<PAGE>
As filed with Securities and Exchange Commission on
April 24, 1998
Registration No. 33-88082
-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 3
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 Flexible Premium
Adjustable Variable 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
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1 Cover Page
2 Cover Page
3 Inapplicable
4 NELICO's Distribution Agreement
5 NELICO
6 The Variable Account
9 Inapplicable
10(a) Other Policy Features
10(b) Policy Values and Benefits
10(c),(d),(e) Death Benefit; Cash Value; 24 Month Right; Surrender;
Partial Surrender; Right to Return the Policy; Loan
Provision; Transfer Option; Premiums
10(f),(g),(h) Voting Rights; Rights Reserved by NELICO
10(i) Limits to NELICO's Right to Challenge the Policy;
Payment of Proceeds; Investment Options
11 The Variable Account
12 Investments of the Variable Account; NELICO's
Distribution Agreement
13 Charges and Expenses; NELICO's Distribution Agreement;
Charge for NELICO's Income Taxes; Appendix A
14 Amount Provided for Investment Under the Policy;
NELICO's Distribution Agreement
15 Premiums
16 Investments of the Variable Account
17 Captions referenced under Items 10(c),(d),(e) and (i)
above
18 The Variable Account
19 Reports; NELICO's Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 NELICO's Distribution Agreement
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 NELICO's Distribution Agreement
<PAGE>
Form N-8B-2
Item No. Caption in Prospectus
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27 NELICO
28 Management
29 NELICO
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 NELICO's Distribution Agreement
35 NELICO
36 Inapplicable
37 Inapplicable
38 NELICO's Distribution Agreement
39 NELICO's Distribution Agreement
40 NELICO's Distribution Agreement
41(a) NELICO's Distribution Agreement
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Amount Provided
for Investment Under the Policy; Deductions from
Premiums; Flexible Premiums
44(b) Charges and Expenses
44(c) Flexible Premiums; Deductions from Premiums
45 Inapplicable
46 Investments of the Variable Account; Captions
referenced under Items 10(c), (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Lapse and Reinstatement;
Charges and Expenses; Additional Benefits by Rider; 24
Month Right; Payment Options; Policy Owner and
Beneficiary; Premiums; NELICO's Distribution Agreement
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
<PAGE>
ZENITH FLEXIBLE LIFE
Supplement dated May 1, 1998 to Prospectus dated May 1, 1998
For Policies purchased through payroll deductions:
If you elect to pay monthly planned premiums using payroll deductions that
your employer will remit to New England Life Insurance Company ("NELICO") on
your behalf, the following special provisions apply to you:
1. Policy Date. Your employer will begin making payroll deductions six
weeks in advance of your first monthly planned premium payment. The Policy Date
and the investment start date for your Policy will be the date when NELICO
receives your first monthly planned premium payment.
2. Temporary Life Insurance Coverage. The insured under your Policy will
be covered by temporary life insurance for a limited period under the terms of a
temporary insurance agreement. Coverage will begin as of the date of the
temporary insurance agreement, which is generally the same date you sign your
application. (Refer to the temporary insurance agreement for details.)
3. Planned Premium Payments. You will be on a monthly planned premium
schedule that assumes your employer will remit 12 premium payments each year,
regardless of the frequency with which payroll deductions are made. The amount
of your monthly planned premium payments may vary from month to month, depending
on the amount of payroll deductions accumulated prior to each payment. Premiums
will be applied to your Policy on the day NELICO receives them.
4. Lapse. Your monthly planned premium schedule is not necessarily
designed to keep your Policy in force. NELICO will make Monthly Deductions from
the cash value of your Policy on the first day of each Policy month, beginning
with the Policy Date. (See "Monthly Deduction from Cash Value" for more
information.) Your Policy will be in default in any month when there is
insufficient net cash value for NELICO to make a Monthly Deduction unless a
Minimum Guaranteed Death Benefit is in effect or your Policy is protected
against lapse during the first three Policy Years by payment of the Minimum
Premium. (See "Monthly Deduction from Cash Value," "Flexible Premiums" and
"Lapse and Reinstatement" for more information.) A default will occur if for any
reason there is insufficient net cash value in the Policy to pay a Monthly
Deduction. A default may result, for example, if you miss a payroll deduction.
The cash value of premiums allocated to the Variable Account is not guaranteed,
and unfavorable investment experience can reduce it to zero. You will bear the
entire investment risk with respect to cash value in the Variable Account. If a
default occurs, NELICO will issue a pre-lapse notice to inform the Policy Owner
of the amount due. The Policy provides a 62 day grace period for payment of a
premium sufficient to pay the Monthly Deduction and prevent lapse. To keep your
Policy in force, you will need to pay the amount shown in the pre-lapse notice
directly to NELICO.
5. Additional Payments and Loan Repayments. You cannot use payroll
deductions to make payments in addition to your planned premium payments or to
repay a Policy loan. Please contact NELICO or your registered representative if
you would like to arrange either of these transactions.
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
ZENITH FLEXIBLE LIFE
Supplement dated May 1, 1998
to
Prospectus dated May 1, 1998
The prospectus on page A-18 under "Deductions from Premiums-Sales Charge"
indicates that NELICO currently intends to deduct the sales charge from premium
payments made in a Policy year (through the first 20 Policy years) only until an
amount equal to 110% of a Target Premium, plus a portion of certain rider
premiums, has been paid in a Policy year. Premium payments during a Policy year
in excess of 110% of a Target Premium (plus the applicable portion of certain
rider premiums) are not currently subject to the sales charge. However, for
Policies issued prior to May 1, 1998 (including your Policy), NELICO currently
intends to implement this waiver in a Policy year (through the first 20 Policy
years) once you have paid 100% of the Target Premium for your Policy, plus a
portion of certain rider premiums, in that Policy year. Currently, premium
payments that you make in a Policy year in excess of 100% of the Target Premium
(plus the applicable portion of certain rider premiums) will not be subject to
the sales charge. NELICO retains the right not to waive the charge or to resume
the charge.
<PAGE>
NEW ENGLAND LIFE
INSURANCE COMPANY
Flexible Premium Adjustable
Variable Life Insurance Policies
Issued by
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual Flexible Premium Adjustable Variable
Life Insurance Policies (the "Policies") offered by New England Life Insurance
Company ("NELICO"), an indirect, wholly-owned subsidiary of Metropolitan Life
Insurance Company ("MetLife").
Each Policy provides premium flexibility together with two types of death
benefit guarantees as long as the total amount of premiums paid with interest,
less any partial surrenders with interest, at least equals certain minimum
amounts and there is no policy loan. (Policies issued in New York offer one
death benefit guarantee.)
You may choose between two death benefit options, one of which provides a
fixed death benefit equal to the Policy's face amount and one of which
provides a variable death benefit which may vary daily with the net investment
experience of one or more mutual fund portfolios. Under either of the death
benefit options, the minimum death benefit guarantee(s) will be available. The
cash value of the Policy generally will increase with the payment of each
premium but will vary daily with the investment experience of the mutual fund
portfolios. There is no guaranteed minimum cash value for investments in the
mutual fund portfolios.
You may cancel the Policy during the "right to return the Policy" period.
The first net premium for the Policy will be allocated to the Zenith Money
Market Sub-Account until the later of 45 days after the date Part 1 of the
application is signed or 10 days after NELICO mails the Notice of Withdrawal
Right. Thereafter, the Policy's cash value will be invested according to your
instructions.
You may, within limits, allocate premiums to one or more of the 16
investment Sub-Accounts of NELICO's Variable Life Separate Account (the
"Variable Account") or to NELICO's Fixed Account, after certain deductions
have been made. Each Sub-Account of the Variable Account invests in the shares
of one of the Eligible Funds. The Eligible Funds are: the Back Bay Advisors
Money Market Series, the Back Bay Advisors Bond Income Series, the Capital
Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors Managed
Series, the Westpeak Growth and Income Series, the Loomis Sayles Small Cap
Series, the Loomis Sayles Balanced Series, the Alger Equity Growth Series, the
Davis Venture Value Series, the Goldman Sachs Midcap Value Series, and the
Morgan Stanley International Magnum Equity Series of the New England Zenith
Fund (the "Zenith Fund"); the Equity-Income Portfolio, Overseas Portfolio and
High Income Portfolio of the Variable Insurance Products Fund ("VIP Fund");
and the Asset Manager Portfolio of the Variable Insurance Products Fund II
("VIP Fund II"). The Series of the Zenith Fund are advised by affiliates of
NELICO. The VIP Fund and VIP Fund II are advised by Fidelity Management &
Research Company.
SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE OUT OF THE FIXED ACCOUNT.
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus. (See "Charges and Expenses".)
- ----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE
CURRENT PROSPECTUSES OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE
INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE
ATTACHED AT THE END OF THIS PROSPECTUS. THESE PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
SHARES OF THE ZENITH FUND, THE VIP FUND AND THE VIP FUND II, AND INTERESTS
IN THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, A BANK, AND THE SHARES AND INTERESTS ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
MAY 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
GLOSSARY.................................................................. A-4
INTRODUCTION TO THE POLICIES.............................................. A-7
The Policies............................................................ A-7
Availability of the Policy.............................................. A-9
Policy Charges.......................................................... A-9
How the Policy Works.................................................... A-11
Receipt of Communications and Payments at NELICO's Home Office.......... A-12
NELICO.................................................................. A-12
POLICY VALUES AND BENEFITS................................................ A-13
Death Benefit........................................................... A-13
Minimum Guaranteed Death Benefit........................................ A-13
Adjustments to the Death Proceeds Payable............................... A-15
Change in Death Benefit Option.......................................... A-15
Extending the Maturity Date............................................. A-15
Cash Value.............................................................. A-16
Net Investment Experience............................................... A-16
Allocation of Net Premiums.............................................. A-16
Amount Provided for Investment under the Policy......................... A-16
Right to Return the Policy.............................................. A-17
CHARGES AND EXPENSES...................................................... A-17
Deductions from Premiums................................................ A-18
Surrender Charge........................................................ A-19
Monthly Deduction from Cash Value....................................... A-21
Charges Against the Eligible Funds and the Sub-Accounts of the Variable
Account................................................................ A-23
Group or Sponsored Arrangements......................................... A-24
PREMIUMS.................................................................. A-25
Flexible Premiums....................................................... A-25
Lapse and Reinstatement................................................. A-26
OTHER POLICY FEATURES..................................................... A-27
Increase in Face Amount................................................. A-27
Loan Provision.......................................................... A-27
Surrender............................................................... A-29
Partial Surrender....................................................... A-29
Reduction in Face Amount................................................ A-30
Acceleration of Death Benefit Rider..................................... A-30
Investment Options...................................................... A-30
Transfer Option......................................................... A-31
Substitution of Insured Person.......................................... A-31
Payment of Proceeds..................................................... A-31
24 Month Right.......................................................... A-32
Payment Options......................................................... A-33
Additional Benefits by Rider............................................ A-33
Policy Owner and Beneficiary............................................ A-34
THE VARIABLE ACCOUNT...................................................... A-34
Investments of the Variable Account..................................... A-35
Investment Management................................................... A-38
THE FIXED ACCOUNT......................................................... A-38
General Description..................................................... A-39
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Values and Benefits..................................................... A-39
Policy Transactions..................................................... A-39
NELICO'S DISTRIBUTION AGREEMENT........................................... A-40
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY.......................... A-41
Misstatement of Age or Sex.............................................. A-41
Suicide................................................................. A-41
TAX CONSIDERATIONS........................................................ A-41
Policy Proceeds......................................................... A-41
Charge for NELICO's Income Taxes........................................ A-45
MANAGEMENT................................................................ A-46
VOTING RIGHTS............................................................. A-48
RIGHTS RESERVED BY NELICO................................................. A-49
TOLL-FREE NUMBERS......................................................... A-49
REPORTS................................................................... A-50
ADVERTISING PRACTICES..................................................... A-50
LEGAL MATTERS............................................................. A-50
REGISTRATION STATEMENT.................................................... A-50
EXPERTS................................................................... A-51
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES
AND ACCUMULATED PREMIUMS................................................. A-52
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................. A-62
APPENDIX C: LONG TERM MARKET TRENDS....................................... A-83
APPENDIX D: USES OF LIFE INSURANCE........................................ A-85
APPENDIX E: TAX INFORMATION............................................... A-86
FINANCIAL STATEMENTS...................................................... F-1
</TABLE>
A-3
<PAGE>
GLOSSARY
ACCOUNT. A sub-account of the Variable Account or the Fixed Account.
AGE. For purposes of this prospectus, the age of an insured refers to the
insured's age at his or her nearest birthday.
CASH VALUE. A Policy's cash value includes the amount of its cash value held
in the Variable Account, the amount held in the Fixed Account and, if there is
an outstanding Policy loan, the amount of its cash value held in NELICO's
general account as a result of the loan. (See "Cash Value".)
COST OF INSURANCE CHARGE. This charge for providing insurance protection is
deducted on the Policy Date and on the first day of each Policy month. The
cost of insurance for a Policy month is equal to the amount at risk multiplied
by the cost of insurance rate for that month. Cost of insurance rates vary
monthly. (See "Monthly Deduction from Cash Value".)
DEATH BENEFIT OPTION 1. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) a percentage, determined in accordance with
federal income tax laws, of the Policy's cash value, including the pro rata
portion of any Monthly Deduction made for a period beyond the date of death.
(See "Death Benefit".)
DEATH BENEFIT OPTION 2. Death Benefit equals the greater of (i) the face
amount of the Policy plus the Policy's cash value and (ii) a percentage,
determined in accordance with federal income tax laws, of the Policy's cash
value, including the pro rata portion of any Monthly Deduction made for a
period beyond the date of death. (See "Death Benefit".)
ELIGIBLE FUNDS. Each Sub-Account of the Variable Account invests in the
shares of one of the Eligible Funds. The Eligible Funds are: the Back Bay
Advisors Money Market Series, the Back Bay Advisors Bond Income Series, the
Capital Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors
Managed Series, the Westpeak Growth and Income Series, the Loomis Sayles Small
Cap Series, the Loomis Sayles Balanced Series, the Alger Equity Growth Series,
the Davis Venture Value Series, the Goldman Sachs Midcap Value Series, and the
Morgan Stanley International Magnum Equity Series of the Zenith Fund; the
Equity-Income Portfolio, Overseas Portfolio and the High Income Portfolio of
the VIP Fund; and the Asset Manager Portfolio of VIP Fund II. (See "The
Variable Account".)
EXCESS POLICY LOAN. The situation when Policy loans plus accrued interest
exceed the Policy's cash value less the applicable Surrender Charge. (See
"Loan Provision".)
FIXED ACCOUNT. The Fixed Account is a part of NELICO's general account to
which net premiums may be allocated. NELICO provides guarantees of principal
and interest with respect to amounts allocated to the Fixed Account. (See "The
Fixed Account".)
INVESTMENT START DATE. This is the latest of the date NELICO first receives
a premium payment for the Policy, the date Part II of the Policy application
is signed and the Policy Date. It is the date when an amount is first provided
for investment under the Policy. (See "Amount Provided for Investment under
the Policy".)
MATURITY DATE. The Policy anniversary on which the insured is (or would have
been) age 100, unless the extended maturity option has been added to the
Policy. (See "Extending the Maturity Date".)
MINIMUM GUARANTEED DEATH BENEFIT A. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if the
total of: (1) premiums paid in each prior Policy year accumulated at a 4% rate
from the first day of the year of payment to the most recent Policy
anniversary, less partial surrenders accumulated at a 4% rate from the date of
surrender to the most recent Policy anniversary, plus (2) premiums paid less
partial surrenders in the current Policy year, is at least equal to: the
amount shown in the Table of Guaranteed Death Benefit A Premiums Accumulated
at 4% for the prior Policy year plus 1/12 of the Benefit A Premium for each
Policy month of the current year up to and including the month for which the
Monthly Deduction is being processed, and there is no outstanding Policy loan.
(For Policies issued in New Jersey, a Policy loan does not automatically
suspend the guarantee.) Generally, NELICO determines whether this benefit is
in effect on the first day of each Policy month. However, certain Policy
transactions could terminate this guarantee. This guarantee is not available
under Policies issued in New York. (See "Minimum Guaranteed Death Benefit".)
A-4
<PAGE>
MINIMUM GUARANTEED DEATH BENEFIT B. The Policy will not lapse, regardless of
whether the net cash value is sufficient to pay a Monthly Deduction, if the
total of: (1) premiums paid in each prior Policy year accumulated at a 4% rate
from the first day of the year of payment to the most recent Policy
anniversary, less partial surrenders accumulated at a 4% rate from the date of
surrender to the most recent Policy anniversary, plus (2) premiums paid less
partial surrenders in the current Policy year, is at least equal to: the
amount shown in the Table of Guaranteed Death Benefit B Premiums Accumulated
at 4% for the prior Policy year plus 1/12 of the Benefit B Premium for each
Policy month of the current year up to and including the month for which the
Monthly Deduction is being processed, and there is no outstanding Policy loan.
(For Policies issued in New Jersey, a Policy loan does not automatically
suspend the guarantee.) Generally, NELICO determines whether this benefit is
in effect on the first day of each Policy month prior to the later of: the
date when the insured attains age 80, and 20 years from the Policy Date, but
no later than the Maturity Date. However, certain Policy transactions could
terminate this guarantee. (See "Minimum Guaranteed Death Benefit".)
MINIMUM PREMIUM. Generally, the Minimum Premium is that amount which, if
timely paid, guarantees that the Policy will not lapse during the first three
Policy years even if the Policy's net cash value is insufficient to pay the
Monthly Deduction in any month. The Minimum Premium amount may be recalculated
following certain Policy transactions. In addition, no three-year Minimum
Premium death benefit guarantee will apply to the Policy following certain
other Policy transactions. (See "Premiums".)
MONTHLY DEDUCTION. The Monthly Deduction is the amount of charges deducted
from the Policy's cash value each month and includes the monthly cost of
insurance, the monthly cost of any benefits provided by riders, the monthly
policy fee, the monthly administrative charge and the monthly minimum death
benefit guarantee charge. (See "Monthly Deduction from Cash Value".)
MORTALITY AND EXPENSE RISK CHARGE. This charge is made daily from the value
of each Sub-Account's assets that come from the Policies. The charge is
currently at an annual rate of .75% of the Sub-Accounts' assets, and is
guaranteed not to exceed .90% of the Sub-Accounts' assets. The mortality risk
NELICO assumes is that insureds may live for shorter periods of time than
estimated. The expense risk NELICO assumes is that the costs of issuing and
administering Policies may be more than estimated. (See "Charges Against the
Eligible Funds and the Sub-Accounts of the Variable Account".)
NET CASH VALUE. The amount you may obtain upon surrender of the Policy and
which is equal to the Policy's cash value reduced by any Surrender Charge that
would apply on surrender and by any outstanding Policy loan and accrued
interest on the loan. (See "Cash Value".)
NET INVESTMENT EXPERIENCE. For any period, a Sub-Account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares for the same period, reduced by the amount of charges against the Sub-
Account for that period. (See "Net Investment Experience".)
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you
choose in an effort to meet your future goals under the Policy. The Planned
Premium is a level amount that is subject to certain limits under the Policy.
Payments in addition to any Planned Premium are referred to in the Policy as
unscheduled payments and can be paid at any time, subject to certain limits.
(See "Premiums".)
PREMIUMS. Premiums include all payments under the Policy, whether a Planned
Premium or an unscheduled payment. (See "Premiums".)
POLICY DATE. If you make a premium payment with the application, the Policy
Date is generally the later of the date Part II of the application was signed
and receipt of the premium payment. If you choose to pay the initial premium
upon delivery of the Policy, the Policy will be issued with a Policy Date
which is generally five days after issue. (See "Amount Provided for Investment
under the Policy".)
TABLE OF GUARANTEED DEATH BENEFIT A PREMIUMS ACCUMULATED AT 4%. The Table of
Guaranteed Death Benefit A Premiums Accumulated at 4%, which appears in the
Policy, is a measurement used to determine if the Minimum Guaranteed Death
Benefit A is in effect. This Table assumes the Guaranteed Death Benefit A
Premium that appears in the Policy is paid on the first day of each Policy
year. The Table shows the value of those premiums accumulated at 4% per year.
This Table is not applicable to Policies issued in New York. (See "Minimum
Guaranteed Death Benefit".)
A-5
<PAGE>
TABLE OF GUARANTEED DEATH BENEFIT B PREMIUMS ACCUMULATED AT 4%. The Table of
Guaranteed Death Benefit B Premiums Accumulated at 4%, which appears in the
Policy, is a measurement used to determine if the Minimum Guaranteed Death
Benefit B is in effect. This Table assumes the Guaranteed Death Benefit B
Premium that appears in the Policy is paid on the first day of each Policy
year. The Table shows the value of those premiums accumulated at 4% per year.
(See "Minimum Guaranteed Death Benefit".)
TARGET PREMIUM. The Target Premium is used to determine the amount of
Deferred Sales Charge that may apply in the event of a surrender, partial
surrender, lapse or face amount reduction. In addition, the portion of the
total premiums paid in a Policy year that is currently subject to the 4% sales
charge, and commissions payable in connection with sales of the Policies, are
based on an amount equal to 110% of the Policy's Target Premium. The Target
Premium varies by issue age, sex and underwriting class of the insured and the
Policy's face amount. The Target Premium is less than or equal to 75% of the
annual premium necessary to maintain a fixed benefit whole life insurance
Policy for the same face amount on the life of the insured. The annual whole
life premium is calculated using an assumed interest rate of 4%, guaranteed
cost of insurance charges and the current level of other Policy charges. (See
"Surrender Charge".)
YOU. When used in this prospectus, "you" refers to the Policy Owner.
A-6
<PAGE>
INTRODUCTION TO THE POLICIES
This prospectus describes Policies under which net premiums are allocated to
the Variable Account. If the Fixed Account is available in your state, you may
choose to allocate or transfer all or part of your funds to that account.
NELICO provides guarantees of principal and interest with respect to the Fixed
Account which is part of NELICO's general account. Amounts in the Fixed
Account are backed by NELICO's general account, rather than the Variable
Account. For a description of the Fixed Account, see "The Fixed Account" which
appears later in this prospectus.
THE POLICIES
The individual Flexible Premium Adjustable Variable Life Insurance Policies
offered by this prospectus are designed to provide lifetime insurance
coverage. They are not offered primarily as an investment.
The following is a brief listing of the basic features of the Policy. These
and other features of the Policy are explained in detail throughout the
prospectus. You should be sure to read the entire prospectus for more complete
information.
-- You may choose to make premium payments under the Policy based on a
schedule you determine, subject to certain limits. NELICO can limit or
prohibit unscheduled payments in certain situations, including cases where
the insured is in a substandard risk class. (See "Premiums".)
-- Net premiums are invested according to your instructions in one or more of
the Sub-Accounts of the Variable Account corresponding to mutual fund
portfolios, or the Fixed Account, after an initial period in the Zenith
Money Market Sub-Account. (See "Allocation of Net Premiums" and "Investment
Options".)
-- The mutual fund portfolios available to you under the Policy include
several common stock funds, including funds which invest primarily in
foreign securities, two bond funds, two managed funds, a balanced fund, and
a money market fund. You may allocate your Policy's cash value to a maximum
of ten accounts (including the Fixed Account) at any one time. (See
"Investments of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. NELICO provides guarantees of Fixed Account
principal and interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE
FROM THE FIXED ACCOUNT. NELICO also reserves the right to restrict
transfers of cash value and allocations of premiums into the Fixed Account.
(See "The Fixed Account".)
-- The cash value of the Policy will vary daily based on, among other things,
the net investment experience of the Sub-Accounts to which amounts have
been allocated and the amount of interest credited to any of the Policy's
cash value in the Fixed Account. (See "Cash Value", "Charges and Expenses",
"Premiums", "Loan Provision" and "Partial Surrender".)
-- The portion of the cash value which you invest in the Sub-Accounts is not
guaranteed. You bear the investment risk on this portion of the cash value.
(See "Cash Value".)
-- You may choose between two death benefit options under the Policy. The
level option provides a death benefit equal to the Policy's face amount.
The variable option provides a death benefit equal to the face amount plus
any cash value, which varies with the net investment experience of the Sub-
Accounts to which amounts have been allocated and the rate of interest
credited on any cash value in the Fixed Account. Under either of these
options the death benefit could be increased to satisfy tax law
requirements if the cash value reaches certain levels. (See "Death
Benefit".)
-- Regardless of investment experience, each form of death benefit is
guaranteed not to be less than the Policy's face amount, as long as the
total amount of premiums paid, with interest, less any partial surrenders,
with interest, at least equals certain minimum amounts and there is no
outstanding Policy loan. (See "Death Benefit" and "Minimum Guaranteed Death
Benefit".)
-- Unless the extended maturity option is part of your Policy, if the insured
is alive and the Policy is in force on the Maturity Date, the Policy will
then terminate. The net cash value as of the Maturity Date will be paid to
you. (See "Extending the Maturity Date".)
A-7
<PAGE>
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- After the "Right to Return the Policy" period, the Policy provides that
you may transfer portions of the Policy's cash value among the Sub-
Accounts and, generally, to the Fixed Account up to four times per Policy
year (twelve times per Policy year for Policies issued in New York)
without NELICO's consent. NELICO currently allows 12 transfers per Policy
year in all states. Transfers and allocations involving the Fixed Account
are subject to certain limits. (See "Transfer Option" and "The Fixed
Account--Policy Transactions".)
-- A loan privilege is available under the Policy. A partial surrender
feature is also available. (See "Loan Provision" and "Partial Surrender".)
-- Death benefits paid to the beneficiary under the Policy generally are not
subject to Federal income tax. Under current law, undistributed increases
in cash value generally are not taxable to you. (See "Tax
Considerations".)
-- Loans, assignments and other pre-death distributions under the Policy may
have tax consequences depending primarily on the amount which you have paid
into the Policy but also on any "material change" in the terms or benefits
of the Policy or any death benefit reduction. If premium payments, a death
benefit reduction, or a material change in the terms or benefits of the
Policy cause it to become a "modified endowment contract", then pre-death
distributions (including loans) will be included in income on an income
first basis, and a 10% penalty tax may be imposed on income distributed
before the Policy Owner attains age 59 1/2. Tax considerations may
therefore influence the amount and timing of premium payments and certain
Policy transactions which you choose to make. (See "Tax Considerations".)
-- If the Policy is not a modified endowment contract, NELICO believes that
loans under the Policy will not be taxable to you as long as the Policy
has not lapsed, been surrendered or terminated. With certain exceptions,
other pre-death distributions under a Policy that is not a modified
endowment contract are includible in income only to the extent they exceed
the investment in the Policy. (See "Tax Considerations".)
-- You have an opportunity during the "Right to Return the Policy" period to
return the Policy for a refund. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue, you may exercise the
Policy's 24 Month Right, which will result in the allocation of all or
part of your Policy's cash value and future premiums to the Fixed Account.
The purpose of the 24 Month Right is to provide you with fixed Policy
values and benefits. (See "24 Month Right" for a description of this
provision generally and for a description of the variation which applies
to Policies issued in Maryland and New Jersey.)
In many respects the Policies are similar to fixed-benefit universal life
insurance. Like universal life insurance, the Policies offer death benefits
and provide flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit universal life insurance in
that the death benefit may, and the cash value will, vary to reflect the
investment experience of the selected Sub-Accounts of the Variable Account.
The variable universal life insurance policies offered by NELICO are
designed to provide insurance protection. Although the underlying mutual fund
portfolios invest in securities similar to those in which mutual funds
available directly to the public invest, in many ways the Policies differ from
mutual fund investments. The main differences are:
-- The Policy provides a death benefit based on NELICO's assumption of an
actuarially calculated risk.
-- If the net cash value is not sufficient to pay a Monthly Deduction, the
Policy may lapse with no value unless additional premiums are paid. If the
Policy lapses when Policy loans are outstanding, adverse tax consequences
may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values of
the Policy. These charges include various insurance, risk, administrative
and premium tax charges. (See "Charges and Expenses".)
-- The Variable Account, not the Policy Owner, owns the mutual fund shares.
-- Federal income tax liability on any earnings is deferred until you receive
a distribution from the Policy. Transfers from one underlying fund
portfolio to another are accomplished without tax liability under current
law.
A-8
<PAGE>
-- Dividends and capital gains are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses
of Life Insurance".
AVAILABILITY OF THE POLICY
Generally, the Policies may be issued on the lives of insureds from the age
of one to 80 on an underwritten basis, and on the lives of insureds from the
age of 20 to 70 on an automatic issue basis. (Automatic issue Policies are not
available in New Jersey.) With NELICO's consent, the Policies may be issued on
the lives of insureds less than the age of one. All persons must meet NELICO's
underwriting and other criteria for issuance. Generally, the minimum face
amount available is $100,000 unless NELICO consents to a lower amount.
However, the minimum face amount available is $50,000 in business situations
(situations in which two or more Policies, on more than one life, are totally
or partially funded, directly or indirectly, by an employer) or for pension
plans qualified under Section 401 of the Internal Revenue Code ("tax-qualified
pension plans"), in each case where the average face amount is at least
$100,000. Policies with a minimum face amount of $50,000 may also be available
for juvenile insureds in the state of New Jersey.
POLICY CHARGES
PREMIUM-BASED CHARGES. NELICO deducts the following charges from premiums:
-- A maximum sales charge of 4%. NELICO currently intends to waive this charge
on premiums paid after the first 20 Policy years. In addition, NELICO
currently intends to deduct this charge from premium payments made in a
Policy year (through the first 20 Policy years) only until an amount equal
to 110% of a Target Premium, plus a portion of certain rider premiums, has
been paid in that Policy year. Premium payments during a Policy year in
excess of 110% of a Target Premium (plus the applicable portion of certain
rider premiums) will not be subject to the sales charge. A 3% sales charge
will apply to certain larger Policies and to Policies sold in certain
business situations or to certain tax-qualified pension plans;
-- A state premium tax charge of 2.5%;
-- A charge for federal taxes of 1%.
SURRENDER CHARGE. The Surrender Charge includes:
-- A deferred sales charge. This charge applies to a lapse, total or partial
surrender or reduction in face amount during Policy years one through
eleven. The maximum Deferred Sales Charge is imposed for Policies which
cover insureds whose issue age is 55 or less at issue, if you lapse or
surrender the Policy, or reduce its face amount, in Policy years three
through five. The maximum Deferred Sales Charge in those years equals 45%
of one Target Premium plus 13.5% of a second Target Premium and 13.5% of a
third Target Premium. After the fifth Policy year, the maximum Deferred
Sales Charge declines on a monthly basis until it reaches 0% in the last
month of the eleventh Policy year. If you lapse or surrender the Policy, or
reduce its face amount, in the first two Policy years, the maximum Deferred
Sales Charge in the first Policy year will be 25% of one Target Premium and
in the second Policy year will be 25% of one Target Premium plus 5% of a
second Target Premium.
-- A deferred administrative charge. This charge applies to a lapse, total or
partial surrender or reduction in face amount during Policy years one
through eleven. This charge is $2.50 per $1,000 of face amount for the
first Policy year, and then reduces monthly until it reaches 0 at the end
of the 11th Policy year. The charge will be less if the issue age is
greater than 65.
The Surrender Charge is deducted from the Policy's available cash value,
regardless of whether that cash value is derived from premiums or investment
experience.
MONTHLY DEDUCTION FROM CASH VALUE. NELICO deducts certain charges from the
cash value:
-- Monthly charge for the cost of insurance and for any benefits provided by
rider;
-- Monthly administrative charge, currently equal to $0.06 per $1,000 of face
amount for the first Policy year and $0.02 per $1,000 thereafter
(guaranteed not to exceed $0.08 per $1,000 of face amount in the first
Policy year and $0.04 per $1,000 thereafter). On a current basis, NELICO
intends not to charge more than $40 per month for the monthly
A-9
<PAGE>
administrative charge in Policy years two and after. For certain larger
Policies and Policies sold in certain business situations or to certain
tax-qualified pension plans the monthly administrative charge for the
first Policy year currently equals $0.05 per $1,000 of face amount rather
than $0.06;
-- Monthly minimum death benefit guarantee charge of $0.01 per $1,000 of face
amount;
-- Monthly policy fee, currently equal to $4.50 per month (guaranteed not to
exceed $7.00 per month).
CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT AND THE ELIGIBLE FUNDS. The
following charges are deducted from the Variable Account and Eligible Fund
assets:
-- Daily charge against the Sub-Account assets for NELICO's mortality and
expense risk, currently equal to an annual rate of .75% (guaranteed not to
exceed .90%);
-- Daily charges against the Eligible Fund portfolios for investment advisory
services and fund operating expenses.
Currently, no charge is made to the Variable Account for federal income taxes
that may be attributable to the Variable Account. NELICO may, however, impose
such a charge in the future.
See "Charges and Expenses".
A-10
<PAGE>
HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
Premium Payments
.Flexible
.Planned premium options
-Minimum premium (in first three Policy years)
-Guaranteed Death Benefit B Premium (to age 80)
-Guaranteed Death Benefit A Premium (to age 100)(not
available under Policies issued in New York)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Charges from Premium Payments
.Sales Load: 4% (3% for certain larger Policies and Policies sold in certain
business situations or to certain tax-qualified pension plans). NELICO intends
to waive after 20 policy yrs. NELICO also intends to waive for premiums in a
Policy year above 110% of Target Premium (plus a portion of certain rider
premiums)
.State Premium Tax Charge: 2.5%
.Charge for Federal Taxes: 1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loans
.After the free look period, you may borrow a portion of your cash value
.Loan interest charge is 5.5%. Loaned funds are transferred out of the Eligible
Funds into the General Account where they are credited with not less than
4.0% interest. (Currently NELICO intends to credit 5.25% interest after 15
Policy years.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Retirement Benefits
.Fixed settlement options are available for policy proceeds
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash Values
.Net premium payments invested in your choice of Eligible Fund investments or
the Fixed Account (after an initial period in the Zenith Money Market
Sub-Account)
.The cash value reflects investment experience, interest, premium payments,
policy charges and any distributions from the Policy
.The cash value invested in mutual funds is not guaranteed
.Any earnings are accumulated free of any current income taxes
.You may change the allocation of future net premiums at any time. You may
currently transfer funds among investment options (and to the Fixed Account) up
to 12 times per policy year, after the free look period.
Transfers from (and, in certain circumstances, to) the Fixed Account are
limited as to timing, frequency and amount
.Your cash value may be allocated among a maximum of ten accounts at any one
time
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Death Benefit
.Level or Variable Death Benefit Options
.Guaranteed not to be less than face amount if Death Benefit Guarantee is in
effect
.Income tax free to named beneficiary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Daily Deductions from Assets
.Mortality and expense risk charges of .75% (guaranteed not to exceed .90%) on
an annual basis are deducted from the cash value daily
.Investment advisory fees and other expenses are deducted from the Eligible Fund
values daily
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beginning of Month Charges
.The cost of insurance protection (reflecting any substandard risk or automatic
issue rating) is deducted from the cash value each month
.Any Rider Charges
.Policy Fee: $4.50 (not to exceed $7.00) per month
.Minimum Death Benefit Guarantee Charge: $.01 per $1,000 face amount monthly
.Administrative Charge: $.06 (guaranteed not to exceed $.08) per $1,000 face
amount monthly (first year) and $.02 (guaranteed not to exceed $.04) per $1,000
face amount monthly (after first year).
For certain larger Policies and Policies sold in certain business situations
charge is currently $.05 per $1,000 in first year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Surrender Charges
.Consist of Deferred Sales Charge and Deferred Administrative Charge (see page
A-19)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Living Benefits
.If policyholder has elected and qualified for benefits for disability and
becomes totally disabled, company will waive monthly charges during the period
of disability up to certain limits.
.Policy may be surrendered at any time for its cash surrender value
.Deferred income taxes, including taxes on amounts borrowed, become payable upon
surrender
.Grace period for lapsing with no value is 62 days from the first date in which
Monthly Deduction was not paid due to insufficient cash value
.Subject to NELICO's rules, a lapsed Policy may be reinstated within seven years
of date of lapse if it has not been surrendered
- --------------------------------------------------------------------------------
A-11
<PAGE>
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME OFFICE
NELICO will treat your request for a Policy transaction, or your submission
of a payment, as received at the Home Office if it is received there before
the close of regular trading on the New York Stock Exchange on that day. If it
is received after that time, or if the New York Stock Exchange is not open
that day, then it will be treated as received on the next day when the New
York Stock Exchange is open.
NELICO
NELICO was organized as a stock life insurance company in Delaware in 1980
and is licensed to sell life insurance in all states, the District of Columbia
and Puerto Rico. Before August 30, 1996, NELICO was a wholly-owned subsidiary
of New England Mutual Life Insurance Company ("New England Mutual"). Effective
August 30, 1996, New England Mutual merged into MetLife, a mutual life
insurance company whose principal office is One Madison Avenue, New York, NY
10010. With the merger, New England Mutual's separate corporate existence
ended, and MetLife became the parent of NELICO. In connection with the merger,
NELICO changed its name from "New England Variable Life Insurance Company" to
"New England Life Insurance Company" and changed its domicile from the State
of Delaware to the Commonwealth of Massachusetts. NELICO's Home Office is now
at 501 Boylston Street, Boston, Massachusetts 02116. NELICO's mailing address
is: P.O. Box 9116, Boston, Massachusetts 02117.
The following chart illustrates the relationship of NEVLICO, the Fixed
Account, the Variable Account and the Eligible Funds.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
NELICO
------------------------------------------------------------------------------------------------------------
(Insurance company subsidiary of MetLife)
Charges are deducted.
Net premiums and net unscheduled payments are allocated to the Policy Owner's choice of sub-
accounts in the Variable Account or to the Fixed Account.
Premiums --------------------------------------------------------------------------------------------------
and VARIABLE ACCOUNT
Unscheduled --------------------------------------------------------------------------------------------------
Payments <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[ARROW Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith Zenith
POINTING Fixed Capital Bond Money Man- Stock Growth Small Bal- Equity Venture Midcap
RIGHT Account Growth Income Market aged Index and Cap anced Growth Value Value
APPEARS Sub- Sub- Sub- Sub- Sub- Income Sub- Sub- Sub- Sub- Sub-
HERE] Account Account Account Account Account Sub- Account Account Account Account Account
Account
--------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Zenith Equity- Over- High Asset
Inter- Income seas Income Man-
national Sub- Sub- Sub- ager
Magnum Account Account Account Sub-
Equity Account
Sub-
Account
--------------------------------------------------------------------------------------------------
Sub-accounts buy
shares of the [TWELVE ARROWS POINTING TO NEW ENGLAND ZENITH FUND APPEARS HERE]
Eligible Funds.
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
NEW ENGLAND ZENITH FUND
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Back Bay Back Bay Back Bay Westpeak Westpeak Loomis Loomis Alger Davis Goldman Morgan
Growth Advisors Advisors Advisors Stock Growth Sayles Sayles Equity Venture Sachs Stanley
Series Bond Money Managed Index and Small Bal- Growth Value Midcap Inter-
Income Market Series Series Income Cap anced Series Series Value national
Series Series Series Series Series Series Magnum
Equity
Series
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
[THREE ARROWS [ARROW
POINTING TO POINTING TO
VIP FUND VIP FUND II
APPEARS HERE APPEARS HERE]
-------------------------------
VIP
FUND
VIP FUND II
-------------------------------
<S> <C> <C> <C>
Equity Over- High Asset
Income seas Income Man-
Port- Port- Port- ager
folio folio folio Port-
folio
-------------------------------
</TABLE>
Eligible Funds buy portfolio investments to support values and benefits of the
Policies.
A-12
<PAGE>
POLICY VALUES AND BENEFITS
DEATH BENEFIT
If the insured dies before the Maturity Date, NELICO will pay a death
benefit to the beneficiary.
DEATH BENEFIT OPTIONS. When you apply for a Policy, you may choose between
two death benefit options.
The Option 1 (Face Amount) death benefit provides a death benefit equal to
the face amount of the Policy. The Option 1 death benefit is fixed, subject to
increases required by the Internal Revenue Code.
The Option 2 (Face Amount Plus Cash Value) death benefit provides a death
benefit equal to the face amount of the Policy plus the amount, if any, of the
Policy's cash value. The Option 2 death benefit is also subject to increases
required by the Internal Revenue Code.
In order to meet the Internal Revenue Code's definition of life insurance,
the Policies provide that the death benefit will not be less than a percentage
of the Policy's cash value, including the pro rata portion of any Monthly
Deduction made for a period beyond the date of death, as set forth in Table I
below. This means that, if the cash value grows to certain levels, the death
benefit will be increased to satisfy the tax law requirements. At that point,
any payment you make into the Policy will increase the death benefit by more
than it increases the cash value. (See "Premiums".)
TABLE I
<TABLE>
<CAPTION>
AGE OF AGE OF
INSURED AT START OF PERCENTAGE OF INSURED AT START OF PERCENTAGE OF
THE POLICY YEAR CASH VALUE* THE POLICY YEAR CASH VALUE*
------------------- ------------- ------------------- -------------
<S> <C> <C> <C>
0 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 through 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 through 99 101
59 134 100 100
60 130
</TABLE>
- ----------
* including the pro rata portion of any Monthly Deduction made for a period
beyond the date of death.
MINIMUM GUARANTEED DEATH BENEFIT
The Policy provides two Minimum Guaranteed Death Benefits. (One of these,
Minimum Guaranteed Death Benefit A, is not available under Policies issued in
New York.) If either Minimum Guaranteed Death Benefit is in effect, as
determined on the first day of each Policy month, the Policy will not lapse
even if the net cash value is insufficient to cover the Monthly Deduction due
for that month. The death benefit will be adjusted as described below before
the proceeds are paid.
A-13
<PAGE>
If premiums are paid in certain amounts, then a Minimum Guaranteed Death
Benefit may be in effect unless you make certain Policy transactions. These
premiums are shown in Section 1 of your Policy and also appear in your
personalized illustration. See Appendix A. Generally, if you pay premiums in
the amount specified for a Minimum Guaranteed Death Benefit each year, that
Minimum Guaranteed Death Benefit will apply to your Policy in accordance with
its terms. (For this purpose, a premium paid within 20 days prior to a Policy
anniversary is treated as if paid in the next Policy year.) If you do not pay
one of these premiums in a Policy year, or if you make certain Policy
transactions, you could lose the Minimum Guaranteed Death Benefit on either a
temporary or permanent basis.
For example, no Minimum Guaranteed Death Benefit will apply to your Policy
while a Policy loan is outstanding, regardless of your premium payments.
However, if the total premiums you have paid, adjusted for interest and any
partial surrenders, as described below under "Minimum Guaranteed Death Benefit
A" and "Minimum Guaranteed Death Benefit B", are sufficient, the applicable
Minimum Guaranteed Death Benefit will apply to the Policy once the loan is
repaid. (Under Policies issued in New Jersey, a Minimum Guaranteed Death
Benefit may apply while a Policy loan is outstanding. For those Policies, the
amount of the loan plus accrued interest is subtracted from premiums paid in
the current Policy year when NELICO applies the Minimum Guaranteed Death
Benefit tests described below under "Minimum Guaranteed Death Benefit A" and
"Minimum Guaranteed Death Benefit B".)
In addition, if you reduce the Policy's face amount or make a partial
surrender which reduces the face amount, or reduce or delete a rider benefit
from your Policy, or if your Policy's rating classification is improved, you
may lose the death benefit guarantee. Whether a guarantee still applies will
depend on the total premiums you have paid and the amount you have withdrawn
from the Policy by means of partial surrenders, as described below under
"Minimum Guaranteed Death Benefit A" and "Minimum Guaranteed Death Benefit B".
The applicable minimum death benefit premiums shown in Section 1 of your
Policy will be recalculated following each of these transactions and also
following an increase in the amount of coverage provided by riders. (See
"Premiums" below.) Federal tax law limits the amount of premiums that can be
paid into the Policy, and if, following one of these transactions, the Federal
tax law limits the minimum death benefit premium for your Policy to an amount
less than zero, your Policy will lose its death benefit guarantee permanently.
If you do not pay a minimum death benefit premium in a Policy year, a
Minimum Guaranteed Death Benefit may still apply to your Policy, depending on
the total premiums paid and partial surrenders made, as described below under
"Minimum Guaranteed Death Benefit A" and "Minimum Guaranteed Death Benefit B".
However, once a death benefit guarantee is lost due to insufficient premium
payments, Federal tax law limits may prevent you from paying sufficient
premiums in future Policy years to regain the guarantee. Although it may be
possible to regain the Guaranteed Minimum Death Benefit B, it is unlikely that
Federal tax law limits will permit you to pay sufficient premiums in future
years to regain the Guaranteed Minimum Death Benefit A.
MINIMUM GUARANTEED DEATH BENEFIT A. NELICO will determine if Minimum
Guaranteed Death Benefit A is in effect on the first day of each Policy month
the Policy is in force, until the Maturity Date. This Benefit is in effect if
the total of: (1) premiums paid under the Policy in each prior Policy year
accumulated at a 4% rate from the first day of the year of payment to the most
recent Policy anniversary, less partial surrenders accumulated at a 4% rate
from the date of surrender to the most recent Policy anniversary, plus (2)
premiums paid less partial surrenders in the current Policy year, is at least
equal to: the applicable amount shown in the Table of Guaranteed Death Benefit
A Premiums Accumulated at 4% for the prior Policy year plus 1/12 of the
Benefit A Premium for each Policy month of the current policy year up to and
including the month for which the Monthly Deduction is being processed, and
there is no outstanding Policy loan. (See the discussion above for the special
rule regarding loans under Policies issued in New Jersey.) For these purposes,
premiums paid within 20 days prior to a Policy anniversary are treated as if
paid in the next Policy year.
The Table of Guaranteed Death Benefit A Premiums Accumulated at 4% assumes
that the Guaranteed Death Benefit A Premium that appears in your Policy is
paid on the first day of each Policy year and accumulates at a 4% rate per
year.
The Minimum Guaranteed Death Benefit A is not available under Policies
issued in New York.
Minimum Guaranteed Death Benefit B. NELICO will determine if Minimum
Guaranteed Death Benefit B is in effect on the first day of each Policy month
the Policy is in force, until the later of: the date the insured attains age
80, or 20 years from the Policy Date, but no later than the Maturity Date of
the Policy. This Benefit is in effect if the total of: (1) premiums paid under
the Policy in each prior Policy year accumulated at a 4% rate from the first
day of the year of payment to the most recent Policy anniversary, less partial
surrenders accumulated at a 4% rate from the date of surrender to the most
recent Policy anniversary, plus (2) premiums paid less partial surrenders in
the current Policy year, is at least equal to: the amount shown in the Table
of
A-14
<PAGE>
Guaranteed Death Benefit B Premiums Accumulated at 4% for the prior Policy
year plus 1/12 of the Benefit B Premium for each Policy month of the current
Policy year up to and including the month for which the Monthly Deduction is
being processed, and there is no outstanding Policy loan. (See the discussion
above for the special rule regarding loans under Policies issued in New
Jersey.) For these purposes, premiums paid within 20 days prior to a Policy
anniversary are treated as if paid in the next Policy year.
The Table of Guaranteed Death Benefit B Premiums Accumulated at 4% assumes
that the Guaranteed Death Benefit B Premium that appears in your Policy is
paid on the first day of each Policy year and accumulates at a 4% rate per
year.
The Minimum Guaranteed Death Benefit B is referred to as the "No Lapse
Guarantee Death Benefit" under Policies issued in New York.
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the death
benefit in effect on the date of the insured's death reduced by any
outstanding loan and accrued loan interest as of that date and by the portion
of any unpaid Monthly Deduction for the period prior to that date. The death
proceeds will be increased (1) by any rider benefits payable and (2) by any
portion of a Monthly Deduction made for a period beyond the date of death,
unless this amount was already included in the death benefit calculation as a
result of Federal tax law requirements (see "Death Benefit Options" above).
The death proceeds may also be adjusted if the insured's age or sex was
misstated in the application, if death results from the insured's suicide
within two years (or less if provided by state law) from the Policy's date of
issue, or if limits on the death benefit are imposed by rider. (See "Limits to
NELICO's Right to Challenge the Policy".)
CHANGE IN DEATH BENEFIT OPTION
At any time after the first Policy year, you may change your death benefit
option by sending your written request for change to NELICO's Home Office. The
request will be effective on the date it is received at NELICO's Home Office.
A change in death benefit option may result in tax consequences to you. (See
"Tax Considerations".)
If you change from Option 1 (Face Amount) to Option 2 (Face Amount Plus Cash
Value), the Policy's face amount will be reduced by the amount necessary for
the death benefit to be the same immediately before and after the change. A
face amount reduction below $250,000 is permitted only with NELICO's consent;
however, special rules apply for certain business situations. Any rider
benefits under the Policy may also have to be decreased. In some circumstances
a partial surrender of cash value may be necessary in order to comply with
Federal tax law limits on the amount of premiums that can be paid into the
Policy. No Surrender Charge will be assessed in connection with a face amount
reduction or partial surrender resulting from a change from Option 1 to Option
2.
If you change from Option 2 (Face Amount Plus Cash Value) to Option 1 (Face
Amount), the Policy's face amount will be increased, if necessary, for the
death benefit to be the same immediately before and after the change.
EXTENDING THE MATURITY DATE
If approved in your state, NELICO will issue or amend your Policy with an
extended maturity endorsement. (The endorsement will be added only prior to
the original Maturity Date.) If the extended maturity rider is added to the
Policy, the Policy will not mature until the date of the insured's death (the
"Extended Maturity Date"). In addition, on and after the original Maturity
Date, the death benefit will equal the cash value on the date of death; or,
the greater of (1) the cash value on the date of death and (2) the Policy face
amount, if, on the original Maturity Date, the total premiums paid in each
Policy year accumulated at 4% from the first day of the Policy year, less
every partial surrender accumulated at 4% from the date of surrender, is not
less than the "Age 100 Amount" shown in the Policy. (For this purpose,
premiums paid within 20 days prior to a Policy anniversary are treated as if
paid in the next Policy year.) The Age 100 Amount is based on the Guaranteed
Death Benefit B Premium being paid each Policy year until the original
Maturity Date (rather than until age 80 of the insured). Currently, no cost of
insurance or minimum death benefit guarantee charges will be deducted after
the original Maturity Date. No premiums
A-15
<PAGE>
can be paid after the original Maturity Date unless necessary to prevent lapse
of the Policy. All riders attached to the Policy and in effect on the original
Maturity Date, other than the extended maturity endorsement, will terminate on
the original Maturity Date.
The tax consequences associated with extending the Maturity Date beyond age
100 are unclear and a tax advisor should be consulted before effecting such an
extension. For more information about the extended maturity option, contact
your registered representative or NELICO.
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account, in
the Fixed Account and, if you have an outstanding Policy loan, in NELICO's
general account as a result of the loan. The cash value reflects net premium
payments, the net investment experience of the Policy's Sub-Accounts, interest
credited on its cash value in the Fixed Account and on amounts held in the
general account as a result of a loan, the death benefit option chosen,
amounts deducted for Policy charges (including Monthly Deductions and any
Surrender Charge that applies if you reduce the Policy's face amount or make a
partial surrender), amounts surrendered and transfers among the Policy's Sub-
Accounts and the Fixed Account.
Your Policy's net cash value is the amount you will receive if you surrender
the Policy. The net cash value is the cash value reduced by any outstanding
policy loan (and accrued interest) and by any applicable Surrender Charge. The
net cash value is increased by the portion of any cost of insurance charge
deducted that applies to the period beyond the date of surrender. If you
surrender the Policy during the grace period, the net cash value you receive
is reduced by an amount to cover the Monthly Deduction to the date of
surrender. (See "Loan Provision", "Surrender Charge" and "Monthly Deduction
from Cash Value".)
The Policy's cash value in the Variable Account may increase or decrease
daily depending on the net investment experience of the Policy's Sub-Accounts.
Unfavorable investment experience can reduce the net cash value to zero.
Because there is no guaranteed minimum cash value in the Variable Account, you
bear the entire investment risk with respect to the cash value. The premium
payment schedule you choose will also affect the Policy's net cash value.
NET INVESTMENT EXPERIENCE
The net investment experience of the Policy's Sub-Accounts will affect the
Policy's cash value and, in some circumstances, the death benefit. The net
investment experience of the Sub-Accounts is determined as of the close of
regular trading on the New York Stock Exchange on each day when the Exchange
is open for trading.
A Sub-Account's net investment experience for any period reflects the
investment experience of the underlying Eligible Fund shares for the same
period, reduced by the charges against the Sub-Account for that period.
(Currently the Sub-Accounts are charged only for NELICO's mortality and
expense risk, but in the future NELICO may impose a charge against the Sub-
Accounts for taxes if appropriate. See "Charges Against the Eligible Funds and
the Sub-Accounts of the Variable Account" and "Charge for NELICO's Income
Taxes".)
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during
the period. Dividends and capital gains distributions on Eligible Fund shares
are reinvested in additional shares of the Eligible Fund and affect subsequent
investment experience.
ALLOCATION OF NET PREMIUMS
As of the "investment start date", the net premium will be allocated to the
Zenith Money Market Sub-Account until the later of 45 days after the date Part
I of the application is signed or 10 days after NELICO mails the Notice of
Withdrawal Right. (See "Right to Return the Policy". For the definition of the
"investment start date", see "Amount Provided for Investment under the
Policy".) Thereafter, the cash value (which will reflect at least one Monthly
Deduction) is allocated to the Sub-Accounts and/or the Fixed Account according
to your instructions. (See "Investment Options" and "Monthly Deduction from
Cash Value".) Therefore, your selection of accounts does not take effect until
after the initial period described above, when the cash value is allocated to
the Zenith Money Market Sub-Account. Allocations can be made to a maximum of
ten accounts (including the Fixed Account) at any one time.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
An amount is first invested under the Policy as of the investment start
date. That is the latest of: the date when NELICO first receives a premium
payment for the Policy, the date Part II of the Policy application is signed
and the Policy Date. (For this
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purpose, receipt of the premium payment means receipt by your registered
representative, if the payment is made with the application; otherwise, it
means receipt by a NELICO agency or, in the case of a Policy sold through
MetLife Brokerage, receipt by MetLife Brokerage at its Princeton, New Jersey
office.)
If you make a premium payment with the application, the Policy Date is
generally the later of the date Part II of the application is signed and
receipt of the premium payment. In that case, the Policy Date and investment
start date are the same. The amount of premium paid with the application must
be at least 10% of the annual Planned Premium for the Policy. Only one premium
payment may be made before the Policy is issued. (A premium payment made
before issue will be maintained by NELICO or an affiliate in the general
account, and will not earn interest until the investment start date.)
If you make a premium payment with the application, the insured will be
covered under a temporary insurance agreement for a limited period that is
described in the temporary insurance agreement form. Generally, coverage under
the temporary insurance agreement begins on the later of the date when NELICO
receives the premium for the Policy and the date when Part II of the
application is signed. The maximum amount of coverage provided is the lesser
of the amount of insurance applied for and $500,000 for standard and preferred
risks ($250,000 for substandard risks and $50,000 for persons who are
determined to be uninsurable). There may be variations to these provisions
required by state law.
If a Policy is issued, Monthly Deductions, including cost of insurance
charges, begin as of the Policy Date, even if the Policy's issuance was
delayed due to underwriting requirements; and will be in amounts based on the
face amount of the Policy issued, even if the temporary insurance coverage
received during the underwriting period was for a lesser amount. If NELICO
declines an application, it will refund the premium payment made plus interest
at the rate currently in use by NELICO.
If you choose to pay the initial premium upon delivery of the Policy, the
Policy will have a Policy Date which is generally five days after issue. The
investment start date will be the later of the Policy Date and the date the
premium is received. Monthly Deductions will begin on the Policy Date.
Interest at a 4% net rate will be credited on the applicable net Minimum
Premium for the period, if any, between the Policy Date and the investment
start date. Insurance coverage under the Policy will begin upon receipt of the
portion of the Minimum Premium due for the first quarter (or, upon receipt of
the number of monthly payments due under NELICO's Master Service Account
arrangement.)
Under limited circumstances, NELICO may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
Backdating may be desirable, for example, so that you can purchase a
particular Policy face amount for lower cost of insurance rates, based on a
younger insurance age. Backdating in some cases may result in a Policy with a
higher Surrender Charge if the backdating results in the Surrender Charge
being based on a lower age bracket. (See "Surrender Charge".) For a backdated
Policy, you must also pay the Minimum Premium payable for the period between
the Policy Date and the investment start date. As of the investment start
date, NELICO will allocate to the Policy those net premiums, adjusted for
monthly Policy charges and interest at a 4% net rate, for the period between
the Policy Date and the investment start date.
The amount provided for investment in the Policy is adjusted as of each day
the New York Stock Exchange is open to reflect the net investment experience
of the Sub-Accounts for that day.
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 45 days after the date Part 1 of the
application is signed, within 10 days (or more where required by applicable
state insurance law) after you receive the Policy or within 10 days after
NELICO mails the Notice of Withdrawal Right, whichever is latest. The Policy
may be returned to NELICO or its agent. Insurance coverage ends as soon as the
Policy is returned (as determined by its postmark, if the Policy is mailed).
If you choose to cancel the Policy, NELICO will refund any premiums paid (or
any other amount that is required by state insurance law) with interest at the
rate currently in use by NELICO.
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 Charge 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.
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DEDUCTIONS FROM PREMIUMS
SALES CHARGE. NELICO deducts a 4% sales charge from premiums (whether a
Planned Premium or an unscheduled payment). NELICO currently intends to waive
this charge on all premiums after the 20th policy year. In addition, NELICO
currently intends to deduct this charge from premium payments made in a Policy
year (through the first 20 Policy years) only until an amount equal to 110% of
a Target Premium, plus a portion of certain rider premiums, has been paid in
that Policy year. Premium payments during a Policy year in excess of 110% of a
Target Premium (plus the applicable portion of certain rider premiums) will
not be subject to the sales charge. However, NELICO retains the right not to
waive the charge or to resume the charge in either of these circumstances. The
"target premium" amount that is shown on personalized illustrations of the
Policy is equal to 110% of the Target Premium, plus a portion of certain rider
premiums, as described in this prospectus; accordingly, all current fees and
charges for the Policy are reflected in personalized illustrations.
For Policies that are not used in a business situation or a tax-qualified
pension plan and which have a face amount of at least $500,000, the sales
charge deducted from premiums will be 3% rather than 4%. In addition, for
Policies used in a business situation (a situation in which two or more
Policies, on more than one life, are totally or partially funded, directly or
indirectly, by an employer), or in a tax-qualified pension plan, where either
(1) the average face amount is $500,000 or (2) the Policies are issued on the
lives of at least 25 persons and the average face amount is at least $250,000,
the sales charge deducted from premiums will be 3% rather than 4%.
The Target Premium is less than or equal to 75% of the annual premium
necessary to maintain a fixed benefit whole life insurance policy for the same
face amount on the life of the insured. The annual whole life premium on which
the Target Premium is based is calculated using an assumed interest rate of
4%, guaranteed cost of insurance charges and the current level of other Policy
charges. The Target Premium varies by issue age, sex and underwriting class of
the insured and the Policy's face amount. (For purposes of determining the
Target Premium, all non-smoker underwriting classes use the nonsmoker
aggregate or nonsmoker substandard classes, as applicable. See "Monthly
Charges for the Cost of Insurance" below.)
During the first 11 Policy years, if you surrender or lapse the Policy,
reduce the face amount or make a partial surrender that reduces the face
amount, a Deferred Sales Charge also applies. (For insureds whose issue age is
56 to 65 at issue of the Policy, the period when the Deferred Sales Charge
applies is 10 years, for insureds whose issue age is 66 to 75, nine years, and
for insureds whose issue age is 76 to 80, five years. See "Surrender Charge"
below.)
The sales charges under a Policy in a given Policy year are not necessarily
related to NELICO's actual sales expenses for that year.
Sales charges for Policies sold in certain group or sponsored arrangements
may be reduced. NELICO offers a program under which certain fixed-benefit life
insurance policies that were issued by New England Mutual may be exchanged for
the Policies without a deduction for the sales charge, state premium tax and
federal premium tax charges (see below) from the amount of cash value that is
transferred to the Policy. Certain eligibility conditions apply, such as
policy issue date, minimum face amount, maximum age and/or underwriting
requirements. Certain insureds may qualify for a waiver of underwriting
requirements. Your registered representative can advise you regarding terms
and availability of the program.
STATE PREMIUM TAX CHARGE. NELICO deducts 2.5% from each premium to cover
state premium taxes and administrative expenses. Premium taxes vary from state
to state and the 2.5% charge reflects an average. Administrative expenses
covered by this charge include those related to premium tax and certain other
state filings.
FEDERAL PREMIUM TAX CHARGE. NELICO deducts 1% from each premium to recover a
portion of that part of NELICO's federal income tax liability that is
determined solely by the amount of life insurance premiums it receives.
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<PAGE>
EXAMPLE: The following chart shows the net amount that would be allocated to
the Variable Account assuming a premium payment of $3,000 and that 110% of the
Policy's Target Premium equals $2,000.
<TABLE>
<CAPTION>
NET
PREMIUM PREMIUM
------- -------
<C> <C> <S>
$3,000 $2,000
- 150 (7.5% X 2,000 = total sales and premium tax charge up to
110% of the Target Premium)
------
$1,850
$1,000
- 35 (3.5% X 1,000 = total sales and premium tax charge on
payments in excess of 110% of
------
$ 965 the Target Premium)
$1,850
+ 965
------
$2,815 Net Premium
------
</TABLE>
NELICO intends to waive the 4% sales charge on premiums paid after the 20th
Policy year. In that case, the net premium in this example would be $3,000 -
105 (3.5% X 3,000) or $2,895.
SURRENDER CHARGE
If, during the first eleven policy years, a Policy is totally surrendered or
lapses, the face amount is reduced, or a partial surrender reduces the face
amount, NELICO deducts a Surrender Charge from the cash value. (For insureds
whose issue age is 66 to 75 at issue of the Policy, the Surrender Charge
period is nine years, and for insureds whose issue age is 76 to 80, five
years.) The Surrender Charge includes a Deferred Sales Charge and a Deferred
Administrative Charge. The maximum Surrender Charge is set forth in your
Policy.
Any Surrender Charge deducted upon lapse is credited back to the Policy's
cash value upon reinstatement. The Surrender Charge on the date of
reinstatement will be the same as it was on the date of lapse. For purposes of
determining the Surrender Charge on any date after reinstatement, the period
the Policy was lapsed will not count.
DEFERRED SALES CHARGE. The Deferred Sales Charge is based on a percentage of
the Target Premium. The Target Premium is defined above under "Sales Charge".
For Policies which cover insureds whose issue age is 55 or less at issue,
the greatest Deferred Sales Charge is paid if you lapse or surrender, or
reduce the face amount, in Policy years three through five. The Deferred Sales
Charge in these years equals 45% of actual premiums paid up to one Target
Premium, plus 13.5% of additional premiums paid in excess of one Target
Premium up to a second Target Premium, plus 13.5% of additional premiums paid
in excess of two Target Premiums up to a third Target Premium. After the fifth
Policy year, the maximum Deferred Sales Charge declines on a monthly basis
until it reaches 0% in the last month of the eleventh Policy year.
The Deferred Sales Charge that applies during the first Policy year is equal
to 25% of premiums paid up to one Target Premium. The Deferred Sales Charge
during the second Policy year is equal to 25% of premiums paid up to one
Target Premium plus 5% of additional premiums paid up to a second Target
Premium. As described above, after the second Policy year, the maximum
Deferred Sales Charge increases substantially.
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<PAGE>
The table below shows the maximum Deferred Sales Charge that applies to
Policies covering insureds whose issue age is 55 or less at issue, and assumes
that one Target Premium per year is paid under the Policy. The table shows the
charge, expressed as a percentage of total Target Premiums paid to date, if
the lapse, surrender or face reduction occurs at the end of each of the Policy
years shown. During Policy years six through eleven, the Deferred Sales Charge
declines on a monthly basis.
<TABLE>
<CAPTION>
THE MAXIMUM DEFERRED
SALES CHARGE IS THE FOLLOWING
PERCENTAGE OF TOTAL TARGET
FOR POLICIES WHICH ARE PREMIUMS PAID TO DATE OF
SURRENDERED, LAPSED OR SURRENDER, LAPSE, OR
REDUCED DURING FACE AMOUNT REDUCTION
---------------------- -----------------------------
<S> <C> <C>
Entire Policy Year 3 24.00%
4 18.00%
5 14.40%
Last Month of Policy
Years 6 10.00%
7 6.86%
8 4.50%
9 2.67%
10 1.20%
11 0.00%
</TABLE>
For insureds whose issue age is above 55 at issue, the Deferred Sales Charge
percentages are less than or equal to those described above, with the maximum
charge occurring in Policy years three through five for insureds with an issue
age up through 65, in Policy years two through four for insureds with an issue
age from 66 through 75, and in Policy year two for insureds with an issue age
above 75.
The applicable Deferred Sales Charge will be deducted from the Policy's
available cash value, regardless of whether that cash value is derived from
premiums or investment experience.
In the case of a partial surrender or reduction in face amount, any Deferred
Sales Charge that applies is deducted from the Policy's remaining cash value
in an amount proportional to the amount of the Policy's face amount
surrendered. (See "Partial Surrender".) The charge is deducted from the
Policy's cash value in the Sub-Accounts and the Fixed Account in proportion to
the amount of the Policy's cash value in each.
DEFERRED ADMINISTRATIVE CHARGE. The Table below shows the Deferred
Administrative Charge deducted if you totally or partially surrender, lapse or
reduce the face amount of the Policy during the first eleven Policy years.
<TABLE>
<CAPTION>
FOR POLICIES WHICH ARE
SURRENDERED, LAPSED DEFERRED ADMINISTRATIVE
OR REDUCED DURING THE CHARGE PER $1,000 OF
POLICY YEAR SHOWN FACE AMOUNT
---------------------- -----------------------
<S> <C> <C>
Entire Policy year 1 $2.50
Last Month of Policy Year* 2 2.25
3 2.00
4 1.75
5 1.50
6 1.25
7 1.00
8 0.75
9 0.50
10 0.25
11 0.00
</TABLE>
- --------
* The charge declines monthly after the end of the first Policy year.
The applicable Deferred Administrative Charge will be deducted from the
Policy's available cash value, regardless of whether that cash value is
derived from premiums or investment experience.
For insureds whose issue age is above 65 at issue, the Deferred
Administrative Charge is less than or equal to that in the table above.
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<PAGE>
The Deferred Administrative Charge, together with the Policy Fee and monthly
Administrative Charge, covers the cost of administering the policies, as well
as legal, actuarial, systems, mailing, and other overhead costs connected with
NELICO's variable life insurance operations.
MONTHLY DEDUCTION FROM CASH VALUE
On the first day of each Policy month, starting with the Policy Date, NELICO
deducts the "Monthly Deduction" from your cash value. If a Minimum Guaranteed
Death Benefit is in effect, or if the Policy is protected against lapse by
payment of the Minimum Premium during the first three Policy years, the
Monthly Deduction is made, whether or not premiums are paid, until the cash
value equals zero. Otherwise, the Monthly Deduction is made, whether or not
premiums are paid, as long as the net cash value is sufficient to cover the
entire Monthly Deduction. If the net cash value is insufficient to cover the
entire Monthly Deduction and no Minimum Guaranteed Death Benefit or Minimum
Premium guarantee is in effect, the Policy will be in default and may lapse.
(See "Lapse and Reinstatement".) The Monthly Deduction reduces the cash value
in each Sub-Account of the Variable Account and in the Fixed Account in
proportion to the cash value in each.
The Monthly Deduction includes the following charges:
POLICY FEE. The Policy fee is currently equal to $4.50 per month (guaranteed
not to exceed $7.00 per month).
ADMINISTRATIVE CHARGE. The Administrative Charge is currently equal to $0.06
per $1,000 of Policy face amount in the first Policy year and $0.02 per $1,000
of Policy face amount thereafter (guaranteed not to exceed $0.08 per $1,000 of
face amount in the first Policy year and $0.04 per $1,000 of Policy face
amount thereafter). On a current basis, NELICO intends not to charge more than
$40 per month for the Administrative Charge in Policy years two and after (for
a Policy face amount above $2 million). For Policies not used in a business
situation or tax-qualified pension plan and which have a face amount of at
least $500,000, the monthly administrative charge for the first Policy year is
currently $0.05 per $1,000 of face amount rather than $0.06. In addition, for
Policies issued in business situations or tax-qualified pension plans where
either (1) the average face amount is at least $500,000 or (2) the Policies
are issued on the lives of at least 25 persons and the average face amount is
at least $250,000, the monthly administrative charge for the first Policy year
is currently $0.05 per $1,000 of face amount rather than $0.06.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE. The minimum death benefit guarantee
charge is $0.01 per $1,000 of Policy face amount. This charge compensates
NELICO for its guarantee that, regardless of the investment experience of the
Policy's Sub-Accounts, the Policy's death benefit will never be less than the
face amount, provided that the total amount of premiums paid with interest,
less any partial surrenders with interest, equals or exceeds the applicable
amount derived from the Table(s) of Minimum Guaranteed Death Benefit Premiums
Accumulated at 4% for the Policy. (See "Minimum Guaranteed Death Benefit" and
"Adjustments to the Death Proceeds Payable".)
MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of
providing insurance protection under your Policy. The cost of insurance charge
for a Policy month is equal to the "amount at risk" under the Policy,
multiplied by the cost of insurance rate for that Policy month. The amount at
risk is determined on the first day of the Policy month after any applicable
Monthly Deduction has been processed and is the amount by which the death
benefit (discounted at the monthly equivalent of 4% per year) exceeds the
Policy's cash value. The cost of insurance rate for your Policy changes from
month to month.
If a Policy loan is outstanding and your Policy's net cash value is not
large enough to cover the cost of insurance charge for a Policy month, the
difference between the net cash value available and the cost of insurance
charge is treated as an excess Policy loan and the Policy may terminate. (See
"Loan Provision".)
The guaranteed cost of insurance rates for a Policy depend on the insured's
underwriting class, age on the first day of the Policy year and sex (if the
Policy is sex-based). The current cost of insurance rates will also depend on
the insured's age at issue of the Policy and on the duration of the Policy. In
addition, for Policies not sold in a business situation or to a tax-qualified
pension plan, current cost of insurance rates will also depend on the face
amount; for Policies sold in a business situation or to a tax-qualified
pension plan, current cost of insurance rates will also depend on the average
face amount of Policies sold to the group and may also depend on the number of
lives in the group. For non-juvenile insureds (those who are age 20 or more at
issue) the rates are guaranteed not to be higher than rates based on the 1980
Commissioners Standard Ordinary Mortality Tables with smoker/nonsmoker
modifications (the "1980 CSO Tables"). For juvenile insureds, the rates are
guaranteed not to be higher than rates based on the 1980 Commissioners
Standard Ordinary Mortality Tables. The rates actually used may be lower than
these maximum rates, depending on NELICO's expectations regarding future
mortality and expense experience,
A-21
<PAGE>
lapse rates and investment earnings. NELICO reviews the adequacy of its
current cost of insurance rates periodically and may adjust them. Any change
in the current cost of insurance rates will be applied prospectively only and
will be on a non-discriminatory basis. The current cost of insurance rate for
a Policy is set forth in the Policy Owner's annual statement.
The underwriting classes used for determining cost of insurance rates for
insureds other than juveniles are smoker standard, smoker substandard,
nonsmoker preferred, nonsmoker standard, nonsmoker aggregate, nonsmoker
substandard and automatic issue. For juvenile insureds the underwriting
classes are standard and substandard. Substandard and automatic issue ratings
result in higher cost of insurance deductions. The guaranteed maximum
mortality charges for substandard ratings are based on multiples of the 1980
CSO Tables.
Availability of the three nonsmoker classes varies. For fully underwritten
Policies with a face amount of $250,000 or more and where the insured's issue
age is 20 through 75, the standard nonsmoker underwriting classes are
nonsmoker preferred and nonsmoker standard; for Policies with a face amount
less than $250,000 and for Policies where the insured's issue age is above 75
only the nonsmoker aggregate class is used. Among these three nonsmoker
classes, the nonsmoker preferred class generally offers the most favorable
rates on a current basis and the nonsmoker standard class generally offers the
least favorable rates on a current basis.
Cost of insurance rates are generally more favorable for nonsmoker than for
smoker insureds and generally more favorable for female than for male
insureds. Within a given underwriting class, cost of insurance rates are
generally more favorable for insureds with lower issue ages. Where required by
state law, and for Policies sold in connection with certain employee benefit
plans, cost of insurance rates (and Policy values and benefits) do not vary
based on the sex of the insured.
Currently, for underwritten Policies that are not issued in a business
situation or tax-qualified pension plan, cost of insurance rates will be more
favorable under Policies with a face amount of at least $500,000 than for
policies with a lower face amount on the same insured. Currently, for
underwritten Policies issued in a business situation or to a tax-qualified
pension plan, cost of insurance rates will be more favorable for a Policy
issued on a given insured with a given face amount where either (1) the
average face amount for Policies covering the group (at issue) is at least
$500,000, or (2) the Policies are issued on the lives of at least 25 persons
and the average face amount (at issue) is at least $250,000.
NELICO may offer Policies on an automatic issue basis to certain group or
sponsored arrangements. If an eligible group or sponsored arrangement
purchases Policies on an automatic issue basis, the Policies will be issued up
to a predetermined face amount limit, with only minimum evidence of
insurability. Automatic issue Policies provide substantial benefit to such
arrangements in that minimal time and effort is necessary to qualify an entire
group of persons for coverage without extensive applications or medical
examinations. Because only limited underwriting information is obtained,
NELICO has determined that the issuance of Policies on an automatic issue
basis may present additional mortality cost to NELICO relative to Policies
issued to individuals in the smoker standard class. Therefore, NELICO will
deduct an additional insurance charge from the cash value of automatic issue
Policies. The additional charge will vary based on the issue age of the
insured and, for certain group or sponsored arrangements, may vary based on
the size of the group, the total premium to be paid by the group and certain
characteristics of its members. The overall guaranteed maximum monthly cost of
insurance charges, including the additional charge for automatic issue status,
will exceed charges based on 100% of the 1980 CSO Tables.
Policies issued on an automatic issue basis will have underlying cost of
insurance rates that vary depending on whether the insured is a smoker or
nonsmoker. Nonsmokers will be treated as a group in that no preferred
nonsmoker rates will be available. The underlying cost of insurance rates for
automatic issue Policies will not vary according to the face amount of an
individual Policy; however, currently the rates may be lower if the Policy is
issued to a group or sponsored arrangement where its members have certain
characteristics, the Policies are issued on the lives of at least 25 persons,
the face amount of each individual Policy is at least $100,000 and the average
face amount is at least $250,000. Generally the overall monthly cost of
insurance charges, including the additional charge for automatic issue status,
will be higher than they would be for the same insured under a fully
underwritten Policy, if the insured is not a substandard risk.
Eligible group or sponsored arrangements may also elect to purchase Policies
on a simplified underwriting basis, either as an alternative to automatic
issue or for amounts of insurance which exceed NELICO's automatic issue
limits, but may not elect automatic issue for some members of the group and
simplified underwriting for others. Policies issued on a simplified
underwriting basis will have the same cost of insurance rates as fully
underwritten Policies.
CHARGES FOR ADDITIONAL BENEFITS AND SERVICES. NELICO imposes charges for the
cost of any additional rider benefits as described in the rider form. NELICO
also reserves the right to charge Policy Owners a nominal fee, which will be
billed directly to the Policy Owner, in the event that a Policy re-issue or
re-dating is requested.
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<PAGE>
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE
ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. NELICO charges the Sub-Accounts of the
Variable Account for the mortality and expense risks that NELICO assumes.
Currently, the charge is made daily at an annual rate of .75% of the Sub-
Accounts' assets. NELICO reserves the right to increase the charge, up to a
maximum annual rate of .90%. The mortality risk NELICO assumes is that
insureds may live for shorter periods of time than NELICO estimated. The
expense risk is that NELICO's costs of issuing and administering the Policies
may be more than NELICO estimated. If proceeds from this charge are not needed
to cover mortality and expense risks, NELICO may use proceeds to finance
distribution of the Policies.
CHARGES FOR INCOME TAXES. NELICO currently makes no charge for income taxes
against the Variable Account, but in the future NELICO may impose such a
charge, if appropriate. NELICO reserves the right to make a charge for any
taxes imposed on the Policies by any governmental body in the future. (See
"Charge for NELICO's Income Taxes".)
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds. The Zenith Fund
Series incur charges for advisory fees and certain other expenses. The series
(other than the Capital Growth Series) are advised by TNE Advisers, Inc., an
affiliate of NELICO. Under a voluntary expense cap by TNE Advisers for each of
the Back Bay Advisors Bond Income, Back Bay Advisors Money Market, Back Bay
Advisors Managed, Westpeak Stock Index, 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 BACK
BAY BAY BACK WESTPEAK LOOMIS
ADVISORS ADVISORS 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
Expenses...................... .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 May 1, 1998, and other expenses actually
incurred for the Series for 1997.
A-23
<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 EXPENSE 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.
GROUP OR SPONSORED ARRANGEMENTS
The Policies may be issued to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals. Examples of such arrangements are tax-qualified pension
plans and non-tax qualified deferred compensation plans. A "sponsored
arrangement" includes a program under which an employer permits group
solicitation of its employees or an association permits group solicitation of
its members for the purchase of the Policies on an individual basis.
For Policies issued in connection with group or sponsored arrangements,
NELICO may waive or reduce one or more of the following charges: the sales
charge, Surrender Charge, charges for the cost of insurance including any
additional charge for automatic issue status, mortality and expense risk
charge, administrative charges, Policy Fee, and/or federal and state premium
tax charges described in "Charges and Expenses". (In addition, the interest
rate credited on amounts taken from the sub-accounts as a result of a Policy
loan may be increased for these Policies.) NELICO will waive or reduce these
charges according to its rules in effect when the Policy application is
approved. To qualify for a waiver or reduction, a group or sponsored
arrangement must satisfy certain criteria as to, for example, size and number
of years in existence. Generally, the sales contacts and effort,
administrative costs and mortality cost per Policy vary based on such factors
as the size of the group or sponsored arrangement, its stability, the purposes
for which the Policies are purchased and certain characteristics of its
members. The amount of reduction and the criteria for qualification will
reflect the reduced sales and administrative effort resulting from sales to
qualifying group or sponsored arrangements. NELICO may modify from time to
time both the amounts of reductions and the criteria for qualification.
Reductions in or waiver of these charges will not be unfairly discriminatory
against any person, including the affected Policy Owners and all other Policy
Owners of Policies funded by the Variable Account. The waiver or reduction of
Policy charges for group or sponsored arrangements described above will not
apply to Policies issued in the state of New York, other than Policies issued
to non-tax qualified deferred compensation plans.
The United States Supreme Court has held that certain insurance policies
providing values and benefits that vary with the sex of the insured may not be
used to fund certain employee benefit programs. Therefore, NELICO offers
Policies that do not vary based on the sex of the insured for use in
connection with certain employee benefit programs. NELICO recommends that any
employer proposing to offer the Policies to employees under a group or
sponsored arrangement consult its attorney before doing so.
A-24
<PAGE>
PREMIUMS
FLEXIBLE PREMIUMS
Within the limits described below, you may choose the amount and frequency
of premium payments. You may select a Planned Premium schedule, which is a
level amount. This schedule, which must be within NELICO's minimum and maximum
limits, appears in your Policy. It is not necessarily designed to keep your
Policy in force, and you may skip Planned Premium payments or make additional
payments. Additional payments could be subject to underwriting. No payment can
be less than $25 ($10 for payments made pursuant to the Master Service Account
or certain other monthly payment arrangements, described below), and the total
of Planned Premiums and other payments will be limited to NELICO's published
maximum.
Planned Premiums can be paid on an annual, semi-annual or quarterly schedule
or, with NELICO's consent, monthly. You can change your Planned Premium
schedule by sending your request to NELICO's Home Office. However, the amount
of your Planned Premium cannot be increased except with the consent of NELICO,
and underwriting may be required. Cash values and death benefits are
permanently affected by the amount and frequency of premium payments.
You may make payments by check or money order. NELICO will send premium
notices for annual, semi-annual or quarterly Planned Premiums. You may also
choose to have NELICO withdraw your premium payments from your bank checking
account or New England Cash Management Trust account. (This is known as the
Master Service Account arrangement.)
NELICO offers three types of premium payment levels that can protect your
Policy against lapse over specified time periods. (One of the three is not
available under Policies issued in New York, as described below.)
First, NELICO determines a three-year Minimum Premium amount based on the
Policy's face amount, the age, sex (unless unisex rates apply) and
underwriting class of the insured, the current level of Policy charges and any
rider benefit selected. Generally, during this three-year period, as long as
the Minimum Premium amount is timely paid, the Policy is guaranteed not to
lapse even if the Policy's net cash value is insufficient to pay the Monthly
Deduction in any month. (To determine whether the Policy will lapse, NELICO
compares (a) the total monthly Minimum Premiums for the Policy from the Policy
Date to that Policy month, to (b) the total premiums paid to date, less all
partial surrenders and any outstanding Policy loan balance. If (b) is greater
than or equal to (a), the Policy will not lapse.) However, no three-year
Minimum Premium death benefit guarantee will apply if you substitute the
insured or reinstate the Policy in the first three Policy years. The Minimum
Premium will be recalculated if you reduce the face amount or make a partial
surrender that reduces the face amount, or add, reduce or delete a rider
benefit, or if the rating classification of your Policy is improved in the
first three Policy years.
Second, NELICO also determines a guaranteed minimum death benefit premium
(to maturity) which will guarantee that the Policy will mature for the net
cash value at age 100 of the insured. Insufficient premium payments, a
reduction in the face amount or partial surrender that reduces the face
amount, reduction or deletion of a rider benefit, or improvement in rating
classification of the Policy could terminate this guarantee. See "Minimum
Guaranteed Death Benefit". This guaranteed minimum death benefit premium is
based on the Policy's face amount, the age, sex (unless unisex rates apply)
and underwriting class of the insured, the death benefit option chosen, the
guaranteed level of cost of insurance charges, the current level of other
Policy charges and any rider benefit selected. The premium is recalculated
following the type of Policy transactions described above in connection with a
recalculation of the three-year Minimum Premium amount, as well as following
an increase in rider coverage. This guaranteed minimum death benefit premium
(to maturity) does not apply under Policies issued in New York.
Third, the Policy's guaranteed minimum death benefit premium (to age 80)
guarantees that the Policy will stay in force until the later of age 80 of the
insured, or 20 years after issue, but no later than the Maturity Date of the
Policy. This premium is based on factors similar to the guaranteed minimum
death benefit premium (to maturity), but is based on the guaranteed level of
both cost of insurance and other Policy charges and is actuarially determined
to provide guaranteed coverage to the earlier age. NELICO limits this premium
so that it will be less than or equal to the guaranteed minimum death benefit
premium (to maturity). Insufficient premium payments, a reduction in the face
amount or a partial surrender that reduces the face amount, reduction or
deletion of a rider benefit, or improvement in the rating classification of
the Policy could also terminate this guarantee, although termination for
insufficient premium payments is less likely here than in the case of the
guaranteed minimum death benefit premium (to maturity). The guaranteed minimum
death benefit premium (to age 80) is recalculated following the type of Policy
transactions described above in connection with a recalculation of the three-
year Minimum Premium amount, as well as following an increase in rider
coverage.
A-25
<PAGE>
Under Policies issued in New Jersey, if you have met the requirements for
the three-year Minimum Premium death benefit guarantee at the end of the three
year guarantee period, the Minimum Premium death benefit guarantee will
continue to apply during the fourth Policy year as long as payments made
during that Policy year, less partial surrenders and loans made in that year,
equal the guaranteed maximum Policy charges plus the applicable Surrender
Charge for the fourth Policy year. In addition, under Policies issued in New
Jersey, if at the end of the period for Minimum Guaranteed Death Benefit B you
have met the requirements for that guarantee, the guarantee will continue to
apply during the next Policy year as long as payments made during that Policy
year, less partial surrenders and loans made in that year, equal the
guaranteed maximum Policy charges for that Policy year. If you make a Policy
transaction that changes the amount of the guaranteed maximum Policy charges
for the year, then the amount you need to pay in order to preserve the death
benefit guarantee for an extra Policy year will change accordingly.
Federal tax law limits the amount of premiums that can be paid under the
Policy. In addition, if any payments under the Policy exceed the "7-pay test"
under Federal tax law, you may be taxed on certain distributions. (See "Tax
Considerations".) NELICO's consent is required if, in order to satisfy tax law
requirements, any payment would increase the Policy's death benefit by more
than it would increase cash value. NELICO may require evidence of insurability
before accepting the payment.
NELICO allocates net payments to your Policy's Sub-Accounts as of the date
the payment is received at NELICO's Home Office. (See "Receipt of
Communications and Payments at NELICO's Home Office".)
A payment is treated first as a Planned Premium, second as repayment of
Policy loan interest due, third as repayment of a Policy loan, and last as an
unscheduled payment, unless you designate otherwise in writing to NELICO. (For
Policies issued in New York, a payment will be treated as a Planned Premium
when a Policy loan is outstanding only if the payment is in the exact amount
of the Planned Premium next due; otherwise, it will be treated first as
repayment of Policy loan interest due, second as repayment of a Policy loan,
third as a Planned Premium, and last as an unscheduled payment.) If you have a
Policy loan, it may be more advantageous to repay the loan than to make a
premium payment, because the premium payment is subject to sales and tax
charges, whereas the loan repayment is not subject to any charges; however,
repayment of the loan in place of a premium payment could cause your Policy to
lose its eligibility for a death benefit guarantee. (See "Loan Provision",
"Deductions from Premiums" and "Death Benefit".)
LAPSE AND REINSTATEMENT
LAPSE. Unless either Minimum Guaranteed Death Benefit is in effect (or,
during the first three Policy years, unless the Minimum Premium requirements
described under "Premiums" have been met), in any month that there is
insufficient net cash value to pay a Monthly Deduction the Policy will be in
default. The Policy provides a 62 day grace period for payment of a premium
sufficient to permit the Monthly Deduction to be made (as well as applicable
deductions from the premium). (For Policies issued in New Jersey the amount
due is the least of: a premium large enough to permit the Monthly Deduction,
as well as applicable deductions from the premium, to be made; a premium large
enough to permit Minimum Guaranteed Death Benefit A to be in effect; a premium
large enough to permit Minimum Guaranteed Death Benefit B to be in effect; and
a premium large enough to permit the three-year Minimum Premium death benefit
to be in effect.) NELICO will notify you of the amount due. During the grace
period insurance coverage continues under your Policy, but if the insured dies
before the premium is paid, NELICO will deduct from the death proceeds the
portion of the unpaid Monthly Deduction for the period prior to the date of
death. If the required premium is unpaid at the end of the grace period, the
Policy will lapse without value.
REINSTATEMENT. If your Policy has lapsed, it may be reinstated within seven
years after the date of lapse. If more than seven years have passed, or if you
have surrendered the Policy, NELICO's consent is required to reinstate.
Reinstatement in all cases is subject to payment of certain charges described
in the Policy and generally requires evidence of insurability that is
satisfactory to NELICO.
Any Surrender Charge deducted upon lapse is credited to the Policy's cash
value upon reinstatement. The Surrender Charge on the date of reinstatement is
the same as it was on the date of lapse. For purposes of determining the
Surrender Charge and other charges that vary by duration of the Policy
(unlike, for example, cost of insurance charges that vary by age of the
insured) on any date after reinstatement, the period the Policy was lapsed
does not count.
A-26
<PAGE>
OTHER POLICY FEATURES
INCREASE IN FACE AMOUNT
The Policy provides that, after the first Policy year, the face amount may
be increased. Currently, NELICO administers requests for increases in face
amount by issuing a new Policy with a face amount equal to the requested
increase in face amount (an "Increase Policy"). Under Increase Policies, the
monthly Policy Fee is generally waived; and the monthly administrative charge
is generally based on the Policy year of the initial Policy. In all other
respects, an Increase Policy is subject to the same terms and conditions as
any other newly issued Policy except that the minimum required face amount for
an Increase Policy is $10,000, and the face amount of the Increase Policy may
be reduced to below $10,000.
NELICO intends in the future to administer face amount increases as
increases in the face amount of the initial Policy. For such increase, a
maximum Face Amount Increase Administrative Charge of $2.50 per $1,000 of the
face amount increase will apply to each such increase on the date the increase
takes effect. In addition, certain terms and conditions will apply to
increases in face amount, as outlined in the Policy. A separate Target Premium
amount will apply to the face amount increase, based on the insured's age and
underwriting class at the time of the increase. The Policy's sales charge and
Surrender Charge scales will apply separately to each face amount segment,
starting with the effective date of the face amount segment. Monthly
Deductions (including cost of insurance charges) will be based on the increase
in coverage and will reflect, in whole or in part, any change in risk
classification of the insured, according to NELICO's rules. (See "Charges and
Expenses".)
When increases in the face amount of the initial Policy are available,
Policy Owners who have previously implemented face amount increases by
purchasing Increase Policies will be contacted by NELICO and given an
opportunity to consolidate coverage under initial and Increase Policies. The
Face Amount Increase Administrative Charge will not apply to the consolidation
of coverage. Consolidation of coverage may raise issues under federal tax law.
You should consult a tax adviser before requesting a consolidation.
In connection with Policies issued in certain business situations on an
automatic issue basis, NELICO may offer annual face amount increases which are
related to increases in salary or which are based on a fixed annual percentage
(the "Salary Refresh" program). Limits on the annual and/or total amount of
face increases per Policy that will be permitted on an automatic issue basis
will be determined at issue of the Policies. Increases which exceed this limit
will require underwriting. The Salary Refresh program will not be available
for Policies with the Option 2 death benefit.
NELICO may also offer the Salary Refresh program in connection with Policies
issued on an underwritten basis in certain business situations. Any Salary
Refresh face amount increases under such Policies will be underwritten in
connection with the application for the initial face amount of the Policies,
and will be subject to limits determined at that time.
The terms and conditions of the Salary Refresh program will be contained in
NELICO's published rules which are furnished at the time of application.
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after
the Right to Return the Policy period. NELICO will make the loan as of the
date when a loan request is received at NELICO's Home Office. (See "Receipt of
Communications and Payments at NELICO's Home Office".) You should contact
NELICO's Home Office or your registered representative for information
regarding the procedures to follow for requesting a loan.
The Policy's loan value is equal to (i) 90% of the Policy's cash value
projected using current Policy charges and a 4% annual rate to the next Policy
anniversary or, if earlier, to the next Planned Premium due date ("projected
cash value"); less (ii) the Surrender Charge that would apply upon surrender
on the next Planned Premium due date or, if greater, on the date the loan is
made; less (iii) loan interest to the next loan interest due date. If required
by state law, the Policy's loan value may be a greater percentage of the cash
value, as described in your Policy. The amount of loan value available to be
borrowed at any time is reduced by the amount of any outstanding Policy loan
plus accrued interest. NELICO currently intends to base the loan value on 100%
of the Policy's projected cash value, rather than 90%, as described above in
item (i), for Policy years 16 and after.
A-27
<PAGE>
The example below illustrates how the loan value is determined.
- -------------------------------------------------------------------------------
EXAMPLE: Using the Policy illustrated on page A-54 assume that the Policy's
Planned Premiums have been paid and that the Policy's Sub-Accounts have earned
a constant 6% hypothetical gross annual rate of return (equal to a constant
net annual rate of return of 4.41%). After the premium payment on the 10th
Policy anniversary, the maximum amount that could be borrowed would be
determined as follows under (i) an annual premium payment schedule and (ii) a
quarterly premium payment schedule:
<TABLE>
<CAPTION>
ANNUAL QUARTERLY
------- ---------
<S> <C> <C>
(1) Cash Value after Premium Payment on 10th Policy Anni-
versary.............................................. $43,199 $40,842
(2) Cash Value Projected at a Constant Annual Rate of Re-
turn of 4% to the
(a) 11th Policy Anniversary........................... 44,248
(b) Next Planned Premium Due Date..................... 41,062
(3) 90% of Amount Calculated in (2)...................... 39,823 36,956
(4) Amount Calculated in (3), Reduced by the Applicable
Surrender Charge..................................... 39,558 36,691
(5) Amount Calculated in (4), Reduced by Loan Interest to
the Next Interest Due Date........................... 37,496 34,778
</TABLE>
- -------------------------------------------------------------------------------
A Policy loan reduces the Policy's cash value in the Sub-Accounts by the
amount of the loan. A loan repayment increases the cash value in the Sub-
Accounts by the amount of the repayment. Unless you request otherwise, Policy
loans are attributed first to the Sub-Accounts of the Variable Account in
proportion to the cash value in each, and then the Fixed Account. All loan
repayments are allocated first to the outstanding loan balance attributed to
the Fixed Account and then to the Sub-Accounts of the Variable Account in
proportion to the cash value in each.
The interest rate charged on Policy loans is an effective rate of 5.5% per
year (using simple interest during the year), accrues daily, and is due on the
Policy anniversary. If not paid at that time, the interest accrued on the loan
is added to the loan, and an amount equal to the unpaid interest is deducted
from the Policy's cash value in the Sub-Accounts and the Fixed Account in
proportion to the amount in each. The amount taken from the Policy's Sub-
Accounts as a result of the loan earns interest (compounded daily) at an
effective rate of not less than 4% per year. The rate currently credited is 4%
per year for the first 15 Policy years and 5.25% thereafter. This interest
earned is credited to the Policy's Sub-Accounts annually, in proportion to the
cash value in each.
The amount taken from the Policy's Sub-Accounts as a result of a loan does
not participate in the investment experience of the Sub-Accounts. Therefore,
the death benefit and cash value of the Policy can be permanently affected by
a Policy loan, even if it is repaid. In addition, any proceeds payable under a
Policy are reduced by the amount of any outstanding loan plus accrued
interest.
Any payment received while a Policy loan is outstanding is treated first as
a Planned Premium, second as repayment of Policy loan interest due, third as
repayment of a Policy loan, and last as an unscheduled payment, unless you
designate otherwise in writing to NELICO. (For Policies issued in New York, a
payment will be treated as a Planned Premium when a Policy loan is outstanding
only if the payment is in the exact amount of the Planned Premium; otherwise,
it will be treated first as repayment of Policy loan interest due, second as
repayment of a Policy loan, third as a Planned Premium, and last as an
unscheduled payment.) If a Policy loan is outstanding, it may be more
advantageous to repay the loan than to pay a premium, because the payment is
subject to sales and premium tax charges, and the loan repayment is not
subject to charges; however, repayment of the loan in place of a premium
payment could cause your Policy to lose its eligibility for a death benefit
guarantee. (See "Deductions from Premiums" and "Death Benefit".)
If Policy loans plus accrued interest at any time exceed the Policy's cash
value less the Surrender Charge on the next Policy loan interest due date (or,
if the Surrender Charge would be greater, on the date the calculation is
made), NELICO will notify you that the Policy is going to terminate. (This
situation is referred to as an "excess Policy loan". NELICO tests for an
excess Policy loan on each monthly processing date and in connection with
certain other Policy processing transactions.) The Policy will terminate
without value 62 days after the notice is mailed unless the excess amount is
paid to NELICO within that time. If the Policy lapses with a loan outstanding,
adverse tax consequences may result. (See "Tax Considerations" below.)
Department of Labor ("DOL") regulations set forth requirements for
participant loans under retirement plans subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"). Generally, the DOL regulations will
apply to plans that qualify under Section 401 of the Internal Revenue Code
(the "Code"). If the retirement plan is subject to ERISA, the plan fiduciary
A-28
<PAGE>
authorized to oversee/direct the plan loan program must fulfill the
requirements of the regulations including charging a "commercially reasonable"
rate of interest. The policy loan interest rate may not be considered
"commercially reasonable" within the meaning of the DOL regulations. In
addition, the DOL regulations require that a plan loan be adequately secured
but provide that not more than 50% of the participant's vested account balance
(including the Policy cash value) be used as security for the loan. The DOL
regulations and applicable tax law may also contain other requirements for
plan loans. Therefore, plan loan provisions may differ from Policy loan
provisions. If you are a participant in a retirement plan subject to ERISA,
you should consult with the fiduciary administering the plan loan program.
Failure of the plan loan program to comply with the requirements of the DOL
regulations and of tax law may result in tax penalties under the Code and
under ERISA.
SURRENDER
You may surrender a Policy for its net cash value at any time while the
insured is living by a request conforming to NELICO's administrative
procedures. The net cash value of the surrendered Policy is determined as of
the date when a surrender request is received at NELICO's Home Office. The net
cash value equals the cash value reduced by any Policy loan and accrued
interest and by any applicable Surrender Charge. (See "Surrender Charge".) The
net cash value paid on surrender is increased by the portion of any cost of
insurance charge deducted that applies to the period beyond the date of
surrender. If you surrender the Policy during the grace period, (that is, at a
time when the net cash value was not sufficient to cover the Monthly Deduction
and no Minimum Guaranteed Death Benefit or three year Minimum Premium
guarantee applies to the Policy), the net cash value you receive is reduced by
an amount to cover the Monthly Deduction to the date of surrender. You may
elect in writing to have all or part of the net cash value applied to a
payment option. (See "Payment Options".) A surrender may result in adverse tax
consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER
You may make a partial surrender of the Policy after the Right to Return the
Policy period, to receive a portion of its net cash value. A partial surrender
will cause a reduction in the Policy's death benefit and may cause a reduction
in the Policy's face amount if necessary in order that the amount at risk
under the Policy not increase. Any reduction in the face amount causes a
proportionate reduction in the Policy's Target Premium, on which any future
Surrender Charges (and, currently, the sales charge deducted from premiums)
are based. Rider benefits may also be reduced. No partial surrender may reduce
the face amount below the Policy's required minimum except with NELICO's
consent; special rules apply for Policies sold in business situations and to
tax-qualified pension plans.
Partial surrenders in any one Policy year are limited, except with NELICO's
consent, to 20% of the Policy's net cash value as of the date of the first
partial surrender for the Policy year or, if less, the Policy's available loan
value. Currently, NELICO permits partial surrenders of up to 75% of the
Policy's net cash value per year, assuming sufficient available loan value.
(In certain business situations or for certain tax-qualified pension plans
NELICO may permit a higher percentage of the net cash value to be withdrawn.)
Any Surrender Charge that applies to a partial surrender is deducted from
the Policy's remaining cash value in an amount proportional to the amount of
the Policy's face amount surrendered. The Surrender Charge applied reduces any
remaining Surrender Charge that can be applied under your Policy.
You should be aware that cash value paid upon partial surrender may not be
reinvested in the Policy except as premium payments, which are subject to the
charges described under "Deductions From Premiums". A partial surrender could
terminate your Policy's Minimum Guaranteed Death Benefit. See "Minimum
Guaranteed Death Benefit".
A partial surrender first reduces the Policy's cash value in the Sub-
Accounts of the Variable Account, in proportion to the amount of cash value in
each, and then the Fixed Account, unless you request otherwise. (See "The
Fixed Account" below.) The amount of net cash value paid upon partial
surrender is determined as of the date when a request conforming to NELICO's
administrative procedures is received at NELICO's Home Office. NELICO's
administrative procedures can be determined by contacting your registered
representative or the Home Office.
A reduction in the death benefit as a result of a partial surrender may
cause the Policy to become a "modified endowment contract". If you are
contemplating a partial surrender, you should consult your tax advisor
regarding the tax consequences of the transaction. (See "Tax Considerations".)
A-29
<PAGE>
REDUCTION IN FACE AMOUNT
You may reduce the face amount of your Policy without receiving a
distribution of any of the Policy's cash value. (This feature differs from a
partial surrender in that a partial surrender causes part of the Policy's cash
value to be distributed to you.)
If you decrease the face amount of your Policy, the Target Premium, on which
any future Surrender Charges (and, currently, the sales charge deducted from
premiums) are based, is also decreased. Your Policy's actual cash value is not
reduced except by the amount of any applicable Surrender Charge. Generally,
the Policy's death benefit is decreased. (However, if the death benefit is
being increased in accordance with federal income tax laws, the death benefit
will not be decreased unless a Surrender Charge was deducted from the cash
value in connection with the face amount reduction. A reduction in face amount
in this situation may not be advisable, although it will reduce your
administrative charges, because it will not reduce your death benefit or cost
of insurance charges and may result in a Surrender Charge.) Any rider benefits
attached to the Policy may also have to be decreased. The face amount
remaining after a reduction has to meet NELICO's minimum face amount
requirements for issue, except with NELICO's consent; special rules apply in
business situations.
A reduction in the face amount of your Policy will reduce the Federal tax
law limitations on the amount of premiums that can be paid under the Policy.
In these cases, a partial surrender of cash value may be required to comply
with Federal tax law. This could result in termination of your Policy's
Minimum Guaranteed Death Benefit. See "Minimum Guaranteed Death Benefit".
A face amount reduction takes effect as of the date when NELICO has received
a request at its Home Office meeting NELICO's administrative requirements. You
can determine NELICO's administrative requirements by contacting your
registered representative or the Home Office.
A reduction in the face amount of a Policy that causes a death benefit
reduction may cause the Policy to become a "modified endowment contract". If
you are contemplating a reduction in face amount, you should consult your tax
advisor regarding the tax consequences of the transaction. (See "Tax
Considerations".)
ACCELERATION OF DEATH BENEFIT RIDER
NELICO may offer in the future a rider benefit that will allow you to
receive an accelerated payment of your Policy's death benefit. This advance
payment of the death benefit will be available where certain special needs
exist, as described briefly below. The right to exercise the rider will be
subject to certain conditions contained in the rider.
NELICO WILL MAKE THE ACCELERATED BENEFITS RIDER AVAILABLE TO YOU ONLY IF:
(1) YOUR STATE INSURANCE DEPARTMENT HAS APPROVED THE RIDER, AND (2) NELICO
BELIEVES THAT THE RIDER WILL MEET THE DEFINITION OF AN ACCELERATED DEATH
BENEFIT FOR FEDERAL INCOME TAX PURPOSES AND (3) NELICO BELIEVES THAT THE
AVAILABILITY OF THE RIDER WILL NOT JEOPARDIZE THE QUALIFICATION OF THE POLICY
AS LIFE INSURANCE UNDER FEDERAL INCOME TAX LAW.
If the accelerated benefits rider is offered, it is expected to provide that
if the insured is diagnosed as terminally ill, as defined in the rider, you
may request an accelerated payment of the Policy's death benefit. The payment
may be subject to discounting and charges. Payment will be subject to evidence
satisfactory to NELICO.
See "Tax Considerations", below, for a discussion of the tax consequences
associated with the accelerated benefits rider.
INVESTMENT OPTIONS
You may allocate your Policy's premiums among the Sub-Accounts of the
Variable Account and the Fixed Account in any combination, provided that
allocations can be made to a maximum of 10 accounts (including the Fixed
Account) at any time. The Policy provides that a minimum of 10% of the 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. Your Policy's cash value may be distributed among
no more than 10 accounts (including the Fixed Account) at any one time.
You make the initial premium allocation when you apply for a Policy. You may
change the allocation of future premiums at any time thereafter. The change
will be effective for premiums applied on or after the date when NELICO
receives your request. You may request the change by telephone or by written
request in a form satisfactory to NELICO. (See "Receipt of Communications and
Payments at NELICO's Home Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
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TRANSFER OPTION
After the Right to Return the Policy period, the Policy provides that you
may transfer your Policy's cash value between Sub-Accounts up to four times in
a policy year (twelve times per policy year for Policies issued in New York)
without NELICO's consent. NELICO currently allows 12 Sub-Account transfers per
policy year under all Policies. Transfers out of the Fixed Account are not
counted against this limit. All Sub-Account transfer requests made at the same
time will be treated as a single request. The transfer will be effective as of
the date when NELICO receives the transfer request at its Home Office. (See
"Receipt of Communications and Payments at NELICO's Home Office".) For special
rules regarding transfers involving the Fixed Account, see "The Fixed
Account". Your Policy's cash value may be distributed among no more than 10
accounts (including the Fixed Account) at any one time.
You may request a Sub-Account transfer or reallocation of future premiums by
written request (which may be telecopied) to NELICO's Home Office or by
telephoning NELICO. To request a transfer or reallocation by telephone, you
should contact your registered representative or contact NELICO at 1-800-200-
2214. Requests for transfers (up to NELICO's current limit per Policy year) or
reallocations by telephone will be automatically permitted. NELICO will use
reasonable procedures, such as requiring certain identifying information from
the caller, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone are genuine. Any telephone instructions reasonably
believed by NELICO to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. As a result of
this policy, you will bear the risk of loss. If NELICO does not employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, it may be liable for any losses due to unauthorized or fraudulent
instructions.
SUBSTITUTION OF INSURED PERSON
Subject to state insurance department approval, NELICO offers a rider
benefit that will allow you to substitute the insured person under your
Policy, if you provide satisfactory evidence that the person proposed to be
insured is insurable. The right to substitute the insured person is subject to
certain restrictions and may also result in a cost or credit to you. A
substitution of the insured person will result in a taxable exchange. In
addition, a substitution of the insured person could reduce the amount of
premiums allowed to be paid into the Policy under Federal tax law and, as a
result, may require a partial surrender of cash value. No Surrender Charge
will be assessed in that situation. This rider may not be approved in every
state and therefore may not be available in every state. Your registered
representative can provide current information on the availability of the
rider. Since substituting the insured person may be a taxable event, you
should consult your tax advisor before substituting the insured person under
your Policy.
PAYMENT OF PROCEEDS
NELICO will ordinarily pay any net cash value, loan value or death benefit
proceeds payable from the Sub-Accounts within seven days after receipt at the
Home Office of a request, or proof of death of the insured, in a form
satisfactory to NELICO. (See "Receipt of Communications and Payments at
NELICO's Home Office".) However, NELICO may delay payment (except when a loan
is made to pay a premium to NELICO) or transfers from the Sub-Accounts: (i) if
the New York Stock Exchange is closed for other than weekends or holidays, or
if trading on the New York Stock Exchange is restricted, (ii) if the SEC
determines that a state of emergency exists that makes payments or Sub-Account
transfers impractical, or (iii) at any other time when the Eligible Funds or
the Variable Account have the legal right to suspend payment. NELICO may
withhold payment of surrender or loan proceeds to the extent that those
proceeds are derived from a Policy Owner's check, or from a Master Service
Account premium transaction, which has not yet cleared. In those cases, NELICO
will process the surrender or loan to the extent of Policy values for which
the Policy Owner has made full payment. The balance of the surrender or loan
proceeds will be paid when the Policy Owner's check, or the Master Service
Account premium transaction, has cleared. NELICO may also delay payment if it
considers whether to contest the Policy. NELICO will pay interest on the death
benefit proceeds from the date they become payable to the date they are paid
in one sum or, if a payment option was selected, to the effective date of the
option. (See "Payment Options".)
Death benefit proceeds may be paid pursuant to NELICO's Access Plus program.
If the Access Plus program is elected, an Access Plus account will be
established at State Street Bank & Trust Company at the time that death
benefit proceeds are payable. The Access Plus account provides convenient
access to proceeds, which are maintained in MetLife's general account, through
checkbook privileges with State Street. A beneficiary may elect to have death
benefit proceeds paid through the Access Plus program at any time prior to the
payment of death benefit proceeds.
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Payments of cash value, or of any loan value available, from cash value in
the Fixed Account will normally be paid promptly. However, NELICO has the
right to delay such payments for up to six months from the date of the request
(to the extent allowed by state insurance law). NELICO will pay interest in
accordance with state insurance law requirements on payments that are delayed.
24 MONTH RIGHT
GENERAL RIGHT. Generally, during the first 24 months after the Policy's
issue date, you may convert this Policy, or a portion thereof, to fixed
benefit coverage by transferring all or a portion of your Policy's cash value,
and allocating all or a portion of future premiums, to the Fixed Account. The
request to convert to fixed benefit coverage must be in written form
satisfactory to NELICO. (Currently, NELICO administers requests for increases
in face amount by issuing an Increase Policy. See "Other Policy Features--
Increase in Face Amount". The 24 Month Right under an Increase Policy is the
same as under the initial Policy, as described below. When increases in the
face amount of the initial Policy are available, Policy Owners will be
informed about the 24 Month Right applicable to face amount increases.)
This privilege may be exercised only once within 24 months after issue.
Transfers into the Fixed Account pursuant to this right will not count toward
the limit on the number of cash value transfers permitted under the Policy
each year. Cash value that is transferred to the Fixed Account, and future
premium amounts allocated to the Fixed Account, may subsequently be
transferred back to one or more Sub-Accounts of the Variable Account, subject
to the Policy's general limits on transfers from the Fixed Account (see "The
Fixed Account").
The Policy generally permits NELICO to limit allocations to the Fixed
Account under certain circumstances. (See "The Fixed Account.") If NELICO
limits such allocations and you subsequently wish to exercise the 24 Month
Right, you may continue to allocate to the Fixed Account only the percentage
of premiums that was allocated to the Fixed Account pursuant to your exercise
of the 24 Month Right. In addition, if you have exercised this right, and
NELICO subsequently limits such allocations, then you may continue to allocate
to the Fixed Account only the lowest percentage of premiums that was allocated
to the Fixed Account at any time since your exercise of the 24 Month Right.
FOR POLICIES ISSUED IN MARYLAND AND NEW JERSEY. Under Policies issued in
Maryland and New Jersey, you can exchange the face amount of your Policy for a
fixed benefit life insurance policy provided that (1) the Policy has not
lapsed and (2) the exchange is made within 24 months after the Policy's issue
date. If you exercise this option, you will have to make up any investment
loss you had under the variable life insurance policy.
The exchange will be made without evidence of insurability. The new policy
will have, at the option of the policyholder, either the same death benefit or
the same net amount at risk as that being exchanged. The new policy will have
the same issue age, underwriting class and policy date as the variable life
policy had. Any riders to the original Policy will be attached to the new
policy if they are available.
In the case of Policies issued in Maryland, the new policy will be a
flexible premium life insurance policy, and in the case of Policies issued in
New Jersey, the new policy will be a whole life or endowment policy. If the
original policy was issued prior to the merger of MetLife and New England
Mutual, the new policy will be issued by MetLife or, at your option, by NELICO
if such a policy was available for an exchange on the Policy Date of your
variable life Policy. If the original policy was issued on or after the
merger, the new policy will be issued by NELICO or, if no such policy was
available for an exchange, by MetLife.
The exchange will be effective on the date when NELICO receives written
notice at its Home Office in a form satisfactory to NELICO, the Policy and
payment to NELICO of any cost to exchange. (See "Receipt of Communications and
Payments at NELICO's Home Office".) The exchange may result in a cost or
credit to you. The cost or credit will reflect any differences in cash values
and charges between the variable life policy and the new policy. Upon the
exchange, you may also need to make an immediate premium payment on the new
policy in order to keep it in force. Any policy loan outstanding must be
repaid on or before the effective date of the exchange.
GROUP OR SPONSORED ARRANGEMENTS. For a Policy issued in connection with
certain group or sponsored arrangements, NELICO offers the additional option
of exchanging the Policy at any time during the first 36 months after the
Policy's issue date, if the Policy has not lapsed, to a fixed-benefit term
life insurance policy issued by NELICO or an affiliate. (Availability of this
feature depends on state insurance department approval.) The exchange will be
made without evidence of insurability. The new term insurance policy will have
the same face amount, policy date, issue age and risk classification for the
insured as the variable life Policy had. Premiums for the new term insurance
policy will be based on the premium rates for comparable fixed-
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benefit term life insurance policies issued by NELICO or an affiliate which
were in effect on the Policy Date of the original Policy. Any riders to the
original Policy will be attached to the new policy if they are available. If
you exercise this option, you will bear any investment loss you had under the
variable life insurance policy. If your Policy has this feature, upon
surrender of the Policy in the first 36 months, you will receive the greater
of the Policy's net cash value and the value which you would receive upon
exercise of the exchange to term insurance option. Your registered
representative can advise you as to the availability of this feature.
PAYMENT OPTIONS
The Policy's death benefit and net cash value will be paid in one sum unless
the Policy Owner or payee chooses to put all or part of the proceeds under a
payment option. You can choose a combination of payment options. The selection
of a payment option and the naming of a payee must be in written form
satisfactory to NELICO. You can make, change or revoke the selection before
the death of the insured. The payment options available are fixed benefit
options only; therefore, proceeds applied to an option will no longer be
affected by the investment experience of the Variable Account. The guaranteed
mortality assumptions used in determining payment levels under the options
will not vary based on sex. (For Policies issued in New York and Oregon,
however, and which are not issued for use in connection with certain employee
benefit plans and fringe benefit programs, the mortality assumptions will vary
based on sex. See "Group or Sponsored Arrangements".) Once payments under an
option begin, withdrawal rights may be restricted.
The following payment options are available:
(i) INCOME FOR A SPECIFIED NUMBER OF YEARS. Proceeds are paid in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.5% a year, compounded yearly. Additional interest paid by
NELICO for any year will be added to the monthly payments for that year.
(ii) LIFE INCOME. Proceeds are paid in equal monthly installments (i)
during the life of the payee, (ii) for the longer of the life of the
payee or 10 years, or (iii) for the longer of the life of the payee or
20 years.
(iii) LIFE INCOME WITH REFUND. Proceeds are paid in equal monthly
installments during the life of the payee. At the payee's death, any
unpaid proceeds remaining are paid either in one sum or in equal
monthly installments until the total proceeds have been paid.
(iv) INTEREST. Proceeds are held for the life of the payee or another
agreed upon period. Interest of at least 3.5% a year is paid monthly
or added to the principal annually. At the death of the payee, or at
the end of the period agreed to, the balance of principal and any
interest will be paid in one sum.
(v) SPECIFIED AMOUNT OF INCOME. Proceeds plus accrued interest of at least
3.5% a year are paid in an amount and at a frequency elected until total
proceeds have been paid. Any amounts unpaid at the death of the payee
will be paid in one sum.
(vi) LIFE INCOME FOR TWO LIVES. Proceeds will be paid in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the surviving payee or 10 years, or (iii) while the two payees
are living and, after the death of one payee, two-thirds of the monthly
amount for the life of the surviving payee will be paid.
NELICO's consent to use of an option is required if the installment payments
would be less than $20.
ADDITIONAL BENEFITS BY RIDER
A Policy can include additional benefits provided by rider to the Policy,
subject to NELICO's underwriting and issuance standards. These additional
benefits usually require an additional charge as part of the Monthly Deduction
from cash value. The rider benefits available with the Policies provide fixed
benefits that do not vary with the investment experience of the Variable
Account.
There may be circumstances in which it will be to your economic advantage to
include a significant portion or percentage of your insurance coverage under a
term rider. In many other circumstances, it may be in your interest to obtain
a Policy without term rider coverage. These circumstances depend on many
factors, including the premium levels and amount and duration of coverage you
choose, as well as the age, sex and risk classification of the insured.
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Reductions in or elimination of term rider coverage do not trigger the
imposition of a Surrender Charge, and use of a term rider generally reduces
sales compensation. Your registered representative can provide you more
information on the uses of term rider coverage.
The following riders are available:
LEVEL TERM INSURANCE, which provides term insurance.
WAIVER OF MONTHLY DEDUCTION, which provides for waiver of Monthly
Deductions upon the disability of the insured.
TEMPORARY TERM INSURANCE, which provides for insurance from the date of
issue to the Policy Date.
CHILDREN'S INSURANCE, which provides insurance on the life of the insured's
children.
Not all riders may be available to you and riders in addition to those
listed above may be made available. You should consult your registered
representative regarding the availability of particular riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time to
time. At the death of the Policy Owner, his or her estate will become the
Policy Owner unless a successor Policy Owner has been named. The Policy
Owner's rights (except for rights to payment of benefits) terminate at the
death of the insured.
The beneficiary is also named in the application. The beneficiary of the
Policy may be changed at any time before the death of the insured. The
beneficiary has no rights under the Policy until the death of the insured and
must survive the insured in order to receive the death proceeds. If no named
beneficiary survives the insured, the proceeds will be paid to the Policy
Owner.
A change of Policy Owner or beneficiary must be in written form satisfactory
to NELICO and must be dated and signed by the Policy Owner making the change.
The change will be subject to all payments made and actions taken by NELICO
under the Policy before the signed change form is received by NELICO at its
Home Office.
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary
to the assignee. A collateral assignment of the Policy does not change the
Policy Owner or beneficiary, but their rights will be subject to the terms of
the assignment. Assignments will be subject to all payments made and actions
taken by NELICO under the Policy before a signed copy of the assignment form
is received at NELICO's Home Office. NELICO will not be responsible for
determining whether or not an assignment is valid. Changing the Policy Owner
or assigning the Policy may have tax consequences. (See "Tax Considerations"
below.)
THE VARIABLE ACCOUNT
The Variable Account was established as a separate investment account of
NELICO on January 31, 1983 under Delaware law and became subject to
Massachusetts law when NELICO changed its domicile to Massachusetts on August
30, 1996. The Variable Account is the funding vehicle for other NELICO
variable life insurance policies in addition to the Policies; these other
policies impose different costs, and provide different benefits, from the
Policies. The Variable Account meets the definition of a "separate account"
under Federal securities laws. The Variable Account is registered with the
Securities and Exchange Commission (the "SEC") as a unit investment trust
under the Investment Company Act of 1940. Registration with the SEC does not
involve supervision by the SEC of the management or investment practices or
policies of the Variable Account. However, both NELICO and the Variable
Account are subject to regulation by the Massachusetts Insurance Commissioner
and to the insurance laws and regulations in every jurisdiction where the
Policies are sold.
Although the assets of the Variable Account are owned by NELICO, applicable
law provides that the portion of the Variable Account assets equal to the
reserves and other liabilities of the Variable Account may not be charged with
liabilities that arise out of any other business NELICO may conduct. NELICO
believes this means that the assets of the Variable Account equal to the
reserves and other liabilities of the Variable Account are not available to
meet the claims of NELICO's general creditors, and may only be used to support
the cash values under its variable life insurance policies issued by the
Variable Account. But NELICO may transfer to its general account assets which
exceed the reserves and other liabilities of the Variable Account. Before
making any such transfer, NELICO will consider any possible adverse impact the
transfer might have on the Variable Account.
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Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of NELICO's
other income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 16 Sub-Accounts, each of which invests in
a series of an Eligible Fund. The Sub-Accounts of the Variable Account are:
--The Zenith Money Market Sub-Account, which invests in the Back Bay
Advisors Money Market Series of the Zenith Fund
--The Zenith Bond Income Sub-Account, which invests in the Back Bay
Advisors Bond Income Series of the Zenith Fund
--The Zenith Capital Growth Sub-Account, which invests in the Capital
Growth Series of the Zenith Fund
--The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
--The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
--The Zenith Growth and Income Sub-Account, which invests in the Westpeak
Growth and Income Series of the Zenith Fund
--The Zenith Small Cap Sub-Account, which invests in the Loomis Sayles
Small Cap Series of the Zenith Fund
--The Zenith Balanced Sub-Account, which invests in the Loomis Sayles
Balanced Series of the Zenith Fund
--The Zenith Equity Growth Sub-Account, which invests in the Alger Equity
Growth Series of the Zenith Fund
--The Zenith 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 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.
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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.
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 capitalization 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
international 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.
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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.
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.
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The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types
of investments you have and your own assessment of future economic and
financial market conditions.
INVESTMENT MANAGEMENT
The adviser and sub-adviser for each series of the Zenith Fund are listed in
the chart below. TNE Advisers, which is an indirect, wholly-owned subsidiary
of NELICO, CGM, and each of the sub-advisers are registered with the SEC as
investment advisers under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------- -----------
<S> <C> <C>
Capital Growth Capital Growth Management Limited
Partnership ("CGM")*
Back Bay Advisors Money TNE Advisers, Inc. Back Bay Advisors, L.P.*
Market
Back Bay Advisors Bond TNE Advisers, Inc. Back Bay Advisors, L.P.*
Income
Back Bay Advisors Man- TNE Advisers, Inc. Back Bay Advisors, L.P.*
aged
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
Westpeak Growth and In- TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
come
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
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-
advisers, 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.
THE FIXED ACCOUNT
A FIXED ACCOUNT OPTION IS AVAILABLE UNDER THE POLICY IN STATES WHERE IT HAS
BEEN APPROVED BY THE STATE INSURANCE DEPARTMENT. THE FIXED ACCOUNT MAY NOT BE
APPROVED BY EVERY STATE INSURANCE DEPARTMENT AND THEREFORE IT MAY NOT BE
AVAILABLE IN EVERY STATE.
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<PAGE>
You may allocate net premiums for your Policy, and may transfer your
Policy's cash value, to the Fixed Account, which is part of NELICO's general
account. Because of exemptive and exclusionary provisions in the Federal
securities laws, interests in the Fixed Account have not been registered under
the Securities Act of 1933, and neither the Fixed Account nor the general
account has been registered as an investment company under the Investment
Company Act of 1940. Therefore, neither the Fixed Account, the general account
nor any interests therein are generally subject to the provisions of these
Acts, and NELICO has been advised that the staff of the SEC does not review
disclosures relating to the general account. Disclosures regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the Federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
GENERAL DESCRIPTION
NELICO's general account includes all the assets owned by NELICO, other than
the assets in the Variable Account or in any other separate accounts that
NELICO may establish. NELICO has sole discretion over the investment of assets
in the general account, including the Fixed Account. Policy Owners who
allocate cash value to the Fixed Account will not share in the actual
investment experience of the Fixed Account. Instead, NELICO guarantees that
cash values in the Fixed Account will earn interest at an annual rate of at
least 4%. NELICO may from time to time credit interest at a higher rate than
4%, but it is under no obligation to do so. NELICO declares the current
interest rate for the Fixed Account periodically. Your Policy cash values that
are in the Fixed Account will earn interest daily.
NELICO may vary the way in which it credits interest in the Fixed Account
from time to time. The following is a description of NELICO's current method
for crediting interest to cash value in the Fixed Account. All of your
Policy's cash value in the Fixed Account on a Policy anniversary will earn
interest at the declared annual rate in effect on the anniversary. It will
earn interest at this rate until the next Policy anniversary, when it will be
credited with the current rate declared by NELICO. (Although NELICO's current
practice is to credit your entire Fixed Account cash value on a Policy
anniversary with the most recently declared annual rate until the next
anniversary, NELICO can select any portion, from 0% to 100%, of your Fixed
Account cash value on a Policy anniversary to earn interest at the most
recently declared rate until the next Policy anniversary.) Any net premiums
allocated or any portion of your Policy's cash value transferred to the Fixed
Account from the Variable Account on a date other than a Policy anniversary
will earn interest at NELICO's most recently declared rate until the next
Policy anniversary. Any loan repayment allocated to the Fixed Account will be
credited with the lesser of the most recently declared interest rate and the
effective interest rate for your Policy's cash value in the Fixed Account on
the date of the repayment. The effective interest rate credited at any time to
your cash value in the Fixed Account will be a weighted average of all the
Fixed Account rates for your Policy.
VALUES AND BENEFITS
The Policy's cash value in the Fixed Account reflects the net premiums
allocated to the Fixed Account, interest credited to cash value in the Fixed
Account, any loans, partial surrenders made from the Fixed Account cash value,
charges deducted, and any transfers of cash value to or from the Variable
Account. Charges will be deducted from the Policy's cash value in the Fixed
Account and in the Policy's Sub-Accounts in proportion to the amount of the
Policy's cash value in each. (See "Monthly Deduction from Cash Value".) A
Policy's total cash value will include its cash value in the Variable Account,
its cash value in the Fixed Account, and any of its cash value held in
NELICO's general account (but outside of the Fixed Account) as a result of a
Policy loan.
The amount of the Policy's cash value in the Fixed Account will be taken
into account in the calculation of the Policy's death benefit in the same
manner as the cash value in the Variable Account. (See "Death Benefit".)
POLICY TRANSACTIONS
NELICO reserves the right to restrict allocations to the Fixed Account if
the effective annual rate of interest that would apply to the amount allocated
is the minimum 4% rate. Otherwise, allocations of net premiums to the Fixed
Account are subject to the same percentage requirements that apply to the
Variable Account. (See "Allocation of Net Premiums".)
Except as described below, amounts in the Fixed Account are subject to the
same rights and limitations regarding premium allocations, transfers, loans,
surrenders and partial surrenders that apply to amounts in the Variable
Account. (See "Other Policy Features".) The following special rules apply to
transactions involving amounts in the Fixed Account.
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<PAGE>
TRANSFERS OF AMOUNTS FROM THE FIXED ACCOUNT TO THE VARIABLE ACCOUNT WILL BE
ALLOWED ONLY ONCE IN EACH POLICY YEAR. A TRANSFER OF CASH VALUE FROM THE FIXED
ACCOUNT WILL BE PROCESSED ONLY IF NELICO RECEIVES THE TRANSFER REQUEST WITHIN
THE 30 DAY PERIOD AFTER THE POLICY ANNIVERSARY, AND THE TRANSFER WILL BE
EFFECTED AS OF THE DATE THE TRANSFER REQUEST IS RECEIVED AT NELICO'S HOME
OFFICE. THE AMOUNT OF CASH VALUE WHICH MAY BE TRANSFERRED FROM THE FIXED
ACCOUNT IS LIMITED TO THE GREATER OF 25% OF THE POLICY'S CASH VALUE IN THE
FIXED ACCOUNT ON THE TRANSFER DATE OR THE AMOUNT OF CASH VALUE TRANSFERRED
FROM THE FIXED ACCOUNT IN THE PRECEDING POLICY YEAR. Regardless of these
limits, if a transfer of cash value from the Fixed Account would reduce the
remaining cash value in the Fixed Account below $100, you may transfer the
entire amount of cash value from the Fixed Account. The total number of
transfers among Sub-Accounts and from the Sub-Accounts to the Fixed Account
may not exceed four in one Policy year without NELICO's consent. NELICO
currently allows 12 such transfers per Policy year. Transfers out of the Fixed
Account will not be counted against this limit. NELICO reserves the right to
restrict transfers of cash value into the Fixed Account, if the effective
annual rate of interest that would apply to the amount transferred is the
minimum 4% rate.
Unless you request otherwise, a Policy loan will reduce the Policy's cash
value in the Sub-Accounts and not the cash value in the Fixed Account. If
there is not enough cash value in the Policy's Sub-Accounts to provide the
amount of the loan, however, the balance of the loan will be taken from the
cash value in the Fixed Account. All loan repayments will be allocated first
to the outstanding loan balance attributable to the Fixed Account. The amount
removed from the Policy's Sub-Accounts and the Fixed Account as a result of a
loan will earn interest at not less than 4% per year, which will be credited
annually to the Policy's cash value in the Sub-Accounts and the Fixed Account
in proportion to the Policy's cash value in each on the day it is credited.
Unless you request otherwise, partial surrenders will be taken only from the
Policy's Sub-Accounts and not the Fixed Account. If there is not enough cash
value in the Policy's sub-accounts to provide the full amount requested, the
balance of the partial surrender will be taken from the Fixed Account.
NELICO has the right to delay transfers, surrenders, and Policy loans from
the Fixed Account for up to six months (to the extent allowed by state
insurance law). Loans to pay premiums on policies issued by NELICO will not be
delayed.
NELICO'S DISTRIBUTION AGREEMENT
NELICO sells the Policies through agents who are licensed by state insurance
officials to sell NELICO's variable life insurance policies. These agents are
also registered representatives of New England Securities Corporation ("New
England Securities"). New England Securities, a Massachusetts corporation
organized in 1968 and an indirect, wholly-owned subsidiary of NELICO, is
registered with the SEC as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers,
Inc.
New England Securities, whose principal business address is 399 Boylston
Street, Boston, Massachusetts 02116, serves as the principal underwriter for
the Policies under a Distribution Agreement between NELICO and New England
Securities.
Under the Distribution Agreement, NELICO pays the following sales expenses:
general agent and agency manager's compensation, agents' training allowances,
deferred compensation and insurance benefits of agents, general agents and
agency managers and advertising expenses and all other expenses of
distributing the Policies.
NELICO pays the following commissions and/or service fees to the selling
agent: a maximum of 50% of 110% of the Target Premium (plus any additional
portion of a premium which NELICO attributes to certain riders for commission
paying purposes) paid in the first Policy year, a maximum of 5% in Policy
years two through ten, and a maximum of 3% thereafter. Agents receive a
maximum commission of 3% of each payment in excess of 110% of the Target
Premium (plus any additional portion of a premium which NELICO attributes to
certain riders for commission paying purposes) in any year. For Policies sold
in connection with certain executive benefit plans the maximum commissions
are: 20% of 110% of the Target Premium (plus any additional portion of a
premium which NELICO attributes to certain riders for commission paying
purposes) in the first Policy year, 10% in Policy years two through ten, and
2% thereafter. For these Policies NELICO will pay a maximum commission of 3.5%
of each payment in excess of 110% of the Target Premium (plus any additional
portion of a premium attributable to riders for commission purposes) in Policy
years one through ten, and 2% of such excess premiums thereafter. For Policies
sold to certain group or sponsored arrangements the maximum 50% first year
commission may be paid in installments over a period of years rather than all
in the first Policy year. Agents who meet certain productivity and persistency
standards in selling policies issued by NELICO may be eligible for additional
compensation. Non-cash forms of compensation may also be paid in compliance
with applicable state law. Sales expenses in any year are not equal to the
deduction for sales load in that year.
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<PAGE>
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. It is the principal underwriter for the
Zenith Fund; The New England Variable Account; New England Retirement
Investment Account; New England Variable Annuity Separate Account; and New
England Variable Annuity Fund I. New England Securities also sells interests
in various investment partnerships.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life
insurance policies. Under the agreements with those broker-dealers, the
commission paid to the broker-dealer on behalf of the registered
representative will not exceed 50% of 110% of the Target Premium (plus any
additional portion of a premium which NELICO attributes to certain riders for
commission paying purposes) in the first Policy year, 5% in Policy years two
through ten, 3% thereafter, and 3% of all payments in excess of 110% of the
Target Premium (plus any additional portion of a premium which NELICO
attributes to certain riders for commission paying purposes) in any year. For
Policies sold in connection with certain executive benefit plans the maximum
commissions are: 20% of 110% of the Target Premium (plus any additional
portion of a premium which NELICO attributes to certain riders for commission
paying purposes) in the first Policy year, 10% in Policy years two through
ten, and 2% thereafter. For these Policies NELICO will pay a maximum
commission of 3.5% of each payment in excess of 110% of the Target Premium
(plus any additional portion of a premium attributable to riders for
commission purposes) in Policy years one through ten, and 2% of such excess
premiums thereafter. NELICO may pay certain broker-dealers an additional bonus
after the first Policy year on behalf of certain registered representatives,
the maximum amount of which may equal up to the amount of the basic commission
for the particular Policy year. Commissions will be paid through the
registered broker-dealer, which may also be reimbursed for portions of
expenses incurred in connection with the sale of the Policies.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
Generally, NELICO can challenge the validity of your Policy or a rider to
your Policy during the insured's lifetime for two years (or less, if required
by state law) from the date of issue, based on misrepresentations made in the
application. NELICO can challenge the portion of the death benefit resulting
from payment of an underwritten premium payment for two years during the
insured's lifetime from the date the premium payment was received. However, if
the insured dies within two years of the date of issue, NELICO can challenge
all or part of the Policy at any time with respect to misrepresentations in
the application.
MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated in the application, the Policy's
death benefit will be the amount that the most recent Monthly Deduction which
was made would have provided, based on the insured's correct age and, if the
Policy is sex-based, on the insured's correct sex.
SUICIDE
If the insured commits suicide within two years (or less, if required by
state law) from the date of issue set forth in the Policy, the death benefit
will be limited to the amount of the premiums paid, less any policy loan
balance, and less any partial surrenders. (Where required by state law, NELICO
will determine the death benefit under this provision by using the greater of:
the reserve of the insurance which is subject to the provision; and the
amounts used to purchase the insurance which is subject to the provision.)
TAX CONSIDERATIONS
POLICY PROCEEDS
The following discussion of Federal income tax issues relating to the
Policies is general in nature and is not intended as tax advice. It describes
what NELICO believes is the Federal income tax treatment of the Policies in
the most commonly occurring circumstances and does not reflect the effect of
Federal income taxes in all situations. In addition, there is no guarantee
that the Federal income tax laws and regulations or interpretation of them
will not change. Therefore, NELICO recommends that you consult your own tax
advisor for more complete information and advice.
DEFINITION OF LIFE INSURANCE. Section 7702 of the Internal Revenue Code of
1986, as amended ("Code") defines a life insurance contract for Federal income
tax purposes.
A-41
<PAGE>
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 creates 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 excludible from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
. the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
Because of the absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether substandard risk and
automatic issue Policies or Policies with term riders added will, in all
cases, meet the statutory life insurance contract definition. If a Policy were
determined not to be a life insurance contract for purposes of Section 7702,
such Policy would not provide most of the tax advantages normally provided by
a life insurance contract.
NELICO thus reserves the right to make changes in the Policy if such changes
are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes.
TAXATION OF ACCELERATED BENEFITS RIDER. NELICO believes that payments
received under the accelerated benefits rider it makes available will qualify
as an accelerated death benefit under the Code. (See "Acceleration of Death
Benefit Rider" for more information regarding the rider.) Pursuant to the
Health Insurance Portability and Accountability Act of 1996, a payment that is
treated as an accelerated death benefit for federal income tax purposes should
be fully excludable from the gross income of the beneficiary, as long as the
beneficiary is the insured under the Policy. If such payments do not qualify
as an accelerated death benefit, their tax treatment would depend on whether
or not the Policy is a modified endowment contract. You should consult a
qualified tax adviser about the consequences of adding this rider to a Policy
or requesting a payment under this rider.
TAX LAW EFFECTS ON CERTAIN PRE-DEATH DISTRIBUTIONS. Section 7702A of the
Code contains provisions affecting the tax treatment of any loan, assignment
or other pre-death distribution from a life insurance policy which is also a
"modified endowment contract" (defined below under "Modified Endowment
Contracts"). Whether a Policy will be classified as a modified endowment
contract will depend upon the amount and timing of payments made under the
Policy.
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NELICO believes any Policy loans received under such
Policies will be treated as indebtedness of the Policy Owner and will not be
treated as taxable income to you. This assumes that the Policy has not lapsed,
been surrendered or terminated. As a general rule, Policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of your Policy if
the net cash surrender value of the Policy is greater than the investment in
the Policy less prior distributions from the Policy that were not taxed. If a
Policy has a Policy loan and is surrendered or lapses, the Policy loan is
treated as a distribution and would be taxable if there is a gain in the
Policy. In that case, the gain in the Policy would be taxable even if the
Policy has no net cash surrender value. If you incur a loss upon the surrender
it is not likely to be deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you
unless it is greater than the investment in the Policy less the untaxed
portions of any prior distributions. The Code does provide, however, that in
certain situations in the first 15 years of the Policy partial surrenders may
be taxable, in whole or in part, if the cash value is greater than the total
investment in the Policy. In this case, an amount may be taxable even if the
amount of the partial surrender is less than the investment in the Policy.
MODIFIED ENDOWMENT CONTRACTS. A modified endowment contract is a life
insurance contract which fails to satisfy a "7-pay test". In general, a Policy
will fail to satisfy the 7-pay test if the total amount paid under the Policy
at any time during the first seven Policy years exceeds the sum of the net
level premiums that would have been paid on or before such time if the Policy
provided for paid up future benefits after the payment of seven level annual
premiums. (The amount of premiums payable under the 7-pay test are calculated
based upon certain assumptions regarding the Policy's earnings and the use of
a reasonable
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<PAGE>
mortality charge. Variable Account investment experience does not affect
whether or not a Policy will become a modified endowment contract.) Riders to
the Policy are considered part of the Policy for purposes of applying the 7-
pay test. If there is a reduction in the Policy's death benefit (for example,
as a result of a partial surrender or face amount reduction) at any time
during the first seven Policy years or within seven years of a "material
change" (see below), the 7-pay test will be applied back to issue (or to the
date of the most recent material change, whichever is latest), as if the
Policy's coverage were equal to the reduced face amount at that time. If there
is a reduction in rider or other benefits during the first seven Policy years,
the 7-pay test will be applied as if the Policy had originally been issued at
the reduced benefit amount. Any Policy received in exchange for a modified
endowment contract will also be a modified endowment contract.
Your registered representative can provide you with information about the
maximum amount of premiums which you can make under your Policy during the
first seven Policy years and still satisfy the 7-pay test. This information
will be based upon NELICO's current understanding of the Federal tax law. As
is the case with any provision of the Internal Revenue Code, there is no
assurance that the Internal Revenue Service will agree with NELICO's
interpretation. NELICO will monitor any IRS announcements or rulings
concerning compliance with the 7-pay test.
MATERIAL CHANGES. If a "material change" in the benefits or other Policy
terms occurs under a Policy which has satisfied the 7-pay test, the Policy may
be treated as a new Policy entered into on the day on which the material
change occurred. The Policy will be retested under the 7-pay test, after
making certain adjustments to reflect the Policy's existing cash value. Any
increase in future benefits under the Policy may constitute a material change
if the increase is not due to the payment of premiums necessary to fund the
Policy's lowest death benefit payable in the first seven Policy years, or the
crediting of interest or other earnings with respect to such premiums. A
material change would also occur if certain Policy changes occurred.
If you do not wish to have the Policy become a modified endowment contract,
you may be required to limit the payment of premiums under the Policy at some
point (or limit your reduction of benefits). The point at which you may have
to limit the payment of premiums will depend upon the issue age, sex and
underwriting class of the insured, investment experience and the amount of
your previous payments.
If you exchange your policy 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. (See "24 Month
Right".)
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent
the cash value of the Policy exceeds your investment in the Policy (i.e.,
will be treated as income first).
(b) Loans (including any unpaid interest) are considered distributions.
Your investment in the Policy will be increased by the amount of any prior
loan that was included in your gross income.
(c) A Policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the
Policy, the collateral assignment is a distribution which will subject any
gain that accrues in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by
NELICO or its affiliates to the same Policy Owner during any calendar year
must be treated as one modified endowment contract.
Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy) or for the
joint lives (or life expectancies) of you and your beneficiary.
If a Policy becomes a modified endowment contract, distributions made during
the Policy year in which it becomes a modified endowment contract,
distributions in any subsequent Policy year and distributions within two years
before the Policy becomes a modified endowment contract will be subject to the
tax treatment described above. This means that a distribution
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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.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS. In the case of a pre-death
distribution (including a loan, partial surrender, collateral assignment or
full surrender) from a Policy that is treated as a modified endowment
contract, a special aggregation requirement may apply for purposes of
determining the amount of the income on the Policy. Specifically, if NELICO or
any of its affiliates issues to the same Policy Owner more than one modified
endowment contract within a calendar year, then for purposes of measuring the
income on the Policy with respect to a distribution from any of those
policies, the income on the policy for all those policies will be aggregated
and attributed to that distribution.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy plus the cost of insurance protection
for the year. Regulations specifying the diversification requirements have
been issued by the Department of Treasury, and NELICO believes it complies
fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of additional
guidance prescribing the circumstances in which an owner's control of the
investments of a separate account may cause a Policy Owner, rather than the
insurance company, to be treated as the owner of the assets in the separate
account. If a Policy Owner is considered the owner of the assets of the
Separate Account, income and gains from the Account would be included in the
Owner's gross income.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it determined that the owners were not owners of separate
account assets. For example, a Policy Owner has additional flexibility in
allocating payments and cash values. These differences could result in the
owner being treated as the owner of a pro rata share of the assets of the
Separate Account. In addition, NELICO does not know what standards will be set
forth in the additional guidance which the Treasury has stated it expects to
be issued. NELICO therefore reserves the right to modify the Policy as
necessary to attempt to prevent the Policy Owner from being considered the
owner of the assets of the Separate Account.
In the event that a Policy is owned by the trustee under a pension or profit
sharing plan, or similar deferred compensation arrangement, the Federal, state
and estate tax consequences of ownership or receipt of proceeds under the
Policy could differ from the principles stated herein. However, if ownership
of such Policy is transferred from the plan to a plan participant (upon
termination of employment, for example), the Policy will be subject to all of
the rules described above relating to Federal tax treatment, including the
rules regarding modified endowment contracts. Policies owned by the trustee
under the plans described above may be subject to restrictions under ERISA.
You should consult a qualified tax advisor regarding any applicable
requirements of ERISA.
If the Policy is owned as part of a pension or profit-sharing plan qualified
under Section 401 of the Code, the current cost of insurance for the net
amount at risk is treated as a "current fringe benefit" and is required to be
included annually in the plan participant's gross income. This cost (generally
referred to as the "P.S. 58" cost) is reported to the participant annually. If
the plan participant dies while covered by the plan and the Policy proceeds
are paid to the participant's beneficiary, then the excess of the death
benefit over the cash value will not be subject to Federal income tax.
However, the cash value will generally be taxable to the extent it exceeds the
participant's cost basis in the Policy. The participant's cost basis will
generally include the costs of insurance previously reported as income to the
participant. Special rules may apply if the participant had borrowed from his
cash value or was an owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased
by a tax qualified plan.
A-44
<PAGE>
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance
plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans,
retiree medical benefit plans and others. The tax consequences of such plans
may vary depending on the particular facts and circumstances of each
individual arrangement. Therefore, if you are contemplating the use of the
Policies in any arrangement the value of which depends in part on its tax
consequences, you should be sure to consult a qualified tax advisor regarding
the tax attributes of the particular arrangement and the suitability of this
product for the arrangement. 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.
NELICO believes that Policies subject to the provisions of the Puerto Rican
tax law will generally receive similar tax treatment, with certain
modifications, as that described above for Policies subject to the Internal
Revenue Code. For taxable years commencing after July 1, 1995, amounts in the
nature of accelerated death benefits are excluded from gross income. The
individual must be certified by a physician as terminally ill and prior
approval of the Secretary of the Treasury must be obtained. You should note
that Policies governed by the Puerto Rican tax law are not currently subject
to the above described rules regarding modified endowment contracts. If such a
Policy becomes subject to the Internal Revenue Code, however, the rules
regarding modified endowment contracts will apply, and they may apply
retroactively. You should consult your tax advisor if a Policy governed by the
Puerto Rican tax law subsequently becomes subject to the Internal Revenue
Code.
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.
CHARGE FOR NELICO'S INCOME TAXES
Under current Federal income tax law no tax is imposed on NELICO as a result
of the operations of the Variable Account. Thus, no charge is being made
currently to the Variable Account for company Federal income taxes, except for
the charge for federal taxes that is deducted from premiums. NELICO reserves
its rights to charge the Variable Account for company Federal income taxes in
the future.
Under current laws NELICO may incur state and local taxes (in addition to
premium taxes) in several states. At present these taxes are not significant
and, accordingly, NELICO is not currently making a charge for them. If they
increase, however, charges for such taxes attributable to the Variable Account
may be made.
A-45
<PAGE>
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<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 business
Jericho, VT 05465 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 the
RR Box 67-15 Board of SLM Holdings since 1997; formerly,
Harborside, ME 04642 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 Director
74 Tater Street 1987-1996 of New England Mutual and Executive
Mont Vernon, NH 03057 Director and Chief Executive Officer 1994-1997 of
the California Academy of Sciences 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 the
Howard, Darby & Levin law firm of Howard, Darby & Levin in New York
1330 Avenue of the City.
Americas
New York, NY 10019
Harry P. Kamen Director of NELICO since 1996 and Chairman of
Metropolitan Life Metropolitan Life since 1998; formerly, Chairman
One Madison Avenue and 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.
Terence Lennon Director of NELICO since 1996 and Senior Vice
Metropolitan Life President of Metropolitan Life Insurance Company
One Madison Avenue since 1994; formerly, Assistant Deputy
New York, NY 10010 Superintendent and Chief Examiner 1984-1994 of
the New York Insurance Department.
Bernard A. Leventhal Director of NELICO since 1996; formerly, Vice
Burlington Industries Chairman of the Board of Directors 1995-1998 of
1345 Avenue of the Burlington Industries, Inc.; President since 1978
Americas and Corporate Group Vice President since 1985 and
New York, NY 10105 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
</TABLE>
A-46
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<C> <S>
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
NAME DURING THE PAST FIVE 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) and Senior Vice President in
1994 of New England Annuities; Vice President
1992-1996 of Keyport Life Insurance.
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.
</TABLE>
A-47
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<C> <S>
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 executive
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.
VOTING RIGHTS
NELICO is the legal owner of the Eligible Fund shares held in the Variable
Account and has the right to vote those shares at meetings of the Eligible
Fund shareholders. However, to the extent required by applicable Federal
securities law, NELICO will give you, as Policy Owner, the right to instruct
NELICO how to vote the shares that are attributable to your Policy.
The Policy Owners who are entitled to give voting instructions and the
number of shares attributable to their Policies will be determined as of the
record date for the meeting. All Eligible Fund shares held in any Sub-Account
of the Variable Account, or in any other registered (or to the extent voting
privileges are granted by the issuing insurance company, unregistered)
separate account of NELICO or an affiliate, and for which timely instructions
are not received, will be voted in the same proportion as (i) the aggregate
cash value of policies giving instructions, respectively, to vote, for,
against, or withhold votes on a proposition, bears to (ii) the total cash
value in that Sub-Account for all policies for which voting instructions are
received. No voting privileges apply with respect to cash value removed from
the Variable Account as a result of a Policy loan.
A-48
<PAGE>
All Zenith Fund shares held by the general account (or any unregistered
separate account for which voting privileges were not extended) of NELICO or
its affiliates will be voted in the same proportion as the total of (i) shares
for which voting instructions were received and (ii) shares that are voted in
proportion to such voting instructions.
The SEC requires the Eligible Funds' Boards of Trustees to monitor events to
identify conflicts that may arise from the sale of Eligible Fund shares to
variable life and variable annuity separate accounts of affiliated and, if
applicable, unaffiliated insurance companies. Conflicts could arise as a
result of changes in state insurance law or Federal income tax law, changes in
investment management of any portfolio of the Eligible Funds, or differences
in voting instructions given by variable life and variable annuity contract
owners, for example. If there is a material conflict, the Board of Trustees
will have an obligation to determine what action should be taken, including
the removal of the affected Sub-Accounts from the Eligible Fund(s), if
necessary. If NELICO believes any Eligible Fund action is insufficient, NELICO
will consider taking other action to protect Policy Owners. There could,
however, be unavoidable delays or interruptions of operations of the Variable
Account that NELICO may be unable to remedy.
If required by state insurance authorities, NELICO may disregard voting
instructions if they would require that shares be voted to cause a change in
the investment objectives of the portfolios of the Eligible Funds or to
approve or disapprove an investment advisory or underwriting contract for a
portfolio. In addition, NELICO may disregard voting instructions in favor of
changes, initiated by a Policy Owner or an Eligible Fund's Board of Trustees,
in the investment policy, investment adviser or principal underwriter of the
Eligible Fund portfolio if NELICO (i) reasonably disapproves of the changes
and (ii) in the case of a change in investment policy or investment adviser,
makes a good faith determination that the proposed change is contrary to state
law or is prohibited by state regulatory authorities or that the change would
be inconsistent with a Sub-Account's investment objectives or would result in
the purchase of securities which vary from the general quality and nature of
investments and investment techniques utilized by other separate accounts of
NELICO or of an affiliated life insurance company, which separate accounts
have investment objectives similar to those of the Sub-Account. If NELICO does
disregard voting instructions, a summary of that action and the reasons for it
will be included in the next semiannual report to Policy Owners.
RIGHTS RESERVED BY NELICO
NELICO and its affiliates may change the voting procedures described above,
and may vote Eligible Fund shares in their own right without instructions from
Policy Owners, if the applicable Federal securities laws or regulations or
interpretations of them change. NELICO also reserves the right: (1) to create
new investment accounts; (2) to combine any two or more separate investment
accounts including the Variable Account; (3) to make available additional Sub-
Accounts of the Variable Account investing in additional Eligible Fund
portfolios or in portfolios of other mutual funds; (4) to invest the assets of
the Variable Account in securities other than Eligible Fund shares or in
shares of a different series of the Eligible Funds as a substitute for such
shares already purchased or as the securities to be purchased in the future,
to withdraw the availability of a series of the Eligible Funds as an
investment option under the Policies, or to transfer assets to NELICO's
general account as permitted by applicable law; (5) to operate the Variable
Account as a management investment company under the Investment Company Act of
1940 or in any other form permitted by law; and (6) to deregister the Variable
Account under the Investment Company Act of 1940 if registration is no longer
required. NELICO will exercise these rights in accordance with applicable law,
including approval of Policy Owners if required. NELICO will notify you if
exercise of any of these rights would result in a material change in the
Variable Account or its investments.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account Sub-
Accounts, call the toll-free number 1-800-333-2501.
For Sub-Account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call the toll-free number 1-
800-200-2214.
You may also call our Client TeleService Center toll-free at 1-800-388-4000
to request current information about your Policy values, to change or update
Policy information such as your address, billing mode, beneficiary or
ownership, or to request Policy loans of less than $25,000. Requests must be
in writing if the Policy is owned by a corporation or a pension trust.
For all other types of Policy changes, please contact your registered
representative.
A-49
<PAGE>
REPORTS
NELICO will send you a statement annually showing your Policy's death
benefit, cash value and any outstanding Policy loan principal. NELICO will
also confirm Policy loans, subaccount transfers, lapses, surrenders and other
Policy transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
NELICO may from time to time receive endorsements of the Policies from
professional organizations. NELICO may refer to or use such endorsements in
advertisements or sales material for the Policies. NELICO may also pay the
professional organization making the endorsement for the use of its customer
or mailing lists in order to distribute promotional materials regarding the
Policies. An endorsement of the Policies by a third party is not necessarily
indicative of the future performance or results which may be obtained by
persons who purchase the Policies.
From time to time, articles discussing the Variable Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to Lipper Analytical Services, Inc. and
Morningstar, Inc.) may publish their own rankings or performance reviews of
variable contract separate accounts, including the Variable Account.
References to, reprints or portions of reprints of such articles or rankings
may be used by NELICO as sales literature or advertising material and may
include rankings that indicate the names of other variable contract separate
accounts and their investment experience.
Articles and releases, developed by NELICO, the Eligible Funds and other
parties, about the Variable Account or the Eligible Funds regarding individual
Eligible Funds' and fund groups' asset levels and sales volumes, statistics
and analyses of industry sales volume and asset levels, and other
characteristics may appear in various publications. References to or reprints
of such articles may be used in promotional literature for the Policies or the
Variable Account. Such literature may refer to personnel of the advisers, who
have portfolio management responsibility, and their investment style. The
reference may allude to or include excerpts from articles appearing in the
media.
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.
The advertising and sales literature for the Policies and the Variable
Account may refer to historical, current and prospective economic trends.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and
prospective Policy Owners. These materials may include, but are not limited
to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by H. James Wilson, General Counsel of NELICO. Sutherland,
Asbill & Brennan LLP, of Washington, D.C., has provided advice on certain
matters relating to federal securities laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
A-50
<PAGE>
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, 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.
Actuarial matters included in this prospectus have been examined by Rodney
J. Chandler, F.S.A., M.A.A.A., Second Vice President and Actuary of NELICO, as
stated in his opinion filed as an exhibit to the Registration Statement.
A-51
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
NET CASH VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash value and cash value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.,
investment income and capital gains and losses, realized or unrealized) for
the Variable Account equal to constant after tax annual rates of 0%, 6% and
12%. The tables are based on face amounts of $250,000 and $500,000 for a male
aged 40. The insured is assumed to be in the nonsmoker preferred risk
classification. The Tables assume no rider benefits and assume that no
allocations are made to the Fixed Account. Values are first given based on
current mortality and other Policy charges and then based on guaranteed
mortality and other Policy charges. The illustrations for the $500,000 face
amount reflect the lower sales charge and, in the illustrations based on
current charges, the cost of insurance and first-year administrative charges
that would apply, for Policies issued on or after May 1, 1997, to a Policy if
issued in the personal market or if issued in business situations or to tax-
qualified pension plans which qualify for those lower charges. (Policies
issued prior to May 1, 1997 imposed different current cost of insurance
rates.) (See "Charges and Expenses".) Each illustration is given for a Policy
with an Option 1 and an Option 2 death benefit. These tables may assist in the
comparison of death benefits, net cash values and cash values for the Policies
with those under other variable life insurance policies which may be issued by
NELICO or other companies.
Death benefits, net cash values and cash values for a Policy would be
different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period, if
premiums were paid in other amounts or at other than annual intervals. They
would also be different depending on the allocation of cash value among the
Variable Account's Sub-Accounts, if the actual gross rate of return for all
Sub-Accounts averaged 0%, 6% or 12%, but varied above or below that average
for individual Sub-Accounts. They would also differ if any Policy loan or
partial surrender were made during the period of time illustrated, if the
insured were female or in another risk classification, or if the Policies were
issued at unisex rates.
The death benefits, net cash values and cash values shown in the tables
reflect: (i) deductions from premiums for the sales charge and state and
federal premium tax charge; and (ii) a Monthly Deduction (consisting of a
Policy fee, an administrative charge, a minimum death benefit guarantee charge
and a charge for the cost of insurance) from the cash value on the first day
of each Policy month. The net cash values reflect a Surrender Charge deducted
from the cash value upon surrender, face reduction or lapse during the first
11 Policy years. The death benefits, net cash values and cash values also
reflect a daily charge assessed against the Variable Account for mortality and
expense risks equivalent to an annual charge of .75% (on a current basis) and
.90% (on a guaranteed basis) of the average daily value of the assets in the
Variable Account attributable to the Policies. (See "Charges and Expenses".)
The illustrations are based on an average of the investment advisory fees and
operating expenses incurred by the Eligible Funds, at an annual rate of .76%
of the average daily net assets of the Eligible Funds. This average reflects
voluntary expense cap and expense deferral arrangements between TNE Advisers
and the Zenith Fund, under which TNE Advisers bears operating expenses of the
Zenith Fund Series (other than the Capital Growth Series) that exceed certain
amounts. TNE Advisers could terminate the expense cap and expense deferral
arrangements at any time. If TNE Advisers terminates these arrangements, the
values illustrated on the following pages could be less. (See "Charges Against
the Eligible Funds and the Sub-Accounts of the Variable Account".)
Taking account of the charges for mortality and expense risks in the
Variable Account and the average investment advisory fee and operating
expenses of the Eligible Funds, the gross annual rates of return of 0%, 6% and
12% correspond to net investment experience at constant annual rates of -
1.50%, 4.41% and 10.32%, respectively, based on NELICO's current charge for
mortality and expense risks, and -1.65%, 4.25% and 10.16%, respectively, based
on NELICO's guaranteed maximum charge for mortality and expense risks. (See
"Net Investment Experience".)
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are
currently made. If any such charges are imposed in the future, the gross
annual rate of return would have to exceed the rates shown by an amount
sufficient to cover the tax charges, in order to produce the death benefits,
net cash values and cash values illustrated. (See "Charges for NELICO's Income
Taxes".)
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate
A-52
<PAGE>
of return on the death benefit is equivalent to an interest rate (after taxes)
at which an amount equal to the illustrated premiums could have been invested
outside the Policy to arrive at the death benefit of the Policy. The internal
rate of return is compounded annually, and the premiums are assumed to be paid
at the beginning of each Policy year.
NELICO will furnish upon request a personalized illustration reflecting the
proposed insured's age, sex, underwriting classification, and the face amount
or premium payment schedule requested. Where applicable, NELICO will also
furnish upon request an illustration for a Policy which is not affected by the
sex of the insured.
A-53
<PAGE>
MALE ISSUE AGE 40
$3,800 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,990 $250,000 $250,000 $250,000 $ 1,733 $ 1,922 $ 2,112 $ 2,831 $ 3,021 $ 3,210
2 8,180 250,000 250,000 250,000 4,599 5,158 5,740 5,729 6,288 6,870
3 12,578 250,000 250,000 250,000 6,693 7,809 9,016 8,556 9,671 10,879
4 17,197 250,000 250,000 250,000 9,491 11,355 13,454 11,291 13,155 15,254
5 22,047 250,000 250,000 250,000 12,237 15,046 18,336 13,975 16,784 20,074
6 27,140 250,000 250,000 250,000 15,156 19,113 23,934 16,604 20,561 25,382
7 32,487 250,000 250,000 250,000 18,002 23,315 30,054 19,161 24,474 31,212
8 38,101 250,000 250,000 250,000 20,815 27,699 36,790 21,684 28,568 37,658
9 43,996 250,000 250,000 250,000 23,549 32,227 44,163 24,128 32,806 44,742
10 50,186 250,000 250,000 250,000 26,250 36,952 52,287 26,540 37,242 52,577
15 86,098 250,000 250,000 250,000 38,216 62,810 106,217 38,216 62,810 106,217
20 131,933 250,000 250,000 252,697 48,032 93,899 194,382 48,032 93,899 194,382
25 190,431 250,000 250,000 406,534 55,098 131,666 338,778 55,098 131,666 338,778
30 265,091 250,000 250,000 657,890 57,811 177,830 572,078 57,811 177,830 572,078
35 360,378 250,000 250,000 997,432 53,684 236,667 949,935 53,684 236,667 949,935
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -54.40% -49.41% -44.41% 6,478.95% 6,478.95% 6,478.95%
2 -29.16 -23.22 -17.32 662.65 662.65 662.65
3 -24.36 -17.76 -11.28 265.39 265.39 265.39
4 -17.97 -11.33 -4.82 152.66 152.66 152.66
5 -14.32 -7.68 -1.18 102.87 102.87 102.87
6 -11.57 -5.02 1.39 75.61 75.61 75.61
7 -9.78 -3.30 3.05 58.68 58.68 58.68
8 -8.49 -2.07 4.23 47.26 47.26 47.26
9 -7.57 -1.19 5.07 39.10 39.10 39.10
10 -6.86 -.51 5.73 33.01 33.01 33.01
15 -5.19 1.20 7.45 17.02 17.02 17.02
20 -4.61 1.97 8.29 10.35 10.35 10.44
25 -4.51 2.43 8.78 6.81 6.81 9.93
30 -4.84 2.73 9.07 4.68 4.68 9.78
35 -5.86 3.00 9.26 3.27 3.27 9.47
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-54
<PAGE>
MALE ISSUE AGE 40
$3,800 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,990 $250,000 $250,000 $250,000 $ 1,571 $ 1,753 $ 1,936 $ 2,669 $ 2,851 $ 3,034
2 8,180 250,000 250,000 250,000 4,123 4,652 5,205 5,254 5,783 6,335
3 12,578 250,000 250,000 250,000 5,896 6,939 8,072 7,758 8,802 9,935
4 17,197 250,000 250,000 250,000 8,378 10,106 12,058 10,179 11,906 13,858
5 22,047 250,000 250,000 250,000 10,779 13,364 16,404 12,516 15,101 18,141
6 27,140 250,000 250,000 250,000 13,316 16,935 21,366 14,764 18,383 22,814
7 32,487 250,000 250,000 250,000 15,762 20,595 26,756 16,920 21,753 27,915
8 38,101 250,000 250,000 250,000 18,113 24,343 32,619 18,982 25,212 33,487
9 43,996 250,000 250,000 250,000 20,368 28,182 39,002 20,948 28,762 39,581
10 50,186 250,000 250,000 250,000 22,520 32,110 45,956 22,810 32,399 46,245
15 86,098 250,000 250,000 250,000 30,293 51,798 90,394 30,293 51,798 90,394
20 131,933 250,000 250,000 250,000 33,538 72,604 161,226 33,538 72,604 161,226
25 190,431 250,000 250,000 333,231 30,168 93,800 277,693 30,168 93,800 277,693
30 265,091 250,000 250,000 531,420 14,860 113,234 462,104 14,860 113,234 462,104
35 360,378 250,000 250,000 792,495 0 127,210 754,757 0 127,210 754,757
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -58.66% -53.86% -49.04% 6,478.95% 6,478.95% 6,478.95%
2 -34.45 -28.58 -22.73 662.65 662.65 662.65
3 -29.52 -22.85 -16.29 265.39 265.39 265.39
4 -22.45 -15.68 -9.05 152.66 152.66 152.66
5 -18.33 -11.51 -4.86 102.87 102.87 102.87
6 -15.20 -8.44 -1.85 75.61 75.61 75.61
7 -13.12 -6.40 .15 58.68 58.68 58.68
8 -11.66 -4.96 1.56 47.26 47.26 47.26
9 -10.59 -3.90 2.62 39.10 39.10 39.10
10 -9.79 -3.09 3.43 33.01 33.01 33.01
15 -8.42 -1.21 5.57 17.02 17.02 17.02
20 -8.66 -.44 6.72 10.35 10.35 10.35
25 -10.58 -.10 7.50 6.81 6.81 8.67
30 -20.35 -.04 7.97 4.68 4.68 8.69
35 -- -.25 8.28 3.27 3.27 8.49
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-55
<PAGE>
MALE ISSUE AGE 40
$3,800 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ---------------------------- ------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,990 $252,825 $253,014 $ 253,204 $ 1,727 $ 1,916 $ 2,106 $ 2,825 $ 3,014 $ 3,204
2 8,180 255,712 256,269 256,849 4,582 5,139 5,719 5,712 6,269 6,849
3 12,578 258,522 259,632 260,834 6,659 7,770 8,972 8,522 9,632 10,834
4 17,197 261,232 263,084 265,170 9,432 11,284 13,370 11,232 13,084 15,170
5 22,047 263,884 266,671 269,934 12,146 14,933 18,197 13,884 16,671 19,934
6 27,140 266,474 270,393 275,167 15,026 18,945 23,719 16,474 20,393 25,167
7 32,487 268,983 274,235 280,895 17,824 23,077 29,736 18,983 24,235 30,895
8 38,101 271,452 278,245 287,211 20,583 27,376 36,342 21,452 28,245 37,211
9 43,996 273,832 282,377 294,124 23,253 31,798 43,545 23,832 32,377 44,124
10 50,186 276,174 286,690 301,748 25,884 36,400 51,458 26,174 36,690 51,748
15 86,098 287,426 311,349 353,509 37,426 61,349 103,509 37,426 61,349 103,509
20 131,933 296,442 340,357 436,310 46,442 90,357 186,310 46,442 90,357 186,310
25 190,431 301,888 373,048 567,880 51,888 123,048 317,880 51,888 123,048 317,880
30 265,091 301,711 407,611 776,027 51,711 157,611 526,027 51,711 157,611 526,027
35 360,378 292,932 440,621 1,104,943 42,932 190,621 854,943 42,932 190,621 854,943
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -54.55% -49.57% -44.58% 6,553.31% 6,558.28% 6,563.25%
2 -29.34 -23.41 -17.52 671.84 672.73 673.66
3 -24.57 -17.98 -11.51 269.98 270.57 271.20
4 -18.20 -11.57 -5.07 155.90 156.42 157.01
5 -14.56 -7.92 -1.44 105.50 106.02 106.62
6 -11.81 -5.27 1.13 77.91 78.44 79.07
7 -10.03 -3.55 2.79 60.76 61.32 62.01
8 -8.75 -2.33 3.96 49.20 49.79 50.54
9 -7.83 -1.46 4.80 40.93 41.55 42.37
10 -7.12 -.78 5.45 34.75 35.41 36.32
15 -5.47 .91 7.15 18.55 19.42 20.80
20 -4.97 1.62 7.93 11.73 12.83 14.80
25 -5.05 1.94 8.37 8.04 9.39 12.00
30 -5.76 2.01 8.64 5.71 7.31 10.61
35 -7.67 1.92 8.81 4.03 5.92 9.90
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-56
<PAGE>
MALE ISSUE AGE 40
$3,800 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,990 $252,664 $252,846 $253,028 $ 1,566 $ 1,748 $ 1,930 $ 2,664 $ 2,846 $ 3,028 -58.80% -54.01% -49.21%
2 8,180 255,234 255,761 256,312 4,104 4,631 5,181 5,234 5,761 6,312 -34.68 -28.81 -22.97
3 12,578 257,718 258,755 259,881 5,855 6,892 8,019 7,718 8,755 9,881 -29.80 -23.13 -16.59
4 17,197 260,108 261,822 263,758 8,308 10,022 11,958 10,108 11,822 13,758 -22.75 -15.98 -9.37
5 22,047 262,407 264,966 267,974 10,669 13,228 16,237 12,407 14,966 17,974 -18.65 -11.84 -5.19
6 27,140 264,606 268,179 272,552 13,158 16,731 21,104 14,606 18,179 22,552 -15.54 -8.78 -2.20
7 32,487 266,702 271,460 277,525 15,544 20,302 26,366 16,702 21,460 27,525 -13.47 -6.76 -.22
8 38,101 268,692 274,807 282,925 17,823 23,938 32,057 18,692 24,807 32,925 -12.03 -5.34 1.18
9 43,996 270,572 278,216 288,794 19,993 27,637 38,214 20,572 28,216 38,794 -10.98 -4.29 2.21
10 50,186 272,334 281,681 295,166 22,044 31,391 44,876 22,334 31,681 45,166 -10.20 -3.51 3.00
15 86,098 279,029 299,470 336,083 29,029 49,470 86,083 29,029 49,470 86,083 -9.03 -1.79 5.00
20 131,933 280,793 316,333 396,689 30,793 66,333 146,689 30,793 66,333 146,689 -9.69 -1.31 5.91
25 190,431 275,048 328,662 485,376 25,048 78,662 235,376 25,048 78,662 235,376 -12.80 -1.49 6.42
30 265,091 256,970 329,172 612,498 6,970 79,172 362,498 6,970 79,172 362,498 -35.28 -2.47 6.69
35 360,378 305,193 790,790 55,193 540,790 55,193 540,790 -5.65 6.83
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ -- -- ---
<S> <C> <C> <C>
1 6,549.06% 6,553.84% 6,558.62%
2 671.08 671.92 672.80
3 269.55 270.10 270.70
4 155.58 156.06 156.61
5 105.23 105.70 106.26
6 77.65 78.14 78.73
7 60.52 61.03 61.66
8 48.96 49.49 50.18
9 40.69 41.25 42.00
10 34.51 35.10 35.93
15 18.22 18.99 20.25
20 11.29 12.25 14.05
25 7.44 8.58 11.04
30 4.83 6.18 9.41
35 4.22 8.48
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-57
<PAGE>
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ---------------------------- ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $500,000 $500,000 $ 500,000 $ 3,850 $ 4,242 $ 4,635 $ 6,046 $ 6,438 $ 6,831
2 16,359 500,000 500,000 500,000 9,918 11,084 12,297 12,178 13,344 14,558
3 25,157 500,000 500,000 500,000 14,459 16,795 19,322 18,184 20,520 23,048
4 34,395 500,000 500,000 500,000 20,423 24,336 28,738 24,023 27,936 32,338
5 44,095 500,000 500,000 500,000 26,285 32,193 39,104 29,760 35,668 42,579
6 54,279 500,000 500,000 500,000 32,498 40,830 50,972 35,394 43,726 53,868
7 64,973 500,000 500,000 500,000 38,581 49,783 63,971 40,898 52,100 66,288
8 76,202 500,000 500,000 500,000 44,587 59,116 78,273 46,324 60,854 80,011
9 87,992 500,000 500,000 500,000 50,455 68,786 93,955 51,613 69,944 95,113
10 100,372 500,000 500,000 500,000 56,254 78,876 111,228 56,833 79,455 111,807
15 172,197 500,000 500,000 500,000 81,216 133,333 225,100 81,216 133,333 225,100
20 263,866 500,000 500,000 533,668 101,199 198,246 410,514 101,199 198,246 410,514
25 380,862 500,000 500,000 855,918 115,634 277,234 713,265 115,634 277,234 713,265
30 530,182 500,000 500,000 1,382,912 121,636 374,413 1,202,532 121,636 374,413 1,202,532
35 720,756 500,000 523,649 2,094,848 114,438 498,713 1,995,093 114,438 498,713 1,995,093
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -49.34% -44.18% -39.01% 6,478.95% 6,478.95% 6,478.95%
2 -25.30 -19.29 -13.32 662.65 662.65 662.65
3 -21.11 -14.52 -8.05 265.39 265.39 265.39
4 -15.29 -8.70 -2.24 152.66 152.66 152.66
5 -12.04 -5.48 .96 102.87 102.87 102.87
6 -9.61 -3.15 3.19 75.61 75.61 75.61
7 -8.04 -1.66 4.61 58.68 58.68 58.68
8 -6.94 -.62 5.59 47.26 47.26 47.26
9 -6.16 .11 6.29 39.10 39.10 39.10
10 -5.55 .67 6.82 33.01 33.01 33.01
15 -4.37 1.93 8.11 17.02 17.02 17.02
20 -4.06 2.47 8.74 10.35 10.35 10.88
25 -4.08 2.79 9.10 6.81 6.81 10.25
30 -4.44 3.03 9.32 4.68 4.68 10.03
35 -5.38 3.26 9.47 3.27 3.49 9.67
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-58
<PAGE>
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ---------------------------- --------------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $500,000 $500,000 $ 500,000 $ 3,530 $ 3,909 $ 4,289 $ 5,726 $ 6,105 $ 6,486
2 16,359 500,000 500,000 500,000 8,787 9,891 11,043 11,048 12,151 13,303
3 25,157 500,000 500,000 500,000 12,483 14,656 17,016 16,208 18,381 20,741
4 34,395 500,000 500,000 500,000 17,597 21,191 25,252 21,198 24,791 28,852
5 44,095 500,000 500,000 500,000 22,545 27,917 34,235 26,020 31,392 37,710
6 54,279 500,000 500,000 500,000 27,766 35,280 44,482 30,662 38,176 47,378
7 64,973 500,000 500,000 500,000 32,801 42,830 55,620 35,118 45,147 57,937
8 76,202 500,000 500,000 500,000 37,646 50,569 67,741 39,383 52,306 69,479
9 87,992 500,000 500,000 500,000 42,297 58,501 80,946 43,455 59,659 82,104
10 100,372 500,000 500,000 500,000 46,740 66,622 95,341 47,320 67,202 95,920
15 172,197 500,000 500,000 500,000 62,974 107,560 187,595 62,974 107,560 187,595
20 263,866 500,000 500,000 500,000 70,169 151,253 335,124 70,169 151,253 335,124
25 380,862 500,000 500,000 692,531 64,216 196,598 577,110 64,216 196,598 577,110
30 530,182 500,000 500,000 1,103,642 34,620 240,087 959,689 34,620 240,087 959,689
35 720,756 500,000 500,000 1,645,165 0 276,377 1,566,824 0 276,377 1,566,824
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -53.55% -48.57% -43.56% 6,478.95% 6,478.95% 6,478.95%
2 -31.42 -25.44 -19.50 662.65 662.65 662.65
3 -27.23 -20.52 -13.93 265.39 265.39 265.39
4 -20.71 -13.92 -7.29 152.66 152.66 152.66
5 -16.92 -10.11 -3.46 102.87 102.87 102.87
6 -14.03 -7.29 -.71 75.61 75.61 75.61
7 -12.12 -5.42 1.11 58.68 58.68 58.68
8 -10.78 -4.11 2.40 47.26 47.26 47.26
9 -9.80 -3.14 3.35 39.10 39.10 39.10
10 -9.07 -2.41 4.08 33.01 33.01 33.01
15 -7.87 -.73 6.01 17.02 17.02 17.02
20 -8.12 -.05 7.04 10.35 10.35 10.35
25 -9.87 .26 7.75 6.81 6.81 8.92
30 -17.96 .33 8.16 4.68 4.68 8.88
35 -- .21 8.44 3.27 3.27 8.65
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-59
<PAGE>
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ---------------------------- ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $506,037 $506,429 $ 506,822 $ 3,841 $ 4,233 $ 4,626 $ 6,037 $ 6,429 $ 6,822
2 16,359 512,153 513,316 514,527 9,892 11,056 12,266 12,153 13,316 14,527
3 25,157 518,132 520,461 522,980 14,407 16,736 19,255 18,132 20,461 22,980
4 34,395 523,933 527,829 532,211 20,332 24,228 28,610 23,933 27,829 32,211
5 44,095 529,621 535,496 542,367 26,146 32,021 38,892 29,621 35,496 42,367
6 54,279 535,195 543,471 553,541 32,299 40,575 50,645 35,195 43,471 53,541
7 64,973 540,626 551,736 565,805 38,309 49,419 63,488 40,626 51,736 65,805
8 76,202 545,970 560,360 579,329 44,233 58,623 77,591 45,970 60,360 79,329
9 87,992 551,160 569,289 594,169 50,002 68,130 93,011 51,160 69,289 94,169
10 100,372 556,272 578,611 610,542 55,693 78,032 109,963 56,272 78,611 110,542
15 172,197 579,857 630,855 720,549 79,857 130,855 220,549 79,857 130,855 220,549
20 263,866 598,169 691,585 895,604 98,169 191,585 395,604 98,169 191,585 395,604
25 380,862 609,257 760,254 1,174,092 109,257 260,254 674,092 109,257 260,254 674,092
30 530,182 609,305 833,716 1,615,761 109,305 333,716 1,115,761 109,305 333,716 1,115,761
35 720,756 592,457 905,504 2,315,513 92,457 405,504 1,815,513 92,457 405,504 1,815,513
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -49.46% -44.30% -39.14% 6,558.39% 6,563.54% 6,568.70%
2 -25.44 -19.44 -13.47 672.43 673.36 674.32
3 -21.26 -14.68 -8.22 270.27 270.88 271.55
4 -15.46 -8.87 -2.41 156.11 156.66 157.27
5 -12.21 -5.65 .77 105.67 106.22 106.84
6 -9.78 -3.33 3.01 78.06 78.62 79.28
7 -8.22 -1.84 4.42 60.91 61.49 62.21
8 -7.12 -.81 5.40 49.33 49.95 50.74
9 -6.34 -.08 6.09 41.06 41.71 42.58
10 -5.74 .48 6.62 34.88 35.57 36.52
15 -4.60 1.70 7.88 18.64 19.56 21.00
20 -4.38 2.16 8.43 11.80 12.96 15.00
25 -4.58 2.34 8.75 8.10 9.51 12.21
30 -5.30 2.35 8.94 5.76 7.43 10.81
35 -7.05 2.23 9.07 4.08 6.04 10.09
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-60
<PAGE>
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ---------------------------- --------------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $505,718 $506,096 $ 506,476 $ 3,522 $ 3,900 $ 4,280 $ 5,718 $ 6,096 $ 6,476
2 16,359 511,010 512,110 513,258 8,750 9,850 10,997 11,010 12,110 13,258
3 25,157 516,126 518,287 520,634 12,401 14,562 16,909 16,126 18,287 20,634
4 34,395 521,054 524,620 528,649 17,454 21,020 25,049 21,054 24,620 28,649
5 44,095 525,796 531,114 537,368 22,321 27,639 33,892 25,796 31,114 37,368
6 54,279 530,336 537,757 546,841 27,440 34,861 43,945 30,336 37,757 46,841
7 64,973 534,668 544,543 557,134 32,351 42,227 54,817 34,668 44,543 57,134
8 76,202 538,784 551,470 568,320 37,046 49,733 66,582 38,784 51,470 68,320
9 87,992 542,679 558,533 580,479 41,520 57,375 79,320 42,679 58,533 80,479
10 100,372 546,336 565,717 593,689 45,756 65,138 93,110 46,336 65,717 93,689
15 172,197 560,357 602,740 678,669 60,357 102,740 178,669 60,357 102,740 178,669
20 263,866 564,466 638,244 804,985 64,466 138,244 304,985 64,466 138,244 304,985
25 380,862 553,512 665,094 990,642 53,512 165,094 490,642 53,512 165,094 490,642
30 530,182 517,849 668,814 1,258,330 17,849 168,814 758,330 17,849 168,614 758,330
35 720,756 624,187 1,636,753 124,187 1,136,753 124,187 1,136,753
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------- --------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -53.66% -48.68% -43.69% 6,554.18% 6,559.16% 6,564.16%
2 -31.62 -25.66 -19.73 671.51 672.39 673.31
3 -27.50 -20.80 -14.22 269.73 270.31 270.93
4 -21.00 -14.23 -7.60 155.70 156.20 156.77
5 -17.24 -10.43 -3.79 105.32 105.81 106.39
6 -14.36 -7.63 -1.06 77.73 78.23 78.84
7 -12.47 -5.78 .75 60.59 61.11 61.77
8 -11.15 -4.48 2.02 49.02 49.57 50.28
9 -10.19 -3.54 2.95 40.74 41.33 42.10
10 -9.48 -2.83 3.66 34.56 35.18 36.03
15 -8.47 -1.31 5.43 18.27 19.06 20.35
20 -9.14 -.91 6.25 11.33 12.32 14.16
25 -11.99 -1.10 6.69 7.48 8.66 11.16
30 -29.86 -2.02 6.93 4.87 6.26 9.55
35 -4.78 7.05 4.33 8.63
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-61
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
The information contained in this Appendix gives hypothetical illustrations
of the Variable Account's and the Policy's investment experience based on the
historical investment experience of the Eligible Funds. It does not represent
what may happen in the future.
The Policies were not available until August, 1995. The Zenith Fund and the
Variable Account commenced operations on August 26, 1983. The Westpeak Stock
Index and Back Bay Advisors Managed Series of the Zenith Fund commenced
operations on May 1, 1987. The Westpeak Growth and Income Series and Goldman
Sachs Midcap Value Series of the Zenith Fund commenced operations on April 30,
1993. The Loomis Sayles Small Cap Series of the Zenith Fund commenced
operations on May 2, 1994. The remaining Zenith Fund Series commenced
operations on October 31, 1994. The Equity-Income Portfolio and Overseas
Portfolio of the VIP Fund commenced operations on October 9, 1986 and January
28, 1987, respectively. The High Income Portfolio of the VIP Fund and the
Asset Manager Portfolio of the VIP Fund II commenced operations on September
19, 1985 and September 6, 1989, respectively.
The illustrations are based on the actual investment experience of the
relevant Eligible Funds for the periods shown (net of actual charges and
expenses incurred by the Eligible Funds), and reflect a charge for mortality
and expense risks against the Variable Account's assets at the currently
applicable annual rate of .75%. The illustrations assume that premiums are
paid at the beginning of each year and that no loans, transfers or other
Policy Owner transactions were made during the periods shown.
VARIABLE ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account which invests in the
Eligible Funds. The investment experience of the Sub-Account or Sub-Accounts
you choose will affect the values and benefits of your Policy.
Many factors in addition to investment experience will affect the actual
values and benefits of your Policy. For instance, these investment experience
figures do not reflect the charges deducted from Premiums and Monthly
Deductions from the cash value. (See "Charges and Expenses".)
NET RATES OF RETURN
The annual net rate is the effective earnings rate at which the investment
Sub-Accounts increased or decreased over a one-year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated
by taking the difference between the Sub-Accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the Sub-Accounts increased or decreased since
the inception dates of the Sub-Accounts. For each Sub-Account, the rate is
calculated by taking the difference between the Sub-Account's ending value and
the value on the date of its inception and dividing it by the value on the
date of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which,
if compounded annually, would equal the total net rate of return since
inception.
A-62
<PAGE>
SUB-ACCOUNT INVESTING IN ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
----------- 8/26/83- --------------------------------------------------------------------------------------------------
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth*. 8.58% -1.11% 66.84% 93.75% 51.56% -9.47% 31.88% -5.73% 52.83% -6.75% 14.11% -7.76%
Bond Income..... 2.77% 11.93 17.87 13.98 1.50 7.56 11.46 7.28 17.08 7.37 11.77 -4.08
Money Market.... 3.03% 9.80 7.45 6.01 5.73 6.71 8.44 7.38 5.42 3.02 2.20 3.20
<CAPTION>
8/26/83- 8/26/83-
SUB-ACCOUNT 12/31/97 12/31/97
----------- TOTAL EFFECTIVE
12/31/95 12/31/96 12/31/97 RETURN ANNUAL
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Capital Growth*. 37.00% 20.16% 22.56% 1,692.05% 22.28%
Bond Income..... 20.29 3.82 10.06 273.72 9.62
Money Market.... 4.91 4.34 4.55 121.92 5.71
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------------------- 5/1/87-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/97
----------- 5/1/87- ----------------------------------------------------------------------------------------- TOTAL
12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 RETURN
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index..... -13.06% 15.47% 29.18% -4.86% 29.46% 6.49% 8.90% .36% 35.90% 21.55% 31.51% 305.79%
Managed......... -1.15% 8.67 18.20 2.44 19.28 5.90 9.82 -1.85 30.28 14.16 25.62 230.83
<CAPTION>
5/1/87-
SUB-ACCOUNT 12/31/97
----------- EFFECTIVE
ANNUAL
---------
<S> <C>
Stock Index..... 14.03%
Managed......... 11.87
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------- 4/30/93- 4/30/93-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/97 12/31/97
----------- 4/30/93- ----------------------------------- TOTAL EFFECTIVE
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income....... 13.67% -1.94% 35.45% 17.21% 32.47% 134.41% 20.01%
Midcap Value**.......... 14.16 -1.01 29.38 16.72 16.45 98.72 15.84
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------- 5/2/94- 5/2/94-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/97 12/31/97
----------- 5/2/94- -------------------------- TOTAL EFFECTIVE
12/31/94 12/31/95 12/31/96 12/31/97 RETURN ANNUAL
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Small Cap................ -3.71% 27.88% 29.70% 23.92% 97.92% 20.47%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------ 10/31/94- 10/31/94-
FOR ONE YEAR ENDING 12/31/97 12/31/97
10/31/94- -------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 RETURN ANNUAL
----------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Equity Growth........... -4.32% 47.59% 12.32% 24.69% 97.78% 24.02%
Balanced................ -.22 23.86 16.03 15.31 65.36 17.21
Venture Value........... -3.62 38.25 24.89 32.50 120.50 28.35
International Magnum
Equity***.............. 2.48 5.44 5.87 -2.04 12.06 3.66
</TABLE>
- -------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
** The Goldman Sachs Midcap Value Series' Sub-adviser was Loomis Sayles until
May 1, 1998, when Goldman Sachs Asset Management became the sub-adviser.
Rates of return reflect the Series' former investment advisory fee of .70%
of average daily net assets. Beginning May 1, 1998, the Series' investment
advisory fee is .75%.
*** The Morgan Stanley International Magnum Equity Series' sub-adviser was
Draycott Partners until May 1, 1997, when Morgan Stanley Asset Management
became sub-adviser.
SUB-ACCOUNTS INVESTING IN VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
----------- 10/9/86- --------------------------------------------------------------------------------------------------
12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income... .03% -1.87% 21.79% 16.47% -15.93% 30.46% 16.01% 17.41% 6.27% 34.09% 13.42% 27.15%
<CAPTION>
10/9/86- 10/9/86-
SUB-ACCOUNT 12/31/97 12/31/97
----------- TOTAL EFFECTIVE
RETURN ANNUAL
-------- ---------
<S> <C> <C>
Equity-Income... 327.48% 13.81%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------------------- 1/28/87-
FOR ONE YEAR ENDING 12/31/97
1/28/87- ----------------------------------------------------------------------------------------- TOTAL
12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 RETURN
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas........ -6.03% 7.32% 25.34% -2.40% 7.19% -11.39% 36.33% .97% 8.86% 12.36% 10.72% 118.43%
<CAPTION>
1/28/87-
12/31/97
EFFECTIVE
ANNUAL
---------
<S> <C>
Overseas........ 7.41%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
----------- 9/19/85- --------------------------------------------------------------------------------------------------
12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..... 6.15% 16.80% 0.46% 10.81% -4.89% -2.97% 34.07% 22.24% 19.50% -2.28% 19.71% 13.17%
<CAPTION>
9/19/85- 9/19/85-
SUB-ACCOUNT 12/31/97 12/31/97
----------- TOTAL EFFECTIVE
12/31/97 RETURN ANNUAL
-------- -------- ---------
<S> <C> <C> <C>
High Income..... 16.79% 285.71% 11.62%
</TABLE>
SUB-ACCOUNT INVESTING IN VARIABLE INSURANCE PRODUCTS FUND II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------- 9/6/89- 9/6/89-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/97 12/31/97
----------- 9/6/89- ----------------------------------------------------------------------- TOTAL EFFECTIVE
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 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager..... .57% 5.92% 21.64% 10.88% 20.33% -6.79% 16.08% 13.74% 19.75% 154.79% 11.90%
</TABLE>
A-63
<PAGE>
POLICY PERFORMANCE
The material below assumes a Policy was issued with a $250,000 and $500,000
face amount, respectively, with annual premiums paid on August 26 of each year
(May 1 in the case of the Zenith Stock Index, Zenith Managed and Zenith Small
Cap Sub-Accounts; October 31 in the case of the Zenith Balanced, Zenith
International Magnum, Equity, Zenith Venture Value and Zenith Equity Growth
Sub-Accounts; October 9 in the case of the Equity-Income Sub-Account, January
28 in the case of the Overseas Sub-Account; April 30 in the case of the Zenith
Growth and Income and Zenith Midcap Value Sub-Accounts; September 19 in the
case of the High Income Sub-Account; September 6 in the case of the Asset
Manager Sub-Account), to a male age 40 in the nonsmoker preferred risk
category. Values and benefits are shown first for Policies with the Option 1
death benefit and then for the Policies with the Option 2 death benefit. The
death benefits, cash values and internal rates of return assume in each
instance that the entire policy value was invested in the particular Sub-
Account for the period shown. The illustrations of Policy investment
experience reflect all Policy charges based on NELICO's current rates. The
illustrations for the $500,000 face amount reflect the lower sales charge,
cost of insurance and first-year administrative charges that would apply to
the Policy if issued in the personal market or if issued in business
situations or to tax-qualified pension plans which qualify for those lower
charges. (See "Charges and Expenses".) (See Appendix A for the definition of
the internal rate of return.)
MALE NONSMOKER PREFERRED RISK, AGE 40
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1983....... 3,800 250,000 250,000 3,595 2,497 -70.10% --
December 31, 1984....... 7,600 250,000 250,000 6,449 5,282 -36.87 2,058.98%
December 31, 1985....... 11,400 250,000 250,000 14,356 12,457 6.69 447.23
December 31, 1986....... 15,200 250,000 250,000 30,701 28,865 36.91 212.13
December 31, 1987....... 19,000 250,000 250,000 48,772 46,998 40.24 130.64
December 31, 1988....... 22,800 250,000 250,000 47,157 45,540 24.45 91.23
December 31, 1989....... 26,600 250,000 250,000 64,192 62,865 25.46 68.52
December 31, 1990....... 30,400 250,000 250,000 64,000 62,962 18.51 53.94
December 31, 1991....... 34,200 250,000 250,000 101,174 100,426 23.83 43.89
December 31, 1992....... 38,000 250,000 250,000 97,663 97,204 18.50 36.58
December 31, 1993....... 41,800 250,000 250,000 114,634 114,465 17.81 31.06
December 31, 1994....... 45,600 250,000 250,000 107,755 107,755 13.90 26.76
December 31, 1995....... 49,400 250,000 260,741 152,480 152,480 16.49 23.90
December 31, 1996....... 53,200 250,000 305,438 186,243 186,243 16.81 23.04
December 31, 1997....... 57,000 250,000 363,084 231,264 231,264 17.31 22.52
</TABLE>
A-64
<PAGE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE CASH VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1983....... 3,800 250,000 250,000 3,387 2,289 -76.70% --
December 31, 1984....... 7,600 250,000 250,000 6,954 5,788 -28.68 2,058.98%
December 31, 1985....... 11,400 250,000 250,000 11,342 9,443 -13.49 447.23
December 31, 1986....... 15,200 250,000 250,000 15,940 14,104 -4.02 212.13
December 31, 1987....... 19,000 250,000 250,000 19,137 17,363 -3.83 130.64
December 31, 1988....... 22,800 250,000 250,000 23,555 21,938 -1.35 91.23
December 31, 1989....... 26,600 250,000 250,000 29,233 27,906 1.43 68.52
December 31, 1990....... 30,400 250,000 250,000 34,407 33,369 2.41 53.94
December 31, 1991....... 34,200 250,000 250,000 43,411 42,663 5.02 43.89
December 31, 1992....... 38,000 250,000 250,000 49,494 49,035 5.17 36.58
December 31, 1993....... 41,800 250,000 250,000 58,208 58,039 5.99 31.06
December 31, 1994....... 45,600 250,000 250,000 58,580 58,580 4.20 26.76
December 31, 1995....... 49,400 250,000 250,000 73,733 73,733 6.10 23.33
December 31, 1996....... 53,200 250,000 250,000 79,697 79,697 5.70 20.53
December 31, 1997....... 57,000 250,000 250,000 90,831 90,831 6.08 18.22
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE CASH VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1983....... 3,800 250,000 250,000 3,394 2,296 -76.49% --
December 31, 1984....... 7,600 250,000 250,000 6,742 5,575 -32.12 2,058.98%
December 31, 1985....... 11,400 250,000 250,000 10,290 8,391 -21.47 447.23
December 31, 1986....... 15,200 250,000 250,000 13,899 12,062 -12.27 212.13
December 31, 1987....... 19,000 250,000 250,000 17,667 15,893 -7.57 130.64
December 31, 1988....... 22,800 250,000 250,000 21,839 20,222 -4.22 91.23
December 31, 1989....... 26,600 250,000 250,000 26,633 25,306 -1.49 68.52
December 31, 1990....... 30,400 250,000 250,000 31,528 30,491 .08 53.94
December 31, 1991....... 34,200 250,000 250,000 36,147 35,399 .79 43.89
December 31, 1992....... 38,000 250,000 250,000 40,112 39,654 .88 36.58
December 31, 1993....... 41,800 250,000 250,000 43,877 43,708 .83 31.06
December 31, 1994....... 45,600 250,000 250,000 48,211 48,211 .95 26.76
December 31, 1995....... 49,400 250,000 250,000 53,523 53,523 1.25 23.33
December 31, 1996....... 53,200 250,000 250,000 58,809 58,809 1.45 20.53
December 31, 1997....... 57,000 250,000 250,000 64,451 64,451 1.65 18.22
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE CASH VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1987....... 3,800 250,000 250,000 2,724 1,626 -71.91% --
December 31, 1988....... 7,600 250,000 250,000 6,297 5,146 -29.28 1,070.47%
December 31, 1989....... 11,400 250,000 250,000 11,885 10,001 -7.66 337.59
December 31, 1990....... 15,200 250,000 250,000 14,073 12,252 -9.74 178.58
December 31, 1991....... 19,000 250,000 250,000 21,453 19,694 1.35 115.51
December 31, 1992....... 22,800 250,000 250,000 25,960 24,415 2.16 82.89
December 31, 1993....... 26,600 250,000 250,000 31,373 30,118 3.38 63.34
December 31, 1994....... 30,400 250,000 250,000 34,450 33,485 2.31 50.46
December 31, 1995....... 34,200 250,000 250,000 50,740 50,064 8.04 41.41
December 31, 1996....... 38,000 250,000 250,000 64,534 64,147 9.89 34.74
December 31, 1997....... 41,800 250,000 250,000 88,520 88,424 12.72 29.65
</TABLE>
A-65
<PAGE>
ZENITH MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1987....... 3,800 250,000 250,000 3,089 1,991 -61.97% --
December 31, 1988....... 7,600 250,000 250,000 6,472 5,321 -27.08 1,070.47%
December 31, 1989....... 11,400 250,000 250,000 11,123 9,239 -12.13 337.59
December 31, 1990....... 15,200 250,000 250,000 14,449 12,628 -8.40 178.58
December 31, 1991....... 19,000 250,000 250,000 20,467 18,708 -.58 115.51
December 31, 1992....... 22,800 250,000 250,000 24,833 23,289 .67 82.89
December 31, 1993....... 26,600 250,000 250,000 30,320 29,065 2.41 63.34
December 31, 1994....... 30,400 250,000 250,000 32,696 31,731 1.03 50.46
December 31, 1995....... 34,200 250,000 250,000 46,293 45,617 6.10 41.41
December 31, 1996....... 38,000 250,000 250,000 55,802 55,416 7.16 34.74
December 31, 1997....... 41,800 250,000 250,000 73,610 73,514 9.66 29.65
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1993....... 3,800 250,000 250,000 3,516 2,418 -49.02% --
December 31, 1994....... 7,600 250,000 250,000 6,432 5,286 -27.45 1,065.53%
December 31, 1995....... 11,400 250,000 250,000 12,427 10,549 -4.58 336.86
December 31, 1996....... 15,200 250,000 250,000 17,826 16,010 2.40 178.34
December 31, 1997....... 19,000 250,000 250,000 27,321 25,568 11.28 115.39
ZENITH MIDCAP VALUE SUB-ACCOUNT**
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1993....... 3,800 250,000 250,000 3,533 2,435 -48.48% --
December 31, 1994....... 7,600 250,000 250,000 6,498 5,352 -26.62 1,065.53%
December 31, 1995....... 11,400 250,000 250,000 12,111 10,232 -6.34 336.86
December 31, 1996....... 15,200 250,000 250,000 17,255 15,440 .72 178.34
December 31, 1997....... 19,000 250,000 250,000 23,595 21,842 5.25 115.39
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1994....... 3,800 250,000 250,000 2,967 1,869 -65.57% --
December 31, 1995....... 7,600 250,000 250,000 7,399 6,248 -15.73 1,075.45%
December 31, 1996....... 11,400 250,000 250,000 12,998 11,115 -1.51 338.33
December 31, 1997....... 15,200 250,000 250,000 19,843 18,022 8.00 178.83
</TABLE>
A-66
<PAGE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1994....... 3,800 250,000 250,000 3,396 2,297 -95.08% --
December 31, 1995....... 7,600 250,000 250,000 7,235 6,058 -30.57 3,427.00%
December 31, 1996....... 11,400 250,000 250,000 11,455 9,545 -14.73 539.22
December 31, 1997....... 15,200 250,000 250,000 16,218 14,371 -3.35 236.33
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1994....... 3,800 250,000 250,000 3,480 2,381 -93.90% --
December 31, 1995....... 7,600 250,000 250,000 6,788 5,610 -39.45 3,427.00%
December 31, 1996....... 11,400 250,000 250,000 10,209 8,299 -25.70 539.22
December 31, 1997....... 15,200 250,000 250,000 12,897 11,050 -18.72 236.33
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1994....... 3,800 250,000 250,000 3,290 2,192 -96.28% --
December 31, 1995....... 7,600 250,000 250,000 7,552 6,375 -24.26 3,427.00%
December 31, 1996....... 11,400 250,000 250,000 12,529 10,620 -5.99 539.22
December 31, 1997....... 15,200 250,000 250,000 19,610 17,763 9.46 236.33
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1994....... 3,800 250,000 250,000 3,210 2,112 -97.02% --
December 31, 1995....... 7,600 250,000 250,000 7,556 6,379 -24.19 3,427.00%
December 31, 1996....... 11,400 250,000 250,000 11,536 9,627 -14.05 539.22
December 31, 1997....... 15,200 250,000 250,000 17,349 15,502 1.18 236.33
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1986....... 3,800 250,000 250,000 3,412 2,314 -88.72% --
December 31, 1987....... 7,600 250,000 250,000 5,714 4,537 -56.07 2,847.86%
December 31, 1988....... 11,400 250,000 250,000 9,836 7,926 -27.71 505.26
December 31, 1989....... 15,200 250,000 250,000 14,430 12,583 -10.78 227.75
December 31, 1990....... 19,000 250,000 250,000 15,194 13,409 -15.57 137.27
December 31, 1991....... 22,800 250,000 250,000 22,911 21,246 -2.59 94.76
December 31, 1992....... 26,600 250,000 250,000 29,788 28,413 2.04 70.66
December 31, 1993....... 30,400 250,000 250,000 37,838 36,752 5.04 55.37
December 31, 1994....... 34,200 250,000 250,000 43,003 42,207 4.91 44.89
December 31, 1995....... 38,000 250,000 250,000 61,052 60,545 9.56 37.32
December 31, 1996....... 41,800 250,000 250,000 71,996 71,779 9.95 31.62
December 31, 1997....... 45,600 250,000 250,000 94,468 94,468 12.06 27.20
</TABLE>
A-67
<PAGE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1987....... 3,800 250,000 250,000 2,716 1,617 -60.35% --
December 31, 1988....... 7,600 250,000 250,000 6,345 5,215 -23.74 731.16%
December 31, 1989....... 11,400 250,000 250,000 11,392 9,530 -9.04 279.55
December 31, 1990....... 15,200 250,000 250,000 14,076 12,276 -8.63 158.04
December 31, 1991....... 19,000 250,000 250,000 18,251 16,513 -4.76 105.56
December 31, 1992....... 22,800 250,000 250,000 18,677 17,229 -8.14 77.19
December 31, 1993....... 26,600 250,000 250,000 29,372 28,214 1.50 59.70
December 31, 1994....... 30,400 250,000 250,000 32,308 31,439 .76 47.97
December 31, 1995....... 34,200 250,000 250,000 38,892 38,313 2.30 39.61
December 31, 1996....... 38,000 250,000 250,000 46,643 46,353 3.63 33.39
December 31, 1997....... 41,800 250,000 250,000 54,951 54,951 4.55 28.61
HIGH INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1985....... 3,800 250,000 250,000 3,559 2,461 -78.56% --
December 31, 1986....... 7,600 250,000 250,000 7,202 6,030 -26.74 2,440.56%
December 31, 1987....... 11,400 250,000 250,000 10,170 8,266 -23.62 477.39
December 31, 1988....... 15,200 250,000 250,000 14,246 12,404 -11.22 220.41
December 31, 1989....... 19,000 250,000 250,000 16,326 14,546 -11.64 134.18
December 31, 1990....... 22,800 250,000 250,000 18,708 17,067 -10.46 93.12
December 31, 1991....... 26,600 250,000 250,000 28,064 26,712 .13 69.67
December 31, 1992....... 30,400 250,000 250,000 37,180 36,118 4.52 54.71
December 31, 1993....... 34,200 250,000 250,000 47,453 46,681 7.14 44.43
December 31, 1994....... 38,000 250,000 250,000 49,251 48,768 5.13 36.98
December 31, 1995....... 41,800 250,000 250,000 62,005 61,812 7.20 31.37
December 31, 1996....... 45,600 250,000 250,000 73,008 73,008 7.85 27.00
December 31, 1997....... 49,400 250,000 250,000 88,272 88,272 8.82 23.52
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 3,800 $250,000 $250,000 $ 3,525 $ 2,427 -- --
December 31, 1989....... 3,800 250,000 250,000 3,385 2,287 -79.75% --
December 31, 1990....... 7,600 250,000 250,000 6,666 5,494 -34.56 2,221.58%
December 31, 1991....... 11,400 250,000 250,000 11,186 9,282 -15.01 460.64
December 31, 1992....... 15,200 250,000 250,000 15,449 13,607 -6.03 215.86
December 31, 1993....... 19,000 250,000 250,000 21,687 19,908 2.02 132.24
December 31, 1994....... 22,800 250,000 250,000 22,918 21,277 -2.46 92.09
December 31, 1995....... 26,600 250,000 250,000 29,747 28,396 1.97 69.04
December 31, 1996....... 30,400 250,000 250,000 36,909 35,847 4.29 54.29
December 31, 1997....... 34,200 250,000 250,000 47,133 46,361 6.93 44.14
</TABLE>
A-68
<PAGE>
OPTION 2 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1983....... 3,800 250,000 253,592 3,592 2,494 -70.19% --
December 31, 1984....... 7,600 250,000 256,437 6,437 5,271 -37.06 2,101.48%
December 31, 1985....... 11,400 250,000 264,314 14,314 12,415 6.43 461.61
December 31, 1986....... 15,200 250,000 280,559 30,559 28,722 36.60 224.67
December 31, 1987....... 19,000 250,000 298,450 48,450 46,676 39.92 142.00
December 31, 1988....... 22,800 250,000 296,760 46,760 45,143 24.14 98.81
December 31, 1989....... 26,600 250,000 313,521 63,521 62,193 25.14 76.13
December 31, 1990....... 30,400 250,000 313,202 63,202 62,164 18.19 60.03
December 31, 1991....... 34,200 250,000 349,692 99,692 98,944 23.51 51.48
December 31, 1992....... 38,000 250,000 364,015 96,015 95,557 18.18 42.90
December 31, 1993....... 41,800 250,000 362,441 112,441 112,272 17.48 37.39
December 31, 1994....... 45,600 250,000 355,455 105,455 105,455 13.56 32.11
December 31, 1995....... 49,400 250,000 398,899 148,899 148,899 16.16 29.74
December 31, 1996....... 53,200 250,000 431,552 181,552 181,552 16.49 27.37
December 31, 1997....... 57,000 250,000 475,174 225,174 225,174 17.00 25.61
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1983....... 3,800 250,000 253,385 3,385 2,286 -76.78% --
December 31, 1984....... 7,600 250,000 256,942 6,942 5,775 -28.88 2,104.80%
December 31, 1985....... 11,400 250,000 261,310 11,310 9,411 -13.72 458.63
December 31, 1986....... 15,200 250,000 265,874 15,874 14,037 -4.28 218.77
December 31, 1987....... 19,000 250,000 269,030 19,030 17,256 -4.09 135.29
December 31, 1988....... 22,800 250,000 273,390 23,390 21,773 -1.62 95.16
December 31, 1989....... 26,600 250,000 278,982 28,982 27,655 1.16 72.18
December 31, 1990....... 30,400 250,000 284,054 34,054 33,016 2.14 57.38
December 31, 1991....... 34,200 250,000 292,888 42,888 42,140 4.75 47.45
December 31, 1992....... 38,000 250,000 298,800 48,800 48,341 4.89 40.04
December 31, 1993....... 41,800 250,000 307,275 57,275 57,106 5.70 34.57
December 31, 1994....... 45,600 250,000 307,530 57,530 57,530 3.90 29.91
December 31, 1995....... 49,400 250,000 322,277 72,277 72,277 5.81 26.81
December 31, 1996....... 53,200 250,000 327,983 77,983 77,983 5.40 23.94
December 31, 1997....... 57,000 250,000 338,699 88,699 88,699 5.78 21.72
</TABLE>
A-69
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1983....... 3,800 250,000 253,392 3,392 2,293 -76.57% --
December 31, 1984....... 7,600 250,000 256,730 6,730 5,563 -32.31 2,103.40%
December 31, 1985....... 11,400 250,000 260,261 10,261 8,362 -21.70 457.59
December 31, 1986....... 15,200 250,000 263,843 13,843 12,006 -12.51 217.94
December 31, 1987....... 19,000 250,000 267,572 17,572 15,798 -7.82 134.95
December 31, 1988....... 22,800 250,000 271,691 21,691 20,074 -4.47 94.88
December 31, 1989....... 26,600 250,000 276,412 26,412 25,085 -1.76 71.87
December 31, 1990....... 30,400 250,000 281,215 31,215 30,177 -.19 57.11
December 31, 1991....... 34,200 250,000 285,725 35,725 34,977 .52 46.89
December 31, 1992....... 38,000 250,000 289,571 39,571 39,113 .59 39.43
December 31, 1993....... 41,800 250,000 293,207 43,207 43,038 .54 33.77
December 31, 1994....... 45,600 250,000 297,391 47,391 47,391 .66 29.40
December 31, 1995....... 49,400 250,000 302,526 52,526 52,526 .96 25.95
December 31, 1996....... 53,200 250,000 307,620 57,620 57,620 1.16 23.13
December 31, 1997....... 57,000 250,000 313,036 63,036 63,036 1.36 20.82
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1987....... 3,800 250,000 252,721 2,721 1,623 -72.00% --
December 31, 1988....... 7,600 250,000 256,283 6,283 5,132 -29.46 1,088.88%
December 31, 1989....... 11,400 250,000 261,845 11,845 9,962 -7.89 346.08
December 31, 1990....... 15,200 250,000 264,008 14,008 12,187 -9.97 183.40
December 31, 1991....... 19,000 250,000 271,322 21,322 19,563 1.10 120.05
December 31, 1992....... 22,800 250,000 275,761 25,761 24,217 1.90 86.79
December 31, 1993....... 26,600 250,000 281,081 31,081 29,826 3.12 66.96
December 31, 1994....... 30,400 250,000 284,071 34,071 33,106 2.04 53.68
December 31, 1995....... 34,200 250,000 300,087 50,087 49,412 7.77 45.30
December 31, 1996....... 38,000 250,000 313,570 63,570 63,184 9.60 38.93
December 31, 1997....... 41,800 250,000 337,010 87,010 86,913 12.43 34.53
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1987....... 3,800 250,000 253,085 3,085 1,987 -62.08% --
December 31, 1988....... 7,600 250,000 256,457 6,457 5,306 -27.26 1,089.39%
December 31, 1989....... 11,400 250,000 261,086 11,086 9,202 -12.35 345.54
December 31, 1990....... 15,200 250,000 264,382 14,382 12,561 -8.63 183.52
December 31, 1991....... 19,000 250,000 270,343 20,343 18,585 -.83 119.85
December 31, 1992....... 22,800 250,000 274,646 24,646 23,101 .41 86.63
December 31, 1993....... 26,600 250,000 280,041 30,041 28,786 2.15 66.84
December 31, 1994....... 30,400 250,000 282,341 32,341 31,376 .76 53.52
December 31, 1995....... 34,200 250,000 295,706 45,706 45,030 5.83 44.99
December 31, 1996....... 38,000 250,000 304,983 54,983 54,597 6.89 38.41
December 31, 1997....... 41,800 250,000 322,380 72,380 72,283 9.37 33.80
</TABLE>
A-70
<PAGE>
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1993....... 3,800 250,000 253,511 3,511 2,412 -49.18% --
December 31, 1994....... 7,600 250,000 256,417 6,417 5,271 -27.65 1,084.22%
December 31, 1995....... 11,400 250,000 262,383 12,383 10,505 -4.82 345.70
December 31, 1996....... 15,200 250,000 267,737 17,737 15,921 2.14 184.39
December 31, 1997....... 19,000 250,000 277,143 27,143 25,390 11.01 121.12
ZENITH MIDCAP VALUE SUB-ACCOUNT**
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1993....... 3,800 250,000 253,528 3,528 2,430 -48.64% --
December 31, 1994....... 7,600 250,000 256,482 6,482 5,336 -26.82 1,084.41%
December 31, 1995....... 11,400 250,000 262,068 12,068 10,189 -6.58 345.48
December 31, 1996....... 15,200 250,000 267,169 17,169 15,353 .46 184.20
December 31, 1997....... 19,000 250,000 273,443 23,443 21,690 4.99 120.36
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1994....... 3,800 250,000 252,963 2,963 1,865 -65.67% --
December 31, 1995....... 7,600 250,000 257,383 7,383 6,232 -15.93 1,097.19%
December 31, 1996....... 11,400 250,000 262,954 12,954 11,070 -1.75 347.62
December 31, 1997....... 15,200 250,000 269,747 19,747 17,926 7.74 185.57
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1994....... 3,800 250,000 253,394 3,394 2,296 -95.10% --
December 31, 1995....... 7,600 250,000 257,224 7,224 6,047 -30.78 3,516.26%
December 31, 1996....... 11,400 250,000 261,426 11,426 9,516 -14.98 553.69
December 31, 1997....... 15,200 250,000 266,156 16,156 14,309 -3.61 243.99
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- --------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1994....... 3,800 250,000 253,478 3,478 2,380 -93.92% --
December 31, 1995....... 7,600 250,000 256,778 6,778 5,601 -39.63 3,510.76%
December 31, 1996....... 11,400 250,000 260,184 10,184 8,275 -25.92 552.14
December 31, 1997....... 15,200 250,000 262,852 12,852 11,005 -18.96 242.45
</TABLE>
A-71
<PAGE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1994....... 3,800 250,000 253,288 3,288 2,190 -96.30% --
December 31, 1995....... 7,600 250,000 257,541 7,541 6,364 -24.49 3,520.17%
December 31, 1996....... 11,400 250,000 262,497 12,497 10,587 -6.25 555.03
December 31, 1997....... 15,200 250,000 269,531 19,531 17,684 9.19 245.54
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1994....... 3,800 250,000 253,209 3,209 2,110 -97.04% --
December 31, 1995....... 7,600 250,000 257,544 7,544 6,367 -24.42 3,520.21%
December 31, 1996....... 11,400 250,000 261,506 11,506 9,597 -14.30 553.80
December 31, 1997....... 15,200 250,000 267,280 17,280 15,433 .91 244.51
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1986....... 3,800 250,000 253,410 3,410 2,312 -88.75% --
December 31, 1987....... 7,600 250,000 255,705 5,705 4,528 -56.22 2,904.05%
December 31, 1988....... 11,400 250,000 259,811 9,811 7,902 -27.93 516.76
December 31, 1989....... 15,200 250,000 264,376 14,376 12,529 -11.02 234.29
December 31, 1990....... 19,000 250,000 265,121 15,121 13,336 -15.81 141.20
December 31, 1991....... 22,800 250,000 272,768 22,768 21,103 -2.84 98.75
December 31, 1992....... 26,600 250,000 279,557 29,557 28,181 1.79 74.52
December 31, 1993....... 30,400 250,000 287,476 37,476 36,390 4.78 59.22
December 31, 1994....... 34,200 250,000 292,513 42,513 41,716 4.64 48.50
December 31, 1995....... 38,000 250,000 310,228 60,228 59,721 9.29 41.58
December 31, 1996....... 41,800 250,000 320,873 70,873 70,656 9.67 35.94
December 31, 1997....... 45,600 250,000 342,785 92,785 92,785 11.78 32.07
OVERSEAS SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE NET OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1987....... 3,800 250,000 252,710 2,710 1,612 -60.50% --
December 31, 1988....... 7,600 250,000 256,327 6,327 5,197 -23.94 742.67%
December 31, 1989....... 11,400 250,000 261,346 11,346 9,484 -9.27 286.02
December 31, 1990....... 15,200 250,000 263,999 13,999 12,199 -8.88 162.22
December 31, 1991....... 19,000 250,000 268,126 18,126 16,388 -5.02 109.08
December 31, 1992....... 22,800 250,000 268,521 18,521 17,073 -8.40 79.82
December 31, 1993....... 26,600 250,000 279,084 29,084 27,925 1.24 62.90
December 31, 1994....... 30,400 250,000 281,935 31,935 31,066 .49 50.85
December 31, 1995....... 34,200 250,000 288,372 38,372 37,793 2.02 42.52
December 31, 1996....... 38,000 250,000 295,932 45,932 45,643 3.35 36.39
December 31, 1997....... 41,800 250,000 304,011 54,011 54,011 4.27 31.69
</TABLE>
A-72
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1985....... 3,800 250,000 253,557 3,557 2,458 -78.63% --
December 31, 1986....... 7,600 250,000 257,190 7,190 6,018 -26.95 2,499.11%
December 31, 1987....... 11,400 250,000 260,143 10,143 8,239 -23.85 488.48
December 31, 1988....... 15,200 250,000 264,190 14,190 12,348 -11.46 226.63
December 31, 1989....... 19,000 250,000 266,240 16,240 14,461 -11.89 138.29
December 31, 1990....... 22,800 250,000 268,587 18,587 16,945 -10.72 96.34
December 31, 1991....... 26,600 250,000 277,838 27,838 26,486 -.13 73.26
December 31, 1992....... 30,400 250,000 286,814 36,814 35,752 4.26 58.46
December 31, 1993....... 34,200 250,000 296,897 46,897 46,125 6.87 48.35
December 31, 1994....... 38,000 250,000 298,576 48,576 48,094 4.85 40.46
December 31, 1995....... 41,800 250,000 311,030 61,030 60,837 6.91 35.12
December 31, 1996....... 45,600 250,000 321,711 71,711 71,711 7.56 30.86
December 31, 1997....... 49,400 250,000 336,527 86,527 86,527 8.53 27.63
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 3,800 $250,000 $253,525 $ 3,525 $ 2,426 -- --
December 31, 1989....... 3,800 250,000 253,383 3,383 2,285 -79.81% --
December 31, 1990....... 7,600 250,000 256,656 6,656 5,484 -34.74 2,269.84%
December 31, 1991....... 11,400 250,000 261,156 11,156 9,252 -15.24 472.30
December 31, 1992....... 15,200 250,000 265,389 15,389 13,547 -6.27 222.43
December 31, 1993....... 19,000 250,000 271,570 21,570 19,791 1.76 137.57
December 31, 1994....... 22,800 250,000 272,761 22,761 21,120 -2.72 95.96
December 31, 1995....... 26,600 250,000 279,497 29,497 28,145 1.70 72.80
December 31, 1996....... 30,400 250,000 286,536 36,536 35,474 4.02 57.99
December 31, 1997....... 34,200 250,000 296,568 46,568 45,796 6.65 48.00
</TABLE>
- ----------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets. Beginning May 1, 1998, the Series' investment advisory fee is
.75%.
A-73
<PAGE>
MALE NON-SMOKER PREFERRED RISK AGE 40
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1983....... 7,600 500,000 500,000 7,380 5,184 -66.70% --
December 31, 1984....... 15,200 500,000 500,000 13,482 11,149 -32.13 2,058.98%
December 31, 1985....... 22,800 500,000 500,000 30,134 26,336 10.99 447.23
December 31, 1986....... 30,400 500,000 500,000 64,593 60,920 40.23 212.13
December 31, 1987....... 38,000 500,000 500,000 102,726 99,178 42.76 130.64
December 31, 1988....... 45,600 500,000 500,000 99,370 96,136 26.40 91.23
December 31, 1989....... 53,200 500,000 500,000 135,379 132,725 27.07 68.52
December 31, 1990....... 60,800 500,000 500,000 135,020 132,945 19.88 53.94
December 31, 1991....... 68,400 500,000 500,000 213,508 212,012 25.01 43.89
December 31, 1992....... 76,000 500,000 500,000 206,107 205,190 19.54 36.58
December 31, 1993....... 83,600 500,000 500,000 241,943 241,605 18.73 31.06
December 31, 1994....... 91,200 500,000 500,000 227,431 227,431 14.73 26.76
December 31, 1995....... 98,800 500,000 550,159 321,731 321,731 17.24 24.64
December 31, 1996....... 106,400 500,000 644,000 392,683 392,683 17.48 23.71
December 31, 1997....... 114,000 500,000 765,145 487,354 487,354 17.92 23.12
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1983....... 7,600 500,000 500,000 6,962 4,766 -73.84% --
December 31, 1984....... 15,200 500,000 500,000 14,519 12,185 -23.78 2,058.98%
December 31, 1985....... 22,800 500,000 500,000 23,787 19,989 -9.53 447.23
December 31, 1986....... 30,400 500,000 500,000 33,527 29,854 -.98 212.13
December 31, 1987....... 38,000 500,000 500,000 40,335 36,787 -1.38 130.64
December 31, 1988....... 45,600 500,000 500,000 49,727 46,493 .68 91.23
December 31, 1989....... 53,200 500,000 500,000 61,810 59,156 3.16 68.52
December 31, 1990....... 60,800 500,000 500,000 72,838 70,763 3.92 53.94
December 31, 1991....... 68,400 500,000 500,000 91,991 90,495 6.34 43.89
December 31, 1992....... 76,000 500,000 500,000 104,976 104,059 6.35 36.58
December 31, 1993....... 83,600 500,000 500,000 123,546 123,208 7.06 31.06
December 31, 1994....... 91,200 500,000 500,000 124,386 124,386 5.18 26.76
December 31, 1995....... 98,800 500,000 500,000 156,508 156,508 6.98 23.33
December 31, 1996....... 106,400 500,000 500,000 168,977 168,977 6.49 20.53
December 31, 1997....... 114,000 500,000 500,000 192,356 192,356 6.80 18.22
</TABLE>
A-74
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1983....... 7,600 500,000 500,000 6,977 4,781 -73.60% --
December 31, 1984....... 15,200 500,000 500,000 14,078 11,744 -27.32 2,058.98%
December 31, 1985....... 22,800 500,000 500,000 21,583 17,785 -17.59 447.23
December 31, 1986....... 30,400 500,000 500,000 29,243 25,570 -9.23 212.13
December 31, 1987....... 38,000 500,000 500,000 37,261 33,713 -5.08 130.64
December 31, 1988....... 45,600 500,000 500,000 46,144 42,910 -2.14 91.23
December 31, 1989....... 53,200 500,000 500,000 56,363 53,708 .28 68.52
December 31, 1990....... 60,800 500,000 500,000 66,809 64,734 1.62 53.94
December 31, 1991....... 68,400 500,000 500,000 76,680 75,184 2.16 43.89
December 31, 1992....... 76,000 500,000 500,000 85,182 84,265 2.11 36.58
December 31, 1993....... 83,600 500,000 500,000 93,267 92,929 1.96 31.06
December 31, 1994....... 91,200 500,000 500,000 102,545 102,545 1.98 26.76
December 31, 1995....... 98,800 500,000 500,000 113,791 113,791 2.20 23.33
December 31, 1996....... 106,400 500,000 500,000 124,845 124,845 2.30 20.53
December 31, 1997....... 114,000 500,000 500,000 136,597 136,597 2.42 18.22
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1987....... 7,600 500,000 500,000 5,684 3,488 -68.81% --
December 31, 1988....... 15,200 500,000 500,000 13,243 10,941 -25.20 1,070.47%
December 31, 1989....... 22,800 500,000 500,000 25,039 21,272 -4.11 337.59
December 31, 1990....... 30,400 500,000 500,000 29,710 26,068 -6.98 178.58
December 31, 1991....... 38,000 500,000 500,000 45,366 41,849 3.63 115.51
December 31, 1992....... 45,600 500,000 500,000 54,955 51,866 4.07 82.89
December 31, 1993....... 53,200 500,000 500,000 66,479 63,969 5.02 63.34
December 31, 1994....... 60,800 500,000 500,000 73,059 71,128 3.75 50.46
December 31, 1995....... 68,400 500,000 500,000 107,670 106,319 9.29 41.41
December 31, 1996....... 76,000 500,000 500,000 136,992 136,220 10.99 34.74
December 31, 1997....... 83,600 500,000 500,000 187,918 187,725 13.70 29.65
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1987....... 7,600 500,000 500,000 6,442 4,246 -58.14% --
December 31, 1988....... 15,200 500,000 500,000 13,601 11,299 -22.98 1,070.47%
December 31, 1989....... 22,800 500,000 500,000 23,425 19,659 -8.65 337.59
December 31, 1990....... 30,400 500,000 500,000 30,489 26,847 -5.66 178.58
December 31, 1991....... 38,000 500,000 500,000 43,261 39,745 1.69 115.51
December 31, 1992....... 45,600 500,000 500,000 52,549 49,460 2.57 82.89
December 31, 1993....... 53,200 500,000 500,000 64,230 61,720 4.04 63.34
December 31, 1994....... 60,800 500,000 500,000 69,328 67,397 2.46 50.46
December 31, 1995....... 68,400 500,000 500,000 98,230 96,878 7.36 41.41
December 31, 1996....... 76,000 500,000 500,000 118,469 117,696 8.28 34.74
December 31, 1997....... 83,600 500,000 500,000 156,311 156,118 10.65 29.65
</TABLE>
A-75
<PAGE>
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1993....... 7,600 500,000 500,000 7,352 5,156 -43.90% --
December 31, 1994....... 15,200 500,000 500,000 13,535 11,243 -23.27 1,065.53%
December 31, 1995....... 22,800 500,000 500,000 26,179 22,423 -.99 336.86
December 31, 1996....... 30,400 500,000 500,000 37,619 33,988 5.19 178.34
December 31, 1997....... 38,000 500,000 500,000 57,685 54,178 13.52 115.39
ZENITH MIDCAP VALUE SUB-ACCOUNT**
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1993....... 7,600 500,000 500,000 7,387 5,191 -43.33% --
December 31, 1994....... 15,200 500,000 500,000 13,668 11,376 -22.45 1,065.53%
December 31, 1995....... 22,800 500,000 500,000 25,501 21,745 -2.81 336.86
December 31, 1996....... 30,400 500,000 500,000 36,403 32,772 3.49 178.34
December 31, 1997....... 38,000 500,000 500,000 49,809 46,303 7.47 115.39
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 500,000 6,197 4,001 -61.86% --
December 31, 1995....... 15,200 500,000 500,000 15,555 13,253 -11.23 1,075.45%
December 31, 1996....... 22,800 500,000 500,000 27,389 23,622 2.14 338.33
December 31, 1997....... 30,400 500,000 500,000 41,836 38,194 10.78 178.83
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 500,000 6,919 4,723 -94.20% --
December 31, 1995....... 15,200 500,000 500,000 15,040 12,686 -24.90 3,427.01%
December 31, 1996....... 22,800 500,000 500,000 23,948 20,129 -10.44 539.22
December 31, 1997....... 30,400 500,000 500,000 34,025 30,331 -.14 236.33
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 500,000 7,089 4,893 -92.83% --
December 31, 1995....... 15,200 500,000 500,000 14,109 11,755 -34.15 3,427.01%
December 31, 1996....... 22,800 500,000 500,000 21,337 17,518 -21.53 539.22
December 31, 1997....... 30,400 500,000 500,000 27,056 23,362 -15.51 236.33
</TABLE>
A-76
<PAGE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 500,000 6,706 4,510 -95.60% --
December 31, 1995....... 15,200 500,000 500,000 15,705 13,351 -18.30 3,427.01%
December 31, 1996....... 22,800 500,000 500,000 26,197 22,378 -1.60 539.22
December 31, 1997....... 30,400 500,000 500,000 41,133 37,439 12.70 236.33
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 500,000 6,544 4,348 -96.46% --
December 31, 1995....... 15,200 500,000 500,000 15,721 13,367 -18.14 3,427.01%
December 31, 1996....... 22,800 500,000 500,000 24,123 20,304 -9.73 539.22
December 31, 1997....... 30,400 500,000 500,000 36,400 32,706 4.41 236.33
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1986....... 7,600 500,000 500,000 6,950 4,754 -87.30% --
December 31, 1987....... 15,200 500,000 500,000 11,878 9,524 -51.96 2,847.86%
December 31, 1988....... 22,800 500,000 500,000 20,581 16,763 -23.69 505.26
December 31, 1989....... 30,400 500,000 500,000 30,319 26,625 -7.60 227.75
December 31, 1990....... 38,000 500,000 500,000 31,969 28,400 -13.01 137.27
December 31, 1991....... 45,600 500,000 500,000 48,322 44,992 -.49 94.76
December 31, 1992....... 53,200 500,000 500,000 62,919 60,168 3.80 70.66
December 31, 1993....... 60,800 500,000 500,000 80,034 77,862 6.56 55.37
December 31, 1994....... 68,400 500,000 500,000 91,049 89,456 6.25 44.89
December 31, 1995....... 76,000 500,000 500,000 129,386 128,372 10.73 37.32
December 31, 1996....... 83,600 500,000 500,000 152,651 152,217 11.00 31.62
December 31, 1997....... 91,200 500,000 500,000 200,371 200,371 12.99 27.20
OVERSEAS SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28,1987......... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1987....... 7,600 500,000 500,000 5,790 3,594 -55.56% --
December 31, 1988....... 15,200 500,000 500,000 13,452 11,192 -19.69 731.16%
December 31, 1989....... 22,800 500,000 500,000 24,140 20,415 -5.64 279.55
December 31, 1990....... 30,400 500,000 500,000 29,852 26,252 -5.97 158.04
December 31, 1991....... 38,000 500,000 500,000 38,734 35,258 -2.55 105.56
December 31, 1992....... 45,600 500,000 500,000 39,700 36,804 -6.23 77.19
December 31, 1993....... 53,200 500,000 500,000 62,423 60,107 3.11 59.70
December 31, 1994....... 60,800 500,000 500,000 68,708 66,971 2.18 47.97
December 31, 1995....... 68,400 500,000 500,000 82,756 81,597 3.56 39.61
December 31, 1996....... 76,000 500,000 500,000 99,289 98,709 4.77 33.39
December 31, 1997....... 83,600 500,000 500,000 117,002 117,002 5.58 28.61
</TABLE>
A-77
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1985....... 7,600 500,000 500,000 7,282 5,086 -75.91% --
December 31, 1986....... 15,200 500,000 500,000 14,995 12,651 -21.66 2,440.56%
December 31, 1987....... 22,800 500,000 500,000 21,280 17,472 -19.76 477.39
December 31, 1988....... 30,400 500,000 500,000 29,916 26,232 -8.17 220.41
December 31, 1989....... 38,000 500,000 500,000 34,376 30,818 -9.14 134.18
December 31, 1990....... 45,600 500,000 500,000 39,489 36,207 -8.32 93.12
December 31, 1991....... 53,200 500,000 500,000 59,362 56,659 1.92 69.67
December 31, 1992....... 60,800 500,000 500,000 78,748 76,624 6.05 54.71
December 31, 1993....... 68,400 500,000 500,000 100,589 99,045 8.47 44.43
December 31, 1994....... 76,000 500,000 500,000 104,474 103,509 6.33 36.98
December 31, 1995....... 83,600 500,000 500,000 131,622 131,236 8.27 31.37
December 31, 1996....... 91,200 500,000 500,000 155,034 155,034 8.81 27.00
December 31, 1997....... 98,800 500,000 500,000 187,405 187,405 9.69 23.52
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 7,600 $500,000 $500,000 $ 7,121 $ 4,924 -- --
December 31, 1989....... 7,600 500,000 500,000 6,929 4,733 -77.47% --
December 31, 1990....... 15,200 500,000 500,000 13,891 11,548 -29.90 2,221.58%
December 31, 1991....... 22,800 500,000 500,000 23,430 19,622 -11.08 460.64
December 31, 1992....... 30,400 500,000 500,000 32,462 28,778 -3.00 215.86
December 31, 1993....... 38,000 500,000 500,000 45,681 42,122 4.46 132.24
December 31, 1994....... 45,600 500,000 500,000 48,352 45,070 -.41 92.09
December 31, 1995....... 53,200 500,000 500,000 62,874 60,171 3.70 69.04
December 31, 1996....... 60,800 500,000 500,000 78,098 75,974 5.78 54.29
December 31, 1997....... 68,400 500,000 500,000 99,834 98,289 8.24 44.14
OPTION 2 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1983....... 7,600 500,000 507,376 7,376 5,180 -66.78% --
December 31, 1984....... 15,200 500,000 513,465 13,465 11,132 -32.27 2,103.42%
December 31, 1985....... 22,800 500,000 530,070 30,070 26,272 10.80 462.32
December 31, 1986....... 30,400 500,000 564,378 64,378 60,705 40.01 225.31
December 31, 1987....... 38,000 500,000 602,237 102,237 98,689 42.53 142.58
December 31, 1988....... 45,600 500,000 598,767 98,767 95,533 26.17 99.21
December 31, 1989....... 53,200 500,000 634,358 134,358 131,703 26.84 76.53
December 31, 1990....... 60,800 500,000 633,806 133,806 131,731 19.64 60.35
December 31, 1991....... 68,400 500,000 711,253 211,253 209,757 24.78 51.87
December 31, 1992....... 76,000 500,000 703,602 203,602 202,684 19.30 43.22
December 31, 1993....... 83,600 500,000 738,615 238,615 238,277 18.49 37.72
December 31, 1994....... 91,200 500,000 723,939 223,939 223,939 14.49 32.39
December 31, 1995....... 98,800 500,000 816,256 316,256 316,256 17.00 30.06
December 31, 1996....... 106,400 500,000 885,416 385,416 385,416 17.24 27.69
December 31, 1997....... 114,000 500,000 977,819 477,819 477,819 17.69 25.94
</TABLE>
A-78
<PAGE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1983....... 7,600 500,000 506,958 6,958 4,762 -73.91% --
December 31, 1984....... 15,200 500,000 514,500 14,500 12,167 -23.93 2,106.82%
December 31, 1985....... 22,800 500,000 523,738 23,738 19,940 -9.70 459.19
December 31, 1986....... 30,400 500,000 533,426 33,426 29,753 -1.16 219.12
December 31, 1987....... 38,000 500,000 540,173 40,173 36,625 -1.57 135.55
December 31, 1988....... 45,600 500,000 549,476 49,476 46,242 .49 95.38
December 31, 1989....... 53,200 500,000 561,427 61,427 58,773 2.97 72.39
December 31, 1990....... 60,800 500,000 572,301 72,301 70,225 3.72 57.58
December 31, 1991....... 68,400 500,000 591,193 91,193 89,697 6.14 47.66
December 31, 1992....... 76,000 500,000 603,917 103,917 103,000 6.15 40.24
December 31, 1993....... 83,600 500,000 622,126 122,126 121,788 6.85 34.78
December 31, 1994....... 91,200 500,000 622,788 122,788 122,788 4.97 30.10
December 31, 1995....... 98,800 500,000 654,254 154,254 154,254 6.77 27.02
December 31, 1996....... 106,400 500,000 666,237 166,237 166,237 6.27 24.13
December 31, 1997....... 114,000 500,000 688,832 188,832 188,832 6.56 21.92
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1983....... 7,600 500,000 506,973 6,973 4,777 -73.67% --
December 31, 1984....... 15,200 500,000 514,060 14,060 11,726 -27.47 2,105.38%
December 31, 1985....... 22,800 500,000 521,540 21,540 17,741 -17.76 458.09
December 31, 1986....... 30,400 500,000 529,158 29,158 25,485 -9.40 218.24
December 31, 1987....... 38,000 500,000 537,116 37,116 33,568 -5.26 135.18
December 31, 1988....... 45,600 500,000 545,919 45,919 42,685 -2.32 95.09
December 31, 1989....... 53,200 500,000 556,025 56,025 53,371 .10 72.06
December 31, 1990....... 60,800 500,000 566,331 66,331 64,256 1.43 57.29
December 31, 1991....... 68,400 500,000 576,036 76,036 74,540 1.97 47.07
December 31, 1992....... 76,000 500,000 584,356 84,356 83,439 1.91 39.60
December 31, 1993....... 83,600 500,000 592,246 92,246 91,908 1.76 33.94
December 31, 1994....... 91,200 500,000 601,295 101,295 101,295 1.78 29.56
December 31, 1995....... 98,800 500,000 612,243 112,243 112,243 1.99 26.11
December 31, 1996....... 106,400 500,000 622,937 122,937 122,937 2.08 23.29
December 31, 1997....... 114,000 500,000 634,244 134,244 134,244 2.19 20.97
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1987....... 7,600 500,000 505,679 5,679 3,483 -68.88% --
December 31, 1988....... 15,200 500,000 513,222 13,222 10,920 -25.33 1,089.84%
December 31, 1989....... 22,800 500,000 524,979 24,979 21,212 -4.27 346.53
December 31, 1990....... 30,400 500,000 529,611 29,611 25,969 -7.15 183.67
December 31, 1991....... 38,000 500,000 545,166 45,166 41,649 3.45 120.31
December 31, 1992....... 45,600 500,000 554,653 54,653 51,564 3.89 87.02
December 31, 1993....... 53,200 500,000 566,034 66,034 63,524 4.83 67.17
December 31, 1994....... 60,800 500,000 572,481 72,481 70,551 3.55 53.87
December 31, 1995....... 68,400 500,000 606,674 106,674 105,323 9.10 45.53
December 31, 1996....... 76,000 500,000 635,522 135,522 134,749 10.79 39.17
December 31, 1997....... 83,600 500,000 685,622 185,622 185,429 13.50 34.81
</TABLE>
A-79
<PAGE>
ZENITH MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1987....... 7,600 500,000 506,436 6,436 4,240 -58.23% --
December 31, 1988....... 15,200 500,000 513,579 13,579 11,277 -23.11 1,090.36%
December 31, 1989....... 22,800 500,000 523,370 23,370 19,603 -8.81 345.96
December 31, 1990....... 30,400 500,000 530,388 30,388 26,746 -5.83 183.80
December 31, 1991....... 38,000 500,000 543,073 43,073 39,557 1.51 120.09
December 31, 1992....... 45,600 500,000 552,264 52,264 49,175 2.38 86.85
December 31, 1993....... 53,200 500,000 563,805 63,805 61,295 3.86 67.05
December 31, 1994....... 60,800 500,000 568,787 68,787 66,856 2.27 53.71
December 31, 1995....... 68,400 500,000 597,334 97,334 95,982 7.16 45.20
December 31, 1996....... 76,000 500,000 617,219 117,219 116,447 8.09 38.63
December 31, 1997....... 83,600 500,000 654,440 154,440 154,247 10.45 34.04
ZENITH GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1993....... 7,600 500,000 507,345 7,345 5,148 -44.02% --
December 31, 1994....... 15,200 500,000 513,511 13,511 11,219 -23.42 1,085.20%
December 31, 1995....... 22,800 500,000 526,113 26,113 22,356 -1.17 346.17
December 31, 1996....... 30,400 500,000 537,484 37,484 33,853 5.01 184.73
December 31, 1997....... 38,000 500,000 557,414 57,414 53,907 13.52 121.43
ZENITH MIDCAP VALUE SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1993....... 7,600 500,000 507,380 7,380 5,183 -43.45% --
December 31, 1994....... 15,200 500,000 513,644 13,644 11,352 -22.60 1,085.39%
December 31, 1995....... 22,800 500,000 525,436 25,436 21,680 -2.99 345.93
December 31, 1996....... 30,400 500,000 536,273 36,273 32,641 3.30 184.53
December 31, 1997....... 38,000 500,000 549,578 49,578 46,071 7.28 120.64
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994............. $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 506,191 6,191 3,995 -61.94% --
December 31, 1995....... 15,200 500,000 515,530 15,530 13,228 -11.38 1,098.31%
December 31, 1996....... 22,800 500,000 527,321 27,321 23,555 1.97 348.12
December 31, 1997....... 30,400 500,000 541,691 41,691 38,049 10.60 185.94
ZENITH BALANCED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 506,917 6,917 4,270 -94.21% --
December 31, 1995....... 15,200 500,000 515,024 15,024 12,669 -25.06 3,519.81%
December 31, 1996....... 22,800 500,000 523,904 23,904 20,085 -10.62 554.35
December 31, 1997....... 30,400 500,000 533,931 33,931 30,237 -.32 244.36
</TABLE>
A-80
<PAGE>
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 507,087 7,087 4,890 -92.85% --
December 31, 1995....... 15,200 500,000 514,095 14,095 11,740 -34.29 3,514.09%
December 31, 1996....... 22,800 500,000 521,300 21,300 17,481 -21.70 552.72
December 31, 1997....... 30,400 500,000 526,987 26,987 23,293 -15.68 242.75
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 506,704 6,704 4,507 -95.61% --
December 31, 1995....... 15,200 500,000 515,688 15,688 13,334 -18.47 3,523.91%
December 31, 1996....... 22,800 500,000 526,147 26,147 22,328 -1.79 555.75
December 31, 1997....... 30,400 500,000 541,013 41,013 37,319 12.50 245.99
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1994....... 7,600 500,000 506,542 6,542 4,345 -96.47% --
December 31, 1995....... 15,200 500,000 515,703 15,703 13,349 -18.31 3,524.00%
December 31, 1996....... 22,800 500,000 524,077 24,077 20,258 -9.91 554.46
December 31, 1997....... 30,400 500,000 536,297 36,297 32,603 4.22 244.91
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1986....... 7,600 500,000 506,948 6,948 4,751 -87.33% --
December 31, 1987....... 15,200 500,000 511,865 11,865 9,511 -52.07 2,906.29%
December 31, 1988....... 22,800 500,000 520,545 20,545 16,726 -23.85 517.29
December 31, 1989....... 30,400 500,000 530,237 30,237 26,543 -7.77 234.62
December 31, 1990....... 38,000 500,000 531,858 31,858 28,289 -13.19 141.41
December 31, 1991....... 45,600 500,000 548,105 48,105 44,775 -.67 98.96
December 31, 1992....... 53,200 500,000 562,567 62,567 59,815 3.62 74.73
December 31, 1993....... 60,800 500,000 579,482 79,482 77,310 6.37 59.44
December 31, 1994....... 68,400 500,000 590,301 90,301 88,708 6.05 48.71
December 31, 1995....... 76,000 500,000 628,129 128,129 127,115 10.53 41.83
December 31, 1996....... 83,600 500,000 650,940 150,940 150,505 10.80 36.19
December 31, 1997....... 91,200 500,000 697,812 197,812 197,812 12.79 32.34
</TABLE>
A-81
<PAGE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1987....... 7,600 500,000 505,782 5,782 3,586 -55.67% --
December 31, 1988....... 15,200 500,000 513,425 13,425 11,164 -19.84 743.37%
December 31, 1989....... 22,800 500,000 524,070 24,070 20,345 -5.81 286.41
December 31, 1990....... 30,400 500,000 529,736 29,736 26,136 -6.14 162.47
December 31, 1991....... 38,000 500,000 538,544 38,544 35,068 -2.73 109.30
December 31, 1992....... 45,600 500,000 539,463 39,463 36,567 -6.42 79.99
December 31, 1993....... 53,200 500,000 561,984 61,984 59,667 2.92 63.10
December 31, 1994....... 60,800 500,000 568,139 68,139 66,402 1.99 51.03
December 31, 1995....... 68,400 500,000 581,963 81,963 80,804 3.37 42.71
December 31, 1996....... 76,000 500,000 598,204 98,204 97,625 4.57 36.58
December 31, 1997....... 83,600 500,000 615,573 115,573 115,573 5.38 31.89
HIGH INCOME SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1985....... 7,600 500,000 507,279 7,279 5,082 -75.97% --
December 31, 1986....... 15,200 500,000 514,977 14,977 12,633 -21.82 2,501.52%
December 31, 1987....... 22,800 500,000 521,239 21,239 17,431 -19.93 489.00
December 31, 1988....... 30,400 500,000 529,832 29,832 26,149 -8.35 226.94
December 31, 1989....... 38,000 500,000 534,247 34,247 30,689 -9.32 138.51
December 31, 1990....... 45,600 500,000 539,305 39,305 36,022 -8.50 96.52
December 31, 1991....... 53,200 500,000 559,018 59,018 56,315 1.73 73.46
December 31, 1992....... 60,800 500,000 578,191 78,191 76,067 5.86 58.68
December 31, 1993....... 68,400 500,000 599,741 99,741 98,196 8.28 48.58
December 31, 1994....... 76,000 500,000 603,444 103,444 102,479 6.13 40.66
December 31, 1995....... 83,600 500,000 630,136 130,136 129,750 8.06 35.34
December 31, 1996....... 91,200 500,000 653,060 153,060 153,060 8.61 31.09
December 31, 1997....... 98,800 500,000 684,709 184,709 184,709 9.48 27.87
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 7,600 $500,000 $507,120 $ 7,120 $ 4,924 -- --
December 31, 1989....... 7,600 500,000 506,926 6,926 4,730 -77.52% --
December 31, 1990....... 15,200 500,000 513,876 13,876 11,532 -30.03 2,271.89%
December 31, 1991....... 22,800 500,000 523,385 23,385 19,577 -11.24 472.86
December 31, 1992....... 30,400 500,000 532,370 32,370 28,686 -3.18 222.76
December 31, 1993....... 38,000 500,000 545,503 45,503 41,945 4.27 137.85
December 31, 1994....... 45,600 500,000 548,113 48,113 44,831 -.60 96.17
December 31, 1995....... 53,200 500,000 562,493 62,493 59,790 3.51 73.01
December 31, 1996....... 60,800 500,000 577,530 77,530 75,406 5.59 58.20
December 31, 1997....... 68,400 500,000 598,972 98,972 97,427 8.04 48.23
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets. Beginning May 1, 1998, the Series' investment advisory fee is
.75%.
A-82
<PAGE>
APPENDIX C
LONG TERM MARKET TRENDS
The information below is a comparison of the average annual returns of
common stock, high grade corporate bonds and 30-day U.S. Treasury bills over
20-year and 30-year holding periods.* The average annual returns assume the
reinvestment of dividends, capital gains and interest. This is an historical
record and is not intended as a projection of future performance. Charges
associated with a variable life policy are not reflected.
The data indicates that, historically, the investment performance of common
stocks over long periods of time has been positive and has generally been
superior to that of long-term, high grade debt securities. Common stocks have,
however, been subject to more dramatic market adjustments over short periods
of time. These trends indicate the potential advantages of holding a variable
life insurance policy for a long period of time.
Over the 53 20-year time periods beginning in 1926 and ending in 1997 (i.e.,
1926-1945, 1927-1946, and so on through 1978-1997):
-- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 50 of the 53 periods.
-- The average annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 53 periods.
-- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 53 periods.
Over the 43 30-year periods beginning in 1926 and ending in 1997, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 43
periods.
From 1926 through 1997 the average annual return for common stocks was
11.0%, compared to 5.7% for high grade, long-term corporate bonds, 3.8% for
U.S. Treasury bills and 3.1% for the Consumer Price Index.
- --------
* Source: Stocks, Bonds, Bills and Inflation 1998 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
----------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR
SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index with dividends reinvested, over one-year, five-year and
twenty-year periods beginning in 1926 and ending 1997.
The chart shows that, historically, the longer that a portfolio matching the
S&P 500 Stock Index was held, the less likely was the chance of a loss.
Conversely, the shorter the holding period of such a portfolio, the more
likely was the chance of a loss. The chart also shows that shorter term
results tend to be more extreme than longer term results.
The chart is not a projection or representation of future stock market
results. It cannot be taken as representative of the performance of any one
fund. Rather it shows the historic performance of a broad index of stocks.
----------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
THAN
HOLDING NEGATIVE 0-5.00% 5.01-10.00% 10.01-15.00% 15.01-20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
- ------- -------- ------- ----------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
1 year......... 28% 4% 11% 7% 11% 39%
5 years........ 10% 15% 15% 31% 19% 10%
10 years........ 3% 10% 34% 24% 27% 2%
20 years........ 0% 6% 32% 55% 7% 0%
</TABLE>
- --------
Source: Stocks, Bonds, Bills and Inflation 1998 Yearbook (TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
A-83
<PAGE>
DOLLAR COST AVERAGING
Dollar cost averaging allows a person to take advantage of the historical
long-term stock market results, assuming that they continue, although it does
not guarantee a profit or protect against a loss. If an investor follows a
program of dollar cost averaging on a long-term basis, and the stock fund
selected performs at least as well as the S&P 500 has historically, it is
likely although not guaranteed that the price at which shares are surrendered,
for whatever reason, will be higher than the average cost per share.
An investor using dollar cost averaging invests the same amount of money in
the same professionally managed fund at regular intervals over a long period
of time. Dollar cost averaging keeps an investor from investing too much when
the price of shares is high and too little when the price is low. When the
price of shares is low, the money invested buys more shares. When it is high,
the money invested buys fewer shares. If the investor has the ability and
desire to maintain this program over a long period of time (for example, 20
years), and the stock fund chosen follows the historical upward market trends,
the price at which the shares are sold should be higher than their average
cost. This price could be lower, however, if the fund chosen does not follow
these historical trends.
Investors contemplating the use of dollar cost averaging should consider
their ability to continue the on-going purchases so that they can take
advantage of periods of low price levels.
A-84
<PAGE>
APPENDIX D
USES OF LIFE INSURANCE
The following are examples of ways in which the Policy can be used to
address certain financial objectives.
FAMILY INCOME PROTECTION
Life insurance may be purchased on the lives of the family income earners to
provide a death benefit to cover final expenses, and continue the current
income to the family. The amount of insurance purchased should be an amount
which will provide a death benefit that when invested outside the policy at a
reasonable interest rate, will generate enough money to replace the
individual's income.
ESTATE PROTECTION
Life insurance may be purchased by a trust on the life of the person whose
estate will incur federal estate taxes upon the person's death. The amount of
insurance purchased would equal the amount of the estimated estate tax
liability. Upon the insured's death, the trustee could make the death proceeds
available to the estate for the payment of estate tax costs.
EDUCATION FUNDING
Life insurance may be purchased on the life of the parent(s) or primary
person funding an education. The amount of insurance purchased should equal
the total education cost projected at a reasonable inflation rate.
In the event of death, the guaranteed death benefit is available to help pay
the education costs. If the insured lives through the education years, the
cash value accumulations may be accessed to help offset the remaining
education costs. Any cash value loans or surrenders will reduce the policy
death benefit.
MORTGAGE PROTECTION
Life insurance may be purchased on the life of the person responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed
late in the mortgage term to help make the remaining mortgage payments. Any
cash value loans or surrenders will reduce the policy death benefit.
KEY PERSON PROTECTION
Life insurance may be purchased by the business on the life of the key
person in an amount equal to the key person's value, considering salary,
benefits, and contribution to business profits. Upon the key person's death,
the business uses the death benefit to ease the interruption of business
operations and/or to provide a replacement fund for hiring a new executive.
BUSINESS CONTINUATION PROTECTION
Life insurance may be purchased on the life of each business owner in an
amount equal to the value of each owner's business interest. In the event of
death, the guaranteed death benefit may provide the funds needed to carry out
the purchase of the deceased's business interest by the business, or surviving
owners, from the deceased owner's heirs.
RETIREMENT INCOME
Life insurance may be purchased on the life of a family income earner during
his or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any cash value loans or surrenders will reduce the policy
death benefit.
Because the Policy provides a death benefit and for the accumulation of cash
value, the Policy can be used for various individual and business planning
purposes. Purchasing the Policy in part for such purposes entails certain
risks, particularly if the Policy's cash value, as opposed to its death
benefit, will be the principal Policy feature used for such planning purposes.
If the investment performance of the Sub-Accounts to which cash value is
allocated is poorer than expected, or if sufficient premiums are not paid or
cash values maintained, the Policy may lapse or may not accumulate sufficient
cash value or net cash value to fund the purpose for which the Policy was
purchased. Because the Policy is designed to provide benefits on a long-term
basis, before purchasing a Policy for a specialized purpose, a purchaser
should consider whether the long-term nature of the Policy is consistent with
the purpose for which it is being considered. If you wish to access your
Policy's cash value, through loans, surrenders or withdrawals, you should
consult your tax advisor about possible tax consequences. (See "Tax
Considerations".)
A-85
<PAGE>
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products"
in March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax
Treatment of Life Insurance Products and Other Retirement Savings Plans".
Because it is a convenient summary of the relevant tax characteristics of
these products and plans, we have reprinted it here, and added footnotes to
reflect exceptions to the general rules.
---------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND
OTHER RETIREMENT SAVINGS PLANS
<TABLE>
<CAPTION>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Annual Contribution Limits No No Yes Yes
Income Eligibility Limits No No Yes** No
Borrowing Treated as No* Yes Loans not Yes,
Distributions allowed beyond
$50,000
Income Ordering Rules (Income No* Yes Yes Yes
included in First
Distribution)
Early Withdrawal Penalties No* Yes*** Yes*** Yes***
Minimum Distribution Rules by No No Yes Yes
Age 70 1/2
Maximum Annual Distribution No No Yes Yes
Rules
Anti-discrimination Rules No No No Yes
</TABLE>
- --------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
The foregoing information is not intended as tax advice. You should consult
with your own tax advisor for more complete information.
A-86
<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>
Part II
RULE 484 UNDERTAKING
Section 9 of NELICO's By-Laws provides that NELICO shall, to the extent
legally permissible, indemnify its directors and officers against liabilities
and expenses relating to lawsuits and proceedings based on such persons' roles
as directors or officers. However, Section 9 further provides that no such
indemnification shall be made with respect to any matter as to which a director
or officer is adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the corporation. Section 9
also provides that in the event a matter is disposed of by a settlement payment
by a director or officer, indemnification will be provided only if the
settlement is approved as in the best interest of the corporation by (a) a
disinterested majority of the directors then in office, (b) a majority of the
disinterested directors then in office, or (c) the holders of a majority of
outstanding voting stock (exclusive of any stock owned by any interested
director or officer).
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
NELICO pursuant to the foregoing provisions, or otherwise, NELICO has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by NELICO of expenses incurred or paid by a
director, officer, or controlling person of NELICO in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered. NELICO
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium adjustable variable life insurance
policies described in this registration statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by New England Life Insurance Company.
II - 1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus
with the items of Form N-8B-2.
The prospectus consisting of 140 pages.
The undertaking to file reports. #
The undertaking pursuant to Rule 484(b) under the Securities Act of
1933.
The signatures.
Written consents of the following persons:
H. James Wilson, Esq. (see Exhibit 3(i) below)
Rodney J. Chandler, F.S.A., M.A.A.A.
(see Exhibit 3(ii) below)
Sutherland, Asbill & Brennan LLP (see Exhibit 6 below)
Independent Auditors (see Exhibit 11 below)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of
Directors of NEVLICO ***
(2) None
(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 ****
(c) Commission Schedule for Policies
(d) Form of contract among NES, NELICO and other
broker dealers *
(4) None
(5) (a) Specimen of Policy
(b) Riders and Endorsements
(6) (a) Amended and restated Articles of
Incorporation ##
(b) Amended and restated By-Laws of NELICO *
(7) None
(8) None
II - 2
<PAGE>
(9) None
(10) Specimen of Applications for Policy
2. See Exhibit 3(i)
3.(i) Opinion and Consent of H. James Wilson,
Esquire #
(ii) Opinion and Consent of Rodney J. Chandler,
F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland, Asbill & Brennan LLP
7. Powers of Attorney##
(ii) Power of Attorney of James M. Benson *
(iii) Power of Attorney of Richard Robinson **
8. Notice of Withdrawal Right for Policies #
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditors
12. Schedule for computation of performance
quotations ****
13. Consolidated memorandum describing certain
procedures, filed pursuant to Rule
6e-2(b)(12)(ii) and
Rule 6e-3(T)(b)(12)(iii) ****
14. (i) Participation Agreement among
Variable Insurance Products Fund, Fidelity
Distributors Corporation and New England
Variable Life Insurance Company ****
(ii) Amendment No. 1 to Participation Agreement
among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England
Variable Life Insurance Company#
(iii) Participation Agreement among Variable
Insurance Products Fund II, Fidelity
Distributors Corporation and New England
Variable Life Insurance Company#
15. Representations, Description, and Undertaking
Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)#
# 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.
II - 3
<PAGE>
* Incorporated herein by reference to the Pre-effective Amendment No. 1 to
the Variable Account's Form S-6 Registration Statement, File No. 333-21767,
filed July 16, 1997.
** Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-46401, filed February 17, 1998.
*** Incorporated herein by reference to Post-Effective Amendment No. 9 to the
Variable Account's Form S-6 Registration Statement, File No. 33-66864,
filed February 25, 1998.
**** Incorporated herein 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.
(vul)
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 24th 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
<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 24th day of
April, 1998.
New England Life Insurance Company
(Seal)
Attest: Marie C. Swift By: 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 24, 1998.
*
- ---------------------- President and Chief
James M. Benson Executive Officer
*
- ---------------------- 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
<PAGE>
*
- ---------------------- Director
Thomas J. May
*
- ---------------------- Director
Stewart G. Nagler
*
- ---------------------- Second Vice President and
Richard A. Robinson Chief Accounting Officer
*
- ---------------------- Executive Vice President and
Robert E. Schneider Chief Financial Officer
*
- ---------------------- Director
Rand N. Stowell
*
- ----------------------- Director
Alexander B. Trowbridge
By: 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.
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
1.A.5(a) Specimen of Policy
1.A.5(b) Riders and Endorsements
1.A.3(c) Commission Schedule
1.A.10 Specimen of Applications for Policy
3. (ii) Opinion and Consent of Rodney J.
Chandler, F.S.A., M.A.A.A.
6. Consent of Sutherland, Asbill &
Brennan LLP
11. Consent of the Independent Auditors
- --------
* Page numbers inserted on manually-signed copy only.
<PAGE>
Exhibit 1.A.5(a)
NEV-9
New England Variable Life
Insurance Company
Variable Life Policy
Name of Insured
JOHN ALDEN
Policy Number
Specimen
Plan
Flexible Premium Adjustable Variable Life
New England Variable Life Insurance Company Agrees to pay the Death Benefit of
this Policy to the Beneficiary on receipt of proof that the death of the Insured
occurred before the maturity Date; or to pay the Net Cash Value of the Policy to
the Owner if the Insured is living on the Maturity Date; and to provide the
other rights and benefits of the Policy.
These agreements are subject to all of the provisions of the Policy.
Signed on the Date of Issue for the Company at its Administrative Office, 501
Boylston Street, Boston, MA 02117
Robert A. Shafto
/s/
President
H. James Wilson
/s/
Secretary
<PAGE>
Flexible Premium Adjustable Variable Life Policy
. The Death Proceeds are payable at the death of the Insured, if the Insured
dies before the Maturity Date and the Policy is in force.
. The Net Cash Value, if any, is payable on the Maturity Date, if the
Insured is still living and the Policy is in force.
. The Policy can be adjusted by increasing or decreasing the Face Amount.
. The amount and frequency of premium payments can be changed.
. The Policy does not share in dividends.
THE DEATH BENEFIT ON THE POLICY DATE WILL BE EQUAL TO THE FACE AMOUNT SHOWN IN
SECTION 1. THEREAFTER, THE DEATH BENEFIT CAN VARY FROM DAY TO DAY. IT CAN
INCREASE OR DECREASE, DEPENDING ON SEPARATE INVESTMENT ACCOUNT PERFORMANCE AND
ON FIXED ACCOUNT INTEREST; BUT IT WILL NOT BE LESS THAN THE FACE AMOUNT. SEE
SECTION 10.
THE CASH VALUE OF THIS POLICY CAN VARY FROM DAY TODAY. IT CAN INCREASE OR
DECREASE, DEPENDING ON SEPARATE INVESTMENT ACCOUNT PERFORMANCE AND ON FIXED
ACCOUNT INTEREST. SEE SECTION 14.
Please Read Your Policy Carefully. This Policy is a legal Contract between you
and the Company.
RIGHT TO RETURN THE POLICY
When this Policy is issued or when you receive an Increase in Face Amount, you
should examine it. You can return the Policy or the increase in Face Amount (See
Section 16) to the Company or its Agent for any reason within the latest of: (a)
10 days after you receive it from the Company; (b) 45 days after Part I of the
Application for that coverage is signed; and (c) 10 days after the Company mails
the separate Notice of Withdrawal Right for that coverage. If you return an
increase in Face Amount any Monthly Deduction and any Administrative Charge for
the increase in Face Amount will then be credited to the Policy; and the
increase in Face Amount will be cancelled from the start Otherwise, if you
return the Policy an amount equal to any premium paid plus any unscheduled
payment made will be refunded to you; and the Policy will be cancelled from the
start.
<PAGE>
Policy Provisions Alphabetical Guide
Section Section
1 Policy Schedule 6 Accounts
2 Table of Guaranteed 16 Adjustment
Maximum Cost of Insurance 1, 7 Adjustment Date
Rates per $1,000 1, 7 Age of Insured
3 Surrender Charge 12 Amount at Risk
4 Table of Guaranteed 18 Assignments
Minimum Death Benefit A 18 Beneficiary
Premiums Accumulated at 19 Benefits, Payment of
4% 14 Cash Value
5 Table of Guaranteed 7 Claims of Creditors
Minimum Death Benefit B 7 Contestable
Premiums Accumulated at 7 Contract
4% 1, 7 Date of Issue
6 Accounts Available on Date 1, 7 Date, Policy
of Issue 10 Death Benefit
7 Contract 16 Decrease in Face Amount
8 The Variable Account 1 Face Amount
9 The Fixed Account 9 Fixed Account
10 Death Benefit 12 Grace Period
11 Premiums 16 Increase in Face Amount
12 Monthly Deduction 2 Insurance Rates
13 Reinstatement After Lapse 14 Investment Return
14 Cash Value of the Policy 19, 20 Life Income Options
15 Policy Loans 21 Life Income Tables
16 Adjustments 1 Loan Interest Rate
17 24 Months Conversion Right 15 Loans, Policy
18 Owner and Beneficiary 1 Maturity Date
19 Payment of Benefits 12 Minimum Guaranteed Death Benefit
20 Payment Options 12 Monthly Deduction
21 Life Income Tables 12 Monthly Minimum Premium
. Riders, if any 14 Net Cash Value
. Amendments and 18 Owner
Endorsements 16 Partial Surrender
. Copy of the Application 20 Payment Options
. Adjustment Attachments 7 Periodic Reports
15 Policy Loan Balance
7 Postponement of Payments
11 Premiums
13 Reinstatement
1 Schedule, Policy
8 Sub-Accounts
7 Suicide
3 Surrender Charge
3, 14 Surrender of the Policy
17 24 Months Conversion Right
8 Variable Account
<PAGE>
New England Variable Life
Insurance Company
1. Policy Schedule
Owner and Beneficiary
As named in the Application or as later changed. See the Owner and Beneficiary
Section of the Policy.
Policy Number Age Sex
Specimen 35 Male
Policy Date Maturity Date*
April 1, 1995 April 1, 2060
Policy Loan Interest Rate
5.5%
THIS POLICY IS ADJUSTABLE. IF IT IS ADJUSTED, THIS SECTION 1 WILL BE CHANGED.
SEE SECTION 16.
Schedule of Benefits
Flexible Premium Adjustable Variable Life
Death Benefit Option: 1
Face Amount Date of Issue
$250,000 April 1, 1995
Maximum Monthly Policy Fee $7.00
Maximum Face Amount Increase Administrative Charge
.0025 times Face Amount Increase
Maximum Monthly Administrative Charge:
Year 1 $22.50
Thereafter 12.50
<PAGE>
Schedule of Premiums
Planned Annual Premium: $ 1,755.00**
Guaranteed Death Benefit A Premium: $4,188.66
Guaranteed Death Benefit B Premium: $3,900.40
Monthly Minimum Premium: $1,413.40
Maximum Premium Expense Charge: 7.5%
*This coverage may expire prior to the Maturity Date if premiums paid are
insufficient to continue the coverage to that date. There may be little or no
Cash Value on that date.
**If the Planned Annual Premium is paid on the first day of each policy year,
and the Actual Investment Return is 4% and the guaranteed maximum charges apply
in all years, this Policy will terminate in policy year 20 unless additional
premium is paid.
Home Office: Wilmington, Delaware
H. James Wilson
/s/
Secretary
<PAGE>
New England Variable Life
Insurance Company
2. Table of Guaranteed Maximum Cost of Insurance Rates per $1,000
Based on the 1980 CSO Smoker Table
Policy Number
Specimen
THIS POLICY IS ADJUSTABLE. IF IT IS ADJUSTED, THIS SECTION 2 WILL BE CHANGED.
SEE SECTION 16.
Policy Year Monthly Rate Policy Year Monthly Rate
1 $.2192 34 $ 3.8792
2 .2342 35 4.1933
3 .2533 36 4.5400
4 .2750 37 4.9242
5 .3000 38 5.3608
6 .3283 39 5.8525
7 .3617 40 6.3883
8 .3958 41 6.9808
9 .4350 42 7.5917
10 .4758 43 8.2100
11 .5225 44 8.8258
12 .5692 45 9.4575
13 .6200 46 10.1325
14 .6733 47 10.8675
15 .7333 48 11.6833
16 .7967 49 12.5858
17 .8700 50 13.5408
18 .9517 51 14.5167
19 1.0450 52 15.4817
20 1.1500 53 16.4217
21 1.2617 54 17.4475
22 1.3825 55 18.4600
23 1.5075 56 19.4742
24 1.6408 57 20.5100
25 1.7792 58 21.6108
26 1.9325 59 23.0250
27 2.1050 60 24.8458
28 2.2992 61 27.4967
29 2.5192 62 32.0458
30 2.7617 63 40.0167
31 3.0242 64 54.8317
32 3.2975 65 83.3333
33 3.5842
H. James Wilson
/s/
Secretary
<PAGE>
New England Variable Life
Insurance Company
3. Surrender Charge
Policy Number
Specimen
THIS POLICY IS ADJUSTABLE. IF IT IS ADJUSTED, THIS SECTION 3 WILL BE CHANGED.
SEE SECTION 16.
A Surrender Charge will be deducted from full surrender, decrease in Face
Amount, lapse and most partial surrender transactions during the Surrender
Charge Period of the initial Face Amount and any increase in Face Amount. For
the initial Face Amount, the Surrender Charge Period is measured from the Policy
Date. For each increase in Face Amount, the Surrender Charge Period is measured
from the Adjustment Date of the increase. The Surrender Charge for the Policy is
equal to: the Deferred Sales Charge for the initial Face Amount and each
increase in Face Amount; plus the Deferred Administrative Charge for the initial
Face Amount and each increase in Face Amount.
H. James Wilson
/s/
Secretary
(continued)
<PAGE>
New England Variable Life
Insurance Company
3. Surrender Charge
Policy Number Face Amount Date of Issue
Specimen $250,000 April 1, 1995
The Surrender Charge Period of the initial Face Amount is 11 years.
The Maximum Deferred Sales Charges for the first 5 years are shown below. The
Maximum Deferred Sales Charges for the last policy month of each of the
remaining years of the Period are shown below; the Maximum Charges for other
months will reflect the number of completed months of the Period in the year of
surrender, lapse or decrease in Face Amount.
The Deferred Administrative Charge is level throughout the first year of the
Period and is shown below. The Charge for the last policy month of each of the
remaining years of the Period is shown below; the Charge for other months will
reflect the number of completed months of the Period in the year of surrender,
lapse or decrease in Face Amount.
Year of
Surrender Maximum Deferred
Charge Deferred Administrative
Period Sales Charge Charge
1 $ 438.75 $625.00
2 526.50 562.50
3 1,263.60 500.00
4 1,263.60 437.50
5 1,263.60 375.00
6 1,053.00 312.50
7 842.40 250.00
8 631.80 187.50
9 421.20 125.00
10 210.60 62.50
11 0.00 0.00
H. James Wilson
/s/
Secretary
<PAGE>
New England Variable Life
Insurance Company
4. Table of Guaranteed Minimum Death Benefit A
Premiums Accumulated at 4%
Policy Number
Specimen
THIS POLICY IS ADJUSTABLE. IF IT IS ADJUSTED, THIS SECTION 4 WILL BE CHANGED.
SEE SECTION 16.
The amounts shown are used to determine if the Minimum Guaranteed Death Benefit
A is in effect. (See Section 12). The amounts shown assume that the Guaranteed
Death Benefit A Premium is paid on the first day of each policy year and is
accumulated at 4%.
End of End of
Year Year
1 $ 4,188.66 36 $ 325,032.95
2 8,544.87 37 342,222.93
3 13,075.32 38 360,100.51
4 17,786.99 39 378,693.19
5 22,687.13 40 398,029.58
6 27,783.28 41 418,139.42
7 33,083.27 42 439,053.66
8 38,595.26 43 460,804.46
9 44,327.73 44 483,425.30
10 50,289.50 45 506,950.97
11 56,489.74 46 531,417.67
12 62,937.99 47 556,863.04
13 69,644.17 48 583,326.22
14 76,618.60 49 610,847.93
15 83,872.00 50 639,470.51
16 91,415.54 51 669,237.99
17 99,260.82 52 700,196.17
18 107,419.92 53 732,392.67
19 115,905.37 54 765,877.04
20 124,730.25 55 800,700.78
21 133,908.12 56 836,917.47
22 143,453.10 57 874,582.83
23 153,379.89 58 913,754.80
24 163,703.74 59 954,493.66
25 174,440.55 60 996,862.06
26 185,606.83 61 1,040,925.21
27 197,219.77 62 1,086,750.87
28 209,297.22 63 1,134,409.57
29 221,857.76 64 1,183,974.61
30 234,920.74 65 1,235,522.26
31 248,506.22
<PAGE>
32 262,635.13
33 277,329.20
34 292,611.03
35 308,504.13
H. James Wilson
/s/
Secretary
<PAGE>
New England Variable Life
Insurance Company
5. Table of Guaranteed Minimum Death Benefit B
Premiums Accumulated at 4%
Policy Number
Specimen
THIS POLICY IS ADJUSTABLE. IF IT IS ADJUSTED, THIS SECTION 5 WILL BE CHANGED.
SEE SECTION 16.
The amounts shown are used to determine if the Minimum Guaranteed Death Benefit
B is in effect. (See Section 12.) The amounts shown assume that the Guaranteed
Death Benefit B Premium is paid on the first day of each policy year and is
accumulated at 4%.
End of End of
Year Year
1 $ 3,900.40 26 172,833.53
2 7,956.82 27 183,647.27
3 12,175.49 28 194,893.56
4 16,562.91 29 206,589.70
5 21,125.82 30 218,753.69
6 25,871.26 31 231,404.24
7 30,806.51 32 244,560.81
8 35,939.17 33 258,243.64
9 41,277.13 34 272,473.79
10 46,828.62 35 287,273.14
11 52,602.17 36 302,664.46
12 58,606.65 37 318,671.44
13 64,851.32 38 335,318.70
14 71,345.77 39 352,631.85
15 78,100.00 40 370,637.52
16 85,124.40 41 389,363.42
17 92,429.78 42 408,838.36
18 100,027.37 43 429,092.29
19 107,928.86 44 450,156.39
20 116,146.42 45 472,063.04
21 124,692.67
22 133,580.78
23 142,824.41
24 152,437.79
25 162,435.70
H. James Wilson
/s/
Secretary
<PAGE>
6. Accounts Available on the Date of Issue
. Variable
Capital Growth Sub-account
Money Market Sub-account
Bond Income Sub-account
Stock Index Sub-account
Managed Sub-account
Avanti Growth Sub-account
Value Growth Sub-account
Equity-Income Sub-account
Overseas Sub-account
Small Cap sub-account
High Income Sub-account
Asset Manager Sub-account
. Fixed
<PAGE>
7. 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 and any
Application for adjustment of the Policy, is the entire contract between you and
the Company. All riders are listed in Section 1. A change in or waiver of the
provisions of the Policy must be signed by the President or the Secretary of the
Company to be valid.
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.
Contestable and suicide periods start on the Date of Issue and on the Adjustment
Date for each increase in Face Amount. The Policy Date, the Date of Issue and
each Adjustment Date are all 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:
. With respect to the amount of Death Benefit which results from other than
payments for which proof of insurability is required, for two years from
the Date of Issue; and
. With respect to any amount of Death Benefit which results from a payment
for which proof of insurability is required, for two years from the date
that payment is received; and
. With respect to the amount of the Death Benefit associated with each
increase in Face Amount, for two years from the Adjustment Date for that
increase.
Suicide Within Two Years
<PAGE>
If the Insured dies by suicide while sane or insane 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; and less any partial
surrenders.
If the Insured dies by suicide while sane or insane more than two years after
the Date of Issue but within two years from the Adjustment Date for an increase
in Face Amount, the Death Benefit for that increase in Face Amount will be
limited to the Monthly Deductions and any Face Amount increase Administrative
Charge made to pay for that increase.
Age of Insured
The age of the Insured on the Policy Date and on each policy anniversary means
the age at the nearest birthday of the Insured. For an increase in Face Amount
during a policy year, age means age at the start of that policy year.
If the age or sex of the Insured has not been correctly stated in the
Application, the Death Benefit will be the amount that the most recent Monthly
Deduction which was made would have provided for the correct age and sex.
Claims of Creditors
The Policy and payments under it are exempt from the claims of creditors to the
extent allowed by law.
Basis of Values
"1980 CSO" means Commissioners 1980 Standard Ordinary; it is used to describe
mortality tables. Minimum Cash Values, Reserves and Guaranteed Insurance Factors
are based on the mortality table shown in Section 2. Interest is compounded
daily at the effective rate of 4% per year. A detailed statement of the method
of computing values has been filed, where required, with the Insurance
Department of the state in which the Policy is delivered. All values are equal
to or in excess of the minimum values required by 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. The annual 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 information required by law or regulation.
<PAGE>
Policy Illustration of Benefits and Values
Upon written request the Company will send you a policy illustration which will
illustrate benefits and values under the Policy.
Postponement of Variable Benefits
Except for a Policy Loan that will be used to pay premiums on policies issued by
the Company, 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 (except for normal
weekend and holiday closing) or when trading is restricted; or
. The Securities and Exchange Commission determines that a state of emergency
exists which may make payment or transfer impractical; or
. The Securities and Exchange Commission orders the Variable Account or
orders the New England Zenith Fund or its successor or any other investment
company in which the Variable Account is invested to postpone payment or
transfer of variable benefits.
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 and any partial surrender
from the Fixed Account for not more than six months from the day you apply,
except Loans or partial surrenders to pay premiums on policies issued by the
Company.
<PAGE>
8. 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. The portion
of the Account assets equal to the reserves plus other policy liabilities of the
Account is not chargeable with liabilities arising out of any other business the
Company may conduct. The Company reserves the right to transfer to its general
account Variable Account assets which exceed the total of reserves and other
liabilities of the Account. Income and realized and unrealized capital gains and
losses of the Account are credited to the Account without regard to any of the
Company's other income or capital gains and losses.
Sub-Accounts
The Account consists of sub-accounts, each of which is invested in shares of one
portfolio of the New England Zenith fund or its successor or any other
investment company in which the Account is invested. Shares of a portfolio are
purchased for a sub-account at their net asset value.
The Policy's first investment is made in the Money Market sub-account as of the
latest of:
. The Policy Date;
. The date of the Part II of the Application for the initial Face Amount, if
any is required; and
. The date the first premium is received by the Company.
The Policy's Cash Value will be transferred, based on your choice, to the sub-
accounts and the Fixed Account as of the later of: 45 days after Part I of the
Application for the initial Face Amount is signed; and 10 days after the Company
mails the separate Notice of Withdrawal Right for the initial Face Amount.
Before this transfer, the values and benefits of the Policy will depend on the
net investment performance of the Money Market sub-account. After this transfer
each net premium allocated to the Account and each net unscheduled payment
allocated to the Account will be invested in the sub-accounts you chose as of
the date it is received by the Company at its Administrative Office.
Each distribution of income, dividends and capital gains from a portfolio to a
sub-account will be reinvested for the benefit of
<PAGE>
the owners of the policies in that sub-account 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; and the Fixed Account will
be counted in the limit of 10.
The values and benefits of a policy depend on:
the investment performance of the portfolios in which the sub-accounts are
invested; and the interest credited to 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 for your
Policy.
Choice of Sub-Accounts
You choose the sub-accounts in which net premiums and net unscheduled payments
are to be invested. You can change the choice for future premiums and future
unscheduled payments at any time by notice to the Company. The change will be
effective as of the date the request is received by the Company at its
Administrative Office. The portion of the net premium and the net unscheduled
payment to be applied to each sub-account chosen 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 and in Section 6.
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 available in the
New England Zenith Fund or its successor or any other investment company in
which the Account is invested; 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 and future net unscheduled payments applied to that
sub-account.
Transfer Option
After the Right to Return the Policy period you can transfer all or a portion of
the Policy's existing share of a sub-account to
<PAGE>
another sub-account or to the Fixed Account. (See Restriction of New Amounts
Applied to the Fixed Account provision.) Requests for transfers can be made in
writing or by telephone. The Company is not responsible for determining the
authenticity of transfer instructions received by telephone. Transfers will be
subject to a limit of 4 in each policy year, except with the consent of the
Company. A transfer out of the Fixed Account will not count against this limit.
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. If the investment
policy of the Account is changed, the Company will give you written notice of
the change. You can then choose to convert this Policy to fixed benefit
coverage. The conversion will be on the same basis as that described in the 24
Months Conversion Right section. (See Section 17.) Your request to convert this
Policy must be made within 60 days of the later of: (a) the effective date of
the investment policy change; or (b) the date you receive the notice of the
change.
Rights Reserved by the Company
The Company reserves the right to take certain actions subject to compliance
with law including, 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 some
or all of the assets of the Account other than in the New England Zenith Fund;
(d) to invest some or all of the assets of the Account in any other investment
company chosen by New England Variable Life Insurance Company; (e) to remove a
portfolio in which the sub-account is invested or to substitute a different
portfolio; (f) to operate the Account as a management investment company and to
charge investment advisory fees under the Investment Company Act of 1940 or to
operate the Account in any other form permitted by law; and (g) to deregister
the Account under the Investment Company Act of 1940 if registration is no
longer required.
9. The Fixed Account
The Fixed Account
The Fixed Account is a segmented fund within the general account of the Company.
If you choose the Fixed Account, the first date on which money is applied to the
Fixed Account for the Policy is the latest of:
<PAGE>
. 45 days after Part I of the Application for the initial Face Amount is
signed;
. 10 days after the Company mails the separate Notice of Withdrawal Right
for the initial Face Amount; and
. The effective date of the choice of the Fixed Account.
Before this date, the value of the portion of the net premium and any net
Unscheduled Payment allocated to the Fixed Account will depend on the net
investment performance of the Money Market sub-account of the Variable Account.
After this date each net premium allocated to the Fixed Account and each net
unscheduled payment allocated to the Fixed Account will be applied as of the
date it is received by the Company at its Administrative Office. Each transfer
to the Fixed Account will be applied as of the transfer date.
Fixed Account Interest
Except as noted in the Repayment of Loans provision of Section 15, 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 the Policy will be the weighted average of
all such rates for the Policy.
Each year, on the policy anniversary, the Company will determine a portion, if
any, of the Policy's portion 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%.
Transfers Out of the Fixed Account
You can transfer a limited amount of the Policy's portion of the Fixed Account
to the sub-accounts once within 30 days after each policy anniversary. The
transfer will be limited to the greater of: 25% of the Policy's portion of the
Fixed Account on the transfer date; and the amount of the Policy's portion of
the Fixed Account transferred to the sub-accounts the prior year. However, if
less than $100.00 would remain in the Fixed Account after the transfer, you
can transfer the remainder to the sub-accounts. Requests for transfers can be
made in writing or by
<PAGE>
telephone. The Company is not responsible for determining the authenticity of
transfer instructions received by telephone.
Choice of the Fixed Account
You can choose to have net premiums and net unscheduled payments applied to the
Fixed Account. You can change the choice for future net premiums and future net
unscheduled payments at any time by notice to the Company in writing. (See the
Restriction of New Amounts Applied to the Fixed Account provision.) The portion
of the net premium and net unscheduled payment to be applied to the Fixed
Account must be a whole percent not less than 10.
10. Death Benefit
Death Benefit
If the Insured dies before the Maturity Date, the Company will pay a Death
Benefit to the Beneficiary. The amount of the Death Benefit will depend on the
Death Benefit Option in effect on the date of death. The amount payable will be
reduced by any Policy Loan Balance on the date of death. If the Insured dies
during the grace period, an amount will be deducted from the policy proceeds to
cover Monthly Deductions to the date of death. The policy proceeds will be paid
in one sum unless all or part of the proceeds is applied to a Payment Option.
(See Payment of Benefits, Section 19.)
Death Benefit Options
This Policy provides two Death Benefit Options. The Death Benefit Option will be
as chosen in the Application or as later changed. The Death Benefit Option is
shown in Section 1. If Option 1 is chosen the Death Benefit on the date of death
is equal to the greater of (a) and (c) and if Option 2 is chosen the Death
Benefit on the date of death is equal to the greater of (b) and (c), where:
(a) is equal to the Face Amount shown in Section 1;
(b) is equal to the Face Amount shown in Section 1 plus the Cash Value; and
(c) is equal to the Death Benefit which will allow the Policy to continue to
qualify as a flexible premium adjustable life insurance contract under the
Internal Revenue Code and any interpretive regulation or rulings by the
Internal Revenue Service.
The Company will calculate (c) as the Applicable Percent of: the Cash Value of
the Policy plus the pro rata portion of any monthly deduction made for a period
beyond the date of death. The percent used will be based on the age of the
Insured at the beginning of
<PAGE>
the policy year as shown in the Table of Applicable Percentages below.
Table of Applicable Percentages
Applicable Applicable
Age Percentage Age Percentage
0 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 113
52 171 72 111
53 164 73 109
54 157 74 107
55 150 75 through 90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 94 through 99 101
60 130 100 100
Changing the Death Benefit Option
After the first policy year you can change the Death Benefit Option by written
application to the Company. A change in Death Benefit Option will be effective
on the Adjustment Date shown in the new Policy Schedule.
Except with the consent of the Company, a change from Option 1 to Option 2 can
be made only if the Face Amount after the change is at least $250.000. If you
change from Option 1 to Option 2:
. The Face Amount will be decreased by the amount of the Cash Value;
. A decrease in Face Amount will be applied to reduce the initial Face
Amount and each increase in Face Amount on a pro rata basis; and
. No surrender charge will apply.
A decrease in Face Amount may require a decrease in the amounts provided by
riders attached to this Policy.
<PAGE>
If you change from Option 2 to Option 1:
. The Face Amount will be increased by the amount of the Cash Value; and
. This increase in Face Amount will be applied to the initial Face Amount and
to each prior increase in Face Amount on a pro rata basis.
The requirements in the Increase in Face Amount provision of Section 16 do not
apply to a change from Option 2 to Option 1.
11. Premiums
Payment
Premiums are payments made to the Company to pay for the Policy. The Policy will
not be in force until the first premium is paid. After the first premium is
paid, premiums can be paid: at any time; and in any amount, subject to the
Limits on Premiums below. 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 given on request. Unless you request otherwise
in writing to the Company, any payment received by the Company when a Policy
Loan exists on the Policy will be used: first, as a planned premium; second, as
payment of the loan interest due; third, as a repayment of the Policy Loan; and
fourth, as an unscheduled payment.
Amount and Frequency
Planned annual premiums are shown in Section 1. Payments and Planned Premium
Dates can be annual, semi-annual or quarterly or can be at any frequency agreed
to by the Company. (See Limits on Premiums below.)
Unscheduled payments can be made at any time prior to the Maturity Date. (See
Limits on Premiums below.)
Cash Values and Death Benefits will be permanently affected by the amount and
frequency of planned and unscheduled payments.
Limits on Premiums
Payments are subject to these limits:
. No payment can be less than $25; and
. Total planned and unscheduled payments will be limited to the Company's
published maximum; and
<PAGE>
. No unscheduled payment can be made if it increases the Death Benefit by
more than it increases the Cash Value, except with evidence of insurability
and the consent of the Company; and
. No planned premium can be increased except with the consent of the Company.
This Policy is intended to qualify as a flexible premium adjustable life
insurance contract under the Internal Revenue Code and any interpretive
regulation or rulings by the Internal Revenue Service. To that end, premiums on
this Policy are limited to an amount no greater than that allowing the Policy to
continue to qualify.
Net Payments
Each net premium and each net unscheduled payment is equal to: the payment; less
no more than the Maximum Premium Expense Charge at the rate shown in Section 1.
12. Monthly Deduction
Monthly Deduction
On the first day of each policy month, whether or not premiums are paid, the
Company will make a Monthly Deduction for that policy month from the Cash Value
of this Policy. The amount of the Monthly Deduction for a policy month is equal
to:
. The cost of insurance and the cost of any riders for the policy month;
PLUS
. An amount not greater than the Maximum Monthly Policy Fee shown in
Section 1;
PLUS
. An amount not greater than the Maximum Monthly Administrative Charge shown
in Section 1.
If either Minimum Guaranteed Death Benefit is in effect or if the Policy meets
the Monthly Minimum Premium test, whether or not premiums are paid, the Monthly
Deduction will be made, until the Cash Value equals zero. Otherwise, the Monthly
Deduction will be made, as long as the Net Cash Value is sufficient to cover the
entire Monthly Deduction. This provision will not continue the Policy beyond the
Maturity Date; nor will it continue any rider beyond the termination date as
provided in the rider.
The Monthly Deduction will be deducted in the same proportion as
<PAGE>
the Cash Value of the Policy is in the sub-accounts and the Fixed Account.
Cost of Insurance
The monthly cost of insurance for the Policy is equal to: the amount at risk;
times the cost of insurance rate per $1,000 for that month divided by 1,000. The
amount at risk is equal to:
. The Death Benefit on the first day of the policy month discounted at
.3273745%, the monthly equivalent of 4% per year;
LESS
. The Cash Value on the first day of the policy month after the Monthly
Deduction has been processed.
Cost of Insurance Rates
The cost of insurance rates will be set by the Company each year on the policy
anniversary, based on the expectations of the Company as to future experience.
The rates are guaranteed for one year.
The Table of Guaranteed Maximum Cost of Insurance Rates per $1,000 (see Section
2) shows the maximum guaranteed rate for each policy month which starts on the
Policy Date or a policy anniversary. The rates between anniversaries vary
monthly based on the assumption of uniform distribution of deaths throughout the
policy year. The cost of insurance rates for each policy year for the initial
Face Amount and for each increase in Face Amount are based on: the sex of the
Insured; the underwriting class of the Insured; and the age of the Insured on
the first day of the policy year.
Monthly Deduction Adjustment At Death
The portion of any Month Deduction made for a period beyond the date of death
will be added to the policy proceeds unless this amount has already been
included in the Death Benefit as described in (c) in Section 10. If the Insured
dies during the grace period, an amount will be deducted from the policy
proceeds to cover Monthly Deductions to the date of death.
Grace Period
Unless either Minimum Guaranteed Death Benefit is in effect or the Policy meets
the Monthly Minimum Premium test, if the Net Cash Value on the first day of a
policy month is not enough to cover the Monthly Deduction for that month, the
Company will mail a premium notice to you and any assignee at the addresses on
record with the Company. There is a grace period of 62 days from the date when
the Monthly Deduction was due in which to pay a premium large enough to permit
the Monthly Deduction to be made.
<PAGE>
The insurance remains in force during the grace period. If the premium remains
unpaid at the end of its 62-day grace period, the Policy will lapse without
value. Any riders will also lapse without value unless otherwise stated in the
rider.
Monthly Minimum Premium
The Company will do the following comparison on the first day of each policy
month during the first three policy years unless: the Face Amount has been
increased; or the Policy has been lapsed; or this Policy is the result of the
exercising of a Change to a New Insured rider.
The Company will compare (a) to (b), where: (a) equals the total of the Monthly
Minimum Premiums for the Policy from the Policy Date to that policy month; and
(b) equals the total premiums paid to date less all partial surrenders and any
Policy Loan Balance at that time. If (b) is greater than or equal to (a), the
Policy will not be lapsed if the Net Cash Value on the first day of the policy
month is not enough to cover the Monthly Deduction due for that month.
The Monthly Minimum Premium is shown in the Policy Schedule. (See Section 1.)
This Premium will be recalculated when: the Face Amount is decreased; the amount
provided by riders attached to this Policy is changed; a partial surrender is
made which results in a decrease in Face Amount; or the underwriting class of
this Policy and its riders is changed to a more favorable underwriting class.
Minimum Guaranteed Death Benefits
This Policy provides two Minimum Guaranteed Death Benefits: Benefit A; and
Benefit B. On the first day of each policy month the Company will determine if
either Benefit is in effect unless: "NOT ELIGIBLE" is shown for the Guaranteed
Death Benefit Premiums in Section 1 (see below); or a Policy Loan exists. If
either Benefit is in effect, the Policy will not be lapsed even if the Net Cash
Value on the first day of the policy month is not enough to cover the full
Monthly Deduction due for that month. If the Insured dies while either Benefit
is in effect, the Death Benefit of the Policy will be based on the Death Benefit
Option in effect on the date of death.
The Guaranteed Death Benefit A Premium and the Guaranteed Death Benefit B
Premium are shown in the Policy Schedule. These Premiums will be recalculated
when: the Face Amount is increased or decreased; the amount provided by riders
attached to this Policy is increased or decreased: a partial surrender which
results in a decrease in Face Amount is made; or the underwriting class of this
Policy and its riders is changed to a more favorable underwriting class.
Recalculation of the Premiums will
<PAGE>
affect the Tables shown in Sections 4 and 5. When the Company recalculates the
Premiums, it will determine if this Policy is still eligible for the Minimum
Guaranteed Death Benefits.
The Policy will become ineligible for the Guaranteed Death Benefits if, in order
to allow the Policy to continue to qualify as a life insurance contract under
the Internal Revenue Code either recalculated Premium is less than zero. If the
Policy is ineligible for these Benefits, the words "NOT ELIGIBLE" will appear in
the Policy Schedule for the Guaranteed Death Benefit A and B Premiums and in the
Tables shown in Section 4 and 5.
Benefit A
If you pay the Guaranteed Death Benefit A Premium for the Policy in each policy
year (any premiums paid within 20 days prior to a policy anniversary are treated
as if paid in the next policy year). Benefit A is in effect unless: a Policy
Loan exists; a partial surrender was made; or "NOT ELIGIBLE" is shown for the
Guaranteed Death Benefit A Premium in Section 1.
Unless a Policy Loan exists or "NOT ELIGIBLE" is shown for the Guaranteed Death
Benefit A Premium, if you pay an amount different from the Guaranteed Death
Benefit A Premium in any policy year, or if you make a partial surrender,
Benefit A will be in effect if (a) plus (b) is equal to or greater than (c),
where:(a) is equal to: the total of the premiums paid in each prior policy year
accumulated at 4% from the first day of the year of payment to the most recent
policy anniversary (except premiums paid within 20 days prior to the policy
anniversary are treated as if paid in the next policy year); less every partial
surrender made in each prior policy year accumulated at 4% from the date of
surrender to the most recent policy anniversary; and (b) is equal to the total
of the premiums paid in the then current policy year (except premiums paid
within 20 days prior to a policy anniversary are treated as if paid in the next
policy year); less every partial surrender made in that policy year; and (c) is
equal to: the amount shown in the Table of Guaranteed Minimum Death Benefit A
Premiums Accumulated at 4% (see Section 4) for the prior policy year; plus 1/12
of the Benefit A Premium times 1 plus the number of completed policy months of
the then current year.
Benefit B
If you pay the Guaranteed Death Benefit B Premium for the Policy in each policy
year (any premiums paid within 20 days prior to a policy anniversary are treated
as if paid in the next policy year), Benefit B is in effect unless: a Policy
Loan exists; a partial surrender was made; or "NOT ELIGIBLE" is shown for the
Guaranteed Death Benefit B Premium in Section 1.
<PAGE>
Unless a Policy Loan exists or "NOT ELIGIBLE" is shown for the Guaranteed Death
Benefit B Premium, if you pay an amount different from the Guaranteed Death
Benefit B Premium in any policy year, or if you make a partial surrender,
Benefit B will be in effect if (a) plus (b) is equal to or greater than (c),
where: (a) is equal to: the total of the premiums paid in each prior policy year
accumulated at 4% from the first day of the year of payment to the most recent
policy anniversary (except premiums paid within 20 days prior to the policy
anniversary are treated as if paid in the next policy year); less every partial
surrender made in each prior policy year accumulated at 4% from the date of
surrender to the most recent policy anniversary; and (b) is equal to the total
of the premiums paid in the then current policy year (except premiums paid
within 20 days prior to a policy anniversary are treated as if paid in the next
policy year); less every partial surrender made in that policy year; and (c) is
equal to: the amount shown in the Table of Guaranteed Minimum Death Benefit B
Premiums Accumulated at 4% (see Section 5) for the prior policy year; plus 1/12
of the Benefit B Premium times 1 plus the number of completed policy months of
the then current year.
Benefit B cannot be in effect beyond the later of: attained age 80 of the
Insured; and 20 years from the Policy Date, or the Maturity Date if earlier.
<PAGE>
13. Reinstatement After Lapse
Reinstatement
If the Policy lapses, the Policy and riders can be reinstated. (See Limitations
on Reinstatement below.) Reinstatement is subject to:
. Written application to reinstate; and
. Proof that the Insured is insurable; and
. Payment of a premium large enough to keep the Policy and any riders in
force for at least two months; and
. Payment or reinstatement of any Policy Loan Balance which existed on the
date when the Policy lapsed.
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 date of lapse.
Any rider which provides life or disability insurance on a person other than the
Insured can be reinstated only as stated in the rider.
Effective Date of Reinstatement
Reinstatement will take effect: only if the application for reinstatement is
approved by the Company; and only when the premium for reinstatement has been
paid, provided that at the time of payment there has been no change in
insurability as represented in the application for reinstatement.
Surrender Charge At and After Reinstatement
A Surrender Charge was applied when the Policy lapsed. If the Policy is later
reinstated, the Surrender Charge will be credited to the Cash Value of the
Policy. The Surrender Charge on the date of reinstatement will be the same as it
was on the date of lapse. For the purpose of determining the Surrender Charge on
any date after reinstatement, the period the Policy was lapsed will not count.
Maximum Monthly Administrative Charge After Reinstatement
For the purpose of determining the Maximum Monthly Administrative Charge on any
date after reinstatement, the period the Policy was lapsed will not count.
<PAGE>
14. Cash Value of the Policy
Cash Value
The first net premium will be credited to the Policy as of the latest of:
. The Policy Date;
. The date of the last Part II of the Application for the initial Face
Amount; and
. The date the first premium is received by the Company.
Each future net premium will be credited to the Cash Value as of the date it is
received by the Company.
The Cash Value of the Policy will depend on the net investment performance of
the Money Market sub-account until the later of: 45 days after Part I of the
Application for the initial Face Amount is signed; and 10 days after the Company
mails the separate Notice of Withdrawal Right for the initial Face Amount.
Thereafter, the Cash Value of the Policy is equal to: the Policy's share of the
chosen sub-accounts; plus the Policy's portion of the Fixed Account; plus the
amount of any assets transferred to the general account of the Company because
of Policy Loans. (See Section 15.) The amount of the Cash Value depends on: the
frequency and amount of net planned premiums; the frequency and amount of net
unscheduled payments; investment performance of the chosen sub-accounts;
interest credited to the Policy's portion of the Fixed Account; Monthly
Deductions; all chosen Death Benefit Options; partial surrenders; increases and
decreases in Face Amount; transfers among sub-accounts and the Fixed Account;
and Policy Loans. The Cash Value can increase or decrease on a daily basis,
depending on: the actual investment performance of the chosen sub-accounts; and
the interest credited to the Policy's portion of the Fixed Account. (See Actual
Investment Return below.)
The Cash Value of the Policy is not increased by the cash value of any rider,
unless stated in the rider.
Net Cash Value
The Net Cash Value is equal to:
. The Cash Value of the Policy;
LESS
<PAGE>
. Any Policy Loan Balance;
LESS
. The Surrender Charge that would apply upon surrender, whether or not there
is a surrender. (See Section 3.)
Surrender of the Policy
You can surrender the Policy for its Net Cash Value at any time before the
Maturity Date by notice to the Company in writing. Upon surrender, the Policy
will be canceled. The Net Cash Value will be paid to you in one sum, unless you
choose in writing to apply all or part to a Payment Option. (See Payment of
Benefits, Section 19.) If you surrender the Policy during the grace period, an
amount will be deducted from the Net Cash Value to cover the Monthly Deduction
to the date of surrender.
Monthly Cost of Insurance Adjustment At Surrender or Partial Surrender
The pro rata portion of any monthly cost of insurance deduction made for a
period beyond the date of surrender or partial surrender (See Section 16) will
be added to the surrender proceeds.
Actual Investment Return
The Policy has an Actual Investment Return for each Valuation Period for its
share of each chosen sub-account and for its portion of the Fixed Account. The
Policy's Actual Investment Return for each sub-account for each Valuation Period
is equal to (a) minus (b); where:
. (a) is equal to the Policy's share of the sub-account as of the end of the
Valuation Period:
PLUS
. the monthly charges deducted in the Valuation Period;
LESS
. any net planned premium and net unscheduled payment credited during the
Valuation Period;
PLUS
. the total of the partial surrenders made during the Valuation Period;
PLUS
. the interest credited during the Valuation Period to any borrowed portion
of the Policy's Cash Value;
PLUS or LESS
<PAGE>
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
. (b) is equal to the Policy's share of the sub-account as of the end of the
most recent Valuation Period;
PLUS or LESS
a charge or credit for the Policy's share of any reserve for taxes which
the Company determines to apply to the sub-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 portion of the Fixed Account as of the end of
the Valuation Period;
PLUS
the monthly charges deducted in the Valuation Period;
LESS
any net planned premium and net unscheduled payment credited during the
Valuation Period;
PLUS
the total of the partial surrenders made during 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 portion of the Fixed Account as of the end of
the most recent Valuation Period.
There is a daily charge for mortality risk and expense risk against the Policy's
share of the sub-accounts. This charge will not be greater than: .002465753425%
which is a rate equivalent to .90% per year divided by 365.
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
<PAGE>
Valuation Date.
15. Policy Loans
Policy Loans
After the Right to Return the Policy period you can borrow all or part of the
Loan Value of the Policy by written request to the Company. Policy Loans are
made on the sole security of the Policy. The amount you can borrow at any time
is equal to the Loan Value less any Policy Loan Balance at that time.
Unless you request otherwise, Policy Loans will reduce first, the Policy's share
of the sub-accounts proportionately and second, the Policy's portion of the
Fixed Account, except as noted below in the Interest on Loans; Policy Loan
Balance provision. Assets equal to the amount of the Loan:
. Will be transferred to the general account of the Company; and
. Will earn interest at the effective rate per year of not less than: the
Policy Loan Interest Rate; less 1.5%
Policy Loans, whether or not repaid, can have a permanent effect on Cash Values
and Death Benefits.
While a Policy Loan exists, neither Minimum Guaranteed Death Benefit will be in
effect.
Loan Value
The Loan Value of the Policy on the date the Loan is made is equal to:
. 90% of the Cash Value of the Policy projected to the next policy
anniversary or, if earlier, to the next Planned Premium Date;
LESS
. The Surrender Charge that would apply upon surrender (whether or not there
will be a surrender) on the next Planned Premium Date or, if greater, on
the date the loan is made;
LESS
. Loan interest to the next loan interest due date.
The Cash Value will be projected with interest at the effective rate per year of
1.5% less than the Policy Loan Interest Rate.
<PAGE>
Interest on Loans; Policy Loan Balance
Interest will be charged on Policy Loans at the Policy Loan Interest Rate 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 on
the policy anniversary each year. Loan interest not paid when due will be added
to the Loan and interest will be charged on it; when loan interest is added to
the Loan, the Policy's share of the sub-accounts and the Policy's portion of the
Fixed Account will be reduced proportionately.
Repayment of Loans
Policy Loans can be repaid to the Company at any time in whole or in part. 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.
The rate of interest for each loan repayment allocated to the Fixed Account will
be the lesser of: the rate set by the Company in advance for the date the loan
repayment is allocated to the Fixed Account; and the effective interest rate
(see Fixed Account Interest) for the Policy on the date of the repayment.
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 less the
Surrender Charge on the next loan interest due date or, if greater, on the
current Valuation Date (called "excess Policy Loan"), 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
62 days after the mailing of the notice, the Policy will lapse without value.
Unless you request otherwise, any payment received by the Company when a Policy
Loan exists on the Policy will be used: first, as a planned premium; second, as
payment of the loan interest due; third, as a repayment of the Policy Loan; and
fourth, as an unscheduled payment.
16. Adjustment
Increase in Face Amount
After the first policy year. the Face Amount can be increased on the first day
of any policy month. (See Limit on Adjustments below.) An increase in Face
Amount is subject to:
. Written application to increase the Face Amount;
<PAGE>
. Proof that the Insured is insurable;
. New insurance for the amount of the increase on the same plan at the age of
the Insured on the Adjustment Date being allowed under the underwriting
rules of the Company;
. The amount of the increase being at least $10,000, except with the consent
of the Company;
. A Monthly Deduction for the increase. (See Monthly Deduction, Section 12.);
and
. A Face Amount Increase Administrative Charge not greater than the Maximum
stated in Section 1, unless the increase is not medically underwritten, to
be deducted from the Cash Value in the same proportion as the Cash Value of
the Policy is in the sub-accounts and the Fixed Account.
There is a new Surrender Charge Period associated with an increase in Face
Amount. (See Section 3).
The amount of any rider which is attached to the Policy can be increased only as
stated in the rider.
The Application to increase the Face Amount must be signed by the Insured and by
you. An increase will be effective on the Adjustment Date shown in the new
Policy Schedule.
Decrease in Face Amount
The Face Amount may be decreased by written application to the Company; but only
if the Face Amount which will remain after a decrease is at least $250,000:
except with the consent of the Company. No portion of the Cash Value will be
paid to you. A Surrender Charge may apply to a decrease in Face Amount. (See
Section 3.) Any Surrender Charge applied will be based on the amount of the
decrease. Thereafter, any Surrender Charges will be proportional to the
remaining Face Amount. Any decrease in Face Amount will be applied to reduce the
initial Face Amount and each increase in Face Amount on a pro rata basis, except
with the consent of the Company. The Cash Value after the decrease in Face
Amount will be equal to: the Cash Value just prior to the decrease; less any
Surrender Charge for the decrease. The Death Benefit will be recalculated based
on the new Face Amount and the Cash Value after the decrease. A decrease in Face
Amount will be effective on the Adjustment Date shown in the new Policy
Schedule. A decrease in Face Amount may require a decrease in the amounts
provided by riders attached to this Policy.
<PAGE>
Partial Surrender
After the Right to Return the Policy Period, you can make a partial surrender by
written request to the Company. A portion of the Cash Value will be paid to you.
A Surrender Charge may apply if you make a partial surrender. (See Section 3.)
Any Surrender Charge applied will be based on the amount of the decrease in Face
Amount. (See below). Thereafter, any Surrender Charge will be proportional to
the remaining Face Amount. In each policy year, partial surrenders will be
limited, except with the consent of the Company, to: 20% of the Net Cash Value
on the day the first partial surrender is made for the policy year; or, if less,
the Loan Value minus any Policy Loan Balance. The amount of the partial
surrender will be deducted from the Cash Value. The Death Benefit of the Policy
will be based on the Face Amount after the partial surrender and the reduced
Cash Value. The Face Amount of the Policy will be reduced, if necessary, so the
amount at risk after the partial surrender is not greater than the amount at
risk before the partial surrender. (See Cost of Insurance, Section 12). Any
decrease in Face Amount will be applied to reduce the initial Face Amount and
each increase in Face Amount on a pro rata basis, except with the consent of the
Company. The Face Amount which will remain after the partial surrender must be
at least $250,000, except with the consent of the Company. A decrease in Face
Amount may require a decrease in the amounts provided by riders attached to this
Policy.
Unless you request otherwise. a partial surrender will reduce: first, the
Policy's portion of the sub-accounts proportionately; and second, the Policy's
portion of the Fixed Account.
Limit on Adjustments
On an Adjustment Date you can have only one increase in Face Amount. Therefore,
if this Policy includes a Level Term Insurance Rider and you request both an
exchange of term insurance for an increase in Face Amount and an additional
increase in Face Amount for this Policy:
. If the two increases will be on the same underwriting class, the two
requests will be combined and processed as one adjustment; otherwise
. The additional increase in Face Amount will be processed first and the
exchange of term insurance will be processed one month later.
Adjustment of the Policy
The Policy Schedule and Sections 2 through 5, must be changed to reflect an
increase or a decrease in the Face Amount. The Policy Schedule must be changed
also to reflect a change in the Death Benefit Option. The changed Policy
Schedule and the changed
<PAGE>
Sections 2 through 5, if any, and the Application for the adjustment will be
made part of the Policy by adjusting the Policy. The Company can, at its option,
adjust the Policy:
. By sending you a new Policy Schedule, and new Sections 2 through 5, if any,
and a copy of the Application for the adjustment for you to attach to the
Policy; or
. By requiring that the Policy be returned to have the new Policy Schedule
and new Sections 2 through 5. if any, and a copy of the Application for the
adjustment attached to the Policy by the Company; or
. By sending you an adjusted policy to take the place of this Policy.
Upon adjustment the Policy will be in force only as adjusted.
17. 24 Months Conversion Right
24 Months Conversion Right
The 24 Months Conversion Right allows you to convert all or a portion of this
Policy, subject to the terms of this Section, to fixed benefit coverage: by
transferring value to the Fixed Account; and by allocating future premiums and
future net unscheduled payments to the Fixed Account.
A request to exercise the 24 Months Conversion Right must be in written form
satisfactory to the Company. The 24 Months Conversion Right can be exercised:
. Once within 24 months after the Date of Issue of the Policy;
. Once within 24 months after the Adjustment Date of an increase in Face
Amount; and
. Even if the Company is restricting new amounts applied to the Fixed
Account. (See Restriction of New Amounts Applied to the Fixed Account
provision of Section 9.)
If the Company is not restricting amounts applied to the Fixed Account: you can
transfer to the Fixed Account all or part of the Policy's Cash Value in the sub-
accounts; and you can allocate all or part of future net premiums and net
unscheduled payments to the Fixed Account. However, at any time in the future if
the Company is restricting new amounts applied to the Fixed Account, the Company
reserves the right to limit the allocation of future net premiums and net
unscheduled payments to the Fixed Account to the Policy's lowest Fixed Account
allocation percentage since the
<PAGE>
most recent date when this Right was exercised. The Policy's share of the sub-
accounts will be reduced proportionately when Cash Value is transferred under
this Right.
If the Company is restricting amounts applied to the Fixed Account: you can
transfer to the Fixed Account the portion of the Policy's Cash Value in the sub-
accounts which is attributable to the coverage for which this Right is being
exercised; and you can allocate future net premiums and net unscheduled payments
to the Fixed Account based on the Company's published rules. The Policy's share
of the sub-accounts will be reduced proportionately when Cash Value is
transferred under this Right.
Transfers to the Fixed Account resulting from the exercise of the 24 Months
Conversion Right are not counted in the limit of 4. (See Transfer Option
provision of Section 8.)
18. Owner and Beneficiary
Owner
The Owner of the Policy is named in the Application (see copy attached); but,
the Owner can be changed. The new Owner will succeed to all 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 a person, a
partnership, a corporation, a fiduciary or any other legal entity. The rights of
the Owner will end at the death of the Insured, except for Payment of Benefits.
(See Section 19.)
Beneficiary
The Beneficiary is named in the Application (see copy attached); but, the
Beneficiary can be changed before the death of the insured. The Beneficiary can
be a person, a corporation, a partnership, a fiduciary or any other legal
entity. A person must survive the Insured to qualify as Beneficiary. If none
survives, the proceeds will be paid to the Owner.
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;
<PAGE>
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.
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.
19. Payment of Benefits
Payment
The policy proceeds will be paid in one sum, unless all or part of the proceeds
is applied to a Payment Option. (See Section 20.) The Company will pay interest
on the death and maturity proceeds from the date the proceeds become payable to
the date of payment in one sum, or to the Option Date. The rate of interest will
be set each year by the Company. The rate will not be less than: that required
by law; or 3 1/2% per year. The interest payable on surrender proceeds is
described in Section 7.
Selection of Payment Options; Option Date
The selection 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 selection
before death of the Insured. The Option Date is the effective date of the
Payment Option, as stated in the selection form.
Payee
The Payee is a person, a corporation, a partnership, a fiduciary
<PAGE>
or any other legal entity entitled to receive payment in one sum or under a
Payment Option.
Selection by Payees
Any proceeds payable in one sum at the death of the Insured, or upon surrender
or maturity of the Policy, can be applied to any Payment Option chosen by the
Payee. Further, with the consent of the Company, any Payee who is entitled to
receive proceeds in one sum when a Payment Option ends, or at the death of a
prior Payee, or when proceeds are withdrawn, can choose to apply the proceeds to
a Payment Option.
Rights of Payees
In the selection of a Payment Option the right can be given to the Payee:
. 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.
Under the Life Income Options only payments certain can be commuted. No Payee
can assign, commute or withdraw the payments under any Payment Option, unless
the right is reserved in the selection of the Option.
Limitations
If installments under an Option would be less than $20, proceeds can be applied
to a Payment Option only with the consent of the Company.
Life Income Options
Guaranteed Life Income Options are based on 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 rates shown in the Life Income Tables
(Section 21); or, if they are greater, on the Payment Option rates of the
Company on the Option Date. If the rates at a given age are the same for
different periods certain, the longest period certain will be used.
Purchase of Increased Payment Option Benefits
On the Option Date, a one sum purchase payment can be made to the Company to be
added to the proceeds being applied to any Payment Option. The portion of Life
Income payments purchased in this way will be based on the Payment Option rates
of the Company on the Option Date, which may not be the rates shown in the Life
Income Tables (Section 21). The purchase payment will be limited to the
Company's published maximum for single premium immediate
<PAGE>
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
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 chosen by the successor Payee. Otherwise,
amounts to be paid after the death of a Payee under a Payment Option will be
paid as due to the successor Payee. If there is no successor Payee, 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.
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.
20. Payment Options
Payment Options
All or part of the policy proceeds can be applied to any one of the following
Options, subject to Section 19, Payment of Benefits:
First Option: Income for a Specified Number of Years
The Company will make monthly payments which will include both principal and
interest. Payments will start on the Option Date and will continue for the
number of years chosen. The number of years chosen cannot 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:
Number of Number of Number of
Years Years Years
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
<PAGE>
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
Second Option: Life Income
The Company will make equal monthly payments. Payments will start on the Option
Date and will continue:
. 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 start on the Option
Date and will continue during the life of the Payee. At the death of the Payee,
if the total payments made are 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,
Instalment 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 starting one month after the Option
Date; or
. Will be added to the principal amount each year and will 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 set each year by the Company; but the rate will not be less than 3 1/2%
per year.
<PAGE>
Fifth Option: Specified Amount of Income
The Company will make monthly payments which will include both principal and
interest. Payments will be in the amount chosen. Payments can be quarterly or at
any other frequency chosen, and payments can be for different amounts, all
subject to the consent of the Company. Payments will start on the Option Date
and 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 set 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 monthly payments. Payments will start 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".
21. Life Income Tables
Life Income Tables
Guaranteed monthly payments per $1,000 of amounts applied to the Life Income
Options are shown below:
- -------------------------------------------------------------------------
Second and Third Options: Life Income
- -------------------------------------------------------------------------
Age of No 10 Years 20 Years Cash Instalment
Payee Refund Certain Certain Refund Refund
*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 3.22 3.22
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
<PAGE>
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
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
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 4.20 4.18 4.11 4.08 4.10
51 4.26 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 4.54 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 5.28 5.35
67 5.92 5.73 5.15 5.39 5.47
68 6.10 5.87 5.21 5.51 5.59
69 6.28 6.02 5.27 5.63 5.72
- --------------------------------------------------------------------------------
Age of No 10 Years 20 Years Cash Instalment
<PAGE>
Payee Refund Certain Certain Refund Refund
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
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
- --------------------------------------------------------------------------------
Sixth Option: Life Income for Two Lives
- --------------------------------------------------------------------------------
Age of One Age of Other Payee
Payee
55 60 65 70 75
Joint and Survivor
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 5.22
70 4.37 4.68 5.02 5.38 5.71
75 4 43 4.79 5.22 5.71 6.22
80 4 47 4.87 5.37 5.98 6.68
- --------------------------------------------------------------------------------
Joint and Survivor, 10 Years Certain
55 $3.96 $4.09 $4.20 $4.36 $4.42
60 4.09 4.27 4.44 4.59 4.77
65 4.20 4.44 4.69 4.91 5.09
70 4.36 4.59 4.91 5.22 5.50
75 4.42 4.77 5.09 5.50 5.88
80 4.46 4.85 5.33 5.72 6.21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Joint and 2/3 to Survivor
55 $4.37 $4.56 $4.76 $4.99 $5.23
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 5.23 5.59 6.03 6.57 7.18
80 5.48 5.89 6.41 7.06 7.84
- --------------------------------------------------------------------------------
Payments for other ages will be quoted by the Company on request.
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 year 2010.
<PAGE>
- ------------------------------------------------------------
Amendments and Endorsements (To be made only by the Company)
<PAGE>
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
Flexible Premium Adjustable Variable Life Policy
. The Death Proceeds are payable at the death of the Insured, if the Insured
dies before the Maturity Date and the Policy is in force.
. The Net Cash Value, if any, is payable on the Maturity Date, if the Insured
is still living and the Policy is in force.
. The Policy can be adjusted by increasing or decreasing the Face Amount.
. The amount and frequency of premium payments can be changed.
. The Policy does not share in dividends.
<PAGE>
Exhibit 1.A.5(b)
NEV-49
Rider: Level Term Insurance
The Company agrees that if the Insured dies while this Rider is in force, the
amount of level term insurance under this Rider will be paid.
Renewal
The Rider will be renewed automatically for successive periods of one year from
the Expiry Date to a new expiry date one year later by payment of the monthly
deduction for the Rider. It cannot be renewed beyond the Final Expiry Date shown
in the Policy Schedule.
Cost of Rider
The cost for this Rider is charged as part of the Monthly Deductions. The rates
will be set by the Company each year on the policy anniversary based on the
expectations of the Company as to future experience. The rates are guaranteed
for one year. The rates for the Rider will never be more than the rates shown in
the Table of Guaranteed Monthly Insurance Rates per $1,000 of Level Term
Insurance.
Decrease in Term Amount
The Term Amount can be decreased by written application to the Company; but only
if the Term Amount which will remain after a decrease is at least $10,000,
except with the consent of the Company. The application for a decrease will be
made a part of the Rider.
Date of Issue
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule.
Rider years will coincide with policy years. If this Rider is issued after the
Date of Issue of the Policy, the first rider year will begin on the policy
anniversary on or next following the Date of Issue of the Rider. The term
insurance provided by this Rider will be in force from the Date of Issue of the
Rider. The effective date of this Rider is its Date of Issue.
Not Contestable After Two Years
This Rider will not be contestable after it has been in force during the life of
the Insured for two years from its Date of Issue.
Suicide Within Two Years
If the Insured dies by suicide while sane or insane within two years from the
Date of Issue of this Rider: the amount of level
<PAGE>
term insurance will not be paid; and the monthly deductions made to pay for the
Rider will be included in the policy proceeds.
Contract
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. This Rider has no cash value.
Exchange Option
The Owner can, before the policy anniversary on which the Insured is age 70,
exchange this Rider: for a new policy; or for an Increase in Face Amount for
this Policy after the first policy year. The exchange can be made without proof
that the Insured is insurable. If the exchange is for a new policy, the new
policy will be issued:
. With a Face Amount equal to the amount of term insurance then provided by
this Rider;
. Based on the actual underwriting class to which the Insured was assigned by
the Company on the Date of Issue of this Rider;
. On any plan of single life Variable Life insurance issued by the Company on
the Policy Date of the new policy;
. On a policy form and at rates in use by the Company on the Policy Date of
the new policy;
. With a current Policy Date and Age of Insured; and
. Subject to any assignments and limitations to which this Rider is subject,
and to the payment of the first premium for the new policy.
Riders can be attached to the new policy only with the consent of the Company.
The Contestable and Suicide periods of the new policy will be measured from the
Date of Issue of this Rider.
If the exchange is for an Increase in Face Amount, any Increase in Face Amount
is subject to:
. New insurance for the amount of the increase on the same plan at the age of
the Insured on the Adjustment Date being allowed under the underwriting
rules of the Company;
. The amount of the increase being at least $10,000, except with the consent
of the Company; and
<PAGE>
. A Monthly Deduction for that increase.
An increase will be effective on the Adjustment Date shown in the new Policy
Schedule.
On an Adjustment Date you can have only one increase in Face Amount. Therefore,
if you request an exchange of term insurance for an increase in Face Amount and
an additional increase in Face Amount for this Policy:
. If the two increases will be on the same underwriting class, the two
requests will be combined and processed as one adjustment; otherwise.
. The additional increase in Face Amount will be processed first and the
exchange of term insurance will be processed one month later.
Termination
This Rider will terminate upon the earliest of: (a) termination or maturity of
the Policy; (b) exchange of the Rider for a new policy; (c) receipt by the
Company at its Administrative Office of written request signed by the Owner of
the Policy to terminate the Rider; and (d) the end of the Final Expiry Date
shown for the Rider in the Policy Schedule.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto H. James Wilson
/s/ /s/
President Secretary
<PAGE>
Table of Guaranteed Monthly Insurance Rates Per $1,000 of Level Term Insurance
Policy Number: Specimen
Year Rate
1 0.2192
2 0.2342
3 0.2533
4 0.2750
5 0.3000
6 0.3283
7 0.3617
8 0.3958
9 0.4350
10 0.4758
11 0.5225
12 0.5692
13 0.6200
14 0.6733
15 0.7333
16 0.7967
17 0.8700
18 0.9517
19 1.0450
20 1.1500
H. James Wilson
/s/
Secretary
<PAGE>
NEV-54
Rider: Children's insurance
The Company agrees that if an Insured Child dies while the Rider is in force the
Amount Insured will be paid to the Beneficiary of the Rider.
Amount Insured
The Amount insured under this Rider on each insured Child at and after age 6
months is the amount shown for the Rider in the Policy Schedule, or half of that
amount before age 6 months.
Insured Child
Any child, stepchild or legally adopted child of the insured is an insured Child
if named in the application for this Rider. Any child of the insured born after
the date of the application for this Rider will become an Insured Child at age
15 days. Any child who is legally adopted by the Insured after the date of the
application for this Rider but before the child's 18th birthday will become an
Insured Child at age 15 days or on the date of adoption, if later. Each Insured
Child will cease to be an Insured Child on the first to occur of: (a) his or her
25th birthday; (b) the Expiry Date shown in the Policy Schedule; or (c) exchange
of the insurance provided by the Rider on that Insured Child.
The Insured
The "Insured" referred to in this Rider is the Insured under the Policy to which
the Rider is attached.
Premiums For This Rider
Premiums for this Rider are charged as part of the Monthly Deductions. The
premiums for the Rider are shown in the Table of Premiums for Children's
Insurance.
Reinstatement Within 62 days
If this Rider lapses because a premium for the Rider remains unpaid at the end
of its grace period, it can be reinstated by payment of the premium within 62
days after the date the Monthly Deduction was due, but only if each Insured
Child is living at the time of payment. (See Limitations below.)
Reinstatement at a Later Time
This Rider can be reinstated at a later time. (See Limitations below.)
Reinstatement will then be subject to:
. Proof that each Insured Child is then insurable; and
<PAGE>
. Payment, while each Insured Child is living, of a premium large enough to
keep the Rider in force for at least two months.
Limitations on Reinstatement
This Rider reinstated only if the Policy is also reinstated or is in force. The
Rider cannot be reinstated except with the consent of the Company, if more than
seven years have passed since the date the Rider lapsed.
Date of Issue
The Date or issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule.
Rider years will coincide with policy years. If this Rider is issued after the
Date of Issue of the Policy, the first rider year will begin on the Policy
anniversary on or next following the Date of Issue of the Rider. The insurance
provided by this Rider will be in force from the Date of Issue of the Rider. The
effective date of the Rider is the Date of Issue.
Not Contestable After Two Years
This Rider will not be contestable after it has been in force during the life of
the Insured for two years from the Date of Issue of the Rider.
Suicide Within Two Years
If the insured dies by suicide while sane or insane within two years from the
Date of Issue of this Rider:
. The Rider will not become paid-up under the Paid-up Benefit provision:
. The Rider will terminate; and
. The Premiums paid for the Rider will be included in the Policy proceeds.
Contract
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule.
Paid-up Benefit
If the Insured dies while premiums are being paid for this Rider, it will become
fully paid-up for the Amount Insured;
<PAGE>
and no further premiums will be due. This benefit will not apply if there is an
Aviation Death.
Extra Amount of Insurance
The Company will provide an extra amount of insurance on an insured Child for 90
days at no extra charge when:
. That Insured Child marries;
. A child is born to that Insured Child;
. A child is legally adopted by that Insured Child.
The extra amount of insurance will be four times the Amount Insured under this
Rider. On receipt of proof that the Insured Child died within 90 days after the
marriage, birth or adoption the Company will pay the extra amount to the estate
of that Insured Child. The extra insurance will expire at the end of 90 days
after the marriage, birth or adoption. In no event will the amount of extra
insurance on an Insured Child be more than four times the Amount Insured if any
90 day periods overlap.
Beneficiary Of This Rider
Unless otherwise provided, the Beneficiary of this Rider: (a) will be the
Insured, if the Insured is living;: and (b) will be the estate of the Insured
Child upon whose death payment is to be made, if the Insured is dead.
Owner Of This Rider
The Owner of this Rider: (a) will be the Owner of the Policy, if the Insured is
living: (b) will be each surviving Insured Child as to the insurance then in
force under the Rider on the life of that Insured Child, if the Insured is dead;
and (c) cannot be changed.
Exchange Option
The Owner may exchange the insurance in force under this Rider on each Insured
Child for a new policy on that Insured Child's Date of Exchange. The Date of
Exchange is the 25th birthday of that Insured Child or, if earlier, the Expiry
Date of this Rider. An Insured Child's Date of Exchange can be advanced to the
date any extra amount of insurance on that Insured Child expires under this
Rider. The new policy will be issued:
. On the life of the Insured Child;
. Without proof of insurability;
<PAGE>
. With a Face Amount not more than 5 times the Amount Insured under this
Rider on the Insured Child;
. In the same underwriting class as this Rider:
. With a current Policy Date and Age of Insured;
. On any plan of single life Variable Life Insurance issued by the company on
the Policy Date of the new policy;
. On a policy form and at rates in use by the Company on the Policy Date of
the new Policy; and
. Subject to any assignments and limitations to which this Rider is subject
and to the exchange cost described below.
The exchange may be made only with the consent of the Company if:
. The amount of insurance to be exchanged is less than the Company's
published minimum limits of issue.
Exchange Cost
The exchange is subject to payment of the first premium for the new policy.
Cash Value
Paid-up insurance on each Insured Child under the Paid-up Benefit provision has
a cash value equal to the net single premium which would be required to provide
the insurance at the age of the insured Child on the date of the valuation. For
31 days after each policy anniversary, the value will not be less than on the
anniversary. The cash value will be paid: (a) to the Insured Child as Owner if
insurance on his or her life is exchanged; or (b) to each surviving Insured
Child as Owner if the Rider is terminated under (c) of the termination
provision.
The cash value of paid-up insurance under this Rider will not increase the cash
value of the Policy to which the Rider is attached. This Rider has no loan
value.
Basis of Values
Minimum Cash Values and Reserves are based on the Commissioners 1980 Standard
Ordinary Mortality Table. Interest is compounded daily at the effective rate of
4% per year.
<PAGE>
Termination
This Rider will terminate upon the earliest of:
(a) Termination or maturity of the Policy other than by death of the insured;
(b} The Expiry Date shown for the Rider in the Policy Schedule; or
(c) Receipt at the Administrative Office of the Company of written election
signed by the Owner of the Rider to terminate the Rider.
Table of Premiums For Children's Insurance
The premium in each month is equal to:
. The amount shown for the Rider in the Policy Schedule divided by 1,000.
TIMES
. $.50.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto H. James Wilson
/s/ /s/
President Secretary
<PAGE>
NEV-79
Rider: Waiver of Monthly Deductions - Disability of Insured
The Company agrees to waive the monthly deductions for the Policy and all Riders
on receipt of proof that total disability of the insured:
. Started while this Rider was in force: and
. Has continued for at least six months.
Definitions
"Total disability" means disability of the Insured:
. Which results from sickness or accidental bodily injury; and
. Which continuously prevents the Insured from working for pay or profit.
During the first 36 months of disability, "working" means engaging in the
occupation which was the regular occupation of the Insured when total disability
started; and thereafter means engaging in any occupation for which the Insured
is or becomes fit by education, training or experience.
Total disability may be the result of a sickness which began or an injury which
occurred either before or after this Rider was Issued.
"Working for pay or profit" includes attending school or college as a full time
student, if that was the main occupation of the Insured when the disability
started.
Total disability will be presumed if, as the result of a sickness or an
accidental bodily injury, the insured has a total loss, which begins while this
Rider is in force of:
. Speech; or sight in both eyes; or hearing in both ears; or
. Use of both hands; or use of both feet; or use of one hand and one foot.
Total disability will be presumed as long as the loss continues, even if the
Insured is working for pay or profit.
<PAGE>
Exclusion
This Rider does not provide benefits for total disability which results from a
sickness or an injury caused by war or an act of war after the Date of Issue of
this Rider.
Increase in Waiver Coverage
Coverage under this Rider can be increased, subject to the underwriting rules of
the Company, when the Face Amount is increased if the Insured is not totally
disabled. Increase is subject to:
. The terms of the Adjustment Section of the Policy;
. The limits of the Company for Waiver of Monthly Deductions benefits; and
. An increase in the premiums for the Rider.
Application to increase the Face Amount will be deemed to be application to
increase coverage under this Rider also, unless otherwise stated.
Monthly Deductions to be Waived
After total disability has continued for at least six months, monthly deductions
will be waived for the period:
. Which starts on the first day of the policy month in which total disability
started; and
. Which ends at the end of the second full policy month after total
disability ends.
No monthly deductions will be waived beyond the policy anniversary or which the
Insured is age 65, unless total disability has been continuous for the full five
year period which ends on that anniversary.
Monthly deductions will not be waived for any period more than one year before
proof of total disability is received by the Company at its Administrative
Office.
The amount of all monthly deductions made after the start of total disability
but before the Company approves a claim for waiver will be added to the cash
value by the Company when a claim is approved.
Proof of Disability
Proof of total disability must be furnished:
<PAGE>
. During the life of the insured; and
. During the period of total disability; and
. Not more than one year after (a) the due date of a premium in default; or
(b) the policy anniversary on which the insured is age 65; or (c) the
surrender or maturity of the Policy.
The Company has the right to require proof that total disability continues to
exist. This right will be exercised at reasonable times; but after total
disability has continued for two years, proof will not be required more often
than once a year.
Failure to furnish proof of total disability within the time required will not
Void or reduce a claim for benefits if it is shown that:
. It was not reasonably possible to furnish proof within that time; and
. Proof was furnished as soon as reasonably possible.
Policy Benefits
The Policy proceeds will be the same while Monthly Deductions are being waived
as they would be if each Monthly Deduction were paid in cash on the first day of
the policy month.
Premiums For This Rider
Premiums for this Rider are charged as part of the monthly deductions. The
factors for calculating the premiums for the Rider are shown in the Table of
Premium Factors for Waiver of Monthly Deductions.
Date of Issue
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule. The
effective date of this Rider is its Date of Issue.
Not Contestable After Two Years
This Rider will not be contestable after it has been in force during the life of
the Insured, and without the occurrence of total disability of the Insured: (a)
with respect to the original coverage under the Rider, for two years from the
Date of Issue of the Rider; and (b) with
<PAGE>
respect to each increase in the coverage under the Rider, for two years from the
Adjustment Date of the Policy for that increase.
Contract
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule.
Termination
This Rider will terminate upon the earliest of:
. Termination of the Policy;
. An increase in the Face Amount of the Policy which does not qualify for
coverage under this Rider;
. Death of the Insured; and
. Receipt of the Company at its Administrative Office of written election
signed by the Owner of the Policy to terminate the Rider.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto H. James Wilson
/s/ /s/
President Secretary
<PAGE>
Policy Number: Specimen
Table of Premium Factors For Waiver of Monthly Deductions - Disability of
Insured Rider
The monthly premium for the Waiver Rider is equal to: the current Cost of
Insurance, expense charges and administrative charges for this Policy and the
Cost of any riders, excluding any Level Term Insurance Rider, times the Factor
from Part A of the Table for the attained age of the insured; plus the amount of
any Level Term Insurance Rider divided by 1000 times the factor from Part B of
the Table for the attained age of the Insured. This premium is part of the
Policy's Monthly Deduction.
Part A
--------------------------------------------------
Age Factor Age Factor Age Factor
--------------------------------------------------
0 .0086 22 .0119 44 .0319
1 .0086 23 .0123 45 .0344
2 .0086 24 .0128 46 .0372
3 .0086 25 .0133 47 .0407
4 .0086 26 .0136 48 .0449
5 .0086 27 .0141 49 .0503
6 .0086 28 .0145 50 .0571
7 .0086 29 .0150 51 .0657
8 .0086 30 .0155 52 .0765
9 .0086 31 .0160 53 .0899
10 .0086 32 .0166 54 .1065
11 .0086 33 .0172 55 .1266
12 .0086 34 .0178 56 .1522
13 .0086 35 .0186 57 .1742
14 .0086 36 .0195 58 .1987
15 .0086 37 .0205 59 .2259
16 .0088 38 .0216 60 .1273
17 .0090 39 .0229 61 .1026
18 .0096 40 .0244 62 .0760
19 .0102 41 .0259 63 .0472
20 .0108 42 .0277 64 .0177
21 .0114 43 .0297
H. James Wilson
/s/
Secretary
Part B
Age Factor Age Factor Age Factor
0 .01 22 .01 44 .02
1 .01 23 .01 45 .03
<PAGE>
2 .01 24 .01 46 .03
3 .01 25 .01 47 .04
4 .01 26 .01 48 .04
5 .01 27 .01 49 .05
6 .01 28 .01 50 .06
7 .01 29 .01 51 .08
8 .01 30 .01 52 .09
9 .01 31 .01 53 .12
10 .01 32 .01 54 .15
11 .01 33 .01 55 .18
12 .01 34 .01 56 .23
13 .01 35 .01 57 .27
14 .01 36 .01 58 .33
15 .01 37 .01 59 .39
16 .01 38 .01 60 .23
17 .01 39 .01 61 .23
18 .01 40 .02 62 .23
19 .01 41 .02 63 .16
20 .01 42 .02 64 .06
21 .01 43 .02
H. James Wilson
/s/
Secretary
<PAGE>
NEV-84
Rider: Change to a New Insured
The Company agrees that after the first policy year the Policy to which this
Rider is attached can be changed to a new policy on the life of a new insured.
Conditions
The change can be made only:
. Upon application signed by the Owner of this Policy and by the new insured;
. Subject to proof that the new insured is insurable;
. If the age of the new insured on the Policy Date of the new policy is at
least 1 and the age of the new insured on the Date of Issue of the new
policy is less than 70;
. If the Owner of this Policy has an insurable interest in the life of the
new insured; and
. If the Insured under this Policy is living on the Date of Issue of the new
policy.
Riders can be attached to the new policy only with the consent of the Company.
This Policy will terminate at the end of the day prior to the Date of Issue of
the new policy. The new policy will take effect on its Date of Issue.
The New Policy
The new policy will be issued:
. On the same plan of Variable Life insurance as this Policy;
. With a Policy Date, a Face Amount and a Death Benefit Option the same as
this Policy;
. With a Cash Value on its Date of Issue which is equal to the Cash Value of
this Policy on the date it terminates;
. Subject to any assignments and Policy Loans on this Policy; and
<PAGE>
. Subject to any change cost.
The Date of Issue of the new policy will be the first day of the policy month
which starts on or next follows:
. The approval by the Company of the application for the change; and
. Payment to the Company of any change cost.
Change Cost and Change Credit
There will be a change cost if there is an increase in the Net Cash Value as a
result of the change.
There will be a change credit payable to you if there is a decrease in the Net
Cash Value as a result of the change.
A detailed statement of the methods of computing the change cost and change
credit have been filed, where required, with the Insurance Department of the
state in which the Policy is delivered.
Contract
This Rider is made a part of the Policy to which it is attached if the Rider is
listed in the Policy Schedule. This Rider has no cash value.
Termination
This Rider will terminate upon the earliest of: (a) lapse, termination or
maturity of the Policy; (b) change of the Policy to a new policy under the
provisions of the Rider; and (c) change of ownership of the Policy.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto H. James Wilson
/s/ /s/
President Secretary
<PAGE>
NEV-371-94
Endorsement
As of the Date of Issue of this Policy, the following provision is added to the
Policy.
Exchange of Policy for Term Insurance
You can exchange for a policy which provides fixed benefit term insurance the
initial Face Amount of this Policy and any increase in Face Amount of this
Policy:
. If the Policy is not lapsed;
. If the Policy is in force under a Corporate Plan of Deferred Compensation;
. If the purchase of insurance under the Plan was not at the option of the
Insured; and
. If the exchange is made within three years of the Policy Date of the
Policy.
The new policy: will be issued by New England Mutual Life Insurance Company;
will have the same Insured as this Policy; will have a Face Amount equal to the
amount of coverage being exchanged; and will be on a plan agreed to by New
England Mutual Life Insurance Company. For the exchange of the initial Face
Amount of this Policy, the new policy will have the same Age and Policy Date as
this Policy. For the exchange of an increase in Face Amount of this Policy, the
new policy will have: the same age of Insured as the increase; and a Policy Date
equal to the Adjustment Date of the increase.
This Policy will terminate after an exchange. The exchange will be subject to:
application to exchange the Policy; and proof that the Insured is then
insurable. An exchange credit will be paid to you; the credit will be quoted by
the Company on request.
A detailed statement of the method of computing the exchange credit has been
filed, where required, with the Insurance Department of the state in which the
Policy is delivered.
If you surrender this Policy for its Net Cash Value at a time when this Exchange
of Policy for Term Insurance would have been available, the Company will
automatically pay an amount equal to the exchange credit in lieu of the Net Cash
<PAGE>
Value if the Company determines that the exchange credit would be greater.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto H. James Wilson
/s/ /s/
President Secretary
<PAGE>
Explanation of Change Cost or Credit
NEV-84
Exercise of the Change to a New Insured Rider will be subject to an adjustment
to reflect the difference in net cash value caused by a change in the surrender
charge between the old and the new insureds.
The policyholder will be charged (or credited, if negative) the net cash value
after the change minus the net cash value before the change. If the adjustment
results in a charge to the policyholder, such charge must be paid by the
policyholder before the effective date of the change. If the adjustment results
in a credit to the policyholder, New England Variable Life Insurance Company
(`NEVLICO') will pay the policyholder in cash.
<PAGE>
Explanation of Exchange Credit
NEV-371-94
Exercise of the Exchange of Policy to Term Insurance provision will be subject
to an adjustment to reflect the difference in the premiums and dividends under
the new policy and the cash value, monthly deductions and gross premium expense
charges under the amount of coverage being exchanged.
The policyholder will be paid an exchange credit that equals the sum of: the
cash value, monthly deductions and gross premium expense charges under the
amount of coverage being exchanged: less the gross premiums less the dividends
on the new policy (both accumulated with interest). Thus, it is the
policyholder, rather than New England Variable Life Insurance Company
(`NEVLICO'), that assumes the investment risk.
Once the exchange takes place, there will be an appropriate transfer of funds
between NEVLICO and New England Mutual Life Insurance Company (`TNE') to reflect
the assumption of the risk by TNE. At the same time, NEVLICO will transfer
assets from the Separate Account to the General Account in an amount equal to
the policy cash value held in the Separate Account.
<PAGE>
NEL-435-98
- --------------------------------------------------------------------------------
Endorsement Endorsement Date: Date of Issue
As of the Endorsement Date, the following is added to the Policy.
Extended Maturity
The Company agrees to defer the Maturity Date of the Policy to which this
Endorsement is attached to the date death proceeds become payable, if that date
occurs after the Maturity Date shown in Section 1.
Death Benefit
At age 100 the Company will compare the Net Premiums Paid to the Age 100 Amount.
If the Net Premiums Paid is greater than or equal to the Age 100 Amount, the
Death Benefit after the original Maturity Date will equal the greater of: the
Face Amount of the Policy; and the Cash Value on the date death proceeds become
payable. If the Net Premiums Paid is less than the Age 100 Amount, the Death
Benefit after the original Maturity Date will equal the Cash Value on the date
death proceeds become payable.
In this Policy, "Net Premiums Paid" means the total of the premiums paid in each
policy year accumulated at 4% from the first day of the policy year (except
premiums paid within 20 days prior to a policy anniversary which are treated as
if paid in the next policy year) less every partial surrender accumulated at 4%
from the date of surrender. In this Policy, the "Age 100 Amount" is equal to the
last value shown in the Table in Section 5 projected to age 100 assuming the
Guaranteed Death Benefit Premium is paid on the first day of each policy year
and is accumulated at 4%.
Cash Value
The Cash Value of the Policy after the original Maturity Date will be calculated
as described in the Cash Value of the Policy Section, except that the Cost of
Insurance portion of the Monthly Deductions will be equal to zero.
Riders
All riders attached to the Policy, which are in effect on the original Maturity
Date, will terminate on that Date.
Surrender of the Policy
You can surrender the Policy for its Net Cash Value at any time.
NEL-435-98
<PAGE>
Exhibit 1.A.5(b)
NEL-435-98
Premiums
Premiums and unscheduled payments cannot be made after the original Maturity
Date, unless the Company sends you a premium notice as provided for in the Grace
Period provision.
New England Life Insurance Company
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
<PAGE>
- --------------------------------------------------------------------------------
RIDER: ACCELERATION OF BENEFITS
RECEIPT OF ACCELERATED BENEFITS MAY BE TAXABLE. THEREFORE, PRIOR TO EXERCISING
THE OPTION, YOU SHOULD CONSULT A PERSONAL TAX ADVISOR TO DETERMINE ANY TAX
CONSEQUENCES.
THE COMPANY agrees to pay an accelerated benefit to the Owner of the Policy if
the Insured is terminally ill. This agreement is subject to the following
provisions.
ELIGIBLE PROCEEDS
Eligible Proceeds equal: the amount of insurance provided under the basic
Policy; minus any Policy Loan and accrued loan interest; plus the amount of
benefit provided by any rider the Company consents to exchange for an
accelerated benefit. Eligible Proceeds will be calculated as of the date your
request for accelerated benefits is received by the Company at its Home Office.
When all of the Eligible Proceeds are exchanged: any rider covering the
Insured's children will become fully paid-up with no further premiums due; and
the Policy and its other riders will terminate.
The Company will not allow the exchange of more than $250,000 of Eligible
Proceeds on the life of any insured for accelerated benefits.
BENEFIT BASE
The accelerated benefit will be calculated using the Policy's Benefit Base. The
Company will compute the Benefit Base by discounting the Eligible Proceeds being
exchanged, using its then current assumptions. The Company's assumptions may
change from time to time. Also, the computation of the amount of Benefit Base
will reflect:
. The life expectancy of the Insured;
. The Net Cash Value on the date used to calculate the Eligible
Proceeds;
. The Death Benefit on the date used to calculate the Eligible Proceeds;
. Expected future mortality and expense charges;
. Interest at a rate set by the Company; and
. A processing charge of not more than 3% of the Benefit Base before the
charge.
NEL-1581-1 (continued)
<PAGE>
You may choose to have the benefits paid to you: in one sum; or in monthly
payments, if each payment is at least $20. The amount of monthly payments
available will be quoted upon request.
If the Insured dies before all monthly payments are made, the present value of
any payments not yet made will be paid to the Beneficiary.
Once an Option is chosen and benefits are being paid: the amount exchanged
cannot be reduced; the number of payments cannot be changed; and the form of
payment cannot be changed.
The obligations of the Company are subject to all payments made and actions
taken by the Company under the Policy before it receives at its Home Office
proof of the Insured's death.
TERMINAL ILLNESS OPTION
You can exercise this Option if the Insured has a medical condition that is
expected to result in death within six months.
To exercise this Option, you must
request acceleration in written form satisfactory to the Company. Also, you must
provide the Company with:
. Certification signed by a licensed medical doctor that the Insured has
a medical condition that is expected to result in death within six
months; and
. Any other information needed by the Company to process your request.
The certification must be supported by evidence satisfactory to the Company.
The Company may require a second opinion by a licensed medical doctor chosen by
the Company, at the Company's expense. This right will be exercised at places
convenient to the Insured.
PARTIAL ACCELERATION OF BENEFITS
If the Company consents, you may exchange less than the full amount of Eligible
Proceeds for an accelerated benefit.
NEL-1581-1 (continued)
<PAGE>
CONDITIONS
The Company will accelerate benefits subject to the following conditions:
. The Policy must be in force.
. Every assignee must give written consent to the acceleration in a
form satisfactory to the Company.
. Every irrevocable beneficiary must give written consent to the
acceleration in a form satisfactory to the Company.
. Company consent must be given if there are less than 5 years
remaining until the Policy will contractually expire or mature.
. You are not being required by law to use the accelerated benefits
to meet the claims of any creditors, whether in bankruptcy or
not.
. You are not being required by a government agency to accelerate
benefits in order to apply for, obtain or keep a government
benefit or entitlement.
. Insurance subject to contestable and suicide provisions will not
be included in the Eligible Proceeds.
CONTRACT
This Rider is made a part of the Policy to which it is attached if the Rider is
listed in the Policy Schedule. This Rider has no cash value.
DATE OF ISSUE
The Date of Issue of the Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule. The
effective date of the Rider is its Date of Issue.
TERMINATION
This Rider will terminate upon the earliest of: (a) termination or maturity of
the Policy; (b) exercise of this Rider; (c) the date on which this Policy would
be disqualified as life insurance under the Internal Revenue Code as interpreted
by the Internal Revenue Service or a court of competent jurisdiction because
this Rider is attached; (d) receipt by the Company at its Home Office of written
election signed by the Owner of the Policy to terminate the Rider; and (e) the
death of the Insured.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
/s/ Robert A. Shafto /s/ David D. Jordan
President Secretary
NEL-1581-1
<PAGE>
NEV-95-1
Rider: Aviation Limitation
The Policy to which this Rider is attached is issued by the Company subject to
the provisions of this Rider.
Aviation Limitation. If the death of the Insured is an Aviation Death, as
defined below, the Death Benefit of the Policy will not be paid; and the amount
of any insurance benefit provided by other Riders upon the death of the Insured
will not be paid. The policy proceeds will be limited to the Aviation Death
Benefit.
Any Spouse Insurance Rider and Children's Insurance Rider attached to the Policy
will terminate and no Paid-Up Benefit will be provided if the Insured under the
Policy dies in an Aviation Death.
Aviation Death. The death of the Insured will be an "Aviation Death" if death
results from, or is contributed to by, flight in or descent from or with any
kind of aircraft or spacecraft. However, it will not be an "Aviation Death" if
the Insured was only a passenger, with no duties in connection with the flight
or descent, and the flight or descent was not for a training or experimental
purpose.
Aviation Death Benefit. If the death of the Insured is an Aviation Death, the
policy proceeds payable at the death of the Insured will be limited to the
following amounts as of the date of death:
. The reserve for the Policy; plus
. The reserve for any other Riders which provide an insurance benefit upon
the death of the Insured; less
. Any Policy Loan Balance.
If the death of the Insured is within five years after the Date of Issue of the
Policy, the Aviation Death Benefit will be not less than the following amounts
as of the date of death:
. The total premiums paid for the Policy; plus
. The total premiums paid for any Riders which provide an insurance benefit
upon the death of the Insured; plus
<PAGE>
. The total of any Unscheduled Payments made for the Policy; and less
. The total amount of partial surrenders and partial withdrawals; and less
. Any Policy Loan Balance.
In no event will the Aviation Death Benefit be greater than the policy proceeds
which would be payable in the absence of this Aviation Limitation Rider.
Contract. This Rider is made part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. (See Section 1 of the Policy.) This
Rider will not lapse if the Policy lapses, but will continue to apply to any
insurance continuing after lapse of the Policy. This Rider has no cash value.
New England Variable Life Insurance Company
501 Boylston Street, Boston, Massachusetts
John A. Fibiger Kernan F. King
/s/ /s/
President Secretary
<PAGE>
NEV-96-1
Rider: Military and Naval Aviation Limitation
The Policy to which this Rider is attached is issued by the Company subject to
the provisions of this Rider.
Aviation Limitation. If the death of the Insured is an Aviation Death, as
defined below, the Death Benefit of the Policy will not be paid; and the amount
of any insurance benefit provided by other Riders upon the death of the Insured
will not be paid. The policy proceeds will be limited to the Aviation Death
Benefit.
Any Spouse Insurance Rider and Children's Insurance Rider attached to the Policy
will terminate and no Paid-Up Benefit will be provided if the Insured under the
Policy dies in an Aviation Death.
Aviation Death. The death of the Insured will be an "Aviation Death" if death
results from, or is contributed to by, flight in or descent from or with any
kind of military or naval aircraft or spacecraft. However, it will not be an
"Aviation Death" if the Insured was only a passenger, with no duties in
connection with the flight or descent, and the flight or descent was not for a
training or experimental purpose.
Aviation Death Benefit. If the death of the Insured is an Aviation Death, the
policy proceeds payable at the death of the Insured will be limited to the
following amounts as of the date of death:
. The reserve for the Policy; plus
. The reserve for any other Riders which provide an insurance benefit upon
the death of the Insured; less
. Any Policy Loan Balance.
If the death of the Insured is within five years after the Date of Issue of the
Policy, the Aviation Death Benefit will be not less than the following amounts
as of the date of death:
. The total premiums paid for the Policy; plus
. The total premiums paid for any Riders which provide an insurance benefit
upon the death of the Insured; plus
<PAGE>
. The total of any Unscheduled Payments made for the Policy; and less
. The total amount of partial surrenders and partial withdrawals; and less
. Any Policy Loan Balance.
In no event will the Aviation Death Benefit be greater than the policy proceeds
which would be payable in the absence of this Aviation Limitation Rider.
Contract. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. (See Section 1 of the Policy.) This
Rider will not lapse if the Policy lapses, but will continue to apply to any
insurance continuing after lapse of the Policy. This Rider has no cash value.
New England Variable Life Insurance Company
501 Boylston Street, Boston Massachusetts
John A. Fibiger Kernan F. King
/s/ /s/
President Secretary
<PAGE>
Exhibit 1.A.(3)(c)
Commission Schedule
For Policies issued on or after May 1, 1998, the following maximum
percentages of 110% of the Target Premium (plus any additional portion of a
premium which NELICO attributes to certain riders for commission paying
purposes) paid for each policy year will be paid to the NELICO agent involved in
the sale of a Policy:
<TABLE>
<CAPTION>
Policy Year Maximum Percentage
----------- ------------------
<S> <C>
1 50%
2-10 5%
11 and later 3%
</TABLE>
(For Policies issued prior to May 1, 1998, lower commission amounts are
payable in some or all renewal years.)
Agents will also receive a commission of 3% of each payment in excess
of 110% of the Target Premium (plus any additional portion of a premium which
NELICO attributes to certain riders for commission paying purposes) in any year.
For Policies sold in connection with certain executive benefit plans the maximum
commissions are: 20% of 110% of the Target Premium (plus any additional portion
of a premium which NELICO attributes to certain riders for commission paying
purposes) in the first Policy year, 10% in Policy years two through ten, and 2%
thereafter. For these Policies NELICO will pay a maximum commission of 3.5% of
each payment in excess of 110% of the Target Premium (plus any additional
portion of a premium attributable to riders for commission purposes) in Policy
years one through ten, and 2% of such excess premiums thereafter. For Policies
sold to certain group or sponsored arrangements the maximum 50% first year
commission may be paid in level installments over a period of years rather than
all in the first policy year.
Agents who meet certain productivity and persistency standards in
selling policies issued by NELICO may be eligible for additional compensation.
New England Securities may enter into selling agreements with other
broker-dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life insurance
policies. Under the agreements with those broker-dealers, the commission paid to
the broker-dealer will be based on the schedules described above. NELICO may pay
certain broker-dealers an additional bonus after the first Policy year on behalf
of certain registered representatives, the maximum amount of which may equal up
to the amount of the basic commission for the particular Policy year.
Commissions will be paid through the registered broker-dealer, which may also be
reimbursed for portions of expenses incurred in connection with the sale of the
Policies.
<PAGE>
APP-557-91
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------------------
Application To Policy Number
-----------------------------------
NEW ENGLAND LIFE INSURANCE COMPANY
Questions below pertain to the Proposed Insured unless otherwise indicated.
Part I
- ----------------------------------------------------------------------------------------------
Personal 1. Print Name as it is to appear on the 2. Social Security Number
policy.
------------------------------------- --------------------------------
Data
--------------------------------
-------------------------------------
First MI Last
-------------------
3. Birthplace 4. Marital [_] Single [_] Married
------------------- Status [_] Widowed [_] Divorced
(state/county) [_] Separated
------------------- -----
5. Birth Date 6. Age Nearest 7. Sex [_] Female
------------------- Birthday ----- [_] Male
month day year
- ----------------------------------------------------------------------------------------------
------------------------------------------------------------------
Address 8.a. Residence
------------------------------------------------------------------
Street City State Zip
------------------------------------------------------------------
b. Business
------------------------------------------------------------------
Company/Street City State Zip
c. Premium [_] Proposed Insured [_] Other (Give name and address.)
--------------------------------------------
Notice [_] a. Residence
Address [_] b. Business
Street
City/State/Zip
--------------------------------------------
- ----------------------------------------------------------------------------------------------
Beneficiary 9. Beneficiary 10. Owner [_] Proposed [_] Other
and Owner Primary Insured
----------------------------
If other, specify below. (Use a numbered
sequence to designate successive owners.)
----------------------------
Names and Relation to Proposed ------------------------------------------
Insured
Secondary
---------------------------- ------------------------------------------
Names and Relation to Proposed Insured
First Owner's Social Security
---------------------------- or Taxpayer ID Number
Names and Relation to Proposed -------------------------------------------
Insured
------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Part I
Application
Continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
------------------------ ------------------------
Plan/Amount 11. Plan 12. Face Amount $
------------------------ ------------------------
-------------------------------------------------------------------------------
13. [_] Universal Life Product*
a. Planned Annual Premium c. Death Benefit Option
--------------------- [_] Option 1 (Face Amount)
Year 1 $
--------------------- [_] Option 2 (Face Amount plus
Cash Value)
---------------------
Renewal $
---------------------
b. [_] Waiver of Monthly Deductions
- --------------------------------------------------------------------------------------------
14. [_] Variable Life Product*
(Complete Variable Life Section (questions 35 through 39)
for scheduled premium, allocations, etc.)
-------------------------------------------------------------------------------
* COST OF INSURANCE RATES MAY CHANGE. The cost of insurance rates for the
policy may change. The rates currently being charged are not guaranteed;
and the Company may charge the full maximum guaranteed rates.
- --------------------------------------------------------------------------------------------
Benefits/ 15. Waiver of Premiums Benefits
Riders a. [_] Waiver of Premium - c. [_] Applicant's Waiver** -
(**Complete Proposed Insured Juvenile Insured
additional [_] Death or Disability
form.) b. [_] Applicant's Waiver** - [_] Death Only
Adult Insured
-------------------------------------------------------------------------------
---------------
16. a. [_] Acc. $ f. [_] Paid-Up Additions
Death ---------------
-------------
[_] Lump Sum $
At Issue -------------
---------------
b. [_] Level $
Term ---------------
[_] Annual
---------------
c. [_] Purchase $
Option ---------------
-------------
At Issue $
-------------
-------------
d. [_] Children's Insurance Rider** Thereafter $
-------------
---------------
$
---------------
g. [_] 1 Year Term (dividends)
e. [_] Additional Protection (FTR)
First Year Total Coverage -------------
(FTR Amount plus h. [_] Spouse $
Amount shown in 12.) Rider** -------------
--------------- -------------------
$ i. [_] Other
--------------- -------------------
[_] Level
[_] Increasing
Increase
-------
Percentage %
-------
-------
Number of Years
-------
[_] Offset Amount (for list
billed policies only)
---------------
$
---------------
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Part I
Application
Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Health 17. Any treatment for or consultation with a physician [_] YES [_] NO
concerning a heart attack, a stroke or cancer (other than
skin cancer) within past 2 years? (If YES, explain in REMARKS.)
18. Any change in health or any treatment by or [_] YES [_] NO
consultation with a physician since the date of Part II of
this Application? (If YES, explain in REMARKS.)
- -------------------------------------------------------------------------------------------------------------------------------
Premium 19. [_] Annual [_] Semi Annual [_] Quarterly
Payment
(*Complete ----------------- ----------------
additional [_] MSA No. [_] List Bill No.
form.) ----------------- ----------------
[_] New Account* [_] Level Billing Option* (For graded
premium life plans only.)
[_] Add to Existing Account
----------------
Amount $
----------------
-------------------
20. Prepayment* $ [_] None
-------------------
(If question 17. or 18. is answered YES, no prepayment is permitted.)
21. [_] Automatic Payment of Premium in Default (if available)
From Dividend Accumulations [_] YES [_] NO
By Policy Loan [_] YES [_] NO
- -------------------------------------------------------------------------------------------------------------------------------
Dividend 22. a. [_] Cash b. [_] Premium Reduction c. [_] Paid-Up Additions
Option d. [_] Accumulations e. [_] Add to Cash Value (Universal Life Only)
23. If available under policy applied for, state year in which: dividend option is
to be changed to Premium Reduction; and any remainder of the premium
is to be paid with surrendered Paid-Up Additions or Accumulations. ----------------
----------------
- -------------------------------------------------------------------------------------------------------------------------------
Policy 24. If available, special Policy Date requested is:
Date -----------------
[_] a. or [_] b. latest date that retains Proposed
----------------- Insured's age last birthday.
mo day yr
Note: Date more than 30 days prior to date of application not allowed if Paid-Up Additions Riders,
Variable Life or Universal Life applied for.
- -------------------------------------------------------------------------------------------------------------------------------
Existing 25. Life Insurance In Force (If none, so state. Type - P = Personal, B = Business, G = Group)
Insurance
Yr of
Company Type Issue Life Amount ADB Amount
------------------------------------------------------------------------------------------------------------
$ $
------------------------------------------------------------------------------------------------------------
$ $
------------------------------------------------------------------------------------------------------------
$ $
------------------------------------------------------------------------------------------------------------
$ $
------------------------------------------------------------------------------------------------------------
26. If Juvenile Insured, state relation to and amount of life insurance in force or applied for on person
responsible for support of Proposed Insured.
Relation to Proposed Insured Amount of Insurance
---------------------------- -------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Part I
Application
Continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C>
Existing 27. Any life Insurance or annuity in this or any other [_] YES [_] NO
Insurance company which has been or will be replaced as a
(Cont'd) result of this Application for insurance? (If YES,
complete the following and submit replacement forms
if required.)
1035
Company Exch. Policy Date Policy Number Amount
-------------------------------------------------------------------------
$
-------------------------------------------------------------------------
$
-------------------------------------------------------------------------
$
-------------------------------------------------------------------------
28. Has life or disability insurance on your life ever [_] YES [_] NO
been declined, postponed or modified as to plan, amount or
rate?
(If YES, give details in REMARKS.)
- --------------------------------------------------------------------------------------------
Smoking/ 29. Has Proposed Insured:
Driving
a. Used any tobacco in the past year? [_] YES [_] NO
If YES, complete the following:
---------------------
How many cigarettes per day?
---------------------
If other than cigarettes, please explain.
---------------------------------------------------------------
---------------------------------------------------------------
b. Been convicted in the past 2 years of: driving [_] YES [_] NO
under the influence of alcohol or drugs; or 2 or more
moving violations?
(If YES, complete supplemental form.)
------------------------ ---------------
30. a. Drivers License No. b. State
------------------------ ---------------
- --------------------------------------------------------------------------------------------
Avocation/ 31. Have you in the past 2 years participated in, or do
Aviation/ you intend to participate in: any flights as a trainee,
Foreign pilot or crew member; underwater sports (SCUBA diving,
Travel skin diving, snorkeling, hardhat); sky sports (sky diving,
hang gliding, parachuting, ballooning); or motor racing
(auto, motorcycle, motorboat)? [_] YES [_] NO
(If YES, complete supplemental form.)
32. Do you intend to travel or reside outside of the [_] YES [_] NO
United States?
(If YES, give details in REMARKS.)
- --------------------------------------------------------------------------------------------
Occupation (If Juvenile Insured, complete with Payor data.)
And ----------------------------------------------------------
Financial 33. a. Occupation
----------------------------------------------------------
(Give Job Title and Duties)
----------------------------------------------------------
b. Employed by
----------------------------------------------------------
-------------------- -------------------------
34. a. Annual b. Net
Income Worth
-------------------- -------------------------
- --------------------------------------------------------------------------------------------
Remarks/ (Attach additional sheet, if necessary.)
Special
Requests for
additional
coverage
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Part I
Application
Continued
- --------------------------------------------------------------------------------
Variable 35. If available under policy applied for, state Planned Annual
Life Unscheduled Payment.
Section ---------------------
$
---------------------
36. Death Benefit Option (if available under policy applied for):
(See Prospectus for further explanation.)
[_] Option 1 (Face Amount)
[_] Option 2 (Face Amount plus any Excess Cash Value)
37. If available under policy applied for, is the
Special Premium Option elected for premiums in default?
[_] YES [_] NO
38. Account allocations (Whole %) (Minimum 10% in each selected
account)*
-----------------------
% Capital Growth
-----------------------
-----------------------
% Money Market
-----------------------
-----------------------
% Bond Income
-----------------------
-----------------------
% Stock Index
-----------------------
-----------------------
% Managed
-----------------------
-----------------------
% Fixed Account
-----------------------
-----------------------
%
-----------------------
-----------------------
100% Total
-----------------------
39. Suitability Statement by Applicant
a. Did you receive the prospectus? [_] YES [_] NO
(If YES, give date of prospectus.)
--------------------
--------------------
b. Do you understand that:
- the Option 2 death benefit may increase or [_] YES [_] NO
decrease depending on the policy's investment
return, but will never be less than the
guaranteed minimum?
- the cash value may increase or decrease [_] YES [_] NO
depending on the policy's investment return?
c. Do you believe that this policy will meet your [_] YES [_] NO
insurance needs and financial objectives?
* The Cash Value will be allocated to the Money Market account,
for an initial period described on page 1 of the prospectus.
THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS.
THE CASH VALUE MAY INCREASE OR DECREASE IN ACCORDANCE WITH SEPARATE
INVESTMENT ACCOUNT EXPERIENCE
- --------------------------------------------------------------------------------
<PAGE>
Part II
Application
(Complete only if medical or paramedical exam is not required.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Family 40. a. Age b. Mother Age
Father
-------------------------- -------------------------
if living at death if living at death
-------------------------- -------------------------
-------------------------- -------------------------
- -------------------------------------------------------------------------------------------------
--------------------------
Medical 41. a. Height ft. in. c. Any weight change
-------------------------- in the past year? [_] YES [_] NO
Data ------------- ----------
b. Weight lbs. If YES: lbs. [_] Gain [_] Loss
------------- ----------
- -------------------------------------------------------------------------------------------------
Give details for each YES answer to questions 42 through YES NO
46 in question 47.
42. Have you ever been treated for or had any known indication
of: frequent fatigue; frequent loss of appetite; frequent
night sweats; chronic diarrhea; enlarged lymph nodes;
unexplained infections; or unusual skin lesions?
[_] [_]
43. Have you ever:
a. Received treatment, advice or counseling from a physician,
other practitioner or an organization for an alcohol
problem? [_] [_]
b. Used cocaine or other drugs except as prescribed by a
physician or licensed practitioner? [_] [_]
44. Have you ever been treated for, or been diagnosed by a member
of the medical profession as having Acquired Immune
Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)? [_] [_]
45. Have you ever been treated for or diagnosed as having:
a. Cancer; tumor; or diabetes? [_] [_]
b. High blood pressure; stroke; or disease of
heart, blood or circulatory system? [_] [_]
c. Any mental or nervous disorder; epilepsy; any
muscular or skeletal disorder; or any paralysis or
deformity? [_] [_]
d. Disease or disorder of: kidneys; lungs;
stomach; liver; digestive system; or urinary
system? [_] [_]
46. Other than above, have you within the past 5 years: had a [_] [_]
check up or consultation; been a patient in a medical
facility; or been advised to have any diagnostic test,
hospitalization or surgery?
- --------------------------------------------------------------------------------------------
47. Give details to each YES answer to questions 42 through 46.
(Attach additional sheet, if necessary.)
------------------------------------------------------------------------------
Detail and severity of condition.
Ques. # Onset Recov Number of attacks. Specific Physician/Health
Letter Mo/Yr Mo/Yr. diagnosis, medication/treatment. Facility address
------------------------------------------------------------------------------
Illness
-----------------------------------
Treatment
------------------------------------------------------------------------------
Illness
-----------------------------------
Treatment
------------------------------------------------------------------------------
Illness
-----------------------------------
Treatment
------------------------------------------------------------------------------
Illness
-----------------------------------
Treatment
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Application
Continued
- --------------------------------------------------------------------------------
Company Use
(Additions and
Amendments)
- --------------------------------------------------------------------------------
Declarations 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 the "Company Use" section as
to: (a) age; or (b) plan of insurance; or (c) riders; or (d)
amounts; or (e) rate class.
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 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 501 Boylston Street, Boston, MA; 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;
(b) to change any terms of this Application; or (c) to make a
contract for the Company.
- --------------------------------------------------------------------------------
Authorization In order that insurance can be issued, I authorize each of the
following having records or knowledge of me or my health to give
this information to the Company: a medical practitioner; a
medical facility; an insurance company; the Medical Information
Bureau; a consumer reporting bureau; and any other company,
concern or person. If insurance on any minor child is applied
for this authorization extends to records and knowledge of that
child and the child's health. Information received by the
Company may be disclosed to third parties in the conduct of the
Company's business.
I understand that: I have a right of access to and correction of
all information obtained by the Company; I can ask to be
interviewed with respect to any investigative consumer report;
and I can ask for a copy of any such report. A photocopy of this
authorization is as valid as the original. This authorization is
valid for 30 months from the date it is signed. I have received
a Notice of Information Practices; this Notice gives a more
detailed description of the information practices of the
Company.
- --------------------------------------------------------------------------------
------------------------- ------------------------
Signatures Signed at Date
------------------------- ------------------------
city state month day year
--------------------------------------------------------
Proposed
Insured
--------------------------------------------------------
-----------------------------------------------
Applicant if Other
than Proposed
Insured
-----------------------------------------------
-----------------------------------------------
Agent
-----------------------------------------------
- --------------------------------------------------------------------------------
-----------------------------
Owner's Owner's Social Security or Taxpayer
Identification Number:
-----------------------------
Certification
(in lieu [_] I am [_] I am not subject to backup withholding under
of W9) Section 3406(a)(l)(c) of the Internal Revenue Code. Under
penalties of perjury, I certify that the information in this
section is true, correct and complete.
-------------------------- -----------------------
Signature Date
of Owner
-------------------------- -----------------------
month day year
- --------------------------------------------------------------------------------
<PAGE>
Agent
Certificate
(Completion required in every case.)
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Questions 1. Did you see the Proposed Insured on the date the [_] YES [_] NO
application was signed? If NO, explain in REMARKS.
2. Is the Proposed Insured a citizen of the USA?
---------------- -----------------------------
If NO, specify: Date of entry Type of visa
---------------- -----------------------------
mo day yr
3. If Proposed Insured's name has been changed in the past 10 years, give former name(s).
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
4. Provide phone number where Proposed Insured can be contacted.
--------------
Preferred calling time AM PM
------ ------
5. If Proposed Insured is a juvenile (ages 0 through 14);
a. Give name and relation of person responsible for support.
----------------------------------------------------------------------
----------------------------------------------------------------------------------------
b. Give Life Insurance in force on above person's life.
---------------------------
c. Are there any other children insured for less than this child? [_] YES [_] NO
If YES, provide details in REMARKS.
6. Has a nonmedical been submitted based on expanded nonmedical limit? [_] YES [_] NO
If YES:
------------- ----------------------------------------
Date of Physician's Who completed
Exam detailed in APS the exam?
------------- ---------------------------------------
mo day year Physician's name and address
7. Do you have knowledge or reason to believe that any insurance
or annuity in this or any other company has been or will be
replaced as a result of this Application for
insurance? [_] YES [_] NO
8. Is this Business Insurance? [_] YES [_] NO
If YES, complete the following:
a. Describe purpose of insurance.
[_] Key Employee [_] Buy-Sell [_] Deferred Compensation
[_] Salary Continuation [_] Split Dollar [_] Section 162 Bonus
[_] Other (Describe in REMARKS.)
b. Are other key individuals insured or being
insured for similar amounts? [_] YES [_] NO
If NO, state why not.
------------------
c. What percentage of business does the applicant own or control? %
------------------
Give names and amount of business coverage in force and/or applied for for all key
associates, plus the percentage of ownership in each:
Name Amount % Name Amount %
----------------------------------------------------------------------------------------
$ $
----------------------------------------------------------------------------------------
$ $
----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Agent
Certificate
Continued
(Completion required in every case.)
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------
----------
d. Year Business was established.
----------
e. For the Business, provide approximate amount of:
Assets Liabilities Net Worth Net Income
-------------------------------------------------------------------------
$ $ $ $
-------------------------------------------------------------------------
9. If Paid Up Additions Rider or FTR was requested, submit copy
of Illustration to the home office with Application.
10. State Source of Funds if $10,000 or greater.
- --------------------------------------------------------------------------------------------
Complete questions 11 and 12 for Variable Life Only:
11. Is policyowner associated with a member firm of the NASD? (If
YES, give name and address of firm.)
-----------
12. Tax Bracket (%)
-----------
- --------------------------------------------------------------------------------------------
Remarks
- --------------------------------------------------------------------------------------------
Signature To the best of my knowledge, I have presented the Company all pertinent facts
regarding the Proposed Insured and regarding this Application.
------------------------------ --------------------
Signature Date
of Agent --------------------
------------------------------ month day year
- --------------------------------------------------------------------------------------------
--------------------------
General If agent of another company, give name of company.
Agent --------------------------
Certificate Is agent licensed where Application is written? [_] YES [_] NO
--------------------------------------- ---------------------
Signature Date
of General ---------------------
Agent month day year
---------------------------------------
- --------------------------------------------------------------------------------------------
------------------------------------------------------------------------------
Commission Split
Agent Agent Agency -----------------------
Identification Agent Name Number Number First Renewal
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
--------------------------------------- -------------------
For Variable Accepted for Date
Life Only the Company -------------------
--------------------------------------- month day year
- --------------------------------------------------------------------------------------------
COMPLETE ABOVE DATA IN ALL CASES FOR PROPER CREDITING OF COMMISSIONS
</TABLE>
<PAGE>
NEV APP-19-87
The New England
Your Financial Partner
For Company Use Only
No
-------------------
Part I - Application to The New England Life
Insurance Company for Insurance on the Proposed Insured
Insured Proposed:
--------------------------------------
(Print name as it should appear in policy)
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. Birthdate
------------------------------------------
(mo/day/yr)
7. Marital Status
___ Married ___ Single
___ Divorced ___ Widowed ___ Separated
Continued on Reverse Side
<PAGE>
8. Age (Nearest Birthday)
--------------------------------------------
9. Sex ___Male ____ Female
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 23)
b. Net worth: $__________________
13. Life Insurance (Personal, Business and Group) in Force (If none, so state)
(Put "B" to the left of any business insurance listed)
Company Year of Issue Amount ADB
- ------------------- ------------------- -------- -----------
- ------------------- ------------------- -------- -----------
- ------------------- ------------------- -------- -----------
14. 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
15. a. Any cigarette smoking in past year? ____ Yes ___No
b. Any other tobacco use in past year? ____ Yes ___No
16. Any other negotiations for life, disability or accidental death insurance
pending or contemplated? ____ Yes ___No
(If "Yes", see 23)
17. Any intent to travel or reside outside USA? ___ Yes ___ No
(If "Yes", see 23)
Continued on Reverse Side
<PAGE>
18. 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
19. Any suspension or revocation of driver's license within past 2 years?
___ Yes ___ No (If "Yes" see 23)
20. 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
21. 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
22. Is Proposed Insured currently employed less than full time? ____ Yes ___No
23. Explain "Yes" answers (Attach memo if more space needed)
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
24. Plan of Insurance
-------------------------------------------------------
Riders (Complete any additional application needed)
___ Waiver of Premiums
___ Acc. Death Ben. $
------------------
___ Purchase Option $
------------------
___ Level Term $
------------------
25. Face Amount of Policy $
------------------------------------------------
26. If available under policy applied for, state Planned Annual Unscheduled
Payment.$
----------------------
27. Death Benefit Option (if available under policy applied for):
___ Option 1 (Face Amount)
___ Option 2 (Face Amount plus any Excess Cash Value)
28. Indicate any special request (Attach memo if more space needed)
------
---------------------------------------------
29. Beneficiary (Include relation to Proposed Insured)
Continued on Reverse Side
<PAGE>
(1) Primary (2) Secondary
--------------------------- ---------------------------
30. 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)
--------------------------------------------------------------
31. Premium Mode
___ Annual ___ Semi-Annual ___ Quarterly
___ Other (see 28)
32. If available under policy applied for, are premiums in default to be paid
automatically by policy loan?
____ Yes ___No
33. If available under policy applied for, is the Special Premium Option
elected for premiums in default?
____ Yes ___No
34. Prepayment $____________ ____ None (If Question 20 or 21 is answered
"Yes", no prepayment is permitted)
35. Account Allocation (whole %) (Minimum 10% in each selected account)
___% Capital Growth
___% Money Market
___% Bond Income
___% Stock Index
___% Managed
100% Total
36. 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
Continued on Reverse Side
<PAGE>
. The death benefit may be variable or fixed under specified conditions.
. The cash values may increase or decrease in accordance with separate
investment account experience.
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.
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.
Cost of Insurance Rates May Change. The cost of insurance rates for the policy
may change. The rates currently being charged are not guaranteed; and the
Company may charge the full maximum guaranteed rates.
Signed at (City and State)_________________Date __________19____
- -------------------- -------------------- ---------------------------
Agent Proposed Insured Applicant if other than
Proposed Insured
New England Life Insurance Company, 501 Boylston Street, Boston, Massachusetts
02116
<PAGE>
Agent's Certificate
Proposed Insured No.
- ---------------------------------------------------- ------------------
Completion Required in Every Case
1. Source of Client (Check only one)
Previous TNE Policyholder
___ a. Agent's Own Client
___ b. Orphan Policyholder
___ c. TNE Group Insured
New Policyholder
___ d. Acquaintance
___ e. Referred Lead
___ f. Direct Mail
___ g. Published Sources
___ h. Other
Agent's
___ j. Own Life
___ k. Immediate Family
___ i. Business Associate
2. How long have you known Proposed Insured?
--------------
3. If name of Proposed Insured has changed within past 10 years by Marriage or
otherwise, give previous name.
4. Give Proposed Insured's addresses for the past 5 years.
a. Residence Address shown on Part I?
Former Business Addresses:
From Mo. Yr.
-----------------------
To Mo. Yr. Present
-------------------
b. Business Address shown on Part I?
Former Business Addresses:
From Mo. Yr.
-----------------------
To Mo. Yr. Present
-------------------
5. If Proposed Insured is a minor or married
a. Give full name and relationship of person responsible for support, if
a minor; or spouse, if married.
--------------------------------------------------
b. How much insurance is in force or applied for on person named above?
-----------------------------------
<PAGE>
6. Explain insurable interest of applicant, proposed beneficiary or proposed
owner if not a relative nor a business partner or associate of Proposed
Insured.
----------------------------------------------------------------------
----------------------------------------------------------------------
7. a. Your estimate (in figures) of annual income after business
expenses and before income taxes of Proposed
Insured's:
Earned Income $
-----------------
Other Income $
-----------------
Total Income $
--------------
Spouse's income $
-------------
b. Your estimate (in figures) of Proposed Insured's networth:
$
-------------
8. Indicate who will pay premiums for this insurance (If
guardianship funds involved, evidence of authority is
required.)
------------------------------------------
9. Has insurance on the life of the Proposed Insured ever been declined,
postponed, or modified as to plan, amount or rate? (If "Yes", explain
fully) _____Yes No_____
10. Do you have knowledge or reason to believe that any insurance or annuity in
this or any other company has been or will be replaced as a result of this
application for insurance? _____Yes No_____
11. Does Proposed Insured contemplate any change in
occupation or duties? _____Yes No_____
(If "Yes" explain fully)
12. Education
___a. High School ___b. Attended College
___c. College Graduate ___Graduate School
13. Employment Status (Check Employer and Field and Level, or check Other
Status)
<TABLE>
<CAPTION>
Employer Corporation Field Level Other Status
<S> <C> <C> <C> <C>
_a. Government _1) Professional _a. Business _a. Professional _j. Armed Forces
_b Non Profit Org. _2) Closely Held _b. Sales _b. Executive _k. Student
_c. Partnership _3) Other _c. Medicine _c. Middle Mgr. _j. Homemaker
_d. Sole Proprietorship _d. Law _d. Supervisory _m. Unemployed
_e. Self Employed _e. Agriculture _e. Technical _n. Retired
</TABLE>
<PAGE>
_f. Education _f. Clerical
_g. Other _g. Craftsman
_h. Laborer
14. Purpose Of Policy Life
Personal Estate Plan Business
__a. Single Need __f. Liquidity __k. Key EE.
__b. Program __g. Capital & Income __l. Buy-Sell
__c. Gift __h. Char. Gifts __m. Def. Comp.
__d. Salary Svngs. __j. Other __n. Salary Cont.
__e. Other __o. Split Dollar
(If purpose is business, complete Questions 16-20 on reverse)
15. Ledger Services Used
a. Capital Needs or Income Analysis ___Yes ___No
b. Estate Analysis Service ___Yes ___No
To the best of my knowledge, I have presented the Company all pertinent facts
regarding the Proposed Insured and regarding this application.
- ------------- --------------------------
Date Signature of Agent
Accepted for the Company
By:
------------------------- ---------------
Date
General Agent's Certificate
If agent of another Company, give name of other
Company
--------------------------------------
Is agent licensed where this application is written?
- ------------- -------------------------------
Date Signature of General Agent
For Business Life Insurance Only
16. If premiums are to be paid by corporation, give exact name of corporation
and State of incorporation.
<PAGE>
Submit evidence of authority, unless corporation is sole beneficiary and
sole owner.
17. a. Give names of other officers, key employees or partners on whom
business insurance is in force or proposed and amount of business
insurance on each.
Name Title Amt. of Business Amt. Of Business
Ins. in force Ins. Proposed
- ------------------ ------------------ ---------------- ------------------
- ------------------ ------------------ ---------------- ------------------
- ------------------ ------------------ ---------------- ------------------
b. Are there any officers, key employees or partners among the executives
or partners on whom business insurance is not in force or proposed?
____Yes ____No (If "Yes" give details)
-------------------------------------------
-------------------------------------------
18. If Applicant is a Corporation
a. What is the present net worth? $
--------------
b What percentage of stock is held by Proposed Insured?
________%
19. If Applicant is a Partnership, give full names of partners, and percent of
interest of each
____________________________ _____________%
____________________________ _____________%
____________________________ _____________%
20. It is frequently advisable to describe a Proposed Insured's value to the
business including skills, financial loss expected, financial resources,
etc. which warrant the amount of insurance requested (Submit a separate
letter if more space needed)
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Owner's Certification Section (in lieu of W9)
Owner's Social Security or Employer Identification Number.
--------------------------------------------
___ I am ___ I am not subject to backup withholding under Section
3406(a)( 1 )(c) of the Internal Revenue Code. Under penalties of perjury, I
certify that the information provided in this section is true, correct and
complete.
<PAGE>
- ----------------------------- --------------
Owner's Signature Date
Enter any request for additional or alternate life policies.
Agent's Identification Plate
(Agent's
Code
(Agent's Name) Number) (Commission Split %)
<PAGE>
NEV APP-22-92
Part I Policy Number
--------------
Application To New England Life Insurance Company
Questions below pertain to the Proposed Insured unless otherwise indicated.
Activity at
Work
Question
1. Have you been actively at work at least 30 hours per week for the past
six months; at the employer's usual place of business; performing all
the regular duties of your occupation; and on a work schedule not
reduced or changed because of health? (If NO, Automatic Issue is not
available.) (If NO, explain in REMARKS) YES NO.
--- ---
Personal Data
2. Print Name as it is to appear on the policy.
--------------------------------------------
First Middle Initial Last
3. Social Security Number
------------------------
4. Birthplace
-------------------
(state/country)
5. Marital Status
Single
---
Divorced
---
Married
---
Separated
---
Widowed
---
6. Birth Date
------------------
month day year
7. Age Nearest Birthday
----------------
8. Sex
Female Male
--- ---
<PAGE>
Part I Application Continued
Address
9. a. Residence
------------------------------------------------------------
Street City State Zip
b. Business
------------------------------------------------------------
Company/Street City State Zip
c. Premium Notice Address
Proposed Insured
---
a. Residence
---
b. Business
---
Other (Give name and address.)
---
Name
-------------------------------
Street
-------------------------------
City/State/Zip
-------------------------------
Beneficiary and Owner
10. Beneficiary
Primary
--------------------------------------
Names and Relation to Proposed insured
Secondary
--------------------------------------
Names and Relation to Proposed insured
11. Owner Proposed Insured Other
--- ---
If other, specify below. (Use a numbered sequence to designate successive
owners.)
---------------------------------------------
Names and Relation to Proposed insured
First Owner's Social Security or Taxpayer ID
Number
----------------------------------
Plan/Amount
12. Plan
---------------------------
13. Total Face Amount $
-------------------
<PAGE>
Part I Application Continued
14. Automatic Issue Amount $
-----------------
15. If available under policy applied for, state Planned Annual
Unscheduled Payment. $
----------------------
16. Death Benefit Option
(See Prospectus for further explanation.)
Option 1 (Face Amount)
---
Option 2 (Face Amount plus any Excess Cash Value)
---
17. If available under policy applied for, is the Special Premium Option
chosen for premiums in default?
YES NO
---- ----
18. Account Allocations (Whole %) (Minimum 10% in each chosen account)**
% Capital Growth
-------
% Money Market
-------
% Bond Income
-------
% Stock Index
-------
% Managed
-------
% Fixed Account
-------
100% Total
*The cost of insurance for the policy may change. The rates currently charged
are not guaranteed; and the Company may charge the full maximum guaranteed
rates.
**The Cash Value will be allocated to the Money Market account, regardless of
the chosen accounts, for an initial period described on page 1 of the
prospectus.
Benefits/Riders
(*Complete additional
form.)
19. Waiver of Premiums Benefits
a. Waiver of Premium -Proposed Insured
---
b. Applicant's Waiver* - Adult Insured
---
c. Applicant's Waiver* - Juvenile Insured
---
Death or Disability
---
Death Only
---
<PAGE>
Part I Application Continued
20. a. Accidental Death $
--- ----------
b. Level Term $
--- ----------
c. Purchase Option $
--- ----------
d. Children's Insurance Rider* $
--- ----------
e. Other $
--- ------------------- ----------
Premium Payment
(*Complete additional form.)
21. Annual Semi Annual Quarterly
--- --- ---
MSA NO.
--- -----------
New Account* Add to Existing Account
--- ---
List Bill No.
--- --------
22. Prepayment* $ None
----- ---
(If the Total Face Amount (see 13) is more than the Automatic Issue Amount (see
14) prepayment is permitted only if the answers to both questions 31 and 32 are
NO).
23. Automatic Payment of Premium in Default (if available) by Policy Loan.
YES NO
--- ---
Policy Date
24. If available, special Policy Date requested is:
a. or b. latest date that
--- --------- --- retains Proposed
Insured's age last
birthday.
Note: Date more than 30 days prior to date of Application not allowed.
Existing Insurance
25. Any life 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 the following and submit replacement
forms if required.)
YES NO
--- ---
<PAGE>
Part I Application Continued
------------------------------------------------------
1035 Policy
Company Exch. Date Policy Amount
Number
------------------------------------------------------
$
------------------------------------------------------
$
------------------------------------------------------
$
------------------------------------------------------
$
------------------------------------------------------
Smoking
26. Has Proposed Insured used any tobacco in past year? (If YES, complete
the following.) YES NO.
--- ---
How many cigarettes per day?
--------------
If other than cigarettes, please explain.
---------------
----------------------------------------------------------
Occupation and
Financial
27. a. Occupation
-------------------------------------------------------
-------------------------------------------------------
(Give Job Title and Duties)
28. a. Employed by
-----------------------------------------------
(Explain Nature of Business)
b. Date of Hire
-------------------------------
Month/Day/Year
29. a. Annual Income $
-------------
b. Net Worth $
-------------
Suitability/Disclosure
30. Suitability Statement by Applicant
a. Did you receive this prospectus? YES NO
--- ---
(If YES, give date of prospectus.)
---------------------------------
Month/Day/Year
b. Do you understand that:
- the death benefit may increase or decrease on the policy's
investment return, but will never be less than the
guaranteed minimum? YES NO
--- ---
<PAGE>
Part I Application Continued
- the cash value may increase or decrease on the policy's
investment return?
YES NO
--- ---
c. Do you believe that this policy will meet your insurance needs
and financial objectives?
YES NO
--- ---
THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS.
THE CASH VALUE MAY INCREASE OR DECREASE IN ACCORDANCE WITH SEPARATE
INVESTMENT ACCOUNT EXPERIENCE.
ANSWER QUESTIONS 31 THRU 40 IF THE TOTAL FACE AMOUNT APPLIED FOR (SEE 13)
IS MORE THAN THE AUTOMATIC ISSUE AMOUNT (SEE 14).
31. Any treatment for or consultation with a physician concerning a heart
attack, a stroke or cancer (other than skin cancer) within past 2
years? (If YES, explain in REMARKS.) YES NO
--- ---
32. Any change in health or any treatment by or consultation with a
physician since the date of Part II of this Application? YES NO
--- ---
(If YES, explain in REMARKS.)
33. Other than above, have you within the past 5 years: had a check up or
consultation; been a patient in a medical facility; or been advised to
have any diagnostic test, hospitalization or surgery? (If YES, explain
in REMARKS.) YES NO
--- ---
34. Has Proposed Insured been convicted in the past 2 years of: driving
under the influence of alcohol or drugs; or 2 or more moving
violations? (If YES, complete supplemental form.) YES NO
--- ---
35. Driver's License No.
---------------
State
---------------
36. Any other negotiations for life, disability or accidental death
insurance pending or contemplated?
<PAGE>
Part I Application Continued
37. Have you in the past 2 years participated in, or do you intend to
participate: in any flights as a trainee, pilot or crew member;
underwater sports (SCUBA diving, skin diving, snorkeling, hardhat);
sky sports (sky diving, hang gliding, parachuting, ballooning); or
motor racing (auto, motorcycle, motorboat)? (If YES, complete
supplemental form.) YES NO
--- ---
38. Life Insurance in Force (If none, so state. Type - P = Personal, B =
Business, G = Group)
-----------------------------------------------------------
Company Type Yr of Issue Life Amount ADB Amount
-----------------------------------------------------------
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
$ $
-----------------------------------------------------------
39. Has life or disability insurance on your life ever been declined,
postponed or modified as a plan, amount or rate? If YES, give
details in REMARKS.)
YES NO
--- ---
40. Do you intend to travel or reside outside of the United States? (If
YES, give details in REMARKS.)
YES NO
--- ---
<PAGE>
Part I Application Continued
Remarks/Special Requests
for additional coverage
(Attach Additional Sheet, if necessary)
<PAGE>
Part I Application Continued
Company Use
(Additions and Amendments)
Declarations
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 the "Company Use" section as to: (a) age; or (b) plan of insurance; or
(c) riders; or (d) amounts; or (e) rate class.
When Insurance Takes Effect. If a prepayment is made in connection with
this Application, the insurance takes effect as stated in the Prepayment
Receipt and Temporary Insurance Agreement. Otherwise, the insurance takes
effect only as of the latest of (a) the date of this Application; (b) the
date the first premium is paid; and (c) the Policy Date that is requested;
provided: that, with respect to the amount which is Automatic Issue, the
Proposed Insured is then actively at work on a full time basis as described
in 1: that the first premium is paid while the Proposed Insured is living;
and, with respect to any Face Amount in excess of the Automatic Issue
Amount, that at the time of payment there has been no change in
insurability as represented in this Application since the date of the
Application. If the Proposed Insured is not insurable under the Company's
underwriting rules, the Company can decline the Application while the
Proposed Insured is living.
Limitation on Authority of Agents and Examiners Agents and Examiners do
not have authority: (a) to determine insurability; (b) to change any terms
of this Application; or (c) to make a contract for the Company.
<PAGE>
Part I Application Continued
Authorization
If the Total Face Amount applied for (see 13) is more than the Automatic
Issue Amount (see 14); in order that insurance can be issued, I authorize
each of the following having records or knowledge of me or my health to
give this information to the Company; a medical practitioner; a medical
facility; an insurance company; the Medical Information Bureau; a consumer
reporting bureau; and any other company, concern or person. If insurance
on any minor child is applied for this authorization extends to records and
knowledge of that child and the child's health. Information received by the
Company may be disclosed to third parties in the conduct of the Company's
business.
I understand that: I have a right of access to and correction of all
information obtained by the Company; I can ask to be interviewed with
respect to any investigative consumer report; and I can ask for a copy of
any such report. A photocopy of this authorization is as valid as the
original. This authorization is valid for 30 months from the date it is
signed. I have received a Notice of Information Practices; this Notice
gives a more detailed description of the information practices of the
Company.
Signatures
Signed at Date
------------------------------- --------------
city state month day year
Proposed
Insured
--------------------------------------------------
Applicant if
Other than
Proposed Insured
------------------------------------------
Agent
---------------------------------------------------
<PAGE>
Agent Certificate
(Completion required in every case.)
Questions
1. Did you see the Proposed Insured on the date the application was
signed? (If NO, explain in REMARKS.) YES NO
--- ---
IF THE TOTAL FACE AMOUNT APPLIED FOR IS MORE THAN THE AUTOMATIC ISSUE
AMOUNT, ANSWER QUESTIONS 2 THROUGH 5.
2. Is the Proposed insured a citizen of the USA?
If NO, specify: YES NO
--- ---
Date of entry
-------------------
mo day yr
Type of visa
--------------------
3. If Proposed Insured's name has been changed in the past 10 years, give
former name(s)
--------------------------------------------
4. Provide phone number where Proposed Insured can be contacted.
---------------------------
Preferred calling time AM PM
---- ----
5. Complete the following:
a. Describe purpose of insurance.
Key Employee
---
Salary Continuation
---
Buy Sell
---
Split Dollar
---
Deferred Compensation
---
Section 162 Bonus Plan
---
Other (Describe in REMARKS)
---
b. Are other key individuals insured or being insured for similar
amounts? YES NO
--- ---
(If NO, state why not.)
------------------------------------------------------------------
c. What percentage of business does the applicant own or control?
%
-----------------
<PAGE>
Agent Certificate Continued
(Completion required in every case.)
Give names and amount of business coverage in force and/or
applied for all key associates, plus the percentage of ownership
in each:
Name Amount % Name Amount %
- -------------------------------------------------------------
$ $
- -------------------------------------------------------------
$ $
- -------------------------------------------------------------
d. Year Business was established.
------------
e. For the Business, provide approximate amount of:
Assets Liabilities Net Worth Net Income
--------------------------------------------------
$ $ $ $
--------------------------------------------------
6. Do you have knowledge or reason to believe that any insurance or
annuity in this or any other company has been or will be replaced as a
result of this Application for insurance? YES NO
--- ---
7. State Source of Funds if $10,000 or greater.
------------------------------
8. Owner's Occupation
---------------------------
9. Owner's Employer
---------------------------
(Give name and address)
10. Owner's Financial Status:
Annual Income $
--------------------
Net Worth, exclusive of home, furnishings and
autos $
--------------------
11. Owner's Tax Bracket %
------
12. Owner's Age
--------
13. Owner's State of Residence
--------------------
14. Is Owner associated with a member firm of the NASD?
YES NO (If Yes, give name and address of firm.)
--- ---
--------------------------------
<PAGE>
Agent Certificate Continued
(Completion required in every case.)
Remakes
Signature
To the best of my knowledge, I have presented the Company all pertinent
facts regarding the Proposed Insured and regarding this Application.
Signature
of Agent Date
-------------------- --------------------
month day year
General Agent Certificate
If Agent of another company, give name of company.
---------------------------------
Is agent licensed where Application is written?
YES NO
--- ---
Signature of
General
Agent Date
------------------------ --------------------
month day year
Accepted for
the Company Date
------------------------ --------------------
month day year
<PAGE>
Agent Certificate Continued
(Completion required in every case.)
Agent Identification
- ---------------------------------------------------------------
Agent Agency Commission Split
Agent Name Number Number First Renewal
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
- ---------------------------------------------------------------
COMPLETE ABOVE DATA IN ALL CASES FOR PROPER CREDITING OF COMMISSIONS
Owner's Certificate (in lieu of W9)
Owner's Social Security or Taxpayer Identification Number
--------------------------
I am I am not subject to backup withholding under Section
--- ---
3406(a)(1)(C) of the Internal Revenue Code. Under penalties of perjury, I
certify that the information in this section is true, correct and complete.
Signature
of Owner Date
---------------------- ----------------
month day year
<PAGE>
Exhibit 3(ii)
April 24, 1998
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
Gentlemen:
In my capacity as Second Vice President and Actuary of New England Life
Insurance Company (the "Company"), I have provided actuarial advice concerning:
The preparation of Post-Effective Amendment No. 3 to the registration
statement on Form S-6 (File No. 33-88082) filed by New England Variable
Life Separate Account and the Company with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to variable life
insurance policies (the "Registration Statement"); and
The preparation of policy forms for the variable life insurance policies
described in the Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated premiums,
internal rates of return on net cash values and internal rates of return on
death benefits shown in Appendix A of the Prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies. The rate structure of the Policies has not been designed
so as to make the relationship between premiums and benefits, as shown in
the illustrations, appear to be correspondingly more favorable to
prospective purchasers of Policies for male insureds, aged 40 in the
underwriting class illustrated than to prospective purchasers of Policies
for insureds of other sexes or ages. Insureds in other underwriting classes
may have higher cost of insurance charges.
2. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the Appendix,
is consistent with the provisions of the Policies.
<PAGE>
3. The illustration of net premiums shown under the heading "Charges and
Expenses-Deductions from Premiums" in the Prospectus contains the net
premium amounts allocated to the Variable Account for a $3,000 premium
under a Policy.
4. The information contained in the example of how the maximum loanable amount
is determined under the heading "Other Policy Features-Loan Provision" in
the Prospectus is consistent with the provisions of the Policies.
I hereby consent to the filing of this opinion as an Exhibit to this Post-
Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler, F.S.A., M.A.A.A.
Second Vice President and Actuary
2
<PAGE>
Exhibit 6
Sutherland, Asbill & Brennan 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. 3 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. 33-88082). 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 24, 1998
<PAGE>
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No. 3 to the
Registration Statement No. 33-88082 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 Prospectus (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
Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 24, 1998
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 3 to the
Registration Statement on Form S-6 (File No. 33-88082) 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 Advisers, Inc., and our report dated March 14, 1996,
on our audit of Newbury Insurance Company, Limited. We also consent to the
reference to our Firm under the caption "Experts" in this Post-Effective
Amendment.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 24, 1998
