<PAGE> 1
As filed with Securities and Exchange Commission on
March 6, 2000
Registration No. 333-89409
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-6
PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
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
-------------------------
Title of Securities Being Registered: Flexible Premium Adjustable Variable
Survivorship Life Insurance Policies
As soon as practicable after the effective date of this
Registration Statement
(Approximate date of proposed public offering)
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
<PAGE> 2
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- ----------- ---------------------
1 Cover Page
2 Cover Page
3 Inapplicable
4 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 Months
Conversion Right; Lapse and Reinstatement; Surrender;
Partial Surrender; Right to Return the Policy; Loan
Provision; Transfer Option; Premiums; Dollar Cost
Averaging; Asset Rebalancing
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;
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; Net Investment Experience
19 Reports; NELICO's Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 Inapplicable
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 NELICO's Distribution Agreement
<PAGE> 3
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- ----------- ---------------------
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 Months Conversion 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
<PAGE> 4
ZENITH SURVIVORSHIP LIFE PLUS
Flexible Premium Adjustable
Variable Survivorship 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
survivorship life insurance policies (the "Policies") issued by New England Life
Insurance Company ("NELICO").
The Policy provides premium flexibility and a death benefit that is payable at
the death of the second to die. In some cases you can choose a rider that
provides a death benefit guarantee as long as your total premiums paid meet
certain minimum requirements.
You may choose among five death benefit options. Three provide a fixed death
benefit equal to the Policy's face amount. Two provide a death benefit that may
vary daily with the investment experience of the Eligible Funds. Cash value
allocated to the Eligible Funds is not guaranteed, and fluctuates daily with the
investment results of the Eligible Funds.
You allocate net 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
Loomis Sayles Balanced Series
Loomis Sayles Small Cap Series
Alger Equity Growth Series
Davis Venture Value Series
Goldman Sachs Midcap Value Series
Morgan Stanley International Magnum Equity Series
MFS Investors Series
MFS Research Managers Series
VARIABLE INSURANCE PRODUCTS FUND ("VIP")
Overseas Portfolio
Equity-Income Portfolio
High Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
Asset Manager Portfolio
You may also allocate net premiums to a Fixed Account in most states. Limits
apply to transfers to and from the Fixed Account.
You may cancel the Policy during the "Right to Return the Policy" period. In
addition, 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 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.
MARCH , 2000
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TABLE OF CONTENTS
<TABLE>
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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-6
How the Policy Works.................................... A-7
Receipt of Communications and Payments at NELICO's Home
Office................................................. A-8
NELICO.................................................. A-8
POLICY VALUES AND BENEFITS.................................. A-9
Death Benefit........................................... A-9
Guaranteed Death Benefit Rider.......................... A-10
Expanded Death Benefit Rider............................ A-10
Change in Death Benefit Option.......................... A-11
Death Proceeds Payable.................................. A-11
Cash Value.............................................. A-11
Net Investment Experience............................... A-12
Allocation of Net Premiums.............................. A-12
Amount Provided for Investment under the Policy......... A-12
Right to Return the Policy.............................. A-13
CHARGES AND EXPENSES........................................ A-13
Deductions from Premiums................................ A-13
Surrender Charge........................................ A-14
Monthly Deduction from Cash Value....................... A-15
Charges Against the Eligible Funds...................... A-17
Group or Sponsored Arrangements......................... A-18
PREMIUMS.................................................... A-18
Flexible Premiums....................................... A-18
Lapse and Reinstatement................................. A-19
OTHER POLICY FEATURES....................................... A-20
Loan Provision.......................................... A-20
Surrender............................................... A-20
Partial Surrender....................................... A-20
Reduction in Face Amount................................ A-21
Investment Options...................................... A-21
Transfer Option......................................... A-22
Dollar Cost Averaging................................... A-22
Asset Rebalancing....................................... A-22
Payment of Proceeds..................................... A-23
24 Months Conversion Right.............................. A-23
Policy Split Rider...................................... A-24
Payment Options......................................... A-24
Additional Benefits by Rider............................ A-24
Policy Owner and Beneficiary............................ A-25
THE VARIABLE ACCOUNT........................................ A-25
Investments of the Variable Account..................... A-26
Investment Management................................... A-27
THE FIXED ACCOUNT........................................... A-28
General Description..................................... A-28
Values and Benefits..................................... A-28
Policy Transactions..................................... A-28
</TABLE>
A-2
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<TABLE>
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<S> <C>
NELICO'S DISTRIBUTION AGREEMENT............................. A-29
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY............ A-29
Notification of First Death............................. A-29
Misstatement of Age or Sex.............................. A-30
Suicide................................................. A-30
TAX CONSIDERATIONS.......................................... A-30
Introduction............................................ A-30
Tax Status of the Policy................................ A-30
Tax Treatment of Policy Benefits........................ A-31
NELICO's Income Taxes................................... A-33
MANAGEMENT.................................................. A-33
VOTING RIGHTS............................................... A-35
RIGHTS RESERVED BY NELICO................................... A-35
TOLL-FREE NUMBERS........................................... A-36
REPORTS..................................................... A-36
ADVERTISING PRACTICES....................................... A-36
LEGAL MATTERS............................................... A-37
REGISTRATION STATEMENT...................................... A-37
EXPERTS..................................................... A-37
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS........ A-38
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............... A-43
APPENDIX C: LONG TERM MARKET TRENDS......................... A-58
APPENDIX D: USES OF SURVIVORSHIP LIFE INSURANCE............. A-59
APPENDIX E: TAX INFORMATION................................. A-60
APPENDIX F: CASH VALUE ACCUMULATION TEST AND GUIDELINE
PREMIUM TEST.............................................. A-61
FINANCIAL STATEMENTS........................................ AA-1
</TABLE>
A-3
<PAGE> 7
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.
BENCHMARK PREMIUM. We use the Benchmark Premium to determine the amount of
Surrender Charge that may apply on a surrender, partial surrender, lapse or face
amount reduction. It is the same as the Target Premium for the base Policy only
and does not include amounts which riders contribute to the Policy's total
Target Premium.
CASH VALUE. A Policy's cash value includes the amount of its cash value held in
the Variable Account, the amount held in the Fixed Account and, if there is an
outstanding policy loan, the amount of its cash value held in our general
account as a result of the loan.
EXCESS POLICY LOAN. When Policy loans plus accrued interest exceed the Policy's
cash value less the applicable Surrender Charge.
FIXED ACCOUNT. The Fixed Account is a part of our general account to which you
may allocate net premiums. It provides guarantees of principal and interest.
INVESTMENT START DATE. This is the latest of the date we receive a premium
payment for the Policy, the date each of the insureds has signed his/her Part II
of the Policy application and the Policy Date.
NET CASH VALUE. The amount you receive if you surrender the Policy. It is equal
to the Policy's cash value reduced by any applicable Surrender Charge 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 can be a
fixed amount or can vary over time and 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 each of the insureds has signed his/her
Part II of the application 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.
TARGET PREMIUM. We use the Target Premium to determine the level of sales
charge that applies to your premium payments, and also sales commissions. The
Target Premium varies with (i) each $1,000 of face amount, (ii) the sex and
underwriting class of each insured and their average issue age, and (iii)
certain riders. The dollar amount of your Target Premium appears in Section 1 of
your Policy as the amount to which the maximum premium load applies.
YOU. "You" refers to the Policy Owner.
A-4
<PAGE> 8
INTRODUCTION TO THE POLICIES
THE POLICIES
The Policies are designed to provide lifetime insurance coverage for two
insureds payable at the death of the second to die. They are not offered
primarily as an investment.
Here is a summary of the Policy's basic features. You should read the 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 an 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, in some cases
after an initial period in the Zenith 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 nine 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 among five death benefit options under the Policy. The
three level options provide a death benefit equal to the Policy's face
amount. The two variable options provide a death benefit equal to 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
under each option could increase to satisfy tax law requirements if the
cash value reaches certain levels. One of the level and one of the
variable options provide for an enhanced increase. (See "Death
Benefit".)
-- If it is available to you and you elect the Guaranteed Death Benefit
Rider, then 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 less any partial surrenders and
outstanding Policy loan balance at least equals certain minimum amounts.
(See "Death Benefit" and "Minimum Guaranteed Death Benefit".)
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- Once we mail the confirmation of the first premium (in some states, 15
days after that) 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. Currently we do not limit the number of
sub-account transfers you may make in a Policy year. 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 become a
"modified endowment contract", then pre-death distributions (including
loans) will be
A-5
<PAGE> 9
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 should generally not be taxable to you as long as
the Policy has not lapsed, been surrendered or terminated. (However, the
issue is not free from doubt and a tax adviser should be consulted about
such loans.) 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. In some states we are required to refund premiums paid; in
other states, we refund an amount that reflects investment experience
and certain charges. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue, you may exercise the
Policy's 24 Months Conversion 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 Months Conversion Right is to offer you fixed
Policy values and benefits. (See "24 Months Conversion Right" for more
information on this provision and its variations under Policies issued
in Maryland and New Jersey.)
In many respects the Policies are similar to fixed-benefit survivorship
universal life insurance. Like survivorship universal life insurance, the
Policies provide for a death benefit upon the death of the second insured,
flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit survivorship 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 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
Survivorship Life Insurance".
AVAILABILITY OF THE POLICY
The Policies are available for insureds from the age of 20 to 85, and, if we
consent, to older or younger insureds. All persons must meet our underwriting
and other requirements. The minimum face amount available is $100,000 unless we
consent to a lower amount. The Policies are not available to employee benefit
plans qualified under Section 401 of the Internal Revenue Code, except with our
consent.
We offer other variable life insurance policies, with different fees and
charges, that invest in the Eligible Funds. Your registered representative has
additional information.
POLICY CHARGES
For a description of Policy charges, see "How the Policy Works" on the next page
and the section "Charges and Expenses" later in the prospectus.
A-6
<PAGE> 10
HOW THE POLICY WORKS [HOW THE POLICY WORKS FLOW CHART]
PREMIUM PAYMENTS
- -Flexible
- -Planned premium options
- -Minimum premium (in first three Policy years)
- -Guaranteed Death Benefit Premium (to age 100 of younger insured) (a rider
benefit that is available only if you choose death benefit Option 4; not
available if you choose "Outside Term")
CHARGES FROM PREMIUM PAYMENTS
- -Sales Load:
- yr. 1: 26.5% up to Target Premium and 4% above Target
- yrs. 2-10: 11.5% (9% if face amount is at least $1 million) up to Target
Premium and 4% above Target
- yrs. 11+: 4% of premiums
- -State Premium Tax Charge: 2.5%
- -Charge for Federal Taxes: 1%
LOANS
- -After we mail the initial premium confirmation, you may borrow a portion of
your cash value
- -Loan interest charge is 4.35%. We transfer loaned funds out of the Eligible
Funds into the General Account where we credit them with 4.0% interest.
RETIREMENT BENEFIT
- -Fixed settlement options are available for policy proceeds
CASH VALUES
- -Net premium payments invested in your choice of Eligible Fund investments
(generally after an initial period during which net investment experience equal
to that of the Zenith Money Market Sub-Account may be credited) or the Fixed
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)
once we mail the initial premium confirmation (in some states, 15 days after
that). Currently we do not limit the number of sub-account transfers you can
make in a Policy year. 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 nine accounts at any one
time
DEATH BENEFIT
- -Paid upon the 2nd death
- -Level or Variable Death Benefit Options apply until age 100 of the younger
insured
- -Guaranteed not to be less than face amount (less any loan balance) if
Guaranteed Death Benefit rider is in effect (available in certain circumstances)
- -Income tax free to named beneficiary
- -Death benefit will not be less than that required by federal tax law, using tax
law test you select (guideline premium or cash value accumulation).
- -If you add Survivorship Level Term Insurance coverage, you elect whether to
include it in the calculation of the base Policy death benefit or simply add the
term proceeds to the base Policy proceeds.
- -Death benefit on or after age 100 of the younger insured equals the cash value,
unless the Policy has an Expanded Death Benefit rider, or a Guaranteed Death
Benefit rider that was in effect at age 100 of the younger insured.
DAILY DEDUCTIONS FROM ASSETS
- -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 rated
classification) from the cash value each month
- -Any Rider Charges
- -Policy Fee: Currently $10.50 (not to exceed $12.50) per month in years 1-3 and
$3.50 (not to exceed $5.50) per month thereafter
- -Mortality and Expense Risk Charge at an annual rate of .90% in the first 10
Policy years and .45% thereafter (applied against cash value in the Variable
Account and any cash value in the general account that represents a Policy loan)
- -Administrative Charge: Currently $0.07 per $1000 of face amount (base Policy
and Survivorship Level Term Insurance) monthly (not to exceed $0.08 per $1000)
in first three Policy years; $0.05 per $1000 (not to exceed $0.06 per $1000)
thereafter ( if face amount is $1 million or more, $0.025 per $1000, not to
exceed $0.035 per $1000, thereafter). If either insured is in a class below
standard, we add $0.02 per $1000 to the current and guaranteed charges, in years
four through six (if only one insured is below standard), or years four through
nine (if both insureds are below standard).
- -Guaranteed Death Benefit Rider Charge (if rider selected): $.01 per $1000 of
face amount (base Policy and any joint or single life term rider) monthly.
SURRENDER CHARGE
- -Applies on lapse, surrender, face reduction or partial surrender that causes a
face reduction in the first 15 Policy years (or until age 100 of younger
insured, if earlier). Maximum charge occurs in first Policy year and equals 90%
of the lesser of: premiums paid and Benchmark Premium. (Percentage is lower for
insureds with average issue age above 52.) Charge reduces monthly over remainder
of surrender charge period.
LIVING BENEFITS
- -If policyholder has elected and qualified for benefits for disability of
covered insured who becomes totally disabled, we will provide specified premium
amounts or waive monthly charges, depending on the option selected, 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
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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 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
mutual life insurance company whose principal office is One Madison Avenue, New
York, NY 10010. MetLife then became the parent of NELICO. In connection with the
merger, NELICO changed its name from "New England Variable Life Insurance
Company" to "New England Life Insurance Company", and changed its domicile from
the State of Delaware to the Commonwealth of Massachusetts. NELICO's Home Office
is now at 501 Boylston Street, Boston, Massachusetts 02116. NELICO's mailing
address is: P.O. Box 9116, Boston, Massachusetts 02117.
The following chart illustrates the relationship of NELICO, the Fixed Account,
the Variable Account and the Eligible Funds.
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 Bond Income Sub-Account
Zenith Money Market Sub-Account
Zenith Managed Sub-Account
Zenith Stock Index Sub-Account
Zenith Growth and Income Sub-Account
Zenith Small Cap Sub-Account
Zenith Balanced Sub-Account
Zenith Equity Growth Sub-Account
Zenith Venture Value Sub-Account
Zenith Midcap Value Sub-Account
Zenith International Magnum Equity Sub-Account
Zenith Investors Sub-Account
Zenith Research Managers Sub-Account
Equity-Income Sub-Account
Overseas Sub-Account
High Income Sub-Account
Asset Manager Sub-Account
Sub-accounts buy shares of the Eligible Funds.
NEW ENGLAND ZENITH FUND
Capital Growth Series
Back Bay Advisors Bond Income Series
Back Bay Advisors Money Market Series
Back Bay Advisors Managed Series
Westpeak Stock Index Series
Westpeak Growth and Income Series
Loomis Sayles Small Cap Series
Loomis Sayles Balanced Series
Alger Equity Growth Series
Davis Venture Value Series
Goldman Sachs Midcap Value Series
Morgan Stanley International Magnum Equity Series
MFS Investors Series
MFS Research Managers Series
VIP
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.
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POLICY VALUES AND BENEFITS
DEATH BENEFIT
The death benefit is payable to the beneficiary at the death of the second
insured to die.
CHOICE OF TAX TEST. The Internal Revenue Code requires that the Policy's death
benefit (including any Survivorship Level Term Insurance rider) not be less than
certain amounts defined in the Code. When you apply for your Policy, you select
which tax law test will apply to the death benefit. You will choose between: (1)
the cash value accumulation test, and (2) the guideline premium test.
Under the CASH VALUE ACCUMULATION TEST, the death benefit will not be less than
the cash value (plus the portion of any Monthly Deduction to the date of death),
times the net single premium factor set by the Internal Revenue Code. The net
single premium factors are shown in the Policy based on the age of the younger
insured at the start of the Policy year. Net single premium factors vary based
on each insured's sex, underwriting class and age at issue, and the Policy year.
Sample net single premium factors appear in Appendix F.
If you select the guideline premium test, one of two death benefit "corridors"
will apply.
Under the basic IRS GUIDELINE PREMIUM TEST, the death benefit will not be less
than the cash value (plus the portion of any Monthly Deduction to the date of
death), times the corridor factor set by the Internal Revenue Code. The corridor
factors vary by and are shown based on the age of the younger insured at the
start of the Policy year. See Appendix F.
Under the GUIDELINE PREMIUM TEST WITH ENHANCED CORRIDOR, the death benefit will
not be less than the cash value (plus the portion of any Monthly Deduction to
the date of death), times a corridor factor. Until age 81 of the younger
insured, these corridor factors are the same as under the basic guideline
premium test. Beginning at age 81 of the younger insured, until age 100 of that
insured, we use an enhanced corridor factor. The enhanced corridor is greater
than under the basic IRS guideline premium test, resulting in a potentially
larger death benefit than required by tax law. See Appendix F.
DEATH BENEFIT OPTIONS--TO AGE 100. When you apply for a Policy you select among
five death benefit options. These options apply until age 100 of the younger
insured.
The OPTION 1 death benefit equals the greater of the FACE AMOUNT and the death
benefit required by the GUIDELINE PREMIUM TEST WITH THE ENHANCED CORRIDOR.
The OPTION 2 death benefit equals the greater of the FACE AMOUNT and the death
benefit required by the GUIDELINE PREMIUM TEST.
The OPTION 3 death benefit equals the greater of the FACE AMOUNT PLUS THE CASH
VALUE, and the death benefit required by the GUIDELINE PREMIUM TEST WITH THE
ENHANCED CORRIDOR.
The OPTION 4 death benefit equals the greater of the FACE AMOUNT and the death
benefit required by the CASH VALUE ACCUMULATION TEST.
The OPTION 5 death benefit equals the greater of the FACE AMOUNT PLUS THE CASH
VALUE, and the death benefit required by the CASH VALUE ACCUMULATION TEST.
THE GUARANTEED DEATH BENEFIT RIDER IS ONLY AVAILABLE IF YOU SELECT OPTION 4.
(SEE "GUARANTEED DEATH BENEFIT RIDER" BELOW.)
TERM RIDER "IN" OR "OUT". If you add a Survivorship Level Term Insurance Rider
to your Policy, you can have the face amount of the rider added to the face
amount of the base Policy for purposes of calculating the base Policy death
benefit under your chosen death benefit option. If you do not choose to do this,
then the face amount of the rider will simply be added to the Policy proceeds.
If you include the rider coverage in the calculation of the death benefit
("Inside Term"), the Policy may provide greater potential for the cash value to
grow relative to the death benefit. If you do not include the rider coverage in
the calculation of the death benefit ("Outside Term"), the Policy may provide
greater potential for the death benefit to grow relative to the cash value.
With our consent, you may change your choice at any time. However, to change
from Inside Term to Outside Term, we require satisfactory evidence of
insurability.
To have both the Guaranteed Death Benefit Rider and the Survivorship Level Term
Insurance Rider, you must elect "Inside Term". See "Guaranteed Death Benefit
Rider" below.
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<PAGE> 13
AGE 100. If the death benefit is payable on or after age 100 of the younger
insured, it equals the cash value on the date of death. However, if at age 100
of the younger insured, the Policy has a Guaranteed Death Benefit Rider and that
benefit is in effect, the death benefit will equal the face amount if it exceeds
the cash value. In addition, if the Policy has an Expanded Death Benefit Rider,
the death benefit will equal the smallest face amount that was in effect since
age 80 of the younger insured (or since the Policy Date if the younger insured
was older than 80 on that date), if this amount is greater than the death
benefit that would otherwise be payable.
GUARANTEED DEATH BENEFIT RIDER
Subject to state availability, if you choose death benefit Option 4, you may
also choose at issue the Guaranteed Death Benefit Rider. (If you elect a
Survivorship Level Term Insurance Rider, you must elect "Inside Term" in order
to choose or keep the Guaranteed Death Benefit Rider.)
If you elect this benefit, we determine whether the "No Lapse Guarantee Benefit"
is in effect on the first day of each Policy month until the younger insured
reaches age 100. If the benefit is in effect, the Policy will not lapse even if
the net cash value is less than the Monthly Deduction for that month.
We determine if the benefit is in effect as follows. On the first day of a
Policy month, if the total premiums you have paid, less all partial surrenders,
less any Policy loan balance, and less any cash value paid to you to allow the
Policy to continue to qualify as life insurance under the tax law, are at least
equal to: the Guaranteed Death Benefit Fund value for the prior year (shown in
the rider), plus 1/12 of the Guaranteed Death Benefit premium (shown in Section
1 of your Policy) for each completed Policy month of the current Policy year,
then the No Lapse Guarantee Benefit will apply for that month.
We recalculate the Guaranteed Death Benefit Premium if:
-- you reduce the face amount
-- you make a partial surrender that reduces the face amount
-- you increase or decrease rider coverage
-- a correction is made in the insurance age of either insured
-- the underwriting class of the Policy and its riders is improved.
When testing whether the No Lapse Guarantee Benefit is in effect, we use the
Policy's original Guaranteed Death Benefit premium for the period of time it was
in effect, and each recalculated Guaranteed Death Benefit premium for the period
of time it was in effect.
If you elect this rider, the Monthly Deduction will include a charge for the
rider, even if the No Lapse Guarantee Benefit is not effective, until the Policy
anniversary when the younger insured reaches age 100, unless you request that
the rider terminate before then.
A change in death benefit option, addition of a Survivorship Level Term
Insurance Rider as "Outside Term", or a change under that rider from "Inside
Term" to "Outside Term", will terminate the Guaranteed Death Benefit Rider.
We can restrict any unplanned premium payment that would increase your Policy's
death benefit by more than it would increase cash value. (See "Flexible
Premiums".) This could prevent you from making unplanned premium payments that
are necessary to keep the No Lapse Guarantee Benefit in effect.
EXPANDED DEATH BENEFIT RIDER
Subject to state availability, you can purchase the Expanded Death Benefit
Rider. You may add the rider to your Policy at issue or at any time until the
insureds' average age reaches 90. (See "Surrender Charge" for the rules we use
when calculating an average age.)
If you choose this rider, then the death benefit on and after age 100 of the
younger insured will at least be equal to the lowest face amount that was in
effect since age 80 of the younger insured (or since the Policy Date, if the
younger insured was older than 80 on that date). See "Age 100" above for how we
determine the death benefit on and after age 100 of the younger insured.
If you elect this rider, the Monthly Deduction will include a charge for the
rider until the Policy anniversary when the younger insured reaches age 100,
unless you request that the rider terminate before then.
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<PAGE> 14
CHANGE IN DEATH BENEFIT OPTION
After the first Policy year and before the younger insured's age 100, you may
change your death benefit option by written request to our Home Office. The
request will be effective on the first day of the Policy month on or after we
receive it. A change in death benefit option may have tax consequences. (See
"Tax Considerations".)
You can change among the three options that use a guideline premium test or
between the two that use the cash value accumulation test, but not between a
guideline premium test option and a cash value accumulation test option.
If you change from Option 1 or 2 (face amount options) to Option 3 (face amount
plus cash value option), or from Option 4 (face amount option) to Option 5 (face
amount plus cash value option), 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. 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. No Surrender Charge applies in that situation.
If you change from Option 3 (face amount plus cash value option) to Option 1 or
2 (face amount options), or from Option 5 (face amount plus cash value option)
to Option 4 (face amount option), we increase the Policy's face amount, if
necessary, so that the death benefit is the same immediately before and after
the change.
If you change from Option 1 or 3 (enhanced corridor options) to Option 2, in
most cases we reduce the Policy's death benefit amount if the enhanced corridor
increases are in effect; the death benefit usually remains the same if they are
not in effect.
Changes from Option 2 to Option 1 or 3 (enhanced corridor options) require
underwriting approval, and both insureds must be living if the amount at risk
under the Policy would increase.
DEATH PROCEEDS PAYABLE
The death proceeds we pay are equal to the death benefit on the date of the
second 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 that are not already included in the base Policy's
death benefit and (2) by any Monthly Deduction made for a period beyond the date
of the second insured's death.
We may adjust the death proceeds if either insured's age or sex was misstated in
the application, if death results from either 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".)
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. If you surrender during the grace period, we also deduct the
Amount Due to cover the Monthly Deduction to the date of surrender. (See "Loan
Provision", "Surrender Charge", "Monthly Deduction from Cash Value" and "Lapse
and Reinstatement".)
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<PAGE> 15
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 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.
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 Money Market Sub-Account from the
investment start date until the day that we mail the confirmation for the
initial premium (in states that require a refund of premiums if you exercise the
Right to Return the Policy, until 15 days after we mail the initial premium
confirmation). (The "investment start date" is defined below.) Then, we allocate
the cash value to the sub-accounts as you choose. We allocate the amounts you
allocated to the Fixed Account as of the investment start date. You can allocate
to a maximum of nine 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 each of the
insureds has signed his/her Part II of the Policy application and the Policy
Date. (For this purpose, receipt of the premium payment means receipt by your
registered representative, if the payment is made with the application;
otherwise, it means receipt by a NELICO agency.)
PREMIUM WITH APPLICATION. If you make a premium payment with the application,
the Policy Date is generally the later of the date each of the insureds has
signed his/her Part II of the application and receipt of the premium payment. In
that case, the Policy Date and investment start date are the same. (Under our
administrative rules, a Policy which would be dated the 28th day or later in a
month will receive a Policy Date of the 28th.) 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 insureds
under a temporary insurance agreement for a limited period that generally begins
when we receive the premium for the Policy (or, if later, on the date when each
of the insureds has signed his/her Part II of the application). The maximum
temporary coverage is the lesser of the amount of insurance applied for and
$500,000 when both insureds are standard risks ($250,000 for when at least one
insured is not a standard risk and $50,000 when both persons 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 to the
Policy for any period between the Policy Date and the investment start date.
Insurance coverage under the Policy begins when we receive the Minimum Premium
(see "Premiums") 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
A-12
<PAGE> 16
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 10 days (more in some states) after you receive
the Policy. 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 the cash
value of the Policy plus any sales and premium tax charges that were deducted
from the premiums you paid, or if required by state insurance law, any premiums
paid.
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 sales charge from premiums. The sales charge is:
-- In Policy year 1: 26.5% of premiums paid up to a Target Premium, and 4%
of premiums paid above a Target Premium
-- In Policy years 2-10: 11.5% (9% for Policies with a base face amount of
at least $1 million) of premiums paid in each year up to the Target Premium, and
4% of premiums paid above the Target Premium in each year
-- In Policy years 11 and after: 4% of premiums paid
When we calculate the sales charge, 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 indicate your Target Premium in Section 1 of your Policy and on your
personalized illustration.
During the first 15 Policy years (or until age 100 of the younger insured, if
earlier), if you surrender or lapse the Policy, make a partial surrender or
reduce the face amount, a Surrender 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 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. These 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.
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<PAGE> 17
EXAMPLE: The following chart shows the net amount of premium that we would
allocate to the Variable Account assuming a premium payment of $3,000 and a
Target Premium of $2,000, for a Policy with a base face amount below $1 million.
POLICY YEAR 1
<TABLE>
<CAPTION>
PREMIUM NET PREMIUM
------- -----------
<C> <C> <S>
$3,000 $2,000
- 600 (30% X 2,000 = total sales and premium tax charge up to
--------- Target Premium)
$1,400
$1,000
- 75 (7.5% X 1,000 = total sales and premium tax charge on
--------- payments above Target Premium)
$ 925
$1,400
+925
---------
$2,325 Net Premium
======
</TABLE>
POLICY YEAR 2
<TABLE>
<CAPTION>
PREMIUM NET PREMIUM
------- -----------
<C> <C> <S>
$3,000 $2,000
- 300 (15% X 2,000 = total sales and premium tax charge up to
--------- Target Premium)
$1,700
$1,000
- 75 (7.5% X 1,000 = total sales and premium tax charge on
--------- payments above Target Premium)
$ 925
$1,700
+925
---------
$2,625 Net Premium
======
</TABLE>
SURRENDER CHARGE
We deduct a Surrender Charge from the cash value if you lapse, surrender, reduce
the face amount, or make a partial surrender of your Policy that reduces the
face amount during the first 15 Policy years (or until age 100 of the younger
insured, if earlier).
For insureds with an average issue age of 52 or less, the Surrender Charge in
the first Policy year is 90% of the lesser of: (1) premiums paid and (2) the
Benchmark Premium. When we calculate this amount, we do not count premiums that
we receive within 20 days before the first Policy anniversary, unless they are
paid through the Master Service Account arrangement.
The Surrender Charge is greatest in the first Policy year. After that, the
charge reduces monthly. To determine the Surrender Charge after the first Policy
year, we take the dollar amount of the charge that applied at the end of the
first Policy year and multiply it by a fraction. The fraction is based on the
number of months remaining in the Surrender Charge period at the end of the
first Policy year (168 months over the next 14 years, for a 15 year Surrender
Charge period) and the number of full months remaining in the Surrender Charge
period at the time of the surrender, lapse or face amount reduction.
For example, if the Surrender Charge was $1000 at the end of the first Policy
year, then in the first month of the second Policy year the Surrender Charge is
$1000 times 167/168, or $994.05.
For insureds with an average issue age above 52, the Surrender Charge percentage
applied to premiums paid in the first Policy year will be less than 90%. Your
Policy's schedule page shows the maximum dollar amount of the Surrender Charge
that will apply in the first Policy year and for the last Policy month of each
remaining year in the Surrender Charge period. (When we calculate the average
issue age for this purpose, we round down and limit the average to the age of
the younger insured plus five years.)
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<PAGE> 18
Any Surrender Charge that we deduct on lapse is credited 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 on any date after reinstatement, we do not count the period that the
Policy was lapsed.
In the case of a reduction in face amount or partial surrender that reduces the
face amount, we deduct any Surrender 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. 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.
IF THE SURRENDER CHARGE EXCEEDS THE AVAILABLE CASH VALUE, THERE WILL BE NO
PROCEEDS PAID TO YOU ON SURRENDER.
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 the No Lapse Guarantee
Benefit under the Guaranteed Death Benefit rider or the three year
Minimum Premium guarantee, we make the Monthly Deduction each month
unless the cash value equals zero. (See "Premiums".)
-- Otherwise, 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".)
There is no Monthly Deduction on or after the Policy anniversary when the
younger insured reaches age 100 (or would have reached age 100, if that person
dies earlier).
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, unless
you choose a "Single Source Expense Fund". If you choose a Single Source Expense
Fund, we will take the Monthly Deduction from the Account that you choose until
the cash value there is gone. Then we will take the Monthly Deduction from your
remaining Accounts in proportion to the cash value in each. You may choose a
Sub-Account or the Fixed Account as your Single Source Expense Fund.
The Monthly Deduction includes the following charges:
POLICY FEE. The Policy fee is currently equal to $10.50 per month in the first
three Policy years (guaranteed not to exceed $12.50 per month) and $3.50 per
month thereafter (guaranteed not to exceed $5.50 per month).
ADMINISTRATIVE CHARGE. Currently the basic Administrative Charge (that is, the
charge that applies if both insureds are in a standard or better underwriting
class) is $0.07 per $1,000 of face amount in the first three Policy years and
$0.05 per $1,000 in Policy years four and after. If the base Policy face amount
is $1 million or greater, the current charge in Policy years four and after is
$0.025 (rather than $0.05) per $1,000.
The guaranteed maximum basic monthly Administrative Charge is $0.08 per $1,000
in the first three Policy years and $0.06 per $1,000 in Policy years four and
after. If the base Policy face amount is $1 million or greater, the guaranteed
maximum basic charge in Policy years four and after is $0.035 (rather than
$0.06) per $1,000.
If either insured is in a class below standard, there is an extra charge that
applies on both a current and guaranteed basis in addition to the basic charge
described above. The extra charge is $0.02 per $1,000. If only one insured is in
a class below standard, the extra charge applies in Policy years four through
six. If both insureds are in a class below standard, the extra charge applies in
Policy years four through nine.
The Administrative Charge applies to the base Policy face amount and to the face
amount of any Survivorship Level Term Insurance rider. Currently we intend to
apply the basic Administrative Charge to no more than $4 million of Policy face
amount beginning in the second Policy year. This means that the maximum
Administrative Charge currently deducted in the second Policy year, for example,
is $100 per month ($0.025 times 4,000) for two insureds who are each a standard
or better risk. However, we do not limit the Policy face amount to which we
apply the extra charge for risk classes below standard. For example, under a
Policy with a $5 million face amount and an insured in a risk class below
standard, the maximum charge deducted on a current basis in the fourth Policy
year would be $200 per month ($0.025 times 4,000 plus $0.02 times 5,000).
MORTALITY AND EXPENSE RISK CHARGE. We deduct a charge for the mortality and
expense risks that we assume. This charge is at an annual rate of 0.90% during
the first ten Policy years, and 0.45% thereafter. The rate is applied against
cash value in the Variable Account and against the amount of any cash value held
in the general account that represents a Policy loan. The mortality risk we
assume is that insureds may live for shorter periods of time than we estimated.
The expense risk we assume is that our costs of issuing and administering the
Policies may be more than we estimated.
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<PAGE> 19
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 each 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
-- each insured's age at issue
-- the Policy year
-- the base Policy face amount (at issue).
We guarantee that the joint rates will not be higher than rates based on the
1980 Commissioners Standard Ordinary Mortality Tables with smoker/nonsmoker
modifications (the "1980 CSO Tables"). 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.
We underwrite each insured person separately. The underwriting classes we use
are smoker standard, smoker rated, nonsmoker standard, nonsmoker preferred,
nonsmoker aggregate, and nonsmoker rated. Rated classes have higher cost of
insurance deductions. We base the guaranteed maximum mortality charges for rated
Policies on multiples of the 1980 CSO Tables.
The three standard nonsmoker classes are available as follows:
-- nonsmoker preferred and nonsmoker standard, for Policies with base face
amounts of $500,000 or more if the insured's issue age is 20 through 75.
-- nonsmoker aggregate, for Policies with base face amounts below $500,000
and for all insureds whose 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,
current cost of insurance rates are generally lower for insureds with lower
issue ages. Current cost of insurance rates will generally be lower for a
particular insured if the base Policy face amount at issue is at least $1
million. We offer Policies with cost of insurance rates (and Policy values and
benefits) that do not vary based on the sex of the insured where required by
state law and to some employee benefit plans. Joint cost of insurance charges
under the Policy do not change due to the first insured's death.
The Survivorship Level Term Insurance Rider has its own cost of insurance rates
that may be different from those of the base Policy. Generally, the term rider
cost of insurance rates are less than or the same as those of the base Policy.
If you choose "Inside Term" (where the face amount of the term rider is included
with the face amount of the base Policy when we calculate the base Policy death
benefit), then the total net amount at risk equals the total death benefit (that
is, the base Policy death benefit calculated by including the term component)
minus the cash value. We allocate that total net amount at risk first to the
term insurance rider up to the face amount of the rider, and we allocate any
excess net amount at risk to the base Policy. This generally results in lower
combined total cost of insurance charges under the base Policy and term rider
than if you choose "Outside Term".
With "Outside Term" (where the term rider's face amount is not used in
calculating the base Policy death benefit and is instead simply added to the
base Policy's death proceeds), we calculate the net amount at risk and cost of
insurance charges separately for the term insurance rider and the base Policy.
The term rider's net amount at risk equals its face
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<PAGE> 20
amount, and the base Policy's net amount at risk equals the base Policy's death
benefit (which is calculated without the term rider component) minus the cash
value.
GUARANTEED DEATH BENEFIT RIDER CHARGE. The charge for the Guaranteed Death
Benefit rider is $0.01 per $1000 of face amount (including the base Policy and
any joint or single life term insurance rider).
CHARGES FOR ADDITIONAL RIDER BENEFITS AND SERVICES. We charge for the cost of
any additional rider benefits, including the Expanded Death Benefit rider, 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 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".)
CHARGES AGAINST THE ELIGIBLE FUNDS
The following table shows the annual operating expenses for each 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>
GOLDMAN MORGAN
SACHS LOOMIS STANLEY DAVIS ALGER MFS
MIDCAP SAYLES 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%. 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 of these 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 Goldman Sachs Midcap
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> 21
The investment adviser for VIP and VIP II is Fidelity Management & Research
Company ("FMR"). The Portfolios of VIP and VIP II pay investment management fees
to FMR and also bear certain other expenses. For the year ended December 31,
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.
Affiliates of FMR compensate NELICO and/or certain affiliates for
administrative, distribution, or other services relating to these Portfolios of
VIP and VIP II. This compensation is based on assets of the Portfolios
attributable to the Policies and certain other variable insurance products that
we and our affiliates issue.
GROUP OR SPONSORED ARRANGEMENTS
We may issue the Policies to group or sponsored arrangements, as well as on an
individual basis. A "group arrangement" includes a situation where a trustee,
employer or similar entity purchases individual Policies covering a group of
individuals. An example of such an arrangement is a non-tax qualified deferred
compensation plan. A "sponsored arrangement" includes a situation where an
employer or an association permits group solicitation of its employees or
members for the purchase of individual Policies.
We may waive, 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. 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 may be a fixed amount or a varying
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. You need our consent to increase your Planned Premium.
You cannot make an additional payment that increases the Policy's death benefit
by more than it increases the cash value except with our consent, and we may
require 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 cannot make any payments at and after age 100 of
the younger insured, except if the Policy is in the grace period.
You can pay Planned Premiums on an annual, semi-annual or quarterly schedule or,
with our consent, monthly. You need our consent to change your Planned Premium
schedule.
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.)
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<PAGE> 22
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". In
addition, if you have selected the guideline premium test, Federal tax law
limits the amount of premiums that you can pay under the Policy. (See "Tax
Considerations".)
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".)
Unless you tell us otherwise in writing, we treat any payment that we receive in
response to an anniversary bill, and any payment we receive within 45 days after
an anniversary while you have an outstanding Policy loan, first as a Planned
Premium, second as payment of loan interest, and third as an unscheduled
payment. Otherwise, we treat the payment first as a Planned Premium and second
as an unscheduled payment.
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. (See "Loan
Provision" and "Deductions from Premiums".)
Two types of premium payment levels can protect your Policy against lapse (1)
for the first three Policy years, and (2) until age 100 of the younger insured.
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 (and
less any cash value paid to you to allow the Policy to continue to qualify as
life insurance), at least equal (b) the total monthly Minimum Premiums for the
Policy up to that Policy month, the Policy will not lapse. We recalculate the
three year 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, (3) the rating classification for your Policy is improved, or (4) a
correction is made in the insurance age of either insured. We base the Minimum
Premium on your Policy's face amount, the age, sex (unless unisex rates apply),
and underwriting class of each insured, the current level of Policy charges and
any riders to the Policy.
To age 100 of the younger insured--In general, if you elect the Guaranteed Death
Benefit rider and pay the Guaranteed Death Benefit Premium amounts on time, the
Policy will stay in force until age 100 of the younger insured. Your total
payments (less any partial surrenders, outstanding Policy loans and cash value
paid to you to allow the Policy to continue to qualify as life insurance) must
meet the requirements of the rider. We recalculate the Guaranteed Death Benefit
premium following the same Policy transactions described above for a
recalculation of the three year Minimum Premium amount. The Guaranteed Death
Benefit premium amount (shown in your Policy) is based on the same factors as
the three year Minimum Premium, except that it is based on the guaranteed
maximum level of Policy charges.
LAPSE AND REINSTATEMENT
LAPSE. Unless your Policy is protected by the No Lapse Guarantee Benefit under
the Guaranteed Death Benefit rider or by the three year 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 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 the No Lapse Guarantee
Benefit to be in effect, if the Policy has the Guaranteed Death Benefit rider;
and a premium large enough to meet the monthly three year Minimum Premium test.
We will tell you the Amount Due. You have insurance coverage during the grace
period, but if the second 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 Amount Due 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.
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, Policy fee, mortality and expense risk charge, administrative charge,
sales charge and rider charges, we do not count the amount of time that a Policy
was lapsed.
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<PAGE> 23
OTHER POLICY FEATURES
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after we
mail the confirmation for the initial premium (unless we consent to an earlier
date). 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 90% (or more if required by state law) of: the
Policy's cash value minus the Surrender Charge. The loan value available is the
loan value reduced by any outstanding loan plus interest.
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,
unless you request otherwise, 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 4.35% per
year, compounded daily. Interest accrues daily and is due on the Policy
anniversary. If not paid, we add the interest accrued to the loan amount, and we
deduct an amount equal to the unpaid interest from the Policy's cash value in
the sub-accounts 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.
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. (See "Deductions from Premiums".)
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 will
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 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. (See "Lapse and Reinstatement".) 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. Although the issue is not free from doubt, we
believe that a loan from or secured by a Policy that is not classified as a
modified endowment contract should generally not be treated as a taxable
distribution. A tax adviser should be consulted about such loans. (See "Tax
Considerations" below.)
Department of Labor ("DOL") 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 either
insured is living. We determine the net cash value of the surrendered Policy as
of the date when we receive a 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
to you by the portion of any Monthly Deduction made for the period beyond the
date of surrender. If you surrender the Policy during the grace period, we
deduct the Amount Due from your proceeds to cover the Monthly Deduction to the
date of surrender. (See "Lapse and Reinstatement".) 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 at any time after we mail the
confirmation for the initial premium, 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
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<PAGE> 24
reduction in the Policy's Benchmark Premium, on which we base any future
Surrender Charges, and in the Target Premium, on which we base the level of the
sales charge. A partial surrender may also reduce rider benefits. We can 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 90% of the Policy's net cash value per year, if
there is sufficient available loan 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 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 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. 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
After the first Policy year, 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 Benchmark
Premium, on which we base any future Surrender Charges, and the Target Premium,
on which we base the level of the sales charge. We deduct any Surrender Charge
that applies from the Policy's cash value in an amount proportional to the
amount of the face reduction.
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.
A reduction in face amount reduces the Federal tax law limits on the amount of
premiums that you can pay under the Policy under the guideline premium test. In
these cases, you may need to have a portion of the Policy's cash value paid to
you to comply with Federal tax law.
A face amount reduction takes effect as of the first day of the Policy month on
or after 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".)
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 nine accounts (including the Fixed Account) at any one time. You may
allocate any whole percentage to a sub-account. You can allocate your Policy's
cash value among no more than nine accounts (including the Fixed Account) at any
one time.
You make the initial 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.
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<PAGE> 25
TRANSFER OPTION
Once we mail the confirmation for the initial premium (in some states, 15 days
after that) 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). Currently we do not limit the
number of transfers per Policy year. We reserve the right to make a charge for
transfers in excess of four in a Policy year. A 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.
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 month (or if not a day when the
New York Stock Exchange is open, the next such day), from any one Sub-Account to
one or more of the other Sub-Accounts (and/or the Fixed Account). We limit your
allocation of cash value to no more than nine accounts (including the Fixed
Account) at any one time. You must transfer a minimum of $100 to each Sub-
Account that you select under this feature. 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 not participate in the dollar cost averaging program
while you are participating 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,
as well as the frequency (using calender month-end, quarter-end or year-end
dates). You may not participate in the asset rebalancing program while you are
participating in the dollar cost averaging program. (See "Dollar Cost Averaging"
above.) On the last day of your chosen 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.
There is no extra charge for this feature.
Ask your registered representative about the availability of this feature.
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<PAGE> 26
PAYMENT OF PROCEEDS
We ordinarily pay any net cash value, loan value or death benefit proceeds
coming from the sub-accounts within seven days after we receive a request, or
satisfactory proof of death of an 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 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 net 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 MONTHS CONVERSION 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.
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
circumstance. (See "The Fixed Account.") If we limit such allocations and you
then wish to exercise the 24 Months Conversion 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 Months Conversion
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 Months Conversion Right.
FOR POLICIES ISSUED IN MARYLAND. Under Policies issued in Maryland, you can
exchange the face amount of your Policy for a fixed benefit survivorship 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 Months Conversion 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, you may (if approved in your state) have 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. Contact us or your registered
representative for more information about this feature.
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POLICY SPLIT RIDER
Subject to state availability and our underwriting guidelines, we may issue or
amend your Policy with a split rider which allows you to "split" the Policy into
two new NELICO individual flexible premium adjustable variable life insurance
policies. The rider permits you to split the Policy in the event of divorce of
the insureds, if certain federal tax law changes occur, or if certain business
circumstances change (each, a "split event"). The rider lists the requirements
for a split event. If you exercise the split rider, this Policy will be
canceled, and we will transfer its cash value (in equal portions, unless we
agree otherwise) to two new individual policies issued on the effective date of
the split. A new Surrender Charge will apply to each individual policy. We will
issue each new policy with either a level or variable death benefit option in
effect, depending on which type of death benefit option you have under this
Policy at the time of the split. Additional conditions apply.
For more information about the Policy split rider you should contact us or your
registered representative. You can request a prospectus and additional
information regarding the individual policies that are issued following a split.
For a discussion of the possible tax consequences of splitting the Policy, see
"Tax Considerations."
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 last death under the Policy. 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% a year, compounded yearly. Additional interest for any year
is added to the monthly payments for that year.
(ii) LIFE INCOME. We pay proceeds in equal monthly installments (i) during
the life of the payee, (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% 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% a year in an amount and at a frequency elected until we have
paid total proceeds. We pay any amounts unpaid at the death of the payee
in one sum.
(vi)LIFE INCOME FOR TWO LIVES. We pay proceeds in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the life of the surviving payee or 10 years, or (iii) while
the two payees are living and, after the death of one payee, we pay
two-thirds of the monthly amount for the life of the surviving payee.
You need our consent to use an option if the installment payments would be less
than $20.
ADDITIONAL BENEFITS BY RIDER
You can add additional benefits to the Policy by rider, subject to our
underwriting and issuance standards. These additional benefits usually require
an additional 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.
It may be to your economic advantage to include a significant portion of your
insurance coverage under a Survivorship Level Term Insurance rider.
Reductions in or elimination of term rider coverage does not trigger a surrender
charge, and use of a term rider generally reduces sales compensation. However,
like the cost of coverage under the Policy, charges deducted from the Policy's
cash value to pay for term rider coverage no longer participate in the
investment experience of the Variable Account, and usually
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increase with the age of the covered individual. Your registered representative
can provide you more information on the uses of term rider coverage.
The following riders are available:
TERM RIDER--SURVIVORSHIP LEVEL TERM INSURANCE, which provides joint life
term insurance.
TERM RIDER--SURVIVORSHIP 4 YEAR LEVEL TERM INSURANCE, which provides joint
life term insurance for four policy years.
TERM RIDER--SINGLE LIFE LEVEL TERM INSURANCE, which provides additional term
insurance on one of the insureds.
TERM RIDER--SINGLE LIFE DECREASING TERM INSURANCE, which provides additional
term insurance on one of the insureds in an amount that decreases each year to
zero over a coverage period of 10, 15 or 20 years.
WAIVER OF MONTHLY DEDUCTION, which provides for waiver of Monthly Deductions
upon the disability of the insured covered by the waiver.
WAIVER OF SPECIFIED PREMIUMS, which provides for waiver of the cost of the
rider itself and for a premium benefit upon the disability of an insured covered
by the rider.
An Expanded Death Benefit, Guaranteed Death Benefit, and/or a Policy split rider
may also be available. (See "Expanded Death Benefit Rider", "Guaranteed Death
Benefit Rider", and "Policy Split Rider".) 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 second
insured.
The beneficiary is also named in the application. You may change the beneficiary
at any time before the death of the second insured. The beneficiary has no
rights under the Policy until the death of the second insured and must survive
the second insured in order to receive the death proceeds. If no named
beneficiary survives the second 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
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general account assets which exceed the reserves and other liabilities of the
Variable Account. We will consider any possible adverse impact such a transfer
might have on the Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of our other
income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
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 United
States publicly traded common stocks.
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 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 Loomis Sayles Balanced Series. Its investment objective is reasonable
long-term investment return from a combination of long-term capital appreciation
and moderate current income.
The 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 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.
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The Zenith Fund is an open-end management investment company, more commonly
known as a mutual fund. The Zenith Fund is available as an investment vehicle
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.
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.
Loomis Sayles Balanced New England Investment Management, Loomis, Sayles & Company, L.P.*
Inc.
Morgan Stanley International New England Investment Management, Morgan Stanley Dean Witter
Magnum Equity Inc. Investment Management Inc.
Goldman Sachs Midcap Value New England Investment Management, Goldman Sachs Asset Management
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, Goldman Sachs Midcap 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 until May 1, 1997, when Morgan Stanley Dean Witter
Investment Management became the sub-adviser. The Goldman Sachs Midcap Value
Series' sub-adviser was Loomis, Sayles until May 1, 1998, when Goldman Sachs
Asset Management, a separate operating division of Goldman Sachs & Co., became
the sub-adviser. For more information about the Series'
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advisory agreements, see the Zenith Fund prospectus attached at the end of this
prospectus and the Zenith Fund's Statement of Additional Information.
Fidelity Management & Research Company ("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.
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 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, unless otherwise required by state law.) 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.
The effective interest rate is a weighted average of all the Fixed Account rates
for your Policy.
After the Policy has been in force for ten years, if we set an interest rate for
the Fixed Account that is higher than 4%, that rate will be increased for the
Policy by at least 0.45%.
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 IF WE RECEIVE
THE TRANSFER REQUEST WITHIN 30 DAYS AFTER THE POLICY ANNIVERSARY. WE MAKE THE
TRANSFER AS OF THE DATE WE RECEIVE THE TRANSFER REQUEST AT OUR HOME OFFICE.
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EXCEPT WITH OUR CONSENT, 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. The total number of transfers among sub-accounts and
from the sub-accounts to the Fixed Account may not exceed four in one Policy
year without our consent. We currently do not limit the number of these
transfers in a Policy year.
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 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 Target Premium paid in the first Policy year; 5% in Policy
years two through ten; and 3% thereafter. Agents receive a commission of 3% of
each payment in excess of the Target Premium in any year. Agents may elect to
receive commissions equal to a maximum of .16% of cash value, instead of
premium-based compensation, beginning in Policy year 11. 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, premium-based
commissions paid to the broker-dealer on behalf of the registered representative
will not exceed those listed above. A registered representative may choose a
combination of premium-based and cash value-based compensation. In that case,
the registered representative will receive maximum premium-based commissions up
to the amounts listed above in Policy years one through ten, plus a maximum of
.30% of cash value in Policy years two through ten and .09% thereafter. 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 also 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
NOTIFICATION OF FIRST DEATH
Generally, we can challenge the validity of your Policy or a rider during either
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 either insured's lifetime)
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from the premium payment. However, if either 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 relating to that insured.
You should notify us immediately upon the first death of an insured under the
Policy. Even if premiums continue to be paid after the first death, we generally
can contest the Policy or limit benefits under the suicide provision (described
below) and terminate the Policy at any time, even beyond the two-year period, if
we were not notified of a death that occurred during the period of
contestability. Policies issued in New York are not contestable after they have
been in force for two years during the life of either insured.
MISSTATEMENT OF AGE OR SEX
If either insured's age or sex is misstated in the application, the Policy's
death benefit is the amount that the most recent Monthly Deduction which was
made would provide, based on the insureds' correct ages and, if the Policy is
sex-based, correct sexes.
SUICIDE
If either of the insureds dies by 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 (more in some states).
The Policy will terminate as of the date of the first death by suicide.
An eligible insured, if age 75 or younger, can request a new single life
variable life insurance policy, with the same face amount as the original
Policy, within 60 days of the date of the suicide. An eligible insured over age
75 may request a single life ordinary (not variable) life policy. Contact us or
your registered representative for more information.
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income tax
considerations associated with the Policies 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 it is reasonable to
conclude that the Policies will satisfy the applicable requirements. If it is
subsequently determined that a Policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the Policy into compliance
with such requirements and we reserve the right to restrict Policy transactions
in order to do so.
In certain circumstances, owners of variable life insurance contracts have been
considered for Federal income tax purposes to be the owners of the assets of the
variable account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the contract
owners have been currently taxed on income and gains attributable to the
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to allocate
payments 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 Policies.
In addition, the Code requires that the investments of the Variable Account be
"adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
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<PAGE> 34
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 at any time below the
lowest level of death benefit provided 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.
(2) Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject
to tax except where the distribution or loan is made when the Policy Owner
has attained age 59 1/2 or is disabled, or where the distribution is part of
a series of substantially equal periodic payments for the life (or life
expectancy) of the Policy Owner or the joint lives (or joint life
expectancies) of the Policy Owner and the Policy Owner's beneficiary or
designated beneficiary.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Policy Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for Federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole or
in part as ordinary income subject to tax.
Although the issue is not free from doubt, we believe that a loan from or
secured by a Policy that is not classified as a Modified Endowment Contract
should generally not be treated as a taxable distribution. 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.
Before taking out a Policy loan, you should consult a tax adviser as to the tax
consequences.
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<PAGE> 35
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.
TAX TREATMENT OF POLICY SPLIT. The policy split rider permits a Policy to be
split into two individual Policies. It is not clear whether exercising the
policy split rider will be treated as a taxable transaction or whether the
individual Policies that result would be classified as Modified Endowment
Contracts. A competent tax advisor should be consulted before exercising the
policy split rider.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance,
transfer, and other tax consequences depend on the individual circumstances of
each Policy Owner or beneficiary.
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.
The transfer of the Policy or designation of a beneficiary may have federal,
state, and/or local transfer and inheritance tax consequences, including the
imposition of gift, estate, and generation-skipping transfer taxes. For example,
the transfer of the Policy to, or the designation as a beneficiary of, or the
payment of proceeds to, a person who is assigned to a generation which is two or
more generations below the generation assignment of the Policy Owner may have
generation skipping transfer tax consequences under federal tax law. The
individual situation of each Policy Owner or beneficiary will determine the
extent, if any, to which federal, state, and local transfer and inheritance
taxes may be imposed and how ownership or receipt of Policy proceeds will be
treated for purposes of federal, state and local estate, inheritance, generation
skipping and other taxes.
If a trustee under a pension or profit-sharing plan, or similar deferred
compensation arrangement, owns a Policy, the Federal, state and estate tax
consequences could differ. The amounts of life insurance that may be purchased
on behalf of a participant in a pension or profit-sharing plan are limited. The
current cost of insurance for the net amount at risk is treated as a "current
fringe benefit" and must be included annually in the plan participant's gross
income. We report this cost (generally referred to as the "P.S. 58" cost) to the
participant annually. If the plan participant dies while covered by the plan and
the Policy proceeds are paid to the participant's beneficiary, then the excess
of the death benefit over the cash value is not taxable. However, the cash value
will generally be taxable to the extent it exceeds the participant's cost basis
in the Policy. Policies owned under these types of plans may be subject to
restrictions under the Employee Retirement Income Security Act of 1974
("ERISA"). You should consult a qualified adviser regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy tax
requirements to be treated as nontaxable. Plan loan requirements and provisions
may differ from Policy loan provisions. Failure of plan loans to comply with the
requirements and provisions of the DOL regulations and of tax law may result in
adverse tax consequences and/or adverse consequences under ERISA. Plan
fiduciaries and participants should consult a qualified adviser before
requesting a loan under a Policy held in connection with a retirement plan.
Businesses can use the Policies in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree
medical benefit plans and others. The tax consequences of such plans may vary
depending on the particular facts and circumstances. If you are purchasing the
Policy for any arrangement the value of which depends in part on its tax
consequences, you should consult a qualified tax adviser. In recent years,
moreover, Congress has adopted new rules relating to life insurance owned by
businesses. Any business contemplating the purchase of a new Policy or a change
in an existing Policy should consult a tax adviser.
We believe that Policies subject to Puerto Rican tax law will generally receive
treatment similar, with certain modifications, to that described above. Among
other differences, Policies governed by Puerto Rican tax law are not currently
subject to the rules described above regarding Modified Endowment Contracts. You
should consult your tax adviser with respect to Puerto Rican tax law governing
the Policies.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
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<PAGE> 36
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 company Federal income taxes. (We do deduct a charge for
Federal taxes from premiums.) We reserve the right to charge the Variable
Account for any future Federal income taxes we may incur.
Under current laws 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, New York 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
RR 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.
Philip K. Howard, Esq............. Director of NELICO since 1996 and Partner of the law firm of
Covington & Burling Covington & Burling, (formerly, Howard, Smith & Levin LLP)
1330 Avenue of the Americas in New York City.
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
New York, NY 10105 Burlington Menswear Division.
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 of Board and
Metropolitan Life Insurance Co. Chief Financial Officer of Metropolitan Life Insurance
One Madison Avenue Company since 1998; formerly, Senior Executive Vice
New York, NY 10010 President and Chief Financial Officer 1986-1998 of
Metropolitan Life Insurance Company.
</TABLE>
A-33
<PAGE> 37
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
<S> <C>
Catherine A. Rein................. Director of NELICO since 1998 and President and Chief
Metropolitan Property and Executive Officer of Metropolitan Property and Casualty
Casualty Insurance Company Insurance Company since 1999; formerly, Senior Executive
700 Quaker Lane Vice President 1998-1999; Executive Vice President
Warwick, RI 02887 1989-1998 of Metropolitan Life Insurance Company.
Rand N. Stowell................... Director of NELICO since 1996 and President of Randwell Co.;
P.O. Box 60 formerly, President of United Timber Corp. of Weld, Maine
Weld, ME 04285 and Director 1990-1996 of New England Mutual.
Alexander B. Trowbridge........... Director of NELICO since 1996 and President of Trowbridge
Trowbridge Partners Inc. Partners, Inc. in Washington, DC; formerly, Director
1317 F Street, NW, Suite 500 1983-1996 of New England Mutual.
Washington, D.C. 20004
</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 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.
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.
</TABLE>
A-34
<PAGE> 38
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
<S> <C>
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.
Richard A. Robinson............... Second Vice President and chief accounting officer of NELICO
since 1998; formerly, Second Vice President 1997-1998 of
NELICO; Manager of Life Insurance Accounting 1994-1997 of
Liberty Life Assurance Company.
David Y. Rogers................... Executive Vice President and Chief Financial Officer of
NELICO since 1999; formerly, Partner, Actuarial Consulting
1992-1999 of Price Waterhouse Coopers LLP.
John G. Small, Jr................. President, New England Services (a business unit of NELICO)
since 1997; formerly, Senior Vice President 1996-1997 of
NELICO and Senior Vice President 1990-1996 of New England
Mutual.
H. James Wilson................... Executive Vice President and General Counsel of NELICO since
1996; formerly, Executive Vice President and General Counsel
1993-1996 of New England Mutual.
John W. Wright.................... President, New England Financial Employee Benefits Group (a
business unit of NELICO) since 1996; formerly, President
1993-1996 of New England Employee Benefits Group (a
business unit of New England Mutual).
</TABLE>
The principal business address for each of the directors and officers is the
same as NELICO's except where indicated.
VOTING RIGHTS
We own the Eligible Fund shares held in the Variable Account and vote those
shares at meetings of the Eligible Fund shareholders. Under Federal securities
law, you currently have the right to instruct us how to vote shares that are
attributable to your Policy.
Policy Owners who are entitled to give voting instructions and the number of
shares attributable to their Policies are determined as of the meeting record
date. If we do not receive timely instructions, we will vote shares in the same
proportion as (i) the aggregate cash value of policies giving instructions,
respectively, to vote for, against, or withhold votes on a proposition, bears to
(ii) the total cash value in that sub-account for all policies for which we
receive voting instructions. No voting privileges apply to the Fixed Account or
to cash value removed from the Variable Account due to a Policy loan.
We will vote all Eligible Fund shares held by our general account (or any
unregistered separate account for which voting privileges were not extended) in
the same proportion as the total of (i) shares for which voting instructions
were received and (ii) shares that are voted in proportion to such voting
instructions.
The Eligible Funds' Boards of Trustees monitor events to identify conflicts that
may arise from the sale of Eligible Fund shares to variable life and variable
annuity separate accounts of affiliated and, if applicable, unaffiliated
insurance companies. Conflicts could result from changes in state insurance law
or Federal income tax law, changes in investment management of an Eligible Fund,
or differences in voting instructions given by variable life and variable
annuity contract owners. If there is a material conflict, the Board of Trustees
will determine what action should be taken, including the removal of the
affected sub-accounts from the Eligible Fund(s), if necessary. If we believe any
Eligible Fund action is insufficient, we will consider taking other action to
protect Policy Owners. There could, however, 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 invest sub-account assets as a substitute for Eligible Fund
shares, to close a sub-account, or to transfer assets to our general account as
permitted by applicable law; (4) to operate the Variable Account as a management
A-35
<PAGE> 39
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, sub-account transfers, lapses, surrenders and other Policy transactions
when they occur.
You will be sent semiannual reports containing the financial statements of the
Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
Professional organizations may endorse the Policies. We may use such
endorsements in Policy sales material. We may pay the professional organization
for the use of its customer or mailing lists to distribute Policy promotional
materials. An endorsement by a third party does not predict the future
performance of the Policies.
Articles discussing the Variable Account's investment performance, rankings and
other characteristics may appear in publications. Some or all of these
publishers or ranking services (including, but not limited to, Lipper Analytical
Services, Inc. and Morningstar, Inc.) may publish their own rankings or
performance reviews of variable contract separate accounts, including the
Variable Account. We may use references to, or reprints of such articles or
rankings as sales material and may include rankings that indicate the names of
other variable contract separate accounts and their investment experience. 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.
We are a member of the Insurance Marketplace Standards Association ("IMSA"), and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
Policy sales material may refer to historical, current and prospective economic
trends. In addition, sales material may discuss topics of general investor
interest for the benefit of registered representatives and prospective Policy
Owners. These materials may include, but are not limited to, discussions of
college planning, retirement planning, reasons for investing and historical
examples of the investment performance of various classes of securities,
securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus have
been passed on by H. James Wilson, General Counsel of NELICO. Sutherland Asbill
& Brennan LLP, of Washington, D.C., has provided advice on certain matters
relating to the Federal securities laws.
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<PAGE> 40
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 Rodney J.
Chandler, F.S.A., M.A.A.A., Second Vice President and Actuary of NELICO, as
stated in his opinion filed as an exhibit to the Registration Statement.
A-37
<PAGE> 41
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS
The tables in Appendix A illustrate the way the Policies work. They show how the
death benefit, net cash value and cash value could vary over an extended period
of time assuming hypothetical gross rates of return (i.e., investment income and
capital gains and losses, realized or unrealized) for the Variable Account equal
to constant after tax annual rates of 0%, 6% and 12%. The tables are based on
face amounts of $250,000 and $1,000,000 and the Option 1 death benefit for a
male and a female, both aged 55. The insureds are each assumed to be in the
nonsmoker aggregate risk classification for the $250,000 face amount and the
nonsmoker preferred risk classification for the $1,000,000 face amount. The
Tables assume no rider benefits. Values are first given based on current
mortality and other Policy charges and then based on guaranteed mortality and
other Policy charges.
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 either or both insureds were 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, a
mortality and expense risk charge, an administrative 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 that is deducted from the
cash value upon surrender, face reduction or lapse during the first 15 Policy
years. (See "Charges and Expenses".) The illustrations reflect an average of the
investment advisory fees and operating expenses of the Eligible Funds, at an
annual rate of .76% of the average daily net assets of the Eligible Funds. This
average reflects voluntary expense cap and expense deferral arrangements between
New England Investment Management and the Zenith Fund that New England
Investment Management could terminate at any time.
Taking account of the average investment advisory fee and operating expenses of
the Eligible Funds, the gross annual rates of return of 0%, 6% and 12%
correspond to net investment experience at constant annual rates of -0.76%,
5.20%, and 11.15%, respectively.
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 insureds' age, sex, underwriting classification, and the death benefit
option and 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 insureds.
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<PAGE> 42
MALE AND FEMALE BOTH ISSUE AGE 55
$4,000 ANNUAL PREMIUM FOR NON-SMOKER AGGREGATE UNDERWRITING RISK
$250,000 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 4,200 250,000 250,000 250,000 0 0 0 2,454 2,611 2,768
2 8,610 250,000 250,000 250,000 2,335 2,834 3,350 5,401 5,899 6,416
3 13,241 250,000 250,000 250,000 5,437 6,464 7,570 8,267 9,294 10,400
4 18,103 250,000 250,000 250,000 8,596 10,348 12,307 11,190 12,942 14,901
5 23,208 250,000 250,000 250,000 11,661 14,341 17,454 14,019 16,699 19,813
6 28,568 250,000 250,000 250,000 14,626 18,440 23,047 16,748 20,563 25,169
7 34,196 250,000 250,000 250,000 17,481 22,639 29,120 19,368 24,526 31,006
8 40,106 250,000 250,000 250,000 20,214 26,930 35,711 21,865 28,580 37,362
9 46,312 250,000 250,000 250,000 22,808 31,297 42,858 24,223 32,712 44,273
10 52,827 250,000 250,000 250,000 25,240 35,724 50,602 26,420 36,903 51,781
15 90,630 250,000 250,000 250,000 39,216 63,819 106,871 39,216 63,819 106,871
20 138,877 250,000 250,000 250,000 52,011 98,939 200,258 52,011 98,939 200,258
25 200,454 250,000 250,000 373,374 60,380 140,760 355,594 60,380 140,760 355,594
30 279,043 250,000 250,000 787,023 58,270 189,999 605,403 58,270 189,999 605,403
35 379,345 250,000 360,011 1,424,325 33,682 240,008 949,550 33,682 240,008 949,550
<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 -100.00 -100.00 -100.00 6,149.98 6,149.98 6,149.98
2 -58.69 -52.10 -45.71 642.15 642.15 642.15
3 -34.66 -27.89 -21.33 258.47 258.47 258.47
4 -23.36 -16.69 -10.23 148.92 148.92 148.92
5 -17.47 -10.89 -4.50 100.39 100.39 100.39
6 -14.01 -7.49 -1.16 73.77 73.77 73.77
7 -11.80 -5.32 0.98 57.22 57.22 57.22
8 -10.32 -3.85 2.43 46.06 46.06 46.06
9 -9.30 -2.81 3.47 38.07 38.07 38.07
10 -8.58 -2.07 4.23 32.11 32.11 32.11
15 -5.53 0.77 6.93 16.46 16.46 16.46
20 -4.31 1.98 8.11 9.93 9.93 9.93
25 -4.15 2.54 8.76 6.48 6.48 9.07
30 -5.19 2.82 9.09 4.39 4.39 10.42
35 -10.41 2.82 9.04 3.02 4.76 10.74
</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-39
<PAGE> 43
MALE AND FEMALE BOTH ISSUE AGE 55
$4,000 ANNUAL PREMIUM FOR NON-SMOKER AGGREGATE UNDERWRITING RISK
$250,000 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 4,200 250,000 250,000 250,000 0 0 0 2,401 2,556 2,711
2 8,610 250,000 250,000 250,000 2,229 2,721 3,230 5,295 5,786 6,296
3 13,241 250,000 250,000 250,000 5,279 6,291 7,381 8,109 9,121 10,211
4 18,103 250,000 250,000 250,000 8,386 10,112 12,042 10,981 12,706 14,636
5 23,208 250,000 250,000 250,000 11,402 14,040 17,105 13,760 16,398 19,463
6 28,568 250,000 250,000 250,000 14,317 18,070 22,604 16,440 20,193 24,727
7 34,196 250,000 250,000 250,000 17,124 22,198 28,575 19,010 24,085 30,462
8 40,106 250,000 250,000 250,000 19,808 26,413 35,053 21,459 28,064 36,704
9 46,312 250,000 250,000 250,000 22,354 30,702 42,075 23,769 32,117 43,490
10 52,827 250,000 250,000 250,000 24,739 35,047 49,680 25,919 36,226 50,859
15 90,630 250,000 250,000 250,000 35,528 59,791 102,443 35,528 59,791 102,443
20 138,877 250,000 250,000 250,000 35,899 81,823 184,500 35,899 81,823 184,500
25 200,454 250,000 250,000 340,980 13,347 92,809 324,743 13,347 92,809 324,743
30 279,043 250,000 688,258 68,875 529,429 68,875 529,429
35 379,345 994,635 663,090 663,090
<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 -100.00% -100.00% -100.00% 6,149.98% 6,149.98% 6,149.98%
2 -60.15 -53.55 -47.16 642.15 642.15 642.15
3 -35.78 -28.98 -22.40 258.47 258.47 258.47
4 -24.23 -17.53 -11.05 148.92 148.92 148.92
5 -18.18 -11.57 -5.17 100.39 100.39 100.39
6 -14.61 -8.06 -1.71 73.77 73.77 73.77
7 -12.32 -5.81 0.51 57.22 57.22 57.22
8 -10.79 -4.28 2.02 46.06 46.06 46.06
9 -9.72 -3.20 3.10 38.07 38.07 38.07
10 -8.97 -2.42 3.90 32.11 32.11 32.11
15 -6.89 -0.04 6.44 16.46 16.46 16.46
20 -8.46 0.21 7.42 9.93 9.93 9.93
25 -23.03 -0.58 8.18 6.48 6.48 8.49
30 -3.88 8.41 4.39 9.75
35 7.50 9.24
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, 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-40
<PAGE> 44
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$1,000,000 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 G
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN ORAT
POLICY INTEREST ---------------------------------- ------------------------------------ ---------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6%
- ------ ----------- -- -- --- -- -- --- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 16,800 1,000,000 1,000,000 1,000,000 0 0 0 10,192 10,832
2 34,440 1,000,000 1,000,000 1,000,000 10,457 12,521 14,657 22,721 24,784
3 52,962 1,000,000 1,000,000 1,000,000 23,594 27,877 32,482 34,914 39,197
4 72,410 1,000,000 1,000,000 1,000,000 36,996 44,331 52,521 47,372 54,707
5 92,831 1,000,000 1,000,000 1,000,000 50,012 61,263 74,315 59,446 70,696
6 114,272 1,000,000 1,000,000 1,000,000 62,616 78,661 98,014 71,106 87,150
7 136,786 1,000,000 1,000,000 1,000,000 74,771 96,505 123,775 82,317 104,051
8 160,425 1,000,000 1,000,000 1,000,000 86,427 114,761 151,762 93,030 121,364
9 185,246 1,000,000 1,000,000 1,000,000 97,516 133,378 182,145 103,176 139,038
10 211,309 1,000,000 1,000,000 1,000,000 109,182 153,498 216,270 113,898 158,215
15 362,520 1,000,000 1,000,000 1,000,000 175,507 281,144 464,248 175,507 281,144
20 555,508 1,000,000 1,000,000 1,000,000 230,166 433,176 866,621 230,166 433,176
25 801,815 1,000,000 1,000,000 1,611,514 269,805 617,499 1,534,776 269,805 617,499
30 1,116,173 1,000,000 1,092,082 3,396,783 272,464 840,063 2,612,910 272,464 840,063
35 1,517,381 1,000,000 1,596,699 6,194,064 199,255 1,064,466 4,129,376 199,255 1,064,466
<CAPTION>
CASH VALUE INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
NG HYPOTHETICAL
GROSS ANNUAL ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF RATE OF RETURN OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ---------------- --------------------------- ------------------------------
YEAR 12% 0% 6% 12% 0% 6% 12%
- ------ --- -- -- --- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1 11,472 -100.00% -100.00% -100.00% 6,150.00% 6,150.00% 6,150.00%
2 26,920 -54.94 -48.39 -42.02 642.15 642.15 642.15
3 43,802 -31.53 -24.81 -18.29 258.47 258.47 258.47
4 62,897 -20.76 -14.16 -7.75 148.92 148.92 148.92
5 83,749 -15.27 -8.77 -2.45 100.39 100.39 100.39
6 106,504 -12.10 -5.67 0.59 73.77 73.77 73.77
7 131,321 -10.12 -3.72 2.50 57.22 57.22 57.22
8 158,365 -8.81 -2.43 3.77 46.06 46.06 46.06
9 187,805 -7.92 -1.54 4.67 38.07 38.07 38.07
10 220,987 -7.09 -0.76 5.41 32.11 32.11 32.11
15 464,248 -4.03 1.95 7.88 16.46 16.46 16.46
20 866,621 -3.26 2.80 8.76 9.93 9.93 9.93
25 1,534,776 -3.19 3.19 9.24 6.48 6.48 9.55
30 2,612,910 -3.96 3.40 9.48 4.39 4.88 10.80
35 4,129,376 -6.86 3.32 9.39 3.02 5.23 11.09
</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-41
<PAGE> 45
MALE AND FEMALE BOTH ISSUE AGE 55
$16,000 ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$1,000,000 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 16,800 1,000,000 1,000,000 1,000,000 0 0 0 10,049 10,684 11,320
2 34,440 1,000,000 1,000,000 1,000,000 10,174 12,219 14,338 22,437 24,483 26,601
3 52,962 1,000,000 1,000,000 1,000,000 23,172 27,416 31,978 34,492 38,736 43,298
4 72,410 1,000,000 1,000,000 1,000,000 36,438 43,702 51,814 46,815 54,079 62,190
5 92,831 1,000,000 1,000,000 1,000,000 49,321 60,459 73,384 58,754 69,893 82,817
6 114,272 1,000,000 1,000,000 1,000,000 61,792 77,675 96,835 70,282 86,165 105,325
7 136,786 1,000,000 1,000,000 1,000,000 73,817 95,328 122,322 81,363 102,875 129,869
8 160,425 1,000,000 1,000,000 1,000,000 85,344 113,385 150,008 91,947 119,988 156,611
9 185,246 1,000,000 1,000,000 1,000,000 96,306 131,793 180,057 101,966 137,453 185,717
10 211,309 1,000,000 1,000,000 1,000,000 106,621 150,487 212,649 111,338 155,203 217,366
15 362,520 1,000,000 1,000,000 1,000,000 151,969 255,334 436,799 151,969 255,334 436,799
20 555,508 1,000,000 1,000,000 1,000,000 156,054 352,051 789,441 156,054 352,051 789,441
25 801,815 1,000,000 1,000,000 1,460,987 69,977 411,387 1,391,416 69,977 411,387 1,391,416
30 1,116,173 1,000,000 2,944,654 352,673 2,265,119 352,673 2,265,119
35 1,517,381 4,251,573 2,834,382 2,834,382
<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 -100.00% -100.00% -100.00% 6,150.00% 6,150.00% 6,150.00%
2 -55.88 -49.32 -42.94 642.15 642.15 642.15
3 -32.23 -25.50 -18.98 258.47 258.47 258.47
4 -21.30 -14.69 -8.27 148.92 148.92 148.92
5 -15.71 -9.19 -2.86 100.39 100.39 100.39
6 -12.47 -6.02 0.25 73.77 73.77 73.77
7 -10.44 -4.03 2.20 57.22 57.22 57.22
8 -9.09 -2.70 3.52 46.06 46.06 46.06
9 -8.17 -1.78 4.44 38.07 38.07 38.07
10 -7.54 -1.12 5.11 32.11 32.11 32.11
15 -5.96 0.77 7.18 16.46 16.46 16.46
20 -7.48 0.90 7.99 9.93 9.93 9.93
25 -18.52 0.22 8.62 6.48 6.48 8.93
30 -2.07 8.75 4.39 10.09
35 7.79 9.52
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND NET
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS
ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS, BUT
VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-42
<PAGE> 46
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 April, 2000. The Zenith Fund and the Variable
Account commenced operations on August 26, 1983. The Westpeak Stock Index and
Back Bay Advisors Managed Series of the Zenith Fund commenced operations on May
1, 1987. The Westpeak Growth and Income Series and Goldman Sachs Midcap Value
Series of the Zenith Fund commenced operations on April 30, 1993. The Loomis
Sayles Small Cap Series commenced operations on May 2, 1994 and was made
available to the Variable Account on December 19, 1994. The MFS Investor Series
and MFS Research Managers Series of the Zenith Fund commenced operations on
April 30, 1999. The remaining Zenith Fund series shown in this Appendix
commenced operations on October 31, 1994 and were made available to the Variable
Account on May 1, 1995. 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). 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.
A-43
<PAGE> 47
SUB-ACCOUNT INVESTING IN ZENITH FUND
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT ------------------------------------------------------------------------------------------------
- ----------- 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*...... 8.87% -0.59% 68.10% 95.21% 52.71% -8.81% 30.76% -3.48% 53.98% -6.05%
Bond Income.......... 3.20 12.61 18.76 14.83 2.27 8.37 12.30 8.09 17.96 8.18
Money Market......... 3.20 10.73 8.26 6.80 6.53 7.52 9.25 8.19 6.21 3.80
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------
FOR ONE YEAR ENDING 8/26/83- 8/26/83-
SUB-ACCOUNT -------------------------------------------------------------------------- 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*...... 14.97% -7.07% 38.03% 21.07% 23.48% 34.09% 15.70% 2,996.30% 23.37%
Bond Income.......... 12.61 -3.36 21.20 4.61 10.89 9.04 -0.47 351.72 9.66
Money Market......... 2.97 3.97 5.70 5.13 5.34 5.26 4.97 173.07 6.34
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT -------------------------------------------------------------------------------------
- ----------- 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.................... -12.20% 16.34% 30.15% -4.14% 30.43% 7.30% 9.72% 1.12% 36.92%
Managed........................ - 0.66 9.48 19.08 3.21 20.17 6.70 10.65 -1.11 31.26
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------
FOR ONE YEAR ENDING 5/1/87- 5/1/87-
SUB-ACCOUNT ----------------------------------------- 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.................... 22.47% 32.50% 27.93% 20.38% 573.77% 16.30%
Managed........................ 15.03 26.56 19.65 9.97 371.64 13.02
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------
FOR ONE YEAR ENDING 4/30/93- 4/30/93-
SUB-ACCOUNT --------------------------------------------------------------- 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............. 14.24% -1.21% 36.47% 18.10% 33.47% 24.45% 9.35% 230.38% 19.62%
Midcap Value**................ 14.74 - .27 30.35 17.61 17.32 -5.46 0.35 95.25 10.55
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING 5/2/94- 5/2/94-
- ----------- ---------------------------------------------------- 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................................ -3.23% 28.84% 30.68% 24.85% -1.69% 31.75% 163.49% 18.65%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------------------
FOR ONE YEAR ENDING 10/31/94- 10/31/94-
SUB-ACCOUNT ---------------------------------------------------- 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.......................... -4.20% 48.69% 13.17% 25.63% 47.78% 34.13% 301.47% 30.87%
Balanced............................... -.10 24.79 16.91 16.18 9.11 -5.06 75.41 11.49
Venture Value.......................... -3.50 39.28 25.84 33.50 14.41 17.52 203.60 23.98
International Magnum Equity***......... 2.60 6.23 6.67 -1.30 7.27 24.61 53.41 8.64
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE
SUB-ACCOUNT OF RETURN 4/30/99- 4/30/99-
- ----------- --------------- 12/31/99 12/31/99
4/30/99- TOTAL EFFECTIVE
12/31/99 RETURN ANNUAL
-------- -------- ---------
<S> <C> <C> <C>
Investors................................................... 2.85% 2.85% N/A
Research Managers........................................... 19.80 19.80 N/A
</TABLE>
- ------------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
** The Goldman Sachs Midcap Value Series' Sub-adviser was Loomis Sayles until
May 1, 1998, when Goldman Sachs Asset Management became the sub-adviser.
Rates of return reflect the Series' former investment advisory fee of .70%
of average daily net assets for the period through April 30, 1998 and .75%
thereafter.
*** The Morgan Stanley International Magnum Equity Series' sub-adviser was
Draycott Partners until May 1, 1997, when Morgan Stanley Dean Witter
Investment Management became sub-adviser.
SUB-ACCOUNTS INVESTING IN VIP
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT -------------------------------------------------------------------------------------
- ----------- 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................. .20% -1.13% 21.93% 19.54% -16.31% 31.44% 16.89% 18.29% 6.93%
<CAPTION>
ANNUAL NET RATE OF RETURN
----------------------------------------------------
FOR ONE YEAR ENDING 10/9/86- 10/9/86-
SUB-ACCOUNT ---------------------------------------------------- 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................. 35.90% 13.75% 28.11% 11.63% 6.33% 451.97% 13.79%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
SUB-ACCOUNT 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................... -5.38% 9.63% 23.97% -1.20% 8.00% -10.72% 37.35% 1.21% 11.02%
<CAPTION>
ANNUAL NET RATE OF RETURN
-----------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING 1/28/87- 1/28/87-
- ----------- ----------------------------------------- 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................... 12.43% 11.56% 12.75% 42.63% 281.27% 10.91%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT -------------------------------------------------------------------------------------
- ----------- 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............ 6.38% 17.68% 1.22% 11.53% -4.07% -2.23% 35.08% 23.17% 20.40%
<CAPTION>
ANNUAL RATE OF RETURN
---------------------------------------------------------------
FOR ONE YEAR ENDING 9/19/85- 9/19/85-
SUB-ACCOUNT --------------------------------------------------------------- 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............ -1.45% 20.79% 13.75% 17.67% -4.33% 8.15% 337.63% 10.89%
</TABLE>
SUB-ACCOUNT INVESTING IN VIP II
<TABLE>
<CAPTION>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
--------------------------------------------------------------------------
9/6/89-
SUB-ACCOUNT 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager..................... 1.32% 6.19% 22.56% 11.71% 21.23% -6.43% 17.68% 14.31%
<CAPTION>
ANNUAL NET RATE OF RETURN
------------------------------
FOR ONE YEAR ENDING 9/6/89- 9/6/89-
------------------------------ 12/31/99 12/31/99
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 RETURN ANNUAL
- ----------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Asset Manager..................... 20.65% 15.05% 11.09% 246.61% 12.81%
</TABLE>
A-44
<PAGE> 48
POLICY PERFORMANCE
The material below assumes a Policy was issued with (i) a $250,000 face amount
and (ii) a $1 million face amount and annual premiums of (i) $4,000 and (ii)
$16,000 paid on August 26 of each year (May 1 in the case of the Zenith Stock
Index and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap
Sub-Account; October 31 in the case of the Zenith Balanced, Zenith International
Magnum Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts;
October 9 in the case of the Equity-Income Sub-Account, January 28 in the case
of the Oversees Sub-Account; April 30 in the case of the Zenith Growth and
Income and Zenith Midcap Value Sub-Accounts; September 19 in the case of the
High Income Sub-Account; September 6 in the case of the Asset Manager
Sub-Account), to a male and a female, both age 55 in (i) the nonsmoker aggregate
risk category and (ii) the nonsmoker preferred risk category. Both examples show
an Option 1 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. These illustrations of policy
investment experience also reflect all Policy charges based on NELICO's current
rates. (See Appendix A for the definition of the internal rate of return.)
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
NONSMOKER AGGREGATE
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............ $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1983.......... 4,000 250,000 2,932 0 -100.0% --
December 31, 1984.......... 8,000 250,000 5,913 2,710 -80.45% 1,975.62%
December 31, 1985.......... 12,000 250,000 13,429 10,461 -9.92 434.27
December 31, 1986.......... 16,000 250,000 28,791 26,060 27.63 206.69
December 31, 1987.......... 20,000 250,000 45,638 43,142 33.88 127.42
December 31, 1988.......... 24,000 250,000 44,038 41,778 19.54 88.99
December 31, 1989.......... 28,000 250,000 59,681 57,657 21.37 66.82
December 31, 1990.......... 32,000 250,000 59,182 57,394 14.89 52.57
December 31, 1991.......... 36,000 250,000 92,909 91,356 20.66 42.74
December 31, 1992.......... 40,000 250,000 88,998 87,681 15.54 35.59
December 31, 1993.......... 44,000 250,000 104,050 102,969 15.12 30.19
December 31, 1994.......... 48,000 250,000 97,542 96,696 11.41 25.98
December 31, 1995.......... 52,000 250,000 137,571 136,962 14.27 22.62
December 31, 1996.......... 56,000 250,000 167,786 167,412 14.80 19.89
December 31, 1997.......... 60,000 250,000 208,119 207,982 15.47 17.62
December 31, 1998.......... 64,000 321,611 279,662 279,662 16.93 18.43
December 31, 1999.......... 68,000 365,657 323,591 323,591 16.69 17.91
</TABLE>
A-45
<PAGE> 49
<TABLE>
<CAPTION>
ZENITH BOND INCOME SUB-ACCOUNT
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............ $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1983.......... 4,000 250,000 2,768 0 -100.00% --
December 31, 1984.......... 8,000 250,000 6,365 3,161 -73.89% 1,975.62%
December 31, 1985.......... 12,000 250,000 10,624 7,657 -30.66 434.27
December 31, 1986.......... 16,000 250,000 15,114 12,382 -13.57 206.69
December 31, 1987.......... 20,000 250,000 18,330 15,834 -9.89 127.42
December 31, 1988.......... 24,000 250,000 22,642 20,382 -5.74 88.99
December 31, 1989.......... 28,000 250,000 28,088 26,064 -2.14 66.82
December 31, 1990.......... 32,000 250,000 32,946 31,158 -0.69 52.57
December 31, 1991.......... 36,000 250,000 41,314 39,762 2.27 42.74
December 31, 1992.......... 40,000 250,000 46,720 45,404 2.59 35.59
December 31, 1993.......... 44,000 250,000 54,773 53,692 3.67 30.19
December 31, 1994.......... 48,000 250,000 54,942 54,097 2.02 25.98
December 31, 1995.......... 52,000 250,000 68,865 68,256 4.19 22.62
December 31, 1996.......... 56,000 250,000 74,432 74,059 3.98 19.89
December 31, 1997.......... 60,000 250,000 85,083 84,946 4.58 17.62
December 31, 1998.......... 64,000 250,000 95,167 95,167 4.87 15.72
December 31, 1999.......... 68,000 250,000 96,938 96,938 4.10 14.10
<CAPTION>
ZENITH MONEY MARKET SUB-ACCOUNT
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............ $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1983.......... 4,000 250,000 2,774 0 -100.00% --
December 31, 1984.......... 8,000 250,000 6,163 2,959 -76.87% 1,975.62%
December 31, 1985.......... 12,000 250,000 9,648 6,681 -38.96 434.27
December 31, 1986.......... 16,000 250,000 13,226 10,494 -22.04 206.69
December 31, 1987.......... 20,000 250,000 17,007 14,511 -13.55 127.42
December 31, 1988.......... 24,000 250,000 21,110 18,850 -8.50 88.99
December 31, 1989.......... 28,000 250,000 25,737 23,713 -4.99 66.82
December 31, 1990.......... 32,000 250,000 30,360 28,571 -2.96 52.57
December 31, 1991.......... 36,000 250,000 34,593 33,040 -1.98 42.74
December 31, 1992.......... 40,000 250,000 38,070 36,754 -1.76 35.59
December 31, 1993.......... 44,000 250,000 41,552 40,471 -1.57 30.19
December 31, 1994.......... 48,000 250,000 45,493 44,648 -1.25 25.98
December 31, 1995.......... 52,000 250,000 50,274 49,665 -0.73 22.62
December 31, 1996.......... 56,000 250,000 55,305 54,931 -0.28 19.89
December 31, 1997.......... 60,000 250,000 60,979 60,842 0.19 17.62
December 31, 1998.......... 64,000 250,000 66,803 66,803 0.54 15.72
December 31, 1999.......... 68,000 250,000 72,620 72,620 0.78 14.10
</TABLE>
A-46
<PAGE> 50
<TABLE>
<CAPTION>
ZENITH STOCK INDEX SUB-ACCOUNT
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................ $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1987.......... 4,000 250,000 2,271 0 -100.00% --
December 31, 1988.......... 8,000 250,000 5,835 2,691 -64.80% 1,033.28%
December 31, 1989.......... 12,000 250,000 11,226 8,317 -20.57 328.36
December 31, 1990.......... 16,000 250,000 13,486 10,814 -17.40 174.11
December 31, 1991.......... 20,000 250,000 20,711 18,274 -3.37 112.69
December 31, 1992.......... 24,000 250,000 25,085 22,883 -1.50 80.87
December 31, 1993.......... 28,000 250,000 30,245 28,280 0.27 61.77
December 31, 1994.......... 32,000 250,000 33,048 31,319 -0.52 49.18
December 31, 1995.......... 36,000 250,000 48,332 46,838 5.58 40.32
December 31, 1996.......... 40,000 250,000 60,916 59,658 7.58 33.80
December 31, 1997.......... 44,000 250,000 83,299 82,277 10.68 28.82
December 31, 1998.......... 48,000 250,000 108,451 107,665 12.50 24.90
December 31, 1999.......... 52,000 250,000 132,248 131,698 13.16 21.75
<CAPTION>
ZENITH MANAGED SUB-ACCOUNT
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................ $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1987.......... 4,000 250,000 2,573 0 -100.00% --
December 31, 1988.......... 8,000 250,000 5,965 2,821 -62.98% 1,033.28%
December 31, 1989.......... 12,000 250,000 10,476 7,568 -25.43 328.36
December 31, 1990.......... 16,000 250,000 13,821 11,148 -16.09 174.11
December 31, 1991.......... 20,000 250,000 19,739 17,302 -5.40 112.69
December 31, 1992.......... 24,000 250,000 23,987 21,785 -3.05 80.87
December 31, 1993.......... 28,000 250,000 29,227 27,261 -0.73 61.77
December 31, 1994.......... 32,000 250,000 31,370 29,640 -1.84 49.18
December 31, 1995.......... 36,000 250,000 44,110 42,616 3.59 40.32
December 31, 1996.......... 40,000 250,000 52,690 51,433 4.80 33.80
December 31, 1997.......... 44,000 250,000 69,317 68,295 7.56 28.82
December 31, 1998.......... 48,000 250,000 84,930 84,143 8.79 24.90
December 31, 1999.......... 52,000 250,000 95,205 94,654 8.62 21.75
<CAPTION>
ZENITH GROWTH AND INCOME SUB-ACCOUNT
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............. $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1993.......... 4,000 250,000 2,939 0 -100.00% --
December 31, 1994.......... 8,000 250,000 5,904 2,779 -63.45% 1,028.55%
December 31, 1995.......... 12,000 250,000 11,648 8,759 -17.80 327.65
December 31, 1996.......... 16,000 250,000 16,934 14,281 -5.18 173.87
December 31, 1997.......... 20,000 250,000 26,072 23,655 6.33 112.58
December 31, 1998.......... 24,000 250,000 35,150 32,969 10.07 80.81
December 31, 1999.......... 28,000 250,000 40,802 38,857 8.90 61.73
</TABLE>
A-47
<PAGE> 51
<TABLE>
<CAPTION>
ZENITH MIDCAP VALUE SUB-ACCOUNT**
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............. $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1993.......... 4,000 250,000 2,952 0 -100.00% --
December 31, 1994.......... 8,000 250,000 5,963 2,838 -62.63% 1,028.55%
December 31, 1995.......... 12,000 250,000 11,348 8,459 -19.65 327.65
December 31, 1996.......... 16,000 250,000 16,386 13,732 -6.94 173.87
December 31, 1997.......... 20,000 250,000 22,541 20,124 0.23 112.58
December 31, 1998.......... 24,000 250,000 23,388 21,207 -3.90 80.81
December 31, 1999.......... 28,000 250,000 25,829 23,883 -4.34 61.73
<CAPTION>
ZENITH SMALL CAP SUB-ACCOUNT
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................ $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1994.......... 4,000 250,000 2,477 0 -100.00% --
December 31, 1995.......... 8,000 250,000 6,824 3,680 -51.36% 1,038.05%
December 31, 1996.......... 12,000 250,000 12,204 9,295 -14.64 329.07
December 31, 1997.......... 16,000 250,000 18,829 16,156 0.45 174.35
December 31, 1998.......... 20,000 250,000 20,888 18,451 -3.01 112.81
December 31, 1999.......... 24,000 250,000 31,203 29,002 6.00 80.93
<CAPTION>
ZENITH EQUITY GROWTH SUB-ACCOUNT
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........... $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1994.......... 4,000 250,000 2,595 0 -100.00% --
December 31, 1995.......... 8,000 250,000 6,800 3,557 -81.79% 3,271.69%
December 31, 1996.......... 12,000 250,000 10,668 7,661 -35.51 522.96
December 31, 1997.......... 16,000 250,000 16,232 13,461 -10.24 230.16
December 31, 1998.......... 20,000 250,000 27,282 24,746 9.88 137.32
December 31, 1999.......... 24,000 250,000 39,506 37,206 16.40 94.25
<CAPTION>
ZENITH BALANCED SUB-ACCOUNT
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........... $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1994.......... 4,000 250,000 2,743 0 -100.00% --
December 31, 1995.......... 8,000 250,000 6,564 3,321 -85.43% 3,271.69%
December 31, 1996.......... 12,000 250,000 10,666 7,659 -35.52 522.96
December 31, 1997.......... 16,000 250,000 15,281 12,510 -14.51 230.16
December 31, 1998.......... 20,000 250,000 19,665 17,130 -7.13 137.32
December 31, 1999.......... 24,000 250,000 21,387 19,088 -8.63 94.25
</TABLE>
A-48
<PAGE> 52
<TABLE>
<CAPTION>
ZENITH VENTURE VALUE SUB-ACCOUNT
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........... $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1994.......... 4,000 250,000 2,659 0 -100.00% --
December 31, 1995.......... 8,000 250,000 6,831 3,589 -81.28% 3,271.69%
December 31, 1996.......... 12,000 250,000 11,616 8,609 -26.81 522.96
December 31, 1997.......... 16,000 250,000 18,350 15,579 -1.60 230.16
December 31, 1998.......... 20,000 250,000 24,004 21,469 3.27 137.32
December 31, 1999.......... 24,000 250,000 31,006 28,707 6.70 94.25
<CAPTION>
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
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........... $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1994.......... 4,000 250,000 2,810 0 -100.00% --
December 31, 1995.......... 8,000 250,000 6,203 2,960 -90.44% 3,271.69%
December 31, 1996.......... 12,000 250,000 9,577 6,570 -46.42 522.96
December 31, 1997.......... 16,000 250,000 12,268 9,497 -30.29 230.16
December 31, 1998.......... 20,000 250,000 16,134 13,598 -17.76 137.32
December 31, 1999.......... 24,000 250,000 23,142 20,842 -5.31 94.25
<CAPTION>
ZENITH MFS INVESTORS SUB-ACCOUNT
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............. $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1999.......... 4,000 250,000 2,622 0 -100.00% --
<CAPTION>
ZENITH MFS RESEARCH MANAGERS SUB-ACCOUNT
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............. $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1999.......... 4,000 250,000 3,070 0 -100.00% --
</TABLE>
A-49
<PAGE> 53
<TABLE>
<CAPTION>
EQUITY-INCOME SUB-ACCOUNT
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............ $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1986.......... 4,000 250,000 2,755 0 -100.00% --
December 31, 1987.......... 8,000 250,000 5,180 1,937 -96.46% 2,723.89%
December 31, 1988.......... 12,000 250,000 9,189 6,183 -47.89 490.23
December 31, 1989.......... 16,000 250,000 13,657 10,886 -21.68 221.84
December 31, 1990.......... 20,000 250,000 14,597 12,062 -22.59 133.88
December 31, 1991.......... 24,000 250,000 22,132 19,832 -7.02 92.44
December 31, 1992.......... 28,000 250,000 28,764 26,700 -1.48 68.91
December 31, 1993.......... 32,000 250,000 36,397 34,569 2.06 53.96
December 31, 1994.......... 36,000 250,000 41,105 39,513 2.19 43.72
December 31, 1995.......... 40,000 250,000 57,892 56,536 7.15 36.31
December 31, 1996.......... 44,000 250,000 67,980 66,860 7.76 30.74
December 31, 1997.......... 48,000 250,000 88,886 88,001 10.11 26.41
December 31, 1998.......... 52,000 250,000 101,548 100,899 10.10 22.96
December 31, 1999.......... 56,000 250,000 109,858 109,446 9.41 20.16
<CAPTION>
OVERSEAS SUB-ACCOUNT
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........... $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1987.......... 4,000 250,000 2,330 0 -100.00% --
December 31, 1988.......... 8,000 250,000 5,915 2,850 -54.02% 707.99%
December 31, 1989.......... 12,000 250,000 10,804 7,974 -19.82 272.18
December 31, 1990.......... 16,000 250,000 13,559 10,965 -15.02 154.15
December 31, 1991.......... 20,000 250,000 17,696 15,338 -8.95 103.01
December 31, 1992.......... 24,000 250,000 18,138 16,016 -11.73 75.31
December 31, 1993.......... 28,000 250,000 28,442 26,556 -1.35 58.22
December 31, 1994.......... 32,000 250,000 31,087 29,436 -1.89 46.75
December 31, 1995.......... 36,000 250,000 37,131 35,716 -0.16 38.57
December 31, 1996.......... 40,000 250,000 44,071 42,892 1.28 32.48
December 31, 1997.......... 44,000 250,000 51,842 50,898 2.44 27.80
December 31, 1998.......... 48,000 250,000 60,745 60,037 3.44 24.10
December 31, 1999.......... 52,000 250,000 89,735 89,264 7.54 21.10
</TABLE>
A-50
<PAGE> 54
<TABLE>
<CAPTION>
HIGH INCOME SUB-ACCOUNT
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......... $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1985.......... 4,000 250,000 2,891 0 -100.00% --
December 31, 1986.......... 8,000 250,000 6,540 3,317 -75.99% 2,337.91%
December 31, 1987.......... 12,000 250,000 9,484 6,497 -42.72 463.37
December 31, 1988.......... 16,000 250,000 13,484 10,733 -21.72 214.72
December 31, 1989.......... 20,000 250,000 15,653 13,138 -18.28 130.87
December 31, 1990.......... 24,000 250,000 18,065 15,785 -15.19 90.84
December 31, 1991.......... 28,000 250,000 27,111 25,068 -3.38 67.95
December 31, 1992.......... 32,000 250,000 35,774 33,966 1.57 53.32
December 31, 1993.......... 36,000 250,000 45,355 43,783 4.52 43.27
December 31, 1994.......... 40,000 250,000 46,687 45,351 2.60 35.98
December 31, 1995.......... 44,000 250,000 58,564 57,463 4.95 30.49
December 31, 1996.......... 48,000 250,000 68,726 67,861 5.82 26.21
December 31, 1997.......... 52,000 250,000 82,729 82,100 7.00 22.81
December 31, 1998.......... 56,000 250,000 81,521 81,128 5.28 20.04
December 31, 1999.......... 60,000 250,000 90,596 90,438 5.42 17.74
<CAPTION>
ASSET MANAGER SUB-ACCOUNT
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.......... $ 4,000 $ 250,000 $ 2,815 $ 0 -- --
December 31, 1989.......... 4,000 250,000 2,751 0 -100.00% --
December 31, 1990.......... 8,000 250,000 6,111 2,888 -79.86% 2,130.09%
December 31, 1991.......... 12,000 250,000 10,493 7,506 -32.63 447.21
December 31, 1992.......... 16,000 250,000 14,668 11,917 -15.82 210.30
December 31, 1993.......... 20,000 250,000 20,787 18,272 -3.89 128.98
December 31, 1994.......... 24,000 250,000 22,038 19,758 -6.92 89.83
December 31, 1995.......... 28,000 250,000 28,604 26,560 -1.59 67.33
December 31, 1996.......... 32,000 250,000 35,366 33,558 1.24 52.92
December 31, 1997.......... 36,000 250,000 44,878 43,305 4.23 42.98
December 31, 1998.......... 40,000 250,000 53,952 52,616 5.59 35.77
December 31, 1999.......... 44,000 250,000 62,172 61,072 6.02 30.33
</TABLE>
- ------------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets for the period through April 30, 1998 and .75% thereafter.
A-51
<PAGE> 55
$1,000,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
NONSMOKER PREFERRED
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............ $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1983.......... 16,000 1,000,000 11,889 0 -100.00% --
December 31, 1984.......... 32,000 1,000,000 24,594 11,780 -77.08% 1,975.63%
December 31, 1985.......... 48,000 1,000,000 56,214 44,344 -5.79 434.27
December 31, 1986.......... 64,000 1,000,000 120,836 109,909 30.80 206.69
December 31, 1987.......... 80,000 1,000,000 191,801 181,817 36.29 127.42
December 31, 1988.......... 96,000 1,000,000 185,260 176,220 21.43 88.99
December 31, 1989.......... 112,000 1,000,000 251,331 243,234 22.95 66.82
December 31, 1990.......... 128,000 1,000,000 249,419 242,265 16.25 52.57
December 31, 1991.......... 144,000 1,000,000 391,834 385,624 21.83 42.74
December 31, 1992.......... 160,000 1,000,000 375,953 370,686 16.60 35.59
December 31, 1993.......... 176,000 1,000,000 440,616 436,293 16.11 30.19
December 31, 1994.......... 192,000 1,000,000 414,750 411,370 12.37 25.98
December 31, 1995.......... 208,000 1,000,000 586,827 584,390 15.18 22.62
December 31, 1996.......... 224,000 1,000,000 716,105 714,611 15.63 19.89
December 31, 1997.......... 240,000 1,029,914 887,857 887,306 16.23 17.96
December 31, 1998.......... 256,000 1,371,437 1,192,554 1,192,554 17.61 19.11
December 31, 1999.......... 272,000 1,558,717 1,379,395 1,379,395 17.33 18.54
</TABLE>
ZENITH 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............ $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1983.......... 16,000 1,000,000 11,231 0 -100.00% --
December 31, 1984.......... 32,000 1,000,000 26,450 13,636 -70.17% 1,975.63%
December 31, 1985.......... 48,000 1,000,000 44,468 32,597 -26.71 434.27
December 31, 1986.......... 64,000 1,000,000 63,488 52,562 -10.48 206.69
December 31, 1987.......... 80,000 1,000,000 77,181 67,198 -7.39 127.42
December 31, 1988.......... 96,000 1,000,000 95,510 86,470 -3.67 88.99
December 31, 1989.......... 112,000 1,000,000 118,654 110,557 -0.39 66.82
December 31, 1990.......... 128,000 1,000,000 139,342 132,188 0.84 52.57
December 31, 1991.......... 144,000 1,000,000 174,921 168,711 3.61 42.74
December 31, 1992.......... 160,000 1,000,000 198,482 193,215 3.84 35.59
December 31, 1993.......... 176,000 1,000,000 234,109 229,786 4.89 30.19
December 31, 1994.......... 192,000 1,000,000 237,142 233,762 3.31 25.98
December 31, 1995.......... 208,000 1,000,000 299,677 297,240 5.46 22.62
December 31, 1996.......... 224,000 1,000,000 324,660 323,167 5.18 19.89
December 31, 1997.......... 240,000 1,000,000 370,476 369,926 5.66 17.62
December 31, 1998.......... 256,000 1,000,000 413,813 413,813 5.85 15.72
December 31, 1999.......... 272,000 1,000,000 421,044 421,044 5.01 14.10
</TABLE>
A-52
<PAGE> 56
<TABLE>
<CAPTION>
ZENITH MONEY MARKET SUB-ACCOUNT
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............ $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1983.......... 16,000 1,000,000 11,257 0 -100.00% --
December 31, 1984.......... 32,000 1,000,000 25,610 12,796 -73.33% 1,975.63%
December 31, 1985.......... 48,000 1,000,000 40,390 28,520 -35.05 434.27
December 31, 1986.......... 64,000 1,000,000 55,584 44,657 -18.90 206.69
December 31, 1987.......... 80,000 1,000,000 71,661 61,677 -11.00 127.42
December 31, 1988.......... 96,000 1,000,000 89,113 80,073 -6.38 88.99
December 31, 1989.......... 112,000 1,000,000 108,804 100,707 -3.19 66.82
December 31, 1990.......... 128,000 1,000,000 128,504 121,350 -1.39 52.57
December 31, 1991.......... 144,000 1,000,000 146,584 140,374 -0.59 42.74
December 31, 1992.......... 160,000 1,000,000 161,986 156,719 -0.43 35.59
December 31, 1993.......... 176,000 1,000,000 178,267 173,944 -0.22 30.19
December 31, 1994.......... 192,000 1,000,000 197,673 194,292 0.20 25.98
December 31, 1995.......... 208,000 1,000,000 220,863 218,426 0.77 22.62
December 31, 1996.......... 224,000 1,000,000 243,725 242,231 1.13 19.89
December 31, 1997.......... 240,000 1,000,000 267,974 267,424 1.46 17.62
December 31, 1998.......... 256,000 1,000,000 292,916 292,916 1.69 15.72
December 31, 1999.......... 272,000 1,000,000 317,887 317,887 1.84 14.10
</TABLE>
<TABLE>
<CAPTION>
ZENITH STOCK INDEX SUB-ACCOUNT
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................ $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1987.......... 16,000 1,000,000 9,303 0 -100.00% --
December 31, 1988.......... 32,000 1,000,000 24,388 11,811 -61.14% 1,033.28%
December 31, 1989.......... 48,000 1,000,000 47,156 35,521 -17.09 328.36
December 31, 1990.......... 64,000 1,000,000 56,819 46,128 -14.63 174.11
December 31, 1991.......... 80,000 1,000,000 87,429 77,682 -1.10 112.69
December 31, 1992.......... 96,000 1,000,000 106,035 97,230 0.40 80.87
December 31, 1993.......... 112,000 1,000,000 127,981 120,120 1.91 61.77
December 31, 1994.......... 128,000 1,000,000 139,978 133,061 0.93 49.18
December 31, 1995.......... 144,000 1,000,000 204,881 198,907 6.83 40.32
December 31, 1996.......... 160,000 1,000,000 259,186 254,155 8.76 33.80
December 31, 1997.......... 176,000 1,000,000 355,939 351,852 11.78 28.82
December 31, 1998.......... 192,000 1,000,000 465,636 462,492 13.56 24.90
December 31, 1999.......... 208,000 1,000,000 569,336 567,135 14.16 21.75
</TABLE>
A-53
<PAGE> 57
<TABLE>
<CAPTION>
ZENITH MANAGED SUB-ACCOUNT
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................ $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1987.......... 16,000 1,000,000 10,535 0 -100.00% --
December 31, 1988.......... 32,000 1,000,000 24,909 12,331 -59.34% 1,033.28%
December 31, 1989.......... 48,000 1,000,000 43,986 32,352 -22.02 328.36
December 31, 1990.......... 64,000 1,000,000 58,206 47,515 -13.35 174.11
December 31, 1991.......... 80,000 1,000,000 83,299 73,551 -3.14 112.69
December 31, 1992.......... 96,000 1,000,000 101,364 92,560 -1.15 80.87
December 31, 1993.......... 112,000 1,000,000 123,646 115,785 0.91 61.77
December 31, 1994.......... 128,000 1,000,000 132,853 125,935 -0.39 49.18
December 31, 1995.......... 144,000 1,000,000 186,974 181,000 4.85 40.32
December 31, 1996.......... 160,000 1,000,000 224,318 219,287 6.00 33.80
December 31, 1997.......... 176,000 1,000,000 296,745 292,657 8.72 28.82
December 31, 1998.......... 192,000 1,000,000 365,974 362,829 9.92 24.90
December 31, 1999.......... 208,000 1,000,000 412,077 409,876 9.72 21.75
</TABLE>
<TABLE>
<CAPTION>
ZENITH GROWTH AND INCOME SUB-ACCOUNT
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............. $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1993.......... 16,000 1,000,000 12,053 0 -100.00% --
December 31, 1994.......... 32,000 1,000,000 24,664 12,165 -59.81% 1,028.55%
December 31, 1995.......... 48,000 1,000,000 48,896 37,341 -14.36 327.65
December 31, 1996.......... 64,000 1,000,000 71,285 60,673 -2.45 173.87
December 31, 1997.......... 80,000 1,000,000 109,897 100,228 8.53 112.58
December 31, 1998.......... 96,000 1,000,000 148,349 139,623 11.89 80.81
December 31, 1999.......... 112,000 1,000,000 172,376 164,593 10.46 61.73
</TABLE>
ZENITH MIDCAP 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............. $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1993.......... 16,000 1,000,000 12,108 0 -100.00% --
December 31, 1994.......... 32,000 1,000,000 24,905 12,406 -58.98% 1,028.55%
December 31, 1995.......... 48,000 1,000,000 47,624 36,068 -16.24 327.65
December 31, 1996.......... 64,000 1,000,000 68,963 58,351 -4.22 173.87
December 31, 1997.......... 80,000 1,000,000 95,012 85,343 2.43 112.58
December 31, 1998.......... 96,000 1,000,000 98,781 90,055 -2.01 80.81
December 31, 1999.......... 112,000 1,000,000 109,249 101,466 -2.69 61.73
</TABLE>
A-54
<PAGE> 58
<TABLE>
<CAPTION>
ZENITH SMALL CAP SUB-ACCOUNT
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................ $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1994.......... 16,000 1,000,000 10,154 0 -100.00% --
December 31, 1995.......... 32,000 1,000,000 28,495 15,918 -47.40% 1,038.05%
December 31, 1996.......... 48,000 1,000,000 51,225 39,590 -11.17 329.07
December 31, 1997.......... 64,000 1,000,000 79,202 68,511 3.17 174.35
December 31, 1998.......... 80,000 1,000,000 88,075 78,327 -0.79 112.81
December 31, 1999.......... 96,000 1,000,000 131,753 122,949 7.85 80.93
</TABLE>
<TABLE>
<CAPTION>
ZENITH EQUITY GROWTH SUB-ACCOUNT
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........... $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1994.......... 16,000 1,000,000 10,472 0 -100.00% --
December 31, 1995.......... 32,000 1,000,000 28,138 15,168 -77.95% 3,271.69%
December 31, 1996.......... 48,000 1,000,000 44,502 32,474 -31.23 522.96
December 31, 1997.......... 64,000 1,000,000 67,993 56,909 -6.98 230.16
December 31, 1998.......... 80,000 1,000,000 114,561 104,421 12.37 137.32
December 31, 1999.......... 96,000 1,000,000 166,138 156,941 18.39 94.25
</TABLE>
<TABLE>
<CAPTION>
ZENITH BALANCED SUB-ACCOUNT
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........... $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1994.......... 16,000 1,000,000 11,068 0 -100.00% --
December 31, 1995.......... 32,000 1,000,000 27,182 14,211 -81.86% 3,271.69%
December 31, 1996.......... 48,000 1,000,000 44,532 32,504 -31.16 522.96
December 31, 1997.......... 64,000 1,000,000 64,064 52,980 -11.19 230.16
December 31, 1998.......... 80,000 1,000,000 82,658 72,517 -4.53 137.32
December 31, 1999.......... 96,000 1,000,000 90,069 80,872 -6.45 94.25
</TABLE>
<TABLE>
<CAPTION>
ZENITH VENTURE VALUE SUB-ACCOUNT
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........... $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1994.......... 16,000 1,000,000 10,730 0 -100.00% --
December 31, 1995.......... 32,000 1,000,000 28,281 15,310 -77.36% 3,271.69%
December 31, 1996.......... 48,000 1,000,000 48,472 36,444 -22.46 522.96
December 31, 1997.......... 64,000 1,000,000 76,862 65,778 1.65 230.16
December 31, 1998.......... 80,000 1,000,000 100,785 90,644 5.78 137.32
December 31, 1999.......... 96,000 1,000,000 130,404 121,206 8.72 94.25
</TABLE>
A-55
<PAGE> 59
<TABLE>
<CAPTION>
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
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........... $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1994.......... 16,000 1,000,000 11,337 0 -100.00% --
December 31, 1995.......... 32,000 1,000,000 25,708 12,737 -87.43 3,271.69%
December 31, 1996.......... 48,000 1,000,000 40,016 27,988 -42.01 522.96
December 31, 1997.......... 64,000 1,000,000 51,482 40,398 -26.80 230.16
December 31, 1998.......... 80,000 1,000,000 67,880 57,740 -15.01 137.32
December 31, 1999.......... 96,000 1,000,000 97,584 88,386 -3.10 94.25
</TABLE>
<TABLE>
<CAPTION>
ZENITH MFS INVESTORS SUB-ACCOUNT
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............. $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1999.......... 16,000 1,000,000 10,782 0 -100,00% --
</TABLE>
<TABLE>
<CAPTION>
ZENITH MFS RESEARCH MANAGERS SUB-ACCOUNT
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............. $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1999.......... 16,000 1,000,000 12,606 0 -100.00% --
</TABLE>
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............ $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1986.......... 16,000 1,000,000 11,113 0 -100.00% --
December 31, 1987.......... 32,000 1,000,000 21,452 8,481 -95.04 2,723.89%
December 31, 1988.......... 48,000 1,000,000 38,406 26,379 -43.74 490.23
December 31, 1989.......... 64,000 1,000,000 57,330 46,246 -18.36 221.84
December 31, 1990.......... 80,000 1,000,000 61,417 51,276 -19.87 133.88
December 31, 1991.......... 96,000 1,000,000 93,324 84,127 -4.85 92.44
December 31, 1992.......... 112,000 1,000,000 121,460 113,206 0.33 68.91
December 31, 1993.......... 128,000 1,000,000 153,882 146,571 3.61 53.96
December 31, 1994.......... 144,000 1,000,000 173,970 167,603 3.56 43.72
December 31, 1995.......... 160,000 1,000,000 245,542 240,118 8.36 36.31
December 31, 1996.......... 176,000 1,000,000 289,496 285,015 8.91 30.74
December 31, 1997.......... 192,000 1,000,000 380,778 377,240 11.22 26.41
December 31, 1998.......... 208,000 1,000,000 436,927 434,333 11.16 22.96
December 31, 1999.......... 224,000 1,000,000 473,498 471,847 10.41 20.16
</TABLE>
A-56
<PAGE> 60
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........... $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1987.......... 16,000 1,000,000 9,668 0 -100.00% --
December 31, 1988.......... 32,000 1,000,000 24,863 12,599 -50.18 707.99%
December 31, 1989.......... 48,000 1,000,000 45,559 34,240 -16.58 272.18
December 31, 1990.......... 64,000 1,000,000 57,297 46,920 -12.42 154.15
December 31, 1991.......... 80,000 1,000,000 74,885 65,452 -6.79 103.01
December 31, 1992.......... 96,000 1,000,000 76,879 68,389 -9.84 75.31
December 31, 1993.......... 112,000 1,000,000 120,596 113,049 0.24 58.22
December 31, 1994.......... 128,000 1,000,000 131,931 125,327 -0.48 46.75
December 31, 1995.......... 144,000 1,000,000 157,701 152,042 1.10 38.57
December 31, 1996.......... 160,000 1,000,000 188,541 183,824 2.54 32.48
December 31, 1997.......... 176,000 1,000,000 223,803 220,030 3.72 27.80
December 31, 1998.......... 192,000 1,000,000 264,753 261,923 4.75 24.10
December 31, 1999.......... 208,000 1,000,000 393,018 391,131 8.78 21.10
</TABLE>
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......... $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1985.......... 16,000 1,000,000 11,696 0 -100.00% --
December 31, 1986.......... 32,000 1,000,000 27,111 14,219 -72.31 2,337.90%
December 31, 1987.......... 48,000 1,000,000 39,630 27,681 -38.78 463.37
December 31, 1988.......... 64,000 1,000,000 56,586 45,580 -18.54 214.72
December 31, 1989.......... 80,000 1,000,000 65,877 55,815 -15.67 130.87
December 31, 1990.......... 96,000 1,000,000 76,202 67,084 -12.97 90.84
December 31, 1991.......... 112,000 1,000,000 114,567 106,392 -1.57 67.95
December 31, 1992.......... 128,000 1,000,000 151,353 144,120 3.12 53.32
December 31, 1993.......... 144,000 1,000,000 192,075 185,786 5.86 43.27
December 31, 1994.......... 160,000 1,000,000 198,261 192,916 3.86 35.98
December 31, 1995.......... 176,000 1,000,000 250,055 245,653 6.16 30.49
December 31, 1996.......... 192,000 1,000,000 295,757 292,298 7.03 26.21
December 31, 1997.......... 208,000 1,000,000 358,365 355,850 8.18 22.81
December 31, 1998.......... 224,000 1,000,000 353,732 352,160 6.41 20.04
December 31, 1999.......... 240,000 1,000,000 392,527 391,898 6.44 17.74
</TABLE>
A-57
<PAGE> 61
<TABLE>
<CAPTION>
ASSET MANAGER SUB-ACCOUNT
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.......... $ 16,000 $1,000,000 $ 11,292 $ 0 -- --
December 31, 1989.......... 16,000 1,000,000 11,132 0 -100.00% --
December 31, 1990.......... 32,000 1,000,000 25,373 12,480 -76.47 2,130.09%
December 31, 1991.......... 48,000 1,000,000 43,894 31,945 -28.65 447.21
December 31, 1992.......... 64,000 1,000,000 61,591 50,586 -12.69 210.30
December 31, 1993.......... 80,000 1,000,000 87,508 77,445 -1.40 128.98
December 31, 1994.......... 96,000 1,000,000 92,933 83,815 -4.82 89.83
December 31, 1995.......... 112,000 1,000,000 120,815 112,640 0.17 67.33
December 31, 1996.......... 128,000 1,000,000 149,541 142,309 2.76 52.92
December 31, 1997.......... 144,000 1,000,000 189,965 183,677 5.56 42.98
December 31, 1998.......... 160,000 1,000,000 228,957 223,611 6.80 35.77
December 31, 1999.......... 176,000 1,000,000 265,148 260,746 7.19 30.33
</TABLE>
- ------------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets for the period through April 30, 1998 and .75% thereafter.
A-58
<PAGE> 62
APPENDIX C
LONG TERM MARKET TRENDS
The information below compares of the average annual returns of common stock,
high grade corporate bonds and 30-day U.S. Treasury bills over 20-year and
30-year holding periods.* The average annual returns assume the reinvestment of
dividends, capital gains and interest. This is an historical record and does not
predict future performance. The information does not reflect policy charges.
The data indicates that, historically, the investment performance of common
stocks over long periods has been positive and generally superior to that of
long-term, high grade debt securities. Common stocks have, however, been subject
to more dramatic market adjustments over short periods.
Over the 54 20-year time periods beginning in 1926 and ending in 1998 (i.e.,
1926-1945, 1927-1946, and so on through 1979-1998):
- -- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 51 of the 54 periods.
- -- The average annual return of common stocks surpassed that of U.S. Treasury
bills in each of the 54 periods.
- -- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 54 periods.
Over the 44 30-year time periods beginning in 1926 and ending in 1998, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 44 periods.
From 1926 through 1998 the average annual return for common stocks was 11.2%,
compared to 5.8% for high grade, long-term corporate bonds, 3.8% for U.S.
Treasury bills and 3.1% for the Consumer Price Index.
- ------------
* Used with permission. (C)1999 Ibbotson Associates, Inc. All rights reserved.
[Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.]
------------------------
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 1998.
The chart does not predict future stock market results. It shows the historic
performance of a broad index of stocks, and not the performance of any fund or
investment.
------------------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<TABLE>
<CAPTION>
GREATER
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% 31% 19% 12%
10 years............................... 3% 10% 33% 24% 28% 2%
20 years............................... 0% 6% 31% 54% 9% 0%
</TABLE>
- ------------
Used with permission. (C)1999 Ibbotson Associates, Inc. All rights reserved.
[Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.]
A-59
<PAGE> 63
APPENDIX D
USES OF SURVIVORSHIP LIFE INSURANCE
These are examples of ways the Policy can be used to address certain personal,
estate and business planning objectives.
ESTATE TAX PAYMENT
Federal estate taxes may be deferred for a married couple until the second
death. At that time, the estate tax liability may exceed 50% of a family's
estate. Survivorship life is especially suited to fund for this liability at the
second death.
EDUCATION AND SUPPORT OF CHILDREN
Often, parents will have enough insurance to provide for dependent children if
one of the parents dies but not enough to provide for them if both parents die.
Survivorship life can provide protection against extraordinary expenses if both
parents die while the children are dependent.
CHARITABLE GIVING
You can use life insurance to facilitate charitable giving, and survivorship
life is especially well suited for this purpose. Assets left to charity at death
can be deductible from a decedent's taxable estate. An individual may be
reluctant to give assets to charity if a surviving spouse may need support or if
the individual wants the children to receive the value of those assets.
Survivorship life can enable a client to defer the charitable gift until the
spouse dies. At the spouse's death, assets that otherwise would be subject to
estate tax can pass to charity. The policy's death benefit proceeds can pass
directly to the children, free of income and estate taxes, at the same time that
the assets in the spouse's estate pass to charity.
GIFTS TO GRANDCHILDREN
Grandparents can provide substantial gifts to grandchildren using survivorship
life. For very large estates, survivorship life can take advantage of exceptions
to the generation skipping tax to maximize the gifts grandchildren can receive.
BUSINESS USES
You can use survivorship life in business planning to provide benefits or
funding for replacement of key people, for buy-sell agreements and the like. The
policy can cover two owners, a parent and child active in the business, two
related or unrelated key executives, an executive and the executive's spouse,
etc. The policy can be used to accumulate cash to help fund a living buyout
under a buy-sell agreement or a deferred compensation plan for executives or for
directors.
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-60
<PAGE> 64
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-61
<PAGE> 65
APPENDIX F
CASH VALUE ACCUMULATION TEST AND GUIDELINE PREMIUM TEST
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 what is required
by the "cash value accumulation test" under Section 7702(a)(1) of the Internal
Revenue Code, or the "guideline premium test" under Section 7702(a)(2) of the
Internal Revenue Code, as selected by you when the Policy is issued. (See "Death
Benefit".)
For the cash value accumulation test, here are sample net single premium factors
for a male and female insured, both with an issue age of 55 and both in the
nonsmoker preferred risk class.
<TABLE>
<CAPTION>
POLICY YEAR NET SINGLE PREMIUM FACTOR
----------- -------------------------
<S> <C>
10........................................................ 2.19
20........................................................ 1.57
30........................................................ 1.25
40........................................................ 1.10
</TABLE>
If the same insureds were both age 45 at issue, the net single premium factors
would be:
<TABLE>
<CAPTION>
POLICY YEAR NET SINGLE PREMIUM FACTOR
----------- -------------------------
<S> <C>
10........................................................ 3.13
20........................................................ 2.16
30........................................................ 1.56
40........................................................ 1.24
50........................................................ 1.10
</TABLE>
For the guideline premium test, here are the corridor factors.
TABLE I
<TABLE>
<CAPTION>
AGE OF YOUNGER
INSURED AT START BASIC CORRIDOR ENHANCED CORRIDOR
OF THE POLICY YEAR FACTOR FACTOR
------------------ -------------- -----------------
<S> <C> <C>
20 through 40 2.50 2.50
41 2.43 2.43
42 2.36 2.36
43 2.29 2.29
44 2.22 2.22
45 2.15 2.15
46 2.09 2.09
47 2.03 2.03
48 1.97 1.97
49 1.91 1.91
50 1.85 1.85
51 1.78 1.78
52 1.71 1.71
53 1.64 1.64
54 1.57 1.57
55 1.50 1.50
56 1.46 1.46
57 1.42 1.42
58 1.38 1.38
59 1.34 1.34
60 1.30 1.30
61 1.28 1.28
62 1.26 1.26
63 1.24 1.24
64 1.22 1.22
65 1.20 1.20
66 1.19 1.19
67 1.18 1.18
68 1.17 1.17
69 1.16 1.16
70 1.15 1.15
</TABLE>
<TABLE>
<CAPTION>
AGE OF YOUNGER
INSURED AT START BASIC CORRIDOR ENHANCED CORRIDOR
OF THE POLICY YEAR FACTOR FACTOR
------------------ -------------- -----------------
<S> <C> <C>
71 1.13 1.13
72 1.11 1.11
73 1.09 1.09
74 1.07 1.07
75 1.05 1.05
76 1.05 1.05
77 1.05 1.05
78 1.05 1.05
79 1.05 1.05
80 1.05 1.05
81 1.05 1.10
82 1.05 1.15
83 1.05 1.20
84 1.05 1.25
85 1.05 1.30
86 1.05 1.35
87 1.05 1.40
88 1.05 1.45
89 1.05 1.50
90 1.05 1.50
91 1.04 1.50
92 1.03 1.50
93 1.02 1.50
94 1.01 1.50
95 1.01 1.50
96 1.01 1.40
97 1.01 1.30
98 1.01 1.20
99 1.01 1.10
100 1.00 1.00
</TABLE>
A-62
<PAGE> 66
<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> 67
NEW ENGLAND LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MA 02116
RECEIPT
This is to acknowledge receipt of a Zenith Survivorship Life Plus Prospectus
dated March , 2000. This Variable Life Policy is offered by New England Life
Insurance Company.
<TABLE>
<S> <C>
- ----------------------------------------------------- -----------------------------------------------------
(Date) (Client's Signature)
</TABLE>
<PAGE> 68
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> 69
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium adjustable variable survivorship
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 117 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
Representations.
The signatures.
Written consents of the following persons:
H. James Wilson, Esq. (see Exhibit 3(i) below)
Rodney J. Chandler, F.S.A., M.A.A.A. (see Exhibit 3(ii))
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 **
II - 2
<PAGE> 70
(b)(i) Form of Contract between NELICO and its General Agents *
(ii) Form of contract between NELICO and its
Agents **
(c) Commission Schedule for Policies
(d) Form of contract among NES, NELICO and other broker
dealers ####
(4) None
(5)(a) Two Specimens of Policy, including the Application +++++
(b) Additional Application *
(c) Riders to Policy
(d) Additional Riders to Policy *
(e) Split Option Rider ***
(6)(a) Amended and restated Articles of Organization
of NELICO ###
(b) Amended and restated By-Laws of NELICO ####
(c) Amendments to the Amended and restated Articles of
Organization +++
(7) None
(8) None
(9) None
2. See Exhibit 3(i)
3.(i) Opinion and Consent of H. James Wilson, Esquire
(ii) Opinion and Consent of Rodney J. Chandler,
F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
7.(i) Powers of Attorney ###
(ii) Power of Attorney for James M. Benson, Robert H.
Benmosche and Catherine A. Rein +
(iii) Power of Attorney for David Y. Rogers and Richard
Robinson ++
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditor
12. Schedule for computation of performance quotations **
II - 3
<PAGE> 71
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) Addendum to Consolidated memorandum describing certain
procedures, filed pursuant to
Rule 6e-3(T)(b)(12)(iii) ##
(iii) Second Addendum to Consolidated Memorandum ++++
14. (i) Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation
and New England Variable Life Insurance Company **
(ii) Amendment No. 1 to Participation Agreement
among Variable Insurance Products Fund, Fidelity
Distributors Corporation and New England Variable
Life Insurance Company #
(iii) Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation
and New England Variable 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 Post-Effective Amendment No. 6 to the
Variable Account's Form S-6 Registration Statement, File No. 33-66864,
filed April 26, 1996.
### Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
#### Incorporated herein by reference to 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.
II - 4
<PAGE> 72
*** Incorporated herein by reference to Post Effective Amendment No. 10 to the
Variable Account's Form S-6 Registration Statement, File No. 33-66864,
filed April 30, 1998.
+ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 333-46401,
filed July 9, 1998.
++ Incorporated herein by reference to Post-Effective Amendment No. 4 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed January 20, 1999.
+++ Incorporated herein by reference to the Post-Effective Amendment No.4 to
the Variable Account's Form S-6 Registration Statement, File No. 33-65263,
filed February 24, 1999.
++++ Incorporated herein by reference to the Post-Effective Amendment No.10 to
the Variable Account's Form S-6 Registration Statement, File No. 33-52050,
filed April 26, 1999.
+++++ Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-89409, filed October 20, 1999.
II - 5
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, New England Variable Life Separate Account, has duly caused this
amended 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 3rd day of
March, 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> 74
Pursuant to the requirements of the Securities Act of 1933, New England
Life Insurance Company has duly caused this amended 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 3rd day of March, 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
amended Registration Statement has been signed below by the following persons in
the capacities indicated on March 3, 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
* Director
- ----------------------
Stewart G. Nagler
<PAGE> 75
* Director
- ----------------------
Catherine A. Rein
* Second Vice President and
- ---------------------- Chief Accounting Officer
Richard A. Robinson
* Executive Vice President and
- ---------------------- Chief Financial Officer
David Y. Rogers
* Director
- ----------------------
Rand N. Stowell
* Director
- ----------------------_
Alexander B. Trowbridge
By: /s/ Anne M. Goggin
-------------------------
Anne M. Goggin, Esq.
Attorney-in-fact
* Executed by Anne M. Goggin, Esquire on behalf of those indicated pursuant
to powers of attorney filed with the Variable Account's Form S-6
Registration Statement, File No. 333-21767, on February 13, 1997,
Pre-Effective Amendment No. 1 to the Variable Account's Form S-6
Registration Statement, File No. 333-46401, on July 9, 1998, and
Post-Effective Amendment No. 4 to the Variable Account's Form S-6
Registration Statement, File No. 33-88082, on January 20, 1999.
<PAGE> 76
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- --------------
1.A.3(c) Commission Schedule
1.A.5(c) Riders to the Policy
3. (i) Opinion and Consent of
H. James Wilson, Esq.
3. (ii) Opinion and Consent of Rodney J.
Chandler, F.S.A., M.A.A.A.
6. Consent of Sutherland Asbill &
Brennan LLP
11. Consent of the Independent Auditor
- ---------
* Page numbers inserted on manually-signed copy only.
<PAGE> 1
Exhibit 1.A.(3)(c)
Commission Schedule
The selling agent who is a registered representative of New England Securities
will receive a maximum commission and/or service fee of:
1) 50% of the Target Premium paid in the first Policy year
2) 5% in Policy years two through ten
3) 3% thereafter; plus
4) 3% of each payment in excess of a Target Premium in any year.
Agents may elect to receive commissions equal to a maximum of .16% of cash
value, instead of premium-based compensation, beginning in Policy year 11.
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, premium-based
commissions paid to the broker-dealer on behalf of the registered representative
will not exceed those listed above. A registered representative may choose a
combination of premium-based and cash value-based compensation. In that case,
the registered representative will receive maximum premium-based commissions up
to the amounts listed above in Policy years one through ten, plus a maximum of
.30% of cash value in Policy years two through ten and .09% thereafter.
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 also 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.
<PAGE> 1
Exhibit 1.A.5(c)
NEL-42
- --------------------------------------------------------------------------------
Rider: Guaranteed Death Benefit
The Policy to which this Rider is attached is issued by the Company subject to
the provisions of this Rider.
NO LAPSE GUARANTEE BENEFIT
On the first day of each policy month until age 100 of the younger Insured the
Company will determine if the No Lapse Guarantee Benefit (called "the Benefit")
is in effect. If the Benefit is in effect, the Policy will not lapse even if the
Net Cash Value of the Policy on the first day of the policy month is not enough
to cover the full Monthly Deduction for that month.
The Guaranteed Death Benefit Premium is shown in the Policy Schedule. This
Premium will be recalculated when: the Face Amount is decreased; the amount
provided by riders attached to the Policy is increased or decreased; a partial
surrender which results in a decrease in Face Amount is made; a correction is
made in the insurance age of either Insured; or the underwriting class of the
Policy and its riders is changed to a more favorable underwriting class. When
this Premium is recalculated: the new Premium will be shown in Section 1 of the
Policy; and a new Guaranteed Death Benefit Fund Table will be sent to you.
The Benefit will be in effect if (a) is equal to or greater than (b) where: (a)
equals the total of the premiums paid to date; less every partial surrender made
to date; less any Cash Value paid to you to allow the Policy to continue to
qualify as life insurance; less the Policy Loan Balance; and (b) equals the sum
of: the Guaranteed Death Benefit Fund value for the prior year (shown in the
attached Table) plus 1/12 of the Guaranteed Death Benefit Premium shown in
Section 1; times one plus the number of completed policy months in the current
policy year.
If the Benefit is not in effect, the amount of premium required to put the
Benefit in force is (a) minus (b) where: (a) equals the sum of: the Guaranteed
Death Benefit Fund value for the prior year (shown in the attached Table) plus
1/12 of the Guaranteed Death Benefit Premium shown in Section 1; times one plus
the number of completed policy months in the current policy year; and (b) equals
the total amount of premium which has already been paid into the Policy; less
every partial surrender made to date; less any Cash Value paid to you to allow
the Policy to continue to qualify as life insurance; less the Policy Loan
Balance.
GUARANTEED DEATH BENEFIT
If the Last Death occurs prior to age 100 of the younger Insured, the Death
Benefit of the Policy will be based on the Death Benefit Option in effect on the
date of death.
If the Last Death occurs on or after age 100 of the younger Insured and the
Benefit was in effect at age 100 of the younger Insured, the Death Benefit will
equal the greater of: the Cash Value on the date of the Last Death; and the Face
Amount of the Policy.
If the Last Death occurs on or after age 100 of the younger Insured and the
Benefit was not in effect at age 100 of the younger Insured, the Death Benefit
will equal: the Cash Value on the date of the Last Death; or, if the Policy has
an Expanded Death Benefit Rider, the smallest Face Amount that has been in
effect since the younger Insured's age 80, or since the Policy Date if the
younger Insured was older than age 80 on that Date if greater.
COST OF RIDER
Whether or not the Benefit is in effect, the cost for this Rider is charged as
part of the Monthly Deductions. The monthly premium for this Rider is shown on
the Policy Schedule page.
CONTRACT
This Rider is made part of the Policy to which it is attached if the Rider is
listed in the Policy Schedule. (See Section 1 of the Policy.) This Rider has no
cash value.
NEL-42 (Continued)
<PAGE> 2
- --------------------------------------------------------------------------------
TERMINATION
This Rider will terminate upon the earliest of:
* A change in Death Benefit Option;
* Addition of a Survivorship Level Term Insurance Rider with Outside Term;
* A change from Inside Term to Outside Term if a Survivorship Level Term
Insurance Rider is attached to the Policy;
* Termination of the Policy;
* The Last Death; or
* Receipt by the Company at its Home Office of written election signed by the
Owner of the Policy to terminate the Rider.
If you elect to terminate this Rider, you cannot apply for this Rider later.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
NEL-42 (See attached Table)
<PAGE> 3
- --------------------------------------------------------------------------------
Guaranteed Death Benefit Fund Table
- --------------------------------------------------------------------------------
POLICY NUMBER
Specimen
- --------------------------------------------------------------------------------
The Guaranteed Death Benefit Fund is used to determine if the No Lapse Guarantee
Benefit is in effect.
YEAR YEAR
1 $1,367.88 36 $49,243.68
2 2,735.76 37 50,611.56
3 4,103.64 38 51,979.44
4 5,471.52 39 53,347.32
5 6,839.40 40 54,715.20
6 8,207.28 41 56,083.08
7 9,575.16 42 57,450.96
8 10,943.04 43 58,818.84
9 12,310.92 44 60,186.72
10 13,678.80 45 61,554.60
11 15,046.68 46 62,922.48
12 16,414.56 47 64,290.36
13 17,782.44 48 65,658.24
14 19,150.32 49 67,026.12
15 20,518.20 50 68,394.00
16 21,886.08 51 69,761.88
17 23,253.96 52 71,129.76
18 24,621.84 53 72,497.64
19 25,989.72 54 73,865.52
20 27,357.60 55 75,233.40
21 28,725.48 56 76,601.28
22 30,093.36 57 77,969.16
23 31,461.24 58 79,337.04
24 32,829.12 59 80,704.92
25 34,197.00 60 82,072.80
26 35,564.88 61 83,440.68
27 36,932.76 62 84,808.56
28 38,300.64 63 86,176.44
29 39,668.52 64 87,544.32
30 41,036.40 65 88,912.20
31 42,404.28
32 43,772.16
33 45,140.04
34 46,507.92
35 47,875.80
NEL-42
<PAGE> 4
NEL-43
- --------------------------------------------------------------------------------
Rider: Expanded Death Benefit
The Policy to which this Rider is attached is issued by the Company subject to
the provisions of this Rider.
COST OF RIDER
The cost for this Rider is charged as part of the Monthly Deductions. The
monthly premium is shown in the Policy Schedule.
DEATH BENEFIT
The Death Benefit on or after age 100 of the younger Insured equals:
* If the Policy has a Guaranteed Death Benefit Rider attached and the No
Lapse Guarantee Benefit was in effect at age 100 of the younger Insured,
the greater of: the Cash Value on the date of the Last Death; and the Face
Amount of the Policy; otherwise
* The greater of: the Cash Value on the date of the Last Death; and the
smallest Face Amount that has been in effect since the younger Insured's
age 80, or since the Policy Date if the younger Insured was older than age
80 on that Date.
CONTRACT
This Rider is made part of the Policy to which it is attached if the Rider is
listed in the Policy Schedule. (See Section 1 of the Policy.) This Rider has no
cash value.
TERMINATION
This Rider will terminate upon the earliest of:
* Termination of the Policy;
* The Last Death; or
* Receipt by the Company at its Home Office of written election signed by the
Owner of the Policy to terminate the Rider.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
NEL-43
<PAGE> 5
NEV-45-1
- --------------------------------------------------------------------------------
Rider: Decreasing Term Insurance
THE COMPANY agrees that if the Insured dies while this Rider is in force, the
applicable Amount Insured shown in the attached Table of Decreasing Term
Insurance Provided By Rider will be paid.
RENEWAL
The Rider will be renewed automatically for successive periods of one year from
the Expiry Date to a new expiry date one year later by payment of the monthly
deduction for the Rider. It cannot be renewed beyond the Final Expiry Date shown
in the Policy Schedule.
TERM INSURANCE
The amount of insurance during any rider year is shown in the Table of
Decreasing Term Insurance Provided By Rider. If any insurance provided by this
Rider is exchanged for a new policy, you will be given a new Table of Decreasing
Term Insurance Provided By Rider.
COST OF RIDER
The cost of this Rider is charged as part of the Monthly Deductions. The rates
will be set by the Company each year on the policy anniversary based on the
expectations of the Company as to future experience. The rates are guaranteed
for one year. The rates for the Rider will never be more than the rates shown in
the Table of Guaranteed Monthly Insurance Rates per $1,000 of Decreasing Term
Insurance.
DATE OF ISSUE
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule.
Rider years will coincide with policy years. If this Rider is issued after the
Date of Issue of the Policy, the first rider year will begin on the policy
anniversary on or next following the Date of Issue of the Rider. The term
insurance provided by this Rider will be in force from the Date of Issue of the
Rider. The effective date of this Rider is its Date of Issue.
NOT CONTESTABLE AFTER TWO YEARS
This Rider will not be contestable after it has been in force during the life of
the Insured for two years from its Date of Issue.
Insured:
SUICIDE WITHIN TWO YEARS
If the Insured dies by suicide while sane or insane within two years from the
Date of Issue of this Rider: the amount of term insurance will not be paid; and
the amount payable under the Rider will be limited to the monthly deductions
made to pay for the Rider.
CONTRACT
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. This Rider has no cash value.
EXCHANGE OPTION
The Owner, before the policy anniversary on which the Insured is 85, can from
time to time exchange any portion of the insurance then in force under this
Rider for a new policy. The new policy will be issued:
* Without proof that the Insured is insurable;
* With a Face Amount equal to the amount of term insurance exchanged;
* With the same Insured as this Rider;
* Based on the actual underwriting class to which the Insured was assigned by
the Company on the Date of Issue of this Rider;
* On any plan of single life Variable Life insurance, with a level face
amount, issued by the Company on the Policy Date of the new policy;
* On a policy form and at rates in use by the Company on the Policy Date of
the new policy;
* With a current Policy Date and Age of Insured; and
* Subject to any assignments and limitations to which this Rider is subject,
and to the payment of the first premium for the new policy.
The exchange may be made only with the consent of the Company if:
* The amount exchanged or the amount of term insurance to be continued under
this Rider is less than the Company's published minimum limits of issue; or
* Any rider is to be attached to the new policy.
The Contestable and Suicide periods of the new policy will be measured from the
Date of Issue of this Rider.
NEV-45-1 (Continued)
<PAGE> 6
- --------------------------------------------------------------------------------
TERMINATION
This Rider will terminate upon the earliest of:
* Termination or maturity of the Policy;
* Exchange of the entire amount of insurance provided under the Rider for a
new policy;
* Receipt by the Company at its Home Office of written request signed by the
Owner of the Policy to terminate the Rider; and
* The end of the Final Expiry Date shown for the Rider in the Policy
Schedule.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
NEV-45-1
<PAGE> 7
- --------------------------------------------------------------------------------
Table of Decreasing Term Insurance Provided By Rider
- --------------------------------------------------------------------------------
POLICY NUMBER: Specimen INSURED: John Alden
- --------------------------------------------------------------------------------
RIDER AMOUNT INSURED
YEAR DURING RIDER YEAR
1 $25,000
2 23,750
3 22,500
4 21,250
5 20,000
6 18,750
7 17,500
8 16,250
9 15,000
10 13,750
11 12,500
12 11,250
13 10,000
14 8,750
15 7,500
16 6,250
17 5,000
18 3,750
19 2,500
20 1,250
- --------------------------------------------------------------------------------
Daniel D. Jordan
Secretary
NEV-45-1
<PAGE> 8
- --------------------------------------------------------------------------------
Table of Guaranteed Monthly Insurance Rates Per $1,000 of Decreasing
Term Insurance
- --------------------------------------------------------------------------------
POLICY NUMBER: Specimen INSURED: John Alden
- --------------------------------------------------------------------------------
YEAR RATE
1 0.2192
2 0.2342
3 0.2533
4 0.2750
5 0.3000
6 0.3283
7 0.3617
8 0.3958
9 0.4350
10 0.4758
11 0.5225
12 0.5692
13 0.6200
14 0.6733
15 0.7333
16 0.7967
17 0.8700
18 0.9517
19 1.0450
20 1.1500
- --------------------------------------------------------------------------------
Daniel D. Jordan
Secretary
NEV-45-1
<PAGE> 9
NEV-46-1
- --------------------------------------------------------------------------------
Rider: Level Term Insurance
THE COMPANY agrees that if the Insured dies while this Rider is in force, the
amount of level term insurance under this Rider will be paid.
RENEWAL
The Rider will be renewed automatically for successive periods of one year from
the Expiry Date to a new expiry date one year later by payment of the monthly
deduction for the Rider. It cannot be renewed beyond the Final Expiry Date shown
in the Policy Schedule.
COST OF RIDER
The cost for this Rider is charged as part of the Monthly Deductions. The rates
will be set by the Company each year on the policy anniversary based on the
expectations of the Company as to future experience. The rates are guaranteed
for one year. The rates for the Rider will never be more than the rates shown in
the Table of Guaranteed Monthly Insurance Rates per $1,000 of Level Term
Insurance.
DECREASE IN TERM AMOUNT
After the first policy year, the Term Amount can be decreased on the first day
of any policy month by written application to the Company; but only if the Term
Amount which will remain after a decrease is at least $10,000, except with the
consent of the Company. The application for a decrease will be made a part of
the Rider.
DATE OF ISSUE
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule.
Rider years will coincide with policy years. If this Rider is issued after the
Date of Issue of the Policy, the first rider year will begin on the policy
anniversary on or next following the Date of Issue of the Rider. The term
insurance provided by this Rider will be in force from the Date of Issue of the
Rider. The effective date of this Rider is its Date of Issue.
NOT CONTESTABLE AFTER TWO YEARS
This Rider will not be contestable after it has been in force during the life of
the Insured for two years from its Date of Issue.
Insured:
SUICIDE WITHIN TWO YEARS
If the Insured dies by suicide while sane or insane within two years from the
Date of Issue of this Rider: the amount of level term insurance will not be
paid; and the amount payable under the Rider will be limited to the monthly
deductions made to pay for the Rider.
CONTRACT
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. This Rider has no cash value.
EXCHANGE OPTION
The Owner, before the policy anniversary on which the Insured is 85, can
exchange this Rider for a new policy. The new policy will be issued:
* Without proof that the Insured is insurable;
* With a Face Amount equal to the amount of term insurance then provided by
this Rider;
* With the same Insured as this Rider;
* Based on the actual underwriting class to which the Insured was assigned by
the Company on the Date of Issue of this Rider;
* On any plan of single life Variable Life insurance, with a level face
amount, issued by the Company on the Policy Date of the new policy;
* On a policy form and at rates in use by the Company on the Policy Date of
the new policy;
* With a current Policy Date and Age of Insured; and
* Subject to any assignments and limitations to which this Rider is subject,
and to the payment of the first premium for the new policy.
The exchange may be made only with the consent of the Company if:
* The amount exchanged under this Rider is less than the Company's published
minimum limits of issue; or
* Any rider is to be attached to the new policy.
The Contestable and Suicide periods of the new policy will be measured from the
Date of Issue of this Rider.
NEV-46-1 (Continued)
<PAGE> 10
- --------------------------------------------------------------------------------
TERMINATION
This Rider will terminate upon the earliest of:
* Termination or maturity of the Policy;
* Exchange of the Rider for a new policy;
* Receipt by the Company at its Home Office of written request signed by the
Owner of the Policy to terminate the Rider; and
* The end of the Final Expiry Date shown for the Rider in the Policy
Schedule.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
NEV-46-1
<PAGE> 11
- --------------------------------------------------------------------------------
Table of Guaranteed Monthly Insurance Rates Per $1,000 of Level Term
Insurance
- --------------------------------------------------------------------------------
POLICY NUMBER: Specimen INSURED: John Alden
- --------------------------------------------------------------------------------
YEAR RATE
1 0.2192
2 0.2342
3 0.2533
4 0.2750
5 0.3000
6 0.3283
7 0.3617
8 0.3958
9 0.4350
10 0.4758
11 0.5225
12 0.5692
13 0.6200
14 0.6733
15 0.7333
16 0.7967
17 0.8700
18 0.9517
19 1.0450
20 1.1500
- --------------------------------------------------------------------------------
Daniel D. Jordan
Secretary
NEV-46-1
<PAGE> 12
NEV-47
- --------------------------------------------------------------------------------
Rider: Survivorship Four Year Level Term Insurance
THE COMPANY agrees that if the Last Death occurs while this Rider is in force,
the amount of Level Term Insurance will be paid as a part of the policy
proceeds.
COST OF RIDER
The cost for this Rider is charged as part of the Monthly Deductions. The rates
will be set by the Company each year on the policy anniversary based on the
expectations of the Company as to future experience. The rates are guaranteed
for one year. The rates for the Rider will never be more than the rates shown in
the Table of Guaranteed Monthly Insurance Rates Per $1,000 of Survivorship Four
Year Level Term Insurance.
DATE OF ISSUE
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule.
Rider years will coincide with policy years. If this Rider is issued after the
Date of Issue of the Policy, the first rider year will begin on the policy
anniversary on or next following the Date of Issue of the Rider. The term
insurance provided by this Rider will be in force from the Date of Issue of the
Rider. The effective date of this Rider is its Date of Issue.
NOT CONTESTABLE AFTER TWO YEARS
With respect to statements made in the application, this Rider will not be
contestable after it has been in force, for statements regarding: Insured 1,
during the life of Insured 1 for two years from its Date of Issue; and Insured
2, during the life of Insured 2 for two years from its Date of Issue.
SUICIDE WITHIN TWO YEARS
If either of the Insureds dies by suicide while sane or insane within two years
from the Date of Issue of this Rider: the amount of Level Term Insurance will
not be paid; and the amount payable under the Rider will be limited to the
monthly deductions made to pay for the Rider.
CONTRACT
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. This Rider has no cash value.
TERMINATION
This Rider will terminate upon the earliest of: (a) termination or maturity of
the Policy; (b) receipt by the Company at its Home Office of written request
signed by the Owner of the Policy to terminate the Rider; and (c) the end of the
Expiry Date shown for the Rider in the Policy Schedule.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
NEV-47
<PAGE> 13
NEL-51
- --------------------------------------------------------------------------------
Rider: Benefits for Disability of Covered Insured
THE COMPANY agrees to provide Premium Benefits for the Policy and to waive the
cost of this Rider on receipt of proof that total disability of a Covered
Insured (see Section 1):
* Started while this Rider was in force; and
* Has continued for at least six months.
If there are two Covered Insureds under this Rider and both are totally
disabled, only one benefit under the Rider will be paid.
DEFINITIONS
"Total disability" means disability of a Covered Insured:
* Which results from sickness or accidental bodily injury; and
* Which continuously prevents the Covered Insured from working for pay or
profit.
During the first 36 months of disability, "working" means engaging in the
occupation which was the regular occupation of that Insured when total
disability started; and thereafter means engaging in any occupation for which
that Covered Insured is or becomes fit by education, training or experience.
Total disability may be the result of a sickness which began or an injury which
occurred either before or after this Rider was issued.
"Working for pay or profit" includes attending school or college as a full time
student, if that was the main occupation of the Covered Insured when the
disability started.
Total disability will be presumed if, as the result of a sickness or an
accidental bodily injury, the Covered Insured has a total loss, which begins
while this Rider is in force, of:
* Speech; or sight in both eyes; or hearing in both ears; or
* Use of both hands; or use of both feet; or use of one hand and one foot.
Total disability will be presumed as long as the loss continues, even if the
Covered Insured is working for pay or profit.
EXCLUSION
This Rider does not provide benefits for total disability which results from a
sickness or an injury caused by war or an act of war after the Date of Issue of
this Rider.
BENEFITS
After total disability of a Covered Insured has continued for at least six
months, Premium Benefits will be provided and the cost of this Rider will be
waived for the period:
* Which starts on the first day of the policy month in which total disability
started; and
* Which ends at the end of the second full policy month after total
disability ends.
No benefits will be provided beyond the policy anniversary on which that
disabled Covered Insured is age 65, unless: total disability of that Covered
Insured has been continuous for the full five year period which ends on that
anniversary; or another Insured is a Covered Insured under this Rider and
qualifies for benefits under this Rider.
Benefits will not be provided for any period more than one year before proof of
total disability for that Covered Insured is received by the Company at its Home
Office.
When the Company approves a claim, the amount of all Net Premium Benefits will
be added to the Cash Value based on the premium allocation in effect on the date
the claim is approved. When a claim is approved, the amount of all costs for
this Rider made as part of the Monthly Deduction after the start of total
disability but before the Company approves the claim under this Rider will be
added by the Company to the Cash Value based on the premium allocation in effect
on the date the claim is approved.
The Policy to which this Rider is attached is intended to qualify as a flexible
premium adjustable life insurance contract under the Internal Revenue Code or
any interpretive regulation or rulings by the Internal Revenue Service. To that
end, premiums on the Policy are limited to an amount no greater than that
allowing the Policy to continue to qualify. Therefore, the portion of any
Premium Benefit that would disqualify the Policy will be paid to you in cash.
AMOUNT OF PREMIUM BENEFIT
The amount of the Premium Benefit will be one-twelfth of the Specified Amount
for the Rider shown in the Policy as issued or later endorsed.
NEL-51 (Continued)
<PAGE> 14
- --------------------------------------------------------------------------------
AMOUNT OF NET PREMIUM BENEFIT
The amount of the Net Premium Benefit is equal to: the Premium Benefit; less no
more than the Maximum Premium Expense Charge at the rates shown in Section 1 of
the Policy.
PROOF OF DISABILITY
Proof of total disability must be furnished:
* During the life of a disabled Covered Insured; and
* During the period of total disability; and
* Not more than one year after: (a) the date total disability started; or (b)
the policy anniversary on which that Covered Insured is age 65; or (c) the
surrender or maturity of the Policy.
The Company has the right to require proof that total disability continues to
exist. This right will be exercised at reasonable times; but after total
disability of that Covered Insured has continued for two years, proof will not
be required more often than once a year.
Failure to furnish proof of total disability within the time required will not
void or reduce a claim for benefits if it is shown that: o It was not reasonably
possible to furnish proof within that time; and o Proof was furnished as soon as
reasonably possible.
PREMIUMS FOR THIS RIDER
Premiums for this Rider are charged as part of the monthly deductions. The
factors for calculating the premiums for the Rider are shown in the Table of
Premium Factors for Benefits for Disability of Covered Insured Rider.
DATE OF ISSUE
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule. The
effective date of this Rider is its Date of Issue.
NOT CONTESTABLE AFTER TWO YEARS
With respect to statements made in the Application, this Rider will not be
contestable after it has been in force, for statements regarding a Covered
Insured, during the life of that Covered Insured, and without the occurrence of
total disability of that Covered Insured for two years from its Date of Issue.
CONTRACT A copy of the application for this Rider is attached to and made a part
of the Rider. This Rider is made a part of the Policy to which it is attached if
the Rider is listed in the Policy Schedule.
TERMINATION
This Rider will terminate upon the earliest of:
* Termination of the Policy;
* Death of the Covered Insureds;
* Receipt of the Company at its Home Office of written election signed by the
Owner of the Policy to terminate the Rider; and
* Addition of a Waiver of Monthly Deductions - Disability of Insured Rider to
the Policy.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
NEL-51
<PAGE> 15
- --------------------------------------------------------------------------------
Table of Premium Factors for Benefits for Disability of Covered Insured
Rider
The monthly premium for this rider is equal to: the Premium Benefit for the
policy year; times the factor from this Table for the policy year. This premium
is part of the Policy's Monthly Deduction.
- --------------------------------------------------------------------------------
POLICY YEAR FACTOR POLICY YEAR FACTOR
1 .0108 23 .0277
2 .0114 24 .0297
3 .0119 25 .0319
4 .0123 26 .0344
5 .0128 27 .0372
6 .0133 28 .0407
7 .0136 29 .0449
8 .0141 30 .0503
9 .0145 31 .0571
10 .0150 32 .0657
11 .0155 33 .0765
12 .0160 34 .0899
13 .0166 35 .1065
14 .0172 36 .1266
15 .0178 37 .1522
16 .0186 38 .1742
17 .0195 39 .1987
18 .0205 40 .2259
19 .0216 41 .1273
20 .0229 42 .1026
21 .0244 43 .0760
22 .0259 44 .0472
45 .0177
- --------------------------------------------------------------------------------
Daniel D. Jordan
Secretary
NEL-51-
<PAGE> 16
NEL-58
- --------------------------------------------------------------------------------
Rider: Survivorship Level Term Insurance
THE COMPANY agrees that if the Last Death occurs while this Rider is in force,
the amount of Level Term Insurance (called "Term Amount") will be paid as part
of the Policy's Death Benefit if you choose Inside Term (see below); or
otherwise, will be added to the policy proceeds.
When you apply for this Rider, you can choose:
* To have the Term Amount of the Rider added to the Face Amount of the Policy
for purposes of calculating the Death Benefit (called "Inside Term"); or
* To not have the Term Amount of the Rider added to the Face Amount of the
Policy for purposes of calculating the Death Benefit (called "Outside
Term").
With the consent of the Company, you can change your choice at any time.
Evidence of insurability will be required to change from Inside Term to Outside
Term.
COST OF RIDER
The cost for this Rider is charged as part of the Monthly Deductions. The rates
will be set by the Company each year on the policy anniversary based on the
expectations of the Company as to future experience. The rates for the Rider
will never be more than the rates shown in the Table of Guaranteed Monthly
Insurance Rates Per $1,000 of Survivorship Level Term Insurance.
DECREASE IN TERM AMOUNT
After the first policy year, the Term Amount can be decreased on the first day
of any policy month by written application to the Company; but only if the Term
Amount which will remain after a decrease is at least $10,000, except with the
consent of the Company. A decrease in Term Amount will be effective on the
Adjustment Date shown in the new Policy Schedule.
ADJUSTMENT OF THE POLICY
The Policy Schedule must reflect a decrease in the Term Amount. The new Policy
Schedule and the Application for the adjustment will be made part of the Policy
when the Company, at its option:
* Sends you a new Policy Schedule and a copy of the Application for the
adjustment for you to attach to the Policy; or
* Requires that the Policy be returned to have the new Policy Schedule and a
copy of the Application for the adjustment attached to the Policy by
the Company; or
* Sends you an adjusted policy to take the place of this Policy.
Upon adjustment, the Policy will be in force only as adjusted.
EXCHANGE OPTION
If Outside Term is in effect, you can, before the policy anniversary on which
the older Insured is 85, exchange any portion of the insurance then in force
under this Rider for a new Policy:
* If the ages of the Insureds meet the Company's issue age requirements on
the Policy Date of the new policy;
* If the Company's underwriting class requirements on the Policy Date of the
new policy can be met; and
* If both Insureds under this Rider are living on the Date of Issue of the
new policy.
The new policy will be issued:
* Without proof that the Insureds are insurable;
* With a Face Amount equal to the amount of term insurance being exchanged;
* With the same Insureds as this Rider;
* Based on the actual underwriting class to which each Insured was assigned
by the Company on the Date of Issue of this Rider;
NEL-58 (Continued)
<PAGE> 17
- --------------------------------------------------------------------------------
* On any plan of Variable Survivorship Life insurance with a level face
amount issued by the Company on the Policy Date of the new policy;
* On a policy form and at rates in use by the Company on the Policy Date of
the new policy;
* With a current Policy Date and current insurance ages of Insureds; and
* Subject to any assignments and limitations to which this Rider is subject,
and to the exchange cost described below.
The exchange can be made only with the consent of the Company if:
* The amount of term insurance you want to exchange is less than the
Company's published minimum limits of issue; or
* Any rider is to be attached to the new policy.
The Contestable and Suicide periods of the new policy will be measured from the
Date of Issue of this Rider.
EXCHANGE COST
The exchange is subject to payment of the first premium for the new policy.
DATE OF ISSUE
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule.
Rider years will coincide with policy years. If this Rider is issued after the
Date of Issue of the Policy, the first rider year will begin on the policy
anniversary on or next following the Date of Issue of the Rider. The term
insurance provided by this Rider will be in force from the Date of Issue of the
Rider. The effective date of this Rider is its Date of Issue.
NOT CONTESTABLE AFTER TWO YEARS
The insurance issued under this Rider will not be contestable after it has been
in force during the life of either Insured for two years from the Date of Issue
of this Rider.
SUICIDE WITHIN TWO YEARS
If either of the Insureds dies by suicide while sane or insane within two years
from the Date of Issue of this Rider: the amount of Level Term Insurance will
not be paid; and the amount payable under the Rider will be limited to the
monthly deductions made to pay for the Rider.
CONTRACT
A copy of the application for this Rider is attached to and made part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule. This Rider has no cash value.
TERMINATION
This Rider will terminate upon the earliest of:
* Termination of the Policy;
* Receipt by the Company at its Home Office of written request signed by the
Owner of the Policy to terminate the Rider; o Exchange of the Level Term
Insurance for a new policy;
* A decrease in Term Amount to zero; and
* Age 100 of the younger Insured.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
NEL-58
<PAGE> 18
NEV-71
- --------------------------------------------------------------------------------
Rider: Waiver of Monthly Deductions - Disability of Insured
THE COMPANY agrees to waive the monthly deductions for the Policy and all Riders
on receipt of proof that total disability of the Insured:
* Started while this Rider was in force; and
* Has continued for at least six months.
DEFINITIONS
"Total disability" means disability of the Insured:
* Which results from sickness or accidental bodily injury; and
* Which continuously prevents the Insured from working for pay or profit.
During the first 36 months of disability, "working" means engaging in the
occupation which was the regular occupation of the Insured when total disability
started; and thereafter means engaging in any occupation for which the Insured
is or becomes fit by education, training or experience.
Total disability may be the result of a sickness which began or an injury which
occurred either before or after this Rider was issued.
"Working for pay or profit" includes attending school or college as a full time
student, if that was the main occupation of the Insured when the disability
started.
Total disability will be presumed if, as the result of a sickness or an
accidental bodily injury, the Insured has a total loss, which begins while this
Rider is in force, of:
* Speech; or sight in both eyes; or hearing in both ears; or
* Use of both hands; or use of both feet; or use of one hand and one foot.
Total disability will be presumed as long as the loss continues, even if the
Insured is working for pay or profit.
Insured:
EXCLUSION
This Rider does not provide benefits for total disability which results from a
sickness or an injury caused by war or an act of war after the Date of Issue of
this Rider.
MONTHLY DEDUCTIONS TO BE WAIVED
After total disability has continued for at least six months, monthly deductions
will be waived for the period:
* Which starts on the first day of the policy month in which total
disability started; and
* Which ends at the end of the second full policy month after total
disability ends.
No monthly deductions will be waived beyond the policy anniversary on which the
Insured is age 65, unless total disability has been continuous for the full five
year period which ends on that anniversary.
Monthly deductions will not be waived for any period more than one year before
proof of total disability is received by the Company at its Home Office.
The amount of all monthly deductions made after the start of total disability
but before the Company approves a claim for waiver will be added to the cash
value by the Company when a claim is approved.
NEV-71 (continued)
<PAGE> 19
PROOF OF DISABILITY
Proof of total disability must be furnished:
* During the life of the Insured; and
* During the period of total disability; and
* Not more than one year after (a) the due date of a premium in default; or
(b) the policy anniversary on which the Insured is age 65; or (c) the
surrender or maturity of the Policy.
The Company has the right to require proof that total disability continues to
exist. This right will be exercised at reasonable times; but after total
disability has continued for two years, proof will not be required more often
than once a year.
Failure to furnish proof of total disability within the time required will not
void or reduce a claim for benefits if it is shown that:
* It was not reasonably possible to furnish proof within that time; and
* Proof was furnished as soon as reasonably possible.
POLICY BENEFITS
The Policy proceeds will be the same while Monthly Deductions are being waived
as they would be if each Monthly Deduction were paid in cash on the first day of
the policy month.
PREMIUMS FOR THIS RIDER
Premiums for this Rider are charged as part of the monthly deductions. The
factors for calculating the premiums for the Rider are shown in the Table of
Premium Factors for Waiver of Monthly Deductions.
DATE OF ISSUE
The Date of Issue of this Rider is the same as the Date of Issue of the Policy
unless a later Date of Issue is shown for the Rider in the Policy Schedule. The
effective date of this Rider is its Date of Issue.
NOT CONTESTABLE AFTER TWO YEARS
This Rider will not be contestable after it has been in force during the life of
the Insured, and without the occurrence of total disability of the Insured, for
two years from its Date of Issue.
CONTRACT
A copy of the application for this Rider is attached to and made a part of the
Rider. This Rider is made a part of the Policy to which it is attached if the
Rider is listed in the Policy Schedule.
TERMINATION
This Rider will terminate upon the earliest of:
* Termination of the Policy;
* Death of the Insured;
* Receipt of the Company at its Home Office of written election
signed by the Owner of the Policy to terminate the Rider; and
* Addition of a Benefit for Disability of Covered Insured Rider to the
Policy.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
[Signature] [Signature]
President Secretary
NEV-71 (continued)
<PAGE> 20
NEV-91
- --------------------------------------------------------------------------------
Rider: Aviation Limitation
The Policy to which this Rider is attached is issued by the Company subject to
the provisions of this Rider.
AVIATION LIMITATION
If the death of the Insured is an Aviation Death, as defined below, the Death
Benefit of the Policy will not be paid; and the amount of any insurance benefit
provided by other riders upon the death of the Insured will not be paid. The
policy proceeds will be limited to the Aviation Death Benefit.
AVIATION DEATH
The death of the Insured will be an "Aviation Death" if death results from, or
is contributed to by, flight in or descent from or with any kind of aircraft or
spacecraft. However, it will not be an "Aviation Death" if the Insured was only
a passenger, with no duties in connection with the flight or descent, and the
flight or descent was not for a training or experimental purpose.
AVIATION DEATH BENEFIT
If the death of the Insured is an Aviation Death, the policy proceeds payable at
the death of the Insured will be limited to the following amounts as of the date
of death:
* The reserve for the Policy; plus
* The reserve for any other riders which provide an insurance benefit upon
the death of the Insured; less
* Any Policy Loan Balance.
Insured:
If the death of the Insured is within five years after the Date of Issue of the
Policy, the Aviation Death Benefit will be not less than the following amounts
as of the date of death:
* The total premiums paid for the Policy; plus
* The total of any unscheduled payments made for the Policy; and less
* The total amount of partial surrenders and partial withdrawals; and less
* Any Policy Loan Balance. In no event will the Aviation Death Benefit be
greater than the policy proceeds which would be payable in the absence of
this Aviation Limitation Rider.
CONTRACT
This Rider is made part of the Policy to which it is attached if the Rider is
listed in the Policy Schedule. (See Section 1 of the Policy.) This Rider has no
cash value.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
[Signature] [Signature]
President Secretary
NEV-91
<PAGE> 21
NEV-92
- --------------------------------------------------------------------------------
Rider: Military and Naval Aviation Limitation
The Policy to which this Rider is attached is issued by the Company subject to
the provisions of this Rider.
AVIATION LIMITATION
If the death of the Insured is an Aviation Death, as defined below, the Death
Benefit of the Policy will not be paid; and the amount of any insurance benefit
provided by other riders upon the death of the Insured will not be paid. The
policy proceeds will be limited to the Aviation Death Benefit.
AVIATION DEATH
The death of the Insured will be an "Aviation Death" if death results from, or
is contributed to by, flight in or descent from or with any kind of military or
naval aircraft or spacecraft. However, it will not be an "Aviation Death" if the
Insured was only a passenger, with no duties in connection with the flight or
descent, and the flight or descent was not for a training or experimental
purpose.
AVIATION DEATH BENEFIT
If the death of the Insured is an Aviation Death, the policy proceeds payable at
the death of the Insured will be limited to the following amounts as of the date
of death:
* The reserve for the Policy; plus
* The reserve for any other riders which provide an insurance benefit upon
the death of the Insured; less
* Any Policy Loan Balance.
Insured:
If the death of the Insured is within five years after the Date of Issue of the
Policy, the Aviation Death Benefit will be not less than the following amounts
as of the date of death:
* The total premiums paid for the Policy; plus
* The total of any unscheduled payments made for the Policy; and less
* The total amount of partial surrenders and partial withdrawals; and less
* Any Policy Loan Balance.
In no event will the Aviation Death Benefit be greater than the policy proceeds
which would be payable in the absence of this Aviation Limitation Rider.
CONTRACT
This Rider is made a part of the Policy to which it is attached if the Rider is
listed in the Policy Schedule. (See Section 1 of the Policy.) This Rider has no
cash value.
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
[Signature] [Signature]
President Secretary
NEV-92
<PAGE> 22
NEV-93-1
- --------------------------------------------------------------------------------
Rider: Exclusion from Benefits
Any rider which provides a benefit upon total disability of __________________,
that is attached to Policy Number ___________________ is issued subject to
the terms of this Rider (NEV-93-1).
EXCLUSION FROM BENEFITS
Any rider which provides a benefit upon total disability excludes certain risks.
By means of this Rider (NEV-93-1), the Company also excludes the risk and will
not provide benefits if total disability results from:
CONTRACT
This Rider (NEV-93-1) is issued with and made a part of any rider which provides
a benefit upon total disability. None of the provisions of any rider which
provides a benefit upon total disability are changed except as provided in this
Rider.
ACCEPTANCE
The Owner accepts any rider attached to the Policy which provides a benefit upon
total disability with full knowledge and understanding of the effect of this
Rider (NEV-93-1).
Date Owner
- -------------------------------------- ---------------------------------
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
[Signature] [Signature]
President Secretary
NEV-93-1
<PAGE> 23
NEV-94-1
- --------------------------------------------------------------------------------
Rider: Exclusion from Benefits
Any rider which provides a benefit upon total disability of ___________________,
that is attached to Policy Number ________________ is reinstated subject to the
terms of this Rider (NEV-94-1).
EXCLUSION FROM BENEFITS
Any rider which provides a benefit upon total disability excludes certain risks.
By means of this Rider (NEV-94-1), the Company also excludes the risk and will
not provide benefits if total disability results from:
CONTRACT
This Rider (NEV-94-1) is issued with and made a part of any rider which provides
a benefit upon total disability. None of the provisions of any rider which
provides a benefit upon total disability are changed except as provided in this
Rider.
ACCEPTANCE
The Owner accepts any rider attached to the Policy which provides a benefit upon
total disability with full knowledge and understanding of the effect of this
Rider (NEV-94-1).
Date Owner
- ---------------------------------- -------------------------------------
NEW ENGLAND LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
[Signature] [Signature]
President Secretary
NEV-94-1
<PAGE> 1
Exhibit 3(i)
March 3, 2000
New England Variable Life Separate Account
New England Life Insurance Company
501 Boylston Street
Boston, MA 02117
Gentlemen:
In my capacity as General Counsel of New England Life Insurance Company (the
"Company"), I have provided legal advice concerning the preparation of a
registration statement on Form S-6, filed by New England Variable Life Separate
Account (the "Account") and the Company with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to individual Variable
Survivorship Life Insurance Policies (the "Registration Statement").
It is my professional opinion that:
1. The Account is a separate investment account of the Company
that was duly created under applicable law and is validly
existing pursuant to the laws of the Commonwealth of
Massachusetts.
2. The Variable Survivorship Life Insurance Policies, when issued
in accordance with the prospectus contained in the
Registration Statement and in compliance with applicable local
law, are and will be legal and binding obligations of the
Company in accordance with their terms; and
3. Assets attributable to reserves and other contract liabilities
and held in the Account will not be chargeable with
liabilities arising out of any other business the Company may
conduct.
In forming this opinion, I have made such examination of law and examined such
records and other documents as in my judgment are necessary and appropriate.
I hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the prospectus contained in the Registration Statement.
Very truly yours,
H. James Wilson
General Counsel
<PAGE> 1
Exhibit 3(ii)
March 3, 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 Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 (File No. 333-89409) 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 and female joint insureds, both aged 55 in the underwriting
classes illustrated than to prospective purchasers of Policies for
joint insureds of other sexes or ages. Insureds in other underwriting
classes may have higher cost of insurance charges and premiums.
2. The information contained in the description of historical investment
experience in Appendix B, based on the assumptions stated in the
Appendix, is consistent with 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 annual
premium under a Policy with a base face amount below $1 million and a
Target Premium of $2,000.
I hereby consent to the filing of this opinion as an Exhibit to this
Pre-Effective Amendment to the Registration Statement and to the use of my name
under the heading "Experts" in the Prospectus.
Sincerely,
Rodney J. Chandler, F.S.A., M.A.A.A.
Second Vice President and Actuary
2
<PAGE> 1
Exhibit 6
[SUTHERLAND ASBILL & BRENNAN LLP]
1275 Pennsylvania Avenue NW
Washington, DC 20004-2415
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We consent to the reference to our firm under the heading "Legal Matters" in the
prospectus included in Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6 for certain variable survivorship life insurance policies
issued through New England Variable Life Separate Account of New England Life
Insurance Company (File No. 333-89409) 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.
March 2, 2000
<PAGE> 1
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-89409 of New England Variable Life Separate Account (the
"Separate Account") of New England Life Insurance Company (the "Company") of our
reports dated February 4, 2000 appearing in the Prospectus, which is part of
such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche LLP
Boston, Massachusetts
March 6, 2000
