<PAGE>
As filed with Securities and Exchange Commission on
April 30, 1998
Registration No. 2-82838
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 21
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
__________________
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
__________________
MARIE C. SWIFT
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 LLP
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, 1998 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
Title of Securities being Registered: Units of Interest in Variable Ordinary
Life Insurance Policies.
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
Form N-8B-2
Item No. CAPTION IN PROSPECTUS
- ----------- ---------------------
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution and Services Agreements
5 How is NEVLICO regulated?
6 The Variable Account
9 Inapplicable
10(a) Other Policy Features
10(b) Principal Policy Features
10(c),(d),(e) Death Benefit; Cash Value of the Policy; Exchange of Policy
During First 24 Months; Default and Lapse Options; Is there a
short-term cancellation right or "Free Look"?; Transfer Option;
Premiums
10(f),(g),(h) Voting Rights; Rights Reserved by NEVLICO
10(i) Limits to NEVLICO's Right to Challenge the Policy; Payment
of Proceeds
11 The Variable Account
12 Who are NEVLICO and New England Life?; What are the Money
Market, Bond Income and Capital Growth Sub-Accounts of the
Variable Account?; Distribution and Services Agreements
13 Illustrations of Death Benefits, Cash Values and Accumulated
Premiums; Charges and Expenses; Distribution and Services
Agreements; Charge for NEVLICO's Income Taxes; Appendix A
14 Amount Provided for Investment Under the Policy's Sub-Accounts;
Distribution and Service Agreements
15 Premiums
16 Investments of the Variable Account
17 Captions referenced under Items 10(c), (d), and (e) above
18 The Variable Account; Net Investment Performance
19 Reports; Distribution and Services Agreements
20 Inapplicable
21 Loan Provision
22 Inapplicable
23 Distribution and Services Agreements
24 Inapplicable
25 Who are NEVLICO and New England Life?
26 Inapplicable
<PAGE>
FORM N-8B-2
Item No. CAPTION IN PROSPECTUS
- ----------- ---------------------
27 Who are NEVLICO and New England Life?
28 Management
29 Who are NEVLICO and New England Life?
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Inapplicable
35 Who are NEVLICO and New England Life?
36 Inapplicable
37 Inapplicable
38 Distribution and Services Agreements
39 Distribution and Services Agreements
40 Inapplicable
41(a) Distribution and Services Agreements
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Amount Provided for
Investment in a Policy's Sub-Accounts; What is the relationship
between the Premium and the amount allocated to the sub-
accounts of the Variable Account?
44(b) Charges and Expenses; Appendix B; Appendix C
45 Inapplicable
46 Investments of the Variable Account; Captions referenced
under Items 10(c) and (e) above; Appendix B; Appendix C
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Default and Lapse Options; Charges
and Expenses; Additional Benefits by Rider; Exchange of Policy
During First 24 Months; Payment Options; Other Policy
Features; Premiums;
Distribution and Services Agreements; Appendix D
52 Rights Reserved by NEVLICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
<PAGE>
NEW ENGLAND LIFE
INSURANCE COMPANY
ZENITH LIFE--VARIABLE LIFE INSURANCE POLICIES
ZENITH LIFE ONE--SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
SUPPLEMENT DATED MAY 1, 1998 TO
PROSPECTUS DATED MAY 1, 1988
INTRODUCTION
This supplement updates certain information contained in the prospectus
dated May 1, 1988, as supplemented February 1, 1989, May 1, 1991, May 1, 1992,
May 1, 1993, May 1, 1994, May 1, 1995, May 1, 1996 and May 1, 1997. You should
read and retain this supplement with your Policy. NELICO will send you an
additional copy of the prospectus as supplemented, without charge, on written
request. The Zenith Life and Zenith Life One Policies are no longer available
for sale.
NELICO is an indirect wholly-owned subsidiary of Metropolitan Life Insurance
Company ("MetLife").
NELICO's Home Office is 501 Boylston Street, Boston, Massachusetts 02116.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS SUPPLEMENT IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE CURRENT
PROSPECTUS OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE INSURANCE
PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE ATTACHED AT
THE END OF THIS SUPPLEMENT. THE SUPPLEMENT AND PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
<PAGE>
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs
associated with providing the services or benefits indicated by the
designation of the charge or associated with the particular Policy. For
example, the sales charge and Deferred Sales Charges may not fully cover all
of the sales and distribution expenses actually incurred by the Company, and
proceeds from other charges, including the mortality and expense risk charge,
may be used in part to cover such expenses.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE
ACCOUNT
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 and Westpeak
Growth and Income Series, TNE Advisers will bear those expenses (other than
the management fee) that exceed 0.15% of average daily net assets; for the
Loomis Sayles Small Cap Series, TNE Advisers will bear all expenses that
exceed 1.00% of average daily net assets. For the remaining Zenith Fund Series
(other than the Capital Growth Series) TNE Advisers, under a voluntary expense
deferral arrangement, will bear those expenses (other than the management fee)
which exceed a certain limit in the year in which they are incurred and will
charge those expenses to the series in a future year when actual expenses of
the series are below the limit up until two years after the end of the fiscal
year in which the expense was incurred. The expense cap and expense deferral
arrangement may be terminated at any time.
The following table shows the annual operating expenses for each series,
based on actual expenses for 1997 (for the Goldman Sachs Midcap Value Series,
anticipated expenses for 1998), 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 BAY BACK BAY WESTPEAK LOOMIS
ADVISORS ADVISORS BACK BAY WESTPEAK GROWTH SAYLES
CAPITAL BOND MONEY ADVISORS STOCK AND SMALL
GROWTH INCOME MARKET MANAGED INDEX INCOME CAP
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------- -------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .63% .40% .35% .50% .25% .70% 1.00%
Other Expenses.......... .04% .12% .10% .11% .15% .12% --
---- ---- ---- ---- ---- ---- -----
Total Series Operating
Expenses............. .67% .52% .45% .61% .40% .82% 1.00%
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE DEFERRAL)
<TABLE>
<CAPTION>
GOLDMAN MORGAN
SACHS LOOMIS STANLEY DAVIS ALGER
MIDCAP SAYLES INTERNATIONAL VENTURE EQUITY
VALUE BALANCED MAGNUM VALUE GROWTH
SERIES* SERIES EQUITY SERIES SERIES SERIES
------- -------- ------------- ------- ------
<S> <C> <C> <C> <C> <C>
Management Fee................... .75% .70% .90% .75% .75%
Other Expenses................... .15% .15% .40% .15% .12%
---- ---- ----- ---- ----
Total Series Operating Ex-
penses........................ .90% .85% 1.30% .90% .87%
</TABLE>
- --------
* Anticipated annual operating expenses for the Goldman Sachs Midcap Value
Series are based on the management fee approved by shareholders of the
Series that became effective on May 1, 1998, and other expenses actually
incurred for the Series for 1997.
A-2
<PAGE>
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, 1997, 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 .50% .08% .58%*
Overseas .75% .17% .92%*
High Income .59% .12% .71%
Asset Manager .55% .10% .65%*
</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 .57% for
Equity-Income Portfolio, .90% for Overseas Portfolio and .64% for Asset
Manager Portfolio.
Affiliates of Fidelity Management & Research Company compensate NELICO
and/or certain affiliates 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.
PRINCIPAL POLICY FEATURES
INVESTMENT OPTION (ZENITH LIFE)
The following change is made:
The Policy provides that a minimum of 10% of any premium must be allocated
to each sub-account selected and that percentages allocated must be in whole
numbers; currently, however, NELICO is waiving the requirement of a 10%
minimum and will permit any whole percentage to be allocated to a sub-account.
THE VARIABLE ACCOUNT
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 16 sub-accounts, each of which invests in
a series of an Eligible Fund. The sub-accounts of the Variable Account are:
--The Zenith Money Market Sub-Account, which invests in the Back Bay
Advisors Money Market Series of the Zenith Fund
--The Zenith Bond Income Sub-Account, which invests in the Back Bay
Advisors Bond Income Series of the Zenith Fund
--The Zenith Capital Growth Sub-Account, which invests in the Capital
Growth Series of the Zenith Fund
--The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
--The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
--The Zenith Growth and Income Sub-Account, which invests in the Westpeak
Growth and Income Series of the Zenith Fund
--The Zenith 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
A-3
<PAGE>
--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 Midcap Value Sub-Account, which invests in the Goldman Sachs
Midcap Value Series (formerly the Loomis Sayles Avanti Growth Series) of
the Zenith Fund
--The Zenith International Magnum Equity Sub-Account, which invests in the
Morgan Stanley International Magnum Equity Series of the Zenith Fund
--The Equity-Income Sub-Account, which invests in the Equity-Income
Portfolio of the VIP Fund
--The Overseas Sub-Account, which invests in the Overseas Portfolio of the
VIP Fund
--The High Income Sub-Account, which invests in the High Income Portfolio
of the VIP Fund
--The Asset Manager Sub-Account, which invests in the Asset Manager
Portfolio of VIP Fund II
The Zenith Fund is an open-end diversified management investment company,
more commonly known as a mutual fund. The Zenith Fund was established as an
investment vehicle for separate investment accounts of NELICO and of other
life insurance companies. Currently the Zenith Fund is the funding vehicle for
the Variable Account and for separate accounts of NELICO and MetLife that
issue variable annuity contracts.
The VIP Fund and VIP Fund II are open-end, diversified management investment
companies (mutual funds) that serve as the investment vehicles for variable
life insurance and variable annuity separate accounts of various insurance
companies. The VIP Fund and VIP Fund II were organized by Fidelity Management
& Research Company.
Shares of the Eligible Funds are purchased and sold by the Variable Account
at their net asset value (without a deduction for sales load) determined as of
the close of regular trading on the New York Stock Exchange on each day when
the exchange is open for trading.
The investment objectives of the Eligible Funds' portfolios are described
briefly below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, including their investment
objectives and policies, expenses, and the risks of investing in the Eligible
Funds, is contained in the attached Eligible Fund prospectuses, as well as in
the Zenith Fund's Statement of Additional Information, which is referenced in
the Zenith Fund prospectus, and in the Statement of Additional Information for
the VIP Fund and VIP Fund II, which is referenced in those Funds' prospectus.
The investment objectives and policies of certain Eligible Funds are similar
to the investment objectives and policies of other funds that may be managed
by the same sub-adviser. The investment results of the Eligible Funds,
however, may be higher or lower than the results of such other funds. There
can be no assurance, and no representation is made, that the investment
results of any of the Eligible Funds will be comparable to the investment
results of any other fund, even if the other fund has the same sub-adviser.
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.
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.
A-4
<PAGE>
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 Goldman Sachs Midcap Value Series' investment objective is long-
term capital appreciation. The Series invests, under normal circumstances,
substantially all of its assets in equity securities and at least 65% of its
total assets in equity securities of companies with public stock market
capitalizations within the range of the market capitalizations of companies
constituting the Russell Midcap Index at the time of investment.
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.
Normally, the Series will invest at least 65% of its assets in companies with
market capitalization in the range of the market capitalization of those
companies which make up the Russell 2000 index at the time of investment.
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 securities and, under normal market
conditions, more than 50% of its assets in common stocks.
The Zenith Morgan Stanley International Magnum Equity Series' investment
objective is long-term capital appreciation through investment primarily in
equity securities of non-U.S. issuers, in accordance with the EAFE country
weightings determined by the series' sub-adviser. Under normal circumstances
at least 65% of the total assets of the series will be invested in equity
securities of issuers in at least three countries outside the United States.
The Zenith Davis Venture Value Series' investment objective is growth of
capital. The Series will primarily invest in domestic common stocks that the
Series' subadviser believes have capital growth potential due to factors such
as undervalued assets or earnings potential, product development and demand,
favorable operating ratios, resources for expansion, management abilities,
reasonableness of market price, and favorable overall business prospects. The
Series will generally invest predominantly in equity securities of companies
with market capitalizations of at least $250 million.
The Zenith Alger Equity Growth Series' investment objective is to seek long-
term capital appreciation. The Series' assets will be invested primarily in a
diversified, actively managed portfolio of equity securities, primarily of
companies having a total market capitalization of $1 billion or greater.
The VIP Fund Equity-Income Portfolio's investment objective is to seek
reasonable income by investing primarily in income-producing equity
securities. In choosing these securities, the Equity-Income Portfolio will
also consider the potential for capital appreciation.
The VIP Fund Overseas Portfolio's investment objective is long-term growth
of capital primarily through investments in foreign securities. Foreign
investments involve greater risks than U.S. investments, including political
and economic risks and the risks of currency fluctuation.
The VIP Fund High Income Portfolio's investment objective is to obtain a
high level of current income by investing primarily in high-yielding, lower-
rated, fixed-income securities, while also considering growth of capital.
High-yielding, lower-rated debt securities present higher risks of untimely
interest and principal payments, default and price volatility than higher-
rated securities, and may present problems of liquidity and valuation.
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 stocks, bonds and short-term instruments.
A-5
<PAGE>
The basic objective of the Policy is to provide benefits which increase in
value when the investment experience of the Policy's sub-accounts is
favorable. Historically, the investment performance of common stocks over the
long term has generally been superior to that of long or short term debt
securities, although common stocks have been subject to more dramatic changes
in value over short periods of time. The Zenith Capital Growth, Zenith Midcap
Value, Zenith Equity Growth, Zenith Venture Value, Zenith Growth and Income,
Zenith Stock Index, Zenith International Magnum Equity or Zenith Small Cap
Sub-Accounts, or the Equity-Income or Overseas Sub-Accounts, or some
combination of these sub-accounts, may, therefore, be a more desirable
selection for Policy Owners who have a long term time horizon and/or are
willing to accept such risks of short term fluctuations in value. For a
demonstration of certain of these market trends, see Appendix C: Long Term
Market Trends. Historically, the investment performance of "small cap" stocks
over the long term has generally been superior to stocks of large
capitalization companies, although "small cap" stocks have been substantially
more volatile than "large cap" stocks. Historically, having a small percentage
of a portfolio invested in overseas stocks and the rest in domestic stocks has
produced a portfolio that has less, although still substantial, volatility
than a completely domestic portfolio. Equity investors should recognize that
overseas and "small cap" funds taken alone traditionally involve more risk
than most domestic stock funds.
The performance of the various financial markets over shorter periods of
time has sometimes differed from their long term historical results. Short
term interest rates were very high in the late 1970's and early 1980's, but
are now lower. Long term bond values continue to fluctuate and could lose
value if interest rates rise. Common stock prices, which have risen
substantially at times, have also had periods of significant negative returns.
Policy Owners who seek somewhat greater protection against loss of principal
in the short term than that afforded by a stock fund may prefer the High
Income Sub-Account or the Zenith Bond Income Sub-Account. However, because the
High Income Portfolio invests in higher yielding, lower rated and unrated
fixed income securities (including bonds commonly referred to as "junk"
bonds), it has a higher degree of risk associated with it relative to more
conservative fixed income funds. Those who seek even greater safety of
principal may select the Zenith Money Market Sub-Account, although it is
subject to possible rapid changes in short term interest rates. Those who
primarily seek safety of principal should consider fixed life insurance as an
alternative to variable life insurance.
NELICO guarantees the principal invested in the Fixed Account, although this
guarantee is subject to NELICO's claims paying ability.
You may wish to consider diversifying your investments by allocating the
Policy's cash value among two or more sub-accounts.
Policy Owners may also diversify by selecting the Zenith Managed Sub-
Account, Zenith Balanced Sub-Account or the Asset Manager Sub-Account, since
each generally invests its assets at most times in a combination of bonds,
stocks and short term instruments, in varying proportions depending upon the
investment adviser's evaluation of the economy and financial markets. The
Asset Manager Portfolio has the ability to invest its stock portfolio more
aggressively than the Back Bay Advisors Managed Series. You may also wish to
diversify your cash value by country. The Overseas Sub-Account and Zenith
International Magnum Equity Sub-Account allow you to participate primarily in
companies and economies outside the United States.
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types
of investments you have and your own assessment of future economic and
financial market conditions.
A-6
<PAGE>
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 Small Cap TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Loomis Sayles Balanced TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Morgan Stanley TNE Advisers, Inc. Morgan Stanley Asset Management,
International Magnum Inc.
Equity
Goldman Sachs Midcap TNE Advisers, Inc. Goldman Sachs Asset Management
Value
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
**Davis Selected may also delegate any of its responsibilities to Davis
Selected Advisers--NY, Inc., a wholly-owned subsidiary of Davis Selected.
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, Goldman Sachs Midcap Value 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. New England Mutual 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 New England Mutual's
responsibilities under the investment advisory agreements with those Series.
Back Bay Advisors served as investment adviser to the Westpeak Stock Index
Series until August 2, 1993, when Westpeak became the investment adviser. The
Capital Growth Series was managed by Loomis, Sayles until March 1, 1990, when
its Capital Growth Management Division was reorganized into CGM. The Morgan
Stanley International Magnum Equity Series' sub-adviser was Draycott Partners,
Ltd. until May 1, 1997, when Morgan Stanley Asset Management became the sub-
adviser. The Goldman Sachs Midcap Value Series' sub-adviser was Loomis, Sayles
until May 1, 1998, when Goldman Sachs 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.
A-7
<PAGE>
TAX CONSIDERATIONS
POLICY PROCEEDS
The following discussion of Federal income tax issues relating to the
Policies is general in nature and is not intended as tax advice. It describes
what NELICO believes is the Federal income tax treatment of the Policies in
the most commonly occurring circumstances and does not reflect the effect of
Federal income taxes in all situations. In addition, there is no guarantee
that the Federal income tax laws and regulations or interpretation of them
will not change. Therefore, NELICO recommends that you consult your own tax
advisor for more complete information and advice.
DEFINITION OF LIFE INSURANCE. Section 7702 of the Internal Revenue Code
defines a life insurance contract for Federal income tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the Policy is not
directly addressed by Section 7702 or proposed regulations issued under that
section. The presence of these Policy features, the absence of final
regulations, and the lack of other pertinent interpretations of Section 7702,
thus create some uncertainty about the application of Section 7702 to the
Policy.
Nevertheless, NELICO believes that the Policy qualifies as a life insurance
contract for federal income tax purposes. This means that:
. the death benefit should be fully excludable from the gross income of
the beneficiary under Section 101(a) (1) of the Code; and
. the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
Because of the absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether substandard risk Policies
will, in all cases, meet the statutory life insurance contract definition. If
a Policy were determined not to be a life insurance contract for purposes of
Section 7702, such Policy would not provide most of the tax advantages
normally provided by a life insurance contract.
NELICO thus reserves the right to make changes in the Policy if such changes
are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes.
TAX LAW EFFECTS ON CERTAIN PRE-DEATH DISTRIBUTIONS. Section 7702A of the
Code contains provisions affecting the tax treatment of any loan, assignment
or other pre-death distribution from a life insurance policy which is also a
"modified endowment contract" (defined below under "Modified Endowment
Contracts").
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NELICO believes any policy loans received under such
Policies will be treated as indebtedness of the owner and will not be treated
as taxable income to you. This assumes that the Policy has not lapsed, been
surrendered or terminated. As a general rule, policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of your Policy if
the net cash surrender value of the Policy is greater than the investment in
the Policy less prior distributions from the Policy that were not taxed. If a
Policy has a policy loan and is surrendered or lapses, the policy loan is
treated as a distribution and would be taxable if there is a gain in the
Policy. In that case, the gain in the Policy would be taxable even if the
Policy has no net cash surrender value. If you incur a loss upon the surrender
it is not likely to be deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you
unless it is greater than the investment in the Policy less the untaxed
portions of any prior distributions. The Internal Revenue Code does provide,
however, that in certain situations in the first 15 years of the Policy
partial surrenders may be taxable, in whole or in part, if the net cash
surrender value is greater than the total investment in the Policy less the
previous untaxed distributions. This may be the case even if the amount of the
partial surrender is less than the investment in the Policy.
A-8
<PAGE>
MODIFIED ENDOWMENT CONTRACT. In general, a modified endowment contract is a
life insurance contract issued or materially changed on or after June 21,
1988, which fails to satisfy a "7-pay test". A life insurance policy will fail
to satisfy the 7-pay test if the cumulative amount paid under the policy at
any time during the first seven policy years exceeds the sum of the net level
premiums that would have been paid on or before such time had the policy
provided for paid up future benefits after the payment of seven level annual
premiums. Riders to the policy are considered part of the policy for purposes
of applying the 7-pay test. Any policy received in exchange for a modified
endowment contract will also be a modified endowment contract.
1. ZENITH LIFE POLICIES
Normally, payment of the Policy's premiums will not cause it to be a
modified endowment contract. If, however, the Policy's face amount is reduced
in the first seven policy years, either as a result of a partial surrender or
because the Policy Owner allows the Policy to lapse to Paid-up Insurance, the
7-pay test may be applied as if the Policy had originally been issued at the
reduced face amount. In that event, the Policy could fail the 7-pay test and
be classified as a modified endowment contract.
If a "material change" in the benefits or other Policy terms occurs under a
Policy which has satisfied the 7-pay test, the Policy will be treated as a new
Policy entered into on the day on which the material change occurred. The
Policy will be retested under the 7-pay test, after making certain adjustments
to reflect the Policy's existing cash value. For this purpose, only the
addition of a rider to the Policy would constitute a material change requiring
a retesting under the 7-pay test. A Policy subject to retesting in this manner
could fail the 7-pay test.
It is important to be aware that the addition of a rider to any Policy, even
a Policy issued before June 21, 1988, could be a material change which
requires the Policy to be tested under the 7-pay test.
Regardless of when it was issued, if a Policy described in the Zenith Life
prospectus is exchanged on or after June 21, 1988 for another life insurance
policy, the new insurance policy should be reviewed to determine how the rules
regarding modified endowment contracts may apply to the new policy.
2. ZENITH LIFE ONE POLICIES
ALL POLICIES DESCRIBED IN THE ZENITH LIFE ONE PROSPECTUS WHICH WERE ENTERED
INTO ON OR AFTER JUNE 21, 1988 ARE CONSIDERED MODIFIED ENDOWMENT CONTRACTS AND
ARE SUBJECT TO THE TAX TREATMENT OF DISTRIBUTIONS DISCUSSED BELOW UNDER
"DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS". IN ADDITION, ANY INSURANCE
POLICY RECEIVED IN EXCHANGE FOR A MODIFIED ENDOWMENT CONTRACT WILL ALSO BE A
MODIFIED ENDOWMENT CONTRACT.
Regardless of when it was issued, if a Policy described in the Zenith Life
One prospectus is exchanged on or after June 21, 1988 for another life
insurance policy, the new insurance policy should be reviewed to determine how
the rules regarding modified endowment contracts may apply to the new policy.
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent
the cash value of the Policy exceeds your investment in the Policy (i.e.
will be treated as income first.)
(b) Loans (including any unpaid interest) are considered distributions
even if the amount borrowed is retained by NELICO as a premium. Your
investment in the Policy will be increased by the amount of any prior loan
that was included in your gross income.
(c) A policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the
Policy, the collateral assignment is a distribution which will subject any
gain in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by
NELICO or its affiliates to the same Policy Owner during any calendar year
must be treated as one modified endowment contract.
A-9
<PAGE>
Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy).
If a Policy becomes a modified endowment contract, distributions made during
the year in which it becomes a modified endowment contract, distributions in
any subsequent policy year and distributions within two years before the
Policy becomes a modified endowment contract will be subject to the tax
treatment described above. This means that a distribution from a Policy that
is not a modified endowment contract could later become taxable as a
distribution from a modified endowment contract. In addition, regulations or
other interpretations may be issued which will apply similar tax treatment to
other distributions made in anticipation of a Policy becoming a modified
endowment contract.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy. Regulations specifying the
diversification requirements have been issued by the Department of Treasury,
and NELICO believes it complies fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of additional
guidance prescribing the circumstances in which an owner's control of the
investments of a separate account may cause a Policy Owner, rather than the
insurance company, to be treated as the owner of the assets in the separate
account. If a Policy Owner is considered the owner of the assets of the
Separate Account, income and gains from the Account would be included in the
Owner's gross income.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it determined that the owners were not owners of separate
account assets. For example, a Policy Owner has additional flexibility in
allocating payments and cash values. These differences could result in the
owner being treated as the owner of a pro rata share of the assets of the
Separate Account. In addition, NELICO does not know what standards will be set
forth in the additional guidance which the Treasury has stated it expects to
be issued. NELICO therefore reserves the right to modify the Policy as
necessary to attempt to prevent the Policy Owner from being considered the
owner of the assets of the Separate Account.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of the Policies in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement. Moreover, in recent years, Congress has adopted new rules
relating to corporate owned life insurance. Any business contemplating the
purchase of a new life insurance contract or a change in an existing contract
should consult a tax advisor.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted,
would adversely modify the federal taxation of this Policy. It is possible
that any legislative change could be retroactive (that is, effective prior to
the date of the change). A tax adviser should be consulted with respect to
legislative developments and their effect on the Policy.
A-10
<PAGE>
CHARGE FOR NELICO'S INCOME TAXES
Under current Federal income tax law no tax is imposed on NELICO as a result
of the operations of the Variable Account. Thus, no charge is being made
currently to the Variable Account for company Federal income taxes. NELICO
reserves its right to charge the Variable Account for company Federal income
taxes in the future.
Under current laws NELICO may incur state and local taxes (in addition to
premium taxes) in several states. At present these taxes are not significant
and, accordingly, NELICO is not currently making a charge for them. If they
increase, however, charges for such taxes attributable to the Variable Account
may be made.
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS
EXPERIENCE
NAME AND PRINCIPAL DURING THE PAST FIVE
BUSINESS ADDRESS YEARS
------------------------------ -----------------------------------------------
<C> <S>
James M. Benson President and Chief Executive Officer of NELICO
since 1998; formerly, President and Chief
Operating Officer 1997-1998 of NELICO;
President and CEO 1996-1997 of Equitable Life
Assurance Society and COO of Equitable
Companies, Inc.; Senior Vice President 1993-
1996 of Equitable Life Assurance Society.
Susan C. Crampton Director of NELICO since 1996 and serves as
127 Tarbox Road Principal of The Vermont Partnership, a
Jericho, VT 05465 business consulting firm located in Jericho,
Vermont since 1989; formerly, Director 1989-
1996 of New England Mutual.
Edward A. Fox Director of NELICO since 1996 and Chairman of
RR Box 67-15 the Board of SLM Holdings since 1997;
Harborside, ME 04642 formerly, Director 1994-1996 of New England
Mutual and Dean 1990-1994 of The Amos Tuck
School of Business Administration at Dartmouth
College.
George J. Goodman Director of NELICO since 1996 and author,
Adam Smith's Money World television journalist, and editor.
50th Floor Craig Drill Capital
General Motors Building
767 Fifth Street
New York, NY 10153
Dr. Evelyn E. Handler Director of NELICO since 1996; formerly,
74 Tater St. Executive Director and Chief Executive Officer
Mount Vernon, N.H. 03057 of the California Academy of Sciences 1994-
1997; Director 1987-1996 of New England Mutual
and Research Fellow and an Associate 1991-1994
of the Graduate School of Education at Harvard
University and a Senior Fellow at The Carnegie
Foundation for the Advancement of Teaching.
Philip K. Howard, Esq. Director of NELICO since 1996 and Partner of
Howard, Darby & Levin the law firm of Howard, Darby & Levin in New
1330 Avenue of the Americas York City.
New York, NY 10019
Harry P. Kamen Director of NELICO since 1996 and Chairman of
Metropolitan Life the Board since 1998; formerly Chairman and
One Madison Avenue Chief Executive Officer 1997-1998; Chairman,
New York, NY 10010 President, and Chief Executive Officer 1995-
1997 and Chairman and CEO 1993-1995 of
Metropolitan Life Insurance Company.
Terence Lennon Director of NELICO since 1996 and Senior Vice
Metropolitan Life President of Metropolitan Life Insurance
One Madison Avenue Company since 1994; formerly, Assistant Deputy
New York, NY 10010 Superintendent and Chief Examiner 1984-1994 of
the New York Insurance Department.
</TABLE>
A-11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS
EXPERIENCE
NAME AND PRINCIPAL DURING THE PAST FIVE
BUSINESS ADDRESS YEARS
--------------------------- --------------------------------------------------
<C> <S>
Bernard A. Leventhal Director of NELICO since 1996; formerly, Vice
Burlington Industries Chairman of the Board of Directors 1995-1997 of
1345 Avenue of the Americas Burlington Industries, Inc.; President since 1978
New York, NY 10105 and Corporate Group Vice President since 1985 and
Director since 1990 of Burlington Menswear
Division.
Thomas J. May Director of NELICO since 1996 and Chairman,
Boston Edison Company President and Chief Executive Officer of Boston
800 Boylston Street Edison Company since 1994; formerly, Director
Boston, MA 02199 1994-1996 of New England Mutual; President and
Chief Operating Officer 1993-1994 of Boston
Edison Co.
Stewart G. Nagler Director of NELICO since 1996 and Senior Executive
Metropolitan Life Vice President and Chief Financial Officer of
One Madison Avenue Metropolitan Life Insurance Company since 1986.
New York, NY 10010
Rand N. Stowell Director of NELICO since 1996 and President of
United Timber Corp. United Timber Corp. of Dixfield, Maine; formerly,
P.O. Box 650 Director 1990-1996 of New England Mutual.
Pine Street
Dixfield, ME 04224
Alexander B. Trowbridge Director of NELICO since 1996 and President of
Trowbridge Partners Inc. Trowbridge Partners, Inc. in Washington, DC;
1317 F Street, NW, formerly, Director 1983-1996 of New England
Suite 500 Mutual.
Washington, D.C. 20004
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS
EXPERIENCE
DURING THE PAST FIVE
NAME YEARS
---- --------------------------------------------------
<C> <S>
James M. Benson See Directors above.
David W. Allen Senior Vice President of NELICO since 1996;
formerly, Senior Vice President 1994-1996 and
Vice President 1990-1994 of New England Mutual.
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 of New England Mutual.
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 New England
Mutual.
Daniel D. Jordan Second Vice President, Counsel and Secretary since
1996; formerly, Counsel and Assistant Secretary
1990-1996 of New England Mutual.
Richard D. Keidan Senior Vice President of NELICO since 1996;
formerly, Vice President 1994-1996 of
Metropolitan Life (Chief Marketing Officer of
MetLife Brokerage) and Regional Sales and
Marketing Manager 1989-1994 of Phoenix Home Life.
Alan C. Leland, Jr. Senior Vice President of NELICO since 1996;
formerly, Vice President 1984-1996 of New England
Mutual.
Bruce C. Long President, New England Annuities (a business unit
of NELICO) since 1996; formerly, President 1994-
1996 New England Annuities (a business unit of
New England Mutual) Senior Vice President in 1994
of New England Annuities; Vice President 1992-
1994 of Keyport Life Insurance.
</TABLE>
A-12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS
EXPERIENCE
DURING THE PAST FIVE
NAME YEARS
---- ------------------------------------------------------
<C> <S>
George J. Maloof Senior Vice President of NELICO since 1996; formerly,
Vice President 1991-1996 of New England Mutual.
Thomas W. McConnell Senior Vice President of NELICO since 1996 and
Director, Chief Executive Officer and President of
New England Securities Corporation since 1993;
formerly, National Sales Manager 1993 of Alliance
Fund Distributors; National Sales Manager 1992-1993
of Equitable Capital Securities.
Thomas W. Moore Senior Vice President of NELICO since 1996; formerly,
Vice President 1990-1996 of New England Mutual.
Robert W. Powell President, Life Brokerage (a business unit of NELICO)
since 1996; formerly, Officer-In-Charge 1994-1996 of
MetLife Brokerage (a subsidiary of Metropolitan Life
Insurance Company) and Marketing Vice President 1988-
1994 of MetLife.
Richard A. Robinson Second Vice President and chief accounting officer of
NELICO since 1998; formerly, Second Vice President
1997-1998 of NELICO; Manager of Life Insurance.
Accounting 1994-1997 and Chief Accountant 1992-1994
of Liberty Life Assurance Company.
Robert E. Schneider Executive Vice President and Chief Financial Officer
of NELICO since 1996; formerly, Director, Executive
Vice President and Chief Financial Officer 1993-1996
and Executive Vice President and Chief Financial
Officer 1990-1993 of New England Mutual.
John G. Small, Jr. President, New England Services (a business unit of
NELICO) since 1997; formerly, Senior Vice President
1996-1997 of NELICO and Senior Vice President 1990-
1996 of New England Mutual.
Ellen D. Sullivan Senior Vice President and Associate General Counsel of
NELICO since 1997; formerly, Vice President and
Counsel in 1996 of NELICO; Vice President and Counsel
1994-1996 and Second Vice President and Counsel 1985-
1994 of New England Mutual.
H. James Wilson Executive Vice President and General Counsel of NELICO
since 1996; formerly, Executive Vice President and
General Counsel 1993-1996, Senior Vice President and
General Counsel 1992-1993 of New England Mutual.
John W. Wright President, New England Employee Benefits Group (a
business unit of NELICO) since 1996; formerly,
President 1993-1996 New England Employee Benefits
Group (a business unit of New England Mutual), Senior
Vice President 1989-1993 of New England Employee
Benefits Group of New England Mutual.
Frederick K. Zimmermann Executive Vice President and Chief Investment Officer
of NELICO since 1996; formerly, Executive Vice
President and Chief Investment Officer 1993-1996 and
Senior Vice President--Investments 1989-1993 of New
England Mutual.
</TABLE>
The principal business address for each of the directors and officers is the
same as NELICO's except where indicated otherwise.
Like all financial services providers, NELICO utilizes systems that may be
affected by Year 2000 transition issues and it relies on a number of third
parties, including banks, custodians, and investment managers, that also may
be affected. NELICO and its affiliates have developed, and are in the process
of implementing, a Year 2000 transition plan, and are confirming that their
service providers are also so engaged. The resources that are being devoted to
this effort are substantial. It is difficult to predict with precision whether
the amount of resources ultimately devoted, or the outcome of these efforts,
will have any negative impact on NELICO. However, as of the date of this
prospectus, it is not anticipated that Owners will experience negative effects
on their investment, or on the services provided in connection therewith, as a
result of Year 2000 transition implementation. NELICO currently anticipates
that its systems will be Year 2000 compliant on or about December 31, 1998,
with systems testing and compliance verification to follow. There can,
however, be no assurance that the other service providers have anticipated
every step necessary to avoid any adverse effect on the Variable Account
attributable to Year 2000 transition.
A-13
<PAGE>
TOLL-FREE NUMBERS
For information about historical values of the Variable Account sub-
accounts, call the toll-free number 1-800-333-2501.
For sub-account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call the toll-free number 1-
800-200-2214.
You may also call our Client TeleService Center toll-free at 1-800-388-4000
to request current information about your Policy values, to change or update
Policy information such as your address, billing mode, beneficiary or
ownership, or to request Policy loans of less than $25,000. Requests must be
in writing if the Policy is owned by a corporation or a pension trust.
For all other types of Policy changes, please contact your registered
representative.
ADVERTISING PRACTICES
The following paragraph is added to this section:
NELICO is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
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 years ended December 31, 1997 and 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
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 statements of operations, surplus, and cash flows of New
England Variable Life Insurance Company and New England Pension and Annuity
Company for the year 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 statements of operations and surplus,
and cash flows of Exeter Reassurance Company, Ltd. for the year ended December
31, 1995 (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 statements of operations, shareholder's equity, and cash
flows of New England Securities Corporation for the year ended December 31,
1995 (not included herein); the statements of operations, changes in
shareholder's equity, and cash flows of TNE Advisers, Inc. for the year ended
December 31, 1995 (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
statements of earnings and retained earnings, and cash flows of Newbury
Insurance Company, Limited for the year ended December 31,
A-14
<PAGE>
1995 (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 period ended December 31, 1995 have
been incorporated herein in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
A-15
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT AUDITORS
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, 1997, and the related statements of operations and changes in net
assets for the two years then ended for all Sub-Accounts. 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. The statements of operations and changes in net assets of New
England Variable Life Separate Account for the year ended December 31, 1995
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, 1997, and the results of
their operations and the changes in their net assets for the two years then
ended, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 10, 1998
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, Growth and Income
Sub-Account (formerly 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 the year ended December 31, 1995, 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 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 statements of operations and
changes in net assets are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of operations and changes in net assets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statements
of operations and changes in net assets. We believe that our audit of the
statements of operations and changes in net assets provides 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, 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, 1997
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
----------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in New England Zenith Fund,
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at
value (Note 2)............................. $761,342,931 $46,779,684 $36,990,546 $66,002,486 $42,839,748 $35,698,565 $36,701,292
<CAPTION>
SHARES COST
--------- --------------
Capital Growth
Series............ 1,905,310 $ 669,976,568
Back Bay Advisors
Bond Income
Series............ 431,109 45,887,625
Back Bay Advisors
Money Market
Series............ 369,905 36,990,546
Westpeak Stock
Index Series...... 423,745 46,113,427
Back Bay Advisors
Managed Series.... 225,651 33,392,311
Loomis Sayles
Avanti Growth
Series............ 209,265 28,734,184
Westpeak Growth
and Income
Series............ 203,930 29,842,628
Loomis Sayles
Small Cap Series.. 347,003 49,723,722
Salomon Brothers
U.S. Government
Series............ 15,715 176,828
Loomis Sayles
Balanced Series... 547,678 7,495,878
Alger Equity
Growth Series..... 2,783,337 43,651,128
Morgan Stanley
International
Magnum Equity
Series............ 773,563 8,555,901
Davis Venture
Value Series...... 2,875,094 49,085,168
Salomon Brothers
Bond
Opportunities
Series............ 52,710 635,304
VIP Equity-Income
Portfolio......... 5,116,958 91,540,584
VIP Overseas
Portfolio......... 4,049,703 66,617,006
VIP High Income
Portfolio......... 622,056 7,482,998
VIP II Asset
Manager
Portfolio......... 350,236 5,336,650
--------------
Total........... $1,221,238,456
==============
Amount due and accrued (payable) from
policy-related transactions, net........... 101,231 159,544 897,289 107,549 48,961 (8,730) 9,824
Dividends receivable........................ -- -- 165,664 -- -- -- --
------------ ----------- ----------- ----------- ----------- ----------- -----------
Total Assets............................. 761,444,162 46,939,228 38,053,499 66,110,035 42,888,709 35,689,835 36,711,116
LIABILITIES
Due New England Life Insurance Company...... 69,802,554 5,423,528 4,948,075 8,559,199 4,348,325 4,623,232 4,943,446
------------ ----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS FOR VARIABLE LIFE INSURANCE
POLICIES.................................... $691,641,608 $41,515,700 $33,105,424 $57,550,836 $38,540,384 $31,066,603 $31,767,670
============ =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- ----------------------------------------------------------------------------------------- ------------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------- ----------- ----------- ----------- ------------- ----------- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$55,145,780 $174,912 $8,138,490 $49,042,395 $8,400,895 $59,801,951 $633,048 $124,239,747 $77,754,305 $8,447,518
140,958 (1,259) 1,139 (20,153) (30,340) 168,093 (525) 127,430 31,232 10,331
-- -- -- -- -- -- -- -- -- --
- ----------- -------- ---------- ----------- ---------- ----------- -------- ------------ ----------- ----------
55,286,738 173,653 8,139,629 49,022,242 8,370,555 59,970,044 632,523 124,367,177 77,785,537 8,457,849
7,776,303 12,470 1,264,381 7,085,182 1,237,518 8,553,311 44,786 17,035,856 9,960,217 1,277,576
- ----------- -------- ---------- ----------- ---------- ----------- -------- ------------ ----------- ----------
$47,510,435 $161,183 $6,875,248 $41,937,060 $7,133,037 $51,416,733 $587,737 $107,331,321 $67,825,320 $7,180,273
=========== ======== ========== =========== ========== =========== ======== ============ =========== ==========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ----------------------------
ASSET
MANAGER
SUB-ACCOUNT TOTAL
- ------------- --------------
<S> <C>
$6,307,747 $1,424,442,040
(2,214) 1,740,360
-- 165,664
- ------------- --------------
6,305,533 1,426,348,064
856,655 157,752,614
- ------------- --------------
$5,448,878 $1,268,595,450
============= ==============
</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, 1997
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME
Dividends............... $184,229,729 $3,419,409 $1,852,865 $ 1,082,727 $5,025,764 $2,781,138 $3,928,553
EXPENSE
Mortality and expense
risk charge (Note 3)... 4,170,905 253,374 241,048 333,771 229,423 207,451 190,264
------------ ---------- ---------- ----------- ---------- ---------- ----------
Net investment income... 180,058,824 3,166,035 1,611,817 748,956 4,796,341 2,573,687 3,738,289
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized
appreciation
(depreciation) on
investments:
Beginning of year...... 138,009,405 40,519 -- 7,633,013 6,137,629 4,823,316 3,107,090
End of year............ 91,366,363 892,059 -- 19,889,059 9,447,437 6,964,381 6,858,664
------------ ---------- ---------- ----------- ---------- ---------- ----------
Net change in unrealized
appreciation
(depreciation)......... (46,643,042) 851,540 -- 12,256,046 3,309,808 2,141,065 3,751,574
Net realized gain on
investments............ 1,699,829 15,488 -- 35,165 242,079 87,159 17,721
------------ ---------- ---------- ----------- ---------- ---------- ----------
Net realized and
unrealized gain (loss)
on investments......... (44,943,213) 867,028 -- 12,291,211 3,551,887 2,228,224 3,769,295
------------ ---------- ---------- ----------- ---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $135,115,611 $4,033,063 $1,611,817 $13,040,167 $8,348,228 $4,801,911 $7,507,584
============ ========== ========== =========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
---------------------------------------------------------------------------------------- -----------------------------------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ----------- ----------- ------------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$6,279,206 $ 9,089 $438,430 $4,721,050 $ 209,389 $ 1,822,395 $43,914 $ 8,872,794 $ 5,434,055 $393,295
275,141 2,290 50,941 265,599 51,702 276,055 9,400 676,059 447,597 41,502
---------- ------- -------- ---------- --------- ----------- ------- ----------- ----------- --------
6,004,065 6,799 387,489 4,455,451 157,687 1,546,340 34,514 8,196,735 4,986,458 351,793
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153) 16,409,989 9,502,216 362,600
5,422,058 (1,916) 642,612 5,391,267 (155,006) 10,716,783 (2,256) 32,699,163 11,137,299 964,520
---------- ------- -------- ---------- --------- ----------- ------- ----------- ----------- --------
2,362,493 (1,097) 405,987 3,306,878 (291,197) 8,318,760 (1,103) 16,289,174 1,635,083 601,920
20,956 1 55,231 75,802 8,303 21,718 201 126,489 67,905 12,234
---------- ------- -------- ---------- --------- ----------- ------- ----------- ----------- --------
2,383,449 (1,096) 461,218 3,382,680 (282,894) 8,340,478 (902) 16,415,663 1,702,988 614,154
---------- ------- -------- ---------- --------- ----------- ------- ----------- ----------- --------
$8,387,514 $ 5,703 $848,707 $7,838,131 $(125,207) $ 9,886,818 $33,612 $24,612,398 $ 6,689,446 $965,947
========== ======= ======== ========== ========= =========== ======= =========== =========== ========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- -------------------------
ASSET
MANAGER
SUB-ACCOUNT TOTAL
----------- ------------
<S> <C>
$528,401 $231,072,203
33,135 7,755,657
----------- ------------
495,266 223,316,546
547,647 194,486,245
971,097 203,203,584
----------- ------------
423,450 8,717,339
5,368 2,491,649
----------- ------------
428,818 11,208,988
----------- ------------
$924,084 $234,525,534
=========== ============
</TABLE>
F-7
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK AVANTI GROWTH 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 year...... 71,963,590 997,195 -- 2,853,587 5,216,548 2,881,100 2,105,777
End of year............ 138,009,405 40,519 -- 7,633,013 6,137,629 4,823,316 3,107,090
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net change in unrealized
appreciation
(depreciation)......... 66,045,815 (956,676) -- 4,779,426 921,081 1,942,216 1,001,313
Net realized gain (loss)
on investments......... 985,421 299 -- 1,808 69,775 27,429 18,964
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net realized and
unrealized gain (loss)
on investments......... 67,031,236 (956,377) -- 4,781,234 990,856 1,969,645 1,020,277
----------- ---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $97,041,105 $1,430,300 $1,145,809 $5,454,098 $3,774,664 $3,326,549 $2,723,883
=========== ========== ========== ========== ========== ========== ==========
</TABLE>
* For the period July 1, 1996 (Commencement of Operations) through December 31,
1996.
See Notes to Financial Statements
F-8
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ---------------------------------------------------------------------------------- ------------------------------ ---------
SMALL U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME ASSET
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- MANAGER
ACCOUNT ACCOUNT* ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT* ACCOUNT ACCOUNT ACCOUNT SUB-
- ---------- ---------- -------- ---------- ------------- ---------- ------------- ---------- ---------- -------- ---------
<S> <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 $174,907
90,146 28 11,713 104,685 19,385 64,656 40 428,473 325,346 19,551 20,483
- ---------- ----- -------- ---------- -------- ---------- ------ ---------- ---------- -------- --------
1,534,562 674 93,226 (59,822) 51,962 379,356 1,178 2,234,517 839,204 179,912 154,424
768,552 -- 3,769 65,901 24,089 171,931 -- 9,642,454 4,022,725 167,043 269,255
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153) 16,409,989 9,502,216 362,600 547,647
- ---------- ----- -------- ---------- -------- ---------- ------ ---------- ---------- -------- --------
2,291,013 (819) 232,856 2,018,488 112,102 2,226,092 (1,153) 6,767,535 5,479,491 195,557 278,392
31,570 -- 2,318 11,723 159 4,907 -- 27,750 44,049 1,942 4,122
- ---------- ----- -------- ---------- -------- ---------- ------ ---------- ---------- -------- --------
2,322,583 (819) 235,174 2,030,211 112,261 2,230,999 (1,153) 6,795,285 5,523,540 197,499 282,514
- ---------- ----- -------- ---------- -------- ---------- ------ ---------- ---------- -------- --------
$3,857,145 $(145) $328,400 $1,970,389 $164,223 $2,610,355 $ 25 $9,029,802 $6,362,744 $377,411 $436,938
========== ===== ======== ========== ======== ========== ====== ========== ========== ======== ========
<CAPTION>
------------
TOTAL
------------
<S>
$ 50,453,549
4,984,819
------------
45,468,730
101,153,516
194,486,245
------------
93,332,729
1,232,236
------------
94,564,965
------------
$140,033,695
============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
--------------------------------------------------------------------------------
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............... $ 58,318,276 $1,844,411 $1,109,838 $ 627,118 $1,061,289 $ 535,217 $ 606,696
EXPENSE
Mortality and expense
risk charge (Note 3)... 2,173,846 143,873 112,033 95,240 113,501 77,636 52,633
------------ ---------- ---------- ---------- ---------- ---------- ----------
Net investment income... 56,144,430 1,700,538 997,805 531,878 947,788 457,581 554,063
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized
appreciation
(depreciation) on
investments:
Beginning of year...... 9,892,073 (2,028,893) -- (1,645,744) 703,242 205,680 1,918
End of year............ 71,963,590 997,195 -- 2,853,587 5,216,548 2,881,100 2,105,777
------------ ---------- ---------- ---------- ---------- ---------- ----------
Net change in unrealized
appreciation
(depreciation)......... 62,071,517 3,026,088 -- 4,499,331 4,513,306 2,675,420 2,103,859
Net realized gain (loss)
on investments......... 1,613,390 7,382 -- 7,637 42,457 21,233 9,493
------------ ---------- ---------- ---------- ---------- ---------- ----------
Net realized and
unrealized gain on
investments............ 63,684,907 3,033,470 -- 4,506,968 4,555,763 2,696,653 2,113,352
------------ ---------- ---------- ---------- ---------- ---------- ----------
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 $2,667,415
============ ========== ========== ========== ========== ========== ==========
</TABLE>
* For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
See Notes to Financial Statements
F-10
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ---------------------------------------------------- ------------------------------- --------- ------------
SMALL EQUITY INTERNATIONAL VENTURE EQUITY HIGH ASSET
CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
- ---------- -------- -------- ------------- -------- ----------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$365,015 $17,538 $195,436 $12,460 $ 86,716 $ 2,284,557 $ 282,520 $ 8,412 $ 11,896 $ 67,367,395
24,746 743 11,686 2,165 7,251 233,864 240,253 6,639 9,537 3,305,646
- ---------- ------- -------- ------- -------- ----------- ---------- -------- -------- ------------
340,269 16,795 183,750 10,295 79,465 2,050,693 42,267 1,773 2,359 64,061,749
4,662 -- -- -- -- 149,659 260,895 213 (1,503) 7,542,202
768,552 3,769 65,901 24,089 171,931 9,642,454 4,022,725 167,043 269,255 101,153,516
- ---------- ------- -------- ------- -------- ----------- ---------- -------- -------- ------------
763,890 3,769 65,901 24,089 171,931 9,492,795 3,761,830 166,830 270,758 93,611,314
1,325 223 237 (34) 203 61,089 32,279 2,817 4,661 1,804,392
- ---------- ------- -------- ------- -------- ----------- ---------- -------- -------- ------------
765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647 275,419 95,415,706
- ---------- ------- -------- ------- -------- ----------- ---------- -------- -------- ------------
$1,105,484 $20,787 $249,888 $34,350 $251,599 $11,604,577 $3,836,376 $171,420 $277,778 $159,477,455
========== ======= ======== ======= ======== =========== ========== ======== ======== ============
</TABLE>
See Notes to Financial Statements
F-11
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND SMALL
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME CAP
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ----------- ------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING
ACTIVITIES
Net investment
income......... $ 180,058,824 $ 3,166,035 $ 1,611,817 $ 748,956 $ 4,796,341 $ 2,573,687 $ 3,738,289 $ 6,004,065
Net realized and
unrealized gain
(loss) on
investments.... (44,943,213) 867,028 -- 12,291,211 3,551,887 2,228,224 3,769,295 2,383,449
------------- ----------- ------------- ------------ ----------- ----------- ----------- -----------
Net Increase
(decrease) in
net assets
resulting from
operations.... 135,115,611 4,033,063 1,611,817 13,040,167 8,348,228 4,801,911 7,507,584 8,387,514
FROM POLICY-
RELATED
TRANSACTIONS
Net premiums
transferred
from New
England Life
Insurance
Company
(Note 4)....... 115,563,292 9,916,442 112,790,933 11,030,326 6,066,893 8,052,822 6,483,236 12,931,007
Net transfers
(to) from other
sub-accounts... 19,184,703 2,250,884 (100,492,346) 13,670,086 2,168,458 728,467 6,112,407 13,551,252
Net transfers to
New England
Life Insurance
Company........ (103,221,618) (7,435,545) (10,617,259) (11,516,905) (6,628,199) (5,007,957) (5,507,253) (8,882,069)
------------- ----------- ------------- ------------ ----------- ----------- ----------- -----------
Net Increase in
net assets
resulting from
policy related
transactions... 31,526,377 4,731,781 1,681,328 13,183,507 1,607,152 3,773,332 7,088,390 17,600,190
------------- ----------- ------------- ------------ ----------- ----------- ----------- -----------
Net increase in
net assets..... 166,641,988 8,764,844 3,293,145 26,223,674 9,955,380 8,575,243 14,595,974 25,987,704
NET ASSETS, AT
BEGINNING OF
THE YEAR....... 524,999,620 32,750,856 29,812,279 31,327,162 28,585,004 22,491,360 17,171,696 21,522,731
------------- ----------- ------------- ------------ ----------- ----------- ----------- -----------
NET ASSETS, AT
END OF THE
YEAR........... $ 691,641,608 $41,515,700 $ 33,105,424 $ 57,550,836 $38,540,384 $31,066,603 $31,767,670 $47,510,435
============= =========== ============= ============ =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
F-12
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- ------------------------------------------------------------------------------- --------------------------------------
U.S. EQUITY INTERNATIONAL VENTURE BOND EQUITY- HIGH
GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------- ----------- ----------- ------------- ------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,799 $ 387,489 $ 4,455,451 $ 157,687 $ 1,546,340 $ 34,514 $ 8,196,735 $ 4,986,458 $ 351,793
(1,096) 461,218 3,382,680 (282,894) 8,340,478 (902) 16,415,663 1,702,988 614,154
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
5,703 848,707 7,838,131 (125,207) 9,886,818 33,612 24,612,398 6,689,446 965,947
-- 2,146,406 14,606,449 3,056,999 13,157,429 -- 23,866,781 17,551,475 2,042,291
118,925 2,461,028 6,194,266 1,537,466 22,596,463 563,357 5,377,892 1,724,137 1,829,771
(9,482) (1,814,302) (8,772,068) (1,574,196) (10,885,947) (36,000) (18,885,322) (9,549,079) (1,756,377)
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
109,443 2,793,132 12,028,647 3,020,269 24,867,945 527,357 10,359,351 9,726,533 2,115,685
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
115,146 3,641,839 19,866,778 2,895,062 34,754,763 560,969 34,971,749 16,415,979 3,081,632
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
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
$161,183 $ 6,875,248 $41,937,060 $ 7,133,037 $ 51,416,733 $587,737 $107,331,321 $67,825,320 $ 7,180,273
======== =========== =========== =========== ============ ======== ============ =========== ===========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- ----------------------------
ASSET
MANAGER
SUB-
ACCOUNT TOTAL
----------- ---------------
<S> <C>
$ 495,266 $ 223,316,546
428,818 11,208,988
----------- ---------------
924,084 234,525,534
1,403,144 360,665,925
422,784 --
(881,229) (212,980,807)
----------- ---------------
944,699 147,685,118
----------- ---------------
1,868,783 382,210,652
3,580,095 886,384,798
----------- ---------------
$5,448,878 $1,268,595,450
=========== ===============
</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, 1996
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING
ACTIVITIES
Net investment income
(loss)................. $ 30,009,869 $ 2,386,677 $ 1,145,809 $ 672,864 $ 2,783,808 $ 1,356,904 $ 1,703,606
Net realized and
unrealized gain (loss)
on investments......... 67,031,236 (956,377) -- 4,781,234 990,856 1,969,645 1,020,277
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net Increase (decrease)
in net assets
resulting from
operations............ 97,041,105 1,430,300 1,145,809 5,454,098 3,774,664 3,326,549 2,723,883
FROM POLICY-RELATED
TRANSACTIONS
Net premiums transferred
from New England Life
Insurance Company (Note
4)..................... 111,194,198 8,517,031 79,806,482 6,566,717 5,631,293 7,140,375 5,201,936
Net transfers (to) from
other sub-accounts..... (1,541,352) 1,894,963 (61,482,739) 5,875,439 1,412,522 2,859,556 2,274,270
Net transfers to New
England Life Insurance
Company................ (76,528,987) (5,770,575) (9,089,129) (5,144,242) (4,232,475) (5,172,577) (3,338,671)
------------ ----------- ------------ ----------- ----------- ----------- -----------
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 YEAR............ 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 YEAR............... $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-14
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
EQUITY
SMALL U.S. GROWTH INTERNATIONAL VENTURE BOND
CAP GOVERNMENT BALANCED SUB- EQUITY VALUE OPPORTUNITIES
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT*
- ----------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,534,562 $ 674 $ 93,226 $ (59,822) $ 51,962 $ 379,356 $ 1,178
2,322,583 (819) 235,174 2,030,211 112,261 2,230,999 (1,153)
- ----------- ------- ---------- ----------- ----------- ----------- -------
3,857,145 (145) 328,400 1,970,389 164,223 2,610,355 25
5,440,860 -- 811,932 9,286,073 1,454,605 4,876,053 --
10,060,122 46,951 2,383,695 11,496,667 2,908,047 9,510,686 27,190
(4,380,392) (769) (708,829) (6,395,345) (1,242,748) (3,721,564) (447)
- ----------- ------- ---------- ----------- ----------- ----------- -------
11,120,590 46,182 2,486,798 14,387,395 3,119,904 10,665,175 26,743
- ----------- ------- ---------- ----------- ----------- ----------- -------
14,977,735 46,037 2,815,198 16,357,784 3,284,127 13,275,530 26,768
6,544,996 -- 418,211 5,712,498 953,848 3,386,440 --
- ----------- ------- ---------- ----------- ----------- ----------- -------
$21,522,731 $46,037 $3,233,409 $22,070,282 $ 4,237,975 $16,661,970 $26,768
=========== ======= ========== =========== =========== =========== =======
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
--------------------------------------- ---------------------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
$ 2,234,517 $ 839,204 $ 179,912 $ 154,424 $ 45,468,730
6,795,285 5,523,540 197,499 282,514 94,564,965
------------ ------------- ------------ ------------ --------------
9,029,802 6,362,744 377,411 436,938 140,033,695
20,426,731 17,135,189 970,763 1,258,847 285,719,085
9,029,810 1,051,463 1,631,762 560,948 --
(13,479,623) (11,522,274) (623,788) (649,631) (152,002,266)
------------ ------------- ------------ ------------ --------------
15,976,918 6,664,378 1,978,737 1,170,164 133,716,819
------------ ------------- ------------ ------------ --------------
25,006,720 13,027,122 2,356,148 1,607,102 273,750,514
47,352,852 38,382,219 1,742,493 1,972,993 612,634,284
------------ ------------- ------------ ------------ --------------
$72,359,572 $ 51,409,341 $4,098,641 $3,580,095 $ 886,384,798
============ ============= ============ ============ ==============
</TABLE>
See Notes to Financial Statements
F-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, 1995
<TABLE>
<CAPTION>
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK AVANTI AND
GROWTH INCOME MARKET INDEX MANAGED GROWTH INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATING ACTIVI-
TIES
Net investment income... $ 56,144,430 $ 1,700,538 $ 997,805 $ 531,878 $ 947,788 $ 457,581 $ 554,063
Net realized and
unrealized gain on
investments............ 63,684,907 3,033,470 -- 4,506,968 4,555,763 2,696,653 2,113,352
------------ ----------- ------------ ----------- ----------- ----------- -----------
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 2,667,415
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 3,473,273
Net transfers (to) from
other sub-accounts..... (7,820,362) 2,481,090 (32,083,917) 2,734,513 286,111 3,131,998 2,645,617
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) (2,568,808)
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net Increase in net
assets resulting from
policy related
transactions........... 25,510,582 5,194,998 1,553,308 3,857,340 1,735,871 4,772,012 3,550,082
------------ ----------- ------------ ----------- ----------- ----------- -----------
Net increase in net
assets................. 145,339,919 9,929,006 2,551,113 8,896,186 7,239,422 7,926,246 6,217,497
NET ASSETS, AT BEGINNING
OF THE YEAR............ 249,494,737 16,750,131 16,880,743 9,678,964 14,759,578 6,411,211 4,092,981
------------ ----------- ------------ ----------- ----------- ----------- -----------
NET ASSETS, AT END OF
THE YEAR............... $394,834,656 $26,679,137 $ 19,431,856 $18,575,150 $21,999,000 $14,337,457 $10,310,478
============ =========== ============ =========== =========== =========== ===========
</TABLE>
* For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
See Notes to Financial Statements
F-16
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ------------------------------------------------------------------- ------------------------------------- ---------
SMALL EQUITY INTERNATIONAL VENTURE EQUITY- HIGH ASSET
CAP BALANCED GROWTH EQUITY VALUE INCOME OVERSEAS INCOME MANAGER
SUB-ACCOUNT SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT* SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
- ----------- ------------ ------------ ------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 340,269 $ 16,795 $ 183,750 $ 10,295 $ 79,465 $ 2,050,693 $ 42,267 $ 1,773 $ 2,359
765,215 3,992 66,138 24,055 172,134 9,553,884 3,794,109 169,647 275,419
- ----------- -------- ----------- --------- ---------- ----------- ----------- ---------- ----------
1,105,484 20,787 249,888 34,350 251,599 11,604,577 3,836,376 171,420 277,778
2,237,626 81,978 1,048,361 241,835 625,044 13,985,879 17,076,602 395,370 696,227
4,814,141 409,874 5,735,744 948,764 3,228,499 12,483,761 (2,007,296) 1,503,857 1,507,606
(1,803,085) (94,428) (1,321,495) (271,101) (718,702) (9,853,532) (8,392,295) (358,576) (709,312)
- ----------- -------- ----------- --------- ---------- ----------- ----------- ---------- ----------
5,248,682 397,424 5,462,610 919,498 3,134,841 16,616,108 6,677,011 1,540,651 1,494,521
- ----------- -------- ----------- --------- ---------- ----------- ----------- ---------- ----------
6,354,166 418,211 5,712,498 953,848 3,386,440 28,220,685 10,513,387 1,712,071 1,772,299
190,830 -- -- -- -- 19,132,167 27,868,832 30,422 200,694
- ----------- -------- ----------- --------- ---------- ----------- ----------- ---------- ----------
$ 6,544,996 $418,211 $ 5,712,498 $ 953,848 $3,386,440 $47,352,852 $38,382,219 $1,742,493 $1,972,993
=========== ======== =========== ========= ========== =========== =========== ========== ==========
<CAPTION>
--------------
TOTAL
--------------
<S>
$ 64,061,749
95,415,706
--------------
159,477,455
202,985,540
--
(115,320,001)
--------------
87,665,539
--------------
247,142,994
365,491,290
--------------
$ 612,634,284
==============
</TABLE>
See Notes to Financial Statements
F-17
<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 as 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", "Zenith Life Plus II" and "Zenith Variable Whole Life")
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 life
policies. For the modified single premium ("American Gateway") variable life
policies mortality and expense risk charges are not charged daily 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
value in the sub-accounts. These deductions, depending on the policy, could
include sales loads,
F-18
<PAGE>
administrative charges, premium tax charges, risk charges, cost of insurance
charges, and charges for rider benefits and special risk charges.
5. FEDERAL INCOME TAXES. For federal income tax purposes the Account's
operations are included with those of NELICO. NELICO intends to make
appropriate charges against the Account in the future if and when tax
liabilities arise.
6. INVESTMENT ADVISERS. The adviser and sub-adviser for each series of the
Zenith Fund are listed in the chart below. TNE Advisers, Inc., which is an
indirect subsidiary of NELICO, Capital Growth Management Limited Partnership
("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 CGM* --
Back Bay Advisors Money TNE Advisers, Inc. Back Bay Advisors, L.P.*
Market
Back Bay Advisors Bond TNE Advisers, Inc. Back Bay Advisors, L.P.*
Income
Back Bay Advisors TNE Advisers, Inc. Back Bay Advisors, L.P.*
Managed
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
Westpeak Growth and TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
Income
Loomis Sayles Avanti TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Growth
Loomis Sayles Small Cap TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Loomis Sayles Balanced TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Morgan Stanley TNE Advisers, Inc. Morgan Stanley Asset Management Inc.
International Magnum
Equity
Davis Venture Value TNE Advisers, Inc. Davis Selected Advisers, L.P.
Alger Equity Growth TNE Advisers, Inc. Fred Alger Management, Inc.
Salomon Brothers U.S. TNE Advisers, Inc. Salomon Brothers Asset Management Inc
Government
Salomon Brothers TNE Advisers, Inc. Salomon Brothers Asset Management Inc
Strategic Bond
Opportunities
</TABLE>
* An affiliate of NELICO
Effective May 1, 1997 the Draycott International Equity Series was renamed the
Morgan Stanley International Magnum Equity Series and a new Sub-advisory
agreement between TNE Advisers, Inc. and Morgan Stanley Asset Management Inc.
went into effect replacing the prior agreement between TNE Advisers, Inc. and
Draycott Partners, Ltd.
On January 28, 1998, the Fund's Board of Trustees approved new advisory and
subadvisory agreements (the "New Agreements") relating to the Loomis Sayles
Avanti Growth Series between TNE Advisers, Inc. and the Fund on behalf of the
Series, and between TNE Advisers, Inc. and Goldman Sachs Asset Management
("Goldman Sachs"), respectively. The New Agreements, which are subject to
shareholder approval, are expected to become effective on or about May 1,
1998. Under the New Agreements, Goldman Sachs would become the subadviser of
the Series, succeeding Loomis Sayles & Company, L.P., and would become
responsible for the day-to-day management of the Series' investment operations
under the oversight of TNE Advisers, Inc. Accordingly, the name of the Series
would be changed to the "Goldman Sachs Midcap Value Series" at the time the
New Agreements take effect. Goldman Sachs is a separate operating division of
Goldman, Sachs & Co., a privately-owned global financial services company.
F-19
<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, 1997:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Capital Growth Series $190,848,855 $152,123,058
Back Bay Advisors Money Market Series 165,843,613 162,797,235
Back Bay Advisors Bond Income Series 19,577,841 13,951,014
Back Bay Advisors Managed Series 12,248,935 9,123,459
Westpeak Stock Index Series 31,190,566 13,926,513
Westpeak Growth and Income Series 16,870,544 7,986,008
Loomis Sayles Avanti Growth Series 14,966,505 10,913,924
Loomis Sayles Small Cap Series 35,774,167 14,288,925
Loomis Sayles Balanced Series 6,944,300 3,461,274
Morgan Stanley International Magnum Equity Series 7,071,617 3,577,480
Davis Venture Value Series 41,982,387 11,519,957
Alger Equity Growth Series 27,712,451 13,170,766
Salomon Brothers U.S. Government Series 315,478 195,450
Salomon Brothers Strategic Bond Opportunities
Series 711,406 148,625
VIP Equity-Income Portfolio 43,541,020 28,601,305
VIP Overseas Portfolio 33,752,160 24,396,016
VIP High Income Portfolio 5,573,049 2,765,596
VIP II Asset Manager Portfolio 3,323,050 2,105,248
</TABLE>
F-20
<PAGE>
8. NET INVESTMENT RETURNS. The following table shows the net investment return
of the sub-account for each type of variable life insurance policy investing
in the Account. The net investment return reflects the appropriate mortality
and expense risk charge against sub-account assets, where applicable, for each
type of variable life insurance policy shown (in the case of American Gateway
Series, the mortality and expense risk charge is deducted monthly from the
cash values rather than daily from sub-account assets and, therefore, does not
impact sub-account net investment returns). These figures do not reflect
charges deducted from premiums and the cash values of the policies. Such
charges will affect the actual cash values and benefits of the policies.
Certain amounts have been restated to conform with the current calculation of
net investment return to provide greater comparability with industry
convention.
FIXED PREMIUM ("ZENITH LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (9.11%) 30.30% (3.82%) 53.45% (6.38%) 14.57% (7.39%) 37.55% 20.65% 23.05%
Bond Income............. 7.99% 11.91% 7.71% 17.55% 7.80% 12.22% (3.70%) 20.78% 4.24% 10.50%
Money Market............ 7.14% 8.87% 7.81% 5.84% 3.43% 2.61% 3.61% 5.33% 4.76% 4.97%
<CAPTION>
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index............. 15.93% 29.70% (4.48%) 29.98% 6.92% 9.34% 0.76% 36.44% 22.04% 32.03%
Managed................. 9.10% 18.67% 2.85% 19.75% 6.33% 10.26% (1.46%) 30.81% 14.62% 26.12%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Avanti Growth........................................................ 14.47% (0.62%) 29.90% 17.20% 16.91%
Growth and Income.................................................... 13.97% (1.55%) 35.99% 17.68% 33.01%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Equity-Income........................................................ 9.29% 6.69% 34.62% 13.88% 27.66%
Overseas............................................................. 14.57% 1.37% 9.30% 12.82% 11.17%
5/2/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
Small Cap..................................................................... (3.45%) 28.40% 30.22% 24.42%
8/31/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
High Income................................................................... (0.58%) 20.18% 13.63% 17.26%
Asset Manager................................................................. (4.41%) 16.55% 14.20% 20.23%
5/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- --------
Equity Growth.......................................................................... 24.84% 12.78% 25.19%
Balanced............................................................................... 13.75% 16.50% 15.77%
International Equity................................................................... 3.85% 6.30% (1.64%)
Venture Value.......................................................................... 21.64% 25.40% 33.03%
</TABLE>
F-21
<PAGE>
SINGLE PREMIUM ("ZENITH LIFE ONE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (9.20%) 30.17% (3.91%) 53.29% (6.47%) 14.46% (7.38%) 37.41% 20.53% 22.92%
Bond Income............. 7.88% 11.79% 7.60% 17.43% 7.69% 12.10% (3.80%) 20.66% 4.14% 10.39%
Money Market............ 7.03% 8.77% 7.71% 5.74% 3.33% 2.51% 3.35% 5.23% 4.65% 4.87%
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index............. 15.82% 29.57% (4.58%) 29.85% 6.81% 9.23% 0.66% 36.30% 21.91% 31.90%
Managed................. 8.99% 18.55% 2.75% 19.63% 6.22% 10.15% (1.56%) 30.67% 14.51% 25.99%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Avanti Growth........................................................ 14.39% (0.72%) 29.77% 17.08% 16.80%
Growth and Income.................................................... 13.90% (1.65%) 35.85% 17.56% 32.87%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Equity Income........................................................ 9.22% 6.59% 34.49% 13.77% 27.53%
Overseas............................................................. 14.49% 1.27% 9.19% 12.70% 11.05%
5/2/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
Small Cap..................................................................... (3.52%) 28.27% 30.09% 24.29%
8/31/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
High Income................................................................... (0.61%) 20.06% 13.52% 17.14%
Asset Manager................................................................. (4.45%) 16.43% 14.09% 20.11%
5/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- --------
Equity Growth.......................................................................... 24.76% 12.66% 25.06%
Balanced............................................................................... 13.67% 16.39% 15.66%
International Equity................................................................... 3.79% 6.19% (1.74%)
Venture Value.......................................................................... 21.56% 25.27% 32.90%
</TABLE>
F-22
<PAGE>
VARIABLE ORDINARY ("ZENITH LIFE PLUS", "ZENITH LIFE PLUS II" AND "ZENITH
VARIABLE WHOLE LIFE") AND
LIMITED PAYMENT ("ZENITH LIFE EXECUTIVE 65") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (9.34%) 29.98% (4.06%) 53.06% (6.61%) 14.28% (7.62%) 37.21% 20.34% 22.74%
Bond Income............. 7.72% 11.63% 7.44% 17.25% 7.53% 11.94% (3.94%) 20.47% 3.98% 10.23%
Money Market............ 6.87% 8.60% 7.54% 5.58% 3.18% 2.36% 3.35% 5.07% 4.50% 4.71%
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index............. 15.65% 29.37% (4.72%) 29.65% 6.65% 9.07% 0.51% 36.10% 21.73% 31.70%
Managed................. 8.83% 18.37% 2.59% 19.45% 6.06% 9.99% (1.70%) 30.48% 14.34% 25.81%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Avanti Growth........................................................ 14.28% (0.87%) 29.57% 16.90% 16.62%
Growth and Income.................................................... 13.78% (1.80%) 35.65% 17.38% 32.67%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Equity-Income........................................................ 9.11% 6.43% 34.29% 13.59% 27.34%
Overseas............................................................. 14.38% 1.12% 9.02% 12.53% 10.89%
5/2/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
Small Cap..................................................................... (3.61%) 28.08% 29.90% 24.11%
8/31/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
High Income................................................................... (0.66%) 19.88% 13.35% 16.96%
Asset Manager................................................................. (4.49%) 16.26% 13.91% 19.93%
5/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- --------
Equity Growth.......................................................................... 24.64% 12.49% 24.88%
Balanced............................................................................... 13.56% 16.21% 15.48%
International Equity................................................................... 3.68% 6.03% (1.89%)
Venture Value.......................................................................... 21.44% 25.08% 32.70%
</TABLE>
F-23
<PAGE>
VARIABLE SURVIVORSHIP ("ZENITH SURVIVORSHIP LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (9.61%) 29.59% (4.35%) 52.61% (6.90%) 13.94% (7.90%) 36.80% 19.98% 22.37%
Bond Income............. 7.40% 11.29% 7.11% 16.90% 7.21% 11.60% (4.23%) 20.12% 3.67% 9.90%
Money Market............ 6.55% 8.28% 7.22% 5.26% 2.87% 2.05% 3.04% 4.75% 4.18% 4.39%
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index............. 15.30% 28.99% (5.01%) 29.27% 6.33% 8.74% 0.21% 35.69% 21.36% 31.31%
Managed................. 8.50% 18.02% 2.28% 19.10% 5.74% 9.69% (2.00%) 30.09% 13.99% 25.43%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Avanti Growth........................................................ 14.05% (1.16%) 29.19% 16.55% 16.27%
Growth and Income.................................................... 13.55% (2.09%) 35.25% 17.03% 32.28%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Equity-Income........................................................ 8.89% 6.11% 33.89% 13.25% 26.96%
Overseas............................................................. 14.15% 0.82% 8.70% 12.19% 10.56%
5/2/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
Small Cap..................................................................... (3.80%) 27.69% 29.50% 23.73%
8/31/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
High Income................................................................... (0.76%) 19.53% 13.00% 16.61%
Asset Manager................................................................. (4.59%) 15.91% 13.57% 19.57%
5/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- --------
Equity Growth.......................................................................... 24.39% 12.15% 24.50%
Balanced............................................................................... 13.33% 15.86% 15.14%
International Equity................................................................... 3.48% 5.71% (2.18%)
Venture Value.......................................................................... 21.20% 24.71% 32.30%
</TABLE>
F-24
<PAGE>
FLEXIBLE PREMIUM ("ZENITH FLEXIBLE LIFE") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (9.47%) 31.88% (5.73%) 52.83% (6.75%) 14.11% (7.76%) 37.00% 20.16% 22.56%
Bond Income............. 7.56% 11.46% 7.28% 17.08% 7.37% 11.77% (4.08%) 20.29% 3.82% 10.06%
Money Market............ 6.71% 8.44% 7.38% 5.42% 3.02% 2.20% 3.20% 4.91% 4.34% 4.55%
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index............. 15.47% 29.18% (4.86%) 29.46% 6.49% 8.90% 0.36% 35.90% 21.55% 31.51%
Managed................. 8.67% 18.20% 2.44% 19.28% 5.90% 9.82% (1.85%) 30.28% 14.16% 25.62%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Avanti Growth........................................................ 14.16% (1.01%) 29.38% 16.72% 16.45%
Growth and Income.................................................... 13.67% (1.94%) 35.45% 17.21% 32.47%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Equity-Income........................................................ 9.00% 6.27% 34.09% 13.42% 27.15%
Overseas............................................................. 14.26% 0.97% 8.86% 12.36% 10.72%
5/2/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
Small Cap..................................................................... (3.71%) 27.88% 29.70% 23.92%
8/31/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
High Income................................................................... (0.71%) 19.71% 13.17% 16.79%
Asset Manager................................................................. (4.54%) 16.08% 13.74% 19.75%
5/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- --------
Equity Growth.......................................................................... 24.51% 12.32% 24.69%
Balanced............................................................................... 13.44% 16.03% 15.31%
International Equity................................................................... 3.58% 5.87% (2.04%)
Venture Value.......................................................................... 21.32% 24.89% 32.50%
</TABLE>
F-25
<PAGE>
MODIFIED SINGLE PREMIUM ("AMERICAN GATEWAY") POLICIES
<TABLE>
<CAPTION>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS
-----------------------------------------------------------------------------------------
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Income............. 8.37% 12.30% 8.09% 17.96% 8.18% 12.61% (3.36%) 21.20% 4.61% 10.89%
Money Market............ 7.52% 9.25% 8.19% 6.21% 3.80% 2.97% 3.97% 5.70% 5.13% 5.34%
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- 1/1/97-
SUB-ACCOUNT 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 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index............. 16.34% 30.15% (4.14%) 30.43% 7.30% 9.72% 1.12% 36.92% 22.47% 32.50%
Managed................. 9.48% 19.08% 3.21% 20.17% 6.70% 10.65% (1.11%) 31.26% 15.03% 26.56%
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- --------
Avanti Growth........................................................ 14.74% (0.27%) 30.35% 17.61% 17.32%
Growth and Income.................................................... 14.24% (1.21%) 36.47% 18.10% 33.47%
5/2/94- 1/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- --------
Small Cap..................................................................... (3.23%) 28.84% 30.68% 24.85%
5/1/95- 1/1/96- 1/1/97-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- --------
Equity Growth.......................................................................... 25.13% 13.17% 25.63%
Balanced............................................................................... 14.01% 16.91% 16.18%
International Equity................................................................... 4.01% 6.67% (1.30%)
Venture Value.......................................................................... 21.92% 25.84% 33.50%
6/28/96- 1/1/97-
SUB-ACCOUNT 12/31/96 12/31/97
- ----------- -------- --------
U.S. Government................................................................................. 4.55% 8.47%
Strategic Bond Opportunities.................................................................... 8.46% 11.07%
</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-26
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
We have audited the accompanying consolidated balance sheets of New England
Life Insurance Company (formerly New England Variable Life Insurance Company)
and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of earnings, equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such 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, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
In 1996, as discussed in Note 1 to the financial statements, the Company (1)
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) reflected the effects of the changes in
corporate organizations.
The consolidated statements of earnings, equity, and cash flows for the period
ended December 31, 1995 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
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 17, 1998
Boston, Massachusetts
N-1
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997 AND 1996 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES 1997 1996
----- ---------- ----------
<S> <C> <C> <C>
ASSETS
Investments:
Fixed Maturities:
Available for Sale, at Estimated Fair Value...... 2,11 $ 734,391 $ 524,285
Held to Maturity, at Amortized Cost.............. 2 -- 29,666
Equity Securities................................. 2,11 9,399 --
Policy Loans...................................... 11 104,783 76,263
Real Estate....................................... 2,757 1,702
Short-Term Investments............................ 11 27,944 156,560
Other Invested Assets............................. 24,349 12,956
---------- ----------
Total Investments.............................. 903,623 801,432
Cash and Cash Equivalents.......................... 11 74,148 49,147
Deferred Policy Acquisition Costs.................. 565,769 434,637
Accrued Investment Income.......................... 18,712 13,713
Premiums and Other Receivables..................... 4 63,036 5,941
Other Assets....................................... 62,326 95,106
Separate Account Assets............................ 1,988,225 1,206,959
---------- ----------
TOTAL ASSETS................................... $3,675,839 $2,606,935
========== ==========
LIABILITIES AND EQUITY
LIABILITIES
Future Policy Benefits............................. 4 $ 500,429 $ 464,889
Policyholder Account Balances...................... 4,11 240,411 181,594
Other Policyholder Funds........................... 11 8,380 2,071
Policyholder Dividends Payable..................... 14,719 9,018
Short and Long-Term Debt........................... 8,11 85,981 84,057
Income Taxes Payable: 5
Current........................................... 9,102 6,272
Deferred.......................................... 42,066 39,463
Due to Parent...................................... 107,337 40,225
Other Liabilities.................................. 45,647 21,965
Separate Account Liabilities....................... 1,988,225 1,206,959
---------- ----------
TOTAL LIABILITIES.............................. 3,042,297 2,056,513
---------- ----------
Commitments and Contingencies (Notes 2, 4, 8 and 9)
EQUITY
Common Stock, $125.00 par value; 50,000 shares
authorized, 20,000 shares issued and outstanding.. 2,500 2,500
Contributed Capital................................ 545,477 497,946
Retained Earnings.................................. 68,218 46,249
Net Unrealized Investment Gains.................... 3 17,347 3,727
---------- ----------
TOTAL EQUITY................................... 12 633,542 550,422
---------- ----------
TOTAL LIABILITIES AND EQUITY....................... $3,675,839 $2,606,935
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
N-2
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES 1997 1996 1995
----- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Premiums...................................... 4 $ 63,616 $ 37,410 $ 38,566
Universal Life and Investment-Type Product
Policy Fee Income............................ 145,157 101,756 79,371
Net Investment Income......................... 3 61,059 49,628 41,815
Investment Gains (Losses), Net................ 3 890 8,822 10,514
Commissions, Fees and Other Income............ 28,302 44,930 34,555
-------- -------- --------
TOTAL REVENUES.............................. 299,024 242,546 204,821
-------- -------- --------
BENEFITS AND OTHER DEDUCTIONS
Policyholder Benefits......................... 4 100,180 65,520 55,810
Interest Credited to Policyholder Account
Balances..................................... 6,220 5,558 2,564
Policyholder Dividends........................ 21,325 14,830 13,954
Other Operating Costs and Expenses............ 10 144,342 143,886 99,424
-------- -------- --------
TOTAL BENEFITS AND OTHER DEDUCTIONS......... 272,067 229,794 171,752
-------- -------- --------
Earnings from Operations before Income Taxes.. 26,957 12,752 33,069
Income Taxes.................................. 5 4,988 3,051 12,303
-------- -------- --------
NET EARNINGS.................................. $ 21,969 $ 9,701 $ 20,766
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
N-3
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EQUITY
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK & NET UNREALIZED
CONTRIBUTED RETAINED INVESTMENT
CAPITAL EARNINGS GAINS (LOSSES) TOTAL
----------- -------- -------------- --------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1994.... 228,057 15,782 (670) 243,169
Net Earnings..................... 20,766 20,766
Change in Net Unrealized Invest-
ment Gains (Losses)............. 27,026 27,026
Contributed Capital.............. 63,543 63,543
-------- ------- -------- --------
BALANCES AT DECEMBER 31, 1995.... 291,600 36,548 26,356 354,504
Net Earnings..................... 9,701 9,701
Change in Net Unrealized Invest-
ment Gains (Losses)............. (22,629) (22,629)
Contributed Capital.............. 208,846 208,846
-------- ------- -------- --------
BALANCES AT DECEMBER 31, 1996.... 500,446 46,249 3,727 550,422
Net Earnings..................... 21,969 21,969
Change in Net Unrealized Invest-
ment Gains (Losses)............. 13,620 13,620
Contributed Capital.............. 47,531 47,531
-------- ------- -------- --------
BALANCES AT DECEMBER 31, 1997.... $547,977 $68,218 $ 17,347 $633,542
======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
N-4
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
NET CASH USED BY OPERATING ACTIVITIES......... $(121,838) $ (85,674) $(111,834)
--------- --------- ---------
Cash Flows from Investing Activities:
Sales, Maturities and Repayments of:
Available for Sale Fixed Maturities.......... 178,003 276,420 538,297
Held to Maturity Fixed Maturities............ -- 10,519 625
Mortgage Loans on Real Estate................ -- 2,210 12
Other, Net................................... 128 -- --
Purchases of:
Available for Sale Fixed Maturities.......... (326,059) (259,713) (983,518)
Real Estate.................................. -- (480) --
Fixed Asset Property and Equipment........... (101) (3,786) --
Other Assets................................. -- (11,024) (15)
Net Change in Short-Term Investments......... 128,616 (135,731) 379,325
Net Change in Policy Loans................... (28,520) (18,052) (14,243)
Other, Net................................... 177 67 (114)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES......... (47,756) (139,570) (79,631)
--------- --------- ---------
Cash Flows from Financing Activities:
Common Stock
Capital Contributions........................ 46,681 159,162 9,515
Borrowed Money............................... (3,181) -- 25,000
Policyholder Account Balances
Deposits..................................... 244,338 482,552 281,762
Withdrawals.................................. (95,066) (364,933) (148,403)
Financial Reinsurance Receivables............ 1,823 (37,519) --
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES..... 194,595 239,262 167,874
--------- --------- ---------
Change in Cash and Cash Equivalents........... 25,001 14,018 (23,591)
Cash and Cash Equivalents, Beginning of Year.. 49,147 35,129 58,720
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR........ $ 74,148 $ 49,147 $ 35,129
========= ========= =========
Supplemental Cash Flow Information:
Interest Paid................................ $ 1,495 $ 1,523 $ 1,277
========= ========= =========
Income Taxes Paid............................ $ 5,470 $ 4,721 $ 6,765
========= ========= =========
NET EARNINGS.................................. 21,969 9,701 20,766
Adjustments to Reconcile Net Earnings to Net
Cash Provided by (Used in) Operating
Activities:
Change in Deferred Policy Acquisition Costs,
Net......................................... (140,578) (68,626) (45,823)
Change in Accrued Investment Income.......... (4,999) 909 (11,507)
Change in Premiums and Other Receivables..... (57,095) 4,370 (4,073)
Gains from Sales of Investments, Net......... (890) (15,979) (21,980)
Depreciation and Amortization Expenses....... 10,085 4,120 5,725
Interest Credited to Policyholder Account
Balances.................................... 6,220 5,558 2,565
Universal Life and Investment-Type Product
Policy Fee Income........................... -- (101,756) (79,371)
Change in Future Policy Benefits............. 35,540 18,202 14,539
Change in Other Policyholder Funds........... 6,309 (283) 1,789
Change in Policyholder Dividends Payable..... 5,701 1,671 114
Change in Income Taxes Payable............... 1,674 (6,634) 10,211
Other, Net................................... (5,774) 63,073 (4,789)
--------- --------- ---------
NET CASH USED BY OPERATING ACTIVITIES......... $(121,838) $ (85,674) $(111,834)
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
N-5
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
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. The Company also provides participating
traditional life insurance, annuity contracts, pension products, as well as,
group life, group medical, and group disability coverage.
Prior to the merger of New England Mutual Life Insurance Company (NEMLICO)
with MetLife on August 30, 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 of 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 $208,846 consisting of
$129,254 of cash and $79,592 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 in cash. MetLife made an
additional statutory capital contribution to NELICO of $50,000 in cash during
1997, which was offset by $2,469 of returned capital.
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. On February 28, 1997, NELICO created and
became the sole owner of New England Life Holdings, Inc. which was established
as a holding company for the non-insurance operations of the Company,
principally, New England Securities and TNE Advisers, Inc. 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.
N-6
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
Newbury Insurance Company, Limited (Newbury) was incorporated in Bermuda on
May 1, 1987, and is registered as a Class 2 insurer under The Insurance Act
1978 (Bermuda). Newbury provides professional liability and personal injury
coverage to the agents of NELICO through a facultative reinsurance agreement
with Lexington Insurance Company. The policy applies to claims made during the
policy period or during the discovery period with limits of $1,000 each claim,
$1,000 annual aggregate each insured, $3,500, $3,500 and $3,000 annual
aggregate all insured in 1997, 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 cumulative effect of such
adoption of all applicable authoritative GAAP pronouncements as of January 1,
1994 was reflected in the financial statements of NELICO as an adjustment of
equity at January 1, 1994.
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
$105, net of deferred income taxes and adjustments of deferred policy
acquisition costs and future policy benefits.
Effective July 1, 1997, management realigned its fixed maturity investment
classifications and transferred all securities classified as held to maturity
to available for sale. As a result, consolidated equity at July 1, 1997
increased by $798, excluding the effects of deferred income taxes, amounts
attributable to participating pension contractholders and adjustments of
deferred policy acquisition costs and future policy benefits.
N-7
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
VALUATION OF INVESTMENTS
As mentioned above, during 1997 management reclassified all of the company's
fixed maturity securities to available for sale. Accordingly, as of December
31, all of the company's investment securities are carried at estimated fair
value. Prior to this reclassification, certain fixed maturity securities
(principally bonds) were carried at amortized cost. Unrealized investment
gains and losses on investment securities are recorded directly as a separate
component of equity net of related deferred income taxes and adjustments of
deferred policy acquisition costs and future policy benefits. Costs of
securities are adjusted for impairments in value deemed to be other than
temporary. Such adjustments are recorded as realized investment losses. All
securities transactions are recorded on a trade date basis.
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 which approximates fair
value.
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. Valuation allowances are netted
against asset categories to which they apply and provisions for losses for
investments are included in investment gains and losses.
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 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 $13,203, and $3,118 at December 31, 1997 and 1996,
respectively. Related depreciation and amortization expense was $10,085,
$3,118, and $0 for the years ended December 31, 1997, 1996 and 1995,
respectively.
RECOGNITION OF INCOME AND EXPENSES
Premiums from traditional life and annuity policies with life contingencies
are generally recognized 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.
N-8
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, agency and
policy issue expenses, all of which vary with and are primarily related to the
production of new business, have been deferred. Deferred policy acquisition
costs are subject to recoverability testing at the time of policy issue and
loss recognition testing at the end of each accounting period.
Deferred policy acquisition costs are amortized over a period up to 40 years
for traditional life, variable life, universal life products and 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 and its eligible life insurance subsidiary, Exeter Reassurance Company,
Ltd., files a consolidated federal income tax return. Separate income tax
returns as required are filed for the other life insurance and nonlife
insurance direct subsidiaries. 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 income 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.
N-9
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
POLICYHOLDER DIVIDENDS
The amount of policyholder dividends to be paid is determined annually by the
Board of Directors. The aggregate amount of policyholder dividends is related
to actual interest, mortality, morbidity and expense experience for the year
and management's judgment as to the appropriate level of statutory surplus to
be retained by the Company.
CONSOLIDATED STATEMENTS OF CASH FLOWS--NON CASH TRANSACTIONS
For the years ended December 31, 1997, 1996 and 1995, the Company received
capital contributions in the form of transfer of assets of $0, $79,592 and
$54,028, respectively.
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.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
The FASB has issued SFAS No. 130 REPORTING COMPREHENSIVE INCOME which
establishes standards for reporting and presentation of comprehensive income
and its components. Comprehensive income (loss) was $35,589, $(12,928), and
$47,792 in 1997, 1996, and 1995, respectively. Consolidated statements of
comprehensive income, which will be required in 1998, have not been presented
as the Company has not determined the individual amounts to be displayed in
such statements.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' amounts to conform to
the 1997 presentation.
N-10
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
2. INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
The amortized cost, gross unrealized gain (loss) and estimated fair value of
fixed securities and equity securities, by category, are shown below.
AVAILABLE FOR SALE SECURITIES
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- -------- ------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Fixed Maturities:
U. S. Treasury Securities and
obligations of U. S. government
corporations and agencies............. $ 12,105 $ 101 $ -- $ 12,206
Foreign governments.................... 2,316 67 -- 2,383
Corporate.............................. 620,916 41,564 3,308 659,172
Mortgage-backed securities............. 57,348 3,282 -- 60,630
-------- -------- ------- --------
Total Fixed Maturities............... $692,685 $ 45,014 $ 3,308 $734,391
======== ======== ======= ========
Equity Securities:
Common stocks.......................... 9,424 216 241 9,399
-------- -------- ------- --------
Total Equity Securities.............. $ 9,424 $ 216 $ 241 $ 9,399
======== ======== ======= ========
AVAILABLE FOR SALE SECURITIES
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- -------- ------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Fixed Maturities:
U. S. Treasury Securities and
obligations of U. S. government
corporations and agencies............. $ 5,465 $ 47 $ 25 $ 5,487
Foreign governments.................... 1,577 1 57 1,521
Corporate.............................. 505,683 18,637 7,093 517,227
Mortgage-backed securities............. 49 1 -- 50
-------- -------- ------- --------
Total Fixed Maturities............... $512,774 $ 18,686 $ 7,175 $524,285
======== ======== ======= ========
HELD TO MATURITY SECURITIES
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- -------- ------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Fixed Maturities:
U. S. Treasury Securities and
obligations of U. S. government
corporations and agencies............. $ 7,299 $ 51 $ 6 $ 7,344
States and political subdivisions...... 480 38 -- 518
Corporate.............................. 21,887 860 99 22,648
-------- -------- ------- --------
Total Fixed Maturities............... $ 29,666 $ 949 $ 105 $ 30,510
======== ======== ======= ========
</TABLE>
N-11
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
Included in net unrealized investment gains (losses) are unrealized gains on
foreign currency investments as well as unrealized gains on the associated
forward foreign exchange contracts. Unrealized investment gains (losses)
consists of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net unrealized gains on investments................................ $281 $ 8
Unrealized gains (losses) on the maturity of forward contracts..... 14 14
---- ---
$295 $22
==== ===
</TABLE>
The amortized cost and estimated fair value of bonds classified as available
for sale, by contractual maturity, at December 31, 1997 are shown below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less................................. $ 5,729 $ 5,723
Due after one year through five years................... 61,395 62,503
Due after five years through ten years.................. 155,795 157,820
Due after ten years..................................... 412,418 447,715
-------- --------
Subtotal.............................................. 635,337 673,761
Mortgage-backed securities.............................. 57,348 60,630
-------- --------
Total................................................. $692,685 $734,391
======== ========
</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, 1997 the trust held $516,491 of bonds and short-
term investments, and at December 31, 1996, the trust held $787 of cash and
$468,847 of bonds and short-term investments.
ASSETS ON DEPOSIT
As of December 31, 1997 and 1996, the Company had assets on deposit with
regulatory agencies of $7,020 and $5,884, respectively.
N-12
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
3. NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Fixed maturities................................. $50,348 $44,630 $39,264
Equity securities................................ 4,915 -- --
Mortgage loans on real estate.................... -- 110 234
Real estate...................................... 815 55 --
Policy loans..................................... 5,081 3,734 2,831
Cash, cash equivalents and short-term
investments..................................... 4,160 3,656 1,174
Other investment income.......................... 591 38 --
------- ------- -------
Gross investment income.......................... 65,910 52,223 43,503
Investment expenses.............................. (4,851) (2,595) (1,688)
------- ------- -------
Net Investment income............................ $61,059 $49,628 $41,815
======= ======= =======
</TABLE>
Investment gains (losses) are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Fixed maturities................................... $ (774) $15,467 $21,981
Other.............................................. 1,032 512 (1)
------ ------- -------
Subtotal......................................... 258 15,979 21,980
Investment gains (losses) related to accelerated
amortization of deferred
policy acquisition costs.......................... (632) 7,157 11,466
------ ------- -------
Investment gains (losses), net..................... $ 890 $ 8,822 $10,514
====== ======= =======
</TABLE>
Proceeds from the sales of bonds classified as available for sale during 1997,
1996 and 1995 were $143,107, $275,008 and $518,417 respectively. During 1997,
1996 and 1995, respectively, gross gains of $1,846, $19,109 and $22,558, and
gross losses of $1,489, $3,878, and $577 were realized on those sales.
Proceeds from the call of direct issue fixed maturities classified as held to
maturity during 1997, 1996 and 1995 were $0, $5,291 and $0, respectively.
During 1997, 1996 and 1995, respectively, gross gains of $0, $236 and $0, and
gross losses of $0, $0 and $0 were realized due to prepayment premiums
received. In 1997 the Company transferred all fixed maturities classified as
held to maturity to available for sale.
N-13
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
The net 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>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Year ended December 31
Balance, beginning of year................... $ 3,727 $ 26,356 $ (670)
Change in unrealized investment gains
(losses).................................. 30,207 (46,850) 58,947
Change in unrealized investment gains
(losses) attributable to:
Deferred policy acquisition cost
allowances.............................. (9,446) 12,211 (17,884)
Deferred income tax (expense) benefit.... (7,141) 12,010 (14,037)
-------- -------- --------
Balance, end of year......................... $ 17,347 $ 3,727 $ 26,356
======== ======== ========
December 31
Balance, end of year, comprised of:
Unrealized investment gains (losses) on:
Fixed maturities......................... $ 41,706 $ 11,525 $ 58,369
Other.................................... 22 (4) 2
-------- -------- --------
41,728 11,521 58,371
Amounts of unrealized investment gains
(losses) attributable to:
Deferred policy acquisition cost
allowances................................ (15,202) (5,756) (17,967)
Deferred income tax (expense) benefit...... (9,179) (2,038) (14,048)
-------- -------- --------
Balance, end of year......................... $ 17,347 $ 3,727 $ 26,356
======== ======== ========
</TABLE>
Net unrealized investment gains at December 31, 1997, before deferred Federal
income tax, reflects gross unrealized gains of $45,014 and gross unrealized
losses of $3,308.
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.
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Direct premiums................................ $ 30,975 $ 2,682 $ 2,794
Reinsurance assumed............................ 62,315 67,483 69,330
Reinsurance ceded.............................. (29,674) (32,755) (33,558)
-------- -------- --------
Net premiums earned............................ $ 63,616 $ 37,410 $ 38,566
======== ======== ========
</TABLE>
N-14
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
Policyholder benefits in the accompanying consolidated statements of earnings
are presented net of reinsurance recoveries of $55,445, $23,962 and $22,577
for the years ended December 31, 1997, 1996 and 1995, respectively. Premiums
and other receivables in the accompanying consolidated balance sheets include
reinsurance recoveries of $1,489 and $200 at December 31, 1997 and 1996,
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 (the "Code").
NELICO and its eligible life insurance subsidiary, Exeter Reassurance Company,
Ltd., files a consolidated federal income tax return. Separate income tax
returns as required are filed for the other life insurance and nonlife
insurance direct subsidiaries. The Company uses the liability method of
accounting for income taxes. Income tax provisions are based on income
reported for financial statement purposes. Deferred income taxes arise from
the recognition of temporary differences between income determined for
financial reporting purposes and income tax purposes.
A summary of income tax expense (benefit) in the consolidated statements of
earnings is shown below:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -------
<S> <C> <C> <C>
1997
Federal............................................ $8,473 $(3,772) $ 4,701
State and Local.................................... 316 (29) 287
------ ------- -------
Total............................................ $8,789 $(3,801) $ 4,988
====== ======= =======
1996
Federal............................................ $5,333 $(1,531) $ 3,802
State and Local.................................... -- (751) (751)
------ ------- -------
Total............................................ $5,333 $(2,282) $ 3,051
====== ======= =======
1995
Federal............................................ $5,504 $ 6,355 $11,859
State and Local.................................... -- 444 444
------ ------- -------
Total.......................................... $5,504 $ 6,799 $12,303
====== ======= =======
</TABLE>
Reconciliations of the differences between income taxes of operations computed
at the federal statutory tax rates and consolidated provisions for income
taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Income before taxes.............................. $26,957 $12,752 $33,069
Income tax rate.................................. 35% 35% 35%
------- ------- -------
Expected income tax expense at federal statutory
income tax rate................................. 9,435 4,463 11,574
Tax effect of:
Change in valuation allowance.................. -- (13,948) (413)
NOL benefit write-off.......................... -- 13,012 --
State and local income taxes................... (1,013) (488) 289
Other, net..................................... (3,434) 12 853
------- ------- -------
Income Tax Expense............................... $ 4,988 $ 3,051 $12,303
======= ======= =======
</TABLE>
N-15
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
The net deferred tax liabilities 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 liabilities at
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Policyholder liabilities............................ $ 63,723 $ 83,304
Net operating loss carryforward..................... -- 12,548
Other............................................... 81,988 14,690
--------- ---------
Total gross assets................................ 145,711 110,542
--------- ---------
Deferred tax liabilities:
Investments......................................... (2,456) (2,526)
Deferred policy acquisition costs................... (168,270) (132,965)
Net unrealized capital gains........................ (9,179) (2,038)
Other............................................... (7,872) (12,476)
--------- ---------
Total gross liabilities........................... (187,777) (150,005)
--------- ---------
Net deferred tax liability............................ $ (42,066) $ (39,463)
========= =========
</TABLE>
The sources of the deferred tax expense (benefit) and their tax effects are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Policyholder liabilities....................... $(23,759) $(17,818) $(4,110)
Net operating loss carryforward................ 12,548 464 --
Investments.................................... 1,319 -- --
Deferred policy acquisition costs.............. 33,621 21,828 13,878
Other, net..................................... (27,530) (6,756) (2,969)
-------- -------- -------
Total........................................ $ (3,801) $ (2,282) $ 6,799
======== ======== =======
</TABLE>
6. EMPLOYEE BENEFIT PLANS
Prior to the merger, substantially all employees were employed by NEMLICO and
were covered under the Home Office Retirement Plan and related Select
Employees' Supplemental Retirement Plan (collectively referred to as the
Plans). Subsequent to the merger substantially all of the employees became
employees of the Company and continued to be covered by the Plans, which
became the Plans of the Company. Under the Plans 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
Company's net pension cost charged to income in 1997, 1996, and 1995 was $277,
$159, and $150, respectively, which represents the Company's allocation of the
total net periodic pension cost of the Plans as shown below:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost................................... $ 5,310 $ 5,761 $ 4,797
Interest cost on projected benefit obligation.. 13,958 12,489 11,012
Actual return on assets........................ (22,250) (15,468) (21,221)
Net amortization and deferrals................. 11,092 6,009 13,059
-------- -------- --------
Net periodic pension cost.................... $ 8,110 $ 8,791 $ 7,647
======== ======== ========
</TABLE>
N-16
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
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 Plans includes amounts relating to NEMLICO.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of accumulated plan benefits.... $143,681 $133,000
======== ========
Projected benefit obligation............................ 193,652 182,000
======== ========
Net assets available for plan benefits.................. 150,820 130,992
======== ========
Unrecognized prior service cost......................... 2,844 224
======== ========
Unrecognized net (loss) from past experience difference
from that assumed...................................... (18,936) (37,327)
======== ========
Unamortized transition gains............................ $ 5,832 $ 4,015
======== ========
</TABLE>
The weighted average discount rate was 7.75%, 7.5% and 8.0% in 1997, 1996 and
1995, respectively. The rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit was 5.0% for
1997, 1996 and 1995. Assets of the Plans consist of bonds, stocks, real
estate, and insurance contracts and have an assumed long-term rate of return
of 8.75% for 1997, and 8.5% for 1996 and 1995.
OTHER POSTRETIREMENT BENEFITS
Prior to the merger, NEMLICO provided certain health care and life insurance
benefits for retired employees. Substantially all employees would have become
eligible for these benefits had they reached retirement age while working for
NEMLICO. Subsequent to the merger, these benefits are being provided by
MetLife, with respect to benefits earned prior to the merger, and the Company,
with respect to benefits earned subsequent to the merger.
As claims were incurred, the Company made contributions to the plan in 1997
and 1996 which were considered immaterial. The total contributions made to the
plan were $3,670 and $3,386, in 1997 and 1996, respectively. The following
table sets forth the plan's fiscal year end funded status:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $33,823 $28,566
Fully eligible active plan participants................... 4,487 5,482
All other actives......................................... 11,114 11,098
------- -------
Total....................................................... 49,424 45,146
plus: unrecognized net gain............................... 15,726 19,997
------- -------
Accrued postretirement benefit liability.................... $65,150 $65,143
======= =======
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
The components of net postretirement benefit cost
were:
Service cost........................................ $ 880 $ 876 $ 876
Interest cost....................................... 3,690 3,183 3,768
Amortization of gain................................ (849) (1,155) (1,043)
------ ------ ------
Net periodic postretirement benefit cost.............. $3,721 $2,904 $3,601
====== ====== ======
</TABLE>
N-17
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
Net periodic postretirement benefit costs for the years ended December 31,
1997, 1996 and 1995, includes the cost of benefits earned by active employees,
interest cost, gains and losses arising from differences between actuarial
assumptions and actual experience, and amortization of the transition
obligation. The discount rate used to determine the net periodic
postretirement benefit cost was 7.75%, 7.25% and 8.5% for 1997, 1996 and 1995,
respectively.
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.75% and 7.50% as of December 31, 1997 and 1996, respectively.
The health care cost trend rate was 7.8% graded to 5.0% over 8 years for 1997,
and 8.2% graded to 5.0% over 8 years for 1996. 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 1998 and the succeeding four years are $13,323,
$13,057, $11,765, $10,739 and $10,468, respectively, and $95,762 thereafter.
Minimum future sub-lease rental income on these non-cancelable leases for 1998
and the succeeding four years is $3,553, $3,620, $3,600, $3,578 and $3,578,
respectively, and $15,257 thereafter.
8. DEBT
In 1995, the Company borrowed $25,000 from a bank, bearing interest at a
variable rate, equal to the greater of the bank's base rate or money market
rates plus 0.6% per annum payable monthly, 5.8% at December 31, 1997 and 5.7%
at December 31, 1996. 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 of $21,965, repayments made during 1997 were
$3,181.
Exeter privately placed $75,118 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. The issue costs of the Notes of
$130 were deducted from Notes, net of discount, to arrive at net subordinated
notes payable of $49,870. 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 of $64,016, repayments made during 1997 were $0.
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.
N-18
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
10. OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Compensation costs........................... $ 58,754 $ 36,172 $ 23,630
Commissions.................................. 77,351 51,617 37,476
Debt expense................................. 6,750 6,261 5,659
Amortization of policy acquisition costs..... 17,723 22,233 21,199
Capitalization of policy acquisition costs... (157,670) (98,016) (65,850)
Rent expense, net of sub-lease income of
$719, $119 and $0........................... 4,473 3,060 1,609
Other........................................ 136,961 122,559 75,701
--------- -------- --------
Total...................................... $ 144,342 $143,886 $ 99,424
========= ======== ========
</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, 1997 and 1996 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, 1997:
ASSETS
Fixed Maturities......................................... $734,391 $734,391
Equity Securities........................................ 9,399 9,399
Policy loans............................................. 104,783 104,783
Short-term investments................................... 27,944 27,944
Cash and cash equivalents................................ 74,148 74,148
LIABILITIES
Policyholder account balances............................ 9,271 8,508
Other policyholder funds................................. 4,324 4,324
Short and long-term debt................................. 85,981 85,981
DECEMBER 31, 1996:
ASSETS
Fixed Maturities......................................... $553,951 $554,795
Policy loans............................................. 76,263 76,263
Short-term investments................................... 156,560 156,560
Cash and cash equivalents................................ 49,147 49,147
LIABILITIES
Policyholder account balances............................ 3,368 3,168
Other policyholder funds................................. 2,868 2,868
Short and long-term debt................................. 84,057 84,057
</TABLE>
N-19
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
For bonds that are publicly traded, estimated fair value was obtained from an
independent market pricing service. Publicly traded bonds represented
approximately 91% of the carrying value and estimated fair value of the total
bonds as of December 31, 1997 and 96% of the carrying value and estimated fair
value of the total bonds as of December 31, 1996. 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
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 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,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income (loss)................ $ (37,358) $ (46,021) $ 375
Adjustments to GAAP for life insurance
companies:
Future policy benefits and policyholders
account balances........................ (718,229) (41,174) (9,616)
Deferred policy acquisition costs........ 139,947 68,626 45,823
Deferred Federal Income taxes............ 4,009 2,283 (6,799)
Statutory interest maintenance reserve... 342 231 --
Other, net............................... 633,258 25,756 (9,017)
--------- --------- ---------
Net GAAP Earnings.......................... $ 21,969 $ 9,701 $ 20,766
========= ========= =========
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Statutory surplus.......................... $ 307,290 $ 355,853 $ 203,374
Adjustments to GAAP for life insurance
companies:
Future policy benefits and policyholders
account balances........................ (279,510) (195,273) (154,099)
Deferred policy acquisition costs........ 565,769 434,637 353,809
Deferred Federal Income taxes............ (43,318) (40,185) (55,201)
Valuation of investments................. 56,873 11,503 58,063
Statutory interest maintenance reserve... 571 306 74
Statutory investment valuation reserves.. 8,388 3,335 373
Surplus notes............................ (64,016) (58,911) (54,210)
Receivables from reinsurance
transactions............................ 27,519 26,030 --
Other, net............................... 53,976 13,127 2,320
--------- --------- ---------
GAAP Equity................................ $ 633,542 $ 550,422 $ 354,503
========= ========= =========
</TABLE>
N-20
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
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 $186,757 including accruals for administrative
services on NEMLICO administered contracts for 1997. The Company charged
MetLife $88,043 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 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 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 1997, MetLife made a capital contribution to the Company of $50,000 in
cash. 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 $29,558. MetLife also made non-
cash capital contributions of home-office properties of $10,301, socially-
responsible investments with a book value of $11,916, furniture, equipment and
leasehold improvements of $27,816, and a cash contribution of $128,412. Prior
to the merger, NEMLICO made a cash contribution to NELICO of $20,000.
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. NELICO received cash contributions from NEMLICO of
$8,215 in 1995.
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 lease payments to MetLife of $2,340 and $780
in 1997 and 1996, respectively.
On June 21, 1996, NEMLICO purchased a mortgage from NELICO for $2,217 which
included principal of $2,204, and interest of $13.
Commissions earned by NES from sales of New England Funds (NEF) and State
Street Research (SSR) shares, subsidiaries of MetLife, for 1997 were $16,799
and $1,127, respectively. Included in accrued income at December 31, 1997,
were amounts receivable for sales-based commissions from NEF and SSR totaling
$233 and $13, respectively. In 1997, NES earned asset-based income of $8,777
and $61 on average assets of approximately $3.9 billion and $33 million under
management with NEF and SSR, respectively.
Exeter has a privately-placed subordinated notes payable to MetLife for
$64,016 at December 31, 1997 and $58,911 at December 31, 1996.
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.
N-21
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (DOLLARS IN THOUSANDS,
EXCEPT AS NOTED)
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.
14. SUBSEQUENT EVENTS
In February 1998, the Company signed a definitive agreement to acquire all of
the outstanding common stock of Nathan Lewis Holding Corp. (Nathan Lewis) a
broker-dealer based in New York City. Under the terms of the agreement, the
Company will pay approximately $28 million in cash at the close and $2 million
per year over the next three years subject to certain financial conditions.
Nathan Lewis had approximately $22 million in assets and earned $2.1 million
on revenues of $78.4 million for the twelve month fiscal period ended
September 30, 1997. The acquisition, which is expected to close in the second
quarter of 1998, will be accounted for as a purchase under generally accepted
accounting principles.
N-22
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholder of
New England Variable Life Insurance Company:
We have audited the statutory statements of operations, surplus, and cash
flows of New England Variable Life Insurance Company (a wholly-owned
subsidiary of New England Mutual Life Insurance Company) for the year 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 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 statements of operations,
surplus, and cash flows are free of material misstatement. An audit includes
examining, on 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 presentation of the statements of operations, surplus,
and cash flows. We believe that our audit of the statements of operations,
surplus, and cash flows provides a reasonable basis for our opinion.
As described more fully in Note 1 to the aforementioned financial statements,
the Company prepared the statements of operations, surplus, and cash flows
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
statements of operations, surplus, and cash flows, prepared using SAP,
presented fairly, in all material respects the results of operations and cash
flows of New England Variable Life Insurance Company for the year ended
December 31, 1995 in conformity with GAAP. As described in Note 1 to the
aforementioned 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 statements of operations,
surplus, and cash flows 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 results
of operations or cash flows of New England Variable Life Insurance Company for
the year 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 results of
operations and cash flows of New England Variable Life Insurance Company for
the year ended December 31, 1995, on the basis of accounting practices
prescribed or permitted by the Insurance Department of the State of Delaware.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 8, 1996, except for the information in the
second paragraph under "Basis of Presentation
and Principles of Consolidation" of Note 1, for which
the date is February 18, 1997
N-23
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT ON INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholder of
New England Pension and Annuity Company:
We have audited the statutory statements of operations and surplus, and cash
flows of New England Pension and Annuity Company (a wholly-owned subsidiary of
New England Mutual Life Insurance Company) for the year 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 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 statements of operations and
surplus, and cash flows 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 presentation of the statements of operations and
surplus, and cash flows. We believe that our audit of the statements of
operations and surplus, and cash flows provides a reasonable basis for our
opinion.
As described more fully in Note 1 to the aforementioned financial statements,
the Company prepared the statements of operations and surplus, and cash flows
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
statements of operations and surplus, and cash flows, prepared using SAP,
presented fairly, in all material respects the results of operations and cash
flows of New England Pension and Annuity Company for the year ended December
31, 1995 in conformity with GAAP. As described in Note 1 to the aforementioned
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 statements of operations and surplus, and cash
flows 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 results
of operations or cash flows of New England Pension and Annuity Company for the
year 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 results of
operations and cash flows of New England Pension and Annuity Company for the
year ended December 31, 1995, on the basis of accounting practices prescribed
or permitted by the Insurance Department of the State of Delaware.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 8, 1996, except for the information in the
second paragraph under "Basis of Presentation and
Principles of Consolidation" of Note 1, for which the
date is February 18, 1997
N-24
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
April 23, 1996
To The Board of Directors and Shareholder of
Exeter Reassurance Company, Ltd.
We have audited the statutory statements of operations and surplus, and cash
flows of Exeter Reassurance Company, Ltd. (a wholly-owned subsidiary of New
England Mutual Life Insurance Company) for the year 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 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
statements of operations and surplus, and cash flows 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 presentation
of the statements of operations and surplus, and cash flows. We believe that
our audit of the statements of operations and surplus, and cash flows provides
a reasonable basis for our opinion.
The statutory statements of operations and surplus, and cash flows 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
results of operations or cash flows of Exeter Reassurance Company, Ltd. for
the year 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 results of operations and cash flows of Exeter
Reassurance Company, Ltd. for the year ended December 31, 1995 in conformity
with the Insurance Act 1978, amendments thereto and related regulations.
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS
N-25
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Stockholder of
New England Securities Corporation:
We have audited the consolidated statements of operations, shareholder's
equity, and cash flows of New England Securities Corporation for the year
ended December 31, 1995. 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 statements of operations,
shareholder's equity, and cash flows 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 presentation of the statements of operations,
shareholder's equity, and cash flows. We believe that our audit of the
statements of operations, shareholder's equity, and cash flows 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 results of
operations and cash flows of New England Securities Corporation for the year
ended December 31, 1995 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 9, 1996
N-26
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Shareholder and Board of Directors of
TNE Advisers, Inc.:
We have audited the statements of operations, changes in shareholder's equity,
and cash flows of TNE Advisers, Inc. for the year ended December 31, 1995.
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 statements of operations,
changes in shareholder's equity, and cash flows 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 presentation
of the statements of operations, changes in shareholder's equity, and cash
flows. We believe that our audit of the statements of operations, changes in
shareholder's equity, and cash flows 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 results of operations
and cash flows of TNE Advisers, Inc. for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 29, 1996
N-27
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
March 14, 1996
To The Shareholders of
Newbury Insurance Company, Limited
We have audited the statements of earnings and retained earnings, and cash
flows of Newbury Insurance Company, Limited for the year 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 audit.
Except as discussed in the following paragraph, 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 statements of earnings and retained
earnings, and cash flows 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 presentation of the statements of earnings and retained
earnings, and cash flows. We believe that our audit of the statements of
earnings and retained earnings, and cash flows provides a reasonable basis for
our opinion.
The provision for losses incurred but not reported is calculated in the manner
described in note 3(b). We have not reviewed the underlying information used
in the calculation of the provision and therefore we have been unable to
determine whether the provision for the year ended December 31, 1995 is
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 results of operations and cash flows of Newbury Insurance Company, Limited
for the year ended December 31, 1995, in conformity with accounting principles
generally accepted in the United States of America.
COOPERS & LYBRAND
CHARTERED ACCOUNTANTS
N-28
<PAGE>
This registration statement incorporates by reference the prospectus dated
May 1, 1988 and the supplement dated February 1, 1989 to the prospectus dated
May 1, 1988 for the policies, each as filed in Post-Effective Amendment No. 19
to the Registration Statement on Form S-6 (File No.2-82838).
<PAGE>
Part II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Section 9 of NELICO's By-Laws provides that NELICO shall, to the extent
legally permissible, indemnify its directors and officers against liabilities
and expenses relating to lawsuits and proceedings based on such persons' roles
as directors or officers. However, Section 9 further provides that no such
indemnification shall be made with respect to any matter as to which a director
or officer is adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the corporation. Section 9
also provides that in the event a matter is disposed of by a settlement payment
by a director or officer, indemnification will be provided only if the
settlement is approved as in the best interest of the corporation by (a) a
disinterested majority of the directors then in office, (b) a majority of the
disinterested directors then in office, or (c) the holders of a majority of
outstanding voting stock (exclusive of any stock owned by any interested
director or officer).
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
NELICO pursuant to the foregoing provisions, or otherwise, NELICO has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by NELICO of expenses incurred or paid by a
director, officer, or controlling person of NELICO in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered. NELICO
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II - 1
<PAGE>
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the variable ordinary life insurance policies described
in this registration statement, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
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 69 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
The signatures.
Written consents of the following persons:
Edward N. Wadsworth, Esq. (see Exhibit 3(ii) below)
Robert E. Schneider, F.S.A. (see Exhibit 6(i) below)
Sutherland, Asbill & Brennan LLP(see Exhibit 6(ii) below)
Independent Auditors (see Exhibit 13 below)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of
Directors of NEVLICO ***
(2) None
(3) (a) Distribution Agreement between NEVLICO and NELESCO ****
(b)(i) Form of Contract between NELICO and its General Agents ***
(ii) Form of contract between NEVLICO and its
Agents ****
II - 2
<PAGE>
(c) Commission Schedule for Variable Life Policies
(d) Form of contract between NES, NELICO and
other broker-dealers *
(4) None
(5) (a) Specimen of Variable Life Insurance Policy,
including Application
(b) Unisex Endorsements to Variable Life Insurance Policy
(c) Fixed Account Endorsement
(d) Accleration of Benefits Rider ###
(e) Additional Riders****
(6) (a) Amended and restated Articles of Incorporation ##
(b) Amended and restated By-Laws of NELICO *
(7) None
(8) None
(9) None
(10) See Exhibit 1.A.(5) above
2. See Exhibit 1.A.(5)
3. (i) Opinion of Edward N. Wadsworth, Esquire
(ii) Consent of Edward N. Wadsworth, Esquire
4. None
5. Inapplicable
6. (i) Opinion and Consent of Robert E. Schneider, F.S.A.
(ii) Consent of Sutherland, Asbill & Brennan LLP
7. (i) Powers of Attorney ##
(ii) Power of Attorney for James M. Benson *
(iii) Power of Attorney for Richard Robinson **
8. Amended and restated election pursuant to
(S)27(g) under the Investment Company Act of 1940
9. Officer's Certificate pursuant to Rule 27d-2(a)(2)(B)
10. Notice of Withdrawal Right for Variable Life
Insurance Policies
11. Inapplicable
12. Inapplicable
13. Consents of Independent Auditors
14. Schedule for computation of performance
quotations ****
15. Consolidated memorandum describing certain
procedures, filed pursuant to Rule 6e-2(b)(12)(ii)
and Rule 6e-3(T)(b)(12)(iii) ****
II - 3
<PAGE>
(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 Life 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#
- --------
# Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed June 22, 1995.
## Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
### Incorporated herein by reference to Post-Effective Amendment No. 8 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 30, 1997.
* Incorporated by reference to Pre-Effective Amendment No. 1 to the Variable
Account's Form S-6 Registration Statement, File No. 333-21767, filed July
16, 1997.
** Incorporated by reference to the Variable Account's Form S-6 Registration
Statement, File No. 333-46401, filed February 17, 1998.
*** Incorporated by reference to Post-Effective Amendment No. 9 to the Variable
Account's Form S-6 Registration Statement, File No. 66864, filed February
25, 1998.
**** Incorporated by reference to Post-Effective Amendment No. 9 to the Variable
Account's Form S-6 Registration Statement, File no. 33-52050, filed April
24, 1998.
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, 1998.
New England Variable Life Separate
Account
(Registrant)
By: New England Life Insurance
Company
(Depositor)
By:
----------------------------------------
H. James Wilson
Executive Vice President
and General Counsel
Attest:
- ---------------------
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, 1998.
New England Life Insurance Company
(Seal)
Attest: By:
--------------------------- --------------------------
Marie C. Swift H. James Wilson
Executive Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on April 29, 1998.
_______*______________ President and Chief Executive Officer
James M. Benson
_______*______________ Director
Susan C. Crampton
_______*______________ Director
Edward A. Fox
_______*______________ Director
George J. Goodman
_______*______________ Director
Evelyn E. Handler
_______*______________ Director
Philip K. Howard
_______*______________ Director
Harry P. Kamen
_______*______________ Director
Terence Lennon
_______*______________ Director
Bernard A. Leventhal
II - 6
<PAGE>
_______*______________ Director
Thomas J. May
_______*______________ Director
Stewart G. Nagler
Second Vice President
and Chief Accounting
Richard A. Robinson Officer
_______*_____________ Executive Vice President and
Robert E. Schneider Chief Financial Officer
_______*______________ Director
Rand N. Stowell
__________*____________ Director
Alexander B. Trowbridge
By: /s/ Anne M. Goggin
------------------
Anne M. Goggin, Esq.
Attorney-in-fact
* Executed by Anne M. Goggin, Esquire on behalf of those indicated pursuant
to powers of attorney filed with the Variable Account's Form S-6
Registration Statement, File No. 333-21767, on February 13, 1997, Pre-
Effective Amendment No. 1 to the Variable Account's Form S-6 Registration
Statement, File No. 333-21767, on July 16, 1997, and the Variable Account's
Form S-6 Registration Statement, File No. 333-46401, on February 17, 1998.
II - 7
<PAGE>
EXHIBIT LIST
SEQUENTIALLY
EXHIBIT NUMBER TITLE NUMBERED PAGE*
- -------------- ----- -------------
1.A.3.(c) Commission Schedule
1.A.5.(a) Specimen of Policy
and Applications
1.A.5(b) Riders to the Policy
3 (i) Opinion of Edward N. Wadsworth, Esq.
(ii) Consent of Edward N. Wadsworth, Esq.
6. (i) Opinion and Consent of Robert
E. Schneider, F.S.A.
(ii) Consent of Sutherland, Asbill &
Brennan LLP
8. Amended and restated election
pursuant to Section 27(g) under
the Investment Company Act of 1940
9. Officers Certificate
10. Notice of Withdrawal Right
13. Consents of Independent Auditors
________________
* Page numbers inserted on manually-signed copy only.
<PAGE>
EXHIBIT 1.A.(3)(C)
COMMISSION SCHEDULE
In general, the following maximum percentages of the premium paid for each
respective policy year will be paid by NEVLICO to the NELESCO agent involved in
the sale of a Policy:
POLICY YEARS MAXIMUM PERCENTAGES
------------ -------------------
1 45 %
2-6 6 %
7-10 3 %
11 and later 1 1/2%
The amount of commissions for extra premiums for a Policy covering an
---------------------------------------------------------------------
insured in a substandard risk classification will be determined by NEVLICO's
- ----------------------------------------------------------------------------
rules and practices current at the time such extra premiums are charged.
- -----------------------------------------------------------------------
Additional commissions are paid based on premiums paid for benefits
purchased by Rider. NEVLICO may recapture up to 50% of the first year
commission paid to the agent if the Policy is not continued after the first
policy anniversary.
Agents with fewer than four years of service with NELESCO may be
compensated differently. Agents who meet certain productivity and persistency
standards with respect to policies sold by NEVLICO and New England Life may be
eligible for additional compensation.
<PAGE>
Exhibit 1.A.5(a)
NEV-2
New England Variable Life Insurance Company
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY Agrees to pay THE DEATH BENEFIT OF
THIS POLICY TO THE BENEFICIARY ON RECEIPT OF PROOF OF THE DEATH OF THE INSURED;
AND to provide THE OTHER RIGHTS AND BENEFITS OF THE POLICY.
These agreements are subject to all the provisions of the Policy.
Signed on the Date of Issue for the Company at its Administrative Office, 501
Boylston Street, Boston, Massachusetts 02117.
John A. Fibiger
/s/
President
Kernan F. King
/s/
Secretary
VARIABLE WHOLE LIFE POLICY
. The Death Benefit is payable at the death of the Insured.
. Premiums are payable to the Company for a specified period.
. Values and benefits are affected by investment performance.
. The Policy does not participate in Dividends.
PLEASE READ YOUR POLICY CAREFULLY
The Death Benefit for the first policy month will be equal to the Face
Amount shown in Section 1. For policy months after the first, the Death Benefit
can increase or decrease, depending on separate investment account performance;
but it will not be less than the Face Amount. See Section 9.
The Cash Value of this Policy can vary from day to day. It can increase or
decrease, depending on separate investment account performance. See Section 8.
<PAGE>
TEN DAY RIGHT TO RETURN THE POLICY
When this Policy is issued, you should examine it. You can return the Policy to
the Company or its Agent for any reason: (a) within 10 days after you receive it
from the Company; or, if later, (b) within 45 days after Part I of the
Application is signed. If you do, the Policy will be cancelled. The Company will
refund an amount equal to any premium paid plus or minus any separate investment
account performance as of the date the returned Policy is received by the
Company or its Agent; except that if required by state or Federal law or
regulation, the Company will refund an amount equal to any premium paid. The
Policy will then be void from the beginning.
<PAGE>
POLICY PROVISIONS ALPHABETICAL GUIDE
<TABLE>
<CAPTION>
Section Section
<S> <C> <C> <C>
1 Policy Schedule 1,3 Age of Insured
2 Table of Values 12 Assignments
3 Contract 4 Automatic Premium Payment
4 Premiums 12 Beneficiary
5 The Variable Account 13 Benefits, Payment of
6 Nonpayment of Premiums 2,8 Cash Value
7 Reinstatement After Lapse 3 Claims of Creditors
8 Cash Value of the Policy 3 Contestable
9 Death Benefit 3 Contract
10 Policy Loans 8 Cost of Insurance
11 Exchange of Policy 1,3 Date of Issue
12 Owner and Beneficiary 1,3 Date, Policy
13 Payment of Benefits 9 Death Benefit
14 Payment Options 11 Exchange of Policy
15 Life Income Tables 2,6 Extended Term Insurance
__ Riders, if any 1 Face Amount
__ Copy of the Application 4 Grace Period
__ Amendments and Endorsements 8 Investment Return
6 Lapse Options
13,14 Life Income Options
15 Life Income Tables
1 Loan Interest Rate
2,10 Loans, Policy
8 Net Cash Value
6 Nonpayment of Premiums
12 Owner
2,6 Paid-Up Insurance
14 Payment Options
3 Periodic Reports
10 Policy Loan Balance
3 Postponement of Payments
4 Premiums
7 Reinstatement
1 Schedule, Policy
5 Sub-Accounts
3 Suicide
8 Surrender of the Policy
2 Values, Table of
5 Variable Account
</TABLE>
<PAGE>
1. POLICY SCHEDULE
Owner and Beneficiary: As named in the Application or as later changed. See
Section 12.
INSURED: JOHN ALDEN AGE AND SEX: 35 MALE
POLICY NUMBER: SPECIMEN POLICY DATE: APRIL 1, 1983
FACE AMOUNT: $25,000 DATE OF ISSUE: APRIL 1, 1983
PLAN: 30 PAYMENT VARIABLE LIFE POLICY LOAN INTEREST RATE: 5%
POLICY CLASS: STANDARD
SCHEDULE OF BENEFITS
30 PAYMENT VARIABLE LIFE $25,000
SCHEDULE OF ANNUAL PREMIUMS
POLICY YEARS TOTAL
FIRST 30 $500.00
TOTAL PREMIUM ON POLICY DATE
ANNUAL SEMI-ANNUAL QUARTERLY
$500.00 $253.20 $127.18
TABLE OF NET ANNUAL PREMIUMS
BEGINNING OF
POLICY YEAR NET PREMIUM
1 $269.62
2 THRU 4 $394.32
5 THRU 30 $414.10
New England Variable Life Insurance Company
Kernan F. King
/s/
Secretary
<PAGE>
2. TABLE OF VALUES
The amounts shown in this Table are not guaranteed. These amounts would accrue
if the Base Investment Return were realized. The actual amounts may be more or
less than the amounts shown here. See Sections 6 and 8.
INSURED: JOHN ALDEN AGE AND SEX: 35 MALE
POLICY NUMBER: SPECIMEN FACE AMOUNT: $25,000
PLAN: 30 PAYMENT VARIABLE LIFE
<TABLE>
<CAPTION>
END OF CASH PAID UP EXTENDED TERM INSURANCE
POLICY VALUE INSURANCE YEARS DAYS
YEAR
<S> <C> <C> <C> <C>
1 216.46 $ 774 3 94
2 568.89 1,969 7 130
3 932.41 3,124 10 157
4 1,306.40 4,237 12 280
5 1,711.38 5,376 14 260
6 2,127.32 6,473 16 94
7 2,554.23 7,531 17 181
8 2,992.41 8,551 18 182
9 3,441.98 9,536 19 114
10 3,903.13 10,486 19 358
11 4,375.88 11,404 20 189
12 4,860.13 12,291 20 349
13 5,355.86 13,149 21 110
14 5,862.95 13,978 21 210
15 6,381.37 14,780 21 291
16 6,911.04 15,557 21 358
17 7,451.98 16,311 22 51
18 8,004.56 17,043 22 105
19 8,568.94 17,755 22 155
20 9,145.46 18,450 22 203
25 AGE 60 12,223.72 21,736 23 152
30 AGE 65 15,709.42 POLICY FULLY PAID-UP
35 AGE 70 17,309.10
</TABLE>
New England Variable Life Insurance Company
Kernan F. King
/s/
Secretary
<PAGE>
3. CONTRACT
THE CONTRACT. This Policy is a legal contract between the Owner of the Policy
(called "you") and New England Variable Life Insurance Company, a Delaware
corporation, (called "the Company"). The Policy, which includes the attached
Application, is the entire contract between you and the Company. All Riders are
listed in Section 1. No change in or waiver of the pro-visions of the Policy is
valid unless the change or waiver is signed by the President or the Secretary of
the Company.
PAYMENTS UNDER THE CONTRACT. All contract amounts are in dollars of the United
States of America. Payments by the Company under the contract will be made at
the Administrative Office of the Company. The obligations of the Company are
subject to all payments made and actions taken by the Company under the Policy
before receipt by the Company at its Administrative Office of proof of death of
the Insured.
DATES. Policy years, months and anniversaries are all measured from the Policy
Date. The contestable and suicide periods start on the Date of Issue. The Policy
Date and the Date of Issue are both shown in Section 1.
NOT CONTESTABLE AFTER TWO YEARS. Insurance is issued by the Company in reliance
on the statements made in the Application for the insurance. Those statements
are representations; they are not warranties. No statement can be used to
contest or rescind insurance or to defend against a claim unless contained in
the Application for the insurance. The insurance issued under this Policy will
not be contestable after it has been in force during the life of the Insured for
two years from the Date of Issue.
SUICIDE WITHIN TWO YEARS. If the Insured dies by suicide within two years from
the Date of Issue, the Death Benefit will be limited to the amount of the
premiums paid less any Policy Loan Balance on the date of death.
AGE OF INSURED. The age of the Insured on the Policy Date and on policy
anniversaries means the age at the nearest birthday of the Insured. Between
anniversaries, age means age on the last anniversary plus elapsed time. If the
age or sex of the Insured has not been correctly stated in the Application, the
values and benefits will be corrected to the amounts which the premiums paid
would have purchased for the correct age and sex.
<PAGE>
CLAIMS OF CREDITORS. The Policy and payments under it will be exempt from the
claims of creditors to the extent allowed by law.
BASIS OF VALUES. Reserves and Cash Values are not less than those based on the
Commissioners 1958 Standard Ordinary Mortality Table. Cost of insurance rates
and net single premiums are guaranteed. They are not greater than those based on
the Commissioners 1958 Standard Ordinary Mortality Table. Curtate monthly
functions are used. Interest is at the effective rate of 4% per year compounded
monthly. Reserves are not less than reserves computed by the Commissioners
Reserve Valuation Method. A detailed statement of the method of computing
values, cost of insurance rates and net single premiums has been filed with the
Insurance Department of the state in which the Policy is delivered. All values
are equal to or are in excess of the minimum values required by and all comply
with the law of that state.
PERIODIC REPORTS. The Company will send you all reports required by law and
regulation. Such reports will be sent once each year or more often if required
by law or regulation. Each report will include, as of the date for which the
report is made: the Death Benefit; the Cash Value; any Policy Loan Balance; and
any other required information. No reports will be sent while the Policy is in
force under a Lapse Option.
EXPENSE AND MORTALITY EXPERIENCE. The Company guarantees that the benefits and
values under this Policy will not be adversely affected by expense and mortality
experience.
POSTPONEMENT OF VARIABLE BENEFITS. The Company can postpone the determination of
and the payment or transfer of amounts based on separate investment account
performance if:
. The New York Stock Exchange is closed for trading; or
. The Securities and Exchange Commission determines that a state of emergency
exists which may make payment or transfer impractical; or
. The NEL Series Fund is permitted under law or regulation to postpone
payment of redemption proceeds.
POSTPONEMENT OF LOANS AND SURRENDER AFTER LAPSE. If the Policy is in force under
the Paid-Up or Extended Term
<PAGE>
Insurance Option, the Company can postpone payment of the Net Cash Value for not
more than six months after surrender. If payment is postponed for more than 30
days it will be credited with interest from the date of surrender. The rate of
interest will be determined each year by the Company; but the rate will not be
less than 3 1/2% per year.
If the Policy is in force under the Paid-Up Insurance Option, the Company can
postpone the making of any Policy Loan for not more than six months from the day
you apply, except Loans to pay premiums on policies issued by the Company.
4. PREMIUMS
PAYMENT. Premiums are your payments to the Company for the Policy. Payments can
be made at the Administrative Office of the Company or at any Agency of the
Company. A receipt for payment signed by the Secretary of the Company will be
furnished on request. The Policy will not be in force until the first premium is
paid.
AMOUNT AND FREQUENCY. Annual premiums for the Policy and for any Riders are
shown in Section 1. Payments can be semi-annual or quarterly or can be at any
other frequency agreed to by the Company. Payment is due in advance on the first
day of each payment period, starting on the Policy Date. Future Cash Values and
Death Benefits can be permanently affected:
. By payment of premiums at a frequency other than annual; and
. By changing the frequency of payment of premiums.
No premium will be due or payable for any period after the death of the Insured.
GRACE PERIOD. There is a grace period of 31 days in which to pay a premium,
without interest, after its due date. The insurance remains in force during the
grace period.
OPTION FOR AUTOMATIC PREMIUM PAYMENT BY POLICY LOANS. If this Option has been
elected in writing, and if a premium is not paid by the end of its grace period,
a premium will be paid automatically to the next quarterly due date by using any
available Loan Value of the Policy. (See Section 10.) If the unpaid premium is
an annual or a semiannual premium, it will be paid in full, if possible. If the
amount available is not sufficient to pay a premium to the next quarterly due
date, no premium will be paid. Loan interest will be charged
<PAGE>
on automatic Policy Loans from the due date of the premium. You can elect or
cancel this Option at any time.
PREMIUM ADJUSTMENT AT DEATH. The pro rata portion of any premium paid for a
period beyond the date of death will be added to the policy proceeds. This
adjustment does not apply to Paid-Up or Extended Term Insurance.
If the Insured dies during the grace period of an unpaid premium, a pro rata
premium to the date of death will be deducted from the policy proceeds.
5. THE VARIABLE ACCOUNT
THE VARIABLE ACCOUNT. The Variable Account (called "the Account") is a separate
investment account established by the Company in accordance with Delaware law.
The assets of the Account are owned by the Company. The assets of the Account
will be used to provide values and benefits under this Policy and similar
Policies; but the Account is not chargeable with liabilities arising out of any
other business the Company may conduct.
SUB-ACCOUNTS. The Account consists of sub-accounts, each of which is invested in
shares of one portfolio of the NEL Series Fund. Shares of a portfolio are
purchased for a sub-account at their net asset value. The Policy's first
investment in the Account is made as of the latest of:
. The Policy Date;
. The date of Part II of the Application; and
. The date the first premium is received by the Company.
Each distribution of income, dividends and capital gains from a portfolio to the
Account will be reinvested for the benefit of the Owners of the Policies at net
asset value in shares of the portfolio which made the distribution.
The Cash Value of the Policy at any time cannot be allocated among more than 10
sub-accounts, except with the consent of the Company.
The values and benefits of the Policy depend on the investment performance of
the portfolios in which the sub-accounts you elect are invested. The Company
does not guarantee the investment performance of the portfolios. You bear the
investment risk for amounts applied to the sub-accounts you elect.
<PAGE>
ELECTION OF SUB-ACCOUNTS. You elect the sub-accounts in which future net
premiums are to be invested. (See Section 1 for net annual premiums.) You can
change the election for future premiums at any time by notice to the Company in
writing. The portion to be applied to each sub-account elected must be a whole
percent not less than 10.
The portfolios as of the Date of Issue are listed in the then current prospectus
for the Account.
CHANGE IN PORTFOLIOS. The Company can add or remove portfolios as sub-account
investments as permitted by law. When a change is made, the Company will send
you: a revised prospectus for the Account which will describe all of the
portfolios then in the NEL Series Fund; and any notice required by law.
When a portfolio is removed, the Company has the right to substitute a different
portfolio in which the sub-account will then invest:
. The value of the removed portfolio; and
. Future net premiums applied to that sub-account.
TRANSFER OPTION. You can transfer all or a portion of the Policy's existing
share in a sub-account to another sub-account. Transfers of existing shares will
be subject to a limit of 2 in each policy year, except with the consent of the
Company.
CHANGE OF INVESTMENT POLICY. The investment policy of the Account will not be
changed unless: (a) the change has been approved by the Insurance Commissioner
of the state of Delaware; and (b) a statement of the approval process has been
filed with the Insurance Department of the state in which this policy is
delivered.
RIGHTS RESERVED BY THE COMPANY. The Company reserves the right to take certain
actions subject to compliance with law and, if required, the approval of the
Owners of the Policies. These actions are: (a) to create new investment
accounts; (b) to combine any two or more separate investment accounts, including
the Account; (c) to invest the assets of the Account other than in the NEL
Series Fund; (d) to operate the Account as a management investment company and
to charge investment advisory fees under the Investment Company Act of 1940 or
in any other form permitted by law; and (e) to deregister the Account under the
Investment Company Act of 1940 if registration is no longer required.
<PAGE>
6. NONPAYMENT OF PREMIUMS
LAPSE OF POLICY. Any premium which is not paid by its due date is in default. If
it remains unpaid at the end of its 31-day grace period and is not paid
automatically under the Option in Section 4, the Policy will lapse. If the
Policy has lapsed, it will not be affected by the investment performance of the
Account.
LAPSE OPTIONS. If the Policy lapses because a premium is not paid, any Net Cash
Value of the Policy will be transferred from the Account to the general account
of the Company and used to continue the Policy in force either as Paid-Up
Insurance or Extended Term Insurance as stated below. Any Riders will lapse
unless otherwise stated in the Rider. Any Policy Loans will terminate when the
Net Cash Value is used for this purpose.
ELECTION OF LAPSE OPTION. If the Policy is in a Standard Policy Class (see
Section 1) the use of the Extended Term Insurance Option at lapse will be
automatic, unless you elect the Paid-Up Insurance Option. You can make or change
your election at any time in writing, but not later than 60 days after the due
date of the premium in default. Regardless of any election:
. If the Net Cash Value will provide an amount of Paid-Up Insurance equal to
or greater than the amount of Extended Term Insurance, the Paid-Up
Insurance Option will be used; and
. If the Insured dies within 60 days after the date of the premium in
default, the Option which will provide the greater death benefit will be
used.
If the Policy is not in a Standard Policy Class, only the Paid-Up Insurance
Option is available.
PAID-UP INSURANCE OPTION. Paid-Up Insurance is permanent life insurance for a
level amount with no further premiums due. It has increasing Cash Values and
Loan Values. The amount of Paid-Up Insurance is payable at the death of the
Insured.
Paid-Up Insurance will be provided by using the Net Cash Value of the Policy as
a net single premium at the age of the Insured on the due date of the premium in
default. The Table of Values (Section 2) shows samples of the amount of Paid-Up
Insurance which the Cash Value could provide.
<PAGE>
EXTENDED TERM INSURANCE OPTION. (Available only if the Policy is in a Standard
Policy Class.) Extended Term Insurance is life insurance for a level amount for
a limited term with no further premiums due. It has Cash Values, but no Loan
Value. The Amount of Extended Term Insurance is payable only if the Insured dies
prior to the end of the term.
Extended Term Insurance will be provided by using the Net Cash Value of the
Policy as a net single premium at the age of the Insured on the due date of the
premium in default. The amount of Extended Term Insurance will equal the Death
Benefit of the Policy on the due date of the premium in default. The Table of
Values (Section 2) shows samples of the length of the term which the Cash Value
could provide.
7. Reinstatement After Lapse
REINSTATEMENT. The Policy and Riders can be reinstated at any time. (See
Limitations on Reinstatement below.) Reinstatement will be subject to:
. Application to reinstate; and
. Proof that the Insured is then insurable if reinstatement is applied for
more than 31 days after the end of the grace period of the premium in
default; and
. Payment, while the Insured is living, of the cost to reinstate; and
. Payment or reinstatement of any Policy Loan Balance on the due date of the
premium in default, plus interest from that date to the date of
reinstatement of the Policy at the rate of 5% per year compounded yearly.
The cost to reinstate is the greater of: (a) each unpaid premium plus interest
at the rate of 5% per year compounded yearly; and (b) 110% of any increase in
the Cash Value as the result of the reinstatement plus each unpaid Rider premium
with interest at the rate of 5% per year compounded yearly.
If Extended Term Insurance is in force under Section 6, and there are at least
five years of the term left, proof of insurability will not be required to
reinstate the Face Amount of the Policy; but it may be required to reinstate
Riders.
<PAGE>
Policy Loans may have been made while the Policy is in force as Paid-Up
Insurance. (See Section 6.) If the Loans are not repaid, they will continue in
force after the Policy is reinstated.
LIMITATIONS ON REINSTATEMENT. The Policy and Riders cannot be reinstated, except
with the consent of the Company:
. If more than seven years have passed since the due date of the premium in
default; or
. If the Policy has been surrendered for its Net Cash Value. (See Section 8.)
Any Rider which provides life or disability insurance on a person other than the
Insured can be reinstated only as stated in the Rider.
8. Cash Value of the Policy
SURRENDER OF THE POLICY. You can surrender the Policy for its Net Cash Value at
any time by notice to the Company in writing. Upon surrender, the Policy will
terminate. The Net Cash Value will be paid to you in one sum, unless you elect
in writing to apply all or part of the Value to any Payment Option. (See Payment
of Benefits, Section 13.)
NET CASH VALUE. The Net Cash Value of the Policy is equal to:
. The Cash Value of the Policy;
LESS
. Any Policy Loan Balance.
CASH VALUE. The Cash Value of the Policy if all premiums due have been paid is
equal to the total of the Policy's share of the elected sub-accounts and the
amount of any assets transferred to the general investment account of the
Company because of Policy Loans. (See Section 10.) The amount of the Cash Value
depends on: the frequency and amount of net premiums; investment performance;
cost of insurance charges; transfers among sub-accounts; and Policy Loans. The
Cash Value can increase or decrease on a daily basis, depending on the
investment performance of the elected sub-accounts. (See Actual Investment
Return below.)
<PAGE>
For 60 days after the due date of a premium in default, the Cash Value will not
be less than the Cash Value on the due date plus or minus the Actual Investment
Return from the due date to the date of the calculation.
If the Policy is in force under the Paid-Up Insurance Option or the Extended
Term Insurance Option, the Cash Value of the Policy on any date is equal to the
net single premium which would be required to provide the insurance at the age
of the Insured on that date. For 31 days after each policy anniversary, the Cash
Value will not be less than on the anniversary.
The Cash Value of the Policy is not increased by the Cash Value of any Rider,
unless stated in the Rider.
COST OF INSURANCE. The cost of insurance is deducted from the Cash Value:
. On the last day of each policy month; and
. On the date the Policy is surrendered if it is other than the last day of
the policy month.
The cost of insurance will be deducted in the same proportion as the Policy is
invested in the sub-accounts.
The cost of insurance depends on the difference between the Death Benefit and
the Cash Value on the last day of the month and on the cost of insurance rate at
the time of the deduction. The cost is pro rated for surrender during a policy
month.
Cost of insurance rates are based on age, sex and under-writing class. The rates
vary monthly. Rates will be quoted by the Company on request.
If a Policy Loan Balance exists and the Net Cash Value is not enough to cover
the cost of insurance, the difference will be treated in the same manner as an
excess Policy Loan. (See Section 10.)
TABLE OF CASH VALUES. The Table of Cash Values (Section 2) shows samples of the
Cash Value of the Policy at various dates, assuming:
. That an annual premium has been paid on the first day of each policy year;
and
<PAGE>
. That the Actual Investment Return is equal to the Base Investment Return;
and
. That there is no Policy Loan Balance.
Values at other dates and for premium frequencies other than annual will be
quoted by the Company on request.
BASE INVESTMENT RETURN. The Policy has a Base Investment Return for each elected
sub-account for each Valuation Period. The Policy's Base Investment Return is
the amount which would be earned by the Policy's share of the sub-account if its
investment performance was at a rate equivalent to 4% per year compounded
monthly.
ACTUAL INVESTMENT RETURN. The Policy's Actual Investment Return for each sub-
account for each Valuation Period is equal to (a) minus (b) minus (c); where:
. (a) is equal to the Policy's share of the sub-account as of the end of the
Valuation Period;
PLUS
. the Policy's share of all dividend and capital gains distributions made to
the sub-account if the ex-dividend date occurs during that Valuation
Period;
PLUS
. The interest credited during the Valuation Period to any borrowed portion
of the Policy's Cash Value;
PLUS or MINUS
. a charge or credit for Policy's share of any reserve for taxes which the
Company determines to apply to the sub-account; and
. (b) is equal to the Policy's share of the sub-account for the most recent
Valuation Period;
PLUS or MINUS
. a charge or credit for the Policy's share of any reserve for taxes which
the Company determines to apply to the sub-account; and
. (c) is a charge for the mortality risk and the expense risk assumed by the
Company which is equal to .00000957 times (a) times the number of days in
that Valuation Period.
<PAGE>
VALUATION PERIODS AND VALUATION DATES. A Valuation Period for each sub-account
is a period:
. Which starts on a Valuation Date; and
. Which ends on the next succeeding Valuation Date.
Each day the New York Stock Exchange is open for trading is a Valuation Date.
9. DEATH BENEFIT
DEATH BENEFIT. The Death Benefit will be equal to:
. The greater of the Variable Death Benefit and the Guaranteed Minimum Death
Benefit;
LESS
. Any Policy Loan Balance.
GUARANTEED MINIMUM DEATH BENEFIT. The Guaranteed Minimum Death Benefit is equal
to the Face Amount shown in Section 1, regardless of the investment performance
of the sub-accounts, if all premiums due have been paid.
VARIABLE DEATH BENEFIT. The Variable Death Benefit for the first policy month is
equal to the Face Amount. The Variable Death Benefit for each later policy month
is adjusted on the first day of that policy month. For each policy month after
the first, the Variable Death Benefit:
. Will increase if the Actual Investment Return plus any cost of insurance
adjustment is greater than the Base Investment Return;
. Will remain the same if the Actual Investment Return plus any cost of
insurance adjustment is equal to the Base Investment Return; and
. Will decrease if the Actual Investment Return plus any cost of insurance
adjustment is less than the Base Investment Return.
The Amount by which the Variable Death Benefit will change each policy month is
equal to:
. The dollar amount by which the Policy's Actual Investment Return plus any
cost of insurance adjustment is greater or less than its Base Investment
Return;
<PAGE>
DIVIDED BY
. The Net Single Premium per $1.00 of Variable Death Benefit at the age of
the Insured on the first day of the policy month.
The cost of insurance adjustment, if any, to be added to the Actual Investment
Return to compute the Variable Death Benefit is equal to the difference between
the cost of insurance for this Policy's underwriting class and the cost of
insurance for a standard underwriting class; and, if the Insured is female, the
difference between the cost of insurance for a female and a male of the same
age.
10. POLICY LOANS
POLICY LOANS. You can borrow all or part of the Loan Value of the Policy from
time to time by written application to the Company; except that during the first
policy year, the consent of the Company is required. Policy Loans are made on
the sole security of the Policy. The amount available to be borrowed at any time
is equal to the Loan Value less any Policy Loan Balance at that time. Policy
Loans may be charged automatically against the Policy to pay premiums. (See
Option for Automatic Premium Payment in Section 4.) Policy Loans will reduce the
Policy's share of the sub-accounts proportionately, unless you request
otherwise. Assets equal to the amount of the Loan:
. Will be transferred to the general investment account of the Company; and
. Will earn interest at the effective rate of 4% per year compounded monthly.
Policy Loans, whether or not repaid, can have a permanent effect on Cash Values
and Death Benefits.
LOAN VALUE. The Loan Value of the Policy is the amount which with loan interest
will equal 90% of the Cash Value of the Policy projected with interest at a rate
equivalent to 4% per year compounded monthly to the next loan interest due date
or, if earlier, to the next premium due date.
If the Policy is in force under the Paid-Up Insurance Option, the Loan Value is
the amount which with loan interest will equal the Cash Value of the Policy on
the next loan interest due date. The Policy has no Loan Value while it is in
force as Extended Term Insurance. (See Section 6.)
<PAGE>
INTEREST ON LOANS; POLICY LOAN BALANCE. Policy Loans bear interest as shown in
Section 1. Interest accrues daily. The Policy Loan Balance at any time means
Policy Loans outstanding plus interest accrued to date. Loan interest is due
each year on the premium anniversary date. Loan interest not paid when due will
be added to the Loan and will bear interest.
REPAYMENT OF LOANS. Policy Loans may be repaid to the Company at any time in
whole or part. Loan repayments will be allocated in the same proportion as the
Policy is invested in the sub-accounts, unless you request otherwise. A Policy
Loan is a charge against the Policy. The proceeds of the Policy will be reduced
by any Policy Loan Balance on the date of death of the Insured. If the Policy
Loan Balance at any time exceeds the Cash Value of the Policy, the Company will
mail a notice to you and to any assignee. The notice will be mailed to the
addresses on record with the Company. If the excess amount is not paid to the
Company within 31 days after mailing of the notice, the Policy will lapse
without value.
11. EXCHANGE OF POLICY
EXCHANGE OF POLICY. Within 24 months after its Date of Issue, you can exchange
this Policy, if all premiums due have been paid, for a policy which provides
fixed benefit insurance. The new policy will be issued:
. By New England Mutual Life Insurance Company (called "New England Life");
. On any plan of Whole Life or Endowment insurance with a level face amount
issued by New England Life on the Policy Date;
. With the same Insured, Age, Policy Date, Face Amount and underwriting class
as this Policy;
. Subject to any cost or credit and the repayment of any Policy Loan Balance;
and
. Subject to any assignments of this Policy, and limitations on this Policy
stated in Riders.
Benefits provided by Rider will be available on the new policy only with the
consent of New England Life.
<PAGE>
CHANGE COST OR CREDIT. Any change cost or credit will be quoted by the Company
on request.
12. OWNER AND BENEFICIARY
OWNER. The Owner of the Policy is named in the Application. (See copy attached.)
However, the Owner can be changed from time to time. The new Owner will succeed
to all of the rights of the Owner, including the right to make a further change
of Owner. At the death of the Owner, his or her estate will be the Owner, unless
a successor Owner has been named. In this Policy "you" means the Owner, whether
the Owner is an individual, a partnership, a corporation, a fiduciary or any
other legal entity. The rights of the Owner will terminate at the death of the
Insured, except for Payment of Benefits. (See Section 13.)
BENEFICIARY. The Beneficiary is named in the Application. (See copy attached.)
However, the Beneficiary can be changed from time to time before the death of
the Insured. The Beneficiary has no rights in the Policy until the death of the
Insured. An individual must survive the Insured to qualify as Beneficiary. If
none survives, the proceeds will be paid to the Owner. The Beneficiary can also
be a corporation, a partnership, a fiduciary or any other legal entity.
CHANGE OF OWNER OR BENEFICIARY. A change of Owner or Beneficiary must be in
written form satisfactory to the Company, and must be dated and signed by the
Owner who is making the change. The change will be subject to all payments made
and actions taken by the Company under the Policy before the signed change form
is received by the Company at its Administrative Office.
ASSIGNMENTS. An absolute assignment of the Policy by the Owner is a change of
Owner and Beneficiary to the assignee. A collateral assignment of the Policy by
the Owner is not a change of 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 the Company before a signed copy of the
assignment form is received by the Company at its Administrative Office. The
Company will not be responsible for determining whether or not an assignment is
valid.
DESIGNATION OF OWNER AND BENEFICIARY. A numbered sequence can be used to name
successive Owners or Beneficiaries. Co-Beneficiaries will receive equal shares
unless otherwise stated.
<PAGE>
In naming Owners or Beneficiaries, unless otherwise stated:
. "Child" includes an adopted or posthumous child;
. "Provision for issue" means that if a Beneficiary does not survive the
Insured, the share of that Beneficiary will be taken by his or her living
issue by right of representation; and
. A family relation such as "wife," "husband;' or "child" means the relation
to the Insured.
At the time for payment of benefits the Company can rely on an affidavit of any
Owner or other responsible person to determine family relations or members of a
class.
13. PAYMENT OF BENEFITS
PAYMENT. The policy proceeds will be paid in one sum, unless you elect to apply
all or part of the proceeds to any Payment Option. (See Section 14.) The Company
will pay interest on the proceeds from the date they become payable to the date
of payment in one sum, or to the Option Date. The rate of interest will be
determined each year by the Company; but the rate will not be less than 3 1/2%
per year.
ELECTION OF PAYMENT OPTIONS; OPTION DATE. The election of a Payment Option and
the naming of the Payee must be in written form satisfactory to the Company. You
can make or change or revoke the election from time to time before the death of
the Insured. The Option Date is the effective date of the Payment Option, as
stated in the election.
PAYEE. A Payee is any individual, corporation, partnership, fiduciary or any
other legal entity entitled to receive payment in one sum or under a Payment
Option.
ELECTION BY PAYEES. Any proceeds payable in one sum at the death of the Insured,
or upon surrender of the Policy, can be applied to any Payment Option at the
election of the Payee. Further, subject to the consent of the Company, any Payee
who is entitled to receive proceeds in one sum at the expiration of a Payment
Option, or at the death of a prior Payee, or upon withdrawal of the proceeds,
can elect to apply the proceeds to a Payment Option.
RIGHTS OF PAYEES. In the election of a Payment Option the right can be given to
the Payee:
<PAGE>
. To withdraw principal and interest under the Fourth or Fifth Option; or
. To withdraw the commuted value of payments certain under the First, Second,
or Sixth Option.
Payments under the Life Income Options cannot be commuted, except for payments
certain. No Payee can assign, anticipate, commute or withdraw the payments under
any Payment Option, unless the right is reserved in the election of the Option.
LIMITATIONS. Amounts less than $2,000 can be applied to a Payment Option only
with the consent of the Company. If installments under an Option are less than
$20, the Company can change the interval of payment to 3 or 6 or 12 months in
order to increase each payment to at least $20.
LIFE INCOME OPTIONS. Life Income Options are based on the sex of the Payee and
the age of the Payee on the Payee's birthday nearest the Option Date. The
Company will require proof of age. The Life Income payments will be based on the
nonparticipating rates shown in the Life Income Tables (Section 15), or on the
nonparticipating Payment Option rates of the Company on the Option Date,
whichever rates are more favorable to the Payee.
PURCHASE OF INCREASED LIFE INCOME BENEFITS. On the Option Date a one sum
purchase payment can be made to the Company to add to the proceeds being applied
to any Life Income Option. The portion of Life Income payments purchased in this
way will be based on the nonparticipating Payment Option rates of the Company on
the Option Date, which may not be the rates shown in the Life Income Tables
(Section 15). The purchase payment will be limited to the Company's published
maximum for single premium immediate annuities on the Option Date. A portion of
the purchase payment may be used by the Company to pay premium taxes on the
purchase payment.
DEATH OF PAYEE. Amounts to be paid after the death of a Payee under a Payment
Option will be paid as due to the surviving or next succeeding Payee. If no
Payee survives, amounts to be paid in one sum, or the commuted value of any
unpaid payments certain, will be paid in one sum to the estate of the last Payee
to die. If a Payee under a Life Income Option dies within 30 days after the
Option Date, the amount applied to the Option, less any payments made, will be
paid in one sum, unless a Payment Option is elected.
<PAGE>
COMMUTATION RATE. The interest rate used to compute the commuted value of any
unpaid payments certain:
. Under the First Option will be 3 1/2% per year; and
. Under the Life Income Options will be the rate used by the Company in
computing the amount of the monthly payments.
14. PAYMENT OPTIONS
PAYMENT OPTIONS. You can elect to have all or part of the policy proceeds
applied to provide payments under any one of the following Options, subject to
Section 13, Payment of Benefits:
FIRST OPTION: INCOME FOR A SPECIFIED NUMBER OF YEARS.
The Company will make equal monthly payments which will include both principal
and interest. Payments will begin on the Option Date and will continue for the
number of years elected, which may not be more than 30. Interest is at the rate
of 3 1/2% per year compounded yearly. Additional interest paid by the Company
for any year will be added to the monthly payments for that year.
Guaranteed monthly payments per $1,000 of proceeds applied to the First Option
are shown below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number Number Number
of Years of Years of Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $84.65 11 $9.09 21 $5.56
2 43.05 12 8.46 22 5.39
3 29.19 13 7.94 23 5.24
4 22.27 14 7.49 24 5.09
5 18.12 15 7.10 25 4.96
6 15.35 16 6.76 26 4.84
7 13.38 17 6.47 27 4.73
8 11.90 18 6.20 28 4.63
9 10.75 19 5.97 29 4.53
10 9.83 20 5.75 30 4.45
</TABLE>
SECOND OPTION: LIFE INCOME. The Company will make equal monthly payments.
Payments will begin on the Option Date and will continue:
<PAGE>
. During the life of the Payee, with no further payment after the death of
the Payee, called "Life Income, No Refund"; or
. During the life of the Payee, but for at least 10 years, called "Life
Income, 10 Years Certain"; or
. During the life of the Payee, but for at least 20 years, called "Life
Income, 20 Years Certain."
THIRD OPTION: LIFE INCOME WITH REFUND. The Company will make equal monthly
payments. Payments will begin on the Option Date and will continue during the
life of the Payee. At the death of the Payee, if the total of the payments made
is less than the total proceeds applied to the Option, then:
. The difference will be paid in one sum, called "Life Income, Cash Refund";
or
. The equal monthly payments will continue until the total payments are equal
to the total proceeds applied to the Option, called "Life Income,
Installment Refund."
FOURTH OPTION: INTEREST. The Company will hold the proceeds at interest during
the life of the Payee or for any other period agreed to by the Company. Interest
on the proceeds:
. Will be paid each month to the Payee beginning one month after the Option
Date; or
. Will be added to the principal amount each year and earn interest.
At the death of the Payee, or at the end of the period agreed to, the balance of
principal and any accrued interest will be paid in one sum. The rate of interest
will be determined each year by the Company; but will not be less than 3 1/2%
per year.
FIFTH OPTION: SPECIFIED AMOUNT OF INCOME. The Company will make equal monthly
payments which will include both principal and interest. Payments will be in the
amount elected. Payments may be quarterly or at any other frequency elected, and
payments may be in variable amounts, all subject to the consent of the Company.
Payments will continue until the balance is fully paid out. At the death of the
Payee any unpaid balance and accrued interest will be paid in one sum. The rate
of interest will be determined
<PAGE>
each year by the Company; but the rate will not be less than 3 1/2% per year.
Interest will be added each year to the principal and will earn interest.
SIXTH OPTION: LIFE INCOME FOR TWO LIVES. The Company will make equal monthly
payments. Payments will begin on the Option Date and will continue:
. While either of two Payees is living, called "Joint and Survivor Life
Income"; or
. While either of two Payees is living, but for at least 10 years, called
"Joint and Survivor Life Income, 10 Years Certain"; or
. While two Payees are living, and after the death of one Payee, two-thirds
of the monthly amount while the other Payee is living, called "Joint and
2/3 to Survivor Life Income."
15. LIFE INCOME TABLES
LIFE INCOME TABLES. Guaranteed monthly payments per $1,000 of proceeds applied
to the Life Income Options are shown below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SECOND AND THIRD OPTIONS: LIFE INCOME
- -------------------------------------------------------------------------------------------------------
Age of Payee 10 YEARS 20 YEARS CASH INSTALLMENT
Male Female NO REFUND CERTAIN CERTAIN REFUND REFUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15* 20* $3.27 $3.26 $3.25 $3.23 $3.24
16 21 3.29 3.28 3.27 3.25 3.26
17 22 3.30 3.29 3.28 3.26 3.27
18 23 3.32 3.31 3.30 3.28 3.29
19 24 3.34 3.33 3.32 3.30 3.31
20 25 3.36 3.35 3.34 3.32 3.33
21 26 3.38 3.37 3.36 3.34 3.35
22 27 3.40 3.39 3.38 3.36 3.37
23 28 3.42 3.41 3.40 3.38 3.39
24 29 3.44 3.43 3.42 3.40 3.41
25 30 3.46 3.45 3.44 3.42 3.43
26 31 3.49 3.48 3.47 3.45 3.46
27 32 3.51 3.50 3.49 3.47 3.48
28 33 3.54 3.53 3.52 3.50 3.51
29 34 3.57 3.56 3.55 3.53 3.54
30 35 3.60 3.59 3.58 3.56 3.57
31 36 3.63 3.62 3.61 3.59 3.60
32 37 3.66 3.65 3.64 3.62 3.63
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
33 38 3.69 3.68 3.67 3.65 3.66
34 39 3.73 3.72 3.70 3.68 3.69
35 40 3.76 3.75 3.73 3.71 3.72
36 41 3.80 3.79 3.77 3.75 3.76
37 42 3.85 3.84 3.81 3.79 3.80
38 43 3.89 3.88 3.84 3.82 3.83
39 44 3.93 3.92 3.88 3.86 3.87
40 45 3.98 3.97 3.93 3.90 3.92
41 46 4.03 4.02 3.97 3.95 3.96
42 47 4.09 4.07 4.01 3.99 4.01
43 48 4.14 4.13 4.06 4.04 4.06
44 49 4.20 4.18 4.11 4.09 4.11
45 50 4.17 4.24 4.16 4.14 4.16
46 51 4.33 4.30 4.21 4.19 4.21
47 52 4.40 4.37 4.27 4.25 4.27
48 53 4.47 4.44 4.32 4.30 4.33
49 54 4.55 4.51 4.38 4.37 4.40
50 55 4.63 4.59 4.44 4.43 4.46
51 56 4.72 4.66 4.50 4.50 4.53
52 57 4.81 4.75 4.56 4.57 4.61
53 58 4.90 4.84 4.63 4.65 4.69
54 59 5.00 4.93 4.69 4.72 4.77
55 60 5.11 5.03 4.76 4.81 4.86
56 61 5.22 5.13 4.83 4.90 4.95
57 62 5.35 5.24 4.90 4.99 5.04
58 63 5.48 5.35 4.97 5.09 5.15
59 64 5.62 5.47 5.04 5.19 5.25
60 65 5.76 5.60 5.11 5.30 5.37
61 66 5.92 5.74 5.18 5.42 5.49
62 67 6.10 5.88 5.25 5.54 5.62
63 68 6.28 6.03 5.31 5.68 5.76
64 69 6.48 6.19 5.37 5.81 5.91
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Age of Payee 10 YEARS 20 YEARS CASH INSTALLMENT
Male Female NO REFUND CERTAIN CERTAIN REFUND REFUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
65 70 $ 6.70 $6.36 $5.43 $ 5.97 $ 6.06
66 71 6.93 6.53 5.48 6.12 6.23
67 72 7.19 6.72 5.52 6.29 6.41
68 73 7.46 6.91 5.57 6.47 6.59
69 74 7.76 7.10 5.60 6.65 6.79
70 75 8.08 7.30 5.63 6.85 7.01
71 76 8.44 7.51 5.66 7.07 7.23
72 77 8.83 7.72 5.68 7.29 7.48
73 78 9.26 7.92 5.70 7.53 7.74
74 79 9.72 8.12 5.71 7.80 8.01
75 80 10.23 8.32 5.72 8.06 8.31
76 81 10.79 8.51 5.72 8.37 8.62
77 82 11.40 8.69 5.72 8.65 8.95
78 83 12.06 8.85 5.72 8.96 9.31
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
79 84 12.78 9.00 5.73 9.34 9.68
80 85+ 13.56 9.14 5.73 9.67 10.07
81 14.39 9.26 5.73 10.02 10.49
82 15.28 9.36 5.73 10.41 10.92
83 16.23 9.44 5.73 10.85 11.37
84 17.25 9.52 5.73 11.25 11.86
85+ 18.33 9.58 5.73 11.67 12.33
- -------------------------------------------------------------------------------------------------------
*and under +and over
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SIXTH OPTION: LIFE INCOME FOR TWO LIVES
- -------------------------------------------------------------------------------------------------------
Age of one Payee Age of Other Payee (Male)
(Female)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 60 65 70 75
- -------------------------------------------------------------------------------------------------------
</TABLE>
Joint and Survivor
<TABLE>
<S> <C> <C> <C> <C> <C>
55 4.25 $4.36 $4.45 $4.52 $4.57
60 4.45 4.63 4.78 4.90 4.99
65 4.63 4.90 5.16 5.37 5.53
70 4.78 5.16 5.55 5.92 6.22
75 4.90 5.37 5.92 6.50 7.05
80 4.99 5.53 6.22 7.05 7.94
</TABLE>
- --------------------------------------------------------------------------------
Joint and Survivor, 10 Years Certain
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
55 $4.24 $4.35 $4.44 $4.51 $4.55
60 4.44 4.62 4.77 4.89 4.96
65 4.62 4.89 5.14 5.34 5.48
70 4.77 5.14 5.52 5.86 6.12
75 4.89 5.34 5.86 6.39 6.84
80 4.96 5.48 6.12 6.84 7.51
</TABLE>
- --------------------------------------------------------------------------------
Joint and 2/3 to Survivor
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
55 $4.63 $4.85 $5.09 $5.35 $5.63
60 4.87 5.13 5.42 5.73 6.08
65 5.13 5.44 5.81 6.21 6.64
70 5.42 5.81 6.17 6.79 7.36
75 5.73 6.21 6.79 7.48 8.26
80 6.08 6.64 7.36 8.26 9.34
</TABLE>
- --------------------------------------------------------------------------------
Payments for other ages or for 2 females or 2 males will be quoted by the
Company on request.
<PAGE>
VARIABLE WHOLE LIFE POLICY
. The Death Benefit is payable at the death of the Insured.
. Premiums are payable to the Company for a Specified period.
. Values and benefits are affected by investment performance.
. The Policy does not participate in Dividends.
Please notify the Company of any change in your name or address. The Company
will communicate with you at your address on record with the Company.
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
ADMINISTRATIVE OFFICE:
501 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02117
<PAGE>
- ------------------------------------------------------------
Amendments and Endorsements (To be made only by the Company)
<PAGE>
Exhibit 1.A.5(a)
NEV APP 1-83
NEW ENGLAND VARIABLE
For Company Use Only
No___________________
PART I - APPLICATION TO THE
New England Variable Life INSURANCE COMPANY
for INSURANCE ON THE PROPOSED INSURED
Questions below pertain to Proposed Insured unless otherwise indicated.
1. Address (Include street and number, city, state and zip code)
a. Residence
---------
b. Business
--------
2. Premium Notice Address - Proposed Insured
___ at 1 .a. ____ at 1 .b.
___ Other than Proposed Insured (Give Name and Address)
________________________________________________________________________________
(Street) (City) (State) (Zip Code)
3. Social Security or Employer Identification Number
Proposed
Insured
- ---------------------------------
First Owner
- ---------------------------------
4. Birthplace
------------------------------------
(City) (State or Country)
5. Citizen of
-------------------------------------
6. Marital Status
___ Married ___ Single
___ Divorced ___ Widowed ___ Separated
7. Birthdate
-------------------------------------
(mo/day/yr)
8. Age (Nearest Birthday)
--------------------------------------
9. Sex ___ Male ____ Female
<PAGE>
10. a. Occupation
-------------------------------------------------------
b. Principal Duties
-------------------------------------------------------
c. Other Duties
-------------------------------------------------------
11. a. Employer
-------------------------------------------------------
b. Nature of Business
-------------------------------------------------------
12. a. Annual income after business expenses and before income taxes:
(Answer every item)
Earned income: $ Other income:$
------------------- --------------------
(Describe in 25)
b. Net worth: $
------------------------
13. Life Insurance (Personal, Business and Group) in Force (If none, so state)
<TABLE>
<CAPTION>
Company Year of Issue Amount ADB
<S> <C> <C> <C>
- ------------------------------------- --------------- -------------- ---------------
- ------------------------------------- --------------- -------------- ---------------
- ------------------------------------- --------------- -------------- ---------------
(Put "B" to the left of any business insurance listed)
</TABLE>
14. Disability Insurance (Personal, Business and Group) in Force (If none, so
state)
<TABLE>
<CAPTION>
Accident Death
Company Year of Issue Monthly Income Benefit Period Benefit
<S> <C> <C> <C> <C>
- ------------------------------------- --------------- -------------- --------------- ---------------
- ------------------------------------- --------------- -------------- --------------- ---------------
- ------------------------------------- --------------- -------------- --------------- ---------------
(Put "B" to the left of any business insurance listed)
</TABLE>
15. Any other negotiations for life, disability or accidental death insurance
pending or contemplated? ____ Yes ___No
(If "Yes", see 23)
16. Any insurance or annuity in this or any other company which has been or
will be replaced as a result of this application for insurance? (If "Yes',
complete required replacement forms; list company, policy number & amounts
in 23)
___ Yes ____ No
<PAGE>
17. Any intent to travel or reside outside USA? ___ Yes ___ No
(If "Yes", see 23)
18. Any flights made as a trainee, pilot or crew member within 3 years, or any
intent to learn to fly? ___ Yes ___ No
(If YES, complete Aviation Questionnaire)
19. Any participation within the past 3 years or intent to participate in: any
flights as a trainee, pilot or crew member; SCUBA diving; sky diving; hang
gliding; or motor racing? (If "Yes", complete applicable Questionnaire
___Yes ___ No
20. Any suspension or revocation of driver's license within past 2 years? ___
___ Yes ___ No (If "Yes" see 23)
21. a. Any cigarette smoking in past year? ____ Yes ___No
(If YES, state number of cigarettes per day_____)
22. Any treatment for or consultation with a physician concerning a heart
attack, a stroke or cancer (other than skin cancer) within past 2 years?
____ Yes ___No
23. Any change in health or any treatment by or consultation with a physician
since the date of Part II of this Application? (Answer only if Part II is
dated prior to Part I. If "Yes'; see 23)
____ Yes ___No
24. Is Proposed Insured currently employed less than full time? ____ Yes ___No
25. Explain "Yes" answers (Attach memo if more space needed)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
26. Plan of Insurance
-----------------
Riders (Complete any additional application needed)
___ Waiver of Premiums
___ Acc. Death Ben. $
------------------
___ Purchase Option $
------------------
___ Level Term $
------------------
27. Indicate any special request (Attach memo if more space needed)
28. Beneficiary (Include relation to Proposed Insured) Continued on
Reverse Side
<PAGE>
(1) Primary (2) Secondary
- --------------------------- --------------------------------------------------
29. Is Proposed Insured to own the policy? ____ Yes ___No
(If "No" name the Owner (Include relation to Proposed Insured) (Note: a
numbered sequence may be used to name successive Owners)
- --------------------------------------------------------------------------------
30. Premium Mode
___ Annual ___ Semi-Annual ___ Quarterly
___ Other (see 28)
31. If available under policy applied for, are premiums in default to be paid
automatically by policy loan?
____ Yes ___No
32. If available under policy applied for, are premiums in default to be paid
automtcially by policy loan?
____ Yes ___No
33. Prepayment $ ____ None (If Question 22 or 23 is answered
-
"Yes", no prepayment is permitted)
34. Account Allocation (whole %) (Minimum 10% in each selected account)
___% Capital Growth
___% Money Market
___% Bond Income
100% Total
35. Suitability Statement by Applicant
a. Did you receive the prospectus? ____ Yes ___No
(If "Yes", give date of prospectus)__________
b. Do you understand that
- the death benefit may increase or decrease depending on the
policy's investment return, but will never be less than the
guaranteed minimum? ____ Yes ___No
- the cash value may increase or decrease depending on the
investment return? ____ Yes ___No
c. Do you believe that this policy will meet insurance needs & financial
objectives? ____ Yes ___No
Administrative Office Use: Additions and Amendments
General To the best of my knowledge and belief, the answers recorded are true
and complete. In those states where written consent is required by law, my
agreement in writing is required to any entry made by the Company in "Additions
and Amendments" as to: (a) age; or (b) plan of insurance; or (c) riders; or (d)
amounts; or (e) rate class.
<PAGE>
When Insurance Takes Effect. If a prepayment is made in connection with this
Application, the Insurance will take effect as stated in the Prepayment Receipt
and Temporary Life Insurance Agreement. Otherwise, the insurance will take
effect only when the first premium is paid; provided that at the time of such
payment: (a) this Application has been approved by the Company at its
Administrative Office; and (b) there has been no change in insurability as
represented in this Application since the date of the Application.
Limitation on Authority of Agents and Examiners. Agents and Examiners do not
have authority: (a) to determine insurability; or (b) to change any terms of
this Application; or (c) to make a contract for the Company.
Signed at (City and State) Date 19
---------------------------- ----------- ------
- -------------------- ----------------------------- -------------------------
Agent Proposed Insured Applicant if other than
Proposed Insured
<PAGE>
NEV-284-88
ENDORSEMENT
As of the Endorsement Date the following changes are made:
"THE FIXED ACCOUNT. The Fixed Account is a segmented fund within the general
account of the Company.
If you elect the Fixed Account, the first date on which money is applied to
the Fixed Account for the Policy is the latest of:
. The Policy Date;
. The date of Part II of the Application;
. The date the first premium is received by the Company; and
. The effective date of the election of the Fixed Account.
Each future net premium allocated to the Fixed Account will be applied as of its
due date. Each transfer to the Fixed Account will be applied as of the transfer
date.
FIXED ACCOUNT INTEREST. The rate of interest for each amount applied to the
Fixed Account will be the rate set by the Company in advance for the date the
amount is applied to the Fixed Account; and will not be less than a rate
equivalent to an annual effective rate of 4%. The effective interest rate used
on your Policy will be the weighted average of all such rates for your Policy.
Each year, on the policy anniversary, the Company will determine a portion,
if any, of the Policy's share of the Fixed Account which will be reinvested at
the rate effective on that date.
Interest will be credited to the Fixed Account on a daily basis.
RESTRICTION OF NEW AMOUNTS APPLIED TO THE FIXED ACCOUNT. The Company reserves
the right to restrict new amounts applied to the Fixed Account if the rate of
interest that would be used for the new amount is a rate equivalent to an annual
effective rate of 4%.
<PAGE>
TRANSFERS OUT OF THE FIXED ACCOUNT. You can transfer a limited portion of the
Policy's share of the Fixed Account to the sub-accounts once within 30 days
before each policy anniversary. The transfer will be limited to the greater of:
15% of the Policy's share of the Fixed Account; and the amount of the Policy's
share of the Fixed Account transferred to the sub-accounts the prior year.
ELECTION OF THE FIXED ACCOUNT. You can elect to have future net premiums applied
to the Fixed Account. (See Section 1 for net annual premiums.) You can change
the election for future net premiums at any time by notice to the Company in
writing. (See the Restriction of New Amounts Applied to the Fixed Account
provision.) The portion to be applied to the Fixed Account must be a whole
percent of the net premium not less than 10."
is added to the Policy.
Endorsement Date:
MODIFICATION OF THE CONTRACT SECTION
"POSTPONEMENT OF SURRENDERS, TRANSFERS AND LOANS FROM THE FIXED ACCOUNT. The
Company can postpone the payment of the portion of the Policy's Net Cash Value
which is in the Fixed Account for not more than six months after surrender. If
payment is postponed for more than 30 days, it will be credited with interest
from the date of surrender. The rate of interest will be set each year by the
Company; but the rate will not be less than 3-1/2% per year.
The Company can postpone transfers from the Fixed Account for not more than
six months from the date of the request. The effective date of the transfer is
the date on which values are transferred from the Fixed Account.
The Company can postpone the making of any Policy Loan from the Fixed
Account for not more than six months from the day you apply, except Loans to pay
premiums on policies issued by the Company."
is added to the Contract section.
MODIFICATION OF THE VARIABLE ACCOUNT SECTION
"The Policy's first investment in the Account is made as of
the latest of:
<PAGE>
. The Policy Date;
. The date of Part II of the Application;
. The date the first premium is received by the Company; and
. The effective date of the election of any sub-account."
is substituted for
"The Policy's first investment in the Account is made as of
the latest of:
. The Policy Date;
. The date of Part II of the Application; and
. The date the first premium is received by the Company."
in the Sub-Accounts provision.
"The Cash Value of the Policy at any time cannot be allocated among more than 10
sub-accounts, except with the consent of the Company; and the Fixed Account will
be counted in the limit of 10.
The values and benefits of the Policy depend on the investment performance
of the portfolios in which the sub-accounts you elect are invested; and interest
credited to the Policy's share of the Fixed Account The Company does not
guarantee the investment performance of the portfolios of the sub-accounts. You
bear the investment risk for amounts invested in the sub-accounts you elect."
is substituted for the second and third paragraphs of the Sub-Accounts
provision.
"You can transfer all or a portion of the Policy's existing share in a sub-
account to another sub-account or to the Fixed Account (See the Restriction of
New Amounts Applied to the Fixed Account provision.)"
is substituted for the first sentence of the Transfer Option provision.
<PAGE>
MODIFICATION OF THE NONPAYMENT OF PREMIUMS SECTION
"If the Policy is lapsed, it will not be affected by: the investment
performance of the Account; and the interest rates used for the Fixed Account"
is substituted for the last sentence in the Lapse of Policy provision.
"LAPSE OPTIONS. If the Policy lapses because a premium is not paid, any Net
Cash Value of the Policy will be transferred from the Fixed Account and the
Account to the general account of the Company and used to continue the Policy in
force either as Paid-Up Insurance or Extended Term Insurance as stated below.
Any Riders will lapse unless otherwise stated in the Rider. Any Policy Loans
will terminate when the Net Cash Value is used for this purpose."
is substituted for the Lapse Options provision.
MODIFICATION OF THE CASH VALUE OF THE POLICY SECTION
"The Cash Value of the Policy if all premiums due have been paid is equal
to: the Policy's share of the elected sub-accounts; plus the Policy's share of
the Fixed Account; plus the amount of any assets transferred to the general
account of the Company because of Policy Loans. (See Section 10.) The amount of
the Cash Value depends on: the frequency and amount of net premiums; investment
performance of the elected sub-accounts; interest credited to the Policy's share
of the Fixed Account; cost of insurance charges; transfers among sub-accounts
and the Fixed Account; and Policy Loans. The Cash Value can increase or decrease
on a dally basis, depending on: the investment performance of the elected sub-
accounts; and the interest credited to the Policy's share of Fixed Account (See
Actual Investment Return below.)"
is substituted for the first paragraph of the Cash Value provision.
"The cost of insurance will be deducted in the same proportion as the Cash
Value of the Policy is in the sub-accounts and the Fixed Account."
is substituted for
"The cost of insurance will be deducted in the same
<PAGE>
proportion as the Policy is invested in the sub-accounts."
in the Cost of Insurance provision.
"BASE INVESTMENT RETURN. The Policy has a Base Investment Return for each
Valuation Period for its share of each elected sub-account and of the Fixed
Account. The Policy's Base Investment Return is the amount which would be earned
by the Policy's share if the sub-account had investment performance and the
Fixed Account had interest credited at a monthly compounded rate equivalent to
an annual effective rate of 4%."
is substituted for the Base Investment Return provision.
"The Policy has an Actual Investment Return for each Valuation Period for
its share of each elected sub-account and of the Fixed Account.
The Actual Investment Return for the Fixed Account for each Valuation
Period is equal to (a) minus (b); where:
. (a) is equal to the Policy's share of the Fixed Account as of the end of
the Valuation Period;
PLUS
the interest credited during the Valuation Period to any borrowed portion of the
Policy's Cash Value; and
. (b) is equal to the Policy's share of the Fixed Account for the most recent
Valuation Period."
is added to the Actual Investment Return provision.
MODIFICATION OF THE DEATH BENEFIT SECTION
"Guaranteed Minimum Death Benefit. The Guaranteed Minimum Death Benefit is
equal to the Face Amount shown in Section 1, regardless of investment
performance and interest credited, if all premiums due have been paid."
is substituted for the Guaranteed Minimum Death Benefit provision.
<PAGE>
MODIFICATION OF THE POLICY LOANS SECTION
"Unless you request otherwise, Policy Loans will reduce first, the Policy's
share of the sub-accounts proportionately and second, the Policy's share of the
Fixed Account, except as noted below in the Interest on Loans; Policy Loan
Balance provision."
is substituted for
"Policy Loans will reduce the Policy's share of the sub-accounts
proportionately, unless you request otherwise."
in the Policy Loans provision.
"Loan interest not paid when due will be added to the Loan and will bear
interest; when loan interest is added to the Loan, the Policy's share of the
sub-accounts and of the Fixed Account will be reduced proportionately."
is substituted for the last sentence of the Interest on Loans; Policy Loan
Balance provision.
"Loan repayments will be allocated: first, to repay the Loans made against
the Fixed Account; and second, unless you request otherwise, to repay the Loans
made against the sub-accounts in the same proportion as the Policy is invested
in the sub-accounts."
is substituted for
"Loan repayments will be allocated in the same proportion as the Policy is
invested in the sub-accounts, unless you request otherwise."
in the Repayment of Loans provision.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
/s/ John A. Fibiger /s/ Kernan F. King
President Secretary
<PAGE>
NEV-217-84
ENDORSEMENT
As of the Date of Issue, each Policy or Rider provision that contain any
differences based on sex is modified to provide for males and females the same:
. Rates;
. Benefits;
. Values; or
. Payments under Life Income Options.
MODIFICATION OF LIFE INCOME TABLES SECTION
As of the Date of Issue of this Policy, the following section is substituted for
the Life Income Tables section:
LIFE INCOME TABLES. Guaranteed monthly payments per $1,000 of proceeds applied
to the Life Income Option are shown below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SECOND AND THIRD OPTIONS: LIFE INCOME
- ----------------------------------------------------------------------------------------------------
Age of 10 Years 20 Years Cash Instalment
Payee No Refund Certain Certain Refund Refund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
15* $3.19 $3.19 $3.19 $3.18 $3.19
16 3.21 3.20 3.20 3.19 3.20
17 3.22 3.22 3.21 3.21 3.21
18 3.23 3.23 3.23 3.21 3.21
19 3.25 3.24 3.24 3.23 3.24
20 3.26 3.26 3.25 3.25 3.25
21 3.27 3.27 3.27 3.26 3.26
22 3.29 3.29 3.28 3.28 3.28
23 3.31 3.30 3.30 3.29 3.29
24 3.32 3.32 3.31 3.31 3.31
25 3.34 3.34 3.33 3.32 3.33
26 3.36 3.36 3.35 3.34 3.35
27 3.38 3.37 3.37 3.36 3.36
28 3.40 3.39 3.39 3.38 3.38
29 3.42 3.41 3.41 3.40 3.40
30 3.44 3.44 3.43 3.42 3.42
31 3.46 3.46 3.45 3.44 3.44
32 3.49 3.48 3.47 3.46 3.47
33 3.51 3.51 3.50 3.49 3.49
34 3.54 3.53 3.52 3.51 3.52
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SECOND AND THIRD OPTIONS: LIFE INCOME
- ----------------------------------------------------------------------------------------------------
Age of 10 Years 20 Years Cash Instalment
Payee No Refund Certain Certain Refund Refund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
35 3.56 3.56 3.55 3.54 3.54
36 3.59 3.59 3.58 3.56 3.57
37 3.62 3.62 3.60 3.59 3.60
38 3.66 3.65 3.63 3.62 3.63
39 3.69 3.69 3.67 3.65 3.66
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Age of 10 Years 20 Years Cash Instalment
Payee No Refund Certain Certain Refund Refund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
40 $3.73 $3.72 $3.70 $3.68 $3.69
41 3.76 3.76 3.73 3.71 3.72
42 3.80 3.79 3.77 3.75 3.76
43 3.84 3.84 3.80 3.78 3.79
44 3.89 3.88 3.84 3.82 3.83
45 3.93 3.92 3.88 3.86 3.87
46 3.98 3.97 3.92 3.90 3.91
47 4.03 4.02 3.97 3.94 3.96
48 4.08 4.07 4.01 3.99 4.00
49 4.14 4.12 4.06 4.03 4.05
50 4.10 4.18 4.11 4.08 4.10
51 4.16 4.23 4.16 4.13 4.15
52 4.32 4.30 4.21 4.19 4.21
53 4.39 4.36 4.26 4.24 4.27
54 4.46 4.43 4.32 4.30 4.33
55 4.54 4.50 4.37 4.36 4.39
56 4.62 4.58 4.43 4.43 4.46
57 4.70 4.65 4.49 4.49 4.53
58 4.79 4.74 4.56 4.57 4.60
59 4.89 4.83 4.62 4.64 4.68
60 4.99 4.92 4.68 4.72 4.76
61 5.10 5.02 4.75 4.80 4.85
62 5.22 5.12 4.82 4.89 4.94
63 5.34 5.23 4.88 4.98 5.03
64 5.47 5.35 4.95 5.07 5.13
65 5.61 5.47 5.02 5.17 5.24
66 5.76 5.60 5.08 5.18 5.35
67 5.92 5.73 5.15 5.39 5.47
68 6.10 5.87 5.11 5.51 5.59
69 6.18 6.02 5.17 5.63 5.72
70 6.48 6.17 5.33 5.76 5.86
71 6.70 6.33 5.38 5.89 6.00
72 6.92 6.49 5.43 6.04 6.16
73 7.17 6.66 5.48 6.19 6.32
74 7.43 6.84 5.52 6.34 6.49
75 7.71 7.02 5.56 6.52 6.67
76 8.02 7.20 5.60 6.69 6.86
77 8.34 7.38 5.63 6.87 7.06
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Age of 10 Years 20 Years Cash Instalment
Payee No Refund Certain Certain Refund Refund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
78 8.69 7.56 5.66 7.07 7.27
79 9.07 7.75 5.68 7.27 7.50
80 9.47 7.93 5.70 7.49 7.74
81 9.90 8.11 5.71 7.73 7.99
82 10.36 8.28 5.73 7.96 8.25
83 10.86 8.45 5.73 8.21 8.53
84 11.39 8.62 5.74 8.50 8.83
85+ 11.96 8.77 5.75 8.78 9.14
- ----------------------------------------------------------------------------------------------------
*and under +and over
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SIXTH OPTION: LIFE INCOME FOR TWO LIVES
- ----------------------------------------------------------------------------------------------
Age of One Age of Other Payee
Payee
55 60 65 70 75
- ----------------------------------------------------------------------------------------------
Joint and Survivor
<S> <C> <C> <C> <C> <C>
55 $4.04 $4.17 $4.28 $4.37 $4.43
60 4.17 4.36 4.53 4.68 4.79
65 4.28 4.53 4.79 5.02 5.12
70 4.37 4.68 5.02 5.38 5.71
75 4.43 4.79 5.22 5.71 6.12
80 4.47 4.87 5.37 5.98 6.68
- ----------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------
Joint and Survivor, 10 Years Certain
<S> <C> <C> <C> <C> <C>
55 $3.96 $4.09 $4.10 $4.36 $4.42
60 4.09 4.17 4.44 4.59 4.77
65 4.10 4.44 4.69 4.91 5.09
70 4.36 4.59 4.91 5.12 5.50
75 4.42 4.77 5.09 5.50 5.88
80 4.46 4.85 5.33 5.72 6.11
- ----------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------
Joint and 2/3 to Survivor
<S> <C> <C> <C> <C> <C>
55 $4.37 $4.56 $4.76 $4.99 $5.13
60 4.56 4.78 5.02 5.30 5.59
65 4.76 5.02 5.33 5.67 6.03
70 4.99 5.30 5.67 6.10 6.57
75 5.13 5.59 6.03 6.57 7.18
80 5.48 5.89 6.41 7.06 7.84
- ----------------------------------------------------------------------------------------------
</TABLE>
Payments for other ages will be quoted by the Company on request.
<PAGE>
The rates shown above are based on an interest rate of 3 1/2% per year; and on
mortality: using a 60/40 male/female weighting; based on the Individual
Annuitant Mortality Table for 1983; and with projection on Scale G to the year
2000 and then on Scale B Modified to the year 2010.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
/s/ John A. Fibiger /s/ Kernan F. King
President Secretary
<PAGE>
EXHIBIT 3
New England Variable Life Separate Account
New England Variable Life Insurance Company
501 Boylston Street
Boston, MA 02117
Gentlemen:
In my capacity as General Counsel of New England Variable Life Insurance
Company, I have provided legal advice concerning:
The establishment of New England Variable Life Separate Account (the
"Account") by the Board of Directors of New England Variable Life Insurance
Company (the "Company") as a separate investment account in accordance with
Section 2932 of the Delaware Insurance Code; and
The preparation of an amendment to the registration statement on Form S-6,
filed by the Securities and Exchange Commission under the Securities Act of
1933 with respect to Limited Payment Variable Ordinary Life Policies (the
"Registration Statement").
It is my professional opinion that:
1. The Account is a separate investment account of the Company and is duly
created and validly existing pursuant to the Laws of the State of
Delaware;
2. The Limited Variable Life Policies and Variable Ordinary Life Policies,
when issued in accordance with the prospectus contained in the
Registration Statement and in compliance with applicable local law, are
and will be legal and binding obligations of the Company in accordance
with their terms; and
3. Assets attributable to reserves and other contract liabilities and held
in the Account will not be chargeable with liabilities arising out of
any other business the Company may conduct.
<PAGE>
New England Variable Life Separate Account
New England Variable Life Insurance Company
February 26, 1985
Page 2
In forming this opinion, I have made such examination of law and examined such
records and other documents as in my judgment are necessary and appropriate.
I hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the prospectus contained in the Registration Statement.
Very truly yours,
Edward N. Wadsworth
General Counsel
<PAGE>
March 4, 1988
New England Variable Life Insurance Company
501 Boylston Street
Boston, MA 02117
Re: Registration Statement No. 2-82838 on Form S-6 of New
England Variable life Separate Account
Gentlemen:
I hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 10 to the above-referenced Registra-tion Statement of my opinion
and consent dated July 21, 1983 and included in the Registration Statement filed
with the Securities and Exchange Commission on July 28, 1983.
I further consent to the use of my name under the caption "Legal Matters"
in the Prospectus.
Very truly yours,
Edward N. Wadsworth
General Counsel
<PAGE>
EXHIBIT 6
Robert E. Schneider, F.S.A.
Vice President and Chief Actuary
Gentlemen:
In my capacity as Vice President and Chief Actuary of New England Variable Life
Insurance Company (the "Company"), I have provided actuarial advice concerning:
The preparation of Post-Effective Amendment No. 11 to the registration
statement on Form S-6 (File No. 2-82838) 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 "sales load" as defined in paragraph (c) (4) of Rule 6(e)-2 under the
Investment Company Act of 1940, shall not exceed 9 per centum of the
payments to be made thereon during the period equal to the lesser of 20
years or the anticipated life expectancy of the insured named in the policy
based on the 1958 Commissioners Standard Ordinary Mortality Table. Such
sales load will not exceed 20 per centum of payments made for the first
policy year, 12 per centum of the payments made for the second through
fourth policy years, plus 7.75% of payments made in subsequent policy
years.
2. The proportionate amount of the sales load deducted from any payment during
the policy period shall not exceed the proportionate amount deducted from
any prior payment during the policy period.
3. The illustrations of death benefits, net cash values, accumulated premiums
and internal rates of return on net cash values 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
males aged 25
<PAGE>
or 40 in the underwriting classes illustrated than to prospective
purchasers of Policies for males at other ages or underwriting classes or
for females.
4. The Prospectus information contained in (i) the examples of variations in
death benefits on page 15; (ii) the example of how the maximum loanable
amount is determined on page 17; (iii) the example of the impact of a
policy loan on page 18; (iv) the example of the effect on death benefits
and cash values of payment of premiums other than annually on page 19,
based on the assumptions stated in the illustrations, is consistent with
the provisions of the Policies.
5. The table of illustrative premium rates on page 20 of the Prospectus
contains the premium rates to be charged by NEVLICO for standard mortality
risk or preferred mortality risk policies issued to males or females with
the face amounts, premium frequencies and issue ages shown in the table.
6. The table of net premiums shown on page 12 of the Prospectus contains the
net premiums allocated to the sub-accounts for standard mortality risk or
preferred mortality risk policies issued to males or females with face
amounts, premium frequencies and issue ages shown in the table.
7. The information contained in (i) the demonstration of the increase in
variable death benefit and table of net single premiums in Appendix B; (ii)
the demonstrations of the amount provided for investment in Appendix C;
(iii) the description of the Preferred or Female Cost of Insurance Factor
in Appendix D; (iv) the description of historical investment experience in
Appendix E; based on the assumptions stated in the Appendices, 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,
Robert E. Schneider, F.S.A.
Vice President and Chief Actuary
<PAGE>
Exhibit 6(ii)
Sutherland, Asbill & Brennan LLP
CONSENT OF SUTHERLAND, ASBILL & BRENNAN LLP
We consent to the reference to our firm under the heading "Legal Matters"
in the prospectus included in Post-Effective Amendment No. 21 to the
Registration Statement on Form S-6 for certain variable life insurance policies
issued through of New England Variable Life Separate Account of New England Life
Insurance Company (File No. 2-82838). 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 LLP
Washington, D.C.
April 28, 1998
<PAGE>
EXHIBIT 8
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
OF
NEW ENGLAND VARIABLE LIFE INSURANCE COMPANY
501 Boylston Street
Boston, Massachusetts 02117
February ___, 1985
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Amended and Restated Notice of Election to be
Governed by Section 27(h) of the
Investment Company Act of 1940
---------------------------------------------
Dear Sirs:
Pursuant to Rule 27g-1(a) under the Investment Company Act of 1940, as
amended (the "Act"), New England Variable Life Separate Account of New England
Variable Life Insurance Company hereby elects, with respect only to its policy
on Form NEV-2, to be governed by the provisions of Section 27(h) of the Act
rather than the provisions of Section 27(a) and 27(d) thereof.
Very truly yours,
NEW ENGLAND VARIABLE
LIFE SEPARATE ACCOUNT
By: New England Variable Life
Insurance Company, Depositor
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT 9
Statement of New England Variable Life
Insurance Company Pursuant to
Rule 27d-2 Under the Investment
Company Act of 1940
The undersigned hereby states that on a monthly basis throughout its fiscal
year ended December 31, 1982, it has met the requirements of Rule 27d-2(a)(1)
under the Investment Company Act of 1940.
NEW ENGLAND VARIABLE
LIFE INSURANCE COMPANY
By: Chester R. Frost
Vice President-Controller
July 13, 1983
<PAGE>
EXHIBIT 10
NEW NOTICE OF WITHDRAWAL
ENGLAND
VARIABLE
New England Variable Life
[Owner's Name] Insurance Company
[Owner's Address] 501 Boylston Street
Boston, Massachusetts 02117
[Date of Mailing]
RE: [Contract Number
Insured's Name
Plan Name
Premium/Mode
Annualized Premium]
This notice is sent to you in accordance with the laws administered by the
United States Securities and Exchange Commission ("SEC"). Please read it
carefully and retain it with your important records.
You have recently purchased a variable life insurance contract from New England
Variable Life Insurance Company ("NEVLICO") under which benefits depend on the
investment experience of New England Variable Life Separate Account ("Account").
You have, pursuant to requirements of the SEC and your contract, the right to
examine and return your contract for cancellation, and receive a full refund of
all premiums paid, at any time within 10 days from delivery of the contract or
45 days from the date of Part 1 of the application, whichever is later, but in
any event you have until 10 days from the date of mailing of this notice, as
determined by its post mark, to return the contract for cancellation.
In determining whether or not to exercise your right, you should consider, among
other things, the projected cost of your contract and your ability to make the
scheduled payments as they become due. Your contract provides for payments as
stated above. Also you have already been furnished a prospectus which describes
the deductions from premiums before amounts are allocated to the Account. These
are:
For sales load, a deduction which will not exceed the following percentages
of the premium (exclusive of the annual deduction for administrative
expenses described below and premiums paid for extra mortality risks and
optional insurance benefits, if any): The sales charge made by NEVLICO
will not be greater than 20% of the basic gross premium payments during the
first policy year plus 12% of the basic gross premium payments made for the
second through fourth policy years. The charge will also not exceed 9% of
all basic gross premium payments during the period equal to the lesser of
20 years or the expected life of the insured based on the 1958
Commissioners Standard Ordinary Mortality Table made from premiums in the
following percentages for designated expenses.
<PAGE>
For administrative expenses, deductions will be made from premiums in the
following percentages for designated expenses: NEVLICO charges $35 in each
policy year for administrative expenses. For a Policy under which premiums
are payable more frequently than annually, this charge will be greater to
an extent dependent on the premium payment schedule chosen; however, this
charge will not exceed $48.
Should you decide to exercise this right of cancellation, complete the enclosed
form and form and return your contract in accordance with the enclosed
instructions, post marked on or before the latest date permitted for
cancellation as described above.
Kernan F. King
Secretary
<PAGE>
Instructions
Please Read Carefully
To the Contract Owner:
If, after reading the enclosed note, you elect to return your contract for
cancellation you must:
1. Sign and date the bottom of this form.
2. Mail the form together with your contract (if received by you)
to: New England Variable Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
3. The post mark on the envelope must be on or before the latest date
permitted for cancellation as described in the attached letter.
4. Please check the box below if you have not yet received your contract
when mailing this card.
- --------------------------------------------------------------------------------
To: New England Variable Life Insurance Company
Pursuant to the terms of the notice previously furnished me by New England
Variable Life Insurance Company I hereby return the contract numbered below for
cancellation and request a full refund of the premium paid by me for the
contract.
_____________________ ____________________________
Date Signature of Contract Owner
____________________________
Contract Number
[_] I have not yet received the contract and should it be received I will
return it to New England Variable Life Insurance Company.
<PAGE>
Exhibit 13
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the inclusion in Post-Effective Amendment No. 21 to the
Registration Statement on Form S-6 (File No. 2-82838) 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 second 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, on our audit of the statutory financial statements of Exeter
Reassurance Company, Ltd., and our report dated February 9, 1996, on our audit
of New England Securities Corporation, and our report dated February 29, 1996,
on our audit of TNE Advisors, Inc., and our report dated March 14, 1996, on our
audit of Newbury Insurance Company, Limited. We also consent to the reference
to our firm under the caption "Experts" in this Post-Effective Amendment.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 28, 1998
<PAGE>
Exhibit 13
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No. 21 to the
Registration Statement No. 2-82838 of New England Variable Life Separate
Account (the "Separate Account") of New England Life Insurance Company (the
"Company") of our reports dated February 10, 1998 and February 17, 1998, on
the financial statements of the Separate Account and the Company for the
years ended December 31, 1997 and 1996 appearing in the Supplement (which
expressed unqualified opinions and, with respect to the Company, includes
an explanatory paragraph referring to the change in the basis of accounting
and the change in corporate organization), which is part of such
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Supplement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 28, 1998
