NEW ENGLAND ZENITH FUND, 497, 1996-07-10

NEW ENGLAND ZENITH FUND
497, 1996-07-10

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<PAGE>

NEW ENGLAND ZENITH FUND
501 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02116
(617) 267-6600
PROSPECTUS--MAY 1, 1996

New England Zenith Fund (the "Fund") offers fourteen investment portfolios,
thirteen of which are contained herein: the Loomis Sayles Small Cap Series,
the Draycott International Equity Series, the Alger Equity Growth Series, the
Loomis Sayles Avanti Growth Series, the Venture Value Series, the Westpeak
Value Growth Series, the Westpeak Stock Index Series, the Loomis Sayles
Balanced Series, the Back Bay Advisors Managed Series, the Salomon Brothers
Strategic Bond Opportunities Series, the Back Bay Advisors Bond Income Series,
the Salomon Brothers U.S. Government Series and the Back Bay Advisors Money
Market Series (each a "Series") with the following investment objectives:

LOOMIS SAYLES SMALL CAP SERIES--long-term capital growth from investments in
common stocks or their equivalent.

DRAYCOTT INTERNATIONAL EQUITY SERIES--total return from long-term growth of
capital and dividend income, primarily through investment in international
equity securities.

ALGER EQUITY GROWTH SERIES--long-term capital appreciation.

LOOMIS SAYLES AVANTI GROWTH SERIES--long-term growth of capital.

VENTURE VALUE SERIES--growth of capital.

WESTPEAK VALUE GROWTH SERIES--long-term total return through investment in
equity securities.

WESTPEAK STOCK INDEX SERIES--investment results that correspond to the
composite price and yield performance of United States publicly traded common
stocks.

LOOMIS SAYLES BALANCED SERIES--reasonable long-term investment return from a
combination of long-term capital appreciation and moderate current income.

BACK BAY ADVISORS MANAGED SERIES--a favorable total return through
investment in a diversified portfolio. The Series' portfolio is expected to
include a mix of (1) common stocks, (2) notes and bonds and (3) money market
instruments.

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES--a high level of total
return consistent with preservation of capital. This Series may invest a
significant portion of its assets in lower rated bonds commonly known as junk
bonds. Investors should assess carefully the risks associated with investment
in this Series. See "Investment Objectives and Policies--Salomon Brothers
Strategic Bond Opportunities Series" and "Investment Risks--Lower Rated Fixed-
Income Securities".

BACK BAY ADVISORS BOND INCOME SERIES--a high level of current income
consistent with protection of capital and moderate investment risk.

SALOMON BROTHERS U.S. GOVERNMENT SERIES--a high level of current income
consistent with preservation of capital and maintenance of liquidity.

BACK BAY ADVISORS MONEY MARKET SERIES--the highest possible level of current
income consistent with preservation of capital. MONEY MARKET FUNDS ARE NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE
THAT THE SERIES WILL MAINTAIN A STABLE NET ASSET VALUE OF $100 PER SHARE.

This Prospectus concisely describes the information that prospective
investors ought to know before investing. Please read this Prospectus
carefully and keep it for future reference.

A Statement of Additional Information (the "Statement") dated May 1, 1996,
is available free of charge by writing to New England Securities Corporation
("New England Securities"), 399 Boylston Street, Boston, Massachusetts 02116.
The Statement, which contains more detailed information about the Fund, has
been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference in this Prospectus.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

B-1
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Highlights....................................................... B-3
The Fund................................................................... B-16
Investment Objectives and Policies......................................... B-16
Investment Risks........................................................... B-23
Performance Information.................................................... B-33
Investment Restrictions.................................................... B-35
Management................................................................. B-39
Sale and Redemption of Shares.............................................. B-46
Net Asset Values and Portfolio Valuation................................... B-46
Dividends and Capital Gain Distributions................................... B-47
Taxes...................................................................... B-47
Organization and Capitalization of the Fund................................ B-47
Transfer Agent............................................................. B-48
Voting Rights.............................................................. B-48
Appendix A................................................................. B-49
</TABLE>

B-2
<PAGE>

FINANCIAL HIGHLIGHTS

These tables have been examined by Coopers & Lybrand LLP, the Fund's
independent accountants, whose reports thereon for periods after 1990
accompany the financial statements in the Statement of Additional Information.
The tables should be read in conjunction with the financial statements and
notes thereto. For further performance information about the Fund, please
refer to the Fund's annual report, which is available free of charge.

LOOMIS SAYLES SMALL CAP SERIES

<TABLE>
<CAPTION>
MAY 1(A) YEAR
TO ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period..... $100.00 $ 96.61
------- -------
Income From Investment Operations
Net Investment Income.................... 0.14 0.85
Net Gains or Losses on Investments (both
realized and unrealized)................ (3.38) 26.93
------- -------
Total From Investment Operations..... (3.24) 27.78
------- -------
Less Distributions
Distributions From Net Investment Income. (0.15) (0.78)
Distributions From Net Realized Capital
Gains................................... 0.00 (4.81)
------- -------
Total Distributions.................. (0.15) (5.59)
------- -------
Net Asset Value, End of the Period....... $ 96.61 $118.80
======= =======
Total Return (%)......................... (3.2)(b) 28.9
Ratio of Operating Expenses to Average
Net Assets (%) (d)...................... 1.00 (c) 1.00
Ratio of Net Investment Income to Average
Net Assets (%).......................... 0.32 (c) 1.26
Portfolio Turnover Rate (%) (a).......... 80 (c) 98
Net Assets, End of Period (000).......... $ 3,105 $27,741
The Ratio of Expenses to Average Net As-
sets without giving effect to the volun-
tary expense limitation described in
Footnote (d) would have been (%)........ 2.31 (c)(d) 1.91 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the period presented, the Series' adviser voluntarily agreed to
reduce its fees and, if necessary, to assume expenses of the Series in
order to limit the Series' expenses to an annual rate of 1.00% of the
Series' average daily net assets.

B-3
<PAGE>

DRAYCOTT INTERNATIONAL EQUITY SERIES

<TABLE>
<CAPTION>
OCTOBER 31(A) YEAR
TO ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period...... $10.00 $ 10.23
------ -------
Income From Investment Operations
Net Investment Income..................... 0.03 .09
Net Gains or Losses on Investments (both
realized and unrealized)................. 0.23 0.53
------ -------
Total From Investment Operations...... 0.26 0.62
------ -------
Less Distributions
Distributions From Net Investment Income.. (0.02) (0.09)
Distributions in Excess of Net Investment
Income................................... 0.00 (0.03)
Distributions From Paid-In Capital........ (0.01) 0.00
------ -------
Total Distributions................... (0.03) (0.12)
------ -------
Net Asset Value, End of the Period........ $10.23 $ 10.73
====== =======
Total Return (%).......................... 2.6 (b) 6.0
Ratio of Operating Expenses to Average Net
Assets (%) (d)........................... 1.30 (c) 1.30
Ratio of Net Investment Income to Average
Net Assets (%)........................... 2.56 (c) 1.29
Portfolio Turnover Rate (%)............... 4 (c) 89
Net Assets, End of Period (000)........... $2,989 $16,268
The Ratio of Expenses to Average Net As-
sets without giving effect to the volun-
tary expense limitation described in
Footnote (d) would have been (%)......... 5.38 (c)(d) 3.12 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) Commencing November 1, 1994, TNE Advisers has agreed to pay operating
expenses of the Series in excess of an annual expense limit of 1.30% of
average assets subject to the obligation of the Series to repay TNE
Advisers such expenses in future years, if any, when the Series' expenses
fall below this stated expense limit; such deferred expenses may be
charged to the Series in a subsequent year to the extent that the charge
does not cause the total expenses in such subsequent year to exceed the
1.30% expense limit; provided, however, that the Series is not obligated
to repay any expense paid by TNE Advisers more than two years after the
end of the fiscal year in which such expense was incurred.

B-4
<PAGE>

ALGER EQUITY GROWTH SERIES

<TABLE>
<CAPTION>
OCTOBER 31(A) YEAR
TO ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period...... $10.00 $ 9.56
------ -------
Income From Investment Operations
Net Investment Income..................... 0.02 0.01
Net Gains or Losses on Investments (both
realized and unrealized)................. (0.44) 4.65
------ -------
Total From Investment Operations...... (0.42) 4.66
------ -------
Less Distributions
Distributions From Net Investment Income.. (0.02) (0.01)
Distributions from Net Realized Capital
Gains.................................... 0.00 (0.41)
------ -------
Total Distributions................... (0.02) (0.42)
------ -------
Net Asset Value, End of the Period........ $ 9.56 $ 13.80
====== =======
Total Return (%).......................... (4.2)(b) 48.7
Ratio of Operating Expenses to Average Net
Assets (%) (d)........................... 0.85 (c) 0.85
Ratio of Net Investment Income to Average
Net Assets (%)........................... 1.07 (c) 0.14
Portfolio Turnover Rate (%) (a)........... 32 (c) 107
Net Assets, End of Period (000)........... $1,917 $46,386
The Ratio of Expenses to Average Net As-
sets without giving effect to the volun-
tary expense limitation described in
Footnote (d) would have been (%)......... 2.74 (c)(d) 2.45 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) Commencing November 1, 1994, TNE Advisers has agreed to pay operating
expenses of the Series in excess of an annual expense limit of 0.85% of
average assets subject to the obligation of the Series to repay TNE
Advisers such expenses in future years, if any, when the Series' expenses
fall below this stated expense limit; such deferred expenses may be
charged to the Series in a subsequent year to the extent that the charge
does not cause the total expenses in such subsequent year to exceed the
0.85% expense limit; provided, however, that the Series is not obligated
to repay any expense paid by TNE Advisers more than two years after the
end of the fiscal year in which such expense was incurred. Beginning
January 1, 1996 the annual expense limit was increased to 0.90% of average
net assets.

B-5
<PAGE>

LOOMIS SAYLES AVANTI GROWTH SERIES

<TABLE>
<CAPTION>
APRIL 30(a) YEAR ENDED DECEMBER 31,
TO ---------------------------
DECEMBER 31, 1993 1994 1995
----------------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning
of the Period.............. $100.00 $ 113.67 $ 112.77
------- ----------- -----------
Income From Investment Oper-
ations
Net Investment Income....... 0.18 0.59 0.42
Net Gains or Losses on In-
vestments (both realized
and unrealized)............ 14.56 (0.89) 33.80
------- ----------- -----------
Total From Investment
Operations............. 14.74 (0.30) 34.22
------- ----------- -----------
Less Distributions
Distributions From Net In-
vestment Income............ (0.18) (0.60) (0.40)
Distributions From Net Real-
ized Capital Gains......... (0.67) 0.00 (4.15)
Distributions From Paid-In
Capital.................... (0.22) 0.00 0.00
------- ----------- -----------
Total Distributions..... (1.07) (0.60) (4.55)
------- ----------- -----------
Net Asset Value, End of the
Period..................... $113.67 $ 112.77 $ 142.44
======= =========== ===========
Total Return (%)............ 14.7 (b) (0.3) 30.4
Ratio of Operating Expenses
to Average Net Assets (%)
(d)........................ 0.85 (c) 0.84 0.85
Ratio of Net Investment In-
come to Average Net Assets
(%)........................ 0.46 (c) 0.67 0.37
Portfolio Turnover Rate (%). 21 (c) 67 58
Net Assets, End of Period
(000)...................... $11,972 $ 25,622 $ 48,832
The Ratio of Expenses to Av-
erage Net Assets without
giving effect to the volun-
tary expense limitation de-
scribed in Footnote (d)
would have been (%)........ 0.89 (c)(d) 0.84 (d) 1.06 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the periods presented, the Series' adviser voluntarily agreed to
reduce its fees and, if necessary, to assume expenses of the Series in
order to limit the Series' expenses to an annual rate of 0.85% of the
Series' average daily net assets.

B-6
<PAGE>

VENTURE VALUE SERIES

<TABLE>
<CAPTION>
OCTOBER 31(a) YEAR
TO ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period...... $10.00 $ 9.62
------ -------
Income From Investment Operations
Net Investment Income..................... 0.03 0.10
Net Gains or Losses on Investments (both
realized and unrealized)................. (0.38) 3.68
------ -------
Total From Investment Operations...... (0.35) 3.78
------ -------
Less Distributions
Distributions From Net Investment Income.. (0.03) (0.10)
Distributions From Net Realized Capital
Gains.................................... 0.00 (0.20)
------ -------
Total Distributions................... (0.03) (0.30)
------ -------
Net Asset Value, End of the Period........ $ 9.62 $ 13.10
====== =======
Total Return (%).......................... (3.5)(b) 39.3
Ratio of Operating Expenses to Average Net
Assets (%) (d)........................... 0.90 (c) 0.90
Ratio of Net Investment Income to Average
Net Assets (%)........................... 2.54 (c) 1.39
Portfolio Turnover Rate (%) (a)........... 1 (c) 20
Net Assets, End of Period (000)........... $3,371 $35,045
The Ratio of Expenses to Average Net As-
sets without giving effect to the volun-
tary expense limitation described In
Footnote (d) would have been (%)......... 3.97 (c)(d) 1.51 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) Commencing November 1, 1994, TNE Advisers has agreed to pay operating
expenses of the Series in excess of an annual expense limit of 0.90% of
average assets subject to the obligation of the Series to repay TNE
Advisers such expenses in future years, if any, when the Series' expenses
fall below this stated expense limit; such deferred expenses may be
charged to the Series in a subsequent year to the extent that the charge
does not cause the total expenses in such subsequent year to exceed the
0.90% expense limit; provided, however, that the Series is not obligated
to repay any expense paid by TNE Advisers more than two years after the
end of the fiscal year in which such expense was incurred.

B-7
<PAGE>

WESTPEAK VALUE GROWTH SERIES

<TABLE>
<CAPTION>
APRIL 30(a) YEAR ENDED DECEMBER 31,
TO ---------------------------
DECEMBER 31, 1993 1994 1995
----------------- ----------- -----------
<S> <C> <C> <C>
Net Asset Value, Beginning
of the Period.............. $100.00 $ 112.32 $ 109.03
------- ----------- -----------
Income From Investment Oper-
ations
Net Investment Income....... 0.92 1.90 1.77
Net Gains or Losses on In-
vestments (both realized
and unrealized)............ 13.33 (3.25) 37.91
------- ----------- -----------
Total From Investment
Operations............. 14.25 (1.35) 39.68
------- ----------- -----------
Less Distributions
Distributions From Net In-
vestment Income............ (0.92) (1.92) (1.71)
Distributions From Net Real-
ized Capital Gains......... (1.00) 0.00 (5.69)
Distributions In Excess of
Net Realized Capital Gains. (0.01) 0.00 0.00
Distributions From Paid In
Capital.................... 0.00 (0.02) 0.00
------- ----------- -----------
Total Distributions..... (1.93) (1.94) (7.40)
------- ----------- -----------
Net Asset Value, End of the
Period..................... $112.32 $ 109.03 $ 141.31
======= =========== ===========
Total Return (%)............ 14.2 (b) (1.2) 36.5
Ratio of Operating Expenses
to Average Net Assets (%)
(d)........................ 0.85 (c) 0.85 0.85
Ratio of Net Investment In-
come to Average Net Assets
(%)........................ 2.16 (c) 2.30 1.63
Portfolio Turnover Rate (%). 49 (c) 133 92
Net Assets, End of Period
(000)...................... $ 9,082 $ 22,934 $ 48,129
The Ratio of Expenses to Av-
erage Net Assets without
giving effect to the volun-
tary expense limitation de-
scribed in Footnote (d)
would have been (%)........ 0.94 (c)(d) 0.86 (d) 1.06 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

B-8
<PAGE>

WESTPEAK STOCK INDEX SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
MAR. 30(A)
TO
DEC. 31, 1987 1988 1989 1990 1991 1992 1993* 1994 1995
------------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Year.. $100.00 $ 84.74 $ 94.36 $117.36 $108.49 $137.39 $ 72.00 $ 76.48 $ 75.35
------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income... 2.44 3.48 3.55 3.76 3.56 8.35 1.54 1.80 1.88
Net Gains or Losses on
Investments (both real-
ized and unrealized)... (15.06) 10.39 24.83 (8.64) 29.29 2.02 5.18 (0.92) 25.89
------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment
Operations............. (12.62) 13.87 28.38 (4.88) 32.85 10.37 6.72 0.88 27.77
------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions
Distributions From Net
Investment Income...... (2.23) (3.44) (3.74) (3.82) (3.56) (8.35) (1.36) (1.82) (1.85)
Distributions in Excess
of Net Investment
Income................. 0.00 0.00 0.00 0.00 0.00 0.00 (0.18) 0.00 0.00
Distributions From Net
Realized Capital Gains. (0.41) (0.81) (1.64) 0.00 (0.39) (67.41) (0.55) (0.16) (1.18)
Distributions in Excess
of Net Realized Capital
Gains.................. 0.00 0.00 0.00 0.00 0.00 0.00 (0.15) 0.00 0.00
Distributions From Paid-
in Capital............. 0.00 0.00 0.00 (0.17) 0.00 0.00 0.00 (0.03) 0.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions. (2.64) (4.25) (5.38) (3.99) (3.95) (75.76) (2.24) (2.01) (3.03)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 84.74 $ 94.36 $117.36 $108.49 $137.39 $ 72.00 $ 76.48 $ 75.35 $100.09
======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return (%)........ (12.2) 16.3 30.2 (4.1) 30.4 7.3 9.7 1.1 36.9
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.31 0.36 0.34 0.36 0.36 0.35 0.34 0.33 0.40
Ratio of Net Investment
Income to Average Net
Assets (%)............. 3.36 3.92 3.31 3.36 2.86 2.63 2.52 2.59 2.20
Portfolio Turnover Rate
(%).................... 31 4 52 1 2 17 12 2 5
Net Assets, End of
Period (000)........... $ 9,002 $11,073 $15,501 $15,122 $20,496 $10,172 $28,817 $37,164 $58,671
The ratio of expenses
without giving effect
to the voluntary
expense limitations
described in Footnote
(a) would have been.... -- -- -- -- -- -- -- -- 0.54(a)
</TABLE>
- --------
* Westpeak Investment Advisors assumed responsibility for managing the Series'
portfolio on August 1, 1993.

(a) Commencing November 1, 1994, TNE Advisers has agreed to pay operating
expenses in future years, if any, when the Series' expenses fall below this
stated expense limit; such deferred expenses may be charged to the Series
in a subsequent year to the extent that the charge does not cause the total
expenses in such subsequent year to exceed the 0.40% expense limit;
provided, however, that the Series is not obligated to repay any expense
paid by TNE Advisers more than two years after the end of the fiscal year
in which such expense was incurred.

B-9
<PAGE>

LOOMIS SAYLES BALANCED SERIES

<TABLE>
<CAPTION>
OCTOBER 31(A) YEAR
TO ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period..... $ 10.00 $ 9.94
------- -------
Income From Investment Operations
Net Investment Income.................... 0.05 0.26
Net Gains or Losses on Investments (both
realized and unrealized)................ (0.06) 2.20
------- -------
Total From Investment Operations..... (0.01) 2.46
Less Distributions
Distributions From Net Investment Income. (0.05) (0.26)
Distributions in Excess of Net Realized
Capital Gains........................... 0.00 (0.19)
------- -------
Total Distributions.................. (0.05) (0.45)
------- -------
Net Asset Value, End of the Period....... $ 9.94 $ 11.95
======= =======
Total Return (%)......................... (0.1)(b) 24.8
Ratio of Operating Expenses to Average
Net Assets (%) (d)...................... 0.85 (c) 0.85
Ratio of Net Investment Income to Average
Net Assets (%).......................... 4.16 (c) 4.03
Portfolio Turnover Rate (%) (a).......... 0 (c) 72
Net Assets, End of Period (000).......... $ 2,722 $18,823
The Ratio of Expenses to Average Net As-
sets without giving effect to the volun-
tary expense limitation described in
Footnote (d) would have been (%)........ 3.73 (c)(d) 1.85 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

B-10
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
MAY 1(A)
TO
DEC. 31,
1987 1988 1989 1990 1991 1992 1993* 1994 1995
-------- ------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Year.. $100.00 $ 96.62 $100.17 $114.65 $112.79 $127.87 $ 130.26 $ 137.18 $ 130.30
------- ------- ------- ------- ------- ------- -------- -------- --------
Income From Investment
Operations
Net Investment Income... 2.80 5.13 4.31 5.47 6.41 5.145 4.35 5.42 6.34
Net Gains or Losses on
Investments (both real-
ized and unrealized)... (3.45) 4.04 14.77 (1.81) 16.23 3.45 9.58 (6.92) 34.33
------- ------- ------- ------- ------- ------- -------- -------- --------
Total From Investment
Operations............. (0.65) 9.17 19.08 3.66 22.64 8.59 13.93 (1.50) 40.67
------- ------- ------- ------- ------- ------- -------- -------- --------
Less distributions
Distributions From Net
Investment Income...... (2.73) (5.24) (4.22) (5.38) (6.41) (5.13) (4.36) (5.38) (6.34)
Distributions in Excess
of Net Investment
Income................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.23)
Distributions From Net
Realized Capital Gains. 0.00 (0.38) (0.38) 0.00 (1.15) (1.07) (2.65) 0.00 (0.88)
Distributions From Paid-
in Capital............. 0.00 0.00 0.00 (0.14) 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- -------- -------- --------
Total Distributions. (2.73) (5.62) (4.60) (5.52) (7.56) (6.20) (7.01) (5.38) (7.45)
------- ------- ------- ------- ------- ------- -------- -------- --------
Net Asset Value, End of
the Year............... $ 96.62 $100.17 $114.65 $112.79 $127.87 $130.26 $ 137.18 $ 130.30 $ 163.52
======= ======= ======= ======= ======= ======= ======== ======== ========
Total Return (%)........ (0.7) 9.5 19.1 3.2 20.2 6.7 10.7 (1.1) 31.3
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.66 0.64 0.57 0.57 0.55 0.54 0.53 0.54 0.64
Ratio of Net Investment
Income to Average Net
Assets (%)............. 4.96 5.88 5.29 5.58 5.45 5.32 3.65 3.98 4.06
Portfolio Turnover Rate
(%).................... 1 1 1 1 36 36 22 76 51
Net Assets, End of
Period (000)........... $ 7,694 $10,806 $23,622 $36,563 $49,995 $77,575 $121,339 $121,877 $147,536
</TABLE>
- --------
(a) Commencement of operations

B-11
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

<TABLE>
<CAPTION>
OCTOBER 31(A) YEAR
TO ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.... $10.00 $ 9.74
------ ------
Income From Investment Operations
Net Investment Income................... 0.12 0.58
Net Gains or Losses on Investments (both
realized and unrealized)............... (0.26) 1.30
------ ------
Total From Investment Operations.... (0.14) 1.88
------ ------
Less Distributions
Distributions From Net Investment
Income................................. (0.12) (0.55)
Distributions From Net Realized Capital
Gains.................................. 0.00 (0.22)
------ ------
Total Distributions................. (0.12) (0.77)
------ ------
Net Asset Value, End of the Period...... $ 9.74 $10.85
====== ======
Total Return (%)........................ (1.4)(b) 19.4
Ratio of Operating Expenses to Average
Net Assets (%) (d)..................... 0.85 (c) 0.85
Ratio of Net Investment Income to
Average Net Assets (%)................. 7.05 (c) 8.39
Portfolio Turnover Rate (%) (a)......... 403 (c) 202
Net Assets, End of Period (000)......... $3,450 $9,484
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation described
in Footnote (d) would have been (%).... 2.01 (c)(d) 2.44 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

B-12
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of the Year....... $119.34 $123.45 $ 95.47 $ 92.75 $ 97.23 $ 97.61 $103.44 $ 103.47 $ 106.14 $ 95.53
------- ------- ------- ------- ------- ------- ------- -------- -------- --------
Income From Investment
Operations
Net Investment Income... 10.2 8.97 8.52 8.58 8.49 8.53 7.96 5.70 7.05 7.34
Net Gains or Losses on
Investments (both
realized and
unrealized)............ 6.66 (7.14) (0.54) 2.81 (0.65) 8.90 0.51 7.38 (10.61) 12.85
------- ------- ------- ------- ------- ------- ------- -------- -------- --------
Total From Investment
Operations............. 16.87 1.83 7.98 11.39 7.84 17.43 8.47 13.08 (3.56) 20.19
------- ------- ------- ------- ------- ------- ------- -------- -------- --------
Less distributions
Distributions From Net
Investment Income...... (11.09) (18.71) (10.70) (6.91) (7.46) (9.47) (6.87) (6.20) (7.05) (7.05)
Distributions in Excess
of Net Investment
Income................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.05) 0.00 0.00
Distributions From Net
Realized Capital Gains. (1.67) (11.10) 0.00 0.00 0.00 (2.13) (1.57) (4.16) 0.00 0.00
------- ------- ------- ------- ------- ------- ------- -------- -------- --------
Total Distributions.. (12.76) (29.81) (10.70) (6.91) (7.46) (11.60) (8.44) (10.41) (7.05) (7.05)
------- ------- ------- ------- ------- ------- ------- -------- -------- --------
Net Asset Value, End of
the Year............... $123.45 $ 95.47 $ 92.75 $ 97.23 $ 97.61 $103.44 $103.47 $ 106.14 $ 95.53 $ 108.67
======= ======= ======= ======= ======= ======= ======= ======== ======== ========
Total Return (%)........ 15.8 1.4 8.4 12.3 8.1 18.0 8.2 12.6 (3.4) 21.2
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.50 0.45 0.47 0.45 0.46 0.45 0.44 0.43 0.44 0.55
Ratio of Net Investment
Income to Average Net
Assets (%)............. 8.86 8.65 8.50 8.62 8.57 8.27 7.70 6.47 6.75 7.22
Portfolio Turnover Rate
(%).................... 303 331 104 69 106 193 71 177 82 73
Net Assets, End of
Period (000)........... $16,379 $17,449 $15,750 $26,156 $40,631 $49,369 $83,057 $131,242 $126,234 $162,712
</TABLE>

As of January 1, 1993, the Bond Income Series discontinued the use of
equalization accounting.

B-13
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES
<TABLE>
<CAPTION>
OCTOBER 31(A) YEAR
TO ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period...... $10.00 $ 9.96
------ ------
Income From Investment Operations
Net Investment Income..................... 0.10 0.33
Net Gains or Losses on Investments (both
realized and unrealized)................. (0.04) 1.16
------ ------
Total From Investment Operations...... 0.06 1.49
------ ------
Less Distributions
Distributions From Net Investment Income.. (0.10) (0.33)
Distributions From Net Realized Capital
Gains.................................... 0.00 (0.08)
------ ------
Total Distributions................... (0.10) (0.41)
------ ------
Net Asset Value, End of the Period........ $ 9.96 $11.04
====== ======
Total Return (%).......................... 0.6 (b) 15.0
Ratio of Operating Expenses to Average Net
Assets (%) (d)........................... 0.70 (c) 0.70
Ratio of Net Investment Income to Average
Net Assets (%)........................... 5.70 (c) 5.62
Portfolio Turnover Rate (%)............... 1,409 (c) 415
Net Assets, End of Period (000)........... $2,012 $7,542
The Ratio of Expenses to Average Net
Assets without giving effect to the
voluntary expense limitation described in
Footnote (d) would have been (%)......... 2.54 (c)(d) 2.90 (d)
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) Commencing November 1, 1994, TNE Advisers has agreed to pay operating
expenses of the Series in excess of an annual expense limit of 0.70% of
average assets subject to the obligation of the Series to repay TNE
Advisers such expenses in future years, if any, when the Series' expenses
fall below this stated expense limit; such deferred expenses may be
charged to the Series in a subsequent year to the extent that the charge
does not cause the total expenses in such subsequent year to exceed the
0.70% expense limit; provided, however, that the Series is not obligated
to repay any expense paid by TNE Advisers more than two years after the
end of the fiscal year in which such expense was incurred.

B-14
<PAGE>

BACK BAY ADVISORS MONEY MARKET SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of the Year....... $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income... 6.58 6.33 7.25 8.85 7.88 6.03 3.73 2.93 3.89 5.50
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment
Operations............. 6.58 6.32 7.25 8.85 7.88 6.03 3.73 2.93 3.89 5.50
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less Distributions
Distributions From Net
Investment Income...... (6.58) (6.32) (7.25) (8.85) (7.88) (6.03) (3.73) (2.93) (3.89) (5.50)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions. (6.58) (6.32) (7.25) (8.85) (7.88) (6.03) (3.73) (2.93) (3.89) (5.50)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
the Year............... $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return (%)........ 6.8 6.6 7.4 9.2 8.2 6.2 3.8 3.0 4.0 5.6
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.39 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.40 0.50
Ratio of Net Investment
Income to Average Net
Assets (%)............. 6.61 6.37 7.26 8.85 7.87 6.01 3.71 2.93 3.89 5.50
Net Assets, End of Pe-
riod (000)............. $26,794 $33,047 $38,929 $42,678 $60,071 $58,614 $61,607 $59,044 $73,960 $90,148
The Ratio of Expenses to
Average Net Assets
without giving effect
to the voluntary
expense limitations
described in Footnote
(a) would have been.... -- -- -- -- -- -- -- -- -- 0.51(a)
</TABLE>
- --------
(a) Commencing November 1, 1994, TNE Advisers has agreed to pay operating
expenses of the Series in excess of an annual expense limit of 0.50% of
average assets subject to the obligation of the Series to repay TNE
Advisers such expenses in future years, if any, when the Series' expenses
fall below this stated expense limit; such deferred expenses may be
charged to the Series in a subsequent year to the extent that the charge
does not cause the total expenses in such subsequent year to exceed the
0.50% expense limit; provided, however, that the Series is not obligated
to repay any expense paid by TNE Advisers more than two years after the
end of the fiscal year in which such expense was incurred.

B-15
<PAGE>

THE FUND

The Fund is a diversified, open-end management investment company organized
in 1987 as a Massachusetts business trust under the laws of Massachusetts. The
Fund is a series type company with fourteen investment portfolios, thirteen of
which are contained herein, the Loomis Sayles Small Cap Series, the Draycott
International Equity Series, the Alger Equity Growth Series, the Loomis Sayles
Avanti Growth Series, the Venture Value Series, the Westpeak Value Growth
Series, the Westpeak Stock Index Series, the Loomis Sayles Balanced Series,
the Back Bay Advisors Managed Series, the Salomon Brothers Strategic Bond
Opportunities Series, the Back Bay Advisors Bond Income Series, the Salomon
Brothers U.S. Government Series and the Back Bay Advisors Money Market Series.

Shares in the Fund are not offered directly to the general public and,
currently, are available only to separate accounts established by New England
Variable Life Insurance Company ("NEVLICO"), New England Mutual Life Insurance
Company ("The New England") or subsidiaries of The New England as an
investment vehicle for variable life insurance or variable annuity products,
although not all Series may be available to all separate accounts. In the
future, however, such shares may be offered to separate accounts of insurance
companies unaffiliated with NEVLICO or The New England.

INVESTMENT OBJECTIVES AND POLICIES

LOOMIS SAYLES SMALL CAP SERIES

The Loomis Sayles Small Cap Series' investment objective is long-term
capital growth from investments in common stocks or their equivalent.

Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the Series' subadviser,
manages the Series by investing primarily in stocks of small cap companies
with good earnings growth potential that Loomis Sayles believes are
undervalued by the market. Typically, such companies range in size from $100
million to $500 million in market capitalization, have better than average
growth rates at below average price/earnings ratios and have strong balance
sheets and cash flow. Loomis Sayles seeks to build a core small cap portfolio
of solid growth company stocks, with a smaller emphasis on special situations
and turnarounds (companies that have experienced significant business problems
but which Loomis Sayles believes have favorable prospects for recovery), as
well as unrecognized stocks.

Under unusual market conditions as determined by Loomis Sayles, all or any
portion of the Series may be invested, for temporary defensive purposes, in
short-term debt instruments or in cash. In addition, under normal conditions,
a portion of the Series' assets may be invested in short-term assets for
liquidity purposes or pending investment in other securities. Short-term
investments may include U.S. Government securities, certificates of deposit,
commercial paper and other obligations of corporate issuers rated in the top
two rating categories by a major rating agency or, if unrated, determined to
be of comparable quality by the subadviser, and repurchase agreements that are
fully collateralized by cash, U.S. Government securities or high-quality money
market instruments.

DRAYCOTT INTERNATIONAL EQUITY SERIES

The Draycott International Equity Series seeks total return from long-term
growth of capital and dividend income, primarily through investment in
international equity securities.

The Series seeks to achieve its objective by investing primarily in common
stocks, although the Series may invest in any type of equity securities.
Normally the Series will invest at least 65% of its total assets in equity
securities of issuers headquartered outside the United States, and
substantially all of its assets (other than cash and short-term investments)
in such equity securities or equity securities of issuers (including closed-
end investment companies) that derive a substantial part of their revenues or
profits from countries outside the United States. Under normal conditions, the
Series' portfolio will contain equity securities of issuers from at least five
countries outside the United States.

The Series' subadviser, Draycott Partners, Ltd. ("Draycott"), will make
investment decisions on behalf of the Series by, first, selecting countries
where it anticipates sustainable growth that will exceed current market
expectations. Within the selected countries, the subadviser will identify
economic sectors that appear to present the most potential for risk-adjusted

B-16
<PAGE>

growth and finally, within the chosen economic sectors, the subadviser will
select securities that are expected to offer the best value.

ALGER EQUITY GROWTH SERIES

The Alger Equity Growth Series' investment objective is to seek long-term
capital appreciation. The Series' assets will be invested primarily in a
diversified, actively managed portfolio of equity securities, primarily of
companies having a total market capitalization of $1 billion or greater. These
companies may still be in the developmental stage, may be older companies that
appear to be entering a new stage of growth progress, or may be companies
providing products or services with a high unit volume growth rate.

The Series' subadviser, Fred Alger Management, Inc. ("Alger Management"),
seeks to achieve its objective by investing in equity securities, such as
common or preferred stocks or securities convertible into or exchangeable for
equity securities, including warrants and rights. Except during temporary
defensive periods, the Series invests at least 85% of its net assets in equity
securities and at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization of $1 billion or greater; the Series may invest up to 35% of
its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization of less than $1 billion. The Series
anticipates that it will invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market.

The Series may invest in bank and thrift obligations, obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities,
foreign bank obligations and obligations of foreign branches of domestic
banks, and variable rate master demand notes.

The Series may also hold up to 15% of its net assets in money market
instruments and repurchase agreements, purchase restricted securities
(including Rule 144A securities) and enter into "short sales against the box."

The Series may lend securities it owns so long as such loans do not exceed
33 1/3% of the Series' total assets.

LOOMIS SAYLES AVANTI GROWTH SERIES

The Loomis Sayles Avanti Growth Series seeks long-term growth of capital.
The Series ordinarily invests substantially all of its assets in equity
securities. Investments are selected based on their growth potential; current
income is not a consideration. The Series normally will invest primarily in
equity securities of companies with medium and large capitalization
(capitalization of $1 billion to $5 billion and over $5 billion,
respectively), but will also invest a portion of its assets in equity
securities of companies with relatively small market capitalization (under $1
billion). The Series may invest a limited portion of its assets in securities
of foreign issuers. See "Investment Risks--Foreign Securities" below.

Loomis Sayles, the Series' subadviser, selects investments based upon
fundamental research and analysis of individual companies and industries. The
subadviser selects investments for the Series based on qualitative and
quantitative criteria including, among others, industry dominance and
competitive position, consistent earnings growth, a history of high
profitability, the subadviser's expectation of continued high profitability
and overall financial strength, although not every investment will have all of
these characteristics.

The Series may invest in convertible securities, including corporate bonds,
notes or preferred stocks that can be converted into common stocks or other
equity securities. See "Investment Risks--Convertible Securities" below.

VENTURE VALUE SERIES

The Series' investment objective is growth of capital. The Series'
subadviser is Davis Selected Advisers, L.P. ("Davis Selected").

The Series will primarily invest in domestic common stocks that Davis
Selected believes have capital growth potential due to factors such as
undervalued assets or earnings potential, product development and demand,
favorable operating ratios, resources for expansion, management abilities,
reasonableness of market price, and favorable overall business prospects. The

B-17
<PAGE>

Series will generally invest predominantly in equity securities of companies
with market capitalizations of at least $250 million. It may also invest in
issues with smaller capitalizations.

The Series may invest in foreign securities, and may hedge currency
fluctuation risks related thereto. The Series may invest in U.S. registered
investment companies that primarily invest in foreign securities, provided
that no such investment may cause more than 10% of the Series' total assets to
be invested in such companies. The Series may invest in restricted securities,
which may include Rule 144A securities.

The Series may write covered call options on its portfolio securities, but
currently intends to invest in such options only to the extent that less than
5% of its net assets would be subject to the options.

The Series may lend securities it owns so long as such loans do not exceed
5% of the Series' net assets.

WESTPEAK VALUE GROWTH SERIES

The Series, for which Westpeak Investment Advisors, L.P. ("Westpeak") acts
as subadviser, seeks long-term total return (capital appreciation and dividend
income) through investment in equity securities. Emphasis will be given to
both undervalued securities ("value" style) and securities of companies with
growth potential ("growth" style). The Series will ordinarily invest
substantially all its assets in equity securities.

The Series may engage in transactions in futures contracts solely for the
purpose of maintaining full exposure of the portfolio to the movements of
broad equity markets at times when the Series holds a cash position pending
investment in stocks or in anticipation of redemptions. See "Futures and Other
Hedging Transactions" under "Investment Risks" below and "Futures" in the
Statement of Additional Information.

WESTPEAK STOCK INDEX SERIES

The Series, for which Westpeak acts as subadviser, seeks to provide
investment results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The Series seeks
to achieve this investment objective by attempting to duplicate the composite
price and yield performance of the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index").

The S&P 500 Index fluctuates with changes in the market value of the stocks
included in the Index. An investment in the Series involves risks similar to
the risks of investing directly in the stocks included in the S&P 500 Index.

The Series seeks to duplicate the composite price and yield performance of
the S&P 500 Index at lower cost without investing in all of the 500 stocks
included in the Index by selecting stocks having a combination of
characteristics similar to the omitted stocks and, in order to minimize
"tracking error," adjusting the proportions of the stocks included in the
Series' portfolio relative to each stock's weighting in the S&P 500 Index.
("Tracking error" is a statistical measure of the difference between the
investment results of the Series, before taking into account the Series'
expenses, and the investment results of the S&P 500 Index.)

Westpeak currently expects that, depending on its size, the Westpeak Stock
Index Series will ordinarily invest in approximately 300 of the 500 stocks
included in the S&P 500 Index. From time to time and over any period of time,
this number may be significantly higher or lower, depending on the size of the
Series and on Westpeak's judgment as to the appropriate number of stocks in
which to invest in order to approximate the composite price and yield
performance of the S&P 500 Index. In the future, however, the Series may,
without shareholder approval, select a stock index other than the S&P 500
Index as the standard of comparison for the Series' investments, or
discontinue the practice of using a stock index as the standard of comparison
for the common stock portion of the Series' portfolio. The Series may also
engage in futures transactions to reduce tracking error. See "Futures and
Other Hedging Transactions" under "Investment Risks" below and "Futures" in
the Statement of Additional Information.

LOOMIS SAYLES BALANCED SERIES

The Series' investment objective is reasonable long-term investment return
from a combination of long-term capital appreciation and moderate current
income.

B-18
<PAGE>

The Series, for which Loomis Sayles acts as subadviser, is "flexibly
managed" in that sometimes it invests more heavily in equity securities and at
other times it invests more heavily in fixed-income securities, depending on
Loomis Sayles' view of the economic and investment outlook. Most of the
Series' investments are normally in dividend-paying common stocks of
recognized investment quality that are expected to achieve growth in earnings
and dividends over the long term. Fixed-income securities include notes,
bonds, non-convertible preferred stock and money market instruments. The
Series may invest in adjustable rate mortgage securities, asset-backed
securities, stripped mortgage securities and inverse floaters, subject to a
limit of 5% of the Series' assets for each of these instruments. The Series
may invest in securities rated BB or Ba by Standard & Poor's Ratings Group
("Standard & Poor's" or "S & P") or Moody's Investors Service, Inc.
("Moody's") or lower (or in unrated securities that Loomis Sayles determines
to be of comparable quality). During the fiscal year ended December 31, 1995,
0.86% of the average month-end net assets of the Series was invested in fixed-
income securities rated in the rating category (BB or Ba) just below
investment grade and no assets were invested in fixed-income securities rated
below this level. The Series invests at least 25% of its assets in fixed-
income senior securities and, under normal market conditions, more than 50% of
its assets in equity securities. The Series also may invest in foreign
securities. See "Investment Risks--Foreign Securities" below.

BACK BAY ADVISORS MANAGED SERIES

The investment objective of the Series is to provide a favorable total
investment return through investment in a diversified portfolio of common
stocks and fixed income securities. These investments will be made in
proportions that Back Bay Advisors, L.P. ("Back Bay Advisors"), the Series'
subadviser, deems appropriate for an investor who wishes to invest in a
portfolio containing a diversified mix of assets.

It is expected that more often than not the investment portfolio of the
Series will contain a higher proportion of common stocks than of notes and
bonds, and a higher proportion of notes and bonds than of money market
instruments. However, Back Bay Advisors will make variations in the
proportions of each investment category in accordance with its assessment of
the outlook for the economy and the financial markets and its judgment about
the relative attractiveness of each asset type in light of economic
conditions. The Series may also engage in futures transactions to manage its
portfolio exposure to the risks of investment in common stocks or notes and
bonds. The Series will engage in futures transactions only to the extent
allowed by state law and regulations. See "Investment Risks--Futures and Other
Hedging Transactions" below and "Futures" in the Statement of Additional
Information.

The investment practices with respect to the common stock portion of the
Series center upon selecting a portfolio of securities, drawn from the S&P
500, which taken as a group can be characterized as high capitalization growth
issues. A proprietary quantitative model is used to achieve an industry
sector-neutral investment approach. In addition, as conditions warrant, a
portion of the stock portfolio may be invested in "value" situations, as
identified by Back Bay Advisors' quantitative model. In the future, however,
the Series may, without shareholder approval, select a stock index other than
the S&P 500 Index as the standard of comparison for the Series' common stock
investments, or discontinue the practice of using a stock index as the
standard of comparison for the common stock portion of the Series' portfolio.
The Series may invest a limited portion of its assets in securities of foreign
issuers and may invest in convertible securities. See "Investment Risks--
Foreign Securities" and "Investment Risks--Convertible Securities."

The fixed income portion of the Series' portfolio will be invested in bonds
of the types in which the Back Bay Advisors Bond Income Series is permitted to
invest. See "Back Bay Advisors Bond Income Series" above for a description of
these types of investments and some possible risks associated with them.
During the fiscal year ended December 31, 1995, 2.7% of the average month-end
net assets of the Series was invested in fixed-income securities rated in the
rating category (BB or Ba) just below investment grade and no assets were
invested in fixed-income securities rated below this level.

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

The Salomon Brothers Strategic Bond Opportunities Series' investment
objective is to seek a high level of total return consistent with preservation
of capital.

Salomon Brothers Asset Management Inc acts as sub-adviser to the Series, and
based on its assessment of the relative risks and opportunities available in
various market segments, assets will be allocated among U.S. Government
obligations,

B-19
<PAGE>

mortgage backed securities, domestic and foreign corporate debt and sovereign
debt securities rated investment grade (BBB or higher by S&P or Baa or higher
by Moody's) (or unrated but deemed to be of equivalent quality in the
subadviser's judgment) and domestic and foreign corporate debt and sovereign
debt securities rated below investment grade. The Series may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations
between a foreign sovereign entity and one or more financial institutions, in
the form of participations in such Loans ("Participations") and assignments of
all or a portion of Loans from third parties ("Assignments"). See "Loan
Participations and Assignments" below.

Depending on market conditions, the Series may invest without limit in below
investment grade securities, which involve significantly greater risks,
including price volatility and risk of default in the payment of interest and
principal, than higher-quality securities. Although the Series' subadviser
does not anticipate investing in excess of 75% of the Series' assets in
domestic and developing country debt securities that are rated below
investment grade, the Series may invest a greater percentage in such
securities when, in the opinion of the subadviser, the yield available from
such securities outweighs their additional risks. Certain of the debt
securities in which the Series may invest may be rated as low as "C" by
Moody's or "D" by S&P or may be considered comparable to securities having
such ratings. Securities of below investment grade quality are considered high
yield, high risk securities and are commonly known as "junk bonds." See
"Investment Risks--Lower Rated Fixed-Income Securities" below. During the
fiscal year ended December 31, 1995, 6.6% of the average month-end net assets
of the Series was invested in fixed-income securities rated in the rating
category (BB or Ba) just below investment grade.

In addition, the Series may invest in securities issued or guaranteed as to
principal or interest by the U.S. Government or its agencies or
instrumentalities, including mortgage backed securities and may also invest in
preferred stocks, convertible securities (including those issued in the
Euromarket), securities carrying warrants to purchase equity securities,
privately placed debt securities, stripped mortgage securities, zero coupon
securities and inverse floaters.

The Series may, and the subadviser anticipates that under certain market
conditions it will, invest up to 100% of its assets in foreign securities,
including Brady Bonds. Brady Bonds are debt obligations created through the
exchange of commercial bank loans for new obligations under a plan introduced
by former U.S. Treasury Secretary Nicholas Brady. See "High Yield/High Risk
Foreign Sovereign Debt Securities" below. There is no limit on the value of
the Series' assets that may be invested in any one country or in assets
denominated in any one country's currency.

The Series may also invest in debt obligations issued or guaranteed by a
foreign sovereign government or one of its agencies or political subdivisions
and debt obligations issued or guaranteed by supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the
Asian Development Bank and the Inter-American Development Bank. Such
supranational issued instruments may be denominated in multi-national currency
units.

The Series currently intends to invest substantially all of its assets in
fixed-income securities. In order to maintain liquidity, the Series may invest
up to 20% of its assets in high-quality short-term money market instruments.

The Series' subadviser will have discretion to select the range of
maturities of the various fixed-income securities in which the Series will
invest. The weighted average life of the Series may vary substantially from
time to time depending on economic and market conditions.

The Series may purchase and sell (or write) exchange-listed and over-the-
counter put and call options on securities, financial futures contracts and
fixed income indices and other financial instruments, enter into financial
futures contracts, enter into interest rate transactions, and enter into
currency transactions. Interest rate transactions may take the form of swaps,
structured notes, caps, floors and collars, and currency transactions may take
the form of currency forward contracts, currency futures contracts, currency
swaps and options on currencies or currency futures contracts. See "Futures
and Other Hedging Transactions" under "Investment Risks" below and "Futures"
in the Statement of Additional Information.

The Series may lend securities it owns so long as such loans do not
represent more than 20% of the Series' total assets.

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BACK BAY ADVISORS BOND INCOME SERIES

The investment objective of the Series is to provide a high level of current
income consistent with protection of capital and moderate investment risk
through investment primarily in U.S. Government and corporate bonds. In
general, fixed-income securities, such as the bonds in which the Series may
invest, are subject to credit risk (the risk that the obligor will default in
the payment of principal and/or interest) and to market risk (the risk that
the market value of the securities will change as a result of changes in
market rates of interest). The Series may also invest in convertible
securities. See "Investment Risks--Convertible Securities" below.

At least 80% of the Series' assets will consist of securities rated AAA, AA,
A or BBB by S&P or Aaa, Aa, A or Baa by Moody's or unrated but determined by
Back Bay Advisors, the Series' subadviser, to be of comparable quality to
securities in those rating categories. The Series may not invest more than 10%
of its total net assets in obligations of foreign issuers. Investments in
foreign securities will subject the Series to special considerations related
to political, economic and legal conditions outside of the U.S. These
considerations include the possibility of unfavorable currency exchange rates,
exchange control regulations (including currency blockage), expropriation,
nationalization, withholding taxes on income and difficulties in enforcing
judgments. Foreign securities may be less liquid and more volatile than
comparable U.S. securities. Some foreign issuers are subject to less
comprehensive accounting and disclosure requirements than similar U.S.
issuers. Transactions in foreign securities include currency conversion costs.
Brokerage and custodial costs for foreign securities may be higher than for
U.S. securities. The Series will invest in these securities only when Back Bay
Advisors believes the associated risks are minimal.

Up to 20% of the Series' assets may be invested in securities rated BB or Ba
or lower (or in unrated securities that Back Bay Advisors determines to be of
comparable quality). During the fiscal year ended December 31, 1995, 18% of
the average month-end net assets of the Series was invested in fixed-income
securities rated in the rating category (BB or Ba) just below investment grade
and no assets were invested in fixed-income securities rated below this level.
Securities rated BB or lower by S&P or Ba or lower by Moody's (or unrated but
determined to be of comparable quality by Back Bay Advisors) are considered
high yield, high risk securities and are commonly known as "junk bonds." The
Series will acquire no security rated below BB or Ba (or unrated but
determined to be of comparable quality by Back Bay Advisors). If a security
held by the Series is downgraded below BB or Ba, Back Bay Advisors will
determine at that time whether the Series will continue to hold the security,
taking into account the current conditions.

The average maturity of the Back Bay Advisors Bond Income Series' portfolio
will usually be between five and fifteen years.

SALOMON BROTHERS U.S. GOVERNMENT SERIES

The Series' investment objective is to provide a high level of current
income consistent with preservation of capital and maintenance of liquidity.

The Series seeks to achieve its objective by investing primarily in debt
obligations (including mortgage backed securities) issued or guaranteed by the
U.S. Government or its agencies, authorities or instrumentalities ("U.S.
Government Securities") or derivative securities (such as collateralized
mortgage obligations) backed by such U.S. Government Securities.

At least 80% of the total assets of the Series will be invested in:

(1) mortgage backed securities guaranteed by the Government National
Mortgage Association ("GNMA") that are supported by the full faith and
credit of the U.S. Government. Such securities entitle the holder to
receive all interest and principal payments due, whether or not payments
are actually made on the underlying mortgages;

(2) U.S. Treasury obligations;

(3) debt obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government which are backed by their own
credit but are not necessarily backed by the full faith and credit of the
U.S. Government;

(4) mortgage-related securities guaranteed by agencies or
instrumentalities of the U.S. Government which are supported by their own
credit but not the full faith and credit of the U.S. Government, such as
the Federal Home Loan Mortgage Corporation and Federal National Mortgage
Association ("FNMA"), and

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(5) collateralized mortgage obligations issued by private issuers for
which the underlying mortgage backed securities serving as collateral are
backed (i) by the credit of the U.S. Government agency or instrumentality
which issues or guarantees the mortgage backed securities, or (ii) by the
full faith and credit of the U.S. Government.

Under normal market conditions, at least 65% of the Series' total assets
will be invested in U.S. Government Securities. For purposes of this policy,
securities that are not issued or guaranteed by the U.S. Government or an
agency, authority or instrumentality will not count toward the 65%, even if
they are backed by mortgages (or other collateral) that are so guaranteed.

Any guarantee of the securities in which the Series invests runs only to
principal and interest payments on the securities and not to the market value
of such securities or the principal and interest payments on the underlying
mortgages. In addition, the guarantee runs to the portfolio securities held by
the Series and not to the purchase of shares of the Series.

The Series may purchase or write options on securities, options on
securities indices and options on futures contracts and buy or sell futures on
financial instruments and securities indices.

Up to 20% of the total assets of the Series may be invested in marketable
debt securities of domestic issuers and of foreign issuers (payable in U.S.
dollars) rated at the time of purchase Baa or higher by Moody's or BBB or
higher by S&P, or, if unrated, deemed to be of equivalent quality in Salomon
Brothers Management Inc's judgment, convertible securities (including those
issued in the Euromarket), securities carrying warrants to purchase equity
securities and privately placed debt securities.

The Series may lend securities it owns so long as such loans do not
represent more than 20% of the Series' total assets.

BACK BAY ADVISORS MONEY MARKET SERIES

The Series seeks the highest possible level of current income consistent
with preservation of capital through investment in a managed portfolio of high
quality money market instruments including: (1) obligations backed by the full
faith and credit of the United States Government, such as bills, notes and
bonds issued by the U.S. Treasury or by such government agencies as the
Farmers' Home Administration or the Small Business Administration; (2) other
obligations issued or guaranteed by the United States Government or its
agencies, authorities or instrumentalities, such as obligations of the
Tennessee Valley Authority, Federal Land Banks and FNMA; (3) commercial paper
and other corporate debt obligations rated in the highest rating category by
Standard & Poor's or Moody's or, if unrated, of comparable quality as
determined by Back Bay Advisors, the Series' subadviser, under guidelines
approved by the Fund's Trustees; (4) repurchase agreements relating to any of
the above and (5) obligations of banks or savings and loan associations (such
as bankers' acceptances and certificates of deposit, including Eurodollar
obligations of foreign branches of U.S. banks and dollar denominated
obligations of U.S. and United Kingdom branches of foreign banks) whose net
assets exceed $100,000,000;

The Series may invest up to 100% of its assets in certificates of deposit,
bankers' acceptances and other bank obligations.

All the Series' money market instruments mature in less than 397 days and
its dollar-weighted average portfolio maturity is 90 days or less. The Series
calculates the maturity of repurchase agreements by reference to the
repurchase date, not by reference to the maturity of the underlying security.

By investing only in high quality, short-term securities, the Series seeks
to minimize credit risk and market risk. Credit risk is the risk that the
obligor will default in the payment of principal and/or interest. In a
repurchase agreement transaction, credit risk relates to the performance by
the other party of its obligation to repurchase the underlying security from
the Series. If the other party defaults on that obligation, the Series may
face various delays and risks of loss. Market risk is the risk that the market
value of the securities will change as a result of changes in market rates of
interest. The Series expects that those changes will be minimal and that the
Series will be able to maintain the net asset value of its shares at a
constant of $100, although this cannot be assured.

The Eurodollar obligations of foreign branches of U.S. banks and U.S. and
United Kingdom branches of foreign banks in which the Series may invest may be
subject to certain risks which do not apply to obligations of domestic
branches of U.S. banks. These risks may relate to foreign economic, political
and legal developments and to the fact that foreign banks and foreign branches
of U.S. banks may be subject to different regulatory requirements.

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ADDITIONAL INFORMATION

Except for the investment objective of the Loomis Sayles Small Cap, Loomis
Sayles Avanti Growth, Westpeak Value Growth, Westpeak Stock Index, Back Bay
Advisors Managed, Back Bay Advisors Bond Income and Back Bay Advisors Money
Market Series, or except as otherwise explicitly stated in this Prospectus or
the Statement, each Series' investment policies may be changed at any time
without shareholder approval.

Equity securities are securities that represent an ownership interest (or
the right to acquire such an interest) in a company, and include common and
preferred stocks and securities exercisable for or convertible into common or
preferred stocks (such as warrants, convertible debt securities and
convertible preferred stock).

The Loomis Sayles Small Cap Series, Draycott International Equity Series,
Alger Equity Growth Series, Loomis Sayles Avanti Growth Series, Venture Value
Series, Westpeak Value Growth Series and Westpeak Stock Index Series seek to
attain their objectives by normally investing their assets primarily in equity
securities. When the particular Series' adviser or subadviser deems it
appropriate, however, any of these Series may, for temporary defensive
purposes, hold all or a substantial portion of its assets in cash or fixed-
income investments, including U.S. Government obligations, investment grade
(and comparable unrated) corporate bonds or notes, money market instruments,
bankers acceptances and repurchase agreements. In addition, the Draycott
International Equity Series may invest temporarily in foreign government,
agency or corporate debt obligations. No estimate can be made as to when or
for how long any Series will employ defensive strategies.

INVESTMENT RISKS

. EQUITY SECURITIES (LOOMIS SAYLES SMALL CAP, DRAYCOTT INTERNATIONAL EQUITY,
ALGER EQUITY GROWTH, LOOMIS SAYLES AVANTI GROWTH, VENTURE VALUE, WESTPEAK
VALUE GROWTH, WESTPEAK STOCK INDEX, LOOMIS SAYLES BALANCED AND BACK BAY
ADVISORS MANAGED SERIES)

Equity securities are more volatile and more risky than some other forms of
investment. Therefore, the value of your investment in a Series may sometimes
decrease instead of increase. Investments in companies with relatively small
capitalization may involve greater risk than is usually associated with more
established companies. These companies often have sales and earnings growth
rates which exceed those of companies with larger capitalization. Such growth
rates may in turn be reflected in more rapid share price appreciation.
However, companies with smaller capitalization often have limited product
lines, markets or financial resources and they may be dependent upon a
relatively small management group. The securities may have limited
marketability and may be subject to more abrupt or erratic movements in price
than securities of companies with larger capitalization or the market averages
in general. The net asset value of a Series that invests in companies with
smaller capitalization, therefore, may fluctuate more widely than market
averages.

. CONVERTIBLE SECURITIES (DRAYCOTT INTERNATIONAL EQUITY, ALGER EQUITY GROWTH,
LOOMIS SAYLES AVANTI GROWTH, LOOMIS SAYLES BALANCED, BACK BAY ADVISORS
MANAGED, SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES AND BACK BAY ADVISORS
BOND INCOME SERIES)

Convertible securities include debt securities or preferred stock that are
convertible into stock as well as other securities, such as warrants, that
provide an opportunity for equity participation. Because convertible
securities can be converted into equity securities, their values will normally
increase or decrease as the values of the underlying equity securities
increase or decrease. The movements in the prices of convertible securities,
however, may be smaller than the movements in the value of the underlying
equity securities. Convertible debt and preferred stock usually provide a
higher yield than the underlying equity securities, however, so that the price
decline of a convertible security may sometimes be less substantial than that
of the underlying equity securities. The value of convertible securities that
pay dividends or interest, like the value of all fixed-income securities,
generally fluctuates inversely with changes in interest rates. Warrants have
no voting rights, pay no dividends and have no rights with respect to the
assets of the corporation issuing them. They do not represent ownership of the
securities for which they are exercisable, but only the right to buy such
securities at a particular price. The Loomis Sayles Avanti Growth Series will
not purchase any convertible debt security or convertible preferred stock that
has not been rated at the time of acquisition investment grade by one major
rating agency or that is not rated but is determined to be of comparable
quality by the Series' adviser.

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. FIXED-INCOME SECURITIES (ALL SERIES)

Fixed-income securities include a broad array of short, medium and long term
debt obligations issued by the U.S. or foreign governments, government or
international agencies and instrumentalities and corporate issuers of various
types as well as corporate preferred stock. Some fixed income securities
represent uncollateralized obligations of their issuers; in other cases, the
securities may be backed by specific assets (such as mortgages or other
receivables) that have been set aside as collateral for the issuer's
obligation. Fixed-income securities generally involve an obligation of the
issuer to pay interest or dividends on either a current basis or at the
maturity of the security, as well as the obligation to repay the principal
amount of the security at maturity.

Fixed-income securities involve both credit risk and market risk. Credit risk
is the risk that the security's issuer will fail to fulfill its obligation to
pay interest, dividends or principal on the security. Market risk is the risk
that the value of the security will fall because of changes in market rates of
interest. (Generally, the value of fixed-income securities falls when market
rates of interest are rising.) Some fixed-income securities also involve
prepayment or call risk. This is the risk that the issuer will repay a Series
the principal on the security before it is due, thus depriving the Series of a
favorable stream of future interest or dividend payments.

Because interest rates vary, it is impossible to predict the income for any
particular period of a Series that invests in fixed-income securities.
Fluctuations in the value of a Series' investments in fixed-income securities
will cause a Series' net asset value to increase or decrease.

. LOWER RATED FIXED-INCOME SECURITIES (LOOMIS SAYLES BALANCED, BACK BAY
ADVISORS MANAGED, SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES AND BACK BAY
ADVISORS BOND INCOME SERIES)

Fixed-income securities rated BB or lower by S&P or Ba or lower by Moody's
(and comparable unrated securities) are of below "investment grade" quality.
Lower quality fixed-income securities generally provide higher yields, but are
subject to greater credit and market risk than higher quality fixed-income
securities. Lower quality fixed-income securities are considered predominantly
speculative with respect to the ability of the issuer to meet principal and
interest payments. Achievement of the investment objective of a mutual fund
investing in lower quality fixed-income securities may be more dependent on
the Series' sub-adviser's own credit analysis than for a fund investing in
higher quality bonds. The market for lower quality fixed-income securities may
be more severely affected than some other financial markets by economic
recession or substantial interest rate increases, by changing public
perceptions of this market or by legislation that limits the ability of
certain categories of financial institutions to invest in these securities. In
addition, the secondary market may be less liquid for lower rated fixed-income
securities. This lack of liquidity at certain times may affect the valuation
of these securities and may make the valuation and sale of these securities
more difficult. Securities of below investment grade quality are considered
high yield, high risk securities and are commonly known as "junk bonds." For
more information, including a detailed description of the ratings assigned by
S&P and Moody's, please refer to "Appendix A--Ratings of Securities."

. MORTGAGE-RELATED SECURITIES (LOOMIS SAYLES BALANCED, BACK BAY ADVISORS
MANAGED, SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES, BACK BAY ADVISORS
BOND INCOME AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

Mortgage-related securities, such as GNMA or FNMA certificates, differ from
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently, usually monthly, and that
principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time. As a result, if a Series purchases these
assets at a premium, a faster-than-expected prepayment rate will reduce yield
to maturity, and a slower-than-expected prepayment rate will have the opposite
effect of increasing yield to maturity. If a Series purchases mortgage-related
securities at a discount, faster-than-expected prepayments will increase, and
slower-than-expected prepayments will reduce, yield to maturity. Prepayments,
and resulting amounts available for reinvestment by the Series, are likely to
be greater during a period of declining interest rates and, as a result, are
likely to be reinvested at lower interest rates. Accelerated prepayments on
securities purchased at a premium may result in a loss of principal if the
premium has not been fully amortized at the time of prepayment. Although these
securities will decrease in value as a result of increases in interest rates
generally, they are likely to appreciate less than other fixed-income
securities when interest rates decline because of the risk of prepayments.

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<PAGE>

. COLLATERALIZED MORTGAGE OBLIGATIONS (LOOMIS SAYLES BALANCED, BACK BAY
ADVISORS MANAGED, SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES, BACK BAY
ADVISORS BOND INCOME AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

A collateralized mortgage obligation ("CMO") is a security backed by a
portfolio of mortgages or mortgage securities held under a trust indenture. In
some cases, the underlying mortgages or mortgage securities are issued or
guaranteed by the U.S. Government or an agency or instrumentality thereof, but
the obligations purchased by a Series will in many cases not be so issued or
guaranteed. The issuer's obligation to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage securities. CMOs
are issued with a number of classes or series which have different maturities
and which may represent interests in some or all of the interest or principal
on the underlying collateral or a combination thereof. In the event of
sufficient early prepayments on such mortgages, the class or series of CMO
first to mature generally will be retired prior to its maturity. The early
retirement of a particular class or series of CMO held by a Series would have
the same effect as the prepayment of mortgages underlying a mortgage pass-
through security.

. ""STRIPPED'' MORTGAGE SECURITIES (SALOMON BROTHERS STRATEGIC BOND
OPPORTUNITIES AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

"Stripped" mortgage securities are issued by agencies or instrumentalities of
the U.S. Government or private issuers. Stripped mortgage securities are
usually structured with two classes that receive different proportions of the
interest and principal distribution on a pool of mortgage assets. In some
cases, one class will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the
principal-only or "PO" class). Stripped mortgage securities have greater
market volatility than other types of mortgage securities. If the underlying
mortgage assets experience greater than anticipated payments of principal, the
Series may fail to recoup fully its investments in IOs. The staff of the SEC
has indicated that it views stripped mortgage securities as illiquid. Until
further clarification of the matter is provided by the staff, the Series will
treat its investment in stripped mortgage securities as illiquid. As a result,
these investments, together with any other illiquid investments, will not
exceed 15% of a Series' net assets.

. ADJUSTABLE RATE MORTGAGE SECURITIES (LOOMIS SAYLES BALANCED, SALOMON
BROTHERS STRATEGIC BOND OPPORTUNITIES AND SALOMON BROTHERS U.S. GOVERNMENT
SERIES)

An adjustable rate mortgage security ("ARM"), like a traditional mortgage
security, is an interest in a pool of mortgage loans that provides investors
with payments consisting of both principal and interest as mortgage loans in
the underlying mortgage pool are paid off by the borrowers. ARMs have interest
rates that are reset at periodic intervals, usually by reference to some
interest rate index or market interest rate. Although the rate adjustment
feature may act as a buffer to reduce sharp changes in the value of adjustable
rate securities, these securities are still subject to changes in value based
on changes in market interest rates or changes in the issuer's
creditworthiness. Because the interest rates are reset only periodically,
changes in the interest rate on ARMs may lag changes in prevailing market
interest rates. Also, some ARMs (or the underlying mortgages) are subject to
caps or floors that limit the maximum change in interest rate during a
specified period or over the life of the security. As a result, changes in the
interest rate on an ARM may not fully reflect changes in prevailing market
interest rates during certain periods. Because of the resetting of interest
rates, ARMs are less likely than non-adjustable rate securities of comparable
quality and maturity to increase significantly in value when market interest
rates fall.

. ASSET BACKED SECURITIES (LOOMIS SAYLES BALANCED, BACK BAY ADVISORS MANAGED,
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES, BACK BAY ADVISORS BOND INCOME
AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

The securitization techniques used to develop mortgage securities are also
being applied to a broad range of other assets. Through the use of trusts and
special purpose corporations, automobile and credit card receivables are being
securitized in pass-through structures similar to mortgage pass-through
structures or in a pay-through structure similar to the CMO structure.
Generally the issuers of asset backed bonds, notes or pass-through
certificates are special purpose entities and do not have any significant
assets other than the receivables securing such obligations. In general, the
collateral supporting asset backed securities is of shorter maturity than
mortgage loans. Instruments backed by pools of receivables are similar to
mortgage-backed securities in that they are subject to unscheduled prepayments
of principal prior to maturity. When the obligations are prepaid, the Series
will ordinarily reinvest the prepaid amounts in securities the yields of which
reflect interest rates prevailing at the time. Therefore, a Series' ability to
maintain a portfolio which includes high-yielding asset backed securities will
be adversely affected

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to the extent that prepayments of principal must be reinvested in securities
which have lower yields than the prepaid obligations. Moreover, prepayments of
securities purchased at a premium could result in a realized loss. A Series
will only invest in asset backed securities rated, at the time of purchase, AA
or better by S&P or Aa or better by Moody's or which, in the opinion of the
subadviser, are of comparable quality.

. INVERSE FLOATERS (LOOMIS SAYLES BALANCED, SALOMON BROTHERS STRATEGIC BOND
OPPORTUNITIES AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

The Series listed above may invest in inverse floaters, which are derivative
mortgage securities. Inverse floaters are structured as a class of security
that receives distributions on a pool of mortgage assets and whose yields move
in the opposite direction of short-term interest rates, sometimes, at an
accelerated rate. Inverse floaters may be issued by agencies or
instrumentalities of the U.S. Government, or by private issuers, including
savings and loan associations, mortgage banks, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. Inverse floaters have
greater volatility than other types of mortgage securities in which the Series
invest (with the exception of stripped mortgage securities). Although inverse
floaters are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, the market for such
securities has not yet been fully developed. Accordingly, inverse floaters are
generally illiquid.

. REPURCHASE AGREEMENTS (ALL SERIES)

In repurchase agreements, a Series buys securities from a seller, usually a
bank or brokerage firm, with the understanding that the seller will repurchase
the securities at a higher price at a later date. Such transactions afford an
opportunity for a Series to earn a return on available cash at minimal market
risk, although the Series may be subject to various delays and risks of loss
if the seller is unable to meet its obligation to repurchase.

. REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLL AGREEMENTS (SALOMON BROTHERS
STRATEGIC BOND OPPORTUNITIES AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

The Series may enter into reverse repurchase agreements and dollar roll
agreements with banks and brokers to enhance return.

Reverse repurchase agreements involve sales by the Series of portfolio assets
concurrently with an agreement by the Series to repurchase the same assets at
a later date at a fixed price. During the reverse repurchase agreement period,
the Series continues to receive principal and interest payments on these
securities and also has the opportunity to earn a return on the collateral
furnished by the counterparties to secure its obligation to redeliver the
securities.

Dollar rolls are transactions in which the Series sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Series forgoes principal and interest paid
on both the securities sold and those to be purchased. The Series is
compensated by the difference between the current sales price and the forward
price for the future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale.

The Series will establish segregated accounts with the Fund's custodian in
which they will maintain cash, U.S. Government Securities or other liquid high
grade debt obligations equal in value to their obligations with respect to
reverse repurchase agreements and dollar rolls. Reverse repurchase agreements
and dollar rolls involve the risk that the market value of the securities
retained by the Series may decline below the price of the securities the
Series has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities under a reverse repurchase agreement or dollar
roll files for bankruptcy or becomes insolvent, the Series' use of the
proceeds of the agreement may be restricted pending a determination by the
other party or its trustee or receiver, whether to enforce the Series'
obligation to repurchase the securities. Reverse repurchase agreements and
dollar rolls are not considered borrowings by the Series for purpose of the
Series' fundamental investment restriction with respect to borrowings.

. OPTIONS (DRAYCOTT INTERNATIONAL EQUITY, VENTURE VALUE, BACK BAY ADVISORS
MANAGED, SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES AND SALOMON BROTHERS
U.S. GOVERNMENT SERIES)

A Series may seek to increase its current return by writing covered call
options and covered put options, with respect to securities it holds or
intends to buy, through the facilities of options exchanges and directly with
market makers in the over-the-

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<PAGE>

counter market. A Series receives a premium from writing a call or put option,
which increases the Series' current return if the option expires unexercised
or is closed out at a net profit.

At times when a Series has written call options on a substantial portion of
its portfolio, the Series' ability to profit and its risk of loss from changes
in market prices of portfolio securities will be limited. Appreciation in
securities covering the options would likely be partially or wholly offset by
losses on the options. The termination of options positions under such
conditions would generally result in the realization of short-term capital
losses, which would reduce the Series' current return. Accordingly, a Series
may seek to realize capital gains to offset realized losses by selling
securities.

As described in the Statement, over-the-counter options involve certain
special risks (including liquidity and credit risks) not necessarily present
with exchange-listed options. A Series will treat as illiquid any over-the-
counter options and assets maintained as "cover" for over-the-counter options
that the Series has written.

The options markets of foreign countries are small compared to those of the
United States and consequently are characterized in most cases by less
liquidity than are the U.S. markets. In addition, foreign markets may be
subject to less detailed reporting requirements and regulatory controls than
U.S. markets. See "Foreign Securities" below.

. FUTURES AND OTHER HEDGING TRANSACTIONS (DRAYCOTT INTERNATIONAL EQUITY,
VENTURE VALUE, WESTPEAK VALUE GROWTH, WESTPEAK STOCK INDEX, LOOMIS SAYLES
BALANCED, BACK BAY ADVISORS MANAGED, SALOMON BROTHERS STRATEGIC BOND
OPPORTUNITIES AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

Futures contracts are exchange-traded obligations to buy or sell a particular
security on a specified future date (or to pay or receive amounts based on the
value of a securities index or currency on that date).

The use of futures transactions entails certain special risks. In particular,
the variable degree of correlation between price movements of futures
contracts and price movements in the related securities or currency position
of a Series could create the possibility that losses on the futures contracts
are greater than gains in the value of the Series' position. In addition,
futures markets could be illiquid in some circumstances. As a result, in
certain markets, a Series might not be able to close out a transaction without
incurring substantial losses. Although a Series' use of futures transactions
for hedging should tend to minimize the risk of loss due to a decline in the
value of the hedged position, at the same time it will tend to limit any
potential gain to a Series that might result from an increase in value of the
position. The daily variation margin requirements for futures contracts create
a greater ongoing potential financial risk than would purchases of options, in
which case the exposure is limited to the cost of the initial premium.

Each of these Series may, at the discretion of its subadviser, engage in
foreign currency exchange transactions, in connection with the purchase and
sale of portfolio securities, to protect the value of specific portfolio
positions or in anticipation of changes in relative values of currencies in
which current or future Series' portfolio holdings are denominated or quoted.

For hedging purposes, each of these Series may also buy put or call options on
securities that it holds or intends to buy. In addition to engaging in options
transactions on established exchanges, a Series may purchase over-the-counter
options from brokerage firms and other financial institutions.

Each of these Series may invest in options and futures contracts on various
securities indices to hedge against changes in the value of securities it
holds or expects to acquire. These Series may also invest in options on index
futures.

No Series will invest more than 5% of its net assets in futures or premiums
for options on futures that are traded on a U.S. commodities exchange.

Certain asset segregation requirements apply when a Series becomes obligated
under a hedging instrument. There is no assurance that a Series' hedging
strategies will be effective. These strategies involve costs and the risk of
loss to the Series. See Part II of the Statement for more information.

. SWAPS (SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)

The Series may enter into interest rate, currency and index swaps. The Series
will enter into these transactions primarily to seek to preserve a return or
spread on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a

B-27
<PAGE>

duration management technique or to protect against any increase in the price
of securities a Series anticipates purchasing at a later date. Interest rate
swaps involve the exchange by a Series with another party of their respective
commitments to pay or receive interest (for example, an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal). A currency swap is an agreement to exchange cash flows on a
notional amount based on changes in the relative values of the specified
currencies. The Series will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its current obligations under swap
agreements. Because swap agreements are not exchange-traded, but are private
contracts into which the Series and a swap counterparty enter as principals,
the Series may experience a loss or delay in recovering assets if the
counterparty were to default on its obligations.

. STRUCTURED NOTES (SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)

The Salomon Brothers Strategic Bond Opportunities Series is permitted to
invest in a broad category of instruments known as "structured notes." These
instruments are debt obligations issued by industrial corporations, financial
institutions or governmental or international agencies. Traditional debt
obligations typically obligate the issuer to repay the principal plus a
specified rate of interest. Structured notes, by contrast, obligate the issuer
to pay amounts of principal or interest that are determined by reference to
changes in some external factor or factors. For example, the issuer's
obligations could be determined by reference to changes in the value of a
commodity (such as gold or oil), a foreign currency, an index of securities
(such as the S&P 500 Index) or an interest rate (such as the U.S. Treasury
bill rate). In some cases, the issuer's obligations are determined by
reference to changes over time in the difference (or "spread") between two or
more external factors (such as the U.S. prime lending rate and the London
Inter-Bank Offering Rate). In some cases, the issuer's obligations may
fluctuate inversely with changes in an external factor or factors (for
example, if the U.S. prime lending rate goes up, the issuer's interest payment
obligations are reduced). In some cases, the issuer's obligations may be
determined by some multiple of the change in an external factor or factors
(for example, three times the change in the U.S. Treasury bill rate). In some
cases, the issuer's obligations remain fixed (as with a traditional debt
instrument) so long as an external factor or factors do not change by more
than the specified amount (for example, if the U.S. Treasury bill rate does
not exceed some specified maximum); but if the external factor or factors
change by more than the specified amount, the issuer's obligations may be
sharply increased or reduced.

Structured notes can serve many different purposes in the management of the
Series. For example, they can be used to increase the Series' exposure to
changes in the value of assets that the Series would not ordinarily purchase
directly (such as gold or oil). They can also be used to hedge the risks
associated with other investments the Series holds. For example, if a
structured note has an interest rate that fluctuates inversely with general
changes in market interest rates, the value of the structured note would
generally move in the opposite direction to the value of traditional debt
obligations, thus moderating the effect of interest rate changes in the value
of the Series' portfolio as a whole.

Structured notes involve special risks. As with any debt obligation,
structured notes involve the risk that the issuer will become insolvent or
otherwise default on its payment obligations. The risk is in addition to the
risk that the issuer's obligations (and thus the value of the Series'
investment) will be reduced because of adverse changes in the external factor
or factors to which the obligations are linked. The value of structured notes
will in many cases be more volatile (that is, will change more rapidly or
severely) than the value of traditional debt instruments. Volatility will be
especially high if the issuer's obligations are determined by reference to
some multiple of the change in the external factor or factors. Many structured
notes have limited or no liquidity, so that the Series would be unable to
dispose of the investment prior to maturity. (The Series is not permitted to
invest more than 15% of its net assets in illiquid investments.) As with all
investments, successful use of structured notes depends in significant part on
the accuracy of the subadviser's analysis of the issuer's creditworthiness and
financial prospects, and of the subadviser's forecast as to changes in
relevant economic and financial market conditions and factors. In instances
where the issuer of a structured note is a foreign entity, the usual risks
associated with investments in foreign securities (described below) apply.

. FOREIGN SECURITIES (LOOMIS SAYLES SMALL CAP, DRAYCOTT INTERNATIONAL EQUITY,
ALGER EQUITY GROWTH, LOOMIS SAYLES AVANTI GROWTH, VENTURE VALUE, LOOMIS
SAYLES BALANCED, BACK BAY ADVISORS MANAGED, SALOMON BROTHERS STRATEGIC BOND
OPPORTUNITIES, BACK BAY ADVISORS BOND INCOME AND SALOMON BROTHERS U.S.
GOVERNMENT SERIES)

Each of these Series may invest in securities of issuers organized or
headquartered outside the United States or primarily traded outside the United
States ("foreign securities"). In the case of the Loomis Sayles Small Cap,
Back Bay Advisors Bond Income,

B-28
<PAGE>

Loomis Sayles Avanti Growth and Salomon Brothers U.S. Government Series, the
Series will not purchase a foreign security if, as a result, the Series'
holdings of foreign securities would exceed 20% (10% in the case of the Back
Bay Advisors Bond Income Series) of the Series' total assets.

Although investing in foreign securities may increase a Series'
diversification and reduce portfolio volatility, foreign securities may
present risks not associated with investments in comparable securities of U.S.
issuers. There may be less information publicly available about a foreign
corporate or government issuer than about a U.S. issuer, and foreign corporate
issuers are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the United States.
The securities of some foreign issuers are less liquid and at times more
volatile than securities of comparable U.S. issuers. Foreign brokerage
commissions and securities custody costs are often higher than in the United
States. With respect to certain foreign countries, there is a possibility of
governmental expropriation of assets, confiscatory taxation, political or
financial instability and diplomatic developments that could affect the value
of investments in those countries. A Series' receipt of interest on foreign
government securities may depend on the availability of tax or other revenues
to satisfy the issuer's obligations.

A Series' investments in foreign securities may include investments in
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development assistance,
currency transfer restrictions, highly limited numbers of potential buyers for
such securities and delays and disruptions in securities settlement
procedures.

In connection with their investments in foreign securities, the Series intend
to comply with certain diversification guidelines of the California Department
of Insurance. These guidelines limit each Series' investments in any one
foreign country to 20% of the Series' net assets (except that the limit is 35%
with respect to each of Australia, Canada, France, Japan, the United Kingdom
and Germany). Also, when a Series has at least 20% but less than 40% of its
net assets invested in foreign securities, it must have investments in at
least two foreign countries; when a Series has at least 40% but less than 60%
of its net assets invested in foreign securities, it must have investments in
at least three foreign countries; when a Series has at least 60% but less than
80% of its net assets invested in foreign securities, it must have investments
in at least four foreign counties; and when a Series has more than 80% of its
net assets invested in foreign securities, it must have investments in at
least five foreign countries.

Since most foreign securities are denominated in foreign currencies or trade
primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of a Series investing in these
securities may be affected favorably or unfavorably by changes in currency
exchange rates or exchange control regulations. Changes in the value relative
to the U.S. dollar of a foreign currency in which a Series' holdings are
denominated will result in a change in the U.S. dollar value of the Series'
assets and the Series' income available for distribution.

In addition, although part of a Series' income may be received or realized in
foreign currencies, the Series will be required to compute and distribute its
income in U.S. dollars. Therefore, if the value of a currency relative to the
U.S. dollar declines after a Series' income has been earned in that currency,
translated into U.S. dollars and declared as a dividend, but before payment of
the dividend, the Series could be required to liquidate portfolio securities
to pay the dividend. Similarly, if the value of a currency relative to the
U.S. dollar declines between the time a Series accrues expenses in U.S.
dollars and the time such expenses are paid, the amount of such currency
required to be converted into U.S. dollars will be greater than the equivalent
amount in such currency of such expenses at the time they were incurred.

. HIGH YIELD/HIGH RISK FOREIGN SOVEREIGN DEBT SECURITIES (SALOMON BROTHERS
STRATEGIC BOND OPPORTUNITIES SERIES)

Investing in fixed and floating rate high yield foreign sovereign debt
securities will expose the Series to special risks in addition to those
described under "Foreign Securities" above. These bonds are typically issued
by developing or emerging countries, whose ability to pay principal and
interest may be adversely affected by many factors, including: high rates of
inflation, high interest rates, currency exchange rates or difficulties,
political uncertainty or instability, the country's cash flow position, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, the policy
of the International Monetary Fund, the World Bank and other international
agencies, the

B-29
<PAGE>

obligor's balance of payments, including export performance, its access to
international credit and investments, fluctuations in the international prices
of commodities which it imports or exports and the extent of its foreign
reserves and access to foreign exchange. Currency devaluations may also
adversely affect the ability of a sovereign obligor to obtain sufficient
foreign exchange to service its external debt.

If a foreign sovereign obligor cannot generate sufficient earnings from
foreign trade to service its external debt, it may need to depend on
continuing loans and aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign investment. The commitment
on the part of these entities to make such disbursements may be conditioned on
the government's implementation of economic reforms or other requirements.
Failure to meet such conditions may result in the cancellation of such third
parties' commitments to lend funds, which may further impair the obligor's
ability or willingness to timely service its debts. Sovereign obligors in
developing and emerging countries have in the past experienced substantial
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness
including among other things, reducing and rescheduling interest and principal
payments by negotiating new or amended credit agreements or converting
outstanding principal and unpaid interest to Brady Bonds and obtaining new
credit to finance interest payments. There can be no assurance that the Brady
Bonds and other foreign sovereign debt securities in which the Series may
invest will not be subject to similar restructuring arrangements or to
requests for new credit which may adversely affect the Series' holdings.

. LOAN PARTICIPATIONS AND ASSIGNMENTS (SALOMON BROTHERS STRATEGIC BOND
OPPORTUNITIES SERIES)

The Series may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between a foreign sovereign entity and one or
more financial institutions ("Lenders"). The Series may invest in such Loans
in the form of participations in Loans ("Participations") and assignments of
all or a portion of Loans from third parties ("Assignments"). Participations
typically will result in the Series having a contractual relationship only
with the Lender, not with the borrower. The Series will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, the Series generally will have no right to enforce compliance
by the borrower with the terms of the loan agreement relating to the Loan, nor
any rights of set-off against the borrower, and the Series may not benefit
directly from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Series will be subject to credit risk relating
to both the borrower and the Lender that is selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Series may
be treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the borrower. When the Series purchases
Assignments from Lenders, the Series will acquire direct rights against the
borrower on the Loan, except that under certain circumstances such rights may
be more limited than those held by the assigning Lender.

The Series may have difficulty disposing of Assignments and Participations.
Because the market for such instruments is not highly liquid, the Series
anticipates that such instruments could be sold only to a limited number of
institutional investors. The lack of a highly liquid secondary market may have
an adverse impact on the value of such instruments and will have an adverse
impact on the Series' ability to dispose of particular Assignments or
Participations in response to a specific economic event, such as deterioration
in the creditworthiness of the borrower. The Series currently intends to treat
all investments in Participations and Assignments as illiquid.

. WHEN-ISSUED SECURITIES (DRAYCOTT INTERNATIONAL EQUITY, ALGER EQUITY GROWTH,
VENTURE VALUE, SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES AND SALOMON
BROTHERS U.S. GOVERNMENT SERIES)

If the value of a "when-issued" security being purchased falls between the
time a Series commits to buy it and the payment date, the Series may sustain a
loss. The risk of this loss is in addition to the Series' risk of loss on the
securities actually in its portfolio at the time. In addition, when the Series
buys a security on a when-issued basis, it is subject to the risk that market
rates of interest will increase before the time the security is delivered,
with the result that the yield on the security delivered to the Series may be
lower than the yield available on other, comparable securities at the time of
delivery. The Series will maintain cash or liquid high grade assets in a
segregated account in an amount sufficient to satisfy its outstanding
obligations to buy securities on a "when-issued" basis.

B-30
<PAGE>

. INVESTMENT COMPANY SECURITIES (DRAYCOTT INTERNATIONAL EQUITY, ALGER EQUITY
GROWTH, LOOMIS SAYLES AVANTI GROWTH, VENTURE VALUE, WESTPEAK VALUE GROWTH,
WESTPEAK STOCK INDEX AND BACK BAY ADVISORS MANAGED SERIES)

Each of these Series may invest up to 10% of its assets in securities of
investment companies. Because of restrictions on direct investment by U.S.
entities in certain countries, a Series may choose to invest indirectly in
such countries (by purchasing shares of another fund that is permitted to
invest in such countries) which may be the most practical or efficient way for
the Series to invest in such countries. In other cases, where the Series'
subadviser desires to make only a relatively small investment in a particular
country, investing through a fund that holds a diversified portfolio in that
country may be more effective than investing directly in issuers in that
country. As an investor in another investment company, a Series will bear its
share of the expenses of that investment company. These expenses are in
addition to the Series' own costs of operations. In some cases, investing in
an investment company may involve the payment of a premium over the value of
the assets held in that investment company's portfolio. The Venture Value
Series may only invest in securities of investment companies investing
primarily in foreign securities.

. LENDING OF PORTFOLIO SECURITIES (ALGER EQUITY GROWTH, VENTURE VALUE,
WESTPEAK STOCK INDEX, BACK BAY ADVISORS MANAGED, SALOMON BROTHERS STRATEGIC
BOND OPPORTUNITIES, BACK BAY ADVISORS BOND INCOME AND SALOMON BROTHERS U.S.
GOVERNMENT SERIES)

To the extent that any of the above Series lend that Series' portfolio
securities, such lending must be fully collateralized by cash, letters of
credit or U.S. Government Securities at all times, but involves some credit
risk to the Series if the other party should default on its obligations and
the Series is delayed in or prevented from recovering the collateral.

."SHORT SALES AGAINST THE BOX" (ALGER EQUITY GROWTH SERIES)

A short sale is a transaction in which a party borrows a security and then
sells the borrowed security to another party. The Alger Equity Growth Series
may engage in short sales, but only if the Series owns (or has the right to
acquire without further consideration) the security it has sold short, a
practice known as selling short "against the box." Short sales against the box
may protect the Series against the risk of losses in the value of its
portfolio securities because any unrealized losses with respect to such
securities should be wholly or partially offset by a corresponding gain in the
short position. However, any potential gains in such securities should be
wholly or partially offset by a corresponding loss in the short position.
Short sales against the box may be used to lock in a profit on a security
when, for tax reasons or otherwise, a subadviser does not want to sell the
security.

. ILLIQUID SECURITIES (ALL SERIES)

Each Series may invest up to 15% of its assets (10% in the case of the Back
Bay Advisors Money Market Series) in "illiquid securities," that is,
securities which are not readily resaleable, including securities whose
disposition is restricted by federal securities laws. The Series may purchase
"Rule 144A securities." These are privately offered securities that can be
resold only to certain qualified institutional buyers. Rule 144A securities
are treated as illiquid, unless the Series' subadviser has determined, under
guidelines established by the Fund's trustees, that the particular issue of
Rule 144A securities is liquid.

. ZERO COUPON SECURITIES (LOOMIS SAYLES BALANCED, BACK BAY ADVISORS MANAGED,
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES, BACK BAY ADVISORS BOND INCOME
AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

Zero coupon securities involve special risk considerations. Zero coupon
securities are debt securities that pay no cash income but are sold at
substantial discounts from their value at maturity. When a zero coupon
security is held to maturity, its entire return, which consists of the
amortization of discount, comes from the difference between its purchase price
and its maturity value. The difference is known at the time of purchase, so
that investors holding zero coupon securities until maturity know at the time
of their investment what the return on their investment will be. Certain zero
coupon securities also are sold at substantial discounts from their maturity
value and provide for the commencement of regular interest payments at a
deferred date.

Zero coupon securities tend to be subject to greater price fluctuations in
response to changes in interest rates than are ordinary interest-paying debt
securities with similar maturities. The value of zero coupon securities
appreciates more during periods of declining interest rates and depreciates
more during periods of rising interest rates. Zero coupon securities may be
issued by a

B-31
<PAGE>

wide variety of corporate and governmental issuers. Although zero coupon
securities are generally not traded on a national securities exchange, many
such securities are widely traded by brokers and dealers and, if so, will not
be considered illiquid.

Current federal income tax law requires the holder of a zero coupon security
(as well as the holders of other securities, such as Brady Bonds, which may be
acquired at a discount) to accrue income with respect to these securities
prior to the receipt of cash payments. To maintain its qualification as a
regulated investment company and avoid liability for federal income and excise
taxes, the Series may be required to distribute income accrued with respect to
these securities and may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.

PORTFOLIO TURNOVER

Portfolio turnover is not a limiting factor with respect to investment
decisions for any Series. For example, although the Alger Equity Growth
Series' objective is long-term capital appreciation, it frequently sells
securities to reflect changes in market, industry or individual company
conditions or outlook, even though it may only have held those securities for
a short period. High portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs, which will be borne
directly by the relevant Series. For additional information about such costs
see "Taxes" and "Management" below, and "Portfolio Transactions and Brokerage"
in the Statement. For information about the past portfolio turnover rates of
all the Series (other than the Back Bay Advisors Money Market Series), see
"Financial Highlights." Turnover in excess of 100% involves higher levels of
brokerage commissions and possibly increased realization of taxable gains, as
compared to many mutual funds.

RESOLVING MATERIAL CONFLICTS

Currently, shares in the Fund are available only to separate accounts
established by NEVLICO, The New England or subsidiaries of The New England as
an investment vehicle for variable life insurance or variable annuity
products. In the future, however, such shares may be offered to separate
accounts of insurance companies unaffiliated with NEVLICO or The New England.

A potential for certain conflicts of interest exists between the interests
of variable life insurance contract owners and variable annuity contract
owners. Pursuant to conditions imposed in connection with related regulatory
relief granted by the SEC, the Fund's board of trustees (the "Board of
Trustees") has an obligation to monitor events to identify conflicts that may
arise from the sale of shares to both variable life insurance and variable
annuity separate accounts or to separate accounts of insurance companies not
affiliated with The New England. Such events might include changes in state
insurance law or federal income tax law, changes in investment management of
any Series of the Fund, or differences between voting instructions given by
variable life insurance and variable annuity contract owners. Insurance
companies investing in the Fund will be responsible for proposing and
executing any necessary remedial action and the Board of Trustees has an
obligation to determine whether such proposed action adequately remedies any
such conflicts.

B-32
<PAGE>

PERFORMANCE INFORMATION

Information about the performance of the Series is set forth below and, from
time to time, the Fund may use this information in advertisements. Performance
information about a Series is based on that Series' past performance and is
not intended to indicate future performance. The Fund serves as the underlying
investment vehicle for variable life insurance or variable annuity products
and its shares cannot be purchased directly. Therefore, such performance
information does not reflect any of the charges assessed against the insurance
company separate accounts or the variable life insurance or variable annuity
products for which the Fund serves as an investment vehicle. Where relevant,
performance information about those variable life insurance or variable
annuity products is contained in the prospectus applicable to those products.

Each Series may include its total return in advertisements or other written
material. Total return is measured by comparing the value of a hypothetical
$1,000 investment in the Series at the beginning of the relevant period to the
value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions). Total return
reflects the bearing or deferral of certain expenses by The New England and
its affiliates pursuant to various arrangements that are described below under
"Management." If these arrangements had not been in effect, each Series' total
return would have been lower.

TOTAL RETURN

<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
FOR THE TEN FOR THE FIVE
YEARS ENDING YEARS ENDING
PERIOD RETURN 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 12/31/95 12/31/95
- ------------- ---- ----- ---- ---- ---- ---- ---- ---- ---- ---- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loomis Sayles
Small Cap
Series(1) -- -- -- -- -- -- -- -- -3.2%(1) 28.9% -- --
Draycott
International
Equity Series -- -- -- -- -- -- -- -- 2.6%(2) 6.0% -- --
Alger Equity
Growth Series -- -- -- -- -- -- -- -- -4.2%(2) 48.7% -- --
Loomis Sayles
Avanti Growth
Series(4) -- -- -- -- -- -- -- 14.7%(4) -0.3% 30.4% -- --
Venture Value
Series -- -- -- -- -- -- -- -- -3.5%(2) 39.3% -- --
Westpeak Value
Growth
Series(5) -- -- -- -- -- -- -- 14.2%(5) -1.2% 36.5% -- --
Westpeak Stock
Index Series(6) -- -12.2%(7) 16.3% 30.2% -4.1% 30.4% 7.3% 9.7% 1.1% 36.9% -- 16.3%
Loomis Sayles
Balanced Series -- -- -- -- -- -- -- -- -0.1%(2) 24.8% -- --
Back Bay
Advisors
Managed Series -- -0.7%(7) 9.5% 19.1% 3.2% 20.2% 6.7% 10.7% -1.1% 31.3% -- 13.0%
Salomon Brothers
Strategic Bond
Opportunities
Series -- -- -- -- -- -- -- -- -1.4%(2) 19.4% -- --
Back Bay
Advisors Bond
Income Series 15.8% 1.4% 8.4% 12.3% 8.1% 18.0% 8.2% 12.6% -3.4% 21.2% 10.0% 14.0%
Salomon Brothers
U.S. Government
Series -- -- -- -- -- -- -- -- 0.6%(2) 15.0% -- --
Back Bay
Advisors Money
Market Series 6.8% 6.6% 7.4% 9.2% 8.2% 6.2% 3.8% 3.0% 4.0% 5.6% 6.1% 4.5%
S&P 500(8) 18.6% 5.2% 16.5% 31.6% -3.1% 30.3% 7.6% 10.1% 1.3% 37.4% 14.8% 16.5%
Lehman
Intermediate
Government/Corporate
Bond Index(9) 13.1% 3.7% 6.8% 12.8% 9.2% 14.6% 7.2% 8.8% -2.0% 15.3% 8.8% 8.6%
Consumer Price
Index(10) 1.1% 4.4% 4.4% 4.7% 6.1% 3.1% 2.9% 2.8% 2.8% 2.6% 3.5% 2.8%
Dow Jones
Industrial
Average(11) 27.1% 5.5% 16.1% 32.2% -1.0% 24.2% 7.4% 16.9% 5.1% 37.0% 16.4% 17.6%
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
SINCE
COMMENCEMENT
OF OFFERING
THROUGH
PERIOD RETURN 12/31/95
- ------------- --------------
<S> <C>
Loomis Sayles
Small Cap
Series(1) 14.1%(1)
Draycott
International
Equity Series 8.8%(2)
Alger Equity
Growth Series 35.4%(2)
Loomis Sayles
Avanti Growth
Series(4) 16.2%(4)
Venture Value
Series 28.8%(2)
Westpeak Value
Growth
Series(5) 17.6%(5)
Westpeak Stock
Index Series(6) 12.2%(7)
Loomis Sayles
Balanced Series 20.3%(2)
Back Bay
Advisors
Managed Series 11.0%(7)
Salomon Brothers
Strategic Bond
Opportunities
Series 15.0%(2)
Back Bay
Advisors Bond
Income Series 10.9%(3)
Salomon Brothers
U.S. Government
Series 13.3%(2)
Back Bay
Advisors Money
Market Series 6.7%(3)
S&P 500(8) 15.2%
Lehman
Intermediate
Government/Corporate
Bond Index(9) 10.1%
Consumer Price
Index(10) 3.5%
Dow Jones
Industrial
Average(11) 16.6%
</TABLE>
- --------
(1) For the period beginning May 2, 1994, when the Loomis Sayles Small Cap
Series commenced operations, but did not become publicly available.
Average annual total return for the period May 2, 1994 through December
31, 1994 is presented on an unannualized basis.

B-33
<PAGE>

(2) Represents unannualized total return for the period beginning October 31,
1994 when the Draycott International Equity, Alger Equity Growth, Venture
Value, Loomis Sayles Balanced, Salomon Brothers Strategic Bond
Opportunities and Salomon Brothers U.S. Government Series commenced
operations.

(3) The Back Bay Advisors Bond Income Series and Back Bay Advisors Money
Market Series commenced operations on August 26, 1983 and their Average
Annual Total Returns From Commencement of Offering have been calculated
for the period beginning with that date. These returns would not change if
they had been calculated for the period beginning with September 1, 1983,
which is the period for which the Average Annual Total Returns Since
Commencement of Offering have been calculated for the S&P 500 Stock Index,
Lehman Intermediate Government/Corporate Bond Index, Consumer Price Index
and Dow Jones Industrial Average (unless otherwise indicated).

(4) For the period beginning April 30, 1993, when the Loomis Sayles Avanti
Growth Series became publicly available.

(5) For the period beginning April 30, 1993, when the Westpeak Value Growth
Series became publicly available.

(6) Operations commenced on March 30, 1987, but the Westpeak Stock Index
Series did not become publicly available until May 1, 1987.

(7) For the period beginning May 1, 1987 when the Back Bay Advisors Managed
Series and Westpeak Stock Index Series became publicly available.

(8) The S&P 500 Stock Index is an unmanaged weighted index of the stock
performance of 500 industrial, transportation, utility and financial
companies. Investment results shown assume the reinvestment of dividends.

(9) The Lehman Intermediate Government/Corporate Bond Index is a subset of the
Lehman Government/Corporate Bond Index covering all issues with maturities
between 1 and 10 years which is composed of taxable, publicly-issued, non-
convertible debt obligations issued or guaranteed by the U.S. Government
or its agencies and another Lehman index that is composed of taxable,
fixed rate publicly-issued, investment grade non-convertible corporate
debt obligations.

(10) The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of changes, over time, in the prices
of goods and services.

(11) The Dow Jones Industrial Average is a market value-weighted and unmanaged
index of 30 large industrial stocks traded on the New York Stock
Exchange.

From time to time, articles about a Series regarding performance, rankings
and other Series characteristics may appear in national publications
including, but not limited to, The Wall Street Journal, Forbes, Fortune, CDA
Investment Technologies and Money Magazine. In particular, some or all of
these publications may publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints or portions of
reprints of such articles, which may include rankings that list the names of
other funds and their performance, may be used as Fund or variable contract
sales literature or advertising material.

YIELD

Back Bay Advisors Money Market Series
-------------------------------------

The Back Bay Advisors Money Market Series may advertise its yield and
"effective" (or "compound") yield (and its total return). The yield of the
Back Bay Advisors Money Market Series is the income earned by the Series over
a seven-day period on an annualized basis, i.e. the income earned in the
period is assumed to be earned every seven days over a 52-week period and is
stated as a percentage of the investment. "Effective" (or "compound") yield is
calculated similarly but, when annualized, the income earned by the investment
is assumed to be reinvested in the Series' shares and thus compounded in the
course of a 52-week period. The effective yield will be higher than the yield
because of the compounding effect of this assumed reinvestment.

For the seven-day period ended December 31, 1995, the yield for the Back Bay
Advisors Money Market Series was 5.32%. The effective yield for the same
period was 5.46%.

B-34
<PAGE>

Loomis Sayles Balanced, Salomon Brothers Strategic Bond Opportunities, Back
---------------------------------------------------------------------------
Bay Advisors Bond Income and Salomon Brothers U.S. Government Series
- --------------------------------------------------------------------

Each of these Series may advertise its yield in addition to its total
return. The yield will be computed in accordance with the SEC's standardized
formula by dividing the net investment income per share earned during a recent
30-day period by the net asset value of a Series share (reduced by any earned
income expected to be declared shortly as a dividend) on the last trading day
of the period. Yield calculations will reflect any waiver of fees and/or
bearing of expenses by The New England and its affiliates.

INVESTMENT RESTRICTIONS

The following is a description of restrictions on the investments to be made
by the fourteen Series. Except as specifically listed below, and except for
restrictions marked with an asterisk, these restrictions may not be changed
without the approval of a majority of the outstanding voting securities of the
relevant Series.

INVESTMENT RESTRICTIONS APPLICABLE TO THE WESTPEAK STOCK INDEX, BACK BAY
ADVISORS MANAGED, BACK BAY ADVISORS BOND INCOME AND BACK BAY ADVISORS MONEY
MARKET SERIES

Each of the Series listed above will not:

(1) Purchase any securities (other than U.S. Government Securities) if,
as a result, more than 5% of the Series' total assets (taken at current
value) would be invested in securities of a single issuer; provided,
however, that the Westpeak Stock Index Series and the Back Bay Advisors
Managed Series may each invest more than 5% (but not more than 25%) of its
total assets (taken at current value) in the securities of a single issuer
if securities of any such issuer represent more than 5%, capitalization
weighted, of the stock index that the Series attempts to track.

(2) Purchase any security (other than U.S. Government Securities) if, as
a result, more than 25% of the Series' total assets (taken at current
value) would be invested in any one industry. For purposes of this
restriction, telephone, gas and electric public utilities are each regarded
as separate industries and finance companies whose financing activities are
related primarily to the activities of their parent companies are
classified in the industry of their parents. For the purposes of the Back
Bay Advisors Money Market Series and Back Bay Advisors Managed Series, this
restriction does not apply to bank obligations.

(3) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities); or make short sales, except where, by virtue of ownership of
other securities, it has the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold, and
no Series will deposit or pledge more than 10% of its total assets (taken
at current value) as collateral for such sales. (Any deposit or payment by
the Westpeak Stock Index or Back Bay Advisors Managed Series of initial or
maintenance margin in connection with futures contracts shall not be
considered the purchase of a security on margin for the purposes of this
restriction.)

(4) Acquire more than 10% of the total value of any class of the
outstanding securities of an issuer (taking all preferred stock issues of
an issuer as a single class and debt issues of an issuer as a single class)
or acquire more than 10% of the outstanding voting securities of an issuer.

(5) Borrow money, except as a temporary measure for extraordinary or
emergency purposes (but not for the purpose of investment) up to an amount
not in excess of 10% of its total assets (taken at cost), or 5% of its
total assets (taken at current value), whichever is lower; provided,
however, that the Back Bay Advisors Bond Income Series and the Back Bay
Advisors Managed Series may loan their portfolio securities. (See "Loans of
Portfolio Securities" above.)

(6) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old.

(7) Purchase or retain securities of any issuer if, to the knowledge of
the Fund, officers and Trustees of the Fund or officers and directors of
any investment adviser of the Fund who individually own beneficially more
than 1/2 of 1% of the securities of that company, together own beneficially
more than 5%.

B-35
<PAGE>

(8) Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under the federal securities laws; or purchase any security restricted as
to disposition under the federal securities laws; provided, however, that,
subject to the Fund's limitation on illiquid investments stated below, each
of the Back Bay Advisors Bond Income and Back Bay Advisors Managed Series
may invest up to 10% of its total assets (taken at current value) in such
restricted securities.

(9) Make investments for the purpose of exercising control or management.

(10) Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or sale
of portfolio securities with The New England, Back Bay Advisors, Westpeak
or accounts under their management to reduce acquisition costs, to average
prices among such accounts to facilitate such transactions, is not
considered participating in a trading account in securities.)

(11) Invest in the securities of other investment companies, except in
connection with a merger, consolidation or similar transaction, and except
that the Back Bay Advisors Bond Income Series, the Westpeak Stock Index
Series and the Back Bay Advisors Managed Series may invest in securities of
other investment companies by purchases in the open market involving only
customary broker's commissions. (Under the Investment Company Act of 1940
(the "1940 Act") each Series generally may not (a) invest more than 10% of
its total assets (taken at current value) in the securities of other
investment companies, (b) own securities of any one investment company
having a value in excess of 5% of that Series' total assets (taken at
current value), or (c) own more than 3% of the outstanding voting stock of
any one investment company.)

(12) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, commodities or commodity contracts (except that each of the
Westpeak Stock Index Series and the Back Bay Advisors Managed Series may
buy or sell futures contracts on stock indexes and the Back Bay Advisors
Managed Series may buy or sell interest rate futures contracts) or real
estate. This restriction does not prevent any Series from purchasing
securities of companies investing in real estate or of companies which are
not principally engaged in the business of buying or selling such leases,
rights or contracts.

(13) Pledge, mortgage or hypothecate more than 15% of its total assets
(taken at cost).

Restrictions (1) and (2) apply to securities subject to repurchase
agreements but not to the repurchase agreements themselves.

Each of the Series listed above will not purchase any illiquid security if,
as a result, more than 15% (10% in the case of the Back Bay Advisors Money
Market Series) of its net assets (taken at current value) would be invested in
such securities.

INVESTMENT RESTRICTIONS APPLICABLE TO INDIVIDUAL SERIES

In addition to the foregoing investment restrictions, the following
investment restrictions are applicable to individual Series as noted below.

BACK BAY ADVISORS MONEY MARKET SERIES

The Back Bay Advisors Money Market Series will not:

(1) Make loans, except by purchase of debt obligations in which the Back
Bay Advisors Money Market Series may invest consistent with its objective
and investment policies. This restriction does not apply to repurchase
agreements.

(2) Write or purchase puts, calls or combinations thereof.

BACK BAY ADVISORS BOND INCOME SERIES

The Back Bay Advisors Bond Income Series will not:

(1) Make loans, except by purchase of bonds, debentures, commercial
paper, corporate notes and similar evidences of indebtedness, which are
part of an issue to the public or to financial institutions, by entering
into repurchase agreements or by lending portfolio securities to the extent
set forth above under "Loans of Portfolio Securities" above.

B-36
<PAGE>

(2) Write or purchase puts, calls or combinations thereof except that the
Back Bay Advisors Bond Income Series may purchase warrants or other rights
to subscribe to securities of companies issuing such warrants or rights, or
of parents or subsidiaries of such companies, provided that such warrants
or other rights to subscribe are attached to, or a part of, a unit offering
involving other securities.

In order to comply with certain state requirements applicable to restriction
(13) above, as a matter of operating policy subject to change without
shareholder approval, the Back Bay Advisors Bond Income Series will not pledge
more than 2% of its assets.

WESTPEAK STOCK INDEX SERIES

The Westpeak Stock Index Series will not:

(1) Make loans, except by purchase of bonds, debentures, commercial
paper, corporate notes, and similar evidences of indebtedness, which are a
part of an issue to the public or to financial institutions, by entering
into repurchase agreements or by lending portfolio securities to the extent
set forth under "Loans of Portfolio Securities" above.

(2) Purchase options or warrants if, as a result, more than 1% of its
total assets (taken at current value) would be invested in such securities.

(3) Write options or warrants.

In order to comply with certain state requirements applicable to restriction
(13) above, as a matter of operating policy subject to change without
shareholder approval, the Westpeak Stock Index Series will not pledge more
than 2% of its assets.

BACK BAY ADVISORS MANAGED SERIES

The Back Bay Advisors Managed Series will not:

(1) Make loans, except by purchase of bonds, debentures, commercial
paper, corporate notes and similar evidences of indebtedness, which are a
part of an issue to the public or to financial institutions, by entering
into repurchase agreements, or by lending portfolio securities to the
extent set forth under "Loans of Portfolio Securities" above.

(2) Purchase options or warrants if, as a result, more than 1% of its
total assets (taken at current value) would be invested in such securities;
provided, however, that the Back Bay Advisors Managed Series may, without
regard to the foregoing percentage limit, purchase warrants or other rights
to subscribe to securities of companies issuing such warrants or rights, or
of parents or subsidiaries of such companies, provided that such warrants
or other rights to subscribe are attached to, or a part of a unit offering
involving, other securities.

In order to comply with certain state requirements applicable to restriction
(13) above, as a matter of operating policy subject to change without
shareholder approval, the Back Bay Advisors Managed Series will not pledge
more than 2% of its assets.

INVESTMENT RESTRICTIONS APPLICABLE TO THE LOOMIS SAYLES SMALL CAP, DRAYCOTT
INTERNATIONAL EQUITY, ALGER EQUITY GROWTH, LOOMIS SAYLES AVANTI GROWTH,
VENTURE VALUE, WESTPEAK VALUE GROWTH, LOOMIS SAYLES BALANCED, SALOMON BROTHERS
STRATEGIC BOND OPPORTUNITIES AND SALOMON BROTHERS U.S. GOVERNMENT SERIES

Each of the Series listed above will not:

*(1) With respect to 75% of the Series' total assets, purchase any
security (other than U.S. Government obligations) if, as a result, more
than 5% of the Series' total assets (taken at current value) would then be
invested in securities of a single issuer and, with respect to the Series'
total assets, purchase any security (other than U.S. Government
obligations) if, as a result, more than 10% of such assets would then be
invested in securities of a single issuer;

(2) Purchase any security (other than U.S. Government Securities) if, as
a result, more than 25% of the Series' total assets (taken at current
value) would be invested in any one industry (in the utilities category,
gas, electric, water and telephone companies will be considered as being in
separate industries, and each foreign country's government (together with
subdivisions thereof) will be considered to be a separate industry);

*(3) Purchase securities on margin (but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities), or make short sales except where, by virtue of ownership of
other securities, it has

B-37
<PAGE>

the right to obtain, without payment of further consideration, securities
equivalent in kind and amount to those sold, and the Series will not
deposit or pledge more than 10% of its total assets (taken at current
value) as collateral for such sales. (For this purpose, the deposit or
payment by the Series of initial or variation margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin);

*(4) Acquire more than 10% of any class of securities of an issuer
(taking all preferred stock issues of an issuer as a single class and all
debt issues of an issuer as a single class) or acquire more than 10% of the
outstanding voting securities of an issuer;

(5) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower, and
then only as a temporary measure for extraordinary or emergency purposes;

*(6) Pledge more than 15% of its total assets (taken at cost). (For the
purpose of this restriction, collateral arrangements with respect to
options, futures contracts and options on futures contracts and with
respect to initial and variation margin are not deemed to be a pledge of
assets);

*(7) Invest more than 5% of its total assets (taken at current value) in
securities of businesses (including predecessors) less than three years
old;

*(8) Purchase or retain securities of any issuer if officers and trustees
of the Fund or officers and directors of any investment advisor of the Fund
who individually own more than 1/2 of 1% of the shares or securities of
that issuer, together own more than 5%;

(9) Make loans, except by entering into repurchase agreements (including
reverse repurchase agreements) or by purchase of bonds, debentures,
commercial paper, corporate notes and similar evidences of indebtedness,
which are a part of an issue to the public or to financial institutions, or
through the lending of the Series' portfolio securities to the extent set
forth under "Loans of Portfolio Securities" above;

(10) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts, real estate or commodities or commodity contracts, except that
the Series may buy and sell futures contracts and related options. (This
restriction does not prevent the Series from purchasing securities of
companies investing in the foregoing);

(11) Act as underwriter, except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws;

*(12) Make investments for the purpose of exercising control or
management;

*(13) Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or sale
of portfolio securities for a Series with that Series' adviser or
subadviser or accounts under their management to reduce brokerage
commissions, to average prices among them or to facilitate such
transactions is not considered a trading account in securities for purposes
of this restriction.);

*(14) Write, purchase or sell options or warrants or, in the case of the
Loomis Sayles Small Cap Series, combinations of both, except that the
Series may (a) acquire warrants or rights to subscribe to securities of
companies issuing such warrants or rights, or of parents or subsidiaries of
such companies, (b) write, purchase and sell put and call options on
securities or securities indices, and (c) enter into currency forward
contracts;

*(15) Purchase any illiquid security if, as a result, more than 15% of
its net assets (taken at current value) would be invested in such
securities;

*(16) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers' commissions.
Under the 1940 Act, the Series may not (a) invest more than 10% of its
total assets (taken at current value) in such securities, (b) own
securities of any one investment company having a value in excess of 5% of
the total assets of the Series (taken at current value), or (c) own more
than 3% of the outstanding voting stock of any one investment company; or

(17) Issue senior securities. (For the purpose of this restriction none
of the following is deemed to be a senior security: any pledge or other
encumbrance of assets permitted by restriction (6) above; any borrowing
permitted by restriction (5) above; any collateral arrangements with
respect to options, futures contracts and options on futures contracts and
with respect to initial and variation margin; the purchase or sale of
options, forward contracts, futures contracts or options on futures
contracts; and the issuance of shares of beneficial interest permitted from
time to time by the provisions of the Trust's Declaration of Trust and by
the 1940 Act, the rules thereunder, or any exemption therefrom.)

B-38
<PAGE>

For purposes of restriction (5), reverse repurchase agreements are not
considered borrowings.

VARIABLE CONTRACT RELATED INVESTMENT RESTRICTIONS

Separate accounts supporting variable life insurance and variable annuity
contracts are subject to certain diversification requirements imposed by
regulations adopted under the Internal Revenue Code. Because the Fund is
intended as an investment vehicle for variable life insurance and variable
annuity separate accounts, Section 817(h) of the Internal Revenue Code
requires that the Fund's investments, and accordingly the investments of each
Series, be "adequately diversified" in accordance with Treasury Regulations.
Failure to do so means the variable life insurance and variable annuity
contracts would cease to qualify as life insurance and annuities for federal
tax purposes. Regulations specifying the diversification requirements have
been issued by the Department of Treasury. The Fund intends to comply with
these requirements.

MANAGEMENT

The Fund's Board of Trustees supervises the affairs of the Fund as conducted
by the Series' advisers and subadvisers. Pursuant to separate advisory
agreements, and subject in each case to the supervision of the Fund's Board of
Trustees, TNE Advisers, Inc. is the investment adviser of each of the Series.

SERIES ADVISED BY TNE ADVISERS, INC.

With respect to each of the thirteen Series for which TNE Advisers, Inc.
serves as adviser, TNE Advisers, Inc. has sub-contracted day-to-day portfolio
management responsibility to a sub-adviser as follows:

<TABLE>
<CAPTION>
SERIES SUBADVISER
------ ----------
<S> <C>
Loomis Sayles Small Cap Series............... Loomis, Sayles & Company, L.P.
Draycott International Equity Series......... Draycott Partners, Ltd.
Alger Equity Growth Series................... Fred Alger Management, Inc.
Loomis Sayles Avanti Growth Series........... Loomis, Sayles & Company, L.P.
Venture Value Series......................... Davis Selected Advisers, L.P.
Westpeak Investment Advisors,
Westpeak Value Growth Series................. L.P.
Westpeak Investment Advisors,
Westpeak Stock Index Series.................. L.P.
Loomis Sayles Balanced Series ............... Loomis, Sayles & Company, L.P.
Back Bay Advisors Managed Series............. Back Bay Advisors, L.P.
Salomon Brothers Strategic Bond Opportunities Salomon Brothers Asset
Series...................................... Management Inc
Back Bay Advisors Bond Income Series......... Back Bay Advisors, L.P.
Salomon Brothers Asset
Salomon Brothers U.S. Government Series...... Management Inc
Back Bay Advisors Money Market Series........ Back Bay Advisors, L.P.
</TABLE>

TNE ADVISERS, INC., 501 Boylston Street, Boston Massachusetts 02116, was
organized in 1994. It is a wholly-owned subsidiary of The New England. TNE
Advisers, Inc. oversees, evaluates and monitors the subadvisers' provision of
investment advisory services to the Series and provides general business
management and administration to the Series. TNE Advisers, Inc. has contracted
with New England Funds, L.P. to provide certain administrative services to
support the Series.

Subject to the supervision of TNE Advisers, Inc., each subadviser manages
its Series in accordance with the Series' investment objective and policies,
makes investment decisions for that Series, places orders to purchase and sell
securities for that Series and employs professional advisers and securities
analysts who provide research services to that Series. The Series advised by
TNE Advisers, Inc. pay no direct fees to any of the subadvisers described
below.

TNE Advisers is a wholly-owned subsidiary of The New England. Loomis Sayles,
Westpeak and Back Bay Advisors are each independently operated subsidiaries of
New England Investment Companies, L.P. ("NEIC"). The general partners of each
of Loomis Sayles, Westpeak and Back Bay Advisors are special purpose
corporations which are indirect wholly-owned

B-39
<PAGE>

subsidiaries of NEIC. NEIC's sole general partner, New England Investment
Companies, Inc., is a wholly-owned subsidiary of The New England, which also
owns a majority of the limited partnership interest in NEIC. Consequently, the
subadvisers (Loomis Sayles, Westpeak and Back Bay Advisors) of eight Series of
the Fund are currently wholly-owned subsidiaries of NEIC. The subadvisers of
the remaining five Series offered through this prospectus are not affiliated
with The New England or NEIC.

The New England and Metropolitan Life Insurance Company ("MetLife") have
entered into an agreement to merge, with MetLife to be the survivor of the
merger. The merger is conditioned upon, among other things, receipt of certain
regulatory approvals.

The merger of The New England into MetLife is being treated, for purposes of
the Investment Company Act of 1940 (the "Act"), as an "assignment" of the
existing advisory agreements for each Series and of the subadvisory agreements
of the eight Series that have NEIC subsidiaries as subadvisers. Under the Act,
such an "assignment" will result in an automatic termination of these
agreements. The subadvisory agreements for the other Series terminate
automatically, by their terms, upon any termination of TNE Advisers' advisory
agreement with the Fund. Thus, those subadvisory agreements will also
terminate at the time of the merger. Shareholders of the Series have approved
new investment advisory and subadvisory agreements, intended to take effect at
the time of the merger. The new agreements are substantially identical to the
existing agreements.

LOOMIS SAYLES, One Financial Center, Boston, MA 02111, subadviser to the
Loomis Sayles Avanti Growth, Loomis Sayles Small Cap and Loomis Sayles
Balanced Series, was founded in 1926 and is one of the country's oldest and
largest investment firms. Richard W. Hurckes and Scott Pape are Vice
Presidents of Loomis Sayles and have served as the portfolio managers of the
Loomis Sayles Avanti Growth Series since its inception in 1993. As of June 30,
1996, Bruce A. Ebel, Vice President of Loomis Sayles, will replace Richard
Hurckes as co-portfolio manager of the Loomis Sayles Avanti Growth Series. Mr.
Hurckes has been employed by Loomis Sayles for more than five years. Prior to
the time he joined Loomis Sayles in 1991, Mr. Pape was Equity Portfolio
Manager of the Illinois State Board of Investment. Mr. Ebel joined Loomis
Sayles in 1994 and prior to that time was Senior Vice President of Kemper
Asset Management.

Jeffrey C. Petherick and Mary Champagne, Vice Presidents of Loomis Sayles,
have day-to-day management responsibility for the Loomis Sayles Small Cap
Series. Mr. Petherick has co-managed the Series since its inception and has
been employed by Loomis Sayles for more than five years. Ms. Champagne has co-
managed the Series since July 1995. Prior to joining Loomis Sayles in 1993,
Ms. Champagne served as a portfolio manager at NBD Bank for 10 years.

Douglas D. Ramos and Meri Anne Beck, who are Vice Presidents of Loomis
Sayles, serve as portfolio managers for the Loomis Sayles Balanced Series.
Both Mr. Ramos and Ms. Beck have been employed by Loomis Sayles for more than
five years.

WESTPEAK, 1011 Walnut Street, Boulder, CO 80302, subadviser to the Westpeak
Value Growth and Westpeak Stock Index Series, was organized in 1991. Gerald H.
Scriver, President and Chief Executive Officer of Westpeak and Philip J.
Cooper, CFA, Senior Vice President of portfolio management of Westpeak, have
served as the portfolio managers of the Westpeak Value Growth Series since its
inception in 1993 and as the portfolio managers of the Westpeak Stock Index
Series since August 1, 1993. Both Mr. Scriver and Mr. Cooper have been with
Westpeak since its inception in 1991. Prior to joining Westpeak in 1991, Mr.
Scriver was Director of Quantitative Strategies of INVESCO and Mr. Cooper was
Portfolio Manager of United Asset Management Services.

BACK BAY ADVISORS, 399 Boylston Street, Boston, Massachusetts 02116,
subadviser to the Back Bay Advisors Money Market, Back Bay Advisors Bond
Income and Back Bay Advisors Managed Series, provides discretionary investment
management services to mutual funds and other institutional investors. The New
England itself served as adviser to the Back Bay Advisors Money Market Series
and the Back Bay Advisors Bond Income Series until September 10, 1986, when it
transferred these advisory functions to Back Bay Advisors, incident to a
reorganization effected in order to maintain The New England's investment
advisory activities in a separate corporate entity for administrative and
regulatory purposes. Catherine L. Bunting, Senior Vice President of Back Bay
Advisors, has served as the Back Bay Advisors Bond Income Series' portfolio
manager since January 1989. Peter Palfrey, Vice President of Back Bay
Advisors, has served as the Back Bay Advisors Managed Series' portfolio
manager since January 1994. Ms. Bunting has been employed by Back Bay Advisors
for more than five years. Mr. Palfrey, prior to joining Back Bay Advisors in
1993, was Investment Vice President with Mutual of New York.

B-40
<PAGE>

DRAYCOTT, 66 Buckingham Gate, London SW1E 6AU, England, (prior to May 10,
1996, the address of Draycott was 8 City Road, London EC2Y 1HE, England)
subadvises the Draycott International Equity Series. Draycott was organized in
1991 to provide investment advice and management services to institutional
investors' accounts and to mutual funds distributed both to institutional and
retail customers. Draycott is regulated by the Investment Management
Regulatory Organisation Limited ("IMRO") in the conduct of Investment Business
and is registered as an investment adviser in the United States pursuant to
the Investment Advisers Act of 1940. IMRO is the United Kingdom regulator of
investment advisers. In addition to the Series, Draycott currently manages two
other mutual funds and a separate investment account of The New England that
invest substantially all of their assets in international equity securities.
Nicholas D.P. Carn, Chief Investment Officer, President and Chief Executive
Officer of Draycott, Timothy S. Griffen, Senior Portfolio Manager and Pacific
Rim Specialist of Draycott, Gregory D. Eckersley, Portfolio Manager and United
Kingdom Specialist of Draycott, and Nigel Hankin, Portfolio Manager and
European Specialist of Draycott, serves as the portfolio managers of the
Draycott International Equity Series. Prior to Draycott's organization in
1991, Mr. Carn was Managing Director, International Equities Group, Mr.
Griffen was a Vice President and Portfolio Manager and Mr. Hankin was European
Fund Manager, all at CIGNA International Investment Advisors, Ltd. and Mr.
Eckersley was an Investment Manager at Century Asset Management, London.

Draycott is an indirect wholly-owned subsidiary of Cursitor Alliance LLC
("Cursitor Alliance"), which in turn is indirectly controlled by The Equitable
Life Assurance Society of the United States, the parent company of which is
controlled by AXA, a French insurance holding company.

ALGER MANAGEMENT, 75 Maiden Lane, New York, New York 10038, subadvises the
Alger Equity Growth Series. Alger Management is a wholly-owned subsidiary of
Fred Alger & Company, Incorporated, which in turn is a wholly-owned subsidiary
of Alger Associates, Inc., a financial services holding company. Fred M. Alger
III and his brother, David D. Alger, are the majority shareholders of Alger
Associates, Inc. and may be deemed to control that company and its
subsidiaries. David D. Alger, Seilai Khoo and Ron Tartaro are primarily
responsible for the day-to-day management of the Alger Equity Growth Series.
David D. Alger has been employed by Alger Management as Executive Vice
President and Director of Research since 1971, as President since 1995 and he
serves as portfolio manager for other mutual funds and investment accounts
managed by Alger Management. Ms. Khoo has been employed by Alger Management
since 1989 and as a Senior Vice President since 1995. Mr. Tartaro has been
employed by Alger Management since 1990 and as a Senior Vice President since
1995.

DAVIS SELECTED, 124 East Marcy Street, Santa Fe, New Mexico 87501,
subadvises the Venture Value Series. Venture Advisers, Inc., is the sole
general partner of Davis Selected, which is controlled by Shelby M. C. Davis.
Davis Selected provides advisory services to other investment companies and
institutions. Since 1968, Mr. Davis, who is co-manager of the Series, has been
a director of Venture Advisers, Inc. He is also a director and officer of all
investment companies managed by Davis Selected. Christopher C. Davis has co-
managed the Venture Value Series since October, 1995. He has been employed by
Davis Selected as an assistant portfolio manager and research analyst since
1989.

SALOMON BROTHERS ASSET MANAGEMENT INC ("SBAM"), 7 World Trade Center, New
York, New York 10048, the subadviser to the Salomon Brothers U.S. Government
Series and the Salomon Brothers Strategic Bond Opportunities Series, is an
indirect, wholly-owned subsidiary of Salomon Inc ("SI") and was incorporated
in 1987.

In connection with SBAM's service as subadviser to the Strategic Bond
Opportunities Series, SBAM's London based affiliate, Salomon Brothers Asset
Management Limited ("SBAM Limited"), Victoria Plaza, 111 Buckingham Palace
Road, London SW1W, OSB, England, serves as subadviser to SBAM relating to
currency transactions and investments in non-dollar denominated debt
securities for the benefit of the Salomon Brothers Strategic Bond
Opportunities Series. For these services, SBAM has agreed to compensate SBAM
Limited at the rate of one-third of the compensation payable to SBAM by TNE
Advisers, Inc. SBAM Limited is an indirect, wholly-owned subsidiary of SI.
SBAM Limited is a member of IMRO and is registered as an investment adviser in
the United States pursuant to the Investment Advisers Act of 1940.

Steven Guterman is primarily responsible for the day-to-day management of
the Salomon Brothers U.S. Government Series and the mortgage-backed securities
and U.S. Government securities portions of the Salomon Brothers Strategic Bond
Opportunities Series. Mr. Guterman co-manages the Salomon Brothers U.S.
Government Series with Roger Lavan. Peter J. Wilby is primarily responsible
for the day-to-day management of the High Yield and Emerging Market Debt
Securities portions of the Salomon Brothers Strategic Bond Opportunities
Series. Beth Semmel assists Mr. Wilby in the day-to-day management of

B-41
<PAGE>

the Strategic Bond Opportunities Series. David Scott is primarily responsible
for the portion of the Salomon Brothers Strategic Bond Opportunities Series
relating to currency transactions and investments in non-dollar denominated
debt securities.

Mr. Guterman joined SBAM in 1990 and is currently a Managing Director and
Senior Portfolio Manager. He initially worked in the mortgage research group
where he became a Research Director and later traded derivative mortgage-
backed securities for Salomon Brothers Inc. Mr. Guterman joined Salomon
Brothers Inc in 1983. Mr. Lavan joined SBAM in 1990 and is a Director and
Portfolio Manager. Prior to joining SBAM, Mr. Lavan spent four years analyzing
portfolios for Salomon Brothers Inc's Fixed Income Sales Group and Product
Support Divisions. Mr. Wilby joined SBAM in 1989. Ms. Semmel joined SBAM in
May of 1993 and is a Director and Portfolio Manager. Prior to joining SBAM,
Ms. Semmel spent four years as a high yield bond analyst at Morgan Stanley
Asset Management. Mr. Scott has been with SBAM Limited since April, 1994 and
is a Director and Portfolio Manager. Previously, he was a portfolio manager
for J.P. Morgan Investment Management in London from 1990-94 where he was
responsible for global and non-dollar portfolios. Before joining J.P. Morgan,
Mr. Scott was employed by Mercury Asset Management where he had responsibility
for captive insurance portfolios and products.

FEES AND EXPENSES. TNE Advisers, Inc. is paid a management fee from the
Series it manages as follows:

<TABLE>
<CAPTION>
MANAGEMENT FEE PAID BY SERIES TO
TNE ADVISERS, INC.
SERIES (% OF AVERAGE DAILY NET ASSETS)
------ ------------------------------------------
<S> <C>
Loomis Sayles Small Cap Series... 1.00% of all assets
Draycott International Equity
Series.......................... 0.90% of all assets
Alger Equity Growth Series....... 0.75% of all assets
Loomis Sayles Avanti Growth
Series.......................... 0.70% of the first $200 million
0.65% of the next $300 million
0.60% of amounts in excess of $500 million
Venture Value Series............. 0.75% of all assets
Westpeak Value Growth Series..... 0.70% of the first $200 million
0.65% of the next $300 million
0.60% of amounts in excess of $500 million
Westpeak Stock Index Series...... 0.25% of all assets
Loomis Sayles Balanced Series.... 0.70% of all assets
Back Bay Advisors Managed Series. 0.50% of all assets
Salomon Brothers Strategic Bond
Opportunities Series............ 0.65% of all assets
Back Bay Advisors Bond Income
Series.......................... 0.40% of the first $400 million
0.35% of the next $300 million
0.30% of the next $300 million
0.25% of amounts in excess of $1 billion
Salomon Brothers U.S. Government
Series.......................... 0.55% of all assets
Back Bay Advisors Money Market
Series.......................... 0.35% of the first $500 million
0.30% of the next $500 million
0.25% of amounts in excess of $1 billion
</TABLE>

B-42
<PAGE>

SUB-ADVISORY FEES. TNE Advisers, Inc. pays each sub-adviser at the following
rates for providing sub-advisory services to the following Series:

<TABLE>
<CAPTION>
ANNUAL PERCENTAGE
RATES PAID
BY TNE
ADVISERS, INC. TO THE
RESPECTIVE AVERAGE DAILY NET ASSET
SERIES SUB-ADVISERS VALUE LEVELS
------ --------------------- ------------------------------------
<S> <C> <C>
Loomis Sayles Small Cap
Series................. 0.55% of the first $25 million
0.50% of the next $75 million
0.45% of the next $100 million
0.40% of amounts in excess of $200 million
Draycott International
Equity Series.......... 0.75% of the first $10 million
0.60% of the next $40 million
0.45% of amounts in excess of $50 million
Alger Equity Growth Se-
ries................... 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million
Loomis Sayles Avanti
Growth Series.......... 0.50% of the first $25 million
0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of $200 million
Venture Value Series.... 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million
Westpeak Value Growth
Series................. 0.50% of the first $25 million
0.40% of the next $75 million
0.35% of the next $100 million
0.30% of amounts in excess of $200 million
Westpeak Stock Index Se-
ries................... 0.10% of all assets
Loomis Sayles Balanced
Series................. 0.50% of the first $25 million
0.40% of the next $75 million
0.30% of amounts in excess of $100 million
Back Bay Advisors Man-
aged Series............ 0.25% of the first $50 million
0.20% of amounts in excess of $50 million
Salomon Brothers
Strategic Bond
Opportunities Series... 0.35% of the first $50 million
0.30% of the next $150 million
0.25% of the next $300 million
0.20% of amounts in excess of $500 million
Back Bay Advisers Bond
Income Series.......... 0.25% of the first $50 million
0.20% of the next $200 million
0.15% of amounts in excess of $250 million
Salomon Brothers U.S.
Government Series...... 0.225% of the first $200 million
0.150% of the next $300 million
0.100% of amounts in excess of $500 million
Back Bay Advisors Money
Market Series.......... 0.15% of the first $100 million
0.10% of amounts in excess of $100 million
</TABLE>

VOLUNTARY EXPENSE AGREEMENT

Pursuant to a voluntary expense agreement relating to the Loomis Sayles
Avanti Growth, Westpeak Value Growth, Westpeak Stock Index, Back Bay Advisors
Managed, Back Bay Advisors Bond Income and Back Bay Advisors Money Market
Series, TNE Advisers, Inc. bears the expenses (other than the advisory fees
and any brokerage costs, interest, taxes or

B-43
<PAGE>

extraordinary expenses) of the Series in excess of 0.15% of the respective
Series' average daily net assets. In the case of the Loomis Sayles Small Cap
Series, TNE Advisers, Inc. bears all the expenses (other than any brokerage
costs, interest, taxes or extraordinary expenses) of the Series in excess of
1.00% of the Series' average daily net assets. Similar voluntary expense
agreements with The New England were in effect with respect to the Back Bay
Advisors Money Market, Back Bay Advisors Bond Income, Back Advisors Managed
and Westpeak Stock Index Series from November 1, 1994 through April 30, 1995
and with respect to the Loomis Sayles Small Cap, Loomis Sayles Avanti Growth
and Westpeak Value Growth Series from December 1, 1994 through April 30, 1995.
As a result of the current voluntary expense agreements (and assuming the
Series incur the same level of advisory fees as in 1995 and no taxes, interest
or extraordinary expenses), the Series' expense ratios during this prospectus'
effectiveness, assuming the continuation of the voluntary expense agreement,
are expected to be:

<TABLE>
<CAPTION>
TOTAL EXPENSE RATIO
UNDER CURRENT VOLUNTARY
SERIES EXPENSE AGREEMENT
------ -----------------------
<S> <C>
Back Bay Advisors Money Market Series................ 0.50%
Back Bay Advisors Bond Income Series................. 0.55%
Back Bay Advisors Managed Series..................... 0.64%
Westpeak Value Growth Series......................... 0.85%
Westpeak Stock Index Series.......................... 0.40%
Loomis Sayles Small Cap Series....................... 1.00%
Loomis Sayles Avanti Growth Series................... 0.85%
</TABLE>

TNE Advisers, Inc. may terminate these expense agreements at any time. If
these expense agreements were terminated, the expense ratios would be higher.

Prior to November 1, 1994, The New England had agreed to pay the charges and
expenses of preparing, printing and distributing prospectuses and reports to
shareholders, custodial and transfer agent charges and expenses, auditing,
accounting and legal fees and certain other expenses in connection with the
affairs of the Fund and the expenses of shareholders' and trustees' meetings.

EXPENSE DEFERRAL ARRANGEMENT

Pursuant to an expense deferral arrangement in effect beginning November 1,
1994, relating to the Draycott International Equity Series, the Alger Equity
Growth Series, the Venture Value Series, the Loomis Sayles Balanced Series,
the Salomon Brothers Strategic Bond Opportunities Series and the Salomon
Brothers U.S. Government Series, which TNE Advisers, Inc. may terminate at any
time, TNE Advisers, Inc. has agreed to pay the expenses of the Series'
operations (exclusive of any brokerage costs, interest, taxes, or
extraordinary expenses) in excess of stated expense limits, which limits vary
from Series to Series, subject to the obligation of the Series to repay TNE
Advisers, Inc. such expenses in future years, if any, when a Series' expenses
fall below the stated expense limit that pertains to that Series; such
deferred expenses may be charged to a Series in a subsequent year to the
extent that the charge does not cause the total expenses in such subsequent
year to exceed the Series' stated expense limit; provided, however, that no
Series is obligated to repay any expense paid by TNE Advisers, Inc. more than
two years after the end of the fiscal year in which such expense was incurred.
For the Draycott International Equity Series, TNE Advisers, Inc. has agreed to
defer such expenses in excess of 1.30% of net assets until a subsequent year,
if any, when total expenses are less than 1.30% of net assets; for the Alger
Equity Growth Series, TNE Advisers, Inc. has agreed to defer such expenses in
excess of 0.90% of net assets until a subsequent year, if any, when total
expenses are less than 0.90% of net assets (prior to January 1, 1996 the
expense deferral arrangement had been limited to 0.85%); for the Venture Value
Series, TNE Advisers, Inc. has agreed to defer such expenses in excess of
0.90% of net assets until a subsequent year, if any, when total expenses are
less than 0.90% of net assets; for the Loomis Sayles Balanced Series, TNE
Advisers, Inc. has agreed to defer such expenses in excess of 0.85% of net
assets until a subsequent year, if any, when total expenses are less than
0.85% of net assets; for the Salomon Brothers Strategic Bond Opportunities
Series, TNE Advisers, Inc. has agreed to defer such expenses in excess of
0.85% of net assets until a subsequent year, if any, when total expenses are
less than 0.85% of net assets; for the Salomon Brothers U.S. Government
Series, TNE Advisers, Inc. has agreed to defer such expenses in excess of
0.70% of net assets until a subsequent year, if any, when total expenses are
less than 0.70% of net assets. These expense limits can be prospectively
discontinued by TNE Advisers, Inc. but any expenses that were deferred while a
Series' expense limit was in place can never be charged to that Series unless
that Series' expenses fall below the limit.

B-44
<PAGE>
ADDITIONAL INFORMATION ABOUT EXPENSES

The Series pay all expenses not borne by TNE Advisers, Inc., the subadvisers
or the Distributor, including, but not limited to, the charges and expenses of
the respective Series' custodian, independent auditors and legal counsel, all
brokerage commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses for
registration or qualification of its shares under federal or state securities
laws, all expenses of shareholders' and trustees' meetings and preparing,
printing and mailing prospectuses and reports to shareholders and the
compensation of trustees of the Fund who are not directors, officers or
employees of The New England or its affiliates, other than affiliated
registered investment companies.

The Fund incurred total expenses during the one-year period ended December
31, 1995 as follows:

<TABLE>
<CAPTION>
TOTAL EXPENSES
(AS OF A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
FOR THE ONE YEAR PERIOD ENDED
SERIES DECEMBER 31, 1995
------ ------------------------------------------------
<S> <C>
Loomis Sayles Small Cap
Series.................... 1.00
Draycott International
Equity Series............. 1.30
Alger Equity Growth Series. 0.85
Loomis Sayles Avanti Growth
Series.................... 0.85
Venture Value Series....... 0.90
Westpeak Value Growth
Series.................... 0.85
Westpeak Stock Index
Series.................... 0.40
Loomis Sayles Balanced
Series.................... 0.85
Back Bay Advisors Managed
Series.................... 0.64
Salomon Brothers Strategic
Bond Opportunities Series. 0.85
Back Bay Advisors Bond
Income Series............. 0.55
Salomon Brothers U.S.
Government Series......... 0.70
Back Bay Advisors Money
Market Series............. 0.50
</TABLE>

If the voluntary expense agreement and expense deferral arrangement
described above had not been in effect, the Series' expenses for the one year
period ended December 31, 1995 would have been:

<TABLE>
<CAPTION>
TOTAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
WITHOUT VOLUNTARY EXPENSE AGREEMENT OR EXPENSE
DEFERRAL ARRANGEMENT FOR THE ONE
SERIES YEAR PERIOD ENDED DECEMBER 31, 1995
------ ----------------------------------------------
<S> <C>
Loomis Sayles Small Cap Se-
ries........................ 1.91
Draycott International Equity
Series...................... 3.12
Alger Equity Growth Series... 2.45
Loomis Sayles Avanti Growth
Series...................... 1.06
Venture Value Series......... 1.51
Westpeak Value Growth Series. 1.06
Westpeak Stock Index Series.. 0.54
Loomis Sayles Balanced Se-
ries........................ 1.85
Back Bay Advisors Managed Se-
ries........................ 0.64
Salomon Brothers Strategic
Bond Opportunities Series... 2.44
Back Bay Advisors Bond Income
Series...................... 0.55
Salomon Brothers U.S. Govern-
ment Series................. 2.90
Back Bay Advisors Money Mar-
ket Series.................. 0.51
</TABLE>

These expense figures do not include portfolio brokerage commission, which
are not deducted from the Series' assets in the same manner as other charges
and expenses; rather, brokerage commissions are part of the purchase price
paid for portfolio securities and reduce the proceeds received on the sale of
portfolio securities.

B-45
<PAGE>

For the one-year period ended December 31, 1995, the Loomis Sayles Small Cap
Series paid $97,195 in brokerage commissions, the Draycott International
Equity Series paid $82,922 in brokerage commissions, the Alger Equity Growth
Series paid $69,052 in brokerage commissions, the Loomis Sayles Avanti Growth
Series paid a total of $72,377 in brokerage commissions, the Venture Value
Series paid a total of $40,523 in brokerage commissions, the Westpeak Value
Growth Series paid a total of $61,252 in brokerage commissions, the Westpeak
Stock Index Series paid a total of $10,566 in brokerage commissions, the
Loomis Sayles Balanced Series paid a total of $44,131 in brokerage commissions
and the Back Bay Advisors Managed Series paid a total of $1,615 in brokerage
commissions on its common stock portfolio transactions. These brokerage
commissions equaled 0.66% of the Loomis Sayles Small Cap Series' average net
assets, 0.87% of the Draycott International Equity Series' average net assets,
0.33% of the Alger Equity Growth Series' average net assets, 0.19% of the
Loomis Sayles Avanti Growth Series' average net assets, 0.23% of the Venture
Value Series' average net assets, 0.18% of the Westpeak Value Growth Series'
average net assets, 0.02% of the Westpeak Stock Index Series' average net
assets, 0.47% of the Loomis Sayles Balanced Series' average net assets and
0.00% of the Back Bay Advisors Managed Series' average net assets. The Alger
Equity Growth Series may pay brokerage commissions to a brokerage firm
affiliated with the Series' subadviser. Portfolio transactions of the Salomon
Brothers Strategic Bond Opportunities Series, Back Bay Advisors Bond Income
Series, Salomon Brothers U.S. Government Series and Back Bay Advisors Money
Market Series and portfolio transactions of the Back Bay Advisors Managed and
the Loomis Sayles Balanced Series in bonds, notes and money market instruments
are generally on a net basis without a stated commission.

MISCELLANEOUS ARRANGEMENTS

The Series' adviser has contracted with New England Funds, L.P. to provide
executive and other personnel for the administration of Fund affairs. Subject
to procedures adopted by the Fund's Board of Trustees, Fund brokerage
transactions may be executed by brokers that are affiliated with any adviser
or subadviser.

Fund shares are offered through New England Securities, 399 Boylston Street,
Boston, Massachusetts 02116, the principal underwriter for the Fund. New
England Securities is a wholly-owned subsidiary of The New England.

SALE AND REDEMPTION OF SHARES

Shares of each Series are purchased or redeemed depending, among other
things, on the amount of premium payments invested and the surrender and
transfer requests effected on any given day pursuant to the variable life
insurance and variable annuity contracts supported by the Fund. Such
transactions can be made only on those days during which the New York Stock
Exchange is open for trading. Purchases and redemptions of Fund shares are
effected at the net asset value per share determined as of the close of
regular trading on the New York Stock Exchange on the day such purchase order
or redemption request is received.

The Fund may suspend the right of redemption for any Series and may postpone
payment for any period when the New York Stock Exchange is closed for other
than weekends or holidays, or, if permitted by the rules of the SEC, during
periods when trading on the New York Stock Exchange is restricted or during an
emergency which makes it impracticable for a Series to dispose of securities
or fairly to determine the value of its net assets, or during any other period
permitted by the SEC for the protection of investors.

NET ASSET VALUES AND PORTFOLIO VALUATION

Loomis Sayles, Draycott, Alger Management, Davis Selected, Westpeak, Back
Bay Advisors and SBAM, under the direction of the Board of Trustees, determine
the value of each Series' securities under the direction of the Fund's Board
of Trustees. The net asset value of each Series' shares is determined as of
the close of regular trading on the New York Stock Exchange each day it is
open. Each Series' total net assets are divided by the number of outstanding
shares of that Series to determine the net asset value per share for that
Series.

The Back Bay Advisors Money Market Series' investment portfolio, and any
fixed-income securities with remaining maturities of 60 days or less held by
any other Series, are valued at amortized cost. Other portfolio securities of
each Series (other than the Back Bay Advisors Money Market Series) are valued
at market value where current market quotations are readily available and
otherwise are taken at fair value as determined in good faith by the Board of
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Board.

B-46
<PAGE>

The Back Bay Advisors Money Market Series seeks to maintain a constant net
asset value per share of $100, although this cannot be assured. The net asset
value per share for the other Series will vary depending on the value of each
Series' investment portfolio.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

BACK BAY ADVISORS MONEY MARKET SERIES

The net investment income of the Back Bay Advisors Money Market Series is
declared daily and paid monthly as a dividend. Although the Back Bay Advisors
Money Market Series does not expect to realize any long-term capital gains, if
such gains are realized they will be distributed once a year.

OTHER SERIES

It is the policy of each Series other than the Back Bay Advisors Money
Market Series to pay annually as dividends substantially all net investment
income and to distribute annually all net realized capital gains, if any,
after offsetting any capital loss carryovers. See "Taxes." Dividends from net
investment income may be paid more or less often if the Board of Trustees
deems it appropriate.

Federal income tax law requires each Series to distribute prior to calendar
year end virtually all of its ordinary income for such year and virtually all
of the capital gain net income realized by the Series in the one-year period
ending October 31 (or December 31, if the Series so elects) of such year and
not previously distributed.

Dividends and distributions of each Series are automatically reinvested in
shares of the respective Series.

TAXES

Each Series is treated as a separate taxable entity for federal income tax
purposes and intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended. So long as a Series distributes all
of its net investment income and net capital gains to its shareholders, the
Series itself does not pay any federal income tax. Dividends from net
investment income of each of the Series and distributions of each Series' net
short-term gains, if any, are ordinary income to its shareholders.
Distributions of any Series' net realized long-term capital gains, if any, are
long-term capital gains to its shareholders. Whether or not taxes must be paid
by the shareholders of a Series on distributions received from that Series
will depend on the tax status of NEVLICO's or The New England's separate
accounts and the tax status of any other shareholders. For the purposes of the
foregoing, each Series' shareholders are the separate accounts investing
directly in the Fund and are not the owners of the variable life insurance or
variable annuity contracts for which the Fund serves as an investment vehicle.
For a description of the tax consequences for such contract owners, see the
relevant prospectus applicable to such contracts.

ORGANIZATION AND CAPITALIZATION OF THE FUND

The Fund was originally organized in 1983 as a Massachusetts corporation and
was reorganized into a Massachusetts business trust on February 27, 1987. The
Fund is registered as a diversified, open-end management company under the
1940 Act and is authorized to issue an unlimited number of shares of each
Series. Shareholders may address inquiries about the Fund to New England
Securities, 399 Boylston Street, Boston, Massachusetts 02116.

As of the date of this prospectus, all of the outstanding voting securities
of the Fund are owned by separate accounts of The New England and/or NEVLICO,
and may, from time to time, be owned by those separate accounts and the
general account of The New England. Therefore, The New England and NEVLICO are
presumed to be in control (as that term is defined in the 1940 Act) of the
Fund. However, the staff of the SEC is presently of the view that The New
England and NEVLICO are each required to vote their Fund shares that are held
in a separate account that is a registered investment company under the 1940
Act (and, to the extent voting privileges are granted by the issuing insurance
company, in unregistered separate accounts) in

B-47
<PAGE>

the same proportion as the voting instructions received from owners of the
variable life insurance or variable annuity contracts issued by the separate
account, and that The New England is required to vote any shares held in its
general account (or in any unregistered separate account that does not have
voting privileges) in the same proportion as all other Fund shares are voted.
The New England and NEVLICO currently intend to vote their shares in a manner
consistent with this view.

The Fund does not generally hold annual meetings of shareholders and will
hold shareholders meetings only when required by law. Shareholders may remove
trustees from office by votes cast at a shareholder meeting or by written
consent.

TRANSFER AGENT

The transfer agent and the dividend paying agent for the Fund is The New
England, 501 Boylston Street, Boston, Massachusetts 02116.

VOTING RIGHTS

Fund shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held). NEVLICO and The New England are
the legal owners of shares attributable to variable life insurance and
variable annuity contracts issued by their separate accounts, and have the
right to vote those shares. Pursuant to the current view of the SEC staff,
NEVLICO and The New England will vote their shares in accordance with
instructions received from owners of variable life insurance and variable
annuity contracts issued by separate accounts that are registered under the
1940 Act. All Fund shares held by separate accounts of NEVLICO and The New
England that are registered under the 1940 Act (and, to the extent voting
privileges are granted by the issuing insurance company, by unregistered
separate accounts) for which no timely instructions are received will be voted
for, voted against or withheld from voting on any proposition in the same
proportion as the shares held in that separate account for all contracts for
which voting instructions are received. All Fund shares held by the general
investment account (or any unregistered separate account that does not have
voting privileges) of NEVLICO or The New England will be voted in the same
proportion as the aggregate of (i) the shares for which voting instructions
are received and (ii) the shares that are voted in proportion to such voting
instructions.

B-48
<PAGE>

APPENDIX A

RATINGS OF SECURITIES

Description of Moody's Investors Service, Inc. corporate bond ratings:

Aaa, Aa, A--Bonds which are rated AAA or Aa are judged to be of high quality
by all standards and are generally known as high grade bonds. Bonds rated Aa
are rated lower than Aaa securities because margins of protection may not be
as large as in the latter or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities. Bonds which are
rated A possess many favorable investment attributes and are to be considered
as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered medium grade obligations,
i.e., they are neither higher protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in
high degree. Such issues are often in default or have other marked
shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Description of Standard & Poor's Ratings Group corporate bond ratings:

AAA, AA, A--Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only in small
degree. Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in high rated
categories.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to repay principal and pay
interest for bonds in this category than for bonds in higher rated categories.

BB-B-CCC-CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

CI--The rating CI is reserved for income bonds on which no income is being
paid.

D--Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

B-49