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As filed with Securities and Exchange Commission on
April 30, 1998
Registration No. 33-19540
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
POST-EFFECTIVE AMENDMENT NO. 15
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
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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
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It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1) of Rule 485
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered: Units of Interest in Variable Ordinary
Life Insurance Policies.
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
Registration Statement on Form S-6
Cross-Reference Sheet
Form N-8B-2
Item No. Caption in Prospectus
- ----------- ---------------------
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution 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; Exchange of Policy During First 24
Months; Default and Lapse Options; Surrender; Partial Surrender
and Partial Withdrawal; "Free Look" Provision; 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
11 The Variable Account
12 Investments of the Variable Account; Distribution Agreement
13 Charges and Expenses; Distribution Agreement; Charge for
NELICO's Income Taxes; Appendix A
14 Amount Provided for Investment Under the Policy; 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; Net Investment Experience
19 Reports; Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 Distribution Agreement
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 Distribution Agreement
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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 Distribution Agreement
35 NELICO
36 Inapplicable
37 Inapplicable
38 Distribution Agreement
39 Distribution Agreement
40 Distribution Agreement
41(a) Distribution Agreement
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Amount Provided for
Investment Under the Policy; Deductions from Premiums and
Unscheduled Payments; Scheduled Premiums
44(b) Charges and Expenses
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; Default and Lapse Options; Charges
and Expenses; Additional Benefits by Rider; Exchange of Policy
During First 24 Months; Payment Options; Policy Owner and
Beneficiary; Premiums; Distribution Agreement;
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
<PAGE>
NEW ENGLAND LIFE
INSURANCE COMPANY
Variable Ordinary Life Insurance Policies
Issued by
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual Variable Ordinary Life Insurance
Policies (the "Policies") offered by New England Life Insurance Company
("NELICO"), an indirect, wholly-owned subsidiary of Metropolitan Life
Insurance Company ("MetLife").
Each Policy provides lifetime insurance protection for the insured named in
the Policy, as long as required scheduled premium payments are made when due.
The Policy provides for the payment of scheduled premiums until age 100. Under
certain circumstances, however, the Policy Owner may not be required to pay a
scheduled premium to keep the Policy in force on a premium paying basis. The
Policy also allows the Policy Owner to make unscheduled payments, subject to
certain restrictions.
A Policy Owner may choose one form of death benefit ("Option 1") which
remains fixed in the amount initially selected or a second form ("Option 2")
which may vary daily with the net investment experience of one or more mutual
fund portfolios. Under both death benefit options, the death benefit will
never be less than the face amount specified in the Policy provided that
required scheduled premium payments are made when due. (See "Loan Provision"
for the effect of an "excess policy loan" on the Policy.) The Policy provides
a net cash value while the insured is living. The cash value of the Policy
generally increases with the payment of each premium and varies daily with the
investment experience of the mutual fund portfolios. There is no guaranteed
minimum cash value for investments in the mutual fund portfolios.
The Policy Owner may cancel the Policy during the "free look" period. As of
the "investment start date", the first net scheduled premium for the Policy,
plus any unscheduled payment made, 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. Thereafter, the Policy's cash value will be invested according to the
instructions of the Policy Owner.
Each Policy Owner may allocate the net scheduled premiums and net
unscheduled payments for his or her Policy among one or more of the 16
investment sub-accounts of NELICO's Variable Life Separate Account (the
"Variable Account") or 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
Alger Equity Growth Series, the Loomis Sayles Balanced 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
Equity-Income Portfolio, Overseas Portfolio and High Income Portfolio of the
Variable Insurance Products Fund ("VIP Fund"); and the Asset Manager Portfolio
of the Variable Insurance Products Fund II ("VIP Fund II").
Special limits apply to transfers of cash value out of the Fixed Account.
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus. (See "Charges and Expenses").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THIS PROSPECTUS IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE
CURRENT PROSPECTUSES OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE
INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE
ATTACHED AT THE END OF THIS PROSPECTUS. THESE PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
SHARES OF THE ZENITH FUND, THE VIP FUND AND THE VIP FUND II, AND INTERESTS
IN THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, A BANK, AND THE SHARES AND INTERESTS ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
MAY 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY.................................................................. A-4
INTRODUCTION TO POLICIES.................................................. A-6
The Policies............................................................ A-6
Availability of the Policy.............................................. A-8
Charges Assessed in Connection with the Policy.......................... A-8
Cost of Insurance Charges............................................... A-9
How the Policy Works.................................................... A-10
Receipt of Communications and Payments at NELICO's Home Office.......... A-11
NELICO.................................................................. A-11
POLICY VALUES AND BENEFITS................................................ A-12
Death Benefit........................................................... A-12
Guaranteed Minimum Death Benefit........................................ A-12
Adjustments to the Death Proceeds Payable............................... A-13
Cash Value.............................................................. A-13
Net Investment Experience............................................... A-13
Allocation of Net Premiums.............................................. A-14
Amount Provided for Investment under the Policy......................... A-14
"Free Look" Provision................................................... A-15
CHARGES AND EXPENSES...................................................... A-15
Deductions from Premiums and Unscheduled Payments....................... A-15
Surrender Charge........................................................ A-16
Deductions from Cash Value.............................................. A-18
Charges Against the Eligible Funds and the Sub-Accounts of the Variable
Account................................................................ A-19
Guarantee of Premiums and Certain Charges............................... A-20
Group or Sponsored Arrangements......................................... A-21
PREMIUMS.................................................................. A-21
Scheduled Premiums...................................................... A-21
Unscheduled Payments.................................................... A-22
Special Premium Option.................................................. A-23
Default and Lapse Options............................................... A-24
OTHER POLICY FEATURES..................................................... A-26
Loan Provision.......................................................... A-26
Surrender............................................................... A-28
Partial Surrender and Partial Withdrawal................................ A-28
Acceleration of Death Benefit Rider..................................... A-29
Investment Options...................................................... A-29
Transfer Option......................................................... A-29
Substitution of Insured Person.......................................... A-30
Payment of Proceeds..................................................... A-30
Exchange of Policy During First 24 Months............................... A-30
Payment Options......................................................... A-31
Additional Benefits by Rider............................................ A-31
Policy Owner and Beneficiary............................................ A-32
THE VARIABLE ACCOUNT...................................................... A-33
Investments of the Variable Account..................................... A-33
Investment Management................................................... A-37
THE FIXED ACCOUNT......................................................... A-38
DISTRIBUTION AGREEMENT.................................................... A-38
</TABLE>
A-2
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<TABLE>
<S> <C>
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY.......................... A-39
Misstatement of Age or Sex.............................................. A-39
Suicide................................................................. A-39
TAX CONSIDERATIONS........................................................ A-39
Policy Proceeds......................................................... A-39
Charge for NELICO's Income Taxes........................................ A-43
MANAGEMENT................................................................ A-44
VOTING RIGHTS............................................................. A-47
RIGHTS RESERVED BY NELICO................................................. A-47
TOLL-FREE NUMBERS......................................................... A-48
REPORTS................................................................... A-48
ADVERTISING PRACTICES..................................................... A-48
LEGAL MATTERS............................................................. A-49
REGISTRATION STATEMENT.................................................... A-49
EXPERTS................................................................... A-49
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES
AND ACCUMULATED SCHEDULED PREMIUMS....................................... A-51
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................. A-61
APPENDIX C: LONG TERM MARKET TRENDS....................................... A-82
APPENDIX D: USES OF LIFE INSURANCE........................................ A-84
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.
AUTOMATIC PREMIUM LOAN OPTION. Upon election by the Policy Owner, the
Policy's loan value will be used to pay a scheduled premium, if the scheduled
premium has not been paid by the end of the grace period. (See "Scheduled
Premiums".)
BASIC SCHEDULED PREMIUM. Scheduled premium minus (i) charges for any
supplementary benefits provided by rider; (ii) any extra premiums paid for a
Policy in a substandard risk classification or for a Version 2 automatic issue
Policy; and (iii) the portion of the annual Policy administrative charge
allocable to the premium. (See "Deductions From Premiums and Unscheduled
Payments".)
CASH VALUE. A Policy's cash value includes the amount of its cash value held
in the Variable Account, the amount held in the Fixed Account and, if there is
an outstanding policy loan, the amount of its cash value held in NELICO's
general account as a result of the loan. (See "Cash Value".)
COST OF INSURANCE CHARGE. This charge for providing insurance protection is
deducted on the Policy Date and on the first day of each policy month. The
cost of insurance for a policy month is equal to the amount at risk multiplied
by the cost of insurance rate for that month. Cost of insurance rates vary
monthly. (See "Deductions from Cash Value".)
DEATH BENEFIT OPTION 1. Death Benefit equals the greater of (i) the face
amount of the Policy and (ii) the Policy's cash value divided by the net
single premium per $1 of death benefit at the insured's attained age. (See
"Death Benefit".)
DEATH BENEFIT OPTION 2. Death Benefit equals the greater of (i) the face
amount of the Policy plus any excess of the Policy's cash value over its
"tabular cash value" and (ii) the Policy's cash value divided by the net
single premium per $1 of death benefit at the insured's attained age. (See
"Death Benefit".)
ELIGIBLE FUNDS. Each sub-account of the Variable Account invests in the
shares of one of the Eligible Funds. The Eligible Funds are: the Back Bay
Advisors Money Market Series, the Back Bay Advisors Bond Income Series, the
Capital Growth Series, the Westpeak Stock Index Series, the Back Bay Advisors
Managed Series, the Westpeak Growth and Income Series, the Loomis Sayles Small
Cap Series, the Alger Equity Growth Series, the Loomis Sayles Balanced 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 Equity-Income Portfolio, the Overseas Portfolio and the High Income
Portfolio of the VIP Fund; and the Asset Manager Portfolio of VIP Fund II.
EXCESS POLICY LOAN. The situation when policy loans plus accrued interest
exceed the Policy's cash value less the applicable Surrender Charge. (See
"Loan Provision".)
FIXED ACCOUNT. The Fixed Account is a part of NELICO's general account to
which net premiums and net unscheduled payments may be allocated and which
provides guarantees of principal and interest.
GUARANTEED MINIMUM DEATH BENEFIT. The death benefit is guaranteed not to be
less than the Policy's face amount, regardless of the investment experience of
the Policy's sub-accounts, as long as scheduled premiums have been paid when
due or are not required to be paid, pursuant to the Special Premium Option.
(See "Guaranteed Minimum Death Benefit".)
INVESTMENT START DATE. This is the latest of the date NELICO receives a
premium payment for the Policy, the date Part II of the Policy application is
signed and the Policy Date and is the date that an amount is first provided
for investment under the Policy. (See "Amount Provided for Investment under
the Policy.")
MORTALITY AND EXPENSE RISK CHARGE. This charge is made daily at an annual
rate of .60% of the value of each sub-account's assets that come from the
Policies. 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").
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NET CASH VALUE. The amount the Policy Owner may obtain upon surrender of the
Policy and which is equal to the Policy's cash value reduced by any
outstanding policy loan and accrued interest; reduced by any applicable
Surrender Charge; and increased by the portion of any cost of insurance charge
deducted from the period beyond the date of surrender. (See "Cash Value".)
NET INVESTMENT EXPERIENCE. For any period, a sub-account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares, for the same period, reduced by the amount of charges against the sub-
account for that period. (See "Net Investment Experience".)
NET SCHEDULED PREMIUM. The amount allocated to the Variable Account and/or
the Fixed Account and which is equal to the basic scheduled premium less the
sales charge and the state premium tax charge. (See "Deductions from Premiums
and Unscheduled Payments".)
NET UNSCHEDULED PAYMENT. The amount allocated to the Variable Account and/or
the Fixed Account and which is equal to the unscheduled payment less the sales
charge and the state premium tax charge. (See "Deductions From Premiums and
Unscheduled Payments".)
PREMIUM DUE DATE. The date on which a scheduled premium is payable. Net
scheduled premiums, after the first, are allocated to a Policy's sub-accounts
on the premium due dates. (See "Premiums".)
POLICY DATE. If a premium payment has been made with the application, the
Policy Date is the later of the date Part II of the application has been
signed and receipt of the premium payment. If the initial premium is to be
paid 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.")
SPECIAL PREMIUM OPTION. Upon election by the Policy Owner, the Policy Owner
may not be required to pay a scheduled premium or premiums under certain
circumstances. (See "Special Premium Option".)
TABULAR CASH VALUE. The value which the Policy would have if: (i) all
scheduled premiums were paid when due; (ii) no unscheduled payments, partial
surrenders, partial withdrawals, or loans were made; (iii) the Policy's cash
value in the Variable Account, and the Policy's cash value in the Fixed
Account, earned a five percent annual net rate of return; and (iv) the maximum
guaranteed cost of insurance rates were deducted from the cash value. (See
"Death Benefit".)
YOU. When used in this prospectus, "you" refers to the Policy Owner.
A-5
<PAGE>
INTRODUCTION TO POLICIES
This prospectus describes Policies under which net scheduled premiums and
net unscheduled payments are allocated to the Variable Account. If the Fixed
Account is available in your state, you may choose to allocate or transfer all
or part of your funds to that account. NELICO provides guarantees of principal
and interest with respect to the Fixed Account which is part of NELICO's
general account. Amounts in the Fixed Account are backed by NELICO's general
account, rather than the Variable Account. For a description of the Fixed
Account, the rules regarding policy transactions (such as transfers, loans and
surrenders) which involve the Fixed Account, and the way in which amounts in
the Fixed Account affect policy values and benefits, see "The Fixed Account"
which appears later in this prospectus.
THE POLICIES
The individual Variable Ordinary Life Insurance Policies offered by this
prospectus are designed to provide lifetime insurance coverage. They are not
primarily offered as an investment.
The following is a brief listing of some of the basic features of the
Policy. These and other features of the Policy are explained in detail
throughout this prospectus. You should be sure to read the prospectus for more
complete information.
-- The Policy requires payment of a level scheduled premium. (See
"Scheduled Premiums".)
-- You may choose to make additional, unscheduled payments under the
Policy. NELICO can limit or prohibit unscheduled payments in certain
situations, including cases where the insured is in a substandard risk
class. (See "Unscheduled Payments".)
-- Net scheduled premiums and net unscheduled payments are invested
according to your instructions in one or more of the sub-accounts of the
Variable Account corresponding to mutual fund portfolios, or the Fixed
Account, after an initial period in the 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 which is allocated to the Fixed Account. (See
"Cash Value", "Charges and Expenses", "Premiums", "Loan Provision" and
"Partial Surrender and Partial Withdrawal".)
-- The portion of the cash value which you invest in the sub-accounts is
not guaranteed. Your bear the investment risk on this portion of the
cash value. (See "Cash Value".)
-- You may choose between two forms of death benefit options under the
Policy. One option provides a death benefit equal to the Policy's face
amount. The other option provides a death benefit which varies with the
net investment experience of the sub-accounts to which amounts have been
allocated and the rate of interest credited on any cash value in the
Fixed Account. Under both options the death benefit could be increased
to satisfy tax law requirements if the cash value reaches certain
levels. (See "Death Benefit".)
-- Regardless of investment experience, either form of death benefit is
guaranteed never to be less than the Policy's face amount, as long as
the required scheduled premiums are paid when due. (See "Death
Benefit".)
A-6
<PAGE>
-- If you elect the "Special Premium Option", you can under certain
circumstances miss a scheduled premium payment without causing the
Policy to lapse. In that case, the Policy will keep its minimum death
benefit guarantee. (See "Special Premium Option".)
-- You may change your allocation of future net scheduled premiums and net
unscheduled payments at any time. (See "Allocation of Net Premiums" and
"Investment Options".)
-- After the "free look" 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 without
NELICO's consent. NELICO currently allows 12 transfers per policy year.
Transfers and allocations involving the Fixed Account are subject to
certain limits. (See "Transfer Option" and "The Fixed Account-Policy
Transactions".)
-- A loan privilege is available under the Policy. Partial withdrawal and
partial surrender features are also available. (See "Loan Provision" and
"Partial Surrender and Partial Withdrawal".)
-- Death benefits paid to the beneficiary under the Policy are not subject
to Federal income tax. Under current law, undistributed increases in
cash value generally are not taxable to you. (See "Tax Considerations".)
-- Loans, assignments and other pre-death distributions under the Policy
may have tax consequences depending primarily on the amount which you
have paid into the Policy but also on any "material change" in the terms
or benefits of the Policy. If premium payments or a material change in
the terms or benefits of the Policy cause it to become a "modified
endowment contract", then pre-death distributions will be includable in
income on an income first basis, and a 10% penalty tax may be imposed on
income distributed before the Policy Owner attains age 59 1/2. Tax
considerations may therefore influence the amount and timing of premiums
and unscheduled payments and certain Policy transactions which you
choose to make. (See "Tax Considerations".)
-- If the Policy is not a modified endowment contract, NELICO believes that
loans under the Policy will not be taxable to you as long as the Policy
has not lapsed, been surrendered or terminated. With certain exceptions,
other pre-death distributions under a Policy that is not a modified
endowment contract are includible in income only to the extent they
exceed the investment in the Policy. (See "Tax Considerations".)
-- You have an opportunity during the "free look" period to return the
Policy for a refund. (See "Free Look Provision".)
-- Within twenty-four months after a Policy's date of issue, you may
exchange the Policy, without evidence of insurability, for a fixed-
benefit policy issued by NELICO or an affiliate on the life of the
insured. If you exercise this option, you will have to make up any
investment loss. (See "Exchange of Policy During First 24 Months".)
In many respects the Policies are similar to traditional fixed-benefit whole
life insurance. Like whole-life insurance, the Policies provide for a
guaranteed minimum death benefit, scheduled premium payments, a cash value,
and loan privileges.
The Policies are different from fixed-benefit life insurance in that the
death benefit may, and the cash value will, vary to reflect the investment
experience of the selected sub-accounts of the Variable Account. In addition,
you can elect an option under the Policy which will allow you, under certain
circumstances, not to pay a particular scheduled premium or premiums and still
keep the Policy in force on a premium paying basis.
The variable life insurance policies offered by NELICO are designed to
provide insurance protection. Although the underlying mutual fund portfolios
invest in securities similar to those in which mutual funds available directly
to the public invest, in many ways the policies differ from mutual fund
investments. The main differences are:
-- The Policy provides a death benefit based on NELICO's assumption of an
actuarially calculated risk.
-- If scheduled premiums are not paid according to the requirements of the
Policy, the Policy may lapse. If the Policy lapses when Policy loans are
outstanding, adverse tax consequences may result.
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<PAGE>
-- 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 Life Separate Account, and 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.
-- Dividend and capital gains distributions 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
At this time new Policies are available only in the state of New Jersey. A
Policy may be issued to a smoker standard or substandard risk insured or to a
nonsmoker standard or substandard risk insured from the age of 20 to 75.
NELICO has withdrawn availability of the Policy to juveniles. With the consent
of NELICO, a Policy may be issued to an insured from the age of 76 to 80. All
persons must meet certain health and other criteria. The minimum face amount
which may be purchased is $5,000 for Policies issued in connection with
employer-sponsored benefit plans qualified under Section 401 of the Internal
Revenue Code, and is $15,000 for all other Policies unless NELICO consents to
a lower amount. NELICO may require a higher face amount in certain states in
order to comply with certain requirements of state law. At this time the
Policies are only available on a limited basis to plans qualified under
Section 401(k) of the Internal Revenue Code.
CHARGES ASSESSED IN CONNECTION WITH THE POLICY
PREMIUM-BASED CHARGES. Before allocating net scheduled premiums and net
unscheduled payments to your choice of sub-accounts, NELICO deducts the
following:
(i) From each scheduled premium, any premiums for rider benefits,
substandard risk classification, and the portion of the annual
administrative charge allocable to the premium equal to $55 per year if
premiums are paid annually (or up to a total of $58.41 per year if
premiums are paid more frequently);
(ii) From each scheduled premium, after deducting the charges listed in (i)
above, a state premium tax charge of 2% and, during the first 15
policy years, a sales charge of 6%;
(iii) From each unscheduled payment, a state premium tax charge of 2% and a
sales charge of 6%. (See "Deductions from Premiums and Unscheduled
Payments".)
SURRENDER CHARGE. If a Policy is totally or partially surrendered or lapses
during the first 15 policy years, a surrender charge consisting of a deferred
administrative charge and a deferred sales charge will be deducted from the
cash value. The maximum dollar amount of the deferred administrative charge is
$5.00 per $1,000 of face amount. The maximum dollar amount of the deferred
sales charge is an amount equal to 24% of the Policy's basic scheduled
premiums for the first policy year plus 4% of the Policy's basic scheduled
premiums for policy years two through ten. The maximum deferred sales charge,
therefore, increases in amount for each of the first ten policy years to a
maximum dollar amount equal to 6% of the Policy's basic scheduled premiums for
the first ten policy years. (A basic scheduled premium is the scheduled
premium less the portion of the annual administrative charge allocable to the
premium and less premiums for rider benefits and substandard risk
classification.) (See "Surrender Charge".) This maximum deferred sales charge
(6% of the Policy's basic scheduled premiums for the first ten policy years)
is in addition to the 6% premium-based sales charge described in "Premium-
Based Charges" above.
The surrender charge is deducted from the Policy's available cash value,
regardless of whether that cash value is derived from scheduled premiums,
unscheduled payments, or investment experience.
CHARGES DEDUCTED FROM CASH VALUE. NELICO will deduct the following monthly
charges from each Policy's cash value: a charge for the cost of insurance; an
administrative charge of $0.015 per $1,000 of face amount; a minimum death
benefit risk charge of $0.01 per $1,000 of face amount; and, during the first
policy year, an extra administrative charge of $0.035 per $1,000 of face
amount. If, pursuant to the Special Premium Option, you do
A-8
<PAGE>
not pay a scheduled premium, NELICO will deduct from the Policy's cash value
any applicable charges for rider benefits, substandard risk status and the
amount of the Policy's annual administrative charge which is allocable to the
unpaid premium. The amount deducted will equal 92% of the charges otherwise
payable for these items. (See "Deductions from Cash Value".)
DAILY CHARGES AGAINST THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT AND AGAINST
THE ELIGIBLE FUNDS. NELICO charges the sub-accounts of the Variable Account
for the mortality and expense risks NELICO assumes. The charge is made daily
at an annual rate of .60% of the value of each sub-account's assets that come
from the Policies. Charges for investment advisory fees and other expenses are
deducted from the assets of the Eligible Funds. (See "Charges Against the
Eligible Funds and the Sub-Accounts of the Variable Account" and "Investment
Management".)
Under current Federal income tax law no tax is imposed upon NELICO as a
result of the operations of the Variable Account. Thus, no charge is being
made currently to the Variable Account for company Federal income taxes.
NELICO reserves its rights to charge the Variable Account for company Federal
income taxes in the future.
COST OF INSURANCE CHARGES
Cost of insurance rates for underwritten risks are guaranteed never to be
higher than those based on the 1980 Commissioners Standard Ordinary Mortality
Tables, with smoker/nonsmoker modifications (the "1980 CSO Tables").
The cost of insurance rates actually charged may be lower than the maximums
described above. The level of the rates charged will vary depending on the
insured's sex (if the Policy is sex-based), age and underwriting class.
NELICO's current cost of insurance rates range from 64% to 100% of the 1980
CSO Tables. NELICO reviews the adequacy of its current cost of insurance rates
periodically and may adjust them.
A-9
<PAGE>
HOW THE POLICY WORKS
- --------------------------------------------------------------------------------
Premium Payments
.Guaranteed not to increase
- --------------------------------------------------------------------------------
[ARROW POINTING TO CHARGES FROM PREMIUM APPEARS HERE]
- --------------------------------------------------------------------------------
Charges from Premium
.Any rider premiums
.Annual Admin Charge-$55
.Substandard Risk Premium
.Sales Load (5%* for 15 years)
.Premium Tax Charge (2%*)
- --------------------------------------------------------------------------------
[ARROW POINTING TO CASH VALUES APPEARS HERE]
- --------------------------------------------------------------------------------
Unscheduled Payments
.Sales Load (6%)
.State Premium Tax Charge (2%)
- --------------------------------------------------------------------------------
[ARROW POINTING TO CASH VALUES APPEARS HERE]
- --------------------------------------------------------------------------------
Special Premium Option
.If used, charges for Annual Admin. Charge and any riders or substandard risk or
Version 2 automatic issue premium are deducted from cash value
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Loans
.After the free look period, you may borrow up to 90% of the adjusted cash value
(100% in Alabama)
.The loan interest charge is 6%. Loaned funds are transferred out of the
Eligible Funds into the General Account where they are credited with 5%
interest
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Retirement Benefits
.Fixed settlement options are available for policy proceeds.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash Values
.Net scheduled premiums or net unscheduled payments invested in your choice of
Eligible Fund investments or the Fixed Account after an initial period in the
Zenith Money Market Sub-Account
.The cash value reflects investment experience, interest, payments and policy
charges
.The cash value invested in mutual funds is not guaranteed
.Any earnings are accumulated free of any current income taxes
.You may change the allocation of future net premiums at any time. You may
currently transfer funds among investment options up to 12 times per policy
year, after the free look period
.Your cash value may be allocated among a maximum of ten accounts at any one
time
- --------------------------------------------------------------------------------
[ARROW POINTING TO SPECIAL PREMIUM OPTION APPEARS HERE]
[ARROW POINTING TO LOANS APPEARS HERE]
[ARROW POINTING TO RETIREMENT BENEFITS APPEARS HERE]
[ARROW POINTING TO DEATH BENEFIT APPEARS HERE]
[ARROW POINTING TO DAILY DEDUCTIONS FROM ASSETS APPEARS HERE]
[ARROW POINTING TO BEGINNING OF MONTH CHARGES APPEARS HERE]
[ARROW POINTING TO SURRENDER CHARGES APPEARS HERE]
[ARROW POINTING TO LIVING BENEFITS APPEARS HERE]
- --------------------------------------------------------------------------------
Death Benefit
.Level or Variable Death Benefit Options
.Guaranteed not to be less than initial face amount net of any loan balance
.Income tax free to named beneficiary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Daily Deductions from Assets
.Mortality and expense risk charges of 0.60% on an annual basis are deducted
from the cash value daily
.Investment advisory fees and other expenses are deducted from the Eligible Fund
values daily
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beginning of Month Charges
.The cost of insurance protection is deducted from the cash value each month
.Minimum Death Benefit Guarantee Charge of $.01 per $1000 face amount monthly
.Admin. Charge 1st yr. $.05 per $1000 face amount monthly; .015 per $1000 face
amount monthly in renewal years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Surrender Charges
.Consists of Deferred Sales Charge and Deferred Administrative Charge (see page
A-16)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Living Benefits
.If policyholder has elected and qualified for disability waiver of premium
rider and becomes totally disabled, company will waive premiums during the
period of disability. Unscheduled payments are not covered by the waiver of
premium rider
.Policy may be surrendered at any time for its cash surrender value
.Deferred income taxes, including taxes on amounts borrowed, become payable upon
surrender
.Grace period for scheduled premiums is 31 days from the due date.
Nonforfeiture options are extended term insurance and paid-up insurance
.Subject to company rules, a lapsed policy may be reinstated within seven years
of date of lapse if it has not been surrendered
- --------------------------------------------------------------------------------
* Percent of Premium after deducting Annual Admin. Charge, Rider Premiums and
Substandard Risk Premiums
A-10
<PAGE>
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME OFFICE
Your request for a particular transaction or your submission of payments or
other items (for example, a returned Policy) is treated as received at
NELICO's Home Office on any day when the New York Stock Exchange is open if it
is received there before the close of regular trading on the New York Stock
Exchange on such day. However, if any such item is received at or after the
above-specified times, the request will be treated as received on the next
such day.
NELICO
NELICO was organized as a stock life insurance company in 1980 under
Delaware law and is authorized to transact a life insurance business 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. The Home Office of NELICO is now at 501 Boylston Street,
Boston, Massachusetts 02116. NELICO's mailing address is: P.O. Box 9116,
Boston, Massachusetts 02117.
The following chart illustrates the relationship of NELICO, the Fixed
Account, the Variable Account and the Eligible Funds.
Premiums and Unscheduled Payments
- --------------------------------------------------------------------------------
NELICO
- --------------------------------------------------------------------------------
(Insurance company subsidiary of MetLife)
Charges are deducted.
Net premiums and net unscheduled payments are allocated to the Policy
Owner's choice of sub-accounts in the Variable Account or to the Fixed
Account.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zenith
Zenith inter-
Zenith Zenith Zenith Zenith Zenith Growth Zenith Zenith Zenith Zenith Zenith national
Fixed Capital Bond Money Man- Stock and Small Bal- Equity Venture Midcap Magnum
Account Growth Income Market aged Index Income Cap anced Growth Value Value Equity
Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account Account Account Account Account Account Account
--------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------
VARIABLE ACCOUNT
-------------------------------------
<S> <C> <C> <C> <C>
Equity- Over- High Asset
Fixed Income seas Income Man-
Account Sub- Sub- Sub- ager
Account Account Account Sub-
Account
-----------------------------------------------
</TABLE>
Sub-accounts buy shares of the Eligible Funds.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
NEW ENGLAND ZENITH FUND
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Back Bay Back Bay Back Bay Westpeak Westpeak Loomis Loomis Alger Davis Goldman Morgan
Growth Advisors Advisors Advisors Stock Growth Sayles Sayles Equity Venture Sachs Stanley
Series Bond Money Managed Index and Small Balanced Growth Value Midcap Inter-
Income Market Series Series Income Cap Series Series Series Value national
Series Series Series Series Series Magnum
Equity
Series
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------
VIP
FUND
VIP FUND II
----------------------------------------
<S> <C> <C> <C>
Equity Overseas High Asset
Income Portfolio Income Manager
Portfolio Portfolio Portfolio
----------------------------------------
</TABLE>
Eligible Funds buy portfolio investments to support values and benefits of the
Policies.
A-11
<PAGE>
POLICY VALUES AND BENEFITS
DEATH BENEFIT
DEATH BENEFIT OPTIONS. On the Policy application, you may choose between two
death benefit options. The scheduled premium and face amount for the Policy
will be the same for a given insured, regardless of which death benefit option
is selected. The death benefit option under a Policy may not be changed.
The Option 1 death benefit provides a death benefit equal to the greater of
(i) the face amount of the Policy and (ii) the Policy's cash value divided by
the net single premium per $1 of death benefit at the insured's attained age.
The alternative in item (ii) means that the death benefit will not be less
than the amount of insurance which could be purchased on that date by a net
single premium equal to the Policy's cash value and is designed to ensure that
the Policy will meet the Internal Revenue Code's definition of life insurance.
Therefore, if the Option 1 death benefit is selected, the death benefit will
not vary unless the death benefit is increased above the face amount to
satisfy federal tax law requirements.
The Option 2 death provides a death benefit equal to the greater of (i) the
face amount of the Policy plus any excess of the Policy's cash value over its
"tabular cash value" and (ii) the Policy's cash value divided by the net
single premium per $1 of death benefit at the insured's attained age.
The Policy's "tabular cash value" is a hypothetical value which is used in
determining the amount of the death benefit provided under Option 2, in
determining whether a scheduled premium payment is not required, pursuant to
the Special Premium Option, and in determining the amount of cash value
available to be withdrawn from the Policy. (See "Special Premium Option" and
"Partial Surrender and Partial Withdrawal".) The "tabular cash value" is the
value which the Policy would have if: (i) all scheduled premiums were paid
when due; (ii) no unscheduled payments, partial surrenders, partial
withdrawals, or loans were made; (iii) the Policy's sub-accounts, and the
Policy's cash value in the Fixed Account, earned a 5% annual net rate of
return; and (iv) the maximum guaranteed cost of insurance rates were deducted
from the cash value. The Policy's payment schedule will affect the amount of
the tabular cash value. The Policy's tabular cash value on any day will be
calculated as if the payment schedule on that day had been in effect since
inception of the Policy.
Under the Option 2 death benefit, the death benefit may increase if the
Policy's sub-accounts (and the Policy's cash value in the Fixed Account) have
earned at greater than a 5% net rate of return, if you have paid more than the
scheduled premiums for the Policy, or if less than the maximum guaranteed cost
of insurance charges have been deducted from the cash value. The death benefit
may decrease if the Policy's sub-accounts have earned at less than a 5% net
rate of return, or if you have made partial withdrawals or loans or exercised
the Special Premium Option. Even if unfavorable net investment experience
reduces the Policy's cash value below its tabular cash value, the Option 2
death benefit will not be less than the Policy's face amount. The amount by
which the tabular cash value exceeds the cash value must be restored to the
Policy, however, either by favorable net investment experience or unscheduled
payments, before further favorable investment experience or unscheduled
payments will increase the death benefit above the face amount.
The premium payment schedule selected for a Policy will affect the amount of
its cash value and therefore may affect the amount of the death benefit
provided under Option 2. As under Option 1, the death benefit under Option 2
will never be less than the amount required to preserve the Policy's status as
life insurance under the Internal Revenue Code.
If two Policies with the same face amount have received the same amount of
premium payments and have earned the same annual net rate of return in excess
of 5%, in the early policy years the Policy with the Option 2 death benefit
will have a higher death benefit, higher cost of insurance charges and lower
cash value than the Policy with the Option 1 death benefit. In later policy
years, however, the death benefit and cash value of the Option 2 Policy will
both be lower than under the Option 1 Policy.
GUARANTEED MINIMUM DEATH BENEFIT
Under both death benefit options, the death benefit is guaranteed not to be
less than the Policy's face amount regardless of the investment experience of
the Policy's sub-accounts, as long as scheduled premiums either have
A-12
<PAGE>
been paid when due or, pursuant to the Special Premium Option, are not
required to be paid. (See "Scheduled Premiums" and "Special Premium Option".)
This amount will be adjusted as described below to determine the death
proceeds actually paid. If, however, an "excess policy loan" exists, the
Policy may terminate even if all scheduled premiums have been paid. (See "Loan
Provision" for the definition of "excess policy loan".)
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The proceeds actually paid to the insured's beneficiary will be the death
benefit provided under the Policy reduced by: (i) any outstanding policy loan
and accrued interest; (ii) (if death occurs during the grace period) the
portion of any unpaid scheduled premium (whether or not its payment is
required) that applies to the period prior to the date of death, and increased
by (i) the portion of any scheduled premium paid for a period beyond the date
of death; and (ii) the amount of any benefit payable by a rider. (See "Loan
Provision", "Scheduled Premiums" and "Additional Benefits by Rider".) The
death benefit may also be adjusted as a result of: (i) a misstatement of the
insured's age or sex made in the application for insurance; (ii) the insured's
suicide within two years from the Policy's date of issue (or less as required
by applicable state law); or (iii) any limits imposed by rider. (See "Limits
to NELICO's Right to Challenge the Policy".)
CASH VALUE
A Policy's cash value equals the total of its cash value held in the
Variable Account, in the Fixed Account and, if there is an outstanding policy
loan, in NELICO's general account as a result of the loan. While a Policy is
in force on a premium paying basis, its cash value equals the net scheduled
premiums paid and net unscheduled payments made; plus or minus any accumulated
net investment experience for the Policy; plus any interest payable on amounts
in the Fixed Account or transferred to NELICO's general account as a result of
policy loans; plus any interest credited to the Policy between the Policy Date
and the investment start date; minus accumulated Monthly Deductions and
monthly cost of insurance charges; minus any cash value withdrawn or
surrendered; and minus deductions from the cash value when you exercise the
Special Premium Option. (See "Premiums", "Net Investment Experience", "Amount
Provided for Investment under a Policy", "Loan Provision", "Deductions from
Cash Value" and "Partial Surrender and Partial Withdrawal".)
The net cash value is the amount which you may obtain upon surrender of the
Policy. The net cash value for a Policy is its cash value reduced by (i) any
outstanding policy loan (and accrued interest) and (ii) any applicable
Surrender Charge, and increased by the portion of any cost of insurance charge
deducted for the period beyond the date of surrender. (See "Loan Provision",
"Surrender Charge" and "Monthly Charges for the Cost of Insurance".) The
amount payable upon surrender may also include an additional benefit if
provided by rider.
The net cash value in the Variable Account may increase or decrease daily
depending on the net investment experience of the Policy's sub-accounts. It is
possible for unfavorable investment experience of the sub-accounts to reduce
the Policy's 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 net cash value will be affected by the premium
payment schedule chosen.
NET INVESTMENT EXPERIENCE
The net investment experience of a Policy's sub-accounts will affect the
Policy's cash value and, in certain circumstances described earlier, may
affect the Policy's death benefit. For purposes of calculating cash values
and, where appropriate, death benefits, the net investment experience of a
Policy's sub-accounts is determined as of the close of regular trading on the
New York Stock Exchange on each day the New York Stock Exchange is open for
trading.
A sub-account's net investment experience for any period equals the
investment experience of the underlying Eligible Fund shares for the same
period, reduced by the amount of the charges against the sub-account for that
period. The investment experience of the underlying Eligible Fund shares is
the increase or decrease in the net asset value (which takes into account the
amount of advisory fees and other expenses charged against the Fund) of such
shares during the period, increased by the amount of any dividends or capital
gains distributions on those shares during the period. Such dividends and
distributions will be reinvested in Eligible Fund shares and will affect
A-13
<PAGE>
subsequent investment experience. Charges against the Policy's sub-accounts
will initially be made only for the mortality and expense risks NELICO
assumes. In the future, NELICO will also impose a charge against the sub-
accounts for income taxes, if appropriate. (See "Charges Against the Eligible
Funds and the Sub-Accounts of the Variable Account" and "Charge for NELICO's
Income Taxes".)
ALLOCATION OF NET PREMIUMS
As of the "investment start date," the net scheduled premium (and any net
unscheduled payment) will be allocated to the Zenith Money Market Sub-Account
until 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. (See "Free Look
Provision". For the definition of the "investment start date," see "Amount
Provided for Investment under a Policy".) You will designate what percentage
of the cash value will be invested thereafter in the various sub-accounts
available to you or in NELICO's Fixed Account. In other words, your selection
of investment options will not take effect until the end of the period,
described above, during which the Policy's cash value is held in the Zenith
Money Market Sub-Account.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
INITIAL AMOUNT. An amount is first provided for investment under a Policy as
of the "investment start date", which 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. (For this purpose, receipt of the
premium payment means receipt by your registered representative, if the
payment is made with the application; otherwise, it means receipt by a NELICO
agency or, in the case of a Policy sold through MetLife Brokerage, receipt by
MetLife Brokerage at its Princeton, New Jersey office.)
If you make a premium payment with the application, the Policy Date is
generally the later of the date Part II of the application has been signed and
receipt of the premium payment. In that case the Policy Date and investment
date are the same. The amount of the premium payment must equal at least 10%
of the annual scheduled premium for the Policy or one monthly scheduled
premium, if you pay premiums monthly. Only one premium payment may be made
during the underwriting period. (A premium payment made before issue will be
maintained by NELICO or an affiliate in the general account, and will not earn
interest prior to the investment start date.) In cases where a premium payment
has been made, the amount provided for investment on the investment start date
is generally equal to the first net scheduled premium plus any net unscheduled
payment made as part of the premium payment. (Special rules apply for payroll
deduction plans.)
If you make a premium payment with the application, the insured will be
covered under a temporary insurance agreement for a limited period that is
described in the temporary insurance agreement form. Coverage under the
temporary insurance agreement will begin on the later of the date when NELICO
receives the premium for the Policy and the date when Part II of the
application is signed. The maximum amount of coverage provided is the lesser
of the amount of insurance applied for and $500,000 for standard risks
($250,000 for substandard risks and $50,000 for persons who are determined to
be uninsurable.) Special rules apply for payroll deduction plans.
If a Policy is issued and accepted, Monthly Deductions and cost of insurance
charges: (i) will begin on the Policy Date even if the Policy issuance was
delayed due to underwriting requirements; (ii) will be deducted at the
beginning of each policy month; and (iii) will be in amounts based on the face
amount of the Policy issued, regardless of the limitations on coverage under
the temporary insurance agreement. Upon declining an application, NELICO will
refund the premium payment made and any unscheduled payment made plus interest
on the unscheduled payment at a rate established by NELICO from time to time.
No premium payment may be submitted with an application for a Policy to be
used in connection with an employee benefit plan under Section 401(a) of the
Internal Revenue Code.
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. The investment start date will be the later of the Policy Date and the
date the premium is received. Cost of insurance deductions and Monthly
Deductions will begin on the Policy Date. Interest at a 5% net rate will be
credited to the Policy for the period, if any, between the Policy Date and the
investment start date. Insurance coverage will begin upon receipt of the
premium.
A-14
<PAGE>
Under limited circumstances, NELICO may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed.
Backdating may be desirable, for example, in order to purchase a particular
Policy face amount for a lower premium, based on a younger insurance age, or,
in the pension plan market, to give all Policies in the plan the same
anniversary date for purposes of pension plan servicing. Backdating in some
cases may result in a Policy with a higher surrender charge. For a backdated
Policy, the Policy Owner must also pay the scheduled premiums payable for the
period between the Policy Date and the investment start date. As of the
investment start date, NELICO will allocate to the Policy those net scheduled
premiums, adjusted for accumulated Monthly Deductions and cost of insurance
charges and interest at a 5% net rate for the period between the Policy Date
and the investment start date.
SUBSEQUENT AMOUNTS. The Policy's cash value on any day reflects only those
net scheduled premium payments and unscheduled payments which have already
been made. However, on each premium due date NELICO transfers to the Policy's
sub-accounts the amount of the net scheduled premium, even if it has not yet
been paid. Therefore, on any premium due date, the amount provided for
investment is the sum of the net cash value on that date, calculated as if
premiums were paid to but not including that date, plus the net scheduled
premium due on that date. If you do not pay a scheduled premium and NELICO
determines its payment is not required, or if you fail to pay a required
scheduled premium and the Policy lapses, NELICO will withdraw from the
Variable Account the net scheduled premium which it advanced on the premium
due date, adjusted for the net investment experience of the Policy's sub-
accounts since that date. (See "Special Premium Option". For a description of
how unscheduled payments are allocated to the Variable Account, see
"Unscheduled Payments". If you do not pay a required scheduled premium, the
Policy may lapse. See "Default and Lapse Options".)
As of each day the New York Stock Exchange is open for trading, the amount
provided for investment in a Policy's sub-accounts will be adjusted to reflect
the net investment experience of those sub-accounts for that day.
"FREE LOOK" PROVISION
You may cancel the Policy within 45 days after the date Part 1 of the
application is signed, within 10 days (or more where required by applicable
state insurance law) after you receive the Policy or within 10 days after
NELICO mails the Notice of Withdrawal Right, whichever is latest. The Policy
may be returned to NELICO or your registered representative. Insurance
coverage ends as soon as the Policy is returned (as determined by its
postmark, if the Policy is mailed.) Within 7 days after receipt of the
returned Policy at NELICO's Home Office, NELICO will refund any scheduled
premium paid (or such other amount that is required by state insurance law)
and any unscheduled payments made before cancellation plus interest on the
unscheduled payments at a rate established by NELICO from time to time. This
provision is referred to in the Policies as "Right to Return the Policy". (See
"Receipt of Communications and Payments at NELICO's Home Office" and see
"Amount Provided for Investment in a Policy's Sub-Accounts" for the definition
of "investment start date".)
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.
DEDUCTIONS FROM PREMIUMS AND UNSCHEDULED PAYMENTS
The amounts allocated to the Variable Account are net scheduled premiums,
which are equal to scheduled premiums less certain deductions, and net
unscheduled payments, which are equal to unscheduled payments less certain
deductions.
From each scheduled premium, the following amounts are deducted to arrive at
a basic scheduled premium: (i) charges for any supplementary benefits provided
by rider; (ii) any extra premiums paid for a Policy in a substandard risk
classification; and (iii) the portion of the annual Policy administrative
charge allocable to the premium. For Policies under which scheduled premiums
are paid annually, the annual Policy administrative charge
A-15
<PAGE>
is $55. This charge will be higher if premiums are paid more frequently than
annually. The amount of the charge will depend on the payment schedule chosen,
but will not exceed $58.41. All of the administrative charges under the
Policies cover the cost of administering the Policies, as well as legal,
actuarial, systems, mailing and other overhead costs connected with NELICO's
variable life insurance operations.
The net scheduled premium which is allocated to the Variable Account is
equal to the basic scheduled premium less the sales charge and the state
premium tax charge.
The net unscheduled payment allocated to the Variable Account equals the
unscheduled payment less the sales charge and the state premium tax charge. No
deductions from unscheduled payments are made for rider benefit charges,
charges for substandard risks or the annual Policy administrative charge.
(1) SALES CHARGE. A charge for sales load will be deducted and will be equal
to 6% of each basic scheduled premium payment during the first 15 policy years
and 6% of each unscheduled payment made regardless of the policy year in which
such unscheduled payment is made.
There is also a Deferred Sales Charge which is deducted only upon surrender,
partial surrender or lapse during the first 15 policy years. (See "Surrender",
"Partial Surrender and Partial Withdrawal" and "Default and Lapse Options".)
The amount of the sales charge in a policy year is not necessarily related to
NELICO's actual sales expenses for that year. Sales charges for Policies sold
under certain group or sponsored arrangements may be less than for other
Policies. (See "Group or Sponsored Arrangements".)
STATE PREMIUM TAX CHARGE. NELICO deducts 2% of each basic scheduled premium
and of each unscheduled payment to cover state premium taxes. These taxes vary
from state to state and the 2% rate reflects an average.
EXAMPLE: The following chart shows the amount of the net scheduled premium
which will be allocated to the Variable Account at the start of each policy
year under a Policy with an annual scheduled premium of $2,000. This example
assumes that the Policy has no rider benefits, that the insured is not in a
substandard risk classification.
<TABLE>
<CAPTION>
BEGINNING OF AMOUNT OF NET
POLICY YEAR SCHEDULED PREMIUM
------------ -----------------
<S> <C>
1-15................................................... $1,789.40
Thereafter............................................. 1,906.10
</TABLE>
If the Policy Owner makes an unscheduled payment of $2,000, the amount of
the net unscheduled payment which will be allocated to the Variable Account is
$1,840, regardless of the policy year in which the unscheduled payment is
made.
SURRENDER CHARGE
During the first 15 policy years, a Surrender Charge will be deducted from
the cash value upon a full or partial surrender or upon lapse of the Policy.
The Surrender Charge consists of a Deferred Sales Charge and a Deferred
Administrative Charge. (Policies issued in certain states may be subject to
reduced Surrender Charges due to applicable insurance law requirements.)
DEFERRED SALES CHARGE. The Deferred Sales Charge is intended to compensate
NELICO partially for expenses incurred in connection with the sale of the
Policies.
The Deferred Sales Charge is based on the lesser of:
(i) the total payments made to the date of surrender or lapse; and
(ii) the Policy's total basic scheduled premiums up to the date of surrender
or lapse, whether or not you have paid each of those premiums. (A basic
scheduled premium is a scheduled premium less any charges for rider
benefits or substandard risk classification and less the portion of the
annual Policy administrative charge allocable to the premium.)
If you have not paid one or more scheduled premiums, the Deferred Sales
Charge percentages will be applied to the Policy's scheduled premiums that you
actually paid. However, any unscheduled payments that you made in
A-16
<PAGE>
that situation, up to the amount of basic scheduled premiums that you did not
pay, will be treated as scheduled premiums in the calculation of the Deferred
Sales Charge. Once the amount of the applicable Deferred Sales Charge is
calculated, using the guidelines described above, it will be deducted from the
Policy's available cash value, regardless of whether that cash value is
derived from scheduled premiums, unscheduled payments or investment
experience.
For Policies under which scheduled premiums are payable annually and which
cover insureds with an issue age of 53 or less, the maximum Deferred Sales
Charge is an amount equal to 24% of the basic scheduled premium for the first
policy year plus 4% of the basic scheduled premiums for policy years two
through ten. Therefore, if all scheduled premiums have been paid under such
Policies, the maximum Deferred Sales Charge is assessed upon surrender or
lapse during the tenth policy year. Thereafter, the maximum charge declines on
a monthly basis, beginning at the start of the eleventh policy year and
reaches 0% during the last month of the fifteenth policy year and thereafter.
The following table shows the Deferred Sales Charge percentage which will
apply upon surrender, partial surrender or lapse in the years indicated under
Policies which cover insureds with an issue age of 53 or less and under which
scheduled premiums are paid annually.
<TABLE>
<CAPTION>
WHICH IS EQUAL TO THE
THE MAXIMUM DEFERRED FOLLOWING PERCENTAGE
SALES CHARGE IS THE OF THE TOTAL ANNUAL
FOR POLICIES WHICH FOLLOWING PERCENTAGE OF BASIC SCHEDULED
ARE SURRENDERED OR ONE ANNUAL PREMIUMS TO DATE OF
LAPSE DURING BASIC SCHEDULED PREMIUM SURRENDER OR LAPSE
------------------ ----------------------- ---------------------
<S> <C> <C> <C>
Entire policy year 1 24% 24.00%
2 28% 14.00%
3 32% 10.66%
4 36% 9.00%
5 40% 8.00%
6 44% 7.33%
7 48% 6.86%
8 52% 6.50%
9 56% 6.22%
10 60% 6.00%
Last month of policy
years 11 48% 4.36%
12 36% 3.00%
13 24% 1.85%
14 12% 0.86%
15 and thereafter 0% 0.00%
</TABLE>
For insureds with an issue age above 53, the percentages which will apply
will be less than or equal to those shown in the table above, with the maximum
percentage occurring in years one through seven for insureds with an issue age
up to 70 and during the first five policy years for insureds with an issue age
of 71 and above.
The rate of the Deferred Sales Charge is the same for Policies under which
scheduled premiums are paid annually and for those under which such premiums
are paid more frequently. Therefore, for Policies with premiums paid more
frequently than annually and covering insureds with an issue age of 53 or
less, the maximum Deferred Sales Charge is also 24% of the first year's basic
scheduled premiums plus 4% of the basic scheduled premiums for policy years
two through ten. If all scheduled premiums have been paid, this maximum charge
is assessed upon lapse or surrender at the end of the tenth year. Thereafter,
the maximum charge under such Policies declines uniformly on a monthly basis,
beginning at the start of the eleventh policy year, and reaches 0% during the
last month of the fifteenth policy year. Although the rate of the Deferred
Sales Charge is the same regardless of whether scheduled premiums are paid
annually or more frequently, for Policies which are surrendered or lapse at
the end of a given policy year, the dollar amount of the charge will be higher
for Policies with scheduled premiums paid more frequently than annually
because the total amount of the basic scheduled premiums is higher. (See
"Scheduled Premiums".)
A-17
<PAGE>
In the case of a partial surrender, a proportionate amount of the Deferred
Sales Charge is deducted from the net cash value remaining after you have
received the amount requested.
DEFERRED ADMINISTRATIVE CHARGE. The Deferred Administrative Charge is
assessed in the following amounts upon surrender, partial surrender or lapse
of the Policy:
<TABLE>
<CAPTION>
DEFERRED ADMINISTRATIVE
FOR POLICIES WHICH ARE CHARGE PER $1,000
SURRENDERED OR LAPSE DURING OF FACE AMOUNT*
--------------------------- -----------------------
<S> <C> <C>
Entire Policy years 1-10 $5.00
Last month of Policy
years* 11 4.00
12 3.00
13 2.00
14 1.00
15 zero
</TABLE>
- --------
* The charge declines monthly in equal dollar amounts after the end of the
tenth policy year.
DEDUCTIONS FROM CASH VALUE
MONTHLY DEDUCTION. On the Policy Date and on the first day of each policy
month, NELICO will make a Monthly Deduction for that policy month from the
Policy's cash value. The Monthly Deduction consists of the following charges:
(i) An administrative charge of $0.015 per $1000 of the Policy's face
amount;
(ii) During the first policy year, an administrative fee of $0.035 per
$1000 of the Policy's face amount to cover expenses related to
issuance of the Policy;
(iii) A minimum death benefit guarantee charge of $0.01 per $1000 of the
Policy's face amount. This charge is to compensate NELICO for the
risk it assumes by guaranteeing that, regardless of the investment
experience of the Policy's sub-accounts, the death benefit will not
be less than the face amount if all required scheduled premiums have
been paid when due and there is no outstanding policy loan. (See
"Adjustments to the Death Proceeds Payable".)
If a Policy loan exists and the Policy's net cash value is insufficient to
cover a Monthly Deduction, the difference will be treated as an excess policy
loan and the Policy may terminate. (See "Loan Provision".)
MONTHLY CHARGES FOR THE COST OF INSURANCE. The cost of 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. The amount at risk is the amount by which the death
benefit on the first day of the policy month, discounted at the monthly
equivalent of 5% per year, exceeds the cash value on the same day after the
Monthly Deduction has been processed. If a policy loan exists and the net cash
value is insufficient to cover the cost of insurance for a policy month, the
difference will be treated as an excess policy loan and the Policy may
terminate. (See "Loan Provision".)
The underwriting classes used in determining cost of insurance rates are
smoker and nonsmoker. Substandard Policies are charged an additional premium
rather than a different cost of insurance rate. That is, cost of insurance
rates for the smoker substandard class are the same as for the smoker standard
class, and cost of insurance rates for the nonsmoker substandard class are the
same as for the nonsmoker standard class. (See "Premiums" and "Guarantee of
Premiums and Certain Charges".)
The cost of insurance rates will generally be more favorable for a nonsmoker
or female insured than for a male smoker insured. Where required by state law,
and for Policies sold in connection with certain employer-sponsored benefit
plans and fringe benefit programs, cost of insurance charges (and Policy
values and benefits) will not vary by the sex of the insured.
A-18
<PAGE>
Eligible group or sponsored arrangements may elect to purchase Policies on a
simplified underwriting basis. Policies issued on a simplified underwriting
basis will have the same cost of insurance rates and basic scheduled premiums
as smoker and nonsmoker fully underwritten Policies. Currently NELICO does not
intend to charge an additional premium for coverage issued on a simplified
underwriting basis unless the insured is in a substandard risk class.
Cost of insurance rates are guaranteed never to be higher than those based
on the 1980 CSO Tables, with smoker/nonsmoker modifications. The cost of
insurance rates actually charged may be lower than the maximum. The level of
the rates charged will vary depending on the insured's sex (if the Policy is
sex-based), age and underwriting class. NELICO's current cost of insurance
rates range from 64% to 100% of the relevant 1980 CSO Tables. NELICO's current
rates reflect actual mortality experience. 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.
CHARGES FOR RIDERS, SUBSTANDARD RISK STATUS AND ANNUAL POLICY ADMINISTRATIVE
CHARGE IF PAYMENT OF A SCHEDULED PREMIUM IS NOT REQUIRED. If you use the
Special Premium Option to skip a scheduled premium payment, NELICO will deduct
from the Policy's cash value charges for any rider benefits under the Policy
and, if applicable to the Policy, for substandard risk status. (See "Special
Premium Option".) The amount deducted will equal 92% of the charges otherwise
payable for the riders or for the Policy's substandard risk classification.
NELICO will also deduct from the cash value 92% of the amount of the Policy's
annual administrative charge which is allocable to the unpaid premium. These
charges are deducted from the Policy's sub-accounts in proportion to the
Policy's cash value then in each such sub-account.
CHARGES FOR ADDITIONAL SERVICES. NELICO reserves the right to charge Policy
Owners a nominal fee, which will be billed directly to the Policy Owner, in
the event that a Policy re-issue or re-dating is requested.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE
ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. NELICO charges the sub-accounts of the
Variable Account for the mortality and expense risks NELICO assumes. The
charge is made daily at an annual rate of .60% of the value of each sub-
account's assets that come from the Policies. The mortality risk NELICO
assumes is that insureds may live for shorter periods of time than NELICO
estimated. The expense risk NELICO assumes is that NELICO's costs of issuing
and administering Policies may be more than NELICO estimated.
CHARGES FOR INCOME TAXES. NELICO currently makes no charge for income taxes
against the Variable Account but in the future NELICO may impose such a
charge. (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 New England 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 New
England Zenith Fund Series (other than the Capital Growth Series) TNE
Advisers, under a voluntary expense deferral arrangement, will bear those
expenses (other than the management fee) which exceed a certain limit in the
year in which they are incurred and will charge those expenses to the series
in a future year when actual expenses of the series are below the limit up
until two years after the end of the fiscal year in which the expense was
incurred. The expense cap and expense deferral arrangement may be terminated
at any time.
A-19
<PAGE>
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 on May 1, 1998, and other expenses actually
incurred for the Series for 1997.
The investment adviser for the VIP Fund and VIP II Fund 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>
TOTAL
PORTFOLIO MANAGEMENT FEES OTHER EXPENSES ANNUAL 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.
GUARANTEE OF PREMIUMS AND CERTAIN CHARGES
NELICO guarantees that it will not increase the amount of the scheduled
premiums, charges deducted from scheduled premiums and unscheduled payments,
the Monthly Deduction and charges to the sub-accounts of the Variable Account
for mortality and expense risks.
A-20
<PAGE>
The monthly cost of insurance rates applicable to a Policy for a given year
will be determined by NELICO on each policy anniversary. The rates vary
monthly and are guaranteed not to be greater than those based on the 1980 CSO
Tables, with smoker/nonsmoker modifications for underwritten risks.
GROUP OR SPONSORED ARRANGEMENTS
Policies may be purchased under group or sponsored arrangements, as well as
on an individual basis. A "group arrangement" includes a program under which a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals on a group basis. Examples of such arrangements are
employer-sponsored benefit plans which are qualified under Section 401 of the
Internal Revenue Code and 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 Policies on an individual basis.
For Policies issued in connection with group or sponsored arrangements,
NELICO may waive or reduce one or more of the following charges: the sales
charge, Surrender Charge, charges for the cost of insurance, mortality and
expense risk charge, administrative charges and/or state premium tax charge
described in "Charges and Expenses". (In addition, the interest rate credited
on amounts taken from the sub-accounts as a result of a Policy loan may be
increased for these Policies.) NELICO will waive or reduce these charges in
accordance with its rules in effect as of the date an application for a Policy
is approved. To qualify for such 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 as indicated
by its term of existence, the purposes for which Policies are purchased and
certain characteristics of its members. The amount of reduction and the
criteria for qualification will reflect the reduced sales effort resulting
from sales to qualifying groups and sponsored arrangements.
NELICO may modify from time to time on a uniform basis, both the amounts of
reductions and the criteria for qualification. Reductions in or waivers of
these charges will not be unfairly discriminatory against any person,
including the affected Policy Owners and all other Policy Owners of Policies
funded by the Variable Account.
The United States Supreme Court has held that certain insurance policies,
the benefits under which vary based on sex, may not be used to fund certain
employer-sponsored benefit plans and fringe benefit programs. Therefore,
NELICO offers Policies which do not vary based on sex for use in connection
with certain employer-sponsored benefit plans and fringe benefit programs.
NELICO recommends that any employer proposing to offer the Policies to
employees under a group or sponsored arrangement consult his or her attorney
before doing so.
PREMIUMS
SCHEDULED PREMIUMS
Scheduled premiums for the Policy are payable until the insured reaches age
100. The amount of the scheduled premiums will depend on the face amount of
the Policy, the age, sex (if the Policy is sex-based) and underwriting class
of the insured, and the premium payment schedule you select. Where required by
state law, and for Policies sold in connection with certain employer-sponsored
benefit plans and fringe benefit programs, premiums (and Policy values and
benefits) will not be affected by the sex of the insured.
If all scheduled premiums are paid when due and there is no excess policy
loan, the Policy will not lapse and will retain its minimum death benefit
guarantee, even if unfavorable investment experience has reduced the cash
value to zero. (See "Loan Provision".) If you have elected the Special Premium
Option and its conditions are met, then even if you do not pay a particular
scheduled premium or premiums, the Policy will not lapse and will continue to
provide the minimum death benefit guarantee, provided there is no excess
policy loan. (See "Special Premium Option".)
The underwriting classes used for determining the level of scheduled
premiums are smoker standard, smoker substandard, nonsmoker standard, and
nonsmoker substandard. Premiums are generally higher for males and smokers,
and are generally lower for females and nonsmokers. Premiums are also
generally higher for Policies
A-21
<PAGE>
issued on older insureds. Scheduled premiums include, where applicable, the
additional premiums which are charged for insureds in a substandard risk
classification and for benefits provided by rider. A credit will be applied
toward the initial scheduled premium under a Policy converted from certain
term insurance that was issued by New England Mutual, NELICO or NELICO's
affiliates. A credit will be applied toward scheduled premiums under a Policy
issued to a home office employee of NELICO on the life of the employee, if the
employee has worked for NELICO for at least one year.
You may elect to have NELICO withdraw scheduled premiums from your bank
checking account or New England Cash Management Trust account. (This service
is known as the Master Service Account arrangement, or "MSA". Scheduled
payments made through MSA may be maintained by NELICO or an affiliate in the
general account pending their due date.)
Scheduled premiums can be paid on an annual, semi-annual or quarterly
payment schedule, or, with NELICO's consent, on a monthly payment schedule.
When premiums are paid more frequently than annually, the total of premiums
paid for a policy year will be higher than one annual premium, reflecting a
charge for additional administrative expenses and the loss of interest. The
premium payment schedule you select will affect the amount of a Policy's cash
value and therefore may affect the amount of the death benefit. For example,
if you pay an annual premium at the beginning of the policy year, your Policy
will experience a larger dollar amount of net investment experience (whether
favorable or unfavorable) by the end of the policy year than if you pay
quarterly premiums.
You can change the schedule of premium payments at any time. A change to a
schedule of less frequent premium payments (e.g., from quarterly to annual)
will become effective after receipt of the request for change at NELICO's Home
Office as of the next premium due date under the new premium payment schedule.
Until then, you will continue paying premiums under the old premium payment
schedule; NELICO will not accept an advance payment of the remaining scheduled
premiums due under the old premium payment schedule or allocate those
scheduled premiums to the Variable Account prior to their due dates under the
old payment schedule, that is, you cannot pay the balance of any premium mode.
A change to a schedule of more frequent premium payments (e.g., from annual to
quarterly) will become effective after receipt of the request for change at
NELICO's Home Office as of the next premium due date under the original
premium payment schedule. (See "Receipt of Communications and Payments at
NELICO's Home Office".)
Scheduled premiums are payable at NELICO's Home Office or at any NELICO
agency on or before their due dates. Net scheduled premiums, after the first,
will be allocated to a Policy's sub-accounts on the premium due dates, not
when they are received. If you exercise the Special Premium Option or fail to
pay a required scheduled premium, NELICO will withdraw from the Variable
Account the net scheduled premium which it advanced on the premium due date,
adjusted for the net investment experience of the Policy's sub-accounts since
that date. (If you do not pay a required scheduled premium, the Policy may
lapse. See "Default and Lapse Options".)
You may elect an automatic premium loan option. Under this option, if you
have not paid a scheduled premium by the end of the grace period, the Policy's
loan value will be used to pay the scheduled premium to the next due date, if
possible, but at least to the next quarterly due date. However, no premium
will be paid if the Policy's loan value is not sufficient to pay a premium to
the next quarterly due date. Loan interest will be charged on automatic
premium loans from the due date of the premium. If at any time the Policy has
an excess policy loan, the Policy may terminate. (See "Loan Provision".) If
you have elected the Special Premium Option, NELICO will first determine
whether the Special Premium Option can be used to satisfy the premium payment
before attempting to pay the premium by means of an automatic premium loan.
UNSCHEDULED PAYMENTS
Except as described below, you may make unscheduled payments at any time
that the Policy is in force on a premium paying basis provided that the
unscheduled payment is at least $25 ($10 if made pursuant to the Master
Service Account or certain other monthly payment arrangements) and, if
required by NELICO, the insured has submitted evidence of insurability
satisfactory to NELICO. In addition, NELICO's consent is required if, in order
to satisfy tax law requirements, the payment would increase the Policy's death
benefit by more than it would increase the cash value. Unscheduled payments
may not be made while scheduled premiums are being waived pursuant to
A-22
<PAGE>
a waiver of premium rider. (See "Additional Benefits by Rider".) NELICO
reserves the right to prohibit or limit the amount of unscheduled payments
under a Policy covering an insured in a substandard risk classification.
You may plan to make a certain amount of unscheduled payments on each policy
anniversary. At your request and subject to NELICO's rules, NELICO will
include this amount of planned unscheduled payment on your premium notice for
premiums due on the policy anniversary. Subject to NELICO's rules, you may
elect to have NELICO withdraw unscheduled payments from your bank checking
account or New England Cash Management Trust account if you are using this
facility to make scheduled premium payments under the Policy. However, you are
required to pay only the scheduled premium in order to keep the Policy in
force on a premium paying basis. There may be cases where the total of all
premiums and payments made could cause the Policy to be a "modified endowment
contract". You could consider the potential tax consequences before planning a
series of unscheduled payments. (See "Tax Considerations".)
Each net unscheduled payment will be allocated to the Policy's sub-accounts
as of the date it is received at NELICO's Home Office. (See "Receipt of
Communications and Payments at NELICO's Home Office".) A net unscheduled
payment will increase the Policy's cash value on the date it is allocated to
the sub-accounts and may increase the Policy's death benefit. (See "Death
Benefit" and "Cash Value".)
RULES FOR CREDITING PAYMENTS TO THE VARIABLE ACCOUNT. NELICO has developed
the following crediting rules for scheduled premiums and other payments
received under a Policy. These rules apply in the case of annual, semi-annual
and quarterly payment frequencies.
Twenty-five days before a premium due date, NELICO will send you a premium
notice indicating the scheduled premium due, any policy loan interest due, and
the amount of any planned unscheduled payment. Payments accompanied by a
premium notice, and payments received by NELICO during the period from 25 days
before the premium due date to 31 days after the due date, whether or not
accompanied by a premium notice, will be applied first to the payment of the
scheduled premium due, next to pay any loan interest due, and any balance will
be applied to the Policy as an unscheduled payment allocated (net of charges)
to the Policy's sub-accounts as of the date it was received. (However, any
payment which is less than the amount of the scheduled premium due will be
treated as an unscheduled payment.) All other payments will be treated as
unscheduled payments.
If premiums are paid monthly, including by means of the Master Service
Account arrangement, they will be credited as agreed by you and NELICO.
Payments made through the MSA arrangement may be maintained by NELICO or an
affiliate in the general account pending crediting. In addition, billing
procedures may differ from those described above for certain group or
sponsored arrangements.
If the Policy has lapsed, and you made an unscheduled payment during the
grace period of the premium in default which is insufficient to pay the
premium due, the amount of the unscheduled payment will be refunded to you.
If a policy loan is outstanding, it may be more advantageous to repay the
loan than to make an unscheduled payment, because the unscheduled payment is
subject to sales and premium tax charges, and the loan repayment is not
subject to charges. (See "Loan Provision" and "Deductions from Premiums and
Unscheduled Payments".) A payment will not be treated as repayment of a policy
loan unless so designated by you.
SPECIAL PREMIUM OPTION
On the Policy application, or while the Policy is in force on a premium
paying basis, you may elect the Special Premium Option. After the first policy
year, this provision allows you not to pay a scheduled premium or premiums
under certain circumstances.
If you have elected this provision and, after the first policy year, you
have not paid a scheduled premium by the end of the grace period for that
premium, payment of the premium will not be required if (i) the Policy's cash
value on the premium due date exceeded its tabular cash value on the same date
by the amount of the scheduled premium, including any substandard risk and
rider premiums due, and (ii) immediately after the Special Premium Option is
used, the amount of any policy loan outstanding plus accrued interest will not
exceed the Policy's loan value. (See "Death Benefit" for the definition of
"tabular cash value" and see "Loan Provision".)
A-23
<PAGE>
Use of the Special Premium Option will reduce the Policy's cash value, and
therefore the Policy's loan value, in the following manner. If NELICO
determines that a scheduled premium payment is not required, it will deduct
from the Policy's sub-accounts an amount to pay for any rider and substandard
risk premiums and the portion of the Policy's annual administrative charge due
on that premium due date. The amount deducted to cover these items will be 92%
of the rider and substandard risk premiums and administrative charge otherwise
payable. This amount will be deducted as of the premium due date and will be
deducted in the same proportion as the Policy's cash value is allocated to the
sub-accounts.
If you have elected both the Special Premium Option and the automatic
premium loan provision, NELICO will first determine whether the Special
Premium Option can be used to satisfy the premium payment before attempting to
pay the premium by means of an automatic premium loan. (See "Scheduled
Premiums".)
You can cancel the Special Premium Option after it has been elected and,
generally, can elect it at any time. The Special Premium Option is not
available to Policies, however, for any period during which scheduled premiums
are paid monthly pursuant to a Policy Owner's election to have NELICO withdraw
premium payments from his or her bank checking account or New England Cash
Management Trust account.
DEFAULT AND LAPSE OPTIONS
A required scheduled premium which is unpaid as of its due date is in
default, but the Policy provides a 31-day grace period for the payment of each
scheduled premium after the first. The insurance continues in full force
during the grace period but, if the insured dies during the grace period, a
prorated portion of the unpaid scheduled premium will be deducted from the
amount otherwise payable.
For 60 days after the due date of a Policy's premium in default, NELICO will
not make the usual Monthly Deductions and cost of insurance deductions from
the Policy's cash value. Therefore, during this period, such Policy's cash
value will not be less than its cash value on the premium due date, adjusted
for the net investment experience of the Policy's sub-accounts and for
interest credited on any cash value in the Fixed Account from the premium due
date to the date of calculation. If the premium in default is paid,
retroactive Monthly Deductions and cost of insurance deductions will be made.
If you surrender the Policy while the premium is in default, the full Monthly
Deduction and a prorated cost of insurance charge will be deducted from the
proceeds.
Upon lapse of a Policy which is in a standard risk classification (and is
not used in connection with an employee benefit plan under Section 401 of the
Internal Revenue Code), any net cash values, reduced by the amount of any
partial surrenders or partial withdrawals made during the grace period, will
automatically be applied as of the due date of the premium in default as Fixed
Extended Term Insurance unless you elect Fixed or Variable Paid-Up Insurance.
Fixed Extended Term Insurance is fixed benefit life insurance for a limited
term with no further premiums due. Paid-Up Insurance is permanent life
insurance with no further premiums due.
You can make or change your election of a lapse option by a written request
at NELICO's Home Office within 60 days after the due date of the premium in
default. (See "Receipt of Communications and Payments at NELICO's Home
Office".)
Unless you have elected and qualify for Variable Paid-Up Insurance, (i) if
the Fixed Paid-Up Insurance Option will provide a death benefit equal to or
greater than the amount of Fixed Extended Term Insurance available for such
Policy, the Fixed Paid-Up Insurance Option will be used, and (ii) if the
insured dies after the end of the grace period but within 60 days after the
due date of the premium in default, the fixed benefit lapse option which will
provide the larger death benefit will be used.
Fixed Extended Term Insurance is not available if the Policy is in a
substandard risk classification or is used in connection with an employee
benefit plan under Section 401 of the Internal Revenue Code.
Fixed Paid-Up Insurance and Fixed Extended Term Insurance will be provided
by using the Policy's net cash value (that is, its cash value less any
outstanding policy loan and accrued interest and less any Surrender Charge
assessed upon lapse) on the due date of the premium in default, reduced by the
amount of any partial surrenders or partial withdrawals made during the grace
period, as a net single premium at the age of the insured on that due date.
The amount of Fixed Extended Term Insurance will equal the death benefit of
the Policy on the due date of
A-24
<PAGE>
the premium in default. If the Policy is continued as Fixed Paid-Up or Fixed
Extended Term Insurance, the cash value on any date will equal the net single
premium which would be required to provide the insurance at the age of the
insured on that date. For 31 days after each policy anniversary, the cash
value of such a policy will not be less than the cash value on that
anniversary. Policy loans are available under Policies continued as Fixed
Paid-Up Insurance but not under Policies continued as Fixed Extended Term
Insurance.
VARIABLE PAID-UP INSURANCE. Variable Paid-Up Insurance is available as a
lapse option if, as of the due date of the premium in default, the Policy's
net cash value, (that is its cash value less any outstanding policy loan and
accrued interest and less any Surrender Charge assessed upon lapse), reduced
by any partial surrenders and partial withdrawals made during the grace
period, is sufficient, when applied as a net single premium at the attained
age of the insured, to purchase Variable Paid-Up Insurance with an initial
amount of at least $5,000. If the net cash value is insufficient to purchase
the minimum required initial amount of Variable Paid-Up Insurance, Fixed Paid-
Up Insurance will be provided. Variable Paid-Up Insurance will not be made
available to Policies in a substandard risk classification.
Variable Paid-Up Insurance is permanent life insurance with no further
premiums due. The death benefit can vary monthly and the cash value can vary
daily, in each case depending on the net investment experience of the Policy's
sub-accounts (and on the interest earned on any of the Policy's cash value in
the Fixed Account). Regardless of investment experience, however, the death
benefit provided will never be less than the initial amount of the Variable
Paid-Up Insurance, if there is no outstanding policy loan.
The death benefit under Variable Paid-Up Insurance will equal the greater of
the Variable Death Benefit and the initial amount of the Variable Paid-Up
Insurance, less any outstanding policy loans and accrued interest. The
Variable Death Benefit in the first policy month under the lapse option equals
the initial amount of the Variable Paid-up Insurance. Thereafter the Variable
Death Benefit may change depending on the net investment experience of the
Policy's sub-accounts and on the sex (if the Policy is sex-based), age and
underwriting class of the insured.
If, for a policy month, the net investment experience of the Policy's sub-
accounts (and the net interest earned on any of the Policy's cash value in the
Fixed Account), plus any cost of insurance adjustment for the Policy, is
greater than it would have been at the monthly equivalent of 5% per year (a
"positive net investment factor"), the Variable Death Benefit will increase.
If the net investment experience of the Policy's sub-accounts (and the net
interest earned on any of the Policy's cash value in the Fixed Account), plus
any cost of insurance adjustment, is less than it would have been at the
monthly equivalent of 5% per year (a "negative investment factor"), the
Variable Death Benefit will decrease. The cost of insurance adjustment for a
Policy, if any, is equal to the difference between the maximum guaranteed cost
of insurance and the actual cost of insurance for the Policy. The amount of
this difference will vary with the sex (if the Policy is sex-based), age and
underwriting class of the insured.
A Policy's Variable Death Benefit under Variable Paid-Up Insurance is
determined monthly as of the Policy's "Monthly Valuation Date". Once
determined, the Variable Death Benefit for a Policy remains the same for that
policy month. The Policy Owner foregoes any increase and avoids any decrease
in the Variable Death Benefit until the next Monthly Valuation Date.
The Variable Death Benefit for a Policy is cumulative. Increases and
decreases in the Variable Death Benefit are carried into each succeeding
policy month. The Variable Death Benefit for a Policy can be higher or lower
than the initial amount of insurance under the Variable Paid-Up Insurance
Option. If the Variable Death Benefit is higher than the initial amount of
insurance, a subsequent positive net investment factor will produce a larger
Variable Death Benefit. If the Variable Death Benefit is lower than the
initial amount, subsequent positive net investment factors must first offset
the amount by which the Variable Death Benefit is lower than the initial
amount; the Variable Death Benefit will then become higher than the initial
amount of insurance if the Policy's sub-accounts experience further positive
net investment factors.
The initial cash value of a Policy continued as Variable Paid-Up Insurance
is its NET cash value as of the due date of the premium in default, reduced by
any partial surrenders or partial withdrawals made during the grace period.
Thereafter, the cash value is determined in the same manner as it is prior to
lapse, except that the charge for the cost of insurance is deducted at the end
of the policy month rather than at the beginning, and there is no Monthly
Deduction. Since there are no Monthly Deductions, generally the cost of
insurance rates actually charged
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<PAGE>
under a Policy continued as Variable Paid-Up Insurance are somewhat higher
than they are under the Policy prior to lapse.
The net cash value of a Policy continued as Variable Paid-Up Insurance,
which is the amount you may obtain upon surrender of the Policy, is its cash
value minus any outstanding policy loan and accrued interest and minus a
prorated charge for the cost of insurance to the date of surrender, if it is
other than the last day of the policy month. No partial withdrawals, premium
payments or unscheduled payments may be made under a Policy continued as
Variable Paid-Up Insurance.
The net cash value of a Policy may increase or decrease between Valuation
Dates, depending on the net investment experience of the Policy's sub-
accounts. There is no guaranteed minimum cash value for a Policy continued as
Variable Paid-Up Insurance.
The amount available to be borrowed at any time under a Policy continued as
Variable Paid-Up Insurance is determined in the same manner as it is prior to
lapse. If an excess policy loan exists under a Policy continued as Variable
Paid-Up Insurance, the Policy may terminate. (See "Loan Provision.") The
Policy provides that you may transfer the amount provided for investment among
the Policy's sub-accounts up to four times in a policy year without NELICO's
consent. NELICO currently allows 12 sub-account transfers per policy year.
REINSTATEMENT. If your Policy has lapsed, it may be reinstated within 7
years after the date of default. If more than 7 years have passed, or if you
have surrendered the Policy, NELICO's consent is required to reinstate.
Reinstatement in all cases is subject to payment of certain charges described
in the Policy and generally will require evidence of insurability that is
satisfactory to NELICO.
OTHER POLICY FEATURES
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after
the end of the "free look" period. The Policy will be security for the policy
loan. The amount available to be borrowed at any time is equal to the loan
value less any outstanding policy loan and accrued interest. NELICO will make
a policy loan as of the policy loan date -- the date as of which 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 NELICO's
administrative procedures for requesting a policy loan. Policy loans may not
be made if the Policy is being continued as Fixed Extended Term Insurance.
The Policy's loan value is equal to: 90% (or more if required by applicable
state insurance law) of the Policy's cash value as of the date of receipt of
the loan request at NELICO's Home Office, projected (assuming a constant
annual rate of return of 5%) to the next policy anniversary or, if earlier, to
the next premium due date; MINUS ANY APPLICABLE SURRENDER CHARGE ON THE NEXT
LOAN INTEREST DUE DATE OR, IF GREATER, ON THE DATE THE LOAN IS MADE; and
discounted at the interest rate (6%) charged on the policy loan. The interest
rate charged on policy loans is an effective rate of 6% per year (using simple
interest during the year). Interest accrues daily, and is due on policy
anniversaries. Any interest remaining unpaid when due will be added to the
outstanding policy loan. (See "Payment of Proceeds".)
If a policy loan is outstanding, it may be more advantageous to repay the
loan than to make an unscheduled payment, because the unscheduled payment is
subject to sales and premium tax charges, and the loan repayment is not
subject to charges. (See "Loan Provision" and "Deductions from Premiums and
Unscheduled Payments".)
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<PAGE>
EXAMPLE: Using the Policy illustrated on page A-53, assume that the Policy's
premiums have been paid when due and that the Policy's sub-accounts have
earned a constant 6% hypothetical gross annual rate of return (equal to a
constant net annual rate of return of 4.57%). After the premium payment on the
10th policy anniversary, the maximum amount that could be borrowed would be
determined as follows under (i) and annual premium payment schedule and (ii) a
quarterly premium payment schedule:
<TABLE>
<CAPTION>
ANNUAL QUARTERLY
------- ---------
<C> <S> <C> <C>
Cash Value after Premium Payment on 10th Policy
(1) Anniversary....................................... $19,411 $18,092
Cash Value Projected at a Constant Annual Rate of
(2) Return of 5% to the
(a) 11th Policy Anniversary........................ 19,796
(b) Next Premium Due Date.......................... 18,169
(3) 90% of Amount Calculated in (2).................... 17,816 16,352
Amount Calculated in (3), Reduced by the Applicable
(4) Surrender Charge.................................. 15,803 14,339
(5) Amount Calculated in (4), Discounted at an Annual
Rate of 6%
Back to the 10th Policy Anniversary............... 14,909 14,127
</TABLE>
Department of Labor ("DOL") regulations set forth requirements for
participant loans under retirement plans subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"). Generally, the DOL regulations will
apply to plans that qualify under Sections 401(a) and 401(k) of the Internal
Revenue Code (the "Code"). If the retirement plan is subject to ERISA, the
plan fiduciary authorized to oversee/direct the plan loan program must fulfill
the requirements of the regulations including charging a "commercially
reasonable" rate of interest. The Policy loan interest rate may not be
considered "commercially reasonable" within the meaning of the DOL
regulations. In addition, the DOL regulations require that a plan loan be
adequately secured but provide that not more than 50% of the participant's
vested account balance (including the Policy cash value) be used as security
for the loan. The DOL regulations and applicable tax law may also contain
other requirements for plan loans. Therefore, plan loan provisions may differ
from Policy loan provisions. If you are a participant in a retirement plan
subject to ERISA, you should consult with the fiduciary administering the plan
loan program. Failure of the plan loan program to comply with the requirements
of the DOL regulations and of tax law may result in tax penalties under the
Code and under ERISA.
EFFECT OF POLICY LOAN. The Policy's cash value in the sub-accounts is
reduced by the amount of a policy loan, as of the date of the policy loan.
Repayment of the policy loan causes the cash value in the sub-accounts to
increase by the amount of the repayment. (See "Receipt of Communications and
Payments at NELICO's Home Office".) NELICO attributes a policy loan to the
Policy's sub-accounts in proportion to the cash value then in each such sub-
account, unless you request otherwise. Similarly, NELICO allocates a policy
loan repayment to the Policy's sub-accounts in proportion to the cash value
then in each, unless you request otherwise.
The amount removed from the Policy's sub-accounts as a result of a policy
loan will earn interest (compounded daily) at an effective rate of 5% per
year, which will be credited to the Policy's sub-accounts annually in
proportion to the Policy's cash value in each sub-account as of the date of
crediting.
The amount removed from the Policy's sub-accounts as a result of a policy
loan is not affected by the investment experience of those sub-accounts from
which the amount provided for investment was withdrawn. Therefore, the death
benefit and the net cash value can be permanently affected by the existence of
any policy loan, whether or not repaid in whole or in part. The amount of any
outstanding policy loan, plus interest accrued thereon, is subtracted from the
amount otherwise payable when the Policy proceeds become payable.
If policy loans plus accrued interest at any time exceed the Policy's cash
value less the applicable Surrender Charge on the next loan interest due date
(or, if greater, on the date the calculation is made), NELICO will notify you
of pending termination. (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 31 days after such notice has been mailed, unless NELICO
has received sufficient repayment to eliminate the excess policy loan. (See
"Default and Lapse Options" and "Receipt of Communications and Payments at
NELICO's Home Office".) If the insured dies after notice but before expiration
of the 31-day period, NELICO will pay the beneficiary the death proceeds. If
the Policy lapses with a loan outstanding, adverse tax consequences may
result. (See "Tax Considerations" below.)
A-27
<PAGE>
SURRENDER
You may surrender a Policy for its net cash value at any time while the
insured is living by a signed written request conforming to NELICO's
administrative procedures. The net cash value of the surrendered Policy will
be determined as of the date on which 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 will be paid unless you elect in
writing to apply all or part of the net cash value to a payment option. (See
"Payment Options.") Upon surrender, the Policy will terminate. A surrender may
result in adverse tax consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER AND PARTIAL WITHDRAWAL
You may make a partial surrender of the Policy to receive a portion of its
net cash value. A partial surrender will reduce the Policy's cash value by the
amount of the cash value requested to be surrendered (including the amount of
any Surrender Charge assessed as a result of the partial surrender). A partial
surrender will cause a proportionate reduction in a Policy's face amount,
tabular cash value, death benefit and basic scheduled premium. No partial
surrender may reduce the face amount below the Policy's required minimum
except with NELICO's consent. Any Surrender Charge applied will reduce any
remaining Surrender Charge under your Policy.
Under a Policy which has the Option 2 death benefit you may make a partial
withdrawal of the amount by which the Policy's cash value exceeds its tabular
cash value. If there is a policy loan outstanding, the amount of the partial
withdrawal will be further limited to prevent the policy loan plus accrued
interest from exceeding the Policy's loan value. (See "Loan Provision".) A
partial withdrawal will reduce the Policy's Option 2 death benefit and cash
value but will not affect its face amount or scheduled premium level. No
Surrender Charge will be assessed against amounts withdrawn.
If you make a request to receive a portion of the cash value under a Policy
with an Option 2 death benefit, unless you specify that the transaction be
processed exclusively as a partial surrender, NELICO will first treat the
transaction as a partial withdrawal of any excess of the cash value over the
tabular cash value and will provide any balance of cash value requested by
means of a partial surrender.
Under a Policy with the Option 1 death benefit, you may make a partial
withdrawal only if the death benefit has increased above the face amount in
order to satisfy Federal tax law requirements. Such a withdrawal may be in an
amount equal to the cash value, minus the face amount multiplied by the net
single premium per $1 of death benefit at the insured's attained age. If there
is a policy loan outstanding, the amount of the partial withdrawal will also
be limited to prevent the policy loan plus accrued interest from exceeding the
Policy's loan value. (See "Loan Provision".) A partial withdrawal under a
Policy with an Option 1 death benefit will reduce the Policy's death benefit
(but not below the face amount) and cash value but will not reduce its face
amount or affect its scheduled premium level. No Surrender Charge will be
assessed against the amount withdrawn.
No more than four partial surrenders and partial withdrawals in total may be
made in any one policy year without the consent of NELICO. Amounts withdrawn
may not be repaid except as scheduled premium payments or unscheduled
payments, which are subject to the charges described under "Deductions From
Premiums and Unscheduled Payments."
A partial withdrawal or partial surrender will reduce proportionately the
cash value in each of the Policy's sub-accounts unless you request otherwise.
The amount of each partial surrender and partial withdrawal made during the
grace period of a premium in default will be subtracted from the net cash
value used to determine the value of the Policy upon lapse. (See "Default and
Lapse Options".)
The net cash value paid upon partial surrender or partial withdrawal will be
determined as of the date on which 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 Policy Owner contemplating a partial withdrawal or surrender transaction
should consult his or her tax advisor as to the tax consequences of the
transaction. A death benefit reduction may cause a Policy to become a
"modified endowment contract". (See "Tax Considerations".)
A-28
<PAGE>
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, (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 have the option to allocate net scheduled premiums and net unscheduled
payments among the sub-accounts of the Variable Account in any combination.
The Policy provides that any portion of a net scheduled premium and net
unscheduled payment allocated to one of the Policy's sub-accounts must be at
least 10% of such premium or payment 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 ten accounts
(including the Fixed Account) at any one time.
You must make the initial election when you apply for the Policy. You may
change the election at any time thereafter. The reallocation will be effective
as to any net scheduled premiums due and net unscheduled payments applied
after the date of receipt at NELICO's Home Office of written notice signed by
you of the change of election in a form satisfactory to NELICO. (See "Receipt
of Communications and Payments at NELICO's Home Office.") You may also request
a reallocation of future net premiums and net unscheduled payments by
telephone. See "Transfer Option" below for information on how to request a
transfer or reallocation by telephone.
TRANSFER OPTION
The Policy provides that you may redistribute the amount provided for
investment in the Policy's sub-accounts up to four times in a policy year
without NELICO's consent. NELICO currently allows 12 sub-account transfers per
policy year. All sub-account transfer requests made at the same time will be
treated as a single redistribution and will be effective at relative net asset
values as of the date of receipt of the transfer request at NELICO's Home
Office. (See "Receipt of Communications and Payments at NELICO's Home Office."
For special rules regarding transfers involving the Fixed Account, see "The
Fixed Account".) Your Policy's cash value may be distributed among no more
than ten accounts (including the Fixed Account) at any one time.
You may request a sub-account transfer or reallocation of future premiums by
written request (which may be telecopied) to NELICO's Home Office or by
telephoning NELICO. To request a transfer or reallocation by telephone, you
should contact your registered representative or contact NELICO at 1-800-200-
2214. Requests for transfers (up to NELICO's current limit per policy year) or
reallocations by telephone will be automatically permitted. NELICO will use
reasonable procedures such as requiring certain identifying information from
the caller, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone are genuine. Any telephone instructions reasonably
believed by NELICO to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. As a result of
this policy, you will bear the risk of loss. If NELICO does not employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, it may be liable for any losses due to unauthorized or fraudulent
instructions.
A-29
<PAGE>
SUBSTITUTION OF INSURED PERSON
NELICO offers a rider benefit under certain Policies that will allow you to
substitute the insured person under your Policy, if you provide satisfactory
evidence that the person proposed to be insured is insurable. The right to
substitute the insured person is subject to certain restrictions and may also
result in a cost or credit to you. This rider may not be approved in every
state and therefore may not be available in every state. Your registered
representative can provide current information on the availability of the
rider. Since substituting the insured person may be a taxable event, you
should consult your tax advisor before substituting the insured person under
your Policy.
PAYMENT OF PROCEEDS
NELICO will ordinarily pay any net cash value, policy loan or death benefit
proceeds from the sub-accounts within 7 days after receipt at NELICO's Home
Office of a request, or proof of death of the insured in the case of a death
benefit payment, in a form satisfactory to NELICO. (See "Receipt of
Communications and Payments at NELICO's Home Office" and "Limits to NELICO's
Right to Challenge the Policy".) However, NELICO may delay payment or
transfers from the sub-accounts: (i) when 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) when the Securities and Exchange Commission
determines that a state of emergency exists which may make payments or
transfers impractical or (iii) at any other time when the Eligible Funds or
the Variable Account may, under applicable laws and regulations, suspend
payment. NELICO may withhold payment of surrender or loan proceeds to the
extent that those proceeds are derived from a Policy Owner's check, or from a
Master Service Account premium transaction, which has not yet cleared. In
those cases, NELICO will process the surrender or loan to the extent of policy
values for which the Policy Owner has made full payment. The balance of the
surrender or loan proceeds will be paid when the Policy Owner's check, or the
Master Service Account premium transaction, has cleared. NELICO may also delay
payment if it considers whether to contest the Policy. NELICO will pay
interest on the death benefit proceeds from the date they become payable to
the date they are paid in one sum or, if a payment option was selected, to the
effective date of the option. (See "Payment Options".)
Death benefit proceeds may be paid pursuant to NELICO's Access Plus program.
If the Access Plus program is elected, an Access Plus account will be
established at State Street Bank & Trust Company at the time that death
benefit proceeds are payable. The Access Plus account provides convenient
access to proceeds, which are maintained in MetLife's general account, through
checkbook privileges with State Street. A beneficiary may elect to have death
benefit proceeds paid through the Access Plus program at any time prior to the
payment of death benefit proceeds.
Payments of net cash value, or of any loan value available, under a fixed-
benefit lapse option or from cash value in the Fixed Account will normally be
paid promptly. However, NELICO has the right to delay such payments for up to
six months from the date of the request. NELICO will pay interest in
accordance with state insurance law requirements on payments that are delayed.
EXCHANGE OF POLICY DURING FIRST 24 MONTHS
At any time during the first 24 months after the date of issue shown in the
Policy while the Policy is in force on a premium paying basis, you may
exchange the Policy without evidence of insurability for a fixed-benefit life
insurance policy. If you exercise this option, you will have to make up any
investment loss experienced under the variable life insurance policy. The
fixed-benefit policy will have guaranteed values which do not vary based on
the investment experience of a separate account. The new policy will have the
same face amount, Policy Date, issue age and risk classification for the
insured as the variable life insurance policy, but will be issued by NELICO or
MetLife, as described below. Premiums for the new policy will be based on the
premium rates for comparable fixed-benefit life insurance policies issued by
NELICO or MetLife which were in effect on the Policy Date of the original
policy. Any riders to the original Policy will be attached to the new policy
if they are available.
Your Policy may be issued or amended with an endorsement providing for an
exchange right to a fixed benefit policy issued by NELICO (if such a policy
was available on the Policy Date of your variable life Policy), or otherwise,
to a fixed benefit policy issued by MetLife. If your Policy does not have such
an endorsement, the exchange right
A-30
<PAGE>
will be to a fixed benefit policy issued by MetLife or, at your option, to a
fixed benefit policy issued by NELICO if such a policy was available on the
Policy Date of your variable life Policy.
The exchange will be effective on the date of receipt of written notice at
NELICO's Home Office in a form satisfactory to NELICO, the Policy and payment
to NELICO of any cost to exchange. (See "Receipt of Communications and
Payments at NELICO's Home Office".)
The cost to exchange will reflect any differences in the premiums and cash
values under the Policy and the new fixed-benefit policy. Therefore, you will
bear the investment risk with respect to any such differences. For this
purpose, cash value of a Policy is determined as of the effective date of the
exchange. Any outstanding policy loan must be repaid on or before the
effective date of the exchange.
PAYMENT OPTIONS
The death benefit or net cash value proceeds of a Policy will be paid in a
lump sum, unless the Policy Owner or payee chooses to apply all or part of the
proceeds under one of the payment options described below. A combination of
payment options can be issued. 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. Proceeds
applied under a payment option will no longer be affected by the investment
experience of the Variable Account. The guaranteed mortality assumption used
in determining payments under an option will not vary based on sex. Once
payments under an option begin, withdrawal rights may be restricted.
(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, but not after the death 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. If, at the death of the
payee, unpaid proceeds remain, they 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, at a rate of not less than 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 accrued interest will be paid in one sum.
(v) SPECIFIED AMOUNT OF INCOME. Proceeds plus interest accrued thereon at a
rate of not less than 3.5% annually, are paid in an amount elected at
the frequency elected until total proceeds have been paid. Any of such
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 life of the surviving payee or 10 years or (iii) while
the two payees are living and, after the death of one payee, two-
thirds of the monthly amount for the life of the surviving payee will
be paid.
If installments under an option would be less than $20, proceeds can be
applied to an option only with the consent of NELICO.
ADDITIONAL BENEFITS BY RIDER
A Policy can include additional benefits that NELICO approves based on
NELICO's standards for issuing insurance and classifying risks. An additional
benefit usually requires an additional premium. An additional benefit is
provided by a rider that is subject to the terms of the Policy. However, rider
benefits are not subject to variation based on the net investment experience
of a Policy's sub-accounts.
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<PAGE>
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.
Reductions in or elimination of term rider coverage does not trigger the
imposition of a surrender charge, and use of a term rider generally reduces
sales compensation. Your registered representative can provide you more
information on the uses of term rider coverage.
The following riders are available:
LEVEL TERM INSURANCE, which provides term insurance;
ACCIDENTAL DEATH BENEFIT, which provides additional insurance if death
results from accidental bodily injury;
OPTIONS TO PURCHASE ADDITIONAL LIFE INSURANCE, which provides the right
to purchase additional insurance on the life of the insured, without proof
of insurability;
WAIVER OF SCHEDULED PREMIUMS -- DISABILITY OF INSURED, which provides for
waiver of scheduled premiums for the total disability of the insured;
WAIVER OF SCHEDULED PREMIUMS -- DISABILITY OF APPLICANT, which provides
for waiver of scheduled premiums for the total disability of the person
named in the rider;
WAIVER OF SCHEDULED PREMIUMS -- DEATH OF APPLICANT, which provides for
waiver of scheduled premiums for a limited period upon the death of the
person named in the rider;
WAIVER OF SCHEDULED PREMIUMS -- DEATH OR DISABILITY OF APPLICANT, which
provides for waiver of scheduled premiums for a limited period upon the
death or disability of the person named in the rider;
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.
Certain riders are available only for sex based Policies. Not all riders may
be available to you and riders in addition to those listed above may be made
available. You should consult your registered representative regarding the
availability of particular riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application for the Policy; however, the
Policy Owner can be changed from time to time. The new Policy Owner will
succeed to all of the rights of the former Policy Owner, including the right
to make a further change of Policy Owner. At the death of the Policy Owner,
his or her estate will be the Policy Owner, unless a successor Policy Owner
has been named. The rights of the Policy Owner (except for rights to payment
of benefits) will terminate at the death of the insured, except for rights to
payment of benefits.
The beneficiary is named in the application for the Policy; however, the
beneficiary can be changed from time to time before the death of the insured.
The beneficiary has no rights in the Policy until the death of the insured. An
individual must survive the insured to qualify as beneficiary; if none
survives, the proceeds will be paid to the 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. 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.
An absolute assignment of the Policy by the Policy Owner is a change of
Policy Owner and beneficiary to the assignee. A collateral assignment of the
Policy by the Policy Owner is not a change of Policy Owner or beneficiary;
however, their rights will be subject to the terms of the assignment.
Assignments will be subject to all payments made and actions taken by NELICO
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.)
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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 acts as the funding vehicle for certain
variable life insurance policies issued by NELICO 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 ("SEC") under the Investment
Company Act of 1940 as a unit investment trust. Registration under the
Investment Company Act of 1940 does not involve supervision by the SEC of the
management or investment practices or policies of the Variable Account or of
NELICO. However, both NELICO and the Variable Account are subject to
regulation by the Massachusetts Insurance Commissioner and to the insurance
laws and regulations of all jurisdictions in which NELICO is authorized to do
business.
Although the assets of the Variable Account are owned by NELICO, applicable
law provides that the portion of the Variable Account assets equal to the
reserves and other liabilities of the Variable Account may not be charged with
liabilities that arise out of any other business NELICO may conduct. NELICO
believes this means that the assets of the Variable Account equal to the
reserves and other liabilities of the Variable Account are not available to
meet the claims of NELICO's general creditors, and may only be used to support
the cash values under its variable life insurance policies issued by the
Variable Account. But NELICO may transfer to its general account assets which
exceed the reserves and other liabilities of the Variable Account. Before
making any such transfer, NELICO will consider any possible adverse impact the
transfer might have on the Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of NELICO's
other income or realized and unrealized capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 16 investment sub-accounts, each of which
invests in the shares of an Eligible Fund. The sub-accounts of the Variable
Account are:
-- The Zenith Money Market Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Back Bay Advisors Money Market
Series of the New England Zenith Fund.
-- The Zenith Bond Income Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Back Bay Advisors Bond Income
Series of the New England Zenith Fund.
-- The Zenith Capital Growth Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Capital Growth Series of the New
England Zenith Fund.
-- The Zenith Stock Index Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Westpeak Stock Index Series of the
New England Zenith Fund.
-- The Zenith Managed Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Back Bay Advisors Managed Series of the
New England Zenith Fund.
-- The Zenith Growth and Income Sub-Account -- Amounts credited to this
sub-account are invested in shares of the Westpeak Growth and Income
Series of the New England Zenith Fund.
-- The Zenith Small Cap Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Loomis Sayles Small Cap Series of the New
England Zenith Fund.
-- The Zenith Equity Growth Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Alger Equity Growth Series of the
New England Zenith Fund.
-- The Zenith Balanced Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Loomis Sayles Balanced Series of the New
England Zenith Fund.
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<PAGE>
-- The Zenith Venture Value Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Davis Venture Value Series of the
New England Zenith Fund.
-- The Zenith Midcap Value Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Goldman Sachs Midcap Value Series
(formerly the Loomis Sayles Avanti Growth Series) of the New England
Zenith Fund.
-- The Zenith International Magnum Equity Sub-Account -- Amounts credited
to this sub-account are invested in shares of the Morgan Stanley
International Magnum Equity Series of the New England Zenith Fund.
-- The Equity-Income Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Equity-Income Portfolio of the VIP Fund.
-- The Overseas Sub-Account -- Amounts credited to this sub-account are
invested in shares of the Overseas Portfolio of the VIP Fund.
-- The High Income Sub-Account -- Amounts credited to this sub-account are
invested in shares of the High Income Portfolio of the VIP Fund.
-- The Asset Manager Sub-Account -- Amounts credit to this sub-account are
invested in shares of the Asset Manager Portfolio of the VIP Fund II.
The New England Zenith fund is an open-end, diversified management company
organized for the purpose of providing a vehicle for the investment of assets
held in various separate investment accounts, including the Variable Account,
established by NELICO or by 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 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.
For each day when the New York Stock Exchange is open for trading, the
Variable Account purchases or redeems shares of the Eligible Fund portfolios
based on, among other things, the amount of net premiums and net unscheduled
payments invested in the Variable Account, transfers among sub-accounts of the
Variable Account, policy loans, policy loan repayments, surrender and
withdrawal payments and death benefit payments to be effected on that day.
Such purchases and redemptions are effected at the net asset value per share
for each Eligible Fund portfolio determined as of the close of regular trading
on the New York Stock Exchange on that same day.
The investment objectives of the Eligible Funds' portfolios currently
available to Policy Owners through each corresponding sub-account are set
forth below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, their investment objectives,
policies and restrictions, their expenses and other aspects of their
operation, as well as a full description of risks related to investment in the
Eligible Funds, is contained in the attached Eligible Fund prospectuses, which
should be read and retained together with this prospectus, as well as in the
New England Zenith Fund's Statement of Additional Information which may be
obtained free of charge from New England Securities, and in the Statement of
Additional Information for the VIP Fund and VIP Fund II which may be obtained
free of charge from Fidelity Distributors Corporation.
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 Money Market Sub-Account invests in shares of the New England
Zenith Fund's Back Bay Advisors Money Market Series. Its 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.
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<PAGE>
The Zenith Bond Income Sub-Account invests in shares of the New England
Zenith Fund's Back Bay Advisors Bond Income Series. Its investment objective
is to provide a high level of current income consistent with protection of
capital.
The Zenith Capital Growth Sub-Account invests in shares of the New England
Zenith Fund's Capital Growth Series. Its 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 Stock Index Sub-Account invests in shares of the New England
Zenith Fund's Westpeak Stock Index Series. Its investment objective is to
provide investment results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The Stock Index
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 Managed Sub-Account invests in shares of the New England Zenith
Fund's Back Bay Advisors Managed Series. Its 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 Growth and Income Sub-Account invests in shares of the New
England Zenith Fund's Westpeak Growth and Income Series. Its 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 Midcap Value Sub-Account invests in shares of the New England
Zenith Fund's Goldman Sachs Midcap Value Series. Its investment objective is
long-term capital appreciation. The Series invests, under normal
circumstances, substantially all of its assets in equity securities of
companies with public stock market capitalizations within the range of the
market capitalizations of companies constituting the Russell Midcap Index at
the time of investment.
The Zenith Small Cap Sub-Account invests in shares of the New England Zenith
Fund's Loomis Sayles Small Cap Series. Its 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 Balanced Sub-Account invests in shares of the New England Zenith
Fund's Loomis Sayles Balanced Series. Its 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 International Magnum Equity Sub-Account invests in shares of the
New England Zenith Fund's Morgan Stanley International Magnum Equity Series.
Its investment objective is long-term capital appreciation through investment
primarily in equity securities of non-U.S. issuers, in accordance with the
EAFE country weightings determined by the Series' sub-adviser. Under normal
circumstances at least 65% of the total assets of the Series will be invested
in equity securities of issuers in at least three countries outside the United
States.
The Zenith Venture Value Sub-Account invests in shares of the New England
Zenith Fund's Davis Venture Value Series. Its 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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<PAGE>
The Zenith Equity Growth Sub-Account invests in shares of the New England
Zenith Fund's Alger Equity Growth Series. Its 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 Equity-Income Sub-Account invests in shares of the VIP Fund's Equity-
Income Portfolio. Its 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 Overseas Sub-Account invests in shares of the VIP Fund's Overseas
Portfolio. Its 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 High Income Sub-Account invests in shares of the VIP Fund's High Income
Portfolio. Its 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 Asset Manager Sub-Account invests in shares of the VIP Fund II Asset
Manager Portfolio. Its 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.
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<PAGE>
Policy Owners may also diversify by selecting the Zenith Managed Sub-
Account, Zenith Balanced Sub-Account or the Asset Manager Sub-Account, since
each generally invests its assets at most times in a combination of bonds,
stocks and short term instruments, in varying proportions depending upon the
investment adviser's evaluation of the economy and financial markets. The
Asset Manager Portfolio has the ability to invest its stock portfolio more
aggressively than the Back Bay Advisors Managed Series. You may also wish to
diversify your cash value by country. The Overseas Sub-Account and Zenith
International Magnum Equity Sub-Account allow you to participate primarily in
companies and economies outside the United States.
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types
of investments you have and your own assessment of future economic and
financial market conditions.
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,
come L.P.*
Loomis Sayles Small Cap TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Loomis Sayles Balanced TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Morgan Stanley Interna- TNE Advisers, Inc. Morgan Stanley Asset Management,
tional Magnum Equity Inc.
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 Se-
lected Advisers-NY, Inc., a wholly-owned subsidiary of Davis Selected.
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak Growth and Income Series, Goldman Sachs Midcap Value Series
and Loomis Sayles Small Cap Series, TNE Advisers became the adviser on May 1,
1995. Prior to that date those series were advised by their current sub-
adviser, except as follows. New England Mutual served as investment adviser to
the Back Bay Advisors Money Market and Back Bay Advisors Bond Income Series
until September 10, 1986 when Back Bay Advisors assumed New England Mutual's
responsibilities under the investment advisory agreements with those Series.
Back Bay Advisors served as investment adviser to the Westpeak Stock Index
Series until August 2, 1993, when Westpeak became the investment adviser. The
Capital Growth Series was managed by Loomis, Sayles until March 1, 1990, when
its Capital Growth Management Division was reorganized into CGM. The Morgan
Stanley International Magnum Equity Series' sub-adviser was Draycott Partners,
Ltd. until May 1, 1997, when Morgan Stanley Asset Management became the sub-
adviser. The Goldman Sachs Midcap Value Series' sub-adviser was Loomis, Sayles
until May 1, 1998, when Goldman Sachs Asset Management became the sub-adviser.
For more information about the Series' advisory agreements, see the Zenith
Fund prospectus attached at the end of this prospectus and the Zenith Fund's
Statement of Additional Information.
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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 option may
not be approved by every state insurance department and thus may not be
available in every state. As of the date of this prospectus the Fixed Account
has not received approval in New Jersey, New York and Pennsylvania. NELICO is
not currently seeking approval of the Fixed Account in any of those states.
DISTRIBUTION AGREEMENT
Applications for the Policies are solicited by agents who are licensed by
state insurance authorities to sell NELICO's variable life insurance policies
and who 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 under the Securities Exchange
Act of 1934 as a broker-dealer 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, acts as the principal underwriter of the
Policies under a Distribution Agreement between NELICO and New England
Securities.
Under the Distribution Agreement, NELICO will pay the following sales
expenses: general agent and agency manager's compensation, agents' training
allowances, agency expense allowances, deferred compensation and insurance
benefits of agents, general agents and agency managers and advertising
expenses and all other expenses of distributing the Policies.
Also, commissions will be paid by NELICO to the agent involved in the sale
of a Policy generally as follows: agents receive the equivalent of not more
than 50% of the scheduled premium paid in the first policy year; in the second
through sixth policy years, agents receive not more than 8% of the scheduled
premium paid for a given year; in the seventh through tenth policy years,
agents receive not more than 4% of the scheduled premium paid for a given
year; in the subsequent years agents receive not more than 2% of the scheduled
premium paid for a given year. Agents receive a commission of 3% of each
unscheduled payment made. The amount of commissions for extra premiums for a
Policy covering an insured in a substandard risk classification will be
determined by NELICO's rules and practices current at the time such extra
premiums are charged. Additional commissions are paid based on premiums paid
for benefits purchased by rider. NELICO may recapture up to 50% of first year
commissions paid to the agent if the Policy is not continued after the first
policy anniversary. Agents with fewer than 4 years of service may be
compensated differently. Agents who meet certain productivity and persistency
standards in selling policies issued by NELICO may be eligible for additional
compensation. Non-cash forms of compensation may also be paid. Sales expenses
in any year are not equal to the deduction for sales load in that year.
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. New England Securities is principal
underwriter for New England 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 and 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 the scheduled premium in the first
policy year, 5%
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in the second through tenth policy years, 2% in the eleventh through twentieth
policy years, and 3% of unscheduled payments. 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 has the right to challenge the validity of a Policy or
rider for misrepresentations made in the application. However, NELICO cannot
make such a challenge to the death benefit of a Policy or rider which has been
in force during the life of the insured for 2 years from the date of issue,
or, with respect to the portion of the death benefit resulting from an
underwritten unscheduled payment, for 2 years (during the life of the insured)
from the date the unscheduled payment is received.
MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated in the Policy application, the
Policy's cash value and death benefit will be what the premiums paid and
unscheduled payments made would have purchased based on the insured's true age
and, if the Policy is sex-based, on the insured's true sex.
SUICIDE
If the insured commits suicide within two years from the Policy's date of
issue (or less as required by the applicable state law), the death benefit
will be limited to the sum of all scheduled premiums actually paid and
unscheduled payments made, minus any outstanding policy loan and accrued
interest, and minus the amount of each partial withdrawal and partial
surrender made (or such greater amount required by state law).
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 represents
what NELICO believes to be 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. Furthermore, 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
advisors for more complete information and advice.
DEFINITION OF LIFE INSURANCE. Section 7702 of the Internal Revenue Code
defines a life insurance contract for Federal income tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the Policy is not
directly addressed by Section 7702 or proposed regulations issued under that
section. The presence of these Policy features, the absence of final
regulations, and the lack of other pertinent interpretations of Section 7702,
thus create some uncertainty about the application of Section 7702 to the
Policy.
Nevertheless, NELICO believes that the Policy qualifies as a life insurance
contract for federal income tax purposes. This means that:
. the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
. the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
Because of the absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether substandard risk and
automatic issue Policies or Policies with term riders added will, in all
cases, meet the statutory life insurance contract definition. If a Policy were
determined not to be a life insurance contract for
A-39
<PAGE>
purposes of Section 7702, such Policy would not provide most of the tax
advantages normally provided by a life insurance contract.
NELICO thus reserves the right to make changes in the Policy if such changes
are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes.
TAXATION OF ACCELERATED BENEFITS RIDER. NELICO believes that payments
received under an accelerated benefits rider it makes available will qualify
as an accelerated death benefit under the Code. (See "Acceleration of Death
Benefit Rider" for more information regarding the rider.) Pursuant to the
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 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. With certain exceptions discussed below, a Policy will not have the
potential to be classified as a modified endowment contract unless it was
issued on or after June 21, 1988.
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NELICO believes any policy loans received under such
Policies will be treated as indebtedness of the owner and will not be treated
as taxable income to you. This assumes that the Policy has not lapsed, been
surrendered or terminated. As a general rule, policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of the Policy if the
net cash surrender value of the Policy is greater than the investment in the
Policy less prior distributions from the Policy that were not taxed. If a
Policy has a policy loan and is surrendered or lapses, the policy loan is
treated as a distribution and would be taxable if there is a gain in the
Policy. In that case, the gain in the Policy would be taxable even if the
Policy has no net cash surrender value. If you incur a loss upon the surrender
it is not likely to be deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you
unless it is greater than the investment in the Policy less the untaxed
portions of any prior distributions. The Internal Revenue Code does provide,
however, that in certain situations in the first 15 years of the Policy
partial surrenders may be taxable, in whole or part, if the net cash surrender
value is greater than the total investment in the Policy less the previous
untaxed distributions. This may be the case even if the amount of the partial
surrender is less than the investment in the Policy. The exercise of an
accelerated benefits rider, in whole or in part, may be treated as a surrender
or partial surrender.
MODIFIED ENDOWMENT CONTRACTS. A modified endowment contract is a life
insurance contract issued on or after June 21, 1988, which fails to satisfy a
"7-pay test". In general, a Policy will fail to satisfy the 7-pay test if the
cumulative amount (both scheduled premiums and unscheduled payments) paid
under the Policy at any time during the first seven policy years exceeds the
sum of the net level premiums that would have been paid on or before such time
had the Policy provided for paid up future benefits after the payment of seven
level annual premiums. (The amount of premiums payable under the 7-pay test
are calculated based upon certain assumptions regarding the Policy's earnings
and the use of a reasonable mortality charge. Variable Account investment
experience does not affect whether or not a Policy will become a modified
endowment contract.) Riders to the Policy are considered part of the Policy
for purposes of applying the 7-pay test. A term rider on the insured issued in
New York could cause the Policy to be treated less favorably for purposes of
the 7-pay test. If there is a reduction in the Policy's future benefits (for
example, as a result of a partial surrender or partial exercise of the
accelerated benefits rider, or because you allow the Policy to lapse to Paid-
Up Insurance) during the first seven policy years the 7-pay test will be
applied as if the Policy had originally been issued at the reduced face
amount. Any Policy received in exchange for a modified endowment contract will
also be a modified endowment contract.
Your registered representative can provide you with information about the
maximum amount of scheduled premiums and unscheduled payments which you can
make under the Policy during the first seven policy years
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<PAGE>
and still satisfy the 7-pay test. This information will be based upon NELICO's
current understanding of the Federal tax law. As is the case with any
provision of the Internal Revenue Code, there is no assurance that the
Internal Revenue Service will agree with NELICO's interpretation. NELICO will
monitor any IRS announcements or rulings concerning compliance with the 7-pay
test.
MATERIAL CHANGES. If a "material change" in the benefits or other Policy
terms occurs under a Policy which has satisfied the 7-pay test, the Policy may
be treated as a new Policy entered into on the day on which the material
change occurred. The Policy will be retested under the 7-pay test, after
making certain adjustments to reflect the Policy's existing cash value. Any
increase in future benefits under the Policy may constitute a material change
unless the increase is due to the payment of premiums necessary to fund the
Policy's lowest death benefit payable in the first seven policy years, or the
crediting of interest or other earnings with respect to such premiums.
If you do not wish to have the Policy become a modified endowment contract,
you may be required to limit the payment of premiums under the Policy at some
point (or limit your reduction of benefits). This may be the case even if no
unscheduled payments have been made for the Policy. The point at which you may
be required to limit the payment of scheduled premiums will depend upon the
issue age, sex and underwriting class of the insured, investment experience
and the amount of any previous unscheduled payments. You may limit payment of
scheduled premiums by use of the Special Premium Option, in those situations
where it is applicable, or by allowing the Policy to lapse to paid-up
insurance. (See "Special Premium Option" and "Default and Lapse Options".)
Regardless of when it was issued, if a Policy described in this prospectus
is exchanged on or after June 21, 1988 for another life insurance policy,
including a fixed-benefit policy pursuant to the twenty-four month exchange
right, the new insurance policy should be reviewed to determine how the rules
regarding modified endowment contracts may apply to the new policy. (See
"Exchange of Policy During First 24 Months".)
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent the
cash value of the Policy exceeds your investment in the Policy (i.e.
will be treated as income first).
(b) Loans (including any unpaid interest) are considered distributions even
if the amount borrowed is retained by NELICO as a premium. Your
investment in the Policy will be increased by the amount of any prior
loan that was included in your gross income.
(c) A policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the
Policy, the collateral assignment is a distribution which will subject
any gain in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by
NELICO or its affiliates to the same Policy Owner during any calendar
year shall be treated as one modified endowment contract.
(e) Payments under the accelerated benefits rider may be treated as
distributions that are subject to taxation under these rules if the
payments are from a Policy that is a modified endowment contract.
Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy).
If a Policy becomes a modified endowment contract, distributions made during
the policy year in which it becomes a modified endowment contract,
distributions in any subsequent policy year and distributions within two years
before the Policy becomes a modified endowment contract will be subject to the
tax treatment described
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<PAGE>
above. This means that a distribution from a Policy that is not a modified
endowment contract could later become taxable as a distribution from a
modified endowment contract. In addition, regulations or other interpretations
may be issued which will apply similar tax treatment to other distributions
made in anticipation of a Policy becoming a modified endowment contract.
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.
EFFECTIVE DATE. As explained above, the rules regarding modified endowment
contracts apply only to Policies issued on or after June 21, 1988. For this
purpose, the following Policies, even if issued before June 21, 1988, will be
considered issued on or after June 21, 1988:
(a) a Policy under which, after June 20, 1988, the death benefit is
increased or an additional benefit (e.g. a Policy rider) is added if,
prior to June 21, 1988, the Policy Owner did not have the right to
obtain such increase or addition without submitting additional evidence
of insurability;
(b) a Policy issued after June 20, 1988, upon conversion of a term life
policy; and,
(c) in certain cases, a Policy under which the death benefit payable as of
October 20, 1988, increases by more than $150,000.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy. Regulations specifying the
diversification requirements have been issued by the Department of Treasury,
and NELICO believes it complies fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of additional
guidance prescribing the circumstances in which an owner's control of the
investments of a separate account may cause a Policy Owner, rather than the
insurance company, to be treated as the owner of the assets in the separate
account. If a Policy Owner is considered the owner of the assets of the
Separate Account, income and gains from the Account would be included in the
Owner's gross income.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it determined that the owners were not owners of separate
account assets. For example, a Policy Owner has additional flexibility in
allocating payments and cash values. These differences could result in the
owner being treated as the owner of a pro rata share of the assets of the
Separate Account. In addition, NELICO does not know what standards will be set
forth in the additional guidance which the Treasury has stated it expects to
be issued. NELICO therefore reserves the right to modify the Policy as
necessary to attempt to prevent the Policy Owner from being considered the
owner of the assets of the Separate Account.
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 a 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.
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<PAGE>
If the Policy is purchased as part of a pension or profit-sharing plan
qualified under Section 401 of the Code, the current cost of insurance for the
net amount at risk is treated as a "current fringe benefit" and is required to
be included annually in the plan participant's gross income. This cost
(generally referred to as the "P.S. 58" cost) is reported to the participant
annually. If the plan participant dies while covered by the plan and the
Policy proceeds are paid to the participant's beneficiary, then the excess of
the death benefit over the cash value will not be subject to Federal income
tax. However, the cash value will generally be taxable to the extent it
exceeds the participant's cost basis in the Policy. The participant's cost
basis will generally include the costs of insurance previously reported as
income to the participant. Special rules may apply if the participant had
borrowed from his cash value or was an owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased
by a tax qualified plan.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of the Policies in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement 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. 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-43
<PAGE>
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
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 Principal of The
127 Tarbox Road Vermont Partnership, a business consulting firm located in
Jericho, VT 05465 Jericho, Vermont since 1989; formerly, Director 1989-1996 of
New England Mutual.
Edward A. Fox Director of NELICO since 1996 and Chairman of the Board of
RR Box 67-15 SLM Holdings since 1997; formerly, Director 1994-1996 of New
Harborside, ME 04642 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, television
Adam Smith's Money journalist, and editor.
World 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 1987-1996
74 Tater Street of New England Mutual and Executive Director and Chief
Mont Vernon, NH 03057 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 law firm of
Howard, Darby & Levin Howard, Darby & Levin in New York City.
1330 Avenue of the
Americas
New York, NY 10019
Harry P. Kamen Director of NELICO since 1996 and Chairman of Metropolitan
Metropolitan Life Life Insurance Company since 1998; formerly, Chairman and
One Madison Avenue Chief Executive Officer 1997- 1998; Chairman, President, and
New York, NY 10010 Chief Executive Officer 1995-1997 and Chairman and CEO 1993-
1995 of Metropolitan Life.
Terence Lennon Director of NELICO since 1996 and Senior Vice President of
Metropolitan Life Metropolitan Life Insurance Company since 1994; formerly,
One Madison Avenue Assistant Deputy Superintendent and Chief Examiner 1984-1994
New York, NY 10010 of the New York Insurance Department.
Bernard A. Leventhal Director of NELICO since 1996; formerly, Vice Chairman of
Burlington Industries the Board of Directors 1995-1998 of Burlington Industries,
1345 Avenue of the Inc.; President since 1978 and Corporate Group Vice
Americas President since 1985 and Director since 1990 of Burlington
New York, NY 10105 Menswear Division.
</TABLE>
A-44
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
Thomas J. May Director of NELICO since 1996 and Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since 1994;
800 Boylston Street formerly, Director 1994-1996 of New England Mutual;
Boston, MA 02199 President and Chief Operating Officer 1993-1994 of Boston
Edison Co.
Stewart G. Nagler Director of NELICO since 1996 and Senior Executive Vice
Metropolitan Life President and Chief Financial Officer of Metropolitan Life
One Madison Avenue Insurance Company since 1986.
New York, NY 10010
Rand N. Stowell Director of NELICO since 1996 and President of United Timber
United Timber Corp. Corp. of Dixfield, Maine; formerly, Director 1990-1996 of
P.O. Box 650 New England Mutual.
Pine Street
Dixfield, ME 04224
Alexander B. Trowbridge Director of NELICO since 1996 and President of Trowbridge
Trowbridge Partners Partners, Inc. in Washington, DC; formerly, Director 1983-
Inc. 1996 of New England Mutual.
1317 F Street, N.W.,
Suite 500
Washington, D.C. 20004
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
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 1992-1994 of Keyport Life Insurance.
George J. Maloof Senior Vice President of NELICO since 1996; formerly, Vice
President 1991-1996 of New England Mutual.
</TABLE>
A-45
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
Thomas W. McConnell Senior Vice President of NELICO since 1996 and Director,
Chief Executive Officer and President of New England
Securities Corporation since 1993; formerly, National Sales
Manager 1993; of Alliance Fund Distributors; National Sales
Manager 1992-1993 of Equitable Capital Securities.
Thomas W. Moore Senior Vice President of NELICO since 1996; formerly, Vice
President 1990-1996 of New England Mutual.
Robert W. Powell President, Life Brokerage (a business unit of NELICO) since
1996; formerly, Officer-In-Charge 1994-1996 of MetLife
Brokerage (a subsidiary of Metropolitan Life Insurance
Company) and Marketing Vice President 1988-1994 of MetLife.
Richard A. Robinson Second Vice President and chief accounting officer of NELICO
since 1998; formerly, Second Vice President 1997-1998 of
NELICO; Manager of Life Insurance Accounting 1994-1997 and
Chief Accountant 1992-1994 of Liberty Life Assurance
Company.
Robert E. Schneider Executive Vice President and Chief Financial Officer of
NELICO since 1996; formerly, Director, Executive Vice
President and Chief Financial Officer 1993-1996 and
Executive Vice President and Chief Financial Officer 1990-
1993 of New England Mutual.
John G. Small, Jr. President, New England Services (a business unit of NELICO)
since 1997; formerly, Senior Vice President 1996-1997 of
NELICO and Senior Vice President 1990-1996 of New England
Mutual.
Ellen D. Sullivan Senior Vice President and Associate General Counsel of
NELICO since 1997; formerly, Vice President and Counsel in
1996 of NELICO; Vice President and Counsel 1994-1996 and
Second Vice President and Counsel 1985-1994 of New England
Mutual.
H. James Wilson Executive Vice President and General Counsel of NELICO since
1996; formerly, Executive Vice President and General
Counsel 1993-1996, Senior Vice President and General
Counsel 1992-1993 of New England Mutual.
John W. Wright President, New England Employee Benefits Group (a business
unit of NELICO) since 1996; formerly, President 1993-1996
New England Employee Benefits Group (a business unit of The
New England), 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
A-46
<PAGE>
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 all Variable Account assets, which consist
primarily of the Eligible Fund shares held in the investment sub-accounts of
the Variable Account. As such, NELICO is the legal owner of such shares with
the corresponding right to vote them. However, in accordance with NELICO's
view of the present applicable law, the Policy Owner will be permitted to give
instructions as to how shares of each Eligible Fund portfolio in which such
Policy Owner has an interest through the Policy's sub-accounts should be voted
at meetings of shareholders.
Those Policy Owners permitted to give instructions and the number of shares
for which instructions may be given 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 any other registered (or, to the extent voting privileges
are granted by the issuing insurance company, unregistered) separate account
of NELICO or any affiliate that are or are not attributable to life insurance
policies (including the Policies) or annuity contracts and for which no timely
instructions are received will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date
cash value held in such sub-account for policies or contracts giving
instructions, respectively, to vote for, against, or withhold, votes on such
proposition, bears to (ii) the aggregate record date cash value held in that
sub-account for all policies or contracts for which voting instructions are
received. Owners of Policies continued in effect under fixed lapse options or
under settlement options will not be permitted to give voting instructions. No
voting privileges apply with respect to any cash value held in NELICO's
general account as a result of a policy loan.
All New England Zenith Fund shares held by the general investment 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 aggregate of (i) the shares for which voting instructions are received and
(ii) the shares that are voted in proportion to such voting instructions.
Pursuant to conditions imposed in connection with regulatory relief granted
by the SEC, the Eligible Funds' Boards of Trustees have an obligation 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, for example
changes in state insurance law or Federal income tax law, changes in
investment management of any portfolio of the Eligible Funds, or differences
between voting instructions given by variable life and variable annuity
contract owners. The Board of Trustees will have an obligation to determine
what action should be taken, including the removal of the affected sub-
account(s) 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.
NELICO may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as 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 such portfolio. In addition, NELICO itself may
disregard voting instructions in favor of changes initiated by a Policy Owner
or an Eligible Fund's Boards of Trustees in the investment policy, investment
adviser or principal underwriter of the Eligible Fund portfolio if NELICO (i)
reasonably disapproves of such 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 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. In the event NELICO does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next semiannual report to Policy Owners.
RIGHTS RESERVED BY NELICO
The voting procedures described in this prospectus are based on NELICO's and
its affiliates' current understanding of requirements under applicable Federal
securities laws or regulations or interpretations of such
A-47
<PAGE>
laws or regulations. In the future, if the Federal securities laws or
regulations or interpretations of them change so that NELICO or its affiliates
are permitted to vote any Eligible Fund shares in their own right, NELICO or
its affiliates may elect to do so. NELICO also reserves the right, subject to
compliance with applicable law, including approval of Policy Owners if so
required, (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 in
the event such registration is no longer required. Policy Owner approval would
probably not be required for NELICO to exercise most of these rights. However,
NELICO will notify a Policy Owner if any such exercise of rights were to
result in a material change in the Variable Account or its investments,
although notice may not be legally required in all cases. Except as set forth
above and as required by Federal or state law or regulation, NELICO will not
take any action adversely affecting the rights of Policy Owners without their
consent.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account sub-
accounts, call the toll-free number 1-800-333-2501.
For sub-account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call the toll-free number 1-
800-200-2214.
You may also call our Client TeleService Center toll-free at 1-800-388-4000
to request current information about your Policy values, to change or update
Policy information such as your address, billing mode, beneficiary or
ownership, or to request Policy loans of less than $25,000. Requests must be
in writing if the Policy is owned by a corporation or a pension trust.
For all other types of Policy changes, please contact your registered
representative.
REPORTS
Annually (except while the Policy is continued in effect under a fixed lapse
option or a settlement option), NELICO will send you a statement setting forth
the death benefit, cash value of the Policy and any outstanding policy loan
principal. NELICO will also send confirmation of significant financial
activities, such as policy loans, reallocations among sub-accounts, lapses and
surrenders, when the transactions occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and Eligible Funds.
ADVERTISING PRACTICES
NELICO may from time to time receive endorsements of the Zenith Life Plus
Policies from various professional organizations. NELICO may refer to or use
such endorsements in advertisements or sales material promoting 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
A-48
<PAGE>
or performance reviews of variable contract separate accounts, including the
Variable Account. References to, reprints or portions or 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, Washington, D.C., has provided advice on certain matters
relating to the Federal securities laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
EXPERTS
The financial statements of New England Variable Life Separate Account of
New England Life Insurance Company ("NELICO") (formerly New England Variable
Life Insurance Company) and the consolidated financial statements of NELICO
and subsidiaries as of and for the 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
A-49
<PAGE>
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 report 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-50
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS
The tables in Appendix A illustrate the way the Policies operate. They show
how the death benefit, net cash value and cash value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.
investment income and capital gains and losses, realized or unrealized) for
the Variable Account equivalent to constant after tax annual rates of 0%, 6%
and 12%. The tables are based on annual scheduled premiums of $2,000 for males
aged 35 and 45. The males aged 35 and 45 are assumed to be in the nonsmoker
standard risk classification. Values are first given based on current
mortality charges and then based on guaranteed mortality charges. Each
illustration is given first for a Policy with an Option 1 death benefit and
then for a Policy with an Option 2 death benefit. These tables may assist in
the comparison of death benefits, net cash values and cash values for the
Policies with those under other variable life insurance policies which may be
issued by NELICO or other companies. (Substandard risk Policies have the same
basic scheduled premiums and cost of insurance rates as standard risk Policies
but require an additional premium.)
Death benefits, net cash values and cash values for a Policy would be
different from the amounts shown if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period, if
scheduled premiums were paid at other than annual intervals, or if unscheduled
payments were made. They would also be different depending on the allocation
of cash value among the Variable Account's sub-accounts, if the actual gross
rate of return for all sub-accounts averaged 0%, 6% or 12%, but varied above
or below that average for individual sub-accounts. They would also differ if
any policy loan were made during the period of time illustrated, if the
insured were female or in the smoker standard risk classification, or if the
Policies were issued at unisex rates.
The death benefits, net cash values and cash values shown in the tables
reflect: (i) deductions from annual premiums for the annual administrative
charge, sales charge and state premium tax charge: and (ii) a monthly
deduction (consisting of an administrative charge, a first year administrative
fee and 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 or lapse during the first 15 policy years. The death benefits, net
cash values, and cash values also reflect a daily charge assessed against the
Variable Account for mortality and expense risks equivalent to an annual
charge of .60% 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 New England Zenith Fund under which TNE Advisers bears operating
expenses of the New England Zenith Fund Series (other than the Capital Growth
Series) that exceed certain amounts. 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 expense and mortality 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 -
1.35%, 4.57% and 10.49%, respectively. (See "Net Investment Experience".)
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are
currently made. If any such charges are imposed in the future, the gross
annual rate of return would have to exceed the rates shown by an amount
sufficient to cover the tax charges, in order to produce the death benefits,
net cash values and cash values illustrated. (See "Charges for NELICO's Income
Taxes".)
A-51
<PAGE>
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated
premiums could have been invested outside the Policy to arrive at the death
benefit of the Policy. The internal rate of return is compounded annually, and
the premiums are assumed to be paid at the beginning of each policy year.
NELICO will furnish upon request an illustration reflecting the proposed
insured's age, sex, underwriting classification, and the face amount or
scheduled premium amount 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-52
<PAGE>
MALE ISSUE AGE 35
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$176,018 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- --------------------- --------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,100 $176,018 $176,018 $176,018 $ 1 $ 93 $ 186 $1,348 $1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,018 1,315 1,586 1,869 2,739 3,011 3,294 -54.75 -47.87 -41.17
3 6,620 176,018 176,018 176,018 2,593 3,134 3,720 4,096 4,636 5,222 -36.43 -29.13 -22.07
4 9,051 176,018 176,018 176,018 3,836 4,739 5,756 5,416 6,319 7,336 -27.32 -19.88 -12.75
5 11,604 176,018 176,018 176,018 5,040 6,400 7,993 6,698 8,058 9,651 -22.02 -14.53 -7.38
6 14,284 176,018 176,018 176,018 6,204 8,118 10,453 7,940 9,854 12,189 -18.61 -11.07 -3.93
7 17,098 176,018 176,018 176,018 7,325 9,893 13,155 9,138 11,707 14,969 -16.26 -8.69 -1.56
8 20,053 176,018 176,018 176,018 8,402 11,728 16,126 10,294 13,619 18,018 -14.56 -6.95 .17
9 23,156 176,018 176,018 176,018 9,434 13,620 19,392 11,403 15,590 21,361 -13.29 -5.63 1.49
10 26,414 176,018 176,018 176,018 10,419 15,575 22,985 12,466 17,622 25,032 -12.31 -4.60 2.51
15 45,315 176,018 176,018 176,018 16,964 28,690 49,594 16,964 28,690 49,594 -7.54 -.56 6.06
20 69,439 176,018 176,018 238,050 20,270 41,895 89,278 20,270 41,895 89,278 -7.04 .44 7.15
25 100,227 176,018 176,018 334,160 20,684 56,313 149,317 20,684 56,313 149,317 -7.73 .90 7.64
30 139,522 176,018 176,018 458,960 18,117 72,670 240,880 18,117 72,670 240,880 -9.49 1.21 7.92
<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 8,700.91% 8,700.91% 8,700.91%
2 789.46 789.46 789.46
3 306.92 306.92 306.92
4 174.74 174.74 174.74
5 117.36 117.36 117.36
6 86.26 86.26 86.26
7 67.07 67.07 67.07
8 54.18 54.18 54.18
9 44.98 44.98 44.98
10 38.14 38.14 38.14
15 20.20 20.20 20.20
20 12.69 12.69 15.08
25 8.70 8.70 12.69
30 6.26 6.26 11.19
</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-53
<PAGE>
MALE ISSUE AGE 35
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$176,018 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $176,018 $176,018 $176,097 $ 1 $ 93 $ 186 $ 1,348 $ 1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,265 1,315 1,586 1,868 2,739 3,011 3,293 -54.75 -47.87 -41.18
3 6,620 176,018 176,018 176,537 2,593 3,134 3,719 4,096 4,636 5,221 -36.43 -29.13 -22.08
4 9,051 176,018 176,018 176,928 3,836 4,739 5,753 5,416 6,319 7,333 -27.32 -19.88 -12.76
5 11,604 176,018 176,018 177,452 5,040 6,400 7,987 6,698 8,058 9,646 -22.02 -14.53 -7.40
6 14,284 176,018 176,018 178,127 6,204 8,118 10,443 7,940 9,854 12,178 -18.61 -11.07 -3.96
7 17,098 176,018 176,018 178,974 7,325 9,893 13,137 9,138 11,707 14,950 -16.26 -8.69 -1.59
8 20,053 176,018 176,018 180,014 8,402 11,728 16,096 10,294 13,619 17,988 -14.56 -6.95 .13
9 23,156 176,018 176,018 181,270 9,434 13,620 19,344 11,403 15,590 21,313 -13.29 -5.63 1.44
10 26,414 176,018 176,018 182,770 10,419 15,575 22,912 12,466 17,622 24,959 -12.31 -4.60 2.46
15 45,315 176,018 176,018 195,064 16,964 28,690 49,167 16,964 28,690 49,167 -7.54 -.56 5.96
20 69,439 176,018 176,018 235,330 20,270 41,895 88,258 20,270 41,895 88,258 -7.04 .44 7.05
25 100,227 176,018 176,018 330,652 20,684 56,313 147,749 20,684 56,313 147,749 -7.73 .90 7.57
30 139,522 176,018 176,018 454,382 18,117 72,670 238,478 18,117 72,670 238,478 -9.49 1.21 7.87
<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 8,700.91% 8,700.91% 8,704.86%
2 789.46 789.46 790.12
3 306.92 306.92 307.36
4 174.74 174.74 175.14
5 117.36 117.36 117.78
6 86.26 86.26 86.71
7 67.07 67.07 67.56
8 54.18 54.18 54.72
9 44.98 44.98 45.58
10 38.14 38.14 38.80
15 20.20 20.20 21.31
20 12.69 12.69 14.99
25 8.70 8.70 12.62
30 6.26 6.26 11.14
</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 35
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$176,018 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $176,018 $176,018 $176,018 $ 1 $ 93 $ 186 $ 1,348 $ 1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,018 1,315 1,586 1,869 2,739 3,011 3,294 -54.75 -47.87 -41.17
3 6,620 176,018 176,018 176,018 2,593 3,134 3,720 4,096 4,636 5,222 -36.43 -29.13 -22.07
4 9,051 176,018 176,018 176,018 3,836 4,739 5,756 5,416 6,319 7,336 -27.32 -19.88 -12.75
5 11,604 176,018 176,018 176,018 5,040 6,400 7,993 6,698 8,058 9,651 -22.02 -14.53 -7.38
6 14,284 176,018 176,018 178,018 6,204 8,118 10,453 7,940 9,854 12,189 -18.61 -11.07 -3.93
7 17,098 176,018 176,018 176,018 7,325 9,893 13,155 9,138 11,707 14,969 -16.26 -8.69 -1.56
8 20,053 176,018 176,018 176,018 8,402 11,728 16,126 10,294 13,619 18,018 -14.56 -6.95 .17
9 23,156 176,018 176,018 176,018 9,434 13,620 19,392 11,403 15,590 21,361 -13.29 -5.63 1.49
10 26,414 176,018 176,018 176,018 10,419 15,575 22,985 12,466 17,622 25,032 -12.31 -4.60 2.51
15 45,315 176,018 176,018 176,018 16,964 28,690 49,594 16,964 28,690 49,594 -7.54 -.56 6.06
20 69,439 176,018 176,018 238,050 20,270 41,895 89,278 20,270 41,895 89,278 -7.04 .44 7.15
25 100,227 176,018 176,018 334,160 20,684 56,313 149,317 20,684 56,313 149,317 -7.73 .90 7.64
30 139,522 176,018 176,018 453,935 16,353 71,373 238,243 16,353 71,373 238,243 -10.55 1.10 7.86
<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 8,700.91% 8,700.91% 8,700.91%
2 789.46 789.46 789.46
3 306.92 306.92 306.92
4 174.74 174.74 174.74
5 117.36 117.36 117.36
6 86.26 86.26 86.26
7 67.07 67.07 67.07
8 54.18 54.18 54.18
9 44.98 44.98 44.98
10 38.14 38.14 38.14
15 20.20 20.20 20.20
20 12.69 12.69 15.08
25 8.70 8.70 12.69
30 6.26 6.26 11.13
</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 35
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$176,018 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ------------------------ ------------------------ -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $176,018 $176,018 $176,097 $ 1 $ 93 $ 186 $ 1,348 $ 1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,265 1,315 1,586 1,868 2,739 3,011 3,293 -54.75 -47.87 -41.18
3 6,620 176,018 176,018 176,537 2,593 3,134 3,719 4,096 4,636 5,221 -36.43 -29.13 -22.08
4 9,051 176,018 176,018 176,928 3,836 4,739 5,753 5,416 6,319 7,333 -27.32 -19.88 -12.76
5 11,604 176,018 176,018 177,452 5,040 6,400 7,987 6,698 8,058 9,646 -22.02 -14.53 -7.40
6 14,284 176,018 176,018 178,127 6,204 8,118 10,443 7,940 9,854 12,178 -18.61 -11.07 -3.96
7 17,098 176,018 176,018 178,974 7,325 9,893 13,137 9,138 11,707 14,950 -16.26 -8.69 -1.59
8 20,053 176,018 176,018 180,014 8,402 11,728 16,096 10,294 13,619 17,988 -14.56 -6.95 .13
9 23,156 176,018 176,018 181,270 9,434 13,620 19,344 11,403 15,590 21,313 -13.29 -5.63 1.44
10 26,414 176,018 176,018 182,770 10,419 15,575 22,912 12,466 17,622 24,959 -12.31 -4.60 2.46
15 45,315 176,018 176,018 195,064 16,964 28,690 49,167 16,964 28,690 49,167 -7.54 -.56 5.96
20 69,439 176,018 176,018 235,330 20,270 41,895 88,258 20,270 41,895 88,258 -7.04 .44 7.05
25 100,227 176,018 176,018 330,652 20,684 56,313 147,749 20,684 56,313 147,749 -7.73 .90 7.57
30 139,522 176,018 176,018 449,408 16,353 71,373 235,867 16,353 71,373 235,867 -10.55 1.10 7.81
<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 8,700.91% 8,700.91% 8,704.86%
2 789.46 789.46 790.12
3 306.92 306.92 307.36
4 174.74 174.74 175.14
5 117.36 117.36 117.78
6 86.26 86.26 86.71
7 67.07 67.07 67.56
8 54.18 54.18 54.72
9 44.98 44.98 45.58
10 38.14 38.14 38.80
15 20.20 20.20 21.31
20 12.69 12.69 14.99
25 8.70 8.70 12.62
30 6.26 6.26 11.08
</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 45
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$110,889 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ----------------------- ----------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,100 $110,889 $110,889 $110,889 $ 305 $ 397 $ 490 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.52%
2 4,305 110,889 110,889 110,889 1,558 1,826 2,105 2,657 2,925 3,204 -48.56 -42.16 -35.87
3 6,620 110,889 110,889 110,889 2,766 3,297 3,873 3,943 4,474 5,049 -34.00 -27.08 -20.35
4 9,051 110,889 110,889 110,889 3,930 4,812 5,807 5,185 6,067 7,062 -26.48 -19.33 -12.41
5 11,604 110,889 110,889 110,889 5,046 6,370 7,925 6,378 7,702 9,257 -21.99 -14.67 -7.65
6 14,284 110,889 110,889 110,889 6,113 7,972 10,245 7,523 9,382 11,655 -19.02 -11.59 -4.50
7 17,098 110,889 110,889 110,889 7,125 9,614 12,784 8,613 11,102 14,272 -16.96 -9.41 -2.27
8 20,053 110,889 110,889 110,889 8,078 11,293 15,563 9,643 12,859 17,129 -15.48 -7.80 -.62
9 23,156 110,889 110,889 110,889 8,965 13,007 18,604 10,609 14,650 20,248 -14.38 -6.58 .66
10 26,413 110,889 110,889 110,889 9,781 14,750 21,933 11,502 16,472 23,655 -13.56 -5.62 1.67
15 45,315 110,889 110,889 110,889 14,701 25,939 46,280 14,701 25,939 46,280 -9.59 -1.84 5.25
20 69,438 110,889 110,889 158,351 16,610 37,239 83,109 16,610 37,239 83,109 -9.39 -.69 6.54
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,444.49%
2 596.29 596.29 596.29
3 242.76 242.76 242.76
4 140.36 140.36 140.36
5 94.68 94.68 94.68
6 69.53 69.53 69.53
7 53.86 53.86 53.86
8 43.26 43.26 43.26
9 35.68 35.68 35.68
10 30.01 30.01 30.01
15 15.15 15.15 15.15
20 8.95 8.95 11.85
</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 45
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$110,889 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ----------------------- ----------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- ------- ------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $110,889 $110,889 $110,968 $ 305 $ 397 $ 489 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.53%
2 4,305 110,889 110,889 111,133 1,558 1,826 2,104 2,657 2,925 3,203 -48.56 -42.16 -35.89
3 6,620 110,889 110,889 111,398 2,766 3,297 3,870 3,943 4,474 5,047 -34.00 -27.08 -20.38
4 9,051 110,889 110,889 111,777 3,930 4,812 5,802 5,185 6,067 7,056 -26.48 -19.33 -12.45
5 11,604 110,889 110,889 112,282 5,046 6,370 7,913 6,378 7,702 9,246 -21.99 -14.67 -7.70
6 14,284 110,889 110,889 112,932 6,113 7,972 10,223 7,523 9,382 11,633 -19.02 -11.59 -4.56
7 17,098 110,889 110,889 113,743 7,125 9,614 12,746 8,613 11,102 14,234 -16.96 -9.41 -2.35
8 20,053 110,889 110,889 114,736 8,078 11,293 15,499 9,643 12,859 17,065 -15.48 -7.80 -.71
9 23,156 110,889 110,889 115,931 8,965 13,007 18,503 10,609 14,650 20,146 -14.38 -6.58 .55
10 26,413 110,889 110,889 117,352 9,781 14,750 21,777 11,502 16,472 23,498 -13.56 -5.62 1.54
15 45,315 110,889 110,889 128,864 14,701 25,939 45,285 14,701 25,939 45,285 -9.59 -1.84 4.99
20 69,438 110,889 110,889 153,533 16,610 37,239 80,580 16,610 37,239 80,580 -9.39 -.69 6.28
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------- ---------- ---------- ----------
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,448.40%
2 596.29 596.29 597.11
3 242.76 242.76 243.35
4 140.36 140.36 140.92
5 94.68 94.68 95.27
6 69.53 69.53 70.17
7 53.86 53.86 54.57
8 43.26 43.26 44.05
9 35.68 35.68 36.56
10 30.01 30.01 31.00
15 15.15 15.15 16.80
20 8.95 8.95 11.60
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-58
<PAGE>
MALE ISSUE AGE 45
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$110,889 FACE AMOUNT
OPTION 1--FIXED DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ----------------------- ----------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $110,889 $110,889 $110,889 $ 305 $ 397 $ 490 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.52%
2 4,305 110,889 110,889 110,889 1,558 1,826 2,105 2,657 2,925 3,204 -48.56 -42.16 -35.87
3 6,620 110,889 110,889 110,889 2,766 3,297 3,873 3,943 4,474 5,049 -34.00 -27.08 -20.35
4 9,051 110,889 110,889 110,889 3,930 4,812 5,807 5,185 6,067 7,062 -26.48 -19.33 -12.41
5 11,604 110,889 110,889 110,889 5,046 6,370 7,925 6,378 7,702 9,257 -21.99 -14.67 -7.65
6 14,284 110,889 110,889 110,889 6,113 7,972 10,245 7,523 9,382 11,655 -19.02 -11.59 -4.50
7 17,098 110,889 110,889 110,889 7,125 9,614 12,784 8,613 11,102 14,272 -16.96 -9.41 -2.27
8 20,053 110,889 110,889 110,889 8,078 11,293 15,563 9,643 12,859 17,129 -15.48 -7.80 -.62
9 23,156 110,889 110,889 110,889 8,965 13,007 18,604 10,609 14,650 20,248 -14.38 -6.58 .66
10 26,413 110,889 110,889 110,889 9,781 14,750 21,933 11,502 16,472 23,655 -13.56 -5.62 1.67
15 45,315 110,889 110,889 110,889 14,701 25,939 46,280 14,701 25,939 46,280 -9.59 -1.84 5.25
20 69,438 110,889 110,889 156,639 15,552 36,318 82,210 15,552 36,318 82,210 -10.21 -.93 6.45
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY ---------------------------------
YEAR 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,444.49%
2 596.29 596.29 596.29
3 242.76 242.76 242.76
4 140.36 140.36 140.36
5 94.68 94.68 94.68
6 69.53 69.53 69.53
7 53.86 53.86 53.86
8 43.26 43.26 43.26
9 35.68 35.68 35.68
10 30.01 30.01 30.01
15 15.15 15.15 15.15
20 8.95 8.95 11.76
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, 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 45
$2,000 ANNUAL PREMIUM FOR NON-SMOKER STANDARD UNDERWRITING RISK
$110,889 FACE AMOUNT
OPTION 2--VARIABLE DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED MAXIMUM COST OF INSURANCE RATES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST -------------------------- ----------------------- ----------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,100 $110,889 $110,889 $110,968 $ 305 $ 397 $ 489 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.53%
2 4,305 110,889 110,889 111,133 1,558 1,826 2,104 2,657 2,925 3,203 -48.56 -42.16 -35.89
3 6,620 110,889 110,889 111,398 2,766 3,297 3,870 3,943 4,474 5,047 -34.00 -27.08 -20.38
4 9,051 110,889 110,889 111,777 3,930 4,812 5,802 5,185 6,067 7,056 -26.48 -19.33 -12.45
5 11,604 110,889 110,889 112,282 5,046 6,370 7,913 6,378 7,702 9,246 -21.99 -14.67 -7.70
6 14,284 110,889 110,889 112,932 6,113 7,972 10,223 7,523 9,382 11,633 -19.02 -11.59 -4.56
7 17,098 110,889 110,889 113,743 7,125 9,614 12,746 8,613 11,102 14,234 -16.96 -9.41 -2.35
8 20,053 110,889 110,889 114,736 8,078 11,293 15,499 9,643 12,859 17,065 -15.48 -7.80 -.71
9 23,156 110,889 110,889 115,931 8,965 13,007 18,503 10,609 14,650 20,146 -14.38 -6.58 .55
10 26,413 110,889 110,889 117,352 9,781 14,750 21,777 11,502 16,472 23,498 -13.56 -5.62 1.54
15 45,315 110,889 110,889 128,864 14,701 25,939 45,285 14,701 25,939 45,285 -9.59 -1.84 4.99
20 69,438 110,889 110,889 151,739 15,552 36,318 79,639 15,552 36,318 79,639 -10.21 -.93 6.18
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,448.40%
2 596.29 596.29 597.11
3 242.76 242.76 243.35
4 140.36 140.36 140.92
5 94.68 94.68 95.27
6 69.53 69.53 70.17
7 53.86 53.86 54.57
8 43.26 43.26 44.05
9 35.68 35.68 36.56
10 30.01 30.01 31.00
15 15.15 15.15 16.80
20 8.95 8.95 11.50
</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>
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 June 1988. The New England Zenith Fund
and the Variable Account commenced operations on August 26, 1983. The Westpeak
Stock Index and Back Bay Advisors Managed Series of the New England Zenith
Fund commenced operations on May 1, 1987. The Westpeak Growth and Income
Series and Goldman Sachs Midcap Value Series of the New England Zenith Fund
commenced operations on April 30, 1993. The Loomis Sayles Small Cap Series
commenced operations on May 2, 1994 and was made available under the Policies
on December 19, 1994. The remaining New England Zenith Fund Series commenced
operations on October 31, 1994 and were made available under the Policies on
May 1, 1995. The Equity-Income Portfolio and Overseas Portfolio of the VIP
Fund commenced operations on October 9, 1986 and January 28, 1987,
respectively. They were first made available as investment options under the
Policies on April 30, 1993. The High Income Portfolio of the VIP Fund and the
Asset Manager Portfolio of VIP Fund II commenced operations on September 19,
1985 and September 6, 1989, respectively, and were added as investment options
on December 19, 1994. The illustrations are based on the actual investment
experience of the relevant Eligible Funds for the periods shown (and reflect
actual charges and expenses incurred by the Eligible Funds), and reflect a
charge for mortality and expense risks against the Variable Account's assets
at an annual rate of .60%. The illustrations assume that annual scheduled
premiums are paid at the beginning of each year and that no loans, transfers
or other Policy Owner transactions were made during the periods shown.
VARIABLE ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account which invests in the
Eligible Funds. The investment experience of the sub-account or sub-accounts
chosen by Policy Owners will affect the values and benefits of their Policies.
Many factors in addition to investment experience will affect the actual
values and benefits of a particular Policy. For instance, these investment
experience figures do not reflect the charges deducted from premiums and
monthly deductions from the cash value. (See "Charges Assessed in Connection
with the Policy", "Cost of Insurance Charges" and "Charges and Expenses".)
NET RATES OF RETURN
The annual net rate of return is the effective earnings rate at which the
investment sub-accounts increased or decreased over a one year period, based
on the investment experience of the relevant Eligible Funds. The rate is
calculated by taking the difference between the sub-accounts' ending values
and beginning values of the period and dividing it by the beginning values of
the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the sub-accounts increased or decreased since
the inception dates of the sub-accounts. For each sub-account, the rate is
calculated by taking the difference between the sub-account's ending value and
the value on the date of its inception and dividing it by the value on the
date of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which,
if compounded annually, would equal the total net rate of return since
inception.
A-61
<PAGE>
SUB-ACCOUNTS INVESTING IN NEW ENGLAND ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
8/26/83- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth*. 8.64% -.96% 67.09% 94.04% 51.79% -9.34% 29.98% -4.06% 53.06% -6.61% 14.28% -7.62%
Bond Income..... 2.83% 12.10 18.05 14.15 1.65 7.72 11.63 7.44 17.25 7.53 11.94 -3.94
Money Market.... 3.08% 9.96 7.61 6.16 5.89 6.87 8.60 7.54 5.58 3.18 2.36 3.35
<CAPTION>
8/26/83- 8/26/83-
12/31/97 12/31/97
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 RETURN ANNUAL
- ----------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Capital Growth*. 37.21% 20.34% 22.74% 1,731.06% 22.46%
Bond Income..... 20.47 3.98 10.23 281.85 9.79
Money Market.... 5.07 4.50 4.71 126.75 5.87
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------------------- 5/1/87-
FOR ONE YEAR ENDING 12/31/97
5/1/87- ----------------------------------------------------------------------------------------- TOTAL
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 RETURN
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index..... -12.55% 15.65% 29.37% -4.72% 29.65% 6.65% 9.07% 0.51% 36.10% 21.73% 31.70% 312.34%
Managed......... -1.06% 8.83 18.37 2.59 19.45 6.06 9.99 -1.70 30.48 14.34 25.81 236.17
<CAPTION>
5/1/87-
12/31/97
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- ---------
<S> <C>
Stock Index..... 14.20%
Managed......... 12.03
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------
FOR ONE YEAR ENDING 4/30/93- 4/30/93-
----------------------------------- 12/31/97 12/31/97
4/30/93 TOTAL EFFECTIVE
SUB-ACCOUNT 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....... 13.78% -1.80% 35.65% 17.38% 32.67% 136.06% 20.19%
Midcap Value**.......... 14.28 -.87 29.57 16.90 16.62 100.12 16.01
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN 5/2/94- 5/2/94-
---------------------------------------------- 12/31/97 12/31/97
5/2/94- FOR ONE YEAR ENDING 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>
Small Cap.... -3.61% 28.08% 29.90% 24.11% 99.01% 20.65%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN 10/31/94- 10/31/94-
----------------------------------------------- 12/31/97 12/31/97
10/31/94- FOR ONE YEAR ENDING 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........... -4.29% 47.81% 12.49% 24.88% 98.72% 24.21%
Balanced................ -.20 24.05 16.21 15.48 66.15 17.38
Venture Value........... -3.60 38.45 25.08 32.70 121.55 28.55
International Magnum
Equity***.............. 2.50 5.60 6.03 -1.89 12.60 3.82
</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 the sub-adviser.
SUB-ACCOUNTS INVESTING IN VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
10/9/86- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income... .06% -3.08% 21.98% 16.64% -15.80% 31.07% 16.39% 17.59% 6.43% 34.29% 13.59% 27.34%
<CAPTION>
10/9/86- 10/9/86-
12/31/97 12/31/97
TOTAL EFFECTIVE
SUB-ACCOUNT RETURN ANNUAL
- ----------- -------- ---------
<S> <C> <C>
Equity-Income... 334.74% 13.98%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------------------- 1/28/87-
FOR ONE YEAR ENDING 12/31/97
1/28/87- ----------------------------------------------------------------------------------------- TOTAL
SUB-ACCOUNT 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 RETURN
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas........ -5.90% 7.48% 25.53% -2.26% 7.79% -11.12% 36.53% 1.12% 9.02% 12.53% 10.89% 122.04%
<CAPTION>
1/28/87-
12/31/97
EFFECTIVE
SUB-ACCOUNT ANNUAL
- ----------- ---------
<S> <C>
Overseas........ 7.58%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
9/19/85- --------------------------------------------------------------------------------------------------
SUB-ACCOUNT 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..... 6.20% 16.98% 0.61% 10.97% -4.75% -2.82% 34.27% 22.43% 19.68% -2.13% 19.88% 13.35%
<CAPTION>
9/19/85- 9/19/85-
12/31/97 12/31/97
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/97 RETURN ANNUAL
- ----------- -------- -------- ---------
<S> <C> <C> <C>
High Income..... 16.96% 292.89% 11.79%
</TABLE>
SUB-ACCOUNT INVESTING IN VARIABLE INSURANCE PRODUCTS FUND II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------- 9/6/89- 9/6/89-
FOR ONE YEAR ENDING 12/31/97 12/31/97
9/6/89- ----------------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager..... .62% 6.08% 21.83% 11.04% 20.51% -6.65% 16.26% 13.91% 19.93% 157.99% 12.07%
</TABLE>
A-62
<PAGE>
POLICY PERFORMANCE
The material below assumes, in the first example, a Policy with an Option 1
death benefit was issued with a $176,018 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value, and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith 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 nonsmoker standard risk, age 35. The second example
assumes a Policy was issued with a $197,864 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value, and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith 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 female nonsmoker standard risk, age 35. The death benefits,
cash values and internal rates of return assume in each instance that the
entire policy value was invested in the particular sub-account for the period
shown. These illustrations of Policy investment experience also reflect all
charges applicable to the Policy, including cost of insurance charges based on
NELICO's current rates. (See Appendix A for the definition of the internal
rate of return.)
MALE NONSMOKER STANDARD RISK, AGE 35
OPTION 1--FIXED DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,018 1,767 420 -98.87% --
December 31, 1984....... 4,000 176,018 176,018 3,125 1,700 -70.31 2,596.84%
December 31, 1985....... 6,000 176,018 176,018 6,938 5,435 -7.20 526.27
December 31, 1986....... 8,000 176,018 176,018 14,826 13,245 28.61 244.56
December 31, 1987....... 10,000 176,018 176,018 23,555 21,897 34.57 149.53
December 31, 1988....... 12,000 176,018 176,018 22,775 21,039 19.80 104.22
December 31, 1989....... 14,000 176,018 176,018 30,987 29,174 21.72 78.34
December 31, 1990....... 16,000 176,018 176,018 30,877 28,986 15.14 61.82
December 31, 1991....... 18,000 176,018 199,689 48,770 46,801 21.18 53.35
December 31, 1992....... 20,000 176,018 187,012 47,028 44,981 16.03 43.42
December 31, 1993....... 22,000 176,018 214,155 55,065 53,189 15.68 39.38
December 31, 1994....... 24,000 176,018 194,787 51,603 50,136 11.98 32.72
December 31, 1995....... 26,000 176,018 258,618 72,694 71,636 14.90 32.61
December 31, 1996....... 28,000 176,018 312,431 88,313 87,664 15.39 31.36
December 31, 1997....... 30,000 176,018 347,324 108,998 108,759 16.00 29.38
</TABLE>
A-63
<PAGE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,018 1,663 316 -- --
December 31, 1984....... 4,000 176,018 176,018 3,373 1,949 -62.69% 2,596.84%
December 31, 1985....... 6,000 176,018 176,018 5,485 3,983 -28.17 526.27
December 31, 1986....... 8,000 176,018 176,018 7,702 6,121 -14.16 244.56
December 31, 1987....... 10,000 176,018 176,018 9,241 7,583 -11.70 149.53
December 31, 1988....... 12,000 176,018 176,018 11,358 9,622 -7.77 104.22
December 31, 1989....... 14,000 176,018 176,018 14,069 12,256 -3.99 78.34
December 31, 1990....... 16,000 176,018 176,018 16,520 14,629 -2.34 61.82
December 31, 1991....... 18,000 176,018 176,018 20,788 18,819 1.02 50.46
December 31, 1992....... 20,000 176,018 176,018 23,636 21,589 1.57 42.23
December 31, 1993....... 22,000 176,018 176,018 27,711 25,834 2.97 36.02
December 31, 1994....... 24,000 176,018 176,018 27,773 26,306 1.56 31.18
December 31, 1995....... 26,000 176,018 176,018 34,793 33,735 4.01 27.32
December 31, 1996....... 28,000 176,018 176,018 37,418 36,770 3.88 24.18
December 31, 1997....... 30,000 176,018 176,018 42,437 42,199 4.50 21.58
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,018 1,667 320 -- --
December 31, 1984....... 4,000 176,018 176,018 3,270 1,845 -65.88% 2,596.84%
December 31, 1985....... 6,000 176,018 176,018 4,976 3,473 -36.63 526.27
December 31, 1986....... 8,000 176,018 176,018 6,714 5,133 -23.15 244.56
December 31, 1987....... 10,000 176,018 176,018 8,528 6,870 -15.84 149.53
December 31, 1988....... 12,000 176,018 176,018 10,524 8,788 -10.98 104.22
December 31, 1989....... 14,000 176,018 176,018 12,807 10,993 -7.28 78.34
December 31, 1990....... 16,000 176,018 176,018 15,122 13,230 -4.99 61.82
December 31, 1991....... 18,000 176,018 176,018 17,284 15,315 -3.76 50.46
December 31, 1992....... 20,000 176,018 176,018 19,114 17,067 -3.31 42.23
December 31, 1993....... 22,000 176,018 176,018 20,816 18,939 -2.84 36.02
December 31, 1994....... 24,000 176,018 176,018 22,746 21,279 -2.08 31.18
December 31, 1995....... 26,000 176,018 176,018 25,084 24,027 -1.25 27.32
December 31, 1996....... 28,000 176,018 176,018 27,358 26,709 -.69 24.18
December 31, 1997....... 30,000 176,018 176,018 29,758 29,520 -.22 21.58
</TABLE>
A-64
<PAGE>
ZENITH STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,322 83 -- --
December 31, 1988....... 4,000 176,018 176,018 3,037 1,612 -57.40% 1,304.55%
December 31, 1989....... 6,000 176,018 176,018 5,728 4,225 -19.73 393.40
December 31, 1990....... 8,000 176,018 176,018 6,784 5,204 -19.03 205.08
December 31, 1991....... 10,000 176,018 176,018 10,336 8,678 -5.28 131.98
December 31, 1992....... 12,000 176,018 176,018 12,492 10,756 -3.45 94.63
December 31, 1993....... 14,000 176,018 176,018 15,075 13,262 -1.48 72.41
December 31, 1994....... 16,000 176,018 176,018 16,515 14,624 -2.16 57.84
December 31, 1995....... 18,000 176,018 176,018 24,273 22,304 4.55 47.63
December 31, 1996....... 20,000 176,018 176,018 30,809 28,762 6.90 40.12
December 31, 1997....... 22,000 176,018 176,018 42,189 40,415 10.38 34.40
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,500 153 -97.86% --
December 31, 1988....... 4,000 176,018 176,018 3,123 1,698 -55.06 1,304.55%
December 31, 1989....... 6,000 176,018 176,018 5,362 3,860 -24.42 393.40
December 31, 1990....... 8,000 176,018 176,018 6,968 5,388 -17.55 205.08
December 31, 1991....... 10,000 176,018 176,018 9,865 8,206 -7.34 131.98
December 31, 1992....... 12,000 176,018 176,018 11,953 10,217 -5.07 94.63
December 31, 1993....... 14,000 176,018 176,018 14,572 12,758 -2.54 72.41
December 31, 1994....... 16,000 176,018 176,018 15,673 13,782 -3.60 57.84
December 31, 1995....... 18,000 176,018 176,018 22,138 20,168 2.42 47.63
December 31, 1996....... 20,000 176,018 176,018 26,619 24,572 3.94 40.12
December 31, 1997....... 22,000 176,018 176,018 35,031 33,257 7.12 34.40
ZENITH MIDCAP VALUE SUB-ACCOUNT**
<CAPTION>
INTERNAL RATE OF
TOTAL MINIMUM VARIABLE 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.......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,018 1,711 365 -92.08% --
December 31, 1994....... 4,000 176,018 176,018 3,134 1,709 -54.67 1,298.23
December 31, 1995....... 6,000 176,018 176,018 5,840 4,337 -18.32 392.51
December 31, 1996....... 8,000 176,018 176,018 8,323 6,743 -7.75 204.79
December 31, 1997....... 10,000 176,018 176,018 11,383 9,725 -1.04 131.85
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.......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,018 1,703 356 -92.36% --
December 31, 1994....... 4,000 176,018 176,018 3,101 1,676 -55.56 1,298.23
December 31, 1995....... 6,000 176,018 176,018 5,990 4,487 -16.50 392.51
December 31, 1996....... 8,000 176,018 176,018 8,596 7,016 -5.97 204.79
December 31, 1997....... 10,000 176,018 176,018 13,179 11,521 5.34 131.85
</TABLE>
A-65
<PAGE>
ZENITH SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,438 92 -- --
December 31, 1995....... 4,000 176,018 176,018 3,570 2,145 -43.37% 1,310.92%
December 31, 1996....... 6,000 176,018 176,018 6,264 4,762 -13.31 394.28
December 31, 1997....... 8,000 176,018 176,018 9,574 7,993 -.04 205.37
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,586 240 -- --
December 31,1995........ 4,000 176,018 176,018 3,675 2,250 -65.55% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 5,592 4,089 -30.68 639.00
December 31, 1997....... 8,000 176,018 176,018 8,395 6,815 -9.51 273.17
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........ $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,679 332 -- --
December 31, 1995....... 4,000 176,018 176,018 3,521 2,097 -71.04% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 5,553 4,050 -31.39 639.00
December 31, 1997....... 8,000 176,018 176,018 7,848 6,268 -14.39 273.17
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,626 279 -- --
December 31, 1995....... 4,000 176,018 176,018 3,675 2,250 -65.55% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 6,073 4,571 -22.20 639.00
December 31, 1997....... 8,000 176,018 176,018 9,491 7,911 -.67 273.17
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,720 374 -- --
December 31, 1995....... 4,000 176,018 176,018 3,304 1,879 -78.51% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 4,949 3,447 -43.06 639.00
December 31, 1997....... 8,000 176,018 176,018 6,242 4,662 -31.33 273.17
</TABLE>
A-66
<PAGE>
EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1986....... 2,000 176,018 176,018 1,687 340 -- --
December 31, 1987....... 4,000 176,018 176,018 2,781 1,357 -88.68% 3,658.16%
December 31, 1988....... 6,000 176,018 176,018 4,765 3,262 -44.44 597.26
December 31, 1989....... 8,000 176,018 176,018 6,975 5,395 -22.16 263.01
December 31, 1990....... 10,000 176,018 176,018 7,347 5,689 -25.21 157.23
December 31, 1991....... 12,000 176,018 176,018 11,057 9,321 -9.31 108.29
December 31, 1992....... 14,000 176,018 176,018 14,349 12,535 -3.44 80.80
December 31, 1993....... 16,000 176,018 176,018 18,190 16,298 .49 63.45
December 31, 1994....... 18,000 176,018 176,018 20,622 18,652 .84 51.61
December 31, 1995....... 20,000 176,018 176,018 29,211 27,164 6.34 43.07
December 31, 1996....... 22,000 176,018 176,018 34,371 32,426 7.21 36.66
December 31, 1997....... 24,000 176,018 176,018 44,994 43,458 9.91 31.69
OVERSEAS SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,294 18 -- --
December 31, 1988....... 4,000 176,018 176,018 3,040 1,616 -49.16% 874.98%
December 31, 1989....... 6,000 176,018 176,018 5,466 3,964 -20.09 323.81
December 31, 1990....... 8,000 176,018 176,018 6,765 5,185 -17.14 181.02
December 31, 1991....... 10,000 176,018 176,018 8,768 7,110 -11.46 120.48
December 31, 1992....... 12,000 176,018 176,018 8,953 7,217 -14.72 88.08
December 31, 1993....... 14,000 176,018 176,018 14,067 12,253 -3.40 68.24
December 31, 1994....... 16,000 176,018 176,018 15,430 13,538 -3.79 54.99
December 31, 1995....... 18,000 176,018 176,018 18,526 16,557 -1.70 45.57
December 31, 1996....... 20,000 176,018 176,018 22,146 20,099 .09 38.58
December 31, 1997....... 22,000 176,018 176,018 26,002 24,364 1.71 33.20
HIGH INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1985....... 2,000 176,018 176,018 1,754 407 -- --
December 31, 1986....... 4,000 176,018 176,018 3,501 2,077 -62.77% 3,107.49%
December 31, 1987....... 6,000 176,018 176,018 4,927 3,425 -39.43 563.12
December 31, 1988....... 8,000 176,018 176,018 6,891 5,311 -22.27 254.34
December 31, 1989....... 10,000 176,018 176,018 7,891 6,232 -20.56 153.65
December 31, 1990....... 12,000 176,018 176,018 9,021 7,285 -18.14 106.41
December 31, 1991....... 14,000 176,018 176,018 13,499 11,685 -5.54 79.66
December 31, 1992....... 16,000 176,018 176,018 17,847 15,955 -.07 62.70
December 31, 1993....... 18,000 176,018 176,018 22,727 20,758 3.30 51.08
December 31, 1994....... 20,000 176,018 176,018 23,533 21,486 1.49 42.69
December 31, 1995....... 22,000 176,018 176,018 29,540 27,630 4.24 36.37
December 31, 1996....... 24,000 176,018 176,018 34,670 33,169 5.45 31.45
December 31, 1997....... 26,000 176,018 176,018 41,772 40,681 6.86 27.54
</TABLE>
A-67
<PAGE>
ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1989....... 2,000 176,018 176,018 1,668 321 -- --
December 31, 1990....... 4,000 176,018 176,018 3,238 1,814 -68.76% 2,813.78%
December 31, 1991....... 6,000 176,018 176,018 5,415 3,913 -29.97 542.64
December 31, 1992....... 8,000 176,018 176,018 7,469 5,889 -16.44 248.96
December 31, 1993....... 10,000 176,018 176,018 10,479 8,821 -5.40 151.39
December 31, 1994....... 12,000 176,018 176,018 11,058 9,322 -8.99 105.21
December 31, 1995....... 14,000 176,018 176,018 14,324 12,510 -3.40 78.94
December 31, 1996....... 16,000 176,018 176,018 17,736 15,845 -.26 62.22
December 31, 1997....... 18,000 176,018 176,018 22,594 20,625 3.13 50.75
</TABLE>
FEMALE NONSMOKER STANDARD RISK, AGE 35
OPTION 1--FIXED DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,864 1,772 316 -- --
December 31, 1984....... 4,000 197,864 197,864 3,145 1,611 -72.98% 2,848.04%
December 31, 1985....... 6,000 197,864 197,864 6,989 5,377 -7.97 560.87
December 31, 1986....... 8,000 197,864 197,864 14,928 13,239 28.58 258.37
December 31, 1987....... 10,000 197,864 197,864 23,704 21,936 34.66 157.45
December 31, 1988....... 12,000 197,864 197,864 22,896 21,050 19.81 109.61
December 31, 1989....... 14,000 197,864 197,864 31,121 29,198 21.75 82.38
December 31, 1990....... 16,000 197,864 197,864 30,979 28,978 15.14 65.04
December 31, 1991....... 18,000 197,864 230,371 48,882 46,803 21.19 56.66
December 31, 1992....... 20,000 197,864 215,711 47,085 44,929 16.01 46.22
December 31, 1993....... 22,000 197,864 246,992 55,079 53,102 15.65 41.84
December 31, 1994....... 24,000 197,864 224,664 51,577 50,031 11.94 34.90
December 31, 1995....... 26,000 197,864 298,393 72,631 71,517 14.88 34.59
December 31, 1996....... 28,000 197,864 360,752 88,244 87,561 15.37 33.17
December 31, 1997....... 30,000 197,864 401,464 108,962 108,711 15.99 31.05
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,864 1,668 212 -- --
December 31, 1984....... 4,000 197,864 197,864 3,395 1,861 -65.40% 2,848.04%
December 31, 1985....... 6,000 197,864 197,864 5,525 3,913 -29.29 560.87
December 31, 1986....... 8,000 197,864 197,864 7,750 6,061 -14.68 258.37
December 31, 1987....... 10,000 197,864 197,864 9,287 7,520 -12.05 157.45
December 31, 1988....... 12,000 197,864 197,864 11,396 9,550 -8.03 109.61
December 31, 1989....... 14,000 197,864 197,864 14,091 12,168 -4.21 82.38
December 31, 1990....... 16,000 197,864 197,864 16,519 14,518 -2.54 65.04
December 31, 1991....... 18,000 197,864 197,864 20,757 18,679 0.85 53.14
December 31, 1992....... 20,000 197,864 197,864 23,575 21,419 1.41 44.52
December 31, 1993....... 22,000 197,864 197,864 27,617 25,641 2.83 38.02
December 31, 1994....... 24,000 197,864 197,864 27,671 26,125 1.44 32.96
December 31, 1995....... 26,000 197,864 197,864 34,675 33,561 3.93 28.93
December 31, 1996....... 28,000 197,864 197,864 37,328 36,645 3.83 25.64
December 31, 1997....... 30,000 197,864 197,864 42,390 42,139 4.48 22.92
</TABLE>
A-68
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,864 1,672 216 -- --
December 31, 1984....... 4,000 197,864 197,864 3,291 1,757 -68.59% 2,848.04%
December 31, 1985....... 6,000 197,864 197,864 5,012 3,400 -37.91 560.87
December 31, 1986....... 8,000 197,864 197,864 6,755 5,066 -23.82 258.37
December 31, 1987....... 10,000 197,864 197,864 8,569 6,801 -16.26 157.45
December 31, 1988....... 12,000 197,864 197,864 10,556 8,711 -11.29 109.61
December 31, 1989....... 14,000 197,864 197,864 12,822 10,899 -7.55 82.38
December 31, 1990....... 16,000 197,864 197,864 15,114 13,113 -5.23 65.04
December 31, 1991....... 18,000 197,864 197,864 17,249 15,170 -3.98 53.14
December 31, 1992....... 20,000 197,864 197,864 19,052 16,896 -3.52 44.52
December 31, 1993....... 22,000 197,864 197,864 20,730 18,753 -3.03 38.02
December 31, 1994....... 24,000 197,864 197,864 22,646 21,100 -2.23 32.96
December 31, 1995....... 26,000 197,864 197,864 24,990 23,876 -1.35 28.93
December 31, 1996....... 28,000 197,864 197,864 27,297 26,614 -.75 25.64
December 31, 1997....... 30,000 197,864 197,864 29,757 29,506 -.23 22.92
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,329 83 -- --
December 31, 1988....... 4,000 197,864 197,864 3,062 1,528 -59.72% 1,410.81%
December 31, 1989....... 6,000 197,864 197,864 5,773 4,161 -20.54 417.58
December 31, 1990....... 8,000 197,864 197,864 6,828 5,139 -19.56 216.31
December 31, 1991....... 10,000 197,864 197,864 10,387 8,620 -5.53 138.86
December 31, 1992....... 12,000 197,864 197,864 12,531 10,686 -3.65 99.49
December 31, 1993....... 14,000 197,864 197,864 15,097 13,174 -1.66 76.13
December 31, 1994....... 16,000 197,864 197,864 16,512 14,511 -2.35 60.85
December 31, 1995....... 18,000 197,864 197,864 24,237 22,158 4.41 50.16
December 31, 1996....... 20,000 197,864 197,864 30,735 28,578 6.78 42.31
December 31, 1997....... 22,000 197,864 197,864 42,061 40,192 10.29 36.32
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,508 52 -- --
December 31, 1988....... 4,000 197,864 197,864 3,148 1,614 -57.35% 1,410.81%
December 31, 1989....... 6,000 197,864 197,864 5,404 3,792 -25.32 417.58
December 31, 1990....... 8,000 197,864 197,864 7,012 5,322 -18.07 216.31
December 31, 1991....... 10,000 197,864 197,864 9,911 8,144 -7.62 138.86
December 31, 1992....... 12,000 197,864 197,864 11,988 10,143 -5.30 99.49
December 31, 1993....... 14,000 197,864 197,864 14,589 12,666 -2.73 76.13
December 31, 1994....... 16,000 197,864 197,864 15,665 13,665 -3.81 60.85
December 31, 1995....... 18,000 197,864 197,864 22,097 20,018 2.27 50.16
December 31, 1996....... 20,000 197,864 197,864 26,543 24,387 3.80 42.31
December 31, 1997....... 22,000 197,864 197,864 34,909 33,040 7.01 36.32
</TABLE>
A-69
<PAGE>
ZENITH MIDCAP VALUE SUB-ACCOUNT**
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $2,000 $197,864 $197,864 $1,755 $ 299 -- --
December 31, 1993....... 2,000 197,864 197,864 1,721 265 -95.07% --
December 31, 1994....... 4,000 197,864 197,864 3,159 1,625 -56.94 1,403.84%
December 31, 1995....... 6,000 197,864 197,864 5,884 4,272 -19.12 416.63
December 31, 1996....... 8,000 197,864 197,864 8,376 6,686 -8.12 216.00
December 31, 1997....... 10,000 197,864 197,864 11,438 9,670 -1.25 138.72
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.......... $2,000 $197,864 $197,864 $1,755 $ 299 -- --
December 31, 1993....... 2,000 197,864 197,864 1,713 256 -95.31 --
December 31, 1994....... 4,000 197,864 197,864 3,127 1,593 -57.83 1,403.84%
December 31, 1995....... 6,000 197,864 197,864 6,036 4,424 -17.26 416.63
December 31, 1996....... 8,000 197,864 197,864 8,651 6,962 -6.32 216.00
December 31, 1997....... 10,000 197,864 197,864 13,245 11,477 5.19 138.72
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $2,000 $197,864 $197,864 $1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,446 10 -- --
December 31, 1995....... 4,000 197,864 197,864 3,598 2,064 -45.46% 1,417.83%
December 31, 1996....... 6,000 197,864 197,864 6,313 4,701 -14.02 418.53
December 31, 1997....... 8,000 197,864 197,864 9,636 7,946 -.31 216.62
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $2,000 $197,864 $197,864 $1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,589 133 -- --
December 31, 1995....... 4,000 197,864 197,864 3,695 2,161 -68.76% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 5,629 4,018 -32.00 683.01
December 31, 1997....... 8,000 197,864 197,864 8,447 6,758 -10.00 288.92
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........ $2,000 $197,864 $197,864 $1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,682 226 -- --
December 31, 1995....... 4,000 197,864 197,864 3,540 2,006 -74.20% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 5,590 3,979 -32.72 683.01
December 31, 1997....... 8,000 197,864 197,864 7,897 6,207 -14.95 288.92
</TABLE>
A-70
<PAGE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,629 173 -- --
December 31, 1995....... 4,000 197,864 197,864 3,694 2,161 -68.78% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 6,114 4,505 -23.86 683.01
December 31, 1997....... 8,000 197,864 197,864 9,551 7,861 -1.05 288.92
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,724 267 -- --
December 31, 1995....... 4,000 197,864 197,864 3,321 1,787 -81.50% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 4,983 3,371 -44.62 683.01
December 31, 1997....... 8,000 197,864 197,864 6,280 4,590 -32.21 288.92
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1986....... 2,000 197,864 197,864 1,690 234 -- --
December 31, 1987....... 4,000 197,864 197,864 2,796 1,262 -90.97% 4,042.12%
December 31, 1988....... 6,000 197,864 197,864 4,798 3,187 -45.95 637.74
December 31, 1989....... 8,000 197,864 197,864 7,021 5,331 -22.82 278.07
December 31, 1990....... 10,000 197,864 197,864 7,383 5,615 -25.79 165.61
December 31, 1991....... 12,000 197,864 197,864 11,092 9,247 -9.61 113.91
December 31, 1992....... 14,000 197,864 197,864 14,370 12,447 -3.66 84.97
December 31, 1993....... 16,000 197,864 197,864 18,190 16,189 .31 66.76
December 31, 1994....... 18,000 197,864 197,864 20,594 18,516 .67 54.35
December 31, 1995....... 20,000 197,864 197,864 29,142 26,986 6.21 45.41
December 31, 1996....... 22,000 197,864 197,864 34,264 32,215 7.09 38.70
December 31, 1997....... 24,000 197,864 197,864 44,834 43,217 9.82 33.49
OVERSEAS SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,306 18 -- --
December 31, 1988....... 4,000 197,864 197,864 3,071 1,537 -51.12% 939.24%
December 31, 1989....... 6,000 197,864 197,864 5,512 3,900 -20.81 342.86
December 31, 1990....... 8,000 197,864 197,864 6,810 5,120 -17.62 190.73
December 31, 1991....... 10,000 197,864 197,864 8,808 7,041 -11.79 126.70
December 31, 1992....... 12,000 197,864 197,864 8,972 7,127 -15.08 92.58
December 31, 1993....... 14,000 197,864 197,864 14,069 12,146 -3.62 71.75
December 31, 1994....... 16,000 197,864 197,864 15,407 13,406 -4.02 57.85
December 31, 1995....... 18,000 197,864 197,864 18,474 16,395 -1.90 48.00
December 31, 1996....... 20,000 197,864 197,864 22,059 19,903 -.09 40.68
December 31, 1997....... 22,000 197,864 197,864 25,887 24,161 1.57 35.06
</TABLE>
A-71
<PAGE>
HIGH INCOME 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>
September 19, 1985...... $2,000 $197,864 $197,864 $1,755 $ 299 -- --
December 31, 1985....... 2,000 197,864 197,864 1,758 302 -- --
December 31, 1986....... 4,000 197,864 197,864 3,521 1,987 -65.65% 3,421.33%
December 31, 1987....... 6,000 197,864 197,864 4,961 3,349 -40.83 600.75
December 31, 1988....... 8,000 197,864 197,864 6,932 5,243 -22.95 268.80
December 31, 1989....... 10,000 197,864 197,864 7,927 6,160 -21.06 161.81
December 31, 1990....... 12,000 197,864 197,864 9,046 7,201 -18.57 111.92
December 31, 1991....... 14,000 197,864 197,864 13,512 11,589 -5.80 83.78
December 31, 1992....... 16,000 197,864 197,864 17,838 15,837 -.27 65.97
December 31, 1993....... 18,000 197,864 197,864 22,688 20,609 3.13 53.79
December 31, 1994....... 20,000 197,864 197,864 23,468 21,312 1.32 45.00
December 31, 1995....... 22,000 197,864 197,864 29,435 27,422 4.10 38.39
December 31, 1996....... 24,000 197,864 197,864 34,533 32,952 5.34 33.25
December 31, 1997....... 26,000 197,864 197,864 41,612 40,462 6.78 29.16
ASSET MANAGER 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>
September 6, 1989....... $2,000 $197,864 $197,864 $1,755 $ 299 -- --
December 31, 1989....... 2,000 197,864 197,864 1,672 216 -- --
December 31, 1990....... 4,000 197,864 197,864 3,257 1,724 -71.53% 3,091.28%
December 31, 1991....... 6,000 197,864 197,864 5,453 3,842 -31.14 578.58
December 31, 1992....... 8,000 197,864 197,864 7,516 5,827 -16.99 263.06
December 31, 1993....... 10,000 197,864 197,864 10,532 8,765 -5.67 159.42
December 31, 1994....... 12,000 197,864 197,864 11,097 9,252 -9.26 110.66
December 31, 1995....... 14,000 197,864 197,864 14,349 12,426 -3.61 83.02
December 31, 1996....... 16,000 197,864 197,864 17,739 15,739 -.43 65.46
December 31, 1997....... 18,000 197,864 197,864 22,569 20,491 2.98 53.44
</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%.
The material below assumes, in the first example, a Policy with an Option 2
death benefit was issued with a $176,018 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith 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 nonsmoker standard risk, age 35. The second example
assumes a Policy was issued with a $197,864 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith 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 female nonsmoker standard risk, age 35. The death benefits,
cash values and internal rates of
A-72
<PAGE>
return assume in each instance that the entire policy value was invested in
the particular sub-account for the period shown. These illustrations of Policy
investment experience also reflect all charges applicable to the Policy,
including cost of insurance charges based on NELICO's current rates. (See
Appendix A for the definition of the internal rate of return.)
MALE NONSMOKER STANDARD RISK, AGE 35
OPTION 2--VARIABLE DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,152 1,767 420 -98.87% --
December 31, 1984....... 4,000 176,018 176,028 3,124 1,700 -70.32 2,596.96%
December 31, 1985....... 6,000 176,018 178,015 6,935 5,433 -7.23 529.53
December 31, 1986....... 8,000 176,018 184,642 14,807 13,227 28.53 250.15
December 31, 1987....... 10,000 176,018 191,043 23,495 21,837 34.45 155.05
December 31, 1988....... 12,000 176,018 188,668 22,692 20,956 19.65 107.41
December 31, 1989....... 14,000 176,018 194,186 30,834 29,021 21.57 81.73
December 31, 1990....... 16,000 176,018 192,894 30,686 28,795 14.98 64.34
December 31, 1991....... 18,000 176,018 207,558 48,406 46,437 21.01 54.24
December 31, 1992....... 20,000 176,018 204,225 46,624 44,577 15.86 45.14
December 31, 1993....... 22,000 176,018 212,263 54,579 52,703 15.52 39.23
December 31, 1994....... 24,000 176,018 205,678 51,138 49,671 11.83 33.55
December 31, 1995....... 26,000 176,018 256,296 72,041 70,983 14.78 32.49
December 31, 1996....... 28,000 176,018 309,690 87,538 86,890 15.27 31.25
December 31, 1997....... 30,000 176,018 344,325 108,057 107,818 15.89 29.28
ZENITH BOND INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,048 1,663 316 -- --
December 31, 1984....... 4,000 176,018 176,254 3,373 1,949 -62.69% 2,599.60%
December 31, 1985....... 6,000 176,018 176,748 5,484 3,982 -28.18 527.46
December 31, 1986....... 8,000 176,018 177,340 7,698 6,118 -14.19 245.43
December 31, 1987....... 10,000 176,018 177,073 9,235 7,577 -11.73 149.93
December 31, 1988....... 12,000 176,018 177,451 11,349 9,613 -7.80 104.59
December 31, 1989....... 14,000 176,018 178,232 14,054 12,241 -4.03 78.77
December 31, 1990....... 16,000 176,018 178,738 16,498 14,607 -2.38 62.24
December 31, 1991....... 18,000 176,018 180,860 20,752 18,782 0.98 51.08
December 31, 1992....... 20,000 176,018 181,793 23,581 21,534 1.52 42.86
December 31, 1993....... 22,000 176,018 183,785 27,625 25,748 2.91 36.76
December 31, 1994....... 24,000 176,018 181,675 27,669 26,202 1.49 31.66
December 31, 1995....... 26,000 176,018 185,961 34,634 33,577 3.94 28.08
December 31, 1996....... 28,000 176,018 186,424 37,214 36,565 3.80 24.90
December 31, 1997....... 30,000 176,018 188,815 42,159 41,920 4.41 22.39
</TABLE>
A-73
<PAGE>
ZENITH MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,040 1,667 320 -- --
December 31, 1984....... 4,000 176,018 176,144 3,270 1,845 -65.89% 2,598.32%
December 31, 1985....... 6,000 176,018 176,246 4,975 3,473 -36.63 526.64
December 31, 1986....... 8,000 176,018 176,317 6,713 5,132 -23.16 244.76
December 31, 1987....... 10,000 176,018 176,400 8,526 6,868 -15.85 149.67
December 31, 1988....... 12,000 176,018 176,587 10,521 8,785 -10.99 104.37
December 31, 1989....... 14,000 176,018 177,002 12,802 10,988 -7.30 78.53
December 31, 1990....... 16,000 176,018 177,386 15,113 13,222 -5.01 62.03
December 31, 1991....... 18,000 176,018 177,546 17,270 15,301 -3.78 50.66
December 31, 1992....... 20,000 176,018 177,306 19,096 17,049 -3.33 42.37
December 31, 1993....... 22,000 176,018 176,856 20,794 18,917 -2.86 36.10
December 31, 1994....... 24,000 176,018 176,548 22,721 21,254 -2.10 31.23
December 31, 1995....... 26,000 176,018 176,585 25,056 23,998 -1.27 27.37
December 31, 1996....... 28,000 176,018 176,488 27,326 26,677 -.71 24.21
December 31, 1997....... 30,000 176,018 176,430 29,723 29,484 -.24 21.60
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,322 83 -- --
December 31, 1988....... 4,000 176,018 176,018 3,037 1,612 -57.40% 1,304.55%
December 31, 1989....... 6,000 176,018 176,887 5,727 4,224 -19.74 394.39
December 31, 1990....... 8,000 176,018 176,288 6,782 5,202 -19.04 205.23
December 31, 1991....... 10,000 176,018 177,329 10,330 8,672 -5.30 132.41
December 31, 1992....... 12,000 176,018 178,391 12,481 10,745 -3.48 95.18
December 31, 1993....... 14,000 176,018 179,083 15,056 13,243 -1.52 72.95
December 31, 1994....... 16,000 176,018 178,352 16,488 14,597 -2.21 58.17
December 31, 1995....... 18,000 176,018 184,401 24,219 22,250 4.50 48.63
December 31, 1996....... 20,000 176,018 189,447 30,711 28,664 6.84 41.49
December 31, 1997....... 22,000 176,018 198,117 41,995 40,221 10.30 36.34
ZENITH MANAGED SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,500 153 -97.86% --
December 31, 1988....... 4,000 176,018 176,041 3,123 1,698 -55.06 1,304.66%
December 31, 1989....... 6,000 176,018 176,613 5,362 3,859 -24.42 394.08
December 31, 1990....... 8,000 176,018 176,484 6,966 5,386 -17.56 205.33
December 31, 1991....... 10,000 176,018 177,144 9,860 8,202 -7.36 132.35
December 31, 1992....... 12,000 176,018 177,803 11,945 10,209 -5.09 95.05
December 31, 1993....... 14,000 176,018 178,692 14,556 12,743 -2.57 72.88
December 31, 1994....... 16,000 176,018 177,621 15,653 13,762 -3.63 58.07
December 31, 1995....... 18,000 176,018 182,268 22,099 20,130 2.38 48.38
December 31, 1996....... 20,000 176,018 185,150 26,552 24,505 3.89 41.07
December 31, 1997....... 22,000 176,018 191,003 34,905 33,131 7.05 35.74
</TABLE>
A-74
<PAGE>
ZENITH MIDCAP VALUE SUB-ACCOUNT**
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,202 1,711 364 -92.09% --
December 31, 1994....... 4,000 176,018 176,115 3,133 1,709 -54.68 1,298.70%
December 31, 1995....... 6,000 176,018 177,161 5,838 4,335 -18.34 393.82
December 31, 1996....... 8,000 176,018 178,017 8,318 6,737 -7.78 205.86
December 31, 1997....... 10,000 176,018 179,221 11,370 9,712 -1.09 132.90
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.......... $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,197 1,703 356 -92.36% --
December 31, 1994....... 4,000 176,018 176,058 3,101 1,676 -55.57 1,298.42%
December 31, 1995....... 6,000 176,018 177,311 5,988 4,486 -16.52 393.99
December 31, 1996....... 8,000 176,018 178,341 8,590 7,010 -6.01 206.03
December 31, 1997....... 10,000 176,018 180,995 13,163 11,505 5.28 133.47
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,438 92 -- --
December 31, 1995....... 4,000 176,018 176,392 3,570 2,145 -43.38% 1,312.79%
December 31, 1996....... 6,000 176,018 177,398 6,262 4,760 -13.33 395.87
December 31, 1997....... 8,000 176,018 179,175 9,566 7,986 -.08 207.06
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,586 240 -- --
December 31, 1995....... 4,000 176,018 176,519 3,675 2,250 -65.57% 4,461.16%
December 31, 1996....... 6,000 176,018 176,842 5,590 4,087 -30.72 640.71
December 31, 1997....... 8,000 176,018 177,986 8,390 6,809 -9.56 274.64
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........ $2,000 $176,018 $176,018 $1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,679 332 -- --
December 31, 1995....... 4,000 176,018 176,366 3,521 2,096 -71.05% 4,457.67%
December 31, 1996....... 6,000 176,018 176,804 5,551 4,049 -31.42 640.63
December 31, 1997....... 8,000 176,018 177,441 7,845 6,264 -14.42 274.24
</TABLE>
A-75
<PAGE>
ZENITH VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,626 279 -- --
December 31, 1995....... 4,000 176,018 176,519 3,674 2,250 -65.57% 4,461.16%
December 31, 1996....... 6,000 176,018 177,323 6,071 4,569 -22.23 641.71
December 31, 1997....... 8,000 176,018 179,080 9,484 7,903 -.73 275.46
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,040 1,720 374 -- --
December 31, 1995....... 4,000 176,018 176,149 3,304 1,879 -78.51% 4,452.77%
December 31, 1996....... 6,000 176,018 176,201 4,949 3,447 -43.07 639.38
December 31, 1997....... 8,000 176,018 176,018 6,241 4,661 -31.34 273.17
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1986....... 2,000 176,018 176,063 1,687 340 -- --
December 31, 1987....... 4,000 176,018 176,018 2,781 1,356 -88.69% 3,658.16%
December 31, 1988....... 6,000 176,018 176,053 4,764 3,262 -44.45 597.33
December 31, 1989....... 8,000 176,018 176,454 6,974 5,394 -22.18 263.33
December 31, 1990....... 10,000 176,018 176,018 7,346 5,688 -25.22 157.23
December 31, 1991....... 12,000 176,018 176,320 11,054 9,318 -9.32 108.37
December 31, 1992....... 14,000 176,018 178,287 14,342 12,529 -3.46 81.25
December 31, 1993....... 16,000 176,018 180,250 18,171 16,280 .46 64.12
December 31, 1994....... 18,000 176,018 180,486 20,589 18,620 .80 52.19
December 31, 1995....... 20,000 176,018 187,635 29,140 27,093 6.29 44.35
December 31, 1996....... 22,000 176,018 190,738 34,249 32,304 7.14 38.06
December 31, 1997....... 24,000 176,018 198,821 44,767 43,232 9.82 33.57
OVERSEAS SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,294 18 -- --
December 31, 1988....... 4,000 176,018 176,018 3,040 1,616 -49.16% 874.98%
December 31, 1989....... 6,000 176,018 176,843 5,466 3,963 -20.09 324.55
December 31, 1990....... 8,000 176,018 176,419 6,763 5,183 -17.16 181.21
December 31, 1991....... 10,000 176,018 176,597 8,765 7,107 -11.48 120.65
December 31, 1992....... 12,000 176,018 176,018 8,949 7,213 -14.74 88.08
December 31, 1993....... 14,000 176,018 178,216 14,059 12,245 -3.42 68.61
December 31, 1994....... 16,000 176,018 177,692 15,416 13,525 -3.81 55.22
December 31, 1995....... 18,000 176,018 178,489 18,506 16,536 -1.73 45.86
December 31, 1996....... 20,000 176,018 180,000 22,112 20,065 .06 38.98
December 31, 1997....... 22,000 176,018 181,665 25,945 24,307 1.67 33.71
</TABLE>
A-76
<PAGE>
HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1985....... 2,000 176,018 176,075 1,754 407 -- --
December 31, 1986....... 4,000 176,018 176,325 3,501 2,076 -62.78% 3,111.97%
December 31, 1987....... 6,000 176,018 176,098 4,926 3,424 -39.44 563.26
December 31, 1988....... 8,000 176,018 176,446 6,889 5,309 -22.29 254.63
December 31, 1989....... 10,000 176,018 176,018 7,888 6,230 -20.57 153.65
December 31, 1990....... 12,000 176,018 176,018 9,019 7,283 -18.15 106.41
December 31, 1991....... 14,000 176,018 177,598 13,494 11,680 -5.56 79.98
December 31, 1992....... 16,000 176,018 180,022 17,831 15,940 -.10 63.32
December 31, 1993....... 18,000 176,018 182,891 22,692 20,723 3.26 51.97
December 31, 1994....... 20,000 176,018 181,531 23,481 21,433 1.44 43.30
December 31, 1995....... 22,000 176,018 186,024 29,450 27,539 4.18 37.32
December 31, 1996....... 24,000 176,018 188,174 34,528 33,026 5.38 32.48
December 31, 1997....... 26,000 176,018 193,062 41,547 40,455 6.78 28.82
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1989....... 2,000 176,018 176,018 1,668 321 -- --
December 31, 1990....... 4,000 176,018 176,065 3,238 1,814 -68.76% 2,814.37%
December 31, 1991....... 6,000 176,018 176,469 5,414 3,912 -29.98 543.40
December 31, 1992....... 8,000 176,018 177,017 7,467 5,887 -16.46 249.63
December 31, 1993....... 10,000 176,018 178,116 10,472 8,814 -5.43 152.19
December 31, 1994....... 12,000 176,018 177,421 11,048 9,313 -9.03 105.58
December 31, 1995....... 14,000 176,018 178,613 14,308 12,494 -3.44 79.45
December 31, 1996....... 16,000 176,018 180,167 17,710 15,819 -.30 62.86
December 31, 1997....... 18,000 176,018 182,951 22,517 20,578 3.08 51.63
</TABLE>
FEMALE NONSMOKER STANDARD RISK, AGE 35
OPTION 2--VARIABLE DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 198,007 1,772 316 -- --
December 31, 1984....... 4,000 197,864 197,907 3,145 1,611 -72.98% 2,848.51%
December 31, 1985....... 6,000 197,864 199,929 6,987 5,375 -7.99 564.03
December 31, 1986....... 8,000 197,864 206,622 14,912 13,223 28.51 263.61
December 31, 1987....... 10,000 197,864 213,082 23,650 21,883 34.54 162.56
December 31, 1988....... 12,000 197,864 210,701 22,821 20,976 19.69 112.55
December 31, 1989....... 14,000 197,864 216,256 30,983 29,060 21.61 85.49
December 31, 1990....... 16,000 197,864 214,967 30,806 28,805 14.99 67.35
December 31, 1991....... 18,000 197,864 229,692 48,558 46,479 21.03 56.59
December 31, 1992....... 20,000 197,864 226,357 46,739 44,583 15.86 47.17
December 31, 1993....... 22,000 197,864 245,178 54,674 52,698 15.52 41.71
December 31, 1994....... 24,000 197,864 227,826 51,205 49,659 11.83 35.12
December 31, 1995....... 26,000 197,864 296,274 72,115 71,001 14.78 34.49
December 31, 1996....... 28,000 197,864 358,250 87,632 86,949 15.28 33.08
December 31, 1997....... 30,000 197,864 398,723 108,218 107,967 15.91 30.97
</TABLE>
A-77
<PAGE>
ZENITH BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,903 1,668 212 -- --
December 31, 1984....... 4,000 197,864 198,133 3,395 1,861 -65.40% 2,851.09%
December 31, 1985....... 6,000 197,864 198,652 5,524 3,912 -29.30 562.08
December 31, 1986....... 8,000 197,864 199,263 7,747 6,058 -14.70 259.22
December 31, 1987....... 10,000 197,864 199,006 9,282 7,514 -12.08 157.84
December 31, 1988....... 12,000 197,864 199,392 11,387 9,542 -8.07 109.97
December 31, 1989....... 14,000 197,864 200,181 14,077 12,154 -4.24 82.79
December 31, 1990....... 16,000 197,864 200,691 16,498 14,497 -2.58 65.44
December 31, 1991....... 18,000 197,864 202,816 20,723 18,644 0.81 53.71
December 31, 1992....... 20,000 197,864 203,754 23,523 21,367 1.36 45.10
December 31, 1993....... 22,000 197,864 205,748 27,537 25,560 2.77 38.69
December 31, 1994....... 24,000 197,864 203,661 27,574 26,029 1.38 33.40
December 31, 1995....... 26,000 197,864 207,964 34,530 33,416 3.87 29.61
December 31, 1996....... 28,000 197,864 208,483 37,144 36,461 3.76 26.30
December 31, 1997....... 30,000 197,864 210,949 42,146 41,895 4.40 23.66
ZENITH MONEY MARKET SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,895 1,672 216 -- --
December 31, 1984....... 4,000 197,864 198,023 3,290 1,757 -68.59% 2,849.84%
December 31, 1985....... 6,000 197,864 198,146 5,011 3,399 -37.91 561.30
December 31, 1986....... 8,000 197,864 198,232 6,754 5,065 -23.83 258.60
December 31, 1987....... 10,000 197,864 198,327 8,567 6,800 -16.27 157.61
December 31, 1988....... 12,000 197,864 198,522 10,553 8,707 -11.30 109.77
December 31, 1989....... 14,000 197,864 198,942 12,817 10,894 -7.56 82.57
December 31, 1990....... 16,000 197,864 199,331 15,105 13,104 -5.24 65.25
December 31, 1991....... 18,000 197,864 199,497 17,235 15,157 -4.00 53.33
December 31, 1992....... 20,000 197,864 199,263 19,034 16,878 -3.55 44.66
December 31, 1993....... 22,000 197,864 198,821 20,708 18,731 -3.05 38.10
December 31, 1994....... 24,000 197,864 198,528 22,620 21,075 -2.25 33.01
December 31, 1995....... 26,000 197,864 198,597 24,961 23,847 -1.37 28.98
December 31, 1996....... 28,000 197,864 198,555 27,264 26,581 -.76 25.69
December 31, 1997....... 30,000 197,864 198,575 29,721 29,469 -.24 22.96
ZENITH STOCK INDEX SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,329 83 -- --
December 31, 1988....... 4,000 197,864 197,864 3,062 1,528 -59.72% 1,410.81%
December 31, 1989....... 6,000 197,864 198,796 5,772 4,160 -20.55 418.57
December 31, 1990....... 8,000 197,864 198,207 6,826 5,137 -19.58 216.48
December 31, 1991....... 10,000 197,864 199,266 10,382 8,614 -5.55 139.28
December 31, 1992....... 12,000 197,864 200,340 12,521 10,676 -3.69 100.02
December 31, 1993....... 14,000 197,864 201,037 15,079 13,156 -1.70 76.65
December 31, 1994....... 16,000 197,864 200,312 16,486 14,486 -2.39 61.17
December 31, 1995....... 18,000 197,864 206,362 24,186 22,108 4.37 51.08
December 31, 1996....... 20,000 197,864 211,404 30,642 28,486 6.72 43.55
December 31, 1997....... 22,000 197,864 220,062 41,881 40,013 10.21 38.07
</TABLE>
A-78
<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............. $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,508 52 -- --
December 31, 1988....... 4,000 197,864 197,924 3,148 1,614 -57.35% 1,411.09%
December 31, 1989....... 6,000 197,864 198,520 5,403 3,791 -25.33 418.28
December 31, 1990....... 8,000 197,864 198,404 7,010 5,321 -18.08 216.58
December 31, 1991....... 10,000 197,864 199,079 9,907 8,140 -7.64 139.23
December 31, 1992....... 12,000 197,864 199,746 11,980 10,135 -5.32 99.89
December 31, 1993....... 14,000 197,864 200,642 14,574 12,651 -2.77 76.58
December 31, 1994....... 16,000 197,864 199,575 15,646 13,645 -3.84 61.08
December 31, 1995....... 18,000 197,864 204,223 22,059 19,981 2.23 50.85
December 31, 1996....... 20,000 197,864 207,103 26,480 24,324 3.75 43.16
December 31, 1997....... 22,000 197,864 212,947 34,791 32,922 6.95 37.53
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.......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 1993........... 2,000 197,864 198,065 1,721 265 -95.08% --
December 31, 1994....... 4,000 197,864 198,000 3,159 1,625 -56.95 1,404.48%
December 31, 1995....... 6,000 197,864 199,072 5,882 4,271 -19.14 417.91
December 31, 1996....... 8,000 197,864 199,948 8,371 6,681 -8.15 217.02
December 31, 1997....... 10,000 197,864 201,169 11,426 9,659 -1.30 139.71
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.......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1993....... 2,000 197,864 198,060 1,712 256 -95.31% --
December 31, 1994....... 4,000 197,864 197,943 3,126 1,592 -57.84 1,404.21%
December 31, 1995....... 6,000 197,864 199,224 6,034 4,423 -17.28 418.07
December 31, 1996....... 8,000 197,864 200,275 8,646 6,957 -6.35 217.18
December 31, 1997....... 10,000 197,864 202,954 13,230 11,463 5.14 140.24
ZENITH SMALL CAP SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,446 10 -- --
December 31, 1995....... 4,000 197,864 198,279 3,598 2,064 -45.47% 1,419.81%
December 31, 1996....... 6,000 197,864 199,312 6,311 4,699 -14.04 420.08
December 31, 1997....... 8,000 197,864 201,114 9,629 7,939 -.35 218.21
ZENITH EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,589 133 -- --
December 31, 1995....... 4,000 197,864 198,396 3,694 2,160 -68.78% 4,950.38%
December 31, 1996....... 6,000 197,864 198,742 5,628 4,016 -32.03 684.72
December 31, 1997....... 8,000 197,864 199,910 8,442 6,753 -10.05 290.53
</TABLE>
A-79
<PAGE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,682 226 -- --
December 31, 1995....... 4,000 197,864 198,242 3,540 2,006 -74.21% 4,946.92%
December 31, 1996....... 6,000 197,864 198,704 5,589 3,977 -32.74 684.65
December 31, 1997....... 8,000 197,864 199,361 7,894 6,204 -14.99 289.95
ZENITH VENTURE VALUE SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,629 173 -- --
December 31, 1995....... 4,000 197,864 198,396 3,694 2,160 -68.79% 4,950.38%
December 31, 1996....... 6,000 197,864 199,227 6,113 4,501 -23.39 685.66
December 31, 1997....... 8,000 197,864 201,012 9,544 7,855 -1.10 291.09
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,891 1,724 267 -- --
December 31, 1995....... 4,000 197,864 198,023 3,321 1,787 -81.51% 4,942.10%
December 31, 1996....... 6,000 197,864 198,097 4,983 3,371 -44.62 683.46
December 31, 1997....... 8,000 197,864 197,864 6,279 4,590 -32.21 288.92
EQUITY-INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1986....... 2,000 197,864 197,914 1,690 234 -- --
December 31, 1987....... 4,000 197,864 197,864 2,796 1,262 -90.97% 4,042.12%
December 31, 1988....... 6,000 197,864 197,950 4,798 3,186 -45.96 637.89
December 31, 1989....... 8,000 197,864 198,370 7,019 5,330 -22.83 278.40
December 31, 1990....... 10,000 197,864 197,864 7,381 5,614 -25.80 165.61
December 31, 1991....... 12,000 197,864 198,253 11,089 9,244 -9.62 114.00
December 31, 1992....... 14,000 197,864 200,230 14,363 12,440 -3.68 85.40
December 31, 1993....... 16,000 197,864 202,199 18,172 16,171 .29 67.37
December 31, 1994....... 18,000 197,864 202,441 20,563 18,485 .63 54.88
December 31, 1995....... 20,000 197,864 209,583 29,076 26,919 6.16 46.56
December 31, 1996....... 22,000 197,864 212,685 34,150 32,102 7.03 39.96
December 31, 1997....... 24,000 197,864 220,757 44,627 43,009 9.74 35.19
</TABLE>
OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $2,000 $197,864 $197,866 $1,755 $299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,306 18 -- --
</TABLE>
A-80
<PAGE>
<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>
December 31, 1988....... 4,000 197,864 197,864 3,071 1,537 -51.13% 939.24%
December 31, 1989....... 6,000 197,864 198,758 5,511 3,900 -20.82 343.61
December 31, 1990....... 8,000 197,864 198,343 6,808 5,118 -17.63 190.93
December 31, 1991....... 10,000 197,864 198,532 8,805 7,037 -11.80 126.88
December 31, 1992....... 12,000 197,864 197,864 8,969 7,124 -15.10 92.58
December 31, 1993....... 14,000 197,864 200,160 14,062 12,139 -3.64 72.10
December 31, 1994....... 16,000 197,864 199,641 15,394 13,393 -4.04 58.07
December 31, 1995....... 18,000 197,864 200,443 18,453 16,375 -1.93 48.27
December 31, 1996....... 20,000 197,864 201,954 22,027 19,870 -.12 41.05
December 31, 1997....... 22,000 197,864 203,623 25,832 24,107 1.54 35.52
HIGH INCOME SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1985....... 2,000 197,864 197,929 1,758 302 -- --
December 31, 1986....... 4,000 197,864 198,203 3,521 1,987 -65.66% 3,426.13%
December 31, 1987....... 6,000 197,864 197,995 4,960 3,348 -40.85 600.96
December 31, 1988....... 8,000 197,864 198,360 6,931 5,241 -22.97 269.12
December 31, 1989....... 10,000 197,864 197,864 7,925 6,158 -21.08 161.81
December 31, 1990....... 12,000 197,864 197,864 9,044 7,199 -18.58 111.92
December 31, 1991....... 14,000 197,864 199,535 13,507 11,584 -5.81 84.08
December 31, 1992....... 16,000 197,864 201,965 17,823 15,823 -.29 66.54
December 31, 1993....... 18,000 197,864 204,836 22,654 20,576 3.10 54.60
December 31, 1994....... 20,000 197,864 203,486 23,418 21,262 1.27 45.56
December 31, 1995....... 22,000 197,864 207,972 29,350 27,338 4.04 39.25
December 31, 1996....... 24,000 197,864 210,128 34,402 32,821 5.28 34.18
December 31, 1997....... 26,000 197,864 215,027 41,408 40,258 6.71 30.31
ASSET MANAGER SUB-ACCOUNT
<CAPTION>
INTERNAL RATE
TOTAL MINIMUM VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1989....... 2,000 197,864 197,864 1,672 216 -- --
December 31, 1990....... 4,000 197,864 197,941 3,257 1,724 -71.53% 3,092.25%
December 31, 1991....... 6,000 197,864 198,369 5,453 3,841 -31.16 579.38
December 31, 1992....... 8,000 197,864 198,936 7,514 5,824 -17.01 263.73
December 31, 1993....... 10,000 197,864 200,054 10,526 8,759 -5.70 160.19
December 31, 1994....... 12,000 197,864 199,364 11,088 9,243 -9.29 111.01
December 31, 1995....... 14,000 197,864 200,563 14,334 12,411 -3.65 83.49
December 31, 1996....... 16,000 197,864 202,123 17,715 15,714 -.47 66.06
December 31, 1997....... 18,000 197,864 204,911 22,525 20,446 2.93 54.25
</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-81
<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 time 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.
A-82
<PAGE>
SUMMARY TABLE: HISTORIC S&P 500 STOCK INDEX RESULTS FOR SPECIFIC HOLDING
PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index, with dividends reinvested, over one-year, five-year,
ten-year and twenty-year periods beginning in 1926 and ending in 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.
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-83
<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.
A-84
<PAGE>
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
included in First Distribution).. No* Yes Yes Yes
Early Withdrawal Penalties........ No* Yes*** Yes*** Yes***
Minimum Distribution Rules by Age
70 1/2........................... No No Yes Yes
Maximum Annual Distribution Rules. No No Yes Yes
Anti-discrimination Rules......... No No No Yes
</TABLE>
- --------
Department of the Treasury March 1990
Office of Tax Analysis
* If the policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
The foregoing information is not intended as tax advice. You should consult
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>
NEW ENGLAND LIFE
INSURANCE COMPANY
Zenith Life Plus
Variable Ordinary Life Insurance Policies
Supplement Dated May 1, 1998 to
Prospectuses Dated May 1, 1997, May 1, 1996, May 1, 1995 and
May 1, 1994
This supplement updates certain information contained in (1) the prospectus
dated May 1, 1997, (2) the prospectus dated May 1, 1996, as supplemented
August 30, 1996 and May 31, 1997, (3) the prospectus dated May 1, 1995, as
supplemented November 13, 1995, May 1, 1996 and May 1, 1997 and (4) the
prospectus dated May 1, 1994, as supplemented October 31, 1994, May 1, 1995,
May 1, 1996 and May 1, 1997. You should read and retain this supplement. A
complete prospectus dated May 1, 1998 is available free of charge upon written
request to New England Life Insurance Company ("NELICO").
NELICO is an indirect, wholly-owned subsidiary of Metropolitan Life
Insurance Company ("MetLife"). NELICO's Home Office is 501 Boylston Street,
Boston, Massachusetts 02116.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS SUPPLEMENT IS NOT VALID UNLESS ACCOMPANIED OR PRECEDED BY THE CURRENT
PROSPECTUS OF THE NEW ENGLAND ZENITH FUND AND OF THE VARIABLE INSURANCE
PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II, WHICH ARE ATTACHED AT
THE END OF THIS SUPPLEMENT. THE SUPPLEMENT AND PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
<PAGE>
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs
associated with providing the services or benefits indicated by the
designation of the charge or associated with the particular Policy. For
example, the sales charge and Deferred Sales Charges may not fully cover all
of the sales and distribution expenses actually incurred by the Company, and
proceeds from other charges, including the mortality and expense risk charge,
may be used in part to cover such expenses.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE
ACCOUNT
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds.
The New England 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 New
England 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 on May 1, 1998, and other expenses actually
incurred for the Series for 1997.
The investment adviser for the VIP Fund and VIP II Fund 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.
2
<PAGE>
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>
TOTAL
PORTFOLIO MANAGEMENT FEES OTHER EXPENSES ANNUAL 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.
PREMIUMS
UNSCHEDULED PAYMENTS
The first sentence is modified as follows:
You may make unscheduled payments at any time that the Policy is in force on
a premium paying basis provided that the unscheduled payment is at least $25
($10 if made pursuant to the Master Service Account or certain other monthly
payment arrangements) and, if required by NELICO, the insured has submitted
evidence of insurability satisfactory to NELICO.
OTHER POLICY FEATURES
INVESTMENT OPTIONS
The first paragraph is revised as follows:
You have the option to allocate net scheduled premiums and net unscheduled
payments among the sub-accounts of the Variable Account in any combination.
The Policy provides that any portion of a net scheduled premium and net
unscheduled payment allocated to one of the Policy's sub-accounts must be at
least 10% of such premium or payment 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 ten accounts
(including the Fixed Account) at any one time.
THE VARIABLE ACCOUNT
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 16 investment sub-accounts, each of which
invests in the shares of an Eligible Fund. The sub-accounts of the Variable
Account are:
-- The Zenith Money Market Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Back Bay Advisors Money Market
Series of the New England Zenith Fund.
-- The Zenith Bond Income Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Back Bay Advisors Bond Income
Series of the New England Zenith Fund.
-- The Zenith Capital Growth Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Capital Growth Series of the New
England Zenith Fund.
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<PAGE>
-- The Zenith Stock Index Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Westpeak Stock Index Series of the
New England Zenith Fund.
-- The Zenith Managed Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Back Bay Advisors Managed Series of the
New England Zenith Fund.
-- The Zenith Growth and Income Sub-Account -- Amounts credited to this
sub-account are invested in shares of the Westpeak Growth and Income
Series of the New England Zenith Fund.
-- The Zenith Small Cap Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Loomis Sayles Small Cap Series of the New
England Zenith Fund.
-- The Zenith Equity Growth Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Alger Equity Growth Series of the
New England Zenith Fund.
-- The Zenith Balanced Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Loomis Sayles Balanced Series of the New
England Zenith Fund.
-- The Zenith Venture Value Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Davis Venture Value Series of the
New England Zenith Fund.
-- The Zenith Midcap Value Sub-Account -- Amounts credited to this sub-
account are invested in shares of the Goldman Sachs Midcap Value Series
(formerly the Loomis Sayles Avanti Growth Series) of the New England
Zenith Fund.
-- The Zenith International Magnum Equity Sub-Account -- Amounts credited
to this sub-account are invested in shares of the Morgan Stanley
International Magnum Equity Series of the New England Zenith Fund.
-- The Equity-Income Sub-Account -- Amounts credited to this sub-account
are invested in shares of the Equity-Income Portfolio of the VIP Fund.
-- The Overseas Sub-Account -- Amounts credited to this sub-account are
invested in shares of the Overseas Portfolio of the VIP Fund.
-- The High Income Sub-Account -- Amounts credited to this sub-account are
invested in shares of the High Income Portfolio of the VIP Fund.
-- The Asset Manager Sub-Account -- Amounts credit to this sub-account are
invested in shares of the Asset Manager Portfolio of the VIP Fund II.
The New England Zenith fund is an open-end, diversified management company
organized for the purpose of providing a vehicle for the investment of assets
held in various separate investment accounts, including the Variable Account,
established by NELICO or by 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 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.
For each day when the New York Stock Exchange is open for trading, the
Variable Account purchases or redeems shares of the Eligible Fund portfolios
based on, among other things, the amount of net premiums and net unscheduled
payments invested in the Variable Account, transfers among sub-accounts of the
Variable Account, policy loans, policy loan repayments, surrender and
withdrawal payments and death benefit payments to be effected on that day.
Such purchases and redemptions are effected at the net asset value per share
for each Eligible Fund portfolio determined as of the close of regular trading
on the New York Stock Exchange on that same day.
The investment objectives of the Eligible Funds' portfolios currently
available to Policy Owners through each corresponding sub-account are set
forth below. There is, of course, no assurance that these objectives will be
met. A full description of the Eligible Funds, their investment objectives,
policies and restrictions, their expenses and
4
<PAGE>
other aspects of their operation, as well as a full description of risks
related to investment in the Eligible Funds, is contained in the attached
Eligible Fund prospectuses, which should be read and retained together with
this prospectus, as well as in the New England Zenith Fund's Statement of
Additional Information which may be obtained free of charge from New England
Securities, and in the Statement of Additional Information for the VIP Fund
and VIP Fund II which may be obtained free of charge from Fidelity
Distributors Corporation.
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 Money Market Sub-Account invests in shares of the New England
Zenith Fund's Back Bay Advisors Money Market Series. Its 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 Bond Income Sub-Account invests in shares of the New England
Zenith Fund's Back Bay Advisors Bond Income Series. Its investment objective
is to provide a high level of current income consistent with protection of
capital.
The Zenith Capital Growth Sub-Account invests in shares of the New England
Zenith Fund's Capital Growth Series. Its 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 Stock Index Sub-Account invests in shares of the New England
Zenith Fund's Westpeak Stock Index Series. Its investment objective is to
provide investment results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The Stock Index
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 Managed Sub-Account invests in shares of the New England Zenith
Fund's Back Bay Advisors Managed Series. Its 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 Growth and Income Sub-Account invests in shares of the New
England Zenith Fund's Westpeak Growth and Income Series. Its 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 Midcap Value Sub-Account invests in shares of the New England
Zenith Fund's Goldman Sachs Midcap Value Series. Its investment objective is
long-term capital appreciation. The Series invests, under normal
circumstances, substantially all of its assets in equity securities of
companies with public stock market capitalizations within the range of the
market capitalizations of companies constituting the Russell Midcap Index at
the time of investment.
The Zenith Small Cap Sub-Account invests in shares of the New England Zenith
Fund's Loomis Sayles Small Cap Series. Its 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 Balanced Sub-Account invests in shares of the New England Zenith
Fund's Loomis Sayles Balanced Series. Its 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
5
<PAGE>
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 International Magnum Equity Sub-Account invests in shares of the
New England Zenith Fund's Morgan Stanley International Magnum Equity Series.
Its investment objective is long-term capital appreciation through investment
primarily in equity securities of non-U.S. issuers, in accordance with the
EAFE country weightings determined by the Series' sub-adviser. Under normal
circumstances at least 65% of the total assets of the Series will be invested
in equity securities of issuers in at least three countries outside the United
States.
The Zenith Venture Value Sub-Account invests in shares of the New England
Zenith Fund's Davis Venture Value Series. Its investment objective is growth
of capital. The Series will primarily invest in domestic common stocks that
the Series' subadviser believes have capital growth potential due to factors
such as undervalued assets or earnings potential, product development and
demand, favorable operating ratios, resources for expansion, management
abilities, reasonableness of market price, and favorable overall business
prospects. The Series will generally invest predominantly in equity securities
of companies with market capitalizations of at least $250 million.
The Zenith Equity Growth Sub-Account invests in shares of the New England
Zenith Fund's Alger Equity Growth Series. Its 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 Equity-Income Sub-Account invests in shares of the VIP Fund's Equity-
Income Portfolio. Its 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 Overseas Sub-Account invests in shares of the VIP Fund's Overseas
Portfolio. Its 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 High Income Sub-Account invests in shares of the VIP Fund's High Income
Portfolio. Its 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 Asset Manager Sub-Account invests in shares of the VIP Fund II Asset
Manager Portfolio. Its 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
6
<PAGE>
are now lower. Long term bond values continue to fluctuate and could lose
value if interest rates rise. Common stock prices, which have risen
substantially at times, have also had periods of significant negative returns.
Policy Owners who seek somewhat greater protection against loss of principal
in the short term than that afforded by a stock fund may prefer the High
Income Sub-Account or the Zenith Bond Income Sub-Account. However, because the
High Income Portfolio invests in higher yielding, lower rated and unrated
fixed income securities (including bonds commonly referred to as "junk"
bonds), it has a higher degree of risk associated with it relative to more
conservative fixed income funds. Those who seek even greater safety of
principal may select the Zenith Money Market Sub-Account, although it is
subject to possible rapid changes in short term interest rates. Those who
primarily seek safety of principal should consider fixed life insurance as an
alternative to variable life insurance.
NELICO guarantees the principal invested in the Fixed Account, although this
guarantee is subject to NELICO's claims paying ability.
You may wish to consider diversifying your investments by allocating the
Policy's cash value among two or more sub-accounts.
Policy Owners may also diversify by selecting the Zenith Managed Sub-
Account, Zenith Balanced Sub-Account or the Asset Manager Sub-Account, since
each generally invests its assets at most times in a combination of bonds,
stocks and short term instruments, in varying proportions depending upon the
investment adviser's evaluation of the economy and financial markets. The
Asset Manager Portfolio has the ability to invest its stock portfolio more
aggressively than the Back Bay Advisors Managed Series. You may also wish to
diversify your cash value by country. The Overseas Sub-Account and Zenith
International Magnum Equity Sub-Account allow you to participate primarily in
companies and economies outside the United States.
The selection of a Policy's sub-accounts is a matter of your own choice and
should depend on your willingness to accept investment risks, the other types
of investments you have and your own assessment of future economic and
financial market conditions.
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,
come L.P.*
Loomis Sayles Small Cap TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Loomis Sayles Balanced TNE Advisers, Inc. Loomis, Sayles & Company, L.P.*
Morgan Stanley Interna- TNE Advisers, Inc. Morgan Stanley Asset Management
tional Magnum Equity Inc.
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 Se-
lected Advisers-NY, Inc., a wholly-owned subsidiary of Davis Selected.
7
<PAGE>
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak Growth and Income Series, Goldman Sachs Midcap Value Series
and Loomis Sayles Small Cap Series, TNE Advisers became the adviser on May 1,
1995. Prior to that date those series were advised by their current sub-
adviser, except as follows. New England Mutual served as investment adviser to
the Back Bay Advisors Money Market and Back Bay Advisors Bond Income Series
until September 10, 1986 when Back Bay Advisors assumed New England Mutual's
responsibilities under the investment advisory agreements with those Series.
Back Bay Advisors served as investment adviser to the Westpeak Stock Index
Series until August 2, 1993, when Westpeak became the investment adviser. The
Capital Growth Series was managed by Loomis, Sayles until March 1, 1990, when
its Capital Growth Management Division was reorganized into CGM. The Morgan
Stanley International Magnum Equity Series' sub-adviser was Draycott Partners,
Ltd. until May 1, 1997, when Morgan Stanley Asset Management became the sub-
adviser. The Goldman Sachs Midcap Value Series' sub-adviser was Loomis, Sayles
until May 1, 1998, when Goldman Sachs Asset Management became the sub-adviser.
For more information about the Series' advisory agreements, see the Zenith
Fund prospectus attached at the end of this prospectus and the Zenith Fund's
Statement of Additional Information.
Fidelity Management & Research Company, the investment adviser for the VIP
Fund and VIP Fund II, is the original Fidelity company and was founded in
1946. It provides a number of mutual funds and other clients with investment
research and portfolio management services. It maintains a large staff of
experienced investment personnel and a full complement of related support
facilities. For more information regarding the Equity-Income, Overseas, High
Income, and Asset Manager Portfolios and Fidelity Management & Research
Company, see the VIP Fund and VIP Fund II prospectus attached at the end of
this prospectus and their Statement of Additional Information.
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 represents
what NELICO believes to be 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. Furthermore, 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
advisors for more complete information and advice.
DEFINITION OF LIFE INSURANCE. Section 7702 of the Internal Revenue Code
defines a life insurance contract for Federal income tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests set forth in that section. The manner in
which these tests should be applied to certain features of the Policy is not
directly addressed by Section 7702 or proposed regulations issued under that
section. The presence of these Policy features, the absence of final
regulations, and the lack of other pertinent interpretations of Section 7702,
thus create some uncertainty about the application of Section 7702 to the
Policy.
Nevertheless, NELICO believes that the Policy qualifies as a life insurance
contract for federal income tax purposes. This means that:
. the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
. the Policy Owner should not be considered in constructive receipt of the
cash surrender value, including any increases, unless and until they are
distributed from the Policy.
Because of the absence of final regulations or any other pertinent
interpretations, it, however, is unclear whether substandard risk and
automatic issue Policies or Policies with term riders added will, in all
cases, meet the statutory life insurance contract definition. If a Policy were
determined not to be a life insurance contract for purposes of Section 7702,
such Policy would not provide most of the tax advantages normally provided by
a life insurance contract.
8
<PAGE>
NELICO thus reserves the right to make changes in the Policy if such changes
are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes.
TAXATION OF ACCELERATED BENEFITS RIDER. NELICO believes that payments
received under an accelerated benefits rider it makes available will qualify
as an accelerated death benefit under the Code. (See "Acceleration of Death
Benefit Rider" for more information regarding the rider.) Pursuant to the
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 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. With certain exceptions discussed below, a Policy will not have the
potential to be classified as a modified endowment contract unless it was
issued on or after June 21, 1988.
NON-MODIFIED ENDOWMENT CONTRACTS. For Policies not classified as modified
endowment contracts NELICO believes any policy loans received under such
Policies will be treated as indebtedness of the owner and will not be treated
as taxable income to you. This assumes that the Policy has not lapsed, been
surrendered or terminated. As a general rule, policy loan interest is not
deductible under current Federal income tax law.
You may be subject to Federal income tax upon surrender of the Policy if the
net cash surrender value of the Policy is greater than the investment in the
Policy less prior distributions from the Policy that were not taxed. If a
Policy has a policy loan and is surrendered or lapses, the policy loan is
treated as a distribution and would be taxable if there is a gain in the
Policy. In that case, the gain in the Policy would be taxable even if the
Policy has no net cash surrender value. If you incur a loss upon the surrender
it is not likely to be deductible for Federal income tax purposes.
Generally, a partial surrender of the Policy will not be taxable to you
unless it is greater than the investment in the Policy less the untaxed
portions of any prior distributions. The Internal Revenue Code does provide,
however, that in certain situations in the first 15 years of the Policy
partial surrenders may be taxable, in whole or part, if the net cash surrender
value is greater than the total investment in the Policy less the previous
untaxed distributions. This may be the case even if the amount of the partial
surrender is less than the investment in the Policy. The exercise of an
accelerated benefits rider, in whole or in part, may be treated as a surrender
or partial surrender.
MODIFIED ENDOWMENT CONTRACTS. A modified endowment contract is a life
insurance contract issued on or after June 21, 1988, which fails to satisfy a
"7-pay test". In general, a Policy will fail to satisfy the 7-pay test if the
cumulative amount (both scheduled premiums and unscheduled payments) paid
under the Policy at any time during the first seven policy years exceeds the
sum of the net level premiums that would have been paid on or before such time
had the Policy provided for paid up future benefits after the payment of seven
level annual premiums. (The amount of premiums payable under the 7-pay test
are calculated based upon certain assumptions regarding the Policy's earnings
and the use of a reasonable mortality charge. Variable Account investment
experience does not affect whether or not a Policy will become a modified
endowment contract.) Riders to the Policy are considered part of the Policy
for purposes of applying the 7-pay test. A term rider on the insured issued in
New York could cause the Policy to be treated less favorably for purposes of
the 7-pay test. If there is a reduction in the Policy's future benefits (for
example, as a result of a partial surrender or partial exercise of the
accelerated benefits rider, or because you allow the Policy to lapse to Paid-
Up Insurance) during the first seven policy years the 7-pay test will be
applied as if the Policy had originally been issued at the reduced face
amount. Any Policy received in exchange for a modified endowment contract will
also be a modified endowment contract.
Your registered representative can provide you with information about the
maximum amount of scheduled premiums and unscheduled payments which you can
make under the 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
9
<PAGE>
tax law. As is the case with any provision of the Internal Revenue Code, there
is no assurance that the Internal Revenue Service will agree with NELICO's
interpretation. NELICO will monitor any IRS announcements or rulings
concerning compliance with the 7-pay test.
MATERIAL CHANGES. If a "material change" in the benefits or other Policy
terms occurs under a Policy which has satisfied the 7-pay test, the Policy may
be treated as a new Policy entered into on the day on which the material
change occurred. The Policy will be retested under the 7-pay test, after
making certain adjustments to reflect the Policy's existing cash value. Any
increase in future benefits under the Policy may constitute a material change
unless the increase is due to the payment of premiums necessary to fund the
Policy's lowest death benefit payable in the first seven policy years, or the
crediting of interest or other earnings with respect to such premiums.
If you do not wish to have the Policy become a modified endowment contract,
you may be required to limit the payment of premiums under the Policy at some
point (or limit your reduction of benefits). This may be the case even if no
unscheduled payments have been made for the Policy. The point at which you may
be required to limit the payment of scheduled premiums will depend upon the
issue age, sex and underwriting class of the insured, investment experience
and the amount of any previous unscheduled payments. You may limit payment of
scheduled premiums by use of the Special Premium Option, in those situations
where it is applicable, or by allowing the Policy to lapse to paid-up
insurance. (See "Special Premium Option" and "Default and Lapse Options".)
Regardless of when it was issued, if a Policy described in this prospectus
is exchanged on or after June 21, 1988 for another life insurance policy,
including a fixed-benefit policy pursuant to the twenty-four month exchange
right, the new insurance policy should be reviewed to determine how the rules
regarding modified endowment contracts may apply to the new policy. (See
"Exchange of Policy During First 24 Months".)
DISTRIBUTIONS UNDER MODIFIED ENDOWMENT CONTRACTS. If a Policy is a modified
endowment contract, then the following rules will apply to distributions under
such contract:
(a) Distributions will be includible in your gross income to the extent the
cash value of the Policy exceeds your investment in the Policy (i.e.
will be treated as income first).
(b) Loans (including any unpaid interest) are considered distributions even
if the amount borrowed is retained by NELICO as a premium. Your
investment in the Policy will be increased by the amount of any prior
loan that was included in your gross income.
(c) A policy assignment is treated as a distribution. For example, in a
split dollar insurance plan involving a collateral assignment of the
Policy, the collateral assignment is a distribution which will subject
any gain in the Policy to taxation.
(d) For purposes of determining the amount of the distribution which is
includible in gross income, all modified endowment contracts issued by
NELICO or its affiliates to the same Policy Owner during any calendar
year shall be treated as one modified endowment contract.
(e) Payments under the accelerated benefits rider may be treated as
distributions that are subject to taxation under these rules if the
payments are from a Policy that is a modified endowment contract.
Any taxable distribution will be subject to an additional tax equal to 10%
of the taxable amount of the distribution unless the distribution is:
(a) made on or after the date when you attain age 59 1/2;
(b) is attributable to your becoming disabled; or
(c) is part of a series of substantially equal periodic payments made no
less frequently than annually for your life (or life expectancy).
If a Policy becomes a modified endowment contract, distributions made during
the policy year in which it becomes a modified endowment contract,
distributions in any subsequent policy year and distributions within two years
before the Policy becomes a modified endowment contract will be subject to the
tax treatment described above. This means that a distribution from a Policy
that is not a modified endowment contract could later become
10
<PAGE>
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.
EFFECTIVE DATE. As explained above, the rules regarding modified endowment
contracts apply only to Policies issued on or after June 21, 1988. For this
purpose, the following Policies, even if issued before June 21, 1988, will be
considered issued on or after June 21, 1988:
(a) a Policy under which, after June 20, 1988, the death benefit is
increased or an additional benefit (e.g. a Policy rider) is added if,
prior to June 21, 1988, the Policy Owner did not have the right to
obtain such increase or addition without submitting additional evidence
of insurability;
(b) a Policy issued after June 20, 1988, upon conversion of a term life
policy; and,
(c) in certain cases, a Policy under which the death benefit payable as of
October 20, 1988, increases by more than $150,000.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance and
other tax consequences of ownership or receipt of proceeds under the Policy
depend upon the individual circumstances of each Policy Owner or beneficiary.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations for the
Policy to qualify as a life insurance contract under Section 7702 of the Code.
Failure to comply with the diversification requirements may result in not
treating the Policy as life insurance. If the Policy does not qualify as life
insurance, you may be subjected to immediate taxation on the incremental
increases in cash value of the Policy. Regulations specifying the
diversification requirements have been issued by the Department of Treasury,
and NELICO believes it complies fully with such requirements.
In connection with the issuance of the diversification regulations, the
Treasury Department stated that it anticipates the issuance of additional
guidance prescribing the circumstances in which an owner's control of the
investments of a separate account may cause a Policy Owner, rather than the
insurance company, to be treated as the owner of the assets in the separate
account. If a Policy Owner is considered the owner of the assets of the
Separate Account, income and gains from the Account would be included in the
Owner's gross income.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it determined that the owners were not owners of separate
account assets. For example, a Policy Owner has additional flexibility in
allocating payments and cash values. These differences could result in the
owner being treated as the owner of a pro rata share of the assets of the
Separate Account. In addition, NELICO does not know what standards will be set
forth in the additional guidance which the Treasury has stated it expects to
be issued. NELICO therefore reserves the right to modify the Policy as
necessary to attempt to prevent the Policy Owner from being considered the
owner of the assets of the Separate Account.
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 a 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.
11
<PAGE>
If the Policy is purchased as part of a pension or profit-sharing plan
qualified under Section 401 of the Code, the current cost of insurance for the
net amount at risk is treated as a "current fringe benefit" and is required to
be included annually in the plan participant's gross income. This cost
(generally referred to as the "P.S. 58" cost) is reported to the participant
annually. If the plan participant dies while covered by the plan and the
Policy proceeds are paid to the participant's beneficiary, then the excess of
the death benefit over the cash value will not be subject to Federal income
tax. However, the cash value will generally be taxable to the extent it
exceeds the participant's cost basis in the Policy. The participant's cost
basis will generally include the costs of insurance previously reported as
income to the participant. Special rules may apply if the participant had
borrowed from his cash value or was an owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased
by a tax qualified plan.
The Policies may be used in various arrangements, including nonqualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of the Policies in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement 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. 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.
12
<PAGE>
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
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 Principal of The
127 Tarbox Road Vermont Partnership, a business consulting firm located in
Jericho, VT 05465 Jericho, Vermont since 1989; formerly, Director 1989-1996 of
New England Mutual.
Edward A. Fox Director of NELICO since 1996 and Chairman of the Board of
RR Box 67-15 SLM Holdings since 1997; formerly, Director 1994-1996 of New
Harborside, ME 04642 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, television
Adam Smith's Money journalist, and editor.
World 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 1987-1996
74 Tater Street of New England Mutual and Executive Director and Chief
Mont Vernon, NH 03057 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 law firm of
Howard, Darby & Levin Howard, Darby & Levin in New York City.
1330 Avenue of the
Americas
New York, NY 10019
Harry P. Kamen Director of NELICO since 1996 and Chairman of Metropolitan
Metropolitan Life Life Insurance Company since 1998; formerly, Chairman and
One Madison Avenue Chief Executive Officer 1997- 1998; Chairman, President, and
New York, NY 10010 Chief Executive Officer 1995-1997 and Chairman and CEO 1993-
1995 of Metropolitan Life.
Terence Lennon Director of NELICO since 1996 and Senior Vice President of
Metropolitan Life Metropolitan Life Insurance Company since 1994; formerly,
One Madison Avenue Assistant Deputy Superintendent and Chief Examiner 1984-1994
New York, NY 10010 of the New York Insurance Department.
Bernard A. Leventhal Director of NELICO since 1996; formerly, Vice Chairman of
Burlington Industries the Board of Directors 1995-1998 of Burlington Industries,
1345 Avenue of the Inc.; President since 1978 and Corporate Group Vice
Americas President since 1985 and Director since 1990 of Burlington
New York, NY 10105 Menswear Division.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
Thomas J. May Director of NELICO since 1996 and Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since 1994;
800 Boylston Street formerly, Director 1994-1996 of New England Mutual;
Boston, MA 02199 President and Chief Operating Officer 1993-1994 of Boston
Edison Co.
Stewart G. Nagler Director of NELICO since 1996 and Senior Executive Vice
Metropolitan Life President and Chief Financial Officer of Metropolitan Life
One Madison Avenue Insurance Company since 1986.
New York, NY 10010
Rand N. Stowell Director of NELICO since 1996 and President of United Timber
United Timber Corp. Corp. of Dixfield, Maine; formerly, Director 1990-1996 of
P.O. Box 650 New England Mutual.
Pine Street
Dixfield, ME 04224
Alexander B. Trowbridge Director of NELICO since 1996 and President of Trowbridge
Trowbridge Partners Partners, Inc. in Washington, DC; formerly, Director 1983-
Inc. 1996 of New England Mutual.
1317 F Street, N.W.,
Suite 500
Washington, D.C. 20004
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
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 The New England) and Senior
Vice President in 1994 of New England Annuities; Vice
President 1992-1994 of Keyport Life Insurance.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
George J. Maloof Senior Vice President of NELICO since 1996; formerly, Vice
President 1991-1996 of New England Mutual.
Thomas W. McConnell Senior Vice President of NELICO since 1996 and Director,
Chief Executive Officer and President of New England
Securities Corporation since 1993; formerly, National Sales
Manager 1993; of Alliance Fund Distributors; National Sales
Manager 1992-1993 of Equitable Capital Securities.
Thomas W. Moore Senior Vice President of NELICO since 1996; formerly, Vice
President 1990-1996 of New England Mutual.
Robert W. Powell President, Life Brokerage (a business unit of NELICO) since
1996; formerly, Officer-In-Charge 1994-1996 of MetLife
Brokerage (a subsidiary of Metropolitan Life Insurance
Company) and Marketing Vice President 1988-1994 of MetLife.
Richard A. Robinson Second Vice President and chief accounting officer of NELICO
since 1998; formerly, Second Vice President 1997-1998 of
NELICO; Manager of Life Insurance Accounting 1994-1997 and
Chief Accountant 1992-1994 of Liberty Life Assurance
Company.
Robert E. Schneider Executive Vice President and Chief Financial Officer of
NELICO since 1996; formerly, Director, Executive Vice
President and Chief Financial Officer 1993-1996 and
Executive Vice President and Chief Financial Officer 1990-
1993 of New England Mutual.
John G. Small, Jr. President, New England Services (a business unit of NELICO)
since 1997; formerly, Senior Vice President 1996-1997 of
NELICO and Senior Vice President 1990-1996 of New England
Mutual.
Ellen D. Sullivan Senior Vice President and Associate General Counsel of
NELICO since 1997; formerly, Vice President and Counsel in
1996 of NELICO; Vice President and Counsel 1994-1996 and
Second Vice President and Counsel 1985-1994 of New England
Mutual.
H. James Wilson Executive Vice President and General Counsel of NELICO since
1996; formerly, Executive Vice President and General Counsel
1993-1996, Senior Vice President and General Counsel 1992-
1993 of New England Mutual.
John W. Wright President, New England Employee Benefits Group (a business
unit of NELICO) since 1996; formerly, President 1993-1996
New England Employee Benefits Group (a business unit of New
England Mutual), Senior Vice President , 1989-1993 of New
England Employee Benefits Group of New England Mutual.
Frederick K. Zimmermann Executive Vice President and Chief Investment Officer of
NELICO since 1996; formerly, Executive Vice President and
Chief Investment Officer 1993-1996 and Senior Vice
President--Investments 1989-1993 of New England Mutual.
</TABLE>
The principal business address for each of the directors and 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
15
<PAGE>
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.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account sub-
accounts, call the toll-free number 1-800-333-2501.
For sub-account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call the toll-free number 1-
800-200-2214.
You may also call our Client TeleService Center toll-free at 1-800-388-4000
to request current information about your Policy values, to change or update
Policy information such as your address, billing mode, beneficiary or
ownership, or to request Policy loans of less than $25,000. Requests must be
in writing if the Policy is owned by a corporation or a pension trust.
For all other types of Policy changes, please contact your registered
representative.
ADVERTISING PRACTICES
The following paragraph is added to this section:
NELICO is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
EXPERTS
The financial statements of New England Variable Life Separate Account of
New England Life Insurance Company ("NELICO") (formerly New England Variable
Life Insurance Company) and the consolidated financial statements of NELICO
and subsidiaries as of and for the years ended December 31, 1997 and 1996
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein (whose
reports express unqualified opinions and, with respect to NELICO, includes an
explanatory paragraph referring to the change in the basis of accounting and
the change in corporate organization), and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing. The adjustments that were applied to restate the 1995
financial statements to reflect the effects of the changes for adoption of
generally accepted accounting principles and the changes in corporate
organization have also been audited by Deloitte & Touche LLP.
The statutory statements of operations, surplus, and cash flows of New
England Variable Life Insurance Company and New England Pension and Annuity
Company for the year ended December 31, 1995 (not included herein), have been
incorporated herein in reliance on the reports (which reports include adverse
opinions as to generally accepted accounting principles and unqualified
opinions as to statutory accounting practices prescribed or permitted by the
Insurance Department of the State of Delaware) of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. The statutory statements of operations and surplus,
and cash flows of Exeter Reassurance Company, Ltd. for the year ended December
31, 1995 (not included herein), have been incorporated herein in reliance on
the report (which report includes an adverse opinion as to generally accepted
accounting principles and an unqualified opinion as to conformity with
16
<PAGE>
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.
17
<PAGE>
This registration statement incorporates by reference the prospectuses dated May
1, 1996, May 1, 1995 and May 1, 1994 for the policies, each as filed in
Post-Effective Amendment No. 13 to the Registration Statement on Form S-6 (File
No. 33-19540).
<PAGE>
Part II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Section 9 of NELICO's By-Laws provides that NELICO shall, to the extent
legally permissible, indemnify its directors and officers against liabilities
and expenses relating to lawsuits and proceedings based on such persons' roles
as directors or officers. However, Section 9 further provides that no such
indemnification shall be made with respect to any matter as to which a director
or officer is adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the corporation. Section 9
also provides that in the event a matter is disposed of by a settlement payment
by a director or officer, indemnification will be provided only if the
settlement is approved as in the best interest of the corporation by (a) a
disinterested majority of the directors then in office, (b) a majority of the
disinterested directors then in office, or (c) the holders of a majority of
outstanding voting stock (exclusive of any stock owned by any interested
director or officer).
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
NELICO pursuant to the foregoing provisions, or otherwise, NELICO has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by NELICO of expenses incurred or paid by a
director, officer, or controlling person of NELICO in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered. NELICO
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II - 1
<PAGE>
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the variable ordinary life insurance policies described
in this registration statement, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus with
the items of Form N-8B-2.
The prospectus consisting of 159 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 NELICO and its Agents ****
(c) Commission Schedule for Variable Life Policies
II - 2
<PAGE>
(d) Form of Contract among NES, NELICO and other broker-dealers *
(4) None
(5) (a) Specimen Policy
(b) Riders
(c) Acceleration of Benefits Rider ###
(6) (a) Amended and restated Articles of Incorporation of NELICO ##
(b) Amended and restated By-Laws of NELICO *
(7) None
(8) None
(9) None
(10) Form of Application
2. See Exhibit 1.A.(10)
3. (i) Opinion and Consent of H. James Wilson, Esq.
(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. (i) Powers of Attorney ##
(ii) Power of Attorney for James M. Benson *
(iii) Power of Attorney for Richard Robinson **
8. Notice of Withdrawal Right for Policies
9. Inapplicable
10. Inapplicable
11. Consents of Independent Auditors
12. Schedule for computation of performance quotations ****
13. Consolidated memorandum describing certain procedures,
filed pursuant to Rule 6e-2(b)(12)(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 #
II - 3
<PAGE>
- ----------
# Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed June 22, 1995.
## Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
### Incorporated herein by reference to Post-Effective Amendment No. 8 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 30, 1997.
* Incorporated 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.
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 28th day of April, 1998.
New England Variable Life Separate
Account
(Registrant)
By: New England Life Insurance
Company
(Depositor)
By:
---------------------------------
H. James Wilson, Esq.
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 28th day of
April, 1998.
New England Life Insurance Company
(Seal)
Attest: Marie C. Swift By: H. James Wilson
----------------- ----------------------------------
Marie C. Swift H. James Wilson, Esq.
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 28, 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
<PAGE>
*
- ---------------------- Director
Bernard A. Leventhal
*
- ---------------------- 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: /s/ Anne M. Goggin
---------------------
Anne M. Goggin, Esq.
Attorney-in-fact
* Executed by Anne M. Goggin, Esquire on behalf of those indicated pursuant
to powers of attorney filed with the Variable Account's Form S-6
Registration Statement, File No. 333-21767, on February 13, 1997, Pre-
Effective Amendment No. 1 to the Variable Account's Form S-6 Registration
Statement, File No. 333-21767, on July 16, 1997, and the Variable Account's
Form S-6 Registration Statement, File No. 333-46401, on February 17, 1998.
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
1.A.(3)(c) Commission Schedule for Policies
1.A.(5)(a) Specimen of Policy
1.A.(5)(b) Riders and Endorsements
1.A.(10) Form Application
3. (i) Opinion and Consent of H. James
Wilson, Esq.
3. (ii) Opinion and Consent of Rodney J.
Chandler, F.S.A., M.A.A.A.
6. Consent of Sutherland, Asbill
& Brennan LLP
10. Notice of Withdrawal Right
11. Consents of Independent Auditors
- -----------
* Page numbers inserted on manually-signed copy only.
<PAGE>
Exhibit 1.A.(3)(c)
Commission and Service Fee Schedule
The following maximum percentages of the scheduled premium paid for each
policy year will be paid to the NELICO agent/New England Securities registered
representative involved in the sale of a Policy:
Policy Years Maximum Percentages
------------ -------------------
1 50%
2-6 8%
7-10 4%
11 and later 2%
Agents will also receive a commission of 3% of each unscheduled payment
made.
The amount of commissions for extra premiums for a Policy covering an
insured in a substandard risk classification will be determined by NELICO's
rules and practices current at the time such extra premiums are charged.
Additional commissions are paid based on premiums paid for benefits purchased by
Rider.
Agents with fewer than four years of service may be compensated
differently. Agents who meet certain productivity and persistency standards
with respect to policies sold by NELICO and its affiliates may be eligible for
additional compensation.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities and Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life insurance
policies. Under the agreements with any such broker-dealers, the commission paid
to the broker-dealer will not exceed 50% of the scheduled premium in the first
policy year, 5% in the second through tenth policy years, 2% in the eleventh
through twentieth policy years, and 3% of unscheduled payments. 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>
EXHIBIT 1.A.5(a)
NEV-5
New England Variable Life
Insurance Company
Variable Life Policy
Insured: JOHN ALDEN
Policy Number: SPECIMEN
Face Amount: $10,000
Plan: VARIABLE ORDINARY LIFE
New England Variable Life Insurance Company Agrees to pay the Death Benefit of
this Policy to the Beneficiary on receipt of proof of the death of the Insured;
and to provide the other rights and benefits of the Policy.
These agreements are subject to all the provisions of the Policy.
Signed on the Date of Issue for the Company at its Administrative Office, 501
Boylston Street Boston, MA 02117
Robert A. Shafto
/s/
President
H. James Wilson
/s/
Secretary
Variable Life Policy
. The Death Benefit is payable at the death of the Insured.
. Premiums are payable to the Company for a specified period.
. Unscheduled Payments can be made.
. Values and benefits are affected by investment performance.
. The Policy does not participate in Dividends.
<PAGE>
Please Read Your Policy Carefully
This Policy is a legal contract between you and the Company.
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; but
it will not be less than the Face Amount See Section 11.
The Cash Value of this Policy can vary from day to day. It can increase or
decrease, depending on separate investment account performance. See Section 10.
Right to Return the Policy
When this Policy is issued, you should examine it. You can return the Policy to
the Company or its Agent for any reason within the latest of: (a) 10 days after
you receive it from the Company; (b) 45 days after Part I of the Application is
signed; and (c) 10 days after the Company mails the separate Notice of
Withdrawal Right. If you do, the Policy will be cancelled. The Company will
refund an amount equal to any premium paid plus any Unscheduled Payment made.
The Policy will then be void from the beginning.
<PAGE>
Policy Provisions Alphabetical Guide
Section Section
1 Policy Schedule 1, 4 Age of Insured
2 Tabular Values 14 Assignments
3 Surrender charges 5 Automatic Premium Payment
4 Contract 14 Beneficiary
5 Premiums 15 Benefits, Payment of
6 Unscheduled Payments 4 Claims of Creditors
7 The Variable Account 4 Contestable
8 Nonpayment of Premiums 4 Contract
9 Reinstatement After Lapse 10 Cost of Insurance
10 Cash Value of the Policy 1, 4 Date of Issue
11 Death Benefit 1, 4 Date, Policy
12 Policy Loans 11 Death Benefit
13 Exchange of Policy 13 Exchange of Policy
14 Owner and Beneficiary 1 Face Amount
15 Payment of Benefits 8 Fixed Extended Term Insurance
16 Payment Options 8 Fixed Paid-Up Insurance
17 Life Income Tables 5 Grace Period
. Riders, if any 10 Investment Return
. Copy of the Application 8 Lapse Options
. Amendments and 15,16 Life Income Options
Endorsements
17 Life Income Tables
1 Loan Interest Rate
12 Loans, Policy
10 Net Cash Value
8 Nonpayment of Premiums
10 Monthly Deduction
14 Owner
10 Partial Surrender
10 Partial Withdrawal
16 Payment Options
4 Periodic Reports
12 Policy Loan Balance
4 Postponement of Payments
5 Premiums
9 Reinstatement
1 Schedule, Policy
7 Sub-Accounts
4 Suicide
3 Surrender Charge
3, 10 Surrender of the Policy
2 Tabular Value
6 Unscheduled Payments
7 Variable Account
8 Variable Paid-Up Insurance
<PAGE>
1. Policy Schedule
Owner and Beneficiary: As named in the Application or as later changed. See the
Owner and Beneficiary Section of the Policy.
Insured: JOHN ALDEN Age and Sex: 35 MALE
Policy Number: SPECIMEN Policy Date: APRIL 1, 1988
Face Amount: $10,000 Date of Issue: APRIL 1, 1988
Plan: VARIABLE ORDINARY LIFE POLICY LOAN INTEREST RATE: 6%
BASIS OF VALUES INTEREST RATE: 5%
Policy Class: SMOKER STANDARD DEATH BENEFIT OPTION: 1
SCHEDULE OF BENEFITS
VARIABLE ORDINARY LIFE $10,000
SCHEDULE OF ANNUAL PREMIUMS
POLICY YEARS LIFE
FOR LIFE $198.10
ANNUAL SEMI-ANNUAL QUARTERLY
TOTAL PREMIUM ON POLICY DATE $198.10 $102.02 $52.00
TABLE OF NET ANNUAL PREMIUMS (AMOUNT INVESTED)
BEGINNING OF
POLICY YEAR NET PREMIUM
1 THRU 15 $131.65
THEREAFTER $140.24
ANNUAL ADMINISTRATIVE CHARGE (REFLECTED IN NET PREMIUM) $55.00
New England Variable Life Insurance Company Kernan F. King
/s/
Secretary
<PAGE>
2. TABULAR VALUES
INSURED: JOHN ALDEN AGE AND SEX: 35 MALE
POLICY NUMBER: SPECIMEN FACE AMOUNT: $10,000
PLAN: VARIABLE ORDINARY LIFE
Tabular Values are used to determine the Death Benefit and the partial
withdrawal available for Death Benefit Option 2.
The amounts shown in this table assume that: an annual premium has been paid on
the first day of each policy year; no Unscheduled Payment has been made; no
partial surrender has been made; no partial withdrawal has been made; there is
no Policy Loan Balance; the cost of insurance rates are equal to the maximum
guaranteed rates; and the Actual Investment Return is equal to the Base
Investment Return. The actual Tabular Values will reflect the frequency of
premium payment in effect.
End of End of
Policy Policy
Year Tabular Value Year Tabular Value
1 $104.20 16 $2,142.10
2 216.50 17 2,310.80
3 332.40 18 2,482.00
4 451.90 19 2,655.40
5 574.90 20 2,830.30
6 701.30 25 Age 60 3,727.00
7 830.70 30 Age 65 4,647.50
8 963.40 35 Age 70 5,538.50
9 1,099.10
10 1,237.90
11 1,379.40
12 1,524.10
13 1,671.90
14 1,822.70
15 1,976.40
New England Variable Life Insurance Company Kernan F. King
/s/
Secretary
<PAGE>
3. SURRENDER CHARGE
INSURED: JOHN ALDEN AGE AND SEX: 35 MALE
POLICY NUMBER: SPECIMEN FACE AMOUNT: $10,000
PLAN: VARIABLE ORDINARY LIFE
A Surrender Charge will be deducted from partial surrender, full surrender and
lapse transactions during the first 15 policy years. The Surrender Charge is
equal to a Deferred Administrative Charge plus a Deferred Sales Charge.
The Deferred Administrative Charge for the first 10 years is shown in the table
on the next page; the Charge is level throughout each of these policy years. The
Charge for the last policy month of each of years 11 through 15 is shown in the
table on the next page; the Charge for other months will reflect the number of
completed policy months in the year of surrender or lapse.
The Maximum Deferred Sales Charge is equal to a percent of the Basic Premium for
policy year one. The percent will depend on the year in which the Charge is
applied. The percentages for years I through 10 are given in the table on the
next page; this Charge is level throughout each of these years. Beginning with
the first month of the eleventh year, the percentage will decrease each month by
1/60 of the percentage shown for year 10 until the end of the fifteenth year.
The Basic Premium is equal to: the number of premiums due each policy year;
TIMES the premium for the Policy less the administrative charge and less any
substandard premium.
New England Variable Life Insurance Company Kernan F. King
/s/
Secretary
<PAGE>
3. SURRENDER CHARGE
INSURED: JOHN ALDEN AGE AND SEX: 35 MALE
POLICY NUMBER: SPECIMEN FACE AMOUNT: $10,000
PLAN: VARIABLE ORDINARY LIFE
Maximum
Year of Deferred Deferred
Surrender or Administrative Sales
Lapse Charge Charge
1 $50.00 24%
2 40.00 28
3 30.00 32
4 20.00 36
5 10.00 40
6 44
7 48
8 52
9 56
10 60
New England Variable Life Insurance Company Kernan F. King
/s/
Secretary
<PAGE>
4. Contract
The Contract
This Policy is a legal contract between the Owner of the Policy (called "you")
and New England Variable Life Insurance Company, a Delaware corporation, (called
"the Company"). The Policy, which includes the attached Application, is the
entire contract between you and the Company. All Riders are listed in Section 1.
No change in or waiver of the provisions of the Policy is valid unless the
change or waiver is signed by the President or the Secretary of the Company.
Payments Under the Contract
All contract amounts are in dollars of the United States of America. Payments by
the Company under the contract will be made at the Administrative Office of the
Company. The obligations of the Company are subject to all payments made and
actions taken by the Company under the Policy before receipt by the Company at
its Administrative Office of proof of death of the Insured.
Dates
Policy years, months and anniversaries are all measured from the Policy Date.
The contestable and suicide periods start on the Date of Issue. The Policy Date
and the Date of Issue are both shown in Section 1.
Not Contestable After Two Years
Insurance is issued by the Company in reliance on the statements made in the
Application for the insurance. Those statements are representations; they are
not warranties. No statement can be used to contest or rescind insurance or to
defend against a claim unless contained in the Application for the insurance.
The insurance issued under this Policy will not be contestable after it has been
in force during the life of the Insured for two years from the Date of Issue.
Suicide Within Two Years
If the Insured dies by suicide within two years from the Date of Issue, the
Death Benefit will be limited to: the amount of the premiums paid; plus the
amount of any Unscheduled Payments; less the amount of each partial surrender;
less the amount of each partial withdrawal; less any Policy Loan Balance on the
date of death.
Age of Insured
<PAGE>
The age of the Insured on the Policy Date and on policy anniversaries means the
age at the nearest birthday of the Insured. Between anniversaries, age means age
on the last anniversary plus elapsed time. If the age or sex of the Insured has
not been correctly stated in the Application, the values and benefits will be
the amounts which the premiums and Unscheduled Payments paid would have
purchased for the correct age and sex.
Claims of Creditors
The Policy and payments under it will be exempt from the claims of creditors to
the extent allowed by law.
Basis of Values
"1980 CSO" means Commissioners 1980 Standard Ordinary; it is used to describe
mortality tables. The B Tables are weighted 80 per cent male and 20 per cent
female. The Policy Class and issue basis are shown in Section 1. Unisex issues
provide the same rates, benefits and values for males and females.
If the Policy Class is Nonsmoker Standard or Nonsmoker Rated Class, the table is
the 1980 CSO Nonsmoker Table; Table B is used for a unisex issue.
If the Policy Class is Smoker Standard or Smoker Rated Class, the table is the
1980 CSO Smoker Table; Table B is used for a unisex issue.
If the Policy Class is Automatic Issue, the table is the 1980 CSO Table B.
If the age of the Insured on the Policy Date is less than 20, the table is: the
1980 CSO Table until the policy anniversary on which the Insured is age 20; and
then the 1980 CSO Smoker Table. The B Tables are used for a unisex issue.
Reserves and Cash Values are not less than those based on the mortality table
for this Policy. Reserves are not less than reserves computed by the
Commissioners Reserve Valuation Method. Net single premiums, Fixed and Variable
Paid-Up Insurance and Fixed Extended Term Insurance are based on the mortality
table for this Policy. Curtate monthly functions are used. Interest is
compounded monthly at the annual effective rate shown in Section 1. (See the
Basis of Values Interest Rate.) A detailed statement of the method of computing
values and net single premiums has been filed with the Insurance Department of
the state in which the Policy is delivered. All values are equal to or are in
<PAGE>
excess of the minimum values required by and all comply with the law of that
state.
Periodic Reports
The Company will send you all reports required by law and regulation. Such
reports will be sent once each year or more often if required by law or
regulation. 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 required information. No annual reports will be sent while the Policy is
in force under the Fixed Paid-Up Insurance Option or the Fixed Extended Term
Insurance Option.
Expense and Mortality Experience
The Company guarantees that the benefits and values under this Policy will not
be adversely affected by expense and mortality experience.
Postponement of Variable Benefits
The Company can postpone the determination of and the payment or transfer of
amounts based on separate investment account performance if:
. The New York Stock Exchange is closed for trading; or
. The Securities and Exchange Commission determines that a state of emergency
exists which may make payment or transfer impractical; or
. The New England Zenith Fund or its successor is ordered by the Securities
and Exchange Commission to postpone payment or transfer of variable
benefits.
Postponement of Loans and Surrender Under Fixed Lapse Options
If the Policy is in force under the Fixed Paid-Up or Fixed Extended Term
Insurance Option, the Company can postpone payment of the Net Cash Value for not
more than six months after surrender. If payment is postponed for more than 30
days it will be credited with interest from the date of surrender. The rate of
interest will be determined each year by the Company; but the rate will not be
less than 3 1/2% per year.
If the Policy is in force under the Fixed Paid-Up Insurance Option, the Company
can postpone the making of any Policy Loan for not more than six months from the
day you apply, except Loans to pay premiums on policies issued by the Company.
<PAGE>
5. Premiums
Payment
Premiums are your scheduled payments to the Company for the Policy. Payments can
be made at the Administrative Office of the Company or at any Agency of the
Company. A receipt for payment signed by the Secretary of the Company will be
furnished on request. The Policy will not be in force until the first premium is
paid.
Amount and Frequency
Annual premiums for the Policy and for any Riders are shown in Section 1.
Payments can be semi-annual or quarterly or can be at any other frequency agreed
to by the Company. Payment is due in advance on the first day of each payment
period, starting on the Policy Date. Future Cash Values and Death Benefits can
be permanently affected:
. By payment of premiums at a frequency other than annual; and
. By changing the frequency of payment of premiums.
No premium will be due or payable for any period after the death of the Insured.
The Company will send you a bill 25 days before the premium due date if you pay
premiums at an annual, semi-annual or quarterly frequency. The bill will show:
the premium due; any policy loan interest due; and any planned Unscheduled
Payment, if the premium due date is a policy anniversary. If you submit the bill
with a payment, the premium due will be paid, if the payment is large enough.
The amount of the payment which is in excess of the premium due will be used to
pay any policy loan interest due. Any remaining amount will be an Unscheduled
Payment. (See Section 6.) If you submit a payment without a bill, the payment
will be deemed to be the premium due if: the payment is received in the period
between 25 days prior to the premium due date and 31 days after the premium due
date; and the payment is large enough to pay the premium due. The amount of the
payment which is in excess of the premium due will be used to pay any policy
loan interest due; any remainder will be an Unscheduled Payment. (See
Section 6.)
If you pay premiums at any other frequency, each payment will be credited as
agreed to by you and the Company.
Grace Period
<PAGE>
There is a grace period of 31 days in which to pay a premium due, without
interest, after its due date. The insurance remains in force during the grace
period. There is no grace period for the first premium.
Option for Automatic Premium Payment by Policy Loans
If this Option has been elected in writing, and if a premium is not paid by the
end of its grace period, a premium will be paid automatically to the next
quarterly due date by using any available Loan Value of the Policy. (See Section
12.) If the unpaid premium is an annual or a semiannual premium, it will be paid
in full, if possible. If the amount available is not sufficient to pay a premium
to the next quarterly due date, no premium will be paid. Loan interest will be
charged on automatic Policy Loans from the due date of the premium. You can
elect or cancel this Option at any time.
Premium Adjustment at Death
The pro rata portion of any premium paid for a period beyond the date of death
will be added to the policy proceeds. This adjustment does not apply to Variable
Paid-Up, Fixed Paid-Up or Fixed Extended Term Insurance.
If the Insured dies during the grace period of an unpaid premium, a pro rata
premium to the date of death will be deducted from the policy proceeds.
6. Unscheduled Payments
Unscheduled Payments
Unscheduled Payments can be made at any time subject to the following:
. The Policy must be in force on a premium paying basis; and
. The premiums for the Policy and any riders are not being waived under any
Waiver of Premiums Rider attached to the Policy; and
. No Unscheduled Payment can be less than $25; and
. If an Unscheduled Payment would increase the Death Benefit by more than it
would increase the Cash Value, proof that the Insured is insurable and the
Company's consent will be required; and
<PAGE>
. If the Policy is in a Rated Class, the Company's consent will be required.
Unscheduled Payments will not be waived by the Company under any Waiver of
Premiums Riders attached to the Policy.
The net Unscheduled Payment will be equal to the Unscheduled Payment less 8%.
Each net Unscheduled Payment will be invested in the Account as of the date it
is received by the Company at its Administrative Office. There is no grace
period for Unscheduled Payments.
If the Policy lapses and you made an Unscheduled Payment during the grace period
of the premium in default, the amount of the Unscheduled Payment will be
refunded to you.
<PAGE>
7. The Variable Account
The Variable Account
The Variable Account (called "the Account") is a separate investment account
established by the Company in accordance with Delaware law. The assets of the
Account are owned by the Company. The assets of the Account will be used to
provide values and benefits under this Policy and similar policies; but the
Account is not chargeable with liabilities arising out of any other business the
Company may conduct.
Sub-Accounts
The Account consists of sub-accounts, each of which is invested in shares of one
portfolio of the New England Zenith Fund or its successor. Shares of a portfolio
are purchased for a sub-account at their net asset value.
The Policy's first investment in the Account is made as of the latest of:
. The Policy Date;
. The date of Part II of the Application; and
. The date the first premium is received by the Company.
The Policy's Cash Value will be transferred to the sub-accounts you elected as
of the later of: 45 days after Part I of the Application is signed; and 10 days
after the Company mails the separate Notice of Withdrawal Right. Before this
transfer, the values and benefits of the Policy will depend on the net
investment performance of the Money Market sub-account.
Each future net premium will be invested in the sub-accounts as of its due date.
Each net Unscheduled Payment will be invested in the sub-accounts 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 the
Account will be reinvested for the benefit of the owners of the policies at net
asset value in shares of the portfolio which made the distribution.
The Cash Value of the Policy at any time cannot be allocated among more than 10
sub-accounts, except with the consent of the Company.
The values and benefits of a policy depend on the investment performance of the
portfolios in which the sub-accounts are invested. The Company does not
guarantee the investment
<PAGE>
performance of the portfolios. You bear the investment risk for amounts invested
for your Policy.
Election of Sub-Accounts
You elect the sub-accounts in which future net premiums and future net
Unscheduled Payments are to be invested. (See Section 1 for net annual
premiums.) You can change the election for future premiums and future
Unscheduled Payments at any time by notice to the Company. The portion to be
applied to each sub-account elected must be a whole percent not less than 10.
The portfolios as of the Date of Issue are listed in the then current prospectus
for the Account.
Change in Portfolios
The Company can add or remove portfolios as sub-account investments as permitted
by law. When a change is made, the Company will send you: a revised prospectus
for the Account which will describe all of the portfolios then in the New
England Zenith Fund; and any notice required by law.
When a portfolio is removed, the Company has the right to substitute a different
portfolio in which the sub-account will then invest:
. The value of the removed portfolio; and
. Future net premiums 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 another sub-account. Requests
for transfers can be made in writing or by telephone. The Company is not
responsible for 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.
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 exchange this Policy for a new policy which
has a fixed death benefit. The exchange will be on the same
<PAGE>
basis as that described in the Exchange of Policy section. If you choose to make
the exchange, the request for the exchange 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 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 (e) to deregister the
Account under the Investment Company Act of 1940 if registration is no longer
required.
8. Nonpayment of Premiums
Lapse of Policy
Any premium which is not paid by its due date is in default. If it remains
unpaid at the end of its 31-day grace period and is not paid automatically under
the Option in Section 5, the Policy will lapse. If the Policy lapses to Fixed
Paid-Up Insurance or Fixed Extended Term Insurance, it will not be affected by
the investment performance of the Account.
Lapse Options
If the Policy lapses because a premium is not paid, any Net Cash Value of the
Policy less the amount of each partial surrender and partial withdrawal made
during the grace period of the premium in default will be: transferred from the
Account to the general account of the Company and used to continue the Policy in
force either as Fixed Paid-Up Insurance or Fixed Extended Term Insurance as
stated below; or kept in the Account and used to continue the Policy in force as
Variable Paid-Up Insurance as stated below. Any Riders will lapse unless
otherwise stated in the Rider. Any Policy Loan Balance will terminate when the
Net Cash Value is used for this purpose.
Election of Lapse Option
If the Policy is in a Standard Policy Class (see Section 1) and is not issued in
connection with a pension plan, the use of the Fixed Extended Term Insurance
Option at lapse will be automatic unless you elect the Fixed Paid-Up Insurance
<PAGE>
Option or the Company consents to your election of the Variable Paid-Up
Insurance Option. You can make or change your election at any time in writing,
but not later than 60 days after the due date of the premium in default. Unless
Variable Paid-Up Insurance applies:
. If the Net Cash Value less the amount of each partial surrender and partial
withdrawal made during the grace period of the premium in default will
provide an amount of Fixed Paid-Up Insurance equal to or greater than the
amount of Fixed Extended Term Insurance, the Fixed Paid-Up Insurance Option
will be used; and
. If the Insured dies within 60 days after the due date of the premium in
default, the Fixed Option which will provide the greater death benefit will
be used.
Fixed Extended Term Insurance is not available:
if the Policy is in other than a Standard Policy Class; or if the Policy is
issued in connection with a pension plan.
Fixed Paid-Up Insurance Option
Fixed Paid-Up Insurance is permanent life insurance for a level amount with no
further premiums due. It has increasing Cash Values and Loan Values. The amount
of Fixed Paid-Up Insurance is payable at the death of the Insured.
Fixed Paid-Up Insurance will be provided by using the Net Cash Value of the
Policy less the amount of each partial surrender and partial withdrawal made
during the grace period of the premium in default as a net single premium at the
age of the Insured on the due date of the premium in default.
Fixed Extended Term Insurance Option
(Available only if the Policy is in a Standard Policy Class and is not issued in
connection with a pension plan.) Fixed Extended Term Insurance is life insurance
for a level amount for a limited term with no further premiums due. It has Cash
Values, but no Loan Value. The amount of Fixed Extended Term Insurance is
payable only if the Insured dies prior to the end of the term.
Fixed Extended Term Insurance will be provided by using the Net Cash Value of
the Policy less the amount of each partial surrender and partial withdrawal made
during the grace period of the premium in default as a net single premium at the
age of the Insured on the due date of the premium in default. The amount of
Fixed Extended Term Insurance will
<PAGE>
equal the Death Benefit of the Policy on the due date of the premium in default.
Variable Paid-Up Insurance Option
Variable Paid-Up Insurance is available:
. If the Company consents to your election of the Variable Paid-Up Insurance
Option; and
. If the Initial Amount of Variable Paid-Up Insurance is at least $5,000.
If the Company has consented to your election of this Option and the Initial
Amount of Variable Paid-Up Insurance is less than $5,000, Fixed Paid-Up
Insurance will be provided.
Variable Paid-Up Insurance is permanent life insurance with no further premiums
due. The Initial Amount of Variable Paid-Up Insurance will be determined by
using the Net Cash Value less the amount of each partial surrender and partial
withdrawal made during the grace period of the premium in default as a net
single premium at the age of the Insured on the due date of the premium in
default.
The Death Benefit will be equal to: the greater of the Variable Death Benefit
and the Initial Amount of the Variable Paid-Up Insurance; less any Policy Loan
Balance. The Variable Death Benefit for the first policy month after lapse is
equal to the Initial Amount. The Variable Death Benefit for each later policy
month is adjusted on the first day of that policy month. For each policy month
after the first, the Variable Death Benefit:
. Will increase if the Policy's Actual Investment Return for the Period plus
any cost of insurance adjustment is greater than the Base Investment
Return;
. Will remain the same if the Policy's Actual Investment Return for the
Period plus any cost of insurance adjustment is equal to the Base
Investment Return; and
. Will decrease if the Policy's Actual Investment Return for the Period plus
any cost of insurance adjustment is less than the Base Investment Return.
(See Actual Investment Return and Base Investment Return, Section 10.)
The amount by which the Variable Death Benefit will change each policy month is
equal to:
<PAGE>
. The dollar amount by which the Policy's Actual Investment Return for the
Period plus any cost of insurance adjustment is greater or less than its
Base Investment Return;
DIVIDED BY
. The Net Single Premium per $1.00 of Variable Death Benefit at the age of
the Insured on the first day of the policy month.
The cost of insurance adjustment, if any, to be added to the Policy's Actual
Investment Return for the Period to compute the Variable Death Benefit is equal
to the difference between the maximum guaranteed cost of insurance and the
actual cost of insurance for the Policy.
Variable Paid-Up Insurance has Cash Values and Loan Values. The Cash Value and
Loan Value can increase or decrease on a daily basis, depending on the separate
account performance. (See Actual Investment Return, Section 10.)
The Cash Value of the Variable Paid-Up Insurance is equal to the total of the
Policy's share of the elected sub-accounts and the amount of any assets
transferred to the general investment account of the Company because of Policy
Loans. (See Section 12.) The amount of the Cash Value depends on investment
performance, cost of insurance charges, transfers among sub-accounts, and Policy
Loans.
The cost of insurance is deducted from the Cash Value:
. On the last day of each policy month; and
. On the date the Policy is surrendered if it is other than the last day of
the policy month.
The cost of insurance will be deducted in the same proportion as the Policy is
invested in the sub-accounts.
The cost of insurance depends on the cost of insurance rate at the time of the
deduction and on the difference between the Variable Death Benefit and the Cash
Value on the last day of the month. The cost is pro rated in the event of
surrender during a policy month. (See Cost of Insurance Rates, Section 10.)
If a Policy Loan Balance exists and the Net Cash Value is not enough to cover
the cost of insurance, the difference
<PAGE>
will be treated in the same manner as an excess Policy Loan. (See Section 12.)
The Loan Value of the Variable Paid-Up Insurance is described in Section 12.
<PAGE>
9. Reinstatement After Lapse
Reinstatement
The Policy and Riders can be reinstated at any time. (See Limitations on
Reinstatement below.) Reinstatement will be subject to:
. Application to reinstate; and
. Proof that the Insured is then insurable if reinstatement is applied for
more than 31 days after the end of the grace period of the premium in
default; and
. Payment, while the Insured is living, of the cost to reinstate; and
. Payment or reinstatement of any Policy Loan Balance on the due date of the
premium in default, plus interest that would have accrued if the Policy
had not lapsed; and
. Payment or reinstatement of each partial surrender and partial withdrawal
made during the grace period of the premium in default.
The cost to reinstate is the greater of: (a) each unpaid premium plus interest
at the rate of 5% per year compounded yearly; and (b) 110% of any increase in
the Cash Value as the result of the reinstatement plus each unpaid Rider premium
with interest at the rate of 5% per year compounded yearly.
If Fixed Extended Term Insurance is in force under Section 8, and there are at
least five years of the term left, proof of insurability will not be required to
reinstate the Policy; but it may be required to reinstate Riders.
Policy Loans may have been made while the Policy is in force as paid-up
insurance. (See Section 8.) If the Loans are not repaid, they will continue in
force after the Policy is reinstated.
<PAGE>
Limitations on Reinstatement
The Policy and Riders cannot be reinstated, except with the consent of the
Company:
. If more than seven years have passed since the due date of the premium in
default; or
. If the Policy has been surrendered for its Net Cash Value. (See Section
10.)
Any Rider which provides life or disability insurance on a person other than the
Insured can be reinstated only as stated in the Rider.
10. Cash Value of the Policy
Surrender of the Policy
You can surrender the Policy for its Net Cash Value at any time by notice to the
Company in writing. Upon surrender, the Policy will terminate. The Net Cash
Value will be paid to you in one sum, unless you elect in writing to apply all
or part of the Value to any Payment Option. (See Payment of Benefits, Section
15.)
Net Cash Value
The Net Cash Value of the Policy is equal to:
. The Cash Value of the Policy;
LESS
. Any Policy Loan Balance;
LESS
. Any Surrender Charge. (See Section 3.)
Cash Value
Before the initial transfer to the elected sub-accounts, the Cash Value of the
Policy will depend on the net investment performance of the Money Market sub-
account. Thereafter, the Cash Value of the Policy if all premiums due have been
paid is equal to the total of the Policy's share of the elected sub-accounts and
the amount of any assets transferred to the general investment account of the
Company because of Policy Loans. (See Section 12.)
The amount of the Cash Value depends on: the frequency and amount of net
premiums; the frequency and amount of net Unscheduled Payments; investment
performance; Monthly
<PAGE>
Deductions; cost of insurance charges; partial surrenders; partial withdrawals;
transfers among sub-accounts; and Policy Loans. The Cash Value can increase or
decrease on a daily basis, depending on the actual investment performance of the
elected sub-accounts. (See Actual Investment Return below.)
For 60 days after the due date of a premium in default, the Cash Value will not
be less than the Cash Value on the due date plus or minus the Actual Investment
Return from the due date to the date of the calculation.
If the Policy is in force under the Fixed Paid-Up Insurance Option or the Fixed
Extended Term Insurance Option, the Cash Value of the Policy on any date is
equal to the net single premium which would be required to provide the insurance
at the age of the Insured on that date. For 31 days after each policy
anniversary, the Cash Value will not be less than on the anniversary.
The Cash Value of the Policy is not increased by the Cash Value of any Rider,
unless stated in the Rider.
Monthly Charges
If the Policy is not lapsed, monthly charges for the Monthly Deduction and the
cost of insurance are deducted from the Cash Value of this Policy on the first
day of each policy month for that policy month. The monthly charges will be
made, whether or not premiums are paid, as long as the Net Cash Value is
sufficient to pay the entire monthly charges. The monthly charges will be
deducted in the same proportion as the Policy is invested in the sub-accounts.
If a Policy Loan Balance exists and the Net Cash Value is not enough to cover
the monthly charges, the difference will be treated in the same manner as an
excess Policy Loan. (See Section 12.)
The Monthly Deduction consists of an administrative charge and a minimum death
benefit guarantee charge. The amount of the Monthly Deduction due for a policy
month is equal to:
. 0.000025 times the Face Amount;
PLUS
. 0.000035 times the Face Amount, if the Policy is in the first policy year.
<PAGE>
The monthly cost of insurance is equal to: the amount at risk; times the cost of
insurance rate for that month. The amount at risk is equal to:
. The Death Benefit on the first day of the policy month discounted at the
monthly equivalent of 5% 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 for each policy month 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. The rates will be determined 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 are
guaranteed not to be greater than those based on the mortality table for the
Policy. (See Basis of Values.)
Partial Withdrawal and Partial Surrender
If Death Benefit Option 1 is in effect, you can make a partial withdrawal, if
the Company consents, if the Death Benefit is greater than the Face Amount of
the Policy. If there is no Policy Loan Balance, the partial withdrawal is
limited to: the Cash Value; less the Face Amount times the net single premium at
the Insured's attained age. If there is a Policy Loan Balance, the amount of the
partial withdrawal will be further limited to prevent the Policy Loan Balance
from exceeding the Loan Value of the Policy.
If Death Benefit Option 2 is in effect, you can make a partial withdrawal, if
the Company consents. If there is no Policy Loan Balance, the partial withdrawal
is limited to the Cash Value less the Tabular Value. (See Section 2.) If there
is a Policy Loan Balance, the amount of the partial withdrawal will be further
limited to prevent the Policy Loan Balance from exceeding the Loan Value of the
Policy.
A partial withdrawal will result in a decrease in Death Benefit and Cash Value.
The Face Amount, premiums and Surrender Charge will not change. A partial
withdrawal will reduce the Policy's share of the sub-accounts proportionately,
unless you request otherwise.
You may make a partial surrender if the Company consents. A Surrender Charge
will be applied if you make a partial surrender. (See Section 3.) A partial
surrender will result
<PAGE>
in a decrease in Cash Value, premiums, Face Amount, and Tabular Value. The Face
Amount which will remain after the partial surrender must not be less than the
Company's published minimum, except with the consent of the Company.
The Company will subtract the amount of each partial withdrawal and partial
surrender taken during the grace period of a premium in default from the Net
Cash Value used to determine the value of the Policy at lapse.
Monthly Cost of Insurance Adjustment At Surrender
The pro rata portion of any monthly cost of insurance deduction made for a
period beyond the date of surrender will be added to the surrender proceeds.
Base Investment Return
The Policy has a Base Investment Return for each elected sub-account for each
Valuation Period. The Policy's Base Investment Return is the amount which would
be earned by the Policy's share of the sub-account if its investment performance
was at a rate equivalent to 5% per year compounded monthly. The Base Investment
Return is used in the determination of: the Tabular Value; and the Variable
Death Benefit under the Variable Paid-Up Insurance Option.
Actual Investment Return
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;
MINUS
any net premium and net Unscheduled Payment credited during the Valuation
Period;
PLUS
the total of the partial surrenders and partial withdrawals 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 MINUS
<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 for the most recent
Valuation Period;
PLUS or MINUS
a charge or credit for the Policy's share of any reserve for taxes which
the Company determines to apply to the sub-account.
There is a daily charge for mortality risk and expense risk against the Policy's
share of the sub-accounts. This charge is equivalent to .60% per year.
Valuation Periods and Valuation Dates
A Valuation Period for each sub-account is a period:
. Which starts on a Valuation Date; and
. Which ends on the next succeeding Valuation Date.
Each day the New York Stock Exchange is open for trading is a Valuation Date.
11. Death Benefit
Death Benefit
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.
Death Benefit Option
This Policy offers two Death Benefit Options. The Death Benefit Option will be
as elected in the Application. The Death Benefit Option is shown in the Policy
Schedule.
Option 1
The Death Benefit on the date of death is equal to:
. The Face Amount shown in Section 1; or, if greater,
. The Cash Value divided by the net single premium at the attained age of the
Insured.
Option 2
The Death Benefit on the date of death is equal to:
<PAGE>
. The Face Amount shown in Section 1 plus any excess of the Cash Value over
the Tabular Value; or, if greater,
. The Cash Value divided by the net single premium at the attained age of the
Insured.
12. 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 from time to time by written application to the
Company. Policy Loans are made on the sole security of the Policy. The amount
available to be borrowed at any time is equal to the Loan Value less any Policy
Loan Balance at that time. Policy Loans may be charged automatically against the
Policy to pay premiums. (See Option for Automatic Premium Payment, Section 5.)
Policy Loans will reduce the Policy's share of the sub-accounts proportionately,
unless you request otherwise. Assets equal to the amount of the Loan:
. Will be transferred to the general investment account of the Company; and
. Will earn interest at the effective rate per year of 1% less than the
Policy Loan interest rate.
Policy Loans, whether or not repaid, can have a permanent effect on Cash Values
and Death Benefits.
Loan Value
While the Policy is invested in the Account, the Loan Value of the Policy is the
amount which with loan interest will equal: 90% of the Cash Value of the Policy
projected to the next policy anniversary or, if earlier, to the next premium due
date; less the Surrender Charge on the next loan interest due date or, if
greater, on the date the loan is made. The Cash Value will be projected with
interest at the effective rate per year of 1% less than the Policy Loan interest
rate.
If the Policy is in force under the Fixed Paid-Up Insurance Option, the Loan
Value is the amount which with loan interest will equal the Cash Value of the
Policy on the next loan interest due date. The Policy has no Loan Value while it
is in force as Fixed Extended Term Insurance. (See Section 8.)
<PAGE>
Interest on Loans; Policy Loan Balance
Policy Loans bear interest as shown in Section 1. Interest accrues daily. The
Policy Loan Balance at any time means Policy Loans outstanding plus interest
accrued to date. Loan interest is due each year on the premium anniversary date.
Loan interest not paid when due will be added to the Loan and will bear
interest.
Repayment of Loans
Policy Loans may be repaid to the Company at any time in whole or part. Loan
repayments will be allocated in the same proportion as the Policy is invested in
the sub-accounts, unless you request otherwise. A Policy Loan is a charge
against the Policy. The proceeds of the Policy will be reduced by any Policy
Loan Balance on the date of death of the Insured. If the Policy Loan Balance at
any time exceeds the Cash Value of the Policy less the Surrender Charge on the
next loan interest due date or, if greater, on the current Valuation Date, the
Company will mail a notice to you and to any assignee. The notice will be mailed
to the addresses on record with the Company. If the excess amount is not paid to
the Company within 31 days after mailing of the notice, the Policy will
terminate without value.
13. Exchange of Policy
Exchange of Policy
Within 24 months after its Date of Issue, you can exchange this Policy, if all
premiums due have been paid, for a policy which provides fixed benefit
insurance. The new policy will be issued:
. By New England Mutual Life Insurance Company;
. On any plan of Whole Life or Endowment insurance with a level face amount
issued by New England Mutual Life Insurance Company on the Policy Date;
. With the same Insured, Age, Policy Date, Face Amount and underwriting class
as this Policy;
. Subject to any cost or credit and the repayment of any Policy Loan Balance;
and
. Subject to any assignments of this Policy, and limitations on this Policy
stated in Riders.
<PAGE>
Riders which provide benefits that are the same as those provided by riders on
this Policy will be attached to the new policy, if they are available.
Change Cost or Credit
Any change cost or credit will be quoted by the Company on request.
A detailed statement of the method of computing the change cost or credit has
been filed with the Insurance Department of the state in which the Policy is
delivered.
14. Owner and Beneficiary
Owner
The Owner of the Policy is named in the Application. (See copy attached.)
However, the Owner can be changed from time to time. The new Owner will succeed
to all rights of the Owner, including the right to make a further change of
Owner. At the death of the Owner, his or her estate will be the Owner, unless a
successor Owner has been named. In this Policy "you" means the Owner, whether
the Owner is an individual, a partnership, a corporation, a fiduciary or any
other legal entity. The rights of the Owner will terminate at the death of the
Insured, except for Payment of Benefits. (See Section 15.)
Beneficiary
The Beneficiary is named in the Application. (See copy attached.) However, the
Beneficiary can be changed from time to time before the death of the Insured.
The Beneficiary has no rights in the Policy until the death of the Insured. An
individual must survive the Insured to qualify as Beneficiary. If none survives,
the proceeds will be paid to the Owner. The Beneficiary can also be a
corporation, a partnership, a fiduciary or any other legal entity.
Change of Owner or Beneficiary
A change of Owner or Beneficiary must be in written form satisfactory to the
Company, and must be dated and signed by the Owner who is making the change. The
change will be subject to all payments made and actions taken by the Company
under the Policy before the signed change form is received by the Company at Its
Administrative Office.
Assignments
An absolute assignment of the Policy by the Owner is a change of Owner and
Beneficiary to the assignee. A collateral assignment of the Policy by the Owner
is not a change of Owner or Beneficiary; but their rights will be
<PAGE>
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.
15. Payment of Benefits
Payment
The policy proceeds will be paid in one sum, unless you elect to apply all or
part of the proceeds to any Payment Option. (See Section 16.) The Company will
pay interest on the proceeds from the date they become payable to the date of
payment in one sum, or to the Option Date. The rate of interest will be
determined each year by the Company; but the rate on death and maturity proceeds
will not be less than that required by law and the rate on other proceeds will
not be less than 3 1/2% per year. The interest payable on surrender proceeds is
described in Section 4.
Election of Payment Options; Option Date
The election of a Payment Option and the naming of the Payee must be in written
form satisfactory to the Company. You can make or change or revoke the election
from time to time before the death of the Insured. The Option Date is the
effective date of the Payment Option, as stated in the election.
<PAGE>
Payee
A Payee is any individual, corporation, partnership, fiduciary or any other
legal entity entitled to receive payment in one sum or under a Payment Option.
Election By Payees
Any proceeds payable in one sum at the death of the Insured, or upon surrender
of the Policy, can be applied to any Payment Option at the election of the
Payee. Further, subject to the consent of the Company, any Payee who is entitled
to receive proceeds in one sum at the expiration of a Payment Option, or at the
death of a prior Payee, or upon withdrawal of the proceeds, can elect to apply
the proceeds to a Payment Option.
Rights of Payees
In the election of a Payment Option the right can be given to the Payee:
. To withdraw principal and interest under the Fourth or Fifth Option; or
. To withdraw the commuted value of payments certain under the First, Second
or Sixth Option.
Payments under the Life Income Options cannot be commuted, except for payments
certain. No Payee can assign, commute or withdraw the payments under any Payment
Option, unless the right is reserved in the election of the Option.
Limitations
If installments under an Option are 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 17), or on the Payment Option rates of the Company on the Option Date,
whichever rates are more favorable to the Payee. If the rates at a given age are
the same for different periods certain, the longest period certain will be
deemed to have been elected.
Purchase of Increased Life Income Benefits
On the Option Date a one sum purchase payment can be made to the Company to add
to the proceeds being applied to any Life
<PAGE>
Income 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 17). The purchase
payment will be limited to the Company's published maximum for single premium
immediate annuities on the Option Date. A portion of the purchase payment may be
used by the Company to pay premium taxes on the purchase payment.
Death of Payee
Amounts to be paid after the death of a Payee under a Payment Option will be
paid as due to the surviving or next succeeding Payee. If no Payee survives,
amounts to be paid in one sum, or the commuted value of any unpaid payments
certain, will be paid in one sum to the estate of the last Payee to die. If a
Payee under a Life Income Option dies within 30 days after the Option Date, the
amount applied to the Option, less any payments made, will be paid in one sum,
unless a Payment Option is elected.
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.
<PAGE>
16. Payment Options
Payment Options
You can elect to have all or part of the policy proceeds applied to provide
payments under any one of the following Options, subject to Section 15, Payment
of Benefits.
First Option: Income for a Specified Number of Years
The Company will make equal monthly payments which will include both principal
and interest. Payments will begin on the Option Date and will continue for the
number of years elected; the number of years 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 Number Number
of Years of Years of 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
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 begin 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
<PAGE>
The Company will make equal monthly payments. Payments will begin on the Option
Date and will continue during the life of the Payee. At the death of the Payee,
if the total of the payments made is less than the total proceeds applied to the
Option, then:
. The difference will be paid In one sum, called "Life Income, Cash Refund";
or
. The equal monthly payments will continue until the total payments are equal
to the total proceeds applied to the Option, called "Life Income,
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 proceeds:
. Will be paid each month to the Payee beginning one month after the Option
Date; or
. Will be added to the principal amount each year and 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 determined each year by the Company; but the rate will not be less than
3 1/2% per year.
Fifth Option: Specified Amount of Income
The Company will make equal monthly payments which will include both principal
and interest. Payments will be in the amount elected. Payments may be quarterly
or at any other frequency elected, and payments may be in variable amounts, all
subject to the consent of the Company. Payments will continue until the balance
is fully paid out. At the death of the Payee any unpaid balance and accrued
interest will be paid in one sum. The rate of interest will be determined each
year by the Company; but the rate will not be less than 3 1/2% per year.
Interest will be added each year to the principal and will earn interest.
Sixth Option: Life Income for Two Lives
The Company will make equal monthly payments. Payments will begin on the Option
Date and will continue:
. While either of two Payees is living, called "Joint and Survivor Life
Income"; or
<PAGE>
. 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."
17. Life Income Tables
Life Income Tables
Guaranteed monthly payments per $1,000 of proceeds applied to the Life Income
Options are shown below:
- --------------------------------------------------------------------------------
Second and Third Options: Life Income
- --------------------------------------------------------------------------------
Age of No 10 Years 20 Years Cash Installment
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
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
<PAGE>
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 4.64 4.68
60 4.99 4.92 4.68 4.72 4.76
61 5.10 5.02 4.75 4.80 4.85
62 5.22 5.12 4.82 4.89 4.94
63 5.34 5.23 4.88 4.98 5.03
64 5.47 5.35 4.95 5.07 5.13
65 5.61 5.47 5.02 5.17 5.24
66 5.76 5.60 5.08 5.28 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
<PAGE>
- --------------------------------------------------------------------------------
Age of No 10 Years 20 Years Cash Installment
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 8.11 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
- --------------------------------------------------------------------------------
Joint and 2/3 to Survivor
- --------------------------------------------------------------------------------
<PAGE>
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
Variable Life Policy
. The Death Benefit is payable at the death of the Insured.
. Premiums are payable to the Company for a specified period.
. Unscheduled Payments can be made.
. Values and benefits are affected by investment performance.
. The Policy does not participate in Dividends.
<PAGE>
Exhibit 1.A.5(b)
NEV-43
Rider: Level Term Insurance
The Company agrees that if the Insured dies while this Rider is in force, the
Policy proceeds will be increased by the amount of Level Term Insurance shown in
the Policy Schedule. (See Section 1 of the Policy.)
Premiums For This Rider
Premiums for this Rider are due with the premiums for the Policy. The annual
premiums for the Rider are shown in the Policy Schedule. No premium will be due
or payable for the Rider for any period after the death of the Insured or the
termination 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.
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 within two years from the Date of Issue of this
Rider, the amount of Level Term Insurance will not be paid. The amount payable
under the Rider will be limited to the premiums paid for the Rider.
Contract
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. This Rider has no cash Value.
Exchange Option
The Owner may exchange this Rider for a new policy. The new policy will be
issued:
. Without proof of insurability;
<PAGE>
. With a Face Amount equal to the amount of term insurance then provided by
this Rider;
. With the same Insured and underwriting class as this Rider;
. On any plan of Variable Life insurance issued by the Company on the Policy
Date of the new policy;
. On a policy form and at premium rates in use by the Company on the Policy
Date of the new policy;
. Subject to any assignments and limitations to which this Rider is subject;
and to the exchange cost described below; and
. As either an "Original Date Exchange" or a "Current Date Exchange," at the
election of the Owner.
Original Date Exchange
The new policy will have a Policy Date and Age of Insured as of the date the
first rider year began. The exchange cost will be the greater of:
103% of the reserve for the new policy; and
The total premiums to date for the new policy, less the total premiums for the
Rider from the Policy Date of the new policy to the date of exchange, with
interest at the rate of 5% per year compounded yearly.
Current Date Exchange
The new policy will have a current Policy Date and Age of Insured. The exchange
is subject to payment of the first premium for the new policy.
Exchange With Waiver of Premiums Rider
If this Policy has a rider for Waiver of Premiums for disability, the new policy
can have a similar Waiver of Premiums Rider, but only if:
. The new policy is not a single premium plan;
. The person insured under the Waiver of Premiums Rider has not been disabled
within two years before the exchange; or
. The new policy is a Current Date Exchange. In this case if the person
insured under the Waiver of Premiums Rider is disabled at the time of the
exchange, premiums for the new policy will be waived as if the rider had
been in force when the disability commenced.
<PAGE>
Automatic Exchange With Waiver of Premiums Rider
At the Expiry Date of this Rider. if premiums are being waived under a rider for
Waiver of Premiums for disability. then an automatic Current Date Exchange will
be made. The new policy will be on the plan being issued by the Company which is
most similar to the plan on which this Policy is written. A similar Waiver of
Premiums Rider will be attached to the new policy. Premiums for the new policy
will be waived as if the rider had been in force when the disability commenced.
Termination
This Rider will terminate upon the earliest of: (a) failure to pay any premium
for the Policy or for the Rider by the end of its grace period; (b) termination
or maturity of the Policy other than by death; (c) exchange of the Rider for a
new policy; (d) receipt at the Administrative Office of the Company of written
election signed by the Owner of the Policy to terminate the Rider; or (e) the
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>
NEV-50
Rider: Spouse Insurance
The Company agrees that if the Insured Spouse dies while this Rider is in force,
the Amount Insured under the Rider will be paid in one sum to the Beneficiary of
the Rider.
Amount Insured
The Amount Insured under this Rider is the amount shown for the Rider in the
Policy Schedule. (See Section 1 of the Policy.)
Insured Spouse
The Insured Spouse is named in the application for this Rider.
The Insured
The "Insured" referred to in this Rider is the Insured under the Policy to which
the Rider is attached.
Beneficiary Of This Rider
The Beneficiary of this Rider: (a) will be the Insured if the Insured is living;
(b) will be the estate of the Insured Spouse if the Insured is dead; and (c)
cannot be changed.
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 the Insured Spouse if the Insured is dead; and (c) cannot be
changed.
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 under the Rider; and no further premiums
will be due.
Premiums For This Rider
Premiums for this Rider are due with the premiums for the Policy. The annual
premiums for the Rider are shown in the Policy Schedule. (See Section 1 of the
Policy.) No premium will be due or payable for this Rider for any period after
the death of the Insured or the Insured Spouse or the termination of the Rider.
<PAGE>
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 insurance
provided by this Rider will be in force from the Date of Issue of the Rider.
Lapse of Rider
If this Rider lapses because a premium is not paid, any cash value of the Rider
will be used to continue the Rider in force as Extended Term Insurance, as
stated below.
Extended Term insurance Provision
Extended Term insurance is life insurance for a limited term with no further
premiums due. It has cash values, but no loan value. The amount of Extended Term
insurance is payable only if the Insured Spouse dies prior to the end of the
term.
Extended Term insurance will be provided by using the cash value of the Rider as
a net single premium at the age of the Insured Spouse on the due date of the
unpaid premium. The amount of Extended Term Insurance will equal the Amount
Insured under the Rider. The Table of Values for Spouse Insurance Rider shows
samples of the length of the term which the cash value could provide. The term
is measured from the due date of the premium in default.
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 its due date, but only if the Insured Spouse is living at the time of
payment. (See Limitations on Reinstatement below.)
Reinstatement at a Later Time
This Rider can be reinstated at a later time. (See Limitations on Reinstatement
below.) Reinstatement will then be subject to:
. Proof that the Insured Spouse is then insurable; and
. Payment, while the Insured Spouse is living, of each overdue premium, plus
interest from its due date at the rate of 5% per year compounded yearly.
<PAGE>
Limitations on Reinstatement
This Rider can be reinstated only if the Policy is also reinstated or is in
force with all premiums paid to date. The Rider cannot be reinstated, except
with the consent of the Company, if more than seven years have passed since the
due date of the premium in default.
Surrender of Policy or Rider
The Owner of this Rider can surrender it for its cash value at any time by
notice to the Company in writing. Upon surrender of either the Policy or this
Rider, the Rider will terminate. The cash value of the Rider will be paid to the
Owner of the Rider in one sum.
Cash Value
The Table of Values for Spouse Insurance Rider shows samples of the cash Value
of the Rider at various dates. The Table assumes all premiums due have been
paid. For 90 days after the due date of an unpaid premium, the cash value of the
Rider will not be less than on the due date.
Paid-up insurance under the Paid-up Benefit provision and Extended Term
insurance have cash values equal to the net single premium which would be
required to provide the insurance at the age of the Insured Spouse 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 of this Rider will not increase the cash value of the Policy to
which the Rider is attached. This Rider has no loan Value.
Exchange Option
The Owner may exchange this Rider for a new policy. The new policy will be
issued:
. By New England Mutual Life insurance Company (called "New England Life");
. On the life of the Insured Spouse;
. Without proof of insurability;
. With a Face Amount equal to the amount of term insurance then provided by
this Rider;
. With the same underwriting class as this Rider;
<PAGE>
. On any plan of Whole Life or Endowment insurance, with a level face
amount, issued by New England Life on the Policy Date of the new policy;
. On a policy form and at premium rates in use by New England Life 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 exchange cost described below.
The exchange may be made only with the consent of New England Life if:
. The amount of this Rider is less than New England Life's published minimum
limits of issue; or
. Any Rider is to be attached to the new policy.
Exchange Cost
The exchange is subject to payment of the first premium for the new policy.
Not Contestable After Two Years
This Rider will not be contestable after it has been in force during the life of
the Insured Spouse for two years from the Date of Issue of the Rider.
Suicide Within Two Years
If the Insured dies by suicide 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 added to the policy proceeds.
If the Insured Spouse dies by suicide within two years from the Date of Issue of
this Rider:
. The Amount Insured will not be paid;
. The Rider will terminate; and
<PAGE>
. The premiums paid for the Rider will be paid in one sum to the Beneficiary
of the Rider.
Age of Insured or Insured Spouse
If the age of either the Insured or the Insured Spouse, or both, has not been
correctly stated, the values and benefits for this Rider will be corrected. The
values and benefits will be those which the premiums for the Rider would have
purchased for the correct age or ages.
Contract
A copy of the application for this Rider and of the Table of Values for Spouse
Insurance Rider are 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.
Basis of Values
Reserves, cash values and net single premiums are based on the Commissioners
1958 Standard Ordinary Table of Mortality. Continuous functions are used.
Interest is at the rate of 4% per year compounded yearly. Reserves are computed
by the Commissioners Reserve Valuation Method. The cash value of the Rider will
be equal to the full reserve at the end of the tenth rider year. The cash value
of the Rider at any time while premiums are being paid is equal to its cash
value at the end of the period for which premiums are due and have been paid.
When premiums are due and paid for a portion of a rider year, the cash value
will reflect the lapse of time and fractional premiums paid for the year. A
detailed statement of the method of computing values has been filed with the
Insurance Department of the state in which this Rider is to be delivered. All
values are equal to or are in excess of the minimums required by the law of that
state.
Termination
This Rider will terminate, and its cash value, if any, will be paid in one sum,
upon the earliest of: (a) failure to pay any premium for the Rider by the end of
its grace period, except as provided in the Extended Term insurance Provision;
(b) termination or maturity of the Policy other than by death of the Insured;
(c) exchange of the Rider for a new policy; (d) receipt at the Administrative
Office of the Company of written election signed by the Owner of the Rider to
terminate the Rider; or (e) the Expiry Date shown for the Rider in the Policy
Schedule.
New England Variable Life insurance Company
<PAGE>
Administrative Office:
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto Edward N. Wadsworth
/s/ /s/
President Secretary
<PAGE>
NEV-53
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 due with the premiums for
the Policy. The annual premiums for the Rider are shown in the Policy Schedule.
(See Section 1 of the Policy.) No premium will be due or payable for this Rider
for any period after the death of the Insured or the termination of the Rider.
Default in Premium Payment. Any premium for this Rider which is not paid by its
due date is in default. If it remains unpaid at the end of its grace period and
is not paid automatically pursuant to the Premiums Section of the Policy, the
Rider will lapse.
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 its due date, but only if each
Insured Child is living at the time of payment. (See Limitations on
Reinstatement below.)
<PAGE>
Reinstatement at a Later Time. This Rider can be reinstated at a later time.
(See Limitations on Reinstatement below.) Reinstatement will then be subject to:
. Proof that each Insured Child is then insurable; and
. Payment, while each Insured Child is living, of each overdue premium, plus
interest from its due date at the rate of 5% per year compounded yearly.
Limitations on Reinstatement. This Rider can be reinstated only if the Policy is
also reinstated or is in force with all premiums paid to date. The Rider cannot
be reinstated, except with the consent of the Company, if more than seven years
have passed since the due date of the unpaid premium.
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.
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
insurance provided by this Rider will be in force from the Date of Issue of the
Rider.
Not Contestable After Two Years. This Rider will not be contestable after it has
been in force for two years from the Date of Issue of the Rider.
Suicide Within Two Years. If the Insured dies by suicide within two years from
the Date of Issue of this Rider
<PAGE>
. 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 added to the policy proceeds.
Age of Insured. If the age of the Insured has not been correctly stated, the
amount of this Rider will be corrected. The amount will be that which the
premium for this Rider would have purchased for the correct age.
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; and no further
premiums will be due.
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 that 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. The Beneficiary of this Rider: (a) will be the
Insured, if the Insured is living; (b) will be the estate of the Insured Child
upon whose death payment is to be made, if the Insured is dead; and (c) cannot
be changed.
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
<PAGE>
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:
. By New England Mutual Life Insurance Company (called "New England Life");
. On the life of the Insured Child;
. Without proof of insurability;
. 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 Life or Endowment insurance, with a level face amount,
issued by New England Life on the Policy Date of the new policy;
. On a policy form and at premium rates in use by New England Life 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 New England Life if:
. The amount of insurance to be exchanged is less than New England Life's
published minimum limits of issue; or
. Any Rider other than a Purchase Option Rider is to be attached to the new
policy.
<PAGE>
Exchange Cost. The exchange is subject to payment of the first premium for the
new policy.
Purchase Option Rider on New Policy. The new policy may be issued with a
Purchase Option Rider. If so, the rider will provide that the Owner can purchase
an additional policy on each option date on the life of the Insured Child whose
insurance was exchanged. The option dates will be the policy anniversaries when
that Insured Child's age is 22, 25, 28, 31, 34, 37 and 40. Each additional
policy will be issued:
. By New England Life;
. Without proof of insurability;
. With a Face Amount not more than the Face Amount of the policy to which the
rider is attached;
. In the same underwriting class as the rider;
. On any plan of Whole Life or Endowment insurance, with a level face amount,
issued by New England Life on that option date;
. On a policy form and at premium rates in use by New England Life on that
option date; and
. Subject to New England Life's published minimum limits of issue.
Premiums for the Purchase Option Rider will be based on the rates in use by New
England Life on the Date of Exchange.
Termination. This Rider will terminate upon the earliest of: (a) failure to pay
any premium for the Policy or for the Rider by the end of its grace period; (b)
termination or maturity of the Policy other than by death of the Insured; (c)
receipt at the Administrative Office of the Company of written election signed
by the Owner of the Rider to terminate the Rider; or (d) the Expiry Date shown
for the Rider in the Policy Schedule.
New England Variable Life Insurance Company
501 Boylston Street, Boston, Massachusetts
John A. Fibiger Kernan F. King
<PAGE>
/s/ /s/
President Secretary
<PAGE>
NEV-72
Rider: Waiver of Premiums - Disability of Insured
The Company agrees to waive premiums 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.
Exclusion
<PAGE>
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.
Premiums to be Waived
After total disability has continued for at least six months, premiums 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 premiums will be waived beyond the policy anniversary on which the Insured is
age 65 unless:
. Total disability has been continuous for the full five year period which
ends on that policy anniversary; and
. Timely proof of disability has been received by the Company during the five
years.
Premiums 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.
Any premiums due before the Company approves a claim for waiver of premium
should be paid as due; and the Company will refund to the Owner the portion of
any premiums which were paid but are later waived.
Proof of Disability
Proof of total disability must be furnished:
. 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.
<PAGE>
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 premiums are being waived as they
would be if the premiums were paid in cash.
Premiums For This Rider
Premiums for this Rider are due with the premiums for the Policy. The annual
premiums for the Rider are shown in the Policy Schedule.
Date of Issue
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule.
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, for
two years from the Date of Issue of the Rider.
Contract
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. This Rider has no cash value.
Termination
This Rider will terminate upon the earliest of:
. Failure to pay any premium for the Policy or for the Rider by the end of
its grace period;
. Termination of the Policy;
. Death of the Insured; or
<PAGE>
. Receipt by 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>
NEV-76
Rider: Waiver of Premiums - Death of Applicant
The Company agrees to waive premiums for the Policy and all Riders for a limited
period on receipt of proof of the death of the person named in the application
for this Rider (called "Applicant").
Waiver of Premiums Upon Death of Applicant
Premiums will be waived for the period:
. Which starts on the first day of the policy month in which the Applicant
dies; and
. Which ends on the policy anniversary on which the Insured is age 21. The
Company will refund the portion of any premiums which were paid but are
later waived.
Policy Benefits
The policy proceeds will be the same while premiums are being waived as they
would be if the premiums were paid in cash.
Premiums For This Rider
Premiums for this Rider are due with the premiums for the Policy. The annual
premiums for the Rider are shown in the Policy Schedule. (See Section 1.) No
premium will be due or payable for the Rider for any period after the death of
either the Applicant or the Insured or the termination of the Rider.
Default in Premium Payment
Any premium for this Rider which is not paid by its due date is in default. If
it remains unpaid at the end of its grace period and is not paid automatically
pursuant to the Premiums Section of the Policy, the Rider will lapse.
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 its due date, but only if the Applicant is living at the time of
payment. (See Limitations on Reinstatement below.)
<PAGE>
Reinstatement at a Later Time
This Rider can be reinstated at a later time. (See Limitations on Reinstatement
below.) Reinstatement will then be subject to:
. Proof that the Applicant is then insurable; and
. Payment, while the Applicant is living, of each overdue premium, plus
interest from its due date at the rate of 5% per year compounded yearly.
Limitations on Reinstatement
This Rider can be reinstated only if the Policy is also reinstated or is in
force with all premiums paid to date. The Rider cannot be reinstated, except
with the consent of the Company, if more than seven years have passed since the
due date of the premium in default.
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.
Not Contestable After Two Years
This Rider will not be contestable after it has been in force during the life of
the Applicant for two years from its Date of Issue.
Suicide Within Two Years
If the Applicant dies by suicide within two years from the Date of Issue of this
Rider, premiums will not be waived; the Company will refund the premiums paid
for the Rider.
Age of Applicant
If the age of the Applicant has not been correctly stated in the application for
this Rider, the values and benefits will be corrected to the amounts which the
total premiums paid for the Policy and all its Riders would have purchased for
the correct age.
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.
Termination
This Rider will terminate upon the earliest of: (a) failure to pay any premium
for the Policy or for the Rider by the
<PAGE>
end of its grace period; (b) termination or maturity of the Policy; (c) death of
the Insured; or (d) receipt at the Administrative Office of the Company 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/
Secretary President
<PAGE>
NEV-77
Rider: Waiver of Premiums - Death or Disability of Applicant
The Company agrees to waive premiums for the Policy and all Riders for a limited
period on receipt of proof of:
. The death of the person named in the application for this Rider (called
"Applicant"); or
. The total disability of the Applicant, which starts while this Rider is in
force and which continues for at least six months.
Waiver of Premiums Upon Death of Applicant
Premiums will be waived for the period:
. Which starts on the first day of the policy month in which the Applicant
dies; and
. Which ends on the policy anniversary on which the Insured is age 21.
The Company will refund the portion of any premiums which were paid but are
later waived.
Waiver of Premiums During Total Disability of Applicant
After total disability has continued for at least six months, premiums 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 premiums will be waived beyond the policy anniversary on which the Insured is
age 21 or the Applicant is age 65 whichever occurs first. Premiums 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.
Any premiums due before the Company approves a claim for waiver of premium
should be paid as due; and the Company will refund to the Owner the portion of
any premiums which were paid but are later waived.
<PAGE>
Definitions
"Total disability" means disability of the Applicant:
. Which results from sickness or accidental bodily injury; and
. Which continuously prevents the Applicant 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 Applicant when total
disability started; and thereafter means engaging in any occupation for which
the Applicant 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 Applicant when the disability
started.
Total disability will be presumed if, as the result of a sickness or an
accidental bodily injury, the Applicant 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
Applicant 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.
Proof of Disability
Proof of total disability must be furnished:
. During the life of the Applicant; 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 Applicant 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 premiums are being waived as they
would be if the premiums were paid in cash.
Premiums For This Rider
Premiums for this Rider are due with the premiums for the Policy. The annual
premiums for the Rider are shown in the Policy Schedule. (See Section 1.) No
premium will be due or payable for the Rider for any period after the death of
either the Applicant or the Insured or the termination of the Rider.
Default in Premium Payment
Any premium for this Rider which is not paid by its due date is in default. If
it remains unpaid at the end of its grace
<PAGE>
period and is not paid automatically pursuant to the Premiums Section of the
Policy, the Rider will lapse.
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 its due date, but only if the Applicant is living at the time of
payment. (See Limitations on Reinstatement below.)
Reinstatement at a Later Time
This Rider can be reinstated at a later time. (See Limitations on Reinstatement
below.) Reinstatement will then be subject to:
. Proof that the Applicant is then insurable; and
. Payment, while the Applicant is living, of each overdue premium plus
interest from its due date at the rate of 5% per year compounded yearly.
Limitations on Reinstatement
This Rider can be reinstated only if the Policy is also reinstated or is in
force with all premiums paid to date. The Rider cannot be reinstated, except
with the consent of the Company, if more than seven years have passed since the
due date of the premium in default.
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.
Not Contestable After Two Years
This Rider will not be contestable after it has been in force during the life of
the Applicant, and without the occurrence of total disability of the Applicant,
for two years from the Date of Issue of the Rider.
Suicide Within Two Years
If the Applicant dies by suicide within two years from the Date of Issue of this
Rider, premiums will not be waived; the Company will refund the premiums paid
for the Rider.
Age of Applicant
If the age of the Applicant has not been correctly stated in the application for
this Rider, the values and benefits will be corrected to the amounts which the
total premiums paid for the Policy and all its Riders would have purchased for
the correct age.
<PAGE>
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.
Termination
This Rider will terminate upon the earliest of: (a) failure to pay any premium
for the Policy or for the Rider by the end of its grace period; (b) termination
or maturity of the Policy; (c) death of the Insured; or (d) receipt at the
Administrative Office of the Company 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>
NEV-82
Rider: Change to a New Insured
The Company agrees that 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 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 any plan of Variable Life insurance issued by the Company on the Policy
Date of the new policy;
. With a Policy Date the same as this Policy or, if later, the same as the
policy anniversary which next follows the new insured's date of birth;
. With a Cash Value on its Date of Issue which is equal to the Cash Value of
this Policy on the date it terminates;
. On a policy form and at premium rates in use by the Company on the Policy
Date of the new policy;
. Subject to any assignments and Policy Loans on this Policy; and
<PAGE>
. Subject to payment of the first premium for the new policy.
Premiums for the new policy will be based on the new insider's sex and age on
the Policy Date of the new policy. 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 the first premium for the new policy.
Face Amount of the New Policy. The new policy will be issued:
. With a Face Amount (Guaranteed Minimum Death Benefit) equal to the Face
Amount of this Policy if the Cash Value transferred to the new policy will
support a Variable Death Benefit equal to or greater than the Face Amount;
or, if it will not,
. With as great a Face Amount and equal Variable Death Benefit as the Cash
Value transferred to the new policy will support.
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) termination or
maturity of the Policy; (b) failure to pay any premium for the Policy by the end
of its grace period; or (c) change of the Policy to a new policy under the
provisions of the Rider.
New England Variable Life Insurance Company
501 Boylston Street, Boston, Massachusetts
John A. Fibiger Kernan F. King
/s/ /s/
President Secretary
<PAGE>
NEV-94
Rider: Exclusion from Waiver of Premiums Benefits
The Waiver of Premiums Rider that is attached to Policy Number
____________________________is reinstated subject to the terms of this Rider.
Exclusion from Waiver of Premiums Benefits. The Waiver of Premiums Rider
excludes certain risks. By means of this Rider, the Company also excludes the
risk and will not waive premiums for total disability which results from:
Contract. This Rider is made a part of the Waiver of Premiums Rider, which would
not otherwise be reinstated. No provisions of the Waiver of Premiums Rider are
changed except as provided in this Rider.
Acceptance. The Owner accepts the Waiver of Premiums Rider with full knowledge
and understanding of the effect of this Rider.
___________________________Date _____________________________________Owner
New England Variable Life Insurance Company
501 Boylston Street, Boston. Massachusetts
John A. Fibiger Kernan F. King
/s/ /s/
President Secretary
<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>
NEV-98-1
Rider: New York Limitation on Juvenile Insurance
The Policy to which this Rider is attached is issued by the Company subject to
the provisions of this Rider.
Limitation on Amount of Insurance. The total amount of life insurance on the
life of the Insured under this Policy, and under any other policy or policies in
force in this or any other company on the Date of Issue of this Policy, is
subject to a maximum limit. This limit is required by the Insurance Law of the
State of New York. This limit applies until the age of the Insured is fourteen
years and 6 months.
To the extent that life insurance under this Policy is in excess of the maximum
limit, it will not be valid, nor payable as a claim by death. Insurance which
has a more recent date of issue than other insurance will be the first to be
deemed the excess insurance. The liability of the Company will be limited to the
Refund Benefit described below.
Maximum Limit. The maximum limit while the Insured is under the age of four
years and 6 months is the greater of:
. $5,000; and
. 25% of the amount of life insurance in force on the life of the Applicant
for this Policy on the Date of Issue of this Policy.
The maximum limit while the Insured is age four years and 6 months or more and
under the age of fourteen years and 6 months is the greater of:
. $10,000; and
. 50% of the amount of life insurance in force on the life on the Applicant
for this Policy on the Date of Issue of this Policy.
Any life insurance on the life of the Insured which is not in excess of the
maximum limit when issued will not be deemed to be in excess because of any
later reduction in the amount of life insurance in force on the life of the
Applicant for this Policy. In determining the amount of life insurance on the
life of the Insured or on the life of the
<PAGE>
Applicant for this Policy, the following amounts will not be included:
. Return of premium benefits;
. Accidental death benefits;
. Any additional insurance provided by the use of dividends; and
. Any death benefit above the guaranteed minimum death benefit under a
variable life policy.
Refund Benefit. Upon receipt of proof satisfactory to the Company that all or
any part of the life insurance on the life of the Insured under this Policy is
then in excess of the maximum limit, or was in excess at the death of the
Insured, the Company will pay a Refund Benefit. Upon payment of the Refund
Benefit, all liability of the Company with respect to the excess insurance will
terminate.
The Refund Benefit will consist of:
. Premiums paid on that portion of life insurance under the Policy in excess
of the maximum limit; plus
. Interest from the due date of each premium at the rate of 4% per year
compounded yearly; plus
. Any Costs of Insurance charged against the Cash Value of the policy which
are attributable to the excess insurance; and less
. Any partial surrenders or partial withdrawals attributable to the excess
insurance; and less
. Any Policy Loan Balance charged against the Policy which is attributable to
the excess insurance.
Any Refund Benefit payable while the Insured is living will be paid to the Owner
of the Policy. Any Refund Benefit payable upon the death of the Insured will be
paid to the Beneficiary. No Refund Benefit will be payable if the Company has
made payment as a death claim of any excess insurance without having received
proof that the insurance was in excess of the maximum limit.
<PAGE>
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 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-99
Rider: New York Limitation on Children's Insurance
The Children's Insurance Rider attached to this Policy is issued by the Company
subject to the provisions of this Rider.
Limitation on Amount of Insurance. The total amount of life insurance on the
life of each Insured Child under the Children's Insurance Rider, and under any
other policy or policies in force in this or any other company on the Date of
issue of the Children's Insurance Rider, is subject to a maximum limit. This
limit is required by Section 147 of the Insurance Law of the State of New York.
This limit applies to each Insured Child until the age of that Insured Child is
fourteen years and 6 months.
To the extent that life insurance on the life of an Insured Child under the
Children's Insurance Rider is in excess of the maximum limit, it will not be
valid, nor payable as a claim by death. Insurance which has a more recent date
of issue than other insurance will be the first to be deemed the excess
insurance. The liability of the Company will be limited to the Refund Benefit
described below.
Maximum Limit. The maximum limit for any Insured Child while the Insured Child
is under the age of four years and 6 months is the greater of:
. $5,000; or
. 25% of the amount of life insurance in force on the life of the Applicant
for the Children's Insurance Rider on the Date of Issue of the Children's
Insurance Rider.
The maximum limit for any Insured Child while the Insured Child is age four
years and 6 months or more and under the age of fourteen years and 6 months is
the greater of:
. $10,000; or
. 50% of the amount of life insurance in force on the life of the Applicant
for the Children's Insurance Rider on the Date of Issue of the Children's
Insurance Rider.
<PAGE>
Any life insurance on the life of an Insured Child which is not in excess of the
maximum limit when issued will not be deemed to be in excess because of any
later reduction in the amount of life insurance in force on the life of the
Applicant for the Children's Insurance Rider. In determining the amount of life
insurance on the life of an Insured Child or on the life of the Applicant for
the Children's Insurance Rider, the following amounts will not be included:
. Return of premium benefits;
. Accidental death benefits;
. Any additional insurance provided by the use of dividends; and
. Any death benefit above the guaranteed minimum death benefit provided under
a variable life policy.
Refund Benefit. Upon receipt of proof satisfactory to the Company that all or
any part of the life insurance on the life of an Insured Child under the
Children's Insurance Rider is then in excess of the maximum limit, or was in
excess at the death of the Insured Child, the Company will pay a Refund Benefit.
Upon payment of the Refund Benefit, all liability of the Company with respect to
the excess insurance will terminate.
The Refund Benefit will consist of:
. Premiums paid on that portion of life insurance under the Children's
Insurance Rider in excess of the maximum limit; plus
. Interest from the due date of each premium at the rate of 4% per year
compounded yearly.
The amount of the Refund Benefit will not be less than $3.30 per $1,000 of
excess insurance multiplied by the number of years and any fraction of a year
that premiums were paid while the child was an Insured Child.
Any Refund Benefit payable with respect to excess insurance on the life of an
Insured Child who is still living will be paid to the Owner of the Children's
Insurance Rider. Any Refund Benefit payable upon the death of an Insured child
will be paid to the Beneficiary of the Children's Insurance Rider. No Refund
Benefit will be payable if the Company has made payment as a death claim of any
excess insurance without having receive proof that the insurance was in excess
of the maximum limit
<PAGE>
Contract. This Rider is made a part of the Policy to which it attached if the
Rider is listed in the Policy Schedule. The limitation of liability under this
Rider will also apply to any life insurance in force under the Paid-up Benefit
provision of the Children's Insurance Rider. 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-286-88
Endorsement
As of the Endorsement Date the following changes are made:
"The Fixed Account. The Fixed Account is a segmented fund within the general
account of the Company.
If you elect the Fixed Account, the first date on which money is applied to the
Fixed Account for the Policy is the latest of:
. 45 days after Part 1 of the Application is signed;
. 10 days after the Company mails the separate Notice of Withdrawal Right;
. The date the first premium is received by the Company; and
. The effective date of the election 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.
Each future net premium allocated to the Fixed Account will be applied as of its
due date. 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. 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 5%. The effective interest rate used
on your Policy will be the weighted average of all such rates for your Policy.
Each year, on the policy anniversary, the Company will determine a portion, if
any, of the Policy's share of the Fixed Account which will be reinvested at the
rate effective on that date.
Interest will be credited to the Fixed Account on a dally basis.
Restriction of New Amounts Applied to the Fixed Account. The Company reserves
the right to restrict new amounts applied to the
<PAGE>
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 5%.
Transfers Out of the Fixed Account. You can transfer a limited portion of the
Policy's share of the Fixed Account to the sub-accounts once within 30 days
before each policy anniversary. The transfer will be limited to the greater of:
15% of the Policy's share of the Fixed Account; and the amount of the Policy's
share of the Fixed Account transferred to the sub-accounts the prior year.
Endorsement Date:
Election of the Fixed Account. You can elect to have future net premiums and
future net Unscheduled Payments applied to the Fixed Account. (See Section 1 for
net annual premiums.) You can change the election 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 to be applied to the Fixed Account must be a whole percent of the net
premium and net Unscheduled Payment not less than 10."
is added to the Policy.
Modification of the Contract Section
"Postponement of Surrenders, Transfers and Loans From The Fixed Account. The
Company can postpone the payment of the portion of the Policy's Net Cash Value
which is in the Fixed Account for not more than six months after surrender. If
payment is postponed for more than 30 days, in will be credited with interest
from the date of surrender. The rate of interest will be set each year by the
Company; but the rate will not be less than 3 1/2% per year.
The Company can postpone transfers from the Fixed Account for not more than six
months from the date of the request. The effective date of the transfer is the
date on which values are transferred from the Fixed Account.
The Company can postpone the making of any Policy Loan from the Fixed Account
for not more than six months from the day you apply, except Loans to pay
premiums on policies issued by the Company."
is added to the Contract Section.
Modification of the Premiums Section
<PAGE>
"The amount will be deducted in the same proportion as the Cash Value of the
Policy is in the sub-accounts and the Fixed Account."
is substituted for
"The amount will be deducted in the same proportion as the Policy is invested in
the sub-accounts."
in the Special Premium Option provision.
Modification of the Unscheduled Payments Section
"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."
is added.
Modification of the Variable Account Section
"Each future net premium allocated to the Account will be invested as of
its due date. Each net Unscheduled Payment allocated to the Account will be
invested as of the date it is received by the Company at its Administrative
Office."
is substituted for the third paragraph of the Sub-Accounts provision.
"The Cash Value of the Policy at any time cannot be allocated among more
than 10 sub-accounts, except with the consent of the Company; and the Fixed
Account will be counted in the limit of 10.
The values and benefits of a policy depend on: the investment performance
of the portfolios in which the elected sub-accounts are invested; and the
interest credited to the Policy's share of the Fixed Account. The Company
does not guarantee the investment performance of the portfolios of the sub-
accounts. You bear the investment risk for amounts invested in the sub-
accounts for your Policy."
is substituted for the fifth and sixth paragraphs of the Sub-Accounts provision.
"After the Right to Return the Policy period you can transfer all or a
portion of the Policy's existing share in a sub-account to another sub-
account or to the Fixed Account. (See the Restriction of New Amounts
Applied to the
<PAGE>
Fixed Account provision.)"
is substituted for the first sentence of the Transfer Option provision.
Modification of the Nonpayment of Premiums Section
"If the Policy is lapsed to Fixed Paid-Up Insurance or Fixed Extended Term
Insurance, it will not be affected by: the investment performance of the
Account; and the interest rates used for the Fixed Account."
is substituted for the last sentence in the Lapse of Policy provision.
"Lapse Options. If the Policy lapses because a premium is not paid, any Net
Cash Value of the Policy less the amount of each partial surrender and
partial withdrawal made during the grace period of the premium in default
will be: transferred from the Fixed Account and the Account to the general
account of the Company and used to continue the Policy in force either as
Fixed Paid-Up Insurance or Fixed Extended Term Insurance as stated below;
or left in the Fixed Account and the Account and used to continue the
Policy in force as Variable Paid-Up Insurance as stated below. Any Riders
will lapse unless otherwise stated in the Rider. Any Policy Loan Balance
will terminate when the Net Cash Value is used for this purpose."
is substituted for the Lapse Options provision.
"Variable Paid-Up Insurance has Cash Values and Loan Values. The Cash Value
and Loan Value can increase or decrease on a daily basis, depending on: the
investment performance of the elected sub-accounts; and the interest
credited to the Policy's share of the Fixed Account. (See Actual Investment
Return, Section 10.)
The Cash Value of the Variable Paid-Up Insurance is equal to: the Policy's
share of the elected sub-accounts; plus the Policy's share of the Fixed
Account; plus the amount of any assets transferred to the general account
of the Company because of Policy Loans. (See Section 12.) The amount of the
Cash Value depends on: investment performance of the elected sub-accounts;
interest credited to the Policy's share of the Fixed Account; cost of
insurance charges; transfers among sub-accounts and the Fixed Account; and
Policy Loans.
The cost of insurance is deducted from the Cash Value:
<PAGE>
. On the last day of each policy month; and
. On the date the Policy is surrendered if it is other than the last
day of the policy month.
The cost of insurance will be deducted in the same proportion as the Cash
Value of the Policy is in the sub-accounts and the Fixed Account."
is substituted for the fourth and fifth paragraphs of the Variable Paid-Up
Insurance Option provision.
Modification of the Cash Value of the Policy Section
"Cash Value. 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 is signed; and 10 days after the Company
mails the separate Notice of Withdrawal Right. Thereafter, the Cash Value
of the Policy if all premiums due have been paid is equal to: the Policy's
share of the elected sub-accounts; plus the Policy's share of the Fixed
Account; plus the amount of any assets transferred to the general account
of the Company because of Policy Loans. (See Section 12.) The amount of the
Cash Value depends on: the frequency and amount of net premiums; the
frequency and amount of net Unscheduled Payments; investment performance of
the elected sub-accounts; interest credited to the Policy's share of the
Fixed Account; Monthly Deductions; cost of insurance charges; partial
surrenders; partial withdrawals; the use of the Special Premium Option;
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 elected sub-accounts; and the interest
credited to the Policy's share of the Fixed Account. (See Actual Investment
Return below.)"
is substituted for the first and second paragraphs of the Cash Value provision.
"The monthly charges will be deducted in the same proportion as the Cash
Value of Policy is in the sub-accounts and the Fixed Account."
is substituted for
"The monthly charges will be deducted in the same proportion as the Policy
is invested in the sub-accounts."
in the Monthly charges provision.
<PAGE>
"Unless you request otherwise, a partial withdrawal will reduce: first, the
Policy's share of the sub-accounts proportionately; and second, the
Policy's share of the Fixed Account."
is substituted for
"A partial withdrawal will reduce the Policy's share of the sub-accounts
proportionately, unless you request otherwise."
in the Partial Withdrawal and Partial Surrender provision.
"Unless you request otherwise, a partial surrender will reduce: first, the
Policy's share of the sub-accounts proportionately; and second, the
Policy's share of the Fixed Account."
is added to the Partial Withdrawal and Partial Surrender provision.
"Base Investment Return. The Policy has a Base Investment Return for each
Valuation Period for its share of each elected sub-account and of the Fixed
Account. The Policy's Base Investment Return is the amount which would be
earned by the Policy's share if the sub-account had investment performance
and the Fixed Account had interest credited at a rate equivalent to an
annual effective rate of 5%. The Base Investment Return is used in the
determination of: the Tabular Value; and the Variable Death Benefit under
the Variable Paid-Up Insurance Option."
is substituted for the Base Investment Return provision.
"The Policy has an Actual Investment Return for each Valuation Period for
its share of each elected sub-account and of the Fixed Account.
The Actual Investment Return for the Fixed Account for each Valuation
Period is equal to (a) minus (b); where:
. (a) is equal to the Policy's share of the Fixed Account as of the end of
the Valuation Period;
PLUS
the monthly charges deducted in the Valuation Period;
MINUS
any net premium and net Unscheduled Payment credited during the Valuation
Period;
<PAGE>
PLUS
the total of the partial surrenders and partial withdrawals 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 share of the Fixed Account for the most
recent Valuation Period."
is added to the Actual Investment Return provision.
Modification of the Policy Loans Section
"Unless you request otherwise, Policy Loans will reduce first, the Policy's
share of the sub-accounts proportionately and second, the Policy's share of
the Fixed Account, except as noted below in the interest on Loans; Policy
Loan Balance provision."
is substituted for
"Policy Loans will reduce the Policy's share of the sub-accounts
proportionately, unless you request otherwise."
in the Policy Loans provision.
"Unless the Policy is lapsed for Fixed Paid-Up Insurance or Fixed Extended
Term Insurance, the Loan Value of the Policy is the amount which with loan
interest will equal: 90% of the Cash Value of the Policy projected to the
next policy anniversary or, if earlier, to the next premium due date; less
the Surrender Charge on the next loan interest due date or, if greater, on
the date the loan is made."
is substituted for the first sentence of the Loan Value provision.
"Loan interest not paid when due will be added to the Loan and will bear
interest; when loan interest is added to the Loan, the Policy's share of
the sub-accounts and of the Fixed Account will be reduced proportionately."
is substituted for the last sentence of the Interest on Loans; Policy Loan
Balance provision.
"Loan repayments will be allocated: first, to repay the Loans made against
the Fixed Account; and second, unless you
<PAGE>
request otherwise, to repay the Loans made against the sub-accounts in the
same proportion as the Policy is invested in the sub-accounts."
is substituted for
"Loan repayments will be allocated in the same proportion as the Policy is
invested in the sub-accounts, unless you request otherwise."
in the Repayment of Loans provision.
New England Variable Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
John A Fibiger Kernan F. King
/s/ /s/
President Secretary
<PAGE>
NEV-303-88
Endorsement
As of the Date of Issue of this Policy, the following provision is
substituted for the Not Contestable After Two Years provision in the Contract
section:
"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 Unscheduled Payments, for two years from the Date of Issue; and
. With respect to any Death Benefit which results from an Unscheduled
Payment for which proof is required that the Insured is insurable, for
two years from the date that Unscheduled Payment is received."
New England Variable Life insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
John A. Fibiger Kernan F. King
/s/ /s/
President Secretary
<PAGE>
Exhibit 1.A5(b)
NEV-40
Rider: Temporary Term Insurance
The Company agrees that the Policy and its Riders will be in force as temporary
term insurance from the Date of Issue to the Policy Date. During that period the
amounts of insurance under the Policy and its Riders will be the same as the
amounts on the Policy Date.
The premium for this Rider is due on the Date of Issue in the amount shown in
the Policy Schedule.
During the temporary term insurance period the Policy will have no cash or loan
value.
This Rider is made a part of the Policy to which it is attached if the Rider is
listed in the Policy Schedule.
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. (10)
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>
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>
Exhibit 3(i)
April 26, 1994
New England Variable Life Separate Account
New England Variable Life Insurance Company
501 Boylston Street
Boston, MA 02117
Gentlemen:
In my capacity as General Counsel of New England Variable Life Insurance Company
(the "Company"), I am rendering the following opinion in connection with the
filing of an amendment to the registration statement on Form S-6, filed by New
England Variable Life Separate Account (the "Account") and the Company with the
Securities and Exchange Commission under the Securities Act of 1933, with
respect to individual Variable Ordinary Life Insurance Policies (the
"Registration Statement").
It is my professional opinion that:
1. The Account is a separate investment account of the Company and is
duly created and validly existing pursuant to the laws of the State of
Delaware.
2. The Variable Ordinary Life Insurance Policies, when issued in
accordance with the prospectus contained in the Registration Statement
and in compliance with applicable local law, are and will be legal and
binding obligations of the Company in accordance with their terms; and
3. Assets attributable to reserves and other contract liabilities and
held in the Account will not be chargeable with liabilities arising
out of any other business the Company may conduct.
In forming this opinion, I have made such examination of law and examined such
records and other documents as in my judgment are necessary and appropriate.
<PAGE>
New England Variable Life Separate Account
New England Variable Life Insurance Company
April 26, 1994
Page 2
I hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement (File No. 33-19540) and to the use of my name under the
caption "Legal Matters" in the prospectus contained in the Registration
Statement.
Very truly yours,
H. James Wilson
General Counsel
<PAGE>
Exhibit 3(ii)
April 28, 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. 15 to the registration
statement on Form S-6 (File No. 33-19540) 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 males aged 35 or 45 in the
underwriting class illustrated than to prospective purchasers of Policies
for males at other ages or for females. Insureds in other underwriting
classes may have higher cost of insurance charges and premiums.
2. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the Appendix,
is consistent with provisions of the Policies.
3. The illustration of net scheduled premiums and net unscheduled payments
shown under the heading "Charges and Expenses-Deductions from Premiums and
Unscheduled Payments" in the Prospectus contains the net scheduled premium
and net unscheduled payment amounts allocated to the Variable Account for
scheduled premiums and unscheduled payments of $2,000 each under a Policy
with no riders and covering an insured who is not in a substandard risk
classification.
4. The information contained in the example of how the maximum loanable amount
is determined under the heading "Other Policy Features-Loan Provision" in
the Prospectus is consistent with the provisions of the Policies.
<PAGE>
Page 2
April 28, 1998
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
<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. 15 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. 33-19540). In giving this consent, we do not admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933.
SUTHERLAND, ASBILL & BRENNAN LLP
Washington, D.C.
April 28, 1998
<PAGE>
EXHIBIT 8
Notice of Withdrawal Right
T CASE MAY 5, 1988
1 RICH RD RE: POL#: 00Z300149T
OLD HOME INSURED: T CASE
AL 02222 PLAN: VOLLVL-PRF
PREM: $34991.87
MODE: ANNUALLY
ANNUAL PREM: $34991.87
We are sending you this notice in order to comply with the laws administered by
the United States Securities and Exchange Commission ("SEC"). Please read it
carefully and retain it with your important records.
You have recently purchased a variable life insurance policy from New England
Variable Life Insurance Company ("NEVLICO"). The benefits of the policy depend
on the investment experience of New England Variable Life Separate Account
("ACCOUNT").
You have the right to examine and cancel this policy. You may return the policy
for cancellation at any time up until the latest of:
1. 10 days after you have received the policy;
2. 45 days from the date you completed Part 1 of the application; and
3. 10 days from the date of the postmark of this notice.
If you exercise this right, you are entitled to a full refund of all payments
made. In determining whether to cancel your policy, you should consider, among
other things, the projected cost of your policy and your ability to make the
scheduled premium payments as stated in your policy. Please consult and review
the prospectus you have received which describes the deductions from premiums
before amounts are allocated to the selected accounts and other charges assessed
in connection with the policy, including:
From each scheduled premium (net of any premiums for rider benefits and
substandard risk) a deduction of the portion of the annual administrative
charge allocable to the premium, equal to $55 per year if premiums are paid
annually, or a maximum of $58.41 if premiums are paid more frequently;
From each scheduled premium (after deduction of the annual administrative
charge and any premiums for rider benefits and substandard risk), a charge
of 2% for premium tax and, during the first 15 policy years, a charge of 6%
of sales expenses.
From each unscheduled payment, a state premium tax charge of 2%, a sales
charge of 6%;
<PAGE>
Upon surrender or lapse of the policy during the first 15 policy years, a
surrender charge consisting of a deferred administrative charge no greater
than $5.00 per $1,000 of face amount and a deferred sales charge no greater
than 24% of the scheduled premium for the first policy year plus 4% of the
scheduled premiums for policy year two through ten;
On the first day of each policy month, deductions from the cash value for
the cost of insurance, an administrative charge of $0.015 per $1,000 of
face amount and, during the first policy year, an extra administrative
charge of $0.035 per $1,000 of face amount;
Upon nonpayment of a scheduled premium pursuant to the Special Premium
Option, a deduction from cash value equal to 92% of any applicable charges
for riders or substandard risk.
If you decide to cancel your policy, complete the enclosed form and return your
policy in accordance with the enclosed instructions. The post mark of the
returned policy must be on or before the latest date permitted for cancellation
described above.
Kernan F. King
Secretary
<PAGE>
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No. 15 to the
Registration Statement No. 33-19540 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 and
Supplement (which expressed unqualified opinions and, with respect to the
Company, includes an explanatory paragraph referring to the change in the
basis of accounting and the change in corporate organization), which is
part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus and Supplement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 28, 1998
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the inclusion in Post-Effective Amendment No. 15 to the
Registration Statement on Form S-6 (File No. 33-19540) of our reports, which
include adverse opinions as to generally accepted accounting principles and
unqualified opinions as to statutory accounting practices prescribed or
permitted by the Insurance Department of the State of Delaware, dated March 8,
1996, except as to the information in the second paragraph under "Basis of
Presentation and Principles of Consolidation" of Note 1, for which the date is
February 18, 1997, on our audits of the statutory financial statements of New
England Variable Life Insurance Company and New England Pension and Annuity
Company, and our report dated February 6, 1996, on our audit of New England
Variable Life Separate Account of New England Variable Life Insurance Company.
We also consent to the inclusion in this registration statement of our report,
which includes an adverse opinion as to generally accepted accounting principles
and an unqualified opinion as to conformity with The Insurance Act 1978, dated
April 23, 1996, on our audit of the statutory financial statements of Exeter
Reassurance Company, Ltd., and our report dated February 9, 1996, on our audit
of New England Securities Corporation, and our report dated February 29, 1996,
on our audit of TNE Advisors, Inc., and our report dated March 14, 1996, on our
audit of Newbury Insurance Company, Limited. We also consent to the reference
to our firm under the caption "Experts" in this Post-Effective Amendment.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 28, 1998
