<PAGE>
As filed with Securities and Exchange Commission on April 27, 1999
Registration No. 33-19540
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 16
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
__________________
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
__________________
MARIE C. SWIFT
Counsel
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
__________________
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on 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 Variable Ordinary
Life Insurance Policies.
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
Registration Statement on Form S-6
Cross-Reference Sheet
Form N-8B-2
Item No. Caption in Prospectus
- ----------- ---------------------
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution Agreement
5 NELICO
6 The Variable Account
9 Inapplicable
10(a) Other Policy Features
10(b) Policy Values and Benefits
10(c), (d), (e) Death Benefit; Cash Value; Exchange of Policy During First 24
Months; Default and Lapse Options; Surrender; Partial Surrender
and Partial Withdrawal; "Free Look" Provision; Loan Provision;
Transfer Option; Premiums
10(f), (g), (h) Voting Rights; Rights Reserved by NELICO
10(i) Limits to NELICO's Right to Challenge the Policy; Payment of
Proceeds
11 The Variable Account
12 Investments of the Variable Account; Distribution Agreement
13 Charges and Expenses; Distribution Agreement; Charge for
NELICO's Income Taxes; Appendix A
14 Amount Provided for Investment Under the Policy; Distribution
Agreement
15 Premiums
16 Investments of the Variable Account
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 The Variable Account; Net Investment Experience
19 Reports; Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 Distribution Agreement
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 Distribution Agreement
<PAGE>
Form N-8B-2
Item No. Caption in Prospectus
- ----------- ---------------------
27 NELICO
28 Management
29 NELICO
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Distribution Agreement
35 NELICO
36 Inapplicable
37 Inapplicable
38 Distribution Agreement
39 Distribution Agreement
40 Distribution Agreement
41(a) Distribution Agreement
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Amount Provided for
Investment Under the Policy; Deductions from Premiums and
Unscheduled Payments; Scheduled Premiums
44(b) Charges and Expenses
45 Inapplicable
46 Investments of the Variable Account; Captions referenced under
Items 10(c), (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Default and Lapse Options; Charges
and Expenses; Additional Benefits by Rider; Exchange of Policy
During First 24 Months; Payment Options; Policy Owner and
Beneficiary; Premiums; Distribution Agreement;
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
<PAGE>
ZENITH LIFE PLUS
Variable Ordinary Life Insurance Policies
Issued by
New England Variable Life Separate Account of
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus offers individual variable ordinary life insurance policies
(the "Policies") issued by New England Life Insurance Company ("NELICO").
The Policy provides a guaranteed minimum death benefit equal to the Policy's
face amount, as long as you pay required scheduled premiums and there is no
"excess Policy loan". (See "Loan Provision".) You must pay scheduled premiums
until the insured reaches age 100. Under some circumstances you may skip a
scheduled premium payment. You may also make additional payments.
You may choose between two death benefit options. One provides a fixed death
benefit equal to the Policy's face amount. The other provides a death benefit
that may vary daily with the investment experience of the Eligible Funds. Cash
value allocated to the Eligible Funds is not guaranteed and fluctuates daily
with the investment results of the Eligible Funds.
You allocate net scheduled premiums and net unscheduled payments among the
investment sub-accounts of NELICO's Variable Life Separate Account (the
"Variable Account"). Each sub-account of the Variable Account invests in the
shares of an Eligible Fund. The Eligible Funds are:
NEW ENGLAND ZENITH FUND Morgan Stanley International Magnum
Back Bay Advisors Bond Income Series Equity Series
MFS Investors Series*
Back Bay Advisors Managed Series
MFS Research Managers Series*
Back Bay Advisors Money Market VARIABLE INSURANCE PRODUCTS FUND
Series ("VIP")
Capital Growth Series
Westpeak Growth and Income Series Overseas Portfolio
Equity-Income Portfolio
Westpeak Stock Index Series High Income Portfolio
Loomis Sayles Balanced Series
Loomis Sayles Small Cap Series VARIABLE INSURANCE PRODUCTS FUND II
("VIP II")
Alger Equity Growth Series
Davis Venture Value Series
Goldman Sachs Midcap Value Series Asset Manager Portfolio
YOU MAY ALSO ALLOCATE NET PREMIUMS TO A FIXED ACCOUNT IN MOST STATES. LIMITS
APPLY TO TRANSFERS TO AND FROM THE FIXED ACCOUNT.
You may cancel the Policy during the "Right to Return the Policy" period.
Replacing existing insurance with the Policy might not be to your advantage.
- --------
* Availability is subject to any necessary state insurance department
approvals.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
POLICIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ELIGIBLE FUND PROSPECTUSES ARE ATTACHED. PLEASE READ THEM AND KEEP THEM
FOR FUTURE REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE SUB-ACCOUNTS OR ELIGIBLE FUNDS WILL
PERFORM. 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 POLICIES.................................................. A-5
The Policies............................................................ A-5
Availability of the Policy.............................................. A-7
Charges Assessed in Connection with the Policy.......................... A-7
How the Policy Works.................................................... A-8
Receipt of Communications and Payments at NELICO's Home Office.......... A-9
NELICO.................................................................. A-9
POLICY VALUES AND BENEFITS................................................ A-10
Death Benefit........................................................... A-10
Guaranteed Minimum Death Benefit........................................ A-10
Death Proceeds Payable.................................................. A-10
Tabular Cash Value...................................................... A-10
Cash Value.............................................................. A-11
Net Investment Experience............................................... A-11
Allocation of Net Premiums.............................................. A-11
Amount Provided for Investment under the Policy......................... A-12
"Free Look" Provision................................................... A-12
CHARGES AND EXPENSES...................................................... A-12
Deductions from Premiums and Unscheduled Payments....................... A-13
Surrender Charge........................................................ A-13
Deductions from Cash Value.............................................. A-15
Charges Against the Eligible Funds and the Sub-Accounts of the Variable
Account................................................................ A-16
Group or Sponsored Arrangements......................................... A-17
PREMIUMS.................................................................. A-18
Scheduled Premiums...................................................... A-18
Unscheduled Payments.................................................... A-18
Special Premium Option.................................................. A-19
Automatic Premium Loan.................................................. A-20
Default and Lapse Options............................................... A-20
OTHER POLICY FEATURES..................................................... A-21
Loan Provision.......................................................... A-21
Surrender............................................................... A-22
Partial Surrender and Partial Withdrawal................................ A-23
Acceleration of Death Benefit Rider..................................... A-23
Investment Options...................................................... A-24
Transfer Option......................................................... A-24
Substitution of Insured Person.......................................... A-24
Payment of Proceeds..................................................... A-25
Exchange of Policy During First 24 Months............................... A-25
Payment Options......................................................... A-25
Additional Benefits by Rider............................................ A-26
Policy Owner and Beneficiary............................................ A-27
THE VARIABLE ACCOUNT...................................................... A-27
Investments of the Variable Account..................................... A-27
Investment Objectives................................................... A-28
Investment Management................................................... A-30
THE FIXED ACCOUNT......................................................... A-30
DISTRIBUTION AGREEMENT.................................................... A-31
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY.......................... A-31
Misstatement of Age or Sex.............................................. A-31
Suicide................................................................. A-31
TAX CONSIDERATIONS........................................................ A-32
Introduction............................................................ A-32
Tax Status of the Policy................................................ A-32
Tax Treatment of Policy Benefits........................................ A-32
NELICO's Income Taxes................................................... A-34
MANAGEMENT................................................................ A-35
VOTING RIGHTS............................................................. A-38
RIGHTS RESERVED BY NELICO................................................. A-38
TOLL-FREE NUMBERS......................................................... A-38
REPORTS................................................................... A-39
ADVERTISING PRACTICES..................................................... A-39
LEGAL MATTERS............................................................. A-39
REGISTRATION STATEMENT.................................................... A-39
EXPERTS................................................................... A-40
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES
AND ACCUMULATED SCHEDULED PREMIUMS....................................... A-41
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................. A-50
APPENDIX C: LONG TERM MARKET TRENDS....................................... A-71
APPENDIX D: USES OF LIFE INSURANCE........................................ A-73
APPENDIX E: TAX INFORMATION............................................... A-75
FINANCIAL STATEMENTS...................................................... F-1
</TABLE>
A-3
<PAGE>
GLOSSARY
Account. A sub-account of the Variable Account or the Fixed Account.
Automatic Premium Loan Option. If you elect this option, we will use the
Policy's loan value to pay a scheduled premium that you have not paid by the
end of the grace period.
Basic Scheduled Premium. Scheduled premium minus (i) charges for any rider
benefits; (ii) any extra premiums paid for substandard class; and (iii) the
portion of the annual Policy administrative charge that is due with the
premium.
Cash Value. A Policy's cash value includes the amount of its cash value held
in the Variable Account, the amount held in the Fixed Account and, if there is
an outstanding Policy loan, the amount of its cash value held in our general
account as a result of the loan.
Excess Policy Loan. When Policy loans plus accrued interest exceed the
Policy's cash value less the applicable Surrender Charge.
Fixed Account. The Fixed Account is a part of our general account to which
you may allocate net premiums and net unscheduled payments. It provides
guarantees of principal and interest.
Investment Start Date. This is the latest of the date we receive a premium
payment for the Policy, the date Part II of the Policy application is signed
and the Policy Date.
Net Cash Value. The amount you receive if you surrender the Policy. It is
equal to the Policy's cash value reduced by any Surrender Charge that would
apply on surrender and by any outstanding Policy loan and accrued interest.
Net Investment Experience. For any period, a sub-account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares for the same period, reduced by the amount of charges against the sub-
account for that period.
Net Scheduled Premium. The amount allocated to the Variable Account and/or
the Fixed Account. It is the basic scheduled premium less the sales charge and
the state premium tax charge.
Net Unscheduled Payment. The amount allocated to the Variable Account and/or
the Fixed Account. It is the unscheduled payment less the sales charge and the
state premium tax charge.
Policy Date. If you make a premium payment with the application, the Policy
Date is generally the later of the date Part II of the application was signed
and receipt of the premium payment. If you choose to pay the initial premium
upon delivery of the Policy, we issue the Policy with a Policy Date which is
generally five days after issue.
Special Premium Option. If you elect this option, you may be able to skip a
scheduled premium or premiums.
Tabular Cash Value. The value which the Policy would have if: (i) you paid
all scheduled premiums when due; (ii) you made no unscheduled payments,
partial surrenders, partial withdrawals, or loans; (iii) the Policy's sub-
accounts earned a 5% annual net rate of return; and (iv) we deducted cost of
insurance charges using the maximum guaranteed cost of insurance rates.
You. When used in this prospectus, "you" refers to the Policy Owner.
A-4
<PAGE>
INTRODUCTION TO POLICIES
The Policies
The Policies are designed to provide lifetime insurance coverage. They are
not primarily offered as an investment.
Here is a summary of the Policy's basic features. You should read the
prospectus for more complete information.
-- The Policy requires payment of scheduled premiums. (See "Scheduled
Premiums".)
-- You can make additional unscheduled payments under the Policy. We can
limit or prohibit unscheduled payments in some situations, including
cases where the insured is in a substandard risk class. (See
"Unscheduled Payments".)
-- You can allocate net scheduled premiums and net unscheduled payments to
one or more of the sub-accounts of the Variable Account corresponding to
mutual fund portfolios, or the Fixed Account, after an initial period in
the Money Market Sub-Account. (See "Allocation of Net Premiums" and
"Investment Options".)
-- The mutual fund portfolios available under the Policy include several
common stock funds, including funds which invest primarily in foreign
securities, two bond funds, two managed funds, a balanced fund and a
money market fund. You may allocate your Policy's cash value to a
maximum of ten accounts (including the Fixed Account) at any one time.
(See "Investments of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. We provide guarantees of Fixed Account principal
and interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE FROM THE
FIXED ACCOUNT. We have the right to restrict transfers of cash value and
allocations of premiums into the Fixed Account. (See "The Fixed
Account".)
-- The cash value of the Policy will vary daily based on the net investment
experience of your Policy's sub-accounts and the amount of interest
credited to your Policy's cash value in the Fixed Account. (See "Cash
Value", "Charges and Expenses", "Premiums", "Loan Provision" and
"Partial Surrender and Partial Withdrawal".)
-- The portion of the cash value in the sub-accounts is not guaranteed. You
bear the investment risk on this portion of the cash value. (See "Cash
Value".)
-- You may choose between two forms of death benefit options under the
Policy. One provides a death benefit equal to the Policy's face amount.
The other provides a death benefit which varies with the net investment
experience of your Policy's sub-accounts and the rate of interest
credited on your cash value in the Fixed Account. The death benefit in
either case could increase to satisfy tax law requirements if the cash
value reaches certain levels. (See "Death Benefit".)
-- Regardless of investment experience, the death benefit is guaranteed
never to be less than the Policy's face amount, as long as you have paid
the required scheduled premiums when due. (See "Death Benefit".)
-- If you elect the "Special Premium Option", you may be able to skip a
scheduled premium payment without causing the Policy to lapse. In that
case, the Policy will keep its minimum death benefit guarantee. (See
"Special Premium Option".)
-- You may change your allocation of future net scheduled premiums and net
unscheduled payments at any time. (See "Allocation of Net Premiums" and
"Investment Options".)
-- After the "free look" period, the Policy allows you to transfer cash
value among the sub-accounts and, generally, to the Fixed Account up to
four times in a Policy year without our consent. We currently allow 12
transfers per Policy year. Transfers and allocations involving the Fixed
Account are subject to some limits. (See "Transfer Option" and "The
Fixed Account-Policy Transactions".)
A-5
<PAGE>
-- A loan privilege, a partial withdrawal feature and a partial surrender
feature are also available. (See "Loan Provision" and "Partial Surrender
and Partial Withdrawal".)
-- Death benefits paid to the beneficiary generally are not subject to
Federal income tax. Under current law, undistributed increases in cash
value generally are not taxable to you. (See "Tax Considerations".)
-- Loans, assignments and other pre-death distributions may have tax
consequences depending primarily on the amount which you have paid into
the Policy but also on any "material change" in the terms or benefits of
the Policy. If premium payments or a material change cause the Policy to
become a "modified endowment contract", then pre-death distributions
will be includable in income on an income first basis, and a 10% penalty
tax may be imposed on income distributed before the Policy Owner attains
age 59 1/2. Tax considerations may therefore influence the amount and
timing of premiums and unscheduled payments and certain Policy
transactions which you choose to make. (See "Tax Considerations".)
-- If the Policy is not a modified endowment contract, we believe that
loans under the Policy will not be taxable to you as long as the Policy
has not lapsed, been surrendered or terminated. With some exceptions,
other pre-death distributions under a Policy that is not a modified
endowment contract are includible in income only to the extent they
exceed your investment in the Policy. (See "Tax Considerations".)
-- During the "free look" period you can return the Policy for a refund.
(See "Free Look Provision".)
-- Within 24 months after a Policy's date of issue, you may exchange the
Policy, without evidence of insurability, for a fixed-benefit policy
issued by us or an affiliate on the life of the insured. If you exercise
this option, you will have to make up any investment loss. (See
"Exchange of Policy During First 24 Months".)
In many respects the Policies are similar to traditional fixed-benefit whole
life insurance. Like whole-life insurance, the Policies provide for a
guaranteed minimum death benefit, scheduled premium payments, a cash value,
and loan privileges.
The Policies are different from fixed-benefit life insurance in that the
death benefit may, and the cash value will, vary to reflect the investment
experience of the selected sub-accounts. In addition, you can elect an option
which will allow you, under some circumstances, to skip a particular scheduled
premium or premiums and still keep the Policy in force on a premium paying
basis.
The Policies are designed to provide insurance protection. Although the
underlying mutual fund portfolios invest in securities similar to those in
which mutual funds available directly to the public invest, in many ways the
policies differ from mutual fund investments. The main differences are:
-- The Policy provides a death benefit based on our assumption of an
actuarially calculated risk.
-- If you do not pay the scheduled premiums, the Policy may lapse. If the
Policy lapses when Policy loans are outstanding, adverse tax
consequences may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values
of the Policy. These charges include various insurance, risk,
administrative and premium tax charges. (See "Charges and Expenses".)
-- The Variable Life Separate Account, and not the Policy Owner, owns the
mutual fund shares.
-- Federal income tax liability on any earnings is deferred until you
receive a distribution from the Policy. Transfers from one underlying
fund portfolio to another do not incur tax liability under current law.
-- Dividend and capital gains distributions are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses
of Life Insurance".
A-6
<PAGE>
Availability of the Policy
At this time new Policies are available only in the state of New Jersey. The
Policies are available to insureds from the age of 20 to 75 and, if we
consent, from the age of 76 to 80. The Policies are not currently available to
insure juveniles. All persons must meet our underwriting and other criteria.
The minimum face amount available currently is $5,000 for Policies issued in
connection with employee benefit plans qualified under Section 401 of the
Internal Revenue Code ("tax-qualified pension plans"), and is $15,000 for all
other Policies unless we consent to a lower amount. At this time the Policies
are only available on a limited basis to plans qualified under Section 401(k)
of the Internal Revenue Code.
Charges Assessed in Connection with the Policy
Premium-Based Charges. We deduct the following charges:
(i) From each scheduled premium, any premiums for rider benefits,
substandard risk class, and the portion of the annual administrative
charge due with the premium equal to $55 per year if premiums are paid
annually (or up to a total of $58.41 per year if premiums are paid more
frequently);
(ii) From each scheduled premium, after the charges in (i) above, a state
premium tax charge of 2% and, during the first 15 Policy years, a
sales charge of 6%;
(iii) From each unscheduled payment, a state premium tax charge of 2% and a
sales charge of 6%.
See "Charges and Expenses" for a discussion of certain charges under
automatic issue Policies.
Surrender Charge. During the first 15 Policy years, a surrender charge will
apply if you totally or partially surrender the Policy, or allow it to lapse.
The surrender charge includes:
-- a deferred administrative charge. This charge is $5.00 per $1,000 of
face amount in the first ten Policy years, and then reduces monthly
until it reaches 0 at the end of the 15th Policy year;
-- a deferred sales charge. The maximum charge for an insured with an issue
age of 53 or less applies if you lapse or surrender the Policy in the
tenth Policy year. The maximum charge in that year is an amount equal to
24% of the Policy's basic scheduled premium for the first Policy year
plus 4% of the basic scheduled premiums for the second through tenth
Policy years. The charge decreases on a monthly basis beginning in
Policy year 11 until it reaches 0 at the end of Policy year 15. The
charge may be less if the issue age is above 53.
We deduct the surrender charge from the Policy's available cash value,
regardless of whether that cash value comes from scheduled premiums,
unscheduled payments, or investment experience.
Charges Deducted from Cash Value. We deduct certain charges from the cash
value:
-- Monthly charge for the cost of insurance;
-- Monthly administrative charge equal to $0.015 per $1,000 of face amount;
-- In the first Policy year, an additional monthly administrative fee equal
to $0.035 per $1,000 of face amount;
-- Monthly minimum death benefit guarantee charge of $0.01 per $1,000 of
face amount.
In addition, if you use the Special Premium Option to skip a scheduled
premium payment, we will deduct from your cash value 92% of the portion of the
annual $55 administrative charge, and of any rider or substandard risk premium
that was due with the skipped premium.
See "Charges and Expenses" for a discussion of certain charges under
automatic issue Policies.
Charges Deducted from the Variable Account and the Eligible Funds. The
following charges are deducted from the Variable Account and Eligible Fund
assets:
-- Daily charge against the sub-account assets for our mortality and
expense risk, equal to an annual rate of .60%;
-- Daily charges against the Eligible Fund portfolios for investment
advisory services and fund operating expenses.
See "Charges and Expenses".
A-7
<PAGE>
HOW THE POLICY WORKS
[CHART APPEARS HERE]
Premium Payments
. Guaranteed not to increase
Charges from Premium
. Any rider premiums
. Annual Admin Charge--$55
. Substandard Risk Premium
. Sales Load (5%* for 15 years)
. Premium Tax Charge (2%*)
Unscheduled Payments
. Sales Load (6%)
. State Premium Tax Charge (2%)
Special Premium Option
. If used, we deduct charges for Annual Admin. Charge and any riders or
substandard risk premium from cash value
Loans
. After the free look period, you may borrow up to 90% of the adjusted cash
value (100% in Alabama)
. The loan interest charge is 6%. We transfer loaned funds out of the Eligible
Funds into the General Account where we credit them with 5% interest
Retirement Benefits
. Fixed settlement options are available for policy proceeds
Cash Values
. Net scheduled premiums or net unscheduled payments invested in your choice of
Eligible Fund investments or the Fixed Account after an initial period in the
Zenith Money Market Sub-Account
. The cash value reflects investment experience, interest, payments and policy
charges
. We do not guarantee the cash value invested in the Eligible Funds
. Any earnings you accumulate are free of any current income taxes
. You may change the allocation of future net premiums at any time. You may
currently transfer funds among investment options (and to the Fixed Account)
up to 12 times per policy year, after the free look period
. We limit the timing, frequency and amount of transfers from (and in some
cases to) the Fixed Account
. You may allocate your cash value among a maximum of ten accounts at any one
time
Death Benefit
. Level or Variable Death Benefit Options
. Guaranteed not to be less than initial face amount less any loan balance
. Income tax free to named beneficiary
Daily Deductions from Assets
. Mortality and expense risk charges of 0.60% on an annual basis are deducted
from the cash value
. Investment advisory fees and other expenses are deducted from the Eligible
Fund values
Beginning of Month Changes
. We deduct the cost of insurance protection from the cash value each month
. Minimum Death Benefit Guarantee Charge of $.01 per $1000 face amount monthly
. Admin. Charge 1st yr. $.05 per $1000 face amount monthly; .015 per $1000 face
amount monthly in renewal years
Surrender Charges
. Deferred Sales Charge and Deferred Administrative Charge (see page A-13)
Living Benefits
. If policyholder has elected and qualified for disability waiver of premium
rider and becomes totally disabled, we will waive premiums during the period
of disability. Unscheduled payments are not covered by the waiver of premium
rider
. You may surrender the Policy at any time for its cash surrender value
. Deferred income taxes, including taxes on amounts borrowed, become payable
upon surrender
. Grace period for scheduled premiums is 31 days from due date. Nonforfeiture
options are extended term insurance and paid-up insurance
. Subject to our rules, you may reinstate a lapsed policy within seven years of
date of lapse if it has not been surrendered
- ------------
* Percent of Premium after deducting Annual Admin. Charge, Rider Premiums and
Substandard Risk Premiums
A-8
<PAGE>
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 by us if we receive a request conforming to our
administrative procedures or a payment at our Home Office before the close of
regular trading on the New York Stock Exchange on that day. If we receive it
after that time, or if the New York Stock Exchange is not open on 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. Originally, NELICO was 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 life insurance company
whose principal office is 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 at 501 Boylston
Street, Boston, Massachusetts 02116. NELICO's mailing address is: P.O. Box
9116, Boston, Massachusetts 02117.
The following chart illustrates the relationship of NELICO, the Fixed
Account, the Variable Account and the Eligible Funds.
[CHART APPEARS HERE]
NELICO
(Insurance company subsidiary of MetLife)
We deduct charges.
We allocate net premiums and net unscheduled payments to your choice of
sub-accounts in the Variable Account or to the Fixed Account.
Premiums and Unscheduled Payments
Fixed Account
VARIABLE ACCOUNT
Zenith Capital Growth Sub-Account
Zenith Bond Income Sub-Account
Zenith Money Market Sub-Account
Zenith Managed Sub-Account
Zenith Stock Index Sub-Account
Zenith Growth and Income Sub-Account
Zenith Small Cap Sub-Account
Zenith Balanced Sub-Account
Zenith Equity Growth Sub-Account
Zenith Venture Value Sub-Account
Zenith Midcap Value Sub-Account
Zenith International Magnum Equity Sub-Account
Zenith Investors Sub-Account
Zenith Research Managers Sub-Account
Equity-Income Sub-Account
Overseas Sub-Account
High Income Sub-Account
Asset Manager Sub-Account
Sub-accounts buy shares of the Eligible Funds.
NEW ENGLAND ZENITH FUND
Capital Growth Series
Back Bay Advisors Bond Income Series
Back Bay Advisors Money Market Series
Back Bay Advisors Managed Series
Westpeak Stock Index Series
Westpeak Growth and Income Series
Loomis Sayles Small Cap Series
Loomis Sayles Balanced Series
Alger Equity Growth Series
Davis Venture Value Series
Goldman Sachs Midcap Value Series
Morgan Stanley International Magnum Equity Series
MFS Investors Series
MFS Research Managers Series
VIP FUND
Equity-Income Portfolio
Overseas Portfolio
High Income Portfolio
VIP FUND II
Asset Manager Portfolio
Eligible Funds buy portfolio investments to support values and benefits of
the Policies.
A-9
<PAGE>
POLICY VALUES AND BENEFITS
Death Benefit
Death Benefit Options. When you apply for a Policy, you choose between two
death benefit options. The death benefit option under a Policy may not be
changed.
The Option 1 death benefit is equal to the face amount of the Policy. The
Option 1 death benefit is fixed, subject to increases required by the Internal
Revenue Code.
The Option 2 death benefit is equal to the face amount of the Policy plus
the amount, if any, by which the Policy's cash value exceeds its "tabular cash
value". The Policy's "tabular cash value" is a hypothetical value and is
discussed under "Tabular Cash Value" below. The Option 2 death benefit is also
subject to increases required by the Internal Revenue Code.
Generally, the Option 2 death benefit may exceed the face amount if the
Policy's sub-accounts (and the cash value in the Fixed Account) have earned
greater than a 5% net return, if you have paid more than the scheduled
premiums, or if less than the maximum charges were deducted.
To meet the Internal Revenue Code's definition of life insurance, the death
benefit will not be less than the Policy's cash value divided by the net
single premium per dollar of death benefit at the insured's attained age. This
means that if the cash value grows to certain levels, the death benefit
increases to satisfy tax law requirements. At that point, any payment you make
into the Policy will increase the death benefit by more than it increases the
cash value.
Guaranteed Minimum Death Benefit
Under both death benefit options, the death benefit is guaranteed not to be
less than the Policy's face amount regardless of the investment experience of
the Policy's sub-accounts, as long as you paid the scheduled premiums when due
or, under the Special Premium Option, they were not required to be paid. (See
"Scheduled Premiums" and "Special Premium Option".) However, if an "excess
Policy loan" exists, the Policy may terminate even if you paid all scheduled
premiums. (See "Loan Provision" for the definition of "excess Policy loan".)
Death Proceeds Payable
The death proceeds we pay are equal to the death benefit reduced by any
outstanding loan and accrued loan interest and by the portion of any unpaid
scheduled premium for the period prior to the date of death. We increase the
death proceeds by any rider benefits payable and by the portion of any
scheduled premium paid for a period beyond the date of death. We increase the
death proceeds by any rider benefits payable.
We may adjust the death proceeds if the insured's age or sex was misstated
in the application, if death results from the insured's suicide within two
years (less in some states) from the Policy's date of issue, or if a rider
limits the death benefit. (See "Limits to NELICO's Right to Challenge the
Policy".)
Tabular Cash Value
The Policy's tabular cash value is a hypothetical value. We use it to
determine (1) the Option 2 death benefit, (2) whether you can skip a premium
payment under the Special Premium Option, and (3) how much cash value you can
withdraw from the Policy. (See "Death Benefit", "Special Premium Option", and
"Partial Surrender and Partial Withdrawal".)
See the Glossary for the definition of the tabular cash value.
Your premium payment schedule (annual vs. quarterly, for example) affects
the amount of the tabular cash value. We calculate the tabular cash value on
any day as if your current payment schedule had always been in effect.
A-10
<PAGE>
Cash Value
Your Policy's cash value includes its cash value in the Variable Account and
in the Fixed Account. If you have a Policy loan, the cash value also includes
the amount we hold in our general account as a result of the loan. The cash
value reflects:
--scheduled premiums
--unscheduled payments
--the net investment experience of the Policy's sub-accounts
--interest credited to the cash value in the Fixed Account
--interest credited to amounts held in the general account for a Policy
loan
--the death benefit option you choose
--Policy charges (including amounts deducted when you use the Special
Premium Option)
--partial surrenders and partial withdrawals
--transfers among the sub-accounts and Fixed Account
--the premium payment schedule (annual vs. quarterly, for example) you
choose
We pay you the NET cash value if you surrender the Policy. It equals the
cash value minus any outstanding Policy loan (and accrued interest) and any
surrender charge that applies. We add to the net cash value the cost of
insurance charge for the remainder of the month. (See "Loan Provision",
"Surrender Charge" and "Monthly Charges for the Cost of Insurance".)
The Policy's net cash value in the Variable Account may increase or decrease
daily depending on net investment experience. Poor investment experience can
reduce the cash value to zero. YOU HAVE THE ENTIRE INVESTMENT RISK FOR THE
CASH VALUE IN THE VARIABLE ACCOUNT.
Net Investment Experience
The net investment experience of the sub-accounts affects the Policy's cash
value and, in some cases, the death benefit. We determine the net investment
experience of each sub-account 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, reduced by the charges against the sub-account (currently only the
mortality and expense risk charge) for that period.
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 Fund.
Allocation of Net Premiums
Your cash value is held in the general account of NELICO or an affiliate
until we issue the Policy. We credit the first net scheduled premium (and any
net unscheduled payment made with it) with net investment experience equal to
that of the Zenith Money Market Sub-Account from the investment start date
until the later of 45 days after the date Part 1 of the application is signed
or 10 days after we mail the Notice of Withdrawal Right. (The "investment
start date" is defined below.) Then, we allocate the cash value to the sub-
accounts and/or the Fixed Account as you choose.
A-11
<PAGE>
Amount Provided for Investment under the Policy
Investment Start Date. The investment start date is the latest of: the date
when we first receive a premium payment for the Policy, the date Part II of
the Policy application is signed and the Policy Date. (For this purpose,
receipt of the premium payment means receipt by your registered
representative, if the payment is made with the application; otherwise, it
means receipt by a NELICO agency.)
Premium with Application. If you make a premium payment with the
application, the Policy Date is generally the later of the date Part II of the
application is signed and receipt of the premium payment. In that case the
Policy Date and investment date are the same. The amount of premium paid with
the application must be at least 10% of the annual scheduled premium for the
Policy or one monthly scheduled premium. You may only make one premium payment
before the Policy is issued. Generally, you cannot submit a premium payment
with an application for a Policy to be used in a tax-qualified pension plan.
(Special rules apply for payroll deduction plans.)
If you make a premium payment with the application, we will cover the
insured under a temporary insurance agreement for a limited period that
usually begins when we receive the premium for the Policy (or, if later, on
the date when Part II of the application is signed). The maximum temporary
coverage is the lesser of the amount of insurance applied for and $500,000 for
standard risks ($250,000 for substandard risks and $50,000 for persons who are
determined to be uninsurable.) Special rules apply for payroll deduction
plans.
If we issue a Policy, Monthly Deductions and cost of insurance charges begin
from the Policy Date, even if we delayed the Policy's issuance for
underwriting. The deductions are for the face amount of the Policy issued,
even if the temporary insurance coverage during underwriting was for a lower
amount. If we decline an application, we refund the premium payment made and
any unscheduled payment made.
Premium on Delivery. If you pay the initial premium on delivery of the
Policy, the Policy Date is usually five days after issue. The investment start
date is the later of the Policy Date and the date we received the premium.
Monthly charges begin on the Policy Date. We credit interest at a 5% net rate
to the Policy for any period between the Policy Date and the investment start
date. Insurance coverage begins when we receive the premium.
Backdating. We may sometimes backdate a Policy, if you request, by assigning
a Policy Date earlier than the date the application is signed. You may wish to
backdate so that you can obtain a lower premium, based on a younger insurance
age, or, in a pension plan, to give all Policies the same anniversary date.
Backdating in some cases results in a Policy with a higher surrender charge.
For a backdated Policy, you must also pay the scheduled premiums payable for
the period between the Policy Date and the investment start date. As of the
investment start date, we allocate to the Policy those net scheduled premiums,
adjusted for monthly Policy charges and interest at a 5% net rate for that
period.
"Free Look" Provision
You may cancel the Policy within 45 days after the date Part 1 of the
application is signed, within 10 days (more in some states) after you receive
the Policy or within 10 days after we mail the Notice of Withdrawal Right,
whichever is latest. You may return the Policy to us or your registered
representative. Insurance coverage ends as soon as you return the Policy
(determined by postmark, if the Policy is mailed.) If you cancel the Policy,
we refund any scheduled premium paid (or any other amount that is required by
state insurance law) and any unscheduled payments made. This provision is
called "Right to Return the Policy" in the Policy.
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs of 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 and
Deferred Sales Charge may not fully cover all of our sales and distribution
expenses, and we may use proceeds from other charges, including the mortality
and expense risk charge, to help cover those expenses.
A-12
<PAGE>
Deductions from Premiums and Unscheduled Payments
We deduct these charges from scheduled premiums to arrive at the Policy's
BASIC scheduled premium:
(i) charges for any rider benefits;
(ii) an extra premium if your Policy is in a substandard risk class;
(iii) the portion of the annual Policy administrative charge that is due
with that scheduled premium payment. The total annual Policy
administrative charge is $55 per year for Policies that pay premiums
once a year and increases if you pay your premium in installments.
The maximum charge is $58.41.
We do not deduct the charges described above from unscheduled payments.
Under Version 1 automatic issue Policies the annual Policy administrative
charge is $45 rather than $55. Under Version 2 automatic issue Policies we
deduct from your scheduled premium an extra premium that is charged for
automatic issue status to arrive at the basic scheduled premium. See "Monthly
Charges for the Cost of Insurance".
Sales Charge. We deduct a 6% sales charge from (i) each BASIC scheduled
premium payment during the first 15 Policy years and (ii) from each
unscheduled payment made in any Policy year.
During the first 15 Policy years, if you surrender or lapse the Policy or
take a partial surrender, a Deferred Sales Charge will also apply.
Sales charges for Policies sold under certain group or sponsored
arrangements may be less than for other Policies.
State Premium Tax Charge. We deduct 2% from each BASIC scheduled premium and
each unscheduled payment for state premium taxes. These taxes vary from state
to state and the 2% rate reflects an average.
Example: The following chart shows the net scheduled premium that would be
allocated to the Variable Account under a Policy with an annual scheduled
premium of $2,000. The example assumes that the Policy has no rider
benefits, and that the insured is not in a substandard risk classification.
<TABLE>
<CAPTION>
Beginning of Amount of Net
Policy Year Scheduled Premium
------------ -----------------
<S> <C>
1-15................................................... $1,789.40
Thereafter............................................. 1,906.10
</TABLE>
If the Policy Owner made an unscheduled payment of $2,000, the amount of
the net unscheduled payment that would be allocated to the Variable Account
is $1,840, regardless of the Policy year.
Surrender Charge
During the first 15 Policy years, if you totally or partially surrender your
Policy, or allow it to lapse, we deduct a Surrender Charge from the cash
value. The Surrender Charge includes a Deferred Sales Charge and a Deferred
Administrative Charge. (Policies issued in certain states may have lower
Surrender Charges because of insurance law requirements.)
Deferred Sales Charge. The Deferred Sales Charge applies to the lesser of:
(i) the total payments (both scheduled premiums and unscheduled payments)
made; and
(ii) the Policy's total BASIC scheduled premiums up to the date of
surrender or lapse, whether or not you have paid each of those
premiums.
For Policies with scheduled premiums that are paid once a year and which
cover insureds who are age 53 or less at issue, the greatest Deferred Sales
Charge applies in the tenth Policy year. The Deferred Sales Charge in that
year equals 24% of the basic scheduled premium for the first Policy year plus
4% of the basic scheduled premiums for Policy years two through ten. After the
tenth Policy year, the maximum charge declines on a monthly basis until it
reaches 0% in the last month of the fifteenth Policy year.
A-13
<PAGE>
The table below shows the Deferred Sales Charge for insureds who are age 53
or less at issue when scheduled premiums are paid on an annual frequency. The
table shows the charge as a percentage of the total annual basic scheduled
premiums to date, if the lapse or surrender occurs at the end of each of the
Policy years shown.
<TABLE>
<CAPTION>
Which is Equal to the
The Maximum Deferred Following Percentage
Sales Charge is the of the Total Annual
For Policies Which Following Percentage of Basic Scheduled
are Surrendered or One Annual Premiums to Date of
Lapse During Basic Scheduled Premium Surrender or Lapse
------------------ ----------------------- ---------------------
<S> <C> <C> <C>
Entire Policy year 1 24% 24.00%
2 28% 14.00%
3 32% 10.66%
4 36% 9.00%
5 40% 8.00%
6 44% 7.33%
7 48% 6.86%
8 52% 6.50%
9 56% 6.22%
10 60% 6.00%
Last month of Policy
years 11 48% 4.36%
12 36% 3.00%
13 24% 1.85%
14 12% 0.86%
15 and thereafter 0% 0.00%
</TABLE>
For insureds who are above age 53 at issue, the percentages are less than or
equal to those described above, with the maximum percentage occurring in years
one through seven for insureds with an issue age up to 70 and during the first
five Policy years for insureds with an issue age of 71 and above.
The Deferred Sales Charge rate is the same regardless of your premium
schedule. However, because the amount of an annual premium is higher if you
pay it in installments instead of annually (e.g., semi-annually or quarterly),
the dollar amount of the Deferred Sales Charge will also be higher if you pay
premiums in installments rather than once a year.
In the case of a partial surrender, we deduct a proportionate amount of the
Deferred Sales Charge from the net cash value remaining after you have
received the amount requested.
Deferred Administrative Charge. The table below shows the Deferred
Administrative Charge we deduct if you totally or partially surrender or lapse
the Policy:
<TABLE>
<CAPTION>
Deferred Administrative
For Policies which are Charge per $1,000
Surrendered or Lapse During of Face Amount*
--------------------------- -----------------------
<S> <C> <C>
Entire Policy years 1-10 $5.00
Last month of Policy
years* 11 4.00
12 3.00
13 2.00
14 1.00
15 zero
</TABLE>
- --------
* The charge declines monthly in equal dollar amounts after the end of the
tenth Policy year.
A-14
<PAGE>
Deductions from Cash Value
Monthly Deduction. On the Policy Date and on the first day of each Policy
month, we make a Monthly Deduction from your cash value for these charges:
(i) An administrative charge of $0.015 per $1000 of the Policy's face
amount;
(ii) During the first Policy year, an additional administrative fee of
$0.035 per $1000 of the Policy's face amount;
(iii) A minimum death benefit guarantee charge of $0.01 per $1000 of the
Policy's face amount.
If a Policy loan exists and the Policy's net cash value is not large enough
to pay the Monthly Deduction in any month, the difference is treated as an
excess Policy loan and the Policy may terminate. (See "Loan Provision".)
Monthly Charges for the Cost of Insurance. We deduct the cost of providing
insurance protection on the Policy Date and on the first day of each Policy
month. The cost of insurance for a Policy month is equal to the amount at risk
multiplied by the cost of insurance rate for that month. We determine the
amount at risk on the first day of the Policy month after we process the
Monthly Deduction. The amount at risk is the amount by which the death
benefit, discounted at the monthly equivalent of 5% per year, exceeds the cash
value. Cost of insurance rates vary monthly.
If a Policy loan exists and the net cash value is not large enough to cover
the cost of insurance for a Policy month, the difference is treated as an
excess Policy loan and the Policy may terminate. (See "Loan Provision".)
The guaranteed cost of insurance rates for a Policy depend on the insured's
--underwriting class
--age on the first day of the Policy year
--sex (if the Policy is sex-based).
We guarantee that the rates will not be higher than those based on the 1980
Commissioners Standard Ordinary Mortality Tables (the "1980 CSO Tables"), with
smoker/nonsmoker modifications. The actual rates we use may be lower than the
maximum rates, depending on our expectations about our future mortality and
expense experience, lapse rates and investment earnings. We review the
adequacy of our cost of insurance rates periodically and may adjust them. Any
change will apply prospectively.
The underwriting classes we use to determine cost of insurance rates for
standard issues are smoker and nonsmoker. Substandard Policies use the same
smoker and nonsmoker standard rates, but require an extra premium as part of
the total scheduled premium. The overall monthly cost of insurance charges of
a substandard risk Policy, including the extra premium, could exceed charges
based on 100% of the 1980 CSO Tables.
Cost of insurance rates are generally lower for nonsmokers than for smokers
and generally lower for females than for males. Where required by state law,
and for Policies sold in connection with some employee benefit plans, cost of
insurance rates (and Policy values and benefits) do not vary based on the sex
of the insured.
Generally, for Policies we have issued to juvenile insureds (below age 20 at
issue), cost of insurance rates are based on the standard class until the
insured reaches age 20 and on the smoker class thereafter, unless the insured
gives us satisfactory evidence of his or her nonsmoker status. For Policies
issued to juveniles in New Jersey on or after May 1, 1997, we initially assign
the insured to the nonsmoker class at age 20 and inquire as to the insured's
actual smoker status. Cost of insurance rates for juvenile Policies are based
on the 1980 CSO aggregate tables until the insured reaches age 20 and are
based on the 1980 CSO Tables with smoker/nonsmoker modifications thereafter.
Eligible purchasers outside the state of New Jersey may have purchased
automatic issue Policies. We issue automatic issue Policies based on very
limited underwriting information. Version 1 automatic issue Policies have
their own cost of insurance rates and premiums. The cost of insurance rates do
not vary based on the insured's smoker status. Version 2 automatic issue
Policies have the same cost of insurance rates and basic scheduled premiums as
fully underwritten Policies but require an additional premium. The cost of
insurance rates for Version 1 automatic issue Policies exceed those based on
100% of the 1980 CSO Tables. The overall charges for insurance protection
under a Version 2 automatic issue Policy are generally lower than under a
Version 1 Policy if the Version 2 Policy uses nonsmoker cost of insurance
rates, and may be slightly lower or slightly higher than under a Version 1
Policy if the Version 2 Policy uses smoker cost of insurance rates.
A-15
<PAGE>
Some group or sponsored arrangements may be eligible to purchase Policies on
a simplified underwriting basis. There is no extra premium for Policies issued
on a simplified underwriting basis unless the insured is in a substandard risk
class.
Charges under the Special Premium Option. If you use the Special Premium
Option to skip a scheduled premium payment, we deduct from the Policy's cash
value 92% of:
--the amount of the annual administrative charge, plus
--any rider premiums, plus
-- any premiums for substandard risk class (or Version 2 automatic issue
status) that were due with the scheduled premium. (See "Special Premium
Option".)
We deduct these charges from the Policy's sub-accounts in proportion to the
Policy's cash value in each sub-account.
Charges for Additional Services. We may charge you a nominal fee, which we
will bill directly to you, if you request a Policy re-issue or re-dating.
Charges Against the Eligible Funds and the Sub-Accounts of the Variable
Account
Mortality and Expense Risk Charge. We charge the sub-accounts of the
Variable Account for our mortality and expense risks. Currently, the charge is
made daily at an annual rate of .60% of the sub-accounts' assets. The
mortality risk we assume is that insureds may live for shorter periods of time
than we estimated. The expense risk we assume is that our costs of issuing and
administering the Policies may be more than we estimated.
Charges for Income Taxes. We currently do not charge the Variable Account
for income taxes, but in the future we may make such a charge, if appropriate.
(See "Charge for NELICO's Income Taxes".)
Eligible Fund Expenses. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds.
The following table shows the annual operating expenses for each series,
based on actual expenses for 1998, (for the two MFS Series, anticipated
expenses for 1999), after any applicable expense cap or expense deferral
arrangement.
Annual Operating Expenses
(as a percentage of average net assets after any expense cap)
<TABLE>
<CAPTION>
Back Back
Bay Bay Back Westpeak Loomis
Advisors Advisors Bay Westpeak Growth Sayles
Capital Bond Money Advisors Stock and Small
Growth Income Market Managed Index Income Cap
Series Series Series Series Series Series Series*
------- -------- ------------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .63% .40% .35% .50% .25% .70% 1.00%
Other Expenses.......... .03% .08% .10% .08% .12% .08% --
---- ---- ----- ---- ---- ---- -----
Total Series Operating
Expenses.............. .66% .48% .45% .58% .37% .78% 1.00%
Annual Operating Expenses
(as a percentage of average net assets after expense deferral)
<CAPTION>
Morgan
Goldman Stanley
Sachs Loomis International Davis Alger MFS
Midcap Sayles Magnum Venture Equity MFS Research
Value Balanced Equity Value Growth Investors Managers
Series Series Series* Series Series Series* Series*
------- -------- ------------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .75% .70% .90% .75% .75% .75% .75%
Other Expenses.......... .15% .12% .40% .08% .08% .15% .15%
---- ---- ----- ---- ---- ---- -----
Total Series Operating
Expenses.............. .90% .82% 1.30% .83% .83% .90% .90%
</TABLE>
- --------
* Without the applicable expense cap or expense deferral arrangement
(described below), Total Series Operating Expenses for the year ended
December 31, 1998 would have been: Loomis Sayles Small Cap Series, 1.10%;
and Morgan Stanley International Magnum Equity Series, 1.40%. 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.
A-16
<PAGE>
Our affiliate, New England Investment Management, Inc. (formerly known as
TNE Advisers, Inc.), advises the series of the Zenith Fund except for the
Capital Growth Series. New England Investment Management voluntarily limits
the expenses of these series with either an expense cap or expense deferral
arrangement, as shown in the chart above. Under the expense cap, New England
Investment Management bears expenses of a series (other than the management
fee) that exceed 0.15% of average daily net assets (in the case of the Loomis
Sayles Small Cap Series, expenses that exceed 1.00% of average daily net
assets). Under the expense deferral, New England Investment Management bears
expenses of a series (other than the management fee) that exceed a certain
limit in the year the series incurs them and charges those expenses to the
series in a future year if actual expenses of the series are below the limit.
New England Investment Management may end these expense limits at any time.
The investment adviser for VIP and VIP II is Fidelity Management & Research
Company ("FMR"). The Portfolios of VIP and VIP II pay investment management
fees to FMR and also bear certain other expenses. For the year ended December
31, 1998, the total operating expenses of the Portfolios, as a percentage of
Portfolio average net assets, were:
<TABLE>
<CAPTION>
Total
Portfolio Management Fees Other Expenses Annual Expenses
--------- --------------- -------------- ---------------
<S> <C> <C> <C>
VIP Equity-Income .49% .09% .58%*
VIP Overseas .74% .17% .91%*
VIP High Income .58% .12% .70%
VIP II Asset Manager .54% .10% .64%*
</TABLE>
- --------
* Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. If we
included these reductions, total annual expenses would have been .57% for
VIP Equity-Income Portfolio, .89% for VIP Overseas Portfolio and .63% for
VIP II Asset Manager Portfolio.
Affiliates of FMR compensate NELICO and/or certain affiliates for
administrative, distribution, or other services relating to these Portfolios
of VIP and VIP II. This compensation is based on assets of the Portfolios
attributable to the Policies and certain other variable insurance products
that we and our affiliates issue.
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. Examples of such arrangements are tax-qualified pension
plans and deferred compensation plans. 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, reduce or vary any Policy charges under Policies sold to a
group or sponsored arrangement. We may also raise the interest rate credited
to loaned amounts under these Policies. The amount of the variations and our
eligibility rules may change from time to time. In general, they reflect cost
savings over time that we anticipate for Policies sold to the eligible group
or sponsored arrangements and relate to objective factors such as the size of
the group, its stability, the purpose of the funding arrangement and
characteristics of the group members. Consult your registered representative
for any variations that may be available and appropriate for your case.
The United States Supreme Court has ruled that certain 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.
A-17
<PAGE>
PREMIUMS
Scheduled Premiums
The Policy requires scheduled premium payments until the insured reaches age
100. The scheduled premium amount depends on the Policy's face amount, the
age, sex (unless unisex rates apply) and underwriting class of the insured,
the premium payment schedule you select, and any rider benefit premiums.
The underwriting classes we use for setting the scheduled premium are smoker
standard, smoker substandard, nonsmoker standard, nonsmoker substandard,
automatic issue (for Version 1 automatic issue Policies) and, for insureds age
0 to 19, standard and substandard. Premiums are generally higher for males
than for females and generally higher for smokers than for nonsmokers.
Premiums are also generally higher for Policies issued on older insureds.
Scheduled premiums include the additional premiums charged for insureds in a
substandard risk or Version 2 automatic issue classification and for rider
benefits.
You may make scheduled payments by check or money order. You may choose to
have us withdraw your scheduled premium payments from your bank checking
account or New England Cash Management Trust account. (This is known as the
Master Service Account arrangement, or "MSA". Scheduled payments made through
MSA may be maintained by NELICO or an affiliate in the general account pending
their due date.)
You can pay scheduled premiums on an annual, semi-annual or quarterly
schedule, or, with our consent, monthly. The premium payment schedule you
select affects the total premium you pay in a Policy year. The total premium
is highest if you select the monthly frequency and lowest if you select the
annual frequency. The payment schedule also affects the Policy's cash value
and tabular cash value and, therefore, may affect the death benefit.
You can change your premium payment schedule by sending your request to us.
If you change to a less frequent payment schedule (e.g., from quarterly to
annual) the change goes into effect on the next premium due date under the new
schedule. Until then, you make payments under the old schedule; we do not
accept an advance payment of the remaining premiums due for the year under the
old schedule. If you change to a more frequent payment schedule (e.g., from
annual to quarterly) the change goes into effect on the next premium due date
under the original schedule. (See "Receipt of Communications and Payments at
NELICO's Home Office".)
Scheduled premiums are due at NELICO's Home Office or a NELICO agency on or
before their due dates. We allocate net scheduled premiums, after the first,
to your Policy's sub-accounts on the premium due dates, not when they are
received. HOWEVER, IF YOU HAVE NOT PAID A PREMIUM BY THE DUE DATE, THE CASH
VALUE ATTRIBUTABLE TO YOU DOES NOT INCLUDE THAT PREMIUM, OR ANY INVESTMENT
PERFORMANCE ON IT, UNTIL YOU ACTUALLY PAY IT. If you use the Special Premium
Option to skip a scheduled premium payment or if you miss a required scheduled
premium payment, we withdraw from the Variable Account the net scheduled
premium that we advanced, adjusted for net investment experience on it since
the due date. (IF YOU DO NOT PAY A REQUIRED SCHEDULED PREMIUM, THE POLICY MAY
LAPSE. SEE "DEFAULT AND LAPSE OPTIONS".)
We may apply a credit to the initial scheduled premium under a Policy
converted from certain term insurance that was issued by New England Mutual,
NELICO or NELICO's affiliates. We may also apply a credit to scheduled
premiums under a Policy issued to a home office employee of NELICO on the life
of the employee, if the employee has worked for us for at least one year.
Unscheduled Payments
Within limits, you may make unscheduled payments as long as the Policy has
not lapsed. We may require satisfactory evidence of insurability. In addition,
our consent is needed if, in order to satisfy tax law requirements, the
payment would increase the Policy's death benefit by more than it would
increase the cash value. We will not accept an unscheduled payment if the
Policy's scheduled premiums are being waived under a waiver of premium rider.
(See "Additional Benefits by Rider".) We can prohibit or limit the amount of
unscheduled payments under a substandard risk Policy. An unscheduled payment
must be at least $10 if made under the Master Service Account or certain other
monthly payment arrangements, and otherwise must be at least $25.
You may ask us to include on your premium notice for the Policy anniversary
a planned unscheduled payment amount in addition to the scheduled premium.
Subject to our rules, you may use MSA to make unscheduled payments if you are
using MSA to pay your scheduled premiums.
A-18
<PAGE>
Under any billing option, the total of all premiums and payments made could
create a "modified endowment contract". You could consider the potential tax
consequences before planning a series of unscheduled payments. (See "Tax
Considerations".)
We allocate an unscheduled payment to the Policy's sub-accounts as of the
date we receive it. (See "Receipt of Communications and Payments at NELICO's
Home Office".)
Rules for Crediting Payments to the Variable Account. We credit payments
that are at least equal to the scheduled premium due, and that we receive
--with a premium notice, or
--within the period of 25 days before the premium due date to 31 days after
the due date
first, as the scheduled premium due;
next, to pay any loan interest due; and
then, as an unscheduled payment.
We credit all other payments as unscheduled payments, unless you designate
them as loan repayments.
If you make an unscheduled payment during the grace period and the Policy
lapses, we return the payment to you.
If you pay premiums monthly, including by MSA, we credit payments as agreed
by you and us. Payments made by MSA may be maintained by NELICO or an
affiliate in the general account pending crediting. Billing and crediting
procedures for some group or sponsored arrangements may differ from those used
for other Policy Owners.
If you have a Policy loan, it may be better to repay the loan than to make
an unscheduled payment, because the unscheduled payment has sales and premium
tax charges, and the loan repayment does not incur any charges. (See "Loan
Provision" and "Deductions from Premiums and Unscheduled Payments".) We will
not treat a payment as repayment of a Policy loan unless so designated by you.
Special Premium Option
When you apply for a Policy, or at a later date as long as the Policy is not
lapsed, you may elect the Special Premium Option. If you do, you may be able
to skip a scheduled premium payment or payments after the first Policy year.
Specifically, if you have not paid a scheduled premium by the end of the
grace period, the Policy will not lapse if the cash value on the premium due
date (before we advanced the net premium due) exceeded the tabular cash value
by at least the amount of the scheduled premium due, including any rider and
substandard risk (or Version 2 automatic issue) premiums due. We will not use
the Special Premium Option to prevent lapse if, immediately afterward, the
amount of any outstanding Policy loan plus accrued interest would exceed the
Policy's loan value.
If we use the Special Premium Option, we deduct from the cash value, as of
the premium due date, 92% of the portion of the annual administrative charge,
and of any rider or substandard risk (or Version 2 automatic issue) premiums,
that were due. We deduct these amounts from the Policy's sub-accounts in
proportion to the Policy's cash value in each. (We also withdraw the net
scheduled premium that we advanced to the Policy, adjusted for investment
experience on it since the due date.)
If you have elected both the Special Premium Option and the automatic
premium loan provision, we first determine whether we can use the Special
Premium Option before attempting to use an automatic premium loan. (See
"Scheduled Premiums".)
You may cancel the Special Premium Option and, generally, re-elect it at any
time. The Special Premium Option is not available to you, however, while you
are paying scheduled premiums by MSA.
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<PAGE>
Automatic Premium Loan
If you elect this feature and you have not paid a scheduled premium by the
end of the grace period, we use your Policy's available loan value to pay the
scheduled premium to the next due date, if possible, but at least to the next
quarterly due date. We will not make a premium loan if the Policy's loan value
cannot pay at least a quarterly premium. Interest on the loan is charged from
the premium due date. Like other Policy loans, an automatic premium loan can
result in an excess Policy loan. (See "Loan Provision".) We will not make an
automatic premium loan if you can skip the scheduled premium payment under the
Special Premium Option.
Default and Lapse Options
If you have not paid a required scheduled premium by its due date, then the
premium is in default. The Policy provides a 31-day grace period for the
payment. You have insurance coverage during the grace period, but if the
insured dies before you pay the premium, we reduce the death proceeds by the
portion of the unpaid premium for the period prior to the date of death.
For 60 days after the due date of a premium in default, we do not make the
usual Monthly Deductions and cost of insurance deductions from the Policy's
cash value. If you pay the premium in default, we make these deductions
retroactively. If you surrender the Policy while the premium is in default, we
deduct the full Monthly Deduction and a prorated cost of insurance charge from
the proceeds.
If your Policy lapses, there are three lapse options that may be available:
Fixed Extended Term Insurance, Fixed Paid-Up Insurance and Variable Paid-Up
Insurance. You may select a lapse option, or change your selection, by written
request to us at any time up to 60 days after the due date of the premium in
default. Eligibility conditions apply to the lapse options.
FIXED EXTENDED TERM INSURANCE is fixed benefit life insurance for a limited
term with no further premiums due. The death benefit is the same as the amount
of your Policy's death benefit on the due date of the premium in default. We
determine the term by applying the Policy's NET cash value as of the due date
of the premium in default (that is, the cash value reduced by any Surrender
Charge that applies and by any Policy loan balance), less any partial
surrenders or partial withdrawals made during the grace period. Policy loans
are not available. Fixed Extended Term Insurance is not available if your
Policy is in a substandard or automatic issue class or is used in connection
with a pension plan.
If you are eligible for this option, it automatically applies unless you
have elected Fixed or Variable Paid-Up Insurance. We will apply Fixed Paid-Up
Insurance, however, if it would provide a greater death benefit.
PAID-UP INSURANCE is permanent life insurance with no further premiums due.
We determine the amount of insurance by applying the Policy's NET cash value
as of the due date of the premium in default (that is, the cash value reduced
by any Surrender Charge that applies and by any Policy loan balance), less any
partial surrenders or partial withdrawals made during the grace period, as a
net single premium at the current age of the insured. Policy loans are
available.
With our consent, you can elect VARIABLE PAID-UP INSURANCE as a lapse option
if the NET cash value of your Policy as of the due date of the premium in
default (that is, the cash value reduced by any Surrender Charge that applies
and by any Policy loan balance), less any partial surrenders or partial
withdrawals made during the grace period, is sufficient, when used as a net
single premium at the insured's current age, to purchase paid-up insurance
with an initial face amount at least equal to $5,000. If your Policy's net
cash value will not purchase this minimum amount of insurance, then we will
provide Fixed Paid-Up Insurance instead. Variable Paid-Up Insurance is usually
not available under Policies in a substandard or Version 2 automatic issue
class.
The death benefit under Variable Paid-Up Insurance can vary monthly and the
cash value can vary daily, depending on the net investment experience of the
Policy's sub-accounts (and on the interest credited to any cash value in the
Fixed Account). The death benefit will never be less than the initial amount
of the Variable Paid-Up Insurance if there is no outstanding Policy loan.
There is no minimum guaranteed cash value.
We set the death benefit under Variable Paid-Up Insurance at the end of each
Policy month for the next Policy month. The death benefit is the greater of
the initial face amount of your Variable Paid-Up Insurance and the
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<PAGE>
Variable Death Benefit. The Variable Death Benefit can increase or decrease,
depending on how the Policy's actual investment experience for the month (plus
any cost of insurance adjustment) compares to investment experience at the
monthly equivalent of 5% per year.
If the actual investment experience of the Policy's sub-accounts (and the
net interest earned on any cash value in the Fixed Account), plus any cost of
insurance adjustment, is greater than the monthly equivalent of 5% per year,
the Variable Death Benefit increases. If it is less, the Variable Death
Benefit decreases. The change in the Variable Death Benefit equals this
difference between the actual return (plus any cost of insurance adjustment)
and the assumed return, divided by the net single premium per dollar of death
benefit at the current age of the insured. The cost of insurance adjustment
reflects any difference between the actual and the guaranteed maximum cost of
insurance charges under the Policy. Thus, changes in the Variable Death
Benefit depend on the age, sex (unless the Policy is unisex) and underwriting
class of the insured as well as on net investment experience.
Although the paid-up death benefit will not be less than the initial face
amount under the option, the Variable Death Benefit can be higher or lower
than the initial amount. Changes in the Variable Death Benefit are carried
forward, so that if investment experience reduces the Variable Death Benefit
below the initial amount of Variable Paid-Up Insurance, subsequent favorable
investment experience must first restore the Variable Death Benefit to the
initial amount before it can cause the Variable Death Benefit to exceed the
initial amount of Variable Paid-Up Insurance.
The initial cash value under Variable Paid-Up Insurance is the Policy's NET
cash value as of the due date of the premium in default, reduced by any
partial surrenders or partial withdrawals made during the grace period.
Thereafter, we determine the cash value in the same way as before lapse,
except that we deduct a charge for the cost of insurance at the end of the
Policy month instead of the beginning, and there are no Monthly Deductions.
Because of this, the current cost of insurance rates under Variable Paid-Up
Insurance are usually somewhat higher than they are under the Policy before
lapse. Cost of insurance rates under Variable Paid-Up Insurance depend on the
insured's underwriting class, attained age and sex (if the Policy is sex-
based).
You cannot make partial withdrawals, premium payments or unscheduled
payments under Variable Paid-Up Insurance. You may surrender the Policy for
its net cash value, which is its cash value reduced by any outstanding loan
(and accrued interest) and by a pro-rated charge for the cost of insurance.
The amount available for a Policy loan under Variable Paid-Up Insurance is
determined in the same way as prior to lapse, and an excess Policy loan may
also cause your Variable Paid-Up Insurance to lapse. (See "Loan Provision".)
We reserve the right to limit sub-account transfers under a Variable Paid-Up
Insurance Policy to four per Policy year. We currently allow 12 sub-account
transfers per Policy year.
Reinstatement. If your Policy has lapsed, you may reinstate it within 7
years after the date of default. If more than 7 years have passed, or if you
have surrendered the Policy, you need our consent to reinstate. Reinstatement
in all cases requires payment of certain charges described in the Policy and
usually requires evidence of insurability that is satisfactory to us.
OTHER POLICY FEATURES
Loan Provision
You may borrow all or part of the Policy's "loan value" at any time after
the end of the "free look" period. We make the loan as of the date when we
receive a loan request. (See "Receipt of Communications and Payments at
NELICO's Home Office".) You should contact our Home Office or your registered
representative for information on loan procedures. Policy loans are not
available under a Policy continued as Fixed Extended Term Insurance.
The Policy's loan value equals:
(i) 90% (or more if required by state law) of the Policy's "projected cash
value", minus
(ii) the Policy's Surrender Charge on the next loan interest due date or,
if greater, on the date the loan is made;
(iii) discounted at the loan interest rate (6%).
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<PAGE>
The "projected cash value" is the cash value projected to the next Policy
anniversary or, if earlier, to the next premium due date, at a 5% rate. The
loan value available is reduced by any outstanding loan plus interest.
Example: Using the Policy illustrated on page A-42, assume that the
Policy's premiums have been paid when due and that the Policy's sub-accounts
have earned a constant 6% hypothetical gross annual rate of return (equal to
a constant net annual rate of return of 4.57%). After the premium payment on
the 10th policy anniversary, the maximum amount that you could borrow would
be determined as follows under (i) and annual premium payment schedule and
(ii) a quarterly premium payment schedule:
<TABLE>
<CAPTION>
Annual Quarterly
------- ---------
<C> <S> <C> <C>
Cash Value after Premium Payment on 10th Policy
(1) Anniversary....................................... $19,411 $18,092
Cash Value Projected at a Constant Annual Rate of
(2) Return of 5% to the
(a) 11th Policy Anniversary........................ 19,796
(b) Next Premium Due Date.......................... 18,169
(3) 90% of Amount Calculated in (2).................... 17,816 16,352
Amount Calculated in (3), Reduced by the Applicable
(4) Surrender Charge.................................. 15,803 14,339
(5) Amount Calculated in (4), Discounted at an Annual
Rate of 6%
Back to the 10th Policy Anniversary............... 14,909 14,127
</TABLE>
A Policy loan reduces the Policy's cash value in the sub-accounts by the
amount of the loan. A loan repayment increases the cash value in the sub-
accounts by the amount of the repayment. Unless you request otherwise, we
attribute Policy loans and loan repayments to the sub-accounts in proportion
to the cash value in each. (See "The Fixed Account" for information on when
loans and loan repayments can impact cash value in the Fixed Account.)
The interest rate charged on Policy loans is an effective rate of 6% per
year (using simple interest during the year) and is due on the Policy
anniversary. If not paid, we add the interest accrued to the loan amount, and
we deduct an amount equal to the unpaid interest from the Policy's cash value
in the sub-accounts. The amount we take from the Policy's sub-accounts as a
result of the loan earns interest (compounded daily) at an effective rate of
5% per year. We credit this interest amount to the Policy's sub-accounts
annually, in proportion to the cash value in each.
The amount taken from the Policy's sub-accounts as a result of a loan does
not participate in the investment experience of the sub-accounts. Therefore,
loans can permanently affect the death benefit and cash value of the Policy,
even if repaid. In addition, we reduce any proceeds payable under a Policy by
the amount of any outstanding loan plus accrued interest.
If a Policy loan is outstanding, it may be better to repay the loan than to
make an unscheduled payment, because the unscheduled payment has sales and
premium tax charges, and the loan repayment does not incur charges. (See "Loan
Provision" and "Deductions from Premiums and Unscheduled Payments".)
If Policy loans plus accrued interest at any time exceed the Policy's cash
value less the Surrender Charge on the next loan interest due date (or, if
greater, on the date the calculation is made), we notify you that the Policy
is doing to terminate. (This is called an "excess Policy loan". We test for an
excess Policy loan on each monthly processing date and in connection with
certain other Policy processing transactions.) The Policy terminates without
value 31 days after we mail the notice, unless you pay us the excess Policy
loan amount within that time. (See "Default and Lapse Options.) If the Policy
lapses with a loan outstanding, adverse tax consequences may result. If your
Policy is a "modified endowment contract", loans under your Policy may be
treated as taxable distributions. (See "Tax Considerations" below.)
Department of Labor regulations impose requirements for participant loans
under pension plans. Therefore, plan loan provisions may differ from Policy
loan provisions. See "Tax Considerations".
Surrender
You may surrender a Policy for its net cash value at any time while the
insured is living by a signed written request to us. We determine the net cash
value of the surrendered Policy as of the date when we receive the
A-22
<PAGE>
surrender request. The net cash value equals the cash value reduced by any
Policy loan and accrued interest and by any applicable Surrender Charge. (See
"Surrender Charge.") You may apply all or part of the net cash value to a
payment option. (See "Payment Options.") A surrender may result in adverse tax
consequences. (See "Tax Considerations" below.)
Partial Surrender and Partial Withdrawal
Partial Surrender. You may make a partial surrender of the Policy to receive
a portion of its net cash value. A partial surrender reduces the Policy's cash
value by the amount of the surrender request (including the amount of any
Surrender Charge assessed). A partial surrender causes a proportionate
reduction in the Policy's face amount, tabular cash value, death benefit and
basic scheduled premium. We reserve the right to decline a partial surrender
request that would reduce the face amount below the Policy's required minimum.
Any Surrender Charge applied reduces any remaining Surrender Charge under your
Policy.
Partial Withdrawal. If your Policy has the Option 2 death benefit you may
make a partial withdrawal of the Policy's cash value that exceeds its tabular
cash value. If there is a Policy loan outstanding, we limit the partial
withdrawal so that the Policy loan plus accrued interest does not exceed the
Policy's loan value. (See "Loan Provision".) A partial withdrawal reduces the
Policy's Option 2 death benefit and cash value but does not affect its face
amount or current scheduled premium level. No Surrender Charge will apply.
If you have a Policy with the Option 2 death benefit and you request a
portion of the cash value, unless you instruct us otherwise, we will treat the
request as a partial withdrawal first and, if necessary, as a partial
surrender next.
If you have a Policy with the Option 1 death benefit, you may make a partial
withdrawal only if the death benefit has increased above the face amount to
satisfy tax law requirements. The amount you may withdraw is limited to the
cash value, less the face amount multiplied by the net single premium per $1
of death benefit at the insured's current age. If there is a Policy loan
outstanding, we limit the partial withdrawal so that the Policy loan plus
accrued interest does not exceed the Policy's loan value. (See "Loan
Provision".) A partial withdrawal under a Policy with an Option 1 death
benefit reduces the Policy's death benefit (but not below the face amount) and
cash value but does not reduce its face amount or affect its current scheduled
premium level. A partial withdrawal under a Policy with the Option 1 death
benefit always reduces the death benefit by more than it reduces the cash
value. No Surrender Charge will apply.
----------------
We limit the total number of partial surrenders and partial withdrawals you
may make in one Policy year to four, unless we consent. You may not reinvest
amounts withdrawn except as scheduled premiums or unscheduled payments, which
incur the charges described under "Deductions From Premiums and Unscheduled
Payments."
A partial withdrawal or partial surrender reduces the Policy's cash value in
the sub-accounts in proportion to the amount of cash value in each, unless you
request otherwise. We determine the amount of net cash value paid on partial
surrender or partial withdrawal as of the date when we receive a request. You
can contact your registered representative or the Home Office for information
on withdrawal and partial surrender procedures.
A reduction in the death benefit as a result of a partial surrender or
partial withdrawal may create a "modified endowment contract" or have other
adverse tax consequences. If you are contemplating a partial surrender or
partial withdrawal, you should consult your tax advisor regarding the tax
consequences. (See "Tax Considerations".)
Acceleration of Death Benefit Rider
We may offer in the future a rider benefit that will allow you to receive an
accelerated payment of your Policy's death benefit. This benefit will be
available where certain special needs exist, as described briefly below. Your
right to exercise the rider will be subject to certain conditions.
WE WILL MAKE THE 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
A-23
<PAGE>
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.
We expect that payment of the rider benefit will be available if the insured
is diagnosed as terminally ill, as defined in the rider. The benefit may be
subject to discounting and charges. Payment will be subject to evidence
satisfactory to us.
See "Tax Considerations," below, for a discussion of the tax consequences
associated with the accelerated benefits rider.
Investment Options
You can allocate your Policy's scheduled premiums and unscheduled payments
among the sub-accounts of the Variable Account in any combination. The Policy
provides that you must allocate a minimum of 10% of the premium or payment to
each sub-account selected in whole percentages; currently we will permit you
to allocate any whole percentage to a sub-account. You can allocate your
Policy's cash value among no more than ten accounts (including the Fixed
Account) at any one time.
You make the initial allocation when you apply for a Policy. You may change
the allocation of future premiums and payments at any time thereafter. The
change will be effective for scheduled premiums due and unscheduled payments
applied after the date when we receive your request. (See "Receipt of
Communications and Payments at NELICO's Home Office.") You may request the
change by telephone or by written request. See "Transfer Option" below for
information on how to request a transfer or reallocation by telephone.
Transfer Option
After the "free look" period, you may transfer your Policy's cash value
between sub-accounts. We reserve the right to limit sub-account transfers to
four per Policy year. We currently allow 12 sub-account transfers per Policy
year. We treat all sub-account transfer requests made at the same time as a
single request. The transfer is effective as of the date when we receive the
transfer request. (See "Receipt of Communications and Payments at NELICO's
Home Office." For special rules regarding transfers involving the Fixed
Account, see "The Fixed Account".) You may distribute your Policy's cash value
among no more than ten accounts (including the Fixed Account) at any one time.
We did not design the Policy's transfer privilege to give you a way to
speculate on short-term market movements. To prevent excessive transfers that
could disrupt the management of the Eligible Funds and increase transaction
costs, we may adopt procedures to limit excessive transfer activity. For
example, we may impose conditions and limits on, or refuse to accept, transfer
requests that we receive from third parties. Third parties include investment
advisors or registered representatives acting under power(s) of attorney from
one or more Policy owners.
You may request a sub-account transfer or reallocation of future premiums by
written request (which may be telecopied) to us or by telephoning us. To
request a transfer or reallocation by telephone, you should contact your
registered representative or contact us at 1-800-200-2214. We use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Any telephone instructions that we reasonably believe to be genuine are your
responsibility, including losses arising from any errors in the communication
of instructions.
Substitution of Insured Person
Subject to state insurance department approval, we offer a rider benefit
that permits you to substitute the insured person under your Policy, if you
provide satisfactory evidence that the person proposed to be insured is
insurable. The right to substitute the insured person is subject to some
restrictions and may result in a cost or credit to you. Your registered
representative can provide current information on the availability of the
rider. In addition, a substitution of the insured person is a taxable
exchange. You should consult your tax advisor before substituting the insured
person under your Policy.
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<PAGE>
Payment of Proceeds
We ordinarily pay any net cash value, Policy loan or death benefit proceeds
from the sub-accounts within 7 days after we receive a request, or
satisfactory proof of death of the insured. (See "Receipt of Communications
and Payments at NELICO's Home Office" and "Limits to NELICO's Right to
Challenge the Policy".) However, we may delay payment or transfers from the
sub-accounts: (i) when the New York Stock Exchange is closed for other than
weekends or holidays, or if trading on the New York Stock Exchange is
restricted, (ii) if the SEC determines that an emergency exists that makes
payments or sub-account transfers impractical or (iii) at any other time when
the Eligible Funds or the Variable Account have the legal right to suspend
payment.
We may withhold payment of surrender or loan proceeds if those proceeds are
coming from a Policy Owner's check, or from a Master Service Account premium
transaction, which has not yet cleared. We may also delay payment while we
consider whether to contest the Policy. We pay interest on the death benefit
proceeds from the date they become payable to the date they are paid.
The beneficiary can elect our Access Plus program for payment of death
proceeds at any time before we pay them. We establish an Access Plus account
at State Street Bank & Trust Company at the time for payment. The Access Plus
account gives convenient access to proceeds, which are maintained in MetLife's
general account, through checkbook privileges with State Street.
Normally we promptly make payments of net cash value, or of any loan value
available, under a fixed-benefit lapse option or from cash value in the Fixed
Account. However, we may delay such payments for up to six months. We pay
interest in accordance with state insurance law requirements on delayed
payments.
Exchange of Policy During First 24 Months
During the first 24 months after the Policy's issue date, you can exchange
it for a fixed-benefit life insurance policy, provided that (1) you repay any
policy loans and (2) the Policy has not lapsed. If you exercise this option,
you will have to make up any investment loss you had under the variable life
insurance policy. We make the exchange without evidence of insurability. The
new policy will have the same face amount, Policy Date, issue age and risk
classification for the insured as the exchanged variable life policy. We will
attach any riders to the original Policy to the new policy if they are
available.
Contact us or your registered representative for more specific information
about the exchange. The exchange may result in a cost or credit to you.
Payment Options
We pay the Policy's death benefit and net cash value in one sum, unless you
or the payee choose a payment option for all or part of the proceeds. You can
choose a combination of payment options. You can make, change or revoke the
selection before the death of the insured. You can contact your registered
representative or the Home Office for the procedure to follow. The payment
options available are fixed benefit options only and are not affected by the
investment experience of the Variable Account. Once payments under an option
begin, withdrawal rights may be restricted.
(i) Income for a Specified Number of Years. We pay proceeds in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.5% a year compounded yearly. Additional interest for any
year is added to the monthly payments for that year.
(ii) Life Income. We pay proceeds in equal monthly installments (i) during
the life of the payee, but not after the death of the payee, (ii) for
the longer of the life of the payee or 10 years or (iii) for the
longer of the life of the payee or 20 years.
(iii) Life Income with Refund. We pay proceeds in equal monthly
installments during the life of the payee. At the payee's death, we
pay any unpaid proceeds remaining either in one sum or in equal
monthly installments until we have paid the total proceeds.
A-25
<PAGE>
(iv) 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 or add it
to the principal annually. At the death of the payee or at the end of
the period agreed to, we pay the balance of principal and any accrued
interest in one sum.
(v) 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 pay any amounts unpaid at the death of the
payee in one sum.
(vi) Life Income for Two Lives. We 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 pay
two-thirds of the monthly amount for the life of the surviving payee.
You need our consent to use an option if the installment payments would be
less than $20.
Additional Benefits by Rider
You can add additional benefits to the Policy by rider, subject to our
underwriting and issuance standards. These additional benefits usually require
an additional premium. The rider benefits available with the Policies provide
fixed benefits that do not vary with the investment experience of the Variable
Account.
There may be circumstances in which it will be to your economic advantage to
include a significant portion or percentage of your insurance coverage under a
level term insurance rider. In many other circumstances, it may be in your
interest to obtain a Policy without term rider coverage. These circumstances
depend on many factors, including the premium levels and amount and duration
of coverage you choose, as well as the age, sex and risk classification of the
insured.
Reductions in or elimination of term rider coverage do not trigger a
surrender charge, and use of a term rider generally reduces sales
compensation. Your registered representative can provide you more information
on the uses of term rider coverage.
The following riders are available:
Level Term Insurance, which provides term insurance;
Accidental Death Benefit, which provides additional insurance if death
results from accidental bodily injury;
Options to Purchase Additional Life Insurance, which provides the right
to purchase additional insurance on the life of the insured, without proof
of insurability;
Waiver of Scheduled Premiums -- Disability of Insured, which provides for
waiver of scheduled premiums for the total disability of the insured;
Waiver of Scheduled Premiums -- Disability of Applicant, which provides
for waiver of scheduled premiums for the total disability of the person
named in the rider;
Waiver of Scheduled Premiums -- Death of Applicant, which provides for
waiver of scheduled premiums for a limited period upon the death of the
person named in the rider;
Waiver of Scheduled Premiums -- Death or Disability of Applicant, which
provides for waiver of scheduled premiums for a limited period upon the
death or disability of the person named in the rider;
Temporary Term Insurance, which provides for insurance from the date of
issue to the Policy Date;
Children's Insurance, which provides insurance on the life of the
insured's children.
Certain riders are available only for sex based Policies. Not all riders may
be available to you and riders in addition to those listed above may be made
available. You should consult your registered representative regarding the
availability of riders.
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<PAGE>
Policy Owner and Beneficiary
The Policy Owner is named in the application for the Policy but may be
changed from time to time. At the death of the Policy Owner, his or her estate
will become the Policy Owner unless a successor Policy Owner has been named.
The Policy Owner's rights (except for rights to payment of benefits) terminate
when the insured dies.
The beneficiary is also named 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 and
must survive the insured in order to receive the death proceeds. If no named
beneficiary survives the insured, we pay proceeds to the Policy Owner.
A change of Policy Owner or beneficiary is subject to all payments made and
actions taken by us under the Policy before we receive a signed change form.
You can contact your registered representative or the Home Office for the
procedure to follow.
You may assign 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 are subject to all payments made and actions taken by
us under the Policy before we receive a signed copy of the assignment form. We
are not responsible for determining whether or not an assignment is valid.
Changing the Policy Owner or assigning the Policy may have tax consequences.
(See "Tax Considerations" below.)
THE VARIABLE ACCOUNT
We established the Variable Account as a separate investment account on
January 31, 1983 under Delaware law. It became subject to Massachusetts law
when we changed our domicile to Massachusetts on August 30, 1996. The Variable
Account is the funding vehicle for the Policies and 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 ("SEC") as a unit
investment trust under the Investment Company Act of 1940. Registration with
the SEC does not involve SEC supervision of the Variable Account's management
or investments. However, 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 we own 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 liabilities
that arise out of any other business we may conduct. We believe 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
our general creditors, and may only be used to support the cash values under
our variable life insurance policies issued by the Variable Account. We may
transfer to our general account assets which exceed the reserves and other
liabilities of the Variable Account. We 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 our
other income or capital gains and losses.
Investments of the Variable Account
The Variable Account currently has 18 sub-accounts, each of which invests in
a series of an Eligible Fund. The sub-accounts of the Variable Account are:
-- The Zenith Money Market Sub-Account, which invests in the Back Bay
Advisors Money Market Series of the Zenith Fund
-- The Zenith Bond Income Sub-Account, which invests in the Back Bay
Advisors Bond Income Series of the Zenith Fund
-- The Zenith Capital Growth Sub-Account, which invests in the Capital
Growth Series of the Zenith Fund
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<PAGE>
-- The Zenith Stock Index Sub-Account, which invests in the Westpeak Stock
Index Series of the Zenith Fund
-- The Zenith Managed Sub-Account, which invests in the Back Bay Advisors
Managed Series of the Zenith Fund
-- The Zenith Growth and Income Sub-Account, which invests in the Westpeak
Growth and Income Series of the Zenith Fund
-- The Zenith Small Cap Sub-Account, which invests in the Loomis Sayles
Small Cap Series of the Zenith Fund
-- The Zenith Equity Growth Sub-Account, which invests in the Alger Equity
Growth Series of the Zenith Fund
-- The Zenith Balanced Sub-Account, which invests in the Loomis Sayles
Balanced Series of the Zenith Fund
-- The Zenith Venture Value Sub-Account, which invests in the Davis Venture
Value Series of the Zenith Fund
-- The Zenith Midcap Value Sub-Account, which invests in the Goldman Sachs
Midcap Value Series (formerly the Loomis Sayles Avanti Growth Series) of
the Zenith Fund
-- The Zenith International Magnum Equity Sub-Account, which invests in the
Morgan Stanley International Magnum Equity Series of the Zenith Fund
-- The Zenith Investors Sub-Account, which invests in the MFS Investors
Series of the Zenith Fund*
-- The Zenith Research Managers Sub-Account, which invests in the MFS
Research Managers Series of the Zenith Fund*
-- The Equity-Income Sub-Account, which invests in the VIP Equity-Income
Portfolio
-- The Overseas Sub-Account, which invests in the VIP Overseas Portfolio
-- The High Income Sub-Account, which invests in the VIP High Income
Portfolio
-- The Asset Manager Sub-Account, which invests in the VIP II Asset Manager
Portfolio
- --------
* Availability is subject to any necessary state insurance department
approvals.
The New England 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.
VIP and VIP II are open-end, diversified management investment companies
(mutual funds) that serve as the investment vehicles for variable life
insurance and variable annuity separate accounts of various insurance
companies.
The 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.
Investment Objectives
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 Eligible Fund
prospectuses and the Eligible Funds' Statements of Additional Information.
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.
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<PAGE>
The Zenith 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
per share, it is possible to lose money by investing in the Money Market
Series.
The Zenith Back Bay Advisors Bond Income Series' investment objective is a
high level of current income consistent with protection of capital.
The Zenith Capital Growth Series' investment objective is the long-term
growth of capital through investment primarily in equity securities of
companies whose earnings are expected to grow at a faster rate than the United
States economy.
The Zenith 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 Zenith Back Bay Advisors Managed Series' investment objective is a
favorable total return through investment in a diversified portfolio.
The Zenith Westpeak Growth and Income Series' investment objective is long-
term total return through investment in equity securities.
The Zenith Goldman Sachs Midcap Value Series' investment objective is long-
term capital appreciation.
The Zenith Loomis Sayles Small Cap Series' investment objective is long-term
capital growth from investments in common stocks or their equivalents.
The Zenith Loomis Sayles Balanced Series' investment objective is reasonable
long-term investment return from a combination of long-term capital
appreciation and moderate current income.
The Zenith 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 Zenith Davis Venture Value Series' investment objective is growth of
capital.
The Zenith Alger Equity Growth Series' investment objective is long-term
capital appreciation.
The Zenith MFS Investors Series' investment objective is reasonable current
income and long-term growth of capital and income.
The Zenith MFS Research Managers Series' investment objective is long-term
growth of capital.
The VIP Equity-Income Portfolio seeks reasonable income. The fund will also
consider the potential for capital appreciation. The fund seeks a yield which
exceeds the composite yield on the securities comprising the S&P 500.
The VIP Overseas Portfolio seeks long-term growth of capital. Foreign
markets, particularly emerging markets, can be more volatile than the U.S.
market due to increased risks of adverse issuer, political, regulatory, market
or economic developments and can perform differently than the U.S. market.
The VIP High Income Portfolio seeks a high level of current income while
also considering growth of capital. Lower-quality debt securities (those of
less than investment-grade quality) can be more volatile due to increased
sensitivity to adverse issuer, political, regulatory, market or economic
developments.
The VIP II Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among stocks, bonds and short-term
instruments.
A-29
<PAGE>
Investment Management
The chart below shows the adviser and sub-adviser for each series of the
Zenith Fund. New England Investment Management, which is an indirect, wholly-
owned subsidiary of NELICO, CGM, and each of the sub-advisers are registered
with the SEC as investment advisers under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
Series Adviser Sub-Adviser
------ ------- -----------
<S> <C> <C>
Capital Capital Growth Management
Growth Limited Partnership ("CGM")*
Back Bay
Advisors
Money Market New England Investment Management, Inc. Back Bay Advisors, L.P.*
Back Bay
Advisors
Bond Income New England Investment Management, Inc. Back Bay Advisors, L.P.*
Back Bay
Advisors
Managed New England Investment Management, Inc. Back Bay Advisors, L.P.*
Westpeak
Stock Index New England Investment Management, Inc. Westpeak Investment Advisors, L.P.*
Westpeak New England Investment Management, Inc. Westpeak Investment Advisors, L.P.*
Growth and
Income
Loomis Sayles
Small Cap New England Investment Management, Inc. Loomis, Sayles & Company, L.P.*
Loomis Sayles
Balanced New England Investment Management, Inc. Loomis, Sayles & Company, L.P.*
Morgan New England Investment Management, Inc.
Stanley
International
Magnum Morgan Stanley Dean Witter
Equity Investment Management, Inc.
Goldman Sachs
Midcap Value New England Investment Management, Inc. Goldman Sachs Asset Management
Davis Venture
Value New England Investment Management, Inc. Davis Selected Advisers, L.P.**
Alger Equity
Growth New England Investment Management, Inc. Fred Alger Management, Inc.
MFS Investors New England Investment Management, Inc. Massachusetts Financial
Services Company
MFS Research New England Investment Management, Inc. Massachusetts Financial
Managers Services Company
</TABLE>
- --------
* An affiliate of NELICO
** Davis Selected may also delegate any of its responsibilities to Davis Se-
lected Advisers-NY, Inc., a wholly-owned subsidiary of Davis Selected.
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak Growth and Income Series, Goldman Sachs Midcap Value Series
and Loomis Sayles Small Cap Series, 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. For more
information about the Series' advisory agreements, see the Zenith Fund
prospectus attached at the end of this prospectus and the Zenith Fund's
Statement of Additional Information.
FMR is the investment adviser for VIP and VIP II. For more information
regarding the VIP Equity-Income, VIP Overseas, VIP High Income, and VIP II
Asset Manager Portfolios and Fidelity Management & Research Company, see the
VIP and VIP II prospectuses attached at the end of this prospectus and their
Statement of Additional Information.
THE FIXED ACCOUNT
A Fixed Account option is available under the Policy in states where it has
been approved by the state insurance department. The Fixed Account option may
not be approved by every state insurance department and thus may not be
available in every state. As of the date of this prospectus the Fixed Account
has not received approval in New Jersey, New York and Pennsylvania. NELICO is
not currently seeking approval of the Fixed Account in any of those states.
A-30
<PAGE>
DISTRIBUTION AGREEMENT
We sell the Policies through licensed insurance agents. These agents are
also registered representatives of New England Securities Corporation ("New
England Securities"). New England Securities, a Massachusetts corporation
organized in 1968 and an indirect, wholly-owned subsidiary of NELICO, is
registered with the SEC as a broker-dealer under the Securities and Exchange
Act of 1934 and is a member of the National Association of Securities Dealers,
Inc.
New England Securities, 399 Boylston Street, Boston, Massachusetts 02116,
also serves as the principal underwriter for the Policies under a Distribution
Agreement with NELICO. Under the Distribution Agreement, we pay the following
sales expenses: general agent and agency manager's compensation, agents'
training allowances, agency expense allowances, deferred compensation and
insurance benefits of agents, general agents and agency managers and
advertising expenses and all other expenses of distributing the Policies.
We pay the following commissions and/or service fees to the selling agent: a
maximum of 50% of the scheduled premium paid in the first Policy year; a
maximum of 8% of scheduled premiums in the second through sixth Policy years;
a maximum of 4% of scheduled premiums in the seventh through tenth Policy
years; and a maximum of 2% of scheduled premiums paid thereafter. Agents
receive a commission of 3% of each unscheduled payment.We pay commissions for
substandard risk and rider premiums based on our rules at the time of payment.
Agents with less than 4 years of service may be compensated differently.
Agents who meet certain NELICO productivity and persistency standards may be
eligible for additional compensation.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities and Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life
insurance policies. Under the agreements with those broker-dealers, the
commission paid to the broker-dealer on behalf of the registered
representative will not exceed 50% of the scheduled premium in the first
Policy year, 5% in the second through tenth Policy years, 2% in the eleventh
through twentieth Policy years, and 3% of unscheduled payments. We may pay
certain broker-dealers an additional bonus after the first Policy year on
behalf of certain registered representatives, the maximum amount of which may
equal up to the amount of the basic commission for the particular Policy year.
We pay commissions through the registered broker-dealer, and may pay
additional compensation to the broker-dealer and/or reimburse it for portions
of Policy sales expenses.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
Generally we can challenge the validity of your Policy or a rider to your
Policy for misrepresentations made in the application. However, we cannot
challenge the Policy or a rider after it has been in force during the
insured's lifetime for 2 years from the date of issue. We cannot challenge the
portion of the death benefit resulting from an underwritten unscheduled
payment, for more than 2 years (during the life of the insured) from receipt
of the unscheduled payment.
Misstatement of Age or Sex
If the application misstates the insured's age or sex, the Policy's cash
value and death benefit are what the premiums paid and unscheduled payments
made would purchase, based on the insured's correct age and, if the Policy is
sex-based, correct sex.
Suicide
If the insured commits suicide within two years from the Policy's date of
issue (or less as required by state law), the death benefit is limited to the
scheduled premiums paid and unscheduled payments made, reduced by any
outstanding Policy loan plus interest, and by any partial withdrawals or
partial surrenders made (or any greater amount required by state law).
A-31
<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. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policy should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard risk or automatic
issue basis and Policies with term riders added and 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. When distributions
from a Policy occur, or when loans are taken out from or secured by a Policy,
the tax consequences depend on whether the Policy is classified as a "Modified
Endowment Contract."
Modified Endowment Contracts. Under the Internal Revenue Code, certain life
insurance contracts issued on or after June 21, 1988 are classified as
"Modified Endowment Contracts," with less favorable income tax treatment than
other life insurance contracts. In general a Policy will be classified as a
Modified Endowment Contract if the amount of premiums paid into the Policy
causes the Policy to fail the "7-pay test." A Policy will fail the 7-pay test
if at any time in the first seven Policy years, the amount paid into the
Policy exceeds the sum of the level premiums that would have been paid at that
point under a Policy that provided for paid-up future benefits after the
payment of seven level annual payments.
A-32
<PAGE>
If there is a reduction in the benefits under the Policy during the first
seven Policy years, for example, as a result of a partial surrender, the 7-pay
test will have to be reapplied as if the Policy had originally been issued at
the reduced face amount. If there is a "material change" in the Policy's
benefits or other terms, even after the first seven Policy years, the Policy
may have to be retested as if it were a newly issued Policy. A material change
can occur, for example, when there is an increase in the death benefit which
is due to the payment of an unnecessary premium. Unnecessary premiums are
premiums paid into the Policy which are not needed in order to provide a death
benefit equal to the lowest death benefit that was payable in the first seven
Policy years.
To prevent your Policy from becoming a Modified Endowment Contract, it may
be necessary to limit premium payments. This may be the case when the insured
reaches very high ages, even if you have not made any unscheduled payments for
the Policy. The point at which you may have to limit your scheduled premium
payments will depend on the issue age, sex and underwriting class of the
insured, investment experience and the amount of any unscheduled payments you
have made. You may be able to limit payment of scheduled premiums by using the
Special Premium Option, when it is available, or by allowing the Policy to
lapse to paid-up insurance. (See "Special Premium Option" and "Default and
Lapse Options".) A current or prospective Policy Owner should consult a tax
advisor to determine whether a Policy transaction will cause the Policy to be
classified as a Modified Endowment Contract.
Policies issued before June 21, 1988 are generally not classified as
Modified Endowment Contracts unless they undergo certain Policy changes on or
after June 21, 1988.
Distributions Other Than Death Benefits from Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts are subject to
the following tax rules:
(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
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.
Distributions Other Than Death Benefits from Policies that are not Modified
Endowment Contracts. Distributions other than death benefits from a Policy
that is not classified as a Modified Endowment Contract are generally 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.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are generally not treated as distributions.
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 adviser as to the
tax consequences.
A-33
<PAGE>
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 beneficiary if the beneficiary is the
insured under the Policy. (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.
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 adviser 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 adviser
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 adviser.
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 adviser.
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 adviser 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 adviser with
respect to legislative developments and their effect on the Policy.
NELICO's Income Taxes
Under current Federal income tax law no tax is imposed on NELICO as a result
of the operations of the Variable Account. Thus, no charge is being made
currently to the Variable Account for company Federal income taxes. 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,
accordingly, we are not currently charging for them. If they increase, we may
deduct charges for such taxes.
A-34
<PAGE>
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
Directors of NELICO
<TABLE>
<CAPTION>
Name and Principal Principal Business Experience
Business Address During the Past Five Years
------------------ -----------------------------
<S> <C>
James M. Benson 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; 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, President and
Metropolitan Life In- Chief Executive Officer of Metropolitan Life Insurance
surance Company Company since 1998; formerly, Director, President and Chief
One Madison Avenue Operating Officer 1997-1998; Executive Vice President 1995-
New York, NY 10010 1997 of Metropolitan Life; Executive Vice President 1989-
1995 of Paine Webber.
Susan C. Crampton Director of NELICO since 1996 and serves as Principal of The
6 Tarbox Road Vermont Partnership, a business consulting firm located in
Jericho, VT 05465 Jericho, Vermont since 1989; formerly, Director 1989-1996
of New England Mutual.
Edward A. Fox Director of NELICO since 1996 and Chairman of the Board of
RR Box 67-15 SLM Holdings since 1997; formerly, Director 1994-1996 of
Harborside, ME 04642 New England Mutual.
George J. Goodman Director of NELICO since 1996 and author, television
Adam Smith's Money journalist, and editor.
World 50th Floor,
Craig Drill Capital
General Motors
Building
767 Fifth Street
New York, NY 10153
Dr. Evelyn E. Handler Director of NELICO since 1996 and President of Merrimack
Ten Sterling Place Higher Education Associates, Inc. since 1998; formerly
Bow, NH 03304 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 the law firm of
Howard, Smith & Levin Howard, Smith & Levin LLP in New York City.
LLP
1330 Avenue of the
Americas
New York, NY 10019
Bernard A. Leventhal Director of NELICO since 1996; formerly, Vice Chairman of
Burlington Industries the Board of Directors 1995-1998 of Burlington Industries,
1345 Avenue of the Inc.; Director and Executive Vice President 1993-1995 of
Americas Burlington Menswear Division.
New York, NY 10105
Thomas J. May Director of NELICO since 1996 and Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since
800 Boylston Street 1994; formerly, Director 1994-1996 of New England Mutual.
Boston, MA 02199
Stewart G. Nagler Director of NELICO since 1996 and Vice Chairman and Chief
Metropolitan Life Financial Officer of Metropolitan Life since 1998;
One Madison Avenue formerly, Senior Executive Vice President and Chief
New York, NY 10010 Financial Officer 1986-1998 of Metropolitan Life Insurance
Company.
</TABLE>
A-35
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Principal Business Experience
Business Address During the Past Five Years
------------------ -----------------------------
<S> <C>
Catherine A. Rein Director of NELICO since 1998 and President and Chief
Metropolitan Auto & Executive Officer of Metropolitan Auto & Home Insurance
Home Company since 1999; formerly, Senior Executive Vice
Insurance Company President 1998-1999 and Executive Vice President 1989-1998
700 Quaker Lane of Metropolitan Life Insurance Company.
Warwick, RI 02887
Rand N. Stowell Director of NELICO since 1996 and President of United Timber
P.O. Box 60 Corp. of Dixfield, Maine; formerly, Director 1990-1996 of
Weld, ME 04285 New England Mutual.
Alexander B. Trowbridge Director of NELICO since 1996 and President of Trowbridge
Trowbridge Partners Partners, Inc. in Washington, DC; formerly, Director 1983-
Inc. 1996 of New England Mutual.
1317 F Street, N.W.,
Suite 500
Washington, D.C. 20004
Executive Officers of NELICO
Other than Directors
<CAPTION>
Principal Business Experience
Name During the Past Five Years
---- -----------------------------
<S> <C>
James M. Benson See Directors above.
David W. Allen Senior Vice President of NELICO since 1996; formerly, Senior
Vice President 1994-1996 of New England Mutual.
A. Frank Beaz Executive Vice President of NELICO since 1999; formerly,
Senior Vice President 1998-1999 of NELICO; Chief
Administrative Officer and Senior Vice President 1997-1998
of Equitable Distributors 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 & 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,
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 Insurance
Company, President 1993-1995 of ING Equities, Inc. and Vice
President 1993-1995 of Security Life of Denver.
</TABLE>
A-36
<PAGE>
<TABLE>
<CAPTION>
Principal Business Experience
Name During the Past Five Years
---- -----------------------------
<S> <C>
Alan C. Leland, Jr. Senior Vice President of NELICO since 1996; formerly, Vice
President 1984-1996 of New England Mutual.
Bruce C. Long President, New England Annuities (a business unit of NELICO)
since 1996; formerly, President, 1994-1996 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
The New England).
Frederick K. Zimmermann Executive Vice President and Chief Investment Officer of
NELICO since 1996; formerly, Executive Vice President and
Chief Investment Officer 1993-1996 of New England Mutual.
</TABLE>
The principal business address for each of the directors and executive
officers is the same as NELICO's except where indicated otherwise.
Like all financial services providers, 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 service
providers are also so engaged. The resources being devoted to this effort are
substantial. We cannot predict whether the resources 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, we do not anticipate 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 and are conducting systems testing and
compliance verification which we expect to complete in mid-1999. Service
providers may not have anticipated every step necessary to avoid any adverse
effect on the Variable Account attributable to Year 2000 transition.
A-37
<PAGE>
VOTING RIGHTS
We own the Eligible Fund shares held in the Variable Account and vote those
shares at meetings of the Eligible Fund shareholders. Under Federal securities
law, you currently have the right to instruct us how to vote shares that are
attributable to your Policy.
Policy Owners who are entitled to give voting instructions and the number of
shares attributable to their Policies are determined as of the meeting record
date. If we do not receive timely instructions, we will vote shares in the
same proportion as (i) the aggregate cash value of policies giving
instructions, respectively, to vote for, against, or withhold votes on a
proposition, bears to (ii) the total cash value in that sub-account for all
policies for which we receive voting instructions. No voting privileges apply
to the Fixed Account or to cash value removed from the Variable Account due to
a Policy loan.
We will vote all Eligible Fund shares held by our 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 voting
instructions were received and (ii) shares that are voted in proportion to
such voting instructions.
The Eligible Funds' Boards 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
an Eligible Fund, 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, by
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 an 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
prohibited by state authorities or inconsistent with a sub-account's
investment objectives. If we do disregard voting instructions, the next annual
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 sub-account assets as a substitute for
Eligible Fund shares, to close a sub-account, or to transfer assets to our
general account as permitted by applicable law; (4) to operate the Variable
Account as a management investment company under the Investment Company Act of
1940 or in any other form; and (5) 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 information about historical values of the Variable Account sub-
accounts, call 1-800-333-2501.
For sub-account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call 1-800-200-2214.
You may also call our Client TeleService Center at 1-800-388-4000 to request
current information about your Policy values, to change or update Policy
information such as your address, billing mode, beneficiary or ownership,
A-38
<PAGE>
or to request Policy loans of less than $25,000. Requests must be in writing
if the Policy is owned by a corporation or a pension trust.
For all other Policy changes, please contact your registered representative.
REPORTS
We will send you an annual statement showing your Policy's death benefit,
cash value and any outstanding Policy loan principal. We will also confirm
Policy loans, sub-account transfers, lapses, surrenders and other Policy
transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
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 NELICO, 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 our
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.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
A-39
<PAGE>
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-40
<PAGE>
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS
The tables in Appendix A illustrate the way the Policies 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%. The tables
show annual scheduled premiums of $2,000 for males aged 35 and 45. The males
aged 35 and 45 are assumed to be in the nonsmoker standard risk
classification. Illustrations show Option 1 and Option 2 death benefits.
(Substandard risk Policies have the same basic scheduled premiums and cost of
insurance rates as standard risk Policies but require an additional premium.)
The illustrated death benefits, net cash values and cash values for a Policy
would be different, either higher or lower, 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 scheduled premiums were paid at other
than annual intervals, or if unscheduled payments were made. They would also
be different depending on the allocation of cash value among the Variable
Account's sub-accounts, if the actual gross rate of return for all sub-
accounts averaged 0%, 6% or 12%, but varied above or below that average for
individual sub-accounts. They would also differ if a Policy loan were made
during the period of time illustrated, if the insured were female or in the
smoker standard risk classification, or if the Policies were issued at unisex
rates. For example, as a result of variations in actual returns, cash values
available for the special premium option or automatic premium loan feature, or
for withdrawal, may not be adequate for the purposes or periods illustrated
even if the average rate of return is achieved. Thus, additional premiums or
unscheduled payments beyond those illustrated may be necessary to achieve the
results shown on particular illustrations.
The death benefits, net cash values and cash values shown in the tables
reflect: (i) deductions from annual premiums for the annual administrative
charge, sales charge and state premium tax charge: and (ii) a monthly
deduction (consisting of an administrative charge, a first year administrative
fee and a minimum death benefit guarantee charge) and a charge for the cost of
insurance from the cash value on the first day of each Policy month. The net
cash values reflect a surrender charge deducted from the cash value on
surrender or lapse during the first 15 Policy years. The death benefits, net
cash values, and cash values also reflect a daily charge assessed against the
Variable Account for mortality and expense risks equivalent to an annual
charge of .60% of the average daily value of the assets in the Variable
Account attributable to the Policies. (See "Charges and Expenses".) The
illustrations reflect an average of the investment advisory fees and operating
expenses of the Eligible Funds, at an annual rate of .76% of the average daily
net assets of the Eligible Funds. This average reflects voluntary expense cap
and expense deferral arrangements between New England Investment Management
and the Zenith Fund that New England Investment Management could terminate at
any time.
Taking account of the mortality and expense risk charge and the average
investment advisory fee and operating expenses of the Eligible Funds, the
gross annual rates of return of 0%, 6% and 12% correspond to net investment
experience at constant annual rates of -1.35%, 4.57% and 10.49%, respectively.
(See "Net Investment Experience".)
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated
premiums could have been invested outside the Policy to arrive at the death
benefit of the Policy. The internal rate of return is compounded annually, and
the premiums are assumed to be paid at the beginning of each Policy year.
If you request, we will furnish an illustration reflecting the proposed
insured's age, sex, underwriting classification, and the face amount or
scheduled premium amount requested. Where applicable, we will also furnish on
request an illustration for a Policy which is not affected by the sex of the
insured.
A-41
<PAGE>
Male Issue Age 35
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$176,018 Face Amount
Option 1--Fixed Death Benefit
This Illustration is based on CURRENT cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of At 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ------------------------ ------------------------ -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $176,018 $176,018 $176,018 $ 1 $ 93 $ 186 $ 1,348 $ 1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,018 1,315 1,586 1,869 2,739 3,011 3,294 -54.75 -47.87 -41.17
3 6,620 176,018 176,018 176,018 2,593 3,134 3,720 4,096 4,636 5,222 -36.43 -29.13 -22.07
4 9,051 176,018 176,018 176,018 3,836 4,739 5,756 5,416 6,319 7,336 -27.32 -19.88 -12.75
5 11,604 176,018 176,018 176,018 5,040 6,400 7,993 6,698 8,058 9,651 -22.02 -14.53 -7.38
6 14,284 176,018 176,018 176,018 6,204 8,118 10,453 7,940 9,854 12,189 -18.61 -11.07 -3.93
7 17,098 176,018 176,018 176,018 7,325 9,893 13,155 9,138 11,707 14,969 -16.26 -8.69 -1.56
8 20,053 176,018 176,018 176,018 8,402 11,728 16,126 10,294 13,619 18,018 -14.56 -6.95 .17
9 23,156 176,018 176,018 176,018 9,434 13,620 19,392 11,403 15,590 21,361 -13.29 -5.63 1.49
10 26,414 176,018 176,018 176,018 10,419 15,575 22,985 12,466 17,622 25,032 -12.31 -4.60 2.51
15 45,315 176,018 176,018 176,018 16,964 28,690 49,594 16,964 28,690 49,594 -7.54 -.56 6.06
20 69,439 176,018 176,018 238,050 20,270 41,895 89,278 20,270 41,895 89,278 -7.04 .44 7.15
25 100,227 176,018 176,018 334,160 20,684 56,313 149,317 20,684 56,313 149,317 -7.73 .90 7.64
30 139,522 176,018 176,018 458,960 18,117 72,670 240,880 18,117 72,670 240,880 -9.49 1.21 7.92
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy --------------------------------
Year 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 8,700.91% 8,700.91% 8,700.91%
2 789.46 789.46 789.46
3 306.92 306.92 306.92
4 174.74 174.74 174.74
5 117.36 117.36 117.36
6 86.26 86.26 86.26
7 67.07 67.07 67.07
8 54.18 54.18 54.18
9 44.98 44.98 44.98
10 38.14 38.14 38.14
15 20.20 20.20 20.20
20 12.69 12.69 15.08
25 8.70 8.70 12.69
30 6.26 6.26 11.19
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-42
<PAGE>
Male Issue Age 35
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$176,018 Face Amount
Option 2--Variable Death Benefit
This Illustration is based on CURRENT cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of at 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ------------------------ ------------------------ -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $176,018 $176,018 $176,097 $ 1 $ 93 $ 186 $ 1,348 $ 1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,265 1,315 1,586 1,868 2,739 3,011 3,293 -54.75 -47.87 -41.18
3 6,620 176,018 176,018 176,537 2,593 3,134 3,719 4,096 4,636 5,221 -36.43 -29.13 -22.08
4 9,051 176,018 176,018 176,928 3,836 4,739 5,753 5,416 6,319 7,333 -27.32 -19.88 -12.76
5 11,604 176,018 176,018 177,452 5,040 6,400 7,987 6,698 8,058 9,646 -22.02 -14.53 -7.40
6 14,284 176,018 176,018 178,127 6,204 8,118 10,443 7,940 9,854 12,178 -18.61 -11.07 -3.96
7 17,098 176,018 176,018 178,974 7,325 9,893 13,137 9,138 11,707 14,950 -16.26 -8.69 -1.59
8 20,053 176,018 176,018 180,014 8,402 11,728 16,096 10,294 13,619 17,988 -14.56 -6.95 .13
9 23,156 176,018 176,018 181,270 9,434 13,620 19,344 11,403 15,590 21,313 -13.29 -5.63 1.44
10 26,414 176,018 176,018 182,770 10,419 15,575 22,912 12,466 17,622 24,959 -12.31 -4.60 2.46
15 45,315 176,018 176,018 195,064 16,964 28,690 49,167 16,964 28,690 49,167 -7.54 -.56 5.96
20 69,439 176,018 176,018 235,330 20,270 41,895 88,258 20,270 41,895 88,258 -7.04 .44 7.05
25 100,227 176,018 176,018 330,652 20,684 56,313 147,749 20,684 56,313 147,749 -7.73 .90 7.57
30 139,522 176,018 176,018 454,382 18,117 72,670 238,478 18,117 72,670 238,478 -9.49 1.21 7.87
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy --------------------------------
Year 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 8,700.91% 8,700.91% 8,704.86%
2 789.46 789.46 790.12
3 306.92 306.92 307.36
4 174.74 174.74 175.14
5 117.36 117.36 117.78
6 86.26 86.26 86.71
7 67.07 67.07 67.56
8 54.18 54.18 54.72
9 44.98 44.98 45.58
10 38.14 38.14 38.80
15 20.20 20.20 21.31
20 12.69 12.69 14.99
25 8.70 8.70 12.62
30 6.26 6.26 11.14
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-43
<PAGE>
Male Issue Age 35
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$176,018 Face Amount
Option 1--Fixed Death Benefit
This Illustration is based on GUARANTEED maximum cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of at 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ------------------------ ------------------------ -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $176,018 $176,018 $176,018 $ 1 $ 93 $ 186 $ 1,348 $ 1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,018 1,315 1,586 1,869 2,739 3,011 3,294 -54.75 -47.87 -41.17
3 6,620 176,018 176,018 176,018 2,593 3,134 3,720 4,096 4,636 5,222 -36.43 -29.13 -22.07
4 9,051 176,018 176,018 176,018 3,836 4,739 5,756 5,416 6,319 7,336 -27.32 -19.88 -12.75
5 11,604 176,018 176,018 176,018 5,040 6,400 7,993 6,698 8,058 9,651 -22.02 -14.53 -7.38
6 14,284 176,018 176,018 178,018 6,204 8,118 10,453 7,940 9,854 12,189 -18.61 -11.07 -3.93
7 17,098 176,018 176,018 176,018 7,325 9,893 13,155 9,138 11,707 14,969 -16.26 -8.69 -1.56
8 20,053 176,018 176,018 176,018 8,402 11,728 16,126 10,294 13,619 18,018 -14.56 -6.95 .17
9 23,156 176,018 176,018 176,018 9,434 13,620 19,392 11,403 15,590 21,361 -13.29 -5.63 1.49
10 26,414 176,018 176,018 176,018 10,419 15,575 22,985 12,466 17,622 25,032 -12.31 -4.60 2.51
15 45,315 176,018 176,018 176,018 16,964 28,690 49,594 16,964 28,690 49,594 -7.54 -.56 6.06
20 69,439 176,018 176,018 238,050 20,270 41,895 89,278 20,270 41,895 89,278 -7.04 .44 7.15
25 100,227 176,018 176,018 334,160 20,684 56,313 149,317 20,684 56,313 149,317 -7.73 .90 7.64
30 139,522 176,018 176,018 453,935 16,353 71,373 238,243 16,353 71,373 238,243 -10.55 1.10 7.86
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy --------------------------------
Year 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 8,700.91% 8,700.91% 8,700.91%
2 789.46 789.46 789.46
3 306.92 306.92 306.92
4 174.74 174.74 174.74
5 117.36 117.36 117.36
6 86.26 86.26 86.26
7 67.07 67.07 67.07
8 54.18 54.18 54.18
9 44.98 44.98 44.98
10 38.14 38.14 38.14
15 20.20 20.20 20.20
20 12.69 12.69 15.08
25 8.70 8.70 12.69
30 6.26 6.26 11.13
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-44
<PAGE>
Male Issue Age 35
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$176,018 Face Amount
Option 2--Variable Death Benefit
This Illustration is based on GUARANTEED maximum cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of at 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ------------------------ ------------------------ -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $176,018 $176,018 $176,097 $ 1 $ 93 $ 186 $ 1,348 $ 1,440 $ 1,533 -99.96% -95.33% -90.69%
2 4,305 176,018 176,018 176,265 1,315 1,586 1,868 2,739 3,011 3,293 -54.75 -47.87 -41.18
3 6,620 176,018 176,018 176,537 2,593 3,134 3,719 4,096 4,636 5,221 -36.43 -29.13 -22.08
4 9,051 176,018 176,018 176,928 3,836 4,739 5,753 5,416 6,319 7,333 -27.32 -19.88 -12.76
5 11,604 176,018 176,018 177,452 5,040 6,400 7,987 6,698 8,058 9,646 -22.02 -14.53 -7.40
6 14,284 176,018 176,018 178,127 6,204 8,118 10,443 7,940 9,854 12,178 -18.61 -11.07 -3.96
7 17,098 176,018 176,018 178,974 7,325 9,893 13,137 9,138 11,707 14,950 -16.26 -8.69 -1.59
8 20,053 176,018 176,018 180,014 8,402 11,728 16,096 10,294 13,619 17,988 -14.56 -6.95 .13
9 23,156 176,018 176,018 181,270 9,434 13,620 19,344 11,403 15,590 21,313 -13.29 -5.63 1.44
10 26,414 176,018 176,018 182,770 10,419 15,575 22,912 12,466 17,622 24,959 -12.31 -4.60 2.46
15 45,315 176,018 176,018 195,064 16,964 28,690 49,167 16,964 28,690 49,167 -7.54 -.56 5.96
20 69,439 176,018 176,018 235,330 20,270 41,895 88,258 20,270 41,895 88,258 -7.04 .44 7.05
25 100,227 176,018 176,018 330,652 20,684 56,313 147,749 20,684 56,313 147,749 -7.73 .90 7.57
30 139,522 176,018 176,018 449,408 16,353 71,373 235,867 16,353 71,373 235,867 -10.55 1.10 7.81
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy --------------------------------
Year 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 8,700.91% 8,700.91% 8,704.86%
2 789.46 789.46 790.12
3 306.92 306.92 307.36
4 174.74 174.74 175.14
5 117.36 117.36 117.78
6 86.26 86.26 86.71
7 67.07 67.07 67.56
8 54.18 54.18 54.72
9 44.98 44.98 45.58
10 38.14 38.14 38.80
15 20.20 20.20 21.31
20 12.69 12.69 14.99
25 8.70 8.70 12.62
30 6.26 6.26 11.08
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-45
<PAGE>
Male Issue Age 45
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$110,889 Face Amount
Option 1--Fixed Death Benefit
This Illustration is based on CURRENT cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of at 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ----------------------- ----------------------- -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,100 $110,889 $110,889 $110,889 $ 305 $ 397 $ 490 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.52%
2 4,305 110,889 110,889 110,889 1,558 1,826 2,105 2,657 2,925 3,204 -48.56 -42.16 -35.87
3 6,620 110,889 110,889 110,889 2,766 3,297 3,873 3,943 4,474 5,049 -34.00 -27.08 -20.35
4 9,051 110,889 110,889 110,889 3,930 4,812 5,807 5,185 6,067 7,062 -26.48 -19.33 -12.41
5 11,604 110,889 110,889 110,889 5,046 6,370 7,925 6,378 7,702 9,257 -21.99 -14.67 -7.65
6 14,284 110,889 110,889 110,889 6,113 7,972 10,245 7,523 9,382 11,655 -19.02 -11.59 -4.50
7 17,098 110,889 110,889 110,889 7,125 9,614 12,784 8,613 11,102 14,272 -16.96 -9.41 -2.27
8 20,053 110,889 110,889 110,889 8,078 11,293 15,563 9,643 12,859 17,129 -15.48 -7.80 -.62
9 23,156 110,889 110,889 110,889 8,965 13,007 18,604 10,609 14,650 20,248 -14.38 -6.58 .66
10 26,413 110,889 110,889 110,889 9,781 14,750 21,933 11,502 16,472 23,655 -13.56 -5.62 1.67
15 45,315 110,889 110,889 110,889 14,701 25,939 46,280 14,701 25,939 46,280 -9.59 -1.84 5.25
20 69,438 110,889 110,889 158,351 16,610 37,239 83,109 16,610 37,239 83,109 -9.39 -.69 6.54
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy --------------------------------
Year 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,444.49%
2 596.29 596.29 596.29
3 242.76 242.76 242.76
4 140.36 140.36 140.36
5 94.68 94.68 94.68
6 69.53 69.53 69.53
7 53.86 53.86 53.86
8 43.26 43.26 43.26
9 35.68 35.68 35.68
10 30.01 30.01 30.01
15 15.15 15.15 15.15
20 8.95 8.95 11.85
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-46
<PAGE>
Male Issue Age 45
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$110,889 Face Amount
Option 2--Variable Death Benefit
This Illustration is based on CURRENT cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of at 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ----------------------- ----------------------- -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -------- -------- -------- ------- ------- ------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $110,889 $110,889 $110,968 $ 305 $ 397 $ 489 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.53%
2 4,305 110,889 110,889 111,133 1,558 1,826 2,104 2,657 2,925 3,203 -48.56 -42.16 -35.89
3 6,620 110,889 110,889 111,398 2,766 3,297 3,870 3,943 4,474 5,047 -34.00 -27.08 -20.38
4 9,051 110,889 110,889 111,777 3,930 4,812 5,802 5,185 6,067 7,056 -26.48 -19.33 -12.45
5 11,604 110,889 110,889 112,282 5,046 6,370 7,913 6,378 7,702 9,246 -21.99 -14.67 -7.70
6 14,284 110,889 110,889 112,932 6,113 7,972 10,223 7,523 9,382 11,633 -19.02 -11.59 -4.56
7 17,098 110,889 110,889 113,743 7,125 9,614 12,746 8,613 11,102 14,234 -16.96 -9.41 -2.35
8 20,053 110,889 110,889 114,736 8,078 11,293 15,499 9,643 12,859 17,065 -15.48 -7.80 -.71
9 23,156 110,889 110,889 115,931 8,965 13,007 18,503 10,609 14,650 20,146 -14.38 -6.58 .55
10 26,413 110,889 110,889 117,352 9,781 14,750 21,777 11,502 16,472 23,498 -13.56 -5.62 1.54
15 45,315 110,889 110,889 128,864 14,701 25,939 45,285 14,701 25,939 45,285 -9.59 -1.84 4.99
20 69,438 110,889 110,889 153,533 16,610 37,239 80,580 16,610 37,239 80,580 -9.39 -.69 6.28
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy --------------------------------
Year 0% 6% 12%
- ------- ---------- ---------- ----------
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,448.40%
2 596.29 596.29 597.11
3 242.76 242.76 243.35
4 140.36 140.36 140.92
5 94.68 94.68 95.27
6 69.53 69.53 70.17
7 53.86 53.86 54.57
8 43.26 43.26 44.05
9 35.68 35.68 36.56
10 30.01 30.01 31.00
15 15.15 15.15 16.80
20 8.95 8.95 11.60
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-47
<PAGE>
Male Issue Age 45
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$110,889 Face Amount
Option 1--Fixed Death Benefit
This Illustration is based on GUARANTEED maximum cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of at 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ----------------------- ----------------------- -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 2,100 $110,889 $110,889 $110,889 $ 305 $ 397 $ 490 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.52%
2 4,305 110,889 110,889 110,889 1,558 1,826 2,105 2,657 2,925 3,204 -48.56 -42.16 -35.87
3 6,620 110,889 110,889 110,889 2,766 3,297 3,873 3,943 4,474 5,049 -34.00 -27.08 -20.35
4 9,051 110,889 110,889 110,889 3,930 4,812 5,807 5,185 6,067 7,062 -26.48 -19.33 -12.41
5 11,604 110,889 110,889 110,889 5,046 6,370 7,925 6,378 7,702 9,257 -21.99 -14.67 -7.65
6 14,284 110,889 110,889 110,889 6,113 7,972 10,245 7,523 9,382 11,655 -19.02 -11.59 -4.50
7 17,098 110,889 110,889 110,889 7,125 9,614 12,784 8,613 11,102 14,272 -16.96 -9.41 -2.27
8 20,053 110,889 110,889 110,889 8,078 11,293 15,563 9,643 12,859 17,129 -15.48 -7.80 -.62
9 23,156 110,889 110,889 110,889 8,965 13,007 18,604 10,609 14,650 20,248 -14.38 -6.58 .66
10 26,413 110,889 110,889 110,889 9,781 14,750 21,933 11,502 16,472 23,655 -13.56 -5.62 1.67
15 45,315 110,889 110,889 110,889 14,701 25,939 46,280 14,701 25,939 46,280 -9.59 -1.84 5.25
20 69,438 110,889 110,889 156,639 15,552 36,318 82,210 15,552 36,318 82,210 -10.21 -.93 6.45
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy ---------------------------------
Year 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,444.49%
2 596.29 596.29 596.29
3 242.76 242.76 242.76
4 140.36 140.36 140.36
5 94.68 94.68 94.68
6 69.53 69.53 69.53
7 53.86 53.86 53.86
8 43.26 43.26 43.26
9 35.68 35.68 35.68
10 30.01 30.01 30.01
15 15.15 15.15 15.15
20 8.95 8.95 11.76
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-48
<PAGE>
Male Issue Age 45
$2,000 Annual Premium for Non-Smoker Standard Underwriting Risk
$110,889 Face Amount
Option 2--Variable Death Benefit
This illustration is based on GUARANTEED maximum cost of insurance rates.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE Internal Rate of Return
Premiums Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical on Net Cash Value
Accumulated Gross Annual Gross Annual Gross Annual Assuming Hypothetical Gross
End of at 5% Rate of Return of Rate of Return of Rate of Return of Annual Rate of Return of
Policy Interest -------------------------- ----------------------- ----------------------- -------------------------------
Year Per Year 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2,100 $110,889 $110,889 $110,968 $ 305 $ 397 $ 489 $ 1,327 $ 1,419 $ 1,511 -84.74% -80.14% -75.53%
2 4,305 110,889 110,889 111,133 1,558 1,826 2,104 2,657 2,925 3,203 -48.56 -42.16 -35.89
3 6,620 110,889 110,889 111,398 2,766 3,297 3,870 3,943 4,474 5,047 -34.00 -27.08 -20.38
4 9,051 110,889 110,889 111,777 3,930 4,812 5,802 5,185 6,067 7,056 -26.48 -19.33 -12.45
5 11,604 110,889 110,889 112,282 5,046 6,370 7,913 6,378 7,702 9,246 -21.99 -14.67 -7.70
6 14,284 110,889 110,889 112,932 6,113 7,972 10,223 7,523 9,382 11,633 -19.02 -11.59 -4.56
7 17,098 110,889 110,889 113,743 7,125 9,614 12,746 8,613 11,102 14,234 -16.96 -9.41 -2.35
8 20,053 110,889 110,889 114,736 8,078 11,293 15,499 9,643 12,859 17,065 -15.48 -7.80 -.71
9 23,156 110,889 110,889 115,931 8,965 13,007 18,503 10,609 14,650 20,146 -14.38 -6.58 .55
10 26,413 110,889 110,889 117,352 9,781 14,750 21,777 11,502 16,472 23,498 -13.56 -5.62 1.54
15 45,315 110,889 110,889 128,864 14,701 25,939 45,285 14,701 25,939 45,285 -9.59 -1.84 4.99
20 69,438 110,889 110,889 151,739 15,552 36,318 79,639 15,552 36,318 79,639 -10.21 -.93 6.18
<CAPTION>
Internal Rate of Return
on Death Benefit
Assuming Hypothetical Gross
End of Annual Rate of Return of
Policy --------------------------------
Year 0% 6% 12%
- ------- -- -- ---
<S> <C> <C> <C>
1 5,444.49% 5,444.49% 5,448.40%
2 596.29 596.29 597.11
3 242.76 242.76 243.35
4 140.36 140.36 140.92
5 94.68 94.68 95.27
6 69.53 69.53 70.17
7 53.86 53.86 54.57
8 43.26 43.26 44.05
9 35.68 35.68 36.56
10 30.01 30.01 31.00
15 15.15 15.15 16.80
20 8.95 8.95 11.50
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE
INVESTMENT EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH
VALUE AND NET CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-49
<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 June 1988. 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 commenced operations on May 2, 1994 and was
made available under the Policies on December 19, 1994. The remaining New
England Zenith Fund Series shown in this Appendix commenced operations on
October 31, 1994 and were made available under the Policies on May 1, 1995.
The VIP Equity-Income Portfolio and VIP Overseas Portfolio commenced
operations on October 9, 1986 and January 28, 1987, respectively. They were
first made available as investment options under the Policies on April 30,
1993. The VIP High Income Portfolio and the VIP II Asset Manager Portfolio
commenced operations on September 19, 1985 and September 6, 1989,
respectively, and were added as investment options on December 19, 1994.
We base the illustrations on the actual investment experience of the
relevant Eligible Funds for the periods shown (and reflect actual charges and
expenses incurred by the Eligible Funds), and reflect a charge for mortality
and expense risks against the Variable Account's assets at an annual rate of
.60%. The illustrations assume that annual scheduled premiums are paid at the
beginning of each year and that no loans, transfers or other Policy Owner
transactions were made during the periods shown.
Many factors other than investment experience affect Policy values and
benefits. These investment experience figures do not reflect the charges
deducted from premiums and monthly deductions from the cash value. (See
"Charges Assessed in Connection with the Policy", "Cost of Insurance Charges"
and "Charges and Expenses".)
Net Rates of Return
The annual net rate of return is the effective earnings rate at which the
investment sub-accounts increased or decreased over a one year period, based
on the investment experience of the relevant Eligible Funds. The rate is
calculated by taking the difference between the sub-accounts' ending values
and beginning values of the period and dividing it by the beginning values of
the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the sub-accounts increased or decreased since
the inception dates of the sub-accounts. For each sub-account, we calculate
the rate 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-50
<PAGE>
Sub-Accounts Investing in New England Zenith Fund
<TABLE>
<CAPTION>
Annual Net Rate of Return
-----------------------------------------------------------------------------------------------------------
For One Year Ending
8/26/83- --------------------------------------------------------------------------------------------------
Sub-Account 12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth*. 8.64% -.96% 67.09% 94.04% 51.79% -9.34% 29.98% -4.06% 53.06% -6.61% 14.28% -7.62%
Bond Income..... 2.83% 11.93 18.05 14.15 1.65 7.72 11.63 7.44 17.25 7.53 11.94 -3.94
Money Market.... 3.08% 9.96 7.61 6.16 5.89 6.87 8.60 7.54 5.58 3.18 2.36 3.35
<CAPTION>
8/26/83- 8/26/83-
12/31/98 12/31/98
Total Effective
Sub-Account 12/31/95 12/31/96 12/31/97 12/31/98 Return Annual
- ----------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital Growth*. 37.21% 20.34% 22.74% 33.29% 2,340.67% 23.14%
Bond Income..... 20.47 3.98 10.23 8.39 313.89 9.70
Money Market.... 5.07 4.50 4.71 4.63 137.26 5.79
</TABLE>
<TABLE>
<CAPTION>
Annual Net Rate of Return
-----------------------------------------------------------------------------------------------------------
For One Year Ending
5/1/87- --------------------------------------------------------------------------------------------------
Sub-Account 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index..... -12.55% 15.65% 29.37% -4.72% 29.65% 6.65% 9.07% 0.51% 36.10% 21.73% 31.70% 27.17%
Managed......... -1.06% 8.83 18.37 2.59 19.45 6.06 9.99 -1.70 30.48 14.34 25.81 18.94
<CAPTION>
5/1/87- 5/1/87-
12/31/98 12/31/98
Total Effective
Sub-Account Return Annual
- ----------- -------- ---------
<S> <C> <C>
Stock Index..... 424.37% 15.26%
Managed......... 299.84 12.61
</TABLE>
<TABLE>
<CAPTION>
Annual Net Rate of Return
-----------------------------------------------------
For One Year Ending 4/30/93- 4/30/93-
-------------------------------------------- 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>
Growth and Income....... 13.78% -1.80% 35.65% 17.38% 32.67% 23.71% 192.02% 20.80%
Midcap Value**.......... 14.28 -.87 29.57 16.90 16.62 -6.03 88.06 11.78
</TABLE>
<TABLE>
<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>
Small Cap...... -3.61% 28.08% 29.90% 24.11% -2.28% 94.47% 15.32%
</TABLE>
<TABLE>
<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>
Equity Growth........... -4.29% 47.81% 12.49% 24.88% 46.90% 191.92% 29.32%
Balanced................ -.20 24.05 16.21 15.48 8.46 80.20 15.18
Venture Value........... -3.60 38.45 25.08 32.70 13.73 151.97 24.83
International Magnum
Equity***.............. 2.50 5.60 6.03 -1.89 6.63 20.07 4.49
</TABLE>
- -------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
** The Goldman Sachs Midcap Value Series' sub-adviser was Loomis Sayles until
May 1, 1998, when Goldman Sachs Asset Management became the sub-adviser.
Rates of return reflect the Series' former investment advisory fee of .70%
of average daily net assets for the period through April 30, 1998 and .75%
thereafter.
*** 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.
Sub-Accounts Investing in VIP
<TABLE>
<CAPTION>
Annual Net Rate of Return
-----------------------------------------------------------------------------------------------------------
For One Year Ending
10/9/86- --------------------------------------------------------------------------------------------------
Sub-Account 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income... .06% -3.08% 21.98% 16.64% -15.80% 31.07% 16.39% 17.59% 6.43% 34.29% 13.59% 27.34%
<CAPTION>
10/9/86- 10/9/86-
12/31/98 12/31/98
Total Effective
Sub-Account 12/31/98 Return Annual
- ----------- -------- -------- ---------
<S> <C> <C> <C>
Equity-Income... 10.96% 382.38% 13.73%
</TABLE>
<TABLE>
<CAPTION>
Annual Net Rate of Return
-----------------------------------------------------------------------------------------------------------
For One Year Ending
1/28/87- --------------------------------------------------------------------------------------------------
Sub-Account 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas........ -5.90% 7.48% 25.53% -2.26% 7.79% -11.12% 36.53% 1.12% 9.02% 12.53% 10.89% 12.08%
<CAPTION>
1/28/87- 1/28/87-
12/31/98 12/31/98
Total Effective
Sub-Account Return Annual
- ----------- -------- ---------
<S> <C> <C>
Overseas........ 148.86% 7.95%
</TABLE>
<TABLE>
<CAPTION>
Annual Net Rate of Return
-----------------------------------------------------------------------------------------------------------
For One Year Ending
9/19/85- --------------------------------------------------------------------------------------------------
Sub-Account 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income..... 6.20% 16.98% 0.61% 10.97% -4.75% -2.82% 34.27% 22.43% 19.68% -2.13% 19.88% 13.35%
<CAPTION>
9/19/85- 9/19/85-
12/31/98 12/31/98
Total Effective
Sub-Account 12/31/97 12/31/98 Return Annual
- ----------- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
High Income..... 16.96% -4.90% 273.63% 10.43%
</TABLE>
Sub-Account Investing in VIP II
<TABLE>
<CAPTION>
Annual Net Rate of Return
----------------------------------------------------------------------------------------- 9/6/89- 9/6/89-
For One Year Ending 12/31/98 12/31/98
9/6/89- -------------------------------------------------------------------------------- Total Effective
Sub-Account 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 Return Annual
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager... .62% 6.08% 21.83% 11.04% 20.51% -6.65% 16.26% 13.91% 19.93% 14.36% 195.04% 12.31%
</TABLE>
A-51
<PAGE>
POLICY PERFORMANCE
The material below assumes, in the first example, a Policy with an Option 1
death benefit was issued with a $176,018 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value, and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith Midcap Value Sub-Accounts; September 19 in the case of the
High Income Sub-Account; September 6 in the case of the Asset Manager Sub-
Account), to a male nonsmoker standard risk, age 35. The second example
assumes a Policy was issued with a $197,864 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value, and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith Midcap Value Sub-Accounts; September 19 in the case of the
High Income Sub-Account; September 6 in the case of the Asset Manager Sub-
Account), to a female nonsmoker standard risk, age 35. The death benefits,
cash values and internal rates of return assume in each instance that the
entire policy value was invested in the particular sub-account for the period
shown. These illustrations of Policy investment experience also reflect all
charges applicable to the Policy, including cost of insurance charges based on
NELICO's current rates. (See Appendix A for the definition of the internal
rate of return.)
Male Nonsmoker Standard Risk, Age 35
Option 1--Fixed Death Benefit
Zenith Capital Growth Sub-Account*
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,018 1,767 420 -98.87% --
December 31, 1984....... 4,000 176,018 176,018 3,125 1,700 -70.31 2,596.84%
December 31, 1985....... 6,000 176,018 176,018 6,938 5,435 -7.20 526.27
December 31, 1986....... 8,000 176,018 176,018 14,826 13,245 28.61 244.56
December 31, 1987....... 10,000 176,018 176,018 23,555 21,897 34.57 149.53
December 31, 1988....... 12,000 176,018 176,018 22,775 21,039 19.80 104.22
December 31, 1989....... 14,000 176,018 176,018 30,987 29,174 21.72 78.34
December 31, 1990....... 16,000 176,018 176,018 30,877 28,986 15.14 61.82
December 31, 1991....... 18,000 176,018 199,689 48,770 46,801 21.18 53.35
December 31, 1992....... 20,000 176,018 187,012 47,028 44,981 16.03 43.42
December 31, 1993....... 22,000 176,018 214,155 55,065 53,189 15.68 39.38
December 31, 1994....... 24,000 176,018 194,787 51,603 50,136 11.98 32.72
December 31, 1995....... 26,000 176,018 258,618 72,694 71,636 14.90 32.61
December 31, 1996....... 28,000 176,018 312,431 88,313 87,664 15.39 31.36
December 31, 1997....... 30,000 176,018 347,324 108,998 108,759 16.00 29.38
December 31, 1998....... 32,000 176,018 467,066 145,853 145,853 17.38 29.74
</TABLE>
A-52
<PAGE>
Zenith Bond Income Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,018 1,663 316 -- --
December 31, 1984....... 4,000 176,018 176,018 3,373 1,949 -62.69% 2,596.84%
December 31, 1985....... 6,000 176,018 176,018 5,485 3,983 -28.17 526.27
December 31, 1986....... 8,000 176,018 176,018 7,702 6,121 -14.16 244.56
December 31, 1987....... 10,000 176,018 176,018 9,241 7,583 -11.70 149.53
December 31, 1988....... 12,000 176,018 176,018 11,358 9,622 -7.77 104.22
December 31, 1989....... 14,000 176,018 176,018 14,069 12,256 -3.99 78.34
December 31, 1990....... 16,000 176,018 176,018 16,520 14,629 -2.34 61.82
December 31, 1991....... 18,000 176,018 176,018 20,788 18,819 1.02 50.46
December 31, 1992....... 20,000 176,018 176,018 23,636 21,589 1.57 42.23
December 31, 1993....... 22,000 176,018 176,018 27,711 25,834 2.97 36.02
December 31, 1994....... 24,000 176,018 176,018 27,773 26,306 1.56 31.18
December 31, 1995....... 26,000 176,018 176,018 34,793 33,735 4.01 27.32
December 31, 1996....... 28,000 176,018 176,018 37,418 36,770 3.88 24.18
December 31, 1997....... 30,000 176,018 176,018 42,437 42,199 4.50 21.58
December 31, 1998....... 32,000 176,018 176,018 47,290 47,290 4.79 19.39
Zenith Money Market Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,018 1,667 320 -- --
December 31, 1984....... 4,000 176,018 176,018 3,270 1,845 -65.88% 2,596.84%
December 31, 1985....... 6,000 176,018 176,018 4,976 3,473 -36.63 526.27
December 31, 1986....... 8,000 176,018 176,018 6,714 5,133 -23.15 244.56
December 31, 1987....... 10,000 176,018 176,018 8,528 6,870 -15.84 149.53
December 31, 1988....... 12,000 176,018 176,018 10,524 8,788 -10.98 104.22
December 31, 1989....... 14,000 176,018 176,018 12,807 10,993 -7.28 78.34
December 31, 1990....... 16,000 176,018 176,018 15,122 13,230 -4.99 61.82
December 31, 1991....... 18,000 176,018 176,018 17,284 15,315 -3.76 50.46
December 31, 1992....... 20,000 176,018 176,018 19,114 17,067 -3.31 42.23
December 31, 1993....... 22,000 176,018 176,018 20,816 18,939 -2.84 36.02
December 31, 1994....... 24,000 176,018 176,018 22,746 21,279 -2.08 31.18
December 31, 1995....... 26,000 176,018 176,018 25,084 24,027 -1.25 27.32
December 31, 1996....... 28,000 176,018 176,018 27,358 26,709 -.69 24.18
December 31, 1997....... 30,000 176,018 176,018 29,758 29,520 -.22 21.58
December 31, 1998....... 32,000 176,018 176,018 32,326 32,326 .13 19.39
</TABLE>
A-53
<PAGE>
Zenith Stock Index Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,322 83 -- --
December 31, 1988....... 4,000 176,018 176,018 3,037 1,612 -57.40% 1,304.55%
December 31, 1989....... 6,000 176,018 176,018 5,728 4,225 -19.73 393.40
December 31, 1990....... 8,000 176,018 176,018 6,784 5,204 -19.03 205.08
December 31, 1991....... 10,000 176,018 176,018 10,336 8,678 -5.28 131.98
December 31, 1992....... 12,000 176,018 176,018 12,492 10,756 -3.45 94.63
December 31, 1993....... 14,000 176,018 176,018 15,075 13,262 -1.48 72.41
December 31, 1994....... 16,000 176,018 176,018 16,515 14,624 -2.16 57.84
December 31, 1995....... 18,000 176,018 176,018 24,273 22,304 4.55 47.63
December 31, 1996....... 20,000 176,018 176,018 30,809 28,762 6.90 40.12
December 31, 1997....... 22,000 176,018 176,018 42,189 40,415 10.38 34.40
December 31, 1998....... 24,000 176,018 193,974 55,020 53,655 12.45 31.33
Zenith Managed Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,500 153 -97.86% --
December 31, 1988....... 4,000 176,018 176,018 3,123 1,698 -55.06 1,304.55%
December 31, 1989....... 6,000 176,018 176,018 5,362 3,860 -24.42 393.40
December 31, 1990....... 8,000 176,018 176,018 6,968 5,388 -17.55 205.08
December 31, 1991....... 10,000 176,018 176,018 9,865 8,206 -7.34 131.98
December 31, 1992....... 12,000 176,018 176,018 11,953 10,217 -5.07 94.63
December 31, 1993....... 14,000 176,018 176,018 14,572 12,758 -2.54 72.41
December 31, 1994....... 16,000 176,018 176,018 15,673 13,782 -3.60 57.84
December 31, 1995....... 18,000 176,018 176,018 22,138 20,168 2.42 47.63
December 31, 1996....... 20,000 176,018 176,018 26,619 24,572 3.94 40.12
December 31, 1997....... 22,000 176,018 176,018 35,031 33,257 7.12 34.40
December 31, 1998....... 24,000 176,018 176,018 42,982 41,617 8.62 29.91
Zenith Midcap Value Sub-Account**
<CAPTION>
Internal Rate of
Total Minimum Variable Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,018 1,711 365 -92.08% --
December 31, 1994....... 4,000 176,018 176,018 3,134 1,709 -54.67 1,298.23%
December 31, 1995....... 6,000 176,018 176,018 5,840 4,337 -18.32 392.51
December 31, 1996....... 8,000 176,018 176,018 8,323 6,743 -7.75 204.79
December 31, 1997....... 10,000 176,018 176,018 11,383 9,725 -1.04 131.85
December 31, 1998....... 12,000 176,018 176,018 11,767 10,031 -5.64 94.56
Zenith Growth and Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,018 1,703 356 -92.36% --
December 31, 1994....... 4,000 176,018 176,018 3,101 1,676 -55.56 1,298.23%
December 31, 1995....... 6,000 176,018 176,018 5,990 4,487 -16.50 392.51
December 31, 1996....... 8,000 176,018 176,018 8,596 7,016 -5.97 204.79
December 31, 1997....... 10,000 176,018 176,018 13,179 11,521 5.34 131.85
December 31, 1998....... 12,000 176,018 176,018 17,771 16,036 9.18 94.56
</TABLE>
A-54
<PAGE>
Zenith Small Cap Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,438 92 -- --
December 31, 1995....... 4,000 176,018 176,018 3,570 2,145 -43.37% 1,310.92%
December 31, 1996....... 6,000 176,018 176,018 6,264 4,762 -13.31 394.28
December 31, 1997....... 8,000 176,018 176,018 9,574 7,993 -.04 205.37
December 31, 1998....... 10,000 176,018 176,018 10,540 8,882 -4.42 132.11
Zenith Equity Growth Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,586 240 -- --
December 31,1995........ 4,000 176,018 176,018 3,675 2,250 -65.55% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 5,592 4,089 -30.68 639.00
December 31, 1997....... 8,000 176,018 176,018 8,395 6,815 -9.51 273.17
December 31, 1998....... 10,000 176,018 176,018 13,988 12,330 9.71 161.36
Zenith Balanced Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,679 332 -- --
December 31, 1995....... 4,000 176,018 176,018 3,521 2,097 -71.04% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 5,553 4,050 -31.39 639.00
December 31, 1997....... 8,000 176,018 176,018 7,848 6,268 -14.39 273.17
December 31, 1998....... 10,000 176,018 176,018 9,986 8,328 -8.42 161.36
Zenith Venture Value Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,626 279 -- --
December 31, 1995....... 4,000 176,018 176,018 3,675 2,250 -65.55% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 6,073 4,571 -22.20 639.00
December 31, 1997....... 8,000 176,018 176,018 9,491 7,911 -.67 273.17
December 31, 1998....... 10,000 176,018 176,018 12,308 10,650 2.91 161.36
Zenith International Magnum Equity Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,720 374 -- --
December 31, 1995....... 4,000 176,018 176,018 3,304 1,879 -78.51% 4,449.85%
December 31, 1996....... 6,000 176,018 176,018 4,949 3,447 -43.06 639.00
December 31, 1997....... 8,000 176,018 176,018 6,242 4,662 -31.33 273.17
December 31, 1998....... 10,000 176,018 176,018 8,104 6,446 -20.23 161.36
</TABLE>
A-55
<PAGE>
Equity-Income Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1986....... 2,000 176,018 176,018 1,687 340 -- --
December 31, 1987....... 4,000 176,018 176,018 2,781 1,357 -88.68% 3,658.16%
December 31, 1988....... 6,000 176,018 176,018 4,765 3,262 -44.44 597.26
December 31, 1989....... 8,000 176,018 176,018 6,975 5,395 -22.16 263.01
December 31, 1990....... 10,000 176,018 176,018 7,347 5,689 -25.21 157.23
December 31, 1991....... 12,000 176,018 176,018 11,057 9,321 -9.31 108.29
December 31, 1992....... 14,000 176,018 176,018 14,349 12,535 -3.44 80.80
December 31, 1993....... 16,000 176,018 176,018 18,190 16,298 .49 63.45
December 31, 1994....... 18,000 176,018 176,018 20,622 18,652 .84 51.61
December 31, 1995....... 20,000 176,018 176,018 29,211 27,164 6.34 43.07
December 31, 1996....... 22,000 176,018 176,018 34,371 32,426 7.21 36.66
December 31, 1997....... 24,000 176,018 176,018 44,993 43,458 9.91 31.69
December 31, 1998....... 26,000 176,018 179,563 51,472 50,346 10.07 28.00
Overseas Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,294 18 -- --
December 31, 1988....... 4,000 176,018 176,018 3,040 1,616 -49.16% 874.98%
December 31, 1989....... 6,000 176,018 176,018 5,466 3,964 -20.09 323.81
December 31, 1990....... 8,000 176,018 176,018 6,765 5,185 -17.14 181.02
December 31, 1991....... 10,000 176,018 176,018 8,768 7,110 -11.46 120.48
December 31, 1992....... 12,000 176,018 176,018 8,953 7,217 -14.72 88.08
December 31, 1993....... 14,000 176,018 176,018 14,067 12,253 -3.40 68.24
December 31, 1994....... 16,000 176,018 176,018 15,430 13,538 -3.79 54.99
December 31, 1995....... 18,000 176,018 176,018 18,526 16,557 -1.70 45.57
December 31, 1996....... 20,000 176,018 176,018 22,146 20,099 .09 38.58
December 31, 1997....... 22,000 176,018 176,018 26,002 24,364 1.71 33.20
December 31, 1998....... 24,000 176,018 176,018 30,490 29,262 3.05 28.96
High Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1985....... 2,000 176,018 176,018 1,754 407 -- --
December 31, 1986....... 4,000 176,018 176,018 3,501 2,077 -62.77% 3,107.49%
December 31, 1987....... 6,000 176,018 176,018 4,927 3,425 -39.43 563.12
December 31, 1988....... 8,000 176,018 176,018 6,891 5,311 -22.27 254.34
December 31, 1989....... 10,000 176,018 176,018 7,891 6,232 -20.56 153.65
December 31, 1990....... 12,000 176,018 176,018 9,021 7,285 -18.14 106.41
December 31, 1991....... 14,000 176,018 176,018 13,499 11,685 -5.54 79.66
December 31, 1992....... 16,000 176,018 176,018 17,847 15,955 -.07 62.70
December 31, 1993....... 18,000 176,018 176,018 22,727 20,758 3.30 51.08
December 31, 1994....... 20,000 176,018 176,018 23,533 21,486 1.49 42.69
December 31, 1995....... 22,000 176,018 176,018 29,540 27,630 4.24 36.37
December 31, 1996....... 24,000 176,018 176,018 34,670 33,169 5.45 31.45
December 31, 1997....... 26,000 176,018 176,018 41,772 40,681 6.86 27.54
December 31, 1998....... 28,000 176,018 176,018 41,041 40,359 5.21 24.36
</TABLE>
A-56
<PAGE>
Asset Manager Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1989....... 2,000 176,018 176,018 1,668 321 -- --
December 31, 1990....... 4,000 176,018 176,018 3,238 1,814 -68.76% 2,813.78%
December 31, 1991....... 6,000 176,018 176,018 5,415 3,913 -29.97 542.64
December 31, 1992....... 8,000 176,018 176,018 7,469 5,889 -16.44 248.96
December 31, 1993....... 10,000 176,018 176,018 10,479 8,821 -5.40 151.39
December 31, 1994....... 12,000 176,018 176,018 11,058 9,322 -8.99 105.21
December 31, 1995....... 14,000 176,018 176,018 14,324 12,510 -3.40 78.94
December 31, 1996....... 16,000 176,018 176,018 17,736 15,845 -.26 62.22
December 31, 1997....... 18,000 176,018 176,018 22,594 20,625 3.13 50.75
December 31, 1998....... 20,000 176,018 176,018 27,327 25,280 4.79 42.44
Female Nonsmoker Standard Risk, Age 35
Option 1--Fixed Death Benefit
Zenith Capital Growth Sub-Account*
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,864 1,772 316 -- --
December 31, 1984....... 4,000 197,864 197,864 3,145 1,611 -72.98% 2,848.04%
December 31, 1985....... 6,000 197,864 197,864 6,989 5,377 -7.97 560.87
December 31, 1986....... 8,000 197,864 197,864 14,928 13,239 28.58 258.37
December 31, 1987....... 10,000 197,864 197,864 23,704 21,936 34.66 157.45
December 31, 1988....... 12,000 197,864 197,864 22,896 21,050 19.81 109.61
December 31, 1989....... 14,000 197,864 197,864 31,121 29,198 21.75 82.38
December 31, 1990....... 16,000 197,864 197,864 30,979 28,978 15.14 65.04
December 31, 1991....... 18,000 197,864 230,371 48,882 46,803 21.19 56.66
December 31, 1992....... 20,000 197,864 215,711 47,085 44,929 16.01 46.22
December 31, 1993....... 22,000 197,864 246,992 55,079 53,102 15.65 41.84
December 31, 1994....... 24,000 197,864 224,664 51,577 50,031 11.94 34.90
December 31, 1995....... 26,000 197,864 298,393 72,631 71,517 14.88 34.59
December 31, 1996....... 28,000 197,864 360,752 88,244 87,561 15.37 33.17
December 31, 1997....... 30,000 197,864 401,464 108,962 108,711 15.99 31.05
December 31, 1998....... 32,000 197,864 540,568 145,916 145,916 17.38 31.29
Zenith Bond Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,864 1,668 212 -- --
December 31, 1984....... 4,000 197,864 197,864 3,395 1,861 -65.40% 2,848.04%
December 31, 1985....... 6,000 197,864 197,864 5,525 3,913 -29.29 560.87
December 31, 1986....... 8,000 197,864 197,864 7,750 6,061 -14.68 258.37
December 31, 1987....... 10,000 197,864 197,864 9,287 7,520 -12.05 157.45
December 31, 1988....... 12,000 197,864 197,864 11,396 9,550 -8.03 109.61
December 31, 1989....... 14,000 197,864 197,864 14,091 12,168 -4.21 82.38
December 31, 1990....... 16,000 197,864 197,864 16,519 14,518 -2.54 65.04
December 31, 1991....... 18,000 197,864 197,864 20,757 18,679 0.85 53.14
December 31, 1992....... 20,000 197,864 197,864 23,575 21,419 1.41 44.52
December 31, 1993....... 22,000 197,864 197,864 27,617 25,641 2.83 38.02
December 31, 1994....... 24,000 197,864 197,864 27,671 26,125 1.44 32.96
December 31, 1995....... 26,000 197,864 197,864 34,675 33,561 3.93 28.93
December 31, 1996....... 28,000 197,864 197,864 37,328 36,645 3.83 25.64
December 31, 1997....... 30,000 197,864 197,864 42,390 42,139 4.48 22.92
December 31, 1998....... 32,000 197,864 197,864 47,310 47,310 4.80 20.64
</TABLE>
A-57
<PAGE>
Zenith Money Market Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,864 1,672 216 -- --
December 31, 1984....... 4,000 197,864 197,864 3,291 1,757 -68.59% 2,848.04%
December 31, 1985....... 6,000 197,864 197,864 5,012 3,400 -37.91 560.87
December 31, 1986....... 8,000 197,864 197,864 6,755 5,066 -23.82 258.37
December 31, 1987....... 10,000 197,864 197,864 8,569 6,801 -16.26 157.45
December 31, 1988....... 12,000 197,864 197,864 10,556 8,711 -11.29 109.61
December 31, 1989....... 14,000 197,864 197,864 12,822 10,899 -7.55 82.38
December 31, 1990....... 16,000 197,864 197,864 15,114 13,113 -5.23 65.04
December 31, 1991....... 18,000 197,864 197,864 17,249 15,170 -3.98 53.14
December 31, 1992....... 20,000 197,864 197,864 19,052 16,896 -3.52 44.52
December 31, 1993....... 22,000 197,864 197,864 20,730 18,753 -3.03 38.02
December 31, 1994....... 24,000 197,864 197,864 22,646 21,100 -2.23 32.96
December 31, 1995....... 26,000 197,864 197,864 24,990 23,876 -1.35 28.93
December 31, 1996....... 28,000 197,864 197,864 27,297 26,614 -.75 25.64
December 31, 1997....... 30,000 197,864 197,864 29,757 29,506 -.23 22.92
December 31, 1998....... 32,000 197,864 197,864 32,412 32,412 .16 20.64
Zenith Stock Index Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,329 83 -- --
December 31, 1988....... 4,000 197,864 197,864 3,062 1,528 -59.72% 1,410.81%
December 31, 1989....... 6,000 197,864 197,864 5,773 4,161 -20.54 417.58
December 31, 1990....... 8,000 197,864 197,864 6,828 5,139 -19.56 216.31
December 31, 1991....... 10,000 197,864 197,864 10,387 8,620 -5.53 138.86
December 31, 1992....... 12,000 197,864 197,864 12,531 10,686 -3.65 99.49
December 31, 1993....... 14,000 197,864 197,864 15,097 13,174 -1.66 76.13
December 31, 1994....... 16,000 197,864 197,864 16,512 14,511 -2.35 60.85
December 31, 1995....... 18,000 197,864 197,864 24,237 22,158 4.41 50.16
December 31, 1996....... 20,000 197,864 197,864 30,735 28,578 6.78 42.31
December 31, 1997....... 22,000 197,864 197,864 42,061 40,192 10.29 36.32
December 31, 1998....... 24,000 197,864 223,095 54,827 53,389 12.38 33.39
Zenith Managed Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,508 52 -- --
December 31, 1988....... 4,000 197,864 197,864 3,148 1,614 -57.35% 1,410.81%
December 31, 1989....... 6,000 197,864 197,864 5,404 3,792 -25.32 417.58
December 31, 1990....... 8,000 197,864 197,864 7,012 5,322 -18.07 216.31
December 31, 1991....... 10,000 197,864 197,864 9,911 8,144 -7.62 138.86
December 31, 1992....... 12,000 197,864 197,864 11,988 10,143 -5.30 99.49
December 31, 1993....... 14,000 197,864 197,864 14,589 12,666 -2.73 76.13
December 31, 1994....... 16,000 197,864 197,864 15,665 13,665 -3.81 60.85
December 31, 1995....... 18,000 197,864 197,864 22,097 20,018 2.27 50.16
December 31, 1996....... 20,000 197,864 197,864 26,543 24,387 3.80 42.31
December 31, 1997....... 22,000 197,864 197,864 34,909 33,040 7.01 36.32
December 31, 1998....... 24,000 197,864 197,864 42,820 41,363 8.53 31.62
</TABLE>
A-58
<PAGE>
Zenith Midcap Value Sub-Account**
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1993....... 2,000 197,864 197,864 1,721 265 -95.07% --
December 31, 1994....... 4,000 197,864 197,864 3,159 1,625 -56.94 1,403.84%
December 31, 1995....... 6,000 197,864 197,864 5,884 4,272 -19.12 416.63
December 31, 1996....... 8,000 197,864 197,864 8,376 6,686 -8.12 216.00
December 31, 1997....... 10,000 197,864 197,864 11,438 9,670 -1.25 138.72
December 31, 1998....... 12,000 197,864 197,864 11,804 9,959 -5.87 99.41
Zenith Growth and Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1993....... 2,000 197,864 197,864 1,713 256 -95.31% --
December 31, 1994....... 4,000 197,864 197,864 3,127 1,593 -57.83 1,403.84%
December 31, 1995....... 6,000 197,864 197,864 6,036 4,424 -17.26 416.63
December 31, 1996....... 8,000 197,864 197,864 8,651 6,962 -6.32 216.00
December 31, 1997....... 10,000 197,864 197,864 13,245 11,477 5.19 138.72
December 31, 1998....... 12,000 197,864 197,864 17,835 15,990 9.10 99.41
Zenith Small Cap Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,446 10 -- --
December 31, 1995....... 4,000 197,864 197,864 3,598 2,064 -45.46% 1,417.83%
December 31, 1996....... 6,000 197,864 197,864 6,313 4,701 -14.02 418.53
December 31, 1997....... 8,000 197,864 197,864 9,636 7,946 -.31 216.62
December 31, 1998....... 10,000 197,864 197,864 10,595 8,828 -4.65 139.01
Zenith Equity Growth Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,589 133 -- --
December 31, 1995....... 4,000 197,864 197,864 3,695 2,161 -68.76% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 5,629 4,018 -32.00 683.01
December 31, 1997....... 8,000 197,864 197,864 8,447 6,758 -10.00 288.92
December 31, 1998....... 10,000 197,864 197,864 14,061 12,294 9.57 169.99
Zenith Balanced Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,682 226 -- --
December 31, 1995....... 4,000 197,864 197,864 3,540 2,006 -74.20% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 5,590 3,979 -32.72 683.01
December 31, 1997....... 8,000 197,864 197,864 7,897 6,207 -14.95 288.92
December 31, 1998....... 10,000 197,864 197,864 10,036 8,269 -8.75 169.99
</TABLE>
A-59
<PAGE>
Zenith Venture Value Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,629 173 -- --
December 31, 1995....... 4,000 197,864 197,864 3,694 2,161 -68.78% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 6,114 4,505 -23.86 683.01
December 31, 1997....... 8,000 197,864 197,864 9,551 7,861 -1.05 288.92
December 31, 1998....... 10,000 197,864 197,864 12,373 10,606 2.72 169.99
Zenith International Magnum Equity Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,724 267 -- --
December 31, 1995....... 4,000 197,864 197,864 3,321 1,787 -81.50% 4,938.57%
December 31, 1996....... 6,000 197,864 197,864 4,983 3,371 -44.62 683.01
December 31, 1997....... 8,000 197,864 197,864 6,280 4,590 -32.21 288.92
December 31, 1998....... 10,000 197,864 197,864 8,142 6,374 -20.74 169.99
Equity-Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1986....... 2,000 197,864 197,864 1,690 234 -- --
December 31, 1987....... 4,000 197,864 197,864 2,796 1,262 -90.97% 4,042.12%
December 31, 1988....... 6,000 197,864 197,864 4,798 3,187 -45.95 637.74
December 31, 1989....... 8,000 197,864 197,864 7,021 5,331 -22.82 278.07
December 31, 1990....... 10,000 197,864 197,864 7,383 5,615 -25.79 165.61
December 31, 1991....... 12,000 197,864 197,864 11,092 9,247 -9.61 113.91
December 31, 1992....... 14,000 197,864 197,864 14,370 12,447 -3.66 84.97
December 31, 1993....... 16,000 197,864 197,864 18,190 16,189 .31 66.76
December 31, 1994....... 18,000 197,864 197,864 20,594 18,516 .67 54.35
December 31, 1995....... 20,000 197,864 197,864 29,142 26,986 6.21 45.41
December 31, 1996....... 22,000 197,864 197,864 34,264 32,215 7.09 38.70
December 31, 1997....... 24,000 197,864 197,864 44,834 43,217 9.82 33.49
December 31, 1998....... 26,000 197,864 206,561 51,280 50,094 9.99 29.95
Overseas Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,306 18 -- --
December 31, 1988....... 4,000 197,864 197,864 3,071 1,537 -51.12% 939.24%
December 31, 1989....... 6,000 197,864 197,864 5,512 3,900 -20.81 342.86
December 31, 1990....... 8,000 197,864 197,864 6,810 5,120 -17.62 190.73
December 31, 1991....... 10,000 197,864 197,864 8,808 7,041 -11.79 126.70
December 31, 1992....... 12,000 197,864 197,864 8,972 7,127 -15.08 92.58
December 31, 1993....... 14,000 197,864 197,864 14,069 12,146 -3.62 71.75
December 31, 1994....... 16,000 197,864 197,864 15,407 13,406 -4.02 57.85
December 31, 1995....... 18,000 197,864 197,864 18,474 16,395 -1.90 48.00
December 31, 1996....... 20,000 197,864 197,864 22,059 19,903 -.09 40.68
December 31, 1997....... 22,000 197,864 197,864 25,887 24,161 1.57 35.06
December 31, 1998....... 24,000 197,864 197,864 30,356 29,062 2.94 30.62
</TABLE>
A-60
<PAGE>
High Income Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable Net of Return on Internal Rate
Premiums Death Death Cash Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1985....... 2,000 197,864 197,864 1,758 302 -- --
December 31, 1986....... 4,000 197,864 197,864 3,521 1,987 -65.65% 3,421.33%
December 31, 1987....... 6,000 197,864 197,864 4,961 3,349 -40.83 600.75
December 31, 1988....... 8,000 197,864 197,864 6,932 5,243 -22.95 268.80
December 31, 1989....... 10,000 197,864 197,864 7,927 6,160 -21.06 161.81
December 31, 1990....... 12,000 197,864 197,864 9,046 7,201 -18.57 111.92
December 31, 1991....... 14,000 197,864 197,864 13,512 11,589 -5.80 83.78
December 31, 1992....... 16,000 197,864 197,864 17,838 15,837 -.27 65.97
December 31, 1993....... 18,000 197,864 197,864 22,688 20,609 3.13 53.79
December 31, 1994....... 20,000 197,864 197,864 23,468 21,312 1.32 45.00
December 31, 1995....... 22,000 197,864 197,864 29,435 27,422 4.10 38.39
December 31, 1996....... 24,000 197,864 197,864 34,533 32,952 5.34 33.25
December 31, 1997....... 26,000 197,864 197,864 41,612 40,462 6.78 29.16
December 31, 1998....... 28,000 197,864 197,864 40,911 40,193 5.16 25.83
Asset Manager Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable Net of Return on Internal Rate
Premiums Death Death Cash Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 2,000 $197,864 $197,864 $ 1,755 $ 299 -- --
December 31, 1989....... 2,000 197,864 197,864 1,672 216 -- --
December 31, 1990....... 4,000 197,864 197,864 3,257 1,724 -71.53% 3,091.28%
December 31, 1991....... 6,000 197,864 197,864 5,453 3,842 -31.14 578.58
December 31, 1992....... 8,000 197,864 197,864 7,516 5,827 -16.99 263.06
December 31, 1993....... 10,000 197,864 197,864 10,532 8,765 -5.67 159.42
December 31, 1994....... 12,000 197,864 197,864 11,097 9,252 -9.26 110.66
December 31, 1995....... 14,000 197,864 197,864 14,349 12,426 -3.61 83.02
December 31, 1996....... 16,000 197,864 197,864 17,739 15,739 -.43 65.46
December 31, 1997....... 18,000 197,864 197,864 22,569 20,491 2.98 53.44
December 31, 1998....... 20,000 197,864 197,864 27,269 25,113 4.65 44.74
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets for the period through April 30, 1998 and .75% thereafter.
The material below assumes, in the first example, a Policy with an Option 2
death benefit was issued with a $176,018 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith Midcap Value Sub-Accounts; September 19 in the case of the
High Income Sub-Account; September 6 in the case of the Asset Manager Sub-
Account), to a male nonsmoker standard risk, age 35. The second example
assumes a Policy was issued with a $197,864 face amount and annual premiums of
$2,000, paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-
Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account; January 28 in the case
of the Overseas Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith Midcap Value Sub-Accounts; September 19 in the case of the
High Income Sub-Account; September 6 in the case of the Asset Manager Sub-
Account), to a female nonsmoker standard risk, age 35. The death benefits,
cash values and internal rates of
A-61
<PAGE>
return assume in each instance that the entire policy value was invested in
the particular sub-account for the period shown. These illustrations of Policy
investment experience also reflect all charges applicable to the Policy,
including cost of insurance charges based on NELICO's current rates. (See
Appendix A for the definition of the internal rate of return.)
Male Nonsmoker Standard Risk, Age 35
Option 2--Variable Death Benefit
Zenith Capital Growth Sub-Account*
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,152 1,767 420 -98.87% --
December 31, 1984....... 4,000 176,018 176,028 3,124 1,700 -70.32 2,596.96%
December 31, 1985....... 6,000 176,018 178,015 6,935 5,433 -7.23 529.53
December 31, 1986....... 8,000 176,018 184,642 14,807 13,227 28.53 250.15
December 31, 1987....... 10,000 176,018 191,043 23,495 21,837 34.45 155.05
December 31, 1988....... 12,000 176,018 188,668 22,692 20,956 19.65 107.41
December 31, 1989....... 14,000 176,018 194,186 30,834 29,021 21.57 81.73
December 31, 1990....... 16,000 176,018 192,894 30,686 28,795 14.98 64.34
December 31, 1991....... 18,000 176,018 207,558 48,406 46,437 21.01 54.24
December 31, 1992....... 20,000 176,018 204,225 46,624 44,577 15.86 45.14
December 31, 1993....... 22,000 176,018 212,263 54,579 52,703 15.52 39.23
December 31, 1994....... 24,000 176,018 205,678 51,138 49,671 11.83 33.55
December 31, 1995....... 26,000 176,018 256,296 72,041 70,983 14.78 32.49
December 31, 1996....... 28,000 176,018 309,690 87,538 86,890 15.27 31.25
December 31, 1997....... 30,000 176,018 344,325 108,057 107,818 15.89 29.28
December 31, 1998....... 32,000 176,018 463,091 144,612 144,612 17.29 29.65
Zenith Bond Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,048 1,663 316 -- --
December 31, 1984....... 4,000 176,018 176,254 3,373 1,949 -62.69% 2,599.60%
December 31, 1985....... 6,000 176,018 176,748 5,484 3,982 -28.18 527.46
December 31, 1986....... 8,000 176,018 177,340 7,698 6,118 -14.19 245.43
December 31, 1987....... 10,000 176,018 177,073 9,235 7,577 -11.73 149.93
December 31, 1988....... 12,000 176,018 177,451 11,349 9,613 -7.80 104.59
December 31, 1989....... 14,000 176,018 178,232 14,054 12,241 -4.03 78.77
December 31, 1990....... 16,000 176,018 178,738 16,498 14,607 -2.38 62.24
December 31, 1991....... 18,000 176,018 180,860 20,752 18,782 0.98 51.08
December 31, 1992....... 20,000 176,018 181,793 23,581 21,534 1.52 42.86
December 31, 1993....... 22,000 176,018 183,785 27,625 25,748 2.91 36.76
December 31, 1994....... 24,000 176,018 181,675 27,669 26,202 1.49 31.66
December 31, 1995....... 26,000 176,018 185,961 34,634 33,577 3.94 28.08
December 31, 1996....... 28,000 176,018 186,424 37,214 36,565 3.80 24.90
December 31, 1997....... 30,000 176,018 188,815 42,159 41,920 4.41 22.39
December 31, 1998....... 32,000 176,018 190,625 46,919 46,919 4.70 20.24
</TABLE>
A-62
<PAGE>
Zenith Money Market Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1983....... 2,000 176,018 176,040 1,667 320 -- --
December 31, 1984....... 4,000 176,018 176,144 3,270 1,845 -65.89% 2,598.32%
December 31, 1985....... 6,000 176,018 176,246 4,975 3,473 -36.63 526.64
December 31, 1986....... 8,000 176,018 176,317 6,713 5,132 -23.16 244.76
December 31, 1987....... 10,000 176,018 176,400 8,526 6,868 -15.85 149.67
December 31, 1988....... 12,000 176,018 176,587 10,521 8,785 -10.99 104.37
December 31, 1989....... 14,000 176,018 177,002 12,802 10,988 -7.30 78.53
December 31, 1990....... 16,000 176,018 177,386 15,113 13,222 -5.01 62.03
December 31, 1991....... 18,000 176,018 177,546 17,270 15,301 -3.78 50.66
December 31, 1992....... 20,000 176,018 177,306 19,096 17,049 -3.33 42.37
December 31, 1993....... 22,000 176,018 176,856 20,794 18,917 -2.86 36.10
December 31, 1994....... 24,000 176,018 176,548 22,721 21,254 -2.10 31.23
December 31, 1995....... 26,000 176,018 176,585 25,056 23,998 -1.27 27.37
December 31, 1996....... 28,000 176,018 176,488 27,326 26,677 -.71 24.21
December 31, 1997....... 30,000 176,018 176,430 29,723 29,484 -.24 21.60
December 31, 1998....... 32,000 176,018 176,350 32,287 32,287 .11 19.41
Zenith Stock Index Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,322 83 -- --
December 31, 1988....... 4,000 176,018 176,018 3,037 1,612 -57.40% 1,304.55%
December 31, 1989....... 6,000 176,018 176,887 5,727 4,224 -19.74 394.39
December 31, 1990....... 8,000 176,018 176,288 6,782 5,202 -19.04 205.23
December 31, 1991....... 10,000 176,018 177,329 10,330 8,672 -5.30 132.41
December 31, 1992....... 12,000 176,018 178,391 12,481 10,745 -3.48 95.18
December 31, 1993....... 14,000 176,018 179,083 15,056 13,243 -1.52 72.95
December 31, 1994....... 16,000 176,018 178,352 16,488 14,597 -2.21 58.17
December 31, 1995....... 18,000 176,018 184,401 24,219 22,250 4.50 48.63
December 31, 1996....... 20,000 176,018 189,447 30,711 28,664 6.84 41.49
December 31, 1997....... 22,000 176,018 198,117 41,995 40,221 10.30 36.34
December 31, 1998....... 24,000 176,018 206,010 54,695 53,330 12.36 32.21
Zenith Managed Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,500 153 -97.86% --
December 31, 1988....... 4,000 176,018 176,041 3,123 1,698 -55.06 1,304.66%
December 31, 1989....... 6,000 176,018 176,613 5,362 3,859 -24.42 394.08
December 31, 1990....... 8,000 176,018 176,484 6,966 5,386 -17.56 205.33
December 31, 1991....... 10,000 176,018 177,144 9,860 8,202 -7.36 132.35
December 31, 1992....... 12,000 176,018 177,803 11,945 10,209 -5.09 95.05
December 31, 1993....... 14,000 176,018 178,692 14,556 12,743 -2.57 72.88
December 31, 1994....... 16,000 176,018 177,621 15,653 13,762 -3.63 58.07
December 31, 1995....... 18,000 176,018 182,268 22,099 20,130 2.38 48.38
December 31, 1996....... 20,000 176,018 185,150 26,552 24,505 3.89 41.07
December 31, 1997....... 22,000 176,018 191,003 34,905 33,131 7.05 35.74
December 31, 1998....... 24,000 176,018 195,369 42,765 41,401 8.54 31.44
</TABLE>
A-63
<PAGE>
Zenith Midcap Value Sub-Account**
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,202 1,711 364 -92.09% --
December 31, 1994....... 4,000 176,018 176,115 3,133 1,709 -54.68 1,298.70%
December 31, 1995....... 6,000 176,018 177,161 5,838 4,335 -18.34 393.82
December 31, 1996....... 8,000 176,018 178,017 8,318 6,737 -7.78 205.86
December 31, 1997....... 10,000 176,018 179,221 11,370 9,712 -1.09 132.90
December 31, 1998....... 12,000 176,018 177,534 11,750 10,014 -5.69 94.91
Zenith Growth and Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1993....... 2,000 176,018 176,197 1,703 356 -92.36% --
December 31, 1994....... 4,000 176,018 176,058 3,101 1,676 -55.57 1,298.42%
December 31, 1995....... 6,000 176,018 177,311 5,988 4,486 -16.52 393.99
December 31, 1996....... 8,000 176,018 178,341 8,590 7,010 -6.01 206.03
December 31, 1997....... 10,000 176,018 180,995 13,163 11,505 5.28 133.47
December 31, 1998....... 12,000 176,018 183,736 17,736 16,000 9.11 96.33
Zenith Small Cap Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,438 92 -- --
December 31, 1995....... 4,000 176,018 176,392 3,570 2,145 -43.38% 1,312.79%
December 31, 1996....... 6,000 176,018 177,398 6,262 4,760 -13.33 395.87
December 31, 1997....... 8,000 176,018 179,175 9,566 7,986 -.08 207.06
December 31, 1998....... 10,000 176,018 177,826 10,528 8,870 -4.48 132.71
Zenith Equity Growth Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,586 240 -- --
December 31, 1995....... 4,000 176,018 176,519 3,675 2,250 -65.57% 4,461.16%
December 31, 1996....... 6,000 176,018 176,842 5,590 4,087 -30.72 640.71
December 31, 1997....... 8,000 176,018 177,986 8,389 6,809 -9.56 274.64
December 31, 1998....... 10,000 176,018 181,847 13,971 12,313 9.65 163.74
Zenith Balanced Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,679 332 -- --
December 31, 1995....... 4,000 176,018 176,366 3,521 2,096 -71.05% 4,457.67%
December 31, 1996....... 6,000 176,018 176,804 5,551 4,049 -31.42 640.63
December 31, 1997....... 8,000 176,018 177,441 7,845 6,264 -14.42 274.24
December 31, 1998....... 10,000 176,018 177,855 9,979 8,321 -8.46 162.11
</TABLE>
A-64
<PAGE>
Zenith Venture Value Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,018 1,626 279 -- --
December 31, 1995....... 4,000 176,018 176,519 3,674 2,250 -65.57% 4,461.16%
December 31, 1996....... 6,000 176,018 177,323 6,071 4,569 -22.23 641.71
December 31, 1997....... 8,000 176,018 179,080 9,484 7,903 -.73 275.46
December 31, 1998....... 10,000 176,018 180,168 12,292 10,634 2.84 163.06
Zenith International Magnum Equity Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1994....... 2,000 176,018 176,040 1,720 374 -- --
December 31, 1995....... 4,000 176,018 176,149 3,304 1,879 -78.51% 4,452.77%
December 31, 1996....... 6,000 176,018 176,201 4,949 3,447 -43.07 639.38
December 31, 1997....... 8,000 176,018 176,018 6,241 4,661 -31.34 273.17
December 31, 1998....... 10,000 176,018 176,018 8,102 6,444 -20.23 161.36
Equity-Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1986....... 2,000 176,018 176,063 1,687 340 -- --
December 31, 1987....... 4,000 176,018 176,018 2,781 1,356 -88.69% 3,658.16%
December 31, 1988....... 6,000 176,018 176,053 4,764 3,262 -44.45 597.33
December 31, 1989....... 8,000 176,018 176,454 6,974 5,394 -22.18 263.33
December 31, 1990....... 10,000 176,018 176,018 7,346 5,688 -25.22 157.23
December 31, 1991....... 12,000 176,018 176,320 11,054 9,318 -9.32 108.37
December 31, 1992....... 14,000 176,018 178,287 14,342 12,529 -3.46 81.25
December 31, 1993....... 16,000 176,018 180,250 18,171 16,280 .46 64.12
December 31, 1994....... 18,000 176,018 180,486 20,589 18,620 .80 52.19
December 31, 1995....... 20,000 176,018 187,635 29,140 27,093 6.29 44.35
December 31, 1996....... 22,000 176,018 190,738 34,249 32,304 7.14 38.06
December 31, 1997....... 24,000 176,018 198,821 44,767 43,232 9.82 33.57
December 31, 1998....... 26,000 176,018 201,130 51,138 50,012 9.97 29.58
Overseas Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1987....... 2,000 176,018 176,018 1,294 18 -- --
December 31, 1988....... 4,000 176,018 176,018 3,040 1,616 -49.16% 874.98%
December 31, 1989....... 6,000 176,018 176,843 5,466 3,963 -20.09 324.55
December 31, 1990....... 8,000 176,018 176,419 6,763 5,183 -17.16 181.21
December 31, 1991....... 10,000 176,018 176,597 8,765 7,107 -11.48 120.65
December 31, 1992....... 12,000 176,018 176,018 8,949 7,213 -14.74 88.08
December 31, 1993....... 14,000 176,018 178,216 14,059 12,245 -3.42 68.61
December 31, 1994....... 16,000 176,018 177,692 15,416 13,525 -3.81 55.22
December 31, 1995....... 18,000 176,018 178,489 18,506 16,536 -1.73 45.86
December 31, 1996....... 20,000 176,018 180,000 22,112 20,065 .06 38.98
December 31, 1997....... 22,000 176,018 181,665 25,945 24,307 1.67 33.71
December 31, 1998....... 24,000 176,018 183,826 30,398 29,169 3.00 29.57
</TABLE>
A-65
<PAGE>
High Income Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1985....... 2,000 176,018 176,075 1,754 407 -- --
December 31, 1986....... 4,000 176,018 176,325 3,501 2,076 -62.78% 3,111.97%
December 31, 1987....... 6,000 176,018 176,098 4,926 3,424 -39.44 563.26
December 31, 1988....... 8,000 176,018 176,446 6,889 5,309 -22.29 254.63
December 31, 1989....... 10,000 176,018 176,018 7,888 6,230 -20.57 153.65
December 31, 1990....... 12,000 176,018 176,018 9,019 7,283 -18.15 106.41
December 31, 1991....... 14,000 176,018 177,598 13,494 11,680 -5.56 79.98
December 31, 1992....... 16,000 176,018 180,022 17,831 15,940 -.10 63.32
December 31, 1993....... 18,000 176,018 182,891 22,692 20,723 3.26 51.97
December 31, 1994....... 20,000 176,018 181,531 23,481 21,433 1.44 43.30
December 31, 1995....... 22,000 176,018 186,024 29,450 27,539 4.18 37.32
December 31, 1996....... 24,000 176,018 188,174 34,528 33,026 5.38 32.48
December 31, 1997....... 26,000 176,018 193,061 41,547 40,455 6.78 28.82
December 31, 1998....... 28,000 176,018 189,579 40,764 40,082 5.12 25.29
Asset Manager Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 2,000 $176,018 $176,018 $ 1,754 $ 408 -- --
December 31, 1989....... 2,000 176,018 176,018 1,668 321 -- --
December 31, 1990....... 4,000 176,018 176,065 3,238 1,814 -68.76% 2,814.37%
December 31, 1991....... 6,000 176,018 176,469 5,414 3,912 -29.98 543.40
December 31, 1992....... 8,000 176,018 177,017 7,467 5,887 -16.46 249.63
December 31, 1993....... 10,000 176,018 178,116 10,472 8,814 -5.43 152.19
December 31, 1994....... 12,000 176,018 177,421 11,048 9,313 -9.03 105.58
December 31, 1995....... 14,000 176,018 178,613 14,308 12,494 -3.44 79.45
December 31, 1996....... 16,000 176,018 180,167 17,710 15,819 -.30 62.86
December 31, 1997....... 18,000 176,018 182,951 22,547 20,578 3.08 51.63
December 31, 1998....... 20,000 176,018 184,705 27,249 25,202 4.72 43.39
Female Nonsmoker Standard Risk, Age 35
Option 2--Variable Death Benefit
Zenith Capital Growth Sub-Account*
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 198,007 1,772 316 -- --
December 31, 1984....... 4,000 197,864 197,907 3,145 1,611 -72.98% 2,848.51%
December 31, 1985....... 6,000 197,864 199,929 6,987 5,375 -7.99 564.03
December 31, 1986....... 8,000 197,864 206,622 14,912 13,223 28.51 263.61
December 31, 1987....... 10,000 197,864 213,082 23,650 21,883 34.54 162.56
December 31, 1988....... 12,000 197,864 210,701 22,821 20,976 19.69 112.55
December 31, 1989....... 14,000 197,864 216,256 30,983 29,060 21.61 85.49
December 31, 1990....... 16,000 197,864 214,967 30,806 28,805 14.99 67.35
December 31, 1991....... 18,000 197,864 229,692 48,558 46,479 21.03 56.59
December 31, 1992....... 20,000 197,864 226,357 46,739 44,583 15.86 47.17
December 31, 1993....... 22,000 197,864 245,178 54,674 52,698 15.52 41.71
December 31, 1994....... 24,000 197,864 227,826 51,205 49,659 11.83 35.12
December 31, 1995....... 26,000 197,864 296,274 72,115 71,001 14.78 34.49
December 31, 1996....... 28,000 197,864 358,250 87,632 86,949 15.28 33.08
December 31, 1997....... 30,000 197,864 398,723 108,218 107,967 15.91 30.97
December 31, 1998....... 32,000 197,864 536,929 144,934 144,934 17.31 31.22
</TABLE>
A-66
<PAGE>
Zenith Bond Income Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,903 1,668 212 -- --
December 31, 1984....... 4,000 197,864 198,133 3,395 1,861 -65.40% 2,851.09%
December 31, 1985....... 6,000 197,864 198,652 5,524 3,912 -29.30 562.08
December 31, 1986....... 8,000 197,864 199,263 7,747 6,058 -14.70 259.22
December 31, 1987....... 10,000 197,864 199,006 9,282 7,514 -12.08 157.84
December 31, 1988....... 12,000 197,864 199,392 11,387 9,542 -8.07 109.97
December 31, 1989....... 14,000 197,864 200,181 14,077 12,154 -4.24 82.79
December 31, 1990....... 16,000 197,864 200,691 16,498 14,497 -2.58 65.44
December 31, 1991....... 18,000 197,864 202,816 20,723 18,644 0.81 53.71
December 31, 1992....... 20,000 197,864 203,754 23,523 21,367 1.36 45.10
December 31, 1993....... 22,000 197,864 205,748 27,537 25,560 2.77 38.69
December 31, 1994....... 24,000 197,864 203,661 27,574 26,029 1.38 33.40
December 31, 1995....... 26,000 197,864 207,964 34,530 33,416 3.87 29.61
December 31, 1996....... 28,000 197,864 208,483 37,144 36,461 3.76 26.30
December 31, 1997....... 30,000 197,864 210,949 42,146 41,894 4.40 23.66
December 31, 1998....... 32,000 197,864 212,857 46,993 46,993 4.72 21.42
Zenith Money Market Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1983....... 2,000 197,864 197,895 1,672 216 -- --
December 31, 1984....... 4,000 197,864 198,023 3,290 1,757 -68.59% 2,849.84%
December 31, 1985....... 6,000 197,864 198,146 5,011 3,399 -37.91 561.30
December 31, 1986....... 8,000 197,864 198,232 6,754 5,065 -23.83 258.60
December 31, 1987....... 10,000 197,864 198,327 8,567 6,800 -16.27 157.61
December 31, 1988....... 12,000 197,864 198,522 10,553 8,707 -11.30 109.77
December 31, 1989....... 14,000 197,864 198,942 12,817 10,894 -7.56 82.57
December 31, 1990....... 16,000 197,864 199,331 15,105 13,104 -5.24 65.25
December 31, 1991....... 18,000 197,864 199,497 17,235 15,157 -4.00 53.33
December 31, 1992....... 20,000 197,864 199,263 19,034 16,878 -3.55 44.66
December 31, 1993....... 22,000 197,864 198,821 20,708 18,731 -3.05 38.10
December 31, 1994....... 24,000 197,864 198,528 22,620 21,075 -2.25 33.01
December 31, 1995....... 26,000 197,864 198,597 24,961 23,847 -1.37 28.98
December 31, 1996....... 28,000 197,864 198,555 27,264 26,581 -.76 25.69
December 31, 1997....... 30,000 197,864 198,575 29,721 29,469 -.24 22.96
December 31, 1998....... 32,000 197,864 198,593 32,371 32,371 .15 20.68
Zenith Stock Index Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,329 83 -- --
December 31, 1988....... 4,000 197,864 197,864 3,062 1,528 -59.72% 1,410.81%
December 31, 1989....... 6,000 197,864 198,796 5,772 4,160 -20.55 418.57
December 31, 1990....... 8,000 197,864 198,207 6,826 5,137 -19.58 216.48
December 31, 1991....... 10,000 197,864 199,266 10,382 8,614 -5.55 139.28
December 31, 1992....... 12,000 197,864 200,340 12,521 10,676 -3.69 100.02
December 31, 1993....... 14,000 197,864 201,037 15,079 13,156 -1.70 76.65
December 31, 1994....... 16,000 197,864 200,312 16,486 14,486 -2.39 61.17
December 31, 1995....... 18,000 197,864 206,362 24,186 22,108 4.37 51.08
December 31, 1996....... 20,000 197,864 211,404 30,642 28,486 6.72 43.55
December 31, 1997....... 22,000 197,864 220,062 41,881 40,013 10.21 38.07
December 31, 1998....... 24,000 197,864 227,952 54,542 53,104 12.30 33.70
</TABLE>
A-67
<PAGE>
Zenith Managed Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,508 52 -- --
December 31, 1988....... 4,000 197,864 197,924 3,148 1,614 -57.35% 1,411.09%
December 31, 1989....... 6,000 197,864 198,520 5,403 3,791 -25.33 418.28
December 31, 1990....... 8,000 197,864 198,404 7,010 5,321 -18.08 216.58
December 31, 1991....... 10,000 197,864 199,079 9,907 8,140 -7.64 139.23
December 31, 1992....... 12,000 197,864 199,746 11,980 10,135 -5.32 99.89
December 31, 1993....... 14,000 197,864 200,642 14,574 12,651 -2.77 76.58
December 31, 1994....... 16,000 197,864 199,575 15,646 13,645 -3.84 61.08
December 31, 1995....... 18,000 197,864 204,223 22,059 19,981 2.23 50.85
December 31, 1996....... 20,000 197,864 207,103 26,480 24,324 3.75 43.16
December 31, 1997....... 22,000 197,864 212,947 34,791 32,922 6.95 37.53
December 31, 1998....... 24,000 197,864 217,317 42,622 41,184 8.46 33.00
Zenith Midcap Value Sub-Account**
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 1993........... 2,000 197,864 198,065 1,721 265 -95.08% --
December 31, 1994....... 4,000 197,864 198,000 3,159 1,625 -56.95 1,404.48%
December 31, 1995....... 6,000 197,864 199,072 5,882 4,271 -19.14 417.91
December 31, 1996....... 8,000 197,864 199,948 8,371 6,681 -8.15 217.02
December 31, 1997....... 10,000 197,864 201,169 11,426 9,659 -1.30 139.71
December 31, 1998....... 12,000 197,864 199,482 11,789 9,943 -5.92 99.76
Zenith Growth and Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1993....... 2,000 197,864 198,060 1,712 256 -95.31% --
December 31, 1994....... 4,000 197,864 197,943 3,126 1,592 -57.84 1,404.21%
December 31, 1995....... 6,000 197,864 199,224 6,034 4,423 -17.28 418.07
December 31, 1996....... 8,000 197,864 200,275 8,646 6,957 -6.35 217.18
December 31, 1997....... 10,000 197,864 202,954 13,230 11,463 5.14 140.24
December 31, 1998....... 12,000 197,864 205,713 17,803 15,958 9.03 101.05
Zenith Small Cap Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,446 10 -- --
December 31, 1995....... 4,000 197,864 198,279 3,598 2,064 -45.47% 1,419.81%
December 31, 1996....... 6,000 197,864 199,312 6,311 4,699 -14.04 420.08
December 31, 1997....... 8,000 197,864 201,114 9,629 7,939 -.35 218.21
December 31, 1998....... 10,000 197,864 199,769 10,584 8,817 -4.70 139.58
Zenith Equity Growth Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,589 133 -- --
December 31, 1995....... 4,000 197,864 198,396 3,694 2,160 -68.78% 4,950.38%
December 31, 1996....... 6,000 197,864 198,742 5,628 4,016 -32.03 684.72
December 31, 1997....... 8,000 197,864 199,910 8,442 6,753 -10.05 290.33
December 31, 1998....... 10,000 197,864 203,806 14,046 12,278 9.52 172.20
</TABLE>
A-68
<PAGE>
Zenith Balanced Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,682 226 -- --
December 31, 1995....... 4,000 197,864 198,242 3,540 2,006 -74.21% 4,946.92%
December 31, 1996....... 6,000 197,864 198,704 5,589 3,977 -32.74 684.65
December 31, 1997....... 8,000 197,864 199,361 7,894 6,204 -14.99 289.95
December 31, 1998....... 10,000 197,864 199,790 10,030 8,262 -8.79 170.71
Zenith Venture Value Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,864 1,629 173 -- --
December 31, 1995....... 4,000 197,864 198,396 3,694 2,160 -68.79% 4,950.38%
December 31, 1996....... 6,000 197,864 199,227 6,113 4,501 -23.39 685.66
December 31, 1997....... 8,000 197,864 201,012 9,544 7,855 -1.10 291.09
December 31, 1998....... 10,000 197,864 202,118 12,359 10,591 2.65 171.58
Zenith International Magnum Equity Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1994....... 2,000 197,864 197,891 1,724 267 -- --
December 31, 1995....... 4,000 197,864 198,023 3,321 1,787 -81.51% 4,942.10%
December 31, 1996....... 6,000 197,864 198,097 4,983 3,371 -44.62 683.46
December 31, 1997....... 8,000 197,864 197,864 6,279 4,590 -32.21 288.92
December 31, 1998....... 10,000 197,864 197,900 8,140 6,373 -20.75 170.00
Equity-Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 9, 1986......... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1986....... 2,000 197,864 197,914 1,690 234 -- --
December 31, 1987....... 4,000 197,864 197,864 2,796 1,262 -90.97% 4,042.12%
December 31, 1988....... 6,000 197,864 197,950 4,798 3,186 -45.96 637.89
December 31, 1989....... 8,000 197,864 198,370 7,019 5,330 -22.83 278.40
December 31, 1990....... 10,000 197,864 197,864 7,381 5,614 -25.80 165.61
December 31, 1991....... 12,000 197,864 198,253 11,089 9,244 -9.62 114.00
December 31, 1992....... 14,000 197,864 200,230 14,363 12,440 -3.68 85.40
December 31, 1993....... 16,000 197,864 202,199 18,172 16,171 .29 67.37
December 31, 1994....... 18,000 197,864 202,441 20,563 18,485 .63 54.88
December 31, 1995....... 20,000 197,864 209,583 29,076 26,919 6.16 46.56
December 31, 1996....... 22,000 197,864 212,685 34,150 32,102 7.03 39.96
December 31, 1997....... 24,000 197,864 220,757 44,627 43,009 9.74 35.19
December 31, 1998....... 26,000 197,864 223,088 50,988 49,802 9.91 31.03
</TABLE>
A-69
<PAGE>
Overseas Sub-Account
<TABLE>
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 28, 1987........ $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1987....... 2,000 197,864 197,864 1,306 18 -- --
December 31, 1988....... 4,000 197,864 197,864 3,071 1,537 -51.13% 939.24%
December 31, 1989....... 6,000 197,864 198,758 5,511 3,900 -20.82 343.61
December 31, 1990....... 8,000 197,864 198,343 6,808 5,118 -17.63 190.93
December 31, 1991....... 10,000 197,864 198,532 8,805 7,037 -11.80 126.88
December 31, 1992....... 12,000 197,864 197,864 8,969 7,124 -15.10 92.58
December 31, 1993....... 14,000 197,864 200,160 14,062 12,139 -3.64 72.10
December 31, 1994....... 16,000 197,864 199,641 15,394 13,393 -4.04 58.07
December 31, 1995....... 18,000 197,864 200,443 18,453 16,375 -1.93 48.27
December 31, 1996....... 20,000 197,864 201,954 22,027 19,870 -.12 41.05
December 31, 1997....... 22,000 197,864 203,623 25,832 24,107 1.54 35.52
December 31, 1998....... 24,000 197,864 205,796 30,270 28,976 2.90 31.18
High Income Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 19, 1985...... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1985....... 2,000 197,864 197,929 1,758 302 -- --
December 31, 1986....... 4,000 197,864 198,203 3,521 1,987 -65.66% 3,426.13%
December 31, 1987....... 6,000 197,864 197,995 4,960 3,348 -40.85 600.96
December 31, 1988....... 8,000 197,864 198,360 6,931 5,241 -22.97 269.12
December 31, 1989....... 10,000 197,864 197,864 7,925 6,158 -21.08 161.81
December 31, 1990....... 12,000 197,864 197,864 9,044 7,199 -18.58 111.92
December 31, 1991....... 14,000 197,864 199,535 13,507 11,584 -5.81 84.08
December 31, 1992....... 16,000 197,864 201,965 17,823 15,823 -.29 66.54
December 31, 1993....... 18,000 197,864 204,836 22,654 20,576 3.10 54.60
December 31, 1994....... 20,000 197,864 203,486 23,418 21,262 1.27 45.56
December 31, 1995....... 22,000 197,864 207,972 29,350 27,338 4.04 39.25
December 31, 1996....... 24,000 197,864 210,128 34,402 32,821 5.28 34.18
December 31, 1997....... 26,000 197,864 215,027 41,408 40,258 6.71 30.31
December 31, 1998....... 28,000 197,864 211,609 40,666 39,948 5.07 26.68
Asset Manager Sub-Account
<CAPTION>
Internal Rate
Total Minimum Variable of Return on Internal Rate
Premiums Death Death Cash Net Cash Net Cash of Return on
Date Paid Benefit Benefit Value Value Value Death Benefit
- ---- -------- -------- -------- ------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
September 6, 1989....... $ 2,000 $197,864 $197,866 $ 1,755 $ 299 -- --
December 31, 1989....... 2,000 197,864 197,864 1,672 216 -- --
December 31, 1990....... 4,000 197,864 197,941 3,257 1,724 -71.53% 3,092.25%
December 31, 1991....... 6,000 197,864 198,369 5,453 3,841 -31.16 579.38
December 31, 1992....... 8,000 197,864 198,936 7,514 5,824 -17.01 263.73
December 31, 1993....... 10,000 197,864 200,054 10,526 8,759 -5.70 160.19
December 31, 1994....... 12,000 197,864 199,364 11,088 9,243 -9.29 111.01
December 31, 1995....... 14,000 197,864 200,563 14,334 12,411 -3.65 83.49
December 31, 1996....... 16,000 197,864 202,123 17,715 15,714 -.47 66.06
December 31, 1997....... 18,000 197,864 204,911 22,525 20,446 2.93 54.25
December 31, 1998....... 20,000 197,864 206,670 27,196 25,039 4.59 45.60
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets for the period through April 30, 1998 and .75% thereafter.
A-70
<PAGE>
APPENDIX C
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 time 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.]
A-71
<PAGE>
SUMMARY TABLE: HISTORIC S&P 500 STOCK INDEX RESULTS FOR SPECIFIC HOLDING
PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index, with dividends reinvested, over one-year, five-year,
ten-year and twenty-year periods beginning in 1926 and ending in 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
Than
Holding Negative 0-5.00% 5.01-10.00% 10.01-15.00% 15.01-20.00% 20.00%
Period Return Return Return Return Return Return
------- -------- ------- ----------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
1 year 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.]
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 you chose 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 chosen 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-72
<PAGE>
APPENDIX D
USES OF LIFE INSURANCE
The following are examples of ways the Policy can be used to address certain
financial objectives.
FAMILY INCOME PROTECTION
You may purchase life insurance on the lives of the family income earners to
provide a death benefit to cover final expenses, and continue current family
income. The amount of insurance you purchase should be an amount which will
provide a death benefit that when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the individual's income.
ESTATE PROTECTION
A trust may purchase life insurance on the life of the person whose estate
will incur federal estate taxes upon the person's death. The amount of
insurance purchased should equal the amount of the estimated estate tax
liability. On the insured's death, the trustee makes the death proceeds
available to the estate for the payment of estate tax costs.
EDUCATION FUNDING
You may purchase life insurance on the life of the parent(s) or primary
person funding an education. The amount of insurance you purchase should equal
the total education cost projected at a reasonable inflation rate.
In the event of death, the guaranteed death benefit is available to help pay
the education costs. If the insured lives through the education years, cash
value may be accessed to meet education costs. Loans or surrenders reduce the
policy's death benefit.
MORTGAGE PROTECTION
You may purchase life insurance on the life of the person responsible for
making mortgage payments. The amount of insurance you purchase should equal
the mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to pay the mortgage balance.
During the insured's lifetime, cash value may be accessed late in the
mortgage term to help make the remaining mortgage payments. Loans or
surrenders reduce the policy's death benefit.
KEY PERSON PROTECTION
A business may purchase life insurance on the life of the key person in an
amount equal to the key person's value, considering salary, benefits, and
contribution to the business. On the key person's death, the business uses the
death benefit to ease the interruption of business operations and/or to
provide a replacement fund for hiring a new executive.
BUSINESS CONTINUATION PROTECTION
You can insure each business owner in an amount equal to the value of each
owner's business interest. In the event of death, the guaranteed death benefit
provides for the purchase of the deceased's business interest by the business,
or surviving owners, from the deceased owner's heirs.
RETIREMENT INCOME
You may purchase life insurance on the life of a family income earner during
his or her working life. If the insured lives to retirement, the cash value
may be accessed to provide retirement payments. In the event of the insured's
death, the proceeds may be used to provide retirement income to his or her
spouse. Any cash value loans or surrenders will reduce the policy's death
benefit.
A-73
<PAGE>
Because the Policy provides a death benefit and cash value accumulation, you
can use the Policy for various individual and business planning purposes. If
you purchase the Policy for such purposes, you assume certain risks,
particularly if the Policy's cash value, as opposed to its death benefit, will
be the principal Policy feature used for such planning purposes. If the
investment performance of the Sub-Accounts to which cash value is allocated is
poorer than expected, or if you don't pay sufficient premiums or maintain cash
values, the Policy may lapse or may not accumulate sufficient cash value or
net cash value to fund the purpose for which you purchased the Policy. Because
the Policy is designed to provide benefits on a long-term basis, before
purchasing a Policy for a specialized purpose, you should consider whether the
long-term nature of the Policy is consistent with your goals. If you wish to
access your Policy's cash value, through loans, surrenders or withdrawals, you
should consult your tax advisor about possible tax consequences. (See "Tax
Considerations".)
A-74
<PAGE>
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products"
in March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax
Treatment of Life Insurance Products and Other Retirement Savings Plans".
Because it is a convenient summary of the relevant tax characteristics of
these products and plans, we have reprinted it here, and added footnotes to
reflect exceptions to the general rules.
----------------
Table 1.1
Comparison of Tax Treatment of Life Insurance Products and
Other Retirement Savings Plans
<TABLE>
<CAPTION>
Cash-Value
Life Non-Qualified Qualified
Insurance Annuities IRA'S Pension
---------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Annual Contribution Limits........ No No Yes Yes
Income Eligibility Limits......... No No Yes** No
Borrowing Treated as No* Yes Loans not Yes,
Distributions.................... allowed beyond
$50,000
Income Ordering Rules (Income
included in First Distribution).. No* Yes Yes Yes
Early Withdrawal Penalties........ No* Yes*** Yes*** Yes***
Minimum Distribution Rules by Age
70 1/2........................... No No Yes Yes
Maximum Annual Distribution Rules. No No Yes Yes
Anti-discrimination Rules......... No No No Yes
</TABLE>
- --------
Department of the Treasury March 1990
Office of Tax Analysis
* If the policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
This appendix is not tax advice. You should consult your own tax advisor for
more complete information.
A-75
<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 a Zenith Life Plus 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 variable ordinary life insurance policies described in this
registration statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus with
the items of Form N-8B-2.
The prospectus consisting of 128 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)
<TABLE>
<CAPTION>
The following exhibits:
<S> <C>
1.A. (1) January 31, 1983 resolution of the Board of Directors of NEVLICO **
(2) None
(3) (a) Distribution Agreement between NEVLICO and NELESCO ***
(b)(i) Form of contract between NELICO and its General Agents **
(ii) Form of contract between NEVLICO and its Agents ***
(c) Commission Schedule for Variable Life Policies +
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
(d) Form of Contract among NES, NELICO and other broker-dealers *
(4) None
(5) (a) Specimen Policy +
(b) Riders +
(c) Additional Riders ***
(d) Acceleration of Benefits Rider ###
(e) Additional Riders
(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 ++++
(7) None
(8) None
(9) None
(10) (a) Form of Application +
(b) Additional Form of Application +++
2. See Exhibit 3(i)
3. (i) Opinion and Consent of H. James Wilson, Esq.+
(ii) Opinion and Consent of Rodney J. Chandler, F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
7. (i) Powers of Attorney ##
(ii) Powers of Attorney of James M. Benson, Robert H. Benmosche and Catherine A. Rein ++
(iii) Powers of Attorney for David Y. Rogers and Richard A. Robinson +++
8. Notice of Withdrawal Right for Policies +
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditors
12. Schedule for computation of performance quotations ***
13. (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 +++++
14. (i) Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors
Corporation and New England Variable Life Insurance Company ***
(ii) Amendment No. 1 to Participation Agreement among Variable Insurance Products Fund, Fidelity
Distributors Corporation and New England Variable Life Insurance Company #
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
(iii) Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors
Corporation and New England Variable Life Insurance Company #
</TABLE>
___________
# Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed June 22, 1995.
## Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
### Incorporated herein by reference to Post-Effective Amendment No. 8 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 30, 1997.
* Incorporated herein by reference to the Pre-effective Amendment No. 1 to
the Variable Account's Form S-6 Registration Statement, File No. 333-21767,
filed July 16, 1997.
** Incorporated herein by reference to 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. 15 to the
Variable Account's Form S-6 Registration Statement, File No. 33-19540,
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. 5 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed January 20, 1999.
II-4
<PAGE>
++++ Incorporated herein by reference to 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 by reference to Post-Effective Amendment No. 10 to
the Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 26, 1999.
II-5
<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, Esq.
Executive Vice President
and General Counsel
Attest:
/s/ Marie C. Swift
- ------------------
Marie C. Swift
II-6
<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: /s/ H. James Wilson
------------------- -------------------
Marie C. Swift H. James Wilson, Esq.
Executive Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on April 26, 1999.
* 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
* Director
- -----------------------
Bernard A. Leventhal
II-7
<PAGE>
* Director
- -----------------------
Thomas J. May
* 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, with 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.
II-8
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
1 A.5(e) Additional Riders
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 Independent Auditors
________________
* Page numbers inserted on manually-signed copy only.
<PAGE>
Exhibit 1.A.5(e)
NEV-287-88
Endorsement
As of the Date of Issue of this Policy the following changes are made:
"The Fixed Account
The Fixed Account is a segmented fund within the general account of the Company.
If you elect the Fixed Account, the first date on which money is applied to the
Fixed Account for the Policy is the latest of:
. 45 days after Part I of the Application is signed;
. 10 days after the Company mails the separate Notice of Withdrawal Right;
. The date the first premium is received by the Company; and
. The effective date of the election of the Fixed Account.
Before this date, the value of the portion of the net premium and any net
Unscheduled Payment allocated to the Fixed Account will depend on the net
investment performance of the Money Market sub-account of the Variable Account.
Each future net premium allocated to the Fixed Account will be applied as of its
due date. Each net Unscheduled Payment allocated to the Fixed Account will be
applied as of the date it is received by the Company at its Home Office. Each
transfer to the Fixed Account will be applied as of the transfer date.
Fixed Account Interest
The rate of interest for each amount applied to the Fixed Account: will be the
rate set by the Company in advance for the date the amount is applied to the
Fixed Account; and will not be less than a rate equivalent to an annual
effective rate of 5%. The effective interest rate used on your Policy will be
the weighted average of all such rates for your Policy.
Each year, on the policy anniversary, the Company will determine a portion, if
any, of the Policy's share of the Fixed Account which will be reinvested at the
rate effective on that date.
Interest will be credited to the Fixed Account on a daily basis.
Restriction to New Amounts Applied to the Fixed Account
The Company reserves the right to restrict new amounts applied to the Fixed
Account if the rate of interest that would be used for the new amount is a rate
equivalent to an annual effective rate of 5%.
<PAGE>
Transfers Out of the Fixed Account
You can transfer a limited portion of the Policy's share of the Fixed Account to
the subaccounts once within 30 days before each policy anniversary. The
transfer will be limited to the greater of: 15% of the Policy's share of the
Fixed Account; and the amount of the Policy's share of the Fixed Account
transferred to the sub-accounts the prior year.
Election of the Fixed Account
You can elect to have future net premiums and future net Unscheduled Payments
applied to the Fixed Account. (See Section 1 net annual premiums.) You can
change the election for future net premiums and future net Unscheduled Payments
at any time by notice to the Company in writing. (See the Restriction of New
Amounts Applied to the Fixed Account provision.) The portion to be applied to
the Fixed Account must be a whole percent of the net premium and net Unscheduled
Payment not less than 10."
is added to the Policy.
Modification of Tabular Values Section
"Tabular Values are used to determine the Death Benefit and the partial
withdrawal available for Death Benefit Option 2 and to determine if the Special
Premium Option can apply."
is substituted for
"Tabular Values are used to determine the Death Benefit and the partial
withdrawal available for Death Benefit Option 2."
Modification of the Contract Section
"Postponement of Surrenders. Transfers and Loans From The Fixed Account
The Company can postpone the payment of the portion of the Policy's Net Cash
Value which is in the Fixed Account for not more than six months after
surrender. If payment is postponed for more than 30 days, it will be credited
with interest from the date of surrender. The rate of interest will be set each
year by the Company; but the rate will not be less than 3 1/2% per year.
The Company can postpone transfers from the Fixed Account for not more than six
months from the date of the request. The effective date of the transfer is the
date on which values are transferred from the Fixed Account.
The Company can postpone the making of any Policy Loan from the Fixed Account
for not more than six months from the day you apply, except Loans to pay
premiums on policies issued by the Company."
-2-
<PAGE>
is added to the Contract Section.
Modification of the Premiums Section
The following provision is added:
"Special Premium Option
If you elect this Option in writing it will take effect after the first policy
year. When this Option is in effect, each time the Policy and Rider premiums
have not been paid by the end of their grace period, the Company will determine
if the Option will apply. This Option will apply if the following conditions
are met:
. On the due date of the premium in default, the Cash Value minus the Tabular
Value is equal to or greater than the total of the Policy and Rider premiums
in default; and
. Use of the Option will not result in the Policy Loan Balance exceeding the
Loan Value of the Policy.
If the Option is applied, the Company will not require payment of the "Life"
premium shown as payable "For Life." (See Section 1.) The Company will deduct
from the Cash Value 92% of each of the following:
. Any difference between the "Life" premium as payable in the current policy
year and the "Life" premium shown as payable "For Life";
. Any Rider premium in default; and
. The administrative charge for the policy premium.
If the premiums are being paid at a frequency other than annual, the amount of
the payment not required and the deduction will reflect the frequency of premium
payment.
The amount will be deducted in the same proportion as the Cash Value of the
Policy is in the sub-accounts and the Fixed Account. If this Option is applied,
the Policy will not lapse for nonpayment of premium.
If you have elected both this Option and the Option for Automatic Premium
Payment by Policy Loans, the Company first will determine if this Option will
apply. If this Option cannot be applied, the Company will determine if the
Option for Automatic Premium Payment by Policy Loans will apply. (See Section
5.)
You can elect or cancel the Special Premium Option.
Use of this Option can have a permanent effect on Cash Values and Death
Benefits."
-3-
<PAGE>
Modification of the Unscheduled Payments Section
"Each net Unscheduled Payment will be invested as of the date it is received by
the Company at its Home Office."
is substituted for
"Each net Unscheduled Payment will be invested in the Account as of the date it
is received by the Company at its Home Office"
Modification of the Variable Account Section
"Each future net premium allocated to the Account will be invested as of its due
date. Each net Unscheduled Payment allocated to the Account will be invested as
of the date it is received by the Company at its Home Office."
is substituted for the third paragraph of the Sub-Accounts provision.
"The Cash Value of the Policy at any time cannot be allocated among more than 10
sub-accounts, except with the consent of the Company; and the Fixed Account will
be counted In the limit of 10.
The values and benefits of a policy depend on: the investment performance of the
portfolios in which the sub-accounts are invested; and the interest credited
to the Fixed Account. The Company does not guarantee the investment performance
of the portfolios of the sub-accounts. You bear the investment risk for amounts
invested in the sub-accounts for your Policy."
is substituted for the fifth and sixth paragraphs of the Sub-Accounts provision.
"After the Right to Return the Policy period you can transfer all or a portion
of the Policy's existing share in a sub-account to another sub-account or to the
Fixed Account. (See the Restriction of New Amounts Applied to the Fixed Account
provision.)"
is substituted for the first sentence of the Transfer Option provision.
Modification of the Nonpayment of Premiums Section
"If the Policy is lapsed to Fixed Paid-Up Insurance or Fixed Extended Term
Insurance, it will not be affected by the investment performance of the Account;
and the interest rates used for the Fixed Account."
is substituted for the last sentence in the Lapse of Policy provision
"Lapse Options
If the Policy lapses because a premium is not paid, any Net Cash Value of the
Policy less the amount of each partial surrender and partial withdrawal made
during the grace period of the premium in default will be: transferred from the
Fixed Account and the Account to the general account of the Company and used to
continue the Policy in force either as
-4-
<PAGE>
Fixed Paid-Up Insurance or Fixed Extended Term Insurance as stated below; or
left in the Fixed Account and the Account and used to continue the Policy in
force as Variable Paid-Up Insurance as stated below. Any Riders will lapse
unless otherwise stated in the Rider. Any Policy Loan Balance will terminate
when the Net Cash Value is used for this purpose."
is substituted for the Lapse Options provision.
"Variable Paid-Up Insurance has Cash Values and Loan Values. The Cash Value and
Loan Value can increase or decrease on a daily basis, depending on: the
investment performance of the elected sub-accounts; and the interest credited to
the Policy's share of the Fixed Account. (See Actual Investment Return, Section
10.)
The Cash Value of the Variable Paid-Up Insurance is equal to: the Policy's share
of the elected sub-accounts; plus the Policy's share of the Fixed Account; plus
the amount of any assets transferred to the general account of the Company
because of Policy Loans. (See Section 12.) The amount of the Cash Value depends
on: investment performance of the elected sub-accounts; interest credited to the
Policy's share of the Fixed Account; cost of insurance charges; transfers among
sub-accounts and the Fixed Account; and Policy Loans.
The cost of insurance is deducted from the Cash Value:
. On the last day of each policy month; and
. On the date the Policy is surrendered if it is other than the last day of the
policy month.
The cost of insurance will be deducted in the same proportion as the Cash Value
of the Policy is in the sub-accounts and the Fixed Account."
is substituted for the fourth and fifth paragraphs of the Variable Paid-Up
Insurance Option provision.
Modification of the Cash Value of the Policy Section
"Cash Value
The Cash Value of the Policy will depend on the net investment performance of
the Money Market sub-account until the later of: 45 days after Part I of the
Application is signed; and 10 days after the Company mails the separate Notice
of Withdrawal Right. Thereafter, the Cash Value of the Policy if all the
premiums due have been paid is equal to: Policy's share of the elected sub-
accounts; plus the Policy's share of the Fixed Account; plus the amount of any
assets transferred to the general account of the Company because of Policy
Loans. (See Section 12.) The amount of the Cash Value depends on: the frequency
and amount of net premiums; the frequency and amount of net Unscheduled
Payments; investment performance of the elected sub-accounts; interest credited
to the Policy's share of the Fixed Account; Monthly Deductions; cost of
-5-
<PAGE>
insurance charges; partial surrenders; partial withdrawals; the use of the
Special Premium Option; transfers among sub-accounts and the Fixed Account; and
Policy Loans. The Cash Value can increase or decrease on a daily basis,
depending on: the actual investment performance of the elected sub-accounts; and
the interest credited to the Policy's share of the Fixed Account. (See Actual
Investment Return below.)"
is substituted for the first and second paragraphs of the Cash Value provision.
"The monthly charges will be deducted in the same proportion as the Cash Value
of the Policy is in the sub-accounts and the Fixed Account."
is substituted for
"The monthly charges will be deducted in the same proportion as the Policy is
invested in the sub-accounts."
in the Monthly Charges provision.
"Unless you request otherwise, a partial withdrawal will reduce: first, the
Policy's share of the Sub-accounts proportionately; and second, the Policy's
share of the Fixed Account."
is substituted for
"A partial withdrawal will reduce the Policy's share of the sub-accounts
proportionately, unless you request otherwise."
in the Partial Withdrawal and Partial Surrender provision.
"Unless you request otherwise, a partial surrender will reduce: first, the
Policy's share of the sub-accounts proportionately; and second, the Policy's
share of the Fixed Account."
is added to the Partial Withdrawal and Partial Surrender Provision.
"Base Investment Return
The Policy has a Base Investment Return for each Valuation Period for its
share of each elected sub-account and of the Fixed Account. The Policy's Base
Investment Return is the amount which would be earned by the Policy's share if
the sub-account had investment performance and the Fixed Account had interest
credited at a rate equivalent to an annual effective rate of 5%. The Base
Investment of Return is used in the determination of: the Tabular Value; and
the Variable Death Benefit under the Variable Paid-Up Insurance Option."
is substituted for the Base Investment Return provision.
-6-
<PAGE>
"The Policy has an Actual Investment Return for each Valuation Period for its
share of each elected sub-account and of the Fixed Account.
The Actual Investment Return for the Fixed Account for each Valuation Period
is equal to (a) minus (b); where:
. (a) is equal to the Policy's share of the Fixed Account as of the end of the
Valuation Period;
PLUS
the monthly charges deducted in the Valuation Period;
MINUS
any net premium and net Unscheduled Payment credited during the Valuation
Period;
PLUS
the total of the partial surrenders and partial withdrawals made during the
Valuation period;
PLUS
the interest credited during the Valuation Period to any borrowed portion
of the Policy's Cash Value; and
. (b) is equal to the Policy's share of the Fixed Account for the most recent
Valuation period."
is added to the Actual Investment Return provision.
Modification to the Policy Loans Section
"Unless you request otherwise, Policy Loans will reduce first, the Policy's
share of the sub-accounts proportionately and second, the Policy's share of
the Fixed Account, except as noted below in the Interest on Loans; Policy Loan
Balance provision."
is substituted for
"Policy Loans will reduce the Policy's share of the sub-accounts
proportionately, unless you request otherwise."
in the Policy Loans provision.
"Unless the Policy is lapsed for Fixed Paid-Up Insurance or Fixed Extended
Term Insurance, the Loan Value of the Policy is the amount which with loan
interest will equal: 90% of the Cash Value of the Policy projected to the next
policy anniversary
-7-
<PAGE>
or, if earlier, to the next premium due date; less the Surrender Charge on the
next loan interest due date or, if greater, on the date the loan is made."
is substituted for the first sentence of the Loan Value provision.
"Loan Interest not paid when due will be added to the Loan and will bear
interest; when loan interest is added to the Loan, the Policy's share of the
sub-accounts and of the Fixed Account will be reduced proportionately."
is substituted for the last sentence of the Interest on Loans; Policy Loan
Balance provision.
"Loan repayments will be allocated: first, to repay the Loans made against the
Fixed Account; and second, unless you request otherwise, to repay the Loans
made against the sub-accounts in the same proportion as the Policy is invested
in the sub-accounts."
is substituted for
"Loan repayments will be allocated in the same proportion as the Policy is
invested in the sub-accounts, unless you request otherwise."
in the Repayment of Loans provision.
New England Life Insurance Company
501 Boylston Street, Boston, Massachusetts
/s/ Robert A. Shafto /s/ Daniel D. Jordan
President Secretary
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<PAGE>
NEV-254-87
Endorsement
As of the Date of Issue of this Policy, the following changes are made:
Modification of the Premiums Section
The following provision is added:
"Special Premium Option
If you elect this Option in writing it will take effect after the first policy
year. When this Option is in effect, each time the Policy and Rider premiums
have not been paid by the end of their grace period, the Company will determine
if the Option will apply. This Option will apply if the following conditions
are met:
. On the due date of the premium in default, the Cash Value minus the Tabular
Value is equal to or greater than the total of the Policy and Rider premiums
in default; and
. Use of the Option will not result in the Policy Loan Balance exceeding the
Loan Value of the Policy.
If the Option is applied, the Company will not require payment of the "Life"
premium shown as payable "For Life" (See Section 1). The Company will deduct
from the Cash Value 92% of each of the following:
. Any difference between the "Life" premium as payable in the current policy
year and the "Life" premium shown as payable "For Life";
. Any Rider premium in default; and
. The administrative charge for the policy premium.
If the premiums are being paid at a frequency other than annual, the amount of
the payment not required and the deduction will reflect the frequency of premium
payment.
The amount will be deducted in the same proportion as the Policy is invested in
the sub-accounts. If this Option is applied, the Policy will not lapse for
nonpayment of premium.
If you have elected both this Option and the Option for Automatic Premium
Payment by Policy Loans, the Company first will determine if this Option will
apply. If this Option cannot be applied, the Company will determine if the
Option for Automatic Premium Payment by Policy Loans will apply. (See Section
5.)
You can edit or cancel the Special Premium Option.
<PAGE>
Use of this Option can have a permanent effect on Cash Value and Death
Benefits."
Modification of Tabular Values Section
"Tabular Values are used to determine the Death Benefit and the partial
withdrawal available for Death Benefit Option 2 and to determine if the Special
Premium Option can apply."
is substituted for
"Tabular Values are used to determine the Death Benefit and the partial
withdrawal available for Death Benefit Option 2."
Modification of Cash Value of the Policy Section
The following provision is substituted for the Cash Value provision:
"Cash Value
Before the initial transfer to the elected sub-accounts, the Cash Value of the
Policy will depend on the net investment performance of the Money Market sub-
account. Thereafter, the Cash Value of the Policy if all premiums due and
required have been paid is equal to the total of the Policy's share of the
elected sub-accounts and the amount for any assets transferred to the general
investment account of the Company because of Policy Loans. (See Section 12.)
The amount of the Cash Value depends on: the frequency and amount of net
premiums; the frequency and amount of net Unscheduled Payments; investment
performance; Monthly Deductions; cost of insurance charges; partial surrenders;
partial withdrawals; the usage of the Special Premium Option; transfers among
sub-accounts; and Policy Loans. The Cash Value can increase or decrease on a
daily basis, depending on the investment performance of the elected sub-account.
(See Actual Investment Return below.)
For 60 days after the due date of a Premium in default, the Cash Value will not
be less than the Cash Value on the due date plus or minus the Actual Investment
Return from the due date to the date of the calculation.
If the Policy is in force under the Fixed Paid-Up Insurance Option or the Fixed
Extended Term Insurance Option: the Cash Value of the Policy on any date is
equal to the net single premium which would be required to provide the insurance
at the age of the Insured on that date; and for 31 days after each policy
anniversary, the Cash Value will not be less than on the anniversary.
The Cash Value of the Policy is not increased by the Cash Value of any Rider,
unless stated in the Rider."
New England Life Insurance Company
501 Boylston Street, Boston, Massachusetts
/s/ Robert A. Shafto /s/ Daniel D. Jordan
President Secretary
2
<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. 16 to the registration
statement on Form S-6 (File No. 33-19540) filed by New England Variable
Life Separate Account and the Company with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to variable life
insurance policies (the "Registration Statement"); and
The preparation of policy forms for the variable life insurance policies
described in the Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated premiums,
internal rates of return on net cash values and internal rates of return on
death benefits shown in Appendix A of the Prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies. The rate structure of the Policies has not been designed
so as to make the relationship between premiums and benefits, as shown in
the illustrations, appear to be correspondingly more favorable to
prospective purchasers of Policies for males aged 35 or 45 in the
underwriting class illustrated than to prospective purchasers of Policies
for males at other ages or for females. Insureds in other underwriting
classes may have higher cost of insurance charges and premiums.
2. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the Appendix,
is consistent with provisions of the Policies.
3. The illustration of net scheduled premiums and net unscheduled payments
shown under the heading "Charges and Expenses-Deductions from Premiums and
Unscheduled Payments" in the Prospectus contains the net scheduled premium
and net unscheduled payment amounts allocated to the Variable Account for
scheduled premiums and unscheduled payments of $2,000 each under a Policy
with no riders and covering an insured who is not in a substandard risk
classification.
4. The information contained in the example of how the maximum loanable amount
is determined under the heading "Other Policy Features-Loan Provision" in
the Prospectus is consistent with the provisions of the Policies.
<PAGE>
Page 2
April 26, 1999
I hereby consent to the filing of this opinion as an Exhibit to this Post-
Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler, F.S.A.,M.A.A.A.
Second Vice President and Actuary
<PAGE>
Exhibit 6
[Sutherland Asbill & Brennan LLP]
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We consent to the reference to our firm in the prospectus included in Post-
Effective Amendment No. 16 to the Registration Statement on Form S-6 for Zenith
Life Plus, issued through the New England Variable Life Separate Account (File
No. 33-19540). In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.
SUTHERLAND ASBILL & BRENNAN LLP
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. 16 to the
Registration Statement No. 33-19540 of New England Variable Life Separate
Account (the "Separate Account") of New England Life Insurance Company (the
"Company") of our reports dated February 10, 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
