<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
REGISTRATION NO. 333-11131
811-5338
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 3 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 20 [X]
THE NEW ENGLAND VARIABLE ACCOUNT
(EXACT NAME OF REGISTRANT)
METROPOLITAN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE MADISON AVENUE, NEW YORK, NEW YORK 10010
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER: (212) 578-5364
NAME AND ADDRESS OF AGENT FOR SERVICE: COPY TO:
Gary A. Beller, Esq. Stephen E. Roth, Esquire
Metropolitan Life Insurance Company Sutherland, Asbill & Brennan LLP
One Madison Avenue 1275 Pennsylvania Avenue, N.W.
New York, New York 10010 Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on (date) pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on April 30, 1999 pursuant to paragraph (a)(1) of Rule 485
Title of Securities Being Registered: Individual Variable Annuity Contracts.
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<PAGE>
ZENITH ACCUMULATOR
Individual Variable Annuity Contracts
Issued by
Metropolitan Life Insurance Company
Supplement dated April 30, 1999
to Prospectus dated April 30, 1999
The Puerto Rico Internal Revenue Code of 1994, as amended (the "PR Code")
provides the following tax treatment for Zenith Accumulator Individual
Variable Annuity Contracts ("the Contracts") issued to Contract Owners in the
Commonwealth of Puerto Rico. The contracts will not be offered in Puerto Rico
as individual retirement annuities ("IRAs").
1. General Tax Treatment of Annuities
For Puerto Rico tax purposes, amounts received as an annuity under an
annuity contract are defined as amounts (determined based on a computation
with reference to life expectancy and mortality tables) received in periodical
installments and payable over a period longer than one year from the annuity
starting date.
Annuity payments generally have two elements: a part that constitutes a
return of the annuity's cost (return of capital) and a part that constitutes
income.
From each annuity payment received, taxpayers must include in their gross
income for income tax purposes the lower of (a) the annuity payments received
during the taxable year, or (b) 3% of the aggregate premiums or consideration
paid for the annuity divided by 12 and multiplied by the number of months in
respect to which the installment is paid. The excess over the 3% is excluded
from gross income until the aggregate premiums or consideration is recovered.
Once the annuity's cost has been fully recovered, all of the annuity payment
constitutes taxable income. There is no penalty tax on early distributions
from annuity contracts.
If a payment is received in a lump sum, the annuity's cost is recovered tax
free and the remainder constitutes taxable income.
2. A Variable Annuity Contract Under Nonqualified Plans
A variable annuity contract may be purchased by an employer for an employee
under a nonqualified stock bonus, pension, profit sharing or annuity plan. The
employer may purchase the variable annuity contract and transfer it to a trust
created under the terms of the nonqualified plan or can make contributions to
the nonqualified trust in order to provide [a] variable annuity contract[s]
for his employees.
The purchase payments paid or the employer's contributions made to a trust
under a plan during a taxable year of the employer which ends within or with a
taxable year of the trust, shall be included in the gross income of the
employee, if his beneficial interest in the employer's contributions is
nonforfeitable at the time the contribution is made. An employee's beneficial
interest in the contributions is nonforfeitable if there is no contingency
under the plan which may cause the employee to lose his rights in the
contribution.
When the contributions are included in the employee's gross income, they are
considered part of the consideration paid by him for the annuity. The amounts
contributed by the employer constitute consideration paid by the employee
which is taken into account for purposes of determining the taxable amount of
each annuity payment received.
VA-153-98
S-1
<PAGE>
The contributions paid by the employer to or under the nonqualified plan for
providing retirement benefits to the employees under an annuity or insurance
contract are deductible in the taxable year when paid if the employee's rights
to or derived from such employer's contribution are nonforfeitable at the time
the contribution is made.
If an amount is paid on behalf of the employee during the taxable year but
the rights of the employee therein are forfeitable at the time the amount is
paid, no employer deduction is allowable for such amount for any taxable year.
A nonqualified plan may not be subject to certain rules which apply to a
qualified plan such as rules regarding participation, vesting and funding.
Thus, nonqualified annuity plans may be used by an employer to provide
additional benefits to key employees.
Since a nonqualified trust is not tax-exempt, the trust itself will be
taxable on the income of the trust assets.
3. A Variable Annuity Contract Under a Qualified Plan
A variable annuity contract may be purchased by an employer for an employee
under a qualified pension, profit-sharing, stock bonus, annuity, or a cash or
deferred arrangement ("CODA") plan established pursuant to Section 1165 of the
PR Code. The employer has two alternatives: (1) purchase the annuity contract
and transfer the same to the trust under the plan, or (2) make contributions
to a trust under a qualified plan for the purpose of providing an annuity
contract for an employee.
Qualified plans must comply with the requirements of Section 1165(a) of the
PR Code which include, among others, certain participation requirements.
The trust created under the qualified plan is exempt from tax on its
investment income.
a. Contributions
The employer is entitled, in determining its net taxable income, to claim a
current income tax deduction for contributions made to the trust created under
the terms of a qualified plan. However, statutory limitations on the
deductibility of contributions made to the trust under a qualified plan limit
the amount of funds that may be contributed each year.
b. Distributions
The amount paid by the employer towards the purchase of the variable annuity
contract or contributed to the trust for providing variable annuity contracts
for the employees is not required to be included in the income of the
employee. However, any amount received or made available to the employee under
the qualified plan is includible in the gross income of the employee in the
taxable year in which received or made available.
In such case, the amount paid or contributed by the employer shall not
constitute consideration paid by the employee for the variable annuity
contract for purposes of determining the amount of annuity payments required
to be included in the employee's gross income. Thus, amounts actually
distributed or made available to any employee under the qualified plan shall
be included in their entirety in the employee's gross income.
Lump-sum proceeds from a qualified plan distributed on account of the
employee's separation from service may receive long term capital gain
treatment and will be taxed at a maximum rate of 20%.
The PR Code does not impose a penalty tax in cases of early (premature)
distributions from a qualified plan.
S-2
<PAGE>
c. Rollover
Deferral of the recognition of income continues upon the receipt of a
distribution by a participant from a qualified plan, if the total distribution
is contributed to another qualified retirement plan or individual retirement
account ("IRA") for the employee's benefit no later than sixty (60) days after
the distribution.
4. A Variable Annuity Contract Under a Keogh Plan
A variable annuity contract may be purchased for purposes of funding a self
employed retirement plan under Section 1165(f) of the PR Code. This plan is
commonly known as a Keogh plan or an HR 10 plan.
This plan permits self-employed individuals and owner-employees to adopt
pension plans, profit sharing plans or annuity plans for themselves and their
employees. A self-employed individual is any individual who carries on a trade
or business as a sole proprietor, an independent contractor or anyone who is
in business for himself or herself.
An owner-employee is any individual who owns all of an unincorporated
business. In the case of a corporation of individuals or a special partnership
under Subchapter K of the PR Code, an owner-employee is a shareholder or a
partner owning more than 10% of the interest in capital or profits.
Similar to a qualified plan, the variable annuity contract may be purchased
and be transferred to a trust, or contributions may be made to the trust for
the purpose of providing an annuity contract for the trust beneficiaries.
a. Contributions
A tax deduction may be claimed for contributions made to the plan. As in
other qualified plans, contributions to the plan are subject to certain
statutory limits. The limit on the deduction depends on the type of plan
selected.
Such contributions and the income generated from them are not taxable to the
owner-employee, his employees or to the self-employed individual until the
funds are distributed or made available to them.
The investment income generated from the contributions made to the plan
which are held in a qualified trust is tax exempt to the trust.
b. Distributions
Distributions made under a qualified self-employed retirement plan will be
subject to the rules described under 3(b) and (c) above.
S-3
<PAGE>
ZENITH ACCUMULATOR
Individual Variable Annuity Contracts
Issued By
The New England Variable Account of
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Designated Office:
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus describes individual variable annuity contracts (the
"Contracts") for individuals and some qualified and non-qualified retirement
plans. You may allocate purchase payments to one or more sub-accounts
investing in these Eligible Funds of New England Zenith Fund and the Variable
Insurance Products Fund.
Loomis Sayles Small Cap Goldman Sachs Midcap Value Salomon Brothers
Series Series Strategic Bond
Morgan Stanley Davis Venture Value Series Opportunities
International Magnum Westpeak Growth and Income Series
Equity Series Series Back Bay Advisors
Bond Income Series
VIP Overseas Portfolio VIP Equity-Income Salomon Brothers
Portfolio U.S. Government
Alger Equity Growth Series Loomis Sayles Balanced Series
Capital Growth Series Series
Back Bay Advisors
Money Market Series
In most states you may also allocate purchase payments to a Fixed Account.
Limits apply to transfers to and from the Fixed Account.
We currently are not offering any new Contracts. However, holders of
existing Contracts may continue to make purchase payments.
Please read this prospectus carefully and keep it for reference. This
prospectus contains information that you should know before investing.
You can obtain a Statement of Additional Information ("SAI") about the
Contracts, dated April 30, 1999. The SAI is filed with the Securities and
Exchange Commission and is incorporated by reference in this prospectus. The
SAI Table of Contents is on page A-54 of the prospectus. For a free copy of
the SAI, write or call New England Securities Corporation, 399 Boylston St.,
Boston, Massachusetts 02116, 1-800-356-5015.
The Securities and Exchange Commission has not approved these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
April 30, 1999
The Prospectus for the Eligible Funds is attached. Please read and keep it
for reference.
The Contracts have risks including possible loss of principal. The Contracts
are not deposits or obligations of, or guaranteed or endorsed by, any
financial institution and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government
agency.
<PAGE>
TABLE OF CONTENTS
OF
THE PROSPECTUS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS......................... A-4
HIGHLIGHTS................................................................ A-5
EXPENSE TABLE............................................................. A-7
ACCUMULATION UNIT VALUES.................................................. A-12
HOW THE CONTRACT WORKS.................................................... A-15
THE COMPANY............................................................... A-16
THE VARIABLE ACCOUNT...................................................... A-16
INVESTMENTS OF THE VARIABLE ACCOUNT....................................... A-16
New England Zenith Fund.................................................. A-17
Variable Insurance Products Fund......................................... A-18
Investment Advice........................................................ A-18
Substitution of Investments.............................................. A-19
GUARANTEED OPTION......................................................... A-19
THE CONTRACTS............................................................. A-19
Purchase Payments........................................................ A-19
Allocation of Purchase Payments.......................................... A-20
Contract Value and Accumulation Unit Value............................... A-20
Payment on Death Prior to Annuitization.................................. A-21
Transfer Privilege....................................................... A-23
Dollar Cost Averaging.................................................... A-24
Surrenders............................................................... A-24
Systematic Withdrawals................................................... A-25
Loan Provision for Certain Tax Benefited Retirement Plans................ A-25
Disability Benefit Rider................................................. A-27
Suspension of Payments................................................... A-27
Ownership Rights......................................................... A-28
Requests and Elections................................................... A-28
Ten Day Right to Review.................................................. A-29
ADMINISTRATION CHARGES, CONTINGENT DEFERRED SALES CHARGE AND OTHER
DEDUCTIONS............................................................... A-29
Administration Charges................................................... A-29
Mortality and Expense Risk Charge........................................ A-30
Contingent Deferred Sales Charge......................................... A-30
Premium Tax Charges...................................................... A-31
Other Expenses........................................................... A-32
Charges Under Contracts Purchased by Exchanging a Fund I or Preference
Contract................................................................ A-32
ANNUITY PAYMENTS.......................................................... A-32
Election of Annuity...................................................... A-32
Annuity Options.......................................................... A-33
AMOUNT OF VARIABLE ANNUITY PAYMENTS....................................... A-34
Minimum Annuity Payments................................................. A-35
Proof of Age, Sex and Survival........................................... A-35
RETIREMENT PLANS OFFERING FEDERAL TAX BENEFITS............................ A-35
FEDERAL INCOME TAX STATUS................................................. A-36
Tax Status of the Company and the Variable Account....................... A-36
Taxation of the Contracts................................................ A-36
Special Rules for Annuities Purchased for Annuitants Under Retirement
Plans Qualifying for Tax Benefited Treatment............................ A-37
Special Rules for Annuities Used by Individuals or with Plans and Trusts
Not Qualifying Under the Code for Tax Benefited Treatment............... A-40
Tax Withholding.......................................................... A-42
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
VOTING RIGHTS.............................................................. A-42
DISTRIBUTION OF CONTRACTS.................................................. A-43
THE FIXED ACCOUNT.......................................................... A-43
General Description of the Fixed Account.................................. A-43
Contract Value and Fixed Account Transactions............................. A-44
YEAR 2000 COMPLIANCE ISSUES................................................ A-44
FINANCIAL STATEMENTS....................................................... A-45
INVESTMENT PERFORMANCE INFORMATION......................................... A-45
APPENDIX A: CONSUMER TIPS.................................................. A-47
APPENDIX B: PREMIUM TAX.................................................... A-48
APPENDIX C: AVERAGE ANNUAL TOTAL RETURN.................................... A-49
</TABLE>
A-3
<PAGE>
GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS
We have tried to make this prospectus as understandable for you as possible.
However, in explaining how the Contract works, we use certain terms that have
special meanings. These terms are defined below:
Account. A sub-account of the Variable Account or the Fixed Account.
Accumulation Unit. Used to calculate the Contract Value before
annuitization.
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. Used to calculate the dollar amount of annuity payments.
Beneficiary. The person designated to receive any benefits under a Contract
if a Contract Owner (or Annuitant, if the Contract is not owned by an
individual) dies before the Maturity Date.
Contract Year. A twelve month period beginning with the date shown on your
Contract and with each Contract anniversary thereafter.
Death Proceeds (prior to annuitization). The amount we pay prior to
annuitization, on receipt of due proof of death of a Contract Owner (or of the
annuitant if the Contract is not owned by an individual) and election of
payment.
Designated Office. Our Designated Office for receipt of purchase payments,
loan repayments, requests and elections, and communications regarding death of
the Contract Owner (or Annuitant) is New England Life Insurance Company,
located at 501 Boylston Street, Boston, Massachusetts 02116, (800) 435-4117.
Fixed Account. A part of the Company's general account to which you can
allocate net purchase payments under most Contracts. The Fixed Account
provides guarantees of principal and interest.
Maturity Date. The date on which annuity payments begin, as stated in the
application or as later deferred.
Net Purchase Payment. A purchase payment, in which the premium tax and any
premium for the disability benefit rider, if applicable has been deducted
before allocation to the accounts.
Payee. Any person or entity entitled to receive payment under the Contract.
The term includes (i) an Annuitant, (ii) a Beneficiary or contingent
Beneficiary who becomes entitled to death proceeds, and (iii) on surrender or
partial surrender of the Contract, the Contract Owner.
Variable Account. A separate investment account of the Company. The Variable
Account is divided into sub-accounts; each invests in shares of one Eligible
Fund.
Variable Annuity. An annuity providing for income payments varying in amount
to reflect the investment experience of a separate investment account.
A-4
<PAGE>
HIGHLIGHTS
Tax Deferred Variable Annuities:
Earnings under variable annuities are usually not taxed until paid out. This
treatment is intended to encourage you to save for retirement.
The Contracts:
The Zenith Accumulator provides for variable annuity payments that begin at
the Maturity Date, or earlier if you choose to surrender and annuitize.
Variable annuity payments fluctuate with the investment results of the
Eligible Fund(s). (See "Annuity Payments.")
Purchase Payments:
Currently, the minimum subsequent purchase payment is $25; however,
exceptions may apply. We may limit the purchase payments you can make.
Ownership:
A Purchaser may be an individual, employer, trust, custodian or any entity
specified in an eligible employee benefit plan. If the Contract is issued
under Section 408(b) or, generally, under Section 403(b), the Contract Owner
must be the Annuitant. Subject to state approval, certain retirement plans
qualified under the Internal Revenue Code ("the Code") may purchase the
Contract.
For contract transactions, we rely on instructions from Contract Owners,
whether a trustee or custodian of an eligible retirement plan or an individual
owner.
Investment Options:
You may allocate net purchase payments to the sub-accounts or to the Fixed
Account (if available under your Contract). You can allocate your contract
value to a maximum of ten Accounts (including the Fixed Account) at any time.
You can change your net purchase payment allocation. We believe that under
current tax law you can transfer Contract Value between Accounts without
federal income tax.
Currently we allow 12 transfers free of charge per Contract Year prior to
annuitization. Additional transfers are $10 each. After variable annuity
payments begin, you may make one transfer per year without our consent. The
minimum transfer amount is currently $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:
We apply the following charges to your Contract:
. premium tax charge, in some states
. mortality and expense risk charge equal to an annual rate of .95% of the
Variable Account's daily net assets
. administration asset charge equal to an annual rate of .40% of the
Variable Account's daily net assets
A-5
<PAGE>
. annual contract administration charge of $30.
. a contingent deferred sales charge equal to a maximum of 6.5% of Contract
Value, on certain full and partial surrenders and certain annuitization
transactions.
Certain waivers or reductions may apply. (See "Administration Charges,
Contingent Deferred Sales Charge and Other Deductions.")
We do not deduct a sales charge from purchase payments.
Ten Day Right to Review:
After you receive the Contract, you have ten days (more in some states) to
return it to us or our agent for cancellation. We will return all purchase
payments made (or, in certain states, Contract Value plus any premium taxes
deducted from purchase payments.)
Payment on Death:
If a Contract Owner (or the Annuitant, if the Contract is not owned by an
individual) dies before annuitization, the Beneficiary receives a death
benefit. Death Proceeds equal the greater of purchase payments adjusted for
any partial surrenders and the current Contract Value. Each is reduced by any
outstanding loan plus accrued interest. (See "Payment on Death Prior to
Annuitization.")
Surrenders:
Before annuitization you can send us a written request to surrender all or
part of your Contract Value. After a partial surrender, the remaining Contract
Value must be at least $500. (Special rules apply if the Contract has a loan.)
Federal tax laws penalize and may prohibit certain premature distributions
from the Contract. (See "Federal Income Tax Status.")
A Contingent Deferred Sales Charge will apply to certain full and partial
surrenders and certain annuitization transactions. On full surrender, a pro
rata portion of the annual administration contract charge will also be
deducted.
In any Contract Year, you may surrender an amount without our deducting
Contingent Deferred Sales Charge (the "free withdrawal amount"). The free
withdrawal amount is 10% of Contract Value on the date of the Surrender. (See
"Surrenders" and "Contingent Deferred Sales Charge.")
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A-6
<PAGE>
EXPENSE TABLE
The purpose of the table and the examples below is to explain the various
costs and expenses you will bear, directly or indirectly, as a Contract Owner.
These are deducted from purchase payments, the Variable Account, or the
Eligible Funds. In the examples following the table, we assume that you
allocated your entire purchase payment to one sub-account, with no transfers.
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
Transfer 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 and Expense Risk Charge...................... .95%
Administration Asset Charge............................ .40%
----
Total Separate Account Annual Expenses............. 1.35%
</TABLE>
NEW ENGLAND ZENITH FUND
Operating Expenses for the Year Ended December 31, 1998
(as a percentage of average net assets after current expense cap or expense
deferral)(6)
<TABLE>
<CAPTION>
Loomis Goldman
Sayles Morgan Stanley Sachs Davis Westpeak Westpeak
Small International Alger Equity Capital Midcap Venture Growth Stock
Cap Magnum Equity Growth Growth Value Value and Income Index
Series Series Series Series Series* Series Series Series(7)
------ -------------- ------------ ------- ------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fee.......... 1.00% .90% .75% .63% .75% .75% .70% .25%
Other Expenses.......... 0% .40% .08% .03% .15% .08% .08% .12%
---- ---- --- --- --- --- --- ---
Total Series Operating
Expenses............. 1.00% 1.30% .83% .66% .90% .83% .78% .37%
</TABLE>
<TABLE>
<CAPTION>
Salomon
Brothers Back Bay Salomon Back Bay
Loomis Back Bay Strategic Advisors Brothers Advisors
Sayles Advisors Bond Bond U.S. Money
Balanced Managed Opportunities Income Government Market
Series Series(7) Series Series Series Series
-------- --------- ------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Management Fee.......... .70% .50% .65% .40% .55% .35%
Other Expenses.......... 12% .08% .20% .08% .22% .10%
--- --- --- --- --- ---
Total Series Operating
Expenses............. .82% .58% .85% .48% .77% .45%
</TABLE>
- --------
* Goldman Sachs Midcap Value Series bases its annual operating expenses on the
management fee approved by shareholders of the Series that became effective
on May 1, 1998, and other expenses actually incurred for the Series for
1998.
A-7
<PAGE>
Example (Note: The examples below are hypothetical. Although we base them 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.(8)) For purchase payments
allocated to each of the Series indicated
You would pay the following direct and
indirect expenses on a $1,000 purchase
payment assuming 1) 5% annual return on the
underlying Series and 2) that a contingent
deferred sales charge would apply at the end
of each time period because you either
surrender your Contract or elect to
annuitize under a non-life contingency
option:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Loomis Sayles Small Cap................... $ $ $ $
Morgan Stanley International Magnum Equi-
ty.......................................
Alger Equity Growth.......................
Capital Growth............................
Goldman Sachs Midcap Value................
Davis Venture Value.......................
Westpeak Growth and Income................
Westpeak Stock Index......................
Loomis Sayles Balanced....................
Back Bay Advisors Managed.................
Salomon Brothers Strategic Bond Opportuni-
ties.....................................
Back Bay Advisors Bond Income.............
Salomon Brothers U.S. Government..........
Back Bay Advisors Money Market............
You would pay the following direct and
indirect expenses on a $1,000 purchase
payment assuming 1) 5% annual return on the
underlying Series and 2) that no contingent
deferred sales charge would apply at the end
of each time period because you either do
not surrender your Contract or you elect to
annuitize under a variable life contingency
option(9):
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Loomis Sayles Small Cap................... $ $ $ $
Morgan Stanley International Magnum Equi-
ty.......................................
Alger Equity Growth.......................
Capital Growth............................
Goldman Sachs Midcap Value................
Davis Venture Value.......................
Westpeak Growth and Income................
Westpeak Stock Index......................
Loomis Sayles Balanced....................
Back Bay Advisors Managed.................
Salomon Brothers Strategic Bond Opportuni-
ties.....................................
Back Bay Advisors Bond Income.............
Salomon Brothers U.S. Government..........
Back Bay Advisors Money Market............
</TABLE>
A-8
<PAGE>
VARIABLE INSURANCE PRODUCTS FUND
Operating Expenses for the Year Ended December 31, 1998
(as a percentage of average net assets prior to expense reductions)(10)
<TABLE>
<CAPTION>
Equity-
Overseas Income
Portfolio Portfolio
--------- ---------
<S> <C> <C>
Management Fee.............................................. .74% .49%
Other Expenses.............................................. .17% .09%
--- ---
Total Portfolio Operating Expenses........................ .91% .58%
</TABLE>
Example (Note: The examples below are hypothetical. Although we base them 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.(11)) For purchase payments
allocated to each of the Portfolios indicated
You would pay the following direct and indi-
rect expenses on a $1,000 purchase payment
assuming 1) 5% annual return on the under-
lying Portfolio and 2) that a contingent de-
ferred sales charge would apply at the end
of each time period because you either sur-
render your Contract or elect to annuitize
under a non-life contingency option:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Overseas Portfolio......................... $ $ $ $
Equity-Income Portfolio....................
You would pay the following direct and
indirect expenses on a $1,000 purchase
payment assuming 1) 5% annual return on the
underlying Portfolio and 2) that no
contingent deferred sales charge would apply
at the end of each time period because you
either do not surrender your Contract or you
elect to annuitize under a variable life
contingency option(12):
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Overseas Portfolio......................... $ $ $ $
Equity-Income Portfolio....................
</TABLE>
A-9
<PAGE>
- --------
NOTES:
(1) Premium tax charges are not shown. They range from 0% (in most states)
to 3.5% of Contract Value (or if applicable purchase payments).
(2) The Maximum Contingent Deferred Sales Charge is expressed here as a
percentage of purchase payments. However we calculate the applicable
Contingent Deferred Sales Charge as a percentage of Contract Value. The
maximum possible charge, as a percentage of Contract Value, occurs in
the first Contract Year and reduces after each Contract Year to 0% by
the eleventh Contract Year.
(3) We currently charge $10 for each transfer in excess of twelve per
Contract Year, and we reserve the right to impose a charge of $10 on
each transfer in excess of four per year.
(4) We do not impose this charge after annuitization.
(5) We do not impose these charges on the Fixed Account or after
annuitization if annuity payments are made on a fixed basis.
(6) For each of these Series other than the Capital Growth Series, Total
Series Operating Expenses are based on the amount of such expenses
applied against assets at December 31, 1998, after giving effect to the
applicable voluntary expense cap or expense deferral. For the Loomis
Sayles Small Cap Series, Total Series Operating Expenses take into
account a voluntary cap on expenses by TNE Advisers, Inc. ("TNE
Advisers"), the Series' investment adviser, 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 Series
Operating Expenses for the Loomis Sayles Small Cap Series for the year
ended December 31, 1998 would have been 1.10%. Total Series Operating
Expenses for the Goldman Sachs Midcap Value, (formerly Loomis Sayles
Avanti Growth), Westpeak Growth and Income, Westpeak Stock Index, Back
Bay Advisors Managed, Back Bay Advisors Bond Income and Back Bay
Advisors Money Market Series are after giving effect to a voluntary
expense cap. For each of these Series, TNE Advisers bears 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 Series Operating Expenses for the Goldman Sachs Midcap Value
Series (formerly Loomis Sayles Avanti Growth) for the year ending
December 31, 1998 would have been .88%. For the six other Series shown,
the Total Series Operating Expenses are after giving effect to a
voluntary expense deferral. Effective May 1, 1998 the Goldman Sachs
Midcap Value is subject to the voluntary expense deferral described
below for the six other Series shown, with an annual expense limit of
.90% of net assets. Under the deferral, expenses which exceed a certain
limit are paid by TNE Advisers 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 limit on expenses for each of these
Series is: 1.30% of average daily net assets for the Morgan Stanley
International Magnum Equity Series; .90% of average daily net assets for
the Alger Equity Growth and Davis Venture Value Series; .85% of average
daily net assets for the Loomis Sayles Balanced and Salomon Brothers
Strategic Bond Opportunities Series; and .70% of average daily net
assets for the Salomon Brothers U.S. Government Series. Absent the
expense deferral, Total Series Operating Expenses for these Series for
the year ended December 31, 1998 would have been: 1.40% for the Morgan
Stanley International Magnum Equity Series; and .77% for Salomon
Brothers U.S. Government Series. The expense cap and deferral
arrangements are voluntary and may be terminated at any time. (See the
attached prospectus of the New England Zenith Fund for more complete
information.)
(7) The Westpeak Stock Index Series and the Back Bay Advisors Managed Series
are not Eligible Funds for Contracts purchased after May 1, 1995.
(8) In these examples, the average Administration Contract Charge of % has
been used. (See (4), above.)
(9) 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.")
(10) Total Portfolio Operating Expenses 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, 1998.
They do not reflect certain expense reductions due to directed brokerage
arrangements and custodian interest credits. Had these reductions been
included, Total Portfolio Operating Expenses would have been
A-10
<PAGE>
.89% for the Overseas Portfolio and .57% for the Equity-Income Portfolio.
(See the attached prospectus of the Variable Insurance Products Fund for
more complete information.) Affiliates of Fidelity Management and Research
Company may compensate NELICO and/or certain affiliates for
administrative, distribution or other services relating to the Overseas
and Equity-Income Portfolios. Such compensation is based on assets of the
Portfolios attributable to the Contracts, which are administered by
NELICO, and to variable life insurance products issued by NELICO and its
affiliates.
(11) In these examples, the average Administration Contract Charge of % has
been used. (See (4), above.)
(12) 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.")
- -------------------------------------------------------------------------------
A-11
<PAGE>
ACCUMULATION UNIT VALUES
(For an Accumulation Unit Outstanding Throughout the Period)
THE NEW ENGLAND VARIABLE ACCOUNT
Condensed Financial Information
<TABLE>
<CAPTION>
Morgan
Stanley
Loomis International
Sayles Magnum
Small Cap Equity
Sub- Sub-
account account
--------- -------------
5/2/94* 1/1/95 1/1/96 1/1/97 1/1/98 10/31/94* 1/1/95 1/1/96 1/1/97 1/1/98
to to to to to to to to to to
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
--------- ---------- ---------- ---------- -------- ------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.000 0.959 1.219 1.572 1.000 1.024 1.073 1.129
2. Accumulation
Unit Value at
end of
period....... 0.959 1.219 1.572 1.936 1.024 1.073 1.129 1.100
3. Number of
Accumulation
Units
outstanding
at end of
period....... 2,988,971 13,533,326 26,307,748 39,442,109 2,916,120 11,062,106 16,322,862 17,243,803
<CAPTION>
Overseas
Sub-
account
----------
10/1/93* 1/1/94 1/1/95 1/1/96 1/1/97 1/1/98
to to to to to to
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.458 1.532 1.538 1.664 1.859
2. Accumulation
Unit Value at
end of
period....... 1.532 1.538 1.664 1.859 2.046
3. Number of
Accumulation
Units
outstanding
at end of
period....... 10,878,551 43,034,544 41,273,183 44,846,316 45,289,247
</TABLE>
<TABLE>
<CAPTION>
Alger
Equity Capital
Growth Growth
Sub- Sub-
account account
--------- --------
10/31/94* 1/1/95 1/1/96 1/1/97 1/1/98 9/16/88* 1/1/89 1/1/90 1/1/91 1/1/92
to to to to to to to to to to
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92
--------- ---------- ---------- ---------- -------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.000 0.956 1.402 1.566 4.645 4.612 5.950 5.666 8.608
2. Accumulation
Unit Value at
end of
period....... 0.956 1.402 1.566 1.941 4.612 5.950 5.666 8.608 7.978
3. Number of
Accumulation
Units
outstanding
at end of
period....... 1,857,319 24,163,685 40,025,594 44,518,891 439,393 5,337,778 12,591,788 21,719,884 33,645,983
<CAPTION>
1/1/93 1/1/94 1/1/95 1/1/96 1/1/97 1/1/98
to to to to to to
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 7.978 9.050 8.298 11.300 13.496
2. Accumulation
Unit Value at
end of
period....... 9.050 8.298 11.300 13.496 16.442
3. Number of
Accumulation
Units
outstanding
at end of
period....... 40,091,665 43,592,961 41,663,900 41,363,155 40,200,592
</TABLE>
<TABLE>
<CAPTION>
Goldman
Sachs Davis
Midcap Venture
Value Value
Sub- Sub-
account account
--------- ---------
10/1/93* 1/1/94 1/1/95 1/1/96 1/1/97 1/1/98 10/31/94* 1/1/95 1/1/96 1/1/97
to to to to to to to to to to
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/94 12/31/95 12/31/96 12/31/97
--------- ---------- ---------- ---------- ---------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.125 1.137 1.119 1.439 1.669 1.000 0.963 1.323 1.643
2. Accumulation
Unit Value at
end of
period....... 1.137 1.119 1.439 1.669 1.932 0.963 1.323 1.643 2.163
3. Number of
Accumulation
Units
outstanding
at end of
period....... 4,515,611 15,572,344 19,773,057 24,345,379 24,035,279 3,499,719 19,608,688 34,997,024 53,977,107
<CAPTION>
Westpeak
Growth
and Income
Sub-
account
----------
1/1/98 10/1/93* 1/1/94 1/1/95 1/1/96 1/1/97 1/1/98
to to to to to to to
12/31/98 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.105 1.132 1.103 1.486 1.731
2. Accumulation
Unit Value at
end of
period....... 1.132 1.103 1.486 1.731 2.279
3. Number of
Accumulation
Units
outstanding
at end of
period....... 3,359,317 16,092,325 21,168,965 26,104,465 30,306,103
</TABLE>
- -----
* Date these sub-accounts were first available.
A-12
<PAGE>
<TABLE>
<CAPTION>
Loomis
Equity- Sayles
Income Balanced
Sub- Sub-
account account
--------- ---------
10/1/93* 1/1/94 1/1/95 1/1/96 1/1/97 1/1/98 10/31/94 1/1/95 1/1/96* 1/1/97
to to to to to to to to to to
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/94 12/31/95 12/31/96 12/31/97
--------- ---------- ---------- ---------- ---------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.980 1.992 2.104 2.804 3.162 1.000 0.997 1.227 1.415
2. Accumulation
Unit Value at
end of
period....... 1.992 2.104 2.804 3.162 3.996 0.997 1.227 1.415 1.622
3. Number of
Accumulation
Units
outstanding
at end of
period....... 5,649,743 25,852,849 38,010,655 44,037,798 45,104,192 1,736,189 10,987,597 20,107,324 28,677,041
<CAPTION>
1/1/98
to
12/31/98
--------
<S> <C>
1. Accumulation
Unit Value at
beginning of
period.......
2. Accumulation
Unit Value at
end of
period.......
3. Number of
Accumulation
Units
outstanding
at end of
period.......
</TABLE>
<TABLE>
<CAPTION>
Salomon
Brothers Back Bay
Strategic Advisors
Bond Bond
Opportunities Income
Sub- Sub-
account account
------------- --------
10/31/94* 1/1/95* 1/1/96 1/1/97 1/1/98 10/5/88* 1/1/89 1/1/90 1/1/91 1/1/92
to to to to to to to to to to
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92
------------- --------- ---------- ---------- -------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.000 0.984 1.159 1.307 1.631 1.634 1.810 1.930 2.247
2. Accumulation
Unit Value at
end of
period....... 0.984 1.159 1.307 1.433 1.634 1.810 1.930 2.247 2.398
3. Number of
Accumulation
Units
outstanding
at end of
period....... 1,124,133 6,132,563 15,034,554 23,074,669 299,002 4,287,540 10,139,527 17,797,335 28,871,719
<CAPTION>
1/1/93 1/1/94 1/1/95 1/1/96 1/1/97 1/1/98
to to to to to to
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 2.398 2.664 2.540 3.037 3.134
2. Accumulation
Unit Value at
end of
period....... 2.664 2.540 3.037 3.134 3.429
3. Number of
Accumulation
Units
outstanding
at end of
period....... 41,939,487 41,657,182 42,231,987 41,138,874 37,260,367
</TABLE>
<TABLE>
<CAPTION>
Salomon Back Bay
Brothers Advisors
U.S. Money
Government Market
Sub- Sub-
account account
---------- --------
10/31/94* 1/1/95 1/1/96 1/1/97 1/1/98 9/29/88* 1/1/89 1/1/90 1/1/91 1/1/92 1/1/93
to to to to to to to to to to to
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
---------- --------- --------- --------- -------- -------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.000 1.004 1.139 1.161 1.384 1.408 1.518 1.620 1.697 1.738
2. Accumulation
Unit Value at
end of
period....... 1.004 1.139 1.161 1.242 1.408 1.518 1.620 1.697 1.738 1.766
3. Number of
Accumulation
Units
outstanding
at end of
period....... 910,020 4,495,184 5,785,148 8,616,135 915,605 7,661,069 21,629,006 26,322,938 26,759,532 25,016,975
<CAPTION>
1/1/94 1/1/95 1/1/96 1/197 1/1/98
to to to to to
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.766 1.811 1.889 1.959
2. Accumulation
Unit Value at
end of
period....... 1.811 1.889 1.959 2.036
3. Number of
Accumulation
Units
outstanding
at end of
period....... 30,220,356 33,015,018 33,412,517 26,785,902
</TABLE>
- ------
* Date these sub-accounts were first available.
A-13
<PAGE>
<TABLE>
<CAPTION>
Back Bay
Advisors
Managed
Sub-
Account**
---------
9/21/88* 1/1/89 1/1/90 1/1/91 1/1/92 1/1/93 1/1/94 1/1/95 1/1/96 1/1/97
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 12/31/95 12/31/96 12/31/97
--------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.042 1.063 1.250 1.272 1.508 1.588 1.733 1.691 2.190 2.485
2. Accumulation
Unit Value at
end of
period....... 1.063 1.250 1.272 1.508 1.588 1.733 1.691 2.190 2.485 3.103
3. Number of
Accumulation
Units
outstanding
at end of
period....... 731,349 9,179,207 18,099,540 26,478,398 41,588,546 60,696,659 61,961,278 56,145,463 52,130,165 48,490,618
<CAPTION>
Westpeak
Stock
Index
Sub-
Account**
---------
1/1/98 1/1/92* 1/1/93 1/1/94 1/1/95 1/1/96 1/197 1/1/98
to to to to to to to to
12/31/98 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- --------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Accumulation
Unit Value at
beginning of
period....... 1.592 1.644 1.780 1.775 2.398 2.898
2. Accumulation
Unit Value at
end of
period....... 1.540 1.780 1.775 2.398 2,898 3.788
3. Number of
Accumulation
Units
outstanding
at end of
period....... 2,583,607 11,017,884 14,282,355 15,539,608 15,623,253 15,874,978
</TABLE>
- ----
* Date these sub-accounts were first available.
**These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
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-14
<PAGE>
How the Contract Works
Purchase Payment Contract Value Daily Deduction from
Variable Account
. You can make a . We allocate . We deduct a
one-time payments to your Mortality and
investment or choice, within Expense risk
establish an limits, of charge of 0.95% on
ongoing investment Eligible Funds an annual basis
program. and/or the Fixed from the Contract
Account. Value daily.
Charges from Payment
. The Contract Value . We deduct an
. Premium tax charge reflects purchase Administration
may apply. payments, Asset Charge of
. Premium for investment 0.40% on an annual
disability benefit experience, basis from the
rider, if elected. interest payments, Contract Value
partial daily.
Additional Payments surrenders, loans
and Contract . Investment
. Any time, (subject charges. advisory fees are
to Company deducted from the
limits). . The Contract Value Eligible Fund
invested in the assets daily.
. Minimum $25. Eligible Funds is
not guaranteed. Annual Contract Fee
Loans
. Are available to . Earnings are . We deduct a $30
participants of accumulated free Administration
certain tax of any current Contract Charge
qualified pension income taxes (see from the Contract
plans (see page A- page A-37). Value on each
25). anniversary while
. You may change the Contract is in-
Surrenders allocation of force, other than
future payments, under an annuity
. You can surrender within limits, at payment option. We
up to 10% of any time. deduct a pro rata
Contract Value portion on full
each year without . Prior to surrender and at
incurring annuitization, you annuitization.
surrender charges, may transfer
subject to any Contract Value
applicable tax law among accounts, Surrender Charge
restrictions. within limits, up
to twelve times
per Contract Year . Consists of
. Surrenders are without charge Contingent
taxable. (special limits Deferred Sales
apply to transfers Charge (see page
of Contract Value A-30).
. Prior to age 59 to and from the
1/2 a 10% penalty Fixed Account). Premium Tax Charge
tax may apply. . Where applicable,
. Allocations of is deducted from
Death Proceeds payments and purchase payments
transfers of (currently in
. Guaranteed not to Contract Value South Dakota) or
be less than your must comply with from Contract
total contribution the rule that Value when annuity
to your Contract Contract Value may payments commence.
net of any prior be allocated among
surrenders and no more than ten Additional Benefits
outstanding loans. accounts,
including the
. Death proceeds Fixed Account, at . You pay no taxes
pass to the any time. on your investment
beneficiary as long as it
without probate. Retirement Benefits remains in the
. Lifetime income Contract.
options.
. Fixed and/or
variable payout . You can surrender
options. your Contract at
any time for its
. Premium tax charge Contract Value,
may apply. less any
applicable
Contingent
Deferred Sales
Charge (subject to
any applicable tax
law restrictions).
. If the Contract
contains the
disability benefit
rider and the
Annuitant becomes
totally disabled,
we provide monthly
benefits.
A-15
<PAGE>
THE COMPANY
The Company is a mutual life insurance company whose principal office is at
One Madison Avenue, New York, N.Y. 10010. The Company was organized in 1866
under the laws of the State of New York and has engaged in the life insurance
business under its present name since 1868. It operates as a life insurance
company in all 50 states, the District of Columbia, Puerto Rico and all
provinces of Canada. The Company has over $330 billion in assets under
management.
New England Life Insurance Company ("NELICO"), a subsidiary of the Company,
provides administrative services for the Contracts and the Variable Account
pursuant to an administrative services agreement with the Company. These
administrative services include maintenance of Contract Owner records and
accounting, valuation, regulatory and reporting services. NELICO, located at
501 Boylston Street, Boston, Massachusetts 02116, is the Company's Designated
Office for receipt of Purchase Payments, loan repayments, requests and
elections, and communications regarding death of the Annuitant, as further
described below.
THE VARIABLE ACCOUNT
The Variable Account was established as a separate investment account 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 state insurance 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(s) 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.") Your Contract Value
may be distributed among no more than 10 accounts (including the Fixed
Account) at any time. The Company reserves the right to add or remove Eligible
Funds from time to time as investments for the Variable Account. See
"Substitution of Investments."
The investment objectives and policies of certain Eligible Funds are similar
to the investment objectives and policies of other funds that may be managed
by the same subadviser. The investment results of the Eligible Funds, however,
may be higher or lower than the results of such other funds. There can be no
assurance, and no representation is made, that the investment results of any
of the Eligible Funds will be comparable to the investment results of any
other fund, even if the other fund has the same subadviser.
A-16
<PAGE>
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.
Loomis Sayles Small Cap Series
The Loomis Sayles Small Cap Series seeks long-term capital growth from
investments in common stocks or their equivalent.
Morgan Stanley International Magnum Equity Series (formerly Draycott
International Equity Series)
The Morgan Stanley International Magnum Equity Series seeks long-term
capital appreciation through investment primarily in international equity
securities.
Alger Equity Growth Series
The Alger Equity Growth Series seeks long-term capital appreciation.
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.
Goldman Sachs Midcap Value Series (formerly Loomis Sayles Avanti Growth
Series)
The Goldman Sachs Midcap Value Series seeks long-term capital appreciation.
Davis Venture Value Series (formerly Venture Value Series)
The Davis Venture Value Series seeks growth of capital.
Westpeak Growth and Income Series (formerly Westpeak Value Growth Series)
The Westpeak Growth and Income Series seeks long-term total return through
investment in equity securities.
Westpeak Stock Index Series
The Westpeak Stock Index Series seeks to provide investment results that
correspond to the composite price and yield performance of United States
publicly traded common stocks.
Loomis Sayles Balanced Series
The Loomis Sayles Balanced Series seeks reasonable long-term investment
return from a combination of long-term capital appreciation and moderate
current income.
Back Bay Advisors Managed Series
The investment objective of the Back Bay Advisors Managed Series is
favorable total return through investment in a diversified portfolio.
A-17
<PAGE>
Salomon Brothers Strategic Bond Opportunities Series
The Salomon Brothers Strategic Bond Opportunities Series seeks a high level
of total return consistent with preservation of capital.
Back Bay Advisors Bond Income Series
The Back Bay Advisors Bond Income Series seeks to provide a high level of
current income consistent with protection of capital.
Salomon Brothers U.S. Government Series
The Salomon Brothers U.S. Government Series seeks to provide a high level of
current income consistent with preservation of capital and maintenance of
liquidity.
Back Bay Advisors Money Market Series
The Back Bay Advisors Money Market Series seeks the highest possible level
of current income consistent with preservation of capital. The Series invests
in a variety of high quality money market instruments. Money market funds are
neither insured nor guaranteed by the U.S. Government and there can be no
assurance that the Series will maintain a stable net asset value of $100 per
share.
VARIABLE INSURANCE PRODUCTS FUND: Currently, there are two Portfolios of the
Variable Insurance Products Fund that are Eligible Funds under the Contracts
offered by this prospectus.
Overseas Portfolio
The Overseas Portfolio seeks long-term growth of capital. Foreign markets,
particularly emerging markets, can be more volatile than the U.S. market due
to increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently than the U.S. market.
Equity-Income Portfolio
The Equity-Income Portfolio seeks reasonable income. The fund will also
consider the potential for capital appreciation. The fund seeks a yield which
exceeds the composite yield on the securities comprising the S&P 500.
Investment Advice
The Capital Growth Series receives investment advice from Capital Growth
Management Limited Partnership ("CGM"), an affiliate of the Company. TNE
Advisers, Inc., an indirect 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 Bond Income Series, Back
Bay Advisors Money Market Series and Back Bay Advisors Managed Series receive
investment subadvisory services from Back Bay Advisors, L.P., an affiliate of
the Company. The Westpeak Growth and Income Series and the Westpeak Stock
Index Series receive investment subadvisory services from Westpeak Investment
Advisors, L.P., an affiliate of the Company. The Loomis Sayles Small Cap
Series and Loomis Sayles Balanced Series receive investment subadvisory
services from Loomis Sayles & Company, L.P., an affiliate of the Company. The
Goldman Sachs Midcap Value Series receives investment subadvisory services
from Goldman Sachs Asset Management. The Morgan Stanley International Magnum
Equity Series receives investment subadvisory services from Morgan Stanley
Dean Witter Investment Management Inc. The Alger Equity Growth Series receives
investment subadvisory services from Fred Alger Management, Inc. The Davis
Venture Value Series receives investment subadvisory services from Davis
Selected Advisers, L.P. Davis Selected Advisers may also delegate any of its
responsibilities to Davis Selected-NY, a wholly-owned subsidiary. The Salomon
Brothers Strategic Bond Opportunities Series and Salomon Brothers U.S.
Government Series receive
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investment subadvisory services from Salomon Brothers Asset Management Inc.
The Salomon Brothers Strategic Bond Opportunities Series also receives certain
investment subadvisory services from Salomon Brothers Asset Management
Limited, a London based affiliate of 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,
02116 or telephoning 1-800-356-5015.
The Overseas Portfolio and the Equity-Income Portfolio receive investment
advice from Fidelity Management & Research Company. More complete information
on the Equity-Income and Overseas Portfolios of the Variable Insurance
Products Fund is contained in the attached 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, 02109 or telephoning 1-800-356-5015.
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
states that have approved the Fixed Account option. 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(s) you select and that, after annuitization, the Company
will make variable annuity payments on a monthly basis, unless you elect
otherwise. 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
Under current rules, the minimum initial purchase payment for flexible
payment Contracts issued in connection with tax-benefited retirement plans
other than individual retirement accounts under Section 408(a) of the Code or
individual retirement annuities under Section 408(b) of the Code (both
referred to as "IRAs") or Roth IRAs under Section 408A of the Code ("Roth
IRAs") is $50. For flexible payment Contracts issued in connection with IRAs
and Roth IRAs (Roth IRAs will only be available if you have an existing IRA
Contract), the Company currently requires a minimum initial purchase payment
of $2,000, although the Company requires a minimum initial payment of $100 if
monthly payments are to be withdrawn from your bank checking account or New
England Cash Management Trust account, a service known as the Master Service
Account arrangement ("MSA"). For all other flexible payment Contracts, the
minimum initial purchase payment is $5,000, although the Company requires a
minimum initial payment of $100 if monthly payments are to be made through
MSA. The Company may consent to lower initial purchase payments in certain
situations. Additional purchase payments must be at least $25, although the
Company currently requires minimum additional purchase payments to be at least
$50 if they are
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made through a group billing arrangement (also known as a "list-bill"
arrangement) and $100 per month if they are made through MSA. 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 $2,000
for Contracts issued in connection with IRAs and $5,000 for all other
Contracts, and the maximum purchase payment for a single payment contract is
$1,000,000. Payments in addition to the required minimum purchase payment may
also be made on a single payment Contract, subject to the minimums set forth
above. 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 (including the
initial purchase payment) is received at the Company's Designated 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, 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 Unit Value for the selected sub-accounts next determined
following receipt of the purchase payment at the Company's Designated 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 variable annuity contract issued by New
England Variable Annuity Fund I (a "Fund I contract") or New England
Retirement Investment Account (a "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 and reflects fees and expenses borne by the Eligible Fund as well as
charges assessed against sub-account assets. 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.
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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 payment option selected. Prior to
annuitization, the Contract's Death Proceeds are payable to the Beneficiary if
the Company receives due proof of death of: (1) the Contract Owner; or (2) the
Annuitant, in the case of a Contract that is not owned in an individual
capacity.
The Contract's Death Proceeds at any time are the greater of: (1) the sum of
all purchase payments adjusted for any partial surrenders; or (2) the current
Contract Value. For this purpose, the current Contract Value is the value next
determined after the later of the date when the Company receives at the
Designated Office: (1) due proof of death; or (2) an election of continuation
of the Contract (if available) or of payment either in one sum or under an
annuity payment option.
Death Proceeds will be reduced by the amount of any outstanding loan plus
accrued interest. (See "Loan Provision for Certain Tax Benefited Retirement
Plans.")
Options for Death Proceeds. The Death Proceeds, reduced by the amount of any
outstanding loan plus accrued interest, will be paid in a lump sum or will be
applied to provide one or more of the fixed or variable methods of payment
available. (See "Annuity Options.") The Contract Owner may elect the form of
payment during his or her lifetime (or during the Annuitant's lifetime, if the
Contract is not owned in an individual capacity). Such an election,
particularly in the case of Contracts issued in connection with retirement
plans qualifying for tax benefited treatment, is 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.
The Company also intends to make Beneficiary Continuation and Spousal
Continuation provisions available under the Contracts, subject to any
necessary state approvals. Under these provisions, an eligible Beneficiary
would also have the option of continuing the Contract, as further described
below. If either Beneficiary or Spousal Continuation applies to a Contract,
and an eligible Beneficiary does not make an election of continuation of the
Contract or of payment either in one sum or under an annuity payment option
within 90 days after the Company receives due proof of death, the Contract
will be continued under the applicable continuation provision.
For non-tax qualified plans, the Code requires that if any Contract Owner
(or, if applicable, the Annuitant) dies prior to annuitization, the Death
Proceeds must be either: (1) distributed within five years after the date of
death; or (2) applied to a payment option payable over the life (or over a
period not exceeding the life expectancy) of the Beneficiary, provided further
that payments under the payment option must begin within one year of the date
of death. Special options apply under a non-tax qualified plan for spouses.
See "Special Options for Spouses." There
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are comparable rules for distributions on the death of the Annuitant under tax
qualified plans; however, if the Beneficiary under a tax qualified Contract is
the Annuitant's spouse, the Code generally allows distributions to begin by
the year in which the Annuitant would have reached age 70 1/2 (which may be
more or less than five years after the Annuitant's death). See "Taxation of
the Contracts--Special Rules for Annuities Purchased for Annuitants Under
Retirement Plans Qualifying for Tax Benefited Treatment--Distributions from
the Contract."
If a Contract Owner (or, if applicable, the Annuitant) dies on or after
annuitization, the remaining interest in the Contract must be distributed at
least as quickly as under the method of distribution in effect on the date of
death.
--Beneficiary Continuation
In keeping with the Code's general requirement that Death Proceeds must be
distributed within five years after the death of a Contract Owner (or, if
applicable, the Annuitant), the Beneficiary Continuation provision permits a
Beneficiary to hold his or her share of the Death Proceeds (as determined
after the Death Proceeds have been reduced by the amount of any outstanding
loan plus accrued interest) in the Contract and to continue the Contract for a
period ending five years after the date of death, provided that the
Beneficiary's share of the Death Proceeds meets the Company's published
minimum (currently $5,000 for non-tax qualified Contracts and $2,000 for tax
qualified Contracts). The Contract cannot be continued for any Beneficiary
whose share of the Death Proceeds does not meet the minimum.
The Beneficiary has 90 days after the date the Company receives due proof of
death to make an election with respect to his or her share of the Death
Proceeds. The Beneficiary may elect either: (1) payment in a single sum; (2)
application to a permitted annuity payment option with payments to begin
within one year of the date of death; or (3) Beneficiary Continuation,
provided that the Beneficiary's share of the Death Proceeds meets the
Company's published minimum. If the Beneficiary does not make an election
within 90 days after the Company receives due proof of death, the Contract
will be continued under the Beneficiary Continuation provision for a period
ending five years after the date of death. If Beneficiary Continuation is not
available because the Beneficiary's share of the Death Proceeds does not meet
the Company's published minimum, however, the Death Proceeds will be paid in a
single sum unless the Beneficiary elects an annuity payment option within 90
days after the Company receives due proof of death.
If the Contract is continued under the Beneficiary Continuation provision,
the Death Proceeds (reduced by the amount of any outstanding loan plus accrued
interest) become the Contract Value on the date the continuation is effected,
and will be allocated among the accounts in the same proportion as they had
been prior to the continuation. In addition, the Beneficiary will have the
right to make transfers and fully or partially surrender his or her Contract
Value, and no contingent deferred sales charge will apply. The Beneficiary
cannot, however, make additional purchase payments, take loans or exercise the
dollar cost averaging feature. Five years from the date of death of the
Contract Owner (or, if applicable, the Annuitant), the Company will pay the
Beneficiary's Contract Value to the Beneficiary. If the Beneficiary dies
during that five year period, the Beneficiary's death benefit will be the
Beneficiary's Contract Value on the date when the Company receives due proof
of the Beneficiary's death.
--Special Options for Spouses
Under the Spousal Continuation provision, the Contract may be continued
after the death of a Contract Owner (or the Annuitant, in the case of a
Contract that is not owned in an individual capacity) if the Contract
identifies the deceased spouse as the Contract Owner (or, if applicable, the
Annuitant) and the surviving spouse as the primary Beneficiary. In that case,
the surviving spouse can elect one of the following three options within 90
days after the Company receives due proof of death of the Contract Owner (or,
if applicable, the Annuitant). The surviving spouse may elect: (1) to receive
the Death Proceeds (reduced by the amount of any outstanding loan plus accrued
interest) either in one sum or under a permitted payment option; (2) to
continue the Contract under the Beneficiary Continuation provision; or (3) to
continue the Contract under the Spousal Continuation provision with the
surviving spouse as the Contract Owner (or, if applicable, the Annuitant). If
the surviving spouse does not make an election
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within 90 days after the Company receives due proof of death, the Contract
will automatically be continued under the Spousal Continuation provision, with
the result that the surviving spouse will forego the right to receive the
Death Proceeds at that time.
Under the Spousal Continuation provision, all terms and conditions of the
Contract that applied prior to the death will continue to apply, regardless of
whether or not the Contract is qualified for tax benefited treatment under the
Code, except that:
a. The surviving spouse will not be permitted to make additional purchase
payments or take loans under Contracts issued in connection with a
retirement plan qualifying for tax benefited treatment under Section 401 or
403 of the Internal Revenue Code; and
b. The Maturity Date will be reset to a later date, if necessary, based
on the age of the surviving spouse. The Maturity Date cannot be reset to an
earlier date. In the event the Maturity Date is reset, the new Maturity
Date will be the date when the surviving spouse reaches the maximum
maturity age under applicable state law. In most states, the maximum
maturity age is 95, but the maximum maturity age is 85 in New York and
Pennsylvania.
The Spousal Continuation provision will not be available if, at the time of
the Contract Owner's death, the surviving spouse is older than the maximum
maturity age under applicable state law. In addition, the Spousal Continuation
provision will not be available if, at the original Maturity Date, the
surviving spouse would be older than the maximum maturity age under applicable
state law.
A surviving spouse who elects Beneficiary Continuation, as opposed to
Spousal Continuation, under a Contract that is qualified for tax-benefited
treatment under the Code must begin to receive distributions from the Contract
by the earlier of: (1) five years from the date of death; and (2) the year in
which the Contract Owner (or, if applicable, the Annuitant) would have reached
age 70 1/2.
If a Contract is subject to a loan at the time the Contract Owner (or, if
applicable, the Annuitant) dies, and the Contract is continued under the
Spousal Continuation provision, the amount of the outstanding loan plus
accrued interest will be treated as a taxable distribution from the Contract
to the deceased Contract Owner, and the Contract Value will be reduced
accordingly.
Transfer Privilege
It is the position of the Company that you may transfer your Contract Value
among accounts without incurring adverse federal income tax consequences. It
is not clear, however, whether the Internal Revenue Service will limit the
number of transfers between sub-accounts and/or the Fixed Account in an
attempt to limit the Contract Owner's incidents of ownership in the assets
used to support the Contract. See "Taxation of the Contracts--Special Rules
for Annuities Used By Individuals or with Plans and Trusts not Qualifying
Under the Code for Tax Benefited Treatment." 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. Currently, after variable annuity payments have
commenced, you may make one transfer per year without the consent of the
Company, and the Fixed Account is not available under variable payment
options. 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 Funds next determined after the request is received by the Company's
Designated Office. 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.
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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 not 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 for more information
about Dollar Cost Averaging.) Requests related to your use of the dollar cost
averaging program should be sent to the Designated Office.
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 Designated
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 an annuity payment option.
If you wish to apply the proceeds to a payment option, you must so indicate 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 deducted from this amount. Any applicable Contingent Deferred Sales
Charge also 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 an annuity 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 Contract
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 Designated Office or, if
surrender proceeds are to be applied to an annuity 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. The Company currently
waives the Contingent Deferred Sales Charge on distributions that are intended
to satisfy required minimum distributions, calculated as if
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this Contract were the participant's only retirement plan asset. This waiver
only applies if the required minimum distribution exceeds the free withdrawal
amount and no previous surrenders were made during the Contract Year. You are
advised to consult a qualified tax advisor as to the consequences of a
distribution. (See "Federal Income Tax Status--Taxation of the Contracts.")
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 amount
is received 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 Contracts are
only available on a limited basis to plans qualified under Section 401(k) of
the Code and are no longer being offered to TSA Plans subject to ERISA. See
"Retirement Plans Offering Federal Tax Benefits.")
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 and complies with 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 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
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
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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
minimum loan amount is currently $500. 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 maximum
amount for a qualified loan is limited such that the amount of the loan, when
added to the outstanding loan balance of all other loans, whenever made, from
all other plans of the same employer, does not exceed $50,000 reduced by the
excess of the highest outstanding balance of loans under such plans during the
one-year period, ending on the day before the date on which the loan is made;
over the outstanding balance of loans under such plans on the date the loan is
made; or if less the greater of: (1) $10,000; or (2) 50% of the current value
of your nonforfeitable, accrued benefits under the plan. 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. Under current practice, if a Contract loan
installment repayment is not made, the Company (unless restricted by law) may
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.) For
TSA Plans that are not subject to ERISA, the current actual distribution will
be limited to pre-1989 money unless you are age 59 1/2 or otherwise comply
with the legal requirements for permitted distributions under the TSA
Contract. If these limitations do not apply (i.e. you are under the age of 59
1/2 or no pre-1989 money is in your Contract) the Company will report the
amount of the unpaid installment repayment or default as a deemed distribution
for tax purposes, but will postpone an actual distribution from the Contract
until the earliest distribution date permitted under the law. 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 default to the IRS as a taxable distribution under the
Contract.
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The Internal Revenue Service issued proposed regulations in December of
1997, which, if finalized in their present form, would require that if the
repayment terms of a loan are not satisfied after the loan has been made due
to a failure to make a loan repayment as scheduled, including any applicable
grace period, the balance of the loan would be deemed to be distributed. If
the loan is treated as a distribution under Code Section 72(p), the proposed
regulations state that the amount so distributed is to be treated as a taxable
distribution subject to the normal rules of Code Section 72, if the
participant's interest in the plan includes after-tax contributions (or other
tax basis). A deemed distribution would also be a distribution for purposes of
the 10 percent tax in Code Section 72(t). However, a deemed distribution under
Section 72(p) would not be treated as an actual distribution for purposes of
Code Section 401, the rollover and income averaging provisions of Section 402
and the distribution restrictions of Section 403(b).
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.
Unless you request otherwise, Contract loans will reduce the amount of the
Contract Value in the accounts in proportion to the Contract Value then in
each 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 and loans made in
South Carolina, 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. In these circumstances, the amount of the outstanding
contract loan plus accrued interest generally will be taxed as a taxable
distribution.
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 advisor 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
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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 may, therefore, be 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 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 advisor.
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. A Contract Owner should review the provisions of any such
plan.
Requests and Elections
Requests for transfers or reallocation of future purchase payments may be
made by telephone or written request (which may be telecopied) to the Company
at its Designated Office. 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's Designated Office at 1-800-435-4117
between the hours of 9:00 a.m. and 4:00 p.m., Eastern Time. Requests for
transfer or reallocation by telephone will be automatically permitted. The
Company (or any servicer acting on its behalf) 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 (or any servicer acting on its behalf) 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 (or any servicer acting on its behalf) 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 Designated 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
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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 at its
Designated Office 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
The Company deducts various charges from Contract Value for the services
provided, expenses incurred and risks assumed in connection with the
Contracts. For example, the Company incurs costs and expenses in connection
with issuing Contracts, maintaining Contract Owner records and providing
accounting, valuation, regulatory and reporting services. The Company also
incurs costs and expenses associated with the marketing, sale and distribution
of the Contracts. In addition, the Company assumes mortality and expense risks
under the Contracts. In particular, 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. Also,
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
Contract Owner (or, if applicable, the Annuitant) dies prior to annuitization.
(See "Payment on Death Prior to Annuitization.") The amount and manner of
deduction of Contract charges is described below. The amount of a charge may
not necessarily correspond to the costs associated with providing the services
or benefits indicated by the designation of the charge or associated with the
particular Contract. For example, the Contingent Deferred Sales Charge may not
fully cover all of the sales and distribution expenses actually incurred by
the Company, and proceeds from other charges, including the mortality and
expense risk charge, may be used in part to cover such expenses.
Administration Charges
The Company deducts 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. In addition, the Company
charges a transfer fee for certain transfers of Contract Value between
accounts, as described below.
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. The charge is not imposed after annuitization. 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.
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Prior to annuitization, the Company currently imposes a transfer fee of $10
for each transfer of Contract Value in excess of 12 per Contract Year. The
Company reserves the right to impose a transfer fee of $10 on each transfer in
excess of 4 per Contract Year and to limit the number of transfers.
Mortality and Expense Risk Charge
The Company deducts a Mortality and Expense Risk Charge from the Variable
Account. This Charge is computed and deducted on a daily basis from the assets
in each sub-account attributable to the Contracts. 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.
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
--- --- --- --- --- --- --- --- --- --- ------------
<S> <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>
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
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Contracts issued on individuals age 50 or above to employer-sponsored pension
plans through which contracts were purchased prior to May 1, 1994, 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 historical
performance results see the tables starting on page II-4 of the Statement of
Additional Information.
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.
The Company currently waives the Contingent Deferred Sales Charge on
distributions that are intended to satisfy minimum distributions, as required
by tax law, calculated as if this Contract were the participant's only
retirement plan asset. This waiver only applies if the required minimum
distribution exceeds the free withdrawal amount and no previous surrenders
were made during the Contract Year. (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 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. Deductions for state
premium tax charges currently range from 1/2% to 2.00% of the Contract Value
or purchase payment for Contracts used with retirement plans qualifying for
tax benefited treatment under the Code and from 1.00% to 3.50% of the Contract
Value or purchase payment for all other Contracts. 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. See Appendix
B for a list of premium tax rates paid by the Company.
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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.
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 these 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 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 1.35%.
A Contract issued in exchange for a Preference contract will have no
Contingent Deferred Sales Charge. Although Preference contracts were
originally issued subject to a contingent deferred sales charge, there are no
longer any Preference contracts subject to such a charge. 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 charges, administrative charges and investment advisory fees.
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 annuity
payment option at any time prior to the Maturity
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Date. You may elect to have annuity payments under a Contract made on a
variable basis or on a fixed basis, or you 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 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 annuity 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.")
Requests to defer the Maturity Date, change payment options or make other
elections relating to annuity payments should be sent to the Designated
Office. 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 annuity 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 annuity payment options to begin
during the first Contract Year, consent of) the Company. Requests relating to
annuity payment options should be sent to the Designated Office. 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 annuity 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 Proceeds under any one of the annuity
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 any applicable charges
and 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 annuity payment options listed
below.*
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. THIS OPTION CANNOT BE SELECTED FOR DEATH PROCEEDS.
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.)
- --------
* Your Contract lists a fourth and fifth option . . . however, due to tax law
considerations, these options are not available on a fixed or variable
basis.
** 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 VARIABLE ANNUITY
PAYMENT IF THE PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE
SECOND PAYMENT OR TO RECEIVE ONLY TWO VARIABLE ANNUITY PAYMENTS IF THE
PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE THIRD PAYMENT, AND
SO ON.
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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.
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).*** THIS OPTION CANNOT BE
SELECTED FOR DEATH PROCEEDS.
- --------
*** IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE VARIABLE ANNUITY
PAYMENT IF THE PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE
SECOND PAYMENT OR TO RECEIVE ONLY TWO VARIABLE ANNUITY PAYMENTS IF THE
PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE THIRD PAYMENT, AND
SO ON.
Comparable fixed payment options are also available for all of the options
described above. In addition, other annuity payment options (including other
periods certain) may be available from time to time, and you should consult
the Company as to their availability. If you do not elect an annuity 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
annuity payment 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, second and sixth variable payment option may
withdraw the commuted value of the period certain portions of the payments.
The commuted value of such payments is calculated based on the assumed
interest rate under the Contract. The life income portion of the payment
option cannot be commuted, and variable annuity payments based on that portion
will resume at the expiration of the period certain if the Annuitant is alive
at that time. (See "Amount of Variable Annuity Payments.") In addition, after
the death of the Payee under the first, 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.
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 annuity
payment option, including an option not involving a life contingency and under
which the Company bears no mortality risk.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
At the Maturity Date (or any other application of proceeds to a payment
option), the Contract Value (reduced by any applicable charges and by any
outstanding loan plus accrued interest) is applied toward the purchase of
monthly annuity payments. The amount of monthly variable 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 Fixed Account is not available under variable payment
options.)
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
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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 an annuity 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 dollar amount of the annuity
payments will increase. Conversely, if the actual rate is less than the
assumed interest rate, the dollar amount of the 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.
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 of the Variable 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 annuity payment options
available, and other matters also 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") (At this time, the Contracts are only available on a
limited basis to plans qualified under Section 401(k). Contracts are not
being offered to 401(k) plans unless such plans already own Contracts on
participants.);
2. Annuity purchase plans adopted by public school systems and certain
tax-exempt organizations pursuant to Section 403(b) of the Code ("TSA
Plans") which are funded solely by salary reduction contributions and which
are not otherwise subject to ERISA. (The Contracts are no longer being
offered through TSA Plans that are subject to ERISA.);
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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 ("SEPs");
4. Roth Individual Retirement Accounts under Section 408A of the Code
("Roth IRAs"). (The Company intends to make Roth IRAs available under this
Contract only if you have an existing IRA.)
5. 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
6. 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 advisor 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 not being offered to plans qualified under Section 401(k) of the Code
unless such plans already own Contracts on participants, and are no longer
being offered through TSA Plans that are subject to ERISA. The Company will
not provide all the administrative support appropriate for 401(k) plans or TSA
Plans subject to ERISA. Accordingly, the Contract should not be purchased for
use with such plans.
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, IRAs
purchased under Section 408(b) of the Code and Roth IRAs under Section 408A 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 advisor.
Tax Status of the 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
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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 distributions or 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. Some retirement plans are subject to distribution and
other requirements that are not incorporated into our Contract administration
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law. An Owner's rights under
this Contract may be limited by the terms of the retirement plan with which it
is used. 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 advisor 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
Statutory limitations on contributions to retirement plans that qualify for
federal tax benefits may limit the amount of money that may be contributed to
the Contract in any Contract Year. Any purchase payments attributable to such
contributions may be 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 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.
However, these payments may be subject to FICA (Social Security) and Medicare
taxes.
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IRAs, SEPs, SARSEPs
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
is not yet age 70 1/2. The maximum tax deductible purchase payment which a
taxpayer may make to a spousal IRA is $2,000. If covered under an employer
plan, taxpayers are permitted to make deductible purchase payments; however,
for 1999, the deductions are phased out and eventually eliminated, on a pro
rata basis, for adjusted gross income between $31,000 and $41,000 for an
individual, between $51,000 and $61,000 for the covered spouse of a married
couple filing jointly, between $150,000 and $160,000 for the non-covered
spouse of 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. An
IRA is also the vehicle that receives contributions to SEPs. Maximum
contributions (including elective deferrals) to SEPs are currently limited to
the lesser of 15% of compensation (generally up to $160,000 for 1999) or
$30,000. For more information concerning the contributions to IRAs and SEPs,
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.
Roth IRAs
The Company intends to make a Roth IRA available under this Contract,
subject to the following limitations.
Eligible individuals can contribute to a Roth IRA. Contributions to a Roth
IRA are not deductible and must be made in cash or as a rollover or transfer
from another Roth IRA or other IRA. A rollover from or conversion of an IRA to
a Roth IRA may be subject to tax and other special rules may apply. The
maximum purchase payment which may be contributed each year to a Roth IRA is
the lesser of $2,000 or 100 percent of includible compensation. A spousal Roth
IRA is available if the taxpayer and spouse file a joint return. The maximum
purchase payment that a taxpayer may make to a spousal Roth IRA is $2,000.
Except in the case of a rollover or a transfer, no more than $2,000 can be
contributed in aggregate to all IRAs and Roth IRAs of either spouse during any
tax year. The Roth IRA contribution may be limited to less than $2,000
depending on the taxpayer's adjusted gross income ("AGI"). The maximum
contribution begins to phase out if the taxpayer is single and the taxpayer's
AGI is more than $95,000 or if the taxpayer is married and files a joint tax
return and the taxpayer's AGI is more than $150,000. The taxpayer may not
contribute to a Roth IRA if the taxpayer's AGI is over $110,000 (if the
taxpayer is single), $160,000 (if the taxpayer is married and files a joint
tax return), or $10,000 (if the taxpayer is married and files separate tax
returns). You should consult a tax adviser before combining any converted
amounts with any other Roth IRA contributions, including any other conversion
amounts from other tax years. To use the Contract in connection with a Roth
IRA, you must have an existing Contract that was issued in connection with an
IRA.
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 $8,000. 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. With respect to a Section 457 Plan for a nonprofit
organization other than a governmental entity, (i) 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 and (ii) 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. The plans may permit participants to specify the form
of investment for their deferred compensation account. Depending on the terms
of the particular plan, a non-governmental employer may be entitled to draw on
deferred amounts for purposes unrelated to its Section 457 Plan obligations.
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Qualified Plans
Code section 401(a) permits employers to establish various types of
retirement plans for employees and permits self-employed individuals to
establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the Contracts to accumulate
retirement savings under the plans. Adverse tax consequences to the plan, to
the participant or to both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments.
(ii) Distributions from the Contract
Mandatory Withholding on Certain Distributions
Distributions called "eligible rollover distributions" from Qualified Plans
and from many TSA Plans are subject to mandatory withholding by the plan or
payor at the rate of 20%. An eligible rollover distribution is the taxable
portion of any distribution from a Qualified Plan or a TSA Plan, except for
certain distributions such as distributions required by the Code or in a
specified annuity form. After December 31, 1999 permissible hardship
withdrawals from TSA and 401(k) plans will no longer be treated as an
"eligible rollover distribution." 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, Roth IRAs, SEPs, Salary Reduction Simplified
Employee Pension Plans ("SARSEPs") and Governmental Plans
Payments made from the Contracts held under a Qualified Plan, TSA Plan, IRA,
SEP, SARSEP 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, SEPs and SARSEPS, 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 but
other exceptions may 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.
Distributions from a Roth IRA generally are not taxed, except that, once
aggregate distributions exceed contributions to the Roth IRA, income tax and a
10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject
to certain exceptions) or (2) during the five taxable years starting with the
year in which the first contribution is made to any Roth IRA.
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. Except under a Roth IRA, 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.
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Except under a Roth IRA, annuity payments, periodic payments or annual
distributions must commence by the later of April 1 of the calendar year
following the year in which the Annuitant attains age 70 1/2 or the year of
retirement. In the case of a Qualified Plan or a Governmental Plan, where if
the Annuitant is a "five-percent owner" as defined in the Code or for an IRA,
these distributions must begin by the year following the year in which the
Annuitant attains age 70 1/2. 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. The Company currently waives the Contingent
Deferred Sales Charge on distributions that are intended to satisfy required
minimum distributions, calculated as if this Contract were the participant's
only retirement plan asset. This waiver only applies if the required minimum
distribution exceeds the free withdrawal amount and no previous surrenders
were made during the Contract Year. Rules regarding required minimum
distributions apply to IRAs (including SEP and SARSEPs), Qualified Plans, TSA
Plans and Governmental Plans.
Other restrictions with respect to election, commencement, or distribution
of benefits may apply under the Contracts or under the terms of the Qualified
Plans in respect of which the Contracts are issued.
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 generally apply in
the case of Section 457 Plans as apply in the case of Qualified Plans, TSA
Plans, IRAs, SEPs, SARSEPs and Governmental Plans. These rules are discussed
above in the immediately preceding section of this prospectus. An exception to
these rules provides that if the beneficiary is other than the Annuitant's
spouse, distribution must be completed within 15 years of death, regardless of
the beneficiary's life expectancy.
(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 income 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.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those
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circumstances, income and gains from the separate account assets would be
includible in the variable contract owner's gross income. The IRS has stated
in published rulings that a variable contract owner will be considered the
owner of separate account assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury Department has also announced, in connection
with the issuance of regulations concerning diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control for the investments of a segregated asset account may cause
the investor [i.e., the Contract Owner], rather than the insurance company, to
be treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular Sub-
Accounts without being treated as owners of the underlying assets."
The ownership rights under the Contract are similar to, but also different
in certain respects from, those described by the IRS in rulings in which it
was determined that contract owners were not owners of separate account
assets. For example, a Contract Owner has additional flexibility in allocating
premium payments and account values. These differences could result in a
Contract Owner being treated as the owner of a pro rata portion of the assets
of the Variable Account. In addition, the Company does not know what standards
will be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves the
right to modify the Contract as necessary to attempt to prevent a Contract
Owner from being considered the owner of a pro rata share of the assets of the
Variable Account.
Any amount received in a surrender of all or part of the Contract Value
(including an amount received as a systematic withdrawal) 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 annuitization, 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 a Contract Owner or Annuitant dies, the tax law requires certain
distributions from the Contract. (See "Payment on Death Prior to
Annuitization.") Generally, such amounts are includible in the income of the
recipient as follows: (1) if distributed in a lump sum, they are taxed in the
same manner as a full surrender as described above; or (2) if distributed
under an Annuity Option, they are taxed in the same manner as Annuity
payments, as described above. For these purposes, the investment in the
Contract is not affected by the Contract Owner's (or Annuitant's) death. That
is, the investment in the Contract remains the amount of any purchase payments
paid which were not excluded from gross income.
A transfer of ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is not also an Owner, the selection of certain
Maturity Dates, or the exchange of a Contract may result in certain tax
consequences that are not discussed herein. Anyone contemplating any such
designation, transfer, assignment, selection, or exchange should contact a
competent tax advisor with respect to the potential tax effects of such a
transaction.
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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.
Possible Changes in Taxation
Although the likelihood of legislative change is uncertain, there is always
the possibility that the tax treatment of the Contracts could change by
legislation or other means. It is also possible that any change could be
retroactive (that is, effective prior to the date of the change). A tax
adviser should be consulted with respect to legislative developments and their
effect on the Contract.
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 they 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 Funds' Board 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 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 Company and is entitled to vote
at the Company's Annual Meeting of Policyholders.
A-42
<PAGE>
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. 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
be credited with 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 be credited with 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-43
<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 accounts,
including the 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 4.5% (whichever is the minimum guaranteed Fixed Account interest
rate for your Contract); 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.) See "Loan Provision for Certain Tax Benefited
Retirement Plans." 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.
YEAR 2000 COMPLIANCE ISSUES
Like all financial services providers, NELICO utilizes systems that may be
affected by Year 2000 transition issues, and it relies on a number of third
parties, including banks, custodians, and investment managers, that also may
be affected. NELICO and its affiliates have developed, and are in the process
of implementing, a Year 2000 transition plan, and are confirming that their
service providers are also so engaged. The resources that are being devoted to
this effort are substantial. It is difficult to predict with precision whether
the amount of resources ultimately devoted, or the outcome of these efforts,
will have any negative impact on NELICO. If NELICO or its service providers
are not successful in the Year 2000 transition, computer systems could fail or
erroneous results or delays could occur when processing information after
December 31, 1999. However, as of the date of this prospectus, it is not
anticipated that Owners will experience negative effects on their investment,
or on the services provided in connection therewith, as a result of Year 2000
transition implementation. Currently NELICO has converted its systems to be
Year 2000 compliant. NELICO is conducting systems testing and compliance
verification which is expected to be complete in mid-1999. There can, however,
be no assurance that the other service providers have anticipated every step
necessary to avoid any adverse effect on the Variable Account attributable to
Year 2000 transition.
A-44
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Variable Account and the Company may be
found in the Statement of Additional Information.
INVESTMENT PERFORMANCE INFORMATION
The Company may advertise performance by illustrating hypothetical average
annual total returns for each sub-account of the Variable Account, based on
the actual investment experience of the Eligible Funds since their inception
and for the year-to-date, one, three, five, and ten year periods ending with
the date of the illustration. Such performance information will be accompanied
by SEC standard performance information for each sub-account, based on the
actual investment experience of the sub-account since its inception and for
the one, five, and ten year periods ending with the date of the information
shown. See "Calculation of Performance Data" in the Statement of Additional
Information and Appendix C of this prospectus.
The Company may also illustrate how the average annual total return for a
five year period was determined by illustrating the average annual total
return for each year in the five year period ending with the date of the
illustration. Such illustrations are based on the same assumptions and reflect
the same expenses and deductions described in the preceding paragraph. See
"Calculation of Performance Data" in the Statement of Additional Information
for an example of this type of illustration and Appendix C of this prospectus
for more information about how average annual total returns are calculated.
The Company may illustrate what would have been the growth and value of a
single $10,000 purchase payment for the Contract if it had been invested in
each of the Eligible Funds on the first day of the first month after those
Eligible Funds commenced operations. These illustrations show Contract Value
and surrender value, calculated in the same manner as when they are used to
arrive at average annual total return, as of the end of each year, ending with
the date of the illustration. The surrender values reflect the deduction of
any applicable Contingent Deferred Sales Charge, but do not reflect the
deduction of any premium tax charge. These illustrations may also show annual
percentage changes in Contract Value and surrender value, cumulative returns,
and annual effective rates of return. 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 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 is calculated in the same manner as average annual total return. See
"Calculation of Performance Data" in the Statement of Additional Information
for examples of these illustrations and more information about how they are
calculated.
The Variable Account may update the performance history of one or more of
its sub-accounts on a quarterly basis by illustrating the one, three, five,
and ten year values (or since inception, if less) of a single $10,000 purchase
payment invested at the beginning of such periods using the same method of
calculation described in the preceding paragraph, 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 Company may illustrate what would have been the change in value of a
$100 monthly purchase payment plan if the monthly payments had been invested
in each of the Eligible Funds on the first day of each month starting with the
first day of the first month after those Eligible Funds commenced operations.
These illustrations show cumulative payments, Contract Value and surrender
value as of the end of each year, ending with the date of the illustration.
Surrender values reflect the deduction of any applicable Contingent Deferred
Sales Charge. The illustrations also show annual effective rates of return,
which represent the compounded annual rates that the hypothetical purchase
payments would have had to earn in order to produce the Contract Value and
surrender
A-45
<PAGE>
value as of the date of the illustration. See "Calculation of Performance
Data" in the Statement of Additional Information for examples of these
illustrations and more information about how they are calculated.
The Variable Account may 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 in the preceding paragraph
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 deduction of any Contingent
Deferred Sales Charge, premium tax charge, or the annual $30 Administration
Contract Charge, all of which have the effect of reducing historical
performance. 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 year-to-date, one year, three year, five
year, and ten 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, as well as other unmanaged indices
of stock and bond performance and the Consumer Price Index, as described in
the Statement of Additional Information in the Notes to the 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.
In addition, the Company may illustrate how variable annuity income payments
under the Contract and commuted values of annuity income options change with
investment performance over periods of time; such illustrations may be
hypothetical (based on assumed uniform annual rates of return) or historical
(based on historical annual returns of the sub-accounts). See "Hypothetical
Illustrations of Annuity Income Payouts" and "Historical Illustrations of
Annuity Income Payouts" in the Statement of Additional Information for a
description of these illustrations.
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 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.
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
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 a 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
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-
435-4117.
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:
New England Annuities
P.O. Box 642
Back Bay Annex
Boston, Mass 02116
A-47
<PAGE>
APPENDIX B
PREMIUM TAX
Premium tax rates are subject to change. At present the Company pays premium
taxes in the following jurisdictions at the rates shown.
<TABLE>
<CAPTION>
Contracts Used With Tax
Jurisdiction Qualified Retirement Plans All Other Contracts
- ------------ -------------------------- -------------------
<S> <C> <C>
California....................... 0.50% 2.35%
Kentucky......................... 2.00% 2.00%
Maine............................ -- 2.00%
Nevada........................... -- 3.50%
Puerto Rico...................... 1.00% 1.00%
South Dakota..................... -- 1.25%
West Virginia.................... 1.00% 1.00%
Wyoming.......................... -- 1.00%
</TABLE>
See "Premium Tax Charges" in the prospectus for more information about how
premium taxes affect the Contracts.
A-48
<PAGE>
APPENDIX C
AVERAGE ANNUAL TOTAL RETURN
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 sub-accounts, and the Eligible Funds during those periods.
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 Westpeak Growth and Income and Goldman
Sachs Midcap Value (formerly the 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 Westpeak Stock Index and Back Bay Advisors Managed Series
commenced operations on May 1, 1987. The Loomis Sayles Small Cap Series
commenced operations on May 2, 1994. The other Zenith Fund Series (Loomis
Sayles Balanced, Morgan Stanley International Magnum Equity, Alger Equity
Growth, Davis Venture Value, Salomon Brothers Strategic Bond Opportunities and
Salomon Brothers U.S. Government) 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, 1998 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, 1998 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, 1998. In other words, the average annual total return is the rate which,
when added to 1, raised to a power reflecting the number of years in the
period shown, and multiplied by the initial $1,000 investment, yields the
surrender value at the end of the period. The average annual total returns
assume that no premium tax charge has been deducted.
Sub-account average total return, which is calculated in accordance with the
SEC standardized formula, uses the inception date of the sub-account through
which the Eligible Fund shown is available. Fund total return adjusted for
Contract charges uses the inception date of the Eligible Fund shown, and
therefore may reflect periods prior to the availablity of the corresponding
sub-account under the Contract. This information does not indicate or
represent future performance.
SUB-ACCOUNT AVERAGE ANNUAL TOTAL RETURN
For purchase payment allocated to the Loomis Sayles Small Cap Series:
<TABLE>
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Sub-Account..................................... %
</TABLE>
A-49
<PAGE>
For purchase payment allocated to the Morgan Stanley International Magnum
Equity Series:*
<TABLE>
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Overseas Portfolio:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Alger Equity Growth Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Capital Growth Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Goldman Sachs Midcap Value Series:**
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Davis Venture Value Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Westpeak Growth and Income Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
Since Inception of the Sub-Account..................................... %
</TABLE>
- --------
* The Morgan Stanley International Magnum Equity Series' subadviser was
Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley Asset
Management Inc. became the subadviser.
** The Goldman Sachs Midcap Value Series' subadviser was Loomis, Sayles &
Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management became
the subadviser.
A-50
<PAGE>
For purchase payment allocated to the Westpeak Stock Index Series:***
<TABLE>
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Equity-Income Portfolio:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Loomis Sayles Balanced Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Back Bay Advisors Managed Series:***
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Salomon Brothers Strategic Bond
Opportunities Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Back Bay Advisors Bond Income Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Sub-Account..................................... %
For purchase payment allocated to the Salomon Brothers U.S. Government
Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Sub-Account..................................... %
</TABLE>
- --------
*** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
A-51
<PAGE>
For purchase payment allocated to the Back Bay Advisors Money Market Series:
<TABLE>
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Sub-Account..................................... %
</TABLE>
FUND TOTAL RETURN ADJUSTED FOR CONTRACT CHARGES
For purchase payment allocated to the Loomis Sayles Small Cap Series:
<TABLE>
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Morgan Stanley International Magnum
Equity Series:*
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Overseas Portfolio:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Alger Equity Growth Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Capital Growth Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Fund............................................ %
</TABLE>
- --------
* The Morgan Stanley International Magnum Equity Series' subadviser was
Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley Asset
Management Inc. became the subadviser.
A-52
<PAGE>
For purchase payment allocated to the Goldman Sachs Midcap Value Series:**
<TABLE>
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Davis Venture Value Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Westpeak Growth and Income Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
Since Inception of the Fund............................................ %
For purchase payments allocated to the Westpeak Stock Index Series:***
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Equity-Income Portfolio:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Loomis Sayles Balanced Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Fund............................................ %
For purchase payments allocated to the Back Bay Advisors Managed Series:***
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Fund............................................ %
</TABLE>
- --------
** The Goldman Sachs Midcap Value Series' subadviser was Loomis, Sayles &
Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management became
the subadviser.
*** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
A-53
<PAGE>
For purchase payment allocated to the Salomon Brothers Strategic Bond
Opportunities Series:
<TABLE>
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Back Bay Advisors Bond Income Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Salomon Brothers U.S. Government
Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
Since Inception of the Fund............................................ %
For purchase payment allocated to the Back Bay Advisors Money Market Series:
<CAPTION>
Period Ending December 31, 1998
-------------------------------
<S> <C>
1 Year................................................................. %
5 Years................................................................ %
10 Years............................................................... %
Since Inception of the Fund............................................ %
</TABLE>
Information is available illustrating the impact of fund performance on
annuity payouts. For examples, see "Historical Illustrations of Annuity Income
Payments" and "Hypothetical Illustrations of Annuity Income Payments" in the
Statement of Additional Information.
A-54
<PAGE>
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
-----
<S> <C>
HISTORY................................................................... II-3
SERVICES RELATING TO THE VARIABLE ACCOUNT AND THE CONTRACTS............... II-3
PERFORMANCE COMPARISONS................................................... II-3
CALCULATION OF PERFORMANCE DATA........................................... II-4
NET INVESTMENT FACTOR..................................................... II-20
ANNUITY PAYMENTS.......................................................... II-20
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS...................... II-22
HISTORICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS........................ II-25
EXPERTS................................................................... II-28
LEGAL MATTERS............................................................. II-28
APPENDIX A................................................................ II-29
FINANCIAL STATEMENTS...................................................... F-1
</TABLE>
If you would like to obtain a copy of the Statement of Additional
Information, please complete the request form 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-55
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
ZENITH ACCUMULATOR
Individual Variable Annuity Contracts
Issued by Metropolitan Life Insurance Company
STATEMENT OF ADDITIONAL INFORMATION
(PART B)
April 30, 1999
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information relates to the Prospectus dated April 30, 1999 and
should be read in conjunction therewith. A copy of the Prospectus may be
obtained by writing to New England Securities Corporation ("New England
Securities") 399 Boylston Street, Boston, Massachusetts 02116.
VA-140SAI-98
II-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
History................................................................... II-3
Services Relating to the Variable Account and the Contracts............... II-3
Performance Comparisons................................................... II-3
Calculation of Performance Data........................................... II-4
Net Investment Factor..................................................... II-20
Annuity Payments.......................................................... II-20
Hypothetical Illustrations of Annuity Income Payouts...................... II-22
Historical Illustrations of Annuity Income Payouts........................ II-25
Experts................................................................... II-28
Legal Matters............................................................. II-28
Appendix A................................................................ II-29
Financial Statements...................................................... F-1
</TABLE>
II-2
<PAGE>
HISTORY
The New England Variable Account (the "Variable Account") is a separate
account of Metropolitan Life Insurance Company (the "Company"). The Variable
Account was originally a separate account of New England Mutual Life Insurance
Company, and became a separate account of the Company when New England Mutual
Life Insurance Company merged with and into the Company on August 30, 1996.
SERVICES RELATING TO THE VARIABLE ACCOUNT AND THE CONTRACTS
Auditors. Deloitte & Touche LLP, located at 125 Summer Street, Boston,
Massachusetts 02110, conducts an annual audit of the Variable Account's
financial statements.
Administrative Services Agreement. Pursuant to an administrative services
agreement between New England Life Insurance Company ("NELICO") and the
Company, NELICO serves as the Designated Office for servicing the Contracts
and performs certain other administrative services for the Company relating to
the Variable Account and the Contracts. NELICO is compensated for these
services based on the expenses it incurs in providing them. NELICO was a
wholly-owned subsidiary of New England Mutual Life Insurance Company before it
merged into the Company, and became a subsidiary of the Company as a result of
the merger. For services rendered, the Company paid NELICO $4,461,228.08, for
the period August 30, 1996 to December 31, 1996, $13,017,919.74 for the one-
year period ended December 31, 1997 and $ for the one-year period
ended December 31, 1998.
Principal Underwriter. New England Securities Corporation ("New England
Securities"), an indirect subsidiary of the Company, serves as principal
underwriter for the Variable Account pursuant to a distribution agreement with
the Company. The Contracts are offered continuously and are sold by NELICO's
life insurance agents and insurance brokers who are registered representatives
of New England Securities. Contracts also may be sold by registered
representatives of broker-dealers that have selling agreements with New
England Securities. The Company pays commissions, none of which are retained
by New England Securities, to the registered representatives involved in
selling Contracts. For the years ended December 31, 1996, 1997 and 1998 the
Company paid commissions in the amount of $5,927,575.34, $5,719,756.22 and
$ , respectively.
PERFORMANCE COMPARISONS
Articles and releases, developed by the Company, the Eligible Funds (as
defined in the Prospectus) and other parties, about the Account or the
Eligible Funds regarding performance, rankings, statistics and analyses of the
Account's, the individual Eligible Funds' and fund groups' asset levels and
sales volumes, statistics and analyses of industry sales volumes and asset
levels, and other characteristics may appear in publications, including, but
not limited to, those publications listed in Appendix A to this Statement of
Additional Information. In particular, some or all of these publications may
publish their own rankings or performance reviews including the Account or the
Eligible Funds. References to or reprints of such articles may be used in the
Company's promotional literature. Such literature may refer to personnel of
the advisers, who have portfolio management responsibility, and their
investment style. The references may allude to or include excerpts from
articles appearing in the media.
The advertising and sales literature of the Contract and the Account may
refer to historical, current and prospective economic trends and may include
historical and current performance and total returns of investment
alternatives.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and
prospective Contractholders. These materials may include, but are not limited
to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
II-3
<PAGE>
CALCULATION OF PERFORMANCE DATA
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 Westpeak Growth and Income and Goldman
Sachs Midcap Value (formerly the 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 Westpeak Stock Index and Back Bay Managed Series
commenced operations on May 1, 1987. The Loomis Sayles Small Cap Series
commenced operations on May 2, 1994. The other Zenith Fund Series (Loomis
Sayles Balanced, Morgan Stanley International Magnum Equity, Alger Equity
Growth, Davis Venture Value, Salomon Brothers Strategic Bond Opportunities and
Salomon Brothers U.S. Government) 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 the 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, 1998 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, 1998 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, 1998. In other words, the average annual total return is the rate which,
when added to 1, raised to a power reflecting the number of years in the
period shown, and multiplied by the initial $1,000 investment, yields the
surrender value at the end of the period. The average annual total returns
assume that no premium tax charge has been deducted.
The following chart illustrates how the average annual total return was
determined for the five year period ending December 31, 1998 for the sub-
account investing in 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 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 illustration assumes no premium tax charge
is deducted.
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, 1993........... 122.0281 9.049554 $1,104.30 $1,044.67 4.47%
December 31, 1994........... 118.4129 8.297578 982.54 933.90 -3.36%
December 31, 1995........... 115.7582 11.300017 1,308.07 1,249.21 7.70%
December 31, 1996........... 113.5352 13.496435 1,532.32 1,470.26 10.12%
December 31, 1997........... 111.7107 16.441932 1,836.74 1,770.62 12.10%
December 31, 1998...........
</TABLE>
II-4
<PAGE>
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, 1987 in the case of the Westpeak
Stock Index Series and the Back Bay Advisors Managed Series; May 1, 1993 in
the case of the Westpeak Growth and Income and Goldman Sachs Midcap Value
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.
II-5
<PAGE>
$10,000 Single Purchase Payment Contract
Issued September 1, 1983 (for Sub-Accounts investing in Capital Growth,
Back Bay Advisors Bond Income and Back Bay Advisors Money Market)
(Equity-Income: November 1, 1986 and Overseas: February 1, 1987)
(Westpeak Stock Index and Back Bay Advisors Managed Series: May 1, 1987)
(Westpeak Growth and Income and Goldman Sachs Midcap Value(3): May 1, 1993)
(Loomis Sayles Small Cap: May 2, 1994)
(Other Zenith Fund Series: November 1, 1994)
Investment Results
<TABLE>
<CAPTION>
Contract Value(1)
------------------------------------------------------------------------------------------------------
Morgan
Loomis Stanley Goldman Westpeak
Sayles International Alger Sachs Davis Growth
Small Magnum Equity Capital Midcap Venture and Equity-
Cap Equity(2) Overseas Growth Growth Value(3) Value Income Income
---------- ------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ $ 10,470.12
1984............ 10,237.14
1985............ 16,941.91
1986............ 32,599.29 $ 9,888.64
1987............ $ 9,345.49 49,087.62 9,615.25
1988............ 9,936.28 44,141.97 11,611.24
1989............ 12,343.46 56,919.65 13,412.67
1990............ 11,945.10 54,170.04 11,176.22
1991............ 12,695.83 82,262.43 14,462.11
1992............ 11,156.05 76,212.70 16,645.30
1993............ 15,078.13 86,417.09 $11,370.39 $11,321.11 19,396.57
1994............ $ 9,590.97 $10,237.83 15,104.86 $ 9,695.00 79,208.42 11,157.06 $ 9,628.96 11,004.57 20,460.15
1995............ 12,156.37 10,698.65 16,311.44 14,193.96 107,838.80 14,313.48 13,201.25 14,780.39 27,238.96
1996............ 15,637.59 11,227.90 18,185.02 15,815.91 128,763.66 16,574.48 16,356.09 17,185.98 30,677.47
1997............ 19,225.09 10,904.04 19,981.29 19,572.63 156,835.46 19,149.94 21,511.40 22,593.88 38,742.01
1998............
<CAPTION>
Surrender Value(1)
------------------------------------------------------------------------------------------------------
Morgan
Loomis Stanley Goldman Westpeak
Sayles International Alger Sachs Davis Growth
Small Magnum Equity Capital Midcap Venture and Equity-
Cap Equity(2) Overseas Growth Growth Value(3) Value Income Income
---------- ------------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ $ 9,847.62
1984............ 9,674.33
1985............ 16,131.91
1986............ 31,789.29 $ 9,305.15
1987............ $ 8,771.28 48,277.62 9,091.03
1988............ 9,372.22 43,331.97 11,031.48
1989............ 11,704.96 56,109.65 12,804.10
1990............ 11,380.07 53,360.04 10,718.58
1991............ 12,154.15 81,452.43 13,936.47
1992............ 10,726.94 75,516.79 16,115.97
1993............ 14,575.67 86,407.09 $10,685.22 $10,638.82 18,867.86
1994............ $ 9,012.40 $ 9,633.91 14,669.53 $ 9,122.84 79,198.42 10,534.58 $ 9,060.66 10,390.32 20,086.86
1995............ 11,482.43 10,115.92 15,990.34 13,422.49 107,828.80 13,584.96 12,483.38 14,028.76 26,988.81
1996............ 14,846.03 10,667.11 17,993.85 15,028.03 128,753.66 15,808.63 15,551.09 16,392.61 30,672.47
1997............ 18,407.59 10,408.36 19,953.79 18,767.63 156,825.48 18,354.37 20,706.40 21,773.88 38,737.01
1998............
<CAPTION>
Salomon
Brothers Back Bay Salomon Back Bay
Westpeak Loomis Back Bay Strategic Advisors Brothers Advisors
Stock Sayles Managed Bond Bond U.S. Money
Index(4) Balanced Series(4) Opportunities Income Government Market
-------- ---------- --------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ $ $ $10,339.37 $10,258.59
1984............ 11,453.64 11,175.34
1985............ 13,388.01 11,905.86
1986............ 15,137.25 12,514.94
1987............ 15,242.29 13,122.50
1988............ 16,265.40 13,889.20
1989............ 17,990.50 14,941.00
1990............ 19,151.95 15,916.76
1991............ 22,256.25 16,648.66
1992............ 23,722.98 17,018.47
1993............ 26,326.49 17,259.12
1994............ $ 9,968.28 $ 9,838.87 25,071.19 $10,038.07 17,674.12
1995............ 12,242.06 11,557.83 29,948.07 11,360.92 18,401.19
1996............ 14,087.95 13,008.06 30,873.63 11,548.68 19,053.28
1997............ 16,117.12 14,224.45 33,745.25 12,328.54 19,770.95
1998............
<CAPTION>
Salomon
Brothers Back Bay Salomon Back Bay
Westpeak Loomis Back Bay Strategic Advisors Brothers Advisors
Stock Sayles Managed Bond Bond U.S. Money
Index(4) Balanced Series(4) Opportunities Income Government Market
-------- ---------- --------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ $ $ $ 9,724.51 $ 9,648.46
1984............ 10,825.14 10,561.87
1985............ 12,715.30 11,306.52
1986............ 14,446.07 11,941.77
1987............ 14,614.97 12,581.04
1988............ 15,669.85 13,379.19
1989............ 17,413.80 14,460.36
1990............ 18,624.85 15,477.01
1991............ 21,845.84 16,338.98
1992............ 23,499.47 16,855.30
1993............ 26,316.49 17,249.12
1994............ $ 9,380.13 $ 9,258.29 25,061.19 $ 9,445.85 17,664.12
1995............ 11,575.99 10,928.71 29,938.07 10,742.43 18,391.19
1996............ 13,385.59 12,359.16 30,863.63 10,972.02 19,043.28
1997............ 15,386.85 13,579.35 33,735.25 11,768.76 19,760.95
1998............
</TABLE>
II-6
<PAGE>
Annual Percentage Change in Contract Value(1)
<TABLE>
<CAPTION>
Morgan
Loomis Stanley Goldman
Sayles International Alger Sachs Davis
Small Magnum Equity Capital Midcap Venture
Cap Equity(2) Overseas Growth Growth Value(3) Value
------ ------------- -------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... 4.70%
1984................... -2.23
1985................... 65.49
1986................... 92.42
1987................... -6.55% 50.58
1988................... 6.32 -10.08
1989................... 24.23 28.95
1990................... -3.23 -4.83
1991................... 6.28 51.86
1992................... -12.13 -7.35
1993................... 35.16 13.39 13.70%
1994................... -4.09% 2.38% 0.18 -3.05% -8.34 -1.88 -3.71%
1995................... 26.75 4.50 7.99 46.40 36.15 28.29 37.10
1996................... 28.64 4.95 11.49 11.43 19.40 15.80 23.90
1997................... 22.94 -2.88 9.88 23.75 21.80 15.54 31.52
1998...................
Cumulative Return.......
Annual Effective Rate of
Return.................
</TABLE>
<TABLE>
<CAPTION>
Salomon
Back Bay Brothers Back Bay Salomon Back Bay
Westpeak Westpeak Loomis Advisors Strategic Advisors Brothers Advisors
Growth Equity- Stock Sayles Managed Bond Bond U.S. Money
and Income Income Index(4) Balanced Series(4) Opportunities Income Government Market
---------- ------- -------- -------- --------- ------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... 3.39% 2.59%
1984................... 10.78 8.94
1985................... 16.89 6.54
1986................... -1.11% 13.07 5.12
1987................... -2.76 0.69 4.85
1988................... 20.76 6.71 5.84
1989................... 15.51 10.61 7.57
1990................... -16.67 6.46 6.53
1991................... 29.40 16.21 4.60
1992................... 15.10 6.59 2.22
1993................... 13.21% 16.53 10.97 1.41
1994................... -2.80 5.48 -0.32% -1.61% -4.77 0.38% 2.40
1995................... 34.31 33.13 22.81 17.47 19.45 13.18 4.11
1996................... 16.28 12.62 15.08 12.55 3.09 1.65 3.54
1997................... 31.47 26.29 14.40 9.35 9.30 6.75 3.77
1998...................
Cumulative Return.......
Annual Effective Rate of
Return.................
</TABLE>
<TABLE>
<CAPTION>
Lehman
Intermediate
Government/
Dow Jones S&P 500 Corporate Consumer
Industrial Stock Bond Price
Average(5) Index(6) Index(7) Index(8)
---------- -------- ------------ --------
<S> <C> <C> <C> <C>
As of December 31:
1983................................ 5.11% 1.79% 4.51% 1.07%
1984................................ 1.35 6.27 14.37 3.95
1985................................ 33.62 31.73 18.06 3.77
1986................................ 27.25 18.66 13.13 1.13
1987................................ 5.55 5.25 3.66 4.41
1988................................ 16.21 16.61 6.67 4.42
1989................................ 32.24 31.69 12.77 4.65
1990................................ -.54 -3.10 9.16 6.11
1991................................ 24.25 30.47 14.62 3.06
1992................................ 7.40 7.62 7.17 2.90
1993................................ 16.97 10.08 8.79 2.75
1994................................ 5.02 1.32 -1.93 2.67
1995................................ 36.94 37.58 15.33 2.54
1996................................ 28.91 22.96 4.05 3.32
1997................................ 24.91 33.36 7.87 1.83
1998................................
Cumulative Return....................
Annual Effective Rate of Return......
</TABLE>
II-7
<PAGE>
Annual Percentage Change in Surrender Value(1)
<TABLE>
<CAPTION>
Morgan
Loomis Stanley Goldman
Sayles International Alger Sachs Davis
Small Magnum Equity Capital Midcap Venture
Cap Equity(2) Overseas Growth Growth Value(3) Value
------ ------------- -------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... -1.52%
1984................... -1.76
1985................... 66.75
1986................... 97.06
1987................... -12.29% 51.87
1988................... 6.85 -10.24
1989................... 24.89 29.49
1990................... -2.78 -4.90
1991................... 6.80 52.65
1992................... -11.74 -7.29
1993................... 35.88 14.42 6.85%
1994................... -9.88% -3.66% 0.64 -8.77% -8.34 -1.41 -9.39%
1995................... 27.41 5.00 9.00 47.13 36.15 28.96 37.78
1996................... 29.29 5.45 12.53 11.96 19.41 16.37 24.57
1997................... 23.99 -2.43 10.89 24.88 21.80 16.10 33.15
1998...................
Cumulative Return.......
Annual Effective Rate of
Return.................
</TABLE>
<TABLE>
<CAPTION>
Salomon
Back Bay Brothers Back Bay Salomon Back Bay
Westpeak Westpeak Loomis Advisors Strategic Advisors Brothers Advisors
Growth Equity- Stock Sayles Managed Bond Bond U.S. Money
and Income Income Index(4) Balanced Series(4) Opportunities Income Government Market
---------- ------- -------- -------- --------- ------------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... -2.75% -3.52%
1984................... 11.32 9.47
1985................... 17.46 7.05
1986................... -6.95% 13.61 5.62
1987................... -2.30 1.17 5.35
1988................... 21.34 7.22 6.34
1989................... 16.07 11.13 8.08
1990................... -16.29 6.95 7.03
1991................... 30.02 17.29 5.57
1992................... 15.64 7.57 3.16
1993................... 6.39% 17.08 11.99 2.34
1994................... -2.34 6.46 -6.20% -7.42% -4.77 -5.54% 2.41
1995................... 35.02 34.36 23.41 18.04 19.46 13.73 4.12
1996................... 16.85 13.65 15.63 13.09 3.09 2.14 3.55
1997................... 32.83 26.29 14.95 9.87 9.30 7.26 3.77
1998...................
Cumulative Return.......
Annual Effective Rate of
Return.................
</TABLE>
<TABLE>
<CAPTION>
Lehman
Intermediate
Government/
Dow Jones S&P 500 Corporate Consumer
Industrial Stock Bond Price
Average(5) Index(6) Index(7) Index(8)
---------- -------- ------------ --------
<S> <C> <C> <C> <C>
As of December 31:
1983................................ 5.11% 1.79% 4.51% 1.07%
1984................................ 1.35 6.27 14.37 3.95
1985................................ 33.62 31.73 18.06 3.77
1986................................ 27.25 18.66 13.13 1.13
1987................................ 5.55 5.25 3.66 4.41
1988................................ 16.21 16.61 6.67 4.42
1989................................ 32.24 31.69 12.77 4.65
1990................................ -.54 -3.10 9.16 6.11
1991................................ 24.25 30.47 14.62 3.06
1992................................ 7.40 7.62 7.17 2.90
1993................................ 16.97 10.08 8.79 2.75
1994................................ 5.02 1.32 -1.93 2.67
1995................................ 36.94 37.58 15.35 2.54
1996................................ 28.91 22.96 4.05 3.32
1997................................ 24.91 33.36 7.87 1.83
1998................................
Cumulative Return....................
Annual Effective Rate of Return......
</TABLE>
II-8
<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 1987
figures for the Westpeak Stock Index and Back Bay Advisors Managed Series
are from May 1, 1987 through December 31, 1987. The 1993 figures for the
Goldman Sachs Midcap Value and Westpeak Growth and Income 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.
(2) The Morgan Stanley International Magnum Equity Series' subadviser was
Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley Asset
Management Inc. became the subadviser.
(3) The Goldman Sachs Midcap Value Series' subadviser was Loomis, Sayles &
Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management
became the subadviser.
(4) The Westpeak Stock Index and Back Bay Advisors Managed Series are only
available through Contracts purchased prior to May 1, 1995.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
II-9
<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 for the Capital Growth, Back Bay Advisors Bond Income
and Back Bay Advisors Money Market Series; November 1, 1986 for the Equity-
Income Portfolio; February 1, 1987 for the Overseas Portfolio; May 1, 1987 for
the Westpeak Stock Index Series and Back Bay Advisors Managed Series; May 1,
1993 for the Goldman Sachs Midcap Value and Westpeak Growth and Income Series;
May 2, 1994 for the Loomis Sayles Small Cap Series; and November 1, 1994 for
the other six Zenith Fund 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,
1998. In other words, the annual effective rate of return is the rate which,
when added to 1 and raised to a power equal to the number of months for which
the payment is invested divided by twelve, and multiplied by the payment
amount, for all monthly payments, would yield the contract value or surrender
value on the ending date of the illustration.
Investment Results
September 1, 1983--December 31, 1998 (Capital Growth, Bond Income and Money
Market Series)
(November 1, 1986--December 31, 1998 for Equity-Income Portfolio and February
1, 1987--December 31, 1998 for Overseas Portfolio)
(May 1, 1987--December 31, 1998 for the Westpeak Stock Index and Back Bay
Advisors Managed Series)
(May 2, 1994--December 31, 1998 for Loomis Sayles Small Cap Series)
(November 1, 1994--December 31, 1998 for all other Zenith Fund Series)
<TABLE>
<CAPTION>
Contract Value
------------------------------------------------------------------
Morgan
Loomis Stanley Goldman
Sayles International Alger Sachs
Cumulative Small Magnum Equity Capital Midcap
Payments(1) Cap Equity(2) Overseas Growth Growth Value(3)
----------- --------- ------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ $ 400 $ 409.40
1984............ 1,600 1,648.95
1985............ 2,800 4,277.11
1986............ 4,000 9,765.58
1987............ 5,200 $ 1,007.13 15,890.14
1988............ 6,400 2,306.86 15,451.37
1989............ 7,600 4,229.80 21,215.12
1990............ 8,800 5,222.71 21,316.48
1991............ 10,000 6,778.08 33,833.21
1992............ 11,200 7,031.68 32,549.81
1993............ 12,400 10,872.84 38,177.72 $ 848.90
1994............ 13,600 $ 782.65 $ 204.56 12,048.05 $ 199.08 36,110.66 2,021.49
1995............ 14,800 2,337.57 1,436.32 14,272.33 1,671.74 50,536.57 3,907.29
1996............ 16,000 4,363.73 2,706.36 17,185.14 3,119.42 61,680.44 5,786.10
1997............ 17,200 6,686.43 3,767.74 20,101.70 5,139.40 76,386.05 7,957.27
1998............
Annual Effective
Rate of Return...
<CAPTION>
Contract Value
------------------------------------------------------------------------------------------------------------
Westpeak Salomon Back Bay Salomon Back Bay
Davis Growth Westpeak Loomis Back Bay Brothers Advisors Brothers Advisors
Venture and Equity- Stock Sayles Advisors Strategic Bond Bond U.S. Money
Value Income Income Index(4) Balanced Managed(4) Opportunities Income Government Market
--------- --------- ---------- -------- --------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ $ $ $ 405.13 $ 406.44
1984............ 1,720.27 1,673.57
1985............ 3,304.19 2,999.59
1986............ $ 195.78 4,982.85 4,362.45
1987............ 1,215.08 6,208.12 5,788.99
1988............ 2,714.98 7,835.43 7,350.98
1989............ 4,346.48 9,915.71 9,142.45
1990............ 4,721.63 11,807.13 10,970.63
1991............ 7,427.49 15,037.48 12,694.15
1992............ 9,840.29 17,272.18 14,182.75
1993............ $ 848.38 12,731.03 20,405.31 15,588.48
1994............ $ 197.97 2,002.46 14,650.43 $ 200.89 $ 196.89 20,609.31 $ 200.97 17,179.87
1995............ 1,632.30 4,059.83 20,892.48 1,543.68 1,507.66 25,924.91 1,476.06 19,112.88
1996............ 3,373.37 6,026.98 24,811.34 3,072.43 2,953.92 27,970.49 2,704.81 21,015.28
1997............ 5,782.92 9,279.81 32,682.67 4,784.73 4,468.88 31,839.31 4,116.70 23,035.65
1998............
Annual Effective
Rate of Return...
</TABLE>
- ----
(1) Cumulative payments as of December 31, 1998 would be $ for Equity-
Income, $ for Overseas, $ for Goldman Sachs Midcap Value and
Westpeak Growth and Income, $ for Loomis Sayles Small Cap, and
$ for each of the other Zenith Fund series.
(2) The Morgan Stanley International Magnum Equity Series' subadviser was
Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley Asset
Management Inc. became the subadviser.
(3) The Goldman Sachs Midcap Value Series' subadviser was Loomis, Sayles &
Company, L.P. until May 1, 1998 when Goldman Sachs Asset Management
became the subadviser.
(4) The Westpeak Stock Index Series and the Back Bay Advisors Managed Series
are only available through Contracts purchased prior to May 1, 1995.
II-10
<PAGE>
<TABLE>
<CAPTION>
Surrender Value
-----------------------------------------------------------------
Morgan
Loomis Stanley Goldman
Sayles International Alger Sachs
Cumulative Small Magnum Equity Capital Midcap
Payments(1) Cap Equity(2) Overseas Growth Growth Value(3)
----------- --------- ------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............ $ 400 $ 375.45
1984............ 1,600 1,549.91
1985............ 2,800 4,055.39
1986............ 4,000 9,435.58
1987............ 5,200 $ 920.71 15,464.14
1988............ 6,400 2,154.79 14,929.37
1989............ 7,600 3,992.93 20,597.12
1990............ 8,800 4,960.18 20,730.94
1991............ 10,000 6,476.07 33,214.21
1992............ 11,200 6,751.04 32,246.86
1993............ 12,400 10,502.85 38,167.72 $ 779.24
1994............ 13,600 $ 719.36 $ 187.60 11,695.26 $ 182.44 36,100.66 1,892.33
1995............ 14,800 2,193.84 1,353.76 13,987.92 1,576.47 50,526.57 3,693.88
1996............ 16,000 4,130.23 2,567.39 17,002.98 2,950.51 61,670.44 5,505.72
1997............ 17,200 6,363.04 3,593.19 20,074.20 4,903.13 76,376.05 7,615.01
1998............
Annual Effective
Rate of Return...
<CAPTION>
Surrender Value
-------------------------------------------------------------------------------------
Westpeak Back Bay Salomon Back Bay Salomon Back Bay
Davis Growth Westpeak Loomis Advisors Brothers Advisors Brothers Advisors
Venture and Equity- Stock Sayles Managed Strategic Bond Bond U.S. Money
Value Income Income Index(4) Balanced Series(4) Opportunities Income Government Market
--------- --------- ---------- -------- --------- --------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............ $ $ $ 371.43 $ 372.66
1984............ 1,617.37 1,573.20
1985............ 3,130.63 2,841.11
1986............ $ 179.32 4,748.62 4,156.14
1987............ 1,144.47 5,946.69 5,544.54
1988............ 2,575.59 7,543.35 7,076.34
1989............ 4,145.89 9,593.36 8,844.46
1990............ 4,525.41 11,478.34 10,664.43
1991............ 7,155.10 14,756.80 12,455.65
1992............ 9,525.32 17,106.73 14,045.10
1993............ $ 778.75 12,382.29 20,395.31 15,578.48
1994............ $ 181.39 1,874.32 14,381.73 $ 184.14 $ 180.37 20,599.31 $ 184.22 17,169.67
1995............ 1,539.15 3,838.86 20,699.45 1,455.32 1,421.25 25,914.91 1,391.35 19,102.88
1996............ 3,201.39 5,735.76 24,806.34 2,915.35 2,802.70 27,960.49 2,565.93 21,005.28
1997............ 5,517.69 8,883.98 32,677.67 4,564.41 4,262.78 31,829.31 3,926.45 23,025.65
1998............
Annual Effective
Rate of Return...
</TABLE>
- ----
(1) Cumulative payments as of December 31, 1998 would be $ for Equity-
Income, $ for Overseas, $ for Goldman Sachs Midcap Value and
Westpeak Growth and Income, $ for Loomis Sayles Small Cap, and $
for each of the other Zenith Fund series.
(2) The Morgan Stanley International Magnum Equity Series' subadviser was
Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley Asset
Management Inc. became the subadviser.
(3) The Goldman Sachs Midcap Value Series' subadviser was Loomis, Sayles &
Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management
became the subadviser.
(4) The Westpeak Stock Index and Back Bay Advisors Managed Series are only
available through Contracts purchased prior to May 1, 1995.
II-11
<PAGE>
As discussed in the prospectus in the third to the last paragraph of the
section entitled "Investment Experience Information," the Variable Account may
illustrate historical investment performance by showing the percentage change
in unit value and the annual effective rate of return of each sub-account of
the Variable Account for every calendar year since inception of the
corresponding Eligible Funds to the date of the illustration and for the 10, 5
and 1 year periods and the year-to-date period ending with the date of the
illustration. Examples of such illustrations follow. Such illustrations do not
reflect the impact of any Contingent Deferred Sales Charge or the annual $30
Administration Contract Charge. The method of calculating the percentage
change in unit value is described in the prospectus under "Investment
Experience Information." The annual effective rate of return in these
illustrations is calculated by dividing the unit value at the end of the
period by the unit value at the beginning of the period, raising this quantity
to the power of 1/n (where n is the number of years in the period), and then
subtracting 1.
Set forth on the following pages are illustrations of the percentage change
in unit value information and annual effective rate of return information
discussed above that may appear in the Variable Account's Annual and Semi-
Annual Reports and in other illustrations of historical investment
performance. Such illustrations do not reflect the impact of any Contingent
Deferred Sales Charge or the annual $30 Administration Contract Charge.
Loomis Sayles Small Cap Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
May 1, 1994................................................ 1.000000
December 31, 1994.......................................... 0.959097 -4.1%
December 31, 1995.......................................... 1.219226 27.1%
December 31, 1996.......................................... 1.571807 28.9%
December 31, 1997.......................................... 1.936137 23.2%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
4 years, 8 months ended December 31, 1998.................... % %
1 year ended December 31, 1998............................... % %
</TABLE>
Morgan Stanley International Magnum Equity Sub-Account**
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 1.023745 2.4%
December 31, 1995.......................................... 1.073005 4.8%
December 31, 1996.......................................... 1.129151 5.2%
December 31, 1997.......................................... 1.099535 -2.6%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
4 years, 2 months ended December 31, 1998.................... % %
1 year ended December 31, 1998............................... % %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge or the annual $30 Administration Contract Charge.
** The Morgan Stanley International Magnum Equity Series' subadviser was
Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley Asset
Management Inc. became the subadviser.
II-12
<PAGE>
Overseas Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
January 28, 1987........................................... 1.000000
December 31, 1987.......................................... 0.934480 -6.6%
December 31, 1988.......................................... 0.996890 6.7%
December 31, 1989.......................................... 1.242056 24.6%
December 31, 1990.......................................... 1.204901 -3.0%
December 31, 1991.......................................... 1.283814 6.5%
December 31, 1992.......................................... 1.130753 -11.9%
December 31, 1993.......................................... 1.532303 35.5%
December 31, 1994.......................................... 1.537887 0.4%
December 31, 1995.......................................... 1.664159 8.2%
December 31, 1996.......................................... 1.858653 11.7%
December 31, 1997.......................................... 2.045625 10.1%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
11 years, 11 months ended December 31, 1998.................. % %
10 years ended December 31, 1998............................. % %
5 years ended December 31, 1998.............................. % %
1 year ended December 31, 1998............................... % %
</TABLE>
Alger Equity Growth Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 0.955891 -4.4%
December 31, 1995.......................................... 1.402375 46.7%
December 31, 1996.......................................... 1.565675 11.6%
December 31, 1997.......................................... 1.940577 23.9%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
4 years, 2 months ended December 31, 1998.................... % %
1 year ended December 31, 1998............................... % %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales Charge
or the annual $30 Administration Contract Charge.
II-13
<PAGE>
Capital Growth Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
August 26, 1983............................................ 1.000000
December 31, 1983.......................................... 1.086144 8.6%
December 31, 1984.......................................... 1.065136 -1.9%
December 31, 1985.......................................... 1.766488 65.8%
December 31, 1986.......................................... 3.402150 92.6%
December 31, 1987.......................................... 5.125504 50.7%
December 31, 1988.......................................... 4.612285 -10.0%
December 31, 1989.......................................... 5.950283 29.0%
December 31, 1990.......................................... 5.665855 -4.8%
December 31, 1991.......................................... 8.607664 51.9%
December 31, 1992.......................................... 7.978068 -7.3%
December 31, 1993.......................................... 9.049554 13.4%
December 31, 1994.......................................... 8.297578 -8.3%
December 31, 1995.......................................... 11.300017 36.2%
December 31, 1996.......................................... 13.496435 19.4%
December 31, 1997.......................................... 16.441932 21.8%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
15 years, 4 months ended December 31, 1998................... % %
10 years ended December 31, 1998............................. % %
5 years ended December 31, 1998.............................. % %
1 year ended December 31, 1998............................... % %
</TABLE>
Goldman Sachs Midcap Value** Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
April 30, 1993............................................. 1.000000
December 31, 1993.......................................... 1.137039 13.7%
December 31, 1994.......................................... 1.118794 -1.6%
December 31, 1995.......................................... 1.438865 28.6%
December 31, 1996.......................................... 1.669358 16.0%
December 31, 1997.......................................... 1.932280 15.7%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
5 years, 8 months ended December 31, 1998.................... % %
5 years ended December 31, 1998.............................. % %
1 year ended December 31, 1998............................... % %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge or the annual $30 Administration Contract Charge.
** The Goldman Sachs Midcap Value Series' subadviser was Loomis, Sayles &
Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management became
the subadviser.
II-14
<PAGE>
Davis Venture Value Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 0.962860 -3.7%
December 31, 1995.......................................... 1.323183 37.4%
December 31, 1996.......................................... 1.642613 24.1%
December 31, 1997.......................................... 2.163463 31.7%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
4 years, 2 months ended December 31, 1998.................... % %
1 year ended December 31, 1998............................... % %
</TABLE>
Westpeak Growth and Income Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
April 30, 1993............................................. 1.000000
December 31, 1993.......................................... 1.132111 13.2%
December 31, 1994.......................................... 1.103489 -2.5%
December 31, 1995.......................................... 1.485762 34.6%
December 31, 1996.......................................... 1.730922 16.5%
December 31, 1997.......................................... 2.279329 31.7%
December 31, 1998.......................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
5 years, 8 months ended December 31, 1998.................... % %
5 years ended December 31, 1998.............................. % %
1 year ended December 31, 1998............................... % %
</TABLE>
Equity-Income Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ------
<S> <C> <C>
October 9, 1986............................................ 1.000000
December 31, 1986.......................................... 0.998929 -0.1%
December 31, 1987.......................................... 0.974348 -2.5%
December 31, 1988.......................................... 1.179618 21.1%
December 31, 1989.......................................... 1.365709 15.8%
December 31, 1990.......................................... 1.141297 -16.4%
December 31, 1991.......................................... 1.480005 29.7%
December 31, 1992.......................................... 1.706687 15.3%
December 31, 1993.......................................... 1.991856 16.7%
December 31, 1994.......................................... 2.104085 5.6%
December 31, 1995.......................................... 2.804492 33.3%
December 31, 1996.......................................... 3.161755 12.7%
December 31, 1997.......................................... 3.996188 26.4%
December 31, 1998.......................................... %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales Charge
or the annual $30 Administration Contract Charge.
II-15
<PAGE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
------------ ---------
<S> <C> <C>
12 years, 2 months ended December 31, 1998.............. % %
10 years ended December 31, 1998........................ % %
5 years ended December 31, 1998......................... % %
1 year ended December 31, 1998.......................... % %
Westpeak Stock Index Sub-Account**
Annual Percent Change in Unit Value*
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ---------
<S> <C> <C>
May 1, 1987.............................................
December 31, 1987.......................................
December 31, 1988.......................................
December 31, 1989.......................................
December 31, 1990.......................................
December 31, 1991.......................................
December 31, 1992.......................................
December 31, 1993.......................................
December 31, 1994.......................................
December 31, 1995.......................................
December 31, 1996.......................................
December 31, 1997.......................................
December 31, 1998.......................................
Percent Change in Unit Value and Annual Effective Rate of Return*
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
------------ ---------
<S> <C> <C>
11 years, 8 months ended December 31, 1998.............. % %
10 years ended December 31, 1998........................ % %
5 years ended December 31, 1998......................... % %
1 year ended December 31, 1998.......................... % %
Loomis Sayles Balanced Sub-Account
Annual Percent Change in Unit Value*
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ---------
<S> <C> <C>
October 31, 1994........................................ 1.000000
December 31, 1994....................................... 0.996791 -0.3%
December 31, 1995....................................... 1.227281 23.1%
December 31, 1996....................................... 1.415482 15.3%
December 31, 1997....................................... 1.622453 14.6%
December 31, 1998....................................... %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge or the annual $30 Administration Contract Charge.
** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
II-16
<PAGE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
------------ ---------
<S> <C> <C>
4 years, 2 months ended December 31, 1998............... % %
1 year ended December 31, 1998.......................... % %
Back Bay Advisors Managed Sub-Account**
Annual Percent Change in Unit Value*
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ---------
<S> <C> <C>
May 1, 1987.............................................
December 31, 1987.......................................
December 31, 1988.......................................
December 31, 1989.......................................
December 31, 1990.......................................
December 31, 1991.......................................
December 31, 1992.......................................
December 31, 1993.......................................
December 31, 1994.......................................
December 31, 1995.......................................
December 31, 1996.......................................
December 31, 1997.......................................
December 31, 1998.......................................
Percent Change in Unit Value and Annual Effective Rate of Return*
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
------------ ---------
<S> <C> <C>
11 years, 8 months ended December 31, 1998.............. % %
10 years ended December 31, 1998........................ % %
5 years ended December 31, 1998......................... % %
1 year ended December 31, 1998.......................... % %
Salomon Brothers Strategic Bond Opportunities Sub-Account
Annual Percent Change in Unit Value*
<CAPTION>
Accumulation %
Date Unit Value Change
---- ------------ ---------
<S> <C> <C>
October 31, 1994........................................ 1.000000
December 31, 1994....................................... 0.983850 -1.6%
December 31, 1995....................................... 1.158823 17.8%
December 31, 1996....................................... 1.307292 12.8%
December 31, 1997....................................... 1.432601 9.6%
December 31, 1998....................................... %
Percent Change in Unit Value and Annual Effective Rate of Return*
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
------------ ---------
<S> <C> <C>
4 years, 2 months ended December 31, 1998............... % %
1 year ended December 31, 1998.......................... % %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge or the annual $30 Administration Contract Charge.
** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
II-17
<PAGE>
Back Bay Advisors Bond Income Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
- ---- ------------ ------
<S> <C> <C>
August 26, 1983............................................. 1.000000
December 31, 1983........................................... 1.027196 2.7%
December 31, 1984........................................... 1.141109 11.1%
December 31, 1985........................................... 1.337005 17.2%
December 31, 1986........................................... 1.514752 13.3%
December 31, 1987........................................... 1.528314 0.9%
December 31, 1988........................................... 1.633970 6.9%
December 31, 1989........................................... 1.810362 10.8%
December 31, 1990........................................... 1.930406 6.6%
December 31, 1991........................................... 2.246568 16.4%
December 31, 1992........................................... 2.397657 6.7%
December 31, 1993........................................... 2.663825 11.1%
December 31, 1994........................................... 2.539801 -4.7%
December 31, 1995........................................... 3.037039 19.6%
December 31, 1996........................................... 3.134109 3.2%
December 31, 1997........................................... 3.428788 9.4%
December 31, 1998........................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
15 years, 4 months ended December 31, 1998................... % %
10 years ended December 31, 1998............................. % %
5 years ended December 31, 1998.............................. % %
1 year ended December 31, 1998............................... % %
</TABLE>
Salomon Brothers U.S. Government Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
- ---- ------------ ------
<S> <C> <C>
October 31, 1994............................................ 1.000000
December 31, 1994........................................... 1.003770 0.4%
December 31, 1995........................................... 1.139109 13.5%
December 31, 1996........................................... 1.160957 1.9%
December 31, 1997........................................... 1.242399 7.0%
December 31, 1998........................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
4 years, 2 months ended December 31, 1998.................... % %
1 year ended December 31, 1998............................... % %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales Charge
or the annual $30 Administration Contract Charge.
II-18
<PAGE>
Back Bay Advisors Money Markey Sub-Account
Annual Percent Change in Unit Value*
<TABLE>
<CAPTION>
Accumulation %
Date Unit Value Change
- ---- ------------ ------
<S> <C> <C>
August 26, 1983............................................. 1.000000
December 31, 1983........................................... 1.027165 2.7%
December 31, 1984........................................... 1.122053 9.2%
December 31, 1985........................................... 1.198477 6.8%
December 31, 1986........................................... 1.262853 5.4%
December 31, 1987........................................... 1.327245 5.1%
December 31, 1988........................................... 1.407892 6.1%
December 31, 1989........................................... 1.517621 7.8%
December 31, 1990........................................... 1.619846 6.7%
December 31, 1991........................................... 1.697425 4.8%
December 31, 1992........................................... 1.738206 2.4%
December 31, 1993........................................... 1.765866 1.6%
December 31, 1994........................................... 1.811432 2.6%
December 31, 1995........................................... 1.889065 4.3%
December 31, 1996........................................... 1.959126 3.7%
December 31, 1997........................................... 2.036045 3.9%
December 31, 1998........................................... %
</TABLE>
Percent Change in Unit Value and Annual Effective Rate of Return*
<TABLE>
<CAPTION>
% Change Annual
in Unit Effective
Value Rate
-------- ---------
<S> <C> <C>
15 years, 4 months ended December 31, 1998................... % %
10 years ended December 31, 1998............................. % %
5 years ended December 31, 1998.............................. % %
1 year ended December 31, 1998............................... % %
</TABLE>
- --------
* Unit values do not reflect the impact of any Contingent Deferred Sales Charge
or the annual $30 Administration Contract Charge.
II-19
<PAGE>
NET INVESTMENT FACTOR
The net investment factor ("Net Investment Factor") for each sub-account is
determined on each day on which the New York Stock Exchange is open for
trading as follows:
(1) The net asset value per share of the Eligible Fund held in the sub-
account determined as of the close of regular trading on the New York Stock
Exchange on a particular day;
(2) Plus the per share amount of any dividend or capital gains
distribution made by the Eligible Fund since the close of regular trading
on the New York Stock Exchange on the preceding trading day;
(3) Is divided by the net asset value per share of the Eligible Fund as
of the close of regular trading on the New York Stock Exchange on the
preceding trading day; and
(4) Finally, the daily charges for the Administration Asset Charge and
Mortality and Expense Risk Charge that have accumulated since the close of
regular trading on the New York Stock Exchange on the preceding trading day
are subtracted. (See "Administration Charges, Contingent Deferred Sales
Charge and Other Deductions" in the prospectus.) On an annual basis, the
total deduction for such charges equals 1.35% of the daily net asset value
of the Variable Account.
ANNUITY PAYMENTS
At annuitization, 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
age of the Payee at annuitization, (ii) the assumed interest rate selected,
(iii) the type of payment option selected, and (iv) the investment performance
of the Eligible Fund selected.
When a variable payment option is selected, the Contract proceeds will be
applied at annuity purchase rates, which vary depending on the particular
option selected and the age of the Payee, to calculate the basic payment level
purchased by the Contract Value. With respect to Contracts issued in New York
or Oregon for use in situations not involving an employer-sponsored plan,
annuity purchase rates used to calculate the basic payment level will also
reflect the sex of the Payee when the payment option involves a life
contingency. The impact of the choice of option and the sex and age of the
Payee on the level of annuity payments is described in the prospectus under
"Amount of Variable Annuity Payments."
The amount of the basic payment level is determined by applying the
applicable annuity purchase rate to the amount applied from each sub-account
to provide the annuity. This basic payment level is converted into annuity
units, the number of which remains constant. Each monthly annuity payment is
in an amount equal to that number of annuity units multiplied by the
applicable annuity unit value for that payment (described below). The
applicable annuity unit value for each sub-account will change from day to day
depending upon the investment performance of the sub-account, which in turn
depends upon the investment performance of the Eligible Fund in which the sub-
account invests.
The selection of an assumed interest rate ("Assumed Interest Rate") will
affect both the basic payment level and the amount by which subsequent
payments increase or decrease. The basic payment level is calculated on the
assumption that the Net Investment Factors applicable to the Contract will be
equivalent on an annual basis to a net investment return at the Assumed
Interest Rate. If this assumption is met following the date any payment is
determined, then the amount of the next payment will be exactly equal to the
amount of the preceding payment. If the actual Net Investment Factors are
equivalent to a net investment return greater than the Assumed Interest Rate,
the next payment will be larger than the preceding one; if the actual Net
Investment Factors are equivalent to a net investment return smaller than the
Assumed Interest Rate, then
II-20
<PAGE>
the next payment will be smaller than the preceding payment. The definition of
the Assumed Interest Rate, and the effect of the level of the Assumed Interest
Rate on the amount of monthly payments is explained in the prospectus under
"Amount of Variable Annuity Payments."
The number of annuity units credited under a variable payment option is
determined as follows:
(1) The proceeds under a deferred Contract, or the net purchase payment
under an immediate Contract (at such time as immediate Contracts may be
made available), are applied at the Company's annuity purchase rates for
the selected Assumed Interest Rate to determine the basic payment level.
(The amount of Contract Value or Death Proceeds applied will be reduced by
any applicable Contingent Deferred Sales Charge, Administration Contract
Charge and the amount of any outstanding loan plus accrued interest.)
(2) The number of annuity units is determined by dividing the amount of
the basic payment level by the applicable annuity unit value(s) next
determined following the date of application of proceeds (in the case of a
deferred Contract) or net purchase payment (in the case of an immediate
Contract.)
The dollar amount of the initial payment will be at the basic payment level.
The dollar amount of each subsequent payment is determined by multiplying the
number of annuity units by the applicable annuity unit value which is
determined at least 14 days before the payment is due.
The value of an annuity unit for each sub-account depends on the Assumed
Interest Rate and on the Net Investment Factors applicable at the time of
valuation. The initial annuity unit values were set at $1.00 effective on or
about the date on which shares of the corresponding Eligible Funds were first
publicly available. The Net Investment Factor and, therefore, changes in the
value of an annuity unit under a variable payment option, reflect the
deduction of the Mortality and Expense Risk Charge and Administration Asset
Charge. (See "Net Investment Factor" above.)
The annuity unit value for each sub-account is equal to the corresponding
annuity unit value for the sub-account previously determined multiplied by the
applicable Net Investment Factor for that sub-account for the New York Stock
Exchange trading day then ended, and further multiplied by the assumed
interest factor ("Assumed Interest Factor") for each day of the valuation
period. The Assumed Interest Factor represents the daily equivalent of the
Contract's annual Assumed Interest Rate. In the calculation of annuity unit
values, the Assumed Interest Factor has the effect of reducing the Net
Investment Factor by an amount equal to the daily equivalent of the Contract's
Assumed Interest Rate. The result of this adjustment is that if the Net
Investment Factor for a valuation period is greater (when expressed as an
annual net investment return) than the Assumed Interest Rate, the annuity unit
value will increase. If the Net Investment Factor for the period is less (when
expressed as an annual net investment return) than the Assumed Interest Rate,
the annuity unit value will decrease. At an Assumed Interest Rate of 3.5%, the
Assumed Interest Factor is .9999058. Assumed Interest Factors for other
Assumed Interest Rates are computed on a consistent basis.
An illustration of annuity income payments under various hypothetical and
historical rates appear below. The monthly equivalents of the hypothetical
annual net returns of 0%, 5.71%, 6%, 8% and 10% shown in the tables at pages
II-23 and II-24 are 0%, %, %, % and %.
II-21
<PAGE>
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity income
payments under the Contract change with investment performance over an
extended period of time. The tables illustrate how monthly annuity income
payments would vary over time if the return on assets in the selected
portfolios were a uniform gross annual rate of 0%, %, 6%, 8% or 10%. The
values would be different from those shown if the returns averaged 0%, %,
6%, 8% or 10%, but fluctuated over and under those averages throughout the
years.
The tables reflect the daily charge to the sub-accounts for assuming
mortality and expense risks, which is equivalent to an annual charge of .95%
and the daily administrative charge which is equivalent to an annual charge of
0.40%. The amounts shown in the tables also take into account the Eligible
Funds' management fees and operating expenses which are assumed to be at an
annual rate of % of the average daily net assets of the Eligible Funds.
Actual fees and expenses of the Eligible Funds associated with your Contract
may be more or less than %, will vary from year to year, and will depend on
how you allocate your Contract Value. See the section in your current
prospectus entitled "Expense Table" for more complete details. The monthly
annuity income payments illustrated are on a pre-tax basis. The federal income
tax treatment of annuity income considerations is generally described in the
section of your current prospectus entitled "Federal Income Tax Status."
The tables show both the gross rate and the net rate. The difference between
gross and net rates represents the 1.35% for mortality and expense risk and
administrative charges and the assumed % for investment management and
operating expenses. Since these charges are deducted daily from assets, the
difference between the gross and net rate is not exactly %.
Two tables follow. The first table assumes that 100% of the Contract Value
is allocated to a variable annuity income option, the second assumes that 50%
of the Contract Value is placed under a fixed annuity income option, using the
fixed crediting rate the Company offered on the fixed annuity income option at
the date of the illustration. Both illustrations assume that the final value
of the accumulation account is $100,000 and is applied at age 65 to purchase a
life annuity for a guaranteed period of 10 years certain and life thereafter.
When part of the Contract Value has been allocated to the fixed annuity
income option, the guaranteed minimum annuity income payment resulting from
this allocation is also shown. The illustrated variable annuity income
payments are determined through the use of standard mortality tables and an
assumed interest rate of 3.5% per year. Thus, actual performance greater than
3.5% per year will result in increasing annuity income payments and actual
performance less than 3.5% per year will result in decreasing annuity income
payments. The Company offers alternative Assumed Interest Rates from which you
may select. Fixed annuity income payments remain constant. Initial monthly
annuity income payments under a fixed annuity income payout are generally
higher than initial payments under a variable income payout option.
These tables show the monthly income payments for several hypothetical
constant assumed interest rates. Of course, actual investment performance will
not be constant and may be volatile. Actual monthly income amounts would
differ from those shown if the actual rate of return averaged the rate shown
over a period of years, but also fluctuated above or below those averages for
individual contract years. Upon request, and when you are considering an
annuity income option, the Company will furnish a comparable illustration
based on your individual circumstances.
II-22
<PAGE>
ANNUITY PAY-OUT ILLUSTRATION
(100% VARIABLE PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: GROSS AMOUNT OF CONTRACT
John Doe VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 4/1/99
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT BASED ON CURRENT RATES, IF 100% FIXED
ANNUITY OPTION SELECTED FOR AGE 65: $562.00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT.
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.5%
VARIABLE MONTHLY ANNUITY INCOME PAYMENT ON THE DATE OF THE
ILLUSTRATION: $581.00
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE. NO MINIMUM
DOLLAR AMOUNT IS GUARANTEED.
<TABLE>
<CAPTION>
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN
WITH AN ASSUMED RATE OF RETURN OF:
-------------------------------------------------
Gross 0% % 6% 8% 10%
PAYMENT CALENDAR ----- --------- --------- --------- --------- ---------
YEAR YEAR AGE Net** % 3.50% % % %
- ------- -------- --- ----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1998 65 581.00 581.00 581.00 581.00 581.00
2 1999 66 581.00
3 2000 67 581.00
4 2001 68 581.00
5 2002 69 581.00
10 2007 74 581.00
15 2012 79 581.00
20 2017 84 581.00
</TABLE>
IT IS EMPHASIZED THAT THE ASSUMED RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE.
ACTUAL PERFORMANCE RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
THE CONTRACT OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THAT SHOWN IF THE
ACTUAL PERFORMANCE AVERAGED THE ASSUMED RATES OF RETURN SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL CONTRACT YEARS. SINCE IT IS HIGHLY LIKELY THAT PERFORMANCE WILL
FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME (BASED ON THE VARIABLE ACCOUNT)
WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS
THAT THIS HYPOTHETICAL PERFORMANCE CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
- --------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period, payments
will be continued for the balance of the Certain Period. The cumulative
amount of income payments received under the annuity depends on how long the
Annuitant lives after the Certain Period. An annuity pools the mortality
experience of Annuitants. Annuitants who die earlier, in effect, subsidize
the payments for those who live longer.
** The illustrated Net Assumed Rates of Return reflect the deduction of
average fund expenses and the 1.35% Mortality and Expense Risk and
Administration Asset Charges from the Gross Rates of Return.
II-23
<PAGE>
ANNUITY PAY-OUT ILLUSTRATION
(50% VARIABLE--50% FIXED PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: GROSS AMOUNT OF CONTRACT
John Doe VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 4/1/99
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT FOR AGE 65 BASED ON CURRENT RATES, IF
100% FIXED ANNUITY OPTION SELECTED: $562.00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 50% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT AND 50% TO FIXED PAYOUT
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.5%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE, BUT WILL NEVER
BE LESS THAN: $ . THE MONTHLY GUARANTEED PAYMENT OF $ IS BEING
PROVIDED BY THE $50,000 APPLIED UNDER THE FIXED ANNUITY OPTION.
<TABLE>
<CAPTION>
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN
WITH AN ASSUMED RATE OF RETURN OF:
-------------------------------------------------
Gross 0% % 6% 8% 10%
PAYMENT CALENDAR ----- --------- --------- --------- --------- ---------
YEAR YEAR AGE Net** % 3.50% % % %
- ------- -------- --- ----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1998 65 $571.50 $571.50 $571.50 $571.50 $571.50
2 1999 66 571.50
3 2000 67 571.50
4 2001 68 571.50
5 2002 69 571.50
10 2007 74 571.50
15 2012 79 571.50
20 2017 84 571.50
</TABLE>
IT IS EMPHASIZED THAT THE ASSUMED RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE.
ACTUAL PERFORMANCE RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
THE CONTRACT OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THAT SHOWN IF THE
ACTUAL PERFORMANCE AVERAGED THE ASSUMED RATES OF RETURN SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL CONTRACT YEARS. SINCE IT IS HIGHLY LIKELY THAT PERFORMANCE WILL
FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME (BASED ON THE VARIABLE ACCOUNT)
WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS
THAT THIS HYPOTHETICAL PERFORMANCE CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
- --------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period, payments
will be continued for the balance of the Certain Period. The cumulative
amount of income payments received under the annuity depends on how long the
Annuitant lives after the Certain Period. An annuity pools the mortality
experience of Annuitants. Annuitants who die earlier, in effect, subsidize
the payments for those who live longer.
** The illustrated Net Assumed Rates of Return apply only to the variable
portion of the monthly payment and reflect the deduction of average fund
expenses and the 1.35% Mortality and Expense Risk and Administration Asset
Charges from the Gross Rate of Return.
II-24
<PAGE>
HISTORICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity income
payments under the Contract change with investment performance over an
extended period of time. In comparison with hypothetical illustrations based
on a uniform annual rate of return, the table uses historical annual returns
to illustrate that monthly annuity income payments vary over time based on
fluctuations in annual returns.
The tables reflect the daily charge to the sub-accounts for assuming
mortality and expense risks, which is equivalent to an annual charge of .95%
and the daily administrative charge which is equivalent to an annual charge of
.40%. The amounts shown in the tables also take into account the actual
Eligible Funds' management fees and operating expenses. Actual fees and
expenses of the Eligible Funds associated with your Contract may be more or
less than the historical fees, will vary from year to year, and will depend on
how you allocate your Contract Value. See the section in your current
prospectus entitled "Expense Table" for more complete details. The monthly
annuity income payments illustrated are on a pre-tax basis. The federal income
tax treatment of annuity income considerations is generally described in the
section of your current prospectus entitled "Federal Income Tax Status."
The following tables assume that 100% of the Contract Value is allocated to
a variable annuity income option, that the final value of the accumulation
account is $100,000 and is applied at age 65 to purchase a life annuity for a
guaranteed period of 10 years certain and life thereafter. The table assumes
that the Annuitant was age 65 in 1983, the year of inception for the Capital
Growth, Back Bay Advisors Bond Income and Back Bay Advisors Money Market
Series, and that the Annuitant's age had increased by the time the other
Eligible Funds became available. The historical variable annuity income
payments are based on an assumed interest rate of 3.5% per year. Thus, actual
performance greater than 3.5% per year resulted in an increased annuity income
payment and actual performance less than 3.5% per year resulted in a decreased
annuity income payment. The Company offers alternative Assumed Interest Rates
(AIR) from which you may select: 0% and 5%. An AIR of 0% will result in a
lower initial payment than a 3.5% or 5% AIR. Similarly, an AIR of 5% will
result in a higher initial payment than a 0% or 3.5% AIR. The illustrations
are based on the current annuity purchase rates used by the Company. The rates
may differ at the time you annuitize.
The table illustrates the amount of the first monthly payment for each year
shown. During each year, the monthly payments would vary to reflect
fluctuations in the actual rate of return on the Eligible Funds. Upon request,
and when you are considering an annuity income option, the Company will
furnish a comparable illustration based on your individual circumstances.
II-25
<PAGE>
ANNUITY PAY-OUT HISTORICAL ILLUSTRATION
(100% VARIABLE PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: GROSS AMOUNT OF CONTRACT
John Doe VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 4/1/99
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT BASED ON CURRENT RATES, IF 100% FIXED
ANNUITY OPTION SELECTED: FOR AGE 65: $ ; FOR AGE 69: $ ; FOR AGE 75: $ ;
AND FOR AGE 76: $ .
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT.
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN
CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE. NO MINIMUM
DOLLAR AMOUNT IS GUARANTEED.
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN WITH
100% OF THE CONTRACT VALUE INVESTED IN:
<TABLE>
<CAPTION>
MORGAN GOLDMAN WESTPEAK
LOOMIS STANLEY ALGER SACHS DAVIS GROWTH
PAYMENT CALENDAR SAYLES INTERNATIONAL FIDELITY EQUITY CAPITAL MIDCAP VENTURE AND
YEAR YEAR AGE SMALL CAP MAGNUM OVERSEAS GROWTH GROWTH VALUE** VALUE INCOME
- ------- -------- --- --------- ------------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1983 65 $ 581.00
2 1984 66 601.36
3 1985 67 569.73
4 1986 68 912.93
5 1987 69 $642.00 1,698.78
6 1988 70 581.39 2,472.75
7 1989 71 599.19 2,149.71
8 1990 72 721.30 2,679.54
9 1991 73 676.06 2,465.18
10 1992 74 695.98 3,618.49
11 1993 75 592.22 3,240.10 $ 747.00 $ 747.00
12 1994 76 $ 765.00 $765.00 775.38 $ 765.00 3,550.97 829.98 $ 765.00 826.38
13 1995 77 733.73 778.70 751.89 737.42 3,145.80 789.05 732.39 778.25
14 1996 78 901.19 788.57 786.11 1,045.27 4,139.22 980.46 972.43 1,012.42
15 1997 79 1,122.40 801.70 848.22 1,127.42 4,776.14 1,098.95 1,166.26 1,139.48
16 1998 80 1,335.81 754.27 901.98 1,350.12 5,621.74 1,229.02 1,484.12 1,449.76
</TABLE>
INVESTMENT PERFORMANCE RESULTS CONTAINED IN THIS REPORT REPRESENT PAST
PERFORMANCE AND ARE NOT INDICATIVE OF FUTURE RETURNS. THE PERFORMANCE RESULTS
OF A CONTRACT MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE CONTRACT OWNER
AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED. SINCE IT IS HIGHLY
LIKELY THAT PERFORMANCE WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(BASED ON THE VARIABLE ACCOUNT) WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE
MADE BY THE COMPANY OR THE FUNDS THAT THESE HISTORICAL RETURNS CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THE PAYMENTS IN THIS ILLUSTRATION ARE NET OF ALL CHARGES: MORTALITY AND
EXPENSE RISK CHARGE AND ADMINISTRATION ASSET CHARGE (1.35%), MANAGEMENT FEES
AND OTHER EXPENSES (These may vary from year to year. The following expenses
are for the year ended December 31, 1998 after giving effect to current
expense caps or deferrals: 1.00% Loomis Sayles Small Cap, 1.30% Morgan Stanley
International Magnum, .83% Alger Equity Growth, .90% Goldman Sachs Midcap
Value, .83% Davis Venture Value, .78% Westpeak Growth and Income, .37%
Westpeak Stock Index, .82% Loomis Sayles Balanced, .58% Back Bay Managed, .85%
Salomon Strategic Bond Opportunities, .48% Back Bay Bond Income, .70% Salomon
US Government, .45% Back Bay Money Market. Effective May 1, 1998 the Goldman
Sachs Midcap Value Series is subject to a voluntary expense deferral
arrangement with an annual expense limit of .90% of net assets. The following
expenses are for the year ended December 31, 1998 and are unaffected by
expense caps or deferrals: .91% Fidelity Overseas, .66% Capital Growth, .58%
Fidelity Equity-Income.)
- -------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period,
payments will be continued for the balance of the Certain Period. The
cumulative amount of income payments received under the annuity depends on
how long the Annuitant lives after the Certain Period. An annuity pools the
mortality experience of Annuitants. Annuitants who die earlier, in effect,
subsidize the payments for those who live longer.
** Rates of return and Contract values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average
daily net assets through April 30, 1998. Beginning May 1, 1998, the
Series' advisory fee is .75% and is reflected through December 31, 1998.
II-26
<PAGE>
ANNUITY PAY-OUT HISTORICAL ILLUSTRATION
(100% VARIABLE PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: GROSS AMOUNT OF CONTRACT
John Doe VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 4/1/99
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT BASED ON CURRENT RATES, IF 100% FIXED
ANNUITY OPTION SELECTED: FOR AGE 65: $ ; FOR AGE 68: $ ; FOR AGE 69: $ ;
FOR AGE 76: $ .
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT.
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN
CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE. NO MINIMUM
DOLLAR AMOUNT IS GUARANTEED.
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN WITH
100% OF THE CONTRACT VALUE INVESTED IN:
<TABLE>
<CAPTION>
SALOMON
FIDELITY WESTPEAK LOOMIS STRATEGIC BACK BAY SALOMON BACK BAY
PAYMENT CALENDAR EQUITY- STOCK SAYLES BACK BAY BOND BOND U.S. MONEY
YEAR YEAR AGE INCOME INDEX BALANCED MANAGED OPPORTUNITIES INCOME GOVERNMENT MARKET
- ------- -------- --- --------- --------- --------- --------- ------------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1983 65 $ 581.00 $581.00
2 1984 66 593.85 589.21
3 1985 67 637.34 621.82
4 1986 68 $ 626.00 721.50 641.71
5 1987 69 615.48 $ 642.00 $ 642.00 789.77 653.31
6 1988 70 580.03 545.85 617.60 769.90 663.40
7 1989 71 678.42 605.30 644.48 795.21 679.85
8 1990 72 758.88 750.98 731.61 851.26 708.06
9 1991 73 612.74 686.15 719.75 877.02 730.20
10 1992 74 767.71 853.12 824.49 986.14 739.29
11 1993 75 855.28 872.44 838.49 1,016.77 731.38
12 1994 76 964.44 912.49 $ 765.00 884.40 $765.00 1,091.45 $765.00 717.90
13 1995 77 984.32 879.55 758.20 833.68 748.36 1,005.44 763.51 711.52
14 1996 78 1,267.62 1,147.99 901.95 1,043.17 851.64 1,161.63 837.15 716.92
15 1997 79 1,380.64 1,339.89 1,004.99 1,143.60 928.18 1,158.11 824.28 718.30
16 1998 80 1,686.00 1,692.29 1,112.99 1,379.69 982.75 1,224.15 852.27 721.25
</TABLE>
INVESTMENT PERFORMANCE RESULTS CONTAINED IN THIS REPORT REPRESENT PAST
PERFORMANCE AND ARE NOT INDICATIVE OF FUTURE RETURNS. THE PERFORMANCE RESULTS
OF A CONTRACT MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE CONTRACT OWNER
AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED. SINCE IT IS HIGHLY
LIKELY THAT PERFORMANCE WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(BASED ON THE VARIABLE ACCOUNT) WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE
MADE BY THE COMPANY OR THE FUNDS THAT THESE HISTORICAL RETURNS CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THE PAYMENTS IN THIS ILLUSTRATION ARE NET OF ALL CHARGES: MORTALITY AND
EXPENSE RISK CHARGE AND ADMINISTRATION ASSET CHARGE (1.35%), MANAGEMENT FEES
AND OTHER EXPENSES (These may vary from year to year. The following expenses
are for the year ended December 31, 1998, after giving effect to current
expense caps or deferrals: 1.00% Loomis Sayles Small Cap, 1.30% Morgan Stanley
International Magnum, .83% Alger Equity Growth, .90% Goldman Sachs Midcap
Value, .83% Davis Venture Value, .78% Westpeak Growth and Income, .37%
Westpeak Stock Index, .82% Loomis Sayles Balanced, .58% Back Bay Managed, .85%
Salomon Strategic Bond Opportunities, .48% Back Bay Bond Income, .70% Salomon
US Government, .45% Back Bay Money Market. Effective May 1, 1998 the Goldman
Sachs Midcap Value Series is subject to a voluntary expense deferral
arrangement with an annual expense limit of .90% of net assets. The following
expenses are for the year ended December 31, 1998 and are unaffected by
expense caps or deferrals: .91% Fidelity Overseas, .66% Capital Growth, .58%
Fidelity Equity-Income.)
- -------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period,
payments will be continued for the balance of the Certain Period. The
cumulative amount of income payments received under the annuity depends on
how long the Annuitant lives after the Certain Period. An annuity pools the
mortality experience of Annuitants. Annuitants who die earlier, in effect,
subsidize the payments for those who live longer.
** Rates of return and Contract values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets through April 30, 1998. Beginning May 1, 1998 the Series'
advisory fee is .75% and is reflected through December 31, 1998.
II-27
<PAGE>
EXPERTS
The financial statements of The New England Variable Account of Metropolitan
Life Insurance Company ("MetLife") as of and for the year ended December 31,
1997, December 31, 1998, and the consolidated financial statements of
Metropolitan Life Insurance Company for the three years in the period ended
December 31, 1998, included in this Statement of Additional Information, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein (whose reports express unqualified opinions
and, with respect to MetLife, includes an explanatory paragraph referring to
the changes in the basis of accounting), and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Legal matters in connection with the Contracts described in this
registration statement have been passed on by Christopher P. Nicholas,
Associate General Counsel of the Company. Sutherland Asbill & Brennan LLP,
Washington, D.C., has provided advice on certain matters relating to the
Federal securities laws.
II-28
<PAGE>
APPENDIX A
ABC and affiliates Fortune Public Broadcasting
Atlanta Constitution Fox Newtwork and Service
Atlanta Journal affiliates Quinn, Jane Bryant
Austin American Fund Action (syndicated column)
Statesman Hartford Courant Registered
Baltimore Sun Houston Chronicle Representative
Barron's INC Research Magazine
Bond Buyer Indianapolis Star Resource
Boston Business Journal Institutional Investor Reuters
Boston Globe Investment Dealers Rukeyser's Business
Boston Herald Digest (syndicated column)
Broker World Investment Vision Sacramento Bee
Business Radio Network Investor's Daily San Francisco Chronicle
Business Week Journal of Commerce San Francisco Examiner
CBS and affiliates Kansas City Star San Jose Mercury
CFO LA Times Seattle Post-
Changing Times Leckey, Andrew Intelligencer
Chicago Sun Times (syndicated column) Seattle Times
Chicago Tribune Life Association News Smart Money
Christian Science Miami Herald St. Louis Post Dispatch
Monitor Milwaukee Sentinel St. Petersburg Times
Christian Science Money Standard & Poor's
Monitor News Service Money Maker Outlook
Cincinnati Enquirer Money Management Letter Standard & Poor's Stock
Cincinnati Post Morningstar Guide
CNBC National Public Radio Stanger's Investment
CNN National Underwriter Advisor
Columbus Dispatch NBC and affiliates Stockbroker's Register
Dallas Morning News New England Business Strategic Insight
Dallas Times-Herald New England Cable News Tampa Tribune
Denver Post New Orleans Times- Time
Des Moines Register Picayune Tobias, Andrew
Detroit Free Press New York Daily News (syndicated column)
Donoghues Money Fund New York Times UPI
Report Newark Star Ledger US News and World Report
Dorfman, Dan (syndicated Newsday USA Today
column) Newsweek Value Line
Dow Jones News Service Nightly Business Report Wall St. Journal
Economist Orange County Register Wall Street Letter
FACS of the Week Orlando Sentinel Wall Street Week
Financial News Network Pension World Washington Post
Financial Planning Pensions and Investments WBZ
Financial Services Week Personal Investor WBZ-TV
Financial World Philadelphia Inquirer WCVB-TV
Forbes Porter, Sylvia WEEI
Fort Worth Star-Telegram (syndicated column) WHDH
Portland Oregonian Worcester Telegram
Worth Magazine
WRKO
II-29
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
PART C. OTHER INFORMATION
-----------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements
The following financial statements of the Registrant are included in Part B
of this Post-Effective Amendment on Form N-4:
Statement of Assets and Liabilities as of December 31, 1998 (to be filed by
Amendment).
Statement of Operations for the years ended December 31, 1998 and 1997 (to
be filed by Amendment).
Statement of Changes in Net Assets for the years ended December 31, 1998
and 1997 (to be filed by Amendment).
Notes to Financial Statements (to be filed by Amendment).
The following financial statements of the Depositor are included in Part B
of this Post-Effective Amendment on Form N-4:
Consolidated Balance Sheets as of December 31, 1998 and 1997 (to be filed
by Amendment).
Consolidated Statements of Earnings for the years ended December 31, 1998,
1997 and 1996 (to be filed by Amendment).
Consolidated Statements of Equity for the years ended December 31, 1998,
1997 and 1996 (to be filed by Amendment).
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996 (to be filed by Amendment).
Notes to Consolidated Financial Statements (to be filed by Amendment).
(b) Exhibits
(1) (i) Resolutions of Board of Directors of New England Mutual Life
Insurance Company authorizing the Registrant are incorporated herein by
reference to the Registration Statement on Form N-4 (No. 333-11131) filed on
August 30, 1996.
<PAGE>
(ii) Resolutions of the Depositor adopting the Registrant as a separate
account are incorporated herein by reference to the Registration Statement on
Form N-4 (No. 333-11131) filed on August 30, 1996.
(2) None
(3) (i) Distribution Agreement is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
(ii) Form of Selling Agreement with other broker-dealers is incorporated
herein by reference to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(4) (i) Form of New England Mutual Life Insurance Company Variable Annuity
Contract is incorporated herein by reference to Post-Effective Amendment No. 2
to the Registration Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(ii) Form of New England Mutual Life Insurance Company Contract Loan
Endorsement is incorporated herein by reference to Post-Effective Amendment No.
2 to the Registration Statement on Form N-4 (No. 333-11131) filed on May 1,
1998.
(iii) Forms of New England Mutual Life Insurance Company Endorsements,
(Death of Owner, Individual Retirement Annuity, and Sample of Benefits for
Disability of Annuitant) are incorporated herein by reference to Post-Effective
Amendment No. 2 to the Registration Statement on Form N-4 (No. 333-11131) filed
on May 1, 1998.
(iv) Forms of Metropolitan Life Insurance Company Endorsements (New
Contract Loan, Spousal/Beneficiary Continuation) are incorporated herein by
reference to Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4 (No. 333-11131) filed on May 1, 1998.
(v) Form of Metropolitan Life Insurance Company Endorsement to New
England Mutual Life Insurance Company Variable Annuity Contract (See (4)(i)
above) is incorporated herein by reference to the Registration Statement on Form
N-4 (No. 333-11131) filed on August 30, 1996.
(vi) Metropolitan Life Insurance Company Variable Annuity Contract and
Application are incorporated herein by reference to the Registration Statement
on Form N-4 (No. 333-11131) filed on August 30, 1996.
(vii) Forms of Metropolitan Life Insurance Company Endorsements (Fixed
Account, Contract Loans, Tax-Sheltered Annuity, Periodic Reports and
Postponement of Surrender) are incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
III-2
<PAGE>
(viii) Forms of New England Mutual Life Insurance Company Endorsements
(Contract Loans, Fixed Account, Tax-Sheltered Annuity and Rider: Benefits of
Disability Annuitant and Modification of Variable Life Income Section and New
York Endorsement).
(ix) Form of Metropolitan Life Insurance Company Endorsement (Roth
Individual Retirement Annuity).
(5) (i) New England Mutual Life Insurance Company Application.
(ii) For Metropolitan Life Insurance Company Application see (4)(vi)
above.
(6) (i) Charter and By-Laws of Metropolitan Life Insurance Company are
incorporated herein by reference to the Registration Statement on Form N-4 (No.
333-11131) filed on August 30, 1996.
(ii) By-Laws Amendment is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
(7) None
(8) (i) Administrative Services Agreement is incorporated herein by
reference to the Registration Statement on Form N-4 (No. 333-11131) filed on
August 30, 1996.
(ii) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England Mutual Life Insurance Company
is incorporated herein by reference to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(iii) Amendment No. 1 to Participation Agreement Among Variable Insurance
Products Fund, Fidelity Distributors Corporation and New England Mutual Life
Insurance Company is incorporated by reference to Post-Effective Amendment No.
15 to the Registration Statement on Form N-4 (No. 33-17377) filed on April 1,
1996.
(iv) Assignment of Participation Agreement from New England Mutual Life
Insurance Company to Metropolitan Life Insurance Company is incorporated herein
by reference to the Registration Statement on Form N-4 (No. 333-11131) filed on
August 30, 1996.
(9) Opinion and consent of Christopher P. Nicholas, Esq. (to be filed by
Amendment).
(10) (i) Consent of Deloitte & Touche LLP. (to be filed by Amendment).
(ii) Consent of Sutherland Asbill and Brennan LLP (to be filed by
Amendment).
(11) None
(12) None
III-3
<PAGE>
(13) Schedule of computations for performance quotations is incorporated herein
by reference to Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4 (No. 333-11131) filed on May 1, 1998.
(14) Powers of Attorney are incorporated herein by reference to the Registration
Statement on Form N-4 (No. 333-11131) filed on August 30, 1996, except for
Gerald Clark, Burton A. Dole and Charles M. Leighton whose powers of attorney
were filed with Post-Effective Amendment No. 1 to the Registration Statement
(File No. 333-11131) on April 30, 1997 and Robert H. Benmosche, Jon F. Danski
and Stewart G. Nagler whose powers of attorney were filed with Post-Effective
Amendment No. 23 to the Registration Statement of Metropolitan Life Separate
Account E (File No. 2-90380) filed April 3, 1998.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
Principal Occupation and Business Positions and Offices
Name Address with Depositor
- ---------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C>
Curtis H. Barnette Chairman and Chief Director
Executive Officer
Bethlehem Steel Corporation,
1170 Eighth Avenue,
Martin Tower 2118,
Bethlehem, PA 18016-7699
Robert H. Benmosche Chairman of the Board, President Chairman of the Board, President
and Chief Executive Officer and Chief Executive Officer
Metropolitan Life Insurance
Company,
One Madison Avenue,
New York, NY 10010
Gerald Clark Vice-Chairman of the Board and Vice-Chairman of the Board and
Chief Investment Officer Chief Investment Officer
Metropolitan Life Insurance
Company
One Madison Avenue
New York, NY 10010
Joan Ganz Cooney Chairman, Executive Committee Director
Children's Television Workshop,
One Lincoln Plaza,
New York, NY 10023
</TABLE>
III-4
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation and Business Positions and Offices
Name Address with Depositor
- ---------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C>
Burton A. Dole, Jr. Retired Chairman, President and Director
Chief Executive Officer
Puritan Bennett
2200 Faraday Avenue
Carlsbad, CA 92008-7208
James R. Houghton Retired Chairman of the Board, Director
Corning Incorporated
80 East Market Street, 2nd Floor
Corning, NY 14830
Harry P. Kamen Retired Chairman and Chief Director
Executive Officer
Metropolitan Life Insurance Company
200 Park Avenue, Suite 5700
New York, NY 10166
Helene L. Kaplan Of Counsel, Skadden, Arps Director
Slate Meagher and Flom
919 Third Avenue
New York, NY 10022
Charles H. Leighton Retired Chairman and Chief Director
Executive Officer
CML Group, Inc.
524 Main Street
Bolton, MA 01720
Allen E. Murray Retired Chairman of the Board Director
and Chief Executive Officer
Mobil Corporation
375 Park Avenue, Suite 2901
New York, NY 10152
</TABLE>
III-5
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation and Business Positions and Offices
Name Address with Depositor
- ---------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C>
Stewart G. Nagler Vice-Chairman of the Board and Vice-Chairman of the Board and
Chief Financial Officer Chief Financial Officer
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
John J. Phelan, Jr. Retired Chairman and Chief Director
Executive Officer
New York Stock Exchange, Inc.
P. O. Box 312
Mill Neck, NY 11765
Hugh B. Price President and Chief Executive Director
Officer
National Urban League, Inc.
120 Wall Street, 7th & 8th Floors
New York, NY 10005
Robert G. Schwartz Retired Chairman of the Board Director
President and Chief Executive
Officer
Metropolitan Life Insurance Company
200 Park Avenue, Suite 5700
New York, NY 10166
Ruth J. Simmons, PH.D. President Director
Smith College
College Hall 20
North Hampton, MA 01063
William C. Steere, Jr. Chairman of the Board and Chief Director
Executive Officer,
Pfizer, Inc.,
235 East 42nd Street,
New York, NY 10017
</TABLE>
III-6
<PAGE>
Set forth below is a list of certain principal officers of Metropolitan Life.
The principal business address of each officer of Metropolitan Life is One
Madison Avenue, New York, New York 10010.
<TABLE>
<CAPTION>
Name Position with Metropolitan Life
- ----------------------------------- ----------------------------------------------------------------
<S> <C>
Robert H. Benmosche Chairman of the Board, President and Chief Executive Officer
Gary A. Beller Senior Executive Vice-President and General Counsel
Gerald Clark Vice-Chairman of the Board and Chief Investment Officer
Stewart C. Nagler Vice-Chairman of the Board and Chief Financial Officer
C. Robert Hendrickson Senior Executive Vice-President
Catherine A. Rein Senior Executive Vice-President
William J. Toppeta Senior Executive Vice-President
John H. Tweedie Senior Executive Vice-President
Jeffrey J. Hodgman Executive Vice-President
Terence I. Lennon Executive Vice-President
David A. Levene Executive Vice-President
Judy E. Weiss Executive Vice-President and Chief Actuary
James M. Benson President and Chief Executive Officer - New England Life
Insurance Company
Richard M. Blackwell Senior Vice-President
Alexander D. Brunini Senior Vice-President
Jon F. Danski Senior Vice-President and Controller
James B. Digney Senior Vice-President
William T. Friedewald, M.D. Senior Vice-President
Ira Friedman Senior Vice-President
Anne E. Hayden Senior Vice-President
Sibyl C. Jacobson Senior Vice-President
Joseph W. Jordan Senior Vice-President
Kernan F. King Senior Vice-President
Nicholas D. Latrenta Senior Vice-President
Leland C. Launer, Jr. Senior Vice-President
Gary E. Lineberry Senior Vice-President
James L. Lipscomb Senior Vice-President
William D. Livesey Senior Vice-President
James M. Logan Senior Vice-President
Eugene Marks, Jr. Senior Vice-President
William R. Prueter Senior Vice-President
Joseph A. Reali Senior Vice-President
Vincent P. Reusing Senior Vice-President
</TABLE>
III-7
<PAGE>
<TABLE>
<CAPTION>
Name Position with Metropolitan Life
- ----------------------------------- ----------------------------------------------------------------
<S> <C>
Felix Schirripa Senior Vice-President
Robert E. Sollman, Jr. Senior Vice-President
Thomas L. Stapleton Senior Vice-President & Tax Director
James F. Stenson Senior Vice-President
Stanley J. Talbi Senior Vice-President
Richard R. Tartre Senior Vice-President
James A. Valentino Senior Vice-President
Lisa Weber Senior Vice-President
William J. Wheeler Senior Vice-President and Treasurer
Anthony J. Williamson Senior Vice-President
Louis J. Ragusa Vice-President and Secretary
</TABLE>
The principle occupation of each officer, except the following officers during
the last five years has been as an officer of Metropolitan Life Insurance
Company or an affiliate thereof. Gary A. Beller has been an officer of
Metropolitan Life Insurance Company since November, 1994; prior thereto, he was
a Consultant and Executive Vice-President and General Counsel of the American
Express Company. Robert H. Benmosche has been an officer of Metropolitan Life
Insurance Company since September, 1995; prior thereto, he was an Executive
Vice-President of Paine Webber. Terence I. Lennon has been an officer of
Metropolitan Life Insurance Company since March, 1994; prior thereto, he was
Assistant Deputy Superintendent and Chief Examiner of the New York State
Department of Insurance. Richard R. Tartre has been an officer of Metropolitan
Life since January 13, 1997, prior thereto he was President and CEO of Astra
Management Corp. William J. Wheeler became an officer of Metropolitan Life since
October 13, 1997; prior thereto he was Senior Vice-President, Investment Banking
of Donaldson, Lufkin and Jenrette. Lisa Weber has been an officer of
Metropolitan Life since March 16, 1998; prior thereto she was a Director of
Diversity Strategy and Development and an Associate Director of Human Resources
of PaineWebber. Jon F. Danski has been an officer of Metropolitan Life since
March 25, 1998; prior thereto he was Senior Vice-President, Controller and
General Auditor at ITT Corporation. The business address of each officer is One
Madison Avenue, New York, New York 10010.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The registrant is a separate account of Metropolitan Life Insurance Company
under the New York Insurance law. Under said law the assets allocated to the
separate account are the property of Metropolitan Life Insurance Company. No
person has the direct or indirect power to control Metropolitan Life Insurance
Company. As a mutual life insurance company, Metropolitan Life Insurance Company
has no stockholders. Its Board of Directors is elected in accordance with New
York Insurance Law by Metropolitan's policyholders, whose policies or contracts
have been in force for at least one year. Each such policyholder has only one
vote, irrespective of the number of policies or contracts held and the amount
thereof. The following outline indicates those persons who are controlled by or
under common control with Metropolitan Life Insurance Company:
III-8
<PAGE>
ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES
AS OF DECEMBER 31, 1998
The following is a list of subsidiaries of Metropolitan Life Insurance Company
("Metropolitan") as of December 31, 1998. Those entities which are listed at
the left margin (labelled with capital letters) are direct subsidiaries of
Metropolitan. Unless otherwise indicated, each entity which is indented under
another entity is a subsidiary of such indented entity and, therefore, an
indirect subsidiary of Metropolitan. Certain inactive subsidiaries have been
omitted from the Metropolitan Organizational listing. The voting securities
(excluding directors' qualifying shares, if any) of the subsidiaries listed are
100% owned by their respective parent corporations, unless otherwise indicated.
The jurisdiction of domicile of each subsidiary listed is set forth in the
parenthetical following such subsidiary.
A. Metropolitan Tower Corp. (Delaware)
1. Metropolitan Property and Casualty Insurance Company (Rhode Island)
a. Metropolitan Group Property and Casualty Insurance Company
(Rhode Island)
i. Metropolitan Reinsurance Company (U.K.) Limited
(Great Britain)
b. Metropolitan Casualty Insurance Company (Rhode Island)
c. Metropolitan General Insurance Company (Rhode Island)
d. Metropolitan Direct Property and Casualty Insurance Company
(Georgia)
e. Metropolitan P&C Insurance Services, Inc. (California)
f. Metropolitan Lloyds, Inc. (Texas)
g. Met P&C Managing General Agency, Inc. (Texas)
2. Metropolitan Insurance and Annuity Company (Delaware)
a. MetLife Europe I, Inc. (Delaware)
b. MetLife Europe II, Inc. (Delaware)
c. MetLife Europe III, Inc. (Delaware)
d. MetLife Europe IV, Inc. (Delaware)
e. MetLife Europe V, Inc. (Delaware)
III-9
<PAGE>
3. MetLife General Insurance Agency, Inc. (Delaware)
a. MetLife General Insurance Agency of Alabama, Inc. (Alabama)
b. MetLife General Insurance Agency of Kentucky, Inc. (Kentucky)
c. MetLife General Insurance Agency of Mississippi, Inc.
(Mississippi)
d. MetLife General Insurance Agency of Texas, Inc. (Texas)
e. MetLife General Insurance Agency of North Carolina, Inc.
(North Carolina)
f. MetLife General Insurance Agency of Massachusetts, Inc.
(Massachusetts)
4. Metropolitan Asset Management Corporation (Delaware)
(a). MetLife Capital, Limited Partnership (Delaware) Partnership
interests in MetLife Capital, Limited Partnership are held by
Metropolitan (90%) and Metropolitan Asset Management Corporation
(10%).
(i). MetLife Capital Credit L.P. (Delaware). Partnership
interests in MetLife Capital Credit L.P. are held by
Metropolitan (90%) and Metropolitan Asset Management
Corporation (10%).
(1) MetLife Capital CFLI Holdings, LLC (DE)
(a). MetLife Capital CFLI Leasing, LLC (DE)
b. MetLife Financial Acceptance Corporation (Delaware). MetLife
Capital Holdings, Inc. holds 100% of the voting preferred stock
of MetLife Financial Acceptance Corporation. Metropolitan
Property and Casualty Insurance Company holds 100% of the common
stock of MetLife Financial Acceptance Corporation.
c. MetLife Investments Limited (United Kingdom). 23rd Street
Investments, Inc. holds one share of MetLife Investments Limited.
d. MetLife Investments Asia Limited (Hong Kong). One share of
MetLife Investments Asia Limited is held by W&C Services, Inc., a
nominee of Metropolitan Asset Management Corporation.
III-10
<PAGE>
5. SSRM Holdings, Inc. (Delaware)
a. GFM Investments Limited (Delaware)
b. State Street Research & Management Company (Delaware). Is a sub-
investment manager for the Growth, Income, Diversified and
Aggressive Growth Portfolios of Metropolitan Series Fund, Inc.
i. State Street Research Investment Services, Inc.
(Massachusetts)
c. SSR Realty Advisors, Inc. (Delaware)
i. Metric Management Inc. (Delaware)
ii. Metric Property Management, Inc. (Delaware)
(1) Metric Realty (Delaware). SSR Realty Advisors, Inc. and
Metric Property Management, Inc. each hold 50% of the
common stock of Metric Realty.
(a) Metric Institutional Apartment Fund II, L.P.
(California). Metric Realty holds a 1% interest as
general partner and Metropolitan holds an
approximately 14.6% limited partnership interest
in Metric Institutional Apartment Fund II, L.P.
(2) Metric Colorado, Inc. (Colorado). Metric Property
Management, Inc. holds 80% of the common stock of
Metric Colorado, Inc.
iii. Metric Capital Corporation (California)
iv. Metric Assignor, Inc. (California)
v. SSR AV, Inc. (Delaware)
6. MetLife Holdings, Inc. (Delaware)
a. MetLife Funding, Inc. (Delaware)
b. MetLife Credit Corp. (Delaware)
7. Metropolitan Tower Realty Company, Inc. (Delaware)
8. Met Life Real Estate Advisors, Inc. (California)
9. Security First Group, Inc. (DE)
a. Security First Life Insurance Company (DE)
b. Security First Insurance Agency, Inc. (MA)
c. Security First Insurance Agency, Inc. (NV)
d. Security First Group of Ohio, Inc. (OH)
e. Security First Financial, Inc. (DE)
f. Security First Investment Management Corporation (DE)
g. Security First Management Corporation (DE)
h. Security First Real Estate, Inc. (DE)
i. Security First Financial Agency, Inc. (TX)
10. Natiloportem Holdings, Inc. (Delaware)
B. Metropolitan Tower Life Insurance Company (Delaware)
III-11
<PAGE>
C. MetLife Security Insurance Company of Louisiana (Louisiana)
D. MetLife Texas Holdings, Inc. (Delaware)
1. Texas Life Insurance Company (Texas)
a. Texas Life Agency Services, Inc. (Texas)
b. Texas Life Agency Services of Kansas, Inc. (Kansas)
E. MetLife Securities, Inc. (Delaware)
F. 23rd Street Investments, Inc. (Delaware)
G. Services La Metropolitaine Quebec, Inc. (Quebec, Canada)
H. Santander Met, S.A. (Spain). Shares of Santander Met, S.A. are held by
Metropolitan (50%) and by an entity (50%) unaffiliated with Metropolitan.
1. Seguros Genesis, S.A. (Spain)
2. Genesis Seguros Generales, Sociedad Anomina de Seguros y Reaseguros
(Spain)
I. MetLife Saengmyoung Insurance Company Ltd. (Korea).
J. Metropolitan Life Seguros de Vida S.A. (Argentina)
K. Metropolitan Life Seguros de Retiro S.A. (Argentina).
L. Met Life Holdings Luxembourg (Luxembourg)
M. Metropolitan Life Holdings, Netherlands BV (Netherlands)
N. MetLife International Holdings, Inc. (Delaware)
O. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
P. Metropolitan Marine Way Investments Limited (Canada)
Q. P.T. MetLife Sejahtera (Indonesia) Shares of P.T. MetLife Sejahtera are
held by Metropolitan (80%) and by an entity (20%) unaffiliated with
Metropolitan.
R. Seguros Genesis S.A. (Mexico) Metropolitan holds 85.49%, Metropolitan Tower
Corp. holds 7.31% and Metropolitan Asset Management Corporation holds 7.20%
of the common stock of Seguros Genesis S.A.
III-12
<PAGE>
S. Metropolitan Life Seguros de Vida S.A. (Uruguay). One share of Metropolitan
Life Seguros de Vida S.A. is held by Alejandro Miller Artola, a nominee of
Metropolitan Life Insurance Company.
T. Metropolitan Life Seguros E Previdencia Privada S.A. (Brazil)
U. Hyatt Legal Plans, Inc. (Delaware)
1. Hyatt Legal Plans of Florida, Inc. (Fl)
V. One Madison Merchandising L.L.C. (Connecticut) Ownership of membership
interests in One Madison Merchandising L.L.C. is as follows: Metropolitan
owns 99% and Metropolitan Tower Corp. owns 1%.
W. Metropolitan Realty Management, Inc. (Delaware)
1. Edison Supply and Distribution, Inc. (Delaware)
2. Cross & Brown Company (New York)
a. CBNJ, Inc. (New Jersey)
X. MetPark Funding, Inc. (Delaware)
Y. 2154 Trading Corporation (New York)
Z. Transmountain Land & Livestock Company (Montana)
A.A. Farmers National Company (Nebraska)
1. Farmers National Commodities, Inc. (Nebraska)
2. Farmers National Marketing Group, LLC (Iowa) Ownership of membership
interests in Farmers National Marketing Group, LLC is as follows:
Farmers National Company (50%) and an entity unaffiliated with
Metropolitan (50%).
A.B. MetLife Trust Company, National Association. (United States)
A.C. Benefit Services Corporation (Georgia)
A.D. G.A. Holding Corporation (MA)
A.E. TNE-Y, Inc. (DE)
A.F. CRH., Inc. (MA)
A.G. NELRECO Troy, Inc. (MA)
A.H. TNE Funding Corporation (DE)
A.I. L/C Development Corporation (CA)
III-13
<PAGE>
A.J. Boylston Capital Advisors, Inc. (MA)
1. New England Portfolio Advisors, Inc. (MA)
A.K. CRB Co., Inc. (MA) AEW Real Estate Advisors, Inc. holds 49,000 preferred
non-voting shares of CRB Co., Inc. AEW Advisors, Inc. holds 1,000 preferred
non-voting shares of CRB Co., Inc.
A.L. New England Life Mortgage Funding Corporation (MA)
A.M. Mercadian Capital L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian Capital L.P.
A.N. Mercadian Funding L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian Funding L.P.
A.O. Tower Resources Group, Inc. (DE)
A.P. MetLife New England Holdings, Inc. (DE)
1. Fulcrum Financial Advisors, Inc. (MA)
2. New England Life Insurance Company (MA)
a. New England Life Holdings, Inc. (DE)
i. New England Securities Corporation (MA)
(1) Hereford Insurance Agency, Inc. (MA)
(2) Hereford Insurance Agency of Alabama, Inc. (AL)
(3) Hereford Insurance Agency of Minnesota, Inc. (MN)
(4) Hereford Insurance Agency of Ohio, Inc. (OH)
(5) Hereford Insurance Agency of New Mexico, Inc. (NM)
ii. TNE Advisers, Inc. (MA)
iii. TNE Information Services, Inc. (MA)
(1) First Connect Insurance Network, Inc. (DE)
(2) Interative Financial Solutions, Inc. (MA)
iv. N.L. Holding Corp. (Del)(NY)
(1) Nathan & Lewis Securities, Inc. (NY)
(2) Nathan & Lewis Associates, Inc. (NY)
(a) Nathan and Lewis Insurance Agency of
Massachusetts, Inc. (MA)
(b) Nathan and Lewis Associates of Texas, Inc. (TX)
(3) Nathan & Lewis Associates--Arizona, Inc. (AZ)
(4) Nathan & Lewis of Nevada, Inc. (NV)
(5) Nathan and Lewis Associates Ohio, Incorporated (OH)
b. Exeter Reassurance Company, Ltd. (MA)
c. Omega Reinsurance Corporation (AZ)
d. New England Pension and Annuity Company (DE)
e. Newbury Insurance Company, Limited (Bermuda)
3. Nvest Corporation (MA)
a. Nvest, L.P. (DE) Nvest Corporation holds a 1.69% general
partnership interest and MetLife New England Holdings, Inc. 3.19%
general partnership interest in Nvest, L.P.
b. Nvest Companies, L.P. (DE) Nvest Corporation holds a 0.0002%
general partnership interest in Nvest Companies, L.P. Nvest, L.P.
holds a 14.64% general partnership interest in Nvest Companies,
L.P. Metropolitan holds a 46.23% limited partnership interest in
Nvest Companies, L.P.
III-14
<PAGE>
i. Nvest Holdings, Inc. (DE)
(1) Back Bay Advisors, Inc. (MA)
(a) Back Bay Advisors, L.P. (DE)
Back Bay Advisors, Inc.
holds a 1% general partner interest and NEIC Holdings, Inc.
holds a 99% limited partner interest in Back Bay Advisors,
L.P.
(2) R & T Asset Management, Inc. (MA)
(a) Reich & Tang Distributors, Inc. (DE)
(b) R & T Asset Management L.P.
R & T Asset Management, Inc.
holds a 0.5% general partner interest and
NEIC Holdings, Inc. hold a 99.5% limited
partner interest in R & T
Asset Management, L.P.
(c) Reich & Tang Services, Inc. (DE)
(3) Loomis, Sayles & Company, Inc. (MA)
(a) Loomis Sayles & Company, L.P. (DE)
Loomis Sayles & Company, Inc.
holds a 1% general partner interest and
R & T Asset Management, Inc. holds a 99%
limited partner interest in Loomis Sayles &
Company, L.P.
(4) Westpeak Investment Advisors, Inc. (MA)
(a) Westpeak Investment Advisors, L.P. (DE)
Westpeak Investment Advisors, Inc.
holds a 1% general partner interest and
Reich & Tang holds a 99% limited
partner interest in Westpeak Investment
Advisors, L.P.
(i) Westpeak Investment Advisors
Australia Limited Pty.
(5) Vaughan, Nelson Scarborough & McCullough (DE)
(a) Vaughan, Nelson Scarborough & McCullough, L.P. (DE)
VNSM, Inc. holds a 1% general partner interest and
Reich & Tang Asset Management, Inc. holds a 99%
limited partner interest in Vaughan, Nelson
Scarborough & McCullough, L.P.
(i) VNSM Trust Company
(6) MC Management, Inc. (MA)
(a) MC Management, L.P. (DE)
MC Management, Inc. holds a 1% general partner
interest and R & T Asset Management, Inc.
holds a 99% limited partner interest in MC
III-15
<PAGE>
Management, L.P.
(7) Harris Associates, Inc. (DE)
(a) Harris Associates Securities L.P. (DE)
Harris Associates, Inc. holds a 1% general partner
interest and Harris Associates L.P. holds a
99% limited partner interest in Harris Associates
Securities, L.P.
(b) Harris Associates L.P. (DE)
Harris Associates, Inc. holds a 0.33% general
partner interest and NEIC Operating Partnership,
L.P. holds a 99.67% limited partner interest in
Harris Associates L.P.
(i) Harris Partners, Inc. (DE)
(ii) Harris Partners L.L.C. (DE)
Harris Partners, Inc. holds a 1%
membership interest and
Harris Associates L.P. holds a 99%
membership interest in Harris Partners L.L.C.
(1) Aurora Limited Partnership (DE)
Harris Partners L.L.C. holds a 1%
general partner interest
(2) Perseus Partners L.P. (DE) Harris Partners L.L.C.
holds a 1% general partner interest
(3) Pleiades Partners L.P. (DE) Harris
Partners L.L.C. holds a 1% general
partner interest
(4) Stellar Partners L.P. (DE)
Harris Partners L.L.C. holds a 1% general partner
interest
(5) SPA Partners L.P. (DE) Harris Partners L.L.C.
holds a 1% general partner interest
(8) Graystone Partners, Inc. (MA)
(a) Graystone Partners, L.P. (DE)
Graystone Partners, Inc. holds a 1%
general partner interest and New England
NEIC Operating Partnership, L.P.
holds a 99% limited partner interest in
Graystone Partners, L.P.
(9) NEF Corporation (MA)
(a) New England Funds, L.P. (DE) NEF Corporation holds a
1% general partner interest and NEIC Operating
Partnership, L.P. holds a 99% limited
partner interest in New England Funds, L.P.
(b) New England Funds Management, L.P. (DE) NEF
III-16
<PAGE>
Corporation holds a 1% general partner interest and
NEIC Operating Partnership, L.P. holds a 99%
limited partner interest in New England Funds
Management, L.P.
(10) New England Funds Service Corporation
(11) AEW Capital Management, Inc. (DE)
(a) AEW Securities, L.P. (DE) AEW Capital Management, Inc.
holds a 1% general partnership and AEW Capital
Management, L.P. holds a 99% limited partnership
interest in AEW Securities, L.P.
ii. Nvest Associates, Inc.
iii. Snyder Capital Management, Inc.
(1) Snyder Capital Management, L.P. NEIC Operating
Partnership holds a 99.5% limited partnership
interest and Snyder Capital Management Inc. holds a
0.5% general partnership interest.
iv. Jurika & Voyles, Inc.
(1)Jurika & Voyles, L.P NEIC Operating Partnership,
L.P. holds a 99% limited partnership interest and
Jurika & Voyles, Inc. holds a 1% general partnership
interest.
v. Capital Growth Management, L.P. (DE)
NEIC Operating Partnership, L.P. holds a 50% limited partner interest
in Capital Growth Management, L.P.
vi. Nvest Partnerships, LLC ( )
vii. AEW Capital Management L.P. (DE)
New England Investment Companies, L.P. holds a 99% limited
partner interest and AEW Capital Management, Inc. holds a 1% general
partner interest in AEW Capital Management, L.P.
(1) AEW II Corporation ( )
(2) AEW Partners III, Inc. ( )
(3) AEW TSF, Inc. ( )
(4) AEW Exchange Management, LLC
(5) AEWPN, LLC ( )
(6) AEW Investment Group, Inc. (MA)
(a) Copley Public Partnership Holding, L.P. (MA)
AEW Investment Group, Inc. holds a 25% general partnership
interest and AEW Capital Management, L.P. holds a 75%
limited partnership interest in Copley Public Partnership
Holding, L.P.
(b) AEW Management and Advisors L.P. (MA)
AEW Investment Group, Inc. holds a 25% general partnership
interest and AEW Capital Management, L.P. holds a 75% limited
partnership interest in AEW Management and Advisors L.P.
ii. AEW Real Estate Advisors, Inc. (MA)
III-17
<PAGE>
1. AEW Advisors, Inc. (MA)
2. Copley Properties Company, Inc. (MA)
3. Copley Properties Company II, Inc. (MA)
4. Copley Properties Company III, Inc. (MA)
5. Fourth Copley Corp. (MA)
6. Fifth Copley Corp. (MA)
7. Sixth Copley Corp. (MA)
8. Seventh Copley Corp. (MA).
9. Eighth Copley Corp. (MA).
10. First Income Corp. (MA).
11. Second Income Corp. (MA).
12. Third Income Corp. (MA).
13. Fourth Income Corp. (MA).
14. Third Singleton Corp. (MA).
15. Fourth Singleton Corp. (MA)
16. Fifth Singleton Corp. (MA)
17. Sixth Singleton Corp. (MA).
18. BCOP Associates L.P. (MA)
AEW Real Estate Advisors, Inc. holds a 1% general
partner interest in BCOP Associates L.P.
ii. CREA Western Investors I, Inc. (MA)
1. CREA Western Investors I, L.P. (DE)
CREA Western Investors I, Inc. holds a 24.28% general
partnership interest and Copley Public Partnership
Holding, L.P. holds a 57.62% limited partnership interest in CREA Western
Investors I, L.P.
iii. CREA Investors Santa Fe Springs, Inc. (MA)
(7) Copley Public Partnership Holding, L.P. (DE)
AEW Capital Management, L.P. holds a 75% limited partner interest and
AEW Investment Group, Inc. holds a 25% general partner interest and
CREA Western Investors I, L.P holds a 57.62% Limited Partnership interest.
(8) AEW Real Estate Advisors, Limited Partnership (MA)
AEW Real Estate Advisors, Inc. holds a 25% general partnership interest
and AEW Capital Management, L.P. holds a 75% limited partnership
interest in AEW Real Estate Advisors, Limited Partnership.
(9) AEW Hotel Investment Corporation (MA)
(a.) AEW Hotel Investment, Limited Partnership (MA)
AEW Hotel Investment Corporation holds a 1% general
partnership interest and AEW Capital Management, L.P. holds a 99%
limited partnership interest in AEW Hotel Investment, Limited
Partnership.
(10) Aldrich Eastman Global Investment Strategies, LLC (DE)
AEW Capital Management, L.P. holds a 25% membership interest
and an unaffiliated third party holds a 75% membership interest in
III-18
<PAGE>
Aldrich Eastman Global Investment Strategies, LLC.
In addition to the entities listed above, Metropolitan (or where indicated an
affiliate) also owns an interest in the following entities, among others:
1) CP&S Communications, Inc., a New York corporation, holds federal radio
communications licenses for equipment used in Metropolitan owned facilities and
airplanes. It is not engaged in any business.
2) Quadreal Corp., a New York corporation, is the fee holder of a parcel of
real property subject to a 999 year prepaid lease. It is wholly owned by
Metropolitan, having been acquired by a wholly owned subsidiary of Metropolitan
in 1973 in connection with a real estate investment and transferred to
Metropolitan in 1988.
3) Met Life International Real Estate Equity Shares, Inc., a Delaware
corporation, is a real estate investment trust. Metropolitan owns approximately
18.4% of the outstanding common stock of this company and has the right to
designate 2 of the 5 members of its Board of Directors.
4) Metropolitan Structures is a general partnership in which Metropolitan owns
a 50% interest.
5) Metropolitan owns, via its subsidiary, AFORE Genesis Metropolitan S.A. de
C.V., approximately 61.7% of SIEFORE Genesis S.A. de C.V., a mutual fund.
6) Metropolitan owns varying interests in certain mutual funds distributed by
its affiliates. These ownership interests are generally expected to decrease as
shares of the funds are purchased by unaffiliated investors.
7) Metropolitan Lloyds Insurance Company of Texas, an affiliated association,
provides homeowner and related insurance for the Texas market. It is an
association of individuals designated as underwriters. Metropolitan Lloyds,
Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company ("MET
P&C"), serves as the attorney-in-fact and manages the association.
8) Metropolitan directly owns 100% of the non-voting preferred stock of Nathan
and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting
common stock of this company is held by an individual who has agreed to vote
such shares at the direction of N.L. Holding Corp. (DEL), an indirect wholly
owned subsidiary of Metropolitan.
9) 100% of the capital stock of Hereford Insurance Agency of Oklahoma, Inc.
(OK) is owned by an officer. New England Life Insurance Company controls the
issuance of additional stock and has certain rights to purchase such officer's
shares.
10) 100% of the capital stock of Fairfield Insurance Agency of Texas, Inc. (TX)
is owned by an officer. New England Life Insurance Company controls the issuance
of additional stock and has certain rights to purchase such officer's shares.
III-19
<PAGE>
11) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited
partnerships, are investment vehicles through which investments in certain
entities are held. A wholly owned subsidiary of Metropolitan serves as the
general partner of the limited partnerships and Metropolitan directly owns a 99%
limited partnership interest in each MILP. The MILPs have various ownership
interests in certain companies. The various MILPs own, directly or indirectly,
100% of the voting stock of the following company: Coating Technologies
International, Inc.
NOTE: THE METROPOLITAN LIFE ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE
JOINT VENTURES AND PARTNERSHIPS OF WHICH METROPOLITAN LIFE AND/OR ITS
SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE
SUBSIDIARIES HAVE ALSO BEEN OMITTED.
ITEM 27. NUMBER OF CONTRACTHOLDERS
As of March 31, 1998, there were ____ owners of tax-qualified Contracts and
_____ owners of non-qualified contracts (to be supplied by Amendment).
ITEM 28. INDEMNIFICATION
Metropolitan Life Insurance Company has secured a Financial Institutions Bond in
the amount of $50,000,000 subject to a $5,000,000 deductible. Metropolitan
maintains a directors' and officers' liability policy with a maximum coverage of
$200 million under which Metropolitan and New England Securities Corporation,
the Registrant's underwriter (the "Underwriter") as well as certain other
subsidiaries of Metropolitan are covered. A provision in Metropolitan's by-laws
provides for the indemnification (under certain circumstances) of individuals
serving as directors or officers of Metropolitan.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
Metropolitan pursuant to the foregoing provisions, or otherwise, Metropolitan
Life Insurance Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification may be against public policy as
expressed in the Act and may be, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Metropolitan of expenses incurred or paid by a director, officer or controlling
person or Metropolitan Life Insurance Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, Metropolitan will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
III-20
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) New England Securities Corporation also serves as principal
underwriter for:
New England Zenith Fund
New England Variable Annuity Fund I
New England Life Retirement Investment Account
New England Variable Life Separate Account
New England Variable Annuity Separate Account
(b) The directors and officers of the Registrant's principal underwriter,
New England Securities Corporation, and their addresses are as follows:
<TABLE>
<CAPTION>
Positions and Offices with Positions and Offices with
-------------------------- --------------------------
Name Principal Underwriter Registrant
---- --------------------- ----------
<S> <C> <C>
Thomas W. McConnell* Director, President and CEO None
Frederick K. Zimmermann** Chairman of Board, Director None
Bradley W. Anderson* Vice President None
Molly M. Diggins** Assistant Clerk None
Mark A. Greco* Vice President and Chief None
Operating Officer
Anne M. Goggin** Vice President, General None
Counsel, Secretary and Clerk
Laura A. Hutner* Vice President None
Mitchell A. Karman** Vice President None
John Peruzzi* Assistant Vice President and None
Controller
Robert F. Regan*** Vice President None
Jonathan M. Rozek* Vice President None
Andrea M. Ruesch* Vice President None
Larry Thiel* Vice President None
Michael E. Toland** Vice President, Chief
Compliance Officer, Chief
Financial Officer, Treasurer,
Assistant Secretary and
Assistant Clerk
</TABLE>
Principal Business Address: *399 Boylston Street, Boston, MA 02116
**501 Boylston Street, Boston, MA 02116
***500 Boylston Street, Boston, MA 02116
III-21
<PAGE>
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation
Name of Principal Discounts and Redemption or Brokerage Other
Underwriter Commissions Annuitization Commissions Compensation
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
New England (to be supplied by
Securities Amendment) 0 0 0
Corporation
</TABLE>
Commissions are paid by the Company directly to agents who are registered
representatives of the Principal Underwriter or to broker-dealers that have
entered into a selling agreement with the principal underwriter with respect to
sales of the Contracts.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The following companies will maintain possession of the documents required
by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder:
(a) Registrant
(b) New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(c) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(d) New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby makes the following undertakings:
(1) To file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
contained in the registration statement are never
III-22
<PAGE>
more than 16 months old for so long as payments under the variable annuity
contracts may be accepted;
(2) To include either (a) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information or (b) a postcard or similar written
communication affixed to or included in the prospectus that the applicant can
remove to send for a Statement of Additional Information;
(3) To deliver a Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly upon
written or oral request;
(4) To offer Contracts to participants in the Texas Optional Retirement Program
in reliance upon Rule 6c-7 of the Investment Company Act of 1940 and to comply
with paragraphs (a)-(d) of that Rule; and
(5) To comply with and rely upon the Securities and Exchange Commission No-
Action Letter to the American Council of Life Insurance, dated November 28,
1988, regarding Sections 22(e), 27(c)(1) and 27(d) of the Investment Company Act
of 1940.
Metropolitan Life Insurance Company represents that the fees and charges
deducted under the Contracts described in this Registration Statement, in the
aggregate, are reasonable in relation to the services rendered, the expenses to
be incurred, and the risks assumed by Metropolitan Life Insurance Company under
the Contracts.
III-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, The New England Variable
Account, has caused this Amendment to its Registration Statement to be signed on
its behalf, in the City of New York, and the State of New York on this 24th day
of February, 1999.
THE NEW ENGLAND VARIABLE ACCOUNT
BY: METROPOLITAN LIFE INSURANCE COMPANY
BY: /s/ GARY A. BELLER, ESQ.
------------------------------
GARY A. BELLER, ESQ.
SENIOR EXECUTIVE VICE PRESIDENT
AND GENERAL COUNSEL
Attest: /s/ Cheryl D. Martino
- ------ ---------------------
Cheryl D. Martino
Assistant Secretary
III-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Metropolitan Life Insurance Company has caused
this Amendment to its Registration Statement to be signed on its behalf in the
City of New York, and the State of New York on this 24th day of February, 1999.
METROPOLITAN LIFE INSURANCE COMPANY
BY: /s/ GARY A. BELLER, ESQ.
-------------------------
GARY A. BELLER, ESQ.
SENIOR EXECUTIVE VICE PRESIDENT
AND GENERAL COUNSEL
Attest: /s/ Cheryl D. Martino
---------------------
Cheryl D. Martino
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons, in the
capacities indicated, on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE Title Date
--------- ----- ----
<S> <C> <C>
Chairman of the Board, President and
* Chief Executive Officer February 24, 1999
- -------------------------------------------
ROBERT H. BENMOSCHE
Vice-Chairman of the Board and
* Chief Financial Officer (Principal February 24, 1999
- ------------------------------------------- Financial Officer)
STEWART G. NAGLER
Senior Vice President and Controller
* (Principal Accounting Officer) February 24, 1999
- -------------------------------------------
JON F. DANSKI
* Director February 24, 1999
- -------------------------------------------
CURTIS H. BARNETTE
</TABLE>
III-25
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE Title Date
--------- ----- ----
<S> <C> <C>
Vice Chairman of the Board and Chief
* Investment Officer February 24, 1999
- -------------------------------------------
GERALD CLARK
* Director February 24, 1999
- -------------------------------------------
JOAN GANZ COONEY
* Director February 24, 1999
- -------------------------------------------
BURTON A. DOLE, JR.
* Director February 24, 1999
- -------------------------------------------
JAMES R. HOUGHTON
* Director February 24, 1999
- -------------------------------------------
HARRY P. KAMEN
* Director February 24, 1999
- -------------------------------------------
HELENE L. KAPLAN
* Director February 24, 1999
- -------------------------------------------
CHARLES H. LEIGHTON
* Director February 24, 1999
- -------------------------------------------
ALLEN E. MURRAY
* Director February 24, 1999
- -------------------------------------------
JOHN J. PHELAN, JR.
* Director February 24, 1999
- -------------------------------------------
HUGH B. PRICE
</TABLE>
III-26
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE Title Date
--------- ----- ----
<S> <C> <C>
* Director February 24, 1999
- -------------------------------------------
ROBERT G. SCHWARTZ
* Director February 24, 1999
- -------------------------------------------
RUTH J. SIMMONS, Ph.D.
Director February 24, 1999
- -------------------------------------------
WILLIAM C. STEERE, JR.
February 24, 1999
/s/ Christopher P. Nicholas
- -------------------------------------------
CHRISTOPHER P. NICHOLAS, ESQ.
ATTORNEY-IN-FACT
</TABLE>
* Executed by Christopher P. Nicholas, Esq. on behalf of those indicated
pursuant to Powers of Attorney filed with the Registration Statement on Form N-4
(No. 333-11131) filed on August 30, 1996 except for Gerald Clark, Burton A. Dole
and Charles M. Leighton whose powers of attorney were filed with Post-Effective
Amendment No. 1 to the Registration Statement (File No. 333-11131) on April 30,
1997 and Robert H. Benmosche, Jon F. Danski and Stewart G. Nagler whose powers
of attorney were filed with Post-Effective Amendment No. 23 to the Registration
Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed April
3, 1998.
III-27
<PAGE>
EXHIBIT INDEX
-------------
(1) (i) Resolutions of Board of Directors of New England Mutual Life Insurance
Company authorizing the Registrant are incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
(ii) Resolutions of the Depositor adopting the Registrant as a separate
account are incorporated herein by reference to the Registration Statement on
Form N-4 (No. 333-11131) filed on August 30, 1996.
(2) None
(3) (i) Distribution Agreement is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
(ii) Form of Selling Agreement with other broker-dealers is incorporated
herein by reference to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(4) (i) Form of New England Mutual Life Insurance Company Variable Annuity
Contract is incorporated herein by reference to Post-Effective Amendment No. 2
to the Registration Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(ii) Form of New England Mutual Life Insurance Company Contract Loan
Endorsement is incorporated herein by reference to Post-Effective Amendment No.
2 to the Registration Statement on Form N-4 (No. 333-11131) filed on May 1,
1998.
(iii) Forms of New England Mutual Life Insurance Company Endorsements,
(Death of Owner, Individual Retirement Annuity, and Sample of Benefits for
Disability of Annuitant) are incorporated herein by reference to Post-Effective
Amendment No. 2 to the Registration Statement on Form N-4 (No. 333-11131) filed
on May 1, 1998.
(iv) Forms of Metropolitan Life Insurance Company Endorsements (New
Contract Loan, Spousal/Beneficiary Continuation) are incorporated herein by
reference to Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4 (No. 333-11131) filed on May 1, 1998.
(v) Form of Metropolitan Life Insurance Company Endorsement to New England
Mutual Life Insurance Company Variable Annuity Contract (See (4)(i) above) is
incorporated herein by reference to the Registration Statement on Form N-4 (No.
333-11131) filed on August 30, 1996.
(vi) Metropolitan Life Insurance Company Variable Annuity Contract and
Application are incorporated herein by reference to the Registration Statement
on Form N-4 (No. 333-11131) filed on August 30, 1996.
(vii) Forms of Metropolitan Life Insurance Company Endorsements (Fixed
Account, Contract Loans, Tax-Sheltered Annuity, Periodic Reports and
Postponement of Surrender) are
<PAGE>
incorporated herein by reference to the Registration Statement on Form N-4 (No.
333-11131) filed on August 30, 1996.
(viii) Forms of New England Mutual Life Insurance Company Endorsements
(Contract Loans, Fixed Account, Tax-Sheltered Annuity and Rider: Benefits of
Disability of Annuitant and Modification of Variable Life Income Section and New
York Endorsement).
(ix) Form of Metropolitan Life Insurance Company Endorsement (Roth
Individual Retirement Annuity).
(5) (i) New England Mutual Life Insurance Company Application.
(ii) For Metropolitan Life Insurance Company Application see (4)(vi) above.
(6) (i) Charter and By-Laws of Metropolitan Life Insurance Company are
incorporated herein by reference to the Registration Statement on Form N-4 (No.
333-11131) filed on August 30, 1996.
(ii) By-Laws Amendment is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
(7) None
(8) (i) Administrative Services Agreement is incorporated herein by reference
to the Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(ii) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England Mutual Life Insurance Company
is incorporated herein by reference to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(iii) Amendment No. 1 to Participation Agreement Among Variable Insurance
Products Fund, Fidelity Distributors Corporation and New England Mutual Life
Insurance Company is incorporated by reference to Post-Effective Amendment No.
15 to the Registration Statement on Form N-4 (No. 33-17377) filed on April 1,
1996.
(iv) Assignment of Participation Agreement from New England Mutual Life
Insurance Company to Metropolitan Life Insurance Company is incorporated herein
by reference to the Registration Statement on Form N-4 (No. 333-11131) filed on
August 30, 1996.
(9) Opinion and consent of Christopher P. Nicholas, Esq. (to be filed by
Amendment).
(10) (i) Consent of Deloitte & Touche LLP. (to be filed by Amendment).
(ii) Consent of Sutherland Asbill and Brennan LLP (to be filed by
Amendment).
(11) None
2
<PAGE>
(12) None
(13) Schedule of computations for performance quotations is incorporated herein
by reference to Post-Effective Amendment No. 2 to the Registration Statement on
Form N-4 (No. 333-11131) filed on May 1, 1998.
(14) Powers of Attorney are incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30, 1996,
except for Gerald Clark, Burton A. Dole and Charles M. Leighton whose powers of
attorney were filed in with Post-Effective Amendment No. 1 to the Registration
Statement (File No. 333-11131) on April 30, 1997 and Robert H. Benmosche, Jon F.
Danski and Stewart G. Nagler whose powers of attorney were filed with Post-
Amendment No. 23 to the Registration Statement of Metropolitan Life Separate
Account E (File No. 2-90380) filed April 3, 1998.
3
<PAGE>
Exhibit 4(viii)
P-935-88
Endorsement
As of the date of the first Loan Application for this Contract, the following
provision is added to the Contract:
Contract Loans
Contract Loans. After the Right to Return the Contract period, you can borrow
all or a part of the Loan Value of the Contract by written request to the
Company. Contract Loans are made on the sole security of the Contract. The
amount you can borrow at any time is equal to the Loan Value less any Contract
Loan Balance at that time. Contract Loans will reduce the Contract's share of
the sub-accounts proportionately, unless you request otherwise. Assets equal to
the amount of the Loan:
. Will be transferred to the general investment account of the Company; and
. Will earn interest at the effective rate of 4 1/2% per year compounded
monthly.
Contract Loans, whether or not repaid, can have a permanent effect on Contract
Values and Death Proceeds.
Loan Value. The Loan Value of the Contract is the amount which with loan
interest will equal 90% of the Contract Value of the Contract projected with
interest at a rate equivalent to 4 1/2% per year to the next loan interest due
date.
Interest on Loans; Contract Loan Balance. Contract Loans bear interest at the
rate of 6 1/2% per year. Interest accrues daily. The Contract Loan Balance at
any time means Contract Loans outstanding plus interest accrued to date. Loan
interest is due each year on the contract anniversary. Loan interest not paid
when due will be added to the Loan and will bear interest.
Repayment of Loans. Contract Loans may be repaid to the Company at any time in
whole or part. Loan repayments will be allocated in the same proportion as the
Contract is invested in the sub-accounts, unless you request otherwise. A
Contract Loan is a charge against the Contract. Any Contract Loan Balance will
be deducted from the payment of the proceeds of the Contract. If the Contract
Loan Balance at any time exceeds the Contract Value of the Contract, the Company
will mail a notice to you and to any assignee. The notice will be mailed to the
addresses on record with the Company. If the excess amount is not paid to the
Company within 31 days after mailing of the notice, the Contract will be
cancelled.
<PAGE>
As of the date of the first Loan Application for this Contract, the following is
substituted for the Contract Value provision of the Contract Value section:
Contract Value. On or before the Maturity Date, the Contract Value is equal to
the sum of : the number of Accumulation Units standing to the credit of the
Contract multiplied by the applicable Accumulation Unit Value; and any Contract
Loan Balance.
The Contract Value is not increased by the cash value of any Rider, unless
stated in the Rider.
New England Mutual Life Insurance Company
501 Boylston Street, Boston, Massachusetts
John A. Fibiger Kernan F. King
President Secretary
<PAGE>
P-935-91
- --------------------------------------------------------------------------------
Endorsement
As of the date of the Loan Application for this Contract, the following
provision is added to the Contract:
Contract Loans
Contract Loans
After the Right to Return the Contract period and before the Maturity Date, you
can borrow all or part of the Loan Value of the Contract by written request to
the Company. Contract Loans are made on the sole security of the Contract. The
amount you can borrow at any time is equal to the Loan Value less any Contract
Loan Balance at that time. Contract Loans will reduce the Contract's share of
the sub-accounts and of the Fixed Account proportionately, unless you request
otherwise. Assets equal to the amount of the Loan:
. Will be transferred to a Loan Collateral Account and held in the general
investment account of the Company; and
. Will earn interest at the effective rate of 4 1/2% per year.
This interest will be credited to the sub-accounts and to the Fixed Account in
the same proportion as net purchase payments are being allocated to the sub-
accounts and to the Fixed Account: each year on the contract anniversary; and on
the date the Contract Loan is repaid in full.
Contract Loans, whether or not repaid, can have a permanent effect on Contract
Values and Death Proceeds.
Loan Value
The Loan Value of the Contract is the amount which with loan interest will equal
90% of the Contract Value of the Contract projected with interest at a rate
equivalent to 4 1/2% per year to the next loan interest due date.
Interest on Loans; Contract Loan Balance
Contract Loans bear interest at the rate of 6 1/2% per year. Interest accrues
daily. The Contract Loan Balance at any time means Contract Loans outstanding
plus loan interest accrued to date. Loan interest is due each year on the
contract anniversary. Loan interest not paid when due will reduce the Contract's
share of the sub-accounts and of the Fixed Account proportionately.
Repayment of Loans
Contract Loans may be repaid to the Company at any time in whole or part. Loan
repayments will be allocated in the same proportion as the Contract Loan reduced
the Contract's share of the sub-accounts and of the Fixed Account, unless the
Company consents to a different allocation. The rate of interest for each loan
repayment applied to the Fixed Account will be the lesser of: the effective
interest rate used on your Contract on the date the repayment is applied to the
Fixed Account; and the rate set by the Company in advance for that date. A
Contract Loan is a charge against the Contract. Any Contract Loan Balance will
be deducted from the payment of the proceeds of the Contract. If the Contract
Loan Balance at any time exceeds the Contract Value of the Contract, the Company
will mail a notice to you and to any assignee. The notice will be mailed to the
addresses on record with the Company. If the excess amount is not paid to the
Company within 31 days after mailing of the notice, the Contract will be
cancelled.
As of the date of the Loan Application for this Contract, the following
provision is added to the Contract section:
Postponement of Contract Loans From the Fixed Account
The Company can postpone the making of any Contract Loan from the Fixed Account
for six months from the date you apply.
As of the date of the Loan Application for this Contract, the following is
substituted for the Contract Value provision of the Contract Value section:
Contract Value
On or before the Maturity Date, the Contract Value is equal to: the number of
Accumulation Units standing to the credit of the Contract multiplied by the
applicable Accumulation Unit Value; plus the Contract's value in the Fixed
Account; plus any amount held for the Contract in a Loan Collateral Account.
The Contract Value is not increased by the cash value of any Rider, unless
stated in the Rider.
As of the date of the Loan Application for this Contract, the following is
substituted for the Surrender of the Contract provision of the Contract Value
section:
Surrender of the Contract
You can surrender the Contract at any time prior to the Maturity Date by notice
to the Company in writing. Upon surrender, the Contract will terminate. The
Surrender Proceeds will be equal to: the Contract Value as of the Surrender
Date; less any Administration Fee; less any Contingent Deferred Sales Charge;
and less any Contract Loan Balance. Unless a later date is specified in the
request, the Surrender Date is the date on which the Company receives at its
Home Office:
. Written request in proper form for surrender and payment in one sum; or
. Written request in proper form for surrender and payment under one of the
Payment Options. (See Payment of Benefits, Section 8.)
You can also make a partial surrender, but the consent of the Company will be
required: if the Contract Loan Balance would exceed the Loan Value of the
Contract; or if the remaining Contract Value outside of the Loan Collateral
Account would be less than the greater of: 10% of the remaining Contract Value;
and $500. A partial surrender will reduce the Contract's share of the
sub-accounts and the Fixed Account proportionately, unless you request
otherwise.
New England Life Insurance Company
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
- ---------------------- ----------------------
President Secretary
<PAGE>
P-1001-91
Endorsement
As of the Date of Issue of this Contract the following changes are made:
"The Fixed Account
The Fixed Account is invested within the general account of the Company.
If you elect the Fixed Account, the first date on which money is applied to
the Fixed Account for the Contract is the latest of:
. The Contract Date;
. The date the first purchase payment is received by the Company at
its Home Office; and
. The effective date of the election of the Fixed Account.
Each future net purchase payment allocated to the Fixed Account will be applied
as of the date it is received by the Company at its Home Office. Each transfer
to the Fixed Account will be applied as of the transfer date.
Fixed Account Interest
The rate of interest for each amount applied to the Fixed Account: will be the
rate set by the Company in advance for the date the amount is applied to the
Fixed Account; and will not be less than a rate equivalent to an annual
effective rate of 4.5%. Each year, on the contract anniversary, the Company
will determine a portion, if any, of the Contract's value in the Fixed Account
which will be reinvested at the rate effective on that date. The effective
interest rate used on your Contract will be the weighted average of all such
rates for your Contract.
Interest will be credited to the Fixed Account on a daily basis.
Restriction of Transfers to the Fixed Account
The Company reserves the right to restrict transfers to the Fixed Account for
the Contract:
. If the rate of interest that would be used for the transfer is a rate
equivalent to an annual effective rate of 4.5%; or
. If the Contract's value in the Fixed Account equals or exceeds the
Company's published maximum for Fixed Account investments; or
<PAGE>
. For the remainder of the contract year if an amount is transferred out
of the Fixed Account in that contract year.
Transfers Out of the Fixed Account
You can transfer a limited portion of the Contract's value in the Fixed Account
to the sub-accounts once within 30 days after each contract anniversary.
Requests for transfer can be made in writing or by telephone. The Company is not
responsible for the authenticity of transfer instructions received by telephone.
The transfer will be limited to the greater of $1000 and 25% of the Contract's
value in the Fixed Account, except with the consent of the Company.
If you transfer an amount out of the Fixed Account in any contract year, the
Company reserves the right to restrict transfers to the Fixed Account for the
Contract for the remainder of that contract year.
Election of the Fixed Account
You can elect to have future net purchase payments applied to the Fixed Account.
You can change the election for future net purchase payments at any time by
notice to the Company in writing. (See the Restriction of Transfers to the
Fixed Account provision.)"
is added to the Contract.
Modification of The Variable Account Section
"The Contract's first investment in the Account will be made as of the latest
of:
. The Contract Date;
. The date the first purchase payment is received by the Company at its
Home Office; and
. The effective date of the election of a sub-account."
is substituted for the second paragraph of the Sub-Accounts provision.
"The Contract value at any time cannot be allocated among more than 10 sub-
accounts, except with the consent of the Company; and the Fixed Account will be
counted in the limit of 10.
The values of a contract depend on: the investment performance of the series in
which the sub-accounts are invested; and the interest credited to the Fixed
Account. You bear the investment risk for amounts invested in the sub-accounts
for your Contract."
<PAGE>
is substituted for the fourth and fifth paragraphs of the Sub-Accounts
provision.
"Transfer Option
You can transfer all or a portion of the Contract's existing share of the a sub-
account to another sub-account or to the Fixed Account. (See the Restriction of
Transfers to the Fixed Account provision.) Requests for transfer can be made in
writing or by telephone. The Company is not responsible for the authenticity of
transfer instructions received by telephone. The minimum transfer is $25 or, if
less, the full value of the Contract's share of the a sub-account. While the
Contract is in force other than under a Payment Option, transfers of existing
shares will be subject to a limit of 4 in each contract year, and transfers out
of the Fixed Account will be counted in the limit of 4; each transfer above 4
will be subject to a charge of not more than $10. While a Variable Payment
Option is in effect, transfers of existing shares will be subject to a limit of
1 in each contract year, except with the consent of the Company."
is substituted for the Transfer Option provision.
Modification of the Contract Value Section
"On or before the Maturity Date, the Contract Value is equal to: the number of
Accumulation Units standing to the credit of the Contract multiplied by the
applicable Accumulation Unit Value; plus the Contract's value in the Fixed
Account."
is substituted for the first sentence of the Contract Value provision.
Net Purchase Payments
A net purchase payment is equal to:
. The purchase payment paid:
LESS
. Any applicable state premium tax.
Each net purchase payment allocated to the Account will be credited in the form
of Accumulation Units to the sub-accounts you elect. The number of Accumulation
Units credited to a sub-account will be equal to the portion of the net purchase
payment credited to that sub-account divided by the Accumulation Unit Value for
that sub-account for the applicable Valuation Period."
is substituted for the Net Purchase Payments provision.
"Annual Fees
The Company will charge an annual Administration Fee of $30. The fee will be
charged on each contract anniversary while the Contract is in force other than
under a Payment Option. If the Contract is surrendered or matures on a date
which is not a contract anniversary, the charge will be the pro rata portion of
the fee for the period beyond the most recent contract anniversary.
<PAGE>
The fee will be charged against the sub-accounts and the Fixed Account
proportionately. The portion of the fee charged to each sub-account will reduce
the number of Accumulation Units standing to the credit of the Contract in that
sub-account."
is substituted for the Annual Fees provision.
"A partial surrender will reduce the Contract's share of the sub-accounts and
the Fixed Account proportionately, unless you request otherwise."
is substituted for the last sentence of the Surrender of the Contract provision.
New England Mutual Life Insurance Company
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto James A. Gallaher
President Secretary
<PAGE>
P-1002-91
Endorsement Effective Date:
As of the Effective Date the following changes are made:
"The Fixed Account
The Fixed Account is invested within the general account of the Company.
If you elect the Fixed Account, the first date on which money is applied to
the Fixed Account for the Contract is the latest of:
. The Contract Date;
. The date the first purchase payment is received by the Company at
its Home Office; and
. The effective date of the election of the Fixed Account.
Each future net purchase payment allocated to the Fixed Account will be applied
as of the date it is received by the Company at its Home Office. Each transfer
to the Fixed Account will be applied as of the transfer date.
Fixed Account Interest
The rate of interest for each amount applied to the Fixed Account: will be the
rate set by the Company in advance for the date the amount is applied to the
Fixed Account; and will not be less than a rate equivalent to an annual
effective rate of 4.5%. Each year, on the contract anniversary, the Company
will determine a portion, if any, of the Contract's value in the Fixed Account
which will be reinvested at the rate effective on that date. The effective
interest rate used on your Contract will be the weighted average of all such
rates for your Contract.
Interest will be credited to the Fixed Account on a daily basis.
Restriction of Transfers to the Fixed Account
The Company reserves the right to restrict transfers to the Fixed Account for
the Contract:
. If the rate of interest that would be used for the transfer is a rate
equivalent to an annual effective rate of 4.5%; or
. If the Contract's value in the Fixed Account equals or exceeds the
Company's published maximum for Fixed Account investments; or
<PAGE>
. For the remainder of the contract year if an amount is transferred out
of the Fixed Account in that contract year.
Transfers Out of the Fixed Account
You can transfer a limited portion of the Contract's value in the Fixed Account
to the sub-accounts once within 30 days after each contract anniversary.
Requests for transfer can be made in writing or by telephone. The Company is not
responsible for the authenticity of transfer instructions received by telephone.
The transfer will be limited to the greater of $1000 and 25% of the Contract's
value in the Fixed Account, except with the consent of the Company.
If you transfer an amount out of the Fixed Account in any contract year, the
Company reserves the right to restrict transfers to the Fixed Account for the
Contract for the remainder of that contract year.
Election of the Fixed Account
You can elect to have future net purchase payments applied to the Fixed Account.
You can change the election for future net purchase payments at any time by
notice to the Company in writing. (See the Restriction of Transfers to the
Fixed Account provision.)"
is added to the Contract.
Modification of The Variable Account Section
"The Contract's first investment in the Account will be made as of the latest
of:
. The Contract Date;
. The date the first purchase payment is received by the Company at its
Home Office; and
. The effective date of the election of a sub-account."
is substituted for the second paragraph of the Sub-Accounts provision.
"The Contract value at any time cannot be allocated among more than 10 sub-
accounts, except with the consent of the Company; and the Fixed Account will be
counted in the limit of 10.
The values of a contract depend on: the investment performance of the series in
which the sub-accounts are invested; and the interest credited to the Fixed
Account. You bear the investment risk for amounts invested in the sub-accounts
for your Contract."
<PAGE>
is substituted for the fourth and fifth paragraphs of the Sub-Accounts
provision.
"Transfer Option
You can transfer all or a portion of the Contract's existing share of the a sub-
account to another sub-account or to the Fixed Account. (See the Restriction of
Transfers to the Fixed Account provision.) Requests for transfer can be made in
writing or by telephone. The Company is not responsible for the authenticity of
transfer instructions received by telephone. The minimum transfer is $25 or, if
less, the full value of the Contract's share of the a sub-account. While the
Contract is in force other than under a Payment Option, transfers of existing
shares will be subject to a limit of 4 in each contract year, and transfers out
of the Fixed Account will be counted in the limit of 4; each transfer above 4
will be subject to a charge of not more than $10. While a Variable Payment
Option is in effect, transfers of existing shares will be subject to a limit of
1 in each contract year, except with the consent of the Company."
is substituted for the Transfer Option provision.
Modification of the Contract Value Section
"On or before the Maturity Date, the Contract Value is equal to: the number of
Accumulation Units standing to the credit of the Contract multiplied by the
applicable Accumulation Unit Value; plus the Contract's value in the Fixed
Account."
is substituted for the first sentence of the Contract Value provision.
Net Purchase Payments
A net purchase payment is equal to:
. The purchase payment paid:
LESS
. Any applicable state premium tax.
Each net purchase payment allocated to the Account will be credited in the form
of Accumulation Units to the sub-accounts you elect. The number of Accumulation
Units credited to a sub-account will be equal to the portion of the net purchase
payment credited to that sub-account divided by the Accumulation Unit Value for
that sub-account for the applicable Valuation Period."
is substituted for the Net Purchase Payments provision.
"Annual Fees
The Company will charge an annual Administration Fee of $30. The fee will be
charged on each contract anniversary while the Contract is in force other than
under a Payment Option. If the Contract is surrendered or matures on a date
which is not a contract anniversary, the charge will be the pro rata portion of
the fee for the period beyond the most recent contract anniversary.
<PAGE>
The fee will be charged against the sub-accounts and the Fixed Account
proportionately. The portion of the fee charged to each sub-account will reduce
the number of Accumulation Units standing to the credit of the Contract in that
sub-account."
is substituted for the Annual Fees provision.
"A partial surrender will reduce the Contract's share of the sub-accounts and
the Fixed Account proportionately, unless you request otherwise."
is substituted for the last sentence of the Surrender of the Contract provision.
New England Mutual Life Insurance Company
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto James A. Gallaher
President Secretary
<PAGE>
P-955-89
Endorsement: Tax-Sheltered Annuity
As of the Date of Issue of this Contract, this Endorsement is added to the
Contract. In the event of a conflict between this Endorsement and the Contract,
the provisions of the Endorsement will control.
In order to qualify this Contract as a Tax-Sheltered Annuity under Section
403(b) of the Internal Revenue Code, (the "Code"), the following restrictions
apply.
1. The Owner of the Contract is the Annuitant; and the Owner of the Contract
CANNOT be changed.
2. Unless otherwise notified by you or your Tax-Sheltered Annuity sponsor, the
Company will treat the purchase payments made to this Contract as contributions
within the permissible limitations of Sections 403(b)(2) and (10) of the Code.
3. The Company will accept Purchase Payments resulting from qualified
rollovers and transfers from other tax-sheltered annuities.
4. The entire interest of the Owner must be distributed to the Owner not later
than the first day of April following the calendar year in which the Owner
attains age 70 1/2; or it must be applied not later than the first day of April
following the calendar year in which the Owner attains age 70 1/2 to the First,
Second, Third or Sixth Payment Option of the Contract for:
(a) The life of the Owner or the lives of the Owner and named Payee; or
(b) A period which is not longer than the life expectancy of the Owner or
the joint life and last survivor expectancy of the Owner and the named
Payee.
If the Owner is an employee under a church plan, distribution can begin on the
date the Owner retires even if it is later than the first day of April following
the calendar year in which the Owner attains age 70 1/2.
Life expectancy and joint and last survivor expectancy are computed by use of
the return multiples contained in Section 1.72-9 of the Income Tax Regulations.
For purposes of this computation, the Owner's life expectancy may be
<PAGE>
recalculated no more frequently than annually; however, the life expectancy of a
non-spouse Beneficiary may not be recalculated.
In no event will the payments under the Payment Option selected by the Owner be
less than the minimum distribution amount and/or the incidental benefit amount
required under Section 401(a)(9) of the Code as applied to tax-sheltered
annuities.
If the spouse of the Owner is not the Beneficiary the method of distribution
selected by the owner must assure that at least 50% of the present value of the
amount available for distribution is paid within the life expectancy of the
Owner.
5. If the Owner's entire interest is to be distributed in other than a lump
sum, then the amount to be distributed each year (commencing with the required
beginning date and each year thereafter) must be at least an amount equal to the
quotient obtained by dividing the Owner's entire interest by the life expectancy
of the Owner or joint and last survivor expectancy of the Owner and Beneficiary.
6. If the Owner dies before distribution of his or her interest starts, the
Death Proceeds must distributed in accordance with one of the following rules.
(a) The Death Proceeds must be paid within 5 years after the death of the
Owner; or
(b) If the Owner's interest is payable to a Beneficiary designated by the
Owner and the Owner has not elected (a) above, then the entire interest
will be distributed in substantially equal installments over the life or
life expectancy of the Beneficiary commencing no later than one (1) year
after the date of the Owner's death. The Beneficiary may elect at any time
to receive greater payments. If the Beneficiary is an individual, the
Beneficiary can elect any Payment Option listed in 4 above, with an Option
Date not later than 1 year after the death of the Owner; or
(c) If the Beneficiary is the Owner's surviving spouse, the spouse may
elect within the five year period commencing with the Owner's date of death
to receive equal or substantially equal payments over the life or life
expectancy of the surviving spouse commencing at any date prior to the date
on which the deceased Owner would have attained age 70 1/2. The surviving
spouse may accelerate these payments at any time by increasing the
frequency or amount of such payments. If the Beneficiary is the surviving
spouse of the
<PAGE>
Owner, the Beneficiary: can elect the Fourth Payment Option for a period
which ends prior to the date on which the Owner would have attained age 70
1/2; and can elect any Payment Option listed in 4 above, with an Option
Date not later than the date on which the Owner would have attained age 70
1/2.
(d) If the Beneficiary is the surviving spouse of the Owner, the
Beneficiary can treat the Contract as his or her own individual retirement
arrangement by making a rollover from the Contract.
Payments will be calculated by use of the return multiples specified in
Section 1.72-9 of the Income Tax Regulations. (Life expectancy of a
surviving spouse may be recalculated annually.) In the case of any other
Beneficiary, life expectancy will be calculated at the time payment first
commences and payments for any period of 12 consecutive months will be
based on such life expectancy minus the number of whole years passed since
distribution first commenced.
Any amount paid to a child of the Owner will be treated as if it had been
paid to the surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the age of majority.
7. If the Owner dies after distribution of his or her interest has commenced,
the remaining portion of such interest will continue to be distributed at least
as rapidly as under the method of distribution being used prior to the Owner's
death.
8. The entire interest of the Owner is nonforfeitable and nontransferable.
9. Except for withdrawals due to excess contributions and/or deferrals,
withdrawals of the Contract Value attributable to contributions made pursuant to
a Salary Reduction Agreement and earnings thereon will be permitted only when
the Owner attains age 59 1/2, separates from service, dies, becomes disabled
within the meaning of Section 72(m)(7) of the Code, or encounters financial
hardship within the meaning of Section 403(b)(11) of the Code.
In the case of financial hardship, withdrawals will not include any earnings on
the Purchase Payments attributed to contributions made pursuant to a Salary
Reduction Agreement.
<PAGE>
Any requests for withdrawal will be approved upon evidence that the withdrawal
satisfies applicable requirements of law or regulations.
10. You are responsible for the tax treatment of any contributions, withdrawals
and distributions made to or from the Contract and must provide the Company with
all necessary instructions and information as may be required to report properly
on the qualified status of the Contract.
11. The Company can amend this Endorsement to reflect changes in the provisions
of the Code and related regulations by sending an amendment to the Owner.
New England Mutual Life Insurance Company
501 Boylston Street, Boston, Massachusetts
Robert A. Shafto James A. Gallaher
President Secretary
<PAGE>
A-71-A
RIDER: BENEFITS FOR DISABILITY OF ANNUITANT
The COMPANY agrees to provide purchase payment benefits with respect to the
Contract and to waive premiums for this Rider on receipt of proof that total
disability of the Annuitant:
- Started while this Rider was in force; and
- Has continued for at least six months.
RIDER SCHEDULE.
Annuity Contract Number:
Annuitant:
Date of Issue of this Rider:
Rider Premium Rate:
Maximum Purchase Payment Benefits:
First Rider Year:
Each Later Rider Year:
Expiry Date:
DEFINITIONS. "Total disability" means disability of the Annuitant:
- Which results from sickness or accidental bodily injury; and
- Which continuously prevents the Annuitant from working for pay or profit.
During the first 36 months of disability, "working" means engaging in the
occupation which was the regular occupation of the Annuitant when total
disability started; and thereafter means engaging in any occupation for which
the Annuitant is or becomes fit by education, training or experience.
<PAGE>
Total disability may be the result of a sickness which began or an injury
which occurred either before or after this Rider was issued.
"Working for pay or profit" includes attending school or college as a full
time student, if that was the main occupation of the Annuitant when the
disability started.
Total disability will be presumed if, as the result of a sickness or an
accidental bodily injury, the Annuitant has a total loss, which begins while
this Rider is in force, of:
- Speech; or sight in both eyes; or hearing in both ears; or
- Use of both hands; or use of both feet; or use of one hand and one foot.
Total disability will be presumed as long as the loss continues, even if the
Annuitant is working for pay or profit.
"Purchase payment benefit" means an amount provided by the Company because
of total disability of the Annuitant and applied to the Contract in the form of
a purchase payment.
"Credits" means the amount of purchase payments applied to the Contract,
except that:
- Credits in a rider year will not be more than the Maximum Purchase Payment
Benefits for that rider year; and
- For any period for which purchase payment benefits are provided, credits
will not be more than those benefits.
EXCLUSION. This Rider does not provide benefits for total disability which
results from a sickness or from an injury caused by war or an act of war.
PURCHASE PAYMENT BENEFITS. After total disability has continued for at least six
months, purchase payment benefits will be provided for each rider month of the
benefit period. The benefit period:
- Starts on the first day of the rider month in which total disability
started; and
- Ends at the end of the second full rider month after total disability ends.
No benefits will be provided beyond the contract anniversary nearest the 65th
birthday of the Annuitant unless:
<PAGE>
- Total disability has been continuous for the full five year period which
ends on that contract anniversary; and
- Timely proof of total disability has been received by the Company during the
five years.
AMOUNT OF PURCHASE PAYMENT BENEFITS. The amount of the purchase payment benefit
for each month of the benefit period will be computed as follows:
- If total disability starts during the first rider month, the amount will be
equal to the smaller of: (a) the sum of all credits in the first rider month
but before the date total disability started; and (b) one-twelfth of the
Maximum Purchase Payment Benefits for the first rider year.
- If total disability starts after the first rider month but during the first
rider year, the amount will be equal to the smaller of: (a) the monthly average
of credits for all rider months before the rider month in which total
disability started; and (b) one-twelfth of the Maximum Purchase Payment
Benefits for the first rider year.
- If total disability starts after the first rider year, the amount will be
equal to the monthly average of credits for all rider years before the rider
year in which total disability started.
HOW PURCHASE PAYMENT BENEFITS ARE PROVIDED. When a claim for benefits under
this Rider is approved, the Company will provide an initial benefit equal to
one monthly purchase payment benefit times the number of rider months which
started during the benefit period. The Company will pay to the Owner in cash:
- The whole initial benefit; or, if less,
- An amount equal to the sum of all purchase payments which were applied to
the contract during the benefit period.
The Company will apply any balance of the initial benefit to the Contract as a
purchase payment. Thereafter during the benefit period, the Company will apply
one monthly purchase payment benefit to the Contract as a purchase payment on
the first day of each rider month.
WAIVER OF PREMIUMS BENEFIT. After total disability has continued for at least
six months, the Company will waive premiums for this Rider which are due and
payable for
<PAGE>
the benefit period. The Company will refund to the Owner the part of any
premiums which were paid but are later waived.
PROOF OF DISABILITY. Proof of total disability must be furnished:
- During the life of the Annuitant; and
- During the period of total disability.
Failure to furnish proof of total disability within the time required will not
void or reduce a claim for benefits if it is shown that:
- It was not reasonably possible to furnish proof within that time; and
- Proof was furnished as soon as reasonably possible.
Proof of the continuance of disability may be required by the Company at
reasonable intervals; but after two years of continuous total disability, proof
will not be required more often than once a year.
CONTRACT BENEFITS. The values of the Contract and any dividends will be the same
as they would be if purchase payment benefits were paid to the Company in cash.
PREMIUMS FOR THIS RIDER. Premiums for this Rider are due when purchase payments
are applied to the Contract. The amount of a premium for the Rider is equal to
the Rider Premium Rate shown above times the amount of the purchase payment; but
any purchase payment which does not count as a credit (see Definitions) will be
excluded from the computation. The computation of the first premium for the
Rider will be based on any purchase payment which is being applied plus all
purchase payments which have been applied during the first rider year. No
premium for the Rider will be due or payable after:
- The contract anniversary which is nearest to the 64th birthday of the
Annuitant;
- The contract anniversary which next precedes the Expiry Date shown above; or
- The termination of the Rider.
DATE OF ISSUE. The Date of Issue of this Rider is shown above. If this Rider
is issued after the Date of Issue of the Contract, the first rider year will
start on the contract anniversary which is on or which next precedes the Date
of Issue of this Rider.
<PAGE>
NOT CONTESTABLE AFTER TWO YEARS. This Rider will not be contestable after it
has been in force during the life of the Annuitant, and without the occurrence
of total disability of the Annuitant, for two years from the Date of Issue of
the Rider.
INCORRECT AGE or SEX. The Rider Premium Rate for this Rider is based on the sex
and date of birth of the Annuitant shown in Section 1 of the Contract. If the
sex or the date of birth is not correctly shown, the values and benefits will be
corrected to the amounts which the premiums paid would have provided for the
correct sex and date of birth.
CONTRACT. A copy of the application for this Rider is attached to and made a
part of the Rider. This Rider is made a part of the Contract to which it is
attached.
TERMINATION. This Rider will terminate upon the earliest of:
- Surrender or maturity of the Contract;
- Death of the Annuitant;
- The contract anniversary nearest the 65th birthday of the Annuitant except
as to benefits for an existing total disability which has been continuous for
the full five year period which ends on that anniversary.
- Receipt by the Company at its Home Office of written election signed by the
Owner of the Contract to terminate the Rider; or
- The Expiry Date of the Rider.
NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY
501 Boylston Street, Boston, Massachusetts
Edward E. Phillips Kernan F. King
President Secretary
<PAGE>
P-868-85
ENDORSEMENT
MODIFICATION OF VARIABLE LIFE INCOME TABLES SECTION
As of the Date of Issue of this Contract, the following section is substituted
for the Variable Life Income Tables section:
Variable Life Income Tables
Guaranteed first monthly payments per $1,000 of proceeds applied to the Variable
Life Income Options are shown below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Second and Third Options: Variable Life Income
- ----------------------------------------------------------------------------------------------------
Second Option Third Option
---------------------------- ----------------------------
Age
and 10 20
sex of No Years Years Period Certain
Payee Refund Certain Certain Amount Years Months
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Male
55 $4.66 $4.63 $4.47 $4.50 18 6
56 4.77 4.71 4.53 4.57 18 3
57 4.86 4.80 4.59 4.65 17 11
58 4.96 4.89 4.65 4.73 17 7
59 5.06 4.98 4.72 4.81 17 4
60 5.17 5.08 4.78 4.90 17 0
61 5.29 5.19 4.85 4.99 16 8
62 5.42 5.30 4.91 5.08 16 5
63 5.56 5.42 4.98 5.19 16 1
64 5.70 5.54 5.04 5.29 15 9
65 5.86 5.67 5.11 5.40 15 5
66 6.03 5.81 5.17 5.52 15 1
67 6.21 5.95 5.23 5.65 14 9
68 6.40 6.10 5.28 5.78 14 5
69 6.60 6.25 5.34 5.92 14 1
70 6.82 6.40 5.39 6.06 13 9
71 7.05 6.57 5.44 6.21 13 5
72 7.30 6.73 5.48 6.37 13 1
73 7.56 6.90 5.52 6.54 12 9
74 7.84 7.07 5.56 6.72 12 5
75 8.14 7.25 5.60 6.91 12 1
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Second and Third Options: Variable Life Income
- ----------------------------------------------------------------------------------------------------
Second Option Third Option
---------------------------- ----------------------------
Age
and 10 20
sex of No Years Years Periods Certain
Payee Refund Certain Certain Amount Years Months
- -----------------------------------------------------------------------------------------------
Female
<S> <C> <C> <C> <C> <C> <C>
55 $4.31 $4.29 $4.21 $4.22 19 9
56 4.38 4.36 4.27 4.28 19 6
57 4.46 4.43 4.33 4.34 19 2
58 4.54 4.50 4.39 4.41 18 11
59 4.62 4.58 4.45 4.48 18 7
60 4.71 4.66 4.52 4.55 18 4
61 4.80 4.75 4.58 4.63 18 0
62 4.90 4.84 4.65 4.71 17 8
63 5.00 4.94 4.72 4.80 17 4
64 5.12 5.04 4.79 4.89 17 0
65 5.23 5.15 4.86 4.98 16 9
66 5.36 5.27 4.93 5.09 16 4
67 5.50 5.39 5.00 5.19 16 1
68 5.65 5.52 5.07 5.31 15 8
69 5.81 5.66 5.14 5.43 15 4
70 5.98 5.80 5.21 5.56 15 0
71 6.17 5.96 5.28 5.69 14 8
72 6.37 6.12 5.34 5.84 14 3
73 6.59 6.29 5.40 5.99 13 11
74 6.83 6.46 5.45 6.15 13 7
75 7.08 6.64 5.50 6.33 13 2
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Sixth Option: Variable Life Income for Two Lives
- ----------------------------------------------------------------------------------------------------
Age of One Age of Other Payee
Payee 55 60 65 70 75
- -----------------------------------------------------------------------------
Joint and Survivor
<S> <C> <C> <C> <C> <C>
55 $3.99 $4.09 $4.16 $4.22 $4.25
60 4.15 4.29 4.42 4.52 4.59
65 4.29 4.50 4.70 4.87 5.00
70 4.41 4.69 4.99 5.27 5.50
75 4.51 4.86 5.25 5.67 6.07
80 4.58 4.98 5.47 6.04 6.64
- -----------------------------------------------------------------------------
Joint and Survivor, 10 Years Certain
<S> <C> <C> <C> <C> <C>
55 $3.99 $4.08 $4.16 $4.21 $4.25
60 4.15 4.29 4.42 4.51 4.58
65 4.29 4.50 4.69 4.86 4.98
70 4.41 4.69 4.98 5.25 5.47
75 4.50 4.84 5.23 5.63 5.99
80 4.57 4.96 5.43 5.96 6.49
- -----------------------------------------------------------------------------
Joint and 2/3 to Survivor
<S> <C> <C> <C> <C> <C>
55 $4.31 $4.48 $4.67 $4.87 $5.09
60 4.50 4.70 4.92 5.17 5.42
65 4.70 4.95 5.22 5.52 5.84
70 4.94 5.23 5.57 5.96 6.36
75 5.23 5.55 5.97 6.46 7.00
80 5.48 5.89 6.40 7.02 7.72
</TABLE>
____________________________________________________________________________
Payments for other ages or for 2 females or 2 males will be quoted by the
Company on request.
____________________________________________________________________________
<PAGE>
MODIFICATIONS OF VARIABLE LIFE INCOME OPTIONS PROVISION
As of the Date of Issue of this Contract, in the Variable Life Income Options
provision of the Payment of Benefit section, the following change is made:
"Variable Life Income Options are based on the sex of the Payee and on the age
of the Payee on the Payee's birthday nearest the Option Date and on the Assumed
Interest Rate selected. The Company will require proof of age. The Life Income
Payments will be based on the rates shown in the Variable Life Income Tables or
on the Payment Option rates of the Company on the Option Date, whichever rates
are more favorable to the Payee. The rates shown in the Variable Income Tables
are based on an Assumed Interest Rate of 3 1/2% per year; and on mortality
based on the Individual Annuitant Mortality Table for 1983; and with projection
on Scale G to the year 2000 and then on Scale B Modified to the year 2010."
Is substituted for
"Variable Life Income Options are based on the sex of the Payee and the age of
the Payee on the Payee's birthday nearest the Option Date and on the Assumed
Interest Rate selected. The Company will require proof of age. The Life Income
Payments will be based on the rates shown in the Variable Life Income Tables
(Section 9) or on the Payment Option rates of the Company on the Option Date,
whichever rates are more favorable to the Payee. The rates shown in the
Variable Income Tables are based on mortality according to the Male Group
Annuity Table for 1951 with projection on Scale C to the year 2000 and female
ages set back 5 years and an Assumed Interest Rate of 31/2% per year."
New England Mutual Life Insurance Company
501 Boylston Street, Boston, Massachusetts
/s/ John A. Fibiger /s/ Kernan F. King
President Secretary
<PAGE>
New York Endorsement
ENDORSEMENT
As of the Date of Issue of this Contract, the following is substituted for the
Transfer Option of The Variable Account section:
"Transfer Option
You can transfer all or a portion of the Contract's existing share of a
sub-account to another sub-account. Requests for transfer must be made in
writing. The minimum transfer is $25 or, if less, the full value of the
Contract's share of a sub-account. While the Contract is in force other
than under a Payment Option, transfers of existing shares will be subject
to a limit of 4 in each contract year; each transfer above 4 will be
subject to a charge of not more than $10. While a Variable Payment Option
is in effect, transfers of existing shares will be subject to a limit of 1
in each contract year, except with the consent of the Company.""
New England Mutual Life Insurance Company
501 Boylston Street, Boston, Massachusetts
/s/ John A. Fibiger /s/ Kernan F. King
President Secretary
<PAGE>
Exhibit 4(ix)
P-1205-98
________________________________________________________________________________
ROTH INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This Endorsement is attached to and made a part of the Annuity Contract (the
{Contract") issued by Metropolitan Life Insurance Company (the {Company") to
qualify the Contract as a Roth Individual Retirement Annuity (IRA) under Section
408A of the Internal Revenue Code (the {Code"), as the same may be amended or
supplemented from time to time. All references to Code Sections are to those
Sections as they may be amended and/or renumbered from time to time. If any
provisions of the Contract conflict with this Endorsement, the provisions of
this Endorsement will apply.
[_] Check here if this is a Roth Conversion IRA.
ARTICLE I - OWNERSHIP
The individual who participates in this Roth IRA (the {Owner") is the Owner of
the Contract. The Contract is established for the exclusive benefit of the Owner
and his or her Beneficiary. The Owner may exercise all rights under the Contract
during his or her lifetime. The Owner's interest in the Contract is
nonforfeitable and nontransferable. The Contract may not be sold, assigned,
discounted or pledged as collateral or as security for the performance of an
obligation or for any other purpose. Separate records will be maintained for the
interest of each individual.
ARTICLE II - DEPOSIT LIMITS
The Company may accept deposits on behalf of the Owner for a tax year of the
Owner. Deposits shall be in cash and shall not be fixed. If the Roth IRA is not
designated as a Roth Conversion IRA, then except in the case of a rollover
contribution described in Section 408A(e), the Company will accept deposits up
to a maximum of $2,000 for any tax year of the Owner. If the Owner also
maintains an IRA under Section 408(a) or 408(b) of the Internal Revenue Code,
the maximum $2,000 premium to the Owner's Roth IRA under Section 408A is reduced
by any contributions or premiums the Owner makes to his or her IRAs under
Sections 408(a) and 408(b). The Owner's total annual contributions to all IRAs
under Section 408(a), 408(b) and 408A cannot exceed the lesser of $2,000 or 100
percent of the Owner's compensation.
If this Roth IRA is designated as a Roth Conversion IRA, no deposits other than
IRA conversion contributions made during the same tax year will be accepted.
No contributions will be accepted under either a SIMPLE plan or a SEP plan
established by any employer pursuant to Code Sections 408(p) and 408(k)
respectively. Transfer or rollover contributions may be made to this Roth IRA
from the custodian, trustee or issuer of another Roth IRA and such other types
of IRAs and plans as permitted by statute, regulation or other IRS
pronouncement.
Any refund of premiums (other than those attributable to excess deposits) will
be applied, before the close of the calendar year following the year of the
refund, toward the payment of future premiums or the purchase of additional
benefits.
ARTICLE III - DISTRIBUTION LIMITS
1. The Owner's interest in the Contract is not subject to the required
distribution rules of Section 401(a)(9)(A), nor is the Contract subject to
the incidental death benefit requirements of Section 401(a).
2. The Owner may elect, in a manner acceptable to the Company, to have
the balance in the Contract distributed in one of the following forms:
a. a single sum payment;
b. equal or substantially equal payments over the life of the owner;
c. equal or substantially equal payments over the lives of the Owner
and his or her designated beneficiary;
d. equal or substantially equal payments over a specified period that
may not be longer than the Owner's life expectancy;
e. equal or substantially equal payments over a specified period that
may not be longer than the joint life and last survivor expectancy
of the Owner and his or her designated beneficiary;
f. any other increments permitted under the Contract.
<PAGE>
________________________________________________________________________________
3. If the Owner dies before his or her entire interest is distributed to him
or her and the Owner's surviving spouse is not the sole beneficiary, the
entire remaining interest will, at the election of the Owner or, if the
Owner has not so elected, at the election of the beneficiary or
beneficiaries, either:
a. Be distributed by December 31 of the year containing the fifth
anniversary of the Owner's death, or
b. Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of
the Owner's death.
If distributions do not begin by the date described in b., distribution
method a. will apply.
4. In the case of distribution method 3.b. above, to determine the minimum
annual payment for each year, divide the Owner's entire interest in the
annuity as of the close of business on December 31 of the preceding year by
the life expectancy of the designated beneficiary using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent
year.
5. If the Owner's spouse is the sole beneficiary on the Owner's date of death,
he or she may treat the Roth IRA as his or her own Roth IRA and would not
be subject to the required minimum distribution rules. The Owner's
surviving spouse will also be entitled to such additional beneficiary
payment options as are permitted under the law or related regulations.
All distributions made pursuant to paragraphs 3, 4 and 5 of this Article
III shall be made in accordance with the applicable requirements of Section
401(a)(9) of the Code and the regulations thereunder. Unless payments are
being made in accordance with the five year rule described above, payments
must be made in periodic payments at intervals of no longer than one year.
If a beneficiary elects distribution in the form of annuity payments, the
payments must be either nonincreasing or they may increase only as provided
in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations.
For purposes of distributions beginning after the Owner's death, life
expectancy is computed by use of the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations.
ARTICLE IV - REPORTING
The Owner agrees to provide the Company with information necessary for the
Company to prepare any report required under the Internal Revenue Code and
Regulations including Section 408(i) and 408A(d)(3)(E) and Regulations Sections
1.408-5 and 1.408-6 and under guidance published by the Internal Revenue
Service.
The Company shall furnish annual calendar year reports concerning the status of
the annuity.
ARTICLE V - AMENDMENTS
Any amendment made for the purpose of complying with provisions of the Code and
related regulations may be made without the consent of the Owner. The Owner will
be deemed to have consented to any other amendment unless the Owner notifies the
Company that he or she does not consent within 30 days from the date the Company
mails the amendment to the Owner.
<PAGE>
________________________________________________________________________________
ARTICLE VI - RESPONSIBILITY OF THE PARTIES
The Company shall not be responsible for any penalties, taxes, judgments or
expenses incurred by the Owner in connection with this IRA and shall have no
duty to determine whether any contributions to or distributions from this IRA
comply with the Code, regulations or rulings.
Metropolitan Life Insurance Company
Administrative Office:
501 Boylston Street, Boston, Massachusetts
ABCD ABCD
President Secretary
<PAGE>
Exhibit 99.5(i)
App 528-87
Agency No.
For Company Use Only
No.____________
Pension No. __________
Part I-Application to the New England Mutual Life
Insurance Company for an Annuity
____________________________________________________________
Name of
Annuitant - - - - - - - - - - - - - - - - - - - - - - - -
(Print name as it should appear in contract)
____________________________________________________________
Questions below pertain to Annuitant unless otherwise indicated.
1. Type of Annuity (check one in each)
a. [_] Deferred or [_] Immediate
b. [_] Variable or [_] Fixed
2. Address (Include street and number, city, state and zip code)
a. Residence ________________________________________
b. Business _________________________________________
3. Payment Notice Address
[_] Annuitant [_] at 2.a. [_] at 2.b.
[_] Other than Annuitant (give name and address)
4. Social Security or Employer
Identification No.
Annuitant _________________________________
First Owner _______________________________
5. Birthplace _____________________________
(City) (State or Country)
6. Citizen of _____________________________
7. Birth Date _____________________________
(Month) (Day) (Year)
8. Sex [_] Male [_] Female
9. Marital Status [_] Married [_] Single
[_] Widowed [_] Divorced [_] Separated
10. Basis of Annuity Plan
[_] Qualified Pension or Profit Sharing Plan ([_] 401(k))
[_] Tax-Sheltered Annuity
[_] Individual Retirement Annuity Plan ([_] Rollover)
[_] Non-Qualified Individual
<PAGE>
[_] Government Deferred Compensation Plan
[_] Other (specify)__________________________________
11. Purchase payment mode [_] Single [_] Annual
[_] Quarterly [_] Monthly
[_] MSA No. ________________________________
[_] Other (specify)_________________________
12. Amount (Check and complete only one)
[_] Gross payment including
Riders at mode shown in 11: $____________________
[_] Monthly income to Annuitant: $____________________
13. Maturity Date (if no date is shown. Maturity Date will be Annuitant's 70th
birthday)
_________________________________
(Month) (Day) (Year)
14. Method of payment to Annuitant --- Note: Payment Option to be Life Income,
10 Years Certain, unless otherwise specified. ___________________________
15. Disability Benefit Rider
[_] Yes (Answer a thru d) [_] No
a. Any other negotiations for disability insurance pending or contemplated?
[_] Yes [_] No
(If Yes, explain on back)
b. Any intent to travel or reside outside USA?
(If Yes, explain on back) [_] Yes [_] No
c. Any participation in SCUBA diving, skydiving, hang gliding, or motor
racing within past 3 years, or any intent to participate in these
activities? [_] Yes [_] No
(If Yes, complete Avocation Questionnaire)
d. Occupation (Be explicit) __________________________
16. Any insurance or annuity in this or any other company which has been or will
be replaced as a result of this Application? (If Yes, explain on back and give
name of company) [_] Yes [_] No
APP-528-87 Continued on Reverse Side
___________________________________________________________
Receipt---Do Not Destroy
Received _____________________________________ dollars
in connection with an application to New England Mutual Life Insurance Company
for an annuity contract on __________________________________________________
Countersigned ______________ 19 _____
New England Mutual Life Insurance Company
[SIGNATURE APPEARS HERE]
<PAGE>
Secretary
_______________________
Agent
17. Beneficiary (Include relation to Annuitant)
(1) Primary ______________ (2) Secondary ________________
18. Is Annuitant to own the contract? [_] Yes [_] No
If No, name the Owner. (Include relation to Annuitant)
(Note: A numbered sequence may be used to name successive
Owners) _________________________________________________
19. Dividend Option: ________________________________________
20. Any special requests
(Attach memo if more space needed)
HOME OFFICE USE: ADDITIONS AND AMENDMENTS
21. Amount paid with this Application: $ ____________________
22. Second Annuitant (Immediate Joint Annuities Only)
__________________________ _______________________________
Name Relation to Annuitant
(Print name as it should appear in contract)
If Application is for a Variable Annuity, answer questions 23 and 24
23. Separate Account Allocation (whole %)
______% Money Market (Minimum 10% in each
______% Bond Income selected account.)
______% Capital Growth
______% Managed
100% Total
24. Suitability Statement by Applicant
a. Did you receive the prospectus? [_] Yes [_] No
(If Yes, give date of prospectus______)
b. Do you understand that the contract value and annuity payments when based on
the investment experience of a separate investment account may increase or
decrease depending on the contract's investment return?
[_] Yes [_] No
c. Do you believe that this contract will meet your financial objectives?
[_] Yes [_] No
________________________________________________________
<PAGE>
General. To the best of my knowledge and belief, the answers recorded are true
and complete. My agreement in writing is required to any change made by the
Company as to information in this Application.
When the Contract Takes Effect. The contract will take effect as of the latest
of: (a) the date of this Application: (b) the date of the first purchase payment
and the first premium for any riders are paid: and (c) any date of issue that is
requested, provided, that this Application can be approved by the Company as
submitted, and, with respect to any riders which involve an insurance risk, that
at the time of payment there has been no change in insurability as represented
in this Application since the date of the Application.
Signed at (City and State) _____________________
Date _______ 19 _______
_______________ __________________ ________________
Agent Annuitant Applicant if other
than Annuitant
Accepted by the Company at the Administrative Office by _____________________
Date: ____________
Owner's Certification (in lieu of W9)
Owner's Social Security or Employer Identification Number: ________
__ I am __ I am not subject to backup withholding under Section 3406(a)(1)(c)
of the Internal Revenue Code. Under penalties of perjury, I certify that the
information provided in this section is true, correct and complete.
Signature _____________________ Date __________________
Owner
Agent's Certificate
Evidence of Date of Birth- No payment will be made under payment options
involving life contingencies until satisfactory evidence of date of birth of
payee(s) has been provided. The best time to obtain such evidence is when the
application is taken. The following items, listed in order of preference, may
be presented as evidence of date of birth. Indicate enclosures for the
Annuitant.
__ A certificate of birth recorded within one year of birth.
__ A certificate of infant baptism record within one year of birth.
Special Affidavit Form UND-55 and one of the following:
__ A certificate of birth recorded later than one year after birth.
<PAGE>
__ A certificate of infant baptism recorded later than one year after birth.
__ A certified copy of a page of the family register of birth which is
frequently kept in the family Bible.
__ A school record made at an early age.
__ A confirmation record.
__ A naturalization record.
__ A passport at least five years old.
__ A military or naval discharge paper.
__ A life insurance record under a policy issued at least five years ago.
__ Where none of the foregoing are available, an old record or affidavit from a
older member of the immediate family.
_______________________________________________________
1. Expected Purchase Payments: First Taxable Yr. $ _______
Subsequent Taxable Yrs. $ ________
2. Annuitant's annual salary from "qualified" employer (after any salary
reduction agreement) $ ____________
3. Total employer contributions to TSA or other retirement plans excludable
from employee's gross income:
current year $ ____________ Prior year $ _____________
4. If tax-sheltered annuity: Date Hired ___________
Expected Retirement Date _________
Maximum Level Annual Exclusion Allowance, if known
$ ___________________
5. Does Annuitant appear to be in good health and mentally competent? (If No,
give details in separate memo)
__ Yes ___ No
6. Do you have reason to believe that replacement or change of any existing
insurance or annuity may be involved?
___ Yes ___ No
7. Sale resulted from
__ TNE Policyholder
__ Referred Lead
__ Direct Mail Reply
__ Other (Specify)
8. Education
__ High School
__ Attended College
__ College Graduate
__ Graduate School
9. Mortgage on Home?
__ Yes __ No __ Renter
10. Occupation (Be specific) ________________
11. County of Residence ____________
Date __________ Signature of Agent ________________
Agent's Identification Place
(Agent's name) (Agent's Code Number) (Commission split %)
