NEW ENGLAND ZENITH FUND, 497, 2000-05-04

NEW ENGLAND ZENITH FUND
497, 2000-05-04

Previous: ACTIVISION INC /NY, S-8, 2000-05-04

Next: NEW ENGLAND ZENITH FUND, 497J, 2000-05-04

<PAGE>

NEW ENGLAND ZENITH FUND

ALGER EQUITY GROWTH SERIES

PROSPECTUS MAY 1, 2000

TABLE OF CONTENTS

<TABLE>
<S> <C>
Section I--Overview of New England Zenith Fund.............................. 1
Section II--Summary Information about Alger Equity Growth Series ........... 2
Section III--Additional Information about Alger Equity Growth Series ....... 3
Section IV--Other Information About the Fund................................ 5
Financial Highlights........................................................ 7
</TABLE>

SECTION I--OVERVIEW OF NEW ENGLAND ZENITH FUND

ORGANIZATION

The Fund is a mutual fund consisting of multiple investment portfolios, the
Series. One of these Series, the Alger Equity Growth Series ("Equity Growth"),
is offered through this Prospectus. New England Investment Management, Inc.
("NEIM") is the investment adviser to the Series. NEIM has contracted the
subadviser of Equity Growth to make the day-to-day investment decisions for the
Series. NEIM is responsible for overseeing the subadviser and for making
recommendations to the Board of Trustees of the Fund relating to hiring and
replacing the subadviser.

Equity Growth is a "diversified" fund.

INVESTORS

Fund shares are offered only to SEPARATE ACCOUNTS established by New England
Life Insurance Company ("New England Financial"), Metropolitan Life Insurance
Company ("Metropolitan Life") General American Life Insurance Company ("General
American"), Security First Life Insurance Company ("SFG Group") or other
insurance companies affiliated with any of these insurance companies (the
"Separate Accounts"). The Fund serves as the investment vehicle for variable
life insurance, variable annuity and group annuity products of these insurance
companies. 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.

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.

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.

<PAGE>

SECTION II--
SUMMARY INFORMATION ABOUT ALGER EQUITY GROWTH SERIES

INVESTMENT OBJECTIVE

The investment objective of 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 a 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.
[CHART]
TOTAL RETURN
1995 48.8%
1996 13.2%
1997 25.6%
1998 47.8%
1999 34.1%

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>

2
<PAGE>

SECTION III-- ADDITIONAL INFORMATION ABOUT ALGER EQUITY GROWTH SERIES

This Section discusses the principal investment strategies and risks of
investing in Equity Growth. However, the 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 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.

INVESTMENT OBJECTIVE

The investment objective of the Series may be changed without shareholder
approval.

TEMPORARY DEFENSIVE POSITIONS

The Series 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 the 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 the 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

The 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 PERCENTAGE REQUIREMENTS AND CAPITALIZATION

The Series has adopted policies that set minimum or maximum percentages of its
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 the 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 the Series to earn a return
on available cash at relatively low credit risk.

3
<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 issuers with a 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

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 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.

4
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

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. The Series pays NEIM an investment advisory fee. NEIM has
contracted with the subadviser to make the day-to-day investment decisions for
the Series and NEIM pays the subadviser's fees. NEIM is responsible for
overseeing the subadviser and for making recommendations to the Board of
Trustees of the Fund relating to hiring and replacing the subadviser. NEIM also
provides a full range of administrative and accounting services to the Series.

ADVISER/SUBADVISER RELATIONSHIP

The Fund has received an exemptive order from the Securities and Exchange
Commission that permits NEIM to enter into a new subadvisory agreement with the
subadviser 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 the new subadvisory agreement under this order, and the Fund must
comply with certain other conditions.

The exemptive order also permits the Fund to continue to employ the subadviser
without shareholder approval after events that would otherwise cause an
automatic termination of the 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 change 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 the Series on each day
that the New York Stock Exchange (the "NYSE") is open for business. The Fund
sells and redeems shares of the Series at the net asset value for the 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 the 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

The 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 the Series is calculated by dividing the Series' total net assets by
its number of outstanding shares.

Securities Valuation

Any fixed-income securities with remaining maturities of 60 days or less held
by the Series are valued at amortized cost. Other portfolio securities of the
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 the subadviser of the Series.

5
<PAGE>

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Currently, the Series annually pays as dividends substantially all net
investment income (including any short-term capital gains). The Series also
annually distributes all net realized capital gains, if any, after offsetting
any capital loss carryovers. The Series 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 the Series to fail to qualify as a regulated
investment company under the Internal Revenue Code.

Federal income tax law requires the Series to distribute prior to calendar
year-end virtually all of its ordinary income for such year. Also, the 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 the Series are automatically reinvested in
additional shares of the Series.

TAXES

The 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 the 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 the Series intends to operate so that it will have no federal
income tax liability, if any such liability is incurred, the investment
performance of the Series will be adversely affected.

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. The
Series intends to comply with these requirements. If the 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.

6
<PAGE>

ALGER EQUITY GROWTH SERIES

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand Equity
Growth's financial performance for the past 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 LLP
acted as the Fund's independent accountants and provided reports which
accompanied the financial statements for those periods.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 25.11 $ 17.62 $ 15.58 $ 13.80 $ 9.56
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income (Loss).. (0.01) 0.04 0.02 0.04 0.01
Net Realized and Unrealized
Gain (Loss) on Investments... 8.34 8.37 3.92 1.78 4.65
-------- -------- -------- -------- -------
Total From Investment
Operations............... 8.33 8.41 3.94 1.82 4.66
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ 0.00 (0.04) (0.02) (0.04) (0.01)
Distributions in Excess of Net
Investment Income ........... (0.01) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... (4.09) (0.88) (1.88) 0.00 (0.41)
-------- -------- -------- -------- -------
Total Distributions....... (4.10) (0.92) (1.90) (0.04) (0.42)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 29.34 $ 25.11 $ 17.62 $ 15.58 $ 13.80
======== ======== ======== ======== =======
Total Return (%).............. 34.1 47.8 25.6 13.2 48.8
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.80 0.83 0.87 0.90 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... (0.03) 0.19 0.12 0.24 0.14
Portfolio Turnover Rate (%)... 128 119 137 78 107
Net Assets, End of Year (000). $841,053 $410,726 $205,318 $120,456 $46,386
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement
would have been (%).......... -- -- -- 0.90 2.45
</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. This
expense arrangement is no longer in effect.

7
<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 the Series. The Fund's annual report discusses the market
conditions and investment strategies that significantly affected the 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.

8
<PAGE>

NEW ENGLAND ZENITH FUND

New England Zenith Fund (the "Fund") is a mutual fund that provides a range of
investment options. The following eight separate investment portfolios (the
"Series") are offered through this prospectus.

<TABLE>
<S> <C>
FIXED-INCOME SERIES EQUITY SERIES

Salomon Brothers Strategic Alger Equity Growth Series
Bond Opportunities Series Capital Growth Series
Davis Venture Value Series
Loomis Sayles Small Cap Series
MFS Investors Series
MFS Research Managers Series

INTERNATIONAL EQUITY 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-17
Section IV--Other Information about the Fund............................... B-36
Financial Highlights....................................................... B-38
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL
SERIES SUMMARY INFORMATION
------ ------- -----------
<S> <C> <C>
Salomon Brothers Strategic Bond Opportunities Series........ B-5 B-18
Alger Equity Growth Series.................................. B-7 B-21
Capital Growth Series....................................... B-8 B-22
Davis Venture Value Series.................................. B-10 B-25
Loomis Sayles Small Cap Series.............................. B-11 B-27
MFS Investors Series........................................ B-13 B-30
MFS Research Managers Series................................ B-14 B-32
Morgan Stanley International Magnum Equity Series........... B-15 B-34
</TABLE>

B-2
<PAGE>

SECTION I--OVERVIEW OF NEW ENGLAND ZENITH FUND

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 Limited Partnership ("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 is a "diversified" fund.

INVESTORS

Fund shares are offered only to SEPARATE ACCOUNTS established by New England
Life Insurance Company ("New England Financial"), Metropolitan Life Insurance
Company ("Metropolitan Life"), General American Life Insurance Company
("General American"), Security First Life Insurance Company ("SFG Group") or
other insurance companies affiliated with any of these insurance companies
(the "Separate Accounts"). The Fund serves as the investment vehicle for
variable life insurance, variable annuity and group annuity products of these
insurance companies. 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 relatively expensive, when compared to other stocks, in terms of
traditional measures of stock valuation. Generally, value stocks are

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.

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.

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 as it would have otherwise, 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

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.

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-5
<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.

[GRAPH]

Total Return

1995 19.4%
1996 14.4%
1997 11.1%
1998 2.0%
1999 1.4%

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-6
<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

PRINCIPAL INVESTMENT RISKS

. 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

[GRAPH]

Total Return

1995 48.8%
1996 13.2%
1997 25.6%
1998 47.8%
1999 34.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-7
<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 the
common stocks 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-8
<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.

[GRAPH]

Total Return

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%

During the period shown above, the highest quarterly return was 28.53% for the
fourth quarter of 1998, and the lowest quarterly return was -24.46% for the
third quarter of 1990. 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-9
<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.

[GRAPH]

Total Return

1995 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%

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 THE 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-10
<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.

[GRAPH]

Total Return

1995 28.9%
1996 30.7%
1997 24.9%
1998 -1.7%
1999 31.8%

B-11
<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-12
<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 American Depositary Receipts ("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-13
<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.

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-14
<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.

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-15
<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. 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, 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.

[GRAPH]

Total Return

1995 6.0%
1996 6.9%
1997 -1.3%
1998 7.3%
1999 24.6%

During the period shown above, the highest quarterly return was 14.82% 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-16
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT 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 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.

INVESTMENT OBJECTIVES

The investment objective of each Series may be changed without shareholder
approval.

TEMPORARY DEFENSIVE POSITIONS

Each Series 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 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-17
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

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.

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

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

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.

B-18
<PAGE>

Foreign Securities

In addition to the risks associated with fixed-income 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. 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 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.

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-19
<PAGE>

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

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.

B-20
<PAGE>

ALGER EQUITY GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Equity Growth paid 0.75% of its
average net assets in investment advisory fees.

B-21
<PAGE>

CAPITAL GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

CGM invests Capital Growth's assets primarily in the common stocks 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

B-22
<PAGE>

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 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 is 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 subject 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.

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-23
<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.

B-24
<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-25
<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 2949 East Elvira Road, Suite 101,
Tucson, AZ 85706. 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.

B-26
<PAGE>

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 is 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-27
<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.

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 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.

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

Small Cap 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

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.

B-28
<PAGE>

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

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.

B-29
<PAGE>

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 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.

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-30
<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.

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 has
been employed by MFS in the investment management area since 1981. Mr. Dynan
has been employed in the investment management area 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.

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-31
<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-32
<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.

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

B-33
<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 and 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-34
<PAGE>

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.

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.

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.

B-35
<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-36
<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

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, NEIM or the subadvisers of the Series.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Currently, each Series annually pays as dividends substantially all net
investment income (including any short-term capital gains). Each Series also
annually distributes all net realized capital gains, if any, after offsetting
any capital loss carryovers. Each Series 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 a
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-37
<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
those 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 December 31, 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 LLP acted as the Fund's independent accountants and
provided reports which accompanied the financial statements for those periods.

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 11.43 $ 12.01 $ 11.62 $ 10.85 $ 9.74
------- ------- ------- ------- ------
Income From Investment Operations
Net Investment Income............. 0.95 0.80 0.75 0.51 0.58
Net Realized and Unrealized Gain
(Loss) on Investments............ (0.78) (0.56) 0.54 1.05 1.30
------- ------- ------- ------- ------
Total From Investment
Operations................... 0.17 0.24 1.29 1.56 1.88
------- ------- ------- ------- ------
Less Distributions
Distributions From Net Investment
Income........................... (0.93) (0.79) (0.76) (0.60) (0.55)
Distributions From Net Realized
Capital Gains.................... 0.00 (0.02) (0.14) (0.19) (0.22)
Distributions in Excess of Net
Realized Capital Gains........... 0.00 (0.01) 0.00 0.00 0.00
------- ------- ------- ------- ------
Total Distributions........... (0.93) (0.82) (0.90) (0.79) (0.77)
------- ------- ------- ------- ------
Net Asset Value, End of Year...... $ 10.67 $ 11.43 $ 12.01 $ 11.62 $10.85
======= ======= ======= ======= ======
Total Return (%).................. 1.4 2.0 11.1 14.4 19.4
Ratio of Operating Expenses to
Average Net Assets (%)(a)........ 0.81 0.85 0.85 0.85 0.85
Ratio of Net Investment Income to
Average Net Assets (%)........... 8.15 7.20 7.32 7.79 8.39
Portfolio Turnover Rate (%)....... 224 283 258 176 202
Net Assets, End of Year (000) .... $94,910 $95,450 $71,202 $35,808 $9,484
The Ratios of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense agreement would have
been (%)......................... -- -- 0.87 1.19 2.44
</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. This expense arrangement is no
longer in effect.

B-38
<PAGE>

ALGER EQUITY GROWTH SERIES

B-39
<PAGE>

CAPITAL GROWTH SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year...... $ 468.03 $ 399.60 $ 427.08 $ 374.62 $ 312.30
---------- ---------- ---------- ---------- --------
Income From Investment
Operations
Net Investment Income... 3.35 5.29 2.52 3.08 3.47
Net Realized and
Unrealized Gain (Loss)
on Investments......... 68.25 130.40 95.67 74.80 114.91
---------- ---------- ---------- ---------- --------
Total From
Investment
Operations......... 71.60 135.69 98.19 77.88 118.38
---------- ---------- ---------- ---------- --------
Less Distributions
Distributions From Net
Investment Income...... (3.33) (5.31) (2.52) (3.08) (3.48)
Distributions From Net
Realized Capital Gains. (101.18) (61.73) (123.15) (22.34) (52.58)
Distributions in Excess
of Net Realized Capital
Gains.................. (0.38) (0.22) 0.00 0.00 0.00
---------- ---------- ---------- ---------- --------
Total Distributions. (104.89) (67.26) (125.67) (25.42) (56.06)
---------- ---------- ---------- ---------- --------
Net Asset Value, End of
Year................... $ 434.74 $ 468.03 $ 399.60 $ 427.08 $ 374.62
========== ========== ========== ========== ========
Total Return (%)........ 15.7 34.1 23.5 21.1 38.0
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.66 0.66 0.67 0.69 0.71
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.67 1.18 0.52 0.79 0.92
Portfolio Turnover Rate
(%).................... 206 204 214 207 242
Net Assets, End of Year
(000) ................. $2,064,016 $1,895,748 $1,425,719 $1,142,660 $921,444
</TABLE>

B-40
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income......... 0.12 0.16 0.18 0.13 0.10
Net Realized and Unrealized
Gain (Loss) on Investments... 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------
Total From Investment
Operations............... 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital Gains....... (0.32) (0.49) (0.53) (0.27) (0.20)
Distribution in Excess of Net
Realized Capital Gain ....... (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total Distributions....... (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
======== ======== ======== ======== =======
Total Return (%).............. 17.5 14.4 33.5 25.8 39.3
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.81 0.83 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate (%)... 22 25 17 18 20
Net Assets, End of Year (000)
............................. $655,599 $440,351 $280,448 $108,189 $35,045
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.90 0.96 1.51
</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. This expense arrangement is no
longer in effect.

B-41
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

B-42
<PAGE>

MFS INVESTORS SERIES

<TABLE>
<CAPTION>
APRIL 30, 1999(a)
THROUGH
DECEMBER 31,
1999
-----------------
<S> <C>
Net Asset Value, Beginning
of Period.................. $10.00
------
Income From Investment
Operations
Net Investment Income....... 0.02
Net Realized and Unrealized
Gain (Loss) on Investments. 0.26
------
Total From Investment
Operations............. 0.28
------
Less Distributions
Distributions From Net
Investment Income.......... (0.02)
------
Total Distributions..... (0.02)
------
Net Asset Value, End of
Period..................... $10.26
======
Total Return (%)............ 2.9 (b)
Ratio of Operating Expenses
to Average Net Assets
(%)(d)..................... 0.90 (c)
Ratio of Net Investment
Income to Average Net
Assets (%)................. 0.45 (c)
Portfolio Turnover Rate (%). 60
Net Assets, End of Period
(000)........................ $6,841
The Ratios of Operating
Expenses to Average Net
Assets without giving
effect to the voluntary
expense agreement would
have been (%).............. 2.03 (c)
</TABLE>
- --------
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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-43
<PAGE>

MFS RESEARCH MANAGERS SERIES

<TABLE>
<CAPTION>
APRIL 30, 1999(a)
THROUGH
DECEMBER 31,
1999
-----------------
<S> <C>
Net Asset Value, Beginning of Period......................... $10.00
------
Income From Investment Operations
Net Investment Income........................................ 0.00
Net Realized and Unrealized Gain (Loss) on Investments....... 1.98
------
Total From Investment Operations......................... 1.98
------
Net Asset Value, End of Period............................... $11.98
======
Total Return (%)............................................. 19.8 (b)
Ratio of Operating Expenses to Average Net Assets (%)........ 0.90 (c)
Ratio of Net Investment Income to Average Net Assets (%)..... (0.06)(c)
Portfolio Turnover Rate (%).................................. 84
Net Assets, End of Period (000).............................. $6,872
The Ratios of Operating Expenses to Average Net Assets
without giving effect to the voluntary expense agreement
would have been (%)......................................... 2.03 (c)
</TABLE>
- --------
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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-44
<PAGE>

MORGAN STANLEY INTERNATIONAL EQUITY MAGNUM SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 11.40 $ 10.86 $ 11.29 $ 10.73 $ 10.23
------- ------- ------- ------- -------
Income From Investment Operations
Net Investment Income............. 0.10 0.14 0.08 0.06 0.09
Net Realized and Unrealized Gain
(Loss) on Investments............ 2.70 0.66 (0.23) 0.68 0.53
------- ------- ------- ------- -------
Total From Investment
Operations................... 2.80 0.80 (0.15) 0.74 0.62
------- ------- ------- ------- -------
Less Distributions
Distributions From Net Investment
Income........................... (0.05) (0.12) (0.09) (0.02) (0.09)
Distributions in Excess of Net
Investment Income................ 0.00 (0.03) 0.00 0.00 (0.03)
Distributions From Net Realized
Capital Gains.................... 0.00 (0.11) (0.08) (0.16) 0.00
Distributions in Excess of Net
Realized Capital Gains........... 0.00 0.00 (0.11) 0.00 0.00
------- ------- ------- ------- -------
Total Distributions........... (0.05) (0.26) (0.28) (0.18) (0.12)
------- ------- ------- ------- -------
Net Asset Value, End of Year...... $ 14.15 $ 11.40 $ 10.86 $ 11.29 $ 10.73
======= ======= ======= ======= =======
Total Return (%).................. 24.6 7.3 (1.3) 6.9 6.0
Ratio of Operating Expenses to
Average Net Assets (%)(b)........ 1.30 1.30 1.30 1.30 1.30
Ratio of Net Investment Income to
Average Net Assets (%)........... 0.84 1.07 0.96 0.67 1.29
Portfolio Turnover Rate (%)....... 59 40 115 64 89
Net Assets, End of Year (000) $99,460 $68,169 $53,035 $39,392 $16,268
The Ratios of Operating Expenses
to Average Net Assets
without giving effect to the
voluntary expense
agreement would have been (%).... 1.30 1.40 1.59 1.66 3.12
</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-45
<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 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 1-202-942-8090 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
electronic request at the following E-mail address: [email protected], or 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-46
<PAGE>

NEW ENGLAND ZENITH FUND

New England Zenith Fund (the "Fund") is a mutual fund that provides a range of
investment options. The following fourteen separate investment portfolios (the
"Series") are offered through this prospectus.

<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 Mid Cap Value
Back Bay Advisors Bond Income Series Series
Salomon Brothers Strategic Loomis Sayles Small Cap Series
Bond Opportunities Series Westpeak Growth and Income Series
Salomon Brothers U.S. Government Series Westpeak Stock Index Series

EQUITY AND FIXED-INCOME SERIES INTERNATIONAL EQUITY SERIES

Back Bay Advisors Managed Series Morgan Stanley International
Balanced Series 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.

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-31
Section IV--Other Information about the Fund............................... B-66
Financial Highlights....................................................... B-68
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL
SERIES SUMMARY INFORMATION
------ ------- -----------
<S> <C> <C>
Back Bay Advisors Money Market Series....................... B-5 B-32
Back Bay Advisors Bond Income Series........................ B-7 B-33
Salomon Brothers Strategic Bond Opportunities Series........ B-9 B-36
Salomon Brothers U.S. Government Series..................... B-11 B-39
Back Bay Advisors Managed Series............................ B-13 B-41
Balanced Series............................................. B-15 B-45
Alger Equity Growth Series.................................. B-17 B-49
Capital Growth Series....................................... B-18 B-50
Davis Venture Value Series.................................. B-20 B-53
Harris Oakmark Mid Cap Value Series......................... B-21 B-55
Loomis Sayles Small Cap Series.............................. B-23 B-59
Westpeak Growth and Income Series........................... B-25 B-62
Westpeak Stock Index Series................................. B-27 B-63
Morgan Stanley International Magnum Equity Series........... B-29 B-64
</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

Each Series of the Fund other than the Harris Oakmark Mid Cap Value Series is
a "diversified" fund. As a "non-diversified" fund, the Harris Oakmark Mid Cap
Value Series may hold fewer securities than the other Series. If the stocks
held by the Harris Oakmark Mid Cap 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"), Metropolitan Life Insurance
Company ("Metropolitan Life"), General American Life Insurance Company
("General American"), Security First Life Insurance Company ("SFG Group") or
other insurance companies affiliated with any of these insurance companies
(the "Separate Accounts"). The Fund serves as the investment vehicle for
variable life insurance, variable annuity and group annuity products of these
insurance companies. 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

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.

Fixed-income Securities

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, L.P. ("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 or 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.

[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 2.00% for each
of the second and third quarters of 1990, and the lowest quarterly return was
0.72% for the second quarter of 1993. 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, L.P. ("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.

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 -3.05% for the first
quarter of 1994. 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
Intermediate Investment Grade
Debt Fund Average................ -0.5% 7.1% 7.1%
</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

PRINCIPAL INVESTMENT RISKS

. 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.

B-9
<PAGE>

INVESTMENT PERFORMANCE RECORD

[SALOMON BROTHERS CHART APPEARS HERE]

Year Total Return
- ---- ------------
1995 19.4%
1996 14.4%
1997 11.1%
1998 2.0%
1999 1.4%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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 or 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.

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
YEARS 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 (a)........ full one-year periods
</TABLE>

(a) Includes all funds in the Lipper Variable Products U.S. Mortgage Fund
Average and the Lipper Variable Products GNMA Fund Average.

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, L.P. ("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 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 two
relevant broad-based securities market indexes 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.

. 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 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 two relevant broad-based securities market indexes 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
Government/Corporate
Bond Index.............. -2.2% 7.6% 7.5%
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

PRINCIPAL INVESTMENT RISKS

. 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

[BAR CHART APPEARS HERE]

Year Total Return
- ---- ------------
1995 48.8%
1996 13.2%
1997 25.6%
1998 47.8%
1999 34.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-17
<PAGE>

CAPITAL GROWTH SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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.

B-18
<PAGE>

INVESTMENT PERFORMANCE RECORD

[SALOMON BROTHERS CHART 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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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

PRINCIPAL INVESTMENT RISKS

. 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

[BAR CHART APPEARS HERE]

Year Total Return
- ---- ------------
1995 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-20
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

Harris Associates L.P. ("Harris") invests Mid Cap Value's assets primarily in
common stocks of U.S. companies. Mid Cap 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." Mid Cap 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 Mid Cap 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 Mid Cap 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 Mid Cap
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 Mid Cap Value's investment objective.

PRINCIPAL INVESTMENT RISKS

Investing in Mid Cap Value involves risks. Mid Cap 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 Mid Cap Value include:

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

. Poor performance of individual stocks held by Mid Cap 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 Mid Cap 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, Mid Cap 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 Mid Cap Value for each
full calendar year since the Series began operations. The table following the
bar chart compares the average annual total returns of Mid Cap 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 Mid Cap 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 Mid Cap Value. On May 1, 1998, GSAM succeeded Loomis Sayles &
Company, L.P. ("Loomis Sayles") as subadviser to Mid Cap 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 CHART APPEARS HERE]

Year Total Return
- ---- ------------
1994 -0.3%
1995 30.4%
1996 17.6%
1997 17.4%
1998 -5.5%
1999 0.3%

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>
Mid Cap 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

PRINCIPAL INVESTMENT RISKS

. 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.

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-24
<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. ("Westpeak") 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-25
<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. 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>
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-26
<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 Investment Advisors, L.P. ("Westpeak") attempts to replicate the
composite price and yield performance, before expenses, 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. 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 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 CHART 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 -13.69% for the
third quarter of 1990. Past performance of a Series does not necessarily
indicate how that Series will perform in the future.

B-27
<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-28
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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.

B-29

<PAGE>

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-30
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT EACH SERIES

INVESTMENT OBJECTIVES

The investment objective of each Series may be changed without shareholder
approval.

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

INVESTMENT PERCENTAGE REQUIREMENTS AND CAPITALIZATION

B-31
<PAGE>

BACK BAY ADVISORS MONEY MARKET SERIES

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.

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.

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-32
<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 four principal areas: U.S. corporate securities, mortgage-
backed securities, U.S. Government securities, and foreign 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.
During 1999, the duration of this Index ranged from 4.4 years to 5.0 years.

PRINCIPAL INVESTMENT RISKS

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

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

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-33
<PAGE>

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

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.

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

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 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-34
<PAGE>

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

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 and Richard Raczkowski, MBA are the portfolio managers of
the Series. Mr. Palfrey, the lead portfolio manager of the Series, is a Senior
Vice President of Back Bay Advisors. He joined the company in 1993. Mr. Palfrey
has 17 years of investment experience. Mr. Raczkowski, a Vice President of Back
Bay Advisors, joined the company in 1998. Previously, he was a senior
consultant at Hagler Bailly Consulting. Mr. Raczkowski has 16 years of
financial and economic consulting experience.

During the fiscal year ended December 31, 1999, Bond Income paid 0.40% of its
average net assets in investment advisory fees.

B-35
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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.

B-36
<PAGE>

Foreign Securities

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

Emerging Markets

Forward Contracts and Futures

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-37
<PAGE>

High Yield Debt

High Yield, High Risk Foreign 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 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.

During the year ended December 31, 1999, Strategic Bond paid 0.65% of its
average net assets in investment advisory fees.

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

B-38
<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.

B-39
<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 since its inception. 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 paid 0.55% of its
average net assets in investment advisory fees.

B-40

<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 four
areas: U.S. corporate securities, mortgage-backed securities, U.S. Government
securities, and foreign 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-41
<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

Investment Style Risk. The stocks 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

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.

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.

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

B-42
<PAGE>

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

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; Danny Chan, CFA; and Richard Raczkowski, MBA are the
portfolio managers of the Series. Mr. Palfrey, the lead portfolio manager of
the Series, is a Senior Vice President of Back Bay Advisors. He joined the
company in 1993 and has 17 years of investment experience. Mr. Chan, a
portfolio manager on the equity side, is a Vice President of Back Bay Advisors.
He joined the company in 1999. Previously, he was a director and a portfolio

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 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-43
<PAGE>

manager in the Private Banking Division of UBS AG. Mr. Chan has seven years of
investment experience. Mr. Raczkowski, a portfolio manager on the fixed income
side, is a Vice President of Back Bay Advisors. He joined the company in 1998.
Previously,he was a senior consultant at Hagler Bailly Consulting.
Mr. Raczkowski has 16 years of financial and economic consulting experience.

During the year ended December 31, 1999, the Managed Series paid 0.50% of its
average net assets in investment advisory fees.

B-44
<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-45
<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-46
<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 Management may use certain techniques,
such as FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However,
Wellington Management 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.

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-47
<PAGE>

Forward Contracts and Futures Contracts

The Series may attempt to avoid the risk of an unfavorable shift in currency 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. The Series may also purchase futures contracts (or options on futures
contracts) to maintain exposure to the broad equity or fixed income markets.

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.

B-48
<PAGE>

ALGER EQUITY GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Equity Growth paid 0.75% of its
average net assets in investment advisory fees.

B-49
<PAGE>

CAPITAL GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

. 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

B-50
<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.

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.

PORTFOLIO MANAGEMENT

B-51
<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.

B-52
<PAGE>

DAVIS VENTURE VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock selection

. 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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

B-53
<PAGE>

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 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.

B-54
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Harris invests Mid Cap Value's assets primarily in common stocks of U.S.
companies. Mid Cap 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. Mid Cap 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 Mid Cap 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 over time due to changes in the value of U.S.
stocks. Harris may invest up to 25% of Mid Cap Value's total assets in fixed-
income securities, including high-yield debt.

Harris uses a value investment style in selecting equity securities for Mid Cap
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 Mid Cap Value's investment objective.

Harris' value strategy also emphasizes investing for the long-term, which means
that Mid Cap 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-55
<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 Mid Cap Value. Harris also monitors Mid Cap 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 Mid Cap Value's investment performance as compared to funds that
invest in a larger number of stocks. If the stocks in which Mid Cap Value
invests perform poorly, Mid Cap 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.

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-56
<PAGE>

High Yield Debt

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 Mid Cap Value and which has been managed using
investment policies and strategies substantially similar, though not
necessarily identical, to those of Mid Cap Value. The Oakmark Select Fund is
managed by William C. Nygren, and Mid Cap Value is managed by William C. Nygren
and Floyd J. Bellman. The following information does not represent Mid Cap
Value's performance and should not be considered a prediction of future
performance of Mid Cap Value. Mid Cap 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 MID CAP 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-57
<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, CFA, Henry Berghoef, CFA and Floyd J. Bellman, CFA are Mid
Cap 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. Berghoef has been a senior analyst at Harris since 1994. He was an analyst
at Kirr, Marbach & Co. from 1990 to 1993 and an analyst at Geico Corporation
from 1985 to 1990. 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, Mid Cap Value paid 0.75% of its
average net assets in investment advisory fees.

B-58
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

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

B-59
<PAGE>

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

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.

B-60
<PAGE>

PORTFOLIO MANAGEMENT

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.

During the year ended December 31, 1999, Small Cap paid 1.00% of its average
net assets in investment advisory fees.

B-61
<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.

B-62
<PAGE>

WESTPEAK STOCK INDEX SERIES

PRINCIPAL INVESTMENT STRATEGIES

Westpeak attempts to replicate the composite price and yield performance,
before expenses, 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.
- --------
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. and
references thereto have been made with permission. The Series is not
sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of investing in
the Series.

B-63
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

MSAM evaluates potential investments for International Equity in several steps.

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.

B-64
<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

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.

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, International Equity paid 0.90% of its
average net assets in investment advisory fees.

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-65
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

All Series except Capital Growth

Capital Growth

ADVISER/SUBADVISER RELATIONSHIP

PURCHASE AND REDEMPTION OF SHARES

SHARE VALUATION AND PRICING

Net Asset Value

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-66
<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, NEIM or 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 a regulated investment company
under the Internal Revenue Code.

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

TAXES

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-67
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand each Series'
financial performance for the past 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
December 31, 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
LLP acted as the Fund's independent accountants and provided reports which
accompanied the financial statements for those periods.

BACK BAY ADVISORS MONEY MARKET SERIES

B-68
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $ 109.89 $ 108.52 $ 105.63 $ 108.67 $ 95.53
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income....... 7.67 6.76 7.43 7.72 7.34
Net Realized and Unrealized
Gain (Loss) on Investments. (8.18) 3.00 4.05 (2.70) 12.85
-------- -------- -------- -------- --------
Total From Investment
Operations................. (0.51) 9.76 11.48 5.02 20.19
-------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income.......... (7.72) (6.64) (7.51) (7.74) (7.05)
Distributions From Net
Realized Capital Gains..... (0.16) (1.75) (1.08) (0.32) 0.00
In Excess of Net Realized
Gain....................... (0.10) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total Distributions......... (7.98) (8.39) (8.59) (8.06) (7.05)
-------- -------- -------- -------- --------
Net Asset Value, End of Year. $ 101.40 $ 109.89 $ 108.52 $ 105.63 $ 108.67
======== ======== ======== ======== ========
Total Return (%)............. (0.5) 9.0 10.9 4.6 21.2
Ratio of Operating Expenses
to Average Net Assets (%)... 0.48 0.48 0.52 0.52 0.55
Ratio of Net Investment
Income to Average Net Assets
(%)......................... 7.12 6.66 6.97 7.22 7.22
Portfolio Turnover Rate (%).. 77 82 40 98 73
Net Assets, End of Year (000)
............................ $283,856 $267,791 $202,888 $180,359 $167,712
</TABLE>

B-69
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

B-70
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 11.47 $ 11.14 $ 10.83 $ 11.04 $ 9.96
------- ------- ------- ------- ------
Income From Investment Operations
Net Investment Income............. 0.65 0.47 0.53 0.58 0.33
Net Realized and Unrealized Gain
(Loss) on Investments............ (0.62) 0.37 0.40 (0.21) 1.16
------- ------- ------- ------- ------
Total From Investment
Operations................... 0.03 0.84 0.93 0.37 1.49
------- ------- ------- ------- ------
Less Distributions
Distributions From Net Investment
Income........................... (0.66) (0.45) (0.53) (0.56) (0.33)
Distributions From Net Realized
Capital Gains.................... (0.03) (0.06) (0.05) (0.02) (0.08)
Distributions in Excess of Net
Realized Capital Gains........... 0.00 0.00 (0.04) 0.00 0.00
------- ------- ------- ------- ------
Total Distributions........... (0.69) (0.51) (0.62) (0.58) (0.41)
------- ------- ------- ------- ------
Net Asset Value, End of Year...... $ 10.81 $ 11.47 $ 11.14 $ 10.83 $11.04
======= ======= ======= ======= ======
Total Return (%).................. 0.2 7.5 8.6 3.3 15.0
Ratio of Operating Expenses to
Average Net Assets (%)(a)........ 0.70 0.70 0.70 0.70 0.70
Ratio of Net Investment Income to
Average Net Assets (%)........... 5.89 5.70 6.42 6.13 5.62
Portfolio Turnover Rate (%)....... 530 496 572 388 415
Net Assets, End of Year (000)..... $50,967 $45,807 $22,143 $13,211 $7,542
The Ratios of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense agreement would have been
(%).............................. 0.72 0.77 0.98 1.37 2.90
</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 0.70% 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-71
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $ 207.76 $ 189.85 $ 170.37 $ 163.52 $ 130.30
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income........ 6.98 6.56 6.38 6.43 6.34
Net Realized and Unrealized
Gain (Loss) on Investments.. 13.48 30.50 38.47 18.21 34.33
-------- -------- -------- -------- --------
Total From Investment
Operations.............. 20.46 37.06 44.85 24.64 40.67
-------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income........... (6.83) (6.51) (6.42) (6.34) (6.34)
Distributions in Excess of
Net Investment Income....... 0.00 0.00 0.00 0.00 (0.23)
Distributions From Net
Realized Capital Gains...... (24.57) (12.64) (18.95) (11.45) (0.88)
-------- -------- -------- -------- --------
Total Distributions...... (31.40) (19.15) (25.37) (17.79) (7.45)
-------- -------- -------- -------- --------
Net Asset Value, End of Year. $ 196.82 $ 207.76 $ 189.85 $ 170.37 $ 163.52
======== ======== ======== ======== ========
Total Return (%)............. 10.0 19.7 26.6 15.0 31.3
Ratio of Operating Expenses
to Average Net Assets (%)... 0.58 0.58 0.61 0.62 0.64
Ratio of Net Investment
Income to Average Net Assets
(%)......................... 3.16 3.15 3.20 3.64 4.06
Portfolio Turnover Rate (%).. 49 25 65 72 51
Net Assets, End of Year
(000)....................... $218,881 $213,639 $188,783 $160,888 $147,536
</TABLE>

B-72
<PAGE>

BALANCED SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 15.51 $ 14.86 $ 13.55 $ 11.95 $ 9.94
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 0.43 0.38 0.28 0.27 0.26
Net Realized and Unrealized
Gain (Loss) on Investments... (1.21) 0.97 1.90 1.73 2.20
-------- -------- -------- ------- -------
Total From Investment
Operations............... (0.78) 1.35 2.18 2.00 2.46
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.43) (0.38) (0.27) (0.27) (0.26)
Distributions From Net
Realized Capital Gains....... (0.26) (0.32) (0.60) (0.13) (0.19)
Distributions in Excess of Net
Realized Capital Gains....... (0.19) 0.00 0.00 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (0.88) (0.70) (0.87) (0.40) (0.45)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 13.85 $ 15.51 $ 14.86 $ 13.55 $ 11.95
======== ======== ======== ======= =======
Total Return (%).............. (5.1) 9.1 16.2 16.9 24.8
Ratio of Operating Expenses to
Average Net Assets (%)(b).... 0.77 0.82 0.85 0.85 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... 2.83 2.72 2.79 3.08 4.03
Portfolio Turnover Rate (%)... 63 72 60 59 72
Net Assets, End of Year (000). $192,666 $190,577 $137,443 $58,525 $18,823
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.86 0.99 1.85
</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. This expense arrangement is no
longer in effect.

B-73
<PAGE>

ALGER EQUITY GROWTH SERIES

B-74
<PAGE>

CAPITAL GROWTH SERIES

B-75
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income......... 0.12 0.16 0.18 0.13 0.10
Net Realized and Unrealized
Gain (Loss) on Investments... 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------
Total From Investment
Operations............... 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital Gains....... (0.32) (0.49) (0.53) (0.27) (0.20)
Distribution in Excess of Net
Realized Capital Gain ....... (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total Distributions....... (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
======== ======== ======== ======== =======
Total Return (%).............. 17.5 14.4 33.5 25.8 39.3
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.81 0.83 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate (%)... 22 25 17 18 20
Net Assets, End of Year (000)
............................. $655,599 $440,351 $280,448 $108,189 $35,045
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.90 0.96 1.51
</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. This expense arrangement is no
longer in effect.

B-76
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 122.85 $ 170.59 $ 157.88 $142.44 $112.77
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.36 1.09 0.00 0.11 0.42
Net Realized and Unrealized
Gain (Loss) on Investments... (0.97) (11.41) 27.12 24.88 33.80
-------- -------- -------- ------- -------
Total From Investment
Operations............... 0.39 (10.32) 27.12 24.99 34.22
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.36) (1.09) 0.00 (0.13) (0.40)
Distributions in Excess of net
investment income............ (0.17) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... 0.00 (36.08) (14.41) (9.42) (4.15)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 (0.25) 0.00 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (1.53) (37.42) (14.41) (9.55) (4.55)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 121.71 $ 122.85 $ 170.59 $157.88 $142.44
======== ======== ======== ======= =======
Total Return (%).............. 0.3 (5.5) 17.4 17.6 30.4
Ratio of Operating Expenses to
Average Net Assets (%)(b).... 0.88 0.88 0.85 0.85 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... 1.08 0.66 (0.16) 0.08 0.37
Portfolio Turnover Rate (%)... 119 171 49 65 58
Net Assets, End of Year (000). $109,280 $112,997 $114,617 $82,667 $48,832
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- 0.90 0.86 0.92 1.06
</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-77
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

B-78
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

B-79
<PAGE>

WESTPEAK STOCK INDEX SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 196.33 $ 155.76 $ 119.62 $100.09 $ 75.35
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.94 1.92 1.86 1.91 1.88
Net Realized and Unrealized
Gain (Loss) on Investments... 38.00 41.60 36.95 20.58 25.89
-------- -------- -------- ------- -------
Total From Investment
Operations............... 39.94 43.52 38.81 22.49 27.77
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.94) (1.91) (1.86) (1.93) (1.85)
Distributions in Excess of Net
Investment Income............ (0.01) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... (3.48) (1.04) (0.67) (1.03) (1.18)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 0.00 (0.14) 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (5.43) (2.95) (2.67) (2.96) (3.03)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 230.84 $ 196.33 $ 155.76 $119.62 $100.09
======== ======== ======== ======= =======
Total Return (%).............. 20.4 27.9 32.5 22.5 36.9
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.35 0.37 0.40 0.40 0.40
Ratio of Net Investment Income
to Average Net Assets (%).... 0.99 1.16 1.41 1.84 2.20
Portfolio Turnover Rate (%)... 3 3 3 4 5
Net Assets, End of Year (000)
............................. $269,751 $186,278 $126,584 $80,764 $58,671
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to a voluntary expense
agreement would have been
(%).......................... -- -- 0.43 0.50 0.54
</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. This expense arrangement is no longer in effect.

B-80
<PAGE>

MORGAN STANLEY INTERNATIONAL EQUITY MAGNUM SERIES(a)

B-81
<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

TO OBTAIN COPIES OF THESE MATERIALS:

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 1-202-942-8090 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
electronic request at the following E-mail address: [email protected], or 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-82
<PAGE>

NEW ENGLAND ZENITH FUND

New England Zenith Fund (the "Fund") is a mutual fund that provides a range of
investment options. The following fifteen separate investment portfolios (the
"Series") are offered through this prospectus.

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

Back Bay Advisors Money Market Alger Equity Growth Series
Series Davis Venture Value Series
Harris Oakmark Mid Cap Value
FIXED-INCOME SERIES Series
Loomis Sayles Small Cap Series
Back Bay Advisors Bond Income MFS Investors Series
Series MFS Research Managers Series
Salomon Brothers Strategic Bond Westpeak Growth and Income Series
Opportunities Series Westpeak Stock Index Series
Salomon Brothers U.S. Government
Series

INTERNATIONAL EQUITY SERIES

EQUITY AND FIXED-INCOME SERIES Morgan Stanley International
Magnum Equity Series
Back Bay Advisors Managed Series
Balanced 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.

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-31
Section IV--Other Information about the Fund............................... B-67
Financial Highlights....................................................... B-69
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL
SERIES SUMMARY INFORMATION
------ ------- -----------
<S> <C> <C>
Back Bay Advisors Money Market Series....................... B-5 B-32
Back Bay Advisors Bond Income Series........................ B-7 B-33
Salomon Brothers Strategic Bond Opportunities Series........ B-9 B-36
Salomon Brothers U.S. Government Series..................... B-11 B-39
Back Bay Advisors Managed Series............................ B-13 B-41
Balanced Series............................................. B-15 B-45
Alger Equity Growth Series.................................. B-17 B-49
Davis Venture Value Series.................................. B-18 B-50
Harris Oakmark Mid Cap Value Series......................... B-19 B-52
Loomis Sayles Small Cap Series.............................. B-21 B-56
MFS Investors Series........................................ B-23 B-59
MFS Research Managers Series................................ B-24 B-61
Westpeak Growth and Income Series........................... B-25 B-63
Westpeak Stock Index Series................................. B-27 B-64
Morgan Stanley International Magnum Equity Series........... B-29 B-65
</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. NEIM has contracted with the subadvisers to make
the day-to-day investment decisions for the Series. 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.

INVESTORS

Fund shares are offered only to SEPARATE ACCOUNTS established by New England
Life Insurance Company ("New England Financial"), Metropolitan Life Insurance
Company ("Metropolitan Life"), General American Life Insurance Company
("General American"), Security First Life Insurance Company ("SFG Group") or
other insurance companies affiliated with any of these insurance companies
(the "Separate Accounts"). The Fund serves as the investment vehicle for
variable life insurance, variable annuity and group annuity products of these
insurance companies. 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

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.

Fixed-income Securities

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

PRINCIPAL INVESTMENT RISKS

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 or credit risk.
INVESTMENT PERFORMANCE RECORD

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%

B-5
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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

PRINCIPAL INVESTMENT RISKS

. 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.

B-7
<PAGE>

INVESTMENT PERFORMANCE RECORD

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%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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

PRINCIPAL INVESTMENT RISKS

. 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.

B-9
<PAGE>

INVESTMENT PERFORMANCE RECORD

1995 19.4%
1996 14.4%
1997 11.1%
1998 2.0%
1999 1.4%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-10
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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 or credit
risk.

B-11
<PAGE>

INVESTMENT PERFORMANCE RECORD

1995 15.0%
1996 3.3%
1997 8.6%
1998 7.5%
1999 0.2%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

(a) Includes all funds in the Lipper Variable Products U.S. Mortgage Fund
Average and the Lipper Variable Products GNMA Fund Average.

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

PRINCIPAL INVESTMENT RISKS

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

. 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

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%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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

PRINCIPAL INVESTMENT RISKS

. 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.

. 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 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

[GRAPH]

1995 24.8%
1996 16.9%
1997 16.2%
1998 9.1%
1999 -5.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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

PRINCIPAL INVESTMENT RISKS

. 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

1995 48.8%
1996 13.2%
1997 25.6%
1998 47.8%
1999 34.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-17
<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

PRINCIPAL INVESTMENT RISKS

. 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

1995 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-18
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

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

. Poor performance of individual stocks held by Mid Cap 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 Mid Cap Value, which
may be due to interest rate risk or credit risk.

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-19
<PAGE>

INVESTMENT PERFORMANCE RECORD

1994 -0.3%
1995 30.4%
1996 17.6%
1997 17.4%
1998 -5.5%
1999 0.3%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-20
<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

PRINCIPAL INVESTMENT RISKS

. 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.

INVESTMENT PERFORMANCE RECORD

1995 28.9%
1996 30.7%
1997 24.9%
1998 -1.7%
1999 31.8%

B-21
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-22
<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

PRINCIPAL INVESTMENT RISKS

. 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-23
<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

PRINCIPAL INVESTMENT RISKS

. 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.

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-24
<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

PRINCIPAL INVESTMENT RISKS

. 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.

B-25
<PAGE>

INVESTMENT PERFORMANCE RECORD

1994 -1.2%
1995 36.5%
1996 18.1%
1997 33.5%
1998 24.4%
1999 9.4%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-26
<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 Investment Advisors, L.P. ("Westpeak") attempts to replicate the
composite price and yield performance, before expenses, of the S&P 500 Index.

PRINCIPAL INVESTMENT RISKS

. 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

[GRAPH]

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%

B-27
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-28
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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.

B-29
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 6.0%
1996 6.9%
1997 -1.3%
1998 7.3%
1999 24.6%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-30
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT EACH SERIES

INVESTMENT OBJECTIVES

The investment objective of each Series may be changed without shareholder
approval.

TEMPORARY DEFENSIVE POSITIONS

PORTFOLIO TURNOVER

INVESTMENT PERCENTAGE REQUIREMENTS AND CAPITALIZATION

B-31
<PAGE>

BACK BAY ADVISORS MONEY MARKET SERIES

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:

. 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

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Money Market paid 0.35% of its average
net assets in investment advisory fees.

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-32
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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

PRINCIPAL INVESTMENT RISKS

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

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

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-33
<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 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.

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
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
called a PREMIUM.

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 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-34
<PAGE>

Forward Contracts and Futures

PORTFOLIO MANAGEMENT

During the fiscal year ended December 31, 1999, Bond Income paid 0.40% of its
average net assets in investment advisory fees.

B-35
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

PRINCIPAL INVESTMENT RISKS

Fixed-income Securities

Mortgage Dollar Roll Transactions. The Series may also enter into mortgage
dollar roll transactions to earn additional income. In these transactions, the
Series sells a U.S. mortgage-backed security and agrees to repurchase another
U.S. mortgage-backed security with the same interest rate and maturity date,
but generally backed by a different pool of mortgages. The Series earns
interest on the proceeds of the sale and may receive a fee or a lower
repurchase price. The benefits from these transactions depend upon the
subadviser's ability to forecast mortgage prepayment patterns on different
mortgage pools.
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-36
<PAGE>

Foreign Securities

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

Emerging Markets

Forward Contracts and Futures

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-37
<PAGE>

High Yield Debt

High Yield, High Risk Foreign 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 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.

During the year ended December 31, 1999, Strategic Bond paid 0.65% of its
average net assets in investment advisory fees.
LEVERAGE in this context is a measure of how much a company has borrowed in
relation to its shareholders' equity.

B-38
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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.

B-39
<PAGE>

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.

During the year ended December 31, 1999, U.S. Government paid 0.55% of its
average net assets in investment advisory fees.

B-40
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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

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

B-41
<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

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

Fixed-income Securities

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.

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.

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

B-42
<PAGE>

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

Forward Contracts and Futures

PORTFOLIO MANAGEMENT

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

B-43
<PAGE>

has seven years of investment experience. Mr. Raczkowski, a portfolio manager
on the fixed income side, is a Vice President of Back Bay Advisors. He joined
the company in 1998. Previously, he was a senior consultant at Hagler Bailly
Consulting. Mr. Raczkowski has 16 years of financial and economic consulting
experience.

During the year ended December 31, 1999, the Managed Series paid 0.50% of its
average net assets in investment advisory fees.

B-44
<PAGE>

BALANCED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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-45
<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.

.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

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-46
<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 Management may use certain techniques,
such as FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However,
Wellington Management cannot assure that these techniques will be effective.

Emerging Markets

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.

B-47
<PAGE>

Forward Contracts and Futures Contracts

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, the Balanced Series paid 0.70% of its
average net assets in investment advisory fees.

B-48
<PAGE>

ALGER EQUITY GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Equity Growth paid 0.75% of its
average net assets in investment advisory fees.

B-49
<PAGE>

DAVIS VENTURE VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock selection

. 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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

B-50
<PAGE>

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 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.

B-51
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Harris uses a value investment style in selecting equity securities for Mid Cap
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 Mid Cap Value's investment objective.

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.

B-52
<PAGE>

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.

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.

B-53
<PAGE>

High Yield Debt

PAST PERFORMANCE OF SIMILARLY MANAGED FUNDS

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-54
<PAGE>

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Mid Cap Value paid 0.75% of its
average net assets in investment advisory fees.

B-55
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

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

B-56
<PAGE>

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

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.

B-57
<PAGE>

PORTFOLIO MANAGEMENT

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.

During the year ended December 31, 1999, Small Cap paid 1.00% of its average
net assets in investment advisory fees.

B-58
<PAGE>

MFS INVESTORS SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

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-59
<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

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.

During the period ended December 31, 1999, the Investors Series paid 0.75% of
its average daily net assets in investment advisory fees.

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-60
<PAGE>

MFS RESEARCH MANAGERS SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

Foreign Securities

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

B-61
<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

Forward Contracts

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.

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

B-62
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

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

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

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

B-63
<PAGE>

WESTPEAK STOCK INDEX SERIES

PRINCIPAL INVESTMENT STRATEGIES

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

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

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.

B-64
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

MSAM evaluates potential investments for International Equity in several steps.

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.

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. 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

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.

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, International Equity paid 0.90% of its
average net assets in investment advisory fees.

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-66
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

ADVISER/SUBADVISER RELATIONSHIP

PURCHASE AND REDEMPTION OF SHARES

SHARE VALUATION AND PRICING

Net Asset Value

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 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

B-67
<PAGE>

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 NEIM or the subadvisers of the
Series.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Money Market

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 a regulated investment company under
the Internal Revenue Code.

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

TAXES

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-68
<PAGE>

FINANCIAL HIGHLIGHTS

BACK BAY ADVISORS MONEY MARKET SERIES

B-69
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

B-70
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

B-71
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 11.47 $ 11.14 $ 10.83 $ 11.04 $ 9.96
------- ------- ------- ------- ------
Income From Investment Operations
Net Investment Income............. 0.65 0.47 0.53 0.58 0.33
Net Realized and Unrealized Gain
(Loss) on Investments............ (0.62) 0.37 0.40 (0.21) 1.16
------- ------- ------- ------- ------
Total From Investment
Operations................... 0.03 0.84 0.93 0.37 1.49
------- ------- ------- ------- ------
Less Distributions
Distributions From Net Investment
Income........................... (0.66) (0.45) (0.53) (0.56) (0.33)
Distributions From Net Realized
Capital Gains.................... (0.03) (0.06) (0.05) (0.02) (0.08)
Distributions in Excess of Net
Realized Capital Gains........... 0.00 0.00 (0.04) 0.00 0.00
------- ------- ------- ------- ------
Total Distributions........... (0.69) (0.51) (0.62) (0.58) (0.41)
------- ------- ------- ------- ------
Net Asset Value, End of Year...... $ 10.81 $ 11.47 $ 11.14 $ 10.83 $11.04
======= ======= ======= ======= ======
Total Return (%).................. 0.2 7.5 8.6 3.3 15.0
Ratio of Operating Expenses to
Average Net Assets (%)(a)........ 0.70 0.70 0.70 0.70 0.70
Ratio of Net Investment Income to
Average Net Assets (%)........... 5.89 5.70 6.42 6.13 5.62
Portfolio Turnover Rate (%)....... 530 496 572 388 415
Net Assets, End of Year (000)..... $50,967 $45,807 $22,143 $13,211 $7,542
The Ratios of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense agreement would have been
(%).............................. 0.72 0.77 0.98 1.37 2.90
</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 0.70% 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-72
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $ 207.76 $ 189.85 $ 170.37 $ 163.52 $ 130.30
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income........ 6.98 6.56 6.38 6.43 6.34
Net Realized and Unrealized
Gain (Loss) on Investments.. 13.48 30.50 38.47 18.21 34.33
-------- -------- -------- -------- --------
Total From Investment
Operations.............. 20.46 37.06 44.85 24.64 40.67
-------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income........... (6.83) (6.51) (6.42) (6.34) (6.34)
Distributions in Excess of
Net Investment Income....... 0.00 0.00 0.00 0.00 (0.23)
Distributions From Net
Realized Capital Gains...... (24.57) (12.64) (18.95) (11.45) (0.88)
-------- -------- -------- -------- --------
Total Distributions...... (31.40) (19.15) (25.37) (17.79) (7.45)
-------- -------- -------- -------- --------
Net Asset Value, End of Year. $ 196.82 $ 207.76 $ 189.85 $ 170.37 $ 163.52
======== ======== ======== ======== ========
Total Return (%)............. 10.0 19.7 26.6 15.0 31.3
Ratio of Operating Expenses
to Average Net Assets (%)... 0.58 0.58 0.61 0.62 0.64
Ratio of Net Investment
Income to Average Net Assets
(%)......................... 3.16 3.15 3.20 3.64 4.06
Portfolio Turnover Rate (%).. 49 25 65 72 51
Net Assets, End of Year
(000)....................... $218,881 $213,639 $188,783 $160,888 $147,536
</TABLE>

B-73
<PAGE>

BALANCED SERIES(a)

B-74
<PAGE>

ALGER EQUITY GROWTH SERIES

B-75
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income......... 0.12 0.16 0.18 0.13 0.10
Net Realized and Unrealized
Gain (Loss) on Investments... 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------
Total From Investment
Operations............... 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital Gains....... (0.32) (0.49) (0.53) (0.27) (0.20)
Distribution in Excess of Net
Realized Capital Gain ....... (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total Distributions....... (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
======== ======== ======== ======== =======
Total Return (%).............. 17.5 14.4 33.5 25.8 39.3
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.81 0.83 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate (%)... 22 25 17 18 20
Net Assets, End of Year (000)
............................. $655,599 $440,351 $280,448 $108,189 $35,045
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.90 0.96 1.51
</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. This expense arrangement is no
longer in effect.

B-76
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 122.85 $ 170.59 $ 157.88 $142.44 $112.77
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.36 1.09 0.00 0.11 0.42
Net Realized and Unrealized
Gain (Loss) on Investments... (0.97) (11.41) 27.12 24.88 33.80
-------- -------- -------- ------- -------
Total From Investment
Operations............... 0.39 (10.32) 27.12 24.99 34.22
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.36) (1.09) 0.00 (0.13) (0.40)
Distributions in Excess of net
investment income............ (0.17) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... 0.00 (36.08) (14.41) (9.42) (4.15)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 (0.25) 0.00 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (1.53) (37.42) (14.41) (9.55) (4.55)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 121.71 $ 122.85 $ 170.59 $157.88 $142.44
======== ======== ======== ======= =======
Total Return (%).............. 0.3 (5.5) 17.4 17.6 30.4
Ratio of Operating Expenses to
Average Net Assets (%)(b).... 0.88 0.88 0.85 0.85 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... 1.08 0.66 (0.16) 0.08 0.37
Portfolio Turnover Rate (%)... 119 171 49 65 58
Net Assets, End of Year (000). $109,280 $112,997 $114,617 $82,667 $48,832
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- 0.90 0.86 0.92 1.06
</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-77
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

B-78
<PAGE>

MFS INVESTORS SERIES

B-79
<PAGE>

MFS RESEARCH MANAGERS SERIES

B-80
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

B-81
<PAGE>

WESTPEAK STOCK INDEX SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 196.33 $ 155.76 $ 119.62 $100.09 $ 75.35
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.94 1.92 1.86 1.91 1.88
Net Realized and Unrealized
Gain (Loss) on Investments... 38.00 41.60 36.95 20.58 25.89
-------- -------- -------- ------- -------
Total From Investment
Operations............... 39.94 43.52 38.81 22.49 27.77
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.94) (1.91) (1.86) (1.93) (1.85)
Distributions in Excess of Net
Investment Income............ (0.01) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... (3.48) (1.04) (0.67) (1.03) (1.18)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 0.00 (0.14) 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (5.43) (2.95) (2.67) (2.96) (3.03)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 230.84 $ 196.33 $ 155.76 $119.62 $100.09
======== ======== ======== ======= =======
Total Return (%).............. 20.4 27.9 32.5 22.5 36.9
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.35 0.37 0.40 0.40 0.40
Ratio of Net Investment Income
to Average Net Assets (%).... 0.99 1.16 1.41 1.84 2.20
Portfolio Turnover Rate (%)... 3 3 3 4 5
Net Assets, End of Year (000)
............................. $269,751 $186,278 $126,584 $80,764 $58,671
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to a voluntary expense
agreement would have been
(%).......................... -- -- 0.43 0.50 0.54
</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. This expense arrangement is no longer in effect.

B-82
<PAGE>

MORGAN STANLEY INTERNATIONAL EQUITY MAGNUM SERIES(a)

B-83
<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

TO OBTAIN COPIES OF THESE MATERIALS:

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 1-202-942-8090 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
electronic request at the following E-mail address: [email protected], or 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-84
<PAGE>

NEW ENGLAND ZENITH FUND

DAVIS VENTURE VALUE SERIES
LOOMIS SAYLES SMALL CAP SERIES

PROSPECTUS MAY 1, 2000

TABLE OF CONTENTS

<TABLE>
<S> <C>
Section I--Overview of New England Zenith Fund.............................. 1
Section II--Summary Information about each Series .......................... 2
Section III--Additional Information about each Series ...................... 5
Section IV--Other Information About the Fund................................ 10
Financial Highlights........................................................ 12
</TABLE>

SECTION I--OVERVIEW OF NEW ENGLAND ZENITH FUND

ORGANIZATION

The Fund is a mutual fund consisting of multiple investment portfolios, the
Series. Two of these Series are offered through this Prospectus. New England
Investment Management, Inc. ("NEIM") is the investment adviser to each Series.
NEIM has contracted with subadvisers to make the day-to-day investment
decisions for the Series. 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.

Each Series is a "diversified" fund.

INVESTORS

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.

SECTION II--
SUMMARY INFORMATION ABOUT EACH SERIES

DAVIS VENTURE VALUE SERIES

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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

[GRAPH]

Total Return

1995 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

2
<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

PRINCIPAL INVESTMENT RISKS

. 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.

3
<PAGE>

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.

[GRAPH]

Total Return

1995 28.9%
1996 30.7%
1997 24.9%
1998 -1.7%
1999 31.8%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

4
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT 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 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.

INVESTMENT OBJECTIVES

The investment objective of each Series may be changed without shareholder
approval.

TEMPORARY DEFENSIVE POSITIONS

PORTFOLIO TURNOVER

INVESTMENT PERCENTAGE REQUIREMENTS AND CAPITALIZATION

Each Series has 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.

5
<PAGE>

DAVIS VENTURE VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock selection

. 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.

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.

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

6
<PAGE>

address is 2949 East Elvira Road, Suite 101, Tucson, Arizona 85706. 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.

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.

LOOMIS SAYLES SMALL CAP SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

7
<PAGE>

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 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,

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.

8
<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 Contracts

PORTFOLIO MANAGEMENT

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.

During the year ended December 31, 1999, Small Cap paid 1.00% of its average
net assets in investment advisory fees.

9
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

ADVISER/SUBADVISER RELATIONSHIP

PURCHASE AND REDEMPTION OF SHARES

SHARE VALUATION AND PRICING

Net Asset Value

Securities Valuation

Any fixed-income securities with remaining maturities of 60 days or less held
by each Series are valued at amortized cost. Other portfolio securities of each
Series normally are valued at market

10
<PAGE>

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 the subadvisers of the
Series.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Currently, each Series 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 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.

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

TAXES

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.

11
<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 LLP
acted as the Fund's independent accountants and provided reports which
accompanied the financial statements for those periods.

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income......... 0.12 0.16 0.18 0.13 0.10
Net Realized and Unrealized
Gain (Loss) on Investments... 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------
Total From Investment
Operations................ 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital Gains....... (0.32) (0.49) (0.53) (0.27) (0.20)
Distribution in Excess of Net
Realized Capital Gain ....... (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total Distributions........ (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
-------- -------- -------- -------- -------
Total Return (%).............. 17.5 14.4 33.5 25.8 39.3
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.81 0.83 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate (%)... 22 25 17 18 20
Net Assets, End of Year (000)
............................. $655,599 $440,351 $280,448 $108,189 $35,045
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.90 0.96 1.51
</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. This expense arrangement is no
longer in effect.

12
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

13
<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

TO OBTAIN COPIES OF THESE MATERIALS:

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

14
<PAGE>

NEW ENGLAND ZENITH FUND

New England Zenith Fund (the "Fund") is a mutual fund that provides a range of
investment options. The following nine separate investment portfolios (the
"Series") are offered through this prospectus.

<TABLE>
<S> <C>
FIXED-INCOME SERIES EQUITY SERIES

Salomon Brothers Strategic Bond Alger Equity Growth Series
Opportunities Series Davis Venture Value Series
Salomon Brothers U.S. Government Harris Oakmark Mid Cap Value
Series Series
Loomis Sayles Small Cap Series
EQUITY AND FIXED-INCOME SERIES Westpeak Growth and Income Series

Balanced Series INTERNATIONAL EQUITY 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.

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-21
Section IV--Other Information about the Fund............................... B-44
Financial Highlights....................................................... B-46
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL
SERIES SUMMARY INFORMATION
------ ------- -----------
<S> <C> <C>
Salomon Brothers Strategic Bond Opportunities Series........ B-5 B-22
Salomon Brothers U.S. Government Series..................... B-7 B-25
Balanced Series............................................. B-9 B-27
Alger Equity Growth Series.................................. B-11 B-31
Davis Venture Value Series.................................. B-12 B-32
Harris Oakmark Mid Cap Value Series......................... B-13 B-34
Loomis Sayles Small Cap Series.............................. B-15 B-38
Westpeak Growth and Income Series........................... B-17 B-41
Morgan Stanley International Magnum Equity Series........... B-19 B-42
</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. NEIM has contracted with subadvisers to make the
day-to-day investment decisions for the Series. 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.

INVESTORS

Fund shares are offered only to SEPARATE ACCOUNTS established by New England
Life Insurance Company ("New England Financial"), Metropolitan Life Insurance
Company ("Metropolitan Life"), General American Life Insurance Company
("General American"), Security First Life Insurance Company ("SFG Group") or
other insurance companies affiliated with any of these insurance companies
(the "Separate Accounts"). The Fund serves as the investment vehicle for
variable life insurance, variable annuity and group annuity products of these
insurance companies. 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

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.

Fixed-income Securities

B-4
<PAGE>

SECTION II--
SUMMARY INFORMATION ABOUT EACH SERIES

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

PRINCIPAL INVESTMENT RISKS

. 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.

B-5
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 19.4%
1996 14.4%
1997 11.1%
1998 2.0%
1999 1.4%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-6
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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 or credit
risk.

B-7
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 15.0%
1996 3.3%
1997 8.6%
1998 7.5%
1999 0.2%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

(a) Includes all funds in the Lipper Variable Products U.S. Mortgage Fund
Average and the Lipper Variable Products GNMA Fund Average.

B-8
<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

PRINCIPAL INVESTMENT RISKS

. 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.

. 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 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-9
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 24.8%
1996 16.9%
1997 16.2%
1998 9.1%
1999 -5.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-10
<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

PRINCIPAL INVESTMENT RISKS

. 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

[GRAPH]

1995 48.8%
1996 13.2%
1997 25.6%
1998 47.8%
1999 34.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-11
<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

PRINCIPAL INVESTMENT RISKS

. 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

[GRAPH]

1995 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-12
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

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

. Poor performance of individual stocks held by Mid Cap 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 Mid Cap Value, which
may be due to interest rate risk or credit risk.

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-13
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1994 -0.3%
1995 30.4%
1996 17.6%
1997 17.4%
1998 -5.5%
1999 0.3%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-14
<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

PRINCIPAL INVESTMENT RISKS

. 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.

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 28.9%
1996 30.7%
1997 24.9%
1998 -1.7%
1999 31.8%

B-15
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-16
<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

PRINCIPAL INVESTMENT RISKS

. 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.

B-17
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1994 -1.2%
1995 36.5%
1996 18.1%
1997 33.5%
1998 24.4%
1999 9.4%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-18
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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.

B-19
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 6.0%
1996 6.9%
1997 -1.3%
1998 7.3%
1999 24.6%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-20
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT EACH SERIES

INVESTMENT OBJECTIVES

The investment objective of each Series may be changed without shareholder
approval.

TEMPORARY DEFENSIVE POSITIONS

PORTFOLIO TURNOVER

INVESTMENT PERCENTAGE REQUIREMENTS AND CAPITALIZATION

B-21
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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.

B-22
<PAGE>

Foreign Securities

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

Emerging Markets

Forward Contracts and Futures

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-23
<PAGE>

High Yield Debt

High Yield, High Risk Foreign 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 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.

During the year ended December 31, 1999, Strategic Bond paid 0.65% of its
average net assets in investment advisory fees.

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

B-24
<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.

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.

B-25
<PAGE>

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.

During the year ended December 31, 1999, U.S. Government paid 0.55% of its
average net assets in investment advisory fees.

B-26
<PAGE>

BALANCED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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-27
<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.

.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

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-28
<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 Management may use certain techniques,
such as FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However,
Wellington Management cannot assure that these techniques will be effective.

Emerging Markets

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.

B-29
<PAGE>

Forward Contracts and Futures Contracts

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, the Balanced Series paid 0.70% of its
average net assets in investment advisory fees.

B-30
<PAGE>

ALGER EQUITY GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Equity Growth paid 0.75% of its
average net assets in investment advisory fees.

B-31
<PAGE>

DAVIS VENTURE VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock selection

. 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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

B-32
<PAGE>

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 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.

B-33
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Harris uses a value investment style in selecting equity securities for Mid Cap
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 Mid Cap Value's investment objective.

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.

B-34
<PAGE>

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.

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.

B-35
<PAGE>

High Yield Debt

PAST PERFORMANCE OF SIMILARLY MANAGED FUNDS

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-36
<PAGE>

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Mid Cap Value paid 0.75% of its
average net assets in investment advisory fees.

B-37
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

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

B-38
<PAGE>

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

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.

B-39
<PAGE>

PORTFOLIO MANAGEMENT

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.

During the year ended December 31, 1999, Small Cap paid 1.00% of its average
net assets in investment advisory fees.

B-40
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

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

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

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

B-41
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

MSAM evaluates potential investments for International Equity in several steps.

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.

B-42
<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

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.

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, International Equity paid 0.90% of its
average net assets in investment advisory fees.

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-43
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

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
each 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 each Series.

ADVISER/SUBADVISER RELATIONSHIP

PURCHASE AND REDEMPTION OF SHARES

SHARE VALUATION AND PRICING

Net Asset Value

Securities Valuation

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

B-44
<PAGE>

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 NEIM or the
subadvisers of the Series.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

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

TAXES

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-45
<PAGE>

FINANCIAL HIGHLIGHTS

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

B-46
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 11.47 $ 11.14 $ 10.83 $ 11.04 $ 9.96
------- ------- ------- ------- ------
Income From Investment Operations
Net Investment Income............. 0.65 0.47 0.53 0.58 0.33
Net Realized and Unrealized Gain
(Loss) on Investments............ (0.62) 0.37 0.40 (0.21) 1.16
------- ------- ------- ------- ------
Total From Investment
Operations................... 0.03 0.84 0.93 0.37 1.49
------- ------- ------- ------- ------
Less Distributions
Distributions From Net Investment
Income........................... (0.66) (0.45) (0.53) (0.56) (0.33)
Distributions From Net Realized
Capital Gains.................... (0.03) (0.06) (0.05) (0.02) (0.08)
Distributions in Excess of Net
Realized Capital Gains........... 0.00 0.00 (0.04) 0.00 0.00
------- ------- ------- ------- ------
Total Distributions........... (0.69) (0.51) (0.62) (0.58) (0.41)
------- ------- ------- ------- ------
Net Asset Value, End of Year...... $ 10.81 $ 11.47 $ 11.14 $ 10.83 $11.04
======= ======= ======= ======= ======
Total Return (%).................. 0.2 7.5 8.6 3.3 15.0
Ratio of Operating Expenses to
Average Net Assets (%)(a)........ 0.70 0.70 0.70 0.70 0.70
Ratio of Net Investment Income to
Average Net Assets (%)........... 5.89 5.70 6.42 6.13 5.62
Portfolio Turnover Rate (%)....... 530 496 572 388 415
Net Assets, End of Year (000)..... $50,967 $45,807 $22,143 $13,211 $7,542
The Ratios of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense agreement would have been
(%).............................. 0.72 0.77 0.98 1.37 2.90
</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 0.70% 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-47
<PAGE>

BALANCED SERIES(a)

B-48
<PAGE>

ALGER EQUITY GROWTH SERIES

B-49
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income......... 0.12 0.16 0.18 0.13 0.10
Net Realized and Unrealized
Gain (Loss) on Investments... 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------
Total From Investment
Operations............... 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital Gains....... (0.32) (0.49) (0.53) (0.27) (0.20)
Distribution in Excess of Net
Realized Capital Gain ....... (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total Distributions....... (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
======== ======== ======== ======== =======
Total Return (%).............. 17.5 14.4 33.5 25.8 39.3
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.81 0.83 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate (%)... 22 25 17 18 20
Net Assets, End of Year (000)
............................. $655,599 $440,351 $280,448 $108,189 $35,045
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.90 0.96 1.51
</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. This expense arrangement is no
longer in effect.

B-50
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 122.85 $ 170.59 $ 157.88 $142.44 $112.77
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.36 1.09 0.00 0.11 0.42
Net Realized and Unrealized
Gain (Loss) on Investments... (0.97) (11.41) 27.12 24.88 33.80
-------- -------- -------- ------- -------
Total From Investment
Operations............... 0.39 (10.32) 27.12 24.99 34.22
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.36) (1.09) 0.00 (0.13) (0.40)
Distributions in Excess of net
investment income............ (0.17) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... 0.00 (36.08) (14.41) (9.42) (4.15)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 (0.25) 0.00 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (1.53) (37.42) (14.41) (9.55) (4.55)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 121.71 $ 122.85 $ 170.59 $157.88 $142.44
======== ======== ======== ======= =======
Total Return (%).............. 0.3 (5.5) 17.4 17.6 30.4
Ratio of Operating Expenses to
Average Net Assets (%)(b).... 0.88 0.88 0.85 0.85 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... 1.08 0.66 (0.16) 0.08 0.37
Portfolio Turnover Rate (%)... 119 171 49 65 58
Net Assets, End of Year (000). $109,280 $112,997 $114,617 $82,667 $48,832
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- 0.90 0.86 0.92 1.06
</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-51
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

B-52
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

B-53
<PAGE>

MORGAN STANLEY INTERNATIONAL EQUITY MAGNUM SERIES(a)

B-54
<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

TO OBTAIN COPIES OF THESE MATERIALS:

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 1-202-942-8090 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
electronic request at the following E-mail address: [email protected], or 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-55
<PAGE>

NEW ENGLAND ZENITH FUND

<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 Mid Cap Value
Back Bay Advisors Bond Income Series Series
Loomis Sayles Small Cap Series
EQUITY AND FIXED-INCOME SERIES MFS Investors Series
MFS Research Managers Series
Back Bay Advisors Managed Series Westpeak Growth and Income Series
Balanced Series Westpeak Stock Index Series

INTERNATIONAL EQUITY 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.

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-29
Section IV--Other Information about the Fund............................... B-63
Financial Highlights....................................................... B-65
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL
SERIES SUMMARY INFORMATION
------ ------- -----------
<S> <C> <C>
Back Bay Advisors Money Market Series....................... B-5 B-30
Back Bay Advisors Bond Income Series........................ B-7 B-31
Back Bay Advisors Managed Series............................ B-9 B-34
Balanced Series............................................. B-11 B-38
Alger Equity Growth Series.................................. B-13 B-42
Capital Growth Series....................................... B-14 B-43
Davis Venture Value Series.................................. B-16 B-46
Harris Oakmark Mid Cap Value Series......................... B-17 B-48
Loomis Sayles Small Cap Series.............................. B-19 B-52
MFS Investors Series........................................ B-21 B-55
MFS Research Managers Series................................ B-22 B-57
Westpeak Growth and Income Series........................... B-23 B-59
Westpeak Stock Index Series................................. B-25 B-60
Morgan Stanley International Magnum Equity Series........... B-27 B-61
</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 Limited Partnership ("CGM"). NEIM has contracted with the
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.

INVESTORS

Fund shares are offered only to SEPARATE ACCOUNTS established by New England
Life Insurance Company ("New England Financial"), Metropolitan Life Insurance
Company ("Metropolitan Life"), General American Life Insurance Company
("General American"), Security First Life Insurance Company ("SFG Group") or
other insurance companies affiliated with any of these insurance companies
(the "Separate Accounts"). The Fund serves as the investment vehicle for
variable life insurance, variable annuity and group annuity products of these
insurance companies. 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

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.

Fixed-income Securities

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

PRINCIPAL INVESTMENT RISKS

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 or credit risk.
INVESTMENT PERFORMANCE RECORD

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%

B-5
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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

PRINCIPAL INVESTMENT RISKS

. 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.

B-7
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

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%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-8
<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

PRINCIPAL INVESTMENT RISKS

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

. 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-9
<PAGE>

INVESTMENT PERFORMANCE RECORD

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%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-10
<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

PRINCIPAL INVESTMENT RISKS

. 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.

. 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 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-11
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 24.8%
1996 16.9%
1997 16.2%
1998 9.1%
1999 -5.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-12
<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

PRINCIPAL INVESTMENT RISKS

. 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

1995 48.8%
1996 13.2%
1997 25.6%
1998 47.8%
1999 34.1%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-13
<PAGE>

CAPITAL GROWTH SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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.

B-14
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

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%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-15
<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

PRINCIPAL INVESTMENT RISKS

. 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

1995 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-16
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

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

. Poor performance of individual stocks held by Mid Cap 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 Mid Cap Value, which
may be due to interest rate risk or credit risk.

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-17
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1994 -0.3%
1995 30.4%
1996 17.6%
1997 17.4%
1998 -5.5%
1999 0.3%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-18
<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

PRINCIPAL INVESTMENT RISKS

. 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.

INVESTMENT PERFORMANCE RECORD

1995 28.9%
1996 30.7%
1997 24.9%
1998 -1.7%
1999 31.8%

B-19
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-20
<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

PRINCIPAL INVESTMENT RISKS

. 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-21
<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

PRINCIPAL INVESTMENT RISKS

. 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.

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-22
<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

PRINCIPAL INVESTMENT RISKS

. 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.

B-23
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1994 -1.2%
1995 36.5%
1996 18.1%
1997 33.5%
1998 24.4%
1999 9.4%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-24
<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 Investment Advisors, L.P. ("Westpeak") attempts to replicate the
composite price and yield performance, before expenses, of the S&P 500 Index.

PRINCIPAL INVESTMENT RISKS

. 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

[GRAPH]

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%

B-25
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-26
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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.

B-27
<PAGE>

INVESTMENT PERFORMANCE RECORD

[GRAPH]

1995 6.0%
1996 6.9%
1997 -1.3%
1998 7.3%
1999 24.6%

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-28
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT EACH SERIES

INVESTMENT OBJECTIVES

The investment objective of each Series may be changed without shareholder
approval.

TEMPORARY DEFENSIVE POSITIONS

PORTFOLIO TURNOVER

INVESTMENT PERCENTAGE REQUIREMENTS AND CAPITALIZATION

B-29
<PAGE>

BACK BAY ADVISORS MONEY MARKET SERIES

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:

. 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

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Money Market paid 0.35% of its average
net assets in investment advisory fees.

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-30
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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

PRINCIPAL INVESTMENT RISKS

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

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

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-31
<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 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.

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

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 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-32
<PAGE>

Forward Contracts and Futures

PORTFOLIO MANAGEMENT

During the fiscal year ended December 31, 1999, Bond Income paid 0.40% of its
average net assets in investment advisory fees.

B-33
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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

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

B-34
<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

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

Fixed-income Securities

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.

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.

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

B-35
<PAGE>

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

Forward Contracts and Futures

PORTFOLIO MANAGEMENT

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

B-36
<PAGE>

During the year ended December 31, 1999, the Managed Series paid 0.50% of its
average net assets in investment advisory fees.

B-37
<PAGE>

BALANCED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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-38
<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.

.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

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-39
<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 Management may use certain techniques,
such as FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However,
Wellington Management cannot assure that these techniques will be effective.

Emerging Markets

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.

B-40
<PAGE>

Forward Contracts and Futures Contracts

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, the Balanced Series paid 0.70% of its
average net assets in investment advisory fees.

B-41
<PAGE>

ALGER EQUITY GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Equity Growth paid 0.75% of its
average net assets in investment advisory fees.

B-42
<PAGE>

CAPITAL GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

. 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

B-43
<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.
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 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.

Foreign Securities

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

PORTFOLIO MANAGEMENT

B-44
<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.

B-45
<PAGE>

DAVIS VENTURE VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock selection

. 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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

B-46
<PAGE>

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 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.

B-47
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Harris uses a value investment style in selecting equity securities for Mid Cap
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 Mid Cap Value's investment objective.

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.

B-48
<PAGE>

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.

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.

B-49
<PAGE>

High Yield Debt

PAST PERFORMANCE OF SIMILARLY MANAGED FUNDS

B-50
<PAGE>

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Mid Cap Value paid 0.75% of its
average net assets in investment advisory fees.

B-51
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

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

B-52
<PAGE>

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

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.

B-53
<PAGE>

PORTFOLIO MANAGEMENT

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.

During the year ended December 31, 1999, Small Cap paid 1.00% of its average
net assets in investment advisory fees.

B-54
<PAGE>

MFS INVESTORS SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

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-55
<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

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.

During the period ended December 31, 1999, the Investors Series paid 0.75% of
its average daily net assets in investment advisory fees.

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-56
<PAGE>

MFS RESEARCH MANAGERS SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

Foreign Securities

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

B-57
<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

Forward Contracts

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.

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

B-58
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

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

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

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

B-59
<PAGE>

WESTPEAK STOCK INDEX SERIES

PRINCIPAL INVESTMENT STRATEGIES

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

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

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.

B-60
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

MSAM evaluates potential investments for International Equity in several steps.

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.

B-61
<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

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.

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, International Equity paid 0.90% of its
average net assets in investment advisory fees.

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-62
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

All Series except Capital Growth

Capital Growth

ADVISER/SUBADVISER RELATIONSHIP

PURCHASE AND REDEMPTION OF SHARES

SHARE VALUATION AND PRICING

Net Asset Value

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-63
<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

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Money Market

Other Series

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

TAXES

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-64
<PAGE>

FINANCIAL HIGHLIGHTS

BACK BAY ADVISORS MONEY MARKET SERIES

B-65
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

B-66
<PAGE>

BACK BAY ADVISORS MANAGED SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $ 207.76 $ 189.85 $ 170.37 $ 163.52 $ 130.30
-------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income........ 6.98 6.56 6.38 6.43 6.34
Net Realized and Unrealized
Gain (Loss) on Investments.. 13.48 30.50 38.47 18.21 34.33
-------- -------- -------- -------- --------
Total From Investment
Operations.............. 20.46 37.06 44.85 24.64 40.67
-------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income........... (6.83) (6.51) (6.42) (6.34) (6.34)
Distributions in Excess of
Net Investment Income....... 0.00 0.00 0.00 0.00 (0.23)
Distributions From Net
Realized Capital Gains...... (24.57) (12.64) (18.95) (11.45) (0.88)
-------- -------- -------- -------- --------
Total Distributions...... (31.40) (19.15) (25.37) (17.79) (7.45)
-------- -------- -------- -------- --------
Net Asset Value, End of Year. $ 196.82 $ 207.76 $ 189.85 $ 170.37 $ 163.52
======== ======== ======== ======== ========
Total Return (%)............. 10.0 19.7 26.6 15.0 31.3
Ratio of Operating Expenses
to Average Net Assets (%)... 0.58 0.58 0.61 0.62 0.64
Ratio of Net Investment
Income to Average Net Assets
(%)......................... 3.16 3.15 3.20 3.64 4.06
Portfolio Turnover Rate (%).. 49 25 65 72 51
Net Assets, End of Year
(000)....................... $218,881 $213,639 $188,783 $160,888 $147,536
</TABLE>

B-67
<PAGE>

BALANCED SERIES(a)

B-68
<PAGE>

ALGER EQUITY GROWTH SERIES

B-69
<PAGE>

CAPITAL GROWTH SERIES

B-70
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income......... 0.12 0.16 0.18 0.13 0.10
Net Realized and Unrealized
Gain (Loss) on Investments... 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------
Total From Investment
Operations............... 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital Gains....... (0.32) (0.49) (0.53) (0.27) (0.20)
Distribution in Excess of Net
Realized Capital Gain ....... (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total Distributions....... (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
======== ======== ======== ======== =======
Total Return (%).............. 17.5 14.4 33.5 25.8 39.3
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.81 0.83 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate (%)... 22 25 17 18 20
Net Assets, End of Year (000)
............................. $655,599 $440,351 $280,448 $108,189 $35,045
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.90 0.96 1.51
</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. This expense arrangement is no
longer in effect.

B-71
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 122.85 $ 170.59 $ 157.88 $142.44 $112.77
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.36 1.09 0.00 0.11 0.42
Net Realized and Unrealized
Gain (Loss) on Investments... (0.97) (11.41) 27.12 24.88 33.80
-------- -------- -------- ------- -------
Total From Investment
Operations............... 0.39 (10.32) 27.12 24.99 34.22
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.36) (1.09) 0.00 (0.13) (0.40)
Distributions in Excess of net
investment income............ (0.17) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... 0.00 (36.08) (14.41) (9.42) (4.15)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 (0.25) 0.00 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (1.53) (37.42) (14.41) (9.55) (4.55)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 121.71 $ 122.85 $ 170.59 $157.88 $142.44
======== ======== ======== ======= =======
Total Return (%).............. 0.3 (5.5) 17.4 17.6 30.4
Ratio of Operating Expenses to
Average Net Assets (%)(b).... 0.88 0.88 0.85 0.85 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... 1.08 0.66 (0.16) 0.08 0.37
Portfolio Turnover Rate (%)... 119 171 49 65 58
Net Assets, End of Year (000). $109,280 $112,997 $114,617 $82,667 $48,832
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- 0.90 0.86 0.92 1.06
</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-72
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

B-73
<PAGE>

MFS INVESTORS SERIES

<TABLE>
<CAPTION>
APRIL 30, 1999(a)
THROUGH
DECEMBER 31,
1999
-----------------
<S> <C>
Net Asset Value, Beginning of Period........................ $10.00
------
Income From Investment Operations
Net Investment Income....................................... 0.02
Net Realized and Unrealized Gain (Loss) on Investments...... 0.26
------
Total From Investment Operations........................ 0.28
------
Less Distributions
Distributions From Net Investment Income.................... (0.02)
------
Total Distributions..................................... (0.02)
------
Net Asset Value, End of Period.............................. $10.26
======
Total Return (%)............................................ 2.9 (b)
Ratio of Operating Expenses to Average Net Assets (%)(d).... 0.90 (c)
Ratio of Net Investment Income to Average Net Assets (%).... 0.45 (c)
Portfolio Turnover Rate (%)................................. 60
Net Assets, End of Period (000)............................. $6,841
The Ratios of Operating Expenses to Average Net Assets
without giving effect to the voluntary expense agreement
would have been (%)........................................ 2.03 (c)
</TABLE>
- --------
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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-74
<PAGE>

MFS RESEARCH MANAGERS SERIES

B-75
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

B-76
<PAGE>

WESTPEAK STOCK INDEX SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 196.33 $ 155.76 $ 119.62 $100.09 $ 75.35
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.94 1.92 1.86 1.91 1.88
Net Realized and Unrealized
Gain (Loss) on Investments... 38.00 41.60 36.95 20.58 25.89
-------- -------- -------- ------- -------
Total From Investment
Operations............... 39.94 43.52 38.81 22.49 27.77
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.94) (1.91) (1.86) (1.93) (1.85)
Distributions in Excess of Net
Investment Income............ (0.01) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... (3.48) (1.04) (0.67) (1.03) (1.18)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 0.00 (0.14) 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (5.43) (2.95) (2.67) (2.96) (3.03)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 230.84 $ 196.33 $ 155.76 $119.62 $100.09
======== ======== ======== ======= =======
Total Return (%).............. 20.4 27.9 32.5 22.5 36.9
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.35 0.37 0.40 0.40 0.40
Ratio of Net Investment Income
to Average Net Assets (%).... 0.99 1.16 1.41 1.84 2.20
Portfolio Turnover Rate (%)... 3 3 3 4 5
Net Assets, End of Year (000)
............................. $269,751 $186,278 $126,584 $80,764 $58,671
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to a voluntary expense
agreement would have been
(%).......................... -- -- 0.43 0.50 0.54
</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. This expense arrangement is no longer in effect.

B-77
<PAGE>

MORGAN STANLEY INTERNATIONAL EQUITY MAGNUM SERIES(a)

B-78
<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

TO OBTAIN COPIES OF THESE MATERIALS:

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 1-202-942-8090 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
electronic request at the following E-mail address: [email protected], or 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-79
<PAGE>

NEW ENGLAND ZENITH FUND

New England Zenith Fund (the "Fund") is a mutual fund that provides a range of
investment options. The following thirteen separate investment portfolios (the
"Series") are offered through this prospectus.

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

Back Bay Advisors Money Market Alger Equity Growth Series
Series Davis Venture Value Series
Harris Oakmark Mid Cap Value
FIXED-INCOME SERIES Series
Loomis Sayles Small Cap Series
Back Bay Advisors Bond Income MFS Investors Series
Series MFS Research Managers Series
Salomon Brothers Strategic Bond Westpeak Growth and Income Series
Opportunities Series
Salomon Brothers U.S. Government INTERNATIONAL EQUITY SERIES
Series

Morgan Stanley International
EQUITY AND FIXED-INCOME SERIES Magnum Equity Series

Balanced 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.

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-27
Section IV--Other Information about the Fund............................... B-58
Financial Highlights....................................................... B-60
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL
SERIES SUMMARY INFORMATION
------ ------- -----------
<S> <C> <C>
Back Bay Advisors Money Market Series....................... B-5 B-28
Back Bay Advisors Bond Income Series........................ B-7 B-29
Salomon Brothers Strategic Bond Opportunities Series........ B-9 B-32
Salomon Brothers U.S. Government Series..................... B-11 B-35
Balanced Series............................................. B-13 B-37
Alger Equity Growth Series.................................. B-15 B-41
Davis Venture Value Series.................................. B-16 B-42
Harris Oakmark Mid Cap Value Series......................... B-17 B-44
Loomis Sayles Small Cap Series.............................. B-19 B-48
MFS Investors Series........................................ B-21 B-51
MFS Research Managers Series................................ B-22 B-53
Westpeak Growth and Income Series........................... B-23 B-55
Morgan Stanley International Magnum Equity Series........... B-25 B-56
</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. NEIM has contracted with the subadvisers to make
the day-to-day investment decisions for the Series. 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.

INVESTORS

Fund shares are offered only to SEPARATE ACCOUNTS established by New England
Life Insurance Company ("New England Financial"), Metropolitan Life Insurance
Company ("Metropolitan Life"), General American Life Insurance Company
("General American"), Security First Life Insurance Company ("SFG Group") or
other insurance companies affiliated with any of these insurance companies
(the "Separate Accounts"). The Fund serves as the investment vehicle for
variable life insurance, variable annuity and group annuity products of these
insurance companies. 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

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.

Fixed-income Securities

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

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

[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>

B-5
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

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

PRINCIPAL INVESTMENT RISKS

. 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.

B-7
<PAGE>

INVESTMENT PERFORMANCE RECORD

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

PRINCIPAL INVESTMENT RISKS

. 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.

B-9
<PAGE>

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-10
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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 or credit
risk.

B-11
<PAGE>

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

(a) Includes all funds in the Lipper Variable Products U.S. Mortgage Fund
Average and the Lipper Variable Products GNMA Fund Average.

B-12
<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

PRINCIPAL INVESTMENT RISKS

. 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.

. 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 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-13
<PAGE>

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-14
<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

PRINCIPAL INVESTMENT RISKS

. 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

[CHART 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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-15
<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 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 39.3%
1996 25.8%
1997 33.5%
1998 14.4%
1999 17.5%
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-16
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

INVESTMENT OBJECTIVE

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

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

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

. Poor performance of individual stocks held by Mid Cap 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 Mid Cap Value, which
may be due to interest rate risk or credit risk.

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-17
<PAGE>

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-18
<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

PRINCIPAL INVESTMENT RISKS

. 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.

INVESTMENT PERFORMANCE RECORD

[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-19
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-20
<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

PRINCIPAL INVESTMENT RISKS

. 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-21
<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

PRINCIPAL INVESTMENT RISKS

. 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.

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-22
<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

PRINCIPAL INVESTMENT RISKS

. 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.

B-23
<PAGE>

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-24
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

INVESTMENT OBJECTIVE

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL INVESTMENT RISKS

. 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.

B-25
<PAGE>

INVESTMENT PERFORMANCE RECORD

[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>

AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31

B-26
<PAGE>

SECTION III--ADDITIONAL INFORMATION ABOUT EACH SERIES

INVESTMENT OBJECTIVES

The investment objective of each Series may be changed without shareholder
approval.

TEMPORARY DEFENSIVE POSITIONS

Each Series other than Money Market 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

INVESTMENT PERCENTAGE REQUIREMENTS AND CAPITALIZATION

B-27
<PAGE>

BACK BAY ADVISORS MONEY MARKET SERIES

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:

. 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

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Money Market paid 0.35% of its average
net assets in investment advisory fees.

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-28
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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

PRINCIPAL INVESTMENT RISKS

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

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

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-29
<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 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.

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

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 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-30
<PAGE>

Forward Contracts and Futures

PORTFOLIO MANAGEMENT

During the fiscal year ended December 31, 1999, Bond Income paid 0.40% of its
average net assets in investment advisory fees.

B-31
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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.

B-32
<PAGE>

Foreign Securities

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

Emerging Markets

Forward Contracts and Futures

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-33
<PAGE>

High Yield Debt

High Yield, High Risk Foreign 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 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.

During the year ended December 31, 1999, Strategic Bond paid 0.65% of its
average net assets in investment advisory fees.

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

B-34
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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

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.

B-35
<PAGE>

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.

During the year ended December 31, 1999, U.S. Government paid 0.55% of its
average net assets in investment advisory fees.

B-36
<PAGE>

BALANCED SERIES

PRINCIPAL INVESTMENT STRATEGIES

Investment Selection

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-37
<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.

. 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

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-38
<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 Management may use certain techniques,
such as FORWARD CONTRACTS or FUTURES CONTRACTS, to manage these risks. However,
Wellington Management cannot assure that these techniques will be effective.

Emerging Markets

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.

B-39
<PAGE>

Forward Contracts and Futures Contracts

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, the Balanced Series paid 0.70% of its
average net assets in investment advisory fees.

B-40
<PAGE>

ALGER EQUITY GROWTH SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Equity Growth paid 0.75% of its
average net assets in investment advisory fees.

B-41
<PAGE>

DAVIS VENTURE VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock selection

. 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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

B-42
<PAGE>

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 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.

B-43
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES

PRINCIPAL INVESTMENT STRATEGIES

Harris uses a value investment style in selecting equity securities for Mid Cap
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 Mid Cap Value's investment objective.

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.

B-44
<PAGE>

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.

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.

B-45
<PAGE>

High Yield Debt

PAST PERFORMANCE OF SIMILARLY MANAGED FUNDS

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-46
<PAGE>

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, Mid Cap Value paid 0.75% of its
average net assets in investment advisory fees.

B-47
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

PRINCIPAL INVESTMENT STRATEGIES

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.

PRINCIPAL INVESTMENT RISKS

Equity Securities

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

B-48
<PAGE>

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

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.

B-49
<PAGE>

PORTFOLIO MANAGEMENT

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.

During the year ended December 31, 1999, Small Cap paid 1.00% of its average
net assets in investment advisory fees.

B-50
<PAGE>

MFS INVESTORS SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

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-51
<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

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.

During the period ended December 31, 1999, the Investors Series paid 0.75% of
its average daily net assets in investment advisory fees.

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-52
<PAGE>

MFS RESEARCH MANAGERS SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

PRINCIPAL INVESTMENT RISKS

Equity Securities

Foreign Securities

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

B-53
<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

Forward Contracts

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.

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

B-54
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

PRINCIPAL INVESTMENT STRATEGIES

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

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

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

B-55
<PAGE>

MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES

PRINCIPAL INVESTMENT STRATEGIES

Stock Selection

MSAM evaluates potential investments for International Equity in several steps.

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.

B-56
<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

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.

PORTFOLIO MANAGEMENT

During the year ended December 31, 1999, International Equity paid 0.90% of its
average net assets in investment advisory fees.

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-57
<PAGE>

SECTION IV--OTHER INFORMATION ABOUT THE FUND

INVESTMENT ADVISORY SERVICES

ADVISER/SUBADVISER RELATIONSHIP

PURCHASE AND REDEMPTION OF SHARES

SHARE VALUATION AND PRICING

Net Asset Value

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

B-58
<PAGE>

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Money Market

Other Series

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

TAXES

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-59
<PAGE>

FINANCIAL HIGHLIGHTS

BACK BAY ADVISORS MONEY MARKET SERIES

B-60
<PAGE>

BACK BAY ADVISORS BOND INCOME SERIES

B-61
<PAGE>

SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES

B-62
<PAGE>

SALOMON BROTHERS U.S. GOVERNMENT SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 11.47 $ 11.14 $ 10.83 $ 11.04 $ 9.96
------- ------- ------- ------- ------
Income From Investment Operations
Net Investment Income............. 0.65 0.47 0.53 0.58 0.33
Net Realized and Unrealized Gain
(Loss) on Investments............ (0.62) 0.37 0.40 (0.21) 1.16
------- ------- ------- ------- ------
Total From Investment
Operations................... 0.03 0.84 0.93 0.37 1.49
------- ------- ------- ------- ------
Less Distributions
Distributions From Net Investment
Income........................... (0.66) (0.45) (0.53) (0.56) (0.33)
Distributions From Net Realized
Capital Gains.................... (0.03) (0.06) (0.05) (0.02) (0.08)
Distributions in Excess of Net
Realized Capital Gains........... 0.00 0.00 (0.04) 0.00 0.00
------- ------- ------- ------- ------
Total Distributions........... (0.69) (0.51) (0.62) (0.58) (0.41)
------- ------- ------- ------- ------
Net Asset Value, End of Year...... $ 10.81 $ 11.47 $ 11.14 $ 10.83 $11.04
======= ======= ======= ======= ======
Total Return (%).................. 0.2 7.5 8.6 3.3 15.0
Ratio of Operating Expenses to
Average Net Assets (%)(a)........ 0.70 0.70 0.70 0.70 0.70
Ratio of Net Investment Income to
Average Net Assets (%)........... 5.89 5.70 6.42 6.13 5.62
Portfolio Turnover Rate (%)....... 530 496 572 388 415
Net Assets, End of Year (000)..... $50,967 $45,807 $22,143 $13,211 $7,542
The Ratios of Operating Expenses
to Average Net Assets without
giving effect to the voluntary
expense agreement would have been
(%).............................. 0.72 0.77 0.98 1.37 2.90
</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 0.70% 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-63
<PAGE>

BALANCED SERIES(a)

B-64
<PAGE>

ALGER EQUITY GROWTH SERIES

B-65
<PAGE>

DAVIS VENTURE VALUE SERIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income......... 0.12 0.16 0.18 0.13 0.10
Net Realized and Unrealized
Gain (Loss) on Investments... 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------
Total From Investment
Operations............... 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income............ (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital Gains....... (0.32) (0.49) (0.53) (0.27) (0.20)
Distribution in Excess of Net
Realized Capital Gain ....... (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total Distributions....... (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------
Net Asset Value, End of Year.. $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
======== ======== ======== ======== =======
Total Return (%).............. 17.5 14.4 33.5 25.8 39.3
Ratio of Operating Expenses to
Average Net Assets (%)(a).... 0.81 0.83 0.90 0.90 0.90
Ratio of Net Investment Income
to Average Net Assets (%).... 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate (%)... 22 25 17 18 20
Net Assets, End of Year (000)
............................. $655,599 $440,351 $280,448 $108,189 $35,045
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- -- 0.90 0.96 1.51
</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. This expense arrangement is no
longer in effect.

B-66
<PAGE>

HARRIS OAKMARK MID CAP VALUE SERIES(a)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year......................... $ 122.85 $ 170.59 $ 157.88 $142.44 $112.77
-------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income......... 1.36 1.09 0.00 0.11 0.42
Net Realized and Unrealized
Gain (Loss) on Investments... (0.97) (11.41) 27.12 24.88 33.80
-------- -------- -------- ------- -------
Total From Investment
Operations............... 0.39 (10.32) 27.12 24.99 34.22
-------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income............ (1.36) (1.09) 0.00 (0.13) (0.40)
Distributions in Excess of net
investment income............ (0.17) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital Gains....... 0.00 (36.08) (14.41) (9.42) (4.15)
Distributions in Excess of Net
Realized Capital Gains....... 0.00 (0.25) 0.00 0.00 0.00
-------- -------- -------- ------- -------
Total Distributions....... (1.53) (37.42) (14.41) (9.55) (4.55)
-------- -------- -------- ------- -------
Net Asset Value, End of Year.. $ 121.71 $ 122.85 $ 170.59 $157.88 $142.44
======== ======== ======== ======= =======
Total Return (%).............. 0.3 (5.5) 17.4 17.6 30.4
Ratio of Operating Expenses to
Average Net Assets (%)(b).... 0.88 0.88 0.85 0.85 0.85
Ratio of Net Investment Income
to Average Net Assets (%).... 1.08 0.66 (0.16) 0.08 0.37
Portfolio Turnover Rate (%)... 119 171 49 65 58
Net Assets, End of Year (000). $109,280 $112,997 $114,617 $82,667 $48,832
The Ratios of Operating
Expenses to Average Net
Assets without giving effect
to the voluntary expense
agreement would have been
(%).......................... -- 0.90 0.86 0.92 1.06
</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-67
<PAGE>

LOOMIS SAYLES SMALL CAP SERIES

B-68
<PAGE>

MFS INVESTORS SERIES

<TABLE>
<CAPTION>
APRIL 30, 1999(a)
THROUGH
DECEMBER 31,
1999
-----------------
<S> <C>
Net Asset Value, Beginning
of Period.................. $10.00
------
Income From Investment
Operations
Net Investment Income....... 0.02
Net Realized and Unrealized
Gain (Loss) on Investments. 0.26
------
Total From Investment
Operations............. 0.28
------
Less Distributions
Distributions From Net
Investment Income.......... (0.02)
------
Total Distributions..... (0.02)
------
Net Asset Value, End of
Period..................... $10.26
======
Total Return (%)............ 2.9 (b)
Ratio of Operating Expenses
to Average Net Assets
(%)(d)..................... 0.90 (c)
Ratio of Net Investment
Income to Average Net
Assets (%)................. 0.45 (c)
Portfolio Turnover Rate (%). 60
Net Assets, End of Period
(000)...................... $6,841
The Ratios of Operating
Expenses to Average Net
Assets without giving
effect to the voluntary
expense agreement would
have been (%).............. 2.03 (c)
</TABLE>
- --------
(a) Commencement of operations.
(b) Not computed on an annualized basis.
(c) 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-69
<PAGE>

MFS RESEARCH MANAGERS SERIES

B-70
<PAGE>

WESTPEAK GROWTH AND INCOME SERIES

B-71
<PAGE>

MORGAN STANLEY INTERNATIONAL EQUITY MAGNUM SERIES(a)

B-72
<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

TO OBTAIN COPIES OF THESE MATERIALS:

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 1-202-942-8090 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
electronic request at the following E-mail address: [email protected], or 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-73
<PAGE>

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

Page
General......................................................................3
Investment Objectives and Policies...........................................3
Investment Restrictions.....................................................12
Investment Practices........................................................14
Resolving Material Conflicts................................................33
Determination of Net Asset Values...........................................34
Fund Performance............................................................36
Expense Deferrals and Limits................................................40
Trustees and Officers.......................................................41
Advisory Arrangements.......................................................43
Distribution Agreement......................................................49
Other Services..............................................................49
Portfolio Transactions and Brokerage........................................50
Code of Ethics..............................................................52
Description of the Fund.....................................................52
Taxes.......................................................................53
Transfer Agent..............................................................54
Financial Statements........................................................55
Appendix A-1 (Description of Bond Ratings)..................................56
Appendix A-2 (Description of Commercial Paper Ratings)......................59
Appendix B..................................................................60

-2-
<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 AllocationGroup, 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.

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

-3-
<PAGE>

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 illiquid
securities (but excluding Rule 144A securities deemed liquid by Alger
Management), and may enter into short sales "against the box."

The Series may lend securities it owns so long as such loans do not exceed
331/3% 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.

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.

-4-
<PAGE>

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 MID CAP VALUE SERIES (FORMERLY GOLDMAN SACHS MIDCAP VALUE SERIES)

Mid Cap Value seeks to provide investors with long-term capital
appreciation. Harris Associates L.P. ("Harris"), Mid Cap Value's subadviser,
invests Mid Cap 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 non-U.S. dollar-denominated securities of U.S. or foreign
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 Mid Cap Value's total assets in American Depositary
Receipts and securities of foreign issuers.

Harris may invest Mid Cap 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 Mid Cap 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
Mid Cap Value's total assets in high yield debt.

Harris may also invest up to 10% of Mid Cap Value's total assets in the
aggregate in shares of 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 Mid
Cap 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.

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 Mid Cap 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 Mid Cap Value would exceed 5% of its assets. Harris will write call options
and put options for Mid Cap 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
Mid Cap 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.

-5-
<PAGE>

In addition, pending investment of proceeds from new sales of Mid Cap
Value's shares or to meet ordinary daily cash needs, Harris may temporarily hold
Mid Cap 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.

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. 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. The capitalization range of the
Russell 2000 Index will vary due to the market value fluctuations of the stocks
in the Index. The index is reconstituted annually, normally in June. Just
following this reconstitution, the capitalization range of the Index may be
significantly different than it was prior to the reconstitution. (See "Fund
Performance--Fund Comparisons")

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
(including ADRs) 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.

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 ADRs and emerging market securities) which are not traded on a U.S.
exchange.

-6-
<PAGE>

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 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.

-7-
<PAGE>

Stock Index is not sponsored, endorsed, sold or promoted by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no
representation or warranty, express or implied, to the owners of Stock Index or
any member of the public regarding the advisability of investing in securities
generally or in Stock Index particularly or the ability of the S&P 500 Index to
track general stock market performance. S&P's only relationship to the
Metropolitan Life Insurance Company (the "Licensee") is S&P's grant of
permission to Licensee to use the S&P 500 Index which is determined, composed
and calculated by S&P without regard to the Licensee or Stock Index. S&P has no
obligation to take the needs of the Licensee or the owners of Stock Index into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination of the prices
and amount of Stock Index or the timing of the issuance or sale of Stock Index
or in the determination or calculation of the equation by which Stock Index is
to be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of Stock Index.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WRRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF STOCK INDEX, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

BALANCED SERIES (FORMERLY LOOMIS SAYLES 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 common stocks and notes and
bonds. 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.

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. 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 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 low P/E 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 Bond Income 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

-8-
<PAGE>

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 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 maturity and the duration 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

-9-
<PAGE>

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.

The Series may lend securities it owns so long as such loans do not
represent more than 20% of the Series' 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. The Series' use of
reverse repurchase agreements and dollar rolls leads to higher portfolio
turnover rates, which involve higher expenses.

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 assets in non-dollar obligations of foreign issuers. The Series
will invest in these securities only when Back Bay Advisors believes the
associated risks are minimal.

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' assets.

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 repurchase agreements 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;

-10-
<PAGE>

(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' 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
(including repurchase agreements and collateralized mortgage obligations) that
are not issued or guaranteed by the U.S. Government or an agency, authority or
instrumentality will not count toward the 65% minimum, even if they are backed
by mortgages (or other collateral) that are so guaranteed.

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

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

Up to 20% of the 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' 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.

-11-
<PAGE>

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
or other factors. 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 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;

-12-
<PAGE>

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

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 Mid Cap Value Series.

-13-
<PAGE>

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 investment practices in
which certain Series may engage. The table indicates which Series may engage in
each of these practices.

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

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

Fixed-income Securities All Series except Stock Index

Money Market Instruments All Series except Stock Index

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 Mid Cap 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 Mid Cap Value, Strategic Bond, Investors, Balanced, Managed,
Securities Bond Income
</TABLE>

-14-
<PAGE>

<TABLE>
<CAPTION>
Practices Series
- --------- ------
<S> <C>
Brady Bonds All Series except Stock Index

Foreign Equity Depositary Receipts Small Cap, International Equity, Equity Growth, Capital Growth,
Mid Cap Value, Venture Value, Growth and Income, Balanced,
Managed, Investors, Research Managers

Foreign Currency Transactions, including Forward All series except Stock Index (Research Managers may not
Contracts, Futures and Options engage in futures or purchase or write options)

Emerging Markets Mid Cap Value, Strategic Bond, Investors, Research Managers,
International Equity, Balanced, Managed, Bond Income

Obligations of Supranational Agencies All Series except Stock Index

Illiquid Securities All Series except Stock Index

Rule 144A Securities All Series except Stock Index

Real Estate Investment Trusts Small Cap, International Equity, Equity Growth, Capital Growth,
Mid Cap 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 and Selling Futures (and options thereon) All Series except Money Market, Research Managers, Mid Cap Value
(Investors may not engage in options on futures)

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

When Issued Securities Small Cap, International Equity, Equity Growth, Mid Cap Value,
Venture Value, Managed, Balanced, Bond Income, U.S Government,
Strategic Bond, Investors, Research Managers
</TABLE>

-15-
<PAGE>

<TABLE>
<CAPTION>
Practices Series
- --------- ------
<S> <C>
Forward Commitments Mid Cap Value, Investors, Research Managers,
International Equity, Balanced

Short Sales "Against the Box" International Equity, Equity Growth, Mid Cap 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 or other factors. Except to the extent values are
affected by other factors such as developments relating to a specific issuer,
generally the value of a fixed-income security can be expected to rise when
interest rates decline and conversely, the value of such a security can be
expected to fall when interest rates rise. Some fixed-income securities also
involve prepayment or call risk. This is the risk that the issuer will repay a
Series the principal on the security before it is due, thus depriving the Series
of a favorable stream of future interest or dividend payments. 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.

-16-
<PAGE>

The short-term and medium-term fixed-income securities in which
International Equity may invest consist 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 24percent for a bond with 12 years' duration; but the same 2 percent
yield increase will produce a price decline of 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,
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

-17-
<PAGE>

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
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.

-18-
<PAGE>

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.

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,

-19-
<PAGE>

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 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 (other than the return of the
principal upon maturity), consists of the amortization of discount and 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

-20-
<PAGE>

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 Series and Strategic Bond may
each invest 100% of its total assets in high yield debt. Balanced and Mid Cap
Value may each 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 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

-21-
<PAGE>

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. See "Investment Practices -
Foreign Equity Depositary Receipts."

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.
Such countries' 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 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

-22-
<PAGE>

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.

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 involving an emerging market country 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
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.

-23-
<PAGE>

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 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 - The 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 except Stock Index may invest up to 15% of
- -------------------
its net assets (10% in the case of Money Market) in "illiquid securities," that
is, securities which in the opinion of the subadviser may not be 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 (other than Rule 144A securities deemed liquid by the
Series' adviser or subadviser) and certificates of deposit and repurchase
agreements of more than seven days duration or any time deposit with a
withdrawal penalty. If through the appreciation of illiquid securities or the
depreciation of liquid securities, a Series is in a position where more than 15%
(10% in the case of Money Market) of the value of its net assets are invested in
illiquid assets,

-24-
<PAGE>

the Series is not required to immediately sell any illiquid securities if to do
so would not be in the best interest of the Series' shareholders.

Rule 144A Securities -- Each Series except Stock Index 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 Investment Company Act of 1940 (the "1940 Act.") REITs, and
mortgage REITs in particular, are also subject to interest rate risk.

Investment Company Securities -- The Series listed above 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 (see below) are investment company
securities; therefore, investments therein are subject to a Series' limitation
on investment in other investment companies.

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.

-25-
<PAGE>

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 - Each of the Series may enter into these 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 listed above 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.

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 high quality 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".

-26-
<PAGE>

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.

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

-27-
<PAGE>

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
and (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.

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.

-28-
<PAGE>

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 and 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 organizations.

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.

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

-29-
<PAGE>

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 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.

-30-
<PAGE>

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
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

-31-
<PAGE>

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 LIBOR). In some cases, the issuer's obligations may fluctuate inversely with
changes in an external factor or factors (for example, if the U.S. prime lending
rate goes up, the issuer's interest payment obligations are reduced). In some
cases, the issuer's obligations may be determined by some multiple of the change
in an external factor or factors (for example, three times the change in the
U.S. Treasury bill rate). In some cases, the issuer's obligations remain fixed
(as with a traditional debt instrument) so long as an external factor or factors
do not change by more than the specified amount (for example, if the U.S.
Treasury bill rate does not exceed some specified maximum); but if the external
factor or factors change by more than the specified amount, the issuer's
obligations may be sharply increased or reduced.

Structured notes can serve many different purposes in the management of
the Series. For example, they can be used to increase the Series' exposure to
changes in the value of assets that the Series would not ordinarily purchase
directly (such as gold or oil). They can also be used to hedge the risks
associated with other investments the Series hold. For example, if a structured
note has an interest rate that fluctuates inversely with general changes in
market interest rates, the value of the structured note would generally move in
the opposite direction to the value of traditional debt obligations, thus
moderating the effect of interest rate changes in the value of 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.
(Each Series is not permitted to invest more than 15% of its net assets in
illiquid investments.) As with all investments, successful use of structured
notes depends in significant part on the accuracy of the subadviser's analysis
of the issuer's creditworthiness and financial prospects, and of the
subadviser's forecast as to changes in relevant economic and financial market
conditions and factors. In instances where the issuer of a structured note is a
foreign entity, the usual risks associated with investments in foreign
securities (described above) 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

-32-
<PAGE>

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 or lost investment opportunity with respect
to liquid assets in the event the counter-party defaults on its obligation to
deliver the security on the settlement date. 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 other 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 or lost investment opportunity with respect to liquid assets in
the event the counter-party defaults on its obligation to deliver the security
on 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 - Each Series 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 may 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.

RESOLVING MATERIAL CONFLICTS

Currently, shares in the Fund are available only to separate accounts
established by New England Financial ("NEF"), Metropolitan Life Insurance
Company ("MetLife"), General American Life Insurance Company ("General
American"), Security First Life Insurance Company ("Security First Group") and
their affiliates 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, MetLife, General American, or Security First Group.

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, MetLife, General
American, or Security First Group. 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.

-33-
<PAGE>

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. Because foreign exchanges are not
always closed at the same time that the New York Stock Exchange is closed, the
price of securities primarily traded on foreign exchanges may increase or
decrease when the New York Stock Exchange is closed. Therefore, the net assets
value of Series that hold these securities may change on days that separate
accounts will not be able to purchase or redeem Fund shares.

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. Equity
securities for which current market quotations are not readily available
(including restricted securities, if any) are valued at fair value, as described
below.

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.

An option purchased by a Series generally will be valued at the last sale
price or, in the absence of the last sale price, the last offer price.

A futures contract will generally be valued at the unrealized gain or loss
on the contract to the current settlement price, but this valuation method may
not be used if the market makes a limit move with respect to a particular
futures contract or if the securities underlying the futures contract experience
significant price fluctuations after determination of the settlement price. When
settlement price is not used, futures contracts will be valued at fair value as
described below.

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 at fair value, as described below.

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.

Fair Value. As noted above, certain securities and assets of each Series
may be valued at their fair market value. Fair market value is determined in
good faith by the adviser or subadviser of that Series acting under the
supervision of the Fund's 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.

-34-
<PAGE>

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.

-35-
<PAGE>

FUND PERFORMANCE

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 and 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 in the past or
currently 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).

AVERAGE AVERAGE AVERAGE
ANNUAL ANNUAL ANNUAL
AVERAGE TOTAL TOTAL TOTAL
ANNUAL RETURN RETURN RETURN
TOTAL FOR THE FOR THE SINCE
RETURN FOR FIVE TEN COMMENCEMENT
THE YEAR YEARS YEARS OF OFFERING
ENDING ENDING ENDING THROUGH
12/31/99 12/31/99 12/31/99 12/31/99
-------- -------- -------- --------

<S> <C> <C> <C> <C>
Series

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% 26.2% 16.9% 23.3% (3)

Mid Cap 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% 27.9% 17.7% 16.3%

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

Managed Series 10.0% 20.3% 13.8% 13.0%

Strategic Bond Series 1.4% 9.4% 8.8%

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

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

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

Investors 2.9% (6)

Research Managers 19.8% (6)

</TABLE>

-36-
<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 May1, 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.

(6) Represents unannualized total return for the period April 30, 1999, when
the Series commenced operations, to December 31, 1999.

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

Yield and Effective 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, MetLife, General American, Security
First Group 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%.

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.

-37-
<PAGE>

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. In addition, each Series may, from time to time, provide
a ranking of such performance figures relative to similar figures for mutual
funds whose performance has been monitored by Lipper Analytical Services, Inc.
("Lipper") or Morningstar, Inc. 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 Mid Cap 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
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 that underlie variable
contracts.

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.

-38-
<PAGE>

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.

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 $526.4 million as
of its last reconstitution date, June 30, 1999. The market capitalization of the
companies comprising the Index will vary during the year. The Index is
reconstituted 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 on June 30, 1999, the average market capitalization of companies
in the Russell Midcap Index was $12.1 billion. The market capitalization of the
companies comprising the Index will vary during the year. The Index is
reconstituted 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. (See Appendix B - Advertising and Promotional
Literature.)

-39-
<PAGE>

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 without notice to or consent of shareholders of
the Series.

EXPENSE DEFERRAL ARRANGEMENT

Pursuant to an expense deferral arrangement relating to the International
Equity, Mid Cap 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 within the prescribed time period.
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%
Mid Cap Value 0.90%
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.

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)
Mid Cap 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>

-40-
<PAGE>

(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.

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; 57 Water Street, Marion, MA 02738; Retired;
-------
formerly, Vice Chairman, President and Chief Operating Officer, American
Brands (global conglomerate); formerly, President and CEO, Acushnet
Company.

EDWARD A. BENJAMIN* (61) -- Trustee; 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) -- Trustee; President, New England Products and Services,
-------
New England Financial; Head of Individual Business Product Management,
Metlife Financial Services; 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;
-------
Chairman, President and Chief Executive Officer, NEIM.

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; Senior Vice
---------
President, NEIM, since December 1998; formerly, Senior 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.

* Denotes trustee who is an "interested person" (as defined in 1940 Act) of the
Fund. Edward A. Benjamin is currently an "interested person" of the Fund due to
his former position as counsel to the Fund. He is expected to cease to be
considered such an "interested person" on January 1, 2001.

-41-
<PAGE>

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, New England Funds, L.P. or New
England Securities Corporation ("NES") are omitted, if not materially different.
The Fund's trustees also serve as managers of New England Variable Annuity Fund
I ("NEVA"), for which NES acts as a principal underwriter and CGM acts as
investment adviser.

The address of each trustee and officer of the Fund affiliated with NEF is
New England Financial, 501 Boylston Street, Boston, Massachusetts 02116.

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
directors, officers, or employees of NEF and/or NEIM.

Each trustee who is not an interested person of the Fund (and Mr. Benjamin)
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.

Aggregate Compensation Total Compensation from the
from the Fund Fund and NEVA
Name of Trustee in 1999($) in 1999($)
- --------------- ---------- ----------
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

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

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

-42-
<PAGE>

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

At 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 Mid Cap 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, which is
wholly-owned by MetLife, Inc., a publicly traded company. 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, April 28, 1999 in the case of Investors and Research Managers Series and
May 1, 2000 in the case of the Harris Oakmark Mid Cap Value Series and the
Balanced 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
approximately 48% 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' 18 principal
subsidiary or affiliated asset management firms, collectively, had more than
$133 billion of assets under management as of December 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 $5 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

-43-
<PAGE>

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.

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 Nvest Growth Fund
of the Nvest 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 a 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,

-44-
<PAGE>

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. ("HAI"), whose directors are David G. Herro, Robert M. Levy,
Roxanne M. Martino, Victor A. Morgenstern, Anita M. Nagler, William C. Nygren,
Neal Litvack, Robert J. Sanborn and Peter S. Voss. Mr. Levy is the president and
chief executive officer of HAI. HAI is a wholly-owned subsidiary of Nvest. Nvest
owns all of the limited partnership interests in Harris Associates.

MFS, subadviser to the Investors and Research Managers Series, and its
predecessor organizations have a history of money management dating from 1924.
MFS is an indirect 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."

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

Mid Cap 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 $1.5billion

Stock Index 0.25% all assets

Balanced Series (e) 0.70% the first $200 million
0.675% amounts in excess of $200 million

Managed Series 0.50% all assets

Strategic Bond 0.65% all assets

Bond Income (f) 0.40% the first $1 billion
0.35% the next $1 billion
0.30% the next $1 billion
0.25% amounts in excess of $3 billion

U.S. Government Series 0.55% all assets

Money Market (g) 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.

-45-
<PAGE>

(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 Mid Cap 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 May 1, 2000, the advisory fee payable by Balanced Series was at the
annual rate of 0.70% of the Series average daily net assets.

(f) 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.

(g) 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

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

</TABLE>

-46-
<PAGE>

<TABLE>

<S> <C> <C>
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, .60% of the next $40
million of such assets, 0.45% of such assets in excess of $50 million.

**From May 1, 1998 to April 30, 2000, the subadviser of Mid Cap Value was
Goldman Sachs Asset Management. Prior to May 1, 1998, the subadviser of Mid Cap
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.

-47-
<PAGE>

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.

Amount Paid to NEIM ($)
--------------------------
Series 1997 1998 1999
- ------ ---- ---- ----
Small Cap 1,404,831 2,178,725 2,368,856
International Equity 422,850 566,848 691,945
Equity Growth 1,246,269 2,115,106 4,418,196
Mid Cap Value 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 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

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.

NEIM may pay a significant amount of its profits to insurance companies (or
their affiliates), which invest in the Fund, as fees in consideration of the
administrative services and beneficial owner services provided by such insurance
companies to their customers.

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, Balanced, Equity Growth,
Investors Series, and Research Managers Series, any amendment to any advisory or
subadvisory agreement must be approved by vote of a majority of the outstanding
voting securities of the applicable Series and by vote of a majority of the
trustees who are not interested persons of (i) the Fund or (ii) the applicable
Series' investment adviser or subadviser. Each agreement may be terminated
without penalty by the trustees or by the shareholders of the applicable Series,
upon sixty days' written notice, or by the applicable Series' investment
adviser, upon ninety days' written notice, and each terminates automatically in
the event of its "assignment" as defined in the 1940 Act. In addition, each
subadvisory agreement may be terminated without penalty upon either ninety or
sixty 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

-48-
<PAGE>

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.

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. In addition, the subadvisory agreements between NEIM and
Harris and NEIM and Wellington provide that Harris or Wellington, as the case
may be, shall be liable for violations of law.

Certain officers and employees of subadvisers or CGM have responsibility for
portfolio management of other advisory accounts and clients (including other
Series of the Fund and other registered investment companies, and accounts of
affiliates) that may invest in securities in which the respective Series may
invest. Where the subadviser or CGM 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 to the participating accounts.

Where advisory accounts have competing interests in a limited investment
opportunity, a subadviser or CGM 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 each subadviser's or CGM's 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 a Series 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 of the Fund are of the view that the
benefits to the respective Series of retaining each subadviser or CGM outweigh
the disadvantages, if any, that might result from participating in such
transactions.

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.

OTHER SERVICES

Custodial Arrangements. State Street Bank and Trust Company ("State Street
----------------------
Bank"), 225 Franklin Street, Boston, Massachusetts 02110, is the Fund's
custodian and fund accounting agent. 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.

-49-
<PAGE>

Independent Accountants. The Fund's independent accountants are Deloitte &
-----------------------
Touche LLP. Deloitte & Touche LLP conducts an annual audit of each Series,
assists in the preparation of federal and state income tax returns and consults
with the Fund as to matters of accounting and federal and state income taxation.
A table of selected per share data and ratios for each of the Series appears in
the Prospectus. Prior to January 1, 1997 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.

CGM Service Agreement. Under a service agreement between New England Funds,
---------------------
L.P. and CGM, CGM paid Nvest Services Co., Inc. (formerly, New England Funds,
L.P.) ("Nvest Services") $1,061,801 and $704,558, respectively, for the Fund's
fiscal years ended December 31, 1997 and 1998, and paid NEIM $704,705 for the
Fund's fiscal year ended December, 31 1998, relating to Capital Growth. As of
January 1, 1999, CGM and Nvest Services 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
$1,675,615 for the Fund's fiscal year ended December 31, 1999.

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

Capital Growth, Stock Index, Managed, International Equity, Venture Value,
- --------------------------------------------------------------------------
Equity Growth, Mid Cap Value, Growth and Income, Small Cap, Balanced, Investors
- -------------------------------------------------------------------------------
and Research Managers (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 Mid Cap 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 or prices which, when combined with the quality of the foregoing services,
will produce best price and execution for the transaction. In the case of equity
securities, 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.

-50-
<PAGE>

A subadviser or CGM may cause a Series it manages to pay a broker-dealer
that provides brokerage and research services 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. The subadviser or
CGM 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 the
subadviser's or CGM's overall responsibilities to the Fund and its other
clients. A subadviser's or CGM's authority to cause a 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.

For the fiscal years ending December 31, 1997, 1998 and 1999, Capital
Growth paid brokerage commissions of $4,245,443, $6,104,694 and $8,032,383,
respectively; Stock Index paid brokerage commissions of $12,015, $18,326 and
$23,478, respectively; the Managed Series paid brokerage commissions of $31,499,
$22,789 and $39,559, respectively; International Equity paid brokerage
commissions of $146,747, $163,946 and $213,177, respectively; Venture Value paid
brokerage commissions of $148,966, $280,522 and $365,429, respectively; Equity
Growth paid brokerage commissions of $489,199, $694,292 and $1,183,662,
respectively; Mid Cap Value paid brokerage commissions of $74,700, $371,572 and
$531,030, respectively; Growth and Income paid brokerage commissions of
$163,690, $323,816 and $512,659, respectively; Small Cap paid brokerage
commissions of $394,066, $711,187 and $643,676, respectively; and the Balanced
Series paid brokerage commissions of $115,075, $225,014 and $224,823,
respectively. For the fiscal period April 30, 1999 through December 31, 1999,
the Investors Series paid brokerage commissions of $8,022 and the Research
Managers Series paid brokerage commissions of $9,202.

For the fiscal year ending December 31, 1999, the following series paid
commissions to brokers because of research services provided: Capital Growth
paid $1,096,820, based on related transactions of $979,418,164; Growth and
Income paid $112,978, based on related transactions of $121,364,271; Stock Index
paid $780, based on related transactions of $700,991; Small Cap paid $27,326,
based on related transactions of $12,188,281; Balanced paid $149,234, based on
related transactions of $114,559,162; Venture Value paid $8,796, based on
related transactions of $8,116,982; Mid Cap Value paid $59,725; and
International Equity paid $211,219.

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 $1,183,662 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 $0, respectively, in brokerage commissions to
Shelby Cullom Davis & Co., L.P., an affiliated broker. This amount represents
36%, 14% and 0%, 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 $819,
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 0.38%,
respectively, of the total brokerage commissions paid by such Series during such
fiscal years. Mid Cap Value paid no brokerage commissions to affiliates for the
year ended December 31, 1997. For the years ended December 31, 1998 and 1999,
Mid Cap Value paid $20,815 and $17,056, respectively, in brokerage commissions
to Goldman, Sachs & Co., an affiliated broker of the former subadviser to Mid
Cap Value, Goldman Sachs Asset Management, which represents 2.7% and 3.21%,
respectively, of the total brokerage commissions paid by such Series during such
fiscal years.

-51-
<PAGE>

CODE OF ETHICS

The Fund, NEIM, CGM, the subadvisers, and New England Securities have each
adopted a Code of Ethics which establishes 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 an open-end management investment company 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. Each Series is
classified under the 1940 Act as diversified except Harris Oakmark Mid Cap Value
Series, which is non-diversified. 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. Stock
Index commenced operations on March 30, 1987. The Managed Series commenced
investment operations on May 1, 1987. Harris Oakmark Mid Cap Value (prior to May
1, 1998, known as Loomis Sayles Avanti Growth Series, and from May 1, 1998 to
April 30, 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 or classes
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.

-52-
<PAGE>

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 or the separate accounts and general
accounts of General American, Security First Group (or any affiliate of any such
company). Therefore, as of March 31, 2000, MetLife and NEF were each 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 (as well as
General American, SFG Group or any other affiliated or unaffiliated insurance
company) 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
each such insurance company is required to vote any shares held in its 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
(including all insurance companies, taken together, as record owners). Each such
insurance company currently intends to vote their shares in a manner consistent
with this view.

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

Fund shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held). Each insurance company is the
legal owner of shares attributable to variable life insurance and variable
annuity contracts issued by its separate accounts, and has the right to vote
those shares. Pursuant to the current view of the SEC staff, each insurance
company will vote its 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 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 each insurance company will be voted in the same
proportion as the aggregate (all insurance company record owners taken together)
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),

-53-
<PAGE>

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. Series investing in foreign
securities, however, may be subject to foreign taxes. These taxes could reduce
the investment performance of such Series.

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.

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

-54-
<PAGE>

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

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

FINANCIAL STATEMENTS

The financial statements of the Fund and the related reports of independent
accountants included in the Fund's annual report for the year ended December 31,
1999 are incorporated herein by reference to the Fund's Annual Report as filed
with the Securities and Exchange Commission on February 29, 2000.

-55-
<PAGE>

APPENDIX A-1
DESCRIPTION OF BOND RATINGS

MOODY'S INVESTORS SERVICE, INC.

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

Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities. See Note 1.

A
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future. See Note 1.

Baa
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
----
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. See Note 1.

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

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

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

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

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

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

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

-56-
<PAGE>

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

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

(4) The issue was privately placed, in which case the rating is not
published in Moody's publications.

- -----------------
Note 1: This rating may include the numerical modifier 1, 2 or 3 to provide a
more precise indication of relative debt quality within the category, with 1
indicating the high end of the category, 2 the mid-range and 3 nearer the low
end.

STANDARD & POOR'S RATINGS GROUP

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

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

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

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

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

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

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

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

DUFF & PHELPS CREDIT RATING CO.

AAA

Highest credit quality. The risk factors are negligible, being only slightly
more than for risk-free U.S. Treasury debt.

AA+, AA, AA-

High credit quality. Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.

A+, A, A-

-57-
<PAGE>

Protection factors are average but adequate. However, risk factors are more
variable and greater in periods of economic stress.

BBB+, BBB, BBB-

Below-average protection factors but still considered sufficient for prudent
investment. Considerable variability in risk during economic cycles.

BB+, BB, BB-

Below investment grade but deemed likely to meet obligations when due. Present
or prospective financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or down frequently
within this category.

B+, B, B-

Below investment grade and possessing risk that obligations will not be met when
due. Financial protection factors will fluctuate widely according to economic
cycles, industry conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into a higher or lower
rating grade.

CCC
Well below investment grade securities. Considerable uncertainty exists as to
timely payment of principal, interest or preferred dividends. Protection factors
are narrow and risk can be substantial with unfavorable economic/industry
conditions, and/or with unfavorable company developments.

Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.

Preferred stock with dividend arrearages.

-58-
<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.

-59-
<PAGE>

APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE

Advertising and promotional literature prepared by each insurance
company which is a record shareholder for products it issues or administers may
include references to its affiliates, NEIM, CGM and any subadviser. Reference
also may be made to other Funds sponsored by CGM or any subadviser.

Each such insurance company's advertising and promotional material may
include, but is not limited to, discussions of the following information (in the
case of corporate 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.

-60-
<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 -number and location of offices
-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 and goals and benchmarks that it
establishes in management
-the systems utilized in management, the features and characteristics
of those systems and the intended results from such computer analysis

-- 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 any of the above information about Nvest
Companies and its affiliates.

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, but not limited to: Nvest, 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.

Advertising may include all of the top portfolio holdings of a Series
or sector or industry breakdowns.

References to the Series may be included in any such insurance
company'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 administrators,
benefits consultants and firms including, but not limited to, DC Xchange,
William Mercer and other

-61-
<PAGE>

organizations involved in 401(k) and retirement programs with whom the
insurance company 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 insurance company
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 the insurance company'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 thebenefits of investing, including mutual fund
diversification and professional management.

-62-