<PAGE>
As filed with Securities and Exchange Commission on
April 27, 1999
Registration No. 33-65263
____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 5
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
_____________________________
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
MARIE C. SWIFT, ESQ.
Counsel
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH, ESQ.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
___________________________
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 30, 1999 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 Modified Single
Premium Variable Life Insurance Policies.
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
Registration Statement on Form S-6
Cross-Reference Sheet
<TABLE>
<CAPTION>
Form N-8B-2
Item No. Caption in Prospectus
- ----------- ---------------------
<S> <C>
1 Cover Page
2 Cover Page
3 Inapplicable
4 NELICO's Distribution Agreement
5 NELICO
6 The Variable Account
9 Inapplicable
10(a) Other Policy Features
10(b) Cash Value and Cash Value Benefits
10(c), (d), (e) Cash Value and Cash Value Benefits; Right to Return the
Policy; Lapse and Reinstatement
10(f), (g), (h) Voting Rights; Rights Reserved by NELICO
10(i) Limits to NELICO's Right to Challenge the Policy; Payment of
Proceeds; Investments of the Variable Account
11 The Variable Account
12 Investments of the Variable Account; NELICO's Distribution
Agreement
13 Charges and Expenses; NELICO's Distribution Agreement; Charge
for NELICO's Income Taxes; Appendix A
14 Premium Payments
15 Premium Payments
16 Investments of the Variable Account
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 The Variable Account; Appendix B
19 Reports; NELICO's Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Privilege
22 Inapplicable
23 NELICO's Distribution Agreement
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 NELICO's Distribution Agreement
27 NELICO
28 Management
29 NELICO
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form N-8B-2
Item No. Caption in Prospectus
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<S> <C>
34 NELICO's Distribution Agreement
35 NELICO
36 Inapplicable
37 Inapplicable
38 NELICO's Distribution Agreement
39 NELICO's Distribution Agreement
40 NELICO's Distribution Agreement
41(a) NELICO's Distribution Agreement
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Premium Payments
44(b) Charges and Expenses
44(c) Premium Payments; Deductions from Initial Premium; Deductions
from Additional Payments
45 Inapplicable
46 Investments of the Variable Account; Captions referenced under
Items 10(c), (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Lapse and Reinstatement; Charges and
Expenses; Policy Owner and Beneficiary; Premium Payments;
NELICO's Distribution Agreement
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
</TABLE>
<PAGE>
AMERICAN GATEWAY SERIES
Modified Single Premium Variable Life Insurance Policies
Issued by
New England Variable Life Separate Account
Home Office:
New England Life Insurance
Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus offers individual modified single premium variable life
insurance policies (the "Policies") issued by New England Life Insurance
Company ("NELICO").
You may purchase a Single Insured Policy or a Last Survivor Policy. A Single
Insured Policy pays a death benefit on the death of a single named insured. A
Last Survivor Policy pays a death benefit on the last of two named insureds to
die. The death benefit is the greater of the variable death benefit and the
minimum guaranteed death benefit. The variable death benefit amount is the
Policy's cash value divided by the applicable net single premium. The initial
minimum guaranteed death benefit is based on premium payments made.
You may allocate premiums to one or more investment Sub-Accounts of NELICO's
Variable Life Separate Account (the "Variable Account"). Each Sub-Account of
the Variable Account invests in shares of an Eligible Fund of the New England
Zenith Fund. The Eligible Funds are:
Loomis Sayles Small Cap Series Westpeak Stock Index Series
Morgan Stanley International Magnum Loomis Sayles Balanced Series
Equity Series Back Bay Advisors Managed Series
Alger Equity Growth Series Salomon Brothers Strategic Bond
Opportunities Series
Goldman Sachs Midcap Value Series Back Bay Advisors Bond Income Series
Davis Venture Value Series Salomon Brothers U.S. Government
Series
MFS Investors Series*
Back Bay Advisors Money Market
MFS Research Managers Series* Series
Westpeak Growth and Income Series
- --------
* Availability is subject to any necessary state insurance department
approvals.
You may make partial surrenders and Policy loans from time to time, subject
to certain restrictions. In almost all cases, the Policies will be modified
endowment contracts for federal income tax purposes.
A LOAN, DISTRIBUTION OR OTHER AMOUNT RECEIVED FROM A MODIFIED ENDOWMENT
CONTRACT DURING THE LIFE OF AN INSURED WILL BE TAXED TO THE EXTENT OF ANY
ACCUMULATED INCOME IN THE POLICY. ANY AMOUNTS THAT ARE TAXABLE WITHDRAWALS
WILL BE SUBJECT TO A 10% ADDITIONAL TAX, WITH CERTAIN EXCEPTIONS, INCLUDING AN
EXCEPTION FOR DISTRIBUTIONS MADE ON OR AFTER THE DATE WHEN YOU ATTAIN AGE 59
1/2.
The cash value of your Policy will vary daily with the investment experience
of the Eligible Funds.
You may cancel the Policy during the "right to return the Policy" period.
Because of this right, we will invest your initial premium in the Money Market
Sub-Account until 15 days (in most states) after we mail the confirmation for
the initial premium. Thereafter, the cash value will be invested in the Sub-
Accounts according to your instructions.
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
POLICIES AND HAS NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE ELIGIBLE FUNDS'
PROSPECTUS IS ATTACHED. PLEASE READ IT AND KEEP IT FOR REFERENCE.
THE POLICIES HAVE RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE POLICIES
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
FINANCIAL INSTITUTION, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY.
APRIL 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY................................................................... A-4
INTRODUCTION TO THE POLICIES............................................... A-5
The Policies.............................................................. A-5
Comparison to Other Policies and Other Investments........................ A-5
Diagram of Policy......................................................... A-7
Availability of the Policy................................................ A-9
Policy Charges............................................................ A-9
Right to Return the Policy................................................ A-11
Receipt of Communications and Payments at NELICO's Home Office............ A-11
NELICO..................................................................... A-12
PREMIUMS................................................................... A-12
Applying for a Policy..................................................... A-12
Premium Payments.......................................................... A-12
Lapse and Reinstatement................................................... A-13
ALLOCATION OF PREMIUM PAYMENTS AND TRANSFER OF CASH VALUE.................. A-14
Allocation of Premium Payments............................................ A-14
Amount Provided for Investment under the Policy........................... A-14
Transfer Option........................................................... A-15
Dollar Cost Averaging..................................................... A-15
Asset Rebalancing......................................................... A-15
Transfer and Reallocation Requests........................................ A-16
DEATH BENEFIT.............................................................. A-16
How the Death Benefit is Determined....................................... A-16
Minimum Guaranteed Death Benefit.......................................... A-17
Adjustments to the Death Proceeds Payable................................. A-17
Payment of Death Benefit Proceeds......................................... A-17
CASH VALUE AND CASH VALUE BENEFITS......................................... A-17
Cash Value................................................................ A-17
Net Investment Experience................................................. A-18
Loan Privilege............................................................ A-18
Effect of Policy Loan..................................................... A-18
Surrender................................................................. A-19
Partial Surrenders........................................................ A-20
Effect of Partial Surrender on Cash Value and Death Benefit............... A-20
Acceleration of Benefits Rider--Terminal Illness.......................... A-20
Acceleration of Benefits Rider--Long-Term Care............................ A-21
Payment of Proceeds....................................................... A-21
Payment Options........................................................... A-21
CHARGES AND EXPENSES....................................................... A-22
Deductions from Payments.................................................. A-22
Monthly Deduction from Cash Value......................................... A-22
Sales Charges............................................................. A-23
State Premium Tax Charge.................................................. A-23
Charges Under Policies Issued to New York Residents....................... A-23
Cost of Insurance Charge.................................................. A-24
Administrative Charge..................................................... A-25
Monthly Maintenance Charge................................................ A-25
Surrender Charge.......................................................... A-26
Mortality and Expense Risk Charge......................................... A-26
Daily Charges Deducted from the Variable Account Assets................... A-26
Charges Deducted from Eligible Fund Assets................................ A-26
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
Charges for Additional Services.......................................... A-26
Group or Sponsored Arrangements.......................................... A-27
THE VARIABLE ACCOUNT...................................................... A-27
Investments of the Variable Account...................................... A-28
Investment Management.................................................... A-30
OTHER POLICY FEATURES..................................................... A-31
Policy Owner and Beneficiary............................................. A-31
Exchange of Policy....................................................... A-31
NELICO'S DISTRIBUTION AGREEMENT........................................... A-31
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY.......................... A-32
Misstatement of Age or Sex............................................... A-32
Suicide.................................................................. A-32
TAX CONSIDERATIONS........................................................ A-33
Introduction............................................................. A-33
Tax Status of the Policy................................................. A-33
Tax Treatment of Policy Benefits......................................... A-33
In General............................................................... A-33
Modified Endowment Contracts ............................................ A-33
Investment in the Policy................................................. A-34
Policy Loans............................................................. A-34
Multiple Policies........................................................ A-34
Accelerated Benefits Rider............................................... A-34
Other Policy Owner Tax Matters........................................... A-34
Possible Tax Law Changes................................................. A-35
NELICO's Income Taxes.................................................... A-35
MANAGEMENT................................................................ A-36
VOTING RIGHTS............................................................. A-38
RIGHTS RESERVED BY NELICO................................................. A-39
TOLL-FREE NUMBERS......................................................... A-39
REPORTS................................................................... A-40
ADVERTISING PRACTICES..................................................... A-40
LEGAL MATTERS............................................................. A-40
REGISTRATION STATEMENT.................................................... A-41
EXPERTS................................................................... A-41
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES
AND ACCUMULATED PREMIUMS................................................. A-42
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................. A-54
APPENDIX C: EXAMPLE OF EFFECT OF NEGATIVE INVESTMENT PERFORMANCE ON
CALCULATION OF SURRENDER CHARGES; EXAMPLE OF ADJUSTMENT TO PREMIUM TAX
CHARGE RESULTING FROM ADDITIONAL PAYMENTS................................ A-76
APPENDIX D: EXAMPLES OF EFFECT OF SURRENDERS AND PARTIAL SURRENDERS ON
OPERATION OF POLICY...................................................... A-77
APPENDIX E: LONG-TERM MARKET TRENDS....................................... A-79
APPENDIX F: DOLLAR COST AVERAGING......................................... A-80
FINANCIAL STATEMENTS...................................................... F-1
</TABLE>
A-3
<PAGE>
GLOSSARY
We have tried to make this prospectus as understandable for you as possible.
However, in explaining how the Policy works, we have had to use certain terms
that have special meanings. These terms are defined below.
AGE. For purposes of this prospectus, the age of an insured refers to the
insured's age at his or her last birthday. Joint insureds are assigned the
same "joint equal age," which reflects the anticipated mortality of both
insureds (except in Texas and New Jersey where the age of the younger insured
is used).
CASH VALUE. A Policy's cash value is the sum of the amount of its cash value
held in the Variable Account and, if there is an outstanding policy loan, the
amount of its cash value held in NELICO's general account as a result of the
loan.
FACE AMOUNT. The amount of the initial premium.
INVESTMENT START DATE. This is the latest of the date NELICO receives the
initial premium for the Policy, the date when the last Part II of the Policy
application or the Supplement to the Part I Application is signed, if any is
required, and the Policy Date. It is the date when an amount is first provided
for investment under the Policy.
ISSUE AGE. The age of an insured as of the last birthday on or before the
Policy Date. In the case of a Last Survivor Policy, "issue age" refers to the
joint equal age assigned to both insureds (insureds' ages must be no more than
9 years apart). For a Last Survivor Policy issued in Texas and New Jersey, the
"issue age" is the age of the younger insured (insureds' ages must be no more
than 5 years apart).
NET CASH VALUE. On any day, the Policy's net cash value is equal to the cash
value for that day, reduced by any outstanding Policy loan balance and also
reduced by any Surrender Charge that would apply on surrender.
POLICY DATE. If you make the initial premium payment with the application or
during the underwriting process, the Policy Date is generally the later of the
date when the last Part II of the application or the Supplement to the Part I
Application is signed, if any is required, and receipt of the premium payment.
If you do not submit the initial premium with the application or during the
underwriting process, the Policy Date will generally be the date NELICO
receives the initial premium payment for the Policy. The Policy Date is the
date used to determine all future cyclical periods under the Policy, e.g.,
Policy Months and Policy Years.
POLICY LOAN BALANCE. Policy loans outstanding plus interest accrued to date.
PREFERRED SURRENDER AMOUNT. This amount may be surrendered from the Policy's
cash value during the Surrender Charge Period free of any Surrender Charge.
This amount is equal to the greater of (a) cash value in excess of initial
premium paid (minus any previous partial surrenders attributable to the
initial premium) and (b) 10% of the initial premium paid (minus previous
partial surrenders in that Policy Year).
A-4
<PAGE>
INTRODUCTION TO THE POLICIES
THE POLICIES
The Policies are designed to provide lifetime insurance coverage. They are
not offered primarily as an investment.
Here is a summary of your Policy's basic features. You should read the
entire prospectus for more complete information.
-- PREMIUM PAYMENTS. You must pay an initial premium of at least $10,000
unless we consent otherwise. After the first Policy Year, you may make
additional payments, subject to certain restrictions and limitations.
The tax consequences associated with continuing a Policy beyond age 100
of the insured(s) are unclear. A tax advisor should be consulted on this
issue.
-- INVESTMENT OF PREMIUMS. After an initial period in the Money Market Sub-
Account, your initial premium is invested according to your instructions
in one or more of the Sub-Accounts. Any net additional payments will be
invested in the Sub-Accounts according to your instructions.
-- AVAILABLE PORTFOLIOS. The mutual fund portfolios (Eligible Funds)
available include several common stock funds, including a fund which
invests primarily in foreign securities, three bond funds, one
equity/fixed income fund, two balanced funds, and a money market fund.
(See "Investments of the Variable Account.")
-- LIMITS ON ALLOCATIONS. You can allocate your Policy's cash value to a
maximum of 10 Sub-Accounts.
-- TRANSFERS. Fifteen days (longer in certain states) after we mail the
confirmation for your initial premium payment, you may transfer portions
of the Policy's cash value among the Sub-Accounts. Currently, you are
permitted twelve transfers each Policy Year without our consent. We will
always allow at least four transfers each Policy Year without our
consent (except for Policies issued in New York, where the minimum
number of transfers permitted each Policy Year will never be less than
twelve). (See "Transfer Option.")
-- FLUCTUATING CASH VALUE. The cash value of your Policy will vary daily
based on the net investment experience of your Policy's Sub-Accounts.
THE CASH VALUE IS NOT GUARANTEED. YOU BEAR THE INVESTMENT RISK.
-- DEATH BENEFIT. The death benefit is the greater of the variable death
benefit and the minimum guaranteed death benefit.
-- POLICY LOANS AND PARTIAL SURRENDERS. A loan privilege is available under
your Policy. We also allow partial surrenders. (See "Loan Privilege" and
"Partial Surrenders.")
-- FEDERAL INCOME TAX CONSEQUENCES. Death benefits paid under a life
insurance contract generally are not subject to Federal income tax.
Under current law, undistributed increases in cash value of a life
insurance contract generally are not taxable. In almost all situations,
your Policy will be treated as a modified endowment contract. Pre-death
distributions (including partial surrenders and loans) from a modified
endowment contract are included in income on an income first basis, and
a 10% penalty tax may be imposed on income distributed before you reach
age 59 1/2.
COMPARISON TO OTHER POLICIES AND OTHER INVESTMENTS
In many respects the Policies are similar to fixed-benefit life insurance.
Like fixed-benefit life insurance, the Policies offer a death benefit and
provide a cash value, loan privileges and surrender values.
The Policies are different from fixed-benefit life insurance in that the
death benefit will in most cases, and the cash value will always, vary to
reflect the investment experience of your selected Sub-Accounts.
A-5
<PAGE>
We designed the Policies 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 our assumption of an
actuarially calculated risk.
-- If the net cash value is not sufficient to pay a Monthly Deduction
because there is an excess Policy loan, the Policy will lapse with no
value unless you make a payment. If the Policy lapses when Policy loans
are outstanding, adverse tax consequences may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from your Policy's cash value
and any additional premiums. These charges include various insurance,
risk, administrative and state premium tax charges.
-- The Variable Account, not you, owns the mutual fund shares.
-- Federal income tax liability on any earnings on the mutual fund
investment is deferred until you receive a distribution from the Policy.
Transfers from one underlying fund portfolio to another do not incur tax
liability under current law.
-- Dividends and capital gains are automatically reinvested.
The chart on the following pages shows how the Policy operates.
A-6
<PAGE>
DIAGRAM OF POLICY
PREMIUM PAYMENTS
--Minimum initial premium required is $10,000.
--You may make additional payments after the first Policy
Year, within limits. See page A-12.
DEDUCTIONS FROM PREMIUMS BEFORE ALLOCATION
-- From initial premium: NONE
-- From additional payments:
--6.5% charge for sales load expense (reduced to 5.10% for
additional payments on Policies with initial premiums of
$2,000,000 or more).
--2.5% charge for state premium tax. See page A-22.
INVESTMENT OF PREMIUMS
-- You direct the allocation of initial premiums and any net additional
payments among Sub-Accounts. See pages A-14 to A-15 for rules and limits
on allocations.
-- The Sub-Accounts invest in corresponding portfolios of the New England
Zenith Fund (Eligible Funds). See page A-28. Eligible Funds are:
Loomis Sayles Small Cap Westpeak Growth and Income Series
Series Westpeak Stock Index Series
Morgan Stanley Loomis Sayles Balanced Series
International Magnum Back Bay Advisors Managed Series
Equity Series Salomon Brothers Strategic Bond
Alger Equity Growth Series Opportunities Series
Goldman Sachs Midcap Value Back Bay Advisors Bond Income Series
Series Salomon Brothers U.S. Government
Davis Venture Value Series Series
Back Bay Advisors Money Market
MFS Investors Series Series
MFS Research Managers
Series
A-7
<PAGE>
CASH VALUE
-- Cash value is equal to the initial premium and any net additional
payments, as adjusted each day the New York Stock Exchange is open to
reflect Sub-Account net investment experience, charges deducted and other
Policy transactions (such as transfers and partial surrenders). See page
A-17.
-- Cash value varies from day to day. There is no minimum guaranteed cash
value. The Policy may lapse if you have a Policy loan. See pages A-18 and
A-19.
-- You can transfer cash value among the Sub-Accounts. See pages A-15 to A-
16 for rules and limits. Policy loans reduce the amount available for
allocations and transfers.
-- Dollar cost averaging and asset rebalancing programs are available. See
pages A-15 and A-16.
-- Cash value is the starting point for calculating certain values under
your Policy, such as the net cash value and the death benefit.
DEDUCTIONS FROM CASH VALUE
-- Monthly Deduction from cash value for:
-- cost of insurance (currently calculated as a percentage of cash value
at an annual rate, depending on the issue age and risk class of the
insured, ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class
(0.70% to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class
(0.40% to 1.60% for substandard risk class)
-- Administrative charge, calculated as a percentage of cash value at an
annual rate of 0.35% (currently reducing to 0.10% after ten years).*
-- During first ten Policy Years, sales charge and state premium tax
charge, calculated as percentages of cash value at annual rates of
0.40% and 0.25%, respectively.*
-- Mortality and expense risk charge, calculated as a percentage of cash
value at an annual rate of 0.90%.
-- For Policies with cumulative premiums less than $50,000, a Monthly
Maintenance Charge of $2.50 per month.
--------
* For Policies with initial premiums of $2,000,000 or more, the 0.40%
sales charge and the 0.25% state premium tax charge will be waived, and
the Administrative Charge currently will be waived after the tenth
Policy Year.
See page A-22.
-- Investment advisory fees and fund operating expenses are deducted from
the assets of each Eligible Fund. See pages A-10 to A-11.
CASH VALUE BENEFITS DEATH BENEFITS
-- You may take loans for amounts -- Income tax free to Beneficiary.
up to 90% of net cash value at (See "Tax Considerations.")
a net interest rate charge of -- Available as lump sum or under
0.75%. Preferred loans are cur- a variety of payment options.
rently available (with a net -- Greater of variable death bene-
interest rate charge of 0%). fit or minimum guaranteed death
See pages A-18 to A-19 for benefit.
rules and limits. -- Variable death benefit
-- You may surrender your Policy equals the cash value di-
in full at any time for its net vided by the applicable net
cash value, less the Monthly single premium. See page A-
Deduction to the date of sur- 16.
render. A declining sales -- Minimum guaranteed death
charge of up to 8.0% of the benefit is the initial pre-
initial premium will apply to a mium plus additional pay-
full surrender made during the ments, less partial surren-
first nine Policy Years. Fed- ders, as long as there is
eral taxes and a tax penalty not an excess Policy loan.
also may apply. See page A-19. See page A-17. On each five-
-- You may make partial surren- year anniversary of the Pol-
ders. A pro rata portion of the icy Date up to age 75, the
Surrender Charge may apply on minimum guaranteed death
partial surrenders made during benefit will be reset as the
the first nine Policy Years. greater of the minimum guar-
Federal taxes and a tax penalty anteed death benefit before
also may apply. See page A-20 the recalculation, and the
for rules and limits. cash value on that date. See
-- Preferred surrender amounts page A-17.
(with no surrender charges ap-
plicable) are available. -- We will reduce the proceeds
-- Payment options are available. paid by any Policy loan bal-
See page A-21. ance.
A-8
<PAGE>
AVAILABILITY OF FHE POLICY
We issue the Policies on the lives of insureds from the ages of 20 to 80. In
the case of a Single Insured Policy, the proposed insured must meet our
underwriting and other requirements for issuance. In the case of a Last
Survivor Policy, both of the insureds must meet those requirements. An insured
may qualify for "simplified underwriting." (See "Applying for a Policy.")
Individuals, and entities who may want to use Policies with certain
retirement plans that qualify for tax benefited treatment under Section 401(a)
(but not Section 401(k)) of the Internal Revenue Code (the "Code") may
purchase the Policies.
POLICY CHARGES
-- DEDUCTIONS FROM INITIAL PREMIUM. We do not deduct any charges from the
initial premium before allocation to the Sub-Accounts, although a
monthly sales charge and state premium tax charge are deducted as part
of the Monthly Deduction during the first ten Policy Years, and a
Surrender Charge applies during the Surrender Charge Period (the first
nine Policy Years).
-- DEDUCTIONS FROM ADDITIONAL PAYMENTS. We will deduct the following
charges from each additional payment before allocation to the Sub-
Accounts you select:
-- 6.5% sales charge (reduced to 5.10% for Policies with Initial
Premiums of $2,000,000 or more).
-- 2.5% state premium tax charge.
-- MONTHLY DEDUCTION DEDUCTED FROM CASH VALUE. We deduct a charge from the
cash value on each Monthly Deduction Date after the date we issued your
Policy. This charge equals the total of the charges below, shown at
their current annual rates:
-- Cost of insurance charge,* ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class
(0.70% to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class
(0.40% to 1.60% for substandard risk class)
-- 0.35% Administrative Charge (currently reduced to 0.10% after the
first ten Policy Years)**
-- 0.40% sales charge (deducted during the first ten Policy Years
only)**
-- 0.25% state premium tax charge (deducted during the first ten Policy
Years only)**
-- 0.90% mortality and expense risk charge
-- For Policies with cumulative premiums less than $50,000, a $2.50
Monthly Maintenance Charge
- --------
* No cost of insurance charge is deducted on or after the Policy Anniversary
when the insured(s) is age 100.
** For Policies with initial premiums of $2,000,000 or more, we waive the
0.40% sales charge and 0.25% premium tax charge, and we currently waive the
Administrative Charge after the tenth Policy Year.
We calculate each charge, except the $2.50 Monthly Maintenance Charge, as a
percentage of cash value on the Monthly Deduction Date. We deduct each charge
pro rata from the cash value in the Sub-Accounts.
We may change the charges shown above. We guarantee that the current cost of
insurance charges will not exceed the maximum permitted under the 1980
Commissioners' Standard Ordinary Smoker/Nonsmoker Tables (or multiples of or
additives to, in the case of substandard classifications). We will adjust the
rate of the state premium tax charge downward proportionately if cash value
increases as a result of an additional payment. We also will monitor the sales
charge so that the total dollar amount deducted, as part of the Monthly
Deduction and any Surrender Charge, does not exceed 9.0% of the initial
premium. We guarantee that the Administrative Charge will
A-9
<PAGE>
not exceed an annual rate of 0.35% of cash value. The $2.50 Monthly
Maintenance Charge will apply only if cumulative premiums you paid are less
than $50,000.
-- CHARGES DEDUCTED FROM ELIGIBLE FUND ASSETS. The value of shares of the
Eligible Funds reflect charges and deductions from assets for investment
advisory services and fund operating expenses.
ANNUAL SERIES OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1998
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE CAP OR EXPENSE
DEFERRAL)*
<TABLE>
<CAPTION>
LOOMIS MORGAN GOLDMAN WESTPEAK
SAYLES STANLEY ALGER SACHS DAVIS MFS GROWTH
SMALL INTERNATIONAL EQUITY MIDCAP VENTURE MFS RESEARCH AND
CAP MAGNUM GROWTH VALUE VALUE INVESTORS MANAGERS INCOME
SERIES EQUITY SERIES SERIES SERIES SERIES SERIES** SERIES** SERIES
------ ------------- ------ ------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... 1.00% .90% .75% .75% .75% .75% .75% .70%
Other Expenses.......... -- .40% .08% .15% .08% .15% .15% .08%
----- ----- ---- ---- ---- ---- ---- ----
Total Operating Ex-
penses................ 1.00% 1.30% .83% .90% .83% .90% .90% .78%
===== ===== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
SALOMON
BROTHERS BACK BAY SALOMON BACK BAY
WESTPEAK LOOMIS BACK BAY STRATEGIC ADVISORS BROTHERS ADVISORS
STOCK SAYLES ADVISORS BOND BOND U.S. MONEY
INDEX BALANCED MANAGED OPPORTUNITIES INCOME GOVERNMENT MARKET
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
-------- -------- -------- ------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .25% .70% .50% .65% .40% .55% .35%
Other Expenses.......... .12% .12% .08% .20% .08% .15% .10%
---- ---- ---- ---- ---- ---- ----
Total Operating Ex-
penses................ .37% .82% .58% .85% .48% .70% .45%
==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------
* The Total Operating Expenses are based on the amount of such expenses
applied against assets after giving effect to the applicable voluntary
expense cap or expense deferral.
Expense Cap. Under an expense cap or expense deferral, New England
Investment Management, Inc. ("NEIM," formerly TNE Advisers Inc.), adviser
to the Zenith Fund Series, voluntarily limits the expenses of the Series it
advises. For the Loomis Sayles Small Cap Series, Total Series Operating
Expenses take into account a voluntary cap on expenses by NEIM who will
bear all expenses that exceed 1.00% of average daily net assets. In the
absence of this cap or any other expense reimbursement arrangement, Total
Operating Expenses for the Loomis Sayles Small Cap Series for the year
ended December 31, 1998 would have been 1.10%. Total Operating Expenses for
the Westpeak Growth and Income, Westpeak Stock Index, Back Bay Advisors
Managed, Back Bay Advisors Bond Income and Back Bay Advisors Money Market
Series are after giving effect to a voluntary expense cap. For each of
these Series, NEIM will bear those expenses (other than the management fee)
that exceed 0.15% of average daily net assets.
Expense Deferral. For the nine other Series shown, the Total Operating
Expenses are after giving effect to a voluntary expense deferral. Under the
deferral, expenses that exceed a certain limit are paid by NEIM in the year
in which they are incurred and transferred to the Series in a future year
when actual expenses of the Series are below the limit. The limit on
expenses for each of these Series is: 1.30% of average daily net assets for
the Morgan Stanley International Magnum Equity Series; .90% of average
daily net assets for the Alger Equity Growth, Davis Venture Value, Goldman
Sachs Midcap Value (formerly Loomis Sayles Avanti Growth), MFS Investors
and MFS Research Managers Series; .85% of average daily net assets for the
Loomis Sayles Balanced and Salomon Brothers Strategic Bond Opportunities
Series, and .70% of average daily net assets for the Salomon Brothers U.S.
Government Series. Absent the expense deferral, Total Operating Expenses
for these Series for the year ended December 31, 1998 would have been:
1.40% for Morgan Stanley International
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<PAGE>
Magnum Equity Series, and .77% for Salomon Brothers U.S. Government Series.
Without the expense deferral arrangement, we estimate that Total Series
Operating Expenses for the MFS Investors Series and MFS Research Managers
Series for the year ended December 31, 1999 would be 1.04%, each, on an
annualized basis. The expense cap and expense deferral arrangements are
voluntary and may be terminated at any time. (See the attached New England
Zenith Fund prospectus for more complete information.)
** MFS Investors Series and MFS Research Managers Series reflect anticipated
annual operating expenses for 1999.
-- SURRENDER CHARGE. If you surrender your Policy, take a partial surrender
from your Policy or if your Policy lapses during the first nine Policy
Years (the Surrender Charge Period), we may deduct a Surrender Charge.
The Surrender Charge is a deferred sales charge. The amount of this
charge decreases over the course of the Surrender Charge Period. The
table below shows the Surrender Charge as a percentage of the portion of
the amount surrendered subject to the Surrender Charge:
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
----------- ------
<S> <C>
1............................... 8.0%
2............................... 8.0%
3............................... 7.0%
4............................... 6.0%
5............................... 5.0%
6............................... 4.0%
7............................... 3.0%
8............................... 2.0%
9............................... 1.0%
10............................... 0.0%
</TABLE>
We deduct the Surrender Charge from the amount surrendered.
During the Surrender Charge period, a partial surrender is taken first from
the "preferred surrender amount" free of any Surrender Charge and then from
the cash value subject to the Surrender Charge. The "preferred surrender
amount" is equal to the greater of (a) cash value on the date of surrender in
excess of the initial premium paid (minus any previous partial surrenders
attributable to the initial premium) and (b) 10% of the initial premium paid
(minus previous partial surrenders in that Policy Year). If you make a full
surrender during the Surrender Charge Period, the preferred surrender amount
will be deducted from the amount of the full surrender before the Surrender
Charge is calculated.
For more information concerning the Surrender Charge, see "Surrender
Charge."
For more information concerning the charges and expenses associated with
your Policy, see "Charges and Expenses."
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 10 days (or more in some states) after you
receive the Policy. You can return the Policy to us or your registered
representative. Insurance coverage ends as soon as you return the Policy (as
determined by its postmark, if the Policy is mailed). If you choose to cancel
the Policy, we will refund any premiums paid (or any other amount that is
required in some states) with interest at our current rate.
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME OFFICE
We will treat your request for a Policy transaction, or your submission of a
payment, as received at our Home Office if we receive it there before the
close of regular trading on the New York Stock Exchange on that day. If we
A-11
<PAGE>
receive it after that time, or if the New York Stock Exchange is not open that
day, then we will treat it as received on the next day when the New York Stock
Exchange is open.
NELICO
NELICO was organized as a stock life insurance company in Delaware in 1980
and is licensed to sell life insurance in all states, the District of Columbia
and Puerto Rico. NELICO was formerly a wholly-owned subsidiary of New England
Mutual Life Insurance Company ("New England Mutual"). On August 30, 1996, New
England Mutual merged into MetLife, a mutual insurance company whose principal
office is at One Madison Avenue, New York, NY 10010. MetLife then became the
parent of NELICO. In connection with the merger, NELICO changed its name from
"New England Variable Life Insurance Company" to "New England Life Insurance
Company," and changed its domicile from the State of Delaware to the
Commonwealth of Massachusetts. NELICO's Home Office is now 501 Boylston
Street, Boston, Massachusetts 02116. NELICO's mailing address is: P.O. Box
9116, Boston, Massachusetts 02117.
PREMIUMS
APPLYING FOR A POLICY
To purchase a Policy you must submit an application and provide evidence of
insurability of the proposed insured(s). You must also pay the initial premium
before we issue the Policy. We will issue a Single Life Policy for an insured
who is between the ages of 20 to 80 and meets our insurability requirements.
We will issue a Last Survivor Policy on two insureds only if each of them is
between the ages of 20 and 80 and each of them meets our insurability
requirements. The ages of the two insureds may not be more than nine years
apart (except in Texas and New Jersey where the ages of the two insureds may
not be more than five years apart).
Before accepting an application, we conduct underwriting to determine
insurability. Depending on the amount of the initial premium and the age of
the insured(s), the insured may qualify for simplified underwriting. To
qualify, a written questionnaire concerning the insured's health must be
completed.
We reserve the right to reject an application or premium for any reason. If
we do not issue a Policy, we will return to you, any premium payment you
submitted plus interest at our current rate. If we issue a Policy, it is
effective on the Policy Date.
PREMIUM PAYMENTS
The minimum initial premium we require is $10,000, unless we otherwise
consent. Currently, we will not accept a premium payment that would cause your
policy value, including the value of all other policies you may own with us,
to exceed $5,000,000. You may purchase a Policy with the proceeds of another
life insurance policy, so long as the following conditions are met.
(1) you must complete the application forms.
(2) if the value to be applied from the existing policy is subject to a
policy loan, then as part of the initial premium you must submit an
additional amount so that the unloaned cash value at issue is $10,000. Any
loan remaining cannot exceed 80% of the cash value of the Policy at the
time of issue.
It may not be advantageous to replace existing insurance with a Policy.
You may make additional payments by check or money order until the
insured(s) is age 100, subject to our underwriting requirements (an exception
may apply during a grace period (See "Lapse and Reinstatement")).
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<PAGE>
However, the following requirements apply:
(1) Any additional payments you make must be at least $1,000 (except for
a payment made during a grace period (see "Lapse and Reinstatement")).
(2) You may make only one additional payment during each Policy Year
beginning with the second year.
(3) If you have a loan, we will apply any payment we receive first
towards repayment of the loan interest due, second towards repayment of the
loan and last as an additional payment (unless you tell us otherwise, in
writing when you send us the payment). (See Effect of Policy Loan.")
(4) Before we accept an additional payment, we may require satisfactory
evidence of insurability if the additional payment would increase the death
benefit by more than it would increase the cash value.
We reserve the right to reject an additional payment for any reason. If we
accept an additional payment, we will credit your net additional payment,
after deductions for sales and state premium tax charges, to your Policy's
cash value. We will credit the additional payment on the date the payment is
received at our Home Office, if underwriting was not required, or the date
underwriting was completed if required. (See "Allocation of Premiums,"
"Charges and Expenses," and "Receipt of Communications and Payments at
NELICO's Home Office.")
If an additional payment is accepted, a proportional downward adjustment
will be made in the rate of the state premium tax charge deducted as part of
the Monthly Deduction. (See "Charges and Expenses" and Appendix C.)
If you have a Policy loan, it may be more advantageous to repay the loan
than to make an additional payment, because an additional payment is subject
to sales and state premium tax charges, whereas the loan repayment is not
subject to any charges. (See "Loan Privilege" and "Deductions from Premiums.")
LAPSE AND REINSTATEMENT
As a single premium policy, we designed your Policy to be fully paid-up when
issued. Accordingly, it will not lapse, regardless of adverse investment
experience, unless there are excessive Policy loans. See "Policy Loans." If a
Policy loan is outstanding, and the net cash value on a Monthly Deduction Date
is not enough to cover the entire Monthly Deduction for that Policy Month,
your Policy will be in default.
We will notify you of the amount due to continue your Policy. Your Policy
provides a 62-day grace period from the date the Monthly Deduction was due
(unless otherwise provided in some states) for you to make an additional
payment in an amount sufficient to cover three months of Monthly Deductions
and loan interest due after the notice is sent. During the grace period,
insurance coverage continues under your Policy, but if the insured dies (in
the case of a Last Survivor Policy, if the last surviving insured dies) before
the grace period payment is made, we will deduct from the death proceeds the
portion of the unpaid Monthly Deduction(s) for the period prior to the date of
death.
If your Policy has lapsed, you may reinstate it within seven years after the
date of lapse. If more than seven years have passed, or if you have
surrendered the Policy, you must obtain our consent to reinstate.
Reinstatement in all cases is subject to payment of certain charges described
in the Policy and generally requires evidence of insurability that is
satisfactory to us. If your Policy lapses and is reinstated, the lapsed period
will not count for purposes of determining:
(i) the Surrender Charge on any date after reinstatement;
(ii) the ten-year period during which the Monthly Deduction includes
deductions for sales charges and state premium taxes; and
(iii) the ten-year period during which we deduct higher administrative
charges.
For determining the dates on which we will recalculate the minimum
guaranteed death benefit, the lapsed period will count. If we would have
recalculated the minimum guaranteed death benefit during the lapsed period, we
will recalculate it upon reinstatement.
A-13
<PAGE>
ALLOCATION OF PREMIUM PAYMENTS AND TRANSFER OF CASH VALUE
ALLOCATION OF PREMIUM PAYMENTS
We will allocate your initial premium to the Money Market Sub-Account as of
the Investment Start Date. The Investment Start Date is the latest of: the
Policy Date, the date when the last Part II of the application for the Policy
or the Supplement to the Part I Application is signed, if any is required, and
the date when we first receive the initial premium. We will mail you a
confirmation for the initial premium when we approve your application and
receive your initial premium. Fifteen days after we mail the confirmation, we
will allocate the cash value in the Money Market Sub-Account to the Sub-
Accounts you selected. (For Policies issued in Maryland, this allocation to
your selected Sub-Accounts will occur on the later of fifteen days after the
confirmation has been mailed and 45 days after the date of Part I of the
application.) (See "Investment Options.")
You can allocate your premium to a maximum of 10 Sub-Accounts at any one
time. Currently, we will permit any whole percentage to be allocated to a Sub-
Account.
You select the initial premium allocation when you apply for a Policy. We
will use this allocation for any additional payments, unless you specify
otherwise when submitting the payment. You also may change the allocation
instructions for future payments at any time, provided that your Policy's cash
value is distributed among no more than 10 Sub-Accounts at any one time. The
change will be effective for additional payments accepted on or after the date
when we receive your instructions. You may change your instructions by
telephone or by written request to us. (See "Receipt of Communications and
Payments at NELICO's Home Office.") See "Transfer and Reallocation Requests"
below for information on how to request a transfer or reallocation by
telephone.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
We invest your initial premium as of the Investment Start Date. (For this
purpose only, receipt of the premium means receipt by your registered
representative if the payment is made with the application; otherwise, it
means receipt by us at our Home Office.)
If you pay the initial premium with the application or during the
underwriting process, the Policy Date is the later of the date when the last
Part II of the application or the Supplement to the Part I Application is
signed, if any is required, and receipt of the premium payment. In this case
the Policy Date and investment start date are the same.
If you pay the initial premium with the application, we will cover the
insured under a temporary insurance agreement for a limited period that
generally begins when we receive the premium payment or, if later, the date
when the last Part II of the application or the Supplement to the Part I
Application is signed, if any is required. The maximum amount of coverage
provided is either the amount of insurance applied for or $500,000, whichever
is less, for standard and preferred risks ($250,000 for substandard risks and
$50,000 for persons who are determined to be uninsurable). There may be
variations to these provisions required by state law.
If we issue a Policy, Monthly Deductions begin from the first Monthly
Deduction Date, even if we delayed issuance for underwriting requirements, and
will be for the face amount of the Policy, even if the temporary insurance
coverage during underwriting was for a lower amount.
If you do not submit the initial premium with the application or during the
underwriting process, the Policy Date will generally be the date we receive
the initial premium payment and will be the same as the investment start date.
However, at your request and under limited circumstances, we may assign your
Policy a Policy Date that is prior to the investment start date in this
situation. We will not deduct charges and we will not credit interest to the
Policy for the period between the Policy Date and the investment start date.
A-14
<PAGE>
TRANSFER OPTION
Fifteen days after we mail the confirmation for the initial premium, you may
transfer your Policy's cash value among the Sub-Accounts. (For Policies issued
in Maryland, you may make Sub-Account transfers beginning with the later of
fifteen days after we mail the initial premium confirmation and 45 days after
the date of Part I of the application.) We currently do not charge a transfer
fee or limit the number of transfers. We reserve the right to limit transfers
and to charge a transfer fee (for Policies issued in New York, the minimum
number of transfers permitted each Policy Year will never be less than
twelve).
Currently, the minimum transfer amount is $100. (If the full amount of cash
value in a Sub-Account is less than $100, that full amount may be
transferred). The maximum you may transfer is $500,000. We will treat as one
transfer all transfers that you request on the same day for all Policies you
own. If you exceed $500,000 on one day, no amount of the transfer will be
made.
A transfer will be effective as of the date when we receive the transfer
request at our Home Office. (See "Receipt of Communications and Payments at
NELICO's Home Office.")
For transfers that we determine are based on "market-timing" (e.g.,
transfers under different Policies that are being requested under Powers of
Attorney with a common attorney-in-fact or that are in our determination based
on the recommendation of a common investment adviser or broker-dealer), we
will allow one transfer every 30 days. Each transfer is subject to a $500,000
maximum. We will treat as one transfer all transfers requested under different
Policies that are being requested under Powers of Attorney with a common
attorney-in-fact or that are, in our determination, based on the
recommendation of a common investment adviser or broker-dealer. If a transfer
is executed under one Policy and, within the next 30 days, a transfer request
for another Policy is determined by us to be related, the second transfer
request will not be made.
See "Transfer and Reallocation Requests" for information regarding transfers
made by written request and by telephone.
DOLLAR COST AVERAGING
We offer an automated transfer privilege called dollar cost averaging. We
will transfer the same dollar amount to selected Sub-Accounts each month. Over
time, more purchases of Eligible Fund shares are made when the value of those
shares is low, and fewer shares are purchased when the value is high. As a
result, you may achieve a lower average cost of purchases over the long term.
This plan of investing allows you to take advantage of investment
fluctuations, but does not assure a profit or protect against a loss in
declining markets.
Under this feature you may request a transfer of a certain amount of your
cash value on any selected business day of each month (or if not a day when
the New York Stock Exchange is open, the next such day), from any one Sub-
Account to one or more of the other Sub-Accounts. The minimum transfer amount
is $100 that must be transferred to each Sub-Account that you select under
this feature. Currently, we do not count transfers made under the dollar cost
averaging program against the 12 transfers that may be made each year. You may
select a dollar cost averaging program when you apply for the Policy or at a
later date by contacting our Home Office. You may not participate in the
dollar cost averaging program while you are participating in the asset
rebalancing program. You may cancel your use of the dollar cost averaging
program at any time prior to the monthly transfer date. Transfers will
continue until you notify us to stop making transfers or there no longer is
sufficient cash value in the Sub-Account from which you are transferring.
ASSET REBALANCING
We offer an asset rebalancing program for cash value. Cash value allocated
to the Sub-Accounts can be expected to increase or decrease at different rates
due to market fluctuations. An asset rebalancing program automatically
reallocates your cash value among the Sub-Accounts each quarter to return the
allocation to the
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<PAGE>
allocation percentages you specify. Asset rebalancing is intended to transfer
cash value from those Sub-Accounts that have increased in value to those that
have declined, or not increased as much, in value. Over time, this method of
investing may help you "buy low and sell high," although there can be no
assurance that this objective will be achieved. Asset rebalancing does not
guarantee profits, nor does it assure that you will not have losses.
You may select an asset rebalancing program when you apply for the Policy or
at a later date by contacting our Home Office. You specify the percentage
allocations to which your cash value will be reallocated among the Sub-
Accounts. You may not participate in the asset rebalancing program while you
are participating in the dollar cost averaging program. On the last day of
each calendar quarter on which the New York Stock Exchange is open, we will
transfer cash value among the Sub-Accounts to the extent necessary to return
the allocation to your specifications. Asset rebalancing will continue until
you notify us in writing or by telephone at our Home Office. Currently, we
don't count transfers made under an asset rebalancing program for purposes of
the transfer rules described above.
TRANSFER AND REALLOCATION REQUESTS
You may request a Sub-Account transfer or change the allocation of net
additional payments by:
. written request to our Home Office;
. fax (617-578-5412);
. telephone (1-877-633-7785); or
. contacting your registered representative.
Requests for transfers (up to our current limit each Policy Year) or
reallocations by telephone will be automatically permitted. We will use
reasonable procedures, such as requiring certain identifying information from
you, 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 us 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.
DEATH BENEFIT
If the insured under a Single Insured Policy dies, we will pay a death
benefit to the beneficiary. In the case of a Last Survivor Policy, we will pay
a death benefit on the last of the two insureds to die.
HOW THE DEATH BENEFIT IS DETERMINED. The death benefit payable on any day is
the greater of the variable death benefit and the minimum guaranteed death
benefit. We determine the variable death benefit by dividing your Policy's
cash value by the applicable net single premium (per $1.00 of death benefit)
calculated as provided in the Internal Revenue Code. We base net single
premiums on the age, sex and smoker/nonsmoker status of the insured at the
time of the calculation. Net single premiums increase over time resulting in a
decreasing death benefit for the same amount of cash value. Set forth below
are net single premiums for selected ages of male and female, nonsmoker
insureds.
<TABLE>
<CAPTION>
NET SINGLE PREMIUM
-------------------------------
AGE MALE NONSMOKER FEMALE NONSMOKER
--- -------------- ----------------
<S> <C> <C>
30............. .19992 .17824
40............. .27992 .24926
50............. .38723 .34338
60............. .52085 .46422
70............. .66655 .61117
80............. .79617 .76294
90............. .88839 .88028
100............. 1 1
</TABLE>
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<PAGE>
As an example of how the variable death benefit is calculated, assume that
the cash value of a Policy held by a 40-year-old male nonsmoker is $10,000.
The variable death benefit would be $35,724 ($10,000 divided by the applicable
net single premium of .27992).
MINIMUM GUARANTEED DEATH BENEFIT
The minimum guaranteed death benefit guarantees, regardless of investment
performance, that as long as there is not an "excess Policy loan," the death
benefit will never be less than the initial premium paid plus additional
payments, less adjustments for partial surrenders. On the Policy Date, the
minimum guaranteed death benefit is equal to the initial premium paid.
Thereafter, we will increase the minimum guaranteed death benefit by each
additional payment, and decrease the benefit proportionately by any partial
surrenders. We will base the reduction at the time of a partial surrender on
the ratio of the cash value after the surrender to the cash value before the
surrender. (See Appendix D for an example illustrating the effect of a partial
surrender on a Policy.)
At the end of the fifth Policy Year and every five years thereafter until
the insured is (or insureds are) age 75, we will recalculate the guaranteed
death benefit. On each of these days, we reset the guaranteed death benefit to
be the greater of:
. (i) the guaranteed death benefit before the recalculation; and
. (ii) the cash value on the date of recalculation.
The new minimum guaranteed death benefit (plus any subsequent premiums and
adjusted for any subsequent surrenders) applies to your Policy until the next
recalculation (five year anniversary) date, or until you make a premium
payment or surrender.
If, however, an "excess Policy loan" exists, the Policy may terminate. (See
"Loan Privilege" for the definition of "excess Policy loan.")
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the amount
of the death benefit determined on the date of the insured's death, reduced by
any Policy loan balance as of that date and by a pro rata portion of the
Monthly Deduction.
We may also adjust the death proceeds if you misstated an insured's age in
the application, if death results from the insured's suicide (or an insured's
suicide under a Last Survivor Policy) within two years (or less in some
states) from the date the Policy was issued or if limits on the death benefit
are imposed by rider. (See "Limits to NELICO's Right to Challenge the
Policy.")
PAYMENT OF DEATH BENEFIT PROCEEDS
We will pay death benefit proceeds in one sum unless you or the payee choose
to put all or part of the proceeds under a payment option. (See "Payment of
Proceeds" and "Payment Options.") We may also pay death benefit proceeds under
our Access Plus program. Under this program, we will establish an Access Plus
account 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.
CASH VALUE AND CASH VALUE BENEFITS
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account
and, if you have an outstanding Policy loan, in our general account as a
result of the loan. (See "Loan Privilege.") The cash value reflects:
-- premium payments
-- the net investment experience of the Policy's Sub-Accounts
-- interest credited on amounts held in the general account as a result of
a loan
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<PAGE>
-- amounts deducted for Policy charges (including Monthly Deductions and
any Surrender Charge that applies if you make a partial surrender)
-- partial surrenders
-- transfers among the Sub-Accounts.
The net cash value is the cash value on any day, reduced by any loan balance
and any applicable Surrender Charge. (See "Loan Privilege," "Surrender
Charge," and "Monthly Deduction Deducted from Cash Value.") If you surrender
your Policy, we will reduce the net cash value by the applicable portion of
the Monthly Deduction for the period from the last deduction to the date of
surrender.
We adjust the amount provided for investment in the Policy (i.e., the cash
value) to reflect the net investment experience of the Sub-Accounts. The
Policy's cash value in the Variable Account may increase or decrease daily
depending on the net investment experience of the Sub-Accounts. Unfavorable
investment experience can reduce the net cash value to zero. YOU BEAR THE
ENTIRE INVESTMENT RISK WITH RESPECT TO CASH VALUE IN THE VARIABLE ACCOUNT.
NET INVESTMENT EXPERIENCE. The net investment experience of the Policy's
Sub-Accounts will affect the Policy's cash value and, in some cases, the death
benefit. We determine the net investment experience of the Sub-Accounts as of
the close of regular trading on the New York Stock Exchange on each day when
the Exchange is open for trading. A Sub-Account's net investment experience
for any period is based on the investment experience of the underlying
Eligible Fund shares for the same period. (See "Daily Charges Deducted from
Variable Account Assets" and "Charges Deducted from Eligible Fund Assets.")
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during
the period. Dividends and capital gains distributions on Eligible Fund shares
are reinvested in additional shares of the Eligible Fund.
LOAN PRIVILEGE
You may borrow all or part of the Policy's "loan value" once fifteen days
have passed after we mail the confirmation for the initial premium. (For
Policies issued in Maryland, you may take a loan once fifteen days from the
initial premium confirmation mailing and 45 days from the date of Part 1 of
the application have passed.) We will make the loan as of the date when we
receive a loan request at our Home Office. (See "Receipt of Communications and
Payments at NELICO's Home Office.") You should contact our Home Office or your
registered representative for information regarding the procedures to follow
for requesting a loan.
The Policy's loan value is equal to 90% (more in some states) of: the
Policy's cash value minus the surrender charge. The loan value available is
reduced by any outstanding loan plus interest.
A Policy loan may result in adverse tax consequences. (See "Tax
Considerations.")
EFFECT OF POLICY LOAN. When we pay Policy loan proceeds to you, we take cash
value in the amount of the loan from the Sub-Accounts and transfer it to our
general account as collateral for the loan. When you make a loan repayment, we
transfer cash value held as collateral from the general account back to the
Sub-Accounts. This increases the cash value in the Sub-Accounts by the amount
of the repayment. Unless you specify a different allocation, we transfer cash
value for a Policy loan from the Sub-Accounts in proportion to the cash value
in each. We allocate loan repayments to the Sub-Accounts in proportion to the
cash value in each, unless you request otherwise.
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<PAGE>
The interest rate charged on Policy loans is 6.0% per year. Interest accrues
daily and is due on the Policy Anniversary. If not paid at that time, we add
the interest accrued on the loan to the loan, and we deduct an amount equal to
the unpaid interest from the Policy's cash value in the Sub-Accounts in
proportion to the amount in each.
The amount we take as collateral for a loan earns interest at not less than
a 5.25% rate per year. Currently, on preferred loans, the rate we credit is a
6.0% annual rate (guaranteed in some states). "Preferred loans" are loans that
represent an amount less than or equal to the excess of cash value over
premiums paid (as adjusted for any partial surrenders). (You should consult a
tax advisor as to the tax consequences associated with a preferred loan.) We
credit interest earned on amounts held in our general account as collateral
for a loan to the Policy's Sub-Accounts on the Policy Anniversary, in
proportion to the cash value in each.
The amount taken from the Policy's Sub-Accounts as a result of a loan does
not participate in the investment experience of the Sub-Accounts. Therefore,
the death benefit and cash value of the Policy can be permanently affected by
a loan, even if it is repaid. In addition, we reduce any proceeds payable
under a Policy by the amount of any outstanding loan plus accrued interest.
While a loan is outstanding, we apply your payments as follows:
(1) as a repayment of Policy loan interest due,
(2) then as repayment of a Policy loan, and
(3) last as an additional payment (if no previous additional payment has
been made in that Policy Year), unless you designate otherwise in writing
to us
If a previous additional payment has been made in that Policy Year, the
portion of the payment in excess of any outstanding Policy loan balance will
be returned. If a Policy loan is outstanding, it may be more advantageous to
repay the loan than to make an additional payment, because an additional
payment is subject to sales and state premium tax charges, and the loan
repayment is not subject to charges.
If a Policy loan is outstanding, and the net cash value on a Monthly
Deduction Date is not enough to cover the entire Monthly Deduction for the
month, we will notify you that the Policy is going to terminate unless a
sufficient payment is made within the 62-day grace period. (This situation is
referred to as an "excess Policy loan.") The Policy will terminate without
value 62 days after the notice is mailed (unless otherwise provided in some
states) unless you pay us the excess amount within that time. (See "Lapse and
Reinstatement.") If the Policy lapses with a loan outstanding, adverse tax
consequences may result. (See "Tax Considerations" below.)
If you purchase a Policy with the proceeds of another life insurance policy
that has an outstanding policy loan (see "Premium Payments"), the following
conditions must be met. First, you must complete appropriate application
forms. Second, if the value to be applied from the existing policy is subject
to a policy loan, then as part of the initial premium you must submit an
additional amount so that the unloaned cash value at issue is $10,000. Any
loan remaining against the new Policy cannot exceed 80% of the cash value of
the Policy at issue. It may not be advantageous to replace existing insurance
with a Policy.
SURRENDER
You may surrender a Policy for its net cash value, less the applicable
portion of the Monthly Deduction to the date of surrender, at any time while
the insured (or at least one insured under a Last Survivor Policy) is living.
Your request must conform to our administrative procedures. We determine the
net cash value of the surrendered Policy as of the date when we received the
surrender request at our Home Office. (See "Receipt of Communications and
Payments at NELICO's Home Office.") The net cash value equals the cash value,
reduced by any Policy loan balance and also reduced by any applicable
Surrender Charge (see "Surrender Charge"). Upon surrender, we will deduct the
applicable portion of the Monthly Deduction from net cash value. (See "Monthly
Deduction Deducted from Cash Value.") You may elect in writing to have all or
part of the surrender amount applied to a payment option. (See "Payment
Options.") A surrender may result in adverse tax consequences. (See "Tax
Considerations.")
A-19
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PARTIAL SURRENDERS
You may make a partial surrender of cash value once fifteen days have passed
after we mail the confirmation for the initial premium payment. (For Policies
issued in Maryland, you may make partial surrenders once fifteen days from the
confirmation mailing and 45 days from the date of Part 1 of the application
have passed.)
In each Policy Year, we will limit partial surrenders, except with our
consent to: 20% of the net cash value on the day the first partial surrender
is made for the Policy Year; or, if less, the Policy's loan value less the
amount of any Policy loan balance on that day. Currently, we do not limit the
maximum amount of a partial surrender as long as the cash value immediately
after the partial surrender is at least $10,000. The minimum amount for a
partial surrender is $500.
A partial surrender made in excess of the preferred surrender amount may be
subject to a Surrender Charge. (See "Surrender Charge" and "Monthly
Deduction.") If any charges apply, we will deduct these charges from the
amount requested to be surrendered. There are no limits on the number of
partial surrenders that may be made during a Policy Year. However, there are
tax consequences. (See "Tax Considerations.")
EFFECT OF PARTIAL SURRENDER ON CASH VALUE AND DEATH BENEFIT. A partial
surrender reduces the minimum guaranteed death benefit based on the ratio of
the cash value immediately after the partial surrender to the cash value just
before the partial surrender. See "Death Benefit" and Appendix D.
You cannot reinvest the net cash value paid on a partial surrender in the
Policy except as additional payments, which are subject to the charges
described under "Charges and Expenses."
The amount paid to you as the result of a partial surrender is equal to the
amount requested less any amount deducted for the Surrender Charge. We will
deduct the applicable portion of the Monthly Deduction (based on the portion
of the Policy Month elapsed and on the proportion of cash value withdrawn)
from the cash value remaining. (See "Surrender Charge" and "Monthly Deduction
Deducted from Cash Value.") We will determine the amount of net cash value
paid on a partial surrender as of the date when we receive a request
conforming to our administrative procedures at our Home Office. For more
information about our administrative procedures, please contact your
registered representative or our Home Office. (See "Receipt of Communications
and Payments at NELICO's Home Office," "Payment of Proceeds," and "Payment
Options.")
Unless you specify a different allocation, the partial surrender reduces the
Policy's cash value in the Sub-Accounts in proportion to the amount of cash
value in each.
ACCELERATION OF BENEFITS RIDER--TERMINAL ILLNESS
We offer a rider benefit that allows you to receive an accelerated payment
of benefits. This advance payment of benefits is available where certain
special circumstances exist, as described briefly below.
If the insured is diagnosed as terminally ill, as defined in the rider, you
may request this benefit. (In the case of a Last Survivor Policy, both
insureds, or the surviving insured, must be diagnosed as terminally ill in
order to request the benefit.) The rider is available in states where it has
been approved.
We calculate the accelerated benefit using the Policy's Eligible Proceeds,
multiplied by the Payout Factor. The Policy's Eligible Proceeds are equal to
the death benefit, less an amount to cover Monthly Deductions that would be
made in the event of death. In determining the Payout Factor, we may take into
consideration the life expectancy, age, gender and underwriting class of the
insured as well as other factors. The Payout Factor used will be determined by
us on the date we receive a written request for an accelerated benefit, at our
Home Office. The rider lists various items which may affect the Payout Factor.
If we accept a request for this benefit, we will notify you of the Payout
Factor and payment terms which will apply to the benefit.
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<PAGE>
We will reduce the accelerated benefit payment made to you by any
outstanding Policy loan balance. Our consent is necessary to obtain payment of
a partial accelerated benefit.
Exercise of the accelerated benefits rider cannot be reversed and is subject
to a number of conditions as set forth in the rider, including evidence
satisfactory to us.
ACCELERATION OF BENEFITS RIDER--LONG-TERM CARE
We may offer in the future a second rider benefit that will allow you to
receive an accelerated payment of benefits where certain special circumstances
exist, as described briefly below. These benefits will depend on certain
conditions contained in the rider.
We expect that payment of the rider benefit will be available if one or
more of the insured(s) is receiving qualified long-term care services, as
defined in the rider and by the Internal Revenue Code. The benefit may be
subject to discounting and charges. Payment will be subject to evidence
satisfactory to us.
WE WILL MAKE THIS ACCELERATED BENEFITS RIDER AVAILABLE TO YOU ONLY IF: (1)
YOUR STATE INSURANCE DEPARTMENT HAS APPROVED THE RIDER, (2) WE BELIEVE THAT
THE RIDER WILL MEET THE DEFINITION OF AN ACCELERATED DEATH BENEFIT FOR FEDERAL
INCOME TAX PURPOSES AND (3) WE BELIEVE THAT THE RIDER WILL NOT JEOPARDIZE THE
QUALIFICATION OF THE POLICY AS LIFE INSURANCE UNDER FEDERAL INCOME TAX LAW.
PAYMENT OF PROCEEDS
We will ordinarily pay any surrender, partial surrender, loan or death
benefit proceeds from the Sub-Accounts within seven days after we receive at
the Home Office a request, or proof of death of an insured, in a form
satisfactory to us. (See "Receipt of Communications and Payments at NELICO's
Home Office.") However, we may delay payment (except when a loan is made to
pay a premium to us) or transfers from the Sub-Accounts: (i) if the New York
Stock Exchange is closed other than on a weekend or holiday, or if trading on
the New York Stock Exchange is restricted, (ii) if the SEC determines that a
state of emergency exists that makes payments or Sub-Account transfers
impractical, or (iii) if the SEC orders the Variable Account or orders the
Zenith Fund or its successor or any other Eligible Fund to postpone payment or
transfer of variable benefits.
We may withhold payment of surrender, partial surrender or loan proceeds if
those proceeds are coming from a Policy Owner's check that has not yet
cleared. In those cases, we will process the surrender or loan up to the
amount of Policy values for which the Policy Owner has made full payment. We
will pay the balance of the surrender, partial surrender or loan proceeds when
the Policy Owner's check has cleared. We may also delay payment if we consider
whether to contest the Policy. We will pay interest on the death benefit
proceeds from the date they become payable to the date they are paid. (See
"Payment Options.")
PAYMENT OPTIONS
We will pay the Policy's death benefit and any partial surrender or
surrender of net cash value in one sum unless you or the payee choose to put
all or part of the proceeds under a payment option. You can choose a
combination of payment options. The selection of a payment option and the
naming of a payee must be in written form satisfactory to us. You can make,
change or revoke the selection before the death of the insured. The payment
options available are fixed benefit options only, and are not affected by the
investment experience of the Eligible Funds. The guaranteed mortality
assumptions used in determining payment levels under the options will not vary
based on sex. (For Policies issued in New York and Oregon, however, and which
are not issued for use in connection with certain employee benefit plans and
fringe benefit programs, the mortality assumptions will vary based on sex.)
(See "Group or Sponsored Arrangements.") Once payments under an option begin,
we may restrict withdrawal rights.
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The following payment options are available:
(1) INCOME FOR A SPECIFIED NUMBER OF YEARS. We pay proceeds in monthly
installments for up to 30 years, with interest at a rate not less than
3.5% a year, compounded yearly. Additional interest that we pay for any
year will be added to the monthly payments for that year.
(2) LIFE INCOME. We pay proceeds in equal monthly installments (i) during
the life of the payee, (ii) for the longer of the life of the payee or
10 years, or (iii) for the longer of the life of the payee or 20 years.
(3) LIFE INCOME WITH REFUND. We pay proceeds in equal monthly installments
during the life of the payee. At the payee's death, any unpaid proceeds
remaining are paid either in one sum or in equal monthly installments
until the total proceeds have been paid to the successor payee.
(4) INTEREST. We hold proceeds for the life of the payee or another agreed
upon period. We pay interest of at least 3.5% a year monthly on the
proceeds or add the interest to the principal annually. At the death of
the payee, or at the end of the period agreed to, we will pay the
balance of principal and any interest in one sum to the successor
payee.
(5) SPECIFIED AMOUNT OF INCOME. We pay proceeds plus accrued interest of at
least 3.5% a year in an amount and at a frequency elected until we have
paid total proceeds. We will pay any amounts unpaid at the death of the
payee in one sum to the successor payee.
(6) LIFE INCOME FOR TWO LIVES. We will pay proceeds 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, we will
pay two-thirds of the monthly amount for the life of the surviving
payee.
You must have our consent to use of an option if the installment payments
would be less than $20.
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs of
providing the services or benefits that are implied by the name of the charge
or that are associated with the particular Policy. For example, the sales
charge may not fully cover all of the sales and distribution expenses we
actually incur, and proceeds from other charges, including the mortality and
expense risk charge, may be used in part to cover those expenses.
DEDUCTIONS FROM PAYMENTS. We do not deduct charges from the initial premium
before allocation to the Sub-Accounts.
We will deduct the following charges from an additional payment before
allocation to the Sub-Accounts:
-- 6.5% sales charge (reduced to 5.10% for Policies with initial premiums
of $2,000,000 or more).
-- 2.5% state premium tax charge.
MONTHLY DEDUCTION FROM CASH VALUE. We deduct a charge from the cash value on
each Monthly Deduction Date after the Policy Date. This Monthly Deduction
includes the following charges, shown below at their current annual rates:
-- Cost of insurance charge,* currently ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class (0.70%
to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class (0.40%
to 1.60% for substandard risk class)
-- 0.35% Administrative Charge (currently reduced to 0.10% after the first
ten Policy Years)**
A-22
<PAGE>
-- 0.40% sales charge (deducted during the first ten Policy Years only)**
-- 0.25% state premium tax charge (deducted during the first ten Policy
Years only)**
-- 0.90% mortality and expense risk charge
-- For Policies with cumulative premiums less than $50,000, a $2.50 Monthly
Maintenance Charge also is included in the Monthly Deduction.
- --------
* We do not deduct the cost of insurance charge on or after the Policy
Anniversary when the age of the insured(s) is equal to 100.
** For Policies with initial premiums of $2,000,000 or more, we will waive the
0.40% sales charge and 0.25% premium tax charge, and we will waive the
Administrative Charge currently after the tenth Policy Year.
We calculate each charge, except the $2.50 Monthly Maintenance Charge, as a
percentage of cash value (including cash value transferred to the general
account as collateral for Policy loans). We first calculate all charges, other
than the cost of insurance charge, based on the cash value on the Monthly
Deduction Date (before we deduct monthly charges, but reflecting daily charges
deducted from Eligible Fund Assets), and then deduct the charges. We then
calculate the cost of insurance charge based on the cash value for that date,
as reduced by all other charges deducted that day. We deduct the Monthly
Deduction pro rata from the cash value in the Sub-Accounts.
SALES CHARGES. We deduct a sales charge calculated as a percentage of cash
value at an annual rate of 0.40%. In no event will the aggregate amount
deducted as part of the Monthly Deduction for sales charges plus the Surrender
Charge exceed 9% of the initial premium. We currently waive the charge:
. for Policies with initial premiums of $2,000,000 or more
. after the first ten policy years (on amounts attributable to the
initial premium)
If a Policy lapses and is reinstated, the lapsed period will not count
towards the ten-year period during which the sales charges apply.
STATE PREMIUM TAX CHARGE. We deduct this charge from your cash value in the
Sub-Accounts for the first ten Policy Years, as part of the Monthly Deduction.
The annual rate of this charge is 0.25% of cash value. Because net additional
payments will have the immediate effect of increasing the cash value, the
monthly charge for state premium tax is proportionately adjusted downward when
you make an additional payment. Appendix C provides an example illustrating
the effect of such an additional payment.
For Policies with initial premiums of $2,000,000 or more, we will waive the
0.25% monthly charge for premium tax.
If a Policy lapses and is reinstated, the lapsed period will not count
towards the ten-year period during which the Monthly Deduction includes a
deduction for state premium taxes.
We designed the state premium tax charge to reimburse us for state premium
taxes and administrative expenses. Premium taxes vary from state to state and
the 2.5% charge reflects an average. Administrative expenses covered by this
charge include those related to premium tax and certain other state filings.
CHARGES UNDER POLICIES ISSUED TO NEW YORK RESIDENTS. The charges described
above apply to Policies issued to New York residents except as follows:
-- We do not deduct any sales or premium tax charge from additional
payments;
-- The sales charge deducted as part of the Monthly Deduction is 0.65%
(deducted for the first ten Policy Years only);
A-23
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-- The administrative charge deducted as part of the Monthly Deduction is
0.10% during the first ten Policy Years, and 0.35% thereafter, and
-- We base the surrender charge on the initial premium AND each additional
payment made within the first nine years.
We limit sales and surrender charges so that any surrender charges you pay,
plus 61.5385% of the sales charge on your initial premium, is never more than
9% of all the payments you make under this Policy.
Your preferred surrender amount is the greater of (a) cash value on the
surrender date in excess of your total premiums paid (less previous partial
surrenders) and (b) 10% of premiums paid (less partial surrenders in that
Policy Year.
COST OF INSURANCE CHARGE. Until the Policy Anniversary when insured(s) reach
age 100, we deduct this charge from the cash value in the Sub-Accounts as part
of the Monthly Deduction.
The cost of insurance charge covers the cost of providing insurance
protection under your Policy. Currently, the amount of this charge is based on
the risk class and issue age of the insured(s). (It does not currently vary by
sex of the insured(s), although it may in the future.) We assign insureds to
risk classes based on underwriting conducted when we receive an application
for a Policy. The risk classes are:
-- standard nonsmoker
-- standard smoker
-- substandard nonsmoker
-- substandard smoker
Once we issue a Policy, an insured's risk class does not change except in the
following circumstances. If you submit an additional payment that, if
accepted, will have the effect of increasing the death benefit, acceptance of
the payment is subject to underwriting review to determine whether the
insured(s) qualify for the same or a better risk class.
If the new risk class is better and has lower cost of insurance rates than
the original risk class, the risk class for the additional payment will be
used for cost of insurance charges under the entire Policy. If, however, the
new risk class has higher cost of insurance rates than the original risk
class, we will decline the additional payment.
Currently, we calculate the cost of insurance charge for a Policy as a
percentage of the cash value on the Monthly Deduction Date. For a Single Life
Policy, we calculate the current charge based on whether the issue age is 70
or less, or over 70, is a smoker or non-smoker, and has been assigned to a
standard or substandard risk class. The current monthly rates for these
classes are equivalent to the annual percentage rates shown in the following
table:
<TABLE>
<CAPTION>
RATING CLASS AND ISSUE AGE NONSMOKER SMOKER
-------------------------- --------- ------
<S> <C> <C>
Standard issue age 70 or less............................... 0.45% 0.75%
Standard over issue age 70.................................. 0.85% 1.25%
Substandard issue age 70 or less............................ 0.70% 1.15%
Substandard over issue age 70............................... 1.30% 1.90%
</TABLE>
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<PAGE>
In the case of a Last Survivor Policy, we calculate the current charge based
on whether the joint equal issue age is 70 or less or over 70, (except in
Texas and New Jersey in which case the age of the younger insured is used),
the smoker/nonsmoker status of each insured, and whether at least one insured
is substandard.
<TABLE>
<CAPTION>
NONSMOKER NONSMOKER SMOKER
RATING CLASS AND ISSUE AGE NONSMOKER SMOKER SMOKER
-------------------------- --------- --------- ------
<S> <C> <C> <C>
Standard issue age 70 or less..................... 0.25% 0.40% 0.55%
Standard over issue age 70........................ 0.65% 0.85% 1.05%
Substandard issue age 70 or less.................. 0.40% 0.60% 0.85%
Substandard over issue age 70..................... 1.00% 1.30% 1.60%
</TABLE>
We guarantee the cost of insurance charge we deduct on a Monthly Deduction
Date will not exceed the amount calculated using the guaranteed cost of
insurance rates set forth in your Policy for that date. Guaranteed cost of
insurance rates depend on the insured's sex, risk class, and age on the first
day of a Policy Year. Guaranteed cost of insurance rates applicable to joint
insureds under a Last Survivor Policy depend on the sex of each insured, their
joint equal issue age (the age of the younger insured is used in Texas and New
Jersey), their risk classes, and the Policy Year. The guaranteed cost of
insurance rates change from month to month. The risk classes used for
determining guaranteed cost of insurance rates for insureds are smoker
standard, smoker substandard, nonsmoker standard, and nonsmoker substandard.
Substandard ratings result in higher cost of insurance charges. We base the
guaranteed cost of insurance rates for substandard ratings on multiples of or
additives to the guaranteed standard rates provided by the 1980 Commissioners
Standard Ordinary Mortality Tables.
Cost of insurance rates--whether current or guaranteed--are generally more
favorable for nonsmoker than for smoker insureds. Within a given rating class,
guaranteed cost of insurance rates are generally more favorable for insureds
of lower ages than for insureds of higher ages.
If a Policy loan is outstanding, and the net cash value on a Monthly
Deduction Date is not enough to cover the entire Monthly Deduction for the
Policy Month, we will notify you that the Policy is going to terminate unless
a sufficient payment is made within the 62-day grace period. (See "Effect of a
Policy Loan.")
Eligible group or sponsored arrangements may also elect to purchase Policies
on a simplified underwriting basis above the underwriting limits applicable to
other purchasers. Policies issued on a simplified underwriting basis will have
the same cost of insurance rates as fully underwritten Policies.
ADMINISTRATIVE CHARGE. This charge is currently set at an annual rate of
0.35% of cash value and decreases to 0.10% after the first 10 Policy Years. We
guarantee the charge will never exceed an amount equivalent to an annual rate
of 0.35% of cash value. This charge is for the cost of administering the
Policies (such as the cost of processing Policy transactions, issuing Policy
Owner statements and reports, and record keeping), as well as legal,
actuarial, systems, mailing and other overhead costs connected with our
variable life insurance operations.
For Policies with initial premiums of $2,000,000 or more, we will waive the
Administrative Charge after the tenth Policy Year.
For purposes of calculating the 10-year period after which the
Administrative Charge is reduced to 0.10%, the period that a Policy was lapsed
will not count.
MONTHLY MAINTENANCE CHARGE. If the initial premium paid for your Policy is
less than $50,000, we will deduct a $2.50 fee from cash value on each Monthly
Deduction Date to cover administrative expenses. This fee is in addition to
the administrative charge. We will continue to deduct this monthly fee until
cumulative premium payments made are at least $50,000. After cumulative
premium payments of at least $50,000 have been made, we will not take this
charge even if your Policy's cash value is reduced to less than $50,000 as a
result of investment performance or partial surrenders.
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<PAGE>
SURRENDER CHARGE. If, during the first nine Policy Years, a Policy is
totally surrendered or lapses or a partial surrender (other than a preferred
partial surrender) is made, we deduct a Surrender Charge from the amount
requested to be surrendered. This charge is based on the portion of the
initial premium deemed to be surrendered in accordance with the following
rules. Appendix C provides an example of the effect of negative investment
performance on Surrender Charges. If there has been negative investment
performance under your Policy, we calculate the Surrender Charge by
attributing negative performance first, to reducing additional payments, and
then, to reducing the initial premium.
When you make a full or partial surrender, we take the requested surrender
amount first from the preferred surrender amount. The preferred surrender
amount is equal to the greater of (a) the cash value on the date of surrender
which exceeds the initial premium paid (minus any previous partial surrenders
attributable to the initial premium) and (b) 10% of the initial premium paid
(minus previous partial surrenders in that Policy Year). No Surrender Charge
applies to the preferred surrender amount. The balance of the requested
surrender amount is subject to a Surrender Charge, which we determine by
multiplying the balance by the applicable percentage for the Policy Year. The
Surrender Charge period and the amount of the Surrender Charge are shown in
the following table:
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
----------- ------
<S> <C>
1............................... 8.0%
2............................... 8.0%
3............................... 7.0%
4............................... 6.0%
5............................... 5.0%
6............................... 4.0%
7............................... 3.0%
8............................... 2.0%
9............................... 1.0%
10............................... 0.0%
</TABLE>
We credit back to the Policy's cash value upon reinstatement any surrender
charge we deducted upon lapse. The Surrender Charge on the date of
reinstatement will be the same as it was on the date of lapse. For purposes of
determining the Surrender Charge on any date after reinstatement, the lapsed
period will not count.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a charge from your cash value
in the Sub-Accounts on each Monthly Deduction Date for the mortality and
expense risks that we assume. This charge is currently set at the equivalent
of an annual rate of 0.90% of cash value. The mortality risk we assume is that
insureds may live for shorter periods of time than we estimated. The expense
risk is that our costs of issuing and administering the Policies may be more
than we estimated.
DAILY CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT ASSETS. Currently, we do
not deduct any daily charges from the Variable Account. However, we reserve
the right to make deductions from the Variable Account for federal or state
income taxes with respect to earnings or capital gains that may be
attributable to the Variable Account. Should we determine that this type of
tax will be imposed, we may make deductions from the Variable Account to pay
these taxes. The imposition of such taxes would reduce your cash value.
CHARGES DEDUCTED FROM ELIGIBLE FUND ASSETS. The value of shares of the
Eligible Funds reflect charges and deductions from assets for investment
advisory fees and operating expenses. See "Introduction to the Policies" and
the prospectus for the Zenith Fund for more information.
CHARGES FOR ADDITIONAL SERVICES. We reserve the right to charge a nominal
fee, which we will bill directly to you, in the event that a Policy re-issue
or re-dating is requested.
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<PAGE>
We may sell the Policies directly, without compensation, to a registered
representative, to employees, officers, directors, and trustees of the Company
and its affiliated companies, and certain family members of the foregoing, and
to employees, officers, directors, trustees and registered representatives of
any broker-dealer authorized to sell the Policies or any bank affiliated with
such a broker-dealer and of any sub-adviser to the Eligible Funds, and certain
family members of the foregoing.
If consistent with applicable state insurance law, we may sell the Policies,
without compensation, to the Company or MetLife for use with deferred
compensation plans for agents, employees, officers, directors, and trustees of
the Company and its affiliated companies, subject to any restrictions imposed
by the terms of such plans, or to persons who obtain their Policies through a
bank, adviser or consultant to whom they pay a fee for investment or planning
advice. If sold under these circumstances, and the policy has an initial
premium of less than 2,000,000, we may credit the Policies with an additional
percentage of premium to reflect in part or in whole any cost savings
associated with the direct sale, but only if such credit will not be unfairly
discriminatory to any person. We will not credit any additional premium to
Policies purchased by persons described above in exchange for another variable
life policy issued by the Company or its affiliated companies.
GROUP OR SPONSORED ARRANGEMENTS
We may issue the Policies to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a situation where a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals. An example of such an arrangement is a non-tax qualified
deferred compensation plan. A "sponsored arrangement" includes a situation
where an employer or an association permits group solicitation of its
employees or members for the purchase of individual policies.
We may waive or reduce any of the Policy charges sold to a group or
sponsored plan. We may also increase the interest rate credited to loaned
amounts under these Policies. The amount of reductions and our eligibility
rules may vary from time to time. In general they will reflect cost savings we
anticipate for Policies sold to the eligible group or sponsored arrangements
and will relate to factors such as the size of the group, its stability, the
purpose of the funding arrangement and characteristics of the group members.
The amount of reduction and the criteria will reflect the reduced sales and
administrative efforts resulting from sales to qualifying group or sponsored
arrangements. Reductions in or waiver of these charges will not be unfairly
discriminatory against any person.
Some group or sponsored arrangements may be eligible to purchase Policies on
a simplified underwriting basis. There may be limits on the age of the insured
and the amount of premium.
The United States Supreme Court has ruled that insurance policies with
values and benefits that vary with the sex of the insured may not be used to
fund certain employee benefit programs. Therefore, we offer Policies that do
not vary based on the sex of the insured to certain employee benefit programs.
We recommend that employers consult an attorney before offering or purchasing
the Policies in connection with an employee benefit program.
THE VARIABLE ACCOUNT
We established the Variable Account as a separate investment account on
January 31, 1983 under Delaware law. It became subject to Massachusetts law
when NELICO changed its domicile to Massachusetts on August 30, 1996. The
Variable Account is the funding vehicle for other NELICO variable life
insurance policies; 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, and is
registered with the Securities and Exchange Commission (the "SEC") as a unit
investment trust under the Investment Company Act of 1940. The Massachusetts
Insurance Commissioner regulates NELICO and the Variable Account, which are
also subject to the insurance laws and regulations where the Policies are
sold.
Although NELICO owns the assets of the Variable Account, 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
A-27
<PAGE>
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. NELICO may transfer to its general account assets which
exceed the reserves and other liabilities of the Variable Account. NELICO will
consider any possible adverse impact such a transfer might have on the
Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of NELICO's
other income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Variable Account currently has 15 Sub-Accounts. Each invests in an
Eligible Fund of the Zenith Fund. The Sub-Accounts are:
-- The Small Cap Sub-Account, which invests in the Loomis Sayles Small Cap
Series
-- The International Magnum Equity Sub-Account, which invests in the Morgan
Stanley International Magnum Equity Series
-- The Equity Growth Sub-Account, which invests in the Alger Equity Growth
Series
-- The Midcap Value Sub-Account, which invests in the Goldman Sachs Midcap
Value Series (formerly the Loomis Sayles Avanti Growth Series)
-- The Venture Value Sub-Account, which invests in the Davis Venture Value
Series
-- The Investors Sub-Account, which invests in the MFS Investors Series*
-- The Research Managers Sub-Account, which invests in the MFS Research
Managers Series*
-- The Growth and Income Sub-Account, which invests in the Westpeak Growth
and Income Series
-- The Stock Index Sub-Account, which invests in the Westpeak Stock Index
Series
-- The Balanced Sub-Account, which invests in the Loomis Sayles Balanced
Series
-- The Managed Sub-Account, which invests in the Back Bay Advisors Managed
Series
-- The Strategic Bond Opportunities Sub-Account, which invests in the
Salomon Brothers Strategic Bond Opportunities Series
-- The Bond Income Sub-Account, which invests in the Back Bay Advisors Bond
Income Series
-- The U.S. Government Sub-Account, which invests in the Salomon Brothers
U.S. Government Series
-- The Money Market Sub-Account, which invests in the Back Bay Advisors
Money Market Series
- --------
* Availability is subject to any necessary state insurance department
approvals.
The Zenith Fund is an open-end diversified management investment company,
more commonly known as a mutual fund. The Zenith Fund is an investment vehicle
for separate investment accounts of NELICO and of other life insurance
companies. Currently the Zenith Fund is the funding vehicle for the Variable
Account and for certain separate accounts of NELICO and MetLife that issue
variable annuity contracts.
The Variable Account purchases and sells Eligible Fund Shares at their net
asset value (without a deduction for sales load) determined as of the close of
regular trading on the New York Stock Exchange on each day when the exchange
is open for trading.
The investment objectives of the Eligible Funds' are described briefly
below. These objectives may not be met. More about the Eligible Funds,
including their investments, expenses, and risks is in the attached Zenith
Fund prospectus and the Statement of Additional Information.
A-28
<PAGE>
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 may be
higher or lower than the results of these funds. There is 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.
The LOOMIS SAYLES SMALL CAP SERIES investment objective is long-term capital
growth from investments in common stocks or their equivalents.
The MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES investment objective
is long-term capital appreciation through investment primarily in
international equity securities. In addition to the risks associated with
equity securities generally, foreign securities present additional risks.
The ALGER EQUITY GROWTH SERIES investment objective is long-term capital
appreciation.
The GOLDMAN SACHS MIDCAP VALUE SERIES investment objective is long-term
capital appreciation.
The DAVIS VENTURE VALUE SERIES investment objective is growth of capital.
The MFS INVESTORS SERIES investment objective is reasonable current income
and long-term growth of capital and income.
The MFS RESEARCH MANAGERS SERIES investment objective is long-term growth of
capital.
The WESTPEAK GROWTH AND INCOME SERIES investment objective is long-term
total return through investment in equity securities.
The WESTPEAK STOCK INDEX SERIES investment objective is investment results
that correspond to the composite price and yield performance of United States
publicly traded common stocks.
The LOOMIS SAYLES BALANCED SERIES investment objective is reasonable long-
term investment return from a combination of long-term capital appreciation
and moderate current income.
The BACK BAY ADVISORS MANAGED SERIES investment objective is a favorable
total return through investment in a diversified portfolio.
The SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES investment
objective is a high level of total return consistent with preservation of
capital.
The BACK BAY ADVISORS BOND INCOME SERIES investment objective is a high
level of current income consistent with protection of capital.
The SALOMON BROTHERS U.S. GOVERNMENT SERIES investment objective is a high
level of current income consistent with preservation of capital and
maintenance of liquidity.
The BACK BAY ADVISORS MONEY MARKET SERIES investment objective is the
highest possible level of current income consistent with preservation of
capital. An investment in the Money Market Series is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Although the Money Market Series seeks to maintain a net asset value of
$100.00 per share, it is possible to lose money by investing in the Money
Market Series.
The policy's basic objective is to provide benefits which increase when the
sub-account's performance is favorable. Historically, the performance of
common stocks over the long term has been superior to that of long or
A-29
<PAGE>
short term debt securities, although common stocks have been subject to more
dramatic changes in value over certain periods. Policy owners may want to
select the Small Cap, International Magnum Equity, Equity Growth, Midcap
Value, Venture Value, Investors, Research Managers, Stock Index or Growth and
Income Sub-Accounts, or some combination of these sub-accounts, for a long-
term time horizon, if willing to accept such risks of short term fluctuations
in value. See Appendix E: Long-Term Market Trends.
INVESTMENT MANAGEMENT
NEIM (formerly TNE Advisers), which is an indirect, wholly-owned subsidiary
of NELICO, is the investment adviser of each of the Series. The chart below
lists the sub-adviser of each Series. NEIM and each of the sub-advisers are
registered with the SEC as investment advisers under the Investment Advisers
Act of 1940.
<TABLE>
<CAPTION>
SERIES SUB-ADVISER
- ------ -----------
<S> <C>
Loomis Sayles Small Cap
Series Loomis, Sayles & Company, L.P.*
Morgan Stanley Interna-
tional Magnum Equity
Series Morgan Stanley Dean Witter Investment Management Inc.
Alger Equity Growth Se-
ries Fred Alger Management, Inc.
Goldman Sachs Midcap
Value Series Goldman Sachs Asset Management
Davis Venture Value Se-
ries Davis Selected Advisers, L.P.**
MFS Investors Series Massachusetts Financial Services Company
MFS Research Managers
Series Massachusetts Financial Services Company
Westpeak Growth and In-
come Series Westpeak Investment Advisors, L.P.*
Westpeak Stock Index Se-
ries Westpeak Investment Advisors, L.P.*
Loomis Sayles Balanced
Series Loomis, Sayles & Company, L.P.*
Back Bay Advisors Man-
aged Series Back Bay Advisors, L.P.*
Salomon Brothers Strate-
gic Bond Opportunities
Series Salomon Brothers Asset Management Inc***
Back Bay Advisors Bond
Income Series Back Bay Advisors, L.P.*
Salomon Brothers U.S.
Government Series Salomon Brothers Asset Management Inc
Back Bay Advisors Money
Market Series Back Bay Advisors, L.P.*
</TABLE>
- --------
* An affiliate of NELICO
** Davis Selected may also delegate any of its responsibilities to Davis
Selected Advisers-NY, Inc., a wholly-owned subsidiary of Davis Selected.
*** In connection with Salomon Brothers Asset Management's service as sub-
adviser to the Strategic Bond Opportunities Series, Salomon Brothers'
London-based affiliate, Salomon Brothers Asset Management Limited,
provides certain sub-advisory services to Salomon Brothers Asset
Management.
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, New England Investment Management
(formerly TNE Advisers. Inc.) became the adviser on May 1, 1995. The Morgan
Stanley International Magnum Equity Series' sub-adviser was Draycott Partners,
Ltd. until May 1, 1997, when Morgan Stanley Dean Witter Investment Management
(formerly 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.
The table on pages A-10 to A-11 shows the annual operating expenses of each
Series.
For more information about the Series' advisory agreements, see the attached
Zenith Fund prospectus and the Zenith Fund's Statement of Additional
Information.
A-30
<PAGE>
OTHER POLICY FEATURES
POLICY OWNER AND BENEFICIARY
You name the Policy Owner in the application but may change the owner. At
the death of the Policy Owner, his or her estate will become the Policy Owner
unless a successor Policy Owner has been named. The Policy Owner's rights
(except for rights to payment of benefits) terminate at the death of the
insured (or the second death under a Last Survivor Policy) or the receipt of
all death proceeds under an accelerated death benefits rider.
You also name the beneficiary in the application. You may change the
beneficiary of the Policy at any time before the death of the insured. The
beneficiary has no rights under the Policy until the death of the insured(s)
and must survive the insured(s) in order to receive the death proceeds. The
beneficiary may have no rights if the Owner elects to receive all death
proceeds payable under an accelerated death benefits rider. If no named
beneficiary survives the insured(s), we will pay the proceeds to the Policy
Owner.
A change of Policy Owner or beneficiary must be in written form satisfactory
to us and must be dated and signed by the Policy Owner making the change. The
change will be subject to all payments made and actions taken by us under the
Policy before we receive the signed change form at our Home Office.
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary
to the assignee. A collateral assignment of the Policy does not change the
Policy Owner or beneficiary, but their rights will be subject to the terms of
the assignment. Assignments will be subject to all payments made and actions
taken by us under the Policy before we receive a signed copy of the assignment
form is at our Home Office. We will not be responsible for determining whether
or not an assignment is valid. Changing the Policy Owner or assigning the
Policy may have tax consequences. (See "Tax Considerations" below.)
EXCHANGE OF POLICY
You may exchange the Policy within 24 months after it was issued for a
policy that provides fixed benefit insurance. The new policy will be issued by
us or MetLife, as described below, on any plan of whole life or endowment
insurance (or, if the Policy exchanged is a Last Survivor Policy, on any plan
of survivorship insurance) with a level face amount.
The new policy will be issued with:
-- the same insured, Face Amount, Policy Date and risk class(es)
-- the age of the insured on the Policy Date
-- a rider that purchases paid-up additions if the cash value is more than
is required to purchase the new policy.
The new policy will be issued subject to any cost or credit and the
repayment of any Policy loan balance, and subject to any assignments of this
Policy.
NELICO'S DISTRIBUTION AGREEMENT
We sell the Policies through licensed insurance agents. These agents are
also registered representatives of New England Securities. New England
Securities, the principal underwriter of the variable life insurance policies,
is a Massachusetts corporation organized in 1968 and an indirect, wholly-owned
subsidiary of NELICO. New England Securities is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. New England Securities
intends to enter into selling agreements with other broker-dealers registered
under the Securities Exchange Act of 1934 whose representatives
A-31
<PAGE>
are authorized by applicable law to sell variable life insurance policies. In
some states, Policies may be sold by representatives or employees of banks
that may be acting as broker-dealers.
We will pay compensation to the New England Securities registered
representatives or other broker-dealers or banks involved in the sale of a
Policy. Such compensation will generally have a present value that does not
exceed 8% of premiums under the Policy (although a lower amount may be paid in
some circumstances, such as sales of the Policies to a person over age 75).
Such compensation may be paid either as a percentage of premiums at the time
we receive them, as a percentage of cash value on an ongoing basis, or in some
combination of both.
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. It is the principal underwriter for the
Zenith Fund; The New England Variable Account; New England Retirement
Investment Account; New England Variable Annuity Separate Account; and New
England Variable Annuity Fund I. New England Securities also sells interests
in various investment partnerships.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
We can challenge that amount of the death benefit that results from the
initial premium for two years during an insured's lifetime from the date of
issue, based on misrepresentations made in the application. We can challenge
any amount of the death benefit that results from an additional payment for
which proof of insurability is required for two years during an insured's
lifetime from receipt of the payment. However, if an insured dies within two
years of the date of issue, we can challenge all or part of the Policy at any
time based on misrepresentations in the application. If an insured dies within
two years of the receipt of an additional payment for which proof of
insurability is required, NELICO can challenge any amount of the death benefit
resulting from that additional payment at any time with respect to
misrepresentation.
MISSTATEMENT OF AGE OR SEX
If the application misstates the insured's age (or either insured's age
under a Last Survivor Policy) or sex, the Policy's death benefit will be the
amount that the most recent Monthly Deduction (for Policies issued in
Maryland, the most recent cost of insurance deduction) which was made would
provide, based on the insured's correct age(s) and sex(es).
SUICIDE
Single Insured Policies. If the Insured dies by suicide while sane or insane
within two years (or less, in some states) from the date of issue (or the
Policy Date, if earlier, in some states), the Death Benefit is limited to: the
initial premium; plus any additional payments made; less any outstanding
Policy Loan Balance and partial surrenders (or such greater amount, in some
states).
Last Survivor Policies. If either of the Insureds dies by suicide while sane
or insane within two years (or less, in some states) from the date of issue
(or the Policy Date, if earlier, in some states) set forth in the Policy, the
Death Benefit is limited to: the initial premium; plus any additional payments
made; less any outstanding Policy Loan Balance and partial surrenders (or such
greater amount, in some states). The Policy will terminate on the first death
by suicide.
Within 60 days after the first death by suicide under a Last Survivor
Policy, the Owner can purchase new life insurance on an Eligible Insured
without evidence of insurability. An Eligible Insured is a surviving Insured
whom we would have issued a single life policy on the Policy Date of this
Policy. The new policy will be issued subject to certain conditions. Contact
your agent or us.
A-32
<PAGE>
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as
tax advice. Counsel or other competent tax advisors should be consulted for
more complete information. This discussion is based upon our understanding of
the present Federal income tax laws. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to how
they may be interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. We believe that the Policy
should satisfy the applicable requirements. However, with respect to Policies
issued on a rated basis, it is not clear whether such Policies will in all
cases satisfy the applicable requirements. If it is subsequently determined
that a Policy does not satisfy the applicable requirements, we may take
appropriate steps to bring the Policy into compliance with such requirements
and we reserve the right to restrict Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to
allocate premiums and cash values, have not been explicitly addressed in
published rulings. While we believe that the Policies do not give Policy
Owners investment control over Variable Account assets, we reserve the right
to modify the Policies as necessary to prevent a Policy Owner from being
treated as the owner of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Eligible Funds, will satisfy these
diversification requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Policy Owner or beneficiary. A
tax advisor should be consulted on these consequences.
Generally, the Policy Owner will not be deemed to be in constructive receipt
of the Policy Cash Value until there is a distribution.
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life
insurance contracts are classified as "Modified Endowment Contracts," with
less favorable income tax treatment than other life insurance contracts.
Although the rules are rather complex, in general, a contract which requires
fewer than seven level annual premiums to provide fully paid-up future
benefits will be a Modified Endowment Contract. Since the Policy only requires
a single premium payment to provide such paid-up benefits, the Policy will in
most cases be a Modified Endowment Contract. As a result, when distributions
from a Policy occur, or when loans are taken out from or secured by a Policy,
the tax consequences will generally be governed by the rules applicable to
Modified Endowment Contracts. These rules are as follows:
(1) All distributions other than death benefits, including distributions
upon surrender and withdrawals, from a Modified Endowment Contract will
be treated first as distributions of gain taxable as ordinary income
A-33
<PAGE>
and as tax-free recovery of the Policy Owner's investment in the Policy
only after all gain has been distributed.
(2) Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject to
tax except where the distribution or loan is made when the Policy Owner
has attained age 59 1/2 or is disabled, or where the distribution is
part of a series of substantially equal periodic payments for the life
(or life expectancy) of the Policy Owner or the joint lives (or joint
life expectancies) of the Policy Owner and the Policy Owner's
beneficiary or designated beneficiary.
If the Policy is issued in a Section 1035 tax-free exchange for a life
insurance policy that is not a Modified Endowment Contract, the new Policy may
not be classified as a Modified Endowment Contract if the death benefit of the
Policy is greater than or equal to the death benefit of the policy being
exchanged. The payment of premiums at the time of or after the exchange may,
however, cause the newly issued Policy to become a Modified Endowment
Contract. In the event the Policy is not classified as a Modified Endowment
Contract, the following rules will apply:
(1) Distributions other than death benefits will generally be treated first
as a recovery of the Policy Owner's investment in the Policy and only
after the recovery of all investment in the Policy as taxable income.
However, certain distributions which must be made in order to enable
the Policy to continue to qualify as a life insurance contract for
Federal income tax purposes if Policy benefits are reduced during the
first 15 Policy years may be treated in whole or in part as ordinary
income subject to tax.
(2) Loans from or secured by a Policy that is not a Modified Endowment
Contract are generally not treated as distributions. However, the tax
consequences associated with preferred loans and loans where the
interest rate we credit is only slightly lower than the interest rate
we charge is less clear and a tax advisor should be consulted about
such loans.
(3) Finally, neither distributions from nor loans from or secured by a
Policy that is not a Modified Endowment Contract are subject to the 10
percent additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate Premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
POLICY LOANS. In general, interest on a Policy loan will not be deductible.
Before taking out a Policy loan, you should consult a tax advisor as to the
tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by
NELICO (or its affiliates) to the same Policy Owner during any calendar year
are treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Policy Owner's income when a taxable distribution
occurs.
ACCELERATED BENEFITS RIDER. If such a rider is made available, we believe
that payments received under the accelerated benefit rider should be fully
excludable from the gross income of the Policy Owner. (See "Acceleration of
Death Benefit Rider" for more information regarding the rider.) However, you
should consult a qualified tax adviser about the consequences of adding this
rider to a Policy or requesting payment under this rider.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance,
transfer and other tax consequences depend on the individual circumstances of
each Policy Owner or beneficiary. A tax advisor should be consulted on these
consequences.
The tax consequences of continuing the Policy beyond an insured's 100th year
are unclear. You should consult a tax advisor if you intend to keep the Policy
in force beyond an insured's 100th year.
A-34
<PAGE>
If a trustee under a pension or profit-sharing plan, or similar deferred
compensation arrangement, owns a Policy, the Federal, state and estate tax
consequences could differ. The amounts of life insurance that may be purchased
on behalf of a participant in a pension or profit-sharing plan are limited.
The current cost of insurance for the net amount at risk is treated as a
"current fringe benefit" and must be included annually in the plan
participant's gross income. We report this cost (generally referred to as the
"P.S. 58" cost) 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 is not taxable. However, the cash value will generally be taxable to the
extent it exceeds the participant's cost basis in the Policy. Policies owned
under these types of plans may be subject to restrictions under the Employee
Retirement Income Security Act of 1974 ("ERISA"). You should consult a
qualified advisor regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy
tax requirements to be treated as nontaxable. Plan loan requirements and
provisions may differ from Policy loan provisions. Failure of plan loans to
comply with the requirements and provisions of the DOL regulations and of tax
law may result in adverse tax consequences and/or adverse consequences under
ERISA. Plan fiduciaries and participants should consult a qualified advisor
before requesting a loan under a Policy held in connection with a retirement
plan.
Businesses can use the Policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare
benefit plans, retiree medical benefit plans and others. The tax consequences
of such plans may vary depending on the particular facts and circumstances. If
you are purchasing the Policy for any arrangement the value of which depends
in part on its tax consequences, you should consult a qualified tax advisor.
In recent years, moreover, Congress has adopted new rules relating to life
insurance owned by businesses. Any business contemplating the purchase of a
new Policy or a change in an existing Policy should consult a tax advisor.
We believe that Policies subject to Puerto Rican tax law will generally
receive treatment similar, with certain modifications, to that described
above. Among other differences, Policies governed by Puerto Rican tax law are
not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax advisor with respect to
Puerto Rican tax law governing the Policies.
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 otherwise. Consult a tax advisor with
respect to legislative developments and their effect on the Policy.
NELICO'S INCOME TAXES
Under current Federal income tax law, NELICO is not taxed on the Variable
Account's operations. Thus, currently we do not deduct a charge from the
Variable Account for Federal income taxes. We reserve the right to charge the
Variable Account for any future Federal income taxes we may incur.
Under current laws in several states, we may incur state and local taxes (in
addition to premium taxes). These taxes are not now significant and we are not
currently charging for them. If they increase, we may deduct charges for such
taxes.
A-35
<PAGE>
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<C> <S>
James M. Benson................. Chairman, President and Chief Executive
Officer of NELICO since 1998; formerly,
Director, President and Chief Operating
Officer 1997-1998 of NELICO; President and
Chief Executive Officer 1996-1997 of
Equitable Life Assurance Society and
President and Chief Operating Officer 1996-
1997 of Equitable Companies, Inc.; President
and Chief Operating Officer 1994-1996 of
Equitable Life Assurance Society.
Robert H. Benmosche ............ Director of NELICO since 1998 and Chairman,
Metropolitan Life Insurance Co. President and Chief Executive Officer of
One Madison Avenue Metropolitan Life Insurance Company since
New York, NY 10010 1998; formerly, Director, President and
Chief Operating Officer 1997-1998; Executive
Vice President 1995-1997 of Metropolitan
Life; Executive Vice President 1989-1995 of
PaineWebber.
Susan C. Crampton............... Director of NELICO since 1996 and serves as
6 Tarbox Road Principal of The Vermont Partnership, a
Jericho, VT 05465 business consulting firm located in Jericho,
Vermont since 1989; formerly, Director 1989-
1996 of New England Mutual.
Edward A. Fox................... Director of NELICO since 1996 and Chairman of
RR Box 67-15 the Board of SLM Holdings since 1997;
Harborside, ME 04642 formerly, Director 1994-1996 of New England
Mutual.
George J. Goodman............... Director of NELICO since 1996 and author,
Adam Smith's Money World television journalist, and editor.
50th Floor, Craig Drill Capital
General Motors Building
767 Fifth Street
New York, NY 10153
Dr. Evelyn E. Handler........... Director of NELICO since 1996 and President
Ten Sterling Place of Merrimack Higher Education Associates,
Bow, NH 03304 Inc. since 1998; formerly Director 1987-1996
of New England Mutual and Executive Director
and Chief Executive Officer 1994-1997 of the
California Academy of Sciences.
Philip K. Howard, Esq........... Director of NELICO since 1996 and Partner of
Howard, Smith & Levin LLP the law firm of Howard, Smith & Levin LLP in
1330 Avenue of the Americas New York City.
New York, NY 10019
Bernard A. Leventhal............ Director of NELICO since 1996; formerly, Vice
Burlington Industries Chairman of the Board of Directors 1995-1998
1345 Avenue of the Americas of Burlington Industries, Inc.; Director and
New York, NY 10105 Executive Vice President 1993-1995 of
Burlington Menswear Division.
Thomas J. May................... Director of NELICO since 1996 and Chairman,
Boston Edison Company President and Chief Executive Officer of
800 Boylston Street Boston Edison Company since 1994; formerly,
Boston, MA 02199 Director 1994-1996 of New England Mutual.
Stewart G. Nagler............... Director of NELICO since 1996 and Vice
Metropolitan Life Chairman and Chief Financial Officer of
One Madison Avenue Metropolitan Life Insurance Company since
New York, NY 10010 1998; formerly, Senior Executive Vice
President and Chief Financial Officer 1986-
1998 of Metropolitan Life Insurance Company.
</TABLE>
A-36
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<C> <S>
Catherine A. Rein......... Director of NELICO since 1998 and President and
Metropolitan Auto Chief Executive Officer since 1999 of
and Home Insurance Metropolitan Auto and Home Insurance Company;
Company formerly, Senior Executive Vice President 1998-
700 Quaker Lane 1999 and Executive Vice President 1989-1998 of
Warwick, RI 02887 Metropolitan Life Insurance Company.
Rand N. Stowell........... Director of NELICO since 1996 and President of
P.O. Box 60 United Timber Corp. of Dixfield, Maine; formerly,
Weld, ME 04285 Director 1990-1996 of New England Mutual.
Alexander B. Trowbridge... Director of NELICO since 1996 and President of
Trowbridge Partners, Inc. Trowbridge Partners, Inc. in Washington, DC;
1317 F Street, NW, formerly, Director 1983-1996 of New England
Suite 500 Mutual.
Washington, D.C. 20004
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<C> <S>
James M. Benson........... See Directors above
David W. Allen............ Senior Vice President of NELICO since 1996;
formerly, Senior Vice President 1994-1996 of New
England Mutual.
A. Frank Beaz............. Executive Vice President since 1999; formerly,
Senior Vice President 1998-1999 of NELICO; Chief
Administrative Officer and Senior Vice President
1997-1998 of Equitable Distributors, Inc. and
Senior Vice President 1994-1997 of The Equitable
Life Insurance Companies.
Mary Ann Brown............ President, New England Products and Services (a
business unit of NELICO) since 1998; formerly,
Director, Worldwide Life Insurance 1997-1998 of
Swiss Reinsurance New Markets; President and
Chief Executive Officer 1996-1998 of Atlantic
International Reinsurance Company; Executive Vice
President 1996-1997 of Swiss Re Atrium and Swiss
Re Services and Principal 1987-1996 of
Tillinghast/Towers Perrin.
Anthony J. Candito........ President, NEF Information Services (a business
unit of NELICO) and Chief Information Officer
since 1998; formerly, Senior Vice President 1996-
1998 of NELICO; Senior Vice President 1995-1996
and Vice President 1994-1995 of New England
Mutual.
Thom A. Faria............. President, Career Agency System (a business unit
of NELICO) since 1996; formerly, Executive Vice
President in 1996 and 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 of New England
Mutual.
Daniel D. Jordan.......... Second Vice President, Counsel, Secretary and
Clerk since 1996; formerly, Counsel and Assistant
Secretary 1990-1996 of New England Mutual.
Stephan M. Largent........ Senior Vice President of NELICO since 1998;
formerly, President 1995-1998 of First Variable
Life Company, President 1993-1995 of ING
Equities, Inc. and Vice President 1993-1995 of
Security Life of Denver.
Alan C. Leland, Jr........ Senior Vice President of NELICO since 1996;
formerly, Vice President 1984-1996 of New England
Mutual.
</TABLE>
A-37
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<C> <S>
Bruce C. Long............. President, New England Annuities (a business unit of
NELICO) since 1996; formerly, President 1994-1996 of
New England Annuities (a business unit of New
England Mutual).
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.
Thomas W. Moore........... Senior Vice President of NELICO since 1996; formerly,
Vice President 1990-1996 of New England Mutual.
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 of Liberty Life Assurance
Company.
David Y. Rogers........... Executive Vice President and Chief Financial Officer
of NELICO since 1999; formerly, Partner, Actuarial
Consulting 1992-1999 of Price Waterhouse Coopers
LLP.
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.
H. James Wilson........... Executive Vice President and General Counsel of
NELICO since 1996; formerly, Executive Vice
President and General Counsel 1993-1996 of New
England Mutual.
John W. Wright............ President, New England Employee Benefits Group (a
business unit of NELICO) since 1996; formerly,
President 1993-1996 of New England Employee Benefits
Group (a business unit 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 of
New England Mutual.
</TABLE>
The principal business address for each of the directors and officers is the
same as our's except where indicated.
Like all financial services providers, we utilize systems that may be
affected by Year 2000 transition issues and we rely on a number of third
parties, including banks, custodians, and investment managers, that also may
be affected. We and our affiliates have developed, and are in the process of
implementing, a Year 2000 transition plan. We are also confirming that our
service providers are also so engaged. The resources that are being devoted to
this effort are substantial. It is difficult to predict whether the amount of
resources being devoted, or the outcome of these efforts, will have any
negative impact. If we or our service providers, or the Eligible Funds are not
successful in the Year 2000 transition, computer systems could fail or
erroneous results or delays could occur when processing information after
December 31, 1999. However, as of the date of this prospectus, it is not
anticipated that you will experience negative effects on your investment, or
on the Policy services provided as a result of Year 2000 transition
implementation. Currently, we have converted our systems to be Year 2000
compliant. We are conducting systems testing and compliance verification which
we expect to complete in mid-1999. 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
We own the Eligible Fund shares held in the Variable Account and vote those
shares at meetings of the Eligible Fund shareholders. As required by
applicable Federal securities law, you have the right to instruct us how to
vote the shares that are attributable to your Policy.
A-38
<PAGE>
We determine Policy Owners who are entitled to give voting instructions and
the number of shares attributable to their Policies as of the meeting record
date. If we do not receive timely instructions, we will vote shares in the
same proportion as the aggregate cash value of policies giving instructions,
respectively, to vote for, against, or withhold votes on a proposition, bears
to the total cash value in that Sub-Account for all policies for which voting
instructions are received. No voting privileges apply to cash value removed
from the Variable Account as a result of a Policy loan. We will vote all
Zenith Fund shares held in our or an affiliate's general account (or any
unregistered separate account for which voting privileges were not extended)
in the same proportion as the total of (i) shares for which we received voting
instructions and (ii) shares that we vote in proportion to such voting
instructions.
The Eligible Funds' Board of Trustees monitor events to identify conflicts
that may arise from the sale of Eligible Fund shares to variable life and
variable annuity separate accounts of affiliated and, if applicable,
unaffiliated insurance companies. Conflicts could result from changes in state
insurance law or Federal income tax law, changes in investment management of
any of the Eligible Funds, or differences in voting instructions given by
variable life and variable annuity contract owners. If there is a material
conflict, the Board of Trustees will determine what action should be taken,
including the removal of the affected Sub-Accounts from the Eligible Fund(s),
if necessary. If we believe any Eligible Fund action is insufficient, we will
consider taking other action to protect Policy Owners. There could, however,
be unavoidable delays or interruptions of operations of the Variable Account
that we may be unable to remedy.
We may disregard voting instructions for changes in the investment policy,
investment adviser or principal underwriter of the Eligible Fund portfolio if
required by state insurance law or if we (i) reasonably disapprove of the
changes and (ii) in the case of a change in investment policy or investment
adviser, make a good faith determination that the proposed change is contrary
to state law, prohibited by state regulatory authorities, inconsistent with a
sub-account's investment objectives, or quality of investments purchased by
the sub-account or similar sub-accounts with investments similar to those of
the sub-account. If we do disregard voting instructions, the next report to
Policy owners will include a summary of that action and the reasons for it.
RIGHTS RESERVED BY NELICO
We and our affiliates may change the voting procedures described above, and
vote Eligible Fund shares without Policy Owner instructions, if the securities
laws change. We also reserve the right: (1) to add sub-accounts; (2) to
combine sub-accounts; (3) to invest some or all of the assets of the Variable
Account other than in the Zenith Fund; (4) to invest some or all of the assets
of the Variable Account in any other investment company chosen by us; (5) to
remove a portfolio in which the Sub-Account is invested or to substitute a
different portfolio; (6) to operate the Variable Account as a management
investment company under the Investment Company Act of 1940 or in any other
form; and (7) to deregister the Variable Account under the Investment Company
Act of 1940. We will exercise these rights in accordance with applicable law,
including approval of Policy Owners if required. We will notify you if
exercise of any of these rights would result in a material change in the
Variable Account or its investments.
TOLL-FREE NUMBERS
For Sub-Account transfers or premium reallocations, call 1-877-633-7785.
To request a copy of the Statement of Additional Information for the New
England Zenith Fund, call 1-800-356-5015.
You may also call our Customer Service at 1-877-633-7785 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
Dollar Cost Averaging, Asset Reallocation or Policy loans of less than
$25,000. Requests must be in writing if the Policy is owned by a corporation
or a pension trust.
A-39
<PAGE>
For all other Policy changes, please contact your registered representative.
We plan to make available later in 1999 a toll-free number that will provide
information about daily unit values of the Variable Account Sub-Accounts. The
toll-free number will be 1-800-333-2501.
REPORTS
We will send you an annual statement showing your Policy's death benefit,
cash value and any outstanding Policy loan balance. We will also confirm
Policy loans, sub-account transfers, lapses, surrenders and other Policy
transactions.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
Professional organizations may endorse the Policies. We may use such
endorsements in Policy sales material. We may pay the professional
organization for the use of its customer or mailing lists to distribute Policy
promotional materials. An endorsement by a third party does not predict the
future performance of the Policies. Articles discussing the Variable Account's
investment performance, rankings and other characteristics may appear in
publications. Some or all of these publishers or ranking services (including,
but not limited to, Lipper Analytical Services, Inc. and Morningstar, Inc.)
may publish their own rankings or performance reviews of variable contract
separate accounts, including the Variable Account. We may use references to or
reprints of such articles or rankings as sales material and may include
rankings that indicate the names of other variable contract separate accounts
and their investment experience.
Publications may use articles and releases, developed by us, the Eligible
Funds and other parties, about the Variable Account or the Eligible Funds. We
may use references to or reprints of such articles in sales material 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 and include excerpts from media articles.
We are a member of the Insurance Marketplace Standards Association ("IMSA"),
and 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.
Policy sales material may refer to historical, current and prospective
economic trends. In addition, sales material may discuss topics of general
investor interest for the benefit of registered representatives and
prospective Policy Owners. These materials may include, but are not limited
to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by H. James Wilson, General Counsel of NELICO. Sutherland
Asbill & Brennan LLP, of Washington, D.C., has provided advice on certain
matters relating to the federal securities laws.
A-40
<PAGE>
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which we filed with the SEC. You may obtain copies of such
additional information from the SEC upon payment of the prescribed fee, or for
free by accessing the SEC's internet site at http://www.sec.gov.
EXPERTS
The financial statements of New England Variable Life Separate Account of
New England Life Insurance Company ("NELICO") and the consolidated financial
statements of NELICO and subsidiaries included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of
such firm given upon their authority 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-41
<PAGE>
APPENDIX A:
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies work. They show how
the death benefit, net cash value and cash value could vary over an extended
period of time assuming hypothetical gross rates of return (i.e., investment
income and capital gains and losses, realized or unrealized) for the Variable
Account equal to constant after tax annual rates of 0%, 6% and 12%. We based
the tables on an initial premium of $50,000 and show the initial death benefit
based on that premium. We assumed the insureds to be in the standard nonsmoker
underwriting class. We first give values based on current Policy charges and
then based on guaranteed Policy charges. (See "Charges and Expenses.") The
issue ages represented in the illustrations are age 70 or less; if an issue
age were over age 70, the death benefit, net cash value and cash value in the
illustrations based on current Policy charges would be lower, all other things
being equal, because the current cost of insurance charge under the Policy
increases for issue ages over 70. These tables may assist in the comparison of
death benefits, net cash values and cash values for the Policies with those
under other variable life insurance policies that may be issued by NELICO or
other companies.
The illustrated 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 during the
period, if the initial premium was paid in another amount, or additional
payments were made. They would also be different depending on the allocation
of cash value among the Variable Account's Sub-Accounts, if the actual gross
rate of return for all Sub-Accounts averaged 0%, 6% or 12%, but varied above
or below that average for individual Sub-Accounts. They would also differ if a
Policy loan or partial surrender were made during the period of time
illustrated, or if the insured were in another risk class.
The death benefits, net cash values and cash values shown in the tables
reflect a Monthly Deduction (consisting of an administrative charge, a charge
for the cost of insurance, a mortality and expense risk charge, and, during
the first ten Policy Years, a sales charge and state premium tax charge) from
cash value on each Monthly Deduction Date. (Because an initial premium of
$50,000 has been assumed for purposes of these illustrations, no Monthly
Maintenance Charge is reflected in the illustrations. If we assumed an initial
premium of less than $50,000, a $2.50 Monthly Maintenance Charge would apply.)
The net cash values shown in the tables reflect the fact that we deduct a
Surrender Charge (consisting of a deferred sales charge) from cash value upon
surrender or lapse during the first nine Policy Years. (See "Charges and
Expenses.") The illustrations reflect an average of the investment advisory
fees and operating expenses of the Eligible Funds, at an annual rate of .78%
of the average daily net assets of the Eligible Funds. This average reflects
voluntary expense cap and expense deferral arrangements between NEIM and the
Zenith Fund, under which NEIM bears operating expenses of the Zenith Fund that
exceed certain amounts. NEIM could terminate the expense cap and expense
deferral arrangements at any time.
Taking account of the average investment advisory fee and operating expenses
of the Eligible Funds, the gross annual rates of return of 0%, 6% and 12%
correspond to net investment experience at constant annual rates of -0.78%,
5.18%%, and 11.13%, respectively. (See "Net Investment Experience.")
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are
currently made. If any such charges are imposed in the future, the gross
annual rate of return would have to exceed the rates shown by an amount
sufficient to cover the tax charges, in order to produce the death benefits,
net cash values and cash values illustrated. (See "Charge for NELICO's Income
Taxes.")
The second column of each table shows the amount which would accumulate if
the initial premium of $50,000 were invested to earn interest, after taxes, of
5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the initial premium could have
been invested outside the Policy to arrive at the net cash value of the
Policy.
A-42
<PAGE>
The internal rate of return on the death benefit is equivalent to an interest
rate (after taxes) at an amount equal to the initial premium could have been
invested outside the Policy to arrive at the death benefit of the Policy. The
internal rate of return is compounded annually.
We will furnish upon request a personalized illustration reflecting the
proposed insured's age, sex, and underwriting classification. Where
applicable, we will also furnish upon request an illustration for a Policy
which is not affected by the sex of the insured.
A-43
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$129,122 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE ON NET CASH VALUE
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------- ------------------------ ------------------------ -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- --------- ------ ------- --------- ------ ------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 121,280 128,565 135,838 44,457 47,368 50,274 48,457 51,368 54,274 -11.09 -5.26 0.55
2 55,125 113,947 128,047 142,944 42,962 48,773 54,912 46,962 52,773 58,912 -7.31 -1.23 4.80
3 57,881 107,093 127,575 150,473 42,012 50,716 60,448 45,512 54,216 63,948 -5.64 0.48 6.53
4 60,775 100,690 127,152 158,458 41,108 52,700 66,414 44,108 55,700 69,414 -4.78 1.32 7.35
5 63,814 94,707 126,781 166,934 40,247 54,723 72,846 42,747 57,223 75,346 -4.25 1.82 7.82
6 67,005 89,118 126,465 175,937 39,427 56,788 79,786 41,427 58,788 81,786 -3.88 2.14 8.10
7 70,355 83,894 126,203 185,506 38,649 58,897 87,277 40,149 60,397 88,777 -3.61 2.37 8.28
8 73,873 79,009 125,993 195,673 37,910 61,049 95,365 38,910 62,049 96,365 -3.40 2.53 8.41
9 77,566 74,439 125,836 206,485 37,209 63,246 104,101 37,709 63,746 104,601 -3.23 2.65 8.49
10 81,445 70,165 125,736 217,993 36,546 65,490 113,542 36,546 65,490 113,542 -3.09 2.74 8.55
15 103,946 55,050 132,059 301,466 32,684 78,405 178,984 32,684 78,405 178,984 -2.79 3.04 8.87
20 132,665 50,000 140,824 423,291 29,230 93,866 282,146 29,230 93,866 282,146 -2.65 3.20 9.04
25 169,318 50,000 152,747 604,542 26,142 112,377 444,767 26,142 112,377 444,767 -2.56 3.29 9.14
30 216,097 50,000 168,983 880,617 23,379 134,539 701,120 23,379 134,539 701,120 -2.50 3.35 9.20
35 275,801 50,000 189,988 1,303,648 20,909 161,071 1,105,227 20,909 161,071 1,105,227 -2.46 3.40 9.25
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL
GROSS ANNUAL
END OF RATE OF RETURN OF
POLICY -----------------------
YEAR 0% 6% 12%
- ------ ------- ------- -------
<S> <C> <C> <C>
1 142.56 157.13 171.68
2 50.96 60.03 69.08
3 28.90 36.65 44.38
4 19.13 26.28 33.42
5 13.63 20.45 27.27
6 10.11 16.73 23.33
7 7.67 14.14 20.60
8 5.89 12.25 18.60
9 4.52 10.80 17.07
10 3.45 9.66 15.86
15 0.64 6.69 12.72
20 0 5.31 11.27
25 0 4.57 10.48
30 0 4.14 10.03
35 0 3.89 9.76
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-44
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$129,122 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ----------------------- --------------------- --------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- ------- ------ ------ ------- ------ ------ ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 120,861 128,126 135,379 44,290 47,193 50,090 48,290 51,193 54,090 -11.42 -5.61 0.18
2 55,125 113,129 127,139 141,940 42,625 48,398 54,499 46,625 52,398 58,499 -7.67 -1.61 4.40
3 57,881 105,892 126,159 148,820 41,502 50,115 59,745 45,002 53,615 63,245 -6.02 0.08 6.12
4 60,775 99,117 125,186 156,033 40,419 51,839 65,351 43,419 54,839 68,351 -5.18 0.91 6.92
5 63,814 92,776 124,221 163,595 39,375 53,568 71,340 41,875 56,068 73,840 -4.67 1.39 7.37
6 67,005 86,840 123,263 171,525 38,368 55,300 77,735 40,368 57,300 79,735 -4.32 1.69 7.63
7 70,355 81,284 122,313 179,839 37,400 57,035 84,565 38,900 58,535 86,065 -4.06 1.90 7.80
8 73,873 76,083 121,370 188,557 36,469 58,772 91,860 37,469 59,772 92,860 -3.87 2.04 7.90
9 77,566 71,214 120,434 197,698 35,576 60,510 99,650 36,076 61,010 100,150 -3.71 2.14 7.96
10 81,445 66,657 119,506 207,282 34,718 62,245 107,963 34,718 62,245 107,963 -3.58 2.21 8.00
15 103,946 50,000 118,776 271,344 29,373 70,518 161,100 29,373 70,518 161,100 -3.48 2.32 8.11
20 132,665 50,000 118,050 355,229 23,395 78,686 236,779 23,395 78,686 236,779 -3.73 2.29 8.09
25 169,318 50,000 117,328 465,083 14,180 86,320 342,166 14,180 86,320 342,166 -4.92 2.21 8.00
30 216,097 0 116,611 608,962 0 92,842 484,837 0 92,842 484,837 -- 2.08 7.87
35 275,801 0 115,898 797,410 0 98,258 676,041 0 98,258 676,041 -- 1.95 7.72
<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>
1 141.72 156.25 170.76
2 50.42 59.46 68.49
3 28.42 36.14 43.85
4 18.66 25.79 32.91
5 13.16 19.96 26.75
6 9.64 16.23 22.81
7 7.19 13.63 20.07
8 5.39 11.72 18.05
9 4.01 10.26 16.50
10 2.92 9.10 15.28
15 0 5.94 11.94
20 0 4.39 10.30
25 0 3.47 9.33
30 0 2.86 8.69
35 0 2.43 8.23
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-45
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$145,611 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ------------------------- ------------------------ ------------------------ ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- --------- ------ ------- --------- ------ ------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 136,793 145,010 153,213 44,457 47,368 50,274 48,457 51,368 54,274 -11.09 -5.26 0.55
2 55,125 128,536 144,442 161,247 42,962 48,773 54,912 46,962 52,773 58,912 -7.31 -1.23 4.80
3 57,881 120,809 143,913 169,744 42,012 50,716 60,448 45,512 54,216 63,948 -5.64 0.48 6.53
4 60,775 113,576 143,424 178,737 41,108 52,700 66,414 44,108 55,700 69,414 -4.78 1.32 7.35
5 63,814 106,802 142,971 188,252 40,247 54,723 72,846 42,747 57,223 75,346 -4.25 1.82 7.82
6 67,005 100,455 142,552 198,318 39,427 56,788 79,786 41,427 58,788 81,786 -3.88 2.14 8.10
7 70,355 94,502 142,160 208,961 38,649 58,897 87,277 40,149 60,397 88,777 -3.61 2.37 8.28
8 73,873 88,912 141,786 220,201 37,910 61,049 95,365 38,910 62,049 96,365 -3.40 2.53 8.41
9 77,566 83,659 141,423 232,062 37,209 63,246 104,101 37,709 63,746 104,601 -3.23 2.65 8.49
10 81,445 78,725 141,076 244,587 36,546 65,490 113,542 36,546 65,490 113,542 -3.09 2.74 8.55
15 103,946 61,033 146,412 334,232 32,684 78,405 178,984 32,684 78,405 178,984 -2.79 3.04 8.87
20 132,665 50,000 153,586 461,651 29,230 93,866 282,146 29,230 93,866 282,146 -2.65 3.20 9.04
25 169,318 50,000 162,966 644,985 26,142 112,377 444,767 26,142 112,377 444,767 -2.56 3.29 9.14
30 216,097 50,000 176,343 918,974 23,379 134,539 701,120 23,379 134,539 701,120 -2.50 3.35 9.20
35 275,801 50,000 194,572 1,335,103 20,909 161,071 1,105,227 20,909 161,071 1,105,227 -2.46 3.40 9.25
<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>
1 173.59 190.02 206.43
2 60.33 69.97 79.58
3 34.19 42.25 50.29
4 22.77 30.14 37.50
5 16.39 23.38 30.36
6 12.33 19.08 25.81
7 9.52 16.10 22.67
8 7.46 13.92 20.36
9 5.89 12.25 18.60
10 4.64 10.93 17.21
15 1.34 7.43 13.50
20 0 5.77 11.76
25 0 4.84 10.77
30 0 4.29 10.19
35 0 3.96 9.84
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-46
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$145,611 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ----------------------- ---------------------- ---------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- ------- ------ ------- ------- ------ ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 136,295 144,488 152,667 44,281 47,183 50,080 48,281 51,183 54,080 -11.44 -5.63 0.16
2 55,125 127,576 143,374 160,066 42,611 48,383 54,481 46,611 52,383 58,481 -7.68 -1.63 4.39
3 57,881 119,414 142,269 167,824 41,487 50,097 59,725 44,987 53,597 63,225 -6.03 0.06 6.10
4 60,775 111,774 141,172 175,958 40,408 51,825 65,334 43,408 54,825 68,334 -5.19 0.90 6.92
5 63,814 104,623 140,084 184,487 39,375 53,568 71,340 41,875 56,068 73,840 -4.67 1.39 7.37
6 67,005 97,930 139,004 193,429 38,386 55,325 77,770 40,386 57,325 79,770 -4.31 1.70 7.64
7 70,355 91,664 137,933 202,804 37,443 57,101 84,661 38,943 58,601 86,161 -4.05 1.92 7.81
8 73,873 85,799 136,869 212,634 36,548 58,897 92,053 37,548 59,897 93,053 -3.84 2.07 7.93
9 77,566 80,310 135,814 222,941 35,699 60,718 99,990 36,199 61,218 100,490 -3.67 2.18 8.00
10 81,445 75,171 134,767 233,747 34,896 62,561 108,509 34,896 62,561 108,509 -3.53 2.27 8.06
15 103,946 55,797 133,944 305,972 29,880 71,728 163,851 29,880 71,728 163,851 -3.37 2.43 8.23
20 132,665 50,000 133,126 400,533 25,044 81,362 244,793 25,044 81,362 244,793 -3.40 2.46 8.27
25 169,318 50,000 132,312 524,345 18,782 91,240 361,577 18,782 91,240 361,577 -3.84 2.44 8.24
30 216,097 50,000 131,504 686,490 7,951 100,329 523,750 7,951 100,329 523,750 -5.95 2.35 8.14
35 275,801 0 130,700 898,855 0 108,196 744,091 0 108,196 744,091 -- 2.23 8.02
<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>
1 172.59 188.98 205.33
2 59.73 69.34 78.92
3 33.67 41.70 49.73
4 22.28 29.63 36.97
5 15.91 22.88 29.84
6 11.86 18.58 25.29
7 9.04 15.60 22.14
8 6.98 13.41 19.83
9 5.41 11.74 18.07
10 4.16 10.42 16.67
15 0.73 6.79 12.84
20 0 5.02 10.96
25 0 3.97 9.86
30 0 3.28 9.12
35 0 2.78 8.60
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-47
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$75,013 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ---------------------- ---------------------- ---------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------ ------- ------- ------ ------- ------- ------ ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 71,164 75,438 79,706 44,457 47,368 50,274 48,457 51,368 54,274 -11.09 -5.26 0.55
2 55,125 67,560 75,920 84,753 42,962 48,773 54,912 46,962 52,773 58,912 -7.31 -1.23 4.80
3 57,881 64,191 76,467 90,192 42,012 50,716 60,448 45,512 54,216 63,948 -5.64 0.48 6.53
4 60,775 61,043 77,086 96,066 41,108 52,700 66,414 44,108 55,700 69,414 -4.78 1.32 7.35
5 63,814 58,103 77,780 102,413 40,247 54,723 72,846 42,747 57,223 75,346 -4.25 1.82 7.82
6 67,005 55,351 78,546 109,273 39,427 56,788 79,786 41,427 58,788 81,786 -3.88 2.14 8.10
7 70,355 52,770 79,382 116,684 38,649 58,897 87,277 40,149 60,397 88,777 -3.61 2.37 8.28
8 73,873 50,344 80,282 124,682 37,910 61,049 95,365 38,910 62,049 96,365 -3.40 2.53 8.41
9 77,566 50,000 81,240 133,308 37,209 63,246 104,101 37,709 63,746 104,601 -3.23 2.65 8.49
10 81,445 50,000 82,256 142,610 36,546 65,490 113,542 36,546 65,490 113,542 -3.09 2.74 8.55
15 103,946 50,000 92,481 211,117 32,684 78,405 178,984 32,684 78,405 178,984 -2.79 3.04 8.87
20 132,665 50,000 105,659 317,591 29,230 93,866 282,146 29,230 93,866 282,146 -2.65 3.20 9.04
25 169,318 50,000 120,372 476,410 26,142 112,377 444,767 26,142 112,377 444,767 -2.56 3.29 9.14
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY -----------------------------
YEAR 0% 6% 12%
- ------ --------- --------- ---------
<S> <C> <C> <C>
1 42.33 50.88 59.41
2 16.24 23.22 30.19
3 8.68 15.21 21.73
4 5.12 11.43 17.73
5 3.05 9.24 15.42
6 1.71 7.82 13.92
7 0.77 6.83 12.87
8 0.09 6.10 12.10
9 0 5.54 11.51
10 0 5.10 11.05
15 0 4.19 10.08
20 0 3.81 9.68
25 0 3.58 9.44
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-48
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$75,013 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST --------------------- --------------------- --------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------ ------ ------- ------ ------ ------- ------ ------ ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 70,210 74,434 78,651 43,808 46,684 49,556 47,808 50,684 53,556 -12.38 -6.63 -0.89
2 55,125 65,715 73,860 82,467 41,679 47,341 53,323 45,679 51,341 57,323 -8.70 -2.70 3.27
3 57,881 61,507 73,290 86,467 40,110 48,464 57,807 43,610 51,964 61,307 -7.08 -1.03 4.95
4 60,775 57,568 72,725 90,662 38,597 49,548 62,509 41,597 52,548 65,509 -6.27 -0.23 5.74
5 63,814 53,882 72,163 95,061 37,141 50,591 67,437 39,641 53,091 69,937 -5.77 0.24 6.17
6 67,005 50,431 71,606 99,673 35,745 51,594 72,601 37,745 53,594 74,601 -5.44 0.52 6.41
7 70,355 50,000 71,054 104,510 34,331 52,560 78,014 35,831 54,060 79,514 -5.23 0.72 6.56
8 73,873 50,000 70,505 109,582 32,722 53,492 83,694 33,722 54,492 84,694 -5.16 0.85 6.65
9 77,566 50,000 69,961 114,900 30,866 54,396 89,657 31,366 54,896 90,157 -5.22 0.94 6.70
10 81,445 50,000 69,421 120,476 28,697 55,271 95,919 28,697 55,271 95,919 -5.40 1.01 6.73
15 103,946 50,000 68,997 157,758 6,883 58,495 133,747 6,883 58,495 133,747 -12.38 1.05 6.78
20 132,665 0 68,575 206,593 0 60,921 183,536 0 60,921 183,536 -- 0.99 6.72
25 169,318 0 68,155 270,541 0 63,628 252,572 0 63,628 252,572 -- 0.97 6.69
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY -----------------------------
YEAR 0% 6% 12%
- ------ --------- --------- ---------
<S> <C> <C> <C>
1 40.42 48.87 57.30
2 14.64 21.54 28.43
3 7.15 13.59 20.03
4 3.59 9.82 16.04
5 1.51 7.61 13.71
6 0.14 6.17 12.19
7 0 5.15 11.11
8 0 4.39 10.31
9 0 3.80 9.69
10 0 3.34 9.19
15 0 2.17 7.96
20 0 1.59 7.35
25 0 1.25 6.99
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-49
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$81,811 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ---------------------- ---------------------- ---------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------ ------- ------- ------ ------- ------- ------ ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 77,296 81,939 86,574 44,457 47,368 50,274 48,457 51,368 54,274 -11.09 -5.26 0.55
2 55,125 73,067 82,108 91,661 42,962 48,773 54,912 46,962 52,773 58,912 -7.31 -1.23 4.80
3 57,881 69,114 82,332 97,109 42,012 50,716 60,448 45,512 54,216 63,948 -5.64 0.48 6.53
4 60,775 65,427 82,621 102,964 41,108 52,700 66,414 44,108 55,700 69,414 -4.78 1.32 7.35
5 63,814 61,990 82,983 109,265 40,247 54,723 72,846 42,747 57,223 75,346 -4.25 1.82 7.82
6 67,005 58,784 83,419 116,053 39,427 56,788 79,786 41,427 58,788 81,786 -3.88 2.14 8.10
7 70,355 55,791 83,927 123,364 38,649 58,897 87,277 40,149 60,397 88,777 -3.61 2.37 8.28
8 73,873 52,990 84,501 131,235 37,910 61,049 95,365 38,910 62,049 96,365 -3.40 2.53 8.41
9 77,566 50,364 85,138 139,704 37,209 63,246 104,101 37,709 63,746 104,601 -3.23 2.65 8.49
10 81,445 50,000 85,839 148,822 36,546 65,490 113,542 36,546 65,490 113,542 -3.09 2.74 8.55
15 103,946 50,000 94,712 216,211 32,684 78,405 178,984 32,684 78,405 178,984 -2.79 3.04 8.87
20 132,665 50,000 106,633 320,519 29,230 93,866 282,146 29,230 93,866 282,146 -2.65 3.20 9.04
25 169,318 50,000 120,514 476,968 26,142 112,377 444,767 26,142 112,377 444,767 -2.56 3.29 9.14
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY -----------------------------
YEAR 0% 6% 12%
- ------ --------- --------- ---------
<S> <C> <C> <C>
1 54.59 63.88 73.15
2 20.89 28.15 35.40
3 11.39 18.09 24.77
4 6.95 13.38 19.79
5 4.39 10.66 16.92
6 2.73 8.91 15.07
7 1.58 7.68 13.77
8 0.73 6.78 12.82
9 0.08 6.09 12.09
10 0 5.55 11.52
15 0 4.35 10.25
20 0 3.86 9.73
25 0 3.58 9.44
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-50
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$81,811 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL NET CASH VALUE ASSUMING ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL HYPOTHETICAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST --------------------- --------------------------- --------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------ ------ ------- -------- -------- --------- ------ ------ ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 76,575 81,180 85,778 44,005 46,892 49,774 48,005 50,892 53,774 -11.99 -6.22 -0.45
2 55,125 71,673 80,554 89,937 42,066 47,774 53,805 46,066 51,774 57,805 -8.28 -2.25 3.73
3 57,881 67,086 79,932 94,298 40,677 49,137 58,597 44,177 52,637 62,097 -6.65 -0.58 5.43
4 60,775 62,791 79,316 98,871 39,331 50,471 63,655 42,331 53,471 66,655 -5.82 0.23 6.22
5 63,814 58,772 78,704 103,666 38,028 51,773 68,986 40,528 54,273 71,486 -5.33 0.70 6.65
6 67,005 55,009 78,097 108,695 36,767 53,038 74,601 38,767 55,038 76,601 -4.99 0.99 6.90
7 70,355 51,487 77,495 113,967 35,552 54,268 80,514 37,052 55,768 82,014 -4.76 1.18 7.04
8 73,873 50,000 76,897 119,496 34,363 55,465 86,745 35,363 56,465 87,745 -4.58 1.30 7.13
9 77,566 50,000 76,303 125,293 33,060 56,631 93,311 33,560 57,131 93,811 -4.49 1.39 7.18
10 81,445 50,000 75,715 131,371 31,583 57,766 100,228 31,583 57,766 100,228 -4.49 1.45 7.20
15 103,946 50,000 75,252 172,011 17,461 62,295 142,394 17,461 62,295 142,394 -6.77 1.48 7.23
20 132,665 0 74,791 225,242 0 65,837 198,276 0 65,837 198,276 -- 1.39 7.13
25 169,318 0 74,334 294,952 0 69,316 275,039 0 69,316 275,039 -- 1.32 7.06
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY -----------------------------
YEAR 0% 6% 12%
- ------ --------- --------- ---------
<S> <C> <C> <C>
1 53.15 62.36 71.56
2 19.73 26.93 34.12
3 10.29 16.93 23.55
4 5.86 12.23 18.58
5 3.29 9.50 15.70
6 1.60 7.72 13.82
7 0.42 6.46 12.49
8 0 5.53 11.51
9 0 4.81 10.75
10 0 4.24 10.14
15 0 2.76 8.59
20 0 2.03 7.82
25 0 1.60 7.36
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-51
<PAGE>
LAST SURVIVOR POLICY
MALE ISSUE AGE 65
FEMALE ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$114,909 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ------------------------- ------------------------ ------------------------ ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- --------- ------ ------- --------- ------ ------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 107,562 114,024 120,474 44,663 47,586 50,504 48,663 51,586 54,504 -10.67 -4.83 1.01
2 55,125 100,685 113,145 126,309 43,334 49,192 55,381 47,334 53,192 59,381 -6.90 -0.81 5.24
3 57,881 94,248 112,274 132,427 42,513 51,313 61,153 46,013 54,813 64,653 -5.26 0.87 6.94
4 60,775 88,221 111,409 138,842 41,697 53,445 67,344 44,697 56,445 70,344 -4.44 1.68 7.73
5 63,814 82,613 110,593 145,622 40,905 55,605 74,010 43,405 58,105 76,510 -3.94 2.15 8.16
6 67,005 77,421 109,868 152,852 40,149 57,814 81,215 42,149 59,814 83,215 -3.59 2.45 8.42
7 70,355 72,615 109,237 160,571 39,431 60,074 89,009 40,931 61,574 90,509 -3.34 2.66 8.59
8 73,873 68,166 108,705 168,828 38,747 62,385 97,442 39,747 63,385 98,442 -3.14 2.80 8.70
9 77,566 64,051 108,279 177,679 38,097 64,749 106,569 38,597 65,249 107,069 -2.98 2.91 8.77
10 81,445 60,250 107,970 187,195 37,481 67,168 116,454 37,481 67,168 116,454 -2.84 3.00 8.82
15 103,946 50,000 113,482 259,064 33,858 81,222 185,420 33,858 81,222 185,420 -2.57 3.29 9.13
20 132,665 50,000 123,190 370,295 30,584 98,217 295,230 30,584 98,217 295,230 -2.43 3.43 9.28
25 169,318 50,000 138,141 546,746 27,628 118,768 470,071 27,628 118,768 470,071 -2.34 3.52 9.38
30 216,097 50,000 157,778 822,244 24,957 143,620 748,458 24,957 143,620 748,458 -2.29 3.58 9.44
35 275,801 50,000 179,153 1,229,331 22,544 173,671 1,191,711 22,544 173,671 1,191,711 -2.25 3.62 9.48
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY -----------------------------
YEAR 0% 6% 12%
- ------ --------- --------- ---------
<S> <C> <C> <C>
1 115.12 128.05 140.95
2 41.91 50.43 58.94
3 23.53 30.95 38.36
4 15.25 22.18 29.09
5 10.56 17.21 23.84
6 7.56 14.02 20.47
7 5.48 11.81 18.14
8 3.95 10.19 16.43
9 2.79 8.96 15.13
10 1.88 8.00 14.11
15 0 5.62 11.59
20 0 4.61 10.53
25 0 4.15 10.04
30 0 3.90 9.78
35 0 3.71 9.58
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-52
<PAGE>
LAST SURVIVOR POLICY
MALE ISSUE AGE 65
FEMALE ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$114,909 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ----------------------- --------------------- --------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- ------- ------ ------ ------- ------ ------ ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 107,562 114,024 120,474 44,663 47,586 50,504 48,663 51,586 54,504 -10.67 -4.83 1.01
2 55,125 100,685 113,145 126,309 43,334 49,192 55,381 47,334 53,192 59,381 -6.90 -0.81 5.24
3 57,881 94,248 112,274 132,427 42,513 51,313 61,153 46,013 54,813 64,653 -5.26 0.87 6.94
4 60,775 88,221 111,409 138,842 41,697 53,445 67,344 44,697 56,445 70,344 -4.44 1.68 7.73
5 63,814 82,580 110,550 145,568 40,887 55,583 73,981 43,387 58,083 76,481 -3.94 2.14 8.15
6 67,005 77,299 109,698 152,620 40,083 57,722 81,089 42,083 59,722 83,089 -3.62 2.42 8.39
7 70,355 72,355 108,853 160,014 39,284 59,857 88,695 40,784 61,357 90,195 -3.39 2.60 8.53
8 73,873 67,727 108,014 167,767 38,491 61,982 96,823 39,491 62,982 97,823 -3.22 2.72 8.61
9 77,566 63,395 107,182 175,897 37,702 64,088 105,495 38,202 64,588 105,995 -3.09 2.80 8.65
10 81,445 59,340 106,356 184,421 36,915 66,164 114,728 36,915 66,164 114,728 -2.99 2.84 8.66
15 103,946 50,000 105,706 241,408 31,324 75,657 172,783 31,324 75,657 172,783 -3.07 2.80 8.62
20 132,665 50,000 105,060 316,050 21,914 83,762 251,981 21,914 83,762 251,981 -4.04 2.61 8.42
25 169,318 0 104,417 413,831 0 89,774 355,796 0 89,774 355,796 -- 2.37 8.17
30 216,097 0 103,779 541,908 0 94,466 493,278 0 94,466 493,278 -- 2.14 7.93
35 275,801 0 103,144 709,605 0 99,988 687,890 0 99,988 687,890 -- 2.00 7.78
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY -----------------------------
YEAR 0% 6% 12%
- ------ --------- --------- ---------
<S> <C> <C> <C>
1 115.12 128.05 140.95
2 41.91 50.43 58.94
3 23.53 30.95 38.36
4 15.25 22.18 29.09
5 10.56 17.20 23.83
6 7.53 13.99 20.44
7 5.42 11.76 18.08
8 3.87 10.11 16.34
9 2.67 8.84 15.00
10 1.73 7.84 13.94
15 0 5.12 11.07
20 0 3.78 9.66
25 0 2.99 8.82
30 0 2.46 8.27
35 0 2.09 7.87
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-53
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
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 predict future performance.
The Policies became available July, 1996. The Zenith Fund and the Variable
Account commenced operations on August 26, 1983. The Westpeak Stock Index and
Back Bay Advisors Managed Series of the Zenith Fund commenced operations on
May 1, 1987. The Westpeak Growth and Income Series and Goldman Sachs Midcap
Value Series of the Zenith Fund commenced operations on April 30, 1993. The
Loomis Sayles Small Cap Series of the Zenith Fund commenced operations on May
2, 1994. The MFS Investors Series and the MFS Research Managers Series
commenced operations on April 30, 1999. The remaining Zenith Fund Series
commenced operations on October 31, 1994.
The illustrations are based on the actual investment experience of the
relevant Eligible Funds for the periods shown (net of actual charges and
expenses incurred by the Eligible Funds). The illustrations assume that an
initial premium of $50,000 was paid and that no loans, transfers or other
Policy Owner transactions were made during the periods shown.
SUB-ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account, which invests in the
Eligible Funds. The investment experience of the Sub-Account or Sub-Accounts
you choose will affect the values and benefits of your Policy.
Many factors other than investment experience affect the values and benefits
of your Policy. These investment experience figures do not reflect the charges
deducted from additional Premiums and the Monthly Deductions from the cash
value. (See "Charges and Expenses.")
NET RATES OF RETURN
A Sub-Account's investment experience is expressed below as a net rate of
return. The annual net rate is the effective earnings rate at which the Sub-
Accounts increased or decreased over a one-year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated
by taking the difference between the Sub-Accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the Sub-Accounts increased or decreased since
the inception dates of the Sub-Accounts. For each Sub-Account, the rate is
calculated by taking the difference between the Sub-Account's ending value and
the value on the date of its inception and dividing it by the value on the
date of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which,
if compounded annually, would equal the total net rate of return since
inception.
A-54
<PAGE>
SUB-ACCOUNTS INVESTING IN NEW ENGLAND ZENITH FUND
<TABLE>
<CAPTION>
8/26/83-
SUB-ACCOUNT 12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bond Income..... 3.20% 12.61% 18.76% 14.83% 2.27% 8.37%
Money Market.... 3.20 10.73 8.26 6.80 6.53 7.52
<CAPTION>
5/1/87-
SUB-ACCOUNT 12/31/87 12/31/88
- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock Index......................................... (12.20%) 16.34%
Managed............................................. (0.66) 9.48
<CAPTION>
SUB-ACCOUNT
- -----------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income.........................................................................................
Midcap Value**............................................................................................
<CAPTION>
SUB-ACCOUNT
- -----------
<S> <C> <C> <C> <C> <C> <C>
Small Cap..........................................................................................................
<CAPTION>
SUB-ACCOUNT
- -----------
<S> <C> <C> <C> <C> <C> <C>
Equity Growth......................................................................................................
Balanced...........................................................................................................
Venture Value......................................................................................................
International Magnum Equity*.......................................................................................
U.S. Government....................................................................................................
Strategic Bond Opportunities.......................................................................................
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------ 8/26/83- 8/28/83-
FOR ONE YEAR ENDING 12/31/98 12/31/98
------------------------------------------------------------------------------------------ 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 12/31/98 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- --------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Income..... 12.30% 8.09% 17.96% 8.18% 12.61% (3.36%) 21.20% 4.61% 10.89% 9.04% 353.83% 10.36%
Money Market.... 9.25 8.19 6.21 3.80 2.97 3.97 5.70 5.13 5.34 5.26 160.15 6.43
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------ 5/1/87- 5/1/87-
FOR ONE YEAR ENDING 12/31/98 12/31/98
------------------------------------------------------------------------------------------ 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 12/31/98 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- --------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index..... 30.15% (4.14%) 30.43% 7.30% 9.72% 1.12% 36.92% 22.47% 32.50% 27.93% 459.71% 15.90%
Managed......... 19.08 3.21 20.17 6.70 10.65 (1.11) 31.26 15.03 26.56 19.65 328.89 13.29
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------ 4/30/93- 4/30/93-
FOR ONE YEAR ENDING 12/31/98 12/31/98
4/30/93- --------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
- ----------- -------- --------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income................... 14.24% (1.21%) 36.47% 18.10% 33.47% 24.45% 202.12% 21.53%
Midcap Value**...................... 14.74 (.27) 30.35 17.61 17.32 (5.46) 94.57 12.46
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------- 5/2/94- 5/2/94-
FOR ONE YEAR ENDING 12/31/98 12/31/98
5/2/94- ----------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
- ----------- --------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap.................................... (3.23%) 28.84% 30.68% 24.85% (1.69)% 99.99% 16.02%
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------- 10/31/94- 10/31/94-
FOR ONE YEAR ENDING 12/31/98 12/31/98
10/31/94- -------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
- ----------- --------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................ (4.20%) 48.69% 13.17% 25.63%
47.78% 199.31% 30.09%
Balanced..................................... (.10) 24.79 16.91 16.18
9.11 84.76 15.87
Venture Value................................ (3.50) 39.28 25.84 33.50
14.41 158.34 25.58
International Magnum Equity*................. 2.60 6.23 6.67 (1.30)
7.27 23.11 5.12
U.S. Government.............................. 0.60 15.02 3.31 8.47
7.61 39.53 8.32
Strategic Bond Opportunities................. (1.40) 19.38 14.36 11.07
2.04 52.57 10.67
</TABLE>
- -------
* The Morgan Stanley International Magnum Equity Series' sub-adviser was
Draycott Partners until May 1, 1997, when Morgan Stanley Dean Witter
Investment 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.
Rates of return reflect the Series' former investment advisory fee of .70%
of average daily net assets for the period through April 30, 1998, and .75%
thereafter.
A-55
<PAGE>
POLICY PERFORMANCE
The material below assumes a Policy was issued with an initial premium of
$50,000 paid on August 26, 1983, in the case of the Bond Income and Money
Market Sub-Accounts (May 1, 1987, in the case of the Stock Index and Managed
Sub-Accounts; April 30, 1993, in the case of the Growth and Income and Midcap
Value Sub-Accounts; May 2, 1994, in the case of the Small Cap Sub-Account;
October 31, 1994, in the case of the Balanced, International Magnum Equity,
Equity Growth, Venture Value, U.S. Government and Strategic Bond Opportunities
Sub-Accounts), to (1) a male age 50, (2) a female age 50, (3) a male age 70,
(4) a female age 70, and (5) a male age 65 and female age 60, each in the
standard nonsmoker risk category. The death benefits, cash values and internal
rates of return assume in each instance that the entire Policy value was
invested in the particular Sub-Account for the period shown. These
illustrations of policy investment experience reflect all Policy charges
(except for the $2.50 Monthly Maintenance Charge) based on NELICO's current
rates. (See Appendix A for the definition of the internal rate of return.)
MALE STANDARD NON SMOKER, ISSUE AGE 50
$50,000 INITIAL PREMIUM
$129,122 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 130,655 51,122 47,122 -15.66% --
December 31, 1984....... 50,000 50,000 139,494 56,311 52,311 3.41 114.08%
December 31, 1985....... 50,000 50,000 156,886 65,320 61,820 9.46 62.75
December 31, 1986....... 50,000 50,000 170,674 73,266 70,266 10.70 44.30
December 31, 1987....... 50,000 50,000 165,419 73,185 70,685 8.29 31.68
December 31, 1988....... 50,000 75,767 169,828 77,406 75,406 7.99 25.69
December 31, 1989....... 50,000 75,767 180,974 84,942 83,442 8.40 22.46
December 31, 1990....... 50,000 75,767 185,675 89,706 88,706 8.11 19.55
December 31, 1991....... 50,000 75,767 207,916 103,356 102,856 9.02 18.62
December 31, 1992....... 50,000 75,767 213,612 109,212 109,212 8.72 16.81
December 31, 1993....... 50,000 120,283 229,245 120,487 120,487 8.87 15.85
December 31, 1994....... 50,000 120,283 212,033 114,506 114,506 7.57 13.58
December 31, 1995....... 50,000 120,283 247,171 137,081 137,081 8.51 13.82
December 31, 1996....... 50,000 120,283 248,295 141,335 141,335 8.10 12.76
December 31, 1997....... 50,000 120,283 264,560 154,468 154,468 8.18 12.31
December 31, 1998....... 50,000 159,637 277,374 166,011 166,011 8.13 11.81
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......... $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 130,974 51,247 47,247 -15.02% --
December 31, 1984....... 50,000 50,000 137,164 55,371 51,371 2.03 111.42%
December 31, 1985....... 50,000 50,000 140,631 58,553 55,053 4.19 55.34
December 31, 1986....... 50,000 50,000 142,293 61,083 58,083 4.58 36.67
December 31, 1987....... 50,000 50,000 143,656 63,557 61,057 4.70 27.47
December 31, 1988....... 50,000 65,444 146,543 66,793 64,793 4.97 22.27
December 31, 1989....... 50,000 65,444 151,824 71,260 69,760 5.39 19.12
December 31, 1990....... 50,000 65,444 155,804 75,274 74,274 5.53 16.73
December 31, 1991....... 50,000 65,444 157,095 78,093 77,593 5.41 14.70
December 31, 1992....... 50,000 65,444 154,861 79,175 79,175 5.04 12.86
December 31, 1993....... 50,000 79,450 151,970 79,873 79,873 4.63 11.34
December 31, 1994....... 50,000 79,450 151,626 81,884 81,884 4.44 10.27
December 31, 1995....... 50,000 79,450 153,789 85,291 85,291 4.42 9.53
December 31, 1996....... 50,000 79,450 155,211 88,350 88,350 4.36 8.86
December 31, 1997....... 50,000 79,450 157,100 91,726 91,726 4.32 8.31
December 31, 1998....... 50,000 93,939 159,001 95,164 95,164 4.28 7.83
</TABLE>
A-56
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 124,238 48,993 44,993 -14.60% --
December 31, 1988....... 50,000 50,000 128,321 52,204 48,204 -2.17 75.93%
December 31, 1989....... 50,000 50,000 146,503 61,467 57,967 5.70 49.61
December 31, 1990....... 50,000 50,000 142,039 61,437 58,437 4.34 32.92
December 31, 1991....... 50,000 50,000 161,786 72,115 69,615 7.35 28.60
December 31, 1992....... 50,000 70,177 163,688 75,159 73,159 6.95 23.27
December 31, 1993....... 50,000 70,177 171,814 81,230 79,730 7.25 20.33
December 31, 1994....... 50,000 70,177 161,126 78,405 77,405 5.86 16.49
December 31, 1995....... 50,000 70,177 202,017 101,135 100,635 8.40 17.48
December 31, 1996....... 50,000 70,177 219,535 113,022 113,022 8.80 16.54
December 31, 1997....... 50,000 118,897 265,421 140,455 140,455 10.17 16.94
December 31, 1998....... 50,000 118,897 304,675 165,641 165,641 10.81 16.75
MIDCAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 142,840 56,477 52,477 7.47% --
December 31, 1994....... 50,000 50,000 133,421 54,419 50,419 .50 79.91%
December 31, 1995....... 50,000 50,000 166,943 70,222 66,722 11.41 57.04
December 31, 1996....... 50,000 50,000 185,560 80,465 77,465 12.67 42.93
December 31, 1997....... 50,000 50,000 206,351 92,209 89,709 13.33 35.45
December 31, 1998....... 50,000 104,570 184,989 85,149 83,149 9.38 25.95
SMALL CAP SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 120,049 47,342 43,342 -19.32% --
December 31, 1995....... 50,000 50,000 147,654 60,069 56,069 7.12 91.57%
December 31, 1996....... 50,000 50,000 182,739 76,670 73,170 15.35 62.61
December 31, 1997....... 50,000 50,000 216,164 93,499 90,499 17.57 49.09
December 31, 1998....... 50,000 50,000 201,412 89,778 87,278 12.68 34.80
BALANCED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 127,694 49,705 45,705 -41.58% --
December 31, 1995....... 50,000 50,000 151,641 60,900 56,900 11.71 158.73%
December 31, 1996....... 50,000 50,000 167,190 69,256 65,756 13.47 74.54
December 31, 1997....... 50,000 50,000 184,004 78,591 75,591 13.94 50.89
December 31, 1998....... 50,000 50,000 190,258 83,758 81,258 12.36 37.81
</TABLE>
A-57
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 130,766 50,900 46,900 -31.81% --
December 31, 1995....... 50,000 50,000 132,641 53,270 49,270 -1.25 130.69%
December 31, 1996....... 50,000 50,000 133,372 55,248 51,748 1.60 57.26
December 31, 1997....... 50,000 50,000 124,702 53,263 50,263 .17 33.45
December 31, 1998....... 50,000 50,000 126,771 55,808 53,308 1.55 25.01
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 120,911 47,065 43,065 -59.08% --
December 31, 1995....... 50,000 50,000 172,803 69,399 65,399 25.86 189.37%
December 31, 1996....... 50,000 50,000 184,931 76,605 73,105 19.16 82.86
December 31, 1997....... 50,000 50,000 220,084 94,002 91,002 20.81 59.67
December 31, 1998....... 50,000 50,000 308,218 135,687 133,187 26.50 54.72
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 142,221 56,232 52,232 6.72% --
December 31, 1994....... 50,000 50,000 132,620 54,093 50,093 .11 79.26%
December 31, 1995....... 50,000 50,000 172,204 72,435 68,935 12.77 58.88
December 31, 1996....... 50,000 50,000 192,400 83,431 80,431 13.82 44.35
December 31, 1997....... 50,000 50,000 243,407 108,768 106,268 17.52 40.33
December 31, 1998....... 50,000 124,211 287,242 132,215 130,215 18.39 36.11
STOCK INDEX SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 109,807 43,303 39,303 -30.24% --
December 31, 1988....... 50,000 50,000 119,943 48,796 44,796 -6.38 68.95%
December 31, 1989....... 50,000 50,000 151,676 63,637 60,137 7.16 51.57
December 31, 1990....... 50,000 50,000 135,410 58,570 55,570 2.92 31.20
December 31, 1991....... 50,000 50,000 167,404 74,619 72,119 8.16 29.54
December 31, 1992....... 50,000 73,892 170,317 78,203 76,203 7.72 24.14
December 31, 1993....... 50,000 73,892 177,273 83,811 82,311 7.76 20.90
December 31, 1994....... 50,000 73,892 170,021 82,733 81,733 6.62 17.30
December 31, 1995....... 50,000 73,892 222,827 111,553 111,053 9.64 18.81
December 31, 1996....... 50,000 73,892 257,217 132,421 132,421 10.60 18.46
December 31, 1997....... 50,000 141,939 325,557 172,277 172,277 12.29 19.20
December 31, 1998....... 50,000 141,939 399,564 217,228 217,228 13.42 19.50
</TABLE>
A-58
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 123,857 48,211 44,211 -52.11% --
December 31, 1995....... 50,000 50,000 163,802 65,784 61,784 19.88 176.41%
December 31, 1996....... 50,000 50,000 194,017 80,369 76,869 21.95 86.95
December 31, 1997....... 50,000 50,000 245,356 104,796 101,796 25.17 65.24
December 31, 1998....... 50,000 50,000 266,031 117,115 114,615 22.03 49.35
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 128,589 50,053 46,053 -38.86% --
December 31, 1995....... 50,000 50,000 140,033 56,238 52,238 3.82 141.67%
December 31, 1996....... 50,000 50,000 137,128 56,804 53,304 3.00 59.29
December 31, 1997....... 50,000 50,000 140,903 60,182 57,182 4.33 38.70
December 31, 1998....... 50,000 50,000 143,687 63,255 60,755 4.79 28.83
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 125,905 49,008 45,008 -46.71% --
December 31, 1995....... 50,000 50,000 142,849 57,369 53,369 5.75 145.82%
December 31, 1996....... 50,000 50,000 154,412 63,963 60,463 9.16 68.26
December 31,1997........ 50,000 50,000 162,474 69,396 66,396 9.37 45.08
December 31, 1998....... 50,000 50,000 157,108 69,164 66,664 7.15 31.62
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' former investment advisory fee of .70% of average
daily net assets for the period through April 30, 1998, and .75% thereafter.
A-59
<PAGE>
FEMALE STANDARD NON SMOKER, ISSUE AGE 50
$50,000 INITIAL PREMIUM
$145,611 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 147,348 51,122 47,122 -15.66% --
December 31, 1984....... 50,000 50,000 157,343 56,311 52,311 3.41 134.08%
December 31, 1985....... 50,000 50,000 176,974 65,320 61,820 9.46 71.32
December 31, 1986....... 50,000 50,000 192,526 73,266 70,266 10.70 49.59
December 31, 1987....... 50,000 50,000 186,573 73,185 70,685 8.29 35.37
December 31, 1988....... 50,000 75,767 191,487 77,406 75,406 7.99 28.54
December 31, 1989....... 50,000 75,767 203,947 84,942 83,442 8.40 24.79
December 31, 1990....... 50,000 75,767 209,082 89,706 88,706 8.11 21.50
December 31, 1991....... 50,000 75,767 233,873 103,356 102,856 9.02 20.30
December 31, 1992....... 50,000 75,767 239,936 109,212 109,212 8.72 18.27
December 31, 1993....... 50,000 120,283 257,039 120,487 120,487 8.87 17.14
December 31, 1994....... 50,000 120,283 237,248 114,506 114,506 7.57 14.71
December 31, 1995....... 50,000 120,283 275,927 137,081 137,081 8.51 14.84
December 31, 1996....... 50,000 120,283 276,495 141,335 141,335 8.10 13.67
December 31, 1997....... 50,000 120,283 293,838 154,468 154,468 8.18 13.14
December 31, 1998....... 50,000 159,637 307,231 166,011 166,011 8.13 12.56
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......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 147,709 51,247 47,247 -15.02% --
December 31, 1984....... 50,000 50,000 154,715 55,371 51,371 2.03 131.17%
December 31, 1985....... 50,000 50,000 158,639 58,553 55,053 4.19 63.52
December 31, 1986....... 50,000 50,000 160,511 61,083 58,083 4.58 41.68
December 31, 1987....... 50,000 50,000 162,027 63,557 61,057 4.70 31.05
December 31, 1988....... 50,000 65,444 165,232 66,793 64,793 4.97 25.05
December 31, 1989....... 50,000 65,444 171,098 71,260 69,760 5.39 21.38
December 31, 1990....... 50,000 65,444 175,446 75,274 74,274 5.53 18.63
December 31, 1991....... 50,000 65,444 176,708 78,093 77,593 5.41 16.33
December 31, 1992....... 50,000 65,444 173,946 79,175 79,175 5.04 14.27
December 31, 1993....... 50,000 79,450 170,396 79,873 79,873 4.63 12.58
December 31, 1994....... 50,000 79,450 169,657 81,884 81,884 4.44 11.37
December 31, 1995....... 50,000 79,450 171,681 85,291 85,291 4.42 10.51
December 31, 1996....... 50,000 79,450 172,838 88,350 88,350 4.36 9.74
December 31, 1997....... 50,000 79,450 174,486 91,726 91,726 4.32 9.10
December 31, 1998....... 50,000 93,939 176,116 95,164 95,164 4.28 8.55
</TABLE>
A-60
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 140,118 48,993 44,993 -14.60% --
December 31, 1988....... 50,000 50,000 144,744 52,204 48,204 -2.17 89.09%
December 31, 1989....... 50,000 50,000 165,263 61,467 57,967 5.70 56.52
December 31, 1990....... 50,000 50,000 160,221 61,437 58,437 4.34 37.36
December 31, 1991....... 50,000 50,000 182,464 72,115 69,615 7.35 31.95
December 31, 1992....... 50,000 70,177 184,543 75,159 73,159 6.95 25.91
December 31, 1993....... 50,000 70,177 193,592 81,230 79,730 7.25 22.51
December 31, 1994....... 50,000 70,177 181,395 78,405 77,405 5.86 18.30
December 31, 1995....... 50,000 70,177 227,163 101,135 100,635 8.40 19.08
December 31, 1996....... 50,000 70,177 246,487 113,022 113,022 8.80 17.94
December 31, 1997....... 50,000 118,897 297,453 140,455 140,455 10.17 18.19
December 31, 1998....... 50,000 118,897 340,716 165,641 165,641 10.81 17.88
MIDCAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 161,101 56,477 52,477 7.47% --
December 31, 1994....... 50,000 50,000 150,498 54,419 50,419 .50 93.35%
December 31, 1995....... 50,000 50,000 188,321 70,222 66,722 11.41 64.29
December 31, 1996....... 50,000 50,000 209,312 80,465 77,465 12.67 47.70
December 31, 1997....... 50,000 50,000 232,720 92,209 89,709 13.33 38.99
December 31, 1998....... 50,000 104,570 208,551 85,149 83,149 9.38 28.64
SMALL CAP SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 135,395 47,342 43,342 -19.32% --
December 31, 1995....... 50,000 50,000 166,551 60,069 56,069 7.12 105.93%
December 31, 1996....... 50,000 50,000 206,139 76,670 73,170 15.35 70.13
December 31, 1997....... 50,000 50,000 243,835 93,499 90,499 17.57 54.07
December 31, 1998....... 50,000 50,000 227,155 89,778 87,278 12.68 38.32
BALANCED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 144,006 49,705 45,705 -41.58% --
December 31, 1995....... 50,000 50,000 171,041 60,900 56,900 11.71 186.84%
December 31, 1996....... 50,000 50,000 188,598 69,256 65,756 13.47 84.52
December 31, 1997....... 50,000 50,000 207,566 78,591 75,591 13.94 56.74
December 31, 1998....... 50,000 50,000 214,598 83,758 81,258 12.36 41.85
</TABLE>
A-61
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 147,470 50,900 46,900 -31.81% --
December 31, 1995....... 50,000 50,000 149,611 53,270 49,270 -1.25 155.76%
December 31, 1996....... 50,000 50,000 150,449 55,248 51,748 1.60 66.25
December 31, 1997....... 50,000 50,000 140,671 53,263 50,263 .17 38.63
December 31, 1998....... 50,000 50,000 142,988 55,808 53,308 1.55 28.68
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 136,356 47,065 43,065 -59.08% --
December 31, 1995....... 50,000 50,000 194,910 69,399 65,399 25.86 220.82%
December 31, 1996....... 50,000 50,000 208,610 76,605 73,105 19.16 93.31
December 31, 1997....... 50,000 50,000 248,266 94,002 91,002 20.81 65.86
December 31, 1998....... 50,000 50,000 347,649 135,687 133,187 26.50 59.26
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 160,403 56,232 52,232 6.72% --
December 31, 1994....... 50,000 50,000 149,594 54,093 50,093 .11 92.66%
December 31, 1995....... 50,000 50,000 194,256 72,435 68,935 12.77 66.21
December 31, 1996....... 50,000 50,000 217,029 83,431 80,431 13.82 49.16
December 31, 1997....... 50,000 50,000 274,512 108,768 106,268 17.52 43.99
December 31, 1998....... 50,000 124,211 323,827 132,215 130,215 18.39 39.02
STOCK INDEX SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 123,843 43,303 39,303 -30.24% --
December 31, 1988....... 50,000 50,000 135,293 48,796 44,796 -6.38 81.59%
December 31, 1989....... 50,000 50,000 171,099 63,637 60,137 7.16 58.57
December 31, 1990....... 50,000 50,000 152,745 58,570 55,570 2.92 35.58
December 31, 1991....... 50,000 50,000 188,801 74,619 72,119 8.16 32.92
December 31, 1992....... 50,000 73,892 192,017 78,203 76,203 7.72 26.79
December 31, 1993....... 50,000 73,892 199,743 83,811 82,311 7.76 23.08
December 31, 1994....... 50,000 73,892 191,409 82,733 81,733 6.62 19.13
December 31, 1995....... 50,000 73,892 250,564 111,553 111,053 9.64 20.43
December 31, 1996....... 50,000 73,892 288,795 132,421 132,421 10.60 19.89
December 31, 1997....... 50,000 141,939 364,847 172,277 172,277 12.29 20.48
December 31, 1998....... 50,000 141,939 446,830 217,228 217,228 13.42 20.65
</TABLE>
A-62
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 139,678 48,211 44,211 -52.11% --
December 31, 1995....... 50,000 50,000 184,758 65,784 61,784 19.88 206.45%
December 31, 1996....... 50,000 50,000 218,859 80,369 76,869 21.95 97.64
December 31, 1997....... 50,000 50,000 276,775 104,796 101,796 25.17 71.65
December 31, 1998....... 50,000 50,000 300,064 117,115 114,615 22.03 53.73
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 145,014 50,053 46,053 -38.86% --
December 31, 1995....... 50,000 50,000 157,948 56,238 52,238 3.82 167.93%
December 31, 1996....... 50,000 50,000 154,686 56,804 53,304 3.00 68.39
December 31, 1997....... 50,000 50,000 158,946 60,182 57,182 4.33 44.08
December 31, 1998....... 50,000 50,000 162,069 63,255 60,755 4.79 32.61
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $145,611 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 141,987 49,008 45,008 -46.71% --
December 31, 1995....... 50,000 50,000 161,124 57,369 53,369 5.75 172.53%
December 31, 1996....... 50,000 50,000 174,183 63,963 60,463 9.16 77.88
December 31, 1997....... 50,000 50,000 183,279 69,396 66,396 9.37 50.70
December 31, 1998....... 50,000 50,000 177,206 69,164 66,664 7.15 35.48
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' former investment advisory fee of .70% of average
daily net assets for the period through April 30, 1998 and .75% thereafter.
A-63
<PAGE>
MALE STANDARD NON SMOKER, ISSUE AGE 70
$50,000 INITIAL PREMIUM
$75,013 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 76,157 51,122 47,122 -15.66% --
December 31, 1984....... 50,000 50,000 82,136 56,311 52,311 3.41 44.52%
December 31, 1985....... 50,000 50,000 93,356 65,320 61,820 9.46 30.47
December 31, 1986....... 50,000 50,000 102,688 73,266 70,266 10.70 23.98
December 31, 1987....... 50,000 50,000 100,681 73,185 70,685 8.29 17.47
December 31, 1988....... 50,000 75,767 104,613 77,406 75,406 7.99 14.80
December 31, 1989....... 50,000 75,767 112,870 84,942 83,442 8.40 13.69
December 31, 1990....... 50,000 75,767 117,286 89,706 88,706 8.11 12.30
December 31, 1991....... 50,000 75,767 133,050 103,356 102,856 9.02 12.44
December 31, 1992....... 50,000 75,767 138,501 109,212 109,212 8.72 11.52
December 31, 1993....... 50,000 75,767 150,616 120,487 120,487 8.87 11.24
December 31, 1994....... 50,000 75,767 141,178 114,506 114,506 7.57 9.58
December 31, 1995....... 50,000 75,767 166,804 137,081 137,081 8.51 10.25
December 31, 1996....... 50,000 75,767 169,862 141,335 141,335 8.10 9.60
December 31, 1997....... 50,000 75,767 183,500 154,468 154,468 8.18 9.49
December 31, 1998....... 50,000 75,767 195,084 166,011 166,011 8.13 9.28
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......... $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 76,344 51,247 47,247 -15.02% --
December 31, 1984....... 50,000 50,000 80,764 55,371 51,371 2.03 42.72%
December 31, 1985....... 50,000 50,000 83,684 58,553 55,053 4.19 24.53
December 31, 1986....... 50,000 50,000 85,612 61,083 58,083 4.58 17.43
December 31, 1987....... 50,000 50,000 87,435 63,557 61,057 4.70 13.72
December 31, 1988....... 50,000 65,444 90,269 66,793 64,793 4.97 11.68
December 31, 1989....... 50,000 65,444 94,690 71,260 69,760 5.39 10.58
December 31, 1990....... 50,000 65,444 98,417 75,274 74,274 5.53 9.65
December 31, 1991....... 50,000 65,444 100,528 78,093 77,593 5.41 8.73
December 31, 1992....... 50,000 65,444 100,408 79,175 79,175 5.04 7.74
December 31, 1993....... 50,000 65,444 99,846 79,873 79,873 4.63 6.91
December 31, 1994....... 50,000 65,444 100,957 81,884 81,884 4.44 6.39
December 31, 1995....... 50,000 65,444 103,785 85,291 85,291 4.42 6.09
December 31, 1996....... 50,000 65,444 106,182 88,350 88,350 4.36 5.80
December 31, 1997....... 50,000 65,444 108,965 91,726 91,726 4.32 5.58
December 31, 1998....... 50,000 65,444 111,829 95,164 95,164 4.28 5.38
</TABLE>
A-64
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 72,598 48,993 44,993 -14.60% --
December 31, 1988....... 50,000 50,000 75,754 52,204 48,204 -2.17 28.28%
December 31, 1989....... 50,000 50,000 87,415 61,467 57,967 5.70 23.29
December 31, 1990....... 50,000 50,000 85,703 61,437 58,437 4.34 15.82
December 31, 1991....... 50,000 50,000 98,762 72,115 69,615 7.35 15.70
December 31, 1992....... 50,000 70,177 101,141 75,159 73,159 6.95 13.23
December 31, 1993....... 50,000 70,177 107,496 81,230 79,730 7.25 12.16
December 31, 1994....... 50,000 70,177 102,108 78,405 77,405 5.86 9.76
December 31, 1995....... 50,000 70,177 129,698 101,135 100,635 8.40 11.62
December 31, 1996....... 50,000 70,177 142,811 113,022 113,022 8.80 11.47
December 31, 1997....... 50,000 70,177 174,963 140,455 140,455 10.17 12.46
December 31, 1998....... 50,000 70,177 203,540 165,641 165,641 10.81 12.78
MIDCAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 83,538 56,477 52,477 7.47% --
December 31, 1994....... 50,000 50,000 78,833 54,419 50,419 .50 31.32%
December 31, 1995....... 50,000 50,000 99,702 70,222 66,722 11.41 29.48
December 31, 1996....... 50,000 50,000 112,069 80,465 77,465 12.67 24.59
December 31, 1997....... 50,000 50,000 126,092 92,209 89,709 13.33 21.90
December 31, 1998....... 50,000 104,570 114,420 85,149 83,149 9.38 15.72
SMALL CAP SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 70,151 47,342 43,342 -19.32% --
December 31, 1995....... 50,000 50,000 87,167 60,069 56,069 7.12 39.61%
December 31, 1996....... 50,000 50,000 109,037 76,670 73,170 15.35 33.97
December 31, 1997....... 50,000 50,000 130,428 93,499 90,499 17.57 29.89
December 31, 1998....... 50,000 50,000 122,952 89,778 87,278 12.68 21.27
BALANCED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 74,308 49,705 45,705 -41.58% --
December 31, 1995....... 50,000 50,000 89,133 60,900 56,900 11.71 64.10%
December 31, 1996....... 50,000 50,000 99,308 69,256 65,756 13.47 37.25
December 31, 1997....... 50,000 50,000 110,499 78,591 75,591 13.94 28.45
December 31, 1998....... 50,000 50,000 115,571 83,758 81,258 12.36 22.27
</TABLE>
A-65
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 76,095 50,900 46,900 -31.81% --
December 31, 1995....... 50,000 50,000 77,966 53,270 49,270 -1.25 46.32%
December 31, 1996....... 50,000 50,000 79,221 55,248 51,748 1.60 23.66
December 31, 1997....... 50,000 50,000 74,887 53,263 50,263 .17 13.60
December 31, 1998....... 50,000 50,000 77,006 55,808 53,308 1.55 10.92
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 70,361 47,065 43,065 -59.08% --
December 31, 1995....... 50,000 50,000 101,572 69,399 65,399 25.86 83.54%
December 31, 1996....... 50,000 50,000 109,846 76,605 73,105 19.16 43.79
December 31, 1997....... 50,000 50,000 132,165 94,002 91,002 20.81 35.92
December 31, 1998....... 50,000 50,000 187,225 135,687 133,187 26.50 37.28
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 83,176 56,232 52,232 6.72% --
December 31, 1994....... 50,000 50,000 78,360 54,093 50,093 .11 30.84%
December 31, 1995....... 50,000 50,000 102,844 72,435 68,935 12.77 30.99
December 31, 1996....... 50,000 50,000 116,200 83,431 80,431 13.82 25.82
December 31, 1997....... 50,000 50,000 148,735 108,768 106,268 17.52 26.29
December 31, 1998....... 50,000 124,211 177,666 132,215 130,215 18.39 25.05
STOCK INDEX SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 64,166 43,303 39,303 -30.24% --
December 31, 1988....... 50,000 50,000 70,808 48,796 44,796 -6.38 23.19%
December 31, 1989....... 50,000 50,000 90,502 63,637 60,137 7.16 24.90
December 31, 1990....... 50,000 50,000 81,703 58,570 55,570 2.92 14.32
December 31, 1991....... 50,000 50,000 102,192 74,619 72,119 8.16 16.55
December 31, 1992....... 50,000 73,892 105,237 78,203 76,203 7.72 14.03
December 31, 1993....... 50,000 73,892 110,912 83,811 82,311 7.76 12.69
December 31, 1994....... 50,000 73,892 107,745 82,733 81,733 6.62 10.53
December 31, 1995....... 50,000 73,892 143,059 111,553 111,053 9.64 12.89
December 31, 1996....... 50,000 73,892 167,323 132,421 132,421 10.60 13.31
December 31, 1997....... 50,000 73,892 214,604 172,277 172,277 12.29 14.63
December 31, 1998....... 50,000 73,892 266,932 217,228 217,228 13.42 15.44
</TABLE>
A-66
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 72,075 48,211 44,211 -52.11% --
December 31, 1995....... 50,000 50,000 96,282 65,784 61,784 19.88 75.32%
December 31, 1996....... 50,000 50,000 115,242 80,369 76,869 21.95 47.01
December 31, 1997....... 50,000 50,000 147,342 104,796 101,796 25.17 40.67
December 31, 1998....... 50,000 50,000 161,599 117,115 114,615 22.03 32.51
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 74,828 50,053 46,053 -38.86% --
December 31, 1995....... 50,000 50,000 82,311 56,238 52,238 3.82 53.28%
December 31, 1996....... 50,000 50,000 81,452 56,804 53,304 3.00 25.25
December 31, 1997....... 50,000 50,000 84,616 60,182 57,182 4.33 18.07
December 31, 1998....... 50,000 50,000 87,282 63,255 60,755 4.79 14.30
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 73,266 49,008 45,008 -46.71% --
December 31, 1995....... 50,000 50,000 83,966 57,369 53,369 5.75 55.92%
December 31, 1996....... 50,000 50,000 91,718 63,963 60,463 9.16 32.31
December 31, 1997....... 50,000 50,000 97,569 69,396 66,396 9.37 23.50
December 31, 1998....... 50,000 50,000 95,434 69,164 66,664 7.15 16.78
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' former investment advisory fee of .70% of average
daily net assets for the period through April 30, 1998, and .75% thereafter.
A-67
<PAGE>
FEMALE STANDARD NON SMOKER, ISSUE AGE 70
$50,000 INITIAL PREMIUM
$81,811 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 82,947 51,122 47,122 -15.66% --
December 31, 1984....... 50,000 50,000 89,088 56,311 52,311 3.41 53.50%
December 31, 1985....... 50,000 50,000 100,818 65,320 61,820 9.46 34.81
December 31, 1986....... 50,000 50,000 110,400 73,266 70,266 10.70 26.69
December 31, 1987....... 50,000 50,000 107,750 73,185 70,685 8.29 19.31
December 31, 1988....... 50,000 75,767 111,447 77,406 75,406 7.99 16.17
December 31, 1989....... 50,000 75,767 119,699 84,942 83,442 8.40 14.74
December 31, 1990....... 50,000 75,767 123,826 89,706 88,706 8.11 13.14
December 31, 1991....... 50,000 75,767 139,851 103,356 102,856 9.02 13.11
December 31, 1992....... 50,000 75,767 144,956 109,212 109,212 8.72 12.06
December 31, 1993....... 50,000 75,767 156,979 120,487 120,487 8.87 11.69
December 31, 1994....... 50,000 75,767 146,552 114,506 114,506 7.57 9.94
December 31, 1995....... 50,000 75,767 172,489 137,081 137,081 8.51 10.55
December 31, 1996....... 50,000 75,767 175,005 141,335 141,335 8.10 9.84
December 31, 1997....... 50,000 75,767 188,391 154,468 154,468 8.18 9.69
December 31, 1998....... 50,000 75,767 199,606 166,011 166,011 8.13 9.44
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......... $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 83,150 51,247 47,247 -15.02% --
December 31, 1984....... 50,000 50,000 87,600 55,371 51,371 2.03 51.59%
December 31, 1985....... 50,000 50,000 90,373 58,553 55,053 4.19 28.67
December 31, 1986....... 50,000 50,000 92,041 61,083 58,083 4.58 19.99
December 31, 1987....... 50,000 50,000 93,574 63,557 61,057 4.70 15.51
December 31, 1988....... 50,000 65,444 96,167 66,793 64,793 4.97 13.01
December 31, 1989....... 50,000 65,444 100,419 71,260 69,760 5.39 11.61
December 31, 1990....... 50,000 65,444 103,905 75,274 74,274 5.53 10.47
December 31, 1991....... 50,000 65,444 105,667 78,093 77,593 5.41 9.38
December 31, 1992....... 50,000 65,444 105,088 79,175 79,175 5.04 8.27
December 31, 1993....... 50,000 65,444 104,064 79,873 79,873 4.63 7.34
December 31, 1994....... 50,000 65,444 104,800 81,884 81,884 4.44 6.74
December 31, 1995....... 50,000 65,444 107,322 85,291 85,291 4.42 6.38
December 31, 1996....... 50,000 65,444 109,397 88,350 88,350 4.36 6.04
December 31, 1997....... 50,000 65,444 111,869 91,726 91,726 4.32 5.77
December 31, 1998....... 50,000 65,444 114,422 95,164 95,164 4.28 5.54
</TABLE>
A-68
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 78,989 48,993 44,993 -14.60% --
December 31, 1988....... 50,000 50,000 82,078 52,204 48,204 -2.17 34.59%
December 31, 1989....... 50,000 50,000 94,298 61,467 57,967 5.70 26.84
December 31, 1990....... 50,000 50,000 92,035 61,437 58,437 4.34 18.09
December 31, 1991....... 50,000 50,000 105,576 72,115 69,615 7.35 17.36
December 31, 1992....... 50,000 70,177 107,626 75,159 73,159 6.95 14.48
December 31, 1993....... 50,000 70,177 113,873 81,230 79,730 7.25 13.14
December 31, 1994....... 50,000 70,177 107,683 78,405 77,405 5.86 10.52
December 31, 1995....... 50,000 70,177 136,181 101,135 100,635 8.40 12.25
December 31, 1996....... 50,000 70,177 149,310 113,022 113,022 8.80 11.98
December 31, 1997....... 50,000 70,177 182,171 140,455 140,455 10.17 12.88
December 31, 1998....... 50,000 70,177 211,085 165,641 165,641 10.81 13.14
MIDCAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 90,861 56,477 52,477 7.47% --
December 31, 1994....... 50,000 50,000 85,382 54,419 50,419 .50 37.74%
December 31, 1995....... 50,000 50,000 107,511 70,222 66,722 11.41 33.19
December 31, 1996....... 50,000 50,000 120,302 80,465 77,465 12.67 27.02
December 31, 1997....... 50,000 50,000 134,739 92,209 89,709 13.33 23.64
December 31, 1998....... 50,000 104,570 121,710 85,149 83,149 9.38 16.98
SMALL CAP SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 76,327 47,342 43,342 -19.32% --
December 31, 1995....... 50,000 50,000 94,443 60,069 56,069 7.12 46.49%
December 31, 1996....... 50,000 50,000 117,621 76,670 73,170 15.35 37.84
December 31, 1997....... 50,000 50,000 140,064 93,499 90,499 17.57 32.45
December 31, 1998....... 50,000 50,000 131,435 89,778 87,278 12.68 23.02
BALANCED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 80,987 49,705 45,705 -41.58% --
December 31, 1995....... 50,000 50,000 96,746 60,900 56,900 11.71 76.04%
December 31, 1996....... 50,000 50,000 107,324 69,256 65,756 13.47 42.26
December 31, 1997....... 50,000 50,000 118,886 78,591 75,591 13.94 31.45
December 31, 1998....... 50,000 50,000 123,778 83,758 81,258 12.36 24.30
</TABLE>
A-69
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 82,935 50,900 46,900 -31.81% --
December 31, 1995....... 50,000 50,000 84,624 53,270 49,270 -1.25 56.96%
December 31, 1996....... 50,000 50,000 85,615 55,248 51,748 1.60 28.17
December 31, 1997....... 50,000 50,000 80,571 53,263 50,263 .17 16.26
December 31, 1998....... 50,000 50,000 82,475 55,808 53,308 1.55 12.76
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 76,685 47,065 43,065 -59.08% --
December 31, 1995....... 50,000 50,000 110,247 69,399 65,399 25.86 96.89%
December 31, 1996....... 50,000 50,000 118,713 76,605 73,105 19.16 49.03
December 31, 1997....... 50,000 50,000 142,197 94,002 91,002 20.81 39.10
December 31, 1998....... 50,000 50,000 200,521 135,687 133,187 26.50 39.56
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 90,467 56,232 52,232 6.72% --
December 31, 1994....... 50,000 50,000 84,870 54,093 50,093 .11 37.24%
December 31, 1995....... 50,000 50,000 110,899 72,435 68,935 12.77 34.74
December 31, 1996....... 50,000 50,000 124,737 83,431 80,431 13.82 28.28
December 31, 1997....... 50,000 50,000 158,935 108,768 106,268 17.52 28.09
December 31, 1998....... 50,000 124,211 188,986 132,215 130,215 18.39 26.42
STOCK INDEX SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 69,815 43,303 39,303 -30.24% --
December 31, 1988....... 50,000 50,000 76,718 48,796 44,796 -6.38 29.25%
December 31, 1989....... 50,000 50,000 97,627 63,637 60,137 7.16 28.50
December 31, 1990....... 50,000 50,000 87,740 58,570 55,570 2.92 16.57
December 31, 1991....... 50,000 50,000 109,242 74,619 72,119 8.16 18.22
December 31, 1992....... 50,000 73,892 111,985 78,203 76,203 7.72 15.29
December 31, 1993....... 50,000 73,892 117,491 83,811 82,311 7.76 13.67
December 31, 1994....... 50,000 73,892 113,627 82,733 81,733 6.62 11.30
December 31, 1995....... 50,000 73,892 150,209 111,553 111,053 9.64 13.53
December 31, 1996....... 50,000 73,892 174,938 132,421 132,421 10.60 13.83
December 31, 1997....... 50,000 73,892 223,445 172,277 172,277 12.29 15.07
December 31, 1998....... 50,000 73,892 276,826 217,228 217,228 13.42 15.80
</TABLE>
A-70
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 81,811 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 78,554 48,211 44,211 -52.11% --
December 31, 1995....... 50,000 50,000 104,505 65,784 61,784 19.88 88.07%
December 31, 1996....... 50,000 50,000 124,545 80,369 76,869 21.95 52.37
December 31, 1997....... 50,000 50,000 158,526 104,796 101,796 25.17 43.96
December 31, 1998....... 50,000 50,000 173,075 117,115 114,615 22.03 34.71
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 81,811 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 81,555 50,053 46,053 -38.86% --
December 31, 1995....... 50,000 50,000 89,340 56,238 52,238 3.82 64.43%
December 31, 1996....... 50,000 50,000 88,027 56,804 53,304 3.00 29.82
December 31, 1997....... 50,000 50,000 91,038 60,182 57,182 4.33 20.83
December 31, 1998....... 50,000 50,000 93,480 63,255 60,755 4.79 16.20
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 81,811 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 79,852 49,008 45,008 -46.71% --
December 31, 1995....... 50,000 50,000 91,137 57,369 53,369 5.75 67.26%
December 31, 1996....... 50,000 50,000 99,122 63,963 60,463 9.16 37.13
December 31, 1997....... 50,000 50,000 104,975 69,396 66,396 9.37 26.39
December 31, 1998....... 50,000 50,000 102,211 69,164 66,664 7.15 18.72
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series former investment advisory fee of .70% of average
daily net assets for the period through April 30, 1998 and .75% thereafter.
A-71
<PAGE>
MALE STANDARD NON SMOKER, ISSUE AGE 65
FEMALE STANDARD NON SMOKER, ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM
$114,909 INITIAL DEATH BENEFIT
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 116,136 51,194 47,194 -15.29% --
December 31, 1984....... 50,000 50,000 123,559 56,620 52,620 3.86 95.65%
December 31, 1985....... 50,000 50,000 138,437 65,906 62,406 9.90 54.30
December 31, 1986....... 50,000 50,000 149,980 74,131 71,131 11.10 38.83
December 31, 1987....... 50,000 50,000 144,724 74,216 71,716 8.65 27.69
December 31, 1988....... 50,000 76,937 147,943 78,654 76,654 8.32 22.49
December 31, 1989....... 50,000 76,937 157,032 86,484 84,984 8.72 19.76
December 31, 1990....... 50,000 76,937 160,543 91,517 90,517 8.41 17.21
December 31, 1991....... 50,000 76,937 179,230 105,654 105,154 9.31 16.52
December 31, 1992....... 50,000 76,937 183,685 111,864 111,864 9.00 14.93
December 31, 1993....... 50,000 123,368 196,769 123,659 123,659 9.14 14.16
December 31, 1994....... 50,000 123,368 181,797 117,756 117,756 7.84 12.05
December 31, 1995....... 50,000 123,368 211,855 141,254 141,254 8.77 12.40
December 31, 1996....... 50,000 123,368 212,910 145,930 145,930 8.36 11.47
December 31, 1997....... 50,000 123,368 227,113 159,809 159,809 8.44 11.12
December 31, 1998....... 50,000 123,368 238,541 172,096 172,096 8.39 10.72
MONEY MARKET SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 116,420 51,320 47,320 -14.64% --
December 31, 1984....... 50,000 50,000 121,496 55,674 51,674 2.47 93.22%
December 31, 1985....... 50,000 50,000 124,093 59,077 55,577 4.61 47.28
December 31, 1986....... 50,000 50,000 125,037 61,803 58,803 4.96 31.49
December 31, 1987....... 50,000 50,000 125,682 64,451 61,951 5.05 23.61
December 31, 1988....... 50,000 66,453 127,657 67,868 65,868 5.29 19.16
December 31, 1989....... 50,000 66,453 131,737 72,553 71,053 5.69 16.49
December 31, 1990....... 50,000 66,453 134,714 76,793 75,793 5.82 14.44
December 31, 1991....... 50,000 66,453 135,418 79,828 79,328 5.68 12.68
December 31, 1992....... 50,000 66,453 133,164 81,096 81,096 5.31 11.05
December 31, 1993....... 50,000 81,486 130,440 81,975 81,975 4.89 9.71
December 31, 1994....... 50,000 81,486 130,002 84,207 84,207 4.70 8.78
December 31, 1995....... 50,000 81,486 131,814 87,887 87,887 4.67 8.17
December 31, 1996....... 50,000 81,486 133,089 91,221 91,221 4.61 7.61
December 31, 1997....... 50,000 81,486 134,862 94,896 94,896 4.57 7.16
December 31, 1998....... 50,000 81,486 136,739 98,650 98,650 4.53 6.77
</TABLE>
A-72
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 110,338 49,114 45,114 -14.26% --
December 31, 1988....... 50,000 50,000 113,557 52,538 48,538 -1.76 63.50%
December 31, 1989....... 50,000 50,000 129,144 62,065 58,565 6.10 42.70
December 31, 1990....... 50,000 50,000 124,677 62,198 59,198 4.71 28.28
December 31, 1991....... 50,000 50,000 141,388 73,167 70,667 7.96 24.94
December 31, 1992....... 50,000 71,261 142,449 76,409 74,409 7.27 20.29
December 31, 1993....... 50,000 71,261 148,947 82,746 81,246 7.55 17.78
December 31, 1994....... 50,000 71,261 139,206 80,028 79,028 6.15 14.28
December 31, 1995....... 50,000 71,261 174,028 103,435 102,935 8.69 15.47
December 31, 1996....... 50,000 71,261 188,682 115,824 115,824 9.08 14.72
December 31, 1997....... 50,000 121,946 227,744 144,226 144,226 10.44 15.72
December 31, 1998....... 50,000 121,946 261,190 170,428 170,428 11.08 15.22
MIDCAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 126,824 56,636 52,636 7.96% --
December 31, 1994....... 50,000 50,000 118,034 54,784 50,784 .94 67.19%
December 31, 1995....... 50,000 50,000 147,115 70,924 67,424 11.84 49.78
December 31, 1996....... 50,000 50,000 162,823 81,480 78,480 13.07 37.93
December 31, 1997....... 50,000 50,000 180,270 93,571 91,071 13.70 31.59
December 31, 1998....... 50,000 106,185 160,933 86,580 84,580 9.71 22.89
SMALL CAP SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 106,618 47,459 43,459 -18.99% --
December 31, 1995....... 50,000 50,000 130,666 60,454 56,454 7.56 78.01%
December 31, 1996....... 50,000 50,000 161,089 77,417 73,917 15.79 55.10
December 31, 1997....... 50,000 50,000 189,750 94,662 91,662 17.98 43.88
December 31, 1998....... 50,000 50,000 176,028 91,093 88,593 13.04 30.96
BALANCED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 113,571 49,740 45,740 -41.31% --
December 31, 1995....... 50,000 50,000 134,404 61,196 57,196 12.21 133.32%
December 31, 1996....... 50,000 50,000 147,631 69,842 66,342 13.94 64.81
December 31, 1997....... 50,000 50,000 161,815 79,489 76,489 14.37 44.89
December 31, 1998....... 50,000 50,000 166,580 84,909 82,409 12.74 33.48
</TABLE>
A-73
<PAGE>
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 116,303 50,936 46,936 -31.50% --
December 31, 1995....... 50,000 50,000 117,564 53,529 49,529 -.81 108.03%
December 31, 1996....... 50,000 50,000 117,768 55,715 52,215 2.02 48.49
December 31, 1997....... 50,000 50,000 109,661 53,869 50,869 .55 28.14
December 31, 1998....... 50,000 50,000 110,990 56,574 54,074 1.90 21.09
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 107,538 47,098 43,098 -58.89% --
December 31, 1995....... 50,000 50,000 153,160 69,736 65,736 26.42 160.95%
December 31, 1996....... 50,000 50,000 163,296 77,253 73,753 19.65 72.66
December 31, 1997....... 50,000 50,000 193,545 95,076 92,076 21.26 53.32
December 31, 1998....... 50,000 50,000 269,870 137,558 135,058 26.93 49.87
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 126,274 56,391 52,391 7.21% --
December 31, 1994....... 50,000 50,000 117,325 54,455 50,455 .54 66.59%
December 31, 1995....... 50,000 50,000 151,751 73,160 69,660 13.22 51.53
December 31, 1996....... 50,000 50,000 168,827 84,484 81,484 14.23 39.30
December 31, 1997....... 50,000 50,000 212,647 110,377 107,877 17.89 36.33
December 31, 1998....... 50,000 126,133 249,894 134,440 132,440 18.74 32.81
STOCK INDEX SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 97,521 43,409 39,409 -29.96% --
December 31, 1988....... 50,000 50,000 106,142 49,107 45,107 -5.99 57.01%
December 31, 1989....... 50,000 50,000 133,705 64,257 60,757 7.58 44.57
December 31, 1990....... 50,000 50,000 118,858 59,295 56,295 3.29 26.62
December 31, 1991....... 50,000 50,000 146,300 75,709 73,209 8.51 25.86
December 31, 1992....... 50,000 75,033 148,219 79,503 77,503 8.04 21.13
December 31, 1993....... 50,000 75,033 153,680 85,376 83,876 8.07 18.34
December 31, 1994....... 50,000 75,033 146,891 84,446 83,446 6.91 15.09
December 31, 1995....... 50,000 75,033 191,956 114,091 113,591 9.93 16.79
December 31, 1996....... 50,000 75,033 221,069 135,706 135,706 10.88 16.62
December 31, 1997....... 50,000 145,580 279,345 176,903 176,903 12.57 17.50
December 31, 1998....... 50,000 145,580 342,539 223,508 223,508 13.69 17.93
</TABLE>
A-74
<PAGE>
VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 110,158 48,245 44,245 -51.89% --
December 31, 1995....... 50,000 50,000 145,183 66,104 62,104 20.41 149.26%
December 31, 1996....... 50,000 50,000 171,321 81,049 77,549 22.45 76.52
December 31, 1997....... 50,000 50,000 215,775 105,996 102,996 25.63 58.67
December 31, 1998....... 50,000 50,000 232,929 118,729 116,229 22.44 44.66
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 114,367 50,088 46,088 -38.58% --
December 31, 1995....... 50,000 50,000 124,115 56,512 52,512 4.29 117.93%
December 31, 1996....... 50,000 50,000 121,085 57,284 53,784 3.42 50.40
December 31, 1997....... 50,000 50,000 123,910 60,869 57,869 4.72 33.18
December 31, 1998....... 50,000 50,000 125,803 64,124 61,624 5.14 24.78
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $114,909 $50,000 $46,000 -- --
December 31, 1994....... 50,000 50,000 111,979 49,043 45,043 -46.46% --
December 31, 1995....... 50,000 50,000 126,611 57,648 53,648 6.22 121.68%
December 31, 1996....... 50,000 50,000 136,347 64,504 61,004 9.61 58.87
December 31, 1997....... 50,000 50,000 142,880 70,188 67,188 9.78 39.31
December 31, 1998....... 50,000 50,000 137,553 70,114 67,614 7.51 27.49
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' former investment advisory fee of .70% of average
daily net assets for the period through April 30, 1998 and .75% thereafter.
A-75
<PAGE>
APPENDIX C
EXAMPLE OF EFFECT OF NEGATIVE INVESTMENT PERFORMANCE
ON CALCULATION OF SURRENDER CHARGES
If there has been negative investment performance under your Policy (that
is, cash value is less than your total premium payments because net investment
experience of the Sub-Accounts has not been at least equal to total charges or
has been negative), we will calculate any Surrender Charge by deeming
additional payments to have been reduced before the initial premium. If we
consider negative investment performance to completely reduce additional
payments and to further reduce initial premium, we will consider any
subsequent increase in cash value (from earnings or net additional payments)
to increase initial premium before additional payments.
For example, assume that an initial premium of $30,000 and a net additional
payment of $20,000 have been paid, so that total net premium payments equals
$50,000. Assume further that because of negative investment performance, cash
value is equal to $40,000, or $10,000 less than total net premium payments.
For purposes of calculating the Surrender Charge upon a surrender, we would
consider the amount of additional payments at this time to equal $10,000, and
the amount of the initial premium to equal $30,000. If, because of negative
investment performance, cash value were equal to $20,000, we will consider the
negative investment performance to have completely reduced additional
payments, and the initial premium remaining would be $20,000. If, in this last
situation, there was a subsequent increase in cash value (from earnings or net
additional payments) of $15,000 occurring after the negative investment
performance, $10,000 will be deemed to increase the initial premium first back
to $30,000, and the remaining $5,000 would be deemed then to increase
additional payments to $5,000.
EXAMPLE OF ADJUSTMENT TO PREMIUM TAX CHARGE RESULTING FROM ADDITIONAL PAYMENTS
As described under "Charges and Expenses," if an additional payment is
accepted, a proportional adjustment will be made in the rate of the state
premium tax charge deducted as part of the Monthly Deduction.
For example, assume that the cash value immediately before the additional
payment is $30,000, and the net additional payment would increase the cash
value to $50,000. As a result, the state premium tax charge deducted monthly
as part of the Monthly Deduction would be 60% of what it was originally,
resulting in deductions thereafter at an annual rate of 0.15% for the state
premium tax charge.
A-76
<PAGE>
APPENDIX D
EXAMPLES OF EFFECT OF SURRENDERS AND PARTIAL
SURRENDERS ON OPERATION OF POLICY
The following examples assume that an initial premium of $40,000 was paid.
The examples further assume that no additional payments have been made and
that there have been no partial surrenders.
Based on these hypothetical assumptions, the examples demonstrate the effect
of surrenders and partial surrenders on a hypothetical Policy at the beginning
of Policy Year 5, assuming that current cash value is either $60,000 or
$30,000.
THE HYPOTHETICAL CURRENT CASH VALUES OF $60,000 AND $30,000 ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT PERFORMANCE.
SURRENDER CHARGE ON FULL SURRENDER
$60,000 current cash value:
Preferred Surrender $20,000 [The maximum of (1) $20,000 (cash value
Amount: calculated on the date of surrender, or $60,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
Surrender Charge Imposed: $2,000[5% of $40,000 ($60,000, the amount being
surrendered, less $20,000, the preferred
surrender amount)]
Surrender Proceeds:
$58,000 [$60,000, the cash value of the Policy,
less $2,000, the Surrender Charge]
$30,000 current cash value:
Preferred Surrender $4,000 [The maximum of (1)--$10,000 (cash value
Amount: calculated on the date of surrender, or $30,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
Surrender Charge Imposed: $1,300 [5% of $26,000 ($30,000, or the amount
being surrendered, less $4,000, the preferred
surrender amount)]
Surrender Proceeds:
$28,700 [$30,000, the cash value of the Policy,
less $1,300, the Surrender Charge]
SURRENDER CHARGE ON PARTIAL SURRENDER AND EFFECT ON CASH VALUE
$60,000 current cash value:
Partial Surrender: $30,000
Preferred Surrender
Amount: $20,000The maximum of (1) $20,000 (cash value
calculated on the date of surrender, or $60,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
A-77
<PAGE>
Surrender Charge Imposed:
$500 [5% of $10,000 ($30,000, the amount being
surrendered, less $20,000, the preferred
surrender amount)]
Surrender Proceeds: $29,500($30,000, the amount being surrendered,
less $500, the Surrender Charge being imposed)
Remaining Cash Value: $30,000
Remaining Initial Premium: $30,000
Remaining Surrender $1,500 [5% of $30,000]
Charge:
Remaining Cash Surrender $28,500
Value:
$30,000 current cash value:
Partial Surrender: $20,000
Preferred Surrender $4,000 [The maximum of (1)--$10,000 (cash value
Amount: calculated on the date of surrender, or $30,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
Surrender Charge Imposed: $800 [5% of $16,000 ($20,000, or the amount being
surrendered, less $4,000, the preferred surrender
amount)]
Surrender Proceeds: $19,200[$20,000, the amount being surrendered,
less $800, the surrender charge being imposed]
Remaining Cash Value: $10,000
Remaining Initial Premium: $20,000
Remaining Surrender $1,000 [5% of $20,000]
Charge:
Remaining Cash Surrender $9,000
Value:
EFFECT OF PARTIAL SURRENDER ON GUARANTEED DEATH BENEFIT
Making a partial surrender will reduce the amount of the minimum guaranteed
death benefit on a proportionate basis, based on the amount of the reduction
in cash value (including any Surrender Charge) because of the partial
surrender, as compared to the cash value before the reduction (but not more
than the partial surrender amount).
Cash Value: $60,000
Partial Surrender: $15,000
Cash Value after $45,000
Surrender:
Minimum Guaranteed Death
Benefit before partial $40,000 [Initial premium paid]
surrender:
Minimum Guaranteed Death
Benefit after partial $30,000 [$40,000, or the minimum guaranteed death
surrender: benefit before partial surrender, multiplied by
$45,000, the cash value after the partial
surrender, divided by $60,000, the cash value
before the partial surrender]
A-78
<PAGE>
APPENDIX E
LONG-TERM MARKET TRENDS
The information below compares 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 does
not predict future performance. The information does not reflect policy
charges.
The data indicates that, historically, the investment performance of common
stocks over long periods has been positive and generally superior to that of
long-term, high grade debt securities. Common stocks have, however, been
subject to more dramatic market adjustments over short periods.
Over the 54 20-year time periods beginning in 1926 and ending in 1998 (i.e.,
1926-1945, 1927-1946, and so on through 1979-1998):
-- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 51 of the 54 periods.
-- The average annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 54 periods.
-- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 54 periods.
Over the 44 30-year periods beginning in 1926 and ending in 1998, 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 44
periods.
From 1926 through 1998 the average annual return for common stocks was
11.2%, compared to 5.8% for high grade, long-term corporate bonds, 3.8% for
U.S. Treasury bills and 3.1% for the Consumer Price Index.
- --------
* Used with permission. (C)1999 Ibbotson Associates, Inc. All rights reserved.
(Certain portions of this work were derived from copyrighted works of Roger
G. Ibbotson and Rex Sinquefield.)
----------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index, with dividends reinvested, over one-year, five-year
and twenty-year periods beginning in 1926 and ending in 1998.
The chart does not predict future stock market results. It shows the
historic performance of a broad index of stocks and not the performance of any
fund or investment.
----------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 0-5.00% 10.00% 15.00% 20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
-------- -------- ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
1 year 27% 4% 11% 7% 11% 40%
5 years 10% 14% 14% 31% 19% 12%
10 years 3% 10% 33% 24% 28% 2%
20 years 0% 6% 31% 54% 9% 0%
</TABLE>
- --------
Used with permission. (C)1999 Ibbotson Associates, Inc. All rights reserved.
(Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.)
A-79
<PAGE>
APPENDIX F
DOLLAR COST AVERAGING
Dollar cost averaging 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--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. Under dollar cost averaging, an investor does not invest more when
the price of shares is high and less 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 you have 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
you sell shares should be higher than their average cost. This price could be
lower, however, if the fund you choose does not follow these historical
trends.
You should consider your ability to continue on-going dollar cost averaging
purchases so that you can take advantage of periods of low price levels if you
are considering dollar cost averaging.
A-80
<PAGE>
New England Variable Life Separate Account of New England Life Insurance
Company
Report of Independent Accountants
To the Policy Owners and Board of Directors of New England Life Insurance
Company:
We have audited the accompanying statement of assets and liabilities of the
New England Variable Life Separate Account (comprised of Capital Growth Sub-
Account, Bond Income Sub-Account, Money Market Sub-Account, Stock Index Sub-
Account, Managed Sub-Account, Midcap Value Sub-Account (formerly 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 Magnum Equity Sub-Account
(formerly 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 as of December 31, 1998, and the related statements of
operations and changes in net assets for each of the three years in the period
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above 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, 1998, and the results of
their operations and the changes in their net assets for each of the three
years in the period then ended, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 10, 1999
F-1
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
New England Zenith Fund
----------------------------------------------------------------------------------------
Growth
Capital Bond Money Stock Midcap and
Growth Income Market Index Managed Value Income
Sub- Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account Account
-------------- ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments in New England Zenith
Fund, Variable Insurance Products
Fund, and Variable Insurance
Products Fund II at value
(Note 2)........................ $1,062,879,735 $63,810,233 $91,999,048 $112,951,497 $58,280,968 $36,325,954 $66,354,407
<CAPTION>
Shares Cost
--------- --------------
<S> <C> <C>
Capital Growth
Series......... 2,270,965 $ 846,910,241
Back Bay
Advisors Bond
Income Series.. 580,674 62,600,962
Back Bay
Advisors Money
Market Series.. 919,990 91,999,048
Westpeak Stock
Index Series... 575,256 72,986,331
Back Bay
Advisors
Managed Series. 280,521 44,995,302
Goldman Sachs
Midcap Value
Series......... 295,718 40,133,483
Westpeak Growth
and Income
Series......... 318,506 52,737,711
Loomis Sayles
Small Cap
Series......... 466,286 68,072,072
Salomon Brothers
U.S. Government
Series......... 67,545 759,527
Loomis Sayles
Balanced
Series......... 927,883 13,354,477
Alger Equity
Growth Series.. 4,069,269 71,472,170
Morgan Stanley
International
Magnum Equity
Series......... 1,025,541 11,496,216
Davis Venture
Value Series... 4,661,398 87,902,713
Salomon Brothers
Bond
Opportunities
Series......... 105,941 1,257,497
VIP Equity-
Income
Portfolio...... 6,075,186 114,838,775
VIP Overseas
Portfolio...... 4,647,523 78,413,065
VIP High Income
Portfolio...... 981,426 11,927,393
VIP II Asset
Manager
Portfolio...... 505,178 7,927,108
--------------
Total $1,679,784,090
==============
Amount due and accrued (payable) from
policy-related transactions, net... 177,286 141,063 1,688,024 146,440 (922) 61,118 58,059
Dividends receivable................ -- -- 317,906 -- -- -- --
-------------- ----------- ----------- ----------- ------------ ----------- -----------
Total Assets........................ 1,063,057,021 63,951,296 94,004,978 113,097,938 58,280,046 36,387,072 66,412,466
Liabilities
Due New England Life Insurance
Company........................... 88,352,429 6,135,252 8,674,054 12,388,146 5,030,060 3,676,010 7,460,673
-------------- ----------- ----------- ----------- ------------ ----------- -----------
Total Liabilities................. 88,352,429 6,135,252 8,674,054 12,388,146 5,030,060 3,676,010 7,460,673
-------------- ----------- ----------- ----------- ------------ ----------- -----------
Net Assets for Variable Life
Insurance Policies................. $ 974,704,592 $57,816,044 $85,330,924 $100,709,791 $53,249,987 $32,711,062 $58,951,793
============== =========== =========== ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements
F-2
<PAGE>
<TABLE>
<CAPTION>
Variable Insurance
Products Fund
- ----------------------------------------------------------------------------------------- -------------------------------------
International
Small U.S. Equity Magnum Venture Bond Equity- High
Cap Government Balanced Growth Equity Value Opportunities Income Overseas Income
Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account Account Account Account Account
- ----------- ---------- ----------- ------------ ------------- ------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$71,588,857 $774,736 $14,391,467 $102,179,339 $11,691,171 $107,911,360 $1,210,903 $154,432,484 $93,181,595 $11,315,839
134,394 5,294 13,282 356,305 15,466 52,450 7,704 9,726 (100,707) 15,136
-- -- -- -- -- -- -- -- -- --
- ----------- -------- ----------- ------------ ----------- ------------ ---------- ------------ ----------- -----------
71,723,251 780,030 14,404,749 102,535,644 11,706,637 107,963,810 1,218,608 154,442,210 93,080,888 11,330,975
7,924,364 88,418 1,928,101 11,661,794 1,388,081 12,691,342 127,954 15,888,809 8,807,089 1,342,020
- ----------- -------- ----------- ------------ ----------- ------------ ---------- ------------ ----------- -----------
7,924,364 88,418 1,928,101 11,661,794 1,388,081 12,691,342 127,954 15,888,809 8,807,089 1,342,020
- ----------- -------- ----------- ------------ ----------- ------------ ---------- ------------ ----------- -----------
$63,798,887 $691,612 $12,476,648 $ 90,873,849 $10,318,556 $ 95,272,468 $1,090,654 $138,553,401 $84,273,799 $ 9,988,955
=========== ======== =========== ============ =========== ============ ========== ============ =========== ===========
<CAPTION>
Variable
Insurance
Products
Fund II
- ------------------------ --------------
Small Asset
Cap Manager
Sub- Sub-
Account Account Total
- ------------ ---------- --------------
<S> <C> <C>
$71,588,857 $9,174,668 $2,070,454,260
134,394 271 2,780,390
-- -- 317,906
- ------------ ---------- --------------
71,723,251 9,174,938 2,073,552,557
7,924,364 987,748 194,552,345
- ------------ ---------- --------------
7,924,364 987,748 194,552,345
- ------------ ---------- --------------
$63,798,887 $8,187,191 $1,879,000,212
============ ========== ==============
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Statement of Operations
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
New England Zenith Fund
------------------------------------------------------------------------------------
Growth
Capital Bond Money Stock Midcap and
Growth Income Market Index Managed Value 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.............. $136,031,595 $4,500,888 $2,243,738 $ 1,665,717 $ 4,920,327 $ 8,522,091 $ 4,438,526
Expense
Mortality and expense
risk charge (Note 3).. 5,675,180 329,452 281,233 574,859 295,717 213,136 321,673
------------ ---------- ---------- ----------- ----------- ------------ -----------
Net investment income
(loss)................ 130,356,415 4,171,436 1,962,505 1,090,858 4,624,610 8,308,955 4,116,853
Net Realized and
Unrealized Gain (Loss)
on Investments
Net unrealized
appreciation
(depreciation) on
investments:
Beginning of period.... 91,366,363 892,059 -- 19,889,059 9,447,437 6,964,381 6,858,665
End of period.......... 215,969,495 1,209,273 -- 39,965,167 13,285,666 (3,807,527) 13,616,695
------------ ---------- ---------- ----------- ----------- ------------ -----------
Net change in
unrealized
appreciation
(depreciation)........ 124,603,132 317,214 -- 20,076,109 3,838,229 (10,771,908) 6,758,031
Net realized gain on
investments........... 5,610,899 1,800 -- 190,803 163,910 236,891 14,655
------------ ---------- ---------- ----------- ----------- ------------ -----------
Net realized and
unrealized gain (loss)
on investments........ 130,214,031 319,014 -- 20,266,912 4,002,139 (10,535,017) 6,772,686
------------ ---------- ---------- ----------- ----------- ------------ -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations........ $260,570,446 $4,490,449 $1,962,505 $21,357,770 $ 8,626,750 $ (2,226,063) $10,889,538
============ ========== ========== =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
Variable Insurance
Products Fund
- --------------------------------------------------------------------------------------- ----------------------------------
International
Small U.S. Equity Magnum Venture Bond Equity- High
Cap Government Balanced Growth Equity Value Opportunities Income Overseas Income
Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account Account Account Account Account
- ----------- ---------- ---------- ----------- ------------- ----------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,148,975 $32,331 $ 607,129 $ 3,598,904 $ 251,292 $ 2,912,129 $ 81,480 $ 8,088,940 $6,093,523 $ 1,064,286
380,727 (2,318) 52,939 452,661 48,632 512,333 (9,440) 902,569 550,070 67,547
- ----------- ------- ---------- ----------- --------- ----------- -------- ----------- ---------- -----------
768,248 34,649 554,190 3,146,243 202,660 2,399,796 90,920 7,186,371 5,543,453 996,739
5,422,058 (1,916) 642,612 5,391,267 (155,005) 10,716,783 (2,256) 32,699,163 11,137,299 964,520
3,516,783 15,209 1,036,991 30,707,168 194,954 20,008,648 (46,594) 39,593,709 14,768,529 (611,552)
- ----------- ------- ---------- ----------- --------- ----------- -------- ----------- ---------- -----------
(1,905,274) 17,125 394,379 25,315,901 349,959 9,291,865 (44,337) 6,894,545 3,631,231 (1,576,072)
20,862 11 6,840 56,142 5,897 22,521 493 561,003 333,272 20,913
- ----------- ------- ---------- ----------- --------- ----------- -------- ----------- ---------- -----------
(1,884,412) 17,136 401,219 25,372,043 355,856 9,314,386 (43,844) 7,455,548 3,964,503 (1,555,159)
- ----------- ------- ---------- ----------- --------- ----------- -------- ----------- ---------- -----------
$(1,116,164) $51,785 $ 955,409 $28,518,286 $ 558,517 $11,714,181 $ 47,076 $14,641,919 $9,507,956 $ (558,420)
=========== ======= ========== =========== ========= =========== ======== =========== ========== ===========
<CAPTION>
Variable
Insurance
Products
Fund II
- ------------------------ ------------
Small Asset
Cap Manager
Sub- Sub-
Account Account Total
- ------------- ---------- ------------
<S> <C> <C>
$ 1,148,975 $ 835,511 $187,037,382
380,727 50,140 10,697,110
- ------------- ---------- ------------
768,248 785,371 176,340,272
5,422,058 971,097 203,203,584
3,516,783 1,247,559 390,670,172
- ------------- ---------- ------------
(1,905,274) 276,461 187,466,588
20,862 4,137 7,251,049
- ------------- ---------- ------------
(1,884,412) 280,598 194,717,637
- ------------- ---------- ------------
$(1,116,164) $1,065,969 $371,057,909
============= ========== ============
</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 Year Ended December 31, 1997
<TABLE>
<CAPTION>
New England Zenith Fund
--------------------------------------------------------------------------------
Growth
Capital Bond Money Stock Midcap and
Growth Income Market Index Managed Value 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.............. $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
(loss)................ 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>
- ---------------------------------------------------------------------------------
International
Small U.S. Equity Magnum Venture Bond
Cap Government Balanced Growth Equity Value Opportunities
Sub- Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account Account
- ---------- ---------- -------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
$6,279,206 $9,089 $438,430 $4,721,050 $ 209,389 $1,822,395 $43,914
275,141 2,290 50,941 265,599 51,702 276,055 9,400
- ---------- ------ -------- ---------- --------- ---------- -------
6,004,065 6,799 387,489 4,455,451 157,687 1,546,340 34,514
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153)
5,422,058 (1,916) 642,612 5,391,267 (155,006) 10,716,783 (2,256)
- ---------- ------ -------- ---------- --------- ---------- -------
2,362,493 (1,097) 405,987 3,306,878 (291,197) 8,318,760 (1,103)
20,956 1 55,231 75,802 8,303 21,718 201
- ---------- ------ -------- ---------- --------- ---------- -------
2,383,449 (1,096) 461,218 3,382,680 (282,894) 8,340,478 (902)
- ---------- ------ -------- ---------- --------- ---------- -------
$8,387,514 $5,703 $848,707 $7,838,131 $(125,207) $9,886,818 $33,612
========== ====== ======== ========== ========= ========== =======
<CAPTION>
- ---------------------------------------------------------------------------------
Variable
Insurance
Variable Insurance Products
Products Fund Fund II
- ------------------------------- ---------
Equity- High Asset
Income Overseas Income Manager
Sub- Sub- Sub- Sub-
Account Account Account Account Total
- ----------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C>
$ 8,872,794 $5,434,055 $393,295 $528,401 $231,072,203
676,059 447,597 41,502 33,135 7,755,657
- ----------- ---------- -------- -------- ------------
8,196,735 4,986,458 351,793 495,266 223,316,546
16,409,989 9,502,216 362,600 547,647 194,486,245
32,699,163 11,137,299 964,520 971,097 203,203,584
- ----------- ---------- -------- -------- ------------
16,289,174 1,635,083 601,920 423,450 8,717,339
126,489 67,905 12,234 5,368 2,491,649
- ----------- ---------- -------- -------- ------------
16,415,663 1,702,988 614,154 428,818 11,208,988
- ----------- ---------- -------- -------- ------------
$24,612,398 $6,689,446 $965,947 $924,084 $234,525,534
=========== ========== ======== ======== ============
</TABLE>
See Notes to Financial Statements
F-7
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Statement of Operations
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
New England Zenith Fund
-------------------------------------------------------------------------------
Capital Bond Money Stock Midcap Growth and
Growth Income Market Index Managed Value 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>
- ----------------------------------------------------------------------------------
International
Small U.S. Equity Magnum Venture Bond
Cap Government Balanced Growth Equity Value Opportunities
Sub- Sub- Sub- Sub- Sub- Sub- Sub-
Account Account* Account Account Account Account Account*
- ---------- ---------- -------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
$1,624,708 $ 702 $104,939 $ 44,863 $ 71,347 $ 444,012 $ 1,218
90,146 28 11,713 104,685 19,385 64,656 40
- ---------- ----- -------- ---------- -------- ---------- -------
1,534,562 674 93,226 (59,822) 51,962 379,356 1,178
768,552 -- 3,769 65,901 24,089 171,931 --
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153)
- ---------- ----- -------- ---------- -------- ---------- -------
2,291,013 (819) 232,856 2,018,488 112,102 2,226,092 (1,153)
31,570 -- 2,318 11,723 159 4,907 --
- ---------- ----- -------- ---------- -------- ---------- -------
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
========== ===== ======== ========== ======== ========== =======
<CAPTION>
- ----------------------------------------------------------------------------------
Variable
Insurance
Variable Insurance Products
Products Fund Fund II
- ------------------------------- ---------
Equity- High Asset
Income Overseas Income Manager
Sub- Sub- Sub- Sub-
Account Account Account Account Total
- ----------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C>
$ 2,662,990 $1,164,550 $199,463 $174,907 $ 50,453,549
428,473 325,346 19,551 20,483 4,984,819
- ----------- ---------- -------- -------- ------------
2,234,517 839,204 179,912 154,424 45,468,730
9,642,454 4,022,725 167,043 269,255 101,153,516
16,409,989 9,502,216 362,600 547,647 194,486,245
- ----------- ---------- -------- -------- ------------
6,767,535 5,479,491 195,557 278,392 93,332,729
27,750 44,049 1,942 4,122 1,232,236
- ----------- ---------- -------- -------- ------------
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
=========== ========== ======== ======== ============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Statement of Changes in Net Assets
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
New England Zenith Fund
------------------------------------------------------------------------------------------------------------
Growth
Capital Bond Money Stock Midcap and Small
Growth Income Market Index Managed Value 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 (loss).. $ 130,356,415 $ 4,171,436 $ 1,962,505 $ 1,090,858 $ 4,624,610 $ 8,308,955 $ 4,116,853 $ 768,248
Net realized and
unrealized gain
(loss) on
investments.... 130,214,031 319,014 -- 20,266,912 4,002,139 (10,535,017) 6,772,686 (1,884,412)
------------- ----------- ------------- ------------ ----------- ------------ ----------- -----------
Net Increase
(decrease) in
net assets
resulting from
operations..... 260,570,446 4,490,449 1,962,505 21,357,770 8,626,750 (2,226,063) 10,889,538 (1,116,164)
From Policy-
Related
Transactions
Net premiums
transferred
from New
England Life
Insurance
Company
(Note 4)....... 130,346,621 10,522,040 221,378,611 15,997,005 6,508,238 8,067,127 10,034,046 16,979,803
Net transfers
(to) from other
sub-
accounts....... 28,412,166 9,220,311 (149,270,654) 22,094,429 6,317,021 (102,089) 15,004,643 9,499,585
Net transfers to
New England
Life Insurance
Company........ (136,266,249) (7,932,456) (21,844,962) (16,290,249) (6,742,406) (4,094,516) (8,744,105) (9,074,771)
------------- ----------- ------------- ------------ ----------- ------------ ----------- -----------
Net Increase in
net assets
resulting from
policy related
transactions... 22,492,538 11,809,895 50,262,995 21,801,185 6,082,853 3,870,522 16,294,584 17,404,617
------------- ----------- ------------- ------------ ----------- ------------ ----------- -----------
Net increase in
net assets..... 283,062,984 16,300,344 52,225,500 43,158,955 14,709,603 1,644,459 27,184,123 16,288,452
Net Assets, at
beginning of the
period.......... 691,641,608 41,515,700 33,105,424 57,550,836 38,540,384 31,066,603 31,767,670 47,510,435
------------- ----------- ------------- ------------ ----------- ------------ ----------- -----------
Net Assets, at
end of the
period.......... $ 974,704,592 $57,816,044 $ 85,330,924 $100,709,791 $53,249,987 $ 32,711,062 $58,951,793 $63,798,887
============= =========== ============= ============ =========== ============ =========== ===========
</TABLE>
See Notes to Financial Statements
F-10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
International
U.S. Equity Magnum Venture Bond
Government Balanced Growth Equity Value Opportunities
Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account
- ---------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
$ 34,649 $ 554,190 $ 3,146,243 $ 202,660 $ 2,399,796 $ 90,920
17,136 401,219 25,372,043 355,856 9,314,386 (43,844)
- ---------- ----------- ------------ ----------- ------------ ----------
51,785 955,409 28,518,286 558,517 11,714,181 47,076
-- 3,185,034 18,566,913 3,131,225 24,165,947 --
590,096 3,794,185 16,305,214 999,735 23,584,994 612,788
(111,452) (2,333,228) (14,453,624) (1,503,958) (15,609,387) (156,947)
- ---------- ----------- ------------ ----------- ------------ ----------
478,644 4,645,991 20,418,503 2,627,002 32,141,554 455,841
- ---------- ----------- ------------ ----------- ------------ ----------
530,429 5,601,400 48,936,789 3,185,519 43,855,735 502,917
161,183 6,875,248 41,937,060 7,133,037 51,416,733 587,737
- ---------- ----------- ------------ ----------- ------------ ----------
$ 691,612 $12,476,648 $ 90,873,849 $10,318,556 $ 95,272,468 $1,090,654
========== =========== ============ =========== ============ ==========
<CAPTION>
Variable Insurance
Variable Insurance Products
Products Fund Fund II
- --------------------------------------- -------------------------------
Equity- High Asset
Income Overseas Income Manager
Sub- Sub- Sub- Sub-
Account Account Account Account Total
- ------------ ------------ ----------- ------------ ---------------
<S> <C> <C> <C> <C>
$ 7,186,371 $ 5,543,453 $ 996,739 $ 785,371 $ 176,340,272
7,455,548 3,964,503 (1,555,159) 280,598 194,717,637
- ------------ ------------ ----------- ------------ ---------------
14,641,919 9,507,956 (558,420) 1,065,969 371,057,909
26,170,240 17,386,996 2,434,923 1,626,307 516,501,076
8,474,098 342,473 2,823,884 1,297,121 --
(18,064,178) (10,788,946) (1,891,706) (1,251,084) (277,154,223)
- ------------ ------------ ----------- ------------ ---------------
16,580,160 6,940,523 3,367,101 1,672,344 239,346,853
- ------------ ------------ ----------- ------------ ---------------
31,222,080 16,448,479 2,808,682 2,738,313 610,404,762
107,331,321 67,825,320 7,180,273 5,448,878 1,268,595,450
- ------------ ------------ ----------- ------------ ---------------
$138,553,401 $ 84,273,799 $ 9,988,955 $ 8,187,191 $1,879,000,212
============ ============ =========== ============ ===============
</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 Year Ended December 31, 1997
<TABLE>
<CAPTION>
New England Zenith Fund
-----------------------------------------------------------------------------------------------------------
Capital Bond Money Stock Midcap Small
Growth Income Market Index Managed Value Growth and Cap
Sub- Sub- Sub- Sub- Sub- Sub- Income 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 (loss).. $ 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>
- -------------------------------------------------------------------------------
International
U.S. Equity Magnum Venture Bond
Government Balanced Growth Equity Value Opportunities
Sub- Sub- Sub- Sub- Sub- Sub-
Account Account Account Account Account Account
- ---------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
$ 6,799 $ 387,489 $ 4,455,451 $ 157,687 $ 1,546,340 $ 34,514
(1,096) 461,218 3,382,680 (282,894) 8,340,478 (902)
-------- ----------- ----------- ----------- ------------ --------
5,703 848,707 7,838,131 (125,207) 9,886,818 33,612
-- 2,146,406 14,606,449 3,056,999 13,157,429 --
118,925 2,461,028 6,194,266 1,537,466 22,596,463 563,357
(9,482) (1,814,302) (8,772,068) (1,574,196) (10,885,947) (36,000)
-------- ----------- ----------- ----------- ------------ --------
109,443 2,793,132 12,028,647 3,020,269 24,867,945 527,357
-------- ----------- ----------- ----------- ------------ --------
115,146 3,641,839 19,866,778 2,895,062 34,754,763 560,969
46,037 3,233,409 22,070,282 4,237,975 16,661,970 26,768
-------- ----------- ----------- ----------- ------------ --------
$161,183 $ 6,875,248 $41,937,060 $ 7,133,037 $ 51,416,733 $587,737
======== =========== =========== =========== ============ ========
<CAPTION>
Variable
Insurance
Variable Insurance Products
Products Fund Fund II
- -------------------------------------- ---------------------------
Equity- High Asset
Income Overseas Income Manager
Sub- Sub- Sub- Sub-
Account Account Account Account Total
- ------------ ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
$ 8,196,735 $ 4,986,458 $ 351,793 $ 495,266 $ 223,316,546
16,415,663 1,702,988 614,154 428,818 11,208,988
- ------------ ----------- ----------- ----------- ---------------
24,612,398 6,689,446 965,947 924,084 234,525,534
23,866,781 17,551,475 2,042,291 1,403,144 360,665,925
5,377,892 1,724,137 1,829,771 422,784 --
(18,885,322) (9,549,079) (1,756,377) (881,229) (212,980,807)
- ------------ ----------- ----------- ----------- ---------------
10,359,351 9,726,533 2,115,685 944,699 147,685,118
- ------------ ----------- ----------- ----------- ---------------
34,971,749 16,415,979 3,081,632 1,868,783 382,210,652
72,359,572 51,409,341 4,098,641 3,580,095 886,384,798
- ------------ ----------- ----------- ----------- ---------------
$107,331,321 $67,825,320 $ 7,180,273 $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 Year Ended December 31, 1996
<TABLE>
<CAPTION>
New England Zenith Fund
--------------------------------------------------------------------------------------------------------
Growth
Capital Bond Money Stock Midcap and Small
Growth Income Market Index Managed Value 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 (loss)...... $ 30,009,869 $ 2,386,677 $ 1,145,809 $ 672,864 $ 2,783,808 $ 1,356,904 $ 1,703,606 $ 1,534,562
Net realized and
unrealized gain
(loss) on
investments........ 67,031,236 (956,377) -- 4,781,234 990,856 1,969,645 1,020,277 2,322,583
------------ ----------- ------------ ----------- ----------- ----------- ----------- -----------
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 3,857,145
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 5,440,860
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 10,060,122
Net transfers to New
England Life
Insurance Company.. (76,528,987) (5,770,575) (9,089,129) (5,144,242) (4,232,475) (5,172,577) (3,338,871) (4,380,392)
------------ ----------- ------------ ----------- ----------- ----------- ----------- -----------
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 11,120,590
------------ ----------- ------------ ----------- ----------- ----------- ----------- -----------
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 14,977,735
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 6,544,996
------------ ----------- ------------ ----------- ----------- ----------- ----------- -----------
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 $21,522,731
============ =========== ============ =========== =========== =========== =========== ===========
</TABLE>
*For the period July 1, 1996 (Commencement of Operations) through December 31,
1996.
See Notes to Financial Statements
F-14
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
International
U.S. Equity Magnum Venture Bond
Government Balanced Growth Equity Value Opportunities
Sub- Sub- Sub- Sub- Sub- Sub-
Account* Account Account Account Account Account*
- ---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$ 674 $ 93,226 $ (59,822) $ 51,962 $ 379,356 $ 1,178
(819) 235,174 2,030,211 112,261 2,230,999 (1,153)
------- ---------- ----------- ----------- ----------- -------
(145) 328,400 1,970,389 164,223 2,610,355 25
-- 811,932 9,286,073 1,454,605 4,876,053 --
46,951 2,383,695 11,496,667 2,908,047 9,510,686 27,190
(769) (708,829) (6,395,345) (1,242,748) (3,721,564) (447)
------- ---------- ----------- ----------- ----------- -------
46,182 2,486,798 14,387,395 3,119,904 10,665,175 26,743
------- ---------- ----------- ----------- ----------- -------
46,037 2,815,198 16,357,784 3,284,127 13,275,530 26,768
-- 418,211 5,712,498 953,848 3,386,440 --
------- ---------- ----------- ----------- ----------- -------
$46,037 $3,233,409 $22,070,282 $ 4,237,975 $16,661,970 $26,768
======= ========== =========== =========== =========== =======
<CAPTION>
- -----------------------------------------------------------------------------
Variable
Insurance
Variable Insurance Products
Products Fund Fund II
- -------------------------------------- ---------
Equity- High Asset
Income Overseas Income Manager
Sub- Sub- Sub- Sub-
Account Account Account Account Total
- ------------ ------------ ---------- ---------- --------------
<C> <C> <C> <C> <C>
$ 2,234,517 $ 839,204 $ 179,912 $ 154,424 $ 45,468,730
6,795,285 5,523,540 197,499 282,514 94,564,965
- ------------ ------------ ---------- ---------- --------------
9,029,802 6,362,744 377,411 436,938 140,033,695
20,426,731 17,135,189 970,763 1,258,847 285,719,085
9,029,810 1,051,463 1,631,762 560,948 --
(13,479,623) (11,522,274) (623,788) (649,631) (152,002,266)
- ------------ ------------ ---------- ---------- --------------
15,976,918 6,664,378 1,978,737 1,170,164 133,716,819
- ------------ ------------ ---------- ---------- --------------
25,006,720 13,027,122 2,356,148 1,607,102 273,750,514
47,352,852 38,382,219 1,742,493 1,972,993 612,634,284
- ------------ ------------ ---------- ---------- --------------
$ 72,359,572 $ 51,409,341 $4,098,641 $3,580,095 $ 886,384,798
============ ============ ========== ========== ==============
</TABLE>
See Notes to Financial Statements
F-15
<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") 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% and .75% 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")
and flexible premium ("Zenith Executive Advantage Plus") 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% and a maximum annual rate of .75%, respectively.
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, administrative charges, premium tax charges, risk
charges, cost of insurance charges, and charges for rider benefits and special
risk charges.
F-16
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
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 Market TNE Advisers, Inc. Back Bay Advisors, L.P.*
Back Bay Advisors Bond Income TNE Advisers, Inc. Back Bay Advisors, L.P.*
Back Bay Advisors Managed TNE Advisers, Inc. Back Bay Advisors, L.P.*
Westpeak Stock Index TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
Westpeak Growth and Income TNE Advisers, Inc. Westpeak Investment Advisors, L.P.*
Goldman Sachs Midcap Value Series TNE Advisers, Inc. Goldman Sachs Asset Management, Inc
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 International Magnum TNE Advisers, Inc. Morgan Stanley Dean Witter
Equity Investment Management, Inc.
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. Government TNE Advisers, Inc. Salomon Brothers Asset Management, Inc
Salomon Brothers Strategic Bond
Opportunities TNE Advisers, Inc. Salomon Brothers Asset Management, Inc
</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 Dean Witter Investment
Management, Inc. (formerly Morgan Stanley Asset Management Inc.) went into
effect replacing the prior agreement between TNE Advisers, Inc. and Draycott
Partners, Ltd.
Effective May 1, 1998 Goldman Sachs Asset Management, ("Goldman Sachs"),
became the subadvisor of the Loomis Sayles Avanti Growth Series, succeeding
Loomis Sayles & Company, L.P., and the name of the Series was changed to the
"Goldman Sachs Midcap Value Series". Goldman Sachs is a separate operating
division of Goldman, Sachs & Co., a privately-owned global financial services
company.
F-17
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
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, 1998:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Capital Growth Series $229,923,840 $194,572,879
Back Bay Advisors Money Market Series 303,898,559 250,343,059
Back Bay Advisors Bond Income Series 29,019,450 16,718,466
Back Bay Advisors Managed Series 16,871,874 10,374,817
Westpeak Stock Index Series 52,293,114 27,237,590
Westpeak Growth and Income Series 31,543,693 13,028,848
Goldman Sachs Midcap Value Series 13,255,960 10,518,399
Loomis Sayles Small Cap Series 36,489,723 19,320,276
Loomis Sayles Balanced Series 9,318,701 4,071,999
Morgan Stanley International Magnum Equity Series 7,480,032 4,717,292
Davis Venture Value Series 59,616,224 23,838,504
Alger Equity Growth Series 42,615,754 18,064,237
Salomon Bothers U.S. Government Series 867,216 285,257
Salomon Bothers Strategic Bond Opportunities
Series 1,003,667 429,636
VIP Equity-Income Portfolio 50,932,583 36,386,679
VIP Overseas Portfolio 34,976,709 29,742,167
VIP High Income Portfolio 8,610,053 5,246,052
VIP II Asset Manager Portfolio 4,502,242 2,748,465
</TABLE>
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, and Zenith Executive Advantage Plus, 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.
F-18
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
Fixed Premium ("Zenith Life") Policies
<TABLE>
<CAPTION>
Net Investment Return of the Sub-Accounts
---------------------------------------------------------------------------------------------
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 30.30% (3.82)% 53.45% (6.38)% 14.57% (7.39)% 37.55% 20.65% 23.05 % 33.63 %
Bond Income............. 11.91% 7.71 % 17.55% 7.80 % 12.22% (3.70)% 20.78% 4.24% 10.50 % 8.66 %
Money Market............ 8.87% 7.81 % 5.84% 3.43 % 2.61% 3.61 % 5.33% 4.76% 4.97 % 4.90 %
<CAPTION>
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. 29.70% (4.48)% 29.98% 6.92 % 9.34% 0.76 % 36.44% 22.04% 32.03 % 27.49 %
Managed................. 18.67% 2.85 % 19.75% 6.33 % 10.26% (1.46)% 30.81% 14.62% 26.12 % 19.24 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Midcap Value................................................ 14.47% (0.62)% 29.90% 17.20% 16.91 % (5.79)%
Growth and Income........................................... 13.97% (1.55)% 35.99% 17.68% 33.01 % 24.02 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income............................................... 9.29% 6.69 % 34.62% 13.88% 27.66 % 11.24 %
Overseas.................................................... 14.57% 1.37 % 9.30% 12.82% 11.17 % 12.36 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............................................................ (3.45)% 28.40% 30.22% 24.42 % (2.04)%
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income.......................................................... (0.58)% 20.18% 13.63% 17.26 % (4.66)%
Asset Manager........................................................ (4.41)% 16.55% 14.20% 20.23 % 14.65 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................................................. 24.84% 12.78% 25.19 % 47.27 %
Balanced...................................................................... 13.75% 16.50% 15.77 % 8.73 %
International Magnum Equity................................................... 3.85% 6.30% (1.64)% 6.90 %
Venture Value................................................................. 21.64% 25.40% 33.03 % 14.02 %
</TABLE>
F-19
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
Single Premium ("Zenith Life One") Policies
<TABLE>
<CAPTION>
Net Investment Return of the Sub-Accounts
---------------------------------------------------------------------------------------------
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 30.17% (3.91)% 53.29% (6.47)% 14.46% (7.38)% 37.41% 20.53% 22.92 % 33.49 %
Bond Income............. 11.79% 7.60 % 17.43% 7.69 % 12.10% (3.80)% 20.66% 4.14% 10.39 % 8.55 %
Money Market............ 8.77% 7.71 % 5.74% 3.33 % 2.51% 3.35 % 5.23% 4.65% 4.87 % 4.79 %
<CAPTION>
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. 29.57% (4.58)% 29.85% 6.81 % 9.23% 0.66 % 36.30% 21.91% 31.90 % 27.36 %
Managed................. 18.55% 2.75 % 19.63% 6.22 % 10.15% (1.56)% 30.67% 14.51% 25.99 % 19.12 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Midcap Value................................................ 14.39% (0.72)% 29.77% 17.08% 16.80 % (5.88)%
Growth and Income........................................... 13.90% (1.65)% 38.85% 17.56% 32.87 % 23.89 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income............................................... 9.22% 6.59 % 34.49% 13.77% 27.53 % 11.13 %
Overseas.................................................... 14.49% 1.27 % 9.19% 12.70% 11.05 % 12.24 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............................................................ (3.52)% 28.27% 30.09% 24.29 % (2.14)%
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income.......................................................... (0.61)% 20.06% 13.52% 17.14 % (4.76)%
Asset Manager........................................................ (4.45)% 16.43% 14.09% 20.11 % 14.53 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................................................. 24.76% 12.66% 25.06 % 47.12 %
Balanced...................................................................... 13.67% 16.39% 15.66 % 8.62 %
International Magnum Equity................................................... 3.79% 6.19% (1.74)% 6.79 %
Venture Value................................................................. 21.56% 25.27% 32.90 % 13.90 %
</TABLE>
F-20
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
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
---------------------------------------------------------------------------------------------
1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 29.98% (4.06)% 53.06% (6.61)% 14.28% (7.62)% 37.21% 20.34% 22.74 % 33.29 %
Bond Income............. 11.63% 7.44 % 17.25% 7.53 % 11.94% (3.94)% 20.47% 3.98% 10.23 % 8.39 %
Money Market............ 8.60% 7.54 % 5.58% 3.18 % 2.36% 3.35 % 5.07% 4.50% 4.71 % 4.63 %
<CAPTION>
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. 29.37% (4.72)% 29.65% 6.65 % 9.07% 0.51 % 36.10% 21.73% 31.70 % 27.17 %
Managed................. 18.37% 2.59 % 19.45% 6.06 % 9.99% (1.70)% 30.48% 14.34% 25.81 % 18.94 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Midcap Value................................................ 14.28% (0.87)% 29.57% 16.90% 16.62 % (6.03)%
Growth and Income........................................... 13.78% (1.80)% 35.65% 17.38% 32.67 % 23.71 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income............................................... 9.11% 6.43 % 34.29% 13.59% 27.34 % 10.96 %
Overseas.................................................... 14.38% 1.12 % 9.02% 12.53% 10.89 % 12.08 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............................................................ (3.61)% 28.08% 29.90% 24.11 % (2.28)%
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income.......................................................... (0.66)% 19.88% 13.35% 16.96 % (4.90)%
Asset Manager........................................................ (4.49)% 16.26% 13.91% 19.93 % 14.36 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................................................. 24.64% 12.49% 24.88 % 46.90 %
Balanced...................................................................... 13.56% 16.21% 15.48 % 8.46 %
International Magnum Equity................................................... 3.68% 6.03% (1.89)% 6.63 %
Venture Value................................................................. 21.44% 25.08% 32.70 % 13.73 %
</TABLE>
F-21
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
Variable Survivorship ("Zenith Survivorship Life") Policies
<TABLE>
<CAPTION>
Net Investment Return of the Sub-Accounts*
---------------------------------------------------------------------------------------------
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 29.59% (4.35)% 52.61% (6.90)% 13.94% (7.90)% 36.80% 19.98% 22.37% 32.89 %
Bond Income............. 11.29% 7.11 % 16.90% 7.21 % 11.60% (4.23)% 20.12% 3.67% 9.90% 8.07 %
Money Market............ 8.28% 7.22 % 5.26% 2.87 % 2.05% 3.04 % 4.75% 4.18% 4.39% 4.32 %
<CAPTION>
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. 28.99% (5.01)% 29.27% 6.33 % 8.74% 0.21 % 35.69% 21.36% 31.31% 26.79 %
Managed................. 18.02% 2.28 % 19.10% 5.74 % 9.69% (2.00)% 30.09% 13.99% 25.43% 18.58 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Midcap Value................................................ 14.05% (1.16)% 29.19% 16.55% 16.27% (6.31)%
Growth and Income........................................... 13.55% (2.09)% 35.25% 17.03% 32.28% 23.34 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income............................................... 8.89% 6.11 % 33.89% 13.25% 26.96% 10.63 %
Overseas.................................................... 14.15% 0.82 % 8.70% 12.19% 10.56% 11.74 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............................................................ (3.80)% 27.69% 29.50% 23.73% (2.58)%
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income.......................................................... (0.76)% 19.53% 13.00% 16.61% (5.19)%
Asset Manager........................................................ (4.59)% 15.91% 13.57% 19.57% 14.02 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................................................. 24.39% 12.15% 24.50 % 46.46 %
Balanced...................................................................... 13.33% 15.86% 15.14 % 8.13 %
International Magnum Equity................................................... 3.48% 5.71% (2.18)% 6.31 %
Venture Value................................................................. 21.20% 24.71% 32.30 % 13.39 %
</TABLE>
* Based on a mortality and expense risk charge at an annual rate of .90%.
Certain Zenith Survivorship Life Policies currently have a mortality and
expense risk charge at an annual rate of .75%.
F-22
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
Flexible Premium ("Zenith Flexible Life") Policies
<TABLE>
<CAPTION>
Net Investment Return of the Sub-Accounts
---------------------------------------------------------------------------------------------
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 31.88% (5.73)% 52.83% (6.75)% 14.11% (7.76)% 37.00% 20.16% 22.56 % 33.09 %
Bond Income............. 11.46% 7.28 % 17.08% 7.37 % 11.77% (4.08)% 20.29% 3.82% 10.06 % 8.23 %
Money Market............ 8.44% 7.38 % 5.42% 3.02 % 2.20% 3.20 % 4.91% 4.34% 4.55 % 4.48 %
<CAPTION>
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. 29.18% (4.86)% 29.46% 6.49 % 8.90% 0.36 % 35.90% 21.55% 31.51 % 26.98 %
Managed................. 18.20% 2.44 % 19.28% 5.90 % 9.82% (1.85)% 30.28% 14.16% 25.62 % 18.76 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Midcap Value................................................ 14.16% (1.01)% 29.38% 16.72% 16.45 % (6.17)%
Growth and Income........................................... 13.67% (1.94)% 35.45% 17.21% 32.47 % 23.52 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income............................................... 9.00% 6.27 % 34.09% 13.42% 27.15 % 10.79 %
Overseas.................................................... 14.26% 0.97 % 8.86% 12.36% 10.72 % 11.91 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............................................................ (3.71)% 27.88% 29.70% 23.92 % (2.43)%
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income.......................................................... (0.71)% 19.71% 13.17% 16.79 % (5.04)%
Asset Manager........................................................ (4.54)% 16.08% 13.74% 19.75 % 14.19 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................................................. 24.51% 12.32% 24.69 % 46.68 %
Balanced...................................................................... 13.44% 16.03% 15.31 % 8.29 %
International Magnum Equity................................................... 3.58% 5.87% (2.04)% 6.47 %
Venture Value................................................................. 21.32% 24.89% 32.50 % 13.56 %
</TABLE>
F-23
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
Flexible Premium ("Zenith Executive Advantage Plus") Policies
<TABLE>
<CAPTION>
Net Investment Return of the Sub-Accounts
----------------------------------------------------------------------------------------------
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... 30.76 % (3.48)% 53.98% (6.05)% 14.97% (7.07)% 38.03% 21.07% 23.48 % 34.09 %
Bond Income............. 12.30 % 8.09 % 17.96% 8.18 % 12.61% (3.36)% 21.20% 4.61% 10.89 % 9.04 %
Money Market............ 9.25 % 8.19 % 6.21% 3.80 % 2.97% 3.97 % 5.70% 5.13% 5.34 % 5.26 %
<CAPTION>
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. 30.15 % (4.14)% 30.43% 7.30 % 9.72% 1.12 % 36.92% 22.47% 32.50 % 27.93 %
Managed................. 19.08 % 3.21 % 20.17% 6.70 % 10.65% (1.11)% 31.26% 15.03% 26.56 % 19.65 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Midcap Value................................................ 14.74% (0.27)% 30.35% 17.61% 17.32 % (5.46)%
Growth and Income........................................... 14.24% (1.21)% 36.47% 18.10% 33.47 % 24.45 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income............................................... 9.55% 6.93 % 35.90% 13.75% 28.11 % 11.63 %
Overseas.................................................... 14.84% 1.21 % 11.02% 12.43% 11.56 % 12.75 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............................................................ (3.23)% 28.84% 30.68% 24.85 % (1.69)%
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income.......................................................... (.37)% 20.79% 13.75% 17.67 % (4.33)%
Asset Manager........................................................ (4.65)% 17.68% 14.31% 20.65 % 15.05 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................................................. 25.13% 13.17% 25.63 % 47.78 %
Balanced...................................................................... 14.01% 16.91% 16.18 % 9.11 %
International Magnum Equity................................................... 4.01% 6.67% (1.30)% 7.27 %
Venture Value................................................................. 21.92% 25.84% 33.50 % 14.41 %
</TABLE>
F-24
<PAGE>
New England Variable Life Separate Account of
New England Life Insurance Company
Notes to Financial Statements--(Continued)
Modified Single Premium ("American Gateway") Policies
<TABLE>
<CAPTION>
Net Investment Return of the Sub-Accounts
--------------------------------------------------------------------------------------------
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Income............. 12.30% 8.09 % 17.96% 8.18% 12.61% (3.36)% 21.20% 4.61% 10.89 % 9.04 %
Money Market............ 9.25% 8.19 % 6.21% 3.80% 2.97% 3.97 % 5.70% 5.13% 5.34 % 5.26 %
<CAPTION>
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- 1/1/98-
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 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. 30.15% (4.14)% 30.43% 7.30% 9.72% 1.12 % 36.92% 22.47% 32.50 % 27.93 %
Managed................. 19.08% 3.21 % 20.17% 6.70% 10.65% (1.11)% 31.26% 15.03% 26.56 % 19.65 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Midcap Value................................................ 14.74% (0.27)% 30.35% 17.61% 17.32 % (5.46)%
Growth and Income........................................... 14.24% (1.21)% 36.47% 18.10% 33.47 % 24.45 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............................................................ (3.23)% 28.84% 30.68% 24.85 % (1.69)%
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98-
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth................................................................. 25.13% 13.17% 25.63 % 47.78 %
Balanced...................................................................... 14.01% 16.91% 16.18 % 9.11 %
International Magnum Equity................................................... 4.01% 6.67% (1.30)% 7.27 %
Venture Value................................................................. 21.92% 25.84% 33.50 % 14.41 %
<CAPTION>
6/28/96- 1/1/97- 1/1/98-
Sub-Account 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government........................................................................ 4.55% 8.47 % 7.61 %
Strategic Bond Opportunities........................................................... 8.46% 11.07 % 2.04 %
</TABLE>
The net investment return of a sub-account is calculated by taking the
difference between the sub-account's ending value and the beginning value for
the period and dividing it by the beginning value for the period.
F-25
<PAGE>
New England Life Insurance Company
Independent Auditors' Report
New England Life Insurance Company:
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, 1998 and 1997, and the related
consolidated statements of income and comprehensive income, equity, and cash
flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
February 16, 1999
F-26
<PAGE>
New England Life Insurance Company
Consolidated Balance Sheets
December 31, 1998 and 1997 (Dollars In Thousands)
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed Maturities:
Available for Sale, at Estimated Fair Value............ $ 769,364 $ 734,391
Equity Securities....................................... 13,240 9,399
Policy Loans............................................ 135,800 104,783
Real Estate............................................. 0 2,757
Short-Term Investments.................................. 52,285 27,944
Other Invested Assets................................... 16,372 24,349
---------- ----------
Total Investments.................................... 987,061 903,623
Cash and Cash Equivalents................................ 43,598 74,148
Deferred Policy Acquisition Costs........................ 710,961 565,769
Accrued Investment Income................................ 21,802 18,712
Premiums and Other Receivables........................... 145,117 63,036
Other Assets............................................. 111,067 62,326
Separate Account Assets.................................. 3,258,383 1,988,225
---------- ----------
Total Assets......................................... $5,277,989 $3,675,839
========== ==========
LIABILITIES AND EQUITY
Liabilities
Future Policy Benefits................................... $ 561,746 $ 500,429
Policyholder Account Balances............................ 210,242 150,648
Other Policyholder Funds................................. 169,090 98,143
Policyholder Dividends Payable........................... 17,774 14,719
Short and Long-Term Debt................................. 82,855 85,981
Income Taxes Payable:
Current................................................. 10,984 9,102
Deferred................................................ 42,334 42,066
Due to Parent............................................ 789 107,337
Other Liabilities........................................ 78,721 45,647
Separate Account Liabilities............................. 3,258,383 1,988,225
---------- ----------
Total Liabilities.................................... 4,432,918 3,042,297
---------- ----------
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
Preferred Stock, $0.00 par value; 1,000,000 shares
authorized, 200,000 shares issued and outstanding....... 0 0
Contributed Capital...................................... 647,273 447,273
Retained Earnings........................................ 177,859 166,422
Accumulated Other Comprehensive Income................... 17,439 17,347
---------- ----------
Total Equity......................................... 845,071 633,542
---------- ----------
Total Liabilities and Equity............................. $5,277,989 $3,675,839
========== ==========
</TABLE>
F-27
<PAGE>
New England Life Insurance Company
Consolidated Statements of Income and Comprehensive Income
For the Years Ended December 31, 1998, 1997, and 1996 (Dollars In Thousands)
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Premiums........................................... $100,689 $ 63,616 $ 37,410
Universal Life and Investment-Type Product Policy
Fees ............................................. 173,766 145,157 101,756
Net Investment Income.............................. 49,077 61,059 49,628
Investment Gains (Losses), Net..................... 5,610 890 8,822
Commissions, Fees and Other Income................. 192,411 28,302 44,930
-------- -------- --------
Total Revenues................................. 521,553 299,024 242,546
-------- -------- --------
BENEFITS AND OTHER DEDUCTIONS
Policyholder Benefits.............................. 149,687 100,180 65,520
Interest Credited to Policyholder Account Balances
.................................................. 7,735 6,220 5,558
Policyholder Dividends............................. 22,989 21,325 14,830
Other Operating Costs and Expenses................. 316,659 144,342 143,886
-------- -------- --------
Total Benefits and Other Deductions............ 497,070 272,067 229,794
-------- -------- --------
Income From Operations Before Income Taxes......... 24,483 26,957 12,752
Income Taxes....................................... 13,046 4,988 3,051
-------- -------- --------
Net Income......................................... $ 11,437 $ 21,969 $ 9,701
-------- -------- --------
Other Comprehensive Income (Loss), Net of Tax:
Unrealized Investment Gains (Losses) (Net of
Related Offsets, Reclassification Adjustments
and Income Taxes, $(299), $(16,588) and $24,212,
Respectively)................................... 92 13,620 (22,629)
-------- -------- --------
Comprehensive Income (Loss)........................ $ 11,529 $ 35,589 $(12,928)
======== ======== ========
</TABLE>
F-28
<PAGE>
New England Life Insurance Company
Consolidated Statements of Equity
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands)
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
Capital Accumulated
Stock & Other
Contributed Retained Comprehensive
Capital Earnings Income Total
----------- -------- ------------- --------
<S> <C> <C> <C> <C>
Balances at December 31, 1995..... $193,396 $134,752 $26,356 $354,504
Net Income........................ 9,701 9,701
Change in Net Unrealized
Investment Gains (Losses)........ (22,629) (22,629)
Contributed Capital............... 208,846 208,846
-------- -------- ------- --------
Balances at December 31, 1996..... 402,242 144,453 3,727 550,422
Net Income........................ 21,969 21,969
Change in Net Unrealized
Investment Gains (Losses)........ 13,620 13,620
Contributed Capital............... 47,531 47,531
-------- -------- ------- --------
Balances at December 31, 1997..... 449,773 166,422 17,347 633,542
Net Income........................ 11,437 11,437
Change in Net Unrealized
Investment Gains (Losses)........ 92 92
Contributed Capital............... 200,000 200,000
-------- -------- ------- --------
Balances at December 31, 1998..... $649,773 $177,859 $17,439 $845,071
======== ======== ======= ========
</TABLE>
F-29
<PAGE>
New England Life Insurance Company
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars in Thousands)
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net Cash Used in Operating Activities........ $(311,296) $(121,838) $ (85,674)
--------- --------- ---------
Cash Flows from Investing Activities:
Sales, Maturities and Repayments of:
Available for Sale Fixed Maturities......... 164,566 178,003 276,420
Held to Maturity Fixed Maturities........... 0 0 10,519
Equity Securities........................... 39,333 0 0
Mortgage Loans on Real Estate............... 0 0 2,210
Other, Net.................................. 721 128 0
Purchases of:
Available for Sale Fixed Maturities......... (184,810) (326,059) (259,713)
Equity Securities........................... (80,066) 0 0
Real Estate................................. (3,644) 0 (480)
Fixed Asset Property and Equipment.......... (1,459) (101) (3,786)
Other Assets................................ (89) 0 (11,024)
Net Change in Short-Term Investments........ (24,341) 128,616 (135,731)
Net Change in Policy Loans.................. (31,017) (28,520) (18,052)
Other, Net.................................. 1,631 177 67
--------- --------- ---------
Net Cash Used in Investing Activities........ (119,175) (47,756) (139,570)
--------- --------- ---------
Cash Flows from Financing Activities:
Capital Contributions....................... 200,000 46,681 159,162
Borrowed Money.............................. (8,670) (3,181) 0
Policyholder Account Balances:
Deposits.................................... 358,090 244,338 482,552
Withdrawals................................. (149,499) (95,066) (364,933)
Financial Reinsurance Receivables........... 0 1,823 (37,519)
--------- --------- ---------
Net Cash Provided by Financing Activities.... 399,921 194,595 239,262
--------- --------- ---------
Change in Cash and Cash Equivalents.......... (30,550) 25,001 14,018
Cash and Cash Equivalents, Beginning of Year. 74,148 49,147 35,129
--------- --------- ---------
Cash and Cash Equivalents, End of Year....... $ 43,598 $ 74,148 $ 49,147
========= ========= =========
Supplemental Cash Flow Information:
Interest Paid............................... $ 3,830 $ 1,495 $ 1,523
========= ========= =========
Income Taxes Paid........................... $ 14,118 $ 5,470 $ 4,721
========= ========= =========
Net Income................................... $ 11,437 $ 21,969 $ 9,701
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating
Activities:
Change in Deferred Policy Acquisition Costs,
Net......................................... (145,787) (140,578) (68,626)
Change in Accrued Investment Income......... (3,090) (4,999) 909
Change in Premiums and Other Receivables.... (82,081) (57,095) 4,370
Gains from Sales of Investments, Net........ (5,610) (890) (8,822)
Depreciation and Amortization Expenses...... 13,137 10,085 3,118
Interest Credited to Policyholder Account
Balances................................... 7,735 6,220 5,558
Universal Life and Investment-Type Product
Policy Fee Income.......................... (173,766) (145,157) (101,756)
Change in Future Policy Benefits............ 61,317 35,540 18,202
Change in Other Policyholder Funds.......... 70,947 6,309 (283)
Change in Policyholder Dividends Payable.... 3,055 5,701 1,671
Change in Income Taxes Payable.............. 2,358 1,674 (6,634)
Other, Net.................................. (70,948) 139,383 56,918
--------- --------- ---------
Net Cash Used in Operating Activities........ $(311,296) $(121,838) $ (85,674)
========= ========= =========
</TABLE>
F-30
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
New England Life Insurance Company and its subsidiaries (the Company or
NELICO) is a wholly-owned stock life insurance subsidiary of Metropolitan Life
Insurance Company (MetLife). The Company is headquartered in Boston,
Massachusetts as a Massachusetts chartered company. The Company principally
provides variable life insurance and variable annuity contracts through a
network of general agencies located throughout the United States. The Company
also provides participating traditional life insurance, fixed 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. As a result of the merger, NEMLICO ceased to exist as a
separate mutual life insurance company, and NELICO became a subsidiary of
MetLife. NELICO has continued after the merger to conduct its existing
business as well as administer the business activities of the former parent
NEMLICO. (Note 13)
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. On April 30, 1998
the Company acquired all of the outstanding stock of NL Holding Corporation
and its wholly owned subsidiaries, Nathan and Lewis Securities, Inc., and
Nathan and Lewis Associates, Inc. Subsequent to the acquistion, NL Holding
Corporation was transferred to New England Life Holdings, 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, which are principally assumed from MetLife.
New England Pension and Annuity Company (NEPA) was incorporated under the laws
of the State of Delaware on September 12, 1980. NEPA holds licenses to sell
annuity contracts in 22 states, but is currently not actively engaged in the
sale or distribution of insurance products.
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.
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.
F-31
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
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
series of the New England Zenith Fund and does not intend to engage in any
business activities other than providing investment management and
administrative services. TNE Advisers, Inc. changed its name to New England
Investment Management, Inc. in March 1999.
NL Holding Corporation (NL Holding), engages in Securities brokerage, dealer
trading in fixed income securities, over the counter stock, unit investment
trusts, and the sale of insurance related products and annuities, sold through
licensed brokers and independent agents. Nathan and Lewis Securities, Inc., a
wholly owned subsidiary, is a National Association of Securities Dealers
(NASD) registered broker/dealer.
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 as of and
for the year ended December 31, 1996 have been prepared as though the current
reporting entity had always existed. Significant intercompany transactions and
balances have been eliminated in consolidation.
The preparation of financial statements 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. The most significant estimates include those used in
determining deferred policy acquisition costs, investment allowances and the
liability for future policyholder benefits. Actual results could differ from
those estimates.
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.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of New
England Life Insurance and its subsidiaries, partnerships and joint ventures
in which NELICO has a controlling interest. All material intercompany accounts
and transactions have been eliminated.
The Company accounts for its investments in real estate joint ventures and
other limited partnership interests in which, it does not have a controlling
interest, under the equity method of accounting.
Certain amounts in the prior years' financial statements have been
reclassified to conform with the 1998 presentation.
Investments
The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of other comprehensive income, net of policyholder related amounts and
deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are recorded as realized losses on investments. Realized gains and
losses on sales of securities are determined on a specific identification
basis. All security transactions are recorded on a trade date basis.
F-32
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Policy loans are stated at unpaid principal balances, which approximates fair
value.
Short-term investments are stated at amortized cost, which approximates fair
value.
Other invested assets are reported at their estimated fair value.
Cash and Cash Equivalents
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.
Property and Equipment
Property, equipment and leasehold improvements which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined 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 on property and equipment and amortization of
leasehold improvements was $24,772, and $13,203 at December 31, 1998 and 1997,
respectively. Related depreciation and amortization expense was $11,570,
$10,085, and $3,118 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Deferred Policy Acquisition Costs
The costs of acquiring new business that vary with, and are primarily related
to, the production of new business are deferred. Such costs, which consist
principally of commissions, agency and policy issue expenses, are amortized
over the expected life of the contract for participating traditional life,
variable life, universal life, investment-type products, and variable
annuities. Generally, deferred policy acquisition costs are amortized in
proportion to the present value of estimated gross margins or profits from
investments, mortality, expense margins and surrender charges. Actual gross
profits can vary from management's estimates resulting in increases and
decreases in the rate of amortization. Management periodically updates these
estimates and evaluates the recoverability of deferred policy acquisition
costs. When appropriate, management revises its assumptions of the estimated
gross margins or profits of these contracts, and the cumulative amortization
is reestimated and adjusted by a cumulative charge or credit to current
operations.
Deferred policy acquisition costs for nonmedical health policies are amortized
in proportion to anticipated premiums. Assumptions as to anticipated premiums
are made at the date of policy issuance and are consistently applied during
the life of the contracts. Deviations from estimated experience are reflected
in operations when they occur. For these contracts, the amortization period is
typically the estimated life of the policy.
Other Intangible Assets
The excess of cost over the fair value of net assets acquired, which
represents goodwill, and the value of insurance acquired are included in other
assets. Goodwill is amortized on a straight-line basis over 10 years. The
Company reviews goodwill to assess recoverability from future operations using
undiscounted cash flows. Impairments would be recognized in operating results
if a permanent diminution in value is deemed to have occurred.
F-33
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Excess of Purchase Price Over Fair Value of Net Assets Acquired
<TABLE>
<CAPTION>
Years Ended
December 31,
------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net Balance, January 1............................. $ 0 $ 0 $ 0
Acquisitions..................................... 23,498 0 0
Dispositions..................................... 0 0 0
Amortization..................................... (1,567) 0 0
------- ------- -------
Net Balance, December 31........................... $21,931 $ 0 $ 0
======= ======= =======
December 31
Accumulated Amortization......................... $(1,567) $ 0 $ 0
======= ======= =======
</TABLE>
Acquisitions
The Company acquired certain assets and assumed certain liabilities of NL
Holding Corporation effective April 30, 1998. The acquisition was accounted
for under the purchase method of accounting and is included in the financial
statements as of the effective date of the transaction. The cost of the
acquisition was $35,082, which represents an initial cash settlement and
payment of direct acquisition costs of $27,873, as well as, accrued contingent
payment arrangements of $7,209 anticipated to be paid to the sellers over a
three year period for years ending December 31, 1998, 1999 and 2000,
respectively. Goodwill of $23,498 was recorded, to be amortized on a straight-
line basis over a ten year period.
The 1998 and 1997 pro forma, unaudited financial data shown as follows
presents the effect of the acquisition as if it had occurred at the beginning
of the respective reporting periods. The pro forma financial data does not
necessarily reflect the results of operations that would have been obtained
had the acquisition occurred on the assumed date, nor is the financial data
necessarily indicative of the results of the combined entities that may be
achieved for any future period.
Pro forma Impact of Acquisition
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenue............................................ $ 557,229 $ 381,691
============ ============
Net Income......................................... $ 10,311 $ 25,049
============ ============
</TABLE>
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 such
liabilities range from 4% to 4.5% for life insurance policies.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and
the present value of expected future payments after annuitization. Interest
rates used in establishing such liabilities range from 5.5% to 7%.
F-34
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Future policy benefit liabilities for non-medical health insurance are
calculated as the net GAAP liability plus the unamortized deferred acquisition
costs. Future policy benefit liabilities for disabled lives are estimated
using the present value of benefits method and experience assumptions as to
claim terminations, expenses and interest. Interest rates used in establishing
such liabilities range from 4% to 6.5%.
Policyholder account balances for variable life, universal life and
investment-type contracts are equal to the policy account values, which
consist of an accumulation of gross premium payments plus credited interest
ranging from 3.75% to 6.5%, less expense and mortality charges and
withdrawals.
Recognition of Insurance Revenue and Related Benefits
Premiums related to traditional life and annuity policies with life
contingencies are recognized as income when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated life of
the policies.
Premiums related to non-medical health contracts are recognized as income when
due.
Premiums related to variable life and universal life contracts are credited to
policyholder account balances. Revenues from such contracts consist of amounts
assessed against policyholder account balances for mortality recognized
ratably over the policy period, policy administration charges recognized as
services are provided and surrender charges recognized as earned. Amounts that
are charged to income include interest credited to policyholders and benefit
claims incurred in excess of related policyholder account balances.
Premiums related to investment-type contracts are credited to policyholder
account balances. Revenues from such contracts consist of amounts assessed
against policyholder account balances for contract administration charges
recognized ratably over the policy period. Amounts that are charged to income
include interest credited to policyholders.
Dividends to Policyholders
Dividends to policyholders are 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, as well as
management's judgment as to the appropriate level of statutory surplus to be
retained by the Company.
Participating Business
Participating business represented approximately 3.52% and 2.94% of the
Company's life insurance in force, and 7.96% and 5.79% of the number of life
insurance policies in force at December 31, 1998 and 1997, respectively.
Participating policies represented approximately 6.15%, 6.22% and 0.74% of
gross life insurance premiums, for the years ended December 31, 1998, 1997 and
1996, respectively.
Income Taxes
NELICO and its eligible life insurance subsidiary, Exeter Reassurance Company,
Ltd., file a consolidated federal income tax return. Separate income tax
returns as required are filed for the other life insurance and non-life
insurance direct subsidiaries. Income tax expense has been calculated in
accordance with the provisions of the Internal Revenue Service Code, as
amended. The Company uses the liability method of accounting for income taxes.
Income tax provisions are based on income reported for financial statement
purposes. 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.
F-35
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Reinsurance
The Company has reinsured certain of its life insurance contracts with other
insurance companies under various agreements. Amounts due from reinsurers are
estimated based upon assumptions consistent with those used in establishing
the liabilities related to the underlying reinsured contracts. Policy and
contract liabilities are reported gross of reinsurance credits.
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,
investment income, and realized and unrealized gains and losses on the
investments of the Separate Account accrue directly to contractholders and,
accordingly, are not reflected in the Company's financial statements.
Mortality, policy administration and surrender charges to all Separate
Accounts are included in revenues.
Application of Accounting Pronouncements
In December 1997, the AICPA issued SOP No. 97-3 Accounting for Insurance and
Other Enterprises for Insurance Related Assessments (SOP 97-3). SOP 97-3
provides guidance on accounting by insurance and other enterprises for
assessments related to insurance activities including recognition, measurement
and disclosure of guaranty fund and other insurance related assessments. The
Company is required to adopt SOP 97-3 as of January 1, 1999. Adoption of SOP
97-3 is not expected to have a material effect on the Company's consolidated
financial condition or results of operations.
In March 1998, the AICPA issued SOP No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use (SOP 98-1). SOP 98-1
provides guidance for determining when an entity should capitalize or expense
external and internal costs of computer software developed or obtained for
internal use. The Company is required to adopt SOP 98-1 as of January 1, 1999.
Adoption of SOP 98-1 is not expected to have a material effect on the
Company's consolidated financial condition or results of operations.
In April 1998, the AICPA issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities (SOP 98-5). SOP 98-5 provides guidance on the
financial reporting of start-up costs and organization costs. It requires
costs of start-up activities and organization costs to be expensed as
incurred. SOP 98-5 broadly defines start-up activities and provides examples
to help entities determine what costs are and are not within the scope of this
SOP. The Company is required to adopt SOP 98-5 as of January 1, 1999. Adoption
of SOP 98-5 is not expected to have a material effect on the Company's
consolidated financial condition or results of operations.
In October 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position SOP 98-7, Accounting for Insurance and
Reinsurance Contracts That Do Not Transfer Insurance Risk (SOP 98-7). SOP 98-7
provides guidance on the method of accounting for insurance and reinsurance
contracts that do not transfer insurance risk, defined in the SOP as the
deposit method. SOP 98-7 classifies insurance and reinsurance contracts for
which the deposit method is appropriate into those that 1) transfer only
significant timing risk, 2) transfer only significant underwriting risk, 3)
transfer neither significant timing or underwriting risk and 4) have an
indeterminate risk. The Company is required to adopt SOP 98-7 as of January 1,
2000. Adoption of SOP 98-7 is not expected to have a material effect on the
Company's consolidated financial condition or results of operations.
F-36
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Effective January 1, 1998, the Company adopted SFAS No. 130 Reporting
Comprehensive Income (SFAS 130). SFAS 130 establishes standards for reporting
and displaying comprehensive income and its components in a financial
statement that is displayed with the same prominence as other financial
statements. Adoption of SFAS 130 had no effect on the Company's consolidated
financial condition or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 131 Disclosures About
Segments of an Enterprise and Related Information (SFAS 131). SFAS 131
establishes standards for reporting financial information and related
disclosures about products and services, geographic areas and major customers
relating to operating segments in annual financial statements. Adoption of
SFAS 131 had no effect on the Company's consolidated financial condition or
results of operations.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS 133). SFAS 133 requires, among other
things, that all derivatives be recognized in the consolidated balance sheets
as either assets or liabilities and measured at fair value. The corresponding
derivative gains and losses should be reported based upon the hedge
relationship, if such a relationship exists. Changes in the fair value of
derivatives designated as fair value hedges are required to be reported in
income. Changes in the fair value of derivatives designated as cash flow
hedges are required to be reported in other comprehensive income to the extent
the hedge is effective, and until such time as the hedged cash flow is
reported in income, whereupon any associated change in fair value of the
derivative is also reported in income. Changes in the fair value of
derivatives designated as cash flow hedges, to the extent it is ineffective,
are reported in income. Changes in the fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria in SFAS
133 are required to be reported in income. The Company is required to adopt
SFAS 133 as of January 1, 2000. The Company is currently in the process of
quantifying the impact of SFAS 133.
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, 1998
Fixed Maturities:
U. S. Treasury Securities and
obligations of U. S. government
corporations and agencies............. $ 27,260 $ 91 $ 47 $ 27,304
Foreign governments.................... 1,679 0 0 1,679
Corporate.............................. 644,636 43,036 5,139 682,533
Mortgage-backed securities............. 55,027 2,821 0 57,848
-------- -------- ------- --------
Total Fixed Maturities............... $728,602 $ 45,948 $ 5,186 $769,364
======== ======== ======= ========
Equity Securities:
Common stocks.......................... 12,075 1,645 480 13,240
-------- -------- ------- --------
Total Equity Securities.............. $ 12,075 $ 1,645 $ 480 $ 13,240
======== ======== ======= ========
</TABLE>
F-37
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
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 $ 0 $ 12,206
Foreign governments.................... 2,316 67 0 2,383
Corporate.............................. 620,916 41,564 3,308 659,172
Mortgage-backed securities............. 57,348 3,282 0 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
======== ======== ======= ========
</TABLE>
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>
1998 1997
---- ----
<S> <C> <C>
Net unrealized gains on investments................................ $ 0 $281
Unrealized gains (losses) on the maturity of forward contracts..... 0 14
---- ----
$ 0 $295
==== ====
</TABLE>
The amortized cost and estimated fair value of bonds classified as available
for sale, by contractual maturity, at December 31, 1998 are shown below.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------- ----------
<S> <C> <C>
Due in one year or less................................. $ 24,215 $ 24,469
Due after one year through five years................... 92,090 93,343
Due after five years through ten years.................. 179,470 191,671
Due after ten years..................................... 377,800 402,033
-------- --------
Subtotal.............................................. 673,575 711,516
Mortgage-backed securities.............................. 55,027 57,848
-------- --------
Total................................................. $728,602 $769,364
======== ========
</TABLE>
Fixed maturities not due at a single maturity date have been included in the
above tables in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
F-38
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Sales of fixed maturities and equity securities are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities classified as available-for-
sale
Proceeds..................................... $159,749 $143,107 $275,008
Gross realized gains......................... $ 10,901 $ 680 $ 19,109
Gross realized losses........................ $ 2 $ 1,454 $ 3,878
Fixed maturities classified as held-to-maturity
Proceeds..................................... $ 0 $ 0 $ 5,291
Gross realized gains......................... $ 0 $ 0 $ 236
Gross realized losses........................ $ 0 $ 0 $ 0
Equity Securities
Proceeds..................................... $ 0 $ 0 $ 0
Gross realized gains......................... $ 0 $ 0 $ 0
Gross realized losses........................ $ 0 $ 0 $ 0
</TABLE>
Excluding investments in U.S. governments and agencies, the Company is not
exposed to any significant concentration of credit risk in its fixed
maturities portfolio.
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, 1998 the trust held $530,563 of bonds and short-
term investments, and at December 31, 1997, the trust held $516,491 of bonds
and short-term investments.
Statutory Deposits
The Company had assets on deposit with regulatory agencies of $6,245 and
$7,020, at December 31, 1998 and 1997 respectively.
3. NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The components of net investment income are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities................................. $53,467 $50,348 $44,630
Equity securities................................ (9,118) 4,915 0
Mortgage loans on real estate.................... 0 0 110
Real estate...................................... 4,149 815 55
Policy loans..................................... 6,855 5,081 3,734
Cash, cash equivalents and short-term
Investments..................................... 861 4,160 3,656
Other investment income.......................... 76 591 38
------- ------- -------
Gross investment income.......................... 56,290 65,910 52,223
Investment expenses.............................. (7,213) (4,851) (2,595)
------- ------- -------
Net Investment income............................ $49,077 $61,059 $49,628
======= ======= =======
</TABLE>
F-39
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Realized investment gains (losses), including changes in valuation allowances,
are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities................................ $10,899 $ (774) $15,467
Equity securities............................... 0 0 0
Other invested assets........................... (7) 1,032 512
------- ------- -------
Subtotal.................................... 10,892 258 15,979
Amounts allocable to:
Amortization of deferred policy acquisition
costs........................................ 5,282 (632) 7,157
------- ------- -------
Investment gains (losses), net................ $ 5,610 $ 890 $ 8,822
======= ======= =======
The changes in unrealized investment gains (losses), net, included in other
comprehensive income, are as follows:
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Year ended December 31
Balance, beginning of year...................... $17,347 $ 3,727 $26,356
Change in unrealized investment gains
(losses)..................................... 391 30,207 (46,850)
Change in unrealized investment gains (losses)
attributable to:
Deferred policy acquisition cost allowances. (595) (9,446) 12,211
Deferred income tax (expense) benefit....... 296 (7,141) 12,010
------- ------- -------
Balance, end of year............................ $17,439 $17,347 $ 3,727
======= ======= =======
The components of unrealized investment gains (losses), net, included in other
comprehensive income, are as follows:
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
December 31
Balance, end of year, comprised of:
Unrealized investment gains (losses) on:
Fixed Maturities............................ $40,928 $41,706 $11,525
Equity Securities........................... 1,191 0 0
Other....................................... 0 22 (4)
------- ------- -------
42,119 41,728 11,521
Amounts of unrealized investment gains (losses)
attributable to:
Deferred policy acquisition cost allowances... (15,798) (15,202) (5,756)
Deferred income tax (expense) benefit......... (8,882) (9,179) (2,038)
------- ------- -------
Balance, end of year............................ $17,439 $17,347 $ 3,727
======= ======= =======
</TABLE>
4. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
The Company assumes and cedes reinsurance with other insurance companies. The
company continually evaluates the financial condition of its reinsurers and
monitors concentration of credit risk in an effort to minimize its exposure to
significant losses from reinsurer insolvencies. The Company is contingently
liable with respect to ceded reinsurance should any reinsurer be unable to
meet its obligations under these agreements. The consolidated statements of
income are presented net of reinsurance ceded.
F-40
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Reinsurance recoverables, included in other assets, were outstanding with the
following reinsurers:
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- -------
<S> <C> <C>
Paul Revere Life Insurance Company.......................... $10,795 $ 4,548
Cologne Life Reinsurance Company............................ 6,519 3,724
Security Life of Denver Insurance Company................... 4,395 1,804
American United Life Insurance Company...................... 3,852 1,332
Great West Life & Annuity Insurance Company................. 6,394 2,505
Swiss Re Life & Health Limited.............................. 2,422 908
Other....................................................... 17,828 3,164
------- -------
$52,205 $17,985
======= =======
</TABLE>
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Direct premiums................................ $110,768 $ 30,975 $ 2,682
Reinsurance assumed............................ 58,329 62,315 67,483
Reinsurance ceded.............................. (68,408) (29,674) (32,755)
-------- -------- --------
Net premiums earned............................ $100,689 $ 63,616 $ 37,410
======== ======== ========
</TABLE>
Reinsurance and ceded commissions payables, included in other liabilities,
were $10,162 and $5,852, at December 31, 1998 and 1997, respectively.
The following provides an analysis of the activity in the liability for
benefits relating to group accident and nonmedical health policies and
contracts:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Balance at January 1.......................... $ 809 $ 0 $ 0
Reinsurance recoverables.................... (647) 0 0
--------- ------- ------
Net balance at January 1...................... 162 0 0
--------- ------- ------
Incurred related to:
Current year................................ 303 173 0
Prior years................................. (57) (11) 0
--------- ------- ------
246 162 0
--------- ------- ------
Paid related to:
Current year................................ 2 0 0
Prior years................................. 18 0 0
--------- ------- ------
20 0 0
--------- ------- ------
Balance at December 31........................ 388 162 0
Add: Reinsurance recoverables............... 1,565 647 0
--------- ------- ------
Balance at December 31........................ $ 1,953 $ 809 $ 0
========= ======= ======
</TABLE>
F-41
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
5. INCOME TAXES
The provision for income tax expense (benefit) in the consolidated statements
of income is shown below:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -------
<S> <C> <C> <C>
1998
Federal............................................ $13,734 $ (788) $12,946
State and Local.................................... 0 100 100
------- ------- -------
Total............................................ $13,734 $ (688) $13,046
======= ======= =======
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.................................... 0 (751) (751)
------- ------- -------
Total............................................ $ 5,333 $(2,282) $ 3,051
======= ======= =======
</TABLE>
Reconciliations of the income tax provision at the U.S. statutory rate to the
provision for income taxes are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Income before taxes.............................. $24,483 $26,957 $12,752
Income tax rate.................................. 35% 35% 35%
------- ------- -------
Expected income tax expense at federal statutory
income tax rate................................. 8,569 9,435 4,463
Tax effect of:
Change in valuation allowance.................. 0 0 (13,948)
NOL benefit write-off.......................... 0 0 13,012
Tax exempt investment income................... (100) 0 0
Tax Credits.................................... (100) 0 0
State and local income taxes................... 100 (1,013) (488)
Other, net..................................... 4,577 (3,434) 12
------- ------- -------
Income Tax Expense............................... $13,046 $ 4,988 $ 3,051
======= ======= =======
</TABLE>
Deferred income taxes represent the tax effect of the differences between the
book and tax basis of assets and liabilities. Net deferred income tax
liabilities consisted of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Policyholder liabilities............................ $ 177,017 $ 63,723
Other, net.......................................... 15,453 81,988
--------- ---------
Total gross assets................................ 192,470 145,711
--------- ---------
Deferred tax liabilities:
Investments......................................... (1,068) (2,456)
Deferred policy acquisition costs................... (208,881) (168,270)
Unrealized investment gains, net.................... (8,882) (9,179)
Other, net.......................................... (15,973) (7,872)
--------- ---------
Total gross liabilities........................... (234,804) (187,777)
--------- ---------
Net deferred tax liability............................ $ (42,334) $ (42,066)
========= =========
</TABLE>
F-42
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
The sources of the deferred tax expense (benefit) and their tax effects are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Policyholder liabilities...................... $(49,251) $(23,759) $(17,818)
Net operating loss carryforward............... 0 12,548 464
Investments................................... (1,388) 1,319 0
Deferred policy acquisition costs............. 40,611 33,621 21,828
Other, net.................................... 9,340 (27,530) (6,756)
-------- -------- --------
Total....................................... $ (688) $ (3,801) $ (2,282)
======== ======== ========
</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.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------ ------------------
December 31,
--------------------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in projected benefit
obligation
Projected benefit obligation at
beginning of year.................. $210,590 $177,125 $ 46,591 $ 49,654
Service cost........................ 6,927 5,310 942 885
Interest cost....................... 15,878 13,958 3,267 3,707
Actuarial gain...................... 14,831 15,926 1,256 (3,972)
Divestitures........................ 0 0 0 0
Curtailments........................ 0 0 0 0
Terminations........................ 0 0 0 0
Change in benefits.................. 11,935 5,755 (10) 0
Benefits paid....................... (7,674) (7,484) (3,059) (3,683)
-------- -------- -------- --------
Projected benefit obligation at end
of year............................ $252,487 $210,590 $ 48,987 $ 46,591
-------- -------- -------- --------
Change in plan assets
Contract value of plan assets at
beginning of year.................. $150,820 $130,995 $ 0 $ 0
Actual return on plan assets........ 28,309 22,250 0 0
Employer contribution............... 12,997 5,059 0 0
Benefits paid....................... (7,323) (7,484) 0 0
-------- -------- -------- --------
Contract value of plan assets at end
of year............................ $184,803 $150,820 $ 0 $ 0
-------- -------- -------- --------
Over/(Under) funded................. $(67,684) $(59,770) $(48,987) $(46,591)
Unrecognized net asset at
transition......................... (1,674) (2,844) 0 0
Unrecognized net actuarial gains.... 34,350 35,889 (17,787) (18,872)
Unrecognized prior service cost..... 16,854 5,832 (9) 0
-------- -------- -------- --------
Prepaid (accrued) benefit cost...... $(18,154) $(20,893) $(66,783) $(65,463)
======== ======== ======== ========
Qualified plan prepaid pension cost. $ (2,164) $ (7,205) $ 0 $ 0
Non-qualified plan accrued pension
cost............................... (15,990) (13,688) 0 0
-------- -------- -------- --------
Prepaid (accrued) benefit cost...... $(18,154) $(20,893) $ 0 $ 0
======== ======== ======== ========
</TABLE>
F-43
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:
<TABLE>
<CAPTION>
Non-Qualified
Qualified Plan Plan Total
------------------ ------------------ ------------------
1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Aggregate projected
benefit obligation..... $226,717 $193,652 $ 25,770 $ 16,938 $252,487 $210,590
Aggregate contract value
of plan assets
(principally Company
contracts)............. 184,803 150,820 0 0 184,803 150,820
-------- -------- -------- -------- -------- --------
Over/(Under) funded..... $(41,914) $(42,832) $(25,770) $(16,938) $(67,684) $(59,770)
======== ======== ======== ======== ======== ========
</TABLE>
The assumptions used in determining the aggregate projected benefit obligation
and aggregate contract value for the pension and other benefits were as
follows:
<TABLE>
<CAPTION>
Other
Pension Benefits Benefits
------------------ ----------
1998 1997 1998 1997
-------- -------- ---- ----
<S> <C> <C> <C> <C>
Weighted average assumptions as of
December 31,
Discount rate............................. 7.25% 7.75% 7.00% 7.75%
Expected return on plan assets............ 8.50% 8.75% -- --
Rate of compensation increase............. 4.50% 5.00% -- --
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was generally 7.40% in 1998,
gradually decreasing to 5.00% over five years and generally 7.80% in 1997,
gradually decreasing to 5.00% over eight years.
Assumed health care cost trend rates have a significant effect on the amounts
reported for health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One % One %
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of service and interest cost components... 14.50% 12.70%
Effect on accumulated postretirement benefit obligation... 12.80% 11.30%
</TABLE>
The components of periodic benefit costs were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------------- ---------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Components of periodic
benefit cost
Service cost............ $ 6,927 $ 5,310 $ 5,761 $ 942 $ 885 $ 876
Interest cost........... 15,878 13,958 12,489 3,267 3,707 3,183
Expected return on plan
assets................. (12,866) (22,250) (15,468) 0 0 0
Net amortization and
deferrals.............. 669 11,092 6,009 167 (871) (1,155)
-------- -------- -------- ------ ------ ------
Net periodic benefit
cost................... $ 10,608 $ 8,110 $ 8,791 $4,376 $3,721 $2,904
======== ======== ======== ====== ====== ======
</TABLE>
Savings and Investment Plans
The Company sponsors savings and investment plans for substantially all
employees under which the Company matches a portion of employee contributions.
The Company contributed $2,252, $1,588 and $3,386 for the years ended December
31, 1998, 1997 and 1996, respectively.
F-44
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
7. LEASES
In accordance with industry practice, certain of the Company's income from
lease agreements with retail tenants is contingent upon the level of the
tenants' sales revenue. Additionally, the Company, as lessee, has entered into
various lease and sublease agreements for office space, data processing and
other equipment. Future minimum rental and sub-rental income, and minimum
gross rental payments relating to these lease agreements were as follows:
<TABLE>
<CAPTION>
Rental Sub-rental Gross Rental
Income Income Expense
------ ---------- ------------
<S> <C> <C> <C>
1999.......................................... $52 $ 4,066 $ 14,851
2000.......................................... 31 7,845 14,805
2001.......................................... 0 7,854 13,221
2002.......................................... 0 7,864 12,336
2003.......................................... 0 8,026 12,023
Thereafter.................................... 0 34,525 114,855
--- ------- --------
Total....................................... $83 $70,180 $182,091
=== ======= ========
</TABLE>
8. DEBT
In 1995, the Company borrowed $25,000 from a bank, bearing interest, payable
monthly, at a variable rate equal to the greater of the bank's base rate or
money market rates plus 0.6% per annum. The interest rate applied was 6.4%,
5.8% and 5.7% at December 31, 1998, 1997 and 1996, respectively. 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 or
less. The carrying value of the loan approximates its fair value of $13,295.
Repayments of principal and interest of $8,612, $3,155 and $0 were made during
1998, 1997 and 1996, respectively. The Company repaid the entire outstanding
balance of the loan in January 1999.
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 $69,560, repayments of $0, $0 and $0 were made
during 1998, 1997 and 1996, respectively.
9. CONTINGENCIES
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life
insurance companies for the deemed losses. Most of these laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's solvency and further provide annual limits on such assessments. A
large part of the assessments paid by the Company's insurance subsidiaries
pursuant to these laws may be used as credits
F-45
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
for a portion of the Company's premium taxes. The Company paid guaranty fund
assessments of approximately, $202, $42, and $42 in 1998, 1997, and 1996,
respectively, of which $202, $33, and $27 were to be credited against premium
taxes.
The Company has no contingent liabilities that would materially affect the
financial position of the Company or the results of its operations. There are
no pending legal proceedings that are beyond the ordinary course of business
that could have a material financial effect.
10. OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Compensation................................. $ 86,822 $ 58,754 $ 36,172
Commissions.................................. 166,218 77,351 51,617
Interest and debt expense.................... 9,374 6,750 6,261
Amortization of policy acquisition costs..... 31,994 17,723 22,233
Capitalization of policy acquisition costs... (183,064) (157,670) (98,016)
Rent expense, net of sub-lease income........ 4,252 4,473 3,060
Other........................................ 201,063 136,961 122,559
--------- --------- --------
Total...................................... $ 316,659 $ 144,342 $143,886
========= ========= ========
</TABLE>
11. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments have been determined
by using available market information and the valuation methodologies
described below. Considerable judgment is often required in interpreting
market data to develop estimates of fair value. Accordingly, the estimates
presented herein may not necessarily be indicative of amounts that could be
realized in a current market exchange. The use of different assumptions or
valuation methodologies may have a material effect on the estimated fair value
amounts.
Amounts related to the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
Carrying Estimated
Value Fair Value
-------- ----------
<S> <C> <C>
December 31, 1998:
Assets
Fixed Maturities......................................... $769,364 $769,364
Equity Securities........................................ 13,240 13,240
Policy loans............................................. 135,800 135,800
Short-term investments................................... 52,285 52,285
Cash and cash equivalents................................ 43,598 43,598
Liabilities
Policyholder account balances............................ 23,365 22,524
Other policyholder funds................................. 7,832 7,832
Short and long-term debt................................. 82,855 82,855
</TABLE>
F-46
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
<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............................ 13,356 12,593
Other policyholder funds................................. 4,324 4,324
Short and long-term debt................................. 85,981 85,981
</TABLE>
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
Fixed Maturities and Equity Securities
The fair value of fixed maturities and equity securities that are publicly
traded are based upon quotations obtained from an independent market pricing
service or published by applicable stock exchanges. For securities for which
the market values were not readily available, fair values were estimated by
management, based primarily on interest rates, maturity, credit quality and
average life.
Policy Loans
Policy loans are stated at unpaid principal balances, which approximates fair
value.
Cash and Cash Equivalents and Short-term Investments
The carrying values for cash and cash equivalents and short-term investments
approximated fair market values due to the short-term maturities of these
instruments.
Policyholder Account Balances
The fair value of policyholder account balances are estimated by discounting
expected future cash flows, based on interest rates currently 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.
Short-term and Long-term Debt
Short-term and long-term debt are stated at unpaid principal balances, which
approximates fair value.
F-47
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
12. STATUTORY FINANCIAL INFORMATION
The reconciliation of statutory surplus and statutory net income, determined
in accordance with accounting practices prescribed or permitted by insurance
regulatory authorities with such amounts determined in conformity with
generally accepted accounting principles were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory surplus............................. $ 456,525 $ 307,290 $ 355,853
Adjustments to GAAP for:
Future policy benefits and policyholders
account balances........................... (336,821) (279,510) (195,273)
Deferred policy acquisition costs........... 710,961 565,769 434,637
Deferred Federal Income taxes............... (42,334) (42,066) (40,185)
Valuation of investments.................... 53,514 56,873 11,503
Statutory asset valuation reserves.......... 10,636 8,388 3,335
Statutory interest maintenance reserve...... 816 571 306
Surplus notes............................... (69,560) (64,016) (58,911)
Receivables from reinsurance transactions... 26,004 27,519 26,030
Other, net.................................. 35,330 52,724 13,127
--------- --------- ---------
GAAP Equity................................... $ 845,071 $ 633,542 $ 550,422
========= ========= =========
<CAPTION>
Years Ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income (loss)................... $ (28,043) $ (37,358) $ (46,021)
Adjustments to GAAP for:
Future policy benefits and policyholders
account balances........................... (196,754) (311,588) (41,174)
Deferred policy acquisition costs........... 135,788 139,947 68,626
Deferred Federal Income taxes............... 688 3,801 2,282
Valuation of investments.................... (13,490) 0 0
Statutory interest maintenance reserve...... 245 342 231
Other, net.................................. 113,003 226,825 25,757
--------- --------- ---------
Net GAAP Income............................... $ 11,437 $ 21,969 $ 9,701
========= ========= =========
</TABLE>
The Company is currently undergoing an examination by the Massachusetts
Department of Insurance. The Company believes that there will be no material
audit adjustments for the periods under examination.
13. RELATED PARTY TRANSACTIONS
Prior to the merger NELICO operated under an Administrative Services Agreement
with its parent NEMLICO to receive all executive, legal, clerical and other
personnel services. Subsequent to the merger of NEMLICO and MetLife, the
Company entered into an Administrative Services 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, and those policies and contracts defined in
the Administrative Services Agreement as Transition Policies which were sold
by the Company's field force post-merger.
The Company charged MetLife $193,641, $186,757 and $88,043 including accruals
for administrative services on NEMLICO administered contracts for 1998, 1997,
and for the period of September 1, 1996 through December 31, 1996,
respectively. Prior to the merger, the Company paid $62,643 to NEMLICO for
administrative services on
F-48
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
variable-life and variable-annuity contracts for the period of January 1, 1996
through August 31, 1996. In addition, $14,123 and $600 for 1998 and 1997,
respectively, was paid or payable by MetLife to the Company for varied and
miscellaneous other services. These services were charged based upon direct
costs incurred. Service fees are recorded by NELICO as a reduction in
operating expenses.
On December 30, 1998 the Company sold to MetLife Credit Corporation shares of
preferred stock for $200,000. 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.
On April 30, 1998 the Company acquired all the outstanding stock of N.L.
Holding Corporation and its subsidiaries, and concurrently contributed such
stock to the Company's downstream holding company, New England Life Holding
Inc. In conjunction with the acquisition, the Company entered into employment
agreements with key individuals of N.L. Holding Corporation. Under these
agreements the Company paid $6,166 in 1998.
The Company entered into a lease agreement with MetLife on August 30, 1996 for
the home-office building that it occupies on 501 Boylston Street in Boston,
Massachusetts. The Company paid lease payments to MetLife of $2,340, $2,340
and $780 in 1998, 1997 and 1996, respectively.
On June 21, 1996, NEMLICO purchased a mortgage from NELICO for $2,217 that
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 1998 were $15,204
and $1,159, respectively. Included in accrued income at December 31, 1998,
were amounts receivable for sales-based commissions from NEF and SSR totaling
$385 and $14, respectively. In 1998, NES earned asset-based income of $9,193
and $139 on average assets of approximately $4,300,000 and $77,000 under
management with NEF and SSR, respectively. Included in accrued income at
December 31, 1998 were amounts receivable for asset-based commissions from NEF
and SSR totaling $593 and $13, respectively.
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 $3,900,000 and $33,000 under
management with NEF and SSR, respectively.
Exeter has a privately-placed subordinated notes payable to MetLife for
$69,560 and $64,016 at December 31, 1998 and 1997, respectively.
Pursuant to certain Reinsurance Agreements, the Company cedes a portion of
premiums on certain variable life, traditional life and universal life
policies to Omega Reinsurance Corporation. Reinsurance premiums paid by the
Company to Omega were $11,539, $10,372 and $5,009 for 1998, 1997 and 1996,
respectively.
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.
F-49
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (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. SEPARATE ACCOUNTS
Separate accounts reflect non-guaranteed separate accounts totaling $3,258,383
and $1,988,225 at December 31, 1998 and 1997, respectively, wherein the
policyholder assumes the investment risk.
Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in
the Company's revenues as universal life and investment-type product policy
fees totaling $30,714, $12,642 and $6,464 in 1998, 1997 and 1996,
respectively.
15. YEAR 2000
The Year 2000 issue is the result of the widespread use of computer programs
written using two digits (rather than four) to define the applicable year.
Such programming was a common industry practice designed to avoid the
significant cost associated with additional mainframe capacity necessary to
accommodate a four digit year field. As a result, any of the Company's
computer systems that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a major
systems failure or miscalculations. The Company has conducted a comprehensive
review of its computer systems to identify the systems that could be affected
by the Year 2000 issue and has developed and implemented a plan to resolve the
issue. The Company currently believes that, with modifications to existing
software and converting to new software, the Year 2000 issue will not pose
significant operational problems for the Company's computer systems. However,
if such modifications and conversions are not completed on a timely basis, the
Year 2000 issue may have a material impact on the operations of the Company.
Furthermore, even if the Company completes such modifications and conversions
on a timely basis, there can be no assurance that the failure by vendors or
other third parties to solve the Year 2000 issue will not have a material
impact on the operations of the Company. The Company estimates the total cost
to resolve its Year 2000 problem to be approximately $51,000, (unaudited) of
which approximately $41,300 has been incurred through December 31, 1998.
16. BUSINESS SEGMENT INFORMATION
The Company provides insurance and financial services to customers primarily
in the United States. The Company's core businesses are divided into five
segments: Individual Life, Individual Annuity, Group Pension, Group Accident
and Health, and Corporate. These segments are managed separately because they
either provide different products and services, require different strategies,
or have different technology requirements.
Individual Life sells primarily variable life as well as traditional life
policies. Individual Annuity sells a variety of fixed annuity and variable
annuity contracts. Group Pension sells a variety of group annuity and pension
contracts to corporations and other institutions. Group Accident and Health
provides group life, group medical, and group disability contracts to
corporations and small businesses. Through its Corporate segment, the Company
reports the operating results of subsidiaries as well as items that are not
allocated to any of the business segments.
Set forth in the following tables is certain financial information with
respect to the Company's operating segments for the years ended December 31,
1998, 1997 and 1996. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies. The Company
evaluates the performance of each operating segment based on profit or loss
from operations after income taxes. The Company does not allocate non-
recurring items to the segments.
F-50
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
Allocation of net investment income and investment gains (losses), net were
based on the amount of assets allocated to each segment. Other costs and
operating costs were allocated to each of the segments based on: (i) a review
of the nature of such costs, (ii) time studies analyzing the amount of
employee compensation costs incurred by each segment, and (iii) cost estimates
included in the Company's product pricing.
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------------------------------------
Corporate
Individual Individual Group Group and
Life Annuity Pension Life, A&H Subsidiaries Total
---------- ---------- -------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Premiums................ $ 48,733 $ 31 $ 417 $ 21,394 $ 30,114 $ 100,689
Universal Life and
Investment-Type
Product Policy Fees.... 161,936 9,332 2,788 (290) 0 173,766
Net Investment Income... (22,496) (1,752) (405) 651 73,079 49,077
Investment Gains,
(Losses) Net........... (182) (7) (4) 17 5,786 5,610
Commissions, Fees, and
Other Income........... 9,408 6,042 1,118 20,430 155,413 192,411
---------- -------- -------- -------- -------- ----------
Total Revenues........ 197,399 13,646 3,914 42,202 264,392 521,553
BENEFITS AND OTHER
DEDUCTIONS
Policyholder Benefits... 84,709 3,943 874 13,561 46,600 149,687
Interest Credited to
Policyholder
Account Balances....... 6,337 1,264 83 0 51 7,735
Policyholder Dividends.. 1,135 4 0 3 21,847 22,989
Other Operating Costs
and Expenses........... 103,284 14,324 3,617 15,731 179,703 316,659
---------- -------- -------- -------- -------- ----------
Total Benefits and
Other Deductions..... 195,465 19,535 4,574 29,295 248,201 497,070
Income from Operations
Before
Income Taxes........... 1,934 (5,889) (660) 12,907 16,191 24,483
Income Taxes............ 9,968 (402) (423) 3,986 (83) 13,046
---------- -------- -------- -------- -------- ----------
Net Income............ $ (8,034) $ (5,487) $ (237) $ 8,921 $ 16,274 $ 11,437
========== ======== ======== ======== ======== ==========
Assets
Deferred Policy
Acquisition Costs...... 616,959 42,524 2,359 2,511 46,608 710,961
Separate Account Assets. 2,073,552 835,648 235,467 113,716 0 3,258,383
Policyholder
Liabilities............ 380,586 38,912 768 19,233 501,579 941,078
Separate Account
Liabilities............ 2,073,552 835,648 235,467 113,716 0 3,258,383
</TABLE>
F-51
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------------
Corporate
Individual Individual Group Group and
Life Annuity Pension Life, A&H Subsidiaries Total
---------- ---------- -------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Premiums................ $ 27,200 $ 31 $ 0 $ 3,743 $ 32,642 $ 63,616
Universal Life and
Investment-Type
Product Policy Fees.... 139,235 4,732 486 704 0 145,157
Net Investment Income... 31,905 (270) (20) (118) 29,562 61,059
Investment Gains,
(Losses) Net........... 523 0 0 0 367 890
Commissions, Fees, and
Other Income........... 9,542 3,253 266 4,383 10,858 28,302
---------- -------- -------- ------- -------- ----------
Total Revenue........... 208,405 7,746 732 8,712 73,429 299,024
BENEFITS AND OTHER
DEDUCTIONS
Policyholder Benefits... 71,010 3,431 0 3,827 21,912 100,180
Interest Credited to
Policyholder
Account Balances....... 5,371 664 149 0 36 6,220
Policyholder Dividends.. 507 1 0 0 20,817 21,325
Other Operating Costs
and Expenses........... 98,664 10,777 2,092 6,745 26,064 144,342
---------- -------- -------- ------- -------- ----------
Total Benefits and
Other Deductions..... 175,552 14,873 2,241 10,572 68,829 272,067
Income from Operations
Before Income Taxes.... 32,853 (7,127) (1,509) (1,860) 4,600 26,957
Income Taxes............ 2,701 (1,203) (504) (447) 4,441 4,988
---------- -------- -------- ------- -------- ----------
Net Income............ $ 30,152 $ (5,924) $ (1,005) $(1,413) $ 159 $ 21,969
========== ======== ======== ======= ======== ==========
Assets
Deferred Policy
Acquisition Costs...... 498,208 24,226 1,347 877 41,111 565,769
Separate Account Assets. 1,426,347 450,441 111,437 0 0 1,988,225
Policyholder
Liabilities............ 258,880 20,476 197 6,398 463,269 749,220
Separate Account
Liabilities............ 1,426,347 450,441 111,437 0 0 1,988,225
</TABLE>
F-52
<PAGE>
New England Life Insurance Company
Notes to Consolidated Financial Statements--(Continued)
For the Years Ended December 31, 1998, 1997 and 1996 (Dollars In Thousands,
except as noted)
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------
Corporate
Individual Individual Group Group and
Life Annuity Pension Life, A&H Subsidiaries Total
---------- ---------- ------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Premiums................ $ 1,729 $ 0 $ 0 $ 56 $ 35,625 $ 37,410
Universal Life and
Investment-Type
Product Policy Fees.... 101,153 603 0 0 0 101,756
Net Investment Income... 23,667 (105) (2) (6) 26,074 49,628
Investment Gains,
(Losses) Net........... 396 0 0 0 8,426 8,822
Commissions, Fees and
Other Income........... 8,340 45 290 363 35,892 44,930
-------- -------- ------ ------- -------- ----------
Total Revenues........ 135,285 543 288 413 106,017 242,546
BENEFITS AND OTHER
DEDUCTIONS
Policyholder Benefits... 25,595 654 0 176 39,095 65,520
Interest Credited to
Policyholder
Account Balances....... 5,345 167 0 0 46 5,558
Policyholder Dividends.. 13 0 0 0 14,817 14,830
Other Operating Costs
and Expenses........... 81,559 13,499 71 1,798 46,959 143,886
-------- -------- ------ ------- -------- ----------
Total Benefits and
Other Deductions..... 112,512 14,320 71 1,974 100,917 229,794
Income from Operations
Before Income Taxes.... 22,773 (13,777) 217 (1,561) 5,100 12,752
Income Taxes............ (2,772) 723 0 0 5,100 3,051
-------- -------- ------ ------- -------- ----------
Net Income............ $ 25,545 $(14,500) $ 217 $(1,561) $ 0 $ 9,701
======== ======== ====== ======= ======== ==========
Assets
Deferred Policy
Acquisition Costs...... 378,397 11,883 147 0 44,209 434,636
Separate Account Assets. 999,130 201,180 6,649 0 0 1,206,959
Policyholder
Liabilities............ 181,484 6,657 0 529 459,884 648,554
Separate Account
Liabilities............ 999,130 201,180 6,649 0 0 1,206,959
</TABLE>
Revenues derived from any single customer do not exceed 10% of the total
consolidated revenues for the years presented. Revenues were predominantly
generated from United States activity. Activity from other geographic locations
did not exceed 10% for any geographic location.
F-53
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MA 02116
RECEIPT
This is to acknowledge receipt of an American Gateway Series Prospectus
dated April 30, 1999. This Variable Life Policy is offered by New England Life
Insurance Company.
_____________________________________ _____________________________________
(Date) (Client's Signature)
<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 modified single premium variable life insurance
policies described in this registration statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus with
the items of Form N-8B-2.
The prospectus consisting of 133 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
Representations.
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 Auditor (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-2
<PAGE>
(ii) Form of Contract between NEVLICO and its Agents ***
(c) Commission Schedule for Policies ##
(d) Form of contract among NELICO and other broker dealers *
(e) Additional Forms of selling agreement among NELICO, NES
and other broker-dealers ####
(4) None
(5) (a) Specimens of Policy #
(b) Accelerated Death Benefit Rider +
(c) Accelerated Death Benefit Rider- Long Term Care ++++
(6) (a) Amended and restated Articles of Organization of NELICO ###
(b) Amended and restated By-Laws of NELICO *
(c) Amendments to the Amended and restated Articles of
Organization of NELICO ++++
(7) None
(8) None
(9) None
(10) (a) Specimen of Applications for Policy #
(b) Additional specimen of Applications ++++
2. See Exhibit 3(i)
3. (i) Opinion and Consent of H. James Wilson, Esquire ##
(ii) Opinion and Consent of Rodney J. Chandler, F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
7. (i) Powers of Attorney ###
(ii) Power of Attorney for James M. Benson, Robert H.
Benmosche and Catherine A. Rein ++
(iii) Powers of Attorney for David Rogers and Richard Robinson +++
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditor
12. Schedule for computation of performance quotations ***
13. (i) Consolidated memorandum describing certain procedures,
filed pursuant to Rule 6e-2(b)(12)(ii) and
Rule 6e-3(T)(b)(12)(iii) ***
(ii) Second Addendum to Consolidated
Memorandum +++++
# Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-65263, filed December 21, 1995.
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. 33-65263,
filed June 10, 1996.
### Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
#### Incorporated herein by reference to the Post-Effective Amendment No.2 to
the Variable Account's Form S-6 Registration Statement, File No. 33-
65263, 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 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.
+ Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Variable Account's Form S-6 Registration Statement, File No. 33-65263,
filed April 30, 1998.
++ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 333-46401,
filed July 9, 1998.
+++ Incorporated herein by reference to Post-Effective Amendment No. 4 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed January 20, 1999.
++++ Incorporated herein be reference to the Post-Effective Amendment No.4 to
the Variable Account's Form S-6 Registration Statement, File No. 33-
65263, filed February 24, 1999.
+++++ Incorporated herein be reference to the Post-Effective Amendment No.10 to
the Variable Account's Form S-6 Registration Statement, File No. 33-
52050, filed April 26, 1999.
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 26th day of April, 1999.
New England Variable Life Separate
Account
(Registrant)
By: New England Life Insurance
Company
(Depositor)
By: /s/ H. James Wilson
-------------------
H. James Wilson
Executive Vice President and
General Counsel
Attest:
/s/Marie C. Swift
- -----------------
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 26th day of
April, 1999.
New England Life Insurance Company
(Seal)
Attest: /s/ Marie C. Swift By: By: /s/ H. James Wilson
------------------ -------------------
Marie C. Swift H. James Wilson
Executive Vice President
and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on April 26, 1999.
* Chairman, President and
- ------------------------- Chief Executive Officer
James M. Benson
* Director
- -------------------------
Robert H. Benmosche
* Director
- -------------------------
Susan C. Crampton
* Director
- -------------------------
Edward A. Fox
* Director
- -------------------------
George J. Goodman
* Director
- -------------------------
Evelyn E. Handler
* Director
- -------------------------
Philip K. Howard, Esq.
* Director
- -------------------------
Bernard A. Leventhal
* Director
- -------------------------
Thomas J. May
<PAGE>
* Director
- -------------------------
Stewart G. Nagler
* Director
- -------------------------
Catherine A. Rein
Second Vice President and
* Chief Accounting Officer
- -------------------------
Richard A. Robinson
* Executive Vice President and
- ------------------------- Chief Financial Officer
David Y. Rogers
* 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. 333-46401, on July 9, 1998, and Post-Effective
Amendment No. 4 to the Variable Account's Form S-6 Registration Statement,
File No. 33-88082, on January 20, 1999.
gate99
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
3. (ii) Opinion and Consent of Rodney J.
Chandler, F.S.A., M.A.A.A.
6. Consent of Sutherland, Asbill &
Brennan LLP
11. Consent of the Independent Auditors
_________
* Page numbers inserted on manually-signed copy only.
<PAGE>
Exhibit 3(ii)
April 26, 1999
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. 5 to the registration
statement on Form S-6 (File No. 33-65263) 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 premium,
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 the initial premiums and policy
benefits, as shown in the illustrations, appear to be correspondingly more
favorable to prospective purchasers of Policies for male and female
insureds, aged 50 and 70, or for joint insureds (male aged 65 and female
aged 60) in the underwriting class illustrated than to prospective
purchasers of Policies for insureds of other sexes or ages. Insureds in
other underwriting classes may have higher cost of insurance charges.
2. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the Appendix,
is consistent with the provisions of the Policies.
<PAGE>
I hereby consent to the filing of this opinion as an Exhibit to this Post-
Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler, F.S.A., M.A.A.A.
Second Vice President and Actuary
2
<PAGE>
Exhibit 6
[Sutherland Asbill & Brennan LLP]
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We consent to the reference to our firm in the prospectus included in Post-
Effective Amendment No. 5 to the Registration Statement on Form S-6 for American
Gateway Series, issued through the New England Variable Life Separate Account
(File No. 33-65263). 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
By: /s/ Kimberly J. Smith
-----------------------------------
Kimberly J. Smith
Washington, D.C.
April 26, 1999
<PAGE>
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post Effective Amendment No. 5 to the
Registration Statement No. 33-65263 of New England Variable Life
Separate Account (the "Separate Account") of New England Life
Insurance Company (the "Company") of our reports dated February 10,
1999 and February 16, 1999 appearing in the Prospectus, which is part
of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in
such Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
April 26, 1999
