NEW ENGLAND ZENITH FUND, 497, 1998-05-06

NEW ENGLAND ZENITH FUND
497, 1998-05-06

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<PAGE>

NEW ENGLAND ZENITH FUND

501 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02116
(617) 267-6600

PROSPECTUS -- MAY 1, 1998

New England Zenith Fund (the "Fund") consists of fourteen investment
portfolios (each a "Series") with the following investment objectives:

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

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES--long-term capital
appreciation through investment primarily in international equity securities.

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

CAPITAL GROWTH SERIES--long-term growth of capital.

GOLDMAN SACHS MIDCAP VALUE SERIES (FORMERLY, LOOMIS SAYLES AVANTI GROWTH
SERIES)--long-term capital appreciation.

DAVIS VENTURE VALUE SERIES--growth of capital.

WESTPEAK GROWTH AND INCOME 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, 1998,
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. The SEC maintains a Web site at
http://www.sec.gov that contains the Statement, material incorporated by
reference and other information about the Fund.

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-17
Investment Objectives and Policies......................................... B-17
Investment Risks........................................................... B-25
Performance Information.................................................... B-36
Investment Restrictions.................................................... B-39
Management................................................................. B-43
Purchase and Redemption of Shares.......................................... B-50
Net Asset Values and Portfolio Valuation................................... B-50
Dividends and Capital Gain Distributions................................... B-51
Taxes...................................................................... B-51
Organization and Capitalization of the Fund................................ B-51
Transfer Agent............................................................. B-51
Voting Rights.............................................................. B-52
Appendix A................................................................. B-53
Appendix B................................................................. B-54
</TABLE>

B-2
<PAGE>

FINANCIAL HIGHLIGHTS

The Financial Highlights for the Fund which appear on the following pages
have been examined by Deloitte & Touche LLP, the Fund's independent
accountants, whose report thereon for the year ended December 31, 1997
accompanies the financial statements incorporated by reference in the
Statement and may be obtained by shareholders. Prior to 1997, Coopers &
Lybrand L.L.P. acted as the Fund's independent accountants and provided
reports which accompany the financial statements for those periods. The
Financial Highlights 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 on request
free of charge.

LOOMIS SAYLES SMALL CAP SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
MAY 2, 1994(A) TO --------------------------
DECEMBER 31, 1994 1995 1996 1997
----------------- ------- ------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $100.00 $ 96.61 $118.80 $ 144.29
------- ------- ------- --------
Income From Investment Operations
Net Investment Income............ 0.14 0.85 1.05 1.22
Net Gains or (Losses) on
Investments (both realized and
unrealized)..................... (3.38) 26.93 35.03 34.11
------- ------- ------- --------
Total From Investment
Operations.................. (3.24) 27.78 36.08 35.33
------- ------- ------- --------
Less Distributions
Distributions From Net Investment
Income.......................... (0.15) (0.78) (1.03) (1.21)
Distributions From Net Realized
Capital Gains................... 0.00 (4.81) (9.56) (19.49)
------- ------- ------- --------
Total Distributions.......... (0.15) (5.59) (10.59) (20.70)
------- ------- ------- --------
Net Asset Value, End of the
Period.......................... $ 96.61 $118.80 $144.29 $ 158.92
======= ======= ======= ========
Total Return (%)................. (3.23)(b) 28.88 30.67 24.85
Ratio of Operating Expenses to
Average Net Assets (%)(d)....... 1.00 (c) 1.00 1.00 1.00
Ratio of Net Investment Income to
Average Net Assets (%).......... 0.32 (c) 1.26 1.15 0.97
Portfolio Turnover Rate (%)...... 80 (c) 98 62 87
Average Commission Rate Paid(e).. -- -- $0.0568 $ 0.0534
Net Assets, End of Period (000).. $ 3,105 $27,741 $89,194 $200,105
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)(d)..................... 2.31 (c) 1.91 1.29 1.14
</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 1.00% of the
Series' average daily net assets.

(e) For fiscal years beginning on or after September 1, 1995, a Series is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.

B-3
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES(A)

<TABLE>
<CAPTION>
OCTOBER 31, 1994(B) YEAR ENDED DECEMBER 31,
TO -------------------------
DECEMBER 31, 1994 1995 1996 1997
------------------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $10.00 $ 10.23 $ 10.73 $ 11.29
------ ------- ------- -------
Income From Investment
Operations
Net Investment Income........... 0.03 0.09 0.06 0.08
Net Gains or (Losses) on
Investments (both realized and
unrealized).................... 0.23 0.53 0.68 (0.23)
------ ------- ------- -------
Total From Investment
Operations................. 0.26 0.62 0.74 (0.15)
------ ------- ------- -------
Less Distributions
Distributions From Net
Investment Income.............. (0.02) (0.09) (0.02) (0.09)
Distributions in Excess of Net
Investment Income.............. 0.00 (0.03) 0.00 0.00
Distributions From Net Realized
Capital Gains.................. 0.00 0.00 (0.16) (0.08)
Distributions in Excess of Net
Realized Capital Gains......... 0.00 0.00 0.00 (0.11)
Distributions From Paid-In
Capital........................ (0.01) 0.00 0.00 (0.00)
------ ------- ------- -------
Total Distributions......... (0.03) (0.12) (0.18) (0.28)
------ ------- ------- -------
Net Asset Value, End of the
Period......................... $10.23 $ 10.73 $ 11.29 $ 10.86
====== ======= ======= =======
Total Return (%)................ 2.60 (c) 6.03 6.87 (1.30)
Ratio of Operating Expenses to
Average Net Assets (%)(e)...... 1.30 (d) 1.30 1.30 1.30
Ratio of Net Investment Income
to Average Net Assets (%)...... 2.56 (d) 1.29 0.67 0.96
Portfolio Turnover Rate (%)..... 4 (d) 89 64 115
Average Commission Rate Paid(f). -- -- $0.0204 $0.0123
Net Assets, End of Period (000). $2,989 $16,268 $39,392 $53,035
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)(e).................... 5.38 (d) 3.12 1.66 1.59
</TABLE>
- --------
(a) On May 1, 1997, Morgan Stanley Asset Management Inc. succeeded Draycott
Partners, Ltd. as investment subadviser to the Series.

(b) Commencement of operations.

(d) Computed on an annualized basis.

(e) During the periods presented, TNE Advisers, Inc. has agreed to pay
operating expenses of the Series in excess of an annual expense limit of
1.30% of average daily net assets, subject to the obligation of the Series
to repay TNE Advisers, Inc. 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, Inc. more than
two years after the end of the fiscal year in which such expense was
incurred.

(f) For fiscal years beginning on or after September 1, 1995, a Series is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.

B-4
<PAGE>

ALGER EQUITY GROWTH SERIES

<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR ENDED DECEMBER 31,
TO ---------------------------
DECEMBER 31, 1994 1995 1996 1997
------------------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $10.00 $ 9.56 $ 13.80 $ 15.58
------ ------- -------- --------
Income From Investment
Operations
Net Investment Income......... 0.02 0.01 0.04 0.02
Net Gains or (Losses) on
Investments (both realized
and unrealized).............. (0.44) 4.65 1.78 3.92
------ ------- -------- --------
Total From Investment
Operations............... (0.42) 4.66 1.82 3.94
------ ------- -------- --------
Less Distributions
Distributions From Net
Investment Income............ (0.02) (0.01) (0.04) (0.02)
Distributions from Net
Realized Capital Gains....... 0.00 (0.41) 0.00 (1.88)
------ ------- -------- --------
Total Distributions....... (0.02) (0.42) (0.04) (1.90)
------ ------- -------- --------
Net Asset Value, End of the
Period....................... $ 9.56 $ 13.80 $ 15.58 $ 17.62
====== ======= ======== ========
Total Return (%).............. (4.20)(b) 48.80 13.17 25.63
Ratio of Operating Expenses to
Average Net Assets (%)(d).... 0.85 (c) 0.85 0.90 0.87
Ratio of Net Investment Income
to Average Net Assets (%).... 1.07 (c) 0.14 0.24 0.12
Portfolio Turnover Rate (%)... 32 (c) 107 78 137
Average Commission Rate
Paid(e)...................... -- -- $ 0.0716 $ 0.0723
Net Assets, End of Period
(000)........................ $1,917 $46,386 $120,456 $205,318
The Ratio of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
limitation would have been
(%)(d)....................... 2.74 (c) 2.45 0.90 0.87
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the periods presented, TNE Advisers, Inc. has agreed to pay
operating expenses of the Series in excess of an annual expense limit of
0.85% (through December 31, 1995) of average daily net assets, subject to
the obligation of the Series to repay TNE Advisers, Inc. 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, Inc. 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>

CAPITAL GROWTH SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1988 1989 1990(A) 1991 1992 1993 1994 1995 1996 1997
------- ------- -------- -------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Year.. $231.33 $201.14 $ 260.25 $ 249.04 $ 347.36 $ 322.23 $ 351.63 $ 312.30 $ 374.62 $ 427.08
------- ------- -------- -------- -------- -------- -------- -------- ---------- ----------
Income From Investment
Operations
Net Investment
Income................. 10.63 1.59 1.78 3.16 4.04 2.12 5.28 3.47 3.08 2.52
Net Gains or (Losses) on
Investments (both
realized and
unrealized)............ (30.97) 60.11 (10.88) 130.75 (25.10) 46.21 (30.54) 114.91 74.80 95.67
------- ------- -------- -------- -------- -------- -------- -------- ---------- ----------
Total From Investment
Operations........... (20.34) 61.70 (9.10) 133.91 (21.06) 48.33 (25.26) 118.38 77.88 98.19
------- ------- -------- -------- -------- -------- -------- -------- ---------- ----------
Less Distributions
Distributions From Net
Investment Income...... (9.55) (2.59) (2.11) (3.22) (4.07) (2.18) (5.15) (3.48) (3.08) (2.52)
Distributions From Net
Realized Capital Gains. (0.30) 0.00 0.00 (31.93) 0.00 (16.75) (8.92) (52.58) (22.34) (123.15)
Distributions From Paid-
in Capital............. 0.00 0.00 0.00 (0.44) 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- -------- -------- -------- -------- -------- -------- ---------- ----------
Total Distributions... (9.85) (2.59) (2.11) (35.59) (4.07) (18.93) (14.07) (56.06) (25.42) (125.67)
------- ------- -------- -------- -------- -------- -------- -------- ---------- ----------
Net Asset Value,
End of the Year........ $201.14 $260.25 $ 249.04 $ 347.36 $ 322.23 $ 351.63 $ 312.30 $ 374.62 $ 427.08 $ 399.60
======= ======= ======== ======== ======== ======== ======== ======== ========== ==========
Total Return (%)........ (8.8) 30.8 (3.5) 54.0 (6.05) 14.97 (7.07) 38.03 21.08 23.48
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.75 0.72 0.73 0.70 0.70 0.68 0.67 0.71 0.69 0.67
Ratio of Net Investment
Income to Average Net
Assets (%)............. 6.20 1.21 0.93 1.22 1.53 0.67 1.61 0.92 0.79 0.52
Portfolio Turnover Rate
(%).................... 813 269 229 174 207 169 140 242 207 214
Average Commission Rate
Paid(b)................ -- -- -- -- -- -- -- -- $ 0.0669 $ 0.0691
Net Assets,
End of Period (000).... $42,538 $90,377 $148,254 $343,965 $472,017 $644,384 $667,127 $921,444 $1,142,660 $1,425,719
</TABLE>
- --------
(a) On March 1, 1990, the Capital Growth Management Division of Loomis, Sayles
& Company, Incorporated was reorganized into Capital Growth Management
Limited Partnership, which assumed management of the Series.

(b) For fiscal years beginning on or after September 1, 1995, a Series is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.

B-6
<PAGE>

GOLDMAN SACHS MIDCAP VALUE SERIES (FORMERLY, LOOMIS SAYLES AVANTI GROWTH
SERIES)(A)

<TABLE>
<CAPTION>
APRIL 30, 1993(B) YEAR ENDED DECEMBER 31,
TO -----------------------------------
DECEMBER 31, 1993 1994 1995 1996 1997
----------------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of the Period..... $100.00 $113.67 $112.77 $142.44 $ 157.88
------- ------- ------- ------- --------
Income From Investment
Operations
Net Investment Income... 0.18 0.59 0.42 0.11 0.00
Net Gains or (Losses) on
Investments (both
realized and
unrealized)............ 14.56 (0.89) 33.80 24.88 27.12
------- ------- ------- ------- --------
Total From Invest-
ment Operations.... 14.74 (0.30) 34.22 24.99 27.12
------- ------- ------- ------- --------
Less Distributions
Distributions From Net
Investment Income...... (0.18) (0.60) (0.40) (0.13) 0.00
Distributions From Net
Realized Capital Gains. (0.67) 0.00 (4.15) (9.42) (14.41)
Distributions From Paid-
In Capital............. (0.22) 0.00 0.00 0.00 0.00
------- ------- ------- ------- --------
Total Distributions. (1.07) (0.60) (4.55) (9.55) (14.41)
------- ------- ------- ------- --------
Net Asset Value, End of
the Period............. $113.67 $112.77 $142.44 $157.88 $ 170.59
======= ======= ======= ======= ========
Total Return (%)........ 14.74 (c) (0.27) 30.35 17.58 17.35
Ratio of Operating Ex-
penses to Average Net
Assets (%)(e).......... 0.85 (d) 0.84 0.85 0.85 0.85
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.46 (d) 0.67 0.37 0.08 (0.16)
Portfolio Turnover Rate
(%).................... 21 (d) 67 58 65 49
Average Commission Rate
Paid(f)................ -- -- -- $0.0508 $ 0.0504
Net Assets, End of Pe-
riod (000)............. $11,972 $25,622 $48,832 $82,667 $114,617
The Ratio of Operating
Expenses to Average Net
Assets without giving
effect to the voluntary
expense limitation
would have been (%)(e). 0.89 (d) 0.84 1.06 0.92 0.86
</TABLE>
- --------
(a) On May 1, 1998, Goldman Sachs Asset Management succeeded Loomis, Sayles &
Company, L.P. as investment subadviser to the Series.

(b) Commencement of operations.

(d) Computed on an annualized basis.

(e) During the periods presented, the Series' adviser voluntarily agreed to
bear expenses of the Series (other than the advisory fees and any
brokerage costs, interest, taxes or extraordinary expenses) in excess of
0.15% of the Series' average daily net assets. Commencing May 1, 1998, TNE
Advisers, Inc. has agreed to pay operating expenses of the Series in
excess of an annual expense limit of 0.90% of average daily net assets,
subject to the obligation of the Series to repay TNE Advisers, Inc. 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, Inc. more than two years after the end of
the fiscal year in which such expense was incurred.

B-7
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR ENDED DECEMBER 31,
TO ---------------------------
DECEMBER 31, 1994 1995 1996 1997
------------------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $10.00 $ 9.62 $ 13.10 $ 16.09
------ ------- -------- --------
Income From Investment
Operations
Net Investment Income......... 0.03 0.10 0.13 0.18
Net Gains or (Losses) on
Investments (both realized
and unrealized).............. (0.38) 3.68 3.26 5.20
------ ------- -------- --------
Total From Investment
Operations............... (0.35) 3.78 3.39 5.38
------ ------- -------- --------
Less Distributions
Distributions From Net
Investment Income............ (0.03) (0.10) (0.13) (0.14)
Distributions From Net
Realized Capital Gains....... 0.00 (0.20) (0.27) (0.53)
------ ------- -------- --------
Total Distributions....... (0.03) (0.30) (0.40) (0.67)
------ ------- -------- --------
Net Asset Value, End of the
Period....................... $ 9.62 $ 13.10 $ 16.09 $ 20.80
====== ======= ======== ========
Total Return (%).............. (3.50)(b) 39.28 25.84 33.50
Ratio of Operating Expenses to
Average Net Assets (%)(d).... 0.90 (c) 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 2.54 (c) 1.39 1.25 0.94
Portfolio Turnover Rate (%)... 1 (c) 20 18 17
Average Commission Rate
Paid(e)...................... -- -- $ 0.0599 $ 0.0600
Net Assets, End of Period
(000)........................ $3,371 $35,045 $108,189 $280,448
The Ratio of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
limitation would have been
(%)(d)....................... 3.97 (c) 1.51 0.96 0.90
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the periods presented, TNE Advisers, Inc. has agreed to pay
operating expenses of the Series in excess of an annual expense limit of
0.90% of average daily net assets, subject to the obligation of the Series
to repay TNE Advisers, Inc. 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, Inc. more than
two years after the end of the fiscal year in which such expense was
incurred.

B-8
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

<TABLE>
<CAPTION>
APRIL 30, 1993(A) YEAR ENDED DECEMBER 31,
TO -----------------------------------
DECEMBER 31, 1993 1994 1995 1996 1997
----------------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of the Period..... $100.00 $112.32 $109.03 $141.31 $ 151.77
------- ------- ------- ------- --------
Income From Investment
Operations
Net Investment Income... 0.92 1.90 1.77 1.78 1.37
Net Gains or (Losses) on
Investments (both
realized and
unrealized)............ 13.33 (3.25) 37.91 23.69 48.76
------- ------- ------- ------- --------
Total From Invest-
ment Operations.... 14.25 (1.35) 39.68 25.47 50.13
------- ------- ------- ------- --------
Less Distributions
Distributions From Net
Investment Income...... (0.92) (1.92) (1.71) (1.82) (1.35)
Distributions From Net
Realized Capital Gains. (1.00) 0.00 (5.69) (13.19) (20.57)
Distributions In Excess
of Net Realized Capital
Gains.................. (0.01) 0.00 0.00 0.00 0.00
Distributions From Paid-
In Capital............. 0.00 (0.02) 0.00 0.00 0.00
------- ------- ------- ------- --------
Total Distributions. (1.93) (1.94) (7.40) (15.01) (21.92)
------- ------- ------- ------- --------
Net Asset Value, End of
the Period............. $112.32 $109.03 $141.31 $151.77 $ 179.98
======= ======= ======= ======= ========
Total Return (%)........ 14.24 (b) (1.21) 36.46 18.10 33.48
Ratio of Operating Ex-
penses to Average Net
Assets (%)(d).......... 0.85 (c) 0.85 0.85 0.85 0.82
Ratio of Net Investment
Income to Average Net
Assets (%)............. 2.16 (c) 2.30 1.63 1.40 0.91
Portfolio Turnover Rate
(%).................... 49 (c) 133 92 104 93
Average Commission Rate
Paid(e)................ -- -- -- $0.0344 $ 0.0334
Net Assets, End of Pe-
riod (000)............. $ 9,082 $22,934 $48,129 $82,330 $152,738
The Ratio of Operating
Expenses to Average Net
Assets without giving
effect to the voluntary
expense limitation
would have been (%)(d). 0.94 (c) 0.86 1.06 0.91 0.82
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the periods presented, the Series' adviser voluntarily agreed to
bear the expenses of the Series (other than the advisory fees and any
brokerage costs, interest, taxes or extraordinary expenses) in excess of
0.15% of the Series' average daily net assets.

B-9
<PAGE>

WESTPEAK STOCK INDEX SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993* 1994 1995 1996 1997
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Year.. $ 84.74 $ 94.36 $117.36 $108.49 $137.39 $ 72.00 $ 76.48 $ 75.35 $100.09 $ 119.62
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
Income From Investment
Operations
Net Investment Income... 3.48 3.55 3.76 3.56 8.35 1.54 1.80 1.88 1.91 1.86
Net Gains or (Losses) on
Investments (both
realized and
unrealized)............ 10.39 24.83 (8.64) 29.29 2.02 5.18 (0.92) 25.89 20.58 36.95
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
Total From
Investment
Operations......... 13.87 28.38 (4.88) 32.85 10.37 6.72 0.88 27.77 22.49 38.81
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
Less distributions
Distributions From Net
Investment Income...... (3.44) (3.74) (3.82) (3.56) (8.35) (1.36) (1.82) (1.85) (1.93) (1.86)
Distributions From Net
Realized Capital Gains. (0.81) (1.64) 0.00 (0.39) (67.41) (0.55) (0.16) (1.18) (1.03) (0.67)
Distributions in Excess
of Net Realized Capital
Gains.................. 0.00 0.00 0.00 0.00 0.00 (0.15) 0.00 0.00 0.00 (0.14)
Distributions In Excess
of Net Investment
Income................. 0.00 0.00 0.00 0.00 0.00 (0.18) 0.00 0.00 0.00 0.00
Distributions From Paid-
in Capital............. 0.00 0.00 (0.17) 0.00 0.00 0.00 (0.03) 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
Total Distributions. (4.25) (5.38) (3.99) (3.95) (75.76) (2.24) (2.01) (3.03) (2.96) (2.67)
------- ------- ------- ------- ------- ------- ------- ------- ------- --------
Net Asset Value, End of
Year................... $ 94.36 $117.36 $108.49 $137.39 $ 72.00 $ 76.48 $ 75.35 $100.09 $119.62 $ 155.76
======= ======= ======= ======= ======= ======= ======= ======= ======= ========
Total Return (%)........ 16.3 30.2 (4.1) 30.4 7.30 9.72 1.14 36.88 22.47 32.50
Ratio of Operating
Expenses to Average Net
Assets (%)(a).......... 0.36 0.34 0.36 0.36 0.35 0.34 0.33 0.40 0.40 0.40
Ratio of Net Investment
Income to Average Net
Assets (%)............. 3.92 3.31 3.36 2.86 2.63 2.52 2.59 2.20 1.84 1.41
Portfolio Turnover Rate
(%).................... 4 52 1 2 17 12 2 5 4 3
Average Commission Rate
Paid(b)................ -- -- -- -- -- -- -- -- $0.0309 $ 0.0322
Net Assets, End of
Period (000)........... $11,073 $15,501 $15,122 $20,496 $10,172 $28,817 $37,164 $58,671 $80,764 $126,584
The ratio of expenses
without
giving effect to the
voluntary expense
limitation would have
been (%)(a) ........... -- -- -- -- -- -- -- 0.54 0.50 0.43
</TABLE>
- --------
* Westpeak Investment Advisors, L.P. assumed responsibility for managing the
Series' portfolio on August 1, 1993.
(a) During the periods presented, the Series' adviser has voluntarily agreed
to bear the expenses of the Series (other than advisory fees and any
brokerage costs, interest, taxes or extraordinary expenses) in excess of
0.15% of the Series' average daily net assets.
(b) For fiscal years beginning on or after September 1, 1995, a Series is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.

B-10
<PAGE>

LOOMIS SAYLES BALANCED SERIES

<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR ENDED DECEMBER 31,
TO --------------------------
DECEMBER 31, 1994 1995 1996 1997
------------------- ------- ------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $10.00 $ 9.94 $ 11.95 $ 13.55
------ ------- ------- --------
Income From Investment
Operations
Net Investment Income......... 0.05 0.26 0.27 0.28
Net Gains or (Losses) on
Investments (both realized
and unrealized).............. (0.06) 2.20 1.73 1.90
------ ------- ------- --------
Total From Investment
Operations............... (0.01) 2.46 2.00 2.18
Less Distributions
Distributions From Net
Investment Income............ (0.05) (0.26) (0.27) (0.27)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 (0.19) (0.13) (0.60)
------ ------- ------- --------
Total Distributions....... (0.05) (0.45) (0.40) (0.87)
------ ------- ------- --------
Net Asset Value, End of the
Period....................... $ 9.94 $ 11.95 $ 13.55 $ 14.86
====== ======= ======= ========
Total Return (%).............. (0.10)(b) 24.79 16.91 16.18
Ratio of Operating Expenses to
Average Net Assets (%)(d).... 0.85 (c) 0.85 0.85 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... 4.16 (c) 4.03 3.08 2.79
Portfolio Turnover Rate (%)... 0 (c) 72 59 60
Average Commission Rate
Paid(e)...................... -- -- $0.0594 $ 0.0594
Net Assets, End of Period
(000)........................ $2,722 $18,823 $58,525 $137,443
The Ratio of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
limitation would have been
(%)(d)....................... 3.73 (c) 1.85 0.99 0.86
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the periods presented, TNE Advisers, Inc. has agreed to pay
operating expenses of the Series in excess of an annual expense limit of
0.85% of average daily net assets, subject to the obligation of the Series
to repay TNE Advisers, Inc. 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, Inc. more than
two years after the end of the fiscal year in which such expense was
incurred.

B-11
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Year.. $ 96.62 $100.17 $114.65 $112.79 $127.87 $ 130.26 $ 137.18 $ 130.30 $ 163.52 $ 170.37
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income... 5.13 4.31 5.47 6.41 5.14 4.35 5.42 6.34 6.43 6.38
Net Gains or (Losses) on
Investments (both
realized and
unrealized)............ 4.04 14.77 (1.81) 16.23 3.45 9.58 (6.92) 34.33 18.21 38.47
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total From Investment
Operations............. 9.17 19.08 3.66 22.64 8.59 13.93 (1.50) 40.67 24.64 44.85
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Less distributions
Distributions From Net
Investment Income...... (5.24) (4.22) (5.38) (6.41) (5.13) (4.36) (5.38) (6.34) (6.34) (6.42)
Distributions in Excess
of Net Investment
Income................. -- -- -- -- 0.00 0.00 0.00 (0.23) 0.00 0.00
Distributions From Net
Realized Capital Gains. (0.38) (0.38) 0.00 (1.15) (1.07) (2.65) 0.00 (0.88) (11.45) (18.95)
Distributions From Paid-
in Capital............. 0.00 0.00 (0.14) 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total Distributions... (5.62) (4.60) (5.52) (7.56) (6.20) (7.01) (5.38) (7.45) (17.79) (25.37)
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Net Asset Value, End of
the Year............... $100.17 $114.65 $112.79 $127.87 $130.26 $ 137.18 $ 130.30 $ 163.52 $ 170.37 $ 189.85
======= ======= ======= ======= ======= ======== ======== ======== ======== ========
Total Return (%)........ 9.5 19.1 3.2 20.2 6.70 10.65 (1.11) 31.26 15.01 26.56
Ratio of Operating
Expenses to Average
Net Assets (%)......... 0.64 0.57 0.57 0.55 0.54 0.53 0.54 0.64 0.62 0.61
Ratio of Net Investment
Income to Average Net
Assets (%)............. 5.88 5.29 5.58 5.45 5.32 3.65 3.98 4.06 3.64 3.20
Portfolio Turnover
Rate (%)............... 1 1 1 36 36 22 76 51 72 65
Average Commission Rate
Paid(a)................ -- -- -- -- -- -- -- -- $ 0.0318 $ 0.0248
Net Assets, End of
Period (000)........... $10,806 $23,622 $36,563 $49,995 $77,575 $121,339 $121,877 $147,536 $160,888 $188,783
</TABLE>
- --------
(a) For fiscal years beginning on or after September 1, 1995, a Series is
required to disclose its average commission rate per share for trades on
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.

B-12
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR ENDED DECEMBER 31,
TO -----------------------------
DECEMBER 31, 1994 1995 1996 1997
------------------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $10.00 $ 9.74 $ 10.85 $ 11.62
------ ------- -------- --------
Income From Investment
Operations
Net Investment Income...... 0.12 0.58 0.51 0.75
Net Gains or Losses on
Investments (both realized
and unrealized)........... (0.26) 1.30 1.05 0.54
------ ------- -------- --------
Total From Investment
Operations............ (0.14) 1.88 1.56 1.29
------ ------- -------- --------
Less Distributions
Distributions From Net
Investment Income......... (0.12) (0.55) (0.60) (0.76)
Distributions From Net
Realized Capital Gains.... 0.00 (0.22) (0.19) (0.14)
------ ------- -------- --------
Total Distributions.... (0.12) (0.77) (0.79) (0.90)
------ ------- -------- --------
Net Asset Value, End of the
Period.................... $ 9.74 $ 10.85 $ 11.62 $ 12.01
====== ======= ======== ========
Total Return (%)........... (1.40)(b) 19.38 14.36 11.07
Ratio of Operating Expenses
to Average Net Assets
(%)(d).................... 0.85 (c) 0.85 0.85 0.85
Ratio of Net Investment
Income to Average Net
Assets (%)................ 7.05 (c) 8.39 7.79 6.45
Portfolio Turnover Rate
(%)(a).................... 403 (c) 202 176 258
Net Assets, End of Period
(000)..................... $3,450 $ 9,484 $ 35,808 $ 71,202
The Ratio of Operating
Expenses to Average Net
Assets without giving
effect to the voluntary
expense limitation would
have been (%)(d).......... 2.01 (c) 2.44 1.19 0.87
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the periods presented, TNE Advisers, Inc. has agreed to pay
operating expenses of the Series in excess of an annual expense limit of
0.85% of average daily net assets, subject to the obligation of the Series
to repay TNE Advisers, Inc. 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, Inc. more than two
years after the end of the fiscal year in which such expense was incurred.

B-13
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993* 1994 1995 1996 1997
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Year.. $ 95.47 $ 92.75 $ 97.23 $ 97.61 $103.44 $ 103.47 $ 106.14 $ 95.53 $ 108.67 $ 105.63
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income... 8.52 8.58 8.49 8.53 7.96 5.70 7.05 7.34 7.72 7.43
Net Gains or (Losses) on
Investments (both
realized and
unrealized)............ (0.54) 2.81 (0.65) 8.90 0.51 7.38 (10.61) 12.85 (2.70) 4.05
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total From
Investment
Operations......... 7.98 11.39 7.84 17.43 8.47 13.08 (3.56) 20.19 5.02 11.48
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income...... (10.70) (6.91) (7.46) (9.47) (6.87) (6.20) (7.05) (7.05) (7.74) (7.51)
Distributions in Excess
of Net Investment
Income................. 0.00 0.00 0.00 0.00 0.00 (0.05) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains. 0.00 0.00 0.00 (2.13) (1.57) (4.16) 0.00 0.00 (0.32) (1.08)
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total Distributions. (10.70) (6.91) (7.46) (11.60) (8.44) (10.41) (7.05) (7.05) (8.06) (8.59)
------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Net Asset Value,
End of the Year........ $ 92.75 $ 97.23 $ 97.61 $103.44 $103.47 $ 106.14 $ 95.53 $ 108.67 $ 105.63 $ 108.52
======= ======= ======= ======= ======= ======== ======== ======== ======== ========
Total Return (%)........ 8.4 12.3 8.1 18.0 8.18 12.61 (3.36) 21.20 4.61 10.90
Ratio of Operating
Expenses to Average
Net Assets (%)......... 0.47 0.45 0.46 0.45 0.44 0.43 0.44 0.55 0.52 0.52
Ratio of Net Investment
Income to Average
Net Assets (%)......... 8.50 8.62 8.57 8.27 7.70 6.47 6.75 7.22 7.22 6.97
Portfolio Turnover Rate
(%).................... 104 69 106 193 71 177 82 73 98 40
Net Assets,
End of Period (000).... $15,750 $26,156 $40,631 $49,369 $83,057 $131,242 $126,234 $162,712 $180,359 $202,888
</TABLE>
- --------
* As of January 1, 1993, the Series discontinued the use of equalization
accounting.

B-14
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

<TABLE>
<CAPTION>
OCTOBER 31, 1994(A) YEAR ENDED DECEMBER 31,
TO ---------------------------
DECEMBER 31, 1994 1995 1996 1997
------------------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $10.00 $ 9.96 $ 11.04 $ 10.83
------ ------- -------- --------
Income From Investment
Operations
Net Investment Income......... 0.10 0.33 0.58 0.53
Net Gains or (Losses) on
Investments (both realized
and unrealized).............. (0.04) 1.16 (0.21) 0.40
------ ------- -------- --------
Total From Investment
Operations............... 0.06 1.49 0.37 0.93
------ ------- -------- --------
Less Distributions
Distributions From Net
Investment Income............ (0.10) (0.33) (0.56) (0.53)
Distributions From Net
Realized Capital Gains....... 0.00 (0.08) 0.00 (0.05)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 0.00 0.00 (0.04)
------ ------- -------- --------
Total Distributions....... (0.10) (0.41) (0.58) (0.62)
------ ------- -------- --------
Net Asset Value, End of the
Period....................... $ 9.96 $ 11.04 $ 10.83 $ 11.14
====== ======= ======== ========
Total Return (%).............. 0.60 (b) 15.02 3.31 8.57
Ratio of Operating Expenses to
Average Net Assets (%)(d).... 0.70 (c) 0.70 0.70 0.70
Ratio of Net Investment Income
to Average Net Assets (%).... 5.70 (c) 5.62 6.13 6.42
Portfolio Turnover Rate (%)... 1,409 (c) 415 388 572
Net Assets, End of Period
(000)........................ $2,012 $ 7,542 $ 13,211 $ 22,143
The Ratio of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
limitation would have been
(%)(d)....................... 2.54 (c) 2.90 1.37 0.98
</TABLE>
- --------
(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the periods presented, TNE Advisers, Inc. has agreed to pay
operating expenses of the Series in excess of an annual expense limit of
0.70% of average daily net assets, subject to the obligation of the Series
to repay TNE Advisers, Inc. 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, Inc. more than two
years after the end of the fiscal year in which such expense was incurred.

B-15
<PAGE>

BACK BAY ADVISORS MONEY MARKET SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning 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... 7.25 8.85 7.88 6.03 3.73 2.93 3.89 5.50 4.99 5.08
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total From
Investment
Operations......... 7.25 8.85 7.88 6.03 3.73 2.93 3.89 5.50 4.99 5.08
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Less Distributions
Distributions From Net
Investment Income...... (7.25) (8.85) (7.88) (6.03) (3.73) (2.93) (3.89) (5.50) (4.99) (5.08)
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total Distributions. (7.25) (8.85) (7.88) (6.03) (3.73) (2.93) (3.89) (5.50) (4.99) (5.08)
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
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 (%)........ 7.4 9.2 8.2 6.2 3.79 2.97 4.01 5.64 5.11 5.20
Ratio of Operating
Expenses to Average Net
Assets (%)(a).......... 0.38 0.38 0.38 0.38 0.38 0.38 0.40 0.50 0.50 0.45
Ratio of Net Investment
Income to Average Net
Assets (%)............. 7.26 8.85 7.87 6.01 3.71 2.93 3.89 5.50 4.99 5.21
Net Assets,
End of Period (000).... $38,929 $42,678 $60,071 $58,614 $61,607 $59,044 $73,960 $90,148 $116,999 $111,009
The Ratio of Operating
Expenses to Average Net
Assets without giving
effect to the voluntary
expense limitations
would have been (%)(a). -- -- -- -- -- -- -- 0.51 0.50 0.45
</TABLE>
- --------
(a) During the periods presented, the Series' adviser has voluntarily agreed
to bear Series' expenses (other than advisory fees and any brokerage
costs, interest, taxes, or extraordinary expenses) in excess of 0.15% of
the Series' average daily net assets.

B-16
<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.
Each of the Series is a series of the Fund.

Shares in the Fund are not offered directly to the general public and,
currently, are available only to separate accounts established by New England
Life Insurance Company ("NELICO"), Metropolitan Life Insurance Company
("MetLife") or subsidiaries of MetLife 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 NELICO
or MetLife.

INVESTMENT OBJECTIVES AND POLICIES

LOOMIS SAYLES SMALL CAP SERIES
Subadviser: Loomis, Sayles & Company, L.P. ("Loomis Sayles")

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

Loomis Sayles manages the Series by investing primarily in stocks of small
capitalization companies with good earnings growth potential that Loomis
Sayles believes are undervalued by the market. Such companies also typically
have better than average growth rates, below-average price/earnings ratios and
strong balance sheets and cash flow. Normally, the Series will invest at least
65% of its assets in companies with market capitalization, at the time of
investment, in the range of the market capitalization of those companies which
make up the Russell 2000 Index. 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.

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES
Subadviser: Morgan Stanley Asset Management Inc. ("MSAM")

The Morgan Stanley International Magnum Equity Series seeks long-term
capital appreciation through investment primarily in international equity
securities. The production of any current income is incidental to this
objective. MSAM seeks to achieve this objective by investing the Series'
assets primarily in common and preferred stocks, convertible securities,
rights or warrants to purchase common stocks and other equity securities of
non-U.S. issuers, in accordance with the EAFE country (as defined below)
weightings determined by MSAM. The production of any current income is
incidental to this objective. The equity securities in which the Series may
invest may be denominated in any currency.

The countries in which the Series will primarily invest are those comprising
the Morgan Stanley Capital International EAFE Index (the "EAFE Index"), which
includes Australia, Japan, New Zealand, most nations located in Western Europe
and certain developed countries in Asia, such as Hong Kong and Singapore (each
an "EAFE country," and collectively the "EAFE countries"). The Series may
invest up to 5% of its assets in non-EAFE countries. Under normal
circumstances, at least 65% of the total assets of the Series will be invested
in equity securities of issuers in at least three countries outside the United
States.

Although the Series intends to invest primarily in equity securities listed
on a stock exchange in an EAFE country, the Series may invest without limit in
equity securities that are traded over the counter or that are not admitted to
listing on a stock exchange or dealt in on a regulated market. As a result of
the absence of a public trading market, such securities may pose liquidity
risks.

MSAM's approach is to establish regional allocation strategies. By analyzing
a variety of macroeconomic and political factors, MSAM develops fundamental
projections on comparative interest rates, currencies, corporate profits and
economic growth among

B-17
<PAGE>

the various regions represented in the EAFE Index. These projections will be
used to establish regional allocation strategies. Within these regional
allocations, MSAM then selects equity securities among issuers of a region.

MSAM's approach in selecting among equity securities within a region
comprised of EAFE countries is oriented towards individual stock selection and
is value driven. MSAM identifies those equity securities which it believes to
be undervalued in relation to the issuer's assets, cash flow, earnings and
revenues. In selecting investments, MSAM utilizes the research of a number of
sources, including Morgan Stanley Capital International, an affiliate of MSAM
located in Geneva, Switzerland. The Series' holdings are regularly reviewed
and subjected to fundamental analysis to determine whether they continue to
conform to MSAM's investment criteria. Equity securities which no longer
conform to such investment criteria will be sold.

Although the Series anticipates being fully invested in equity securities of
EAFE countries, the Series may invest, under normal circumstances for cash
management purposes, up to 35% of its total assets in certain short-term (less
than twelve months to maturity) and medium-term (not greater than five years
to maturity) debt securities or hold cash.

ALGER EQUITY GROWTH SERIES
Subadviser: Fred Alger Management, Inc. ("Alger Management")

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.

Alger Management seeks to achieve the Series' 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 (with respect to 15% of its average net assets) may also: (i)
purchase money market instruments and repurchase agreements, (ii) purchase
restricted securities, including Rule 144A securities, and (iii) 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.

CAPITAL GROWTH SERIES
Adviser: Capital Growth Management Limited Partnership ("CGM")

The Capital Growth Series seeks long-term growth of capital through
investment primarily in equity securities of companies whose earnings are
expected to grow at a faster rate than the United States economy. Most of the
Series' investments are normally in common stocks, although the Series may
invest in any type of equity securities. Equity securities are common stocks
and securities convertible into common stocks. The Series does not consider
current income as a significant factor in selecting its investments. Equity
securities are volatile investments, subject to price declines as well as
advances, and involve greater risks than some other investment media.

GOLDMAN SACHS MIDCAP VALUE SERIES
Subadviser: Goldman Sachs Asset Management ("GSAM")

The Goldman Sachs Midcap Value Series seeks to provide investors with long-
term capital appreciation. GSAM invests, under normal circumstances,
substantially all of the Series' assets in equity securities and at least 65%
of its total assets in equity

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securities of companies with public stock market capitalizations (based upon
shares available for trading on an unrestricted basis) within the range of the
market capitalization of companies constituting the Russell Midcap Index at
the time of investment. Such range varies over time, and as of December 31,
1997 was between $400 million and $16 billion. If the capitalization of an
issuer increases above or decreases below this range after purchase of such
issuer's securities, the Series may, but is not required to, sell the
securities. Dividend income, if any, is an incidental consideration.

GSAM evaluates securities using fundamental analysis and intends to purchase
equity securities that are, in its view, underpriced relative to a combination
of such companies' long-term earnings prospects, growth rate, free cash flow
and/or dividend-paying ability. Consideration will be given to the business
quality of the issuer. Factors positively affecting GSAM's view of the quality
include the competitiveness and degree of regulation in markets in which the
issuer operates, the existence of a management team with a record of success,
the position of the issuer in markets in which it operates, the level of the
issuer's financial leverage and the sustainable return on capital invested in
the business. The Series may also purchase securities of companies that have
experienced difficulties and that, in the opinion of GSAM, are available at
attractive prices.

The Series may invest up to 35% of its total assets in fixed-income
securities, including up to 10% of its total assets in fixed-income securities
rated BB or lower by Standard & Poor's Rating Group ("Standard & Poor's" or
"S&P") or Ba or lower by Moody's Investors Services, Inc. ("Moody's"). In
addition, although the Series will invest primarily in publicly traded U.S.
securities, it may invest up to 25% of its total assets in foreign securities,
including up to 15% of its assets in securities of issuers in emerging markets
(as from time to time determined by GSAM) and securities quoted in foreign
currencies.

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

The Series may make short sales "against the box" but will not invest more
than 25% of the Series' net assets (determined at the time of the short sale)
in such short sales.

The Series may, together with other registered investment companies managed
by GSAM or its affiliates, transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.

In addition to the techniques described above, the Series may engage in the
following techniques and investments, in each case, with respect to no more
than 5% of its total assets: (i) warrants and stock purchase rights; (ii)
custodial receipts; (iii) privately-issued mortgage securities; (iv) asset-
backed securities; (v) stripped mortgage securities; (vi) swaps, caps, floors
and collars; (vii) futures; (viii) options; (ix) structured notes; (x) inverse
floaters; (xi) collateralized mortgage obligations; (xii) adjustable rate
mortgage securities and (xiii) mortgage-related securities not included in the
foregoing categories.

DAVIS VENTURE VALUE SERIES
Subadviser: Davis Selected Advisers, L.P. ("Davis Selected")

The Davis Venture Value Series' investment objective is growth of capital.
The Series seeks to achieve its objective by investing primarily 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 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 write 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.

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WESTPEAK GROWTH AND INCOME SERIES
Subadviser: Westpeak Investment Advisors, L.P. ("Westpeak")

The Series 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.

WESTPEAK STOCK INDEX SERIES
Subadviser: Westpeak

The Series 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 S&P 500 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 S&P 500 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.) The Series may
engage in futures transactions to reduce tracking error.

Westpeak 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 Series.

LOOMIS SAYLES BALANCED SERIES
Subadviser: Loomis Sayles

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

The Series 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' equity 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, STRIPS (see "Miscellaneous
Investment Practices--STRIPS" in the Statement), stripped mortgage securities
and inverse floaters, subject to a limit of 5% of the Series' average net
assets for each of these instruments. The Series may invest in securities
rated BB or Ba or lower by S&P or Moody's (or in unrated securities that
Loomis Sayles determines to be of comparable quality). During the fiscal year
ended December 31, 1997, 1.33% of the average month-end net assets of the
Series were invested in fixed-income securities rated in the rating category
BB or Ba (just below investment grade) and 0.57% of such assets were invested
in fixed-income securities rated below this level. The Series invests at least
25% of its assets in fixed-income securities and, under normal market
conditions, more than 50% of its assets in equity securities. The Series also
may invest in foreign securities.

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BACK BAY ADVISORS MANAGED SERIES
Subadviser: Back Bay Advisors, L.P. ("Back Bay Advisors")

The investment objective of the Back Bay Advisors Managed Series is to
provide a favorable total investment 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. These
investments will be made in proportions Back Bay Advisors 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.

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.

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 below). These may include securities rated BB or B by S&P or Ba or
B by Moody's (or unrated but determined to be of comparable quality by Back
Bay Advisors) which are considered high yield, high risk securities and are
commonly known as "junk bonds." The Series will acquire no security rated
below B at the time of investment (or unrated but determined to be of
comparable quality by Back Bay Advisors). If a security held by the Series is
downgraded below B, Back Bay Advisors will determine at that time whether the
Series will continue to hold the security, taking into account the current
conditions. During the fiscal year ended December 31, 1997, 8.6% of the
average month-end net assets of the Series were 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 may lend securities it owns so long as such loans do not exceed
15% of the Series' total assets.

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
Subadviser: Salomon Brothers Asset Management Inc ("SBAM")

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

Based upon SBAM's assessment of the relative risks and opportunities
available in various market segments, assets will be allocated among U.S.
Government obligations, 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 if unrated, deemed to be of
comparable quality in SBAM'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 arranged through private negotiations
between a foreign sovereign entity and one or more financial institutions, in
the form of participation in such Loans and/or assignments of all or a portion
of such loans from third parties. See "Investment Risks--Loan Participations
and Assignments" below.

Depending on market conditions, the Series may invest without limit in
securities rated below investment grade, which involve significantly greater
risks, including price volatility and risk of default in the payment of
interest and principal, than investments in higher-quality securities.
Although SBAM 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 SBAM, the yield available from such
securities outweighs their additional risks. Certain

B-21
<PAGE>

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, if unrated, determined to be of comparable
quality to securities so rated. Securities rated 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, 1997, 9.0% of the average
month-end net assets of the Series were invested in fixed-income securities
rated in the rating category BB by S&P or Ba by Moody's (just below investment
grade), and 36.0% of the Series assets were invested in fixed-income
securities below this level. See Appendix A for more complete information on
portfolio composition.

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 SBAM anticipates that under certain market conditions it
will, invest up to 100% of its total 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 "Investment Risks--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 the securities of 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. The securities
issued by such entities 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
(except that short-term investments in securities for the forward settlement
of trades shall not count for purpose of this limitation).

SBAM has the 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,
fixed-income indices and other financial instruments, enter into financial
futures contracts, interest rate transactions and 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 or options on
currencies or currency futures contracts and Eurodollar futures and options.

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

BACK BAY ADVISORS BOND INCOME SERIES
Subadviser: Back Bay Advisors

The investment objective of the Series is to provide a high level of current
income consistent with protection of capital. 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 and in Rule
144A securities.

At least 80% of the Series' average net 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 to be of comparable quality to securities in
those rating categories. The Series may not invest more than 10% of its total
assets in obligations of foreign issuers. The Series will invest in these
securities only when Back Bay Advisors believes the associated risks are
minimal.

Up to 20% of the Series' average daily net assets may be invested in
securities rated BB or B by S&P or Ba or B by Moody's at the time of
investment. During the fiscal year ended December 31, 1997, 12% of the average
month-end net assets of the Series were invested in fixed-income securities
rated in the rating category BB or Ba (just below investment grade), and no
assets

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<PAGE>

were invested in fixed-income securities rated below this level. See Appendix
A for more complete information on portfolio composition. 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 not invest
in any securities rated below B at the time of investment (or unrated
securities that Back Bay Advisors determines to be of comparable quality). If
a security held by the Series is downgraded below B, Back Bay Advisors will
determine at that time whether the Series will continue to hold the security,
taking into account current conditions.

The Series may lend securities it owns so long as such loans do not exceed
15% of the Series' total assets.

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
Subadviser: SBAM

The Salomon Brothers U.S. Government 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 or
derivative securities (such as collateralized mortgage obligations) backed by
such 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"), which 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 when 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

(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 securities issued or guaranteed by the U.S. Government or
an agency, authority or instrumentality thereof. 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% minimum,
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 may 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 by SBAM to be of comparable quality,
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.

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BACK BAY ADVISORS MONEY MARKET SERIES
Subadviser: Back Bay Advisors

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 (together with full
faith and credit obligations, "U.S. Government Securities"); (3) commercial
paper and other corporate debt obligations rated in the highest rating
category by S&P or Moody's or, if unrated, of comparable quality as determined
by Back Bay Advisors, 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 million.

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 relatively small and
that the Series will be able to maintain the net asset value of its shares at
a constant level 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 investments in 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.

ADDITIONAL INFORMATION

Except for the investment objective of the Loomis Sayles Small Cap, Capital
Growth, Westpeak Growth and Income, 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 objective and policies may be changed at
any time without shareholder approval. If there is a change in the objective
or policies of a Series, shareholders should consider whether the Series
remains an appropriate investment, in light of their own investment
objectives.

TEMPORARY DEFENSIVE INVESTMENTS

The Loomis Sayles Small Cap, Morgan Stanley International Magnum Equity,
Alger Equity Growth, Capital Growth, Davis Venture Value, Goldman Sachs Midcap
Value, Westpeak Growth and Income and Westpeak Stock Index Series seek to
attain their objectives by normally investing their assets primarily in equity
securities. The Loomis Sayles Balanced and Back Bay Advisors Managed Series
may also invest a portion of their assets 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 Morgan Stanley International Magnum Equity Series
may invest temporarily in foreign government, agency or corporate debt
obligations and any other instruments denominated in any currency issued by
international development agencies. No estimate can be made as to when or for
how long any Series will employ defensive strategies.

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INVESTMENT RISKS

. EQUITY SECURITIES (LOOMIS SAYLES SMALL CAP, MORGAN STANLEY INTERNATIONAL
MAGNUM EQUITY, ALGER EQUITY GROWTH, CAPITAL GROWTH, GOLDMAN SACHS MIDCAP
VALUE, DAVIS VENTURE VALUE, WESTPEAK GROWTH AND INCOME, WESTPEAK STOCK
INDEX, LOOMIS SAYLES BALANCED AND BACK BAY ADVISORS MANAGED SERIES)

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).

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. Their 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.

The Series may also invest in real estate investment trusts ("REITs"). REITs
are pooled investment vehicles that invest primarily in either real estate or
real estate related loans. The value of a REIT is affected by changes in the
value of the properties owned by the REIT or securing mortgage loans held by
the REIT. REITs are dependent upon cash flow from their investments to repay
financing costs and the ability of the REIT's manager. REITs are also subject
to risks generally associated with investments in real estate. A Series will
indirectly bear its proportionate share of any expenses, including management
fees, paid by each REIT in which it invests.

. CONVERTIBLE SECURITIES (MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY, ALGER
EQUITY GROWTH, CAPITAL GROWTH, GOLDMAN SACHS MIDCAP VALUE, 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 common 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 other 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.

.FIXED-INCOME SECURITIES (ALL SERIES)

Fixed-income securities include a broad array of short-, medium- and long-term
obligations (including notes, bonds and preferred stock) issued by the U.S. or
foreign governments, government or international agencies and
instrumentalities, and corporate issuers of various types. 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 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 or other factors. Except to the extent values are affected by other
factors such as developments relating to a specific issuer, generally the
value of a fixed-income security can be expected to rise when interest rates
decline and conversely, the value of such a security can be expected to fall
when interest rates rise. Some fixed-income securities also involve prepayment
or call risk. Prepayment risk is the risk that the issuer will repay a Series
the principal on the

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security before it is due, thus depriving the Series of a favorable stream of
future interest or dividend payments. Call risk is the risk that an issuer
will exercise a call feature that permits the issuer to repurchase the
securities from their holders. Although a Series would typically receive a
premium if an issuer were to call a security, if a call occurs during times of
declining interest rates, the Series may realize a capital loss if the
security was purchased at a premium, and may be forced to replace the called
security with a lower yielding security.

The short-term and medium-term fixed-income securities in which the Morgan
Stanley International Magnum Equity Series may invest consist of; (a)
obligations of governments, agencies or instrumentalities of any member state
of the Organization for Economic Cooperation and Development (the "OECD"),
including the United States; (b) bank deposits and bank obligations (including
certificates of deposit, time deposits and bankers' acceptances) of banks
organized under the laws of any member states of the OECD, including the
United States, denominated in any currency; (c) finance company and corporate
commercial paper and other short-term corporate debt obligations of
corporations organized under the laws of any member states of the OECD,
including the United States, meeting the Series' credit quality standards,
provided that no more than 20% of the Series' assets are invested in any one
of such issuers. The short-term and medium-term fixed-income securities in
which the Series may invest will be rated investment grade, or if unrated,
determined to be of comparable quality by MSAM.

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 (GOLDMAN SACHS MIDCAP VALUE, 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,
are considered high yield, high risk securities and are commonly known as
"junk bonds". 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. The ability of a Series investing in lower
quality fixed-income securities to achieve its investment objective may be
more dependent on the credit analysis of the Series' subadviser than it would
be for a Series 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. For more information,
including a detailed description of the ratings assigned by S&P and Moody's,
please refer to "Appendix B--Ratings of Securities."

. MORTGAGE-RELATED SECURITIES (GOLDMAN SACHS MIDCAP 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)

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
securities 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. When interest rates rise, the value and liquidity of mortgage-
backed securities may decline sharply and generally will decline more than
would be the case with other fixed-income securities. However, because of the
prepayment feature, the value of mortgage-backed securities may not increase
as much as other fixed-income securities when interest rates decline.

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. COLLATERALIZED MORTGAGE OBLIGATIONS (GOLDMAN SACHS MIDCAP 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)

A collateralized mortgage obligation (a "CMO") is a debt security
collateralized 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 a CMO first to mature generally will be
retired prior to its maturity. The early retirement of a particular class or
series of a CMO held by a Series would have the same effect as the prepayment
of mortgages underlying a mortgage pass-through security.

. STRIPPED MORTGAGE SECURITIES (GOLDMAN SACHS MIDCAP VALUE, SALOMON BROTHERS
STRATEGIC BOND OPPORTUNITIES AND SALOMON BROTHERS U.S. GOVERNMENT SERIES)

Stripped mortgage securities are derivative multi-class mortgage securities.
Stripped mortgage securities may be issued by agencies or instrumentalities of
the U.S. Government or by private originators of, or investors in, mortgage
loans, including savings and loans, mortgage banks, commercial banks or
investment banks. 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. The yield to maturity on IOs and POs and other
mortgage-backed securities that are purchased at a substantial premium or
discount generally are sensitive to changes in prevailing interest rates and
to the rates of principal payments (including prepayments) on the underlying
mortgage assets. If the underlying mortgage assets experience greater than
anticipated pre-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, each Series will treat its investments in stripped
mortgage securities as illiquid, and as such, these investments, together with
any other illiquid investments, will not exceed 15% of a Series' net assets.

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

An adjustable rate mortgage security (an "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. Unlike fixed-rate
mortgage securities, ARMs are collateralized by or represent interests in
mortgage loans with variable rates of interest. These interest rates 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 (GOLDMAN SACHS MIDCAP 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)

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

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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 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 (GOLDMAN SACHS MIDCAP VALUE, 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
may 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 treated as illiquid.

. REPURCHASE AGREEMENTS (ALL SERIES)

In a repurchase agreement, 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. If the seller fails to
repurchase the securities, the Series has rights to sell the securities to
third parties. Repurchase agreements can be regarded as loans by the Series to
the seller, collateralized by securities that are the subject of the
agreement. Repurchase agreements afford an opportunity for a Series to earn a
return on available cash at relatively low credit risk, although the Series
may be subject to various delays and risks of loss if the seller fails to meet
its obligation to repurchase.

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

The Salomon Brothers Strategic Bond Opportunities and Salomon Brothers U.S.
Government Securities Series may enter into reverse repurchase agreements and
dollar rolls 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 certain assets 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 restrictions with respect to
borrowings.

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. WRITING OPTIONS (MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY, GOLDMAN SACHS
MIDCAP VALUE, DAVIS VENTURE VALUE, 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-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. A put option
gives the purchaser of the option the right to sell, and obliges the writer of
the option to buy, the underlying security at the exercise price. A call
option gives the purchaser of the option the right to buy, and obliges the
writer of the option to sell, the underlying security at the exercise price.

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 underlying 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 (MORGAN STANLEY INTERNATIONAL MAGNUM
EQUITY, GOLDMAN SACHS MIDCAP VALUE, DAVIS VENTURE VALUE, WESTPEAK GROWTH AND
INCOME, 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
commodity 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 positions
of a Series could cause losses on the futures contracts to be greater than
gains in the value of such securities or currency positions. 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 the Series listed above may, in the discretion of its subadviser,
engage in foreign currency exchange transactions, including options on foreign
currencies 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 the 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. The Goldman
Sachs Midcap Value Series may also engage (to the extent of up to 5% of its
total net assets) in transactions in futures and options thereon and on
securities indices for the purpose of increasing total return (i.e., for
purposes other than hedging).

Each of the Series listed above 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.

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

. SWAPS (MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY, GOLDMAN SACHS MIDCAP
VALUE AND SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)

The Morgan Stanley International Magnum Equity, Goldman Sachs Midcap Value and
Salomon Brothers Strategic Bond Opportunities 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
duration management technique or to protect against any increase in the price
of securities the Series anticipates purchasing at a later date. Interest rate
swaps involve the exchange by the 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/or other 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 (GOLDMAN SACHS MIDCAP VALUE AND SALOMON BROTHERS STRATEGIC
BOND OPPORTUNITIES SERIES)

The Salomon Brothers Strategic Bond Opportunities and Goldman Sachs Midcap
Value Series are 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 hold. 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' portfolios 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 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 are 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.

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. FOREIGN SECURITIES (LOOMIS SAYLES SMALL CAP, MORGAN STANLEY INTERNATIONAL
MAGNUM EQUITY, ALGER EQUITY GROWTH, CAPITAL GROWTH, GOLDMAN SACHS MIDCAP
VALUE, DAVIS VENTURE VALUE, WESTPEAK GROWTH AND INCOME, 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 the Series listed above may invest in securities of issuers organized
or headquartered outside the United States or primarily traded outside the
United States ("foreign securities"). The Morgan Stanley International Magnum
Equity and Salomon Brothers Strategic Bond Opportunities Series may invest up
to 100% of their total assets in foreign securities. Each of the following
Series will not purchase a foreign security if, as a result, the Series'
holdings of foreign securities would exceed the indicated percentage of the
Series' total assets: Back Bay Advisors Bond Income Series, 10%; Loomis Sayles
Small Cap and Salomon Brothers U.S. Government Series, 20%; Goldman Sachs
Midcap Value Series, 25%.

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 governmental 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.

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.

Each Series may invest in foreign equity securities either by purchasing such
securities directly or by purchasing "depository receipts." Depository
receipts are instruments issued by a bank that represent an interest in equity
securities held by arrangement with the bank. Depository receipts can be
either "sponsored" or "unsponsored." Sponsored depository receipts are issued
by banks in cooperation with the issuer of the underlying equity securities.
Unsponsored depository receipts are arranged without involvement by the issuer
of the underlying equity securities. Less information about the issuer of the
underlying equity securities may be available in the case of unsponsored
depository receipts.

. 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 rate fluctuations or
difficulties, political uncertainty or instability, the country's cash flow
position, the availability of

B-31
<PAGE>

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 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.

Certain debt obligations, customarily referred to as "Brady Bonds," are
created through the exchange of existing commercial bank loans to foreign
entities for new obligations in connection with debt restructuring under a
plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady.
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and
issued in various currencies (although most are dollar-denominated), and they
are actively traded in the over-the-counter secondary market.

The Series may purchase Brady Bonds with no or limited collateralization, and
will be relying for payment of interest and (except in the case of principal
collateralized Brady Bonds) principal primarily on the willingness and ability
of the foreign government to make payment in accordance with the terms of the
Brady Bonds. In the event of a default with respect to collateralized Brady
Bonds as a result of which the payment obligations of the issuer are
accelerated, the U.S. Treasury zero coupon obligations held as collateral for
the payment of principal will not be distributed to investors, nor will such
obligations be sold and the proceeds distributed. The collateral will be held
by the collateral agent to the scheduled maturity of the defaulted Brady
Bonds, which will continue to be outstanding, at which time the face amount of
the collateral will equal the principal payments which would have then been
due on the Brady Bonds in the normal course. In light of the residual risk of
the Brady Bonds and, among other factors, the history of default with respect
to commercial bank loans by public and private entities of countries issuing
Brady Bonds, investments in Brady Bonds are to be viewed as speculative. The
Internal Revenue Code requires the holder of a Brady Bond 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.

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 Salomon Brothers Strategic Bond Opportunities 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 assume the credit risk of 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.

B-32
<PAGE>

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 intends to treat all
investments in Participations and Assignments as illiquid.

. WHEN-ISSUED SECURITIES (LOOMIS SAYLES SMALL CAP, MORGAN STANLEY
INTERNATIONAL MAGNUM EQUITY, ALGER EQUITY GROWTH, GOLDMAN SACHS MIDCAP
VALUE, DAVIS VENTURE VALUE, BACK BAY ADVISORS MANAGED, LOOMIS SAYLES
BALANCED, BACK BAY ADVISORS BOND INCOME, 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 assets in a segregated
account in an amount sufficient to satisfy its outstanding obligations to buy
securities on a "when-issued" basis.

. FORWARD COMMITMENTS (GOLDMAN SACHS MIDCAP VALUE SERIES)

The Goldman Sachs Midcap Value Series may purchase securities on a forward
commitment basis; that is, make contracts to purchase securities for a fixed
price at a future date beyond the customary three-day settlement period. The
Series is required to hold and maintain in a segregated account with the
custodian until three days prior to settlement date, cash or liquid assets in
an amount sufficient to meet the purchase price. Alternatively, the Series may
enter into offsetting contracts for the forward sale of other securities it
owns. The purchase of securities on a forward commitment basis involves a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. Although the Series would generally purchase securities on a
forward commitment basis with the intention of acquiring such securities for
its portfolio, the Series may dispose of forward commitments prior to
settlement if GSAM deems it appropriate to do so.

. INVESTMENT COMPANY SECURITIES (MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY,
ALGER EQUITY GROWTH, CAPITAL GROWTH, GOLDMAN SACHS MIDCAP VALUE, DAVIS
VENTURE VALUE, WESTPEAK GROWTH AND INCOME, WESTPEAK STOCK INDEX AND BACK BAY
ADVISORS MANAGED SERIES)

Each of the Series listed above may invest up to 10% of its assets in
securities of other investment companies ("funds"), including funds that are
advised by a subadviser to the Series. 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' adviser or 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 Davis Venture Value Series may only invest in
securities of investment companies investing primarily in foreign securities.

The Goldman Sachs Midcap Value and Back Bay Advisors Managed Series may also
purchase Standard and Poor's Depository Receipts ("SPDRs"). SPDRs are
interests in a unit investment trust which is designed to track the S&P 500.
SPDRs may be obtained from the issuer or purchased in the secondary market
(SPDRs are listed on the American Stock Exchange).

. LENDING OF PORTFOLIO SECURITIES (MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY,
ALGER EQUITY GROWTH, CAPITAL GROWTH, GOLDMAN SACHS MIDCAP VALUE, DAVIS
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-listed Series lends its 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.

B-33
<PAGE>

. SHORT SALES "AGAINST THE BOX" (MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY,
ALGER EQUITY GROWTH AND GOLDMAN SACHS MIDCAP VALUE SERIES)

A short sale is a transaction in which a party borrows a security and then
sells the borrowed security to another party. The Series listed above 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. The tax advantages of short sales against the box may be limited by
certain provisions of the Taxpayer Relief Act of 1997.

. 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 resalable, including securities whose
disposition is restricted by federal securities laws. Each 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' adviser or subadviser has
determined, under guidelines established by the Fund's trustees, that the
particular issue of Rule 144A securities is liquid. Investment in restricted
or other illiquid securities involves the risk that a Series may be unable to
sell such a security at the desired time. Also, a Series may incur expenses,
losses or delays in the process of registering restricted securities prior to
resale.

. 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)

Each Series listed above may invest in zero coupon securities. Zero coupon
securities involve special risk considerations. Zero coupon securities include
debt securities that pay no cash income but are sold at substantial discounts
from their value at maturity. When such 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 other zero coupon
securities which also are sold at substantial discounts from their maturity
values 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 values of zero coupon securities
appreciate more during periods of declining interest rates and depreciate more
during periods of rising interest rates. Zero coupon securities may be issued
by a 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 (see "High
Yield/High Risk Foreign Sovereign Debt Securities" above), 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 Capital Growth Series'
objective is long-term capital growth, 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. Higher portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
relevant Series, and may result in increased recognition of taxable capital
gains. For additional information about such costs see "Taxes" 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" above. A portfolio
turnover rate in excess of 100% may be considered high.

B-34
<PAGE>

RESOLVING MATERIAL CONFLICTS

Currently, shares in the Fund are available only to separate accounts
established by NELICO, MetLife or subsidiaries of MetLife 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 NELICO or MetLife.

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 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 NELICO or
MetLife. 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-35
<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 New England Mutual
Life Insurance Company ("The New England") (which merged into MetLife on
August 30, 1996) or TNE Advisers, Inc. 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
AVERAGE ANNUAL
AVERAGE ANNUAL TOTAL
ANNUAL TOTAL RETURN
TOTAL RETURN SINCE
RETURN FOR THE COMMENCE-
FOR THE FIVE MENT
YEAR ENDED DECEMBER 31, TEN YEARS YEARS OF OPERATIONS
-------------------------------------------------------------------- ENDED ENDED THROUGH
SERIES 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 12/31/97 12/31/97 12/31/97
- ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loomis Sayles
Small Cap
Series -- -- -- -- -- -- (3.2)%(1) 28.9% 30.7% 24.9 % -- -- 21.4%
Morgan Stanley
International
Magnum Equity
Series(2) -- -- -- -- -- -- 2.6 %(3) 6.0% 6.9% (1.3)% -- -- 4.4%
Alger Equity
Growth Series -- -- -- -- -- -- (4.2)%(3) 48.8% 13.2% 25.6 % -- -- 25.0%
Capital Growth
Series (8.8)% 30.8% (3.5)% 54.0% (6.1)% 15.0% (7.1)% 38.0% 21.1% 23.5 % 13.9% 17.1% 23.2%(4)
Goldman Sachs
Midcap Value
Series(5) -- -- -- -- -- 14.7%(6) (0.3)% 30.4% 17.6% 17.4 % -- -- 16.7%
Davis Venture
Value Series -- -- -- -- -- -- (3.5)%(3) 39.3% 25.8% 33.5 % -- -- 29.3%
Westpeak Growth
and Income
Series -- -- -- -- -- 14.2%(7) (1.2)% 36.5% 18.1% 33.5 % -- -- 20.9%
Westpeak Stock
Index Series 16.3 % 30.2% (4.1)% 30.4% 7.3 % 9.7%(9) 1.1 % 36.9% 22.5% 32.5 % 17.5% 19.8% 14.9%(8)
Loomis Sayles
Balanced Series -- -- -- -- -- -- (0.1)%(3) 24.8% 16.9% 16.2 % -- -- 18.1%
Back Bay
Advisors
Managed Series 9.5 % 19.1% 3.2 % 20.2% 6.7 % 10.7% (1.1)% 31.3% 15.1% 26.6 % 13.7% 15.9% 12.3%(8)
Salomon Brothers
Strategic Bond
Opportunities
Series -- -- -- -- -- -- (1.4)%(3) 19.4% 14.4% 11.1 % -- -- 13.6%
Back Bay
Advisors Bond
Income Series 8.4 % 12.3% 8.1 % 18.0% 8.2 % 12.6% (3.4)% 21.2% 4.6% 10.9 % 9.9% 8.9% 10.5%(4)
Salomon Brothers
U.S. Government
Series -- -- -- -- -- -- 0.6 %(3) 15.0% 3.3% 8.6 % -- -- 8.6%
Back Bay
Advisors Money
Market Series 7.4 % 9.2% 8.2 % 6.2% 3.8 % 3.0% 4.0 % 5.6% 5.1% 5.2 % 5.8% 4.6% 6.4%(4)
S&P 500(10) 16.5 % 31.6% (3.1)% 30.3% 7.6 % 10.1% 1.3 % 37.4% 23.0% 33.3 % 18.0% 20.2% 16.9%(4)
Lehman
Intermediate
Government/Corporate
Bond Index(11) 6.8 % 12.8% 9.2 % 14.6% 7.2 % 8.8% (2.0)% 15.3% 2.9% 7.9 % 8.3% 6.6% 9.5%(4)
Consumer Price
Index(12) 4.4 % 4.7% 6.1 % 3.1% 2.9 % 2.8% 2.8 % 2.6% 3.3% 1.7 % 3.4% 2.6% 3.4%(4)
Dow Jones
Industrial
Average(13) 16.1 % 32.2% (1.0)% 24.2% 7.4 % 16.9% 5.1 % 37.0% 28.9% 24.9 % 18.6% 22.0% 17.9%(4)
</TABLE>
- --------
(1) Represents unannualized total return for the period May 2, 1994, when the
Loomis Sayles Small Cap Series commenced operations, to December 31, 1994.
The Series was not available through variable insurance or variable
annuity products until October 31, 1994.
(2) Effective May 1, 1997, MSAM began managing the Series, succeeding Draycott
Partners, Ltd.
(3) Represents unannualized total return for the period from October 31, 1994,
when the Morgan Stanley International Magnum Equity, Alger Equity Growth,
Davis Venture Value, Loomis Sayles Balanced, Salomon Brothers Strategic
Bond Opportunities and Salomon Brothers U.S. Government Series commenced
operations, to December 31, 1994.

B-36
<PAGE>

(4) The Capital Growth, Back Bay Advisors Bond Income and Back Bay Advisors
Money Market Series commenced operations on August 26, 1983, and their
Average Annual Total Returns Since Commencement of Operations have been
calculated for the period beginning with that date. These returns would
not change if they had been calculated for the period beginning September
1, 1983, which is the period for which the Average Annual Total Returns
Since Commencement of Operations have been calculated for the S&P 500,
Lehman Intermediate Government/Corporate Bond Index, Consumer Price Index
and Dow Jones Industrial Average (unless otherwise indicated).
(5) On May 1, 1998, GSAM became subadviser to the Series, succeeding Loomis
Sayles.
(6) Represents unannualized total return for the period beginning April 30,
1993, when the Series became publicly available, to December 31, 1993.
(7) Represents unannualized total return for the period beginning April 30,
1993, when the Series became publicly available, to December 31, 1993.
(8) For the period beginning May 1, 1987 when the Back Bay Advisors Managed
and Westpeak Stock Index Series became publicly available. Operations for
the Series commenced on March 30, 1987, but Series did not become publicly
available until May 1, 1987.
(9) Westpeak succeeded Back Bay Advisors as investment adviser to the Series
on August 1, 1993.
(10) The S&P 500 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.
(11) 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.
(12) 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.
(13) 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.

PAST PERFORMANCE OF SIMILARLY MANAGED ACCOUNTS

The performance data shown below for Goldman Sachs Mid Cap Equity Fund (the
"Goldman Fund") and the Morgan Stanley International Magnum Composite (the
"Composite") were calculated in accordance with recommended standards of the
Association for Investment Management and Research retroactively applied to
all time periods. Investors should also be aware that the use of methodology
different from that used below to calculate performance could result in
different performance data.

GOLDMAN SACHS ASSET MANAGEMENT

The total returns shown below are based on performance data furnished by
GSAM for the Goldman Fund, a mutual fund which has the same investment
objective as that of the Goldman Sachs Midcap Value Series and is managed
using policies and strategies substantially similar, though not necessarily
identical, to those employed by GSAM in managing the Goldman Sachs Midcap
Value Series, and is the only account that has been managed by GSAM using such
policies and strategies. The performance information for the Goldman Fund has
been adjusted to give effect to the expenses incurred by the Goldman Sachs
Midcap Value Series in its most recent fiscal year without giving effect to
the Voluntary Expense Agreement or the Expense Deferral Arrangement but giving
effect to a 0.05% increase in investment advisory fees that takes effect May
1, 1998. The Goldman Fund may not have been subject to the same types of
expenses to which the Series is subject, nor to the diversification
requirements, investment limitations and other restrictions imposed on the
Series by the Investment Company Act of 1940 or Internal Revenue Code. The
following information does not represent the Series' performance and should
not be considered a prediction of future performance of the Series. The
Series' performance may be higher or lower than the performance of the Goldman
Fund shown below. IN ADDITION, THE PERFORMANCE OF THE GOLDMAN FUND SHOWN BELOW
DOES NOT REFLECT ANY OF THE CHARGES ASSESSED AGAINST THE INSURANCE COMPANY
SEPARATE ACCOUNTS OR VARIABLE LIFE INSURANCE OR VARIABLE ANNUITY PRODUCTS FOR
WHICH THE SERIES SERVES AS AN INVESTMENT VEHICLE. THESE CHARGES WOULD HAVE THE
EFFECT OF LOWERING PERFORMANCE.

B-37
<PAGE>

<TABLE>
<CAPTION>
GOLDMAN SACHS MID CAP LIPPER MIDCAP
EQUITY FUND* FUND INDEX RUSSELL MIDCAP INDEX
--------------------- ------------- --------------------
<S> <C> <C> <C>
Total Return for the
Year Ended December 31,
1997................... 36.0% 17.6% 29.0%
Average Annual Total
Return Since Inception
of Goldman Fund (August
1, 1995)............... 25.5% 16.7% 22.9%
</TABLE>
- --------
* Giving effect to the expense deferral arrangement which goes into effect May
1, 1998 the total returns for the one year and since inception periods
ending December 31, 1997 would have been 36.0% and 25.5%, respectively.

The Russell Midcap Index is an unmanaged index of the 800 smallest companies
in the Russell 1000 Index. The Russell 1000 Index represents the largest 1000
U.S. companies. The range of market capitalization of the companies included
in the Russell Midcap Index was $400 million to $16 billion as of December 31,
1997. The Russell Midcap Index has not been adjusted for ongoing management,
distribution and operating expenses.

The Lipper Midcap Fund Index is a composite return of 10 midcap mutual funds
that by prospectus or portfolio practice invest primarily in companies with
market capitalization of less than $5 billion (such capitalization fluctuates
with the market).

MORGAN STANLEY ASSET MANAGEMENT INC.

The data presented below under "Morgan Stanley International Magnum
Composite" represent the composite average annual total return of nine
accounts managed by MSAM. These accounts include three separate accounts, six
mutual fund accounts (including, during the period it has been under MSAM's
management, the Morgan Stanley International Magnum Equity Series) and a
pooled trust.

The total returns shown below are based on performance data furnished by
MSAM for the Composite. Each account represented in the Composite has an
investment objective substantially similar to that of the Morgan Stanley
International Magnum Equity Series and was managed using policies and
strategies substantially similar (although not necessarily identical) to those
that are employed by MSAM in managing the Series. The Composite includes the
Morgan Stanley International Magnum Equity Series and all the accounts with
assets in excess of $25 million managed by MSAM with substantially similar
policies as the Series. The performance data for the Composite does not
represent the Series' performance and does not include the Series' performance
prior to MSAM becoming investment subadviser to the Series' on May 1, 1997.

Several of the accounts included in the Composite are not subject to the
same types of expenses to which the Series is subject, nor to the
diversification requirements, investment limitations and other restrictions
imposed on the Series by the Investment Company Act of 1940 or the Internal
Revenue Code. The performance data shown below might have been less favorable
had all of the accounts been subject to regulation as investment companies
under the relevant federal laws. Investors should not consider this
performance data as an indication of future performance of the Series. IN
ADDITION, THE PERFORMANCE SHOWN BELOW 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 SERIES SERVES AS AN
INVESTMENT VEHICLE. THESE CHARGES WOULD HAVE THE EFFECT OF LOWERING
PERFORMANCE.

<TABLE>
<CAPTION>
MORGAN STANLEY MORGAN STANLEY
INTERNATIONAL MAGNUM INTERNATIONAL MAGNUM LIPPER INTERNATIONAL
COMPOSITE*** EQUITY SERIES EQUITY FUND INDEX MSCI EAFE INDEX
-------------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Total Return for the
Period
5/1/97-12/31/97*....... 5.0% 1.9 % 4.2% 2.9%
Total Return for the
Year Ended December 31,
1997................... 8.2% (1.3)% 7.3% 4.1%
Average Annual Total
Return Since Inception
(June 1, 1995)**....... 10.8% 3.5 % 11.4% 5.5%
</TABLE>
- --------
* Represents unannualized total return since MSAM began managing the Series
on May 1, 1997.
** Earliest commencement of operations of an account managed by MSAM included
in the Composite.
*** The performance information for the Composite has been adjusted to give
effect to the annualized expenses incurred by the Series in its most
recent fiscal year without giving effect to the expense deferral
arrangement (described below under "Management"). Giving effect to the
expense deferral arrangement the total returns for the eight month, one
year and since inception periods ending December 31, 1997 would have been
5.2%, 8.6% and 11.1%, respectively.

The MSCI EAFE Index is an arithmetical average (weighted by market value) of
the performance (in U.S. dollars) of over 1,000 companies representing the
stock markets of Europe, Australia, New Zealand, and the Far East. The Index
performance has not been adjusted for ongoing management, distribution and
operating expenses.

B-38
<PAGE>

The Lipper International Equity Fund Index is a composite return of 30
mutual funds that invest their assets in equity securities with primary
trading markets outside the United States.

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, 1997, the yield for the Back Bay
Advisors Money Market Series was 5.27%. The effective yield for the same
period was 5.41%.

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 the Series listed above 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 TNE Advisers, Inc.

INVESTMENT RESTRICTIONS

The following is a description of restrictions on the investments to be made
by each of the 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. Percentage tests regarding any investment restriction apply
only at the time a Series is making that investment.

INVESTMENT RESTRICTIONS APPLICABLE TO THE CAPITAL GROWTH, 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 and 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. In the case of the Back Bay
Advisors Money Market 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; or
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 any 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 any
issuer;

B-39
<PAGE>

(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 Capital Growth, Back Bay Advisors Managed and Back Bay
Advisors Bond Income Series may make loans of their portfolio securities,
as long as such loans do not exceed 15% of the Series' total assets.

(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 issuer, together own beneficially
more than 5% of the securities of that issuer;

(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 Capital Growth, Back Bay Advisors Managed and Back Bay Advisors Bond
Income 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 MetLife, NELICO or their affiliates or Back
Bay Advisors, CGM, Westpeak or accounts under their management to reduce
acquisition costs, to average prices among such accounts or 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 Capital Growth, Westpeak Stock Index, Back Bay Advisors Managed
and Back Bay Advisors Bond Income Series may invest in securities of other
investment companies by purchases in the open market involving only
customary broker's commissions. (Under 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 or real estate (except that
the Westpeak Stock Index and 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). 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; or

(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
Series may invest consistently with its objective and investment policies
(This restriction does not apply to repurchase agreements.); or

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

B-40
<PAGE>

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 that
such loans do not exceed 15% of the Series' total assets; or

(2) Write or purchase puts, calls or a combination thereof, except that
the 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 Series will not pledge more than 2% of its assets.

CAPITAL GROWTH SERIES AND WESTPEAK STOCK INDEX SERIES

Neither the Capital Growth Series nor the Westpeak Stock Index Series will:

(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
that such loans do not exceed 15% of the Series' total assets;

(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;
or

(3) Write options or warrants.

As a matter of operating policy subject to change without shareholder
approval, the Capital Growth Series will not make loans of its portfolio
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, neither the Capital Growth Series nor the
Westpeak Stock Index Series will 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 that such loans do not exceed 15% of the Series' total assets; or

(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 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, MORGAN
STANLEY INTERNATIONAL MAGNUM EQUITY, ALGER EQUITY GROWTH, GOLDMAN SACHS MIDCAP
VALUE, DAVIS VENTURE VALUE, WESTPEAK GROWTH AND INCOME, 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 securities) 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 or, with respect to all of the
Series' total assets, purchase any security (other than U.S. Government
securities) if, as a result, more than 10% of such assets would then be
invested in securities of a single issuer;

B-41
<PAGE>

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 the right to obtain, without payment of further
consideration, securities equivalent in kind and amount to those sold; or
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) 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;

(8) 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);

(9) 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;

*(10) Except to the extent permitted by rule or order of the SEC,
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);

*(11) Write, purchase or sell options except that the Series may (a)
write, purchase and sell put and call options on securities, securities
indices, currencies, futures contracts, swap contracts and other similar
investments, (b) enter into currency forward contracts, and (c) invest in
structured notes;

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

(13) 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 Fund's Agreement and Declaration of
Trust and by the 1940 Act, the rules thereunder, or any exemption
therefrom.)

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

* Denotes investment restrictions which may be changed without shareholder
approval.

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 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 Regulations

B-42
<PAGE>

promulgated by the Department of the Treasury. 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. The Fund intends to
comply with the regulations specifying the diversification requirements which
have been issued by the Department of the Treasury. State insurance laws and
regulations may impose additional limitations on the Series' investments,
including the Series' ability to borrow, lend and use options, futures, and
other derivative instruments. In addition, such laws and regulations may
require that a Series' investments meet additional diversificiation or other
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. ("TNE Advisers") is the investment adviser of
each of the Series except the Capital Growth Series, for which CGM serves as
investment adviser.

SERIES ADVISED BY TNE ADVISERS

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

<TABLE>
<CAPTION>
SERIES SUBADVISER
------ ----------
<S> <C>
Loomis Sayles Small Cap Series.......................... Loomis Sayles
Morgan Stanley International Magnum Equity Series....... MSAM
Alger Equity Growth Series.............................. Alger Management
Goldman Sachs Midcap Value Series....................... GSAM
Davis Venture Value Series.............................. Davis Selected
Westpeak Growth and Income Series....................... Westpeak
Westpeak Stock Index Series............................. Westpeak
Loomis Sayles Balanced Series........................... Loomis Sayles
Back Bay Advisors Managed Series........................ Back Bay Advisors
Salomon Brothers Strategic Bond Opportunities Series.... SBAM
Back Bay Advisors Bond Income Series.................... Back Bay Advisors
Salomon Brothers U.S. Government Series................. SBAM
Back Bay Advisors Money Market Series................... Back Bay Advisors
</TABLE>

TNE ADVISERS, 501 Boylston Street, Boston, Massachusetts 02116, was
organized in 1994 and is an indirect wholly-owned subsidiary of MetLife, a
mutual insurance company. TNE Advisers 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 has contracted with New England Funds, L.P. to provide executive and
other personnel for administration of certain affairs of the Series.

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

The general partners of each of Loomis Sayles, Westpeak, Back Bay Advisors
and New England Funds, L.P. are special purpose corporations which are
indirect wholly-owned subsidiaries of Nvest Companies, L.P. ("Nvest
Companies"). Nvest Companies' managing general partner, Nvest Corporation, is
an indirect wholly-owned subsidiary of MetLife. MetLife owns in the aggregate,
directly and indirectly, approximately 47% of the outstanding limited
partnership interests in Nvest Companies. Nvest Companies' advising general
partner, Nvest, L.P., is a publicly-traded company listed on the New York
Stock Exchange. Nvest Corporation is the sole general partner of Nvest,
L.P. Nvest Companies is the owner of a majority limited partnership interest
in CGM.

The Fund has received an exemptive order from the SEC to permit TNE
Advisers, subject to certain conditions, to enter into subadvisory agreements
with subadvisers, including subadvisers other than the existing subadvisers of
a Series, when approved by the Fund's Board of Trustees, without obtaining
shareholder approval. The exemptive order also permits, without shareholder

B-43
<PAGE>

approval, the terms of an existing subadvisory agreement to be changed or the
employment of existing subadviser to be continued after events that would
otherwise cause an automatic termination of a subadvisory agreement, when such
changes or continuation are approved by the Board of Trustees. Shareholders
will be notified of any subadviser changes and whenever notification is
required by the conditions of the order.

LOOMIS SAYLES, One Financial Center, Boston, Massachusetts 02111, subadviser
to the 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.

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.

Carol C. McMurtrie and Tricia H. Mills are the portfolio managers of the
equity portion of the Loomis Sayles Balanced Series and are responsible for
allocating the assets of the Series between equity and fixed-income
securities. Ms. McMurtrie and Ms. Mills have served in these capacities since
July 1997. The portfolio management team for the fixed-income portion of the
Series consists of Meri Anne Beck, John Hyll and Barr Segal. Ms. Beck and Mr.
Hyll have had portfolio management responsibility for the Series' fixed-income
investments since 1994, and Mr. Segal joined the team in 1996. Messrs. Hyll
and Segal and Mses. Beck, McMurtrie and Mills are Vice Presidents of Loomis
Sayles. Mses. Beck, McMurtrie and Mills and Mr. Hyll have been employed by
Loomis Sayles for more than five years. Mr. Segal was a Senior Portfolio
Manager at TCW Group before joining Loomis Sayles in 1996.

WESTPEAK, 1011 Walnut Street, Boulder, Colorado 80302, subadviser to the
Westpeak Growth and Income 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 Growth and
Income 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.

BACK BAY ADVISORS, 399 Boylston Street, Boston, Massachusetts 02116,
subadviser to the Back Bay Advisors Managed, Back Bay Advisors Bond Income and
Back Bay Advisors Money Market Series, provides discretionary investment
management services to mutual funds and other institutional investors. Peter
Palfrey, Vice President of Back Bay Advisors has served as the Back Bay
Advisors Managed Series' portfolio manager since January 1994. Mr. Palfrey,
prior to joining Back Bay Advisors in 1993, was Investment Vice President with
Mutual of New York. 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.

MSAM, 1221 Avenue of the Americas, New York, New York 10020, subadviser to
the Morgan Stanley International Magnum Equity Series, conducts a worldwide
investment management business, providing a broad range of portfolio
management services to customers in the United States and abroad. MSAM is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., which is a
preeminent financial services firm that maintains leading market positions in
each of its three primary businesses--securities, asset management and credit
services. MSAM serves as investment adviser to numerous open-end and closed-
end investment companies.

Barton Biggs, Managing Director of MSAM, heads MSAM's Asset Allocation
Committee in New York. This Committee makes decisions about regional
allocation based on projections of comparable interest rates, currencies,
corporate profits and economic growth among the various regions represented in
the EAFE Index. Francine J. Bovich, acts as portfolio manager of the Morgan
Stanley International Magnum Equity Series. Ms. Bovich, Managing Director of
MSAM, joined MSAM in 1993 and has been primarily responsible for the day-to-
day management of the Series since MSAM became subadviser to the Series in May
1997. Previously she was a Principal and Executive Vice President of Westwood
Management Corp., a registered investment adviser.

ALGER MANAGEMENT, 75 Maiden Lane, New York, New York 10038, subadviser to
the Alger Equity Growth Series, is a wholly-owned indirect 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 until 1995 and as President since 1995. 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

B-44
<PAGE>

since 1995. Each has served as portfolio manager of the Series since its
inception in October 1994. Mr. Alger, Ms. Khoo and Mr. Tartaro serve as
portfolio managers for other mutual funds and investment accounts managed by
Alger Management.

DAVIS SELECTED, 124 East Marcy Street, Santa Fe, New Mexico 87501,
subadviser to the Davis Venture Value Series, also provides advisory services
to other investment companies and institutions. Venture Advisers, Inc., which
is controlled by Shelby M.C. Davis, is the sole general partner of Davis
Selected. Davis Selected may also delegate any of its responsibilities to
Davis Selected-NY, Inc. ("DSA-NY"). Davis Selected compensates DSA-NY for all
reasonable direct costs of providing services to the Series. DSA-NY, organized
in 1996, is a wholly-owned subsidiary of Davis Selected and is located at 609
Fifth Avenue, New York, New York 10017. Christopher C. Davis has been the
portfolio manager for the Series and other equity funds managed by Davis
Selected since February 1997, and was co-portfolio manager of the Series with
Shelby M.C. Davis from October 1995 until February 1997. Prior to his
responsibilities as co-portfolio manager, Christopher C. Davis worked closely
with Shelby M.C. Davis as assistant portfolio manager and research analyst
beginning in September 1989.

Shelby M.C. Davis is Chief Investment Officer of Davis Selected. As Chief
Investment Officer, he is active in providing investment themes, strategies
and individual stock selections to the Series.

SBAM, 7 World Trade Center, New York, New York 10048, the subadviser to the
Salomon Brothers Strategic Bond Opportunities Series and the Salomon Brothers
U.S. Government Series, is an indirect wholly-owned subsidiary of Travelers
Group Inc. ("Travelers"). Travelers is a diversified financial services
company engaged in investment services, asset management, consumer finance and
life and property and casualty insurance business. SBAM was incorporated in
1987 and, together with its affiliates in London, Frankfurt and Hong Kong,
provides a full range of fixed-income and equity investment advisory services
for individuals and institutional clients around the world, including European
and Far Eastern central banks, pension funds, endowments and insurance
companies, and serves as investment adviser to various investment companies.
In providing advisory services, SBAM and its affiliates have access to more
than 400 economists and mortgage, bond and sovereign debt analysts. As of
February 28, 1998, SBAM and such affiliates managed approximately $27 billion
in assets.

On April 6, 1998, Travelers announced that it had entered into a Merger
Agreement with Citicorp. The transaction, which is expected to be completed
during the third quarter of 1998, is subject to various regulatory approvals,
including approval by the Federal Reserve Board. The transaction is also
subject to approval by the stockholders of each of Travelers and Citicorp.
Upon consummation of the merger it is anticipated that SBAM and Salomon
Brothers Asset Management Limited ("SBAM Ltd") would be subsidiaries of the
surviving corporation. The surviving corporation would be a bank holding
company subject to regulation under the Bank Holding Company Act of 1956 (the
"BHCA"), the requirements of the Glass-Steagall Act and certain other laws and
regulations. Although the effects of the merger of Travelers and Citicorp and
compliance with the requirements of the BHCA and the Glass-Steagall Act are
still under review, SBAM does not believe that its compliance with applicable
law following the merger of Travelers and Citicorp will have a material
adverse effect on its ability to continue to provide the Fund with the same
level of investment advisory services that it currently receives.

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

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 the
Salomon Brothers 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 of SBAM. He has acted as co-portfolio manager of the
Salomon Brothers Strategic Bond Opportunities Series and as portfolio manager
of the Salomon Brothers U.S. Government Series since their inception in
October 1994. Mr. Lavan joined SBAM as Director and Portfolio

B-45
<PAGE>

Manager in 1990 and has served as a co-portfolio manager of the Series since
its inception. Mr. Wilby joined SBAM in 1989 and is a Managing Director of
SBAM's broker dealer affiliate, Salomon Brothers Inc and SBAM and Senior
Portfolio Manager of SBAM. He is responsible for investment company and
institutional portfolio investments in high yield U.S. corporate debt
securities and high yield foreign sovereign debt securities. He has served as
a co-portfolio manager of the Salomon Brothers Strategic Bond Opportunities
Series since its inception. Ms. Semmel has served as assistant portfolio
manager of the Salomon Brothers Strategic Bond Opportunities Series since its
inception. She has served as a Director of SBAM since January 1996 and as Vice
President from May 1993 to December 1995. Prior to joining SBAM in May 1993,
Ms. Semmel spent four years as a high yield bond analyst at MSAM. Mr. Scott
has been with SBAM Ltd since April 1994 and is a Director and Senior Portfolio
Manager of SBAM Ltd. He has served as a co-portfolio manager of the Salomon
Brothers Strategic Bond Opportunities Series since October 1994. From 1990 to
1994, he was a portfolio manager for J.P. Morgan Investment Management in
London, where he was responsible for global and non-dollar portfolios.

GSAM, One New York Plaza, New York, New York, 10004, subadviser to the
Goldman Sachs Midcap Value Series, is a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"). G. Lee Anderson, Vice President of
GSAM, Lawrence S. Sibley, Vice President of GSAM and Ronald E. Gutfleish,
Managing Director of GSAM, have served as portfolio managers of the Goldman
Sachs Midcap Value Series since May 1998. Mr. Anderson has been employed by
GSAM for more than five years. Mr. Sibley joined GSAM in 1997. Prior to that
he was Vice President at J.P. Morgan Securities and before that he was a
partner in institutional sales at Sanford C. Bernstein & Co. Mr. Gutfleish
joined GSAM in 1993. Prior to that, he was a principal of Sanford C. Bernstein
& Co. in its investment research department. Goldman Sachs is a worldwide
investment banking firm and has its principal business address at 85 Broad
Street, New York, New York 10004. The general partners of Goldman Sachs are
controlled by The Goldman Sachs Corporation.

FEES AND EXPENSES. TNE Advisers is paid a management fee from the Series it
manages at the following annual rates:

<TABLE>
<CAPTION>
ANNUAL MANAGEMENT FEE RATE PAID BY SERIES TO
TNE ADVISERS
SERIES (% OF AVERAGE DAILY NET ASSETS)
------ --------------------------------------------
<S> <C>
Loomis Sayles Small Cap Series....................... 1.00% of all assets
Morgan Stanley International Magnum Equity Series.... 0.90% of all assets
Alger Equity Growth Series........................... 0.75% of all assets
Goldman Sachs Midcap Value Series.................... 0.75% of all assets
Davis Venture Value Series........................... 0.75% of all assets
Westpeak Growth and Income 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-46
<PAGE>

SUBADVISORY FEES. TNE Advisers pays each subadviser a subadvisory fee at the
following annual rates for providing subadvisory services to the following
Series:

<TABLE>
<CAPTION>
ANNUAL SUBADVISORY
FEE RATES PAID
BY TNE
ADVISERS TO THE AS A % OF THE SERIES
SERIES SUBADVISERS AVERAGE DAILY NET ASSETS
- ------ ------------------ ------------------------------------
<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
Morgan Stanley
International Magnum
Equity Series.......... 0.75% of the first $30 million
0.60% of the next $40 million
0.45% of the next $30 million
0.40% of amounts in excess of $100 million
Alger Equity Growth
Series................. 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million
Goldman Sachs Midcap
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
Davis 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 Growth and
Income 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
Series................. 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
Managed 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
0.10% 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>

ADVISER OF THE CAPITAL GROWTH SERIES

CGM, One International Place, Boston, Massachusetts 02110, adviser to the
Capital Growth Series, is an investment advisory firm organized in 1990 which
manages seven mutual fund portfolios and advisory accounts for other clients.
The sole general partner of CGM is a corporation owned in equal shares by
Robert L. Kemp and G. Kenneth Heebner. Mr. Heebner, Senior Portfolio Manager
of CGM, has served as portfolio manager of the Capital Growth Series since its
inception.

B-47
<PAGE>

The Capital Growth Series pays CGM an advisory fee at an annual rate of
0.70% of the first $200 million of the Series' average daily net assets, 0.65%
of the next $300 million of such assets and 0.60% of such assets in excess of
$500 million. For advisory services rendered during the fiscal year ended
December 31, 1997, CGM was paid 0.63% of the Capital Growth Series' average
net assets in advisory fees.

VOLUNTARY EXPENSE AGREEMENT

Pursuant to voluntary expense agreements relating to the Westpeak Growth and
Income, Westpeak Stock Index, Back Bay Advisors Managed, Back Bay Advisors
Bond Income and Back Bay Advisors Money Market Series, TNE Advisers bears the
expenses (other than management fees and any brokerage costs, interest, taxes
or extraordinary expenses) of the Series in excess of 0.15% annually of the
respective Series' average daily net assets. Prior to May 1, 1998 a similar
arrangement was in effect for the Goldman Sachs Midcap Value Series (then
called the Loomis Sayles Avanti Growth Series). In the case of the Loomis
Sayles Small Cap Series, TNE Advisers bears all the expenses (other than any
brokerage costs, interest, taxes or extraordinary expenses) of the Series in
excess of 1.00% annually of the Series' average daily net assets. TNE Advisers
may terminate these expense agreements at any time. As a result of the current
voluntary expense agreements (and assuming the Series incur the same level of
management fees as in 1997 and no taxes, interest or extraordinary expenses),
these annual Series' annual expense ratios as a percentage of net assets
during this prospectus' effectiveness, assuming the continuation of the
voluntary expense agreements, are expected to be as follows:

<TABLE>
<CAPTION>
TOTAL EXPENSE RATIO
UNDER CURRENT VOLUNTARY
SERIES EXPENSE AGREEMENTS
------ -----------------------
<S> <C>
Back Bay Advisors Money Market Series............. 0.45%
Back Bay Advisors Bond Income Series.............. 0.52%
Back Bay Advisors Managed Series.................. 0.65%
Westpeak Growth and Income Series................. 0.82%
Westpeak Stock Index Series....................... 0.40%
Loomis Sayles Small Cap Series.................... 1.00%
</TABLE>

If these expense agreements were to terminate, the expense ratios may be
higher.

EXPENSE DEFERRAL ARRANGEMENT

Pursuant to an expense deferral arrangement relating to the Morgan Stanley
International Magnum Equity, the Alger Equity Growth, Goldman Sachs Midcap
Value Series, Davis Venture Value, Loomis Sayles Balanced, Salomon Brothers
Strategic Bond Opportunities and Salomon Brothers U.S. Government Series, TNE
Advisers 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 each Series to repay TNE Advisers such expenses in future
years, if any, when that 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 more than two years after the end of the fiscal year in
which such expense was incurred. The expense deferral arrangement can be
prospectively discontinued by TNE Advisers at any time 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. The expense
limits (annual rates as a percentage of the Series average daily net assets)
are as follows:

<TABLE>
<CAPTION>
EXPENSE LIMIT UNDER
SERIES DEFERRAL ARRANGEMENT
------ --------------------
<S> <C>
Morgan Stanley International Magnum Equity Series... 1.30%
Alger Equity Growth Series.......................... 0.90%
Goldman Sachs Midcap Value Series................... 0.90%
Davis Venture Value Series.......................... 0.90%
Loomis Sayles Balanced Series....................... 0.85%
Salomon Brothers Strategic Bond Opportunities Se-
ries............................................... 0.85%
Salomon Brothers U.S. Government Series............. 0.70%
</TABLE>

B-48
<PAGE>

ADDITIONAL INFORMATION ABOUT EXPENSES

Each Series pays all expenses not borne by its adviser or subadvisers or New
England Securities, including, but not limited to, the charges and expenses of
each Series' custodian, independent auditors and legal counsel for the Fund
and its independent trustees, 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 and
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 NELICO or its affiliates, other than affiliated registered
investment companies.

The Series incurred total expenses during the year ended December 31, 1997
as follows:

<TABLE>
<CAPTION>
TOTAL EXPENSES
(AS OF A PERCENTAGE OF
AVERAGE NET ASSETS)
FOR THE YEAR ENDED
SERIES DECEMBER 31, 1997
------ ----------------------
<S> <C>
Loomis Sayles Small Cap Series.................... 1.00%
Morgan Stanley International Magnum Equity Series. 1.30%
Alger Equity Growth Series........................ 0.87%
Capital Growth Series............................. 0.67%
Goldman Sachs Midcap Value Series*................ 0.85%*
Davis Venture Value Series........................ 0.90%
Westpeak Growth and Income Series................. 0.82%
Westpeak Stock Index Series....................... 0.40%
Loomis Sayles Balanced Series..................... 0.85%
Back Bay Advisors Managed Series.................. 0.61%
Salomon Brothers Strategic Bond Opportunities Se-
ries............................................. 0.85%
Back Bay Advisors Bond Income Series.............. 0.52%
Salomon Brothers U.S. Government Series........... 0.70%
Back Bay Advisors Money Market Series............. 0.45%
</TABLE>

*During 1997, the Goldman Sachs Midcap Value Series, then known as the
Loomis Sayles Avanti Growth Series, was subject to a lower management fee than
is currently in effect for the Series and operated under a voluntary expense
agreement described above rather than the expense deferral arrangement under
which the Series currently operates.

If the voluntary expense agreements and expense deferral arrangement
described above had not been in effect, the Series' expenses for the year
ended December 31, 1997 would have been:

<TABLE>
<CAPTION>
TOTAL EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS) WITHOUT
VOLUNTARY EXPENSE
AGREEMENT OR
EXPENSE DEFERRAL
ARRANGEMENT FOR THE YEAR
SERIES ENDED DECEMBER 31, 1997
------ ---------------------------
<S> <C>
Loomis Sayles Small Cap Series............... 1.14%
Morgan Stanley International Magnum Equity
Series...................................... 1.59%
Alger Equity Growth Series................... 0.87%
Capital Growth Series........................ 0.67%
Goldman Sachs Midcap Value Series**.......... 0.86%
Davis Venture Value Series................... 0.88%
Westpeak Growth and Income Series............ 0.82%
Westpeak Stock Index Series.................. 0.43%
Loomis Sayles Balanced Series................ 0.86%
Back Bay Advisors Managed Series............. 0.61%
Salomon Brothers Strategic Bond Opportunities
Series...................................... 0.87%
Back Bay Advisors Bond Income Series......... 0.52%
Salomon Brothers U.S. Government Series...... 0.98%
Back Bay Advisors Money Market Series........ 0.45%
</TABLE>

**Total expenses for the Goldman Sachs Midcap Value Series are expected to
be higher during 1998 and are limited to 0.90% under the expense deferral
arrangement.

B-49
<PAGE>

These expense figures do not include portfolio brokerage commissions, 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.

MISCELLANEOUS ARRANGEMENTS

Subject to procedures adopted by the Fund's Board of Trustees, Fund
brokerage transactions may be executed by brokers, and Fund transactions in
futures contract transactions and options thereon may be executed by futures
commission merchants, where such brokers or futures commission merchants are
affiliated with any adviser or subadviser. The Morgan Stanley International
Magnum Equity, Alger Equity Growth, Goldman Sachs Midcap Value and Davis
Venture Value Series may pay brokerage commissions to brokerage firms
affiliated with each Series' respective subadviser. The Goldman Sachs Midcap
Value Series may pay commissions and charges on futures and futures options
transactions to futures commissions merchants affiliated with GSAM. Portfolio
transactions of all Series in bonds, notes and money market instruments are
generally effected on a net basis without a stated commission.

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

SERVICE SYSTEMS--YEAR 2000

Many of the services provided to the Series depend on the smooth functioning
of computer systems. Many systems in use today cannot distinguish between the
year 1900 and the year 2000. Failure of any of the service systems to process
information properly in the year 2000 could have an adverse impact on the
Series' operations and services provided to shareholders. TNE Advisers, CGM,
the Series subadvisers, New England Securities, NELICO (the Fund's transfer
agent), State Street Bank and Trust Company (the Fund's custodian) and certain
other service providers to the Series have reported that each expects to
modify its systems, as necessary, prior to January 1, 2000 to address the so-
called "year 2000 problem." However, there can be no assurance that the
problem will be corrected in all respects and that the Series' operations and
services provided to shareholders will not be adversely affected.

PURCHASE AND REDEMPTION OF SHARES

Shares of each Series are purchased or redeemed depending on, among other
things, 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 (the "NYSE")
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 NYSE (currently 4 p.m. Eastern time) 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 NYSE is closed for other than weekends or
holidays, or, if permitted by the rules of the SEC, during periods when
trading on the NYSE 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 VALUE AND PORTFOLIO VALUATION

CGM and the Series' subadvisers, under the direction of the Fund's Board of
Trustees, determine the value of each Series' securities. The net asset value
of each Series' shares is determined as of the close of regular trading on the
NYSE on 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 Fund's
Board of Trustees, although the actual calculations may be made by persons
acting pursuant to the direction of the Board.

B-50
<PAGE>

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 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 Fund's 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
additional shares of the respective Series.

TAXES

Each Series is treated as a separate entity for federal income tax purposes
and intends to qualify as a regulated investment company under the Code, 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 treated as
ordinary income to its shareholders. Distributions of any Series' net realized
capital gains on sales of securities held for more than one year but not more
than eighteen months (i.e. 28% rate gain) and on sales of securities held for
more than eighteen months (i.e. 20% rate gain), if any, are treated as such 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 NELICO's or MetLife'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 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 as 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 MetLife or NELICO, and may, from
time to time, be owned by those separate accounts and the general accounts of
MetLife or NELICO. Therefore, MetLife and NELICO 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 MetLife and NELICO 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 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 MetLife and NELICO are required to
vote any shares held in their general accounts (or in any unregistered
separate account that does not have voting privileges) in the same proportion
as all other Fund shares are voted. MetLife and NELICO 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 dividend paying agent for the Fund is NELICO, 501
Boylston Street, Boston, Massachusetts 02116.

B-51
<PAGE>

VOTING RIGHTS

Fund shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held). NELICO and MetLife 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 described above, NELICO
and MetLife 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 NELICO and MetLife 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 NELICO or MetLife
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-52
<PAGE>

APPENDIX A

AVERAGE PORTFOLIO COMPOSITION OF THE SALOMON BROTHERS STRATEGIC BOND
OPPORTUNITIES SERIES

<TABLE>
<CAPTION>
PERCENTAGE OF
SECURITY NET ASSETS
-------- -------------
<S> <C>
Preferred Stock............................................. 0%
Short-term Obligations and Other Assets..................... 5.0%
Common Stock................................................ 0%
Debt -- Unrated............................................. 3.0%
Debt -- Standard and Poor's Rating
AAA....................................................... 40.0%
AA........................................................ 2.0%
A......................................................... 2.0%
BBB....................................................... 3.0%
BB........................................................ 9.0%
B......................................................... 36.0%
CCC....................................................... 0.0%
</TABLE>

The chart above indicates the composition of the Salomon Brothers Strategic
Bond Opportunities Series for the fiscal year ended December 31, 1997, with
the debt securities rated by S&P separated into the indicated categories. The
percentages were calculated on a dollar-weighted average basis by determining
monthly the percentage of the Series' net assets invested in each category as
of the end of each month during the year. SBAM does not rely primarily on
ratings designed by any rating agency in making investment decisions. The
chart does not necessarily indicate what the composition of the Series'
portfolio will be in subsequent fiscal years.

AVERAGE PORTFOLIO COMPOSITION OF THE BACK BAY ADVISORS BOND INCOME SERIES

<TABLE>
<CAPTION>
PERCENTAGE OF
SECURITY NET ASSETS
-------- -------------
<S> <C>
Preferred Stock............................................. 0%
Short-term Obligations and Other Assets..................... 6.4%
Common Stock................................................ 0%
Debt -- Unrated............................................. 0%
Debt -- Standard and Poor's Rating
AAA....................................................... 42.0%
AA........................................................ 12.0%
A......................................................... 14.0%
BBB....................................................... 20.0%
BB........................................................ 12.0%
B......................................................... 0%
CCC....................................................... 0%
CD........................................................ 0%
</TABLE>

The chart above indicates the composition of the Back Bay Advisors Bond
Income Series for the fiscal year ended December 31, 1997, with the debt
securities rated by S&P separated into the indicated categories. The
percentages were calculated on a dollar-weighted average basis by determining
monthly the percentage of the Series' net assets invested in each category as
of the end of each month during the year. Back Bay Advisors does not rely
primarily on ratings designed by any rating agency in making investment
decisions. The chart does not necessarily indicate what the composition of the
Series' portfolio will be in subsequent fiscal years.

B-53
<PAGE>

APPENDIX B

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-54
<PAGE>

NEW ENGLAND ZENITH FUND

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1998

This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Prospectus of New England Zenith Fund
dated May 1, 1998 (the "Prospectus"), and should be read in conjunction
therewith. A copy of the Prospectus may be obtained from New England Securities
Corporation, 399 Boylston Street, Boston, Massachusetts 02116.
<PAGE>

TABLE OF CONTENTS

Page
Investment Objectives and Policies

Miscellaneous Investment Practices

Determination of Net Asset Values

Fund Performance

Trustees and Officers

Advisory Arrangements

Distribution Agreement

Other Services

Portfolio Transactions and Brokerage

Description of the Fund

Appendix A-1 (Description of Bond Ratings)

Appendix A-2 (Description of Commercial Paper Ratings)

Appendix B

Appendix C
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and policies of each Series (collectively and
individually the "Series") of New England Zenith Fund (the "Fund") are
summarized on the front page of the Prospectus and in the text of the Prospectus
following the caption "Investment Objectives and Policies." There can be no
assurance that any of the Series will achieve its objective. The investment
policies of each Series set forth in the Prospectus and in this Statement of
Additional Information may be changed without shareholder approval, except for
any policy as to which the Prospectus or this Statement of Additional
Information explicitly indicates that such approval is required, and except for
the investment objectives of the Back Bay Advisors Money Market, Back Bay
Advisors Bond Income, Capital Growth, Westpeak Growth and Income, Westpeak Stock
Index, Back Bay Advisors Managed and Loomis Sayles Small Cap Series, which have
fundamental investment objectives.

The terms "shareholder approval" and "approval of a majority of the
outstanding voting securities," as used in the Prospectus and this Statement of
Additional Information, mean, with respect to a Series, approval by the lesser
of (i) 67% of the shares of the Series represented at a meeting at which more
than 50% of the outstanding shares of such Series are represented or (ii) more
than 50% of the outstanding shares of such Series.

Morgan Stanley International Magnum Equity Series

Although the 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. As a result of these policies, the Series, under certain
market conditions, may experience high portfolio turnover, although specific
portfolio turnover rates are impossible to predict. In recent years, the
portfolio turnover rate of the Series has fluctuated considerably as a result of
strategic shifts in portfolio holdings designed to maintain an optimum portfolio
structure in view of general market conditions and movements in individual stock
prices. After taking over the portfolio on May 1, 1997, MSAM restructured the
portfolio through a program trade. Brokerage costs associated with such trade
did not exceed more than 2% of the Series' average net asset value.

Alger Equity Growth Series

As disclosed in the Prospectus under the caption "Investment Objectives and
Policies -- Alger Equity Growth Series," the Alger Equity Growth Series seeks to
attain its investment objective of long-term capital appreciation by investing
primarily in a diversified, actively managed portfolio of equity securities,
principally in 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.

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. As a result of these policies,
the Series, under certain market conditions, may experience high portfolio
turnover, although specific portfolio turnover rates are impossible to predict.
In recent years, the portfolio turnover rate of the Series has fluctuated
considerably as a result of strategic shifts in portfolio holdings designed

<PAGE>

to maintain an optimum portfolio structure in view of general market conditions
and movements in individual stock prices.

Capital Growth Series

As disclosed in the Prospectus under the caption "Investment Objectives and
Policies -- Capital Growth Series," the Capital Growth Series seeks to attain
its investment objective of long-term growth of capital through investment
primarily in equity securities of companies whose earnings are expected to grow
at a faster rate than the United States economy. The selection of common stocks
for the Capital Growth Series' investment portfolio is based on the assessment
of the Series' adviser, Capital Growth Management Limited Partnership ("CGM"),
that the common stock is attractively priced relative to its earnings and growth
potential.

The Series does not consider current income as a significant factor in
selecting its investments. However, during periods when management considers
that economic or market conditions make it desirable, the Series may take a
defensive position by investing a substantial portion of its assets in cash or
fixed-income securities (bonds, notes and money market instruments). No estimate
can be made as to when or for how long the Series will employ such defensive
strategies; however, in the past, such periods have been as long as one year.

The Capital Growth Series does not currently intend to invest in restricted
securities, options or warrants although, subject to its investment
restrictions, it may do so in the future. See "Investment Restrictions."

Although the Capital Growth Series' objective is long-term capital growth,
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. As a result of these policies, the Series, under
certain market conditions, may experience high portfolio turnover, although
specific portfolio turnover rates are impossible to predict. In recent years,
the portfolio turnover rate of the Series has fluctuated considerably as a
result of strategic shifts in portfolio holdings designed to maintain an optimum
portfolio structure in view of general market conditions and movements in
individual stock prices.

<PAGE>

Westpeak Growth and Income Series

As disclosed in the Prospectus under the caption "Investment Objectives and
Policies -- Westpeak Growth and Income Series," the Westpeak Growth and Income
Series seeks long-term total return (capital appreciation and dividend income)
through investment in equity securities, both in securities that the Series'
subadviser, Westpeak Investment Advisors, L.P. ("Westpeak"), believes are
undervalued ("value" style) and securities of companies that Westpeak believes
have growth potential ("growth" style). The Westpeak Growth and Income Series
will ordinarily invest substantially all of its assets in equity securities.

Although the Westpeak Growth and Income Series' objective is long-term
total return, it may sell securities to reflect changes in Westpeak's assessment
of the relative attractiveness of particular investments. As a result, the
Westpeak Growth and Income Series, under certain market conditions, may
experience high portfolio turnover. High portfolio turnover involves
correspondingly higher brokerage commissions than would be experienced by a
similar fund with lower turnover.

The assets of the Westpeak Growth and Income Series that are not invested
in equity securities will be held in cash or invested as described below under
"Miscellaneous Investment Practices--Money Market Instruments."

Westpeak Stock Index Series

As disclosed in the Prospectus under the caption "Investment Objectives and
Policies -- Westpeak Stock Index Series," the Westpeak Stock Index Series uses
the Standard & Poor's 500 Composite Stock Index ("S&P 500 Index") as the
standard of performance comparison because that index currently represents a
significant percentage of the total market value of all United States publicly
traded common stocks, is well known to investors, and is commonly regarded as
representative of the performance of United States publicly traded common stocks
taken as a whole.

The S&P 500 Index is composed of 500 common stocks, most of which are
listed on the New York Stock Exchange. Standard & Poor's, which is not a sponsor
of or in any other way affiliated with the Series, chooses the 500 stocks
included in the S&P 500 Index on the basis of market value and industry
diversification. The S&P 500 Index assigns relative values to the stocks
included in the index, weighted according to each stock's total market value
relative to the total market value of the other stocks included in the index.
The stocks included in the S&P 500 Index may change from time to time.
<PAGE>

The Westpeak Stock Index Series is not managed through traditional methods
of investment management, which typically attempt to use economic, financial and
market analysis to select undervalued stocks or stocks of companies that may
experience above-average growth, nor will the adverse financial situation of a
company necessarily result in the elimination of its stock from the Westpeak
Stock Index Series' portfolio. As described in the Prospectus, stocks will be
selected in an attempt to approximate the performance of the S&P 500 Index and
to minimize tracking error. From time to time, adjustments may be made in the
Westpeak Stock Index Series' investment portfolio, but such changes should be
infrequent compared to those of most management investment companies. Westpeak
currently expects that such adjustments will ordinarily be made on a monthly
basis, but such adjustments could be made more or less frequently, depending on
changes in the size of the Westpeak Stock Index Series, among other factors. As
a consequence of the relative infrequency of portfolio adjustments, brokerage
and other transaction costs are expected to be relatively low. However, these
costs and other expenses may cause the return of the Westpeak Stock Index Series
to be lower than the return of the S&P 500 Index. In addition, the relative
infrequency of portfolio adjustments may result in increased tracking error, to
the extent that new cash that has come into the Series is held, or invested in
money market instruments and repurchase agreements, pending the next portfolio
adjustment, rather than invested immediately in common stocks included in the
S&P 500 Index.

It is the Westpeak Stock Index Series' policy to be fully invested in
common stocks. However, the Westpeak Stock Index Series may hold a portion of
its assets, which will not exceed 5% (not including additional cash that has
come into the Series and is pending investment in common stocks), in cash to
meet redemptions and other day-to-day operating expenses. The Series may also
engage in futures transactions to reduce tracking error. In addition, the
Westpeak Stock Index Series may invest cash temporarily in money market
instruments and repurchase agreements, as described below under "Miscellaneous
Investment Practices -- Money Market Instruments". Such temporary investments
will only be made with cash held to maintain liquidity or pending investment,
and will not be made for defensive purposes in the event or in anticipation of a
general decline in the market prices of stocks in which the Series invests. A
defensive investment posture is precluded by the Westpeak Stock Index Series'
investment objective to provide investment results that correspond to the price
and yield performance of a universe of common stocks. Investors in the Westpeak
Stock Index Series therefore bear the risk of general declines in stock prices
in the stock markets.

The index that the Westpeak Stock Index Series uses as a standard of
comparison in seeking to achieve its objective may be changed without
shareholder approval. At some time in the future, another index may be selected
if such a standard of comparison is deemed more appropriate than the S&P 500
Index as an indicator of the performance of United States publicly traded common
stocks.

Back Bay Advisors Managed Series

<PAGE>

The text of the Prospectus following the caption "Investment Objective and
Policies -- Back Bay Advisors Money Market Series," contains a description of
the money market instruments and related repurchase agreements in which the Back
Bay Advisors Managed Series may invest; for a fuller description, see
"Miscellaneous Investment Practices--Money Market Instruments," below.

The portion of the Back Bay Advisors Managed Series' investment portfolio
consisting of notes and bonds will be invested in bonds of the types in which
the Back Bay Advisors Bond Income Series is permitted to invest. These
investments may include bonds rated B or higher by S&P or Moody's (or unrated
bonds of similar quality). The risks associated with lesser rated and unrated
bonds are described in the Prospectus under "Investment Risks - Lower Rated
Fixed-Income Securities." The Series will purchase and sell securities for the
bond portion of its portfolio in anticipation of or in response to changes in
yield relationships, markets or economic conditions. The bond portion of the
Series' investment portfolio will also be invested to take advantage of
temporary disparities in the relative values of certain sectors of the market
for fixed-income securities. As a result of these policies, the bond portion of
the Series' portfolio, under certain market conditions, may experience high
portfolio turnover.

Because the securities in its portfolio are subject to price declines as
well as price advances, at times the net asset value per Back Bay Advisors
Managed Series share may be less than a shareholder's original cost. There can
be no assurance that the Back Bay Advisors Managed Series' investment objective
will be attained.

Salomon Brothers Strategic Bond Opportunities Series

As disclosed in the Prospectus under the caption "Investment Objectives and
Policies -- Salomon Brothers Strategic Bond Opportunities Series," the Salomon
Brothers Strategic Bond Opportunities Series seeks to attain its investment
objective of a high level of total return consistent with preservation of
capital by assessing the relative risks and opportunities available in various
market segments and allocating assets primarily among U.S. Government
obligations, mortgage backed securities, domestic corporate debt and
international debt securities rated investment grade (BBB or higher by S&P or
Baa or higher by Moody's) and domestic and sovereign corporate debt and
international debt securities rated below investment grade.

Although the Series' objective is a high level of total return consistent
with the preservation of capital, 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. As a result of
these policies, the Series, under certain market conditions, may experience high
portfolio turnover, although specific portfolio turnover rates are impossible to
predict. In recent years, the portfolio turnover rate of the Series has
fluctuated considerably as a result of strategic shifts in portfolio holdings
designed to maintain an optimum portfolio structure in view of general market
conditions and movements in individual stock prices

Back Bay Advisors Bond Income Series

The text of the Prospectus following the caption "Investment Objectives and
Policies -- Back Bay Advisors Bond Income Series" gives a description of the
securities in which the Back Bay Advisors Bond Income Series may invest.
Although at least 80% of the Series' bond investments will carry ratings higher
than BBB or Baa by S&P and/or Moody's, the Series may purchase non-rated or
lower-rated bonds, which may be traded only over-the-counter. Non-rated bonds
are so categorized because the bond's rating has been suspended or because the
issuer did not seek a rating of the bonds from Moody's or Standard & Poor's.

As described in the Prospectus, the average maturity of the Back Bay
Advisors Bond Income Series' portfolio will usually be between five and fifteen
years. Depending on market conditions, the Back Bay Advisors Bond Income Series
may take a defensive position by investing a substantial portion of its assets
in the money market instruments eligible for purchase by the Back Bay Advisors
Money Market Series. No estimate can be made as to when or for how long the
Series would employ such defensive strategies.

The Back Bay Advisors Bond Income Series purchases and sells portfolio
investments in anticipation of or in response to changes in yield relationships,
markets or economic conditions. The Back Bay Advisors Bond Income Series also
invests to take advantage of temporary disparities in the relative values of
certain sectors of the market for fixed-income securities. As a result of these
policies, the Back Bay Advisors Bond Income Series, under certain market
conditions, may experience high portfolio turnover, although specific portfolio
turnover rates are impossible to predict.
<PAGE>

Salomon Brothers U.S. Government Series

As disclosed in the Prospectus under the caption "Investment Objectives and
Policies -- Salomon Brothers U.S. Government Series," the Salomon Brothers U.S.
Government Series seeks to attain its investment objective of providing a high
level of current income consistent with preservation of capital and maintenance
of liquidity by investing primarily in debt obligations and, to the extent
allowed by state law and regulation, in mortgage backed securities issued or
guaranteed by the U. S. Government its agencies, authorities or
instrumentalities or derivative securities such as collateralized mortgage
obligations ("CMOs") backed by such securities.

Back Bay Advisors Money Market Series

The text of the Prospectus following the caption "Investment Objectives and
Policies -- Back Bay Advisors Money Market Series" gives a description of the
money market instruments in which the Back Bay Advisors Money Market Series may
invest. For a fuller description of those money market instruments and some of
the risks relating thereto, see "Miscellaneous Investment Practices - Money
Market Instruments" below. The Back Bay Advisors Money Market Series will invest
only in securities which the Series' subadviser, Back Bay Advisors, L.P. ("Back
Bay Advisors"), acting pursuant to guidelines established by the Fund's Board of
Trustees, has determined are of high quality and present minimal credit risk.

As indicated in the Prospectus, all the Series' money market instruments
mature in less than 397 days, and the average maturity of the Series' portfolio
securities based on their dollar value will not exceed 90 days at the time of
each investment. Money market instruments maturing in less than 397 days tend to
yield less than obligations of comparable quality having longer maturities. See
"Determination of Net Asset Values" and "Fund Performance." Where obligations of
greater than one year are used to secure the Series' repurchase agreements, the
repurchase agreements themselves will have very short maturities. If the
disposition of a portfolio security results in a dollar-weighted average
portfolio maturity in excess of 90 days, the Series will invest its available
cash in such a manner as to reduce its dollar-weighted average portfolio
maturity to 90 days or less as soon as reasonably practicable.

In seeking to provide the highest possible level of current income
consistent with preservation of capital, the Series may not necessarily invest
in money market instruments paying the highest available yield at a particular
time. The Series, consistent with its investment objective, attempts to maximize
income by engaging in portfolio trading and by buying and selling portfolio
investments in anticipation of or in response to changing economic and money
market conditions and trends. The Series may also invest to take advantage of
what are believed to be temporary disparities in the yields of different
segments of the high grade money market or among particular instruments within
the same segment of the market. These policies, as well as the relatively short
maturity of obligations to be purchased by the Series, may result in frequent
changes in the Series' investment portfolio of money market instruments.

The value of the securities in the Series' investment portfolio can be
expected to vary inversely to changes in prevailing interest rates. Thus, if
interest rates increase after a security is purchased, that security, if sold,
might be sold at less than cost. Conversely, if interest rates decline after
purchase, the security, if sold, might be sold at a profit. In either instance,
if the security were held to maturity, no gain or loss would normally be
realized as a result of these fluctuations. Substantial redemptions of shares of
the Series could require the sale of portfolio investments at a time when a sale
might not be desirable.
<PAGE>

MISCELLANEOUS INVESTMENT PRACTICES

The following information relates to some of the certain investment
practices in which certain Series may engage. The table indicates which Series
may engage in each of these practices.

<TABLE>
<CAPTION>
Practices Series
- --------- ------
<S> <C>
Money Market Instruments All Series

U.S. Government Securities All Series

Convertible Securities Morgan Stanley International Magnum Equity Series
Alger Equity Growth Series
Capital Growth Series
Goldman Sachs Midcap Value Series
Loomis Sayles Balanced Series
Back Bay Advisors Managed Series
Salomon Brothers Strategic Bond Opportunities Series
Back Bay Advisors Bond Income Series

Reverse Repurchase Agreements and Dollar Rolls Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series

Lending of Portfolio Securities Morgan Stanley International Magnum Equity Series
Alger Equity Growth Series
Davis Venture Value Series
Goldman Sachs Midcap Value Series
Back Bay Advisors Managed Series
Salomon Brothers Strategic Bond Opportunities Series
Back Bay Advisors Bond Income Series
Salomon Brothers U.S. Government Series

Privately-Issued Mortgage Securities Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series
Goldman Sachs Midcap Value Series
Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series
Asset-Backed Securities; Types of Credit Support Goldman Sachs Midcap Value Series
Loomis Sayles Balanced Series
Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series

STRIPs Goldman Sachs Midcap Value Series
Loomis Sayles Balanced Series
Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series

Stripped Mortgage Securities
Goldman Sachs Midcap Value Series
Loomis Sayles Balanced Series
Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Eurodollar Futures and Options Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series

High Yield/High Risk Foreign Sovereign Debt Securities Salomon Brothers Strategic Bond Opportunities Series

Futures and Options Morgan Stanley International Magnum Equity Series
Goldman Sachs Midcap Value Series
Davis Venture Value Series
Westpeak Growth and Income Series
Westpeak Stock Index Series
Loomis Sayles Balanced Series
Back Bay Advisors Managed Series
Salomon Brothers Strategic Bond Opportunities Series
Salomon Brothers U.S. Government Series

Real Estate Investment Trusts Goldman Sachs Midcap Value Series

Emerging Markets Goldman Sachs Midcap Value Series
Salomon Brothers Strategic Bond Opportunities Series

</TABLE>

Money Market Instruments - Obligations of foreign branches of U.S. banks and
other foreign securities are subject to risks of foreign political, economic and
legal developments, which include foreign governmental restrictions adversely
affecting payment of principal and interest on the obligations, foreign
withholding and other taxes on interest income, and difficulties in obtaining
and enforcing a judgment against a foreign branch of a domestic bank. With
respect to bank obligations, different risks may result from the fact that
foreign banks are not necessarily subject to the same or similar regulatory
requirements that apply to domestic banks. For instance, such branches may not
be subject to the types of requirements imposed on domestic banks with respect
to mandatory reserves, loan limitations, examinations, accounting, auditing,
recordkeeping and the public availability of information. Obligations of such
branches will be purchased by the Series only when the Series' adviser or
subadviser believes the risks are minimal.

The following constitutes a description of the money market instruments
which may be purchased by the Back Bay Advisors Money Market Series, and by any
of the Series, some of which may only invest for temporary defensive purposes.

U.S. Government Securities -- are bills, certificates of indebtedness,
notes and bonds issued by agencies, authorities and instrumentalities of the
U.S. Government. Some obligations, such as those issued by the U.S. Treasury,
the Government National Mortgage Association, the Farmers' Home Administration
and the Small Business Administration, are backed by the full faith and credit
of the U.S. Treasury. Other obligations are backed by the right of the issuer to
borrow from the U.S. Treasury or by the credit of the agency, authority or
<PAGE>

instrumentality itself. Such obligations include, but are not limited to,
obligations issued by the Tennessee Valley Authority, the Bank for Cooperatives,
Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks
and the Federal National Mortgage Association.

Repurchase Agreements -- are agreements by which a Series purchases a
security (usually a U.S. Government Security) and obtains a simultaneous
commitment from the seller (a member bank of the Federal Reserve System or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date. The resale price is in
excess of the purchase price and reflects an agreed upon market rate unrelated
to the coupon rate on the purchased security. Such transactions afford the
Series the opportunity to earn a return on temporarily available cash at minimal
market risk. While the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality of
the United States Government, the obligation of the seller is not guaranteed by
the U.S. Government and there is a risk that the seller may fail to repurchase
the underlying security. In such event, the Series may be able to exercise
rights with respect to the underlying security, including possible disposition
of the security in the market. However, the Series may be subject to various
delays and risks of loss, including (a) possible declines in the value of the
underlying security during the period while the Series seeks to enforce its
rights thereto, (b) possible reduced levels of income and lack of access to
income during this period and (c) inability to enforce rights and the expenses
involved in attempted enforcement.

In addition, the Goldman Sachs Midcap Value Series, together with other
registered investment companies managed by Goldman Sachs Asset Management or its
affiliates, may transfer uninvested cash balances into a single joint account,
the daily aggregate balance of which will be invested in one or more repurchase
agreements.

Certificates of Deposit -- are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified rate of
return and are normally negotiable.

Bankers' Acceptances -- are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.

Eurodollar Obligations -- are obligations of foreign branches of U.S.
banks.

Commercial Paper -- refers to promissory notes issued by corporations in
order to finance their short-term credit needs. For a description of commercial
paper ratings see Appendix A-2.

U.S. Government Securities - The Series may invest in some or all of the
following U.S. Government Securities, as well as in other types of securities
issued or guaranteed by the U.S. Government or its agencies, authorities or
instrumentalities:

. U.S. Treasury Bills - Direct obligations of the United States Treasury which
are issued in maturities of one year or less. No interest is paid on Treasury
bills; instead, they are issued at a discount and repaid at full face value when
they mature. They are backed by the full faith and credit of the United States
Government.

. U.S. Treasury Notes and Bonds - Direct obligations of the United States
Treasury issued in maturities that vary between one and 40 years, with interest
normally payable every six months. These obligations are backed by the full
faith and credit of the United States Government.

. "Ginnie Maes" - Debt securities issued by a mortgage banker or other mortgagee
which represent an interest in a pool of mortgages insured by the Federal
Housing Administration or the Farmer's Home Administration or guaranteed by the
Veterans Administration. The Government National Mortgage Association ("GNMA")
guarantees the timely payment of principal and interest when such payments are
due, whether or not these amounts are collected by the issuer of these
certificates on the underlying mortgages. Mortgages included in single family or
multi-family residential mortgage pools backing an issue of Ginnie Maes have a
maximum maturity of up to 30 years. Scheduled payments of principal and interest
are made to the registered holders of Ginnie Maes (such as the Fund) each month.
Unscheduled prepayments may be made by homeowners, or as a result of a default.
Prepayments are passed through to the registered holder (such as the Fund, which
reinvests any prepayments) of Ginnie Maes along with regular monthly payments of
principal and interest.
<PAGE>

. "Fannie Maes" - The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders that
purchases residential mortgages from a list of approved seller/servicers. Fannie
Maes are pass-through securities issued by FNMA that are guaranteed as to timely
payment of principal and interest by FNMA but are not backed by the full faith
and credit of the United States Government.

. "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC") is a
corporate instrumentality of the United States Government. Freddie Macs are
participation certificates issued by FHLMC that represent an interest in
residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but Freddie
Macs are not backed by the full faith and credit of the United States
Government.

As described in the Prospectus, U.S. Government Securities do not involve
the credit risks associated with investments in other types of fixed-income
securities, although, as a result, the yields available from U.S. Government
Securities are generally lower than the yields available from corporate
fixed-income securities. Like other fixed-income securities, however, the values
of U.S. Government Securities change as interest rates fluctuate. Fluctuations
in the value of portfolio securities will not affect interest income on existing
portfolio securities but will be reflected in the Series' net asset value. Since
the magnitude of these fluctuations will generally be greater at times when the
Series' average maturity is longer, under certain market conditions, a Series
may, for temporary defensive purposes, accept lower current income from
short-term investments rather than investing in higher yielding long-term
securities.

Convertible Securities - The Series listed above may invest in convertible
securities, including corporate bonds, notes or preferred stocks of U.S. or
foreign issuers that can be converted into (that is, exchanged for) common
stocks or other equity securities. Convertible securities also include 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 vary in some proportion with those of the
underlying equity securities. Convertible securities usually provide a higher
yield than the underlying equity, however, so that the price decline of a
convertible security may sometimes be less substantial than that of the
underlying equity security.

Reverse Repurchase Agreements and Dollar Rolls - The Series may enter into
reverse repurchase agreements and dollar rolls with qualified institutions to
seek to enhance returns.

The Series may enter into dollar rolls 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
the securities. 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 a segregated account with its custodian in which
it will maintain liquid assets equal in value to its obligations in respect of
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 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 considered
borrowings by the Series.

Lending of Portfolio Securities - The Series listed above may lend its
portfolio securities to broker-dealers under contracts calling for cash
collateral equal to at least the market value of the securities loaned, marked
to market on a daily basis. The Series will continue to benefit from interest or
dividends on the securities loaned and will also receive interest through
investment of the cash collateral in short-term liquid investments, which may
include shares of money market funds subject to any investment restriction
described in the Prospectus.
<PAGE>

Any voting rights, or rights to consent, relating to securities loaned pass to
the borrower. However, if a material event affecting the investment occurs, such
loans will be called so that the securities may be voted by the Series. A Series
pays various fees in connection with such loans, including shipping fees and
reasonable custodian and placement fees.

Privately-Issued Mortgage Securities - The Series listed above may invest
in privately-issued pass through securities that provide for the monthly
principal and interest payments made by individual borrowers to pass through to
investors on a corporate basis, and in privately issued collateralized mortgage
obligations ("CMOs"; see the general description under "Investment Risks" in the
Prospectus). Privately-issued mortgage securities are issued by private
originators of, or investors in, mortgage loans, including mortgage bankers,
commercial banks, investment banks, savings and loan associations and special
purpose subsidiaries of the foregoing. Since privately-issued mortgage
certificates are not guaranteed by an entity having the credit status of GNMA or
FHLMC, such securities generally are structured with one or more types of credit
enhancement. For a description of the types of credit enhancements that may
accompany privately-issued mortgage securities, see "Types of Credit Support"
below. A Series will not limit its investments to asset-backed securities with
credit enhancements.

Asset-Backed Securities As with mortgage securities, asset-backed
securities are often backed by a pool of assets representing the obligation of a
number of different parties and use similar credit enhancement techniques. For a
description of the types of credit enhancement that may accompany
privately-issued mortgage securities, see "Types of Credit Support" below. A
Series will not limit its investments to asset-backed securities with credit
enhancements. Although asset-backed securities are not generally traded on a
national securities exchange, many such securities are widely traded by brokers
and dealers, and in such cases will not be considered illiquid securities for
the purposes of the investment policy that limits a Series' investments in
illiquid securities to 15% of net assets.

Types of Credit Support - Mortgage securities and asset-backed securities
are often backed by a pool of assets representing the obligations of a number of
different parties. To lessen the effect of failure by obligors on underlying
assets to make payments, such securities may contain elements of credit support.
Such credit support falls into two categories: (i) liquidity protection and (ii)
protection against losses resulting from ultimate default by an obligor on the
underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to ensure that the
pass-through of payments due on the underlying pool occurs in a timely fashion.
Protection against losses resulting from ultimate default enhances the
likelihood of ultimate payment of the obligations on at least a portion of the
assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a
combination of such approaches. A Series will not pay any additional fees for
such credit support, although the existence of credit support may increase the
price of a security.

The ratings of mortgage securities and asset-backed securities for which
third-party credit enhancement provides liquidity protection or protection
against losses from default are generally dependent upon the continued
creditworthiness of the provider of the credit enhancement. The ratings of such
securities could be subject to reduction in the event of deterioration in the
creditworthiness of the credit enhancement provider even in cases where the
delinquency and loss experience on the underlying pool of assets is better than
expected.

Examples of credit support arising out of the structure of the transaction
include "senior subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal and
interest, with the result that defaults on the underlying assets are borne first
by the holders of the subordinated class), creation of "reserve funds" (where
cash or investments, sometimes funded from a portion of the payments on the
underlying assets, are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information with
respect to the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that which is anticipated could adversely
affect the return on an investment in such security.
<PAGE>

STRIPS - In addition to the U.S. Government Securities discussed above, the
Series listed above may invest in separately traded interest components of
securities issued or guaranteed by the United States Treasury. The interest
components of selected securities are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program ("STRIPS").
Under the STRIPS program, the interest components are individually numbered and
separately issued by the United States Treasury at the request of depository
financial institutions, which then trade the component parts independently.

Stripped Mortgage Securities - Stripped mortgage securities are derivative
multiclass mortgage securities. Stripped mortgage securities 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. Stripped
mortgage securities have greater volatility than other types of mortgage
securities in which the Series invest. Although stripped mortgage securities 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, stripped mortgage securities are generally
treated as illiquid.

Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage security will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, 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). The yield to
maturity on an IO class is extremely sensitive not only to changes in prevailing
interest rates but also the rate of principal payments (including prepayments)
on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on the Series' yield to maturity. If
the underlying mortgage assets experience greater than anticipated prepayments
of principal, the Series may fail to fully recoup its initial investment in
these securities even if the securities are rated in a top rating category.

As interest rates rise and fall, the value of IOs tends to move in the same
direction as interest rates. The value of other mortgage securities, like other
debt instruments, will tend to move in the opposite direction of interest rates.
Accordingly, investing in IOs, in conjunction with the other mortgage securities
described herein, may reduce fluctuations in a Series' net asset value.

In addition to the stripped mortgage securities described above, the Series
listed above may invest in similar securities such as "Super POs," "Levered IOs"
and "IOettes," all of which are more volatile than conventional POs or IOs.
Risks associated with instruments such as Super POs are similar in nature to
those risks related to investments in POs. Risks connected with Levered IOs and
IOettes are similar in nature to those associated with IOs. The Series may also
invest in other similar instruments developed in the future that are deemed
consistent with the investment objectives, policies and restrictions of the
Series.

Under the Internal Revenue Code of 1986, as amended (the "Code"), POs may
generate taxable income from the current accrual of original issue discount,
without a corresponding distribution of cash to the portfolio.

Swaps, Caps, Floors, Collars, Etc. - The Series listed above may enter into
interest rate, currency and index swaps, the purchase or sale of related caps,
floors and collars and other derivatives. A 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 duration management technique or to protect against any
increase in the price of securities a portfolio anticipates purchasing at a
later date. A Series will use these transactions for non-speculative purposes
and will not sell interest rate caps or floors if it does not own securities or
other instruments providing the income the portfolio may be obligated to pay.
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). The purchase of an interest rate cap entitles the purchaser to
receive payments on a notional principal amount from the party selling the cap
to the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of an interest rate floor entitles the purchaser to receive
payments of interest on a notional principal amount from the party selling the
interest rate floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values. A currency swap is an agreement to exchange cash flows on a
notional amount based on changes in the values of the reference currencies.
<PAGE>

A Series will usually enter into interest rate swaps on a net basis, that
is, two payment streams are netted out in a cash settlement on the payment date
or dates specified in the instrument, with the portfolio receiving or paying, as
the case may be, only the net amount of the two payments. To the extent that a
Series maintains in a segregated account with its custodian liquid assets
sufficient to meet its obligations under swaps, caps, floors, collars and other
similar derivatives (see below) these investments will not constitute senior
securities under the Investment Company Act of 1940 (the "1940 Act"), as
amended, and, thus, will not be treated as being subject to the Series'
borrowing restrictions. A Series will not enter into any swap, cap, floor,
collar or other derivative transaction unless the counterparty is deemed
creditworthy by that Series' subadviser. If a counterparty defaults, the Series
may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, for that reason, they are less liquid than swaps.

The liquidity of swap agreements will be determined by a Series' subadviser
based on various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset a portfolio's rights and obligations
relating to the investment). Such determination will govern whether a swap will
be deemed to be within the 15% restriction on investments in illiquid
securities.

Each Series will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its current obligations under swap
agreements. If a Series enters into a swap agreement on a net basis, it will
segregate assets with a daily value at least equal to the excess, if any, of the
Series' accrued obligations under the swap agreement over the accrued amount the
Series is entitled to receive under the agreement. If a Series enters into a
swap agreement on other than a net basis, it will segregate assets with a value
equal to the full amount of the Series' accrued obligations under the agreement.

Eurodollar Futures and Options - The Series listed above may make
investments in Eurodollar instruments, which are typically dollar-denominated
futures contracts or options on those contracts that are linked to the London
Interbank Offered Rate ("LIBOR"), although foreign currency denominated
instruments are available from time to time. Eurodollar futures contracts enable
purchasers to obtain a fixed rate for the lending of funds and sellers to obtain
a fixed rate for borrowings. A Series might use Eurodollar futures contracts and
options thereon to hedge against changes in LIBOR, to which many interest rate
swaps and fixed income instruments are linked.

High Yield/High Risk Foreign Sovereign Debt Securities - The Salomon
Brothers Strategic Bond Opportunities Series may invest in the sovereign debt of
foreign countries which have issued or have announced plans to issue Brady
Bonds, and expect that a substantial portion of their investments in sovereign
debt securities will consist of Brady Bonds. Brady Bonds are debt securities
issued under the framework of the Brady Plan, an initiative announced by then
U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external commercial bank indebtedness.
In restructuring its external debt under the Brady Plan framework, a debtor
nation negotiates with its existing bank lenders as well as multilateral
institutions such as the World Bank and the International Monetary Fund (the
"IMF"). The Brady Plan framework, as it has developed, contemplates the exchange
of commercial bank debt for newly issued bonds (Brady Bonds). Brady Bonds may
also be issued in respect of new money being advanced by existing lenders in
connection with the debt restructuring. The World Bank and/or the IMF support
the restructuring by providing funds pursuant to loan agreements or other
arrangements which enable the debtor nation to collateralize the new Brady Bonds
or to repurchase outstanding bank debt at a discount. Under these arrangements
with the World Bank or the IMF, debtor nations have been required to agree to
the implementation of certain domestic monetary and fiscal reforms. Such reforms
have included the liberalization of trade and foreign investment, the
privatization of state-owned enterprises and the setting of targets for public
spending
<PAGE>

and borrowing. These policies and programs seek to promote the debtor
country's economic growth and development. Investors should recognize that the
Brady Plan only sets forth general guiding principles for economic reform and
debt reduction, emphasizing that solutions must be negotiated on a case-by-case
basis between debtor nations and their creditors. Investors should recognize
that Brady Bonds have been issued only recently, and accordingly do not have a
long payment history.

Agreements implemented under the Brady Plan to date are designed to achieve
debt and debt-service reduction through specific options negotiated by a debtor
nation with its creditors. As a result, the financial packages offered by each
country differ. The types of options have included the exchange of outstanding
commercial bank debt for bonds issued at 100% of face value of such debt, which
carry a below-market stated rate of interest (generally known as par bonds),
bonds issued at a discount from face value of such debt (generally known as
discount bonds), bonds bearing an interest rate which increases over time and
bonds issued in exchange for the advancement of new money by existing lenders.
Regardless of the stated face amount and stated interest rate of the various
types of Brady Bonds, a Series will purchase Brady Bonds in secondary markets,
as described below, in which the price and yield to the investor reflect market
conditions at the time of purchase. Brady Bonds issued to date have traded at a
deep discount from their face value. Certain Brady Bonds have been
collateralized as to principal due at maturity (typically 30 years from the date
of issuance) by U.S. Treasury zero coupon bonds with a maturity equal to the
final maturity of such Brady Bonds, although the collateral is not available to
investors until the final maturity of the Brady Bonds. Collateral purchases are
financed by the IMF, the World Bank and the debtor nations' reserves. In
addition, interest payments on certain types of Brady Bonds may be
collateralized by cash or high-grade securities in amounts that typically
represent between 12 and 18 months of interest accruals on these instruments
with the balance of the interest accruals being uncollateralized. A Series may
purchase Brady Bonds with no or limited collateralization, and will be relying
for payment of interest and (except in the case of principal collateralized
Brady Bonds) principal primarily on the willingness and ability of the foreign
government to make payment in accordance with the terms of the Brady Bonds.
Brady Bonds issued to date are purchased and sold in secondary markets through
U.S. securities dealers and other financial institutions and are generally
maintained through European transnational securities depositories.

Futures and Options

Futures Contracts. A futures contract is an agreement between two parties
to buy and sell a commodity or financial instrument (e.g., an interest-bearing
security, a currency or, in the case of futures contracts on the S&P 500 Index,
the value of the basket of securities comprising the Index) for a specified
price on a specified future date. In the case of futures on an index, the seller
and buyer agree to settle in cash, at a future date, based on the difference in
value of the contract between the date it is opened and the settlement date. The
value of each contract is equal to the value of the index from time to time
multiplied by a specified dollar amount. For example, long-term municipal bond
index futures trade in contracts equal to $1000 multiplied by the Bond Buyer
Municipal Bond Index.

When a trader, such as a Series, enters into a futures contract, it is
required to deposit with (or for the benefit of) its broker, as "initial
margin," an amount of cash or short-term high-quality securities (such as U.S.
Treasury Bills) equal to approximately 2% to 20% of the delivery or settlement
price of the contract (depending on applicable exchange rules). Initial margin
is held to secure the performance of the holder of the futures contract. As the
value of the contract changes, the value of futures contract positions increases
or declines. At the end of each trading day, the amount of such increase or
decline is received or paid respectively by and to the holders of these
positions. The amount received or paid is known as "variation margin" or
"maintenance margin." A Series with a long position in a futures contract will
establish a segregated account with the Series' custodian containing liquid
assets equal to the purchase price of the contract (less any margin on deposit).
For short positions in futures contracts, a Series will establish a segregated
account with the custodian with liquid assets that, when added to the amounts
deposited as margin, equal the market value of the instruments or currency
underlying the futures contracts.

Although futures contracts by their terms may require actual delivery and
acceptance of securities, in most cases the contracts are closed out before
settlement. Closing out a futures sale is effected by purchasing a futures
contract for the same aggregate amount of the specific type of financial
instrument or commodity and with the same delivery date. Similarly, the closing
out of a futures purchase is effected by the purchaser selling an offsetting
futures contract.
<PAGE>

Gain or loss on a futures position is equal to the net variation margin
received or paid over the time the position is held, plus or minus the amount
received or paid when the position is closed, minus brokerage commissions.

The Westpeak Stock Index Series may purchase and sell futures contracts on
the S&P 500 Index solely for the purpose of reducing the risk of tracking error
arising from holding cash from new investments in the Series or in anticipation
of shareholder redemptions. The Back Bay Advisors Managed Series may purchase
and sell futures contracts on interest-bearing securities or indices thereof, or
on indices of stock prices (such as the S&P 500 Index), to increase or decrease
its portfolio exposure to common stocks or to increase or decrease its portfolio
exposure to notes and bonds. The Westpeak Growth and Income 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.

Options. An option on a futures contract obligates the writer, in return
for the premium received, to assume a position in a futures contract (a short
position if the option is a call and a long position if the option is a put), at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option generally will be accompanied by delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the exercise price to the
market price and volatility of the underlying contract, the remaining term of
the option, supply and demand and interest rates. Options on futures contracts
traded in the United States may only be traded on a United States board of trade
licensed by the Commodity Futures Trading Commission.

An option on a security entitles the holder to receive (in the case of a
call option) or to sell (in the case of a put option) a particular security at a
specified exercise price. An "American style" option allows exercise of the
option at any time during the term of the option. A "European style" option
allows an option to be exercised only at the end of its term. Options on
securities may be traded on or off a national securities exchange.

A call option on a futures contract written by a Series is considered by
the Series to be covered if the Series owns the security subject to the
underlying futures contract or other securities whose values are expected to
move in tandem with the values of the securities subject to such futures
contract, based on historical price movement volatility relationships. A call
option on a security written by a Series is considered to be covered if the
Series owns a security deliverable under the option. A written call option is
also covered if the Series holds a call on the same futures contract or security
as the call written where the exercise price of the call held (a) is equal to or
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the Series
in liquid assets in a segregated account with its custodian.

A put option on a futures contract written by a Series, or a put option on
a security written by a Series, is covered if the Series maintains cash, or
other liquid assets with a value equal to the exercise price in a segregated
account with the Series' custodian, or else holds a put on the same futures
contract (or security, as the case may be) as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written.

If the writer of an option wishes to terminate its position, it may effect
a closing purchase transaction by buying an option identical to the option
previously written. The effect of the purchase is that the writer's position
will be canceled. Likewise, the holder of an option may liquidate its position
by selling an option identical to the option previously purchased.

Closing a written call option will permit the Series to write another call
option on the portfolio securities used to cover the closed call option. Closing
a written put option will permit the Series to write another put option secured
by the segregated cash or other liquid assets used to secure the closed put
option. Also, effecting a closing transaction will permit the cash or proceeds
from the concurrent sale of any futures contract or
<PAGE>

securities subject to the option to be used for other Series investments. If a
Series desires to sell particular securities covering a written call option
position, it will close out its position or will designate from its portfolio
comparable securities to cover the option prior to or concurrent with the sale
of the covering securities.

The Series will realize a profit from closing out an option if the price of
the offsetting position is less than the premium received from writing the
option or is more than the premium paid to purchase the option; the Series will
realize a loss from closing out an option transaction if the price of the
offsetting option position is more than the premium received from writing the
option or is less than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the covering securities, any loss resulting from the
closing of a written call option position is expected to be offset in whole or
in part by appreciation of such covering securities.

Since premiums on options having an exercise price close to the value of
the underlying securities or futures contracts usually have a time value
component (i.e. a value that diminishes as the time within which the option can
be exercised grows shorter) an option writer may profit from the lapse of time
even though the value of the futures contract (or security in some cases)
underlying the option (and of the security deliverable under the futures
contract) has not changed. Consequently, profit from option writing may or may
not be offset by a decline in the value of securities covering the option. If
the profit is not entirely offset, the Series will have a net gain from the
options transaction, and the Series' total return will be enhanced. Likewise,
the profit or loss from writing put options may or may not be offset in whole or
in part by changes in the market value of securities acquired by the Series when
the put options are closed.

An over-the-counter option (an option not traded on a national securities
exchange) may be closed out only with the other party to the original option
transaction. While a Series will seek to enter into over-the-counter options
only with dealers who agree to or are expected to be capable of entering into
closing transactions with the Series, there can be no assurance that the Series
will be able to liquidate an over-the-counter option at a favorable price at any
time prior to its expiration. Accordingly, the Series might have to exercise an
over-the-counter option it holds in order to realize any profit thereon and
thereby would incur transactions costs on the purchase or sale of the underlying
assets. If the Series cannot close out a covered call option written by it, it
will not be able to sell the underlying security until the option expires or is
exercised. Furthermore, over-the-counter options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation or other clearing organization.

The staff of the Securities and Exchange Commission (the "SEC") has taken
the position that over-the-counter options on U.S. Government Securities and the
assets used as cover for written over-the-counter options on U.S. Government
Securities should generally be treated as illiquid securities. However, if a
dealer recognized by the Federal Reserve Bank of New York as a "primary dealer"
in U.S. Government Securities is the other party to an option contract written
by a mutual fund such as a Series, and such Series has the absolute right to
repurchase the option from the dealer at a formula price established in a
contract with the dealer, the SEC staff has agreed that the Series only needs to
treat as illiquid that amount of the "cover" assets equal to the amount by which
(i) the formula price exceeds (ii) any amount by which the market value of the
securities subject to the options exceeds the exercise price of the option (the
amount by which the option is "in-the-money").

Risks Related to Futures and Options. The use of futures contracts and
options involves risks. One risk arises because of the imperfect correlation
between movements in the price of futures contracts or options and movements in
the price of the underlying securities or index. The Series' use of futures
contracts or options will not be fully effective unless the Series can
compensate for such imperfect correlation. There is no assurance that the Series
will be able to effect such compensation.

The correlation between the price movement of a futures contract or option
and the related security (or index) may be distorted due to differences in the
nature of the markets. If the price of the futures contract or option moves more
than the price of the security or index, the Series would experience either a
loss or a gain on the future or option that is not completely offset by
movements in the price of the security or index. In an attempt to compensate for
imperfect price movement correlations, a Series may purchase or sell futures
contracts or options in a greater amount than the related securities or index
position if the volatility of the related securities or index is historically
greater than the volatility of the futures contracts or options. Conversely, the
Series may purchase or sell fewer contracts or options if the volatility of the
price of the securities or index is historically less than that of the contracts
or options.
<PAGE>

There are many reasons why changes in the values of futures contracts or
options may not correlate perfectly with changes in the value of the underlying
security or index. For example, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions, which could distort the normal relationship
between the index and futures markets. Secondly, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market, and as a result the futures market may attract more speculators than
does the securities market. In addition, trading hours for index futures or
options may not correspond perfectly to hours of trading on the exchange where
the underlying securities trade. This may result in a disparity between the
price of futures or options and the value of the underlying security or index
due to the lack of continuous arbitrage between the futures or options price and
the value of the underlying security or index. Hedging transactions using
securities indices also involve the risk that movements in the price of the
index may not correlate with price movements of the particular portfolio
securities being hedged (since a Series will typically not own all of the
securities included in a particular index.)

Price movement correlation also may be distorted by the limited liquidity
of certain futures or options markets and the participation of speculators in
such markets. If an insufficient number of contracts are traded, commercial
users may not deal in futures contracts or options because they do not want to
assume the risk that they may not be able to close out their positions within a
reasonable amount of time. In such instance, futures and options market prices
may be driven by different forces than those driving the market in the
underlying securities, and price spreads between these markets may widen. The
participation of speculators in the market generally enhances its liquidity.
Nonetheless, speculative trading spreads between futures markets may create
temporary price distortions unrelated to the market in the underlying
securities.

Positions in futures contracts and related options are established or
closed out only on an exchange or board of trade regulated by the Commodity
Futures Trading Commission. There is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract or at any
particular time. The liquidity of markets in futures contracts may be adversely
affected by "daily price fluctuation limits" established by commodity exchanges
which limit the amount of fluctuation in a futures price during a single trading
day. Once the daily limit has been reached in a contract, no trades may be
entered into at a price beyond the limit, which may prevent the liquidation of
open futures positions. Prices have in the past exceeded the daily limit on a
number of consecutive trading days. If there is not a liquid market at a
particular time, it may not be possible to close a futures position at such
time, and, in the event of adverse price movements, the Series would continue to
be required to make daily cash payments of variation margin. However, if futures
or options are used to hedge portfolio securities, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract.

An exchange-traded option may be closed out only on a national securities
or commodities exchange which generally provides a liquid secondary market for
an option of the same series. If a liquid secondary market for an
exchange-traded option does not exist, it might not be possible to effect a
closing transaction with respect to a particular option, with the result that
the Series would have to exercise the option in order to realize any profit. If
the Series that has written an option is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation or other clearing organization may not at all
times be adequate to handle current trading volume or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options on that
exchange that had been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
<PAGE>

Because the specific procedures for trading foreign futures and options on
futures exchanges are still evolving, additional or different margin
requirements as well as settlement procedures may be applicable to foreign
futures and options at the time the Series purchases foreign futures or options.

The successful use of transactions in futures and options depends in part
on the ability of the Series to forecast correctly the direction and extent of
interest rate or securities price movements within a given time frame. To the
extent interest rates or securities prices move in a direction opposite to that
anticipated, a Series may realize a loss that is not fully or partially offset
by an increase in the value of portfolio securities. In addition, whether or not
interest rates or securities prices move during the period that the Series holds
futures or options positions, the Series will pay the cost of taking those
positions (i.e., brokerage costs). As a result, the Series' total return for
such period may be less than if it had not engaged in the futures or option
transaction.

Future Developments. The above discussion relates to the Series' proposed
use of futures contracts, options and options on futures contracts currently
available. The relevant markets and related regulations are still in the
developing stage. In the event of future regulatory or market developments, the
Series may also use additional types of futures contracts or options and other
similar or related investment techniques.

Foreign Currency Transactions - To protect against a change in the foreign
currency exchange rate between the date on which a Series contracts to purchase
or sell a security that settles in a foreign currency and the settlement date
for the purchase or sale, or to "lock in" the equivalent of a dividend or
interest payment in another currency, the Series might purchase or sell a
foreign currency on a spot (or cash) basis at the prevailing spot rate. Each
Series may also purchase options on foreign currencies. If conditions warrant, a
Series may also enter into contracts with banks or broker-dealers to purchase or
sell foreign currencies at a future date ("forward contracts"). The Series will
maintain cash or other liquid assets in a segregated account with the custodian
in an amount at least equal to (i) the difference between the current value of
the Series' liquid holdings that settle in the relevant currency and the Series'
outstanding net obligations under currency forward contracts in that currency,
or (ii) the current amount, if any, that would be required to be paid to enter
into an offsetting forward currency contract which would have the effect of
closing out the original forward contract. The Series' use of currency hedging
transactions may be limited by tax considerations. The Series may also purchase
or sell foreign currency futures contracts traded on futures exchanges. Foreign
currency futures contract transactions involve risks similar to those of other
futures transactions. See "Futures and Options," above. Each Series may use
foreign currency transactions for hedging purposes only.

Real Estate Investment Trusts ("REITs") - REITs are pooled investment
vehicles which invest primarily in investment in income producing real estate or
real estate related loans or interest. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Like regulated investment
companies such as the Series, REITs are not taxed on income distributed to
shareholders provided that they comply with certain requirements under the Code.
The Series will indirectly bear its proportionate share of any expenses paid by
REITs in which it invests in addition to the expenses paid by the Series.

Investing in REITs involves certain unique risks. Equity REITs may be
affected by changes in the value of the underlying property owned by such REITs,
while mortgage REITs may be affected by the quality of any credit extended.
REITs are dependent upon management skills, are not diversified (except to the
extent the Code requires), and are subject to the risk of financing projects.
REITs are subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for the exemption
from tax for distributed income under the Code and failing to maintain their
exemption from the 1940 Act. REITs, and mortgage REITs in particular, are also
subject to interest rate risk.

Emerging Markets - Investing in the securities of issuers in emerging
countries involves risks in addition to those discussed in the Prospectus under
"Foreign Securities." The Goldman Sachs Midcap Value Series may invest up to 15%
of its total assets in securities of issuers in emerging countries. Emerging
countries are generally located in the Asia-Pacific region, Eastern Europe,
Latin and South America and Africa. The Series' purchase and sale of portfolio
securities in certain emerging countries may be constrained by limitations as to
daily changes in
<PAGE>

the prices of listed securities, periodic trading or settlement volume and/or
limitations on aggregate holdings of foreign investors. Such limitations may be
computed based on the aggregate trading volume by or holdings of the Series, the
subadviser, its affiliates and their respective clients and other service
providers. The Series may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached.

Foreign investment in the securities markets of certain emerging countries
is restricted or controlled to varying degrees which may limit investment in
such countries or increase the administrative costs of such investments. For
example, certain Asian countries require governmental approval prior to
investments by foreign countries or limit investment by foreign countries to
only a specified percentage of an issuer's outstanding securities or a specific
class of securities which may have less advantageous terms (including price)
than securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Series. The repatriation of both investment income and capital
from certain emerging countries is subject to restrictions such as the need for
governmental consents. Due to restrictions on direct investment in equity
securities in certain Asian countries, such as Taiwan, it is anticipated that
the Series may invest in such countries only through other investment funds in
such countries. See "Investment Risks - Investment Company Securities."" in the
Prospectus.
<PAGE>

DETERMINATION OF NET ASSET VALUES

As described in the text of the Prospectus following the caption "Net Asset
Values and Portfolio Valuation," the value of each Series' portfolio assets is
determined by that Series' adviser (or subadviser, in the case of Series that
have a subadviser). The net asset value of each Series' shares is determined as
of the close of regular trading on the New York Stock Exchange on each day the
New York Stock Exchange is open and there is a sufficient degree of trading in a
Series' portfolio securities that the current net asset value of a Series'
shares is materially affected. The New York Stock Exchange is currently expected
to be closed on weekend days and on the following holidays each year: New Year's
Day, Martin Luther King Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Expenses of
each Series are paid or accrued each day.

All Series (other than the Back Bay Advisors Money Market Series)

As described in the text of the Prospectus following the caption "Net Asset
Values and Portfolio Valuation," each Series other than the Back Bay Advisors
Money Market Series values its securities in the manner set forth below.

Equity securities traded on a national securities exchange or exchanges or
the NASDAQ National Market System are valued at their last sale price on the
principal trading market. Equity securities traded on a national securities
exchange or exchanges or on the NASDAQ National Market System for which there is
no reported sale during the day, and equity securities not so traded are valued
at the last reported bid price. Other securities for which current market
quotations are not readily available (including restricted securities, if any)
and all other assets are taken at fair value as determined in good faith by the
Series' adviser or subadviser acting under the supervision of the Board of
Trustees, although the actual calculations may be made by a pricing service
selected by the Series' adviser or subadviser and approved by the Board. Such
valuations are determined by using methods based on market transactions for
comparable securities and on various relationships between securities that are
generally recognized by institutional traders.

Fixed-income securities (other than short term obligations maturing in 60
days or less, which are valued using the amortized cost method which
approximates market value) are valued on the basis of market valuations
furnished by a pricing service selected by the Series' adviser or subadviser,
pursuant to the authorization of the Board of Trustees. The pricing service
employed will be one that determines valuations of normal institutional-sized
trading units of long-term debt securities. Such valuations are determined by
using methods based on market transactions for comparable securities and on
various relationships between securities that are generally recognized by
institutional traders. Other securities for which current market quotations are
not available are valued at fair value as determined in good faith by the
Series' adviser or subadviser acting under the supervision of the Board of
Trustees, although the actual calculations may be made by a pricing service
selected by the Series' adviser or subadviser Back Bay Advisors and approved by
the Board.

An option written by a Series of the Fund generally will be valued at the
last sale price or, in the absence of the last price, the last offer price. A
futures contract will be valued at the unrealized gain or loss on the contract
to the current settlement price. A settlement price may not be used if the
market makes a limit move with respect to a particular futures contract or if
the securities underlying the futures contract experience significant price
fluctuations after determination of the settlement price. When settlement price
is not used, futures contracts will be valued at their fair value as determined
by or under the direction of the Fund's Board of Trustees.

Securities traded primarily on an exchange outside the United States which
closes before the close of the New York Stock Exchange generally will be valued
for purposes of calculating a Series' net asset value at the last sale or bid
price on that non-U.S. exchange, except that when an occurrence after the
closing of that exchange is likely to have materially changed such security's
value, such security will be valued at fair value as determined by or under
direction of the Fund's Board of Trustees.

All other securities and assets of each Series are valued at their fair
market value as determined in good faith by the adviser or subadviser of that
Series (or pricing service selected by the adviser or subadviser) under the
supervision of the Fund's Board of Trustees. The value of any assets for which
the market price is expressed in terms of foreign currency will be translated
into U.S. dollars at the prevailing market rate on the date of net asset value
computation, or, if no such rate is quoted at such time, at such other
appropriate rate as may be determined by or under the direction of the Fund's
Board of Trustees.

Back Bay Advisors Money Market Series

As described in the text of the Prospectus following the caption "Net Asset
Values and Portfolio Valuation," the portfolio securities of the Back Bay
Advisors Money Market Series will be valued at amortized cost. Under the
amortized cost method of valuation, securities are valued at cost on the date of
purchase. Thereafter the values of securities purchased at a discount or premium
are increased or decreased incrementally each day so that at maturity the
purchase discount or premium is fully amortized and the value of the security is
equal to its principal amount. Due to fluctuations in interest rates, the
amortized cost value of the securities of the Back Bay Advisors Money Market
Series may at times be more or less than their market value.

By using amortized cost valuation, the Back Bay Advisors Money Market
Series seeks to maintain a constant net asset value of $100 per share despite
minor shifts in the market value of its portfolio securities. The yield on a
shareholder's investment may be more or less than that which would be recognized
if the net asset value per
<PAGE>

share of the Back Bay Advisors Money Market Series were not constant and were
permitted to fluctuate with the market value of the Series' portfolio securities
of the Series. However, as a result of the following procedures, the Fund
believes any difference will normally be minimal. Quarterly, the Fund's Trustees
monitor the deviation between the net asset value per share of the Series as
determined by using available market quotations and its amortized cost price per
share. Back Bay Advisors makes such comparisons at least weekly and will advise
the Trustees promptly in the event of any significant deviation. If the
deviation exceeds 0.50% the Board of Trustees will consider what action, if any,
should be initiated to provide fair valuation of the portfolio securities of the
Series and prevent material dilution or other unfair results to shareholders.
Such action may include selling portfolio securities prior to maturity,
withholding dividends or utilizing a net asset value per share as determined by
using available market quotations.

FUND PERFORMANCE

Calculations of Yield and Total Return

Yield of the Loomis Sayles Balanced, Back Bay Advisors Managed, Salomon
Brothers Strategic Bond Opportunities, Back Bay Advisors Bond Income and
Salomon Brothers U.S. Government Series. As summarized in the Prospectus under
the caption "Performance Information," the yield of each of these Series will be
computed in accordance with the SEC's standardized formula by annualizing net
investment income per share for a recent 30-day period and dividing that amount
by a share's net asset value (reduced by any earned income expected to be
declared shortly as a dividend) on the last trading day of that period. Net
investment income will reflect amortization of any market value premium or
discount of fixed-income securities (except for obligations backed by mortgages
or other assets) and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities.

These Series' yield will vary from time to time depending upon market
conditions, the composition of the Series' portfolio and the operating expenses
of the Series. These factors and possible differences in the methods used in
calculating yield should be considered when comparing the Back Bay Advisors Bond
Income Series' yield to yields published for other investment companies and
other investment vehicles. Yield should also be considered relative to changes
in the value of the Series' shares and to the relative risks associated with the
investment objectives and policies of the Series. Yield information may be
useful in reviewing such Series' performance and providing a basis for
comparison with other investment alternatives, although the yields of the Series
do not take into account any of the fees imposed in connection with the purchase
of variable life insurance policies or variable annuity contracts offered by New
England Life Insurance Company ("NELICO") or Metropolitan Life Insurance Company
("MetLife"). Yield may be stated with or without giving effect to any expense
limitations in effect for the Series.

At any time in the future, yields may be higher or lower than past yields
and there can be no assurance that any historical results will continue.

Investors are specifically advised that share prices, expressed as the net
asset value per share, will vary just as yields will vary. An investor's focus
on the yield of a Series to the exclusion of consideration of the share price
may result in the investor's misunderstanding the total return he or she may
derive from the Series.

Yield of the Back Bay Advisors Money Market Series. The Back Bay Advisors
Money Market Series' yield represents the net change, exclusive of capital
changes, in the value of a hypothetical account having a balance of one share at
the beginning of the period for which yield is determined (the "base period").
Current yield for the base period (for example, seven calendar days) is
calculated by dividing (i) the net change in the value of the account for the
base period by (ii) the number of days in the base period. The resulting number
is then multiplied by 365 in order to determine such net change on an annualized
basis. This amount is divided by the value of the account as of the beginning of
the base period, normally $100, in order to state the current yield as a
percentage. Yield may also be calculated on an "effective" or a "compound"
basis, which assumes continual reinvestment throughout an entire year of net
income earned at the same rate as net income is earned by the account for the
base period. Yield is calculated without regard to realized and unrealized gains
and losses. The yield of the Series will vary depending on prevailing interest
rates, the operating expenses of the Series and the quality, maturity and type
of instruments held in the portfolio of that Series. Yield information may be
useful in reviewing such Series' performance and providing a basis for
comparison with other investment alternatives,
<PAGE>

although the yield of the Series does not take into account any of the fees
imposed in connection with the purchase of variable insurance policies or
variable annuity contracts offered by NELICO or MetLife. However, unlike certain
bank deposits or other investments which pay a fixed yield for a stated period
of time, money market fund yields fluctuate. Consequently no yield quotation
should be considered as representative of what the yield of the Series may be
for any specified period in the future.

Calculation of Total Return. As summarized in the Prospectus under the
heading "Performance Information," total return is a measure of the change in
value of an investment in a Series over the period covered, which assumes that
any dividends or capital gain distributions are automatically reinvested in the
Series rather than paid to the investor in cash. Total return may be higher or
lower than past performance, and there can be no assurance that any historical
results will continue.

The formula for total return used by a Series includes three steps: (1)
adding to the total number of shares purchased by a hypothetical $1,000
investment in a Series all additional shares that would have been purchased if
all dividends and distributions paid or distributed during the period had been
automatically reinvested; (2) calculating the value of the hypothetical initial
investment as of the end of the period by multiplying the total number of shares
owned at the end of the period by the net asset value per share on the last
trading day of the period; and (3) dividing this account value for the
hypothetical investor by the amount of the initial investment and annualizing
the result for periods of less than one year. Total return reflects the bearing
or deferral of certain expenses by New England Mutual Life Insurance Company
("The New England") or TNE Advisers, Inc. Total return would be lower for these
Series if these expense arrangements had not been in effect. Total return does
not reflect 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. Total return may be stated alone or may be
accompanied by investment return information for those separate accounts or the
variable life insurance or variable annuity products.

Performance Comparisons

Yield and Total Return. Each Series may, from time to time, include its
total return in advertisements or in other written information furnished to
present and prospective owners of the variable life insurance and variable
annuity contracts supported by the Fund. The Loomis Sayles Balanced, Back Bay
Advisors Managed, Back Bay Advisors Bond Income Series, the Salomon Brothers
U.S. Government Series, the Salomon Brothers Strategic Bond Opportunities Series
and the Back Bay Advisors Money Market Series may, from time to time, also
include their yield in such advertisements or other written information. These
results may include comparisons to the yields of money market funds reporting to
IBC/Donoghue's Money Fund Report ("Donoghue's Report"). In addition, each Series
may, from time to time, provide a ranking of such performance figures relative
to similar figures for mutual funds whose performance has been monitored by
Lipper Analytical Services, Inc. ("Lipper"). Performance information about a
Series is based on the Series' past performance and is not intended to indicate
future performance.

Donoghue's Report is an independent service that collects data from over
1,000 money market funds weekly and reports on the assets, 7- and 30-day yields,
12-month yields, average maturities and portfolio breakdowns of such funds.
12-month yields represent total return assuming reinvestment of dividends for up
to one year.

Lipper is an independent service that monitors the performance of over 750
variable annuity and variable life mutual funds, calculates total return and, in
some cases, yield for such funds.

Total return (and yield in the case of the Back Bay Advisors Bond Income,
the Back Bay Advisors Money Market, Loomis Sayles Balanced, Back Bay Advisors
Managed, Salomon Brothers U.S. Government and Salomon Brothers Strategic
Bond Opportunities Series) may also be used to compare the performance of a
Series against certain widely acknowledged standards or indices for stock and
bond market performance, including, but not limited to, the S&P 500 Index, the
Dow Jones Industrial Average, the Lehman Government/Corporate Bond Index, the
Lehman Intermediate Government/Corporate Bond Index, the S&P/BARRA Growth Index,
the S&P/BARRA Value Index, the Lipper Variable Balanced Fund Average, the Lipper
Variable Growth and Income Average, the Lipper Variable A-Rated Corporate Bond
Fund Average, the Lipper Variable Flexible Portfolio Fund Average, the Lipper
Variable General Bond Fund Average, the Lipper Variable Growth Fund Average, the
Lipper Variable International Fund Average, the Lipper Variable Intermediate
Investment Grade Debt Fund Average, the
<PAGE>

Lipper Variable Small Company Fund Average, the Lipper Variable S&P 500 Index
Fund Average, the Lipper Variable U.S. Mortgage and GNMA Fund Average, the
Russell 2000 Index, the Russell Midcap Index, the Lehman Brothers Aggregate Bond
Index, the Lehman Brothers Intermediate Government Bond Index and the Morgan
Stanley Capital International Europe, Australasia, Far East Index, or against
the U.S. Bureau of Labor Statistics' Consumer Price Index.

The S&P 500 Index is a market value-weighted and unmanaged index showing
the changes in the aggregate market value of 500 stocks relative to the base
period 1941-43. The S&P 500 Index is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 385
industrial, 15 transportation, 55 financial services and 45 utilities concerns.

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

The Lehman Government/Corporate Bond Index is a measure of the market value
of approximately 5,300 bonds with a face value currently in excess of $1.3
trillion. To be included in the Lehman Government/Corporate Bond Index, an issue
must have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency.

The Lehman Intermediate Government/Corporate Bond Index is an unmanaged
index of investment grade bonds issued by the U.S. Government and U.S.
corporations having maturities between one and ten years.

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 in major expenditure groups.

The S&P/BARRA Growth Index is an unmanaged index of more than 150 large
capitalization stocks that have high historical earnings growth and predicted
above average earnings growth. The S&P/BARRA Value Index is an unmanaged index
of more than 300 large capitalization stocks characterized by low price-to-book
ratios, high yield and low price-to-earnings ratios. Both the S&P/BARRA Growth
Index and the S&P/BARRA Value Index are compiled by BARRA.

The Lipper International Fund Index is an index of 30 international funds
which are determined to reflect the general movement of the entire universe of
international funds tracked by Lipper Analytical Services.

The Lipper Variable Balanced Fund Average is a measure of the performance
of the largest open-end balanced mutual funds.

The Lipper Variable Growth and Income Average represents a grouping of
funds underlying annuity products which have growth and income as their
investment objectives.

The Lipper Variable A-Rated Corporate Bond Fund Average is an average of
the total return performance (calculated on net asset value) of funds with
similar investment objectives as calculated by Lipper Analytical Services.

Lipper Variable Flexible Portfolio Fund Average is an average of the total
return performance (calculated on net asset value) of funds with similar
investment objectives as calculated by Lipper Analytical Services.

The Lipper Variable General Bond Fund Average is an average of the total
return performance (calculated on net asset value) of funds with similar
investment objectives as calculated by Lipper Analytical Services.

Lipper Variable Growth Fund Average is an average of the total return
performance (calculated on net asset value) of funds with similar investment
objectives as calculated by Lipper Analytical Services.

The Lipper Variable International Fund Average is an average of the total
return performance (calculated on net asset value) of funds with similar
investment objectives as calculated by Lipper Analytical Services.
<PAGE>

The Lipper Variable Intermediate Investment Grade Debt Fund Average is an
average of the total return performance (calculated on net asset value) of funds
with similar investment objectives as calculated by Lipper Analytical Services.

The Lipper Variable Small Company Fund Average is an average of the total
return performance (calculated on net asset value) of funds with similar
investment objectives as calculated by Lipper Analytical Services.

The Lipper Variable S&P 500 Index Fund Average is an average of the total
return performance (calculated on net asset value) of funds with similar
investment objectives as calculated by Lipper Analytical Services.

The Lehman Brothers Aggregate Bond Index is an index which includes most
obligations of the U.S. Treasury, agencies and quasi-federal corporations, most
publicly issued investment grade corporate bonds, and most bonds backed by
mortgage pools of GNMA, FNMA and FHLMC.

The Lehman Brothers Intermediate Government Bond Index is an index which
includes most obligations of the U.S. Treasury, agencies and quasi-federal
corporations having maturities of one to ten years.

The Russell 2000 Index is an unmanaged index which consists of 2000 small
market capitalization stocks having an average market cap of $160 million.

The Russell Midcap Index is an unmanaged index which consists of the 800
smallest companies in the Russell 1000 Index. The Russell 1000 Index represents
the largest 1000 U.S. companies.

The Morgan Stanley Capital International Europe, AustralAsia, Far East
Index is an arithmetical average (weighted by market value) of the performance
(in U.S. dollars) of over 1,000 companies representing the stock markets of
Europe, Australia, New Zealand and the Far East.

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 (see Appendix B). 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 be 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.
<PAGE>

Certain total return information with respect to the Series is presented
under "Performance Information" in the prospectus. Listed below is restated
information without giving effect to the voluntary expense agreements or the
expense deferral arrangement, as the case may be, for the periods presented.

1-Year 5-Year Average Since -
Total Return Annual Total 10-Year Average Inception
Without Giving Return Annual Total Average Annual
Effect to Without Giving Return Without Total Return
Expense Deferral Effect to the Giving Effect Without Giving
Arrangement or Expense Deferral to the Effect to Expense
Voluntary Arrangement or Voluntary Deferral Arrangement
Expense Voluntary Expense Expense or Voluntary
Agreement Agreement Agreement Expense Agreements
for the for the period for the period for the
year ended ended ended periods ended
12/31/97 12/31/97 12/31/97 12/31/97
-------------------- ------------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Loomis Sayles Small Cap 24.7% -- -- 20.9%
Series
(inception 5/1/94)

Morgan Stanley
International
Magnum Equity Series(a) (1.6)% -- -- 2.5%
(inception 10/31/94)

Alger Equity Growth
Series 25.6% -- -- 24.3%
(inception 10/31/94)

Capital Growth
Series 23.5% 17.1% 13.9% 17.1%
(inception 8/26/83)

Davis Venture Value
Series 33.5% -- -- 28.7%
(inception 10/31/94)

Goldman Sachs Midcap
Value Series(b) 17.3% -- -- 16.7%
(inception 4/30/93)

Westpeak Growth and
Income Series 33.5% -- -- 20.9%
(inception 4/30/93)

Westpeak Stock
Index Series 32.5% 19.8% 17.5% 14.8%
(inception 5/1/87)

Loomis Sayles Balanced
Series 16.2% -- -- 17.2%
(inception 10/31/94)

Back Bay Advisors
Managed Series 10.9% 15.9% 13.7% 15.9%
(inception 5/1/87)
</TABLE>
<PAGE>

5-Year 10-Year
1-Year Total Average Average Since-
Return Without Annual Annual Inception
Giving Effect to Total Return Total Return Average
Expense Deferral Without Giving Without Giving Annual Total
Arrangement or Effect to Expense Effect to Expense Without Giving
Voluntary Expense Deferral Arrangement Deferral Arrangement Effect to the
Agreement or Voluntary Expense or Voluntary Expense Expense Deferral
For The Agreements Agreements Arrangement or
Year Ended for the period ended for the period ended Voluntary Expense
12/31/97 12/31/97 12/31/97 Agreements
--------- --------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Salomon Brothers Strategic
Bond Opportunities
Series 11.7% -- -- 12.8%
(inception 10/31/94)

Back Bay Advisors Bond
Income Series 10.9% 8.9% 9.9% 10.5%
(inception 8/26/83)

Salomon Brothers
U.S. Government Series 8.6% -- -- 7.3%
(inception 10/31/94)

Back Bay Advisors
Money Market Series 5.2% 4.6% 5.8% 6.4%
(inception 8/26/83)
</TABLE>

(a) On May 1, 1997, MSAM succeeded Draycott Partners, Ltd. as subadviser
to the Morgan Stanley International Magnum Equity Series.

(b) On May 1, 1998 GSAM succeeded Loomis, Sayles & Company, L. P. as
subadviser to the Goldman Sachs Midcap Value Series.
<PAGE>

No brokerage commissions or other fees were factored into the values of the
S&P 500, which is an index of an unmanaged group of common stocks. No
adjustments have been made for a shareholder's tax liability on dividends and
capital gains distributions.

TRUSTEES AND OFFICERS

Trustees and officers of the Fund (ages in parentheses) and their principal
occupations during the past five years or more are as follows:

NANCY HAWTHORNE (47) -- Trustee; Pilot House, Lewis Wharf, Boston, MA 02110;
formerly, Chief Executive Officer and Managing Partner, Hawthorne, Krauss
and Associates (corporate financial advisor); Executive Vice President,
Enterprise Transformation MediaOne, Inc.(a cable television company);
Director, Perini Corporation (construction); Director, Avid Technologies
(computer software company); Director, Commercial Union Assurance Co.
(property and casualty insurance company)

JOSEPH M. HINCHEY (73) -- Trustee; 193 Wamphassuc Road, Stonington, CT 06378;
Retired; formerly, Senior Vice President-Finance, Analog Devices, Inc.
(manufacturer of electronic devices); Trustee, Union College and Citizens
Scholarship Foundation of America, Inc.

ROBERT B. KITTREDGE (77) -- Trustee; 21 Sturdivant Road, Cumberland Foreside, ME
04110; Retired; Trustee, CGM Trust and CGM Capital Development Fund;
formerly, Vice President, General Counsel and Director, Loomis, Sayles &
Company, Inc.

LAURENS MACLURE (73) -- Trustee; 183 Sohier Street, Cohasset, MA 02025; Retired;
Trustee, CGM Trust and CGM Capital Development Fund; Director, Blue Cross
of Massachusetts (health insurance).

DALE ROGERS MARSHALL (61) -- Trustee; 26 East Main Street, Norton, MA 02766;
President, Wheaton College; formerly, Academic Dean, Wellsley College.

JOHN J. ARENA (61) -- Trustee; 330 Beacon Street, Boston, MA 02116; Retired;
formerly, Vice Chairman of the Board of Directors of Bay Banks, Inc. and
President of Bay Banks Investment Management.

JOHN W. FLYNN (58) -- Trustee; 791 Main Street, Warren, RI 02885; Retired;
formerly, Vice Chairman, Chief Financial Officer, Fleet Financial Group.

JOHN T. LUDES (61) -- Trustee; 1700 E. Putnam Avenue, Old Greenwich, CT 06870;
President and Chief Operating Officer, American Brands (global
conglomerate); formerly, President and CEO, Acushnet Company.

FREDERICK K. ZIMMERMANN* (46) -- Chairman of the Board, Chief Executive Officer,
President and Trustee; Chief Investment Officer and Executive Vice
President, NELICO; Chairman of the Board and President, TNE Advisers,
Inc.; Director and Vice President - Investments, NELICO until 1996;
Chairman of the Board and President, New England Pension and Annuity
Company.

ANNE M. GOGGIN* (49) -- Senior Vice President and Trustee; Senior Vice
President and Associate General Counsel, NELICO; Vice President, General
Counsel, Secretary and Clerk, New England Securities Corp.

JOHN F. GUTHRIE (54) -- Senior Vice President; Vice President, NELICO; Senior
Vice President, TNE Advisers, Inc.

<PAGE>

ALAN C. LELAND (45) -- Senior Vice President; Senior Vice President, NELICO;
Chief Financial Officer, TNE Advisers, Inc.

MAURA A. MURPHY (38) - Secretary and Clerk; Counsel and Assistant Secretary,
NELICO; Secretary and Chief Legal Officer, TNE Advisers, Inc.; formerly,
an attorney for the Securities and Exchange Commission.

FRANK NESVET (53) -- Treasurer; Senior Vice President and Managing Director, New
England Funds, L.P.

* Denotes trustee who is an "interested person" as defined in the Investment
Company Act of 1940, as amended

Messrs. Arena, Hinchey and Zimmermann serve as members of the Executive
Committee of the Board of Trustees. The Executive Committee is authorized to
exercise broad decision-making responsibility on behalf of the Fund's Board of
Trustees with respect to issues that require immediate response and for which it
is difficult or impractical to contact all of the members of the Board within
the time frame required for the decision.

Previous positions during the past five years with NELICO or its
predecessor, New England Mutual Life Insurance Company or New England Funds,
L.P. are omitted, if not materially different. The Fund's trustees also serve as
managers of New England Variable Annuity Fund I ("NEVA"), for which New England
Securities Corporation acts as a principal underwriter and CGM acts as
investment adviser.

Except as indicated above, the address of each trustee and officer of the
Fund affiliated with NELICO is 501 Boylston Street, Boston, Massachusetts 02116.
The address of each trustee or officer of the Fund affiliated with New England
Funds, L.P. or New England Securities Corporation is 399 Boylston Street,
Boston, Massachusetts.

The officers and trustees of the Fund who are "interested persons" receive
no compensation from the Fund, for their services in such capacities, although
they do receive compensation from NELICO or New England Funds, L.P. for services
rendered in other capacities.

Trustees Fees

The Fund pays no compensation to its officers or to its trustees who are
interested persons thereof.

Each trustee who is not an interested person of the Fund receives for
serving as Trustee of the Fund and on the Board of Managers of NEVA a retainer
fee at an annual rate of $20,000, and meeting attendance fees of $2,500 for each
board meeting attended. In addition, the chairman of the Contract Review and
Governance Committee receives a retainer at the annual rate of $6,000, and the
chairman of the Audit Committee receives a retainer at the annual rate of
$4,000. The compensation is allocated among the Series and NEVA based on a
formula that takes into account, among other factors, the assets of each Series
and NEVA.

During the fiscal year ended December 31, 1997, the persons who were then
trustees of the Fund received the amounts set forth below for serving as a
trustee of the Fund and for also serving on the Board of Managers of NEVA.

<TABLE>
<CAPTION>
Total
Aggregate Compensation
Compensation from the Fund
from the Fund and NEVA
Name of Trustee in 1997 in 1997
- --------------- ------- -------
<S> <C> <C>
Nancy Hawthorne $32,104 $34,000
Joseph M. Hinchey 34,049 36,000
Richard S. Humphrey, Jr. (b) 30,237 32,000
Robert B. Kittredge 33,971 73,000 (a)
Laurens MacLure 35,021 74,000(a)
Dale Rogers Marshall 30,237 32,000
Joseph F. Turley (b) 30,237 32,000
John J. Arena 34,700 36,750
John. W. Flynn 33,971 36,000
John T. Ludes 30,237 32,000
</TABLE>

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

(a) Also includes compensation paid by the portfolios of the CGM
Funds, a group of mutual funds for which CGM, the investment
adviser of the Fund's Capital Growth Series and NEVA, serves as
investment adviser.

(b) Retired from service as a trustee of the Fund effective December
31, 1997

<PAGE>

The Fund provides no pension or retirement benefits to trustees, but has
adopted a deferred payment arrangement under which each trustee may elect not to
receive fees from the Fund on a current basis but to receive in a subsequent
period an amount equal to the value that such fees would have if they had been
invested in each Series on the normal payment date for such fees. As a result of
this method of calculating the deferred payments, each Series, upon making the
deferred payments, will be in the same financial position as if the fees had
been paid on the normal payment dates.

At April 15, 1998, the officers and trustees of the Fund as a group owned
less than 1% of the outstanding shares of the Fund.

ADVISORY ARRANGEMENTS

Advisory Structure. Pursuant to separate advisory agreements, each dated
August 30, 1996 (May 1, 1997 in the case of the Morgan Stanley International
Magnum Equity Series and May 1, 1998 in the case of the Goldman Sachs Midcap
Value Series), TNE Advisers, Inc. has agreed to manage the investment and
reinvestment of assets of each Series other than the Capital Growth Series. TNE
Advisers, Inc. has delegated certain of these responsibilities, including
responsibility for determining what investments such Series should purchase,
hold or sell and directing all trading for the Series' account, for each of the
Series to subadvisers under subadvisory agreements described below. Pursuant to
an advisory agreement dated August 30, 1996, CGM has agreed to manage the
investment and reinvestment of the assets of the Capital Growth Series.

In each case, advisory services are provided subject to the supervision and
control of the Fund's trustees. Each advisory agreement also provides that the
relevant investment adviser will furnish or pay the expenses of the applicable
Series for office space, facilities and equipment, services of executive and
other personnel of the Fund and certain administrative services. TNE Advisers,
Inc. has subcontracted with New England Funds, L.P. to provide, at no extra cost
to the Series it advises, certain administrative services to the Fund. CGM, in
the case of the Capital Growth Series, has subcontracted with New England Funds,
L.P. to provide such services to that Series at no extra cost to the
Series.

TNE Advisers, Inc. is a wholly-owned subsidiary of New England Life
Holdings, Inc., which is a wholly-owned subsidiary of NELICO, which in turn is a
wholly owned subsidiary of MetLife New England Holdings, Inc. ("MetLife
Holdings"). MetLife Holdings is wholly owned by Metropolitan Life Insurance
Company ("MetLife"). TNE Advisers, Inc. oversees, evaluates and monitors the
subadvisers' provision of investment advisory services to all of the Series
(except the Capital Growth Series) and provides general business management and
administration to all of the Series (except the Capital Growth Series).

Subject to the supervision of TNE Advisers, Inc. each subadviser, pursuant
to Subadvisory Agreements dated August 30, 1996 (December 16, 1996 in the case
of the Davis Venture Value Series, May 31, 1997 in the case of the Morgan
Stanley International Magnum Equity Series, November 28, 1997 in the case of the
Salomon Brothers Strategic Bond Opportunities and Salomon Brothers U. S.
Government Series and May 1, 1998 in the case of the Goldman Sachs Midcap Value
Series), manages the assets of its Series in accordance with that Series'
investment objective and policies, makes investment decisions for that Series
and employs professional advisers and securities analysts who provide research
services to that Series. The Series pay no direct fees to any of the
subadvisers.

<PAGE>

Back Bay Advisors, formed in 1986, is a limited partnership whose sole
general partner, Back Bay Advisors, Inc., is a wholly-owned subsidiary of Nvest
Holdings, Inc. which in turn is a wholly owned subsidiary of Nvest Companies,
L.P. ("Nvest Companies"). Nvest Companies owns the entire limited partnership
interest in Back Bay Advisors. Nvest Companies managing general partner, Nvest
Corporation, is a wholly owned subsidiary of MetLife New England Holdings, Inc.,
which in turn is a wholly owned subsidiary of MetLife. MetLife owns directly 46%
(and in aggregate, directly and indirectly, 47%) of the outstanding limited
partnership interest in Nvest Companies. Nvest Companies ' advising general
partner, Nvest, L.P., is a publicly-traded company listed on the New York Stock
Exchange. Nvest Corporation is the sole general partner of Nvest, L.P. Nvest
Companies' 14 principal subsidiary or affiliated assets management firms,
collectively, had more than $125 billion of assets under management as of March
31, 1998. Back Bay Advisors provides investment management services to
institutional clients, including other registered investment companies and
accounts of NELICO and its affiliates. Back Bay Advisors specializes in
fixed-income management and currently manages over $7 billion in total assets;
it is subadviser to the Back Bay Advisors Managed, Back Bay Advisors Bond Income
and Back Bay Advisors Money Market Series.

Loomis Sayles, subadviser to the Loomis Sayles Small Cap and Loomis Sayles
Balanced Series, was organized in 1926 and is one of the oldest and largest
investment counsel firms in the country. An important feature of the Loomis
Sayles investment approach is its emphasis on investment research.
Recommendations and reports of the Loomis Sayles research department are
circulated throughout the Loomis Sayles organization and are available to the
individuals in the Loomis Sayles organization who have been assigned the
responsibility for making investment decisions for the Series' portfolios.
Loomis Sayles provides investment advice to numerous other institutional and
individual clients. These clients include other registered investment companies
and some accounts of NELICO and its affiliates ("New England Accounts"). Loomis
Sayles is a limited partnership whose sole general partner is Loomis, Sayles &
Company, Incorporated is a wholly owned subsidiary of Nvest Holdings, Inc. Nvest
Companies owns the entire limited partnership interest in Loomis Sayles.

MSAM, subadviser to the Morgan Stanley International Magnum Equity Series,
conducts worldwide investment management business, providing a broad range of
portfolio management services to customers in the United States and abroad. MSAM
is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., which is a
preeminent financial services firm that maintains a leading market positions in
each of its three primary businesses - securities, asset management and credit
services. MSAM serves as adviser to numerous open-end and closed-end investment
companies.

Fred Alger Management, Inc. ("Alger Management"), provides investment
management services to mutual funds and to other institutions and individuals;
it is subadviser to the Alger Equity Growth Series. Alger Management is a
wholly-owned subsidiary of Fred Alger Company, Inc., 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 majority owners
of Alger Associates, Inc. and may be deemed to control that company and its
subsidiaries.

CGM is a limited partnership whose general partner, Kenbob, Inc., is a
corporation controlled equally by Robert L. Kemp and G. Kenneth Heebner, both
employees of CGM. In addition to advising the Capital Growth Series, CGM acts as
investment adviser of CGM Capital Development Fund, CGM Trust, NEVA and New
England Growth Fund of the New England Funds. CGM also provides investment
advice to other institutional and individual clients.

Westpeak Investment Advisors, L.P. ("Westpeak") is a limited partnership
whose sole general partner, Westpeak Investment Advisors, Inc., is a
wholly-owned subsidiary of Nvest Holdings, Inc. Nvest Companies owns the entire
limited partnership interest in Westpeak. Organized in 1991, Westpeak provides
investment management services to mutual fund and other institutional clients,
including accounts of MetLife and its affiliates; it is subadviser to the
Westpeak Growth and Income and Westpeak Stock Index Series.

Davis Selected Advisers, L.P. ("Davis Selected") provides investment
advisory services for mutual funds and other clients; it is subadviser to the
Davis Venture Value Series. Venture Advisers, Inc., the general partner of Davis
Selected, is controlled by Shelby M.C. Davis, President of Davis Selected. Davis
Selected may also delegate any of its responsibilities to its wholly-owned
subsidiary Davis Selected - NY, Inc. ("DSA-NY").
<PAGE>

Salomon Brothers Asset Management Inc ("SBAM") provides investment advisory
services for individuals, other mutual funds and institutional clients; it is
subadviser to the Salomon Brothers U.S. Government Series and together with its
affiliate, Salomon Brothers Asset Management Limited ("SBAM Ltd."), the Salomon
Brothers Strategic Bond Opportunities Series.

SBAM is a corporation organized under the laws of Delaware on December 24,
1987 and is a registered investment adviser pursuant to the Investment Advisers
Act of 1940, as amended. As of February 28, 1998, SBAM and its worldwide
affiliates managed approximately $27 billion of assets. SBAM is a wholly owned
subsidiary of Salomon Brothers Holding Company Inc. ("SBHC"). SBHC is a wholly
owned subsidiary of Salomon Smith Barney Holdings Inc.,("SSBH") which in turn is
a wholly owned subsidiary of Travelers Group, Inc. ("Travelers")

SBAM Ltd. is a company organized under the laws of England. SBAM Ltd.
provides certain advisory services to SBAM relating to currency transactions and
investments in non-dollar denominated debt securities for the benefit of the
Strategic Bond Opportunities Series. SBAM Ltd. is a wholly owned subsidiary of
Salomon Brothers Europe Ltd., which is a wholly-owned by Salomon (International)
Finanz AG,(25%) and Salomon International Limited (75%) which in turn is a
wholly owned subsidiary of SBHC. The principal address of SBAM Ltd. is Victoria
Plaza, 111 Buckingham Palace Road, London SW1W OSB, England. SBAM Ltd. is a
member of the Investment Management Regulatory Organization Limited in the
United Kingdom and is registered as an investment adviser pursuant to the
Investment Advisers Act of 1940, as amended.

GSAM, subadviser to the Goldman Sachs Midcap Value Series, is a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"). Goldman Sachs
provides a wide range of fully discretionary investment advisory services
including quantitatively driven and actively managed U.S. and international
equity portfolios, U.S. and global fixed income portfolios, commodity and
currency products, and money markets. The general partners of Goldman Sachs are
the Goldman Sachs Group, L.P. (a Delaware limited partnership ) ("GSGLP") and
The Goldman Sachs & Co. L.L.C. (a Delaware limited liability company)("GSCLLC").
The Goldman Sachs Corporation ("GSC") is the parent company of both GSGLP and
GSCLLC. GSGLP is also a parent of GSCLLC. GSC is the sole general partner of
GSGLP. The principal business address of Goldman Sachs is 85 Broad Street, New
York, New York 10004.

Advisory Fees. Each Series pays its adviser compensation at the annual
percentage rates of the corresponding levels of that Series' average daily net
asset values, subject to any fee reductions or deferrals as described in the
Prospectus under "Voluntary Expense Agreements" or "Expense Deferral
Arrangement."
<TABLE>
<CAPTION>
Annual
Percentage Average Daily Net
Series Rate Asset Value Levels
------ ------ ------------------
<S> <C> <C>
Loomis Sayles Small Cap Series 1.00% all assets

Morgan Stanley International Magnum Equity Series 0.90% all assets

Alger Equity Growth Series 0.75% all assets

Capital Growth Series 0.70% the first $200 million
0.65% the next $300 million
0.60% amounts in excess of $500 million

Goldman Sachs Midcap Value Series+ 0.75% all assets

Davis Venture Value Series 0.75% all assets

</TABLE>
<PAGE>

<TABLE>
<S> <C> <C>
Westpeak Growth and Income Series 0.70% the first $200 million
0.65% the next $300 million
0.60% amounts in excess of $500 million

Westpeak Stock Index Series 0.25% all assets

Loomis Sayles Balanced Series 0.70% all assets

Back Bay Advisors Managed Series 0.50% all assets

Salomon Brothers Strategic Bond Opportunities Series 0.65% all assets

Back Bay Advisors Bond Income Series 0.40% the first $400 million
0.35% the next $300 million
0.30% the next $300 million
0.25% amounts in excess of $1 billion

Salomon Brothers U.S. Government Series 0.55% all assets

Back Bay Advisors Money Market Series 0.35% the first $500 million
0.30% the next $500 million
0.25% amounts in excess of $1 billion
</TABLE>

+Prior to May 1, 1998 the advisory fee payable by the Goldman Sachs Midcap Value
Series was at the annual rate of 0.70% of the first $200 million of the Series'
average daily net assets, 0.65% of the next $300 million of such assets and
0.60% of such assets in excess of $500 million.

Sub-Advisory Fees. TNE Advisers 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 to the Average Daily Net Asset
Series Respective 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

Morgan Stanley International Magnum Equity 0.75% of the first $100 million
Series* 0.60% of the next $40 million
0.45% of the next $30 million
0.40% of amounts in excess of $100 million

Alger Equity Growth Series** 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million

Goldman Sachs Midcap Value 0.45% of the first $100 million
Series*** 0.40% of the next $400 million
0.35% of amounts in excess of $500 million
</TABLE>
<PAGE>

<TABLE>
<S> <C> <C>
Davis 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 Growth and Income 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 Series
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 Managed 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>

*Prior to May 1, 1997 the subadviser of the Morgan Stanley International Magnum
Equity Series was Draycott Partners Ltd. and the subadvisory fee rate payable
for the Series was 0.75% of the first $10 million of the Series' average net
assets, 0.60% of the next $40 million of such assets, 0.45% of such assets in
excess of $50 million.

**Prior to May 1, 1996, the advisory fee rate for the Alger Equity Growth Series
was 0.70% of average net assets and the sub-advisory fee rate was 0.45% of the
first $10 million of average net assets, 0.40% of the next $90 million of such
assets, 0.35% of the next $150 million of such assets, 0.30% of the next $250
million of such assets and 0.25% of such assets in excess of $500 million.
Effective May 1, 1996, Alger Management has agreed with TNE Advisers, Inc. that
the sub-advisory fee payable by TNE Advisers, Inc. to Alger Management will be
reduced by 0.05% of the first $240 million of the excess of the Series' average
daily net assets over $10 million, and by 0.10% of the excess of the Series'
average daily net assets over $250 million. This fee reduction benefits TNE
Advisers, Inc., but does not reduce the advisory fees payable by the Series. The
fee reduction agreement will expire on at such time as TNE Advisers, Inc. has
recovered certain expenses (generally, those expenses borne by TNE Advisers,
Inc. under the Expense Deferral Arrangement prior to January 1, 1996 which are
not recovered from the Series).

***Prior to May 1, 1998, the subadviser of the Goldman Sachs Midcap Value
Series was Loomis Sayles was the subadvisory fee rate payable for the Series was
0.50% of the first $25 million of average daily net assets, 0.40% of the next
$75 million of such assets, 0.35% of the next $100 million of such assets, and
0.30% of such assets in excess of $200 million.
<PAGE>

In connection with SBAM's service as subadviser to the Strategic Bond
Opportunities Series, SBAM's London based affiliate, SBAM Ltd. 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 pay
SBAM Ltd. one-third of the compensation that SBAM receives for serving as
subadviser to the Series.

In connection with Davis Selected's service as subadviser to the Davis
Venture Value Series, Davis Selected may delegate any and all responsibilities
to its New York based subsidiary, DSA-NY. As compensation to DSA-NY, Davis
Selected will compensate DSA-NY for all reasonable direct and indirect costs
associated with DSA-NY's performance of services provided to Davis Selected.

For the periods below, the following amounts of advisory fees were paid by
each Series:

<TABLE>
<CAPTION>
January 1, 1995 to April 30, 1995 May 1, 1995 to December 31, 1995 January 1, 1995 to December 31, 1995
--------------------------------- -------------------------------- ------------------------------------
Series Amount Paid Adviser Paid Amount Paid Adviser Paid Amount Paid Adviser Paid
- ------ ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Loomis Sayles Small TNE Advisers,
Cap Series $22,671 Loomis Sayles $124,433 Inc. -- --

Morgan Stanley
International
Magnum Equity Series TNE Advisers,
-- -- -- -- $85,666 Inc.

Alger Equity Growth TNE Advisers,
Series -- -- -- -- $144,943 Inc.

Capital Growth
Series -- -- -- -- $5,232,562 CGM

Goldman Sachs $65,057 Loomis Sayles $195,829 TNE Advisers, -- --
Midcap Value Inc.

Davis Venture Value TNE Advisers,
Series -- -- -- -- $131,969 Inc.

Westpeak Growth and TNE Advisers,
Income Series $59,980 Westpeak $182,648 Inc. -- --

Westpeak Stock TNE Advisers,
Index Series $33,568 Westpeak $88,791 Inc. -- --

Loomis Sayles TNE Advisers,
Balanced Series -- -- -- -- $65,752 Inc.

Back Bay Advisors Back Bay TNE Advisers,
Managed Series $207,821 Advisors $467,918 Inc. -- --

Salomon Brothers
Strategic Bond TNE Advisers,
Opportunities Series -- -- -- -- $35,085 Inc.

Back Bay Advisors Back Bay TNE Advisers,
Bond Income Series $173,139 Advisors $399,140 Inc. -- --

Salomon Brothers
U.S. Government TNE Advisers,
Series -- -- -- -- $20,446 Inc.

Back Bay Advisors Back Bay TNE Advisers,
Money Market Series $84,329 Advisors $193,678 Inc. -- --

</TABLE>

<PAGE>

For the fiscal years ended December 31, 1996 and 1997, each Series (except
the Capital Growth Series) paid the following amounts in advisory fees to TNE
Advisers, Inc.
<TABLE>
<CAPTION>
Amount Paid to TNE Advisers, Inc.
---------------------------------
Series 1996 1997
- ------ ---- ----
<S> <C> <C>
Loomis Sayles Small Cap $506,242 $1,404,831
Morgan Stanley International Magnum Equity Series (1) 256,659 422,850
Alger Equity Growth Series 620,895 1,246,269
Goldman Sachs Midcap Value Series (2) 454,015 711,667
Davis Venture Value Series 495,948 1,425,245
Westpeak Growth and Income Series 443,509 808,891
Westpeak Stock Index Series 170,651 261,396
Loomis Sayles Balanced Series 252,822 607,641
Back Bay Advisors Managed Series 759,811 878,632
Salomon Brothers Strategic Bond Opportunities Series 130,094 353,611
Back Bay Advisors Bond Income Series 672,348 747,372
Salomon Brothers U.S. Government Series 59,626 92,762
Back Bay Advisors Money Market Series 350,632 405,959
</TABLE>

(1) Prior to May 1, 1997, the Morgan Stanley International Magnum Equity Series
was subadvised by Draycott Partners, Ltd. and was called the Draycott
International Equity Series.

(2) Prior to May 1, 1998, the Goldman Sachs Midcap Value Series was subadvised
by Loomis, Sayles & Company, L.P. On January 28, 1998, the Board of Trustees
approved a new subadvisory agreement by and between TNE Advisers, Inc. and
Goldman Sachs Asset Management, which was approved by shareholders on April
10, 1998, and the Series consequently changed its name from Loomis Sayles
Avanti Growth Series to Goldman Sachs Midcap Value Series.

For the fiscal years ended December 31, 1996 and 1997, the Capital Growth
Series paid CGM a total of $6,398,659 and $8,434,722, respectively, in advisory
fees.

Each advisory and subadvisory agreement provides that it will continue in
effect after two years from the date of its execution only if it is approved at
least annually thereafter (i) by the trustees of the Fund or by vote of a
majority of the outstanding voting securities of the applicable Series and (ii)
by vote of a majority of the trustees who are not interested persons of (i) the
Fund or (ii) the applicable Series' investment adviser or subadviser. Except in
the case of Salomon Brothers Strategic Bond Opportunities, Salomon Brother U.S.
Government and the Goldman Sachs Midcap Value Series, any amendment to any
advisory or subadvisory agreement must be approved by vote of a majority of the
outstanding voting securities of the applicable Series and by vote of a majority
of the trustees who are not interested persons of (i) the Fund or (ii) the
applicable Series' investment adviser or subadviser. Each agreement may be
terminated without penalty by the trustees or by the shareholders of the
applicable Series, upon sixty days' written notice, or by the applicable Series'
investment adviser, upon ninety days' written notice, and each terminates
automatically in the event of its "assignment" as defined in the Investment
Company Act of 1940, as amended. In addition, each subadvisory agreement may be
terminated without penalty upon ninety days' written notice by the relevant
subadviser. Each advisory agreement will automatically terminate if the Fund
shall at any time be required by New England Securities to eliminate all
reference to the words "New England" in its name, unless the continuance of such
agreement after such change of name is approved by a majority of the outstanding
voting securities of the applicable Series and by a majority of the trustees who
are not interested persons of (i) the Fund or (ii) the applicable Series'
investment adviser or subadviser.

Each advisory agreement provides that if the total ordinary business
expenses of a particular Series for any fiscal year exceed the lowest applicable
limitations (based on a percentage of average net assets or income) prescribed
by any state in which shares of that Series are qualified for sale, the
applicable Series' investment
<PAGE>

adviser shall pay such excess. Each advisory agreement provides, however, that
the advisory fee shall not be reduced nor shall any of such expenses be paid to
an extent or under circumstances which might result in the inability of any
Series or of the Fund, taken as a whole, to qualify as a regulated investment
company under the Code. The term "expenses" for this purpose excludes brokerage
commissions, taxes, interest and extraordinary expenses.

As required by state insurance licensing authorities, each Series'
investment adviser has also undertaken, separately from the advisory agreements,
to be liable for negligence in the performance of any administrative services
with respect to the Fund which are supplemental to their management of the
investment and reinvestment of that Series' assets.

Each advisory and subadvisory agreement provides that the relevant
investment adviser or subadviser shall not be subject to any liability in
connection with the performance of its services thereunder in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.

Certain officers and employees of Back Bay Advisors have responsibility for
portfolio management of the other advisory accounts and clients (including other
Series of the Fund and other registered investment companies, and accounts of
affiliates of Back Bay Advisors) that may invest in securities in which the
Series for which Back Bay Advisors acts as a subadviser may invest. Where Back
Bay Advisors determines that an investment purchase or sale opportunity is
appropriate and desirable for more than one advisory account, purchase and sale
orders may be executed separately or may be combined and, to the extent
practicable, allocated by Back Bay Advisors to the participating accounts.

Where advisory accounts have competing interests in a limited investment
opportunity, Back Bay Advisors will allocate an investment purchase opportunity
based on the relative time that competing accounts have had funds available for
investment, and the relative amounts of available funds, and will allocate an
investment sale opportunity based on relative cash requirements and the time
that the competing accounts have had investments available for sale. It is Back
Bay Advisors' policy to allocate, to the extent practicable, investment
opportunities to each client over a period of time on a fair and equitable basis
relative to its other clients.

It is believed that the ability of the Series for which Back Bay Advisors
acts as subadviser to participate in larger volume transactions in this manner
will in some cases produce better executions for the Series. However, in some
cases, this procedure could have a detrimental effect on the price and amount of
a security available to a Series or the price at which a security may be sold.
The trustees are of the view that the benefits of retaining Back Bay Advisors as
subadviser outweigh the disadvantages, if any, that might result from
participating in such transactions.

Certain officers of Loomis Sayles have responsibility for the management of
other client portfolios. The Detroit office of Loomis Sayles buys and sell
portfolio securities for the Loomis Sayles Small Cap Series. The Pasadena office
buys and sells portfolio securities for the Loomis Sayles Balanced Series. These
and other offices of Loomis Sayles buy securities independently of one another.
The other investment companies and clients served by Loomis Sayles sometimes
invest in securities in which the Series advised by Loomis Sayles also invest.
If one of these Series and such other clients advised by the same office of
Loomis Sayles desire to buy or sell the same portfolio securities at about the
same time, purchases and sales will be allocated, to the extent practicable, on
a pro rata basis in proportion to the amounts desired to be purchased or sold
for each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of a security
which that Series purchases or sells. In other cases, however, it is believed
that these practices may benefit the Series. It is the opinion of the trustees
of the Fund that the desirability of retaining Loomis Sayles as subadviser for
these Series outweighs the disadvantages, if any, which might result from these
practices.

Certain officers of Westpeak have responsibility for portfolio management
for other clients (including affiliates of Westpeak), some of which may invest
in securities in which the Westpeak Growth and Income Series or the Westpeak
Stock Index Series also may invest. When these Series and other clients desire
to purchase or sell the same security at or about the same time, the purchase
and sale orders are ordinarily placed and confirmed separately but may be
combined to the extent practicable and allocated as nearly as practicable on a
pro rata basis in proportion to the amounts desired to be purchased or sold for
each. It is believed that the ability of those clients to participate in larger
volume transactions will in some cases produce better executions for the
Westpeak
<PAGE>

Growth and Income Series and the Westpeak Stock Index Series. However, in some
cases this procedure could have a detrimental effect on the price and amount of
a security available to a Series or the price at which a security may be sold.
It is the opinion of the trustees of the Fund that the desirability of retaining
Westpeak as subadviser for the Westpeak Growth and Income Series and the
Westpeak Stock Index Series outweighs the disadvantages, if any, which might
result from these practices.

Various officers and trustees of the Fund also serve as officers or
trustees of other investment companies advised by CGM. The other investment
companies and clients served by CGM (including accounts of affiliates of CGM)
sometimes invest in securities in which the Capital Growth Series also invests.
If the Capital Growth Series and such other investment companies or clients
advised by CGM desire to buy or sell the same portfolio securities at the same
time, purchases and sales will be allocated to the extent practicable on a pro
rata basis in proportion to the amounts desired to be purchased or sold for
each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities which the Capital Growth Series purchases or sells. In other cases,
however, it is believed that these practices may benefit the Capital Growth
Series. It is the opinion of the trustees that the desirability of retaining CGM
as adviser for the Capital Growth Series outweighs the disadvantages, if any,
which might result from these practices.

Certain officers and employees of SBAM, Davis Selected, MSAM, GSAM and
Alger Management have responsibility for portfolio management for other clients
(including other registered investment companies and affiliates of SBAM, Davis
Selected, MSAM, GSAM or Alger Management) some of which may invest in securities
in which the respective Series that these subadvisers manage also invest. In
such circumstances, SBAM, Davis Selected, MSAM, GSAM or Alger Management may
determine that orders for the purchase or sale of the same security for the
Series it manages and one or more other registered investment companies or other
accounts it manages should be combined, in which event the transactions will be
priced and allocated in a manner deemed by SBAM, Davis Selected, MSAM, GSAM or
Alger Management, respectively, to be equitable and in the best interests of the
respective Series that it manages and its other accounts. It is recognized that
in some cases the practices described in this paragraph could have a detrimental
effect on the price or amount of a security that a Series purchases or sells. In
other cases, however, it is believed that these practices may benefit a Series.
It is the opinion of the trustees that the desirability of retaining SBAM, Davis
Selected, MSAM, GSAM and Alger Management as subadvisers for the respective
Series outweighs the disadvantages, if any, which might result from these
practices.

DISTRIBUTION AGREEMENT

Under an agreement with the Fund, New England Securities, a Massachusetts
corporation, serves as the general distributor of shares of each Series, which
are sold at net asset value without any sales charge. The offering of each
Series' shares is continuous. Shares are offered for sale only to certain
insurance company separate accounts. New England Securities receives no
compensation from the Fund or purchasers of Fund shares for acting as
distributor. The agreement does not obligate New England Securities to sell a
specific number of shares. New England Securities is an indirect wholly-owned
subsidiary of NELICO.

New England Securities controls the words "New England" in the Fund's name
and if it should cease to be the Fund's distributor, the Fund may be required to
change its name and delete these words. New England Securities also acts as
general distributor for New England Retirement Investment Account, NEVA, The New
England Variable Account, New England Variable Annuity Separate Account and New
England Variable Life Separate Account.

OTHER SERVICES

Custodial Arrangements. State Street Bank and Trust Company ("State Street
Bank"), 225 Franklin Street, Boston, Massachusetts 02110, is the Fund's
custodian. As such, State Street Bank holds in safekeeping certificated
securities and cash belonging to each Series and, in such capacity, is the
registered owner of securities held in book-entry form belonging to the Series.
Upon instruction, State Street Bank receives and delivers cash and securities of
the Series in connection with Series transactions and collects all dividends and
other distributions made with respect to Series portfolio securities. State
Street Bank also maintains certain accounts and records of the Fund and
calculates the total net asset value, total net income and net asset value per
share of each Series on a daily basis.
<PAGE>

Independent Accountants. The Fund's independent accountants are Deloitte &
Touche LLP. Deloitte & Touche LLP conducts an annual audit of each Series,
assists in the preparation of federal and state income tax returns and consults
with the Fund as to matters of accounting and federal and state income taxation.
A table of selected per share data and ratios for each of the Series appears in
the Prospectus. Prior to January 1, 1997 the Fund's independent accountants were
Coopers & Lybrand L.L.P., and the financial statements included in this
Statement of Additional Information are included in reliance on the report of
Coopers & Lybrand L.L.P. for the years prior to 1997.

Other Arrangements. Under a service agreement between New England
Securities and CGM, CGM paid New England Securities or New England Funds, L.P.,
for fiscal years ended December 31, 1995, 1996 and 1997, $734,743, $1,574,016,
and $1,061,801 respectively, and TNE Advisers, Inc. $101,552 for the fiscal year
ended 1997, relating to the Capital Growth Series. For the fiscal year ended
December 31, 1995, under a service agreement between New England Funds, L.P.
and TNE Advisers, Inc., TNE Advisers, Inc. paid New England Funds, L.P. $10,044
for the Loomis Sayles Balanced Series, $10,044 for the Morgan Stanley
International Magnum Equity Series, $10,044 for the Salomon Brothers U.S.
Government Series, $10,044 for the Salomon Brothers Strategic Bond Opportunities
Series, $11,503 for the Davis Venture Value Series and $13,133 for the Alger
Equity Growth Series $10,604 for the Loomis Sayles Small Cap Series, $34,683 for
the Goldman Sachs Midcap Value Series, $120,279 for the Back Bay Advisors
Managed Series, $126,352 for the Back Bay Advisors Bond Income Series, $49,914
for the Westpeak Stock Index Series and $71,233 for the Back Bay Advisors Money
Market Series. For the fiscal year ended December 31, 1996, TNE Advisers, Inc.
paid $18,011 for the Loomis Sayles Balanced Series, $14,419 for the Morgan
Stanley International Magnum Equity Series, $10,000 for the Salomon Brothers
U.S. Government Series, $11,629 for the Salomon Brothers Strategic Bond
Opportunities Series, $31,230 for the Davis Venture Value Series and $38,435 for
the Alger Equity Growth Series $24,599 for the Loomis Sayles Small Cap Series,
$30,928 for the Goldman Sachs Midcap Value Series, $63,191 for the Back Bay
Advisors Managed Series, $68,830 for the Back Bay Advisors Bond Income Series,
$32,318 for the Westpeak Stock Index Series and $44,919 for the Back Bay
Advisors Money Market Series. For the fiscal year ended 1997 under an
administrative services agreement between New England Funds and TNE Advisers,
Inc., TNE Advisers, Inc. paid New England Funds, L.P. $26,923 for the Loomis
Sayles Balanced Series, $26,923 for the Morgan Stanley International Magnum
Equity Series, $26,923 for the Salmon Brothers U.S. Government Series, $26,923
for the Salmon Brothers Strategic Bond Opportunities Series, $26,923 for the
Davis Venture Value Series, $26,923 for the Alger Equity Growth Services,
$26,923 for the Back Bay Advisors Bond Income Series, $26,923 for the Back Bay
Advisors Managed Series, $26,923 for the Back Bay Advisors Money Market Series,
$26,923 the Loomis Sayles Small Cap Series, $26,923 for the Goldman Sachs Midcap
Value Series, $26,923 for the Back Bay Advisors Managed Series, $26,923 for the
Back Bay Advisors Bond Income Series, $26,923 for the Westpeak Stock Index
Series and $26,923 for the Back Bay Advisors Money Market Series.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Some of the Fund's portfolio transactions are placed with brokers and
dealers who provide the investment advisers or subadvisers with supplementary
investment and statistical information or furnish market quotations to the Fund
or other investment companies advised by the investment advisers or subadvisers.
Although it is not possible to assign an exact dollar value to these services,
they may, to the extent used, tend to reduce the expenses of the investment
advisers or subadvisers. The services may also be used by the investment
advisers or subadvisers in connection with their other advisory accounts and in
some cases may not be used with respect to the Fund.

Certain Portfolio Transactions of Loomis Sayles Balanced, Back Bay Advisors
Managed, Back Bay Advisors Bond Income Salomon Brothers Strategic bond
Opportunities, Salomon Brothers U.S. Government and Back Bay Advisors Money
Market Series

It is expected that the portfolio transactions of the Loomis Sayles
Balanced, Back Bay Advisors Managed Series, Back Bay Advisors Bond Income and
Back Bay Advisors Money Market Series in bonds, notes and money market
instruments will generally be with issuers or dealers on a net basis without a
stated commission. Portfolio turnover for the years 1995, 1996, and 1997 was
73%, 98%, and 40% respectively, for the Back Bay Advisors Bond Income Series and
51%, 72% and 65%, respectively, for the Back Bay Advisors Managed Series. The
Loomis Sayles Balanced Series' portfolio turnover rates for the fiscal years
ended December 31, 1995, 1996 and 1997 were

<PAGE>

72%, 59% and 60%, respectively. Over the same periods the Salomon Brothers
strategic Bond Opportunities Series portfolio turnover rates were 202%, 176% and
258%, respectively. For the Salomon Brothers U.S. Government Series the
portfolio turnover rates were 415%, 288%, 572%, respectively for the fiscal
years ended 1995, 1996 and 1997.

Loomis Sayles Small Cap Series, Morgan Stanley International Magnum Equity
Series, Alger Equity Growth Series, Capital Growth Series, Goldman Sachs Midcap
Value Series, Davis Venture Value Series, Loomis Sayles Balanced Series and Back
Bay Advisors Managed Series (Common Stock Transactions)

In placing orders for the purchase and sale of portfolio securities, CGM,
in the case of the Capital Growth Series, GSAM, in the case of the Goldman Sachs
Midcap Value Series, Loomis Sayles, in the case of the Loomis Sayles Small Cap
and the Loomis Sayles Balanced Series, Back Bay Advisors, in the case of
investments in common stocks by the Back Bay Advisors Managed Series, MSAM, in
the case of the Morgan Stanley International Magnum Equity Series, Davis
Selected, in the case of the Davis Venture Value Series, and Alger Management,
in the case of the Alger Equity Growth Series, each selects only brokers which
it believes are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge commission
rates which, when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates. The
Series' advisers or subadvisers will use their best efforts to obtain
information as to the general level of commission rates being charged by the
brokerage community from time to time and will evaluate the overall
reasonableness of brokerage commissions paid on transactions by reference to
such data. In making such evaluation, all factors affecting liquidity and
execution of the order, as well as the amount of the capital commitment by the
broker in connection with the order, are taken into account.

For the fiscal years ending in 1995, 1996 and 1997, brokerage transactions
for the Capital Growth Series aggregating $3,292,999,742, $3,548,037,504, and
$4,668,741,649, respectively and commissions of $4,129,082, $4,124,163, and
$4,245,443 respectively, were paid as commissions on such transactions and
$534,101, $747,543 and $690,456 of those commissions were paid to brokers
providing research services. For the fiscal years ending in 1995, 1996 and 1997
the Westpeak Stock Index Series paid brokerage commissions aggregating $10,566,
$9,955, and $12,015 respectively. For the same periods, the Back Bay Advisors
Managed Series paid brokerage commissions aggregating $1,615 , $11,697, and
$31,499 respectively. For the fiscal years ending December 31, 1995, 1996 and
1997, the Goldman Sachs Midcap Value Series paid brokerage commissions of
$67,095, $72,377 and $74,700 and $2,775, $2,080 and $1,300 were paid to brokers
providing research services. The Westpeak Growth and Income Series paid
brokerage commissions of $61,252, $106,927, and $163,690 of which $28,521,
$44,431 and $77,711 were paid to brokers providing research services, for the
fiscal years ended 1995, 1996 and 1997, respectively. For the fiscal years ended
December 31, 1995, 1996 and 1997, the Loomis Sayles Small Cap Series paid
brokerage commissions of $97,195, $462,358, and $394,066 of which $26,895,
$82,963 and $56,493, respectively were paid to brokers providing research
services. For the period the fiscal year end 1995, 1996 and 1997, the Morgan
Stanley International Magnum Equity Series paid brokerage commissions of
$85,037, $127,196, and $146,747. The Davis Venture Value Series paid brokerage
commissions of $40,523, $81,002, and $148,966 for the fiscal years ended 1995,
1996 and 1997. The Alger Equity Growth Series paid brokerage commissions of
$69,052, $174,495, and $489,199 for the fiscal years ended 1995, 1996 and 1997.
For the fiscal years ended 1995, 1996 and 1997 the Loomis Sayles Balanced Series
paid brokerage commissions of $73,823, $51,801 and $115,074 of which $46,083,
$13,888 and $51,000 were paid to brokers providing research services.

Westpeak Growth and Income Series, Westpeak Stock Index Series, Salomon
Brothers Strategic Bond Opportunities Series and Salomon Brothers U.S.
Government Series

In placing orders for the purchase and sale of securities, Westpeak, in the
case of the Westpeak Growth and Income and Westpeak Stock Index Series, and
SBAM, in the case of Salomon Brothers Strategic Bond Opportunities and Salomon
Brothers U.S. Government Series, always seeks best execution. Westpeak and SBAM
each selects only brokers or dealers which it believes are financially
responsible, will provide efficient and effective services in executing,
clearing and settling an order and will charge commission rates which, when
combined with the quality of the foregoing services, will produce best price and
execution. This does not necessarily mean that the lowest available brokerage
commission will be paid. Westpeak or SBAM will each use its best efforts to
obtain information as to the general level of commission rates being charged by
the brokerage
<PAGE>

community from time to time and will evaluate the overall reasonableness of
brokerage commissions paid on transactions by reference to such data. In making
such evaluation, all factors affecting liquidity and execution of the order, as
well as the amount of the capital commitment by the broker in connection with
the order, are taken into account. Westpeak or SBAM may cause the Series they
manage to pay a broker-dealer that provides brokerage and research services to
Westpeak or SBAM an amount of commission for effecting a securities transaction
for a Series in excess of the amount another broker-dealer would have charged
effecting that transaction. Westpeak or SBAM, as the case may be, must determine
in good faith that such greater commission is reasonable in relation to the
value of the brokerage and research services provided by the executing broker-
dealer viewed in terms of that particular transaction or Westpeak's or SBAM's
overall responsibilities to the Fund and its other clients. Westpeak's or SBAM's
authority to cause the Series it manages to pay such greater commissions is also
subject to such policies as the trustees of the Fund may adopt from time to
time.

Affiliated Brokerage

A Series may pay brokerage commissions to an affiliated broker for acting
as the respective Series' agent on purchases and sales of securities for the
portfolio of the Series. SEC rules require that commissions paid to an
affiliated broker of a mutual fund for portfolio transactions not exceed "usual
and customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair" compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." The Trustees of the Fund, including those who are not "interested
persons" of the Fund, have adopted procedures for evaluating the reasonableness
of commissions paid to affiliated brokers and will review these procedures
periodically. The Alger Equity Growth Series paid $69,052, $174,495, and
$489,199 in brokerage commissions to Fred Alger and Company, Inc., an affiliated
broker, for the fiscal years ended December 31, 1995, 1996, and 1997,
respectively. The amount paid by the Alger Equity Growth Series represents
approximately all of that Series' aggregate brokerage commissions for the period
for the years ended December 31, 1995, 1996, and 1997. For the fiscal year ended
December 31, 1996 and 1997 the Davis Venture Value Series paid a total of $5,316
and $54,840 in brokerage commissions to Shelby Cullum Davis, Inc., an affiliated
broker. This amount represents 6.6% and 36% of the Series aggregate brokerage
commissions for the fiscal year ended December 31, 1996 and 1997. For the fiscal
year ended December 31, 1997 the Morgan Stanley International Magnum Equity
Series paid a total of $2,395 in brokerage commissions to Morgan Stanley &
Company, Inc. Morgan Stanley & Co., Inc. - International, Morgan Stanley
International, Limited, and Morgan Stanley Securities, Limited, each an
affiliate broker representing 1.6% of the total brokerage commissions paid for
the fiscal year ended December 31, 1997.

DESCRIPTION OF THE FUND

The Fund is organized as a Massachusetts business trust under the laws of
Massachusetts pursuant to an Agreement and Declaration of Trust (the
"Declaration of Trust") dated December 16, 1986. On February 27, 1987, the Fund
succeeded to the operations of The New England Zenith Fund, Inc., a
Massachusetts corporation incorporated on January 7, 1983 as NEL Series Fund,
Inc. On November 1, 1985, the name of that corporation was changed to Zenith
Fund, Inc. and on July 17, 1986 it was changed again to The New England Zenith
Fund, Inc. The Capital Growth, Back Bay Advisors Bond Income and Back Bay
Advisors Money Market Series all commenced investment operations in 1983. The
Westpeak Stock Index Series commenced operations on March 30, 1987. The Back Bay
Advisors Managed Series commenced investment operations on May 1, 1987. The
Goldman Sachs Midcap Value (prior to May 1, 1998 the Series was named the Loomis
Sayles Avanti Growth Series) and the Westpeak Growth and Income Series (prior to
August 30, 1996 the Series was named Westpeak Value Growth Series) commenced
investment operations in April 1993. The Loomis Sayles Small Cap Series
commenced investment operations on May 1, 1994. The Alger Equity Growth, Morgan
Stanley International Magnum Equity (prior to May 1, 1997 the Series was named
the Draycott International Equity Series), Davis Venture Value, Loomis Sayles
Balanced, Salomon Brothers Strategic Bond Opportunities and Salomon Brothers
U.S. Government Series commenced investment operations on October 31, 1994.

The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of each of the Loomis Sayles Small Cap, Morgan
Stanley International Magnum Equity, Alger Equity Growth, Capital Growth,
Goldman Sachs Midcap Value, Davis Venture Value, Westpeak Growth and Income,
Westpeak Stock Index, Loomis Sayles Balanced, Back Bay Advisors Managed, Salomon
Brothers Strategic Bond
<PAGE>

Opportunities, Back Bay Advisors Bond Income, Salomon Brothers U.S. Government
and Back Bay Advisors Money Market Series. Interests in the Fund portfolios
described in the Prospectus and in this Statement of Additional Information are
represented by shares of such Series. Each share of a Series represents an equal
proportionate interest in such Series with each other share and is entitled to a
proportionate interest in the dividends and distributions from such Series. The
shares of the Series do not have any preemptive rights. Upon liquidation of any
Series, whether pursuant to liquidation of the Fund or otherwise, shareholders
of such Series are entitled to share pro rata in the net assets of such Series
available for distribution to shareholders. The Declaration of Trust also
permits the trustees to charge shareholders directly for custodial, transfer
agency and servicing expenses.

The Declaration of Trust also permits the Trustees, without shareholder
approval, to subdivide any series of shares into various sub-series of shares
with such dividend preferences and other rights as the trustees may designate.
While the trustees have no current intention to exercise this power, it is
intended to allow them to provide for an equitable allocation of the impact of
any future regulatory requirements which might affect various classes of
shareholders differently. The trustees may also, without shareholder approval,
establish one or more additional separate portfolios for investments in the Fund
or merge two or more existing portfolios. Shareholders' investments in such a
portfolio would be evidenced by a separate series of shares. The Fund is a
"series" company as that term is used in Section 18(f) of the 1940 Act.

The Declaration of Trust provides for the perpetual existence of the Fund.
The Fund or any Series, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of each Series affected. The
Declaration of Trust further provides that the trustees may terminate the Fund
or any Series upon written notice to the shareholders thereof.

The assets received by the Fund for the issue or sale of shares of each
Series and all income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of creditors, are allocated to that Series, and constitute
the underlying assets of the Series. The underlying assets of each Series are
segregated and are charged with the expenses in respect of that Series and with
a share of the general expenses of the Fund. Any general expenses of the Fund
not readily identifiable as belonging to a particular Series are allocated by or
under the direction of the trustees in such manner as the trustees determine to
be fair and equitable. While the expenses of the Funds are allocated to the
separate books of account of each Series, certain expenses may be legally
chargeable against the assets of all Series.

As of April 30, 1998, all of the outstanding voting securities of the Fund
were owned by separate accounts of MetLife and/or NELICO, and may, from time to
time, be owned by those separate accounts and the general account of NELICO and
its affiliates. Therefore, MetLife and NELICO 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 MetLife and NELICO are each required to vote their
Fund shares that are held in a registered separate account (and, to the extent
voting privileges are granted by the issuing insurance company, in unregistered
separate accounts) in 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 MetLife and NELICO each is required to vote
any shares held in general account (or in any unregistered separate account for
which voting privileges were not extended) in the same proportion as all other
Fund shares are voted. MetLife and NELICO currently intend to vote their shares
in a manner consistent with this view.

Voting Rights

Fund shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held). NELICO and MetLife 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, NELICO and MetLife 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 NELICO and MetLife that are registered with the SEC (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
<PAGE>

any unregistered separate account for which voting privileges are not extended)
of NELICO and its affiliates 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 are
received.

There will normally be no meetings of shareholders for the purpose of
electing trustees except that in accordance with the 1940 Act (i) the Fund will
hold a shareholders' meeting for the election of trustees at such time as less
than a majority of the trustees holding office have been elected by shareholders
and (ii) if there is a vacancy on the Board of Trustees, unless, after filling
such vacancy, at least two-thirds of the trustees holding office will have been
elected by the shareholders, such vacancy may only be filled by a vote of the
shareholders. In addition, trustees may be removed from office by a written
consent signed by the holders of two-thirds of the outstanding shares at a
meeting duly called for the purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Fund has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders). Except as
set forth above, the trustees shall continue to hold office and may appoint
successor trustees.

No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Fund except (i)
to change the Fund's name or to cure technical problems in the Declaration of
Trust and (ii) to establish, designate or modify new and existing series or
sub-series of Fund shares or other provisions relating to Fund shares in
response to applicable laws or regulations.

Shareholder and Trustee Liability

Under Massachusetts law shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the Declaration
of Trust disclaims shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or the trustees. The
Declaration of Trust provides for indemnification out of the relevant Series'
property for all loss and expense of any shareholder held personally liable for
the obligations of the Series in which the shareholder owns shares. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and a Series itself would be unable to meet its
obligations. For purposes of such liability, the Fund's shareholders are the
separate accounts investing directly in the Fund and not the owners of variable
life insurance or variable annuity contracts or purchasers of other insurance
products.

The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office. The By-Laws of the Fund provide for indemnification by the
Fund of the trustees and officers of the Fund except with respect to any matter
as to which any such person did not act in good faith in the reasonable belief
that his or her action was in or not opposed to the best interests of the Fund.
Such person may not be indemnified against any liability to the Fund or the
Fund's shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.

FINANCIAL STATEMENTS

The financial statements of the Fund and the related reports of independent
accountants included in the Fund's annual report for the year ended December 31,
1997 are incorporated herein by reference.

<PAGE>

APPENDIX A-1
DESCRIPTION OF BOND RATINGS

Moody's Investors Service, Inc.

Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations 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. See Note 1.

A
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. See Note 1.

Baa
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly 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. See Note 1.

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 a 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 issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Should no rating be assigned by Moody's, the reason may be one of the following:

(1) An application for rating was not received or accepted.
<PAGE>

(2) The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.

(3) There is a lack of essential data pertaining to the issue or issuer.

(4) The issue was privately placed, in which case the rating is not
published in Moody's publications.
- -----------------
Note 1: This rating may include the numerical modifier 1, 2 or 3 to provide a
more precise indication of relative debt quality within the category, with 1
indicating the high end of the category, 2 the mid-range and 3 nearer the low
end.

Standard & Poor's Ratings Group

AAA
This is the highest rating assigned by Standard & Poor's Corporation ("S&P") to
a debt obligation and indicates an extremely strong capacity to pay principal
and interest.

AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.

A
Bonds rated A have strong capacity to pay principal and interest although they
are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.

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

BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly
speculative with respect to 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.

C
The rating C is reserved for income bonds on which no interest is being paid.

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

Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>

APPENDIX A-2
DESCRIPTION OF COMMERCIAL PAPER RATINGS

Standard & Poor's Corporation

A-1
Commercial paper rated A-1 by S&P has the following characteristics: Liquidity
ratios are adequate to meet cash requirements. Long-term senior debt is rated
"A" or better. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Commercial paper within the A-1 category
which has overwhelming safety characteristics is denoted "A-1+."

A-2
Capacity for timely payment on issues with this designation is strong. However,
the relative degree of safety is not as overwhelming as for issues designated
A-1.

Moody's Investors Service, Inc.

P-1
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following:

(1) evaluation of the management of the issuer;

(2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas;

(3) evaluation of the issuer's products in relation to competition and
customer acceptance;

(4) liquidity;

(5) amount and quality of long-term debt;

(6) trend of earnings over a period of ten years;

(7) financial strength of a parent company and the relationships which
exist with the issuer; and

(8) recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations.

P-2
Issuers rated P-2 have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
<PAGE>

APPENDIX B

ABC and affiliates
Atlanta Constitution
Atlanta Journal
Austin American Statesman
Baltimore Sun
Barron's
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
Cincinnati Post
CNBC
CNN
Columbus Dispatch
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghue's Money Fund Report
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Financial News Network
Financial Planning
Financial Services Week
Financial World
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Institutional Investor
Investment Dealers Digest
Investment Vision
Investor's Daily
Journal of Commerce
Kansas City Star
LA Times
<PAGE>

Leckey, Andrew (syndicated column)
Life Association News
Miami Herald
Milwaukee Sentinel
Money
Money Maker
Money Management Letter
Morningstar
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rukeyser's Business (syndicated column)
Sacramento Bee
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
UPI
US News and World Report
USA Today
Value Line
Wall St. Journal
<PAGE>

Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
Worth Magazine
WRKO
<PAGE>

APPENDIX C
ADVERTISING AND PROMOTIONAL LITERATURE

Advertising and promotional literature prepared by NELICO for products
it issues or administers may include references to TNE Advisers or Nvest
Companies and its affiliates that perform advisory and subadvisory functions for
TNE Advisers also including, but not limited to: Back Bay Advisors, Loomis
Sayles, CGM and Westpeak. Reference also may be made to the Funds of their
respective fund groups, namely, the Loomis Sayles Funds and the CGM Funds

NELICO's advertising and promotional literature may include references
to other NELICO or NEIC affiliates including, but not limited to, New England
Investment Associates, L. P., AEW Capital Management, L.P., Marlborough Capital
Advisors, L.P., Reich & Tang Capital Management, Reich and Tang Mutual Funds,
the Oakmark Family of Funds and Jurika & Voyles and their fund groups.

References to subadvisers unaffiliated with TNE Advisers or NELICO that
perform subadvisory functions on behalf of New England Zenith Fund and their
respective fund groups may be contained in NELICO's advertising and promotional
literature including, but not limited to, Alger, Davis Selected, Salomon
Brothers and MSAM.

NELICO's advertising and promotional material may include, but is not
limited to, discussions of the following information about both affiliated and
unaffiliated entities:

|X| Specific and general assessments and forecasts regarding the U.S. economy,
world economies, the economics of specific nations and their impact on the
Series

|X| Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions

|X| Specific and general investment philosophies, strategies, processes,
techniques and types of analysis

|X| Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services

|X| The corporate histories, founding dates and names of founders of the
entities

|X| Awards, honors and recognition given to the firms

|X| The names of those with ownership interest and the percentage of ownership

|X| The industries and sectors from which clients are drawn and specific client
names and background information on current individual, corporate and
institutional clients, including pension and profit sharing plans

|X| Current capitalization, levels of profitability and other financial and
statistical information

|X| Identification of portfolio managers, researchers, economists, principals
and other staff members and employees

|X| The specific credentials of the above individuals, including, but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
<PAGE>

|X| Current and historical statistics about:

-total dollar amount of assets managed -TNE Advisers assets managed in
total and/or by Series -Asset managed by CGM in total and/or by Series
-the growth of assets -asset types managed
-numbers of principal parties and employees, and the length of their
tenure, including officers, portfolio managers, researchers, economists,
technicians and support staff
-the above individuals' total and average number of years of industry
experience and the total and average length of their service to the
adviser or the subadviser

|X| The general and specific strategies applied by the advisers in the
management of the New England Zenith Fund's portfolios including, but not
limited to:

-the pursuit of growth, value, income oriented, risk management or other
strategies -the manner and degree to which the strategy is pursued
-whether the strategy is conservative, moderate or extreme and an
explanation of other features, attributes -the types and characteristics
of investments sought and specific portfolio holdings -the actual or
potential impact and result from strategy implementation -through its own
areas of expertise and operations, the value added by subadvisers to the
management process
-the disciplines it employs, e.g., in the case of Loomis Sayles, the
strict buy/sell guidelines and focus on sound value it employs, and goals
and benchmarks that it establishes in management, e.g., CGM pursues
growth 50% above the S&P 500
-the systems utilized in management, the features and characteristics of
those systems and the intended results from such computer analysis, e.g.,
Westpeak's efforts to identify overvalued and undervalued issues.

|X| Specific and general references to portfolio managers and funds that they
serve as portfolio manager of, other than Series of the Fund, and those
families of funds, other than New England Zenith Fund. Any such references
will indicate that New England Zenith Funds and the other funds of the
managers differ as to performance, objectives, investment restrictions and
limitations, portfolio composition, asset size and other characteristics,
including fees and expenses. References may also be made to industry
rankings and ratings of Series and other funds managed by the Series'
adviser and subadvisers, including, but not limited to, those provided by
Morningstar, Lipper Analytical Services, Forbes and Worth.

In addition, communications and materials developed by NELICO or its
affiliates may make reference to the following information about Nvest Companies
and its affiliates:

Nvest Companies is one of the largest publicly traded managers in the U.S.
listed on the New York Stock Exchange. Nvest Companies maintains over $100
billion in assets under management. In addition, promotional materials may
include:

New England Securities Corporation ("NES") an indirect subsidiary of
NELICO, may be referenced in Fund advertising and promotional literature
concerning the marketing services it provides to Nvest Companies-affiliated fund
groups including: New England Funds, Loomis Sayles Funds, Oakmark Funds and
Reich & Tang Funds.

Additional information contained in advertising and promotional
literature may include: rankings and ratings of the Series including, but not
limited to, those of Morningstar and Lipper Analytical Services; statistics
about the advisers', fund groups' or a specific fund's assets under management;
the histories of the advisers and biographical references to portfolio managers
and other staff including, but not limited to, background, credentials, honors,
awards and recognition received by the advisers and their personnel; and
commentary about the advisers, their funds and their personnel from third-party
sources including newspapers, magazines, periodicals, radio, television or other
electronic media.
<PAGE>

References to the Series may be included in NELICO's advertising and
promotional literature about its 401(k) and retirement plans. The information
may include, but is not limited to:

|X| Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information and industry trends and
forecasts regarding the growth of assets, numbers of plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms including, but not limited to, DC Xchange,
William Mercer and other organizations involved in 401(k) and retirement
programs with whom NELICO may or may not have a relationship.

|X| Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the NELICO as a 401(k)
or retirement plan funding vehicle produced by, including, but not limited
to, Access Research, Dalbar, Investment Company Institute and other
industry authorities, research organizations and publications.

|X| Specific and general discussion of economic, legislative, and other
environmental factors affecting 401(k) and retirement plans, including, but
not limited to, statistics, detailed explanations or broad summaries of:

-past, present and prospective tax regulation, Internal Revenue Service
requirements and rules, including, but not limited to, reporting
standards, minimum distribution notices, Form 5500, Form 1099R and other
relevant forms and documents, Department of Labor rules and standards and
other regulation. This includes past, current and future initiatives,
interpretive releases and positions of regulatory authorities about the
past, current or future eligibility, availability, operations,
administration, structure, features, provisions or benefits of 401(k) and
retirement plans
-information about the history, status and future trends of Social
Security and similar government benefit programs including, but not
limited to, eligibility and participation, availability, operations and
administration, structure and design, features, provisions, benefits and
costs
-current and prospective ERISA regulation and requirements.

|X| Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the NELICO 401(k) and retirement
plans, to the participant and plan sponsor, including explanations,
statistics and other data, about:

-increased employee retention
-reinforcement or creation of morale
-deductibility of contributions for participants
-deductibility of expenses for employers
-tax deferred growth, including illustrations and charts
-loan features and exchanges among accounts
-educational services materials and efforts, including, but not limited
to, videos, slides, presentation materials, brochures, an investment
calculator, payroll stuffers, quarterly publications, releases and
information on a periodic basis and the availability of wholesalers and
other personnel.

|X| Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and, in particular, New England Zenith
Fund and investing in NELICO's 401(k) and retirement plans, including, but
not limited to:

-the significant economies of scale experienced by mutual fund companies
in the 401(k) and retirement benefits arena
-broad choice of investment options and competitive fees
-plan sponsor and participant statements and notices
-the plan prototype, summary descriptions and board resolutions
-plan design and customized proposals
-trusteeship, record keeping and administration
-the services of State Street Bank, including, but not limited to,
trustee services and tax reporting
<PAGE>

-the services of DST and BFDS, including, but not limited to, mutual
fund processing support, participant 800 numbers and participant 401(k)
statements
-the services of Trust Consultants Inc. (TCI), including, but not limited
to, sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.

|X| Specific and general reference to the role of the investment dealer and the
benefits and features of working with a financial professional including:

-access to expertise on investments
-assistance in interpreting past, present and future market trends and
economic events
-providing information to clients including participants
during enrollment and on an ongoing basis after
participation
-promoting and understanding the benefits of investing, including mutual
fund diversification and professional management.