<PAGE>
As filed with Securities and Exchange Commission on
April 27, 2000
Registration No. 33-65263
____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 6
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
_____________________________
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
MARIE C. SWIFT, ESQ.
Counsel
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH, ESQ.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
___________________________
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered: Units of Interest in Modified Single
Premium Variable Life Insurance Policies.
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
Registration Statement on Form S-6
Cross-Reference Sheet
<TABLE>
<CAPTION>
Form N-8B-2
Item No. Caption in Prospectus
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<S> <C>
1 Cover Page
2 Cover Page
3 Inapplicable
4 NELICO's Distribution Agreement
5 NELICO
6 The Variable Account
9 Inapplicable
10(a) Other Policy Features
10(b) Cash Value and Cash Value Benefits
10(c), (d), (e) Cash Value and Cash Value Benefits; Right to Return the
Policy; Lapse and Reinstatement
10(f), (g), (h) Voting Rights; Rights Reserved by NELICO
10(i) Limits to NELICO's Right to Challenge the Policy; Payment of
Proceeds; Investments of the Variable Account
11 The Variable Account
12 Investments of the Variable Account; NELICO's Distribution
Agreement
13 Charges and Expenses; NELICO's Distribution Agreement; Charge
for NELICO's Income Taxes; Appendix A
14 Premium Payments
15 Premium Payments
16 Investments of the Variable Account
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 The Variable Account; Appendix B
19 Reports; NELICO's Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Privilege
22 Inapplicable
23 NELICO's Distribution Agreement
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 NELICO's Distribution Agreement
27 NELICO
28 Management
29 NELICO
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
</TABLE>
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<TABLE>
<CAPTION>
Form N-8B-2
Item No. Caption in Prospectus
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<S> <C>
34 NELICO's Distribution Agreement
35 NELICO
36 Inapplicable
37 Inapplicable
38 NELICO's Distribution Agreement
39 NELICO's Distribution Agreement
40 NELICO's Distribution Agreement
41(a) NELICO's Distribution Agreement
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Premium Payments
44(b) Charges and Expenses
44(c) Premium Payments; Deductions from Initial Premium; Deductions
from Additional Payments
45 Inapplicable
46 Investments of the Variable Account; Captions referenced under
Items 10(c), (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Lapse and Reinstatement; Charges and
Expenses; Policy Owner and Beneficiary; Premium Payments;
NELICO's Distribution Agreement
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
</TABLE>
<PAGE>
AMERICAN GATEWAY SERIES
Modified Single Premium Variable Life Insurance Policies
Issued by
New England Variable Life Separate Account
Home Office:
New England Life Insurance
Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus offers individual modified single premium variable life
insurance policies (the "Policies") issued by New England Life Insurance
Company ("NELICO").
You may purchase a Single Insured Policy or a Last Survivor Policy. A Single
Insured Policy pays a death benefit on the death of a single named insured. A
Last Survivor Policy pays a death benefit on the last of two named insureds to
die. The death benefit is the greater of the variable death benefit and the
minimum guaranteed death benefit. The variable death benefit amount is the
Policy's cash value divided by the applicable net single premium. The initial
minimum guaranteed death benefit is based on premium payments made.
You may allocate premiums to one or more investment Sub-Accounts of NELICO's
Variable Life Separate Account (the "Variable Account"). Each Sub-Account of
the Variable Account invests in shares of an Eligible Fund of the New England
Zenith Fund ("Zenith Fund") or the Metropolitan Series Fund, Inc.
("Metropolitan Fund"). The Eligible Funds are:
NEW ENGLAND ZENITH FUND Harris Oakmark Mid Cap Value Series
Back Bay Advisors Money Market Series Loomis Sayles Small Cap Series
Back Bay Advisors Bond Income Series MFS Investors Series
Salomon Brothers Strategic Bond MFS Research Managers Series
Opportunities Series Westpeak Growth and Income Series
Salomon Brothers U.S. Government Series Westpeak Stock Index Series
Back Bay Advisors Managed Series METROPOLITAN SERIES FUND, INC.
Balanced Series Putnam Large Cap Growth Portfolio*
Alger Equity Growth Series Putnam International Stock Portfolio*
Davis Venture Value Series
- --------
* Availability is subject to any necessary state insurance department
approvals.
You may make partial surrenders and Policy loans from time to time, subject
to certain restrictions. In almost all cases, the Policies will be modified
endowment contracts for federal income tax purposes.
A LOAN, DISTRIBUTION OR OTHER AMOUNT RECEIVED FROM A MODIFIED ENDOWMENT
CONTRACT DURING THE LIFE OF AN INSURED WILL BE TAXED TO THE EXTENT OF ANY
ACCUMULATED INCOME IN THE POLICY. ANY AMOUNTS THAT ARE TAXABLE WITHDRAWALS
WILL BE SUBJECT TO A 10% ADDITIONAL TAX, WITH CERTAIN EXCEPTIONS, INCLUDING AN
EXCEPTION FOR DISTRIBUTIONS MADE ON OR AFTER THE DATE WHEN YOU ATTAIN AGE 59
1/2.
The cash value of your Policy will vary daily with the investment experience
of the Eligible Funds.
You may cancel the Policy during the "right to return the Policy" period.
Because of this right, we will invest your initial premium in the Money Market
Sub-Account until 15 days (in most states) after we mail the confirmation for
the initial premium. Thereafter, the cash value will be invested in the Sub-
Accounts according to your instructions.
It may not be advantageous to replace existing insurance with the Policy
described in this prospectus.
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 SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
THE STATEMENT OF ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE,
AND OTHER INFORMATION REGARDING REGISTRANTS THAT FILE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE ADDRESS OF THE SITE IS
HTTP://WWW.SEC.GOV.
THE ELIGIBLE FUND PROSPECTUSES ARE ATTACHED. PLEASE READ THEM AND KEEP THEM
FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THESE SUB-ACCOUNTS OR ELIGIBLE FUNDS WILL
PERFORM. THE POLICIES AND THE ELIGIBLE FUNDS 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.
MAY 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY................................................................... A-4
INTRODUCTION TO THE POLICIES............................................... A-5
The Policies.............................................................. A-5
Comparison to Other Policies and Other Investments........................ A-5
Diagram of Policy......................................................... A-7
Availability of the Policy................................................ A-9
Policy Charges............................................................ A-9
Right to Return the Policy................................................ A-12
Receipt of Communications and Payments at NELICO's Home Office............ A-12
NELICO..................................................................... A-12
PREMIUMS................................................................... A-12
Applying for a Policy..................................................... A-12
Premium Payments.......................................................... A-12
Lapse and Reinstatement................................................... A-13
ALLOCATION OF PREMIUM PAYMENTS AND TRANSFER OF CASH VALUE.................. A-14
Allocation of Premium Payments............................................ A-14
Amount Provided for Investment under the Policy........................... A-14
Transfer Option........................................................... A-15
Dollar Cost Averaging..................................................... A-15
Asset Rebalancing......................................................... A-16
Transfer and Reallocation Requests........................................ A-16
DEATH BENEFIT.............................................................. A-16
How the Death Benefit is Determined....................................... A-17
Minimum Guaranteed Death Benefit.......................................... A-17
Adjustments to the Death Proceeds Payable................................. A-17
Payment of Death Benefit Proceeds......................................... A-18
CASH VALUE AND CASH VALUE BENEFITS......................................... A-18
Cash Value................................................................ A-18
Net Investment Experience................................................. A-18
Loan Privilege............................................................ A-19
Effect of Policy Loan..................................................... A-19
Surrender................................................................. A-20
Partial Surrenders........................................................ A-20
Effect of Partial Surrender on Cash Value and Death Benefit............... A-20
Acceleration of Benefits Rider--Terminal Illness.......................... A-21
Acceleration of Benefits Rider--Long-Term Care............................ A-21
Payment of Proceeds....................................................... A-21
Payment Options........................................................... A-22
CHARGES AND EXPENSES....................................................... A-23
Deductions from Payments.................................................. A-23
Monthly Deduction from Cash Value......................................... A-23
Sales Charges............................................................. A-23
State Premium Tax Charge.................................................. A-24
Charges under Policies Issued to New York Residents....................... A-24
Cost of Insurance Charge.................................................. A-24
Administrative Charge..................................................... A-25
Monthly Maintenance Charge................................................ A-26
Surrender Charge.......................................................... A-26
Mortality and Expense Risk Charge......................................... A-26
Daily Charges Deducted from the Variable Account Assets................... A-27
Charges Deducted from Eligible Fund Assets................................ A-27
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
Charges for Additional Services.......................................... A-27
Group or Sponsored Arrangements.......................................... A-27
THE VARIABLE ACCOUNT...................................................... A-28
Investments of the Variable Account...................................... A-28
Investment Management.................................................... A-30
Substitution of Investments.............................................. A-31
OTHER POLICY FEATURES..................................................... A-31
Policy Owner and Beneficiary............................................. A-31
Exchange of Policy....................................................... A-31
NELICO'S DISTRIBUTION AGREEMENT........................................... A-32
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY.......................... A-32
Misstatement of Age or Sex............................................... A-32
Suicide.................................................................. A-33
TAX CONSIDERATIONS........................................................ A-33
Introduction............................................................. A-33
Tax Status of the Policy................................................. A-33
Tax Treatment of Policy Benefits......................................... A-34
In General............................................................... A-34
Modified Endowment Contracts ............................................ A-34
Investment in the Policy................................................. A-35
Policy Loans............................................................. A-35
Multiple Policies........................................................ A-35
Accelerated Benefits Rider............................................... A-35
Other Policy Owner Tax Matters........................................... A-35
Possible Tax Law Changes................................................. A-36
NELICO's Income Taxes.................................................... A-36
MANAGEMENT................................................................ A-37
VOTING RIGHTS............................................................. A-39
RIGHTS RESERVED BY NELICO................................................. A-40
TOLL-FREE NUMBERS......................................................... A-40
REPORTS................................................................... A-40
ADVERTISING PRACTICES..................................................... A-40
LEGAL MATTERS............................................................. A-41
REGISTRATION STATEMENT.................................................... A-41
EXPERTS................................................................... A-41
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, NET CASH VALUES
AND ACCUMULATED PREMIUMS................................................. A-42
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............................. A-54
APPENDIX C: EXAMPLE OF EFFECT OF NEGATIVE INVESTMENT PERFORMANCE ON
CALCULATION OF SURRENDER CHARGES; EXAMPLE OF ADJUSTMENT TO PREMIUM TAX
CHARGE RESULTING FROM ADDITIONAL PAYMENTS................................ A-81
APPENDIX D: EXAMPLES OF EFFECT OF SURRENDERS AND PARTIAL SURRENDERS ON
OPERATION OF POLICY...................................................... A-82
APPENDIX E: LONG-TERM MARKET TRENDS....................................... A-84
APPENDIX F: DOLLAR COST AVERAGING......................................... A-85
FINANCIAL STATEMENTS...................................................... AA-1
</TABLE>
A-3
<PAGE>
GLOSSARY
We have tried to make this prospectus as understandable for you as possible.
However, in explaining how the Policy works, we have had to use certain terms
that have special meanings. These terms are defined below.
AGE. For purposes of this prospectus, the age of an insured refers to the
insured's age at his or her last birthday. Joint insureds are assigned the
same "joint equal age," which reflects the anticipated mortality of both
insureds (except in Texas and New Jersey where the age of the younger insured
is used).
CASH VALUE. A Policy's cash value is the sum of the amount of its cash value
held in the Variable Account and, if there is an outstanding policy loan, the
amount of its cash value held in NELICO's general account as a result of the
loan.
FACE AMOUNT. The amount of the initial premium.
INVESTMENT START DATE. This is the latest of the date NELICO receives the
initial premium for the Policy, the date when the last Part II of the Policy
application or the Supplement to the Part I Application is signed, if any is
required, and the Policy Date. It is the date when an amount is first provided
for investment under the Policy.
ISSUE AGE. The age of an insured as of the last birthday on or before the
Policy Date. In the case of a Last Survivor Policy, "issue age" refers to the
joint equal age assigned to both insureds (insureds' ages must be no more than
9 years apart). For a Last Survivor Policy issued in Texas and New Jersey, the
"issue age" is the age of the younger insured (insureds' ages must be no more
than 5 years apart).
NET CASH VALUE. On any day, the Policy's net cash value is equal to the cash
value for that day, reduced by any outstanding Policy loan balance and also
reduced by any Surrender Charge that would apply on surrender.
POLICY DATE. If you make the initial premium payment with the application or
during the underwriting process, the Policy Date is generally the later of the
date when the last Part II of the application or the Supplement to the Part I
Application is signed, if any is required, and receipt of the premium payment.
If you do not submit the initial premium with the application or during the
underwriting process, the Policy Date will generally be the date NELICO
receives the initial premium payment for the Policy. The Policy Date is the
date used to determine all future cyclical periods under the Policy, e.g.,
Policy Months and Policy Years.
POLICY LOAN BALANCE. Policy loans outstanding plus interest accrued to date.
PREFERRED SURRENDER AMOUNT. This amount may be surrendered from the Policy's
cash value during the Surrender Charge Period free of any Surrender Charge.
This amount is equal to the greater of (a) cash value in excess of initial
premium paid (minus any previous partial surrenders attributable to the
initial premium) and (b) 10% of the initial premium paid (minus previous
partial surrenders in that Policy Year).
A-4
<PAGE>
INTRODUCTION TO THE POLICIES
THE POLICIES
The Policies are designed to provide lifetime insurance coverage. They are
not offered primarily as an investment.
Here is a summary of your Policy's basic features. You should read the
entire prospectus for more complete information.
-- PREMIUM PAYMENTS. You must pay an initial premium of at least $10,000
unless we consent otherwise. After the first Policy Year, you may make
additional payments, subject to certain restrictions and limitations.
The tax consequences associated with continuing a Policy beyond age 100
of the insured(s) are unclear. A tax advisor should be consulted on this
issue.
-- INVESTMENT OF PREMIUMS. After an initial period in the Money Market Sub-
Account, your initial premium is invested according to your instructions
in one or more of the Sub-Accounts. Any net additional payments will be
invested in the Sub-Accounts according to your instructions.
-- AVAILABLE PORTFOLIOS. The mutual fund portfolios (Eligible Funds)
available include several common stock funds, including a fund which
invests primarily in foreign securities, three bond funds, one
equity/fixed income fund, two balanced funds, and a money market fund.
(See "Investments of the Variable Account.")
-- LIMITS ON ALLOCATIONS. You can allocate your Policy's cash value to a
maximum of 10 Sub-Accounts.
-- TRANSFERS. Fifteen days (longer in certain states) after we mail the
confirmation for your initial premium payment, you may transfer portions
of the Policy's cash value among the Sub-Accounts. Currently, we do not
charge a transfer fee or limit the number of transfers; but we do apply
special limits to "market- timing." We reserve the right to limit
transfers and to charge a fee (for Policies issued in New York, the
minimum number of transfers permitted each Policy Year will never be
less than twelve). (See "Transfer Option.")
-- FLUCTUATING CASH VALUE. The cash value of your Policy will vary daily
based on the net investment experience of your Policy's Sub-Accounts.
The cash value is not guaranteed. You bear the investment risk.
-- DEATH BENEFIT. The death benefit is the greater of the variable death
benefit and the minimum guaranteed death benefit.
-- POLICY LOANS AND PARTIAL SURRENDERS. A loan privilege is available under
your Policy. We also allow partial surrenders. (See "Loan Privilege" and
"Partial Surrenders.")
-- FEDERAL INCOME TAX CONSEQUENCES. Death benefits paid under a life
insurance contract generally are not subject to Federal income tax.
Under current law, undistributed increases in cash value of a life
insurance contract generally are not taxable. In almost all situations,
your Policy will be treated as a modified endowment contract. Pre-death
distributions (including partial surrenders and loans) from a modified
endowment contract are included in income on an income first basis, and
a 10% penalty tax may be imposed on income distributed before you reach
age 59 1/2.
COMPARISON TO OTHER POLICIES AND OTHER INVESTMENTS
In many respects the Policies are similar to fixed-benefit life insurance.
Like fixed-benefit life insurance, the Policies offer a death benefit and
provide a cash value, loan privileges and surrender values.
The Policies are different from fixed-benefit life insurance in that the
death benefit will in most cases, and the cash value will always, vary to
reflect the investment experience of your selected Sub-Accounts.
A-5
<PAGE>
We designed the Policies to provide insurance protection. Although the
underlying mutual fund portfolios invest in securities similar to those in
which mutual funds available directly to the public invest, in many ways the
Policies differ from mutual fund investments. The main differences are:
-- The Policy provides a death benefit based on our assumption of an
actuarially calculated risk.
-- If the net cash value is not sufficient to pay a Monthly Deduction
because there is an excess Policy loan, the Policy will lapse with no
value unless you make a payment. If the Policy lapses when Policy loans
are outstanding, adverse tax consequences may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from your Policy's cash value
and any additional premiums. These charges include various insurance,
risk, administrative and state premium tax charges.
-- The Variable Account, not you, owns the mutual fund shares.
-- Federal income tax liability on any earnings on the mutual fund
investment is generally deferred until you receive a distribution from
the Policy. Transfers from one underlying fund portfolio to another do
not incur tax liability under current law.
-- Dividends and capital gains are automatically reinvested.
We offer other variable life insurance contracts that may have different
death benefits, contract features, fund selections, and optional programs.
These other contracts also have different charges that would affect your sub-
account performance and Contract Value. To obtain more information about these
other contracts, contact your registered representative.
For any tax qualified account e.g. 401(k) plan or IRA, the tax deferred
accrual feature is provided by the tax qualified retirement plan. Therefore,
there should be reasons other than tax deferral for acquiring a variable life
policy within a qualified plan.
The chart on the following pages shows how the Policy operates.
A-6
<PAGE>
DIAGRAM OF POLICY
PREMIUM PAYMENTS
--Minimum initial premium required is $10,000.
--You may make additional payments after the first Policy
Year, within limits. See page A-12.
DEDUCTIONS FROM PREMIUMS BEFORE ALLOCATION
-- From initial premium: NONE
-- From additional payments:
--6.5% charge for sales load expense (reduced to 5.10% for
additional payments on Policies with initial premiums of
$2,000,000 or more).
--2.5% charge for state premium tax. See page A-23.
INVESTMENT OF PREMIUMS
-- You direct the allocation of initial premiums and any net additional
payments among Sub-Accounts. See pages A-14 to A-15 for rules and limits
on allocations.
-- The Sub-Accounts invest in corresponding portfolios of the New England
Zenith Fund or Metropolitan Series Fund, Inc. (Eligible Funds). See page
A-28. Eligible Funds are:
Back Bay Advisors Money Market Harris Oakmark Mid Cap
Series Value Series
Back Bay Advisors Bond Income Series Loomis Sayles Small Cap
Series
Salomon Brothers Strategic MFS Investors Series
Bond
MFS Research Managers
Series
Opportunities Series
Salomon Brothers U.S. Government Westpeak Growth and Income Series
Series
Back Bay Advisors Managed Series Westpeak Stock Index Series
Putnam Large Cap Growth Portfolio
Balanced Series
Alger Equity Growth Series Putnam International Stock Portfolio
Davis Venture Value Series
A-7
<PAGE>
CASH VALUE
-- Cash value is equal to the initial premium and any net additional
payments, as adjusted each day the New York Stock Exchange is open to
reflect Sub-Account net investment experience, charges deducted and other
Policy transactions (such as transfers and partial surrenders). See page
A-18.
-- Cash value varies from day to day. There is no minimum guaranteed cash
value. The Policy may lapse if you have a Policy loan. See pages A-18 and
A-19.
-- You can transfer cash value among the Sub-Accounts. See pages A-15 to A-
16 for rules and limits. Policy loans reduce the amount available for
allocations and transfers.
-- Dollar cost averaging and asset rebalancing programs are available. See
pages A-15 and A-16.
-- Cash value is the starting point for calculating certain values under
your Policy, such as the net cash value and the death benefit.
DEDUCTIONS FROM CASH VALUE
-- Monthly Deduction from cash value for:
-- cost of insurance* (currently calculated as a percentage of cash value
at an annual rate, depending on the issue age and risk class of the
insured, ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class
(0.70% to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class
(0.40% to 1.60% for substandard risk class)
-- Administrative charge, calculated as a percentage of cash value at an
annual rate of 0.35% (currently reducing to 0.10% after ten years).**
-- During first ten Policy Years, sales charge and state premium tax
charge, calculated as percentages of cash value at annual rates of
0.40% and 0.25%, respectively.**
-- Mortality and expense risk charge, calculated as a percentage of cash
value at an annual rate of 0.90%.
-- For Policies with cumulative premiums less than $50,000, a Monthly
Maintenance Charge of $2.50 per month.
--------
* We do not deduct the cost of insurance charge on or after the Policy
Anniversary when the age of the insured(s) is equal to 100.
** For Policies with initial premiums of $2,000,000 or more, the 0.40%
sales charge and the 0.25% state premium tax charge will be waived,
and the Administrative Charge currently will be waived after the tenth
Policy Year.
See page A-23.
-- Investment advisory fees and fund operating expenses are deducted from
the assets of each Eligible Fund. See pages A-10 to A-11.
CASH VALUE BENEFITS DEATH BENEFITS
-- Income tax free to Beneficiary.
-- You may take loans for amounts (See "Tax Considerations.")
up to 90% of net cash value at -- Available as lump sum or under
a net interest rate charge of a variety of payment options.
0.75%. Preferred loans are cur- -- Greater of variable death bene-
rently available (with a net fit or minimum guaranteed death
interest rate charge of 0%). benefit.
See page A-19 for rules and
limits. -- Variable death benefit
equals the cash value di-
-- You may surrender your Policy vided by the applicable net
in full at any time for its net single premium. See page A-
cash value, less the Monthly 17.
Deduction to the date of sur- -- Minimum guaranteed death
render. A declining sales benefit is the initial pre-
charge of up to 8.0% of the mium plus additional pay-
initial premium will apply to a ments, less partial surren-
full surrender made during the ders, as long as there is
first nine Policy Years. Fed- not an excess Policy loan.
eral taxes and a tax penalty See page A-17. On each five-
also may apply. See page A-20. year anniversary of the Pol-
icy Date up to age 75, the
-- You may make partial surren- minimum guaranteed death
ders. A pro rata portion of the benefit will be reset as the
Surrender Charge may apply on greater of the minimum guar-
partial surrenders made during anteed death benefit before
the first nine Policy Years. the recalculation, and the
Federal taxes and a tax penalty cash value on that date. See
also may apply. See page A-20 page A-17.
for rules and limits.
-- Preferred surrender amounts -- We will reduce the proceeds
(with no surrender charges ap- paid by any Policy loan bal-
plicable) are available. ance.
-- Payment options are available.
See page A-22.
A-8
<PAGE>
AVAILABILITY OF THE POLICY
We issue the Policies on the lives of insureds from the ages of 20 to 80. In
the case of a Single Insured Policy, the proposed insured must meet our
underwriting and other requirements for issuance. In the case of a Last
Survivor Policy, both of the insureds must meet those requirements. An insured
may qualify for "simplified underwriting." (See "Applying for a Policy.")
Individuals, and entities who may want to use Policies with certain
retirement plans that qualify for tax benefited treatment under Section 401(a)
(but not Section 401(k)) of the Internal Revenue Code (the "Code"), may
purchase the Policies.
POLICY CHARGES
-- DEDUCTIONS FROM INITIAL PREMIUM. We do not deduct any charges from the
initial premium before allocation to the Sub-Accounts, although a
monthly sales charge and state premium tax charge are deducted as part
of the Monthly Deduction during the first ten Policy Years, and a
Surrender Charge applies during the Surrender Charge Period (the first
nine Policy Years).
-- DEDUCTIONS FROM ADDITIONAL PAYMENTS. We will deduct the following
charges from each additional payment before allocation to the Sub-
Accounts you select:
-- 6.5% sales charge (reduced to 5.10% for Policies with Initial
Premiums of $2,000,000 or more).
-- 2.5% state premium tax charge.
-- MONTHLY DEDUCTION DEDUCTED FROM CASH VALUE. We deduct a charge from the
cash value on each Monthly Deduction Date after the date we issued your
Policy. This charge equals the total of the charges below, shown at
their current annual rates:
-- Cost of insurance charge,* ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class
(0.70% to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class
(0.40% to 1.60% for substandard risk class)
-- 0.35% Administrative Charge (currently reduced to 0.10% after the
first ten Policy Years)**
-- 0.40% sales charge (deducted during the first ten Policy Years
only)**
-- 0.25% state premium tax charge (deducted during the first ten Policy
Years only)**
-- 0.90% mortality and expense risk charge
-- For Policies with cumulative premiums less than $50,000, a $2.50
Monthly Maintenance Charge
- --------
* No cost of insurance charge is deducted on or after the Policy Anniversary
when the insured(s) is age 100.
** For Policies with initial premiums of $2,000,000 or more, we waive the
0.40% sales charge and 0.25% premium tax charge, and we currently waive the
Administrative Charge after the tenth Policy Year.
We calculate each charge, except the $2.50 Monthly Maintenance Charge, as a
percentage of cash value on the Monthly Deduction Date. We deduct each charge
pro rata from the cash value in the Sub-Accounts.
We may change the charges shown above. We guarantee that the current cost of
insurance charges will not exceed the maximum permitted under the 1980
Commissioners' Standard Ordinary Smoker/Nonsmoker Tables (or multiples of or
additives to, in the case of substandard classifications). We will adjust the
rate of the state premium tax charge downward proportionately if cash value
increases as a result of an additional payment. We also will monitor the sales
charge so that the total dollar amount deducted, as part of the Monthly
Deduction and any Surrender Charge, does not exceed 9.0% of the initial
premium. We guarantee that the Administrative Charge will
A-9
<PAGE>
not exceed an annual rate of 0.35% of cash value. The $2.50 Monthly
Maintenance Charge will apply only if cumulative premiums you paid are less
than $50,000.
-- CHARGES DEDUCTED FROM ELIGIBLE FUND ASSETS. The value of shares of the
Eligible Funds reflect charges and deductions from assets for investment
advisory services and fund operating expenses.
ANNUAL SERIES OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1999
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE CAP OR EXPENSE DEFERRAL)
<TABLE>
<CAPTION>
SALOMON
BACK BAY BACK BAY BROTHERS SALOMON
ADVISORS ADVISORS STRATEGIC BROTHERS BACK BAY ALGER DAVIS
MONEY BOND BOND U.S. ADVISORS EQUITY VENTURE
MARKET INCOME OPPORTUNITIES GOVERNMENT MANAGED BALANCED GROWTH VALUE
SERIES SERIES SERIES SERIES* SERIES SERIES SERIES SERIES
-------- -------- ------------- ---------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .35% .40% .65% .55% .50% .70% .75% .75%
Other Expenses.......... .05% .08% .16% .15% .08% .07% .05% .06%
---- ---- ---- ---- ---- ---- ---- ----
Total Operating Ex-
penses................ .40% .48% .81% .70% .58% .77% .80% .81%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
HARRIS LOOMIS WESTPEAK MORGAN
OAKMARK SAYLES MFS GROWTH WESTPEAK STANLEY
MID CAP SMALL MFS RESEARCH AND STOCK INTERNATIONAL
VALUE CAP INVESTORS MANAGERS INCOME INDEX MAGNUM
SERIES SERIES* SERIES* SERIES* SERIES SERIES EQUITY SERIES**
------- ------- --------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .75% .90% .75% .75% .68% .25% .90%
Other Expenses.......... .13% .10% .15% .15% .06% .10% .40%
---- ----- ---- ---- ---- ---- -----
Total Operating Ex-
penses................ .88% 1.00% .90% .90% .74% .35% 1.30%
==== ===== ==== ==== ==== ==== =====
</TABLE>
- --------
* Without the applicable expense cap or expense deferral arrangement
(described below), Total Series Operating Expenses for the year ended
December 31, 1999 would have been: MFS Investors Series, 2.03%; MFS
Research Managers Series, 2.03% (both on an annualized basis since the
Series' start date of April 30, 1999); and Salomon Brothers U.S. Government
Series, .72%. In 1999, the management fee for the Loomis Sayles Small Cap
Series was 1.00%, and Total Series Operating Expenses were capped at 1.00%.
Without the expense cap, Total Series Operating Expenses would have been
1.10%.
** The Morgan Stanley International Magnum Equity Series is not an Eligible
Fund for Contracts purchased on or after May 1, 2000.
Our affiliate, New England Investment Management, Inc. ("NEIM"), is the
investment adviser for the series of the Zenith Fund. New England Investment
Management voluntarily limits the expenses (other than brokerage costs,
interest, taxes or extraordinary expenses) of certain series with either an
expense cap or expense deferral arrangement. Under the expense cap, New
England Investment Management bears expenses of the Loomis Sayles Small Cap
Series that exceed 1.00% of average daily net assets. Under the expense
deferral agreement, New England Investment Management bears expenses which
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. The limit on expenses for these series are: .90% of average
daily net assets for the Harris Oakmark Mid Cap Value, MFS Investors and MFS
Research Managers Series; .70% of average daily net assets for the Salomon
Brothers U.S. Government Series; and 1.30% of average daily net assets for the
Morgan Stanley International Magnum Equity Series. New England Investment
Management may end these expense limits at any time.
A-10
<PAGE>
MetLife is the investment advisor for the Portfolios of the Metropolitan
Series Fund, Inc. The Portfolios pay investment management fees to MetLife and
also bear other expenses. The chart below shows the total operating expenses
of the Portfolios for the year ended December 31, 1999 (in the case of the
Putnam Large Cap Growth Portfolio, anticipated expenses for 2000) as a
percentage of Portfolio net assets.
<TABLE>
<CAPTION>
PUTNAM PUTNAM
LARGE INTERNATIONAL
CAP STOCK
PORTFOLIO GROWTH PORTFOLIO
- --------- ------ -------------
<S> <C> <C>
Management Fees............................................ .80% .90%
Other Expenses............................................. .20% .22%
----- -----
Total Annual Expenses..................................... 1.00%* 1.12%
===== =====
</TABLE>
- --------
* Metlife voluntarily pays expenses (other than the management fee, brokerage
commissions, taxes, interest and other loan costs, and any unusual one-time
expenses) of the Putnam Large Cap Growth Portfolio that exceed .20% of net
assets until the earlier of 7/1/02 and the date this Portfolio reaches $100
million. Without this subsidy, the anticipated total annual expenses of the
Putnam Large Cap Growth Portfolio would be 1.39%. MetLife can terminate
this arrangement at any time upon notice to the Board of Directors and to
Fund shareholders.
-- SURRENDER CHARGE. If you surrender your Policy, take a partial surrender
from your Policy or if your Policy lapses during the first nine Policy
Years (the Surrender Charge Period), we may deduct a Surrender Charge.
The Surrender Charge is a deferred sales charge. The amount of this
charge decreases over the course of the Surrender Charge Period. The
table below shows the Surrender Charge as a percentage of the portion of
the amount surrendered subject to the Surrender Charge:
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
----------- ------
<S> <C>
1............................... 8.0%
2............................... 8.0%
3............................... 7.0%
4............................... 6.0%
5............................... 5.0%
6............................... 4.0%
7............................... 3.0%
8............................... 2.0%
9............................... 1.0%
10............................... 0.0%
</TABLE>
We deduct the Surrender Charge from the amount surrendered.
During the Surrender Charge period, a partial surrender is taken first from
the "preferred surrender amount" free of any Surrender Charge and then from
the cash value subject to the Surrender Charge. The "preferred surrender
amount" is equal to the greater of (a) cash value on the date of surrender in
excess of the initial premium paid (minus any previous partial surrenders
attributable to the initial premium) and (b) 10% of the initial premium paid
(minus previous partial surrenders in that Policy Year). If you make a full
surrender during the Surrender Charge Period, the preferred surrender amount
will be deducted from the amount of the full surrender before the Surrender
Charge is calculated.
For more information concerning the Surrender Charge, see "Surrender
Charge."
For more information concerning the charges and expenses associated with
your Policy, see "Charges and Expenses."
A-11
<PAGE>
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 10 days (or more in some states) after you
receive the Policy. You can return the Policy to us or your registered
representative. Insurance coverage ends as soon as you return the Policy (as
determined by its postmark, if the Policy is mailed). If you choose to cancel
the Policy, we will refund any premiums paid (or any other amount that is
required in some states) with interest at our current rate.
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME OFFICE
We will treat your request for a Policy transaction, or your submission of a
payment, as received at our Home Office if we receive it there before the
close of regular trading on the New York Stock Exchange on that day. If we
receive it after that time, or if the New York Stock Exchange is not open that
day, then we will treat it as received on the next day when the New York Stock
Exchange is open.
NELICO
NELICO was organized as a stock life insurance company in Delaware in 1980
and is licensed to sell life insurance in all states, the District of Columbia
and Puerto Rico. NELICO was formerly a wholly-owned subsidiary of New England
Mutual Life Insurance Company ("New England Mutual"). On August 30, 1996, New
England Mutual merged into MetLife, an insurance company whose principal
office is at One Madison Avenue, New York, NY 10010. MetLife is a wholly-owned
subsidiary of MetLife, Inc., a publicly traded company. MetLife then became
the parent of NELICO. In connection with the merger, NELICO changed its name
from "New England Variable Life Insurance Company" to "New England Life
Insurance Company," and changed its domicile from the State of Delaware to the
Commonwealth of Massachusetts. NELICO's Home Office is now 501 Boylston
Street, Boston, Massachusetts 02116. NELICO's mailing address is: P.O. Box
9116, Boston, Massachusetts 02117.
PREMIUMS
APPLYING FOR A POLICY
To purchase a Policy you must submit an application and provide evidence of
insurability of the proposed insured(s). You must also pay the initial premium
before we issue the Policy. We will issue a Single Life Policy for an insured
who is between the ages of 20 to 80 and meets our insurability requirements.
We will issue a Last Survivor Policy on two insureds only if each of them is
between the ages of 20 and 80 and each of them meets our insurability
requirements. The ages of the two insureds may not be more than nine years
apart (except in Texas and New Jersey where the ages of the two insureds may
not be more than five years apart).
Before accepting an application, we conduct underwriting to determine
insurability. Depending on the amount of the initial premium and the age of
the insured(s), the insured may qualify for simplified underwriting. To
qualify, a written questionnaire concerning the insured's health must be
completed.
We reserve the right to reject an application or premium for any reason. If
we do not issue a Policy, we will return to you, any premium payment you
submitted plus interest at our current rate. If we issue a Policy, it is
effective on the Policy Date.
PREMIUM PAYMENTS
The minimum initial premium we require is $10,000, unless we otherwise
consent. Currently, we will not accept a premium payment that would cause your
policy value, including the value of all other policies you may own with us,
to exceed $5,000,000. You may purchase a Policy with the proceeds of another
life insurance policy, so long as the following conditions are met.
(1) you must complete the application forms.
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<PAGE>
(2) if the value to be applied from the existing policy is subject to a
policy loan, then as part of the initial premium you must submit an
additional amount so that the unloaned cash value at issue is $10,000. Any
loan remaining cannot exceed 80% of the cash value of the Policy at the
time of issue.
It may not be advantageous to replace existing insurance with a Policy.
You may make additional payments by check or money order until the
insured(s) is age 100, subject to our underwriting requirements (an exception
may apply during a grace period (See "Lapse and Reinstatement")).
However, the following requirements apply:
(1) Any additional payments you make must be at least $1,000 (except for
a payment made during a grace period (see "Lapse and Reinstatement"). For
policies issued in New York, any additional payment must be at least
$10,000).
(2) You may make only one additional payment during each Policy Year
beginning with the second year.
(3) If you have a loan, we will apply any payment we receive first
towards repayment of the loan interest due, second towards repayment of the
loan and last as an additional payment (unless you tell us otherwise in
writing when you send us the payment). (See Effect of Policy Loan.")
(4) Before we accept an additional payment, we may require satisfactory
evidence of insurability if the additional payment would increase the death
benefit by more than it would increase the cash value.
We reserve the right to reject an additional payment for any reason. If we
accept an additional payment, we will credit your net additional payment,
after deductions for sales and state premium tax charges, to your Policy's
cash value. We will credit the additional payment on the date the payment is
received at our Home Office, if underwriting was not required, or the date
underwriting was completed if required. (See "Allocation of Premiums,"
"Charges and Expenses," and "Receipt of Communications and Payments at
NELICO's Home Office.")
If an additional payment is accepted, a proportional downward adjustment
will be made in the rate of the state premium tax charge deducted as part of
the Monthly Deduction. (See "Charges and Expenses" and Appendix C.)
If you have a Policy loan, it may be more advantageous to repay the loan
than to make an additional payment, because an additional payment is subject
to sales and state premium tax charges, whereas the loan repayment is not
subject to any charges. (See "Loan Privilege" and "Deductions from Premiums.")
LAPSE AND REINSTATEMENT
As a single premium policy, we designed your Policy to be fully paid-up when
issued. Accordingly, it will not lapse, regardless of adverse investment
experience, unless there are excessive Policy loans. See "Policy Loans." If a
Policy loan is outstanding, and the net cash value on a Monthly Deduction Date
is not enough to cover the entire Monthly Deduction for that Policy Month,
your Policy will be in default.
We will notify you of the amount due to continue your Policy. Your Policy
provides a 62-day grace period from the date the Monthly Deduction was due
(unless otherwise provided in some states) for you to make an additional
payment in an amount sufficient to cover three months of Monthly Deductions
and loan interest due after the notice is sent. During the grace period,
insurance coverage continues under your Policy, but if the insured dies (in
the case of a Last Survivor Policy, if the last surviving insured dies) before
the grace period payment is made, we will deduct from the death proceeds the
portion of the unpaid Monthly Deduction(s) for the period prior to the date of
death.
If your Policy has lapsed, you may reinstate it within seven years after the
date of lapse. If more than seven years have passed, or if you have
surrendered the Policy, you must obtain our consent to reinstate.
Reinstatement
A-13
<PAGE>
in all cases is subject to payment of certain charges described in the Policy
and generally requires evidence of insurability that is satisfactory to us. If
your Policy lapses and is reinstated, the lapsed period will not count for
purposes of determining:
(i) the Surrender Charge on any date after reinstatement;
(ii) the ten-year period during which the Monthly Deduction includes
deductions for sales charges and state premium taxes; and
(iii) the ten-year period during which we deduct higher administrative
charges.
For determining the dates on which we will recalculate the minimum
guaranteed death benefit, the lapsed period will count. If we would have
recalculated the minimum guaranteed death benefit during the lapsed period, we
will recalculate it upon reinstatement.
ALLOCATION OF PREMIUM PAYMENTS AND TRANSFER OF CASH VALUE
ALLOCATION OF PREMIUM PAYMENTS
We will allocate your initial premium to the Money Market Sub-Account as of
the Investment Start Date. The Investment Start Date is the latest of: the
Policy Date, the date when the last Part II of the application for the Policy
or the Supplement to the Part I Application is signed, if any is required, and
the date when we first receive the initial premium. We will mail you a
confirmation for the initial premium when we approve your application and
receive your initial premium. Fifteen days after we mail the confirmation, we
will allocate the cash value in the Money Market Sub-Account to the Sub-
Accounts you selected. (For Policies issued in Maryland, this allocation to
your selected Sub-Accounts will occur on the later of fifteen days after the
confirmation has been mailed and 45 days after the date of Part I of the
application.) (See "Investment Options.")
You can allocate your premium to a maximum of 10 Sub-Accounts at any one
time. Currently, we will permit any whole percentage to be allocated to a Sub-
Account.
You select the initial premium allocation when you apply for a Policy. We
will use this allocation for any additional payments, unless you specify
otherwise when submitting the payment. You also may change the allocation
instructions for future payments at any time, provided that your Policy's cash
value is distributed among no more than 10 Sub-Accounts at any one time. The
change will be effective for additional payments accepted on or after the date
when we receive your instructions. You may change your instructions by
telephone or by written request to us. (See "Receipt of Communications and
Payments at NELICO's Home Office.") See "Transfer and Reallocation Requests"
below for information on how to request a transfer or reallocation by
telephone.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
We invest your initial premium as of the Investment Start Date. (For this
purpose only, receipt of the premium means receipt by your registered
representative if the payment is made with the application; otherwise, it
means receipt by us at our Home Office.)
If you pay the initial premium with the application or during the
underwriting process, the Policy Date is the later of the date when the last
Part II of the application or the Supplement to the Part I Application is
signed, if any is required, and receipt of the premium payment. In this case
the Policy Date and investment start date are the same.
If you pay the initial premium with the application, we will cover the
insured under a temporary insurance agreement for a limited period that
generally begins when we receive the premium payment or, if later, the date
when the last Part II of the application or the Supplement to the Part I
Application is signed, if any is required. The maximum amount of coverage
provided is either the amount of insurance applied for or $500,000, whichever
is less, for standard and preferred risks ($250,000 for substandard risks and
$50,000 for persons who are determined to be uninsurable). There may be
variations to these provisions required by state law.
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<PAGE>
If we issue a Policy, Monthly Deductions begin from the first Monthly
Deduction Date, even if we delayed issuance for underwriting requirements, and
will be for the face amount of the Policy, even if the temporary insurance
coverage during underwriting was for a lower amount.
If you do not submit the initial premium with the application or during the
underwriting process, the Policy Date will generally be the date we receive
the initial premium payment and will be the same as the investment start date.
However, at your request and under limited circumstances, we may assign your
Policy a Policy Date that is prior to the investment start date in this
situation. We will not deduct charges and we will not credit interest to the
Policy for the period between the Policy Date and the investment start date.
TRANSFER OPTION
Fifteen days after we mail the confirmation for the initial premium, you may
transfer your Policy's cash value among the Sub-Accounts. (For Policies issued
in Maryland, you may make Sub-Account transfers beginning with the later of
fifteen days after we mail the initial premium confirmation and 45 days after
the date of Part I of the application.) We currently do not charge a transfer
fee or limit the number of transfers. We reserve the right to limit transfers
and to charge a transfer fee (for Policies issued in New York, the minimum
number of transfers permitted each Policy Year will never be less than
twelve).
Currently, the minimum transfer amount is $100. (If the full amount of cash
value in a Sub-Account is less than $100, that full amount may be
transferred). The maximum you may transfer is $500,000. We will treat as one
transfer all transfers that you request on the same day for all Policies you
own. If you exceed $500,000 on one day, no amount of the transfer will be
made.
A transfer will be effective as of the date when we receive the transfer
request at our Home Office. (See "Receipt of Communications and Payments at
NELICO's Home Office.")
For transfers that we determine are based on "market-timing" (e.g.,
transfers under different Policies that are being requested under Powers of
Attorney with a common attorney-in-fact or that are in our determination based
on the recommendation of a common investment adviser or broker-dealer), we
will allow one transfer every 30 days. In some states, this limitation does
not apply. Transfers can be made under Powers of Attorney only with our
consent. Each transfer is subject to a $500,000 maximum. We will treat as one
transfer all transfers requested under different Policies that are being
requested under Powers of Attorney with a common attorney-in-fact or that are,
in our determination, based on the recommendation of a common investment
adviser or broker-dealer. If a transfer is executed under one Policy and,
within the next 30 days, a transfer request for another Policy is determined
by us to be related, the second transfer request will not be made.
In addition, the Metropolitan Fund may restrict or refuse purchases or
redemptions of shares in their Portfolios as a result of certain market timing
activities. You should read the prospectuses of these Eligible Funds for more
details.
See "Transfer and Reallocation Requests" for information regarding transfers
made by written request and by telephone.
DOLLAR COST AVERAGING
We offer an automated transfer privilege called dollar cost averaging. We
will transfer the same dollar amount to selected Sub-Accounts each month. Over
time, more purchases of Eligible Fund shares are made when the value of those
shares is low, and fewer shares are purchased when the value is high. As a
result, you may achieve a lower average cost of purchases over the long term.
This plan of investing allows you to take advantage of investment
fluctuations, but does not assure a profit or protect against a loss in
declining markets.
Under this feature you may request a transfer of a certain amount of your
cash value on any selected business day of each month (or if not a day when
the New York Stock Exchange is open, the next such day), from any one
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<PAGE>
Sub-Account to one or more of the other Sub-Accounts. The minimum transfer
amount is $100 that must be transferred to each Sub-Account that you select
under this feature. If we impose a transfer fee, we may count transfers made
under the dollar cost averaging program against the number of transfers per
year allowed free of charge. You may select a dollar cost averaging program
when you apply for the Policy or at a later date by contacting our Home
Office. You may not participate in the dollar cost averaging program while you
are participating in the asset rebalancing program. You may cancel your use of
the dollar cost averaging program at any time prior to the monthly transfer
date. Transfers will continue until you notify us to stop making transfers or
there no longer is sufficient cash value in the Sub-Account from which you are
transferring.
ASSET REBALANCING
We offer an asset rebalancing program for cash value. Cash value allocated
to the Sub-Accounts can be expected to increase or decrease at different rates
due to market fluctuations. An asset rebalancing program automatically
reallocates your cash value among the Sub-Accounts each quarter to return the
allocation to the allocation percentages you specify. Asset rebalancing is
intended to transfer cash value from those Sub-Accounts that have increased in
value to those that have declined, or not increased as much, in value. Over
time, this method of investing may help you "buy low and sell high," although
there can be no assurance that this objective will be achieved. Asset
rebalancing does not guarantee profits, nor does it assure that you will not
have losses.
You may select an asset rebalancing program when you apply for the Policy or
at a later date by contacting our Home Office. You specify the percentage
allocations to which your cash value will be reallocated among the Sub-
Accounts. You may not participate in the asset rebalancing program while you
are participating in the dollar cost averaging program. On the last day of
each calendar quarter on which the New York Stock Exchange is open, we will
transfer cash value among the Sub-Accounts to the extent necessary to return
the allocation to your specifications. Asset rebalancing will continue until
you notify us in writing or by telephone at our Home Office. Currently, we
don't count transfers made under an asset rebalancing program for purposes of
the transfer rules described above.
TRANSFER AND REALLOCATION REQUESTS
You may request a Sub-Account transfer or change the allocation of net
additional payments by:
. written request to our Home Office;
. fax (617-578-5412);
. telephone (1-877-633-7785); or
. contacting your registered representative.
Requests for transfers (up to our current limit each Policy Year) or
reallocations by telephone will be automatically permitted. We will use
reasonable procedures, such as requiring certain identifying information from
you, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone are genuine. Any telephone instructions reasonably
believed by us to be genuine will be your responsibility, including losses
arising from any errors in the communication of instructions. As a result of
this policy, you will bear the risk of loss.
DEATH BENEFIT
If the insured under a Single Insured Policy dies, we will pay a death
benefit to the beneficiary. In the case of a Last Survivor Policy, we will pay
a death benefit on the last of the two insureds to die. In New York, we will
pay a death benefit if the insured dies prior to the date the insured reaches
age 100 (based on a single life or if the joint equal issue age is 100 for a
Last Survivor Policy), called the Maturity Date. If the insured is living on
the Maturity Date and the policy is still in force, we will pay the net cash
value to the owner.
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<PAGE>
HOW THE DEATH BENEFIT IS DETERMINED. The death benefit payable on any day is
the greater of the variable death benefit and the minimum guaranteed death
benefit. We determine the variable death benefit by dividing your Policy's
cash value by the applicable net single premium (per $1.00 of death benefit)
calculated as provided in the Internal Revenue Code. We base net single
premiums on the age, sex and smoker/nonsmoker status of the insured at the
time of the calculation. Net single premiums increase over time resulting in a
decreasing death benefit for the same amount of cash value. Set forth below
are net single premiums for selected ages of male and female, nonsmoker
insureds.
<TABLE>
<CAPTION>
NET SINGLE PREMIUM
-------------------------------
AGE MALE NONSMOKER FEMALE NONSMOKER
--- -------------- ----------------
<S> <C> <C>
30............. .19992 .17824
40............. .27992 .24926
50............. .38723 .34338
60............. .52085 .46422
70............. .66655 .61117
80............. .79617 .76294
90............. .88839 .88028
100............. 1 1
</TABLE>
As an example of how the variable death benefit is calculated, assume that
the cash value of a Policy held by a 40-year-old male nonsmoker is $10,000.
The variable death benefit would be $35,724 ($10,000 divided by the applicable
net single premium of .27992).
MINIMUM GUARANTEED DEATH BENEFIT
The minimum guaranteed death benefit guarantees, regardless of investment
performance, that as long as there is not an "excess Policy loan," the death
benefit will never be less than the initial premium paid plus additional
payments, less adjustments for partial surrenders. On the Policy Date, the
minimum guaranteed death benefit is equal to the initial premium paid.
Thereafter, we will increase the minimum guaranteed death benefit by each
additional payment, and decrease the benefit proportionately by any partial
surrenders. We will base the reduction at the time of a partial surrender on
the ratio of the cash value after the surrender to the cash value before the
surrender. (See Appendix D for an example illustrating the effect of a partial
surrender on a Policy.)
At the end of the fifth Policy Year and every five years thereafter until
the insured is (or insureds are) age 75, we will recalculate the guaranteed
death benefit. On each of these days, we reset the guaranteed death benefit to
be the greater of:
.(i) the guaranteed death benefit before the recalculation; and
.(ii) the cash value on the date of recalculation.
The new minimum guaranteed death benefit (plus any subsequent premiums and
adjusted for any subsequent surrenders) applies to your Policy until the next
recalculation (five year anniversary) date, or until you make a premium
payment or surrender.
If, however, an "excess Policy loan" exists, the Policy may terminate. (See
"Loan Privilege" for the definition of "excess Policy loan.")
ADJUSTMENTS TO THE DEATH PROCEEDS PAYABLE
The death proceeds actually paid to the beneficiary are equal to the amount
of the death benefit determined on the date of the insured's death, reduced by
any Policy loan balance as of that date and by a pro rata portion of the
Monthly Deduction.
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<PAGE>
We may also adjust the death proceeds if you misstated an insured's age in
the application, if death results from the insured's suicide (or an insured's
suicide under a Last Survivor Policy) within two years (or less in some
states) from the date the Policy was issued or if limits on the death benefit
are imposed by rider. (See "Limits to NELICO's Right to Challenge the
Policy.")
PAYMENT OF DEATH BENEFIT PROCEEDS
We will pay death benefit proceeds in one sum unless you or the payee choose
to put all or part of the proceeds under a payment option. (See "Payment of
Proceeds" and "Payment Options.") We may also pay death benefit proceeds under
our Access Plus program. Under this program, we will establish an Access Plus
account at State Street Bank & Trust Company at the time that death benefit
proceeds are payable. The Access Plus account provides convenient access to
proceeds, which are maintained in MetLife's general account, through checkbook
privileges with State Street. A beneficiary may elect to have death benefit
proceeds paid through the Access Plus program at any time prior to the payment
of death benefit proceeds.
We will not pay any death benefit until we receive satisfactory proof of
death of the insured, and any other information we may need.
CASH VALUE AND CASH VALUE BENEFITS
CASH VALUE
Your Policy's cash value includes its cash value in the Variable Account
and, if you have an outstanding Policy loan, in our general account as a
result of the loan. (See "Loan Privilege.") The cash value reflects:
-- premium payments
-- the net investment experience of the Policy's Sub-Accounts
-- interest credited on amounts held in the general account as a result of
a loan
-- amounts deducted for Policy charges (including Monthly Deductions and
any Surrender Charge that applies if you make a partial surrender)
-- partial surrenders
-- transfers among the Sub-Accounts.
The net cash value is the cash value on any day, reduced by any loan balance
and any applicable Surrender Charge. (See "Loan Privilege," "Surrender
Charge," and "Monthly Deduction Deducted from Cash Value.") If you surrender
your Policy, we will reduce the net cash value by the applicable portion of
the Monthly Deduction for the period from the last deduction to the date of
surrender.
We adjust the amount provided for investment in the Policy (i.e., the cash
value) to reflect the net investment experience of the Sub-Accounts. The
Policy's cash value in the Variable Account may increase or decrease daily
depending on the net investment experience of the Sub-Accounts. Unfavorable
investment experience can reduce the net cash value to zero. YOU BEAR THE
ENTIRE INVESTMENT RISK WITH RESPECT TO CASH VALUE IN THE VARIABLE ACCOUNT.
NET INVESTMENT EXPERIENCE. The net investment experience of the Policy's
Sub-Accounts will affect the Policy's cash value and, in some cases, the death
benefit. We determine the net investment experience of the Sub-Accounts as of
the close of regular trading on the New York Stock Exchange on each day when
the Exchange is open for trading. A Sub-Account's net investment experience
for any period is based on the investment experience of the underlying
Eligible Fund shares for the same period. (See "Daily Charges Deducted from
Variable Account Assets" and "Charges Deducted from Eligible Fund Assets.")
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<PAGE>
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during
the period. Dividends and capital gains distributions on Eligible Fund shares
are reinvested in additional shares of the Eligible Fund.
LOAN PRIVILEGE
You may borrow all or part of the Policy's "loan value" once fifteen days
have passed after we mail the confirmation for the initial premium. (For
Policies issued in Maryland, you may take a loan once fifteen days from the
initial premium confirmation mailing and 45 days from the date of Part 1 of
the application have passed.) We will make the loan as of the date when we
receive a loan request at our Home Office. (See "Receipt of Communications and
Payments at NELICO's Home Office.") You should contact our Home Office or your
registered representative for information regarding the procedures to follow
for requesting a loan.
The Policy's loan value is equal to 90% (more in some states) of: the
Policy's cash value minus the surrender charge. The loan value available is
reduced by any outstanding loan plus interest.
A Policy loan may result in adverse tax consequences. (See "Tax
Considerations.")
EFFECT OF POLICY LOAN. When we pay Policy loan proceeds to you, we take cash
value in the amount of the loan from the Sub-Accounts and transfer it to our
general account as collateral for the loan. When you make a loan repayment, we
transfer cash value held as collateral from the general account back to the
Sub-Accounts. This increases the cash value in the Sub-Accounts by the amount
of the repayment. Unless you specify a different allocation, we transfer cash
value for a Policy loan from the Sub-Accounts in proportion to the cash value
in each. We allocate loan repayments to the Sub-Accounts in proportion to the
cash value in each, unless you request otherwise.
The interest rate charged on Policy loans is 6.0% per year. Interest accrues
daily and is due on the Policy Anniversary. If not paid at that time, we add
the interest accrued on the loan to the loan, and we deduct an amount equal to
the unpaid interest from the Policy's cash value in the Sub-Accounts in
proportion to the amount in each.
The amount we take as collateral for a loan earns interest at not less than
a 5.25% rate per year. Currently, on preferred loans, the rate we credit is a
6.0% annual rate (guaranteed in some states). "Preferred loans" are loans that
represent an amount less than or equal to the excess of cash value over
premiums paid (as adjusted for any partial surrenders). (You should consult a
tax advisor as to the tax consequences associated with a preferred loan.) We
credit interest earned on amounts held in our general account as collateral
for a loan to the Policy's Sub-Accounts on the Policy Anniversary, in
proportion to the cash value in each.
The amount taken from the Policy's Sub-Accounts as a result of a loan does
not participate in the investment experience of the Sub-Accounts. Therefore,
the death benefit and cash value of the Policy can be permanently affected by
a loan, even if it is repaid. In addition, we reduce any proceeds payable
under a Policy by the amount of any outstanding loan plus accrued interest.
While a loan is outstanding, we apply your payments as follows:
(1) as a repayment of Policy loan interest due,
(2) then as repayment of a Policy loan, and
(3) last as an additional payment (if no previous additional payment has
been made in that Policy Year), unless you designate otherwise in writing
to us.
If a previous additional payment has been made in that Policy Year, the
portion of the payment in excess of any outstanding Policy loan balance will
be returned. If a Policy loan is outstanding, it may be more advantageous to
repay the loan than to make an additional payment, because an additional
payment is subject to sales and state premium tax charges, and the loan
repayment is not subject to charges.
A-19
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If a Policy loan is outstanding, and the net cash value on a Monthly
Deduction Date is not enough to cover the entire Monthly Deduction for the
month, we will notify you that the Policy is going to terminate unless a
sufficient payment is made within the 62-day grace period. (This situation is
referred to as an "excess Policy loan.") The Policy will terminate without
value 62 days after the notice is mailed (unless otherwise provided in some
states) unless you pay us the excess amount within that time. (See "Lapse and
Reinstatement.") If the Policy lapses with a loan outstanding, adverse tax
consequences may result. (See "Tax Considerations" below.)
If you purchase a Policy with the proceeds of another life insurance policy
that has an outstanding policy loan (see "Premium Payments"), the following
conditions must be met. First, you must complete appropriate application
forms. Second, if the value to be applied from the existing policy is subject
to a policy loan, then as part of the initial premium you must submit an
additional amount so that the unloaned cash value at issue is $10,000. Any
loan remaining against the new Policy cannot exceed 80% of the cash value of
the Policy at issue. It may not be advantageous to replace existing insurance
with a Policy.
SURRENDER
You may surrender a Policy for its net cash value, less the applicable
portion of the Monthly Deduction to the date of surrender, at any time while
the insured (or at least one insured under a Last Survivor Policy) is living.
Your request must conform to our administrative procedures. We determine the
net cash value of the surrendered Policy as of the date when we received the
surrender request at our Home Office. (See "Receipt of Communications and
Payments at NELICO's Home Office.") The net cash value equals the cash value,
reduced by any Policy loan balance and also reduced by any applicable
Surrender Charge (see "Surrender Charge"). Upon surrender, we will deduct the
applicable portion of the Monthly Deduction from net cash value. (See "Monthly
Deduction from Cash Value.") You may elect in writing to have all or part of
the surrender amount applied to a payment option. (See "Payment Options.") A
surrender may result in adverse tax consequences. (See "Tax Considerations.")
PARTIAL SURRENDERS
You may make a partial surrender of cash value once fifteen days have passed
after we mail the confirmation for the initial premium payment. (For Policies
issued in Maryland, you may make partial surrenders once fifteen days from the
confirmation mailing and 45 days from the date of Part 1 of the application
have passed.)
In each Policy Year, we will limit partial surrenders, except with our
consent to: 20% of the net cash value on the day the first partial surrender
is made for the Policy Year; or, if less, the Policy's loan value less the
amount of any Policy loan balance on that day. Currently, we do not limit the
maximum amount of a partial surrender as long as the cash value immediately
after the partial surrender is at least $10,000. The minimum amount for a
partial surrender is $500.
A partial surrender made in excess of the preferred surrender amount may be
subject to a Surrender Charge. (See "Surrender Charge" and "Monthly
Deduction.") If any charges apply, we will deduct these charges from the
amount requested to be surrendered. There are no limits on the number of
partial surrenders that may be made during a Policy Year. However, there are
tax consequences. (See "Tax Considerations.")
EFFECT OF PARTIAL SURRENDER ON CASH VALUE AND DEATH BENEFIT. A partial
surrender reduces the minimum guaranteed death benefit based on the ratio of
the cash value immediately after the partial surrender to the cash value just
before the partial surrender. See "Death Benefit" and Appendix D.
You cannot reinvest the net cash value paid on a partial surrender in the
Policy except as additional payments, which are subject to the charges
described under "Charges and Expenses."
The amount paid to you as the result of a partial surrender is equal to the
amount requested less any amount deducted for the Surrender Charge. We will
deduct the applicable portion of the Monthly Deduction (based on the portion
of the Policy Month elapsed and on the proportion of cash value withdrawn)
from the cash value remaining.
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(See "Surrender Charge" and "Monthly Deduction from Cash Value.") We will
determine the amount of net cash value paid on a partial surrender as of the
date when we receive a request conforming to our administrative procedures at
our Home Office. For more information about our administrative procedures,
please contact your registered representative or our Home Office. (See
"Receipt of Communications and Payments at NELICO's Home Office," "Payment of
Proceeds," and "Payment Options.")
Unless you specify a different allocation, the partial surrender reduces the
Policy's cash value in the Sub-Accounts in proportion to the amount of cash
value in each.
ACCELERATION OF BENEFITS RIDER--TERMINAL ILLNESS
We offer a rider benefit that allows you to receive an accelerated payment
of benefits. This advance payment of benefits is available where certain
special circumstances exist, as described briefly below.
If the insured is diagnosed as terminally ill, as defined in the rider, you
may request this benefit. (In the case of a Last Survivor Policy, both
insureds, or the surviving insured, must be diagnosed as terminally ill in
order to request the benefit.) The rider is available in states where it has
been approved.
We calculate the accelerated benefit using the Policy's Eligible Proceeds,
multiplied by the Payout Factor. The Policy's Eligible Proceeds are equal to
the death benefit, less an amount to cover Monthly Deductions that would be
made in the event of death. In determining the Payout Factor, we may take into
consideration the life expectancy, age, gender and underwriting class of the
insured as well as other factors. The Payout Factor used will be determined by
us on the date we receive a written request for an accelerated benefit, at our
Home Office. The rider lists various items which may affect the Payout Factor.
If we accept a request for this benefit, we will notify you of the Payout
Factor and payment terms which will apply to the benefit.
We will reduce the accelerated benefit payment made to you by any
outstanding Policy loan balance. Our consent is necessary to obtain payment of
a partial accelerated benefit.
Exercise of the accelerated benefits rider cannot be reversed and is subject
to a number of conditions as set forth in the rider, including evidence
satisfactory to us.
ACCELERATION OF BENEFITS RIDER--LONG-TERM CARE
We may offer in the future a second rider benefit that will allow you to
receive an accelerated payment of benefits where certain special circumstances
exist, as described briefly below. These benefits will depend on certain
conditions contained in the rider.
We expect that payment of the rider benefit will be available if one or more
of the insured(s) is receiving qualified long-term care services, as defined
in the rider and by the Internal Revenue Code. The benefit may be subject to
discounting and charges. Payment will be subject to evidence satisfactory to
us.
WE WILL MAKE THIS ACCELERATED BENEFITS RIDER AVAILABLE TO YOU ONLY IF: (1)
YOUR STATE INSURANCE DEPARTMENT HAS APPROVED THE RIDER, (2) WE BELIEVE THAT
THE RIDER WILL MEET THE DEFINITION OF AN ACCELERATED DEATH BENEFIT FOR FEDERAL
INCOME TAX PURPOSES AND (3) WE BELIEVE THAT THE RIDER WILL NOT JEOPARDIZE THE
QUALIFICATION OF THE POLICY AS LIFE INSURANCE UNDER FEDERAL INCOME TAX LAW.
PAYMENT OF PROCEEDS
We will ordinarily pay any surrender, partial surrender, loan or death
benefit proceeds from the Sub-Accounts within seven days after we receive at
the Home Office a request, or proof of death of an insured, in a form
satisfactory to us. (See "Receipt of Communications and Payments at NELICO's
Home Office.") However, we may delay payment (except when a loan is made to
pay a premium to us) or transfers from the Sub-Accounts: (i) if the
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New York Stock Exchange is closed other than on a weekend or holiday, or if
trading on the New York Stock Exchange is restricted, (ii) if the SEC
determines that a state of emergency exists that makes payments or Sub-Account
transfers impractical, or (iii) if the SEC orders the Variable Account or
orders the Zenith Fund or its successor or any other Eligible Fund to postpone
payment or transfer of variable benefits.
We may withhold payment of surrender, partial surrender or loan proceeds if
those proceeds are coming from a Policy Owner's check that has not yet
cleared. In those cases, we will process the surrender or loan up to the
amount of Policy values for which the Policy Owner has made full payment. We
will pay the balance of the surrender, partial surrender or loan proceeds when
the Policy Owner's check has cleared. We may also delay payment if we consider
whether to contest the Policy. We will pay interest on the death benefit
proceeds from the date they become payable to the date they are paid. (See
"Payment Options.")
PAYMENT OPTIONS
We will pay the Policy's death benefit and any partial surrender or
surrender of net cash value in one sum unless you or the payee choose to put
all or part of the proceeds under a payment option. You can choose a
combination of payment options. The selection of a payment option and the
naming of a payee must be in written form satisfactory to us. You can make,
change or revoke the selection before the death of the insured. The payment
options available are fixed benefit options only, and are not affected by the
investment experience of the Eligible Funds. The guaranteed mortality
assumptions used in determining payment levels under the options will not vary
based on sex. (For Policies issued in New York and Oregon, however, and which
are not issued for use in connection with certain employee benefit plans and
fringe benefit programs, the mortality assumptions will vary based on sex.)
(See "Group or Sponsored Arrangements.") Once payments under an option begin,
we may restrict withdrawal rights.
The following payment options are available:
(1) INCOME FOR A SPECIFIED NUMBER OF YEARS. We pay proceeds in monthly
installments for up to 30 years, with interest at a rate not less than
3.5% a year, compounded yearly. Additional interest that we pay for any
year will be added to the monthly payments for that year.
(2) LIFE INCOME. We pay proceeds in equal monthly installments (i) during
the life of the payee, (ii) for the longer of the life of the payee or
10 years, or (iii) for the longer of the life of the payee or 20 years.
(3) LIFE INCOME WITH REFUND. We pay proceeds in equal monthly installments
during the life of the payee. At the payee's death, any unpaid proceeds
remaining are paid either in one sum or in equal monthly installments
until the total proceeds have been paid to the successor payee.
(4) INTEREST. We hold proceeds for the life of the payee or another agreed
upon period. We pay interest of at least 3.5% a year monthly on the
proceeds or add the interest to the principal annually. At the death of
the payee, or at the end of the period agreed to, we will pay the
balance of principal and any interest in one sum to the successor
payee.
(5) SPECIFIED AMOUNT OF INCOME. We pay proceeds plus accrued interest of at
least 3.5% a year in an amount and at a frequency elected until we have
paid total proceeds. We will pay any amounts unpaid at the death of the
payee in one sum to the successor payee.
(6) LIFE INCOME FOR TWO LIVES. We will pay proceeds in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the life of the surviving payee or 10 years, or (iii) while
the two payees are living and, after the death of one payee, we will
pay two-thirds of the monthly amount for the life of the surviving
payee.
You must have our consent to use of an option if the installment payments
would be less than $20.
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CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs of
providing the services or benefits that are implied by the name of the charge
or that are associated with the particular Policy. For example, the sales
charge may not fully cover all of the sales and distribution expenses we
actually incur, and proceeds from other charges, including the cost of
insurance charge and mortality and expense risk charge, may be used in part to
cover those expenses. We can profit from certain policy charges.
DEDUCTIONS FROM PAYMENTS. We do not deduct charges from the initial premium
before allocation to the Sub-Accounts.
We will deduct the following charges from an additional payment before
allocation to the Sub-Accounts:
-- 6.5% sales charge (reduced to 5.10% for Policies with initial premiums
of $2,000,000 or more).
-- 2.5% state premium tax charge.
MONTHLY DEDUCTION FROM CASH VALUE. We deduct a charge from the cash value on
each Monthly Deduction Date after the Policy Date. This Monthly Deduction
includes the following charges, shown below at their current annual rates:
-- Cost of insurance charge,* currently ranging from:
Single Insured Policy: 0.45% to 1.25% for standard risk class (0.70%
to 1.90% for substandard risk class)
Last Survivor Policy: 0.25% to 1.05% for standard risk class (0.40%
to 1.60% for substandard risk class)
-- 0.35% Administrative Charge (currently reduced to 0.10% after the first
ten Policy Years)**
-- 0.40% sales charge (deducted during the first ten Policy Years only)**
-- 0.25% state premium tax charge (deducted during the first ten Policy
Years only)**
-- 0.90% mortality and expense risk charge
-- For Policies with cumulative premiums less than $50,000, a $2.50 Monthly
Maintenance Charge also is included in the Monthly Deduction.
- --------
* We do not deduct the cost of insurance charge on or after the Policy
Anniversary when the age of the insured(s) is equal to 100.
** For Policies with initial premiums of $2,000,000 or more, we will waive the
0.40% sales charge and 0.25% premium tax charge, and we will waive the
Administrative Charge currently after the tenth Policy Year.
We calculate each charge, except the $2.50 Monthly Maintenance Charge, as a
percentage of cash value (including cash value transferred to the general
account as collateral for Policy loans). We first calculate all charges, other
than the cost of insurance charge, based on the cash value on the Monthly
Deduction Date (before we deduct monthly charges, but reflecting daily charges
deducted from Eligible Fund Assets), and then deduct the charges. We then
calculate the cost of insurance charge based on the cash value for that date,
as reduced by all other charges deducted that day. We deduct the Monthly
Deduction pro rata from the cash value in the Sub-Accounts.
SALES CHARGES. We deduct a sales charge calculated as a percentage of cash
value at an annual rate of 0.40%. In no event will the aggregate amount
deducted as part of the Monthly Deduction for sales charges plus the Surrender
Charge exceed 9% of the initial premium. We currently waive the charge:
. for Policies with initial premiums of $2,000,000 or more
. after the first ten policy years (on amounts attributable to the
initial premium)
If a Policy lapses and is reinstated, the lapsed period will not count
towards the ten-year period during which the sales charges apply.
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STATE PREMIUM TAX CHARGE. We deduct this charge from your cash value in the
Sub-Accounts for the first ten Policy Years, as part of the Monthly Deduction.
The annual rate of this charge is 0.25% of cash value. Because net additional
payments will have the immediate effect of increasing the cash value, the
monthly charge for state premium tax is proportionately adjusted downward when
you make an additional payment. Appendix C provides an example illustrating
the effect of such an additional payment.
For Policies with initial premiums of $2,000,000 or more, we will waive the
0.25% monthly charge for premium tax.
If a Policy lapses and is reinstated, the lapsed period will not count
towards the ten-year period during which the Monthly Deduction includes a
deduction for state premium taxes.
We designed the state premium tax charge to reimburse us for state premium
taxes and administrative expenses. Premium taxes vary from state to state and
the 2.5% charge reflects an average. Administrative expenses covered by this
charge include those related to premium tax and certain other state filings.
CHARGES UNDER POLICIES ISSUED TO NEW YORK RESIDENTS. The charges described
above apply to Policies issued to New York residents except as follows:
-- We do not deduct any sales or premium tax charge from additional
payments;
-- The sales charge deducted as part of the Monthly Deduction is 0.65%
(deducted for the first ten Policy Years only);
-- The administrative charge deducted as part of the Monthly Deduction is
0.10% during the first ten Policy Years, and 0.35% thereafter, and
-- We base the surrender charge on the initial premium AND each additional
payment made within the first nine years.
We limit sales and surrender charges so that any surrender charges you pay,
plus 61.5385% of the sales charge on your initial premium, is never more than
9% of all the payments you make under this Policy.
Your preferred surrender amount is the greater of (a) cash value on the
surrender date in excess of your total premiums paid (less previous partial
surrenders) and (b) 10% of premiums paid (less partial surrenders in that
Policy Year).
COST OF INSURANCE CHARGE. Until the Policy Anniversary when insured(s) reach
age 100, we deduct this charge from the cash value in the Sub-Accounts as part
of the Monthly Deduction.
The cost of insurance charge covers the cost of providing insurance
protection under your Policy. Currently, the amount of this charge is based on
the risk class and issue age of the insured(s). (It does not currently vary by
sex of the insured(s), although it may in the future.) We assign insureds to
risk classes based on underwriting conducted when we receive an application
for a Policy. The risk classes are:
-- standard nonsmoker
-- standard smoker
-- substandard nonsmoker
-- substandard smoker
Once we issue a Policy, an insured's risk class does not change except in the
following circumstances. If you submit an additional payment that, if
accepted, will have the effect of increasing the death benefit, acceptance of
the payment is subject to underwriting review to determine whether the
insured(s) qualify for the same or a better risk class.
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If the new risk class is better and has lower cost of insurance rates than
the original risk class, the risk class for the additional payment will be
used for cost of insurance charges under the entire Policy. If, however, the
new risk class has higher cost of insurance rates than the original risk
class, we will decline the additional payment.
Currently, we calculate the cost of insurance charge for a Policy as a
percentage of the cash value on the Monthly Deduction Date. For a Single Life
Policy, we calculate the current charge based on whether the issue age is 70
or less, or over 70, is a smoker or non-smoker, and has been assigned to a
standard or substandard risk class. The current monthly rates for these
classes are equivalent to the annual percentage rates shown in the following
table:
<TABLE>
<CAPTION>
RATING CLASS AND ISSUE AGE NONSMOKER SMOKER
-------------------------- --------- ------
<S> <C> <C>
Standard issue age 70 or less............................... 0.45% 0.75%
Standard over issue age 70.................................. 0.85% 1.25%
Substandard issue age 70 or less............................ 0.70% 1.15%
Substandard over issue age 70............................... 1.30% 1.90%
</TABLE>
In the case of a Last Survivor Policy, we calculate the current charge based
on whether the joint equal issue age is 70 or less or over 70 (except in Texas
and New Jersey in which case the age of the younger insured is used), the
smoker/nonsmoker status of each insured, and whether at least one insured is
substandard.
<TABLE>
<CAPTION>
NONSMOKER NONSMOKER SMOKER
RATING CLASS AND ISSUE AGE NONSMOKER SMOKER SMOKER
-------------------------- --------- --------- ------
<S> <C> <C> <C>
Standard issue age 70 or less..................... 0.25% 0.40% 0.55%
Standard over issue age 70........................ 0.65% 0.85% 1.05%
Substandard issue age 70 or less.................. 0.40% 0.60% 0.85%
Substandard over issue age 70..................... 1.00% 1.30% 1.60%
</TABLE>
We guarantee the cost of insurance charge we deduct on a Monthly Deduction
Date will not exceed the amount calculated using the guaranteed cost of
insurance rates set forth in your Policy for that date. Guaranteed cost of
insurance rates depend on the insured's sex, risk class, and age on the first
day of a Policy Year. Guaranteed cost of insurance rates applicable to joint
insureds under a Last Survivor Policy depend on the sex of each insured, their
joint equal issue age (the age of the younger insured is used in Texas and New
Jersey), their risk classes, and the Policy Year. The guaranteed cost of
insurance rates change from month to month. The risk classes used for
determining guaranteed cost of insurance rates for insureds are smoker
standard, smoker substandard, nonsmoker standard, and nonsmoker substandard.
Substandard ratings result in higher cost of insurance charges. We base the
guaranteed cost of insurance rates for substandard ratings on multiples of or
additives to the guaranteed standard rates provided by the 1980 Commissioners
Standard Ordinary Mortality Tables.
Cost of insurance rates--whether current or guaranteed--are generally more
favorable for nonsmoker than for smoker insureds. Within a given rating class,
guaranteed cost of insurance rates are generally more favorable for insureds
of lower ages than for insureds of higher ages.
If a Policy loan is outstanding, and the net cash value on a Monthly
Deduction Date is not enough to cover the entire Monthly Deduction for the
Policy Month, we will notify you that the Policy is going to terminate unless
a sufficient payment is made within the 62-day grace period. (See "Effect of a
Policy Loan.")
Eligible group or sponsored arrangements may also elect to purchase Policies
on a simplified underwriting basis above the underwriting limits applicable to
other purchasers. Policies issued on a simplified underwriting basis will have
the same cost of insurance rates as fully underwritten Policies.
ADMINISTRATIVE CHARGE. This charge is currently set at an annual rate of
0.35% of cash value and decreases to 0.10% after the first 10 Policy Years. We
guarantee the charge will never exceed an amount equivalent to an annual rate
of 0.35% of cash value. This charge is for the cost of administering the
Policies (such as the cost of
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processing Policy transactions, issuing Policy Owner statements and reports,
and record keeping), as well as legal, actuarial, systems, mailing and other
overhead costs connected with our variable life insurance operations.
For Policies with initial premiums of $2,000,000 or more, we will waive the
Administrative Charge after the tenth Policy Year.
For purposes of calculating the 10-year period after which the
Administrative Charge is reduced to 0.10%, the period that a Policy was lapsed
will not count.
MONTHLY MAINTENANCE CHARGE. If the initial premium paid for your Policy is
less than $50,000, we will deduct a $2.50 fee from cash value on each Monthly
Deduction Date to cover administrative expenses. This fee is in addition to
the administrative charge. We will continue to deduct this monthly fee until
cumulative premium payments made are at least $50,000. After cumulative
premium payments of at least $50,000 have been made, we will not take this
charge even if your Policy's cash value is reduced to less than $50,000 as a
result of investment performance or partial surrenders.
SURRENDER CHARGE. If, during the first nine Policy Years, a Policy is
totally surrendered or lapses or a partial surrender (other than a preferred
partial surrender) is made, we deduct a Surrender Charge from the amount
requested to be surrendered. This charge is based on the portion of the
initial premium deemed to be surrendered in accordance with the following
rules. Appendix C provides an example of the effect of negative investment
performance on Surrender Charges. If there has been negative investment
performance under your Policy, we calculate the Surrender Charge by
attributing negative performance first, to reducing additional payments, and
then, to reducing the initial premium.
When you make a full or partial surrender, we take the requested surrender
amount first from the preferred surrender amount. The preferred surrender
amount is equal to the greater of (a) the cash value on the date of surrender
which exceeds the initial premium paid (minus any previous partial surrenders
attributable to the initial premium) and (b) 10% of the initial premium paid
(minus previous partial surrenders in that Policy Year). No Surrender Charge
applies to the preferred surrender amount. The balance of the requested
surrender amount is subject to a Surrender Charge, which we determine by
multiplying the balance by the applicable percentage for the Policy Year. The
Surrender Charge period and the amount of the Surrender Charge are shown in
the following table:
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
----------- ------
<S> <C>
1............................... 8.0%
2............................... 8.0%
3............................... 7.0%
4............................... 6.0%
5............................... 5.0%
6............................... 4.0%
7............................... 3.0%
8............................... 2.0%
9............................... 1.0%
10............................... 0.0%
</TABLE>
We credit back to the Policy's cash value upon reinstatement any surrender
charge we deducted upon lapse. The Surrender Charge on the date of
reinstatement will be the same as it was on the date of lapse. For purposes of
determining the Surrender Charge on any date after reinstatement, the lapsed
period will not count.
MORTALITY AND EXPENSE RISK CHARGE. We deduct a charge from your cash value
in the Sub-Accounts on each Monthly Deduction Date for the mortality and
expense risks that we assume. This charge is currently set at the equivalent
of an annual rate of 0.90% of cash value. The rate is applied against cash
value in the Variable Account and against the amount of cash value held in the
general account that represents a Policy loan. The
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mortality risk we assume is that insureds may live for shorter periods of time
than we estimated. The expense risk is that our costs of issuing and
administering the Policies may be more than we estimated.
DAILY CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT ASSETS. Currently, we do
not deduct any daily charges from the Variable Account. However, we reserve
the right to make deductions from the Variable Account for federal or state
income taxes with respect to earnings or capital gains that may be
attributable to the Variable Account. Should we determine that this type of
tax will be imposed, we may make deductions from the Variable Account to pay
these taxes. The imposition of such taxes would reduce your cash value.
CHARGES DEDUCTED FROM ELIGIBLE FUND ASSETS. The value of shares of the
Eligible Funds reflect charges and deductions from assets for investment
advisory fees and operating expenses. See "Introduction to the Policies" and
the prospectus for the Zenith Fund for more information.
CHARGES FOR ADDITIONAL SERVICES. We reserve the right to charge a nominal
fee, which we will bill directly to you, in the event that a Policy re-issue
or re-dating is requested.
We may sell the Policies directly, without compensation, to a registered
representative, to employees, officers, directors, and trustees of the Company
and its affiliated companies, and certain family members of the foregoing, and
to employees, officers, directors, trustees and registered representatives of
any broker-dealer authorized to sell the Policies or any bank affiliated with
such a broker-dealer and of any sub-adviser to the Eligible Funds, and certain
family members of the foregoing.
If consistent with applicable state insurance law, we may sell the Policies,
without compensation, to the Company or MetLife for use with deferred
compensation plans for agents, employees, officers, directors, and trustees of
the Company and its affiliated companies, subject to any restrictions imposed
by the terms of such plans, or to persons who obtain their Policies through a
bank, adviser or consultant to whom they pay a fee for investment or planning
advice. If sold under these circumstances, and the policy has an initial
premium of less than $2,000,000, we may credit the Policies with an additional
percentage of premium to reflect in part or in whole any cost savings
associated with the direct sale, but only if such credit will not be unfairly
discriminatory to any person. We will not credit any additional premium to
Policies purchased by persons described above in exchange for another variable
life policy issued by the Company or its affiliated companies.
GROUP OR SPONSORED ARRANGEMENTS
We may issue the Policies to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a situation where a
trustee, employer or similar entity purchases individual Policies covering a
group of individuals. An example of such an arrangement is a non-tax qualified
deferred compensation plan. A "sponsored arrangement" includes a situation
where an employer or an association permits group solicitation of its
employees or members for the purchase of individual policies.
We may waive or reduce any of the Policy charges sold to a group or
sponsored plan (unless prohibited in certain states). We may also increase the
interest rate credited to loaned amounts under these Policies. The amount of
reductions and our eligibility rules may vary from time to time. In general
they will reflect cost savings we anticipate for Policies sold to the eligible
group or sponsored arrangements and will relate to factors such as the size of
the group, its stability, the purpose of the funding arrangement and
characteristics of the group members. The amount of reduction and the criteria
will reflect the reduced sales and administrative efforts resulting from sales
to qualifying group or sponsored arrangements. Reductions in or waiver of
these charges will not be unfairly discriminatory against any person.
Some group or sponsored arrangements may be eligible to purchase Policies on
a simplified underwriting basis. There may be limits on the age of the insured
and the amount of premium.
The United States Supreme Court has ruled that insurance policies with
values and benefits that vary with the sex of the insured may not be used to
fund certain employee benefit programs. Therefore, we offer Policies that do
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not vary based on the sex of the insured to certain employee benefit programs.
We recommend that employers consult an attorney before offering or purchasing
the Policies in connection with an employee benefit program.
THE VARIABLE ACCOUNT
We established the Variable Account as a separate investment account on
January 31, 1983 under Delaware law. It became subject to Massachusetts law
when NELICO changed its domicile to Massachusetts on August 30, 1996. The
Variable Account is the funding vehicle for other NELICO variable life
insurance policies; these other policies impose different costs, and provide
different benefits, from the Policies. The Variable Account meets the
definition of a "separate account" under Federal securities laws, and is
registered with the Securities and Exchange Commission (the "SEC") as a unit
investment trust under the Investment Company Act of 1940. The Massachusetts
Insurance Commissioner regulates NELICO and the Variable Account, which are
also subject to the insurance laws and regulations where the Policies are
sold.
Although NELICO owns the assets of the Variable Account, applicable law
provides that the portion of the Variable Account assets equal to the reserves
and other liabilities of the Variable Account may not be charged with
liabilities that arise out of any other business NELICO may conduct. NELICO
believes this means that the assets of the Variable Account equal to the
reserves and other liabilities of the Variable Account are not available to
meet the claims of NELICO's general creditors, and may only be used to support
the cash values under its variable life insurance policies issued by the
Variable Account. NELICO may transfer to its general account assets which
exceed the reserves and other liabilities of the Variable Account. NELICO will
consider any possible adverse impact such a transfer might have on the
Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of NELICO's
other income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
Sub-Accounts of the Variable Account that are available in this Policy
invest in the following Eligible Funds:
The BACK BAY ADVISORS MONEY MARKET SERIES. Its 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 BACK BAY ADVISORS BOND INCOME SERIES. Its investment objective is a high
level of current income consistent with protection of capital.
The SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES. Its investment
objective is a high level of total return consistent with preservation of
capital.
The SALOMON BROTHERS U.S. GOVERNMENT SERIES. Its investment objective is a
high level of current income consistent with preservation of capital and
maintenance of liquidity.
The BACK BAY ADVISORS MANAGED SERIES. Its investment objective is a
favorable total return through investment in a diversified portfolio.
The BALANCED SERIES (formerly, the Loomis Sayles Balanced Series). Its
investment objective is long-term total return from a combination of capital
appreciation and current income.
The ALGER EQUITY GROWTH SERIES. Its investment objective is long-term
capital appreciation.
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The DAVIS VENTURE VALUE SERIES. Its investment objective is growth of
capital.
The HARRIS OAKMARK MID CAP VALUE SERIES (formerly, the Goldman Sachs Midcap
Value Series). Its investment objective is long-term capital appreciation.
The LOOMIS SAYLES SMALL CAP SERIES. Its investment objective is long-term
capital growth from investments in common stocks or their equivalents.
The MFS INVESTORS SERIES. Its investment objective is reasonable current
income and long-term growth of capital and income.
The MFS RESEARCH MANAGERS SERIES. Its investment objective is long-term
growth of capital.
The WESTPEAK GROWTH AND INCOME SERIES. Its investment objective is long-term
total return through investment in equity securities.
The WESTPEAK STOCK INDEX SERIES. Its investment objective is investment
results that correspond to the composite price and yield performance of the
S&P 500 Index.
The MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES. Its 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 PUTNAM LARGE CAP GROWTH PORTFOLIO. Its investment objective is capital
appreciation.**
The PUTNAM INTERNATIONAL STOCK PORTFOLIO. Its investment objective is long-
term growth of capital.**
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* The Morgan Stanley International Magnum Equity Series is only available to
Policies issued before May 1, 2000.
**Availability is subject to any necessary state insurance department
approvals.
WE INTEND TO SUBSTITUTE SHARES OF THE PUTNAM INTERNATIONAL STOCK PORTFOLIO OF
THE METROPOLITAN FUND, FOR SHARES OF THE MORGAN STANLEY INTERNATIONAL MAGNUM
EQUITY SERIES ONCE WE RECEIVE NECESSARY REGULATORY APPROVAL (CURRENTLY
ANTICIPATED DURING THE FOURTH QUARTER OF 2000).
The Zenith Fund and the Metropolitan Fund are open-end management investment
companies, more commonly known as mutual funds. These funds are available as
investment vehicles for separate investment accounts of MetLife, NELICO and of
other life insurance companies.
An investment adviser or affiliates thereof may compensate NELICO and/or
certain affiliates for administrative, distribution, or other services
relating to Eligible Funds. This compensation is based on assets of the
Eligible Funds attributable to the Policies and certain other variable
insurance products that we and our affiliates issue. Some advisers and/or
affiliates may pay us more than others.
The Variable Account purchases and sells Eligible Fund Shares at their net
asset value (without a deduction for sales load) determined as of the close of
regular trading on the New York Stock Exchange on each day when the exchange
is open for trading.
The Eligible Funds' investment 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.
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The investment objectives and policies of certain Eligible Funds are similar
to the investment objectives and policies of other funds that may be managed
by the same sub-adviser. The investment results of the Eligible Funds may be
higher or lower than the results of these funds. There is no assurance, and no
representation is made, that the investment results of any of the Eligible
Funds will be comparable to the investment results of any other fund.
The policy's basic objective is to provide benefits which increase when the
Sub-Account's performance is favorable. Historically, the performance of
common stocks over the long term has been superior to that of long or short
term debt securities, although common stocks have been subject to more
dramatic changes in value over certain periods. Policy owners may want to
select the Small Cap, International Magnum Equity, Equity Growth, Mid Cap
Value, Venture Value, Investors, Research Managers, Stock Index or Growth and
Income Sub-Accounts, or some combination of these sub-accounts, for a long-
term time horizon, if willing to accept such risks of short- term fluctuations
in value. See Appendix E: Long-Term Market Trends.
INVESTMENT MANAGEMENT
NEIM, which is an indirect, wholly-owned subsidiary of NELICO, is the
investment adviser of each Series of the Zenith Fund. The chart below lists
the sub-adviser of each Series. NEIM and each of the sub-advisers are
registered with the SEC as investment advisers under the Investment Advisers
Act of 1940.
SERIES SUB-ADVISER
Back Bay Advisors Money Market Series Back Bay Advisors, L.P.*
Back Bay Advisors, L.P.*
Back Bay Advisors Bond Income Series Salomon Brothers Asset Management
Inc***
Salomon Brothers Strategic Bond Salomon Brothers Asset Management Inc
Opportunities Series
Salomon Brothers U.S. Government Back Bay Advisors, L.P.*
Series
Wellington Management Company LLP
Back Bay Advisors Managed Series Fred Alger Management, Inc.
Balanced Series Davis Selected Advisers, L.P.**
Alger Equity Growth Series Harris Associates L.P.*
Davis Venture Value Series Loomis, Sayles & Company, L.P.*
Harris Oakmark Mid Cap Value Series Massachusetts Financial Services
Company
Loomis Sayles Small Cap Series Massachusetts Financial Services
Company
MFS Investors Series
MFS Research Managers Series Westpeak Investment Advisors, L.P.*
Westpeak Growth and Income Series
Westpeak Investment Advisors, L.P.*
Westpeak Stock Index Series
Morgan Stanley International Magnum Morgan Stanley Dean Witter Investment
Equity Series**** Management Inc.
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* An affiliate of NELICO
** Davis Selected may also delegate any of its responsibilities to Davis
Selected Advisers-NY, Inc., a wholly-owned subsidiary of Davis Selected.
*** In connection with Salomon Brothers Asset Management's service as sub-
adviser to the Strategic Bond Opportunities Series, Salomon Brothers'
London-based affiliate, Salomon Brothers Asset Management Limited,
provides certain sub-advisory services to Salomon Brothers Asset
Management.
**** Available only to Policies issued before May 1, 2000.
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, Harris Oakmark Mid Cap Value
Series, and Loomis Sayles Small Cap Series, New England Investment Management
became the adviser on May 1, 1995. The Harris Oakmark Mid Cap Value Series'
sub-adviser was Loomis, Sayles until May 1, 1998, when Goldman Sachs Asset
Management, a separate operating division of Goldman Sachs & Co., became the
sub-adviser. Harris Associates became the sub-adviser on May 1, 2000. The
Balanced Series' sub-adviser was Loomis, Sayles until May 1, 2000, when
Wellington Management Company became the sub-adviser. For more information
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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.
MetLife is the investment adviser for the Metropolitan Fund Portfolios.
Putnam Investment Management, Inc. is the sub-investment manager of the Putnam
Large Cap Growth Portfolio and Putnam International Stock Portfolio. For more
information regarding the investment adviser and sub-investment managers of
the Metropolitan Fund Portfolios, see the Metropolitan Fund prospectus
attached at the end of this prospectus and its Statement of Additional
Information.
The table on pages A-10 to A-11 shows the annual operating expenses of each
Series and Portfolio.
SUBSTITUTION OF INVESTMENTS
If investment in the Eligible Funds or a particular Series or Portfolio is
no longer possible, in the judgment of the Company becomes inappropriate for
the purposes of the Policy, or for any other reason in our sole discretion,
the Company may substitute another Eligible Fund or Funds without your
consent. The substituted fund may have different fees and expenses.
Substitution may be made with respect to existing investments or the
investment of future purchase payments, or both. However, no such substitution
will be made without any necessary approval of the Securities and Exchange
Commission. Furthermore, we may close sub-accounts to allocations of purchase
payments or cash value, or both, at any time in our sole discretion.
OTHER POLICY FEATURES
POLICY OWNER AND BENEFICIARY
You name the Policy Owner in the application but may change the owner. At
the death of the Policy Owner, his or her estate will become the Policy Owner
unless a successor Policy Owner has been named. The Policy Owner's rights
(except for rights to payment of benefits) terminate at the death of the
insured (or the second death under a Last Survivor Policy) or the receipt of
all death proceeds under an accelerated death benefits rider.
You also name the beneficiary in the application. You may change the
beneficiary of the Policy at any time before the death of the insured. The
beneficiary has no rights under the Policy until the death of the insured(s)
and must survive the insured(s) in order to receive the death proceeds. The
beneficiary may have no rights if the Owner elects to receive all death
proceeds payable under an accelerated death benefits rider. If no named
beneficiary survives the insured(s), we will pay the proceeds to the Policy
Owner.
A change of Policy Owner or beneficiary must be in written form satisfactory
to us and must be dated and signed by the Policy Owner making the change. The
change will be subject to all payments made and actions taken by us under the
Policy before we receive the signed change form at our Home Office.
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary
to the assignee. A collateral assignment of the Policy does not change the
Policy Owner or beneficiary, but their rights will be subject to the terms of
the assignment. Assignments will be subject to all payments made and actions
taken by us under the Policy before we receive a signed copy of the assignment
form at our Home Office. We will not be responsible for determining whether or
not an assignment is valid. Changing the Policy Owner or assigning the Policy
may have tax consequences. (See "Tax Considerations" below.)
EXCHANGE OF POLICY
You may exchange the Policy within 24 months after it was issued for a
policy that provides fixed benefit insurance. The new policy will be issued by
us or MetLife, as described below, on any plan of whole life or
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endowment insurance (or, if the Policy exchanged is a Last Survivor Policy, on
any plan of survivorship insurance) with a level face amount.
The new policy will be issued with:
-- the same insured, Face Amount, Policy Date and risk class(es)
-- the age of the insured on the Policy Date
-- a rider that purchases paid-up additions if the cash value is more than
is required to purchase the new policy.
The new policy will be issued subject to any cost or credit and the
repayment of any Policy loan balance, and subject to any assignments of this
Policy.
NELICO'S DISTRIBUTION AGREEMENT
We sell the Policies through licensed insurance agents. These agents are
also registered representatives of New England Securities Corporation. New
England Securities, the principal underwriter of the variable life insurance
policies, is a Massachusetts corporation organized in 1968 and an indirect,
wholly-owned subsidiary of NELICO. New England Securities is registered with
the SEC as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. New England
Securities intends to enter into selling agreements with other broker-dealers
registered under the Securities Exchange Act of 1934 whose representatives are
authorized by applicable law to sell variable life insurance policies. In some
states, Policies may be sold by representatives or employees of banks that may
be acting as broker-dealers.
We will pay compensation to the New England Securities registered
representatives or other broker-dealers or banks involved in the sale of a
Policy. Such compensation will generally have a present value that does not
exceed 8% of premiums under the Policy (although a lower amount may be paid in
some circumstances, such as sales of the Policies to a person over age 75).
Such compensation may be paid either as a percentage of premiums at the time
we receive them, as a percentage of cash value on an ongoing basis, or in some
combination of both.
New England Securities distributes mutual funds, variable annuity contracts
and variable life insurance policies. It is the principal underwriter for the
Zenith Fund; The New England Variable Account; New England Retirement
Investment Account; New England Variable Annuity Separate Account; and New
England Variable Annuity Fund I. New England Securities also sells interests
in various investment partnerships.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
We can challenge that amount of the death benefit that results from the
initial premium for two years during an insured's lifetime from the date of
issue, based on misrepresentations made in the application. We can challenge
any amount of the death benefit that results from an additional payment for
which proof of insurability is required for two years during an insured's
lifetime from receipt of the payment. However, if an insured dies within two
years of the date of issue, we can challenge all or part of the Policy at any
time based on misrepresentations in the application. If an insured dies within
two years of the receipt of an additional payment for which proof of
insurability is required, NELICO can challenge any amount of the death benefit
resulting from that additional payment at any time with respect to
misrepresentation.
MISSTATEMENT OF AGE OR SEX
If the application misstates the insured's age (or either insured's age
under a Last Survivor Policy) or sex, the Policy's death benefit will be the
amount that the most recent Monthly Deduction (for Policies issued in
Maryland, the most recent cost of insurance deduction) which was made would
provide, based on the insured's correct age(s) and sex(es).
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SUICIDE
Single Insured Policies. If the Insured dies by suicide while sane or insane
within two years (or less, in some states) from the date of issue (or the
Policy Date, if earlier, in some states), the Death Benefit is limited to: the
initial premium; plus any additional payments made; less any outstanding
Policy Loan Balance and partial surrenders (or such greater amount, in some
states).
Last Survivor Policies. If either of the Insureds dies by suicide while sane
or insane within two years (or less, in some states) from the date of issue
(or the Policy Date, if earlier, in some states) set forth in the Policy, the
Death Benefit is limited to: the initial premium; plus any additional payments
made; less any outstanding Policy Loan Balance and partial surrenders (or such
greater amount, in some states). The Policy will terminate on the first death
by suicide.
Within 60 days after the first death by suicide under a Last Survivor
Policy, the Owner can purchase new life insurance on an Eligible Insured
without evidence of insurability. An Eligible Insured is a surviving Insured
whom we would have issued a single life policy on the Policy Date of this
Policy. The new policy will be issued subject to certain conditions. Contact
your agent or us.
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as
tax advice. Counsel or other competent tax advisors should be consulted for
more complete information. This discussion is based upon our understanding of
the present Federal income tax laws. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to how
they may be interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. We believe that the Policy
should satisfy the applicable requirements. However, with respect to Policies
issued on a rated or Last Survivor basis, it is not clear whether such
Policies will in all cases satisfy the applicable requirements. If it is
subsequently determined that a Policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the Policy into
compliance with such requirements and we reserve the right to restrict Policy
transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to
allocate premiums and cash values, have not been explicitly addressed in
published rulings. While we believe that the Policies do not give Policy
Owners investment control over Variable Account assets, we reserve the right
to modify the Policies as necessary to prevent a Policy Owner from being
treated as the owner of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Eligible Funds, will satisfy these
diversification requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
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TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Policy Owner or beneficiary. A
tax advisor should be consulted on these consequences.
Generally, the Policy Owner will not be deemed to be in constructive receipt
of the Policy Cash Value until there is a distribution.
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life
insurance contracts are classified as "Modified Endowment Contracts," with
less favorable income tax treatment than other life insurance contracts.
Although the rules are rather complex, in general, a contract which requires
fewer than seven level annual premiums to provide fully paid-up future
benefits will be a Modified Endowment Contract. Since the Policy only requires
a single premium payment to provide such paid-up benefits, the Policy will in
most cases be a Modified Endowment Contract. As a result, when distributions
from a Policy occur, or when loans are taken out from or secured by a Policy,
the tax consequences will generally be governed by the rules applicable to
Modified Endowment Contracts. These rules are as follows:
(1) All distributions other than death benefits, including distributions
upon surrender and withdrawals, from a Modified Endowment Contract will
be treated first as distributions of gain taxable as ordinary income
and as tax-free recovery of the Policy Owner's investment in the Policy
only after all gain has been distributed.
(2) Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject to
tax except where the distribution or loan is made when the Policy Owner
has attained age 59 1/2 or is disabled, or where the distribution is
part of a series of substantially equal periodic payments for the life
(or life expectancy) of the Policy Owner or the joint lives (or joint
life expectancies) of the Policy Owner and the Policy Owner's
beneficiary or designated beneficiary.
If the Policy is issued in a Section 1035 tax-free exchange for a life
insurance policy that is not a Modified Endowment Contract, the new Policy may
not be classified as a Modified Endowment Contract if the death benefit of the
Policy is greater than or equal to the death benefit of the policy being
exchanged. The payment of premiums at the time of or after the exchange or a
reduction in benefits after the exchange may, however, cause the newly issued
Policy to become a Modified Endowment Contract. In the event the Policy is not
classified as a Modified Endowment Contract, the following rules will apply:
(1) Distributions other than death benefits will generally be treated first
as a recovery of the Policy Owner's investment in the Policy and only
after the recovery of all investment in the Policy as taxable income.
However, certain distributions which must be made in order to enable
the Policy to continue to qualify as a life insurance contract for
Federal income tax purposes if Policy benefits are reduced during the
first 15 Policy years may be treated in whole or in part as ordinary
income subject to tax.
(2) Loans from or secured by a Policy that is not a Modified Endowment
Contract are generally not treated as distributions. However, the tax
consequences associated with preferred loans and loans where the
interest rate we credit is only slightly lower than the interest rate
we charge is less clear and a tax advisor should be consulted about
such loans.
(3) Finally, neither distributions from nor loans from or secured by a
Policy that is not a Modified Endowment Contract are subject to the 10
percent additional income tax.
If a Policy becomes a modified endowment contract, distributions that occur
during the contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a Policy within two
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years before it becomes a modified endowment contract will be taxed in this
manner. This means that a distribution made from a Policy that is not a
modified endowment contract could later become taxable as a distribution from
a modified endowment contract.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate Premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
POLICY LOANS. In general, interest on a Policy loan will not be deductible.
Before taking out a Policy loan, you should consult a tax advisor as to the
tax consequences. If a Policy loan is outstanding when a Policy is canceled or
lapses, the amount of the outstanding indebtedness will be added to the amount
distributed and will be taxed accordingly.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by
NELICO (or its affiliates) to the same Policy Owner during any calendar year
are treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Policy Owner's income when a taxable distribution
occurs.
ACCELERATED BENEFITS RIDER. If such a rider is made available, we believe
that payments received under the accelerated benefit rider should be fully
excludable from the gross income of the Policy Owner. (See "Acceleration of
Death Benefit Rider" for more information regarding the rider.) However, you
should consult a qualified tax adviser about the consequences of adding this
rider to a Policy or requesting payment under this rider.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance,
transfer and other tax consequences depend on the individual circumstances of
each Policy Owner or beneficiary. A tax advisor should be consulted on these
consequences.
The tax consequences of continuing the Policy beyond an insured's 100th year
are unclear. You should consult a tax advisor if you intend to keep the Policy
in force beyond an insured's 100th year.
If a trustee under a pension or profit-sharing plan, or similar deferred
compensation arrangement, owns a Policy, the Federal, state and estate tax
consequences could differ. The amounts of life insurance that may be purchased
on behalf of a participant in a pension or profit-sharing plan are limited.
The current cost of insurance for the net amount at risk is treated as a
"current fringe benefit" and must be included annually in the plan
participant's gross income. We report this cost (generally referred to as the
"P.S. 58" cost) to the participant annually. If the plan participant dies
while covered by the plan and the Policy proceeds are paid to the
participant's beneficiary, then the excess of the death benefit over the cash
value is not taxable. However, the cash value will generally be taxable to the
extent it exceeds the participant's cost basis in the Policy. Policies owned
under these types of plans may be subject to restrictions under the Employee
Retirement Income Security Act of 1974 ("ERISA"). You should consult a
qualified advisor regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy
tax requirements to be treated as nontaxable. Plan loan requirements and
provisions may differ from Policy loan provisions. Failure of plan loans to
comply with the requirements and provisions of the DOL regulations and of tax
law may result in adverse tax consequences and/or adverse consequences under
ERISA. Plan fiduciaries and participants should consult a qualified advisor
before requesting a loan under a Policy held in connection with a retirement
plan.
Businesses can use the Policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare
benefit plans, retiree medical benefit plans and others. The tax consequences
of such plans may vary depending on the particular facts and circumstances. If
you are purchasing the Policy for any arrangement the value of which depends
in part on its tax consequences, you should consult a qualified tax advisor.
In recent years, moreover, Congress has adopted new rules relating to life
insurance owned by businesses. Any business contemplating the purchase of a
new Policy or a change in an existing Policy should consult a tax advisor.
A-35
<PAGE>
We believe that Policies subject to Puerto Rican tax law will generally
receive treatment similar, with certain modifications, to that described
above. Among other differences, Policies governed by Puerto Rican tax law are
not currently subject to the rules described above regarding Modified
Endowment Contracts. You should consult your tax advisor with respect to
Puerto Rican tax law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or otherwise. Consult a tax advisor with
respect to legislative developments and their effect on the Policy.
NELICO'S INCOME TAXES
Under current Federal income tax law, NELICO is not taxed on the Variable
Account's operations. Thus, currently we do not deduct a charge from the
Variable Account for Federal income taxes. We reserve the right to charge the
Variable Account for any future Federal income taxes we may incur.
Under current laws in several states, we may incur state and local taxes (in
addition to premium taxes). These taxes are not now significant and we are not
currently charging for them. If they increase, we may deduct charges for such
taxes.
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<C> <S>
James M. Benson................. Chairman, President and Chief Executive
Officer of NELICO since 1998 and President,
Individual Business of Metropolitan Life
Insurance Company since 1999; formerly,
Director, President and Chief Operating
Officer 1997-1998 of NELICO; President and
Chief Executive Officer 1996-1997 of
Equitable Life Assurance Society and
President and Chief Operating Officer 1996-
1997 of Equitable Companies, Inc.; President
and Chief Operating Officer 1994-1996 of
Equitable Life Assurance Society.
Robert H. Benmosche ............ Director of NELICO since 1998 and Chairman,
Metropolitan Life Insurance Co. President and Chief Executive Officer of
One Madison Avenue Metropolitan Life Insurance Company since
New York, NY 10010 1998; formerly, Director, President and
Chief Operating Officer 1997-1998; Executive
Vice President 1995-1997 of Metropolitan
Life; Executive Vice President 1989-1995 of
PaineWebber.
Susan C. Crampton............... Director of NELICO since 1996 and serves as
6 Tarbox Road Principal of The Vermont Partnership, a
Jericho, VT 05465 business consulting firm located in Jericho,
Vermont since 1989; formerly, Director 1989-
1996 of New England Mutual.
Edward A. Fox................... Director of NELICO since 1996 and Chairman of
RR Box 67-15 the Board of SLM Holdings since 1997;
Harborside, ME 04642 formerly, Director 1994-1996 of New England
Mutual.
George J. Goodman............... Director of NELICO since 1996 and author,
Adam Smith's Global Television television journalist, and editor.
50th Floor, Craig Drill Capital
General Motors Building
767 Fifth Street
New York, NY 10153
</TABLE>
A-36
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<C> <S>
Dr. Evelyn E. Handler..... Director of NELICO since 1996 and President of
Ten Sterling Place Merrimack Higher Education Associates, Inc. since
Bow, NH 03304 1998; formerly Director 1987-1996 of New England
Mutual and Executive Director and Chief Executive
Officer 1994-1997 of the California Academy of
Sciences.
Philip K. Howard, Esq..... Director of NELICO since 1996 and Partner of the
Covington & Burling law firm of Covington & Burling in New York City.
1330 Avenue of the
Americas
New York, NY 10019
Bernard A. Leventhal...... Director of NELICO since 1996; formerly, Vice
Burlington Industries Chairman of the Board of Directors 1995-1998 of
1345 Avenue of the Burlington Industries, Inc.; Director and
Americas Executive Vice President 1993-1995 of Burlington
New York, NY 10105 Menswear Division.
Thomas J. May............. Director of NELICO since 1996 and Chairman,
Boston Edison Company President and Chief Executive Officer of Boston
800 Boylston Street Edison Company since 1994; formerly, Director
Boston, MA 02199 1994-1996 of New England Mutual.
Stewart G. Nagler......... Director of NELICO since 1996 and Vice Chairman
Metropolitan Life and Chief Financial Officer of Metropolitan Life
One Madison Avenue Insurance Company since 1998; formerly, Senior
New York, NY 10010 Executive Vice President and Chief Financial
Officer 1986-1998 of Metropolitan Life Insurance
Company.
Catherine A. Rein......... Director of NELICO since 1998 and President and
Metropolitan Property Chief Executive Officer since 1999 of
and Casualty Insurance Metropolitan Property and Casualty Insurance
Company Company; formerly, Senior Executive Vice
700 Quaker Lane President 1998-1999 and Executive Vice President
Warwick, RI 02887 1989-1998 of Metropolitan Life Insurance Company.
Rand N. Stowell........... Director of NELICO since 1996 and President of
P.O. Box 60 United Timber Corp. and President, Randwell Co.
Weld, ME 04285 since 2000 of Weld, Maine; formerly, Director
1990-1996 of New England Mutual.
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<C> <S>
James M. Benson........... See Directors above
David W. Allen............ Senior Vice President of NELICO since 1996;
formerly, Senior Vice President 1994-1996 of New
England Mutual.
A. Frank Beaz............. Executive Vice President since 1999; formerly,
Senior Vice President 1998-1999 of NELICO; Chief
Administrative Officer and Senior Vice President
1997-1998 of Equitable Distributors, Inc. and
Senior Vice President 1994-1997 of The Equitable
Life Insurance Companies.
Pauline V. Belisle........ Senior Vice President of NELICO since 1996;
formerly, Senior Vice President 1994-1996 of New
England Mutual.
Mary Ann Brown............ President, New England Products and Services (a
business unit of NELICO) since 1998; formerly,
Director, Worldwide Life Insurance 1997-1998 of
Swiss Reinsurance New Markets; President and
Chief Executive Officer 1996-1998 of Atlantic
International Reinsurance Company; Executive Vice
President 1996-1997 of Swiss Re Atrium and Swiss
Re Services and Principal 1987-1996 of
Tillinghast/Towers Perrin.
</TABLE>
A-37
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<C> <S>
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.
Anne Marie Faria.......... Senior Vice President of NELICO since 1996;
formerly, Vice President 1990-1996 of New England
Mutual.
Thom A. Faria............. President, Career Agency System (a business unit
of NELICO) since 1996; formerly, Executive Vice
President in 1996 and Senior Vice President 1993-
1996 of New England Mutual.
Anne M. Goggin............ Senior Vice President and Associate General
Counsel of NELICO since 1997; formerly, Vice
President and Counsel of NELICO in 1996; Vice
President and Counsel 1994-1996 of New England
Mutual.
Daniel D. Jordan.......... Second Vice President, Counsel, Secretary and
Clerk since 1996; formerly, Counsel and Assistant
Secretary 1990-1996 of New England Mutual.
Alan C. Leland, Jr........ Senior Vice President of NELICO since 1996;
formerly, Vice President 1984-1996 of New England
Mutual.
George J. Maloof.......... Senior Vice President of NELICO since 1996;
formerly, Vice President 1991-1996 of New England
Mutual.
Kenneth D. Martinelli..... Senior Vice President of NELICO since 1999;
formerly, Vice President 1997-1999 of NELICO and
Vice President 1994-1997 of The Equitable Life
Assurance Company.
Thomas W. McConnell....... Senior Vice President of NELICO since 1996 and
Director, Chief Executive Officer and President
of New England Securities Corporation since 1993.
Hugh C. McHaffie.......... Senior Vice President of NELICO since 1999;
formerly, Vice President 1994-1999 of
Manufacturers Life Insurance Company of North
America.
Stephen J. McLaughlin..... Senior Vice President of NELICO since 1999;
formerly, Vice President 1996-1999 of NELICO and
Vice President 1994-1996 of New England Mutual.
Thomas W. Moore........... Senior Vice President of NELICO since 1996;
formerly, Vice President 1990-1996 of New England
Mutual.
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.
</TABLE>
The principal business address for each of the directors and officers is the
same as NELICO's except where indicated.
A-38
<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. As required by
applicable Federal securities law, you have the right to instruct us how to
vote the shares that are attributable to your Policy.
We determine Policy Owners who are entitled to give voting instructions and
the number of shares attributable to their Policies as of the meeting record
date. If we do not receive timely instructions, we will vote shares in the
same proportion as the aggregate cash value of policies giving instructions,
respectively, to vote for, against, or withhold votes on a proposition, bears
to the total cash value in that Sub-Account for all policies for which voting
instructions are received. No voting privileges apply to cash value removed
from the Variable Account as a result of a Policy loan. We will vote all
Zenith Fund shares held in our or an affiliate's general account (or any
unregistered separate account for which voting privileges were not extended)
in the same proportion as the total of (i) shares for which we received voting
instructions and (ii) shares that we vote in proportion to such voting
instructions.
The Eligible Funds' Board of Trustees monitor events to identify conflicts
that may arise from the sale of Eligible Fund shares to variable life and
variable annuity separate accounts of affiliated and, if applicable,
unaffiliated insurance companies. Conflicts could result from changes in state
insurance law or Federal income tax law, changes in investment management of
any of the Eligible Funds, or differences in voting instructions given by
variable life and variable annuity contract owners. If there is a material
conflict, the Board of Trustees will determine what action should be taken,
including the removal of the affected Sub-Accounts from the Eligible Fund(s),
if necessary. If we believe any Eligible Fund action is insufficient, we will
consider taking other action to protect Policy Owners. There could, however,
be unavoidable delays or interruptions of operations of the Variable Account
that we may be unable to remedy.
We may disregard voting instructions for changes in the investment policy,
investment adviser or principal underwriter of the Eligible Fund portfolio if
required by state insurance law or if we (i) reasonably disapprove of the
changes and (ii) in the case of a change in investment policy or investment
adviser, make a good faith determination that the proposed change is contrary
to state law, prohibited by state regulatory authorities, inconsistent with a
sub-account's investment objectives, or quality of investments purchased by
the sub-account or similar sub-accounts with investments similar to those of
the sub-account. If we do disregard voting instructions, the next report to
Policy owners will include a summary of that action and the reasons for it.
RIGHTS RESERVED BY NELICO
We and our affiliates may change the voting procedures described above, and
vote Eligible Fund shares without Policy Owner instructions, if the securities
laws change. We also reserve the right: (1) to add sub-accounts; (2) to
combine sub-accounts; (3) to invest some or all of the assets of the Variable
Account other than in the Zenith Fund; (4) to invest some or all of the assets
of the Variable Account in any other investment company chosen by us; (5) to
remove a portfolio in which the Sub-Account is invested or to substitute a
different portfolio; (6) to operate the Variable Account as a management
investment company under the Investment Company Act of 1940 or in any other
form; and (7) to deregister the Variable Account under the Investment Company
Act of 1940. We will exercise these rights in accordance with applicable law,
including approval of Policy Owners if required. We will notify you if
exercise of any of these rights would result in a material change in the
Variable Account or its investments.
A-39
<PAGE>
TOLL-FREE NUMBERS
For Sub-Account transfers or premium reallocations, call 1-877-633-7785.
To request a copy of the Statement of Additional Information for the New
England Zenith Fund, call 1-800-356-5015.
You may also call our Customer Service at 1-877-633-7785 to request current
information about your Policy values, to change or update Policy information
such as your address, billing mode, beneficiary or ownership, or to request
Dollar Cost Averaging, Asset Reallocation or Policy loans of less than
$25,000. Requests must be in writing if the Policy is owned by a corporation
or a pension trust.
To obtain information about daily unit values of the Variable Account Sub-
Accounts, call 1-800-333-2501.
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 balance. We will also confirm
Policy loans, sub-account transfers, lapses, surrenders and other Policy
transactions.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
Professional organizations may endorse the Policies. We may use such
endorsements in Policy sales material. We may pay the professional
organization for the use of its customer or mailing lists to distribute Policy
promotional materials. An endorsement by a third party does not predict the
future performance of the Policies.
Articles discussing the Variable Account's investment performance, rankings
and other characteristics may appear in publications. Some or all of these
publishers or ranking services (including, but not limited to, Lipper
Analytical Services, Inc. and Morningstar, Inc.) may publish their own
rankings or performance reviews of variable contract separate accounts,
including the Variable Account. We may use references to or reprints of such
articles or rankings as sales material and may include rankings that indicate
the names of other variable contract separate accounts and their investment
experience. We may also use "unit values" to provide information about the
Variable Account's investment performance in this prospectus, marketing
materials and historical illustrations.
Publications may use articles and releases, developed by us, the Eligible
Funds and other parties, about the Variable Account or the Eligible Funds. We
may use references to or reprints of such articles in sales material for the
Policies or the Variable Account. Such literature may refer to personnel of
the advisers, who have portfolio management responsibility, and their
investment style and include excerpts from media articles.
We are a member of the Insurance Marketplace Standards Association ("IMSA"),
and may include the IMSA logo and information about IMSA membership in 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.
A-40
<PAGE>
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 we filed with the SEC. You may obtain copies of such
additional information from the SEC upon payment of the prescribed fee, or for
free by accessing the SEC's internet site at http://www.sec.gov.
EXPERTS
The financial statements of New England Variable Life Separate Account of
New England Life Insurance Company ("NELICO") and the consolidated financial
statements of NELICO and subsidiaries included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Rodney
J. Chandler, F.S.A., M.A.A.A., Second Vice President and Actuary of NELICO, as
stated in his opinion filed as an exhibit to the Registration Statement.
A-41
<PAGE>
APPENDIX A:
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies work. They show how
the death benefit, net cash value and cash value could vary over an extended
period of time assuming hypothetical gross rates of return (i.e., investment
income and capital gains and losses, realized or unrealized) for the Variable
Account equal to constant after-tax annual rates of 0%, 6% and 12%. We based
the tables on an initial premium of $50,000 and show the initial death benefit
based on that premium. We assumed the insureds to be in the standard nonsmoker
underwriting class. We first give values based on current Policy charges and
then based on guaranteed Policy charges. (See "Charges and Expenses.") The
issue ages represented in the illustrations are age 70 or less; if an issue
age were over age 70, the death benefit, net cash value and cash value in the
illustrations based on current Policy charges would be lower, all other things
being equal, because the current cost of insurance charge under the Policy
increases for issue ages over 70. These tables may assist in the comparison of
death benefits, net cash values and cash values for the Policies with those
under other variable life insurance policies that may be issued by NELICO or
other companies.
The illustrated death benefits, net cash values and cash values for a Policy
would be different from the amounts shown if the actual gross rates of return
averaged 0%, 6% or 12%, but varied above and below that average during the
period, if the initial premium was paid in another amount, or additional
payments were made. They would also be different depending on the allocation
of cash value among the Variable Account's Sub-Accounts, if the actual gross
rate of return for all Sub-Accounts averaged 0%, 6% or 12%, but varied above
or below that average for individual Sub-Accounts. They would also differ if a
Policy loan or partial surrender were made during the period of time
illustrated, or if the insured were in another risk class.
The death benefits, net cash values and cash values shown in the tables
reflect a Monthly Deduction (consisting of an administrative charge, a charge
for the cost of insurance, a mortality and expense risk charge, and, during
the first ten Policy Years, a sales charge and state premium tax charge) from
cash value on each Monthly Deduction Date. (Because an initial premium of
$50,000 has been assumed for purposes of these illustrations, no Monthly
Maintenance Charge is reflected in the illustrations. If we assumed an initial
premium of less than $50,000, a $2.50 Monthly Maintenance Charge would apply.)
The net cash values shown in the tables reflect the fact that we deduct a
Surrender Charge (consisting of a deferred sales charge) from cash value upon
surrender or lapse during the first nine Policy Years. (See "Charges and
Expenses.") The illustrations reflect an average of the investment advisory
fees and operating expenses of the Eligible Funds, at an annual rate of .77%
of the average daily net assets of the Eligible Funds. This average reflects
voluntary expense cap and expense deferral arrangements between NEIM and the
Zenith Fund, under which NEIM bears operating expenses of the Zenith Fund that
exceed certain amounts. NEIM could terminate the expense cap and expense
deferral arrangements at any time. This average also reflects our voluntary
expense cap arrangement between MetLife and the Metropolitan Fund, that
MetLife can terminate at any time upon notice to the Board of Directors and to
Fund shareholders.
Taking account of the average investment advisory fee and operating expenses
of the Eligible Funds, the gross annual rates of return of 0%, 6% and 12%
correspond to net investment experience at constant annual rates of -0.77%,
5.19%, and 11.14%, respectively. (See "Net Investment Experience.")
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account since no such charges are
currently made. If any such charges are imposed in the future, the gross
annual rate of return would have to exceed the rates shown by an amount
sufficient to cover the tax charges, in order to produce the death benefits,
net cash values and cash values illustrated. (See "Charge for NELICO's Income
Taxes.")
The second column of each table shows the amount which would accumulate if
the initial premium of $50,000 were invested to earn interest, after taxes, of
5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the initial premium could have
been invested outside the Policy to arrive at the net cash value of the
Policy.
A-42
<PAGE>
The internal rate of return on the death benefit is equivalent to an interest
rate (after taxes) at an amount equal to the rate that the initial premium
would have to have been invested outside the Policy to arrive at the death
benefit of the Policy. The internal rate of return is compounded annually.
We will furnish upon request a personalized illustration reflecting the
proposed insured's age, sex, and underwriting classification. Where
applicable, we will also furnish upon request an illustration for a Policy
which is not affected by the sex of the insured.
A-43
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$129,122 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE ON NET CASH VALUE
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------- ------------------------ ------------------------ ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- --------- ------ ------- --------- ------ ------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 121,292 128,577 135,850 44,462 47,373 50,278 48,462 51,373 54,278 -11.08% -5.25% 0.56%
2 55,125 113,970 128,072 142,970 42,971 48,783 54,923 46,971 52,783 58,923 -7.30 -1.22 4.81
3 57,881 107,126 127,611 150,514 42,026 50,732 60,465 45,526 54,232 63,965 -5.63 0.49 6.54
4 60,775 100,731 127,200 158,515 41,126 52,721 66,438 44,126 55,721 69,438 -4.77 1.33 7.36
5 63,814 94,755 126,841 167,009 40,268 54,750 72,880 42,768 57,250 75,380 -4.24 1.83 7.83
6 67,005 89,172 126,537 176,032 39,453 56,822 79,831 41,453 58,822 81,831 -3.87 2.15 8.11
7 70,355 83,954 126,287 185,623 38,677 58,937 87,333 40,177 60,437 88,833 -3.60 2.38 8.29
8 73,873 79,072 126,089 195,814 37,941 61,096 95,434 38,941 62,096 96,434 -3.39 2.54 8.42
9 77,566 74,506 125,944 206,652 37,243 63,301 104,186 37,743 63,801 104,686 -3.22 2.66 8.50
10 81,445 70,236 125,856 218,189 36,582 65,552 113,644 36,582 65,552 113,644 -3.08 2.75 8.56
15 103,946 55,133 132,247 301,873 32,733 78,517 179,226 32,733 78,517 179,226 -2.78 3.05 8.88
20 132,665 50,000 141,092 424,054 29,289 94,045 282,654 29,289 94,045 282,654 -2.64 3.21 9.05
25 169,318 50,000 153,111 605,904 26,207 112,645 445,769 26,207 112,645 445,769 -2.55 3.30 9.15
30 216,097 50,000 169,465 882,997 23,450 134,923 703,015 23,450 134,923 703,015 -2.49 3.36 9.21
35 275,801 50,000 190,621 1,307,760 20,983 161,607 1,108,713 20,983 161,607 1,108,713 -2.45 3.41 9.26
<CAPTION>
INTERNAL
RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL
GROSS ANNUAL
END OF RATE OF RETURN OF
POLICY --------------------------
YEAR 0% 6% 12%
- ------ -------- -------- --------
<S> <C> <C> <C>
1 142.58% 157.15% 171.70%
2 50.98 60.04 69.10
3 28.92 36.66 44.39
4 19.14 26.29 33.44
5 13.64 20.46 27.28
6 10.12 16.74 23.34
7 7.68 14.15 20.61
8 5.90 12.26 18.61
9 4.53 10.81 17.08
10 3.46 9.67 15.87
15 0.65 6.70 12.73
20 0.00 5.32 11.28
25 0.00 4.58 10.49
30 0.00 4.15 10.04
35 0.00 3.90 9.77
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-44
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$129,122 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ----------------------- --------------------- --------------------- --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- ------- ------ ------ ------- ------ ------ ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 120,874 128,139 135,391 44,295 47,197 50,095 48,295 51,197 54,095 -11.41% -5.61% 0.19%
2 55,125 113,152 127,163 141,966 42,634 48,408 54,509 46,634 52,408 58,509 -7.66 -1.60 4.41
3 57,881 105,924 126,195 148,860 41,515 50,130 59,762 45,015 53,630 63,262 -6.01 0.09 6.13
4 60,775 99,157 125,234 156,089 40,436 51,859 65,376 43,436 54,859 68,376 -5.17 0.92 6.93
5 63,814 92,823 124,280 163,669 39,396 53,594 71,373 41,896 56,094 73,873 -4.66 1.40 7.38
6 67,005 86,892 123,334 171,618 38,393 55,333 77,778 40,393 57,333 79,778 -4.31 1.70 7.64
7 70,355 81,341 122,395 179,953 37,427 57,074 84,619 38,927 58,574 86,119 -4.05 1.91 7.81
8 73,873 76,144 121,463 188,693 36,499 58,818 91,927 37,499 59,818 92,927 -3.86 2.05 7.91
9 77,566 71,279 120,538 197,858 35,608 60,562 99,731 36,108 61,062 100,231 -3.70 2.15 7.97
10 81,445 66,724 119,620 207,468 34,753 62,304 108,060 34,753 62,304 108,060 -3.57 2.22 8.01
15 103,946 50,000 118,945 271,711 29,417 70,619 161,318 29,417 70,619 161,318 -3.47 2.33 8.12
20 132,665 50,000 118,275 355,870 23,455 78,836 237,206 23,455 78,836 237,206 -3.71 2.30 8.10
25 169,318 50,000 117,608 466,131 14,259 86,525 342,937 14,259 86,525 342,937 -4.89 2.22 8.01
30 216,097 116,944 610,610 93,108 486,149 93,108 486,149 2.09 7.88
35 275,801 116,285 799,929 98,586 678,177 98,586 678,177 1.96 7.73
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 141.75% 156.28% 170.78%
2 50.43 59.48 68.50
3 28.43 36.15 43.86
4 18.67 25.80 32.92
5 13.17 19.97 26.77
6 9.65 16.24 22.82
7 7.20 13.64 20.08
8 5.40 11.73 18.06
9 4.02 10.27 16.51
10 2.93 9.11 15.29
15 0.00 5.95 11.95
20 0.00 4.40 10.31
25 0.00 3.48 9.34
30 2.87 8.70
35 2.44 8.24
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-45
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$145,611 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ------------------------- ------------------------ ------------------------ ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- --------- ------ ------- --------- ------ ------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 136,807 145,024 153,227 44,462 47,373 50,278 48,462 51,373 54,278 -11.08% -5.25% 0.56%
2 55,125 128,562 144,470 161,276 42,971 48,783 54,923 46,971 52,783 58,923 -7.30 -1.22 4.81
3 57,881 120,845 143,954 169,790 42,026 50,732 60,465 45,526 54,232 63,965 -5.63 0.49 6.54
4 60,775 113,622 143,479 178,802 41,126 52,721 66,438 44,126 55,721 69,438 -4.77 1.33 7.36
5 63,814 106,856 143,039 188,336 40,268 54,750 72,880 42,768 57,250 75,380 -4.24 1.83 7.83
6 67,005 100,515 142,633 198,425 39,453 56,822 79,831 41,453 58,822 81,831 -3.87 2.15 8.11
7 70,355 94,568 142,255 209,092 38,677 58,937 87,333 40,177 60,437 88,833 -3.60 2.38 8.29
8 73,873 88,984 141,894 220,359 37,941 61,096 95,434 38,941 62,096 96,434 -3.39 2.54 8.42
9 77,566 83,735 141,544 232,250 37,243 63,301 104,186 37,743 63,801 104,686 -3.22 2.66 8.50
10 81,445 78,804 141,210 244,807 36,582 65,552 113,644 36,582 65,552 113,644 -3.08 2.75 8.56
15 103,946 61,126 146,620 334,683 32,733 78,517 179,226 32,733 78,517 179,226 -2.78 3.05 8.88
20 132,665 50,000 153,878 462,483 29,289 94,045 282,654 29,289 94,045 282,654 -2.64 3.21 9.05
25 169,318 50,000 163,353 646,437 26,207 112,645 445,769 26,207 112,645 445,769 -2.55 3.30 9.15
30 216,097 50,000 176,847 921,458 23,450 134,923 703,015 23,450 134,923 703,015 -2.49 3.36 9.21
35 275,801 50,000 195,220 1,339,315 20,983 161,607 1,108,713 20,983 161,607 1,108,713 -2.45 3.41 9.26
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 173.61% 190.05% 206.45%
2 60.35 69.98 79.60
3 34.20 42.26 50.31
4 22.78 30.15 37.52
5 16.40 23.39 30.37
6 12.34 19.09 25.83
7 9.53 16.11 22.68
8 7.47 13.93 20.37
9 5.90 12.26 18.61
10 4.65 10.94 17.22
15 1.35 7.44 13.51
20 0.00 5.78 11.77
25 0.00 4.85 10.78
30 0.00 4.30 10.20
35 0.00 3.97 9.85
</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, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-46
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 50
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$145,611 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ----------------------- ---------------------- ---------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- ------- ------ ------- ------- ------ ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 136,309 144,502 152,681 44,286 47,188 50,085 48,286 51,188 54,085 -11.43% -5.62% 0.17%
2 55,125 127,602 143,402 160,095 42,620 48,393 54,492 46,620 52,393 58,492 -7.67 -1.62 4.40
3 57,881 119,450 142,310 167,870 41,501 50,112 59,742 45,001 53,612 63,242 -6.02 0.07 6.11
4 60,775 111,820 141,226 176,022 40,426 51,846 65,359 43,426 54,846 68,359 -5.18 0.91 6.93
5 63,814 104,676 140,151 184,570 39,396 53,594 71,373 41,896 56,094 73,873 -4.66 1.40 7.38
6 67,005 97,989 139,084 193,533 38,411 55,358 77,813 40,411 57,358 79,813 -4.30 1.71 7.65
7 70,355 91,729 138,025 202,932 37,471 57,140 84,716 38,971 58,640 86,216 -4.04 1.93 7.82
8 73,873 85,869 136,974 212,788 36,578 58,943 92,121 37,578 59,943 93,121 -3.83 2.08 7.94
9 77,566 80,383 135,931 223,122 35,732 60,770 100,071 36,232 61,270 100,571 -3.66 2.19 8.01
10 81,445 75,247 134,896 233,958 34,931 62,621 108,607 34,931 62,621 108,607 -3.52 2.28 8.07
15 103,946 55,881 134,135 306,386 29,925 71,831 164,072 29,925 71,831 164,072 -3.36 2.44 8.24
20 132,665 50,000 133,379 401,255 25,100 81,517 245,234 25,100 81,517 245,234 -3.39 2.47 8.28
25 169,318 50,000 132,628 525,527 18,852 91,457 362,392 18,852 91,457 362,392 -3.83 2.44 8.25
30 216,097 50,000 131,880 688,348 8,041 100,616 525,167 8,041 100,616 525,167 -5.91 2.36 8.15
35 275,801 131,136 901,693 108,557 746,441 108,557 746,441 2.24 8.03
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 172.62% 189.00% 205.36%
2 59.75 69.35 78.94
3 33.68 41.72 49.74
4 22.29 29.64 36.98
5 15.92 22.89 29.85
6 11.87 18.59 25.30
7 9.06 15.61 22.16
8 6.99 13.42 19.85
9 5.42 11.75 18.08
10 4.17 10.43 16.69
15 0.74 6.80 12.85
20 0.00 5.03 10.97
25 0.00 3.98 9.87
30 0.00 3.29 9.13
35 2.79 8.61
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-47
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$75,013 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ---------------------- ---------------------- ---------------------- --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------ ------- ------- ------ ------- ------- ------ ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 71,171 75,445 79,713 44,462 47,373 50,278 48,462 51,373 54,278 -11.08% -5.25% 0.56%
2 55,125 67,573 75,934 84,768 42,971 48,783 54,923 46,971 52,783 58,923 -7.30 -1.22 4.81
3 57,881 64,210 76,489 90,216 42,026 50,732 60,465 45,526 54,232 63,965 -5.63 0.49 6.54
4 60,775 61,068 77,115 96,100 41,126 52,721 66,438 44,126 55,721 69,438 -4.77 1.33 7.36
5 63,814 58,132 77,817 102,459 40,268 54,750 72,880 42,768 57,250 75,380 -4.24 1.83 7.83
6 67,005 55,384 78,591 109,332 39,453 56,822 79,831 41,453 58,822 81,831 -3.87 2.15 8.11
7 70,355 52,807 79,435 116,757 38,677 58,937 87,333 40,177 60,437 88,833 -3.60 2.38 8.29
8 73,873 50,385 80,343 124,772 37,941 61,096 95,434 38,941 62,096 96,434 -3.39 2.54 8.42
9 77,566 50,000 81,310 133,416 37,243 63,301 104,186 37,743 63,801 104,686 -3.22 2.66 8.50
10 81,445 50,000 82,334 142,738 36,582 65,552 113,644 36,582 65,552 113,644 -3.08 2.75 8.56
15 103,946 50,000 92,613 211,402 32,733 78,517 179,226 32,733 78,517 179,226 -2.78 3.05 8.88
20 132,665 50,000 105,860 318,163 29,289 94,045 282,654 29,289 94,045 282,654 -2.64 3.21 9.05
25 169,318 50,000 120,659 477,483 26,207 112,645 445,769 26,207 112,645 445,769 -2.55 3.30 9.15
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 42.34% 50.89% 59.43%
2 16.25 23.24 30.21
3 8.70 15.22 21.74
4 5.13 11.44 17.74
5 3.06 9.25 15.43
6 1.72 7.83 13.93
7 0.78 6.84 12.88
8 0.10 6.11 12.11
9 0.00 5.55 11.52
10 0.00 5.11 11.06
15 0.00 4.19 10.09
20 0.00 3.82 9.69
25 0.00 3.59 9.45
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-48
<PAGE>
SINGLE INSURED POLICY
MALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$75,013 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST --------------------- --------------------- --------------------- ------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------ ------ ------- ------ ------ ------- ------ ------ ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 70,217 74,441 78,658 43,813 46,689 49,560 47,813 50,689 53,560 -12.37% -6.62% -0.88%
2 55,125 65,728 73,874 82,481 41,688 47,351 53,334 45,688 51,351 57,334 -8.69 -2.69 3.28
3 57,881 61,526 73,311 86,490 40,123 48,479 57,823 43,623 51,979 61,323 -7.07 -1.02 4.96
4 60,775 57,592 72,752 90,695 38,614 49,568 62,533 41,614 52,568 65,533 -6.26 -0.22 5.75
5 63,814 53,909 72,198 95,104 37,161 50,617 67,469 39,661 53,117 69,969 -5.76 0.25 6.18
6 67,005 50,461 71,647 99,727 35,768 51,625 72,641 37,768 53,625 74,641 -5.43 0.53 6.42
7 70,355 50,000 71,101 104,576 34,358 52,596 78,065 35,858 54,096 79,565 -5.22 0.73 6.57
8 73,873 50,000 70,559 109,661 32,754 53,534 83,755 33,754 54,534 84,755 -5.15 0.86 6.66
9 77,566 50,000 70,021 114,993 30,904 54,443 89,730 31,404 54,943 90,230 -5.21 0.95 6.71
10 81,445 50,000 69,487 120,585 28,741 55,324 96,006 28,741 55,324 96,006 -5.39 1.02 6.74
15 103,946 50,000 69,095 157,972 6,971 58,579 133,928 6,971 58,579 133,928 -12.31 1.06 6.79
20 132,665 68,705 206,966 61,037 183,867 61,037 183,867 1.00 6.73
25 169,318 68,318 271,151 63,780 253,142 63,780 253,142 0.98 6.70
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 40.43% 48.88% 57.32%
2 14.65 21.55 28.44
3 7.16 13.61 20.04
4 3.60 9.83 16.05
5 1.52 7.62 13.72
6 0.15 6.18 12.20
7 0.00 5.16 11.12
8 0.00 4.40 10.32
9 0.00 3.81 9.70
10 0.00 3.35 9.20
15 0.00 2.18 7.97
20 1.60 7.36
25 1.26 7.00
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-49
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$81,811 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ---------------------- ---------------------- ---------------------- --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------ ------- ------- ------ ------- ------- ------ ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 77,304 81,947 86,582 44,462 47,373 50,278 48,462 51,373 54,278 -11.08% -5.25% 0.56%
2 55,125 73,081 82,124 91,677 42,971 48,783 54,923 46,971 52,783 58,923 -7.30 -1.22 4.81
3 57,881 69,135 82,355 97,136 42,026 50,732 60,465 45,526 54,232 63,965 -5.63 0.49 6.54
4 60,775 65,453 82,652 103,001 41,126 52,721 66,438 44,126 55,721 69,438 -4.77 1.33 7.36
5 63,814 62,021 83,022 109,314 40,268 54,750 72,880 42,768 57,250 75,380 -4.24 1.83 7.83
6 67,005 58,820 83,467 116,115 39,453 56,822 79,831 41,453 58,822 81,831 -3.87 2.15 8.11
7 70,355 55,830 83,983 123,442 38,677 58,937 87,333 40,177 60,437 88,833 -3.60 2.38 8.29
8 73,873 53,032 84,566 131,329 37,941 61,096 95,434 38,941 62,096 96,434 -3.39 2.54 8.42
9 77,566 50,410 85,211 139,817 37,243 63,301 104,186 37,743 63,801 104,686 -3.22 2.66 8.50
10 81,445 50,000 85,921 148,955 36,582 65,552 113,644 36,582 65,552 113,644 -3.08 2.75 8.56
15 103,946 50,000 94,847 216,503 32,733 78,517 179,226 32,733 78,517 179,226 -2.78 3.05 8.88
20 132,665 50,000 106,836 321,096 29,289 94,045 282,654 29,289 94,045 282,654 -2.64 3.21 9.05
25 169,318 50,000 120,800 478,042 26,207 112,645 445,769 26,207 112,645 445,769 -2.55 3.30 9.15
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 54.61% 63.89% 73.16%
2 20.90 28.16 35.41
3 11.41 18.10 24.78
4 6.96 13.39 19.80
5 4.40 10.67 16.93
6 2.74 8.92 15.08
7 1.59 7.69 13.78
8 0.74 6.79 12.83
9 0.09 6.10 12.10
10 0.00 5.56 11.53
15 0.00 4.36 10.26
20 0.00 3.87 9.74
25 0.00 3.59 9.45
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-50
<PAGE>
SINGLE INSURED POLICY
FEMALE ISSUE AGE 70
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$81,811 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INTERNAL RATE OF
INTERNAL RATE OF RETURN
RETURN ON DEATH BENEFIT
NET CASH VALUE ON NET CASH VALUE ASSUMING
INITIAL DEATH BENEFIT ASSUMING CASH VALUE ASSUMING HYPOTHETICAL
PREMIUM ASSUMING HYPOTHETICAL HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL HYPOTHETICAL GROSS GROSS
ACCUMULATED GROSS ANNUAL ANNUAL GROSS ANNUAL ANNUAL RATE OF ANNUAL RATE OF
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF RETURN OF RETURN OF
POLICY INTEREST --------------------- --------------------- --------------------- -------------------- -------------------
YEAR PER YEAR 0% 6% 12% 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> <C> <C> <C>
1 52,500 76,582 81,188 85,785 44,010 46,897 49,779 48,010 50,897 53,779 -11.98% -6.21% -0.44% 53.16% 62.38% 71.57%
2 55,125 71,688 80,569 89,953 42,076 47,784 53,815 46,076 51,784 57,815 -8.27 -2.24 3.74 19.74 26.94 34.13
3 57,881 67,106 79,955 94,324 40,690 49,152 58,613 44,190 52,652 62,113 -6.64 -0.57 5.44 10.31 16.94 23.56
4 60,775 62,817 79,346 98,907 39,348 50,492 63,679 42,348 53,492 66,679 -5.81 0.24 6.23 5.87 12.24 18.59
5 63,814 58,801 78,742 103,713 38,048 51,798 69,018 40,548 54,298 71,518 -5.32 0.71 6.66 3.30 9.51 15.71
6 67,005 55,042 78,142 108,753 36,790 53,069 74,642 38,790 55,069 76,642 -4.98 1.00 6.91 1.61 7.73 13.83
7 70,355 51,523 77,546 114,039 35,578 54,305 80,566 37,078 55,805 82,066 -4.75 1.19 7.05 0.43 6.47 12.50
8 73,873 50,000 76,955 119,582 34,393 55,508 86,808 35,393 56,508 87,808 -4.57 1.31 7.14 0.00 5.54 11.52
9 77,566 50,000 76,369 125,394 33,094 56,680 93,387 33,594 57,180 93,887 -4.48 1.40 7.19 0.00 4.82 10.76
10 81,445 50,000 75,787 131,490 31,622 57,821 100,318 31,622 57,821 100,318 -4.48 1.46 7.21 0.00 4.25 10.15
15 103,946 50,000 75,359 172,243 17,532 62,384 142,587 17,532 62,384 142,587 -6.75 1.49 7.24 0.00 2.77 8.60
20 132,665 74,934 225,648 65,963 198,633 65,963 198,633 1.39 7.14 2.04 7.83
25 169,318 74,511 295,617 69,481 275,660 69,481 275,660 1.32 7.07 1.61 7.37
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-51
<PAGE>
LAST SURVIVOR POLICY
MALE ISSUE AGE 65
FEMALE ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$114,909 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ------------------------- ------------------------ ------------------------ --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- --------- ------ ------- --------- ------ ------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 107,573 114,034 120,485 44,668 47,591 50,509 48,668 51,591 54,509 -10.66% -4.82% 1.02%
2 55,125 100,706 113,167 126,332 43,344 49,202 55,391 47,344 53,202 59,391 -6.89 -0.80 5.25
3 57,881 94,276 112,306 132,463 42,527 51,329 61,170 46,027 54,829 64,670 -5.25 0.88 6.95
4 60,775 88,257 111,451 138,892 41,715 53,467 67,370 44,715 56,467 70,370 -4.43 1.69 7.74
5 63,814 82,655 110,646 145,688 40,927 55,633 74,044 43,427 58,133 76,544 -3.93 2.16 8.17
6 67,005 77,468 109,931 152,935 40,175 57,848 81,260 42,175 59,848 83,260 -3.58 2.46 8.43
7 70,355 72,666 109,310 160,672 39,459 60,115 89,066 40,959 61,615 90,566 -3.33 2.67 8.60
8 73,873 68,221 108,788 168,949 38,779 62,433 97,512 39,779 63,433 98,512 -3.13 2.81 8.71
9 77,566 64,110 108,372 177,823 38,132 64,805 106,656 38,632 65,305 107,156 -2.97 2.92 8.78
10 81,445 60,310 108,073 187,363 37,519 67,232 116,558 37,519 67,232 116,558 -2.83 3.01 8.83
15 103,946 50,000 113,644 259,414 33,909 81,338 185,670 33,909 81,338 185,670 -2.56 3.30 9.14
20 132,665 50,000 123,425 370,962 30,646 98,404 295,762 30,646 98,404 295,762 -2.42 3.44 9.29
25 169,318 50,000 138,470 547,977 27,697 119,051 471,130 27,697 119,051 471,130 -2.34 3.53 9.39
30 216,097 50,000 158,229 824,467 25,032 144,030 750,481 25,032 144,030 750,481 -2.28 3.59 9.45
35 275,801 50,000 179,750 1,233,208 22,624 174,249 1,195,470 22,624 174,249 1,195,470 -2.24 3.63 9.49
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 115.15% 128.07% 140.97%
2 41.92 50.44 58.95
3 23.54 30.96 38.37
4 15.26 22.19 29.10
5 10.58 17.22 23.85
6 7.57 14.03 20.48
7 5.49 11.82 18.15
8 3.96 10.20 16.44
9 2.80 8.98 15.14
10 1.89 8.01 14.12
15 0.00 5.63 11.60
20 0.00 4.62 10.54
25 0.00 4.16 10.05
30 0.00 3.91 9.79
35 0.00 3.72 9.59
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-52
<PAGE>
LAST SURVIVOR POLICY
MALE ISSUE AGE 65
FEMALE ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM FOR STANDARD NONSMOKER
$114,909 INITIAL DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
INITIAL DEATH BENEFIT NET CASH VALUE CASH VALUE INTERNAL RATE OF RETURN
PREMIUM ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ON NET CASH VALUE
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY INTEREST ----------------------- ---------------------- ---------------------- --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- ------- ------- ------- ------ ------- ------- ------ ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 52,500 107,573 114,034 120,485 44,668 47,591 50,509 48,668 51,591 54,509 -10.66% -4.82% 1.02%
2 55,125 100,706 113,167 126,332 43,344 49,202 55,391 47,344 53,202 59,391 -6.89 -0.80 5.25
3 57,881 94,276 112,306 132,463 42,527 51,329 61,170 46,027 54,829 64,670 -5.25 0.88 6.95
4 60,775 88,257 111,451 138,892 41,715 53,467 67,370 44,715 56,467 70,370 -4.43 1.69 7.74
5 63,814 82,621 110,603 145,633 40,909 55,610 74,015 43,409 58,110 76,515 -3.93 2.15 8.16
6 67,005 77,346 109,761 152,702 40,108 57,756 81,134 42,108 59,756 83,134 -3.61 2.43 8.40
7 70,355 72,406 108,926 160,115 39,313 59,898 88,752 40,813 61,398 90,252 -3.38 2.61 8.54
8 73,873 67,782 108,096 167,888 38,523 62,030 96,894 39,523 63,030 97,894 -3.21 2.73 8.62
9 77,566 63,453 107,273 176,040 37,737 64,143 105,581 38,237 64,643 106,081 -3.08 2.81 8.66
10 81,445 59,400 106,457 184,587 36,953 66,227 114,831 36,953 66,227 114,831 -2.98 2.85 8.67
15 103,946 50,000 105,857 241,734 31,376 75,765 173,017 31,376 75,765 173,017 -3.06 2.81 8.63
20 132,665 50,000 105,260 316,620 21,992 83,922 252,435 21,992 83,922 252,435 -4.02 2.62 8.43
25 169,318 104,666 414,763 89,988 356,598 89,988 356,598 2.38 8.18
30 216,097 104,076 543,374 94,736 494,613 94,736 494,613 2.15 7.94
35 275,801 103,488 711,846 100,321 690,062 100,321 690,062 2.01 7.79
<CAPTION>
INTERNAL RATE OF RETURN
ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF
POLICY --------------------------------
YEAR 0% 6% 12%
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
1 115.15% 128.07% 140.97%
2 41.92 50.44 58.95
3 23.54 30.96 38.37
4 15.26 22.19 29.10
5 10.57 17.21 23.84
6 7.54 14.00 20.45
7 5.43 11.77 18.09
8 3.88 10.12 16.35
9 2.68 8.85 15.01
10 1.74 7.85 13.95
15 0.00 5.13 11.08
20 0.00 3.79 9.67
25 3.00 8.83
30 2.47 8.28
35 2.10 7.88
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL
GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY
OWNER, WHETHER ADDITIONAL PAYMENTS ARE MADE, AND THE INVESTMENT EXPERIENCE OF
THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET CASH VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF
ANY POLICY LOAN OR PARTIAL SURRENDER WERE MADE DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-53
<PAGE>
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
This Appendix gives hypothetical illustrations of the Variable Account's and
the Policy's investment experience based on the historical investment
experience of the Eligible Funds. It does not predict future performance.
The Policies became available July, 1996. The Zenith Fund and the Variable
Account commenced operations on August 26, 1983. The Westpeak Stock Index and
Back Bay Advisors Managed Series of the Zenith Fund commenced operations on
May 1, 1987. The Westpeak Growth and Income Series and Goldman Sachs Midcap
Value Series of the Zenith Fund commenced operations on April 30, 1993. The
Loomis Sayles Small Cap Series of the Zenith Fund commenced operations on May
2, 1994. The MFS Investors Series and the MFS Research Managers Series
commenced operations on April 30, 1999. The remaining Zenith Fund Series
commenced operations on October 31, 1994. The commencement of operations for
the Putnam International Stock Portfolio of the Metropolitan Fund was May 1,
1991. The Putnam Large Cap Growth Portfolio of the Metropolitan Fund commenced
operations on May 1, 2000 and is not included in this Appendix.
The illustrations are based on the actual investment experience of the
relevant Eligible Funds for the periods shown (net of actual charges and
expenses incurred by the Eligible Funds). The illustrations assume that an
initial premium of $50,000 was paid and that no loans, transfers or other
Policy Owner transactions were made during the periods shown.
SUB-ACCOUNT INVESTMENT EXPERIENCE
The Policies are supported by the Variable Account, which invests in the
Eligible Funds. The investment experience of the Sub-Account or Sub-Accounts
you choose will affect the values and benefits of your Policy.
Many factors other than investment experience affect the values and benefits
of your Policy. These investment experience figures do not reflect the charges
deducted from additional Premiums and the Monthly Deductions from the cash
value. (See "Charges and Expenses.")
NET RATES OF RETURN
A Sub-Account's investment experience is expressed below as a net rate of
return. The annual net rate is the effective earnings rate at which the Sub-
Accounts increased or decreased over a one-year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated
by taking the difference between the Sub-Accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the Sub-Accounts increased or decreased since
the inception dates of the Sub-Accounts. For each Sub-Account, the rate is
calculated by taking the difference between the Sub-Account's ending value and
the value on the date of its inception and dividing it by the value on the
date of inception. This result is the total net rate of return since inception
("Total Return"). The effective annual net rate of return is the rate which,
if compounded annually, would equal the total net rate of return since
inception.
A-54
<PAGE>
SUB-ACCOUNTS INVESTING IN NEW ENGLAND ZENITH FUND
<TABLE>
<CAPTION>
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>
Bond Income..... 3.20% 12.61% 18.76% 14.83% 2.27% 8.37% 12.30% 8.09% 17.96% 8.18% 12.61% -3.36%
Money Market.... 3.20 10.73 8.26 6.80 6.53 7.52 9.25 8.19 6.21 3.80 2.97 3.97
<CAPTION>
8/26/83- 8/28/83-
12/31/99 12/31/99
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Bond Income..... 21.20% 4.61% 10.89% 9.04% -0.47% 351.72% 9.66%
Money Market.... 5.70 5.13 5.34 5.26 4.97 173.07 6.34
</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..... -12.20% 16.34% 30.15% -4.14% 30.43% 7.30% 9.72% 1.12% 36.92% 22.47% 32.50% 27.93%
Managed......... -0.66 9.48 19.08 3.21 20.17 6.70 10.65 -1.11 31.26 15.03 26.56 19.65
<CAPTION>
5/1/87- 5/1/87-
12/31/99 12/31/99
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/99 RETURN ANNUAL
- ----------- -------- -------- ---------
<S> <C> <C> <C>
Stock Index..... 20.38% 573.77% 16.25%
Managed......... 9.97 371.64 13.02
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------- 4/30/93- 4/30/93-
FOR ONE YEAR ENDING 12/31/99 12/31/99
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 12/31/99 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income....... 14.24% -1.21% 36.47% 18.10% 33.47% 24.45% 9.35% 230.38% 19.62%
Mid Cap Value*.......... 14.74 -.27 30.35 17.61 17.32 -5.46 0.35 95.25 10.55
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------- 5/2/94- 5/2/94-
FOR ONE YEAR ENDING 12/31/99 12/31/99
5/2/94- -------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap............... -3.23% 28.84% 30.68% 24.85% -1.69% 31.75% 163.49% 18.65%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------ 10/31/94- 10/31/94-
FOR ONE YEAR ENDING 12/31/99 12/31/99
10/31/94- -------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 RETURN ANNUAL
- ----------- --------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........... -4.20% 48.69% 13.17% 25.63% 47.78% 34.13% 301.47% 30.87%
Balanced**.............. -.10 24.79 16.91 16.18 9.11 -5.06 75.41 11.49
Venture Value........... -3.50 39.28 25.84 33.50 14.41 17.52 203.60 23.98
International Magnum Eq-
uity***................ 2.60 6.23 6.67 -1.30 7.27 24.61 53.41 8.64
U.S. Government......... 0.60 15.02 3.31 8.47 7.61 0.17 39.78 6.70
Strategic Bond Opportu-
nities................. -1.40 19.38 14.36 11.07 2.04 1.44 54.77 8.82
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN 4/30/99- 4/30/99-
------------------------- 12/31/99 12/31/99
4/30/99- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/99 RETURN ANNUAL
- ----------- -------- -------- ---------
<S> <C> <C> <C>
Investors.......................... 2.85% 2.85% N/A
Research Managers.................. 19.80 19.80 N/A
</TABLE>
- -------
* The Harris Oakmark Mid Cap Value Series' Sub-adviser was Loomis Sayles
until May 1, 1998, when Goldman Sachs Asset Management became the sub-
adviser. Harris Associates became the sub-adviser on May 1, 2000. 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 Balanced Series' sub-adviser was Loomis, Sayles until May 1, 2000, when
Wellington Management Company became the sub-adviser.
*** Available only to Policies issued before May 1, 2000.
SUB-ACCOUNTS INVESTING IN METROPOLITAN SERIES FUND, INC.
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------- 5/1/91- 5/1/91-
FOR ONE YEAR ENDING 12/31/99 12/31/99
5/1/91- ----------------------------------------------------------------------- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 RETURN ANNUAL
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International
Stock............ -1.55% -10.21% 47.76% 5.03% 0.84% -1.78% -2.34% 22.56% 16.44% 39.02% 12.35%
</TABLE>
A-55
<PAGE>
POLICY PERFORMANCE
The material below assumes a Policy had been available and issued with an
initial premium of $50,000 paid on August 26, 1983, in the case of the Bond
Income and Money Market Sub-Accounts (May 1, 1987, in the case of the Stock
Index and Managed Sub-Accounts; April 30, 1993, in the case of the Growth and
Income and Mid Cap Value Sub-Accounts; May 2, 1994, in the case of the Small
Cap Sub-Account; October 31, 1994, in the case of the Balanced, International
Magnum Equity, Equity Growth, Venture Value, U.S. Government and Strategic
Bond Opportunities Sub-Accounts; April 30, 1999 in the case of the Investors
and Research Managers Sub-Accounts; and May 1, 1991 in the case of the
International Stock Sub-Account), to (1) a male age 50, (2) a female age 50,
(3) a male age 70, (4) a female age 70, and (5) a male age 65 and female age
60, each in the standard nonsmoker risk category. The death benefits, cash
values and internal rates of return assume in each instance that the entire
Policy value was invested in the particular Sub-Account for the period shown.
These illustrations of policy investment experience reflect all Policy charges
(except for the $2.50 Monthly Maintenance Charge) based on NELICO's current
rates. (See Appendix A for the definition of the internal rate of return.)
MALE STANDARD NON SMOKER, ISSUE AGE 50
$50,000 INITIAL PREMIUM
$129,122 INITIAL DEATH BENEFIT
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......... $50,000 $50,000 $129,122 $50,000 $46,000 -- --
December 31, 1983....... 50,000 50,000 130,974 51,247 47,247 -15.02% 1,492.06%
December 31, 1984....... 50,000 50,000 137,164 55,371 51,371 2.03 111.42
December 31, 1985....... 50,000 50,000 140,631 58,552 55,052 4.19 55.34
December 31, 1986....... 50,000 50,000 142,293 61,083 58,083 4.58 36.67
December 31, 1987....... 50,000 50,000 143,656 63,557 61,057 4.70 27.47
December 31, 1988....... 50,000 65,444 146,543 66,793 64,793 4.97 22.27
December 31, 1989....... 50,000 65,444 151,824 71,260 69,760 5.39 19.12
December 31, 1990....... 50,000 65,444 155,804 75,274 74,274 5.53 16.73
December 31, 1991....... 50,000 65,444 157,095 78,093 77,593 5.41 14.70
December 31, 1992....... 50,000 65,444 154,861 79,175 79,175 5.04 12.86
December 31, 1993....... 50,000 79,450 151,970 79,872 79,872 4.63 11.34
December 31, 1994....... 50,000 79,450 151,626 81,883 81,883 4.44 10.27
December 31, 1995....... 50,000 79,450 153,789 85,291 85,291 4.42 9.53
December 31, 1996....... 50,000 79,450 155,211 88,350 88,350 4.36 8.86
December 31, 1997....... 50,000 79,450 157,100 91,726 91,726 4.32 8.31
December 31, 1998....... 50,000 93,939 159,001 95,164 95,164 4.28 7.83
December 31, 1999....... 50,000 93,939 160,571 98,451 98,451 4.23 7.40
</TABLE>
A-56
<PAGE>
BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 130,654 51,122 47,122 -15.66% 1,480.91%
December 31, 1984....... 50,000 50,000 139,494 56,311 52,311 3.41 114.08
December 31, 1985....... 50,000 50,000 156,886 65,320 61,820 9.46 62.75
December 31, 1986....... 50,000 50,000 170,674 73,266 70,266 10.70 44.30
December 31, 1987....... 50,000 50,000 165,419 73,185 70,685 8.29 31.68
December 31, 1988....... 50,000 75,767 169,828 77,406 75,406 7.99 25.69
December 31, 1989....... 50,000 75,767 180,973 84,942 83,442 8.40 22.46
December 31, 1990....... 50,000 75,767 185,675 89,706 88,706 8.11 19.55
December 31, 1991....... 50,000 75,767 207,916 103,356 102,856 9.02 18.62
December 31, 1992....... 50,000 75,767 213,612 109,212 109,212 8.72 16.81
December 31, 1993....... 50,000 120,283 229,245 120,487 120,487 8.87 15.85
December 31, 1994....... 50,000 120,283 212,033 114,506 114,506 7.57 13.58
December 31, 1995....... 50,000 120,283 247,171 137,081 137,081 8.51 13.82
December 31, 1996....... 50,000 120,283 248,295 141,335 141,335 8.10 12.76
December 31, 1997....... 50,000 120,283 264,560 154,468 154,468 8.18 12.31
December 31, 1998....... 50,000 159,637 277,374 166,011 166,011 8.13 11.81
December 31, 1999....... 50,000 159,637 265,618 162,859 162,859 7.49 10.76
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 125,905 49,008 45,008 -46.71% 25,010.65%
December 31, 1995....... 50,000 50,000 142,849 57,369 53,369 5.75 145.82
December 31, 1996....... 50,000 50,000 154,412 63,963 60,463 9.16 68.26
December 31, 1997....... 50,000 50,000 162,474 69,396 66,396 9.37 45.08
December 31, 1998....... 50,000 50,000 157,108 69,164 66,664 7.15 31.62
December 31, 1999....... 50,000 67,822 151,096 68,532 66,532 5.68 23.87
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 128,589 50,053 46,053 -38.86% 28,388.84%
December 31, 1995....... 50,000 50,000 140,033 56,238 52,238 3.82 141.67
December 31, 1996....... 50,000 50,000 137,128 56,804 53,304 3.00 59.29
December 31, 1997....... 50,000 50,000 140,903 60,182 57,182 4.33 38.70
December 31, 1998....... 50,000 50,000 143,687 63,255 60,755 4.79 28.83
December 31, 1999....... 50,000 62,166 136,458 61,892 59,892 3.56 21.45
</TABLE>
A-57
<PAGE>
MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 124,238 48,993 44,993 -14.60% 290.22%
December 31, 1988....... 50,000 50,000 128,321 52,204 48,204 -2.17 75.93
December 31, 1989....... 50,000 50,000 146,503 61,467 57,967 5.70 49.61
December 31, 1990....... 50,000 50,000 142,039 61,437 58,437 4.34 32.92
December 31, 1991....... 50,000 50,000 161,786 72,115 69,615 7.35 28.60
December 31, 1992....... 50,000 70,177 163,688 75,159 73,159 6.95 23.27
December 31, 1993....... 50,000 70,177 171,814 81,230 79,730 7.25 20.33
December 31, 1994....... 50,000 70,177 161,126 78,405 77,405 5.86 16.49
December 31, 1995....... 50,000 70,177 202,017 101,135 100,635 8.40 17.48
December 31, 1996....... 50,000 70,177 219,535 113,022 113,022 8.80 16.54
December 31, 1997....... 50,000 118,897 265,421 140,455 140,455 10.17 16.94
December 31, 1998....... 50,000 118,897 304,675 165,641 165,641 10.81 16.75
December 31, 1999....... 50,000 118,897 321,597 179,530 179,530 10.62 15.83
BALANCED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 127,694 49,705 45,705 -41.58% 22,223.56%
December 31, 1995....... 50,000 50,000 151,641 60,900 56,900 11.71 158.73
December 31, 1996....... 50,000 50,000 167,190 69,256 65,756 13.47 74.54
December 31, 1997....... 50,000 50,000 184,004 78,591 75,591 13.94 50.89
December 31, 1998....... 50,000 50,000 190,258 83,758 81,258 12.36 37.81
December 31, 1999....... 50,000 78,805 171,243 77,670 75,670 8.35 26.90
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 120,911 47,065 43,065 -59.08% 19,610.55%
December 31, 1995....... 50,000 50,000 172,803 69,399 65,399 25.86 189.37
December 31, 1996....... 50,000 50,000 184,931 76,605 73,105 19.16 82.86
December 31, 1997....... 50,000 50,000 220,083 94,002 91,002 20.81 59.67
December 31, 1998....... 50,000 50,000 308,218 135,687 133,187 26.50 54.72
December 31, 1999....... 50,000 154,859 391,937 177,768 175,768 27.54 48.96
VENTURE VALUE SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 123,857 48,211 44,211 -52.11% 22,664.00%
December 31, 1995....... 50,000 50,000 163,803 65,784 61,784 19.88 176.41
December 31, 1996....... 50,000 50,000 194,017 80,369 76,869 21.95 86.95
December 31, 1997....... 50,000 50,000 245,356 104,796 101,796 25.17 65.24
December 31, 1998....... 50,000 50,000 266,031 117,115 114,615 22.03 49.35
December 31, 1999....... 50,000 126,240 296,391 134,432 132,432 20.74 41.12
</TABLE>
A-58
<PAGE>
MID CAP VALUE SUB-ACCOUNT*
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 142,840 56,477 52,477 7.47% 377.72%
December 31, 1994....... 50,000 50,000 133,421 54,419 50,419 .50 79.91
December 31, 1995....... 50,000 50,000 166,943 70,222 66,722 11.41 57.04
December 31, 1996....... 50,000 50,000 185,560 80,465 77,465 12.67 42.93
December 31, 1997....... 50,000 50,000 206,351 92,209 89,709 13.33 35.45
December 31, 1998....... 50,000 104,570 184,989 85,149 83,149 9.38 25.95
December 31, 1999....... 50,000 104,570 176,106 83,462 81,962 7.69 20.77
SMALL CAP SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 120,049 47,342 43,342 -19.32% 272.71%
December 31, 1995....... 50,000 50,000 147,654 60,069 56,069 7.12 91.57
December 31, 1996....... 50,000 50,000 182,739 76,670 73,170 15.35 62.61
December 31, 1997....... 50,000 50,000 216,164 93,499 90,499 17.57 49.09
December 31, 1998....... 50,000 50,000 201,412 89,778 87,278 12.68 34.80
December 31, 1999....... 50,000 85,480 251,621 115,534 113,534 15.57 33.00
INVESTORS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 128,043 50,626 46,626 -9.89% 305.89%
RESEARCH MANAGERS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 149,142 58,968 54,968 15.16% 409.45%
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 142,221 56,232 52,232 6.72% 374.63%
December 31, 1994....... 50,000 50,000 132,620 54,093 50,093 .11 79.26
December 31, 1995....... 50,000 50,000 172,204 72,435 68,935 12.77 58.88
December 31, 1996....... 50,000 50,000 192,400 83,431 80,431 13.82 44.35
December 31, 1997....... 50,000 50,000 243,407 108,768 106,268 17.52 40.33
December 31, 1998....... 50,000 124,211 287,242 132,215 130,215 18.39 36.11
December 31, 1999....... 50,000 124,211 297,975 141,219 139,719 16.65 30.68
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Harris
Oakmark Mid Cap Value Series' former investment advisory fee of .70% of
average daily net assets for the period through April 30, 1998, and .75%
thereafter.
A-59
<PAGE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 109,807 43,303 39,303 -30.24% 224.41%
December 31, 1988....... 50,000 50,000 119,943 48,796 44,796 -6.38 68.95
December 31, 1989....... 50,000 50,000 151,676 63,637 60,137 7.16 51.57
December 31, 1990....... 50,000 50,000 135,410 58,570 55,570 2.92 31.20
December 31, 1991....... 50,000 50,000 167,404 74,619 72,119 8.16 29.54
December 31, 1992....... 50,000 73,892 170,317 78,203 76,203 7.72 24.14
December 31, 1993....... 50,000 73,892 177,273 83,811 82,311 7.76 20.90
December 31, 1994....... 50,000 73,892 170,021 82,733 81,733 6.62 17.30
December 31, 1995....... 50,000 73,892 222,827 111,553 111,053 9.64 18.81
December 31, 1996....... 50,000 73,892 257,217 132,421 132,421 10.60 18.46
December 31, 1997....... 50,000 141,939 325,557 172,277 172,277 12.29 19.20
December 31, 1998....... 50,000 141,939 399,564 217,228 217,228 13.42 19.50
December 31, 1999....... 50,000 141,939 461,684 257,733 257,733 13.82 19.18
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 130,766 50,900 46,900 -31.81% 31,399.62%
December 31, 1995....... 50,000 50,000 132,641 53,270 49,270 -1.25 130.69
December 31, 1996....... 50,000 50,000 133,372 55,248 51,748 1.60 57.26
December 31, 1997....... 50,000 50,000 124,702 53,263 50,263 .17 33.45
December 31, 1998....... 50,000 50,000 126,771 55,808 53,308 1.55 25.01
December 31, 1999....... 50,000 61,404 149,765 67,928 65,928 5.50 23.65
INTERNATIONAL STOCK SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1991............. $50,000 $ 50,000 $129,122 $ 50,000 $ 46,000 -- --
December 31, 1991....... 50,000 50,000 123,125 48,554 44,554 -15.84% 285.00%
December 31, 1992....... 50,000 50,000 104,674 42,584 38,584 -14.39 55.71
December 31, 1993....... 50,000 50,000 146,484 61,459 57,959 5.69 49.60
December 31, 1994....... 50,000 50,000 144,975 62,707 59,707 4.96 33.67
December 31, 1995....... 50,000 50,000 139,894 62,356 59,856 3.93 24.66
December 31, 1996....... 50,000 62,628 129,760 59,581 57,581 2.52 18.32
December 31, 1997....... 50,000 62,628 120,209 56,832 55,332 1.53 14.06
December 31, 1998....... 50,000 62,628 139,811 68,033 67,033 3.90 14.35
December 31, 1999....... 50,000 62,628 154,566 77,379 76,879 5.09 13.91
</TABLE>
- --------
* Available only to Policies issued before May 1, 2000.
A-60
<PAGE>
FEMALE STANDARD NON SMOKER, ISSUE AGE 50
$50,000 INITIAL PREMIUM
$145,611 INITIAL DEATH BENEFIT
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......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 147,709 51,247 47,247 -15.02% 2,149.28%
December 31, 1984....... 50,000 50,000 154,715 55,371 51,371 2.03 131.17
December 31, 1985....... 50,000 50,000 158,639 58,552 55,052 4.19 63.52
December 31, 1986....... 50,000 50,000 160,511 61,083 58,083 4.58 41.68
December 31, 1987....... 50,000 50,000 162,027 63,557 61,057 4.70 31.05
December 31, 1988....... 50,000 65,444 165,232 66,793 64,793 4.97 25.05
December 31, 1989....... 50,000 65,444 171,098 71,260 69,760 5.39 21.38
December 31, 1990....... 50,000 65,444 175,446 75,274 74,274 5.53 18.63
December 31, 1991....... 50,000 65,444 176,708 78,093 77,593 5.41 16.33
December 31, 1992....... 50,000 65,444 173,946 79,175 79,175 5.04 14.27
December 31, 1993....... 50,000 79,450 170,395 79,872 79,872 4.63 12.58
December 31, 1994....... 50,000 79,450 169,657 81,883 81,883 4.44 11.37
December 31, 1995....... 50,000 79,450 171,681 85,291 85,291 4.42 10.51
December 31, 1996....... 50,000 79,450 172,838 88,350 88,350 4.36 9.74
December 31, 1997....... 50,000 79,450 174,486 91,726 91,726 4.32 9.10
December 31, 1998....... 50,000 93,939 176,116 95,164 95,164 4.28 8.55
December 31, 1999....... 50,000 93,939 177,342 98,451 98,451 4.23 8.05
BOND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 147,348 51,122 47,122 -15.66% 2,133.53%
December 31, 1984....... 50,000 50,000 157,343 56,311 52,311 3.41 134.08
December 31, 1985....... 50,000 50,000 176,975 65,320 61,820 9.46 71.32
December 31, 1986....... 50,000 50,000 192,526 73,266 70,266 10.70 49.59
December 31, 1987....... 50,000 50,000 186,573 73,185 70,685 8.29 35.37
December 31, 1988....... 50,000 75,767 191,487 77,406 75,406 7.99 28.54
December 31, 1989....... 50,000 75,767 203,947 84,942 83,442 8.40 24.79
December 31, 1990....... 50,000 75,767 209,082 89,706 88,706 8.11 21.50
December 31, 1991....... 50,000 75,767 233,873 103,356 102,856 9.02 20.30
December 31, 1992....... 50,000 75,767 239,936 109,212 109,212 8.72 18.27
December 31, 1993....... 50,000 120,283 257,039 120,487 120,487 8.87 17.14
December 31, 1994....... 50,000 120,283 237,248 114,506 114,506 7.57 14.71
December 31, 1995....... 50,000 120,283 275,927 137,081 137,081 8.51 14.84
December 31, 1996....... 50,000 120,283 276,495 141,335 141,335 8.10 13.67
December 31, 1997....... 50,000 120,283 293,838 154,468 154,468 8.18 13.14
December 31, 1998....... 50,000 159,637 307,231 166,011 166,011 8.13 12.56
December 31, 1999....... 50,000 159,637 293,362 162,859 162,859 7.49 11.43
</TABLE>
A-61
<PAGE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 141,987 49,008 45,008 -46.71% 51,451.97%
December 31, 1995....... 50,000 50,000 161,124 57,369 53,369 5.75 172.53
December 31, 1996....... 50,000 50,000 174,183 63,963 60,463 9.16 77.88
December 31, 1997....... 50,000 50,000 183,279 69,396 66,396 9.37 50.70
December 31, 1998....... 50,000 50,000 177,206 69,164 66,664 7.15 35.48
December 31, 1999....... 50,000 67,822 170,378 68,532 66,532 5.68 26.78
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 145,014 50,053 46,053 38.86% 58,387.37%
December 31, 1995....... 50,000 50,000 157,948 56,238 52,238 3.82 167.93
December 31, 1996....... 50,000 50,000 154,686 56,804 53,304 3.00 68.39
December 31, 1997....... 50,000 50,000 158,946 60,182 57,182 4.33 44.08
December 31, 1998....... 50,000 50,000 162,069 63,255 60,755 4.79 32.61
December 31, 1999....... 50,000 62,166 153,872 61,892 59,892 3.56 24.30
MANAGED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 140,118 48,993 44,993 -14.60% 367.15%
December 31, 1988....... 50,000 50,000 144,745 52,204 48,204 -2.17 89.09
December 31, 1989....... 50,000 50,000 165,263 61,467 57,967 5.70 56.52
December 31, 1990....... 50,000 50,000 160,222 61,437 58,437 4.34 37.36
December 31, 1991....... 50,000 50,000 182,464 72,115 69,615 7.35 31.95
December 31, 1992....... 50,000 70,177 184,543 75,159 73,159 6.95 25.91
December 31, 1993....... 50,000 70,177 193,592 81,230 79,730 7.25 22.51
December 31, 1994....... 50,000 70,177 181,395 78,405 77,405 5.86 18.30
December 31, 1995....... 50,000 70,177 227,163 101,135 100,635 8.40 19.08
December 31, 1996....... 50,000 70,177 246,487 113,022 113,022 8.80 17.94
December 31, 1997....... 50,000 118,897 297,453 140,455 140,455 10.17 18.19
December 31, 1998....... 50,000 118,897 340,716 165,641 165,641 10.81 17.88
December 31, 1999....... 50,000 118,897 358,793 179,530 179,530 10.62 16.83
</TABLE>
A-62
<PAGE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 144,006 49,705 45,705 -41.58% 55,995.07%
December 31, 1995....... 50,000 50,000 171,041 60,900 56,900 11.71 186.84
December 31, 1996....... 50,000 50,000 188,598 69,256 65,756 13.47 84.52
December 31, 1997....... 50,000 50,000 207,566 78,591 75,591 13.94 56.74
December 31, 1998....... 50,000 50,000 214,598 83,758 81,258 12.36 41.85
December 31, 1999....... 50,000 78,805 193,097 77,670 75,670 8.35 29.89
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 136,356 47,065 43,065 -59.08% 40,365.60%
December 31, 1995....... 50,000 50,000 194,910 69,399 65,399 25.86 220.82
December 31, 1996....... 50,000 50,000 208,610 76,605 73,105 19.16 93.31
December 31, 1997....... 50,000 50,000 248,266 94,002 91,002 20.81 65.86
December 31, 1998....... 50,000 50,000 347,649 135,687 133,187 26.50 59.26
December 31, 1999....... 50,000 154,859 441,954 177,768 175,768 27.54 52.46
VENTURE VALUE SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 139,678 48,211 44,211 -52.11% 46,634.32%
December 31, 1995....... 50,000 50,000 184,758 65,784 61,784 19.88 206.45
December 31, 1996....... 50,000 50,000 218,859 80,369 76,869 21.95 97.64
December 31, 1997....... 50,000 50,000 276,775 104,796 101,796 25.17 71.65
December 31, 1998....... 50,000 50,000 300,064 117,115 114,615 22.03 53.73
December 31, 1999....... 50,000 126,240 334,215 134,432 132,432 20.74 44.44
MID CAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 161,101 56,477 52,477 7.47% 471.49%
December 31, 1994....... 50,000 50,000 150,498 54,419 50,419 .50 93.35%
December 31, 1995....... 50,000 50,000 188,321 70,222 66,722 11.41 64.29
December 31, 1996....... 50,000 50,000 209,312 80,465 77,465 12.67 47.70
December 31, 1997....... 50,000 50,000 232,720 92,209 89,709 13.33 38.99
December 31, 1998....... 50,000 104,570 208,551 85,149 83,149 9.38 28.64
December 31, 1999....... 50,000 104,570 198,416 83,462 81,962 7.69 22.95
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Harris
Oakmark Mid Cap Value Series' former investment advisory fee of .70% of
average daily net assets for the period through April 30, 1998 and .75%
thereafter.
A-63
<PAGE>
SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 135,395 47,342 43,342 -19.32% 346.52%
December 31, 1995....... 50,000 50,000 166,551 60,069 56,069 7.12 105.93
December 31, 1996....... 50,000 50,000 206,139 76,670 73,170 15.35 70.13
December 31, 1997....... 50,000 50,000 243,835 93,499 90,499 17.57 54.07
December 31, 1998....... 50,000 50,000 227,155 89,778 87,278 12.68 38.32
December 31, 1999....... 50,000 85,480 283,679 115,534 113,534 15.57 35.85
INVESTORS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 144,412 50,626 46,626 -9.89% 385.57%
RESEARCH MANAGERS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 168,209 58,968 54,968 15.16% 509.45%
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 160,403 56,232 52,232 6.72% 467.80%
December 31, 1994....... 50,000 50,000 149,594 54,093 50,093 .11 92.66
December 31, 1995....... 50,000 50,000 194,256 72,435 68,935 12.77 66.21
December 31, 1996....... 50,000 50,000 217,029 83,431 80,431 13.82 49.16
December 31, 1997....... 50,000 50,000 274,512 108,768 106,268 17.52 43.99
December 31, 1998....... 50,000 124,211 323,827 132,215 130,215 18.39 39.02
December 31, 1999....... 50,000 124,211 335,725 141,219 139,719 16.65 33.04
</TABLE>
A-64
<PAGE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 123,843 43,303 39,303 -30.24% 288.36%
December 31, 1988....... 50,000 50,000 135,293 48,796 44,796 -6.38 81.59
December 31, 1989....... 50,000 50,000 171,099 63,637 60,137 7.16 58.57
December 31, 1990....... 50,000 50,000 152,745 58,570 55,570 2.92 35.58
December 31, 1991....... 50,000 50,000 188,801 74,619 72,119 8.16 32.92
December 31, 1992....... 50,000 73,892 192,017 78,203 76,203 7.72 26.79
December 31, 1993....... 50,000 73,892 199,743 83,811 82,311 7.76 23.08
December 31, 1994....... 50,000 73,892 191,409 82,733 81,733 6.62 19.13
December 31, 1995....... 50,000 73,892 250,564 111,553 111,053 9.64 20.43
December 31, 1996....... 50,000 73,892 288,795 132,421 132,421 10.60 19.89
December 31, 1997....... 50,000 141,939 364,847 172,277 172,277 12.29 20.48
December 31, 1998....... 50,000 141,939 446,830 217,228 217,228 13.42 20.65
December 31, 1999....... 50,000 141,939 515,082 257,733 257,733 13.82 20.21
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 147,469 50,900 46,900 -31.81% 64,568.47%
December 31, 1995....... 50,000 50,000 149,611 53,270 49,270 -1.25 155.76
December 31, 1996....... 50,000 50,000 150,449 55,248 51,748 1.60 66.25
December 31, 1997....... 50,000 50,000 140,671 53,263 50,263 .17 38.63
December 31, 1998....... 50,000 50,000 142,988 55,808 53,308 1.55 28.68
December 31, 1999....... 50,000 61,404 168,877 67,928 65,928 5.50 26.56
INTERNATIONAL STOCK SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1991............. $50,000 $ 50,000 $145,611 $ 50,000 $ 46,000 -- --
December 31, 1991....... 50,000 50,000 138,863 48,554 44,554 -15.84% 360.90%
December 31, 1992....... 50,000 50,000 118,071 42,584 38,584 -14.39 67.36
December 31, 1993....... 50,000 50,000 165,241 61,459 57,959 5.69 56.51
December 31, 1994....... 50,000 50,000 163,533 62,707 59,707 4.96 38.13
December 31, 1995....... 50,000 50,000 157,774 62,356 59,856 3.93 27.91
December 31, 1996....... 50,000 62,628 146,292 59,581 57,581 2.52 20.85
December 31, 1997....... 50,000 62,628 135,445 56,832 55,332 1.53 16.12
December 31, 1998....... 50,000 62,628 157,399 68,033 67,033 3.90 16.13
December 31, 1999....... 50,000 62,628 173,806 77,379 76,879 5.09 15.46
</TABLE>
- --------
* Available only to Policies issued before May 1, 2000.
A-65
<PAGE>
MALE STANDARD NON SMOKER, ISSUE AGE 70
$50,000 INITIAL PREMIUM
$75,013 INITIAL DEATH BENEFIT
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......... $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 76,344 51,247 47,247 -15.02% 237.49%
December 31, 1984....... 50,000 50,000 80,764 55,371 51,371 2.03 42.72
December 31, 1985....... 50,000 50,000 83,684 58,552 55,052 4.19 24.53
December 31, 1986....... 50,000 50,000 85,612 61,083 58,083 4.58 17.43
December 31, 1987....... 50,000 50,000 87,435 63,557 61,057 4.70 13.72
December 31, 1988....... 50,000 65,444 90,269 66,793 64,793 4.97 11.68
December 31, 1989....... 50,000 65,444 94,690 71,260 69,760 5.39 10.58
December 31, 1990....... 50,000 65,444 98,417 75,274 74,274 5.53 9.65
December 31, 1991....... 50,000 65,444 100,528 78,093 77,593 5.41 8.73
December 31, 1992....... 50,000 65,444 100,408 79,175 79,175 5.04 7.74
December 31, 1993....... 50,000 65,444 99,846 79,872 79,872 4.63 6.91
December 31, 1994....... 50,000 65,444 100,957 81,883 81,883 4.44 6.39
December 31, 1995....... 50,000 65,444 103,785 85,291 85,291 4.42 6.09
December 31, 1996....... 50,000 65,444 106,182 88,350 88,350 4.36 5.80
December 31, 1997....... 50,000 65,444 108,965 91,726 91,726 4.32 5.58
December 31, 1998....... 50,000 65,444 111,829 95,164 95,164 4.28 5.38
December 31, 1999....... 50,000 65,444 114,522 98,451 98,451 4.23 5.20
BOND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 76,157 51,122 47,122 -15.66% 235.12%
December 31, 1984....... 50,000 50,000 82,136 56,311 52,311 3.41 44.52
December 31, 1985....... 50,000 50,000 93,357 65,320 61,820 9.46 30.47
December 31, 1986....... 50,000 50,000 102,688 73,266 70,266 10.70 23.98
December 31, 1987....... 50,000 50,000 100,681 73,185 70,685 8.29 17.47
December 31, 1988....... 50,000 75,767 104,613 77,406 75,406 7.99 14.80
December 31, 1989....... 50,000 75,767 112,870 84,942 83,442 8.40 13.69
December 31, 1990....... 50,000 75,767 117,286 89,706 88,706 8.11 12.30
December 31, 1991....... 50,000 75,767 133,050 103,356 102,856 9.02 12.44
December 31, 1992....... 50,000 75,767 138,501 109,212 109,212 8.72 11.52
December 31, 1993....... 50,000 75,767 150,616 120,487 120,487 8.87 11.24
December 31, 1994....... 50,000 75,767 141,177 114,506 114,506 7.57 9.58
December 31, 1995....... 50,000 75,767 166,804 137,081 137,081 8.51 10.25
December 31, 1996....... 50,000 75,767 169,862 141,335 141,335 8.10 9.60
December 31, 1997....... 50,000 75,767 183,500 154,468 154,468 8.18 9.49
December 31, 1998....... 50,000 75,767 195,084 166,011 166,011 8.13 9.28
December 31, 1999....... 50,000 75,767 189,444 162,859 162,859 7.49 8.49
</TABLE>
A-66
<PAGE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 73,266 49,008 45,008 -46.71% 883.77%
December 31, 1995....... 50,000 50,000 83,966 57,369 53,369 5.75 55.92
December 31, 1996....... 50,000 50,000 91,718 63,963 60,463 9.16 32.31
December 31, 1997....... 50,000 50,000 97,569 69,396 66,396 9.37 23.50
December 31, 1998....... 50,000 50,000 95,434 69,164 66,664 7.15 16.78
December 31, 1999....... 50,000 67,822 92,884 68,532 66,532 5.68 12.73
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 74,828 50,053 46,053 -38.86% 1,016.11%
December 31, 1995....... 50,000 50,000 82,311 56,238 52,238 3.82 53.28
December 31, 1996....... 50,000 50,000 81,452 56,804 53,304 3.00 25.25
December 31, 1997....... 50,000 50,000 84,616 60,182 57,182 4.33 18.07
December 31, 1998....... 50,000 50,000 87,282 63,255 60,755 4.79 14.30
December 31, 1999....... 50,000 62,166 83,886 61,892 59,892 3.56 10.53
MANAGED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 72,598 48,993 44,993 -14.60% 74.69%
December 31, 1988....... 50,000 50,000 75,754 52,204 48,204 -2.17 28.28
December 31, 1989....... 50,000 50,000 87,415 61,467 57,967 5.70 23.29
December 31, 1990....... 50,000 50,000 85,703 61,437 58,437 4.34 15.82
December 31, 1991....... 50,000 50,000 98,762 72,115 69,615 7.35 15.70
December 31, 1992....... 50,000 70,177 101,141 75,159 73,159 6.95 13.23
December 31, 1993....... 50,000 70,177 107,496 81,230 79,730 7.25 12.16
December 31, 1994....... 50,000 70,177 102,108 78,405 77,405 5.86 9.76
December 31, 1995....... 50,000 70,177 129,698 101,135 100,635 8.40 11.62
December 31, 1996....... 50,000 70,177 142,811 113,022 113,022 8.80 11.47
December 31, 1997....... 50,000 70,177 174,963 140,455 140,455 10.17 12.46
December 31, 1998....... 50,000 70,177 203,540 165,641 165,641 10.81 12.78
December 31, 1999....... 50,000 70,177 217,766 179,530 179,530 10.62 12.32
</TABLE>
A-67
<PAGE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 74,308 49,705 45,705 -41.58% 970.46%
December 31, 1995....... 50,000 50,000 89,133 60,900 56,900 11.71 64.10
December 31, 1996....... 50,000 50,000 99,308 69,256 65,756 13.47 37.25
December 31, 1997....... 50,000 50,000 110,499 78,591 75,591 13.94 28.45
December 31, 1998....... 50,000 50,000 115,571 83,758 81,258 12.36 22.27
December 31, 1999....... 50,000 78,805 105,270 77,670 75,670 8.35 15.50
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 70,361 47,065 43,065 -59.08% 672.20%
December 31, 1995....... 50,000 50,000 101,572 69,399 65,399 25.86 83.54
December 31, 1996....... 50,000 50,000 109,846 76,605 73,105 19.16 43.79
December 31, 1997....... 50,000 50,000 132,165 94,002 91,002 20.81 35.92
December 31, 1998....... 50,000 50,000 187,225 135,687 133,187 26.50 37.28
December 31, 1999....... 50,000 154,859 240,939 177,768 175,768 27.54 35.57
VENTURE VALUE SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 72,075 48,211 44,211 -52.11% 791.83%
December 31, 1995....... 50,000 50,000 96,282 65,784 61,784 19.88 75.32
December 31, 1996....... 50,000 50,000 115,242 80,369 76,869 21.95 47.01
December 31, 1997....... 50,000 50,000 147,342 104,796 101,796 25.17 40.67
December 31, 1998....... 50,000 50,000 161,599 117,115 114,615 22.03 32.51
December 31, 1999....... 50,000 126,240 182,203 134,432 132,432 20.74 28.44
MID CAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 83,538 56,477 52,477 7.47% 114.83%
December 31, 1994....... 50,000 50,000 78,833 54,419 50,419 .50 31.32
December 31, 1995....... 50,000 50,000 99,702 70,222 66,722 11.41 29.48
December 31, 1996....... 50,000 50,000 112,069 80,465 77,465 12.67 24.59
December 31, 1997....... 50,000 50,000 126,092 92,209 89,709 13.33 21.90
December 31, 1998....... 50,000 104,570 114,420 85,149 83,149 9.38 15.72
December 31, 1999....... 50,000 104,570 110,298 83,462 81,962 7.69 12.59
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Harris
Oakmark Mid Cap Value Series' former investment advisory fee of .70% of
average daily net assets for the period through April 30, 1998, and .75%
thereafter.
A-68
<PAGE>
SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $ 50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 70,151 47,342 43,342 -19.32% 66.30%
December 31, 1995....... 50,000 50,000 87,167 60,069 56,069 7.12 39.61
December 31, 1996....... 50,000 50,000 109,037 76,670 73,170 15.35 33.97
December 31, 1997....... 50,000 50,000 130,428 93,499 90,499 17.57 29.89
December 31, 1998....... 50,000 50,000 122,952 89,778 87,278 12.68 21.27
December 31, 1999....... 50,000 85,480 155,473 115,534 113,534 15.57 22.17
INVESTORS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $75,013 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 74,884 50,626 46,626 -9.89% 82.53%
RESEARCH MANAGERS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $75,013 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 87,223 58,968 54,968 15.16% 129.10%
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 83,176 56,232 52,232 6.72% 113.44%
December 31, 1994....... 50,000 50,000 78,360 54,093 50,093 .11 30.84
December 31, 1995....... 50,000 50,000 102,844 72,435 68,935 12.77 30.99
December 31, 1996....... 50,000 50,000 116,200 83,431 80,431 13.82 25.82
December 31, 1997....... 50,000 50,000 148,735 108,768 106,268 17.52 26.29
December 31, 1998....... 50,000 124,211 177,666 132,215 130,215 18.39 25.05
December 31, 1999....... 50,000 124,211 186,627 141,219 139,719 16.65 21.83
</TABLE>
A-69
<PAGE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 64,166 43,303 39,303 -30.24% 45.23%
December 31, 1988....... 50,000 50,000 70,808 48,796 44,796 -6.38 23.19
December 31, 1989....... 50,000 50,000 90,502 63,637 60,137 7.16 24.90
December 31, 1990....... 50,000 50,000 81,703 58,570 55,570 2.92 14.32
December 31, 1991....... 50,000 50,000 102,192 74,619 72,119 8.16 16.55
December 31, 1992....... 50,000 73,892 105,237 78,203 76,203 7.72 14.03
December 31, 1993....... 50,000 73,892 110,912 83,811 82,311 7.76 12.69
December 31, 1994....... 50,000 73,892 107,745 82,733 81,733 6.62 10.53
December 31, 1995....... 50,000 73,892 143,059 111,553 111,053 9.64 12.89
December 31, 1996....... 50,000 73,892 167,323 132,421 132,421 10.60 13.31
December 31, 1997....... 50,000 73,892 214,604 172,277 172,277 12.29 14.63
December 31, 1998....... 50,000 73,892 266,932 217,228 217,228 13.42 15.44
December 31, 1999....... 50,000 73,892 312,624 257,733 257,733 13.82 15.57
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 76,095 50,900 46,900 -31.81% 1,134.07%
December 31, 1995....... 50,000 50,000 77,966 53,270 49,270 -1.25 46.32
December 31, 1996....... 50,000 50,000 79,221 55,248 51,748 1.60 23.66
December 31, 1997....... 50,000 50,000 74,887 53,263 50,263 .17 13.60
December 31, 1998....... 50,000 50,000 77,006 55,808 53,308 1.55 10.92
December 31, 1999....... 50,000 61,404 92,066 67,928 65,928 5.50 12.54
INTERNATIONAL STOCK SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1991............. $50,000 $50,000 $ 75,013 $ 50,000 $ 46,000 -- --
December 31, 1991....... 50,000 50,000 71,948 48,554 44,554 -15.84% 72.35%
December 31, 1992....... 50,000 50,000 61,794 42,584 38,584 -14.39 13.53
December 31, 1993....... 50,000 50,000 87,404 61,459 57,959 5.69 23.28
December 31, 1994....... 50,000 50,000 87,474 62,707 59,707 4.96 16.47
December 31, 1995....... 50,000 50,000 85,398 62,356 59,856 3.93 12.15
December 31, 1996....... 50,000 62,628 80,177 59,581 57,581 2.52 8.69
December 31, 1997....... 50,000 62,628 75,209 56,832 55,332 1.53 6.31
December 31, 1998....... 50,000 62,628 88,600 68,033 67,033 3.90 7.75
December 31, 1999....... 50,000 62,628 99,234 77,379 76,879 5.09 8.23
</TABLE>
- --------
* Available only to Policies issued before May 1, 2000.
A-70
<PAGE>
FEMALE STANDARD NON SMOKER, ISSUE AGE 70
$50,000 INITIAL PREMIUM
$81,811 INITIAL DEATH BENEFIT
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......... $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 83,150 51,247 47,247 -15.02% 331.37%
December 31, 1984....... 50,000 50,000 87,600 55,371 51,371 2.03 51.59
December 31, 1985....... 50,000 50,000 90,373 58,552 55,052 4.19 28.67
December 31, 1986....... 50,000 50,000 92,042 61,083 58,083 4.58 19.99
December 31, 1987....... 50,000 50,000 93,574 63,557 61,057 4.70 15.51
December 31, 1988....... 50,000 65,444 96,167 66,793 64,793 4.97 13.01
December 31, 1989....... 50,000 65,444 100,419 71,260 69,760 5.39 11.61
December 31, 1990....... 50,000 65,444 103,905 75,274 74,274 5.53 10.47
December 31, 1991....... 50,000 65,444 105,667 78,093 77,593 5.41 9.38
December 31, 1992....... 50,000 65,444 105,088 79,175 79,175 5.04 8.27
December 31, 1993....... 50,000 65,444 104,064 79,872 79,872 4.63 7.34
December 31, 1994....... 50,000 65,444 104,800 81,883 81,883 4.44 6.74
December 31, 1995....... 50,000 65,444 107,322 85,291 85,291 4.42 6.38
December 31, 1996....... 50,000 65,444 109,397 88,350 88,350 4.36 6.04
December 31, 1997....... 50,000 65,444 111,870 91,726 91,726 4.32 5.77
December 31, 1998....... 50,000 65,444 114,422 95,164 95,164 4.28 5.54
December 31, 1999....... 50,000 65,444 116,799 98,451 98,451 4.23 5.33
BOND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 82,947 51,122 47,122 -15.66% 328.85%
December 31, 1984....... 50,000 50,000 89,088 56,311 52,311 3.41 53.50
December 31, 1985....... 50,000 50,000 100,818 65,320 61,820 9.46 34.81
December 31, 1986....... 50,000 50,000 110,400 73,266 70,266 10.70 26.69
December 31, 1987....... 50,000 50,000 107,750 73,185 70,685 8.29 19.31
December 31, 1988....... 50,000 75,767 111,447 77,406 75,406 7.99 16.17
December 31, 1989....... 50,000 75,767 119,699 84,942 83,442 8.40 14.74
December 31, 1990....... 50,000 75,767 123,826 89,706 88,706 8.11 13.14
December 31, 1991....... 50,000 75,767 139,851 103,356 102,856 9.02 13.11
December 31, 1992....... 50,000 75,767 144,956 109,212 109,212 8.72 12.06
December 31, 1993....... 50,000 75,767 156,979 120,487 120,487 8.87 11.69
December 31, 1994....... 50,000 75,767 146,552 114,506 114,506 7.57 9.94
December 31, 1995....... 50,000 75,767 172,489 137,081 137,081 8.51 10.55
December 31, 1996....... 50,000 75,767 175,005 141,335 141,335 8.10 9.84
December 31, 1997....... 50,000 75,767 188,391 154,468 154,468 8.18 9.69
December 31, 1998....... 50,000 75,767 199,606 166,011 166,011 8.13 9.44
December 31, 1999....... 50,000 75,767 193,210 162,859 162,859 7.49 8.62
</TABLE>
A-71
<PAGE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 79,852 49,008 45,008 -46.71% 1,546.53%
December 31, 1995....... 50,000 50,000 91,137 57,369 53,369 5.75 67.26
December 31, 1996....... 50,000 50,000 99,122 63,963 60,463 9.16 37.13
December 31, 1997....... 50,000 50,000 104,975 69,396 66,396 9.37 26.39
December 31, 1998....... 50,000 50,000 102,211 69,164 66,664 7.15 18.72
December 31, 1999....... 50,000 67,822 99,026 68,532 66,532 5.68 14.14
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 81,555 50,053 46,053 -38.86% 1,768.04%
December 31, 1995....... 50,000 50,000 89,340 56,238 52,238 3.82 64.43
December 31, 1996....... 50,000 50,000 88,027 56,804 53,304 3.00 29.82
December 31, 1997....... 50,000 50,000 91,038 60,182 57,182 4.33 20.83
December 31, 1998....... 50,000 50,000 93,480 63,255 60,755 4.79 16.20
December 31, 1999....... 50,000 62,166 89,433 61,892 59,892 3.56 11.91
MANAGED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 78,989 48,993 44,993 -14.60% 98.19%
December 31, 1988....... 50,000 50,000 82,078 52,204 48,204 -2.17 34.59
December 31, 1989....... 50,000 50,000 94,297 61,467 57,967 5.70 26.84
December 31, 1990....... 50,000 50,000 92,035 61,437 58,437 4.34 18.10
December 31, 1991....... 50,000 50,000 105,576 72,115 69,615 7.35 17.36
December 31, 1992....... 50,000 70,177 107,626 75,159 73,159 6.95 14.48
December 31, 1993....... 50,000 70,177 113,873 81,230 79,730 7.25 13.14
December 31, 1994....... 50,000 70,177 107,683 78,405 77,405 5.86 10.52
December 31, 1995....... 50,000 70,177 136,181 101,135 100,635 8.40 12.25
December 31, 1996....... 50,000 70,177 149,310 113,022 113,022 8.80 11.98
December 31, 1997....... 50,000 70,177 182,171 140,455 140,455 10.17 12.88
December 31, 1998....... 50,000 70,177 211,085 165,641 165,641 10.81 13.14
December 31, 1999....... 50,000 70,177 224,980 179,530 179,530 10.62 12.61
</TABLE>
A-72
<PAGE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 80,987 49,705 45,705 -41.58% 1,691.63%
December 31, 1995....... 50,000 50,000 96,746 60,900 56,900 11.71 76.04
December 31, 1996....... 50,000 50,000 107,324 69,256 65,756 13.47 42.26
December 31, 1997....... 50,000 50,000 118,886 78,591 75,591 13.94 31.45
December 31, 1998....... 50,000 50,000 123,778 83,758 81,258 12.36 24.30
December 31, 1999....... 50,000 78,805 112,231 77,670 75,670 8.35 16.94
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 76,685 47,065 43,065 -59.08% 1,192.44%
December 31, 1995....... 50,000 50,000 110,247 69,399 65,399 25.86 96.89
December 31, 1996....... 50,000 50,000 118,713 76,605 73,105 19.16 49.03
December 31, 1997....... 50,000 50,000 142,197 94,002 91,002 20.81 39.10
December 31, 1998....... 50,000 50,000 200,521 135,687 133,187 26.50 39.56
December 31, 1999....... 50,000 154,859 256,870 177,768 175,768 27.54 37.26
VENTURE VALUE SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 78,554 48,211 44,211 -52.11% 1,392.66%
December 31, 1995....... 50,000 50,000 104,505 65,784 61,784 19.88 88.07
December 31, 1996....... 50,000 50,000 124,545 80,369 76,869 21.95 52.37
December 31, 1997....... 50,000 50,000 158,526 104,796 101,796 25.17 43.96
December 31, 1998....... 50,000 50,000 173,075 117,115 114,615 22.03 34.71
December 31, 1999....... 50,000 126,240 194,251 134,432 132,432 20.74 30.04
MID CAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 90,861 56,477 52,477 7.47% 143.48%
December 31, 1994....... 50,000 50,000 85,382 54,419 50,419 .50 37.74
December 31, 1995....... 50,000 50,000 107,511 70,222 66,722 11.41 33.19
December 31, 1996....... 50,000 50,000 120,302 80,465 77,465 12.67 27.02
December 31, 1997....... 50,000 50,000 134,739 92,209 89,709 13.33 23.64
December 31, 1998....... 50,000 104,570 121,710 85,149 83,149 9.38 16.98
December 31, 1999....... 50,000 104,570 116,796 83,462 81,962 7.69 13.56
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Harris
Oakmark Mid Cap Value Series former investment advisory fee of .70% of
average daily net assets for the period through April 30, 1998 and .75%
thereafter.
A-73
<PAGE>
SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 76,327 47,342 43,342 -19.32% 88.77%
December 31, 1995....... 50,000 50,000 94,443 60,069 56,069 7.12 46.49
December 31, 1996....... 50,000 50,000 117,621 76,670 73,170 15.35 37.84
December 31, 1997....... 50,000 50,000 140,064 93,499 90,499 17.57 32.45
December 31, 1998....... 50,000 50,000 131,435 89,778 87,278 12.68 23.02
December 31, 1999....... 50,000 85,480 165,443 115,534 113,534 15.57 23.52
INVESTORS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 81,448 50,626 46,626 -9.89% 106.87%
RESEARCH MANAGERS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 94,870 58,968 54,968 15.16% 159.66%
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 90,467 56,232 52,232 6.72% 141.91%
December 31, 1994....... 50,000 50,000 84,870 54,093 50,093 .11 37.24
December 31, 1995....... 50,000 50,000 110,899 72,435 68,935 12.77 34.74
December 31, 1996....... 50,000 50,000 124,737 83,431 80,431 13.82 28.28
December 31, 1997....... 50,000 50,000 158,935 108,768 106,268 17.52 28.09
December 31, 1998....... 50,000 124,211 188,986 132,215 130,215 18.39 26.42
December 31, 1999....... 50,000 124,211 197,622 141,219 139,719 16.65 22.88
</TABLE>
A-74
<PAGE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 69,815 43,303 39,303 -30.24% 64.77%
December 31, 1988....... 50,000 50,000 76,718 48,796 44,796 -6.38 29.25
December 31, 1989....... 50,000 50,000 97,627 63,637 60,137 7.16 28.50
December 31, 1990....... 50,000 50,000 87,740 58,570 55,570 2.92 16.57
December 31, 1991....... 50,000 50,000 109,242 74,619 72,119 8.16 18.22
December 31, 1992....... 50,000 73,892 111,985 78,203 76,203 7.72 15.29
December 31, 1993....... 50,000 73,892 117,491 83,811 82,311 7.76 13.67
December 31, 1994....... 50,000 73,892 113,627 82,733 81,733 6.62 11.30
December 31, 1995....... 50,000 73,892 150,209 111,553 111,053 9.64 13.53
December 31, 1996....... 50,000 73,892 174,938 132,421 132,421 10.60 13.83
December 31, 1997....... 50,000 73,892 223,445 172,277 172,277 12.29 15.07
December 31, 1998....... 50,000 73,892 276,826 217,228 217,228 13.42 15.80
December 31, 1999....... 50,000 73,892 322,981 257,733 257,733 13.82 15.87
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 82,935 50,900 46,900 -31.81% 1,965.46%
December 31, 1995....... 50,000 50,000 84,624 53,270 49,270 -1.25 56.96
December 31, 1996....... 50,000 50,000 85,615 55,248 51,748 1.60 28.17
December 31, 1997....... 50,000 50,000 80,571 53,263 50,263 .17 16.26
December 31, 1998....... 50,000 50,000 82,475 55,808 53,308 1.55 12.76
December 31, 1999....... 50,000 61,404 98,154 67,928 65,928 5.50 13.94
INTERNATIONAL STOCK SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1991............. $50,000 $50,000 $ 81,811 $ 50,000 $ 46,000 -- --
December 31, 1991....... 50,000 50,000 78,282 48,554 44,554 -15.84% 95.54%
December 31, 1992....... 50,000 50,000 66,952 42,584 38,584 -14.39 19.12
December 31, 1993....... 50,000 50,000 94,285 61,459 57,959 5.69 26.83
December 31, 1994....... 50,000 50,000 93,937 62,707 59,707 4.96 18.76
December 31, 1995....... 50,000 50,000 91,290 62,356 59,856 3.93 13.76
December 31, 1996....... 50,000 62,628 85,318 59,581 57,581 2.52 9.89
December 31, 1997....... 50,000 62,628 79,670 56,832 55,332 1.53 7.24
December 31, 1998....... 50,000 62,628 93,438 68,033 67,033 3.90 8.50
December 31, 1999....... 50,000 62,628 104,194 77,379 76,879 5.09 8.84
</TABLE>
- --------
* Available only to Policies issued before May 1, 2000.
A-75
<PAGE>
MALE STANDARD NON SMOKER, ISSUE AGE 65
FEMALE STANDARD NON SMOKER, ISSUE AGE 60
(JOINT EQUAL AGE 63)
$50,000 INITIAL PREMIUM
$114,909 INITIAL DEATH BENEFIT
MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 116,420 51,320 47,320 -14.64% 1,034.84%
December 31, 1984....... 50,000 50,000 121,496 55,674 51,674 2.47 93.22
December 31, 1985....... 50,000 50,000 124,093 59,077 55,577 4.61 47.28
December 31, 1986....... 50,000 50,000 125,037 61,803 58,803 4.96 31.49
December 31, 1987....... 50,000 50,000 125,682 64,451 61,951 5.05 23.61
December 31, 1988....... 50,000 66,453 127,657 67,868 65,868 5.29 19.16
December 31, 1989....... 50,000 66,453 131,737 72,553 71,053 5.69 16.49
December 31, 1990....... 50,000 66,453 134,714 76,793 75,793 5.82 14.44
December 31, 1991....... 50,000 66,453 135,418 79,828 79,328 5.68 12.68
December 31, 1992....... 50,000 66,453 133,164 81,096 81,096 5.31 11.05
December 31, 1993....... 50,000 81,486 130,440 81,975 81,975 4.89 9.71
December 31, 1994....... 50,000 81,486 130,002 84,207 84,207 4.70 8.78
December 31, 1995....... 50,000 81,486 131,814 87,887 87,887 4.67 8.17
December 31, 1996....... 50,000 81,486 133,089 91,221 91,221 4.61 7.61
December 31, 1997....... 50,000 81,486 134,862 94,896 94,896 4.57 7.16
December 31, 1998....... 50,000 81,486 136,739 98,650 98,650 4.53 6.77
December 31, 1999....... 50,000 81,486 138,423 102,262 102,262 4.47 6.43
BOND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
August 26, 1983......... $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1983....... 50,000 50,000 116,136 51,194 47,194 -15.29% 1,026.89%
December 31, 1984....... 50,000 50,000 123,559 56,620 52,620 3.86 95.65
December 31, 1985....... 50,000 50,000 138,437 65,906 62,406 9.90 54.30
December 31, 1986....... 50,000 50,000 149,980 74,131 71,131 11.10 38.83
December 31, 1987....... 50,000 50,000 144,723 74,216 71,716 8.65 27.69
December 31, 1988....... 50,000 76,937 147,943 78,654 76,654 8.32 22.49
December 31, 1989....... 50,000 76,937 157,032 86,484 84,984 8.72 19.76
December 31, 1990....... 50,000 76,937 160,543 91,517 90,517 8.41 17.21
December 31, 1991....... 50,000 76,937 179,230 105,654 105,154 9.31 16.52
December 31, 1992....... 50,000 76,937 183,685 111,864 111,864 9.00 14.94
December 31, 1993....... 50,000 123,368 196,769 123,659 123,659 9.14 14.16
December 31, 1994....... 50,000 123,368 181,797 117,756 117,756 7.84 12.05
December 31, 1995....... 50,000 123,368 211,855 141,254 141,254 8.77 12.40
December 31, 1996....... 50,000 123,368 212,910 145,930 145,930 8.36 11.47
December 31, 1997....... 50,000 123,368 227,113 159,809 159,809 8.44 11.12
December 31, 1998....... 50,000 123,368 238,541 172,096 172,096 8.39 10.72
December 31, 1999....... 50,000 123,368 228,984 169,166 169,166 7.74 9.75
</TABLE>
A-76
<PAGE>
STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 111,979 49,043 45,043 -46.46% 12,352.84%
December 31, 1995....... 50,000 50,000 126,611 57,648 53,648 6.22 121.68
December 31, 1996....... 50,000 50,000 136,347 64,504 61,004 9.61 58.87
December 31, 1997....... 50,000 50,000 142,880 70,188 67,188 9.78 39.31
December 31, 1998....... 50,000 50,000 137,553 70,114 67,614 7.51 27.49
December 31, 1999....... 50,000 68,868 131,713 69,612 67,612 6.01 20.62
U.S. GOVERNMENT SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 114,367 50,088 46,088 -38.58% 14,028.19%
December 31, 1995....... 50,000 50,000 124,115 56,512 52,512 4.29 117.93
December 31, 1996....... 50,000 50,000 121,085 57,284 53,784 3.42 50.40
December 31, 1997....... 50,000 50,000 123,910 60,869 57,869 4.72 33.18
December 31, 1998....... 50,000 50,000 125,803 64,124 61,624 5.14 24.78
December 31, 1999....... 50,000 63,125 118,953 62,868 60,868 3.88 18.26
MANAGED SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 110,338 49,114 45,114 -14.26% 226.75%
December 31, 1988....... 50,000 50,000 113,557 52,538 48,538 -1.76 63.50
December 31, 1989....... 50,000 50,000 129,144 62,065 58,565 6.10 42.70
December 31, 1990....... 50,000 50,000 124,677 62,198 59,198 4.71 28.28
December 31, 1991....... 50,000 50,000 141,388 73,167 70,667 7.96 24.94
December 31, 1992....... 50,000 71,261 142,449 76,409 74,409 7.27 20.29
December 31, 1993....... 50,000 71,261 148,947 82,746 81,246 7.55 17.78
December 31, 1994....... 50,000 71,261 139,206 80,028 79,028 6.15 14.28
December 31, 1995....... 50,000 71,261 174,028 103,435 102,935 8.69 15.47
December 31, 1996....... 50,000 71,261 188,682 115,824 115,824 9.08 14.72
December 31, 1997....... 50,000 121,946 227,744 144,226 144,226 10.44 15.72
December 31, 1998....... 50,000 121,946 261,190 170,428 170,428 11.08 15.22
December 31, 1999....... 50,000 121,946 275,661 185,089 185,089 10.88 14.43
</TABLE>
A-77
<PAGE>
BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 113,571 49,740 45,740 -41.31% 13,450.30%
December 31, 1995....... 50,000 50,000 134,404 61,196 57,196 12.21 133.32
December 31, 1996....... 50,000 50,000 147,631 69,842 66,342 13.94 64.81
December 31, 1997....... 50,000 50,000 161,815 79,489 76,489 14.37 44.89
December 31, 1998....... 50,000 50,000 166,580 84,909 82,409 12.74 33.48
December 31, 1999....... 50,000 80,022 149,279 78,895 76,895 8.69 23.58
EQUITY GROWTH SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 107,538 47,098 43,098 -58.89% 9,674.78%
December 31, 1995....... 50,000 50,000 153,160 69,736 65,736 26.42 160.95
December 31, 1996....... 50,000 50,000 163,296 77,253 73,753 19.65 72.66
December 31, 1997....... 50,000 50,000 193,545 95,076 92,076 21.26 53.32
December 31, 1998....... 50,000 50,000 269,870 137,558 135,058 26.93 49.87
December 31, 1999....... 50,000 157,256 341,677 180,580 178,580 27.94 45.05
VENTURE VALUE SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 110,158 48,245 44,245 -51.89% 11,189.07%
December 31, 1995....... 50,000 50,000 145,183 66,104 62,104 20.41 149.26
December 31, 1996....... 50,000 50,000 171,321 81,049 77,549 22.45 76.52
December 31, 1997....... 50,000 50,000 215,775 105,996 102,996 25.63 58.67
December 31, 1998....... 50,000 50,000 232,929 118,729 116,229 22.44 44.66
December 31, 1999....... 50,000 128,193 258,382 136,557 134,557 21.12 37.42
MID CAP VALUE SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 126,824 56,636 52,636 7.96% 300.15%
December 31, 1994....... 50,000 50,000 118,034 54,784 50,784 .94 67.19
December 31, 1995....... 50,000 50,000 147,115 70,924 67,424 11.84 49.78
December 31, 1996....... 50,000 50,000 162,823 81,480 78,480 13.07 37.93
December 31, 1997....... 50,000 50,000 180,270 93,571 91,071 13.70 31.59
December 31, 1998....... 50,000 106,185 160,933 86,580 84,580 9.71 22.89
December 31, 1999....... 50,000 106,185 152,621 85,034 83,534 8.00 18.21
</TABLE>
- --------
* Rates of return and Policy values and benefits shown reflect the Harris
Oakmark Mid Cap Value Series' former investment advisory fee of .70% of
average daily net assets for the period through April 30, 1998 and .75%
thereafter.
A-78
<PAGE>
SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 2, 1994............. $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 106,618 47,459 43,459 -18.99% 211.86%
December 31, 1995....... 50,000 50,000 130,666 60,454 56,454 7.56 78.01
December 31, 1996....... 50,000 50,000 161,089 77,417 73,917 15.79 55.10
December 31, 1997....... 50,000 50,000 189,750 94,662 91,662 17.98 43.88
December 31, 1998....... 50,000 50,000 176,028 91,093 88,593 13.04 30.96
December 31, 1999....... 50,000 86,805 218,983 117,461 115,461 15.92 29.78
INVESTORS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 113,685 50,769 46,769 -9.47% 239.99%
RESEARCH MANAGERS SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1999.......... $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1999....... 50,000 50,000 132,419 59,135 55,135 15.68% 326.73%
GROWTH AND INCOME SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1993.......... $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1993....... 50,000 50,000 126,274 56,391 52,391 7.21% 297.57%
December 31, 1994....... 50,000 50,000 117,325 54,455 50,455 .54 66.59
December 31, 1995....... 50,000 50,000 151,752 73,160 69,660 13.22 51.53
December 31, 1996....... 50,000 50,000 168,827 84,484 81,484 14.23 39.30
December 31, 1997....... 50,000 50,000 212,647 110,377 107,877 17.89 36.33
December 31, 1998....... 50,000 126,133 249,894 134,440 132,440 18.74 32.81
December 31, 1999....... 50,000 126,133 258,245 143,883 142,383 16.98 27.90
</TABLE>
A-79
<PAGE>
STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1987............. $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1987....... 50,000 50,000 97,521 43,409 39,409 -29.96% 171.65%
December 31, 1988....... 50,000 50,000 106,142 49,107 45,107 -5.99 57.01
December 31, 1989....... 50,000 50,000 133,705 64,257 60,757 7.58 44.57
December 31, 1990....... 50,000 50,000 118,857 59,295 56,295 3.29 26.62
December 31, 1991....... 50,000 50,000 146,300 75,709 73,209 8.51 25.86
December 31, 1992....... 50,000 75,033 148,219 79,503 77,503 8.04 21.13
December 31, 1993....... 50,000 75,033 153,680 85,376 83,876 8.07 18.34
December 31, 1994....... 50,000 75,033 146,891 84,446 83,446 6.91 15.09
December 31, 1995....... 50,000 75,033 191,956 114,091 113,591 9.93 16.79
December 31, 1996....... 50,000 75,033 221,069 135,706 135,706 10.88 16.62
December 31, 1997....... 50,000 145,580 279,345 176,903 176,903 12.57 17.50
December 31, 1998....... 50,000 145,580 342,539 223,508 223,508 13.69 17.93
December 31, 1999....... 50,000 145,580 395,741 265,715 265,715 14.09 17.74
INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT*
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
October 31, 1994........ $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1994....... 50,000 50,000 116,303 50,936 46,936 -31.50% 15,521.33%
December 31, 1995....... 50,000 50,000 117,564 53,529 49,529 -.81 108.03
December 31, 1996....... 50,000 50,000 117,768 55,715 52,215 2.02 48.49
December 31, 1997....... 50,000 50,000 109,661 53,869 50,869 .55 28.14
December 31, 1998....... 50,000 50,000 110,990 56,574 54,074 1.90 21.09
December 31, 1999....... 50,000 62,350 130,551 68,998 66,998 5.83 20.41
INTERNATIONAL STOCK SUB-ACCOUNT
<CAPTION>
MINIMUM INTERNAL RATE
TOTAL GUARANTEED VARIABLE OF RETURN ON INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH NET CASH OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE VALUE DEATH BENEFIT
- ---- -------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1991............. $50,000 $ 50,000 $114,909 $ 50,000 $ 46,000 -- --
December 31, 1991....... 50,000 50,000 109,349 48,674 44,674 -15.50% 222.38%
December 31, 1992....... 50,000 50,000 92,630 42,856 38,856 -14.03 44.71
December 31, 1993....... 50,000 50,000 129,127 62,056 58,556 6.10 42.70
December 31, 1994....... 50,000 50,000 127,253 63,484 60,484 5.33 29.00
December 31, 1995....... 50,000 50,000 122,254 63,265 60,765 4.27 21.11
December 31, 1996....... 50,000 63,593 112,921 60,570 58,570 2.83 15.46
December 31, 1997....... 50,000 63,593 104,207 57,892 56,392 1.82 11.64
December 31, 1998....... 50,000 63,593 120,788 69,440 68,440 4.18 12.19
December 31, 1999....... 50,000 63,593 133,149 79,138 78,638 5.36 11.96
</TABLE>
- --------
* Available only to Policies issued before May 1, 2000.
A-80
<PAGE>
APPENDIX C
EXAMPLE OF EFFECT OF NEGATIVE INVESTMENT PERFORMANCE
ON CALCULATION OF SURRENDER CHARGES
If there has been negative investment performance under your Policy (that
is, cash value is less than your total premium payments because net investment
experience of the Sub-Accounts has not been at least equal to total charges or
has been negative), we will calculate any Surrender Charge by deeming
additional payments to have been reduced before the initial premium. If we
consider negative investment performance to completely reduce additional
payments and to further reduce initial premium, we will consider any
subsequent increase in cash value (from earnings or net additional payments)
to increase initial premium before additional payments.
For example, assume that an initial premium of $30,000 and a net additional
payment of $20,000 have been paid, so that total net premium payments equal
$50,000. Assume further that because of negative investment performance, cash
value is equal to $40,000, or $10,000 less than total net premium payments.
For purposes of calculating the Surrender Charge upon a surrender, we would
consider the amount of additional payments at this time to equal $10,000, and
the amount of the initial premium to equal $30,000. If, because of negative
investment performance, cash value were equal to $20,000, we will consider the
negative investment performance to have completely reduced additional
payments, and the initial premium remaining would be $20,000. If, in this last
situation, there was a subsequent increase in cash value (from earnings or net
additional payments) of $15,000 occurring after the negative investment
performance, $10,000 will be deemed to increase the initial premium first back
to $30,000, and the remaining $5,000 would be deemed then to increase
additional payments to $5,000.
EXAMPLE OF ADJUSTMENT TO PREMIUM TAX CHARGE RESULTING FROM ADDITIONAL PAYMENTS
As described under "Charges and Expenses," if an additional payment is
accepted, a proportional adjustment will be made in the rate of the state
premium tax charge deducted as part of the Monthly Deduction.
For example, assume that the cash value immediately before the additional
payment is $30,000, and the net additional payment would increase the cash
value to $50,000. As a result, the state premium tax charge deducted monthly
as part of the Monthly Deduction would be 60% of what it was originally,
resulting in deductions thereafter at an annual rate of 0.15% for the state
premium tax charge.
A-81
<PAGE>
APPENDIX D
EXAMPLES OF EFFECT OF SURRENDERS AND PARTIAL
SURRENDERS ON OPERATION OF POLICY
The following examples assume that an initial premium of $40,000 was paid.
The examples further assume that no additional payments have been made and
that there have been no partial surrenders.
Based on these hypothetical assumptions, the examples demonstrate the effect
of surrenders and partial surrenders on a hypothetical Policy at the beginning
of Policy Year 5, assuming that current cash value is either $60,000 or
$30,000.
THE HYPOTHETICAL CURRENT CASH VALUES OF $60,000 AND $30,000 ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
INVESTMENT PERFORMANCE.
SURRENDER CHARGE ON FULL SURRENDER
$60,000 current cash value:
Preferred Surrender $20,000 [The maximum of (1) $20,000 (cash value
Amount: calculated on the date of surrender, or $60,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
Surrender Charge Imposed: $2,000[5% of $40,000 ($60,000, the amount being
surrendered, less $20,000, the preferred
surrender amount)]
Surrender Proceeds:
$58,000 [$60,000, the cash value of the Policy,
less $2,000, the Surrender Charge]
$30,000 current cash value:
Preferred Surrender $4,000 [The maximum of (1)--$10,000 (cash value
Amount: calculated on the date of surrender, or $30,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
Surrender Charge Imposed: $1,300 [5% of $26,000 ($30,000, or the amount
being surrendered, less $4,000, the preferred
surrender amount)]
Surrender Proceeds:
$28,700 [$30,000, the cash value of the Policy,
less $1,300, the Surrender Charge]
SURRENDER CHARGE ON PARTIAL SURRENDER AND EFFECT ON CASH VALUE
$60,000 current cash value:
Partial Surrender: $30,000
Preferred Surrender
Amount:
$20,000[The maximum of (1) $20,000 (cash value
calculated on the date of surrender, or $60,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
A-82
<PAGE>
Surrender Charge Imposed:
$500 [5% of $10,000 ($30,000, the amount being
surrendered, less $20,000, the preferred
surrender amount)]
Surrender Proceeds: $29,500($30,000, the amount being surrendered,
less $500, the Surrender Charge being imposed)
Remaining Cash Value: $30,000
Remaining Initial Premium: $30,000
Remaining Surrender $1,500 [5% of $30,000]
Charge:
Remaining Cash Surrender $28,500
Value:
$30,000 current cash value:
Partial Surrender: $20,000
Preferred Surrender $4,000 [The maximum of (1)--$10,000 (cash value
Amount: calculated on the date of surrender, or $30,000,
in excess of the initial premium paid, or
$40,000); and (2) $4,000 (10% of the initial
premium paid, or $40,000)]
Surrender Charge Imposed: $800 [5% of $16,000 ($20,000, or the amount being
surrendered, less $4,000, the preferred surrender
amount)]
Surrender Proceeds: $19,200[$20,000, the amount being surrendered,
less $800, the surrender charge being imposed]
Remaining Cash Value: $10,000
Remaining Initial Premium: $20,000
Remaining Surrender $1,000 [5% of $20,000]
Charge:
Remaining Cash Surrender $9,000
Value:
EFFECT OF PARTIAL SURRENDER ON GUARANTEED DEATH BENEFIT
Making a partial surrender will reduce the amount of the minimum guaranteed
death benefit on a proportionate basis, based on the amount of the reduction
in cash value (including any Surrender Charge) because of the partial
surrender, as compared to the cash value before the reduction (but not more
than the partial surrender amount).
Cash Value: $60,000
Partial Surrender: $15,000
Cash Value after $45,000
Surrender:
Minimum Guaranteed Death
Benefit before partial $40,000 [Initial premium paid]
surrender:
Minimum Guaranteed Death
Benefit after partial $30,000 [$40,000, or the minimum guaranteed death
surrender: benefit before partial surrender, multiplied by
$45,000, the cash value after the partial
surrender, divided by $60,000, the cash value
before the partial surrender]
A-83
<PAGE>
APPENDIX E
LONG-TERM MARKET TRENDS
The information below compares the average annual returns of common stock,
high grade corporate bonds and 30-day U.S. Treasury bills over 20-year and 30-
year holding periods.* The average annual returns assume the reinvestment of
dividends, capital gains and interest. This is an historical record and does
not predict future performance. The information does not reflect policy
charges.
The data indicates that, historically, the investment performance of common
stocks over long periods has been positive and generally superior to that of
long-term, high grade debt securities. Common stocks have, however, been
subject to more dramatic market adjustments over short periods.
Over the 55 20-year time periods beginning in 1926 and ending in 1999 (i.e.,
1926-1945, 1927-1946, and so on through 1980-1999):
-- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 52 of the 55 periods.
-- The average annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 55 periods.
-- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 55 periods.
Over the 45 30-year periods beginning in 1926 and ending in 1999, 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 45
periods.
From 1926 through 1999 the average annual return for common stocks was
11.3%, compared to 5.6% 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)2000 Ibbotson Associates, Inc. All rights reserved.
(Certain portions of this work were derived from copyrighted works of Roger
G. Ibbotson and Rex Sinquefield.)
----------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index, with dividends reinvested, over one-year, five-year
and twenty-year periods beginning in 1926 and ending in 1999.
The chart does not predict future stock market results. It shows the
historic performance of a broad index of stocks and not the performance of any
fund or investment.
----------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 0-5.00% 10.00% 15.00% 20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
-------- -------- ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
1 year 27% 4% 11% 7% 11% 40%
5 years 10% 14% 14% 30% 19% 13%
10 years 3% 10% 33% 24% 28% 2%
20 years 0% 6% 31% 53% 10% 0%
</TABLE>
- --------
Used with permission. (C)2000 Ibbotson Associates, Inc. All rights reserved.
(Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.)
A-84
<PAGE>
APPENDIX F
DOLLAR COST AVERAGING
Dollar cost averaging does not guarantee a profit or protect against a loss.
If an investor follows a program of dollar cost averaging on a long-term
basis, and the stock fund selected performs at least as well as the S&P 500
has historically, it is likely--not guaranteed--that the price at which shares
are surrendered, for whatever reason, will be higher than the average cost per
share.
An investor using dollar cost averaging invests the same amount of money in
the same professionally managed fund at regular intervals over a long period
of time. Under dollar cost averaging, an investor does not invest more when
the price of shares is high and less when the price is low. When the price of
shares is low, the money invested buys more shares. When it is high, the money
invested buys fewer shares. If you have the ability and desire to maintain
this program over a long period of time (for example, 20 years), and the stock
fund chosen follows the historical upward market trends, the price at which
you sell shares should be higher than their average cost. This price could be
lower, however, if the fund you choose does not follow these historical
trends.
You should consider your ability to continue on-going dollar cost averaging
purchases so that you can take advantage of periods of low price levels if you
are considering dollar cost averaging.
A-85
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
REPORT OF INDEPENDENT AUDITORS
To the Policy Owners and Board of Directors of New England Life Insurance
Company:
We have audited the accompanying statement of assets and liabilities of the
New England Variable Life Separate Account (comprised of the following Sub-
Accounts: Capital Growth, Bond Income, Money Market, Stock Index, Managed,
Midcap Value (formerly Avanti Growth), Growth and Income (formerly Value
Growth), Small Cap, U.S. Government, Balanced, Equity Growth, International
Magnum Equity (formerly International Equity), Venture Value, Bond
Opportunities, Investors, Research Managers, Equity-Income, Overseas, High
Income and Asset Manager) of New England Life Insurance Company (the
"Company") as of December 31, 1999, 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, 1999, 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 4, 2000
AA-1
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
Investments in New England Zenith Fund,
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at
value (Note 2)..........................
<CAPTION>
SHARES COST
--------- --------------
<S> <C> <C>
Capital Growth
Series......... 2,831,583 $1,086,202,933
Back Bay
Advisors Bond
Income Series.. 738,049 79,337,797
Back Bay
Advisors Money
Market Series.. 1,481,735 148,173,522
Westpeak Stock
Index Series... 796,217 120,113,367
Back Bay
Advisors
Managed Series. 356,133 60,490,121
Goldman Sachs
Midcap Value
Series......... 303,945 41,326,387
Westpeak Growth
and Income
Series......... 476,840 86,077,139
Loomis Sayles
Small Cap
Series......... 494,133 72,214,392
Salomon Brothers
U.S. Government
Series......... 72,858 844,414
Loomis Sayles
Balanced
Series......... 1,214,912 18,213,928
Alger Equity
Growth Series.. 7,670,932 172,788,088
Morgan Stanley
International
Magnum Equity
Series......... 1,284,810 14,534,170
Davis Venture
Value Series... 6,183,625 126,513,387
Salomon Brothers
Bond
Opportunities
Series......... 104,337 1,267,848
MFS Investors
Series......... 77,411 773,570
MFS Research
Managers
Series......... 78,902 806,954
VIP Equity-
Income
Portfolio...... 6,551,702 126,034,149
VIP Overseas
Portfolio...... 5,064,896 87,116,523
VIP High Income
Portfolio...... 1,322,300 15,875,113
VIP II Asset
Manager
Portfolio...... 707,988 11,460,518
--------------
Total........... $2,270,164,320
==============
Amount due and accrued (payable) from
policy-related transactions, net........
Dividends receivable.....................
Total Assets
LIABILITIES
Due to New England Life Insurance
Company.................................
NET ASSETS FOR VARIABLE LIFE INSURANCE
POLICIES................................
<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>
ASSETS
Investments in New England Zenith Fund,
Variable Insurance Products Fund, and
Variable Insurance Products Fund II at
value (Note 2).. $1,230,974,235 $74,838,213 $148,173,522 $183,798,637 $70,090,490 $36,996,243 $94,643,283 $99,681,359
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth
Series.........
Back Bay
Advisors Bond
Income Series..
Back Bay
Advisors Money
Market Series..
Westpeak Stock
Index Series...
Back Bay
Advisors
Managed Series.
Goldman Sachs
Midcap Value
Series.........
Westpeak Growth
and Income
Series.........
Loomis Sayles
Small Cap
Series.........
Salomon Brothers
U.S. Government
Series.........
Loomis Sayles
Balanced
Series.........
Alger Equity
Growth Series..
Morgan Stanley
International
Magnum Equity
Series.........
Davis Venture
Value Series...
Salomon Brothers
Bond
Opportunities
Series.........
MFS Investors
Series.........
MFS Research
Managers
Series.........
VIP Equity-
Income
Portfolio......
VIP Overseas
Portfolio......
VIP High Income
Portfolio......
VIP II Asset
Manager
Portfolio......
Total...........
Amount due and accrued (payable) from
policy-related transactions,
net............... (136,071) 21,370 560,723 49,113 (11,519) 39,928 7,685 84,454
Dividends receivable.. -- -- -- -- -- -- -- --
--------------- ----------- ------------ ------------ ------------ ----------- ----------- -----------
Total Assets 1,230,838,164 74,859,583 148,734,245 183,847,750 70,078,971 37,036,171 94,650,968 99,765,813
LIABILITIES
Due to New England Life Insurance
Company........... 84,134,782 6,819,176 11,964,362 19,325,681 5,908,740 3,542,818 9,540,656 10,713,149
--------------- ----------- ------------ ------------ ------------ ----------- ----------- -----------
NET ASSETS FOR VARIABLE LIFE INSURANCE
POLICIES....... $1,146,703,382 $68,040,407 $136,769,883 $164,522,069 $64,170,231 $33,493,353 $85,110,312 $89,052,664
=============== =========== ============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements
AA-2
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
INTERNATIONAL
U.S. EQUITY MAGNUM VENTURE BOND RESEARCH
GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INVESTORS MANAGERS
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------- ----------- ------------ ------------- ------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$787,592 $16,826,533 $225,065,146 $18,180,067 $164,917,275 $1,113,279 $794,240 $945,245
10,965 157,461 236,677 96,973 124,826 5,544 (2,239) (2,139)
-- -- -- -- -- -- -- --
-------- ----------- ------------ ----------- ------------ ---------- -------- --------
798,557 16,983,994 225,301,823 18,277,040 165,042,101 1,118,823 792,001 943,106
41,247 1,694,626 26,656,245 2,058,494 18,572,069 57,789 99,163 154,903
-------- ----------- ------------ ----------- ------------ ---------- -------- --------
$757,310 $15,289,368 $198,645,578 $16,218,546 $146,470,032 $1,061,034 $692,838 $788,203
======== =========== ============ =========== ============ ========== ======== ========
<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>
$168,444,262 $138,980,751 $14,955,213 $13,218,146 $2,703,423,731
(5,066) 101,197 2,344 592 1,342,818
-- -- -- -- --
- ------------- ------------ ----------- ----------- --------------
168,439,196 139,081,948 14,957,557 13,218,738 2,704,766,549
16,380,286 12,743,559 1,476,634 1,448,557 233,332,936
- ------------- ------------ ----------- ----------- --------------
$152,058,910 $126,338,389 $13,480,923 $11,770,181 $2,471,433,613
============= ============ =========== =========== ==============
</TABLE>
See Notes to Financial Statements
AA-3
<PAGE>
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<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>
INCOME
Dividends.............. $239,049,928 $5,475,221 $5,083,165 $ 4,154,533 $9,783,326 $ 459,624 $12,174,462 $ 260,319
EXPENSE
Mortality and expense
risk charge (Note 3)... 6,723,595 471,818 638,578 1,013,735 421,255 330,436 578,297 538,571
------------ ---------- ---------- ----------- ---------- ---------- ----------- -----------
Net investment income
(loss)................. 232,326,333 5,003,403 4,444,587 3,140,798 9,362,071 129,188 11,596,165 (278,252)
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net unrealized
appreciation
(depreciation) on
investments:
Beginning of period... 215,969,495 1,209,273 -- 39,965,167 13,285,666 (3,807,527) 13,616,695 3,516,783
End of period......... 144,771,302 (4,499,584) -- 63,685,270 9,600,369 (4,330,144) 8,566,144 27,466,967
------------ ---------- ---------- ----------- ---------- ---------- ----------- -----------
Net change in
unrealized appreciation
(depreciation)......... (71,198,193) (5,708,857) -- 23,720,103 (3,685,297) (522,617) (5,050,551) 23,950,184
Net realized gain
(loss) on investments.. (572,298) 1,487 -- (52,322) (65,614) (9,202) (33,403) 2,146
------------ ---------- ---------- ----------- ---------- ---------- ----------- -----------
Net realized and
unrealized gain (loss)
on investments......... (71,770,491) (5,707,370) -- 23,667,781 (3,750,911) (531,819) (5,083,954) 23,952,330
------------ ---------- ---------- ----------- ---------- ---------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $160,555,842 $ (703,967) $4,444,587 $26,808,579 $5,611,160 $ (402,631) $ 6,512,211 $23,674,078
============ ========== ========== =========== ========== ========== =========== ===========
</TABLE>
* For the period April 30, 1999 (Commencement of Operations) through December
31, 1999.
See Notes to Financial Statements
AA-4
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
INTERNATIONAL
U.S. EQUITY MAGNUM VENTURE BOND RESEARCH
GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INVESTORS* MANAGERS*
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------- ----------- ----------- ------------- ----------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 46,383 $ 998,875 $26,651,028 $ 60,426 $ 3,101,039 $ 90,809 $ 1,921 $ --
10,668 126,629 1,069,420 119,372 961,922 24,177 533 1,540
-------- ----------- ----------- ---------- ----------- -------- ------- --------
35,715 872,246 25,581,608 (58,946) 2,139,117 66,632 1,388 (1,540)
15,209 1,036,991 30,707,168 194,954 20,008,648 (46,594) -- --
(56,822) (1,387,395) 52,277,058 3,645,897 38,403,888 (154,569) 20,670 138,291
-------- ----------- ----------- ---------- ----------- -------- ------- --------
(72,031) (2,424,386) 21,569,890 3,450,943 18,395,240 (107,975) 20,670 138,291
(1,634) (14,874) (116,438) (4,634) (47,139) 1,097 8,670 (34,566)
-------- ----------- ----------- ---------- ----------- -------- ------- --------
(73,665) (2,439,260) 21,453,452 3,446,309 18,348,101 (106,878) 29,340 103,725
-------- ----------- ----------- ---------- ----------- -------- ------- --------
$(37,950) $(1,567,014) $47,035,060 $3,387,363 $20,487,218 $(40,246) $30,728 $102,185
======== =========== =========== ========== =========== ======== ======= ========
<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>
$ 7,478,140 $ 3,746,050 $1,147,254 $ 713,060 $320,475,563
1,005,310 681,381 87,077 74,260 14,878,574
- ------------ ------------ ----------- ----------- -------------
6,472,830 3,064,669 1,060,177 638,800 305,596,989
39,593,709 14,768,529 (611,552) 1,247,559 390,670,173
42,410,113 51,864,228 (919,900) 1,757,628 433,259,411
- ------------ ------------ ----------- ----------- -------------
2,816,404 37,095,699 (308,348) 510,069 42,589,238
(592,373) (370,244) 48,706 (3,669) (1,856,304)
- ------------ ------------ ----------- ----------- -------------
2,224,031 36,725,455 (259,642) 506,400 40,732,934
- ------------ ------------ ----------- ----------- -------------
$ 8,696,861 $39,790,124 $ 800,535 $1,145,200 $346,329,923
============ ============ =========== =========== =============
</TABLE>
See Notes to Financial Statements
AA-5
<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
AA-6
<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
- -------------------------------------------------------------------------
ASSET
MANAGER
SUB-
ACCOUNT TOTAL
- ---------- ------------
<S> <C>
$ 835,511 $187,037,382
50,140 10,697,110
- ---------- ------------
785,371 176,340,272
971,097 203,203,584
1,247,559 390,670,172
- ---------- ------------
276,461 187,466,588
4,137 7,251,049
- ---------- ------------
280,598 194,717,637
- ---------- ------------
$1,065,969 $371,057,909
======= ========== =========== ========= =========== ======== =========== ========== ===========
========== ============
</TABLE>
See Notes to Financial Statements
AA-7
<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
AA-8
<PAGE>
<TABLE>
<CAPTION>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- ---------------------------------------------------------------------------------- ------------------------------- ---------
INTERNATIONAL
SMALL U.S. EQUITY MAGNUM VENTURE BOND EQUITY- HIGH ASSET
CAP GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------- ---------- -------- ---------- ------------- ----------- ------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$6,279,206 $9,089 $438,430 $4,721,050 $ 209,389 $ 1,822,395 $43,914 $ 8,872,794 $5,434,055 $393,295 $528,401
275,141 2,290 50,941 265,599 51,702 276,055 9,400 676,059 447,597 41,502 33,135
- ---------- ------ -------- ---------- --------- ----------- ------- ----------- ---------- -------- --------
6,004,065 6,799 387,489 4,455,451 157,687 1,546,340 34,514 8,196,735 4,986,458 351,793 495,266
3,059,565 (819) 236,625 2,084,389 136,191 2,398,023 (1,153) 16,409,989 9,502,216 362,600 547,647
5,422,058 (1,916) 642,612 5,391,267 (155,006) 10,716,783 (2,256) 32,699,163 11,137,299 964,520 971,097
- ---------- ------ -------- ---------- --------- ----------- ------- ----------- ---------- -------- --------
2,362,493 (1,097) 405,987 3,306,878 (291,197) 8,318,760 (1,103) 16,289,174 1,635,083 601,920 423,450
20,956 1 55,231 75,802 8,303 21,718 201 126,489 67,905 12,234 5,368
- ---------- ------ -------- ---------- --------- ----------- ------- ----------- ---------- -------- --------
2,383,449 (1,096) 461,218 3,382,680 (282,894) 8,340,478 (902) 16,415,663 1,702,988 614,154 428,818
- ---------- ------ -------- ---------- --------- ----------- ------- ----------- ---------- -------- --------
$8,387,514 $5,703 $848,707 $7,838,131 $(125,207) $ 9,886,818 $33,612 $24,612,398 $6,689,446 $965,947 $924,084
========== ====== ======== ========== ========= =========== ======= =========== ========== ======== ========
<CAPTION>
- ----------------------------------------------------------------------------------
TOTAL
- ------------
<S>
$231,072,203
7,755,657
- ------------
223,316,546
194,486,245
203,203,584
- ------------
8,717,339
2,491,649
- ------------
11,208,988
- ------------
$234,525,534
============
</TABLE>
See Notes to Financial Statements
AA-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, 1999
<TABLE>
<CAPTION>
CAPITAL BOND MONEY STOCK MIDCAP
GROWTH INCOME MARKET INDEX MANAGED VALUE
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
-------------- ----------- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATING
ACTIVITIES
Net investment
income (loss)... $ 232,326,333 $ 5,003,403 $ 4,444,587 $ 3,140,798 $ 9,362,071 $ 129,188
Net realized and
unrealized gain
(loss) on
investments..... (71,770,491) (5,707,370) -- 23,667,781 (3,750,911) (531,819)
-------------- ----------- ------------- ------------ ----------- -----------
Net Increase
(decrease) in
net assets
resulting from
operations..... 160,555,842 (703,967) 4,444,587 26,808,579 5,611,160 (402,631)
FROM POLICY-
RELATED
TRANSACTIONS
Net premiums
transferred from
New England Life
Insurance
Company (Note
4).............. 142,211,177 13,805,688 214,469,972 29,988,746 10,115,433 7,098,841
Net transfers
(to) from other
sub-accounts.... (3,426,057) 5,993,183 (132,180,032) 28,975,401 3,130,211 (1,928,318)
Net transfers
(to) from New
England Life
Insurance
Company......... (127,342,172) (8,870,541) (35,295,568) (21,960,448) (7,936,560) (3,985,601)
-------------- ----------- ------------- ------------ ----------- -----------
Net Increase in
net assets
resulting from
policy related
transactions... 11,442,948 10,928,330 46,994,372 37,003,699 5,309,084 1,184,922
-------------- ----------- ------------- ------------ ----------- -----------
Net increase
(decrease) in
net assets...... 171,998,790 10,224,363 51,438,959 63,812,278 10,920,244 782,291
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 974,704,592 57,816,044 85,330,924 100,709,791 53,249,987 32,711,062
-------------- ----------- ------------- ------------ ----------- -----------
NET ASSETS, AT
END OF THE
PERIOD.......... $1,146,703,382 $68,040,407 $ 136,769,883 $164,522,069 $64,170,231 $33,493,353
============== =========== ============= ============ =========== ===========
<CAPTION>
NEW ENGLAND ZENITH FUND
--------------------------------------
GROWTH
AND SMALL U.S.
INCOME CAP GOVERNMENT
SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT
------------- ------------- ----------
<S> <C> <C> <C>
FROM OPERATING
ACTIVITIES
Net investment
income (loss)... $ 11,596,165 $ (278,252) $ 35,715
Net realized and
unrealized gain
(loss) on
investments..... (5,083,954) 23,952,330 (73,665)
------------- ------------- ----------
Net Increase
(decrease) in
net assets
resulting from
operations..... 6,512,211 23,674,078 (37,950)
FROM POLICY-
RELATED
TRANSACTIONS
Net premiums
transferred from
New England Life
Insurance
Company (Note
4).............. 15,769,644 16,994,060 --
Net transfers
(to) from other
sub-accounts.... 14,513,514 (3,433,209) 79,255
Net transfers
(to) from New
England Life
Insurance
Company......... (10,636,850) (11,981,152) 24,393
------------- ------------- ----------
Net Increase in
net assets
resulting from
policy related
transactions... 19,646,308 1,579,699 103,648
------------- ------------- ----------
Net increase
(decrease) in
net assets...... 26,158,519 25,253,777 65,698
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 58,951,793 63,798,887 691,612
------------- ------------- ----------
NET ASSETS, AT
END OF THE
PERIOD.......... $ 85,110,312 $ 89,052,664 $757,310
============= ============= ==========
</TABLE>
* For the period April 30, 1999 (Commencement of Operations) through December
31, 1999.
See Notes to Financial Statements
AA-10
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY MAGNUM VENTURE BOND RESEARCH
BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INVESTORS* MANAGERS*
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ----------- ------------ ------------- ------------ ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 872,246 $ 25,581,608 $ (58,946) $ 2,139,117 $ 66,632 $ 1,388 $ (1,540)
(2,439,260) 21,453,452 3,446,309 18,348,101 (106,878) 29,340 103,725
- ----------- ------------ ----------- ------------ ---------- -------- --------
(1,567,014) 47,035,060 3,387,363 20,487,218 (40,246) 30,728 102,185
4,093,455 31,646,457 3,430,299 32,031,496 -- 75,935 86,667
1,865,860 59,949,102 1,463,742 22,546,367 1,100 684,756 763,549
(1,579,581) (30,858,890) (2,381,414) (23,867,517) 9,526 (98,581) (164,198)
- ----------- ------------ ----------- ------------ ---------- -------- --------
4,379,734 60,736,669 2,512,627 30,710,346 10,626 662,110 686,018
- ----------- ------------ ----------- ------------ ---------- -------- --------
2,812,720 107,771,729 5,899,990 51,197,564 (29,620) 692,838 788,203
12,476,648 90,873,849 10,318,556 95,272,468 1,090,654 -- --
- ----------- ------------ ----------- ------------ ---------- -------- --------
$15,289,368 $198,645,578 $16,218,546 $146,470,032 $1,061,034 $692,838 $788,203
=========== ============ =========== ============ ========== ======== ========
<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>
$ 6,472,830 $ 3,064,669 $ 1,060,177 $ 638,800 $ 305,596,989
2,224,031 36,725,455 (259,642) 506,400 40,732,934
- ------------- ------------- ------------ ------------ ---------------
8,696,861 39,790,124 800,535 1,145,200 346,329,923
26,649,674 17,254,614 3,727,099 2,393,210 571,842,467
(2,823,843) 1,086,949 1,354,057 1,384,413 --
(19,017,183) (16,067,097) (2,389,723) (1,339,833) (325,738,990)
- ------------- ------------- ------------ ------------ ---------------
4,808,648 2,274,466 2,691,433 2,437,790 246,103,477
- ------------- ------------- ------------ ------------ ---------------
13,505,509 42,064,590 3,491,968 3,582,990 592,433,400
138,553,401 84,273,799 9,988,955 8,187,191 1,879,000,213
- ------------- ------------- ------------ ------------ ---------------
$152,058,910 $126,338,389 $13,480,923 $11,770,181 $2,471,433,613
============= ============= ============ ============ ===============
</TABLE>
See Notes to Financial Statements
AA-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, 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
AA-12
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
-------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
U.S. EQUITY MAGNUM VENTURE BOND EQUITY- HIGH
GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
---------- ----------- ------------ ------------- ------------ ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 34,649 $ 554,190 $ 3,146,243 $ 202,660 $ 2,399,796 $ 90,920 $ 7,186,371 $ 5,543,453 $ 996,739
17,136 401,219 25,372,043 355,856 9,314,386 (43,844) 7,455,548 3,964,503 (1,555,159)
--------- ----------- ------------ ----------- ------------ ---------- ------------ ------------ -----------
51,785 955,409 28,518,286 558,517 11,714,181 47,076 14,641,919 9,507,956 (558,420)
-- 3,185,034 18,566,913 3,131,225 24,165,947 -- 26,170,240 17,386,996 2,434,923
590,096 3,794,185 16,305,214 999,735 23,584,994 612,788 8,474,098 342,473 2,823,884
(111,452) (2,333,228) (14,453,624) (1,503,958) (15,609,387) (156,947) (18,064,178) (10,788,946) (1,891,706)
--------- ----------- ------------ ----------- ------------ ---------- ------------ ------------ -----------
478,644 4,645,991 20,418,503 2,627,002 32,141,554 455,841 16,580,160 6,940,523 3,367,101
--------- ----------- ------------ ----------- ------------ ---------- ------------ ------------ -----------
530,429 5,601,400 48,936,789 3,185,519 43,855,735 502,917 31,222,080 16,448,479 2,808,682
161,183 6,875,248 41,937,060 7,133,037 51,416,733 587,737 107,331,321 67,825,320 7,180,273
--------- ----------- ------------ ----------- ------------ ---------- ------------ ------------ -----------
$ 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
- ----------------------------------------------------------------------------------
ASSET
MANAGER
SUB-
ACCOUNT TOTAL
- ------------ ---------------
<S> <C>
$ 785,371 $ 176,340,272
280,598 194,717,637
- ------------ ---------------
1,065,969 371,057,909
1,626,307 516,501,076
1,297,121 --
(1,251,084) (277,154,223)
- ------------ ---------------
1,672,344 239,346,853
- ------------ ---------------
2,738,313 610,404,762
5,448,878 1,268,595,450
- ------------ ---------------
$ 8,187,191 $1,879,000,212
============ ===============
</TABLE>
See Notes to Financial Statements
AA-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, 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
AA-14
<PAGE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
- ------------------------------------------------------------------------------- --------------------------------------
INTERNATIONAL
U.S. EQUITY MAGNUM VENTURE BOND EQUITY- HIGH
GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
- ---------- ----------- ----------- ------------- ------------ ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,799 $ 387,489 $ 4,455,451 $ 157,687 $ 1,546,340 $ 34,514 $ 8,196,735 $ 4,986,458 $ 351,793
(1,096) 461,218 3,382,680 (282,894) 8,340,478 (902) 16,415,663 1,702,988 614,154
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
5,703 848,707 7,838,131 (125,207) 9,886,818 33,612 24,612,398 6,689,446 965,947
-- 2,146,406 14,606,449 3,056,999 13,157,429 -- 23,866,781 17,551,475 2,042,291
118,925 2,461,028 6,194,266 1,537,466 22,596,463 563,357 5,377,892 1,724,137 1,829,771
(9,482) (1,814,302) (8,772,068) (1,574,196) (10,885,947) (36,000) (18,885,322) (9,549,079) (1,756,377)
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
109,443 2,793,132 12,028,647 3,020,269 24,867,945 527,357 10,359,351 9,726,533 2,115,685
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
115,146 3,641,839 19,866,778 2,895,062 34,754,763 560,969 34,971,749 16,415,979 3,081,632
46,037 3,233,409 22,070,282 4,237,975 16,661,970 26,768 72,359,572 51,409,341 4,098,641
-------- ----------- ----------- ----------- ------------ -------- ------------ ----------- -----------
$161,183 $ 6,875,248 $41,937,060 $ 7,133,037 $ 51,416,733 $587,737 $107,331,321 $67,825,320 $ 7,180,273
======== =========== =========== =========== ============ ======== ============ =========== ===========
<CAPTION>
VARIABLE
INSURANCE
PRODUCTS
FUND II
- -------------------------------------------------------------------------------
ASSET
MANAGER
SUB-
ACCOUNT TOTAL
- ----------- ---------------
<S> <C>
$ 495,266 $ 223,316,546
428,818 11,208,988
- ----------- ---------------
924,084 234,525,534
1,403,144 360,665,925
422,784 --
(881,229) (212,980,807)
- ----------- ---------------
944,699 147,685,118
- ----------- ---------------
1,868,783 382,210,652
3,580,095 886,384,798
- ----------- ---------------
$5,448,878 $1,268,595,450
=========== ===============
</TABLE>
See Notes to Financial Statements
AA-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. NELICO is an indirect wholly-owned subsidiary of Metropolitan Life
Insurance Company.
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 twenty 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 twenty 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 (the "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% and .60% 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 load, administrative charges, premium tax charges, risk charges,
cost of insurance charges, and charges for rider benefits and special risk
charges.
AA-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. New England Investment Management,
Inc. (formerly, 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 Securities and Exchange Commission 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................. 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 Growth and
Income................. New England Investment Management, Inc. Westpeak Investment Advisors, L.P. *
Goldman Sachs Midcap
Value.................. New England Investment Management, Inc. Goldman Sachs Asset Management
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 Stanley
International Magnum New England Investment Management, Inc. Morgan Stanley Dean Witter
Equity................. Investment Management Inc.
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.
Salomon Brothers U.S. New England Investment Management, Inc. Salomon Brothers Asset
Government............. Management Inc
Salomon Brothers
Strategic Bond
Opportunities.......... New England Investment Management, Inc. Salomon Brothers Asset
Management Inc
MFS Investors........... New England Investment Management, Inc. Massachusetts Financial
Services Company
MFS Research Managers... New England Investment Management, Inc. Massachusetts Financial
Services Company
</TABLE>
*An affiliate of NELICO
Effective May 1, 1997 the Draycott International Equity Series was renamed the
Morgan Stanley International Magnum Equity Series and Morgan Stanley Dean
Witter Investment Management Inc. became the sub-adviser of the Series,
succeeding Draycott Partners, Ltd.
Effective May 1, 1998 Goldman Sachs Asset Management ("Goldman Sachs") became
the sub-adviser 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.
AA-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, 1999:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Capital Growth Series............................. $242,198,370 $241,707,039
Back Bay Advisors Money Market Series............. 327,644,952 277,923,925
Back Bay Advisors Bond Income Series.............. 36,178,905 24,991,981
Back Bay Advisors Managed Series.................. 24,394,855 18,680,924
Westpeak Stock Index Series....................... 81,767,015 38,818,677
Westpeak Growth and Income Series................. 43,834,304 22,733,178
Goldman Sachs Midcap Value Series................. 14,632,125 14,003,124
Loomis Sayles Small Cap Series.................... 32,520,472 28,114,874
Loomis Sayles Balanced Series..................... 11,121,785 7,665,490
Morgan Stanley International Magnum Equity Series. 8,500,269 5,336,590
Davis Venture Value Series........................ 74,752,030 39,161,371
Alger Equity Growth Series........................ 112,530,144 37,977,904
Salomon Bothers U.S. Government Series............ 728,153 711,346
Salomon Bothers Strategic Bond Opportunities
Series........................................... 504,155 619,331
MFS Investors Series *............................ 853,017 92,276
MFS Research Managers Series *.................... 869,163 29,781
VIP Equity-Income Portfolio....................... 48,322,887 44,032,962
VIP Overseas Portfolio............................ 36,474,794 30,947,930
VIP High Income Portfolio......................... 10,500,033 7,853,618
VIP II Asset Manager Portfolio.................... 6,412,123 3,587,782
</TABLE>
*For the period April 30, 1999 (Commencement of Operations) to December 31,
1999.
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.
AA-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
----------------------------------------------------------------------------------------------
1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (3.82)% 53.45% (6.38)% 14.57% (7.39)% 37.55% 20.65% 23.05 % 33.63 % 15.30 %
Bond Income............. 7.71 % 17.55% 7.80 % 12.22% (3.70)% 20.78% 4.24% 10.50 % 8.66 % (0.81)%
Money Market............ 7.81 % 5.84% 3.43 % 2.61% 3.61 % 5.33% 4.76% 4.97 % 4.90 % 4.60 %
<CAPTION>
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- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (4.48)% 29.98% 6.92 % 9.34% 0.76 % 36.44% 22.04% 32.03 % 27.49 % 19.96 %
Managed................. 2.85 % 19.75% 6.33 % 10.26% (1.46)% 30.81% 14.62% 26.12 % 19.24 % 9.59 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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)% 0.00 %
Growth and Income.................................. 13.97% (1.55)% 35.99% 17.68% 33.01 % 24.02 % 8.97 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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 % 5.96 %
Overseas........................................... 14.57% 1.37 % 9.30% 12.82% 11.17 % 12.36 % 42.13 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................... (3.45)% 28.40% 30.22% 24.42 % (2.04)% 31.29 %
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income................................................. (0.58)% 20.18% 13.63% 17.26 % (4.66)% 7.78 %
Asset Manager............................................... (4.41)% 16.55% 14.20% 20.23 % 14.65 % 10.70 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........................................................ 24.84% 12.78% 25.19 % 47.27 % 33.66 %
Balanced............................................................. 13.75% 16.50% 15.77 % 8.73 % (5.39)%
International Magnum Equity.......................................... 3.85% 6.30% (1.64)% 6.90 % 24.18 %
Venture Value........................................................ 21.64% 25.40% 33.03 % 14.02 % 17.11 %
<CAPTION>
4/30/99-
SUB-ACCOUNT 12/31/99
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors................................................................................................ 2.61 %
Research Managers........................................................................................ 19.52 %
</TABLE>
AA-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
----------------------------------------------------------------------------------------------
1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (3.91)% 53.29% (6.47)% 14.46% (7.38)% 37.41% 20.53% 22.92 % 33.49 % 15.18 %
Bond Income............. 7.60 % 17.43% 7.69 % 12.10% (3.80)% 20.66% 4.14% 10.39 % 8.55 % (0.91)%
Money Market............ 7.71 % 5.74% 3.33 % 2.51% 3.35 % 5.23% 4.65% 4.87 % 4.79 % 4.49 %
<CAPTION>
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- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (4.58)% 29.85% 6.81 % 9.23% 0.66 % 36.30% 21.91% 31.90 % 27.36 % 19.84 %
Managed................. 2.75 % 19.63% 6.22 % 10.15% (1.56)% 30.67% 14.51% 25.99 % 19.12 % 9.48 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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)% (0.10)%
Growth and Income.................................. 13.90% (1.65)% 38.85% 17.56% 32.87 % 23.89 % 8.86 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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 % 5.85 %
Overseas........................................... 14.49% 1.27 % 9.19% 12.70% 11.05 % 12.24 % 41.99 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................... (3.52)% 28.27% 30.09% 24.29 % (2.14)% 31.16 %
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income................................................. (0.61)% 20.06% 13.52% 17.14 % (4.76)% 7.67 %
Asset Manager............................................... (4.45)% 16.43% 14.09% 20.11 % 14.53 % 10.59 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........................................................ 24.76% 12.66% 25.06 % 47.12 % 33.53 %
Balanced............................................................. 13.67% 16.39% 15.66 % 8.62 % (5.49)%
International Magnum Equity.......................................... 3.79% 6.19% (1.74)% 6.79 % 24.05 %
Venture Value........................................................ 21.56% 25.27% 32.90 % 13.90 % 16.99 %
<CAPTION>
4/30/99-
SUB-ACCOUNT 12/31/99
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors................................................................................................ 2.54 %
Research Managers........................................................................................ 19.44 %
</TABLE>
AA-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
----------------------------------------------------------------------------------------------
1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (4.06)% 53.06% (6.61)% 14.28% (7.62)% 37.21% 20.34% 22.74 % 33.29 % 15.01 %
Bond Income............. 7.44 % 17.25% 7.53 % 11.94% (3.94)% 20.47% 3.98% 10.23 % 8.39 % (1.06)%
Money Market............ 7.54 % 5.58% 3.18 % 2.36% 3.35 % 5.07% 4.50% 4.71 % 4.63 % 4.34 %
<CAPTION>
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- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (4.72)% 29.65% 6.65 % 9.07% 0.51 % 36.10% 21.73% 31.70 % 27.17 % 19.66 %
Managed................. 2.59 % 19.45% 6.06 % 9.99% (1.70)% 30.48% 14.34% 25.81 % 18.94 % 9.31 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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)% (0.25)%
Growth and Income.................................. 13.78% (1.80)% 35.65% 17.38% 32.67 % 23.71 % 8.70 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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 % 5.69 %
Overseas........................................... 14.38% 1.12 % 9.02% 12.53% 10.89 % 12.08 % 41.77 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................... (3.61)% 28.08% 29.90% 24.11 % (2.28)% 30.96 %
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income................................................. (0.66)% 19.88% 13.35% 16.96 % (4.90)% 7.51 %
Asset Manager............................................... (4.49)% 16.26% 13.91% 19.93 % 14.36 % 10.43 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........................................................ 24.64% 12.49% 24.88 % 46.90 % 33.33 %
Balanced............................................................. 13.56% 16.21% 15.48 % 8.46 % (5.63)%
International Magnum Equity.......................................... 3.68% 6.03% (1.89)% 6.63 % 23.87 %
Venture Value........................................................ 21.44% 25.08% 32.70 % 13.73 % 16.81 %
<CAPTION>
4/30/99-
SUB-ACCOUNT 12/31/99
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors................................................................................................ 2.44 %
Research Managers........................................................................................ 19.32 %
</TABLE>
AA-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*
----------------------------------------------------------------------------------------------
1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (4.35)% 52.61% (6.90)% 13.94% (7.90)% 36.80% 19.98% 22.37% 32.89 % 14.67 %
Bond Income............. 7.11 % 16.90% 7.21 % 11.60% (4.23)% 20.12% 3.67% 9.90% 8.07 % (1.36)%
Money Market............ 7.22 % 5.26% 2.87 % 2.05% 3.04 % 4.75% 4.18% 4.39% 4.32 % 4.03 %
<CAPTION>
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- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (5.01)% 29.27% 6.33 % 8.74% 0.21 % 35.69% 21.36% 31.31% 26.79 % 19.30 %
Managed................. 2.28 % 19.10% 5.74 % 9.69% (2.00)% 30.09% 13.99% 25.43% 18.58 % 8.98 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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)% (0.55)%
Growth and Income.................................. 13.55% (2.09)% 35.25% 17.03% 32.28% 23.34 % 8.37 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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 % 5.38 %
Overseas........................................... 14.15% 0.82 % 8.70% 12.19% 10.56% 11.74 % 41.35 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................... (3.80)% 27.69% 29.50% 23.73% (2.58)% 30.57 %
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income................................................. (0.76)% 19.53% 13.00% 16.61% (5.19)% 7.19 %
Asset Manager............................................... (4.59)% 15.91% 13.57% 19.57% 14.02 % 10.10 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........................................................ 24.39% 12.15% 24.50 % 46.46 % 32.93 %
Balanced............................................................. 13.33% 15.86% 15.14 % 8.13 % (5.91)%
International Magnum Equity.......................................... 3.48% 5.71% (2.18)% 6.31 % 23.50 %
Venture Value........................................................ 21.20% 24.71% 32.30 % 13.39 % 16.47 %
<CAPTION>
4/30/99-
SUB-ACCOUNT 12/31/99
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors................................................................................................ 2.23 %
Research Managers........................................................................................ 19.08 %
</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%.
AA-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*
----------------------------------------------------------------------------------------------
1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (5.73)% 52.83% (6.75)% 14.11% (7.76)% 37.00% 20.16% 22.56 % 33.09 % 14.84 %
Bond Income............. 7.28 % 17.08% 7.37 % 11.77% (4.08)% 20.29% 3.82% 10.06 % 8.23 % (1.21)%
Money Market............ 7.38 % 5.42% 3.02 % 2.20% 3.20 % 4.91% 4.34% 4.55 % 4.48 % 4.18 %
<CAPTION>
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- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (4.86)% 29.46% 6.49 % 8.90% 0.36 % 35.90% 21.55% 31.51 % 26.98 % 19.48 %
Managed................. 2.44 % 19.28% 5.90 % 9.82% (1.85)% 30.28% 14.16% 25.62 % 18.76 % 9.15 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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)% (0.40)%
Growth and Income.................................. 13.67% (1.94)% 35.45% 17.21% 32.47 % 23.52 % 8.53 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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 % 5.54 %
Overseas........................................... 14.26% 0.97 % 8.86% 12.36% 10.72 % 11.91 % 41.56 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................... (3.71)% 27.88% 29.70% 23.92 % (2.43)% 30.77 %
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income................................................. (0.71)% 19.71% 13.17% 16.79 % (5.04)% 7.35 %
Asset Manager............................................... (4.54)% 16.08% 13.74% 19.75 % 14.19 % 10.26 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........................................................ 24.51% 12.32% 24.69 % 46.68 % 33.13 %
Balanced............................................................. 13.44% 16.03% 15.31 % 8.29 % (5.77)%
International Magnum Equity.......................................... 3.58% 5.87% (2.04)% 6.47 % 23.68 %
Venture Value........................................................ 21.32% 24.89% 32.50 % 13.56 % 16.64 %
<CAPTION>
4/30/99-
SUB-ACCOUNT 12/31/99
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors................................................................................................ 2.34 %
Research Managers........................................................................................ 19.20 %
</TABLE>
* Based on a mortality and expense risk charge at an annual rate of .75%.
Certain Zenith Flexible Life Policies currently have a mortality and expense
risk charge at an annual rate of .60%.
AA-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
----------------------------------------------------------------------------------------------
1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth.......... (3.48)% 53.98% (6.05)% 14.97% (7.07)% 38.03% 21.07% 23.48 % 34.09 % 15.70 %
Bond Income............. 8.09 % 17.96% 8.18 % 12.61% (3.36)% 21.20% 4.61% 10.89 % 9.04 % (0.47)%
Money Market............ 8.19 % 6.21% 3.80 % 2.97% 3.97 % 5.70% 5.13% 5.34 % 5.26 % 4.97 %
<CAPTION>
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- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (4.14)% 30.43% 7.30 % 9.72% 1.12 % 36.92% 22.47% 32.50 % 27.93 % 20.38 %
Managed................. 3.21 % 20.17% 6.70 % 10.65% (1.11)% 31.26% 15.03% 26.56 % 19.65 % 9.97 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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)% 0.35 %
Growth and Income.................................. 14.24% (1.21)% 36.47% 18.10% 33.47 % 24.45 % 9.35 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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 % 6.33 %
Overseas........................................... 14.84% 1.21 % 11.02% 12.43% 11.56 % 12.75 % 42.63 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................... (3.23)% 28.84% 30.68% 24.85 % (1.69)% 31.75 %
<CAPTION>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income................................................. (.37)% 20.79% 13.75% 17.67 % (4.33)% 8.15 %
Asset Manager............................................... (4.65)% 17.68% 14.31% 20.65 % 15.05 % 11.09 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........................................................ 25.13% 13.17% 25.63 % 47.78 % 34.13 %
Balanced............................................................. 14.01% 16.91% 16.18 % 9.11 % (5.06)%
International Magnum Equity.......................................... 4.01% 6.67% (1.30)% 7.27 % 24.61 %
Venture Value........................................................ 21.92% 25.84% 33.50 % 14.41 % 17.52 %
<CAPTION>
4/30/99-
SUB-ACCOUNT 12/31/99
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors................................................................................................ 2.85 %
Research Managers........................................................................................ 19.80 %
</TABLE>
AA-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
---------------------------------------------------------------------------------------------
1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bond Income............. 8.09 % 17.96% 8.18% 12.61% (3.36)% 21.20% 4.61% 10.89 % 9.04 % (0.47)%
Money Market............ 8.19 % 6.21% 3.80% 2.97% 3.97 % 5.70% 5.13% 5.34 % 5.26 % 4.97 %
<CAPTION>
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- 1/1/99-
SUB-ACCOUNT 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 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index............. (4.14)% 30.43% 7.30% 9.72% 1.12 % 36.92% 22.47% 32.50 % 27.93 % 20.38 %
Managed................. 3.21 % 20.17% 6.70% 10.65% (1.11)% 31.26% 15.03% 26.56 % 19.65 % 9.97 %
<CAPTION>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- -------- --------
<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)% 0.35 %
Growth and Income.................................. 14.24% (1.21)% 36.47% 18.10% 33.47 % 24.45 % 9.35 %
<CAPTION>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Small Cap................................................... (3.23)% 28.84% 30.68% 24.85 % (1.69)% 31.75 %
<CAPTION>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Growth........................................................ 25.13% 13.17% 25.63 % 47.78 % 34.13 %
Balanced............................................................. 14.01% 16.91% 16.18 % 9.11 % (5.06)%
International Magnum Equity.......................................... 4.01% 6.67% (1.30)% 7.27 % 24.61 %
Venture Value........................................................ 21.92% 25.84% 33.50 % 14.41 % 17.52 %
<CAPTION>
6/28/96- 1/1/97- 1/1/98- 1/1/99-
SUB-ACCOUNT 12/31/96 12/31/97 12/31/98 12/31/99
- ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government............................................................... 4.55% 8.47 % 7.61 % 0.17 %
Strategic Bond Opportunities.................................................. 8.46% 11.07 % 2.04 % 1.44 %
<CAPTION>
4/30/99-
SUB-ACCOUNT 12/31/99
- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investors................................................................................................ 2.85 %
Research Managers........................................................................................ 19.80 %
</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.
AA-25
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Policyholders of New England Life Insurance
Company:
We have audited the accompanying consolidated balance sheets of New England
Life Insurance Company and subsidiaries (the "Company") as of December 31,
1999 and 1998, 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, 1999. These consolidated 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 New England Life Insurance
Company and subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1999 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 4, 2000
AA-26
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed Maturities, Available for Sale, at Estimated Fair
Value................................................. $ 735,697 $ 769,364
Equity Securities, at Fair Value....................... 22,685 13,240
Policy Loans........................................... 181,995 135,800
Short-Term Investments................................. 62,619 52,285
Other Invested Assets.................................. 16,798 16,372
---------- ----------
Total Investments................................... 1,019,794 987,061
Cash and Cash Equivalents............................... 84,371 43,598
Deferred Policy Acquisition Costs....................... 930,703 710,961
Accrued Investment Income............................... 29,940 21,802
Premiums and Other Receivables.......................... 119,750 145,117
Other Assets............................................ 105,982 111,067
Separate Account Assets................................. 4,840,029 3,258,383
---------- ----------
TOTAL ASSETS........................................ $7,130,569 $5,277,989
========== ==========
LIABILITIES AND EQUITY
LIABILITIES
Future Policy Benefits.................................. $ 614,927 $ 561,746
Policyholder Account Balances........................... 325,385 210,242
Other Policyholder Funds................................ 245,339 186,255
Policyholder Dividends Payable.......................... 977 609
Short and Long-Term Debt................................ 75,053 82,855
Income Taxes Payable:
Current................................................ (77) 10,984
Deferred............................................... 38,669 42,334
Due to Parent........................................... 72,247 789
Other Liabilities....................................... 64,717 78,721
Separate Account Liabilities............................ 4,840,029 3,258,383
---------- ----------
TOTAL LIABILITIES................................... 6,277,266 4,432,918
---------- ----------
Commitments and Contingencies (Notes 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..................................... 647,273 647,273
Retained Earnings....................................... 214,528 177,859
Accumulated Other Comprehensive Income.................. (10,998) 17,439
---------- ----------
TOTAL EQUITY........................................ 853,303 845,071
---------- ----------
TOTAL LIABILITIES AND EQUITY............................ $7,130,569 $5,277,989
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
AA-27
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Premiums........................................... $123,638 $100,689 $ 63,616
Universal Life and Investment-Type Product Policy
Fees.............................................. 220,841 173,766 145,157
Net Investment Income.............................. 68,498 49,077 61,059
Investment Gains (Losses), Net..................... 2,922 5,610 890
Commissions, Fees and Other Income................. 265,891 192,411 28,302
-------- -------- --------
TOTAL REVENUES................................... 681,790 521,553 299,024
-------- -------- --------
BENEFITS AND OTHER DEDUCTIONS
Policyholder Benefits.............................. 193,293 149,687 100,180
Interest Credited to Policyholder Account Balances. 10,721 7,735 6,220
Policyholder Dividends............................. 20,827 22,989 21,325
Other Operating Costs and Expenses................. 381,881 316,659 144,342
-------- -------- --------
TOTAL BENEFITS AND OTHER DEDUCTIONS.............. 606,722 497,070 272,067
-------- -------- --------
Income From Operations Before Income Taxes......... 75,068 24,483 26,957
Income Taxes....................................... 29,344 13,046 4,988
-------- -------- --------
NET INCOME......................................... $ 45,724 $ 11,437 $ 21,969
-------- -------- --------
Other Comprehensive Income (Loss), Net of Tax:
Unrealized Investment Gains (Losses) (Net of
Related Offsets, Reclassification Adjustments and
Income Taxes, of $45,376, $(299) and $(16,588),
Respectively).................................... (28,437) 92 13,620
-------- -------- --------
COMPREHENSIVE INCOME............................... $ 17,287 $ 11,529 $ 35,589
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
AA-28
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITAL ACCUMULATED
STOCK & OTHER
CONTRIBUTED RETAINED COMPREHENSIVE
CAPITAL EARNINGS INCOME TOTAL
----------- -------- ------------- --------
<S> <C> <C> <C> <C>
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
Net Income....................... 45,724 45,724
Preferred Stock Dividends........ (9,055) (9,055)
Change in Net Unrealized
Investment Gains (Losses)....... (28,437) (28,437)
-------- -------- -------- --------
BALANCES AT DECEMBER 31, 1999.... $649,773 $214,528 $(10,998) $853,303
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
AA-29
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES.......... $(159,314) $(311,296) $(121,838)
--------- --------- ---------
Cash Flows from Investing Activities:
Sales, Maturities and Repayments of:
Available for Sale Fixed Maturities.......... 114,478 164,566 145,197
Equity Securities............................ 2,491 39,333 32,806
Other, Net................................... (1) 721 128
Purchases of:
Available for Sale Fixed Maturities.......... (157,761) (184,810) (326,059)
Equity Securities............................ (9,590) (80,066) 0
Real Estate.................................. (3,251) (3,644) 0
Fixed Asset Property and Equipment........... 0 (1,459) (101)
Other Assets................................. (302) (89) 0
Net Change in Short-Term Investments.......... (10,334) (24,341) 128,616
Net Change in Policy Loans.................... (46,195) (31,017) (28,520)
Other, Net.................................... 23,443 1,631 177
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES.......... (87,022) (119,175) (47,756)
--------- --------- ---------
Cash Flows from Financing Activities:
Capital Contributions......................... 0 200,000 46,681
Dividends Paid................................ (9,055) 0 0
Repayment of Debt............................. (13,232) (8,670) (3,181)
Policyholder Account Balances:
Deposits..................................... 517,551 358,090 244,338
Withdrawals.................................. (242,388) (149,499) (95,066)
Financial Reinsurance Receivables............. 34,233 0 1,823
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES...... 287,109 399,921 194,595
--------- --------- ---------
Change in Cash and Cash Equivalents............ 40,773 (30,550) 25,001
Cash and Cash Equivalents, Beginning of Year... 43,598 74,148 49,147
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR......... $ 84,371 $ 43,598 $ 74,148
========= ========= =========
Supplemental Cash Flow Information:
Interest Paid................................. $ 87 $ 3,830 $ 1,495
========= ========= =========
Income Taxes Paid............................. $ 30,045 $ 14,118 $ 5,470
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
AA-30
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
NET INCOME................................... $ 45,724 $ 11,437 $ 21,969
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating
Activities:
Change in Deferred Policy Acquisition Costs,
Net........................................ (186,467) (145,787) (140,578)
Change in Accrued Investment Income......... (8,138) (3,090) (4,999)
Change in Premiums and Other Receivables.... 25,367 (82,081) (57,095)
Gains from Sales of Investments, Net........ (2,922) (5,610) (890)
Depreciation and Amortization Expenses...... 11,350 13,137 10,085
Interest Credited to Policyholder Account
Balances................................... 10,721 7,735 6,220
Universal Life and Investment-Type Product
Policy Fee Income.......................... (220,841) (173,766) (145,157)
Change in Future Policy Benefits............ 53,181 61,317 35,540
Change in Other Policyholder Funds.......... 59,084 73,814 6,309
Change in Policyholder Dividends Payable.... 368 188 5,701
Change in Income Taxes Payable.............. (26,871) 2,358 1,674
Other, Net.................................. 80,130 (70,948) 139,383
--------- --------- ---------
NET CASH USED IN OPERATING ACTIVITIES........ $(159,314) $(311,296) $(121,838)
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
AA-31
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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 and independent brokers located throughout the
United States. The Company also provides participating and non-participating
traditional life insurance, fixed annuity contracts, pension products, as well
as, group life, medical, and 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 New
England Investment Management, 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 New England
Investment Management, 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 acquisition, 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.
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. Effective September 1, 1999, Newbury began
providing errors and omissions coverage to certain of the life insurance
agents of MetLife through a facultative reinsurance agreement with Fireman's
Fund 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.
New England Investment Management, Inc. (NEIM), which changed its name from
TNE Advisers, Inc. in March 1999, was incorporated on August 26, 1994, and is
registered as an investment adviser with the SEC, under the Investment
Advisers Act of 1940. NEIM was organized to serve as an investment adviser to
certain series of the New England Zenith Fund.
AA-32
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
NL Holding Corporation and subsidiaries (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 of NL Holding, is a National
Association of Securities Dealers (NASD) registered broker/dealer. N&L
Associates, a wholly owned subsidiary of NL Holding, is a general insurance
agent which sells insurance policies and other insurance related products
through its licensed brokers and independent agents.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles (GAAP). The
Commonwealth of Massachusetts Division of Insurance (the "Division")
recognizes only statutory accounting practices for determining and reporting
the financial condition and results of operations of an insurance company for
determining solvency under the Massachusetts Insurance Law. No consideration
is given by the Division to financial statements prepared in accordance with
GAAP in making such determination.
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, but more than a minimal interest, under the equity method of
accounting.
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 1999 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 accumulated 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.
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.
AA-33
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
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 $36,122, and $24,772 at December 31, 1999 and 1998,
respectively. Related depreciation and amortization expense was $11,350,
$13,137 and $10,085 for the years ended December 31, 1999, 1998 and 1997,
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.
Information regarding deferred policy acquisition costs is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1........................... $710,961 $565,769 $434,636
Capitalized during the year.................... 216,913 182,943 157,670
-------- -------- --------
Total........................................ 927,874 748,712 592,306
Amortization allocated to:
Net realized investment gains................. (616) (5,282) 0
Unrealized investment gains (losses).......... 33,276 (595) (9,446)
Other Expenses................................ (29,831) (31,874) (17,091)
-------- -------- --------
Total amortization........................... 2,829 (37,751) (26,537)
Balance at December 31......................... $930,703 $710,961 $565,769
======== ======== ========
</TABLE>
AA-34
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
Amortization of deferred policy acquisition costs is allocated to (1) realized
investment gains and losses to provide consolidated statement of income
information regarding the impact of such gains and losses on the amount of the
amortization, (2) unrealized investment gains and losses to provide
information regarding the amount of deferred policy acquisition costs that
would have been amortized if such gains and losses had been realized and (3)
other expenses to provide amounts related to the gross margins or profits
originating from transactions other than investment gains and losses.
Realized investment gains and losses related to certain products have a direct
impact on the amortization of deferred policy acquisition costs. Presenting
realized investment gains and losses net of related amortization of deferred
policy acquisition costs provides information useful in evaluating the
operating performance of the Company. This presentation may not be comparable
to presentations made by other insurers.
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 ending December 31, 2000. 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>
OTHER INTANGIBLE ASSETS
The excess of cost over the fair value of net assets acquired, which
represents goodwill, and the value of business 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.
Excess of Purchase Price Over Fair Value of Net Assets Acquired
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
Net Balance, January 1.......................... $ 21,931 $ 0 $ 0
Acquisitions................................... 0 23,498 0
Amortization................................... (2,350) (1,567) 0
--------- --------- -----
Net Balance, December 31........................ $ 19,581 $ 21,931 $ 0
========= ========= =====
December 31
Accumulated Amortization....................... $ (3,917) $ (1,567) $ 0
========= ========= =====
</TABLE>
AA-35
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES
Future policy benefit liabilities for participating traditional life insurance
policies are equal to the aggregate of (a) net level premium reserves for
death and endowment policy benefits (calculated based upon the nonforfeiture
interest rate, ranging from 4% to 4.5%, and mortality rates guaranteed in
calculating the cash surrender values described in such contracts), (b) the
liability for terminal dividends and (c) premium deficiency reserves, which
are established when the liabilities for future policy benefits plus the
present value of expected future gross premiums are insufficient to provide
for expected future policy benefits and expenses after deferred policy
acquisition costs are written off.
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 6%.
Future policy benefit liabilities for non-medical health insurance are
calculated using the net level premium method and assumptions as to future
morbidity, withdrawals and interest, which provide a margin for adverse
deviation. 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. The interest rates used in
establishing such liabilities range from 3% 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 3.8% to 7.25%, less expense and mortality charges and
withdrawals.
The liability for unpaid claims represents the amount estimated for claims
that have been reported but not settled and claims incurred but not reported.
Liabilities for unpaid claims are estimated based upon the Company's
historical experience and other actuarial assumptions that consider the
effects of current developments, anticipated trends and risk management
programs. Revisions of these estimates are included in operations in the year
such refinements are made.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues 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 operations 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
operations include interest credited to policyholders.
DIVIDENDS TO POLICYHOLDERS
Dividends to policyholders are determined annually by the board of directors.
The aggregate amount of policyholders' 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.
AA-36
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
PARTICIPATING BUSINESS
Participating business represented approximately 3.49% and 3.52% of the
Company's life insurance in force, and 8.30% and 7.96% of the number of life
insurance policies in force at December 31, 1999 and 1998, respectively.
Participating policies represented approximately 56.77%, 95.78% and 68.24% of
gross life insurance premiums, for the years ended December 31, 1999, 1998 and
1997, 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 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.
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 ACCOUNTS
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. See Note 14.
APPLICATION OF ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted Statement of Position ("SOP")
98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5
broadly defines start-up activities. SOP 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. Adoption of SOP
98-5 did not have a material effect on the Company's consolidated financial
statements.
Effective January 1, 1999, the Company adopted SOP 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 adoption of SOP 98-1 resulted in
the capitalization of $6 million of software costs which would have otherwise
been expensed in 1999.
Effective January 1, 1999, the Company adopted SOP 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. Adoption of SOP 97-3 did not have a material effect on
the Company's consolidated financial statements.
AA-37
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of FASB Statement No.
133 ("SFAS 137"). SFAS 137 defers the provisions of SFAS 133 until January 1,
2001. The provisions of SFAS 133 require, 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 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 in the process of
quantifying the impact of SFAS 133 on its consolidated financial statements.
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 statements.
2. NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The components of net investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities.............................. $ 54,490 $ 53,467 $ 50,348
Equity securities............................. 13,896 (9,118) 4,915
Real estate................................... 831 4,149 815
Policy loans.................................. 9,157 6,855 5,081
Cash, cash equivalents and short-term
investments.................................. 3,494 861 4,160
Other investment income....................... (7,529) 76 591
-------- -------- --------
Gross investment income....................... 74,339 56,290 65,910
Investment expenses........................... (5,841) (7,213) (4,851)
-------- -------- --------
Net Investment income......................... $ 68,498 $ 49,077 $ 61,059
======== ======== ========
</TABLE>
Realized investment gains (losses), net, including changes in valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
---------------- --------
<S> <C> <C> <C>
Fixed maturities................................. $ 850 $ 10,899 $ (774)
Equity securities................................ 0 0 1,040
Other invested assets............................ 2,688 (7) (8)
------- -------- -------
Subtotal....................................... 3,538 10,892 258
Less: Amounts allocable to amortization of
deferred policy acquisition costs............... 616 5,282 (632)
------- -------- -------
Investment gains (losses), net................... $ 2,922 $ 5,610 $ 890
======= ======== =======
</TABLE>
AA-38
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
Realized investment gains have been reduced by (1) deferred policy acquisition
amortization to the extent that such amortization results from realized
investment gains and losses, (2) additions to future policy benefits resulting
from the need to establish additional liabilities due to the recognition of
investment gains, and (3) additions to participating contractholder accounts
when amounts equal to such investment gains and losses are credited to the
contractholders' accounts. This presentation may not be comparable to
presentations made by other insurers.
The changes in unrealized investment gains (losses), net, included in
accumulated other comprehensive income, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Balance at January 1........................... $ 17,439 $17,347 $ 3,727
Change in unrealized investment gains
(losses)..................................... (73,813) 391 30,207
Change in unrealized investment gains (losses)
attributable to:
Deferred policy acquisition costs............ 33,276 (595) (9,446)
Deferred income tax (expense) benefit........ 12,100 296 (7,141)
-------- ------- -------
Balance at December 31......................... $(10,998) $17,439 $17,347
======== ======= =======
</TABLE>
The components of unrealized investment gains (losses), net, included in
accumulated other comprehensive income, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance, end of year, comprised of:
Unrealized investment gains (losses) on:
Fixed maturities........................... $(35,205) $ 40,928 $ 41,706
Equity securities.......................... 3,511 1,191 0
Other...................................... 0 0 22
-------- -------- --------
(31,694) 42,119 41,728
Amounts of unrealized investment gains
(losses)
Attributable to:
Deferred policy acquisition costs.......... 17,478 (15,798) (15,202)
Deferred income tax (expense) benefit...... 3,218 (8,882) (9,179)
-------- -------- --------
Balance, end of year......................... $(10,998) $ 17,439 $ 17,347
======== ======== ========
</TABLE>
AA-39
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
3. INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
The amortized cost, gross unrealized gain (loss) and estimated fair value of
fixed maturities 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, 1999
Fixed Maturities:
U. S. Treasury Securities and
obligations of U. S. Government
corporations and agencies.............. $ 33,909 $ 20 $ 439 $ 33,490
Foreign governments..................... 20,748 201 581 20,368
Corporate............................... 670,602 5,074 40,237 635,439
Mortgage-backed securities.............. 44,470 934 203 45,201
Other................................... 1,199 0 0 1,199
-------- ------- -------- --------
Total Fixed Maturities................. $770,928 $ 6,229 $ 41,460 $735,697
======== ======= ======== ========
Equity Securities:
Common stocks........................... 19,174 4,191 680 22,685
-------- ------- -------- --------
Total Equity Securities................ $ 19,174 $ 4,191 $ 680 $ 22,685
======== ======= ======== ========
</TABLE>
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>
AA-40
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
The amortized cost and estimated fair value of fixed maturities classified as
available for sale, by contractual maturity, at December 31, 1999 are shown
below.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less................................. $ 15,910 $ 15,857
Due after one year through five years................... 92,303 90,635
Due after five years through ten years.................. 131,438 130,492
Due after ten years..................................... 486,807 453,512
-------- --------
Subtotal.............................................. 726,458 690,496
Mortgage-backed securities.............................. 44,470 45,201
-------- --------
Total................................................. $770,928 $735,697
======== ========
</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.
Sales of fixed maturities and equity securities are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
Fixed Maturities
Proceeds.......................................... $64,925 $120,416 $110,301
Gross realized gains.............................. $ 1,897 $ 10,901 $ 1,036
Gross realized losses............................. $ 1,047 $ 2 $ 1,810
Equity Securities
Proceeds.......................................... $ 2,491 $ 39,333 $ 32,806
Gross realized gains.............................. $ 0 $ 0 $ 1,344
Gross realized losses............................. $ 0 $ 0 $ 304
</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. The bonds and short-term investments at fair market value held by
the trust were $518,436 and $526,723, at December 31, 1999 and 1998,
respectively.
STATUTORY DEPOSITS
The Company had assets on deposit with regulatory agencies of $6,245 and
$6,245 at December 31, 1999 and 1998, respectively.
AA-41
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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.
Effective July 1, 1999, the Company reinsured the general account liability
for certain group pension variable contracts assumed from Sun Life Assurance
Company of Canada (U.S.). The initial liability assumed included in
Policyholder Account Balances was $53,675 at July 1, 1999, and was $44,431 at
December 31, 1999.
The effect of reinsurance on premiums earned is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Direct premiums................................ $163,159 $110,768 $ 30,975
Reinsurance assumed............................ 57,479 58,329 62,315
Reinsurance ceded.............................. (97,000) (68,408) (29,674)
-------- -------- --------
Net premiums earned............................ $123,638 $100,689 $ 63,616
======== ======== ========
</TABLE>
Reinsurance recoverables, included in other receivables, were $83,091 and
$103,677 at December 31, 1999 and 1998, respectively.
Reinsurance and ceded commissions payables, included in other liabilities,
were $23,400 and $21,152 at December 31, 1999 and 1998, 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,
------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1............................. $ 1,953 $ 809 $ 0
Less: Reinsurance recoverables.................. 1,565 647 0
-------- -------- ------
Net balance at January 1......................... 388 162 0
-------- -------- ------
Incurred related to:
Current year.................................... 472 303 173
Prior years..................................... (33) (57) (11)
-------- -------- ------
439 246 162
-------- -------- ------
Paid related to:
Current year.................................... 23 2 0
Prior years..................................... 19 18 0
-------- -------- ------
42 20 0
-------- -------- ------
Balance at December 31........................... 785 388 162
Add: Reinsurance recoverables................... 3,147 1,565 647
-------- -------- ------
Balance at December 31........................... $ 3,932 $ 1,953 $ 809
======== ======== ======
</TABLE>
AA-42
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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>
1999
Federal............................................. $20,910 $ 8,134 $29,044
State and Local..................................... 0 300 300
------- ------- -------
Total............................................. $20,910 $ 8,434 $29,344
======= ======= =======
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
======= ======= =======
</TABLE>
Reconciliations of the income tax provision at the U.S. statutory rate to the
provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Income before taxes.............................. $75,068 $24,483 $26,957
Income tax rate.................................. 35% 35% 35%
------- ------- -------
Expected income tax expense at federal statutory
income tax rate................................. 26,274 8,569 9,435
Tax effect of:
Tax exempt investment income.................... 0 (100) 0
State and local income taxes.................... 300 100 (1,013)
Tax credits..................................... 0 (100) 0
Prior year taxes................................ 684 0 0
Other, net...................................... 2,086 4,577 (3,434)
------- ------- -------
Income Tax Expense............................... $29,344 $13,046 $ 4,988
======= ======= =======
</TABLE>
AA-43
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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>
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Policyholder liabilities............................. $ 233,504 $ 177,017
Unrealized investment losses, net.................... 3,218 0
Other, net........................................... 15,035 15,453
--------- ---------
Total gross assets.................................. 251,757 192,470
--------- ---------
Deferred tax liabilities:
Investments.......................................... (216) (1,068)
Deferred policy acquisition costs.................... (267,249) (208,881)
Unrealized investment gains, net..................... 0 (8,882)
Other, net........................................... (22,961) (15,973)
--------- ---------
Total gross liabilities............................. (290,426) (234,804)
--------- ---------
Net deferred tax liability............................ $ (38,669) $ (42,334)
========= =========
</TABLE>
AA-44
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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>
DECEMBER 31,
--------------------------------------
PENSION BENEFITS OTHER BENEFITS
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at
beginning of year..................... $252,487 $210,590 $ 48,987 $ 46,591
Service cost........................... 8,172 6,927 973 942
Interest cost.......................... 18,488 15,878 3,351 3,267
Actuarial gain......................... (15,914) 14,831 (3,214) 1,256
Divestitures........................... 0 0 0 0
Curtailments........................... 0 0 0 0
Terminations........................... 0 0 0 0
Change in benefits..................... 0 11,935 0 (10)
Benefits paid.......................... (8,444) (7,674) (3,475) (3,059)
-------- -------- -------- --------
Projected benefit obligation at end of
year.................................. $254,789 $252,487 $ 46,622 $ 48,987
-------- -------- -------- --------
CHANGE IN PLAN ASSETS
Contract value of plan assets at
beginning of year..................... $184,803 $150,820 $ 0 $ 0
Actual return on plan assets........... 25,300 28,309 0 0
Employer contribution.................. 7,620 12,997 0 0
Benefits paid.......................... (7,500) (7,323) 0 0
-------- -------- -------- --------
Contract value of plan assets at end of
year.................................. $210,223 $184,803 $ 0 $ 0
-------- -------- -------- --------
Over/(Under) funded.................... $(44,566) $(67,684) $(46,622) $(48,987)
Unrecognized net asset at transition... (503) (1,674) 0 0
Unrecognized net actuarial gains....... 7,681 34,350 (20,068) (17,787)
Unrecognized prior service cost........ 15,942 16,854 (8) (9)
-------- -------- -------- --------
Prepaid (accrued) benefit cost......... $(21,446) $(18,154) $(66,698) $(66,783)
======== ======== ======== ========
Qualified plan prepaid (accrued)
pension cost.......................... $ (2,675) $ (2,164) $ 0 $ 0
Non-qualified plan prepaid (accrued)
pension cost.......................... (18,771) (15,990) 0 0
-------- -------- -------- --------
Prepaid (accrued) benefit cost......... $(21,446) $(18,154) $ 0 $ 0
======== ======== ======== ========
</TABLE>
AA-45
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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
------------------ ------------------ ------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Aggregate projected
benefit obligation..... $224,653 $226,717 $ 30,136 $ 25,770 $254,789 $252,487
Aggregate contract value
of plan assets
(principally Company
contracts)............. 210,223 184,803 0 0 210,223 184,803
-------- -------- -------- -------- -------- --------
Over/(Under) funded..... $(14,430) $(41,914) $(30,136) $(25,770) $(44,566) $(67,684)
======== ======== ======== ======== ======== ========
</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>
PENSION OTHER
BENEFITS BENEFITS
---------- ----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average assumptions as of December 31,
Discount rate........................................ 7.00% 7.25% 7.75% 7.00%
Expected return on plan assets....................... 8.50% 8.50% -- --
Rate of compensation increase........................ 5.50% 4.50% -- --
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was generally 7.00% in 1999,
gradually decreasing to 5.00% over five years and generally 7.40% in 1998,
gradually decreasing to 5.00% over five 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... 13% (10%)
Effect on accumulated postretirement benefit obligation... 11% (10%)
</TABLE>
The components of periodic benefit costs were as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------------------- ---------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 8,172 $ 6,927 $ 5,310 $ 973 $ 942 $ 885
Interest cost........... 18,488 15,878 13,958 3,351 3,267 3,707
Expected return on plan
assets................. (15,698) (12,866) (22,250) 0 0 0
Net amortization and
deferrals.............. 1,322 669 11,092 (934) 167 (871)
-------- -------- -------- ------ ------ ------
Net periodic benefit
cost................... $ 12,284 $ 10,608 $ 8,110 $3,390 $4,376 $3,721
======== ======== ======== ====== ====== ======
</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 $2,187, $2,252 and $1,588 for the years ended
December 31, 1999, 1998 and 1997, respectively.
AA-46
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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>
GROSS
RENTAL SUB-RENTAL RENTAL
INCOME INCOME EXPENSE
------ ---------- --------
<S> <C> <C> <C>
2000.............................................. $31 $ 7,845 $ 14,738
2001.............................................. 0 7,854 14,042
2002.............................................. 0 7,864 13,413
2003.............................................. 0 8,026 13,822
2004.............................................. 0 8,206 12,836
Thereafter........................................ 0 26,319 117,722
--- ------- --------
Total........................................... $31 $66,114 $186,573
=== ======= ========
</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 loan was collateralized by sales
loads and surrender charges collected on a defined block of variable life
insurance policies issued by the Company. Repayment was structured in a manner
to result in repayment over a term of five years or less. The Company repaid
the entire outstanding balance of the loan in January 1999. Repayments of
principal and interest of $13,310, $8,612 and $3,155 were made during 1999,
1998 and 1997, respectively. The interest rate applied was 6.4%, 6.4% and 5.8%
at January 31, 1999 and December 31, 1998 and 1997, respectively.
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 the 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 $75,053. No repayments were made during 1999,
1998 and 1997, respectively.
9. COMMITMENTS AND 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 for a portion of the Company's
premium taxes. The Company paid guaranty fund assessments of approximately,
$197, $204, and $43 in 1999, 1998, and 1997, respectively, of which $197,
$203, and $33 were to be credited against premium taxes.
AA-47
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
Various litigation, claims and assessments against the Company, in addition to
those otherwise provided for in the Company's consolidated financial
statements, have arisen in the course of the Company's business, including,
but not limited to, in connection with its activities as an insurer, employer,
investor, investment advisor and taxpayer. Further, state insurance regulatory
authorities and other Federal and state authorities regularly make inquiries
and conduct investigations concerning the Company's compliance with applicable
insurance and other laws and regulations.
In some of the matters referred to above, large and/or indeterminate amounts,
including punitive damages and treble damages, are sought. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings or provide reasonable ranges of potential
losses, it is the opinion of the Company's management that their outcomes,
after consideration of available insurance and reinsurance and the provisions
made in the Company's consolidated financial statements, are not likely to
have a material adverse effect on the Company's consolidated financial
position. However, given the large and/or indeterminate amounts sought in
certain of these matters and the inherent unpredictability of litigation, it
is possible that an adverse outcome in certain matters could, from time to
time, have a material adverse effect on the Company's operating results or
cash flows in particular annual periods.
10. OTHER EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Compensation................................... $ 96,887 $ 86,822 $ 58,754
Commissions.................................... 205,463 166,218 77,351
Interest and debt expense...................... 5,493 9,374 6,750
Amortization of policy acquisition costs....... 29,831 31,874 17,091
Capitalization of policy acquisition costs..... (216,913) (182,943) (157,670)
Rent expense, net of sub-lease income.......... 5,550 4,252 4,473
Insurance taxes, licenses, and fees............ 21,253 21,802 15,002
Other.......................................... 234,317 179,260 122,591
--------- --------- ---------
Total........................................ $ 381,881 $ 316,659 $ 144,342
========= ========= =========
</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.
AA-48
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
Amounts related to the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
-------- ----------
<S> <C> <C>
DECEMBER 31, 1999:
ASSETS
Fixed maturities......................................... $735,697 $735,697
Equity securities........................................ 22,685 22,685
Policy loans............................................. 181,995 181,995
Short-term investments................................... 62,619 62,619
Cash and cash equivalents................................ 84,371 84,371
LIABILITIES
Policyholder account balances............................ 84,037 82,765
Other policyholder funds................................. 525 525
Short and long-term debt................................. 75,053 75,053
<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................................. 646 646
Short and long-term debt................................. 82,855 82,855
</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.
AA-49
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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.
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,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Statutory surplus.......................... $ 399,864 $ 456,525 $ 307,290
Adjustments to GAAP for:
Future policy benefits and policyholders
account balances........................ (435,980) (336,821) (279,510)
Deferred policy acquisition costs........ 930,703 710,961 565,769
Deferred federal income taxes............ (38,669) (42,334) (42,066)
Valuation of investments................. (46,890) 53,514 56,873
Statutory asset valuation reserves....... 13,514 10,636 8,388
Statutory interest maintenance reserve... 462 816 571
Surplus notes............................ (75,053) (69,560) (64,016)
Receivables from reinsurance
transactions............................ 5,049 26,004 27,519
Other, net............................... 100,303 35,330 52,724
--------- --------- ---------
GAAP equity................................ $ 853,303 $ 845,071 $ 633,542
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Statutory net income (loss)................ $ (40,928) $ (28,043) $ (37,358)
Adjustments to GAAP for:
Future policy benefits and policyholders
account balances........................ (295,868) (196,754) (311,588)
Deferred policy acquisition costs........ 186,497 135,788 139,947
Deferred federal income taxes............ (580) 688 3,801
Valuation of investments................. 13,681 (13,490) 0
Statutory interest maintenance reserve... (354) 245 342
Other, net............................... 183,276 113,003 226,825
--------- --------- ---------
GAAP net income............................ $ 45,724 $ 11,437 $ 21,969
========= ========= =========
</TABLE>
AA-50
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
13. RELATED PARTY TRANSACTIONS
MetLife and the Company have 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 $160,792, $193,641 and $186,757 including accruals
for administrative services on NEMLICO administered contracts for 1999, 1998,
and 1997, respectively. In addition, $9,442, $14,123 and $600 for 1999, 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.
During 1999, the Company paid $9,055 of preferred stock dividends to MetLife
Credit Corporation.
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. The Company paid
$2,730 and $6,166 in 1999 and 1998, respectively under these agreements.
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 $4,219, $2,340
and $2,340 in 1999, 1998 and 1997, respectively.
Commissions earned by NES from sales of New England Funds (NEF) and State
Street Research (SSR) shares, subsidiaries of MetLife, for 1999 were $12,736
and $751, respectively. Included in accrued income at December 31, 1999, were
amounts receivable for sales-based commissions from NEF and SSR totaling $312
and $4, respectively. In 1999, NES earned asset-based income of $11,184 and
$183 on average assets of approximately $4,500,000 and $101,000 under
management with NEF and SSR, respectively. Included in accrued income at
December 31, 1999 were amounts receivable for asset-based commissions from NEF
and SSR totaling $307 and $0, respectively.
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
$75,053 and $69,560 at December 31, 1999 and 1998, respectively.
AA-51
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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.
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 $4,840,029
and $3,258,383 at December 31, 1999 and 1998, 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 $36,934, $30,714 and $12,642 in 1999, 1998 and 1997,
respectively.
15. YEAR 2000
The Year 2000 issue was 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 costs associated with additional mainframe capacity necessary to
accommodate a four-digit 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 major system
failures 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 implemented a plan to resolve the issue. There can be
no assurances that the Year 2000 plan of the Company or that of its vendors or
third parties have resolved all Year 2000 issues. Further, there can be no
assurance that there will not be any future system failure or that such
failure, if any, will not have a material impact on the operations of the
Company.
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, medical, and 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,
1999, 1998 and 1997. 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.
AA-52
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
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, 1999
-------------------------------------------------------------------
GROUP CORPORATE
INDIVIDUAL INDIVIDUAL GROUP LIFE, AND
LIFE ANNUITY PENSION A&H SUBSIDIARIES TOTAL
---------- ---------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Premiums................ $ 63,358 $ 0 $ 15 $ 28,652 $ 31,613 $ 123,638
Universal Life and
Investment-Type Product
Policy Fees............ 199,701 16,771 4,369 0 0 220,841
Net Investment Income... (31,181) (108) (13) 167 99,633 68,498
Investment Gains
(Losses), Net.......... 402 1 0 (1) 2,520 2,922
Commissions, Fees and
Other Revenues......... 25,376 6,708 3,005 34,610 196,192 265,891
---------- ---------- -------- -------- -------- ----------
Total Revenues........ 257,656 23,372 7,376 63,428 329,958 681,790
BENEFITS AND OTHER
DEDUCTIONS
Policyholder Benefits... 124,727 4,624 113 23,814 40,015 193,293
Interest Credited to
Policyholder Account
Balances............... 8,811 1,623 1,220 30 (963) 10,721
Policyholder Dividends.. 1,739 0 0 (32) 19,120 20,827
Other Operating Costs
and Expenses........... 128,466 21,826 6,196 36,326 189,067 381,881
---------- ---------- -------- -------- -------- ----------
Total Benefits and
Other Deductions..... 263,743 28,073 7,529 60,138 247,239 606,722
Income from Operations
Before Income Taxes.... (6,087) (4,701) (153) 3,290 82,719 75,068
Income Taxes............ 1,357 (1,563) (26) 1,244 28,332 29,344
---------- ---------- -------- -------- -------- ----------
Net Income.............. $ (7,444) $ (3,138) $ (127) $ 2,046 $ 54,387 $ 45,724
========== ========== ======== ======== ======== ==========
Assets
Deferred Policy
Acquisition Costs...... $ 771,879 $ 63,123 $ 10,499 $ 8,539 $ 76,663 $ 930,703
Separate Account Assets. 2,704,767 1,398,993 517,920 218,349 0 4,840,029
Liabilities
Policyholder
Liabilities............ 535,662 43,674 45,407 43,936 517,949 1,186,628
Separate Account
Liabilities............ 2,704,767 1,398,993 517,920 218,349 0 4,840,029
</TABLE>
AA-53
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
<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 Revenues......... 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
Liabilities
Policyholder
Liabilities............ 380,586 38,912 768 19,233 519,353 958,852
Separate Account
Liabilities............ 2,073,552 835,648 235,467 113,716 0 3,258,383
</TABLE>
AA-54
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE STATED.)
<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 Revenues......... 9,542 3,253 266 4,383 10,858 28,302
---------- -------- -------- ------- -------- ----------
Total Revenues........ 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
Liabilities
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>
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.
AA-55
<PAGE>
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street
Boston, MA 02116
RECEIPT
This is to acknowledge receipt of an American Gateway Series Prospectus dated
May 1, 2000. This Variable Life Policy is issued by New England Life Insurance
Company.
_____________________________________ _____________________________________
(Date) (Client's Signature)
<PAGE>
Part II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Section 9 of NELICO's By-Laws provides that NELICO shall, to the extent
legally permissible, indemnify its directors and officers against liabilities
and expenses relating to lawsuits and proceedings based on such persons' roles
as directors or officers. However, Section 9 further provides that no such
indemnification shall be made with respect to any matter as to which a director
or officer is adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the corporation. Section 9
also provides that in the event a matter is disposed of by a settlement payment
by a director or officer, indemnification will be provided only if the
settlement is approved as in the best interest of the corporation by (a) a
disinterested majority of the directors then in office, (b) a majority of the
disinterested directors then in office, or (c) the holders of a majority of
outstanding voting stock (exclusive of any stock owned by any interested
director or officer).
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
NELICO pursuant to the foregoing provisions, or otherwise, NELICO has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification may be against public policy as expressed in the Act and may be,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by NELICO of expenses incurred or paid by a
director, officer, or controlling person of NELICO in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, NELICO
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-1
<PAGE>
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the modified single premium variable life insurance
policies described in this registration statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus with
the items of Form N-8B-2.
The prospectus consisting of 140 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
Representations.
The signatures.
Written consents of the following persons:
H. James Wilson, Esq. (see Exhibit 3(i) below)
Rodney J. Chandler, F.S.A., M.A.A.A.
(see Exhibit 3(ii) below)
Sutherland Asbill & Brennan LLP (see Exhibit 6 below)
Independent Auditor (see Exhibit 11 below)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of
Directors of NEVLICO **
(2) None
(3)(a)Distribution Agreement between NEVLICO and NELESCO ***
(b)(i)Form of Contract between NELICO and its General Agents **
II-2
<PAGE>
(ii)Form of Contract between NEVLICO and its
Agents ***
(c)Commission Schedule for Policies ##
(d)Form of contract among NELICO and other broker dealers *
(e)Additional Forms of selling agreement among NELICO, NES and
other broker-dealers ####
(4) None
(5)(a)Specimens of Policy #
(b)Accelerated Death Benefit Rider +
(c)Accelerated Death Benefit Rider- Long Term Care ++++
(6)(a)Amended and restated Articles of
Organization of NELICO ###
(b)Amended and restated By-Laws of NELICO *
(c)Amendments to the Amended and restated
Articles of Organization of NELICO ++++
(7) None
(8) None
(9) None
(10)(a)Specimen of Applications for Policy #
(b)Additional specimen of Applications ++++
2. See Exhibit 3(i)
3.(i)Opinion and Consent of H. James Wilson, Esquire ##
(ii)Opinion and Consent of Rodney J. Chandler, F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
7.(i)Powers of Attorney ###
(ii)Power of Attorney for James M. Benson, Robert H. Benmosche and
Catherine A. Rein ++
(iii)Power of Attorney for David Rogers @
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditor
12. Schedule for computation of performance quotations ***
13.(i)Consolidated memorandum describing certain
procedures, filed pursuant to Rule 6e-2(b)(12)(ii) and
Rule 6e-3(T)(b)(12)(iii) ***
(ii)Second Addendum to Consolidated Memorandum +++++
14. Form of Participation Agreement among Metropolitan Series Fund, Inc.,
Metropolitan Life Insurance Company and New England Life Insurance
Company @@
# Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 33-65263, filed December 21, 1995.
II-3
<PAGE>
## Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-65263,
filed June 10, 1996.
### Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
#### Incorporated herein by reference to the Post-Effective Amendment No.2 to
the Variable Account's Form S-6 Registration Statement, File No. 33-65263,
filed April 30, 1997.
* Incorporated herein by reference to the Pre-effective Amendment No. 1 to
the Variable Account's Form S-6 Registration Statement, File No. 333-21767,
filed July 16, 1997.
** Incorporated herein by reference to Post-Effective Amendment No. 9 to the
Variable Account's Form S-6 Registration Statement, File No. 33-66864,
filed February 25, 1998.
*** Incorporated herein by reference to Post-Effective Amendment No. 9 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 24, 1998.
+ Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Variable Account's Form S-6 Registration Statement, File No. 33-65263,
filed April 30, 1998.
++ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 333-46401,
filed July 9, 1998.
+++ Incorporated herein by reference to Post-Effective Amendment No. 4 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed January 20, 1999.
++++ Incorporated herein by reference to the Post-Effective Amendment No.4 to
the Variable Account's Form S-6 Registration Statement, File No. 33-65263,
filed February 24, 1999.
+++++ Incorporated herein by reference to the Post-Effective Amendment No.10 to
the Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 26, 1999.
II-4
<PAGE>
@ Incorporated herein by reference to the Post-Effective Amendment No.11 to
the Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 26, 2000.
@@ Incorporated herein by reference to Post-Effective Amendment No. 26 to the
Metropolitan Series Fund, Inc. Registration Statement on Form N-1A (File
No. 2-80751) filed April 6, 2000.
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, 2000.
New England Variable Life Separate
Account
(Registrant)
By: New England Life Insurance
Company
(Depositor)
By: /s/ H. James Wilson
-------------------
H. James Wilson
Executive Vice President and
General Counsel
Attest:
/s/ Marie C. Swift
- ------------------
Marie C. Swift
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, New England
Life Insurance Company certifies that it meets all of the requirements for
effectiveness of this amendment to the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amendment to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the city of Boston, and the Commonwealth of Massachusetts, on the 26th day of
April, 2000.
New England Life Insurance Company
(Seal)
Attest: /s/ Marie C. Swift By: /s/ H. James Wilson
------------------ -------------------
Marie C. Swift H. James Wilson
Executive Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on April 26, 2000.
* Chairman, President and
- ---------------------- Chief Executive Officer
James M. Benson
* Director
- ----------------------
Robert H. Benmosche
* Director
- ----------------------
Susan C. Crampton
* Director
- ----------------------
Edward A. Fox
* Director
- ----------------------
George J. Goodman
* Director
- ----------------------
Evelyn E. Handler
* Director
- ----------------------
Philip K. Howard, Esq.
* Director
- ----------------------
Bernard A. Leventhal
* Director
- ----------------------
Thomas J. May
<PAGE>
* Director
- ----------------------
Stewart G. Nagler
* Director
- ----------------------
Catherine A. Rein
* Executive Vice President,
- ---------------------- Chief Financial Officer and
David Y. Rogers Chief Accounting Officer
* Director
- ----------------------
Rand N. Stowell
By: /s/ Anne M. Goggin
--------------------
Anne M. Goggin, Esq.
Attorney-in-fact
* Executed by Anne M. Goggin, Esquire on behalf of those indicated pursuant
to powers of attorney filed with the Variable Account's Form S-6
Registration Statement, File No. 333-21767, on February 13, 1997, Pre-
Effective Amendment No. 1 to the Variable Account's Form S-6 Registration
Statement, File No. 333-46401, on July 9, 1998, Post-Effective Amendment
No. 4 to the Variable Account's Form S-6 Registration Statement, File No.
33-88082, on January 20, 1999 and Post-Effective Amendment No. 11 to the
Variable Account's Form S-6 Registration Statement, File No. 33-52050, on
April 26, 2000.
<PAGE>
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
3. (ii) Opinion and Consent of Rodney J.
Chandler, F.S.A., M.A.A.A.
6. Consent of Sutherland, Asbill &
Brennan LLP
11. Consent of the Independent Auditors
_________
* Page numbers inserted on manually-signed copy only.
<PAGE>
Exhibit 3(ii)
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
April 26, 2000
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. 6 to the registration
statement on Form S-6 (File No. 33-65263) filed by New England Variable
Life Separate Account and the Company with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to variable life
insurance policies (the "Registration Statement"); and
The preparation of policy forms for the variable life insurance policies
described in the Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated premium,
internal rates of return on net cash values and internal rates of return on
death benefits shown in Appendix A of the Prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions
of the Policies. The rate structure of the Policies has not been designed
so as to make the relationship between the initial premiums and policy
benefits, as shown in the illustrations, appear to be correspondingly more
favorable to prospective purchasers of Policies for male and female
insureds, aged 50 and 70, or for joint insureds (male aged 65 and female
aged 60) in the underwriting class illustrated than to prospective
purchasers of Policies for insureds of other sexes or ages. Insureds in
other underwriting classes may have higher cost of insurance charges.
2. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the Appendix,
is consistent with the provisions of the Policies.
<PAGE>
I hereby consent to the filing of this opinion as an Exhibit to this Post-
Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler, F.S.A., M.A.A.A.
Second Vice President and Actuary
2
<PAGE>
Exhibit 6
[Sutherland Asbill & Brennan LLP]
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We consent to the reference to our firm in the prospectus included in Post-
Effective Amendment No. 6 to the Registration Statement on Form S-6 for American
Gateway Series, issued through the New England Variable Life Separate Account
(File No. 33-65263). In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933.
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ Kimberly J. Smith
----------------------
Kimberly J. Smith
Washington, D.C.
April 26, 2000
<PAGE>
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 6 to the Registration
Statement No. 33-65263 of New England Variable Life Separate Account (the
"Separate Account") of New England Life Insurance Company (the "Company") of our
reports dated February 4, 2000 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, 2000
