NEW ENGLAND ZENITH FUND, 485APOS, 2000-03-02

NEW ENGLAND ZENITH FUND
485APOS, 2000-03-02

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. _________ [_]
Post-Effective Amendment No. 27 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]

Amendment No. 28 [X]

(Check Appropriate Box or Boxes)

New England Zenith Fund
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

501 Boylston Street, Boston, Massachusetts 02116
- --------------------------------------------- ----------------
(Address of Principal Executive Offices) (Zip Code)

(617)578-1388
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)

Thomas M. Lenz
New England Investment Management, Inc.
501 Boylston Street
Boston, Massachusetts 02116
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)

Copy to:
John M. Loder
Ropes & Gray
One International Place
Boston, Massachusetts 02110

It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant to paragraph (b)
[_] On (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[_] On (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] On (date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:

[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>

NEW ENGLAND ZENITH FUND

New England Zenith Fund (the "Fund") is a mutual fund that provides a range of
investment options through the following sixteen separate investment portfolios
(the "Series").

<TABLE>
<S> <C>
MONEY MARKET SERIES EQUITY SERIES

Back Bay Advisors Money Market Series Alger Equity Growth Series

Capital Growth Series
FIXED-INCOME SERIES Davis Venture Value Series

Harris/Oakmark Midcap Value Series
Back Bay Advisors Bond Income Series Loomis Sayles Small Cap Series
Salomon Brothers Strategic MFS Investors Series
Bond Opportunities Series MFS Research Managers Series
Salomon Brothers U.S. Government Series Westpeak Growth and Income Series
Westpeak Stock Index Series
EQUITY AND FIXED-INCOME SERIES
INTERNATIONAL EQUITY SERIES
Back Bay Advisors Managed Series
Balanced Series Morgan Stanley International
Magnum Equity Series
</TABLE>

This Prospectus is designed to help you decide whether to invest in the Fund
and which Series best match your investment objectives. The Prospectus is
divided into four Sections:

I A brief overview of the structure of the Fund and the Series.

II Summaries of each Series, including investment objectives and principal
investment strategies and risks.

III More detailed descriptions of each Series, including the investment
process and additional investment risks.

IV Other information about the Fund, including information on purchases and
redemptions, portfolio valuation, securities pricing and financial
highlights.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed on the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

MAY 1, 2000
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Section I--Overview of New England Zenith Fund............................. B-3
Section II--Summary Information about each Series ......................... B-5
Section III--Additional Information about each Series ..................... B-33
Section IV--Other Information About the Fund............................... B-71
Financial Highlights....................................................... B-73
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL
SERIES SUMMARY INFORMATION
------ ------- -----------
<S> <C> <C>
Back Bay Advisors Money Market Series....................... B-5 B-34
Back Bay Advisors Bond Income Series........................ B-7 B-35
Salomon Brothers Strategic Bond Opportunities Series........ B-9 B-38
Salomon Brothers U.S. Government Series..................... B-11 B-41
Back Bay Advisors Managed Series............................ B-13 B-43
Balanced Series............................................. B-15 B-46
Alger Equity Growth Series.................................. B-17 B-50
Capital Growth Series....................................... B-18 B-51
Davis Venture Value Series.................................. B-20 B-54
Harris/Oakmark Midcap Series................................ B-21 B-56
Loomis Sayles Small Cap Series.............................. B-23 B-60
MFS Investors Series........................................ B-25 B-63
MFS Research Managers Series................................ B-26 B-65
Westpeak Growth and Income Series........................... B-27 B-67
Westpeak Stock Index Series................................. B-29 B-68
Morgan Stanley International Magnum Equity Series........... B-31 B-69
</TABLE>

B-2
<PAGE>

SECTION I--OVERVIEW OF NEW ENGLAND ZENITH FUND

A SEPARATE ACCOUNT is a pool of assets set aside by an insurance company to
fund payments under a specified group of insurance policies or contracts.

A DIVIDEND is a payment made by a company to a shareholder that typically is
based on the company's performance. A dividend may be paid as cash or
additional securities.

ORGANIZATION

The Fund is a mutual fund consisting of multiple investment portfolios, the
Series. New England Investment Management, Inc. ("NEIM") is the investment
adviser to all the Series except Capital Growth, which is managed by Capital
Growth Management ("CGM"). NEIM has contracted with subadvisers to make the
day-to-day investment decisions for all Series except Capital Growth. NEIM is
responsible for overseeing these subadvisers and for making recommendations to
the Board of Trustees of the Fund relating to hiring and replacing
subadvisers. CGM makes the day-to-day investment decisions for Capital Growth.

Each Series of the Fund other than the Harris/Oakmark Midcap Value Series is a
"diversified" fund. As a "non-diversified" fund, the Harris/Oakmark Midcap
Value Series may hold fewer securities than the other Series. If the stocks
held by the Harris/Oakmark Midcap Value Series perform poorly, the Series
could incur greater losses than if it had invested in a greater number of
stocks.

INVESTORS

Fund shares are offered only to SEPARATE ACCOUNTS established by New England
Life Insurance Company ("New England Financial") and Metropolitan Life
Insurance Company ("Metropolitan Life") or other insurance companies
affiliated with Metropolitan Life (the "Separate Accounts"). The Fund serves
as the investment vehicle for variable life insurance, variable annuity and
group annuity products of New England Financial and Metropolitan Life or their
affiliates. The general public may not directly purchase Fund shares. The
performance information in this Prospectus does not reflect charges associated
with the Separate Accounts or variable contracts that an investor in the Fund
may pay under insurance or annuity contracts.

TYPES OF INVESTMENTS

Each Series invests in a variety of securities. Securities generally fall into
two main categories: equity and fixed-income.

Equity Securities

Equity securities include common stocks, preferred stocks and other
instruments related to common and preferred stocks. Generally, common and
preferred stocks represent ownership interests in a corporation, which may be
referred to as the "issuer" of the stock. Stocks often pay a DIVIDEND.

Investment advisers often characterize stocks as "growth stocks" or "value
stocks." Generally, an investment adviser considers a stock to be a growth
stock if it expects the company's earnings to grow more rapidly than earnings
of other companies. An investment adviser using a "growth" style of investing
will be more likely than an adviser using a "value" style to buy a stock which
is considered

B-3
<PAGE>

The MATURITY DATE is the date on which a fixed-income security "matures." This
is the date on which the borrower must pay back the borrowed amount, the
principal.

relatively expensive, when compared to other stocks, in terms of traditional
measures of stock valuation. Generally, value stocks are the stocks of
companies that an investment adviser believes are inexpensive relative to other
stocks under current market conditions. A stock may display characteristics of
both classifications. Therefore, it is possible that a stock may be
characterized as a growth stock by some investment professionals and as a value
stock by other investment professionals.

The prices of growth stocks may be more sensitive to changes in current or
expected earnings than the prices of other stocks. The prices of value stocks
may fall, or simply may not increase as much, if the market does not agree with
the subadviser's view of the value of the stock.

Stocks are also often categorized according to the market capitalization of the
issuer. Market capitalization is calculated by multiplying the total number of
outstanding shares of an issuer by the market price of those shares. Some
mutual funds invest primarily in stocks of issuers with larger capitalizations,
while other mutual funds invest primarily in stocks of issuers with medium or
small capitalizations.

Stock markets tend to move in cycles with periods of rising prices and periods
of falling prices. Like the stock market generally, the investment performance,
or "total return," of the Series which invest in stocks and other equity
securities will fluctuate within a wide range, so an investor may lose money
over short or even long periods.

Each type of stock, such as stocks in different market capitalization
categories, including "small cap," "mid cap," and "large cap," and in different
investment style categories, such as value or growth, tend to go through cycles
of doing better or worse than the stock market in general. These periods in the
past have lasted for as long as several years.

Fixed-income Securities

Fixed-income securities, including bonds, notes, and U.S. and other government
securities, represent an obligation of a company or other issuer to repay money
that it has borrowed. Generally, the issuer agrees to pay the investor interest
in return for the use of the money until the MATURITY DATE, as set forth in the
terms of the security. The rate of interest may be fixed or variable.

The value of fixed-income securities (and of the shares of a Series invested in
fixed-income securities) will generally rise when interest rates fall and drop
when interest rates increase. A bond with a longer remaining maturity or
duration will tend to lose or gain more value in response to interest rate
changes than a shorter-term bond. While presenting more risk of loss, longer-
term bonds tend to pay higher rates of interest or "yields." Falling interest
rates will cause the yield of a portfolio of bonds to decrease over time.

B-4
<PAGE>

SECTION II--

SUMMARY INFORMATION ABOUT EACH SERIES

BACK BAY ADVISORS MONEY MARKET SERIES

INVESTMENT OBJECTIVE

The investment objective of the Back Bay Advisors Money Market Series ("Money
Market") is the highest possible level of current income consistent with
preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

Back Bay Advisors, Inc. ("Back Bay Advisors") invests Money Market's assets in
a managed portfolio of MONEY MARKET INSTRUMENTS.

PRINCIPAL INVESTMENT RISKS

AN INVESTMENT IN MONEY MARKET IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH MONEY
MARKET SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $100.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN MONEY MARKET.

Factors that could harm the investment performance of Money Market include:

. A general decline in fixed-income security markets.

. Poor performance of individual fixed-income securities held by Money
Market, which may be due to interest rate risk and credit risk.

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Money Market for the last
ten full calendar years. The table following the bar chart compares the average
annual total returns of Money Market to the returns of a relevant broad-based
securities market index. This information helps illustrate the volatility of
Money Market's returns. These returns do not reflect charges associated with
the Separate Accounts or variable contracts that an investor in the Fund may
pay under insurance or annuity contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1990 8.2%
1991 6.2%
1992 3.8%
1993 3.0%
1994 4.0%
1995 5.6%
1996 5.1%
1997 5.3%
1998 5.3%
1999 5.0%
</TABLE>

A money market fund is a type of mutual fund that only invests in certain types
of high quality securities with short maturities. These securities are
sometimes referred to as MONEY MARKET INSTRUMENTS. Please see Section III for
more information on money market instruments.

B-5
<PAGE>

During the period shown above, the highest quarterly return was 1.43% for the
second quarter of 1995, and the lowest quarterly return was 1.14% for the first
quarter of 1999. Past performance of a Series does not necessarily indicate how
that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS
------------- --------------- --------------
<S> <C> <C> <C>
Money Market....................... 5.0% 5.3% 5.1%
91 day T-Bill Rate................. 4.8% 5.0% 4.9%
</TABLE>

B-6
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

INVESTMENT OBJECTIVE

The investment objective of the Back Bay Advisors Bond Income Series ("Bond
Income") is a high level of current income consistent with protection of
capital.

PRINCIPAL INVESTMENT STRATEGIES

Back Bay Advisors invests Bond Income's assets primarily in U.S. corporate
bonds. Back Bay Advisors will invest at least 80% of Bond Income's total assets
in INVESTMENT GRADE securities. Back Bay Advisors may also invest Bond Income's
assets in foreign corporate and government securities, U.S. government
securities, and mortgage-backed securities. Up to 20% of Bond Income's total
assets may be invested in HIGH YIELD DEBT.

PRINCIPAL INVESTMENT RISKS

Investing in Bond Income involves risks. Bond Income may not perform as well as
other investments, and it is possible for investors to lose money. Factors that
could harm the investment performance of Bond Income include:

. A general decline in U.S. or foreign fixed-income security markets.

. Poor performance of individual fixed-income securities held by Bond
Income, which may be due to interest rate risk or credit risk.

. The risks associated with investments in foreign securities. Foreign
securities may be subject to less regulation and additional regional,
national and currency risks. These risks are increased for emerging
market securities. The risks of foreign investing are discussed more
fully in Section III.

INVESTMENT GRADE: Moody's and Standard & Poor's are rating agencies that assign
a "credit rating" to fixed-income securities and issuers based on the agency's
evaluation of the risk that the issuer will default on its obligations.
Securities or issuers that earn one of the top four ratings from Moody's or
Standard & Poor's are considered "investment grade." In this Prospectus,
unrated securities that, in the subadviser's judgment, are of similar quality
to other securities rated investment grade are also referred to as investment
grade.

Fixed-income securities that are below investment grade quality are referred to
as HIGH YIELD DEBT (commonly known as "junk bonds"). High yield debt is
typically riskier than investment grade securities.

B-7
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Bond Income for the last
ten full calendar years. The table following the bar chart compares the average
annual total returns of Bond Income to the returns of a relevant broad-based
securities market index and to returns of a group of other similar mutual funds
underlying variable insurance products. This information helps illustrate the
volatility of Bond Income's returns. These returns do not reflect charges
associated with the Separate Accounts or variable contracts that an investor in
the Fund may pay under insurance or annuity contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1990 8.1%
1991 18.0%
1992 8.2%
1993 12.6%
1994 -3.4%
1995 21.2%
1996 4.6%
1997 10.9%
1998 9.0%
1999 -0.5%
</TABLE>

During the period shown above, the highest quarterly return was 7.65% for the
second quarter of 1995 and the lowest quarterly return was -2.18% for the first
quarter of 1996. Past performance of a Series does not necessarily indicate how
that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS
------------- --------------- --------------
<S> <C> <C> <C>
Bond Income....................... -0.5% 8.8% 8.6%
Lehman Brothers Intermediate
Government/Corporate Bond Index.. 0.4% 7.1% 7.3%
Lipper Variable Products A-rated
Corporate Bond Fund Average...... -2.0% 7.2% 7.5%
</TABLE>

B-8
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

INVESTMENT OBJECTIVE

The investment objective of the Salomon Brothers Strategic Bond Opportunities
Series ("Strategic Bond") is a high level of total return consistent with
preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

Salomon Brothers Asset Management Inc ("SBAM") invests substantially all of
Strategic Bond's assets in three classes of fixed-income securities: (1) U.S.
investment grade securities (including U.S. Government obligations), (2) U.S.
and foreign HIGH YIELD DEBT, and (3) foreign government securities.

PRINCIPAL INVESTMENT RISKS

Investing in Strategic Bond involves risks. Strategic Bond may not perform as
well as other investments, and it is possible for investors to lose money.
Factors that could harm the investment performance of Strategic Bond include:

. A general decline in U.S. or foreign fixed-income security markets.

. Poor performance of the classes of fixed-income securities held by
Strategic Bond.

. Poor performance of individual fixed-income securities held by Strategic
Bond, which may be due to interest rate risk or credit risk.

. The risks associated with investments in foreign securities, which may
be subject to less regulation and additional regional, national and
currency risk. These risks are increased for emerging market securities.
The risks of foreign investing are discussed more fully in Section III.

B-9
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Strategic Bond for each
full calendar year since the Series began operations. The table following the
bar chart compares the average annual total returns of Strategic Bond to the
returns of a relevant broad-based securities market index and to returns of a
group of other similar mutual funds underlying variable insurance products.
This information helps illustrate the volatility of Strategic Bond's returns.
These returns do not reflect charges associated with the Separate Accounts or
variable contracts that an investor in the Fund may pay under insurance or
annuity contracts.

[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1995 19.4%
1996 14.4%
1997 11.1%
1998 2.0%
1999 1.4%
</TABLE>

During the period shown above, the highest quarterly return was 9.84% for the
second quarter of 1995, and the lowest quarterly return was -2.44% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF THE SERIES
PAST ONE YEAR PAST FIVE YEARS (OCTOBER 31, 1994)
------------- --------------- -----------------------
<S> <C> <C> <C>
Strategic Bond........... 1.4% 9.4% 8.8%
Lehman Brothers Aggregate
Bond
Index................... -0.8% 7.7% 7.6%
Lipper Variable Products
General Bond Fund Data only available for
Average................. 0.8% 7.9% full one-year periods
</TABLE>

B-10
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

INVESTMENT OBJECTIVE

The investment objective of the Salomon Brothers U.S. Government Series (the
"U.S. Government Series") is a high level of current income consistent with
preservation of capital and maintenance of liquidity.

PRINCIPAL INVESTMENT STRATEGIES

Salomon Brothers Asset Management Inc ("SBAM") generally invests at least 80%
of the total assets of the U.S. Government Series in fixed-income securities
issued or guaranteed by the U.S. Government or its agencies, authorities or
instrumentalities ("U.S. Government Securities"), including repurchase
agreements collateralized by U.S. Government Securities, and collateralized
mortgage obligations ("CMOs") that relate to U.S. Government Securities. The
U.S. Government Series may also invest up to 20% of its total assets in
INVESTMENT GRADE fixed-income securities that are not U.S. Government
Securities.

PRINCIPAL INVESTMENT RISKS

Investing in the U.S. Government Series involves risks. The U.S. Government
Series may not perform as well as other investments, and it is possible for
investors to lose money. Factors that could harm the investment performance of
the U.S. Government Series include:

. A general decline in fixed-income security markets.

. Poor performance of the types of fixed-income securities in which U.S.
Government Series invests relative to other fixed-income securities.

. Poor performance of individual fixed-income securities held by the U.S.
Government Series, which may be due to interest rate risk and credit
risk.

B-11
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of the U.S Government Series
for each full calendar year since the Series began operations. The table
following the bar chart compares the average annual total returns of the U.S
Government Series to the returns of a relevant broad-based securities market
index and to returns of a group of other similar mutual funds underlying
variable insurance products. This information helps illustrate the volatility
of the returns of the U.S. Government Series. These returns do not reflect
charges associated with the Separate Accounts or variable contracts that an
investor in the Fund may pay under insurance or annuity contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1995 15.0%
1996 3.3%
1997 8.6%
1998 7.5%
1999 0.2%
</TABLE>

During the period shown above, the highest quarterly return was 5.52% for the
second quarter of 1995, and the lowest quarterly return was -1.45% for the
first quarter of 1996. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF THE SERIES
PAST ONE YEAR PAST FIVE YEARS (OCTOBER 31, 1994)
------------- --------------- -----------------------
<S> <C> <C> <C>
U.S. Government Series... 0.2% 6.8% 6.7%
Lehman Brothers
Intermediate Government
Bond Index.............. 0.5% 6.9% 6.7%
Lipper Variable Products
U.S. Mortgage and GNMA 0.4% 7.2% Data only available for
Fund Average............ full one-year periods
</TABLE>

B-12
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

INVESTMENT OBJECTIVE

The investment objective of the Back Bay Advisors Managed Series (the "Managed
Series") is a favorable total return through investment in a diversified
portfolio.

PRINCIPAL INVESTMENT STRATEGIES

Back Bay Advisors invests the assets of the Managed Series in a portfolio of
U.S. common stocks and U.S. and foreign fixed-income securities. Back Bay
Advisors will generally invest more of the assets of Managed Series in common
stocks than in fixed-income securities. The Managed Series will generally
invest in the stocks included in the S&P 500 Index and may invest in INVESTMENT
GRADE fixed-income securities, HIGH YIELD DEBT and fixed-income securities of
foreign issuers.

PRINCIPAL INVESTMENT RISKS

Investing in the Managed Series involves risks. The Managed Series may not
perform as well as other investments, and it is possible for investors to lose
money. Factors that could harm the investment performance of the Managed Series
include:

. A general decline in the stocks included in the S&P 500 Index or U.S. or
foreign fixed-income security markets.

. Poor performance of individual equity securities or poor performance of
fixed-income securities held by the Managed Series, which may be due to
interest rate risk or credit risk.

. Poor performance of equity securities relative to fixed-income
securities when Back Bay Advisors emphasizes investment in equity
securities, or poor performance of fixed-income securities relative to
equity securities when Back Bay Advisors emphasizes investment in fixed-
income securities.

. Potentially rapid price changes (volatility) of equity securities.

. The risks associated with investments in foreign securities. Foreign
securities may be subject to less regulation and additional regional,
national and currency risk. These risks are increased for emerging
market securities. The risks of foreign investing are discussed more
fully in Section III.

B-13
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of the Managed Series for the
last ten full calendar years. The table following the bar chart compares the
average annual total returns of the Managed Series to the returns of a relevant
broad-based securities market index and to returns of a group of other similar
mutual funds underlying variable insurance products. This information helps
illustrate the volatility of the returns of the Managed Series. These returns
do not reflect charges associated with the Separate Accounts or variable
contracts that an investor in the Fund may pay under insurance or annuity
contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1990 3.2%
1991 20.2%
1992 6.7%
1993 10.6%
1994 -1.1%
1995 31.3%
1996 15.0%
1997 26.6%
1998 19.7%
1999 10.0%
</TABLE>

During the period shown above, the highest quarterly return was 14.88% for the
fourth quarter of 1998, and the lowest quarterly return was -7.39% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS
------------- --------------- --------------
<S> <C> <C> <C>
Managed Series.................... 10.0% 20.3% 13.8%
S&P 500 Index..................... 21.0% 28.6% 18.2%
Lehman Brothers
Government/Corporate Bond Index.. -2.2% 7.6% 7.7%
Lipper Variable Products Flexible
Portfolio Fund Average........... 12.0% 17.1% 13.0%
</TABLE>

B-14
<PAGE>

BALANCED SERIES

INVESTMENT OBJECTIVE

The investment objective of the Balanced Series is long-term total return from
a combination of capital appreciation and current income.

PRINCIPAL INVESTMENT STRATEGIES

Wellington Management Company, LLP ("Wellington Management") invests the
Balanced Series' assets in a balanced portfolio of stocks and bonds. The
"neutral position" of the Balanced Series portfolio consists of 60% stocks and
other equity securities and 40% U.S. and foreign bonds. In response to current
market conditions, Wellington Management may vary the percentage of the
Balanced Series invested in equity securities from 50% to 70% of the Balanced
Series' total assets and the fixed-income investments from 30% to 50% of the
Series' total assets. Wellington Management will invest the equity portion of
the Balanced Series primarily in stocks of U.S. companies with larger market
capitalizations (generally greater than $6 billion), using a blend of top-down
sector analysis and bottom-up security selection. Wellington Management will
invest the fixed-income portion of the Balanced Series in INVESTMENT GRADE U.S.
corporate and U.S. government fixed-income securities and, to a lesser extent,
U.S. HIGH YIELD DEBT and fixed-income securities of foreign issuers, including
companies and governments of emerging market countries.

PRINCIPAL INVESTMENT RISKS

Investing in the Balanced Series involves risk. The Balanced Series may not
perform as well as other investments, and it is possible for investors to lose
money. Factors that could harm the investment performance of the Balanced
Series include:

. A general decline in U.S. stock or U.S. or foreign fixed-income markets.

. Poor performance of individual equity securities held by the Balanced
Series or of large capitalization stocks in general.

. Poor performance of fixed-income securities held by the Balanced Series,
which may be due to interest rate risk or credit risk.

. Poor performance of equity securities relative to fixed-income
securities when Wellington Management emphasizes investment in equity
securities, or poor performance of fixed-income securities relative to
equity securities when Wellington Management invests relatively more of
the Balanced Series' assets in fixed-income securities.

. Potentially rapid price changes (volatility) of equity securities.

INVESTMENT GRADE: Moody's and Standard & Poor's are rating agencies that assign
a "credit rating" to fixed- income securities and issuers based on the agency's
evaluation of the risk that the issuer will default on its obligations.
Securities or issuers that earn one of the top four ratings from Moody's or
Standard & Poor's are considered "investment grade." In this Prospectus,
unrated securities that, in the subadviser's judgement, are of similar quality
to other securities rated investment grade are also referred to as investment
grade.

B-15
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of the Balanced Series for
each full calendar year since the Series began operations. The table following
the bar chart compares the average annual total returns of the Balanced Series
to the returns of a relevant broad-based securities market index and to returns
of a group of other similar mutual funds underlying variable insurance
products. This information helps illustrate the volatility of the returns of
the Balanced Series. These returns do not reflect charges associated with the
Separate Accounts or variable contracts that an investor in the Fund may pay
under insurance or annuity contracts. On May 1, 2000, Wellington Management
succeeded Loomis Sayles & Company, L.P. ("Loomis") as subadviser to the
Balanced Series. The performance information set forth below relates to the
life of the Series and, therefore, reflects the management of Loomis.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1995 24.8%
1996 16.9%
1997 16.2%
1998 9.1%
1999 -5.1%
</TABLE>

During the period shown above, the highest quarterly return was 9.65% for the
fourth quarter of 1998, and the lowest quarterly return was -8.60% for the
third quarter of 1999. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF THE SERIES
PAST ONE YEAR PAST FIVE YEARS (OCTOBER 31, 1994)
------------- --------------- -----------------------
<S> <C> <C> <C>
Balanced Series.......... -5.1% 11.9% 11.5%
S&P 500 Index............ 21.0% 28.6% 27.0%
Lehman Brothers Aggregate
Bond Index.............. -0.8% 7.7% 7.6%
Lipper Variable Products Data only available for
Balanced Fund Average... 8.7% 16.3% full one-year periods
</TABLE>

B-16
<PAGE>

ALGER EQUITY GROWTH SERIES

INVESTMENT OBJECTIVE

The investment objective of the Alger Equity Growth Series ("Equity Growth") is
long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Fred Alger Management, Inc. ("Alger") invests Equity Growth's assets primarily
in growth stocks. Alger will ordinarily invest at least 65% of Equity Growth's
total assets in equity securities of issuers with market capitalization of $1
billion or greater.

PRINCIPAL INVESTMENT RISKS

Investing in Equity Growth involves risks. Equity Growth may not perform as
well as other investments, and it is possible for investors to lose money.
Factors that could harm the investment performance of Equity Growth include:

. A general decline in U.S. stock markets.

. Poor performance of individual stocks held by Equity Growth or of growth
stocks in general.

. Potentially rapid price changes (volatility) of equity securities.

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Equity Growth for each
full calendar year since the Series began operations. The table following the
bar chart compares the average annual total returns of Equity Growth to the
returns of a relevant broad-based securities market index and to returns of a
group of other similar mutual funds underlying variable insurance products.
This information helps illustrate the volatility of Equity Growth's returns.
These returns do not reflect charges associated with the Separate Accounts or
variable contracts that an investor in the Fund may pay under insurance or
annuity contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1995 48.8%
1996 13.2%
1997 25.6%
1998 47.8%
1999 34.1%
</TABLE>

During the period shown above, the highest quarterly return was 26.06% for the
fourth quarter of 1998, and the lowest quarterly return was -6.95% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF SERIES
PAST ONE YEAR PAST FIVE YEARS (OCTOBER 31, 1994)
------------- --------------- -----------------------
<S> <C> <C> <C>
Equity Growth............ 34.1% 33.2% 30.9%
S&P 500 Index............ 21.0% 28.6% 27.0%
Lipper Variable Products Data only available for
Growth Fund Average..... 31.7% 26.9% full one-year periods
</TABLE>

B-17
<PAGE>

CAPITAL GROWTH SERIES

INVESTMENT OBJECTIVE

The investment objective of the Capital Growth Series ("Capital Growth") is the
long-term growth of capital through investment primarily in equity securities
of companies whose earnings are expected to grow at a faster rate than the
United States economy.

PRINCIPAL INVESTMENT STRATEGIES

Capital Growth Management invests Capital Growth's assets primarily in common
stock of large capitalization U.S. companies whose earnings CGM expects will
grow at a faster rate than the United States economy. When market conditions
warrant, however, CGM may select stocks on the basis of overall economic
factors such as the general economic outlook, the level and direction of
interest rates and the potential impact of inflation. Capital Growth invests
primarily in equity securities of U.S. companies but may also invest in equity
securities of foreign issuers. Over time, Capital Growth has held larger
positions in a smaller number of issuers than many other mutual funds. CGM does
not consider income as a significant factor when selecting investments for
Capital Growth.

PRINCIPAL INVESTMENT RISKS

Investing in Capital Growth involves risks. Capital Growth may not perform as
well as other investments, and it is possible for investors to lose money.
Factors that could harm the investment performance of Capital Growth include:

. A general decline in U.S. or foreign stock markets.

. Poor performance of individual stocks held by Capital Growth.

. Potentially rapid price changes (volatility) of equity securities.

. The risks associated with investment in foreign securities. Foreign
securities may be subject to less regulation and additional regional,
national and currency risk. These risks are discussed more fully in
Section III.

B-18
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Capital Growth for the
last ten full calendar years. The table following the bar chart compares the
average annual total returns of Capital Growth to the returns of a relevant
broad-based securities market index and to returns of a group of other similar
mutual funds underlying variable insurance products. This information helps
illustrate the volatility of Capital Growth's returns. These returns do not
reflect charges associated with the Separate Accounts or variable contracts
that an investor in the Fund may pay under insurance or annuity contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1990 -3.5%
1991 54.0%
1992 -6.1%
1993 15.0%
1994 -7.1%
1995 38.0%
1996 21.1%
1997 23.5%
1998 34.1%
1999 15.7%
</TABLE>

During the period shown above, the highest quarterly return was 28.53% for the
fourth quarter of 1998, and the lowest quarterly return was -17.92% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS
------------- --------------- --------------
<S> <C> <C> <C>
Capital Growth.................... 15.7% 26.2% 16.9%
S&P 500 Index..................... 21.0% 28.6% 18.2%
Lipper Variable Products Growth
Fund Average..................... 31.7% 26.9% 18.2%
</TABLE>

B-19
<PAGE>

DAVIS VENTURE VALUE SERIES

INVESTMENT OBJECTIVE

The investment objective of the Davis Venture Value Series ("Venture Value") is
growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Davis Selected Advisers, L.P. ("Davis Selected") invests Venture Value's assets
primarily in U.S. common stocks of companies that have a market capitalization
of at least $5 billion and that it believes are of high quality and are selling
at attractive prices. Davis Selected generally selects stocks with the
intention of holding them for the long term. Davis Selected believes that
managing risk is the key to delivering superior long-term investment results;
therefore, it considers how much could potentially be lost on an investment
before considering how much might be gained.

PRINCIPAL INVESTMENT RISKS

Investing in Venture Value involves risks. Venture Value may not perform as
well as other investments, and it is possible for investors to lose money.
Factors that could harm the investment performance of Venture Value include:

. A general decline in the U.S. stock market.

. Poor performance of individual stocks held by Venture Value or of value
stocks in general.

. Potentially rapid price changes (volatility) of equity securities.

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Venture Value for each
full calendar year since the Series began operations. The table following the
bar chart compares the average annual total returns of Venture Value to the
returns of a relevant broad-based securities market index and to returns of a
group of other similar mutual funds underlying variable insurance products.
This information helps illustrate the volatility of Venture Value's returns.
These returns do not reflect charges associated with the Separate Accounts or
variable contracts that an investor in the Fund may pay under insurance or
annuity contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1995 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%
</TABLE>

During the period shown above, the highest quarterly return was 21.20% for the
fourth quarter of 1998, and the lowest quarterly return was -14.47% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF SERIES
PAST ONE YEAR PAST FIVE YEARS (OCTOBER 31, 1994)
------------- --------------- -----------------------
<S> <C> <C> <C>
Venture Value............ 17.5% 25.8% 24.0%
S&P 500 Index............ 21.0% 28.6% 27.0%
Lipper Variable Products Data only available for
Growth Fund Average..... 31.7% 26.9% full one-year periods
</TABLE>

B-20
<PAGE>

HARRIS/OAKMARK MIDCAP VALUE SERIES

INVESTMENT OBJECTIVE

The investment objective of the Harris/Oakmark Midcap Value Series ("Midcap
Value") is long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

Harris Associates L.P. ("Harris") invests Midcap Value's assets primarily in
common stocks of U.S. companies. Midcap Value is a "non-diversified fund,"
which means that it may hold at any one time securities of fewer issuers
compared to a "diversified fund." Midcap Value could own as few as 12
securities, but generally will have 15 to 20 securities in its portfolio.
Harris will normally invest at least 65% of Midcap Value's total assets in
equity securities of companies with public stock market capitalizations within
the range of the market capitalization of companies considered to be midcap
stocks by Morningstar, Inc. Harris may invest up to 25% of Midcap Value's total
assets in fixed-income securities, including INVESTMENT GRADE securities and
HIGH YIELD DEBT.

Harris uses a value investment style in selecting equity securities for Midcap
Value. Harris believes that, over time, a company's stock price converges with
its true business value. Harris believes that investing in equity securities
priced significantly below what Harris believes is the true business value
presents the best opportunity to achieve Midcap Value's investment objective.

PRINCIPAL INVESTMENT RISKS

Investing in Midcap Value involves risks. Midcap Value may not perform as well
as other investments, and it is possible for investors to lose money. Factors
that could harm the investment performance of Midcap Value include:

. A general decline in the U.S. stock markets or fixed-income securities
markets.

. Poor performance of individual stocks held by Midcap Value, of midcap
stocks, or of value stocks in general.

. Potentially rapid price changes (volatility) of equity securities.

. Poor performance of fixed-income securities held by Midcap Value, which
may be due to interest rate risk or credit risk.

. The risks associated with a "non-diversified" fund. If the stocks in
which a "non-diversified" fund invests perform poorly, Midcap Value
could incur greater losses than if it had invested in a larger number of
stocks.

INVESTMENT GRADE: Moody's and Standard & Poor's are rating agencies that assign
a "credit rating" to fixed- income securities and issuers based on the agency's
evaluation of the risk that the issuer will default on its obligations.
Securities or issuers that earn one of the top four ratings from Moody's or
Standard & Poor's are considered "investment grade." In this Prospectus,
unrated securities that, in the subadviser's judgment, are of similar quality
to other securities rated investment grade are also referred to as investment
grade.

B-21
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Midcap Value for each full
calendar year since the Series began operations. The table following the bar
chart compares the average annual total returns of Midcap Value to the returns
of a relevant broad-based securities market index and to returns of a group of
other similar mutual funds underlying variable insurance products. This
information helps illustrate the volatility of Midcap Value's returns. These
returns do not reflect charges associated with the Separate Accounts or
variable contracts that an investor in the Fund may pay under insurance or
annuity contracts. On May 1, 2000, Harris succeeded Goldman Sachs Asset
Management ("GSAM"), a separate operating division of Goldman, Sachs & Co., as
subadviser to Midcap Value. On May 1, 1998, GSAM succeeded Loomis Sayles as
subadviser to Midcap Value. The performance information set forth below relates
to the life of the Series and, therefore, reflects the management of GSAM and
Loomis Sayles.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1994 -0.3%
1995 30.4%
1996 17.6%
1997 17.4%
1998 -5.5%
1999 0.3%
</TABLE>

During the period shown above, the highest quarterly return was 20.42% for the
second quarter of 1999, and the lowest quarterly return was -19.83% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF THE SERIES
PAST ONE YEAR PAST FIVE YEARS (APRIL 30, 1993)
------------- --------------- -----------------------
<S> <C> <C> <C>
Midcap Value............. 0.3% 11.3% 10.6%
Russell Midcap Index..... 18.2% 21.9% 17.5%
Lipper Variable Products
Midcap Fund Average..... 44.5% 23.0% Data only available for
full one-year periods
</TABLE>

B-22
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

INVESTMENT OBJECTIVE

The investment objective of the Loomis Sayles Small Cap Series ("Small Cap") is
long-term capital growth from investments in common stocks or their
equivalents.

PRINCIPAL INVESTMENT STRATEGIES

Loomis, Sayles & Company, L.P. ("Loomis Sayles") will invest, under normal
market conditions, at least 65% of Small Cap's total assets in equity
securities of U.S. companies with market capitalizations that fall within the
capitalization range of those companies constituting the Russell 2000 Index.
Loomis Sayles may also invest up to 20% of Small Cap's total assets in foreign
securities, including emerging markets. Small Cap invests in both value and
growth stocks.

PRINCIPAL INVESTMENT RISKS

Investing in Small Cap involves risks. Small Cap may not perform as well as
other investments, and it is possible for investors to lose money. Factors that
could harm the investment performance of Small Cap include:

. A general decline in U.S. or foreign stock markets.

. Poor performance of individual stocks held by Small Cap.

. Potentially rapid price changes (volatility) of equity securities.

. Poor performance of small capitalization issuers relative to the
performance of issuers with larger capitalizations.

. The risks associated with investments in foreign securities. Foreign
securities may be subject to less regulation and additional regional,
national and currency risk. These risks are increased for emerging market
securities. The risks of foreign investing are discussed more fully in
Section III.

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Small Cap for each full
calendar year since the Series began operations. The table following the bar
chart compares the average annual total returns of Small Cap to the returns of
a relevant broad-based securities market index and to returns of a group of
other similar mutual funds underlying variable insurance products. This
information helps illustrate the volatility of Small Cap's returns. These
returns do not reflect charges associated with the Separate Accounts or
variable contracts that an investor in the Fund may pay under insurance or
annuity contracts.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1995 28.9%
1996 30.7%
1997 24.9%
1998 -1.7%
1999 31.8%
</TABLE>

B-23
<PAGE>

During the period shown above, the highest quarterly return was 29.19% for the
fourth quarter of 1999, and the lowest quarterly return was -18.53% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF THE SERIES
PAST ONE YEAR PAST FIVE YEARS (MAY 2, 1994)
------------- --------------- -----------------------
<S> <C> <C> <C>
Small Cap................ 31.8% 22.2% 18.6%
Russell 2000 Index....... 21.3% 16.7% 14.7%
Lipper Variable Products
Small Company Fund 38.4% 21.1% Data only available for
Average................. full one-year periods
</TABLE>

B-24
<PAGE>

MFS INVESTORS SERIES

INVESTMENT OBJECTIVE

The investment objective of the MFS Investors Series (the "Investors Series")
is reasonable current income and long-term growth of capital and income.

PRINCIPAL INVESTMENT STRATEGIES

Massachusetts Financial Services Company ("MFS") ordinarily invests at least
65% of the total assets of the Investors Series in equity securities. Although
the Series may invest in companies of any size, the Series focuses on companies
with large market capitalizations (greater than $5 billion) that MFS believes
have sustainable growth prospects and attractive valuations based on current
and expected earnings or cash flow. The Series will also seek to generate gross
income equal to approximately 90% of the dividend yield on the S&P 500 Index.
MFS may also invest up to 20% of the assets of the Investors Series in foreign
securities (including ADRs), through which it may have exposure to foreign
currencies.

PRINCIPAL INVESTMENT RISKS

Investing in the Investors Series involves risks. The Investors Series may not
perform as well as other investments, and it is possible for investors to lose
money. Factors that could harm the investment performance of the Investors
Series include:

. A general decline in U.S. or foreign stock markets.

. Poor performance of individual equity securities held by the Investors
Series or of large capitalization stocks in general.

. Potentially rapid price changes (volatility) of equity securities.

INVESTMENT PERFORMANCE RECORD

As of the date of this Prospectus, the Investors Series does not yet have a
full calendar year of investment performance.

B-25
<PAGE>

MFS RESEARCH MANAGERS SERIES

INVESTMENT OBJECTIVE

The investment objective of the MFS Research Managers Series (the "Research
Managers Series") is long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

Massachusetts Financial Services Company ("MFS") invests at least 80% of the
total assets of the Research Managers Series in equity securities. The Series
invests primarily in companies that MFS believes possess better than average
prospects for long-term growth and attractive valuations. MFS may also invest
up to 20% of the net assets of the Series in foreign securities (including
emerging markets).

PRINCIPAL INVESTMENT RISKS

Investing in the Research Managers Series involves risks. The Research Managers
Series may not perform as well as other investments, and it is possible for
investors to lose money. Factors that could harm the investment performance of
the Research Managers Series include:

. A general decline in U.S. or foreign stock markets.

. Poor performance of individual equity securities held by the Research
Managers Series.

. Potentially rapid price changes (volatility) of equity securities.

. The risks associated with investments in foreign securities. Foreign
securities may be subject to less regulation and additional regional,
national and currency risk. These risks are increased for emerging market
securities. The risks of foreign investing are discussed more fully in
Section III.

INVESTMENT PERFORMANCE RECORD

As of the date of this Prospectus, the Research Managers Series does not yet
have a full calendar year of investment performance.

B-26
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

INVESTMENT OBJECTIVE

The investment objective of the Westpeak Growth and Income Series ("Growth and
Income") is long-term total return through investment in equity securities.

PRINCIPAL INVESTMENT STRATEGIES

Westpeak Investment Advisors, L.P. may invest Growth and Income's assets using
both a growth and a value style of investing. Westpeak sometimes invests more
of Growth and Income's assets in value stocks, and sometimes invests more
heavily in growth stocks. Growth and Income invests primarily in stocks of
large capitalization U.S. companies, such as those included in the S&P 500
Index, but it may also invest in securities of other large capitalization
companies, as well as mid capitalization companies, such as those included in
the Russell 1000 Index. Westpeak emphasizes individual stock selection rather
than targeting particular industries or sectors that it believes may outperform
other sectors.

PRINCIPAL INVESTMENT RISKS

Investing in Growth and Income involves risks. Growth and Income may not
perform as well as other investments, and it is possible for investors to lose
money. Factors that could harm the investment performance of Growth and Income
include:

. A general decline in the U.S. stock market.

. Poor performance of individual stocks held by Growth and Income or of
the stocks included in the S&P 500 Index or of larger capitalization
stocks in general.

. Potentially rapid price changes (volatility) of equity securities.

. Poor performance of growth stocks relative to value stocks when Westpeak
emphasizes investment in growth stocks, or poor performance of value
stocks relative to growth stocks when Westpeak emphasizes investment in
value stocks.

B-27
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Growth and Income for each
full calendar year since the Series began operations. The table following the
bar chart compares the average annual total returns of Growth and Income to the
returns of a relevant broad-based securities market index and to returns of a
group of other similar mutual funds underlying variable insurance products.
This information helps illustrate the volatility of Growth and Income's
returns, and does not reflect charges associated with the Separate Accounts or
variable contracts that an investor in the Fund may pay under insurance or
annuity contracts.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1994 -1.2%
1995 36.5%
1996 18.1%
1997 33.5%
1998 24.4%
1999 9.4%
</TABLE>

During the period shown above, the highest quarterly return was 19.53% for the
fourth quarter of 1998, and the lowest quarterly return was -12.33% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF THE SERIES
PAST ONE YEAR PAST FIVE YEARS (APRIL 30, 1993)
------------- --------------- -----------------------
<S> <C> <C> <C>
Growth & Income.......... 9.4% 24.0% 19.7%
S&P 500 Index............ 21.0% 28.6% 22.4%
Lipper Variable Products
Growth and Income Fund 14.8% 22.2% Data only available for
Average................. full one-year periods
</TABLE>

B-28
<PAGE>

WESTPEAK STOCK INDEX SERIES

INVESTMENT OBJECTIVE

The investment objective of the Westpeak Stock Index Series ("Stock Index") is
investment results that correspond to the composite price and yield performance
of the S&P 500 Index.

PRINCIPAL INVESTMENT STRATEGIES

Westpeak attempts to replicate the composite price and yield performance of the
S&P 500 Index.

Westpeak will ordinarily invest Stock Index's assets in all of the 500 stocks
included in the S&P 500 Index. Each month, Westpeak purchases and sells stocks
as necessary to replicate the proportions of stocks included in the S&P 500
Index.

PRINCIPAL INVESTMENT RISKS

Investing in Stock Index involves risks. Stock Index may not perform as well as
other investments, and it is possible for investors to lose money. Factors that
could harm the investment performance of Stock Index include:

. A general decline in the value of stocks included in the S&P 500 Index.

. Potentially rapid price changes (volatility) of equity securities.

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of Stock Index for the last
ten full calendar years. The table following the bar chart compares the average
annual total returns of Stock Index to the returns of a relevant broad-based
securities market index and to returns of a group of other similar mutual funds
underlying variable insurance products. This information helps illustrate the
volatility of the returns of Stock Index, and does not reflect charges
associated with the Separate Accounts or variable contracts that an investor in
the Fund may pay under insurance or annuity contracts. On August 1, 1993,
Westpeak succeeded Back Bay Advisors as subadviser to Stock Index. The
performance information set forth below relates to the life of the Series and,
therefore, reflects the management of both Westpeak and Back Bay Advisors.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1990 -4.1%
1991 30.4%
1992 7.3%
1993 9.7%
1994 1.1%
1995 36.9%
1996 22.5%
1997 32.5%
1998 27.9%
1999 20.4%
</TABLE>

During the period shown above, the highest quarterly return was 21.08% for the
fourth quarter of 1998, and the lowest quarterly return was -9.90% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

B-29
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS
------------- --------------- --------------
<S> <C> <C> <C>
Stock Index....................... 20.4% 27.9% 17.7%
S&P 500 Index..................... 21.0% 28.6% 18.2%
Lipper Variable Products S&P 500
Fund Average..................... 20.5% 28.1% 17.7%
</TABLE>

B-30
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

INVESTMENT OBJECTIVE

The investment objective of the Morgan Stanley International Magnum Equity
Series ("International Equity") is long-term capital appreciation through
investment primarily in international equity securities.

PRINCIPAL INVESTMENT STRATEGIES

Morgan Stanley Asset Management ("MSAM") is International Equity's subadviser.
On December 1, 1998, Morgan Stanley Asset Management Inc. changed its name to
Morgan Stanley Dean Witter Investment Management Inc. but continues to do
business in certain instances (including as subadviser to International Equity)
using the name Morgan Stanley Asset Management. MSAM invests International
Equity's assets in a diversified portfolio of equity securities of foreign
issuers domiciled in EAFE COUNTRIES. MSAM may also invest up to 5% of the
Series' total assets in non-EAFE countries, including emerging markets. MSAM
seeks to achieve superior long-term returns by creating a diversified portfolio
of stocks that MSAM believes are undervalued. To achieve this goal, MSAM
implements a combination of strategic geographic asset allocation and
fundamental, value-oriented stock selection implemented by regional experts
around the globe.

PRINCIPAL INVESTMENT RISKS

Investing in International Equity involves risks. International Equity may not
perform as well as other investments, and it is possible for investors to lose
money. Factors that could harm the investment performance of International
Equity include:

. A general decline in foreign stock markets.

. Poor performance of the stock markets in which International Equity
invests relative to the performance of other stock markets.

. Poor performance of individual stocks held by International Equity or of
value stocks in general.

. Potentially rapid price changes (volatility) of equity securities.

. The risks associated with investments in foreign securities. Foreign
securities may be subject to less regulation and additional regional,
national and currency risk. These risks are increased for emerging market
securities. The risks of foreign investing are discussed more fully in
Section III.

EAFE COUNTRIES are countries included in the Morgan Stanley Capital
International EAFE Index. This index consists of companies headquartered in
approximately 20 countries, including Australia, New Zealand, many nations in
Western Europe and the more developed nations of Asia, such as Japan, Hong Kong
and Singapore.

B-31
<PAGE>

INVESTMENT PERFORMANCE RECORD

The bar chart below shows the annual total return of International Equity for
each full calendar year since the Series began operations. The table following
the bar chart compares the average annual total returns of International Equity
to the returns of a relevant broad-based securities market index and to returns
of a group of other similar mutual funds underlying variable insurance
products. This information helps illustrate the volatility of International
Equity's returns, and does not reflect charges associated with the Separate
Accounts or variable contracts that an investor in the Fund may pay under
insurance or annuity contracts. On May 1, 1997, MSAM succeeded Draycott
Partners, Ltd. as subadviser to International Equity. The performance
information set forth below relates to the life of the Series and, therefore,
reflects the management of both MSAM and Draycott Partners, Ltd.

[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
YEAR TOTAL RETURN
---- ------------
<S> <C>
1995 6.0%
1996 6.9%
1997 -1.3%
1998 7.3%
1999 24.6%
</TABLE>

During the period shown above, the highest quarterly return was 14.18% for the
first quarter of 1998, and the lowest quarterly return was -17.12% for the
third quarter of 1998. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

<TABLE>
<CAPTION>
LIFE OF THE SERIES
PAST ONE YEAR PAST FIVE YEARS (OCTOBER 31, 1994)
------------- --------------- -----------------------
<S> <C> <C> <C>
International Equity..... 24.6% 8.4% 8.6%
Morgan Stanley Capital
International EAFE
Index................... 27.0% 12.8% 11.5%
Lipper Variable Products
International Fund Data only available for
Average................. 43.2% 17.7% full one-year periods
</TABLE>

B-32
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT EACH SERIES

This Section contains additional information that may help you decide whether
and how much to invest in each Series. This Section discusses the principal
investment strategies and risks of investing in each Series. However, each
Series may invest in securities and engage in certain investment practices not
discussed below or in the Summary. For more information about these securities,
strategies and related risks, please see "Investment Risks" in the Fund's
Statement of Additional Information (the "SAI"). Please call the toll free
number listed on the back cover of the Prospectus to receive a free copy of the
SAI.

TEMPORARY DEFENSIVE POSITIONS

Each Series other than Money Market and Stock Index may, for temporary
defensive purposes, hold all or a substantial portion of its assets in cash or
fixed-income investments. The types of securities in which a Series may invest
include U.S. Government securities, investment grade fixed-income securities,
money market instruments and REPURCHASE AGREEMENTS. No estimate can be made as
to when or for how long a Series may employ a defensive strategy. Although a
defensive strategy may help insulate a Series from a downturn in securities
markets, it could prevent the Series from capturing the gains it would
otherwise achieve if the Series did not employ a defensive strategy.

PORTFOLIO TURNOVER

Each Series may engage in active and frequent trading of portfolio securities
to achieve its principal investment strategies. As a result, the Series may
experience high portfolio turnover. High portfolio turnover results in higher
brokerage and other transaction costs.

INVESTMENT RESTRICTIONS

Each Series is restricted as to the types of investments it may make. These
restrictions are described in detail in the SAI. Some investment restrictions
are "fundamental," which means that the Fund's Trustees may only change them
after obtaining shareholder approval. The investment objective of each Series
may be changed without shareholder approval.

INVESTMENT PERCENTAGE REQUIREMENTS AND CAPITALIZATION

Several of the Series have adopted policies that set minimum or maximum
percentages of their assets to be allocated to certain types of investments or
to certain ranges of market capitalization. These percentage requirements and
capitalization ranges apply at the time an investment is made; a change in the
value of an investment after it is acquired is not treated as a violation of
these policies or ranges.

REPURCHASE AGREEMENTS are agreements under which a Series purchases one or more
securities from another party, usually a bank or a brokerage firm, with the
understanding that the counterparty will buy the securities back from the
Series at a later date. Repurchase agreements allow a Series to earn a return
on available cash at relatively low credit risk.

B-33
<PAGE>

BACK BAY ADVISORS MONEY MARKET SERIES

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

INTEREST RATE RISK reflects the fact that the values of fixed- income
securities tend to fall as interest rates rise. When interest rates go down,
interest earned on fixed- income securities will tend to decline.

Some securities pay a higher interest rate than the current market rate. An
investor may have to pay more than the security's principal to compensate the
seller for the value of the higher interest rate. This additional payment is a
PREMIUM.

PRINCIPAL INVESTMENT STRATEGIES

Back Bay Advisors invests Money Market's assets in a managed portfolio of MONEY
MARKET INSTRUMENTS.

Investment selection

Money market instruments are short term fixed-income investments that include
the following:

. Obligations backed by the full faith and credit of the United States
Government, and other obligations issued or guaranteed by the United
States Government or its agencies, authorities or instrumentalities.

. 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).

. REPURCHASE AGREEMENTS.

. Obligations of banks or savings and loan associations with net assets of
more than $100 million.

PRINCIPAL INVESTMENT RISKS

Fixed-income Securities

Because of the short maturity and high credit quality of money market
instruments, the risks associated with these instruments is generally lower
than the risks associated with other fixed-income securities.

Fixed-income securities involve both CREDIT RISK and MARKET RISK, which
includes INTEREST RATE RISK. Some fixed-income securities also involve the risk
that an issuer will repay the principal or repurchase the security before it
matures. If this happens, the holder will no longer receive any interest on
that security. The holder could buy another security, but that other security
might pay a lower interest rate. Also, if the holder paid a PREMIUM when it
bought the security, the holder may receive less from the issuer than it paid
for the security.

PORTFOLIO MANAGEMENT

As of December 31, 1999, Back Bay Advisors managed approximately $5 billion in
assets. In addition to Series of the Fund, Back Bay Advisors advises 10 mutual
funds and several institutional accounts. Back Bay Advisors is located at 399
Boylston Street, Boston, Massachusetts 02116.

During the year ended December 31, 1999, Money Market paid 0.35% of its average
net assets in investment advisory fees and its total operating expenses were
0.40% of such assets.

B-34
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

Back Bay Advisors invests Bond Income's assets primarily in U.S. corporate
bonds. Back Bay Advisors will invest at least 80% of Bond Income's assets in
investment grade securities. Back Bay Advisors may also invest Bond Income's
assets in foreign corporate and government securities, U.S. government
securities, and mortgage-backed securities. Up to 20% of Bond Income's total
assets may be invested in high yield debt.

Investment Selection

Back Bay Advisors evaluates potential investments for Bond Income in several
steps.

Back Bay Advisors first allocates the assets of Bond Income that are available
for investment among three principal areas: corporate securities, mortgage-
backed securities and U.S. Treasury securities. Back Bay Advisors makes this
allocation based on its analysis of current and future interest rate trends and
market indicators. Once Back Bay Advisors makes this allocation, it searches
for investment opportunities in each area.

When evaluating domestic and foreign corporate fixed-income securities, Back
Bay Advisors first considers the relative attractiveness of corporate
securities in four different sectors: industrial, financial, utilities, and
YANKEE BOND. Back Bay Advisors allocates assets among the four sectors based on
its evaluation of the relative merits of each sector and its market outlook.
Back Bay Advisors next analyzes the credit quality of specific issuers and the
market prices of securities of those issuers.

When evaluating mortgage-backed securities, Back Bay Advisors reviews the
creditworthiness and likelihood of prepayment on the mortgages underlying those
securities.

When evaluating U.S. Treasury securities, Back Bay Advisors considers the
difference between the interest rates on U.S. Treasury securities of various
maturities and the interest rates on other fixed-income securities.

Back Bay Advisors generally attempts to maintain a DURATION for the Bond Income
portfolio that is within 1 1/2 years of the duration of the Lehman Aggregate
Bond Index. As of December 31, 1999, the duration of this Index was 4.92 years.

PRINCIPAL INVESTMENT RISKS

Fixed-income Securities

YANKEE BONDS are fixed-income securities issued by foreign companies in U.S.
dollars.

DURATION is an estimate of how much a bond fund's share price will fluctuate in
response to a change in interest rates. To see how the price could shift,
multiply the Series' duration by the change in rates. If interest rates rise by
one percentage point, the share price of a fund with an average duration of
five years would decline by about 5%. If rates decrease by a percentage point,
the fund's share price would rise by 5%.

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

B-35
<PAGE>

pay a lower interest rate. Also, if the holder paid a PREMIUM when it bought
the security, the holder might receive less from the issuer than it paid for
the security.

High yield debt

High yield debt has a higher credit risk and market risk than investment grade
fixed-income securities. Issuers could have high credit risk for many reasons,
including problems with product development or distribution, reductions in
market share or overall sales, competition in their markets or a high degree of
LEVERAGE. High yield debt has higher market risk for a variety of reasons,
including greater sensitivity to interest rate changes and economic downturns,
and the difficulty some issuers may have when trying to obtain additional
financing. Also, high yield debt may be difficult to value, and if other
investors believe that a certain issuer's securities are overvalued, the holder
may be unable to sell those securities for what it believes is an adequate
price.

Foreign Securities

In addition to the risks associated with equity securities generally, foreign
securities present additional risks.

Regulation and Access to Information. Changes in foreign countries' laws may
harm the performance and liquidity of the Series' investments in those
countries. Additionally, many countries have less stringent financial reporting
requirements than the United States, so it may be difficult to obtain
information to evaluate the business potential of foreign issuers.

Regional and National Risk. News and events unique to particular regions and
foreign countries will affect non-U.S. markets and issuers. These same events
may not affect the U.S. economy or similar issuers located in the United States
in the same manner. As a result, movements in the prices of foreign securities
may not correlate with the prices of U.S. securities.

Currency Risk. As many investments in foreign countries are denominated in
foreign currencies, changes in the value of those countries' currencies
relative to the U.S. dollar may affect the value of those investments. These
changes may occur in response to events unrelated to the value of the security
in the issuer's home country. Back Bay Advisors may use certain techniques,
such as FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However,
Back Bay Advisors cannot assure that these techniques will be effective.

Emerging Markets

Bond Income may invest in emerging markets, which are generally located in the
Asia-Pacific Region, Eastern Europe, Latin and South America and Africa. In
addition to the risks of foreign securities described above (which are
potentially greater for emerging markets securities than for other foreign
securities), emerging markets securities may be subject to other risks,

LEVERAGE in this context is a measure of how much a company has borrowed in
relation to its shareholders' equity.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

A FUTURES CONTRACT is an obligation to buy or sell an asset on a specified
future date or an obligation to pay or receive money based on the value of some
securities index or currency or interest rate on a specified future date.
Typically, futures contracts are traded on an exchange (rather than entered
into between two parties). Futures contracts are one kind of DERIVATIVE.

A DERIVATIVE is a financial instrument whose value is based on (derived from)
changes in the value of something else, such as a currency, an interest rate or
a security.

B-36
<PAGE>

including increased risks of reduced liquidity, high inflation rates, political
uncertainty, high administrative and regulatory costs, repatriation of income
and less advantageous investment terms relative to foreign nationals.

Forward Contracts and Futures

The Series may seek to avoid the risk of an unfavorable shift in currency rates
or interest rates by entering into forward contracts or buying or selling
futures contracts or options on futures contracts. In so doing, the Series will
also give up the opportunity for gain from a favorable shift in currency or
interest rates.

PORTFOLIO MANAGEMENT

As of December 31, 1999, Back Bay Advisors managed approximately $5 billion in
assets. In addition to Series of the Fund, Back Bay Advisors manages 10 mutual
funds and several institutional accounts. Back Bay Advisors is located at 399
Boylston Street, Boston, Massachusetts 02116.

Peter Palfrey, CFA is primarily responsible for the day-to-day management of
Bond Income. Mr. Palfrey is a Senior Vice President of Back Bay Advisors.

During the fiscal year ended December 31, 1999, Bond Income paid 0.40% of its
average net assets in investment advisory fees and its total operating expenses
were 0.48% of such assets.

B-37
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

PRINCIPAL INVESTMENT STRATEGIES

SBAM invests substantially all of Strategic Bond's assets in three classes of
fixed-income securities: (1) U.S. investment grade securities (including U.S.
Government obligations), (2) U.S. and foreign high yield debt, and (3) foreign
government securities.

Investment Selection

SBAM determines how to invest Strategic Bond assets in several steps:

SBAM considers many factors when selecting individual fixed-income securities,
including the interest rate of the security, the interval at which the interest
rate adjusts, the date of maturity of the security and the creditworthiness of
the issuer. SBAM also considers Strategic Bond's likely need for liquidity,
which can be influenced by redemptions (and opportunities for purchases of
other securities), and the DURATION of the portfolio, which will generally be
approximately 4.5 years.

PRINCIPAL INVESTMENT RISKS

Fixed-income Securities

Foreign Securities

In addition to the risks associated with fixed-income securities generally,
foreign securities present additional risks.

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

INTEREST RATE RISK reflects the fact that the values of fixed-income securities
tend to fall as interest rates rise. When interest rates go down, interest
earned on fixed-income securities will tend to decline.

B-38
<PAGE>

Currency Risk. As many investments in foreign countries are denominated in
foreign currencies, changes in the value of those countries' currencies
relative to the U.S. dollar may affect the value of those investments. These
changes may occur in response to events unrelated to the value of the security
in the issuer's home country. SBAM may use certain techniques, such as FORWARD
CONTRACTS or FUTURES CONTRACTS, to manage these risks. However, SBAM cannot
assure that these techniques will be effective.

Emerging Markets

Strategic Bond may invest in emerging markets, which are generally located in
the Asia-Pacific Region, Eastern Europe, Latin and South America and Africa. In
addition to the risks of foreign securities described above (which are
potentially greater for emerging markets securities than for other foreign
securities), emerging markets securities may be subject to other risks,
including increased risks of reduced liquidity, high inflation rates, political
uncertainty, high administrative and regulatory costs, repatriation of income
and less advantageous investment terms relative to foreign nationals.

Forward Contracts and Futures

The Series may seek to avoid the risk of an unfavorable shift in currency rates
by entering into forward contracts or buying or selling futures contracts or
options on futures contracts. In so doing, the Series will also give up the
opportunity for gain from a favorable shift in foreign currency or interest
rates.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

A DERIVATIVE is a financial instrument whose value is based on (derived from)
changes in the value of something else, such as a currency, an interest rate or
a security.

B-39
<PAGE>

High Yield Debt

High yield debt has a higher credit risk and market risk than investment grade
fixed-income securities. Issuers could have high credit risk for many reasons,
including problems with product development, distribution or competition in
their markets or a high degree of LEVERAGE. High yield debt has higher market
risk for a variety of reasons, including greater sensitivity to interest rate
changes and economic downturns, and the difficulty some issuers may have when
trying to obtain additional financing. Also, high yield debt may be difficult
to value, and if other investors believe that a certain issuer's securities are
overvalued, the holder may be unable to sell those securities for what it
believes is an adequate price.

High Yield, High Risk Foreign Securities

SBAM may invest up to 100% of Strategic Bond's total assets in high yield, high
risk foreign securities. High yield, high risk foreign securities are typically
issued by emerging countries, and will therefore be subject to emerging market
risks in addition to risks of foreign securities described above. Other risks
may include high interest rates and under collateralization.

PORTFOLIO MANAGEMENT

As of December 31, 1999, SBAM managed approximately $28.7 billion in assets.
SBAM is located at 7 World Trade Center, New York, New York 10048.

SBAM may delegate to its affiliate, Salomon Brothers Asset Management Limited
("SBAM Ltd."), any of its responsibilities with respect to transactions of
Strategic Bond in foreign currencies and debt securities denominated in foreign
currencies. SBAM Ltd. is located at Victoria Plaza, 111 Buckingham Palace Road,
London SW1W OSB, England.

Roger Lavan is primarily responsible for the day-to-day management of the
investment grade portion of Strategic Bond's portfolio. Mr. Lavan joined SBAM
as the Director and Portfolio Manager in 1990.

Peter Wilby is primarily responsible for the day-to-day management of the high
yield and foreign sovereign securities portion of Strategic Bond's portfolio.
Mr. Wilby joined SBAM in 1989 and is a Managing Director of SBAM.

David Scott is primarily responsible for the day-to-day management of currency
transactions and certain non-dollar denominated debt securities investments of
Strategic Bond's portfolio. Mr. Scott joined SBAM in 1994 and is a Managing
Director of SBAM.

During the year ended December 31, 1999, Strategic Bond paid 0.65% of its
average net assets in investment advisory fees and its total operating expenses
were 0.81% of such assets.

LEVERAGE in this context is a measure of how much a company has borrowed in
relation to its shareholders' equity.

B-40
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

PRINCIPAL INVESTMENT STRATEGIES

SBAM generally invests at least 80% of the assets of
the U.S. Government Series in U.S. Government
Securities including repurchase agreements
collateralized by U.S. Government Securities and CMOs
that relate to U.S. Government Securities. The U.S.
Government Series may also invest up to 20% of its
assets in investment grade fixed-income securities
that are not U.S. Government Securities.

Investment Selection

SBAM determines how to invest assets of the U.S.
Government Series in several steps.

SBAM has an investment committee consisting of senior
portfolio managers which analyzes current interest
rate trends and their impact on potential economic
scenarios. This committee meets every month to revise
its estimate of interest rate and general economic
trends. Based on this analysis, portfolio managers of
the Series allocate assets among various classes of
securities, including U.S. Treasury securities and
securities of agencies or instrumentalities of the
U.S. Government, mortgage-backed assets and investment
grade fixed-income securities. The mortgage-backed
assets in which the Series invests include GNMA and
FNMA mortgage-backed securities as well as privately
issued mortgage-backed securities, including CMOs.

SBAM considers many factors when selecting individual fixed-income securities,
including the interest rate of the security, the interval at which that
interest rate adjusts, the date of maturity of the security and the
creditworthiness of the issuer. SBAM also considers the U.S. Government Series'
likely need for liquidity, which can be influenced by redemptions and
opportunities for purchases of other securities, and the DURATION of the
portfolio, which SBAM will normally maintain between 2.5 and 5 years.

PRINCIPAL INVESTMENT RISKS

Fixed-income Securities

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

INTEREST RATE RISK reflects the fact that the values of fixed-income securities
tend to fall as interest rates rise. When interest rates go down, interest
earned on fixed-income securities will tend to decline.

B-41
<PAGE>

Collateralized Mortgage Obligations (CMOs). One type of security in which the
U.S. Government Series can invest is a CMO. CMOs are fixed-income securities
that are collateralized by a portfolio of mortgages or mortgage securities. The
underlying mortgages or mortgage securities of the CMOs purchased by the U.S.
Government Series are issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, but the CMOs themselves may not be so issued or
guaranteed. Therefore, CMOs are often riskier than other U.S. Government
Securities.

PORTFOLIO MANAGEMENT

As of December 31, 1999, SBAM managed approximately $28.7 billion in assets.
SBAM is located at 7 World Trade Center, New York, New York 10048.

Roger Lavan has been primarily responsible for the day-to-day management of
U.S. Government Bond since 1997. Mr. Lavan joined SBAM as Director and
Portfolio Manager in 1990 and served as a co-portfolio manager of U.S.
Government Bond from its inception until 1997.

During the year ended December 31, 1999, U.S. Government Bond paid 0.55% of its
average net assets in investment advisory fees and its total operating expenses
were 0.70% of such assets.

B-42
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Back Bay Advisors invests the assets of the Managed Series in a portfolio of
U.S. common stocks and U.S. and foreign fixed-income securities. Back Bay
Advisors will generally invest more of the assets of Managed Series in common
stocks than in fixed-income securities. The Managed Series will generally
invest in the stocks included in the S&P 500 Index and may invest in investment
grade fixed-income securities, high yield debt and fixed-income securities of
foreign issuers.

Investment Selection

Back Bay Advisors evaluates potential investments for the Managed Series in
several steps.

Back Bay Advisors uses a quantitative model to evaluate and adjust the Managed
Series' allocation of assets between equity and fixed-income securities. This
model analyzes U.S. Government monetary policy, the relative valuation of stock
markets relative to fixed-income markets and the flow of funds between stock
markets and fixed-income markets.

Equity Securities. Back Bay Advisors generally invests all of the Managed
Series' equity portfolio in stocks included in the S&P 500. Back Bay Advisors
uses quantitative analysis to invest approximately 20% of this portfolio in
stocks which Back Bay believes have favorable price/earnings ratios. Back Bay
Advisors invests the remaining 80% of this portfolio to reflect individual
stock and industry sector weightings of the S&P 500.

Fixed-Income Securities. Back Bay Advisors first allocates the assets of the
Managed Series that will be invested in fixed-income securities among three
areas: corporate securities, mortgage-backed securities and U.S. Treasury
securities. Back Bay Advisors makes this allocation based on its analysis of
current and future interest rate trends and market indicators. Once Back Bay
Advisors makes this allocation, it searches for investment opportunities in
each area.

When evaluating corporate fixed-income securities, Back Bay Advisors first
considers the relative attractiveness of domestic and foreign corporate
securities in four different sectors: industrial, financial, utilities, and
YANKEE BOND. Back Bay Advisors allocates assets among the four sectors based on
its evaluation of the relative merits of each sector and its market outlook.
Back Bay Advisors next analyzes the credit quality of specific issuers and the
market prices of securities of those issuers.

When evaluating mortgage-backed securities, Back Bay Advisors reviews the
creditworthiness and likelihood of prepayment on the mortgages underlying those
securities.

When evaluating U.S. Treasury securities, Back Bay Advisors considers the
difference between the interest rates on U.S. Treasuries of various maturities
and the interest rates on other fixed-income securities.

YANKEE BONDS are fixed-income securities issued by foreign companies in U.S.
dollars.

B-43
<PAGE>

The DURATION of the fixed-income securities portfolio of the Managed Series may
vary widely; generally, the duration will range from 5 to 10 years.

PRINCIPAL INVESTMENT RISKS

Equity Securities

In general, equity securities are considered more volatile than fixed-income
securities. The prices of equity securities will rise and fall in response to
events that affect entire financial markets or industries (changes in inflation
or consumer demand, for example) and to events that affect particular companies
(news about the success or failure of a new product, for example).

Investment Style Risk. The stock included in the S&P 500 Index may not perform
as well as other stocks or the stock market in general.

Fixed-income Securities

The value of most fixed-income securities generally will rise when interest
rates decline and fall when interest rates rise. Fixed-income securities
involve both CREDIT RISK and MARKET RISK, which includes INTEREST RATE RISK.
Some fixed-income securities also involve the risk that an issuer will repay
the principal or repurchase the security before it matures. If this happens,
the holder will no longer receive any interest on that security. The holder
could buy another security, but that other security might pay a lower interest
rate. Also, if the holder paid a PREMIUM when it bought the security, the
holder might receive less from the issuer than it paid for the security.

High yield debt

Foreign Securities

In addition to the risks associated with equity securities generally, foreign
securities present additional risks.

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

INTEREST RATE RISK reflects the fact that the values of fixed-income securities
tend to fall as interest rates rise. When interest rates go down, interest
earned on fixed-income securities will tend to decline.

LEVERAGE in this context is a measure of how much a company has borrowed in
relation to its shareholders' equity.

B-44
<PAGE>

As a result, movements in the prices of foreign securities may not correlate
with the prices of U.S. securities.

Emerging Markets

The Managed Series may invest in emerging markets, which are generally located
in the Asia-Pacific Region, Eastern Europe, Latin and South America and Africa.
In addition to the risks of foreign securities described above (which are
potentially greater for emerging markets securities than for other foreign
securities), emerging markets securities may be subject to other risks,
including increased risks of reduced liquidity, high inflation rates, political
uncertainty, high administrative and regulatory costs, repatriation of income
and less advantageous investment terms relative to foreign nationals.

Forward Contracts and Futures

PORTFOLIO MANAGEMENT

Peter Palfrey, CFA is primarily responsible for the day-to-day management of
the Managed Series. Mr. Palfrey is a Vice President of Back Bay Advisors and
has served as portfolio manager of the Managed Series since January 1994.

During the year ended December 31, 1999, the Managed Series paid 0.50% of its
average net assets in investment advisory fees and its total operating expenses
were 0.58% of such assets.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

A FUTURES CONTRACT is an obligation to buy or sell an asset on a specified
future date, or to pay or receive money based on the value of some securities
index or currency or interest rate on a specified future date. Typically,
futures contracts are traded on an exchange (rather than entered into between
two parties). Futures contracts are one kind of DERIVATIVE.

A DERIVATIVE is a security, the value of which is based on (derived from) the
movement of an underlying instrument. This instrument could be the price of
another security or other asset or an interest rate, among other things.

B-45
<PAGE>

BALANCED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Wellington Management invests the Balanced Series' assets in a balanced
portfolio of stocks and bonds. The "neutral position" of the Balanced Series
portfolio consists of 60% stocks and other equity securities and 40% U.S. and
foreign bonds. In response to current market conditions, Wellington Management
may vary the percentage of the Balanced Series invested in equity securities
from 50% to 70% of the Balanced Series' total assets and the fixed-income
investments from 30% to 50% of the Series' total assets. Wellington Management
will invest the equity portion of the Balanced Series primarily in stocks of
U.S. companies with larger market capitalizations (generally greater than $6
billion), using a blend of top-down sector analysis and bottom-up security
selection. Wellington Management will invest the fixed-income portion of the
Balanced Series in investment grade U.S. corporate and U.S. government fixed-
income securities and, to a lesser extent, U.S. high yield debt and fixed-
income securities of foreign issuers, including companies and governments of
emerging market countries.

Investment Selection

Asset Allocation. Wellington Management invests 50% to 70% of the Balanced
Series' total assets in equity securities and 30% to 50% of the Series' total
assets in fixed-income securities. Wellington Management will divide the
Balanced Series' assets between equity and fixed income securities based on
Wellington Management's judgement of the projected investment environment for
financial assets, relative fundamental values, the attractiveness of each asset
category, and expected future returns of each asset category.

Equity Securities. Wellington Management invests the equity portfolio of the
Balanced Series using a combination of top-down industry and sector analysis
and bottom-up stock selection. Macro-economic data, such as changes in the
Gross Domestic Product (GDP), rates of employment, and interest rates, are
considered to identify sectors of the economy and industries which Wellington
Management believes will grow faster than the U.S. economy. Wellington
Management also attempts to identify long-term broad "themes" based on, for
example, demographic trends, technological developments, and political and
social developments in the U.S. and abroad.

Wellington Management selects stocks for the Balanced Series which Wellington
Management believes have the following attributes:

. leadership position within an industry;

. a strong balance sheet;

. a high return on equity;

. sustainable or increasing dividends;

. a strong management team;

. a globally competitive position.

B-46
<PAGE>

Wellington Management may also consider general investor opinion as to whether
a stock will continue to gain in value when evaluating stocks priced at
historically high levels.

Wellington Management continually monitors each stock in the Series' portfolio
and considers selling a stock when:

.fundamentals deteriorate;

.the stock appears overpriced.

Fixed-income Securities. Wellington Management also uses a blend of top-down
market analysis and bottom-up security analysis when making selections for the
Balanced Series' fixed-income portfolio, which may consist of a variety of
securities, including, but not limited to:

.U.S. government bonds

.mortgage-backed securities

.ASSET-BACKED SECURITIES

.YANKEE BONDS

.investment grade U.S. corporate bonds

.high yield U.S. corporate bonds

.foreign government and SUPRANATIONAL BONDS

.emerging market debt

Wellington Management combines quantitative modeling and subjective judgement
first to determine the fixed-income portfolio's average DURATION and industry
sector weightings. Under normal market conditions, the duration of the Series'
fixed-income portfolio will be within one year of the average duration of the
Lehman Aggregate Bond Index. As of December 31, 1999, the average duration of
this Index was 4.92 years. During 1999, the duration of this Index ranged from
4.4 years to 5.0 years.

Wellington Management may invest up to 25% of the Balanced Series' fixed-income
portfolio in high yield and non-U.S. dollar bonds and up to 10% of the fixed-
income portfolio in emerging market debt. For a description of the risks
associated with investing in emerging markets, and foreign markets generally,
see "Principal Investment Risks" below.

PRINCIPAL INVESTMENT RISKS

Equity Securities

ASSET-BACKED SECURITIES are bonds and notes backed by certain assets, such as
anticipated car loan or credit card payments.

YANKEE BONDS are fixed-income securities issued by foreign companies in U.S.
dollars.

SUPRANATIONAL BONDS are issued by organizations governed by representatives
from different countries (e.g., the World Bank) to finance reconstruction and
development projects around the world.

B-47
<PAGE>

Market Capitalization. The stocks of large capitalization companies do not
always have as much growth potential as smaller and medium capitalization
stocks.

Fixed-income Securities

Foreign Securities

In addition to the risks associated with securities generally, foreign
securities present additional risks.

Currency Risk. As many investments in foreign countries are denominated in
foreign currencies, changes in the value of those countries' currencies
relative to the U.S. dollar may affect the value of those investments. These
changes may occur in response to events unrelated to the value of the security
in the issuer's home country. Wellington may use certain techniques, such as
FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However,
Wellington cannot assure that these techniques will be effective.

Emerging Markets

The Balanced Series may invest in emerging markets, which are generally located
in the Asia-Pacific Region, Eastern Europe, Latin and South America and Africa.
In addition to the risks of foreign securities described above (which are
potentially greater for emerging markets securities than for other foreign
securities), emerging markets securities may be subject to other risks,
including increased risks of reduced liquidity, high inflation rates, political
uncertainty, high administrative and regulatory costs, repatriation of income
and less advantageous investment terms relative to foreign nationals.

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

INTEREST RATE RISK reflects the fact that the values of fixed-income securities
tend to fall as interest rates rise. When interest rates go down, interest
earned on fixed-income securities will tend to decline.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

A DERIVATIVE is a financial instrument whose value is based on (derived from)
changes in the value of something else, such as a currency, an interest rate or
a security.

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<PAGE>

Forward Contracts and Futures Contracts

The Series may attempt to avoid the risk of an unfavorable shift in currency
rates by entering into forward contracts or buying or selling futures contracts
or options on futures contracts. In so doing, the Series will also give up the
opportunity for gain from a favorable shift in currency or interest rates. The
Series may also purchase futures contracts (or options on futures contracts) to
maintain exposure to the broad equity markets.

Securities Futures Contracts. If the price of a futures contract changes more
than the price of the security or index on which the contract is based, the
Series could make or lose more money than if it had invested directly in the
underlying security or index. This added volatility increases the risk of these
investments. In addition, investors may be unwilling to buy or sell futures
contracts under some market conditions. If this happens, the Series might not
be able to close out futures transactions without incurring substantial losses.

PORTFOLIO MANAGEMENT

Wellington Management has been in the investment management business since
1928. As of December 31, 1999, the company managed over $235 billion in assets.
Wellington Management's address is 75 State Street, Boston, Massachusetts
02109.

Maya K. Bittar, CFA, manages the equity portion of the Series and Thomas L.
Pappas, CFA, manages the fixed income portion of the Series. Ms. Bittar is a
Vice President of Wellington Management and has been a Portfolio Manager there
since she joined Wellington Management in 1998. From 1993 until she joined
Wellington Management, Ms. Bittar was employed by Firstar Investment Research
and Management Company. Mr. Pappas is a Senior Vice President and Partner of
Wellington Management. He has been employed by Wellington Management since
1987.

During the year ended December 31, 1999, the Balanced Series paid 0.70% of its
average net assets in investment advisory fees and its total operating expenses
were 0.77% of such assets.

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<PAGE>

ALGER EQUITY GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

Alger invests Equity Growth's assets primarily in growth stocks. Alger will
ordinarily invest at least 65% of Equity Growth's total assets in equity
securities of issues with market capitalization of $1 billion or greater.

Stock Selection

Alger seeks out and invests primarily in companies that are traded on domestic
stock exchanges or in the domestic over-the-counter market. The companies Alger
chooses for the portfolio of the Series may still be in the development stage,
may be older companies that appear to be entering a new stage of growth
progress due to factors like management changes or development of new
technologies, products or markets, or may be companies providing products or
services with a high unit volume growth rate. Alger focuses on fundamental
characteristics of individual companies and does not allocate assets based on
specific industry sectors.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Investment Style Risk. The prices of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. Growth
stocks may not perform as well as value stocks or the stock market in general.

PORTFOLIO MANAGEMENT

As of December 31, 1999, Alger managed approximately $19 billion in assets for
seven mutual funds and other institutional investors. Alger's address is One
World Trade Center, Suite 9333, New York, New York 10048.

David D. Alger and Ron Tartaro have served as Equity Growth's portfolio
managers since its inception in October 1994. Mr. Alger became Alger's
President in 1995 and served as Executive Vice President and Director of
Research before 1995. Mr. Tartaro has been employed by Alger since 1990 and has
been a Senior Vice President since 1995.

During the year ended December 31, 1999, Equity Growth paid 0.75% of its
average net assets in investment advisory fees and its total operating expenses
were 0.80% of such assets.

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<PAGE>

CAPITAL GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

CGM invests Capital Growth's assets primarily in common stock of large
capitalization U.S. companies whose earnings CGM expects will grow at a faster
rate than the United States economy. When market conditions warrant, however,
CGM may select stocks on the basis of overall economic factors such as the
general economic outlook, the level and direction of interest rates and the
potential impact of inflation. Capital Growth invests primarily in equity
securities of U.S. companies but may also invest in equity securities of
foreign issuers. Over time, Capital Growth has held larger positions in a
smaller number of issuers than many other mutual funds. CGM does not consider
income as a significant factor when selecting investments for Capital Growth.

Stock Selection

In general, CGM seeks companies with the following characteristics:

. A well-established record of above-average growth.

. The prospect of maintaining market leadership.

. The potential to benefit from internal revitalization or innovations,
changes in consumer demand or basic economic forces.

Although CGM searches for these types of companies, not every company in which
Capital Growth invests will have all of these characteristics. Rather than
strictly following a growth style, CGM may also invest in attractive value
stocks. In making an investment decision, CGM will generally:

. Use a top-down approach to analyze the overall economic factors that may
affect a potential investment.

. Thoroughly analyze certain industries and companies, evaluate the
fundamentals of each and focus on attractively valued companies.

. Purchase a security only after a thorough assessment of all information
that CGM deems to be relevant at the time of investment.

. Sell a stock if CGM's investment expectations are not being met, if CGM
identifies better opportunities or if CGM has attained its price
objective.

PRINCIPAL INVESTMENT RISKS

Equity Securities

In general, equity securities are considered more volatile than fixed-income
securities. The prices of equity securities in general will rise and fall in
response to events that affect entire financial markets. The values of stocks
of companies in a particular industry or sector of the economy tend to increase
or decrease in response to

B-51
<PAGE>

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

events affecting that industry or sector (changes in inflation or consumer
demand, for example). The price of any individual stock will increase or
decrease in response to events that affect that particular company (news about
the success or failure of a new product, for example).

Market Capitalization. The stocks of large capitalization companies do not
always have as much growth potential as smaller and medium capitalization
stocks.

Real Estate Investment Trusts (REITs). One category of equity securities in
which Capital Growth invests are REITs. REITs are generally categorized as
equity REITs or mortgage REITs, although some REITs have characteristics of
both classifications. Equity REITs invest directly in real property and receive
income from rent collection and sale of those properties. These REITs may
decline in value when the property they own declines in value. Mortgage REITs
invest in real estate mortgages and receive income from interest payments on
those mortgages. These REITs are particularly subject to CREDIT RISK and MARKET
RISK, although equity REITs are also sensitive to market risk.

Foreign Securities

In addition to the risks associated with securities generally, foreign
securities present additional risks.

PORTFOLIO MANAGEMENT

As of December 31, 1999, CGM managed approximately $8.0 billion in assets and
currently serves as investment adviser to eight additional mutual funds and to
other institutional investors. CGM's address is One International Place,
Boston, Massachusetts 02110.

B-52
<PAGE>

Kenneth Heebner has managed Capital Growth since it was established in 1983.
Mr. Heebner co-founded and is currently Senior Portfolio Manager of CGM.

During the year ended December 31, 1999, Capital Growth paid 0.62% of its
average net assets in investment advisory fees and its total operating expenses
were 0.66% of such assets.

B-53
<PAGE>

DAVIS VENTURE VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Davis Selected invests Venture Value's assets primarily in U.S. common stocks
of companies that have a market capitalization of at least $5 billion and that
Davis Selected believes are of high quality and are selling at attractive
prices. Davis Selected generally selects stocks with the intention of holding
them for the long term. Davis Selected believes that managing risk is the key
to delivering superior long-term investment results; therefore, it considers
how much could potentially be lost on an investment before considering how much
might be gained.

Stock selection

Davis Selected has developed a list of ten characteristics that it believes
allow companies to sustain long-term growth and minimize risks to enhance their
potential for superior long-term returns. Although few companies exhibit all
ten characteristics, Davis Selected searches for companies that possess:

. Excellent management.

. Managers who own stock in their own company.

. Strong returns on investments of an issuer's capital.

. A lean expense structure.

. A dominant or growing market share in a growing market.

. A proven record as an acquirer.

. A strong balance sheet.

. Products or services that are not likely to become obsolete.

. Successful international operations.

. Innovation in all aspects of operations.

Davis Selected does not have particular allocation strategies, and emphasizes
individual stock selection rather than industry sectors. Davis Selected relies
heavily on its evaluation of the management of potential investments, and will
ordinarily visit the managers at their place of business to gain insight into
the relative value of different companies.

PRINCIPAL INVESTMENT RISKS

Equity Securities

B-54
<PAGE>

Investment Style Risk. The price of value stocks may fall, or simply may not
increase very much, if the market does not agree with the subadviser's view of
the value of the stock. Value stocks may not perform as well as growth stocks
or as the stock market in general.

Market Capitalization. The stocks of large capitalization companies do not
always have as much growth potential as smaller and medium capitalization
stocks.

PORTFOLIO MANAGEMENT

As of December 31, 1999, Davis Selected, together with its affiliated
institutional asset management companies, managed approximately $27.6 billion
in assets. Davis Selected's address is 124 East Mercy Street, Santa Fe, New
Mexico 87501. Davis Selected may delegate to Davis Selected Advisers-NY, Inc.
any of its responsibilities related to Venture Value. Davis Selected Advisers-
NY, Inc. is a wholly owned subsidiary of Davis Selected and is located at 609
Fifth Avenue, New York, New York 10017.

Christopher C. Davis and Kenneth C. Feinberg are co-portfolio managers of
Venture Value. Christopher Davis has been the portfolio manager for Venture
Value and other equity funds managed by Davis Selected since February 1997.
Christopher Davis was co-portfolio manager of Venture Value with Shelby M.C.
Davis from October 1995 until February 1997. Prior to co-managing Venture
Value's portfolio, Christopher Davis worked as Shelby Davis' assistant
portfolio manager and research analyst. Mr. Feinberg has co-managed other
equity funds for Davis Selected since May 1998 and became co-portfolio manager
of Venture Value in April 1999. Mr. Feinberg was a research analyst at Davis
Selected from December 1994 until May 1998, and before that he was an Assistant
Vice President of Investor Relations for Continental Corp.

As Chief Investment Officer, Shelby Davis provides investment themes and
strategies to, and helps select individual stocks for, Venture Value.

During the year ended December 31, 1999, Venture Value paid 0.75% of its
average net assets in investment advisory fees and its total operating expenses
were 0.81% of such assets.

B-55
<PAGE>

HARRIS/OAKMARK MIDCAP VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Harris invests Midcap Value's assets primarily in common stocks of U.S.
companies. Midcap Value is a "non-diversified" fund, which means that it may
hold at any one time securities of fewer issuers compared to a "diversified"
fund. Midcap Value could own as few as 12 securities, but generally will have
15 to 20 securities in its portfolio. Harris will normally invest at least 65%
of Midcap Value's total assets in equity securities of companies with public
stock market capitalizations within the range of the market capitalization of
companies considered to be midcap by Morningstar, Inc. As of January 31, 2000,
this capitalization range was $1.67 billion to $10.54 billion. This
capitalization range will change due to changes in the value of U.S. stocks.
Harris may invest up to 25% of MidCap Value's total assets in fixed-income
securities, including high-yield debt.

Harris uses a value investment style in selecting equity securities for Midcap
Value. Harris believes that, over time, a company's stock price converges with
its true business value. By "true business value," Harris means its estimate of
the price a knowledgeable buyer would pay to acquire the entire business.
Harris believes that by investing in equity securities priced significantly
below what Harris believes is the true business value presents the best
opportunity to achieve Midcap Value's investment objective.

Harris' value strategy also emphasizes investing for the long-term, which means
that Midcap Value will generally own the stock of companies in which it invests
for at least two to three years, although Harris may use short-term trading
strategies as well.

Stock Selection

Harris uses this value philosophy to identify companies that it believes have
discounted stock prices compared to the companies' true business values.

In assessing such companies, Harris looks for the following characteristics,
although not all of the companies selected will have these attributes:

. free cash flows and intelligent investment of excess cash.

. earnings that are growing and reasonably predictable.

. high level of manager ownership.

Harris focuses on individual companies in making its investment decisions
rather than on specific economic factors or specific industries. In order to
select those companies that meet the criteria described above, Harris uses in-
house research to analyze each company. As part of this selection process, its
analysts typically visit companies and talk to various industry sources.

B-56
<PAGE>

The chief consideration in the selection of stocks is the size of the discount
of a company's stock price compared to Harris' view of the company's true
business value. Once Harris determines that a stock is selling at a significant
discount (typically 60%) to Harris' view of its estimated worth, and the
company has certain of the additional qualities mentioned above, Harris
generally will consider buying that stock. Harris usually sells when the
company's stock price approaches 90% of Harris' view of its estimated worth.
This process allows Harris to set specific "buy" and "sell" targets for each
stock held by Midcap Value. Harris also monitors Midcap Value's holdings, and,
if warranted, adjusts a stock's price target to reflect changes in a company's
characteristics.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Investment Style Risk. The price of value stocks may fall, or simply may not
increase very much, if the market does not agree

with the subadviser's view of the value of the stock. Value stocks may not
perform as well as growth stocks or as the stock market in general.

Market Capitalization. The stocks of midcap companies involve potentially
greater risks and higher volatility than those of larger companies. Midcap
stocks do not always have as much growth potential as smaller capitalization
stocks.

Non-Diversification. Investing in a limited number of stocks may increase the
volatility of Midcap Value's investment performance as compared to funds that
invest in a larger number of stocks. If the stocks in which Midcap Value
invests perform poorly, Midcap Value could incur greater losses than if it had
invested in a larger number of stocks.

Fixed-income Securities

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

INTEREST RATE RISK reflects the fact that the values of fixed-income securities
tend to fall as interest rates rise. When interest rates go down, interest
earned on fixed-income securities will tend to decline.

Some securities pay a higher interest rate than the current market rate. An
investor may have to pay more than the security's principal to compensate the
seller for the value of higher interest rate. This additional payment is a
PREMIUM.

B-57
<PAGE>

High Yield Debt

High yield debt has a higher credit risk and market risk than investment grade
fixed-income securities. Issuers could have high credit risk for many reasons,
including problems with product development, distribution or competition in
their markets or a high degree of LEVERAGE. High yield debt has higher market
risk for a variety of reasons, including greater sensitivity to interest rate
changes and economic downturns, and the difficulty some issuers may have when
trying to obtain additional financing. Also, high yield debt may be difficult
to value, and if other investors believe that a certain issuer's securities are
overvalued, the holder may be unable to sell those securities for what it
believes is an adequate price.

PAST PERFORMANCE OF SIMILARLY MANAGED FUNDS

The total returns shown below are based on performance data furnished by Harris
for Class I shares of The Oakmark Select Fund, a mutual fund which has the same
investment objective as that of Midcap Value and which has been managed using
investment policies and strategies substantially similar, though not
necessarily identical, to those of Midcap Value. The Oakmark Select Fund is
managed by William C. Nygren, and Midcap Value is managed by William C. Nygren
and Floyd J. Bellman. The following information does not represent Midcap
Value's performance and should not be considered a prediction of future
performance of Midcap Value. The Midcap Value's performance may be higher or
lower than the performance of The Oakmark Select Fund shown below. THE
PERFORMANCE OF THE OAKMARK SELECT 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 MIDCAP VALUE SERVES AS AN
INVESTMENT VEHICLE. THESE CHARGES HAVE THE EFFECT OF LOWERING THE PERFORMANCE
OF A VARIABLE INSURANCE PRODUCT.

<TABLE>
<CAPTION>
THE OAKMARK SELECT RUSSELL
FUND--CLASS I MIDCAP INDEX
------------------ ------------
<S> <C> <C>
Total Return for the Year Ended December 31,
1999.......................................... 14.49% 18.2%
Average Annual Total Return Since Inception of
The Oakmark Select Fund (November 1, 1996).... 31.07% 19.6%
</TABLE>

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.

LEVERAGE in this context is a measure of how much a company has borrowed in
relation to its shareholders' equity.

B-58
<PAGE>

PORTFOLIO MANAGEMENT

Harris also serves as investment adviser to individuals, trusts, retirement
plans, endowments and foundations, and manages numerous private partnerships.
Together with a predecessor, Harris has advised and managed mutual funds since
1970. As of December 31, 1999, Harris manages approximately $12.6 billion in
assets. Harris' address is Two North LaSalle Street, Chicago, Illinois 60602-
3790.

William C. Nygren, C.F.A. and Floyd J. Bellman, C.F.A. are Midcap Value's
portfolio managers. Mr. Nygren joined Harris as an analyst in 1983, and was
Harris' Director of Research from September, 1990 to April, 1998. Previously,
he was an analyst with Northwestern Mutual Life Insurance Company. Mr. Bellman
joined Harris in 1995 and has over 19 years of investment experience. Prior to
joining Harris, he was a Vice President and Senior Portfolio Manager at Harris
Trust and Savings Bank.

During the year ended December 31, 1999, Midcap Value paid 0.75% of its average
net assets in investment advisory fees and its total operating expenses were
0.88% of such assets.

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LOOMIS SAYLES SMALL CAP SERIES

PRINCIPAL INVESTMENT STRATEGIES

Loomis Sayles, under normal market conditions, will invest at least 65% of
Small Cap's total assets in equity securities of U.S. companies with market
capitalizations that fall within the capitalization range of those companies
constituting the Russell 2000 Index. Loomis Sayles may also invest up to 20% of
Small Cap's total assets in foreign securities, including emerging markets.
Small Cap invests in both value and growth stocks.

Stock Selection

Loomis Sayles begins with a universe of approximately 3000 companies that
generally fall within the market capitalization range of the Russell 2000
Index.

Value Stocks. Loomis Sayles may invest in stocks of companies which it believes
have reasonable growth prospects and are attractively priced in relation to the
companies' earnings. Small Cap may also invest in companies that have
experienced significant business problems but that Loomis Sayles believes have
favorable prospects for recovery.

Growth Stocks. When investing in growth stocks, Loomis Sayles seeks companies
that have distinctive products, technologies, or services; dynamic earnings
growth; prospects for a high level of profitability; and outstanding
management.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Investment Style Risk. The prices of growth stocks may be more sensitive to
changes in current or expected earnings than the prices of other stocks. The
price of a value stock may fall, or simply may not increase very much, if the
market does not agree with the subadviser's view of the value of the stock.
Small Cap may not perform as well as a fund which invests in only value or
growth stocks.

Market Capitalization. The stocks of small capitalization companies may
underperform the broad equity markets and may be more volatile than other
stocks.

Real Estate Investment Trusts (REITs). One category of equity securities in
which Small Cap invests are REITs. REITs are generally categorized as equity
REITs or mortgage REITs, although some REITs have characteristics of both
classifications. Equity REITs invest directly in real property and receive
income from rent collection and sale of those properties. These REITs may
decline in value when the property they own declines in value. Mortgage REITs
invest in real estate mortgages and receive income

B-60
<PAGE>

from interest payments on those mortgages. These REITs are particularly subject
to CREDIT RISK and MARKET RISK, although equity REITs are also sensitive to
market risk.

Foreign Securities

In addition to the risks associated with securities generally, foreign
securities present additional risks.

Currency Risk. As many investments in foreign countries are denominated in
foreign currencies, changes in the value of those countries' currencies
relative to the U.S. dollar may affect the value of those investments. These
changes may occur in response to events unrelated to the value of the security
in the issuer's home country. Loomis Sayles may use certain techniques, such as
FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However, Loomis
Sayles cannot assure that these techniques will be effective.

Emerging Markets

The Small Cap Series may invest in emerging markets, which are generally
located in the Asia-Pacific Region, Eastern Europe, Latin and South America and
Africa. In addition to the risks of foreign securities described above (which
are potentially greater for emerging markets securities than for other foreign
securities), emerging markets securities may be subject to other risks,
including increased risks of reduced liquidity, high inflation rates, political
uncertainty, high administrative and regulatory costs, repatriation of income
and less advantageous investment terms relative to foreign nationals.

Forward Contracts and Futures Contracts

CREDIT RISK is the risk that the security's issuer will not pay the interest,
dividends or principal that it has promised to pay.

MARKET RISK is the risk that the value of the security will fall because of
changes in market rates of interest or other factors.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

A DERIVATIVE is a financial instrument whose value is based on (derived from)
changes in the value of something else, such as a currency, an interest rate or
a security.

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<PAGE>

PORTFOLIO MANAGEMENT

Loomis Sayles has been in the investment management business since 1926. As of
December 31, 1999, Loomis Sayles managed approximately $67.6 billion in assets.
Loomis Sayles' address is One Financial Center, Boston, Massachusetts 02110.

Christopher R. Ely and Joseph R. Gatz are the lead Portfolio Managers of Small
Cap. The other Portfolio Managers are Dawn Alston Paige, Philip C. Fine and
David L. Smith.

Mr. Gatz, Vice President of Loomis Sayles, joined Loomis Sayles as a portfolio
manager in 1999. From 1993 until he joined Loomis Sayles, Mr. Gatz was a
Portfolio Manager at Banc One Investment Advisers Corporation and certain of
its corporate predecessors. Mr. Ely, a Vice President of Loomis Sayles, has co-
managed the Series since April 1999 and joined Loomis Sayles in 1996. Before
joining Loomis Sayles, Mr. Ely was a Senior Vice President and portfolio
manager at Keystone Investment Management Company, Inc. Ms. Paige has been a
Portfolio Manager at Loomis Sayles since 1998. She has been employed by Loomis
Sayles since 1992. Mr. Fine, a Vice President of Loomis Sayles, has co-managed
the Series since April 1999 and joined Loomis Sayles in 1996. Before joining
Loomis Sayles, Mr. Fine was a Vice President and portfolio manager at Keystone
Investment Management Company, Inc. Mr. Smith, a Vice President of Loomis
Sayles, has co-managed the Series since April 1999 and joined Loomis Sayles in
1996. Before joining Loomis Sayles, Mr. Smith was a Vice President and
portfolio manager at Keystone Investment Management Company, Inc.

During the year ended December 31, 1999, Small Cap paid 1.00% of its average
net assets in investment advisory fees and its total operating expenses were
1.00% of such assets.

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MFS INVESTORS SERIES

PRINCIPAL INVESTMENT STRATEGIES

MFS ordinarily invests at least 65% of the total assets of the Investors Series
in equity securities. Although the Series may invest in companies of any size,
the Series focuses on companies with large market capitalizations (greater than
$5 billion) that MFS believes have sustainable growth prospects and attractive
valuations based on current and expected earnings or cash flow. The Series will
also seek to provide income equal to approximately 90% of the dividend yield on
the S&P 500 Index. MFS may also invest a substantial portion of the assets of
the Investors Series in foreign securities, through which it may have exposure
to foreign currencies.

Stock Selection

MFS uses a bottom-up, as opposed to a top-down, investment style in managing
the Investors Series. This means that MFS selects securities based upon
fundamental analysis (such as an analysis of earnings, cash flows, competitive
position and management's abilities) performed by the portfolio manager and
MFS' large group of equity research analysts.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Market Capitalization. The stocks of large capitalization companies do not
always have as much growth potential as smaller and medium capitalization
stocks.

Foreign Securities

In addition to the risks associated with securities generally, foreign
securities present additional risks.

B-63
<PAGE>

Currency Risk. As many investments in foreign countries are denominated in
foreign currencies, changes in the value of those countries' currencies
relative to the U.S. dollar may affect the value of those investments. These
changes may occur in response to events unrelated to the value of the security
in the issuer's home country. MFS may use certain techniques, such as FORWARD
CONTRACTS or FUTURES CONTRACTS, to manage these risks. However, MFS cannot
assure that these techniques will be effective.

Forward Contracts and Futures Contracts

The Series may attempt to avoid the risk of an unfavorable shift in currency
rates by entering into forward contracts or buying or selling futures
contracts. In so doing, the Series will also give up the opportunity for gain
from a favorable shift in currency rates. The Series may also purchase futures
contracts to maintain exposure to the broad equity markets.

Securities Futures Contracts. If the price of a futures contract changes more
than the price of the security or index on which the contract is based, the
Investors Series could make or lose more money than if it had invested directly
in the underlying security or index. This added volatility increases the risk
of these investments. In addition, investors may be unwilling to buy or sell
futures contracts under some market conditions. If this happens, the Investors
Series might not be able to close out futures transactions without incurring
substantial losses.

PORTFOLIO MANAGEMENT

As of December 31, 1999, MFS managed approximately $136.7 billion in assets on
behalf of over 4.2 million investors worldwide. MFS is located at 500 Boylston
Street, Boston, Massachusetts 02116.

John D. Laupheimer and Mitchell D. Dynan are the portfolio managers of
Investors Series and each is a Senior Vice President of MFS. Mr. Laupheimer is
a Senior Vice President of MFS and has been employed by MFS as a portfolio
manager since 1981. Mr. Dynan is a Vice President of MFS and has been employed
as a portfolio manager since 1986.

During the period ended December 31, 1999, the Investors Series paid 0.75% of
its average daily net assets in investment advisory fees and its total
operating expenses were 0.90% of such assets.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

A DERIVATIVE is a financial instrument whose value is based on (derived from)
changes in the value of something else, such as a currency, an interest rate or
a security.

B-64
<PAGE>

MFS RESEARCH MANAGERS SERIES

PRINCIPAL INVESTMENT STRATEGIES

MFS invests at least 80% of the total assets of the Research Managers Series in
equity securities. The Series invests primarily in companies that MFS believes
possess better than average prospects for long-term growth and attractive
valuations. MFS may also invest up to 20% of the net assets of the Series in
foreign securities (including emerging markets).

Stock Selection

A committee of investment research analysts selects portfolio securities for
the Research Managers Series. This committee includes investment analysts
employed by MFS and MFS investment advisory affiliates. The committee first
allocates assets among various industries. Individual analysts are then
responsible for selecting what they view as the securities best suited to meet
the investment objective of the Series from within their assigned industry
responsibility. Analysts focus on companies that they believe have favorable
prospects for long-term growth, attractive valuations based on current and
expected earnings or cash flow, dominant or growing market share and superior
management. The Series may invest in companies of any size and its investments
may include securities traded on securities exchanges or in the over-the-
counter markets.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Foreign Securities

In addition to the risks associated with securities generally, foreign
securities present additional risks.

B-65
<PAGE>

Currency Risk. As many investments in foreign countries are denominated in
foreign currencies, changes in the value of those countries' currencies
relative to the U.S. dollar may affect the value of those investments. These
changes may occur in response to events unrelated to the value of the security
in the issuer's home country. MFS may use certain techniques, such as FORWARD
CONTRACTS, to manage these risks. However, MFS cannot assure that these
techniques will be effective.

Emerging Markets

Research Managers may invest in emerging markets, which are generally located
in the Asia-Pacific Region, Eastern Europe, Latin and South America and Africa.
In addition to the risks of foreign securities described above (which are
potentially greater for emerging markets securities than for other foreign
securities), emerging markets securities may be subject to other risks,
including increased risks of reduced liquidity, high inflation rates, political
uncertainty, high administrative and regulatory costs, repatriation of income
and less advantageous investment terms relative to foreign nationals.

Forward Contracts

The Series may attempt to avoid the risk of an unfavorable shift in currency
rates by entering into forward contracts. In so doing, the Series will also
give up the opportunity for gain from a favorable shift in currency rates.

PORTFOLIO MANAGEMENT

As of December 31, 1999, MFS managed approximately $136.7 billion in assets on
behalf of over 4.2 million investors worldwide. MFS is located at 500 Boylston
Street, Boston, Massachusetts 02116.

The Research Managers Series is currently managed by a committee of various
equity research analysts employed by MFS and its affiliates.

During the period ended December 31, 1999, the Research Managers Series paid
0.75% of its average daily net assets in investment advisory fees and its total
operating expenses were 0.90% of such assets.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

B-66
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

Westpeak may invest the assets of Growth and Income using both the growth or
value style of investing. Westpeak sometimes invests more of Growth and
Income's assets in value stocks and sometimes invests more heavily in growth
stocks. Growth and Income invests primarily in stocks of large capitalization
U.S. companies, such as those included in the S&P 500 Index, but it may also
invest such assets in securities of other large capitalization companies, as
well as mid capitalization companies, such as those included in the Russell
1000 Index. Westpeak emphasizes individual stock selection rather than
targeting particular industries or sectors which it believes may outperform
other sectors.

Stock Selection

Westpeak uses the following procedure to select stocks for Growth and Income:

. Westpeak collects extensive amounts of information on a large universe
of companies.

. Westpeak then develops a profile of characteristics that Westpeak
believes Growth and Income's portfolio should possess to best achieve
the investment objective of the Series. Westpeak considers many factors
when developing this profile, including historic earnings and other
fundamentals, market expectations for corporate earnings and overall
growth prospects. Westpeak regularly revises the profile in response to
changing market conditions.

. Westpeak then ranks each of the companies in a variety of categories
based on the information it has collected about those companies.

. Westpeak then uses fundamental research, quantitative analysis and
judgment to select stocks that, when assembled in a single portfolio,
will most closely fit the profile Westpeak has developed given existing
market conditions.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Investment Style Risk. Growth and Income may not perform as well as a fund
which invests in only value or only growth stocks.

Market Capitalization. The stocks of large capitalization companies do not
always have as much growth potential as smaller and mid capitalization stocks.

PORTFOLIO MANAGEMENT

As of December 31, 1999, Westpeak managed approximately $10 billion in assets.
Westpeak manages several other mutual funds as well as equity portfolios for
corporate and public retirement plans, insurance and trust companies, and other
large institutional investors. Westpeak is located at 1011 Walnut Street,
Boulder, Colorado 80302.

Gerald H. Scriver is Westpeak's President, Chief Executive Officer and Chief
Investment Officer, and Philip J. Cooper, CFA, is its Executive Vice President,
Director of Portfolio Management. Mr. Scriver and Mr. Cooper have both served
as the portfolio managers of Growth and Income since its inception in 1993 and
both have been with Westpeak since it was established in 1991.

During the year ended December 31, 1999, Growth and Income paid 0.68% of its
average net assets in investment advisory fees and its total operating expenses
were 0.74% of such assets.

B-67
<PAGE>

WESTPEAK STOCK INDEX SERIES

PRINCIPAL INVESTMENT STRATEGIES

Westpeak attempts to replicate the composite price and yield performance of the
S&P 500 Index, which is dominated by large capitalization stocks.

Westpeak will ordinarily invest Stock Index's assets in all of the 500 stocks
included in the S&P 500 Index. Each month, Westpeak adjusts the proportions of
stocks included in Stock Index to replicate the proportions of stocks included
in the S&P 500 Index.

Stock Selection

Westpeak collects data each day on the proportions of the 500 stocks included
in the S&P 500. Each month, Westpeak purchases and sells stocks as necessary to
replicate the proportions of stocks included in the S&P 500 Index.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Investment Style Risk. Stock Index may not perform as well as a fund which is
more actively managed and does not seek to replicate the performance of the S&P
500 Index. The stocks included in the S&P 500 Index may not perform as well as
other stocks or the stock market in general.

Market Capitalization. The stocks of large capitalization companies do not
always have as much growth potential as smaller and mid capitalization stocks.

PORTFOLIO MANAGEMENT

Gerald H. Scriver is Westpeak's President, Chief Executive Officer and Chief
Investment Officer, and Philip J. Cooper, CFA, is its Executive Vice President,
Director of Portfolio Management. Mr. Scriver and Mr. Cooper have both served
as the portfolio managers of Stock Index since 1993 and both have been with
Westpeak since it was established in 1991.

During the year ended December 31, 1999, Stock Index paid 0.25% of its average
net assets in investment advisory fees and its total operating expenses were
0.35% of such assets.

B-68
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

PRINCIPAL INVESTMENT STRATEGIES

MSAM invests International Equity's assets in a diversified portfolio of equity
securities of foreign issuers domiciled in EAFE countries. MSAM may also invest
up to 5% of the Series' total assets in non-EAFE countries, including emerging
markets. MSAM seeks to achieve superior long-term returns by creating a
diversified portfolio of stocks that MSAM believes are undervalued. To achieve
this goal, MSAM implements a combination of strategic geographic asset
allocation and fundamental, value-oriented stock selection implemented by
regional experts around the globe.

Stock Selection

MSAM evaluates potential investments for International Equity in several steps.

The New York-based portfolio management team decides upon the appropriate
allocation of International Equity's assets among Europe, Japan and developed
Asia (including Australia/New Zealand). This regional allocation is based on a
variety of factors, including relative valuations, earnings expectations,
macroeconomic factors and input from the regional stock selection teams and
from MSAM's Asset Allocation Group, which is made up of several of MSAM's most
senior investment officers.

Once the allocations to Europe, Asia and Japan have been determined, overseas
investment teams in London (for European stocks), Tokyo (for Japanese stocks)
and Singapore (for Asian stocks) decide which stocks International Equity
should purchase in their respective geographic regions. These three regional
portfolio management teams look for stocks that they believe to be undervalued
by the market. The regional specialists analyze each company's finances,
products and management, typically meeting with a company's management before
its stock is purchased.

PRINCIPAL INVESTMENT RISKS

Equity Securities

Foreign stocks in general, or stocks of companies in a particular country or
region, may not perform as well as U.S. stocks or the world stock markets in
general.

Foreign Securities

In addition to the risks associated with equity securities generally, foreign
securities present additional risks.

Regulation and Access to Information. Changes in foreign countries' laws may
harm the performance and liquidity of the Series' investments in those
countries.

Additionally, many countries have less stringent financial reporting
requirements than the United States, so it may be difficult to obtain
information to evaluate the business potential of foreign issuers.

B-69
<PAGE>

Currency Risk. As many investments in foreign countries are denominated in
foreign currencies, changes in the value of those countries' currencies
relative to the U.S. dollar may affect the value of those investments. These
changes may occur in response to events unrelated to the value of the security
in the issuer's home country. MSAM may use certain techniques, such as FORWARD
CONTRACTS or FUTURES CONTRACTS, to manage these risks. However, MSAM cannot
assure that these techniques will be effective.

Emerging Markets

International Equity may invest in emerging markets, which are generally
located in the Asia-Pacific Region, Eastern Europe, Latin and South America and
Africa. In addition to the risks of foreign securities described above (which
are potentially greater for emerging markets securities than for other foreign
securities), emerging markets securities may be subject to other risks,
including increased risks of reduced liquidity, high inflation rates, political
uncertainty, high administrative and regulatory costs, repatriation of income
and less advantageous investment terms relative to foreign nationals.

Forward Contracts and Futures

The Series may attempt to avoid the risk of an unfavorable shift in currency
rates by entering into forward contracts or buying or selling futures contracts
or options on futures contracts. In so doing, the Series will also give up the
opportunity for gain from a favorable shift in currency rates. The Series may
also purchase futures contracts (or options on futures contracts) to maintain
exposure to the broad equity markets.

Securities Futures Contracts. If the price of a futures contract changes more
than the price of the security or index on which the contract is based,
International Equity could make or lose more money than if it had invested
directly in the underlying security or index. This added volatility increases
the risk of these investments. In addition, investors may be unwilling to buy
or sell futures contracts under some market conditions. If this happens,
International Equity might not be able to close out futures transactions
without incurring substantial losses.

PORTFOLIO MANAGEMENT

As of December 31, 1999, MSAM, together with its affiliated institutional asset
management companies, managed approximately $184.9 billion in assets. MSAM's
address is 1221 Avenue of the Americas, New York, New York 10020.

Francine J. Bovich, a Managing Director of Morgan Stanley & Co. Incorporated
and MSAM, joined MSAM in 1993. She is primarily responsible for managing
International Equity's portfolio. Prior to joining MSAM, Ms. Bovich was a
Principal and Executive Vice President of Westwood Management Corp., a
registered investment adviser.

During the year ended December 31, 1999, International Equity paid 0.90% of its
average net assets in investment advisory fees and its total operating expenses
were 1.30% of such assets.

A FORWARD CONTRACT is an agreement to buy or sell securities or currencies on a
specified future date at a specific price.

A DERIVATIVE is a financial instrument whose value is based on (derived from)
changes in the value of something else, such as a currency, an interest rate or
a security.

B-70
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

All Series except Capital Growth

NEIM was organized in 1994 by New England Financial to serve as the investment
adviser of the Fund. NEIM is located at 501 Boylston Street, Boston,
Massachusetts 02116. Each Series pays NEIM an investment advisory fee. NEIM has
contracted with subadvisers to make the day-to-day investment decisions for
these Series and NEIM pays each subadviser's fees. NEIM is responsible for
overseeing these subadvisers and for making recommendations to the Board of
Trustees of the Fund relating to hiring and replacing subadvisers. NEIM also
provides a full range of administrative and accounting services to these
Series.

Capital Growth

CGM makes the day-to-day investment decisions for Capital Growth. CGM receives
an investment advisory fee from the Fund for its services to Capital Growth.
CGM has subcontracted with and pays NEIM for providing administrative and
accounting services to Capital Growth.

ADVISER/SUBADVISER RELATIONSHIP

The Fund has received an exemptive order from the Securities and Exchange
Commission that permits NEIM to enter into new subadvisory agreements with
either a current or a new subadviser that is not an affiliate of the Fund or
NEIM, without obtaining shareholder approval. The Fund's Board of Trustees must
approve any new subadvisory agreements under this order, and the Fund must
comply with certain other conditions.

The exemptive order also permits the Fund to continue to employ an existing
subadviser without shareholder approval after events that would otherwise cause
an automatic termination of a subadvisory agreement (and the need for a
shareholder vote). This continuation must be approved by the Board of Trustees.
The Fund will notify shareholders of any subadviser changes and any other event
of which notification is required under the order.

PURCHASE AND REDEMPTION OF SHARES

The Separate Accounts may purchase or redeem shares of a Series on each day
that the New York Stock Exchange (the "NYSE") is open for business. The Fund
sells and redeems shares of each Series at the net asset value for that Series
calculated at the close of regular trading on the NYSE, ordinarily 4:00 p.m.
Eastern time each day. These transactions are made on the same day that the
purchase order or redemption request is received by the Fund from the Separate
Accounts. No transactions occur on those days that the NYSE is closed for
trading.

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. The Fund may also postpone payment when trading on the NYSE is
restricted or during an emergency in which disposing of securities or fairly
determining the value of net assets is impracticable. The Fund may also suspend
redemption rights when the SEC permits such suspension for the protection of
investors.

SHARE VALUATION AND PRICING

Net Asset Value

Each Series determines the net asset value of its shares as of the close of
regular trading on each day that the NYSE is open. The net asset value per
share for each Series is calculated by dividing the Series' total net assets by
its number of outstanding shares.

Because foreign exchanges are not always closed at the same time that the NYSE
is closed, the price of securities primarily traded on foreign exchanges may
increase or decrease when the

B-71
<PAGE>

NYSE is closed. Therefore, the net asset value of Series that hold these
securities may change on days that Separate Accounts will not be able to
purchase or redeem Fund shares.

Securities Valuation

The entire Money Market 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 normally
are valued at market value. On the rare occasions when no current market value
is available for a portfolio security, the Fund's Board of Trustees is
responsible for making a good faith determination of fair value, although the
Board has delegated responsibility for day-to-day fair value calculations to
CGM and the subadvisers of the Series.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Money Market

Money Market declares its net investment income daily and pays these amounts
monthly as a dividend. Money Market does not expect to realize any long-term
capital gains, but if it does, these gains will be distributed once a year.

Other Series

Currently, each Series other than Money Market annually pays as dividends
substantially all net investment income (including any short-term capital
gains). These Series also annually distribute all net realized capital gains,
if any, after offsetting any capital loss carryovers. Each Series, other than
Money Market, may pay dividends from net investment income more or less often
if the Fund's Board of Trustees deems it appropriate and if such change would
not cause such Series to fail to qualify as regulated investment company under
the Internal Revenue Code.

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

Dividends and distributions of each Series are automatically reinvested in
additional shares of that Series.

TAXES

Each Series is a separate entity for federal income tax purposes and intends to
qualify as a regulated investment company under the Internal Revenue Code. 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. Although each Series intends to operate so that it will have no federal
income tax liability, if any such liability is incurred, the investment
performance of such Series will be adversely affected. In addition, Series
investing in foreign securities and currencies may be subject to foreign taxes.
These taxes could reduce the investment performance of such Series.

In order for contract holders to receive the favorable tax treatment that is
generally available to holders of variable annuity and variable life contracts,
the separate accounts underlying such contracts, as well as the Series in which
such accounts invest, must meet certain diversification requirements. Each
Series intends to comply with these requirements. If a Series does not meet
such requirements, income allocable to the variable annuity and variable life
contracts, including accumulated investment earnings, would be taxable
immediately to the holders of such contracts. For a description of the tax
consequences for variable annuity and variable life contract owners, see the
prospectus for those contracts.

B-72
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand each Series'
financial performance for the past 5 years (or the life of the Series, for
these Series that have not been in existence for 5 years). Certain information
reflects financial results for a single share of the relevant Series. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Series (assuming reinvestment of all dividends
and distributions). The information for the years ended December 31, 1997
through 1999 has been audited by Deloitte & Touche, LLP, whose report for 1999,
along with the Fund's financial statements, are included in the annual report
which is available upon request. Prior to 1997, PriceWaterhouseCoopers L.L.P.
acted as the Fund's independent accountants and provided reports which
accompanied the financial statements for those periods.

BACK BAY ADVISORS MONEY MARKET SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1996 1997 1998 1999
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................... $100.00 $ 100.00 $ 100.00 $ 100.00 $100.00
------- -------- -------- -------- -------
Income from Investment
Operations
Net Investment Income........... 5.50 4.99 5.08 5.13
------- -------- -------- -------- -------
Total from Investment
Operations................. 5.50 4.99 5.08 5.13
------- -------- -------- -------- -------
Less Distributions
Distributions from Net
Investment Income.............. (5.50) (4.99) (5.08) (5.13)
------- -------- -------- -------- -------
Total Distributions......... (5.50) (4.99) (5.08) (5.13)
------- -------- -------- -------- -------
Net Asset Value, End of Year.... $100.00 $ 100.00 $ 100.00 $ 100.00 $100.00
======= ======== ======== ======== =======
Total Return (%)................ 5.6 5.1 5.3 5.3
Ratio of Operating Expenses to
Average Net Assets (%)(a)...... 0.50 0.50 0.45 0.45
Ratio of Net Investment Income
to Average Net Assets (%)...... 5.50 4.99 5.21 5.15
Net Assets, End of Year (000)... $90,148 $116,999 $111,009 $203,597
The Ratio of Operating Expenses
to Average New Assets without
giving effect to the voluntary
expense limitations would have
been (%)....................... 0.51 0.50 -- --
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to bear the
Series' operating expenses (other than advisory fees; "operating expenses"
does not include brokerage costs, interest, taxes, or extraordinary
expenses) in excess on an annual basis of 0.15% of the Series' average
daily net assets.

B-73
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 95.53 $ 108.67 $ 105.63 $ 108.52
-------- -------- -------- -------- ---
Income from Investment Operations
Net Investment Income............. 7.34 7.72 7.43 6.76
Net Gains or (Losses) on
Investments (both realized and
unrealized)...................... 12.85 (2.70) 4.05 3.00
-------- -------- -------- -------- ---
Total from Investment
Operations................... 20.19 5.02 11.48 9.76
-------- -------- -------- -------- ---
Less Distributions
Distributions from Net Investment
Income........................... (7.05) (7.74) (7.51) (6.64)
Distributions from Net Realized
Capital Gains.................... 0.00 (0.32) (1.08) (1.75)
-------- -------- -------- -------- ---
Total Distributions........... (7.05) (8.06) (8.59) (8.39)
-------- -------- -------- -------- ---
Net Asset Value, End of Year...... $ 108.67 $ 105.63 $ 108.52 $ 109.89
======== ======== ======== ======== ===
Total Return (%).................. 21.2 4.6 10.9 9.0
Ratio of Operating Expenses to
Average Net Assets (%)........... 0.55 0.52 0.52 0.48
Ratio of Net Investment Income to
Average Net Assets (%)........... 7.22 7.22 6.97 6.66
Portfolio Turnover Rate (%)....... 73 98 40 82
Net Assets, End of Year (000)..... $162,712 $180,359 $202,888 $267,791
</TABLE>

B-74
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year..... $ 9.74 $ 10.85 $ 11.62 $ 12.01
------ ------- ------- ------- ---
Income from Investment Operations
Net Investment Income.................. 0.58 0.51 0.75 0.80
Net Gains or (Losses) on Investments
(both realized and unrealized)........ 1.30 1.05 0.54 (0.56)
------ ------- ------- ------- ---
Total from Investment Operations... 1.88 1.56 1.29 0.24
------ ------- ------- ------- ---
Less Distributions
Distributions from Net Investment
Income................................ (0.55) (0.60) (0.76) (0.79)
Distributions from Net Realized Capital
Gains................................. (0.22) (0.19) (0.14) (0.02)
Distributions in excess of Net Realized
Capital Gains......................... 0.00 0.00 0.00 (0.01)
------ ------- ------- ------- ---
Total Distributions................ (0.77) (0.79) (0.90) (0.82)
------ ------- ------- ------- ---
Net Asset Value, End of Year........... $10.85 $ 11.62 $ 12.01 $ 11.43
====== ======= ======= ======= ===
Total Return (%)....................... 19.4 14.4 11.1 2.0
Ratio of Operating Expenses to Average
Net Assets (%)(a)..................... 0.85 0.85 0.85 0.85
Ratio of Net Investment Income to
Average Net Assets (%)................ 8.39 7.79 7.32 7.20
Portfolio Turnover Rate (%)............ 202 176 258 283
Net Assets, End of Year (000).......... $9,484 $35,808 $71,202 $95,450
The Ratio of Operating Expenses to
Average Net Assets without giving
effect to the voluntary expense
limitation would have been (%)........ 2.44 1.19 0.87 --
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to reduce its
fees or to bear the operating expenses (does not include brokerage costs,
interest, taxes, or extraordinary expenses) of the Series in excess of an
annual expense limit of 0.85% of the Series' average daily net assets,
subject to the obligation of the Series to repay NEIM such expenses in
future years, if any, when the Series' total operating expenses fall below
this stated expense limit; such deferred expenses may be charged to the
Series in a subsequent year to the extent the charge does not cause the
total operating 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 NEIM more than two years after the end of the fiscal
year in which such expense was incurred.

B-75
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.... $ 9.96 $ 11.04 $ 10.83 $ 11.14
------ ------- ------- ------- -----
Income from Investment Operations
Net Investment Income................. 0.33 0.58 0.53 0.47
Net Gains or (Losses) on Investments
(both realized and unrealized)....... 1.16 (0.21) 0.40 0.37
------ ------- ------- ------- -----
Total from Investment Operations.. 1.49 0.37 0.93 0.84
------ ------- ------- ------- -----
Less Distributions
Distributions from Net Investment
Income............................... (0.33) (0.56) (0.53) (0.45)
Distributions from Net Realized
Capital Gains........................ (0.08) (0.02) (0.05) (0.06)
Distributions in Excess of Net
Realized Capital Gains............... 0.00 0.00 (0.04) 0.00
------ ------- ------- ------- -----
Total Distributions............... (0.41) (0.58) (0.62) (0.51)
------ ------- ------- ------- -----
Net Asset Value, End of Year.......... $11.04 $ 10.83 $ 11.14 $ 11.47
====== ======= ======= ======= =====
Total Return (%)...................... 15.0 3.3 8.6 7.5
Ratio of Operating Expenses to Average
Net Assets (%)(a).................... 0.70 0.70 0.70 0.70
Ratio of Net Investment Income to
Average Net Assets (%)............... 5.62 6.13 6.42 5.70
Portfolio Turnover Rate (%)........... 415 388 572 496
Net Assets, End of Year (000)......... $7,542 $13,211 $22,143 $45,807
The Ratio of Operating Expenses to
Average Net Assets without giving
effect to the voluntary expense
limitation would have been (%)....... 2.90 1.37 0.98 0.77
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to reduce its
fees or to bear the operating expenses (does not include brokerage costs,
interest, taxes, or extraordinary expenses) of the Series in excess of an
annual expense limit of 0.70% of the Series' average daily net assets,
subject to the obligation of the Series to repay NEIM such expenses in
future years, if any, when the Series' total operating expenses fall below
this stated expense limit; such deferred expenses may be charged to the
Series in a subsequent year to the extent the charge does not cause the
total operating 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 NEIM more than two years after the end of the fiscal
year in which such expense was incurred.

B-76
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year.......................... $ 130.30 $ 163.52 $ 170.37 $ 189.85
-------- -------- -------- -------- -------
Income from Investment
Operations
Net Investment Income.......... 6.34 6.43 6.38 6.56
Net Gains or (Losses) on
Investments (both realized and
unrealized)................... 34.33 18.21 38.47 30.50
-------- -------- -------- -------- -------
Total from Investment
Operations................ 40.67 24.64 44.85 37.06
-------- -------- -------- -------- -------
Less Distributions
Distributions from Net
Investment Income............. (6.34) (6.34) (6.42) (6.51)
Distributions in Excess of Net
Investment Income............. (0.23) 0.00 0.00 0.00
Distributions from Net Realized
Capital Gains................. (0.88) (11.45) (18.95) (12.64)
-------- -------- -------- -------- -------
Total Distributions........ (7.45) (17.79) (25.37) (19.15)
-------- -------- -------- -------- -------
Net Asset Value, End of Year... $ 163.52 $ 170.37 $ 189.85 $ 207.76
======== ======== ======== ======== =======
Total Return (%)............... 31.3 15.0 26.6 19.7
Ratio of Operating Expenses to
Average Net Assets (%)........ 0.64 0.62 0.61 0.58
Ratio of Net Investment Income
to Average Net Assets (%)..... 4.06 3.64 3.20 3.15
Portfolio Turnover Rate (%).... 51 72 65 25
Net Assets, End of Year (000).. $147,536 $160,888 $188,783 $213,639
</TABLE>

B-77
<PAGE>

BALANCED SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................ $ 9.94 $ 11.95 $ 13.55 $ 14.86
------- ------- -------- -------- -------
Income from Investment Operations
Net Investment Income............ 0.26 0.27 0.28 0.38
Net Gains or (Losses) on
Investments (both realized and
unrealized)..................... 2.20 1.73 1.90 0.97
------- ------- -------- -------- -------
Total from Investment
Operations.................. 2.46 2.00 2.18 1.35
------- ------- -------- -------- -------
Less Distributions
Distributions from Net Investment
Income.......................... (0.26) (0.27) (0.27) (0.38)
Distributions in Excess of Net
Realized Capital Gains.......... (0.19) (0.13) (0.60) (0.32)
------- ------- -------- -------- -------
Total Distributions.......... (0.45) (0.40) (0.87) (0.70)
------- ------- -------- -------- -------
Net Asset Value, End of Year..... $ 11.95 $ 13.55 $ 14.86 $ 15.51
======= ======= ======== ======== =======
Total Return (%)................. 24.8 16.9 16.2 9.1
Ratio of Operating Expenses to
Average Net Assets (%)(a)....... 0.85 0.85 0.85 0.82
Ratio of Net Investment Income to
Average Net Assets (%).......... 4.03 3.08 2.79 2.72
Portfolio Turnover Rate (%)...... 72 59 60 72
Net Assets, End of Year (000).... $18,823 $58,525 $137,443 $190,577
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)........................ 1.85 0.99 0.86 0.82
</TABLE>
- --------

(a) On May 1, 2000, Wellington succeeded Loomis Sayles as subadviser to the
Series.

(b) During the fiscal years presented, NEIM voluntarily agreed to reduce its
fees or to bear the operating expenses (does not include brokerage costs,
interest, taxes, or extraordinary expenses) of the Series in excess of an
annual expense limit of 0.85% of the Series' average daily net assets,
subject to the obligation of the Series to repay NEIM such expenses in
future years, if any, when the Series' total operating expenses fall below
this stated expense limit; such deferred expenses may be charged to the
Series in a subsequent year to the extent the charge does not cause the
total operating 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 NEIM more than two years after the end of the fiscal
year in which such expense was incurred.

B-78
<PAGE>

ALGER EQUITY GROWTH SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1996 1997 1998 1999
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................... $ 9.56 $ 13.80 $ 15.58 $ 17.62
------- -------- -------- -------- -------
Income from Investment
Operations
Net Investment Income........... 0.01 0.04 0.02 0.04
Net Gains or (Losses) on
Investments (both realized and
unrealized).................... 4.65 1.78 3.92 8.37
------- -------- -------- -------- -------
Total from Investment
Operations................. 4.66 1.82 3.94 8.41
------- -------- -------- -------- -------
Less Distributions
Distributions from Net
Investment Income.............. (0.01) (0.04) (0.02) (0.04)
Distributions from Net Realized
Capital Gains.................. (0.41) 0.00 (1.88) (0.88)
------- -------- -------- -------- -------
Total Distributions......... (0.42) (0.04) (1.90) (0.92)
------- -------- -------- -------- -------
Net Asset Value, End of Year.... $ 13.80 $ 15.58 $ 17.62 $ 25.11
======= ======== ======== ======== =======
Total Return (%)................ 48.8 13.2 25.6 47.8
Ratio of Operating Expenses to
Average Net Assets (%)(a)...... 0.85 0.90 0.87 0.83
Ratio of Net Investment Income
to Average Net Assets (%)...... 0.14 0.24 0.12 0.19
Portfolio Turnover Rate (%)..... 107 78 137 119
Net Assets, End of Year (000)... $46,386 $120,456 $205,318 $410,726
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)....................... 2.45 0.90 -- --
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to reduce its
fees or to bear the operating expenses (does not include brokerage costs,
interest, taxes, or extraordinary expenses) of the Series in excess of an
annual expense limit of 0.95% (0.85% prior to January 1, 1996) of the
Series' average daily net assets, subject to the obligation of the Series
to repay NEIM such expenses in future years, if any, when the Series'
operating expenses fall below this stated expense limit; such deferred
expenses may be charged to the Series in a subsequent year to the extent
the charge does not cause the total operating 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 NEIM more than two years
after the end of the fiscal year in which such expense was incurred.

B-79
<PAGE>

CAPITAL GROWTH SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1996 1997 1998 1999
-------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year....... $ 312.30 $ 374.62 $ 427.08 $ 399.60
-------- ---------- ---------- ---------- -------
Income from Investment
Operations
Net Investment Income.... 3.47 3.08 2.52 5.29
Net Gains or (Losses) on
Investments (both
realized and
unrealized)............. 114.91 74.80 95.67 130.40
-------- ---------- ---------- ---------- -------
Total from Investment
Operations.......... 118.38 77.88 98.19 135.69
-------- ---------- ---------- ---------- -------
Less Distributions
Distributions from Net
Investment Income....... (3.48) (3.08) (2.52) (5.31)
Distributions From Net
Realized Capital Gains.. (52.58) (22.34) (123.15) (61.73)
Distributions in excess
of Net Realized Capital
Gains................... 0.00 0.00 0.00 (0.22)
-------- ---------- ---------- ---------- -------
Total Distributions.. (56.06) (25.42) (125.67) (67.26)
-------- ---------- ---------- ---------- -------
Net Asset Value, End of
Year.................... $ 374.62 $ 427.08 $ 399.60 $ 468.03
======== ========== ========== ========== =======
Total Return (%)......... 38.0 21.1 23.5 34.1
Ratio of Operating
Expenses to Average Net
Assets (%).............. 0.71 0.69 0.67 0.66
Ratio of Net Investment
Income to Average Net
Assets (%).............. 0.92 0.79 0.52 1.18
Portfolio Turnover Rate
(%)..................... 242 207 214 204
Net Assets, End of Year
(000)................... $921,444 $1,142,660 $1,425,719 $1,895,748
</TABLE>

B-80
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1995 1996 1997 1998 1999
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................... $ 9.62 $ 13.10 $ 16.09 $ 20.80
------- -------- -------- -------- -------
Income from Investment
Operations
Net Investment Income........... 0.10 0.13 0.18 0.16
Net Gains or (Losses) on
Investments (both realized and
unrealized).................... 3.68 3.26 5.20 2.84
------- -------- -------- -------- -------
Total from Investment
Operations................. 3.78 3.39 5.38 3.00
------- -------- -------- -------- -------
Less Distributions
Distributions from Net
Investment Income.............. (0.10) (0.13) (0.14) (0.16)
Distributions from Net Realized
Capital Gains.................. (0.20) (0.27) (0.53) (0.49)
------- -------- -------- -------- -------
Total Distributions......... (0.30) (0.40) (0.67) (0.65)
------- -------- -------- -------- -------
Net Asset Value, End of Year.... $ 13.10 $ 16.09 $ 20.80 $ 23.15
======= ======== ======== ======== =======
Total Return (%)................ 39.3 25.8 33.5 14.4
Ratio of Operating Expenses to
Average Net Assets (%)(a)...... 0.90 0.90 0.90 0.83
Ratio of Net Investment Income
to Average Net Assets (%)...... 1.39 1.25 0.94 0.82
Portfolio Turnover Rate (%)..... 20 18 17 25
Net Assets, End of Year (000)... $35,045 $108,189 $280,448 $440,351
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)....................... 1.51 0.96 0.90 --
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to reduce its
fees or to bear the operating expenses (does not include brokerage costs,
interest, taxes, or other extraordinary expenses) of the Series in excess
of an annual expense limit of 0.90% of the Series' average daily net
assets, subject to the obligation of the Series to repay NEIM such expenses
in future years, if any, when the Series' total operating expenses fall
below this stated expense limit; such deferred expenses may be charged to
the Series in a subsequent year to the extent the charge does not cause the
total operating 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 NEIM more than two years after the end of the fiscal
year in which such expense was incurred.

B-81
<PAGE>

HARRIS/OAKMARK MIDCAP VALUE SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................ $112.77 $142.44 $ 157.88 $ 170.59
------- ------- -------- -------- -------
Income from Investment Operations
Net Investment Income............ 0.42 0.11 0.00 1.09
Net Gains or (Losses) on
Investments (both realized and
unrealized)..................... 33.80 24.88 27.12 (11.41)
------- ------- -------- -------- -------
Total from Investment
Operations.................. 34.22 24.99 27.12 (10.32)
------- ------- -------- -------- -------
Less Distributions
Distributions from Net Investment
Income.......................... (0.40) (0.13) 0.00 (1.09)
Distributions from Net Realized
Capital Gains................... (4.15) (9.42) (14.41) (36.08)
Distributions in excess of Net
Realized Capital Gains.......... 0.00 0.00 0.00 (0.25)
------- ------- -------- -------- -------
Total Distributions.......... (4.55) (9.55) (14.41) (37.42)
------- ------- -------- -------- -------
Net Asset Value, End of Year..... $142.44 $157.88 $ 170.59 $ 122.85
======= ======= ======== ======== =======
Total Return (%)................. 30.4 17.6 17.4 (5.5)
Ratio of Operating Expenses to
Average Net Assets (%)(b)....... 0.85 0.85 0.85 0.88
Ratio of Net Investment Income to
Average Net Assets (%).......... 0.37 0.08 (0.16) 0.66
Portfolio Turnover Rate (%)...... 58 65 49 171
Net Assets, End of Year (000).... $48,832 $82,667 $114,617 $112,997
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)........................ 1.06 0.92 0.86 0.90
</TABLE>
- --------

(a) On May 1, 2000, Harris succeeded GSAM as subadviser to the Series. On May
1, 1998, GSAM succeeded Loomis, Sayles & Company, L.P. as subadviser to the
Series.
(b) Prior to May 1, 1998, NEIM voluntarily agreed to bear the operating
expenses (other than the advisory fees; "operating expenses" does not
include brokerage costs, interest, taxes or extraordinary expenses) of the
Series in excess on an annual basis of 0.15% of the Series' average daily
net assets. Commencing May 1, 1998, NEIM voluntarily agreed to reduce its
fees or to bear operating expenses of the Series in excess of an annual
expense limit of 0.90% of the Series' average daily net assets, subject to
the obligation of the Series to repay NEIM such expenses in future years,
if any, when the Series' total operating 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
operating 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 NEIM more than two years after the end of the fiscal year
in which such expense was incurred.

B-82
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................ $ 96.61 $118.80 $ 144.29 $ 158.92
------- ------- -------- -------- -------
Income from Investment Operations
Net Investment Income............ 0.85 1.05 1.22 1.24
Net Gains or (Losses) on
Investments (both realized and
unrealized)..................... 26.93 35.03 34.11 (4.01)
------- ------- -------- -------- -------
Total from Investment
Operations.................. 27.78 36.08 35.33 (2.77)
------- ------- -------- -------- -------
Less Distributions
Distributions from Net Investment
Income.......................... (0.78) (1.03) (1.21) (1.24)
Distributions from Net Realized
Capital Gains................... (4.81) (9.56) (19.49) (1.32)
Distributions in excess of Net
Realized Capital Gains.......... 0.00 0.00 0.00 (0.07)
------- ------- -------- -------- -------
Total Distributions.......... (5.59) (10.59) (20.70) (2.63)
------- ------- -------- -------- -------
Net Asset Value, End of Year..... $118.80 $144.29 $ 158.92 $ 153.52
======= ======= ======== ======== =======
Total Return (%)................. 28.9 30.7 24.9 (1.7)
Ratio of Operating Expenses to
Average Net Assets (%)(a)....... 1.00 1.00 1.00 1.00
Ratio of Net Investment Income to
Average Net Assets (%).......... 1.26 1.15 0.97 0.88
Portfolio Turnover Rate (%)...... 98 62 87 111
Net Assets, End of Year (000).... $27,741 $89,194 $200,105 $238,589
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)........................ 1.91 1.29 1.14 1.10
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to reduce its
fees or to bear operating expenses of the Series in order to limit the
Series' total operating expenses (does not include brokerage costs,
interest, taxes, or extraordinary expenses) to an annual rate of 1.00% of
the Series' average daily net assets.

B-83
<PAGE>

MFS INVESTORS SERIES

<TABLE>
<CAPTION>
APRIL 30, 1999(A)
TO
DECEMBER 31, 1999
-----------------
<S> <C>
Net Asset Value, Beginning of Period.........................
---
Income from Investment Operations
Net Investment Income........................................
Net Gains or (Losses) on Investments (both realized and
unrealized).................................................
---
Total from Investment Operations.........................
---
Less Distributions
Distributions from Net Investment Income.....................
Distributions from Net Realized Capital Gains................
---
Total Distributions......................................
---
Net Asset Value, End of Period...............................
===
Total Return (%)............................................. (b)
Ratio of Operating Expenses to Average Net Assets (%)(d)..... (c)
Ratio of Net Investment Income to Average Net Assets (%)..... (c)
Portfolio Turnover Rate (%).................................. (c)
Net Assets, End of Period (000)..............................
The Ratio of Operating Expenses to Average Net Assets without
giving effect to the voluntary expense limitation would have
been (%).................................................... (c)
</TABLE>
- --------

(a) Commencement of operations.

(b) Not computed on an annualized basis.

(d) During the period presented, NEIM voluntarily agreed to reduce its fees or
to bear the operating expenses (does not include brokerage costs, interest,
taxes, or extraordinary expenses) of the Series in excess of an annual
expense limit of 0.90% of the Series' average daily net assets, subject to
the obligation of the Series to repay NEIM such expenses in future years,
if any, when the Series' total operating expenses fall below this stated
expense limit; such deferred expenses may be charged to the Series in a
subsequent year to the extent the charge does not cause the total operating
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 NEIM more than three years after the end of the fiscal year in
which such expense was incurred.

B-84
<PAGE>

MFS RESEARCH MANAGERS SERIES

(a) Commencement of operations.

(b) Not computed on an annualized basis.

B-85
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................ $109.03 $141.31 $ 151.77 $ 179.88
------- ------- -------- -------- -------
Income from Investment Operations
Net Investment Income............ 1.77 1.78 1.37 1.30
Net Gains or (Losses) on
Investments (both realized and
unrealized)..................... 37.91 23.69 48.76 42.44
------- ------- -------- -------- -------
Total from Investment
Operations.................. 39.68 25.47 50.13 43.74
------- ------- -------- -------- -------
Less Distributions
Distributions from Net Investment
Income.......................... (1.71) (1.82) (1.35) (1.31)
Distributions from Net Realized
Capital Gains................... (5.69) (13.19) (20.57) (14.07)
------- ------- -------- -------- -------
Total Distributions.......... (7.40) (15.01) (21.92) (15.38)
------- ------- -------- -------- -------
Net Asset Value, End of Year..... $141.31 $151.77 $ 179.98 $ 208.34
======= ======= ======== ======== =======
Total Return (%)................. 36.5 18.1 33.5 24.4
Ratio of Operating Expenses to
Average Net Assets (%)(a)....... 0.85 0.85 0.82 0.78
Ratio of Net Investment Income to
Average Net Assets (%).......... 1.63 1.40 0.91 0.80
Portfolio Turnover Rate (%)...... 92 104 93 100
Net Assets, End of Year (000).... $48,129 $82,330 $152,738 $281,557
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)........................ 1.06 0.91 0.82 0.78
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to bear the
operating expenses of the Series (other than the advisory fees; "operating
expenses" does not include brokerage costs, interest, taxes or
extraordinary expenses) in excess of 0.15% of the Series' average daily net
assets.

B-86
<PAGE>

WESTPEAK STOCK INDEX SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................ $ 75.35 $100.09 $ 119.62 $ 155.76
------- ------- -------- -------- -------
Income from Investment Operations
Net Investment Income............ 1.88 1.91 1.86 1.92
Net Gains or (Losses) on
Investments (both realized and
unrealized)..................... 25.89 20.58 36.95 41.60
------- ------- -------- -------- -------
Total from Investment
Operations.................. 27.77 22.49 38.81 43.52
------- ------- -------- -------- -------
Less Distributions
Distributions from Net Investment
Income.......................... (1.85) (1.93) (1.86) (1.91)
Distributions from Net Realized
Capital Gains................... (1.18) (1.03) (0.67) (1.04)
Distributions in Excess of Net
Realized Capital Gains.......... 0.00 0.00 (0.14) 0.00
------- ------- -------- -------- -------
Total Distributions.......... (3.03) (2.96) (2.67) (2.95)
------- ------- -------- -------- -------
Net Asset Value, End of Year..... $100.09 $119.62 $ 155.76 $ 196.33
======= ======= ======== ======== =======
Total Return (%)................. 36.9 22.5 32.5 27.9
Ratio of Operating Expenses to
Average Net Assets (%)(a)....... 0.40 0.40 0.40 0.37
Ratio of Net Investment Income to
Average Net Assets (%).......... 2.20 1.84 1.41 1.16
Portfolio Turnover Rate (%)...... 5 4 3 3
Net Assets, End of Year (000).... $58,671 $80,764 $126,584 $186,278
The Ratio of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense limitation would have
been (%)........................ 0.54 0.50 0.43 --
</TABLE>
- --------

(a) During the fiscal years presented, NEIM voluntarily agreed to bear the
operating expenses (other than advisory fees; "operating expenses" does not
include brokerage costs, interest, taxes or extraordinary expenses) of the
Series in excess on an annual basis of 0.15% of the Series' average daily
net assets.

B-87
<PAGE>

MORGAN STANLEY INTERNATIONAL EQUITY MAGNUM SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 10.23 $ 10.73 $ 11.29 $ 10.86
------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income............. 0.09 0.06 0.08 0.14
Net Gains or (Losses) on
Investments (both realized and
unrealized)...................... 0.53 0.68 (0.23) 0.66
------- ------- ------- ------- -------
Total from Investment
Operations................... 0.62 0.74 (0.15) 0.80
------- ------- ------- ------- -------
Less Distributions
Distributions from Net Investment
Income........................... (0.09) (0.02) (0.09) (0.12)
Distributions in Excess of Net
Investment Income................ (0.03) 0.00 0.00 (0.03)
Distributions from Net Realized
Capital
Gains............................ 0.00 (0.16) (0.08) (0.11)
Distributions in Excess of Net
Realized Capital Gains........... 0.00 0.00 (0.11) 0.00
------- ------- ------- ------- -------
Total Distributions........... (0.12) (0.18) (0.28) (0.26)
------- ------- ------- ------- -------
Net Asset Value, End of Year...... $ 10.73 $ 11.29 $ 10.86 $ 11.40
======= ======= ======= ======= =======
Total Return (%).................. 6.0 6.9 (1.3) 7.3
Ratio of Operating Expenses to
Average Net Assets (%)(b)........ 1.30 1.30 1.30 1.30
Ratio of Net Investment Income to
Average Net Assets (%)........... 1.29 0.67 0.96 1.07
Portfolio Turnover Rate (%)....... 89 64 115 40
Net Assets, End of Year (000)..... $16,268 $39,392 $53,035 $68,169
The Ratio of Operating Expenses to
Average Net Assets without giving
effect to the voluntary expense
limitation would have been (%)... 3.12 1.66 1.59 1.40
</TABLE>
- --------
(a) On May 1, 1997, MSAM succeeded Draycott Partners, Ltd. as investment
subadviser of the Series.

(b) During the fiscal years presented, NEIM voluntarily agreed to reduce its
fees or to bear the operating expenses (does not include brokerage costs,
interest, taxes or extraordinary expenses) of the Series in excess of an
annual expense limit of 1.30% of the Series' average daily net assets,
subject to the obligation of the Series to repay NEIM such expenses in
future years, if any, when the Series' total operating expenses fall below
this stated expense limit; such deferred expenses may be charged to the
Series in a subsequent year to the extent the charge does not cause the
Series' total operating 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 NEIM more than two years after the end of the
fiscal year in which such expense was incurred.

B-88
<PAGE>

NEW ENGLAND ZENITH FUND
501 BOYLSTON STREET, BOSTON, MASSACHUSETTS 02116
(800) 356-5015

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The Fund's SAI contains more detailed information about the Fund. The SAI is
incorporated by reference into this prospectus, which means that it is a part
of this prospectus for legal purposes.

SHAREHOLDER REPORTS

The Fund's annual and semi-annual reports to shareholders contain additional
information about each Series. The Fund's annual report discusses the market
conditions and investment strategies that significantly affected each Series'
performance during its last fiscal year. The financial statements in the
Fund's most recent annual report to shareholders are incorporated by reference
into this prospectus.

TO OBTAIN COPIES OF THESE MATERIALS:

You may obtain free copies of the SAI or shareholder reports, request other
information about a Series, or make shareholder inquiries by calling toll free
(800) 356-5015 or by writing to New England Securities Corporation, 399
Boylston Street, Boston, Massachusetts 02116.

You may review and copy information about the Fund, including the SAI and
shareholder reports, at the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. You may call (800)-SEC-0330 for information
about the operation of the Public Reference Room. You may also access reports
and other information about the Fund on the Internet at http://www.sec.gov.
You may get copies of this information, upon payment of a duplication fee, by
writing the Public Reference Station of the Securities and Exchange
Commission, Washington, D.C. 20549-6009.

New England Zenith Fund's Investment Company Act file number is 811-3728.

B-89
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NEW ENGLAND ZENITH FUND

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 2000

This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the prospectuses of New England Zenith Fund
dated May 1, 2000, as any prospectus may be supplemented or amended from time to
time (the "Prospectus"), and should only be read, with respect to a Series,
along with the Prospectus for that Series. A copy of the Prospectus may be
obtained from New England Securities Corporation, 399 Boylston Street, Boston,
Massachusetts 02116.
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
General...................................................................... 3
Investment Objectives and Policies........................................... 4
Investment Restrictions...................................................... 14
Investment Practices......................................................... 20
Determination of Net Asset Values............................................ 40
Fund Performance............................................................. 42
Expense Deferrals and Limits................................................. 46
Trustees and Officers........................................................ 47
Advisory Arrangements........................................................ 50
Distribution Agreement....................................................... 57
Other Services............................................................... 58
Portfolio Transactions and Brokerage......................................... 58
Code of Ethics............................................................... 60
Description of the Fund...................................................... 60
Appendix A-1 (Description of Bond Ratings)................................... 64
Appendix A-2 (Description of Commercial Paper Ratings)....................... 66
Appendix B................................................................... 67
</TABLE>
<PAGE>

GENERAL

Defined terms used in this Statement of Additional Information, but not
defined herein, are used as they are defined in the Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and principal investment strategies of each
Series (collectively and individually the "Series") of New England Zenith Fund
(the "Fund") are set forth in Sections II and III of the Prospectus. There can
be no assurance that a Series will achieve its investment 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.

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

International Equity seeks long-term capital appreciation through
investment primarily in international equity securities. The production of any
current income is incidental to this objective. Morgan Stanley Asset Management
("MSAM") is subadviser to International Equity. On December 1, 1998, Morgan
Stanley Asset Management Inc. changed its name to Morgan Stanley Dean Witter
Investment Management Inc. but continues to do business under certain
circumstances (including as subadviser to International Equity) using the name
Morgan Stanley Asset Management.

MSAM seeks to achieve International Equity's investment 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 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 include 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, including
emerging markets. 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
different EAFE countries.

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 uses a combination of strategic geographic asset allocation and
fundamental, value-oriented stock selection. Regional allocation decisions are
based on a variety of factors, including relative valuations, earnings
expectations, macroeconomic factors and input from the regional stock selection
teams and from MSAM's Asset Allocation Group, which is made up of several of
MSAM's most senior investment officers. MASM develops projections that are 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. MSAM's regional specialists analyze each company's finances,
products and management, typically meeting with a company's management before
purchasing that company's stock.

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.

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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.

Alger Equity Growth Series

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

The Series' subadviser, Fred Alger Management, Inc. ("Alger Management"),
seeks to achieve the Series' investment 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 for
temporary or defensive purposes, the Series invests 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 35% of its total assets) may also purchase
money market instruments and repurchase agreements. With respect to 15% of its
net assets, the Series may purchase restricted securities (including Rule 144A
securities), illiquid securities, and enter into short sales "against the box."

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

Although Equity Growth's 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.

Capital Growth Series

Capital Growth 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 include common stocks and securities
convertible into common stocks. Equity securities are volatile investments,
subject to price declines as well as advances, and involve greater risks than
some other investment media.

The selection of common stocks for Capital Growth's 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.

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<PAGE>

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 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 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.

Davis Venture Value Series

Venture Value's investment objective is growth of capital. The Series seeks
to achieve its objective by investing primarily in domestic common stocks that
its subadviser, Davis Selected Advisers, L.P. ("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
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 $5
billion. It may also invest in issuers 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
33 1/3% of the Series' net assets.

Harris/Oakmark Midcap Value Series

Midcap Value seeks to provide investors with long-term capital
appreciation. Harris Associates L.P. ("Harris"), Midcap Value's subadviser,
invests Midcap Value's assets primarily in common stocks of U.S. companies,
although it may invest up to 25% of its total assets (valued at the time of
investment) in securities of non-U.S. companies (other than securities
represented by American Depositary Receipts (as defined in "Investment Practices
- - Foreign Equity Depositary Receipts"). Although securities represented by
American Depositary Receipts are not subject to the above referenced 25%
restriction, Harris has no present intention to invest more than 25% of Midcap
Value's total assets in American Depositary Receipts and securities of foreign
issuers.

Harris may invest Midcap Value's assets in debt securities, including high
yield debt (as defined in "Investment Practices - Lower Rated Fixed-income
Securities (High Yield Debt)") and securities that are not rated. There are no
restrictions as to the ratings of debt securities Harris may acquire or the
portion of Midcap Value's assets that Harris may invest in debt securities in a
particular ratings category except that Harris will not invest more than 25% of
Midcap Value's total assets in high yield debt.

Harris may also invest up to 10% of Midcap Value's total assets in the
aggregate in shares other investment companies and up to 5% of its total assets
in any one investment company, as long as no investment represents more than 3%
of the outstanding voting stock of the acquired investment company at the time
of investment.

Harris may engage in lending of portfolio securities (as defined in
"Investment Practices - Lending of Portfolio Securities") with up to 33% of
Midcap Value's total assets and in short sales (as defined in "Investment
Practices - Short Sales `Against the Box'") with up to 20% of its total assets.

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<PAGE>

Harris may invest Midcap Value's assets in illiquid securities (as defined
in "Investment Practices - Illiquid Securities") so long as such securities do
not exceed 15% of its net assets. If through the appreciation of illiquid
securities or the depreciation of liquid securities, Midcap Value is in a
position where more than 15% of the value of its net assets are invested in
illiquid assets, including restricted securities (other than Rule 144A
securities deemed liquid by Harris), Harris is not required to immediately sell
any illiquid securities if to do so would not be in the best interest of the
Midcap Value's shareholders.

Harris may purchase and sell both call options and put options on
securities (as defined in "Investment Practices - Purchasing and Selling Options
on Securities") for Midcap Value. Harris does not expect to purchase a call
option or a put option if the aggregate value of all call and put options held
by Midcap Value would exceed 5% of its assets. Harris will write call options
and put options for Midcap Value only if such options are "covered" (as defined
in Investment Practices - Writing Covered Options")

Harris has the flexibility to respond promptly to changes in market and
economic conditions. In the interest of preserving shareholders' capital, Harris
may employ a temporary defensive investment strategy if it determines such a
strategy to be warranted. Pursuant to such a defensive strategy, Harris may hold
Midcap Value's assets in cash (U.S. dollars, foreign currencies, or
multinational currency units) and/or invest up to 100% of its assets in high
quality debt securities or money market instruments of U.S. or foreign issuers.
It is impossible to predict whether, when or for how long Harris will employ
defensive strategies.

In addition, pending investment of proceeds from new sales of Midcap
Value's shares or to meet ordinary daily cash needs, Harris may temporarily hold
Midcap Value's assets in cash (U.S. dollars, foreign currencies, or
multinational currency units) and may invest any portion of its assets in money
market instruments.

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<PAGE>

Loomis Sayles Small Cap Series

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

Loomis, Sayles & Company, L.P. ("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. Normally the Series will invest 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, which
have better than average growth rates, below-average price/earnings ratios and
strong balance sheets and cash flow. Loomis Sayles seeks to build a core
small-cap portfolio of solid growth stocks, but with an additional 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.

MFS Investors Series

The Investors Series' investment objective is to provide reasonable current
income and long-term growth of capital and income.

Under normal conditions, Massachusetts Financial Services Company ("MFS")
will invest at least 65% of the Series' total assets in equity securities of
companies that are believed to have long-term prospects for growth and income.

Consistent with its investment objective and policies described above, the
Series may also invest up to 20% of its net assets in foreign securities which
are not traded on a U.S. exchange.

MFS Research Managers Series

The Research Managers Series' investment objective is to provide long-term
growth of capital and future income.

The portfolio securities of the Series are selected by a committee of
investment research analysts. This committee includes investment analysts
employed by MFS and its affiliates. The Series' assets are allocated among
industries by the analysts acting together as a group. Individual analysts are
then responsible for selecting what they view as the securities best suited to
meet the Series' investment objective with their assigned industry
responsibility.

The Series policy is to invest a substantial proportion of its assets in
equity securities of companies believed to possess better than average prospects
for long term growth. A small proportion of the assets may be invested in bonds,
short-term obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such securities may also
offer opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on selection on progressive,
well-managed companies. The Series' non-convertible debt investments, if any,
may consist of "investment grade" securities (rated Baa or better by Moody's or
better by S&P or by Fitch), and, with respect to no more than 10% of the Series'
net assets, securities in the lower rated categories (rated Ba or lower by
Moody's or BB or lower by S&P, by Fitch or by Duff & Phelps) or securities which
the adviser believes to be of similar quality to these lower rated securities
(commonly known as "junk bonds"). For a description of bond ratings, see
Appendix A to this SAI.

-7-
<PAGE>

Consistent with this investment objective and policies described above, the
Series may also invest up to 20% of its net assets in foreign securities
(including emerging market securities) which are not traded on a U.S. exchange.

Westpeak Growth and Income Series

As disclosed in the Prospectus, Growth and Income 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). Growth and Income will ordinarily invest substantially all of 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.

Although Growth and Income's 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, Growth and Income, 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 Growth and Income that are not invested in equity securities
will be held in cash or invested as described below under "Investment
Practices--Money Market Instruments."

Westpeak Stock Index Series

As disclosed in the Prospectus, Stock Index is designed to replicate the
performance of the S&P 500 Index.

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.

Stock Index 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 Stock Index's portfolio.
As described in the Prospectus, stocks will be selected in an attempt to mirror
the performance of the S&P 500 Index. From time to time, adjustments may be made
in Stock Index's 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 Stock Index, 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 Stock Index 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.

It is Stock Index's policy to be fully invested in common stocks. However,
Stock Index 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. ("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.) In addition,
the Stock Index may invest cash temporarily in money market instruments and
repurchase agreements, as described below under "Investment Practices -- Money
Market Instruments". Such temporary investments

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<PAGE>

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 Stock Index's investment
objective to provide investment results that correspond to the composite price
and yield performance of the S&P 500 Index. Investors in Stock Index therefore
bear the risk of a general decline in the value of the S&P 500 Index.

The index that Stock Index 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.

The Balanced Series

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

No more than 5% of the fixed-income portfolio will be invested in non-U.S.
dollar denominated securities (other than investment positions hedged back into
the U.S. dollar).

Back Bay Advisors Managed Series

The investment objective of the 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 that Back Bay Advisors deems appropriate for an investor who wishes
to invest in a portfolio containing a diversified mix of assets.

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

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.

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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
Index, 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 portion of Managed Series' investment portfolio consisting of notes and
bonds will be invested in bonds of the types in which the 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, commonly known as "high yield debt" or "junk
bonds," are described under the heading "Investment Practices." 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 Managed Series share
may be less than a shareholder's original cost. There can be no assurance that
the Managed Series' investment objective will be attained.

Salomon Brothers Strategic Bond Opportunities Series

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

Based upon the assessment by Salomon Brothers Asset Management Inc ("SBAM")
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, but deemed to be of comparable quality in the subadviser's judgment,
and domestic and foreign corporate debt and sovereign debt securities rated
below investment grade. The Series may invest in fixed and floating rate loans
("Loans") arranged through private negotiations between a foreign sovereign
entity and one or more financial institutions, in the form of participation in
such Loans and assignments of all or a portion of such loans from third parties.
See "Investment Practices--Loan Participations and Assignments" below.

Depending on market conditions, the Series may invest without limit in high
yield debt, 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 the
subadviser, the yield available from such securities outweighs their additional
risks. Certain of the debt securities in which the Series may invest may be
rated as low as "C" by Moody's or "D" by S&P or, 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 "high yield debt" or "junk bonds." See "Investment Practices--Lower
Rated Fixed-Income Securities" below. See Appendix A for more complete
information on bond ratings.

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 assets in foreign securities, including Brady
Bonds. Brady Bonds are debt obligations created through the exchange of
commercial

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<PAGE>

bank loans for new obligations under a plan introduced by former U.S. Treasury
Secretary Nicholas Brady. See "Investment Practices--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. Such supranational
issued instruments may be denominated in multi-national currency units.

The Series currently intends to invest substantially all of its assets in
fixed-income securities. In order to maintain liquidity, the Series may invest
up to 20% of its assets in high-quality short-term money market instruments,
provided, however, that short-term investment in securities for the forward
settlement of trades is not included in this 20%.

The Series' subadviser 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, enter into interest rate transactions and enter
into currency transactions. Interest rate transactions may take the form of
swaps, structured notes, caps, floors and collars, and currency transactions may
take the form of currency forward contracts, currency futures contracts,
currency swaps and options on currencies or currency futures contracts. See
"Futures and Other Hedging Transactions" under "Investment Risks" below and
"Futures" in the Statement.

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

Although the Series' investment 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 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 Rule 144A securities.

At least 80% of the Series' assets will consist of securities rated AAA,
AA, A, or BBB by S&P or Aaa, Aa, A or Baa by Moody's, or unrated but determined
by Back Bay Advisors, the Series' subadviser, to be of comparable quality to
securities in those rating categories. The Series may not invest more than 10%
of its total net assets in obligations of foreign issuers. The Series will
invest in these securities only when Back Bay Advisors believes the associated
risks are minimal.

Up to 20% of the Series' assets may be invested in securities rated BB or B
by S&P or Ba or B by Moody's at the time of investment. The Series will not
invest in any securities rated below B at the time of investment (or if unrated
securities that Back Bay Advisors determines to be of comparable quality).

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<PAGE>

Securities rated B or lower by S&P or 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 "high yield debt" or "junk bonds." 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. See Appendix A for more complete
information on bond ratings.

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 Bond Income Series' portfolio will usually be
between five and fifteen years.

Although the Series' investment objective is a high level of total return
consistent with protection 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.

Salomon Brothers U.S. Government Series

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

SBAM seeks to achieve the Series' investment 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");

(5) repurchase agreements collateralized by any of the above; and

(6) 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.

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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.

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 Money Market Series

Money Market 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, the Series' subadviser, under guidelines approved by the Fund's
Trustees; (4) repurchase agreements relating to any of the above and (5)
obligations of banks or savings and loan associations (such as bankers'
acceptances and certificates of deposit, including Eurodollar obligations of
foreign branches of U.S. banks and U.S. dollar denominated obligations of U.S.
and United Kingdom branches of foreign banks) whose net assets exceed
$100,000,000.

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

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 U.S. dollar-denominated 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.

For a fuller description of those money market instruments and some of the
risks relating thereto, see "Investment Practices - Money Market Instruments"
below. Money Market will invest only in securities which the Series' subadviser
acting pursuant to guidelines established by the Fund's Board of Trustees, has
determined are of high quality and present minimal credit risk.

All the Series' investments 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

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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.

INVESTMENT RESTRICTIONS

The following is a description of fundamental and nonfundamental
restrictions on the investments to be made by the sixteen Series. Fundamental
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of the relevant Series. Nonfundamental
restrictions may be changed without such vote. Percentage tests regarding any
investment restriction apply only at the time of a Series is making that
investment. State insurance laws and regulations may impose additional
limitations on a Series' investments, including its ability to borrow, lend, and
use options, futures, and other derivative instruments. In addition, these laws
may require that a Series' investments meet additional diversification or other
requirements.

Fundamental Investment Restrictions

No Series will:

1. Borrow money, except to the extent permitted by applicable law,
regulation or order;

2. Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities laws;

3. Purchase or sell real estate, except that, consistent with its
investment policies, the Series may purchase securities of issuers which deal in
real estate, securities which are secured by interests in real estate, and
securities which represent interests in real estate, and it may acquire and
dispose of real estate or interests in real estate acquired through the exercise
of its rights as a holder of debt obligations secured by real estate or
interests therein;

4. Purchase or sell commodities or commodity contracts, except that,
consistent with its investment policies, the Series may purchase and sell
financial futures contracts and options and may enter into swap agreements,
foreign exchange contracts and other financial transactions not requiring the
delivery of physical commodities;

5. Make loans, except by purchasing debt obligations in which the Series
may invest consistent with its investment policies, by entering into repurchase
agreements, by lending its portfolio securities, or as otherwise permitted by
applicable law, regulation or order;

6. Purchase securities (other than (i) securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, (ii) securities of a
registered investment company, and (iii) in the case of Money Market, bank
instruments issued by domestic banks and U.S. branches of foreign banks) if, as
a result of such purchase, more than 25% of the total assets of the Series (as
of the time of investment) would be invested in any one industry, except to the
extent permitted by applicable law, regulation or order; or

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7. Issue any senior securities except to the extent permitted by applicable
law, regulation or order. (For purposes of this restriction, collateral
arrangements with respect to any type of swap, option, forward contract or
future contract and collateral arrangements with respect to initial and
variation margin are not deemed to involve the issuance of a senior security).

Nonfundamental Investment Restrictions

No Series will:

1. Invest in securities of other investment companies except to the extent
permitted by applicable law, regulation or order;

2. Invest more than 15% (10% in the case of Money Market) of the value of
the net assets of the Series in illiquid securities (as of the time of
investment), including variable amount master demand notes (if such notes
provide for prepayment penalties) and repurchase agreements with remaining
maturities in excess of seven days. (If, through a change in security values or
net assets, or due to other circumstances, the value of illiquid securities held
by the Series exceeds 15% (10% in the case of Money Market) of the value of the
net assets of the Series, the Series shall consider appropriate steps to protect
liquidity);

3. Sell securities short or purchase any securities on margin, except to
the extent permitted by applicable law, regulation or order;

4.* With respect to 75% of its total assets, invest in the securities of
any issuer if, immediately after such investment, more than 5% of the total
assets of the Series would be invested in the securities of such issuer;
provided that this limitation does not apply to obligations issued or guaranteed
as to interest or principal by the U.S. government or its agencies or
instrumentalities, or to securities of any registered investment company; or

5.* With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer (as of the time of
acquisition).

*Does not apply to Harris/Oakmark Midcap Value Series.

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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 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. Regulations specifying the diversification requirements
have been issued by the Department of the Treasury. The Fund intends to comply
with these requirements.

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.

Practices Series
- --------- ------
<S> <C>
Equity Securities Small Cap, International Equity, Equity Growth, Capital Growth,
Midcap Value, Venture Value, Growth and Income, Stock Index,
Balanced, Managed, Investors, Research Managers

Convertible Securities International Equity, Equity Growth, Capital Growth, Midcap
Value, Balanced, Managed, Strategic Bond, Bond Income,
Investors, Research Managers

Fixed-income Securities All Series

Money Market Instruments All Series

U.S. Government Securities All Series except Investors

Privately Issued Mortgage Securities Strategic Bond, U.S. Government, Balanced

Adjustable Rate Mortgage Securities Balanced, Strategic Bond, U.S. Government,

Collateralized Mortgage Obligations Balanced, Managed, Strategic Bond, Bond Income

Stripped Mortgage Securities Balanced, Strategic Bond, U.S. Government

Asset-backed Securities Balanced, Strategic Bond, U.S. Government

Zero Coupon Securities Balanced, Managed, Strategic Bond, U.S. Government, Investors

Lower Rated Fixed Income Securities Midcap Value, Balanced, Managed, Strategic Bond, Bond Income,
(High Yield Debt) Research Managers

Foreign Securities All Series except Stock Index

High Yield/High Risk Foreign Sovereign Debt Midcap Value, Strategic Bond, Investors, Balanced
</TABLE>
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Securities

Brady Bonds All Series except Stock Index
<S> <C>
Foreign Equity Depositary Receipts Small Cap, International Equity, Equity Growth, Capital Growth,
Midcap Value, Venture Value, Growth and Income, Balanced,
Managed, Investors, Research Managers

Foreign Currency Transactions, including Forward International Equity, Venture Value, Midcap Value
Contracts, Futures and Options Strategic Bond, Bond Income, Managed, Investors (excluding
options), Research Managers (excluding futures and options),
Balanced

Emerging Markets Midcap Value, Strategic Bond, Investors, Research Managers,
International Equity , Balanced

Obligations of Supranational Agencies All Series except Stock Index

Illiquid Securities All Series

Real Estate Investment Trusts Small Cap, International Equity, Equity Growth, Capital Growth,
Midcap Value, Venture Value, Growth and Income, Stock Index,
Balanced, Managed

Investment Company Securities All Series except Money Market

Domestic Equity Depositary Receipts Small Cap, International Equity, Equity Growth, Capital Growth,
Venture Value, Growth and Income, Stock Index, Balanced,
Managed, Investors, Research Managers

Repurchase Agreements All Series

Reverse Repurchase Agreements and Dollar Rolls Strategic Bond, U.S. Government, Balanced

Purchasing and Selling Options on Securities All Series except Money Market, Investors, Research Managers

Purchasing All Series except Money Market, Research Managers,
and Selling Futures Midcap Value (Investors may not engage in options on futures)
(and options thereon)

Eurodollar Futures and Options Strategic Bond, U.S. Government, Balanced

Loan Participations and Assignments Strategic Bond

Swaps, Caps, Floors, Collars, Etc. Strategic Bond, Balanced

Inverse Floaters Balanced, Strategic Bond, U.S. Government

Structured Notes Strategic Bond
</TABLE>

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<S> <C>
When Issued Securities Small Cap, International Equity, Equity Growth, Midcap Value,
Venture Value, Managed, Balanced, Bond Income, Strategic Bond,
Investors, Research Managers

Forward Commitments Midcap Value, Investors, Research Managers,
International Equity, Balanced

Short Sales "Against the Box" International Equity, Equity Growth, Midcap Value, Investors

Lending of Portfolio Securities All Series
</TABLE>

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

Convertible Securities -- 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. 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 -- The Series listed above may invest in fixed-income
- -----------------------
securities. Fixed-income securities include a broad array of short, medium and
long term obligations 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 or dividends on either a current basis
or at the maturity of the security, as well as the obligation to repay the
principal amount of the security at maturity.

Fixed-income securities involve both credit risk and market risk. Credit
risk is the risk that the security's issuer will fail to fulfill its obligation
to pay interest, dividends or principal on the security. Market risk is the risk
that the value of the security will fall because of changes in market rates of
interest. 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.
This 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. In addition, many fixed-income securities
contain call or buy-back features that permit their issuers to call or
repurchase the securities from their holders. Such securities may present risks
based on payment expectations. Although a Series would typically receive a
premium if an issuer were to redeem a security, if an issuer were to exercise a
"call option" and redeem the security during times of declining interest rates,
a Series may realize a capital loss on its investment if the security was
purchased at a premium and a Series may be forced to replace the called security
with a lower yielding security.

The short-term and medium-term fixed-income securities in which
International Equity may invest consists of (a) obligations of governments,
agencies or instrumentalities of any member state of the Organization for
Economic Cooperation and Development ("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 is invested in any one of such issuers. The short-term and medium-term
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.

Duration is a measure of the price volatility of a bond equal to the
weighted average term to maturity of the bond's cash flows. The weights are the
present values of each cash flow as a percentage of the present value of all
cash flows. The greater the duration of a bond, the greater its percentage price
volatility. Only a pure discount bond -- that is, one with no coupon or
sinking-fund payments -- has a duration equal to the remaining maturity of the
bond, because only in this case does the present value of the final redemption
payment represent the entirety of the present value of the bond. For all other
bonds, duration is less then maturity.

The difference between duration and maturity depends on: (a) the size of
the coupon, (b) whether or not there are to be sinking-fund payments, and (c)
the yield to maturity represented by the bond's current market value. The higher
the coupon the shorter the duration. This is because the final redemption
payment accounts for a smaller percentage of the bond's current value. The
higher the yield the shorter the duration. This is because the present values of
the distant payments become less important relative to the present values of the
nearer payments. A typical sinking fund reduces duration by about 1.5 years. For
bonds of less than five years to maturity, duration expands rapidly as maturity
expands. From 5 to 15 years remaining maturity, duration continues to expand as
maturity lengthens, but as a considerably slower rate. Beyond 15 years'
maturity, increments to duration are quite small, and only a bond with very low
(or no) coupon would have a duration of more than 15 years.

There is a close relationship between duration and the price sensitivity of
a bond to changes in interest rates. The relationship is approximately as
follows:

Percent change in bond price = -(Duration x Absolute change in yield).

For example, a bond with 10 years' duration will decline (or rise) in price
by approximately 5 percent when yield increases (or decreases) by one half
percent. Similarly, a yield increase of 2 percent will produce a price decline
of about 24 percent for a bond with 12 years' duration; but the same 2 percent
yield increase will produce a price decline if only some 10 percent for a bond
with five-years' duration. This same relationship holds true for the duration
and price of the entire portfolio of a Series.

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,

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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
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.

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.

"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

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<PAGE>

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.

U.S. Government Securities often do not involve the same 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.

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 below). 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.

Adjustable Rate Mortgage Securities -- The Series listed above may invest in
- -----------------------------------
Adjustable Rate Mortgage Securities ("ARM"). 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.

Collateralized Mortgage Obligations -- The Series listed above may invest in
- -----------------------------------
collateralized mortgage obligations (a "CMO"). 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 CMO first to mature generally will be retired prior to its maturity. The
early retirement of a particular class or series of CMO held by a Series would
have the same effect as the prepayment of mortgages underlying a mortgage
pass-through security.

Stripped Mortgage Securities -- 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. Stripped mortgage securities may not be
as liquid as other securities in which the Series may invest.

-25-
<PAGE>

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.

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 deemed by that Series' subadviser (or
by CGM, in the case of Capital Growth) to be illiquid securities for the
purposes of the investment policy that limits a Series' investments in illiquid
securities to 15% of net assets (10% in the case of Money Market).

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

-26-
<PAGE>

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.

Zero Coupon Securities -- The 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 value, 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 depreciates 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, 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.

Lower Rated Fixed-income Securities (High Yield Debt) -- Each Series listed
- -----------------------------------------------------
above may invest in high yield debt. The Managed and Strategic Bond may invest
100% of their total assets in high yield debt. Balanced and Midcap Value may
invest up to 25% of its total assets, Bond Income may invest 20% of its total
assets, and Research Managers may invest 10% of its total assets, in high yield
debt. 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 "high
yield debt" or "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 relevant adviser's or subadviser's own
credit analysis 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 A-1--Description of Bond Ratings."

Foreign Securities -- 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").

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

-27-
<PAGE>

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 listed above may also purchase shares of investment companies
investing primarily in foreign securities, including shares of funds that invest
primarily in securities of issuers located in one foreign country or region.
Each Series may, subject to the limitations stated above, invest in World Equity
Benchmark Shares ("WEBS") and similar securities that invest in securities
included in foreign securities indices.

High Yield/High Risk Foreign Sovereign Debt Securities -- The Series listed
- ------------------------------------------------------
above (up to 75% of the net assets of Investors Series) may invest in these
bonds, which are typically issued by developing or emerging market 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 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 "IMF"), 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.

A 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 -- 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 IMF.
The Brady Plan framework, as it has developed, contemplates the exchange of
commercial bank debt for newly issued bonds (Brady

-28-
<PAGE>

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 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.

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.

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. 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.

Sovereign obligors in developing and emerging market 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 a Series may invest will not be subject to similar restructuring
arrangements or to requests for new credit which may adversely affect the
Series' holdings. Brady Bonds are included in any Series' limitation on
investments in emerging markets.

Foreign Equity Depositary Receipts -- In addition to purchasing foreign
- ----------------------------------
securities directly, each Series listed above may invest in foreign equity
securities by purchasing Foreign Equity Depositary Receipts. Foreign Equity
Depositary Receipts are instruments issued by a bank that represent an interest
in equity securities held by arrangement with the bank, and include American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs"). ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank. ADRs are
traded on domestic exchanges or in the U.S. over-the-counter market and,
generally, are in registered form. EDRs and GDRs are receipts evidencing an
arrangement with a non-U.S. bank similar to that for ADRs and are designed for

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<PAGE>

use in the non-U.S. securities markets. EDRs and GDRs are not necessarily quoted
in the same currency as the underlying security.

Foreign Equity Depositary Receipts can be either "sponsored" or
"unsponsored." Sponsored Foreign Equity Depositary Receipts are issued by banks
in cooperation with the issuer of the underlying equity securities. Unsponsored
Foreign Equity Depositary 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
Foreign Equity Depositary Receipts.

To the extent a Series acquires Foreign Equity Depositary Receipts through
banks that do not have a contractual relationship with the foreign issuer of the
security underlying the Foreign Equity Depositary Receipts to issue and service
such Foreign Equity Depositary Receipts (unsponsored), there may be an increased
possibility that such Series would not become aware of and be able to respond to
corporate actions such as stock splits or rights offerings involving the foreign
issuer in a timely manner. In addition, the lack of information may result in
inefficiencies in the valuation of such instruments. Investment in Foreign
Equity Depositary Receipts does not eliminate the risks inherent in investing in
securities of non-U.S. issuers. The market value of Foreign Equity Depositary
Receipts is dependent upon the market value of the underlying securities and
fluctuations in the relative value of the currencies in which the Foreign Equity
Depositary receipts and the underlying securities are quoted. However, by
investing in Foreign Equity Depositary Receipts, such as ADRs, that are quoted
in U.S. dollars, a Series may avoid currency risks during the settlement period
for purchases and sales.

Foreign Currency Transactions, including Forward Contracts, Futures and Options
- -------------------------------------------------------------------------------
- -- The Series listed above may engage in 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. In order to
"lock in" the equivalent of a dividend or interest payment in another currency,
the Series may purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate. 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 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. Each series may also purchase options on foreign currencies. See
"Futures and Options on Futures" and "Risks related to Futures and Options"
above. Each Series may use foreign currency transactions for hedging purposes
only. The Series' use of such transactions may be limited by tax considerations.

Emerging Markets -- The Series listed above may invest in the securities of
- ----------------
issuers in emerging market countries (up to the limit of each Series' ability to
invest in foreign securities, except that International Equity may invest up to
5% of its total assets in securities of issuers in emerging market countries
that are not EAFE countries. Investing in securities of issuers in emerging
market countries involves risks in addition to those discussed in the Prospectus
under "Foreign Securities." Emerging market 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 market
countries may be constrained by limitations as to daily changes in 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 market
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

-30-
<PAGE>

the Series. The repatriation of both investment income and capital from certain
emerging market 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 Company Securities" below.

Obligations of Supranational Agencies -- Each Series listed above may also
- -------------------------------------
invest in obligations issued by supranational agencies such as the International
Bank for Reconstruction and Development (commonly known as the World Bank) which
was chartered to finance development projects in developing member countries;
the European Community, which is a twelve-nation organization engaged in
cooperative economic activities; the European Coal and Steel Community, which is
an economic union of various European nations' steel and coal industries; and
the Asian Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical assistance
to member nations in the Asian and Pacific regions. Debt obligations of
supranational agencies are not considered U.S. Government Securities and are not
supported, directly or indirectly, by the U.S. Government.

Illiquid Securities -- Each Series may invest up to 15% of its assets (10% in
- -------------------
the case of Money Market) in "illiquid securities," that is, securities which in
the opinion of the subadviser are not resalable at the price at which the Series
is valuing the security, within seven days, except as qualified below, including
securities whose disposition is restricted by federal securities laws. The
Series may purchase Rule 144A securities. These are privately offered securities
that can be resold only to certain qualified institutional buyers. Rule 144A
securities are treated as illiquid, unless the Series' adviser or subadviser has
determined, under guidelines established by the Fund's trustees, that the
particular issue of Rule 144A securities is liquid.

Real Estate Investment Trusts ("REITs") -- The Series listed above may invest in
- ----------------------------------------
REITs, which 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.

Investment Company Securities -- The Series listed above, other than Investors
- -----------------------------
and Research Managers, may invest up to 10% of their assets in securities of
other investment companies. Investors and Research Managers may invest in other
investment companies to the extent permitted by the 1940 Act. 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 investment company 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 an investment company 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. Venture Value may only invest in
securities of investment companies investing primarily in foreign securities.

Domestic Equity Depositary Receipts are investment company securities;
therefore, investments therein are subject to a Series' limitation on investment
in other investment companies.

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<PAGE>

Domestic Equity Depositary Receipts -- Each of the Series listed above may
- -----------------------------------
invest in Domestic Equity Depositary Receipts, subject to the restrictions on
the percentage of such Series' assets that may be represented by Investment
Company Securities. Domestic Equity Depositary Receipts are interests in a unit
investment trust ("UIT") that holds a portfolio of common stocks that is
intended to track the price and dividend performance of a particular index.
Common examples of Domestic Equity Depositary Receipts include S&P Depositary
Receipts ("SPDRs") and Nasdaq 100 Shares, which may be obtained from the UIT
issuing the securities or purchased in the secondary market (SPDRs and Nasdaq
100 Shares are listed on the American Stock Exchange).

Domestic Equity Depositary Receipts are issued in aggregations known as
"Creation Units" in exchange for a "Portfolio Deposit" consisting of (a) a
portfolio of securities substantially similar to the component securities
("Index Securities") of the relevant index (the "Target Index"), (b) a cash
payment equal to a pro rata portion of the dividends accrued on the UIT's
portfolio securities since the last dividend payment by the UIT, net of expenses
and liabilities, and (c) a cash payment or credit ("Balancing Amount") designed
to equalize the net asset value of the Target Index and the net asset value of a
Portfolio Deposit.

Domestic Equity Depositary Receipts are not individually redeemable, except
upon termination of the UIT that issued them. To redeem, a Series must
accumulate enough Domestic Equity Depositary Receipts to reconstitute a Creation
Unit. The liquidity of small holdings of Domestic Equity Depositary Receipts,
therefore, will depend upon the existence of a secondary market. Upon redemption
of a Creation Unit, a Series will receive Index Securities and cash identical to
the Portfolio Deposit required of an investor wishing to purchase a Creation
Unit that day.

The redemption price (and therefore the sale price) of Domestic Equity
Depositary Receipts is derived from and based upon the securities held by the
UIT that issued them. Accordingly, the level of risk involved in the purchase or
redemption or sale of a Domestic Equity Depositary Receipt is similar to the
risk involved in the purchase or sale of traditional common stock, with the
exception that the price of Domestic Equity Depositary Receipts is based on the
value of a basket of stocks. Disruptions in the markets for the securities
underlying Domestic Equity Depositary Receipts purchased or sold by a Series
could result in losses on Domestic Equity Depositary Receipts.

Repurchase Agreements -- 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. Each Series, through the custodian or
subcustodian, receives delivery of the underlying securities collateralizing
repurchase agreements. It is the Fund's policy that the market value of the
collateral be at least equal to 100% of the repurchase price in the case of a
repurchase agreement of one day duration and 102% on all other repurchase
agreements. Each Series' adviser or subadviser is responsible for determining
that the value of the collateral is at all times at least equal to the
repurchase price.

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, or the seller may enter insolvency,
thereby delaying or limiting realization of collateral. 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.

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.

Reverse repurchase agreements involve sales by a Series of portfolio assets
concurrently with an agreement by that 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.

-32-
<PAGE>

The Series may enter into dollar rolls in which a 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. Although reverse repurchase agreements and dollar rolls have certain
characteristics similar to borrowings, these investment techniques are not
considered borrowings by the Series for purposes of determining the limitations
on each Series' borrowings described under the heading "Investment
Restrictions".

Purchasing and Selling Options on Securities -- 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. For a discussion of additional risks related to futures and
options, see the discussion below.

Risks Related to Futures and Options -- The purchase and sale of futures
contracts, options on futures, and options on securities or indexes 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.

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.

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<PAGE>

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.

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 and swap
transactions currently available. The relevant markets and related regulations
are constantly evolving. 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.

Writing Covered Options -- The Series listed above may write covered call or put
- -----------------------
options. 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.

-34-
<PAGE>

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 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.

Over-the-Counter Options -- 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").

Purchasing and Selling Futures (and options thereon) -- The Series listed above
- ----------------------------------------------------
may purchase and sell futures and options on futures.

-35-
<PAGE>

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.

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.

Stock Index 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 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. Growth and Income 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 on Futures -- 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.

The Fund, on behalf of each of the Series, has notified the Commodities
Futures Trading Commission, pursuant to Rule 4.5 under the Commodity Exchange
Act, that it desires to claim exclusion from the definition of the term
"Commodity Pool Operator". In connection with such exclusion, the Fund has
represented, on behalf of each Series, that the Fund will operate the Series in
a manner such that the Series:

(i) Will use commodity futures or commodity options contracts solely for
bona fide hedging purposes within the meaning and intent of Commission Rule
1.3(z)(1); provided, however, that, in addition, with respect to positions in
-------- -------
commodity futures or commodity option contracts which do not come within the
meaning and intent of Rule 1.3(z)(1), the Series may enter into commodity
futures and commodity options contracts for which the aggregate initial margin
and premiums required to establish such positions will not exceed 5 percent of
the liquidation value of the Series' assets, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into; provided, further, that
-------- -------

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<PAGE>

in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount as defined in Commission Rule 190.01(x) may be excluded in
computing such 5%;

(ii) Will not be, and has not been, marketing participation to the public
as or in a commodity pool or otherwise as or in a vehicle for trading in the
commodity futures or commodity options markets;

(iii) Will disclose in writing to each prospective participant the purpose
of and the limitations on the scope of the commodity futures and commodity
options trading in which the Series intends to engage; and

(iv) Will submit to such special calls as the under the Commodity Futures
Trading Commission may make to require the Fund on behalf of the Series to
demonstrate compliance with the provisions of Rule 4.5(c) under the Commodity
Exchange Act.

For a discussion of additional risks related to futures and options, see
the discussion below.

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.

Loan Participations and Assignments -- Strategic Bond 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.

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

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 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

-37-
<PAGE>

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.

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 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' adviser or subadviser. If a
counterparty defaults, the Series may have contractual remedies pursuant to the
agreements related to the transaction. Caps, floors and collars may not be as
liquid as swaps.

The liquidity of such agreements will be determined by a Series' adviser or
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.

Inverse Floaters -- The Series listed above may invest in inverse floaters,
- ----------------
which are derivative mortgage securities. Inverse floaters are structured as a
class of security that receives distributions on a pool of mortgage assets and
whose yields move in the opposite direction of short-term interest rates,
sometimes, at an accelerated rate. Inverse floaters may be issued by agencies or
instrumentalities of the U.S. Government, or by private issuers, including
savings and loan associations, mortgage banks, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. Inverse floaters have
greater volatility than other types of mortgage securities in which the Series
invest (with the exception of stripped mortgage securities). Inverse floaters
may not be as liquid as other securities in which the Series may invest.

Structured Notes -- The Series listed above may 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

-38-
<PAGE>

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 a Series' portfolio as a whole.

Structured notes involve special risks. As with any debt obligation,
structured notes involve the risk that the issuer will become insolvent or
otherwise default on its payment obligations. The risk is in addition to the
risk that the issuer's obligations (and thus the value of a 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 a 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.

When-Issued Securities -- The Series listed above may invest in when-issued
- ----------------------
securities. 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 assets in a segregated account in
an amount sufficient to satisfy its outstanding obligations to buy securities on
a "when-issued" basis.

Forward Commitments -- The Series listed above 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. A
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
amount sufficient to meet the purchase price. Alternatively, a 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 risk of loss if
the value of the security to be purchased declines prior to the settlement date.
Although a Series will generally purchase securities on a forward commitment
basis with the intention of acquiring such securities for its portfolio, a
Series may dispose of forward commitments prior to settlement if the subadviser
deems it appropriate to do so.

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

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 herein. 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.

-39-
<PAGE>

RESOLVING MATERIAL CONFLICTS

Currently, shares in the Fund are available only to separate accounts
established by New England Financial ("NEF"), MetLife or their subsidiaries 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 NEF 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 NEF 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.

DETERMINATION OF NET ASSET VALUES

The net asset value per share of each Series 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. 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 Money Market)

Each Series other than Money Market 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. Equity securities traded over-the-counter are
valued at the last reported bid price or at the average of the last reported bid
and asked price, according to the subadviser's valuation policies. Other equity
securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets 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 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.

Exchange traded and other fixed-income securities are valued at the last
reported sale price. Other 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. 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 an approved pricing service. 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.

An option purchased 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 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

-40-
<PAGE>

contract experience significant price fluctuations after determination of the
settlement price. When settlement price is not used, futures contracts will be
valued at fair value as determined by the respective adviser or subadviser,
acting under the supervision 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 price on
that non-U.S. exchange, except that when an occurrence after the closing of that
exchange may materially change such security's value, the respective adviser or
subadviser may value the security in good faith, acting under the supervision 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 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 the
Series' adviser or subadviser acting under the supervision of the Fund's Board
of Trustees. The U.S. dollar value of forward foreign currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. All contracts are "marked-to-market" daily at the applicable
transaction rates, and any gains or losses are recorded for financial statement
purposes as unrealized until settlement date.

Money Market

The portfolio securities of Money Market 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 Money Market may at
times be more or less than their market value.

By using amortized cost valuation, the Money Market 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
share of the Money Market were not constant and were permitted to fluctuate with
the market value of the 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 Money Market 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.

-41-
<PAGE>

FUND PERFORMANCE
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.

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 NEF or NEIM. If these
arrangements had not been in effect, certain Series' total return would have
been lower (see "Effect of Expense Deferrals and Limits" below).

<TABLE>
<CAPTION>
Average Average Average
Average Annual Annual Annual
Annual Total Total Total
Total Return Return Return
Return For the For the Since
For the Ten Five Commencement
Year Years Years of Offering
Ending Ending Ending Through
12/31/99 12/31/99 12/31/99 12/31/99
-------- -------- -------- --------
Series
- ------
<S> <C> <C> <C> <C>
Small Cap 31.8% 22.2% 18.6%(1)

International Equity(2) 24.6% 8.4% 8.6%

Equity Growth 34.1% 33.2% 30.9%

Capital Growth 15.7% 16.9% 26.2% 23.3%(3)

Midcap Value(4) 0.3% 11.3% 10.6%

Venture Value 17.5% 25.8% 24.0%

Growth and Income 9.4% 24.0% 19.7%

Stock Index 20.4% 17.7% 27.9% 16.3%

Balanced Series(5) -5.1% 11.9% 11.5%

Managed Series 10.0% 13.8% 20.3% 13.0%

Strategic Bond Series 1.4% 9.4% 8.8%

Bond Income -0.5% 8.6% 8.8% 9.6%(3)

U.S. Government Series 0.2% 6.8% 6.7%

Money Market 5.0% 5.1% 5.3% 6.3%(3)

Investors 2.9%
</TABLE>

-42-
<PAGE>

(1) Represents unannualized total return for the period May 2, 1994, when Small
Cap 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) Capital Growth, Bond Income and Money Market commenced operations on August
26, 1983 and their Average Annual Total Returns From Commencement of
Offering have been calculated for the period beginning with that date.
These returns would not change if they had been calculated for the period
beginning with September 1, 1983, which is the period for which the Average
Annual Total Returns Since Commencement of Offering have been calculated
for the S&P 500, Lehman Intermediate Government/Corporate Bond Index,
Consumer Price Index and Dow Jones Industrial Average (unless otherwise
indicated).

(4) On May 1, 2000, Harris Associates became subadviser to the Series,
succeeding Goldman Sachs Asset Management ("GSAM"). On May 1, 1998, GSAM
became subadviser to the Series, succeeding Loomis Sayles.

(5) On May 1, 2000, Wellington Management became subadviser to the Series,
succeeding Loomis Sayles.

Calculations of Yield and Total Return
- --------------------------------------

Yield of Money Market. Money Market's 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 Money Market will
vary depending on prevailing interest rates, the operating expenses of Money
Market and the quality, maturity and type of instruments held in the portfolio
of Money Market. Yield information may be useful in reviewing Money Market's
performance and providing a basis for comparison with other investment
alternatives, although the yield of Money Market 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 NEF or MetLife or their
affiliates. 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 Money Market may be for any specified period
in the future.

For the seven day period ending December 31, 1999, Money Market had a yield of
5.47% and an effective yield of 5.62%.

-43-
<PAGE>

Calculation of Total Return. 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 NEIM. 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 of a Series should only be
considered along with investment return information for those separate accounts
or the variable life insurance or variable annuity products.

Performance Comparisons
- -----------------------

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. Performance information about a Series is based on the
Series' past performance and is not intended to indicate future
performance.

Total return 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 Products Balanced Fund Average, the
Lipper Variable Products Growth and Income Average, the Lipper Variable Products
A-Rated Corporate Bond Fund Average, the Lipper Variable Products Flexible
Portfolio Fund Average, the Lipper Variable Products General Bond Fund Average,
the Lipper Variable Products Growth Fund Average, the Lipper Variable Products
International Fund Average, the Lipper Variable Products Intermediate Investment
Grade Debt Fund Average, the 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 1000 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, AustraAsia, 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

-44-
<PAGE>

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 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. To be included in the Lehman Government/Corporate
Bond Index, an issue must have amounts outstanding in excess of $100 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 Products Balanced Fund Average is a measure of the
performance of the largest open-end balanced mutual funds.

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

The Lipper Variable Products A-Rated Corporate Bond Fund Average represents
a grouping of funds underlying variable contracts which have similar investment
objectives as calculated by Lipper Analytical Services.

Lipper Variable Products Flexible Portfolio Fund Average represents a
grouping of funds underlying variable contracts which have similar investment
objectives as calculated by Lipper Analytical Services.

The Lipper Variable Products General Bond Fund Average represents a
grouping of funds underlying variable contracts which have similar investment
objectives as calculated by Lipper Analytical Services.

Lipper Variable Products Growth Fund Average represents a grouping of funds
underlying variable contracts which have similar investment objectives as
calculated by Lipper Analytical Services.

The Lipper Variable Products International Fund Average represents a
grouping of funds underlying variable contracts which have similar investment
objectives as calculated by Lipper Analytical Services.

The Lipper Variable Products Intermediate Investment Grade Debt Fund
Average represents a grouping of funds underlying variable contracts which have
similar investment objectives as calculated by Lipper Analytical Services.

The Lipper Variable Products Small Company Fund Average represents a
grouping of funds underlying variable contracts which have similar investment
objectives as calculated by Lipper Analytical Services.

The Lipper Variable Products S&P 500 Index Fund Average represents a
grouping of funds underlying variable contracts which have 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.

-45-
<PAGE>

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 $592 million as of
its last reconstitution date, June 30, 1998. The market capitalization of the
companies comprising the Index will vary during the year until the Index's next
construction, which occurs annually.

The Russell Midcap Index is an unmanaged index which measures the
performance of the 800 smallest companies in the Russell 1000 Index. The Russell
1000 Index represents the largest 1000 U.S. companies. As of the latest
reconstitution, the average market capitalization of companies in the Russell
Midcap Index was $3.7 billion. The market capitalization of the companies
comprising the Index will vary during the year until the Index's next
construction, which occurs annually.

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. 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.

EXPENSE DEFERRALS AND LIMITS

Voluntary Expense Agreement

Pursuant to the voluntary expense agreement relating to Small Cap, NEIM
bears all the operating expenses (does not include amortization of expenses,
brokerage costs, interest, taxes or extraordinary expenses) of the Series in
excess of 1.00% of the Series' average daily net assets. NEIM may terminate this
expense agreement at any time. As a result of the current voluntary expense
agreement (and assuming the Series incurs the same level of management fees as
in 1999 and no taxes, interest or extraordinary expenses), Small Cap's expense
ratio during this SAI's effectiveness, assuming the continuation of the
voluntary expense agreement, is expected to be 1.00% of the Series' average
daily net assets.

Expense Deferral Arrangement

Pursuant to an expense deferral arrangement relating to the International
Equity, Midcap Value, U.S. Government, Investors and Research Managers Series,
NEIM has agreed to pay the operating expenses (does not include amortization of
expenses, brokerage costs, interest, taxes, or extraordinary expenses) in excess
of stated annual expense limits (based on a Series' then-current fiscal year,
which limits vary from Series to Series, subject to the obligation of the Series
to repay NEIM such expenses in future years, if any, when a Series' expenses
fall below the stated expense limit that pertains to that Series; such deferred
expenses may be charged to a Series in a subsequent year to the extent that the
charge does not cause the total expenses in such subsequent year to exceed the
Series' stated expense limit; provided, however, that no Series is obligated to
repay any expense paid by NEIM more than two years (three in the case of
Investors Series and Research Managers Series) after the end of the fiscal year
in which such expense was incurred. The expense deferral arrangements can be
prospectively discontinued by NEIM 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 each Series' net average daily net assets) are as follows:

Series Deferral Arrangement Expense Limit
- ---------------------------------------- ------------------------------------
International Equity 1.30%

Midcap Value 0.90%

-46-
<PAGE>

U.S. Government 0.70%
Investors 0.90%
Research Managers 0.90%

Additional Information About Expenses

Each Series pays all expenses not borne by its adviser or subadviser 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 NEF or its affiliates, other than affiliated registered investment
companies.

The table below sets forth the total expenses incurred by each Series
during the year ended December 31, 1999 and what the Series' expenses would have
been without the voluntary expense agreement or expense deferral arrangement for
the same period.

<TABLE>
<CAPTION>
Total Operating Expenses
(as a percentage of average daily
Total Operating Expenses net assets) without voluntary
Series (as of a percentage of average daily expense agreement or expense
net assets) for the year ended deferral arrangement for the year
December 31, 1999 ended December 31, 1999
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Small Cap 1.00% 1.10%
International Equity 1.30% 1.30%(a)
Midcap Value 0.88% *
U.S. Government 0.70% 0.72%
Investors 0.90%(b) 2.03%(b)
Research Managers 0.90%(b) 2.03%(b)
</TABLE>

(a) Subject to expense deferral arrangement, deferred operating expenses
were .001% of average daily net assets.

(b) Computed on an annualized basis.

*Voluntary expense agreement or expense deferral agreement had no effect
for the period presented.

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.

TRUSTEES AND OFFICERS

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, NEIM is the investment adviser of each of the Series except Capital
Growth, for which CGM serves as investment adviser.

-47-
<PAGE>

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 (49) -- Trustee; 60 Hyslop Road, Brookline, MA 02146; 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, CGU (property and casualty insurance
company).

DALE ROGERS MARSHALL (63) -- Trustee; 26 East Main Street, Norton, MA 02766;
President, Wheaton College; formerly, Academic Dean, Wellesley
College.

JOHN J. ARENA (62) -- 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 (60) -- Trustee; 791 Main Street, Warren, RI 02885; Retired;
formerly, Vice Chairman, Chief Financial Officer, Fleet Financial
Group.

JOHN T. LUDES (63) -- Trustee; 1700 E. Putnam Avenue, Old Greenwich, CT 06870;
Vice Chairman, formerly, President and Chief Operating Officer, American
Brands (global conglomerate); formerly, President and CEO, Acushnet
Company.

EDWARD A. BENJAMIN* (61) -- 71 Sierra Rosa Loop, Santa Fe, NM 87501; Retired;
formerly, Partner, Ropes & Gray (law firm); Director, Precision Optics
Corporation (optics manufacturer).

MARY ANN BROWN* (47) -- President, New England Products and Services, New
England Financial; formerly, President and Chief Executive Officer,
Atlantic International Reinsurance Company; formerly, Director, Swiss
Reinsurance Company; formerly, Principal, Tillinghast/Towers Perrin
(consulting).

ANNE M. GOGGIN* (51) -- Chairman of the Board, Senior Vice President and
Trustee; Senior Vice President and Associate General Counsel, NEF; Vice
President, General Counsel, Secretary and Clerk, New England Securities
Corp.

JOHN F. GUTHRIE (56) -- Senior Vice President; Vice President, NEF; Senior Vice

President, NEIM.

ALAN C. LELAND (47) -- Senior Vice President; Senior Vice President, NEF; Chief

Financial Officer, NEIM.

PETER DUFFY (44) -- Treasurer; Second Vice President, NEF since December 1998;
formerly, Executive Vice President, New England Funds, L.P.

THOMAS M. LENZ (41) -- Secretary; Counsel, NEF; Secretary, Clerk and General
Counsel; NEIM (since December 1998); formerly, Vice President, State
Street Bank and Trust Company from 1996 until December 1998; Senior Vice
President U.S./Offshore Product Development and Associate General Counsel,
Signature Financial Group, Inc. prior to 1996.

-48-
<PAGE>

* Denotes trustee who is an "interested person" as defined in 1940 Act.

Messrs. Arena and Flynn and Ms. Goggin 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 NEF 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 NEF 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 affiliates of CGM, NEIM, any
subadviser of the Fund or NES receive no compensation from the Fund, for their
services in such capacities, although they may receive compensation from NEF or
NEIM 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, 1999, 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>
Aggregate Compensation Total Compensation from the
from the Fund Fund and NEVA
Name of Trustee in 1999($) in 1999($)
- --------------- ---------- ----------
<S> <C> <C>
Nancy Hawthorne 36,067 37,500
Joseph M. Hinchey (a) 35,339 36,500
Robert B. Kittredge (a) 36,067 37,500
Dale Rogers Marshall 36,067 37,500
John J. Arena 41,975 43,500
John W. Flynn 34,720 36,000
John T. Ludes 33,734 35,000
Edward A. Benjamin 7,284 7,500
</TABLE>

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

(a) Retired from service as a trustee of the Fund effective December 31,
1999.

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.

-49-
<PAGE>

At March 31, 2000, the officers and trustees of the Fund as a group owned
less than 1% of the outstanding shares of the Fund or any Series.

ADVISORY ARRANGEMENTS

Advisory Structure. Pursuant to separate advisory agreements, each dated
August 30, 1996 (May 1, 1997 in the case of International Equity; May 1, 1998 in
the case of Midcap Value; April 28, 1999 in the case of Investors and Research
Managers; and January 1, 2000 in the case of Small Cap, Growth and Income, Bond
Income and Money Market), NEIM has agreed to manage the investment and
reinvestment of assets of each Series other than Capital Growth. NEIM 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 Capital Growth.

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. CGM, in the
case of Capital Growth, has subcontracted with NEIM to provide such services to
that Series at no extra cost to the Series.

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

Subject to the supervision of NEIM, 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, 2000 in the case of the Harris/Oakmark Midcap Value Series and
April 28, 1999 in the case of Investors and Research Managers 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.

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 $ billion of assets under management as of March
31, 1999. Back Bay Advisors provides investment management services to
institutional clients, including other registered investment companies and
accounts of NEF 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 Managed, Bond Income and Money Market Series.

Loomis Sayles, subadviser to Small Cap, 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 NEF 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.

-50-
<PAGE>

Wellington Management, subadviser to Balanced, is a professional
investment counseling firm that provides services to investment companies,
employee benefit plans, endowments, foundations and other institutions and
individuals. Wellington Management and its predecessor organizations have
provided investment advisory services since 1928. As of December 31, 1999,
Wellington Management had over $235 billion in total assets under management.
Wellington Management is a Massachusetts limited liability partnership. The
three managing partners of Wellington Management are Laurie A. Gabriel, Duncan
M. McFarland and John R. Ryan.

MSAM, subadviser to International Equity, 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 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 Equity Growth. 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 Capital Growth, 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 Growth and
Income and Stock Index.

Davis Selected Advisers, L.P. ("Davis Selected") provides investment
advisory services for mutual funds and other clients; it is subadviser to
Venture Value. 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").

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

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, 1999, SBAM and its worldwide
affiliates managed approximately $28.7 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 Limited
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 Series. SBAM Ltd. is a wholly owned subsidiary of Salomon
Brothers Europe Limited, which is wholly-owned by Salomon (International)
Finanz AG,(25%) and Salomon International Limited (75%) which in turn is a
wholly owned subsidiary of SBHC. SBHC is a wholly-owned subsidiary of SSBH which
in turn is wholly owned by Travelers. The principal address of SBAM Ltd. and
Salomon Brothers Europe Limited is Victoria Plaza, 111 Buckingham Palace Road,
London SW1W OSB, England, and the principal address of Salomon
(International) Finanz AG is Schipfe 2, 8001 Zurich, Switzerland. SBAM Limited
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.

Harris is a limited partnership managed by its general partner, Harris
Associates, Inc., whose directors are David G. Herro, Robert M. Levy, Roxanne M.
Martino, Victor A. Morgenstern, Anita M. Nagler, William C. Nygren, Neal

-51-
<PAGE>

Litvack, Robert J. Sanborn and Peter S. Voss. Mr. Levy is the president and
chief executive officer of Harris Associates, Inc. ("HAI"). HAI is a
wholly-owned subsidiary of Nvest Companies, L.P. ("Nvest"). Nvest owns all of
the limited partnership interests in Harris Associates. Nvest is a limited
partnership that owns investment management and related firms and is an
affiliate of Nvest, L.P., a publicly traded company listed on the NYSE. Nvest,
L.P. is one of the largest publicly traded investment management firms.
Metropolitan Life Insurance Company owns the general partner of Nvest and
approximately 48% of its outstanding partnership interests.

MFS, subadviser to the Investors and Research Managers Series, and its
predecessor organizations have a history of money management dating from 1924.
MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings,
Inc., which in turn is an indirect wholly owned subsidiary of Sun Life Assurance
Company of Canada ("Sun Life").

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 under
"Expense Deferral and Limits."

<TABLE>
<CAPTION>
Annual Average Daily Net
Series Percentage Rate Asset Value Levels
------ --------------- ------------------
<S> <C> <C>
Small Cap 0.90% the first $500 million
0.85% amounts in excess of $500 million

International Equity (a) 0.90% all assets

Equity Growth 0.75% all assets

Capital Growth (b) 0.70% the first $200 million
0.65% the next $300 million
0.60% the next $1.5 billion
0.55% amounts in excess of $2 billion

Midcap Value (c) 0.75% all assets

Venture Value 0.75% all assets

Growth and Income (d) 0.70% the first $200 million
0.65% the next $1.3 billion
0.60% amounts in excess of $1.5 billion

Stock Index 0.25% all assets

Balanced Series 0.70% all assets

Managed Series 0.50% all assets

Strategic Bond 0.65% all assets

Bond Income (e) 0.40% the first $1 billion
0.35% the next $1 billion
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Annual Average Daily Net
Series Percentage Rate Asset Value Levels
------ --------------- ------------------
<S> <C> <C> <C>
0.30% the next $1 billion
0.25% amounts in excess of $3 billion

U.S. Government Series 0.55% all assets

Money Market (f) 0.35% the first $1 billion
0.30% the next $1 billion
0.25% amounts in excess of $2 billion

Investors 0.75% all assets

Research Managers 0.75% all assets
</TABLE>

(a) Prior to January 1, 2000, the advisory fee payable by Small Cap Series was
at the annual rate of 1.00% of the Series' average daily net assets.

(b) Prior to June 18, 1998, the advisory fee payable by Capital Growth 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.

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

(d) Prior to January 1, 2000, the advisory fee payable by Growth and Income
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.

(e) Prior to January 1, 2000, the advisory fee payable by Bond Income Series was
at the annual rate of 0.40% of the first $400 million of the Series' average
daily net assets; 0.35% of the next $300 million of such assets; 0.30% of the
next $300 million of such assets; and 0.25% of such assets in excess of $1
billion.

(f) Prior to January 1, 2000, the advisory fee payable by Money Market Series
was at the annual rate of 0.35% of the first $500 million of the Series' average
daily net assets; 0.30% of the next $500 million of such assets; and 0.25% of
such assets in excess of $1 billion.

Subadvisory Fees. NEIM pays each sub-adviser at the following rates for
providing subadvisory services to the following Series:

<TABLE>
<CAPTION>
Annual Percentage Rates Paid Average Daily Net Asset
Series by NEIM to the Subadvisers Value Levels
- ------ -------------------------- ------------
<S> <C> <C>
Small Cap 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

International Equity * 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

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

Midcap Value*** 0.45% of the first $100 million
0.40% of the next $400 million
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Annual Percentage Rates Paid Average Daily Net Asset
Series by NEIM to the Subadvisers Value Levels
- ------ -------------------------- ------------
<S> <C> <C>

0.35% of amounts in excess of $500 million

Venture Value 0.45% of the first $100 million
0.40% of the next $400 million
0.35% of amounts in excess of $500 million

Growth and Income 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

Stock Index 0.10% of all assets

Balanced Series**** 0.325% of the first $100 million
0.275% of the next $100 million
0.25% of amounts in excess of $200 million

Managed Series 0.25% of the first $50 million
0.20% of amounts in excess of $50 million

Strategic Bond 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

Bond Income 0.25% of the first $50 million
0.20% of the next $200 million
0.15% of amounts in excess of $250 million

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
Money Market
0.15% of the first $100 million
0.10% of amounts in excess of $100 million

Investors 0.40% of the first $150 million
0.375%
0.350% of amounts in excess of $300 million

Research Managers 0.40% of the first $150 million
0.375% of the next $150 million
0.350% of amounts in excess of $300 million
</TABLE>

*Prior to May 1, 1997 the subadviser of International Equity 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 Equity Growth 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 NEIM (then , TNE Advisers) that the
sub-advisory fee payable by NEIM 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 NEIM, but does not reduce
the advisory fees payable by the Series. The fee reduction
<PAGE>

agreement will expire at such time as NEIM has recovered certain expenses
(generally, those expenses borne by NEIM under the Expense Deferral Arrangement
prior to January 1, 1996 which are not recovered from the Series).

***From May 1, 1998 to April 30, 2000, the subadviser of Midcap Value was
Goldman Sachs Asset Management. Prior to May 1, 1998, the subadviser of Midcap
Value was Loomis Sayles, and 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.

****Prior to May 1, 2000, the subadviser of Balanced was Loomis Sayles, and 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, and
0.30% of such assets in excess of $100 million.

In connection with SBAM's service as subadviser to Strategic Bond, 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 Venture Value,
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 fiscal years ended December 31, 1997, 1998, and 1999 each Series
(except Capital Growth) paid the following amounts in advisory fees to
NEIM.

<TABLE>
<CAPTION>
Amount Paid to NEIM ($)
Series 1997 1998 1999
- ------ ---- ---- ----
<S> <C> <C> <C>
Small Cap 1,404,831 2,178,725 2,368,856
International Equity (1) 422,850 566,848 691,945
Equity Growth 1,246,269 2,115,106 4,418,196
Midcap Value (2) 711,667 859,331 834,843
Venture Value 1,425,245 2,706,162 4,032,970
Growth and Income 808,891 1,462,154 2,410,327
Stock Index 261,396 381,940 560,987
Balanced Series (3) 607,641 1,144,390 1,386,037
Managed Series 878,632 1,003,695 1,083,736
Strategic Bond 353,611 560,007 618,506
Bond Income 747,372 917,376 1,121,515
U.S. Government Series 92,762 169,287 270,607
Money Market 405,959 463,281 796,250
</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, Midcap Value was subadvised by Loomis Sayles &
Company, L.P. From May 1, 1998 to April 30, 2000, Midcap Value was
subadvised by Goldman Sachs Asset Management. On , 2000, the Board of
Trustees approved a new subadvisory agreement by and between NEIM and
Harris, which was approved by shareholders on, 2000. The Series
subsequently changed its name from Goldman Sachs Midcap Value Series to
Harris/Oakmark Midcap Value Series.

(3) Prior to May 1, 2000, Balanced Series was subadvised by Loomis Sayles &
Company, L.P. On _ 2000, the Board of Trustees approved a new subadvisory
agreement by and between NEIM and Wellington Management Company, LLP. The
Series subsequently changed its name from Loomis Sayles Balanced Series to
Balanced Series.
<PAGE>

For the fiscal years ended December 31, 1997, 1998 and 1999, Capital Growth
paid CGM a total of $8,434,722, $10,272,927, and $11,792,608, 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 the Strategic Bond, U.S. Government and Midcap Value, 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 1940 Act. 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 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 Small Cap. Offices of Loomis Sayles buy securities
independently of one another. The other

-56-
<PAGE>

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 Growth and Income or Stock Index 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 Growth and Income and Stock Index. 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 Growth and Income and Stock Index 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 Capital Growth also invests. If Capital
Growth 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 Capital Growth purchases
or sells. In other cases, however, it is believed that these practices may
benefit Capital Growth Series. It is the opinion of the trustees that the
desirability of retaining CGM as adviser for Capital Growth outweighs the
disadvantages, if any, which might result from these practices.

Certain officers and employees of SBAM, Davis Selected, MSAM, Alger
Management and MFS have responsibility for portfolio management for other
clients (including other registered investment companies and affiliates of SBAM,
Davis Selected, MSAM, Alger Management or MFS) 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, Alger Management or
MFS 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,
Alger Management or MFS, 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, Alger Management and MFS 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 NEF.

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.

-57-
<PAGE>

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.

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 PricewaterhouseCoopers L.L.P. acted as
the Fund's independent accountants, and the financial highlights included in the
Prospectus are included in reliance on the reports of PricewaterhouseCoopers
L.L.P. for the years prior to 1997.

Other Arrangements. Under a service agreement between New England Funds,
------------------
L.P. and CGM, CGM paid New England Funds, L.P. $1,061,801 and $704,558,
respectively, for the Fund's fiscal years ended December 31, 1997 and 1998, and
paid NEIM (formerly, TNE Advisers) $704,705 for the Fund's fiscal year ended
December 31, 1998, relating to Capital Growth. On January 1, 1999, CGM and New
England Funds, L.P. terminated their service agreement, and CGM and NEIM entered
a new service agreement under which NEIM provides certain administrative
services to CGM. Under that new service agreement, CGM paid NEIM $ for the
Fund's fiscal year ended December 31, 1999.

For the fiscal year ended 1997 under an administrative services agreement
between New England Funds and NEIM, NEIM paid $26,923 for Balanced, $26,923 for
International Equity, $26,923 for U.S. Government, $26,923 for Strategic Bond,
$26,923 for Venture Value, $26,923 for Equity Growth, $26,923 for Bond Income,
$26,923 for Managed, $26,923 for Money Market. For the fiscal year ended
December 31, 1998 under an administrative services agreement between New England
Funds and NEIM, NEIM paid $26,923 per Series for each of the following Series:
Balanced, International Equity, U.S. Government, Strategic Bond, Venture Value,
Equity Growth, Bond Income, Managed and Money Market.

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 Balanced, Managed, Bond Income, Strategic
- ---------------------------------------------------------------------------
Bond, U.S. Government and Money Market Series
- ---------------------------------------------

It is expected that the portfolio transactions of Balanced, Managed, Bond
Income and Money Market 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 fiscal years ended December 31, 1997, 1998 and 1999
was 40%, 82% and 77%, respectively, for Bond Income; 65%, 25% and 49%
respectively, for Managed; 60%, 72%, and 63% respectively, for

-58-
<PAGE>

Balanced; 258%, 283% and 224%, respectively, for Strategic Bond; and 572%, 496%
and 530%, respectively, for U.S. Government.

Small Cap, International Equity, Equity Growth, Capital Growth, Midcap Value,
- -----------------------------------------------------------------------------
Venture Value, Balanced and Managed (Common Stock Transactions)
- ---------------------------------------------------------------

In placing orders for the purchase and sale of portfolio securities, CGM,
in the case of Capital Growth Series, Harris, in the case of the Midcap Value
Series, Loomis Sayles, in the case of the Small Cap Series, Wellington
Management, in the case of the Balanced Series, Back Bay Advisors, in the case
of investments in common stocks by the Managed Series, MSAM, in the case of the
International Equity Series, Davis Selected, in the case of the Venture Value
Series, Alger Management, in the case of Equity Growth and MFS, in the case of
the Investors and Research Managers 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 December 31, 1997, 1998 and 1999, Capital
Growth paid brokerage commissions of $4,245,443, $6,104,694 and $ ,
respectively; Stock Index paid brokerage commissions of $12,015, $18,326 and
$ , respectively; the Managed Series paid brokerage commissions of
$31,499, $22,789 and $ , respectively; International Equity paid
brokerage commissions of $146,747, $163,946 and $ , respectively;
Venture Value paid brokerage commissions of $148,966, $280,521.84 and $ ,
respectively; and Equity Growth paid brokerage commissions of $489,199,
$694,292 and $ , respectively.

For the fiscal years ending December 31, 1997, 1998 and 1999, Midcap Value
paid brokerage commissions of $74,700, $371,572 and $ , respectively, of which
$1,300, no dollars and $ , respectively, were paid to brokers providing
research services. For the same periods, Growth and Income paid brokerage
commissions of $163,690, $323,816 and $ , respectively, of which $77,711,
$157,952 and $ , respectively, were paid to brokers providing research
services. For the same periods, Small Cap paid brokerage commissions of
$394,066, $711,187 and $ , respectively, of which $42,246, $71,282 and
$ , respectively, were paid to brokers providing research services. For
the same periods, the Balanced Series paid brokerage commissions of $115,075,
$225,014 and $ , respectively, of which $3,436, $20,766 and $ ,
respectively, were paid to brokers providing research services.

-59-
<PAGE>

Growth and Income, Stock Index, Strategic Bond and U.S. Government Series
- -------------------------------------------------------------------------

In placing orders for the purchase and sale of securities, the subadvisers
for the Series listed above always seeks best execution. Westpeak and SBAM each
select 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
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, 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. Equity Growth paid $489,199, $694,292 and $ in brokerage
commissions to Fred Alger and Company, Inc., an affiliated broker, for the
fiscal years ended December 31, 1997, 1998 and 1999, respectively. The amount
paid by Equity Growth represents approximately all of that Series' aggregate
brokerage commissions for the years ended December 31, 1997, 1998 and 1999. For
the fiscal years ending December 31, 1997, 1998 and 1999, Venture Value paid a
total of $54,840, $40,044 and $ , respectively, in brokerage commissions to
Shelby Cullom Davis & Co., L.P., an affiliated broker. This amount represents
36%, 14% and %, respectively, of such Series aggregate brokerage
commissions for such fiscal years. For the fiscal years ended
December 31, 1997, 1998 and 1999, International Equity paid a total of $2,395,
$1,539 and $ , respectively, in brokerage commissions to Morgan Stanley
& Co. Incorporated, Morgan Stanley & Co. Limited, Morgan Stanley Securities
Limited and Dean Witter Reynolds Inc., each an affiliated broker, representing
1.6%, 0.9% and %, respectively, of the total brokerage commissions paid by
such Series during such fiscal years. Midcap Value paid no brokerage
commissions to affiliates for the year ended December 31, 1997. For the years
ended December 31, 1998 and 1999, Midcap Value paid 18.3% and $ ,
respectively, in brokerage commissions to Goldman, Sachs & Co., an affiliated
broker of the former subadviser to Midcap Value, Goldman Sachs Asset
Management, which represents 4.9% and %, respectively, of the total
brokerage commissions paid by such Series during such fiscal years.

CODE OF ETHICS

The Fund, NEIM, each Series' subadviser, and New England Securities
Corporation have each adopted a Code of Ethics which establish procedures for
the detection and prevention of certain conflicts of interest, including
activities by which persons having knowledge of the investments and investment
intentions of the Fund might take advantage of that knowledge for their own
benefit. Although each Code of Ethics does not prohibit employees who have
knowledge of the investments and investment intentions of any Series of the Fund
from engaging in personal securities investing, it does regulate such personal
securities investing so that conflicts of interest may be avoided.

DESCRIPTION OF THE FUND

The Fund is a diversified, open-end management investment company (except
with regard to Harris/Oakmark Midcap Value Series, which is a non-diversified
Series) registered under the 1940 Act and was 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, as
amended. 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. Capital Growth, Bond Income and Money
Market all commenced investment operations in 1983.

-60-
<PAGE>

Stock Index commenced operations on March 30, 1987. The Managed Series commenced
investment operations on May 1, 1987. Harris/Oakmark Midcap Value (prior to May
1, 1998, known as Loomis Sayles Avanti Growth Series, and from May 1, 1998 to,
2000, known as Goldman Sachs Midcap Value Series) and Growth and Income (prior
to August 30, 1996 the Series was named Westpeak Value Growth Series) commenced
investment operations in April 1993. Small Cap commenced investment operations
on May 1, 1994. Equity Growth, International Equity (prior to May 1, 1997 the
Series was named the Draycott International Equity Series), Venture Value,
Balanced Series (prior to May 1, 2000, known as the Loomis Sayles Balanced
Series), Strategic Bond and the 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 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 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 March 31, 2000, 100% of the outstanding voting securities of the Fund
were owned by separate accounts of MetLife and/or NEF, and may, from time to
time, be owned by those separate accounts and the general account of NEF and its
affiliates. Therefore, MetLife and NEF 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 NEF 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 NEF 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 NEF currently intend to vote their shares in
a manner consistent with this view.

As of March 31, 2000, John Hancock Mutual Life Insurance Company located at
200 Clarendon Street, Boston, Massachusetts 02117, was the beneficial owner
(through ownership units in a Separate Account) of % of Money Market.

Voting Rights
- -------------

Fund shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held). NEF and MetLife are the legal
owners of shares attributable to variable life insurance and variable annuity
contracts issued by

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<PAGE>

their separate accounts, and have the right to vote those shares. Pursuant to
the current view of the SEC staff, NEF 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 NEF 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 any unregistered
separate account for which voting privileges are not extended) of NEF 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 of Fund
shares or other provisions relating to Fund shares in response to applicable
laws or regulations.

TAXES

The following discussion of federal income tax consequences is based on the
Code and the regulations issued thereunder as in effect on the date of this SAI.
New legislation, as well as administrative changes or court decisions, may
significantly change the conclusions expressed herein and may have a retroactive
effect with respect to the transactions contemplated herein.

Each of the Series intends to qualify as a "regulated investment company"
("RIC") under Subchapter M of the Code. A Series that is a RIC and distributes
to its shareholders at least 90% of its taxable net investment income
(including, for this purpose, its net realized short-term capital gains) and 90%
of its tax-exempt interest income (reduced by certain expenses), will not be
liable for federal income taxes to the extent its taxable net investment income
and its net realized long-term and short-term capital gains, if any, are
distributed to its shareholders.

A number of technical rules are prescribed for computing net investment
income and net capital gains. For example, a Series is generally treated as
certain foreign currency losses and capital losses arising after October 31 of a
given year may be treated as if they arise on the first day of the next taxable
year.

In order to qualify as a RIC under the Code, in addition to satisfying the
distribution requirement described above, each Series must (a) derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities, or foreign currencies, and certain other related income,
including generally, certain gains from options, futures, and forward contracts;
and (b) diversify its holdings so that, at the end of each fiscal quarter of the
Series' taxable year, (i) at least 50% of the market value of the Series' assets
is represented by cash and cash items, U.S. Government Securities, securities of
other RICs, and other securities, with such other securities limited, in respect
of any one issuer, to an amount that does not exceed 10% of the voting
securities of such issuer or 5% of the value of the Series' total assets; and
(ii) not more than 25% of the value of its assets is invested in the securities
(other than U.S. Government Securities and securities of other RICs) of any one
issuer or two or more issuers which the Series controls and which are engaged in
the same, similar or related trades or businesses.

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<PAGE>

If a Series fails to qualify as a RIC for any year, all of its income will
be subject to tax at corporate rates, and its distributions (including capital
gain distributions) will be taxable as ordinary income dividends to its
shareholders to the extent of the Series' current and accumulated earnings and
profits.

In addition to qualifying under Subchapter M by meeting the requirements
described above, each Series intends to meet the diversification requirements of
Subchapter L of the Code so that non-qualified variable annuity contracts funded
by each Series will not fail to qualify as annuities for tax purposes. In
general, for a Series to meet the investment diversification requirements of
Subchapter L of the Code, Treasury regulation 1.817-5 requires that, as of the
end of each fiscal quarter, no more than 55% of the total value of the assets of
the Series be represented by any one investment, no more than 70% by any two
investments, no more than 80% by three investments and no more than 90% by four
investments. Generally, for purposes of the regulations, all securities of the
same issuer are treated as one investment. In the context of U.S. Government
securities (including any security that is issued, guaranteed or insured by the
United States or an instrumentality of the United States), each U.S. Government
agency or instrumentality is treated as a separate issuer. In the context of
shares of registered investment companies, each series, fund or portfolio is
treated as a separate issuer.

Notwithstanding the distribution requirement described above, which only
requires a Series to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gain, a RIC is generally subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year at least 98% of its
ordinary income for the one-year period ending on October 31 of that year, plus
certain other amounts.

The excise tax is inapplicable to any RIC all of the shareholders of which
are either tax-exempt pension trusts or separate accounts of life insurance
companies funding variable contracts. Although each Series believes that it is
not subject to the excise tax, each Series intends to make the distributions
required to avoid the imposition of the tax, provided such payments and
distributions are determined to be in the best interest of such Series'
shareholders.

Dividends declared by each Series in October, November, or December of any
year and payable to shareholders of record on a date in such month will be
deemed to have been paid by the Series and received by the shareholders on
December 31 of that year if paid by the Series at any time during the following
January.

TRANSFER AGENT

The transfer agent and the dividend paying agent for the Fund, NEF,
located 501 Boylston Street, Boston, Massachusetts 02116, receives no
remuneration from the Fund in connection with its services as such.

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.

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<PAGE>

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,
1999 are incorporated herein by reference to the Fund's Annual Report as filed
with the Securities and Exchange Commission on _____________,2000.

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.

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<PAGE>

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.

(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.

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<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.

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APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE

Advertising and promotional literature prepared by NEF for products it
issues or administers may include references to NEIM or Nvest Companies and its
affiliates that perform advisory and subadvisory functions for NEIM 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.

NEF's advertising and promotional literature may include references to
other NEF or Nvest Companies' 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 & Tang Mutual
Funds, the Oakmark Family of Funds and Jurika & Voyles and their fund groups.

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

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

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

[_] Specific and general investment emphasis, specialties, fields of expertise,
competencies, operations and functions

[_] Specific and general investment philosophies, strategies, processes,
techniques and types of analysis

[_] 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

[_] The corporate histories, founding dates and names of founders of the
entities

[_] Awards, honors and recognition given to the firms

[_] The names of those with ownership interest and the percentage of ownership

[_] 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

[_] Current capitalization, levels of profitability and other financial and
statistical information

[_] Identification of portfolio managers, researchers, economists, principals
and other staff members and employees

[_] 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

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<PAGE>

[_] Current and historical statistics about:

-total dollar amount of assets managed

-NEIM 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

[_] 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.

[_] 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 the Fund. Any such references will
indicate that the Fund 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 NEF 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 an indirect subsidiary of NEF,
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.

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

[_] 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

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<PAGE>

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 NEF may or may
not have a relationship.

[_] Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the NEF 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.

[_] 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.

[_] Specific and general discussion of the benefits of 401(k) investment and
retirement plans, and, in particular, the NEF 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.

[_] Specific and general reference to the benefits of investing in mutual funds
for 401(k) and retirement plans, and, in particular, the Fund and investing
in NEF'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

- -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., including, but not limited to,
sales support, plan record keeping, document service support, plan
sponsor support, compliance testing and Form 5500 preparation.

[_] 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.

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NEW ENGLAND ZENITH FUND
-----------------------

PART C. OTHER INFORMATION
-----------------

Item 23 Exhibits:
--------
a.

(1) Agreement and Declaration of Trust is incorporated herein by
reference to Post-Effective Amendment No. 22 (File No. 2-83538)
filed on February 28, 1997.

(2) Amendment No. 1 to Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment No.
22 (File No. 2-83538) filed on February 28, 1997.

(3) Amendment No. 2 to Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment No.
22 (File No. 2-83538) filed on February 28, 1997.

(4) Amendment No. 3 to Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment No.
22 (File No. 2-83538) filed on February 28, 1997.

(5) Amendment No. 4 to Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment
No. 22 (File No. 2-83538) filed on February 28, 1997.

(6) Amendment No. 5 to the Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment No.
22 (File No. 2-83538) filed on February 28, 1997.

(7) Amendment No. 6 to the Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment No.
22 (File No. 2-83538) filed on February 28, 1997.

(8) Amendment No. 7 to Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment No.
22 (File No. 2-83538) filed on February 28, 1997.

(9) Amendment No. 8 to the Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment
No. 24 (File No. 2-83538) filed on May 1, 1998.

(10) Amendment No. 9 to the Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment
No. 24 (File No. 2-83538) filed on May 1, 1998.

(11) Amendment No. 10 to the Agreement and Declaration of Trust is
incorporated herein by reference to Post-Effective Amendment
No. 26 (File No. 2-83538) filed on April 29, 1999.
<PAGE>

Registration Nos. 2-83538
811-3728

(1) By-Laws, as amended, are incorporated herein by reference to
Post-Effective Amendment No. 23 (File No. 2-83538) filed on
March 2, 1998.

(2) Amendment to By-Laws relating to Electronic Proxy Voting is
incorporated herein by reference to Post-Effective Amendment
No. 23 (File No. 2-83538) filed on March 2, 1998.

c. None.

d.
(1) Advisory Agreements by and between New England Investment
Management, Inc. (formerly TNE Advisers, Inc.) and the Fund, on
behalf of each of its Loomis Sayles Small Cap, Alger Equity
Growth, Davis Venture Value, Westpeak Growth and Income, Westpeak
Stock Index, Balanced (formerly Loomis Sayles Balanced), Back Bay
Advisors Managed, Salomon Brothers Strategic Bond Opportunities,
Back Bay Advisors Bond Income, Salomon Brothers U.S. Government,
Back Bay Advisors Money Market and Morgan Stanley International
Magnum Equity Series are incorporated herein by reference to
Post-Effective Amendment No. 24 (File No. 2-83538) filed on May
1, 1998 as Exhibits 5(a) as follows:

(i) Loomis Sayles Small Cap Series
(ii) Alger Equity Growth Series
(iii) Davis Venture Value Series
(iv) Westpeak Growth and Income Series
(v) Westpeak Stock Index Series
(vi) Balanced Series
(vii) Back Bay Advisors Managed Series
(viii) Salomon Brothers Strategic Bond Opportunities Series
(ix) Back Bay Advisors Bond Income Series
(x) Salomon Brothers U.S. Government Series
(xi) Back Bay Advisors Money Market Series
(xii) Morgan Stanley International Magnum Equity Series

(2) Advisory Agreement between the Fund on behalf of its
Harris/Oakmark Midcap Value Series (formerly Goldman Sachs MidCap
Value Series) and New England Investment Management, Inc.
(formerly TNE Advisers, Inc.) is incorporated herein by reference
to Post-Effective Amendment No. 26 (File No. 2-83538) filed on
April 29, 1999.

(3) Advisory Agreements by and between the Fund, on behalf of each of
its MFS Investors Series and MFS Research Managers Series, and
New England Investment Management, Inc. (formerly TNE Advisers,
Inc.) are incorporated herein by reference to Post-Effective
Amendment No. 26 (File No. 2-83538) filed on April 29, 1999.

(4) Advisory Agreement between the Fund, on behalf of its Capital
Growth Series and Capital Growth Management Limited Partnership
is incorporated herein by reference to Post-Effective Amendment
No. 23 (File No. 2-83538) filed on March 2, 1998.

(5) Subadvisory Agreements relating to the following Series of the
Registrant, by and between New England Investment Management,
Inc. (formerly TNE Advisers, Inc.) and the subadvisers indicated
in parentheses, are incorporated herein to Post-Effective
Amendment No. 23 (File No. 2- 83538) filed on March 2, 1998 as
Exhibits 5(b) as follows:

-2-
<PAGE>

(i) Loomis Sayles Small Cap Series (Loomis, Sayles & Company,
L.P. ["Loomis Sayles"]
(ii) Alger Equity Growth Series (Fred Alger Management Inc.)
(iii) Westpeak Growth and Income Series (Westpeak Investment
Advisors, L.P.["Westpeak"])
(iv) Westpeak Stock Index Series (Westpeak)
(v) Back Bay Advisors Managed Series (Back Bay Advisors, L.P.
["Back Bay Advisors"])
(vi) Salomon Brothers Strategic Bond Opportunities Series
(Salomon Brothers Asset Management Inc. [SBAM] and
Salomon Brothers Asset Management Limited [SBAM Ltd].)
(vii) Back Bay Advisors Bond Income Series (Back Bay Advisors)
(viii) Salomon Brothers U.S. Government Series (SBAM)
(ix) Back Bay Advisors Money Market Series (Back Bay Advisors)

(6) Sub-Advisory Agreement for the Davis Venture Value Series
by and among New England Investment Management, Inc. (formerly TNE
Advisers, Inc.), Davis Selected Advisers, L.P. and Davis Selected
Advisers - NY, Inc. is incorporated herein by reference to Post-
Effective Amendment No. 22 on Form N-1A (File No. 2-83538) filed on
February 28, 1997.

(7) Sub-Advisory Agreement for the Morgan Stanley International Magnum
Equity Series by and between New England Investment Management,
Inc. (formerly TNE Advisers, Inc.) and Morgan Stanley Asset
Management Inc. ("MSAM") is incorporated herein by reference to
Post- Effective Amendment No. 25 (File No. 2-83538) filed on
February 11, 1999.

(8) Sub-Advisory Agreements for the MFS Investors Series and the MFS
Research Managers Series are incorporated herein by reference to
Post-Effective Amendment No. 26 (File No. 2-83538) filed on
April 29, 1999.

**(9) Sub-Advisory Agreement for the Harris/Oakmark Midcap Value Series
between New England Investment Management, Inc. and Harris
Associates L.P.

**(10) Sub-Advisory Agreement for the Balanced Series between New England
Investment Management, Inc. and Wellington Management Company, LLP.

(1) Distribution Agreement by and between New England Securities
Corporation and the Fund, dated as of April 28, 1999 is
incorporated herein by reference to Post-Effective Amendment
No. 26 (File No. 2-83538) filed on April 29, 1999.

f. None.

(1) Amended and Restated Custodian Contract among the Fund, New England
Mutual Life Insurance Company ("The New England"), and State

-3-

<PAGE>

Street Bank and Trust Company ("State Street"), dated September
24, 1992, is incorporated herein by reference to Post-Effective
No. 24 (File No. 2-83538) filed on May 1, 1998.

(2) Amendment No. 1, dated April 29, 1993, to the Amended and
Restated Custodian Contract, among the Fund, The New England and
State Street relating to the applicability of the Custodian
Contract to the Westpeak Growth and Income and Loomis Sayles
Avanti Growth Series, is incorporated herein by reference to
Post-Effective No. 24 (File No. 2-83538) filed on May 1, 1998.

(3) Amendment No. 2, dated April 29, 1994, to the Amended and
Restated Custodian Contract, among the Fund, The New England and
State Street relating to the applicability of the Custodian
Contract to the Loomis Sayles Small Cap Series is incorporated
herein by reference to Post-Effective No. 24 (File No. 2-83538)
filed on May 1, 1998.

(4) Amendment No. 3, dated October 31, 1994, to the Amended and
Restated Custodian Contract, among the Fund, The New England and
State Street relating to the applicability of the Custodian
Contract to each of the Loomis Sayles Balanced Series, Draycott
International Equity Series, Salomon Brothers U.S. Government
Series, Salomon Brothers Strategic Bond Opportunities Series,
Davis Venture Value Series, Alger Equity Growth Series and CS
First Boston Strategic Equity Opportunities Series is
incorporated herein by reference to Post-Effective No. 24 (File
No. 2-83538) filed on May 1, 1998.

(5) Amendment No. 4, dated as of April 28, 1999, to the Amended and
Restated Custodian Contract, among the Fund, NELICO and State
Street relating to the applicability of the Custodian Contract to
each of the MFS Investors Series and the MFS Research Managers
Series, is incorporated herein by reference to Post-Effective
Amendment No. 26 (File No. 2-83538) filed on April 29, 1999.

*(6) Amendment, dated as of November 17, 1999, to Amended and Restated
Custodian Agreement among the Fund, State Street and Metropolitan
Life Insurance Company.

(1) Transfer Agency Agreement by and between the Fund and The New
England is incorporated herein by reference to Post-Effective No.
24 (File No. 2- 83538) filed on May 1, 1998.

(2) Amendment to Transfer Agency Agreement relating to the
applicability of the Agreement to the Westpeak Growth and Income
and the Loomis Sayles Avanti Growth Series (renamed Goldman Sachs
Midcap Value Series) is incorporated herein by reference to
Post-Effective No. 24 (File No. 2-83538) filed on May 1, 1998.

(3) Amendment to Transfer Agency Agreement relating to the
applicability of the Agreement to the Loomis Sayles Small Cap
Series is incorporated herein by reference to Post-Effective No.
24 (File No. 2-83538) filed on May 1, 1998.

(4) Amendment to Transfer Agency Agreement relating to the
applicability of the Agreement to each of the Loomis Sayles
Balanced Series, Draycott International Equity Series, Salomon
Brothers U.S. Government, Salomon Brothers Strategic Bond
Opportunities, Davis Venture Value Series, Alger Equity Growth
Series and CS First Boston Strategic Equity Opportunities Series
is incorporated herein by reference to Post-Effective No. 24
(File No. 2- 83538) filed on May 1, 1998.

(5) Amendment to the Transfer Agency Agreement relating to the
applicability of the Agreement to each of the MFS Investors
Series and the MFS Research Managers Series, dated as of April
28, 1999, is incorporated herein by reference to Post-Effective
Amendment No. 26 (File No. 2-83538) filed on April 29, 1999.

**(6) Assignment and Assumption of Transfer Agency Agreement of the
Fund between Metropolitan Life Insurance Company and New England
Life Insurance Company.

-4-
<PAGE>

**(7) Expense Agreement between the Fund and New England Investment
Management, Inc., dated as of ________, 2000.

(8) Powers of Attorney.

**(1) Opinion and Consent of counsel relating to the Series dated
______, 2000.

-5-
<PAGE>

Registration Nos. 2-83538
811-3728

**(1) Consent of Deloitte & Touche, L.L.P.

**(2) Consent of Coopers and Lybrand, LLP.

k. None.

l. None.

m. None.

-6-
<PAGE>

Registration Nos. 2-83538
811-3728

n. None.

**p. Codes of Ethics of the Registrant and its advisers, subadvisers
and principal underwriter.
-------------
* Filed herewith
** To be filed by amendment.

Item 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------

None.

-7-
<PAGE>

Item 25. Indemnification
---------------

See Article 4 of the Fund's By-Laws, as amended, filed as Exhibit 1 to
Post-Effective Amendment No. 23 on Form N-1A (File No. 2-83538) which
Exhibit is incorporated herein by reference. In addition, the Fund
maintains a trustees and officers liability insurance policy with a
maximum coverage of $15 million under which the Fund and its trustees
and officers are named insureds.

Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the Fund's
By-Laws, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful
defense of any action, suit of proceeding) is asserted by such
trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.

-8-
<PAGE>

Item 26. Business and other Connections of Investment Adviser
----------------------------------------------------

(a) New England Investment Management, Inc. ("NEIM"), which
prior to May 1, 1999 had the name TNE Advisers, Inc., is the
adviser of the Back Bay Advisors Money Market, Back Bay
Advisers Bond Income, Back Bay Advisors Managed, Westpeak
Growth and Income, Harris/Oakmark Midcap Value, Westpeak
Stock Index, Loomis Sayles Small Cap, Balanced, MFS
Investors, MFS Research Managers, Morgan Stanley
International Magnum Equity, Salomon Brothers U.S.
Government, Salomon Brothers Strategic Bond Opportunities,
Davis Venture Value and the Alger Equity Growth Series and
has entered into subadvisory agreements for these Series
with Back Bay Advisors, Westpeak Investment Advisors, L.P.,
Harris Associates L.P., Loomis, Sayles & Company, L.P.,
Wellington Management Company, LLP, Massachusetts Financial
Services Company, Morgan Stanley Dean Witter Investment
Management Inc., Salomon Brothers Asset Management Inc. and
Salomon Brothers Management Limited, Davis Selected
Advisers, L.P. and Fred Alger Management, Inc.,
respectively. NEIM, a wholly-owned subsidiary of New England
Life Insurance Company ("NELICO"), was organized in 1994 and
oversees, evaluates and monitors the subadvisers' provision
of investment advisory services to the Series and provides
general management and administration to the Series.

The list required by this Item 26 regarding any other
business, profession, vocation or employment of a
substantial nature engaged in by officers and directors of
NEIM during the past two years is incorporated by reference
to Schedules A and D of Form ADV filed by NEIM pursuant to
the Investment Advisers Act of 1940, as amended
(SEC File No. 801-47459).

(b) Capital Growth Management Limited Partnership, the adviser
of the Capital Growth Series, provides investment advice to
a number of other registered investment companies and to
other organizations and individuals.

The list required by this Item 26 regarding any other
business, profession, vocation or employment of a
substantial nature engaged in by officers and directors of
Capital Growth Management Limited Partnership ("CGM") during
the past two years is incorporated by reference to Schedules
A and D of Form ADV filed by CGM pursuant to the Advisers
Act (SEC File No. 801-35935).

(c) Back Bay Advisors, L.P., the subadviser of the Back Bay
Advisors Money Market, Back Bay Advisors Bond Income Series
and Back Bay Advisors Managed Series, is a wholly-owned
subsidiary of Nvest Companies, L. P. ("Nvest Companies").
Its sole general partner is Back Bay Advisors, Inc.

The list required by this Item 26 regarding any other
business, profession, vocation or employment of a
substantial nature engaged in by officers and directors of
Back Bay Advisors during the past two years is incorporated
by reference to Schedules A and D of Form ADV filed by Back
Bay Advisors pursuant to the Advisers Act (SEC File
No. 801-27694).

(d) Westpeak Investment Advisors, L.P. ("Westpeak"), the
subadviser of the Westpeak Growth and Income and Westpeak
Stock Index Series, is a wholly-

-9-
<PAGE>

owned subsidiary of Nvest Companies. Its sole general
partner is Westpeak Investment Advisors, Inc.

The list required by this Item 26 regarding any other
business, profession, vocation or employment of a
substantial nature engaged in by officers and directors of
Westpeak during the past two years is incorporated by
reference to Schedules A and D of Form ADV filed by Westpeak
pursuant to the Advisers Act (SEC File No. 801-39554).

(e) Loomis Sayles & Company, L. P. ("Loomis Sayles"), the
subadviser to the Loomis Sayles Small Cap, is a wholly-owned
subsidiary of Nvest Companies. Its sole general partner is
Loomis Sayles & Company, Inc.

The list required by this Item 26 regarding any other
business, profession, vocation or employment of a
substantial nature engaged in by officers and directors of
Loomis Sayles during the past two years is incorporated by
reference to Schedules A and D of Form ADV filed by Loomis
Sayles pursuant to the Advisers Act (SEC File No. 801-170).

(f) Fred Alger Management, Inc., the subadviser of Alger Equity
Growth Series, provides investment advice to a number of
other registered investment companies and to other
organizations and individuals.

The list required by this Item 26 regarding any other
business, profession, vocation or employment of a
substantial nature engaged in by officers and directors of
Alger Management during the past two years is incorporated
by reference to Schedules A and D of Form ADV filed by Fred
Alger Management pursuant to the Advisers Act (SEC File No.
801-06709).

(g) Davis Selected Advisers, L.P., the subadviser of the Venture
Value Series, provides investment advice to a number of
other registered investment companies and to other
organizations and individuals.

The list required by this Item 26 regarding any other
business, profession, vocation or employment of a
substantial nature engaged in by officers and directors of
Davis Selected during the past two years is incorporated by
reference to Schedules A and D of Form ADV filed by Fred
Alger Management pursuant to the Advisers Act (SEC File No.
801-31648).

(h) SBAM Subadviser to the Salomon Brothers U.S. Government
Series and along with SBAM, Ltd., subadviser to the Salomon
Brothers Strategic Bond Series, provides investment advise
to a number of other registered investment companies and to
other organizations.

The list required by this Item 26 of officers and directors
of SBAM, SBAM Limited together with information as to any
other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to
Schedules A and D of their respective Form ADV filed by SBAM
and SBAM Limited, respectively, pursuant to the Advisers Act
(SEC File Nos.801-32046 and 801-43335, respectively).

-10-
<PAGE>

(i) Morgan Stanley Dean Witter Investment Management,Inc.
provides investment advice to a number of other registered
investment companies and to other organizations.

The list required by Item 26 of the officers and directors
of Morgan Stanley Dean Witter Investment Management Inc.
("MSDW") together with information as to any other business,
profession, vocation, or employment of a substantial nature
engaged in by the Chairman, President and Directors during
the past two fiscal years, is incorporated by reference to
Schedules A and D of Form ADV filed by MSDW pursuant to the
Advisers Act (SEC File No. 801-15757).

(j) MFS provides investment advice to a number of other
registered investment companies and to other organizations.

The list required by Item 26 of the officers and directors
of MFS together with information as to any other business,
profession, vocation, or employment of a substantial nature
engaged in by the Chairman, President and Directors during
the past two fiscal years, is incorporated by reference to
Schedules A and D for Form ADV filed by MFS pursuant to the
Advisers Act (SEC. File No. 801-17352).

(k) Wellington Management Company, LLP ("Wellington"), the
subadviser of the Balanced Series, provides investment
advice to a number of other registered investment companies
and to other organizations.

The list required by Item 26 of the officers and directors
of Wellington together with information as to any other
business, profession, vocation, or employment of a
substantial nature engaged in by the Chairman, President and
Directors during the past two fiscal years, is incorporated
by reference to Schedules A and D of Form ADV filed by
Wellington pursuant to the Advisers Act (SEC File
No. 801-15908).

(l) Harris Associates L.P. ("Harris"), the subadviser of the
Harris/Oakmark Midcap Value Series, is a wholly-owned
subsidiary of Nvest Companies. Its sole general partner is
Harris Associates, Inc.

The list required by Item 26 of the officers and directors
of Harris together with information as to any other
business, profession, vocation, or employment of a
substantial nature engaged in by the Chairman, President and
Directors during the past two fiscal years, is incorporated
by reference to Schedules A and D of Form ADV filed by
Harris pursuant to the Advisers Act (SEC File
No. 801-50333).

Item 27. Principal Underwriters
----------------------

(l) New England Securities Corporation also serves as principal
underwriter for:

New England Variable Life Separate Account
New England Variable Annuity Fund I
New England Retirement Investment Account
The New England Variable Account
New England Variable Annuity Separate Account

(m) The directors and officers of the Registrant's principal
underwriter, New England Securities Corporation, and their
addresses are as follows:

<TABLE>
<CAPTION>
Positions and
Positions and Offices Offices with
Name with Principal Underwriter Registrant
---- -------------------------- -------------
<S> <C> <C>
Thomas W. McConnell (2) Chairman of the Board, President None
and Chief Executive Officer

Mary M. Diggins (1) Vice President, General Counsel, None
Secretary and Clerk
</TABLE>

-11-
<PAGE>

<TABLE>
<S> <C> <C>
Mark Greco (2) Vice President and Chief None
Operating Officer

Michael E. Toland (1) Vice President, Chief Financial None
Officer, Treasurer, Chief
Compliance Officer, Assistant
Secretary, and Assistant Clerk

Bradley Anderson (2) Vice President None

Mitchell A. Karman (1) Vice President None

Laura A. Hutner (2) Vice President None

Robert F. Regan (3) Vice President None

Jonathan M. Rozek (2) Vice President None

Andrea Ruesch (2) Vice President None

Joanne Logue (1) Vice President None

Genevieve Martin (2) Field Vice President None

Rebecca Kovatch (2) Field Vice President None

John Peruzzi (2) Assistant Vice President and None
Controller

Steven J. Brash (4) Assistant Treasurer None

Leo R. Brown (4) Assistant Treasurer None

Ronald Mare (4) Assistant Treasurer None

Gregory M. Harrison (4) Assistant Treasurer None
</TABLE>
- --------------------
(1) New England Financial, 501 Boylston Street, Boston, MA 02116
(2) New England Financial, 399 Boylston Street, Boston, MA 02116
(3) New England Financial, 500 Boylston Street, Boston, MA 02116
(4) Metropolitan Life Insurance Company, One Madison Avenue, New York, NY 10010

Item 28. Location of Accounts and Records
--------------------------------

The following companies maintain possession of the documents required
by the specified rules:

(a) Registrant
Rule 31a-1(a)(4)
Rule 31a-2(a)

(b) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)

(c) For the Back Bay Advisors Money Market Series, the Back Bay
Advisors Bond Income Series and the Back Bay Advisors Managed
Series:

-12-
<PAGE>

Back Bay Advisors, L.P.
399 Boylston Street
Boston, Massachusetts 02116

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Westpeak Growth and Income and Westpeak Stock Index
Series:

Westpeak Investment Advisors, L.P.
1011 Walnut St. Suite 400
Boulder, Colorado 80302

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Loomis Sayles Small Cap Series:

Loomis Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02110

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Morgan Stanley International Magnum Equity Series:

Morgan Stanley Asset Management
1221 Avenue of the Americas
New York, New York 10021

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Salomon Brothers U. S. Government Series and the Salomon
Brothers Strategic Bond Opportunities Series:

Salomon Brothers Asset Management Inc.
7 World Trade Center
New York, New York 10048

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Davis Venture Value Series:

Davis Selected Advisers, L.P.
124 East Marcy Street
Santa Fe, NM 87501

-13-
<PAGE>

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Alger Equity Growth Series:

Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the MFS Investors Series and the MFS Research Managers Series:

Massachusetts Financial Services Company
501 Boylston Street
Boston, Massachusetts 02116

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Capital Growth Series:

Capital Growth Management Limited Partnership
One Financial Center
Boston, Massachusetts 02111

Rule 31a-1(a); 31a-1(b)(9), (10), (11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Balanced Series:

Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109

Rule 31a-1(a); 31a-1(b)(9),(10),(11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

For the Harris/Oakmark Midcap Value Series:

Harris Associates L.P.
2 North LaSalle Street
Chicago, IL 60602

Rule 31a-1(a); 31a-1(b)(9),(10),(11);
31a-1(f)
Rule 31a-2(a); 31a-2(e)

(d) New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116

Rule 31a-1(d)
Rule 31a-2(c)

Item 29. Management Services
-------------------

Not applicable.

Item 30. Undertakings
------------

(a) The Registrant undertakes to provide the Fund's annual
report to any person who receives a Fund prospectus and
who requests the annual report.

********

A copy of the Agreement and Declaration of Trust establishing New England Zenith
Fund is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby

-14-
<PAGE>

given that this Registration Statement is executed on behalf of the Fund by
officers of the Fund as officers and not individually and that the obligations
of or arising out of this Registration Statement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Fund.

-15-
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Fund has duly caused this registration statement to be signed on its
behalf by the undersigned, duly authorized, in the city of Boston and the
Commonwealth of Massachusetts on the 1st day of March, 2000.

New England Zenith Fund

By: /s/ ANNE GOGGIN
---------------------------
Anne Goggin
President

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following person in the capacities and as
of the date indicated.

/s/ ANNE GOGGIN Chairman of the Board; March 1, 2000
- --------------------------- Chief Executive Officer;
Anne Goggin President and Trustee

/s/ PETER DUFFY Treasurer March 1, 2000
- --------------------------- Principal Financial and
Peter Duffy Accounting Officer

JOHN J. ARENA* Trustee March 1, 2000
- ---------------------------
John J. Arena

JOHN W. FLYNN* Trustee March 1, 2000
- ---------------------------
John W. Flynn

/s/ MARY ANN BROWN* Trustee March 1, 2000
- ---------------------------
Mary Ann Brown

NANCY HAWTHORNE* Trustee March 1, 2000
- ---------------------------
Nancy Hawthorne

-16-
<PAGE>

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

EDWARD A. BENJAMIN* Trustee March 1, 2000
- ---------------------------
Edward A. Benjamin

JOHN T. LUDES* Trustee March 1, 2000
- ---------------------------
John T. Ludes

DALE ROGERS MARSHALL* Trustee March 1, 2000
- ---------------------------
Dale Rogers Marshall

*By: /s/ THOMAS M. LENZ
------------------------------------------
Thomas M. Lenz
Attorney-in-Fact
March 1, 2000

-17-
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
g(6) Amendment to Custodian Agreement
h(8) Powers of Attorney
</TABLE>

<PAGE>

Exhibit g (6)

AMENDMENT TO AMENDED AND RESTATED CUSTODIAN AGREEMENT

This Amendment to the Amended and Restated Custodian Agreement is made as
of November 17, 1999 by and between New England Zenith Fund (the "Fund"),
Metropolitan Life Insurance Company ("MetLife") and State Street Bank and Trust
Company (the "Custodian"). Capitalized terms used in this Amendment without
definition shall have the respective meanings given to such terms in the Amended
and Restated Custodian Agreement referred to below.

WHEREAS, the Fund, New England Mutual Life Insurance Company ("The New
England") and the Custodian entered into an Amended and Restated Custodian
Agreement dated as of September 22, 1992 (as amended and in effect from time to
time, the "Agreement"); and

WHEREAS, MetLife, the surviving company of a merger of The New England and
MetLife, which merger was consummated on August 30, 1996, has certain rights and
obligations under the Custodian Agreement; and

WHEREAS, the Fund, the Custodian and MetLife desire to effect a novation by
removing MetLife as a party to the Custodian Agreement and by having the Fund
assume all rights and obligations of MetLife under the Custodian Agreement; and

WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets, and the Fund has made the series listed on Schedule D hereto
subject to the Agreement (each such series, together with all other series
subsequently established by the Fund and made subject to the Contract in
accordance with the terms thereof, shall be referred to as a "Series", and,
collectively, the "Series"); and

WHEREAS, the Fund and the Custodian desire to amend certain provisions of
the Agreement to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated
under the Investment Company Act of 1940, as amended (the "1940 Act"); and

WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Agreement relating to the custody of assets of each of
the Portfolios held outside of the United States.

NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereby agree to amend the
Agreement, pursuant to the terms thereof, as follows:
<PAGE>

I. Sections II.7.A through 7.M of the Agreement is hereby deleted, and
Sections 8 through 16 of the Agreement are hereby renumbered, as of the
effective date of this Amendment, as Sections 9 through 17 of Article II,
respectively.

II. New Sections II.7.A through 7.I and Sections II.8.A through 8.L of the
Agreement are hereby added, as of the effective date of this Amendment, as
set forth below.

7. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
----------------------------------------

7.A. DEFINITIONS.
-----------

Capitalized terms in this Section 7 of Article II shall have the following
meanings:

"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing settlement practices; and laws and regulations
applicable to the safekeeping and recovery of Foreign Assets held in custody in
that country.

"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign
branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the
requirements of a custodian under Section 17(f) of the 1940 Act, except that the
term does not include Mandatory Securities Depositories.

"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Series'
transactions in such investments.

"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.

"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolio's behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.

2
<PAGE>

7.B. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
------------------------------------------------------

The Fund, by resolution adopted by its Board of Trustees (the "Board"), hereby
delegates to the Custodian, with respect to the Portfolios, pursuant to Section
(b) of Rule 17f-5, the responsibilities set forth in this Section 7 of Article
II with respect to Foreign Assets of the Series held outside the United States,
and the Custodian hereby accepts such delegation, as Foreign Custody Manager
with respect to the Series.

7.C. COUNTRIES COVERED.
-----------------

The Foreign Custody Manager shall be responsible for performing the delegated
responsibilities defined below only with respect to the countries and custody
arrangements for each such country listed on Schedule A to this Agreement, which
list of countries may be amended from time to time by the Fund with the
agreement of the Foreign Custody Manager. The Foreign Custody Manager shall
list on Schedule A the Eligible Foreign Custodians selected by the Foreign
Custody Manager to maintain the assets of the Series which list of Eligible
Foreign Custodians may be amended from time to time in the sole discretion of
the Foreign Custody Manager. Mandatory Securities Depositories are listed on
Schedule B to this Agreement, which Schedule B may be amended from time to time
by the Foreign Custody Manager. The Foreign Custody Manager will provide
amended versions of Schedules A and B in accordance with Section 7.G of this
Article II.

Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Series of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board on behalf of the
Series responsibility as Foreign Custody Manager with respect to that country
and to have accepted such delegation. Execution of this Amendment by the Fund
shall be deemed to be a Proper Instruction to open an account, or to place or
maintain Foreign Assets, in each country listed on Schedule A in which the
Custodian has previously placed or currently maintains Foreign Assets pursuant
to the terms of the Agreement. Following the receipt of Proper Instructions
directing the Foreign Custody Manager to close the account of a Portfolio with
the Eligible Foreign Custodian selected by the Foreign Custody Manager in a
designated country, the delegation by the Board on behalf of the Series to the
Custodian as Foreign Custody Manager for that country shall be deemed to have
been withdrawn and the Custodian shall immediately cease to be the Foreign
Custody Manager of the Series with respect to that country.

The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Sixty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.

3
<PAGE>

7.D. SCOPE OF DELEGATED RESPONSIBILITIES.
-----------------------------------

7.D.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS.
----------------------------------------

Subject to the provisions of this Section 7 of Article II, the Portfolio's
Foreign Custody Manager may place and maintain the Foreign Assets in the care of
the Eligible Foreign Custodian selected by the Foreign Custody Manager in each
country listed on Schedule A, as amended from time to time.

In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(1), as
amended from time to time.

7.D.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS.
------------------------------------------

The Foreign Custody Manager shall determine that the contract (or the rules or
established practices or procedures in the case of an Eligible Foreign Custodian
that is a foreign securities depository or clearing agency) governing the
foreign custody arrangements with each Eligible Foreign Custodian selected by
the Foreign Custody Manager satisfies the requirements of Rule 17f-5(c)(2), as
amended from time to time.

7.D.3. MONITORING.
----------

In each case in which the Foreign Custody Manager maintains Foreign Assets with
an Eligible Foreign Custodian selected by the Foreign Custody Manager, the
Foreign Custody Manager shall establish a system to monitor (i) the
appropriateness of maintaining the Foreign Assets with such Eligible Foreign
Custodian and (ii) the contract governing the custody arrangements established
by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules
or established practices and procedures in the case of an Eligible Foreign
Custodian selected by the Foreign Custody Manager which is a foreign securities
depository or clearing agency that is not a Mandatory Securities Depository).
In the event the Foreign Custody Manager determines that the custody
arrangements with an Eligible Foreign Custodian it has selected are no longer
appropriate, the Foreign Custody Manager shall notify the Board in accordance
with Section 7.G of Article II hereunder and assist the Series in withdrawing
their assets from such Eligible Foreign Custodian as soon as reasonably
practicable.

4
<PAGE>

7.E. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY.
--------------------------------------------------

For purposes of this Section 7 of Article II, the Fund and the Board shall be
deemed to have considered and determined to accept such Country Risk as is
incurred by placing and maintaining the Foreign Assets in each country for which
the Custodian is serving as Foreign Custody Manager of the Series. The Fund, on
behalf of the Series, and the Board shall be deemed to be monitoring on a
continuing basis such Country Risk to the extent that the Board considers
necessary or appropriate. The Fund and the Custodian each expressly acknowledge
that the Foreign Custody Manager shall not be delegated any responsibilities
under this Section 7 of Article II with respect to Mandatory Securities
Depositories.

7.F. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO.
----------------------------------------------------------

In performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of management investment
companies registered under the 1940 Act would exercise.

7.G. REPORTING REQUIREMENTS.
----------------------

7.G.1 The Foreign Custody Manager shall report the withdrawal of the
Foreign Assets from an Eligible Foreign Custodian and the placement of such
Foreign Assets with another Eligible Foreign Custodian by providing to the Board
amended Schedules A or B at the end of the calendar quarter in which an
amendment to either Schedule has occurred. The Foreign Custody Manager shall
make written reports notifying the Board of any other material change in the
foreign custody arrangements of the Series described in this Section 7 of
Article II promptly after the occurrence of the material change.

7.G.2 The Foreign Custody Manager shall deliver the written reports
required by Section 7.G.1 of Article II to the following address, or to such
other address as the Fund shall from time to time reasonably request:

Board of Trustees
New England Zenith Fund
c/o New England Financial
501 Boylston Street
Boston, Massachusetts 02116
Attn: Thomas M. Lenz

7.H. REPRESENTATIONS WITH RESPECT TO RULE 17F-5.
------------------------------------------

The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.

5
<PAGE>

The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Agreement to the Custodian as the
Foreign Custody Manager of the Series.

7.I. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
--------------------------------------------------------------------------

The Board's delegation to the Custodian as Foreign Custody Manager of the Series
shall be effective as of the date hereof and shall remain in effect until
terminated at any time, without penalty, by written notice from the terminating
party to the non-terminating party or upon termination of the Agreement in
accordance with its terms, if earlier. Termination will become effective sixty
(60) days after receipt by the non-terminating party of such notice. The
provisions of Section 7.C of Article II hereof shall govern the delegation to
and termination of the Custodian as Foreign Custody Manager of the Series with
respect to designated countries.

II.8. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE SERIES HELD
-------------------------------------------------------------------
OUTSIDE THE UNITED STATES.
-------------------------

8.A. DEFINITIONS.
-----------

Capitalized terms in this Section 8 of Article II shall have the following
meanings:

"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.

"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.

8.B. HOLDING SECURITIES.
------------------

The Custodian shall identify on its books as belonging to each Series the
respective foreign securities held by each Foreign Sub-Custodian or Foreign
Securities System. The Custodian may hold foreign securities for all of its
customers, including the Series, with any Foreign Sub-Custodian in an account
that is identified as belonging to the Custodian for the benefit of its
customers, provided however, that (i) the records of the Custodian with respect
----------------
to foreign securities of each Series which are maintained in such account shall
identify those securities as belonging to such Series and (ii), to the extent
permitted and customary in the market in which the account is maintained, the
Custodian shall require that securities so held by the Foreign Sub-Custodian be
held separately from any assets of such Foreign Sub-Custodian or of other
customers of such Foreign Sub-Custodian.

6
<PAGE>

8.C. FOREIGN SECURITIES SYSTEMS.
--------------------------

Foreign securities shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the Foreign Sub-
Custodian in such country pursuant to the terms of this Agreement.

8.D. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
---------------------------------------

8.D.1. DELIVERY OF FOREIGN ASSETS.
--------------------------

The Custodian or a Foreign Sub-Custodian shall release and deliver foreign
securities of a Portfolio held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:

(i) upon the sale of such foreign securities for the Portfolio in
accordance with commercially reasonable market practice in the
country where such foreign securities are held or traded, including,
without limitation: (A) delivery against expectation of receiving
later payment; or (B) in the case of a sale effected through a
Foreign Securities System, in accordance with the rules governing the
operation of the Foreign Securities System;

(ii) in connection with any repurchase agreement related to foreign
securities;

(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolio;

(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;

(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian or
of any nominee of the Custodian or such Foreign Sub-Custodian) or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units;

(vi) to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with market custom; provided that in
--------
any such case the Foreign Sub-Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except as
may arise from the Foreign Sub-Custodian's own negligence or willful
misconduct;

<PAGE>

(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement;

(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities;

(ix) for delivery as security in connection with borrowing by a
Portfolio requiring a pledge of assets by such Portfolio;

(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;

(xi) in connection with the lending of foreign securities; and

(xii) for any other proper purpose, but only upon receipt of Proper
--- ----
Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper trust purpose, and naming the
person or persons to whom delivery of such securities shall be made.

8.D.2. PAYMENT OF PORTFOLIO MONIES.
---------------------------

Upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to
pay out, monies of a Portfolio in the following cases only:

(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering money to
the seller thereof or to a dealer therefor (or an agent for such
seller or dealer) against expectation of receiving later delivery of
such foreign securities; or (B) in the case of a purchase effected
through a Foreign Securities System, in accordance with the rules
governing the operation of such Foreign Securities System;

(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;

(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest, taxes,
investment advisory fees,

<PAGE>

transfer agency fees, fees under this Agreement, legal fees,
accounting fees, and other operating expenses;

(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;

(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;

(vi) for payment of part or all of the dividends received in respect of
securities sold short;

(vii) in connection with the borrowing or lending of foreign securities;
and

(viii) for any other proper purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper trust purpose, and naming the person or
persons to whom such payment is to be made.

8.D.3. MARKET CONDITIONS; MARKET INFORMATION.
-------------------------------------

Notwithstanding any provision of this Agreement to the contrary, settlement and
payment for Foreign Assets received for the account of the Series and delivery
of Foreign Assets maintained for the account of the Series may be effected in
accordance with the customary established securities trading or processing
practices and procedures in the country or market in which the transaction
occurs, including, without limitation, delivering Foreign Assets to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) with the expectation of receiving later payment for such Foreign Assets
from such purchaser or dealer.

The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian or a Foreign Securities System, described on Schedule C hereto at
the time or times set forth on such Schedule. The Custodian may revise Schedule
C from time to time, provided that no such revision shall result in the Board
being provided with substantively less information than had been previously
provided hereunder.

8.E. REGISTRATION OF FOREIGN SECURITIES.
----------------------------------

The foreign securities maintained in the custody of a Foreign Sub-Custodian
(other than bearer securities) shall be registered in the name of the applicable
Portfolio or in the name of the Custodian or in the name of any Foreign Sub-
Custodian or in the name of any nominee

9
<PAGE>

of the foregoing, and the Fund on behalf of such Portfolio agrees to hold any
such nominee harmless from any liability as a holder of record of such foreign
securities except as such liability may arise from such nominee's own
negligence, misfeasance, bad faith or willful misconduct. The Custodian or a
Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a
Portfolio under the terms of this Agreement unless the form of such securities
and the manner in which they are delivered are in accordance with reasonable
market practice.

8.F. BANK ACCOUNTS.
-------------

The Custodian shall identify on its books as belonging to each Series (including
cash denominated in foreign currencies) deposited with the Custodian. Where the
Custodian is unable to maintain, or market practice does not facilitate the
maintenance of, cash on the books of the Custodian, a bank account or bank
accounts opened and maintained outside the United States on behalf of a
Portfolio with a Foreign Sub-Custodian shall be subject only to draft or order
by the Custodian or such Foreign Sub-Custodian, acting pursuant to the terms of
this Agreement to hold cash received by or from or for the account of the
Portfolio.

8.G. COLLECTION OF INCOME.
--------------------

The Custodian shall use reasonable commercial efforts to collect all income and
other payments with respect to the Foreign Assets held hereunder to which the
Series shall be entitled and shall credit such income, as collected, to the
applicable Portfolio In the event that extraordinary measures are required to
collect such income, the Fund and the Custodian shall consult as to such
measures and as to the compensation and expenses of the Custodian relating to
such measures.

8.H. SHAREHOLDER RIGHTS.
------------------

With respect to the foreign securities held pursuant to this Article 4, the
Custodian will use reasonable commercial efforts to facilitate the exercise of
voting and other shareholder rights, subject always to the laws, regulations and
practical constraints that may exist in the country where such securities are
issued. The Fund acknowledges that local conditions, including lack of
regulation, onerous procedural obligations, lack of notice and other factors may
have the effect of severely limiting the ability of the Fund to exercise
shareholder rights.

8.I. COMMUNICATIONS RELATING TO FOREIGN SECURITIES.
---------------------------------------------

The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of the Series. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender

10
<PAGE>

or exchange is sought or from the party (or its agents) making the tender or
exchange offer. Absent the Custodian's failure to observe the standard of care
set forth in Section 6.A of Article II, the Custodian shall not be liable for
any untimely exercise of any tender, exchange or other right or power in
connection with foreign securities or other property of the Series at any time
held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is
in actual possession of such foreign securities or property and (ii) the
Custodian receives Proper Instructions with regard to the exercise of any such
right or power, and both (i) and (ii) occur at least three business days prior
to the date on which the Custodian is to take action to exercise such right or
power.

8.J. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS.
------------------------------------------------------------------

Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian
shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian and the Fund from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Sub-Custodian's performance of such obligations. At the Fund's
election, the Fund and the Series shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a Foreign Sub-
Custodian as a consequence of any such loss, damage, cost, expense, liability or
claim if and to the extent that the Series have not been made whole for any such
loss, damage, cost, expense, liability or claim.

8.K. TAX LAW.
-------

The Custodian shall have no responsibility or liability for any obligations now
or hereafter imposed on the Fund, the Series or the Custodian as custodian of
the Series by the tax law of the United States or of any state or political
subdivision thereof. It shall be the responsibility of the Fund to notify the
Custodian of the obligations imposed on the Fund with respect to the Series or
the Custodian as custodian of the Series by the tax law of countries other than
those mentioned in the above sentence, including responsibility for withholding
and other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with regard to
such tax law shall be to use reasonable efforts to assist the Fund with respect
to any claim for exemption or refund under the tax law of countries for which
the Fund has provided such information.

8.L. LIABILITY OF CUSTODIAN.
----------------------

Except as may arise from the Custodian's own negligence or willful misconduct or
the negligence or willful misconduct of a Foreign Sub-Custodian, the Custodian
shall be without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by anything which is part of Country Risk.

11
<PAGE>

The Custodian shall be liable for the acts or omissions of a Foreign Sub-
Custodian to the same extent as set forth with respect to sub-custodians
generally in the Agreement and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where a Sub-Custodian has otherwise
exercised the standard of care that a professional custodian engaged in the
banking or trust company industry and having professional expertise in financial
and securities processing transactions and custody would observe.

8.M. REIMBURSEMENT FOR ADVANCES.
---------------------------

Notwithstanding any other provision in this Agreement, if the Fund requires the
Custodian to advance cash or foreign securities for any purpose including the
purchase or sale of foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of Section 8 of Article II, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, each Series hereby grants to the Custodian a security interest and
pledges to the Custodian in an amount not to exceed the lesser of the dollar
amounts borrowed or two percent (15 percent, in the case of the Money Market
Series) of such Series's total assets (taken at cost), the specific securities
to be designated in writing from time to time by the Series or its investment
advisor; provided, however, that (1) if from time to time neither the Series nor
its investment adviser shall have designated in writing specific securities in
an amount at least equal to the lesser of the dollar amounts borrowed or two
percent (15 percent, in the case of the Money Market Series) of such Series's
total assets (taken at cost), or (2) if as a result of the delivery by the
Custodian out of its custody, pursuant to Proper Instructions, of any securities
so designated shall be less than lesser of the dollar amounts borrowed or two
percent (15 percent, in the case of the Money Market Series) of such Series's
total assets, then the Custodian shall have a security interest in such Series's
securities in an amount that, taken together with amounts of securities from
time to time designated in writing by the Series or its investment adviser that
have not been delivered out of the custody of the Custodian pursuant to Proper
Instructions, does not exceed the lesser of the dollar amounts borrowed or two
percent (15 percent, in the case of the Money Market Series) of such Series's
total assets (taken at cost). Should the Series fail to repay promptly any
advances of cash or securities, the Custodian shall be entitled to use available
cash and to dispose of pledged securities and property as is necessary to repay
any such advances.

III. All references to "New England Mutual Life Insurance Company" and "The New
England" in the preamble of the Agreement are hereby deleted from the
Agreement. Each time the words "The New England" appear in the Agreement,
such words are hereby replaced with the words "the Fund." The second
sentence of the third paragraph of Section 6.A. of Article II is hereby
deleted.

12
<PAGE>

IV. Except as specifically superseded or modified herein, the terms and
provisions of the Agreement shall continue to apply with full force and
effect. Regarding the Custodian's role as Foreign Custody Manager only, in
the event of any conflict between the terms of the Agreement prior to this
Amendment and this Amendment, the terms of this Amendment shall prevail.
If the Custodian is delegated the responsibilities of Foreign Custody
Manager pursuant to the terms of Article 3 hereof, in the event of any
conflict between the provisions of Articles 3 and 4 hereof, the provisions
of Article 3 shall prevail.

13
<PAGE>

IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.

Witnessed By: STATE STREET BANK AND TRUST COMPANY

/s/ MARC L. PARSONS By: /s/ RONALD E. LOGUE
- --------------------------- -------------------
Marc L. Parsons Name: Ronald E. Logue
A.V.P. and Assoc. Counsel Title: Vice Chairman

Witnessed By: NEW ENGLAND ZENITH FUND,
on behalf of each of its series.

/s/ THOMAS M. LENZ By: /s/ JOHN F. GUTHRIE, JR.
- --------------------------- ------------------------
Secretary Name: John F. Guthrie, Jr.
New England Zenith Fund Title: Senior Vice President

Witnessed By: METROPOLITAN LIFE INSURANCE COMPANY

/s/ MYRA L. SAUL By: /s/ CHRISTOPHER P. NICHOLAS
- --------------------------- ---------------------------
Myra L. Saul Name: Christopher P. Nicholas
Assistant General Counsel Title: Associate General Counsel

A Copy of the Agreement and Declaration of Trust establishing New England Zenith
Fund is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed on
behalf of the Fund by officers of the Fund as officers and not individually and
that the obligations of or arising out of this Agreement are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the Fund.

14
<PAGE>

SCHEDULE A

STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
NON-MANDATORY
COUNTRY SUBCUSTODIAN DEPOSITORIES
- ------- ------------ ------------
<C> <S> <C>
Argentina Citibank, N.A. --

Australia Westpac Banking Corporation --

Austria Erste Bank der Oesterreichischen --
Sparkassen AG

Bahrain HSBC Bank Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)

Bangladesh Standard Chartered Bank --

Belgium Fortis Bank NV/as. --

Bermuda The Bank of Bermuda Limited --

Bolivia Citibank, N.A. --

Botswana Barclays Bank of Botswana Limited --

Brazil Citibank, N.A. --

Bulgaria ING Bank N.V. --

Canada State Street Trust Company Canada --

Chile Citibank, N.A. --

People's The Hongkong and Shanghai --
Republic Banking Corporation Limited,
of China Shanghai and Shenzhen branches

Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
</TABLE>
10/5/99 1
<PAGE>

SCHEDULE A

Croatia Privredna Banka Zagreb d.d. --

Cyprus The Cyprus Popular Bank Ltd. --

Czech eskoslovenska Obchodni --
Republic Banka, A.S.

Denmark Den Danske Bank --

Ecuador Citibank, N.A. --

Egypt Egyptian British Bank --
(as delegate of The Hongkong
and Shanghai Banking Corporation
Limited)

Estonia Hansabank --

Finland Merita Bank Plc. --

France Paribas, S.A. --

Germany Dresdner Bank AG --

Ghana Barclays Bank of Ghana Limited --

Greece National Bank of Greece S.A. Bank of Greece,
System for Monitoring
Transactions in Securities
in Book-Entry Form

Hong Kong Standard Chartered Bank --

Hungary Citibank Rt. --
</TABLE>

10/5/99 2
<PAGE>

SCHEDULE A

India Deutsche Bank A.G. --

The Hongkong and Shanghai
Banking Corporation Limited

Indonesia Standard Chartered Bank --

Ireland Bank of Ireland --

Israel Bank Hapoalim B.M. --

Italy Paribas, S.A. --

Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire

Jamaica Scotiabank Jamaica Trust and --
Merchant Bank Limited

Japan The Fuji Bank, Limited Japan Securities Depository
Center (JASDEC)
The Sumitomo Bank, Limited

Jordan HSBC Bank Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)

Kenya Barclays Bank of Kenya Limited --

Republic The Hongkong and Shanghai Banking
of Korea Corporation Limited

Latvia A/s Hansabank --
</TABLE>

10/5/99 3
<PAGE>

SCHEDULE A

Lithuania Vilniaus Bankas AB --

Malaysia Standard Chartered Bank --
Malaysia Berhad

Mauritius The Hongkong and Shanghai --
Banking Corporation Limited

Mexico Citibank Mexico, S.A. --

Morocco Banque Commerciale du Maroc --

Namibia (via) Standard Bank of South Africa --

The MeesPierson N.V. --
Netherlands

New Zealand ANZ Banking Group --
(New Zealand) Limited

Norway Christiania Bank og --
Kreditkasse ASA

Oman HSBC Bank Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)

Pakistan Deutsche Bank A.G. --

Palestine HSBC Bank Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)

Peru Citibank, N.A. --
</TABLE>

4
10/5/99
<PAGE>

SCHEDULE A

Poland Citibank (Poland) S.A. --

Portugal Banco Comercial Portugues --

Qatar HSBC Bank Middle East --

Romania ING Bank N.V. --

Russia Credit Suisse First Boston AO, --
Moscow (as delegate of
Credit Suisse First Boston,
Zurich)

Singapore The Development Bank --
of Singapore Limited

Slovak Ceskoslovenska Obchodni Banka, A.S. --
Republic

Slovenia Bank Austria Creditanstalt --
d.d. Ljubljana

South Africa Standard Bank of South Africa --
Limited

Spain Banco Santander Central --
Hispano, S.A.

Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited

Swaziland Standard Bank Swaziland Limited --

Sweden Skandinaviska Enskilda Banken --

Switzerland UBS AG --
</TABLE>

10/5/99 5
<PAGE>

SCHEDULE A

Thailand Standard Chartered Bank --

Trinidad & Republic Bank Limited --
Tobago

Tunisia Banque Internationale Arabe --
de Tunisie

Turkey Citibank, N.A. --

Ukraine ING Bank Ukraine --

United State Street Bank and Trust --
Kingdom Company, London Branch

Uruguay BankBoston N.A. --

Venezuela Citibank, N.A. --

Vietnam The Hongkong and Shanghai --
Banking Corporation Limited

Zambia Barclays Bank of Zambia Limited --

Zimbabwe Barclays Bank of Zimbabwe Limited --
</TABLE>

Euroclear (The Euroclear System)/State Street London Limited

Cedelbank S.A. (Cedel Bank, societe anonyme)/State Street London Limited

INTERSETTLE (for EASDAQ Securities)

10/5/99 6

<PAGE>

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES

<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
------- ----------------------
<C> <S>
Argentina Caja de Valores S.A.

Australia Austraclear Limited

Reserve Bank Information and
Transfer System

Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)

Belgium Caisse Interprofessionnelle de Depots et
de Virements de Titres S.A.

Banque Nationale de Belgique

Brazil Companhia Brasileira de Liquidacao e
Custodia

Bulgaria Central Depository AD

Bulgarian National Bank

Canada Canadian Depository
for Securities Limited

Chile Deposito Central de Valores S.A.

People's Republic Shanghai Securities Central Clearing &
of China Registration Corporation

Shenzhen Securities Clearing Co., Ltd.

Colombia Deposito Centralizado de Valores

Costa Rica Central de Valores S.A.
</TABLE>
* Mandatory depositories include entities for which use is mandatory 1
as a matter of law or effectively mandatory as a matter of market practice.

10/25/99
<PAGE>

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES

<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
------- ----------------------
<C> <S>
Croatia Ministry of Finance

National Bank of Croatia

Sredisnja Depozitarna Agencija

Czech Republic Stredisko cennych papiru

Czech National Bank

Denmark Vaerdipapircentralen (Danish
Securities Center)

Egypt Misr Company for Clearing, Settlement,
and Depository

Estonia Eesti Vaartpaberite Keskdepositoorium

Finland Finnish Central Securities
Depository

France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres

Germany Deutsche Borse Clearing AG

Greece Central Securities Depository
(Apothetirion Titlon AE)

Hong Kong Central Clearing and
Settlement System

Central Moneymarkets Unit

Hungary Kozponti Elszamolohaz es Ertektar
(Budapest) Rt. (KELER)
[Mandatory for Gov't Bonds and
dematerialized equities only; SSB does not
use for other securities]
</TABLE>
* Mandatory depositories include entities for which use is mandatory 2
as a matter of law or effectively mandatory as a matter of market practice.

10/25/99
<PAGE>

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES

<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
------- ----------------------
<C> <S>
India The National Securities Depository Limited

Central Depository Services India Limited

Reserve Bank of India

Indonesia Bank Indonesia

PT Kustodian Sentral Efek Indonesia

Ireland Central Bank of Ireland
Securities Settlement Office

Israel Tel Aviv Stock Exchange Clearing
House Ltd. (TASE Clearinghouse)

Bank of Israel
(As part of the TASE Clearinghouse system)

Italy Monte Titoli S.p.A.

Banca d'Italia

Ivory Coast Depositaire Central - Banque de Reglement

Jamaica Jamaica Central Securities Depository

Japan Bank of Japan Net System

Kenya Central Bank of Kenya

Republic of Korea Korea Securities Depository Corporation

Latvia Latvian Central Depository
</TABLE>
* Mandatory depositories include entities for which use is mandatory 3
as a matter of law or effectively mandatory as a matter of market practice.

10/25/99
<PAGE>

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES

<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
------- ----------------------
<C> <S>
Lebanon
Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.

The Central Bank of Lebanon

Lithuania Central Securities Depository of Lithuania

Malaysia Malaysian Central Depository Sdn. Bhd.

Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
System

Mauritius Central Depository & Settlement
Co. Ltd.

Mexico S.D. INDEVAL
(Instituto para el Deposito de Valores)

Morocco Maroclear

The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)

New Zealand New Zealand Central Securities
Depository Limited

Norway Verdipapirsentralen (the Norwegian Central
Registry of Securities)
</TABLE>
* Mandatory depositories include entities for which use is mandatory 4
as a matter of law or effectively mandatory as a matter of market practice.

10/25/99
<PAGE>

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES

<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
------- ----------------------
<C> <S>
Oman Muscat Securities Market Depository &
Securities Registration Company

Pakistan Central Depository Company of Pakistan
Limited State Bank of Pakistan

Palestine The Palestine Stock Exchange

Peru Caja de Valores y Liquidaciones
CAVALI ICLV S.A.

Philippines Philippines Central Depository, Inc.

Registry of Scripless Securities
(ROSS) of the Bureau of Treasury

Poland National Depository of Securities
(Krajowy Depozyt Papierow Wartos'ciowych SA)

Central Treasury Bills Registrar

Portugal Central de Valores Mobiliarios

Qatar Doha Securities Market

Romania National Securities Clearing, Settlement and
Depository Company

Bucharest Stock Exchange Registry Division

National Bank of Romania

Singapore Central Depository (Pte)
Limited

Monetary Authority of Singapore
</TABLE>
* Mandatory depositories include entities for which use is mandatory 5
as a matter of law or effectively mandatory as a matter of market practice.

10/25/99
<PAGE>

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES

<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
------- ----------------------
<C> <S>
Slovak Republic Stredisko cennych papierov SR
Bratislava, a.s.

National Bank of Slovakia

Slovenia Klirinsko Depotna Druzba d.d.

South Africa The Central Depository Limited

Strate Ltd.

Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.

Banco de Espana,
Central de Anotaciones en Cuenta

Sri Lanka Central Depository System
(Pvt) Limited

Sweden Vardepapperscentralen VPC AB
(the Swedish Central Securities Depository)

Switzerland SIS - SegaIntersettle

Taiwan - R.O.C. Taiwan Securities Central
Depository Co., Ltd.

Thailand Thailand Securities Depository
Company Limited

Tunisia Societe Tunisienne Interprofessionelle pour
la Compensation et de Depots de Valeurs
Mobilieres
</TABLE>
* Mandatory depositories include entities for which use is mandatory 6
as a matter of law or effectively mandatory as a matter of market practice.

10/25/99
<PAGE>

SCHEDULE B

STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES

<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
------- ----------------------
<C> <S>
Turkey Takas ve Saklama Bankasi A..
(TAKASBANK)

Central Bank of Turkey

Ukraine National Bank of Ukraine

United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office

Venezuela Central Bank of Venezuela

Zambia LuSE Central Shares Depository Limited

Bank of Zambia
</TABLE>
* Mandatory depositories include entities for which use is mandatory 7
as a matter of law or effectively mandatory as a matter of market practice.

10/25/99
<PAGE>
SCHEDULE C

MARKET INFORMATION

<TABLE>
<CAPTION>
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
- ------------------------------- -----------------
(Frequency)
<S> <C>
The Guide to Custody An overview of safekeeping and settlement
- -------------------- practices and procedures in each market in which
in World Markets State Street Bank and Trust Company offers
- ---------------- custodial services.
(annually)

Global Custody Network Review Information relating to the operating history
- ----------------------------- and structure of depositories and subcustodians
(annually) located in the markets in which State Street
Bank and Trust Company offers custodial
services, including transnational depositories.

Global Legal Survey With respect to each market in which
- ------------------- State Street Bank and Trust Company offers
(annually) custodial services, opinions relating to whether
local law restricts (i) access of a fund's
independent public accountants to books and
records of a Foreign Sub-Custodian or Foreign
Securities System, (ii) the Fund's ability to
recover in the event of bankruptcy or insolvency
of a Foreign Sub-Custodian or Foreign Securities
System, (iii) the Fund's ability to recover in
the event of a loss by a Foreign Sub-Custodian
or Foreign Securities System, and (iv) the
ability of a foreign investor to convert cash
and cash equivalents to U.S. dollars.

Subcustodian Agreements Copies of the subcustodian contracts State
- ----------------------- Street Bank and Trust Company has entered into
(annually) with each subcustodian in the markets in which
State Street Bank and Trust Company offers
subcustody services to its US mutual fund
clients.

Network Bulletins (weekly): Developments of interest to investors in the
markets in which State Street Bank and Trust
Company offers custodial services.

Foreign Custody Advisories With respect to markets in which State Street
(as necessary): Bank and Trust Company offers custodial services
which exhibit special custody risks,
developments which may impact State Street's
ability to deliver expected levels of service.
</TABLE>
<PAGE>

Schedule D
----------

Alger Equity Growth Series

Back Bay Advisors Bond Income Series

Back Bay Advisors Managed Series

Back Bay Advisors Money Market Series

Capital Growth Series

Davis Venture Value Series

Goldman Sachs Midcap Value Series

Loomis Sayles Balanced Series

Loomis Sayles Small Cap Series

MFS Investors Series

MFS Research Managers Series

Morgan Stanley International Magnum Equity Series

Salomon Brothers Strategic Bond Opportunities Series

Salomon Brothers U.S. Government Series

Westpeak Growth and Income Series

Westpeak Stock Index Series
<PAGE>

Exhibit h(8)
NEW ENGLAND ZENITH FUND

POWER OF ATTORNEY
-----------------

We, the undersigned members of the Board of Trustees of New England Zenith
Fund, hereby severally constitute and appoint, Peter H. Duffy, Anne M. Goggin,
John F. Guthrie, Jr. and Thomas M. Lenz and each of them singly, our true and
lawful attorneys, with full power to them and each of them to sign, for us, and
in our names and in the capacities indicated below, any and all registration
statements of the New England Zenith Fund and any and all amendments thereto to
be filed with the Securities and Exchange Commission, pursuant to the Securities
Act of 1933 and/or the Investment Company Act of 1940, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys to any and
all such registration statements and amendments thereto.

Witness our hands on the date set forth below.

Signature Title Date
--------- ----- ----

/s/ JOHN J. ARENA
- ---------------------------- Trustee February 1, 2000
John J. Arena

/s/ EDWARD A. BENJAMIN
- ---------------------------- Trustee February 1, 2000
Edward A. Benjamin

/s/ MARY ANN BROWN
- ---------------------------- Trustee February 1, 2000
Mary Ann Brown

/s/ JOHN W. FLYNN
- ---------------------------- Trustee February 1, 2000
John W. Flynn

/s/ NANCY HAWTHORNE
- ---------------------------- Trustee February 1, 2000
Nancy Hawthorne

/s/ JOHN T. LUDES
- ---------------------------- Trustee February 1, 2000
John T. Ludes

/s/ DALE ROGERS MARSHALL
- ---------------------------- Trustee February 1, 2000
Dale Rogers Marshall

(May be executed in counterparts.)

<PAGE>

NEW ENGLAND ZENITH FUND

POWER OF ATTORNEY
-----------------

I, the Chairman of the Board of Trustees, President, and Chief Executive
Officer of New England Zenith Fund, hereby severally constitute and appoint,
Peter H. Duffy, John F. Guthrie, Jr. and Thomas M. Lenz and each of them singly,
my true and lawful attorneys, with full power to them and each of them to sign,
for me, and in my name and in the capacities indicated below, any and all
registration statements of New England Zenith Fund and any and all amendments
thereto to be filed with the Securities and Exchange Commission, pursuant to the
Securities Act of 1933 and/or the Investment Company Act of 1940, hereby
ratifying and confirming my signature as it may be signed by my said attorneys
to any and all such registration statements and amendments thereto.

Witness my hand on the 1st of February, 2000.

/s/ ANNE M. GOGGIN
--------------------
Anne M. Goggin
Chairman of the Board, President
and Chief Executive Officer

<PAGE>

NEW ENGLAND ZENITH FUND

POWER OF ATTORNEY
-----------------

I, the Treasurer of New England Zenith Fund, hereby severally constitute
and appoint, Anne M. Goggin, John F. Guthrie, Jr. and Thomas M. Lenz and each of
them singly, my true and lawful attorneys, with full power to them and each of
them to sign, for me, and in my name and in the capacities indicated below, any
and all registration statements of New England Zenith Fund and any and all
amendments thereto to be filed with the Securities and Exchange Commission,
pursuant to the Securities Act of 1933 and/or the Investment Company Act of
1940, hereby ratifying and confirming my signature as it may be signed by my
said attorneys to any and all such registration statements and amendments
thereto.

Witness my hand on the 1st of February, 2000.

/s/ PETER H. DUFFY
------------------
Peter H. Duffy
Treasurer

<PAGE>

Exhibit h(8)
NEW ENGLAND ZENITH FUND

POWER OF ATTORNEY
-----------------

Witness our hands on the date set forth below.

Signature Title Date
--------- ----- ----

/s/ JOHN J. ARENA
- ---------------------------- Trustee February 1, 2000
John J. Arena

/s/ EDWARD A. BENJAMIN
- ---------------------------- Trustee February 1, 2000
Edward A. Benjamin

/s/ MARY ANN BROWN
- ---------------------------- Trustee February 1, 2000
Mary Ann Brown

/s/ JOHN W. FLYNN
- ---------------------------- Trustee February 1, 2000
John W. Flynn

/s/ NANCY HAWTHORNE
- ---------------------------- Trustee February 1, 2000
Nancy Hawthorne

/s/ JOHN T. LUDES
- ---------------------------- Trustee February 1, 2000
John T. Ludes

/s/ DALE ROGERS MARSHALL
- ---------------------------- Trustee February 1, 2000
Dale Rogers Marshall

(May be executed in counterparts.)
<PAGE>

NEW ENGLAND ZENITH FUND

POWER OF ATTORNEY
-----------------

Witness my hand on the 1st of February, 2000.

/s/ ANNE M. GOGGIN
--------------------
Anne M. Goggin
Chairman of the Board, President
and Chief Executive Officer
<PAGE>

NEW ENGLAND ZENITH FUND

POWER OF ATTORNEY
-----------------

Witness my hand on the 1st of February, 2000.

/s/ PETER H. DUFFY
------------------
Peter H. Duffy
Treasurer