces
monthly until it reaches $2.00 at the end of the tenth Policy year and 0 at
the end of the 14th Policy year. The charge may be less if the average of
the issue ages is greater than 60.
-- A deferred sales charge. This charge applies to a lapse, surrender,
reduction in face amount or partial surrender that reduces the face amount
during Policy years one through fourteen. The maximum Deferred Sales Charge
is imposed for Policies which cover insureds whose average issue age is 60
or less at issue, if you lapse or surrender the Policy, or reduce its face
amount, in Policy years three through five. The maximum Deferred Sales
Charge in those years equals 41% of one Benchmark Premium plus 41% of a
second Benchmark Premium and 8% of a third Benchmark Premium. In no event
will the Deferred Sales Charge be more than $30 per $1,000 of face amount.
After the fifth Policy year, the maximum Deferred Sales Charge declines on
a monthly basis until it reaches 0% in the last month of the fourteenth
Policy year. If you lapse or surrender the Policy, reduce its face amount,
or make a partial surrender that reduces the face amount in the first two
Policy years, the maximum Deferred Sales Charge will be 21% of one
Benchmark Premium.
The Surrender Charge is deducted from the Policy's available cash value,
regardless of whether that cash value is derived from premiums or investment
experience.
MONTHLY DEDUCTION FROM CASH VALUE. NELICO deducts certain charges from the
cash value:
-- Monthly charge for the cost of insurance and for any benefits provided by
rider;
A-9
<PAGE>
-- Monthly administrative charge, currently equal to $0.12 per $1,000 of face
amount for the first Policy year and $0.06 per $1,000 thereafter
(guaranteed not to exceed $0.16 per $1,000 of face amount in the first
Policy year and $0.10 per $1,000 thereafter). Currently, NELICO intends to
implement a limit on the monthly administrative charge deducted under a
Policy of $240 per month after Policy year one;
-- Monthly minimum death benefit guarantee charge of $0.01 per $1,000 of face
amount;
-- Monthly policy fee, currently equal to $5.00 per month (guaranteed not to
exceed $7.50 per month).
CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT AND THE ELIGIBLE FUNDS. The
following charges are deducted from the Variable Account and Eligible Fund
assets:
-- Daily charge against the sub-account assets for NELICO's mortality and
expense risk, equal to an annual rate of .90%;
-- Daily charges against the Eligible Fund portfolios for investment advisory
services and fund operating expenses.
See "Charges and Expenses".
A-10
<PAGE>
HOW THE POLICY WORKS
- -----------------------------------------------------------------------------
PREMIUM PAYMENTS
. Flexible
. Planned premium options
-Minimum premium (in first three Policy years)
-Guaranteed Death Benefit 2 Premium (to age 80)
-Guaranteed Death Benefit 1 Premium (to age 100)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
CHARGES FROM PREMIUM PAYMENTS
. Sales Load: 9.00%. NELICO intends to waive after 15 policy
yrs. (17 policy years in PA)
. State Premium Tax Charge: 2.5%
. Charge for Federal Taxes: 1%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
LOANS
. After the free look period, you may borrow a portion of your cash value
. Loan interest charge is 5.5%. Loaned funds are transferred out of the
Eligible Funds into the General Account where they are credited with not
less than 4.0% interest
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
RETIREMENT BENEFITS
. Fixed settlement options are available for policy proceeds
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
CASH VALUES
. Net premium payments invested in your choice of Eligible Fund investments
(after an initial period in the Zenith Money Market Sub-Account) or the
Fixed Account
. The cash value reflects investment experience, interest, premium payments,
policy charges and any distributions from the Policy
. The cash value invested in mutual funds is not guaranteed
. Any earnings are accumulated free of any current income taxes
. You may change the allocation of future net premiums at any time. You may
currently transfer funds among investment options (and to the Fixed Account)
up to 12 times per policy year, after the free look period.
Transfers from the Fixed Account are limited as to timing, frequency and
amount
. Your cash value may be allocated among a maximum of nine accounts at
any one time
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
DEATH BENEFIT
. Paid upon the 2nd death
. Level or Variable Death Benefit Options
. Guaranteed not to be less than initial face amount if Death Benefit
Guarantee is in effect
. Income tax free to named beneficiary
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
DAILY DEDUCTIONS FROM ASSETS
. Mortality and expense risk charges of .90% on an annual basis are deducted
from the cash value daily
. Investment advisory fees and other expenses are deducted from the Eligible
Fund values daily
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
BEGINNING OF MONTH CHARGES
. The cost of insurance protection (reflecting any substandard risk rating)
is deducted from the cash value each month
. Any Rider Charges
. Policy Fee: $5.00 (not to exceed $7.50) per month
. Minimum Death Benefit Guarantee Charge: $.01 per $1000 face amount monthly
. Administrative Charge: $.12 (guaranteed not to exceed $.16) per $1000 face
amount monthly (first year) and $.06 (guaranteed not to exceed $.10) per
$1000 face amount monthly (after first year)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SURRENDER CHARGES
. Consist of Deferred Sales Charge and Deferred Administrative Charge (see
page A-19)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
LIVING BENEFITS
. If policyholder has elected and qualified for benefits for disability of
covered insured who becomes totally disabled, company will provide specified
premium amounts or waive monthly charges, depending on the option selected,
during the period of disability up to certain limits.
. Policy may be surrendered at any time for its cash surrender value
. Deferred income taxes, including taxes on amounts borrowed, become payable
upon surrender
. Grace period for lapsing with no value is 62 days from the first date in
which Monthly Deduction was not paid due to insufficient cash value
. Subject to NELICO's rules, a lapsed Policy may be reinstated within seven
years of date of lapse if it has not been surrendered
- ------------------------------------------------------------------------------
A-11
<PAGE>
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME OFFICE
NELICO will treat your request for a Policy transaction, or your submission of
a payment, as received at the Home Office if it is received there before the
close of regular trading on the New York Stock Exchange on that day. If it is
received after that time, or if the New York Stock Exchange is not open that
day, then it will be treated as received on the next day when the New York Stock
Exchange is open.
NELICO
NELICO was organized as a stock life insurance company in Delaware in 1980 and
is licensed to sell life insurance in all states, the District of Columbia and
Puerto Rico. Before August 30, 1996, NELICO was a wholly-owned subsidiary of New
England Mutual Life Insurance Company ("The New England"). Effective August 30,
1996, The New England merged into MetLife, a mutual life insurance company whose
principal office is One Madison Avenue, New York, NY 10010. With the merger, The
New England's separate corporate existence ended, and MetLife became the parent
of NELICO. In connection with the merger, NELICO changed its name from "New
England Variable Life Insurance Company" to "New England Life Insurance
Company", and changed its domicile from the State of Delaware to the
Commonwealth of Massachusetts. NELICO's Home Office is now at 501 Boylston
Street, Boston, Massachusetts 02116. NELICO's mailing address is: P.O. Box 9116,
Boston, Massachusetts 02117.
The following chart illustrates the relationship of NELICO, the Fixed Account,
the Variable Account and the Eligible Funds.
---------------------------------------------------------------------
NELICO
---------------------------------------------------------------------
(Insurance company subsidiary of MetLife)
Charges are deducted.
Net premiums and net unscheduled payments are allocated to the
Policy Owner's choice of sub-accounts in the Variable Account or
to the Fixed Account.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Premiums VARIABLE ACCOUNT
and --------------------------------------------------------------------------------------------------
Unscheduled <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Payments Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith
Fixed Capital Bond Money Man- Stock Growth Avanti Small Bal- Equity
Account Growth Income Market aged Index and Growth Cap anced Growth
Sub- Sub- Sub- Sub- Sub- Income Sub- Sub- Sub- Sub-
Account Account Account Account Account Sub- Account Account Account Account
Account
--------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT
--------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Zenith Zenith Equity- Over- High Asset
Venture Inter- Income seas Income Man-
Value national Sub- Sub- Sub- ager
Sub- Magnum Account Account Account Sub-
Account Equity Account
Sub-
Account
--------------------------------------------------------------------------------------------------
</TABLE>
Sub-accounts buy
shares of the
Eligible Funds.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
NEW ENGLAND ZENITH FUND
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Back Bay Back Bay Back Bay Westpeak Westpeak Loomis Loomis Loomis Alger Davis Morgan
Growth Advisors Advisors Advisors Stock Growth Sayles Sayles Sayles Equity Venture Stanley
Series Bond Money Managed Index and Avanti Small Bal- Growth Value Inter-
Income Market Series Series Income Growth Cap anced Series Series national
Series Series Series Series Series Series Magnum
Equity
Series
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------
VIP
FUND
VIP FUND II
--------------------------------------------
<C> <C> <C> <C>
Equity Overseas High Asset
Income Portfolio Income Manager
Portfolio Portfolio Portfolio
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Eligible Funds buy portfolio investments to support values and
benefits of the Policies.
A-12
<PAGE>
POLICY VALUES AND BENEFITS
DEATH BENEFIT
DEATH BENEFIT OPTIONS. When you apply for a Policy, you may choose among four
death benefit options. The death benefit is payable to the beneficiary upon the
death of the second insured to die.
The Option A (Enhanced with Face Amount) death benefit provides a death
benefit equal to the face amount of the Policy. The Option A death benefit is
fixed, subject to increases required by the Internal Revenue Code on an enhanced
basis, as described below.
The Option B (Enhanced with Face Amount Plus Cash Value) death benefit
provides a death benefit equal to the face amount of the Policy plus the amount,
if any, of the Policy's cash value. The Option B death benefit is also subject
to increases required by the Internal Revenue Code on an enhanced basis, as
described below. In general, the Option B death benefit does not significantly
exceed the Option D death benefit.
The Option C (Face Amount) death benefit provides a death benefit equal to the
face amount of the Policy. The Option C death benefit, like the Option A death
benefit, is fixed, subject to increases required by the Internal Revenue Code.
In the case of the Option C death benefit, these increases are not enhanced.
The Option D (Face Amount Plus Cash Value) death benefit provides a death
benefit equal to the face amount of the Policy plus the amount, if any, of the
Policy's cash value. The Option D death benefit is also subject to increases
required by the Internal Revenue Code but, unlike the Option B death benefit,
these increases are not enhanced.
In order to meet the Internal Revenue Code's definition of life insurance, the
Policies provide that the death benefit will not be less than a percentage of
the Policy's cash value as set forth in Table I below. This means that, if the
cash value grows to certain levels, the death benefit will be increased to
satisfy the tax law requirements. At that point, any payment you make into the
Policy will increase the death benefit by more than it increases the cash value.
(See "Premiums".)
TABLE I
<TABLE>
<CAPTION>
AGE OF YOUNGER AGE OF YOUNGER
INSURED AT START OF PERCENTAGE OF INSURED AT START OF PERCENTAGE OF
THE POLICY YEAR CASH VALUE THE POLICY YEAR CASH VALUE
------------------- ------------- ------------------- -------------
<S> <C> <C> <C>
20 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 through 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 through 99 101
59 134 100 100
60 130
</TABLE>
A-13
<PAGE>
In the case of Option A or Option B, the death benefit will be a maximum of
1.45 times the amount required to satisfy tax law requirements, until age 91 of
the younger insured, resulting in a higher death benefit than required by law.
After age 91 of the younger insured, the maximum enhancement factor of 1.45 is
reduced by .05 each year for nine years, at which time the factor is 1.00. The
enhanced death benefit is subject to certain limits that depend in part on the
tabular cash value, set forth in Appendix F, but will never be less than the
amount required to satisfy tax law requirements. Tabular cash value is a
hypothetical value that uses the Guaranteed Death Benefit 1 Premium (as shown in
the Policy), maximum guaranteed charges and a 4% interest rate. See Appendix F.
MINIMUM GUARANTEED DEATH BENEFIT
The Policy provides two Minimum Guaranteed Death Benefits. If either Minimum
Guaranteed Death Benefit is in effect, as determined on the first day of each
Policy month, the Policy will not lapse even if the net cash value is
insufficient to cover the Monthly Deduction due for that month. If the death of
the second insured occurs while either Minimum Guaranteed Death Benefit is in
effect, the death benefit will be adjusted as described below before the
proceeds are paid. The minimum premiums necessary to maintain either Minimum
Guaranteed Death Benefit in effect under your Policy are shown in your Policy
and also appear in your personalized illustration. See Appendix A.
MINIMUM GUARANTEED DEATH BENEFIT 1. NELICO will determine if Minimum
Guaranteed Death Benefit 1 is in effect on the first day of each Policy month
the Policy is in force, until the Maturity Date. This Benefit is in effect at
the end of a Policy year if (1) the total of all premiums paid under the Policy
for each completed Policy year, accumulated at a 4% rate as if they were paid on
the first day of each Policy year, less any partial surrender under the Policy
in each completed Policy year, accumulated at a 4% rate from the date of
surrender, is at least equal to (2) the Guaranteed Death Benefit 1 Fund, and
there is no outstanding Policy loan. For these purposes, premiums paid within 20
days prior to a Policy anniversary are treated as if paid in the next Policy
year.
During a Policy year, the amount of premiums paid in (1) above will include
premiums paid less partial surrenders in the current Policy year, and the amount
in (2) above will be calculated as the Minimum Guaranteed Death Benefit 1 Fund
amount shown in your Policy for the prior Policy year end plus 1/12 of the
Guaranteed Death Benefit 1 Premium for each Policy month of the current Policy
year up to and including the current Policy month.
The Guaranteed Death Benefit 1 Fund assumes that the Guaranteed Death Benefit
1 Premium, that appears in your Policy, is paid on the first day of each Policy
year and accumulates at a 4% rate per year.
If the Guaranteed Minimum Death Benefit 1 is lost due to insufficient premium
payments, it is unlikely because of Federal tax law limitations that you will be
permitted to pay sufficient premiums in future years to regain the guarantee.
Federal tax law limitations also may prevent the payment of sufficient premiums
to maintain the Minimum Guaranteed Death Benefit 1 following: certain reductions
in face amount, including certain partial surrenders that reduce the face
amount, reduction or deletion of a rider benefit, or improvement in your
Policy's rating classification (see "Reduction in Face Amount").
Under Policies issued in New York, the Minimum Guaranteed Death Benefit 1 is
referred to as the "No Lapse Guarantee Benefit 1", the Minimum Guaranteed Death
Benefit 1 Fund is referred to as the "No Lapse Guarantee Benefit 1 Fund", and
the Minimum Guaranteed Death Benefit 1 Premium is referred to as the "No Lapse
Guarantee Benefit 1 Premium".
MINIMUM GUARANTEED DEATH BENEFIT 2. NELICO will determine if Minimum
Guaranteed Death Benefit 2 is in effect on the first day of each Policy month
the Policy is in force, until the later of: the date the younger insured attains
age 80 (or would have attained age 80, if that person died before reaching age
80), or 20 years from the Policy Date, but no later than the Maturity Date of
the Policy. This Benefit is in effect at the end of a Policy year if (1) the
total of all premiums paid under the Policy for each completed Policy year,
accumulated at a 4% rate as if they were paid on the first day of each Policy
year, less any partial surrender under the Policy in each completed Policy year,
accumulated at a 4% rate from the date of surrender, is at least equal to (2)
the Guaranteed Death Benefit 2 Fund, and there is no outstanding Policy loan.
For these purposes, premiums paid within 20 days prior to a Policy anniversary
are treated as if paid in the next Policy year.
A-14
<PAGE>
During a Policy year, the amount of premiums paid in (1) above will include
premiums paid less partial surrenders in the current Policy year, and the amount
in (2) above will be calculated as the Minimum Guaranteed Death Benefit 2 Fund
amount shown in your Policy for the prior Policy year end plus 1/12 of the
Guaranteed Death Benefit 2 Premium for each Policy month of the current Policy
year up to and including the current Policy month.
The Guaranteed Death Benefit 2 Fund assumes that the Guaranteed Death Benefit
2 Premium, that appears in your Policy, is paid on the first day of each Policy
year and accumulates at a 4% rate per year.
If the Guaranteed Minimum Death Benefit 2 is lost due to insufficient premium
payments, it may be possible to regain the guarantee in future years. Federal
tax law limitations may prevent the payment of sufficient premiums to maintain
the Minimum Guaranteed Death Benefit 2 following: certain reductions in face
amount, including certain partial surrenders that reduce the face amount,
reduction or deletion of a rider benefit, or improvement in your Policy's rating
classification (see "Reduction in Face Amount").
Under Policies issued in New York, the Minimum Guaranteed Death Benefit 2 is
referred to as the "No Lapse Guarantee Benefit 2", the Minimum Guaranteed Death
Benefit 2 Fund is referred to as the "No Lapse Guarantee Benefit 2 Fund", and
the Minimum Guaranteed Death Benefit 2 Premium is referred to as the "No Lapse
Guarantee Benefit 2 Premium".
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the death
benefit in effect on the date of the second insured's death reduced by any
outstanding loan and accrued loan interest as of that date and by the portion of
any unpaid Monthly Deduction for the period prior to that date. The death
proceeds will be increased by any rider benefits payable and by any portion of a
Monthly Deduction made for a period beyond the date of the second insured's
death.
The death proceeds may also be adjusted if either insured's age or sex was
misstated in the application, if death results from either insured's suicide
within two years (or less if provided by state law) from the Policy's date of
issue, or if limits on the death benefit are imposed by rider. (See "Limits to
NELICO's Right to Challenge the Policy".)
CHANGE IN DEATH BENEFIT OPTION
At any time after the first Policy year, before or after the death of the
first insured, you may change your death benefit option by sending your written
request for change to NELICO's Home Office. The request will be effective on the
first day of the Policy month on or after it is received. A change in death
benefit option may result in tax consequences to you. (See "Tax
Considerations".)
If you change from Option A or C (face amount options) to Option B or D (face
amount plus cash value options), the Policy's face amount will be reduced by the
amount necessary for the death benefit to be the same immediately before and
after the change. A face amount reduction below $100,000 is permitted only with
NELICO's consent. Any rider benefits under the Policy may also have to be
decreased. In some circumstances a partial surrender of cash value may be
necessary in order to comply with Federal tax law limits on the amount of
premiums that can be paid into the Policy. No Surrender Charge will be assessed
in that situation.
If you change from Option B or D (face amount plus cash value options) to
Option A or C (face amount options), the Policy's face amount may be increased,
if necessary, for the death benefit to be the same immediately before and after
the change.
If you change from Option A or B (enhanced) to Option C or D, the Policy's
death benefit amount in most cases will be reduced, if the Internal Revenue Code
increases are in effect, or will remain the same, if they are not in effect.
A-15
<PAGE>
Changes from Option C or D to Option A or B (enhanced) are subject to
underwriting approval, and both insureds must be living if the amount at risk
under the Policy would increase as a result of the change.
EXTENDING THE MATURITY DATE
Subject to state availability, you may extend the original maturity of your
Policy by adding an extended maturity endorsement to the Policy at issue, or any
time thereafter prior to the death of the younger insured or the policy
anniversary on which the younger insured is age 100, whichever is earlier. If
the extended maturity endorsement is added to the Policy, the Policy will not
mature until the date of the younger insured's death (the "Extended Maturity
Date"). In addition, on and after the original Maturity Date, the death benefit
will equal the greater of the cash value on the original Maturity Date and the
Minimum Guaranteed Death Benefit, if the Minimum Guaranteed Death Benefit is in
effect on the original Maturity Date; otherwise, the death benefit on and after
the original Maturity Date will equal the cash value on the original Maturity
Date. No cost of insurance charges will be deducted after the original Maturity
Date. All riders attached to the Policy and in effect on the original Maturity
Date, other than the extended maturity endorsement, will terminate on the
original Maturity Date.
The tax consequences associated with extending the Maturity Date beyond age
100 are unclear and a tax advisor should be consulted before effecting such an
extension. For more information about the extended maturity option, contact your
agent or NELICO.
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account, in
the Fixed Account and, if you have an outstanding policy loan, in NELICO's
general account as a result of the loan. The cash value reflects premium
payments, the net investment experience of the Policy's sub-accounts, interest
credited on its cash value in the Fixed Account and on amounts held in the
general account as a result of a loan, the death benefit option chosen, amounts
deducted for Policy charges (including Monthly Deductions, any Surrender Charge
that applies if you reduce the Policy's face amount or make a partial surrender
and any due and unpaid interest on Policy loans), amounts surrendered and
transfers among the Policy's sub-accounts and the Fixed Account.
Your Policy's net cash value is the amount you will receive if you surrender
the Policy. The net cash value is the cash value reduced by any outstanding
policy loan (and accrued interest) and by any applicable Surrender Charge. (See
"Loan Provision", "Surrender Charge" and "Monthly Deduction from Cash Value".)
The Policy's cash value in the Variable Account may increase or decrease daily
depending on the net investment experience of the Policy's sub-accounts.
Unfavorable investment experience can reduce the net cash value to zero. Because
there is no guaranteed minimum cash value in the Variable Account, you bear the
entire investment risk with respect to the cash value. The premium payment
schedule you choose will also affect the Policy's net cash value.
NET INVESTMENT EXPERIENCE
The net investment experience of the Policy's sub-accounts will affect the
Policy's cash value and, in some circumstances, the death benefit. The net
investment experience of the sub-accounts is determined as of the close of
regular trading on the New York Stock Exchange on each day when the Exchange is
open for trading.
A sub-account's net investment experience for any period reflects the
investment experience of the underlying Eligible Fund shares for the same
period, reduced by the charges against the sub-account for that period.
(Currently the sub-accounts are charged only for NELICO's mortality and expense
risk, but in the future NELICO may impose a charge against the sub-accounts for
taxes if appropriate. See "Charges Against the Eligible Funds and the Sub-
Accounts of the Variable Account" and "Charge for NELICO's Income Taxes".)
A-16
<PAGE>
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.
ALLOCATION OF NET PREMIUMS
As of the "investment start date", the net premium to be allocated to any of
the variable sub-accounts is allocated to the Zenith Money Market Sub-Account
until the later of 45 days after the date Part I of the application is signed or
10 days after NELICO mails the Notice of Withdrawal Right. (See "Right to Return
the Policy". For the definition of the "investment start date", see "Amount
Provided for Investment under the Policy".) Thereafter, the cash value (which
will reflect at least one Monthly Deduction) is allocated to the sub-accounts
according to your instructions. (See "Investment Options".) Therefore, your
selection of sub-accounts does not take effect until after the initial period
described above, when the cash value is allocated to the Zenith Money Market
Sub-Account. Amounts to be allocated to the Fixed Account are so allocated as of
the investment start date and are not invested in the Money Market Sub-Account.
Allocations can be made to a maximum of nine accounts (including the Fixed
Account) at any time.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
An amount is first provided for investment under the Policy as of the
investment start date. That is the latest of: the date when NELICO first
receives a premium payment for the Policy, the date each of the insureds has
signed his/her Part II of the Policy application and the Policy Date. (For this
purpose, receipt of the premium payment means receipt by your registered
representative, if the payment is made with the application; otherwise, it means
receipt by a NELICO agency or, in the case of a Policy sold through MetLife
Brokerage, receipt by MetLife Brokerage at its Princeton, New Jersey office.)
If you make a premium payment with the application, the Policy Date is
generally the later of the date each of the insureds has signed his/her Part II
of the application and receipt of the premium payment. In that case the Policy
Date and investment start date are the same. (Under NELICO's administrative
rules, a Policy which would be dated the 28th day or later in a month will
receive a Policy Date of the 28th.) The amount of premium paid with the
application must be at least 10% of the annual Planned Premium for the Policy.
Only one premium payment may be made before the Policy is issued.
If you make a premium payment with the application, the insureds 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 for the Policy and the date when each of the insureds has
signed his/her Part II of the application. The maximum amount of coverage
provided is the lesser of the amount of insurance applied for and $500,000 when
both insureds are standard risks ($250,000 for when at least one insured is not
a standard risk and $50,000 when both persons are determined to be uninsurable).
There may be variations to these provisions required by state law.
If a Policy is issued, Monthly Deductions, including cost of insurance
charges, begin as of the Policy Date, even if the Policy's issuance was delayed
due to underwriting requirements; and will be in amounts based on the face
amount of the Policy issued, even if the temporary insurance coverage received
during the underwriting period was for a lesser amount. If NELICO declines an
application, it will refund the premium payment made plus interest at the rate
currently in use by NELICO.
If you choose to pay the initial premium upon delivery of the Policy, the
Policy will have a Policy Date which is generally five days after issue. The
investment start date will be the later of the Policy Date and the date the
premium is received. Monthly Deductions will begin on the Policy Date. Interest
at a 4% net rate will be credited to the Policy for the period, if any, between
the Policy Date and the investment start date. Insurance coverage under the
Policy will begin upon receipt of the portion of the Minimum Premium due for the
first quarter (or, with NELICO's consent, upon receipt of the number of monthly
payments due under the Master Service Account arrangement. This arrangement is
not available under the Policies as of the date of this prospectus, but NELICO
plans to make it available in the future).
A-17
<PAGE>
Under limited circumstances, NELICO may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
Backdating may be desirable, for example, so that you can purchase a particular
Policy face amount for lower cost of insurance rates, based on a younger
insurance age. Backdating in some cases may result in a Policy with a higher
Surrender Charge if the backdating results in the Surrender Charge being based
on a lower age bracket. (See "Surrender Charge".) For a backdated Policy, you
must also pay the minimum premium payable for the period between the Policy Date
and the investment start date. As of the investment start date, NELICO will
allocate to the Policy those net premiums, adjusted for monthly Policy charges
and interest at a 4% net rate, for the period between the Policy Date and the
investment start date.
The amount provided for investment in the Policy is adjusted as of each day
the New York Stock Exchange is open to reflect the net investment experience of
the sub-accounts for that day.
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 45 days after the date Part 1 of the
application is signed, within 10 days (or more where required by applicable
state insurance law) after you receive the Policy or within 10 days after NELICO
mails the Notice of Withdrawal Right, whichever is latest. The Policy may be
returned to NELICO or your registered representative. Insurance coverage ends as
soon as the Policy is returned (as determined by its postmark, if the Policy is
mailed). If you choose to cancel the Policy, NELICO will refund any premium paid
(or any other amount that is required by state insurance law and permitted by
the Securities and Exchange Commission) with interest at the rate currently in
use by NELICO.
CHARGES AND EXPENSES
DEDUCTIONS FROM PREMIUMS
SALES CHARGE. NELICO deducts 9% from each premium (whether a Planned Premium
or an unscheduled payment) as a sales charge. NELICO currently intends to waive
this charge on premiums after the 15th policy year (after the 17th policy year,
for Policies issued in Pennsylvania); however, NELICO retains the right not to
waive the charge, or to reimpose it once it has been waived.
During the first 14 policy years, if you surrender or lapse the Policy, make a
partial surrender or reduce the face amount, a Deferred Sales Charge also
applies. (For joint insureds whose average issue age was 60 to 70 at issue of
the Policy, the period when the Deferred Sales Charge applies is 9 years, for
insureds whose average issue age was 70 to 80, 6 years, and above 80, 5 years.
See "Surrender Charge" below.)
The sales charges under a Policy in a given Policy year are not necessarily
related to NELICO's actual sales expenses for that year.
Sales charges for Policies sold in certain group or sponsored arrangements may
be reduced. NELICO may reduce or eliminate the sales charge, when you purchase a
Policy, on cash value transferred 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, as well as certain other eligibility requirements, 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 registered representative can advise you regarding the
availability of this feature.
STATE PREMIUM TAX CHARGE. NELICO deducts 2.5% from each premium to cover state
premium taxes and administrative expenses. These 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.
A-18
<PAGE>
FEDERAL PREMIUM TAX CHARGE. NELICO deducts 1% from each premium to recover a
portion of that part of NELICO's federal income tax liability that is determined
solely by the amount of life insurance premiums it receives.
EXAMPLE: The following chart shows the net amount that would be allocated to
the Variable Account, assuming a premium payment of $2,000.
<TABLE>
<CAPTION>
NET
PREMIUM PREMIUM
------- -------
<S> <C> <C>
$2,000 $2,000
-250 (12.5% X 2,000 = total sales and premium tax charge)
------
$1,750
======
</TABLE>
NELICO may waive the 9% sales charge on premiums paid after the 15th Policy
year (after the 17th Policy year for Policies issued in Pennsylvania). In that
case, the net premium in this example would be $2,000 - 70 (3.5% X 2,000), or
$1,930.
SURRENDER CHARGE
If, during the first 14 policy years, a Policy is totally surrendered or
lapses, the face amount is reduced, or a partial surrender reduces the face
amount, a Surrender Charge will be deducted from the cash value. (For joint
insureds whose average issue age is 60 1/2 to 70 at issue of the Policy, the
Surrender Charge period is 9 years, for insureds whose average issue ages are 70
1/2 to 80, 6 years, and above 80, 5 years.) The Surrender Charge includes a
Deferred Sales Charge and a Deferred Administrative Charge. The maximum
Surrender Charge is set forth in your Policy.
Any Surrender Charge deducted upon lapse is credited back to the Policy's cash
value upon reinstatement. The Surrender Charge on the date of reinstatement will
be the same as it was on the date of lapse. For purposes of determining the
Surrender Charge on any date after reinstatement, the period the Policy was
lapsed will not count.
DEFERRED SALES CHARGE. The Deferred Sales Charge is based on a percentage of
the Benchmark Premium. The Policy's Benchmark Premium is used to determine the
amount of the Deferred Sales Charge and equals the level annual premium
necessary to keep a level death benefit Policy, without riders, in-force until
age 80 of the younger insured (or 20 years after issue, if later, but not later
than the Maturity Date) assuming charges are imposed at the guaranteed levels
and a 4% rate of interest.
For Policies which cover insureds whose average issue age is 60 or less at
issue, the maximum Deferred Sales Charge applies in Policy years three through
five. The Deferred Sales Charge in these years equals 41% of actual premiums
paid up to one Benchmark Premium, plus 41% of additional premiums paid up to a
second Benchmark Premium, plus 8% of additional premiums paid up to a third
Benchmark Premium. In no event will the Deferred Sales Charge exceed $30 per
$1,000 of face amount. After the fifth Policy year, the maximum Deferred Sales
Charge declines on a monthly basis until it reaches 0% in the last month of the
fourteenth Policy year.
The Deferred Sales Charge during either of the first two Policy years for
insureds whose average issue age is 70 or less is equal to 21% of the premiums
paid in the first Policy year, up to a maximum of 21% of one Benchmark Premium.
----- ---
As described above, after the second Policy year, the maximum Deferred Sales
Charge increases substantially.
A-19
<PAGE>
The table below shows the maximum Deferred Sales Charge that applies to
Policies covering insureds whose average issue age is 60 or less at issue, and
assumes that one Benchmark Premium per year is paid under the Policy. The table
shows the charge, expressed as a percentage of the Benchmark Premiums paid to
date, if the lapse, surrender or face reduction occurs at the end of each of the
Policy years shown. During Policy years 6 through 14, the maximum Deferred Sales
Charge declines on a monthly basis.
<TABLE>
<CAPTION>
THE MAXIMUM DEFERRED SALES
CHARGE IS THE FOLLOWING
PERCENTAGE OF ONE BENCHMARK
FOR POLICIES WHICH ARE PREMIUM PER YEAR TO DATE
SURRENDERED, LAPSED OF SURRENDER, LAPSE OR
OR REDUCED DURING FACE AMOUNT REDUCTION
---------------------- -----------------------------
<S> <C> <C>
Entire policy year 3 30.00%
4 22.50%
5 18.00%
Last Month of Policy
years 6 13.33%
7 10.00%
8 7.50%
9 5.56%
10 4.00%
11 2.73%
12 1.67%
13 .77%
14 0.00%
</TABLE>
For insureds whose average issue age is above 60 at issue, the Deferred Sales
Charge percentages are less than or equal to those described above, with the
maximum charge occurring in Policy year 3, for insureds with an average issue
age up through 70, and in Policy year 1, for insureds with an average issue age
above 70.
In the case of a reduction in face amount or partial surrender that reduces
the face amount, any Deferred Sales Charge that applies is deducted from the
Policy's cash value in an amount proportional to the amount of the Policy's face
amount surrendered. (See "Partial Surrender".) The charge is deducted from the
Policy's cash value in the sub-accounts and the Fixed Account in proportion to
the amount of the Policy's cash value in each.
DEFERRED ADMINISTRATIVE CHARGE. The Table below shows the Deferred
Administrative Charge deducted if you totally or partially surrender, lapse or
reduce the face amount of the Policy.
<TABLE>
<CAPTION>
FOR POLICIES WHICH ARE
SURRENDERED, LAPSED DEFERRED ADMINISTRATIVE
OR REDUCED DURING THE CHARGE PER $1,000 OF
POLICY YEAR SHOWN FACE AMOUNT
---------------------- -------------------------
<S> <C> <C>
Entire Policy year 1 $4.00
2 4.00
3 4.00
4 4.00
5 4.00
Last Month of Policy
year* 6 3.60
7 3.20
8 2.80
9 2.40
10 2.00
11 1.50
12 1.00
13 0.50
14 0.00
</TABLE>
- ---------
* The charge declines monthly after the end of the fifth Policy year.
A-20
<PAGE>
The applicable Deferred Administrative Charge will be deducted from the
Policy's available cash value, regardless of whether that cash value is derived
from premiums or investment experience.
For insureds whose average issue age is above 60 at issue, the Deferred
Administrative Charge is less than or equal to that in the table above.
MONTHLY DEDUCTION FROM CASH VALUE
On the first day of each Policy month, starting with the Policy Date, NELICO
deducts the "Monthly Deduction" from your cash value. If either Minimum
Guaranteed Death Benefit is in effect, or if the Policy coverage is being
protected by payment of the Minimum Premium during the first three Policy years,
the Monthly Deduction is made until the cash value equals zero. Otherwise, the
Monthly Deduction is made as long as the net cash value is sufficient to cover
the entire Monthly Deduction. If the net cash value is insufficient to cover the
entire Monthly Deduction and no Minimum Guaranteed Death Benefit or Minimum
Premium guarantee is in effect, the Policy will be in default and may lapse.
(See "Lapse and Reinstatement".) The Monthly Deduction reduces the cash value in
each sub-account of the Variable Account and in the Fixed Account in proportion
to the cash value in each.
The Monthly Deduction includes the following charges:
POLICY FEE. The policy fee is currently equal to $5.00 per month (guaranteed
not to exceed $7.50 per month).
ADMINISTRATIVE CHARGE. The Administrative Charge is currently equal to $0.12
per $1,000 of Policy face amount in the first Policy year and $0.06 per $1,000
of Policy face amount thereafter (guaranteed not to exceed $0.16 per $1,000 of
face amount in the first Policy year and $0.10 per $1,000 of Policy face amount
thereafter). Currently, NELICO intends to limit the Administrative Charge
deducted under a Policy to $240 per month after Policy year one.
The Policy Fee, the Administrative Charge and the Deferred Administrative
Charge together cover the cost of administering the Policies, as well as legal,
actuarial, systems, mailing and other overhead costs connected with NELICO's
variable life insurance operations.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE. The minimum death benefit guarantee
charge is $0.01 per $1,000 of Policy face amount. This charge compensates NELICO
for its guarantee that, regardless of the investment experience of the Policy's
sub-accounts, the Policy's death benefit will never be less than the face
amount, provided that the total amount of premiums paid with interest, less any
partial surrenders with interest, equals or exceeds the applicable Minimum
Guaranteed Death Benefit Fund amount for the Policy. (See "Minimum Guaranteed
Death Benefit" and "Adjustments to the Death Proceeds Payable".)
MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of
providing insurance protection under your Policy. There are no future mortality
charges attributable to an insured from the time he or she reaches age 100 (or
would have reached age 100, if that person died before reaching age 100). The
cost of insurance charge for a Policy month is equal to the "amount at risk"
under the Policy, multiplied by the cost of insurance rate for that Policy
month. The amount at risk is determined on the first day of the Policy month
after any applicable Monthly Deduction has been processed and is the amount by
which the death benefit (discounted at the monthly equivalent of 4% per year)
exceeds the Policy's cash value. The cost of insurance rate for your Policy
changes from month to month.
If a Policy loan is outstanding and your Policy's net cash value is not large
enough to cover the cost of insurance charge for a policy month, the difference
between the net cash value available and the cost of insurance charge is treated
as an excess policy loan and the Policy may terminate. (See "Loan Provision".)
A-21
<PAGE>
The guaranteed cost of insurance rates for a Policy depend on each insured's
underwriting class, age on the first day of the Policy year and sex (if the
Policy is sex-based). The current cost of insurance rates for a given Policy
also depend on the insureds' issue ages and on the duration of the Policy. The
joint rates are guaranteed not to be higher than joint rates based on the 1980
Commissioners Standard Ordinary Mortality Tables with smoker/ nonsmoker
modifications (the "1980 CSO Tables"). The rates actually used may be lower than
these maximum rates, depending on NELICO's expectations regarding future
mortality and expense experience, lapse rates and investment earnings. NELICO
reviews the adequacy of its current cost of insurance rates annually and may
adjust their level periodically. Any change in the current cost of insurance
rates will be applied prospectively only and will be on a non-discriminatory
basis. The current cost of insurance rate for a Policy is set forth in the
Policy Owner's annual statement.
Each insured person is underwritten separately. The underwriting classes used
for determining cost of insurance rates are smoker standard, smoker substandard,
nonsmoker standard and nonsmoker substandard. Substandard ratings result in
higher cost of insurance deductions. The guaranteed maximum mortality charges
for substandard ratings are based on multiples of the 1980 CSO Tables.
Cost of insurance rates are generally more favorable for nonsmoker than for
smoker insureds and generally more favorable for female than for male insureds.
Within a given underwriting class, cost of insurance rates are generally more
favorable for insureds with lower issue ages. Where required by state law, and
for Policies sold in connection with certain employee benefit plans, cost of
insurance rates (and Policy values and benefits) do not vary based on the sex of
the insured.
CHARGES FOR ADDITIONAL BENEFITS AND SERVICES. Charges are imposed for the cost
of any additional rider benefits as described in the rider form. NELICO also
reserves the right to charge Policy Owners a nominal fee, which will be billed
directly to the Policy Owner, in the event that a Policy re-issue or re-dating
is requested.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. NELICO charges the sub-accounts of the
Variable Account for the mortality and expense risks that NELICO assumes.
Currently, the charge is made daily at an annual rate of .90% of the
sub-accounts' assets. The mortality risk NELICO assumes is that insureds may
live for shorter periods of time than NELICO estimated. The expense risk is that
NELICO's costs of issuing and administering the Policies may be more than NELICO
estimated.
CHARGES FOR INCOME TAXES. NELICO currently makes no charge for income taxes
against the Variable Account, but in the future NELICO may impose such a charge,
if appropriate. 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".)
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds.
The Zenith Fund Series incur charges for advisory fees and certain other
expenses. The series (other than the Capital Growth Series) are advised by TNE
Advisers, Inc., an affiliate of NELICO. Under a voluntary expense cap by TNE
Advisers for each of the Back Bay Advisors Bond Income, Back Bay Advisors Money
Market, Back Bay Advisors Managed, Westpeak Stock Index, Westpeak Growth and
Income and Loomis Sayles Avanti Growth Series, TNE Advisers will bear those
expenses (other than the management fee) that exceed 0.15% of average daily net
assets; for the Loomis Sayles Small Cap Series, TNE Advisers will bear all
expenses that exceed 1.00% of average daily net assets. For the remaining Zenith
Fund Series (other than the Capital Growth Series) TNE Advisers, under a
voluntary expense deferral arrangement, will bear those expenses (other than the
management fee) which exceed a certain limit in the year in which they are
incurred and will charge those expenses to the series in a future year when
actual expenses of the series are below the limit up until two years after the
end of the fiscal year in which the expense was incurred. The expense cap and
expense deferral arrangement may be terminated at any time.
A-22
<PAGE>
The following table shows the annual operating expenses for each series, based
on actual expenses for 1996, after giving effect to the applicable expense cap
or expense deferral arrangement.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY EXPENSE CAP)
<TABLE>
<CAPTION>
BACK BACK
BAY BAY BACK WESTPEAK LOOMIS LOOMIS
ADVISORS ADVISORS BAY WESTPEAK GROWTH SAYLES SAYLES
CAPITAL BOND MONEY ADVISORS STOCK AND AVANTI SMALL
GROWTH INCOME MARKET MANAGED INDEX INCOME GROWTH CAP
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------- -------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee .63% .40% .35% .50% .25% .70% .70% 1.00%
Other Expenses .06% .12% .15% .12% .15% .15% .15% --
---- ---- ---- ---- ---- ---- ---- -----
Total Series
Operating Expenses .69% .52% .50% .62% .40% .85% .85% 1.00%
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE DEFERRAL)
<TABLE>
<CAPTION>
LOOMIS MORGAN STANLEY DAVIS ALGER
SAYLES INTERNATIONAL VENTURE EQUITY
BALANCED MAGNUM VALUE GROWTH
SERIES EQUITY SERIES SERIES SERIES
-------- -------------- ------- --------
<S> <C> <C> <C> <C>
Management Fee .70% .90% .75% .74%
Other Expenses .15% .40% .15% .16%
---- ----- ---- ----
Total Series Operating Expenses .85% 1.30% .90% .90%
</TABLE>
The investment adviser for the VIP Fund and VIP Fund II is Fidelity Management
& Research Company, a registered investment adviser under the Investment
Advisers Act of 1940. The Portfolios of the VIP Fund and VIP Fund II, as part of
their operating expenses, pay investment management fees to Fidelity Management
& Research Company.
The Portfolios also bear certain other expenses. For the year ended December
31, 1996, the total operating expenses incurred by the Portfolios, as a
percentage of Portfolio average net assets, were as follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- --------------
<S> <C> <C> <C>
Equity-Income .51% .07% .58%*
Overseas .76% .17% .93%*
High Income .59% .12% .71%
Asset Manager .64% .10% .74%*
</TABLE>
- ---------
* Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. Had these
reductions been included, total annual expenses would have been .56% for
Equity-Income Portfolio, .92% for Overseas Portfolio and .73% for Asset
Manager Portfolio.
Affiliates of Fidelity Management & Research Company may compensate NELICO or
an affiliate for administrative, distribution, or other services relating to
these Portfolios of VIP Fund and VIP Fund II. Such compensation is based on
assets of the Portfolios attributable to the Policies and certain other variable
insurance products issued by NELICO and its affiliates.
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
A-23
<PAGE>
covering a group of individuals. An example of such an arrangement is a non-tax
qualified deferred compensation plan. A "sponsored arrangement" includes a
program under which an employer permits group solicitation of its employees or
an association permits group solicitation of its members for the purchase of the
Policies on an individual basis.
For Policies issued in connection with group or sponsored arrangements, NELICO
may waive or reduce one or more of the following charges: the sales charge,
Surrender Charge, charges for the cost of insurance, mortality and expense risk
charge, administrative charges, Policy Fee and/or federal and state premium tax
charges described in "Charges and Expenses". (In addition, the interest rate
credited on amounts taken from the sub-accounts as a result of a Policy loan may
be increased for these Policies.) NELICO will waive or reduce these charges
according to its rules in effect when the Policy application is approved. To
qualify for a waiver or reduction, a group or sponsored arrangement must satisfy
certain criteria as to, for example, size and number of years in existence.
Generally, the sales contacts and effort, administrative costs and mortality
cost per Policy vary based on such factors as the size of the group or sponsored
arrangement, its stability, the purposes for which the Policies are purchased
and certain characteristics of its members. The amount of reduction and the
criteria for qualification will reflect the reduced sales and administrative
effort resulting from sales to qualifying group or sponsored arrangements.
NELICO may modify from time to time both the amounts of reductions and the
criteria for qualification. Reductions in or waiver of these charges will not be
unfairly discriminatory against any person, including the affected Policy Owners
and all other Policy Owners of Policies funded by the Variable Account. The
waiver or reduction of Policy charges for group or sponsored arrangements
described above will not apply to Policies issued in the state of New York,
other than Policies issued to non-tax qualified deferred compensation plans.
The United States Supreme Court has held that certain insurance policies
providing values and benefits that vary with the sex of the insured may not be
used to fund certain employee benefit programs. Therefore, NELICO offers
Policies that do not vary based on the sex of the insured for use in connection
with certain employee benefit programs. NELICO recommends that any employer
proposing to offer the Policies to employees under a group or sponsored
arrangement consult its attorney before doing so.
PREMIUMS
FLEXIBLE PREMIUMS
Within the limits described below, you may choose the amount and frequency of
premium payments. You may select a Planned Premium schedule, which may be a
fixed amount or a varying amount. This schedule, which must be within NELICO's
minimum and maximum limits, appears in your Policy form. It is not necessarily
designed to keep your Policy in force, and you may skip Planned Premium payments
or make additional payments. Additional payments could be subject to
underwriting. No payment can be less than $25, and the total of Planned Premiums
and other payments will be limited to NELICO's published maximum.
Planned Premiums can be paid on an annual, semi-annual or quarterly schedule
or, with NELICO's consent, monthly. You can change your Planned Premium schedule
at any time by sending your request to NELICO's Home Office. Cash values and
death benefits are permanently affected by the amount and frequency of premium
payments.
You may make payments by check or money order. NELICO will send premium
notices for annual, semi-annual or quarterly Planned Premiums. In the future,
NELICO may make available the Master Service Account arrangement under which you
may have NELICO withdraw your premium payments from your bank checking account
or TNE Cash Management Trust account.
NELICO offers three types of premium payment levels that can protect your
Policy against lapse over specified time periods.
A-24
<PAGE>
First, NELICO determines a three-year Minimum Premium amount based on the
Policy's face amount, the age, sex (unless unisex rates apply) and underwriting
class of each of the insureds, the current level of Policy charges and any rider
benefit selected. Generally, during this three-year period, as long as the
Minimum Premium amount is timely paid, the Policy is guaranteed not to lapse
even if the Policy's net cash value is insufficient to pay the Monthly Deduction
in any month. However, no three-year Minimum Premium death benefit guarantee
will apply if you reinstate the Policy, if you reduce the face amount or make a
partial surrender that reduces the face amount, if you add, reduce or delete a
rider benefit, or if the rating classification of your Policy is improved in the
first three Policy years.
Second, NELICO determines a guaranteed minimum death benefit premium (to
maturity) which will guarantee that the Policy will mature for the net cash
value at age 100 of the younger insured. Insufficient premium payments, a
reduction in the face amount or partial surrender that reduces the face amount,
reduction or deletion of a rider benefit, or improvement in rating
classification of the Policy could terminate this guarantee. See "Minimum
Guaranteed Death Benefit". The guaranteed minimum death benefit premium is based
on the Policy's face amount, the age, sex (unless unisex rates apply) and
underwriting class of each of the insureds, the death benefit option chosen, the
guaranteed level of Policy charges and any rider benefit selected. The premium
is recalculated following the Policy transactions described above (other than
insufficient premiums) and is also recalculated following an increase in rider
coverage.
Third, the Policy's guaranteed minimum death benefit premium (to age 80)
guarantees that the Policy will stay in force until the later of age 80 of the
younger insured, or 20 years after issue, but no later than the Maturity Date of
the Policy. This premium is based on factors similar to the guaranteed minimum
death benefit premium (to maturity), but is actuarially determined to provide
guaranteed coverage to the earlier age. Insufficient premium payments, a
reduction in the face amount or a partial surrender that reduces the face
amount, reduction or deletion of a rider benefit, or improvement in the rating
classification of the Policy could also terminate this guarantee, although
termination for insufficient premium payments is less likely here than in the
case of the guaranteed minimum death benefit premium (to maturity). The
guaranteed minimum death benefit premium (to age 80) is recalculated following
these transactions (other than insufficient premiums) and is also recalculated
following an increase in rider coverage.
Federal tax law limits the amount of premiums that can be paid under the
Policy. In addition, if any payments under the Policy exceed the "7-pay test"
under Federal tax law, you may be taxed on certain distributions. (See "Tax
Considerations".) NELICO's consent is required if, in order to satisfy tax law
requirements, any payment would increase the Policy's death benefit by more than
it would increase cash value. NELICO may require evidence of insurability before
accepting the payment.
NELICO allocates payments to your Policy's sub-accounts as of the date the
payment is received at NELICO's Home Office. (See "Receipt of Communications and
Payments at NELICO's Home Office".)
A payment is treated first as a Planned Premium, second as repayment of a
Policy loan, and third as an unscheduled payment, unless you designate otherwise
in writing to NELICO. (For Policies issued in New York, a payment will be
treated as a Planned Premium when a Policy loan is outstanding only if the
payment is in the exact amount of the Planned Premium next due; otherwise, it
will be treated first as repayment of Policy loan interest, second as repayment
of a Policy loan, third as a Planned Premium, and last as an unscheduled
payment.) If you have a Policy loan, it may be more advantageous to repay the
loan than to make a premium payment, because the premium payment is subject to
sales and tax charges, whereas the loan repayment is not subject to any charges;
however, repayment of the loan in place of a premium payment could cause your
Policy to lose its eligibility for a death benefit guarantee. (See "Loan
Provision", "Deductions from Premiums" and "Death Benefit".)
LAPSE AND REINSTATEMENT
LAPSE. Unless either Minimum Guaranteed Death Benefit is in effect (or, during
the first three Policy years, unless the Minimum Premium requirements described
under "Premiums" have been met), in any month that there
A-25
<PAGE>
is insufficient net cash value to pay a Monthly Deduction the Policy will be in
default. The Policy provides a 62 day grace period for payment of a premium
sufficient to pay the amount in default plus applicable deductions from premium
payments. NELICO will notify you of the amount due. During the grace period
insurance coverage continues under your Policy, but if the second insured dies
before the premium is paid, NELICO will deduct from the death proceeds the
portion of the unpaid Monthly Deduction for the period prior to the date of
death. If the required premium is unpaid at the end of the grace period, the
Policy will lapse without value.
REINSTATEMENT. If your Policy has lapsed, it may be reinstated within 7 years
after the date of lapse. If more than 7 years have passed, or if you have
surrendered the Policy, 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.
Any Surrender Charge deducted upon lapse is credited to the Policy's cash
value upon reinstatement. The Surrender Charge on the date of reinstatement is
the same as it was on the date of lapse. For purposes of determining the
Surrender Charge and other charges that vary by duration of the Policy (rather
than by age of the insured) on any date after reinstatement, the period the
Policy was lapsed does not count.
OTHER POLICY FEATURES
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after the
Right to Return the Policy period. NELICO will make the loan as of the date when
a loan request is received at NELICO's Home Office. (See "Receipt of
Communications and Payments at NELICO's Home Office".) You should contact
NELICO's Home Office or your registered representative for information regarding
the procedures to follow for requesting a loan.
The Policy's loan value is equal to (i) 90% of the Policy's cash value
projected using current Policy charges and a 4% annual rate to the next Policy
anniversary or, if earlier, to the next Planned Premium due date; less (ii) the
Surrender Charge that would apply upon surrender on the next Planned Premium due
date or, if greater, on the date the loan is made; less (iii) loan interest to
the next interest due date. If required by state law, the Policy's loan value
may be a greater percentage of the cash value, as described in your Policy. The
amount of loan value available to be borrowed at any time is reduced by the
amount of any outstanding Policy loan plus accrued interest.
The example below illustrates how the loan value is determined.
- -----------------------------------------------------------------------------
EXAMPLE: Using the Policy illustrated on page A-54 assume that the Policy's
Planned Premiums have been paid and that the Policy's sub-accounts have earned a
constant 6% hypothetical gross annual rate of return (equal to a constant net
annual rate of return of 4.24%). After the premium payment on the 10th Policy
anniversary, the maximum amount that could be borrowed would be determined as
follows under (i) an annual premium payment schedule and (ii) a quarterly
premium payment schedule:
<TABLE>
<CAPTION>
ANNUAL QUARTERLY
-------- -----------
<S> <C> <C>
(1) Cash Value after Premium Payment on 10th Policy
Anniversary . . . . . . . . . . . . . . . . . . $172,252 $161,752
(2) Cash Value Projected at a Constant Annual Rate of
Return of 4% to the
(a) 11th Policy Anniversary . . . . . . . . . . 177,963
(b) Next Planned Premium Due Date . . . . . . . 163,054
(3) 90% of Amount Calculated in (2) . . . . . . . . 160,167 146,749
(4) Amount Calculated in (3), Reduced by the
Applicable Surrender Charge . . . . . . . . . . 154,350 140,932
(5) Amount Calculated in (4), Reduced by Loan
Interest to the Next Interest Due Date . . . . 146,303 139,020
</TABLE>
- -----------------------------------------------------------------------------
A Policy loan reduces the Policy's cash value in the sub-accounts by the
amount of the loan. A loan repayment increases the cash value in the
sub-accounts by the amount of the repayment. Unless you request otherwise,
Policy loans are attributed first to the sub-accounts of the Variable Account in
proportion to the cash value in each, and
A-26
<PAGE>
then the Fixed Account. All loan repayments are allocated first to the
outstanding loan balance attributed to the Fixed Account and then to the
sub-accounts of the Variable Account in proportion to the cash value in each.
The interest rate charged on Policy loans is an effective rate of 5.5% per
year (using simple interest during the year) and is due on the Policy
anniversary. If not paid, the interest accrued on the loan is added to the loan,
and an amount equal to the unpaid interest is deducted from the Policy's cash
value in the sub-accounts and the Fixed Account in proportion to the amount in
each. The amount taken from the Policy's sub-accounts as a result of the loan
earns interest (compounded daily) at an effective rate of not less than 4% per
year. The rate currently credited is 4% per year. This interest earned is
credited to the Policy's sub-accounts annually, in proportion to the cash value
in each.
The amount taken from the Policy's sub-accounts as a result of a loan does not
participate in the investment experience of the sub-accounts. Therefore, the
death benefit and cash value of the Policy can be permanently affected by a
Policy loan, even if it is repaid. In addition, any proceeds payable under a
Policy are reduced by the amount of any outstanding loan plus accrued interest.
Any payment received while a Policy loan is outstanding is treated first as a
Planned Premium, second as repayment of a Policy loan, and third as an
unscheduled payment, unless you designate otherwise in writing to NELICO. (For
Policies issued in New York, a payment will be treated as a Planned Premium when
a Policy loan is outstanding only if the payment is in the exact amount of the
Planned Premium next due; otherwise, it will be treated first as repayment of
Policy loan interest, second as repayment of a Policy loan, third as a Planned
Premium, and last as an unscheduled payment.) If a Policy loan is outstanding,
it may be more advantageous to repay the loan than to pay a premium, because the
payment is subject to sales and premium tax charges, and the loan repayment is
not subject to charges; however, repayment of the loan in place of a premium
payment could cause your Policy to lose its eligibility for a death benefit
guarantee. (See "Deductions from Premiums" and "Death Benefits".)
If Policy loans plus accrued interest exceed the Policy's cash value less the
Surrender Charge on the next Policy loan interest due date (or, if the Surrender
Charge would be greater, on the date the calculation is made), NELICO will
notify you that the Policy is going to terminate. (This situation is referred to
as an "excess policy loan". NELICO tests for an excess policy loan on each
monthly processing date and any time a loan-related transaction is made.) The
Policy will terminate without value 62 days after the notice is mailed unless
the excess 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.)
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 Section 401 of the Internal Revenue Code (the "Code"). If the
retirement plan is subject to ERISA, the plan fiduciary authorized to
oversee/direct the plan loan program must fulfill the requirements of the
regulations including charging a "commercially reasonable" rate of interest. The
policy loan interest rate may not be considered "commercially reasonable" within
the meaning of the DOL regulations. In addition, the DOL regulations require
that a plan loan be adequately secured but provide that not more than 50% of the
participant's vested account balance (including the Policy cash value) be used
as security for the loan. The DOL regulations and applicable tax law may also
contain other requirements for plan loans. Therefore, plan loan provisions may
differ from Policy loan provisions. If you are a participant in a retirement
plan subject to ERISA, you should consult with the fiduciary administering the
plan loan program. Failure of the plan loan program to comply with the
requirements of the DOL regulations and of tax law may result in tax penalties
under the Code and under ERISA.
SURRENDER
You may surrender a Policy for its net cash value at any time while either
insured is living by 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. The net cash value equals
the cash value reduced by any Policy loan and accrued interest and by any
applicable Surrender Charge. (See "Surrender Charge".)
A-27
<PAGE>
You may elect in writing to have all or part of the net cash value applied to a
payment option. (See "Payment Options".) A surrender may result in adverse tax
consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER
You may make a partial surrender of the Policy on the first day of any Policy
month after the first Policy year, to receive a portion of its net cash value. A
partial surrender will cause a reduction in the Policy's death benefit and may
cause a reduction in the Policy's face amount if necessary in order that the
amount at risk under the Policy not increase. Any reduction in the face amount
causes a proportionate reduction in the Policy's Benchmark Premium, on which any
future Surrender Charges are based. Rider benefits may also be reduced. No
partial surrender may reduce the face amount below the Policy's required minimum
except with NELICO's consent.
Partial surrenders in any one Policy year are limited, except with NELICO's
consent, to 20% of the Policy's net cash value as of the date of the first
partial surrender for the Policy year or, if less, the Policy's available loan
value. Currently, NELICO permits partial surrenders of up to 75% of the Policy's
net cash value per year, assuming sufficient available loan value.
Any Surrender Charge that applies to a partial surrender is deducted from the
Policy's cash value in an amount proportional to the amount of the Policy's face
amount surrendered. The Surrender Charge applied reduces any remaining Surrender
Charge under your Policy.
You should be aware that cash value paid upon partial surrender may not be
reinvested in the Policy except as premium payments, which are subject to the
charges described under "Deductions From Premiums". A partial surrender could
terminate your Policy's Minimum Guaranteed Death Benefit 1 or 2. See "Minimum
Guaranteed Death Benefit".
A partial surrender first reduces the Policy's cash value in the sub-accounts
of the Variable Account, in proportion to the amount of cash value in each, and
then the Fixed Account, unless you request otherwise. The amount of net cash
value paid upon partial surrender is determined as of the first day of the
Policy month on or after the date when a request conforming to NELICO's
administrative procedures is received at NELICO's Home Office. NELICO's
administrative procedures can be determined by contacting your registered
representative or the Home Office.
A reduction in the death benefit as a result of a partial surrender may cause
the Policy to become a "modified endowment contract". If you are contemplating a
partial surrender, you should consult your tax advisor regarding the tax
consequences of the transaction. (See "Tax Considerations".)
REDUCTION IN FACE AMOUNT
You may reduce the face amount of your Policy without receiving a distribution
of any of the Policy's cash value. (This feature differs from a partial
surrender in that a partial surrender causes part of the Policy's cash value to
be distributed to you.)
If you decrease the face amount of your Policy, the Benchmark Premium, on
which any future Surrender Charges are based, is also decreased. Your Policy's
actual cash value is not reduced except by the amount of any applicable
Surrender Charge. Generally, the Policy's death benefit is decreased. (However,
if the death benefit is being increased in accordance with federal income tax
laws (times the enhancement factor, if applicable), the death benefit will not
be decreased unless a Surrender Charge was deducted from the cash value in
connection with the face amount reduction. A reduction in face amount in this
situation is not advisable, because it will not reduce your death benefit or
cost of insurance charges and may result in a Surrender Charge.) Any rider
benefits attached to the Policy may also have to be decreased. The face amount
remaining after a reduction has to meet NELICO's minimum face amount
requirements for issue, except with NELICO's consent.
A-28
<PAGE>
A reduction in the face amount of your Policy will reduce the Federal tax law
limitations on the amount of premiums that can be paid under the Policy. In
these cases, a partial surrender of cash value may be required to comply with
Federal tax law. This could result in termination of the Minimum Guaranteed
Death Benefit 1 or 2. See "Minimum Guaranteed Death Benefit".
A face amount reduction takes effect as of the first day of the Policy month
on or after the date when NELICO has received a request at its Home Office
meeting NELICO's administrative requirements. You can determine NELICO's
administrative requirements by contacting your registered representative or the
Home Office.
A reduction in the face amount of a Policy that causes a death benefit
reduction may cause the Policy to become a "modified endowment contract". If you
are contemplating a reduction in face amount, you should consult your tax
advisor regarding the tax consequences of the transaction. (See "Tax
Considerations".)
INVESTMENT OPTIONS
You may allocate your Policy's premiums among the sub-accounts of the Variable
Account and the Fixed Account in any combination, provided that allocations can
be made to a maximum of nine accounts (including the Fixed Account) at any time.
A minimum of 10% of the premium must be allocated to each sub-account selected.
Percentages allocated must be in whole numbers. Your Policy's cash value may be
distributed among no more than nine accounts (including the Fixed Account) at
any one time.
You make the initial allocation when you apply for a Policy. You may change
the allocation of future premiums at any time thereafter. The change will be
effective for premiums applied on or after the date when NELICO receives your
request. You may request the change by telephone or by written request in a form
satisfactory to NELICO. (See "Receipt of Communications and Payments at NELICO's
Home Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
TRANSFER OPTION
After the Right to Return the Policy period, you may transfer your Policy's
cash value between sub-accounts up to four times in a policy year (twelve times
per policy year for Policies issued in New York) without NELICO's consent.
NELICO currently allows 12 sub-account transfers per policy year under all
Policies. Transfers out of the Fixed Account are not counted against this limit.
All sub-account transfer requests made at the same time will be treated as a
single request. The transfer will be effective as of the date when NELICO
receives the transfer request at its Home Office. (See "Receipt of
Communications and Payments at NELICO's Home Office".) For special rules
regarding transfers involving the Fixed Account, see "The Fixed Account". Your
Policy's cash value may be distributed among no more than nine accounts
(including the Fixed Account) at any one time.
You may request a sub-account transfer or reallocation of future premiums by
written request (which may be telecopied) to NELICO's Home Office or by
telephoning NELICO. To request a transfer or reallocation by telephone, you
should contact your registered representative or contact NELICO at
1-800-200-2214. Requests for transfers (up to NELICO's current limit per policy
year) or reallocations by telephone will be automatically permitted. NELICO will
use reasonable procedures such as requiring certain identifying information from
the caller, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone are genuine. Any telephone instructions reasonably
believed by NELICO to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. As a result of
this policy, you will bear the risk of loss. If NELICO does not employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, it may be liable for any losses due to unauthorized or fraudulent
instructions.
A-29
<PAGE>
PAYMENT OF PROCEEDS
NELICO will ordinarily pay any net cash value, loan value or death benefit
proceeds payable from the sub-accounts within seven days after receipt at the
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) at any other time when the Eligible Funds or the Variable
Account have the legal right to suspend payment. NELICO may withhold payment of
surrender or loan proceeds to the extent that those proceeds are derived from a
Policy Owner's check, or from a Master Service Account premium transaction,
which has not yet cleared. In those cases, NELICO will process the surrender or
loan to the extent of policy values for which the Policy Owner has made full
payment. The balance of the surrender or loan proceeds will be paid when the
Policy Owner's check, or the Master Service Account premium transaction, has
cleared. NELICO may also delay payment if it considers whether to contest the
Policy. NELICO will pay interest on the death benefit proceeds from the date
they become payable to the date they are paid in one sum or, if a payment option
was selected, to the effective date of the option. (See "Payment Options".)
Death benefit proceeds may be paid pursuant to NELICO's Access Plus program.
If the Access Plus program is elected, an Access Plus account will be
established at State Street Bank & Trust Company at the time that death benefit
proceeds are payable. The Access Plus account provides convenient access to
proceeds, which are maintained in MetLife's general account, through checkbook
privileges with State Street. A beneficiary may elect to have death benefit
proceeds paid through the Access Plus program at any time prior to the payment
of death benefit proceeds.
Payments of net cash value, or of any loan value available, from cash value in
the Fixed Account will normally be paid promptly. However, NELICO has the right
to delay such payments for up to six months from the date of the request (to the
extent allowed by state insurance law). NELICO will pay interest in accordance
with state insurance law requirements on payments that are delayed.
EXCHANGE OF POLICY DURING FIRST 24 MONTHS
During the first 24 months after the issue date of the Policy, if the Policy
has not lapsed, you may exchange it for a comparable fixed-benefit traditional
survivorship life insurance policy issued by NELICO or MetLife, as described
below. This exchange is available to a surviving insured. If you exercise this
option, you will have to make up any investment loss you had under the variable
life insurance policy.
The exchange will be made without evidence of insurability. The new policy
will have the same face amount (or the same net amount at risk) as the original
Policy on the date of the exchange, the same policy date as the original Policy,
the same issue ages as of the Policy Date of the original Policy and risk
classifications based on the actual underwriting classes to which each insured
was assigned by NELICO on the date of issue of the original Policy. For Policies
issued in New York, you have the option of exchanging for a new, fixed-benefit
traditional survivorship policy with a face amount equal to the current death
benefit of the exchanged variable life policy. Premiums for the new policy will
be based on the premium rates for comparable fixed-benefit traditional
survivorship life insurance policies issued by NELICO or MetLife which were in
effect on the Policy Date of the original Policy. Any riders to the original
Policy will be attached to the new policy if they are available.
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.
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<PAGE>
The exchange will be effective on the date when NELICO receives written notice
at its Home Office in a form satisfactory to NELICO, the Policy and payment to
NELICO of any cost to exchange. (See "Receipt of Communications and Payments at
NELICO's Home Office".) The cost to exchange will reflect any differences in
premiums and cash values between the two policies. Any Policy loan outstanding
must be repaid on or before the effective date of the exchange.
POLICY SPLIT RIDER
Subject to state availability, a split rider may be added to the Policy which
allows the Policy Owner to "split" the Policy into two new individual flexible
premium adjustable variable life insurance policies issued by NELICO. The rider
permits the Policy to be split at the request of the Policy Owner in the event
of divorce of the insureds, if certain federal tax law changes occur, or if
certain business circumstances change (each, a "split event"). The rider sets
forth the specific conditions that must be met in order for a split event to be
deemed to have occurred. If the split rider is exercised, this Policy will be
canceled, and its cash value will be transferred (in equal portions, unless
otherwise requested) to two new individual policies issued on the effective date
of the split. A Surrender Charge will apply to each individual policy in
accordance with such Policy's terms. Each new policy will be issued with either
a level or variable death benefit option in effect, depending on which type of
death benefit option is in effect under this Policy at the time the split rider
is exercised.
For more information about the policy split rider and the conditions and rules
relating to the exercise of any rights under the split rider, you should contact
your registered representative or NELICO. You can also request a prospectus and
additional information regarding the individual policies to be issued upon
exercise of the split rider. For a discussion of the possible tax consequences
of splitting the Policy, see "Tax Considerations."
PAYMENT OPTIONS
The Policy's death benefit and net cash value will be paid in one sum, unless
the Policy Owner or payee chooses to put all or part of the proceeds under a
payment option. You can choose a combination of payment options. The selection
of a payment option and the naming of a payee must be in written form
satisfactory to NELICO. You can make, change or revoke the selection before the
last death under the Policy. The payment options available are fixed benefit
options only, therefore, proceeds applied to an option will no longer be
affected by the investment experience of the Variable Account. The guaranteed
mortality assumptions used in determining payment levels under the options will
not vary based on sex. (For Policies issued in New York and Oregon, however, and
which are not issued for use in connection with certain employee benefit plans
and fringe benefit programs, the mortality assumptions will vary based on sex.
See "Group or Sponsored Arrangements".) Once payments under an option begin,
withdrawal rights may be restricted.
The following payment options are available:
(i) INCOME FOR A SPECIFIED NUMBER OF YEARS. Proceeds are paid in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.5% a year, compounded yearly. Additional interest paid by
NELICO for any year will be added to the monthly payments for that year.
(ii) LIFE INCOME. Proceeds are paid in equal monthly installments (i) during
the life of the payee, (ii) for the longer of the life of the payee or
10 years, or (iii) for the longer of the life of the payee or 20 years.
(iii) LIFE INCOME WITH REFUND. Proceeds are paid in equal monthly installments
during the life of the payee. At the payee's death, any unpaid proceeds
remaining are paid either in one sum or in equal monthly installments
until the total proceeds have been paid.
(iv) INTEREST. Proceeds are held for the life of the payee or another agreed
upon period. Interest of at least 3.5% a year is paid monthly or added
to the principal annually. At the death of the payee, or at the end of
the period agreed to, the balance of principal and any interest will be
paid in one sum.
(v) SPECIFIED AMOUNT OF INCOME. Proceeds plus accrued interest of at least
3.5% a year are paid in an amount and at a frequency elected until total
proceeds have been paid. Any amounts unpaid at the death of the payee
will be paid in one sum.
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<PAGE>
(vi) LIFE INCOME FOR TWO LIVES. Proceeds will be paid in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the surviving payee or 10 years, or (iii) while the two payees
are living and, after the death of one payee, two-thirds of the monthly
amount for the life of the surviving payee will be paid.
NELICO's consent to use of an option is required if the installment payments
would be less than $20.
ADDITIONAL BENEFITS BY RIDER
A Policy can include additional benefits provided by rider to the Policy,
subject to NELICO's underwriting and issuance standards. These additional
benefits usually require an additional charge as part of the Monthly Deduction
from cash value. The rider benefits available with the Policies provide fixed
benefits that do not vary with the investment experience of the Variable
Account.
There may be circumstances in which it will be to your economic advantage to
include a significant portion or percentage of your insurance coverage under a
term rider. In many other circumstances, it may be in your interest to obtain a
Policy without term rider coverage. These circumstances depend on many factors,
including the premium levels and amount and duration of coverage you choose, as
well as the ages, sexes and risk classifications of the insureds.
Reductions in or elimination of term rider coverage does not trigger the
imposition of a surrender charge, and use of a term rider generally reduces
sales compensation. Your registered representative can provide you more
information on the uses of term rider coverage.
The following riders are available:
TERM RIDER--JOINT LIFE TERM INSURANCE TO AGE 100, which provides joint life
term insurance.
TERM RIDER--JOINT 4 YEAR TERM INSURANCE, which provides joint life term
insurance for four policy years.
TERM RIDER--LEVEL SINGLE LIFE TERM INSURANCE, which provides additional
term insurance on one of the insureds.
TERM RIDER--DECREASING SINGLE LIFE TERM INSURANCE, which provides
additional term insurance on one of the insureds in an amount that decreases
each year to zero over a coverage period of 10, 15 or 20 years.
WAIVER OF MONTHLY DEDUCTION, which provides for waiver of Monthly
Deductions upon the disability of the insured covered by the waiver.
BENEFITS FOR DISABILITY OF COVERED INSUREDS, which provides for waiver of
the cost of the rider itself and for a premium benefit upon the disability of
an insured covered by the rider.
An extended maturity endorsement and/or a Policy split rider may also be
available. (See "Extending the Maturity Date" and "Policy Split Rider".) Not all
riders may be available to you and riders in addition to those listed above may
be made available. You should consult your registered representative regarding
the availability of particular riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time to
time. At the death of the Policy Owner, his or her estate will become the Policy
Owner unless a successor Policy Owner has been named. The Policy Owner's rights
(except for rights to payment of benefits) terminate at the death of the second
insured.
The beneficiary is also named in the application. The beneficiary of the
Policy may be changed at any time before the death of the second insured. The
beneficiary has no rights under the Policy until the death of the second insured
and must survive the second insured in order to receive the death proceeds. If
no named beneficiary survives the second insured, the proceeds will be paid to
the Policy Owner.
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<PAGE>
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.)
THE VARIABLE ACCOUNT
The Variable Account was established as a separate investment account of
NELICO on January 31, 1983 under Delaware law and became subject to
Massachusetts law when NELICO changed its domicile to Massachusetts on August
30, 1996. The Variable Account is the funding vehicle for other NELICO variable
life insurance policies in addition to the Policies. The Variable Account meets
the definition of a "separate account" under Federal securities laws. The
Variable Account is registered with the Securities and Exchange Commission (the
"SEC") as a unit investment trust under the Investment Company Act of 1940.
Registration with the SEC does not involve supervision by the SEC of management
or investment practices or policies of the Variable Account. However, both
NELICO and the Variable Account are subject to regulation by the Massachusetts
Insurance Commissioner and to the insurance laws and regulations in every
jurisdiction where the Policies are sold.
Although the assets of the Variable Account are owned by NELICO, applicable
law provides that the portion of the Variable Account assets equal to the
reserves and other liabilities of the Variable Account may not be charged with
liabilities that arise out of any other business NELICO may conduct. NELICO
believes this means that the assets of the Variable Account equal to the
reserves and other liabilities of the Variable Account are not available to meet
the claims of NELICO's general creditors, and may only be used to support the
cash values under its variable life insurance policies issued by the Variable
Account. But NELICO may transfer to its general account assets which exceed the
reserves and other liabilities of the Variable Account. Before making any such
transfer, NELICO will consider any possible adverse impact the transfer might
have on the Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of NELICO's
other income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 16 sub-accounts, each of which invests in a
series of an Eligible Fund. The sub-accounts of the Variable Account are:
-- The Zenith Money Market Sub-Account, which invests in the Back Bay Advisors
Money Market Series of the Zenith Fund
-- The Zenith Bond Income Sub-Account, which invests in the Back Bay Advisors
Bond Income Series of the Zenith Fund
-- The Zenith Capital Growth Sub-Account, which invests in the Capital Growth
Series of the Zenith Fund
-- The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
-- The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
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<PAGE>
-- The Zenith Growth and Income Sub-Account, which invests in the Westpeak
Growth and Income Series of the Zenith Fund
-- The Zenith Avanti Growth Sub-Account, which invests in the Loomis Sayles
Avanti Growth Series of the Zenith Fund
-- The Zenith Small Cap Sub-Account, which invests in the Loomis Sayles Small
Cap Series of the Zenith Fund
-- The Zenith Equity Growth Sub-Account, which invests in the Alger Equity
Growth Series of the Zenith Fund
-- The Zenith Balanced Sub-Account, which invests in the Loomis Sayles
Balanced Series of the Zenith Fund
-- The Zenith Venture Value Sub-Account, which invests in the Davis Venture
Value Series of the Zenith Fund
-- The Zenith International Magnum Equity Sub-Account, which invests in the
Morgan Stanley International Magnum Equity Series of the Zenith Fund
-- The Equity-Income Sub-Account, which invests in the Equity-Income Portfolio
of the VIP Fund
-- The Overseas Sub-Account, which invests in the Overseas Portfolio of the
VIP Fund
-- The High Income Sub-Account, which invests in the High Income Portfolio of
the VIP Fund
-- The Asset Manager Sub-Account, which invests in the Asset Manager Portfolio
of VIP Fund II
The Zenith Fund is an open-end diversified management investment company, more
commonly known as a mutual fund. The Zenith Fund was established as an
investment vehicle for separate investment accounts of NELICO and of other life
insurance companies. Currently the Zenith Fund is the funding vehicle for the
Variable Account and for certain separate accounts of NELICO and MetLife that
issue variable annuity contracts.
The VIP Fund and VIP Fund II are open-end, diversified management investment
companies (mutual funds) that serve as the investment vehicles for variable life
insurance and variable annuity separate accounts of various insurance companies.
The VIP Fund and VIP Fund II were organized by Fidelity Management & Research
Company.
Shares of the Eligible Funds are purchased and sold by the Variable Account at
their net asset value (without a deduction for sales load) determined as of the
close of regular trading on the New York Stock Exchange on each day when the
exchange is open for trading.
The investment objectives of the Eligible Funds' portfolios are described
briefly below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, including their investment
objectives and policies, expenses, and risks of investing in the Eligible Funds,
is contained in the attached Eligible Fund prospectuses, as well as in the
Zenith Fund's Statement of Additional Information, which is referenced in the
Zenith Fund prospectus, and in the Statement of Additional Information for the
VIP Fund and VIP Fund II, which is referenced in those Funds' prospectus.
The Zenith Back Bay Advisors Money Market Series' investment objective is the
highest possible level of current income consistent with preservation of capital
through investment in a managed portfolio of high quality money market
instruments. Money market funds are neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Series will maintain a stable
net asset value of $100 per share.
The Zenith Back Bay Advisors Bond Income Series' investment objective is to
provide a high level of current income consistent with protection of capital and
moderate investment risk through investment primarily in U.S. Government and
corporate bonds.
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<PAGE>
The Zenith Capital Growth Series' investment objective is long-term growth of
capital through investment primarily in equity securities of companies whose
earnings are expected to grow at a faster rate than the U.S. economy.
The Zenith Westpeak Stock Index Series' investment objective is to provide
investment results that correspond to the composite price and yield performance
of United States publicly traded common stocks. The Series currently seeks to
achieve its objective by attempting to duplicate the composite price and yield
performance of the Standard & Poor's 500 Composite Stock Price Index.
The Zenith Back Bay Advisors Managed Series' investment objective is to
provide a favorable total investment return through investment in a diversified
portfolio of common stocks and fixed income securities.
The Zenith Westpeak Growth and Income Series' investment objective is
long-term total return (capital appreciation and dividend income) through
investment in equity securities. Emphasis will be given to both undervalued
securities ("value" style) and securities of companies with growth potential
("growth" style).
The Zenith Loomis Sayles Avanti Growth Series' investment objective is
long-term growth of capital. The Series normally will invest primarily in equity
securities of companies with medium and large capitalization (capitalization of
$1 billion to $5 billion and over $5 billion, respectively), but will also
invest a portion of its assets in equity securities of companies with relatively
small market capitalization (under $1 billion).
The Zenith Loomis Sayles Small Cap Series' investment objective is long-term
capital growth from investments in common stocks or their equivalent. The Series
invests primarily in stocks of small cap companies with good earnings growth
potential that Loomis Sayles believes are undervalued by the market. Typically,
such companies have market capitalization of less than $1 billion, have better
than average growth rates at below average price/earnings ratios, and have
strong balance sheets and cash flow.
The Zenith Loomis Sayles Balanced Series' investment objective is reasonable
long-term investment return from a combination of long-term capital appreciation
and moderate current income. The Series is "flexibly managed" in that sometimes
it invests more heavily in equity securities and at other times it invests more
heavily in fixed-income securities. The series invests at least 25% of its
assets in fixed income senior securities and, under normal market conditions,
more than 50% of its assets in common stocks.
The Zenith Morgan Stanley International Magnum Equity Series' investment
objective is long-term capital appreciation through investment primarily in
equity securities of non-U.S. issuers, in accordance with the EAFE country
weightings determined by the Series' sub-adviser. Under normal circumstances at
least 65% of the total assets of the Series will be invested in equity
securities of issuers in at least three countries outside the United States.
The Zenith Davis Venture Value Series' investment objective is growth of
capital. The Series will primarily invest in domestic common stocks that the
Series' subadviser believes have capital growth potential due to factors such as
undervalued assets or earnings potential, product development and demand,
favorable operating ratios, resources for expansion, management abilities,
reasonableness of market price, and favorable overall business prospects. The
Series will generally invest predominantly in equity securities of companies
with market capitalizations of at least $250 million.
The Zenith Alger Equity Growth Series' investment objective is to seek
long-term capital appreciation. The Series' assets will be invested primarily in
a diversified, actively managed portfolio of equity securities, primarily of
companies having a total market capitalization of $1 billion or greater.
The VIP Fund Equity-Income Portfolio's investment objective is to seek
reasonable income by investing primarily in income-producing equity securities.
In choosing these securities, the Equity-Income Portfolio will also consider the
potential for capital appreciation.
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<PAGE>
The VIP Fund Overseas Portfolio's investment objective is long-term growth of
capital primarily through investments in foreign securities. Foreign investments
involve greater risks than U.S. investments, including political and economic
risks and the risks of currency fluctuation.
The VIP Fund High Income Portfolio's investment objective is to obtain a high
level of current income by investing primarily in high-yielding, lower-rated,
fixed-income securities, while also considering growth of capital.
High-yielding, lower-rated debt securities present higher risks of untimely
interest and principal payments, default and price volatility than higher-rated
securities, and may present problems of liquidity and valuation.
The VIP Fund II Asset Manager Portfolio's investment objective is to seek high
total return with reduced risk over the long-term by allocating its assets among
domestic and foreign stocks, bonds and short-term fixed-income instruments.
The basic objective of the Policy is to provide benefits which increase in
value when the investment experience of the Policy's sub-accounts is favorable.
Historically, the investment performance of common stocks over the long term has
generally been superior to that of long or short term debt securities, although
common stocks have been subject to more dramatic changes in value over short
periods of time. The Zenith Capital Growth, Zenith Avanti Growth, Zenith Equity
Growth, Zenith Venture Value, Zenith Growth and Income, Zenith Stock Index,
Zenith International Magnum Equity or Zenith Small Cap Sub-Accounts, or the
Equity-Income or Overseas Sub-Accounts, or some combination of these
sub-accounts, may, therefore, be a more desirable selection for Policy Owners
who have a long term time horizon and/or are willing to accept such risks of
short term fluctuations in value. For a demonstration of certain of these market
trends, see Appendix C: Long Term Market Trends. Historically, the investment
performance of "small cap" stocks over the long term has generally been superior
to stocks of large capitalization companies, although "small cap" stocks have
been substantially more volatile than "large cap" stocks. Historically, having a
small percentage of a portfolio invested in overseas stocks and the rest in
domestic stocks has produced a portfolio that has less, although still
substantial, volatility than a completely domestic portfolio. Equity investors
should recognize that overseas and "small cap" funds taken alone traditionally
involve more risk than most domestic stock funds.
The performance of the various financial markets over shorter periods of time
has sometimes differed from their long term historical results. Short term
interest rates were very high in the late 1970's and early 1980's, but are now
lower. Long term bond values continue to fluctuate and could lose value if
interest rates rise. Common stock prices, which have risen substantially at
times, have also had periods of significant negative returns. Policy Owners who
seek somewhat greater protection against loss of principal in the short term
than that afforded by a stock fund may prefer the High Income Sub-Account or the
Zenith Bond Income Sub-Account. However, because the High Income Portfolio
invests in higher yielding, lower rated and unrated fixed income securities
(including bonds commonly referred to as "junk" bonds), it has a higher degree
of risk associated with it relative to more conservative fixed income funds.
Those who seek even greater safety of principal may select the Zenith Money
Market Sub-Account, although it is subject to possible rapid changes in short
term interest rates. Those who primarily seek safety of principal should
consider fixed life insurance as an alternative to variable life insurance.
NELICO guarantees the principal invested in the Fixed Account, although this
guarantee is subject to NELICO's claims paying ability.
You may wish to consider diversifying your investments by allocating the
Policy's cash value among two or more sub-accounts.
Policy Owners may also diversify by selecting the Zenith Managed Sub-Account,
Zenith Balanced Sub-Account or the Asset Manager Sub-Account, since each
generally invests its assets at most times in a combination of bonds, stocks and
short term instruments, in varying proportions depending upon the investment
adviser's evaluation of the economy and financial markets. The Asset Manager
Portfolio has the ability to invest its stock portfolio more aggressively than
the Back Bay Advisors Managed Series. You may also wish to diversify your cash
value by country. The Overseas Sub-Account and Zenith International Magnum
Equity Sub-Account allow you to participate primarily in companies and economies
outside the United States.
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<PAGE>
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types of
investments you have and your own assessment of future economic and financial
market conditions.
INVESTMENT MANAGEMENT
The adviser and sub-adviser for each series of the Zenith Fund are listed in
the chart below. TNE Advisers, which is an indirect, wholly-owned subsidiary of
NELICO, CGM, and each of the sub-advisers are registered with the SEC as
investment advisers under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ---------------------- ----------------------------
<S> <C> <C>
Capital Growth Capital Growth
Management
Limited Partnership
("CGM")*
Back Bay Advisors Money TNE Advisers, Inc. Back Bay Advisors, L.P.*
Market
Back Bay Advisors Bond TNE Advisers, Inc. Back Bay Advisors, L.P.*
Income
Back Bay Advisors TNE Advisers, Inc. Back Bay Advisors, L.P.*
Managed
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors,
L.P.*
Westpeak Growth and TNE Advisers, Inc. Westpeak Investment Advisors,
Income L.P.*
Loomis Sayles Avanti TNE Advisers, Inc. Loomis, Sayles & Company,
Growth L.P.*
Loomis Sayles Small Cap TNE Advisers, Inc. Loomis, Sayles & Company,
L.P.*
Loomis Sayles Balanced TNE Advisers, Inc. Loomis, Sayles & Company,
L.P.*
Morgan Stanley TNE Advisers, Inc. Morgan Stanley Asset
International Magnum Management Inc.
Equity
Davis Venture Value TNE Advisers, Inc. Davis Selected Advisers, L.P.
Alger Equity Growth TNE Advisers, Inc. Fred Alger Management, Inc.
</TABLE>
- ---------
* An affiliate of NELICO
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak Growth and Income Series, Loomis Sayles Avanti Growth Series
and Loomis Sayles Small Cap Series, TNE Advisers became the adviser on May 1,
1995. Prior to that date those series were advised by their current sub-adviser,
except as follows. The New England served as investment adviser to the Back Bay
Advisors Money Market and Back Bay Advisors Bond Income Series until September
10, 1986 when Back Bay Advisors assumed The New England's responsibilities under
the investment advisory agreements with those Series. Back Bay Advisors served
as investment adviser to the Westpeak Stock Index Series until August 2, 1993,
when Westpeak became the investment adviser. The Capital Growth Series was
managed by Loomis, Sayles until March 1, 1990, when its Capital Growth
Management Division was reorganized into CGM. The Morgan Stanley International
Magnum Equity Series' sub-adviser was Draycott Partners until May 1, 1997, when
Morgan Stanley Asset Management became the sub-adviser. For more information
about the Series' advisory agreements, see the Zenith Fund prospectus attached
at the end of this prospectus and the Zenith Fund's Statement of Additional
Information.
Fidelity Management & Research Company, the investment adviser for the VIP
Fund and VIP Fund II, is the original Fidelity company and was founded in 1946.
It provides a number of mutual funds and other clients with investment research
and portfolio management services. It maintains a large staff of experienced
investment personnel and a full complement of related support facilities. For
more information regarding the Equity-Income, Overseas, High Income and Asset
Manager Portfolios and Fidelity Management & Research Company, see the VIP Fund
and VIP Fund II prospectus attached at the end of this prospectus and their
Statement of Additional Information.
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<PAGE>
THE FIXED ACCOUNT
A FIXED ACCOUNT OPTION IS AVAILABLE UNDER THE POLICY IN STATES WHERE IT HAS
BEEN APPROVED BY THE STATE INSURANCE DEPARTMENT. THE FIXED ACCOUNT MAY NOT BE
APPROVED BY EVERY STATE INSURANCE DEPARTMENT AND THEREFORE IT MAY NOT BE
AVAILABLE IN EVERY STATE.
You may allocate net premiums for your Policy, and may transfer your Policy's
cash value, to the Fixed Account, which is part of NELICO's general account.
Because of exemptive and exclusionary provisions in the Federal securities laws,
interests in the Fixed Account have not been registered under the Securities Act
of 1933, and neither the Fixed Account nor the general account has been
registered as an investment company under the Investment Company Act of 1940.
Therefore, neither the Fixed Account, the general account nor any interests
therein are generally subject to the provisions of these Acts, and NELICO has
been advised that the staff of the SEC does not review disclosures relating to
the general account. Disclosures regarding the Fixed Account may, however, be
subject to certain generally applicable provisions of the Federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
GENERAL DESCRIPTION
NELICO's general account includes all the assets owned by NELICO, other than
the assets in the Variable Account or in any other separate accounts that NELICO
may establish. NELICO has sole discretion over the investment of assets in the
general account, including the Fixed Account. Policy Owners who allocate cash
value to the Fixed Account will not share in the actual investment experience of
the Fixed Account. Instead, NELICO guarantees that cash values in the Fixed
Account will earn interest at an annual rate of at least 4%. NELICO may from
time to time credit interest at a higher rate than 4%, but it is under no
obligation to do so. NELICO declares the current interest rate for the Fixed
Account periodically. Your Policy cash values that are in the Fixed Account will
earn interest daily.
NELICO may vary the way in which it credits interest in the Fixed Account from
time to time. The following is a description of NELICO's current method for
crediting interest to cash value in the Fixed Account. All of your Policy's cash
value in the Fixed Account on a Policy anniversary will earn interest at the
declared annual rate in effect on the anniversary. It will earn interest at this
rate until the next Policy anniversary, when it will be credited with the
current rate declared by NELICO. (Although NELICO's current practice is to
credit your entire Fixed Account cash value on a Policy anniversary with the
most recently declared annual rate until the next anniversary, NELICO can select
any portion, from 0% to 100%, of your Fixed Account cash value on a Policy
anniversary to earn interest at the most recently declared rate until the next
Policy anniversary, unless otherwise required by state law.) Any net premiums
allocated or any portion of your Policy's cash value transferred to the Fixed
Account on a date other than a Policy anniversary will earn interest at NELICO's
most recently declared rate until the next Policy anniversary. The effective
interest rate credited at any time to your cash value in the Fixed Account will
be a weighted average of all the Fixed Account rates for your Policy.
VALUES AND BENEFITS
The Policy's cash value in the Fixed Account reflects the net premiums
allocated to the Fixed Account, net interest credited to cash value in the Fixed
Account, any loans, partial surrenders made from the Fixed Account cash value,
charges deducted, and any transfers of cash value to or from the Variable
Account. Charges will be deducted from the Policy's cash value in the Fixed
Account and in the Policy's sub-accounts in proportion to the amount of the
Policy's cash value in each. (See "Monthly Deduction from Cash Value".) A
Policy's total cash value will include its cash value in the Variable Account,
its cash value in the Fixed Account, and any of its cash value held in NELICO's
general account (but outside of the Fixed Account) as a result of a Policy loan.
The amount of the Policy's cash value in the Fixed Account will be taken into
account in the calculation of the Policy's death benefit in the same manner as
the cash value in the Variable Account. (See "Death Benefit".)
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<PAGE>
POLICY TRANSACTIONS
NELICO reserves the right to restrict allocations to the Fixed Account if the
effective annual rate of interest that would apply to the amount allocated is
4%. Otherwise, allocations of net premiums to the Fixed Account are subject to
the same percentage requirements that apply to the Variable Account. (See
"Allocation of Net Premiums".)
Except as described below, amounts in the Fixed Account are subject to the
same rights and limitations regarding transfers, loans, surrenders and partial
surrenders that apply to amounts in the Variable Account. (See "Other Policy
Features".) The following special rules apply to transactions involving amounts
in the Fixed Account.
TRANSFERS OF AMOUNTS FROM THE FIXED ACCOUNT TO THE VARIABLE ACCOUNT WILL BE
ALLOWED ONLY ONCE IN EACH POLICY YEAR. A TRANSFER OF CASH VALUE FROM THE FIXED
ACCOUNT WILL BE PROCESSED IF NELICO RECEIVES THE TRANSFER REQUEST NO MORE THAN
30 DAYS BEFORE THE POLICY ANNIVERSARY, AND THE TRANSFER WILL BE EFFECTED AS OF
THE DATE THE TRANSFER REQUEST IS RECEIVED AT NELICO'S HOME OFFICE; HOWEVER, YOU
MAY REQUEST A TRANSFER FROM THE FIXED ACCOUNT WITHIN 30 DAYS AFTER A POLICY
-----
ANNIVERSARY IF YOU HAVE NOT REQUESTED SUCH A TRANSFER IN THE 30 DAY PERIOD
BEFORE THE ANNIVERSARY. THE AMOUNT OF CASH VALUE WHICH MAY BE TRANSFERRED FROM
THE FIXED ACCOUNT IS LIMITED TO THE GREATER OF 25% OF THE POLICY'S CASH VALUE IN
THE FIXED ACCOUNT ON THE TRANSFER DATE OR THE AMOUNT OF CASH VALUE TRANSFERRED
FROM THE FIXED ACCOUNT IN THE PRECEDING POLICY YEAR. Regardless of these limits,
if a transfer of cash value from the Fixed Account would reduce the remaining
cash value in the Fixed Account below $100, you may transfer the entire amount
of cash value from the Fixed Account. The total number of transfers among
sub-accounts and from the sub-accounts to the Fixed Account may not exceed four
in one Policy year without NELICO's consent. NELICO currently allows 12 such
transfers per Policy year. Transfers out of the Fixed Account will not be
counted against this limit. NELICO reserves the right to restrict transfers of
cash value into the Fixed Account, if the effective annual rate of interest that
would apply to the amount transferred is 4%.
Unless you request otherwise, a Policy loan will reduce the Policy's cash
value in the sub-accounts and not the cash value in the Fixed Account. If there
is not enough cash value in the Policy's sub-accounts to provide the amount of
the loan, however, the balance of the loan will be taken from the cash value in
the Fixed Account. All loan repayments will be allocated first to the
outstanding loan balance attributable to the Fixed Account. The amount removed
from the Policy's sub-accounts and the Fixed Account as a result of a loan will
earn interest at not less than 4% per year, which will be credited annually to
the Policy's cash value in the sub-accounts and the Fixed Account in proportion
to the Policy's cash value in each on the day it is credited.
Unless you request otherwise, partial surrenders will be taken only from the
Policy's sub-accounts and not the Fixed Account. If there is not enough cash
value in the Policy's sub-accounts to provide the full amount requested, the
balance of the partial surrender will be taken from the Fixed Account.
NELICO has the right to delay transfers, surrenders, and Policy loans from the
Fixed Account for up to six months (to the extent allowed by state insurance
law). Loans to pay premiums on policies issued by NELICO will not be delayed.
NELICO'S DISTRIBUTION AGREEMENT
NELICO sells the Policies through agents who are licensed by state insurance
officials to sell NELICO's variable life insurance policies. These agents are
also registered representatives of New England Securities Corporation ("New
England Securities"). New England Securities, a Massachusetts corporation
organized in 1968 and an indirect, wholly-owned subsidiary of NELICO, is
registered with the SEC as a broker-dealer under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc.
New England Securities, whose principal business address is 399 Boylston
Street, Boston, Massachusetts 02116, serves as the principal underwriter for the
Policies under a Distribution Agreement between NELICO and New England
Securities.
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<PAGE>
Under the Distribution Agreement, NELICO pays the following sales expenses:
general agent and agency manager's compensation, agents' training allowances,
deferred compensation and insurance benefits of agents, general agents and
agency managers and advertising expenses and all other expenses of distributing
the Policies.
NELICO pays the following commissions and/or service fees to the selling
agent: a maximum of 50% of the Benchmark Premium (plus any additional portion of
a premium which NELICO attributes to certain riders for commission paying
purposes) paid in the first Policy year; 5% in Policy years two through ten and
4% thereafter. Agents receive a commission of 3% of each payment in excess of
the Benchmark Premium (plus any additional portion of a premium which NELICO
attributes to certain riders for commission paying purposes) in any year. Agents
who meet certain productivity and persistency standards in selling policies
issued by NELICO may be eligible for additional compensation. Non-cash forms of
compensation may also be paid. Sales expenses in any year are not equal to the
deduction for sales load in that year.
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. It is the principal underwriter for the
Zenith Fund; The New England Variable Account; New England Retirement Investment
Account; New England Variable Annuity Separate Account; and New England Variable
Annuity Fund I. New England Securities also sells interests in various
investment partnerships.
New England Securities may enter into selling agreements with other
broker-dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life insurance
policies. Under the agreements with those broker-dealers, the commission paid to
the broker-dealer will not exceed 50% of the Benchmark Premium (plus any
additional portion of a premium which NELICO attributes to certain riders for
commission paying purposes) in the first Policy year, 5% in the second through
tenth Policy years, 4% thereafter, and 3% of all payments in excess of the
Benchmark Premium (plus any additional portion of a premium which NELICO
attributes to certain riders for commission paying purposes) in any year.
Commissions will be paid through the registered broker-dealer, which may also be
reimbursed for portions of expenses incurred in connection with the sale of the
Policies.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
NOTIFICATION OF FIRST DEATH
Generally, NELICO can challenge the validity of your Policy or a rider to your
Policy during either insured's lifetime for two years (or less, if required by
state law) from the date of issue, based on misrepresentations made in the
application. NELICO can challenge the portion of the death benefit resulting
from payment of an underwritten premium payment for two years (during either
insured's lifetime) from the date the premium payment was received. However, if
either 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
relating to that insured.
NELICO should be notified immediately upon the first death of an insured under
the Policy. Even if premiums continue to be paid after the first death, NELICO
generally has the right to contest the Policy or to limit benefits under the
suicide provision (described below) and terminate the Policy at any time, even
beyond the two-year period, if it was not notified of a death that occurred
during the period of contestability. Policies issued in New York are not
contestable after they have been in force for two years during the life of
either insured.
MISSTATEMENT OF AGE OR SEX
If either insured's age or sex is misstated in the application, the Policy's
death benefit will be the amount that the most recent Monthly Deduction which
was made would have provided, based on the insureds' correct ages and, if the
Policy is sex-based, on the insureds' correct sexes.
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<PAGE>
SUICIDE
If either of the insureds dies by suicide within two years (or less, if
required by state law) from the date of issue set forth in the Policy, the death
benefit will be limited to the amount of the premiums paid, less any policy loan
balance, and less any partial surrenders (or such greater amount required by
state law). The Policy will terminate as of the date of the first death by
suicide.
An eligible insured, if age 75 or younger, can request a new single life
variable life insurance policy, with the same face amount as the original
Policy, within 60 days of the date of the suicide. An eligible insured over age
75 may request a single life ordinary life policy and not a single life variable
life insurance policy. For these purposes an eligible insured is a surviving
insured on whom NELICO would have issued a single life policy on the Policy Date
of the original Policy. The new single life policy is based on the surviving
insured's underwriting class at the time of issue of the original 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 the 24-month exchange
provision.
If the eligible surviving 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 would have been a variable life policy,
assuming all premiums had been allocated to the Fixed Account and that the death
benefit option chosen equals the face amount of the new policy.
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.
Nevertheless, NELICO believes it is reasonable to conclude that the Policy
qualifies as a life insurance contract for federal income tax purposes. This
means that:
. the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
. the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
Because of the absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether a Policy will meet the
statutory life insurance definition, particularly if it is a substandard risk
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.
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<PAGE>
NELICO thus reserves the right to make changes in the Policy if such changes
are deemed necessary to attempt to assure its qualification as a life insurance
contract for tax purposes.
TAX LAW EFFECTS ON CERTAIN PRE-DEATH DISTRIBUTIONS. Section 7702A of the Code
contains provisions affecting the tax treatment of any loan, assignment or other
pre-death distribution from a life insurance policy which is also a "modified
endowment contract" (defined below under "Modified Endowment Contracts").
Whether a Policy will be classified as a modified endowment contract will depend
upon the amount and timing of payments made under the Policy.
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NELICO believes any Policy loans received under such
Policies will be treated as indebtedness of the Policy Owner and will not be
treated as taxable income to you. This assumes that the Policy has not lapsed,
been surrendered or terminated. As a general rule, Policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of your Policy if the
net cash surrender value of the Policy is greater than the investment in the
Policy less prior distributions from the Policy that were not taxed. If a Policy
has a Policy loan and is surrendered or lapses, the Policy loan is treated as a
distribution and would be taxable if there is a gain in the Policy. In that
case, the gain in the Policy would be taxable even if the Policy has no net cash
surrender value. If you incur a loss upon the surrender it is not likely to be
deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you unless
it is greater than the investment in the Policy less the untaxed portions of any
prior distributions. The Code does provide, however, that in certain situations
in the first 15 years of the Policy partial surrenders may be taxable, in whole
or in part, if the cash value is greater than the total investment in the
Policy. In this case, an amount may be taxable even if the amount of the partial
surrender is less than the investment in the Policy.
MODIFIED ENDOWMENT CONTRACTS. A modified endowment contract is a life
insurance contract which fails to satisfy a "7-pay test". In general, a Policy
will fail to satisfy the 7-pay test if the total amount paid under the Policy at
any time during the first seven Policy years exceeds the sum of the net level
premiums that would have been paid on or before such time if the Policy provided
for paid up future benefits after the payment of seven level annual premiums.
(The amount of premiums payable under the 7-pay test are calculated based upon
certain assumptions regarding the Policy's earnings and the use of a reasonable
mortality charge. Variable Account investment experience does not affect whether
or not a Policy will become a modified endowment contract.) Riders to the Policy
are considered part of the Policy for purposes of applying the 7-pay test. A
joint term rider could cause the Policy to be treated less favorably for
purposes of the 7-pay test. If there is a reduction in the Policy's death
benefit (for example, as a result of a partial surrender or face amount
reduction) at any time during the Policy's existence the 7-pay test will be
applied as if the Policy had originally been issued at the reduced face amount.
Any Policy received in exchange for a modified endowment contract will also be a
modified endowment contract.
Your agent can provide you with information about the maximum amount of
premiums which you can make under your Policy during the first seven Policy
years and still satisfy the 7-pay test. This information will be based upon
NELICO's current understanding of the Federal tax law. As is the case with any
provision of the Internal Revenue Code, there is no assurance that the Internal
Revenue Service will agree with NELICO's interpretation. NELICO will monitor any
IRS announcements or rulings concerning compliance with the 7-pay test.
MATERIAL CHANGES. If a "material change" in the benefits or other Policy terms
occurs under a Policy which has satisfied the 7-pay test, the Policy may be
treated as a new Policy entered into on the day on which the material change
occurred. The Policy will be retested under the 7-pay test, after making certain
adjustments to reflect the Policy's existing cash value. Any increase in future
benefits under the Policy may constitute a material change if the increase is
not due to the payment of premiums necessary to fund the Policy's lowest death
benefit payable in the first seven Policy years, or the crediting of interest or
other earnings with respect to such premiums. A material change would also occur
if certain Policy changes occurred.
A-42
<PAGE>
If you do not wish to have the Policy become a modified endowment contract,
you may be required to limit the payment of premiums under the Policy at some
point (or limit your reduction of benefits). The point at which you may have to
limit the payment of premiums will depend upon the issue age, sex and
underwriting class of the insureds, investment experience and the amount of your
previous payments.
If you exchange your policy for another life insurance policy, including a
fixed-benefit policy pursuant to the 24 month exchange right, the new insurance
policy should be reviewed to determine how the rules regarding modified
endowment contracts may apply to the new policy. (See "Exchange of Policy During
First 24 Months.")
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent the
cash value of the Policy exceeds your investment in the Policy (i.e., will be
treated as income first).
(b) Loans (including any unpaid interest) are considered distributions.
Your investment in the Policy will be increased by the amount of any prior
loan that was included in your gross income.
(c) A Policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the Policy,
the collateral assignment is a distribution which will subject any gain that
accrues in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by NELICO
or its affiliates to the same Policy Owner during any calendar year must be
treated as one modified endowment contract.
Any taxable distribution will be subject to an additional tax equal to 10% of
the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy) or for the
joint lives (or life expectancies) of you and your beneficiary.
If a Policy becomes a modified endowment contract, distributions made during
the Policy year in which it becomes a modified endowment contract, distributions
in any subsequent Policy year and distributions within two years before the
Policy becomes a modified endowment contract will be subject to the tax
treatment described above. This means that a distribution from a Policy that is
not a modified endowment contract could later become taxable as a distribution
from a modified endowment contract. In addition, regulations or other
interpretations may be issued which will apply similar tax treatment to other
distributions made in anticipation of a Policy becoming a modified endowment
contract.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account to
be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy plus the cost of insurance protection for
the year. Regulations specifying the diversification requirements have been
issued by the Department of Treasury, and NELICO believes it complies fully with
such requirements.
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<PAGE>
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of additional
guidance prescribing the circumstances in which an owner's control of the
investments of a separate account may cause a Policy Owner, rather than the
insurance company, to be treated as the owner of the assets in the separate
account. If a Policy Owner is considered the owner of the assets of the Separate
Account, income and gains from the Account would be included in the Owner's
gross income.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the Internal Revenue Service in rulings in
which it determined that the owners were not owners of separate account assets.
For example, a Policy Owner has additional flexibility in allocating payments
and cash values. These differences could result in the owner being treated as
the owner of a pro rata share of the assets of the Separate Account. In
addition, NELICO does not know what standards will be set forth in the
additional guidance which the Treasury has stated it expects to be issued.
NELICO therefore reserves the right to modify the Policy as necessary to attempt
to prevent the Policy Owner from being considered the owner of the assets of the
Separate Account.
In the event that a Policy is owned by the trustee under a pension or profit
sharing plan, or similar deferred compensation arrangement, the Federal, state
and estate tax consequences of ownership or receipt of proceeds under the Policy
could differ from the principles stated herein. However, if ownership of such
Policy is transferred from the plan to a plan participant (upon termination of
employment, for example), the Policy will be subject to all of the rules
described above relating to Federal tax treatment, including the rules regarding
modified endowment contracts. Policies owned by the trustee under the plans
described above may be subject to restrictions under ERISA. You should consult a
qualified tax advisor regarding any applicable requirements of ERISA.
If the Policy is owned as part of a pension or profit-sharing plan qualified
under Section 401 of the Code, the current cost of insurance for the net amount
at risk is treated as a "current fringe benefit" and is required to be included
annually in the plan participant's gross income. This cost (generally referred
to as the "P.S. 58" cost) is reported to the participant annually. If the plan
participant dies while covered by the plan and the Policy proceeds are paid to
the participant's beneficiary, then the excess of the death benefit over the
cash value will not be subject to Federal income tax. However, the cash value
will generally be taxable to the extent it exceeds the participant's cost basis
in the Policy. The participant's cost basis will generally include the costs of
insurance previously reported as income to the participant. Special rules may
apply if the participant had borrowed from his cash value or was an
owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax qualified plan.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, 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, with certain
modifications, as that described above for Policies subject to the Internal
Revenue Code. You should note that Policies governed by the Puerto Rican tax law
are not currently subject to the above-described rules regarding modified
endowment contracts. If such a Policy becomes subject to the Internal Revenue
Code, however, the rules regarding modified endowment contracts will apply, and
they may apply retroactively. You should consult your tax advisor if a Policy
governed by the Puerto Rican tax law subsequently becomes subject to the
Internal Revenue Code.
A-44
<PAGE>
TAX TREATMENT OF POLICY SPLIT. The policy split rider permits a Policy to be
split into two individual contracts, provided certain conditions are met. A
policy split could have adverse tax consequences; for example, it is not clear
whether a policy split will be treated as a nontaxable exchange under Sections
1031 through 1043 of the Code. If the policy split is not treated as a
nontaxable exchange, a split could result in the recognition of taxable income
in an amount up to any gain in the Policy at the time of the split. In addition,
it is not clear whether the individual policies that result from a policy split
would be classified as modified endowment contracts. (See above.) Before the
Policy Owner exercises rights provided by the policy split rider, it is
important that he or she consult with a competent tax advisor regarding the
possible consequences of a policy split.
OTHER TAX CONSIDERATIONS. The transfer of the Policy or designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate, and generation-skipping
transfer taxes. For example, the transfer of the Policy to, or the designation
as a beneficiary of, or the payment of proceeds to, a person who is assigned to
a generation which is two or more generations below the generation assignment of
the Policy Owner, may have Generation Skipping Transfer tax considerations under
Section 2601 of the Code.
The individual situation of each Policy Owner or beneficiary will determine
the extent, if any, to which federal, state, and local transfer taxes may be
imposed. Consult with your tax advisor for specific information in connection
with these taxes.
The particular situation of each Policy Owner or beneficiary will determine
how ownership or receipt of Policy proceeds will be treated for purposes of
federal estate tax as well as state and local estate, inheritance, generation
skipping and other taxes.
CHARGE FOR NELICO'S INCOME TAXES
Under current Federal income tax law no tax is imposed on NELICO as a result
of the operations of the Variable Account. Thus, no charge is being made
currently to the Variable Account for company Federal income taxes, except for
the charge for federal taxes that is deducted from premiums. 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-45
<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
50th Floor Drill
Capital
General Motors
Building
767 Fifth Avenue
New York, NY 10153
Dr. Paul E. Gray . . Director of NELICO since 1996; Chairman of the
MIT Corporation of the Massachusetts Institute of
77 Massachusetts 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 1994. Formerly, Director of The New
Golden Gate Park England 1987-1996; Research Fellow and an Associate of
San Francisco, CA the Graduate School of Education at Harvard University
94118 and a Senior Fellow at The Carnegie Foundation for the
Advancement of Teaching, 1991-1994.
Philip K. Howard,
Esq. . . . . . . . . Director of NELICO since 1996; Partner of the 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.
</TABLE>
A-46
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
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.
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.
David W. Allen . . . Senior Vice President of NELICO since 1996. Formerly,
Senior Vice President 1994-1996; Vice President
1990-1994 of The New England.
James P. Bossert . . Vice President and Controller of NELICO since 1996.
Formerly, Vice President and Controller 1993-1996;
Vice President 1991-1993 of The New England.
Thom A. Faria . . . . President, Career Agency System (a business unit of
NELICO) since 1996. Formerly, Executive Vice President
in 1996; Senior Vice President, 1993-1996; Vice
President, 1986-1993 of The New England.
Chester R. Frost . . Senior Vice President and Treasurer of NELICO since
1996. Formerly, Senior Vice President since 1980 and
Treasurer since 1996 of The New England.
Anne M. Goggin . . . Senior Vice President and Associate General Counsel of
NELICO since 1997. Formerly, Vice President and
Counsel of NELICO in 1996; Vice President and Counsel
1994-1996 and Second Vice President and Counsel
1988-1994 of The New England.
Edward C. Hall . . . President, New England Services (a business unit of
NELICO) since 1996. Formerly, President, New England
Services (a business unit of The New England)
1994-1996, Executive Vice President--Client Services,
1988 to 1994, of The New England.
Daniel D. Jordan . . Second Vice President, Counsel and Secretary of NELICO
since 1996. Formerly, Counsel and Assistant Secretary
of The New England, 1985-1996.
Richard D. Keidan . . Senior Vice President of NELICO since 1996. Formerly,
Vice President of Metropolitan Life 1994-1996 (Chief
Marketing Officer of MetLife Brokerage); Regional
Sales and Marketing Manager of Phoenix Home Life until
1994.
Alan C. Leland, Jr. . Senior Vice President of NELICO since 1996. Formerly,
Vice President of The New England 1984-1996.
</TABLE>
A-47
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
Bruce C. Long . . . . President, New England Annuities (a business unit of
NELICO) since 1996. Formerly, President, New England
Annuities (a business unit of The New England)
1994-1996; Senior Vice President, New England
Annuities in 1994; Vice President, Keyport Life
Insurance 1992-1994; General Director, John Hancock
Insurance 1990-1992.
George J. Maloof . . Senior Vice President of NELICO since 1996. Formerly,
Vice President of The New England 1991-1996.
Eileen T. McCarthy . Senior Vice President of NELICO since 1996. Formerly,
Senior Vice President 1995-1996; Vice President
1989-1995 of The New England.
Thomas W. McConnell . Senior Vice President of NELICO since 1996. Director,
Chief Executive Officer and President of New England
Securities Corporation since 1993. Formerly, National
Sales Manager of Alliance Fund Distributors in 1993;
National Sales Manager of Equitable Capital Securities
1992-1993.
Thomas W. Moore . . . Senior Vice President of NELICO since 1996. Formerly,
Vice President of The New England 1990-1996.
Robert W. Powell . . President, Life Brokerage (a business unit of NELICO)
since 1996. Formerly, Officer-In-Charge of MetLife
Brokerage (a subsidiary of Metropolitan Life Insurance
Company) 1994-1996; Marketing Vice President
1988-1994.
Gregory A. Ross . . . President, TNE Information Services (a business unit of
NELICO) since 1996. Formerly, President, TNE
Information Services (a business unit of The New
England) and Chief Information Officer of The New
England, 1994-1996; Senior Vice President and Chief
Information Officer 1993-1994; Vice President,
1991-1993 of The New England. President of TNE
Information Services, Inc.
Robert E. Schneider . Executive Vice President and Chief Financial Officer of
NELICO since 1996. Formerly, Director, Executive Vice
President and Chief Financial Officer, 1993 to 1996;
Executive Vice President and Chief Financial Officer,
1990-1993, of The New England.
John G. Small, Jr. . Senior Vice President of NELICO since 1996. Formerly,
Senior Vice President of The New England 1990-1996.
Ellen D. Sullivan . . Senior Vice President and Associate General Counsel of
NELICO since 1997. Formerly, Vice President and
Counsel of NELICO in 1996; Vice President and Counsel
1994-1996 and Second Vice President and Counsel
1985-1994 of The New England.
H. James Wilson . . . Executive Vice President and General Counsel of NELICO
since 1996. Formerly, Executive Vice President and
General Counsel of The New England, 1993-1996; Senior
Vice President and General Counsel, 1992 to 1993,
Senior Vice President and Associate General Counsel,
1990 to 1992, of The New England.
John W. Wright . . . President, New England Employee Benefits Group (a
business unit of NELICO) since 1996. Formerly,
President, New England Employee Benefits Group (a
business unit of The New England), 1993-1996; Senior
Vice President of New England Employee Benefits Group,
1989-1993 of The New England.
Frederick K.
Zimmermann . . . . . Executive Vice President and Chief Investment Officer
of NELICO since 1996. Formerly, Executive Vice
President and Chief Investment Officer of The New
England 1993-1996; Senior Vice President--Investments,
1989 to 1993, of The New England.
</TABLE>
The principal business address for each of the directors and executive
officers is the same as NELICO's except where indicated otherwise.
A-48
<PAGE>
VOTING RIGHTS
NELICO is the legal owner of the Eligible Fund shares held in the Variable
Account and has the right to vote those shares at meetings of the Eligible Fund
shareholders. However, to the extent required by applicable Federal securities
law, NELICO will give you, as Policy Owner, the right to instruct NELICO how to
vote the shares that are attributable to your Policy.
The Policy Owners who are entitled to give voting instructions and the number
of shares attributable to their Policies will be determined as of the record
date for the meeting. All Eligible Fund shares held in any sub-account of the
Variable Account, or in any other registered (or to the extent voting privileges
are granted by the issuing insurance company, unregistered) separate account of
NELICO or an affiliate, and for which timely instructions are not received, will
be voted in the same proportion as (i) the aggregate cash value of policies
giving instructions, respectively, to vote, for, against, or withhold votes on a
proposition, bears to (ii) the total cash value in that sub-account for all
policies for which voting instructions are received. No voting privileges apply
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' Boards of Trustees to monitor events to
identify conflicts that may arise from the sale of Eligible Fund shares to
variable life and variable annuity separate accounts of affiliated and, if
applicable, unaffiliated insurance companies. Conflicts could arise as a result
of changes in state insurance law or Federal income tax law, changes in
investment management of any portfolio of the Eligible Funds, or differences in
voting instructions given by variable life and variable annuity contract owners,
for example. If there is a material conflict, the Board of Trustees will have an
obligation to determine what action should be taken, including the removal of
the affected sub-accounts from the Eligible Fund(s), if necessary. If NELICO
believes any Eligible Fund action is insufficient, NELICO will consider taking
other action to protect Policy Owners. There could, however, be unavoidable
delays or interruptions of operations of the Variable Account that NELICO may be
unable to remedy.
If required by state insurance authorities, NELICO may disregard voting
instructions if they would require that shares be voted to cause a change in the
investment objectives of the portfolios of the Eligible Funds or to approve or
disapprove an investment advisory or underwriting contract for a portfolio. In
addition, NELICO may disregard voting instructions in favor of changes,
initiated by a Policy Owner or an Eligible Fund's Board of Trustees, in the
investment policy, investment adviser or principal underwriter of the Eligible
Fund portfolio if NELICO (i) reasonably disapproves of the changes and (ii) in
the case of a change in investment policy or investment adviser, makes a good
faith determination that the proposed change is contrary to state law or is
prohibited by state regulatory authorities or that the change would be
inconsistent with a sub-account's investment objectives or would result in the
purchase of securities which vary from the general quality and nature of
investments and investment techniques utilized by other separate accounts of
NELICO or of an affiliated life insurance company, which separate accounts have
investment objectives similar to those of the sub-account. If NELICO does
disregard voting instructions, a summary of that action and the reasons for it
will be included in the next semiannual report to Policy Owners.
RIGHTS RESERVED BY NELICO
NELICO and its affiliates may change the voting procedures described above,
and may vote Eligible Fund shares in their own right without instructions from
Policy Owners, if the applicable Federal securities laws or regulations or
interpretations of them change. NELICO also reserves the right: (1) to create
new investment accounts; (2) to combine any two or more separate investment
accounts including the Variable Account; (3) to make available additional
sub-accounts of the Variable Account investing in additional Eligible Fund
portfolios or in portfolios of other mutual funds; (4) to invest the assets of
the Variable Account in securities other than Eligible Fund shares or in shares
of a different series of the Eligible Funds as a substitute for such shares
already purchased or as the securities to be purchased in the future, to
withdraw the availability of a series of the Eligible Funds as an investment
option under the Policies, or to transfer assets to NELICO's general account as
permitted by applicable law; (5) to operate the Variable Account as a management
investment company under the Investment Company Act of 1940 or in any other form
permitted by law; and (6) to deregister the Variable Account under the
Investment Company Act of 1940 if registration is no longer required. NELICO
A-49
<PAGE>
will exercise these rights in accordance with applicable law, including approval
of Policy Owners if required. NELICO will notify you if exercise of any of these
rights would result in a material change in the Variable Account or its
investments.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account sub-accounts,
call the toll-free number 1-800-333-2501.
For sub-account transfers, premium reallocations, or Statements of Additional
Information for the Eligible Funds, call the toll-free number 1-800-200-2214.
You may also call our Client TeleService Center toll-free at 1-800-388-4000 to
request current information about your Policy values, to change or update Policy
information such as your address, billing mode, beneficiary or ownership, or to
request Policy loans of less than $25,000. Requests must be in writing if the
Policy is owned by a corporation or a pension trust.
For all other types of Policy changes, please contact your registered
representative.
REPORTS
NELICO will send you a statement annually showing your Policy's death benefit,
cash value and any outstanding Policy loan principal. NELICO will also confirm
Policy loans, sub-account transfers, lapses, surrenders and other Policy
transactions when they occur.
You will be sent semiannual reports containing the financial statements of the
Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
NELICO may from time to time receive endorsements of the Policies from
professional organizations. NELICO may refer to or use such endorsements in
advertisements or sales material for the Policies. NELICO may also pay the
professional organization making the endorsement for the use of its customer or
mailing lists in order to distribute promotional materials regarding the
Policies. An endorsement of the Policies by a third party is not necessarily
indicative of the future performance or results which may be obtained by persons
who purchase the Policies.
From time to time, articles discussing the Variable Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to Lipper Analytical Services, Inc. and Morningstar,
Inc.) may publish their own rankings or performance reviews of variable contract
separate accounts, including the Variable Account. References to, reprints or
portions of reprints of such articles or rankings may be used by NELICO as sales
literature or advertising material and may include rankings that indicate the
names of other variable contract separate accounts and their investment
experience.
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,
A-50
<PAGE>
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., Washington, D.C., has provided advice on certain
matters relating to the Federal securities laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
EXPERTS
The financial statements of New England Variable Life Separate Account of New
England Life Insurance Company ("NELICO") (formerly New England Variable Life
Insurance Company) and the consolidated financial statements of NELICO and
subsidiaries as of and for the year ended December 31, 1996 included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein (whose reports express unqualified
opinions and, with respect to NELICO, includes an explanatory paragraph
referring to the change in the basis of accounting and the change in corporate
organization), and have been so included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing. The
adjustments that were applied to restate the 1995 and 1994 financial statements
to reflect the effects of the changes for adoption of generally accepted
accounting principles and the changes in corporate organization have also been
audited by Deloitte & Touche LLP.
The statutory balance sheets of New England Variable Life Insurance Company
and New England Pension and Annuity Company as of December 31, 1995, and the
related statutory statements of operations, surplus, and cash flows for each of
the two years in the period ended December 31, 1995 (not included herein), have
been incorporated herein in reliance on the reports (which reports include
adverse opinions as to generally accepted accounting principles and unqualified
opinions as to statutory accounting practices prescribed or permitted by the
Insurance Department of the State of Delaware) of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. The statutory balance sheet of Exeter Reassurance
Company, Ltd. as at December 31, 1995, and the related statutory statements of
income, capital and surplus, and cash flows for the year then ended (not
included herein), have been incorporated herein in reliance on the report (which
report includes an adverse opinion as to generally accepted accounting
principles and an unqualified opinion as to conformity with The Insurance Act
1978, amendments thereto and related regulations) of Coopers & Lybrand,
chartered accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated statement of financial condition of New England Securities
Corporation as of December 31, 1995, and the related consolidated statements of
operations, shareholder's equity, and cash flows for the year then ended (not
included herein); the balance sheet of TNE Advisers, Inc. as of December 31,
1995, and the related statements of operations, changes in shareholder's equity
(deficit), and cash flows for the year ended December 31, 1995 and for the
period August 26, 1994 (commencement of operations) through December 31, 1994
(not included herein), have been incorporated herein in reliance on the reports
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing. The balance sheet of Newbury
Insurance Company, Limited as of December 31, 1995, and the related statements
of earnings and retained earnings, and cash flows for the years ended December
31, 1995 and 1994 (not included herein), have been incorporated herein in
reliance on the reports of Coopers & Lybrand, chartered accountants, given on
the authority of that firm as experts in accounting and auditing.
The statements of operations and changes in net assets of New England Variable
Life Separate Account for the periods ended December 31, 1995 and 1994, have
been incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
Actuarial matters included in this prospectus have been examined by
Rodney J. Chandler, F.S.A., M.A.A.A., Second Vice President and Actuary of
NELICO, as stated in his opinion filed as an exhibit to the Registration
Statement.
A-51
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash value and cash value could vary over an extended
period of time assuming hypothetical gross rates of return (i.e., investment
income and capital gains and losses, realized or unrealized) for the Variable
Account equal to constant after tax annual rates of 0%, 6% and 12%. The tables
are based on annual premium payments of $16,000 for a male and a female, both
aged 55. The insureds are each assumed to be in the nonsmoker standard risk
classification. The Tables assume no rider benefits. Values are first given
based on current mortality and other Policy charges and then based on guaranteed
mortality and other Policy charges. Each illustration is given for a Policy with
an Option A death benefit, a Policy with an Option B death benefit and a Policy
with an Option C death benefit. A Policy with an Option D death benefit, under
the circumstances illustrated, will have the same values as a Policy with an
Option B death benefit. These tables may assist in the comparison of death
benefits, net cash values and cash values for the Policies with those under
other variable life insurance policies which may be issued by NELICO or other
companies.
Death benefits, net cash values and cash values for a Policy would be
different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period, if
premiums were paid in other amounts or at other than annual intervals. They
would also be different depending on the allocation of cash value among the
Variable Account's sub-accounts, if the actual gross rate of return for all
sub-accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual sub-accounts. They would also differ if any policy loan or partial
surrender were made during the period of time illustrated, if either or both
insureds were in the smoker standard risk classification or a substandard risk
classification, or if the Policies were issued at unisex rates.
The death benefits, net cash values and cash values shown in the tables
reflect: (i) deductions from premiums for the sales charge and state and federal
premium tax charge; and (ii) a Monthly Deduction (consisting of a Policy fee, an
administrative charge, a minimum death benefit guarantee charge, a charge for
the cost of insurance and charges for any additional benefits) from the cash
value on the first day of each Policy month. The net cash values reflect a
Surrender Charge that is deducted from the cash value upon surrender, face
reduction or lapse during the first 14 Policy years. The death benefits, net
cash values and cash values also reflect a daily charge assessed against the
Variable Account for mortality and expense risks equivalent to an annual charge
of .90% of the average daily value of the assets in the Variable Account
attributable to the Policies. (See "Charges and Expenses".) The illustrations
are based on an average of the investment advisory fees and operating expenses
incurred by the Eligible Funds, at an annual rate of .77% of the average daily
net assets of the Eligible Funds. This average reflects voluntary expense cap
and expense deferral arrangements between TNE Advisers and the Zenith Fund under
which TNE Advisers bear operating expenses of the Zenith Fund Series (other than
the Capital Growth Series) that exceed certain amounts. TNE Advisers could
terminate the expense cap and expense deferral arrangements at any time. If TNE
Advisers terminates these arrangements, the values illustrated on the following
pages could be less. (See "Charges Against the Eligible Funds and the
Sub-Accounts of the Variable Account".
Taking account of the charges for mortality and expense risks in the Variable
Account and the average investment advisory fee and operating expenses of the
Eligible Funds, the gross annual rates of return of 0%, 6% and 12% correspond to
net investment experience at constant annual rates of -1.66%, 4.24% and 10.15%,
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 "Charges for NELICO's Income Taxes".)
A-52
<PAGE>
The second column of each table shows the amount which would accumulate if an
amount equal to the annual premium were invested to earn interest, after taxes,
of 5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated premiums
could have been invested outside the Policy to arrive at the death benefit of
the Policy. The internal rate of return is compounded annually, and the premiums
are assumed to be paid at the beginning of each Policy year.
NELICO will furnish upon request a personalized illustration reflecting the
proposed insureds' age, sex, underwriting classification, and the face amount or
premium payment schedule requested. Where applicable, NELICO will also furnish
upon request an illustration for a Policy which is not affected by the sex of
the insureds.
The illustrations using current Policy charges assume that the 9% sales charge
is waived after the 15th policy year. For Policies issued in Pennsylvania,
NELICO does not intend to waive this charge until after the 17th policy year.
Purchasers in Pennsylvania should refer to a personalized illustration, which
will reflect the longer duration of this sales charge.
A-53
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION A (ENHANCED WITH FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
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 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 6,047 $ 6,820 $ 7,595 $ 12,115 $ 12,888 $ 13,664
2 34,440 1,000,000 1,000,000 1,000,000 18,575 20,889 23,299 24,644 26,957 29,368
3 52,962 1,000,000 1,000,000 1,000,000 23,990 28,646 33,686 36,856 41,512 46,552
4 72,410 1,000,000 1,000,000 1,000,000 35,885 43,700 52,496 48,751 56,566 65,362
5 92,831 1,000,000 1,000,000 1,000,000 47,460 59,270 73,091 60,326 72,136 85,957
6 114,272 1,000,000 1,000,000 1,000,000 60,098 76,755 97,034 71,579 88,236 108,515
7 136,786 1,000,000 1,000,000 1,000,000 72,412 94,788 123,137 82,507 104,883 133,233
8 160,425 1,000,000 1,000,000 1,000,000 84,394 113,381 151,613 93,105 122,092 160,323
9 185,246 1,000,000 1,000,000 1,000,000 96,037 132,550 182,700 103,363 139,875 190,025
10 211,309 1,000,000 1,000,000 1,000,000 107,336 152,311 216,664 113,276 158,252 222,605
15 362,520 1,000,000 1,000,000 1,000,000 163,994 266,661 447,188 163,994 266,661 447,188
20 555,508 1,000,000 1,000,000 1,267,244 210,150 401,840 816,786 210,150 401,840 816,786
25 801,815 1,000,000 1,000,000 2,120,297 231,327 553,827 1,392,642 231,327 553,827 1,392,642
30 1,116,173 1,000,000 1,094,750 3,389,671 199,518 719,047 2,226,385 199,518 719,047 2,226,385
35 1,517,381 1,000,000 1,283,644 4,906,171 23,468 843,116 3,222,444 23,468 843,116 3,222,444
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
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 -62.21% -57.38% -52.53% 6,150.00% 6,150.00% 6,150.00%
2 -31.22 -25.28 -19.38 642.15 642.15 642.15
3 -30.87 -23.68 -16.69 258.47 258.47 258.47
4 -21.85 -14.69 -7.77 148.92 148.92 148.92
5 -16.92 -9.84 -3.00 100.39 100.39 100.39
6 -13.25 -6.36 .31 73.77 73.77 73.77
7 -10.92 -4.17 2.37 57.22 57.22 57.22
8 -9.35 -2.70 3.75 46.06 46.06 46.06
9 -8.23 -1.66 4.73 38.07 38.07 38.07
10 -7.41 -.90 5.44 32.11 32.11 32.11
15 -4.93 1.31 7.45 16.46 16.46 16.46
20 -4.20 2.12 8.27 9.93 9.93 11.85
25 -4.53 2.42 8.62 6.48 6.48 11.26
30 -6.50 2.49 8.66 4.39 4.89 10.79
35 -40.54 2.17 8.34 3.02 4.22 10.12
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-54
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION B (ENHANCED WITH FACE AMOUNT PLUS CASH VALUE)--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
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 $ 16,800 $1,012,115 $1,012,888 $1,013,663 $ 6,046 $ 6,819 $ 7,594 $ 12,115 $ 12,888 $ 13,663
2 34,440 1,024,640 1,026,953 1,029,362 18,571 20,884 23,294 24,640 26,953 29,362
3 52,962 1,036,842 1,041,495 1,046,534 23,976 28,629 33,668 36,842 41,495 46,534
4 72,410 1,048,717 1,056,527 1,065,316 35,851 43,661 52,450 48,717 56,527 65,316
5 92,831 1,060,261 1,072,056 1,085,860 47,395 59,190 72,994 60,261 72,056 85,860
6 114,272 1,071,466 1,088,093 1,108,335 59,985 76,612 96,854 71,466 88,093 108,335
7 136,786 1,082,327 1,104,646 1,132,922 72,231 94,550 122,826 82,327 104,646 132,922
8 160,425 1,092,832 1,121,720 1,159,818 84,121 113,009 151,107 92,832 121,720 159,818
9 185,246 1,102,968 1,139,317 1,189,237 95,642 131,991 181,911 102,968 139,317 189,237
10 211,309 1,112,725 1,157,443 1,221,418 106,785 151,502 215,478 112,725 157,443 221,418
15 362,520 1,163,044 1,264,921 1,443,984 163,044 264,921 443,984 163,044 264,921 443,984
20 555,508 1,206,799 1,394,825 1,802,739 206,799 394,825 802,739 206,799 394,825 802,739
25 801,815 1,218,793 1,522,505 2,347,843 218,793 522,505 1,347,843 218,793 522,505 1,347,843
30 1,116,173 1,163,616 1,604,711 3,147,251 163,616 604,711 2,147,251 163,616 604,711 2,147,251
35 1,517,381 1,528,113 4,242,190 528,113 3,242,190 528,113 3,242,190
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
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 -62.21% -57.38% -52.54% 6,225.72% 6,230.55% 6,235.40%
2 -31.23 -25.29 -19.39 651.81 652.71 653.65
3 -30.90 -23.70 -16.71 263.34 263.95 264.60
4 -21.88 -14.73 -7.80 152.39 152.93 153.54
5 -16.97 -9.88 -3.04 103.22 103.76 104.38
6 -13.31 -6.41 .25 76.24 76.80 77.46
7 -10.99 -4.24 2.31 59.47 60.05 60.77
8 -9.42 -2.78 3.68 48.14 48.76 49.55
9 -8.32 -1.75 4.64 40.04 40.69 41.55
10 -7.51 -.99 5.35 33.98 34.67 35.62
15 -5.01 1.23 7.36 18.11 19.03 20.47
20 -4.37 1.96 8.13 11.46 12.62 14.65
25 -5.04 2.00 8.42 7.77 9.19 11.89
30 -8.30 1.45 8.48 5.23 6.96 10.42
35 -.33 8.37 5.03 9.51
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-55
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION C (FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
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 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 6,047 $ 6,820 $ 7,595 $ 12,115 $ 12,888 $ 13,664
2 34,440 1,000,000 1,000,000 1,000,000 18,575 20,889 23,299 24,644 26,957 29,368
3 52,962 1,000,000 1,000,000 1,000,000 23,990 28,646 33,686 36,856 41,512 46,552
4 72,410 1,000,000 1,000,000 1,000,000 35,885 43,700 52,496 48,751 56,566 65,362
5 92,831 1,000,000 1,000,000 1,000,000 47,460 59,270 73,091 60,326 72,136 85,957
6 114,272 1,000,000 1,000,000 1,000,000 60,098 76,755 97,034 71,579 88,236 108,515
7 136,786 1,000,000 1,000,000 1,000,000 72,412 94,788 123,137 82,507 104,883 133,233
8 160,425 1,000,000 1,000,000 1,000,000 84,394 113,381 151,613 93,105 122,092 160,323
9 185,246 1,000,000 1,000,000 1,000,000 96,037 132,550 182,700 103,363 139,875 190,025
10 211,309 1,000,000 1,000,000 1,000,000 107,336 152,311 216,664 113,276 158,252 222,605
15 362,520 1,000,000 1,000,000 1,000,000 163,994 266,661 447,188 163,994 266,661 447,188
20 555,508 1,000,000 1,000,000 1,000,000 210,150 401,840 818,035 210,150 401,840 818,035
25 801,815 1,000,000 1,000,000 1,492,343 231,327 553,827 1,421,279 231,327 553,827 1,421,279
30 1,116,173 1,000,000 1,000,000 2,510,248 199,518 722,599 2,390,713 199,518 722,599 2,390,713
35 1,517,381 1,000,000 1,000,000 4,121,254 23,468 923,004 3,925,004 23,468 923,004 3,925,004
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
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 -62.21% -57.38% -52.53% 6,150.00% 6,150.00% 6,150.00%
2 -31.22 -25.28 -19.38 642.15 642.15 642.15
3 -30.87 -23.68 -16.69 258.47 258.47 258.47
4 -21.85 -14.69 -7.77 148.92 148.92 148.92
5 -16.92 -9.84 -3.00 100.39 100.39 100.39
6 -13.25 -6.36 .31 73.77 73.77 73.77
7 -10.92 -4.17 2.37 57.22 57.22 57.22
8 -9.35 -2.70 3.75 46.06 46.06 46.06
9 -8.23 -1.66 4.73 38.07 38.07 38.07
10 -7.41 -.90 5.44 32.11 32.11 32.11
15 -4.93 1.31 7.45 16.46 16.46 16.46
20 -4.20 2.12 8.28 9.93 9.93 9.93
25 -4.53 2.42 8.75 6.48 6.48 9.06
30 -6.50 2.52 9.03 4.39 4.39 9.28
35 -40.54 2.62 9.18 3.02 3.02 9.39
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-56
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION A (ENHANCED WITH FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
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 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 5,541 $ 6,298 $ 7,057 $ 11,610 $ 12,367 $ 13,126
2 34,440 1,000,000 1,000,000 1,000,000 17,565 19,815 22,161 23,634 25,884 28,230
3 52,962 1,000,000 1,000,000 1,000,000 22,463 26,976 31,864 35,329 39,842 44,730
4 72,410 1,000,000 1,000,000 1,000,000 33,811 41,370 49,882 46,677 54,236 62,748
5 92,831 1,000,000 1,000,000 1,000,000 44,791 56,191 69,545 57,657 69,057 82,411
6 114,272 1,000,000 1,000,000 1,000,000 56,758 72,811 92,373 68,239 84,292 103,854
7 136,786 1,000,000 1,000,000 1,000,000 68,292 89,820 117,128 78,388 99,916 127,224
8 160,425 1,000,000 1,000,000 1,000,000 79,340 107,182 143,958 88,051 115,892 152,669
9 185,246 1,000,000 1,000,000 1,000,000 89,835 124,840 173,016 97,161 132,165 180,341
10 211,309 1,000,000 1,000,000 1,000,000 99,692 142,724 204,463 105,633 148,664 210,404
15 362,520 1,000,000 1,000,000 1,000,000 135,060 231,700 404,262 135,060 231,700 404,262
20 555,508 1,000,000 1,000,000 1,089,549 127,020 302,423 702,256 127,020 302,423 702,256
25 801,815 1,000,000 1,000,000 1,707,834 26,002 316,905 1,121,730 26,002 316,905 1,121,730
30 1,116,173 1,000,000 2,391,034 158,067 1,570,466 158,067 1,570,466
35 1,517,381 2,715,295 1,783,445 1,783,445
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
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 -65.37% -60.64% -55.89% 6,150.00% 6,150.00% 6,150.00%
2 -33.90 -28.00 -22.13 642.15 642.15 642.15
3 -33.43 -26.17 -19.13 258.47 258.47 258.47
4 -23.95 -16.71 -9.72 148.92 148.92 148.92
5 -18.74 -11.55 -4.63 100.39 100.39 100.39
6 -14.86 -7.85 -1.10 73.77 73.77 73.77
7 -12.40 -5.52 1.12 57.22 57.22 57.22
8 -10.76 -3.96 2.61 46.06 46.06 46.06
9 -9.62 -2.87 3.65 38.07 38.07 38.07
10 -8.82 -2.09 4.41 32.11 32.11 32.11
15 -7.60 -.44 6.28 16.46 16.46 16.46
20 -9.95 -.54 7.00 9.93 9.93 10.63
25 -38.09 -1.84 7.23 6.48 6.48 9.92
30 -8.63 6.84 4.39 9.03
35 5.74 7.60
</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, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-57
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION B (ENHANCED WITH FACE AMOUNT PLUS CASH VALUE)--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
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 $ 16,800 $1,011,609 $1,012,366 $1,013,125 $ 5,541 $ 6,297 $ 7,057 $ 11,609 $ 12,366 $ 13,125
2 34,440 1,023,629 1,025,879 1,028,224 17,560 19,810 22,155 23,629 25,879 28,224
3 52,962 1,035,313 1,039,824 1,044,711 22,447 26,958 31,845 35,313 39,824 44,711
4 72,410 1,046,640 1,054,192 1,062,697 33,774 41,326 49,831 46,640 54,192 62,697
5 92,831 1,057,582 1,068,966 1,082,300 44,716 56,100 69,434 57,582 68,966 82,300
6 114,272 1,068,103 1,084,119 1,103,637 56,622 72,639 92,156 68,103 84,119 103,637
7 136,786 1,078,158 1,099,615 1,126,832 68,063 89,520 116,736 78,158 99,615 126,832
8 160,425 1,087,686 1,115,396 1,151,966 78,976 106,685 143,286 87,686 115,396 151,966
9 185,246 1,096,603 1,131,378 1,179,233 89,277 124,052 171,908 96,603 131,378 179,233
10 211,309 1,104,806 1,147,454 1,208,634 98,865 141,513 202,693 104,806 147,454 208,634
15 362,520 1,130,961 1,224,406 1,391,162 130,961 224,406 391,162 130,961 224,406 391,162
20 555,508 1,113,977 1,272,253 1,633,940 113,777 272,253 633,940 113,777 272,253 633,940
25 801,815 1,218,496 1,899,477 218,496 899,477 218,496 899,477
30 1,116,173 2,074,649 1,074,649 1,074,649
35 1,517,381 1,880,484 880,484 880,484
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
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 -65.37% -60.64% -55.90% 6,222.56% 6,227.29% 6,232.03%
2 -33.92 -28.01 -22.14 651.42 652.29 653.21
3 -33.45 -26.19 -19.16 263.14 263.73 264.37
4 -23.99 -16.75 -9.76 152.24 152.77 153.36
5 -18.80 -11.60 -4.69 103.09 103.61 104.22
6 -14.93 -7.92 -1.17 76.13 76.67 77.31
7 -12.48 -5.60 1.04 59.36 59.92 60.62
8 -10.86 -4.06 2.50 48.03 48.62 49.39
9 -9.75 -3.00 3.52 39.92 40.55 41.38
10 -8.98 -2.25 4.26 33.85 34.52 35.44
15 -8.04 -.84 5.89 17.81 18.67 20.06
20 -11.35 -1.57 6.14 10.81 11.88 13.87
25 -5.05 5.77 7.77 10.58
30 4.79 8.30
35 2.39 5.98
</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, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-58
<PAGE>
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION C (FACE AMOUNT)--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
END ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
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 $ 16,800 $1,000,000 $1,000,000 $1,000,000 $ 5,541 $ 6,298 $ 7,057 $ 11,610 $ 12,367 $ 13,126
2 34,440 1,000,000 1,000,000 1,000,000 17,565 19,815 22,161 23,634 25,884 28,230
3 52,962 1,000,000 1,000,000 1,000,000 22,463 26,976 31,864 35,329 39,842 44,730
4 72,410 1,000,000 1,000,000 1,000,000 33,811 41,370 49,882 46,677 54,236 62,748
5 92,831 1,000,000 1,000,000 1,000,000 44,791 56,191 69,545 57,657 69,057 82,411
6 114,272 1,000,000 1,000,000 1,000,000 56,758 72,811 92,373 68,239 84,292 103,854
7 136,786 1,000,000 1,000,000 1,000,000 68,292 89,820 117,128 78,388 99,916 127,224
8 160,425 1,000,000 1,000,000 1,000,000 79,340 107,182 143,958 88,051 115,892 152,669
9 185,246 1,000,000 1,000,000 1,000,000 89,835 124,840 173,016 97,161 132,165 180,341
10 211,309 1,000,000 1,000,000 1,000,000 99,692 142,724 204,463 105,633 148,664 210,404
15 362,520 1,000,000 1,000,000 1,000,000 135,060 231,700 404,262 135,060 231,700 404,262
20 555,508 1,000,000 1,000,000 1,000,000 127,020 302,423 703,099 127,020 302,423 703,099
25 801,815 1,000,000 1,000,000 1,261,478 26,002 316,905 1,201,407 26,002 316,905 1,201,407
30 1,116,173 1,000,000 2,098,400 158,067 1,998,476 158,067 1,998,476
35 1,517,381 3,372,010 3,211,438 3,211,438
<CAPTION>
INTERNAL RATE OF RETURN
ON NET CASH VALUE INTERNAL RATE OF RETURN
ASSUMING ON DEATH BENEFIT
END HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
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 -65.37% -60.64% -55.89% 6,150.00% 6,150.00% 6,150.00%
2 -33.90 -28.00 -22.13 642.15 642.15 642.15
3 -33.43 -26.17 -19.13 258.47 258.47 258.47
4 -23.95 -16.71 -9.72 148.92 148.92 148.92
5 -18.74 -11.55 -4.63 100.39 100.39 100.39
6 -14.86 -7.85 -1.10 73.77 73.77 73.77
7 -12.40 -5.52 1.12 57.22 57.22 57.22
8 -10.76 -3.96 2.61 46.06 46.06 46.06
9 -9.62 -2.87 3.65 38.07 38.07 38.07
10 -8.82 -2.09 4.41 32.11 32.11 32.11
15 -7.60 -.44 6.28 16.46 16.46 16.46
20 -9.95 -.54 7.02 9.93 9.93 9.93
25 -38.09 -1.84 7.68 6.48 6.48 7.99
30 -8.63 8.11 4.39 8.36
35 8.33 8.53
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-59
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
The information contained in this Appendix gives hypothetical illustrations of
the Variable Account's and the Policy's investment experience based on the
historical investment experience of the Eligible Funds. It does not represent
what may happen in the future.
The Policies were not available until January, 1994. The Zenith Fund and the
Variable Account commenced operations on August 26, 1983. The Westpeak Stock
Index and Back Bay Advisors Managed Series of the Zenith Fund commenced
operations on May 1, 1987. The Westpeak Growth and Income Series and Loomis
Sayles Avanti Growth Series of the Zenith Fund commenced operations on April 30,
1993. The Loomis Sayles Small Cap Series commenced operations on May 2, 1994 and
was made available under the Policies on December 19, 1994. The remaining Zenith
Fund series commenced operations on October 31, 1994 and were made available
under the Policies in May 1996. The Equity-Income Portfolio and Overseas
Portfolio of the VIP Fund commenced operations on October 9, 1986 and January
28, 1987, respectively. The High Income Portfolio of the VIP Fund and the Asset
Manager Portfolio of the VIP Fund II commenced operations on September 19, 1985
and September 6, 1989, respectively, and were added as investment options on
December 19, 1994. The illustrations are based on the actual investment
experience of the relevant Eligible Funds for the periods shown (and reflect
actual charges and expenses incurred by the Eligible Funds), and reflect a
charge for mortality and expense risks against the Variable Account's assets at
an annual rate of .90%. The illustrations assume that premiums are paid at the
beginning of each year and that no loans, transfers or other Policy Owner
transactions were made during the periods shown.
VARIABLE ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account which invests in the
Eligible Funds. The investment experience of the sub-account or sub-accounts you
choose will affect the values and benefits of your Policy.
Many factors in addition to investment experience will affect the actual
values and benefits of your Policy. For instance, these investment experience
figures do not reflect the charges deducted from premiums and Monthly Deductions
from the cash value. (See "Charges and Expenses".)
NET RATES OF RETURN
The annual net rate is the effective earnings rate at which the investment
sub-accounts increased or decreased over a one year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated by
taking the difference between the sub-accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the sub-accounts increased or decreased since
the inception dates of the sub-accounts. For each sub-account, the rate is
calculated by taking the difference between the sub-account's ending value and
the value on the date of its inception and dividing it by the value on the date
of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which, if
compounded annually, would equal the total net rate of return since inception.
A-60
<PAGE>
SUB-ACCOUNT INVESTING IN ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
8/26/83- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital
Growth* . . . 8.52% -1.25% 66.59% 93.46% 51.34% -9.61% 29.59% -4.35% 52.61% -6.90% 13.94%
Bond Income . . 2.72 11.77 17.70 13.81 1.35 7.40 11.29 7.11 16.90 7.21 11.60
Money Market . 2.97 9.63 7.29 5.85 5.57 6.55 8.28 7.22 5.26 2.87 2.05
<CAPTION>
8/26/83- 8/26/83-
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>
Capital
Growth* . . . -7.90% 36.80% 19.98% 1,333.22% 22.07%
Bond Income . . -4.23 20.12 3.67 232.82 9.43
Money Market . 3.04 4.75 4.18 108.05 5.64
</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 . . . . . -12.73% 15.30% 28.99% -5.01% 29.27% 6.33% 8.74% 0.21% 35.69% 21.36%
Managed . . . . . . . -1.26 8.50 18.02 2.28 19.10 5.74 9.69 -2.00 30.09 13.99
<CAPTION>
5/1/87- 5/1/87-
12/31/96 12/31/96
TOTAL EFFECTIVE
SUB-ACCOUNT RETURN ANNUAL
- ----------- -------- -----------
<S> <C> <C>
Stock Index . . . . . 204.13% 12.19%
Managed . . . . . . . 159.64 10.37
</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 . . . . . . . . . . . . . . . . . . . . . . . 13.55% -2.09% 35.25% 17.03% 75.98% 16.64%
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . 14.05 -1.16 29.19 16.55 69.72 15.50
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------
FOR ONE YEAR 5/2/94- 5/2/94-
ENDING 12/31/96 12/31/96
5/3/94- ------------------ TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.80% 27.69% 29.50% 59.08% 19.02%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------
FOR ONE YEAR 10/31/94- 10/31/94-
ENDING 12/31/96 12/31/96
10/31/94- ------------------ TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 RETURN ANNUAL
- ----------- --------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4.34% 47.37% 12.15% 58.10% 23.52%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -.25 23.68 15.86 42.94 17.91
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3.64 38.04 24.71 65.87 26.29
International Magnum Equity** . . . . . . . . . . . . . . . . . . . . . 2.45 5.28 5.71 14.02 6.24
</TABLE>
- ---------
* Rates of return reflect the Capital Growth Series' former investment advisory
fee of .50% of average daily net assets for the period through December 31,
1987 and its current advisory fee schedule thereafter.
** The Morgan Stanley International Magnum Equity Series' sub-adviser was
Draycott Partners until May 1, 1997, when Morgan Stanley Asset Management
became the sub-adviser.
A-61
<PAGE>
SUB-ACCOUNTS INVESTING IN VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
10/9/86- ------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income . 0.00% -2.02% 21.61% 16.30% -16.05% 30.26% 15.84% 17.23% 6.11% 33.89% 13.25%
<CAPTION>
10/9/86- 10/9/86-
12/31/96 12/31/96
TOTAL EFFECTIVE
SUB-ACCOUNT RETURN ANNUAL
- ----------- -------- -----------
<S> <C> <C>
Equity-Income . 231.07% 12.42%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------------------- 5/1/87-
FOR ONE YEAR ENDING 12/31/96
1/28/87- ---------------------------------------------------------------------------------------- TOTAL
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 RETURN
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas . . . . -6.16% 7.16% 25.15% -2.55% 7.03% -11.52% 36.12% 0.82% 8.70% 12.19% 94.36%
<CAPTION>
5/1/87-
12/31/96
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- -----------
<S> <C>
Overseas . . . . 6.93%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
9/19/85- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High
Income . . 6.11% 16.63% 0.31% 10.64% -5.03% -3.11% 33.87% 22.06% 19.32% -2.43% 19.53%
<CAPTION>
9/19/85- 9/19/85-
12/31/96 12/31/96
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/96 RETURN ANNUAL
- ----------- -------- -------- -----------
<S> <C> <C> <C>
High
Income . . 13.00% 224.72% 11.00%
</TABLE>
SUB-ACCOUNT INVESTING IN VARIABLE INSURANCE PRODUCTS FUND II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------ 9/6/89-
FOR ONE YEAR ENDING 12/31/96
9/6/89- -------------------------------------------------------------------- TOTAL
SUB-ACCOUNT 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 RETURN
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager . . . . . . . . . . 0.53% 5.76% 21.46% 10.71% 20.15% -6.93% 15.91% 13.57% 110.44%
<CAPTION>
9/6/89
12/31/96
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- -----------
<S> <C>
Asset Manager . . . . . . . . . . 10.70%
</TABLE>
A-62
<PAGE>
POLICY PERFORMANCE
The material below assumes a Policy was issued with a $1 million face amount
and annual premiums of $16,000, paid on August 26 of each year (May 1 in the
case of the Zenith Stock Index and Managed Sub-Accounts; May 2 in the case of
the Zenith Small Cap Sub-Account; October 31 in the case of the Zenith Balanced,
Zenith International Magnum Equity, Zenith Venture Value and Zenith Equity
Growth Sub-Accounts; October 9 in the case of the Equity-Income Sub-Account,
January 28 in the case of the Overseas Sub-Account; April 30 in the case of the
Zenith Growth and Income and Zenith Avanti Growth Sub-Accounts; September 19 in
the case of the High Income Sub-Account; September 6 in the case of the Asset
Manager Sub-Account), to a male and a female, both age 55 in the nonsmoker
standard risk category. The first example shows such a Policy with an Option A
death benefit, the second example shows a Policy with an Option B death benefit
and the third example shows a Policy with an Option C death benefit. The death
benefits, cash values and internal rates of return assume in each instance that
the entire policy value was invested in the particular sub-account for the
period shown. These illustrations of policy investment experience also reflect
all Policy charges based on NELICO's current rates. (See Appendix A for the
definition of the internal rate of return.)
OPTION A DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983 . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,000,000 14,491 8,422 -84.19% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,000,000 26,856 20,787 -42.50 1,975.63%
December 31,
1985 . . . . . . 48,000 1,000,000 1,000,000 60,394 47,528 -.73 434.27
December 31,
1986 . . . . . . 64,000 1,000,000 1,000,000 129,603 116,737 34.44 206.69
December 31,
1987 . . . . . . 80,000 1,000,000 1,000,000 205,962 193,096 39.09 127.42
December 31,
1988 . . . . . . 96,000 1,000,000 1,000,000 198,941 186,652 23.49 88.99
December 31,
1989 . . . . . . 112,000 1,000,000 1,000,000 270,617 259,713 24.89 66.82
December 31,
1990 . . . . . . 128,000 1,000,000 1,000,000 269,342 259,823 18.01 52.57
December 31,
1991 . . . . . . 144,000 1,000,000 1,000,000 424,971 416,837 23.52 42.74
December 31,
1992 . . . . . . 160,000 1,000,000 1,000,000 409,235 402,486 18.18 35.59
December 31,
1993 . . . . . . 176,000 1,000,000 1,000,000 479,444 474,123 17.53 30.19
December 31,
1994 . . . . . . 192,000 1,000,000 1,000,000 450,141 446,304 13.64 25.98
December 31,
1995 . . . . . . 208,000 1,000,000 1,088,149 635,972 633,621 16.31 23.78
December 31,
1996 . . . . . . 224,000 1,000,000 1,315,133 775,204 774,337 16.65 23.32
</TABLE>
A-63
<PAGE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983 . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,000,000 13,680 7,611 -88.18% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,000,000 28,890 22,822 -34.63 1,975.63%
December 31,
1985 . . . . . . 48,000 1,000,000 1,000,000 47,663 34,797 -22.48 434.27
December 31,
1986 . . . . . . 64,000 1,000,000 1,000,000 67,356 54,490 -8.59 206.69
December 31,
1987 . . . . . . 80,000 1,000,000 1,000,000 81,112 68,245 -6.74 127.42
December 31,
1988 . . . . . . 96,000 1,000,000 1,000,000 99,937 87,648 -3.20 88.99
December 31,
1989 . . . . . . 112,000 1,000,000 1,000,000 124,057 113,153 .31 66.82
December 31,
1990 . . . . . . 128,000 1,000,000 1,000,000 145,900 136,381 1.64 52.57
December 31,
1991 . . . . . . 144,000 1,000,000 1,000,000 183,803 175,669 4.52 42.74
December 31,
1992 . . . . . . 160,000 1,000,000 1,000,000 209,173 202,424 4.78 35.59
December 31,
1993 . . . . . . 176,000 1,000,000 1,000,000 245,781 240,459 5.71 30.19
December 31,
1994 . . . . . . 192,000 1,000,000 1,000,000 247,530 243,694 4.00 25.98
December 31,
1995 . . . . . . 208,000 1,000,000 1,000,000 311,461 309,109 6.04 22.62
December 31,
1996 . . . . . . 224,000 1,000,000 1,000,000 336,221 335,354 5.69 19.89
</TABLE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983 . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,000,000 13,710 7,642 -88.04% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,000,000 28,017 21,948 -38.00 1,975.63%
December 31,
1985 . . . . . . 48,000 1,000,000 1,000,000 43,264 30,398 -31.13 434.27
December 31,
1986 . . . . . . 64,000 1,000,000 1,000,000 58,797 45,931 -17.46 206.69
December 31,
1987 . . . . . . 80,000 1,000,000 1,000,000 75,013 62,147 -10.68 127.42
December 31,
1988 . . . . . . 96,000 1,000,000 1,000,000 92,845 80,556 -6.17 88.99
December 31,
1989 . . . . . . 112,000 1,000,000 1,000,000 113,251 102,347 -2.70 66.82
December 31,
1990 . . . . . . 128,000 1,000,000 1,000,000 133,966 124,447 -.73 52.57
December 31,
1991 . . . . . . 144,000 1,000,000 1,000,000 153,354 145,221 .19 42.74
December 31,
1992 . . . . . . 160,000 1,000,000 1,000,000 169,848 163,099 .40 35.59
December 31,
1993 . . . . . . 176,000 1,000,000 1,000,000 185,716 180,395 .46 30.19
December 31,
1994 . . . . . . 192,000 1,000,000 1,000,000 204,420 200,583 .74 25.98
December 31,
1995 . . . . . . 208,000 1,000,000 1,000,000 227,033 224,682 1.21 22.62
December 31,
1996 . . . . . . 224,000 1,000,000 1,000,000 249,272 248,406 1.50 19.89
</TABLE>
A-64
<PAGE>
ZENITH STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987 . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . . . 16,000 1,000,000 1,000,000 11,256 5,188 -81.45% --
December 31,
1988 . . . . . . 32,000 1,000,000 1,000,000 26,542 20,473 -32.91 1,033.28%
December 31,
1989 . . . . . . 48,000 1,000,000 1,000,000 50,376 37,510 -14.14 328.36
December 31,
1990 . . . . . . 64,000 1,000,000 1,000,000 59,886 47,020 -13.80 174.11
December 31,
1991 . . . . . . 80,000 1,000,000 1,000,000 91,460 78,594 -.66 112.69
December 31,
1992 . . . . . . 96,000 1,000,000 1,000,000 110,640 98,698 .87 80.87
December 31,
1993 . . . . . . 112,000 1,000,000 1,000,000 133,587 123,030 2.56 61.77
December 31,
1994 . . . . . . 128,000 1,000,000 1,000,000 146,438 137,266 1.67 49.18
December 31,
1995 . . . . . . 144,000 1,000,000 1,000,000 215,224 207,437 7.71 40.32
December 31,
1996 . . . . . . 160,000 1,000,000 1,000,000 273,032 266,630 9.65 33.80
</TABLE>
ZENITH MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ------- -------- ----- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987 . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . . . 16,000 1,000,000 1,000,000 12,752 6,684 -72.90% --
December 31,
1988 . . . . . . 32,000 1,000,000 1,000,000 27,239 21,170 -30.79 1,033.28%
December 31,
1989 . . . . . . 48,000 1,000,000 1,000,000 47,116 34,250 -19.04 328.36
December 31,
1990 . . . . . . 64,000 1,000,000 1,000,000 61,438 48,572 -12.39 174.11
December 31,
1991 . . . . . . 80,000 1,000,000 1,000,000 87,193 74,327 -2.75 112.69
December 31,
1992 . . . . . . 96,000 1,000,000 1,000,000 105,767 9325 -.72 80.87
December 31,
1993 . . . . . . 112,000 1,000,000 1,000,000 129,080 118,522 1.54 61.77
December 31,
1994 . . . . . . 128,000 1,000,000 1,000,000 138,970 129,797 .33 49.18
December 31,
1995 . . . . . . 144,000 1,000,000 1,000,000 196,363 188,575 5.71 40.32
December 31,
1996 . . . . . . 160,000 1,000,000 1,000,000 236,097 229,695 6.87 33.80
</TABLE>
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30,
1993 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1993 . . . . . . 16,000 1,000,000 1,000,000 14,577 8,508 -60.97% --
December 31,
1994 . . . . . . 32,000 1,000,000 1,000,000 27,146 21,078 -31.00 1,028.55%
December 31,
1995 . . . . . . 48,000 1,000,000 1,000,000 52,666 39,800 -10.84 327.65
December 31,
1996 . . . . . . 64,000 1,000,000 1,000,000 75,783 62,917 -.78 173.87
</TABLE>
A-65
<PAGE>
ZENITH AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993 . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1993 . . . . . . 16,000 1,000,000 1,000,000 14,645 8,576 -60.51% --
December 31,
1994 . . . . . . 32,000 1,000,000 1,000,000 27,406 21,338 -30.21 1,028.55%
December 31,
1995 . . . . . . 48,000 1,000,000 1,000,000 51,283 38,417 -12.80 327.65
December 31,
1996 . . . . . . 64,000 1,000,000 1,000,000 73,313 60,447 -2.62 173.87
</TABLE>
ZENITH SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994 . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . 16,000 1,000,000 1,000,000 12,279 6,210 -75.86% --
December 31,
1995 . . . . . 32,000 1,000,000 1,000,000 31,142 25,073 -19.28 1,038.05%
December 31,
1996 . . . . . 48,000 1,000,000 1,000,000 55,058 42,192 -7.57 329.07
</TABLE>
ZENITH EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . 16,000 1,000,000 1,000,000 12,802 6,733 -100.00% --
December 31,
1995 . . . . . 32,000 1,000,000 1,000,000 31,158 25,089 -32.53 3,271.69%
December 31,
1996 . . . . . 48,000 1,000,000 1,000,000 48,185 35,319 -24.88 522.96
</TABLE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . 16,000 1,000,000 1,000,000 13,532 7,464 -98.96% --
December 31,
1995 . . . . . 32,000 1,000,000 1,000,000 29,802 23,733 -38.93 3,271.69%
December 31,
1996 . . . . . 48,000 1,000,000 1,000,000 47,858 34,992 -25.59 522.96
</TABLE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . 16,000 1,000,000 1,000,000 13,117 7,049 -100.00% --
December 31,
1995 . . . . . 32,000 1,000,000 1,000,000 31,121 25,052 -32.71 3,271.69%
December 31,
1996 . . . . . 48,000 1,000,000 1,000,000 52,326 39,460 -16.20 522.96
</TABLE>
A-66
<PAGE>
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,000,000 13,863 7,795 -98.65% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,000,000 27,965 21,896 -47.56 3,271.69%
December 31,
1996 . . . . . . 48,000 1,000,000 1,000,000 42,658 29,792 -37.55 522.96
</TABLE>
EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9,
1986 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1986 . . . . . . 16,000 1,000,000 1,000,000 13,590 7,521 -96.38% --
December 31,
1987 . . . . . . 32,000 1,000,000 1,000,000 23,548 17,479 -63.02 2,723.89%
December 31,
1988 . . . . . . 48,000 1,000,000 1,000,000 41,197 28,331 -39.03 490.23
December 31,
1989 . . . . . . 64,000 1,000,000 1,000,000 60,910 48,044 -16.25 221.84
December 31,
1990 . . . . . . 80,000 1,000,000 1,000,000 64,281 51,415 -19.75 133.88
December 31,
1991 . . . . . . 96,000 1,000,000 1,000,000 97,173 84,653 -4.62 92.44
December 31,
1992 . . . . . . 112,000 1,000,000 1,000,000 126,352 115,217 .88 68.91
December 31,
1993 . . . . . . 128,000 1,000,000 1,000,000 160,443 150,694 4.34 53.96
December 31,
1994 . . . . . . 144,000 1,000,000 1,000,000 182,079 173,714 4.39 43.72
December 31,
1995 . . . . . . 160,000 1,000,000 1,000,000 258,099 251,120 9.26 36.31
December 31,
1996 . . . . . . 176,000 1,000,000 1,000,000 303,832 298,262 9.72 30.74
</TABLE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28,
1987 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . . . 16,000 1,000,000 1,000,000 11,596 5,527 -68.38% --
December 31,
1988 . . . . . . 32,000 1,000,000 1,000,000 27,183 21,115 -25.92 707.99%
December 31,
1989 . . . . . . 48,000 1,000,000 1,000,000 48,821 35,955 -14.30 272.18
December 31,
1990 . . . . . . 64,000 1,000,000 1,000,000 60,413 47,547 -11.91 154.15
December 31,
1991 . . . . . . 80,000 1,000,000 1,000,000 78,294 65,428 -6.81 103.01
December 31,
1992 . . . . . . 96,000 1,000,000 1,000,000 80,122 68,641 -9.74 75.31
December 31,
1993 . . . . . . 112,000 1,000,000 1,000,000 125,608 115,513 .79 58.22
December 31,
1994 . . . . . . 128,000 1,000,000 1,000,000 137,840 129,129 .20 46.75
December 31,
1995 . . . . . . 144,000 1,000,000 1,000,000 165,500 158,174 1.90 38.57
December 31,
1996 . . . . . . 160,000 1,000,000 1,000,000 197,835 191,894 3.32 32.48
</TABLE>
A-67
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19,
1985 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1985 . . . . . . 16,000 1,000,000 1,000,000 14,274 8,205 -90.62% --
December 31,
1986 . . . . . . 32,000 1,000,000 1,000,000 29,761 23,692 -33.71 2,337.90%
December 31,
1987 . . . . . . 48,000 1,000,000 1,000,000 42,563 29,697 -34.27 463.37
December 31,
1988 . . . . . . 64,000 1,000,000 1,000,000 60,045 47,179 -16.70 214.72
December 31,
1989 . . . . . . 80,000 1,000,000 1,000,000 69,113 56,247 -15.33 130.87
December 31,
1990 . . . . . . 96,000 1,000,000 1,000,000 79,401 66,997 -13.01 90.84
December 31,
1991 . . . . . . 112,000 1,000,000 1,000,000 119,247 108,228 -1.05 67.95
December 31,
1992 . . . . . . 128,000 1,000,000 1,000,000 157,896 148,262 3.86 53.32
December 31,
1993 . . . . . . 144,000 1,000,000 1,000,000 201,189 192,940 6.72 43.27
December 31,
1994 . . . . . . 160,000 1,000,000 1,000,000 208,379 201,515 4.75 35.98
December 31,
1995. . . . . . . 176,000 1,000,000 1,000,000 262,022 256,576 6.94 30.49
December 31,
1996 . . . . . . 192,000 1,000,000 1,000,000 308,587 304,627 7.70 26.21
</TABLE>
ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6,
1989 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1989 . . . . . . 16,000 1,000,000 1,000,000 13,583 7,514 -90.73% --
December 31,
1990 . . . . . . 32,000 1,000,000 1,000,000 27,598 21,529 -40.93 2,130.09%
December 31,
1991 . . . . . . 48,000 1,000,000 1,000,000 46,904 34,038 -24.47 447.21
December 31,
1992 . . . . . . 64,000 1,000,000 1,000,000 65,176 52,310 -10.91 210.30
December 31,
1993 . . . . . . 80,000 1,000,000 1,000,000 91,834 78,968 -.56 128.98
December 31,
1994 . . . . . . 96,000 1,000,000 1,000,000 97,152 84,747 -4.43 89.83
December 31,
1995 . . . . . . 112,000 1,000,000 1,000,000 126,191 115,172 .84 67.33
December 31,
1996 . . . . . . 128,000 1,000,000 1,000,000 156,439 146,805 3.57 52.92
</TABLE>
A-68
<PAGE>
OPTION B DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26,
1983 . . . . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,014,491 14,491 8,422 -84.19% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,026,854 26,854 20,785 -42.51 2,018.29%
December 31,
1985 . . . . . . 48,000 1,000,000 1,060,380 60,380 47,514 -.75 449.10
December 31,
1986 . . . . . . 64,000 1,000,000 1,129,535 129,535 116,669 34.41 219.75
December 31,
1987 . . . . . . 80,000 1,000,000 1,205,770 205,770 192,904 39.05 139.32
December 31,
1988 . . . . . . 96,000 1,000,000 1,198,653 198,653 186,364 23.43 96.96
December 31,
1989 . . . . . . 112,000 1,000,000 1,270,045 270,045 259,141 24.83 74.82
December 31,
1990 . . . . . . 128,000 1,000,000 1,268,560 268,560 259,041 17.93 58.97
December 31,
1991 . . . . . . 144,000 1,000,000 1,423,320 423,320 415,186 23.43 50.71
December 31,
1992 . . . . . . 160,000 1,000,000 1,407,176 407,176 400,428 18.09 42.22
December 31,
1993 . . . . . . 176,000 1,000,000 1,476,651 476,651 471,329 17.43 36.83
December 31,
1994 . . . . . . 192,000 1,000,000 1,447,430 447,430 443,593 13.55 31.60
December 31,
1995 . . . . . . 208,000 1,000,000 1,631,940 631,940 629,588 16.22 29.35
December 31,
1996 . . . . . . 224,000 1,000,000 1,770,021 770,021 769,154 16.56 27.04
</TABLE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26,
1983 . . . . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,013,680 13,680 7,611 -88.18% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,028,888 28,888 22,819 -34.64 2,021.51%
December 31,
1985 . . . . . . 48,000 1,000,000 1,047,652 47,652 34,786 -22.50 446.02
December 31,
1986 . . . . . . 64,000 1,000,000 1,067,324 67,324 54,458 -8.62 213.62
December 31,
1987 . . . . . . 80,000 1,000,000 1,081,045 81,045 68,179 -6.78 132.32
December 31,
1988 . . . . . . 96,000 1,000,000 1,099,811 99,811 87,522 -3.25 93.15
December 31,
1989 . . . . . . 112,000 1,000,000 1,123,830 123,830 112,926 .25 70.70
December 31,
1990 . . . . . . 128,000 1,000,000 1,145,530 145,530 136,011 1.57 56.21
December 31,
1991 . . . . . . 144,000 1,000,000 1,183,177 183,177 175,044 4.44 46.52
December 31,
1992 . . . . . . 160,000 1,000,000 1,208,239 208,239 201,491 4.68 39.25
December 31,
1993 . . . . . . 176,000 1,000,000 1,244,514 244,514 239,192 5.61 33.91
December 31,
1994 . . . . . . 192,000 1,000,000 1,246,235 246,235 242,398 3.91 29.32
December 31,
1995 . . . . . . 208,000 1,000,000 1,309,757 309,757 307,406 5.96 26.33
December 31,
1996 . . . . . . 224,000 1,000,000 1,334,246 334,246 333,379 5.61 23.51
</TABLE>
A-69
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26,
1983 . . . . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,013,710 13,710 7,641 -88.04% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,028,015 28,015 21,946 -38.01 2,020.13%
December 31,
1985 . . . . . . 48,000 1,000,000 1,043,254 43,254 30,388 -31.15 444.95
December 31,
1986 . . . . . . 64,000 1,000,000 1,058,770 58,770 45,904 -17.49 212.76
December 31,
1987 . . . . . . 80,000 1,000,000 1,074,953 74,953 62,087 -10.72 131.96
December 31,
1988 . . . . . . 96,000 1,000,000 1,092,731 92,731 80,442 -6.22 92.86
December 31,
1989 . . . . . . 112,000 1,000,000 1,113,048 113,048 102,144 -2.76 70.38
December 31,
1990 . . . . . . 128,000 1,000,000 1,133,632 133,632 124,114 -.80 55.93
December 31,
1991 . . . . . . 144,000 1,000,000 1,152,843 152,843 144,710 .11 45.93
December 31,
1992 . . . . . . 160,000 1,000,000 1,169,110 169,110 162,362 .30 38.61
December 31,
1993 . . . . . . 176,000 1,000,000 1,184,796 184,796 179,474 .36 33.07
December 31,
1994 . . . . . . 192,000 1,000,000 1,203,402 203,402 199,565 .66 28.79
December 31,
1995 . . . . . . 208,000 1,000,000 1,225,863 225,863 223,511 1.13 25.42
December 31,
1996 . . . . . . 224,000 1,000,000 1,247,899 247,899 247,033 1.42 22.67
</TABLE>
ZENITH STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987 . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . 16,000 1,000,000 1,011,256 11,256 5,187 -81.45% --
December 31,
1988 . . . . 32,000 1,000,000 1,026,538 26,538 20,470 -32.92 1,052.13%
December 31,
1989 . . . . 48,000 1,000,000 1,050,361 50,361 37,494 -14.16 337.20
December 31,
1990 . . . . 64,000 1,000,000 1,059,852 59,852 46,986 -13.83 179.18
December 31,
1991 . . . . 80,000 1,000,000 1,091,373 91,373 78,507 -.71 117.50
December 31,
1992 . . . . 96,000 1,000,000 1,110,481 110,481 98,538 .82 85.01
December 31,
1993 . . . . 112,000 1,000,000 1,133,312 133,312 122,755 2.50 65.61
December 31,
1994 . . . . 128,000 1,000,000 1,146,026 146,026 136,854 1.60 52.60
December 31,
1995 . . . . 144,000 1,000,000 1,214,419 214,419 206,631 7.63 44.45
December 31,
1996 . . . . 160,000 1,000,000 1,271,698 271,698 265,296 9.55 38.23
</TABLE>
ZENITH MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987 . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . . . 16,000 1,000,000 1,012,752 12,752 6,683 -72.91% --
December 31,
1988 . . . . . . 32,000 1,000,000 1,027,235 27,235 21,167 -30.80 1,052.62%
December 31,
1989 . . . . . . 48,000 1,000,000 1,047,102 47,102 34,236 -19.06 336.64
December 31,
1990 . . . . . . 64,000 1,000,000 1,061,403 61,403 48,537 -12.42 179.31
December 31,
1991 . . . . . . 80,000 1,000,000 1,087,111 87,111 74,245 -2.79 117.29
December 31,
1992 . . . . . . 96,000 1,000,000 1,105,617 105,617 93,674 -.77 84.84
December 31,
1993 . . . . . . 112,000 1,000,000 1,128,816 128,816 118,259 1.48 65.49
December 31,
1994 . . . . . . 128,000 1,000,000 1,138,582 138,582 129,410 .26 52.43
December 31,
1995 . . . . . . 144,000 1,000,000 1,195,635 195,635 187,848 5.63 44.12
December 31,
1996 . . . . . . 160,000 1,000,000 1,234,958 234,958 228,556 6.78 37.69
</TABLE>
A-70
<PAGE>
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30,
1993 . . . . . . $16,000 $1,000,000 $1,013,861 $13,861 $ 7,792 -- --
December 31,
1993 . . . . . . 16,000 1,000,000 1,014,576 14,576 8,508 -60.98% --
December 31,
1994 . . . . . . 32,000 1,000,000 1,027,143 27,143 21,074 -31.01 1,047.72%
December 31,
1995 . . . . . . 48,000 1,000,000 1,052,648 52,648 39,782 -10.86 336.86
December 31,
1996 . . . . . . 64,000 1,000,000 1,075,763 75,736 62,870 -.82 180.24
</TABLE>
ZENITH AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30,
1993 . . . . . . $16,000 $1,000,000 $1,013,861 $13,861 $ 7,792 -- --
December 31,
1993 . . . . . . 16,000 1,000,000 1,014,645 14,645 8,576 -60.51% --
December 31,
1994 . . . . . . 32,000 1,000,000 1,027,403 27,403 21,334 -30.23 1,047.90%
December 31,
1995 . . . . . . 48,000 1,000,000 1,051,266 51,266 38,400 -12.83 336.63
December 31,
1996 . . . . . . 64,000 1,000,000 1,073,268 73,268 60,401 -2.65 180.04
</TABLE>
ZENITH SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994 . . . $16,000 $1,000,000 $1,013,861 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,012,279 12,279 6,210 -75.87% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,031,138 31,138 25,069 -19.29 1,060.27%
December 31,
1996 . . . . . . 48,000 1,000,000 1,055,041 55,041 42,175 -7.59 338.75
</TABLE>
ZENITH EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . $16,000 $1,000,000 $1,013,861 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . 16,000 1,000,000 1,012,801 12,801 6,733 -100.00% --
December 31,
1995 . . . . . 32,000 1,000,000 1,031,155 31,155 25,087 -32.54 3,363.77%
December 31,
1996 . . . . . 48,000 1,000,000 1,048,176 48,176 35,310 -24.90 537.86
</TABLE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,013,861 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,013,532 13,532 7,463 -98.96% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,029,800 29,800 23,731 -38.94 3,359.77%
December 31,
1996 . . . . . . 48,000 1,000,000 1,047,849 47,849 34,983 -25.61 537.76
</TABLE>
A-71
<PAGE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,013,861 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,013,117 13,117 7,049 -100.00% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,031,119 31,119 25,050 -32.72 3,363.66%
December 31,
1996 . . . . . . 48,000 1,000,000 1,052,316 52,316 39,450 -16.22 539.12
</TABLE>
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,013,861 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,013,863 13,863 7,794 -98.65% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,027,963 27,963 21,895 -47.57 3,354.36%
December 31,
1996 . . . . . . 48,000 1,000,000 1,042,650 42,650 29,784 -37.57 536.17
</TABLE>
EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9,
1986 . . . . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1986 . . . . . . 16,000 1,000,000 1,013,589 13,589 7,521 -96.38% --
December 31,
1987 . . . . . . 32,000 1,000,000 1,023,546 23,546 17,477 -63.03 2,779.50%
December 31,
1988 . . . . . . 48,000 1,000,000 1,041,189 41,189 28,323 -39.05 502.03
December 31,
1989 . . . . . . 64,000 1,000,000 1,060,885 60,885 48,019 -16.28 228.66
December 31,
1990 . . . . . . 80,000 1,000,000 1,064,237 64,237 51,371 -19.78 138.00
December 31,
1991 . . . . . . 96,000 1,000,000 1,097,066 97,066 84,547 -4.67 96.64
December 31,
1992 . . . . . . 112,000 1,000,000 1,126,145 126,145 115,011 .82 72.98
December 31,
1993 . . . . . . 128,000 1,000,000 1,160,068 160,068 150,318 4.28 58.04
December 31,
1994 . . . . . . 144,000 1,000,000 1,181,497 181,497 173,133 4.31 47.54
December 31,
1995 . . . . . . 160,000 1,000,000 1,257,002 257,002 250,023 9.17 40.82
December 31,
1996 . . . . . . 176,000 1,000,000 1,302,262 302,262 296,693 9.62 35.30
</TABLE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28,
1987 . . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . 16,000 1,000,000 1,011,595 11,595 5,526 -68.38% --
December 31,
1988 . . . . 32,000 1,000,000 1,027,179 27,179 21,110 -25.93 720.03%
December 31,
1989 . . . . 48,000 1,000,000 1,048,802 48,802 35,936 -14.33 279.02
December 31,
1990 . . . . 64,000 1,000,000 1,060,370 60,370 47,504 -11.94 158.60
December 31,
1991 . . . . 80,000 1,000,000 1,078,207 78,207 65,341 -6.85 106.76
December 31,
1992 . . . . 96,000 1,000,000 1,079,990 79,990 68,509 -9.79 78.13
December 31,
1993 . . . . 112,000 1,000,000 1,125,323 125,323 115,227 .72 61.64
December 31,
1994 . . . . 128,000 1,000,000 1,137,413 137,413 128,702 .12 49.82
December 31,
1995 . . . . 144,000 1,000,000 1,164,829 164,829 157,503 1.81 41.68
December 31,
1996 . . . . 160,000 1,000,000 1,196,804 196,804 190,863 3.23 35.67
</TABLE>
A-72
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19,
1985 . . . . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1985 . . . . . . 16,000 1,000,000 1,014,274 14,274 8,205 -90.62% --
December 31,
1986 . . . . . . 32,000 1,000,000 1,029,758 29,758 23,690 -33.72 2,396.09%
December 31,
1987 . . . . . . 48,000 1,000,000 1,042,554 42,554 29,688 -34.29 474.74
December 31,
1988 . . . . . . 64,000 1,000,000 1,060,019 60,019 47,153 -16.73 221.19
December 31,
1989 . . . . . . 80,000 1,000,000 1,069,061 69,061 56,195 -15.37 135.19
December 31,
1990 . . . . . . 96,000 1,000,000 1,079,309 79,309 66,905 -13.06 94.24
December 31,
1991 . . . . . . 112,000 1,000,000 1,119,043 119,043 108,024 -1.10 71.75
December 31,
1992 . . . . . . 128,000 1,000,000 1,157,513 157,513 147,879 3.79 57.30
December 31,
1993 . . . . . . 144,000 1,000,000 1,200,524 200,524 192,275 6.64 47.42
December 31,
1994 . . . . . . 160,000 1,000,000 1,207,472 207,472 200,608 4.66 39.67
December 31,
1995 . . . . . . 176,000 1,000,000 1,260,674 260,674 255,228 6.85 34.46
December 31,
1996 . . . . . . 192,000 1,000,000 1,306,964 306,964 303,004 7.62 30.31
</TABLE>
ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6,
1989 . . . . . . $ 16,000 $1,000,000 $1,013,861 $ 13,861 $ 7,792 -- --
December 31,
1989 . . . . . . 16,000 1,000,000 1,013,583 13,583 7,514 -90.73% --
December 31,
1990 . . . . . . 32,000 1,000,000 1,027,596 27,596 21,527 -40.94 2,178.20%
December 31,
1991 . . . . . . 48,000 1,000,000 1,046,894 46,894 34,028 -24.49 459.19
December 31,
1992 . . . . . . 64,000 1,000,000 1,065,147 65,147 52,281 -10.94 217.15
December 31,
1993 . . . . . . 80,000 1,000,000 1,091,762 91,762 78,896 -.60 134.58
December 31,
1994 . . . . . . 96,000 1,000,000 1,097,034 97,034 84,630 -4.48 93.92
December 31,
1995 . . . . . . 112,000 1,000,000 1,125,967 125,967 114,948 .78 71.30
December 31,
1996 . . . . . . 128,000 1,000,000 1,156,053 156,053 146,419 3.50 56.83
</TABLE>
- ---------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series investment advisory fee of .50% of average daily net assets for
the period through December 31, 1987 and its current advisory fee schedule
thereafter.
A-73
<PAGE>
OPTION C DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26,
1983 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,000,000 14,491 8,422 -84.19% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,000,000 26,856 20,787 -42.50 1,975.63%
December 31,
1985 . . . . . . 48,000 1,000,000 1,000,000 60,394 47,528 -.73 434.27
December 31,
1986 . . . . . . 64,000 1,000,000 1,000,000 129,603 116,737 34.44 206.69
December 31,
1987 . . . . . . 80,000 1,000,000 1,000,000 205,962 193,096 39.09 127.42
December 31,
1988 . . . . . . 96,000 1,000,000 1,000,000 198,941 186,652 23.49 88.99
December 31,
1989 . . . . . . 112,000 1,000,000 1,000,000 270,617 259,713 24.89 66.82
December 31,
1990 . . . . . . 128,000 1,000,000 1,000,000 269,342 259,823 18.01 52.57
December 31,
1991 . . . . . . 144,000 1,000,000 1,000,000 424,971 416,837 23.52 42.74
December 31,
1992 . . . . . . 160,000 1,000,000 1,000,000 409,235 402,486 18.18 35.59
December 31,
1993 . . . . . . 176,000 1,000,000 1,000,000 479,444 474,123 17.53 30.19
December 31,
1994 . . . . . . 192,000 1,000,000 1,000,000 450,141 446,304 13.64 25.98
December 31,
1995 . . . . . . 208,000 1,000,000 1,000,000 635,988 633,637 16.31 22.62
December 31,
1996 . . . . . . 224,000 1,000,000 1,000,000 775,345 774,478 16.65 19.89
</TABLE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26,
1983 . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . 16,000 1,000,000 1,000,000 13,680 7,611 -88.18% --
December 31,
1984 . . . . 32,000 1,000,000 1,000,000 28,890 22,822 -34.63 1,975.63%
December 31,
1985 . . . . 48,000 1,000,000 1,000,000 47,663 34,797 -22.48 434.27
December 31,
1986 . . . . 64,000 1,000,000 1,000,000 67,356 54,490 -8.59 206.69
December 31,
1987 . . . . 80,000 1,000,000 1,000,000 81,112 68,245 -6.74 127.42
December 31,
1988 . . . . 96,000 1,000,000 1,000,000 99,937 87,648 -3.20 88.99
December 31,
1989 . . . . 112,000 1,000,000 1,000,000 124,057 113,153 .31 66.82
December 31,
1990 . . . . 128,000 1,000,000 1,000,000 145,900 136,381 1.64 52.57
December 31,
1991 . . . . 144,000 1,000,000 1,000,000 183,803 175,669 4.52 42.74
December 31,
1992 . . . . 160,000 1,000,000 1,000,000 209,173 202,424 4.78 35.59
December 31,
1993 . . . . 176,000 1,000,000 1,000,000 245,781 240,459 5.71 30.19
December 31,
1994 . . . . 192,000 1,000,000 1,000,000 247,530 243,694 4.00 25.98
December 31,
1995 . . . . 208,000 1,000,000 1,000,000 311,461 309,109 6.04 22.62
December 31,
1996 . . . . 224,000 1,000,000 1,000,000 336,221 335,345 5.69 19.89
</TABLE>
A-74
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26,
1983 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1983 . . . . . . 16,000 1,000,000 1,000,000 13,710 7,642 -88.04% --
December 31,
1984 . . . . . . 32,000 1,000,000 1,000,000 28,017 21,948 -38.00 1,975.63%
December 31,
1985 . . . . . . 48,000 1,000,000 1,000,000 43,264 30,398 -31.13 434.27
December 31,
1986 . . . . . . 64,000 1,000,000 1,000,000 58,797 45,931 -17.46 206.69
December 31,
1987 . . . . . . 80,000 1,000,000 1,000,000 75,013 62,147 -10.68 127.42
December 31,
1988 . . . . . . 96,000 1,000,000 1,000,000 92,845 80,556 -6.17 88.99
December 31,
1989 . . . . . . 112,000 1,000,000 1,000,000 113,251 102,347 -2.70 66.82
December 31,
1990 . . . . . . 128,000 1,000,000 1,000,000 133,966 124,447 -.73 52.57
December 31,
1991 . . . . . . 144,000 1,000,000 1,000,000 153,354 145,221 .19 42.74
December 31,
1992 . . . . . . 160,000 1,000,000 1,000,000 169,848 163,099 .40 35.59
December 31,
1993 . . . . . . 176,000 1,000,000 1,000,000 185,716 180,395 .46 30.19
December 31,
1994 . . . . . . 192,000 1,000,000 1,000,000 204,420 200,583 .74 25.98
December 31,
1995 . . . . . . 208,000 1,000,000 1,000,000 227,033 224,682 1.21 22.62
December 31,
1996 . . . . . . 224,000 1,000,000 1,000,000 249,272 248,406 1.50 19.89
</TABLE>
ZENITH STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1,
1987 . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . 16,000 1,000,000 1,000,000 11,256 5,188 -81.45% --
December 31,
1988 . . . . 32,000 1,000,000 1,000,000 26,542 20,473 -32.91 1,033.28%
December 31,
1989 . . . . 48,000 1,000,000 1,000,000 50,376 37,510 -14.14 328.36
December 31,
1990 . . . . 64,000 1,000,000 1,000,000 59,886 47,020 -13.80 174.11
December 31,
1991 . . . . 80,000 1,000,000 1,000,000 91,460 78,594 -.66 112.69
December 31,
1992 . . . . 96,000 1,000,000 1,000,000 110,640 98,698 .87 80.87
December 31,
1993 . . . . 112,000 1,000,000 1,000,000 133,587 123,030 2.56 61.77
December 31,
1994 . . . . 128,000 1,000,000 1,000,000 146,438 137,266 1.67 49.18
December 31,
1995 . . . . 144,000 1,000,000 1,000,000 215,224 207,437 7.71 40.32
December 31,
1996 . . . . 160,000 1,000,000 1,000,000 273,032 266,630 9.65 33.80
</TABLE>
ZENITH MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1,
1987 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . . . 16,000 1,000,000 1,000,000 12,752 6,684 -72.90% --
December 31,
1988 . . . . . . 32,000 1,000,000 1,000,000 27,239 21,170 -30.79 1,033.28%
December 31,
1989 . . . . . . 48,000 1,000,000 1,000,000 47,116 34,250 -19.04 328.36
December 31,
1990 . . . . . . 64,000 1,000,000 1,000,000 61,438 48,572 -12.39 174.11
December 31,
1991 . . . . . . 80,000 1,000,000 1,000,000 87,193 74,327 -2.75 112.69
December 31,
1992 . . . . . . 96,000 1,000,000 1,000,000 105,767 93,825 -.72 80.87
December 31,
1993 . . . . . . 112,000 1,000,000 1,000,000 129,080 118,522 1.54 61.77
December 31,
1994 . . . . . . 128,000 1,000,000 1,000,000 138,970 129,797 .33 49.18
December 31,
1995 . . . . . . 144,000 1,000,000 1,000,000 196,363 188,575 5.71 40.32
December 31,
1996 . . . . . . 160,000 1,000,000 1,000,000 236,097 229,695 6.87 33.80
</TABLE>
A-75
<PAGE>
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30,
1993 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1993 . . . . . . 16,000 1,000,000 1,000,000 14,577 8,508 -60.97% --
December 31,
1994 . . . . . . 32,000 1,000,000 1,000,000 27,146 21,078 -31.00 1,028.55%
December 31,
1995 . . . . . . 48,000 1,000,000 1,000,000 52,666 39,800 -10.84 327.65
December 31,
1996 . . . . . . 64,000 1,000,000 1,000,000 75,783 62,917 -.78 173.87
</TABLE>
ZENITH AVANTI GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30,
1993 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1993 . . . . . . 16,000 1,000,000 1,000,000 14,645 8,576 -60.51% --
December 31,
1994 . . . . . . 32,000 1,000,000 1,000,000 27,406 21,338 -30.21 1,028.55%
December 31,
1995 . . . . . . 48,000 1,000,000 1,000,000 51,283 38,417 -12.80 327.65
December 31,
1996 . . . . . . 64,000 1,000,000 1,000,000 73,313 60,447 -2.62 173.87
</TABLE>
ZENITH SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2,
1994 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,000,000 12,279 6,210 -75.86% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,000,000 31,142 25,073 -19.28 1,038.05%
December 31,
1996 . . . . . . 48,000 1,000,000 1,000,000 55,058 42,192 -7.57 329.07
</TABLE>
ZENITH EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,000,000 12,802 6,733 -100.00% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,000,000 31,158 25,089 -32.53 3,271.69%
December 31,
1996 . . . . . . 48,000 1,000,000 1,000,000 48,185 35,319 -24.88 522.96
</TABLE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,000,000 13,532 7,464 -98.96% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,000,000 29,802 23,733 -38.93 3,271.69%
December 31,
1996 . . . . . . 48,000 1,000,000 1,000,000 47,858 34,992 -25.59 522.96
</TABLE>
A-76
<PAGE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,000,000 13,117 7,049 -100.00% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,000,000 31,121 25,052 -32.71 3,271.69%
December 31,
1996 . . . . . . 48,000 1,000,000 1,000,000 52,326 39,460 -16.20 522.96
</TABLE>
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31,
1994 . . . . . . $16,000 $1,000,000 $1,000,000 $13,861 $ 7,792 -- --
December 31,
1994 . . . . . . 16,000 1,000,000 1,000,000 13,863 7,795 -98.65% --
December 31,
1995 . . . . . . 32,000 1,000,000 1,000,000 27,965 21,896 -47.56 3,271.69%
December 31,
1996 . . . . . . 48,000 1,000,000 1,000,000 42,658 29,792 -37.55 522.96
</TABLE>
EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9,
1986 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1986 . . . . . . 16,000 1,000,000 1,000,000 13,590 7,521 -96.38% --
December 31,
1987 . . . . . . 32,000 1,000,000 1,000,000 23,548 17,479 -63.02 2,723.89%
December 31,
1988 . . . . . . 48,000 1,000,000 1,000,000 41,197 28,331 -39.03 490.23
December 31,
1989 . . . . . . 64,000 1,000,000 1,000,000 60,910 48,044 -16.25 221.84
December 31,
1990 . . . . . . 80,000 1,000,000 1,000,000 64,281 51,415 -19.75 133.88
December 31,
1991 . . . . . . 96,000 1,000,000 1,000,000 97,173 84,653 -4.62 92.44
December 31,
1992 . . . . . . 112,000 1,000,000 1,000,000 126,352 115,217 .88 68.91
December 31,
1993 . . . . . . 128,000 1,000,000 1,000,000 160,443 150,694 4.34 53.96
December 31,
1994 . . . . . . 144,000 1,000,000 1,000,000 182,079 173,714 4.39 43.72
December 31,
1995 . . . . . . 160,000 1,000,000 1,000,000 258,099 251,120 9.26 36.31
December 31,
1996 . . . . . . 176,000 1,000,000 1,000,000 303,832 298,262 9.72 30.74
</TABLE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28,
1987 . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1987 . . . . 16,000 1,000,000 1,000,000 11,596 5,527 -68.38% --
December 31,
1988 . . . . 32,000 1,000,000 1,000,000 27,183 21,115 -25.92 707.99%
December 31,
1989 . . . . 48,000 1,000,000 1,000,000 48,821 35,955 -14.30 272.18
December 31,
1990 . . . . 64,000 1,000,000 1,000,000 60,413 47,547 -11.91 154.15
December 31,
1991 . . . . 80,000 1,000,000 1,000,000 78,294 65,428 -6.81 103.01
December 31,
1992 . . . . 96,000 1,000,000 1,000,000 80,122 68,641 -9.74 75.31
December 31,
1993 . . . . 112,000 1,000,000 1,000,000 125,608 115,513 .79 58.22
December 31,
1994 . . . . 128,000 1,000,000 1,000,000 137,840 129,129 .20 46.75
December 31,
1995 . . . . 144,000 1,000,000 1,000,000 165,500 158,174 1.90 38.57
December 31,
1996 . . . . 160,000 1,000,000 1,000,000 197,835 191,894 3.32 32.48
</TABLE>
A-77
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19,
1985 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1985 . . . . . . 16,000 1,000,000 1,000,000 14,274 8,205 -90.62% --
December 31,
1986 . . . . . . 32,000 1,000,000 1,000,000 29,761 23,692 -33.71 2,337.90%
December 31,
1987 . . . . . . 48,000 1,000,000 1,000,000 42,563 29,697 -34.27 463.37
December 31,
1988 . . . . . . 64,000 1,000,000 1,000,000 60,045 47,179 -16.70 214.72
December 31,
1989 . . . . . . 80,000 1,000,000 1,000,000 69,113 56,247 -15.33 130.87
December 31,
1990 . . . . . . 96,000 1,000,000 1,000,000 79,401 66,997 -13.01 90.84
December 31,
1991 . . . . . . 112,000 1,000,000 1,000,000 119,247 108,228 -1.05 67.95
December 31,
1992 . . . . . . 128,000 1,000,000 1,000,000 157,896 148,262 3.86 53.32
December 31,
1993 . . . . . . 144,000 1,000,000 1,000,000 201,189 192,940 6.72 43.27
December 31,
1994 . . . . . . 160,000 1,000,000 1,000,000 208,379 201,515 4.75 35.98
December 31,
1995 . . . . . . 176,000 1,000,000 1,000,000 262,022 256,576 6.94 30.49
December 31,
1996 . . . . . . 192,000 1,000,000 1,000,000 308,587 304,627 7.70 26.21
</TABLE>
ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- ---------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6,
1989 . . . . . . $ 16,000 $1,000,000 $1,000,000 $ 13,861 $ 7,792 -- --
December 31,
1989 . . . . . . 16,000 1,000,000 1,000,000 13,583 7,514 -90.73% --
December 31,
1990 . . . . . . 32,000 1,000,000 1,000,000 27,598 21,529 -40.93 2,130.09%
December 31,
1991 . . . . . . 48,000 1,000,000 1,000,000 46,904 34,038 -24.47 447.21
December 31,
1992 . . . . . . 64,000 1,000,000 1,000,000 65,176 52,310 -10.91 210.30
December 31,
1993 . . . . . . 80,000 1,000,000 1,000,000 91,834 78,968 -.56 128.98
December 31,
1994 . . . . . . 96,000 1,000,000 1,000,000 97,152 84,747 -4.43 89.83
December 31,
1995 . . . . . . 112,000 1,000,000 1,000,000 126,191 115,172 .84 67.33
December 31,
1996 . . . . . . 128,000 1,000,000 1,000,000 156,439 146,805 3.57 52.92
</TABLE>
A-78
<PAGE>
APPENDIX C
LONG TERM MARKET TRENDS
The information below is a comparison of the average annual returns of common
stock, high grade corporate bonds and 30-day U.S. Treasury bills over 20-year
and 30-year holding periods.* The average annual returns assume the reinvestment
of dividends, capital gains and interest. This is an historical record and is
not intended as a projection of future performance. Charges associated with a
variable life policy are not reflected.
The data indicates that, historically, the investment performance of common
stocks over long periods of time has been positive and has generally been
superior to that of long-term, high grade debt securities. Common stocks have,
however, been subject to more dramatic market adjustments over short periods of
time. These trends indicate the potential advantages of holding a variable life
insurance policy for a long period of time.
Over the 52 20-year time periods beginning in 1926 and ending in 1996 (i.e.,
1926-1945, 1927-1946, and so on through 1977-1996):
-- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 49 of the 52 periods.
-- The average annual return of common stocks surpassed that of U.S. Treasury
bills in each of the 52 periods.
-- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 52 periods.
Over the 42 30-year time periods beginning in 1926 and ending in 1996, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 42 periods.
From 1926 through 1996 the average annual return for common stocks was 10.7%,
compared to 5.6% for high grade, long-term corporate bonds, 3.7% for U.S.
Treasury bills and 3.1% for the Consumer Price Index.
- ---------
* Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
A-79
<PAGE>
---------------------
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 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.
---------------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
0- 5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 5.00% 10.00% 15.00% 20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
------ -------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1 year . . . . . 28% 4% 11% 7% 11% 38%
5 years . . . . 10% 15% 15% 31% 19% 9%
10 years . . . . 3% 10% 34% 24% 26% 2%
20 years . . . . 0% 6% 32% 56% 6% 0%
</TABLE>
- ---------
Source: Stocks, Bonds, Bills and Inflation 1997 Yearbook(TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
A-80
<PAGE>
DOLLAR COST AVERAGING
Dollar cost averaging allows a person to take advantage of the historical
long-term stock market results, assuming that they continue, although it does
not guarantee a profit or protect against a loss. If an investor follows a
program of dollar cost averaging on a long-term basis, and the stock fund
selected performs at least as well as the S&P 500 has historically, it is likely
although not guaranteed that the price at which shares are surrendered, for
whatever reason, will be higher than the average cost per share.
An investor using dollar cost averaging invests the same amount of money in
the same professionally managed fund at regular intervals over a long period of
time. Dollar cost averaging keeps an investor from investing too much when the
price of shares is high and too little when the price is low. When the price of
shares is low, the money invested buys more shares. When it is high, the money
invested buys fewer shares. If the investor has the ability and desire to
maintain this program over a long period of time (for example, 20 years), and
the stock fund chosen follows the historical upward market trends, the price at
which the shares are sold should be higher than their average cost. This price
could be lower, however, if the fund chosen does not follow these historical
trends.
Investors contemplating the use of dollar cost averaging should consider their
ability to continue the on-going purchases so that they can take advantage of
periods of low price levels.
A-81
<PAGE>
APPENDIX D
USES OF SURVIVORSHIP LIFE INSURANCE
The following are examples of ways in which the Policy can be used to address
certain personal, estate and business planning objectives.
ESTATE TAX PAYMENT
Federal estate taxes may be deferred for a married couple until the second
death. At that time, the estate tax liability may exceed 50% of a family's
estate. Survivorship life is especially suited to fund for this liability at the
second death.
EDUCATION AND SUPPORT OF CHILDREN
Often, parents will have sufficient insurance to provide for children if
either of the parents dies. However, few have sufficient insurance to provide
for children in the event both parents die while the children are in need of
education and support. Survivorship life can provide protection against the
extraordinary expenses that arise if both parents die while the children are
dependent.
CHARITABLE GIVING
Life insurance can be used to facilitate charitable giving, and survivorship
life is especially well suited for this purpose. Assets left to charity at death
can be deductible from a decedent's taxable estate. An individual may be
reluctant to give assets to charity if a surviving spouse may need those assets
for support or if the individual may want the children to receive the value of
those assets. Survivorship life can enable a client to defer the charitable gift
until the spouse dies. At the spouse's death, assets that otherwise would be
subject to estate tax can pass to charity. The children can be provided for
using survivorship life, which provides for payment of death benefit proceeds
directly to the children at the same time that the assets in the spouse's estate
pass to charity. Children can receive those life insurance proceeds free of
income and estate taxes.
GIFTS TO GRANDCHILDREN
Grandparents can provide substantial gifts to grandchildren using survivorship
life. For very large estates, survivorship life can take advantage of exceptions
to the generation skipping tax to maximize the gifts grandchildren will receive.
BUSINESS USES
Survivorship life can be used in business planning to provide benefits or
funding for replacement of key people, for buy-sell agreements and the like. The
policy can cover two owners, a parent and child active in the business, two
related or unrelated key executives, an executive and the executive's spouse,
etc. The policy can be used to accumulate cash to help fund a living buyout
under a buy-sell agreement or a deferred compensation plan for executives or for
directors.
Because the Policy provides a death benefit and for the accumulation of cash
value, the Policy can be used for various individual and business planning
purposes. Purchasing the Policy in part for such purposes entails certain risks,
particularly if the Policy's cash value, as opposed to its death benefit, will
be the principal Policy feature used for such planning purposes. If the
investment performance of the Sub-Accounts to which cash value is allocated is
poorer than expected, or if sufficient premiums are not paid or cash values
maintained, the Policy may lapse or may not accumulate sufficient cash value or
net cash value to fund the purpose for which the Policy was purchased. Because
the Policy is designed to provide benefits on a long-term basis, before
purchasing a Policy for a specialized purpose, a purchaser should consider
whether the long-term nature of the Policy is consistent with the purpose for
which it is being considered. If you wish to access your Policy's cash value,
through loans, surrenders or withdrawals, you should consult your tax advisor
about possible tax consequences. (See "Tax Considerations".)
A-82
<PAGE>
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published a
"Report to the Congress on the Taxation of Life Insurance Company Products" in
March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax Treatment
of Life Insurance Products and Other Retirement Savings Plans". Because it is a
convenient summary of the relevant tax characteristics of these products and
plans, we have reprinted it here, and added footnotes to reflect exceptions to
the general rules.
---------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND
OTHER RETIREMENT SAVINGS PLANS
<TABLE>
<CAPTION>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Annual Contribution
Limits No No Yes Yes
Income Eligibility Limits No No Yes** No
Borrowing Treated as
Distributions No* Yes Loans not Yes,
allowed beyond
$50,000
Income Ordering Rules
(Income included in
First Distribution) No* Yes Yes Yes
Early Withdrawal
Penalties No* Yes*** Yes*** Yes***
Minimum Distribution
Rules by Age 70 1/2 No No Yes Yes
Maximum Annual
Distribution Rules No No Yes Yes
Anti-discrimination Rules No No No Yes
</TABLE>
- ---------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
The foregoing information is not intended as tax advice. You should consult
with your own tax advisor for more complete information.
A-83
<PAGE>
APPENDIX F
ENHANCED DEATH BENEFIT LIMITATIONS
As noted under "Policy Values and Benefits" in the Prospectus, the enhancement
factor that applies to the Option A and B death benefits is subject to certain
limits in order to contain cost of insurance charges against the Policy. The
maximum death benefit under Option A is the lesser of (i) the percent of the
cash value at the age of the younger insured at the start of the Policy year as
shown in Table II below and (ii) the cash value of the Policy times: the face
amount divided by the Tabular Cash Value of the Policy at the start of the
Policy month. The maximum death benefit under Option B is the lesser of (i) the
percent of the cash value at the age of the younger insured at the start of the
Policy year as shown in Table II below and (ii) the cash value of the Policy
times: the sum of the face amount plus the Tabular Cash Value, divided by the
Tabular Cash Value.
In no event will the death benefit be less than the amount required to satisfy
tax law requirements.
The Tabular Cash Value at the start of each Policy month assumes: the
Guaranteed Death Benefit 1 Premium, as shown in the Policy, is paid on the first
day of each Policy year; maximum charges are charged; and the Actual Investment
Return is equivalent to an annual rate of 4% in all policy years.
---------------------
TABLE II
<TABLE>
<CAPTION>
AGE PERCENT AGE PERCENT
--- ---------- --- --------
<S> <C> <S> <C>
20 through 40 362.50 63 179.80
41 352.35 64 176.90
42 342.20 65 174.00
43 332.05 66 172.55
44 321.90 67 171.10
45 311.75 68 169.65
46 303.05 69 168.20
47 294.35 70 166.75
48 285.65 71 163.85
49 276.95 72 160.95
50 268.25 73 158.05
51 258.10 74 155.15
52 247.95 75 through 90 152.25
53 237.80 91 150.80
54 227.65 92 144.20
55 217.50 93 137.70
56 211.70 94 131.30
57 205.90 95 126.25
58 200.10 96 121.20
59 194.30 97 116.15
60 188.50 98 111.10
61 185.60 99 106.05
62 182.70 100 100.00
</TABLE>
A-84
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Policy Owners and Board of Directors of New England Life Insurance
Company:
We have audited the accompanying statement of assets and liabilities of the New
England Variable Life Separate Account (comprised of Capital Growth Sub-Account,
Bond Income Sub-Account, Money Market Sub-Account, Stock Index Sub-Account,
Managed Sub-Account, Avanti Growth Sub-Account, Growth and Income Sub-Account
(formerly Value Growth Sub-Account), Small Cap Sub-Account, U.S. Government
Sub-Account, Balanced Sub-Account, Equity Growth Sub-Account, International
Equity Sub-Account, Venture Value Sub-Account, Bond Opportunities Sub-Account,
Equity-Income Sub-Account, Overseas Sub-Account, High Income Sub-Account and
Asset Manager Sub-Account) of New England Life Insurance Company (formerly New
England Variable Life Insurance Company) as of December 31, 1996, and the
related statements of operations and changes in net assets for the year then
ended for all Sub-Accounts, except for U.S. Government Sub-Account and Bond
Opportunities Sub-Account which are for the period July 1, 1996 (Commencement of
Operations) through December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
statements of New England Variable Life Separate Account for the years ended
December 31, 1995 and 1994 were audited by other auditors whose report, dated
February 6, 1996, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the respective aforementioned
sub-accounts comprising the New England Variable Life Separate Account of New
England Life Insurance Company as of December 31, 1996, and the results of their
operations and changes in their net assets for the period then ended, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 18, 1997
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Policy Owners and Board of Directors of New England Variable Life
Separate Account of New England Variable Life Insurance Company:
We have audited the statements of operations and changes in net assets of New
England Variable Life Separate Account, comprised of Capital Growth Sub-Account,
Bond Income Sub-Account, Money Market Sub-Account, Stock Index Sub-Account,
Managed Sub-Account, Avanti Growth Sub-Account, Value Growth Sub-Account, Small
Cap Sub-Account, Equity-Income Sub-Account, Overseas Sub-Account, High Income
Sub-Account and Asset Manager Sub-Account for each of the periods ended December
31, 1995 and 1994, and also comprised of the Balanced Sub-Account, Equity Growth
Sub-Account, International Equity Sub-Account, and Venture Value Sub-Account for
the period May 1, 1995 (commencement of operations) through December 31, 1995,
of New England Variable Life Insurance Company. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of operation and changes in
net assets are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statements of
operation and changes in net assets. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the statements of operation and
changes in net assets. We believe that our audits of the statements of operation
and changes in net assets provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and changes in net assets of
the respective aforementioned sub-accounts comprising New England Variable Life
Separate Account of New England Variable Life Insurance Company for each of the
aforementioned periods ending December 31, 1995 and 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 6, 1996
F-2
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-3
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
----------------------------------------------------------------
CAPITAL BOND MONEY STOCK
GROWTH INCOME MARKET INDEX MANAGED
SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in New England Zenith Fund, Variable Insurance
Products Fund, and Variable Insurance Products Fund II at
value (Note 2) . . . . . . . . . . . . . . . . . . . . . $583,330,618 $36,866,420 $32,121,040 $35,364,494 $31,136,621
SHARES COST
--------- ------------
Capital Growth
Series . . . . . . . . . . . . 1,365,890 $445,321,213
Back Bay Advisors Bond Income
Series. . . . . . . . . . . . . 349,015 36,825,901
Back Bay Advisors Money Market
Series. . . . . . . . . . . . . 321,210 32,121,040
Westpeak Stock Index Series . . 295,640 27,731,481
Back Bay Advisors Managed
Series . . . . . . . . . . . . 182,770 24,998,992
Loomis Sayles Avanti Growth
Series. . . . . . . . . . . . . 168,672 21,813,307
Westpeak Growth and Income
Series . . . . . . . . . . . . 132,562 17,011,817
Loomis Sayles Small Cap
Series . . . . . . . . . . . . 173,260 21,938,318
Salomon Bros. U.S. Government
Series. . . . . . . . . . . . . 4,330 47,709
Loomis Sayles Balanced Series . 277,182 3,519,191
Alger Equity Growth Series . . . 1,694,286 24,312,591
Draycott International Equity
Series. . . . . . . . . . . . . 441,122 4,844,072
Davis Venture Value Series . . . 1,191,836 16,778,624
Salomon Bros. Bond Opportunities
Series. . . . . . . . . . . . . 2,345 28,407
VIP Equity-Income Series . . . . 3,994,844 67,601,587
VIP Overseas Series . . . . . . 3,251,652 51,758,903
VIP High Income Series . . . . . 370,017 4,270,016
VIP II Asset Manager Series . . 244,107 3,585,079
Amount due and accrued (payable) from policy-related
transactions, net . . . . . . . . . . . . . . . . . . . 378,429 37,297 1,495,891 73,267 36,326
Dividends receivable . . . . . . . . . . . . . . . . . . -- -- 135,927 -- --
------------ ----------- ----------- ----------- -----------
Total Assets . . . . . . . . . . . . . . . . . . . . . 583,709,047 36,903,717 33,752,858 35,437,761 31,172,947
LIABILITIES
Due New England Life Insurance Company . . . . . . . . . 58,709,427 4,152,861 3,940,579 4,110,599 2,587,943
------------ ----------- ----------- ----------- -----------
Total Liabilities . . . . . . . . . . . . . . . . . . 58,709,427 4,152,861 3,940,579 4,110,599 2,587,943
------------ ----------- ----------- ----------- -----------
NET ASSETS FOR VARIABLE LIFE INSURANCE POLICIES . . . . . $524,999,620 $32,750,856 $29,812,279 $31,327,162 $28,585,004
============ =========== =========== =========== ===========
<CAPTION>
GROWTH
AVANTI AND
GROWTH INCOME
SUB- SUB-
ACCOUNT ACCOUNT
- ----------- ----------
<C> <C>
$26,636,623 $20,118,907
69,074 23,180
-- --
- ----------- -----------
26,705,697 20,142,087
4,214,337 2,970,391
- ----------- -----------
4,214,337 2,970,391
- ----------- -----------
$22,491,360 $17,171,696
=========== ===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- ------------------------------------------------------------------------------------------- ------------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ----------- ---------- ---------- ----------- ------------- ----------- ------------- ----------- ----------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$24,997,883 $46,890 $3,755,816 $26,396,980 $4,980,263 $19,176,647 $27,254 $84,011,576 $61,261,119 $4,632,616
49,863 (56) 446 33,786 (6,452) 90,311 -- 39,225 91,476 388
-- -- -- -- -- -- -- -- -- --
- ----------- ------- ---------- ----------- ---------- ----------- ------- ----------- ----------- ----------
25,047,746 46,834 3,756,262 26,430,766 4,973,811 19,266,958 27,254 84,050,801 61,352,595 4,633,004
3,525,015 797 522,853 4,360,484 735,836 2,604,988 486 11,691,229 9,943,254 534,363
- ----------- ------- ---------- ----------- ---------- ----------- ------- ----------- ----------- ----------
3,525,015 797 522,853 4,360,484 735,836 2,604,988 486 11,691,229 9,943,254 534,363
- ----------- ------- ---------- ----------- ---------- ----------- ------- ----------- ----------- ----------
$21,522,731 $46,037 $3,233,409 $22,070,282 $4,237,975 $16,661,970 $26,768 $72,359,572 $51,409,341 $4,098,641
=========== ======= ========== =========== ========== =========== ======= =========== =========== ==========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ----------- -------------
ASSET
MANAGER
SUB-
ACCOUNT TOTAL
- ----------- -------------
<C> <C>
$4,132,726 $ 998,994,493
(5,236) 2,407,215
-- 135,927
- ---------- --------------
4,127,490 1,001,537,635
547,395 115,152,837
- ---------- --------------
547,395 115,152,837
- ---------- --------------
$3,580,095 $ 886,384,798
========== ==============
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
Dividends . . . . . . . . . . . . . . . . $ 32,991,113 $2,579,133 $1,306,712 $ 841,454 $2,942,415 $1,494,679 $1,804,344
EXPENSE
Mortality and expense risk charge
(Note 3) . . . . . . . . . . . . . . . . 2,981,244 192,456 160,903 168,590 158,607 137,775 100,738
------------ ---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) . . . . . . 30,009,869 2,386,677 1,145,809 672,864 2,783,808 1,356,904 1,703,606
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net unrealized appreciation (depreciation)
on investments:
Beginning of period . . . . . . . . . . 71,963,590 997,195 -- 2,853,587 5,216,548 2,881,100 2,105,777
End of period . . . . . . . . . . . . . 138,009,405 40,519 -- 7,633,013 6,137,629 4,823,316 3,107,090
------------ ---------- ---------- ---------- ---------- ---------- ----------
Net change in unrealized appreciation
(depreciation) . . . . . . . . . . . . . 66,045,815 (956,676) -- 4,779,426 921,081 1,942,216 1,001,313
Net realized gain (loss) on investments . 985,421 299 -- 1,808 69,775 27,429 18,964
------------ ---------- ---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments. . . . . . . . . . . . . . . 67,031,236 (956,377) -- 4,781,234 990,856 1,969,645 1,020,277
------------ ---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . $ 97,041,105 $1,430,300 $1,145,809 $5,454,098 $3,774,664 $3,326,549 $2,723,883
============ ========== ========== ========== ========== ========== ==========
</TABLE>
* For the period July 1, 1996 (Commencement of Operations) through December 31,
1996.
See Notes to Financial Statements
F-6
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- --------------------------------------------------------------------------------------- ---------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT* ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT* ACCOUNT ACCOUNT ACCOUNT
- ---------- ---------- -------- ----------- ------------- ---------- ------------- ----------- ---------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,624,708 $ 702 $104,939 $ 44,863 $ 71,347 $ 444,012 $ 1,218 $ 2,662,990 $1,164,550 $199,463
90,146 28 11,713 104,685 19,385 64,656 40 428,473 325,346 19,551
- ---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
1,534,562 674 93,226 (59,822) 51,962 379,356 1,178 2,234,517 839,204 179,912
768,552 -- 3,769 65,901 24,089 171,931 -- 9,642,454 4,022,725 167,043
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153) 16,409,989 9,502,216 362,600
- ---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
2,291,013 (819) 232,856 2,018,488 112,102 2,226,092 (1,153) 6,767,535 5,479,491 195,557
31,570 -- 2,318 11,723 159 4,907 -- 27,750 44,049 1,942
- ---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
2,322,583 (819) 235,174 2,030,211 112,261 2,230,999 (1,153) 6,795,285 5,523,540 197,499
- ---------- ----- -------- ---------- -------- ---------- ------- ----------- ---------- --------
$3,857,145 $(145) $328,400 $1,970,389 $164,223 $2,610,355 $ 25 $ 9,029,802 $6,362,744 $377,411
========== ===== ======== ========== ======== ========== ======= =========== ========== ========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- --------- -----------
ASSET
MANAGER
SUB-
ACCOUNT TOTAL
- --------- -----------
<C> <C>
$174,907 $ 50,453,549
20,483 4,984,819
- -------- ------------
154,424 45,468,730
269,255 101,153,516
547,647 194,486,245
- -------- ------------
278,392 93,332,729
4,122 1,232,236
- -------- ------------
282,514 94,564,965
- -------- ------------
$436,938 $140,033,695
======== ============
</TABLE>
See Notes to Financial Statements
F-7
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
----------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI
GROWTH INCOME MARKET INDEX MANAGED GROWTH
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME
Dividends . . . . . . $ 58,318,276 $ 1,844,411 $1,109,838 $ 627,118 $1,061,289 $ 535,217
EXPENSE
Mortality and expense
risk charge
(Note 3) . . . . . . 2,173,846 143,873 112,033 95,240 113,501 77,636
------------ ----------- ---------- ----------- ---------- ----------
Net investment
income . . . . . . . 56,144,430 1,700,538 997,805 531,878 947,788 457,581
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net unrealized
appreciation
(depreciation) on
investments:
Beginning of
period . . . . . . 9,892,073 (2,028,893) -- (1,645,744) 703,242 205,680
End of period . . . 71,963,590 997,195 -- 2,853,587 5,216,548 2,881,100
------------ ----------- ---------- ----------- ---------- ----------
Net change in
unrealized
appreciation
(depreciation) . . . 62,071,517 3,026,088 -- 4,499,331 4,513,306 2,675,420
Net realized gain
(loss) on
investments . . . . 1,613,390 7,382 -- 7,637 42,457 21,233
------------ ----------- ---------- ----------- ---------- ----------
Net realized and
unrealized gain on
investments. . . . . 63,684,907 3,033,470 -- 4,506,968 4,555,763 2,696,653
------------ ----------- ---------- ----------- ---------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS . . . . . $119,829,337 $ 4,734,008 $ 997,805 $ 5,038,846 $5,503,551 $3,154,234
============ =========== ========== =========== ========== ==========
</TABLE>
* For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
See Notes to Financial Statements
F-8
<PAGE>
<TABLE>
<CAPTION> VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ------------------------------------------------------------------- --------------------------------- ---------
GROWTH
AND SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH ASSET
INCOME CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------- ---------- -------- -------- ------------- -------- ----------- ---------- -------- ---------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 606,696 $ 365,015 $17,538 $195,436 $12,460 $ 86,716 $ 2,284,557 $ 282,520 $ 8,412 $ 11,896
52,633 24,746 743 11,686 2,165 7,251 233,864 240,253 6,639 9,537
- ---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
554,063 340,269 16,795 183,750 10,295 79,465 2,050,693 42,267 1,773 2,359
1,918 4,662 -- -- -- -- 149,659 260,895 213 (1,503)
2,105,777 768,552 3,769 65,901 24,089 171,931 9,642,454 4,022,725 167,043 269,255
- ---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
2,103,859 763,890 3,769 65,901 24,089 171,931 9,492,795 3,761,830 166,830 270,758
9,493 1,325 223 237 (34) 203 61,089 32,279 2,817 4,661
- ---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
2,113,352 765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647 275,419
- ---------- ---------- ------- -------- ------- -------- ----------- ---------- -------- --------
$2,667,415 $1,105,484 $20,787 $249,888 $34,350 $251,599 $11,604,577 $3,836,376 $171,420 $277,778
========== ========== ======= ======== ======= ======== =========== ========== ======== ========
<CAPTION>
- -----------
TOTAL
- -----------
<C>
$ 67,367,395
3,305,646
- ------------
64,061,749
7,542,202
101,153,516
- ------------
93,611,314
1,804,392
- ------------
95,415,706
- ------------
$159,477,455
============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ------------ -------- ------------ ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
Dividends . . . . . . . . . . . . . . . . $ 13,519,083 $ 1,399,070 $691,932 $ 307,159 $ 678,949 $ 43,109 $ 89,817
EXPENSE
Mortality and expense risk charge
(Note 3) . . . . . . . . . . . . . . . . 1,637,278 107,252 93,830 59,230 86,049 31,737 18,214
------------ ----------- -------- ----------- ---------- -------- --------
Net investment income (loss) . . . . . . . 11,881,805 1,291,818 598,102 247,929 592,900 11,372 71,603
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net unrealized appreciation (depreciation)
on investments:
Beginning of period . . . . . . . . . . 46,100,393 41,284 -- (1,457,732) 1,602,795 143,154 67,310
End of period . . . . . . . . . . . . . 9,892,073 (2,028,893) -- (1,645,744) 703,242 205,680 1,918
------------ ----------- -------- ----------- ---------- -------- --------
Net change in unrealized appreciation
(depreciation). . . . . . . . . . . . . . (36,208,320) (2,070,177) -- (188,012) (899,553) 62,526 (65,392)
Net realized gain (loss) on
investments . . . . . . . . . . . . . . . 67,810 1,763 -- 6,200 37,994 542 776
------------ ----------- -------- ----------- ---------- -------- --------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . (36,140,510) (2,068,414) -- (181,812) (861,559) 63,068 (64,616)
------------ ----------- -------- ----------- ---------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . $(24,258,705) $ (776,596) $598,102 $ 66,117 $ (268,659) $ 74,440 $ 6,987
============ =========== ======== =========== ========== ======== ========
<CAPTION> VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
-------------------------------- --------- ---------------
SMALL EQUITY- HIGH ASSET
CAP INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB-
ACCOUNT* ACCOUNT ACCOUNT ACCOUNT** ACCOUNT** TOTAL
-------- --------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INCOME
Dividends . . . . . . . . . . . . . . . . $ 327 $670,101 $ 69,390 $ -- $ -- $ 17,468,937
EXPENSE
Mortality and expense risk charge
(Note 3) . . . . . . . . . . . . . . . . 28 75,586 133,276 6 34 2,242,520
------ -------- --------- ---- ------- ------------
Net investment income (loss) . . . . . . . 299 594,515 (63,886) (6) (34) 15,226,417
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net unrealized appreciation (depreciation)
on investments:
Beginning of period . . . . . . . . . . -- 93,013 700,341 -- -- 47,290,558
End of period . . . . . . . . . . . . . 4,662 149,659 260,895 213 (1,503) 7,542,202
------ -------- --------- ---- ------- ------------
Net change in unrealized appreciation
(depreciation). . . . . . . . . . . . . . 4,662 56,646 (439,446) 213 (1,503) (39,748,356)
Net realized gain (loss) on
investments . . . . . . . . . . . . . . . -- (929) (471) -- -- 113,685
------ -------- --------- ---- ------- ------------
Net realized and unrealized gain (loss) on
investments . . . . . . . . . . . . . . . 4,662 55,717 (439,917) 213 (1,503) (39,634,671)
------ -------- --------- ---- ------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . $4,961 $650,232 $(503,803) $207 $(1,537) $(24,408,254)
====== ======== ========= ==== ======= ============
</TABLE>
* For the period May 2, 1994 (Commencement of Operations) through December 31,
1994.
** For the period August 31, 1994 (Commencement of Operations) through December
31, 1994.
See Notes to Financial Statements
F-10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-11
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ------------ ------------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING ACTIVITIES
Net investment income
(loss) . . . . . . . . . . $ 30,009,869 $ 2,386,677 $ 1,145,809 $ 672,864 $ 2,783,808 $ 1,356,904 $ 1,703,606
Net realized and unrealized
gain (loss) on
investments . . . . . . . . 67,031,236 (956,377) -- 4,781,234 990,856 1,969,645 1,020,277
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net increase (decrease) in
net assets resulting from
operations . . . . . . . 97,041,105 1,430,300 1,145,809 5,454,098 3,774,664 3,326,549 2,723,883
FROM POLICY-RELATED
TRANSACTIONS
Net premiums transferred from
New England Life Insurance
Company (Note 4) . . . . . 111,194,198 8,517,031 79,806,482 6,566,717 5,631,293 7,140,375 5,201,936
Net transfers (to) from other
sub-accounts. . . . . . . . (1,541,352) 1,894,963 (61,482,739) 5,875,439 1,412,522 2,859,556 2,274,270
Net transfers to New England
Life Insurance Company . . (76,528,987) (5,770,575) (9,089,129) (5,144,242) (4,232,475) (5,172,577) (3,338,871)
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net increase in net assets
resulting from policy
related transactions . . . 33,123,859 4,641,419 9,234,614 7,297,914 2,811,340 4,827,354 4,137,335
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net increase in net assets . 130,164,964 6,071,719 10,380,423 12,752,012 6,586,004 8,153,903 6,861,218
NET ASSETS, AT BEGINNING OF
THE PERIOD . . . . . . . . 394,834,656 26,679,137 19,431,856 18,575,150 21,999,000 14,337,457 10,310,478
------------ ----------- ------------ ----------- ----------- ----------- -----------
NET ASSETS, AT END OF THE
PERIOD. . . . . . . . . . . $524,999,620 $32,750,856 $ 29,812,279 $31,327,162 $28,585,004 $22,491,360 $17,171,696
============ =========== ============ =========== =========== =========== ===========
</TABLE>
* For the period July 1, 1996 (Commencement of Operations) through
December 31, 1996.
See Notes to Financial Statements
F-12
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT* ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT*
- ------------ ---------- ----------- ------------ ------------- ------------ -------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,534,562 $ 674 $ 93,226 $ (59,822) $ 51,962 $ 379,356 $ 1,178
2,322,583 (819) 235,174 2,030,211 112,261 2,230,999 (1,153)
- ----------- ------- ---------- ----------- ----------- ----------- -------
3,857,145 (145) 328,400 1,970,389 164,223 2,610,355 25
5,440,860 -- 811,932 9,286,073 1,454,605 4,876,053 --
10,060,122 46,951 2,383,695 11,496,667 2,908,047 9,510,686 27,190
(4,380,392) (769) (708,829) (6,395,345) (1,242,748) (3,721,564) (447)
- ----------- ------- ---------- ----------- ----------- ----------- -------
11,120,590 46,182 2,486,798 14,387,395 3,119,904 10,665,175 26,743
- ----------- ------- ---------- ----------- ----------- ----------- -------
14,977,735 46,037 2,815,198 16,357,784 3,284,127 13,275,530 26,768
6,544,996 -- 418,211 5,712,498 953,848 3,386,440 --
- ----------- ------- ---------- ----------- ----------- ----------- -------
$21,522,731 $46,037 $3,233,409 $22,070,282 $ 4,237,975 $16,661,970 $26,768
=========== ======= ========== =========== =========== =========== =======
<CAPTION> VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ---------------------------------------- ----------- -------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
- ------------- ------------- ----------- ----------- -------------
<C> <C> <C> <C> <C>
$ 2,234,517 $ 839,204 $ 179,912 $ 154,424 $ 45,468,730
6,795,285 5,523,540 197,499 282,514 94,564,965
- ------------ ------------ ---------- ---------- -------------
9,029,802 6,362,744 377,411 436,938 140,033,695
20,426,731 17,135,189 970,763 1,258,847 285,719,085
9,029,810 1,051,463 1,631,762 560,948 --
(13,479,623) (11,522,274) (623,788) (649,631) (152,002,266)
- ------------ ------------ ---------- ---------- -------------
15,976,918 6,664,378 1,978,737 1,170,164 133,716,819
- ------------ ------------ ---------- ---------- -------------
25,006,720 13,027,122 2,356,148 1,607,102 273,750,514
47,352,852 38,382,219 1,742,493 1,972,993 612,634,284
- ------------ ------------ ---------- ---------- -------------
$ 72,359,572 $ 51,409,341 $4,098,641 $3,580,095 $ 886,384,798
============ ============ ========== ========== =============
</TABLE>
See Notes to Financial Statements
F-13
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI
GROWTH INCOME MARKET INDEX MANAGED GROWTH
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATING ACTIVITIES
Net investment income . . . . . . . . . . $ 56,144,430 $ 1,700,538 $ 997,805 $ 531,878 $ 947,788 $ 457,581
Net realized and unrealized gain on
investments . . . . . . . . . . . . . . . 63,684,907 3,033,470 -- 4,506,968 4,555,763 2,696,653
------------ ----------- ------------ ----------- ----------- -----------
Increase in net assets resulting from
operations. . . . . . . . . . . . . . . 119,829,337 4,734,008 997,805 5,038,846 5,503,551 3,154,234
FROM POLICY-RELATED TRANSACTIONS
Net premiums transferred from New England
Life Insurance Company (Note 4) . . . . . 100,611,223 7,330,838 40,457,027 4,559,195 4,757,562 5,407,500
Net transfers (to) from other
sub-accounts . . . . . . . . . . . . . . (7,820,362) 2,481,090 (32,083,917) 2,734,513 286,111 3,131,998
Net transfers to New England Life Insurance
Company . . . . . . . . . . . . . . . . . (67,280,279) (4,616,930) (6,819,802) (3,436,368) (3,307,802) (3,767,486)
------------ ----------- ------------ ----------- ----------- -----------
Increase in net assets resulting from
policy related transactions . . . . . . . 25,510,582 5,194,998 1,553,308 3,857,340 1,735,871 4,772,012
------------ ----------- ------------ ----------- ----------- -----------
Net increase in net assets . . . . . . . . 145,339,919 9,929,006 2,551,113 8,896,186 7,239,422 7,926,246
NET ASSETS, AT BEGINNING OF THE PERIOD . . 249,494,737 16,750,131 16,880,743 9,678,964 14,759,578 6,411,211
------------ ----------- ------------ ----------- ----------- -----------
NET ASSETS, AT END OF THE PERIOD . . . . . $394,834,656 $26,679,137 $ 19,431,856 $18,575,150 $21,999,000 $14,337,457
============ =========== ============ =========== =========== ===========
</TABLE>
* For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
See Notes to Financial Statements
F-14
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- ------------------------------------------------------------------------------ --------------------------------------
GROWTH
AND SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH
INCOME CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT ACCOUNT ACCOUNT
- ------------ ------------ --------- ------------ ------------- ----------- ------------ ------------ -----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 554,063 $ 340,269 $ 16,795 $ 183,750 $ 10,295 $ 79,465 $ 2,050,693 $ 42,267 $ 1,773
2,113,352 765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
2,667,415 1,105,484 20,787 249,888 34,350 251,599 11,604,577 3,836,376 171,420
3,473,273 2,237,626 81,978 1,048,361 241,835 625,044 13,985,879 17,076,602 395,370
2,645,617 4,814,141 409,874 5,735,744 948,764 3,228,499 12,483,761 (2,007,296) 1,503,857
(2,568,808) (1,803,085) (94,428) (1,321,495) (271,101) (718,702) (9,853,532) (8,392,295) (358,576)
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
3,550,082 5,248,682 397,424 5,462,610 919,498 3,134,841 16,616,108 6,677,011 1,540,651
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
6,217,497 6,354,166 418,211 5,712,498 953,848 3,386,440 28,220,685 10,513,387 1,712,071
4,092,981 190,830 -- -- -- -- 19,132,167 27,868,832 30,422
- ----------- ----------- -------- ----------- --------- ---------- ----------- ----------- ----------
$10,310,478 $ 6,544,996 $418,211 $ 5,712,498 $ 953,848 $3,386,440 $47,352,852 $38,382,219 $1,742,493
=========== =========== ======== =========== ========= ========== =========== =========== ==========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ----------- ----------------
ASSET
MANAGER
SUB-
ACCOUNT TOTAL
- ----------- ----------------
<C> <C>
$ 2,359 $ 64,061,749
275,419 95,415,706
- ---------- -------------
277,778 159,477,455
696,227 202,985,540
1,507,606 --
(709,312) (115,320,001)
- ---------- -------------
1,494,521 87,665,539
- ---------- -------------
1,772,299 247,142,994
200,694 365,491,290
- ---------- -------------
$1,972,993 $ 612,634,284
========== =============
</TABLE>
See Notes to Financial Statements
F-15
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI
GROWTH INCOME MARKET INDEX MANAGED GROWTH
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATING ACTIVITIES
Net investment income (loss) . . . $ 11,881,805 $ 1,291,818 $ 598,102 $ 247,929 $ 592,900 $ 11,372
Net realized and unrealized gain
(loss) on investments . . . . . . (36,140,510) (2,068,414) -- (181,812) (861,559) 63,068
------------ ----------- ------------ ----------- ----------- -----------
Increase (decrease) in net assets
resulting from operations . . . (24,258,705) (776,596) 598,102 66,117 (268,659) 74,440
FROM POLICY-RELATED TRANSACTIONS
Net premiums transferred from New
England Life Insurance Company
(Note 4) . . . . . . . . . . . . 101,802,783 6,362,705 39,544,492 3,600,140 4,112,835 3,173,029
Net transfers (to) from other
sub-accounts. . . . . . . . . . . (1,234,289) (822,617) (29,858,294) 718,688 (186,357) 2,527,486
Net transfers to New England Life
Insurance Company . . . . . . . . (56,761,722) (4,458,223) (6,161,941) (2,075,140) (3,102,454) (2,027,427)
------------ ----------- ------------ ----------- ----------- -----------
Increase in net assets resulting
from policy-related
transactions . . . . . . . . . 43,806,772 1,081,865 3,524,257 2,243,688 824,024 3,673,088
------------ ----------- ------------ ----------- ----------- -----------
Net increase in net assets . . . . 19,548,067 305,269 4,122,359 2,309,805 555,365 3,747,528
NET ASSETS, AT BEGINNING OF THE
PERIOD . . . . . . . . . . . . . 229,946,670 16,444,862 12,758,384 7,369,159 14,204,213 2,663,683
------------ ----------- ------------ ----------- ----------- -----------
NET ASSETS, AT END OF THE PERIOD . $249,494,737 $16,750,131 $ 16,880,743 $ 9,678,964 $14,759,578 $ 6,411,211
============ =========== ============ =========== =========== ===========
<CAPTION> VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
------------------------------------- --------- ---------------
GROWTH
AND SMALL EQUITY- HIGH ASSET
INCOME CAP INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT* ACCOUNT ACCOUNT ACCOUNT** ACCOUNT** TOTAL
------------ --------- ------------ ------------ --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING ACTIVITIES
Net investment income (loss) . . . $ 71,603 $ 299 $ 594,515 $ (63,886) $ (6) $ (34) $ 15,226,417
Net realized and unrealized gain
(loss) on investments . . . . . . (64,616) 4,662 55,717 (439,917) 213 (1,503) (39,634,671)
----------- -------- ----------- ----------- ------- -------- ------------
Increase (decrease) in net assets
resulting from operations . . . 6,987 4,961 650,232 (503,803) 207 (1,537) (24,408,254)
FROM POLICY-RELATED TRANSACTIONS
Net premiums transferred from New
England Life Insurance Company
(Note 4) . . . . . . . . . . . . 1,762,484 4,323 9,237,234 11,268,285 102 8,495 180,876,907
Net transfers (to) from other
sub-accounts. . . . . . . . . . . 2,012,595 226,677 9,868,299 16,487,055 36,048 224,709 --
Net transfers to New England Life
Insurance Company . . . . . . . . (1,190,128) (45,131) (4,905,512) (8,836,370) (5,935) (30,973) (89,600,956)
----------- -------- ----------- ----------- ------- -------- ------------
Increase in net assets resulting
from policy-related
transactions . . . . . . . . . 2,584,951 185,869 14,200,021 18,918,970 30,215 202,231 91,275,951
----------- -------- ----------- ----------- ------- -------- ------------
Net increase in net assets . . . . 2,591,938 190,830 14,850,253 18,415,167 30,422 200,694 66,867,697
NET ASSETS, AT BEGINNING OF THE
PERIOD . . . . . . . . . . . . . 1,501,043 -- 4,281,914 9,453,665 -- -- 298,623,593
----------- -------- ----------- ----------- ------- -------- ------------
NET ASSETS, AT END OF THE PERIOD . $ 4,092,981 $190,830 $19,132,167 $27,868,832 $30,422 $200,694 $365,491,290
=========== ======== =========== =========== ======= ======== ============
</TABLE>
* For the period May 2, 1994 (Commencement of Operations) through December 31,
1994.
** For the period August 31, 1994 (Commencement of Operations) through
December 31, 1994.
See Notes to Financial Statements
F-16
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS. New England Variable Life Separate Account (the
"Account") of New England Life Insurance Company ("NELICO"), formerly New
England Variable Life Insurance Company ("NEVLICO"), was established by NELICO's
Board of Directors on January 31, 1983 in accordance with the regulations of the
Delaware Insurance Department and is now operating in accordance with the
regulations of the Commonwealth of Massachusetts Division of Insurance. The
Account is registered as a unit investment trust under the Investment Company
Act of 1940. The assets of the Account are owned by NELICO. The net assets of
the Account are restricted from use in the ordinary business of NELICO.
Effective with the merger on August 30, 1996 of New England Mutual Life
Insurance Company ("NEMLICO") and Metropolitan Life Insurance Company ("MLI"),
NEMLICO ceased to exist, with MLI the surviving company of the merger. NELICO
then became an indirect wholly-owned subsidiary of MLI.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. SUB-ACCOUNTS. The Account has eighteen investment sub-accounts each of which
invest in the shares of one portfolio of the New England Zenith Fund ("Zenith
Fund"), the Variable Insurance Products Fund or the Variable Insurance Products
Fund II. The portfolios of the Zenith Fund, the Variable Insurance Products Fund
and the Variable Insurance Products Fund II in which the sub-accounts invest are
referred to herein as the "Eligible Funds". The Zenith Fund, the Variable
Insurance Products Fund and the Variable Insurance Products Fund II are
diversified, open-end management investment companies. The Account purchases or
redeems shares of the eighteen Eligible Funds based on the amount of net
premiums invested in the Account, transfers among the sub-accounts, policy
loans, surrender payments, and death benefit payments. The values of the shares
of the Eligible Funds are determined as of the close of the New York Stock
Exchange (normally 4:00 p.m. EST) on each day the Exchange is open for trading.
Realized gains and losses on the sale of Eligible Funds' shares are computed on
the basis of identified cost on the trade date. Income from dividends is
recorded on the ex-dividend date. Charges for investment advisory fees and other
expenses are reflected in the carrying value of the assets of the Eligible
Funds.
3. MORTALITY AND EXPENSE RISK CHARGES. NELICO charges the Account for the
mortality and expense risk NELICO assumes. The mortality risk assumed by NELICO
is the risk that insureds may live for shorter periods of time than NELICO
estimated when setting its cost of insurance charges. The expense risk assumed
by NELICO is the risk that the deductions for sales and administrative charges
may prove insufficient to cover actual cost. If these deductions are
insufficient to cover the cost of the mortality and expense risk assumed by
NELICO, NELICO absorbs the resulting losses and makes sufficient transfers to
the Fund from its general assets. Conversely, if those deductions are more than
sufficient after the establishment of any contingency reserves deemed prudent or
required by law, the excess is retained by NELICO. Currently, the charges are
made daily at an annual rate of .35% of the Account assets attributable to fixed
premium ("Zenith Life") variable policies, .45% of the Account assets
attributable to single premium ("Zenith Life One") variable life policies, .60%
of the Account assets attributable to variable ordinary ("Zenith Life Plus" and
"Zenith Life Plus II") life policies and limited payment ("Zenith Life Executive
65") variable life policies, .90% of the Account assets attributable to variable
survivorship ("Zenith Survivorship Life") life policies, and .75% of the Account
assets attributable to flexible premium ("Zenith Flexible Life") variable
policies. For the modified single premium ("American Gateway") variable life
policies mortality and expense risk charges are not charged against the
sub-account assets but are deducted from the policy cash values monthly at an
annual rate of .90%.
4. NET PREMIUM TRANSFERS AND DEDUCTIONS FROM CASH VALUE. Certain deductions are
made from each premium payment paid to NELICO to arrive at a net premium that is
transferred to the Account. Certain deductions are made from cash values in the
sub-accounts. These deductions, depending on the policy, could include sales
loads, administrative charges, premium tax charges, risk charges, cost of
insurance charges, and charges for rider benefits and special risk charges.
F-17
<PAGE>
5. FEDERAL INCOME TAXES. For federal income tax purposes the Account's
operations are included with those of NELICO. NELICO intends to make appropriate
charges against the Account in the future if and when tax liabilities arise.
6. INVESTMENT ADVISERS. The adviser and sub-adviser for each series of the
Zenith Fund are listed in the chart below. TNE Advisers, Inc. which is a
subsidiary of NELICO, and each of the sub-advisers are registered with the SEC
as investment advisers under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ---------------------- -----------------------------
<S> <C> <C>
Capital Growth Capital Growth
Management, L.P.
("CGM")*
Back Bay Advisors TNE Advisers, Inc.** Back Bay Advisors, L.P.*
Money Market
Back Bay Advisors Bond TNE Advisers, Inc.** Back Bay Advisors, L.P.*
Income
Back Bay Advisors TNE Advisers, Inc.** Back Bay Advisors, L.P.*
Managed
Westpeak Stock Index TNE Advisers, Inc.** Westpeak Investment Advisors,
L.P.*
Westpeak Growth and TNE Advisers, Inc.** Westpeak Investment Advisors,
Income L.P.*
Loomis Sayles Avanti TNE Advisers, Inc.** Loomis, Sayles & Company, L.P.*
Growth
Loomis Sayles Small TNE Advisers, Inc.** Loomis, Sayles & Company, L.P.*
Cap
Loomis Sayles Balanced TNE Advisers, Inc.** Loomis, Sayles & Company, L.P.*
Draycott International TNE Advisers, Inc.** Draycott Partners, Ltd.
Equity
Davis Venture Value TNE Advisers, Inc.** Davis Selected Advisers, Inc.
Alger Equity Growth TNE Advisers, Inc.** Fred Alger Management, Inc.
Salomon Brothers U.S. TNE Advisers, Inc.** Salomon Brothers Asset
Government Management, Inc.
Salomon Brothers TNE Advisers, Inc.** Salomon Brothers Asset
Strategic Bond Management, Inc.
Opportunities
</TABLE>
* An affiliate of NELICO
** A subsidiary of NELICO
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors Bond
Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index Series,
Westpeak Growth and Income Series, Loomis Sayles Avanti Growth Series and Loomis
Sayles Small Cap Series, TNE Advisers became the adviser on May 1, 1995. Prior
to that date those Series were advised by their current sub-adviser, except as
follows. NEMLICO, the former parent of NELICO, itself served as investment
adviser to the Back Bay Advisors Money Market Series and Back Bay Advisors Bond
Income Series until September 10, 1986 when Back Bay Advisors assumed its
responsibilities under the investment advisory agreements with those Series.
Back Bay Advisors served as investment adviser to the Westpeak Stock Index
Series until August 2, 1993, when Westpeak became the investment adviser. The
Capital Growth Series was managed by Loomis, Sayles until March 1, 1990, when
its Capital Growth Management division was reorganized into CGM. The
Equity-Income, Overseas, and High Income Portfolios of the Variable Insurance
Products Fund and the Asset Manager Portfolio of the Variable Insurance Products
Fund II receive investment advice from Fidelity Management & Research Company.
On January 22, 1997, the Board of Trustees of New England Zenith Fund approved a
new subadvisory agreement relating to the Draycott International Equity Series
between TNE Advisers, Inc. and Morgan Stanley Asset Management Inc. ("MSAM").
This new agreement, is expected to become effective May 1, 1997 (subject to
shareholder approval, if necessary). Under this new agreement MSAM would become
subadviser of the Series, succeeding Draycott Partners, Ltd. and would be
responsible for the day to day management of the Series. The new name of the
Series will be Morgan Stanley International Magnum Equity Series.
F-18
<PAGE>
7. INVESTMENT PURCHASES AND SALES. The following table shows the aggregate cost
of Eligible Fund shares purchased and proceeds from the sales of Eligible Fund
shares for each sub-account for the year ended December 31, 1996:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ --------------
<S> <C> <C>
Capital Growth Series $192,435,910 $125,337,191
Back Bay Advisors Money Market Series 98,065,488 87,200,674
Back Bay Advisors Bond Income Series 18,719,861 11,239,097
Back Bay Advisors Managed Series 13,159,539 7,382,329
Westpeak Stock Index Series 16,840,737 7,613,106
Westpeak Growth and Income Series 11,290,092 4,514,904
Loomis Sayles Avanti Growth Series 14,804,586 7,554,161
Loomis Sayles Small Cap Series 20,487,120 6,016,762
Loomis Sayles Balanced Series 3,720,239 699,768
Draycott International Equity Series 5,234,589 1,560,413
Davis Venture Value Series 16,761,770 3,814,839
Alger Equity Growth Series 25,051,802 7,538,044
Salomon Brothers U.S. Government Series* 47,709 --
Salomon Brothers Strategic Bond Opportunities
Series* 28,407 --
VIP Equity-Income Series 40,788,600 18,781,619
VIP Overseas Series 29,417,696 19,661,090
VIP High Income Series 3,849,778 1,456,754
VIP II Asset Manager Series 2,822,409 1,496,363
</TABLE>
* For the period July 1, 1996 (Commencement of Operations of the sub-account)
through December 31, 1996.
8. NET INVESTMENT RETURNS. The following table shows the net investment return
of the sub-account for each type of variable life insurance policy investing in
the Account. The net investment return reflects the appropriate mortality and
expense risk charge against sub-account assets, where applicable, for each type
of variable life insurance policy shown (in the case of the American Gateway
Series, the mortality and expense risk charge is deducted monthly from cash
values rather than daily from sub-account assets and, therefore, does not impact
sub-account net investment returns). These figures do not reflect charges
deducted from premiums and the cash values of the policies. Such charges will
affect the actual cash values and benefits of the policies. Certain amounts have
been restated to conform with the current calculation of net investment return
to provide greater comparability with industry convention.
F-19
<PAGE>
FIXED PREMIUM ("ZENITH LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
----------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth . . . . . . . . . 52.17% (9.11%) 30.30% (3.82%) 53.45% (6.38%) 14.57% (7.39%) 37.55%
Bond Income . . . . . . . . . . 1.91% 7.99% 11.91% 7.71% 17.55% 7.80% 12.22% (3.70%) 20.78%
Money Market . . . . . . . . . . 6.16% 7.14% 8.87% 7.81% 5.84% 3.43% 2.61% 3.61% 5.33%
<CAPTION>
SUB-ACCOUNT 1/1/96-
- ----------- 12/31/96
----------
<S> <C>
Capital Growth . . . . . . . . . 20.65%
Bond Income . . . . . . . . . . 4.24%
Money Market . . . . . . . . . . 4.76%
</TABLE>
<TABLE>
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index . . . . . . . . . . (12.40%) 15.93% 29.70% (4.48%) 29.98% 6.92% 9.34% 0.76% 36.44%
Managed . . . . . . . . . . . . (0.89%) 9.10% 18.67% 2.85% 19.75% 6.33% 10.26% (1.46%) 30.81%
<CAPTION>
1/1/96-
SUB-ACCOUNT 12/31/96
- ----------- ----------
<S> <C>
Stock Index . . . . . . . . . . 22.04%
Managed . . . . . . . . . . . . 14.62%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.47% (0.62%) 29.90% 17.20%
Growth and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.97% (1.55%) 35.99% 17.68%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Equity-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.29% 6.69% 34.62% 13.88%
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.57% 1.37% 9.30% 12.82%
</TABLE>
<TABLE>
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.45%) 28.40% 30.22%
</TABLE>
<TABLE>
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
High Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.58%) 20.18% 13.63%
Asset Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.41%) 16.55% 14.20%
</TABLE>
<TABLE>
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- ----------
<S> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.84% 12.78%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.75% 16.50%
International Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.85% 6.30%
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.64% 25.40%
</TABLE>
F-20
<PAGE>
SINGLE PREMIUM ("ZENITH LIFE ONE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
----------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth . . . . . . . . . 52.02% (9.20%) 30.17% (3.91%) 53.29% (6.47%) 14.46% (7.38%) 37.41%
Bond Income . . . . . . . . . . . 1.81% 7.88% 11.79% 7.60% 17.43% 7.69% 12.10% (3.80%) 20.66%
Money Market . . . . . . . . . . 6.05% 7.03% 8.77% 7.71% 5.74% 3.33% 2.51% 3.35% 5.23%
<CAPTION>
SUB-ACCOUNT 1/1/96-
- ----------- 12/31/96
----------
<S> <C>
Capital Growth . . . . . . . . . 20.53%
Bond Income . . . . . . . . . . . 4.14%
Money Market . . . . . . . . . . 4.65%
</TABLE>
<TABLE>
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index . . . . . . . . . . . (12.46%) 15.82% 29.57% (4.58%) 29.85% 6.81% 9.23% 0.66% 36.30%
Managed . . . . . . . . . . . . . (0.96%) 8.99% 18.55% 2.75% 19.63% 6.22% 10.15% (1.56%) 30.67%
<CAPTION>
1/1/96-
SUB-ACCOUNT 12/31/96
- ----------- ----------
<S> <C>
Stock Index . . . . . . . . . . . 21.91%
Managed . . . . . . . . . . . . . 14.51%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.39% (0.72%) 29.77% 17.08%
Growth and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.90% (1.65%) 35.85% 17.56%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Equity-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.22% 6.59% 34.49% 13.77%
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.49% 1.27% 9.19% 12.70%
</TABLE>
<TABLE>
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.52%) 28.27% 30.09%
</TABLE>
<TABLE>
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
High Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.61%) 20.06% 13.52%
Asset Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.45%) 16.43% 14.09%
</TABLE>
<TABLE>
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- ----------
<S> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.76% 12.66%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.67% 16.39%
International Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.79% 6.19%
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.56% 25.27%
</TABLE>
F-21
<PAGE>
VARIABLE ORDINARY ("ZENITH LIFE PLUS" AND "ZENITH LIFE PLUS II") AND
LIMITED PAYMENT ("ZENITH LIFE EXECUTIVE 65") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth . . . . . 51.79% (9.34%) 29.98% (4.06%) 53.06% (6.61%) 14.28% (7.62%) 37.21% 20.34%
Bond Income . . . . . . . 1.65% 7.72% 11.63% 7.44% 17.25% 7.53% 11.94% (3.94%) 20.47% 3.98%
Money Market . . . . . . 5.89% 6.87% 8.60% 7.54% 5.58% 3.18% 2.36% 3.35% 5.07% 4.50%
</TABLE>
<TABLE>
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index . . . . . . . (12.55%) 15.65% 29.37% (4.72%) 29.65% 6.65% 9.07% 0.51% 36.10% 21.73%
Managed . . . . . . . . . (1.06%) 8.83% 18.37% 2.59% 19.45% 6.06% 9.99% (1.70%) 30.48% 14.34%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.28% (0.87%) 29.57% 16.90%
Growth and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.78% (1.80%) 35.65% 17.38%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Equity-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.11% 6.43% 34.29% 13.59%
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.38% 1.12% 9.02% 12.53%
</TABLE>
<TABLE>
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.61%) 28.08% 29.90%
</TABLE>
<TABLE>
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
High Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.66%) 19.88% 13.35%
Asset Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.49%) 16.26% 13.91%
</TABLE>
<TABLE>
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- ----------
<S> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.64% 12.49%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.56% 16.21%
International Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.68% 6.03%
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.44% 25.08%
</TABLE>
F-22
<PAGE>
VARIABLE SURVIVORSHIP ("ZENITH SURVIVORSHIP LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth . . . . . . . . 51.34% (9.61%) 29.59% (4.35%) 52.61% (6.90%) 13.94% (7.90%) 36.80% 19.98%
Bond Income . . . . . . . . . . 1.35% 7.40% 11.29% 7.11% 16.90% 7.21% 11.60% (4.23%) 20.12% 3.67%
Money Market . . . . . . . . . 5.57% 6.55% 8.28% 7.22% 5.26% 2.87% 2.05% 3.04% 4.75% 4.18%
</TABLE>
<TABLE>
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index . . . . . . . . . . (12.73%) 15.30% 28.99% (5.01%) 29.27% 6.33% 8.74% 0.21% 35.69%
Managed . . . . . . . . . . . . (1.26%) 8.50% 18.02% 2.28% 19.10% 5.74% 9.69% (2.00%) 30.09%
<CAPTION>
1/1/96-
SUB-ACCOUNT 12/31/96
- ----------- ----------
<S> <C>
Stock Index . . . . . . . . . . 21.36%
Managed . . . . . . . . . . . . 13.99%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.05% (1.16%) 29.19% 16.55%
Growth and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.55% (2.09%) 35.25% 17.03%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Equity-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.89% 6.11% 33.89% 13.25%
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.15% 0.82% 8.70% 12.19%
</TABLE>
<TABLE>
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.80%) 27.69% 29.50%
</TABLE>
<TABLE>
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
High Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.76%) 19.53% 13.00%
Asset Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.59%) 15.91% 13.57%
</TABLE>
<TABLE>
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- ----------
<S> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.39% 12.15%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.33% 15.86%
International Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.48% 5.71%
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.20% 24.71%
</TABLE>
F-23
<PAGE>
FLEXIBLE PREMIUM ("ZENITH FLEXIBLE LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
------------------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth . . . . . . . . 51.56% (9.47%) 31.88% (5.73%) 52.83% (6.75%) 14.11% (7.76%) 37.00% 20.16%
Bond Income . . . . . . . . . 1.50% 7.56% 11.46% 7.28% 17.08% 7.37% 11.77% (4.08%) 20.29% 3.82%
Money Market . . . . . . . . . 5.73% 6.71% 8.44% 7.38% 5.42% 3.02% 2.20% 3.20% 4.91% 4.34%
</TABLE>
<TABLE>
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index . . . . . . . . (13.06%) 15.47% 29.18% (4.86%) 29.46% 6.49% 8.90% 0.36% 35.90% 21.55%
Managed . . . . . . . . . . . (1.15%) 8.67% 18.20% 2.44% 19.28% 5.90% 9.82% (1.85%) 30.28% 14.16%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.16% (1.01%) 29.38% 16.72%
Growth and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.67% (1.94%) 35.45% 17.21%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Equity-Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.00% 6.27% 34.09% 13.42%
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.26% 0.97% 8.86% 12.36%
</TABLE>
<TABLE>
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.71%) 27.88% 29.70%
</TABLE>
<TABLE>
<CAPTION>
8/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
High Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.71%) 19.71% 13.17%
Asset Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.54%) 16.08% 13.74%
</TABLE>
<TABLE>
<CAPTION>
5/1/95- 1/1/96-
SUB-ACCOUNT 12/31/95 12/31/96
- ----------- -------- ----------
<S> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.51% 12.32%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.44% 16.03%
International Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.58% 5.87%
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.32% 24.89%
</TABLE>
F-24
<PAGE>
MODIFIED SINGLE PREMIUM ("AMERICAN GATEWAY") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
----------------------------------------------------------------------------------------
1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Income . . . . . . . . . . 2.27% 8.37% 12.30% 8.09% 17.96% 8.18% 12.61% (3.36%) 21.20%
Money Market . . . . . . . . . . 6.53% 7.52% 9.25% 8.19% 6.21% 3.80% 2.97% 3.97% 5.70%
<CAPTION>
SUB-ACCOUNT 1/1/96-
- ----------- 12/31/96
----------
<S> <C>
Bond Income . . . . . . . . . . 4.61%
Money Market . . . . . . . . . . 5.13%
</TABLE>
<TABLE>
<CAPTION>
5/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95-
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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>
1/1/96-
SUB-ACCOUNT 12/31/96
- ----------- ----------
<S> <C>
Stock Index . . . . . . . . . . 22.47%
Managed . . . . . . . . . . . . 15.03%
</TABLE>
<TABLE>
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
Avanti Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74% (0.27%) 30.35% 17.61%
Growth and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.24% (1.21%) 36.47% 18.10%
</TABLE>
<TABLE>
<CAPTION>
5/2/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- ----------
<S> <C> <C> <C>
Small Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.23%) 28.84% 30.68%
</TABLE>
<TABLE>
<CAPTION>
10/31/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96
- ----------- --------- -------- ----------
<S> <C> <C> <C>
Equity Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.20%) 48.69% 13.17%
Balanced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.10%) 24.79% 16.91%
International Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.60% 6.23% 6.67%
Venture Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.50%) 39.28% 25.84%
U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60% 15.02% 3.31%
Strategic Bond Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.40%) 19.38% 14.36%
</TABLE>
The net investment return of a sub-account is calculated by taking the
difference between the sub-account's ending value and the beginning value for
the period and dividing it by the beginning value for the period.
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
New England Life Insurance Company:
We have audited the accompanying consolidated balance sheet of New England Life
Insurance Company (formally New England Variable Life Insurance Company) and
subsidiaries as of December 31, 1996, and the related consolidated statement of
earnings, equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 consolidated financial statements present fairly, in
all material respects, the financial position of the New England Life Insurance
Company and subsidiaries as of December 31, 1996 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
In 1996, as discussed in Note 1 to the financial statements, the Company (1) has
adopted all applicable generally accepted accounting principles as required for
mutual life insurance enterprises (or wholly-owned stock life insurance company
subsidiaries of mutual life insurance enterprises) by Interpretation No. 40,
Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises, and Statement of Financial Accounting Standards
No. 120, Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long Duration Participating Policies; and (2)
has reflected the effects of the changes in corporate organization.
The consolidated balance sheet of the Company and subsidiaries as of December
31, 1995 and the related consolidated statements of earnings, equity, and cash
flows for the periods ended December 31, 1995 and 1994 present the combination
of the individual financial statements of New England Variable Life Insurance
Company and other entities listed in Note 1. Such individual financial
statements were audited by other auditors before the applicable effects of the
changes described in the paragraph above and their reports on the financial
statements of each of the insurance entities listed in Note 1 expressed an
adverse opinion as to the conformity with generally accepted accounting
principles and an unqualified opinion as to conformity with statutory principles
and their reports on the financial statements of each of the other entities
expressed an unqualified opinion. We have audited the adjustments that were
applied to restate the 1995 and 1994 financial statements to reflect the effects
of the changes for the adoption of generally accepted accounting principles and
the changes in corporate organization as described in Note 1. In our opinion,
such adjustments are appropriate and have been properly applied.
DELOITTE & TOUCHE LLP
February 18, 1997
Boston, Massachusetts
F-26
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
NOTES 1996 1995
----- -------------- ----------------
<S> <C> <C> <C>
Investments:
Fixed Maturities:
Available for Sale, at Estimated
Fair Value . . . . . . . . . . 2,11 $ 524,284,643 $ 575,834,866
Held to Maturity, at Amortized
Cost. . . . . . . . . . . . . . 29,666,318 36,550,618
Mortgage Loans on Real Estate . . . 2,11 -- 2,210,153
Policy Loans . . . . . . . . . . . 11 76,262,779 58,210,498
Real Estate . . . . . . . . . . . . 1,701,981 --
Short-Term Investments . . . . . . 11 156,559,460 20,828,254
Other Invested Assets . . . . . . . 12,956,434 206,000
-------------- --------------
Total Investments . . . . . . 801,431,615 693,840,389
Cash and Cash Equivalents . . . . . . 11 49,147,342 35,129,015
Deferred Policy Acquisition Costs . . 434,636,666 353,809,245
Accrued Investment Income . . . . . . 13,712,748 14,621,811
Premiums and Other Receivables . . . 4 5,941,433 10,311,027
Other Assets . . . . . . . . . . . . 95,106,160 11,148,103
Separate Account Assets . . . . . . . 1,206,959,498 748,184,716
-------------- --------------
TOTAL ASSETS . . . . . . . . $2,606,935,462 $1,867,044,306
============== ==============
LIABILITIES AND EQUITY
LIABILITIES
Future Policy Benefits . . . . . . . 4 $ 464,888,914 $ 446,687,020
Policyholder Account Balances . . . . 4,11 181,594,090 138,831,391
Other Policyholder Funds . . . . . . 11 2,071,162 2,353,586
Policyholder Dividends Payable . . . 9,018,002 7,346,500
Short and Long-Term Debt . . . . . . 8,11 84,056,337 79,347,546
Income Taxes Payable: 5
Current . . . . . . . . . . . . . . 6,272,302 9,179,749
Deferred . . . . . . . . . . . . . 39,463,081 54,981,645
Other Liabilities . . . . . . . . . . 62,190,384 25,629,031
Separate Account Liabilities . . . . 1,206,959,498 748,184,716
-------------- --------------
Total Liabilities . . . . . . 2,056,513,770 1,512,541,184
-------------- --------------
Commitments and Contingencies
(Notes 2, 4, 8 and 9)
EQUITY
Common Stock . . . . . . . . . . . . 2,500,000 2,500,000
Contributed Capital . . . . . . . . . 497,945,598 289,099,450
Retained Earnings . . . . . . . . . . 46,248,721 36,547,252
Net Unrealized Investment Gains . . . 3 3,727,373 26,356,420
-------------- --------------
Total Equity . . . . . . . . 550,421,692 354,503,122
-------------- --------------
TOTAL LIABILITIES AND
EQUITY . . . . . . . . . . . $2,606,935,462 $1,867,044,306
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NOTES 1996 1995 1994
------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
REVENUES
Premiums, net . . . . . . 4 $ 37,410,040 $ 38,565,735 $206,099,650
Universal Life and
Investment-Type Product
Policy Fee Income . . . 101,755,632 79,371,437 63,349,660
Net Investment Income . . 3 49,628,343 41,815,075 4,069,355
Investment Gains (Losses),
Net. . . . . . . . . . . 3 15,979,267 21,979,906 (64,081)
Commissions, Fees and
Other Income . . . . . . 44,929,609 34,554,617 264,883,323
------------ ------------ ------------
Total Revenues . . . . . 249,702,891 216,286,770 538,337,907
BENEFITS AND OTHER
DEDUCTIONS
Policyholder Benefits,
net . . . . . . . . . . 4 65,520,519 55,810,172 435,150,792
Interest Credited to
Policyholder Account
Balances . . . . . . . . 5,557,652 2,564,651 904,003
Policyholder Dividends . 14,829,641 13,953,664 7,232,042
Other Operating Costs and
Expenses . . . . . . . . 151,043,021 110,890,061 83,725,839
------------ ------------ ------------
Total Benefits and Other
Deductions . . . . . . . 236,950,833 183,218,548 527,012,676
------------ ------------ ------------
Earnings from Continuing
Operations before Income
Taxes . . . . . . . . . 12,752,058 33,068,222 11,325,231
Income Taxes . . . . . . 5 3,050,589 12,302,605 4,188,483
------------ ------------ ------------
NET EARNINGS . . . . . . $ 9,701,469 $ 20,765,617 $ 7,136,748
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NET
COMMON UNREALIZED
STOCK & INVESTMENT
CONTRIBUTED RETAINED GAINS
CAPITAL EARNINGS (LOSSES) TOTAL
------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C>
BALANCES AT JANUARY 1,
1994 . . . . . . . . $175,028,227 $ 8,644,887 $ 104,801 $183,777,915
Net Earnings . . . . 7,136,748 7,136,748
Change in Net
Unrealized Investment
Gains (Losses) . . . (774,432) (774,432)
Contributed Capital . 53,028,000 53,028,000
------------ ----------- ------------ ------------
BALANCES AT DECEMBER
31, 1994 . . . . . . 228,056,227 15,781,635 (669,631) 243,168,231
Net Earnings . . . . 20,765,617 20,765,617
Change in Net
Unrealized Investment
Gains (Losses) . . . 27,026,051 27,026,051
Contributed Capital . 63,543,223 63,543,223
------------ ----------- ------------ ------------
BALANCES AT DECEMBER
31, 1995 . . . . . . 291,599,450 36,547,252 26,356,420 354,503,122
Net Earnings . . . . 9,701,469 9,701,469
Change in Net
Unrealized Investment
Gains (Losses) . . . (22,629,047) (22,629,047)
Contributed Capital . 208,846,148 208,846,148
------------ ----------- ------------ ------------
BALANCES AT DECEMBER
31, 1996 . . . . . . $500,445,598 $46,248,721 $ 3,727,373 $550,421,692
============ =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
NET CASH USED IN OPERATING
ACTIVITIES. . . . . . . . . $ (85,673,871) $(111,833,907) $ (46,062,592)
------------- ------------- -------------
Cash Flows from Investing
Activities:
Sales, Maturities and
Repayments of:
Available for Sale Fixed
Maturities . . . . . . 276,420,158 538,296,916 13,480,392
Held to Maturity Fixed
Maturities . . . . . . 10,519,220 625,000 --
Mortgage Loans on Real
Estate . . . . . . . . 2,210,152 11,789 8,000
Purchases of:
Available for Sale Fixed
Maturities . . . . . . (259,713,146) (983,517,566) (121,490,180)
Real Estate . . . . . . (480,007) -- --
Fixed Asset Property and
Equipment. . . . . . . (3,786,192) -- --
Other Assets . . . . . (11,024,000) (15,000) (32,000)
Net Change in Short-Term
Investments. . . . . . . (135,731,206) 379,325,026 13,737,203
Net Change in Policy Loans (18,052,280) (14,243,155) (13,293,625)
Other, Net . . . . . . . . 66,820 (114,000) 2,255,589
------------- ------------- -------------
NET CASH USED IN INVESTING
ACTIVITIES. . . . . . . . . (139,570,481) (79,630,990) (105,334,621)
------------- ------------- -------------
Cash Flows from Financing
Activities:
Common Stock . . . . . . .
Capital Contributions . . 159,162,170 9,515,000 52,698,000
Borrowed Money . . . . . . 25,000,000 50,000,000
Policyholder Account
Balances:
Deposits . . . . . . . 482,551,966 281,761,424 201,732,909
Withdrawals . . . . . . (364,932,882) (148,402,748) (108,766,575)
Financial Reinsurance
Receivables. . . . . . . (37,518,575) -- --
------------- ------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES . . . 239,262,679 167,873,676 195,664,334
------------- ------------- -------------
Change in Cash and Cash
Equivalents . . . . . . . . 14,018,327 (23,591,221) 44,267,121
Cash and Cash Equivalents,
Beginning of Year . . . . . 35,129,015 58,720,236 14,453,115
------------- ------------- -------------
CASH AND CASH EQUIVALENTS,
END OF YEAR . . . . . . . . $ 49,147,342 $ 35,129,015 $ 58,720,236
============= ============= =============
Supplemental Cash Flow
Information:
Interest Paid . . . . . . $ 1,523,134 $ 1,277,033 $ --
============= ============= =============
Income Taxes Paid . . . . $ 4,720,928 $ 6,764,653 $ 132,000
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
NET EARNINGS . . . . . . . . $ 9,701,469 $ 20,765,617 $ 7,136,748
Adjustments to Reconcile Net
Earnings to Net Cash
Provided by (Used in)
Operating Activities:
Change in Deferred Policy
Acquisition Costs, Net . (68,626,162) (45,823,425) (128,219,002)
Change in Accrued
Investment Income . . . 909,063 (11,507,438) (87,020)
Change in Premiums and
Other Receivables . . . 4,369,594 (4,072,681) (1,494,680)
Investment (Gains) Losses,
Net. . . . . . . . . . . (15,979,267) (21,979,906) 64,081
Depreciation and
Amortization Expenses . 4,119,881 5,724,945 99,912
Change in Transfer to
Separate Account . . . . (2,242,885) 1,412,264 105,477
Interest Credited to
Policyholder Account
Balances . . . . . . . . 5,557,652 2,564,651 904,003
Universal Life and
Investment-Type Product
Policy Fee Income . . . (101,755,632) (79,371,437) (63,349,660)
Change in Future Policy
Benefits . . . . . . . . 18,201,894 14,538,593 125,898,745
Change in Other
Policyholder Funds . . . (282,879) 1,789,475 156,400
Change in Policyholder
Dividends Payable . . . 1,671,502 114,458 7,232,042
Change in Income Taxes
Payable. . . . . . . . . (6,633,789) 10,210,526 10,337,032
Other, Net . . . . . . . . 65,315,688 (6,199,549) (4,846,670)
------------- ------------- -------------
NET CASH USED IN OPERATING
ACTIVITIES. . . . . . . . . $ (85,673,871) $(111,833,907) $ (46,062,592)
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
New England Life Insurance Company and its subsidiaries (the "Company") is a
wholly-owned stock life insurance subsidiary of Metropolitan Life Insurance
Company (MetLife). The Company principally provides variable life insurance and
variable annuity products through a network of general agencies located
throughout the United States.
Prior to the merger of New England Mutual Life Insurance Company (NEMLICO)
with MetLife on August 31, 1996, New England Life Insurance Company (NELICO),
formerly known as New England Variable Life Insurance Company (NEVLICO) was a
subsidiary of NEMLICO. NEMLICO was merged directly into MetLife and ceased to
exist as a separate mutual life insurance company. In conjunction with the
merger, NEVLICO became a subsidiary of MetLife and changed its name to New
England Life Insurance Company. NELICO has continued after the merger to conduct
its existing businesses and is also administering the business activities for
the former parent NEMLICO. (Note 13)
NELICO is headquartered in Boston, Massachusetts and became a Massachusetts
chartered company through a legal process known as redomestication. Prior to the
merger, NEVLICO was organized under Delaware law. The capital structure of
NELICO continues in the same form subsequent to the merger with common stock
authorized at 50,000 shares and 20,000 shares issued and outstanding with a par
value of $125 per share. MetLife made an additional statutory capital
contribution to NELICO at the merger date totaling $208,003,770 consisting of
$128,412,170 of cash and $79,591,600 of bonds, real estate, mortgages, common
stock of affiliates and furniture and equipment. Prior to the merger, NELICO
received a capital contribution from NEMLICO for $20,000,000 in cash. The total
contributed capital for 1996 equaled $228,003,770.
Certain companies that were subsidiaries of NEMLICO became subsidiaries of
NELICO as of the merger. The principal subsidiaries of which NELICO owns 100% of
the outstanding common stock are Exeter Reassurance Company, Ltd., New England
Pension and Annuity Company and Newbury Insurance Company Limited for insurance
operations and New England Securities Corporation and TNE Advisers, Inc. for
other operations. The principal business activities of the subsidiaries are
disclosed below.
Exeter Reassurance Company, Ltd., (Exeter) was incorporated in Bermuda on
November 15, 1994, and registered as an insurer under The Insurance Act 1978
(Bermuda). Exeter engages in financial reinsurance of life insurance and annuity
policies.
New England Pension and Annuity Company (NEPA) was incorporated under the laws
of the State of Delaware on September 12, 1980. NEPA holds licenses in 20
states, but is currently not actively engaged in the sale or distribution of
insurance products.
New England Securities Corporation (NES), a National Association of Securities
Dealers ("NASD") registered broker/dealer, conducts business as a wholesale
distributor of investment products through the sales force of NELICO.
Established in 1968, NES offers a range of investment products including mutual
funds, investment partnerships, and individual securities. In 1994, NES became a
Registered Investment Advisor with the Securities and Exchange Commission
("SEC") and now offers individually managed portfolios. NES is the national
distributor for variable annuity and variable life products issued by NELICO.
NES is the sole owner of Hereford Insurance Agency, Inc.
Newbury Insurance Company, Limited (Newbury) was incorporated in Bermuda on
May 1, 1987, and is registered as a Class 2 insurer under The Insurance Act 1978
(Bermuda). Newbury provides professional liability
F-32
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
and personal injury coverage to the agents of NELICO through a facultative
reinsurance agreement with Lexington Insurance Company. The policy applies to
claims made during the policy period or during the discovery period with limits
of $1,000,000 each claim, $1,000,000 annual aggregate each insured, $3,500,000
and $3,000,000 annual aggregate all insured in 1996 and 1995 respectively.
TNE Advisers, Inc. was incorporated on August 26, 1994, and is registered as
an investment adviser with the SEC, under the Investment Advisers Act of 1940.
TNE Advisers, Inc. was organized to serve as an investment adviser to certain
mutual funds of the New England Zenith Fund and does not intend to engage in any
business activities other than providing investment management and
administrative services.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP"), and include
the accounts of NELICO and its subsidiaries in which NELICO has control and a
majority economic interest. The consolidated financial statements have been
prepared as though the current reporting entity had always existed. Significant
intercompany transactions and balances have been eliminated in consolidation.
Prior to 1996, NELICO, as a wholly owned stock life insurance subsidiary of a
mutual life insurance company, prepared its financial statements in conformity
with accounting practices prescribed or permitted by the Insurance Department of
the State of Delaware (statutory financial statements), which accounting
practices were considered to be GAAP. In 1996, NELICO adopted Interpretation No.
40, Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises (the "Interpretation") and Statement of
Financial Accounting Standards ("SFAS") No. 120, Accounting and Reporting by
Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long
Duration Participating Policies (the "Standard"), of the Financial Accounting
Standards Board ("FASB"). The Interpretation and Standard required mutual life
insurance companies to adopt all standards promulgated by the FASB in their
general purpose financial statements. The financial statements of NELICO for
1995 and 1994 have been retroactively restated to reflect the adoption of all
applicable authoritative GAAP pronouncements. The cumulative effect of such
adoption as of January 1, 1994 has been reflected in an adjustment of equity at
January 1, 1994 (see Note 12).
As of December 31, 1993, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", which expanded the use of fair value accounting for those
securities that a company does not have positive intent and ability to hold to
maturity. Implementation of SFAS No. 115 increased consolidated equity by
$104,801, net of deferred income taxes and adjustments of deferred policy
acquisition costs and future policy benefits.
VALUATION OF INVESTMENTS
Fixed maturity securities for which the Company has the positive intent and
ability to hold to maturity are stated principally at amortized cost and include
bonds and redeemable preferred stock. All other fixed maturity securities are
classified as available for sale and are reported at estimated fair market
value. Unrealized holding gains and losses on fixed maturity securities
available for sale are reported as a separate component of equity. Such amounts
are net of related deferred income taxes and adjustments of deferred policy
acquisition costs and future policy benefits relating to unrealized gains on
available for sale securities. Amortized cost of fixed maturity securities is
adjusted for impairments in value deemed to be other than temporary. All
securities are recorded on a trade date basis.
The Company's mortgage loan on real estate was carried at outstanding
principal balance. Mortgage loans are considered impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the contract terms of the loan agreement.
The mortgage loan was in good standing at December 31, 1995 and no allowance for
loss was required.
F-33
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Real estate is considered held for sale by management and is reported at the
lower of cost or estimated fair market value less allowances for the estimated
cost of sales. No impairment allowance is required on the property.
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost which approximates fair
value.
Cash and cash equivalents includes cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less. These are carried at cost, which approximates fair value.
INVESTMENT RESULTS
Realized investment gains and losses are determined by specific identification
and are presented as a component of revenues.
PROPERTY AND EQUIPMENT
Property and equipment and leasehold improvements are included in other assets
and are stated at cost, less accumulated depreciation and amortization.
Depreciation, including charges relating to capitalized leases, is provided
using the straight line method over the estimated useful lives of the assets
which generally range from 4 to 15 years or the term of the lease, if shorter.
Amortization of leasehold improvements is provided using the straight line
method over the lesser of the term of the leases or the estimated useful life of
the improvements.
Accumulated depreciation and amortization on property and equipment and
leasehold improvements was $3,117,743 and $0 at December 31, 1996 and 1995,
respectively. Related depreciation and amortization expense was $3,117,743, $0
and $0 for the years ended December 31, 1996, 1995 and 1994, respectively.
RECOGNITION OF INCOME AND EXPENSES
Premiums from traditional life policies are recognized generally as income
when due. Benefits and expenses are matched with such income so as to result in
the recognition of profits over the life of the contract. This match is
accomplished by means of the provision for liabilities for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs.
Reinsurance allowances for individual non-medical health contracts are
recognized as income when due.
Premiums from variable life, universal life and investment-type contracts are
reported as deposits to policyholder account balances. Revenues from these
contracts consist of amounts assessed during the period against policyholder
account balances for mortality charges, policy administration charges and
surrender charges. Policy benefits and claims that are charged to expense
include benefit claims incurred in the period in excess of related policyholder
account balances and interest credited to policyholder account balances.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, agency and
policy issue expenses, all of which vary with and are primarily related to the
production of new business, have been deferred. Deferred policy acquisition
costs are subject to recoverability testing at the time of policy issue and loss
recognition testing at the end of each accounting period.
F-34
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Deferred policy acquisition costs are amortized over a period up to 40 years
for traditional life, variable life, universal life products and for
investment-type products as a constant percentage of estimated gross margins or
profits arising principally from surrender charges and interest, mortality and
expense margins based on historical and anticipated future experience, updated
regularly. The effects of revisions to experience on previous amortization of
deferred policy acquisition costs are reflected in earnings in the period
estimated gross margins or profits are revised.
For non-medical health insurance contracts, deferred policy acquisition costs
are amortized over the life of the contracts (generally between 10 and 30 years)
in proportion to anticipated reinsurance allowances.
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES
Future policy benefit liabilities for participating traditional life insurance
policies are equal to the aggregate of net level premium reserve for death and
endowment policy benefits and the liability for terminal dividends. The net
level premium reserve is calculated based on the dividend fund interest rate and
mortality rates guaranteed in calculating the cash surrender values described in
such contracts. Interest rates used in establishing future policy benefit
liabilities range from 4 percent to 5 percent for life insurance policies.
Policyholder account balances for variable life, universal life and
investment-type contracts are equal to the policy account values. The policy
account values represent an accumulation of gross premium payments plus credited
interest less expense and mortality charges and withdrawals.
Benefit liabilities for non-medical health insurance are calculated as the net
GAAP liability plus the unamortized deferred acquisition costs. Benefit
liabilities for disabled lives are estimated using the present value of benefits
method and experience assumptions as to claim terminations, expenses and
interest.
INCOME TAXES
NELICO files a consolidated Federal Income Tax return with Exeter Reassurance
Company, Ltd. The future tax consequences of temporary differences between
financial reporting and tax basis of assets and liabilities are measured as of
the balance sheet dates and are recorded as deferred tax assets or liabilities.
SEPARATE ACCOUNT OPERATIONS
Separate Accounts are established in conformity with the state insurance laws
and are generally not chargeable with liabilities that arise from any other
business of the Company. Separate Account assets are subject to general account
claims only to the extent the value of such assets exceed the Separate Account
liabilities.
Investments held in the Separate Accounts (stated at estimated fair market
value) and liabilities of the Separate Accounts (including participants'
corresponding equity in the Separate Accounts) are reported separately as assets
and liabilities. Deposits to Separate Accounts are reported as increases in
Separate Account liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges to all Separate Accounts are included in
revenues.
POLICYHOLDER DIVIDENDS
The amount of policyholder dividends to be paid is determined annually by the
Board of Directors. The aggregate amount of policyholder dividends is related to
actual interest, mortality, morbidity and expense experience for the year and
management's judgment as to the appropriate level of statutory surplus to be
retained by the Company.
F-35
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
CONSOLIDATED STATEMENTS OF CASH FLOWS--NON CASH TRANSACTIONS
For the years ended December 31, 1996 and 1995, respectively, the Company
received capital contributions in the form of transfer of assets of $49,683,978
and $54,028,223. In 1994, $296,815,969 of bonds were received in support of the
coinsurance treaty with NEMLICO.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. INVESTMENTS
DEBT SECURITIES
The carrying value, gross unrealized gain (loss) and estimated fair value of
fixed securities, by category, as of December 31, 1996 and 1995 are shown below.
HELD TO MATURITY SECURITIES
<TABLE>
<CAPTION>
GROSS UNREALIZED
ESTIMATED ------------------ AMORTIZED
FAIR VALUE GAIN LOSS COST
----------- -------- -------- -------------
<S> <C> <C> <C> <C>
1996
Fixed Maturities:
Bonds:
U.S. Treasury Securities
and obligations of U.S.
government corporations
and agencies . . . . . . $ 7,344,149 $ 51,289 $ 6,095 $ 7,298,955
States and political
subdivisions . . . . . . 517,770 38,031 479,739
Corporate . . . . . . . . 22,648,666 860,180 99,138 21,887,624
----------- -------- -------- -----------
Total Fixed Maturities . . . . $30,510,585 $949,500 $105,233 $29,666,318
=========== ======== ======== ===========
1995
Fixed Maturities:
Bonds:
U.S. Treasury Securities
and obligations of U.S.
government corporations
and agencies . . . . . . $ 9,695,983 $179,024 $ $ 9,516,959
States and political
subdivisions . . . . . . 530,650 60,604 470,046
Corporate . . . . . . . . 26,599,841 257,222 170,994 26,513,613
Other . . . . . . . . . . 50,000 50,000
----------- -------- -------- -----------
Total Fixed Maturities . . . . $36,876,474 $496,850 $170,994 $36,550,618
=========== ======== ======== ===========
</TABLE>
F-36
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
AVAILABLE FOR SALE SECURITIES
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ----------------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
------------ ----------- ---------- --------------
<S> <C> <C> <C> <C>
1996
Fixed Maturities:
Bonds:
U.S. Treasury
Securities and
obligations of
U.S. government
corporations and
agencies. . . . . $ 5,464,659 $ 46,737 $ 24,580 $ 5,486,816
Foreign
governments . . . 1,577,439 1,147 57,272 1,521,314
Corporate . . . . 505,682,553 18,637,259 7,092,856 517,226,956
Mortgage-backed
securities. . . . 48,759 798 49,557
------------ ----------- ---------- ------------
Total Fixed
Maturities . . . . . . $512,773,410 $18,685,941 $7,174,708 $524,284,643
============ =========== ========== ============
1995
Fixed Maturities:
Bonds:
U.S. Treasury
Securities and
obligations of
U.S. government
corporations and
agencies. . . . . $ 1,991,186 $ 746 $ 1,135 $ 1,990,797
Foreign
governments . . . 3,017,691 178,111 3,195,802
Corporate . . . . 512,320,546 58,440,764 183,844 570,577,466
Mortgage-backed
securities. . . . 69,877 924 70,801
------------ ----------- ---------- ------------
Total Fixed
Maturities . . . . . . $517,399,300 $58,620,545 $ 184,979 $575,834,866
============ =========== ========== ============
</TABLE>
Included in net unrealized appreciation (depreciation) of investments are
unrealized gains on foreign currency investments as well as unrealized gains on
the associated forward foreign exchange contracts. Unrealized appreciation
(depreciation) of investments consists of the following:
<TABLE>
<CAPTION>
1996 1995
------- -----------
<S> <C> <C>
Net unrealized gains on investments . . . . . . . . . . $ 8,213 $372,881
Unrealized gains (losses) on the maturity of forward
contracts . . . . . . . . . . . . . . . . . . . . . . . 13,665 (76,214)
------- --------
$21,878 $296,667
======= ========
</TABLE>
The estimated fair value and amortized cost of bonds classified as held to
maturity, by contractual maturity, at December 31, 1996 are shown below.
<TABLE>
<CAPTION>
ESTIMATED AMORTIZED
FAIR VALUE COST
----------- -------------
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . $ 3,792,488 $ 3,783,539
Due after one year through five years . . . . . . 8,714,767 8,791,593
Due after five years through ten years . . . . . . 17,503,330 16,591,186
Due after ten years . . . . . . . . . . . . . . . 500,000 500,000
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . $30,510,585 $29,666,318
=========== ===========
</TABLE>
F-37
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The amortized cost and estimated fair value of bonds classified as available
for sale, by contractual maturity, at December 31, 1996 are shown below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
------------ --------------
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . $ $
Due after one year through five years . . . . . 23,380,259 23,820,548
Due after five years through ten years . . . . . 51,941,867 51,169,921
Due after ten years . . . . . . . . . . . . . . 437,402,525 449,244,617
------------ ------------
Subtotal . . . . . . . . . . . . . . . . . . . 512,724,651 524,235,086
Mortgage-backed securities . . . . . . . . . . . 48,759 49,557
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . $512,773,410 $524,284,643
============ ============
</TABLE>
Bonds not due at a single maturity date have been included in the above tables
in the year of final maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without prepayment penalties.
ASSETS HELD IN TRUST FOR THE BENEFIT OF OTHER PARTIES
Exeter has deposited in a trust for the benefit of MetLife certain assets for
the purpose of allowing MetLife to record a reserve credit as permitted by
regulations of the State of New York. Under the terms of the Trust Agreement
MetLife enjoys broad powers to withdraw funds from the trust for the payment of
policyholder claims incurred by Exeter under its reinsurance treaty and to
direct the investment of funds held in the trust. The Trust Agreement limits the
types of investments that may be held in trust to cash and certificates of
deposit, U.S. Government bonds and notes and publicly traded securities of U.S.
companies having a National Association of Insurance Commissioners (NAIC) rating
of 1. At December 31, 1996, the trust held $786,828 of cash and $468,847,351 of
bonds and short-term investments, and at December 31, 1995 $487,268,195 of bonds
and short-term investments.
MORTGAGE LOANS
As of December 31, 1995 the mortgage loan investment was collateralized by
industrial property in Baltimore, Maryland.
ASSETS ON DEPOSIT
As of December 31, 1996 and 1995, the Company had assets on deposit with
regulatory agencies of $5,884,253 and $6,486,794, respectively.
F-38
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
3. INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of investment income are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Fixed maturities . . . . . . . . . . . $44,629,921 $39,264,322 $1,597,939
Mortgage loans on real estate . . . . 110,037 233,974 235,138
Real estate . . . . . . . . . . . . . 55,149
Policy loans . . . . . . . . . . . . . 3,734,183 2,831,097 1,996,359
Cash, cash equivalents and short-term
investments . . . . . . . . . . . . . 3,656,448 1,173,815 597,425
Other investment income . . . . . . . 37,135
----------- ----------- ----------
Gross investment income . . . . . . . 52,222,873 43,503,208 4,426,861
Investment expenses . . . . . . . . . 2,594,530 1,688,133 357,506
----------- ----------- ----------
Investment income, net . . . . . . . . $49,628,343 $41,815,075 $4,069,355
=========== =========== ==========
</TABLE>
Investment gains (losses), are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ -----------
<S> <C> <C> <C>
Fixed maturities . . . . . . . . . . . $15,467,124 $21,981,201 $(64,090)
Other . . . . . . . . . . . . . . . . 512,143 (1,295) 9
----------- ----------- --------
Investment gains (losses), net . . . . $15,979,267 $21,979,906 $(64,081)
=========== =========== ========
</TABLE>
Proceeds from the sales of bonds classified as available for sale during 1996,
1995 and 1994 were $275,008,306, $518,416,727 and $13,127,940 respectively.
During 1996, 1995 and 1994, respectively, gross gains of $19,109,340,
$22,557,997 and $77,319, and gross losses of $3,878,497, $576,796, and $141,409
were realized on those sales.
Proceeds from the call of direct issue bonds classified as held to maturity
during 1996, 1995 and 1994 were $5,290,796, $0, and $0, respectively. During
1996, 1995 and 1994, respectively, gross gains of $236,280, $0 and $0, and gross
losses of $0, $0, and $0 were realized due to prepayment premiums received.
There were no sales of fixed maturities classified as held to maturity.
The unrealized investment gains (losses), which are included in the
consolidated balance sheets as a component of equity and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31
Balance, beginning of year . . . . $ 26,356,420 $ (669,631) $ 104,801
Change in unrealized investment
gains (losses) . . . . . . . . (46,851,102) 58,946,561 --
Effect of adopting SFAS No. 115 -- -- (931,481)
Change in unrealized investment
gains (losses) attributable to:
Deferred policy acquisition
cost allowances . . . . . . 12,210,988 (17,883,703) 98,294
Deferred income tax (expense)
benefit. . . . . . . . . . . 12,011,067 (14,036,807) 58,755
------------ ------------ ---------
Balance, end of year . . . . . . . $ 3,727,373 $ 26,356,420 $(669,631)
============ ============ =========
</TABLE>
F-39
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------- ------------
<S> <C> <C> <C>
DECEMBER 31
Balance, end of year, comprises:
Unrealized investment gains
(losses) on:
Fixed maturities . . . . . . . $11,524,866 $ 58,369,351 $(574,586)
Other . . . . . . . . . . . . (4,327) 2,290 (334)
----------- ------------ ---------
11,520,539 58,371,641 (574,920)
Amounts of unrealized investment
gains (loss) attributable to:
Deferred policy acquisition cost
allowances. . . . . . . . . . . (5,755,640) (17,966,628) (82,925)
Deferred income taxes . . . . . . (2,037,526) (14,048,593) (11,786)
----------- ------------ ---------
Balance, end of year . . . . . . . $ 3,727,373 $ 26,356,420 $(669,631)
=========== ============ =========
</TABLE>
Net unrealized investment gains at December 31, 1996, before deferred Federal
income tax, reflects gross unrealized gains of $18,685,941 and gross unrealized
losses of $7,174,708.
4. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
In the normal course of business, the Company assumes and cedes reinsurance
with other insurance companies. The accompanying consolidated statements of
earnings are presented net of reinsurance ceded.
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- ----------------
<S> <C> <C> <C>
Direct premiums . . . . . . . $ 2,681,689 $ 2,794,103 $ 329,113
Reinsurance assumed . . . . . 67,482,752 69,329,831 402,121,966
Reinsurance ceded . . . . . . (32,754,401) (33,558,199) (196,351,429)
------------ ------------ -------------
Net premiums earned . . . . . $ 37,410,040 $ 38,565,735 $ 206,099,650
============ ============ =============
</TABLE>
Policyholder benefits in the accompanying consolidated statements of earnings
are presented net of reinsurance recoveries of $23,961,773, $22,577,080 and
$4,948,808 for the years ended December 31, 1996, 1995 and 1994, respectively.
Premiums and other receivables in the accompanying consolidated balance sheets
include reinsurance recoveries of $0.2 million and $0 million at December 31,
1996 and 1995, respectively.
A contingent liability exists with respect to reinsurance ceded should the
reinsurers be unable to meet their obligations.
5. INCOME TAXES
Income tax expense for U.S. operations has been calculated in accordance with
the provisions of the Internal Revenue Code, as amended.
NELICO and its eligible subsidiary file a consolidated U. S. income tax return
and other subsidiaries file separate income tax returns as required. The Company
uses the liability method of accounting for income taxes. Income tax provisions
are based on income reported for financial statement purposes. Deferred income
taxes arise from the recognition of temporary differences between income
determined for financial reporting purposes and income tax purposes.
F-40
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
A summary of income tax expense (benefit) in the consolidated statements of
earnings is shown below:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------------ ------------ --------------
<S> <C> <C> <C>
1996
Federal . . . . . . . . . . . . . $ 5,333,391 $(1,531,395) $ 3,801,996
State and Local . . . . . . . . . (751,407) (751,407)
----------- ----------- -----------
Total . . . . . . . . . . . . . . $ 5,333,391 $(2,282,802) $ 3,050,589
=========== =========== ===========
1995
Federal . . . . . . . . . . . . . $ 5,503,644 $ 6,354,610 $11,858,254
State and Local . . . . . . . . . 444,351 444,351
----------- ----------- -----------
Total . . . . . . . . . . . . . . $ 5,503,644 $ 6,798,961 $12,302,605
=========== =========== ===========
1994
Federal . . . . . . . . . . . . . $(1,960,017) $ 5,557,870 $ 3,597,853
State and Local . . . . . . . . . 590,630 590,630
----------- ----------- -----------
Total . . . . . . . . . . . . . . $(1,960,017) $ 6,148,500 $ 4,188,483
=========== =========== ===========
</TABLE>
Reconciliations of the differences between income taxes computed at the
federal statutory tax rates and consolidated provisions for income taxes are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ --------------
<S> <C> <C> <C>
Income before taxes . . . . . . . $ 12,752,058 $33,068,222 $11,325,231
Income tax rate . . . . . . . . . 35% 35% 35%
------------ ----------- -----------
Expected income tax expense at
federal statutory income tax
rate . . . . . . . . . . . . . . 4,463,220 11,573,878 3,963,831
Tax effect of:
Change in valuation allowance . (13,948,000) (413,000) (402,850)
NOL benefit write-off . . . . . 13,012,000 -- --
State and local income taxes . (488,415) 288,828 383,910
Tax credits . . . . . . . . . .
Other, net . . . . . . . . . . 11,784 852,899 243,592
------------ ----------- -----------
Income Tax Expense (Benefit) . . $ 3,050,589 $12,302,605 $ 4,188,483
============ =========== ===========
</TABLE>
F-41
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The deferred tax asset or liability recorded represents the net temporary
differences between the tax bases of assets and liabilities and their amounts
for financial reporting. The components of the net deferred tax asset or
liability at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------------- ----------------
<S> <C> <C>
Deferred tax assets:
Policyholder liabilities . . . . . . . . . $ 83,303,973 $ 69,491,980
Net operating loss carryforward . . . . . 12,547,940 13,012,000
Other . . . . . . . . . . . . . . . . . . 14,690,260 9,890,697
------------- -------------
Total gross assets . . . . . . . . . . . . . 110,542,173 92,394,677
Less valuation allowance . . . . . . . . . (13,948,000)
------------- -------------
Asset, net of valuation allowance . . . . . 110,542,173 78,446,677
------------- -------------
Deferred tax liabilities
Investments . . . . . . . . . . . . . . . (2,526,047) (7,185,868)
Deferred policy acquisition costs . . . . (132,964,603) (106,477,179)
Net unrealized capital gains . . . . . . . (2,037,526) (14,048,593)
Other . . . . . . . . . . . . . . . . . . (12,477,078) (5,716,682)
------------- -------------
Total gross liabilities . . . . . . . . . . (150,005,254) (133,428,322)
------------- -------------
Net deferred tax liability . . . . . . . . . $ (39,463,081) $ (54,981,645)
============= =============
</TABLE>
The sources of the deferred tax expense (benefit) and their tax effects are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ ---------------
<S> <C> <C> <C>
Policyholder liabilities . . . . $(17,818,264) $(4,109,738) $(25,551,114)
Net operating loss
carryforward . . . . . . . . . 464,060
Deferred policy acquisition
costs . . . . . . . . . . . . . 21,827,603 13,877,584 32,756,212
Other, net . . . . . . . . . . . (6,756,201) (2,968,885) (1,056,598)
------------ ----------- ------------
Total . . . . . . . . . . . . . $ (2,282,802) $ 6,798,961 $ 6,148,500
============ =========== ============
</TABLE>
6. EMPLOYEE BENEFIT PLANS
The Home Office Retirement Plan and related Select Employees' Supplemental
Retirement Plan (together the "Plan") cover substantially all of the Company's
employees. Retirement benefits are based primarily on years of service and the
employee's average salary. The Company's funding policy is to contribute
annually an amount that can be deducted for federal income tax purposes using a
different actuarial cost method and different assumptions from those used for
financial reporting purposes. The net pension cost charged to income in 1996,
1995, and 1994 was $159,000, $150,000, and $145,000, respectively. These amounts
are not representative of the net pension cost that can be expected to be
charged to income in future years, because substantially all the Company's
employees were employed by NEMLICO prior to the merger, and, correspondingly,
substantially all net pension cost was incurred by NEMLICO. The amounts of net
periodic pension cost disclosed below are more indicative of the net pension
cost that will be incurred in future years.
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- ---------------
<S> <C> <C> <C>
Service cost . . . . . . . . . $ 5,761,000 $ 4,797,000 $ 6,575,000
Interest cost on projected
benefit obligation . . . . . . 12,489,000 11,012,000 10,590,000
Actual return on assets . . . . (15,468,000) (21,221,000) 2,121,000
Net amortization and
deferrals . . . . . . . . . . 6,009,000 13,059,000 (10,002,000)
------------ ------------ ------------
Net periodic pension cost . . . $ 8,791,000 $ 7,647,000 $ 9,284,000
============ ============ ============
</TABLE>
F-42
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The assumed long-term rate of return on assets used in determining the net
periodic pension cost was 8.5 percent.
The following information for the plan includes amounts relating to NEMLICO.
<TABLE>
<CAPTION>
1996 1995
------------- ---------------
<S> <C> <C>
Actuarial present value of accumulated plan
benefits. . . . . . . . . . . . . . . . . . . $133,000,000 $119,000,000
============ ============
Projected benefit obligation . . . . . . . . . 182,000,000 168,000,000
============ ============
Net assets available for plan benefits . . . . 130,992,000 116,000,000
============ ============
Unrecognized prior service cost . . . . . . . 224,000 3,954,000
============ ============
Unrecognized net (loss) from past experience
difference from that assumed . . . . . . . . (37,327,000) (47,300,000)
============ ============
Unamortized transition gains . . . . . . . . . $ 4,015,000 $ 5,185,000
============ ============
</TABLE>
The weighted average discount rate was 7.5%, 8.0% and 7.5% in 1996, 1995 and
1994, respectively. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit was 5.0% for
1996, 1995 and 1994. Plan assets consist of bonds, stocks, real estate, and
insurance contracts and have an assumed long-term rate of return of 8.5% for
1996, 1995 and 1994.
OTHER POSTRETIREMENT BENEFITS
In addition to pension benefits, the Company provides certain health care and
life insurance benefits for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age while working
for the Company.
The following sets forth the plan's fiscal year end funded status reconciled
with amounts reported in the financial statements of MetLife. Subsequent to the
merger, substantially all employees covered by the plan are employed by the
Company. Accordingly, in future years these disclosures will reconcile to
amounts reported on the Company's balance sheet and income statement.
<TABLE>
<CAPTION>
1996 1995
----------- -------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . $28,566,000 $31,696,000
Fully eligible active plan participants . . . . 5,482,000 7,075,000
All other actives . . . . . . . . . . . . . . . 11,098,000 14,200,000
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . 45,146,000 52,971,000
plus: unrecognized net gain . . . . . . . . . . 19,997,000 12,654,000
----------- -----------
Accrued postretirement benefit liability . . . . . $65,143,000 $65,625,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -------------
<S> <C> <C> <C>
The components of net postretirement
benefit cost were:
Service cost . . . . . . . . . . $ 876,000 $ 876,000 $1,070,000
Interest cost . . . . . . . . . . 3,183,000 3,768,000 3,926,000
Amortization of gain . . . . . . (1,155,000) (1,043,000) (922,000)
----------- ----------- ----------
Net periodic postretirement benefit
cost . . . . . . . . . . . . . . . $ 2,904,000 $ 3,601,000 $4,074,000
=========== =========== ==========
</TABLE>
Net periodic postretirement benefit costs for the years ended December 31,
1996 and 1995, includes the cost of benefits earned by active employees,
interest cost, gains and losses arising from differences between actuarial
F-43
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
assumptions and actual experience, and amortization of the transition
obligation. The discount rate used to determine the net periodic postretirement
benefit cost was 7.25%, 8.5% and 8.0% for 1996, 1995 and 1994, respectively. The
Company made contributions to the plan of $3,386,000 in 1996, $3,700,000 in 1995
and $3,579,000 in 1994, as claims were incurred.
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.50% and 7.25% as of December 31, 1996 and 1995 respectively.
The health care cost trend rate was 8.2% graded to 5.0% over 8 years for 1996,
and 8.6% graded to 5.5% over 8 years for 1995. The health care cost trend rate
assumption has a minimal impact on the amounts reported, since the Company has
capped its contributions at 200% of 1993 levels.
7. LEASES
LEASE EXPENSE
The Company has entered into various lease agreements for office space, data
processing and other equipment. Future gross minimum rental payments under
non-cancelable leases for 1997 and the succeeding four years are $10,942,951,
$10,690,820, $10,919,215, $9,269,160 and $8,686,613, respectively, and
$51,208,079 thereafter. Minimum future sub-lease rental income on these
noncancelable leases is $3,202,010, $3,336,379, $3,336,379, $3,336,379 and
$3,336,379 for 1997 and the succeeding four years, respectively, and $16,518,626
thereafter.
8. DEBT
In 1995, the Company borrowed $25,000,000 from a bank, bearing interest at a
variable rate, equal to the greater of the bank's base rate or money market
rates plus .6% per annum payable monthly, 5.7% at December 31, 1996 and 5.8% at
December 31, 1995. The loan is collateralized by sales loads and surrender
charges collected on a defined block of variable life insurance policies issued
by the Company. Repayment is structured in a manner to result in repayment over
a term of five years. The carrying value of the loan approximates its fair
value.
Exeter privately placed $75,118,152 aggregate principal amount, subordinated
notes payable (the "Notes"), on December 30, 1994 which are due December 30,
2004, with no interest payments for the first five years and semiannual interest
payments thereafter. The Notes have been discounted to yield 8.45% for the first
five years and pay interest at 8.845% thereafter. The Notes are expressly
subordinated in right of payment to the insurance liabilities of Exeter. The
Notes are not subject to redemption by Exeter or through the operation of a
sinking fund prior to maturity. Proceeds of the issuance of the Notes, net of
discount, amounted to $50,000,000. The issue costs of the Notes of $130,000 were
deducted from Notes, net of discount, to arrive at net subordinated notes
payable of $49,870,000. The issue cost will be amortized over the life of the
Notes. The Notes are held by MetLife, and the carrying value of the loan
approximates its fair value.
9. CONTINGENCIES
The Company has no contingent liabilities which might materially affect the
financial position of the Company or the results of its operations. There are no
pending legal proceedings which are beyond the ordinary course of business which
could have a material financial effect.
F-44
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
10. OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- ---------------
<S> <C> <C> <C>
Compensation costs . . . . . . $ 36,172,270 $ 23,629,621 $ 18,807,641
Commissions . . . . . . . . . . 51,616,356 37,476,445 37,220,361
Debt expense . . . . . . . . . 6,261,153 5,658,756 --
Amortization of policy
acquisition costs . . . . . . 29,390,090 32,664,723 23,130,743
Capitalization of policy
acquisition costs . . . . . . (98,016,252) (65,850,148) (63,779,884)
Rent expense, net of sub-lease
income of $119,272,
$0 and $0 . . . . . . . . . . 3,060,243 1,609,487 1,288,197
Other . . . . . . . . . . . . . 122,559,161 75,701,177 67,058,781
------------ ------------ ------------
Total . . . . . . . . . . . . . $151,043,021 $110,890,061 $ 83,725,839
============ ============ ============
</TABLE>
11. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments presented below have
been determined by the Company using market information available as of December
31, 1996 and 1995 and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value for financial instruments for which there are no
available market value quotations.
The use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
------------ --------------
<S> <C> <C>
DECEMBER 31, 1996:
Assets
Fixed Maturities . . . . . . . . . . . . . . . $553,950,961 $554,795,228
Policy loans . . . . . . . . . . . . . . . . . 76,262,779 76,262,779
Short-term investments . . . . . . . . . . . . 156,559,460 156,559,460
Cash and cash equivalents . . . . . . . . . . 49,147,342 49,147,342
Separate Account Assets . . . . . . . . . . . 192,632,348 192,632,348
Liabilities
Policyholder account balances . . . . . . . . 6,269,574 6,031,664
Other policyholder funds . . . . . . . . . . . 2,071,162 2,071,162
Short and long-term debt . . . . . . . . . . . 84,056,337 84,056,337
Separate Account Balances . . . . . . . . . . 208,269,567 192,632,348
DECEMBER 31, 1995:
Assets
Fixed Maturities . . . . . . . . . . . . . . . $612,385,484 $612,711,339
Mortgage loans . . . . . . . . . . . . . . . . 2,210,153 2,210,153
Policy loans . . . . . . . . . . . . . . . . . 58,210,498 58,210,498
Short-term investments . . . . . . . . . . . . 20,828,254 20,828,254
Cash and cash equivalents . . . . . . . . . . 35,129,015 35,129,015
Separate Account Assets . . . . . . . . . . . 39,701,263 39,701,263
Liabilities
Policyholder account balances . . . . . . . . 2,582,913 2,382,538
Other policyholder funds . . . . . . . . . . . 2,353,586 2,353,586
Short and long-term debt . . . . . . . . . . . 79,347,546 79,347,546
Separate Account Balances . . . . . . . . . . 42,297,885 39,701,263
</TABLE>
F-45
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
For bonds that are publicly traded, estimated fair value was obtained from an
independent market pricing service. Publicly traded bonds represented
approximately 96 percent of the carrying value and estimated fair value of the
total bonds as of December 31, 1996 and 71 percent of the carrying value and
estimated fair value of the total bonds as of December 31, 1995. For all other
bonds, estimated fair value was determined by management, based primarily on
interest rates, maturity, credit quality and average life. Estimated fair values
of mortgage loans were generally based on discounted projected cash flows using
interest rates offered for loans to borrowers with comparable credit ratings and
for the same maturities. Estimated fair values of policy loans were based on
discounted projected cash flows using U.S. Treasury rates to approximate
interest rates and Company experience to project patterns of loan accrual and
repayment. For cash and cash equivalents and short-term investments, the
carrying amount is a reasonable estimate of fair value.
The fair values for policyholder account balances are estimated using
discounted projected cash flows, based on interest rates being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued. Other policyholder funds include liabilities without
defined durations such as policy proceeds and dividends left with the Company.
The estimated fair value of such liabilities, which generally are of short
duration or have periodic adjustments of interest rates, approximates their
carrying value.
The estimated fair value of short and long-term debt was determined using
rates currently available to the Company for debt with similar terms and
remaining maturities.
12. STATUTORY FINANCIAL INFORMATION
The Interpretation and Standard required life insurance companies to adopt all
standards promulgated by the FASB in their general purpose financial statements.
The effect of all adjustments of initially applying the Interpretation and
Standard has been presented as an adjustment to the 1994 opening balance of
equity. The components of such adjustments are as follows:
<TABLE>
<CAPTION>
<S> <C>
January 1, 1994:
NELICO Historical . . . . . . . . . . . . . . . . . . . . . $ 94,378,654
Other Subsidiaries Combined Historical . . . . . . . . . . . 13,965,944
------------
108,344,598
Adjustments to GAAP for life insurance companies:
Future policy benefits and policyholder account
balances . . . . . . . . . . . . . . . . . . . . . . . . (92,581,713)
Deferred policy acquisition costs . . . . . . . . . . . . 197,723,446
Deferred federal income taxes . . . . . . . . . . . . . . (28,204,895)
Valuation of investments . . . . . . . . . . . . . . . . 116,100
Statutory investment valuation reserves . . . . . . . . . 206,448
Statutory interest maintenance reserve . . . . . . . . . 75,672
Other, net . . . . . . . . . . . . . . . . . . . . . . . (1,901,741)
------------
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . $183,777,915
============
</TABLE>
F-46
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The following reconciles statutory net income and statutory surplus and
reflects the corporate reorganization described in Note 1 determined in
accordance with accounting practices prescribed or permitted by insurance
regulatory authorities with net earnings and equity on a GAAP basis.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
Statutory net income
(loss) . . . . . . . . . . $ (46,020,586) $ 374,833 $ (56,208,918)
Adjustments to GAAP for life
insurance companies:
Future policy benefits and
policyholders account
balances . . . . . . . . (41,173,515) (9,616,060) (51,901,361)
Deferred policy acquisition
costs. . . . . . . . . . 68,626,162 45,823,425 128,219,002
Deferred Federal Income
taxes. . . . . . . . . . 2,282,802 (6,798,961) (6,148,500)
Statutory interest
maintenance reserve . . 231,011 (744) (221)
Other, net . . . . . . . . 25,755,595 (9,016,876) (6,823,254)
------------- ------------- -------------
Net GAAP Earnings . . . . . $ 9,701,469 $ 20,765,617 $ 7,136,748
============= ============= =============
Statutory surplus . . . . . $ 355,853,248 $ 203,373,628 $ 142,727,150
Adjustments to GAAP for life
insurance companies:
Future policy benefits and
policyholders account
balances . . . . . . . . (195,272,649) (154,099,134) (144,483,074)
Deferred policy acquisition
costs. . . . . . . . . . 434,636,395 353,809,245 325,859,523
Deferred Federal Income
taxes. . . . . . . . . . (40,185,081) (55,200,949) (34,365,181)
Valuation of investments . 11,502,988 58,062,684 114,109
Statutory interest
maintenance reserve . . 305,720 74,707 75,451
Statutory investment
valuation reserves . . . 3,334,658 372,954 137,202
Surplus notes . . . . . . (58,910,797) (54,210,173) (49,870,000)
Receivables from
reinsurance
transactions . . . . . . 26,029,575 -- --
Other, net . . . . . . . . 13,127,635 2,320,160 2,973,051
------------- ------------- -------------
GAAP Equity . . . . . . . . $ 550,421,692 $ 354,503,122 $ 243,168,231
============= ============= =============
</TABLE>
13. RELATED PARTY TRANSACTIONS
Prior to the merger NELICO operated under a service agreement with its parent
NEMLICO to receive all executive, legal, clerical and other personnel services.
Subsequent to the merger, the Company has entered into a Service Agreement to
provide all administrative, accounting, legal and similar services to MetLife
for certain Administered Contracts, which are life insurance and annuity
contracts issued by NEMLICO prior to the merger of NEMLICO and MetLife and those
policies and contracts defined in the Service Agreement as Transition Policies
which were sold by the Company's field force post-merger.
The Company charged MetLife $88,043,274 including accruals for administrative
services on NEMLICO administered contracts for the period of September 1, 1996
through December 31, 1996. Prior to the merger, the Company paid $62,643,521 to
NEMLICO for administrative services on variable-life and variable-annuity
contracts for the period of January 1, 1996 through August 31, 1996. In 1995,
the Company paid $50,875,006 to NEMLICO for administrative services. These
services were charged based upon direct costs incurred. Service fees are
recorded by NELICO as a reduction in operating expenses.
In 1996, MetLife made a non-cash capital contribution to the Company of common
stock of affiliated companies consisting of Exeter, NEPA, NES, Newbury, Omega
Reinsurance Corp., TNE Advisers Inc., and TNE Information Services Inc. with a
total estimated statutory fair value of $29,557,626. MetLife also made non-cash
capital contributions of home-office properties of $10,301,481,
socially-responsible investments with a book value
F-47
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
of $11,916,278, furniture, equipment and leasehold improvements of $27,816,216
and a cash contribution of $128,412,170. Prior to the merger, NEMLICO made a
cash contribution to NELICO of $20,000,000.
In 1995, NEMLICO made a non-cash capital contribution to NELICO of
publicly-traded debt securities and private-placement obligations with an
estimated fair value of $54,028,223. NELICO received cash contributions from
NEMLICO of $8,215,000 and $11,648,000 in 1995 and 1994, respectively.
The Company entered into a lease agreement with MetLife on August 30, 1996 for
the home-office building which it occupies on 501 Boylston Street in Boston,
Massachusetts. The Company paid $780,160 for lease payments to MetLife for 1996.
Commissions earned by NES from sales of New England Funds (NEF) shares, a
subsidiary of MetLife, amounted to $14,791,000 in 1996. Included in accrued
income at December 31, 1996, were amounts receivable for assets-based
commissions from NEF totaling $226,000. In 1996, NES earned asset based income
of $7,605,000 on average assets of approximately $3.5 billion under management
with NEF.
Exeter has a privately-placed subordinated notes payable to MetLife for
$58,910,797 at December 31, 1996 and $54,210,173 at December 31, 1995.
On June 21, 1996, NEMLICO purchased a mortgage from NELICO for $2,216,703
which included principal of $2,203,774, and interest of $12,929.
Stockholder dividends or other distributions proposed to be paid by NELICO
must be approved by the Massachusetts Commissioner of Insurance if such
dividends or distributions, together with other dividends or distributions made
within the preceding 12 months, exceeds the greater of (1) 10% of NELICO's
statutory surplus as regards policyholders as of the previous December 31, or
(2) NELICO's statutory net gain from operations for the 12 month period ending
the previous December 31.
Of the statutory profits earned by NELICO on participating policies and
contracts, the portion which shall inure to the benefit of NELICO's stockholder
shall not exceed the larger of (1) 10% of such statutory profits, or (2) fifty
cents per year per thousand dollars of participating life insurance other than
group term insurance in force at the end of the year.
F-48
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
New England Variable Life Insurance Company:
We have audited the statutory balance sheet of New England Variable Life
Insurance Company (a wholly-owned subsidiary of New England Mutual Life
Insurance Company) as of December 31, 1995, and the related statutory statements
of operations, surplus, and cash flows for each of the two years in the period
ended December 31, 1995. These statutory financial statements (not presented
separately herein) are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Note 1 to the aforementioned financial statements,
the Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware
(SAP), which practices after 1996 (upon issuance of 1996 financial statements)
differ from generally accepted accounting principles (GAAP).
In our report dated March 8, 1996, we expressed our opinion that the 1995 and
1994 financial statements, prepared using SAP, presented fairly, in all material
respects the financial position of New England Variable Life Insurance Company
as of December 31, 1995, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995 in conformity
with GAAP. As described in Note 1 to the financial statements, financial
statements of wholly-owned subsidiaries of mutual life insurance enterprises
prepared in accordance with SAP are no longer considered to be presented in
conformity with GAAP. Accordingly, our present opinion on the 1995 and 1994
financial statements is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the two
preceding paragraphs, the financial statements referred to above (and not
included herein) do not present fairly, in conformity with GAAP, the financial
position of New England Variable Life Insurance Company as of December 31, 1995,
or the results of its operations or its cash flows for each of the two years in
the period ended December 31, 1995.
In our opinion, the statutory financial statements referred to above (and not
included herein) present fairly, in all material respects, the financial
condition of New England Variable Life Insurance Company as of December 31,
1995, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995, on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
Delaware.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 6, 1996, except for the information
in the penultimate paragraph under
"Basis of Presentation and Principles of Consolidation"
of Note 1, for which the date is February 18, 1997
F-49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
New England Pension and Annuity Company:
We have audited the statutory balance sheet of New England Pension and Annuity
Company (a wholly-owned subsidiary of New England Mutual Life Insurance Company)
as of December 31, 1995, and the related statutory statements of operations and
surplus, and cash flows for each of the two years in the period ended December
31, 1995. These statutory financial statements (not presented separately herein)
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Note 1 to the aforementioned financial statements,
the Company prepared these financial statements using accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware
(SAP), which practices after 1996 (upon issuance of 1996 financial statements)
differ from generally accepted accounting principles (GAAP).
In our report dated March 8, 1996, we expressed our opinion that the 1995 and
1994 financial statements, prepared using SAP, presented fairly, in all material
respects the financial position of New England Pension and Annuity Company as of
December 31, 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995 in conformity with GAAP.
As described in Note 1 to the financial statements, financial statements of
wholly-owned subsidiaries of mutual life insurance enterprises prepared in
accordance with SAP are no longer considered to be presented in conformity with
GAAP. Accordingly, our present opinion on the 1995 and 1994 financial statements
is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the two
preceding paragraphs, the financial statements referred to above (and not
included herein) do not present fairly, in conformity with GAAP, the financial
position of New England Pension and Annuity Company as of December 31, 1995, or
the results of its operations or its cash flows for each of the two years in the
period ended December 31, 1995.
In our opinion, the statutory financial statements referred to above (and not
included herein) present fairly, in all material respects, the financial
condition of New England Pension and Annuity Company as of December 31, 1995,
and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 1995, on the basis of accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 6, 1996, except for the information
in the penultimate paragraph under
"Basis of Presentation and Principles of Consolidation"
of Note 1, for which the date is February 18, 1997
F-50
<PAGE>
April 23, 1996
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Shareholder of
Exeter Reassurance Company, Ltd.
We have audited the statutory balance sheet of Exeter Reassurance Company, Ltd.
(a wholly-owned subsidiary of New England Mutual Life Insurance Company) as of
December 31, 1995 and the related statutory statements of operations and
surplus, and cash flows for the year then ended. These statutory financial
statements (not presented separately herein) are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The statutory financial statements have been prepared in conformity with The
Insurance Act 1978, amendments thereto and related regulations and are not
intended to be presented in conformity with accounting principles generally
accepted in the United States of America ("U.S. GAAP").
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above (and not included herein)
do not present fairly in conformity with U.S. GAAP, the financial position of
Exeter Reassurance Company, Ltd. as of December 31, 1995, or the results of its
operations or its cash flows for the year then ended. In our opinion, the
statutory financial statements referred to above (and not included herein)
present fairly, in all material respects, the financial condition of Exeter
Reassurance Company, Ltd. as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity with the
Insurance Act 1978, amendments thereto and related regulations.
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS
F-51
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New England Securities Corporation:
We have audited the consolidated statement of financial condition of New England
Securities Corporation as of December 31, 1995, and the related consolidated
statements of operations, shareholder's equity, and cash flows for the year then
ended. These financial statements (not presented separately herein) are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (and not included
herein) present fairly, in all material respects, the consolidated financial
position of New England Securities Corporation as of December 31, 1995, and the
consolidated results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 9, 1996
F-52
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
TNE Advisers, Inc.:
We have audited the balance sheet of TNE Advisers, Inc. as of December 31, 1995,
and the related statements of operations, changes in shareholder's equity
(deficit), and cash flows for the year ended December 31, 1995, and for the
period August 26, 1994 (commencement of operations) through December 31, 1994.
These financial statements (not presented separately herein) are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (and not included
herein) present fairly, in all material respects, the financial position of TNE
Advisers, Inc. as of December 31, 1995, and the results of its operations and
its cash flows for the year ended December 31, 1995, and for the period August
26, 1994 (commencement of operations) through December 31, 1994, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 29, 1996
F-53
<PAGE>
March 14, 1996
INDEPENDENT AUDITORS' REPORT
To The Shareholders of
Newbury Insurance Company, Limited
We have audited the accompanying balance sheets of Newbury Insurance Company,
Limited as of December 31, 1995, and the related statements of earnings and
retained earnings and cash flows for each of the two years in the period ended
December 31, 1995 (not presented separately herein). These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
Except as discussed in the following paragraph, we conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The provision for losses incurred but not reported is calculated in the manner
described in note 3b). We have not reviewed the underlying information used in
the calculation of the provision and therefore we have been unable to determine
whether the provisions for the years ended December 31, 1995 and 1994 are
adequate, deficient or excessive.
In our opinion, except for the effects of such adjustments, if any, that might
have been determined to be necessary had we been able to assess fully the matter
described in the preceding paragraph, the financial statements referred to above
(and not included herein) present fairly, in all material respects, the
financial position of Newbury Insurance Company, Limited as of December 31,
1995, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995 and 1994, in conformity with
accounting principles generally accepted in the United States of America.
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS
F-54
<PAGE>
PART II
RULE 484 UNDERTAKING
Section 9 of NELICO's By-Laws provides that NELICO shall, to the extent
legally permissible, indemnify its directors and officers against liabilities
and expenses relating to lawsuits and proceedings based on such persons' roles
as directors or officers. However, Section 9 further provides that no such
indemnification shall be made with respect to any matter as to which a director
or officer is adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the corporation. Section 9
also provides that in the event a matter is disposed of by a settlement payment
by a director or officer, indemnification will be provided only if the
settlement is approved as in the best interest of the corporation by (a) a
disinterested majority of the directors then in office, (b) a majority of the
disinterested directors then in office, or (c) the holders of a majority of
outstanding voting stock (exclusive of any stock owned by any interested
director or officer).
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of NELICO
pursuant to the foregoing provisions, or otherwise, NELICO has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
may be against public policy as expressed in the Act and may be, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by NELICO of expenses incurred or paid by a
director, officer or controlling person of NELICO in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, NELICO
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium adjustable variable survivorship
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 138 pages.
The undertaking to file reports.@
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
The signatures.
Written consents of the following persons:
H. James Wilson, Esq. (see Exhibit 3(i) below)
Rodney J. Chandler, F.S.A., M.A.A.A. (see Exhibit 3(ii) below)
Sutherland, Asbill & Brennan, 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>
(3) (a) Distribution Agreement between NEVLICO and NELESCO*
(b) (i) Form of Contract between NEVLICO and its General
Agents+++
(ii) Form of contract between NEVLICO and its Agents+++
(c) Commission Schedule for Policies@@
(d) Form of contract among NES, TNE, NEVLICO and other
broker dealers++
(4) None
(5) (a) Specimen of Policy, including Application@
(b) Riders to Policy@
(6) (a) Amended and restated Articles of Incorporation and
amended and restated By-Laws of NELICO####
(7) None
(8) None
(9) None
2. See Exhibit 1.A.(5)
3. (i) Opinion and Consent of H. James Wilson, Esquire@@
(ii) Opinion and Consent of Rodney J. Chandler F.S.A.,
M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland, Asbill & Brennan, L.L.P.
7. Powers of Attorney####
8. Notice of Withdrawal Right for Policies@@
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditors
12. Schedule for computation of performance quotations+
13. (i) Consolidated memorandum describing certain procedures,
filed pursuant to Rule 6e-2(b)(12)(ii) and
Rule 6e-3(T)(b)(12)(iii)#
II-2
<PAGE>
(ii) Addendum to Consolidated memorandum describing certain procedures,
filed pursuant to Rule 6e-3(T)(b)(12)(iii)###
14. (i) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England Variable Life
Insurance Company++++
(ii) Amendment No. 1 to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation and New England
Variable Life Insurance Company##
(iii) Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and New England Variable Life
Insurance Company##
27. Financial Data Schedule
- ---------
* Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 2-82838, filed
July 28, 1983.
** Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 2-82838, filed April 4, 1983.
+ Incorporated herein by reference to Post-Effective Amendment No. 2 to the
Variable Account's Form S-6 Registration Statement, File No. 33-19540,
filed April 28, 1989.
++ Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-52050, filed September 16, 1992.
+++ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed January 12, 1993.
++++ Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-64170, filed June 9, 1993.
II-3
<PAGE>
@ Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-66864, filed August 9, 1993.
@@ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-66864 filed
January 6, 1994.
# Incorporated herein by reference to Post-Effective Amendment No. 6 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 28, 1995.
## Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed June 22, 1995.
### Incorporated herein by reference to Post-Effective Amendment No. 6 to the
Variable Account's Form S-6 Registration Statement, File No. 33-66864,
filed April 26, 1996.
#### Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
New England Variable Life Separate Account, certifies that it meets all of the
requirements for effectiveness of this amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this amendment to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the city of Boston, and the Commonwealth of Massachusetts, on
the 29th day of April, 1997.
New England Variable Life Separate Account
(Registrant)
By: New England Life Insurance Company
(Depositor)
By: /s/ Chester R. Frost
----------------------
Chester R. Frost
Senior Vice President and Treasurer
Attest:
/s/ Marie C. Swift
- ---------------------
Marie C. Swift
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, New England
Life Insurance Company certifies that it meets all of the requirements for
effectiveness of this amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the city of Boston, and the Commonwealth of Massachusetts, on the 29th day of
April, 1997.
(Seal) New England Life Insurance Company
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
Registration Statement has been signed below by the following persons in the
capacities indicated on April 29, 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
II-6
<PAGE>
* Director
- -----------------------
Terence Lennon
* 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-7
<PAGE>
EXHIBIT LIST
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBER TITLE NUMBERED PAGE*
- -------------- ----- --------------
<S> <C> <C>
3. (ii) Opinion and Consent of Rodney J. Chandler,
F.S.A., M.A.A.A.
6. Consent of Sutherland, Asbill & Brennan,
L.L.P.
11. Consent of the Independent Auditors
27. Financial Data Schedule
</TABLE>
- ---------
* Page numbers inserted on manually-signed copy only.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 804,508,248
<INVESTMENTS-AT-VALUE> 998,994,493
<RECEIVABLES> 2,543,142
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,001,537,635
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 115,152,837
<TOTAL-LIABILITIES> 115,152,837
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 886,384,798
<DIVIDEND-INCOME> 50,453,549
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,984,819
<NET-INVESTMENT-INCOME> 45,468,730
<REALIZED-GAINS-CURRENT> 1,232,236
<APPREC-INCREASE-CURRENT> 93,332,729
<NET-CHANGE-FROM-OPS> 140,033,695
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 273,750,514
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 3(ii)
April 28, 1997
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Gentlemen:
In my capacity as Second Vice President and Actuary of New England Life
Insurance Company (the "Company"), I have provided actuarial advice concerning:
The preparation of Post-Effective Amendment No. 8 to the registration
statement on Form S-6 (File No. 33-66864) filed by New England Variable Life
Separate Account and the Company with the Securities and Exchange Commission
under the Securities Act of 1933 with respect to variable life insurance
policies (the "Registration Statement"); and
The preparation of policy forms for the variable life insurance policies
described in the Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated premiums,
internal rates of return on net cash values and internal rates of return on
death benefits shown in Appendix A of the Prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies. The rate structure of the Policies has not been designed so
as to make the relationship between premiums and benefits, as shown in the
illustrations, appear to be correspondingly more favorable to prospective
purchasers of Policies for male and female joint insureds, both aged 55 in
the underwriting class illustrated than to prospective purchasers of
Policies for joint insureds of other sexes or ages. Insureds in other
underwriting classes may have higher cost of insurance charges and premiums.
2. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the Appendix,
is consistent with the provisions of the Policies.
<PAGE>
3. The illustration of net premiums shown under the heading "Charges and
Expenses-Deductions from Premiums" in the Prospectus contains the net
premium amounts allocated to the Variable Account for a $2,000 premium under
a Policy.
4. The information contained in the example of how the maximum loanable amount
is determined under the heading "Other Policy Features-Loan Provision" in
the Prospectus is consistent with the provisions of the Policies.
I hereby consent to the filing of this opinion as an Exhibit to this
Post-Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler, F.S.A., M.A.A.A.
Second Vice President and Actuary
2
<PAGE>
Exhibit 6
Sutherland, Asbill & Brennan, L.L.P.
CONSENT OF SUTHERLAND, ASBILL & BRENNAN, L.L.P.
We consent to the reference to our firm under the heading "Legal Matters" in
the prospectus included in Post-Effective Amendment No. 8 to the Registration
Statement on Form S-6 for certain variable life insurance policies issued
through New England Variable Life Separate Account of New England Life Insurance
Company (File No. 33-66864). In giving this consent, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
Washington, D.C.
April 28, 1997
<PAGE>
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No. 8 to the Registration
Statement No. 33-66864 of New England Variable Life Separate Account (the
"Separate Account") of New England Life Insurance Company (the "Company") of our
reports dated February 18, 1997, on the financial statements of the Separate
Account and the Company for the year ended December 31, 1996, appearing the
Prospectus, which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche LLP
Boston, Massachusetts
April 28, 1997
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 8 to the
Registration Statement on Form S-6 (File No. 33-66864) of our reports, which
include adverse opinions as to generally accepted accounting principles and
unqualified opinions as to statutory accounting practices prescribed or
permitted by the Insurance Department of the state of Delaware, dated March 8,
1996, except as to the information in the penultimate paragraph under "Basis of
Presentation and Principles of Consolidation" of Note 1, for which the date is
February 18, 1997, on our audits of the statutory financial statements of New
England Variable Life Insurance Company and New England Pension and Annuity
Company, and our report dated February 6, 1996, on our audit of New England
Variable Life Separate Account of New England Variable Life Insurance Company.
We also consent to the inclusion in this Registration Statement of our report,
which includes an adverse opinion as to generally accepted accounting principles
and an unqualified opinion as to conformity with The Insurance Act 1978, dated
April 23, 1996, except as to the information in the penultimate paragraph under
"Basis of Presentation and Principles of Consolidation" of Note 1, for which the
date is February 18, 1997, on our audit of the statutory financial statements of
Exeter Reassurance Company, Ltd., and our report dated February 9, 1996, on our
audit of New England Securities Corporation, and our report dated February 29,
1996, on our audit of TNE Advisers, Inc., and our report dated March 14, 1996,
on our audit of Newbury Insurance Company, Limited. We also consent to the
reference to our Firm under the caption "Experts" in this Post-Effective
Amendment.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 28, 1997
