<PAGE>
ZENITH ACCUMULATOR
Individual Variable Annuity Contracts
Issued by
New England Mutual Life Insurance Company
Supplement dated July 24, 1995
to Prospectus dated May 1, 1995
The Commonwealth of Pennsylvania has repealed the state's 2% tax on annuity
payments received by insurance companies, effective January 1, 1996.
Accordingly, beginning on January 1, 1996, New England Mutual Life Insurance
Company will no longer deduct a 2% premium tax from purchase payments it
receives for Zenith Accumulator Contracts that are subject to the insurance tax
law of Pennsylvania.
NEA-19-95
<PAGE>
ZENITH ACCUMULATOR
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
ISSUED BY
NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MASSACHUSETTS 02116
(617) 578-2000
This prospectus offers individual flexible and single purchase payment
variable annuity contracts (the "Contracts") that are currently intended for
individual use, for use with certain retirement plans that qualify for tax
benefited treatment under the Internal Revenue Code (the "Code"), and for use
with plans and trusts not qualifying under the Code for tax benefited
treatment. All purchase payments made under the Contracts may be allocated to
New England Variable Account (the "Variable Account"), a separate investment
account of New England Mutual Life Insurance Company ("The New England" or the
"Company"). Assets of the Variable Account are invested in shares of certain
Series of the New England Zenith Fund and certain portfolios of the Variable
Insurance Products Fund (collectively, the "Eligible Funds"). See "Investments
of the Variable Account." The owner of a Contract chooses the Eligible Funds
in which the purchase payments are invested and may change the Eligible Fund
or Funds selected at any time. Any one or a combination of the following
Eligible Funds may be selected:
Capital Growth Loomis Sayles Loomis Sayles
Series Balanced Series Small Cap
Draycott Series
International Equity
Back Bay Series
Advisors Bond Equity-Income
Income Series Portfolio
Salomon Brothers U.S. Overseas
Back Bay Government Series Portfolio
Advisors Money
Market Series
Salomon Brothers
Loomis Sayles Strategic Bond
Avanti Growth Opportunities Series
Series
Venture Value Series
Westpeak Value
Growth Series Alger Equity Growth
Series
A Fixed Account option is also available in approved states. (See "The Fixed
Account" for more information.) Special limits apply to transfers of Contract
---------------------------------------------
Value to and from the Fixed Account.
- -----------------------------------
This prospectus sets forth concisely the information about the Contracts
that a prospective investor ought to know before investing. The prospectus
should be read carefully and retained for future reference.
Certain additional information about the Contracts is contained in a
Statement of Additional Information dated May 1, 1995, as it may be
supplemented from time to time, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Table of
Contents of the Statement of Additional Information appears on page A-48 of
this prospectus. The Statement of Additional Information is available without
charge and may be obtained by writing to New England Securities Corporation
("New England Securities"), 399 Boylston St., Boston, Massachusetts 02116.
New England Securities, a subsidiary of the Company, serves as principal
underwriter for the Variable Account.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1995.
THIS PROSPECTUS IS NOT VALID UNLESS IT IS ACCOMPANIED OR PRECEDED BY CURRENT
PROSPECTUSES FOR THE NEW ENGLAND ZENITH FUND AND THE VARIABLE INSURANCE
PRODUCTS FUND. THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
AN INVESTMENT IN THE CONTRACT IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND IS NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
TABLE OF CONTENTS
OF
THE PROSPECTUS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS......................... A-4
HIGHLIGHTS................................................................ A-5
EXPENSE TABLE............................................................. A-7
HOW THE CONTRACT WORKS.................................................... A-14
THE COMPANY............................................................... A-15
THE VARIABLE ACCOUNT...................................................... A-15
INVESTMENTS OF THE VARIABLE ACCOUNT....................................... A-15
New England Zenith Fund............................................... A-15
Variable Insurance Products Fund...................................... A-17
Investment Advice..................................................... A-17
Substitution of Investments........................................... A-18
GUARANTEED OPTION......................................................... A-18
THE CONTRACTS............................................................. A-18
Purchase Payments..................................................... A-18
Allocation of Purchase Payments....................................... A-18
Contract Value and Accumulation Unit Value............................ A-19
Payment on Death Prior to Annuitization .............................. A-19
Transfer Privilege.................................................... A-20
Dollar Cost Averaging................................................. A-20
Surrenders............................................................ A-20
Systematic Withdrawals................................................ A-21
Loan Provision for Certain Tax Benefited Retirement Plans............. A-21
Disability Benefit Rider.............................................. A-23
Suspension of Payments................................................ A-23
Ownership Rights...................................................... A-23
Requests and Elections................................................ A-24
Ten Day Right to Review............................................... A-24
ADMINISTRATION CHARGES, CONTINGENT DEFERRED SALES CHARGE AND OTHER
DEDUCTIONS............................................................... A-24
Administration Charges................................................ A-24
Mortality and Expense Risk Charge..................................... A-25
Contingent Deferred Sales Charge...................................... A-25
Premium Tax Charges................................................... A-26
Other Expenses........................................................ A-27
Charges Under Contracts Purchased by Exchanging a Fund I or Preference
Contract............................................................. A-27
ANNUITY PAYMENTS.......................................................... A-27
Election of Annuity................................................... A-27
Annuity Options....................................................... A-28
AMOUNT OF VARIABLE ANNUITY PAYMENTS....................................... A-29
Minimum Annuity Payments.............................................. A-30
Proof of Age, Sex and Survival........................................ A-30
RETIREMENT PLANS OFFERING FEDERAL TAX BENEFITS............................ A-30
FEDERAL INCOME TAX STATUS................................................. A-30
Tax Status of the Insurance Company and the Variable Account.......... A-31
Taxation of the Contracts............................................. A-31
Special Rules for Annuities Purchased for Annuitants Under Retirement
Plans Qualifying for Tax Benefited Treatment......................... A-31
Special Rules for Annuities Used by Individuals or with Plans and
Trusts Not Qualifying Under the Code for Tax Benefited Treatment..... A-33
Tax Withholding....................................................... A-34
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
VOTING RIGHTS.............................................................. A-34
DISTRIBUTION OF CONTRACTS.................................................. A-35
THE FIXED ACCOUNT.......................................................... A-35
General Description of the Fixed Account............................... A-35
Contract Value and Fixed Account Transactions.......................... A-36
FINANCIAL STATEMENTS....................................................... A-36
INVESTMENT EXPERIENCE INFORMATION.......................................... A-37
AVERAGE ANNUAL TOTAL RETURN................................................ A-37
APPENDIX A: Consumer Tips.................................................. A-47
</TABLE>
A-3
<PAGE>
GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS
ACCOUNT--A sub-account of the Variable Account or the Fixed Account.
ACCUMULATION UNIT--An accounting device used to calculate the Contract Value
prior to the Maturity Date.
ACCUMULATION UNIT VALUE--The value of an Accumulation Unit, determined as of
the close of regular trading on the New York Stock Exchange on each day the
Exchange is open. The Accumulation Unit Value of a sub-account reflects the
net investment experience of the underlying Eligible Fund and daily deductions
for the Mortality and Expense Risk Charge and Administration Asset Charge.
ADMINISTRATION ASSET CHARGE--A charge deducted daily from the assets of each
sub-account of the Variable Account to cover the Company's cost of providing
certain administrative services relating to the Contracts and the Variable
Account. On an annualized basis, the charge equals .40% of daily net assets.
ADMINISTRATION CONTRACT CHARGE--A $30 charge deducted annually from the
Contract Value to cover the Company's cost of providing certain administrative
services relating to the Contracts and the Variable Account.
ANNUITANT--The person on whose life the Contract is issued.
ANNUITIZATION--Application of proceeds under the Contract to an annuity
option on the Maturity Date or upon an earlier surrender of the Contract.
ANNUITY UNIT--An accounting device used to calculate the dollar amount of
annuity payments.
BENEFICIARY--The person designated to receive any benefits under a Contract
if the Annuitant dies before the Maturity Date.
CONTINGENT DEFERRED SALES CHARGE--A charge deducted upon certain full and
partial surrenders and application of Contract proceeds to certain annuity
payment options prior to the Maturity Date.
CONTRACT DATE--The date shown as the Contract Date in the Contract.
CONTRACT OWNER--The person so designated in the application or as
subsequently changed.
CONTRACT VALUE--On or before the Maturity Date, the value obtained by
multiplying the number of Accumulation Units credited to the Contract by the
appropriate current Accumulation Unit Value. Under Contracts that permit
Contract loans, the Contract Value also includes the amount of Contract Value
transferred to the Company's general account as a result of a loan and any
interest credited on that amount. Under Contracts with the Fixed Account
option, the Contract Value also includes the amount of Contract Value
allocated to the Fixed Account.
CONTRACT YEAR--A twelve month period commencing with the Contract Date and
with each Contract anniversary thereafter.
DEATH PROCEEDS (prior to annuitization)--The amount payable upon death of
the Annuitant prior to annuitization. The Death Proceeds are guaranteed to be
no less than the purchase payments made, adjusted for any previous surrenders.
The Death Proceeds will be reduced by the amount of any outstanding Contract
loan plus accrued interest.
ELIGIBLE FUNDS--A term that currently includes twelve Series of the New
England Zenith Fund and two portfolios of the Variable Insurance Products
Fund. Purchase payments applied to the Variable Account may be invested in
shares of one or more of these Series and portfolios, as described in
"Investments of the Variable Account." Two additional Series of the New
England Zenith Fund are Eligible Funds for Contracts issued before May 1,
1995, and a third Series is no longer an Eligible Fund for any Contracts. See
"Investments of the Variable Account--New England Zenith Fund."
FIXED ACCOUNT--A part of the Company's general account to which net purchase
payments may be allocated under certain Contracts. The Fixed Account provides
guarantees of principal and interest. Special limits apply to transfers of
------------------------------------
Contract Value to and from the Fixed Account. See "Contract Value and Fixed
- --------------------------------------------
Account Transactions."
MORTALITY AND EXPENSE RISK CHARGE--A charge deducted daily from the assets
of each sub-account of the Variable Account to compensate the Company for
assuming certain mortality and expense risks under the Contracts. On an
annualized basis, the charge equals .95% of daily net assets.
MATURITY DATE--The date on which annuity payments are to commence, as stated
in the application or as subsequently deferred.
A-4
<PAGE>
NET PURCHASE PAYMENT--A purchase payment, less any premium tax and any
premium for the disability benefit rider, if applicable, deducted before
allocation to the sub-accounts or the Fixed Account.
PAYEE--Any person or entity entitled to receive payment in one sum or under
a payment option. The term includes (i) an Annuitant, (ii) a Beneficiary or
contingent Beneficiary who becomes entitled to payments upon death of the
Annuitant, and (iii) in the event of surrender or partial surrender of the
Contract, the Contract Owner.
PREMIUM TAX--A tax charged by a state on purchase payments.
PURCHASE PAYMENTS--Amounts paid to the Company for investment in the
Contract.
SYSTEMATIC WITHDRAWALS--A method of distributing your Contract Value which
involves a series of partial surrenders.
TEN DAY RIGHT TO REVIEW--Within 10 days of your receipt of an issued
Contract you may return it to the Company or its agent for cancellation. Upon
cancellation of the Contract, the Company will refund all your purchase
payments (or, if required by state law, the Contract Value plus any premium
taxes deducted from the purchase payments).
VARIABLE ACCOUNT--A separate investment account of the Company designated as
The New England Variable Account. The Variable Account is divided into sub-
accounts, each of which invests in shares of one of the Eligible Funds.
VARIABLE ANNUITY--An annuity providing for payments varying in amount in
accordance with the investment experience of the assets of a separate
investment account.
HIGHLIGHTS
This prospectus describes Contracts under which net purchase payments are
allocated to the Variable Account. If the Fixed Account is available under
your Contract, you may allocate net purchase payments or transfer all or part
of your Contract Value to that account. For a description of the Fixed
Account, the rules regarding transactions which involve the Fixed Account
(such as special restrictions on transfers of Contract Value to and from the
-------------------------------------------------------------------
Fixed Account), and the way in which the Fixed Account affects the Contract
- -------------
Value, see "The Fixed Account". You should review "The Fixed Account"
carefully before allocating purchase payments or Contract Value to that
account.
TAX DEFERRED VARIABLE ANNUITIES:
The deferral of taxes on earnings under variable annuities is designed to
encourage long-term personal savings and supplemental retirement plans.
THE CONTRACT:
The Zenith Accumulator is a variable annuity issued by The New England. The
variable annuity provides for variable payments to commence at the Maturity
Date. The Contract Owner may, however, surrender the Contract and apply the
proceeds to an annuity payment option at an earlier date. The payments
generally are made on a monthly basis and will vary in amount according to the
payment option selected and the investment results of the underlying Eligible
Fund(s). (See "Annuity Payments".)
PURCHASE PAYMENTS:
Under current rules, the minimum initial purchase payment is $50 for
Contracts issued in connection with tax-benefited retirement plans other than
Individual Retirement Accounts ("IRAs"), $2,000 for Contracts issued for IRAs,
and $5,000 for all other Contracts. The Company may consent to lower minimum
initial purchase payments in certain situations. Additional payments must be
at least $25. The Company reserves the right to limit the amount of purchase
payments in any Contract Year. (See "Purchase Payments".) Contracts can be
purchased through insurance agents of The New England who are also registered
representatives of New England Securities.
A-5
<PAGE>
OWNERSHIP:
The Contracts may be purchased and owned by the Annuitant, the employer, a
trust, a custodian or any entity specified in an employee benefit plan, except
that where a Contract is issued under Section 408(b) or, generally, under
Section 403(b) of the Code, the Contract Owner must be the Annuitant. The
Company relies on instructions from trustees and custodians, as Contract
Owners, who may exercise certain rights under the Contracts on behalf of plan
participants. In any event, references to "you" in this prospectus refer to
the Contract Owner or to plan participants who may be entitled to instruct
their trustee or custodian with regard to the exercise of these rights.
INVESTMENT OPTIONS:
You may allocate net purchase payments to the Eligible Funds or to the Fixed
Account (if available under your Contract). Your Contract Value may be
distributed among no more than 10 accounts (including the Fixed Account) at
any time.
You may change the Eligible Funds in which you invest future purchase
payments. You may also transfer Contract Value between Eligible Funds without
taxation. (See "Requests and Elections" and "Transfer Privilege.") Currently
the Company allows 12 transfers free of charge per Contract Year prior to
annuitization. Additional transfers are subject to a charge of $10 per
transfer. After variable annuity payments begin, you may make one transfer per
year without the consent of the Company. The amount of Contract Value
transferred must be a minimum of $25 (or, if less, the amount of Contract
Value held in the sub-account from which the transfer is made). Special limits
apply to transfers of Contract Value to and from the Fixed Account. See "The
Fixed Account" for a description of transfers involving that account.
CHARGES:
No sales charges are deducted from purchase payments before they are
invested in the Contract. In certain states, applicable state premium taxes
are deducted from purchase payments. Where state law requires, the Company
deducts premium taxes from Contract Value at the date annuity benefits
commence. (See "Premium Tax Charges.") As compensation for its assumption of
mortality and expense risks, the Company deducts an amount equal to an annual
rate of .95% of the daily net assets of the Variable Account, of which .60%
represents a mortality risk charge and .35% represents an expense risk charge.
The Company deducts an amount equal to an annual rate of .40% of the daily net
assets of the Variable Account for administrative expenses and also imposes an
annual administrative charge of $30 against each Contract.
A Contingent Deferred Sales Charge will be imposed on certain full and
partial surrenders and applications of proceeds to certain payment options
prior to the Maturity Date. (See "Administration Charges, Contingent Deferred
Sales Charge and Other Deductions.") In no event will the total Contingent
Deferred Sales Charge exceed 8% of the first $50,000 of purchase payments made
under the Contract and 6.5% of the amount of purchase payments in excess of
$50,000.
TEN DAY RIGHT TO REVIEW:
Within 10 days (or more where required by applicable state insurance law) of
your receipt of a Contract you may return it to the Company or the Company's
agent for cancellation. The Company will refund all purchase payments made
under the Contract (or, if required by state law or regulation, the Contract
Value plus any premium taxes deducted from the purchase payments). (See "Ten
Day Right to Review.")
PAYMENT ON DEATH:
The Contract provides a payment to the Beneficiary if the Annuitant dies
prior to annuitization. The amount provided to the Beneficiary is guaranteed
not to be less than the purchase payments made under the Contract (adjusted
for previous surrenders and reduced by any outstanding Contract loan balance).
(See "'Payment on Death Prior to Annuitization.")
SURRENDERS:
Surrenders of the Contract for all or a portion of the Contract Value are
generally permitted upon written request at any time prior to annuitization so
long as, after a partial surrender, the remaining Contract Value is at least
$500. (See
A-6
<PAGE>
"Surrenders". Special rules apply if the Contract is subject to a loan.) The
Federal tax laws impose penalties upon, and in some cases prohibit, certain
premature distributions from the Contracts before or after the date on which
the annuity payments are to begin. (See "Federal Income Tax Status.") A
Contingent Deferred Sales Charge will be imposed in connection with certain
Contract surrenders and applications of proceeds to certain payment options
prior to the Maturity Date. Up to 10% of the Contract Value may be surrendered
without sales charge in any one Contract Year. (See "Administration Charges,
Contingent Deferred Sales Charge and Other Deductions" for more information.)
- -------------------------------------------------------------------------------
EXPENSE TABLE
VARIABLE ACCOUNT
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES(1)
Sales Charge Imposed on Purchases (as a percentage of
purchase payments).................................... 0%
Maximum Contingent Deferred Sales Charge(2) (as a 8% of first $50,000
percentage of total purchase payments)................ 6.5% of excess
Exchange Fee(3)........................................ $ 0
ANNUAL CONTRACT FEE
Administration Contract Charge (per Contract)(4)....... $30
SEPARATE ACCOUNT ANNUAL EXPENSES(5)
(as percentage of average net assets)
Mortality Risk Charge.................................. .60%
Expense Risk Charge.................................... .35%
Administration Asset Charge............................ .40%
-------------------
Total Separate Account Annual Expenses............. 1.35%
</TABLE>
NEW ENGLAND ZENITH FUND
ANNUAL OPERATING EXPENSES(6)
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE CAP)
<TABLE>
<CAPTION>
BACK BAY BACK BAY LOOMIS LOOMIS
ADVISORS ADVISORS WESTPEAK SAYLES SAYLES BACK BAY WESTPEAK
CAPITAL BOND MONEY VALUE AVANTI SMALL ADVISORS STOCK
GROWTH INCOME MARKET GROWTH GROWTH CAP MANAGED INDEX
SERIES SERIES SERIES SERIES SERIES SERIES SERIES(7) SERIES(7)
------- -------- -------- -------- ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... .65% .40% .35% .59% .63% .77% .50% .25%
Other Expenses.......... .05% .14% .15% .26% .22% .23% .14% .15%
---- ---- ---- ---- ---- ----- ---- ----
Total Operating
Expenses............. .70% .54% .50% .85% .85% 1.00% .64% .40%
</TABLE>
ESTIMATED ANNUAL OPERATING EXPENSES(8)
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE DEFERRAL)
<TABLE>
<CAPTION>
SALOMON
SALOMON BROTHERS
LOOMIS BROTHERS STRATEGIC ALGER
SAYLES DRAYCOTT U.S. BOND VENTURE EQUITY
BALANCED INTERNATIONAL GOVERNMENT OPPORTUNITIES VALUE GROWTH
SERIES EQUITY SERIES SERIES SERIES SERIES SERIES
-------- ------------- ---------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Management Fee.......... .70% .90% .55% .65% .75% .70%
Other Estimated
Expenses............... .15% .40% .15% .20% .15% .15%
Total Estimated
Operating Expenses... .85% 1.30% .70% .85% .90% .85%
</TABLE>
A-7
<PAGE>
EXAMPLE (NOTE: The examples shown below are entirely hypothetical. Although
they are based on the expenses shown in the expense table above, the examples
are not representations of past or future performance or expenses. Actual
performance and/or expenses may be more or less than shown.(9)) For purchase
payments allocated to each of the Series indicated
<TABLE>
<CAPTION>
You would pay the following direct and indirect
expenses on a $1,000 purchase payment assuming
1) 5% annual return on the underlying New
England Zenith Fund Series and 2) that you
surrender your Contract or that you elect to
annuitize under a non-life contingency option 1 YEAR 3 YEARS 5 YEARS 10 YEARS
at the end of each time period: ------ ------- ------- --------
<S> <C> <C> <C> <C>
Capital Growth............................... $82.43 $122.49 $164.22 $262.47
Back Bay Advisors Bond Income................ 80.91 117.90 156.47 248.28
Back Bay Advisors Money Market............... 80.54 116.75 154.53 244.19
Back Bay Advisors Managed.................... 81.86 120.77 161.32 258.43
Westpeak Stock Index......................... 79.60 113.87 149.65 233.89
Westpeak Value Growth........................ 83.84 126.77 171.41 279.39
Loomis Sayles Avanti Growth.................. 83.84 126.77 171.41 279.39
Loomis Sayles Small Cap...................... 85.25 131.02 178.55 294.06
Loomis Sayles Balanced....................... 83.84 126.77 171.41 279.39
Draycott International Equity................ 88.06 139.48 192.67 322.71
Salomon Brothers U.S. Government............. 82.43 122.49 164.22 264.47
Salomon Brothers Strategic Bond Opportuni-
ties........................................ 83.84 126.77 171.41 279.39
Venture Value................................ 84.31 128.19 173.80 284.31
Alger Equity Growth.......................... 83.84 126.77 171.41 279.39
<CAPTION>
You would pay the following direct and indirect
expenses on a $1,000 purchase payment assuming
1) 5% annual return on the underlying New
England Zenith Fund Series and 2) that you do
not surrender your Contract or that you elect
to annuitize under a variable life contingency 1 YEAR 3 YEARS 5 YEARS 10 YEARS
option at the end of each time period(10): ------ ------- ------- --------
<S> <C> <C> <C> <C>
Capital Growth............................... $22.34 $ 68.85 $117.92 $252.71
Back Bay Advisors Bond Income................ 20.73 64.01 109.80 236.33
Back Bay Advisors Money Market............... 20.33 62.79 107.77 232.19
Back Bay Advisors Managed.................... 21.74 67.04 114.88 246.60
Westpeak Stock Index......................... 19.33 59.75 102.65 221.77
Westpeak Value Growth........................ 23.84 73.37 125.46 267.80
Loomis Sayles Avanti Growth.................. 23.84 73.37 125.46 267.80
Loomis Sayles Small Cap...................... 25.34 77.86 132.94 282.65
Loomis Sayles Balanced....................... 23.84 73.37 125.46 267.80
Draycott International Equity................ 28.33 86.80 147.74 311.63
Salomon Brothers U.S. Government............. 22.34 68.85 117.92 252.71
Salomon Brothers Strategic Bond
Opportunities............................... 23.84 73.37 125.46 267.80
Venture Value................................ 24.34 74.87 127.96 272.78
Alger Equity Growth.......................... 23.84 73.37 125.46 267.80
</TABLE>
A-8
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND
ANNUAL OPERATING EXPENSES(11)
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
EQUITY-
INCOME OVERSEAS
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
Management Fee.............................................. .52% .77%
Other Expenses.............................................. .06% .15%
---- ----
Total Portfolio Operating Expenses........................ .58% .92%
</TABLE>
EXAMPLE (NOTE: The examples shown below are entirely hypothetical. Although
they are based on the expenses shown in the expense table above, the examples
are not representations of past or future performance or expenses. Actual
performance and/or expenses may be more or less than shown.(12)) For purchase
payments allocated to each of the Portfolios indicated
<TABLE>
<CAPTION>
You would pay the following direct and indirect
expenses on a $1,000 purchase payment assuming
1) 5% annual return on the underlying Variable
Insurance Products Fund Portfolio and 2) that
you surrender your Contract or that you elect
to annuitize under a non-life contingency 1 YEAR 3 YEARS 5 YEARS 10 YEARS
option at the end of each time period: ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity-Income Portfolio...................... $81.67 $120.19 $160.35 $256.40
Overseas Portfolio........................... 85.53 131.87 179.97 296.97
<CAPTION>
You would pay the following direct and indirect
expenses on a $1,000 purchase payment assuming
1) 5% annual return on the underlying Variable
Insurance Products Fund Portfolio and 2) that
you do not surrender your Contract or that you
elect to annuitize under a variable life
contingency option at the end of each time 1 YEAR 3 YEARS 5 YEARS 10 YEARS
period(13): ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity-Income Portfolio...................... $21.54 $ 66.43 $113.87 $244.55
Overseas Portfolio........................... 25.64 78.76 134.43 285.59
</TABLE>
A-9
<PAGE>
- --------
NOTES:
(1) Premium tax charges are not shown. The amount of premium tax, if any, is
deducted from purchase payments or, in any state which so requires, from
the Contract Value on the date of annuitization. Currently, the Company
deducts premium tax from purchase payments in three states and at
annuitization in one state. (See "Premium Tax Charges.")
(2) Although the Maximum Contingent Deferred Sales Charge is expressed here
as a percentage of purchase payments, ordinarily any applicable
Contingent Deferred Sales Charge will be calculated as a percentage of
Contract Value. No Contingent Deferred Sales Charge will apply after a
Contract reaches its Maturity Date and, prior to the Maturity Date, up to
10% of the Contract Value may be surrendered in any one Contract Year
without charge. The maximum possible charge, as a percentage of Contract
Value, occurs in the first Contract Year. As a percentage of Contract
Value, the applicable Contingent Deferred Sales Charge reduces after each
Contract Year. In no event will the total Contingent Deferred Sales
Charge exceed 8% of the first $50,000 of purchase payments made under the
Contract and 6.5% of the amount of purchase payments in excess of
$50,000. (See "Contingent Deferred Sales Charge.")
(3) The Company currently charges $10 for each transfer in excess of twelve
per Contract Year, and reserves the right to impose a charge of $10 on
each transfer in excess of four per year.
(4) This charge is not imposed after annuitization of the Contract. As a
percentage of the average Contract Value in the Variable Account, this
fee equals 0.15%, based on an average Contract Value of $19,457 over the
period from January 1, 1994 to December 31, 1994.
(5) These charges are not imposed after annuitization if annuity payments are
made on a fixed basis.
(6) The Total Operating Expenses shown for these Series are based on the
amount of such expenses incurred during the most recent fiscal year
applied against assets at December 31, 1994, after giving effect to a
voluntary expense cap. For the Capital Growth Series, The New England
will bear those expenses (other than the management fee) that exceed
0.15% of average daily net assets. For each of the Back Bay Advisors Bond
Income, Back Bay Advisors Money Market, Back Bay Advisors Managed,
Westpeak Stock Index, Westpeak Value Growth and Loomis Sayles Avanti
Growth Series, TNE Advisers, Inc. ("TNE Advisers"), the Series'
investment adviser, will bear those expenses (other than the management
fee) that exceed 0.15% of average daily net assets. Without this cap or
any other expense reimbursement arrangement, Total Operating Expenses for
the Back Bay Advisors Money Market, Westpeak Stock Index, Westpeak Value
Growth and Loomis Sayles Avanti Growth Series for the year ending
December 31, 1994 would have been 0.52%, 0.61%, 1.36% and 1.25%,
respectively. For the Loomis Sayles Small Cap Series, which commenced
operations on May 2, 1994, the Total Operating Expenses take into account
a voluntary cap on expenses by TNE Advisers, which will bear all expenses
that exceed 1.00% of average daily net assets. In the absence of this cap
or any other expense reimbursement arrangement, Total Operating Expenses
for the Loomis Sayles Small Cap Series are estimated to be 1.70% of
average daily net assets for its first year of operations. The expense
cap arrangements for these Series are voluntary and may be terminated at
any time. (See attached prospectus of New England Zenith Fund for more
complete information.)
(7) The Back Bay Advisors Managed Series and Westpeak Stock Index Series are
not Eligible Funds for Contracts purchased after May 1, 1995.
(8) The Total Estimated Operating Expenses shown for each of these Series is
after giving effect to a voluntary expense deferral. Under the deferral,
a Series' expenses other than the management fee which exceed a certain
limit are paid by the investment adviser for these Series in the year in
which they are incurred and transferred to the Series in a future year
when actual expenses of the Series are below the limit. The amounts shown
as "Other Estimated Expenses" for these Series are the applicable limits
under the expense deferral arrangements. It is estimated that, absent the
voluntary expense deferral, Total Estimated Operating Expenses for these
Series for their first year of operations would be: 0.89% for the Loomis
Sayles Balanced Series, 1.52% for the Draycott International Equity
Series, 0.91% for Salomon Brothers U.S. Government Series, 1.42% for
Salomon Brothers Strategic Bond Opportunities Series, 1.01% for Venture
Value Series and 0.87% for Alger Equity Growth Series. The expense
deferral arrangements are voluntary and may be terminated at any time.
(See attached prospectus of New England Zenith Fund for more complete
information.)
(9) In these examples, the figures assume that no premium tax charge has been
deducted. (See (1), above). The effect of the Administration Contract
Charge has been reflected by dividing the estimated total amount of
annual contract fees by the total average net assets of the sub-accounts
invested in the Zenith Fund. The average Administration Contract Charge
of 0.15% is used in these examples. (See (4), above.)
A-10
<PAGE>
(10) The same would apply if you elect to annuitize under a fixed life
contingency option unless your Contract has been in effect less than five
years, in which case the expenses shown in the first three columns of the
preceding example would apply. (See "Contingent Deferred Sales Charge".)
(11) The operating expenses shown for the Variable Insurance Products
Portfolios are based on the amount of such expenses incurred during the
most recent fiscal year applied against assets at December 31, 1994. (See
prospectus of Variable Insurance Products Fund for more complete
information.)
(12) In these examples, the figures assume that no premium tax charge has been
deducted. (See (1), above). The effect of the Administration Contract
Charge has been reflected by dividing the estimated total amount of
annual contract fees by the total average net assets of the sub-accounts
invested in the Variable Insurance Products Fund. The average
Administration Contract Charge of 0.15% is used in these examples. (See
(4), above.)
(13) The same would apply if you elect to annuitize under a fixed life
contingency option unless your Contract has been in effect less than five
years, in which case the expenses shown in the first three columns of the
preceding example would apply. (See "Contingent Deferred Sales Charge".)
The preceding table lists the charges and expenses incurred with respect to
purchase payments invested under the Contracts. The items listed include
charges deducted from purchase payments, charges assessed against Variable
Account assets, and charges deducted from the assets of each of the Eligible
Funds. The examples assume that the entire purchase payment was allocated
initially to a single sub-account without any subsequent transfers. The
purpose of the table is to assist you in understanding the various costs and
expenses you will bear, directly and indirectly, as a Contract Owner.
- -------------------------------------------------------------------------------
A-11
<PAGE>
ACCUMULATION UNIT VALUES
(FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE PERIOD)
THE NEW ENGLAND VARIABLE ACCOUNT
CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ZENITH
BACK BAY
ZENITH ADVISORS
CAPITAL BOND
GROWTH INCOME
SUB- SUB-
ACCOUNT ACCOUNT
-------- --------
9/16/88* 1/1/89 1/1/90 1/1/91 1/1/92 1/1/93 1/1/94 10/5/88* 1/1/89 1/1/90
TO TO TO TO TO TO TO TO TO TO
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/88 12/31/89 12/31/90
-------- --------- ---------- ---------- ---------- ---------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 4.645 4.612 5.950 5.666 8.608 7.978 9.050 1.630 1.634 1.810
2. Accumulation
Unit Value at
end of
period....... 4.612 5.950 5.666 8.608 7.978 9.050 8.236 1.634 1.810 1.930
3. Number of
Accumulation
Units
outstanding
at end of
period....... 439,393 5,337,778 12,591,788 21,719,884 33,645,983 40,091,665 43,917,271 299,002 4,287,540 10,139,527
<CAPTION>
1/1/91 1/1/92 1/1/93 1/1/94
TO TO TO TO
12/31/91 12/31/92 12/31/93 12/31/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.930 2.247 2.398 2.664
2. Accumulation
Unit Value at
end of
period....... 2.247 2.398 2.664 2.534
3. Number of
Accumulation
Units
outstanding
at end of
period....... 17,797,335 28,871,719 41,939,487 41,755,150
</TABLE>
- -------
* Date these sub-accounts were first available.
------------------
<TABLE>
<CAPTION>
ZENITH
BACK BAY ZENITH
ADVISORS BACK BAY
MONEY ADVISORS
MARKET MANAGED
SUB- SUB-
ACCOUNT ACCOUNT**
-------- ---------
9/29/88* 1/1/89 1/1/90 1/1/91 1/1/92 1/1/93 1/1/94 9/21/88* 1/1/89 1/1/90
TO TO TO TO TO TO TO TO TO TO
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/88 12/31/89 12/31/90
-------- --------- ---------- ---------- ---------- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.384 1.408 1.518 1.620 1.697 1.738 1.766 1.042 1.063 1.250
2. Accumulation
Unit Value at
end of
period....... 1.408 1.518 1.620 1.697 1.738 1.766 1.812 1.063 1.250 1.272
3. Number of
Accumulation
Units
outstanding
at end of
period....... 915,605 7,661,069 21,629,006 26,322,938 26,759,532 25,016,975 30,211,717 731,349 9,179,207 18,099,540
<CAPTION>
1/1/91 1/1/92 1/1/93 1/1/94
TO TO TO TO
12/31/91 12/31/92 12/31/93 12/31/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.272 1.508 1.588 1.733
2. Accumulation
Unit Value at
end of
period....... 1.508 1.588 1.733 1.690
3. Number of
Accumulation
Units
outstanding
at end of
period....... 26,478,398 41,588,546 60,696,659 62,013,275
</TABLE>
- -------
* Date these sub-accounts were first available.
** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
------------------
A-12
<PAGE>
<TABLE>
<CAPTION>
ZENITH
ZENITH ZENITH LOOMIS
WESTPEAK WESTPEAK SAYLES
STOCK VALUE AVANTI EQUITY-
INDEX GROWTH GROWTH INCOME OVERSEAS
SUB- SUB- SUB- SUB- SUB-
ACCOUNT** ACCOUNT ACCOUNT ACCOUNT ACCOUNT
--------- --------- --------- --------- ----------
8/1/92* 1/1/93 1/1/94 10/1/93* 1/1/94 10/1/93* 1/1/94 10/1/93* 1/1/94 10/1/93*
TO TO TO TO TO TO TO TO TO TO
12/31/92 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93 12/31/94 12/31/93
--------- ---------- ---------- --------- ---------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.592 1.644 1.780 1.105 1.132 1.125 1.137 1.980 1.992 1.458
2. Accumulation
Unit Value at
end of
period....... 1.644 1.780 1.774 1.132 1.100 1.137 1.107 1.992 2.101 1.532
3. Number of
Accumulation
Units
outstanding
at end of
period....... 2,583,607 11,017,884 14,292,055 3,359,317 16,145,070 4,515,611 15,745,008 5,649,743 25,890,404 10,878,551
<CAPTION>
1/1/94
TO
12/31/94
----------
<S> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.532
2. Accumulation
Unit Value at
end of
period....... 1.530
3. Number of
Accumulation
Units
outstanding
at end of
period....... 43,261,784
</TABLE>
- -------
* Date these sub-accounts were first available.
** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
<TABLE>
<CAPTION>
ZENITH
ZENITH SALOMON
ZENITH ZENITH ZENITH ZENITH SALOMON BROTHERS
LOOMIS LOOMIS DRAYCOTT ALGER ZENITH BROTHERS STRATEGIC
SAYLES SAYLES INTERNATIONAL EQUITY VENTURE U.S. BOND
SMALL CAP BALANCED EQUITY GROWTH VALUE GOVERNMENT OPPORTUNITIES
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
--------- --------- ------------- --------- --------- ---------- -------------
5/2/94* 10/31/94* 10/31/94* 10/31/94* 10/31/94* 10/31/94* 10/31/94*
TO TO TO TO TO TO TO
12/31/94 12/31/94 12/31/94 12/31/94 12/31/94 12/31/94 12/31/94
--------- --------- ------------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation Unit
Value at beginning of
period............... 1.000 1.000 1.000 1.000 1.000 1.000 1.000
2. Accumulation Unit
Value at end of
period............... 0.951 0.996 1.020 0.943 0.966 1.003 0.982
3. Number of
Accumulation Units
outstanding at end of
period............... 3,013,745 1,737,195 2,928,001 1,883,207 3,489,354 911,069 1,126,613
</TABLE>
- -------
*Date these sub-accounts were first available.
Information on units and unit values is useful because they affect the
calculation of Contract Values. The value of a Contract is determined by
multiplying the number of Accumulation Units in each sub-account credited to
the Contract by the Accumulation Unit Value of the sub-account. The
Accumulation Unit Value of a sub-account depends in part on the net investment
experience of the Eligible Fund in which it invests. See "Contract Value and
Accumulation Unit Value" for more information.
- -------------------------------------------------------------------------------
A-13
<PAGE>
HOW THE CONTRACT WORKS
<TABLE>
<CAPTION>
<S> <C> <C>
PURCHASE PAYMENT DAILY DEDUCTION FROM
CONTRACT VALUE ASSETS
. You can make a one-time . Payments are allocated to your choice,
investment or establish an within limits, of Eligible Funds and/or . Mortality and expense risk charge of
ongoing investment program the Fixed Account 0.95% on an annual basis is deducted
from the Contract Value daily
. Administration Asset Charge of 0.40%
on annual basis is deducted from the
. The Contract Value reflects purchase Contract Value daily
CHARGES FROM PAYMENT payments, investment experience,
interest payments, partial surrenders, . Investment advisary fees are deducted
. State Premium Tax, if applicable loans and Contract charges from the Elgible Fund Values daily
. Premium for disability benefit
rider, if elected
. The Contract Value invested in the
Eligible Fund is not guaranteed
ANNUAL CONTRACT FEE
. Earnings are accumulated free of any . $30 Administration Contract Charge is
ADDITIONAL PAYMENTS current income taxes (see pages A-31) deducted from the Contract Value on
each anniversary while Contract is
. Anytime (subject to Company . You may chnge the allocation of inforce,other than under a Payment
limits) future payments, within limits, at any Option
time
. Minimum $25
. Prior to annuitization, you may transfer
funds among Accounts, within limits, SURRENDER CHARGE
LOANS up to twelve times per Contract Year . Consists of Contingent Deferred Sales
without charge Charge (see page A-25)
. Are available to participants
of certain tax qualified pension . Allocations of payments and transfers
plans (see page A-21) of Contract Value must comply with the LIVING BENEFITS
rule that Contract Value may be . You pay no taxes on your investmen
allocated among no more than 10 as long as it remains in the Contract
SURRENDERS Accounts, including the Fixed Account,
at any time. . Contract may be surrendered at any
. Up to 10% of Contract Value can time for its Contract Value less any
be surrendered each year without applicable Contingent Deferred Sales
incurring surrender charges, Charge (subject to any applicable tax
subject to any applicable tax law law restrictions)
restrictions
RETIREMENT BENEFITS . If the Contract contains the disability
. Surrenders will be taxable benefit rider and the Annuitant
. Lifetime income options becomes totally disabled, monthly
. Prior to age 59 1/2 a 10% penalty benefits will be provided
tax may apply . Fixed and/or variable payout options
DEATH PROCEEDS
. Guaranteed not to be less than
your total contribution to your
Contract net of any prior
surrenders and outstanding
loans
. Death proceeds pass to the
beneficiary without probate
</TABLE>
A-14
<PAGE>
THE COMPANY
New England Mutual Life Insurance Company, the first chartered mutual life
insurance company in the United States, was organized in 1835 under the laws
of the Commonwealth of Massachusetts. The Company currently has assets of over
$16 billion. It offers life insurance, annuity, accident and health insurance
products and is licensed to do business in all states, the District of
Columbia and Puerto Rico. The Company's home office is at 501 Boylston Street,
Boston, Massachusetts (the "Home Office").
The Company, along with its subsidiaries and affiliates, is known as The New
England. As of December 31, 1994 The New England and its affiliates had more
than $66 billion in assets under management.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company as a separate investment
account pursuant to the provisions of Massachusetts law on July 15, 1987, and
is registered as a unit investment trust under the Investment Company Act of
1940. The Variable Account meets the definition of a "separate account" under
Federal securities laws.
Applicable law provides that the assets in the Variable Account equal to the
reserves and other contract liabilities of the Variable Account shall not be
chargeable with liabilities arising out of any other business the Company may
conduct. The Company believes this means that the assets of the Variable
Account equal to its reserves and other contract liabilities are not available
to meet the claims of the Company's general creditors and may only be used to
support the Contract Values under the Contracts. The income and realized and
unrealized capital gains or losses of the Variable Account are credited to or
charged against the Variable Account without regard to other income, gains or
losses of the Company. All obligations arising under the Contracts are,
however, general corporate obligations of the Company.
Purchase payments are allocated within the Variable Account to one or more
of the sub-accounts as you elect. The value of Accumulation Units credited to
your Contract and the amount of the variable annuity payments depend on the
investment experience of the Eligible Fund that you select. The Company does
not guarantee the investment performance of the Variable Account. Thus, you
bear the full investment risk for all amounts contributed to the Variable
Account.
INVESTMENTS OF THE VARIABLE ACCOUNT
Purchase payments applied to the Variable Account will be invested in one or
more of the Eligible Funds listed below, at net asset value without deduction
of any sales charge, in accordance with the selection you make in your
application. You may change your selection of Eligible Funds for future
purchase payments at any time without charge. (See "Requests and Elections.")
You also may transfer previously invested amounts among the Eligible Funds,
subject to certain conditions. (See "Transfer Privilege.")
NEW ENGLAND ZENITH FUND: Currently, there are twelve Series of the New England
Zenith Fund that are Eligible Funds under the Contracts offered by this
prospectus. Two additional Series, the Back Bay Advisors Managed Series and
the Westpeak Stock Index Series described below, are Eligible Funds only for
Contracts issued before May 1, 1995. One other Series of the New England
Zenith Fund was available prior to March 29, 1995. That Series is no longer
available to any Contracts, so no information about it has been included in
this prospectus.
BACK BAY ADVISORS MONEY MARKET SERIES
The Back Bay Advisors Money Market Series (formerly known as the Money
Market Series) seeks the highest possible level of current income consistent
with preservation of capital. The Back Bay Advisors Money Market Series
invests in a variety of high quality money market instruments.
BACK BAY ADVISORS BOND INCOME SERIES
The Back Bay Advisors Bond Income Series (formerly known as the Bond Income
Series) seeks to provide a high level of current income consistent with
protection of capital and moderate investment risk through investment
primarily in U.S. Government and corporate bonds.
A-15
<PAGE>
CAPITAL GROWTH SERIES
The Capital Growth Series seeks long-term growth of capital through
investment primarily in equity securities of companies whose earnings are
expected to grow at a faster rate than the United States economy. Most of the
Capital Growth Series' investments are normally in common stocks.
WESTPEAK VALUE GROWTH SERIES
The Westpeak Value Growth Series (formerly known as the Value Growth Series)
seeks long-term total return (capital appreciation and dividend income)
through investment primarily in equity securities. Emphasis will be given to
both undervalued securities ("value" style) and securities of companies with
growth potential ("growth" style).
LOOMIS SAYLES AVANTI GROWTH SERIES
The Loomis Sayles Avanti Growth Series (formerly known as the Avanti Growth
Series) seeks long-term growth of capital. The Series normally will invest
primarily in equity securities of companies with medium and large
capitalization (capitalization of $1 billion to $5 billion and over $5
billion, respectively), but will also invest a portion of its assets in equity
securities of companies with relatively small market capitalization (under $1
billion).
LOOMIS SAYLES BALANCED SERIES
The Loomis Sayles Balanced Series' investment objective is reasonable long-
term investment return from a combination of long-term capital appreciation
and moderate current income. The Series is "flexibly managed" in that
sometimes it invests more heavily in equity securities and at other times it
invests more heavily in fixed-income securities, depending on its subadviser's
view of the economic and investment outlook.
DRAYCOTT INTERNATIONAL EQUITY SERIES
The Draycott International Equity Series seeks total return from long-term
growth of capital and dividend income, primarily through investment in
international equity securities.
SALOMON BROTHERS U.S. GOVERNMENT SERIES
The Salomon Brothers U.S. Government Series' investment objective is to
provide a high level of current income consistent with preservation of capital
and maintenance of liquidity. The Series seeks to achieve its objective by
primarily investing in debt obligations (including mortgage backed securities)
issued or guaranteed by the U.S. Government or agencies, or derivative
securities (such as collateralized mortgage obligations) backed by such
securities.
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
The Salomon Brothers Strategic Bond Opportunities Series' investment
objective is to seek a high level of total return consistent with preservation
of capital. Assets will be allocated among U.S. Government obligations,
mortgage backed securities, domestic corporate debt and international debt
securities rated investment grade (BBB or higher by S&P or Baa or higher by
Moody's) (or unrated but deemed to be of equivalent quality in the
subadviser's judgment) and domestic corporate debt and international debt
securities rated below investment grade. Depending on market conditions, the
Series may invest without limit in below investment grade fixed-income
securities. Securities of below investment grade quality are considered high
yield, high risk securities and are commonly known as "junk bonds."
VENTURE VALUE SERIES
The Venture Value Series' investment objective is growth of capital. The
Series will primarily invest in domestic common stocks (and securities
convertible into common stock) that the Series' subadviser believes have
capital growth potential due to factors such as undervalued assets or earnings
potential, product development and demand, favorable operating ratios,
resources for expansion, management abilities, reasonableness of market price,
and favorable overall business prospects. The Series will generally invest
predominantly in equity securities of companies with market capitalizations of
at least $250 million.
A-16
<PAGE>
ALGER EQUITY GROWTH SERIES
The Alger Equity Growth Series' investment objective is to seek long-term
capital appreciation. The Series' assets will be invested primarily in a
diversified, actively managed portfolio of equity securities, primarily of
companies having a total market capitalization of $1 billion or greater.
LOOMIS SAYLES SMALL CAP SERIES
The Loomis Sayles Small Cap Series (formerly known as the Small Cap Series)
seeks long-term capital growth from investments in common stocks or their
equivalent. The Series will normally invest at least 65% of its total assets
in companies with market capitalization of less than $500 million.
BACK BAY ADVISORS MANAGED SERIES
The Back Bay Advisors Managed Series (formerly known as the Managed Series)
is an Eligible Fund only for Contracts issued before May 1, 1995. The Series
seeks to provide a favorable total investment return through investment in a
diversified portfolio. The Series' portfolio is expected to include (i) common
stocks, (ii) notes and bonds and (iii) money market instruments.
WESTPEAK STOCK INDEX SERIES
The Westpeak Stock Index Series (formerly known as the Stock Index Series)
is an Eligible Fund only for Contracts issued before May 1, 1995. The Series
seeks to provide results that correspond to the composite price and yield
performance of United States publicly traded common stocks. The Series
currently seeks to achieve its objective by attempting to duplicate the
composite price and yield performance of the Standard & Poor's 500 Composite
Stock Price Index.
VARIABLE INSURANCE PRODUCTS FUND:
EQUITY-INCOME PORTFOLIO
The Equity-Income Portfolio seeks reasonable income by investing primarily
in income-producing equity securities.
OVERSEAS PORTFOLIO
The Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities.
INVESTMENT ADVICE
The Capital Growth Series receives investment advice from Capital Growth
Management Limited Partnership ("CGM"), an affiliate of the Company. TNE
Advisers, Inc., a subsidiary of the Company, serves as investment adviser for
the remaining Series of the New England Zenith Fund. Each of these Series also
has a subadviser. The Back Bay Advisors Money Market Series and Back Bay
Advisors Bond Income Series receive investment subadvisory services from Back
Bay Advisors, L.P., an indirect subsidiary of the Company. The Westpeak Value
Growth Series receives investment subadvisory services from Westpeak
Investment Advisors, L.P., an indirect subsidiary of the Company. The Loomis
Sayles Avanti Growth Series, Loomis Sayles Small Cap Series and Loomis Sayles
Balanced Series receive investment subadvisory services from Loomis Sayles &
Company, L.P., an indirect subsidiary of the company. The Draycott
International Equity Series receives investment subadvisory services from
Draycott Partners, Ltd., an indirect subsidiary of the Company. The Alger
Equity Growth Series receives investment subadvisory services from Fred Alger
Management, Inc. The Venture Value Series receives investment subadvisory
services from Selected/Venture Advisers, L.P. The Salomon Brothers U.S.
Government Series and Salomon Brothers Strategic Bond Opportunities Series
receive investment subadvisory services form Salomon Brothers Asset Management
Inc. More complete information on each Series of the New England Zenith Fund
is contained in the attached New England Zenith Fund prospectus, which you
should read carefully before investing, as well as in the New England Zenith
Fund's Statement of Additional Information, which may be obtained free of
charge by writing to New England Securities, 399 Boylston St., Boston,
Massachusetts.
The Equity-Income Portfolio and the Overseas Portfolio receive investment
advice from Fidelity Management & Research Company. More complete information
on the Equity-Income and Overseas Portfolio of the Variable Insurance
A-17
<PAGE>
Products Fund is contained in the prospectus of that Fund, which you should
read carefully before investing, as well as in the Variable Insurance Products
Fund's Statement of Additional Information, which may be obtained free of
charge by writing to Fidelity Distributors Corporation, 82 Devonshire Street,
Boston, Massachusetts.
SUBSTITUTION OF INVESTMENTS
If investment in the Eligible Funds or a particular Series or Portfolio is
no longer possible or in the judgment of the Company becomes inappropriate for
the purposes of the Contract, the Company may substitute another Eligible Fund
or Funds without your consent. Substitution may be made with respect to both
existing investments and the investment of future purchase payments. However,
no such substitution will be made without any necessary approval of the
Securities and Exchange Commission.
GUARANTEED OPTION
Net purchase payments may also be allocated to the Fixed Account option in
approved states. The Fixed Account is a part of the Company's general account
and provides guarantees of principal and interest. (See "The Fixed Account"
for more information.)
THE CONTRACTS
The Contracts provide that purchase payments will be invested by the Company
in the Eligible Fund or Funds you select from among those available under your
Contract (See "Glossary--Eligible Funds") and that, after annuitization, the
Company will make variable annuity payments on a monthly basis. You assume the
risk of investment gain or loss in that the value of your Contract before
annuitization and, in the case of a variable payment option, the annuity
payments after annuitization will vary with the investment performance of
those Eligible Funds in which your Contract is invested.
PURCHASE PAYMENTS
The Company currently requires the following minimum initial purchase
payments on flexible payment Contracts: $50 for Contracts issued in connection
with retirement plans, other than Individual Retirement Annuities ("IRAs"),
qualifying for tax-benefited treatment under the Code; $2,000 for Contracts
issued in connection with IRAs; and $5,000 for all other Contracts. The
Company may consent to lower minimum initial purchase payments in certain
situations, and reserves the right to change these minimum payment amounts.
Additional purchase payments may be made, provided that each additional
payment is at least $25. The Company reserves the right to limit the amount of
purchase payments under a Contract in any Contract Year to three times the
anticipated annual contribution that you specify in your Contract application.
The Company currently limits anticipated annual contributions to $100,000, so
that the maximum amount you may contribute in any Contract Year is $300,000,
or three times your specified anticipated annual contribution, if less. Except
with the consent of the Company, the minimum purchase payment for a single
payment Contract is $5,000, and the maximum purchase payment for a single
payment contract is $1,000,000. Payments in addition to the required $5,000
purchase payment may also be made on a single payment Contract, subject to the
$25 minimum. The Company reserves the right to limit purchase payments made in
any Contract Year or in total under a single payment Contract.
The Company will determine whether to approve applications for new
Contracts, and will apply initial purchase payments under new Contracts not
later than 2 business days after a completed application is received at the
Company's Home Office. If an application is not complete upon receipt, the
Company will apply the initial purchase payment not later than 2 business days
after it is completed. If an incomplete application is not completed within 5
days after the Company receives it, however, the Company will inform the
applicant of the reasons for the delay and will refund any purchase payment
unless the applicant consents to allow the Company to retain the purchase
payment until the application is made complete. The Company reserves the right
to reject any application.
ALLOCATION OF PURCHASE PAYMENTS
Net purchase payments are converted into Accumulation Units of the sub-
accounts you select from among those available under your Contract (See
"Glossary--Eligible Funds"), subject to the limitation that Contract Value may
be allocated among no more than 10 accounts, including the Fixed Account, at
any time. The number of Accumulation Units of each sub-account to be credited
to the Contract is determined by dividing the net purchase payment by the
Accumulation
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Unit Value for the selected sub-accounts next determined following receipt of
the purchase payment at the Company's Home Office (or, in the case of the
initial purchase payment, next determined following approval of the Contract
application. In the case of an initial purchase payment to be made by
exchanging a Fund I or Preference contract, the payment will be applied using
the Accumulation Unit Value next determined following approval of the Contract
application and receipt of the proceeds of the Fund I or Preference contract.)
CONTRACT VALUE AND ACCUMULATION UNIT VALUE
The value of a Contract is determined by multiplying the number of
Accumulation Units credited to the Contract by the appropriate Accumulation
Unit Values. As described below, the Accumulation Unit Value of each sub-
account depends on the net investment experience of its corresponding Eligible
Fund. The Accumulation Unit Value of each sub-account was set at $1.00 on or
about the date on which shares of the corresponding Eligible Fund first became
available to investors. The Accumulation Unit Value is determined as of the
close of regular trading on the New York Stock Exchange on each day during
which the Exchange is open for trading by multiplying the last-determined
Accumulation Unit Value by the net investment factor determined as of the
close of regular trading on the Exchange on that day. To determine the net
investment factor for any sub-account, the Company takes into account the
change in net asset value per share of the Eligible Fund held in the sub-
account as of the close of regular trading on the Exchange on that day from
the net asset value most recently determined, the amount of dividends or other
distributions made by that Eligible Fund since the previous determination of
net asset value per share, and daily deductions for the Mortality and Expense
Risk Charge and Administration Asset Charge, equal, on an annual basis, to
1.35% of the average daily net asset value of the sub-account. The formula for
determining the net investment factor is described under the caption "Net
Investment Factor" in the Statement of Additional Information.
The net investment factor may be greater or less than one, depending in part
upon the investment performance of the Eligible Fund which is the underlying
investment of the sub-account, and you bear this investment risk. The net
investment results are also affected by the deductions from sub-account assets
for the Mortality and Expense Risk Charge and Administration Asset Charge.
Under a Contract with the Fixed Account option, the total Contract Value
includes the amount of Contract Value held in the Fixed Account. Under a
Contract that permits Contract loans, the Contract Value also includes the
amount of Contract Value transferred to the Company's general account (but
outside of the Fixed Account) as a result of a loan and any interest credited
on that amount. Interest earned on the amount held in the general account as a
result of a loan will be credited to the Contract's sub-accounts annually in
accordance with the allocation instructions in effect for purchase payments
under your Contract on the date of the crediting. (See "Loan Provision for
Certain Tax Benefited Retirement Plans".)
PAYMENT ON DEATH PRIOR TO ANNUITIZATION
If the Annuitant dies after annuitization, the amount payable, if any, will
be as specified in the annuity option selected. If the Annuitant dies prior to
annuitization, the Company will pay to the Beneficiary, upon receipt of due
proof of the Annuitant's death, the Contract's Death Proceeds, equal to the
greater of (a) the sum of all purchase payments, adjusted for surrenders, and
(b) the Contract Value next determined after the later of the date on which
proof of the Annuitant's death is received at the Home Office or the date on
which election of payment in one sum or under a Payment Option is received at
the Home Office. (See restrictions on payment options imposed by Section 72(s)
of the Code, discussed below.)
Death Proceeds will be reduced by the amount of any outstanding loan plus
accrued interest. (See "Loan Provision for Certain Tax Benefited Retirement
Plans".)
The Death Proceeds will be paid in cash or will be applied to provide one or
more of the fixed or variable methods of payment available (see "Annuity
Options"), depending upon the election made by the Contract Owner during the
Annuitant's lifetime. Such an election, particularly in the case of Contracts
issued in connection with retirement plans qualifying for tax benefited
treatment, would be subject to any applicable requirements of Federal tax law.
If the Contract Owner has not made such an election, payment will be in a
single sum, unless the Beneficiary elects an annuity payment option within 90
days after receipt by the Company of due proof of the Annuitant's death or
elects to apply the amount payable under the Contract to purchase a new
Contract. Whether and when such an election is made could affect when the
Death Proceeds are deemed to be received under the tax laws.
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The Contract provides that, where the Contract Owner is an individual, the
Annuitant must be the Contract Owner, and where the Contract Owner is not an
individual, the Annuitant is treated as the Contract Owner for purposes of the
Death of Owner provision. The Contract also provides, in accordance with
Section 72(s) of the Code, that, on the death of the Contract Owner before the
Maturity Date, all of the Death Proceeds must be distributed within five years
after the death of the Contract Owner, or applied to a payment option payable
over the life (or over a period not extending beyond the life expectancy) of
the Beneficiary, and the payment option payments must start within one year of
the death of the Contract Owner. If the Contract Owner dies on or after the
Maturity Date, the remaining interest in the Contract must be distributed at
least as quickly as under the method of distribution in effect on the death of
the Contract Owner. There are comparable rules for distributions on the death
of the Annuitant under tax benefited retirement plans. (See "Taxation of the
Contracts--Special Rules for Annuities Purchased for Annuitants Under
Retirement Plans Qualifying for Tax Benefited Treatment--Distributions from
the Contract.")
TRANSFER PRIVILEGE
You may transfer your Contract Value among accounts without current
taxation. The Company currently allows 12 free transfers per Contract Year
prior to annuitization. Additional transfers are subject to a $10 charge per
transfer. The Company reserves the right to impose a charge of $10 on each
transfer in excess of four per year and to limit the number of transfers.
After variable annuity payments have commenced, you may make one transfer per
year without the consent of the Company. All transfers are subject to the
requirement that the amount of Contract Value transferred be at least $25 (or,
if less, the amount of Contract Value held in the sub-account from which the
transfer is made) and that, after the transfer is effected, Contract Value be
allocated among not more than ten accounts, including the Fixed Account.
Transfers will be accomplished at the relative net asset values per share of
the particular Eligible Fund next determined after the request is received.
See "Requests and Elections" for information regarding transfers made by
written request and by telephone.
For special rules regarding transfers involving the Fixed Account, see "The
Fixed Account". Transfers out of the Fixed Account are limited as to timing,
-----------------------------------------------------------
frequency and amount.
- --------------------
DOLLAR COST AVERAGING
The Company offers an automated transfer privilege referred to here as
dollar cost averaging. Under this feature you may request that a certain
amount of your Contract Value be transferred on the same day each month, prior
to annuitization, from any one account of your choice (excluding the Fixed
Account) to one or more of the other accounts (excluding the Fixed Account)
subject to the limitation that Contract Value may not be allocated to more
than 10 accounts, including the Fixed Account, at any time. Currently, a
minimum of $100 must be transferred to each account that you select under this
feature. Transfers made under the dollar cost averaging program will be
counted against the twelve transfers per year which may be made free of
charge. You may cancel your use of the dollar cost averaging program at any
time prior to the monthly transfer date. (See Appendix A.)
SURRENDERS
Prior to annuitization, you may surrender the Contract for all or part of
the Contract Value (reduced by the amount of any outstanding loan plus accrued
interest.) (See "Loan Provision for Certain Tax Benefited Retirement Plans.")
This right is subject to any restrictions on surrender under applicable laws
relating to employee benefit plans or under the terms of the plans themselves.
The election to surrender must be in a form conforming to the Company's
administrative procedures and must be received at the Company's Home Office
prior to the earlier of the Maturity Date or the Annuitant's death. You may
receive the proceeds in cash or apply them to a payment option. If you wish to
apply the proceeds to a payment option, you must indicate that in your
surrender request; otherwise you will receive the proceeds in a lump sum and
may be taxed on them as a full distribution. Payment of surrender proceeds
normally will be made within 7 days, subject to the Company's right to suspend
payments under certain circumstances. (See "Suspension of Payments.") The
Federal tax laws impose penalties upon, and in some cases prohibit, certain
premature distributions from the Contracts before or after the date on which
annuity payments are to begin. (See "Federal Income Tax Status.") No surrender
is permitted in connection with a Contract issued pursuant to the Optional
Retirement Program of the University of Texas System prior to the plan
participant's death, retirement, or termination of employment in all Texas
public institutions of higher education.
On receipt of an election to surrender, the Company will cancel the number
of Accumulation Units necessary to equal the dollar amount of the surrender
request. On a full surrender, any applicable Administration Contract Charge
will be
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deducted from this amount. Any applicable Contingent Deferred Sales Charge
will be deducted from this amount on a full or partial surrender. Also, any
applicable Contingent Deferred Sales Charge will be imposed upon the
application of proceeds to a payment option unless you elect (a) a variable
life income option (payment options 2, 3 or 6 as described under "Annuity
Options") or (b) for Contracts that have been in force at least five years, a
fixed life income payment option (comparable to payment options 2, 3 or 6 as
described under "Annuity Options" but on a fixed basis). (See "Administration
Charges, Contingent Deferred Sales Charge and Other Deductions" and "Annuity
Options".) A partial surrender will reduce the Contract Value in the sub-
accounts in proportion to the amount of the Contract's value in each sub-
account, unless you request otherwise. Surrenders and related charges will be
based on Accumulation Unit Values next determined after the election is
received at the Company's Home Office or, if surrender proceeds are to be
applied to a payment option, at such later date as may be specified in the
request for surrender. After a partial surrender, the remaining Contract Value
must be at least $500 (unless the Company consents to a lesser amount) or, if
the Contract is subject to an outstanding loan, the remaining unloaned
Contract Value must be at least 10% of the total Contract Value after the
partial surrender or $500, whichever is greater (unless the Company consents
to a lesser amount). If the requested partial surrender would not satisfy this
requirement, at the Contract Owner's option either the amount of the partial
surrender will be reduced or the transaction will be treated as a full
surrender and any applicable Contingent Deferred Sales Charge will be deducted
from the proceeds.
Any surrender may result in adverse tax consequences. You are advised to
consult a qualified tax advisor as to the consequences of such a distribution.
(See "Federal Income Tax Status.")
SYSTEMATIC WITHDRAWALS
The Systematic Withdrawal feature available under the Contracts allows the
Contract Owner to have a portion of the Contract Value withdrawn automatically
at regularly scheduled intervals prior to annuitization. The application for
the Systematic Withdrawal feature specifies the applicable terms and
conditions of the program. Systematic Withdrawals are processed on the same
day each month, depending on your election. If the New York Stock Exchange is
closed on the day when the withdrawal is to be made, the withdrawal will be
processed on the next business day. The Contingent Deferred Sales Charge will
apply to amounts received under the Systematic Withdrawal program in the same
manner as it applies to other partial surrenders and surrenders of Contract
Value. (See "Contingent Deferred Sales Charge".) Of course, continuing to make
purchase payments under the Contract while you are making Systematic
Withdrawals means that you could incur any applicable Contingent Deferred
Sales Charge on the withdrawals at the same time that you are making the new
purchase payments. The Federal tax laws may include systematic withdrawals in
the Contract Owner's gross income in the year in which the withdrawal occurs
and will impose a penalty of 10% on certain systematic withdrawals which are
premature distributions.
LOAN PROVISION FOR CERTAIN TAX BENEFITED RETIREMENT PLANS
Contract loans are available to participants under TSA Plans that are not
subject to ERISA, to trustees of Qualified Plans and to fiduciaries of TSA
Plans subject to ERISA in those states where the insurance department has
approved the currently applicable Contract loan provision.
The Department of Labor has issued regulations (the "ERISA regulations")
governing plan participant loans under retirement plans subject to ERISA.
Generally, the ERISA regulations will apply to retirement plans that qualify
under Sections 401(a) and 401(k) of the Code and employer-sponsored TSA Plans
(generally those to which employers make contributions not attributable to
salary reduction agreements). You and your employer are responsible for
determining whether your plan is subject to the ERISA regulations on
participant plan loans.
It is the responsibility of the trustee of a Qualified Plan or fiduciary of
a TSA Plan subject to ERISA to ensure that the proceeds of a Contract loan are
made available to a participant under a separate plan loan agreement, the
terms of which comply with all the plan qualification requirements including
the requirements of the ERISA regulations on plan loans. Therefore, the plan
loan agreement may differ from the Contract loan provisions and, if you are a
participant in a Qualified Plan or a TSA Plan subject to ERISA, you should
consult with the fiduciary administering the plan loan program to determine
your rights and obligations with respect to plan loans.
The ERISA regulations contain requirements for plan loans relating to their
maximum amount, availability, and other matters. Among the rules are the
requirements that the loan bear a reasonable rate of interest, be adequately
secured, provide a reasonable repayment schedule, and be made available on a
basis that does not discriminate in favor of employees who
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are officers or shareholders or who are highly compensated. These regulations
may change from time to time. Failure to comply with these requirements may
result in tax penalties under the Code and under ERISA.
One of the current requirements of the ERISA regulations is that the plan
must charge a "commercially reasonable" rate of interest for plan loans. The
Contract loan interest rate may not be considered "commercially reasonable"
within the meaning of the ERISA regulations, and it is the responsibility of
the plan fiduciary to charge the participant any additional interest under the
plan loan agreement which may be necessary to make the overall rate charged
comply with the regulation. The ERISA regulations also currently require that
a loan be adequately secured, but provide that not more than 50% of the
participant's vested account balance under the plan may be used as security
for the loan. A Contract loan is secured by the portion of the Contract Value
which is held in the Company's general account as a result of the loan. The
plan fiduciary must ensure that the Contract Value held as security under the
Contract, plus any additional portion of the participant's vested account
balance which is used as security under the plan loan agreement, does not
exceed 50% of the participant's total vested account balance under the plan.
The amount of any loan may not exceed the maximum loan amount as determined
under the Company's maximum loan formula. The effect of a loan on your
Contract is that a portion of the Contract Value equal to the amount of the
loan will be transferred to the Company's general account and will earn
interest (which is credited to the Contract) at the effective rate of 4 1/2%
per year. This earned interest will be credited to the Contract's sub-accounts
(and, if available under your Contract, to the Fixed Account) annually in
accordance with the allocation instructions in effect for purchase payments
under your Contract on the date of the crediting. Interest charged on the loan
will be 6 1/2% per year. Depending on the Company's interpretation of
applicable law and on the Company's administrative procedures, the interest
rates charged and earned on loaned amounts may be changed (for example, to
provide for a variable interest rate) with respect to new loans made. The
Company may also establish a minimum loan amount. Because the amount moved to
the general account as a result of the loan does not participate in the
Variable Account's investment experience, a Contract loan can have a permanent
effect on the Contract Value and death proceeds.
The Company will not permit more than one loan at a time on any Contract
except where state regulators require otherwise. In addition, the Code
provides that the total amount of loans under all your retirement plans may
not at any one time exceed $50,000 less the highest outstanding loan balance
in the preceding 12 months, subject, however, to a smaller maximum if
applicable, of the greater of (1) $10,000, or (2) 50% of the value of your
nonforfeitable, accrued benefits. Loans must be repaid within 5 years except
for certain loans used for the purchase of a principal residence, which must
be repaid within 20 years. Repayment of the principal amount and interest on
the loan will be required in equal monthly installments by means of repayment
procedures established by the Company. Contract loans are subject to
applicable retirement program laws and their taxation is determined under the
Code. If a Contract loan installment repayment is not made, the Company
intends (unless restricted by law) to make a full or partial surrender of the
Contract in the amount of the unpaid installment repayment on the Contract
loan or, if there is a default on the Contract loan, in an amount equal to the
outstanding loan balance (plus any applicable Contingent Deferred Sales Charge
and $30 Administration Contract Charge in each case). (A default on the loan
is defined in the loan application and includes among other things, nonpayment
of three consecutive or a total of five installment repayments, or surrender
of the Contract.) An installment repayment of less than the amount billed will
not be accepted. A full or partial surrender of the Contract to repay all or
part of the loan may result in serious adverse tax consequences for the plan
participant (including penalty taxes) and may adversely affect the
qualification of the plan or Contract. The trustee of a Qualified Plan or a
TSA Plan subject to ERISA will be responsible for reporting to the IRS and
advising the participant of any tax consequences resulting from the reduction
in the Contract Value caused by the surrender and for determining whether the
surrender adversely affects the qualification of the plan. In the case of a
TSA Plan not subject to ERISA, the Company will report the surrender to the
IRS as a taxable distribution under the Contract.
Partial surrenders will be restricted by the existence of a loan and, after
any partial surrender, the remaining unloaned Contract Value must be at least
10% of the total Contract Value after the partial surrender or $500, whichever
is greater (unless the Company consents to a lesser amount). If a partial
surrender by the Company to enforce the loan repayment schedule would reduce
the unloaned Contract Value below this amount, the Company reserves the right
to surrender the entire Contract and apply the Contract Value to the
Contingent Deferred Sales Charge, the $30 Administration Contract Charge and
the amount owed to the Company under the loan. If at any time an excess
Contract loan exists (that is, the Contract loan balance exceeds the Contract
Value), the Company has the right to terminate the Contract.
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Unless you request otherwise, Contract loans will reduce the amount of the
Contract Value in the sub-accounts (and, if available under your Contract, in
the Fixed Account) in proportion to the Contract Value then in each sub-
account (and in the Fixed Account). If any portion of the Contract loan was
attributable to Contract Value in the Fixed Account, then an equal portion of
each loan repayment will have to be allocated to the Fixed Account. (For
example, if 50% of the loan was attributable to your Fixed Account Contract
Value, then 50% of each loan repayment will be allocated to the Fixed
Account). Unless you request otherwise, a repayment will be allocated to the
sub-accounts in the same proportions to which the loan was attributable to the
sub-accounts. (Under certain loans made prior to the date of this prospectus,
repayments will be allocated, unless you request otherwise, according to the
allocation instructions in effect for purchase payments under your Contract,
pursuant to the terms of the applicable Contract loan endorsement.)
The amount of the death proceeds, the amount payable upon surrender of the
Contract and the amount applied on the Maturity Date to provide annuity
payments will be reduced by the amount of any outstanding Contract loan plus
accrued interest.
The tax and ERISA rules relating to participant loans under tax benefited
retirement plans are complex and in some cases unclear, and they may vary
depending on the individual circumstances of each loan. The Company strongly
recommends that you, your employer and your plan fiduciary consult a qualified
tax adviser regarding the currently applicable tax and ERISA rules before
taking any action with respect to loans.
The Company will provide further information regarding loans upon request.
DISABILITY BENEFIT RIDER
A disability benefit rider may be purchased, provided that the Annuitant
satisfies any applicable underwriting standards. This feature is available
only if you are under age 60 when your contract is issued and if you plan to
make regular annual contributions to the Contract. If the Annuitant becomes
totally disabled, the rider provides that the Company will make monthly
purchase payments under the Contract, subject to the terms and conditions of
the rider.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the payment of any
amounts due under the Contract or transfers of Contract Values between sub-
accounts when permitted under applicable Federal laws, rules and regulations.
Current Federal law permits such suspension or postponement if (a) the New
York Stock Exchange is closed (other than for customary weekend and holiday
closings); (b) trading on the Exchange is restricted; (c) an emergency exists
such that it is not reasonably practicable to dispose of securities held in
the Variable Account or to determine the value of its assets; or (d) the
Securities and Exchange Commission by order so permits for the protection of
securities holders. Conditions described in (b) and (c) will be decided by or
in accordance with rules of the Securities and Exchange Commission.
OWNERSHIP RIGHTS
During the Annuitant's lifetime, all rights under the Contract are vested
solely in the Contract Owner unless otherwise provided. Such rights include
the right to change the Beneficiary, to change the payment option, to assign
the Contract (subject to the restrictions referred to below), and to exercise
all other rights, benefits, options and privileges conferred by the Contract
or allowed by the Company. Transfer of ownership of the Contract under an
ERISA "Pension Plan" to a non-spousal beneficiary may require spousal consent.
Qualified Plans and certain TSA Plans with sufficient employer involvement
are deemed to be "Pension Plans" under ERISA and are, therefore, subject to
rules under the Retirement Equity Act of 1984. These rules require that
benefits from annuity contracts purchased by a Pension Plan and distributed to
or owned by a participant be provided in accordance with certain spousal
consent, present value and other requirements which are not enumerated in the
Contract. Thus, the tax consequences of the purchase of the Contracts by
Pension Plans should be considered carefully.
Those Contracts offered by the prospectus which are designed to qualify for
the favorable tax treatment described below under "Federal Income Tax Status"
contain restrictions on transfer or assignment, reflecting requirements of the
Code which must be satisfied in order to assure continued eligibility for such
tax treatment. In accordance with such requirements, ownership of such a
Contract may not be changed and the Contract may not be sold, assigned or
pledged as collateral for a
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loan or for any other purpose except under certain limited circumstances. A
Contract Owner contemplating a sale, assignment or pledge of the Contract
should carefully review its provisions and consult a qualified tax adviser.
If Contracts offered by this prospectus are used in connection with deferred
compensation plans or retirement plans not qualifying for favorable Federal
tax treatment, such plans may also restrict the exercise of rights by the
Contract Owner.
REQUESTS AND ELECTIONS
Requests for transfers or reallocation of future purchase payments may be
made by written request (which may be telecopied) to the Company at its Home
Office or by telephoning the Company. Written requests for such transfers or
changes of allocation must be in a form acceptable to the Company. To request
a transfer or change of allocation by telephone, please contact your
registered representative, or contact the Company at 1-800-777-5897 between
the hours of 9:00 a.m. and 4:00 p.m., Eastern Time. For Contracts issued in
New York, requests for transfers must be in writing. Requests for transfer or
reallocation by telephone will be automatically permitted. The Company will
use reasonable procedures such as requiring certain identifying information
from the caller, tape recording the telephone instructions, and providing
written confirmation of the transaction, in order to confirm that instructions
communicated by telephone are genuine. Any telephone instructions reasonably
believed by the Company to be genuine will be your responsibility, including
losses arising from any errors in the communication of instructions. As a
result of this policy, you will bear the risk of loss. If the Company does not
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, it may be liable for any losses due to unauthorized or
fraudulent transactions. All other requests and elections under a Contract
must be in writing signed by the proper party, must include any necessary
documentation and must be received at the Company's Home Office to be
effective. If acceptable to the Company, requests or elections relating to
Beneficiaries and ownership will take effect as of the date signed unless the
Company has already acted in reliance on the prior status. The Company is not
responsible for the validity of any written request or election.
TEN DAY RIGHT TO REVIEW
Within 10 days (or more where required by applicable state insurance law) of
your receipt of an issued Contract you may return it to the Company or its
agent for cancellation. Upon cancellation of the Contract, the Company will
refund all your purchase payments. If required by the insurance law or
regulations of the state in which your Contract is issued, however, the
Company will return to you an amount equal to the sum of (1) any difference
between the purchase payments made and the amounts allocated to the Variable
Account and (2) the Contract Value.
ADMINISTRATION CHARGES, CONTINGENT
DEFERRED SALES CHARGE AND OTHER DEDUCTIONS
ADMINISTRATION CHARGES
The Company is responsible for administering the Contracts and the Variable
Account. The Company's administrative services include issuing Contracts,
maintaining Contract Owner records and accounting, valuation, regulatory and
reporting services. To cover the cost of these services, the Company receives
two Administration Charges equal, on an annual basis, to $30 per Contract plus
.40% of the daily net assets of each sub-account. The Administration Charges
will be deducted from each sub-account in the ratio of your interest therein
to your total Contract Value.
The annual $30 Administration Contract Charge is deducted from the Contract
Value on each Contract anniversary for the prior Contract Year and will be
deducted on a pro rata basis at annuitization or at the time of a full
surrender if the annuitization or surrender occurs on a date other than a
Contract anniversary. In those instances in which two Contracts are issued to
permit the funding of a spousal IRA, the Administration Contract Charge will
be imposed only on the Contract to which the larger purchase payments have
been allocated in the Contract application.
The Administration Asset Charge is equal to an annual rate of .40% of net
assets and is computed and deducted on a daily basis from each sub-account. As
a percentage of net assets, this charge will not increase over the life of a
Contract, but the total dollar amount of the charge will vary depending on the
level of net assets. The Administration Asset Charge will continue to be
assessed after annuitization if annuity payments are made on a variable basis.
There is not necessarily a relationship between the amount of this charge
imposed on a given Contract and the amount of expenses that may be
attributable to that Contract. (See "Annuity Payments.")
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The Administration Charges have been established at a level designed to
cover the actual costs (including overhead costs) of administering the
Contracts and are not intended to produce a profit. The Company periodically
will monitor the Administration Charges to determine whether they exceed the
actual cost of providing administrative services for the Contracts.
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a Mortality and Expense Risk Charge from the Variable
Account as compensation for assuming the mortality and expense risks under the
Contract. By assuming the expense risk under the Contract, the Company
guarantees that the dollar amount of the Administration Contract Charge and
the amount of the Administration Asset Charge as a percentage of Contract
Value will not increase over the life of a Contract, regardless of the actual
expenses. By assuming the mortality risk, the Company guarantees that,
although annuity payments will vary according to the performance of the
investments you select, annuity payments will not be affected by the mortality
experience (death rate) of persons receiving such payments or of the general
population. The Company assumes this mortality risk by virtue of annuity rates
in the Contract that cannot be changed. The Company also assumes the risk of
making a minimum death benefit payment if the Annuitant dies prior to
annuitization. (See "Payment on Death Prior to Annuitization.")
The Mortality and Expense Risk Charge is computed and deducted on a daily
basis from each sub-account. The charge is at an annual rate of .95% of the
daily net assets of each such sub-account, of which .60% represents a
mortality risk charge and .35% represents an expense risk charge. The
Mortality and Expense Risk Charge as a percentage of Contract Value will not
increase over the life of a Contract. The Mortality and Expense Risk Charge
will continue to be assessed after annuitization if annuity payments are made
on a variable basis. (See "Annuity Payments.")
CONTINGENT DEFERRED SALES CHARGE
The Company does not make any deductions for sales expenses from purchase
payments at the time of purchase. The Contingent Deferred Sales Charge, when
applicable, is intended to assist the Company in covering its expenses
relating to the sale of the Contracts, including commissions, preparation of
sales literature and other promotional activity. The Contingent Deferred Sales
Charge may not cover the full amount of the sales expenses over the lives of
the Contracts. To the extent such expenses are not covered by the Contingent
Deferred Sales Charge, they will be recovered from the Company's general
account, including any income derived from the Mortality and Expense Risk
Charge.
No Contingent Deferred Sales Charge will apply after a Contract reaches its
Maturity Date. You select a Maturity Date when applying for your Contract. The
Maturity Date selected must be at least 10 years after issue of the Contract.
Under current rules, the Company may consent to issue a Contract with a
Maturity Date less than 10 years after issue, provided that the Contract Owner
is an employer-sponsored pension plan through which Contracts were purchased
prior to May 1, 1994. (See "Election of Annuity" for more information.) A
Contingent Deferred Sales Charge will be imposed in the event of certain
partial and full surrenders and applications of proceeds to certain payment
options prior to the Maturity Date. Up to 10% of the Contract Value on the
date of surrender may be surrendered without charge in any one Contract Year.
If there is more than one partial surrender in a Contract Year, the amount
that may be surrendered without charge is 10% of the Contract Value on the
date of the first partial surrender during such year. No charge will be
imposed for payments made upon death or application of proceeds to variable
life income payment options (payment options 2, 3 or 6 as described under
"Annuity Options" below) prior to the Maturity Date. If the Contract has been
in force for five years, no charge will be applied upon the election of a
fixed life income payment option (comparable to payment options 2, 3 or 6 as
described under "Annuity Options" below but on a fixed basis). The Contingent
Deferred Sales Charge will be applied upon the election of other forms of
payment prior to the Maturity Date. Any such election will be treated as a
full surrender for purposes of calculating the applicable Contingent Deferred
Sales Charge. The Contingent Deferred Sales Charge applied will equal the
following amounts if the transaction occurs in the years indicated:
PERCENTAGE OF CONTRACT VALUE WITHDRAWN
(AFTER FREE WITHDRAWAL OF 10% OF THE CONTRACT VALUE)
<TABLE>
<CAPTION>
CONTRACT YEAR
--------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10 11 AND AFTER
- - - - - - - - - -- ------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.0% 1.0% 0%
</TABLE>
A-25
<PAGE>
In cases where the Company has consented to issue a Contract with less than
10 years to the Maturity Date, the Contingent Deferred Sales Charge will be
calculated as though the year of the Maturity Date is the tenth Contract Year
(and the preceding Contract Year is the ninth year, and so forth) resulting in
a lower percentage charge for each Contract Year shown in the table above.
In no event will the total Contingent Deferred Sales Charge exceed 8% of the
first $50,000 of purchase payments made under the Contract and 6.5% of the
amount of purchase payments in excess of $50,000. (For persons who purchased a
Contract prior to May 1, 1994 and who were age 50 or above at issue, a
different Contingent Deferred Sales Charge scale may apply. The applicable
scale is indicated on the schedule page of the Contract.)
The following example illustrates the circumstances under which the maximum
sales load would apply. It is hypothetical only and is not intended to suggest
that these performance results would necessarily be achieved. For actual
performance results see the tables on page A-38.
EXAMPLE: Assume that you purchased a Contract with a $10,000 single purchase
payment and that you surrendered the Contract during the second
Contract Year when the Contract Value had grown to $15,000.
Using the Contingent Deferred Sales Charge schedule in the chart
above, the Contingent Deferred Sales Charge would be: 6% X (90% of
$15,000), or $810. However, because this is larger than the maximum
allowable charge (8% of the $10,000 purchase payment), your actual
Contingent Deferred Sales Charge would be only $800.
In the event that tax law requires you to take distributions of Contract
Value prior to the Maturity Date, they may be subject to the Contingent
Deferred Sales Charge to the extent they exceed 10% of the Contract Value in a
Contract Year, as described above. (See "Federal Income Tax Status--Taxation
of the Contracts.")
In the case of a partial surrender, the Contingent Deferred Sales Charge is
deducted from the Contract Value remaining after the Contract Owner has
received the amount requested and is a percentage of the total amount
withdrawn. For example, if you requested a partial surrender of $100 (after
previously surrendering 10% of the Contract Value free of charge in that
Contract Year) and the applicable Contingent Deferred Sales Charge was 5%, the
total amount of Contract Value withdrawn in that transaction would be $105.26.
After giving effect to a partial surrender, including deduction of the
Contingent Deferred Sales Charge, the remaining Contract Value must be at
least $500 (unless the Company consents to a lesser amount) or, if the
Contract is subject to an outstanding loan, the remaining unloaned Contract
Value must be at least 10% of the total Contract Value after the partial
surrender or $500, whichever is greater (unless the Company consents to a
lesser amount). If the requested partial surrender would not satisfy this
requirement, at the Contract Owner's option either the amount of the partial
surrender will be reduced or the transaction will be treated as a full
surrender and the Contingent Deferred Sales Charge deducted from the proceeds.
The Contingent Deferred Sales Charge is deducted from the sub-accounts in the
same proportion as the Contract Value that you requested to be surrendered.
The Contingent Deferred Sales Charge will be waived in connection with an
exchange by a Contract Owner of one Zenith Accumulator Contract for another
Zenith Accumulator Contract.
PREMIUM TAX CHARGES
Various states impose a premium tax on annuity purchase payments received by
insurance companies. The Company may deduct these taxes from purchase payments
and currently does so for Contracts subject to the insurance tax law of
Pennsylvania, Kentucky and South Dakota. Certain states may require the
Company to pay the premium tax at annuitization rather than when purchase
payments are received. In those states the Company may deduct the premium tax,
calculated as a percentage of Contract Value, on the date when annuity
payments are to begin. Currently, the Company follows this procedure for
Contracts subject to the insurance tax law of North Carolina. The maximum
premium tax currently deducted by the Company is 2%. The Company may in the
future deduct premium taxes under Contracts subject to the insurance tax laws
of other states, or the applicable premium tax rates may change.
Surrender of a Contract may result in a credit against the premium tax
liability of the Company in certain States. In such event, the surrender
proceeds will be increased by the amount of such tax credit.
Premium tax rates are subject to being changed by law, administrative
interpretations or court decisions. Premium tax amounts will depend on, among
other things, the state of residence of the Annuitant and the insurance tax
law of the state.
A-26
<PAGE>
OTHER EXPENSES
A deduction for an investment advisory fee is made from, and certain other
expenses are paid out of, the assets of each Eligible Fund. (See "Expense
Table".) The prospectuses and Statements of Additional Information of the
Eligible Funds describe all deductions and expenses.
CHARGES UNDER CONTRACTS PURCHASED BY EXCHANGING A FUND I OR PREFERENCE
CONTRACT
If a Contract is purchased by exchanging a variable annuity contract issued
by New England Variable Annuity Fund I (a "Fund I contract") or a variable
annuity contract issued by New England Retirement Investment Account (a
"Preference contract"), the sales charges will be calculated as described
below. There will be no Contingent Deferred Sales Charge on the transfer of
assets from a Fund I or Preference contract to a Zenith Accumulator Contract.
A Contract issued in exchange for a Fund I contract will have no Contingent
Deferred Sales Charge. No further purchase payments will be permitted to be
made under a Contract purchased by exchanging a Fund I contract. If you
purchase a Contract by exchanging a Fund I contract and you also hold or
acquire another Zenith Accumulator Contract, the $30 Administration Contract
Charge will only be imposed on one of the Contracts. Total asset-based charges
(including the investment advisory fee) under Fund I contracts currently equal
approximately 1.25%. However, beginning December 1, 1994, The New England
intends to have Fund I bear certain operating expense which have previously
been borne by The New England.
A Contract issued in exchange for a Preference contract will be subject to a
Contingent Deferred Sales Charge calculated as if you had purchased the
Contract on the date you purchased the Preference contract. Your Contract will
have the same Maturity Date as the Preference contract you exchanged, unless
you request a later date. Because the Contingent Deferred Sales Charge for a
Contract is determined differently than the contingent deferred sales charge
for a Preference contract, you may be subject to a higher Contingent Deferred
Sales Charge under a Contract than under a Preference contract. The contingent
deferred sales charge for a Preference contract is 5% of the lesser of (a) the
total purchase payments made within six years prior to the date of surrender
(less any purchase payments that already incurred the charge) and (b) the
amount of contract value surrendered (no charge will apply in any year when
surrenders total less than 10% of purchase payments). Beginning in the seventh
contract year, there is no contingent deferred sales charge under a Preference
contract. Preference contracts have asset-based charges of 1.25% for mortality
and expense risks, but do not have an asset-based administration charge.
Preference contracts impose a $30 annual administration charge.
If you are contemplating an exchange of a Fund I or Preference contract for
a Zenith Accumulator Contract, you should compare the charges deducted under
your existing contract and under the Zenith Accumulator Contract for mortality
and expense risk, administrative charges, investment advisory fees and, in the
case of a Preference contract exchange, the contingent deferred sales charges.
ANNUITY PAYMENTS
ELECTION OF ANNUITY
When applying for a Contract, you select the Maturity Date and an annuity
payment option. The Maturity Date selected must be at least 10 years after
issue of the Contract. Under current rules, the Company may consent to issue a
Contract with a Maturity Date less than 10 years after issue, provided that
the Contract Owner is an employer-sponsored pension plan through which
Contracts were purchased prior to May 1, 1994. Such Contracts are only
available, however, to Annuitants who are age 50 or over at the time of issue.
In addition, the applications for such Contracts must satisfy the Company's
suitability guidelines and, in the case of Annuitants between the ages of 50
and 58 1/2 at the time of issue, the Maturity Date must be no earlier than the
date at which the Annuitant would reach age 59 1/2. Once a Maturity Date is
selected, you cannot change it to an earlier date. However, you may surrender
the Contract at any time before the Maturity Date and apply the surrender
proceeds to an annuity payment option. At any time before the Maturity Date,
you may elect to defer the Maturity Date, but you must obtain Company consent
to defer if on the later Maturity Date the age of the Annuitant at his or her
nearest birthday would be more than seventy-five. You may change the payment
option at any time prior to the Maturity Date. You may elect to have annuity
payments under a Contract made on a variable basis or on a fixed basis, or may
designate a portion to be paid on a variable basis and a portion on a fixed
basis. If you select payments on a fixed
A-27
<PAGE>
basis, the amount of Contract Value applied to the fixed payment option (net
of any applicable charges described under "Administration Charges, Contingent
Deferred Sales Charge and Other Deductions") will be transferred to the
general account of the Company, and the annuity payments will be fixed in
amount and duration by the payment option selected, the age of the Payee and,
for Contracts issued in New York or Oregon for use in situations not involving
an employer-sponsored plan, by the sex of the Payee. (See "Amount of Variable
Annuity Payments".)
Contracts acquired by retirement plans qualifying for tax benefited
treatment may be subject to various requirements concerning the time by which
benefit payments must commence, the period over which such payments may be
made, the payment options that may be selected, and the minimum annual amounts
of such payments. Penalty taxes or other adverse tax consequences may occur
upon failure to meet such requirements.
ANNUITY OPTIONS
Prior to annuitization, you may elect, subject to any applicable
restrictions of Federal tax law, to have payments made under any of the
annuity payment options provided in the Contract. Any such election depends
upon written notice to (and, for variable payment options to begin during the
first Contract Year, consent of) the Company. In the event of your death,
without having made an election of an annuity payment option, the beneficiary
can elect any of the available options listed below, subject to applicable
Federal tax law restrictions. Payments will begin on the Maturity Date, as
stated in your application or as subsequently deferred, or, in the case of a
full surrender as otherwise specified. Pursuant to your election, the Company
shall apply all or any part designated by you of the value of your Contract,
less any applicable Contingent Deferred Sales Charge and Administration
Contract Charge, to any one of the payment options described below.
Prior to annuitization (but only if the Annuitant is living), you may elect
to apply all or any part of the death benefit under any one of the payment
options listed below or in any other manner agreeable to the Company.
The total amount of the Contract Value or Death Proceeds which may be
applied to provide annuity payments will be reduced by the amount of any
outstanding loan plus accrued interest. (See "Loan Provision for Certain Tax
Benefited Retirement Plans.")
The Contract provides for the variable payment options listed below. Due to
tax law restrictions, however, only options 1, 2, 3 and 6 are available on a
variable payment basis.
First Option: Variable Income for a Specified Number of Years.* The
Company will make variable monthly payments for the number of years
elected, which may not be more than 30 except with the consent of the
Company.
Second Option: Variable Life Income. The Company will make variable
monthly payments which will continue: while the Payee is living**; while
the Payee is living but for at least ten years; or while the Payee is
living but for at least twenty years. (The latter two alternatives are
referred to as Variable Life Income with Period Certain Option.)
Third Option: Variable Life Income, Installment Refund. The Company will
make variable monthly payments during the life of the Payee but for a
period at least as long as the nearest whole number of months calculated by
dividing the amount applied to this Option by the amount of the first
monthly payment.
Fourth Option Investment.* The Company will hold the proceeds applied to
this Option as a fixed number of Accumulation Units during the life of the
Payee or some other agreed-upon period and, at the death of the Payee or
the end of the specified period, the value of the Accumulation Units will
be paid in one sum.
Fifth Option: Specified Amount of Income.* The Company will make monthly
payments in the amount elected. Payments will continue until the balance is
fully paid out or until the death of the Payee, at which time any balance
will be paid in one sum.
Sixth Option: Variable Life Income for Two Lives. The Company will make
variable monthly payments which will continue: while either of two Payees
is living (Joint and Survivor Variable Life Income)**, while either of two
Payees is living but for at least 10 years (Joint and Survivor Variable
Life Income, 10 Years Certain); while two Payees are living, and, after the
death of one while the other is still living, two-thirds to the survivor
(Joint and 2/3 to Survivor Variable Life Income).**
Comparable fixed payment options are also available for all of the options
described above except Option 4. In addition, other payment options (including
other periods certain) may be available from time to time, and you should
consult
A-28
<PAGE>
the Company as to their availability. If you do not elect a payment option by
the Maturity Date, variable payments under the Contract will be made while the
Payee is living but for at least ten years. (This is the Second Option:
Variable Life Income with Period Certain.) If installments under an option are
less than $20, the Company can change the payment intervals to 3, 6 or 12
months in order to increase each payment to at least $20.
The Payee under the first, fourth, or fifth variable payment option may
withdraw the commuted value of the payments certain. The commuted value of
such payments is calculated based on the assumed interest rate under the
Contract. (See "Amount of Variable Annuity Payments.") After the death of the
Payee under the second or third variable payment option or the surviving Payee
under the sixth variable payment option, a Payee named to receive any unpaid
payments certain may withdraw the commuted value of the payments certain. If
the fifth option is elected as a fixed payment option, the Payee can be given
the right to withdraw all or part of the amounts remaining under the payment
option.
The availability of certain annuity payment options may be restricted on
account of Company policy and Federal tax law, which among other things, may
restrict payment to the life expectancy of the payee.
The Company continues to assess the Mortality and Expense Risk Charge after
the Maturity Date if annuity payments are made under any variable payment
option, including an option not involving a life contingency and under which
the Company bears no mortality risk.
- ----------
* Application of proceeds under this option upon surrender will result in the
imposition of any applicable charge described under "Contingent Deferred
Sales Charge".
** IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE
PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE SECOND PAYMENT OR TO
RECEIVE ONLY TWO ANNUITY PAYMENTS IF THE PAYEE DIES (OR PAYEES DIE) BEFORE
THE DUE DATE OF THE THIRD PAYMENT, AND SO ON.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
At the Maturity Date (or any other application of proceeds to a payment
option), the Contract Value is applied toward the purchase of monthly variable
annuity payments. The amount of these payments will be determined on the basis
of (i) annuity purchase rates not lower than the rates set forth in the Life
Income Tables contained in the Contract that reflect the Payee's age, (ii) the
assumed interest rate selected, (iii) the type of payment option selected, and
(iv) the investment performance of the Eligible Funds selected.
The annuity purchase rates are used to calculate the basic payment level
purchased by the Contract Value. These rates vary according to the age of the
Payee. The higher the Payee's age at annuitization, the greater the basic
payment level under options involving life contingencies, because the Payee's
life expectancy and thus the period of anticipated income payments will be
shorter. With respect to Contracts issued in New York or Oregon for use in
situations not involving an employer-sponsored plan, purchase rates used to
calculate the basic payment level will also reflect the sex of the Payee.
Under such Contracts, a given Contract Value will produce a higher basic
payment level for a male Payee than for a female Payee, reflecting the greater
life expectancy of the female Payee. If the Contract Owner has selected a
payment option that provides for a refund at death of the Payee or that
guarantees that payments will be made for the balance of a period of a certain
number of years after the death of the Payee, the Contract Value will purchase
lower monthly benefits.
The dollar amount of the initial variable annuity payment will be at the
basic payment level. The assumed interest rate under the Contract will affect
both this basic payment level and the amount by which subsequent payments
increase or decrease. Each payment after the first will vary with the
difference between the net investment performance of the sub-accounts selected
and the assumed interest rate under the Contract. If the actual net investment
rate exceeds the assumed interest rate, the payments will increase.
Conversely, if the actual rate is less than the assumed interest rate, annuity
payments will decrease. If actual investment performance is equal to the
assumed interest rate, the monthly payments will remain level.
Unless otherwise provided, the assumed interest rate will be at an annual
rate of 3.5%. You may select as an alternative an annual assumed interest rate
of 0% or, if allowed by applicable law or regulation, 5%. A higher assumed
interest rate will produce a higher first payment, a more slowly rising series
of subsequent payments when the actual net investment performance exceeds the
assumed interest rate, and a more rapid drop in subsequent payments when the
actual net investment performance is less than the assumed interest rate.
A-29
<PAGE>
You may, even after variable annuity payments have commenced, direct that
all or a portion of your investment in one sub-account be transferred to
another sub-account in the manner provided under "Transfer Privilege".
MINIMUM ANNUITY PAYMENTS
Annuity payments will be made monthly. But if any payment would be less than
$20, the Company may change the frequency so that payments are at least $20
each.
PROOF OF AGE, SEX AND SURVIVAL
The Company may require proof of age, sex (if applicable) and survival of
any person upon the continuation of whose life annuity payments depend.
The foregoing descriptions are qualified in their entirety by reference to
the Statement of Additional Information and to the Contract, which contains
detailed information about the various forms of options available, and other
matters of importance.
RETIREMENT PLANS OFFERING FEDERAL TAX BENEFITS
The Federal tax laws provide for a variety of retirement plans offering tax
benefits. These plans, which may be funded through the purchase of the
individual variable annuity contracts offered in this prospectus, include:
1. Plans qualified under Section 401(a), 401(k), or 403(a) of the Code
("Qualified Plans");
2. Annuity purchase plans adopted by public school systems and certain
tax-exempt organizations pursuant to Section 403(b) of the Code ("TSA
Plans");
3. Individual retirement accounts adopted by or on behalf of individuals
pursuant to Section 408(a) of the Code and individual retirement annuities
purchased pursuant to Section 408(b) of the Code (both of which may be
referred to as "IRAs"), including simplified employee pension plans, which
are specialized IRAs that meet the requirements of Section 408(k) of the
Code ("Simplified Employee Pension Plans");
4. Eligible deferred compensation plans (within the meaning of Section
457 of the Code) for employees of state and local governments and tax-
exempt organizations ("Section 457 Plans"); and
5. Governmental plans (within the meaning of Section 414(d) of the Code)
for governmental employees, including Federal employees ("Governmental
Plans").
An investor should consult a qualified tax or other adviser as to the
suitability of a Contract as a funding vehicle for retirement plans qualifying
for tax benefited treatment, as to the rules underlying such plans and as to
the state and Federal tax aspects of such plans. At this time the Contracts
are only available on a limited basis to plans qualified under Section 401(k)
of the Code.
A summary of the Federal tax laws regarding contributions to, and
distributions from, the above tax benefited retirement plans may be found
below under the heading "Special Rules for Annuities Purchased for Annuitants
Under Retirement Plans Qualifying for Tax Benefited Treatment." It should be
understood that should a tax benefited retirement plan lose its qualification
for tax-exempt status, employees will lose some of the tax benefits described
herein.
In the case of certain TSA Plans under Section 403(b)(1) of the Code and
IRAs purchased under Section 408(b) of the Code, the individual variable
annuity contracts offered in this prospectus comprise the retirement "plan"
itself. These Contracts will be endorsed, if necessary, to comply with Federal
and state legislation governing such plans, and such endorsements may alter
certain Contract provisions described in this prospectus. Refer to the
Contracts and any endorsements for more complete information.
FEDERAL INCOME TAX STATUS
The following discussion is intended as a general description of the Federal
income tax aspects of the Contracts. It is not intended as tax advice. For
more complete information, you should consult a qualified tax adviser.
A-30
<PAGE>
TAX STATUS OF THE INSURANCE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under the Code. The
Variable Account and its operations are part of the Company's total operations
and are not taxed separately. Under current law no taxes are payable by the
Company on the investment income and capital gains of the Variable Account.
Such income and gains will be retained in the Variable Account and will not be
taxable until received by the Annuitant or the Beneficiary in the form of
annuity payments or other distributions.
The Contracts provide that the Company may make a charge against the assets
of the Variable Account as a reserve for taxes which may relate to the
operations of the Variable Account.
TAXATION OF THE CONTRACTS
The variable annuity contracts described in this prospectus are considered
annuity contracts the taxation of which is governed by the provisions of
Section 72 of the Code. As a general proposition, Section 72 provides that
Contract Owners are not subject to current taxation on increases in the value
of the Contracts resulting from earnings or gains on the underlying mutual
fund shares until they are received by the Annuitant or Beneficiary in the
form of annuity payments. (Exceptions to this rule are discussed below under
"Special Rules for Annuities Used by Individuals or with Plans and Trusts Not
Qualifying Under the Code for Tax Benefited Treatment.")
Under the general rule of Section 72, to the extent there is an "investment"
in the Contract, a portion of each annuity payment is excluded from gross
income as a return of such investment. The balance of each annuity payment is
includible in gross income and taxable as ordinary income. In general,
earnings on all contributions to the Contract and contributions made to a
Contract which are deductible by the contributor will not constitute an
"investment" in the Contract under Section 72.
(A) SPECIAL RULES FOR ANNUITIES PURCHASED FOR ANNUITANTS UNDER RETIREMENT
PLANS QUALIFYING FOR TAX BENEFITED TREATMENT
Set forth below is a summary of the Federal tax laws applicable to
contributions to, and distributions from, retirement plans that qualify for
Federal tax benefits. Such plans are defined above under the heading
"Retirement Plans Offering Federal Tax Benefits." You should understand that
the following summary does not include everything you need to know regarding
such tax laws.
The Code provisions and the rules and regulations thereunder regarding
retirement trusts and plans, the documents which must be prepared and executed
and the requirements which must be met to obtain favorable tax treatment for
them are very complex. A person contemplating the purchase of a Contract for
use with a retirement plan qualifying for tax benefited treatment under the
Code should consult a qualified tax adviser as to all applicable Federal and
state tax aspects of the Contracts and, if applicable, as to the suitability
of the Contracts as investments under ERISA.
(I) PLAN CONTRIBUTION LIMITATIONS
QUALIFIED PLANS, SIMPLIFIED EMPLOYEE PENSION PLANS AND GOVERNMENTAL PLANS
Statutory limitations on contributions to Qualified Plans, Simplified
Employee Pension Plans and Governmental Plans may limit the amount of money
that may be contributed to the Contract in any Contract Year. Any purchase
payments attributable to such contributions are tax deductible to the employer
and are not currently taxable to the Annuitants for whom the Contracts are
purchased. The contributions to the Contract and any increase in Contract
Value attributable to such contributions are not subject to taxation until
payments from the Contract are made to the Annuitant or his/her Beneficiaries.
TSA PLANS
Purchase payments attributable to TSA Plans are not includible within the
Annuitant's income to the extent such purchase payments do not exceed certain
statutory limitations, including the "exclusion allowance." The exclusion
allowance is a calculation which takes into consideration the Annuitant's
includible compensation, number of years of service, and
A-31
<PAGE>
prior years of contributions. For more information, the Annuitant should
obtain a copy of IRS Publication 571 on TSA Programs for Employees of Public
Schools and Certain Tax Exempt Organizations which will better assist the
Annuitant in calculating the exclusion allowance and other limitations to
which he or she may be subject for any given tax year. Any purchase payments
attributable to permissible contributions under Code Section 403(b) (and
earnings thereon) are not taxable to the Annuitant until amounts are
distributed from the Contract.
IRA'S
The maximum tax deductible purchase payment which may be contributed each
year to an IRA is the lesser of $2,000 or 100 percent of includible
compensation if the taxpayer is not covered under an employer plan. A spousal
IRA is available if the taxpayer and spouse file a joint return and the spouse
earns no compensation (or elects to be treated as earning no compensation) and
is not yet age 70 1/2. The maximum tax deductible purchase payment which a
taxpayer may make to his or her own IRA and a spousal IRA, combined, is the
lesser of $2,250 or 100 percent of compensation of the working spouse. If
covered under an employer plan, taxpayers are permitted to make deductible
purchase payments; however, the deductions are phased out and eventually
eliminated, on a pro rata basis, for adjusted gross income between $25,000 and
$35,000 for an individual, between $40,000 and $50,000 for a married couple
filing jointly and between $0 and $10,000 for a married person filing
separately. A taxpayer may also make nondeductible purchase payments. However,
the total of deductible and nondeductible purchase payments may not exceed the
limits described above for deductible payments. For more information
concerning the contributions to IRAs, you should obtain a copy of IRS
Publication 590 on Individual Retirement Accounts. In addition to the above,
an individual may make a "rollover" contribution into an IRA with the proceeds
of certain distributions (as defined in the Code) from a Qualified Plan.
SECTION 457 PLANS
Generally, under a Section 457 Plan, an employee or executive may defer
income under a written agreement in an amount equal to the lesser of 33 1/3%
of includible compensation or $7,500. The amounts so deferred (including
earnings thereon) by an employee or executive electing to contribute to a
Section 457 Plan are includible in gross income only in the tax year in which
such amounts are paid or made available to that employee or executive or
his/her Beneficiary. Once contributed to the plan, any Contracts purchased
with employee contributions remain the sole property of the employer and may
be subject to the general creditors of the employer. The employer retains all
ownership rights to the Contract including voting and redemption rights which
may accrue to the Contract(s) issued under the plan.
(II) DISTRIBUTIONS FROM THE CONTRACT
MANDATORY WITHHOLDING ON CERTAIN DISTRIBUTIONS
After January 1, 1993, many distributions called "eligible rollover
distributions" from Qualified Plans and from many TSA Plans will be subject to
automatic withholding by the plan or payor at the rate of 20%. Withholding can
be avoided by arranging a direct transfer of the eligible rollover
distribution to a Qualified Plan, TSA or IRA.
QUALIFIED PLANS, TSA PLANS, IRAS, SIMPLIFIED EMPLOYEE PENSION PLANS AND
GOVERNMENTAL PLANS
Payments made from the Contracts held under a Qualified Plan, TSA Plan, IRA,
Simplified Employee Pension Plan or Governmental Plan are taxable under
Section 72 of the Code as ordinary income, in the year of receipt. Any amount
received in surrender of all or part of the Contract Value prior to
annuitization will, subject to restrictions and penalties discussed below,
also be included in income in the year of receipt. If there is any
"investment" in the Contract, a portion of each amount received is excluded
from gross income as a return of such investment. Distributions or withdrawals
prior to age 59 1/2 may be subject to a penalty tax of 10% of the amount
includible in income. This penalty tax does not apply: (i) to distributions of
excess contributions or deferrals; (ii) to distributions made on account of
the Annuitant's death, retirement, disability or early retirement at or after
age 55; (iii) when distribution from the Contract is in the form of an annuity
over the life or life expectancy of the Annuitant (or joint lives or life
expectancies of the Annuitant and his or her Beneficiary); or (iv) when
distribution is made pursuant to a qualified domestic relations order. In the
case of IRAs, the exceptions for distributions on account of early retirement
at or after age 55 or made pursuant to a qualified domestic relations order do
not apply. A tax-free rollover may be made once each year among individual
retirement arrangements subject to the conditions and limitations described in
the Code.
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If the Annuitant dies before distributions begin, distributions must be
completed within five years after death, unless payments begin within one year
after death and are made over the life (or life expectancy) of the
Beneficiary. If the Annuitant's spouse is the Beneficiary, distributions need
not begin until the Annuitant would have reached age 70 1/2. If the Annuitant
dies after annuity payments have begun, payments must continue to be made at
least as rapidly as payments made before death.
With respect to TSA Plans, elective contributions to the Contract made after
December 31, 1988 and any increases in Contract Value after that date may not
be distributed prior to attaining age 59 1/2, termination of employment, death
or disability. Contributions (but not earnings) made after December 31, 1988
may also be distributed by reason of financial hardship. These restrictions on
withdrawal will not apply to the Contract Value as of December 31, 1988. These
restrictions are not expected to change the circumstances under which
transfers to other investments which qualify for tax free treatment under
Section 403(b) of the Code may be made.
Annuity payments, periodic payments or annual distributions must commence by
April 1 of the calendar year following the year in which the Annuitant attains
age 70 1/2. In the case of a Governmental Plan, these distributions must begin
by the later of the date determined by the preceding sentence or April 1 of
the calendar year following the year in which the Annuitant retires. Each
annual distribution must equal or exceed a "minimum distribution amount" which
is determined by minimum distribution rules under the plan. A penalty tax of
up to 50% of the amount which should be distributed may be imposed by the IRS
for failure to distribute the required minimum distribution amount. Other tax
penalties may apply to aggregate annual distributions in excess of $150,000.
SECTION 457 PLANS
When a distribution under a Contract held under a Section 457 Plan is made
to the Annuitant, such amounts are taxed as ordinary income in the year in
which received. The plan must not permit distributions prior to the
Annuitant's separation from service (except in the case of unforeseen
emergency).
Generally, annuity payments, periodic payments or annual distributions must
commence by April 1 of the calendar year following the year in which the
Annuitant attains age 70 1/2 and meet other distribution requirements. Minimum
distributions under a Section 457 Plan may be further deferred if the
Annuitant remains employed with the sponsoring employer. Each annual
distribution must equal or exceed a "minimum distribution amount" which is
determined by distribution rules under the plan. If the Annuitant dies before
distributions begin, the same special distribution rules apply in the case of
Section 457 Plans as apply in the case of Qualified Plans, TSA Plans, IRAs,
Simplified Employee Pension Plans and Governmental Plans. These rules are
discussed above in the immediately preceding section of this prospectus.
(B) SPECIAL RULES FOR ANNUITIES USED BY INDIVIDUALS OR WITH PLANS AND TRUSTS
NOT QUALIFYING UNDER THE CODE FOR TAX BENEFITED TREATMENT
For a Contract held by an individual, any increase in the accumulated value
of the Contract is not taxable until amounts are received, either in the form
of annuity payments as contemplated by the Contract or in a full or partial
lump sum settlement of the Company's obligations to the Contract Owner.
Under Section 72(u) of the Code, however, Contracts held by other than a
natural person (i.e. those held by a corporation or certain trusts) generally
will not be treated as an annuity contract for Federal tax purposes. This
means a Contract Owner who is not a natural person will have to include in
income any increase during the taxable year in the accumulated value over the
investment in the Contract.
Section 817(h) of the Code requires the investments of the Variable Account
to be "adequately diversified" in accordance with Treasury Regulations.
Failure to do so means the variable annuity contracts described herein will
cease to qualify as annuities for Federal income tax purposes. Regulations
specifying the diversification requirements have been issued by the Department
of the Treasury, and the Company believes it complies fully with these
requirements. The Company believes that the Contracts meet other existing
requirements relating to the degree of Contract Owner control over
investments, including purchase payment allocation and transfer privileges.
However, neither the IRS nor the Secretary of the Treasury has issued any
rulings or regulations on this subject. Such rulings or regulations, if
adopted, could include additional requirements that are not reflected in the
Contracts. For example, the rulings or regulations could require the Company
to impose limitations on a Contract Owner's right to transfer between the
Eligible Funds. Moreover, any such
A-33
<PAGE>
rulings or regulations could also apply to tax benefited retirement plans. The
Company believes any such additional requirements would apply only after the
effective date of such rulings or regulations.
Any amount received in a surrender of all or part of the Contract Value
prior to annuitization will be included in gross income to the extent of any
increases in the value of the Contract resulting from earnings or gains on the
underlying mutual fund shares.
The Code also imposes a ten percent penalty tax on amounts received under a
Contract, before or after the annuity starting date, which are includible in
gross income. The penalty tax will not apply to any amount received under the
Contract (1) after the Contract Owner has attained age 59 1/2, (2) after the
death of the Contract Owner, (3) after the Contract Owner has become totally
and permanently disabled, (4) as one of a series of substantially equal
periodic payments made for the life (or life expectancy) of the Contract Owner
or the joint lives (or life expectancies) of the Contract Owner and a
Beneficiary, (5) if the Contract is purchased under certain types of
retirement plans or arrangements, (6) allocable to investments in the Contract
before August 14, 1982, or (7) if the Contract is an immediate annuity
contract.
In the calculation of any increase in value for contracts entered into after
October 4, 1988, all annuity contracts issued by the Company or its affiliates
to the same Contract Owner within a calendar year will be treated as one
contract.
If the Contract Owner dies, the tax law requires certain distributions from
the Contract. (See "Payment on Death".)
TAX WITHHOLDING
The Code and the laws of certain states require tax withholding on
distributions made under annuity contracts, unless the recipient has made an
election not to have any amount withheld. The Company provides recipients with
an opportunity to instruct it as to whether taxes are to be withheld.
VOTING RIGHTS
The Company is the legal owner of the Eligible Fund shares held in the
Variable Account and has the right to vote those shares at meetings of the
Eligible Fund shareholders. However, to the extent required by Federal
securities law, the Company will give you, as Contract Owner, the right to
instruct the Company how to vote the shares that are attributable to your
Contract.
Prior to annuitization, the number of votes as to which you have a right of
instruction is determined by applying your percentage interest in a sub-
account to the total number of votes attributable to the sub-account. After
annuitization, the number of votes attributable to your Contract is determined
by applying the percentage interest reflected by the reserve for your Contract
to the total number of votes attributable to the sub-account. After
annuitization the votes attributable to your Contract decrease as reserves
underlying the Contract decrease.
Contract Owners who are entitled to give voting instructions and the number
of shares as to which you have a right of instruction will be determined as of
the record date for the meeting. All Eligible Fund shares held in any sub-
account of the Variable Account or any other registered (or to the extent
voting privileges are granted by the issuing insurance company, unregistered)
separate accounts of the Company or any affiliate for which no timely
instructions are received will be voted for, against, or withheld from voting
on any proposition in the same proportion as the shares held in that sub-
account for all policies or contracts for which voting instructions are
received.
All Eligible Fund shares held by the general investment account (or any
unregistered separate account for which voting privileges are not extended) of
the Company or its affiliates will be voted in the same proportion as the
aggregate of (i) the shares for which voting instructions are received and
(ii) the shares that are voted in proportion to such voting instructions.
The SEC requires the Eligible Fund Boards of Trustees to monitor events to
identify conflicts that may arise from the sale of shares to variable life and
variable annuity separate accounts of affiliated and, if applicable,
unaffiliated insurance companies. Conflicts could arise as a result of changes
in state insurance law or Federal income tax law, changes in investment
management of any portfolio of the Eligible Funds, or differences between
voting instructions given by variable life and variable annuity contract
owners, for example. If there is a material conflict, the Boards of Trustees
will have an obligation to determine what action should be taken, including
the removal of the affected sub-account(s) from the Eligible Fund(s), if
necessary. If the Company believes any Eligible Fund action is insufficient,
the Company will consider taking
A-34
<PAGE>
other action to protect Contract Owners. There could, however, be unavoidable
delays or interruptions of operations of the Variable Account that the Company
may be unable to remedy.
Each Contract Owner is a policyholder of The New England and is entitled to
vote at the Company's Annual Meeting of Policyholders held annually on the
third Wednesday of March.
DISTRIBUTION OF CONTRACTS
New England Securities, the principal underwriter of the Contracts, is a
broker-dealer registered under the Securities Exchange Act of 1934 and a
member of the National Association of Securities Dealers, Inc. Commissions of
3% of purchase payments will be paid by the Company to the New England
Securities registered representative involved in the sale of a Contract if the
Maturity Date selected at issue is ten or more years after issue of the
Contract. Lower commissions will be paid if the Maturity Date selected at
issue is less than ten years after issue. No commission is paid in connection
with the initial issuance of a Contract as a result of an exchange from New
England Variable Annuity Fund I or New England Retirement Investment Account.
A maximum override of .75% of purchase payments made after the first Contract
Year will be paid by the Company to the general agent involved in the
transaction.
New England Securities may enter into selling agreements with other broker-
dealers registered under the Securities Exchange Act of 1934 whose
representatives are authorized by applicable law to sell variable annuity
contracts. Commissions paid to such broker-dealers will not exceed 3% of
purchase payments. Commissions will be paid through the registered broker-
dealer, which may also be reimbursed for all or part of the expenses incurred
by the broker-dealer in connection with the sale of the Contracts.
THE FIXED ACCOUNT
A Fixed Account option is included under Contracts issued in those states
where it has been approved by the state insurance department. You may allocate
net purchase payments and may transfer Contract Value in the Variable Account
to the Fixed Account, which is part of the Company's general account. The
Fixed Account offers diversification to a Variable Account contract, allowing
the Contract Owner to protect principal and earn, at least, a guaranteed rate
of interest.
Because of exemptive and exclusionary provisions, interests in the Fixed
Account have not been registered under the Securities Act of 1933, and neither
the Fixed Account nor the general account has been registered as an investment
company under the Investment Company Act of 1940. Therefore, neither the
general account, the Fixed Account nor any interests therein are generally
subject to the provisions of these Acts, and the Company has been advised that
the staff of the Securities and Exchange Commission does not review
disclosures relating to the general account. Disclosures regarding the Fixed
Account may, however, be subject to certain generally applicable provisions of
the Federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
GENERAL DESCRIPTION OF THE FIXED ACCOUNT
The Company's general account consists of all assets owned by the Company
other than those in the Variable Account and the Company's other separate
accounts. The Company has sole discretion over the investment of assets in the
general account, including those in the Fixed Account. Contract Owners do not
share in the actual investment experience of the assets in the Fixed Account.
Instead, the Company guarantees that Contract Values in the Fixed Account will
earn interest at an effective annual net rate of at least 4.5% or 3%,
depending on the date when your Contract was issued. The Company is not
obligated to credit interest at a rate higher than the minimum guaranteed rate
applicable to your Contract, although in its sole discretion it may do so. The
Company declares the current interest rate for the Fixed Account periodically.
Contract Values in the Fixed Account will earn interest daily.
The Company has the right to modify its method of crediting interest. Under
its current method, any net purchase payment or portion of Contract Value
allocated to the Fixed Account will earn interest at the declared annual rate
in effect on the date of the allocation. On each Contract Anniversary, the
Company will determine a portion, from 0% to 100%, of your Contract Value in
the Fixed Account which will earn interest at the Company's declared annual
rate in effect on the Contract Anniversary. The effective interest rate
credited at any time to your Contract Value in the Fixed Account will be a
weighted average of all the Fixed Account rates for your Contract. (See
"Contract Value and Fixed Account Transactions" below for a description of the
interest rate which will be applied to Contract loan repayments allocated to
the Fixed Account.)
A-35
<PAGE>
CONTRACT VALUE AND FIXED ACCOUNT TRANSACTIONS
A Contract's total Contract Value will include its Contract Value in the
Variable Account, its Contract Value in the Fixed Account and, for Contracts
under which Contract loans are available, any of its Contract Value held in
the Company's general account (but outside the Fixed Account) as a result of a
Contract loan.
The annual $30 Administration Contract Charge will be deducted
proportionately from the Contract Value in the Fixed Account and in the
Variable Account. Unless you request otherwise, a partial surrender or
Contract loan will reduce the Contract Value in the sub-accounts of the
Variable Account and the Fixed Account proportionately. Except as described
below, amounts in the Fixed Account are subject to the same rights and
limitations as are amounts in the Variable Account with respect to transfers,
surrenders, partial surrenders and Contract loans. The following special rules
apply to transfers and Contract loan repayments involving the Fixed Account.
You may transfer amounts from the Fixed Account to the Variable Account once
----------------------------------------------------------------------------
each year within 30 days after the Contract anniversary. The amount of
- ----------------------------------------------------------------------
Contract Value which may be transferred from the Fixed Account is limited to
- ----------------------------------------------------------------------------
the greater of 25% of the Contract Value in the Fixed Account and $1,000,
- ------------------------------------------------------------------------
except with the consent of the Company. Also, after the transfer is effected,
- --------------------------------------
Contract Value may not be allocated among more than ten of the Sub-accounts
and/or Fixed Account. The Company intends to restrict transfers of Contract
Value into the Fixed Account in the following circumstances: (1) for the
remainder of a Contract Year if an amount is transferred out of the Fixed
Account in that same Contract Year; (2) if the interest rate which would be
credited to the transferred amount would be equivalent to an annual effective
rate of 3%; or (3) if the total Contract Value in the Fixed Account equals or
exceeds a maximum amount established by the Company.
If any portion of a Contract loan was attributable to Contract Value in the
Fixed Account, then an equal portion of each loan repayment must be allocated
to the Fixed Account. (For example, if 50% of the loan was attributable to
your Fixed Account Contract Value, then 50% of each loan repayment will be
allocated to the Fixed Account.) Similarly, unless you request otherwise, the
balance of the loan repayment will be allocated to the sub-accounts in the
same proportions in which the loan was attributable to the sub-accounts. The
rate of interest for each loan repayment applied to the Fixed Account will be
the lesser of: (1) the effective interest rate for your Contract on the date
the loan repayment is applied to the Fixed Account; and (2) the current Fixed
Account interest rate set by the Company in advance for that date.
The Company reserves the right to delay transfers, surrenders, partial
surrenders and Contract loans from the Fixed Account for up to six months.
FINANCIAL STATEMENTS
The financial statements of the Variable Account and of the Company may be
found in the Statement of Additional Information.
A-36
<PAGE>
INVESTMENT EXPERIENCE INFORMATION
The tables below illustrate hypothetical average annual total returns for
each sub-account for the periods shown, based on the actual investment
experience of the Eligible Funds during those periods. For sub-accounts
investing in Eligible Funds that did not commence operations until 1994,
returns have not been annualized. The tables do not represent what may happen
in the future.
The Variable Account was not established until July, 1987. The Contracts
were not available until September, 1988. The Capital Growth, Back Bay
Advisors Bond Income and Back Bay Advisors Money Market Series commenced
operations on August 26, 1983. The Back Bay Advisors Managed and Westpeak
Stock Index Series commenced operations on May 1, 1987. The Westpeak Value
Growth and Loomis Sayles Avanti Growth Series commenced operations on April
30, 1993. The Equity-Income Portfolio commenced operations on October 9, 1986,
and the Overseas Portfolio commenced operations on January 28, 1987. The
Loomis Sayles Small Cap Series commenced operations on May 2, 1994. The other
Zenith Fund Series (Loomis Sayles Balanced, Draycott International Equity,
Salomon Brothers U.S. Government, Salomon Brothers Strategic Bond
Opportunities, Venture Value, and Alger Equity Growth) commenced operations on
October 31, 1994.
Calculations of average annual total return are based on the assumption that
a single investment of $1,000 was made at the beginning of each period shown.
The figures do not reflect the effect of any premium tax charges, which apply
in certain states, and which would reduce the results shown.
The average annual total return is related to surrender value and is
calculated as follows. The amount of the assumed $1,000 purchase payment for a
Contract issued at the beginning of the period is divided by the Accumulation
Unit Value of each sub-account at the beginning of the period shown to arrive
at the number of Accumulation Units purchased. The number of Accumulation
Units is reduced on each Contract anniversary to reflect deduction of the
annual $30 Administration Contract Charge from the Contract Value. Each such
$30 deduction reduces the number of units held under the Contract by an amount
equal to $30 divided by the Accumulation Unit Value on the date of the
deduction. The total number of units held under the Contract at the beginning
of the last Contract Year covered by the period shown is multiplied by the
Accumulation Unit Value on December 31, 1994 to arrive at the Contract Value
on that date. This Contract Value is then reduced by the applicable Contingent
Deferred Sales Charge and by the portion of the $30 Administration Contract
Charge which would be deducted upon surrender on December 31, 1994 to arrive
at the surrender value. The average annual total return is the annual
compounded rate of return which would produce the surrender value on December
31, 1994. The average annual total returns assume that no premium tax charge
has been deducted.
AVERAGE ANNUAL TOTAL RETURN
For purchase payment allocated to the Capital Growth Series
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
1 Year.......................................................... -16.74%
5 Years......................................................... 3.22%
10 Years........................................................ 21.85%
Since Inception................................................. 19.35%
For purchase payment allocated to the Back Bay Advisors Bond Income Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
1 Year.......................................................... -12.85%
5 Years......................................................... 3.58%
10 Years........................................................ 6.12%
Since Inception................................................. 6.44%
For purchase payment allocated to the Back Bay Advisors Money Market Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
1 Year.......................................................... -5.77%
5 Years......................................................... -0.03%
10 Years........................................................ 2.28%
Since Inception................................................. 2.91%
</TABLE>
A-37
<PAGE>
<TABLE>
For purchase payment allocated to the Westpeak Value Growth Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
1 Year.......................................................... -10.93%
Since Inception................................................. -0.56%
For purchase payment allocated to the Loomis Sayles Avanti Growth Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
1 Year.......................................................... -10.78%
Since Inception................................................. -0.20%
For purchase payment allocated to the Equity-Income Portfolio
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
1 Year.......................................................... -3.05%
5 Years......................................................... 5.00%
Since Inception................................................. 6.72%
For purchase payment allocated to the Overseas Portfolio
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
1 Year.......................................................... -8.39%
5 Years......................................................... 0.50%
Since Inception................................................. 2.27%
</TABLE>
The tables below illustrate hypothetical cumulative total returns for each
sub-account for the periods shown. Cumulative total return is calculated like
average annual total return, above, except that the return for the period is
not annualized. Instead, the cumulative total return reflects the actual
investment experience of the Eligible Fund for the period from inception to
December 31, 1994, which in all cases is less than one year.
<TABLE>
For purchase payment allocated to the Loomis Sayles Small Cap Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
Since Inception................................................. -12.33%
For purchase payment allocated to the Loomis Sayles Balanced Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
Since Inception................................................. -6.73%
For purchase payment allocated to the Draycott International Equity Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
Since Inception................................................. -4.48%
For purchase payment allocated to the Salomon Brothers U.S. Government
Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
Since Inception................................................. -6.08%
For purchase payment allocated to the Salomon Brothers Strategic Bond
Opportunities Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
Since Inception................................................. -8.05%
For purchase payment allocated to the Venture Value Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
Since Inception................................................. -9.55%
For purchase payment allocated to the Alger Equity Growth Series
<CAPTION>
PERIOD ENDING DECEMBER 31, 1994
-------------------------------
<S> <C>
Since Inception................................................. -11.71%
</TABLE>
A-38
<PAGE>
Information is available illustrating the impact of fund performance on
annuity payouts.
The following chart illustrates how the average annual total return was
determined for the five year period ending December 31, 1994 for the Capital
Growth Series based on the assumptions used in the above table. The units
column below shows the number of accumulation units hypothetically purchased
by the $1000 investment in the Capital Growth Series in the first year
(assuming that no premium tax is deducted). The units are reduced on each
Contract anniversary to reflect the deduction of the $30 Administration
Contract Charge.
The unit values of the sub-accounts reflect the change in the net asset
value of the underlying Eligible Funds plus the reinvestment of dividends from
net investment income and of distributions from net realized gains, if any.
The unit values also reflect the deduction of the Mortality and Expense Risk
Charge as well as the Administration Asset Charge.
<TABLE>
<CAPTION>
AVERAGE
UNIT CONTRACT SURRENDER ANNUAL TOTAL
DATE UNITS VALUE VALUE VALUE RETURN
- ---- -------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
December 31, 1989............. 167.0569 5.985984 $1000.00
December 31, 1990............. 161.762 5.665855 916.52 $ 867.03 -13.30%
December 31, 1991............. 158.2768 8.607664 1362.39 1294.95 13.80%
December 31, 1992............. 154.5165 7.978068 1232.74 1177.27 5.59%
December 31, 1993............. 151.2014 9.049554 1368.31 1312.89 7.04%
December 31, 1994............. 147.559 8.236304 1215.34 1171.59 3.22%
</TABLE>
The following charts illustrate what would have been the growth and value of
a $10,000 purchase payment for a Contract if it had been invested in each of
the Eligible Funds on the first day of the first month after those Eligible
Funds became available: September 1, 1983 in the case of the Back Bay Advisors
Money Market, Back Bay Advisors Bond Income and Capital Growth Series;
November 1, 1986 in the case of the Equity-Income Portfolio; February 1, 1987
in the case of the Overseas Portfolio; May 1, 1993 in the case of the Westpeak
Value Growth and Loomis Sayles Avanti Growth Series; May 2, 1994 in the case
of the Loomis Sayles Small Cap Series; and November 1, 1994 for the other
Zenith Fund Series. The figures shown do not reflect the deduction of any
premium tax charge. During the period when the Contingent Deferred Sales
Charge applies, the percentage return on surrender value from year to year
(after the 1st year) will be greater than the percentage return on Contract
Value for the same years. This is because the percentage return on surrender
value reflects not only investment experience but also the annual reduction in
the applicable Contingent Deferred Sales Charge. In the first chart, the
Contract Value and surrender value on each date shown are calculated in the
manner described in the preceding illustrations of average annual total
return, assuming that no premium tax charge is deducted.
In the second and third charts, the difference between the Contract Value or
surrender value at the beginning and at the end of each year is divided by the
beginning Contract Value or surrender value to arrive at the annual percentage
change. The cumulative return information set forth in these charts is
determined by taking the difference between the $10,000 investment and the
ending Contract Value or surrender value and dividing it by $10,000. The
annual effective rate of return in this illustration is calculated in the same
manner as the average annual total return described in the preceding
illustration, assuming that no premium tax charge is deducted.
A-39
<PAGE>
$10,000 SINGLE PURCHASE PAYMENT CONTRACT
ISSUED SEPTEMBER 1, 1983 (MANAGED AND STOCK INDEX SERIES ISSUED MAY 1, 1987)
(EQUITY-INCOME: NOVEMBER 1, 1986 AND OVERSEAS: FEBRUARY 1, 1987)
(VALUE GROWTH AND AVANTI GROWTH: MAY 1, 1993)
(LOOMIS SAYLES SMALL CAP: MAY 2, 1994)
(OTHER ZENITH FUND SERIES: NOVEMBER 1, 1994)
INVESTMENT RESULTS
<TABLE>
<CAPTION>
--------------------------------------------
BACK BAY BACK BAY LOOMIS
ADVISORS ADVISORS SAYLES
CAPITAL BOND MONEY AVANTI
GROWTH INCOME MARKET GROWTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
As of December
31:
1983............ $10,444.58 $10,322.81 $10,267.54
1984............ 10,236.94 11,453.60 11,175.37
1985............ 16,941.07 13,388.02 11,905.91
1986............ 32,597.59 15,137.28 12,515.01
1987............ 49,085.06 15,242.32 13,122.58
1988............ 44,124.36 16,250.76 13,896.84
1989............ 57,258.18 17,982.33 14,945.51
1990............ 54,167.35 19,151.99 15,916.87
1991............ 82,257.93 22,256.32 16,648.79
1992............ 76,208.53 23,723.05 17,018.60
1993............ 86,412.36 26,326.57 17,259.26 $11,306.07
1994............ 78,619.20 25,012.44 17,679.32 10,972.12
</TABLE>
<TABLE>
<CAPTION>
CONTRACT VALUE(1)
- -----------------------------------------------------------------------------------------------------------------------
SALOMON
LOOMIS SALOMON BROTHERS
WESTPEAK SAYLES LOOMIS DRAYCOTT BROTHERS STRATEGIC ALGER
VALUE SMALL SAYLES INTERNATIONAL U.S. BOND VENTURE EQUITY EQUITY-
GROWTH CAP BALANCED EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH INCOME OVERSEAS
- ---------- --------- --------- ------------- ---------- ------------- --------- --------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9,812.08
9,540.79 $ 9,346.53
11,446.14 10,073.52
13,468.76 12,284.55
11,089.00 11,946.44
14,349.01 12,697.26
16,515.02 11,157.37
$11,357.58 19,244.53 15,079.90
11,004.10 $9,512.13 $9,956.78 $10,196.29 $10,026.51 $9,817.20 $9,657.56 $9,561.73 20,270.09 15,027.29
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------
BACK BAY BACK BAY LOOMIS
ADVISORS ADVISORS SAYLES
CAPITAL BOND MONEY AVANTI
GROWTH INCOME MARKET GROWTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
As of December
31:
1983............ $ 9,824.16 $ 9,709.52 $ 9,657.47
1984............ 9,674.68 10,825.65 10.562.44
1985............ 16,131.07 12,715.81 11,307.06
1986............ 31,787.59 14,446.55 11,942.28
1987............ 48,275.06 14,615.41 12,581.52
1988............ 43,314.36 15,656.09 13,386.91
1989............ 56,448.18 17,406.21 14,465.04
1990............ 53,357.35 18,625.16 15,477.39
1991............ 81,447.93 21,845.89 16,339.29
1992............ 75,512.75 23,499.64 16,855.52
1993............ 86,402.36 26,316.57 17,249.26 $10,625.83
1994............ 78,609.20 25,002.44 17,669.32 10,360.71
</TABLE>
<TABLE>
<CAPTION>
SURRENDER VALUE(1)
- -----------------------------------------------------------------------------------------------------------------------
SALOMON
LOOMIS SALOMON BROTHERS
WESTPEAK SAYLES LOOMIS DRAYCOTT BROTHERS STRATEGIC ALGER
VALUE SMALL SAYLES INTERNATIONAL U.S. BOND VENTURE EQUITY EQUITY-
GROWTH CAP BALANCED EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH INCOME OVERSEAS
- ---------- --------- --------- ------------- ---------- ------------- --------- --------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9,233.37
9,020.86 $ 8,773.87
10,874.80 9,503.54
12,857.89 11,650.33
10,635.10 11,382.59
13,827.62 12,156.63
15,989.95 10,729.19
$10,674.33 18,720.06 14,578.25
10,390.96 $8,936.84 $9,369.60 $9,595.10 $9,435.25 $9,238.19 $9,087.88 $8,997.66 19,900.32 14,594.80
</TABLE>
A-40
<PAGE>
ANNUAL PERCENTAGE CHANGE IN CONTRACT VALUE(1)
<TABLE>
<CAPTION>
BACK BAY BACK BAY LOOMIS
ADVISORS ADVISORS SAYLES WESTPEAK
CAPITAL BOND MONEY AVANTI VALUE
GROWTH INCOME MARKET GROWTH GROWTH
------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
As of December 31:
1983.............................. 4.45% 3.23% 2.68%
1984.............................. -1.99 10.95 8.84
1985.............................. 65.49 16.89 6.54
1986.............................. 92.42 13.07 5.12
1987.............................. 50.58 0.69 4.85
1988.............................. -10.11 6.62 5.90
1989.............................. 29.77 10.66 7.55
1990.............................. -5.40 6.50 6.50
1991.............................. 51.86 16.21 4.60
1992.............................. -7.35 6.59 2.22
1993.............................. 13.39 10.97 1.41 13.06% 13.58%
1994.............................. -9.02 -4.99 2.43 -2.95 -3.11
Cumulative Return.................. 686.19 150.12 76.79 9.72 10.04
Annual Effective Rate of Return.... 19.94 8.42 5.15 5.72 5.90
</TABLE>
<TABLE>
<CAPTION>
SALOMON
LOOMIS SALOMON BROTHERS
SAYLES LOOMIS DRAYCOTT BROTHERS STRATEGIC ALGER
SMALL SAYLES INTERNATIONAL U.S. BOND VENTURE EQUITY
CAP BALANCED EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH
------ -------- ------------- ---------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1994................... --4.88% --0.43% 1.96% 0.27% --1.83% --3.42% --4.38%
Cumulative Return....... --4.88 --0.43 1.96 0.27 --1.83 --3.42 --4.38
</TABLE>
<TABLE>
<CAPTION>
LEHMAN
INTERMEDIATE
GOVERNMENT/
DOW JONES S&P 500 CORPORATE CONSUMER
EQUITY- INDUSTRIAL STOCK BOND PRICE
INCOME OVERSEAS AVERAGE(2) INDEX(3) INDEX(4) INDEX(5)
------- -------- ---------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... 5.89% 1.71% 4.50% 1.07%
1984................... 1.30 6.22 14.38 3.95
1985................... 33.55 31.64 18.05 3.80
1986................... -1.88% 27.10 18.62 13.12 1.10
1987................... -2.76 -6.53% 5.48 5.21 3.67 4.43
1988................... 19.97 7.78 16.14 16.50 6.78 4.42
1989................... 17.67 21.95 32.19 31.59 12.76 4.65
1990................... -17.67 -2.75 -1.00 -3.12 9.17 6.11
1991................... 29.40 6.28 24.19 30.34 14.63 3.06
1992................... 15.10 -12.13 7.39 7.61 7.17 2.90
1993................... 16.53 35.16 16.97 10.06 8.79 2.75
1994................... 5.33 -0.35 5.06 1.31 -1.95 2.78
Cumulative Return....... 102.70 50.27 378.41 319.54 185.02 49.52
Annual Effective Rate of
Return................. 9.03 5.28 14.81 13.49 9.68 3.61
</TABLE>
A-41
<PAGE>
ANNUAL PERCENTAGE CHANGE IN SURRENDER VALUE(1)
<TABLE>
<CAPTION>
BACK BAY BACK BAY LOOMIS
ADVISORS ADVISORS SAYLES WESTPEAK
CAPITAL BOND MONEY AVANTI VALUE
GROWTH INCOME MARKET GROWTH GROWTH
------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
As of December 31:
1983............................ -1.76% -2.90 % -3.43%
1984............................ -1.52 11.50 9.37
1985............................ 66.73 17.46 7.05
1986............................ 97.06 13.61 5.62
1987............................ 51.87 1.17 5.35
1988............................ -10.28 7.12 6.40
1989............................ 30.32 11.18 8.05
1990............................ -5.48 7.00 7.00
1991............................ 52.65 17.29 5.57
1992............................ -7.29 7.57 3.16
1993............................ 14.42 11.99 2.34 6.26% 6.74%
1994............................ -9.02 -4.99 2.44 -2.50 -2.65
Cumulative Return................ 686.09 150.02 76.69 3.61 3.91
Annual Effective Rate of Return.. 19.94 8.42 5.15 2.15 2.33
</TABLE>
<TABLE>
<CAPTION>
SALOMON
LOOMIS SALOMON BROTHERS
SAYLES LOOMIS DRAYCOTT BROTHERS STRATEGIC ALGER
SMALL SAYLES INTERNATIONAL U.S. BOND VENTURE EQUITY
CAP BALANCED EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH
------- -------- ------------- ---------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1994................... --10.63% --6.30% --4.05% --5.65% --7.62% --9.12% --10.02%
Cumulative Return....... --10.63 --6.30 --4.05 --5.65 --7.62 --9.12 --10.02
</TABLE>
<TABLE>
<CAPTION>
LEHMAN
INTERMEDIATE
GOVERNMENT/
DOW JONES S&P 500 CORPORATE CONSUMER
EQUITY- INDUSTRIAL STOCK BOND PRICE
INCOME OVERSEAS AVERAGE(2) INDEX(3) INDEX(4) INDEX(5)
------- -------- ---------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... 5.89% 1.71% 4.50% 1.07%
1984................... 1.30 6.22 14.38 3.95
1985................... 33.55 31.64 18.05 3.80
1986................... -7.67% 27.10 18.62 13.12 1.10
1987................... -2.30 -12.26% 5.48 5.21 3.67 4.43
1988................... 20.55 8.32 16.14 16.50 6.78 4.42
1989................... 18.24 22.59 32.19 31.59 12.76 4.65
1990................... -17.29 -2.30 -1.00 -3.12 9.17 6.11
1991................... 30.02 6.80 24.19 30.34 14.63 3.06
1992................... 15.64 -11.74 7.39 7.61 7.17 2.90
1993................... 17.07 35.87 16.97 10.06 8.79 2.75
1994................... 6.30 0.11 5.06 1.31 -1.95 2.78
Cumulative Return....... 99.00 45.95 378.41 319.54 185.02 49.52
Annual Effective Rate of
Return................. 8.79 4.89 14.81 13.49 9.68 3.61
</TABLE>
A-42
<PAGE>
- ----------
NOTES:
(1) The Contract Value, surrender value and annual percentage change figures
assume reinvestment of dividends and capital gain distributions. The
Contract Value figures are net of all deductions and expenses except
premium tax. Each surrender value shown equals the Contract Value less any
applicable Contingent Deferred Sales Charge and a pro rata portion of the
annual $30 Administration Contract Charge. (See "Administration Charges,
Contingent Deferred Sales and Other Deductions.") 1983 figures for the
Capital Growth, Back Bay Advisors Bond Income and Back Bay Advisors Money
Market Series are from September 1 through December 31, 1983. The 1986
figure for the Equity-Income Portfolio is from November 1, 1986 through
December 31, 1986; the 1987 figure for the Overseas Portfolio is from
February 1, 1987 through December 31, 1987. The 1993 figures for the
Loomis Sayles Avanti Growth and Westpeak Value Growth Series are from May
1, 1993 through December 31, 1993. The 1994 figure for the Loomis Sayles
Small Cap Series is from May 2, 1994 through December 31, 1994. The 1994
figures for the other Zenith Fund Series are from November 1, 1994 through
December 31, 1994. The charts do not show an Annual Effective Rate of
Return for the Loomis Sayles Small Cap Series or for the other Zenith Fund
Series that commenced operations in 1994 because none of these Series had
a full year of operations.
(2) The Dow Jones Industrial Average is an unmanaged index of 30 large
industrial stocks traded on the New York Stock Exchange. The annual
percentage change figures have been adjusted to reflect reinvestment of
dividends. 1983 figures are from September 1 through December 31, 1983.
(3) The S&P 500 Stock Index is an unmanaged weighted index of the stock
performance of 500 industrial, transportation, utility and financial
companies. The annual percentage change figures have been adjusted to
reflect reinvestment of dividends. 1983 figures are from September 1
through December 31, 1983.
(4) The Lehman Intermediate Government/Corporate Bond Index is a subset of the
Lehman Government/Corporate Bond Index covering all issues with maturities
between 1 and 10 years which is comprised of taxable, publicly issued,
non-convertible debt obligations issued or guaranteed by the U.S.
Government or its agencies and another Lehman Index that is comprised of
taxable, fixed rate publicly issued, investment grade non-convertible
corporate debt obligations. 1983 figures are from September 1 through
December 31, 1983.
(5) 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. 1983 figures are from September 1 through December
31, 1983.
A-43
<PAGE>
The chart below illustrates what would have been the change in value of a
$100 monthly investment in each of the Eligible Funds if monthly purchase
payments for a Contract had been made on the first day of each month starting
with September 1, 1983 (November 1, 1986 for the Equity-Income Portfolio;
February 1, 1987 for the Overseas Portfolio; May 1, 1993 for the Loomis Sayles
Avanti Growth and Westpeak Value Growth Series; May 2, 1994 for the Loomis
Sayles Small Cap Series; and November 1, 1994 for the Loomis Sayles Balanced,
Draycott International Equity, Salomon Brothers U.S. Government, Salomon
Brothers Strategic Bond Opportunities, Venture Value, and Alger Equity Growth
Series.) The figures shown do not reflect the deduction of any premium tax
charge, and only surrender values, not Contract Values, reflect the deduction
of any applicable Contingent Deferred Sales Charge. Each purchase payment is
divided by the Accumulation Unit Value of each sub-account on the date of the
investment to calculate the number of Accumulation Units purchased. The total
number of units under the Contract is reduced on each Contract anniversary as
a result of the $30 Administration Contract Charge, as described in the
illustrations of average annual total return. The Contract Value and the
surrender value are calculated according to the methods described in the
preceding examples. The annual effective rate of return in this illustration
represents the compounded annual rate that the hypothetical purchase payments
shown would have had to earn in order to produce the Contract Value and
surrender value illustrated on December 31, 1994. See the Statement of
Additional Information for a description of the method of calculating the
annual effective rate of return in this illustration. The charts do not show
an annual effective rate of return for the Loomis Sayles Small Cap Series or
for the other Zenith Fund Series that commenced operations in 1994 because
none of these Series had a full year of operations. Instead, the rates of
return shown for these Series are not annualized.
INVESTMENT RESULTS
SEPTEMBER 1, 1983--DECEMBER 31, 1994 (CAPITAL GROWTH, BOND INCOME AND MONEY
MARKET SERIES)
(NOVEMBER 1, 1986--DECEMBER 31, 1994 FOR EQUITY-INCOME PORTFOLIO AND FEBRUARY
1, 1987--DECEMBER 31, 1994 FOR OVERSEAS PORTFOLIO)
(MAY 2, 1994--DECEMBER 31, 1994 FOR LOOMIS SAYLES SMALL CAP SERIES)
(NOVEMBER 1, 1994--DECEMBER 31, 1994 FOR ALL OTHER ZENITH FUND SERIES)
<TABLE>
<CAPTION>
CUMULATIVE
PAYMENTS*
----------
<S> <C>
As of December
31:
1983............ $ 400
1984............ 1,600
1985............ 2,800
1986............ 4,000
1987............ 5,200
1988............ 6,400
1989............ 7,600
1990............ 8,800
1991............ 10,000
1992............ 11,200
1993............ 12,400
1994............ 13,600
Annual Effective
Rate of Return...
Rate of Return**.
</TABLE>
<TABLE>
<CAPTION>
---------------------------------
BACK BAY BACK BAY
ADVISORS ADVISORS
CAPITAL BOND MONEY
GROWTH INCOME MARKET
---------- ---------- ----------
<S> <C> <C> <C>
As of December 31:
1983............ $ 408.55 $ 404.51 $ 406.73
1984............ 1,652.90 1,720.39 1,673.10
1985............ 4,286.49 3,304.00 2,998.89
1986............ 9,785.53 4,981.88 4,361.45
1987............ 15,914.69 6,207.06 5,787.75
1988............ 15,465.64 7,827.20 7,353.43
1989............ 21,368.41 9,909.41 9,143.25
1990............ 21,339.67 11,804.98 10,968.40
1991............ 33,870.55 15,034.52 12,691.67
1992............ 32,583.40 17,270.47 14,180.13
1993............ 38,213.23 20,402.48 15.585.77
1994............ 35,878.20 20,560.58 17,181.74
Annual Effective
Rate of Return... 16.12% 7.05% 4.03%
</TABLE>
<TABLE>
<CAPTION>
CONTRACT VALUE
- ----------------------------------------------------------------------------------------------------------------
LOOMIS LOOMIS SALOMON SALOMON
SAYLES WESTPEAK SAYLES LOOMIS DRAYCOTT BROTHERS BROTHERS BOND ALGER
AVANTI VALUE SMALL SAYLES INTERNATIONAL U.S. STRATEGIC VENTURE EQUITY EQUITY-
GROWTH GROWTH CAP BALANCED EQUITY GOVERNMENT OPPORTUNITIES VALUE GROWTH INCOME OVERSEAS
- --------- -------- ------- -------- ------------- ---------- ------------- ------- ------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 195.01
1,212.40 $ 1,004.85
2,691.26 2,337.75
4,391.26 4,204.39
4,714.30 5,221.07
7,417.83 6,776.73
9,828.50 7,031.48
$ 847.63 $ 848.54 12,716.94 10,871.79
2,000.60 1,997.99 $774.87 $200.66 $203.73 $200.74 $196.45 $198.56 $196.35 14,615.73 11,984.99
0.03% -0.12% -- -- -- -- -- -- -- 9.56% 5.76%
-- -- -0.71% 0.22% 1.24% 0.25% -1.19% 0.48% -1.22% -- --
</TABLE>
- -----
* Cumulative payments as of December 31, 1994 would be $2,000 for Loomis
Sayles Avanti Growth and Westpeak Value Growth, $700 for Loomis Sayles Small
Cap, $200 for each of the other Zenith Fund series, $9,800 for Equity-
Income, and $9,500 for Overseas.
**Rates of return for these Series are not annualized because the Series had
not had a full year of operations by December 31, 1994.
A-44
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE
PAYMENTS*
----------
<S> <C>
As of December
31:
1983............ $ 400
1984............ 1,600
1985............ 2,800
1986............ 4,000
1987............ 5,200
1988............ 6,400
1989............ 7,600
1990............ 8,800
1991............ 10,000
1992............ 11,200
1993............ 12,400
1994............ 13,600
Annual Effective
Rate of Return...
Rates of
Return**......... --
</TABLE>
<TABLE>
<CAPTION>
---------------------------------
BACK BAY BACK BAY
ADVISORS ADVISORS
CAPITAL BOND MONEY
GROWTH INCOME MARKET
---------- ---------- ----------
<S> <C> <C> <C>
As of December
31:
1983............ $ 375.23 $ 371.43 $ 373.52
1984............ 1,554.18 1,618.03 1,573.30
1985............ 4,064.80 3,130.95 2,840.94
1986............ 9,455.53 4,748.14 4,155.63
1987............ 15,488.69 5,946.08 5,543.75
1988............ 14,943.64 7,535.78 7,079.07
1989............ 20,750.41 9,587.58 8,845.55
1990............ 20,753.77 11,476.52 10,662.52
1991............ 33,251.06 14,754.08 12,453.40
1992............ 32,280.23 17,105.13 14,042.59
1993............ 38,203.23 20,392.48 15,575.77
1994............ 35,868.20 20,550.58 17,171.74
Annual Effective
Rate of Return... 16.12% 7.04% 4.02%
</TABLE>
<TABLE>
<CAPTION>
SURRENDER VALUE
- ----------------------------------------------------------------------------------------------------------------
LOOMIS LOOMIS
SAYLES WESTPEAK SAYLES LOOMIS DRAYCOTT SALOMON SALOMON ALGER
AVANTI VALUE SMALL SAYLES INTERNATIONAL BROTHERS US BROTHERS BOND VENTURE EQUITY EQUITY-
GROWTH GROWTH CAP BALANCED EQUITY GOVT OPPORTUNITIES VALUE GROWTH INCOME OVERSEAS
- -------- -------- ------- -------- ------------- ----------- ------------- ------- ------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 178.90
1,142.20 $ 920.18
2,553.29 2,185.50
4,188.87 3,970.13
4,518.57 4,959.86
7,145.96 6,475.88
9,514.06 6,751.84
$ 779.21 $ 780.07 12,368.71 10,502.69
1,873.64 1,871.18 $710.71 $184.22 $187.11 $184.29 $180.25 $182.24 $180.15 14,347.74 11,634.64
-7.26% -7.40% 9.12% 5.03%
Rates of
Return**......... 2.64% -5.36% -4.36% -5.33% -6.73% -6.04% -6.77% --
</TABLE>
- -----
* Cumulative payments as of December 31, 1994 would be $2,000 for Loomis
Sayles Avanti Growth and Westpeak Value Growth, $700 for Loomis Sayles Small
Cap, $200 for each of the other Zenith Fund series, $9,800 for Equity-
Income, and $9,500 for Overseas.
**Rate of return for these Series are not annualized because the Series had
not had a full year of operations by December 31, 1994.
A-45
<PAGE>
The Variable Account may update the performance history of one or more of
its sub-accounts on a quarterly basis by illustrating the one, five and ten
year growth (or the growth since inception, if less than one year) of a
$10,000 single payment using the same method of calculation described on page
A-39, but using the periods ending with the date of the quarterly
illustration. Such illustrations will show the Contract Value at the end of
the period and the cumulative return and annual effective rate of return for
the period. The illustration may also include the cumulative return and annual
effective rate of return of an appropriate securities index and the Consumer
Price Index for the same period.
The Variable Account will make available illustrations showing historical
Contract Values and the annual effective rate of return, based upon
hypothetical purchase payment amounts and frequencies, which can be selected
by the client. The method of calculation described on page A-43 will be used,
but the illustration will reflect the effect of any premium tax charge
applicable in the state where the illustration is delivered. The beginning
date of the illustration can be selected by the client. Contract Values will
be shown as of the end of each calendar year in the period and as of the end
of the most recent calendar quarter.
Historical investment performance may also be illustrated by showing the
percentage change in the Accumulation Unit Value and annual effective rate of
return of a sub-account without reflecting the impact of any Contingent
Deferred Sales Charge or the annual $30 Administration Contract Charge. The
percentage change in unit value and annual effective rate of return of each
sub-account may be shown from inception of the Eligible Fund to the date of
the report and for the 1, 5 and 10 year periods ending with the date of the
report. The percentage change in unit value and annual effective rate of
return also may be compared with the percentage change and annual effective
rate for the Dow Jones Industrial Average and S&P 500 Stock Index, unmanaged
indices of stock performance described in Notes (2) and (3) to the preceding
illustration of Annual Percentage Change in Contract Value and Annual
Percentage Change in Surrender Value for a $10,000 Single Purchase Payment
Contract. The percentage change is calculated by dividing the difference in
unit or index values at the beginning and end of the period by the beginning
unit or index value. See the Statement of Additional Information for a
description of the method for calculating the annual effective rate of return
in this illustration.
From time to time the Company may advertise (in sales literature or
advertising material) performance rankings of the sub-accounts of the Variable
Account assigned by independent services, such as Variable Annuity Research
and Data Services ("VARDS"). VARDS monitors and ranks the performance of
variable annuity accounts on an industry-wide basis in each of the major
categories of investment objectives. The performance analysis prepared by
VARDS ranks accounts on the basis of total return calculated using
Accumulation Unit Values. Thus, the effect of the Contingent Deferred Sales
Charge and $30 Administration Contract Charge assessed under the Contracts is
not taken into consideration.
From time to time, articles discussing the Variable Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to, Lipper Analytical Services, Inc. and
Morningstar) may publish their own rankings or performance reviews of variable
contract separate accounts, including the Variable Account. References to,
reprints or portions of reprints of such articles or rankings may be used by
the Company as sales literature or advertising material and may include
rankings that indicate the names of other variable contract separate accounts
and their investment experience.
A-46
<PAGE>
APPENDIX A
CONSUMER TIPS
DOLLAR COST AVERAGING
Dollar cost averaging allows a person to take advantage of the historical
long-term stock market results, assuming that they continue, although it does
not guarantee a profit or protect against a loss. If an investor follows a
program of dollar cost averaging on a long-term basis and the stock fund
selected performs at least as well as the S&P 500 has historically, it is
likely although not guaranteed that the price at which shares are surrendered,
for whatever reason, will be higher than the average cost per share.
An investor using dollar cost averaging invests the same amount of money in
the same professionally managed fund at regular intervals over a long period
of time. Dollar cost averaging keeps an investor from investing too much when
the price of shares is high and too little when the price is low. When the
price of shares is low, the money invested buys more shares. When it is high,
the money invested buys fewer shares. If the investor has the ability and
desire to maintain this program over a long period of time (for example, 20
years), and the stock fund chosen follows the historical upward market trends,
the price at which the shares are sold should be higher than their average
cost. The price could be lower, however, if the fund chosen does not follow
these historical trends.
Investors contemplating the use of dollar cost averaging should consider
their ability to continue the on-going purchases so that they can take
advantage of periods of low price levels.
DIVERSIFICATION
Diversifying investment choices can enhance returns, by providing a wider
opportunity for safe returns, and reduce risks, by spreading the chance of
loss. Holding of single investment requires of that investment a safe return
because a loss may risk the entire investment. By diversifying, on the other
hand, an investor can more safely take a chance that some investments will
under-perform and that others will over-perform. Thus an investor can
potentially earn a better-than-average rate of return on a diversified
portfolio than on a single safe investment. This is because, although portions
of a diversified investment may be totally lost, other portions may perform at
above-average rates that more than compensate for the loss.
MISCELLANEOUS
<TABLE>
<C> <S>
Toll-free telephone --A recording of daily unit values is available by
service: calling 1-800-333-2501.
--Fund transfers and changes of future purchase
payment allocations can be made by calling 1-800-
777-5897 (Not available for fund transfers under
Contracts issued in New York.)
Written Communications: --All communications and inquiries regarding address
changes, premium payments, billing, fund transfers,
surrenders, loans, maturities and any other
processing matters relating to your Contract should
be directed to:
Annuity Services
P.O. Box 642
Back Bay Annex
Boston, Mass 02116
</TABLE>
A-47
<PAGE>
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SERVICES TO THE VARIABLE ACCOUNT........................................... 3
PERFORMANCE COMPARISONS.................................................... 3
CALCULATION OF PERFORMANCE DATA............................................ 4
NET INVESTMENT FACTOR...................................................... 12
ANNUITY PAYMENTS........................................................... 13
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS....................... 16
HISTORICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS......................... 20
EXPERTS.................................................................... 23
LEGAL MATTERS.............................................................. 23
FINANCIAL STATEMENTS....................................................... 24
</TABLE>
If you would like to obtain a copy of the Statement of Additional
Information, please complete the request for below and mail to:
New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116
...............................................................................
Please send a copy of the Statement of Additional
Information of The New England Variable Account to:
------------------------------------------------------
Name
------------------------------------------------------
Street
------------------------------------------------------
City State Zip
A-48
<PAGE>
THE NEW ENGLAND
501 BOYLSTON STREET
BOSTON, MA 02116-3700
RECEIPT
This is to acknowledge receipt of a Zenith Accumulator Prospectus dated May
1, 1995. This Variable Annuity Contract is offered by New England Mutual Life
Insurance Company.
_____________________________________ _____________________________________
(Date) (Client's Signature)
