<PAGE> 1
As filed with Securities and Exchange Commission on
April 27, 2000
Registration No. 33-88082
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 8
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
MARIE C. SWIFT
Counsel
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 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 Flexible Premium
Adjustable Variable Life Insurance Policies.
<PAGE> 2
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) Policy Values and Benefits
10(c), (d), (e) Death Benefit; Cash Value; 24 Month Right; Surrender; Partial Surrender; Right to Return
the Policy; Loan Provision; Transfer Option; Premiums
10(f), (g), (h) Voting Rights; Rights Reserved by NELICO
10(i) Limits to NELICO's Right to Challenge the Policy; Payment of Proceeds; Investment Options
11 The Variable Account
12 Investments of the Variable Account; NELICO's Distribution Agreement
13 Charges and Expenses; NELICO's Distribution Agreement; Charge for NELICO's Income Taxes;
Appendix A
14 Amount Provided for Investment Under the Policy; NELICO's Distribution Agreement
15 Premiums
16 Investments of the Variable Account
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 The Variable Account
19 Reports; NELICO's Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 NELICO's Distribution Agreement
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 NELICO's Distribution Agreement
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
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<S> <C>
27 NELICO
28 Management
29 NELICO
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 NELICO's Distribution Agreement
35 NELICO
36 Inapplicable
37 Inapplicable
38 NELICO's Distribution Agreement
39 NELICO's Distribution Agreement
40 NELICO's Distribution Agreement
41(a) NELICO's Distribution Agreement
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Amount Provided for Investment Under the Policy;
Deductions from Premiums; Flexible Premiums
44(b) Charges and Expenses
44(c) Flexible Premiums; Deductions from Premiums
45 Inapplicable
46 Investments of the Variable Account; Captions referenced under Items 10(c), (d) and (e)
above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Lapse and Reinstatement; Charges and Expenses; Additional
Benefits by Rider; 24 Month Right; Payment Options; Policy Owner and Beneficiary;
Premiums; NELICO's Distribution Agreement
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
</TABLE>
<PAGE> 4
ZENITH FLEXIBLE LIFE
Supplement dated May 1, 2000 to Prospectus dated May 1, 2000
For Policies purchased through payroll deductions:
If you elect to pay monthly planned premiums using payroll deductions
that your employer will remit to us, New England Life Insurance Company, on your
behalf, the following special provisions apply to you:
1. Policy Date. Your employer will begin making payroll deductions six
weeks in advance of your first monthly planned premium payment. The Policy Date
and the investment start date for your Policy will be the date when we receive
your first monthly planned premium payment.
2. Temporary Life Insurance Coverage. The insured under your Policy
will be covered by temporary life insurance for a limited period under the terms
of a temporary insurance agreement. Coverage will begin as of the date of the
temporary insurance agreement, which is generally the same date you sign your
application. (Refer to the temporary insurance agreement for details.)
3. Planned Premium Payments. You will be on a monthly planned premium
schedule that assumes your employer will remit 12 premium payments each year,
regardless of the frequency with which payroll deductions are made. The amount
of your monthly planned premium payments may vary from month to month, depending
on the amount of payroll deductions accumulated prior to each payment. Premiums
will be applied to your Policy on the day we receive them.
4. Lapse. Your monthly planned premium schedule is not necessarily
designed to keep your Policy in force. We will make Monthly Deductions from the
cash value of your Policy on the first day of each Policy month, beginning with
the Policy Date. (See "Monthly Deduction from Cash Value" for more information.)
Your Policy will be in default in any month when there is insufficient net cash
value for us to make a Monthly Deduction unless a Minimum Guaranteed Death
Benefit is in effect or your Policy is protected against lapse during the first
three Policy Years by payment of the Minimum Premium. (See "Monthly Deduction
from Cash Value," "Flexible Premiums" and "Lapse and Reinstatement" for more
information.) A default will occur if for any reason there is insufficient net
cash value in the Policy to pay a Monthly Deduction. A default may result, for
example, if you miss a payroll deduction. THE CASH VALUE OF PREMIUMS ALLOCATED
TO THE VARIABLE ACCOUNT IS NOT GUARANTEED, AND UNFAVORABLE INVESTMENT EXPERIENCE
CAN REDUCE IT TO ZERO. YOU WILL BEAR THE ENTIRE INVESTMENT RISK WITH RESPECT TO
CASH VALUE IN THE VARIABLE ACCOUNT. If a default occurs, we will issue a
pre-lapse notice to inform the Policy Owner of the amount due. The Policy
provides a 62 day grace period for payment of the amount due to prevent lapse.
To keep your Policy in force, you will need to pay the amount shown in the
pre-lapse notice directly to us.
5. Additional Payments and Loan Repayments. You cannot use payroll
deductions to make payments in addition to your planned premium payments or to
repay a Policy loan. Please contact us or your registered representative if you
would like to arrange either of these transactions.
<PAGE> 5
ZENITH FLEXIBLE LIFE
Flexible Premium Adjustable
Variable Life Insurance Policies
Issued by
New England Variable Life Separate Account of
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus offers individual flexible premium adjustable variable life
insurance policies the ("Policies") issued by New England Life Insurance Company
("NELICO").
The Policy provides premium flexibility and two types of death benefit
guarantees as long as your total premiums paid meet certain minimum requirements
and no policy loan is outstanding. (Policies issued in New York offer one death
benefit guarantee.)
You may choose between two death benefit options. One provides a fixed death
benefit equal to the Policy's face amount. The other provides a death benefit
that may vary daily with the investment experience of the Eligible Funds. Under
both death benefit options, the minimum death benefit guarantee(s) are
available. Cash value allocated to the Eligible Funds is not guaranteed, and
fluctuates daily with the investment results of the Eligible Funds.
You allocate net premiums among the 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. The Eligible Funds are:
NEW ENGLAND ZENITH FUND
Back Bay Advisors Bond Income Series
Back Bay Advisors Managed Series
Back Bay Advisors Money Market Series
Capital Growth Series
Westpeak Growth and Income Series
Westpeak Stock Index Series
Balanced Series
Loomis Sayles Small Cap Series
Alger Equity Growth Series
Davis Venture Value Series
Harris Oakmark Mid Cap Value Series
Morgan Stanley International Magnum Equity Series
MFS Investors Series
MFS Research Managers Series
METROPOLITAN SERIES FUND, INC.
Putnam Large Cap Growth Portfolio*
Janus Mid Cap Portfolio*
Russell 2000(R) Index Portfolio*
VARIABLE INSURANCE PRODUCTS FUND ("VIP")
Overseas Portfolio
Equity-Income Portfolio
High Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
Asset Manager Portfolio
- ---------------
* Subject to any necessary state insurance department approvals
DURING THE FOURTH QUARTER OF 2000, WE ANTICIPATE REPLACING THE MORGAN
STANLEY INTERNATIONAL MAGNUM EQUITY SERIES WITH THE PUTNAM INTERNATIONAL STOCK
PORTFOLIO OF THE METROPOLITAN SERIES FUND, INC, SUBJECT TO REGULATORY APPROVALS.
You may also allocate net premiums to a Fixed Account in most states. Limits
apply to transfers to and from the Fixed Account.
You may cancel the Policy during the "Right to Return the Policy" period.
Replacing existing insurance with the Policy might not be to your advantage.
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 STATEMENTS 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 THE 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> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
GLOSSARY.................................................... A-4
INTRODUCTION TO THE POLICIES................................ A-5
The Policies............................................ A-5
Availability of the Policy.............................. A-6
Policy Charges.......................................... A-7
How the Policy Works.................................... A-10
Receipt of Communications and Payments at NELICO's Home
Office................................................. A-11
NELICO.................................................. A-11
POLICY VALUES AND BENEFITS.................................. A-12
Death Benefit........................................... A-12
Minimum Guaranteed Death Benefit........................ A-12
Death Proceeds Payable.................................. A-13
Change in Death Benefit Option.......................... A-13
Extending the Maturity Date............................. A-14
Cash Value.............................................. A-14
Net Investment Experience............................... A-14
Allocation of Net Premiums.............................. A-15
Amount Provided for Investment under the Policy......... A-15
Right to Return the Policy.............................. A-15
State Variations........................................ A-15
CHARGES AND EXPENSES........................................ A-16
Deductions from Premiums................................ A-16
Surrender Charge........................................ A-17
Monthly Deduction from Cash Value....................... A-18
Charges Against the Eligible Funds and the Sub-Accounts
of the Variable Account................................ A-21
Group or Sponsored Arrangements......................... A-21
PREMIUMS.................................................... A-21
Flexible Premiums....................................... A-21
Lapse and Reinstatement................................. A-23
OTHER POLICY FEATURES....................................... A-24
Increase in Face Amount................................. A-24
Loan Provision.......................................... A-24
Surrender............................................... A-25
Partial Surrender....................................... A-26
Reduction in Face Amount................................ A-26
Investment Options...................................... A-27
Transfer Option......................................... A-27
Dollar Cost Averaging................................... A-27
Asset Rebalancing....................................... A-28
Substitution of Insured Person.......................... A-28
Payment of Proceeds..................................... A-28
24 Month Right.......................................... A-28
Payment Options......................................... A-29
Additional Benefits by Rider............................ A-30
Policy Owner and Beneficiary............................ A-30
THE VARIABLE ACCOUNT........................................ A-30
Investments of the Variable Account..................... A-31
Investment Management................................... A-33
</TABLE>
A-2
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE FIXED ACCOUNT........................................... A-33
General Description..................................... A-34
Values and Benefits..................................... A-34
Policy Transactions..................................... A-34
NELICO'S DISTRIBUTION AGREEMENT............................. A-35
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY............ A-35
Misstatement of Age or Sex.............................. A-35
Suicide................................................. A-35
TAX CONSIDERATIONS.......................................... A-36
Introduction............................................ A-36
Tax Status of the Policy................................ A-36
Tax Treatment of Policy Benefits........................ A-36
NELICO's Income Taxes................................... A-38
MANAGEMENT.................................................. A-38
VOTING RIGHTS............................................... A-40
RIGHTS RESERVED BY NELICO................................... A-41
TOLL-FREE NUMBERS........................................... A-41
REPORTS..................................................... A-41
ADVERTISING PRACTICES....................................... A-41
LEGAL MATTERS............................................... A-42
REGISTRATION STATEMENT...................................... A-42
EXPERTS..................................................... A-42
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
NET CASH VALUE AND ACCUMULATED PREMIUMS................... A-43
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............... A-52
APPENDIX C: LONG TERM MARKET TRENDS......................... A-75
APPENDIX D: USES OF LIFE INSURANCE.......................... A-76
APPENDIX E: TAX INFORMATION................................. A-77
APPENDIX F: TAX LAW AND THE DEATH BENEFIT................... A-78
FINANCIAL STATEMENTS........................................ AA-1
</TABLE>
A-3
<PAGE> 8
GLOSSARY
ACCOUNT. A sub-account of the Variable Account or the Fixed Account.
AGE. The age of an insured refers to the insured's age at his or her
nearest birthday.
CASH VALUE. A Policy's cash value includes the amount of its cash value
held in the Variable Account, the amount held in the Fixed Account and, if there
is an outstanding Policy loan, the amount of its cash value held in our general
account as a result of the loan.
EXCESS POLICY LOAN. When Policy loans plus accrued interest exceed the
Policy's cash value less the applicable Surrender Charge.
FIXED ACCOUNT. The Fixed Account is a part of our general account to which
you may allocate net premiums. It provides guarantees of principal and interest.
INVESTMENT START DATE. This is the latest of the date we first receive a
premium payment for the Policy, the date Part II of the Policy application is
signed and the Policy Date.
MATURITY DATE. The Policy anniversary on which the insured is (or would
have been) age 100. The Policy will not mature on this date if the extended
maturity option has been added to the Policy.
NET CASH VALUE. The amount you receive if you surrender the Policy. It is
equal to the Policy's cash value reduced by any Surrender Charge that would
apply on surrender and by any outstanding Policy loan and accrued interest.
NET INVESTMENT EXPERIENCE. For any period, a Sub-Account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares for the same period, reduced by the amount of charges against the
Sub-Account for that period.
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you
choose to help meet your future goals under the Policy. The Planned Premium is a
level amount that is subject to certain limits under the Policy. Payments in
addition to any Planned Premium are called unscheduled payments in the Policy
and can be paid at any time, subject to certain limits.
PREMIUMS. Premiums include all payments under the Policy, whether a Planned
Premium or an unscheduled payment.
POLICY DATE. If you make a premium payment with the application, the Policy
Date is generally the later of the date Part II of the application was signed
and receipt of the premium payment. If you choose to pay the initial premium
upon delivery of the Policy, we issue the Policy with a Policy Date which is
generally five days after issue.
SALES CHARGE BREAKPOINT PREMIUM. We use the Sales Charge Breakpoint Premium
to measure the portion of the total premiums paid in a Policy year that is
currently subject to the 4% sales charge, as well as sales commissions. It
equals between 110% and 121% of a Target Premium, depending on the insured's
issue age, plus a portion of certain rider premiums.
TARGET PREMIUM. We use the Target Premium to determine the amount of
Deferred Sales Charge that may apply on a surrender, partial surrender, lapse or
face amount reduction. The Target Premium varies by issue age, sex and
underwriting class of the insured and the Policy's face amount. The Target
Premium is less than or equal to 75% of the annual premium necessary to maintain
a fixed benefit whole life insurance Policy for the same face amount on the life
of the insured. We calculate the annual whole life premium using an assumed
interest rate of 4%, guaranteed cost of insurance charges and the current level
of other Policy charges.
YOU. "You" refers to the Policy Owner.
A-4
<PAGE> 9
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 the Policy's basic features. You should read the entire
prospectus for more complete information.
-- You can make premium payments under the Policy based on a schedule you
determine, subject to some limits. We can limit or prohibit unscheduled
payments in some situations, including cases where the insured is in a
substandard risk class. (See "Premiums".)
-- You can allocate net premiums to one or more of the Sub-Accounts of the
Variable Account corresponding to mutual fund portfolios after an
initial period in the Zenith Back Bay Money Market Sub-Account. (See
"Allocation of Net Premiums" and "Investment Options".)
-- The mutual fund portfolios available under the Policy include several
common stock funds, including funds which invest primarily in foreign
securities, two bond funds, two managed funds, a balanced fund, and a
money market fund. You may allocate your Policy's cash value to a
maximum of ten accounts (including the Fixed Account) at any one time.
(See "Investments of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. We provide guarantees of Fixed Account principal
and interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE FROM THE
--------------------------------------------------------
FIXED ACCOUNT. We have the right to restrict transfers of cash value and
-------------
allocations of premiums into the Fixed Account. (See "The Fixed
Account".)
-- The cash value of the Policy will vary daily based on the net investment
experience of your Policy's Sub-Accounts and the amount of interest
credited to your Policy's cash value in the Fixed Account. (See "Cash
Value", "Charges and Expenses", "Premiums", "Loan Provision" and
"Partial Surrender".)
-- The portion of the cash value in the Sub-Accounts is not guaranteed. You
bear the investment risk on this portion of the cash value. (See "Cash
Value".)
-- You may choose between two death benefit options under the Policy. The
level option death benefit equals the Policy's face amount. The variable
option death benefit equals the face amount plus any cash value, which
varies with the net investment experience of your Policy's Sub-Accounts
and the rate of interest credited on your cash value in the Fixed
Account. The death benefit in either case could increase to satisfy tax
law requirements if the cash value reaches certain levels. (See "Death
Benefit".)
-- Regardless of investment experience, the death benefit is guaranteed not
to be less than the Policy's face amount, as long as the total amount of
premiums paid, with interest, less any partial surrenders, with
interest, at least equals certain minimum amounts and there is no
outstanding Policy loan. (See "Death Benefit" and "Minimum Guaranteed
Death Benefit".)
-- Unless the extended maturity option is part of your Policy, if the
insured is alive and the Policy is in force on the Maturity Date, the
Policy will then terminate. In that case we pay you the Policy's net
cash value as of the Maturity Date. (See "Extending the Maturity Date".)
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- After the "Right to Return the Policy" period, the Policy allows you to
transfer cash value among the Sub-Accounts and, generally, to the Fixed
Account up to four times in a Policy year (twelve times in a Policy year
for Policies issued in New York) without our consent. We currently allow
12 transfers per Policy year in all states. Transfers and allocations
involving the Fixed Account are subject to some limits. (See "Transfer
Option" and "The Fixed Account--Policy Transactions".)
-- A loan privilege and a partial surrender feature are available. (See
"Loan Provision" and "Partial Surrender".)
-- Death benefits paid to the beneficiary generally are not subject to
Federal income tax. Under current law, undistributed increases in cash
value generally are not taxable to you. (See "Tax Considerations".)
-- Loans, assignments and other pre-death distributions may have tax
consequences depending primarily on the amount which you have paid into
the Policy but also on any "material change" in the terms or benefits of
the Policy or any death benefit reduction. If premium payments, a death
benefit reduction, or a material change cause the Policy to
A-5
<PAGE> 10
become a "modified endowment contract", then pre-death distributions
(including loans) will be included in income on an income first basis,
and a 10% penalty tax may be imposed on income distributed before the
Policy Owner attains age 59 1/2. Tax considerations may therefore
influence the amount and timing of premium payments and certain Policy
transactions which you choose to make. (See "Tax Considerations".)
-- If the Policy is not a modified endowment contract, we believe that
loans under the Policy will generally not be taxable to you as long as
the Policy has not lapsed, been surrendered or terminated. With some
exceptions, other pre-death distributions under a Policy that is not a
modified endowment contract are includible in income only to the extent
they exceed your investment in the Policy. (See "Tax Considerations".)
-- During the "Right to Return the Policy" period you can return the Policy
for a refund. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue, you may exercise the
Policy's 24 Month Right. If you do, we allocate all or part of your
Policy's cash value and future premiums to the Fixed Account. The
purpose of the 24 Month Right is to provide you with fixed Policy values
and benefits. (See "24 Month Right" for a description of this provision
and for a description of the variation which applies to Policies issued
in Maryland and New Jersey.)
In many respects the Policies are similar to fixed-benefit universal life
insurance. Like universal life insurance, the Policies offer death benefits and
provide flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit universal life insurance in
that the death benefit may, and the cash value will, vary to reflect the
investment experience of the selected Sub-Accounts.
The Policies are designed to provide insurance protection. Although the
underlying mutual fund portfolios invest in securities similar to those in which
mutual funds available directly to the public invest, in many ways the Policies
differ from mutual fund investments. The main differences are:
-- The Policy provides a death benefit based on our assumption of an
actuarially calculated risk.
-- If the net cash value is not sufficient to pay a Monthly Deduction, the
Policy may lapse with no value unless you pay additional premiums. If
the Policy lapses when Policy loans are outstanding, adverse tax
consequences may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values
of the Policy. These charges include various insurance, risk,
administrative and premium tax charges. (See "Charges and Expenses".)
-- The Variable Account, not the Policy Owner, owns the mutual fund shares.
-- Federal income tax liability on any earnings is 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.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses
of Life Insurance".
AVAILABILITY OF THE POLICY
The Policies are available for insureds from the age of one to 80 on an
underwritten basis and from the age of 20 to 70 on an automatic issue basis. (We
issue automatic issue Policies based on very limited underwriting information.
Automatic issue Policies are not available in New Jersey.) We may consent to
issue the Policies on insureds below the age of one and up to age 85. All
persons must meet our underwriting and other requirements.
The minimum face amount available is $100,000 unless we consent to a lower
amount, but exceptions apply. The minimum face amount available is $50,000 in
business situations (situations in which two or more Policies, on more than one
life, are totally or partially funded, directly or indirectly, by an employer)
or for pension plans qualified under Section 401 of the Internal Revenue Code
("tax-qualified pension plans"), in each case where the average face amount is
at least $100,000. Policies with a minimum face amount of $50,000 may also be
available for juvenile insureds in the state of New Jersey. For a tax-qualified
pension plan, the tax deferred accrual feature is provided by the plan.
Therefore, there should be reasons other than tax deferral for acquiring a life
insurance policy within a tax-qualified pension plan.
We offer other variable life insurance policies, with different fees and
charges, that invest in the Eligible Funds. Your registered representative has
additional information.
A-6
<PAGE> 11
POLICY CHARGES
PREMIUM-BASED CHARGES. We deduct the following charges from premiums:
-- A maximum sales charge of 4%. We currently intend to waive this charge
on premiums paid after the first 15 Policy years. In addition, we
currently intend to deduct this charge in any Policy year only until you
have paid an amount equal to a Sales Charge Breakpoint Premium in that
Policy year. Premium payments during a Policy year above that amount
will not incur the sales charge. A 3% sales charge will apply to larger
Policies and to Policies sold in certain business situations or to
certain tax-qualified pension plans;
-- A state premium tax charge of 2.5%;
-- A charge for federal taxes of 1%.
SURRENDER CHARGE. The Surrender Charge includes:
-- A deferred sales charge. This charge applies to a lapse, total or
partial surrender or face amount reduction during the first 11 Policy
years. For Policies covering insureds whose issue age is 55 or less at
issue, the maximum Deferred Sales Charge applies in Policy years three
through five. The maximum Deferred Sales Charge in those years equals
45% of one Target Premium plus 13.5% of a second Target Premium and
13.5% of a third Target Premium. After the fifth Policy year, the
maximum Deferred Sales Charge declines on a monthly basis until it
reaches 0% in the last month of the eleventh Policy year. If you lapse
or surrender the Policy, or reduce its face amount, in the first two
Policy years, the maximum Deferred Sales Charge in the first Policy year
will be 25% of one Target Premium and in the second Policy year will be
25% of one Target Premium plus 5% of a second Target Premium. The charge
may be less if the issue age is above 55.
-- A deferred administrative charge. This charge applies to a lapse, total
or partial surrender or reduction in face amount during the first 11
Policy years. This charge is $2.50 per $1,000 of face amount for the
first Policy year, and then reduces monthly until it reaches 0 at the
end of the 11th Policy year. The charge will be less if the issue age is
greater than 65.
We deduct the Surrender Charge from the Policy's available cash value,
regardless of whether that cash value comes from premiums or investment
experience.
MONTHLY DEDUCTION FROM CASH VALUE. We deduct certain charges from the cash
value:
-- Monthly charge for the cost of insurance and for any benefits provided
by rider;
-- Monthly administrative charge, currently equal to $0.07 per $1,000 of
face amount for the first Policy year and $0.02 per $1,000 thereafter
(guaranteed not to exceed $0.08 per $1,000 of face amount in the first
Policy year and $0.04 per $1,000 thereafter). On a current basis, we
intend not to charge more than $40 per month for the monthly
administrative charge after the first Policy year. For larger Policies
and Policies sold in certain business situations or to certain
tax-qualified pension plans the monthly administrative charge for the
first Policy year currently equals $0.06 per $1,000 of face amount
rather than $0.07;
-- Monthly minimum death benefit guarantee charge of $0.01 per $1,000 of
face amount;
-- Monthly Policy fee, currently equal to $7.00 per month in the first
Policy year and $5.00 per month thereafter (guaranteed not to exceed
$7.00 per month). For larger Policies and Policies sold in certain
business situations or to certain tax-qualified pension plans the
monthly Policy fee after the first Policy year currently is $3.00 rather
than $5.00.
CHARGES DEDUCTED FROM THE VARIABLE ACCOUNT AND THE ELIGIBLE FUNDS. The
following charges are deducted from the Variable Account and Eligible Fund
assets:
-- Daily charge against the Sub-Account assets for our mortality and
expense risk, currently equal to an annual rate of .60% (guaranteed not
to exceed .90%);
-- Daily charges against the Eligible Fund portfolios for investment
advisory services and fund operating expenses.
Currently, we do not charge the Variable Account for any federal income
taxes. We may, however, impose such a charge in the future.
A-7
<PAGE> 12
The following table shows the annual operating expenses for each New England
Zenith Fund series, based on actual expenses for 1999, after any applicable
expense cap or expense deferral arrangement:
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY EXPENSE CAP)
<TABLE>
<CAPTION>
BACK BACK
BAY BAY BACK WESTPEAK LOOMIS
ADVISORS ADVISORS BAY WESTPEAK GROWTH SAYLES
CAPITAL BOND MONEY ADVISORS STOCK AND SMALL
GROWTH INCOME MARKET MANAGED INDEX INCOME CAP
SERIES SERIES SERIES SERIES SERIES SERIES SERIES*
------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee........................ .62% .40% .35% .50% .25% .68% .90%
Other Expenses........................ .04% .08% .05% .08% .10% .06% .10%
--- --- --- --- --- --- ----
Total Series Operating
Expenses................... .66% .48% .40% .58% .35% .74% 1.00%
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE DEFERRAL)
<TABLE>
<CAPTION>
HARRIS MORGAN
OAKMARK STANLEY DAVIS ALGER MFS
MID CAP INTERNATIONAL VENTURE EQUITY MFS RESEARCH
VALUE BALANCED MAGNUM VALUE GROWTH INVESTORS MANAGERS
SERIES SERIES EQUITY SERIES SERIES SERIES SERIES* SERIES*
------- -------- -------------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee........................... .75% .70% .90% .75% .75% .75% .75%
Other Expenses........................... .13% .07% .40% .06% .05% .15% .15%
--- --- ---- --- --- --- ---
Total Series Operating
Expenses...................... .88% .77% 1.30% .81% .80% .90% .90%
</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%; and MFS Research Managers
Series, 2.03%, both on an annualized basis since the Series' start date of
April 30, 1999. 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%.
Our affiliate, New England Investment Management, Inc., advises the series
of the Zenith Fund except for the Capital Growth Series. 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 of the Harris Oakmark Mid Cap
Value, Morgan Stanley International Magnum Equity, MFS Investors, and MFS
Research Managers Series that exceed .90% of average daily net assets (1.30% for
the Morgan Stanley International Magnum Equity Series) in the year the series
incurs them and charges those expenses to the series in a future year if actual
expenses of the series are below the limit. New England Investment Management
may end these expense limits at any time.
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 based on the year ended December 31, 1999 and current expense
subsidies (in the case of the Putnam Large Cap Growth Portfolio, anticipated
expenses for 2000) as a percentage of Portfolio net assets.
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ------------
<S> <C> <C> <C>
Putnam Large Cap Growth..................................... .80% .20% 1.00%*
Janus Mid Cap............................................... .67% .04% .71%
Russell 2000 Index.......................................... .25% .30% .55%*
</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 (i) July 1, 2002 and (ii) the date when the
Portfolio's net assets reach $100 million. Without this subsidy, the
anticipated total annual expenses of the Putnam Large Cap Growth Portfolio
would be 1.39%. MetLife also paid such expenses that exceeded .20% of net
assets for the Russell 2000 Index Portfolio until December 3, 1999. Without
this subsidy the total annual expenses of the Russell 2000 Index Portfolio for
1999 would have been .89%. Beginning February 22, 2000,
A-8
<PAGE> 13
MetLife is paying such expenses that exceed .30% of the Russell 2000 Index
Portfolio's net assets until the earlier of (i) April 30, 2001 and (ii) the
date when the Portfolio's assets reach $200 million. Total Annual Expenses for
the Russell 2000 Index Portfolio are shown as if this subsidy was in effect
for the entire current year. MetLife can terminate these arrangements at any
time upon notice to the Board of Directors and to Fund shareholders.
The investment adviser for VIP and VIP II is Fidelity Management & Research
Company ("FMR"). The Portfolios of VIP and VIP II pay investment management fees
to FMR and also bear other expenses. For the year ended December 31, 1999, the
total operating expenses of the Portfolios, as a percentage of Portfolio average
net assets, were:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ------------
<S> <C> <C> <C>
VIP Equity-Income........................................... .48% .09% .57%*
VIP Overseas................................................ .73% .18% .91%*
VIP High Income............................................. .58% .11% .69%
VIP II Asset Manager........................................ .53% .10% .63%*
</TABLE>
- ------------
* Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. If we included
these reductions, total annual expenses would have been .56% for VIP
Equity-Income Portfolio, .87% for VIP Overseas Portfolio and .62% for VIP II
Asset Manager Portfolio.
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. New England Securities may also receive brokerage commissions on
securities transactions initiated by an investment adviser.
See "Charges and Expenses".
A-9
<PAGE> 14
[HOW THE POLICY WORKS FLOW CHART]
<TABLE>
<CAPTION>
HOW THE POLICY WORKS
<S> <C>
PREMIUM PAYMENTS
Flexible
Planned premium options
- -Minimum premium (in first three Policy years)
- -Guaranteed Death Benefit B Premium (to age 80)
- -Guaranteed Death Benefit A Premium (to age 100)(not
available under Policies issued in New York)
CHARGES FROM PREMIUM PAYMENTS
- -Sales Load: 4% (3% for certain larger Policies and Policies
sold in certain business situations or to certain
tax-qualified pension plans). We intend to waive after 15
policy yrs. We also intend to waive for premiums in a Policy
year above a Sales Charge Breakpoint Premium
- -State Premium Tax Charge: 2.5%
- -Charge for Federal Taxes: 1%
LOANS
After the free look period, you may borrow a portion of your
cash value
Loan interest charge is 5.5%. We transfer loaned funds out
of the Eligible Funds into the General Account where we credit
them with not less than 4.0% interest. (Currently we
intend to credit 5.25% interest after 15 Policy years.)
RETIREMENT BENEFITS
Fixed settlement options are available for policy proceeds
CASH VALUES
- -Net premium payments invested in your choice of Eligible
Fund investments or the Fixed Account (after an initial period in
the Zenith Money Market Sub-Account)
- -The cash value reflects investment experience, interest,
premium payments, policy charges and any distributions from
the Policy
- -We do not guarantee the cash value invested in the Eligible
Funds
- -Any earnings you accumulate are generally free of any
current income taxes
- -You may change the allocation of future net premiums at any
time. You may currently transfer funds among investment
options (and to the Fixed Account) up to 12 times per Policy
year after the free look period.
We limit the timing, frequency and amount of transfers from
(and in some cases to) the Fixed Account
- -You may allocate your cash value among a maximum of ten
accounts at any time
DEATH BENEFIT
- -Level or Variable Death Benefit Options
- -Guaranteed not to be less than face amount (less any loan
balance) if Death Benefit Guarantee is in effect
- -Income tax free to named beneficiary
DAILY DEDUCTIONS FROM ASSETS
- -Mortality and expense risk charges of .60% (guaranteed not
to exceed .90%) on an annual basis are deducted from the
cash value
- -Investment advisory fees and other expenses are deducted
from the Eligible Fund values
BEGINNING OF MONTH CHARGES
- -We deduct the cost of insurance protection (reflecting any
substandard risk or automatic issue rating) from the cash
value each month
- -Any Rider Charges
- -Policy Fee: $7.00 per month (first year) and $5.00 (not to
exceed $7.00) per month thereafter. For certain larger
Policies and Policies sold in certain business situations
or to certain tax-qualified pension plans charge is
currently $3.00 per month after first year
- -Minimum Death Benefit Guarantee Charge: $.01 per $1000 face
amount monthly
- -Administrative Charge: $.07 (guaranteed not to exceed $.08)
per $1000 face amount monthly (first year) and $.02
(guaranteed not to exceed $.04) per $1000 face amount
monthly (after first year).
- -For certain larger Policies and Policies sold in certain
business situations or to certain tax-qualified pension
plans charge is currently $.06 per $1,000 in first year.
SURRENDER CHARGES
- -Deferred Sales Charge and Deferred Administrative Charge
(see page A-17)
LIVING BENEFITS
- -If policyholder has elected and qualified for benefits for
disability and becomes totally disabled, we will waive
monthly charges during the period of disability up to
certain limits
- -You may surrender the Policy at any time for its cash
surrender value
- -Deferred income taxes, including taxes on amounts borrowed,
become payable upon surrender
- -Grace period for lapsing with no value is 62 days from the
first date in which Monthly Deduction was not paid due to
insufficient cash value
- -Subject to our rules, you may reinstate a lapsed Policy
within seven years of date of lapse if it has not been
surrendered
</TABLE>
A-10
<PAGE> 15
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME OFFICE
We will treat your request for a Policy transaction, or your submission of a
payment, as received by us if we receive a request conforming to our
administrative procedures or a payment at our Home Office before the close of
regular trading on the New York Stock Exchange on that day. If we receive it
after that time, or if the New York Stock Exchange is not open that day, then we
will treat it as received on the next day when the New York Stock Exchange is
open.
NELICO
NELICO was organized as a stock life insurance company in Delaware in 1980
and is licensed to sell life insurance in all states, the District of Columbia
and Puerto Rico. Originally, NELICO was a wholly-owned subsidiary of New England
Mutual Life Insurance Company ("New England Mutual"). On August 30, 1996, New
England Mutual merged into Metropolitan Life Insurance Company ("MetLife"), a
life insurance company whose principal office is One Madison Avenue, New York,
NY 10010. MetLife then became the parent of NELICO. MetLife is a wholly-owned
subsidiary of MetLife, Inc., a publicly-traded company. In connection with the
merger, NELICO changed its name from "New England Variable Life Insurance
Company" to "New England Life Insurance Company" and changed its domicile from
the State of Delaware to the Commonwealth of Massachusetts. NELICO's Home Office
is now at 501 Boylston Street, Boston, Massachusetts 02116. NELICO's mailing
address is: P.O. Box 9116, Boston, Massachusetts 02117.
The following chart illustrates the relationship of NELICO, the Fixed
Account, the Variable Account and the Eligible Funds.
NELICO [NELICO FLOW CHART]
(Insurance company subsidiary of MetLife)
We deduct charges.
We allocate net premiums and net unscheduled payments to your choice of
sub-accounts in the Variable Account or to the Fixed Account.
Premiums and Unscheduled Payments
Fixed Account
VARIABLE ACCOUNT
Zenith Capital Growth Sub-Account
Zenith Back Bay Bond Income Sub-Account
Zenith Back Bay Money Market Sub-Account
Zenith Back Bay Managed Sub-Account
Zenith Westpeak Stock Index Sub-Account
Zenith Westpeak Growth and Income Sub-Account
Zenith Loomis Sayles Small Cap Sub-Account
Zenith Balanced Sub-Account
Zenith Alger Equity Growth Sub-Account
Zenith Davis Venture Value Sub-Account
Zenith Harris Oakmark Mid Cap Value Sub-Account
Zenith Morgan Stanley International Magnum Equity Sub-Account
Zenith MFS Investors Sub-Account
Zenith MFS Research Managers Sub-Account
Metropolitan Putnam Large Cap Growth Sub-Account
Metropolitan Janus Mid Cap Sub-Account
Metropolitan Russell 2000 Index Sub-Account
VIP Equity-Income Sub-Account
VIP Overseas Sub-Account
VIP High Income Sub-Account
VIP II Asset Manager Sub-Account
Sub-accounts buy shares of the Eligible Funds.
NEW ENGLAND ZENITH FUND
Capital Growth Series
Back Bay Advisors Bond Income Series
Back Bay Advisors Money Market Series
Back Bay Advisors Managed Series
Westpeak Stock Index Series
Westpeak Growth and Income Series
Loomis Sayles Small Cap Series
Balanced Series
Alger Equity Growth Series
Davis Venture Value Series
Harris Oakmark Mid Cap Value Series
Morgan Stanley International Magnum Equity Series
MFS Investors Series
MFS Research Managers Series
Metropolitan Series Fund, Inc.*
Putnam Large Cap Growth Portfolio
Janus Mid Cap Portfolio
Russell 2000 Index Portfolio
VIP
Equity-Income Portfolio
Overseas Portfolio
High Income Portfolio
VIP II
Asset Manager Portfolio
Eligible Funds buy portfolio investments to support values and benefits of the
Policies.
* Availability of the Portfolios of the Metropolitan Series Fund, Inc. is
subject to any necessary state insurance department approvals.
A-11
<PAGE> 16
POLICY VALUES AND BENEFITS
DEATH BENEFIT
If the insured dies while the Policy is in force, we pay a death benefit to
the beneficiary.
DEATH BENEFIT OPTIONS. When you apply for a Policy, you choose between two
death benefit options.
The Option 1 (Face Amount) death benefit is equal to the face amount of the
Policy. The Option 1 death benefit is fixed, subject to increases required by
the Internal Revenue Code.
The Option 2 (Face Amount Plus Cash Value) death benefit is equal to the
face amount of the Policy, plus the Policy's cash value, if any. The Option 2
death benefit is also subject to increases required by the Internal Revenue
Code.
To meet the Internal Revenue Code's definition of life insurance, the death
benefit will not be less than a certain multiple of the Policy's cash value,
including the portion of any Monthly Deduction made for a period beyond the date
of death. (See Appendix F.) This means that, if the cash value grows to certain
levels, the death benefit increases to satisfy tax law requirements. At that
point, any payment you make into the Policy will increase the death benefit by
more than it increases the cash value. (See "Premiums".)
MINIMUM GUARANTEED DEATH BENEFIT
The Policy provides two Minimum Guaranteed Death Benefits. (One of these,
Minimum Guaranteed Death Benefit A, is not available under Policies issued in
New York.) We determine whether a Minimum Guaranteed Death Benefit is in effect
on the first day of each Policy month. If a Minimum Guaranteed Death Benefit is
in effect, the Policy will not lapse even if the net cash value is less than the
Monthly Deduction for that month.
Generally, if you pay the required premium for a Minimum Guaranteed Death
Benefit each year, that Minimum Guaranteed Death Benefit will apply to your
Policy. The Guaranteed Death Benefit A and Guaranteed Death Benefit B premiums
are shown in Section 1 of your Policy and also appear in your personalized
illustration. If you do not pay one of these premiums in a Policy year, or if
---------------------------------------------------------------
you make certain Policy transactions, you could lose the Minimum Guaranteed
- ---------------------------------------------------------------------------
Death Benefit on a temporary or permanent basis.
- -----------------------------------------------
-- LOANS. No Minimum Guaranteed Death Benefit applies to your Policy while
a Policy loan is outstanding. However, if the total premiums you have
paid, adjusted for interest and any partial surrenders, are sufficient,
the applicable Minimum Guaranteed Death Benefit will apply to the Policy
once the loan is repaid. (Under Policies issued in New Jersey, a Minimum
-----------------------------------
Guaranteed Death Benefit may apply while a Policy loan is outstanding.)
---
-- OTHER POLICY TRANSACTIONS. In addition, if you reduce the Policy's face
amount or make a partial surrender which reduces the face amount, or
reduce or delete a rider benefit from your Policy, or if your Policy's
rating classification is improved, you may lose the death benefit
guarantee. Whether a guarantee still applies depends on the total
premiums you have paid and the amount you have withdrawn from the Policy
by partial surrenders. We recalculate the minimum death benefit premiums
shown in Section 1 of your Policy following these transactions and also
following an increase in rider coverage. (See "Premiums" below.) Federal
tax law limits the amount of premiums that you can pay into the Policy.
If, after one of these transactions, the Federal tax law limits the
minimum death benefit premium for your Policy to an amount less than
zero, your Policy will lose its death benefit guarantee permanently.
-- SKIPPING A PREMIUM. If you do not pay a minimum death benefit premium
in a Policy year, a Minimum Guaranteed Death Benefit may still apply to
your Policy, depending on the total premiums paid and partial surrenders
made. However, if you lose a death benefit guarantee because of
insufficient premium payments, Federal tax law limits may prevent you
from paying enough premiums in future Policy years to regain the
guarantee. Although you may be able to regain the Guaranteed Minimum
Death Benefit B, it is unlikely that you will be able to regain the
Guaranteed Minimum Death Benefit A. (See "Minimum Guaranteed Death
Benefit A" and "Minimum Guaranteed Death Benefit B" below for more
information.)
MINIMUM GUARANTEED DEATH BENEFIT A. We determine if Minimum Guaranteed
Death Benefit A is in effect on the first day of each Policy month the Policy is
in force, until the Maturity Date (age 100 of the insured). This Benefit is in
effect if the total of:
(1) premiums paid under the Policy in each prior Policy year accumulated
at a 4% rate from the first day of the year of payment to the most recent
Policy anniversary, less partial surrenders accumulated at a 4% rate from
the date of surrender to the most recent Policy anniversary, plus
A-12
<PAGE> 17
(2) premiums paid less partial surrenders in the current Policy year, is
at least equal to:
(3) the amount shown in the Table of Guaranteed Death Benefit A Premiums
Accumulated at 4% for the prior Policy year plus 1/12 of the Benefit A
Premium for each Policy month of the current Policy year, up to and
including the month for which the Monthly Deduction is being processed, and
there is no outstanding Policy loan.
(Under Policies issued in New Jersey the guarantee may apply while a loan is
-----------------------------------
outstanding. For those Policies, we subtract the amount of the loan plus accrued
interest from premiums paid in the current Policy year when we apply this test.)
For these purposes, we treat premiums paid within 20 days prior to a Policy
anniversary as if paid in the next Policy year.
The Table of Guaranteed Death Benefit A Premiums Accumulated at 4% assumes
that the Guaranteed Death Benefit A Premium shown in your Policy is paid on the
first day of each Policy year and accumulates at a 4% rate per year.
The Minimum Guaranteed Death Benefit A is not available under Policies
----------------------------------------------------------------------
issued in New York.
- ------------------
MINIMUM GUARANTEED DEATH BENEFIT B. We determine if Minimum Guaranteed
Death Benefit B is in effect on the first day of each Policy month the Policy is
in force, until the later of: the date the insured reaches age 80, or 20 years
-----
from the Policy Date, but no later than the Maturity Date of the Policy (age 100
of the insured). This Benefit is in effect if the total of:
(1) premiums paid under the Policy in each prior Policy year accumulated
at a 4% rate from the first day of the year of payment to the most recent
Policy anniversary, less partial surrenders accumulated at a 4% rate from
the date of surrender to the most recent Policy anniversary, plus
(2) premiums paid less partial surrenders in the current Policy year, is
at least equal to:
(3) the amount shown in the Table of Guaranteed Death Benefit B Premiums
Accumulated at 4% for the prior Policy year plus 1/12 of the Benefit B
Premium for each Policy month of the current Policy year, up to and
including the month for which the Monthly Deduction is being processed, and
there is no outstanding Policy loan.
(Under Policies issued in New Jersey the guarantee may apply while a loan is
-----------------------------------
outstanding. For those Policies, we subtract the amount of the loan plus accrued
interest from premiums paid in the current Policy year when we apply this test.)
For these purposes, we treat premiums paid within 20 days prior to a Policy
anniversary as if paid in the next Policy year.
The Table of Guaranteed Death Benefit B Premiums Accumulated at 4% assumes
that the Guaranteed Death Benefit B Premium shown in your Policy is paid on the
first day of each Policy year and accumulates at a 4% rate per year.
Under Policies issued in New York, we call the Minimum Guaranteed Death
---------------------------------
Benefit B the "No Lapse Guarantee Death Benefit".
DEATH PROCEEDS PAYABLE
The death proceeds we pay are equal to the death benefit on the date of the
insured's death, reduced by any outstanding loan and accrued loan interest on
that date. If the death occurs during the grace period, we reduce the proceeds
by the amount due, to cover unpaid Monthly Deductions to the date of death. (See
"Lapse and Reinstatement".) We increase the death proceeds (1) by any rider
benefits payable and (2) by any Monthly Deduction made for a period beyond the
date of death, unless we already included this amount in the death benefit
calculation because of Federal tax law requirements (see "Death Benefit Options"
above and Appendix F).
We may adjust the death proceeds if the insured's age or sex was misstated
in the application, if death results from the insured's suicide within two years
(less in some states) from the Policy's date of issue, or if a rider limits the
death benefit. (See "Limits to NELICO's Right to Challenge the Policy".)
CHANGE IN DEATH BENEFIT OPTION
After the first Policy year, you may change your death benefit option by
written request to our Home Office. The request will be effective on the date we
receive it. A change in death benefit option may have tax consequences. (See
"Tax Considerations".)
If you change from Option 1 (Face Amount) to Option 2 (Face Amount Plus Cash
Value), we reduce the Policy's face amount if necessary so that the death
benefit is the same immediately before and after the change. A face amount
reduction below $100,000 requires our consent; however, special rules apply for
some business situations. We may also decrease any rider benefits under the
Policy. A partial surrender of cash value may be necessary to meet Federal tax
law limits on the amount of premiums that you can pay into the Policy. There is
no Surrender Charge for a face amount reduction or partial surrender on a change
from Option 1 to Option 2.
A-13
<PAGE> 18
If you change from Option 2 (Face Amount Plus Cash Value) to Option 1 (Face
Amount), we increase the Policy's face amount, if necessary, so that the death
benefit is the same immediately before and after the change.
EXTENDING THE MATURITY DATE
In all states except New York, we will issue your Policy with an extended
maturity endorsement. If endorsed, the Policy will not mature until the date of
the insured's death. The death benefit we pay on and after the original Maturity
Date depends on the endorsement available in your state and on the insured's
issue age. Our latest endorsement (available in approved states and only if the
insured's issue age was below 81) extends the face amount of the Policy. It
provides that the death benefit on and after the original Maturity Date is the
greater of (1) the cash value on the date of death and (2) the Policy face
- -------
amount at the original Maturity Date, or at age 80, whichever is less.
In some states, (and for Policies sold in all states where the insured's
issue age was above 80) the death benefit we pay on and after the original
Maturity Date generally equals the cash value on the date of death. However, we
will extend the Policy face amount if, on the original Maturity Date, your
premiums paid (with interest at 4%), less partial surrenders (with interest at
4%) are at least equal to the "Age 100 Amount" shown in the Policy. In this
case, the death benefit on and after the original Maturity Date equals the
greater of (1) the cash value on the date of death and (2) the Policy face
- -------
amount. We base the Age 100 Amount on the Guaranteed Death Benefit B Premium
being paid each Policy year until the original Maturity Date (rather than until
age 80 of the insured). Certain Policy transactions--reductions in face amount,
reduction or deletion of a rider benefit, or improvement in rating class--could
prevent you from paying sufficient premiums to reach the Age 100 Amount.
Currently, we do not make Monthly Deduction charges after the original
Maturity Date. You cannot pay premiums after the original Maturity Date unless
necessary to prevent lapse of the Policy. All Policy riders (except the extended
maturity endorsement) terminate on the original Maturity Date.
The tax consequences of the endorsement are unclear, and you should consult
a tax advisor about them. For more information about the extended maturity
option, contact us or your registered representative.
CASH VALUE
Your Policy's total cash value includes its cash value in the Variable
Account and in the Fixed Account. If you have a Policy loan, the cash value also
includes the amount we hold in our general account as a result of the loan. The
cash value reflects:
-- net premium payments
-- the net investment experience of the Policy's sub-accounts
-- interest credited to cash value in the Fixed Account
-- interest credited to amounts held in the general account for a Policy
loan
-- the death benefit option you choose
-- Policy charges
-- partial surrenders
-- transfers among the sub-accounts and Fixed Account
We pay you the NET cash value if you surrender the Policy. It equals the
cash value minus any outstanding Policy loan (plus interest) and any Surrender
Charge that applies. We add to the net cash value the cost of insurance charge
for the remainder of the month. If you surrender in the grace period, we reduce
the net cash value by the Monthly Deduction that applies to the date of
surrender. (See "Loan Provision", "Surrender Charge", and "Monthly Deduction
from Cash Value".)
The Policy's cash value in the Variable Account may increase or decrease
daily depending on net investment experience. Poor investment experience can
reduce the cash value to zero. YOU HAVE THE ENTIRE INVESTMENT RISK FOR THE CASH
VALUE IN THE VARIABLE ACCOUNT.
NET INVESTMENT EXPERIENCE
The net investment experience of the Sub-Accounts affects the Policy's cash
value and, in some cases, the death benefit. We determine the net investment
experience of each Sub-Account as of the close of regular trading on the New
York Stock Exchange on each day when the Exchange is open for trading.
A-14
<PAGE> 19
A Sub-Account's net investment experience for any period is based on the
investment experience of the underlying Eligible Fund shares for the same
period, reduced by the charges against the Sub-Account (currently only the
mortality and expense risk charge) for that period.
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during the
period. Dividends and capital gains distributions on Eligible Fund shares are
reinvested in additional shares of the Eligible Fund.
ALLOCATION OF NET PREMIUMS
Your cash value is held in the general account of NELICO or an affiliate
until we issue the Policy. We credit the first net premium with net investment
experience equal to that of the Zenith Back Bay Money Market Sub-Account from
the investment start date until the later of 45 days after the date Part I of
the application is signed or 10 days after we mail the Notice of Withdrawal
Right. (The "investment start date" is defined below.) Then, we allocate the
cash value to the Sub-Accounts and/or the Fixed Account as you choose. You can
allocate to a maximum of ten accounts (including the Fixed Account) at any one
time.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
INVESTMENT START DATE. The investment start date is the latest of: the date
when we first receive a premium payment for the Policy, the date Part II of the
Policy application is signed and the Policy Date. (For this purpose, receipt of
the premium payment means receipt by your registered representative, if the
payment is made with the application; otherwise, it means receipt by the Home
Office or by a NELICO agency if earlier.)
PREMIUM WITH APPLICATION. If you make a premium payment with the
application, the Policy Date is generally the later of the date Part II of the
application is signed and receipt of the premium payment. In that case, the
Policy Date and investment start date are the same. The amount of premium paid
with the application must be at least 10% of the annual Planned Premium for the
Policy. You may only make one premium payment before the Policy is issued.
If you make a premium payment with the application, we will cover the
insured under a temporary insurance agreement for a limited period that usually
begins when we receive the premium for the Policy (or, if later, on the date
when Part II of the application is signed). The maximum temporary coverage is
the lesser of the amount of insurance applied for and $500,000 for standard and
preferred risks ($250,000 for substandard risks and $50,000 for persons who are
determined to be uninsurable). These provisions vary in some states.
If we issue a Policy, Monthly Deductions begin from the Policy Date, even if
we delayed the Policy's issuance for underwriting. The deductions are for the
face amount of the Policy issued, even if the temporary insurance coverage
during underwriting was for a lower amount. If we decline an application, we
refund the premium payment made.
PREMIUM ON DELIVERY. If you pay the initial premium on delivery of the
Policy, the Policy Date is usually five days after issue. The investment start
date is the later of the Policy Date and the date we received the premium.
Monthly Deductions begin on the Policy Date. We credit interest at a 4% net rate
on the net Minimum Premium (see "Premiums") for any period between the Policy
Date and the investment start date. Insurance coverage under the Policy begins
when we receive the Minimum Premium due for the first quarter (or on receipt of
the number of monthly payments due under NELICO's Master Service Account
arrangement.)
BACKDATING. We may sometimes backdate a Policy, if you request, by
assigning a Policy Date earlier than the date the application is signed. You may
wish to backdate so that you can obtain lower cost of insurance rates, based on
a younger insurance age. Backdating in some cases causes a higher Surrender
Charge if it results in the Surrender Charge being based on a lower age bracket.
(See "Surrender Charge".) For a backdated Policy, you must also pay the Minimum
Premium payable for the period between the Policy Date and the investment start
date. As of the investment start date, we allocate to the Policy those net
premiums, adjusted for monthly Policy charges and interest at a 4% net rate for
that period.
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 45 days after the date Part 1 of the
application is signed, within 10 days (more in some states) after you receive
the Policy or within 10 days after we mail the Notice of Withdrawal Right,
whichever is latest. You may return the Policy to us or your registered
representative. Insurance coverage ends as soon as you return the Policy
(determined by postmark, if the Policy is mailed). If you cancel the Policy, we
refund any premiums paid (or any other amount that is required by state
insurance law).
STATE VARIATIONS
Certain Policy features, such as the "Right to Return the Policy", may vary
by state. You should read the Policy carefully for any variations in your state.
A-15
<PAGE> 20
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs of the
services or benefits that are implied by the name of the charge or that are
associated with the particular Policy. For example, the sales charge and
Deferred Sales Charge may not fully cover all of our sales and distribution
expenses, and we may use proceeds from other charges, including the mortality
and expense risk charge, to help cover those expenses. We can profit from
certain Policy charges.
DEDUCTIONS FROM PREMIUMS
We deduct a 4% sales charge from premiums. We currently intend to waive the
charge:
-- on all premiums after the 15th Policy year
-- on premiums paid in a Policy year that are in excess of a Sales Charge
Breakpoint Premium.
For these purposes, we consider premiums we receive during the twenty days
prior to a Policy anniversary as paid in the next Policy year. (This rule does
not apply to premiums paid through our Master Service Account arrangement,
described in "Premiums".)
We have the right not to waive the charge or to resume the charge in either
situation. We indicate your Sales Charge Breakpoint Premium as the "Target
Premium" on your personalized illustration.
The sales charge is 3% rather than 4% for:
-- Policies used in a business situation (defined in "Availability of the
Policy") or a tax-qualified pension plan where either (1) the average
base Policy face amount is at least $500,000 or (2) the Policies are
issued on the lives of at least 25 persons and the average base Policy
face amount is at least $250,000. (The "base" Policy is the Policy
without riders.)
-- All other Policies with a base Policy face amount of at least $500,000.
During the first 11 Policy years (less for older insureds), if you surrender
or lapse the Policy, reduce the face amount or make a partial surrender that
reduces the face amount, a Deferred Sales Charge also applies. (See "Surrender
Charge" below.)
We may reduce sales charges for Policies sold to some group or sponsored
arrangements. We offer a program under which you may exchange certain
fixed-benefit life insurance policies that New England Mutual issued for the
Policies without a deduction for the sales charge, state premium tax and federal
premium tax charges (see below) from the amount of cash value that you transfer
to the Policy. Eligibility conditions apply. Your registered representative can
advise you regarding terms and availability of the program.
STATE PREMIUM TAX CHARGE. We deduct 2.5% from each premium 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.
FEDERAL PREMIUM TAX CHARGE. We deduct 1% from each premium for our federal
income tax liability related to premiums.
A-16
<PAGE> 21
EXAMPLE: The following chart shows the net amount that we would allocate to
the Variable Account assuming a premium payment of $3,000 and that the Policy's
Sales Charge Breakpoint Premium equals $2,000.
<TABLE>
<CAPTION>
NET
PREMIUM PREMIUM
- ------- -------
<C> <C> <S>
$3,000 $2,000
- 150 (7.5% X 2,000 = total sales and premium tax charge up to the
------- Sales Charge Breakpoint Premium)
$1,850
$1,000
- 35 (3.5% X 1,000 = total sales and premium tax charge on
------ payments in excess of the Sales Charge Breakpoint Premium)
$ 965
$1,850
+ 965
-------
$2,815 Net Premium
-------
</TABLE>
We intend to waive the 4% sales charge on premiums paid after the 15th
Policy year. In that case, the net premium in this example would be $3,000 - 105
(3.5% X 3,000) or $2,895.
SURRENDER CHARGE
If, during the first eleven policy years, you surrender or lapse your
Policy, reduce the face amount, or make a partial surrender that reduces the
face amount, then we will deduct a Surrender Charge from the cash value. (For
insureds whose issue age is 66 to 75 at issue of the Policy, the Surrender
Charge period is nine years, and for insureds whose issue age is 76 to 85, five
years.) The Surrender Charge includes a Deferred Sales Charge and a Deferred
Administrative Charge. The maximum Surrender Charge is shown in your Policy.
DEFERRED SALES CHARGE. We base the Deferred Sales Charge on a percentage of
the Target Premium. The Target Premium varies by issue age, sex and underwriting
class of the insured and the Policy's face amount. (To determine the Target
Premium, we use the nonsmoker aggregate or nonsmoker substandard classes for all
nonsmokers. See "Monthly Charges for the Cost of Insurance" below.)
The Deferred Sales Charge that applies during the first Policy year is equal
----------------------------
to 25% of premiums paid up to one Target Premium. The Deferred Sales Charge
during the second Policy year is equal to 25% of premiums paid up to one Target
- -----------------------------
Premium plus 5% of additional premiums paid up to a second Target Premium. As
--
described below, after the second Policy year, the maximum Deferred Sales Charge
- --------------------------------------------------------------------------------
increases substantially.
- ------------------------
For Policies which cover insureds whose issue age is 55 or less at issue,
the greatest Deferred Sales Charge applies if you lapse or surrender, or reduce
--------
the face amount, in Policy years three through five. The Deferred Sales Charge
-----------------------------------
in these years equals 45% of actual premiums paid up to one Target Premium, plus
13.5% of additional premiums paid in excess of one Target Premium up to a second
Target Premium, plus 13.5% of additional premiums paid in excess of two Target
Premiums up to a third Target Premium. After the fifth Policy year, the maximum
Deferred Sales Charge declines on a monthly basis until it reaches 0% in the
last month of the eleventh Policy year.
A-17
<PAGE> 22
The table below shows the maximum Deferred Sales Charge that applies to
Policies covering insureds whose issue age is 55 or less at issue, and assumes
that one Target Premium per year is paid under the Policy. The table shows the
charge, expressed as a percentage of total Target Premiums paid to date, if the
lapse, surrender or face reduction occurs at the end of each of the Policy years
shown.
<TABLE>
<CAPTION>
THE MAXIMUM DEFERRED
SALES CHARGE IS THE FOLLOWING
PERCENTAGE OF TOTAL TARGET
FOR POLICIES WHICH ARE PREMIUMS PAID TO DATE OF
SURRENDERED, LAPSED OR SURRENDER, LAPSE, OR
REDUCED DURING FACE AMOUNT REDUCTION
---------------------- -----------------------------
<S> <C> <C>
Entire Policy Year 3 24.00%
4 18.00%
5 14.40%
Last Month of Policy Years 6 10.00%
7 6.86%
8 4.50%
9 2.67%
10 1.20%
11 0.00%
</TABLE>
For insureds whose issue age is above 55 at issue, the Deferred Sales Charge
percentages are less than or equal to those described above, with the maximum
charge occurring in Policy years three through five for insureds with an issue
age up through 65, in Policy years two through four for insureds with an issue
age from 66 through 75, and in Policy year two for insureds with an issue age
above 75.
In the case of a partial surrender or reduction in face amount, we deduct
any Deferred Sales Charge that applies from the Policy's remaining cash value in
an amount that is proportional to the amount of the Policy's face amount
surrendered. (See "Partial Surrender".) The charge reduces the Policy's cash
value in the Sub-Accounts and the Fixed Account in proportion to the amount of
the Policy's cash value in each.
DEFERRED ADMINISTRATIVE CHARGE. The table below shows the Deferred
Administrative Charge deducted if you totally or partially surrender, lapse or
reduce the face amount of the Policy during the first eleven Policy years.
<TABLE>
<CAPTION>
FOR POLICIES WHICH ARE
SURRENDERED, LAPSED DEFERRED ADMINISTRATIVE
OR REDUCED DURING THE CHARGE PER $1,000 OF
POLICY YEAR SHOWN FACE AMOUNT
---------------------- -----------------------
<S> <C> <C>
Entire Policy year 1 $2.50
Last Month of Policy Year* 2 2.25
3 2.00
4 1.75
5 1.50
6 1.25
7 1.00
8 0.75
9 0.50
10 0.25
11 0.00
</TABLE>
- ------------
* The charge declines monthly after the end of the first Policy year.
For insureds whose issue age is above 65 at issue, the Deferred
Administrative Charge is less than or equal to that in the table above.
MONTHLY DEDUCTION FROM CASH VALUE
On the first day of each Policy month, starting with the Policy Date, we
deduct the "Monthly Deduction" from your cash value.
-- If your Policy is protected against lapse by a Minimum Death Benefit
Guarantee or the three year Minimum Premium guarantee, we make the
Monthly Deduction each month unless the cash value equals zero. (See
"Premiums".)
-- If you do not have a Minimum Death Benefit Guarantee and the three year
Minimum Premium guarantee is not in effect, we make the Monthly
Deduction as long as the net cash value is large enough to cover the
entire Monthly Deduction. If it is not large enough, the Policy will be
in default and may lapse. (See "Lapse and Reinstatement".)
A-18
<PAGE> 23
The Monthly Deduction reduces the cash value in each Sub-Account of the
Variable Account and in the Fixed Account in proportion to the cash value in
each.
The Monthly Deduction includes the following charges:
POLICY FEE. The Policy fee is currently equal to $7.00 per month in the
first Policy year and $5.00 per month thereafter (guaranteed not to exceed $7.00
per month).
The Policy fee is currently $3.00 per month rather than $5.00 after the
first Policy year for:
-- Policies used in a business situation (defined in "Availability of the
Policy") or a tax-qualified pension plan, where either (1) the average
base face amount is at least $500,000 or (2) the Policies are issued on
the lives of at least 25 persons and the average base face amount is at
least $250,000.
-- All other Policies with a face amount of at least $500,000.
ADMINISTRATIVE CHARGE. The Administrative Charge is currently equal to
$0.07 per $1,000 of base Policy face amount in the first Policy year and $0.02
per $1,000 of base Policy face amount thereafter (guaranteed not to exceed $0.08
per $1,000 of base face amount in the first Policy year and $0.04 per $1,000 of
base face amount thereafter).
Currently we intend not to charge more than $40 per month for the
Administrative Charge after the first Policy year. This means that after the
first year the charge will not apply to the portion of a Policy's face amount
above $2 million.
The Administrative Charge is currently $0.06 per $1,000 of face amount
rather than $0.07 for:
-- Policies used in a business situation or a tax-qualified pension plan,
where either (1) the average base face amount is at least $500,000 or
(2) the Policies are issued on the lives of at least 25 persons and the
average base face amount is at least $250,000.
-- All other Policies with a base face amount of at least $500,000.
MINIMUM DEATH BENEFIT GUARANTEE CHARGE. The minimum death benefit guarantee
charge is $0.01 per $1,000 of base Policy face amount. (See "Minimum Guaranteed
Death Benefit".)
MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of
providing insurance protection under your Policy. The cost of insurance charge
for a Policy month is equal to the "amount at risk" under the Policy, multiplied
by the cost of insurance rate for that Policy month. We determine the amount at
risk on the first day of the Policy month after we process the Monthly
Deduction. The amount at risk is the amount by which the death benefit
(discounted at the monthly equivalent of 4% per year) exceeds the Policy's cash
value. The cost of insurance rate for your Policy changes from month to month.
The guaranteed cost of insurance rates for a Policy depend on the insured's
-- underwriting class
-- age on the first day of the Policy year
-- sex (if the Policy is sex-based).
The current cost of insurance rates will also depend on
-- the insured's age at issue
-- the Policy year
-- the face amount (for Policies not sold in a business situation or to a
tax-qualified pension plan)
-- the average face amount sold to the group and possibly the number of
lives in the group (for Policies sold in a business situation or to a
tax-qualified pension plan).
We guarantee that the rates will not be higher than rates based on
-- the 1980 Commissioners Standard Ordinary Mortality Tables (the "1980 CSO
Tables") with smoker/nonsmoker modifications, for Policies issued on
non-juvenile insureds (age 20 and above at issue)
-- the 1980 CSO Tables, for Policies issued on juvenile insureds (below age
20 at issue).
The actual rates we use may be lower than the maximum rates, depending on
our expectations about our future mortality and expense experience, lapse rates
and investment earnings. We review the adequacy of our cost of insurance rates
periodically and may adjust them. Any change will apply prospectively.
A-19
<PAGE> 24
The underwriting classes we use are
-- for Policies issued on non-juvenile insureds: smoker standard, smoker
substandard, nonsmoker preferred, nonsmoker standard, nonsmoker
aggregate, nonsmoker substandard and automatic issue
-- for Policies issued on juvenile insureds: standard and substandard.
Substandard and automatic issue ratings result in higher cost of insurance
deductions. We base the guaranteed maximum mortality charges for substandard
ratings on multiples of the 1980 CSO Tables. (See below for a discussion of
automatic issue Policies.)
The three standard nonsmoker classes are available as follows:
-- nonsmoker preferred and nonsmoker standard, for Policies with base face
amounts of $250,000 or more where the issue age is 20 through 75
-- nonsmoker aggregate, for Policies with base face amounts below $250,000
and for all Policies where the issue age is above 75.
Of the three standard nonsmoker classes, the nonsmoker preferred class
generally offers the best current cost of insurance rates and the nonsmoker
standard class generally offers the least favorable current cost of insurance
rates.
Cost of insurance rates are generally lower for nonsmokers than for smokers
and generally lower for females than for males. Within a given underwriting
class, cost of insurance rates are generally lower for insureds with lower issue
ages. Where required by state law, and for Policies sold in connection with some
employee benefit plans, cost of insurance rates (and Policy values and benefits)
do not vary based on the sex of the insured.
Currently, the face amount of a Policy or the average Policy face amount for
a group may affect a Policy's cost of insurance rates. The current cost of
insurance rates will be most favorable for a particular insured if:
-- For a Policy not used in a business situation or in a tax-qualified
pension plan, the base Policy face amount is at least $500,000.
-- For a Policy used in a business situation or in a tax-qualified pension
plan, either (1) the average base face amount is at least $500,000, or
(2) the Policies are issued on the lives of at least 25 persons and the
average base face amount is at least $250,000.
The current cost of insurance rates will be least favorable for a particular
insured if:
-- For a Policy not used in a business situation or in a tax-qualified
pension plan, the base Policy face amount is below $250,000.
-- For a Policy used in a business situation or in a tax-qualified pension
plan, the base face amount is below $250,000 and either (1) the average
base face amount is below $500,000 or (2) the Policies are issued on the
lives of at least 25 persons and the average base face amount is below
$250,000.
We may offer Policies on an automatic issue basis to certain group or
sponsored arrangements. We issue these Policies up to predetermined face amount
limits. Because we issue these Policies based on minimal underwriting
information, they may present a greater mortality cost to us than Policies in a
standard class. Therefore, these Policies have their own cost of insurance
rates. We may also deduct an additional insurance charge from an automatic issue
Policy's cash value. The automatic issue cost of insurance rates vary based on
the same factors that determine underwritten cost of insurance rates, except
that currently the automatic issue rates do not vary based on the average face
amount for the group. The cost of insurance rates are guaranteed not to exceed
100% of the 1980 CSO (unisex) Tables with smoker/nonsmoker modifications.
Generally the current automatic issue rates will exceed current cost of
insurance rates for a comparable underwritten Policy. The additional insurance
charge for an automatic issue Policy will vary depending on certain
characteristics of the group, as well as on the smoker status and issue age of
the insured and the average face amount for the group. (For this purpose we use
the same average face amount categories that we use when determining current
cost of insurance rates for underwritten Policies.) The total guaranteed maximum
monthly cost of insurance charges, including the additional charge for automatic
issue status, exceed charges based on 100% of the 1980 CSO Tables.
The underlying cost of insurance rates for automatic issue Policies vary
based on whether the insured is a smoker or nonsmoker, and the preferred
nonsmoker class is not available. The current cost of insurance rates do not
vary by individual Policy face amount but may be lower if the members of the
group or sponsored arrangement have certain characteristics, the Policies are
issued on at least 25 lives, the base face amount of each Policy is at least
$100,000 and the average base face amount is at least $250,000.
A-20
<PAGE> 25
Some group or sponsored arrangements may be eligible to purchase Policies on
a simplified underwriting basis. They may elect simplified underwriting instead
of automatic issue or for amounts of insurance above our automatic issue limits.
However, they may not choose automatic issue for some members of the group and
simplified underwriting for others. There is no extra insurance charge for
Policies issued on a simplified underwriting basis. The preferred nonsmoker
class is not available for these Policies.
CHARGES FOR ADDITIONAL BENEFITS AND SERVICES. We charge for the cost of any
additional rider benefits as described in the rider form. We also may charge you
a nominal fee, which we will bill directly to you, if you request a Policy
re-issue or re-dating.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. We charge the Sub-Accounts of the
Variable Account for our mortality and expense risks. Currently, the charge is
made daily at an annual rate of .60% of the Sub-Accounts' assets. We have the
right to increase the charge, up to a maximum annual rate of .90%. The mortality
risk we assume is that insureds may live for shorter periods of time than we
estimated. The expense risk is that our costs of issuing and administering the
Policies may be more than we estimated.
CHARGES FOR INCOME TAXES. We currently do not charge the Variable Account
for income taxes, but in the future we may make such a charge, if appropriate.
We have the right to make a charge for any taxes imposed on the Policies in the
future. (See "Charge for NELICO's Income Taxes".)
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds. See the "Policy
Charges" section under "Introduction to the Policies".
GROUP OR SPONSORED ARRANGEMENTS
We may issue the Policies to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a situation where a trustee,
employer or similar entity purchases individual Policies covering a group of
individuals. Examples of such arrangements are tax-qualified pension plans and
non-tax qualified deferred compensation plans. A "sponsored arrangement"
includes a situation where an employer or an association permits group
solicitation of its employees or members for the purchase of individual
Policies.
We may waive, reduce or vary any Policy charges under Policies sold to a
group or sponsored arrangement. We may also raise the interest rate credited to
loaned amounts under these Policies. The amount of the variations and our
eligibility rules may change from time to time. In general, they reflect cost
savings over time that we anticipate for Policies sold to the eligible group or
sponsored arrangements and relate to objective factors such as the size of the
group, its stability, the purpose of the funding arrangement and characteristics
of the group members. These variations of charges do not apply to Policies sold
in New York other than Policies sold to non-tax qualified deferred compensation
plans of various types. Consult your registered representative for any
variations that may be available and appropriate for your case.
The United States Supreme Court has ruled that insurance policies with
values and benefits that vary with the sex of the insured may not be used to
fund certain employee benefit programs. Therefore, we offer Policies that do not
vary based on the sex of the insured to certain employee benefit programs. We
recommend that employers consult an attorney before offering or purchasing the
Policies in connection with an employee benefit program.
PREMIUMS
FLEXIBLE PREMIUMS
Within limits, you choose the amount and frequency of premium payments. You
select a Planned Premium schedule, which is a level amount. This schedule
appears in your Policy. YOUR PLANNED PREMIUMS WILL NOT NECESSARILY KEEP YOUR
POLICY IN FORCE. You may skip Planned Premium payments or make additional
payments. Additional payments could be subject to underwriting. No payment can
be less than $25 ($10 for payments made through the Master Service Account,
described below, or certain other monthly payment arrangements). We limit the
total of Planned Premiums and other payments to our published maximum.
You can pay Planned Premiums on an annual, semi-annual or quarterly schedule
or, with our consent, monthly. You can change your Planned Premium schedule by
sending your request to us. However, you cannot increase the amount of your
Planned Premium unless we consent, and we may require underwriting.
You may make payments by check or money order. We will send premium notices
for annual, semi-annual or quarterly Planned Premiums. You may also choose to
have us withdraw your premium payments from your bank checking account or Nvest
Cash Management Trust account. (This is known as the Master Service Account
arrangement.)
A-21
<PAGE> 26
Federal tax law limits the amount of premiums that you can pay under the
Policy. In addition, if any payments under the Policy exceed the "7-pay test"
under Federal tax law, your Policy will become a "modified endowment contract"
and you may have more adverse tax consequences with respect to certain
distributions than would otherwise be the case if premium payments did not
exceed the "7-pay test". (See "Tax Considerations".) You need our consent if,
because of tax law requirements, a payment would increase the Policy's death
benefit by more than it would increase cash value. We may require evidence of
insurability before accepting the payment.
We allocate net payments to your Policy's Sub-Accounts as of the date we
receive the payment. (See "Receipt of Communications and Payments at NELICO's
Home Office".)
Under our current processing, we treat a payment first as a Planned Premium,
second as repayment of Policy loan interest due, and last as an unscheduled
payment, unless you instruct us otherwise in writing. (For Policies issued in
-----------------------
New York, we treat a payment as a Planned Premium when a Policy loan is
- --------
outstanding only if the payment is in the exact amount of the Planned Premium
----
next due; otherwise, we treat it first as repayment of Policy loan interest due,
second as a Planned Premium, and last as an unscheduled payment.) We do not
treat a payment as repayment of a Policy loan unless you instruct us to.
If you have a Policy loan, it may be better to repay the loan than to make a
premium payment, because the premium payment is subject to sales and tax
charges, whereas the loan repayment is not subject to any charges. However,
repaying the loan instead of paying a premium could make your Policy ineligible
for a death benefit guarantee. (See "Loan Provision", "Deductions from Premiums"
and "Death Benefit".)
A-22
<PAGE> 27
- --------------------------------------------------------------------------------
Three types of premium payment levels can protect your Policy against lapse
(1) for the first three Policy years, (2) until age 80 of the insured, and (3)
until age 100 of the insured. (The guarantee to age 100 is not available under
Policies issued in New York.)
First three Policy years--In general, if you pay the three year Minimum
------------------------
Premium amount on time, the Policy will not lapse even if the net cash value is
less than the Monthly Deduction in any month. If (a) the total premiums you have
paid, less all partial surrenders and any outstanding Policy loan balance, at
least equal (b) the total monthly Minimum Premiums for the Policy up to that
Policy month, the Policy will not lapse. The guarantee will not apply if you
substitute the insured or reinstate the Policy. We recalculate the Minimum
Premium if (1) you reduce the face amount or make a partial surrender that
reduces the face amount, (2) you increase or decrease rider coverage, or (3) the
rating classification for your Policy is improved. We base the Minimum Premium
amount (shown in your Policy) on your Policy's face amount, the age, sex (unless
unisex rates apply) and underwriting class of the insured, current Policy
charges and any riders to the Policy.
To Maturity (age 100 of the insured)--Payment of the Guaranteed Death
-----------------------------------
Benefit A premium can guarantee that the Policy will stay in force until age 100
of the insured. Insufficient premium payments, a reduction in the face amount or
partial surrender that reduces the face amount, reduction or deletion of a rider
benefit, or improvement in rating classification of the Policy could terminate
this guarantee. See "Minimum Guaranteed Death Benefit". We base this guaranteed
minimum death benefit premium on the Policy's face amount, the age, sex (unless
unisex rates apply) and underwriting class of the insured, the death benefit
option chosen, the guaranteed level of cost of insurance charges, the current
level of other Policy charges and any rider benefit selected. We recalculate
this premium following the same Policy transactions described above for a
recalculation of the three-year Minimum Premium amount. This Guaranteed Death
---------------------
Benefit A premium does not apply under Policies issued in New York.
- -------------------------------------------------------------------
To age 80 of the insured--Payment of the Guaranteed Death Benefit B premium
------------------------
can guarantee that the Policy will stay in force until the later of age 80 of
the insured, or 20 years after issue, but no later than the Maturity Date of the
Policy (age 100 of the insured). Insufficient premium payments, a reduction in
the face amount or a partial surrender that reduces the face amount, reduction
or deletion of a rider benefit, or improvement in the rating classification of
the Policy could terminate this guarantee, although termination for insufficient
premium payments is less likely here than in the case of the Guaranteed Death
Benefit A premium. We base this premium on factors similar to the Guaranteed
Death Benefit A premium, but we use the guaranteed level of both cost of
insurance and other Policy charges for coverage to that age. We recalculate the
Guaranteed Death Benefit B premium following the same Policy transactions
described above for a recalculation of the three-year Minimum Premium amount.
Under Policies issued in New Jersey, if you have met the requirements for
-----------------------------------
the three-year Minimum Premium death benefit guarantee at the end of the three
year guarantee period, the Minimum Premium death benefit guarantee will continue
to apply during the fourth Policy year as long as (a) payments made during that
Policy year, less partial surrenders and loans made in that year, equal (b) the
guaranteed maximum Policy charges plus the applicable Surrender Charge for the
fourth Policy year. In addition, under Policies issued in New Jersey, if at the
end of the period for Minimum Guaranteed Death Benefit B you have met the
requirements for that guarantee, the guarantee will continue to apply during the
next Policy year as long as (a) payments made during that Policy year, less
partial surrenders and loans made in that year, equal (b) the guaranteed maximum
Policy charges for that Policy year. If you make a Policy transaction that
changes the amount of the guaranteed maximum Policy charges for the year, then
the amount needed to preserve the death benefit guarantee for an extra Policy
year will change accordingly.
- --------------------------------------------------------------------------------
LAPSE AND REINSTATEMENT
LAPSE. Unless your Policy is protected by a guaranteed death benefit or
minimum premium guarantee, any month that your Policy's net cash value is not
large enough to cover a Monthly Deduction, your Policy will be in default. Your
Policy provides a 62 day grace period for payment of a premium large enough to
pay the amount due. The amount due is the least of: a premium large enough to
cover the Monthly Deduction and all deductions from the premium; a premium large
enough to permit Minimum Guaranteed Death Benefit A to be in effect; a premium
large enough to permit Minimum Guaranteed Death Benefit B to be in effect; and a
premium large enough to permit the three-year Minimum Premium death benefit to
be in effect. We will tell you the amount due. You have insurance coverage
during the grace period, but if the insured dies before you have paid the
premium, we deduct from the death proceeds the amount due for the period before
the date of death. If you have not paid the required premium by the end of the
grace period, your Policy will lapse without value.
REINSTATEMENT. 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 need our consent to reinstate. Reinstatement in
all cases requires payment of certain charges described in the Policy and
usually requires evidence of insurability that is satisfactory to us.
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<PAGE> 28
If we deducted a Surrender Charge on lapse, we credit it back to the
Policy's cash value on reinstatement. The Surrender Charge on the date of
reinstatement is the same as it was on the date of lapse. When we determine the
Surrender Charge and other charges that vary by duration of the Policy (unlike,
for example, cost of insurance charges that vary by age of the insured), we do
not count the amount of time that a Policy was lapsed.
OTHER POLICY FEATURES
INCREASE IN FACE AMOUNT
The Policy provides that, after the first Policy year, you may increase the
face amount. Currently, we administer requests for increases in face amount by
issuing a new Policy with a face amount equal to the requested increase in face
amount (an "Increase Policy"). Under Increase Policies, we generally waive the
monthly Policy Fee; and we usually base the monthly administrative charge on the
Policy year of the initial Policy. Otherwise, an Increase Policy is subject to
the same terms and conditions as any other Policy except that the minimum
required face amount for an Increase Policy is $10,000, and you may reduce the
face amount of the Increase Policy to below $10,000.
We may in the future administer face amount increases as increases in the
face amount of the initial Policy. A maximum Face Amount Increase Administrative
Charge of $2.50 per $1,000 of the face amount increase will apply to each
increase when it takes effect. Certain terms and conditions will apply to
increases in face amount, as outlined in the Policy. A separate Target Premium
amount will apply to the face amount increase, based on the insured's age and
underwriting class at the time of the increase. The Policy's sales charge and
Surrender Charge scales will apply separately to each face amount segment,
starting with the effective date of the face amount segment. Monthly Deductions
(including cost of insurance charges) will be based on the increase in coverage
and will reflect, in whole or in part, any change in risk classification of the
insured, according to our rules. (See "Charges and Expenses".) An increase in
face amount may have tax consequences. You should consult a tax advisor before
increasing the face amount.
When increases in the face amount of the initial Policy are available, we
will give Policy Owners who have purchased Increase Policies an opportunity to
consolidate coverage under initial and Increase Policies. The Face Amount
Increase Administrative Charge will not apply to the consolidation.
Consolidation of coverage may raise issues under federal tax law. You should
consult a tax advisor before requesting a consolidation.
For Policies issued in some business situations on an automatic issue basis,
we may offer annual face amount increases which are related to increases in
salary or which are based on a fixed annual percentage (the "Salary Refresh"
program). We determine limits on the annual and/or total amount of face
increases per Policy that we will permit on an automatic issue basis at issue.
Increases over this limit will require underwriting. The Salary Refresh program
is not available for Policies with the Option 2 death benefit.
We may also offer the Salary Refresh program for Policies issued on an
underwritten basis in some business situations. Any Salary Refresh face amount
increases under these Policies are underwritten in connection with the
application for the initial face amount of the Policies, and are subject to
limits that we determine at that time.
The terms and conditions of the Salary Refresh program are contained in our
published rules which are furnished at the time of application.
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after
the Right to Return the Policy period. We make the loan as of the date when we
receive a loan request. (See "Receipt of Communications and Payments at NELICO's
Home Office".) You should contact our Home Office or your registered
representative for information on loan procedures.
The Policy's loan value equals:
(i) 90% (or more if required by state law) of the Policy's "projected cash
value"; minus
(ii) the Policy's Surrender Charge on the next Planned Premium due date
or, if greater, on the date the loan is made; minus
(iii) loan interest to the next loan interest due date.
The "projected cash value" is the cash value projected to the next Policy
anniversary or, if earlier, to the next Planned Premium due date, at a 4% rate
and using current Policy charges. The loan value available is reduced by any
outstanding loan plus interest. We currently intend to base the loan value on
100% of the Policy's projected cash value, rather than 90%, for Policy years 16
and after.
A-24
<PAGE> 29
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EXAMPLE: Using the Policy illustrated on page A-44 assume that the Policy's
Planned Premiums have been paid and that the Policy's Sub-Accounts have earned a
constant 6% hypothetical gross annual rate of return (equal to a constant net
annual rate of return of 4.58%). After the premium payment on the 10th Policy
anniversary, the maximum amount that you could borrow would be determined as
follows under (i) an annual premium payment schedule and (ii) a quarterly
premium payment schedule:
<TABLE>
<CAPTION>
ANNUAL QUARTERLY
------- ---------
<S> <C> <C>
(1) Cash Value after Premium Payment on 10th Policy
Anniversary............................................... $42,386 $39,985
(2) Cash Value Projected at a Constant Annual Rate of
Return of 4% to the
(a) 11th Policy Anniversary............................. 43,674
(b) Next Planned Premium Due Date....................... 40,266
(3) 90% of Amount Calculated in (2)........................ 39,307 36,239
(4) Amount Calculated in (3), Reduced by the Applicable
Surrender Charge.......................................... 39,042 35,974
(5) Amount Calculated in (4), Reduced by Loan Interest to
the Next Interest Due Date................................ 37,007 34,099
</TABLE>
- --------------------------------------------------------------------------------
A Policy loan reduces the Policy's cash value in the Sub-Accounts by the
amount of the loan. A loan repayment increases the cash value in the
Sub-Accounts by the amount of the repayment. Unless you request otherwise, we
attribute Policy loans first to the Sub-Accounts of the Variable Account in
proportion to the cash value in each, and then the Fixed Account. We allocate
loan repayments first to the outstanding loan balance attributed to the Fixed
Account and then to the Sub-Accounts of the Variable Account in proportion to
the cash value in each.
The interest rate charged on Policy loans is an effective rate of 5.5% per
year (using simple interest during the year). Interest accrues daily and is due
on the Policy anniversary. If not paid at that time, we add the interest accrued
to the loan amount, and we deduct an amount equal to the unpaid interest from
the Policy's cash value in the Sub-Accounts and the Fixed Account in proportion
to the amount in each. The amount we take from the Policy's Sub-Accounts as a
result of the loan earns interest (compounded daily) at an effective rate of not
less than 4% per year. The rate we currently credit is 4% per year for the first
15 Policy years and 5.25% thereafter. (You should consult a tax advisor as to
the tax consequences associated with a Policy loan outstanding after the first
15 Policy years.) We credit this interest amount to the Policy's Sub-Accounts
annually, in proportion to the cash value in each.
The amount taken from the Policy's Sub-Accounts as a result of a loan does
not participate in the investment experience of the Sub-Accounts. Therefore,
loans can permanently affect the death benefit and cash value of the Policy,
even if repaid. In addition, we reduce any proceeds payable under a Policy by
the amount of any outstanding loan plus accrued interest.
If a Policy loan is outstanding, it may be better to repay the loan than to
pay a premium, because the payment is subject to sales and premium tax charges,
and the loan repayment is not subject to charges. However, repaying the loan
instead of paying a premium could make your Policy ineligible for a death
benefit guarantee. (See "Deductions from Premiums" and "Death Benefit".)
If Policy loans plus accrued interest at any time exceed the Policy's cash
value less the Surrender Charge on the next Policy loan interest due date (or,
if the Surrender Charge would be greater, on the date the calculation is made),
we notify you that the Policy is going to terminate. (This is called an "excess
Policy loan". We test for an excess Policy loan on each monthly processing date
and in connection with other Policy processing transactions.) The Policy
terminates without value 62 days after we mail the notice unless you pay us the
excess Policy loan amount within that time. If the Policy lapses with a loan
outstanding, adverse tax consequences may result. If your Policy is a "modified
endowment contract", loans under your Policy may be treated as taxable
distributions. (See "Tax Considerations" below.)
Department of Labor regulations impose requirements for participant loans
under tax-qualified pension plans. Therefore, plan loan provisions may differ
from Policy loan provisions. See "Tax Considerations".
SURRENDER
You may surrender a Policy for its net cash value at any time while the
insured is living. We determine the net cash value of the surrendered Policy as
of the date when we receive the surrender request. The net cash value equals the
cash value reduced by any Policy loan and accrued interest and by any applicable
Surrender Charge. (See "Surrender Charge".) We increase the net cash value paid
on surrender by the portion of any cost of insurance charge we deducted for the
period beyond the date of surrender. If you surrender the Policy during the
grace period, we reduce the net cash value by an amount to cover the Monthly
A-25
<PAGE> 30
Deduction to the date of surrender. You may apply all or part of the net cash
value to a payment option. (See "Payment Options".) A surrender may result in
adverse tax consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER
You may make a partial surrender of the Policy after the Right to Return the
Policy period, to receive a portion of its net cash value. A partial surrender
reduces the Policy's death benefit and may reduce the Policy's face amount if
necessary so that the amount at risk under the Policy will not increase. Any
reduction in the face amount causes a proportionate reduction in the Policy's
Target Premium, on which we base any future Surrender Charges, and in the Sales
Charge Breakpoint Premium, on which we currently base the 4% sales charge. A
partial surrender may also reduce rider benefits. We reserve the right to
decline a partial surrender request that would reduce the face amount below the
Policy's required minimum.
We have the right to limit partial surrenders in any one Policy year to 20%
of the Policy's net cash value on the date of the first partial surrender for
the Policy year or, if less, the Policy's available loan value. Currently, we
permit partial surrenders of up to 75% of the Policy's net cash value per year,
if there is sufficient available loan value. (In some business situations or for
some tax-qualified pension plans we may permit you to withdraw a higher
percentage of the net cash value.)
We deduct any Surrender Charge that applies to the partial surrender from
the Policy's remaining cash value in an amount proportional to the amount of the
Policy's face amount surrendered. The Surrender Charge applied reduces any
remaining Surrender Charge that can be applied under your Policy.
You may not reinvest cash value paid upon partial surrender in the Policy
except as premium payments, which are subject to the charges described under
"Deductions From Premiums". A partial surrender could terminate your Policy's
Minimum Guaranteed Death Benefit. See "Minimum Guaranteed Death Benefit".
A partial surrender first reduces the Policy's cash value in the
Sub-Accounts of the Variable Account, in proportion to the amount of cash value
in each, and then the Fixed Account, unless you request otherwise. (See "The
Fixed Account" below.) We determine the amount of net cash value paid upon
partial surrender as of the date when we receive a request. You can contact your
registered representative or the Home Office for information on partial
surrender procedures.
A reduction in the death benefit as a result of a partial surrender may
create a "modified endowment contract" or have other adverse tax consequences.
If you are contemplating a partial surrender, you should consult your tax
advisor regarding the tax consequences. (See "Tax Considerations".)
REDUCTION IN FACE AMOUNT
You may reduce the face amount of your Policy without receiving a
distribution of any Policy cash value. (This feature differs from a partial
surrender, which pays a portion of the Policy's net cash value to you.)
If you decrease the face amount of your Policy, we also decrease the Target
Premium, on which we base any future Surrender Charges, and in the Sales Charge
Breakpoint Premium, on which we currently base the 4% sales charge. We deduct
any Surrender Charge that applies from the Policy's cash value when you reduce
its face amount.
A face amount reduction usually decreases the Policy's death benefit.
(However, if we are increasing the death benefit to satisfy federal income tax
laws, a face amount reduction will not decrease the death benefit unless we
deducted a Surrender Charge from the cash value. A reduction in face amount in
this situation may not be advisable because it will not reduce your death
benefit or cost of insurance charges and may result in a Surrender Charge.) We
also may decrease any rider benefits attached to the Policy. The face amount
remaining after a reduction must meet our minimum face amount requirements for
issue, except with our consent; special rules apply in business situations.
A reduction in face amount reduces the Federal tax law limits on the amount
of premiums that you can pay under the Policy. In these cases, you may need a
partial surrender of cash value to comply with Federal tax law. This could
terminate your Policy's Minimum Guaranteed Death Benefit. (See "Minimum
Guaranteed Death Benefit".)
A face amount reduction takes effect as of the date when we receive a
request. You can contact your registered representative or the Home Office for
information on face reduction procedures.
A reduction in the face amount of a Policy may create a "modified endowment
contract". If you are contemplating a reduction in face amount, you should
consult your tax advisor regarding the tax consequences of the transaction. (See
"Tax Considerations".)
A-26
<PAGE> 31
INVESTMENT OPTIONS
You can allocate your Policy's premiums among the Sub-Accounts of the
Variable Account and the Fixed Account in any combination, as long as you choose
no more than 10 accounts (including the Fixed Account) at any one time. The
Policy provides that you must allocate a minimum of 10% of the premium to each
Sub-Account selected in whole percentages; currently we will permit you to
allocate any whole percentage to a Sub-Account. You can allocate your Policy's
cash value among no more than 10 accounts (including the Fixed Account) at any
one time.
You make the initial premium allocation when you apply for a Policy. You can
change the allocation of future premiums at any time thereafter. The change will
be effective for premiums applied on or after the date when we receive your
request. You may request the change by telephone or by written request. (See
"Receipt of Communications and Payments at NELICO's Home Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
TRANSFER OPTION
After the Right to Return the Policy period, you may transfer your Policy's
cash value between Sub-Accounts. We reserve the right to limit sub-account
transfers to four per Policy year (twelve per Policy year for Policies issued in
New York). We currently allow 12 Sub-Account transfers per Policy year under all
Policies. We do not count transfers out of the Fixed Account against this limit.
We treat all Sub-Account transfer requests made at the same time as a single
request. The transfer is effective as of the date when we receive the transfer
request. (See "Receipt of Communications and Payments at NELICO's Home Office".)
For special rules regarding transfers involving the Fixed Account, see "The
Fixed Account".
We did not design the Policy's transfer privilege to give you a way to
speculate on short-term market movements. To prevent excessive transfers that
could disrupt the management of the Eligible Funds and increase transaction
costs, we may adopt procedures to limit excessive transfer activity. For
example, we may impose conditions and limits on, or refuse to accept, transfer
requests that we receive from third parties. Third parties include investment
advisors or registered representatives acting under power(s) of attorney from
one or more Policy owners. In addition, the Metropolitan Series Fund, Inc. may
restrict or refuse purchases or redemptions of shares in its Portfolios as a
result of certain market timing activities. You should read the prospectuses of
these Eligible Funds for more details.
You may request a Sub-Account transfer or reallocation of future premiums by
written request (which may be telecopied) to us or by telephoning us. To request
a transfer or reallocation by telephone, you should contact your registered
representative or contact us at 1-800-200-2214. We use reasonable procedures to
confirm that instructions communicated by telephone are genuine. Any telephone
instructions that we reasonably believe to be genuine are your responsibility,
including losses arising from any errors in the communication of instructions.
DOLLAR COST AVERAGING
We plan to offer an automated transfer privilege called dollar cost
averaging. The same dollar amount is transferred to selected Sub-Accounts
(and/or the Fixed Account) periodically. 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, a lower than average cost of
purchases may be achieved 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 that a certain amount of your cash value
be transferred on any selected business day of each period (or if not a day when
the New York Stock Exchange is open, the next such day), from any one
Sub-Account to one or more of the other Sub-Accounts (and/or the Fixed Account).
We limit your allocation of cash value to no more than 10 accounts (including
the Fixed Account) at any one time. You must transfer a minimum of $100 to each
account that you select under this feature. Transfers made under the dollar cost
averaging program count against the 12 transfers allowed in a Policy year. You
can select a dollar cost averaging program when you apply for the Policy or at a
later date by contacting our Home Office. You may participate in the dollar cost
averaging program while you are participating in the asset rebalancing program
as long as the Sub-Account from which you are transferring cash value under the
dollar cost averaging program is not included in the asset rebalancing program.
---
(See "Asset Rebalancing" below). You can cancel your use of the dollar cost
averaging program at any time before a transfer date. Transfers will continue
until you notify us to stop or there no longer is sufficient cash value in the
Sub-Account from which you are transferring. There is no extra charge for this
feature.
Ask your registered representative about the availability of this feature.
A-27
<PAGE> 32
ASSET REBALANCING
We plan to 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. An asset rebalancing program automatically reallocates your
cash value among the Sub-Accounts periodically 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. Asset rebalancing does not
guarantee profits, nor does it assure that you will not have losses.
You can 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 by which your cash value will be reallocated among the Sub-Accounts.
You may participate in the asset rebalancing program while you are participating
in the dollar cost averaging program as long as the Sub-Account from which you
are transferring cash value under the dollar cost averaging program is not
included in the asset rebalancing program. (See "Dollar Cost Averaging" above).
On the last day of each period on which the New York Stock Exchange is open, we
will transfer cash value among the Sub-Accounts as 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. Transfers made under
the asset rebalancing program count against the 12 transfers allowed in a Policy
year. There is no extra charge for this feature.
Ask your registered representative about the availability of this feature.
SUBSTITUTION OF INSURED PERSON
Subject to state insurance department approval, we offer a rider benefit
that permits you to substitute the insured person under your Policy, if you
provide satisfactory evidence that the person proposed to be insured is
insurable. The right to substitute the insured person is subject to some
restrictions and may result in a cost or credit to you. A substitution of the
insured person is a taxable exchange. In addition, a substitution of the insured
person could reduce the amount of premiums you can pay into the Policy under
Federal tax law and, therefore, may require a partial surrender of cash value.
(No Surrender Charge will apply.)
Your registered representative can provide current information on the
availability of the rider. You should consult your tax advisor before
substituting the insured person under your Policy.
PAYMENT OF PROCEEDS
We ordinarily pay any net cash value, loan value or death benefit proceeds
from the Sub-Accounts within seven days after we receive a request, or
satisfactory proof of death of the insured (and any other information we need to
pay the death proceeds). (See "Receipt of Communications and Payments at
NELICO's Home Office".) However, we may delay payment (except when a loan is
made to pay a premium to us) or transfers from the Sub-Accounts: (i) if the New
York Stock Exchange is closed for other than weekends or holidays, or if trading
on the New York Stock Exchange is restricted, (ii) if the SEC determines that an
emergency exists that makes payments or Sub-Account transfers impractical, or
(iii) at any other time when the Eligible Funds or the Variable Account have the
legal right to suspend payment.
We may withhold payment of surrender or loan proceeds if those proceeds are
coming from a Policy Owner's check, or from a Master Service Account premium
transaction, which has not yet cleared. We may also delay payment while we
consider whether to contest the Policy. We pay interest on the death benefit
proceeds from the date they become payable to the date we pay them.
The beneficiary can elect our Access Plus program for payment of death
proceeds at any time before we pay them. We establish an Access Plus account at
a banking institution at the time for payment. The Access Plus account gives
convenient access to the proceeds, which are maintained in our general account
or that of an affiliate, through checkbook privileges with the bank.
Normally we promptly make payments of cash value, or of any loan value
available, from cash value in the Fixed Account. However, we may delay those
payments for up to six months. We pay interest in accordance with state
insurance law requirements on delayed payments.
24 MONTH RIGHT
GENERAL RIGHT. Generally, during the first 24 months after the Policy's
issue date, you may convert the Policy, or a portion of it, to fixed benefit
coverage by transferring all or a portion of your Policy's cash value, and
allocating all or a portion of future premiums, to the Fixed Account. The
request to convert to fixed benefit coverage must be in written form
satisfactory to us. Increase Policies have the same 24 Month Right.
A-28
<PAGE> 33
You may exercise this privilege only once within 24 months after issue.
Transfers into the Fixed Account pursuant to this right will not count toward
the limit on the number of cash value transfers permitted under the Policy each
year. Transfers of cash value back to one or more Sub-Accounts of the Variable
Account are subject to the Policy's general limits on transfers from the Fixed
Account (see "The Fixed Account").
The Policy permits us to limit allocations to the Fixed Account under some
circumstances. (See "The Fixed Account.") If we limit such allocations and you
then wish to exercise the 24 Month Right, you may continue to allocate to the
Fixed Account only the percentage of premiums that you allocated to the Fixed
Account pursuant to your exercise of the 24 Month Right. In addition, if you
have exercised this right, and we later limit such allocations, then you may
continue to allocate to the Fixed Account only the lowest percentage of premiums
that you allocated to the Fixed Account at any time since your exercise of the
24 Month Right.
FOR POLICIES ISSUED IN MARYLAND AND NEW JERSEY. Under Policies issued in
Maryland and New Jersey, you can exchange the face amount of your Policy for a
fixed benefit life insurance policy provided that you repay any policy loans and
(1) the Policy has not lapsed and (2) the exchange is made within 24 months
after the Policy's issue date. If you exercise this option, you will have to
make up any investment loss you had under the variable life insurance policy. We
make the exchange without evidence of insurability. The new policy will have the
same face amount as that being exchanged. The new policy will have the same
issue age, underwriting class and policy date as the variable life policy had.
We will attach any riders to the original Policy to the new policy if they are
available.
Contact us or your registered representative for more specific information
about the 24 Month Right in these states. The exchange may result in a cost or
credit to you. On the exchange, you may need to make an immediate premium
payment on the new policy in order to keep it in force.
GROUP OR SPONSORED ARRANGEMENTS. For a Policy issued to some group or
sponsored arrangements, we offer the additional option of exchanging the Policy
at any time during the first 36 months after the Policy's issue date, if the
Policy has not lapsed, to a fixed-benefit term life insurance policy issued by
us or an affiliate. (Availability of this feature depends on state insurance
department approval.) Contact us or your registered representative for more
information about this feature.
PAYMENT OPTIONS
We pay the Policy's death benefit and net cash value in one sum unless you
or the payee choose a payment option for all or part of the proceeds. You can
choose a combination of payment options. You can make, change or revoke the
selection of payee or payment option before the death of the insured. You can
contact your registered representative or the Home Office for the procedure to
follow. The payment options available are fixed benefit options only and are not
affected by the investment experience of the Variable Account. Once payments
under an option begin, withdrawal rights may be restricted.
The following payment options are available:
(i) INCOME FOR A SPECIFIED NUMBER OF YEARS. We pay proceeds in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.5% a year, compounded yearly. Additional interest that we
pay for any year is added to the monthly payments for that year.
(ii) LIFE INCOME. We pay proceeds in equal monthly installments (i) during
the life of the payee, (ii) for the longer of the life of the payee or
10 years, or (iii) for the longer of the life of the payee or 20 years.
(iii)LIFE INCOME WITH REFUND. We pay proceeds in equal monthly installments
during the life of the payee. At the payee's death, we pay any unpaid
proceeds remaining either in one sum or in equal monthly installments
until we have paid the total proceeds.
(iv)INTEREST. We hold proceeds for the life of the payee or another agreed
upon period. We pay interest of at least 3.5% a year monthly or add it
to the principal annually. At the death of the payee, or at the end of
the period agreed to, we pay the balance of principal and any interest
in one sum.
(v) SPECIFIED AMOUNT OF INCOME. We pay proceeds plus accrued interest of at
least 3.5% a year in an amount and at a frequency elected until we have
paid total proceeds. We pay any amounts unpaid at the death of the payee
in one sum.
(vi)LIFE INCOME FOR TWO LIVES. We pay proceeds in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the life of the surviving payee or 10 years, or (iii) while
the two payees are living and, after the death of one payee, we pay
two-thirds of the monthly amount for the life of the surviving payee.
You need our consent to use an option if the installment payments would be
less than $20.
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<PAGE> 34
ADDITIONAL BENEFITS BY RIDER
You can add additional benefits to the Policy by rider, subject to our
underwriting and issuance standards. These additional benefits usually require
an additional charge as part of the Monthly Deduction from cash value. The rider
benefits available with the Policies provide fixed benefits that do not vary
with the investment experience of the Variable Account.
There may be circumstances in which it will be to your economic advantage to
include a significant portion or percentage of your insurance coverage under a
level term insurance rider. In many other circumstances, it may be in your
interest to obtain a Policy without term rider coverage. These circumstances
depend on many factors, including the premium levels and amount and duration of
coverage you choose, as well as the age, sex and risk classification of the
insured.
Reductions in or elimination of term rider coverage do not trigger a
Surrender Charge, and use of a term rider generally reduces sales compensation.
Your registered representative can provide you more information on the uses of
term rider coverage.
The following riders are available:
LEVEL TERM INSURANCE, which provides term insurance.
WAIVER OF MONTHLY DEDUCTION, which provides for waiver of Monthly Deductions
upon the disability of the insured.
TEMPORARY TERM INSURANCE, which provides for insurance from the date of
issue to the Policy Date.
CHILDREN'S INSURANCE, which provides insurance on the life of the insured's
children.
Not all riders may be available to you and riders in addition to those
listed above may be made available. You should consult your registered
representative regarding the availability of riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time to
time. At the death of the Policy Owner, his or her estate will become the Policy
Owner unless a successor Policy Owner has been named. The Policy Owner's rights
(except for rights to payment of benefits) terminate at the death of the
insured.
The beneficiary is also named in the application. You may change the
beneficiary at any time before the death of the insured. The beneficiary has no
rights under the Policy until the death of the insured and must survive the
insured in order to receive the death proceeds. If no named beneficiary survives
the insured, we pay proceeds to the Policy Owner.
A change of Policy Owner or beneficiary is subject to all payments made and
actions taken by us under the Policy before we receive a signed change form. You
can contact your registered representative or the Home Office for the procedure
to follow.
You may assign (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 are subject to all payments made and actions taken by us
under the Policy before we receive a signed copy of the assignment form. We are
not responsible for determining whether or not an assignment is valid. Changing
the Policy Owner or assigning the Policy may have tax consequences. (See "Tax
Considerations" below.)
THE VARIABLE ACCOUNT
We established the Variable Account as a separate investment account on
January 31, 1983 under Delaware law. It became subject to Massachusetts law when
we changed our domicile to Massachusetts on August 30, 1996. The Variable
Account is the funding vehicle for the Policies, and other NELICO variable life
insurance policies; these other policies impose different costs, and provide
different benefits, from the Policies. The Variable Account meets the definition
of a "separate account" under Federal securities laws, and is registered with
the Securities and Exchange Commission (the "SEC") as a unit investment trust
under the Investment Company Act of 1940. Registration with the SEC does not
involve SEC supervision of the Variable Account's management or investments.
However, the Massachusetts Insurance Commissioner regulates NELICO and the
Variable Account, which are also subject to the insurance laws and regulations
where the Policies are sold.
Although we own the assets of the Variable Account, applicable law provides
that the portion of the Variable Account assets equal to the reserves and other
liabilities of the Variable Account may not be charged with liabilities that
arise out of any other business we may conduct. We believe this means that the
assets of the Variable Account equal to the reserves and other liabilities of
the Variable Account are not available to meet the claims of our general
creditors, and may only be used to support the cash values under our variable
life insurance policies issued by the Variable Account. We may transfer to our
general account
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assets which exceed the reserves and other liabilities of the Variable Account.
We will consider any possible adverse impact such a transfer might have on the
Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of our other
income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
Sub-Accounts of the Variable Account that are available in this Policy
invest in the following Eligible Funds:
The Zenith 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 Zenith Back Bay Advisors Bond Income Series. Its investment objective is
a high level of current income consistent with protection of capital.
The Zenith Capital Growth Series. Its investment objective is the long-term
growth of capital through investment primarily in equity securities of companies
whose earnings are expected to grow at a faster rate than the United States
economy.
The Zenith Westpeak Stock Index Series. Its investment objective is
investment results that correspond to the composite price and yield performance
of the S&P 500 Index.
The Zenith Back Bay Advisors Managed Series. Its investment objective is a
favorable total return through investment in a diversified portfolio.
The Zenith Westpeak Growth and Income Series. Its investment objective is
long-term total return through investment in equity securities.
The Zenith Harris Oakmark Mid Cap Value Series (formerly, the Goldman Sachs
Midcap Value Series). Its investment objective is long-term capital
appreciation.
The Zenith Loomis Sayles Small Cap Series. Its investment objective is
long-term capital growth from investments in common stocks or their equivalents.
The Zenith 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 Zenith 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 Zenith Davis Venture Value Series. Its investment objective is growth of
capital.
The Zenith Alger Equity Growth Series. Its investment objective is long-term
capital appreciation.
The Zenith MFS Investors Series. Its investment objective is reasonable
current income and long-term growth of capital and income.
The Zenith MFS Research Managers Series. Its investment objective is
long-term growth of capital.
The Metropolitan Putnam Large Cap Growth Portfolio.* Its investment
objective is capital appreciation.
The Metropolitan Janus Mid Cap Portfolio.* Its investment objective is
long-term growth of capital.
The Metropolitan Russell 2000 Index Portfolio.* Its investment objective is
to equal the return of the Russell 2000 Index.
The VIP Equity-Income Portfolio. It seeks reasonable income. The fund will
also consider the potential for capital appreciation. The fund seeks a yield
which exceeds the composite yield on the securities comprising the S&P 500.
The VIP Overseas Portfolio. It seeks long-term growth of capital. Foreign
markets, particularly emerging markets, can be more volatile than the U.S.
market due to increased risks of adverse issuer, political, regulatory, market
or economic developments and can perform differently than the U.S. market.
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The VIP High Income Portfolio. It seeks a high level of current income while
also considering growth of capital. Lower-quality debt securities (those of less
than investment-grade quality) can be more volatile due to increased sensitivity
to adverse issuer, political, regulatory, market or economic developments.
The VIP II Asset Manager Portfolio. It seeks high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds and
short-term instruments.
- ------------
* Availability of these Portfolios is subject to any necessary state insurance
department approvals.
WE INTEND TO SUBSTITUTE SHARES OF THE PUTNAM INTERNATIONAL STOCK PORTFOLIO
OF THE METROPOLITAN SERIES FUND, INC. FOR SHARES OF THE MORGAN STANLEY
INTERNATIONAL MAGNUM EQUITY SERIES OF THE NEW ENGLAND ZENITH FUND ONCE WE
RECEIVE NECESSARY REGULATORY APPROVAL (CURRENTLY ANTICIPATED DURING THE FOURTH
QUARTER OF 2000).
The Zenith Fund and the Metropolitan Series Fund, Inc. 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 other life insurance companies.
VIP and VIP II are mutual funds that serve as the investment vehicles for
variable life insurance and variable annuity separate accounts of various
insurance companies.
The Variable Account purchases and sells Eligible Fund shares at their net
asset value (without a deduction for sales load) determined as of the close of
regular trading on the New York Stock Exchange on each day when the exchange is
open for trading.
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.
The investment objectives and policies of certain Eligible Funds are similar
to the investment objectives and policies of other funds that may be managed by
the same sub-adviser. The investment results of the Eligible Funds may be higher
or lower than the results of these funds. There is no assurance, and no
representation is made, that the investment results of any of the Eligible Funds
will be comparable to the investment results of any other fund.
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INVESTMENT MANAGEMENT
The chart below shows the adviser and sub-adviser for each series of the
Zenith Fund. New England Investment Management, which is an indirect,
wholly-owned subsidiary of NELICO, CGM, and each of the sub-advisers are
registered with the SEC as investment advisers under the Investment Advisers Act
of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------- -----------
<S> <C> <C>
Capital Growth Capital Growth Management Limited
Partnership ("CGM")*
Back Bay Advisors Money Market New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Back Bay Advisors Bond Income New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Back Bay Advisors Managed New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Westpeak Stock Index New England Investment Management, Westpeak Investment Advisors,
Inc. L.P.*
Westpeak Growth and Income New England Investment Management, Westpeak Investment Advisors,
Inc. L.P.*
Loomis Sayles Small Cap New England Investment Management, Loomis, Sayles & Company, L.P.*
Inc.
Balanced New England Investment Management, Wellington Management Company, LLP
Inc.
Morgan Stanley International New England Investment Management, Morgan Stanley Dean Witter
Magnum Equity Inc. Investment Management Inc.
Harris Oakmark Mid Cap Value New England Investment Management, Harris Associates L.P.*
Inc.
Davis Venture Value New England Investment Management, Davis Selected Advisers, L.P.**
Inc.
Alger Equity Growth New England Investment Management, Fred Alger Management, Inc.
Inc.
MFS Investors New England Investment Management, Massachusetts Financial Services
Inc. Company
MFS Research Managers New England Investment Management, Massachusetts Financial Services
Inc. Company
</TABLE>
- ------------
* An affiliate of NELICO
** Davis Selected may also delegate any of its responsibilities to Davis
Selected Advisers--NY, Inc., a wholly-owned subsidiary of Davis Selected.
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak Growth and Income Series, Harris Oakmark Mid Cap Value Series
and Loomis Sayles Small Cap Series, New England Investment Management became the
adviser on May 1, 1995. The Morgan Stanley International Magnum Equity Series'
sub-adviser was Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley
Dean Witter Investment Management became the sub-adviser. 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 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 Series Fund
Portfolios. Putnam Investment Management, Inc. is the sub-investment manager of
the Putnam Large Cap Growth Portfolio. Janus Capital Corporation is the
sub-investment manager of the Janus Mid Cap Portfolio. For more information
regarding the investment adviser and sub-investment managers of the Metropolitan
Series Fund Portfolios, see the Metropolitan Series Fund prospectus attached at
the end of this prospectus and its Statement of Additional Information.
Fidelity Management & Research Company ("FMR") is the investment adviser for
VIP and VIP II. For more information regarding the VIP Equity-Income, VIP
Overseas, VIP High Income and VIP II Asset Manager Portfolios and FMR, see the
VIP and VIP II prospectuses attached at the end of this prospectus and their
Statements of Additional Information.
THE FIXED ACCOUNT
THE POLICY HAS A FIXED ACCOUNT OPTION ONLY IN STATES THAT APPROVE IT. IT IS
NOT AVAILABLE UNDER POLICIES ISSUED IN NEW JERSEY.
You may allocate net premiums and transfer cash value to the Fixed Account,
which is part of NELICO's general account. Because of exemptive and exclusionary
provisions in the Federal securities laws, interests in the Fixed Account are
not
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<PAGE> 38
registered under the Securities Act of 1933. Neither the Fixed Account nor the
general account is registered as an investment company under the Investment
Company Act of 1940. Therefore, neither the Fixed Account, the general account
nor any interests therein are generally subject to the provisions of these Acts,
and the SEC does not review Fixed Account disclosure. This disclosure may,
however, be subject to certain provisions of the Federal securities laws on the
accuracy and completeness of prospectuses.
GENERAL DESCRIPTION
Our general account includes all of our assets except assets in the Variable
Account or in our other separate accounts. We decide how to invest our general
account assets. Fixed Account allocations do not share in the actual investment
experience of the Fixed Account. Instead, we guarantee that the Fixed Account
will credit interest at an annual effective rate of at least 4%. We may or may
not credit interest at a higher rate. We declare the current interest rate for
the Fixed Account periodically. The Fixed Account earns interest daily.
We can change our Fixed Account interest crediting procedures. Currently,
all cash value in the Fixed Account on a Policy anniversary earns interest at
the declared annual rate in effect on the anniversary until the next Policy
anniversary, when it is credited with our current rate. (Although our current
practice is to credit your entire Fixed Account cash value on a Policy
anniversary with our current annual rate until the next anniversary, we can
select any portion, from 0% to 100%, of your Fixed Account cash value on a
Policy anniversary to earn interest at our current rate until the next Policy
anniversary.) Any net premiums allocated or cash value transferred to the Fixed
Account on a date other than a Policy anniversary earn interest at our current
rate until the next Policy anniversary. Any loan repayment allocated to the
Fixed Account is credited with the lesser of our current interest rate and the
effective interest rate for your Policy's cash value in the Fixed Account on the
date of the repayment. The Fixed Account effective interest rate is a weighted
average of all the Fixed Account rates for your Policy.
VALUES AND BENEFITS
Cash value in the Fixed Account increases from net premiums allocated and
transfers to the Fixed Account and Fixed Account interest, and decreases from
loans, partial surrenders made from the Fixed Account, charges and transfers
from the Fixed Account. We deduct charges from the Fixed Account and the
Policy's Sub-Accounts in proportion to the amount of cash value in each. (See
"Monthly Deduction from Cash Value".) A Policy's total cash value includes cash
value in the Variable Account, the Fixed Account, and any cash value held in our
general account (but outside of the Fixed Account) due to a Policy loan.
Cash value in the Fixed Account is included in the calculation of the
Policy's death benefit in the same manner as the cash value in the Variable
Account. (See "Death Benefit".)
POLICY TRANSACTIONS
We can restrict allocations and transfers to the Fixed Account if the
effective annual rate of interest on the amount would be 4%. Otherwise, the
requirements for Fixed Account and Variable Account allocations are the same.
(See "Allocation of Net Premiums".)
Except as described below, the Fixed Account has the same rights and
limitations about premium allocations, transfers, loans, surrenders and partial
surrenders as the Variable Account. (See "Other Policy Features".) The following
special rules apply to the Fixed Account.
TRANSFERS FROM THE FIXED ACCOUNT TO THE VARIABLE ACCOUNT ARE ALLOWED ONLY
ONCE IN EACH POLICY YEAR. WE PROCESS A TRANSFER FROM THE FIXED ACCOUNT ONLY IF
WE RECEIVE THE TRANSFER REQUEST WITHIN THE 30 DAY PERIOD AFTER THE POLICY
ANNIVERSARY. WE MAKE THE TRANSFER AS OF THE DATE WE RECEIVE THE TRANSFER REQUEST
AT OUR HOME OFFICE.
THE AMOUNT OF CASH VALUE YOU MAY TRANSFER FROM THE FIXED ACCOUNT IS LIMITED
TO THE GREATER OF 25% OF THE POLICY'S CASH VALUE IN THE FIXED ACCOUNT ON THE
TRANSFER DATE OR THE AMOUNT OF CASH VALUE TRANSFERRED FROM THE FIXED ACCOUNT IN
THE PRECEDING POLICY YEAR. Regardless of these limits, if a transfer of cash
value from the Fixed Account would reduce the remaining cash value in the Fixed
Account below $100, you may transfer the entire amount of Fixed Account cash
value. We may limit the total number of transfers among Sub-Accounts and from
the Sub-Accounts to the Fixed Account to four in one Policy year (twelve per
Policy year for Policies issued in New York). We currently allow 12 transfers
per Policy year in all states. We do not count transfers out of the Fixed
Account against this limit.
Unless you request otherwise, a Policy loan reduces the Policy's cash value
in the Sub-Accounts and not the Fixed Account. If there is not enough cash value
in the Policy's Sub-Accounts for the loan, we take the balance from the Fixed
Account. We allocate all loan repayments first to the outstanding loan balance
attributable to the Fixed Account. The amount removed from
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<PAGE> 39
the Policy's Sub-Accounts and the Fixed Account as a result of a loan earns
interest at an effective rate of at least 4% per year, which we credit annually
to the Policy's cash value in the Sub-Accounts and the Fixed Account in
proportion to the Policy's cash value in each on the day it is credited.
Unless you request otherwise, we take partial surrenders only from the
Policy's Sub-Accounts and not the Fixed Account. If there is not enough cash
value in the Policy's sub-accounts for the partial surrender, we take the
balance from the Fixed Account.
We can delay transfers, surrenders, and Policy loans from the Fixed Account
for up to six months (to the extent allowed by state insurance law). We will not
delay loans to pay premiums on policies issued by us.
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"). New England Securities, a Massachusetts corporation
organized in 1968 and an indirect, wholly-owned subsidiary of NELICO, is
registered with the SEC as a broker-dealer under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers, Inc.
New England Securities, 399 Boylston Street, Boston, Massachusetts 02116,
also serves as the principal underwriter for the Policies under a Distribution
Agreement with NELICO. Under the Distribution Agreement, we pay the following
sales expenses: general agent and agency manager's compensation, agents'
training allowances, deferred compensation and insurance benefits of agents,
general agents and agency managers and advertising expenses and all other
expenses of distributing the Policies.
We pay the following commissions and/or service fees to the selling agent: a
maximum of 50% of the Sales Charge Breakpoint Premium paid in the first Policy
year, a maximum of 5% in Policy years two through ten, and a maximum of 3%
thereafter. Agents receive a maximum commission of 3% of each payment in excess
of the Sales Charge Breakpoint Premium in any year. For Policies sold in
connection with certain executive benefit plans the maximum commissions are: 20%
of the Sales Charge Breakpoint Premium in the first Policy year, 10% in Policy
years two through ten, and 2% thereafter. For these Policies we will pay a
maximum commission of 3.5% of each payment in excess of the Sales Charge
Breakpoint Premium in Policy years one through ten, and 2% of such excess
premiums thereafter. Agents who meet certain NELICO productivity and persistency
standards may be eligible for additional compensation. Agents may receive a
portion of the general agent's expense reimbursement allowance.
New England Securities may enter into selling agreements with other
broker-dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable life insurance
policies. Under the agreements with those broker-dealers, commissions paid to
the broker-dealer on behalf of the registered representative will not exceed
those described above. We may pay certain broker-dealers an additional bonus
after the first Policy year on behalf of certain registered representatives,
which may be up to the amount of the basic commission for the particular Policy
year. We pay commissions through the registered broker-dealer, and may pay
additional compensation to the broker-dealer and/or reimburse it for portions of
Policy sales expenses. The registered representative may receive a portion of
the expense reimbursement allowance paid to the broker-dealer.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
Generally, we can challenge the validity of your Policy or a rider during
the insured's lifetime for two years (or less, if required by state law) from
the date of issue, based on misrepresentations made in the application. We can
challenge the portion of the death benefit resulting from an underwritten
premium payment for two years during the insured's lifetime from receipt of the
premium payment. However, if the 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.
MISSTATEMENT OF AGE OR SEX
If the application misstates the insured's age or sex, the Policy's death
benefit is the amount that the most recent Monthly Deduction which was made
would provide, based on the insured's correct age and, if the Policy is
sex-based, correct sex.
SUICIDE
If the insured commits suicide within two years (or less, if required by
state law) from the date of issue, the death benefit is limited to premiums
paid, less any policy loan balance and partial surrenders. (Where required by
state law, we determine the death benefit under this provision by using the
greater of: the reserve of the insurance which is subject to the provision; and
the amounts used to purchase the insurance which is subject to the provision.)
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<PAGE> 40
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisors should be consulted for more
complete information. This discussion is based upon our understanding of the
present Federal income tax laws. No representation is made as to the likelihood
of continuation of the present Federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or automatic issue
basis and Policies with term riders added, and it is not clear whether such
Policies will in all cases satisfy the applicable requirements. If it is
subsequently determined that a Policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the Policy into compliance
with such requirements, and we reserve the right to restrict Policy transactions
in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts, due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to allocate
premiums and cash values, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Policy Owners investment
control over Variable Account assets, we reserve the right to modify the
Policies as necessary to prevent a Policy Owner from being treated as the owner
of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Policy Owner or beneficiary. A tax advisor
should be consulted on these consequences.
Generally, the Policy Owner will not be deemed to be in constructive receipt
of the Policy cash value until there is a distribution. When distributions from
a Policy occur, or when loans are taken out from or secured by a Policy, the tax
consequences depend on whether the Policy is classified as a "Modified Endowment
Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life
insurance contracts are classified as "Modified Endowment Contracts," with less
favorable income tax treatment than other life insurance contracts. In general a
Policy will be classified as a Modified Endowment Contract if the amount of
premiums paid into the Policy causes the Policy to fail the "7-pay test." A
Policy will fail the 7-pay test if at any time in the first seven Policy years,
the amount paid into the Policy exceeds the sum of the level premiums that would
have been paid at that point under a Policy that provided for paid-up future
benefits after the payment of seven level annual payments.
If there is a reduction in the benefits under the Policy during the first
seven Policy years, for example, as a result of a partial surrender, the 7-pay
test will have to be reapplied as if the Policy had originally been issued at
the reduced face amount. If there is a "material change" in the Policy's
benefits or other terms, even after the first seven Policy years, the Policy may
have to be retested as if it were a newly issued Policy. A material change can
occur, for example, when there is an increase in the death benefit which is due
to the payment of an unnecessary premium. Unnecessary premiums are premiums paid
into the Policy which are not needed in order to provide a death benefit equal
to the lowest death benefit that was payable in the first seven Policy years. To
prevent your Policy from becoming a Modified Endowment Contract, it may be
necessary to limit premium
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payments or to limit reductions in benefits. A current or prospective Policy
Owner should consult a tax advisor to determine whether a Policy transaction
will cause the Policy to be classified as a Modified Endowment Contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT
CONTRACTS. Policies classified as Modified Endowment Contracts are subject to
the following tax rules:
(1) All distributions other than death benefits, including distributions
upon surrender and withdrawals, from a Modified Endowment Contract will be
treated first as distributions of gain taxable as ordinary income and as
tax-free recovery of the Policy Owner's investment in the Policy only after
all gain has been distributed.
(2) Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject
to tax except where the distribution or loan is made when the Policy Owner
has attained age 59 1/2 or is disabled, or where the distribution is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Policy Owner or the joint lives (or joint life
expectancies) of the Policy Owner and the Policy Owner's beneficiary or
designated beneficiary.
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 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.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Policy Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for Federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole or
in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are generally not treated as distributions. However, the tax consequences
associated with Policy loans that are outstanding after the first 15 Policy
years are less clear and a tax adviser should be consulted about such loans.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
POLICY LOANS. In general, interest on a Policy loan will not be deductible.
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. Before taking out a Policy loan, you should consult a tax
adviser as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by
NELICO (or its affiliates) to the same Policy Owner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Policy Owner's income when a taxable distribution
occurs.
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.
The tax consequences of continuing the Policy beyond the insured's 100th
year are unclear. You should consult a tax adviser if you intend to keep the
Policy in force beyond the 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 adviser regarding ERISA.
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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 the Policy loan provisions. Failure of plan loans to comply with
the requirements and provisions of the DOL regulations and of tax law may result
in adverse tax consequences and/or adverse consequences under ERISA. Plan
fiduciaries and participants should consult a qualified adviser before
requesting a loan under a Policy held in connection with a retirement plan.
Businesses can use the Policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit
plans, retiree medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and circumstances. If you are
purchasing the Policy for any arrangement the value of which depends in part on
its tax consequences, you should consult a qualified tax adviser. In recent
years, moreover, Congress has adopted new rules relating to life insurance owned
by businesses. Any business contemplating the purchase of a new Policy or a
change in an existing Policy should consult a tax adviser.
We believe that Policies subject to Puerto Rican tax law will generally
receive treatment similar, with certain modifications, to that described above.
Among other differences, Policies governed by Puerto Rican tax law are not
currently subject to the rules described above regarding Modified Endowment
Contracts. You should consult your tax adviser with respect to Puerto Rican tax
law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
NELICO'S INCOME TAXES
Under current Federal income tax law, 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
------------------ -----------------------------
<S> <C>
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; President and Chief
Operating Officer 1996-1997 of Equitable Companies, Inc.;
President and Chief Operating Officer 1994-1996 of
Equitable Life Assurance Society.
Robert H. Benmosche............... Director of NELICO since 1998 and Chairman, President and
Metropolitan Life Insurance Co. Chief Executive Officer of Metropolitan Life Insurance
One Madison Avenue Company since 1998; formerly, Director, President and
New York, NY 10010 Chief Operating Officer 1997-1998; Executive Vice
President 1995-1997 of Metropolitan Life; Executive Vice
President 1989-1995 of Paine Webber.
Susan C. Crampton................. Director of NELICO since 1996 and serves as Principal of The
6 Tarbox Road Vermont Partnership, a business consulting firm located in
Jericho, VT 05465 Jericho, Vermont since 1989; formerly, Director 1989-1996
of New England Mutual.
Edward A. Fox..................... Director of NELICO since 1996 and Chairman of the Board of
R.R. Box 67-15 SLM Holdings since 1997; formerly, Director 1994-1996 of New
Harborside, ME 04642 England Mutual.
</TABLE>
A-38
<PAGE> 43
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
George J. Goodman................. Director of NELICO since 1996 and author, television
Adam Smith's Global Television journalist, and editor.
50th Floor, Craig Drill Capital
General Motors Building
767 Fifth Street
New York, NY 10153
Dr. Evelyn E. Handler............. Director of NELICO since 1996 and President of Merrimack
Ten Sterling Place Higher Education Associates, Inc. since 1998; formerly,
Bow, NH 03304 Director 1987-1996 of New England Mutual and Executive
Director and Chief Executive Officer 1994-1997 of the
California Academy of Sciences.
Philip K. Howard, Esq............. Director of NELICO since 1996 and Partner of the law firm of
Covington & Burling 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 Chairman of
Burlington Industries the Board of Directors 1995-1998 of Burlington Industries,
1345 Avenue of the Americas Inc.; Director and Executive Vice President 1993-1995 of
17th Floor Burlington Menswear Division.
New York, NY 10105
Thomas J. May..................... Director of NELICO since 1996 and Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since 1994;
800 Boylston Street formerly, Director 1994-1996 of New England Mutual.
Boston, MA 02199
Stewart G. Nagler................. Director of NELICO since 1996 and Vice Chairman and Chief
Metropolitan Life Insurance Co. Financial Officer of Metropolitan Life Insurance Company
One Madison Avenue since 1998; formerly, Senior Executive Vice President and
New York, NY 10010 Chief Financial Officer 1986-1998 of Metropolitan Life
Insurance Company.
Catherine A. Rein................. Director of NELICO since 1998 and President and Chief
Metropolitan Property and Executive Officer of Metropolitan Property and Casualty
Casualty Insurance Company since 1999; formerly, Senior Executive Vice President
700 Quaker Lane 1998-1999; Executive Vice President 1989-1998 of
Warwick, RI 02887 Metropolitan Life Insurance Company.
Rand N. Stowell................... Director of NELICO since 1996 and President of United Timber
P.O. Box 60 Corp. and President, Randwell Co. since 2000 of Weld, Maine;
Weld, ME 04285 formerly, Director 1990-1996 of New England Mutual.
</TABLE>
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
James M. Benson................... See Directors above.
David W. Allen.................... Senior Vice President of NELICO since 1996; formerly, Senior
Vice President 1994-1996 and Vice President 1990-1994 of New
England Mutual.
A. Frank Beaz..................... Executive Vice President of NELICO since 1999; formerly,
Senior Vice President 1998-1999 of NELICO; Chief
Administrative Officer and Senior Vice President 1997-1998
of Equitable Distributors and Senior Vice President
1994-1997 of The Equitable Life Insurance Companies.
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 & Chief Executive Officer 1996-1998 of Atlantic
International Reinsurance Company; Executive Vice
President 1996-1997 of Swiss Re Atrium and Swiss Re
Services and Principal 1987-1996 of Tillinghast/ Towers
Perrin.
Anthony J. Candito................ President, NEF Information Services (a business unit of
NELICO) and Chief Information Officer since 1998; formerly,
Senior Vice President 1996-1998 of NELICO; Senior Vice
President 1995-1996 and Vice President 1994-1995 of New
England Mutual.
</TABLE>
A-39
<PAGE> 44
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
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;
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 executive
officers is the same as NELICO's except where indicated.
VOTING RIGHTS
We own Eligible Fund shares held in the Variable Account and vote those
shares at meetings of the Eligible Fund shareholders. Under Federal securities
law, you currently have the right to instruct us how to vote shares that are
attributable to your Policy.
Policy Owners who are entitled to give voting instructions and the number of
shares attributable to their Policies are determined as of the meeting record
date. If we do not receive timely instructions, we will vote shares in the same
proportion as (i) the aggregate cash value of policies giving instructions,
respectively, to vote for, against, or withhold votes on a proposition, bears to
(ii) the total cash value in that Sub-Account for all policies for which we
receive voting instructions. No voting privileges apply to the Fixed Account or
to cash value removed from the Variable Account due to a Policy loan.
We will vote Eligible Fund shares held by our general account (or any
unregistered separate account for which voting privileges were not extended) in
the same proportion as the total of (i) shares for which voting instructions
were received and (ii) shares that are voted in proportion to such voting
instructions.
The Eligible Funds' Boards of Trustees monitor events to identify conflicts
that may arise from the sale of Eligible Fund shares to variable life and
variable annuity separate accounts of affiliated and, if applicable,
unaffiliated insurance companies. Conflicts could result from changes in state
insurance law or Federal income tax law, changes in investment management of an
Eligible Fund, or differences in voting instructions given by variable life and
variable annuity contract owners. If there is a material conflict, the Board of
Trustees will determine what action should be taken, including the removal of
the affected Sub-Accounts from the Eligible Fund(s), if necessary. If we believe
any Eligible Fund action is insufficient, we will consider taking
A-40
<PAGE> 45
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 an Eligible Fund portfolio if
required by state insurance law, or if we (i) reasonably disapprove of the
changes and (ii) in the case of a change in investment policy or investment
adviser, make a good faith determination that the proposed change is prohibited
by state authorities or inconsistent with a Sub-Account's investment objectives.
If we do disregard voting instructions, the next annual report to Policy Owners
will include a summary of that action and the reasons for it.
RIGHTS RESERVED BY NELICO
We and our affiliates may change the voting procedures described above, and
vote Eligible Fund shares without Policy Owner instructions, if the securities
laws change. We also reserve the right: (1) to add sub-accounts; (2) to combine
sub-accounts; (3) to substitute shares of a new fund for shares of an Eligible
Fund (the new fund may have different fees and expenses), to close a sub-account
to allocations of premium payments or cash value or both at any time in our sole
discretion, or to transfer assets to our general account as permitted by
applicable law; (4) to operate the Variable Account as a management investment
company under the Investment Company Act of 1940 or in any other form; and (5)
to deregister the Variable Account under the Investment Company Act of 1940. We
will exercise these rights in accordance with applicable law, including approval
of Policy Owners if required. We will notify you if exercise of any of these
rights would result in a material change in the Variable Account or its
investments.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account
Sub-Accounts, call 1-800-333-2501.
For Sub-Account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call 1-800-200-2214.
You may also call our Client TeleService Center at 1-800-388-4000 to request
current information about your Policy values, to change or update Policy
information such as your address, billing mode, beneficiary or ownership, or to
request Policy loans of less than $25,000. Requests must be in writing if the
Policy is owned by a corporation or a pension trust.
For all other Policy changes, please contact your registered representative.
REPORTS
We will send you an annual statement showing your Policy's death benefit,
cash value and any outstanding Policy loan principal. We will also confirm
Policy loans, subaccount transfers, lapses, surrenders and other Policy
transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
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 NELICO, the
Eligible Funds and other parties, about the Variable Account or the Eligible
Funds. We may use references to or reprints of such articles in sales material
for the Policies or the Variable Account. Such literature may refer to personnel
of the advisers, who have portfolio management responsibility, and their
investment style, and include excerpts from media articles.
A-41
<PAGE> 46
We are a member of the Insurance Marketplace Standards Association ("IMSA"),
and may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
Policy sales material may refer to historical, current and prospective
economic trends. In addition, sales material may discuss topics of general
investor interest for the benefit of registered representatives and prospective
Policy Owners. These materials may include, but are not limited to, discussions
of college planning, retirement planning, reasons for investing and historical
examples of the investment performance of various classes of securities,
securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by H. James Wilson, General Counsel of NELICO. Sutherland,
Asbill & Brennan LLP, of Washington, D.C., has provided advice on certain
matters relating to federal securities laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
EXPERTS
The financial statements of New England Variable Life Separate Account of
New England Life Insurance Company ("NELICO") 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 James J.
Reilly, 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-42
<PAGE> 47
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%. The tables
are based on face amounts of $100,000 and $500,000 for a male aged 40. The
insured is assumed to be in the nonsmoker aggregate class for the $100,000 face
amount and in the nonsmoker preferred class for the $500,000 face amount. The
Tables assume no rider benefits and assume that no allocations are made to the
Fixed Account. Values are first given based on current mortality and other
Policy charges and then based on guaranteed mortality and other Policy charges.
The illustrations for the $500,000 face amount reflect the lower sales charge
and, in the illustrations based on current charges, the cost of insurance,
Policy fee, and first-year administrative charges that would apply to a Policy
if issued in the personal market or if issued in business situations or to
tax-qualified pension plans which qualify for those lower charges. (See "Charges
and Expenses".) Illustrations show Option 1 and Option 2 death benefits.
The illustrated death benefits, net cash values and cash values for a Policy
would be different, either higher or lower, from the amounts shown if the actual
gross rates of return averaged 0%, 6% or 12%, but varied above and below that
average during the period, if premiums were paid in other amounts or at other
than annual intervals. They would also be different depending on the allocation
of cash value among the Variable Account's Sub-Accounts, if the actual gross
rate of return for all Sub-Accounts averaged 0%, 6% or 12%, but varied above or
below that average for individual Sub-Accounts. They would also differ if a
Policy loan or partial surrender were made during the period of time
illustrated, if the insured were female or in another risk classification, or if
the Policies were issued at unisex rates. For example, as a result of variations
in actual returns, additional premium payments beyond those illustrated may be
necessary to maintain the Policy in force for the periods shown or to realize
the Policy values shown on particular illustrations even if the average rate of
return is achieved.
The death benefits, net cash values and cash values shown in the tables
reflect: (i) deductions from premiums for the sales charge and state and federal
premium tax charge; and (ii) a Monthly Deduction (consisting of a Policy fee, an
administrative charge, a minimum death benefit guarantee charge and a charge for
the cost of insurance) from the cash value on the first day of each Policy
month. The net cash values reflect a Surrender Charge deducted from the cash
value upon surrender, face reduction or lapse during the first 11 Policy years.
The death benefits, net cash values and cash values also reflect a daily charge
assessed against the Variable Account for mortality and expense risks equivalent
to an annual charge of .60% (on a current basis) and .90% (on a guaranteed
basis) of the average daily value of the assets in the Variable Account
attributable to the Policies. (See "Charges and Expenses".) The illustrations
reflect an average of the investment advisory fees and operating expenses of the
Eligible Funds, at an annual rate of .75% of the average daily net assets of the
Eligible Funds. This average reflects voluntary expense cap and expense deferral
arrangements between New England Investment Management and the Zenith Fund, that
New England Investment Management could terminate at any time, as well as
expense subsidies by MetLife of certain Portfolios of the Metropolitan Series
Fund, Inc. that may be voluntary and of limited duration.
Taking account of the mortality and expense risk charge and the average
investment advisory fee and operating expenses of the Eligible Funds, the gross
annual rates of return of 0%, 6% and 12% correspond to net investment experience
at constant annual rates of -1.34%, 4.58% and 10.50%, respectively, based on the
current charge for mortality and expense risks, and -1.64%, 4.27% and 10.17%,
respectively, based on the guaranteed maximum charge for mortality and expense
risks. (See "Net Investment Experience".)
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on net cash value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the net cash value of the
Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated premiums
could have been invested outside the Policy to arrive at the death benefit of
the Policy. The internal rate of return is compounded annually, and the premiums
are assumed to be paid at the beginning of each Policy year.
If you request, we will furnish a personalized illustration reflecting the
proposed insured's age, sex, underwriting classification, and the face amount or
premium payment schedule requested. Where applicable, we will also furnish on
request an illustration for a Policy which is not affected by the sex of the
insured.
A-43
<PAGE> 48
MALE ISSUE AGE 40
$1,520 ANNUAL PREMIUM FOR NONSMOKER
AGGREGATE UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,596 $100,000 $100,000 $100,000 $ 582 $ 654 $ 726 $ 1,021 $ 1,093 $ 1,166
2 3,272 100,000 100,000 100,000 1,641 1,852 2,071 2,094 2,304 2,524
3 5,031 100,000 100,000 100,000 2,382 2,801 3,254 3,127 3,546 3,999
4 6,879 100,000 100,000 100,000 3,410 4,107 4,893 4,130 4,827 5,613
5 8,819 100,000 100,000 100,000 4,407 5,456 6,686 5,102 6,151 7,381
6 10,856 100,000 100,000 100,000 5,462 6,937 8,738 6,041 7,516 9,317
7 12,995 100,000 100,000 100,000 6,498 8,476 10,990 6,962 8,939 11,454
8 15,240 100,000 100,000 100,000 7,536 10,096 13,486 7,884 10,443 13,834
9 17,598 100,000 100,000 100,000 8,592 11,817 16,267 8,824 12,049 16,499
10 20,074 100,000 100,000 100,000 9,683 13,662 19,381 9,799 13,778 19,497
15 34,439 100,000 100,000 100,000 14,591 23,859 40,205 14,591 23,859 40,205
20 52,773 100,000 100,000 100,000 18,693 36,238 74,536 18,693 36,238 74,536
25 76,172 100,000 100,000 157,449 21,817 51,385 131,208 21,817 51,385 131,208
30 106,036 100,000 100,000 257,317 23,590 70,194 223,754 23,590 70,194 223,754
35 144,151 100,000 100,000 393,846 23,094 94,248 375,092 23,094 94,248 375,092
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -61.73% -56.98% -52.21% 6,478.95% 6,478.95% 6,478.95%
2 -34.68 -28.82 -23.00 662.65 662.65 662.65
3 -29.12 -22.47 -15.94 265.39 265.39 265.39
4 -21.84 -15.09 -8.50 152.66 152.66 152.66
5 -17.64 -10.85 -4.24 102.87 102.87 102.87
6 -14.50 -7.77 -1.22 75.61 75.61 75.61
7 -12.36 -5.69 0.81 58.68 58.68 58.68
8 -10.76 -4.15 2.30 47.26 47.26 47.26
9 -9.48 -2.94 3.45 39.10 39.10 39.10
10 -8.40 -1.95 4.37 33.01 33.01 33.01
15 -5.82 0.57 6.81 17.02 17.02 17.02
20 -4.90 1.64 7.93 10.35 10.35 10.35
25 -4.60 2.25 8.57 6.81 6.81 9.73
30 -4.69 2.65 8.95 4.68 4.68 9.66
35 -5.31 2.98 9.20 3.27 3.27 9.41
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-44
<PAGE> 49
MALE ISSUE AGE 40
$1,520 ANNUAL PREMIUM FOR NONSMOKER
AGGREGATE UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,596 $100,000 $100,000 $100,000 $ 542 $ 613 $ 683 $ 982 $ 1,052 $ 1,122
2 3,272 100,000 100,000 100,000 1,515 1,717 1,928 1,967 2,169 2,380
3 5,031 100,000 100,000 100,000 2,176 2,574 3,006 2,921 3,319 3,751
4 6,879 100,000 100,000 100,000 3,122 3,781 4,524 3,842 4,501 5,244
5 8,819 100,000 100,000 100,000 4,035 5,022 6,178 4,730 5,717 6,873
6 10,856 100,000 100,000 100,000 5,005 6,385 8,070 5,584 6,964 8,650
7 12,995 100,000 100,000 100,000 5,938 7,781 10,124 6,401 8,244 10,588
8 15,240 100,000 100,000 100,000 6,834 9,209 12,356 7,181 9,557 12,703
9 17,598 100,000 100,000 100,000 7,692 10,671 14,784 7,923 10,902 15,015
10 20,074 100,000 100,000 100,000 8,509 12,164 17,427 8,624 12,280 17,542
15 34,439 100,000 100,000 100,000 11,403 19,589 34,244 11,403 19,589 34,244
20 52,773 100,000 100,000 100,000 12,485 27,319 60,926 12,485 27,319 60,926
25 76,172 100,000 100,000 125,916 10,895 34,967 104,930 10,895 34,967 104,930
30 106,036 100,000 100,000 201,081 4,458 41,449 174,853 4,458 41,449 174,853
35 144,151 100,000 300,162 44,710 285,868 44,710 285,868
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -64.32% -59.70% -55.07% 6,478.95% 6,478.95% 6,478.95%
2 -38.35 -32.54 -26.78 662.65 662.65 662.65
3 -32.68 -25.98 -19.44 265.39 265.39 265.39
4 -24.95 -18.12 -11.48 152.66 152.66 152.66
5 -20.40 -13.51 -6.83 102.87 102.87 102.87
6 -16.95 -10.11 -3.48 75.61 75.61 75.61
7 -14.63 -7.83 -1.24 58.68 58.68 58.68
8 -13.00 -6.21 0.35 47.26 47.26 47.26
9 -11.80 -5.01 1.55 39.10 39.10 39.10
10 -10.90 -4.10 2.47 33.01 33.01 33.01
15 -9.29 -1.92 4.93 17.02 17.02 17.02
20 -9.53 -1.03 6.24 10.35 10.35 10.35
25 -11.77 -0.65 7.13 6.81 6.81 8.31
30 -25.43 -0.62 7.68 4.68 4.68 8.40
35 -0.99 8.05 3.27 8.26
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-45
<PAGE> 50
MALE ISSUE AGE 40
$1,520 ANNUAL PREMIUM FOR NONSMOKER
AGGREGATE UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,596 $101,018 $101,090 $101,163 $ 579 $ 651 $ 723 $ 1,018 $ 1,090 $ 1,163
2 3,272 102,086 102,295 102,514 1,633 1,843 2,062 2,086 2,295 2,514
3 5,031 103,111 103,527 103,978 2,366 2,782 3,233 3,111 3,527 3,978
4 6,879 104,101 104,793 105,573 3,381 4,073 4,853 4,101 4,793 5,573
5 8,819 105,058 106,096 107,313 4,363 5,401 6,618 5,058 6,096 7,313
6 10,856 105,977 107,433 109,210 5,398 6,854 8,631 5,977 7,433 9,210
7 12,995 106,873 108,821 111,296 6,410 8,357 10,832 6,873 8,821 11,296
8 15,240 107,770 110,284 113,613 7,422 9,937 13,265 7,770 10,284 13,613
9 17,598 108,684 111,846 116,205 8,453 11,614 15,973 8,684 11,846 16,205
10 20,074 109,637 113,531 119,123 9,521 13,415 19,007 9,637 13,531 19,123
15 34,439 114,291 123,297 139,151 14,291 23,297 39,151 14,291 23,297 39,151
20 52,773 118,085 134,879 171,423 18,085 34,879 71,423 18,085 34,879 71,423
25 76,172 120,645 148,232 223,285 20,645 48,232 123,285 20,645 48,232 123,285
30 106,036 121,443 163,115 306,660 21,443 63,115 206,660 21,443 63,115 206,660
35 144,151 119,303 178,425 440,260 19,303 78,425 340,260 19,303 78,425 340,260
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -61.90% -57.16% -52.41% 6,545.98% 6,550.69% 6,555.40%
2 -34.91 -29.06 -23.25 671.04 671.88 672.76
3 -29.40 -22.75 -16.24 269.58 270.13 270.73
4 -22.14 -15.40 -8.82 155.62 156.11 156.66
5 -17.96 -11.18 -4.58 105.27 105.75 106.31
6 -14.83 -8.11 -1.57 77.70 78.19 78.79
7 -12.70 -6.04 0.45 60.57 61.09 61.74
8 -11.11 -4.51 1.93 49.02 49.57 50.27
9 -9.82 -3.29 3.08 40.77 41.35 42.12
10 -8.72 -2.28 4.03 34.62 35.24 36.08
15 -6.10 0.27 6.50 18.48 19.31 20.62
20 -5.26 1.29 7.58 11.69 12.76 14.66
25 -5.10 1.79 8.17 8.03 9.35 11.90
30 -5.46 2.02 8.55 5.74 7.32 10.55
35 -6.70 2.06 8.79 4.12 5.97 9.88
</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, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-46
<PAGE> 51
MALE ISSUE AGE 40
$1,520 ANNUAL PREMIUM FOR NONSMOKER
AGGREGATE UNDERWRITING RISK
$100,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,596 $100,979 $101,049 $101,119 $ 540 $ 610 $ 680 $ 979 $ 1,049 $ 1,119
2 3,272 101,959 102,160 102,370 1,507 1,708 1,918 1,959 2,160 2,370
3 5,031 102,905 103,301 103,730 2,160 2,556 2,985 2,905 3,301 3,730
4 6,879 103,815 104,469 105,205 3,094 3,749 4,485 3,815 4,469 5,205
5 8,819 104,688 105,665 106,809 3,993 4,970 6,114 4,688 5,665 6,809
6 10,856 105,523 106,886 108,549 4,944 6,307 7,970 5,523 6,886 8,549
7 12,995 106,318 108,132 110,438 5,854 7,669 9,975 6,318 8,132 10,438
8 15,240 107,070 109,402 112,488 6,723 9,054 12,141 7,070 9,402 12,488
9 17,598 107,780 110,694 114,714 7,548 10,462 14,483 7,780 10,694 14,714
10 20,074 108,443 112,006 117,130 8,327 11,890 17,014 8,443 12,006 17,130
15 34,439 110,923 118,703 132,603 10,923 18,703 32,603 10,923 18,703 32,603
20 52,773 111,448 124,940 155,406 11,448 24,940 55,406 11,448 24,940 55,406
25 76,172 108,983 129,252 188,561 8,983 29,252 88,561 8,983 29,252 88,561
30 106,036 101,596 128,695 235,666 1,596 28,695 135,666 1,596 28,695 135,666
35 144,151 118,158 300,935 18,158 200,935 18,158 200,935
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -64.49% -59.88% -55.26% 6,543.33% 6,547.96% 6,552.59%
2 -38.59 -32.78 -27.03 670.54 671.34 672.19
3 -32.97 -26.28 -19.74 269.31 269.83 270.40
4 -25.26 -18.44 -11.80 155.42 155.88 156.40
5 -20.73 -13.84 -7.17 105.10 105.55 106.08
6 -17.29 -10.46 -3.84 77.54 78.01 78.57
7 -14.99 -8.20 -1.61 60.42 60.91 61.51
8 -13.38 -6.60 -0.04 48.87 49.38 50.04
9 -12.20 -5.42 1.14 40.60 41.14 41.86
10 -11.32 -4.52 2.04 34.43 35.00 35.79
15 -9.92 -2.52 4.35 18.16 18.90 20.10
20 -10.61 -1.93 5.42 11.23 12.15 13.88
25 -14.20 -2.08 6.01 7.38 8.48 10.85
30 -48.78 -3.19 6.34 4.76 6.06 9.22
35 -7.20 6.50 4.07 8.27
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-47
<PAGE> 52
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- -------------------------------- --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $500,000 $500,000 $ 500,000 $ 3,656 $ 4,042 $ 4,429 $ 5,852 $ 6,238 $ 6,625
2 16,359 500,000 500,000 500,000 9,583 10,728 11,919 11,844 12,988 14,180
3 25,157 500,000 500,000 500,000 13,930 16,221 18,700 17,655 19,946 22,426
4 34,395 500,000 500,000 500,000 19,681 23,515 27,831 23,281 27,115 31,431
5 44,095 500,000 500,000 500,000 25,280 31,063 37,836 28,755 34,539 41,311
6 54,279 500,000 500,000 500,000 31,208 39,359 49,292 34,104 42,255 52,188
7 64,973 500,000 500,000 500,000 37,069 48,018 61,911 39,386 50,335 64,228
8 76,202 500,000 500,000 500,000 42,895 57,092 75,850 44,632 58,830 77,588
9 87,992 500,000 500,000 500,000 48,748 66,661 91,311 49,906 67,819 92,470
10 100,372 500,000 500,000 500,000 54,678 76,798 108,502 55,257 77,377 109,081
15 172,197 500,000 500,000 500,000 81,238 132,684 223,267 81,238 132,684 223,267
20 263,866 500,000 500,000 536,440 104,204 201,228 412,646 104,204 201,228 412,646
25 380,862 500,000 500,000 868,491 122,011 285,292 723,743 122,011 285,292 723,743
30 530,182 500,000 500,000 1,416,541 133,013 390,194 1,231,775 133,013 390,194 1,231,775
35 720,756 500,000 550,761 2,166,106 133,817 524,534 2,062,958 133,817 524,534 2,062,958
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL GROSS ANNUAL
END OF RATE OF RETURN OF RATE OF RETURN OF
POLICY ------------------------ ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -51.90% -46.81% -41.72% 6,478.95% 6,478.95% 6,478.95%
2 -27.08 -21.10 -15.15 662.65 662.65 662.65
3 -22.69 -16.08 -9.59 265.39 265.39 265.39
4 -16.65 -10.01 -3.50 152.66 152.66 152.66
5 -13.29 -6.64 -0.14 102.87 102.87 102.87
6 -10.75 -4.19 2.23 75.61 75.61 75.61
7 -9.04 -2.56 3.79 58.68 58.68 58.68
8 -7.81 -1.40 4.90 47.26 47.26 47.26
9 -6.86 -0.52 5.73 39.10 39.10 39.10
10 -6.09 0.19 6.38 33.01 33.01 33.01
15 -4.37 1.87 8.02 17.02 17.02 17.02
20 -3.75 2.60 8.78 10.35 10.35 10.92
25 -3.61 3.00 9.20 6.81 6.81 10.34
30 -3.75 3.27 9.44 4.68 4.68 10.15
35 -4.25 3.50 9.61 3.27 3.74 9.81
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-48
<PAGE> 53
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ------------------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $500,000 $500,000 $ 500,000 $ 3,428 $ 3,804 $ 4,181 $ 5,624 $ 6,001 $ 6,377
2 16,359 500,000 500,000 500,000 8,688 9,784 10,924 10,948 12,044 13,185
3 25,157 500,000 500,000 500,000 12,387 14,548 16,887 16,112 18,273 20,612
4 34,395 500,000 500,000 500,000 17,505 21,083 25,112 21,105 24,683 28,712
5 44,095 500,000 500,000 500,000 22,456 27,810 34,084 25,931 31,285 37,559
6 54,279 500,000 500,000 500,000 27,681 35,176 44,320 30,577 38,072 47,216
7 64,973 500,000 500,000 500,000 32,721 42,730 55,446 35,038 45,046 57,763
8 76,202 500,000 500,000 500,000 37,571 50,474 67,555 39,309 52,212 69,292
9 87,992 500,000 500,000 500,000 42,228 58,413 80,747 43,386 59,572 81,906
10 100,372 500,000 500,000 500,000 46,677 66,544 95,130 47,256 67,123 95,709
15 172,197 500,000 500,000 500,000 62,944 107,558 187,324 62,944 107,558 187,324
20 263,866 500,000 500,000 500,000 70,175 151,395 334,815 70,175 151,395 334,815
25 380,862 500,000 500,000 692,233 64,258 196,982 576,861 64,258 196,982 576,861
30 530,182 500,000 500,000 1,103,681 34,693 240,881 959,723 34,693 240,881 959,723
35 720,756 500,000 1,645,962 277,914 1,567,583 277,914 1,567,583
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS ANNUAL GROSS ANNUAL
END OF RATE OF RETURN OF RATE OF RETURN OF
POLICY ------------------------ ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -54.89% -49.94% -44.99% 6,478.95% 6,478.95% 6,478.95%
2 -31.97 -26.01 -20.10 662.65 662.65 662.65
3 -27.55 -20.84 -14.28 265.39 265.39 265.39
4 -20.90 -14.12 -7.50 152.66 152.66 152.66
5 -17.05 -10.23 -3.60 102.87 102.87 102.87
6 -14.12 -7.37 -0.81 75.61 75.61 75.61
7 -12.18 -5.48 1.03 58.68 58.68 58.68
8 -10.83 -4.15 2.34 47.26 47.26 47.26
9 -9.84 -3.17 3.30 39.10 39.10 39.10
10 -9.10 -2.43 4.04 33.01 33.01 33.01
15 -7.87 -0.73 5.99 17.02 17.02 17.02
20 -8.12 -0.04 7.04 10.35 10.35 10.35
25 -9.87 0.28 7.75 6.81 6.81 8.91
30 -17.93 0.35 8.16 4.68 4.68 8.88
35 0.24 8.44 3.27 8.65
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-49
<PAGE> 54
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- -------------------------------- --------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $505,842 $506,228 $ 506,614 $ 3,646 $ 4,032 $ 4,418 $ 5,842 $ 6,228 $ 6,614
2 16,359 511,813 512,954 514,143 9,552 10,694 11,882 11,813 12,954 14,143
3 25,157 517,590 519,871 522,340 13,864 16,146 18,615 17,590 19,871 22,340
4 34,395 523,165 526,977 531,267 19,565 23,377 27,667 23,165 26,977 31,267
5 44,095 528,571 534,311 541,031 25,096 30,836 37,556 28,571 34,311 41,031
6 54,279 533,836 541,909 551,747 30,940 39,013 48,851 33,836 41,909 51,747
7 64,973 539,020 549,846 563,577 36,703 47,529 61,260 39,020 49,846 63,577
8 76,202 544,160 558,171 576,675 42,422 56,433 74,938 44,160 58,171 76,675
9 87,992 549,325 566,975 591,250 48,166 65,816 90,091 49,325 66,975 91,250
10 100,372 554,574 576,341 607,518 53,995 75,761 106,939 54,574 76,341 107,518
15 172,197 579,922 630,234 718,693 79,922 130,234 218,693 79,922 130,234 218,693
20 263,866 601,536 695,282 899,153 101,536 195,282 399,153 101,536 195,282 399,153
25 380,862 616,547 770,731 1,189,717 116,547 270,731 689,717 116,547 270,731 689,717
30 530,182 622,408 855,736 1,657,703 122,408 355,736 1,157,703 122,408 355,736 1,157,703
35 720,756 614,438 946,654 2,411,197 114,438 446,654 1,911,197 114,438 446,654 1,911,197
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -52.03% -46.95% -41.87% 6,555.81% 6,560.90% 6,565.98%
2 -27.24 -21.27 -15.34 672.15 673.07 674.02
3 -22.89 -16.29 -9.80 270.12 270.73 271.38
4 -16.87 -10.24 -3.73 156.00 156.54 157.14
5 -13.52 -6.88 -0.39 105.58 106.11 106.72
6 -10.99 -4.44 1.97 77.97 78.51 79.17
7 -9.29 -2.82 3.53 60.82 61.39 62.10
8 -8.07 -1.66 4.63 49.26 49.86 50.63
9 -7.11 -0.77 5.46 40.99 41.63 42.48
10 -6.33 -0.06 6.13 34.83 35.50 36.43
15 -4.59 1.65 7.78 18.64 19.55 20.98
20 -4.03 2.33 8.50 11.84 13.00 15.03
25 -4.01 2.62 8.89 8.17 9.59 12.29
30 -4.39 2.73 9.13 5.88 7.57 10.94
35 -5.38 2.71 9.28 4.26 6.24 10.26
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-50
<PAGE> 55
MALE ISSUE AGE 40
$7,600 ANNUAL PREMIUM FOR NONSMOKER
PREFERRED UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION 2 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<TABLE>
<CAPTION>
DEATH BENEFIT NET CASH VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ------------------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,980 $505,615 $505,990 $ 506,366 $ 3,418 $ 3,794 $ 4,170 $ 5,615 $ 5,990 $ 6,366
2 16,359 510,910 512,002 513,138 8,649 9,742 10,878 10,910 12,002 13,138
3 25,157 516,029 518,178 520,504 12,304 14,453 16,779 16,029 18,178 20,504
4 34,395 520,961 524,511 528,508 17,360 20,911 24,908 20,961 24,511 28,508
5 44,095 525,707 531,007 537,216 22,232 27,532 33,741 25,707 31,007 37,216
6 54,279 530,252 537,652 546,678 27,356 34,756 43,782 30,252 37,652 46,678
7 64,973 534,588 544,443 556,960 32,272 42,126 54,643 34,588 44,443 56,960
8 76,202 538,710 551,376 568,135 36,972 49,638 66,397 38,710 51,376 68,135
9 87,992 542,610 558,446 580,282 41,452 57,288 79,124 42,610 58,446 80,282
10 100,372 546,273 565,639 593,481 45,694 65,060 92,902 46,273 65,639 93,481
15 172,197 560,327 602,737 678,410 60,327 102,737 178,410 60,327 102,737 178,410
20 263,866 564,472 638,372 804,701 64,472 138,372 304,701 64,472 138,372 304,701
25 380,862 553,549 665,418 990,409 53,549 165,418 490,409 53,549 165,418 490,409
30 530,182 517,902 669,398 1,258,307 17,902 169,398 758,307 17,902 169,398 758,307
35 720,756 625,072 1,637,255 125,072 1,137,255 125,072 1,137,255
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C>
1 -55.02% -50.08% -45.13% 6,552.83% 6,557.77% 6,562.72%
2 -32.18 -26.23 -20.34 671.43 672.31 673.21
3 -27.82 -21.12 -14.57 269.71 270.28 270.90
4 -21.19 -14.42 -7.81 155.68 156.19 156.75
5 -17.36 -10.56 -3.94 105.31 105.80 106.37
6 -14.45 -7.71 -1.16 77.72 78.23 78.83
7 -12.53 -5.84 0.67 60.58 61.11 61.76
8 -11.19 -4.53 1.95 49.02 49.57 50.28
9 -10.22 -3.57 2.90 40.74 41.32 42.10
10 -9.51 -2.85 3.62 34.56 35.17 36.02
15 -8.48 -1.31 5.42 18.27 19.06 20.35
20 -9.13 -0.90 6.24 11.33 12.32 14.16
25 -11.98 -1.08 6.69 7.48 8.66 11.16
30 -29.80 -1.99 6.93 4.87 6.27 9.55
35 -4.73 7.05 4.34 8.63
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-51
<PAGE> 56
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 in August, 1995. The Zenith Fund and the
Variable Account commenced operations on August 26, 1983. The Westpeak Stock
Index and Back Bay Advisors Managed Series of the Zenith Fund commenced
operations on May 1, 1987. The Westpeak Growth and Income Series and Harris
Oakmark Mid Cap 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 and was made available to the Variable Account on
December 19, 1994. The MFS Investors Series and MFS Research Managers Series of
the Zenith Fund commenced operations on April 30, 1999. The remaining Zenith
Fund Series commenced operations on October 31, 1994 and were made available to
the Variable Account on May 1, 1995. The commencement of operations for the
Metropolitan Series Fund, Inc. Portfolios was: March 3, 1997 for the Janus Mid
Cap Portfolio; and November 9, 1998 for the Russell 2000 Index Portfolio. Both
were made available to the Variable Account on May 1, 2000. The Putnam Large Cap
Growth Portfolio of the Metropolitan Series Fund, Inc. commenced operations on
May 1, 2000 and is not included in this Appendix. The VIP Equity-Income
Portfolio and VIP Overseas Portfolio commenced operations on October 9, 1986 and
January 28, 1987, respectively, and were added as investment options of the
Variable Account on April 30, 1993. The VIP High Income Portfolio and the VIP II
Asset Manager Portfolio commenced operations on September 19, 1985 and September
6, 1989, respectively, and were added as investment options of the Variable
Account on December 19, 1994.
We base the illustrations on the actual investment experience of the
relevant Eligible Funds for the periods shown (net of actual charges and
expenses incurred by the Eligible Funds), and reflect a charge for mortality and
expense risks against the Variable Account's assets at the currently applicable
annual rate of .60%. The illustrations assume that premiums are paid at the
beginning of each year and that no loans, transfers or other Policy Owner
transactions were made during the periods shown.
Many factors other than investment experience affect Policy values and
benefits. These investment experience figures do not reflect the charges
deducted from Premiums and Monthly Deductions from the cash value. (See "Charges
and Expenses".)
NET RATES OF RETURN
The annual net rate is the effective earnings rate at which the investment
Sub-Accounts increased or decreased over a one-year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated by
taking the difference between the Sub-Accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the Sub-Accounts increased or decreased since
the inception dates of the Sub-Accounts. For each Sub-Account, we calculate the
rate by taking the difference between the Sub-Account's ending value and the
value on the date of its inception and dividing it by the value on the date of
inception. This result is the total net rate of return since inception ("Total
Return"). The effective annual net rate of return is the rate which, if
compounded annually, would equal the total net rate of return since inception.
SUB-ACCOUNTS INVESTING IN ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- 8/26/83- ------------------------------------------------------------------------------------------------
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Growth*....... 8.64% -.96% 67.09% 94.04% 51.79% -9.34% 29.98% -4.06% 53.06% -6.61%
Bond Income........... 2.83% 11.93 18.05 14.15 1.65 7.72 11.63 7.44 17.25 7.53
Money Market.......... 3.08% 9.96 7.61 6.16 5.89 6.87 8.60 7.54 5.58 3.18
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------- 8/26/83- 8/26/83-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- -------------------------------------------------------------------------- TOTAL EFFECTIVE
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>
Capital Growth*....... 14.28% -7.62% 37.21% 20.34% 22.74% 33.29% 15.01% 2,707.00% 22.63%
Bond Income........... 11.94 -3.94 20.47 3.98 10.23 8.39 -1.06 309.50 9.01
Money Market.......... 2.36 3.35 5.07 4.50 4.71 4.63 4.34 147.55 5.70
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- 5/1/87- -------------------------------------------------------------------------------------
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
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Index...................... -12.55% 15.65% 29.37% -4.72% 29.65% 6.65% 9.07% .51% 36.10%
Managed.......................... -1.06% 8.83 18.37 2.59 19.45 6.06 9.99 -1.70 30.48
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------- 5/1/87- 5/1/87-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- ----------------------------------------- TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 12/31/99 RETURN ANNUAL
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stock Index...................... 21.73% 31.70% 27.17% 19.66% 527.46% 15.60%
Managed.......................... 14.34 25.81 18.94 9.31 337.07 12.35
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------- 4/30/93- 4/30/93-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- 4/30/93 --------------------------------------------------------------- TOTAL EFFECTIVE
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............. 13.78% -1.80% 35.65% 17.38% 32.67% 23.71% 8.70% 217.42% 18.91%
Mid Cap Value**............... 14.28 -.87 29.57 16.90 16.62 -6.03 -0.25 87.59 9.89
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------- 5/2/94 5/2/94
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- 5/2/94- ---------------------------------------------------- TOTAL EFFECTIVE
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................................ -3.61% 28.08% 29.90% 24.11% -2.28% 30.96% 154.68% 17.94%
</TABLE>
A-52
<PAGE> 57
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------- 10/31/94- 10/31/94-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- 10/31/94 ---------------------------------------------------- TOTAL EFFECTIVE
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........................... -4.29% 47.81% 12.49% 24.88% 46.90% 33.33% 289.22% 30.09%
Balanced***............................. -.20 24.05 16.21 15.48 8.46 -5.63 70.05 10.82
Venture Value........................... -3.60 38.45 25.08 32.70 13.73 16.81 194.33 23.24
International Magnum Equity****......... 2.50 5.60 6.03 -1.89 6.63 23.87 48.72 7.99
</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................................................... 2.44% 2.44% N/A
Research Managers........................................... 19.32 19.32 N/A
</TABLE>
- ------------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
** The 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.
**** The Morgan Stanley International Magnum Equity Series' sub-adviser was
Draycott Partners until May 1, 1997, when Morgan Stanley Dean Witter
Investment Management became sub-adviser.
SUB-ACCOUNTS INVESTING IN METROPOLITAN SERIES FUND, INC.
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------- 3/3/97- 3/3/97-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- 3/3/97- -------------------- TOTAL EFFECTIVE
12/31/97 12/31/98 12/31/99 RETURN ANNUAL
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Mid Cap..................................................... 27.57% 36.37% 121.59% 285.53% 61.15%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------ 11/9/98- 11/9/98-
FOR ONE YEAR ENDING 12/31/99 12/31/99
11/9/98- ------------------- TOTAL EFFECTIVE
12/31/98 12/31/99 RETURN ANNUAL
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Russell 2000 Index.......................................... 5.39% 22.00% 28.57% 24.63%
</TABLE>
SUB-ACCOUNTS INVESTING IN VIP
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- 10/9/86- -------------------------------------------------------------------------------------
12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity-Income.................... .06% -3.08% 21.98% 16.64% -15.80% 31.07% 16.39% 17.59% 6.43%
<CAPTION>
ANNUAL NET RATE OF RETURN
---------------------------------------------------- 10/9/86- 10/9/86-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- ---------------------------------------------------- TOTAL EFFECTIVE
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>
Equity-Income.................... 34.29% 13.59% 27.34% 10.96% 5.69% 409.85% 13.11%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
1/28/87- -------------------------------------------------------------------------------------
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
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Overseas......................... -5.90% 7.48% 25.53% -2.26% 7.79% -11.12% 36.53% 1.12% 9.02%
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------- 1/28/87- 1/28/87-
FOR ONE YEAR ENDING 12/31/99 12/31/99
----------------------------------------- TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 12/31/99 RETURN ANNUAL
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Overseas......................... 12.53% 10.89% 12.08% 41.77% 252.81% 10.25%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- 9/19/85- -------------------------------------------------------------------------------------
12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Income.............. 6.20% 16.98% 0.61% 10.97% -4.75% -2.82% 34.27% 22.43% 19.68%
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------- 9/19/85- 9/19/85-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- --------------------------------------------------------------- TOTAL EFFECTIVE
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>
High Income.............. -2.13% 19.88% 13.35% 16.96% -4.90% 7.51% 301.69% 10.23%
</TABLE>
SUB-ACCOUNT INVESTING IN VIP II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- 9/6/89- --------------------------------------------------------------------------
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager..................... .62% 6.08% 21.83% 11.04% 20.51% -6.65% 16.26% 13.91%
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------ 9/6/89- 9/6/89-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/99 12/31/99
- ----------- ------------------------------ TOTAL EFFECTIVE
12/31/97 12/31/98 12/31/99 RETURN ANNUAL
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Asset Manager..................... 19.93% 14.36% 10.43% 225.80% 12.13%
</TABLE>
A-53
<PAGE> 58
POLICY PERFORMANCE
The material below assumes a Policy was issued with a $100,000 and $500,000
face amount, respectively, with annual premiums paid on August 26 of each year
(May 1 in the case of the Zenith Westpeak Stock Index and Zenith Back Bay
Managed Sub-Accounts; May 2 in the case of the Loomis Sayles Small Cap
Sub-Account; October 31 in the case of the Zenith Balanced, Zenith Morgan
Stanley International Magnum Equity, Zenith Davis Venture Value and Zenith Alger
Equity Growth Sub-Accounts; October 9 in the case of the VIP Equity-Income
Sub-Account; January 28 in the case of the VIP Overseas Sub-Account; April 30 in
the case of the Zenith Westpeak Growth and Income and Zenith Harris Oakmark Mid
Cap Value Sub-Accounts; September 19 in the case of the VIP High Income
Sub-Account; September 6 in the case of the VIP II Asset Manager Sub-Account;
March 3 in the case of the Metropolitan Janus Mid Cap Sub-Account; November 9 in
the case of the Metropolitan Russell 2000 Index Sub-Account), to a male age 40
in the nonsmoker preferred risk category. Values and benefits are shown first
for Policies with the Option 1 death benefit and then for the Policies with the
Option 2 death benefit. The death benefits, cash values and internal rates of
return assume in each instance that the entire policy value was invested in the
particular Sub-Account for the period shown. The illustrations of Policy
investment experience reflect all Policy charges based on NELICO's current
rates. The illustrations for the $500,000 face amount reflect the lower sales
charge, cost of insurance and first-year administrative charges that would apply
to the Policy if issued in the personal market or if issued in business
situations or to tax-qualified pension plans which qualify for those lower
charges. (See "Charges and Expenses".) (See Appendix A for the definition of the
internal rate of return.)
MALE NONSMOKER AGGREGATE RISK, AGE 40
$100,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................. $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1983............... 1,520 100,000 1,388 949 -74.17% --
December 31, 1984............... 3,040 100,000 2,419 1,953 -43.40 2,058.97%
December 31, 1985............... 4,560 100,000 5,357 4,598 0.61 447.23
December 31, 1986............... 6,080 100,000 11,424 10,689 32.21 212.13
December 31, 1987............... 7,600 100,000 18,136 17,426 36.70 130.64
December 31, 1988............... 9,120 100,000 17,530 16,883 21.73 91.23
December 31, 1989............... 10,640 100,000 23,844 23,313 23.21 68.52
December 31, 1990............... 12,160 100,000 23,785 23,370 16.63 53.94
December 31, 1991............... 13,680 100,000 37,646 37,347 22.25 43.89
December 31, 1992............... 15,200 100,000 36,434 36,251 17.16 36.58
December 31, 1993............... 16,720 100,000 42,897 42,829 16.67 31.06
December 31, 1994............... 18,240 100,000 40,454 40,454 12.91 26.76
December 31, 1995............... 19,760 100,000 57,385 57,385 15.64 23.33
December 31, 1996............... 21,280 115,212 70,251 70,251 16.06 22.31
December 31, 1997............... 22,800 137,216 87,399 87,399 16.65 21.87
December 31, 1998............... 24,320 176,785 117,857 117,857 18.04 22.36
December 31, 1999............... 25,840 199,830 136,870 136,870 17.76 21.50
</TABLE>
A-54
<PAGE> 59
ZENITH BACK BAY BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................... $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1983................. 1,520 100,000 1,306 866 -80.13% --
December 31, 1984................. 3,040 100,000 2,615 2,148 -35.42 2,058.97%
December 31, 1985................. 4,560 100,000 4,239 3,480 -19.07 447.23
December 31, 1986................. 6,080 100,000 5,935 5,200 -8.35 212.13
December 31, 1987................. 7,600 100,000 7,107 6,397 -7.30 130.64
December 31, 1988................. 9,120 100,000 8,721 8,075 -4.28 91.23
December 31, 1989................. 10,640 100,000 10,795 10,264 -1.08 68.52
December 31, 1990................. 12,160 100,000 12,693 12,278 0.25 53.94
December 31, 1991................. 13,680 100,000 16,034 15,735 3.19 43.89
December 31, 1992................. 15,200 100,000 18,346 18,163 3.63 36.58
December 31, 1993................. 16,720 100,000 21,691 21,623 4.72 31.06
December 31, 1994................. 18,240 100,000 21,960 21,960 3.13 26.76
December 31, 1995................. 19,760 100,000 27,752 27,752 5.20 23.33
December 31, 1996................. 21,280 100,000 30,081 30,081 4.90 20.53
December 31, 1997................. 22,800 100,000 34,359 34,359 5.37 18.22
December 31, 1998................. 24,320 100,000 38,473 38,473 5.60 16.27
December 31, 1999................. 25,840 100,000 39,243 39,243 4.80 14.62
</TABLE>
ZENITH BACK BAY MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................... $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1983................. 1,520 100,000 1,308 869 -79.96% --
December 31, 1984................. 3,040 100,000 2,534 2,068 -38.71 2,058.97%
December 31, 1985................. 4,560 100,000 3,845 3,085 -26.95 447.23
December 31, 1986................. 6,080 100,000 5,171 4,437 -16.61 212.13
December 31, 1987................. 7,600 100,000 6,554 5,844 -11.11 130.64
December 31, 1988................. 9,120 100,000 8,074 7,427 -7.22 91.23
December 31, 1989................. 10,640 100,000 9,818 9,287 -4.08 68.52
December 31, 1990................. 12,160 100,000 11,609 11,194 -2.16 53.94
December 31, 1991................. 13,680 100,000 13,328 13,028 -1.13 43.89
December 31, 1992................. 15,200 100,000 14,854 14,670 -0.73 36.58
December 31, 1993................. 16,720 100,000 16,360 16,292 -0.49 31.06
December 31, 1994................. 18,240 100,000 18,107 18,107 -0.13 26.76
December 31, 1995................. 19,760 100,000 20,201 20,201 0.35 23.33
December 31, 1996................. 21,280 100,000 22,264 22,264 0.66 20.53
December 31, 1997................. 22,800 100,000 24,457 24,457 0.95 18.22
December 31, 1998................. 24,320 100,000 26,756 26,756 1.20 16.27
December 31, 1999................. 25,840 100,000 29,065 29,065 1.39 14.62
</TABLE>
ZENITH WESTPEAK STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987....................... $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1987................. 1,520 100,000 1,024 585 -76.05% --
December 31, 1988................. 3,040 100,000 2,341 1,880 -35.00 1,070.47%
December 31, 1989................. 4,560 100,000 4,409 3,656 -12.73 337.59
December 31, 1990................. 6,080 100,000 5,211 4,482 -13.65 178.58
December 31, 1991................. 7,600 100,000 7,925 7,222 -1.91 115.51
December 31, 1992................. 9,120 100,000 9,569 8,951 -0.59 82.89
December 31, 1993................. 10,640 100,000 11,549 11,047 1.02 63.34
December 31, 1994................. 12,160 100,000 12,681 12,295 0.26 50.46
December 31, 1995................. 13,680 100,000 18,723 18,452 6.33 41.41
December 31, 1996................. 15,200 100,000 23,908 23,753 8.45 34.74
December 31, 1997................. 16,720 100,000 32,953 32,914 11.53 29.65
December 31, 1998................. 18,240 100,000 43,229 43,229 13.32 25.65
December 31, 1999................. 19,760 100,000 53,045 53,045 13.95 22.43
</TABLE>
A-55
<PAGE> 60
ZENITH BACK BAY MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987....................... $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1987................. 1,520 100,000 1,162 723 -67.08% --
December 31, 1988................. 3,040 100,000 2,409 1,948 -32.80 1,070.47%
December 31, 1989................. 4,560 100,000 4,129 3,375 -17.08 337.59
December 31, 1990................. 6,080 100,000 5,354 4,625 -12.28 178.58
December 31, 1991................. 7,600 100,000 7,567 6,863 -3.80 115.51
December 31, 1992................. 9,120 100,000 9,159 8,541 -2.07 82.89
December 31, 1993................. 10,640 100,000 11,165 10,663 0.06 63.34
December 31, 1994................. 12,160 100,000 12,038 11,652 -1.03 50.46
December 31, 1995................. 13,680 100,000 17,085 16,815 4.38 41.41
December 31, 1996................. 15,200 100,000 20,684 20,530 5.73 34.74
December 31, 1997................. 16,720 100,000 27,437 27,398 8.47 29.65
December 31, 1998................. 18,240 100,000 33,897 33,897 9.67 25.65
December 31, 1999................. 19,760 100,000 38,255 38,255 9.48 22.43
</TABLE>
ZENITH WESTPEAK GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993.................... $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1993................. 1,520 100,000 1,316 877 -55.94% --
December 31, 1994................. 3,040 100,000 2,389 1,931 -33.29 1,065.53%
December 31, 1995................. 4,560 100,000 4,611 3,860 -9.68 336.86
December 31, 1996................. 6,080 100,000 6,605 5,878 -1.55 178.34
December 31, 1997................. 7,600 100,000 10,121 9,420 8.12 115.39
December 31, 1998................. 9,120 100,000 13,637 13,029 11.32 82.83
December 31, 1999................. 10,640 100,000 15,875 15,382 10.02 63.30
</TABLE>
ZENITH HARRIS OAKMARK MID CAP VALUE SUB-ACCOUNT**
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993...................... $1,520 $100,000 $1,397 $ 958 -- --
December 31, 1993................... 1,520 100,000 1,323 884 -55.43% --
December 31, 1994................... 3,040 100,000 2,415 1,957 -32.45 1,065.53%
December 31, 1995................... 4,560 100,000 4,497 3,746 -11.36 336.86
December 31, 1996................... 6,080 100,000 6,397 5,671 -3.19 178.34
December 31, 1997................... 7,600 100,000 8,743 8,042 2.12 115.39
December 31, 1998................... 9,120 100,000 9,020 8,411 -2.55 82.83
December 31, 1999................... 10,640 100,000 9,944 9,451 -3.23 63.30
</TABLE>
ZENITH LOOMIS SAYLES SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 2, 1994......................... $1,520 $100,000 $1,397 $ 958 -- --
December 31, 1994................... 1,520 100,000 1,113 674 -70.54% --
December 31, 1995................... 3,040 100,000 2,752 2,292 -22.04 1,075.45%
December 31, 1996................... 4,560 100,000 4,820 4,067 -6.73 338.33
December 31, 1997................... 6,080 100,000 7,361 6,633 4.05 178.83
December 31, 1998................... 7,600 100,000 8,087 7,383 -1.08 115.62
December 31, 1999................... 9,120 100,000 12,027 11,409 7.10 82.96
</TABLE>
A-56
<PAGE> 61
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................... $1,520 $100,000 $1,397 $ 958 -- --
December 31, 1994................... 1,520 100,000 1,327 888 -95.98% --
December 31, 1995................... 3,040 100,000 2,739 2,268 -38.27 3,427.00%
December 31, 1996................... 4,560 100,000 4,303 3,539 -20.74 539.22
December 31, 1997................... 6,080 100,000 6,061 5,322 -7.91 236.33
December 31, 1998................... 7,600 100,000 7,696 6,982 -3.91 140.81
December 31, 1999................... 9,120 100,000 8,305 7,639 -6.67 96.62
</TABLE>
ZENITH MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................... $1,520 $100,000 $1,397 $ 958 -- --
December 31, 1994................... 1,520 100,000 1,361 921 -95.00% --
December 31, 1995................... 3,040 100,000 2,570 2,099 -46.63 3,427.00%
December 31, 1996................... 4,560 100,000 3,837 3,073 -31.52 539.22
December 31, 1997................... 6,080 100,000 4,821 4,082 -23.28 236.33
December 31, 1998................... 7,600 100,000 6,244 5,530 -14.63 140.81
December 31, 1999................... 9,120 100,000 8,872 8,206 -3.97 96.62
</TABLE>
ZENITH DAVIS VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1994................. 1,520 100,000 1,286 846 -96.99% --
December 31, 1995................. 3,040 100,000 2,857 2,386 -32.39 3,427.00%
December 31, 1996................. 4,560 100,000 4,706 3,942 -12.15 539.22
December 31, 1997................. 6,080 100,000 7,332 6,593 4.89 236.33
December 31, 1998................. 7,600 100,000 9,491 8,777 6.67 140.81
December 31, 1999................. 9,120 100,000 12,207 11,541 8.80 96.62
</TABLE>
ZENITH ALGER EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1994................. 1,520 100,000 1,254 815 -97.60% --
December 31, 1995................. 3,040 100,000 2,856 2,385 -32.46 3,427.00%
December 31, 1996................. 4,560 100,000 4,332 3,568 -20.11 539.22
December 31, 1997................. 6,080 100,000 6,483 5,744 -3.40 236.33
December 31, 1998................. 7,600 100,000 10,781 10,067 13.06 140.81
December 31, 1999................. 9,120 100,000 15,582 14,916 18.41 96.62
</TABLE>
ZENITH MFS INVESTORS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999...................... $1,520 $100,000 $1,397 $958 -- --
December 31, 1999................... 1,520 100,000 1,158 719 -67.24% --
</TABLE>
ZENITH MFS RESEARCH MANAGERS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999...................... $1,520 $100,000 $1,397 $958 -- --
December 31, 1999................... 1,520 100,000 1,367 928 -52.07% --
</TABLE>
A-57
<PAGE> 62
METROPOLITAN JANUS MID CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
March 3, 1997....................... $1,520 $100,000 $1,397 $ 958 -- --
December 31, 1997................... 1,520 100,000 1,450 1,011 -38.83% --
December 31, 1998................... 3,040 100,000 3,363 2,906 -3.33 831.66%
December 31, 1999................... 4,560 100,000 9,914 9,164 43.08 298.61
</TABLE>
METROPOLITAN RUSSELL 2000 INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
November 9, 1998.................... $1,520 $100,000 $1,397 $ 958 -- --
December 31, 1998................... 1,520 100,000 1,439 999 -94.73% --
December 31, 1999................... 3,040 100,000 2,924 2,451 -30.24 3,715.89%
</TABLE>
VIP EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 9, 1986................... $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1986................. 1,520 100,000 1,335 895 -90.25% --
December 31, 1987................. 3,040 100,000 2,163 1,692 -61.59 2,847.87%
December 31, 1988................. 4,560 100,000 3,690 2,927 -33.33 505.26
December 31, 1989................. 6,080 100,000 5,381 4,642 -15.31 227.75
December 31, 1990................. 7,600 100,000 5,659 4,945 -19.20 137.27
December 31, 1991................. 9,120 100,000 8,497 7,831 -5.60 94.76
December 31, 1992................. 10,640 100,000 11,016 10,466 -0.51 70.66
December 31, 1993................. 12,160 100,000 13,973 13,539 2.87 55.37
December 31, 1994................. 13,680 100,000 15,891 15,572 3.04 44.89
December 31, 1995................. 15,200 100,000 22,622 22,419 8.01 37.32
December 31, 1996................. 16,720 100,000 26,792 26,705 8.66 31.62
December 31, 1997................. 18,240 100,000 35,304 35,304 10.98 27.20
December 31, 1998................. 19,760 100,000 40,621 40,621 10.94 23.68
December 31, 1999................. 21,280 100,000 44,154 44,154 10.21 20.82
</TABLE>
VIP OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
January 28, 1987.................. $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1987................. 1,520 100,000 982 543 -67.22% --
December 31, 1988................. 3,040 100,000 2,329 1,877 -29.50 731.16%
December 31, 1989................. 4,560 100,000 4,185 3,440 -13.96 279.55
December 31, 1990................. 6,080 100,000 5,174 4,454 -12.45 158.04
December 31, 1991................. 7,600 100,000 6,701 6,006 -7.95 105.56
December 31, 1992................. 9,120 100,000 6,831 6,251 -10.96 77.19
December 31, 1993................. 10,640 100,000 10,753 10,290 -0.85 59.70
December 31, 1994................. 12,160 100,000 11,836 11,488 -1.29 47.97
December 31, 1995................. 13,680 100,000 14,311 14,079 0.58 39.61
December 31, 1996................. 15,200 100,000 17,270 17,154 2.22 33.39
December 31, 1997................. 16,720 100,000 20,507 20,507 3.41 28.61
December 31, 1998................. 18,240 100,000 24,276 24,276 4.37 24.82
December 31, 1999................. 19,760 100,000 36,087 36,087 8.38 21.77
</TABLE>
A-58
<PAGE> 63
VIP HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 19, 1985................ $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1985................. 1,520 100,000 1,382 943 -81.60% --
December 31, 1986................. 3,040 100,000 2,720 2,251 -33.68 2,440.56%
December 31, 1987................. 4,560 100,000 3,816 3,054 -29.03 477.39
December 31, 1988................. 6,080 100,000 5,317 4,580 -15.54 220.41
December 31, 1989................. 7,600 100,000 6,072 5,361 -15.19 134.18
December 31, 1990................. 9,120 100,000 6,926 6,270 -13.56 93.12
December 31, 1991................. 10,640 100,000 10,349 9,809 -2.49 69.67
December 31, 1992................. 12,160 100,000 13,696 13,271 2.30 54.71
December 31, 1993................. 13,680 100,000 17,499 17,190 5.26 44.43
December 31, 1994................. 15,200 100,000 18,227 18,034 3.53 36.98
December 31, 1995................. 16,720 100,000 23,062 22,985 5.88 31.37
December 31, 1996................. 18,240 100,000 27,298 27,298 6.75 27.00
December 31, 1997................. 19,760 100,000 33,124 33,124 7.88 23.52
December 31, 1998................. 21,280 100,000 32,758 32,758 6.12 20.69
December 31, 1999................. 22,800 100,000 36,410 36,410 6.16 18.34
</TABLE>
VIP II ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 6, 1989................. $ 1,520 $100,000 $ 1,397 $ 958 -- --
December 31, 1989................. 1,520 100,000 1,314 875 -82.41% --
December 31, 1990................. 3,040 100,000 2,514 2,045 -40.94 2,221.59%
December 31, 1991................. 4,560 100,000 4,190 3,428 -20.53 460.64
December 31, 1992................. 6,080 100,000 5,761 5,024 -10.33 215.86
December 31, 1993................. 7,600 100,000 8,063 7,352 -1.43 132.24
December 31, 1994................. 9,120 100,000 8,496 7,840 -5.38 92.09
December 31, 1995................. 10,640 100,000 10,992 10,452 -0.54 69.04
December 31, 1996................. 12,160 100,000 13,627 13,202 2.15 54.29
December 31, 1997................. 13,680 100,000 17,414 17,105 5.11 44.14
December 31, 1998................. 15,200 100,000 21,182 20,989 6.56 36.77
December 31, 1999................. 16,720 100,000 24,614 24,537 7.02 31.20
</TABLE>
OPTION 2 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................. $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1983............... 1,520 101,387 1,387 948 -74.27% --
December 31, 1984............... 3,040 102,414 2,414 1,947 -43.62 2,098.82%
December 31, 1985............... 4,560 105,337 5,337 4,577 0.28 460.65
December 31, 1986............... 6,080 111,355 11,355 10,621 31.82 223.81
December 31, 1987............... 7,600 117,979 17,979 17,269 36.28 141.23
December 31, 1988............... 9,120 117,335 17,335 16,688 21.32 98.29
December 31, 1989............... 10,640 123,510 23,510 22,979 22.78 75.61
December 31, 1990............... 12,160 123,388 23,388 22,973 16.20 59.61
December 31, 1991............... 13,680 136,923 36,923 36,623 21.82 51.00
December 31, 1992............... 15,200 135,660 35,660 35,476 16.75 42.50
December 31, 1993............... 16,720 141,919 41,919 41,851 16.27 37.03
December 31, 1994............... 18,240 139,481 39,481 39,481 12.53 31.82
December 31, 1995............... 19,760 155,914 55,914 55,914 15.28 29.43
December 31, 1996............... 21,280 168,333 68,333 68,333 15.71 27.05
December 31, 1997............... 22,800 184,902 84,902 84,902 16.31 25.30
December 31, 1998............... 24,320 214,378 114,378 114,378 17.72 24.40
December 31, 1999............... 25,840 232,712 132,712 132,712 17.45 23.00
</TABLE>
A-59
<PAGE> 64
ZENITH BACK BAY BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................... $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1983................. 1,520 101,304 1,304 865 -80.21% --
December 31, 1984................. 3,040 102,609 2,609 2,143 -35.66 2,102.05%
December 31, 1985................. 4,560 104,224 4,224 3,464 -19.38 457.88
December 31, 1986................. 6,080 105,902 5,902 5,168 -8.68 218.32
December 31, 1987................. 7,600 107,055 7,055 6,345 -7.65 134.96
December 31, 1988................. 9,120 108,640 8,640 7,993 -4.64 94.87
December 31, 1989................. 10,640 110,670 10,670 10,139 -1.44 71.90
December 31, 1990................. 12,160 112,518 12,518 12,103 -0.12 57.11
December 31, 1991................. 13,680 115,781 15,781 15,481 2.82 47.19
December 31, 1992................. 15,200 118,024 18,024 17,841 3.27 39.79
December 31, 1993................. 16,720 121,284 21,284 21,217 4.38 34.34
December 31, 1994................. 18,240 121,530 21,530 21,530 2.80 29.72
December 31, 1995................. 19,760 127,175 27,175 27,175 4.89 26.63
December 31, 1996................. 21,280 129,410 29,410 29,410 4.59 23.76
December 31, 1997................. 22,800 133,528 33,528 33,528 5.06 21.56
December 31, 1998................. 24,320 137,460 37,460 37,460 5.28 19.68
December 31, 1999................. 25,840 138,113 38,113 38,113 4.48 17.85
</TABLE>
ZENITH BACK BAY MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................... $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1983................. 1,520 101,307 1,307 868 -80.04% --
December 31, 1984................. 3,040 102,529 2,529 2,062 -38.94 2,100.72%
December 31, 1985................. 4,560 103,831 3,831 3,071 -27.24 456.90
December 31, 1986................. 6,080 105,144 5,144 4,410 -16.92 217.54
December 31, 1987................. 7,600 106,507 6,507 5,798 -11.45 134.64
December 31, 1988................. 9,120 108,000 8,000 7,354 -7.57 94.61
December 31, 1989................. 10,640 109,707 9,707 9,176 -4.44 71.61
December 31, 1990................. 12,160 111,454 11,454 11,039 -2.53 56.86
December 31, 1991................. 13,680 113,124 13,124 12,824 -1.49 46.66
December 31, 1992................. 15,200 114,604 14,604 14,421 -1.09 39.22
December 31, 1993................. 16,720 116,070 16,070 16,002 -0.82 33.60
December 31, 1994................. 18,240 117,774 17,774 17,774 -0.44 29.24
December 31, 1995................. 19,760 119,809 19,809 19,809 0.04 25.81
December 31, 1996................. 21,280 121,803 21,803 21,803 0.35 23.01
December 31, 1997................. 22,800 123,910 23,910 23,910 0.64 20.70
December 31, 1998................. 24,320 126,105 26,105 26,105 0.90 18.76
December 31, 1999................. 25,840 128,292 28,292 28,292 1.08 17.12
</TABLE>
ZENITH WESTPEAK STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987....................... $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1987................. 1,520 101,022 1,022 583 -76.15% --
December 31, 1988................. 3,040 102,334 2,334 1,874 -35.21 1,087.58%
December 31, 1989................. 4,560 104,390 4,390 3,637 -13.02 345.46
December 31, 1990................. 6,080 105,179 5,179 4,451 -13.96 183.04
December 31, 1991................. 7,600 107,862 7,862 7,158 -2.24 119.70
December 31, 1992................. 9,120 109,470 9,470 8,853 -0.94 86.49
December 31, 1993................. 10,640 111,404 11,404 10,902 0.66 66.67
December 31, 1994................. 12,160 112,494 12,494 12,108 -0.10 53.42
December 31, 1995................. 13,680 118,409 18,409 18,139 5.98 45.01
December 31, 1996................. 15,200 123,467 23,467 23,312 8.10 38.64
December 31, 1997................. 16,720 132,306 32,306 32,268 11.20 34.22
December 31, 1998................. 18,240 142,323 42,323 42,323 13.01 30.81
December 31, 1999................. 19,760 151,844 51,844 51,844 13.64 27.98
</TABLE>
A-60
<PAGE> 65
ZENITH BACK BAY MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987....................... $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1987................. 1,520 101,161 1,161 721 -67.21% --
December 31, 1988................. 3,040 102,402 2,402 1,941 -33.02 1,088.07%
December 31, 1989................. 4,560 104,111 4,111 3,357 -17.37 344.97
December 31, 1990................. 6,080 105,321 5,321 4,593 -12.59 183.16
December 31, 1991................. 7,600 107,506 7,506 6,803 -4.13 119.52
December 31, 1992................. 9,120 109,066 9,066 8,448 -2.41 86.34
December 31, 1993................. 10,640 111,026 11,026 10,524 -0.30 66.56
December 31, 1994................. 12,160 111,862 11,862 11,476 -1.39 53.28
December 31, 1995................. 13,680 116,803 16,803 16,533 4.03 44.72
December 31, 1996................. 15,200 120,310 20,310 20,155 5.38 38.16
December 31, 1997................. 16,720 126,911 26,911 26,872 8.15 33.54
December 31, 1998................. 18,240 133,206 33,206 33,206 9.36 29.84
December 31, 1999................. 19,760 137,415 37,415 37,415 9.17 26.65
</TABLE>
ZENITH WESTPEAK GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993.................... $1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1993................. 1,520 101,314 1,314 874 -56.12% --
December 31, 1994................. 3,040 102,382 2,382 1,924 -33.53 1,082.88%
December 31, 1995................. 4,560 104,589 4,589 3,838 -10.00 345.06
December 31, 1996................. 6,080 106,561 6,561 5,835 -1.89 183.95
December 31, 1997................. 7,600 110,034 10,034 9,333 7.77 120.70
December 31, 1998................. 9,120 113,485 13,485 12,877 10.94 87.87
December 31, 1999................. 10,640 115,656 15,656 15,164 9.63 67.79
</TABLE>
ZENITH HARRIS OAKMARK MID CAP VALUE SUB-ACCOUNT**
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993...................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1993................... 1,520 101,321 1,321 881 -55.61% --
December 31, 1994................... 3,040 102,408 2,408 1,950 -32.69 1,083.07%
December 31, 1995................... 4,560 104,476 4,476 3,725 -11.67 344.86
December 31, 1996................... 6,080 106,355 6,355 5,629 -3.53 183.78
December 31, 1997................... 7,600 108,668 8,668 7,967 1.77 120.00
December 31, 1998................... 9,120 108,920 8,920 8,312 -2.92 86.22
December 31, 1999................... 10,640 109,812 9,812 9,319 -3.62 66.18
</TABLE>
ZENITH LOOMIS SAYLES SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 2, 1994......................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1994................... 1,520 101,111 1,111 672 -70.66% --
December 31, 1995................... 3,040 102,744 2,744 2,284 -22.28 1,095.67%
December 31, 1996................... 4,560 104,799 4,799 4,045 -7.03 346.94
December 31, 1997................... 6,080 107,315 7,315 6,587 3.72 185.09
December 31, 1998................... 7,600 108,018 8,018 7,315 -1.43 119.90
December 31, 1999................... 9,120 111,899 11,899 11,282 6.74 87.44
</TABLE>
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1994................... 1,520 101,327 1,327 887 -96.00% --
December 31, 1995................... 3,040 102,734 2,734 2,263 -38.51 3,511.46%
December 31, 1996................... 4,560 104,289 4,289 3,525 -21.05 552.81
December 31, 1997................... 6,080 106,031 6,031 5,292 -8.24 243.48
December 31, 1998................... 7,600 107,643 7,643 6,929 -4.26 145.89
December 31, 1999................... 9,120 108,232 8,232 7,566 -7.04 100.31
</TABLE>
A-61
<PAGE> 66
ZENITH MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1994................... 1,520 101,360 1,360 921 -95.02% --
December 31, 1995................... 3,040 102,565 2,565 2,095 -46.85 3,506.26%
December 31, 1996................... 4,560 103,825 3,825 3,061 -31.81 551.36
December 31, 1997................... 6,080 104,798 4,798 4,060 -23.60 242.05
December 31, 1998................... 7,600 106,205 6,205 5,491 -14.96 144.96
December 31, 1999................... 9,120 108,798 8,798 8,132 -4.31 100.55
</TABLE>
ZENITH DAVIS VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1994................... 1,520 101,285 1,285 846 -97.01% --
December 31, 1995................... 3,040 102,852 2,852 2,381 -32.66 3,515.10%
December 31, 1996................... 4,560 104,690 4,690 3,926 -12.48 554.07
December 31, 1997................... 6,080 107,293 7,293 6,555 4.54 244.95
December 31, 1998................... 7,600 109,422 9,422 8,709 6.30 147.03
December 31, 1999................... 9,120 112,092 12,092 11,426 8.43 101.96
</TABLE>
ZENITH ALGER EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1994................... 1,520 101,253 1,253 814 -97.61% --
December 31, 1995................... 3,040 102,850 2,850 2,379 -32.73 3,515.06%
December 31, 1996................... 4,560 104,317 4,317 3,554 -20.43 552.90
December 31, 1997................... 6,080 106,449 6,449 5,711 -3.74 243.97
December 31, 1998................... 7,600 110,703 10,703 9,990 12.70 147.85
December 31, 1999................... 9,120 115,434 15,434 14,768 18.03 103.35
</TABLE>
ZENITH MFS INVESTORS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999...................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1999................... 1,520 101,156 1,156 716 -67.39% --
</TABLE>
ZENITH MFS RESEARCH MANAGERS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999...................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1999................... 1,520 101,365 1,365 925 -52.26% --
</TABLE>
METROPOLITAN JANUS MID CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
March 3, 1997....................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1997................... 1,520 101,447 1,447 1,008 -39.05% --
December 31, 1998................... 3,040 103,351 3,351 2,895 -3.62 849.54%
December 31, 1999................... 4,560 109,863 9,863 9,113 42.70 313.59
</TABLE>
A-62
<PAGE> 67
METROPOLITAN RUSSELL 2000 INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
November 9, 1998.................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1998................... 1,520 101,438 1,438 999 -94.75% --
December 31, 1999................... 3,040 102,920 2,920 2,447 -30.48 3,815.49%
</TABLE>
VIP EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 9, 1986..................... $1,520 $101,397 $1,397 $ 958 -- --
December 31, 1986................... 1,520 101,334 1,334 895 -90.28% --
December 31, 1987................... 3,040 102,159 2,159 1,689 -61.77 2,901.04%
December 31, 1988................... 4,560 103,679 3,679 2,915 -33.60 516.05
December 31, 1989................... 6,080 105,354 5,354 4,616 -15.63 233.85
December 31, 1990................... 7,600 105,623 5,623 4,910 -19.52 140.93
December 31, 1991................... 9,120 108,427 8,427 7,761 -5.94 98.46
December 31, 1992................... 10,640 110,901 10,901 10,351 -0.85 74.23
December 31, 1993................... 12,160 113,794 13,794 13,359 2.51 58.93
December 31, 1994................... 13,680 115,652 15,652 15,333 2.68 48.23
December 31, 1995................... 15,200 122,237 22,237 22,034 7.66 41.28
December 31, 1996................... 16,720 126,297 26,297 26,210 8.32 35.66
December 31, 1997................... 18,240 134,609 34,609 34,609 10.66 31.78
December 31, 1998................... 19,760 139,767 39,767 39,767 10.63 28.34
December 31, 1999................... 21,280 143,149 43,149 43,149 9.91 25.37
</TABLE>
VIP OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
January 28, 1987.................. $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1987................. 1,520 100,979 979 540 -67.39% --
December 31, 1988................. 3,040 102,320 2,320 1,868 -29.74 741.72%
December 31, 1989................. 4,560 104,163 4,163 3,418 -14.27 285.49
December 31, 1990................. 6,080 105,137 5,137 4,417 -12.77 161.88
December 31, 1991................. 7,600 106,640 6,640 5,945 -8.29 108.79
December 31, 1992................. 9,120 106,753 6,753 6,174 -11.32 79.60
December 31, 1993................. 10,640 110,610 10,610 10,147 -1.21 62.63
December 31, 1994................. 12,160 111,652 11,652 11,304 -1.65 50.61
December 31, 1995................. 13,680 114,064 14,064 13,833 0.23 42.29
December 31, 1996................. 15,200 116,951 16,951 16,835 1.88 36.18
December 31, 1997................. 16,720 120,116 20,116 20,116 3.09 31.50
December 31, 1998................. 18,240 123,788 23,788 23,788 4.07 27.85
December 31, 1999................. 19,760 135,313 35,313 35,313 8.09 25.67
</TABLE>
VIP HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 19, 1985................ $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1985................. 1,520 101,381 1,381 942 -81.68% --
December 31, 1986................. 3,040 102,715 2,715 2,246 -33.92 2,495.82%
December 31, 1987................. 4,560 103,802 3,802 3,041 -29.32 487.79
December 31, 1988................. 6,080 105,290 5,290 4,553 -15.86 226.21
December 31, 1989................. 7,600 106,031 6,031 5,319 -15.53 138.01
December 31, 1990................. 9,120 106,866 6,866 6,210 -13.91 96.10
December 31, 1991................. 10,640 110,237 10,237 9,696 -2.84 72.98
December 31, 1992................. 12,160 113,515 13,515 13,090 1.94 58.17
December 31, 1993................. 13,680 117,229 17,229 16,920 4.90 48.05
December 31, 1994................. 15,200 117,913 17,913 17,720 3.17 40.21
December 31, 1995................. 16,720 122,635 22,635 22,558 5.54 34.87
December 31, 1996................. 18,240 126,766 26,766 26,766 6.43 30.63
December 31, 1997................. 19,760 132,433 32,433 32,433 7.57 27.40
December 31, 1998................. 21,280 132,024 32,024 32,024 5.81 24.19
December 31, 1999................. 22,800 135,526 35,526 35,526 5.84 21.88
</TABLE>
A-63
<PAGE> 68
VIP II ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 6, 1989................. $ 1,520 $101,397 $ 1,397 $ 958 -- --
December 31, 1989................. 1,520 101,313 1,313 874 -82.47% --
December 31, 1990................. 3,040 102,509 2,509 2,040 -41.14 2,267.08%
December 31, 1991................. 4,560 104,175 4,175 3,414 -20.82 471.56
December 31, 1992................. 6,080 105,731 5,731 4,995 -10.64 221.99
December 31, 1993................. 7,600 108,007 8,007 7,295 -1.77 137.20
December 31, 1994................. 9,120 108,419 8,419 7,762 -5.73 95.68
December 31, 1995................. 10,640 110,868 10,868 10,327 -0.90 72.51
December 31, 1996................. 12,160 113,442 13,442 13,017 1.78 57.71
December 31, 1997................. 13,680 117,139 17,139 16,830 4.74 47.72
December 31, 1998................. 15,200 120,810 20,810 20,617 6.20 40.44
December 31, 1999................. 16,720 124,150 24,150 24,073 6.68 34.90
</TABLE>
- ------------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Harris
Oakmark Mid Cap Value Series' investment advisory fee of .70% of average
daily net assets for the period through April 30, 1998 and .75% thereafter.
MALE NON-SMOKER PREFERRED RISK AGE 40
$500,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ---------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983............... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1983............. 7,600 500,000 7,289 5,093 -68.35% --
December 31, 1984............. 15,200 500,000 13,202 10,869 -34.40 2,058.98%
December 31, 1985............. 22,800 500,000 29,463 25,665 8.98 447.23
December 31, 1986............. 30,400 500,000 63,104 59,430 38.70 212.13
December 31, 1987............. 38,000 500,000 100,369 96,821 41.63 130.64
December 31, 1988............. 45,600 500,000 97,082 93,848 25.53 91.23
December 31, 1989............. 53,200 500,000 132,279 129,624 26.37 68.52
December 31, 1990............. 60,800 500,000 132,027 129,952 19.30 53.94
December 31, 1991............. 68,400 500,000 209,040 207,544 24.54 43.89
December 31, 1992............. 76,000 500,000 202,188 201,271 19.17 36.58
December 31, 1993............. 83,600 500,000 237,869 237,531 18.44 31.06
December 31, 1994............. 91,200 500,000 224,128 224,128 14.51 26.76
December 31, 1995............. 98,800 543,318 317,730 317,730 17.06 24.47
December 31, 1996............. 106,400 637,291 388,592 388,592 17.35 23.57
December 31, 1997............. 114,000 758,655 483,220 483,220 17.82 23.03
December 31, 1998............. 121,600 976,959 651,306 651,306 19.11 23.42
December 31, 1999............. 129,200 1,103,925 756,113 756,113 18.75 22.49
</TABLE>
A-64
<PAGE> 69
ZENITH BACK BAY BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................ $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1983.............. 7,600 500,000 6,872 4,676 -75.24% --
December 31, 1984.............. 15,200 500,000 14,228 11,894 -26.12 2,058.98%
December 31, 1985.............. 22,800 500,000 23,265 19,467 -11.38 447.23
December 31, 1986.............. 30,400 500,000 32,723 29,049 -2.45 212.13
December 31, 1987.............. 38,000 500,000 39,285 35,737 -2.61 130.64
December 31, 1988.............. 45,600 500,000 48,328 45,095 -0.39 91.23
December 31, 1989.............. 53,200 500,000 59,990 57,336 2.23 68.52
December 31, 1990.............. 60,800 500,000 70,685 68,609 3.12 53.94
December 31, 1991.............. 68,400 500,000 89,371 87,875 5.68 43.89
December 31, 1992.............. 76,000 500,000 102,244 101,327 5.82 36.58
December 31, 1993.............. 83,600 500,000 120,739 120,401 6.65 31.06
December 31, 1994.............. 91,200 500,000 122,023 122,023 4.86 26.76
December 31, 1995.............. 98,800 500,000 154,028 154,028 6.75 23.33
December 31, 1996.............. 106,400 500,000 166,798 166,798 6.31 20.53
December 31, 1997.............. 114,000 500,000 190,410 190,410 6.67 18.22
December 31, 1998.............. 121,600 500,000 213,064 213,064 6.79 16.27
December 31, 1999.............. 129,200 500,000 217,227 217,227 5.92 14.62
</TABLE>
ZENITH BACK BAY MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................ $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1983.............. 7,600 500,000 6,887 4,690 -75.02% --
December 31, 1984.............. 15,200 500,000 13,794 11,461 -29.61 2,058.98%
December 31, 1985.............. 22,800 500,000 21,107 17,308 -19.42 447.23
December 31, 1986.............. 30,400 500,000 28,527 24,853 -10.72 212.13
December 31, 1987.............. 38,000 500,000 36,259 32,711 -6.36 130.64
December 31, 1988.............. 45,600 500,000 44,792 41,558 -3.26 91.23
December 31, 1989.............. 53,200 500,000 54,630 51,975 -0.70 68.52
December 31, 1990.............. 60,800 500,000 64,743 62,667 0.79 53.94
December 31, 1991.............. 68,400 500,000 74,396 72,900 1.46 43.89
December 31, 1992.............. 76,000 500,000 82,882 81,965 1.55 36.58
December 31, 1993.............. 83,600 500,000 91,125 90,787 1.53 31.06
December 31, 1994.............. 91,200 500,000 100,640 100,640 1.67 26.76
December 31, 1995.............. 98,800 500,000 112,105 112,105 1.97 23.33
December 31, 1996.............. 106,400 500,000 123,434 123,434 2.14 20.53
December 31, 1997.............. 114,000 500,000 135,514 135,514 2.31 18.22
December 31, 1998.............. 121,600 500,000 148,147 148,147 2.47 16.27
December 31, 1999.............. 129,200 500,000 160,881 160,881 2.57 14.62
</TABLE>
ZENITH WESTPEAK STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987..................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1987............... 7,600 500,000 5,568 3,371 -70.36% --
December 31, 1988............... 15,200 500,000 12,937 10,635 -27.12 1,070.47%
December 31, 1989............... 22,800 500,000 24,432 20,665 -5.79 337.59
December 31, 1990............... 30,400 500,000 28,936 25,294 -8.33 178.58
December 31, 1991............... 38,000 500,000 44,092 40,575 2.46 115.51
December 31, 1992............... 45,600 500,000 53,322 50,233 3.06 82.89
December 31, 1993............... 53,200 500,000 64,468 61,958 4.15 63.34
December 31, 1994............... 60,800 500,000 70,868 68,938 3.00 50.46
December 31, 1995............... 68,400 500,000 104,625 103,273 8.69 41.41
December 31, 1996............... 76,000 500,000 133,479 132,707 10.51 34.74
December 31, 1997............... 83,600 500,000 183,666 183,473 13.32 29.65
December 31, 1998............... 91,200 500,000 240,695 240,695 14.92 25.65
December 31, 1999............... 98,800 504,644 295,114 295,114 15.39 22.56
</TABLE>
A-65
<PAGE> 70
ZENITH BACK BAY MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987..................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1987............... 7,600 500,000 6,312 4,116 -60.05% --
December 31, 1988............... 15,200 500,000 13,292 10,990 -24.90 1,070.47%
December 31, 1989............... 22,800 500,000 22,860 19,093 -10.30 337.59
December 31, 1990............... 30,400 500,000 29,698 26,056 -7.01 178.58
December 31, 1991............... 38,000 500,000 42,049 38,532 0.52 115.51
December 31, 1992............... 45,600 500,000 50,982 47,893 1.55 82.89
December 31, 1993............... 53,200 500,000 62,275 59,766 3.17 63.34
December 31, 1994............... 60,800 500,000 67,232 65,301 1.71 50.46
December 31, 1995............... 68,400 500,000 95,428 94,076 6.74 41.41
December 31, 1996............... 76,000 500,000 115,422 114,650 7.80 34.74
December 31, 1997............... 83,600 500,000 152,815 152,622 10.28 29.65
December 31, 1998............... 91,200 500,000 188,574 188,574 11.28 25.65
December 31, 1999............... 98,800 500,000 212,631 212,631 10.94 22.43
</TABLE>
ZENITH WESTPEAK GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993.................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1993................. 7,600 500,000 7,193 4,996 -46.47% --
December 31, 1994................. 15,200 500,000 13,220 10,928 -25.22 1,065.53%
December 31, 1995................. 22,800 500,000 25,545 21,788 -2.69 336.86
December 31, 1996................. 30,400 500,000 36,654 33,023 3.84 178.34
December 31, 1997................. 38,000 500,000 56,154 52,647 12.41 115.39
December 31, 1998................. 45,600 500,000 75,793 72,752 14.86 82.83
December 31, 1999................. 53,200 500,000 88,374 85,912 13.02 63.30
</TABLE>
ZENITH HARRIS OAKMARK MID CAP VALUE SUB-ACCOUNT**
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993.................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1993................. 7,600 500,000 7,228 5,031 -45.91% --
December 31, 1994................. 15,200 500,000 13,353 11,061 -24.40 1,065.53%
December 31, 1995................. 22,800 500,000 24,889 21,133 -4.48 336.86
December 31, 1996................. 30,400 500,000 35,476 31,845 2.15 178.34
December 31, 1997................. 38,000 500,000 48,480 44,974 6.36 115.39
December 31, 1998................. 45,600 500,000 50,223 47,182 1.08 82.83
December 31, 1999................. 53,200 500,000 55,533 53,072 -0.07 63.30
</TABLE>
ZENITH LOOMIS SAYLES SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 2, 1994....................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1994................. 7,600 500,000 6,066 3,870 -63.71% --
December 31, 1995................. 15,200 500,000 15,199 12,896 -13.34 1,075.45%
December 31, 1996................. 22,800 500,000 26,727 22,960 0.42 338.33
December 31, 1997................. 30,400 500,000 40,797 37,155 9.45 178.83
December 31, 1998................. 38,000 500,000 44,979 41,462 3.28 115.62
December 31, 1999................. 45,600 500,000 66,985 63,896 10.72 82.96
</TABLE>
A-66
<PAGE> 71
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1994................. 7,600 500,000 6,860 4,664 -94.62% --
December 31, 1995................. 15,200 500,000 14,766 12,412 -27.62 3,427.01%
December 31, 1996................. 22,800 500,000 23,463 19,644 -12.43 539.22
December 31, 1997................. 30,400 500,000 33,256 29,562 -1.67 236.33
December 31, 1998................. 38,000 500,000 42,349 38,780 0.94 140.81
December 31, 1999................. 45,600 500,000 45,815 42,484 -2.66 96.62
</TABLE>
ZENITH MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1994................. 7,600 500,000 7,029 4,833 -93.34% --
December 31, 1995................. 15,200 500,000 13,852 11,498 -36.70 3,427.01%
December 31, 1996................. 22,800 500,000 20,905 17,086 -23.47 539.22
December 31, 1997................. 30,400 500,000 26,434 22,740 -17.07 236.33
December 31, 1998................. 38,000 500,000 34,337 30,768 -9.72 140.81
December 31, 1999................. 45,600 500,000 48,984 45,654 0.04 96.62
</TABLE>
ZENITH DAVIS VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1994................. 7,600 500,000 6,648 4,451 -95.93% --
December 31, 1995................. 15,200 500,000 15,416 13,062 -21.17 3,427.01%
December 31, 1996................. 22,800 500,000 25,666 21,847 -3.63 539.22
December 31, 1997................. 30,400 500,000 40,223 36,529 11.18 236.33
December 31, 1998................. 38,000 500,000 52,203 48,634 11.45 140.81
December 31, 1999................. 45,600 500,000 67,287 63,957 12.65 96.62
</TABLE>
ZENITH ALGER EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1994................. 7,600 500,000 6,486 4,290 -96.73% --
December 31, 1995................. 15,200 500,000 15,428 13,074 -21.05 3,427.01%
December 31, 1996................. 22,800 500,000 23,632 19,813 -11.73 539.22
December 31, 1997................. 30,400 500,000 35,582 31,888 2.88 236.33
December 31, 1998................. 38,000 500,000 59,346 55,777 17.90 140.81
December 31, 1999................. 45,600 500,000 85,934 82,603 22.26 96.62
</TABLE>
ZENITH MFS INVESTORS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999.................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1999................. 7,600 500,000 6,389 4,193 -58.77% --
</TABLE>
ZENITH MFS RESEARCH MANAGERS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999.................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1999................. 7,600 500,000 7,501 5,305 -41.47% --
</TABLE>
A-67
<PAGE> 72
METROPOLITAN JANUS MID CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
March 3, 1997..................... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1997................. 7,600 500,000 7,983 5,786 -28.00% --
December 31, 1998................. 15,200 500,000 18,661 16,380 5.75 831.66%
December 31, 1999................. 22,800 500,000 54,833 51,087 50.76 298.61
</TABLE>
METROPOLITAN RUSSELL 2000 INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
November 9, 1998.................. $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1998................. 7,600 500,000 7,365 5,168 -93.32% --
December 31, 1999................. 15,200 500,000 15,698 13,334 -19.16 3,715.91%
</TABLE>
VIP EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 9, 1986................ $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1986.............. 7,600 500,000 6,892 4,696 -87.96% --
December 31, 1987.............. 15,200 500,000 11,663 9,309 -53.92 2,847.86%
December 31, 1988.............. 22,800 500,000 20,156 16,337 -25.55 505.26
December 31, 1989.............. 30,400 500,000 29,607 25,914 -9.13 227.75
December 31, 1990.............. 38,000 500,000 31,155 27,586 -14.31 137.27
December 31, 1991.............. 45,600 500,000 46,957 43,627 -1.62 94.76
December 31, 1992.............. 53,200 500,000 61,050 58,299 2.83 70.66
December 31, 1993.............. 60,800 500,000 77,645 75,473 5.74 55.37
December 31, 1994.............. 68,400 500,000 88,410 86,818 5.56 44.89
December 31, 1995.............. 76,000 500,000 125,911 124,898 10.18 37.32
December 31, 1996.............. 83,600 500,000 148,987 148,552 10.56 31.62
December 31, 1997.............. 91,200 500,000 196,143 196,143 12.66 27.20
December 31, 1998.............. 98,800 500,000 225,373 225,373 12.44 23.68
December 31, 1999.............. 106,400 500,000 244,778 244,778 11.58 20.82
</TABLE>
VIP OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
January 28, 1987................ $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1987............... 7,600 500,000 5,608 3,412 -58.00% --
December 31, 1988............... 15,200 500,000 13,097 10,836 -21.57 731.16%
December 31, 1989............... 22,800 500,000 23,475 19,750 -7.29 279.55
December 31, 1990............... 30,400 500,000 28,995 25,395 -7.29 158.04
December 31, 1991............... 38,000 500,000 37,537 34,062 -3.72 105.56
December 31, 1992............... 45,600 500,000 38,373 35,477 -7.30 77.19
December 31, 1993............... 53,200 500,000 60,363 58,046 2.22 59.70
December 31, 1994............... 60,800 500,000 66,482 64,745 1.42 47.97
December 31, 1995............... 68,400 500,000 80,297 79,139 2.95 39.61
December 31, 1996............... 76,000 500,000 96,702 96,123 4.29 33.39
December 31, 1997............... 83,600 500,000 114,469 114,469 5.22 28.61
December 31, 1998............... 91,200 500,000 135,233 135,233 5.99 24.82
December 31, 1999............... 98,800 500,000 200,703 200,703 9.81 21.77
</TABLE>
A-68
<PAGE> 73
VIP HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 19, 1985............. $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1985.............. 7,600 500,000 7,204 5,008 -77.19% --
December 31, 1986.............. 15,200 500,000 14,713 12,369 -24.08 2,440.56%
December 31, 1987.............. 22,800 500,000 20,838 17,029 -21.56 477.39
December 31, 1988.............. 30,400 500,000 29,216 25,532 -9.65 220.41
December 31, 1989.............. 38,000 500,000 33,486 29,928 -10.41 134.18
December 31, 1990.............. 45,600 500,000 38,340 35,057 -9.49 93.12
December 31, 1991.............. 53,200 500,000 57,521 54,818 0.91 69.67
December 31, 1992.............. 60,800 500,000 76,305 74,181 5.21 54.71
December 31, 1993.............. 68,400 500,000 97,579 96,035 7.78 44.43
December 31, 1994.............. 76,000 500,000 101,607 100,642 5.76 36.98
December 31, 1995.............. 83,600 500,000 128,432 128,045 7.83 31.37
December 31, 1996.............. 91,200 500,000 151,801 151,801 8.48 27.00
December 31, 1997.............. 98,800 500,000 184,027 184,027 9.43 23.52
December 31, 1998.............. 106,400 500,000 181,764 181,764 7.54 20.69
December 31, 1999.............. 114,000 500,000 201,900 201,900 7.46 18.34
</TABLE>
VIP II ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 6, 1989............... $ 7,600 $500,000 $ 7,092 $ 4,896 -- --
December 31, 1989............... 7,600 500,000 6,855 4,659 -78.56% --
December 31, 1990............... 15,200 500,000 13,624 11,280 -32.12 2,221.58%
December 31, 1991............... 22,800 500,000 22,933 19,125 -12.91 460.64
December 31, 1992............... 30,400 500,000 31,700 28,017 -4.46 215.86
December 31, 1993............... 38,000 500,000 44,519 40,960 3.24 132.24
December 31, 1994............... 45,600 500,000 47,025 43,743 -1.48 92.09
December 31, 1995............... 53,200 500,000 61,048 58,345 2.77 69.04
December 31, 1996............... 60,800 500,000 75,823 73,700 5.00 54.29
December 31, 1997............... 68,400 500,000 97,016 95,472 7.59 44.14
December 31, 1998............... 76,000 500,000 117,933 116,968 8.71 36.77
December 31, 1999............... 83,600 500,000 136,890 136,504 8.91 31.20
</TABLE>
OPTION 2 DEATH BENEFIT
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- ---------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................. $ 7,600 $ 507,091 $ 7,091 $ 4,895 -- --
December 31, 1983............... 7,600 507,284 7,284 5,088 -68.44% --
December 31, 1984............... 15,200 513,182 13,182 10,848 -34.56 2,102.49%
December 31, 1985............... 22,800 529,384 29,384 25,586 8.74 461.99
December 31, 1986............... 30,400 562,830 62,830 59,157 38.41 225.00
December 31, 1987............... 38,000 599,734 99,734 96,186 41.32 142.31
December 31, 1988............... 45,600 596,281 96,281 93,047 25.22 99.02
December 31, 1989............... 53,200 630,908 130,908 128,253 26.05 76.34
December 31, 1990............... 60,800 630,399 130,399 128,324 18.99 60.20
December 31, 1991............... 68,400 706,060 206,060 204,563 24.23 51.70
December 31, 1992............... 76,000 698,980 198,980 198,063 18.86 43.09
December 31, 1993............... 83,600 733,787 233,787 233,449 18.14 37.60
December 31, 1994............... 91,200 720,032 220,032 220,032 14.22 32.30
December 31, 1995............... 98,800 811,518 311,518 311,518 16.79 29.98
December 31, 1996............... 106,400 880,554 380,554 380,554 17.08 27.62
December 31, 1997............... 114,000 972,837 472,837 472,837 17.57 25.88
December 31, 1998............... 121,600 1,136,943 636,943 636,943 18.87 25.02
December 31, 1999............... 129,200 1,239,062 739,062 739,062 18.53 23.62
</TABLE>
A-69
<PAGE> 74
ZENITH BACK BAY BOND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1983................. 7,600 506,867 6,867 4,671 -75.31% --
December 31, 1984................. 15,200 514,206 14,206 11,872 -26.29 2,105.86%
December 31, 1985................. 22,800 523,204 23,204 19,406 -11.60 458.92
December 31, 1986................. 30,400 532,594 32,594 28,921 -2.69 218.95
December 31, 1987................. 38,000 539,074 39,074 35,526 -2.86 135.42
December 31, 1988................. 45,600 547,993 47,993 44,759 -0.65 95.26
December 31, 1989................. 53,200 559,475 59,475 56,820 1.96 72.27
December 31, 1990................. 60,800 569,963 69,963 67,888 2.85 57.46
December 31, 1991................. 68,400 588,322 88,322 86,826 5.41 47.55
December 31, 1992................. 76,000 600,905 100,905 99,988 5.56 40.14
December 31, 1993................. 83,600 619,032 119,032 118,694 6.39 34.70
December 31, 1994................. 91,200 620,198 120,198 120,198 4.62 30.03
December 31, 1995................. 98,800 651,557 151,557 151,557 6.51 26.96
December 31, 1996................. 106,400 663,906 163,906 163,906 6.08 24.09
December 31, 1997................. 114,000 686,814 186,814 186,814 6.43 21.88
December 31, 1998................. 121,600 708,665 208,665 208,665 6.55 20.01
December 31, 1999................. 129,200 712,315 212,315 212,315 5.67 18.16
</TABLE>
ZENITH BACK BAY MONEY MARKET SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
August 26, 1983................ $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1983.............. 7,600 506,882 6,882 4,686 -75.09% --
December 31, 1984.............. 15,200 513,773 13,773 11,439 -29.78 2,104.43%
December 31, 1985.............. 22,800 521,052 21,052 17,254 -19.63 457.85
December 31, 1986.............. 30,400 528,418 28,418 24,745 -10.94 218.09
December 31, 1987.............. 38,000 536,071 36,071 32,523 -6.60 135.06
December 31, 1988.............. 45,600 544,491 44,491 41,257 -3.52 94.97
December 31, 1989.............. 53,200 554,175 54,175 51,521 -0.96 71.95
December 31, 1990.............. 60,800 564,102 64,102 62,026 0.52 57.19
December 31, 1991.............. 68,400 573,550 73,550 72,054 1.19 46.98
December 31, 1992.............. 76,000 581,840 81,840 80,923 1.29 39.52
December 31, 1993.............. 83,600 589,904 89,904 89,566 1.28 33.87
December 31, 1994.............. 91,200 599,222 99,222 99,222 1.43 29.51
December 31, 1995.............. 98,800 610,423 110,423 110,423 1.73 26.07
December 31, 1996.............. 106,400 621,439 121,439 121,439 1.91 23.26
December 31, 1997.............. 114,000 633,137 133,137 133,137 2.08 20.95
December 31, 1998.............. 121,600 645,314 145,314 145,314 2.23 19.01
December 31, 1999.............. 129,200 657,513 157,513 157,513 2.32 17.36
</TABLE>
ZENITH WESTPEAK STOCK INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987..................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1987............... 7,600 505,562 5,562 3,365 -70.44% --
December 31, 1988............... 15,200 512,912 12,912 10,610 -27.27 1,089.39%
December 31, 1989............... 22,800 524,357 24,357 20,590 -6.00 346.31%
December 31, 1990............... 30,400 528,809 28,809 25,167 -8.55 183.53
December 31, 1991............... 38,000 543,831 43,831 40,314 2.22 120.17
December 31, 1992............... 45,600 552,917 52,917 49,828 2.80 86.90
December 31, 1993............... 53,200 563,869 63,869 61,359 3.88 67.05
December 31, 1994............... 60,800 570,096 70,096 68,165 2.73 53.76
December 31, 1995............... 68,400 603,325 103,325 101,974 8.43 45.41
December 31, 1996............... 76,000 631,638 131,638 130,866 10.25 39.06
December 31, 1997............... 83,600 680,939 180,939 180,746 13.08 34.69
December 31, 1998............... 91,200 736,836 236,836 236,836 14.68 31.32
December 31, 1999............... 98,800 789,959 289,959 289,959 15.16 28.50
</TABLE>
A-70
<PAGE> 75
ZENITH BACK BAY MANAGED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 1, 1987..................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1987............... 7,600 506,305 6,305 4,109 -60.15% --
December 31, 1988............... 15,200 513,266 13,266 10,964 -25.06 1,089.90%
December 31, 1989............... 22,800 522,790 22,790 19,024 -10.51 345.76
December 31, 1990............... 30,400 529,568 29,568 25,927 -7.23 183.66
December 31, 1991............... 38,000 541,802 41,802 38,285 0.28 119.96
December 31, 1992............... 45,600 550,600 50,600 47,511 1.30 86.73
December 31, 1993............... 53,200 561,703 61,703 59,193 2.91 66.93
December 31, 1994............... 60,800 566,507 66,507 64,577 1.44 53.60
December 31, 1995............... 68,400 594,259 94,259 92,908 6.48 45.09
December 31, 1996............... 76,000 613,859 113,859 113,086 7.54 38.53
December 31, 1997............... 83,600 650,597 150,597 150,404 10.03 33.95
December 31, 1998............... 91,200 685,630 185,630 185,630 11.04 30.27
December 31, 1999............... 98,800 709,028 209,028 209,028 10.70 27.07
</TABLE>
ZENITH WESTPEAK GROWTH AND INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993.................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1993................. 7,600 507,184 7,184 4,988 -46.61% --
December 31, 1994................. 15,200 513,192 13,192 10,900 -25.40 1,084.74%
December 31, 1995................. 22,800 525,461 25,461 21,704 -2.92 345.94
December 31, 1996................. 30,400 536,481 36,481 32,850 3.60 184.56
December 31, 1997................. 38,000 555,798 55,798 52,292 12.14 121.27
December 31, 1998................. 45,600 575,169 75,169 72,128 14.58 88.41
December 31, 1999................. 53,200 587,477 87,477 85,015 12.74 68.28
</TABLE>
ZENITH HARRIS OAKMARK MID CAP VALUE SUB-ACCOUNT**
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1993.................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1993................. 7,600 507,219 7,219 5,022 -46.05% --
December 31, 1994................. 15,200 513,324 13,324 11,032 -24.58 1,084.93%
December 31, 1995................. 22,800 524,808 24,808 21,051 -4.71 345.71
December 31, 1996................. 30,400 535,309 35,309 31,677 1.90 184.37
December 31, 1997................. 38,000 548,176 48,176 44,670 6.10 120.49
December 31, 1998................. 45,600 549,816 49,816 46,775 0.80 86.60
December 31, 1999................. 53,200 554,990 54,990 52,528 -0.35 66.51
</TABLE>
ZENITH LOOMIS SAYLES SMALL CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
May 2, 1994....................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1994................. 7,600 506,060 6,060 3,864 -63.80% --
December 31, 1995................. 15,200 515,169 15,169 12,867 -13.52 1,097.78%
December 31, 1996................. 22,800 526,642 26,642 22,875 0.20 347.88
December 31, 1997................. 30,400 540,612 40,612 36,970 9.21 185.76
December 31, 1998................. 38,000 544,698 44,698 41,181 3.03 120.38
December 31, 1999................. 45,600 566,459 66,459 63,369 10.45 87.94
</TABLE>
A-71
<PAGE> 76
ZENITH BALANCED SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1994................. 7,600 506,857 6,857 4,661 -94.64% --
December 31, 1995................. 15,200 514,747 14,747 12,393 -27.81 3,518.11%
December 31, 1996................. 22,800 523,408 23,408 19,589 -12.65 554.04
December 31, 1997................. 30,400 533,137 33,137 29,443 -1.91 244.18
December 31, 1998................. 38,000 542,137 42,137 38,568 0.68 146.40
December 31, 1999................. 45,600 545,516 45,516 42,186 -2.92 100.69
</TABLE>
ZENITH MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1994................. 7,600 507,026 7,026 4,830 -93.36% --
December 31, 1995................. 15,200 513,835 13,835 11,481 -36.87 3,512.48%
December 31, 1996................. 22,800 520,859 20,859 17,040 -23.68 552.45
December 31, 1997................. 30,400 526,345 26,345 22,651 -17.30 242.60
December 31, 1998................. 38,000 534,177 34,177 30,608 -9.96 145.37
December 31, 1999................. 45,600 548,682 48,682 45,351 -0.20 100.96
</TABLE>
ZENITH DAVIS VENTURE VALUE SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1994................. 7,600 506,645 6,645 4,449 -95.94% --
December 31, 1995................. 15,200 515,396 15,396 13,042 -21.37 3,522.10%
December 31, 1996................. 22,800 525,605 25,605 21,786 -3.86 555.42
December 31, 1997................. 30,400 540,072 40,072 36,378 10.92 245.78
December 31, 1998................. 38,000 551,926 51,926 48,357 11.19 147.65
December 31, 1999................. 45,600 566,816 66,816 63,485 12.37 102.49
</TABLE>
ZENITH ALGER EQUITY GROWTH SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 31, 1994.................. $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1994................. 7,600 506,484 6,484 4,288 -96.75% --
December 31, 1995................. 15,200 515,407 15,407 13,053 -21.25 3,522.17%
December 31, 1996................. 22,800 523,576 23,576 19,757 -11.96 554.15
December 31, 1997................. 30,400 535,451 35,451 31,757 2.63 244.71
December 31, 1998................. 38,000 559,034 59,034 55,465 17.63 148.54
December 31, 1999................. 45,600 585,325 85,325 81,995 21.98 104.02
</TABLE>
ZENITH MFS INVESTORS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999.................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1999................. 7,600 506,381 6,381 4,185 -58.89% --
</TABLE>
ZENITH MFS RESEARCH MANAGERS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1999.................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1999................. 7,600 507,492 7,492 5,295 -41.62% --
</TABLE>
A-72
<PAGE> 77
METROPOLITAN JANUS MID CAP SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
March 3, 1997..................... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1997................. 7,600 507,972 7,972 5,775 -28.16% --
December 31, 1998................. 15,200 518,617 18,617 16,335 5.54 851.51%
December 31, 1999................. 22,800 554,634 54,634 50,888 50.48 315.15
</TABLE>
METROPOLITAN RUSSELL 2000 INDEX SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
November 9, 1998.................. $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1998................. 7,600 507,363 7,363 5,166 -93.34% --
December 31, 1999................. 15,200 515,681 15,681 13,316 -19.34 3,822.85%
</TABLE>
VIP EQUITY-INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
October 9, 1986................. $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1986............... 7,600 506,890 6,890 4,693 -87.99% --
December 31, 1987............... 15,200 511,648 11,648 9,294 -54.06 2,905.22%
December 31, 1988............... 22,800 520,111 20,111 16,292 -25.75 517.04
December 31, 1989............... 30,400 529,504 29,504 25,810 -9.36 234.46
December 31, 1990............... 38,000 531,011 31,011 27,442 -14.54 141.30
December 31, 1991............... 45,600 546,668 46,668 43,338 -1.87 98.84
December 31, 1992............... 53,200 560,575 60,575 57,824 2.57 74.61
December 31, 1993............... 60,800 576,904 76,904 74,732 5.48 59.32
December 31, 1994............... 68,400 587,421 87,421 85,828 5.29 48.60
December 31, 1995............... 76,000 624,309 124,309 123,296 9.92 41.71
December 31, 1996............... 83,600 646,909 146,909 146,475 10.31 36.08
December 31, 1997............... 91,200 693,197 193,197 193,197 12.42 32.24
December 31, 1998............... 98,800 721,721 221,721 221,721 12.21 28.79
December 31, 1999............... 106,400 740,452 240,452 240,452 11.35 25.80
</TABLE>
VIP OVERSEAS SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
January 28, 1987................ $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1987............... 7,600 505,599 5,599 3,402 -58.13% --
December 31, 1988............... 15,200 513,063 13,063 10,803 -21.75 743.04%
December 31, 1989............... 22,800 523,388 23,388 19,663 -7.51 286.22
December 31, 1990............... 30,400 528,845 28,845 25,245 -7.53 162.34
December 31, 1991............... 38,000 537,286 37,286 33,811 -3.97 109.18
December 31, 1992............... 45,600 538,053 38,053 35,157 -7.56 79.89
December 31, 1993............... 53,200 559,772 59,772 57,455 1.96 62.98
December 31, 1994............... 60,800 565,722 65,722 63,985 1.15 50.93
December 31, 1995............... 68,400 579,274 79,274 78,116 2.69 42.61
December 31, 1996............... 76,000 595,368 95,368 94,789 4.03 36.50
December 31, 1997............... 83,600 612,814 112,814 112,814 4.98 31.82
December 31, 1998............... 91,200 633,148 133,148 133,148 5.76 28.18
December 31, 1999............... 98,800 697,366 197,366 197,366 9.59 26.07
</TABLE>
A-73
<PAGE> 78
VIP HIGH INCOME SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 19, 1985............. $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1985.............. 7,600 507,201 7,201 5,004 -77.25% --
December 31, 1986.............. 15,200 514,692 14,692 12,349 -24.26 2,500.37%
December 31, 1987.............. 22,800 520,787 20,787 16,978 -21.77 488.75
December 31, 1988.............. 30,400 529,109 29,109 25,426 -9.88 226.79
December 31, 1989.............. 38,000 533,319 33,319 29,760 -10.65 138.40
December 31, 1990.............. 45,600 538,094 38,094 34,812 -9.74 96.42
December 31, 1991.............. 53,200 557,058 57,058 54,355 0.65 73.34
December 31, 1992.............. 60,800 575,558 75,558 73,434 4.95 58.55
December 31, 1993.............. 68,400 596,462 96,462 94,917 7.51 48.45
December 31, 1994.............. 76,000 600,301 100,301 99,335 5.50 40.56
December 31, 1995.............. 83,600 626,638 126,638 126,252 7.58 35.24
December 31, 1996.............. 91,200 649,540 149,540 149,540 8.23 31.01
December 31, 1997.............. 98,800 681,066 181,066 181,066 9.19 27.79
December 31, 1998.............. 106,400 678,600 178,600 178,600 7.30 24.54
December 31, 1999.............. 114,000 698,070 198,070 198,070 7.22 22.22
</TABLE>
VIP II ASSET MANAGER SUB-ACCOUNT
<TABLE>
<CAPTION>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
September 6, 1989............... $ 7,600 $507,091 $ 7,091 $ 4,895 -- --
December 31, 1989............... 7,600 506,851 6,851 4,655 -78.61% --
December 31, 1990............... 15,200 513,606 13,606 11,262 -32.28 2,270.91%
December 31, 1991............... 22,800 522,878 22,878 19,069 -13.12 472.60
December 31, 1992............... 30,400 531,584 31,584 27,900 -4.69 222.60
December 31, 1993............... 38,000 544,289 44,289 40,730 3.00 137.71
December 31, 1994............... 45,600 546,707 46,707 43,425 -1.74 96.05
December 31, 1995............... 53,200 560,534 60,534 57,831 2.51 72.89
December 31, 1996............... 60,800 575,061 75,061 72,937 4.73 58.08
December 31, 1997............... 68,400 595,880 95,880 94,335 7.32 48.11
December 31, 1998............... 76,000 616,388 116,388 115,423 8.45 40.84
December 31, 1999............... 83,600 634,944 134,944 134,558 8.66 35.28
</TABLE>
- ------------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Harris
Oakmark Mid Cap Value Series' investment advisory fee of .70% of average
daily net assets for the period through April 30, 1998 and .75% thereafter.
A-74
<PAGE> 79
APPENDIX C
LONG TERM MARKET TRENDS
The information below compares the average annual returns of common stock,
high grade corporate bonds and 30-day U.S. Treasury bills over 20-year and
30-year holding periods.* The average annual returns assume the reinvestment of
dividends, capital gains and interest. This is an historical record and does not
predict future performance. The information does not reflect Policy charges.
The data indicates that, historically, the investment performance of common
stocks over long periods has been positive and generally superior to that of
long-term, high grade debt securities. Common stocks have, however, been subject
to more dramatic market adjustments over short periods.
Over the 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 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
0- 5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 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-75
<PAGE> 80
APPENDIX D
USES OF LIFE INSURANCE
These are examples of ways the Policy can be used to address certain
financial objectives.
FAMILY INCOME PROTECTION
You may purchase life insurance on the lives of family income earners to
provide a death benefit to cover final expenses, and continue current family
income. The amount of insurance you purchase should be an amount which will
provide a death benefit that, when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the individual's income.
ESTATE PROTECTION
A trust may purchase life insurance on the life of the person whose estate
will incur federal estate taxes upon the person's death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. On the
insured's death, the trustee makes the death proceeds available to the estate
for the payment of estate tax costs.
EDUCATION FUNDING
You may purchase life insurance on the life of the parent(s) or primary
person funding an education. The amount of insurance you purchase should equal
the total education cost projected at a reasonable inflation rate.
In the event of death, the guaranteed death benefit is available to help pay
the education costs. If the insured lives through the education years, cash
value may be accessed to meet education costs. Loans or surrenders reduce the
Policy's death benefit.
MORTGAGE PROTECTION
You may purchase life insurance on the life of the person responsible for
making mortgage payments. The amount of insurance you purchase should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to pay the mortgage balance.
During the insured's lifetime, cash value may be accessed late in the
mortgage term to help make the remaining mortgage payments. Loans or surrenders
reduce the Policy's death benefit.
KEY PERSON PROTECTION
A business may purchase life insurance on the life of a key person in an
amount equal to the key person's value, considering salary, benefits, and
contribution to the business. On the key person's death, the business uses the
death benefit to ease the interruption of business operations and/or to provide
a replacement fund for hiring a new executive.
BUSINESS CONTINUATION PROTECTION
You can insure each business owner in an amount equal to the value of each
owner's business interest. In the event of death, the guaranteed death benefit
provides funds for the purchase of the deceased's business interest by the
business, or surviving owners, from the deceased owner's heirs.
RETIREMENT INCOME
You may purchase life insurance on the life of a family income earner during
his or her working life. If the insured lives to retirement, cash value may be
accessed to provide retirement payments. In the event of the insured's death,
the proceeds may be used to provide retirement income to his or her spouse.
Loans or surrenders reduce the Policy's death benefit.
Because the Policy provides a death benefit and cash value accumulation, you
can use the Policy for various individual and business planning purposes. If you
purchase the Policy for such purposes, you assume certain risks, particularly if
the Policy's cash value, as opposed to its death benefit, will be the principal
Policy feature used for such planning purposes. If the investment performance of
the Sub-Accounts to which cash value is allocated is poorer than expected, or if
you don't pay sufficient premiums or maintain cash values, the Policy may lapse
or may not accumulate sufficient cash value or net cash value to fund the
purpose for which you purchased the Policy. Because the Policy is designed to
provide benefits on a long-term basis, before purchasing a Policy for a
specialized purpose, you should consider whether the long-term nature of the
Policy is consistent with your goals. If you wish to access your Policy's cash
value, through loans, surrenders or withdrawals, you should consult your tax
advisor about possible tax consequences. (See "Tax Considerations".)
A-76
<PAGE> 81
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products" in
March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax Treatment
of Life Insurance Products and Other Retirement Savings Plans". Because it is a
convenient summary of the relevant tax characteristics of these products and
plans, we have reprinted it here, and added footnotes to reflect exceptions to
the general rules.
------------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND OTHER RETIREMENT
SAVINGS PLANS
<TABLE>
<CAPTION>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- ----- ---------
<S> <C> <C> <C> <C>
Annual Contribution Limits No No Yes Yes
Income Eligibility Limits No No Yes** No
Borrowing Treated as
Distributions No* Yes Loans not allowed Yes, beyond $50,000
Income Ordering Rules (Income
included in First
Distribution) No* Yes Yes Yes
Early Withdrawal Penalties No* Yes*** Yes*** Yes***
Minimum Distribution Rules by
Age 70 1/2 No No Yes Yes
Maximum Annual Distribution
Rules No No Yes Yes
Anti-discrimination Rules No No No Yes
</TABLE>
- ------------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
This appendix is not tax advice. You should consult with your own tax advisor
for more complete information.
A-77
<PAGE> 82
APPENDIX F
TAX LAW AND THE DEATH BENEFIT
In order to meet the Internal Revenue Code's definition of life insurance,
the Policies provide that the death benefit will not be less than a percentage
of the Policy's cash value. These percentages are set forth below.
<TABLE>
<CAPTION>
AGE OF INSURED AGE OF INSURED AT
AT START OF THE PERCENTAGE OF START OF THE PERCENTAGE OF
POLICY YEAR CASH VALUE* POLICY YEAR CASH VALUE*
- --------------- ------------- ----------------- -------------
<S> <C> <C> <C>
0 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 through 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 through 99 101
59 134 100 100
60 130
</TABLE>
- ------------
* including the pro rata portion of any Monthly Deduction made for a period
beyond the date of death.
A-78
<PAGE> 83
<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> 84
NEW ENGLAND LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MA 02116
RECEIPT
This is to acknowledge receipt of a Zenith Flexible Life Prospectus dated May 1,
2000. This Variable Life Policy is offered by New England Life Insurance
Company.
<TABLE>
<S> <C>
- ----------------------------------------------------- -----------------------------------------------------
(Date) (Client's Signature)
</TABLE>
<PAGE> 85
NEW ENGLAND LIFE
INSURANCE COMPANY
Zenith Flexible Life
Flexible Premium Adjustable
Variable Life Insurance Policies
Supplement Dated May 1, 2000 to
Prospectuses Dated April 30, 1999 and October 25, 1999
This supplement updates certain information contained in the prospectuses
dated April 30, 1999 and October 25, 1999. You should read and retain this
supplement. A complete prospectus dated May 1, 2000 is available free of charge
upon written request to New England Life Insurance Company ("NELICO"). The May
1, 2000 prospectus describes the Policies as they may have been modified since
the date you purchased your Policy; accordingly, certain benefits and charges
discussed therein may differ from the benefits and charges of your Policy.
NELICO is an indirect wholly-owned subsidiary of Metropolitan Life Insurance
Company ("MetLife"). MetLife is a wholly-owned subsidiary of MetLife, Inc., a
publicly-traded company. NELICO's Home Office is 501 Boylston Street, Boston,
Massachusetts 02116.
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 THE SUB-ACCOUNTS OR ELIGIBLE FUNDS WILL
PERFORM.
<PAGE> 86
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs of the
services or benefits that are implied by the name of the charge or that are
associated with the particular Policy. For example, the sales charge and
Deferred Sales Charge may not fully cover all of our sales and distribution
expenses, and we may use proceeds from other charges, including the mortality
and expense risk charge, to help cover those expenses. We can profit from
certain Policy charges.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds.
The following table shows the annual operating expenses for each New England
Zenith Fund series, based on actual expenses for 1999, after any applicable
expense cap or expense deferral arrangement:
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY EXPENSE CAP)
<TABLE>
<CAPTION>
BACK BACK
BAY BAY BACK WESTPEAK LOOMIS
ADVISORS ADVISORS BAY WESTPEAK GROWTH SAYLES
CAPITAL BOND MONEY ADVISORS STOCK AND SMALL
GROWTH INCOME MARKET MANAGED INDEX INCOME CAP
SERIES SERIES SERIES SERIES SERIES SERIES SERIES*
------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee........................ .62% .40% .35% .50% .25% .68% .90%
Other Expenses........................ .04% .08% .05% .08% .10% .06% .10%
--- --- --- --- --- --- ----
Total Series Operating
Expenses................... .66% .48% .40% .58% .35% .74% 1.00%
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE DEFERRAL)
<TABLE>
<CAPTION>
HARRIS MORGAN
OAKMARK STANLEY DAVIS ALGER MFS
MID CAP INTERNATIONAL VENTURE EQUITY MFS RESEARCH
VALUE BALANCED MAGNUM VALUE GROWTH INVESTORS MANAGERS
SERIES SERIES EQUITY SERIES SERIES SERIES SERIES* SERIES*
------- -------- -------------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee........................... .75% .70% .90% .75% .75% .75% .75%
Other Expenses........................... .13% .07% .40% .06% .05% .15% .15%
--- --- ---- --- --- --- ---
Total Series Operating
Expenses...................... .88% .77% 1.30% .81% .80% .90% .90%
</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%; and MFS Research Managers
Series, 2.03%, both on an annualized basis since the Series' start date of
April 30, 1999. 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%.
Our affiliate, New England Investment Management, Inc., advises the series
of the Zenith Fund except for the Capital Growth Series. 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 of the Harris Oakmark Mid Cap
Value, Morgan Stanley International Magnum Equity, MFS Investors, and MFS
Research Managers Series that exceed .90% of average daily net assets (1.30% for
the Morgan Stanley International Magnum Equity Series) in the year the series
incurs them and charges those expenses to the series in a future year if actual
expenses of the series are below the limit. New England Investment Management
may end these expense limits at any time.
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<PAGE> 87
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 based on the year ended December 31, 1999 and current expense
subsidies (in the case of the Putnam Large Cap Growth Portfolio, anticipated
expenses for 2000) as a percentage of Portfolio net assets.
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ------------
<S> <C> <C> <C>
Putnam Large Cap Growth..................................... .80% .20% 1.00%*
Janus Mid Cap............................................... .67% .04% .71%
Russell 2000(R) Index....................................... .25% .30% .55%*
</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 (i) July 1, 2002 and (ii) the date when the
Portfolio's net assets reach $100 million. Without this subsidy, the
anticipated total annual expenses of the Putnam Large Cap Growth Portfolio
would be 1.39%. MetLife also paid such expenses that exceeded .20% of net
assets for the Russell 2000 Index Portfolio until December 3, 1999. Without
this subsidy the total annual expenses of the Russell 2000 Index Portfolio for
1999 would have been .89%. Beginning February 22, 2000, MetLife is paying such
expenses that exceed .30% of the Russell 2000 Index Portfolio's net assets
until the earlier of (i) April 30, 2001 and (ii) the date when the Portfolio's
assets reach $200 million. Total Annual Expenses for the Russell 2000 Index
Portfolio are shown as if this subsidy was in effect for the entire current
year. MetLife can terminate these arrangements at any time upon notice to the
Board of Directors and to Fund shareholders.
The investment adviser for VIP and VIP II is Fidelity Management & Research
Company ("FMR"). The Portfolios of VIP and VIP II pay investment management fees
to FMR and also bear other expenses. For the year ended December 31, 1999, the
total operating expenses of the Portfolios, as a percentage of Portfolio average
net assets, were:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ------------
<S> <C> <C> <C>
VIP Equity-Income........................................... .48% .09% .57%*
VIP Overseas................................................ .73% .18% .91%*
VIP High Income............................................. .58% .11% .69%
VIP II Asset Manager........................................ .53% .10% .63%*
</TABLE>
- ------------
* Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. If we included
these reductions, total annual expenses would have been .56% for VIP
Equity-Income Portfolio, .87% for VIP Overseas Portfolio and .62% for VIP II
Asset Manager Portfolio.
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. New England Securities may also receive brokerage commissions on
securities transactions initiated by an investment adviser.
OTHER POLICY FEATURES
ACCELERATION OF DEATH BENEFIT RIDER
This feature is not currently offered and is deleted from the prospectus.
TRANSFER OPTION
After the Right to Return the Policy period, you may transfer your Policy's
cash value between Sub-Accounts. We reserve the right to limit sub-account
transfers to four per Policy year (twelve per Policy year for Policies issued in
New York). We currently allow 12 Sub-Account transfers per Policy year under all
Policies. We do not count transfers out of the Fixed Account against this limit.
We treat all Sub-Account transfer requests made at the same time as a single
request. The transfer is effective as of the date when we receive the transfer
request. (See "Receipt of Communications and Payments at NELICO's Home Office".)
For special rules regarding transfers involving the Fixed Account, see "The
Fixed Account".
We did not design the Policy's transfer privilege to give you a way to
speculate on short-term market movements. To prevent excessive transfers that
could disrupt the management of the Eligible Funds and increase transaction
costs, we may adopt procedures to limit excessive transfer activity. For
example, we may impose conditions and limits on, or refuse to accept,
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<PAGE> 88
transfer requests that we receive from third parties. Third parties include
investment advisors or registered representatives acting under power(s) of
attorney from one or more Policy owners. In addition, the Metropolitan Series
Fund, Inc. may restrict or refuse purchases or redemptions of shares in its
Portfolios as a result of certain market timing activities. You should read the
prospectuses of these Eligible Funds for more details.
You may request a Sub-Account transfer or reallocation of future premiums by
written request (which may be telecopied) to us or by telephoning us. To request
a transfer or reallocation by telephone, you should contact your registered
representative or contact us at 1-800-200-2214. We use reasonable procedures to
confirm that instructions communicated by telephone are genuine. Any telephone
instructions that we reasonably believe to be genuine are your responsibility,
including losses arising from any errors in the communication of instructions.
DOLLAR COST AVERAGING
We plan to offer an automated transfer privilege called dollar cost
averaging. The same dollar amount is transferred to selected Sub-Accounts
(and/or the Fixed Account) periodically. 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, a lower than average cost of
purchases may be achieved 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 that a certain amount of your cash value
be transferred on any selected business day of each period (or if not a day when
the New York Stock Exchange is open, the next such day), from any one
Sub-Account to one or more of the other Sub-Accounts (and/or the Fixed Account).
We limit your allocation of cash value to no more than 10 accounts (including
the Fixed Account) at any one time. You must transfer a minimum of $100 to each
account that you select under this feature. Transfers made under the dollar cost
averaging program count against the 12 transfers allowed in a Policy year. You
can select a dollar cost averaging program when you apply for the Policy or at a
later date by contacting our Home Office. You may participate in the dollar cost
averaging program while you are participating in the asset rebalancing program
as long as the Sub-Account from which you are transferring cash value under the
dollar cost averaging program is not included in the asset rebalancing program.
---
(See "Asset Rebalancing" below). You can cancel your use of the dollar cost
averaging program at any time before a transfer date. Transfers will continue
until you notify us to stop or there no longer is sufficient cash value in the
Sub-Account from which you are transferring. There is no extra charge for this
feature.
Ask your registered representative about the availability of this feature.
ASSET REBALANCING
We plan to 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. An asset rebalancing program automatically reallocates your
cash value among the Sub-Accounts periodically 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. Asset rebalancing does not
guarantee profits, nor does it assure that you will not have losses.
You can 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 by which your cash value will be reallocated among the Sub-Accounts.
You may participate in the asset rebalancing program while you are participating
in the dollar cost averaging program as long as the Sub-Account from which you
are transferring cash value under the dollar cost averaging program is not
---
included in the asset rebalancing program. (See "Dollar Cost Averaging" above).
On the last day of each period on which the New York Stock Exchange is open, we
will transfer cash value among the Sub-Accounts as 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. Transfers made under
the asset rebalancing program count against the 12 transfers allowed in a Policy
year. There is no extra charge for this feature.
Ask your registered representative about the availability of this feature.
PAYMENT OF PROCEEDS
The third paragraph of this section is revised as follows:
The beneficiary can elect our Access Plus program for payment of death
proceeds at any time before we pay them. We establish an Access Plus account at
a banking institution at the time for payment. The Access Plus account gives
convenient access to the proceeds, which are maintained in our general account
or that of an affiliate, through checkbook privileges with the bank.
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<PAGE> 89
24 MONTH RIGHT
GENERAL RIGHT. Generally, during the first 24 months after the Policy's
issue date, you may convert the Policy, or a portion of it, to fixed benefit
coverage by transferring all or a portion of your Policy's cash value, and
allocating all or a portion of future premiums, to the Fixed Account. The
request to convert to fixed benefit coverage must be in written form
satisfactory to us. Increase Policies have the same 24 Month Right.
You may exercise this privilege only once within 24 months after issue.
Transfers into the Fixed Account pursuant to this right will not count toward
the limit on the number of cash value transfers permitted under the Policy each
year. Transfers of cash value back to one or more Sub-Accounts of the Variable
Account are subject to the Policy's general limits on transfers from the Fixed
Account (see "The Fixed Account").
The Policy permits us to limit allocations to the Fixed Account under some
circumstances. (See "The Fixed Account.") If we limit such allocations and you
then wish to exercise the 24 Month Right, you may continue to allocate to the
Fixed Account only the percentage of premiums that you allocated to the Fixed
Account pursuant to your exercise of the 24 Month Right. In addition, if you
have exercised this right, and we later limit such allocations, then you may
continue to allocate to the Fixed Account only the lowest percentage of premiums
that you allocated to the Fixed Account at any time since your exercise of the
24 Month Right.
FOR POLICIES ISSUED IN MARYLAND AND NEW JERSEY. Under Policies issued in
Maryland and New Jersey, you can exchange the face amount of your Policy for a
fixed benefit life insurance policy provided that you repay any policy loans and
(1) the Policy has not lapsed and (2) the exchange is made within 24 months
after the Policy's issue date. If you exercise this option, you will have to
make up any investment loss you had under the variable life insurance policy. We
make the exchange without evidence of insurability. The new policy will have the
same face amount as that being exchanged. The new policy will have the same
issue age, underwriting class and policy date as the variable life policy had.
We will attach any riders to the original Policy to the new policy if they are
available.
Contact us or your registered representative for more specific information
about the 24 Month Right in these states. The exchange may result in a cost or
credit to you. On the exchange, you may need to make an immediate premium
payment on the new policy in order to keep it in force.
GROUP OR SPONSORED ARRANGEMENTS. For a Policy issued to some group or
sponsored arrangements, we offer the additional option of exchanging the Policy
at any time during the first 36 months after the Policy's issue date, if the
Policy has not lapsed, to a fixed-benefit term life insurance policy issued by
us or an affiliate. (Availability of this feature depends on state insurance
department approval.) Contact us or your registered representative for more
information about this feature.
THE VARIABLE ACCOUNT
INVESTMENTS OF THE VARIABLE ACCOUNT
Sub-Accounts of the Variable Account that are available in this Policy
invest in the following Eligible Funds:
The Zenith 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 Zenith Back Bay Advisors Bond Income Series. Its investment objective is
a high level of current income consistent with protection of capital.
The Zenith Capital Growth Series. Its investment objective is the long-term
growth of capital through investment primarily in equity securities of companies
whose earnings are expected to grow at a faster rate than the United States
economy.
The Zenith Westpeak Stock Index Series. Its investment objective is
investment results that correspond to the composite price and yield performance
of the S&P 500 Index.
The Zenith Back Bay Advisors Managed Series. Its investment objective is a
favorable total return through investment in a diversified portfolio.
The Zenith Westpeak Growth and Income Series. Its investment objective is
long-term total return through investment in equity securities.
A-5
<PAGE> 90
The Zenith Harris Oakmark Mid Cap Value Series (formerly, the Goldman Sachs
Midcap Value Series). Its investment objective is long-term capital
appreciation.
The Zenith Loomis Sayles Small Cap Series. Its investment objective is
long-term capital growth from investments in common stocks or their equivalents.
The Zenith 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 Zenith 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 Zenith Davis Venture Value Series. Its investment objective is growth of
capital.
The Zenith Alger Equity Growth Series. Its investment objective is long-term
capital appreciation.
The Zenith MFS Investors Series. Its investment objective is reasonable
current income and long-term growth of capital and income.
The Zenith MFS Research Managers Series. Its investment objective is
long-term growth of capital.
The Metropolitan Putnam Large Cap Growth Portfolio.* Its investment
objective is capital appreciation.
The Metropolitan Janus Mid Cap Portfolio.* Its investment objective is
long-term growth of capital.
The Metropolitan Russell 2000 Index Portfolio.* Its investment objective is
to equal the return of the Russell 2000 Index.
The VIP Equity-Income Portfolio. It seeks reasonable income. The fund will
also consider the potential for capital appreciation. The fund seeks a yield
which exceeds the composite yield on the securities comprising the S&P 500.
The VIP Overseas Portfolio. It seeks long-term growth of capital. Foreign
markets, particularly emerging markets, can be more volatile than the U.S.
market due to increased risks of adverse issuer, political, regulatory, market
or economic developments and can perform differently than the U.S. market.
The VIP High Income Portfolio. It seeks a high level of current income while
also considering growth of capital. Lower-quality debt securities (those of less
than investment-grade quality) can be more volatile due to increased sensitivity
to adverse issuer, political, regulatory, market or economic developments.
The VIP II Asset Manager Portfolio. It seeks high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds and
short-term instruments.
- ------------
* Availability of these Portfolios is subject to any necessary state insurance
department approvals.
WE INTEND TO SUBSTITUTE SHARES OF THE PUTNAM INTERNATIONAL STOCK PORTFOLIO
OF THE METROPOLITAN SERIES FUND, INC. FOR SHARES OF THE MORGAN STANLEY
INTERNATIONAL MAGNUM EQUITY SERIES OF THE NEW ENGLAND ZENITH FUND ONCE WE
RECEIVE NECESSARY REGULATORY APPROVAL (CURRENTLY ANTICIPATED DURING THE FOURTH
QUARTER OF 2000).
The Zenith Fund and the Metropolitan Series Fund, Inc. 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 other life insurance companies.
VIP and VIP II are mutual funds that serve as the investment vehicles for
variable life insurance and variable annuity separate accounts of various
insurance companies.
The Variable Account purchases and sells Eligible Fund shares at their net
asset value (without a deduction for sales load) determined as of the close of
regular trading on the New York Stock Exchange on each day when the exchange is
open for trading.
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.
The investment objectives and policies of certain Eligible Funds are similar
to the investment objectives and policies of other funds that may be managed by
the same sub-adviser. The investment results of the Eligible Funds may be higher
or lower than the results of these funds. There is no assurance, and no
representation is made, that the investment results of any of the Eligible Funds
will be comparable to the investment results of any other fund.
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<PAGE> 91
INVESTMENT MANAGEMENT
The chart below shows the adviser and sub-adviser for each series of the
Zenith Fund. New England Investment Management, which is an indirect,
wholly-owned subsidiary of NELICO, CGM, and each of the sub-advisers are
registered with the SEC as investment advisers under the Investment Advisers Act
of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------- -----------
<S> <C> <C>
Capital Growth Capital Growth Management Limited
Partnership ("CGM")*
Back Bay Advisors Money Market New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Back Bay Advisors Bond Income New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Back Bay Advisors Managed New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Westpeak Stock Index New England Investment Management, Westpeak Investment Advisors,
Inc. L.P.*
Westpeak Growth and Income New England Investment Management, Westpeak Investment Advisors,
Inc. L.P.*
Loomis Sayles Small Cap New England Investment Management, Loomis, Sayles & Company, L.P.*
Inc.
Balanced New England Investment Management, Wellington Management Company, LLP
Inc.
Morgan Stanley International New England Investment Management, Morgan Stanley Dean Witter
Magnum Equity Inc. Investment Management Inc.
Harris Oakmark Mid Cap Value New England Investment Management, Harris Associates L.P.*
Inc.
Davis Venture Value New England Investment Management, Davis Selected Advisers, L.P.**
Inc.
Alger Equity Growth New England Investment Management, Fred Alger Management, Inc.
Inc.
MFS Investors New England Investment Management, Massachusetts Financial Services
Inc. Company
MFS Research Managers New England Investment Management, Massachusetts Financial Services
Inc. Company
</TABLE>
- ------------
* An affiliate of NELICO
** Davis Selected may also delegate any of its responsibilities to Davis
Selected Advisers--NY, Inc., a wholly-owned subsidiary of Davis Selected.
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors
Bond Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index
Series, Westpeak Growth and Income Series, Harris Oakmark Mid Cap Value Series
and Loomis Sayles Small Cap Series, New England Investment Management became the
adviser on May 1, 1995. The Morgan Stanley International Magnum Equity Series'
sub-adviser was Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley
Dean Witter Investment Management became the sub-adviser. 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 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 Series Fund
Portfolios. Putnam Investment Management, Inc. is the sub-investment manager of
the Putnam Large Cap Growth Portfolio. Janus Capital Corporation is the
sub-investment manager of the Janus Mid Cap Portfolio. For more information
regarding the investment adviser and sub-investment managers of the Metropolitan
Series Fund Portfolios, see the Metropolitan Series Fund prospectus attached at
the end of this prospectus and its Statement of Additional Information.
Fidelity Management & Research Company ("FMR") is the investment adviser for
VIP and VIP II. For more information regarding the VIP Equity-Income, VIP
Overseas, VIP High Income and VIP II Asset Manager Portfolios and FMR, see the
VIP and VIP II prospectuses attached at the end of this prospectus and their
Statements of Additional Information.
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
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<PAGE> 92
the present Federal income tax laws. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to how
they may be interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or automatic issue
basis and Policies with term riders added, and it is not clear whether such
Policies will in all cases satisfy the applicable requirements. If it is
subsequently determined that a Policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the Policy into compliance
with such requirements, and we reserve the right to restrict Policy transactions
in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts, due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to allocate
premiums and cash values, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Policy Owners investment
control over Variable Account assets, we reserve the right to modify the
Policies as necessary to prevent a Policy Owner from being treated as the owner
of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Policy Owner or beneficiary. A tax advisor
should be consulted on these consequences.
Generally, the Policy Owner will not be deemed to be in constructive receipt
of the Policy cash value until there is a distribution. When distributions from
a Policy occur, or when loans are taken out from or secured by a Policy, the tax
consequences depend on whether the Policy is classified as a "Modified Endowment
Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life
insurance contracts are classified as "Modified Endowment Contracts," with less
favorable income tax treatment than other life insurance contracts. In general a
Policy will be classified as a Modified Endowment Contract if the amount of
premiums paid into the Policy causes the Policy to fail the "7-pay test." A
Policy will fail the 7-pay test if at any time in the first seven Policy years,
the amount paid into the Policy exceeds the sum of the level premiums that would
have been paid at that point under a Policy that provided for paid-up future
benefits after the payment of seven level annual payments.
If there is a reduction in the benefits under the Policy during the first
seven Policy years, for example, as a result of a partial surrender, the 7-pay
test will have to be reapplied as if the Policy had originally been issued at
the reduced face amount. If there is a "material change" in the Policy's
benefits or other terms, even after the first seven Policy years, the Policy may
have to be retested as if it were a newly issued Policy. A material change can
occur, for example, when there is an increase in the death benefit which is due
to the payment of an unnecessary premium. Unnecessary premiums are premiums paid
into the Policy which are not needed in order to provide a death benefit equal
to the lowest death benefit that was payable in the first seven Policy years. To
prevent your Policy from becoming a Modified Endowment Contract, it may be
necessary to limit premium payments or to limit reductions in benefits. A
current or prospective Policy Owner should consult a tax advisor to determine
whether a Policy transaction will cause the Policy to be classified as a
Modified Endowment Contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT
CONTRACTS. Policies classified as Modified Endowment Contracts are subject to
the following tax rules:
(1) All distributions other than death benefits, including distributions
upon surrender and withdrawals, from a Modified Endowment Contract will be
treated first as distributions of gain taxable as ordinary income and as
tax-free recovery of the Policy Owner's investment in the Policy only after
all gain has been distributed.
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<PAGE> 93
(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 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 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.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Policy Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for Federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole or
in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are generally not treated as distributions. However, the tax consequences
associated with Policy loans that are outstanding after the first 15 Policy
years are less clear and a tax adviser should be consulted about such loans.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
POLICY LOANS. In general, interest on a Policy loan will not be deductible.
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. Before taking out a Policy loan, you should consult a tax
adviser as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by
NELICO (or its affiliates) to the same Policy Owner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Policy Owner's income when a taxable distribution
occurs.
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.
The tax consequences of continuing the Policy beyond the insured's 100th
year are unclear. You should consult a tax adviser if you intend to keep the
Policy in force beyond the 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 adviser regarding ERISA. For a
tax-qualified pension plan, the tax deferred accrual feature is provided by the
plan. Therefore, there should be reasons other than tax deferral for acquiring a
life insurance policy within a tax-qualified pension plan.
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 the Policy loan provisions. Failure of plan loans to comply with
the requirements and provisions of the DOL regulations and of tax law may result
in adverse tax consequences and/or adverse consequences under ERISA. Plan
fiduciaries and participants should consult a qualified adviser before
requesting a loan under a Policy held in connection with a retirement plan.
A-9
<PAGE> 94
Businesses can use the Policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit
plans, retiree medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and circumstances. If you are
purchasing the Policy for any arrangement the value of which depends in part on
its tax consequences, you should consult a qualified tax adviser. In recent
years, moreover, Congress has adopted new rules relating to life insurance owned
by businesses. Any business contemplating the purchase of a new Policy or a
change in an existing Policy should consult a tax adviser.
We believe that Policies subject to Puerto Rican tax law will generally
receive treatment similar, with certain modifications, to that described above.
Among other differences, Policies governed by Puerto Rican tax law are not
currently subject to the rules described above regarding Modified Endowment
Contracts. You should consult your tax adviser with respect to Puerto Rican tax
law governing the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
NELICO'S INCOME TAXES
Under current Federal income tax law, 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
------------------ -----------------------------
<S> <C>
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; President and Chief
Operating Officer 1996-1997 of Equitable Companies, Inc.;
President and Chief Operating Officer 1994-1996 of
Equitable Life Assurance Society.
Robert H. Benmosche............... Director of NELICO since 1998 and Chairman, President and
Metropolitan Life Insurance Co. Chief Executive Officer of Metropolitan Life Insurance
One Madison Avenue Company since 1998; formerly, Director, President and
New York, NY 10010 Chief Operating Officer 1997-1998; Executive Vice
President 1995-1997 of Metropolitan Life; Executive Vice
President 1989-1995 of Paine Webber.
Susan C. Crampton................. Director of NELICO since 1996 and serves as Principal of The
6 Tarbox Road Vermont Partnership, a business consulting firm located in
Jericho, VT 05465 Jericho, Vermont since 1989; formerly, Director 1989-1996
of New England Mutual.
Edward A. Fox..................... Director of NELICO since 1996 and Chairman of the Board of
R.R. Box 67-15 SLM Holdings since 1997; formerly, Director 1994-1996 of New
Harborside, ME 04642 England Mutual.
George J. Goodman................. Director of NELICO since 1996 and author, television
Adam Smith's Global Television journalist, and editor.
50th Floor, Craig Drill Capital
General Motors Building
767 Fifth Street
New York, NY 10153
Dr. Evelyn E. Handler............. Director of NELICO since 1996 and President of Merrimack
Ten Sterling Place Higher Education Associates, Inc. since 1998; formerly,
Bow, NH 03304 Director 1987-1996 of New England Mutual and Executive
Director and Chief Executive Officer 1994-1997 of the
California Academy of Sciences.
</TABLE>
A-10
<PAGE> 95
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
Philip K. Howard, Esq............. Director of NELICO since 1996 and Partner of the law firm of
Covington & Burling 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 Chairman of
Burlington Industries the Board of Directors 1995-1998 of Burlington Industries,
1345 Avenue of the Americas Inc.; Director and Executive Vice President 1993-1995 of
17th Floor Burlington Menswear Division.
New York, NY 10105
Thomas J. May..................... Director of NELICO since 1996 and Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since 1994;
800 Boylston Street formerly, Director 1994-1996 of New England Mutual.
Boston, MA 02199
Stewart G. Nagler................. Director of NELICO since 1996 and Vice Chairman and Chief
Metropolitan Life Insurance Co. Financial Officer of Metropolitan Life Insurance Company
One Madison Avenue since 1998; formerly, Senior Executive Vice President and
New York, NY 10010 Chief Financial Officer 1986-1998 of Metropolitan Life
Insurance Company.
Catherine A. Rein................. Director of NELICO since 1998 and President and Chief
Metropolitan Property and Executive Officer of Metropolitan Property and Casualty
Casualty Insurance Company since 1999; formerly, Senior Executive Vice President
700 Quaker Lane 1998-1999; Executive Vice President 1989-1998 of
Warwick, RI 02887 Metropolitan Life Insurance Company.
Rand N. Stowell................... Director of NELICO since 1996 and President of United Timber
P.O. Box 60 Corp. and President, Randwell Co. since 2000 of Weld, Maine;
Weld, ME 04285 formerly, Director 1990-1996 of New England Mutual.
</TABLE>
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
James M. Benson................... See Directors above.
David W. Allen.................... Senior Vice President of NELICO since 1996; formerly, Senior
Vice President 1994-1996 and Vice President 1990-1994 of New
England Mutual.
A. Frank Beaz..................... Executive Vice President of NELICO since 1999; formerly,
Senior Vice President 1998-1999 of NELICO; Chief
Administrative Officer and Senior Vice President 1997-1998
of Equitable Distributors and Senior Vice President
1994-1997 of The Equitable Life Insurance Companies.
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 & Chief Executive Officer 1996-1998 of Atlantic
International Reinsurance Company; Executive Vice
President 1996-1997 of Swiss Re Atrium and Swiss Re
Services and Principal 1987-1996 of Tillinghast/ Towers
Perrin.
Anthony J. Candito................ President, NEF Information Services (a business unit of
NELICO) and Chief Information Officer since 1998; formerly,
Senior Vice President 1996-1998 of NELICO; Senior Vice
President 1995-1996 and Vice President 1994-1995 of New
England Mutual.
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;
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.
</TABLE>
A-11
<PAGE> 96
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
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 executive
officers is the same as NELICO's except where indicated.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account
Sub-Accounts, call 1-800-333-2501.
For Sub-Account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call 1-800-200-2214.
You may also call our Client TeleService Center at 1-800-388-4000 to request
current information about your Policy values, to change or update Policy
information such as your address, billing mode, beneficiary or ownership, or to
request Policy loans of less than $25,000. Requests must be in writing if the
Policy is owned by a corporation or a pension trust.
For all other Policy changes, please contact your registered representative.
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.
A-12
<PAGE> 97
<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> 98
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> 99
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium adjustable variable life insurance
policies described in this registration statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by New England Life Insurance Company.
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 200 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)
James J. Reilly, Jr., 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> 100
(ii) Form of contract between NEVLICO and its
Agents ***
(c) Commission Schedule for Policies +
(d) Form of contract among NES, NELICO and other
broker dealers *
(4) None
(5) (a) Specimen of Policy +
(b) Riders and Endorsements +
(c) Temporary Term Rider +++
(d) Exclusion from Benefits Riders @
(e) Endorsement- Unisex rates **
(f) Extended Maturity Rider @@
(6) (a) Amended and restated Articles of
Organization of NELICO ##
(b) Amended and restated By-Laws of NELICO *
(c) Amendments to Amended and restated Articles
of Organization ++++
(7) None
(8) None
(9) None
(10) (a) Specimens of Application for Policy +
(b) Additional Application for Policy +++
2. See Exhibit 3(i)
3. (i) Opinion and Consent of H. James Wilson,
Esquire #
(ii) Opinion and Consent of James J. Reilly, Jr.,
F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
7. (i) Powers of Attorney ##
(ii) Powers of Attorney of James M. Benson,
Robert H. Benmosche and Catherine A. Rein ++
(iii) Power of Attorney for David Rogers @@@
8. Notice of Withdrawal Right for Policies #
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditors
12. Schedule for computation of performance
quotations ***
13. (i) Consolidated memorandum describing certain
procedures, filed pursuant to
Rule 6e-2(b)(12)(ii) and
Rule 6e-3(T)(b)(12)(iii) ***
(ii) Second Addendum to Consolidated
Memorandum +++++
14. (i) Participation Agreement among Variable
Insurance Products Fund, Fidelity
Distributors Corporation and New England
Variable Life Insurance Company ***
II - 3
<PAGE> 101
(ii) Amendment No. 1 to Participation Agreement
among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New
England Variable Life Insurance Company #
(iii) Participation Agreement among Variable
Insurance Products Fund II, Fidelity
Distributors Corporation and New England
Variable Life Insurance Company #
(iv) Form of Participation Agreement among
Metropolitan Series Fund, Inc.,
Metropolitan Life Insurance Company and New
England Life Insurance Company. @@@@
# Incorporated herein by reference to Pre-Effective Amendment No. 1 to
the Variable Account's Form S-6 Registration Statement, File No.
33-88082, filed June 22, 1995.
## Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
* Incorporated herein by reference to 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.
33-88082, filed April 24, 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.
II - 4
<PAGE> 102
+++++ 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.
@ Incorporated herein by reference to the Post-Effective Amendment No.6
to the Variable Account's Form S-6 Registration Statement, File No.
33-88082, filed April 27, 1999.
@@ Incorporated herein by reference to the Post-Effective Amendment No.7
to the Variable Account's Form S-6 Registration Statement, File No.
33-88082, filed February 29, 2000.
@@@ Incorporated herein by reference to 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> 103
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> 104
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> 105
* Director
- ------------------------
Stewart G. Nagler
* Director
- ------------------------
Catherine A. Rein
* Executive Vice President,
- ------------------------ Chief Financial Officer and Chief Accounting
David Y. Rogers 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> 106
EXHIBIT LIST
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
<S> <C> <C>
3. (ii) Opinion and Consent of James J.
Reilly, Jr., F.S.A., M.A.A.A.
6. Consent of Sutherland Asbill &
Brennan LLP
11. Consent of the Independent Auditors
</TABLE>
- ---------
* Page numbers inserted on manually-signed copy only.
<PAGE> 1
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. 8 to the registration
statement on Form S-6 (File No. 33-88082) filed by New England Variable
Life Separate Account and the Company with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to variable
life insurance policies (the "Registration Statement"); and
The preparation of policy forms for the variable life insurance
policies described in the Registration Statement (the "Policies").
It is my professional opinion that:
1. The illustrations of death benefits, net cash values, accumulated
premiums, internal rates of return on net cash values and internal
rates of return on death benefits shown in Appendix A of the
Prospectus, based on the assumptions stated in the illustrations, are
consistent with the provisions of the Policies. The rate structure of
the Policies has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear to
be correspondingly more favorable to prospective purchasers of Policies
for male insureds, aged 40 in the underwriting classes 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> 2
3. The illustration of net premiums shown under the heading "Charges and
Expenses- Deductions from Premiums" in the Prospectus contains the net
premium amounts allocated to the Variable Account for a $3,000 premium
under a Policy with a $2,000 Sales Charge Breakpoint Premium.
4. The information contained in the example of how the maximum loanable
amount is determined under the heading "Other Policy Features-Loan
Provision" in the Prospectus is consistent with the provisions of the
Policies.
I hereby consent to the filing of this opinion as an Exhibit to this
Post-Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
James J. Reilly, Jr., F.S.A., M.A.A.A.
Second Vice President and Actuary
2
<PAGE> 1
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. 8 to the Registration Statement on Form S-6 for
Zenith Flexible Life, issued through the New England Variable Life Separate
Account (File No. 33-88082). In giving this consent, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ Kimberly J. Smith
-----------------------------
Kimberly J. Smith
Washington, D.C.
April 26, 2000
<PAGE> 1
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 8 to the Registration
Statement No. 33-88082 of New England Variable Life Separate Account (the
"Separate Account") of New England Life Insurance Company (the "Company") of our
reports dated February 4, 2000 appearing in the Prospectus and the Supplement,
which are part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus and Supplement.
Deloitte & Touche LLP
Boston, Massachusetts
April 26, 2000
