As filed with Securities and Exchange Commission on
April 30, 2002
Registration No. 333-73676
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
NEW ENGLAND LIFE INSURANCE COMPANY
(Name of Depositor)
501 Boylston Street
Boston, Massachusetts 02117
(Address of depositor's principal executive offices)
MARIE C. SWIFT
Second Vice President and Counsel
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Title of Securities Being Registered: Units of Interest in Flexible Premium
Variable Life Insurance Policies.
As soon as practicable after the effective date of this
Registration Statement
(Approximate date of proposed public offering)
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution of the Policies
5 NELICO
6 The Variable Account
9 Inapplicable
10(a) Other Policy Features
10(b) Policy Values and Benefits
10(c), (d), (e) Death Benefit; Cash Value; 24 Month Conversion Right;
Surrender; Partial Withdrawal; Right to Examine the Policy;
Loan Provision; Transfer Option; Premiums
10(f), (g), (h) Voting Rights; Rights Reserved by NELICO
10(i) Limits to NELICO's Right to Challenge the Policy; Payment of
Proceeds; Investment Options
11 The Variable Account
12 Investments of the Variable Account; Distribution of the
Policies
13 Charges and Expenses; Distribution of the Policies; NELICO's
Income Taxes; Appendix A
14 Amount Provided for Investment Under the Policy;
Distribution of the Policies
15 Premiums
16 Investments of the Variable Account
17 Captions referenced under Items 10(c), (d), (e) and (i)
above
18 The Variable Account
19 Reports; Distribution of the Policies
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 Distribution of the Policies
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 Distribution of the Policies
27 NELICO
28 Management
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
29 NELICO
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Distribution of the Policies
35 NELICO
36 Inapplicable
37 Inapplicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41(a) Distribution of the Policies
42 Inapplicable
43 Inapplicable
44(a) Investments of the Variable Account; Amount Provided for
Investment Under the Policy; Deductions from Premiums;
Flexible Premiums
44(b) Charges and Expenses
44(c) Flexible Premiums; Deductions from Premiums
45 Inapplicable
46 Investments of the Variable Account; Captions referenced
under Items 10(c), (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Lapse and Reinstatement; Charges
and Expenses; Additional Benefits by Rider; 24 Month
Conversion Right; Payment Options; Policy Owner and
Beneficiary; Premiums; Distribution of the Policies
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
ZENITH FLEXIBLE LIFE 2002
Flexible Premium
Variable Life Insurance Policies
Issued by
New England Variable Life Separate Account of
New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(617) 578-2000
This prospectus offers individual flexible premium variable life insurance
policies (the "Policies") issued by New England Life Insurance Company
("NELICO").
The Policy provides premium flexibility. You may choose between two death
benefit options. One provides a fixed death benefit equal to the Policy's face
amount. The other provides a death benefit that may vary daily with the
investment experience of the Eligible Funds. Cash value allocated to the
Eligible Funds is not guaranteed, and fluctuates daily with the investment
results of the Eligible Funds.
You allocate net premiums among the investment Sub-Accounts of NELICO's
Variable Life Separate Account (the "Variable Account"). Each Sub-Account of the
Variable Account invests in shares of an Eligible Fund. The Eligible Funds are:
NEW ENGLAND ZENITH FUND
State Street Research Bond Income Series
MFS Total Return Series
State Street Research Money Market Series
Zenith Equity Series
FI Structured Equity Series
Balanced Series
Loomis Sayles Small Cap Series
Alger Equity Growth Series
Davis Venture Value Series
Harris Oakmark Focused Value Series
MFS Investors Trust Series
MFS Research Managers Series
FI Mid Cap Opportunities Series
METROPOLITAN SERIES FUND, INC.
Putnam Large Cap Growth Portfolio
Janus Mid Cap Portfolio
Russell 2000(R) Index Portfolio
Putnam International Stock Portfolio
MetLife Stock Index Portfolio
MetLife Mid Cap Stock Index Portfolio
Morgan Stanley EAFE(R) Index Portfolio
Lehman Brothers(R) Aggregate Bond Index Portfolio
State Street Research Aurora Portfolio
Janus Growth Portfolio
State Street Research Investment Trust Portfolio
Franklin Templeton Small Cap Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
Harris Oakmark Large Cap Value Portfolio
State Street Research Large Cap Value Portfolio
MET INVESTORS SERIES TRUST
MFS Mid Cap Growth Portfolio
PIMCO Innovation Portfolio
Met/AIM Mid Cap Core Equity Portfolio
Met/AIM Small Cap Growth Portfolio
PIMCO Total Return Portfolio
State Street Research Concentrated International Portfolio
VARIABLE INSURANCE PRODUCTS FUND ("VIP")
Overseas Portfolio
Equity-Income Portfolio
High Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
Asset Manager Portfolio
AMERICAN FUNDS INSURANCE SERIES
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds Global Small Capitalization Fund
You receive State Street Research Money Market Sub-Account performance
until 15 days (less in some states) after we apply your initial premium payment
to the Policy. Thereafter, we invest the Policy's cash value according to your
instructions.
You may also allocate net premiums to a Fixed Account in most states.
Special limits apply to Fixed Account transfers, premium allocations and
withdrawals.
You may cancel the Policy during the "Right to Examine Policy" period.
Replacing existing insurance with the Policy might not be to your advantage.
Before you buy a Policy, ask your registered representative if changing, or
adding to, current insurance coverage would be advantageous.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
POLICIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS http://www.sec.gov.
THE ELIGIBLE FUND PROSPECTUSES ARE ATTACHED. PLEASE READ THEM AND KEEP THEM
FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE SUB-ACCOUNTS OR ELIGIBLE FUNDS WILL
PERFORM. THE POLICIES AND THE ELIGIBLE FUNDS 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.
MAY , 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
-----
GLOSSARY.................................................... A-4
INTRODUCTION TO THE POLICIES................................ A-5
The Policies........................................... A-5
Availability of the Policy............................. A-6
Policy Charges......................................... A-7
How the Policy Works................................... A-12
Receipt of Communications and Payments at NELICO's
Designated Office..................................... A-13
NELICO................................................. A-13
POLICY VALUES AND BENEFITS.................................. A-15
Death Benefit.......................................... A-15
Death Proceeds Payable................................. A-16
Change in Death Benefit Option......................... A-17
Cash Value............................................. A-17
Allocation of Net Premiums............................. A-18
Amount Provided for Investment under the Policy........ A-18
Right to Examine Policy................................ A-19
CHARGES AND EXPENSES........................................ A-19
Deductions from Premiums............................... A-19
Surrender Charge....................................... A-20
Monthly Deduction from Cash Value...................... A-21
Charges Against the Eligible Funds and the Sub-Accounts
of the Variable Account............................... A-23
Group or Sponsored Arrangements........................ A-23
PREMIUMS.................................................... A-24
Flexible Premiums...................................... A-24
Lapse and Reinstatement................................ A-25
OTHER POLICY FEATURES....................................... A-26
Increase in Face Amount................................ A-26
Loan Provision......................................... A-26
Surrender.............................................. A-27
Partial Withdrawal..................................... A-28
Reduction in Face Amount............................... A-28
Investment Options..................................... A-29
Transfer Option........................................ A-29
Dollar Cost Averaging.................................. A-30
Portfolio Rebalancing.................................. A-30
Change of Insured Person............................... A-31
Payment of Proceeds.................................... A-31
24 Month Conversion Right.............................. A-31
Other Exchange Rights.................................. A-32
Payment Options........................................ A-32
Additional Benefits by Rider........................... A-33
Policy Owner and Beneficiary........................... A-34
</Table>
A-2
<Table>
<Caption>
PAGE
-----
THE VARIABLE ACCOUNT........................................ A-34
Investments of the Variable Account.................... A-35
Investment Management.................................. A-37
Substitution of Investments............................ A-39
Share Classes of the Eligible Funds.................... A-39
THE FIXED ACCOUNT........................................... A-39
General Description.................................... A-40
Values and Benefits.................................... A-40
Policy Transactions.................................... A-40
DISTRIBUTION OF THE POLICIES................................ A-41
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY............ A-42
Misstatement of Age or Sex............................. A-42
Suicide................................................ A-42
TAX CONSIDERATIONS.......................................... A-42
Introduction........................................... A-42
Tax Status of the Policy............................... A-42
Tax Treatment of Policy Benefits....................... A-43
NELICO's Income Taxes.................................. A-45
MANAGEMENT.................................................. A-46
VOTING RIGHTS............................................... A-48
RIGHTS RESERVED BY NELICO................................... A-48
RESTRICTIONS ON FINANCIAL TRANSACTIONS...................... A-49
TOLL-FREE NUMBERS........................................... A-49
REPORTS..................................................... A-49
ADVERTISING PRACTICES....................................... A-49
LEGAL MATTERS............................................... A-50
REGISTRATION STATEMENT...................................... A-50
EXPERTS..................................................... A-50
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS............ A-51
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............... A-56
APPENDIX C: LONG TERM MARKET TRENDS......................... A-74
APPENDIX D: USES OF LIFE INSURANCE.......................... A-75
APPENDIX E: TAX INFORMATION................................. A-77
APPENDIX F: GUIDELINE PREMIUM TEST AND CASH VALUE
ACCUMULATION TEST......................................... A-78
FINANCIAL STATEMENTS........................................ AA-1
</Table>
A-3
GLOSSARY
ACCOUNT. A Sub-Account of the Variable Account or the Fixed Account.
AGE. The age of an insured refers to the insured's age at his or her
nearest birthday.
BASE POLICY. The Policy without riders.
CASH SURRENDER VALUE. The amount you receive if you surrender the Policy.
It is equal to the Policy's cash value reduced by any Surrender Charge that
would apply on surrender and by any outstanding Policy loan and accrued
interest.
CASH VALUE. A Policy's cash value includes the amount of its cash value
held in the Variable Account, the amount held in the Fixed Account and, if there
is an outstanding Policy loan, the amount of its cash value held in the Loan
Account.
FIXED ACCOUNT. The Fixed Account is a part of our general account to which
you may allocate net premiums. It provides guarantees of principal and interest.
INVESTMENT START DATE. This is the later of the date we first receive a
premium payment for the Policy and the Policy Date.
LOAN ACCOUNT. The account to which cash value from the Variable and/or
Fixed Accounts is transferred when a Policy loan is taken.
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you
choose to help meet your future goals under the Policy. The Planned Premium is a
level amount that is subject to certain limits under the Policy.
PREMIUMS. Premiums include all payments under the Policy, whether a
Planned Premium or an unscheduled payment.
POLICY DATE. If you make a premium payment with the application, the
Policy Date is generally the later of the date Part II of the application (if
any) was signed and receipt of the premium payment. If you choose to pay the
initial premium upon delivery of the Policy, we issue the Policy with a Policy
Date which is generally up to 31 days after issue. When you receive the Policy,
you will have an opportunity to redate it to a current date.
TARGET PREMIUM. We use the Target Premium to determine the amount of
Surrender Charge that may apply on a surrender, lapse, face amount reduction, or
a partial withdrawal or change in death benefit option that results in a face
amount reduction. The Target Premium varies by issue age, sex, smoking status
and any substandard rating of the insured and the Policy's base face amount.
YOU. "You" refers to the Policy Owner.
A-4
INTRODUCTION TO THE POLICIES
THE POLICIES
The Policies are designed to provide lifetime insurance coverage. They are
not offered primarily as an investment.
Here is a summary of the Policy's basic features. You should read the
entire prospectus for more complete information.
-- You can make premium payments under the Policy based on a schedule you
determine, subject to some limits. Your policy also provides
flexibility to change your schedule at any time or make a payment that
does not correspond with your schedule. We can limit or prohibit
payments in some situations. (See "Premiums".)
-- You can allocate net premiums to one or more of the Sub-Accounts of the
Variable Account corresponding to mutual fund portfolios, in some
states after an initial period in the State Street Research Money
Market Sub-Account. (See "Allocation of Net Premiums" and "Investment
Options".)
-- The mutual fund portfolios available under the Policy include several
common stock funds, including funds which invest primarily in foreign
securities, as well as bond funds, balanced funds, and a money market
fund. You may allocate your Policy's cash value to a cumulative maximum
of 49 accounts (including the Fixed Account) over the life of the
Policy. (See "Investments of the Variable Account".) We may limit your
initial selection to 25 accounts.
-- If the Fixed Account is available in your state, you may also allocate
cash value to that account. We provide guarantees of Fixed Account
principal and interest. SPECIAL LIMITS APPLY TO FIXED ACCOUNT
-------------------------------------
TRANSFERS, PREMIUM ALLOCATIONS AND WITHDRAWALS. We have the right to
-----------------------------------------------
restrict withdrawals from, and transfers of cash value and allocations
of premiums into, the Fixed Account. (See "The Fixed Account".)
-- The cash value of the Policy will vary daily based on the net
investment experience of your Policy's Sub-Accounts and the amount of
interest credited to your Policy's cash value in the Fixed Account.
(See "Cash Value", "Charges and Expenses", "Premiums", "Loan Provision"
and "Partial Withdrawal".)
-- The portion of the cash value in the Sub-Accounts is not guaranteed.
You bear the investment risk on this portion of the cash value. (See
"Cash Value".)
-- You may choose between two death benefit options and two definitions of
life insurance under the Policy. The level option death benefit equals
the Policy's face amount. The variable option death benefit equals the
face amount plus any cash value, which varies with the net investment
experience of your Policy's Sub-Accounts and the rate of interest
credited on your cash value in the Fixed Account. The death benefit in
either case could increase to satisfy tax law requirements if the cash
value reaches certain levels. (See "Death Benefit".)
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- A loan privilege and partial withdrawal feature are available. (See
"Loan Provision" and "Partial Withdrawal".)
-- The Policy allows you to withdraw cash value from the Policy or
transfer cash value among the Sub-Accounts and the Fixed Account up to
twelve times in a Policy year without our consent. Currently, we do not
limit the number of Sub-Account transfers or withdrawals you may make
in a Policy year. We reserve the right to impose a charge of $25 for
each transfer or each withdrawal in excess of twelve. Transfers,
withdrawals and allocations involving the Fixed Account are subject to
special limits. (See "Partial Withdrawal", "Transfer Option" and "The
Fixed Account--Policy Transactions".)
-- Death benefits paid to the beneficiary generally are not subject to
Federal income tax. Under current law, undistributed increases in cash
value generally are not taxable to you. (See "Tax Considerations".)
A-5
-- Loans, assignments and other pre-death distributions may have tax
consequences depending primarily on the amount which you have paid into
the Policy but also on any "material change" in the terms or benefits
of the Policy or any death benefit reduction. If premium payments, a
death benefit reduction, or a material change cause the Policy to
become a "Modified Endowment Contract," then pre-death distributions
(including loans) will be included in income on an income first basis,
and a 10% penalty tax may be imposed on income distributed before the
Policy Owner attains age 59 1/2. Tax considerations may therefore
influence the amount and timing of premium payments and certain Policy
transactions which you choose to make. (See "Tax Considerations".)
-- If the Policy is not a Modified Endowment Contract, we believe that
loans under the Policy will generally not be taxable to you as long as
the Policy has not lapsed, been surrendered or terminated. However, the
tax consequences associated with loans outstanding after the tenth
policy year are uncertain. With some exceptions, other pre-death
distributions under a Policy that is not a Modified Endowment Contract
are includible in income only to the extent they exceed your investment
in the Policy. (See "Tax Considerations".)
-- During the "Right to Examine Policy" period you can return the Policy
for a refund. (See "Right to Examine Policy".)
-- Within 24 months after a Policy's date of issue, you may exercise the
Policy's 24 Month Conversion Right. If you do, we allocate all of your
Policy's cash value and future premiums to the Fixed Account. The
purpose of the 24 Month Conversion Right is to provide you with fixed
Policy values and benefits. (See "24 Month Conversion Right" for a
description of this provision and for a description of the variation
which applies to Policies issued in Maryland, New York and
Connecticut.)
In many respects the Policies are similar to fixed-benefit universal life
insurance. Like universal life insurance, the Policies offer death benefits and
provide flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit universal life insurance in
that the death benefit may, and the cash value will, vary to reflect the
investment experience of the selected Sub-Accounts.
The Policies are designed to provide insurance protection. Although the
underlying mutual fund portfolios invest in securities similar to those in which
mutual funds available directly to the public invest, in many ways the Policies
differ from mutual fund investments. The main differences are:
-- The Policy provides a death benefit based on our assumption of an
actuarially calculated risk.
-- If the cash surrender value is not sufficient to pay a Monthly
Deduction, the Policy may lapse with no value unless you pay additional
premiums. If the Policy lapses when Policy loans are outstanding,
adverse tax consequences may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values
of the Policy. These charges include various insurance, risk,
administrative and premium tax charges. (See "Charges and Expenses".)
-- The Variable Account, not the Policy Owner, owns the mutual fund
shares.
-- Federal income tax liability on any earnings is generally deferred
until you receive a distribution from the Policy. Transfers from one
underlying fund portfolio to another do not incur tax liability under
current law.
-- Dividends and capital gains are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix D: Uses
of Life Insurance".
AVAILABILITY OF THE POLICY
The Policies are available for insureds age 85 or younger on an
underwritten basis and from the age of 20 to 70 on a guaranteed issue basis. (We
issue guaranteed issue Policies based on very limited underwriting information.)
We may consent to issue the Policies on insureds up to age 90. All persons must
meet our underwriting and other requirements.
A-6
The minimum face amount for the base Policy is $50,000 unless we consent to
a lower amount.
We offer other variable life insurance policies that have different death
benefits, policy features, and optional programs. However, these other policies
also have different charges that would affect your Sub-Account performance and
cash values. The Policies may also be available with term riders that provide
death benefit coverage at a lower overall current cost than coverage under the
base Policy; however, term riders have no surrenderable cash value and terminate
at the insured's age 100. (See "Other Policy Features--Additional Benefits by
Rider".) To obtain more information about these other policies and term riders,
contact our Home Office or your registered representative.
For information concerning compensation paid for the sale of the Policies,
see "Distribution of the Policies".
POLICY CHARGES
PREMIUM-BASED CHARGES. We deduct the following charges from premiums:
-- A maximum sales charge of 5% (currently 2% in Policy year 11 and
thereafter);
-- A premium tax charge of 2.5%;
-- A charge for federal taxes of 1.25%.
In North Carolina, the maximum sales charge is 5.6% and the maximum premium
tax charge is 1.9%.
SURRENDER CHARGE. A Surrender Charge applies to a lapse, surrender, face
amount reduction, or a partial withdrawal or change in death benefit option that
results in a face amount reduction during the first ten Policy years, or during
the first ten years following a face amount increase (nine years for issue age
90). For the first partial withdrawal in each Policy year, no Surrender Charge
will apply on up to 10% of the cash surrender value at the time of the
withdrawal. The maximum Surrender Charge equals 45% of the Target Premium. After
the first Policy year (or after the first year following a face amount
increase), the Surrender Charge declines ratably on a monthly basis over the
remaining nine years of the Surrender Charge period until it reaches $0 in the
last month of the tenth Policy year (or the tenth year following the face amount
increase).
We deduct the Surrender Charge from the Policy's available cash value,
regardless of whether that cash value comes from premiums or investment
experience.
PROCESSING CHARGE. We reserve the right to impose a processing charge of
$25 on each partial withdrawal in excess of 12 per Policy year. We also reserve
the right to impose a $25 processing charge on each transfer between
Sub-Accounts or between a Sub-Account and the Fixed Account in excess of 12 per
Policy year.
MONTHLY DEDUCTION FROM CASH VALUE. We deduct certain charges from the cash
value:
-- Monthly charge for the cost of insurance and for any benefits provided
by rider;
-- Monthly Administration and Issue Expense Charge during the first ten
Policy years (and during the first ten Policy years following a face
amount increase), that varies by issue age, risk class and, except for
unisex Policies, sex of the insured. The monthly charge per $1000 of
base Policy and Supplemental Coverage Term Rider face amount ranges
from approximately 3 cents to 38 cents. Currently, the charge is
applied only to the base Policy face amount;
-- A Face Amount Increase Administration Charge of $100 that applies to
each underwritten face amount increase and is deducted from the
Policy's cash value on the monthly anniversary when the increase takes
place;
-- Monthly Policy Charge, currently equal to $25.00 per month in the first
Policy year and $6.00 per month thereafter (guaranteed not to exceed
these amounts in any year);
-- Monthly Asset Charge against the cash value in the Variable Account for
our mortality and expense risk, currently equal to an annual rate of
.60% in Policy years 1-10; .25% in Policy years 11-20; and .15%
thereafter (guaranteed not to exceed .70% in Policy years 1-10; .35% in
Policy years 11-20; and .25% thereafter).
A-7
CHARGES DEDUCTED FROM THE ELIGIBLE FUNDS. There are daily charges against
the Eligible Fund assets for investment advisory services and fund operating
expenses.
NEW ENGLAND ZENITH FUND (CLASS A SHARES). The following table shows the
annual operating expenses for each New England Zenith Fund series, based on
actual expenses for 2001 (anticipated expenses for 2002 for the FI Mid Cap
Opportunities Series), after any applicable expense deferral arrangement:
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY APPLICABLE EXPENSE DEFERRAL)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
SERIES FEES EXPENSES EXPENSES
------ ---------- -------- ------------
Zenith Equity............................................... .66% .09% .75%*
State Street Research Bond Income........................... .40% .09% .49%
State Street Research Money Market.......................... .35% .07% .42%
MFS Total Return............................................ .50% .13% .63%
FI Structured Equity........................................ .68% .10% .78%**
Loomis Sayles Small Cap..................................... .90% .10% 1.00%
Harris Oakmark Focused Value................................ .75% .12% .87%**
Balanced.................................................... .70% .13% .83%
Davis Venture Value......................................... .75% .08% .83%**
Alger Equity Growth......................................... .75% .09% .84%
MFS Investors Trust......................................... .75% .15% .90%***
MFS Research Managers....................................... .75% .15% .90%***
FI Mid Cap Opportunities.................................... .80% .15% .95%***
</Table>
- ------------
*Effective May 1, 2002, the Zenith Equity Series became a "fund of funds" that
invests equally in three other series of the Zenith Fund--the FI Structured
Equity Series, the Jennison Growth Series, and the Capital Guardian U.S.
Equity Series (together, the "Underlying Series"). The Zenith Equity Series
does not have a management fee, but has its own operating expenses, and will
also bear indirectly the management fees and other operating expenses of the
Underlying Series. Investing in a fund of funds, like the Zenith Equity
Series, involves some duplication of expenses, and may be more expensive than
investing in a series that is not a fund of funds. The expenses shown for the
Zenith Equity Series for the year ended December 31, 2001, have been restated
to reflect the impact of such indirect expenses of the Underlying Series,
based upon the equal allocation of assets among the three Underlying Series.
MetLife Advisers maintains the equal division of assets among the Underlying
Series by rebalancing Zenith Equity Series' assets each fiscal quarter.
Actual expenses, however, may vary as the allocation of assets to the various
Underlying Series will fluctuate slightly during the course of each quarter.
The Zenith Fund prospectus provides more specific information on the fees and
expenses of the Zenith Equity Series.
**Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Total
Annual Expenses would have been .74% for the FI Structured Equity Series,
.84% for the Harris Oakmark Focused Value Series and .82% for the Davis
Venture Value Series.
*** Without the applicable expense deferral arrangement (similar to that
described below), Total Annual Expenses for the year ended December 31, 2001
would have been: 1.37% for the MFS Investors Trust Series and 1.06% for the
MFS Research Managers Series. Anticipated Total Annual Expenses for the FI
Mid Cap Opportunities Series (annualized from its May 1, 2002 start date)
would be 1.30%.
Our affiliate, MetLife Advisers, LLC (formerly New England Investment
Management, LLC) advises the series of the New England Zenith Fund. MetLife
Advisers and the Zenith Fund have entered into an Expense Agreement under which
MetLife Advisers will waive management fees and/or pay expenses (other than
brokerage costs, interest, taxes or extraordinary expenses) ("Expenses")
attributable to the Class A shares of certain Series of the Zenith Fund, so that
Total Annual Expenses of these Series will not exceed, at any time prior to
April 30, 2003, the following percentages: .90% for the MFS Investors Trust
Series; .90% for MFS Research Managers Series; and .95%
A-8
for the FI Mid Cap Opportunities Series. Under the agreement, if certain
conditions are met, MetLife Advisers may be reimbursed by a Series for fees
waived or Expenses paid if, in the future, actual Expenses are less than these
expense limits.
METROPOLITAN SERIES FUND (CLASS A SHARES). MetLife Advisers is the
investment manager for the Portfolios of the Metropolitan Series Fund, Inc. The
Portfolios pay investment management fees to MetLife Advisers and also bear
other expenses. The chart below shows the total operating expenses of the
Portfolios for the year ended December 31, 2001 (in the case of the State Street
Research Large Cap Value Portfolio, anticipated expenses for 2002) after any
applicable expense subsidy, as a percentage of Portfolio net assets.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY APPLICABLE EXPENSE SUBSIDY)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ------------
Putnam Large Cap Growth..................................... .80% .20% 1.00%*
Janus Mid Cap............................................... .67% .07% .74%
Russell 2000 Index.......................................... .25% .30% .55%*
Putnam International Stock.................................. .90% .26% 1.16%**
MetLife Stock Index......................................... .25% .06% .31%
MetLife Mid Cap Stock Index................................. .25% .20% .45%*
Morgan Stanley EAFE Index................................... .30% .45% .75%*
Lehman Brothers Aggregate Bond Index........................ .25% .13% .38%
State Street Research Aurora................................ .85% .13% .98%
Janus Growth................................................ .80% .15% .95%*
State Street Research Investment Trust...................... .48% .05% .53%**
Franklin Templeton Small Cap Growth......................... .90% .15% 1.05%*
Neuberger Berman Partners Mid Cap Value..................... .69% .12% .81%**
Harris Oakmark Large Cap Value.............................. .75% .11% .86%**
State Street Research Large Cap Value....................... .70% .15% .85%*
</Table>
- ------------
* Without the applicable expense subsidy arrangement (similar to that described
below), Total Annual Expenses for the year ended December 31, 2001 would have
been 1.12% for the Putnam Large Cap Growth Portfolio, .56% for the Russell
2000 Index Portfolio, .52% for the MetLife Mid Cap Stock Index Portfolio,
.82% for the Morgan Stanley EAFE Index Portfolio, 2.26% for the Janus Growth
Portfolio and 2.69% for the Franklin Templeton Small Cap Growth Portfolio.
Anticipated Total Annual Expenses for the State Street Research Large Cap
Value Portfolio would be 1.56% (annualized from the Portfolio's start date of
May 1, 2002). Expenses of the Morgan Stanley EAFE Index Portfolio have been
restated to reflect the terms of the expense arrangement described below.
** Total Annual Expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Total
Annual Expenses would have been 1.14% for the Putnam International Stock
Portfolio, .50% for the State Street Research Investment Trust Portfolio,
.69% for the Neuberger Berman Partners Mid Cap Value Portfolio and .84% for
the Harris Oakmark Large Cap Value Portfolio.
MetLife Advisers and the Metropolitan Series Fund have entered into an Expense
Agreement under which MetLife Advisers will waive management fees and/or pay
expenses (other than brokerage costs, interest, taxes or extraordinary expenses)
("Expenses") attributable to the Class A shares of certain Portfolios of the
Metropolitan Series Fund, so that Total Annual Expenses of these Portfolios will
not exceed, at any time prior to April 30, 2003, the following percentages:
1.00% for the Putnam Large Cap Growth Portfolio; .55% for the Russell 2000 Index
Portfolio; .45% for the MetLife Mid Cap Stock Index Portfolio; .75% for the
Morgan Stanley EAFE Index Portfolio; .95% for the Janus Growth Portfolio; 1.05%
for the Franklin Templeton Small Cap Growth Portfolio; and .85% for the State
Street Research Large Cap Value Portfolio. Under the agreement, if certain
conditions are met, MetLife Advisers may be reimbursed for fees waived and
Expenses paid with respect to the Janus Growth Portfolio, the
A-9
Franklin Templeton Small Cap Growth Portfolio and the State Street Research
Large Cap Value Portfolio if, in the future, actual Expenses of these Portfolios
are less than these expense limits.
MET INVESTORS SERIES TRUST (CLASS A SHARES). The investment adviser for
Met Investors Series Trust is Met Investors Advisory LLC ("Met Investors
Advisory") (formerly known as Met Investors Advisory Corp.). The Portfolios of
Met Investors Series Trust pay investment management fees to Met Investors
Advisory and also bear certain other expenses. The total operating expenses of
the Portfolios for the year ended December 31, 2001, after any applicable
expense subsidy, as a percentage of Portfolio average net assets, were:
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY APPLICABLE EXPENSE SUBSIDY)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES*
- --------- ---------- -------- ------------
MFS Mid Cap Growth.......................................... .00% .80% .80%
PIMCO Innovation............................................ .00% 1.10% 1.10%
Met/AIM Mid Cap Core Equity................................. .00% .90% .90%
Met/AIM Small Cap Growth.................................... .00% 1.05% 1.05%
PIMCO Total Return.......................................... .00% .65% .65%
State Street Research Concentrated International............ .00% 1.10% 1.10%
</Table>
- ------------
* Met Investors Advisory and Met Investors Series Trust have entered into an
Expense Limitation Agreement under which Met Investors Advisory has agreed to
waive or limit its fees and to assume other expenses so that the Total Annual
Expenses of each Portfolio (other than interest, taxes, brokerage commissions,
other expenditures which are capitalized in accordance with generally accepted
accounting principles and other extraordinary expenses not incurred in the
ordinary course of each Portfolio's business) will not exceed, at any time
prior to April 30, 2003, the following percentages: .80% for the MFS Mid Cap
Growth Portfolio, 1.10% for the PIMCO Innovation Portfolio, .90% for the
Met/AIM Mid Cap Core Equity Portfolio, 1.05% for the Met/AIM Small Cap Growth
Portfolio, .65% for the PIMCO Total Return Portfolio and 1.10% for the State
Street Research Concentrated International Portfolio. Absent this Agreement,
Total Annual Expenses (and Management Fees) for the period ended December 31,
2001 would have been 2.35% (.65%) for the MFS Mid Cap Growth Portfolio, 3.97%
(1.05%) for the PIMCO Innovation Portfolio and 1.15% (.50%) for the PIMCO
Total Return Portfolio (annualized from the February 12, 2001 start date for
these Portfolios); and 6.93% (.75%) for the Met/AIM Mid Cap Core Equity
Portfolio, 4.97% (.90%) for the Met/AIM Small Cap Growth Portfolio and 5.44%
(.85%) for the State Street Research Concentrated International Portfolio
(annualized from the October 9, 2001 start date for these Portfolios). Under
certain circumstances, any fees waived or expenses reimbursed by Met Investors
Advisory may, with the approval of the Trust's Board of Trustees, be repaid to
Met Investors Advisory.
VIP AND VIP II (INITIAL CLASS SHARES). The investment adviser for VIP and
VIP II is Fidelity Management & Research Company ("FMR"). The Portfolios of VIP
and VIP II pay investment management fees to FMR and also bear other expenses.
For the year ended December 31, 2001, the total operating expenses of the
Portfolios, as a percentage of Portfolio average net assets, were:
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES*
- --------- ---------- -------- ------------
VIP Equity-Income........................................... .48% .10% .58%
VIP Overseas................................................ .73% .19% .92%
VIP High Income............................................. .58% .13% .71%
VIP II Asset Manager........................................ .53% .11% .64%
</Table>
- ------------
* Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. If we included
these reductions, total annual expenses would have been .57% for VIP
Equity-Income Portfolio, .87% for VIP Overseas Portfolio, .70% for VIP High
Income Portfolio and .63% for VIP II Asset Manager Portfolio.
A-10
AMERICAN FUNDS INSURANCE SERIES (CLASS 2 SHARES). The investment adviser
for American Funds Insurance Series is Capital Research and Management Company
("Capital Research"). The Funds of American Funds Insurance Series pay
investment management fees to Capital Research and also bear certain other
expenses. For the year ended December 31, 2001, the total operating expenses of
each Fund, as a percentage of Fund average net assets, were:
<Table>
<Caption>
MANAGEMENT 12B-1 OTHER TOTAL ANNUAL
FUND FEES FEES EXPENSES EXPENSES
- ---- ---------- ----- -------- ------------
American Funds Growth................................. .37% .25% .01% .63%
American Funds Growth-Income.......................... .33% .25% .02% .60%
American Funds Global Small Capitalization............ .80% .25% .03% 1.08%
</Table>
An investment adviser or affiliates thereof may compensate NELICO and/or
certain affiliates for administrative, distribution, or other services relating
to the Eligible Funds. We (or our affiliates) may also be compensated with 12b-1
fees from the Eligible Funds. This compensation is based on assets of the
Eligible Funds attributable to the Policies and certain other variable insurance
products that we and our affiliates issue. Some funds or their advisers (or
other affiliates) may pay us more than others, and the amounts paid may be
significant. New England Securities may also receive brokerage commissions on
securities transactions initiated by an investment adviser.
See "Charges and Expenses".
A-11
HOW THE POLICY WORKS
[FLOW CHART]
Premium Payments
* Flexible
* Planned premium options
* No Lapse Premium (in first five Policy years)
* Secondary Guarantee Premium (to age 100)
Charges from Premium Payments
* Sales Load: 5% (currently 2% in Policy years 11 and thereafter)
* Premium Tax Charge: 2.5%
* Charge for Federal Taxes: 1.25%
Loans
* You may borrow your cash value
* Loan interest charge is 3.5%. (Currently we intend to charge 3.25% interest in
Policy years 11-20 and 3.00% thereafter.) We transfer loaned funds out of the
Fixed Account and the Eligible Funds into the Loan Account where we credit
them with not less than 3.0% interest.
Retirement Benefits
* Fixed settlement options are available for policy proceeds
Cash Values
* Net premium payments invested in your choice of Eligible Fund investments or
the Fixed Account (generally after an initial period in the State Street
Research Money Market Sub-Account)
* The cash value reflects investment experience, interest, premium payments,
policy charges and any distributions from the Policy
* We do not guarantee the cash value invested in the Eligible Funds
* Any earnings you accumulate are generally free of any current income taxes
* You may change the allocation of future net premiums at any time. You may
transfer funds among investment options (and to the Fixed Account). Currently
we do not limit the number of Sub-Account transfers you can make in a Policy
year.
* We reserve the right to impose a $25 charge on each partial withdrawal in
excess of 12 per Policy year and on each Sub-Account transfer (including a
transfer between a Sub-Account and the Fixed Account) in excess of 12 per
Policy year.
* We limit the amount of transfers from (and in some cases to) the Fixed Account
* You may allocate your cash value among a maximum of 49 accounts over the life
of the Policy.
Death Benefit
* Level or Variable Death Benefit Options
* Guaranteed not to be less than face amount (less any loan and loan interest)
during first five Policy years if the five-year No Lapse Premium guarantee is
in effect, or until age 100 if the Secondary Guarantee Rider is in effect.
* On or after age 100, equal to cash value for insureds over age 80 at issue.
For insureds age 80 or younger at issue, equal to the greater of (1) cash
value and (2) the lesser of the face amount on the Policy anniversary at age
80 and at age 100.
* Income tax free to named beneficiary (generally)
Daily Deductions from Assets
* Investment advisory fees and other expenses are deducted from the Eligible
Fund values
Beginning of Month Charges
* We deduct the cost of insurance protection (reflecting any substandard risk or
guaranteed issue rating) from the cash value each month
* Any Rider Charges
* Policy Charge: $25.00 per month (first year) and $6.00 per month thereafter
* Administration and Issue Expense Charge: Monthly charge ranging from
approximately $.03 to $.38 per $1,000 of base Policy face amount that applies
during the first ten Policy years or during the first ten Policy years
following a face amount increase.
* Face Amount Increase Administration Charge: maximum one-time charge of $100
levied on each underwritten increase in the base Policy's face amount.
* Asset Charge applied against the cash value in the Variable Account at an
annual rate of .60% in Policy years 1-10; .25% in Policy years 11-20; and .15%
thereafter (guaranteed not to exceed .70% in Policy years 1-10; .35% in Policy
years 11-20; and .25% thereafter)
Surrender Charge
* Applies on lapse, surrender, face amount reduction, or partial withdrawal or
change in death benefit option that results in face reduction in first ten
Policy years (or in first ten Policy years following a face amount increase).
Maximum charge is 45% of Target Premium in first Policy year. After first
Policy year, charge reduces ratably on a monthly basis over the remaining nine
years of the surrender period.
Living Benefits
* If policyholder has elected and qualified for benefits for disability and
becomes totally disabled, we will waive monthly charges during the period of
disability up to certain limits.
* You may surrender the Policy at any time for its cash surrender value
* Deferred income taxes, including taxes on certain amounts borrowed, become
payable upon surrender
* Grace period for lapsing with no value is 62 days from the first date in which
Monthly Deduction was not paid due to insufficient cash value
* Subject to our rules, you may reinstate a lapsed Policy within three years of
date of lapse if it has not been surrendered
A-12
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S DESIGNATED OFFICE
We will treat your request for a Policy transaction, or your submission of
a payment, as received by us if we receive a request conforming to our
administrative procedures or a payment at our Designated Office before the close
of regular trading on the New York Stock Exchange on that day. If we receive it
after that time, or if the New York Stock Exchange is not open that day, then we
will treat it as received on the next day when the New York Stock Exchange is
open.
The Designated Office for various Policy transactions is as follows:
<Table>
Premium Payments New England Financial
P.O. Box 4332
Carol Stream, IL 60197-4332
Payment Inquiries and New England Financial/MetLife
Correspondence P.O. Box 30440
Tampa, FL 33630-3440
Beneficiary and Ownership New England Financial/MetLife
Changes P.O. Box 541
Warwick, RI 02887-0541
Surrenders, Loans, New England Financial/MetLife
Withdrawals and P.O. Box 543
Sub-Account Transfers Warwick, RI 02887-0543
Cancellations (Free Look New England Financial/MetLife
Period) Johnstown Client Relations Center
Free Look Unit
500 Schoolhouse Road
Johnstown, PA 15904
Death Claims New England Financial/MetLife
P.O. Box 542
Warwick, RI 02887-0542
Sub-Account Transfers (800) 200-2214
All Other Telephone (800) 388-4000
Transactions and Inquiries
</Table>
NELICO
NELICO was organized as a stock life insurance company in Delaware in 1980
and is licensed to sell life insurance in all states and the District of
Columbia. Originally, NELICO was a wholly-owned subsidiary of New England Mutual
Life Insurance Company ("New England Mutual"). On August 30, 1996, New England
Mutual merged into Metropolitan Life Insurance Company ("MetLife"), a life
insurance company whose principal office is One Madison Avenue, New York, NY
10010. MetLife then became the parent of NELICO. MetLife is a wholly-owned
subsidiary of MetLife, Inc., a publicly-traded company. In connection with the
merger, NELICO changed its name from "New England Variable Life Insurance
Company" to "New England Life Insurance Company" and changed its domicile from
the State of Delaware to the Commonwealth of Massachusetts. NELICO's Home Office
is at 501 Boylston Street, Boston, Massachusetts 02116.
The chart on the next page illustrates the relationship of NELICO, the
Fixed Account, the Variable Account and the Eligible Funds.
A-13
[FLOW CHART]
NELICO
(Insurance company subsidiary of MetLife)
We deduct charges.
We allocate net premiums and net unscheduled payments to your choice of
sub-accounts in the Variable Account or to the Fixed Account.
Premiums
Fixed Account
VARIABLE ACCOUNT
Zenith Equity Sub-Account
Zenith State Street Research Bond Income Sub-Account
Zenith State Street Research Money Market Sub-Account
Zenith MFS Total Return Sub-Account
Zenith FI Structured Equity Sub-Account
Zenith Loomis Sayles Small Cap Sub-Account
Zenith Balanced Sub-Account
Zenith Alger Equity Growth Sub-Account
Zenith Davis Venture Value Sub-Account
Zenith Harris Oakmark Focused Value Sub-Account
Zenith MFS Investors Trust Sub-Account
Zenith MFS Research Managers Sub-Account
Metropolitan Putnam Large Cap Growth Sub-Account
Metropolitan Janus Mid Cap Sub-Account
Metropolitan Russell 2000 Index Sub-Account
Metropolitan Putnam International Stock Sub-Account
Metropolitan MetLife Stock Index Sub-Account
Metropolitan MetLife Mid Cap Stock Index Sub-Account
Metropolitan Morgan Stanley EAFE Index Sub-Account
Metropolitan Lehman Brothers Aggregate Bond Index Sub-Account
Metropolitan State Street Research Aurora Sub-Account
Metropolitan Janus Growth Sub-Account
Metropolitan State Street Investment Trust Sub-Account
Metropolitan Franklin Templeton Small Cap Growth Sub-Account
Metropolitan Neuberger Berman Partners Mid Cap Value Sub-Account
Metropolitan Harris Oakmark Large Cap Value Sub-Account
Metropolitan State Street Research Large Cap Value Sub-Account
Met Investors MFS Mid Cap Growth Sub-Account
Met Investors PIMCO Innovation Sub-Account
Met Investors Met/AIM Mid Cap Core Equity Sub-Account
Met Investors Met/AIM Small Cap Growth Sub-Account
Met Investors PIMCO Total Return Sub-Account
Met Investors State Street Research Concentrated International Sub-Account
VIP Equity-Income Sub-Account
VIP Overseas Sub-Account
VIP High Income Sub-Account
VIP II Asset Manager Sub-Account
American Funds Growth Sub-Account
American Funds Growth-Income Sub-Account
American Funds Global Small Capitalization Sub-Account
Sub-accounts buy shares of the Eligible Funds.
NEW ENGLAND ZENITH FUND
Zenith Equity Series
State Street Research Bond Income Series
State Street Research Money Market Series
MFS Total Return Series
FI Structured Equity Series
Loomis Sayles Small Cap Series
Balanced Series
Alger Equity Growth Series
Davis Venture Value Series
Harris Oakmark Focused Value Series
MFS Investors Trust Series
MFS Research Managers Series
FI Mid Cap Opportunities Series
METROPOLITAN SERIES FUND, INC.
Putnam Large Cap Growth Portfolio
Janus Mid Cap Portfolio
Russell 2000 Index Portfolio
Putnam International Stock Portfolio
MetLife Stock Index Portfolio
MetLife Mid Cap Stock Index Portfolio
Morgan Stanley EAFE Index Portfolio
Lehman Brothers Aggregate Bond Index Portfolio
State Street Research Aurora Portfolio
Janus Growth Portfolio
State Street Research Investment Trust Portfolio
Franklin Templeton Small Cap Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
Harris Oakmark Large Cap Value Portfolio
State Street Research Large Cap Value Portfolio
MET INVESTORS SERIES TRUST
MFS Mid Cap Growth Portfolio
PIMCO Innovation Portfolio
Met/AIM Mid Cap Core Equity Portfolio
Met/AIM Small Cap Growth Portfolio
PIMCO Total Return Portfolio
State Street Research Concentrated International Portfolio
VIP
Equity-Income Portfolio
Overseas Portfolio
High Income Portfolio
VIP II
Asset Manager Portfolio
AMERICAN FUNDS INSURANCE SERIES
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds Global Small Capitalization Fund
Eligible Funds buy portfolio investments to support values and benefits of the
Policies.
A-14
THIS PROSPECTUS PROVIDES A GENERAL DESCRIPTION OF THE POLICY. POLICIES
ISSUED IN YOUR STATE MAY PROVIDE DIFFERENT FEATURES AND BENEFITS FROM, AND
IMPOSE DIFFERENT COSTS THAN, THOSE DESCRIBED IN THIS PROSPECTUS. YOUR ACTUAL
POLICY AND ANY ENDORSEMENTS ARE THE CONTROLLING DOCUMENTS. YOU SHOULD READ THE
POLICY CAREFULLY FOR ANY VARIATIONS IN YOUR STATE.
POLICY VALUES AND BENEFITS
DEATH BENEFIT
If the insured dies while the Policy is in force, we pay a death benefit to
the beneficiary.
DEATH BENEFIT OPTIONS--TO AGE 100. When you apply for a Policy, you choose
between two death benefit options.
The Option A (Face Amount) death benefit is equal to the face amount of the
Policy. The Option A death benefit is fixed, subject to increases required by
the Internal Revenue Code of 1986 (the "Code").
The Option B (Face Amount Plus Cash Value) death benefit is equal to the
face amount of the Policy, plus the Policy's cash value, if any. The Option B
death benefit is also subject to increases required by the Internal Revenue
Code.
CHOICE OF TAX TEST. The Internal Revenue Code requires the Policy's death
benefit to be not less than an amount defined in the Code. As a result, if the
cash value grows to certain levels, the death benefit increases to satisfy tax
law requirements.
When you apply for your Policy, you select which tax test will apply to the
death benefit. You will choose between: (1) the guideline premium test, and (2)
the cash value accumulation test. The test you choose at issue cannot be
changed.
Under the GUIDELINE PREMIUM TEST, the death benefit will not be less than
the cash value times the guideline premium factor. See Appendix F.
Under the CASH VALUE ACCUMULATION TEST, the death benefit will not be less
than the cash value times the net single premium factor set by the Code. Net
single premium factors are based on the age, smoking status, underwriting class
and sex of the insured at the time of the calculation. Sample net single premium
factors appear in Appendix F.
If cash value growth in the later Policy years is your main objective, the
guideline premium test may be the appropriate choice because it does not require
as high a death benefit as the cash value accumulation test, and therefore cost
of insurance charges may be lower, once the Policy's death benefit is subject to
increases required by the Code. If you select the cash value accumulation test,
you can generally make a higher amount of premium payments for any given face
amount, and a higher death benefit may result in the long term. If cash value
growth in the early Policy years is your main objective, the cash value
accumulation test may be the appropriate choice because it allows you to invest
more premiums in the Policy for each dollar of death benefit.
TERM RIDER "IN" OR "OUT". If you add a Supplemental Coverage Term Rider to
your Policy at issue, we will add the face amount of the rider to the face
amount of the base Policy when we calculate the Policy death benefit under your
chosen death benefit option ("Inside Term"). If you add a Convertible
Supplemental Coverage Term Rider to your Policy at issue, we will not include
the rider face amount in the calculation of the Policy death benefit but will
simply add the face amount of the rider to the Policy proceeds ("Outside Term").
You may not select both Supplemental Coverage Term and Convertible Supplemental
Coverage Term or change from one to the other.
If you choose Supplemental Coverage Term, the Policy may have greater
potential for the cash value to grow relative to the death benefit. If you
choose Convertible Supplemental Coverage Term, the Policy may have greater
potential for higher Policy proceeds relative to the cash value. Also, you may
be able to convert Convertible Supplemental Coverage Term (but not Supplemental
Coverage Term) to permanent insurance. If you choose Convertible Supplemental
Coverage Term, any death benefit increases required by the Code will be
triggered earlier
A-15
than would be the case with Supplemental Coverage Term. These increases lead to
higher Monthly Deductions. For more information on these term riders, see "Other
Policy Features--Additional Benefits by Rider".)
AGE 100. If the death benefit is payable on or after the insured's
attained age 100, the death benefit will be:
-- the cash value on the date of death, if the insured was older than 80
at issue (or under any Policy issued in Florida or Illinois), or
-- the greater of (1) the cash value on the date of death, and (2) the
lesser of the face amount of the Policy on the Policy anniversary when
the insured was 80 and the face amount on the Policy anniversary when
the insured is 100, if the insured was 80 or younger at issue.
SECONDARY GUARANTEE RIDER. If available in your state, you may choose at
issue the Secondary Guarantee Rider. If you choose this benefit, we determine
whether the Secondary Guarantee is in effect on the first day of each Policy
month until the insured reaches age 100. If the Secondary Guarantee is in
effect, the Policy will not lapse even if the cash surrender value is less than
the Monthly Deduction for that month. However, any shortfall will, in effect,
cause your cash surrender value to have a negative balance. During any period in
which your Policy has negative cash value, no earnings will be credited to the
Policy. If a negative cash surrender value balance is not restored, then upon
termination of the guarantee period, you will have to pay an amount sufficient
to cover the accumulated outstanding Monthly Deductions, in addition to the
amount you are required to pay to prevent lapse at the end of the grace period,
in order to keep the Policy in force. (See "Premiums".)
On the first day of a Policy month, if the total premiums you have paid,
less all partial withdrawals and any outstanding Policy loan and loan interest
(and less any cash value paid to you to allow the Policy to continue to qualify
as life insurance), are at least equal to the sum of the Secondary Guarantee
Premiums for each monthly anniversary since the Policy Date, then the guarantee
will apply for that month.
If your total premiums paid do not equal this amount, you will have a grace
period of 62 days from the first day of the Policy month to pay a premium
sufficient to keep the guarantee in force. If we do not receive this amount, the
rider will terminate and the guarantee provided by the rider will no longer
apply.
We will restrict any premium payment that would cause the Policy to fail to
meet the definition of a life insurance contract under the Internal Revenue
Code. This limitation will not cause the Secondary Guarantee Rider to terminate.
When testing whether the guarantee is in effect, we use each Secondary
Guarantee Premium that applied to the Policy for the period of time it was in
effect.
If you choose this rider, the Monthly Deduction will include a charge for
the rider until the rider terminates when the insured reaches age 100, unless
the rider terminates before then. The rider will also terminate upon request or
in the event of the following:
-- death of the insured
-- termination of the Policy
-- change of insured
-- addition of a term rider on the life of someone other than the insured,
if you have selected the guideline premium test for the Policy.
DEATH PROCEEDS PAYABLE
The death proceeds we pay are equal to the death benefit on the date of the
insured's death, reduced by any outstanding loan and accrued loan interest on
that date. If death occurs during the grace period, we reduce the proceeds by
the amount of unpaid Monthly Deductions. (See "Lapse and Reinstatement".) We
increase the death proceeds (1) by any rider benefits payable and (2) by any
cost of insurance charge made for a period beyond the date of death.
A-16
We may adjust the death proceeds if the insured's age or sex was misstated
in the application, if death results from the insured's suicide within two years
(less in some states) from the Policy's date of issue, or if a rider limits the
death benefit. (See "Limits to NELICO's Right to Challenge the Policy").
CHANGE IN DEATH BENEFIT OPTION
After the first Policy year and prior to the insured's attained age 100 (85
in Florida), you may change your death benefit option by written request to our
Designated Office. The change will be effective on the monthly anniversary on or
following the date we receive your request. We may require proof of
insurability. A change in death benefit option may have tax consequences.
If you change from Option A (Face Amount) to Option B (Face Amount Plus
Cash Value), we reduce the Policy's face amount if necessary so that the death
benefit is the same immediately before and after the change. A face amount
reduction below $50,000 requires our consent. If we reduce the face amount, we
will first reduce any prior increases in face amount that you applied for, in
the reverse order in which the increases occurred, then the face amount of any
Supplemental Coverage Term Rider, then any remaining initial face amount
(including any increase in face amount from a prior change in death benefit
option), but not below the Policy minimum, and finally the face amount of any
Adjustable Benefit Term Rider. A partial withdrawal of cash value may be
necessary to meet Federal tax law limits on the amount of premiums that you can
pay into the Policy. A Surrender Charge may apply to a Policy face amount
reduction or partial withdrawal that reduces the face amount on a change from
Option A to Option B. (See "Surrender Charge".)
If you change from Option B (Face Amount Plus Cash Value) to Option A (Face
Amount), we increase the Policy's face amount, if necessary, so that the death
benefit is the same immediately before and after the change.
CASH VALUE
Your Policy's total cash value includes its cash value in the Variable
Account and in the Fixed Account. If you have a Policy loan, the cash value also
includes the amount we hold in the Loan Account as a result of the loan. The
cash value reflects:
-- net premium payments
-- the net investment experience of the Policy's Sub-Accounts
-- interest credited to cash value in the Fixed Account
-- interest credited to amounts held in the Loan Account for a Policy loan
-- the death benefit option you choose
-- Policy charges
-- partial withdrawals
-- transfers among the Sub-Accounts and the Fixed Account.
We pay you the cash surrender value if you surrender the Policy. It equals
the cash value minus any outstanding Policy loan (plus interest) and any
Surrender Charge that applies. (See "Loan Provision" and "Surrender Charge".)
The Policy's cash value in the Variable Account may increase or decrease
daily depending on net investment experience. Poor investment experience can
reduce the cash value to zero. YOU HAVE THE ENTIRE INVESTMENT RISK FOR THE CASH
VALUE IN THE VARIABLE ACCOUNT.
The Policy's total cash value in the Variable Account equals the number of
accumulation units credited in each Sub-Account multiplied by that Sub-Account's
accumulation unit value. We convert any premium, interest earned on loan cash
value, or cash value allocated to a Sub-Account into accumulation units of the
Sub-Account. Surrenders, partial withdrawals, Policy loans, transfers and
charges deducted from the cash value reduce the number of accumulation units
credited in a Sub-Account. We determine the number of accumulation units by
dividing the dollar amount of the transaction by the Sub-Account's accumulation
unit value next determined following the transaction. (In the case of an initial
premium, we use the accumulation unit value on the investment start date).
The accumulation unit value of a Sub-Account depends on the net investment
experience of its corresponding Eligible Fund and reflects fees and expenses of
the Eligible Fund. We determine the accumulation unit value as of the
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close of regular trading on the New York Stock Exchange on each day that the
Exchange is open for trading by multiplying the most recent accumulation unit
value by the net investment factor ("NIF") for that day (see below).
The NIF for a Sub-Account reflects:
-- the change in net asset value per share of the corresponding Eligible
Fund (as of the close of regular trading on the Exchange) from its last
value,
-- the amount of dividends or other distributions from the Eligible Fund
since the last determination of net asset value per share, and
-- any deductions for taxes that we make from the Variable Account.
The NIF can be greater or less than one.
ALLOCATION OF NET PREMIUMS
Your cash value is held in the general account of NELICO or an affiliate
until we issue the Policy. We credit the first net premium with net investment
experience equal to that of the State Street Research Money Market Sub-Account
from the investment start date until the day we apply the initial premium to the
Policy (in states that require a refund of premiums if you exercise the Right to
Examine Policy provision, until 15 days after we apply the initial premium to
the Policy). (The "investment start date" is defined below.) Then, we allocate
the cash value to the Sub-Accounts and/or the Fixed Account as you choose. You
can allocate to a cumulative maximum of 49 accounts (including the Fixed
Account) over the life of the Policy. We may limit your initial selection to 25
accounts.
We will maintain an ongoing record of the accounts to which you allocate
premiums and cash values. Each time you make an allocation to an account that
has not previously received an allocation, the account will be added to your
cumulative lifetime total. An account will not be counted more than once. You
may therefore transfer all cash value out of an account and later reallocate
cash value or premiums to that same account without increasing the number of
accounts utilized. If an underlying fund is replaced by a new fund, the transfer
of cash value to the new fund will not be considered a new allocation.
Allocating premiums and cash value among a large number of accounts in early
Policy years may limit your ability to take advantage of new funds that may be
added in later years.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
INVESTMENT START DATE. The investment start date is the later of: the date
when we first receive a premium payment for the Policy and the Policy Date. (For
this purpose, receipt of the premium payment means receipt by your registered
representative, if the payment is made with the application; otherwise, it means
the earlier of receipt by our Designated Office (See "Receipt of Communications
and Payments at NELICO's Designated Office") or by a NELICO agency.)
PREMIUM WITH APPLICATION. If you make a premium payment with the
application, the Policy Date is generally the later of the date Part II (if any)
of the application is signed and receipt of the premium payment. In that case,
the Policy Date and investment start date are the same. The minimum amount of
premium you must pay is the amount set forth in the application. You may only
make one premium payment before the Policy is issued. When the Policy is
delivered to you, you will need to pay any remaining monthly No Lapse Premiums
for the period between the Policy Date and the delivery date. (See "Premiums".)
If you make a premium payment with the application, we will cover the
insured under a temporary insurance agreement for a limited period that usually
begins when we receive the premium for the Policy (or, if later, on the date
when Part II of the application is signed). The maximum temporary coverage is
the lesser of the amount of insurance applied for and $500,000 for standard and
preferred risks ($250,000 for substandard risks and $50,000 for persons who are
determined to be uninsurable). We may increase these limits. These provisions
vary in some states.
If we issue a Policy, Monthly Deductions begin from the Policy Date, even
if we delayed the Policy's issuance for underwriting. The deductions are for the
face amount of the Policy issued, even if the temporary insurance coverage
during underwriting was for a lower amount. If we decline an application, we
refund the premium payment made.
PREMIUM ON DELIVERY. If you pay the initial premium on delivery of the
Policy, the Policy Date is generally up to 31 days after issue. When you receive
the Policy, you will have an opportunity to redate it to a current date. The
investment start date is the later of the Policy Date and the date we received
the premium. Monthly Deductions begin
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on the Policy Date. Insurance coverage under the Policy begins when we receive
the monthly No Lapse Premiums for the period since the Policy Date.
BACKDATING. We may sometimes backdate a Policy, if you request, by
assigning a Policy Date earlier than the date the application is signed. You may
wish to backdate so that you can obtain lower cost of insurance rates, based on
a younger insurance age. For a backdated Policy, you must also pay the No Lapse
Premiums due for the period between the Policy Date and the investment start
date. As of the investment start date, we allocate to the Policy those net
premiums, adjusted for monthly Policy charges.
RIGHT TO EXAMINE POLICY
You may cancel the Policy or an increase in face amount within ten days
(more in some states) after you receive it. You may return the Policy or face
amount increase to the Designated Office (see "Receipt of Communications and
Payments at NELICO's Designated Office") or your registered representative.
Insurance coverage ends as soon as you return the Policy (determined by
postmark, if the Policy is mailed). If you cancel the Policy, we refund any
premiums paid (or any other amount that is required by state insurance law). If
you return an increase in face amount, it is cancelled from its beginning, and
we will return to your cash value the Monthly Deductions for the increase, as
well as the Face Amount Increase Administration Charge.
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs of the
services or benefits that are implied by the name of the charge or that are
associated with the particular Policy. For example, the sales charge and
surrender charge may not fully cover all of our sales and distribution expenses,
and we may use proceeds from other charges, including the mortality and expense
risk charge and the cost of insurance charge, to help cover those expenses. We
can profit from certain Policy charges.
DEDUCTIONS FROM PREMIUMS
We deduct a 5% sales charge from premiums.
The sales charge is currently 2% rather than 5% for premiums paid in Policy
year 11 and thereafter.
In North Carolina, the maximum sales charge is 5.6%.
We may reduce sales charges for Policies sold to some group or sponsored
arrangements. Currently, you may purchase the Policy, in exchange for certain
fixed-benefit life insurance policies issued by New England Mutual, NELICO or
NELICO's affiliates, without a deduction for any sales charge from the amount of
cash surrender value that you transfer to the Policy. Eligibility conditions
apply. Your registered representative can advise you regarding terms and
availability of these programs.
PREMIUM TAX CHARGE. We deduct 2.5% from each premium for premium taxes and
administrative expenses. Premium taxes vary from state to state and the 2.5%
charge reflects an average. Administrative expenses covered by this charge
include those related to premium tax and certain other state filings.
In North Carolina, the maximum premium tax charge is 1.9%.
FEDERAL TAX CHARGE. We deduct 1.25% from each premium for our federal
income tax liability related to premiums.
EXAMPLE: The following chart shows the net amount that we would allocate
to the Policy assuming a premium payment of $2,000 (in the first ten Policy
years).
<Table>
<Caption>
NET
PREMIUM PREMIUM
- ------- -------
$2,000 $2,000
- 175 (8.75% X 2,000 = total sales and premium tax charge)
-------
$1,825 Net Premium
</Table>
A-19
SURRENDER CHARGE
If, during the first ten Policy years, or during the first ten Policy years
following a face amount increase, you surrender or lapse your Policy, reduce the
face amount, or make a partial withdrawal or change in death benefit option that
reduces the face amount, then we will deduct a Surrender Charge from the cash
value. (For insureds whose issue age is 90 at issue of the Policy, or the face
amount increase, the Surrender Charge period is nine years.) The maximum
Surrender Charge is shown in your Policy.
For the first partial withdrawal in any Policy year, no Surrender Charge
will apply to 10% of the cash surrender value at the time of the withdrawal (or,
if less, the amount of the partial withdrawal).
We base the Surrender Charge on a percentage of the Target Premium. The
Surrender Charge that applies during the first Policy year (or the first year
----------------------------
following a face amount increase) is equal to 45% of the Target Premium. After
the first Policy year, the Surrender Charge declines ratably on a monthly basis
until it reaches $0 in the last month of the tenth Policy year (or the tenth
year following a face amount increase).
EXAMPLES -- SURRENDER CHARGES
<Table>
<Caption>
HYPOTHETICAL MAXIMUM SURRENDER
INSURED TARGET PREMIUM CHARGE
------- --------------------------- -----------------
Male, Age 45 $ 6,900 $ 3,105
Preferred Nonsmoker
Face Amount $500,000
Female, Age 45 $ 1,328 $ 598
Preferred Smoker
Face Amount $100,000
Male, Age 55 $ 25,990 $ 11,696
Standard Smoker
Face Amount $1,000,000
</Table>
The table below shows the maximum Surrender Charge that applies to the
Policy. The table shows the charge that applies if the lapse, surrender or face
amount reduction occurs in any month of Policy year one and in the last month of
Policy years two through ten.
<Table>
<Caption>
THE MAXIMUM SURRENDER
FOR POLICIES WHICH ARE CHARGE IS THE FOLLOWING
SURRENDERED, LAPSED OR PERCENTAGE OF ONE
REDUCED DURING TARGET PREMIUM
---------------------- -----------------------
Entire Policy Year 1 45%
Last Month of Policy Years 2 40%
3 35%
4 30%
5 25%
6 20%
7 15%
8 10%
9 5%
10 0%
</Table>
In the case of a face amount reduction or a partial withdrawal or change in
death benefit option that results in a face amount reduction, we deduct any
Surrender Charge that applies from the Policy's remaining cash value in an
amount that is proportional to the amount of the Policy's face amount
surrendered. (See "Reduction in Face Amount," "Partial Withdrawal" and "Change
in Death Benefit Option".) The charge reduces the Policy's cash value in the
Sub-Accounts and the Fixed Account in proportion to the amount of the Policy's
cash value in each. However,
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if you designate the accounts from which a partial withdrawal is to be taken,
the charge will be deducted proportionately from the cash value of the
designated accounts.
MONTHLY DEDUCTION FROM CASH VALUE
On the first day of each Policy month, starting with the Policy Date, we
deduct the "Monthly Deduction" from your cash value.
-- If your Policy is protected against lapse by the five year No Lapse
Premium guarantee or the Secondary Guarantee Rider, we make the Monthly
Deduction each month regardless of the amount of your cash surrender
value. If your cash surrender value is insufficient to pay the Monthly
Deduction in any month, your Policy will not lapse, but the shortfall
will, in effect, cause your cash surrender value to have a negative
balance. During any period in which your Policy has negative cash
value, no earnings will be credited to the Policy. If a negative cash
surrender value balance is not restored, then upon termination of the
guarantee period, you will have to pay an amount sufficient to cover
the accumulated outstanding Monthly Deductions, in addition to the
amount you are required to pay to prevent lapse at the end of the grace
period, in order to keep the Policy in force. (See "Premiums".)
-- If the five year No Lapse Premium guarantee or the Secondary Guarantee
Rider is not in effect, and the cash surrender value is not large
enough to cover the entire Monthly Deduction, we will make the
deduction to the extent cash value is available, but the Policy will be
in default, and it may lapse. (See "Lapse and Reinstatement".)
There is no Monthly Deduction on or after the Policy anniversary when the
insured attains age 100.
The Monthly Deduction reduces the cash value in each Sub-Account of the
Variable Account and in the Fixed Account in proportion to the cash value in
each. However, you may request that we charge the Monthly Deduction to a
specific Sub-Account of the Variable Account or to the Fixed Account. If, in any
month, the designated account has insufficient cash surrender value to satisfy
the Monthly Deduction, we will charge the Monthly Deduction to all Sub-Accounts
and, if applicable, the Fixed Account, in proportion to the cash value in each.
The Monthly Deduction includes the following charges:
POLICY CHARGE. The Policy Charge is currently equal to $25.00 per month in
the first Policy year and $6.00 per month thereafter (guaranteed not to exceed
these amounts in any year).
ADMINISTRATION AND ISSUE EXPENSE CHARGE. During the first ten Policy
years, and during the first ten Policy years following a face amount increase,
we impose a monthly charge for the costs of underwriting, issuing (including
sales commissions), and administering the Policy or the face amount increase.
The monthly charge ranges from approximately 3 cents to 38 cents per $1000 of
base Policy and Supplemental Coverage Term Rider face amount, and varies by the
insured's issue age and underwriting class (at the time the Policy or a face
amount increase is issued), and, except for unisex Policies, the insured's sex.
Currently, the charge is applied only to the base Policy face amount.
In addition, each time there is an underwritten increase in the face amount
of the base Policy, we deduct a one-time Face Amount Increase Administration
Charge of $100 from the Policy's cash value on the monthly anniversary when the
increase takes place.
MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of
providing insurance protection under your Policy. The cost of insurance charge
for a Policy month is equal to the "amount at risk" under the Policy, multiplied
by the cost of insurance rate for that Policy month. We determine the amount at
risk on the first day of the Policy month after we process the Monthly
Deduction, except for the cost of insurance, Waiver of Monthly Deduction Rider
and Secondary Guarantee Rider charges. The amount at risk is the amount by which
the death benefit (generally discounted at the monthly equivalent of 3% per
year) exceeds the Policy's cash value. The cost of insurance rate for your
Policy may change from month to month.
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The guaranteed cost of insurance rates for a Policy depend on the insured's
-- smoking status
-- substandard rating
-- age on the first day of the Policy year
-- sex (if the Policy is sex-based).
The current cost of insurance rates will also depend on
-- underwriting class
-- the insured's age at issue (and at the time of any face amount
increase)
-- the Policy year (and the year of any face amount increase).
We guarantee that the rates for underwritten Policies will not be higher
than rates based on
-- the 1980 Commissioners Standard Ordinary Mortality Tables (the "1980
CSO Tables") with smoker/nonsmoker modifications, for Policies issued
on non-juvenile insureds (age 18 and above at issue), adjusted for
substandard ratings or flat extras, if applicable
-- the 1980 Nonsmoker CSO Tables, for Policies issued on juvenile insureds
(below age 18 at issue).
However, in all states except New Jersey, the maximum rates for coverage
provided under the Supplemental Coverage Term Rider will be based on
110% of the applicable 1980 CSO Table rates.
The actual rates we use may be lower than the maximum rates, depending on
our expectations about our future mortality and expense experience, lapse rates,
taxes and investment earnings. We review the adequacy of our cost of insurance
rates and other non-guaranteed charges periodically and may adjust them. Any
change will apply prospectively.
The underwriting classes we use are
-- for Policies issued on non-juvenile insureds: preferred smoker,
standard smoker, rated smoker, elite nonsmoker, preferred nonsmoker,
standard nonsmoker, rated nonsmoker, guaranteed issue smoker and
guaranteed issue nonsmoker
-- for Policies issued on juvenile insureds: standard and rated.
Rated and guaranteed issue Policies have higher cost of insurance
deductions. We base the guaranteed maximum mortality charges for substandard
ratings on multiples of the 1980 CSO Tables. (See below for a discussion of
guaranteed issue Policies.)
The following standard or better smoker and non-smoker classes are
available for underwritten Policies:
-- elite nonsmoker for Policies with total face amounts (base Policy plus
Supplemental Coverage or Convertible Supplemental Coverage Term Riders)
of $250,000 or more where the issue age is 18 through 80;
-- preferred smoker and preferred nonsmoker for Policies with total face
amounts (base Policy plus Supplemental Coverage or Convertible
Supplemental Coverage Term Riders) of $100,000 or more where the issue
age is 18 through 80;
-- standard smoker and standard nonsmoker for Policies with total face
amounts (base Policy plus Supplemental Coverage or Convertible
Supplemental Coverage Term Riders) of $50,000 or more where the issue
age is 18 through 90.
The elite nonsmoker class offers the best current cost of insurance rates,
and the preferred classes generally offer better current cost of insurance rates
than the standard classes.
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Cost of insurance rates are generally lower for nonsmokers than for smokers
and generally lower for females than for males. Within a given underwriting
class, cost of insurance rates are generally lower for insureds with lower issue
ages. Where required by state law, and for Policies sold in connection with some
employee benefit plans, cost of insurance rates (and Policy values and benefits)
do not vary based on the sex of the insured.
We may offer Policies on a guaranteed issue basis to certain group or
sponsored arrangements. The classes available are guaranteed issue smoker and
guaranteed issue nonsmoker. We issue these Policies up to predetermined face
amount limits. Because we issue these Policies based on minimal underwriting
information, they may present a greater mortality cost to us than Policies in a
standard class. Therefore, these Policies have their own cost of insurance
rates. The cost of insurance rates are guaranteed not to exceed 100% of the 1980
CSO Tables (with smoker/nonsmoker modifications for non-juvenile insureds).
Generally the current guaranteed issue rates will exceed current cost of
insurance rates for a comparable underwritten Policy.
Some group or sponsored arrangements may be eligible to purchase Policies
on a simplified underwriting basis. They may elect simplified underwriting
instead of guaranteed issue or for amounts of insurance above our guaranteed
issue limits. However, they may not choose guaranteed issue for some members of
the group and simplified underwriting for others. There is no extra insurance
charge for Policies issued on a simplified underwriting basis.
CHARGES FOR ADDITIONAL BENEFITS AND SERVICES. We charge for the cost of
any additional rider benefits as described in the rider form. We also may charge
you a nominal fee, which we will bill directly to you, if you request a Policy
re-issue or re-dating.
ASSET CHARGE. We impose a charge for our mortality and expense risks.
Currently, the charge is made monthly, based on the cash value of the Policy in
the Sub-Accounts of the Variable Account, at an annual rate of .60% in Policy
years 1 through 10; .25% in Policy years 11 through 20; and .15% thereafter. The
charge is guaranteed not to exceed .70% in Policy years 1 through 10; .35% in
Policy years 11 through 20; and .25% thereafter.
The mortality risk we assume is that insureds may live for shorter periods
of time than we estimated. The expense risk is that our costs of issuing and
administering the Policies may be more than we estimated.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE SUB-ACCOUNTS OF THE VARIABLE ACCOUNT
CHARGES FOR INCOME TAXES. We currently do not charge the Variable Account
for income taxes, but in the future we may make such a charge, if appropriate.
We have the right to make a charge for any taxes imposed on the Policies in the
future. (See "NELICO's Income Taxes".)
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds. (See the "Policy
Charges" section under "Introduction to the Policies.")
GROUP OR SPONSORED ARRANGEMENTS
We may issue the Policies to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a situation where a trustee,
employer or similar entity purchases individual Policies covering a group of
individuals. Examples of such arrangements are non-tax qualified deferred
compensation plans. A "sponsored arrangement" includes a situation where an
employer or an association permits group solicitation of its employees or
members for the purchase of individual Policies.
We may waive, reduce or vary any Policy charges under Policies sold to a
group or sponsored arrangement. We may also raise the interest rate credited to
loaned amounts under these Policies. The amount of the variations and our
eligibility rules may change from time to time. In general, they reflect cost
savings over time that we anticipate for Policies sold to the eligible group or
sponsored arrangements and relate to objective factors such as the size of the
group, its stability, the purpose of the funding arrangement and characteristics
of the group members. These variations of charges do not apply to Policies sold
in New York other than Policies sold to non-tax qualified deferred compensation
plans of various types. Consult your registered representative for any
variations that may be available and appropriate for your case.
A-23
The United States Supreme Court has ruled that insurance policies with
values and benefits that vary with the sex of the insured may not be used to
fund certain employee benefit programs. Therefore, we offer Policies that do not
vary based on the sex of the insured to certain employee benefit programs. We
recommend that employers consult an attorney before offering or purchasing the
Policies in connection with an employee benefit program.
PREMIUMS
FLEXIBLE PREMIUMS
Within limits, you choose the amount and frequency of premium payments. You
select a Planned Premium schedule, which is a level amount. This schedule
appears in your Policy. YOUR PLANNED PREMIUMS WILL NOT NECESSARILY KEEP YOUR
POLICY IN FORCE. You may skip Planned Premium payments or make additional
payments. Additional payments could be subject to underwriting. No payment can
be less than $10.
You can pay Planned Premiums on an annual, semi-annual or quarterly
schedule or, with our consent, monthly. You can change your Planned Premium
schedule by sending your request to us at our Designated Office.
You may make payments by check or money order. We will send premium notices
for annual, semi-annual or quarterly Planned Premiums. You may also choose to
have us withdraw your premium payments from your bank checking account or Nvest
Cash Management Trust account. (This is known as the Master Service Account
arrangement.)
You may not make premium payments on or after the Policy anniversary when
the insured reaches age 100, except for premiums required during the grace
period.
If any payments under the Policy exceed the "7-pay limit" under Federal tax
law, your Policy will become a "Modified Endowment Contract" and you may have
more adverse tax consequences with respect to certain distributions than would
otherwise be the case if premium payments did not exceed the "7-pay limit". The
amount of your "7-pay limit" is shown in your Policy illustration and in your
annual Policy statement. If you make a payment that exceeds the "7-pay limit",
we will notify you and give you an opportunity to receive a refund of the excess
premium to prevent your Policy from becoming a Modified Endowment Contract. (See
"Tax Considerations".) In addition, if you have selected the guideline premium
test, Federal tax law limits the amount of premiums that you can pay under the
Policy. You need our consent if, because of tax law requirements, a payment
would increase the Policy's death benefit by more than it would increase cash
value. We may require evidence of insurability before accepting the payment.
We allocate net payments to your Policy's Sub-Accounts as of the date we
receive the payment. (See "Receipt of Communications and Payments at NELICO's
Designated Office".)
Under our current processing, unless you instruct us otherwise in writing,
we treat a payment that is greater than the amount billed, first, as a payment
of loan interest due, and second, as a premium payment. If a payment is less
than the amount billed, we treat the entire payment as a premium payment. If the
payment is equal to the amount billed, we apply the payment to premium and loan
interest as set forth in the bill. We do not treat a payment as repayment of a
Policy loan unless you instruct us to.
If you have a Policy loan, it may be better to repay the loan than to make
a premium payment, because the premium payment is subject to sales and tax
charges, whereas the loan repayment is not subject to any charges. (See "Loan
Provision" and "Deductions from Premiums".)
Two types of premium payment levels can protect your Policy against lapse
(1) for the first five Policy years, and (2) until age 100 of the insured.
FIRST FIVE POLICY YEARS. In general, if you pay the five-year No Lapse
Monthly Premium amount on time, the Policy will not lapse even if the cash
surrender value is less than the Monthly Deduction in any month. If (a) the
total premiums you have paid, less all partial withdrawals and any outstanding
Policy loan balance and loan interest (and less any cash value paid to you to
allow the Policy to continue to qualify as life insurance), at least equal (b)
the total No Lapse Monthly Premiums for the Policy up to that Policy month, the
Policy will not lapse. The guarantee will not apply if you reinstate the Policy.
We recalculate the No Lapse Premium if (1) you change the face amount, (2) you
add, delete or change rider coverage, (3) the rating classification for your
Policy is changed,
A-24
(4) we correct a misstatement of the insured's age or sex, or (5) you change the
insured. The No Lapse Annual Premium is shown in your Policy. The No Lapse
Monthly Premium is one twelfth of the No Lapse Annual Premium.
TO AGE 100. In general, if you choose the Secondary Guarantee Rider and
pay the Secondary Guarantee Premiums on time, the Policy will stay in force
until the insured reaches age 100. Your total premium payments (less any partial
withdrawals, outstanding Policy loans, loan interest, and cash value paid to you
to allow the Policy to continue to qualify as life insurance) must meet the
requirements of the rider.
We recalculate the Secondary Guarantee Premium if:
-- you change your death benefit option
-- you increase or decrease the face amount
-- you add, delete or change rider coverage
-- a correction is made in the age or sex of the insured
-- the underwriting class of the Policy is changed.
If your Policy is protected against lapse by the five year No Lapse Premium
guarantee or the Secondary Guarantee Rider, we make the Monthly Deduction
regardless of the amount of your cash surrender value. If your cash surrender
value is insufficient to pay the Monthly Deduction in any month, your Policy
will not lapse, but the shortfall will, in effect, cause your cash surrender
value to have a negative balance. During any period in which your Policy has
negative cash value, no earnings will be credited to the Policy. If a negative
cash surrender value balance is not restored, then upon termination of the
guarantee period, you will have to pay an amount sufficient to cover the
accumulated outstanding Monthly Deductions, in addition to the amount you are
required to pay to prevent lapse at the end of the grace period, in order to
keep the Policy in force.
LAPSE AND REINSTATEMENT
LAPSE. Unless your Policy is protected by the Secondary Guarantee Rider or
by the five-year No Lapse Premium guarantee, any month that your Policy's cash
surrender value is not large enough to cover a Monthly Deduction, your Policy
will be in default. Your Policy provides a 62 day grace period for payment of a
premium large enough to pay the amount due. The amount due is the least of: a
premium large enough to cover the Monthly Deduction amount due and all
deductions from the premium; a premium large enough to satisfy the Secondary
Guarantee Rider requirement, if the Policy has the rider; and a premium large
enough to meet the five-year No Lapse Monthly Premium test. We will tell you the
amount due. You have insurance coverage during the grace period, but if the
insured dies before you have paid the premium, we deduct from the death proceeds
the amount due for the period before the date of death. If you have not paid the
required premium by the end of the grace period, your Policy will lapse without
value.
REINSTATEMENT. If your Policy has lapsed, in most states you may reinstate
it within three years after the date of lapse if the insured has not attained
age of 100. If more than three years have passed, you need our consent to
reinstate. Reinstatement in all cases requires payment of certain charges
described in the Policy and usually requires evidence of insurability that is
satisfactory to us.
If we deducted a Surrender Charge on lapse, we credit it back to the
Policy's cash value on reinstatement. The Surrender Charge on the date of
reinstatement is the same as it was on the date of lapse. When we determine the
Surrender Charge and other charges except cost of insurance and the Policy loan
interest rate, we do not count the amount of time that a Policy was lapsed.
Some states may require a different grace period than that described above.
Please read the grace period provision of your Policy for details.
A-25
OTHER POLICY FEATURES
INCREASE IN FACE AMOUNT
You may increase the Policy's face amount. We require satisfactory evidence
of insurability, and the insured's attained age must not exceed the maximum age
at which we currently offer new insurance for the amount of the increase. The
minimum amount of increase permitted is $10,000 ($20,000 for Policies issued in
New York or for insureds aged 90). The increase is effective on the monthly
anniversary on or next following our receipt of a completed request at our
Designated Office.
A Face Amount Increase Administration Charge of $100 applies to each
underwritten face amount increase, and is deducted from the Policy's cash value
on the monthly anniversary when the increase takes effect. The face amount
increase will have its own Target Premium, as well as its own Surrender Charge,
monthly Administration and Issue Expense Charge rates, current cost of insurance
rates, and Right to Examine Policy and suicide and contestability periods as if
it were a new Policy. When calculating the monthly cost of insurance charge, we
attribute the Policy's cash value first to any remaining initial face amount
(including any increase in face amount from a prior change in death benefit
option), then to the Supplemental Coverage Term Rider, then to the Adjustable
Benefit Term Rider, and finally to any face amount increases in the order in
which they were issued, for purposes of determining the net amount at risk.
LOAN PROVISION
You may borrow all or part of the Policy's "loan value". The minimum loan
amount is $500. We make the loan as of the date when we receive a loan request.
(See "Receipt of Communications and Payments at NELICO's Designated Office".)
You should contact our Designated Office or your registered representative for
information on loan procedures.
The Policy's loan value equals:
(i) the Policy's cash value; minus
(ii) the Policy's Surrender Charge; minus
(iii) the amount of the most recent Monthly Deduction, times the number of
Policy months to the earlier of the next Planned Premium due date
and the next Policy anniversary; plus
(iv) interest on the amount determined in (iii) at an annual rate of 3% to
the next Policy anniversary; minus
(v) loan interest to the next Policy anniversary; minus
(vi) any outstanding Policy loans.
EXAMPLE: Using the Policy illustrated on page A-52 assume that the
Policy's Planned Premiums have been paid and that the Policy's Sub-Accounts have
earned a constant 6% hypothetical gross annual rate of return (equal to a
constant net annual rate of return of 5.17%). After the premium payment on the
10th Policy anniversary, the maximum amount that you could borrow (if there are
no outstanding loans) would be determined as follows under an annual premium
payment schedule:
<Table>
(1) Cash Value after Premium Payment on 10th Policy
Anniversary............................................... $59,583
(2) Cash Value Reduced by the Policy's Surrender Charge.... 59,583
(3) Amount Calculated in (2), Reduced by the Most Recent
Monthly Deduction Times the Number of Policy Months to
the Earlier of the Next Planned Premium Due Date and
the Next Policy Anniversary............................ 58,529
(4) Amount Calculated in (3), Plus Interest at an Annual
Rate of Return of 3% to the 11th Policy Anniversary.... 60,136
(5) Amount Calculated in (4), Reduced by Loan Interest to
the Next Policy Anniversary............................ 58,399
</Table>
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A Policy loan reduces the Policy's cash value in the Sub-Accounts by the
amount of the loan. A loan repayment increases the cash value in the
Sub-Accounts by the amount of the repayment. Unless you request otherwise, we
attribute Policy loans to the Sub-Accounts of the Variable Account and the Fixed
Account in proportion to the cash value in each. We transfer cash value equal to
the amount of the loan from the Sub-Accounts and the Fixed Account to the
appropriate Loan Sub-Account within the Loan Account (which is part of NELICO's
general account). The Loan Account has a Loan Sub-Account that corresponds to
each Sub-Account of the Variable Account and the Fixed Account.
When you make a loan repayment, we transfer an amount of cash value equal
to the repayment from the Loan Account to the Sub-Accounts of the Variable
Account and to the Fixed Account in the same proportion that the cash value in
each Loan Sub-Account bears to the total cash value in the Loan Account.
We guarantee that the interest rate charged on Policy loans will not be
more than 3.50% per year. Currently, we charge:
-- 3.5% in Policy years 1-10
-- 3.25% in Policy years 11-20
-- 3.00% in Policy years 21+.
Policy loan interest is due and payable annually on each Policy
anniversary. If not paid when due, we add the interest accrued to the loan
amount, and we transfer an amount of cash value equal to the unpaid interest
from the Sub-Accounts and the Fixed Account to the appropriate Loan Sub-Accounts
in the same manner as a new loan.
Cash value in the Loan Account earns interest at not less than 3% per year
and is transferred on each Policy anniversary to the Sub-Accounts of the
Variable Account and to the Fixed Account in the same proportion that the cash
value in each Loan Sub-Account bears to the total cash value in the Loan
Account. The interest credited will also be transferred: (1) when you take a new
loan; (2) when you make a full or partial loan repayment; and (3) when the
Policy enters the grace period.
The amount taken from the Policy's Sub-Accounts as a result of a loan does
not participate in the investment experience of the Sub-Accounts. Therefore,
loans can permanently affect the death benefit and cash value of the Policy,
even if repaid. In addition, we reduce any proceeds payable under a Policy by
the amount of any outstanding loan plus accrued interest.
If a Policy loan is outstanding, it may be better to repay the loan than to
pay a premium, because the payment is subject to sales and premium tax charges,
and the loan repayment is not subject to charges. (See "Deductions from
Premiums".)
Although the issue is not free from doubt, we believe that a loan from or
secured by a Policy that is not classified as a Modified Endowment Contract
should generally not be treated as a taxable distribution. A tax adviser should
be consulted when considering a loan.
If you surrender your Policy or your Policy lapses while there is an
outstanding loan balance, there will generally be Federal income tax payable on
the amount by which withdrawals and loans exceed the premiums paid to date.
Please be advised that amounts borrowed and withdrawn reduce the Policy's cash
value and any remaining cash value of the Policy may be insufficient to pay the
income tax on your gains.
If Policy loans plus accrued interest exceed the Policy's cash value less
the Surrender Charge, we notify you that the Policy is going to terminate. The
Policy terminates without value unless you make a sufficient payment within the
later of 62 days from the monthly anniversary immediately before the date when
the excess loan occurs or 31 days after we mail the notice. If the Policy lapses
with a loan outstanding, adverse tax consequences may result. If your Policy is
a Modified Endowment Contract, loans under your Policy may be treated as taxable
distributions. (See "Tax Considerations" below.)
SURRENDER
You may surrender a Policy for its cash surrender value at any time while
the insured is living. We determine the cash surrender value as of the date when
we receive the surrender request. (See "Receipt of Communications and Payments
at NELICO's Designated Office".) The cash surrender value equals the cash value
reduced by any Policy loan and accrued interest and by any applicable Surrender
Charge. (See "Surrender Charge".) You may apply
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all or part of the cash surrender value to a payment option. (See "Payment
Options".) A surrender may result in adverse tax consequences. (See "Tax
Considerations" below.)
PARTIAL WITHDRAWAL
After the Right to Examine Policy period you may withdraw a portion of the
Policy's cash surrender value. A partial withdrawal reduces the Policy's death
benefit and may reduce the Policy's face amount if necessary so that the amount
at risk under the Policy will not increase. A partial withdrawal may also reduce
rider benefits. We reserve the right to decline a partial withdrawal request
that would reduce the face amount below the Policy's required minimum. The
minimum amount of a partial withdrawal request must be $500.
We have the right to limit partial withdrawals to no more than 90% of the
cash surrender value. In addition, a partial withdrawal will be limited by any
restriction that we currently impose on withdrawals from the Fixed Account. (See
"The Fixed Account".) Currently, we permit partial withdrawals of up to 100% of
the cash surrender value in the Variable Account. We have the right to limit
partial withdrawals to twelve per Policy year. Currently we do not limit the
number of partial withdrawals. We reserve the right to impose a charge of $25 on
each partial withdrawal in excess of twelve per Policy year.
If a partial withdrawal reduces your Policy's face amount, the amount of
the Surrender Charge that will be deducted from your cash value is an amount
that is proportional to the amount of the face reduction. The amount deducted
will reduce the remaining Surrender Charge payable under the Policy.
For the first partial withdrawal in each Policy year, no Surrender Charge
will apply on up to 10% of the cash surrender value at the time of the
withdrawal (or, if less, the amount of the partial withdrawal).
Any face amount reduction resulting from a partial withdrawal will reduce
the face amount in the following order: any remaining initial face amount
(including face amount increases resulting from a change in death benefit
option) down to the required minimum (excluding riders), the amount of any
Supplemental Coverage Term Rider, the face amount of any Adjustable Benefit Term
Rider, and any face amount increases in the same order in which they were
issued.
You may not reinvest cash value paid upon a partial withdrawal in the
Policy except as premium payments, which are subject to the charges described
under "Deductions From Premiums".
Unless you request otherwise, a partial withdrawal reduces the cash value
in the Sub-Accounts of the Variable Account and the Fixed Account in the same
proportion that the cash value in each bears to the Policy's total unloaned cash
value. If current restrictions on the Fixed Account will not permit this
allocation, we will ask you for an acceptable allocation. We determine the
amount of cash surrender value paid upon a partial withdrawal as of the date
when we receive a request. You can contact your registered representative or our
Designated Office for information on partial withdrawal procedures. (See
"Receipt of Communications and Payments at NELICO's Designated Office".)
A reduction in the death benefit as a result of a partial withdrawal may
create a Modified Endowment Contract or have other adverse tax consequences. If
you are contemplating a partial withdrawal, you should consult your tax adviser
regarding the tax consequences. (See "Tax Considerations".)
REDUCTION IN FACE AMOUNT
After the first Policy year, you may reduce the face amount of your Policy
without receiving a distribution of any Policy cash value. You may reduce your
Policy's face amount by reducing the face amount of your Supplemental Coverage
Term Rider or your Adjustable Benefit Term Rider, if applicable, or by reducing
the face amount of your base Policy.
If you decrease the face amount of your base Policy, we deduct any
Surrender Charge that applies from the Policy's cash value in proportion to the
amount of the face amount reduction. (A reduction in the face amount of your
Supplemental Coverage Term Rider or Adjustable Benefit Term Rider will not
trigger a Surrender Charge.)
A face amount reduction usually decreases the Policy's death benefit.
(However, if we are increasing the death benefit to satisfy Federal income tax
laws, a face amount reduction will not decrease the death benefit unless we
A-28
deduct a Surrender Charge from the cash value. A reduction in face amount in
this situation may not be advisable.) We also may decrease any rider benefits
attached to the Policy. The amount of any face reduction must be at least
$10,000, and the face amount remaining after a reduction must meet our minimum
face amount requirements for issue, except with our consent.
If you choose to reduce your base Policy face amount, we will first
decrease any prior increases in face amount that you applied for, in the reverse
order in which the increases occurred, and then any remaining initial face
amount (including any increase in face amount from a prior change in death
benefit option).
A reduction in face amount reduces the Federal tax law limits on the amount
of premiums that you can pay under the Policy under the guideline premium test.
In these cases, a portion of the Policy's cash value may have to be paid to you
to comply with Federal tax law.
A face amount reduction takes effect as of the monthly anniversary on or
next following the date when we receive a request. You may only reduce the face
amount of your Supplemental Coverage Term Rider on the Policy anniversary. You
can contact your registered representative or the Designated Office for
information on face reduction procedures.
A reduction in the face amount of a Policy may create a Modified Endowment
Contract or have other adverse tax consequences. If you are contemplating a
reduction in face amount, you should consult your tax adviser regarding the tax
consequences of the transaction. (See "Tax Considerations".)
INVESTMENT OPTIONS
You can allocate your Policy's premiums and cash value among the
Sub-Accounts of the Variable Account and the Fixed Account in any combination,
as long as you choose no more than a cumulative total of 49 accounts (including
the Fixed Account) over the life of the Policy. You may allocate any whole
percentage to a Sub-Account. For special rules regarding allocations to the
Fixed Account, see "The Fixed Account."
You make the initial premium allocation when you apply for a Policy. We may
limit your initial allocation to 25 accounts. You can change the allocation of
future premiums at any time thereafter. The change will be effective for
premiums applied on or after the date when we receive your request. You may
request the change by telephone or by written request. (See "Receipt of
Communications and Payments at NELICO's Designated Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
TRANSFER OPTION
You may transfer your Policy's cash value between Sub-Accounts. (In states
where we refund your premium if you exercise the Right to Examine Policy
provision, your right to transfer begins after the first 15 days following
application of the initial premium to the Policy.) We reserve the right to limit
Sub-Account transfers to twelve per Policy year. Currently we do not limit the
number of Sub-Account transfers per Policy year. We reserve the right to make a
charge of $25 per transfer for transfers in excess of twelve in a Policy year.
We treat all Sub-Account transfer requests made at the same time as a single
request. The transfer is effective as of the date when we receive the transfer
request. (See "Receipt of Communications and Payments at NELICO's Designated
Office".) For special rules regarding transfers involving the Fixed Account, see
"The Fixed Account".
We did not design the Policy's transfer privilege to give you a way to
speculate on short-term market movements. To prevent excessive transfers that
could disrupt the management of the Eligible Funds and increase transaction
costs, we may adopt procedures to limit excessive transfer activity. For
example, we may impose conditions and limits on, or refuse to accept, transfer
requests that we receive from third parties. Third parties include investment
advisers or registered representatives acting under power(s) of attorney from
one or more Policy owners. In addition, certain Eligible Funds may restrict or
refuse purchases of their shares, and impose a redemption fee as a result of
certain market timing activities. You should read the prospectuses of the
Eligible Funds for more details.
You may request a Sub-Account transfer or reallocation of future premiums
by written request (which may be telecopied) to us or by telephoning us. To
request a transfer or reallocation by telephone, you should contact your
A-29
registered representative or contact us at 1-800-200-2214. We use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Any telephone instructions that we reasonably believe to be genuine are your
responsibility, including losses arising from any errors in the communication of
instructions.
We do not currently offer Internet transfer capability to Policy Owners,
but may do so in the future. We will notify you if we begin to offer Internet
transactions.
Telephone, facsimile, and computer systems may not always be available. Any
telephone facsimile, or computer system, whether it is yours, your service
provider's, your registered representative's, or ours, can experience outages or
slowdowns for a variety of reasons. These outages or slowdowns may delay or
prevent our processing of your request. Although we have taken precautions to
help our systems handle heavy use, we cannot promise complete reliability under
all circumstances. If you are experiencing problems, you should make your
request by writing to our Designated Office.
DOLLAR COST AVERAGING
You may select an automated transfer privilege called dollar cost
averaging. The same dollar amount is transferred from the State Street Research
Money Market Sub-Account to other selected Sub-Accounts on a monthly basis. Over
time, more purchases of Eligible Fund shares are made when the value of those
shares is low, and fewer shares are purchased when the value is high. As a
result, a lower than average cost of purchases may be achieved over the long
term. This plan of investing allows you to take advantage of investment
fluctuations, but does not assure a profit or protect against a loss in
declining markets.
Under this feature, you may request that a certain amount of your cash
value be transferred on each monthly anniversary from the State Street Research
Money Market Sub-Account to one or more of the other Sub-Accounts. You must
transfer a minimum of $100 to each account that you select under this feature,
and each selected Sub-Account must receive at least 1% of the total amount of
each monthly transfer. Fractional percentages may not be used. If we exercise
our right to limit the number of transfers in the future, or to impose a charge
for transfers in excess of 12 per Policy year, transfers made under the dollar
cost averaging program will not count against the total number of transfers
allowed in a Policy year nor be subject to any charge. You can select a dollar
cost averaging program when you apply for the Policy or at a later date by
contacting us at our Designated Office. You may not participate in the dollar
cost averaging program while you are participating in the portfolio rebalancing
program. (See "Portfolio Rebalancing" below). You can cancel your use of the
dollar cost averaging program at any time before a transfer date. Transfers will
continue until you notify us to stop or there no longer is sufficient cash value
in the Sub-Account from which you are transferring. There is no extra charge for
this feature. We reserve the right to suspend dollar cost averaging at any time.
PORTFOLIO REBALANCING
You can select a portfolio rebalancing program for your cash value. Cash
value allocated to the Sub-Accounts can be expected to increase or decrease at
different rates. A portfolio rebalancing program automatically reallocates your
cash value among the Sub-Accounts and the Fixed Account periodically to return
the allocation to the allocation percentages you specify. Portfolio rebalancing
is intended to transfer cash value from those accounts that have increased in
value to those that have declined, or not increased as much, in value. Portfolio
rebalancing does not guarantee profits, nor does it assure that you will not
have losses.
There are two methods of rebalancing available--periodic and variance.
PERIODIC REBALANCING. Under this option you elect a frequency (monthly,
quarterly, semi-annually or annually), measured from the Policy anniversary. On
each date elected, we will rebalance the accounts by generating transfers to
reallocate the cash value according to the investment percentages elected. You
can exclude specific accounts from being rebalanced.
VARIANCE REBALANCING. Under this option you elect a specific allocation
percentage for the Fixed Account and each Sub-Account of the Variable Account.
For each such account, the allocation percentage (if not zero) must be a whole
percentage. You also elect a maximum variance percentage (5%, 10%, 15%, or 20%
only), and can exclude specific accounts from being rebalanced. On each monthly
anniversary we will review the current account balances to determine whether any
balance is outside of the variance range (either above or below) as a percentage
of the
A-30
specified allocation percentage for that fund. If any account is outside of the
variance range, we will generate transfers to rebalance all of the specified
accounts back to the predetermined percentages.
If we exercise our right to limit the number of transfers in the future, or
to impose a charge for transfers in excess of 12 per policy year, transfers
resulting from portfolio rebalancing will not count against the total number of
transfers allowed in a Policy year, nor be subject to any charge.
You may elect either form of portfolio rebalancing by specifying it on the
Policy application, or may elect it later for an in-force Policy, or may cancel
it, by submitting a change form acceptable to us under our administrative rules.
Only one form of portfolio rebalancing may be elected at any one time, and
portfolio rebalancing may not be used in conjunction with dollar cost averaging.
(See "Dollar Cost Averaging".) We reserve the right to suspend portfolio
rebalancing at any time. There is no charge for this feature.
CHANGE OF INSURED PERSON
We offer a benefit that permits you to change the insured person under your
Policy, if you provide satisfactory evidence that the person proposed to be
insured is insurable and that you have an insurable interest in that person's
life. The right to change the insured person is subject to some restrictions,
may result in a cost or credit to you and we reserve the right to charge a fee
not to exceed $25 for processing the change. A change of the insured person is a
taxable exchange. In addition, a change of the insured person could reduce the
amount of premiums you can pay into the Policy under Federal tax law and,
therefore, may require a partial withdrawal of cash value. (No Surrender Charge
will apply.)
Your registered representative can provide current information on the
availability of this benefit. You should consult your tax adviser before
changing the insured person under your Policy.
PAYMENT OF PROCEEDS
We ordinarily pay any cash surrender value, loan value or death benefit
proceeds from the Sub-Accounts within seven days after we receive a request, or
satisfactory proof of death of the insured (and any other information we need to
pay the death proceeds). (See "Receipt of Communications and Payments at
NELICO's Designated Office".) However, we may delay payment (except when a loan
is made to pay a premium to us) or transfers from the Sub-Accounts: (i) if the
New York Stock Exchange is closed for other than weekends or holidays, or if
trading on the New York Stock Exchange is restricted as determined by the SEC,
(ii) if the SEC by order permits postponement or determines that an emergency
exists that makes payments or Sub-Account transfers impractical, or (iii) at any
other time when the Eligible Funds or the Variable Account have the legal right
to suspend payment.
We may withhold payment of surrender or loan proceeds if those proceeds are
coming from a Policy Owner's check, or from a Master Service Account premium
transaction, which has not yet cleared. We may also delay payment while we
consider whether to contest the Policy. We pay interest on the death benefit
proceeds from the date they become payable to the date we pay them.
Unless otherwise requested, we may apply the Policy's death proceeds to our
Total Control Account. We establish a Total Control Account at a banking
institution at the time for payment. The Total Control Account is an
interest-bearing checking account through which you have convenient and complete
access to the proceeds, which are maintained in our general account or that of
an affiliate.
Normally we promptly make payments of cash value, or of any loan value
available, from cash value in the Fixed Account. However, we may delay those
payments for up to six months. We pay interest in accordance with state
insurance law requirements on delayed payments.
24 MONTH CONVERSION RIGHT
GENERAL RIGHT. Generally, during the first two Policy years,, you may
convert the Policy to fixed benefit coverage by transferring all of your
Policy's cash value to the Fixed Account. The transfer will not be subject to a
transfer charge, if any, and it will have no effect on the Policy's death
benefit, face amount, net amount at risk, risk classification or issue age. The
request to convert to fixed benefit coverage must be in written form
satisfactory to us.
A-31
You may exercise this privilege only once within the first two Policy
years. If you do so, we will automatically allocate all future net premiums to
the Fixed Account and transfers of cash value to the Variable Account will no
longer be permitted.
The Policy permits us to limit allocations to the Fixed Account under some
circumstances. (See "The Fixed Account.") If we limit such allocations, you may
still exercise the 24 Month Conversion Right.
FOR POLICIES ISSUED IN MARYLAND, NEW YORK AND CONNECTICUT. Under Policies
issued in Maryland, New York and Connecticut, you can exchange the face amount
of your Policy for a fixed benefit life insurance policy provided that you repay
any policy loans and (1) the Policy has not lapsed and (2) the exchange is made
within the first two Policy years. If you exercise this option, you will have to
make up any investment loss you had under the variable life insurance policy. We
make the exchange without evidence of insurability. The new policy will have the
same face amount as that being exchanged. The new policy will have the same
issue age, underwriting class and policy date as the variable life policy had.
We will attach any riders to the original Policy to the new policy if they are
available.
Contact our Designated Office or your registered representative for more
specific information about the 24 Month Conversion Right in these states. The
exchange may result in a cost or credit to you. On the exchange, you may need to
make an immediate premium payment on the new policy in order to keep it in
force.
OTHER EXCHANGE RIGHTS
FOR POLICIES ISSUED IN NEW YORK. Under policies issued in New York, you
can exchange your Policy while it is in force for a new policy which provides
Paid-Up Insurance. Paid-Up Insurance will be provided by using the cash
surrender value of the Policy as a net single premium at your age on the date of
the exchange. Paid-Up Insurance is permanent insurance with no further premiums
due. The face amount of the new policy of Paid-Up Insurance may be less than the
face amount of this Policy.
GROUP OR SPONSORED ARRANGEMENTS. For a Policy issued in certain business
situations, we offer the additional option of exchanging the Policy at any time
during the first 36 months after the Policy's issue date, if the Policy has not
lapsed, to a fixed-benefit term life insurance policy issued by us or an
affiliate. (Availability of this feature depends on state insurance department
approval and on the insured's risk classification.) Contact your registered
representative for more information about this feature.
PAYMENT OPTIONS
We pay the Policy's death benefit and cash surrender value in one sum
unless you or the payee choose a payment option for all or part of the proceeds.
You can choose a combination of payment options. You can make, change or revoke
the selection of payee or payment option before the death of the insured. You
can contact your registered representative or our Designated Office for the
procedure to follow. (See "Receipt of Communications and Payments of NELICO's
Designated Office".) The payment options available are fixed benefit options
only and are not affected by the investment experience of the Variable Account.
Once payments under an option begin, withdrawal rights may be restricted.
The following payment options are available:
(i) INCOME FOR A SPECIFIED NUMBER OF YEARS. We pay proceeds in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.0% a year, compounded yearly. Additional interest that we
pay for any year is added to the monthly payments for that year.
(ii) LIFE INCOME. We pay proceeds in equal monthly installments (i) for
the longer of the life of the payee or 10 years, (ii) for the longer
of the life of the payee or 15 years, or (iii) for the longer of the
life of the payee or 20 years.
(iii) LIFE INCOME WITH REFUND. We pay proceeds in equal monthly
installments during the life of the payee. At the payee's death, we
pay any remaining proceeds in one sum.
(iv) INTEREST. We hold proceeds and pay interest of at least 3.0% a year
monthly or add it to the principal annually. Withdrawals of at least
$500 may be made at any time by written request.
A-32
(v) LIFE INCOME FOR TWO LIVES. We pay proceeds in equal monthly
installments (i) while either of two payees is living, but for at least
10 years, or (ii) while the two payees are living and, after the death
of one payee, we pay two-thirds of the monthly amount for the life of
the surviving payee.
(vi) SPECIFIED AMOUNT OF INCOME. We make monthly payments of a chosen
amount until the entire proceeds, with interest, are paid.
You need our consent to use an option if the installment payments would be
less than $50.
ADDITIONAL BENEFITS BY RIDER
You can add additional benefits to the Policy by rider, subject to our
underwriting and issuance standards. These additional benefits usually require
an additional charge as part of the Monthly Deduction from cash value. The rider
benefits available with the Policies provide fixed benefits that do not vary
with the investment experience of the Variable Account.
The term riders discussed below permit you, by purchasing term insurance,
to increase your insurance coverage. Term riders have no surrenderable cash
value.
If you seek to reduce the current overall cost of your insurance
protection, it is generally to your economic advantage to include a significant
portion or percentage of your insurance coverage under a Supplemental Coverage
Term Rider. Although current charges for the Supplemental Coverage Term Rider
are lower than for the base Policy, you should be aware that guaranteed maximum
charges on the rider are generally higher (except under Policies issued in New
Jersey, where they are the same as for the base Policy). Unlike the base Policy,
the Supplemental Coverage Term Rider terminates at age 100, and the benefit
provided by the Acceleration of Death Benefit Rider (described below) does not
apply to the coverage under the Supplemental Coverage Term Rider. Reductions in
the face amount of the Supplemental Coverage Term Rider can only occur on Policy
anniversaries. This rider is not available in New York.
The Convertible Supplemental Coverage Term Rider can also provide less
expensive insurance protection than the base Policy for a period of time.
However, because no portion of the Policy's cash value is attributable to the
rider, the cost of insurance for the rider applies to the entire face amount of
the rider and is not offset by any increases in the Policy's cash value.
Therefore, the cost of coverage under the Convertible Supplemental Coverage Term
Rider can become expensive relative to the base Policy cost, particularly at
higher attained ages. This rider also terminates at age 100 (at age 80 in New
York).
Reductions in or elimination of term rider coverage do not trigger a
Surrender Charge, and use of a term rider generally reduces sales compensation.
Because the term insurance riders don't have surrender charges, a Policy
providing insurance coverage with a combination of base Policy and term rider
will have a lower maximum surrender charge than a Policy with the same amount of
insurance coverage provided solely by the base Policy. However, like the cost of
coverage under the Policy, charges deducted from the Policy's cash value to pay
for term rider coverage no longer participate in the investment experience of
the Variable Account, and usually increase with the age of the covered
individual.
Your determination as to how to purchase a desired level of insurance
coverage should be based on your specific insurance needs. Your registered
representative can provide you more information on the uses of term rider
coverage.
The following riders and endorsements, some of which have been described
previously, are available:
SUPPLEMENTAL COVERAGE TERM RIDER, which provides non-convertible term
insurance that terminates at age 100.
CONVERTIBLE SUPPLEMENTAL COVERAGE TERM RIDER, which provides term insurance
that can be converted to permanent coverage.
TEMPORARY TERM RIDER, which provides insurance coverage from the date
coverage is approved until a later Policy date.
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SECONDARY GUARANTEE RIDER, which provides for a guaranteed death benefit to
age 100.
CHILDREN'S LIFE INSURANCE RIDER, which provides term insurance on the life
of children of the insured.
WAIVER OF MONTHLY DEDUCTION RIDER, which provides for waiver of Monthly
Deductions upon the disability of the insured.
WAIVER OF SPECIFIED PREMIUM RIDER, which provides for waiver of a specified
amount of monthly premium in the event of the disability of the insured.
OPTIONS TO PURCHASE ADDITIONAL LIFE INSURANCE RIDER, which allows the Owner
to purchase additional coverage on the insured without providing evidence of
insurability.
TERM INSURANCE ON COVERED INSURED RIDER, which provides term insurance on
any person in whom the insured has an insurable interest.
OPTION TO PURCHASE LONG-TERM CARE INSURANCE RIDER, which allows the Owner
to purchase long-term care coverage on the insured without providing evidence of
insurability.
ADJUSTABLE BENEFIT TERM RIDER, which provides term insurance coverage on
the insured that allows annual adjustments and which terminates at age 100.
ACCELERATION OF DEATH BENEFIT RIDER, which provides for an accelerated
payment of all or part of the Policy's death benefit, including amounts payable
under the Convertible Supplemental Coverage Term Rider, on a discounted basis,
if the insured is terminally ill, as defined in the rider.
EXCHANGE TO TERM INSURANCE ENDORSEMENT, which allows the Policy to be
reissued as term insurance if it is surrendered within the first three Policy
years.
Not all riders may be available to you and riders in addition to those
listed above may be made available. You should consult your registered
representative regarding the availability of riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time
to time. At the death of the Policy Owner, his or her estate will become the
Policy Owner unless a successor Policy Owner has been named. The Policy Owner's
rights (except for rights to payment of benefits) terminate at the death of the
insured.
The beneficiary is also named in the application. You may change the
beneficiary at any time before the death of the insured, unless the beneficiary
designation is irrevocable. The beneficiary has no rights under the Policy until
the death of the insured and must survive the insured in order to receive the
death proceeds. If no named beneficiary survives the insured, we pay proceeds to
the Policy Owner.
A change of Policy Owner or beneficiary is subject to all payments made and
actions taken by us under the Policy before we receive a signed change form. You
can contact your registered representative or our Designated Office for the
procedure to follow.
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary to
the assignee. A collateral assignment of the Policy does not change the Policy
Owner or beneficiary, but their rights will be subject to the terms of the
assignment. Assignments are subject to all payments made and actions taken by us
under the Policy before we receive a signed copy of the assignment form. We are
not responsible for determining whether or not an assignment is valid. Changing
the Policy Owner or assigning the Policy may have tax consequences. (See "Tax
Considerations" below.)
THE VARIABLE ACCOUNT
We established the Variable Account as a separate investment account on
January 31, 1983 under Delaware law. It became subject to Massachusetts law when
we changed our domicile to Massachusetts on August 30, 1996. The Variable
Account is the funding vehicle for the Policies, and other NELICO variable life
insurance policies; these other policies impose different costs, and provide
different benefits, from the Policies. The Variable Account meets
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the definition of a "separate account" under Federal securities laws, and is
registered with the Securities and Exchange Commission (the "SEC") as a unit
investment trust under the Investment Company Act of 1940. Registration with the
SEC does not involve SEC supervision of the Variable Account's management or
investments. However, the Massachusetts Insurance Commissioner regulates NELICO
and the Variable Account, which are also subject to the insurance laws and
regulations where the Policies are sold.
Although we own the assets of the Variable Account, applicable law provides
that the portion of the Variable Account assets equal to the reserves and other
liabilities of the Variable Account may not be charged with liabilities that
arise out of any other business we may conduct. We believe this means that the
assets of the Variable Account equal to the reserves and other liabilities of
the Variable Account are not available to meet the claims of our general
creditors, and may only be used to support the cash values under our variable
life insurance policies issued by the Variable Account. We may transfer to our
general account assets which exceed the reserves and other liabilities of the
Variable Account. We will consider any possible adverse impact such a transfer
might have on the Variable Account.
Income and realized and unrealized capital gains and losses of the Variable
Account are credited to the Variable Account without regard to any of our other
income or capital gains and losses.
INVESTMENTS OF THE VARIABLE ACCOUNT
Sub-Accounts of the Variable Account that are available in this Policy
invest in the following Eligible Funds:
The Zenith State Street Research Money Market Series (formerly, the Back
Bay Advisors Money Market Series). Its investment objective is a high level of
current income consistent with preservation of capital. An investment in the
Money Market Series is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Money Market
Series seeks to maintain a net asset value of $100 per share, it is possible to
lose money by investing in the Money Market Series. During extended periods of
low interest rates, the yields of the Sub-Account investing in the Money Market
Series may become extremely low and possibly negative.
The Zenith State Street Research Bond Income Series (formerly, the Back Bay
Advisors Bond Income Series). Its investment objective is a competitive total
return primarily from investing in fixed-income securities.
The Zenith Equity Series (formerly, the Capital Growth Series). Its
investment objective is long-term capital appreciation.
The Zenith MFS Total Return Series (formerly, the Back Bay Advisors Managed
Series). Its investment objective is a favorable total return through investment
in a diversified portfolio.
The Zenith FI Structured Equity Series (formerly, the Westpeak Growth and
Income Series). Its investment objective is long-term growth of capital.
The Zenith Harris Oakmark Focused Value Series (formerly, the Harris
Oakmark Mid Cap Value Series). Its investment objective is long-term capital
appreciation.
The Zenith Loomis Sayles Small Cap Series. Its investment objective is
long-term capital growth from investments in common stocks or other equity
securities.
The Zenith Balanced Series (formerly, the Loomis Sayles Balanced Series).
Its investment objective is long-term total return from a combination of capital
appreciation and current income.
The Zenith Davis Venture Value Series. Its investment objective is growth
of capital.
The Zenith Alger Equity Growth Series. Its investment objective is
long-term capital appreciation.
The Zenith MFS Investors Trust Series (formerly, the MFS Investors Series).
Its investment objective is long-term growth of capital with a secondary
objective to seek reasonable current income.
The Zenith MFS Research Managers Series. Its investment objective is
long-term growth of capital.
The Zenith FI Mid Cap Opportunities Series. Its investment objective is
long-term growth of capital.
A-35
The Metropolitan Putnam Large Cap Growth Portfolio. Its investment
objective is capital appreciation.
The Metropolitan Janus Mid Cap Portfolio. Its investment objective is
long-term growth of capital.
The Metropolitan Russell 2000 Index Portfolio. Its investment objective is
to equal the return of the Russell 2000 Index.
The Metropolitan Putnam International Stock Portfolio. Its investment
objective is long-term growth of capital.
The Metropolitan MetLife Stock Index Portfolio. Its investment objective is
to equal the performance of the Standard & Poor's 500 Composite Stock Price
Index.
The Metropolitan MetLife Mid Cap Stock Index Portfolio. Its investment
objective is to equal the performance of the Standard & Poor's MidCap 400
Composite Stock Index.
The Metropolitan Morgan Stanley EAFE Index Portfolio. Its investment
objective is to equal the performance of the MSCI EAFE Index.
The Metropolitan Lehman Brothers Aggregate Bond Index Portfolio. Its
investment objective is to equal the performance of the Lehman Brothers
Aggregate Bond Index.
The Metropolitan State Street Research Aurora Portfolio (formerly, the
State Street Research Aurora Small Cap Value Portfolio). Its investment
objective is high total return, consisting principally of capital appreciation.
The Metropolitan Janus Growth Portfolio. Its investment objective is
long-term growth of capital.
The Metropolitan State Street Research Investment Trust Portfolio
(formerly, the State Street Research Growth Portfolio). Its investment objective
is long-term growth of capital and income.
The Metropolitan Franklin Templeton Small Cap Growth Portfolio. Its
investment objective is long-term capital growth.
The Metropolitan Neuberger Berman Partners Mid Cap Value Portfolio. Its
investment objective is capital growth.
The Metropolitan Harris Oakmark Large Cap Value Portfolio. Its investment
objective is long-term capital appreciation.
The Metropolitan State Street Research Large Cap Value Portfolio. Its
investment objective is long-term growth of capital.
The Met Investors MFS Mid Cap Growth Portfolio. Its investment objective is
long-term growth of capital.
The Met Investors PIMCO Innovation Portfolio. Its investment objective is
to seek capital appreciation; no consideration is given to income.
The Met Investors Met/AIM Mid Cap Core Equity Portfolio. Its investment
objective is long-term growth of capital.
The Met Investors Met/AIM Small Cap Growth Portfolio. Its investment
objective is long-term growth of capital.
The Met Investors PIMCO Total Return Portfolio. Its investment objective is
to seek maximum total return, consistent with the preservation of capital and
prudent investment management.
The Met Investors State Street Research Concentrated International
Portfolio. Its investment objective is long-term growth of capital.
The VIP Equity-Income Portfolio. It seeks reasonable income. The fund will
also consider the potential for capital appreciation. The fund's goals is to
achieve a yield which exceeds the composite yield of securities comprising the
S&P 500.
The VIP Overseas Portfolio. It 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.
A-36
The VIP High Income Portfolio. It seeks a high level of current income
while also considering growth of capital. Lower-quality debt securities (those
of less than investment-grade quality) can be more volatile due to increased
sensitivity to adverse issuer, political, regulatory, market or economic
developments.
The VIP II Asset Manager Portfolio. It seeks high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds and
short-term instruments.
The American Funds Insurance Series American Funds Growth Fund. Its
investment objective is to seek capital appreciation through stocks.
The American Funds Insurance Series American Funds Growth-Income Fund. Its
investment objective is to seek capital appreciation and income.
The American Funds Insurance Series American Funds Global Small
Capitalization Fund. Its investment objective is to seek capital appreciation
through stocks.
The New England Zenith Fund, the Metropolitan Series Fund, Inc. and the Met
Investors Series Trust are open-end management investment companies, more
commonly known as mutual funds. These funds are available as investment vehicles
for separate investment accounts of MetLife, NELICO, and other life insurance
companies.
VIP, VIP II and the American Funds Insurance Series are mutual funds that
serve as the investment vehicles for variable life insurance and variable
annuity separate accounts of various insurance companies.
The Variable Account purchases and sells Eligible Fund shares at their net
asset value (without a deduction for sales load) determined as of the close of
regular trading on the New York Stock Exchange on each day when the exchange is
open for trading.
The Eligible Funds' investment objectives may not be met. More about the
Eligible Funds, including their investments, expenses, and risks, is in the
attached Eligible Fund prospectuses and the Eligible Funds' Statements of
Additional Information.
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 sub-adviser. The investment results of the Eligible Funds
may be higher or lower than the results of these funds. There is 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.
INVESTMENT MANAGEMENT
MetLife Advisers, LLC (formerly New England Investment Management, LLC) is
the investment adviser for the series of the New England Zenith Fund. The chart
below shows the sub-adviser for each series of the New England Zenith Fund.
MetLife Advisers, which is an affiliate of NELICO, and each of the sub-advisers
are registered with the SEC as investment advisers under the Investment Advisers
Act of 1940.
<Table>
<Caption>
SERIES SUB-ADVISER
------ -----------
Zenith Equity N/A
State Street Research Money Market State Street Research and Management Company
State Street Research Bond Income State Street Research and Management Company
MFS Total Return Massachusetts Financial Services Company
FI Structured Equity Fidelity Management & Research Company
Loomis Sayles Small Cap Loomis, Sayles & Company, L.P.
Balanced Wellington Management Company, LLP
Harris Oakmark Focused Value Harris Associates L.P.
Davis Venture Value Davis Selected Advisers, L.P.*
Alger Equity Growth Fred Alger Management, Inc.
MFS Investors Trust Massachusetts Financial Services Company
</Table>
A-37
<Table>
<Caption>
SERIES SUB-ADVISER
------ -----------
MFS Research Managers Massachusetts Financial Services Company
FI Mid Cap Opportunities Fidelity Management & Research Company
</Table>
- ------------
* Davis Selected Advisers, L.P. may also delegate any of its responsibilities to
Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary.
Effective May 1, 2002, the Zenith Equity Series (formerly, the Capital
Growth Series) became a "fund of funds" that invests equally in three other
series of the Zenith Fund--the FI Structured Equity Series, the Jennison Growth
Series and the Capital Guardian U.S. Equity Series. The sub-advisers to these
funds are Fidelity Management & Research Company, Jennison Associates LLC and
Capital Guardian Trust Company, respectively. Capital Growth Management Limited
Partnership was the sub-adviser to the Zenith Equity Series until May 1, 2002.
Also effective May 1, 2002, Fidelity Management & Research Company became the
sub-adviser to the FI Structured Equity Series (formerly, the Westpeak Growth
and Income Series). Prior to that time, Westpeak Investment Advisors, L.P. was
the sub-adviser. In the case of the State Street Research Money Market Series,
the State Street Research Bond Income Series, the MFS Total Return Series, the
FI Structured Equity Series, the Loomis Sayles Small Cap Series and the Harris
Oakmark Focused Value Series, MetLife Advisers became the adviser on May 1,
1995. The State Street Research Money Market Series', State Street Research Bond
Income Series' and MFS Total Return Series' sub-adviser was Back Bay Advisors,
L.P. until July 1, 2001. At that time State Street Research and Management
Company became the sub-adviser to the State Street Research Money Market and
Bond Income Series and Massachusetts Financial Services Company became the
sub-adviser to the MFS Total Return Series. The Harris Oakmark Focused Value
Series' sub-adviser was Loomis, Sayles & Company, L.P. until May 1, 1998, when
Goldman Sachs Asset Management, a separate operating division of Goldman Sachs &
Co., became the sub-adviser. Harris Associates L.P. became the sub-adviser on
May 1, 2000. The Balanced Series' sub-adviser was Loomis, Sayles & Company, L.P.
until May 1, 2000, when Wellington Management Company became the sub-adviser.
For more information about the Series' advisory agreements, see the New England
Zenith Fund prospectus attached at the end of this prospectus and the New
England Zenith Fund's Statement of Additional Information.
MetLife Advisers became the investment manager for the Metropolitan Series
Fund Portfolios on May 1, 2001. Prior to that time, MetLife was the investment
manager. For more information regarding the investment manager and
sub-investment managers of the Metropolitan Series Fund Portfolios, see the
Metropolitan Series Fund prospectus attached at the end of this prospectus and
its Statement of Additional Information. The following chart shows the
sub-investment manager for each portfolio of the Metropolitan Series Fund.
<Table>
<Caption>
PORTFOLIO SUB-INVESTMENT MANAGER
--------- ----------------------
Putnam Large Cap Growth Putnam Investment Management, LLC
Janus Mid Cap Janus Capital Corporation
Russell 2000 Index Metropolitan Life Insurance Company*
Putnam International Stock Putnam Investment Management, LLC
MetLife Stock Index Metropolitan Life Insurance Company*
MetLife Mid Cap Stock Index Metropolitan Life Insurance Company*
Morgan Stanley EAFE Index Metropolitan Life Insurance Company*
Lehman Brothers Aggregate Bond Index Metropolitan Life Insurance Company*
State Street Research Aurora State Street Research and Management Company
Janus Growth Janus Capital Corporation
State Street Research Investment Trust State Street Research and Management Company
Franklin Templeton Small Cap Growth Franklin Advisers, Inc.
Neuberger Berman Partners Mid Cap Value Neuberger Berman Management Inc.
Harris Oakmark Large Cap Value Harris Associates L.P.
State Street Research Large Cap Value State Street Research and Management Company
</Table>
- ------------
* Metropolitan Life Insurance Company became the sub-investment manager on May
1, 2001.
A-38
Met Investors Advisory LLC (formerly known as Met Investors Advisory Corp.)
is an indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
and is the Manager for the portfolios of the Met Investors Series Trust. For
more information regarding the Manager and Advisers of the Met Investors Series
Trust, see the Met Investors Series Trust prospectuses attached at the end of
this prospectus and their Statements of Additional Information. The following
chart shows the Adviser for each portfolio of the Met Investors Series Trust.
<Table>
<Caption>
PORTFOLIO ADVISER
--------- -------
MFS Mid Cap Growth Massachusetts Financial Services Company
PIMCO Innovation PIMCO Equity Advisors
Met/AIM Mid Cap Core Equity AIM Capital Management, Inc.
Met/AIM Small Cap Growth AIM Capital Management, Inc.
PIMCO Total Return Pacific Investment Management Company LLC
State Street Research Concentrated State Street Research and Management Company
International
</Table>
Fidelity Management & Research Company ("FMR") is the investment adviser
for VIP and VIP II. For more information regarding the VIP Equity-Income, VIP
Overseas, VIP High Income and VIP II Asset Manager Portfolios and FMR, see the
VIP and VIP II prospectuses attached at the end of this prospectus and their
Statements of Additional Information.
Capital Research and Management Company ("Capital Research") is the
investment adviser for the American Funds Insurance Series. For more information
regarding the American Funds Growth Fund, the American Funds Growth-Income Fund
and the American Funds Global Small Capitalization Fund, see the American Funds
Insurance Series prospectuses attached at the end of this prospectus and their
Statement of Additional Information.
SUBSTITUTION OF INVESTMENTS
If investment in the Eligible Funds or a particular Fund is no longer
possible, in our judgment becomes inappropriate for the purposes of the
Policies, or for any other reason in our sole discretion, we may substitute
another Eligible Fund or Funds without your consent. The substituted fund may
have different fees and expenses. Substitution may be made with respect to
existing investments or the investment of future premium payments, or both.
However, we will not make such substitution without any necessary approval of
the Securities and Exchange Commission. Furthermore, we may make available or
close Sub-Accounts to allocation of premium payments or cash value, or both, for
some or all classes of Policies, at any time in our sole discretion.
SHARE CLASSES OF THE ELIGIBLE FUNDS
The Eligible Funds offer various classes of shares, each of which has a
different level of expenses. Attached prospectuses for the Eligible Funds may
provide information for share classes that are not available through the Policy.
When you consult the attached prospectus for any Eligible Fund, you should be
careful to refer to only the information regarding the class of shares that is
available through the Policy. For the New England Zenith Fund, Metropolitan
Series Fund and Met Investors Series Trust, we offer Class A shares only, for
VIP and VIP II we offer Initial Class shares only, and for the American Funds
Insurance Series we offer Class 2 shares only.
THE FIXED ACCOUNT
THE POLICY HAS A FIXED ACCOUNT OPTION ONLY IN STATES THAT APPROVE IT.
You may allocate net premiums and transfer cash value to the Fixed Account,
which is part of NELICO's general account. Because of exemptive and exclusionary
provisions in the Federal securities laws, interests in the Fixed Account are
not registered under the Securities Act of 1933. Neither the Fixed Account nor
the general account is registered as an investment company under the Investment
Company Act of 1940. Therefore, neither the Fixed Account, the general account
nor any interests therein are generally subject to the provisions of these Acts,
and the SEC does not review Fixed Account disclosure. This disclosure may,
however, be subject to certain provisions of the Federal securities laws on the
accuracy and completeness of prospectuses.
A-39
GENERAL DESCRIPTION
Our general account includes all of our assets except assets in the
Variable Account or in our other separate accounts. We decide how to invest our
general account assets. Fixed Account allocations do not share in the actual
investment experience of the general account. Instead, we guarantee that the
Fixed Account will credit interest at an annual effective rate of at least 3%.
We may or may not credit interest at a higher rate. We declare the current
interest rate for the Fixed Account periodically. The Fixed Account earns
interest daily.
VALUES AND BENEFITS
Cash value in the Fixed Account increases from net premiums allocated and
transfers to the Fixed Account and Fixed Account interest, and decreases from
loans, partial withdrawals made from the Fixed Account, charges and transfers
from the Fixed Account. We deduct charges from the Fixed Account and the
Policy's Sub-Accounts in proportion to the amount of cash value in each. (See
"Monthly Deduction from Cash Value".) A Policy's total cash value includes cash
value in the Variable Account, the Fixed Account, and any cash value held in the
Loan Account due to a Policy loan.
Cash value in the Fixed Account is included in the calculation of the
Policy's death benefit in the same manner as the cash value in the Variable
Account. (See "Death Benefit".)
POLICY TRANSACTIONS
Except as described below, the Fixed Account has the same rights and
limitations regarding premium allocations, transfers, loans, surrenders and
partial withdrawals as the Variable Account. (See "Other Policy Features".) The
following special rules apply to the Fixed Account.
After the Right to Examine Policy period, a portion of the cash value may
be withdrawn from the Fixed Account or transferred from the Fixed Account to the
Variable Account. The amount of any partial withdrawal (net of applicable
Surrender Charges) or any transfer must be at least $500, unless the balance
remaining would be less than $100, in which case you may withdraw or transfer
the entire Fixed Account cash value. No amount may be withdrawn from the Fixed
Account that would result in there being insufficient cash value to meet any
Surrender Charges that would be payable immediately following the withdrawal
upon the surrender of the remaining cash value in the Policy. The total amount
of transfers and withdrawals in a Policy year may not exceed a Maximum Amount
equal to the greater of (a) 25% of the Policy's cash surrender value in the
Fixed Account at the beginning of the Policy year, or (b) the previous Policy
year's Maximum Amount (not to exceed the total cash surrender value of the
Policy).
Transfers and premium allocations to the Fixed Account are limited by the
Maximum Allocation Percent and Maximum Withdrawal Percent Limit set forth in
your Policy and in effect at the time a transfer request is made.
There is no transaction charge for the first twelve partial withdrawals or
twelve transfers in a Policy year. We reserve the right to limit partial
withdrawals and transfers to twelve each in a Policy year and to impose a charge
of $25 for each partial withdrawal or transfer in excess of twelve in a Policy
year. We may revoke or modify the privilege of transferring amounts to or from
the Fixed Account at any time. Partial withdrawals will result in the imposition
of any applicable Surrender Charges.
Unless you request otherwise, a Policy loan reduces the Policy's cash value
in the Sub-Accounts and the Fixed Account proportionately. We allocate all loan
repayments in the same proportion that the cash value in each Loan Sub-Account
bears to the total value of the Loan Account. The amount transferred from the
Policy's Sub-Accounts and the Fixed Account as a result of a loan earns interest
at an effective rate of at least 3% per year, which we credit to the Policy's
cash value in the Sub-Accounts and the Fixed Account in proportion to the
Policy's cash value in each on the day it is credited.
Unless you request otherwise, we take partial withdrawals from the Policy's
Sub-Accounts and the Fixed Account in the same proportion that the cash value in
each account bears to the Policy's total unloaned cash value. If current
restrictions on the Fixed Account will not permit this allocation, we will ask
you for an acceptable allocation.
A-40
We can delay transfers, surrenders, withdrawals and Policy loans from the
Fixed Account for up to six months (to the extent allowed by state insurance
law). We will not delay loans to pay premiums on policies issued by us.
DISTRIBUTION OF THE POLICIES
We sell the Policies through licensed insurance agents. These agents are
also registered representatives of New England Securities Corporation ("New
England Securities"), and are registered with the National Association of
Securities Dealers, Inc. and with the states in which they do business.
Registered representatives with New England Securities are also licensed as
insurance agents in the states in which they do business and are appointed with
NELICO. New England Securities, a Massachusetts corporation organized in 1968
and an indirect, wholly-owned subsidiary of NELICO, is registered with the SEC
as a broker-dealer under the Securities Exchange Act of 1934 as well as with the
securities commissions in the states in which it operates, and is a member of
the National Association of Securities Dealers, Inc. More information about New
England Securities and its registered persons is available at
http://www.nasdr.com or by calling 1-800-289-9999. You also can obtain an
investor brochure from NASD Regulation describing its Public Disclosure Program.
New England Securities, 399 Boylston Street, Boston, Massachusetts 02116,
also serves as the principal underwriter for the Policies under a Distribution
Agreement with NELICO. Under the Distribution Agreement, we pay sales
commissions for sale of the Policies and the following sales expenses: general
agent and agency manager's compensation, agents' training allowances, deferred
compensation and insurance benefits of agents, general agents and agency
managers and advertising expenses and all other expenses of distributing the
Policies.
The selling agent may select one of two schedules for payment of
commissions and/or service fees: (1) a maximum of 50% of the Commissionable
Target Premium paid in the first Policy year, a maximum of 4% of the
Commissionable Target Premium paid in Policy years two through ten, and a
maximum of 3% thereafter, with a maximum commission of 3% of each payment above
the Commissionable Target Premium paid in any year; (2) a maximum of 50% of the
Commissionable Target Premium paid in the first Policy year, a maximum of 3% of
the Commissionable Target Premium paid, plus 0.05% of the Policy's cash value in
Policy years two through ten, a maximum of 2% of the Commissionable Target
Premium paid, plus 0.14% of the Policy's cash value in Policy years eleven
through thirty, and a maximum of 2% of the Commissionable Target Premium paid,
plus 0.06% of the Policy's cash value thereafter, with a maximum commission of
2% of each payment above the Commissionable Target Premium paid in any year.
(The Commissionable Target Premium is the Target Premium, as defined in the
Glossary, plus the Target Premium associated with any riders added to the
Policy.) Agents who meet certain NELICO productivity and persistency standards
may be eligible for additional compensation. Agents may receive a portion of the
general agent's expense reimbursement allowance. All or a portion of commissions
may be returned if the Policy is not continued through the first Policy year.
Agents receive less compensation for the sale of Policies that provide a
significant portion of death benefit coverage through the use of term riders.
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 life insurance
policies. Generally, the sales commissions and sales expenses paid to the
broker-dealer on behalf of the registered representative will be equivalent to
those described above on a present value basis. Selling firms may retain a
portion of commissions. We may pay certain broker-dealers an additional bonus
after the first Policy year on behalf of certain registered representatives,
which may be up to the amount of the basic commission for the particular Policy
year. We pay commissions through the registered broker-dealer, and may pay
additional compensation to the broker-dealer and/or reimburse it for portions of
Policy sales expenses. The registered representative may receive a portion of
the expense reimbursement allowance paid to the broker-dealer.
New England Securities does not retain any override as distributor for the
Policies. However, New England Securities' operating and other expenses are paid
for by NELICO. Also, New England Securities or an affiliate may receive 12b-1
fees from the American Funds Growth Fund, the American Funds Growth-Income Fund,
and the American Funds Global Small Capitalization Fund.
Because registered representatives of New England Securities are also
agents of NELICO, they are eligible for various cash benefits, such as bonuses,
insurance benefits and financing arrangements, and non-cash compensation
A-41
programs that NELICO offers, such as conferences, trips, prizes, and awards.
Other payments may be made for other services that do not directly involve the
sale of the Policies. These services may include the recruitment and training of
personnel, production of promotional literature, and similar services.
We intend to recoup commissions and other sales expenses through fees and
charges imposed under the Policy. Commissions paid on the Policy, including
other incentives or payments, are not charged directly to the Policy owners or
the Variable Account.
We offer the Policies to the public on a continuous basis. We anticipate
continuing to offer the Policies, but reserve the right to discontinue the
offering.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
Generally, we can challenge the validity of your Policy or a rider during
the insured's lifetime for two years (or less, if required by state law) from
the date of issue, based on misrepresentations made in the application. We can
challenge the portion of the death benefit resulting from an underwritten
premium payment for two years during the insured's lifetime from receipt of the
premium payment. However, if the insured dies within two years of the date of
issue, we can challenge all or part of the Policy at any time based on
misrepresentations in the application. We can challenge an increase in face
amount, with regard to material misstatements concerning such increase, for two
years during the insured's lifetime from its effective date.
MISSTATEMENT OF AGE OR SEX
If the application misstates the insured's age or sex, the Policy's death
benefit is the amount that the most recent Monthly Deduction which was made
would provide, based on the insured's correct age and, if the Policy is
sex-based, correct sex.
SUICIDE
If the insured, while sane or insane, commits suicide within two years (or
less, if required by state law) from the date of issue, the death benefit is
limited to premiums paid, less any outstanding loan and loan interest to the
date of death and partial withdrawals. If the insured, while sane or insane,
commits suicide within two years (or less, if required by state law) after the
effective date of an increase in face amount, the death benefit for such
increase will be limited to the Monthly Deductions for the increase. (Where
required by state law, we determine the death benefit under this provision by
using the greater of: the reserve of the insurance which is subject to the
provision; and the amounts used to purchase the insurance which is subject to
the provision.)
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon our understanding of the
present Federal income tax laws. No representation is made as to the likelihood
of continuation of the present Federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders
A-42
added, and it is not clear whether such Policies will in all cases satisfy the
applicable requirements. We may take appropriate steps to bring the Policy into
compliance with applicable requirements, and we reserve the right to restrict
Policy transactions in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts, due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to allocate
premiums and cash values, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Policy Owners investment
control over Variable Account assets, we reserve the right to modify the
Policies as necessary to prevent a Policy Owner from being treated as the owner
of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Policy Owner or beneficiary. A tax adviser
should be consulted on these consequences.
Generally, the Policy Owner will not be deemed to be in constructive
receipt of the Policy cash value until there is a distribution or a deemed
distribution. When distributions from a Policy occur, or when loans are taken
from or secured by a Policy, the tax consequences depend on whether the Policy
is classified as a "Modified Endowment Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain
life insurance contracts are classified as "Modified Endowment Contracts," with
less favorable income tax treatment than other life insurance contracts. In
general a Policy will be classified as a Modified Endowment Contract if the
amount of premiums paid into the Policy causes the Policy to fail the "7-pay
test." A Policy will fail the 7-pay test if at any time in the first seven
Policy years, the amount paid into the Policy exceeds the sum of the level
premiums that would have been paid at that point under a Policy that provided
for paid-up future benefits after the payment of seven level annual payments.
If there is a reduction in the benefits under the Policy during the first
seven Policy years, for example, as a result of a partial withdrawal, the 7-pay
test will have to be reapplied as if the Policy had originally been issued at
the reduced face amount. If there is a "material change" in the Policy's
benefits or other terms, even after the first seven Policy years, the Policy may
have to be retested as if it were a newly issued Policy. A material change can
occur, for example, when there is an increase in the death benefit which is due
to the payment of an unnecessary premium. Unnecessary premiums are premiums paid
into the Policy which are not needed in order to provide a death benefit equal
to the lowest death benefit that was payable in the first seven Policy years. To
prevent your Policy from becoming a Modified Endowment Contract, it may be
necessary to limit premium payments or to limit reductions in benefits. A
current or prospective Policy Owner should consult a tax adviser to determine
whether a Policy transaction will cause the Policy to be classified as a
Modified Endowment Contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT
CONTRACTS. Policies classified as Modified Endowment Contracts are subject to
the following tax rules:
(1) All distributions other than death benefits, including
distributions upon surrender and withdrawals, from a Modified Endowment
Contract will be treated first as distributions of gain taxable as ordinary
income and as tax-free recovery of the Policy Owner's investment in the
Policy only after all gain has been distributed.
A-43
(2) Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount
subject to tax except where the distribution or loan is made when the
Policy Owner has attained age 59 1/2 or is disabled, or where the
distribution is part of a series of substantially equal periodic payments
for the life (or life expectancy) of the Policy Owner or the joint lives
(or joint life expectancies) of the Policy Owner and the Policy Owner's
beneficiary or designated beneficiary.
If a Policy becomes a Modified Endowment Contract, distributions will be
taxed as distributions from a Modified Endowment Contract. In addition,
distributions from a Policy within two years before it becomes a Modified
Endowment Contract will be taxed in this manner. This means that a distribution
made from a Policy that is not a Modified Endowment Contract could later become
taxable as a distribution from a Modified Endowment Contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Policy Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for Federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole or
in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are generally not treated as distributions. However, the tax consequences
associated with Policy loans that are outstanding after the first ten Policy
years are less clear and a tax adviser should be consulted about such loans.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
POLICY LOANS. In general, interest on a Policy loan will not be
deductible. If a Policy loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding indebtedness will be added to the amount
distributed and will be taxed accordingly. A loan may also be taxed when a
Policy is exchanged. Before taking out a Policy loan, you should consult a tax
adviser as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by
NELICO (or its affiliates) to the same Policy Owner during any calendar year are
treated as one Modified Endowment Contract for purposes of determining the
amount includible in the Policy Owner's income when a taxable distribution
occurs.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ACCELERATION OF DEATH BENEFIT RIDER. We believe that payments received
under the Acceleration of Death Benefit Rider should be fully excludable from
the gross income of the beneficiary except in certain business contexts.
However, you should consult a qualified tax adviser about the consequences of
adding this rider to a Policy or requesting payment under this rider.
OTHER POLICY OWNER TAX MATTERS. The transfer of the Policy or designation
of a beneficiary may have Federal, state, and/or local transfer and inheritance
tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy or
the payment of proceeds to a person who is assigned to a generation which is two
or more generations below the generation assignment of the Policy Owner may have
generation-skipping transfer tax consequences under Federal tax law. Federal and
state estate, inheritance, transfer and other tax consequences depend on the
individual circumstances of each Policy Owner or beneficiary.
A-44
The tax consequences of continuing the Policy beyond the insured's Attained
Age 100 are unclear. You should consult a tax adviser if you intend to keep the
Policy in force beyond the insured's Attained Age 100.
If a trustee under a pension or profit-sharing plan, or similar deferred
compensation arrangement, owns a Policy, the Federal, state and estate tax
consequences could differ. The amounts of life insurance that may be purchased
on behalf of a participant in a pension or profit-sharing plan are limited. The
current cost of insurance for the net amount at risk is treated as a "current
fringe benefit" and must be included annually in the plan participant's gross
income. We report this cost to the participant annually. If the plan participant
dies while covered by the plan and the Policy proceeds are paid to the
participant's beneficiary, then the excess of the death benefit over the cash
value is not income taxable. However, the cash value will generally be taxable
to the extent it exceeds the participant's cost basis in the Policy. Policies
owned under these types of plans may be subject to restrictions under the
Employee Retirement Income Security Act of 1974 ("ERISA"). You should consult a
qualified adviser regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy tax
requirements to be treated as nontaxable. Plan loan requirements and provisions
may differ from the Policy loan provisions. Failure of plan loans to comply with
the requirements and provisions of the DOL regulations and of tax law may result
in adverse tax consequences and/or adverse consequences under ERISA. Plan
fiduciaries and participants should consult a qualified adviser before
requesting a loan under a Policy held in connection with a retirement plan.
Businesses can use the Policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit
plans, retiree medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and circumstances. If you are
purchasing the Policy for any arrangement the value of which depends in part on
its tax consequences, you should consult a qualified tax adviser. In recent
years, moreover, Congress has adopted new rules relating to life insurance owned
by businesses. Any business contemplating the purchase of a new Policy or a
change in an existing Policy should consult a tax adviser.
NEW GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has recently issued guidance
on split dollar insurance plans. A tax adviser should be consulted with respect
to this new guidance if you have purchased or are considering the purchase of a
Policy for a split dollar insurance plan. If your Policy is part of an equity
split dollar arrangement, there is a risk that some portion of the Policy cash
value may be taxed prior to any Policy distribution.
ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income
in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Policy Owner is subject to that tax.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes
is uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
NELICO'S INCOME TAXES
Under current Federal income tax law, NELICO is not taxed on the Variable
Account's operations. Thus, currently we do not deduct a charge from the
Variable Account for Federal income taxes. We reserve the right to charge the
Variable Account for any future Federal income taxes we may incur.
Under current laws in several states, we may incur state and local taxes
(in addition to premium taxes). These taxes are not now significant and we are
not currently charging for them. If they increase, we may deduct charges for
such taxes.
A-45
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
<Table>
<Caption>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
James M. Benson................... Chairman, President and Chief Executive Officer of NELICO
since 1998 and President, Individual Business of
Metropolitan Life Insurance Company since 1999; formerly,
Director, President and Chief Operating Officer 1997-1998
of NELICO; President and Chief Executive Officer 1996-1997
of Equitable Life Assurance Society; President and Chief
Operating Officer 1996-1997 of Equitable Companies, Inc.
Susan C. Crampton................. Director of NELICO since 1996 and serves as Principal of The
6 Tarbox Road Vermont Partnership, a business consulting firm located in
Jericho, VT 05465 Jericho, Vermont since 1989; formerly, Director 1989-1996
of New England Mutual.
Edward A. Fox..................... Director of NELICO since 1996 and Chairman of the Board of
USA Education, Inc. USA Education, Inc. since 2001; formerly, Chairman of the
11600 Sallie Mae Drive Board 1997-2001 of SLM Holdings.
Reston, VA 20193
George J. Goodman................. Director of NELICO since 1996 and author, television
Adam Smith's Global Television journalist, and editor.
50th Floor, Craig Drill Capital
General Motors Building
767 Fifth Street
New York, NY 10153
Dr. Evelyn E. Handler............. Director of NELICO since 1996 and President of Merrimack
Ten Sterling Place Higher Education Associates, Inc. since 1998; formerly,
Bow, NH 03304 Director 1987-1996 of New England Mutual and Executive
Director and Chief Executive Officer 1994-1997 of the
California Academy of Sciences.
Philip K. Howard, Esq............. Director of NELICO since 1996 and Partner of the law firm of
Covington & Burling Covington & Burling in New York City.
1330 Avenue of the Americas
New York, NY 10019
Bernard A. Leventhal.............. Director of NELICO since 1996; formerly, Vice Chairman of
Burlington Industries the Board of Directors 1995-1998 of Burlington Industries,
580 Park Avenue Inc.
New York, NY 10021
Thomas J. May..................... Director of NELICO since 1996 and Chairman and Chief
NSTAR Executive Officer of NSTAR since 2000; formerly, Chairman,
800 Boylston Street President and Chief Executive Officer of Boston Edison
Boston, MA 02199 Company 1994-2000.
Stewart G. Nagler................. Director of NELICO since 1996 and Vice Chairman and Chief
Metropolitan Life Financial Officer of Metropolitan Life Insurance Company
Insurance Co. since 1998; formerly, Senior Executive Vice President and
One Madison Avenue Chief Financial Officer 1986-1998 of Metropolitan Life
New York, NY 10010 Insurance Company.
Catherine A. Rein................. Director of NELICO since 1998 and President and Chief
Metropolitan Property and Executive Officer of Metropolitan Property and Casualty
Casualty Insurance Company since 1999; formerly, Senior Executive Vice President
700 Quaker Lane 1998-1999; Executive Vice President 1989-1998 of
Warwick, RI 02887 Metropolitan Life Insurance Company.
</Table>
A-46
<Table>
<Caption>
NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
Rand N. Stowell................... Director of NELICO since 1996 and President of United Timber
P.O. Box 60 Corp. and President, Randwell Co. since 2000 of Weld, Maine;
Weld, ME 04285 formerly, Director 1990-1996 of New England Mutual.
Lisa M. Weber..................... Director of NELICO since 2000 and Senior Executive Vice
Metropolitan Life President and Chief Administrative Officer of Metropolitan
Insurance Company Life Insurance Company since 2001; formerly, Executive
One Madison Avenue Vice President 1998-2001 of Metropolitan Life Insurance
New York, New York 10010 Company; Director of Diversity Strategies and Development
and an Associate Director of Human Resources of Paine
Webber.
</Table>
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
<Table>
<Caption>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
James M. Benson................... See Directors above.
David W. Allen.................... Senior Vice President of NELICO since 1996 and Vice
President of Metropolitan Life Insurance Company since 2000.
Mary Ann Brown.................... President, New England Products and Services of NELICO since
1998 and Senior Vice President of Metropolitan Life
Insurance Company since 2000; formerly, Director,
Worldwide Life Insurance 1997-1998 of Swiss Reinsurance
New Markets; President & Chief Executive Officer 1996-1998
of Atlantic International Reinsurance Company; Executive
Vice President 1996-1997 of Swiss Re Atrium and Swiss Re
Services and Principal 1987-1996 of Tillinghast/Towers
Perrin.
Anthony J. Candito................ President, NEF Information Services of NELICO and Chief
Information Officer since 1998 and Senior Vice President of
Metropolitan Life Insurance Company since 2000; formerly,
Senior Vice President 1996-1998 of NELICO.
Thom A. Faria..................... President, Career Agency System of NELICO since 1996 and
President - NEF Distribution of Metropolitan Life Insurance
Company since 2000.
Anne M. Goggin.................... Senior Vice President and General Counsel of NELICO since
2000 and Chief Counsel - Individual Business of Metropolitan
Life Insurance Company since 2000; formerly, Senior Vice
President and Associate General Counsel 1997-2000 of
NELICO.
Alan C. Leland, Jr. .............. Senior Vice President of NELICO since 1996 and Vice
President of Metropolitan Life Insurance Company since 2000.
George J. Maloof.................. Executive Vice President of NELICO since 2001 and Senior
Vice President - NEF Distribution of Metropolitan Life
Insurance Company since 2000; formerly, Senior Vice
President 1996-2001 of NELICO.
Kenneth D. Martinelli............. Senior Vice President of NELICO since 1999 and Senior Vice
President - NEF Distribution of Metropolitan Life Insurance
Company since 2000; formerly, Vice President 1997-1999 of
NELICO.
Thomas W. McConnell............... Senior Vice President of NELICO since 1996 and Director,
Chief Executive Officer and President of New England
Securities Corporation since 1993.
Hugh C. McHaffie.................. Senior Vice President of NELICO since 1999 and Senior Vice
President of Metropolitan Life Insurance Company since 2000;
formerly, Vice President 1994-1999 of Manufacturers Life
Insurance Company of North America.
Stephen J. McLaughlin............. Senior Vice President of NELICO since 1999 and Senior Vice
President - NEF Distribution of Metropolitan Life Insurance
Company since 2000; formerly, Vice President 1996-1999 of
NELICO.
Thomas W. Moore................... Senior Vice President of NELICO since 1996 and Senior Vice
President - NEF Distribution of Metropolitan Life Insurance
Company since 2000.
</Table>
A-47
<Table>
<Caption>
PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
Kathryn F. Plazak................. Vice President, Secretary and Clerk of NELICO since 2001 and
Vice President of Metropolitan Life Insurance Company since
2000; formerly, Vice President - Public Affairs 1999-2001,
Second Vice President 1996-1999 of NELICO.
David Y. Rogers................... Executive Vice President and Chief Financial Officer of
NELICO since 1999 and Senior Vice President of Metropolitan
Life Insurance Company since 2000.; formerly, Partner,
Actuarial Consulting 1992-1999 of Price Waterhouse Coopers
LLP.
John G. Small, Jr. ............... President, New England Services of NELICO since 1997 and
Vice President of Metropolitan Life Insurance Company since
2000; formerly, Senior Vice President 1996-1997 of NELICO.
</Table>
The principal business address for each of the directors and executive
officers is the same as NELICO's except where indicated.
VOTING RIGHTS
We own Eligible Fund shares held in the Variable Account and vote those
shares at meetings of the Eligible Fund shareholders. Under Federal securities
law, you currently have the right to instruct us how to vote shares that are
attributable to your Policy.
Policy Owners who are entitled to give voting instructions and the number
of shares attributable to their Policies are determined as of the meeting record
date. If we do not receive timely instructions, we will vote shares in the same
proportion as (i) the aggregate cash value of policies giving instructions,
respectively, to vote for, against, or withhold votes on a proposition, bears to
(ii) the total cash value in that Sub-Account for all policies for which we
receive voting instructions. No voting privileges apply to the Fixed Account or
to cash value removed from the Variable Account due to a Policy loan.
We will vote Eligible Fund shares held by our general account (or any
unregistered separate account for which voting privileges were not extended) in
the same proportion as the total of (i) shares for which voting instructions
were received and (ii) shares that are voted in proportion to such voting
instructions.
The Eligible Funds' Boards of Trustees monitor events to identify conflicts
that may arise from the sale of Eligible Fund shares to variable life and
variable annuity separate accounts of affiliated and, if applicable,
unaffiliated insurance companies and qualified plans. Conflicts could result
from changes in state insurance law or Federal income tax law, changes in
investment management of an Eligible Fund, or differences in voting instructions
given by variable life and variable annuity contract owners and qualified plans,
if applicable. If there is a material conflict, the Board of Trustees will
determine what action should be taken, including the removal of the affected
Sub-Accounts from the Eligible Fund(s), if necessary. If we believe any Eligible
Fund action is insufficient, we will consider taking other action to protect
Policy Owners. There could, however, be unavoidable delays or interruptions of
operations of the Variable Account that we may be unable to remedy.
We may disregard voting instructions for changes in the investment policy,
investment adviser or principal underwriter of an Eligible Fund portfolio if
required by state insurance law, or if we (i) reasonably disapprove of the
changes and (ii) in the case of a change in investment policy or investment
adviser, make a good faith determination that the proposed change is prohibited
by state authorities or inconsistent with a Sub-Account's investment objectives.
If we do disregard voting instructions, the next annual report to Policy Owners
will include a summary of that action and the reasons for it.
RIGHTS RESERVED BY NELICO
We and our affiliates may change the voting procedures described above, and
vote Eligible Fund shares without Policy Owner instructions, if the securities
laws change. We also reserve the right: (1) to add Sub-Accounts; (2) to combine
Sub-Accounts; (3) to substitute shares of a new fund for shares of an Eligible
Fund (the new fund may
A-48
have different fees and expenses), to close a Sub-Account to allocations of
premium payments or cash value or both at any time in our sole discretion, or to
transfer assets to our general account as permitted by applicable law; (4) to
operate the Variable Account as a management investment company under the
Investment Company Act of 1940 or in any other form; (5) to deregister the
Variable Account under the Investment Company Act of 1940; (6) to combine it
with other Variable Accounts; and (7) to transfer its assets to other Variable
Accounts. We will exercise these rights in accordance with applicable law,
including approval of Policy Owners if required. We will notify you if exercise
of any of these rights would result in a material change in the Variable Account
or its investments.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
If mandated under applicable law, we may be required to reject a premium
payment. We may also be required to block a Policy Owner's account and thereby
refuse to pay any request for transfers, withdrawals, surrenders, loans, or
death benefits, until instructions are received from the appropriate regulator.
TOLL-FREE NUMBERS
For information about historical values of the Variable Account
Sub-Accounts, call 1-800-333-2501.
For Sub-Account transfers, premium reallocations, or Statements of
Additional Information for the Eligible Funds, call 1-800-200-2214.
You may also call our Client TeleService Center at 1-800-388-4000 for
current information about your Policy values, to change or update Policy
information such as your address, billing mode, beneficiary or ownership, or for
information about other Policy transactions.
REPORTS
We will send you an annual statement showing your Policy's death benefit,
cash value and any outstanding Policy loan principal. We will also confirm
Policy loans, Sub-Account transfers, lapses, surrenders and other Policy
transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Variable Account and the Eligible Funds.
ADVERTISING PRACTICES
Professional organizations may endorse the Policies. We may use such
endorsements in Policy sales material. We may pay the professional organization
for the use of its customer or mailing lists to distribute Policy promotional
materials. An endorsement by a third party does not predict the future
performance of the Policies.
Articles discussing the Variable Account's investment performance, rankings
and other characteristics may appear in publications. Some or all of these
publishers or ranking services (including, but not limited to, Lipper Analytical
Services, Inc. and Morningstar, Inc.) may publish their own rankings or
performance reviews of variable contract separate accounts, including the
Variable Account. We may use references to, or reprints of such articles or
rankings as sales material and may include rankings that indicate the names of
other variable contract separate accounts and their investment experience. We
may also use "unit values" to provide information about the Variable Account's
investment performance in this prospectus, marketing materials, and historical
illustrations.
Publications may use articles and releases, developed by NELICO, the
Eligible Funds and other parties, about the Variable Account or the Eligible
Funds. We may use references to or reprints of such articles in sales material
for the Policies or the Variable Account. Such literature may refer to personnel
of the advisers, who have portfolio management responsibility, and their
investment style, and include excerpts from media articles.
We are a member of the Insurance Marketplace Standards Association
("IMSA"), and may include the IMSA logo and information about IMSA membership in
our advertisements. Companies that belong to IMSA subscribe to a
A-49
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
Policy sales material may refer to historical, current and prospective
economic trends. In addition, sales material may discuss topics of general
investor interest for the benefit of registered representatives and prospective
Policy Owners. 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.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by Anne M. Goggin, General Counsel of NELICO. Sutherland
Asbill & Brennan LLP, of Washington, D.C., has provided advice on certain
matters relating to federal securities laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
EXPERTS
The financial statements of New England Variable Life Separate Account of
New England Life Insurance Company ("NELICO") and the consolidated financial
statements of NELICO and subsidiaries included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by James
J. Reilly, F.S.A., M.A.A.A., Second Vice President and Actuary of NELICO, as
stated in his opinion filed as an exhibit to the Registration Statement.
A-50
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies work. They show
how the death benefit, cash surrender value and cash value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.,
investment income and capital gains and losses, realized or unrealized) for the
Variable Account equal to constant after tax annual rates of 0%, 6% and 12%. The
tables are based on a face amount of $500,000 for a male aged 45. The insured is
assumed to be in the preferred nonsmoker class. The Tables assume no rider
benefits and assume that no allocations are made to the Fixed Account. Values
are first given based on current mortality and other Policy charges and then
based on guaranteed mortality and other Policy charges. Illustrations show the
Option A and Option B death benefits with the guideline premium test.
The illustrated death benefits, cash surrender values and cash values for a
Policy would be different, either higher or lower, from the amounts shown if the
actual gross rates of return averaged 0%, 6% or 12%, but varied above and below
that average during the period, if premiums were paid in other amounts or at
other than annual intervals. They would also be different depending on the
allocation of cash value among the Variable Account's Sub-Accounts, if the
actual gross rate of return for all Sub-Accounts averaged 0%, 6% or 12%, but
varied above or below that average for individual Sub-Accounts. They would also
differ if a Policy loan or partial withdrawal were made during the period of
time illustrated, if the insured were female or in another risk classification,
or if the Policies were issued at unisex rates. For example, as a result of
variations in actual returns, additional premium payments beyond those
illustrated may be necessary to maintain the Policy in force for the periods
shown or to realize the Policy values shown on particular illustrations even if
the average rate of return is achieved.
The death benefits, cash surrender values and cash values shown in the
tables reflect: (i) deductions from premiums for the sales charge, premium tax
and federal tax charge; and (ii) a Monthly Deduction (consisting of a Policy
charge, an administration and issue expense charge, an asset charge, and a
charge for the cost of insurance) from the cash value on the first day of each
Policy month. The cash surrender values reflect a Surrender Charge deducted from
the cash value upon surrender, face reduction or lapse during the first ten
Policy years. (See "Charges and Expenses".) The illustrations reflect an average
of the investment advisory fees and operating expenses of the Eligible Funds, at
an annual rate of .79% of the average daily net assets of the Eligible Funds.
This average reflects expense subsidies by the investment advisers of certain
Eligible Funds that may be voluntary and of limited duration.
Taking account of the average investment advisory fee and operating
expenses of the Eligible Funds, the gross annual rates of return of 0%, 6% and
12% correspond to net investment experience at constant annual rates of -0.79%,
5.17% and 11.12%, respectively.
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on cash surrender value is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated premiums
could have been invested outside the Policy to arrive at the cash surrender
value of the Policy. The internal rate of return on the death benefit is
equivalent to an interest rate (after taxes) at which an amount equal to the
illustrated premiums could have been invested outside the Policy to arrive at
the death benefit of the Policy. The internal rate of return is compounded
annually, and the premiums are assumed to be paid at the beginning of each
Policy year.
If you request, we will furnish a personalized illustration reflecting the
proposed insured's age, sex, underwriting classification, and the face amount or
premium payment schedule requested. Because these and other assumptions will
differ, the values shown in the personalized illustrations can differ very
substantially from those shown in the tables below. Therefore, you should
carefully review the information that accompanies any personalized illustration.
That information will disclose all the assumptions on which the personalized
illustration is based. Where applicable, we will also furnish on request an
illustration for a Policy which is not affected by the sex of the insured.
A-51
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ------------------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1 $ 7,245 $500,000 $500,000 $ 500,000 $ 238 $ 519 $ 802 $ 3,343 $ 3,624 $ 3,907
2 14,852 500,000 500,000 500,000 4,010 4,789 5,603 6,770 7,549 8,363
3 22,840 500,000 500,000 500,000 7,720 9,223 10,857 10,135 11,638 13,272
4 31,227 500,000 500,000 500,000 12,480 14,972 17,788 14,550 17,042 19,858
5 40,033 500,000 500,000 500,000 17,117 20,905 25,345 18,842 22,630 27,070
6 49,280 500,000 500,000 500,000 21,620 27,016 33,580 23,000 28,396 34,960
7 58,989 500,000 500,000 500,000 25,968 33,292 42,543 27,003 34,327 43,578
8 69,183 500,000 500,000 500,000 30,160 39,737 52,311 30,850 40,427 53,001
9 79,887 500,000 500,000 500,000 34,201 46,365 62,977 34,546 46,710 63,322
10 91,127 500,000 500,000 500,000 38,085 53,175 74,628 38,085 53,175 74,628
15 156,337 500,000 500,000 500,000 61,216 98,189 162,287 61,216 98,189 162,287
20 239,563 500,000 500,000 500,000 79,193 151,863 307,390 79,193 151,863 307,390
25 345,783 500,000 500,000 639,584 92,686 218,831 556,160 92,686 218,831 556,160
30 481,349 500,000 500,000 1,022,444 97,193 301,527 973,756 97,193 301,527 973,756
35 654,371 500,000 500,000 1,757,674 86,912 407,379 1,673,976 86,912 407,379 1,673,976
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1 -96.55% -92.47% -88.38% 7,146.37% 7,146.37% 7,146.37%
2 -58.83 -52.84 -46.95 702.72 702.72 702.72
3 -41.77 -35.30 -28.96 278.75 278.75 278.75
4 -29.33 -23.02 -16.82 159.82 159.82 159.82
5 -22.51 -16.26 -10.11 107.60 107.60 107.60
6 -18.33 -12.09 -5.95 79.10 79.10 79.10
7 -15.58 -9.32 -3.17 61.44 61.44 61.44
8 -13.65 -7.36 -1.20 49.54 49.54 49.54
9 -12.24 -5.91 0.28 41.04 41.04 41.04
10 -11.17 -4.80 1.42 34.70 34.70 34.70
15 -6.91 -0.66 5.44 18.08 18.08 18.08
20 -5.65 0.90 7.13 11.13 11.13 11.13
25 -5.20 1.78 8.13 7.45 7.45 9.03
30 -5.47 2.33 8.74 5.21 5.21 8.99
35 -6.76 2.74 9.13 3.74 3.74 9.34
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-52
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1 $ 7,245 $500,000 $500,000 $500,000 $ 0 $ 177 $ 449 $ 3,012 $ 3,282 $ 3,554
2 14,852 500,000 500,000 500,000 3,324 4,060 4,830 6,084 6,820 7,590
3 22,840 500,000 500,000 500,000 6,566 7,968 9,496 8,981 10,383 11,911
4 31,227 500,000 500,000 500,000 9,626 11,894 14,469 11,696 13,964 16,539
5 40,033 500,000 500,000 500,000 12,490 15,823 19,767 14,215 17,548 21,492
6 49,280 500,000 500,000 500,000 15,150 19,747 25,416 16,530 21,127 26,796
7 58,989 500,000 500,000 500,000 17,579 23,635 31,427 18,614 24,670 32,462
8 69,183 500,000 500,000 500,000 19,746 27,454 37,809 20,436 28,144 38,499
9 79,887 500,000 500,000 500,000 21,627 31,176 44,580 21,972 31,521 44,925
10 91,127 500,000 500,000 500,000 23,185 34,756 51,749 23,185 34,756 51,749
15 156,337 500,000 500,000 500,000 30,190 55,785 103,045 30,190 55,785 103,045
20 239,563 500,000 500,000 500,000 23,007 68,692 178,388 23,007 68,692 178,388
25 345,783 500,000 500,000 60,725 297,056 60,725 297,056
30 481,349 500,000 534,955 1,941 509,481 1,941 509,481
35 654,371 923,550 879,571 879,571
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ---------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1 -100.00% -97.43% -93.49% 7,146.37% 7,146.37% 7,146.37%
2 -64.46 -58.44 -52.53 702.72 702.72 702.72
3 -47.28 -40.65 -34.19 278.75 278.75 278.75
4 -37.89 -30.95 -24.22 159.82 159.82 159.82
5 -32.10 -24.93 -18.02 107.60 107.60 107.60
6 -28.22 -20.86 -13.80 79.10 79.10 79.10
7 -25.52 -17.96 -10.76 61.44 61.44 61.44
8 -23.60 -15.82 -8.48 49.54 49.54 49.54
9 -22.23 -14.21 -6.71 41.04 41.04 41.04
10 -21.29 -12.97 -5.31 34.70 34.70 34.70
15 -17.79 -8.21 -0.06 18.08 18.08 18.08
20 -22.98 -7.25 2.39 11.13 11.13 11.13
25 -9.43 3.96 7.45 7.45
30 -78.05 5.31 5.21 5.58
35 6.34 6.56
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-53
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ------------------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1 $ 7,245 $503,331 $503,611 $ 503,892 $ 226 $ 506 $ 787 $ 3,331 $ 3,611 $ 3,892
2 14,852 506,734 507,509 508,319 3,974 4,749 5,559 6,734 7,509 8,319
3 22,840 510,066 511,558 513,181 7,651 9,143 10,766 10,066 11,558 13,181
4 31,227 514,472 516,947 519,743 12,402 14,877 17,673 14,472 16,947 19,743
5 40,033 518,750 522,512 526,921 17,025 20,787 25,196 18,750 22,512 26,921
6 49,280 522,886 528,245 534,761 21,506 26,865 33,381 22,886 28,245 34,761
7 58,989 526,857 534,126 543,306 25,822 33,091 42,271 26,857 34,126 43,306
8 69,183 530,661 540,159 552,625 29,971 39,469 51,935 30,661 40,159 52,625
9 79,887 534,302 546,352 562,801 33,957 46,007 62,456 34,302 46,352 62,801
10 91,127 537,770 552,700 573,910 37,770 52,700 73,910 37,770 52,700 73,910
15 156,337 560,169 596,334 658,955 60,169 96,334 158,955 60,169 96,334 158,955
20 239,563 576,421 646,000 794,591 76,421 146,000 294,591 76,421 146,000 294,591
25 345,783 586,935 703,878 1,016,823 86,935 203,878 516,823 86,935 203,878 516,823
30 481,349 586,105 765,408 1,376,406 86,105 265,408 876,406 86,105 265,408 876,406
35 654,371 567,409 823,450 1,957,538 67,409 323,450 1,457,538 67,409 323,450 1,457,538
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1 -96.73% -92.67% -88.59% 7,194.65% 7,198.72% 7,202.80%
2 -59.12 -53.14 -47.26 708.43 709.08 709.76
3 -42.09 -35.62 -29.30 281.56 281.97 282.42
4 -29.54 -23.24 -17.06 161.97 162.33 162.74
5 -22.68 -16.43 -10.30 109.42 109.78 110.20
6 -18.48 -12.25 -6.12 80.73 81.11 81.56
7 -15.72 -9.47 -3.33 62.94 63.34 63.83
8 -13.79 -7.51 -1.36 50.95 51.37 51.92
9 -12.39 -6.07 0.11 42.38 42.83 43.44
10 -11.33 -4.97 1.25 35.99 36.47 37.14
15 -7.15 -0.90 5.20 19.32 20.00 21.08
20 -6.05 0.53 6.77 12.28 13.18 14.82
25 -5.80 1.26 7.66 8.48 9.63 11.92
30 -6.49 1.56 8.19 6.07 7.49 10.49
35 -8.97 1.57 8.54 4.34 6.05 9.79
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-54
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1 $ 7,245 $502,997 $503,266 $503,537 $ 0 $ 161 $ 432 $ 2,997 $ 3,266 $ 3,537
2 14,852 506,041 506,773 507,538 3,281 4,013 4,778 6,041 6,773 7,538
3 22,840 508,898 510,287 511,801 6,483 7,872 9,386 8,898 10,287 11,801
4 31,227 511,558 513,798 516,341 9,488 11,728 14,271 11,558 13,798 16,341
5 40,033 514,006 517,287 521,167 12,281 15,562 19,442 14,006 17,287 21,167
6 49,280 516,234 520,741 526,297 14,854 19,361 24,917 16,234 20,741 26,297
7 58,989 518,212 524,124 531,726 17,177 23,089 30,691 18,212 24,124 31,726
8 69,183 519,908 527,396 537,448 19,218 26,706 36,758 19,908 27,396 37,448
9 79,887 521,296 530,522 543,462 20,951 30,177 43,117 21,296 30,522 43,462
10 91,127 522,337 533,450 549,751 22,337 33,450 49,751 22,337 33,450 49,751
15 156,337 527,938 551,496 594,886 27,938 51,496 94,886 27,938 51,496 94,886
20 239,563 518,502 557,423 650,677 18,502 57,423 150,677 18,502 57,423 150,677
25 345,783 536,100 711,314 36,100 211,314 36,100 211,314
30 481,349 757,594 257,594 257,594
35 654,371 742,669 242,669 242,669
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ---------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1 -100.00% -97.67% -93.74% 7,189.80% 7,193.71% 7,197.63%
2 -64.82 -58.81 -52.92 707.84 708.46 709.11
3 -47.70 -41.08 -34.63 281.23 281.62 282.04
4 -38.36 -31.42 -24.70 161.54 161.87 162.25
5 -32.60 -25.44 -18.54 108.97 109.28 109.65
6 -28.77 -21.41 -14.36 80.26 80.58 80.97
7 -26.11 -18.55 -11.36 62.47 62.79 63.21
8 -24.25 -16.47 -9.12 50.47 50.80 51.25
9 -22.95 -14.90 -7.40 41.88 42.24 42.73
10 -22.08 -13.73 -6.05 35.47 35.84 36.38
15 -19.15 -9.37 -1.09 18.67 19.15 19.97
20 -27.13 -9.37 0.83 11.43 12.01 13.24
25 -15.87 1.53 7.90 9.70
30 1.38 7.44
35 0.03 5.58
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S SUB-ACCOUNTS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY NELICO OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-55
APPENDIX B
INVESTMENT EXPERIENCE INFORMATION
This Appendix gives hypothetical illustrations of the Variable Account's
and the Policy's investment experience based on the historical investment
experience of the Eligible Funds. It does not predict future performance.
The Policies became available in May 2002. Except as noted, each Eligible
Fund was made available to the Variable Account when that fund commenced
operations. The Variable Account and the first three series of the Zenith Fund,
the Zenith Equity Series, the State Street Research Bond Income Series and the
State Street Research Money Market Series, commenced operations on August 26,
1983. The MFS Total Return Series of the Zenith Fund commenced operations on May
1, 1987. The FI Structured Equity Series and Harris Oakmark Focused Value Series
of the Zenith Fund commenced operations on April 30, 1993. The Loomis Sayles
Small Cap Series of the Zenith Fund commenced operations on May 2, 1994 and was
made available to the Variable Account on December 19, 1994. The MFS Investors
Trust Series and MFS Research Managers Series of the Zenith Fund commenced
operations on April 30, 1999. The remaining Zenith Fund Series shown in this
Appendix commenced operations on October 31, 1994 and were made available to the
Variable Account on May 1, 1995. The FI Mid Cap Opportunities Series of the
Zenith Fund commenced operations on May 1, 2002 and is not included in this
Appendix.
The commencement of operations for the following portfolios of the
Metropolitan Series Fund, Inc. was: March 3, 1997 for the Janus Mid Cap
Portfolio; November 9, 1998 for the Russell 2000 Index Portfolio; and May 1,
2000 for the Putnam Large Cap Growth Portfolio. These three Portfolios were made
available to the Variable Account on May 1, 2000. The commencement of operations
for the following Metropolitan Series Fund, Inc. Portfolios was: November 9,
1998 for the Lehman Brothers Aggregate Bond Index Portfolio and the Morgan
Stanley EAFE Index Portfolio; July 5, 2000 for the MetLife Mid Cap Stock Index
Portfolio and State Street Research Aurora Portfolio; and May 1, 2001 for the
Janus Growth Portfolio. These Portfolios were made available to the Variable
Account on May 1, 2001. The commencement of operations for the following
Metropolitan Series Fund, Inc. Portfolios was: June 24, 1983 for the State
Street Research Investment Trust Portfolio; November 9, 1998 for the Neuberger
Berman Partners Mid Cap Value Portfolio; and May 1, 2001 for the Franklin
Templeton Small Cap Growth Portfolio. These Portfolios were made available to
the Variable Account on January 11, 2002. The Harris Oakmark Large Cap Value
Portfolio of the Metropolitan Series Fund, Inc. commenced operations on November
9, 1998 and was made available to the Variable Account on May 1, 2002. The State
Street Research Large Cap Value Portfolio of the Metropolitan Series Fund, Inc.
commenced operations on May 1, 2002 and is not included in this Appendix.
On December 1, 2000, the Putnam International Stock Portfolio of the
Metropolitan Series Fund, Inc. (which commenced operations on May 1, 1991)
replaced the Morgan Stanley International Magnum Equity Series of the Zenith
Fund (which commenced operations on October 31, 1994). Performance figures for
dates on or before December 1, 2000 reflect the performance of the Morgan
Stanley International Magnum Equity Series. On April 27, 2001, the MetLife Stock
Index Portfolio of the Metropolitan Series Fund, Inc. (which commenced
operations on May 1, 1990) replaced the Westpeak Stock Index Series of the
Zenith Fund (which commenced operations on May 1, 1987). Performance figures for
dates on or before April 27, 2001 reflect the performance of the Westpeak Stock
Index Series.
The commencement of operations for the following Portfolios of the Met
Investors Series Trust was: February 12, 2001 for the MFS Mid Cap Growth
Portfolio, the PIMCO Innovation Portfolio and the PIMCO Total Return Portfolio;
and October 9, 2001 for the Met/AIM Mid Cap Core Equity Portfolio, the Met/AIM
Small Cap Growth Portfolio and the State Street Research Concentrated
International Portfolio. The MFS Mid Cap Growth Portfolio and PIMCO Innovation
Portfolio were made available to the Variable Account on January 11, 2002. The
remaining Met Investors Series Trust Portfolios shown in this Appendix were made
available to the Variable Account on May 1, 2002. Performance figures for the
Met/AIM Mid Cap Core Equity Portfolio, the Met/AIM Small Cap Growth Portfolio
and the State Street Research Concentrated International Portfolio for dates
before January 2, 2002 reflect the performance of the Class B shares of these
Portfolios, as restated to exclude 12b-1 fees.
The commencement of operations for the following Funds of the American
Funds Insurance Series was: February 8, 1984 for the American Funds Growth Fund
and the American Funds Growth-Income Fund; and
A-56
April 30, 1998 for the American Funds Global Small Capitalization Fund. These
Funds were added as investment options of the Variable Account on May 1, 2001.
The VIP Equity-Income Portfolio and VIP Overseas Portfolio commenced
operations on October 9, 1986 and January 28, 1987, respectively, and were added
as investment options of the Variable Account on April 30, 1993. The VIP High
Income Portfolio and the VIP II Asset Manager Portfolio commenced operations on
September 19, 1985 and September 6, 1989, respectively, and were added as
investment options of the Variable Account on December 19, 1994.
We base the illustrations on the actual investment experience of the
relevant Eligible Funds for the periods shown (net of actual charges and
expenses incurred by the Eligible Funds). The illustrations assume that premiums
are paid at the beginning of each year and that no loans, transfers or other
Policy Owner transactions were made during the periods shown.
Many factors other than investment experience affect Policy values and
benefits. These investment experience figures do not reflect the charges
deducted from Premiums and Monthly Deductions from the cash value. (See "Charges
and Expenses".)
NET RATES OF RETURN
The annual net rate is the effective earnings rate at which the investment
Sub-Accounts increased or decreased over a one-year period, based on the
investment experience of the relevant Eligible Funds. The rate is calculated by
taking the difference between the Sub-Accounts' ending values and beginning
values of the period and dividing it by the beginning values of the period.
The effective annual net rate of return since inception is the annualized
effective interest rate at which the Sub-Accounts increased or decreased since
the inception dates of the Sub-Accounts. For each Sub-Account, we calculate the
rate by taking the difference between the Sub-Account's ending value and the
value on the date of its inception and dividing it by the value on the date of
inception. This result is the total net rate of return since inception ("Total
Return"). The effective annual net rate of return is the rate which, if
compounded annually, would equal the total net rate of return since inception.
A-57
SUB-ACCOUNTS INVESTING IN ZENITH FUND
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- 8/26/83- ------------------------------------------------------------------------------------------------
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Zenith Equity(1)..... 8.87% -0.59% 68.10% 95.21% 52.71% -8.81% 30.76% -3.48% 53.98% -6.05%
State Street Research
Bond Income(2)...... 3.20 12.61 18.76 14.83 2.27 8.37 12.30 8.09 17.96 8.18
State Street Research
Money Market(2)..... 3.20 10.73 8.26 6.80 6.53 7.52 9.25 8.19 6.21 3.80
<Caption>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------ 8/26/83-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/01
- ----------- ------------------------------------------------------------------------------------------------ TOTAL
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Zenith Equity(1)..... 14.97% -7.07% 38.03% 21.07% 23.48% 34.09% 15.70% -4.65% -16.43% 2,367.20%
State Street Research
Bond Income(2)...... 12.61 -3.36 21.20 4.61 10.89 9.04 -0.47 8.15 8.81 431.53
State Street Research
Money Market(2)..... 2.97 3.97 5.70 5.13 5.34 5.26 4.97 6.22 3.98 201.61
<Caption>
8/26/83-
SUB-ACCOUNT 12/31/01
- ----------- EFFECTIVE
ANNUAL
---------
Zenith Equity(1)..... 19.09%
State Street Research
Bond Income(2)...... 9.53
State Street Research
Money Market(2)..... 6.20
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT -------------------------------------------------------------------------------------
- ----------- 5/1/87-
12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- -------- -------- -------- --------
MFS Total Return(3)....... -0.66% 9.48% 19.08% 3.21% 20.17% 6.70% 10.65% -1.11% 31.26%
<Caption>
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
FOR ONE YEAR ENDING 5/1/87- 5/1/87-
SUB-ACCOUNT --------------------------------------------------------------- 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- ---------
MFS Total Return(3)....... 15.03% 26.56% 19.65% 9.97% -3.38% -3.80% 338.36% 10.60%
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT ----------------------------------------------------
- ----------- 4/30/93-
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
FI Structured Equity(4)............ 14.24% -1.21% 36.47% 18.10% 33.47% 24.45%
Harris Oakmark Focused Value(5).... 14.74 -.27 30.35 17.61 17.32 -5.46
<Caption>
ANNUAL NET RATE OF RETURN
------------------------------
FOR ONE YEAR ENDING 4/30/93- 4/30/93-
SUB-ACCOUNT ------------------------------ 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- ---------
FI Structured Equity(4)............ 9.35% -5.15% -13.93% 169.72% 12.12%
Harris Oakmark Focused Value(5).... 0.35 20.43 27.78 200.47 13.53
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT --------------------------------------------------------------------------
- ----------- 5/2/94-
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- -------- -------- --------
Loomis Sayles Small Cap............ -3.23% 28.84% 30.68% 24.85% -1.69% 31.75% 5.25% -8.83%
<Caption>
5/2/94- 5/2/94-
SUB-ACCOUNT 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
RETURN ANNUAL
-------- ---------
Loomis Sayles Small Cap............ 152.85% 12.86%
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT --------------------------------------------------------------------------
- ----------- 10/31/94-
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
--------- -------- -------- -------- -------- -------- -------- --------
Alger Equity Growth................ -4.20% 48.69% 13.17% 25.63% 47.78% 34.13% -13.68% -12.02%
Balanced(6)........................ -.10 24.79 16.91 16.18 9.11 -5.06 -1.91 -4.45
Davis Venture Value................ -3.50 39.28 25.84 33.50 14.41 17.52 9.49 -11.14
<Caption>
10/31/94- 10/31/94-
SUB-ACCOUNT 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
RETURN ANNUAL
--------- ---------
Alger Equity Growth................ 204.88% 16.83%
Balanced(6)........................ 64.40 7.18
Davis Venture Value................ 195.36 16.31
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-------------------------------- 4/30/99- 4/30/99-
SUB-ACCOUNT FOR ONE YEAR ENDING 12/31/00 12/31/00
- ----------- 4/30/99- -------------------- TOTAL EFFECTIVE
12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- ---------
MFS Investors Trust......................................... 2.85% -0.15% -15.93% -13.66% -5.35%
MFS Research Managers....................................... 19.80 -3.64 -20.95 -8.74 -3.37
</Table>
- ------------
(1)The Zenith Equity Series' sub-adviser was Capital Growth Management Limited
Partnership until May 1, 2002 when it became a "fund of funds" that invests
equally in three other series of the Zenith Fund--the FI Structured Equity
Series, the Jennison Growth Series and the Capital Guardian U.S. Equity
Series. Rates of return for the period through December 31, 1987, reflect the
Zenith Equity Series' former advisory fee of .50% of average daily net
assets. Rates of return for the period thereafter reflect the advisory fee
schedule in effect as of December 31, 2001.
(2)The State Street Research Bond Income and State Street Research Money Market
Series' sub-adviser was Back Bay Advisors, L.P. until July 1, 2001 when State
Street Research and Management Company became the sub-adviser.
(3)The MFS Total Return Series' sub-adviser was Back Bay Advisors, L.P. until
July 1, 2001 when Massachusetts Financial Services Company became the
sub-adviser.
(4)The FI Structured Equity Series' sub-adviser was Westpeak Investment
Advisers, L.P. until May 1, 2002 when Fidelity Management & Research Company
became the sub-adviser.
(5)The Harris Oakmark Focused Value Series' sub-adviser was Loomis, Sayles &
Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management became
the sub-adviser. Harris Associates L.P. became the sub-adviser on May 1,
2000. Rates of return reflect the Series' former investment advisory fee of
.70% of average daily net assets for the period through April 30, 1998 and
.75% thereafter.
(6)The Balanced Series' sub-adviser was Loomis, Sayles & Company, L.P. until May
1, 2000, when Wellington Management Company became the sub-adviser.
A-58
SUB-ACCOUNTS INVESTING IN METROPOLITAN SERIES FUND, INC.
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
---------------------------------------------------------
FOR ONE YEAR ENDING 3/3/97- 3/3/97-
SUB-ACCOUNT -------------------------------------------- 12/31/01 12/31/01
- ----------- 3/3/97- TOTAL EFFECTIVE
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- ---------
Janus Mid Cap................................ 28.21% 37.19% 122.92% -30.86% -37.67% 68.99% 11.48%
</Table>
<Table>
<Caption>
SUB-ACCOUNT ANNUAL NET RATE OF RETURN
- ----------- ----------------------------- 5/1/00- 5/1/00-
FOR ONE 12/31/01 12/31/01
5/1/00- YEAR ENDING TOTAL EFFECTIVE
12/31/00 12/31/01 RETURN ANNUAL
-------- ----------- -------- ---------
Putnam Large Cap Growth..................................... -27.00% -30.82% -49.50% -33.62%
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT --------------------------------------------------------------------------
- ----------- 10/31/94-
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
--------- -------- -------- -------- -------- -------- -------- --------
Putnam International Stock(1)...... 2.60% 6.23% 6.67% -1.30% 7.27% 24.61% -10.20% -20.59%
<Caption>
10/31/94- 10/31/94-
SUB-ACCOUNT 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
RETURN ANNUAL
--------- ---------
Putnam International Stock(1)...... 9.40% 1.26%
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT -------------------------------------------------------------------------------------
- ----------- 5/1/87-
12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- -------- -------- -------- --------
MetLife Stock Index(2)... -12.20% 16.34% 30.15% -4.14% 30.43% 7.30% 9.72% 1.12% 36.92%
<Caption>
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
FOR ONE YEAR ENDING 5/1/87- 5/1/87-
SUB-ACCOUNT --------------------------------------------------------------- 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- ---------
MetLife Stock Index(2)... 22.47% 32.50% 27.93% 20.38% -9.04% -12.23% 437.92% 12.19%
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-----------------------------------------
FOR ONE YEAR ENDING 11/9/98- 11/9/98-
SUB-ACCOUNT ------------------------------ 12/31/01 12/31/01
- ----------- 11/9/98- TOTAL EFFECTIVE
12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- ---------
Morgan Stanley EAFE Index................................... 8.11% 24.90% -14.48% -21.74% -9.62% -3.17%
Lehman Brothers Aggregate Bond Index........................ 1.38 -1.37 11.41 5.83 17.90 5.38
Neuberger Berman Partners Mid Cap Value..................... 7.44 17.63 28.25 -2.51 58.03 15.67
Russell 2000 Index.......................................... 5.48 22.73 -3.80 0.87 25.62 7.53
Harris Oakmark Large Cap Value.............................. -2.70 -6.89 12.43 18.38 20.57 -8.29
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- ------------------------------------------------------------------------------------------------
6/24/83-
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
State Street Research
Investment
Trust(3)............ -2.35% 0.54% 34.79% 10.21% 7.19% 12.10% 32.13% -5.40% 33.09% 11.56%
<Caption>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING 6/24/83-
- ----------- ------------------------------------------------------------------------------------------------ 12/31/01
TOTAL
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
State Street Research
Investment
Trust(3)............ 14.40% -3.26% 33.14% 22.18% 28.36% 28.75% 18.47% -6.18% -17.01% 777.12%
<Caption>
SUB-ACCOUNT 6/24/83-
- ----------- 12/31/01
EFFECTIVE
ANNUAL
---------
State Street Research
Investment
Trust(3)............ 12.44%
</Table>
<Table>
<Caption>
ANNUAL NET
SUB-ACCOUNT RATE OF RETURN FOR
- ----------- -------------- ONE YEAR 7/5/00- 7/5/00-
ENDING 12/31/01 12/31/01
7/5/00- -------- TOTAL EFFECTIVE
12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- ---------
MetLife Mid Cap Stock Index................................. 6.84% -1.18% 5.58% 3.72%
State Street Research Aurora................................ 23.22% 16.00 42.94 27.11
</Table>
<Table>
<Caption>
ANNUAL NET
SUB-ACCOUNT RATE OF RETURN 5/1/01- 5/1/01-
- ----------- -------------- 12/31/01 12/31/01
5/1/01- TOTAL EFFECTIVE
12/31/01 RETURN ANNUAL
-------- -------- ---------
Janus Growth................................................ -21.80% -21.80% N/A
Franklin Templeton Small Cap Growth......................... -11.20 -11.20 N/A
</Table>
- ------------
(1)On December 1, 2000, the Putnam International Stock Portfolio of the
Metropolitan Series Fund, Inc. replaced the Morgan Stanley International
Magnum Equity Series of the Zenith Fund (which commenced operations on
October 31, 1994). Performance figures for dates on or before December 1,
2000 reflect the performance of the Morgan Stanley International Magnum
Equity Series.
(2)On April 27, 2001, the MetLife Stock Index Portfolio of the Metropolitan
Series Fund, Inc. replaced the Westpeak Stock Index Series of the Zenith Fund
(which commenced operations on May 1, 1987). Performance figures for dates on
or before April 27, 2001 reflect the performance of the Westpeak Stock Index
Series.
(3)The State Street Research Investment Trust Portfolio commenced operations on
June 24, 1983. Performance figures for the period from June 24, 1983 through
September 6, 1994 are based on month-end net asset values, as daily net asset
value information is not available.
A-59
SUB-ACCOUNTS INVESTING IN MET INVESTORS SERIES TRUST
<Table>
<Caption>
ANNUAL NET RATE 2/12/01- 2/12/01-
OF RETURN 12/31/01 12/31/01
2/12/01- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/01 RETURN ANNUAL
- ----------- --------------- -------- ---------
PIMCO Total Return.......................................... 7.00% 7.00% N/A
PIMCO Innovation............................................ -38.10 -38.10 N/A
MFS Mid Cap Growth.......................................... -16.30 -16.30 N/A
</Table>
<Table>
<Caption>
10/9/01- 10/9/01-
12/31/01 12/31/01
10/9/01- TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/01 RETURN ANNUAL
- ----------- -------- -------- ---------
Met/AIM Mid Cap Core Equity(1).............................. 9.30% 9.30% N/A
Met/AIM Small Cap Growth(1)................................. 18.30 18.30 N/A
State Street Research Concentrated International(1)......... 8.00 8.00 N/A
</Table>
- ------------
(1)Performance figures for the Met/AIM Mid Cap Core Equity Portfolio, the
Met/AIM Small Cap Growth Portfolio and the State Street Research Concentrated
International Portfolio for dates before January 2, 2002 reflect the
performance of the Class B shares of these Portfolios, as restated to exclude
12b-1 fees.
SUB-ACCOUNTS INVESTING IN VIP
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING
- ----------- ------------------------------------------------------------------------------------------------
10/9/86-
12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Equity-Income........ .20% -1.13% 21.93% 19.54% -16.31% 31.44% 16.89% 18.29% 6.93% 35.90%
<Caption>
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
SUB-ACCOUNT FOR ONE YEAR ENDING 10/9/86- 10/9/86-
- ----------- --------------------------------------------------------------- 12/31/01 12/31/01
TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- ---------
Equity-Income........ 13.75% 28.11% 11.63% 6.33% 8.42% -4.96% 468.79% 12.09%
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT -------------------------------------------------------------------------------------
- ----------- 1/28/87-
12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- -------- -------- -------- --------
Overseas...................... -5.38% 9.63% 23.97% -1.20% 8.00% -10.72% 37.35% 1.21% 11.02%
<Caption>
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
FOR ONE YEAR ENDING 1/28/87- 1/28/87-
SUB-ACCOUNT --------------------------------------------------------------- 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- ---------
Overseas...................... 12.43% 11.56% 12.75% 42.63% -19.11% -21.17% 143.14% 6.13%
</Table>
<Table>
<Caption>
ANNUAL RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT ------------------------------------------------------------------------------------------------
- ----------- 9/19/85-
12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
High Income.......... 6.38% 17.68% 1.22% 11.53% -4.07% -2.23% 35.08% 23.17% 20.40% -1.45%
<Caption>
ANNUAL RATE OF RETURN
--------------------------------------------------------------------------
FOR ONE YEAR ENDING 9/19/85- 9/19/85-
SUB-ACCOUNT -------------------------------------------------------------------------- 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- -------- ---------
High Income.......... 20.79% 13.75% 17.67% -4.33% 8.15% -22.47% -11.73% 199.48% 6.97%
</Table>
SUB-ACCOUNT INVESTING IN VIP II
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT --------------------------------------------------------------------------
- ----------- 9/6/89-
12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- -------- -------- --------
Asset Manager............................ 1.32% 6.19% 22.56% 11.71% 21.23% -6.43% 17.68% 14.31%
<Caption>
ANNUAL NET RATE OF RETURN
----------------------------------------------------
FOR ONE YEAR ENDING 9/6/89- 9/6/89-
SUB-ACCOUNT ---------------------------------------------------- 12/31/01 12/31/01
- ----------- TOTAL EFFECTIVE
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- ---------
Asset Manager............................ 20.65% 15.05% 11.09% -3.93% -4.09% 219.37% 9.89%
</Table>
SUB-ACCOUNTS INVESTING IN AMERICAN FUNDS INSURANCE SERIES
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT ------------------------------------------------------------------------------------------------
- ----------- 2/8/84-
12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Growth............... 1.87% 19.76% 30.04% 7.78% 14.27% 30.79% -4.67% 32.90% 10.48% 16.00%
Growth-Income........ 8.96 36.91 21.82 0.30 14.02 25.02 -2.87 23.69 7.62 11.97
<Caption>
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------------------
FOR ONE YEAR ENDING 2/8/84-
SUB-ACCOUNT -------------------------------------------------------------------------------------- 12/31/01
- ----------- TOTAL
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 RETURN
-------- -------- -------- -------- -------- -------- -------- -------- --------
Growth............... 0.23% 32.90% 13.07% 29.79% 35.24% 57.27% 4.47% -18.15% 1375.34%
Growth-Income........ 1.79 32.63 18.41 25.54 18.09 11.20 7.95 2.56 997.29
<Caption>
2/8/84-
SUB-ACCOUNT 12/31/01
- ----------- EFFECTIVE
ANNUAL
---------
Growth............... 16.23%
Growth-Income........ 14.32
</Table>
<Table>
<Caption>
ANNUAL NET RATE OF RETURN
-----------------------------------------
FOR ONE YEAR ENDING 4/30/98- 4/30/98-
SUB-ACCOUNT ------------------------------ 12/31/01 12/31/01
- ----------- 4/30/98- TOTAL EFFECTIVE
12/31/98 12/31/99 12/31/00 12/31/01 RETURN ANNUAL
-------- -------- -------- -------- -------- ------
Global Small Capitalization................................. 2.47% 91.37% -16.53% -12.85% 42.65% 10.16%
</Table>
A-60
POLICY PERFORMANCE
The material below assumes a Policy was issued with a $500,000 face amount
and Option A death benefit with the guideline premium test, with annual premiums
paid on August 26 of each year (May 1 in the case of the Metropolitan MetLife
Stock Index, Zenith MFS Total Return, Metropolitan Putnam Large Cap Growth,
Metropolitan Janus Growth and Metropolitan Franklin Templeton Small Cap Growth
Sub-Accounts; May 2 in the case of the Zenith Loomis Sayles Small Cap
Sub-Account; October 31 in the case of the Zenith Balanced, Zenith Davis Venture
Value, Zenith Alger Equity Growth and Metropolitan Putnam International Stock
Sub-Accounts; October 9 in the case of the VIP Equity-Income, Met Investors
Met/AIM Mid Cap Core Equity, Met Investors Met/AIM Small Cap Growth and Met
Investors State Street Research Concentrated International Sub-Accounts; January
28 in the case of the VIP Overseas Sub-Account; April 30 in the case of the
Zenith FI Structured Equity, Zenith Harris Oakmark Focused Value, Zenith MFS
Investors Trust and Zenith MFS Research Managers Sub-Accounts; September 19 in
the case of the VIP High Income Sub-Account; September 6 in the case of the VIP
II Asset Manager Sub-Account; March 3 in the case of the Metropolitan Janus Mid
Cap Sub-Account; November 9 in the case of the Metropolitan Russell 2000 Index
Sub-Account; June 24 in the case of the Metropolitan State Street Research
Investment Trust Sub-Account; November 9 in the case of the Metropolitan Lehman
Brothers Aggregate Bond Index, the Metropolitan Morgan Stanley EAFE Index, the
Harris Oakmark Large Cap Value and the Metropolitan Neuberger Berman Partners
Mid Cap Value Sub-Accounts; July 5 in the case of the Metropolitan MetLife Mid
Cap Stock Index and the Metropolitan State Street Research Aurora Sub-Accounts;
February 8 in the case of the American Funds Growth Sub-Account, and the
American Funds Growth-Income Sub-Account; April 30 in the case of the American
Funds Global Small Capitalization Sub-Account; and February 12 in the case of
the Met Investors MFS Mid Cap Growth, the Met Investors PIMCO Innovation and the
Met Investors PIMCO Total Return Sub-Accounts) to a male age 45 in the preferred
nonsmoker risk category. The death benefits, cash values and internal rates of
return assume in each instance that the entire Policy value was invested in the
particular Sub-Account for the period shown. The illustrations of Policy
investment experience reflect all Policy charges based on NELICO's current
rates.
MALE PREFERRED NONSMOKER RISK AGE 45
$500,000 FACE AMOUNT
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM TEST
ZENITH EQUITY SUB-ACCOUNT(1)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
August 26, 1983.............. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1983............ 6,900 500,000 5,622 2,517 -94.49% --
December 31, 1984............ 13,800 500,000 8,850 5,888 -70.10 2,224.87%
December 31, 1985............ 20,700 500,000 18,931 16,315 -16.90 472.41
December 31, 1986............ 27,600 500,000 40,212 37,941 17.73 222.61
December 31, 1987............ 34,500 500,000 64,366 62,440 25.90 136.79
December 31, 1988............ 41,400 500,000 63,005 61,424 13.87 95.48
December 31, 1989............ 48,300 500,000 86,212 84,976 16.72 71.74
December 31, 1990............ 55,200 500,000 86,498 85,607 11.22 56.54
December 31, 1991............ 62,100 500,000 137,214 136,668 17.55 46.06
December 31, 1992............ 69,000 500,000 132,965 132,763 13.02 38.45
December 31, 1993............ 75,900 500,000 157,384 157,384 13.04 32.70
December 31, 1994............ 82,800 500,000 150,005 150,005 9.74 28.23
December 31, 1995............ 89,700 500,000 214,598 214,598 12.92 24.65
December 31, 1996............ 96,600 500,000 264,840 264,840 13.68 21.74
December 31, 1997............ 103,500 500,000 331,917 331,917 14.56 19.34
December 31, 1998............ 110,400 585,873 450,671 450,671 16.19 19.01
December 31, 1999............ 117,300 674,217 526,732 526,732 16.11 18.57
December 31, 2000............ 124,200 629,560 499,651 499,651 14.11 16.27
December 31, 2001............ 131,100 531,217 428,401 428,401 11.45 13.37
</Table>
A-61
ZENITH STATE STREET RESEARCH BOND INCOME SUB-ACCOUNT(2)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
August 26, 1983.............. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1983............ 6,900 500,000 5,259 2,154 -96.48% --
December 31, 1984............ 13,800 500,000 9,644 6,683 -63.05 2,224.87%
December 31, 1985............ 20,700 500,000 15,057 12,441 -34.35 472.41
December 31, 1986............ 27,600 500,000 21,211 18,940 -19.75 222.61
December 31, 1987............ 34,500 500,000 26,235 24,309 -14.78 136.79
December 31, 1988............ 41,400 500,000 32,910 31,329 -9.82 95.48
December 31, 1989............ 48,300 500,000 41,316 40,080 -5.61 71.74
December 31, 1990............ 55,200 500,000 49,005 48,114 -3.60 56.54
December 31, 1991............ 62,100 500,000 62,100 61,554 -0.20 46.06
December 31, 1992............ 69,000 500,000 70,956 70,754 0.52 38.45
December 31, 1993............ 75,900 500,000 84,361 84,361 1.96 32.70
December 31, 1994............ 82,800 500,000 86,580 86,580 0.76 28.23
December 31, 1995............ 89,700 500,000 110,581 110,581 3.24 24.65
December 31, 1996............ 96,600 500,000 120,956 120,956 3.22 21.74
December 31, 1997............ 103,500 500,000 139,242 139,242 3.92 19.34
December 31, 1998............ 110,400 500,000 156,822 156,822 4.32 17.31
December 31, 1999............ 117,300 500,000 160,776 160,776 3.66 15.59
December 31, 2000............ 124,200 500,000 179,995 179,995 4.04 14.12
December 31, 2001............ 131,100 500,000 198,674 198,674 4.26 12.83
</Table>
ZENITH STATE STREET RESEARCH MONEY MARKET SUB-ACCOUNT(2)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
August 26, 1983.............. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1983............ 6,900 500,000 5,267 2,162 -96.44% --
December 31, 1984............ 13,800 500,000 9,335 6,373 -65.81 2,224.87%
December 31, 1985............ 20,700 500,000 13,642 11,026 -41.55 472.41
December 31, 1986............ 27,600 500,000 18,513 16,242 -27.48 222.61
December 31, 1987............ 34,500 500,000 24,299 22,372 -18.26 136.79
December 31, 1988............ 41,400 500,000 30,634 29,052 -12.49 95.48
December 31, 1989............ 48,300 500,000 37,818 36,582 -8.38 71.74
December 31, 1990............ 55,200 500,000 45,109 44,217 -5.83 56.54
December 31, 1991............ 62,100 500,000 51,953 51,407 -4.40 46.06
December 31, 1992............ 69,000 500,000 57,810 57,609 -3.77 38.45
December 31, 1993............ 75,900 500,000 64,116 64,116 -3.20 32.70
December 31, 1994............ 82,800 500,000 72,064 72,064 -2.41 28.23
December 31, 1995............ 89,700 500,000 81,376 81,376 -1.55 24.65
December 31, 1996............ 96,600 500,000 90,589 90,589 -0.94 21.74
December 31, 1997............ 103,500 500,000 100,377 100,377 -0.42 19.34
December 31, 1998............ 110,400 500,000 110,459 110,459 0.01 17.31
December 31, 1999............ 117,300 500,000 120,576 120,576 0.33 15.59
December 31, 2000............ 124,200 500,000 132,616 132,616 0.74 14.12
December 31, 2001............ 131,100 500,000 142,132 142,132 0.86 12.83
</Table>
A-62
ZENITH MFS TOTAL RETURN SUB-ACCOUNT(3)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
May 1, 1987.................... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1987.............. 6,900 500,000 4,373 1,268 -92.07% --
December 31, 1988.............. 13,800 500,000 8,489 5,614 -56.99 1,143.72%
December 31, 1989.............. 20,700 500,000 14,264 11,734 -30.71 355.47
December 31, 1990.............. 27,600 500,000 19,123 16,938 -21.48 187.16
December 31, 1991.............. 34,500 500,000 27,946 26,106 -10.32 120.88
December 31, 1992.............. 41,400 500,000 34,582 33,087 -7.06 86.74
December 31, 1993.............. 48,300 500,000 42,739 41,589 -4.09 66.32
December 31, 1994.............. 55,200 500,000 46,464 45,659 -4.58 52.89
December 31, 1995.............. 62,100 500,000 66,128 65,668 1.19 43.46
December 31, 1996.............. 69,000 500,000 79,922 79,807 2.79 36.52
December 31, 1997.............. 75,900 500,000 106,997 106,997 5.93 31.22
December 31, 1998.............. 82,800 500,000 133,574 133,574 7.52 27.06
December 31, 1999.............. 89,700 500,000 152,032 152,032 7.63 23.72
December 31, 2000.............. 96,600 500,000 149,742 149,742 5.91 20.98
December 31, 2001.............. 103,500 500,000 150,645 150,645 4.74 18.70
</Table>
ZENITH FI STRUCTURED EQUITY SUB-ACCOUNT(4)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
April 30, 1993.................... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1993................. 6,900 500,000 4,874 1,769 -86.84% --
December 31, 1994................. 13,800 500,000 8,334 5,488 -57.88 1,138.35%
December 31, 1995................. 20,700 500,000 15,886 13,384 -24.12 354.68
December 31, 1996................. 27,600 500,000 23,503 21,347 -11.54 186.90
December 31, 1997................. 34,500 500,000 37,081 35,270 0.83 120.75
December 31, 1998................. 41,400 500,000 50,687 49,221 5.47 86.67
December 31, 1999................. 48,300 500,000 59,563 58,441 5.18 66.27
December 31, 2000................. 55,200 500,000 58,535 57,758 1.08 52.86
December 31, 2001................. 62,100 500,000 55,144 54,713 -2.73 43.44
</Table>
ZENITH HARRIS OAKMARK FOCUSED VALUE SUB-ACCOUNT(5)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
April 30, 1993.................... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1993................. 6,900 500,000 4,903 1,798 -86.51% --
December 31, 1994................. 13,800 500,000 8,445 5,598 -57.01 1,138.35%
December 31, 1995................. 20,700 500,000 15,540 13,038 -25.45 354.68
December 31, 1996................. 27,600 500,000 22,800 20,643 -13.01 186.90
December 31, 1997................. 34,500 500,000 32,168 30,356 -4.76 120.75
December 31, 1998................. 41,400 500,000 33,713 32,247 -7.86 86.67
December 31, 1999................. 48,300 500,000 37,698 36,576 -7.61 66.27
December 31, 2000................. 55,200 500,000 49,192 48,416 -3.16 52.86
December 31, 2001................. 62,100 500,000 68,349 67,917 1.91 43.44
</Table>
A-63
ZENITH LOOMIS SAYLES SMALL CAP SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
May 2, 1994....................... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1994................. 6,900 500,000 4,150 1,045 -94.13% --
December 31, 1995................. 13,800 500,000 9,696 6,821 -47.73 1,149.12%
December 31, 1996................. 20,700 500,000 16,622 14,092 -21.54 356.25
December 31, 1997................. 27,600 500,000 26,141 23,956 -6.45 187.42
December 31, 1998................. 34,500 500,000 29,415 27,575 -8.32 121.00
December 31, 1999................. 41,400 500,000 44,779 43,284 1.41 86.80
December 31, 2000................. 48,300 500,000 48,345 47,195 -0.63 66.36
December 31, 2001................. 55,200 500,000 50,506 49,701 -2.53 52.92
</Table>
ZENITH BALANCED SUB-ACCOUNT(6)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
October 31, 1994.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1994................. 6,900 500,000 5,552 2,447 -100.00% --
December 31, 1995................. 13,800 500,000 10,382 7,364 -69.71 3,738.81%
December 31, 1996................. 20,700 500,000 15,584 12,910 -37.20 570.90
December 31, 1997................. 27,600 500,000 21,786 19,457 -20.49 248.21
December 31, 1998................. 34,500 500,000 28,504 26,520 -12.11 147.49
December 31, 1999................. 41,400 500,000 31,440 29,801 -12.44 101.13
December 31, 2000................. 48,300 500,000 34,633 33,340 -11.94 75.16
December 31, 2001................. 55,200 500,000 37,948 36,999 -11.24 58.80
</Table>
ZENITH DAVIS VENTURE VALUE SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
October 31, 1994.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1994................. 6,900 500,000 5,371 2,266 -100.00% --
December 31, 1995................. 13,800 500,000 10,815 7,796 -65.21 3,738.81%
December 31, 1996................. 20,700 500,000 17,050 14,377 -29.27 570.90
December 31, 1997................. 27,600 500,000 26,329 24,000 -8.30 248.21
December 31, 1998................. 34,500 500,000 34,937 32,953 -2.12 147.49
December 31, 1999................. 41,400 500,000 45,656 44,017 2.30 101.13
December 31, 2000................. 48,300 500,000 52,925 51,631 2.10 75.16
December 31, 2001................. 55,200 500,000 52,885 51,936 -1.67 58.80
</Table>
ZENITH ALGER EQUITY GROWTH SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
October 31, 1994.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1994................. 6,900 500,000 5,236 2,131 -100.00% --
December 31, 1995................. 13,800 500,000 10,782 7,763 -65.56 3,738.81%
December 31, 1996................. 20,700 500,000 15,689 13,016 -36.61 570.90
December 31, 1997................. 27,600 500,000 23,281 20,952 -16.22 248.21
December 31, 1998................. 34,500 500,000 39,644 37,660 4.05 147.49
December 31, 1999................. 41,400 500,000 58,058 56,419 11.57 101.13
December 31, 2000................. 48,300 500,000 51,986 50,692 1.52 75.16
December 31, 2001................. 55,200 500,000 52,190 51,241 -2.04 58.80
</Table>
A-64
ZENITH MFS INVESTORS TRUST SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
April 30, 1999...................... $ 6,900 $500,000 $6,053 $2,948 -- --
December 31, 1999................... 6,900 500,000 4,190 1,085 -93.64% --
December 31, 2000................... 13,800 500,000 7,410 4,563 -65.33 1,138.35%
December 31, 2001................... 20,700 500,000 9,369 6,867 -53.90 354.68
</Table>
ZENITH MFS RESEARCH MANAGERS SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
April 30, 1999.................... $ 6,900 $500,000 $6,053 $2,948 -- --
December 31, 1999................. 6,900 500,000 5,015 1,910 -85.24% --
December 31, 2000................. 13,800 500,000 7,535 4,689 -64.31 1,138.35%
December 31, 2001................. 20,700 500,000 9,002 6,501 -55.97 354.68
</Table>
METROPOLITAN JANUS MID CAP SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
March 3, 1997..................... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1997................. 6,900 500,000 5,278 2,173 -75.13% --
December 31, 1998................. 13,800 500,000 11,646 8,829 -29.32 885.00%
December 31, 1999................. 20,700 500,000 34,452 31,980 25.64 314.01
December 31, 2000................. 27,600 500,000 23,640 21,512 -10.43 172.87
December 31, 2001................. 34,500 500,000 19,111 17,329 -23.54 114.06
</Table>
METROPOLITAN RUSSELL 2000 INDEX SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
November 9, 1998.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1998................. 6,900 500,000 6,130 3,025 -100.00% --
December 31, 1999................. 13,800 500,000 11,226 8,178 -63.29 4,060.39%
December 31, 2000................. 20,700 500,000 13,654 10,952 -49.92 586.99
December 31, 2001................. 27,600 500,000 18,629 16,272 -31.19 252.10
</Table>
METROPOLITAN PUTNAM LARGE CAP GROWTH SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
May 1, 2000......................... $ 6,900 $500,000 $6,053 $2,948 -- --
December 31, 2000................... 6,900 500,000 2,836 0 -100.00% --
December 31, 2001................... 13,800 500,000 4,739 1,864 -88.17 1,149.12%
</Table>
A-65
METROPOLITAN PUTNAM INTERNATIONAL STOCK SUB-ACCOUNT(7)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
October 31, 1994.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1994................. 6,900 500,000 5,695 2,590 -100.00% --
December 31, 1995................. 13,800 500,000 9,741 6,722 -76.18 3,738.81%
December 31, 1996................. 20,700 500,000 13,906 11,232 -47.03 570.90
December 31, 1997................. 27,600 500,000 17,394 15,065 -35.02 248.21
December 31, 1998................. 34,500 500,000 23,356 21,373 -22.06 147.49
December 31, 1999................. 41,400 500,000 33,891 32,252 -9.42 101.13
December 31, 2000................. 48,300 500,000 34,650 33,357 -11.93 75.16
December 31, 2001................. 55,200 500,000 32,343 31,394 -16.11 58.80
</Table>
METROPOLITAN METLIFE STOCK INDEX SUB-ACCOUNT(8)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
May 1, 1987.................... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1987.............. 6,900 500,000 3,839 734 -96.50% --
December 31, 1988.............. 13,800 500,000 8,210 5,335 -59.20 1,143.72%
December 31, 1989.............. 20,700 500,000 15,193 12,663 -26.96 355.47
December 31, 1990.............. 27,600 500,000 18,551 16,366 -22.92 187.16
December 31, 1991.............. 34,500 500,000 29,142 27,302 -8.68 120.88
December 31, 1992.............. 41,400 500,000 35,940 34,445 -5.79 86.74
December 31, 1993.............. 48,300 500,000 43,991 42,841 -3.27 66.32
December 31, 1994.............. 55,200 500,000 48,706 47,901 -3.42 52.89
December 31, 1995.............. 62,100 500,000 72,120 71,660 3.05 43.46
December 31, 1996.............. 69,000 500,000 91,966 91,851 5.45 36.52
December 31, 1997.............. 75,900 500,000 127,834 127,834 8.93 31.22
December 31, 1998.............. 82,800 500,000 169,275 169,275 11.11 27.06
December 31, 1999.............. 89,700 500,000 209,308 209,308 12.04 23.72
December 31, 2000.............. 96,600 500,000 189,513 189,513 8.96 20.98
December 31, 2001.............. 103,500 500,000 175,479 175,479 6.60 18.70
</Table>
METROPOLITAN METLIFE MID CAP STOCK INDEX SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
July 5, 2000........................ $ 6,900 $500,000 $6,053 $2,948 -- --
December 31, 2000................... 6,900 500,000 5,035 1,930 -92.66% --
December 31, 2001................... 13,800 500,000 8,505 5,573 -65.08 1,613.15%
</Table>
A-66
METROPOLITAN MORGAN STANLEY EAFE INDEX SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
November 9, 1998.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1998................. 6,900 500,000 6,293 3,188 -100.00% --
December 31, 1999................. 13,800 500,000 11,428 8,381 -61.07 4,060.39%
December 31, 2000................. 20,700 500,000 13,343 10,641 -51.93 586.99
December 31, 2001................. 27,600 500,000 14,390 12,032 -48.50 252.10
</Table>
METROPOLITAN LEHMAN BROTHERS AGGREGATE BOND INDEX SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------- -------- -------------- -------------
November 9, 1998.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1998................. 6,900 500,000 5,893 2,788 -100.00% --
December 31, 1999................. 13,800 500,000 9,149 6,101 -84.59 4,060.39%
December 31, 2000................. 20,700 500,000 13,804 11,102 -48.97 586.99
December 31, 2001................. 27,600 500,000 17,925 15,568 -33.74 252.10
</Table>
METROPOLITAN STATE STREET RESEARCH AURORA SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- ------ -------- -------------- -------------
July 5, 2000........................ $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2000................... 6,900 500,000 5,945 2,840 -83.81% --
December 31, 2001................... 13,800 500,000 10,250 7,318 -50.52 1,613.15%
</Table>
METROPOLITAN STATE STREET RESEARCH INVESTMENT TRUST SUB-ACCOUNT(9)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- -------- -------------- -------------
June 24, 1983................... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1983............... 6,900 500,000 4,452 1,347 -95.66% --
December 31, 1984............... 13,800 500,000 8,362 5,459 -64.46 1,507.25%
December 31, 1985............... 20,700 500,000 14,991 12,433 -30.51 402.47
December 31, 1986............... 27,600 500,000 20,328 18,114 -20.05 202.19
December 31, 1987............... 34,500 500,000 25,483 23,615 -14.83 127.79
December 31, 1988............... 41,400 500,000 32,788 31,264 -9.29 90.59
December 31, 1989............... 48,300 500,000 49,277 48,098 -0.12 68.73
December 31, 1990............... 55,200 500,000 48,561 47,727 -3.64 54.52
December 31, 1991............... 62,100 500,000 69,407 68,918 2.29 44.63
December 31, 1992............... 69,000 500,000 81,787 81,643 3.32 37.39
December 31, 1993............... 75,900 500,000 98,656 98,656 4.67 31.89
December 31, 1994............... 82,800 500,000 100,231 100,231 3.13 27.59
December 31, 1995............... 89,700 500,000 140,566 140,566 6.66 24.14
December 31, 1996............... 96,600 500,000 176,422 176,422 8.19 21.33
December 31, 1997............... 103,500 500,000 231,730 231,730 10.07 18.99
December 31, 1998............... 110,400 500,000 302,256 302,256 11.62 17.02
December 31, 1999............... 117,300 500,000 363,490 363,490 12.16 15.34
December 31, 2000............... 124,200 500,000 334,128 334,128 10.10 13.90
December 31, 2001............... 131,100 500,000 290,971 290,971 7.79 12.65
</Table>
A-67
METROPOLITAN NEUBERGER BERMAN PARTNERS MID CAP VALUE SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
November 9, 1998.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1998................. 6,900 500,000 6,255 3,150 -100.00% --
December 31, 1999................. 13,800 500,000 11,051 8,003 -65.19 4,060.39%
December 31, 2000................. 20,700 500,000 17,132 14,430 -29.64 586.99
December 31, 2001................. 27,600 500,000 21,207 18,850 -22.67 252.10
</Table>
METROPOLITAN HARRIS OAKMARK LARGE CAP VALUE SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------- -------- -------------- -------------
November 9, 1998.................. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1998................. 6,900 500,000 5,645 2,540 -100.00% --
December 31, 1999................. 13,800 500,000 8,946 5,898 -86.41 4,060.39%
December 31, 2000................. 20,700 500,000 13,264 10,561 -52.45 586.99
December 31, 2001................. 27,600 500,000 19,861 17,503 -26.98 252.10
</Table>
METROPOLITAN JANUS GROWTH SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
May 1, 2001......................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................... 6,900 500,000 3,113 8 -100.00% --
</Table>
METROPOLITAN FRANKLIN TEMPLETON SMALL CAP GROWTH SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
May 1, 2001....................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................. 6,900 500,000 3,610 505 -98.00% --
</Table>
MET INVESTORS MFS MID CAP GROWTH SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
February 12, 2001................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................... 6,900 500,000 2,636 0 -100.00% --
</Table>
MET INVESTORS PIMCO TOTAL RETURN SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
February 12, 2001................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................... 6,900 500,000 3,971 866 -90.48% --
</Table>
A-68
MET INVESTORS PIMCO INNOVATION SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
February 12, 2001................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................... 6,900 500,000 1,458 0 -100.00% --
</Table>
MET INVESTORS STATE STREET RESEARCH CONCENTRATED INTERNATIONAL SUB-ACCOUNT(10)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
October 9, 2001................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................. 6,900 500,000 6,027 2,922 -97.71% --
</Table>
MET INVESTORS MET/AIM MID CAP CORE EQUITY SUB-ACCOUNT(10)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
October 9, 2001..................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................... 6,900 500,000 6,105 3,000 -97.43% --
</Table>
MET INVESTORS MET/AIM SMALL CAP GROWTH SUB-ACCOUNT(10)
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- ------ -------- -------------- -------------
October 9, 2001..................... $6,900 $500,000 $6,053 $2,948 -- --
December 31, 2001................... 6,900 500,000 6,625 3,520 -94.82% --
</Table>
VIP EQUITY-INCOME SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
October 9, 1986................ $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1986.............. 6,900 500,000 5,590 2,485 -98.88% --
December 31, 1987.............. 13,800 500,000 8,191 5,173 -84.85 3,095.94%
December 31, 1988.............. 20,700 500,000 13,271 10,598 -48.29 534.50
December 31, 1989.............. 27,600 500,000 19,175 16,846 -27.60 239.13
December 31, 1990.............. 34,500 500,000 21,118 19,134 -26.35 143.76
December 31, 1991.............. 41,400 500,000 32,404 30,765 -10.95 99.18
December 31, 1992.............. 48,300 500,000 42,619 41,326 -4.86 73.99
December 31, 1993.............. 55,200 500,000 54,419 53,470 -0.86 58.03
December 31, 1994.............. 62,100 500,000 62,048 61,444 -0.25 47.11
December 31, 1995.............. 69,000 500,000 88,190 87,931 5.04 39.22
December 31, 1996.............. 75,900 500,000 104,689 104,689 6.00 33.29
December 31, 1997.............. 82,800 500,000 139,314 139,314 8.72 28.69
December 31, 1998.............. 89,700 500,000 161,777 161,777 9.02 25.02
December 31, 1999.............. 96,600 500,000 177,150 177,150 8.56 22.05
December 31, 2000.............. 103,500 500,000 194,891 194,891 8.27 19.58
December 31, 2001.............. 110,400 500,000 192,834 192,834 6.84 17.52
</Table>
A-69
VIP OVERSEAS SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
January 28, 1987............... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1987.............. 6,900 500,000 3,250 145 -98.48% --
December 31, 1988.............. 13,800 500,000 7,674 4,914 -54.04 776.52%
December 31, 1989.............. 20,700 500,000 13,849 11,434 -27.89 293.77
December 31, 1990.............. 27,600 500,000 18,230 16,160 -20.94 165.49
December 31, 1991.............. 34,500 500,000 24,570 22,845 -13.80 110.43
December 31, 1992.............. 41,400 500,000 25,668 24,288 -15.44 80.76
December 31, 1993.............. 48,300 500,000 41,199 40,164 -4.71 62.51
December 31, 1994.............. 55,200 500,000 45,647 44,957 -4.66 50.28
December 31, 1995.............. 62,100 500,000 55,326 54,981 -2.48 41.58
December 31, 1996.............. 69,000 500,000 66,570 66,570 -0.66 35.11
December 31, 1997.............. 75,900 500,000 80,404 80,404 0.97 30.13
December 31, 1998.............. 82,800 500,000 96,401 96,401 2.34 26.20
December 31, 1999.............. 89,700 500,000 144,776 144,776 6.71 23.02
December 31, 2000.............. 96,600 500,000 120,738 120,738 2.95 20.40
December 31, 2001.............. 103,500 500,000 99,107 99,107 -0.55 18.22
</Table>
VIP HIGH INCOME SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
September 19, 1985............. $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1985.............. 6,900 500,000 5,678 2,573 -96.97% --
December 31, 1986.............. 13,800 500,000 10,207 7,217 -62.28 2,645.48%
December 31, 1987.............. 20,700 500,000 13,749 11,104 -43.29 504.67
December 31, 1988.............. 27,600 500,000 19,151 16,851 -26.67 231.36
December 31, 1989.............. 34,500 500,000 22,630 20,675 -22.26 140.52
December 31, 1990.............. 41,400 500,000 26,473 24,863 -18.54 97.47
December 31, 1991.............. 48,300 500,000 40,100 38,835 -6.70 72.95
December 31, 1992.............. 55,200 500,000 53,412 52,492 -1.33 57.34
December 31, 1993.............. 62,100 500,000 68,385 67,810 2.04 46.63
December 31, 1994.............. 69,000 500,000 71,142 70,912 0.57 38.87
December 31, 1995.............. 75,900 500,000 90,327 90,327 3.25 33.02
December 31, 1996.............. 82,800 500,000 108,172 108,172 4.52 28.48
December 31, 1997.............. 89,700 500,000 132,463 132,463 6.00 24.85
December 31, 1998.............. 96,600 500,000 132,136 132,136 4.49 21.91
December 31, 1999.............. 103,500 500,000 147,974 147,974 4.74 19.47
December 31, 2000.............. 110,400 500,000 118,580 118,580 0.91 17.43
December 31, 2001.............. 117,300 500,000 109,511 109,511 -0.84 15.69
</Table>
A-70
VIP II ASSET MANAGER SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- -------- -------- -------- -------------- -------------
September 6, 1989............... $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1989............... 6,900 500,000 5,396 2,291 -96.88% --
December 31, 1990............... 13,800 500,000 9,381 6,391 -67.55 2,403.92%
December 31, 1991............... 20,700 500,000 14,998 12,353 -35.59 486.75
December 31, 1992............... 27,600 500,000 20,641 18,341 -21.75 226.55
December 31, 1993............... 34,500 500,000 29,747 27,792 -9.28 138.47
December 31, 1994............... 41,400 500,000 32,007 30,397 -11.01 96.38
December 31, 1995............... 48,300 500,000 42,004 40,739 -5.16 72.29
December 31, 1996............... 55,200 500,000 52,534 51,614 -1.77 56.90
December 31, 1997............... 62,100 500,000 67,306 66,731 1.66 46.32
December 31, 1998............... 69,000 500,000 81,848 81,618 3.45 38.64
December 31, 1999............... 75,900 500,000 95,525 95,525 4.25 32.85
December 31, 2000............... 82,800 500,000 95,087 95,087 2.35 28.34
December 31, 2001............... 89,700 500,000 98,175 98,175 1.42 24.75
</Table>
AMERICAN FUNDS GROWTH SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
- ---- -------- ------- ----- -------- -------------- -------------
February 8, 1984................ $ 6,900 $500,000 $ 6,053 $ 2,948 -- --
December 31, 1984............... 6,900 500,000 3,667 562 -93.97% --
December 31, 1985............... 13,800 500,000 7,817 5,028 -54.05 809.10%
December 31, 1986............... 20,700 500,000 14,942 12,498 -24.44 300.06
December 31, 1987............... 27,600 500,000 20,027 17,928 -17.27 167.82
December 31, 1988............... 34,500 500,000 28,069 26,315 -9.23 111.58
December 31, 1989............... 41,400 500,000 42,755 41,346 -0.04 81.42
December 31, 1990............... 48,300 500,000 44,378 43,314 -2.80 62.94
December 31, 1991............... 55,200 500,000 63,792 63,073 3.03 50.58
December 31, 1992............... 62,100 500,000 74,528 74,154 3.60 41.80
December 31, 1993............... 69,000 500,000 90,643 90,614 4.99 35.27
December 31, 1994............... 75,900 500,000 95,413 95,413 3.83 30.26
December 31, 1995............... 82,800 500,000 135,055 135,055 7.44 26.30
December 31, 1996............... 89,700 500,000 157,433 157,433 7.88 23.10
December 31, 1997............... 96,600 500,000 210,809 210,809 10.04 20.47
December 31, 1998............... 103,500 500,000 291,612 291,612 12.27 18.27
December 31, 1999............... 110,400 606,105 466,235 466,235 15.70 18.39
December 31, 2000............... 117,300 606,517 473,841 473,841 14.32 16.68
December 31, 2001............... 124,200 511,366 405,846 405,846 11.56 13.67
</Table>
A-71
AMERICAN FUNDS GROWTH-INCOME SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- ------- ----- -------- -------------- -------------
February 8, 1984................ $ 6,900 $500,000 $ 6,053 2,948 -- --
December 31, 1984............... 6,900 500,000 3,977 872 -90.13% --
December 31, 1985............... 13,800 500,000 9,904 7,115 -39.20 809.10%
December 31, 1986............... 20,700 500,000 16,465 14,021 -19.25 300.06
December 31, 1987............... 27,600 500,000 20,436 18,337 -16.41 167.82
December 31, 1988............... 34,500 500,000 28,222 26,468 -9.03 111.58
December 31, 1989............... 41,400 500,000 41,190 39,781 -1.17 81.42
December 31, 1990............... 48,300 500,000 43,755 42,691 -3.17 62.94
December 31, 1991............... 55,200 500,000 58,813 58,094 1.16 50.58
December 31, 1992............... 62,100 500,000 67,446 67,073 1.57 41.80
December 31, 1993............... 69,000 500,000 79,639 79,610 2.63 35.27
December 31, 1994............... 75,900 500,000 86,378 86,378 2.18 30.26
December 31, 1995............... 82,800 500,000 122,178 122,178 5.95 26.30
December 31, 1996............... 89,700 500,000 149,378 149,378 7.16 23.10
December 31, 1997............... 96,600 500,000 193,726 193,726 8.99 20.47
December 31, 1998............... 103,500 500,000 234,367 234,367 9.79 18.27
December 31, 1999............... 110,400 500,000 266,030 266,030 9.84 16.42
December 31, 2000............... 117,300 500,000 288,316 288,316 9.45 14.83
December 31, 2001............... 124,200 500,000 304,584 304,584 8.90 13.46
</Table>
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION SUB-ACCOUNT
<Table>
<Caption>
TOTAL INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- ------- ----- -------- -------------- -------------
April 30, 1998.................... $ 6,900 500,000 $ 6,053 $ 2,948 -- --
December 31, 1998................. 6,900 500,000 3,962 857 -95.53% --
December 31, 1999................. 13,800 500,000 13,877 11,031 -17.74 1,138.35%
December 31, 2000................. 20,700 500,000 13,820 11,318 -32.39 354.68
December 31, 2001................. 27,600 500,000 16,109 13,953 -29.43 186.90
</Table>
- ------------
(1)The Zenith Equity Series' sub-adviser was Capital Growth Management Limited
Partnership until May 1, 2002 when it became a "fund of funds" that invests
equally in three other series of the Zenith Fund--the FI Structured Equity
Series, the Jennison Growth Series and the Capital Guardian U.S. Equity
Series. Rates of return for the period through December 31, 1987, reflect
the Zenith Equity Series' former advisory fee of .50% of average daily net
assets. Rates of return for the period thereafter reflect the advisory fee
schedule in effect as of December 31, 2001.
(2)The State Street Research Bond Income and State Street Research Money Market
Series' sub-adviser was Back Bay Advisors, L.P. until July 1, 2001 when
State Street Research and Management Company became the sub-adviser.
(3)The MFS Total Return Series' sub-adviser was Back Bay Advisors, L.P. until
July 1, 2001 when Massachusetts Financial Services Company became the
sub-adviser.
(4)The FI Structured Equity Series' sub-adviser was Westpeak Investment
Advisers, L.P. until May 1, 2002 when Fidelity Management & Research Company
became the sub-adviser.
(5)The Harris Oakmark Focused Value Series' sub-adviser was Loomis, Sayles &
Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management became
the sub-adviser. Harris Associates L.P. became the sub-adviser on May 1,
2000. Rates of return reflect the Series' former investment advisory fee of
.70% of average daily net assets for the period through April 30, 1998 and
.75% thereafter.
A-72
(6)The Balanced Series' sub-adviser was Loomis, Sayles & Company, L.P. until
May 1, 2000, when Wellington Management Company became the sub-adviser.
(7)On December 1, 2000, the Putnam International Stock Portfolio of the
Metropolitan Series Fund, Inc. replaced the Morgan Stanley International
Magnum Equity Series of the Zenith Fund (which commenced operations on
October 31, 1994). Performance figures for dates on or before December 1,
2000 reflect the performance of the Morgan Stanley International Magnum
Equity Series.
(8)On April 27, 2001, the MetLife Stock Index Portfolio of the Metropolitan
Series Fund, Inc. replaced the Westpeak Stock Index Series of the Zenith
Fund (which commenced operations on May 1, 1987). Performance figures for
dates on or before April 27, 2001 reflect the performance of the Westpeak
Stock Index Series.
(9)The State Street Research Investment Trust Portfolio commenced operations on
June 24, 1983. Performance figures for the period from June 24, 1983 through
September 6, 1994 are based on month-end net asset values, as daily net
asset value information is not available.
(10)Performance figures for the Met/AIM Mid Cap Core Equity Portfolio, the
Met/AIM Small Cap Growth Portfolio and the State Street Research
Concentrated International Portfolio for dates before January 2, 2002
reflect the performance of the Class B shares of these Portfolios, as
restated to exclude 12b-1 fees.
A-73
APPENDIX C
LONG TERM MARKET TRENDS
The information below compares the average annual returns of common stock,
high grade corporate bonds and 30-day U.S. Treasury bills over 20-year and
30-year holding periods.* The average annual returns assume the reinvestment of
dividends, capital gains and interest. This is an historical record and does not
predict future performance. The information does not reflect Policy charges.
The data indicates that, historically, the investment performance of common
stocks over long periods has been positive and generally superior to that of
long-term, high grade debt securities. Common stocks have, however, been subject
to more dramatic market adjustments over short periods.
Over the 57 20-year time periods beginning in 1926 and ending in 2001
(i.e., 1926-1945, 1927-1946, and so on through 1982-2001):
-- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 54 of the 57 periods.
-- The average annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 57 periods.
-- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 57 periods.
Over the 47 30-year periods beginning in 1926 and ending in 2001, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 47 periods.
From 1926 through 2001 the average annual return for common stocks was
10.7%, compared to 5.8% for high grade, long-term corporate bonds, 3.8% for U.S.
Treasury bills and 3.1% for the Consumer Price Index.
- ------------
* Used with permission. (C)2002 Ibbotson Associates, Inc. All rights reserved.
[Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.]
------------------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR
SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index with dividends reinvested, over one-year, five-year and
twenty-year periods beginning in 1926 and ending 2001.
The chart does not predict future stock market results. It shows the
historic performance of a broad index of stocks, and not the performance of any
fund or investment.
------------------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<Table>
<Caption>
GREATER
0- 5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 5.00% 10.00% 15.00% 20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
- ------- -------- ------ ------ ------ ------ -------
1 year.................................. 25% 4% 11% 7% 13% 40%
5 years................................. 10% 14% 15% 30% 18% 13%
10 years................................ 3% 9% 33% 24% 29% 2%
20 years................................ 0% 7% 31% 53% 9% 0%
</Table>
- ------------
Used with permission. (C)2002 Ibbotson Associates, Inc. All rights reserved.
[Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.]
A-74
APPENDIX D
USES OF LIFE INSURANCE
These are examples of ways the Policy can be used to address certain
financial objectives.
FAMILY INCOME PROTECTION
You may purchase life insurance on the lives of family income earners to
provide a death benefit to cover final expenses, and continue current family
income. The amount of insurance you purchase should be an amount which will
provide a death benefit that, when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the individual's income.
ESTATE PROTECTION
A trust may purchase life insurance on the life of the person whose estate
will incur federal estate taxes upon the person's death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. On the
insured's death, the trustee makes the death proceeds available to the estate
for the payment of estate tax costs.
EDUCATION FUNDING
You may purchase life insurance on the life of the parent(s) or primary
person funding an education. The amount of insurance you purchase should equal
the total education cost projected at a reasonable inflation rate.
In the event of death, the guaranteed death benefit is available to help
pay the education costs. If the insured lives through the education years, cash
value may be accessed to meet education costs. Loans or withdrawals reduce the
Policy's death benefit.
MORTGAGE PROTECTION
You may purchase life insurance on the life of the person responsible for
making mortgage payments. The amount of insurance you purchase should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to pay the mortgage balance.
During the insured's lifetime, cash value may be accessed late in the
mortgage term to help make the remaining mortgage payments. Loans or withdrawals
reduce the Policy's death benefit.
KEY PERSON PROTECTION
A business may purchase life insurance on the life of a key person in an
amount equal to the key person's value, considering salary, benefits, and
contribution to the business. On the key person's death, the business uses the
death benefit to ease the interruption of business operations and/or to provide
a replacement fund for hiring a new executive.
BUSINESS CONTINUATION PROTECTION
You can insure each business owner in an amount equal to the value of each
owner's business interest. In the event of death, the guaranteed death benefit
provides funds for the purchase of the deceased's business interest by the
business, or surviving owners, from the deceased owner's heirs.
RETIREMENT INCOME
You may purchase life insurance on the life of a family income earner
during his or her working life. If the insured lives to retirement, cash value
may be accessed to provide retirement payments. In the event of the insured's
death, the proceeds may be used to provide retirement income to his or her
spouse. Loans or withdrawals reduce the Policy's death benefit.
A-75
Because the Policy provides a death benefit and cash value accumulation,
you can use the Policy for various individual and business planning purposes. If
you purchase the Policy for such purposes, you assume certain risks,
particularly if the Policy's cash value, as opposed to its death benefit, will
be the principal Policy feature used for such planning purposes. If the
investment performance of the Sub-Accounts to which cash value is allocated is
poorer than expected, or if you don't pay sufficient premiums or maintain cash
values, the Policy may lapse or may not accumulate sufficient cash value or cash
surrender value to fund the purpose for which you purchased the Policy. If you
borrow from the Policy for these purposes, poor investment performance may make
it difficult or impossible to repay the Policy loans. Moreover, if the Policy
lapses, outstanding loans could create a significant income tax liability.
Because the Policy is designed to provide benefits on a long-term basis, before
purchasing a Policy for a specialized purpose, you should consider whether the
long-term nature of the Policy is consistent with your goals. If you wish to
access your Policy's cash value, through loans or withdrawals, you should
consult your tax adviser about possible tax consequences. (See "Tax
Considerations".)
A-76
APPENDIX E
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products" in
March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax Treatment
of Life Insurance Products and Other Retirement Savings Plans". Because it is a
convenient summary of the relevant tax characteristics of these products and
plans, we have reprinted it here, and added footnotes to reflect exceptions to
the general rules.
------------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND OTHER RETIREMENT
SAVINGS PLANS
<Table>
<Caption>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- ----- ---------
Annual Contribution
Limits No No Yes Yes
Income Eligibility
Limits No No Yes** No
Borrowing Treated as
Distributions No* Yes Loans not allowed Yes, beyond $50,000
Income Ordering Rules
(Income included in
First Distribution) No* Yes Yes Yes
Early Withdrawal
Penalties No* Yes*** Yes*** Yes***
Minimum Distribution
Rules by Age 70 1/2 No No Yes Yes
Anti-discrimination
Rules No No No Yes
</Table>
- ------------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
This appendix is not tax advice. You should consult with your own tax advisor
for more complete information.
A-77
APPENDIX F
GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST
In order to meet the Internal Revenue Code's definition of life insurance,
the Policies provide that the death benefit will not be less than what is
required by the "guideline premium test" under Section 7702(a)(2) of the
Internal Revenue Code, or the "cash value accumulation test" under Section
7702(a)(1) of the Internal Revenue Code, as selected by you when the Policy is
issued. The test you choose at issue will be used for the life of the Policy.
(See "Death Benefit".)
For the guideline premium test, the table below shows the percentage of the
Policy's cash value that is used to determine the death benefit.
<Table>
<Caption>
AGE OF AGE OF
INSURED AT START OF PERCENTAGE OF INSURED AT START OF PERCENTAGE OF
THE POLICY YEAR CASH VALUE THE POLICY YEAR CASH VALUE
- ------------------- ------------- ------------------- -------------
0 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 through 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 through 99 101
59 134 100+ 100
60 130
</Table>
For the cash value accumulation test, sample net single premiums for
selected ages of male and female insureds, in a standard or better nonsmoker
risk class, are listed below.
<Table>
<Caption>
NET SINGLE PREMIUM
---------------------
AGE MALE FEMALE
- --- --------- ---------
30.......................................................... 0.1955185 0.1743701
40.......................................................... 0.2736424 0.2437963
50.......................................................... 0.3786685 0.3359599
60.......................................................... 0.5098683 0.4542278
70.......................................................... 0.6534828 0.5984410
80.......................................................... 0.7815873 0.7483734
90.......................................................... 0.8737282 0.8654986
100......................................................... 1.0000000 1.0000000
</Table>
A-78
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
INDEPENDENT AUDITORS REPORT
To the Policy Owners and Board of Directors of New England Life Insurance
Company:
We have audited the accompanying statement of assets and liabilities of the New
England Variable Life Separate Account (comprised of Capital Growth Sub-Account,
State Street Research Bond Income Sub-Account, State Street Research Money
Market Sub-Account, Westpeak Stock Index Sub-Account, MFS Total Return
Sub-Account, Harris Oakmark Mid Cap Value Sub-Account, Westpeak Growth and
Income Sub-Account, Loomis Sayles Small Cap Sub-Account, Salomon Brothers U.S.
Government Sub-Account, Balanced Sub-Account, Alger Equity Growth Sub-Account,
Davis Venture Value Sub-Account, Salomon Brothers Bond Opportunities
Sub-Account, MFS Investors Trust Sub-Account, MFS Research Managers Sub-Account,
Janus Mid Cap Sub-Account, Putnam Large Cap Growth Sub-Account, Russell 2000
Index Sub-Account, Putnam International Stock Sub-Account, MetLife Stock Index
Sub-Account, MetLife Mid Cap Stock Index Sub-Account, Morgan Stanley EAFE Index
Sub-Account, Lehman Brothers Aggregate Bond Index Sub-Account, State Street
Research Aurora Small Cap Value Sub-Account, Janus Growth Sub-Account, VIP
Equity-Income Sub-Account, VIP Overseas Sub-Account, VIP High Income Sub-
Account, VIP II Asset Manager Sub-Account, American Funds Growth Sub-Account,
American Funds Growth-Income Sub-Account and American Funds Global Small
Capitalization Sub-Account) of New England Life Insurance Company (the
"Company") as of December 31, 2001, and the related statements of operations and
changes in net assets for each of the three years in the period then ended for
all Sub-Accounts. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the respective aforementioned
Sub-Accounts comprising the New England Variable Life Separate Account of New
England Life Insurance Company as of December 31, 2001, and the results of their
operations and the changes in their net assets for each of the three years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 22, 2002
AA-1
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------
CAPITAL BOND MONEY TOTAL MID CAP
GROWTH INCOME MARKET RETURN VALUE
SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ------------ ----------- ------------
ASSETS
Investments in New England Zenith
Fund, Metropolitan Series Fund,
American Funds Insurance Series
Variable Insurance Products Fund,
and Variable Insurance Products
Fund II at value (Note 2).......... $874,531,822 $114,180,090 $ 99,500,958 $69,489,979 $101,586,264
<Caption>
NEW ENGLAND ZENITH FUND
--------------------------
GROWTH
AND SMALL
INCOME CAP
SUB- SUB-
ACCOUNT ACCOUNT
----------- ------------
ASSETS
Investments in New England Zenith
Fund, Metropolitan Series Fund,
American Funds Insurance Series
Variable Insurance Products Fund,
and Variable Insurance Products
Fund II at value (Note 2).......... $85,380,506 $142,269,823
</Table>
<Table>
<Caption>
SHARES COST
---------- --------------
Capital Growth
Series............. 2,580,653 $ 988,314,650
State Street
Research Bond
Income Series...... 1,044,362 112,299,971
State Street
Research Money
Market Series...... 995,010 99,500,958
Westpeak Stock Index
Series............. 0 0
MFS Total Return
Series............. 489,642 80,275,644
Harris Oakmark Mid
Cap Value Series... 545,899 81,564,439
Westpeak Growth and
Income Series...... 545,527 98,869,346
Loomis Sayles Small
Cap Series......... 802,605 135,943,720
Salomon Brothers U.S
Government
Series............. 70,115 814,723
Balanced Series..... 1,439,666 21,199,752
Alger Equity Growth
Series............. 13,147,717 324,656,563
Davis Venture Value
Series............. 11,577,733 270,276,821
Salomon Brothers
Bond Opportunities
Series............. 106,849 1,305,436
MFS Investors
Series............. 550,885 5,422,917
MFS Research
Managers Series.... 1,418,962 17,523,698
Janus Mid Cap
Portfolio.......... 1,997,789 52,241,900
Putnam Large Cap
Growth Portfolio... 1,414,595 10,379,667
Russell 2000(R)
Index Portfolio.... 570,633 6,257,309
Putnam International
Stock Portfolio.... 2,408,638 27,262,057
State Street Aurora
Small Cap Value
Portfolio.......... 1,194,166 16,255,886
MetLife Stock Index
Portfolio.......... 6,602,429 216,710,254
Lehman Brothers
Aggregate Bond
Index Portfolio.... 424,083 4,391,129
Morgan Stanley EAFE
Index Portfolio.... 58,779 518,499
MetLife Mid Cap
Stock Portfolio.... 106,252 1,066,894
Janus Growth
Portfolio.......... 112,609 920,285
American Funds
Growth Fund........ 478,702 21,344,568
American Funds
Growth -- Income
Fund............... 475,930 14,871,501
American Funds
Global Small
Capitalization
Fund............... 201,050 2,177,192
VIP Equity-Income
Portfolio.......... 7,479,231 147,619,047
VIP Overseas
Portfolio.......... 7,772,829 144,360,429
VIP High Income
Portfolio.......... 2,376,386 24,502,937
VIP II Asset Manager
Portfolio.......... 1,173,845 18,737,901
--------------
Total............... $2,947,586,093
==============
</Table>
<Table>
<Caption>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------------------------
CAPITAL BOND MONEY MID CAP
GROWTH INCOME MARKET MANAGED VALUE
SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ------------ ----------- ------------
Amount due and accrued (payable)
from policy-related transactions,
net................................ 482,509 281,027 379,226 39,065 202,271
Dividends receivable................ -- -- 155,204 -- --
------------ ------------ ------------ ----------- ------------
Total Assets...................... 875,014,331 114,461,117 100,035,388 69,529,044 101,788,535
LIABILITIES
Due to New England Life Insurance
Company............................ 66,678,720 12,124,018 12,394,813 6,938,041 10,979,737
------------ ------------ ------------ ----------- ------------
Total Liabilities................. 66,678,720 12,124,018 12,394,813 6,938,041 10,979,737
------------ ------------ ------------ ----------- ------------
NET ASSETS FOR VARIABLE LIFE
INSURANCE POLICIES.................. $808,335,611 $102,337,099 $ 87,640,575 $62,591,003 $ 90,808,798
============ ============ ============ =========== ============
<Caption>
NEW ENGLAND ZENITH FUND
--------------------------
GROWTH
AND SMALL
INCOME CAP
SUB- SUB-
ACCOUNT ACCOUNT
----------- ------------
Amount due and accrued (payable)
from policy-related transactions,
net................................ 53,575 111,127
Dividends receivable................ -- --
----------- ------------
Total Assets...................... 85,434,081 142,380,950
LIABILITIES
Due to New England Life Insurance
Company............................ 9,948,705 16,521,788
----------- ------------
Total Liabilities................. 9,948,705 16,521,788
----------- ------------
NET ASSETS FOR VARIABLE LIFE
INSURANCE POLICIES.................. $75,485,376 $125,859,162
=========== ============
</Table>
See Notes to Financial Statements
AA-2
<Table>
<Caption>
NEW ENGLAND ZENITH FUND METROPOLITAN SERIES FUND
------------------------------------------------------------------------------------------------- ------------------------
U.S. EQUITY VENTURE BOND RESEARCH LARGE CAP
GOVERNMENT BALANCED GROWTH VALUE OPPORTUNITIES INVESTORS MANAGERS MID CAP GROWTH
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
---------- ----------- ------------ ------------ ------------- ---------- ----------- ----------- ----------
$838,581 $17,909,444 $272,683,651 $270,803,178 $1,198,841 $4,720,184 $12,826,711 $29,287,581 $7,143,704
13,714 30,995 230,767 251,499 7,500 1,857 8,393 27,925 14,559
-- -- -- -- -- -- -- -- --
-------- ----------- ------------ ------------ ---------- ---------- ----------- ----------- ----------
852,295 17,940,439 272,914,418 271,054,677 1,206,341 4,722,041 12,835,104 29,315,506 7,158,263
26,854 2,362,186 32,732,471 33,068,010 38,009 634,362 1,526,263 3,788,268 921,530
-------- ----------- ------------ ------------ ---------- ---------- ----------- ----------- ----------
26,854 2,362,186 32,732,471 33,068,010 38,009 634,362 1,526,263 3,788,268 921,530
-------- ----------- ------------ ------------ ---------- ---------- ----------- ----------- ----------
$825,441 $15,578,253 $240,181,947 $237,986,667 $1,168,332 $4,087,679 $11,308,841 $25,527,238 $6,236,733
======== =========== ============ ============ ========== ========== =========== =========== ==========
<Caption>
METROPOLITAN SERIES FUND
--------------------------
RUSSELL INTERNATIONAL
2000 INDEX STOCK
SUB- SUB-
ACCOUNT ACCOUNT
---------- -------------
$5,951,708 $22,833,885
34,615 85,257
-- --
---------- -----------
5,986,323 22,919,142
766,762 701,642
---------- -----------
766,762 701,642
---------- -----------
$5,219,561 $22,217,500
========== ===========
</Table>
See Notes to Financial Statements
AA-3
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
METROPOLITAN SERIES FUND
---------------------------------------------------------------------------
AURORA MID CAP
SMALL CAP STOCK AGGREGATE EAFE STOCK JANUS
VALUE INDEX BOND INDEX INDEX GROWTH
SUB- SUB- INDEX SUB- SUB- SUB-
ACCOUNT ACCOUNT SUB-ACCOUNT ACCOUNT ACCOUNT ACCOUNT
----------- ------------ ----------- -------- ---------- --------
ASSETS
Investments in New England Zenith
Fund, Metropolitan Series Fund,
American Funds Insurance Series,
Variable Insurance Products Fund,
and Variable Insurance Products
Fund II at value (Note 2).......... $16,873,571 $202,034,330 $4,435,911 $514,317 $1,111,396 $880,600
</Table>
<Table>
<Caption>
SHARES COST
---------- --------------
Capital Growth
Series............. 2,580,653 $ 988,314,650
State Street
Research Bond
Income Series...... 1,044,362 112,299,971
State Street
Research Money
Market Series...... 995,010 99,500,958
Westpeak Stock Index
Series............. 0 0
MFS Total Return
Series............. 489,642 80,275,644
Harris Oakmark Mid
Cap Value Series... 545,899 81,564,439
Westpeak Growth and
Income Series...... 545,527 98,869,346
Loomis Sayles Small
Cap Series......... 802,605 135,943,720
Salomon Brothers
U.S. Government
Series............. 70,115 814,723
Balanced Series..... 1,439,666 21,199,752
Alger Equity Growth
Series............. 13,147,717 324,656,563
Davis Venture Value
Series............. 11,577,733 270,276,821
Salomon Brothers
Bond Opportunities
Series............. 106,849 1,305,436
MFS Investors
Series............. 550,885 5,422,917
MFS Research
Managers Series.... 1,418,962 17,523,698
Janus Mid Cap
Portfolio.......... 1,997,789 52,241,900
Putnam Large Cap
Growth Portfolio... 1,414,595 10,379,667
Russell 2000 Index
Portfolio.......... 570,633 6,257,309
Putnam International
Stock Portfolio.... 2,408,638 27,262,057
State Street Aurora
Small Cap Value
Portfolio.......... 1,194,166 16,255,886
MetLife Stock Index
Portfolio.......... 6,602,429 216,710,254
Lehman Brothers
Aggregate Bond
Index Portfolio.... 424,083 4,391,129
Morgan Stanley EAFE
Index Portfolio.... 58,779 518,499
MetLife Mid Cap
Stock Portfolio.... 106,252 1,066,894
Janus Growth
Portfolio.......... 112,609 920,285
American Funds
Growth Fund........ 478,702 21,344,568
American Funds
Growth -- Income
Fund............... 475,930 14,871,501
American Funds
Global Small
Capitalization
Fund............... 201,050 2,177,192
VIP Equity-Income
Portfolio.......... 7,479,231 147,619,047
VIP Overseas
Portfolio.......... 7,772,829 144,360,429
VIP High Income
Portfolio.......... 2,376,386 24,502,937
VIP II Asset Manager
Portfolio.......... 1,173,845 18,737,901
--------------
Total............... $2,947,586,093
==============
</Table>
<Table>
Amount due and accrued (payable)
from policy-related transactions,
net................................ 106,190 282,841 52,871 112 4,536 7,385
Dividends receivable................ -- -- -- -- -- --
----------- ------------ ---------- -------- ---------- --------
Total Assets...................... 16,979,761 202,317,171 4,488,782 514,429 1,115,932 887,985
LIABILITIES
Due to New England Life Insurance
Company............................ 1,809,719 24,057,752 396,473 77,161 155,799 98,898
----------- ------------ ---------- -------- ---------- --------
Total Liabilities................. 1,809,719 24,057,752 396,473 77,161 155,799 98,898
----------- ------------ ---------- -------- ---------- --------
NET ASSETS FOR VARIABLE LIFE
INSURANCE POLICIES.................. $15,170,042 $178,259,419 $4,092,309 $437,268 $ 960,133 $789,087
=========== ============ ========== ======== ========== ========
</Table>
See Notes to Financial Statements
AA-4
<Table>
<Caption>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
AMERICAN FUNDS INSURANCE SERIES PRODUCTS FUND FUND II
- ---------------------------------------------- ------------------------------------------- --------------
GLOBAL ------------------------------------------------------------ --------------
GROWTH- SMALL EQUITY- HIGH ASSET
GROWTH INCOME CAPITALIZATION INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
----------- ----------- -------------- ------------ ------------ ------------- -------------- --------------
$21,101,194 $15,029,874 $2,308,057 169,937,860 106,565,449 $15,589,779 $16,996,984 $2,706,516,232
</Table>
<Table>
<Caption>
</Table>
<Table>
111,571 74,367 5,739 (270,579) 94,324 5,745 3,436 2,734,419
-- -- -- -- -- -- -- 155,204
----------- ----------- ---------- -------------- ------------ ----------- ----------- --------------
21,212,765 15,104,241 2,313,796 169,667,281 106,659,773 15,595,524 17,000,420 2,709,405,855
2,376,788 1,886,181 244,258 17,359,668 6,684,553 2,285,040 2,171,081 271,755,550
----------- ----------- ---------- -------------- ------------ ----------- ----------- --------------
2,376,788 1,886,181 244,258 17,359,668 6,684,553 2,285,040 2,171,081 271,755,550
----------- ----------- ---------- -------------- ------------ ----------- ----------- --------------
$18,835,977 $13,218,060 $2,069,538 $ 152,307,613 $ 99,975,220 $13,310,484 $14,829,339 $2,437,650,305
=========== =========== ========== ============== ============ =========== =========== ==============
</Table>
See Notes to Financial Statements
AA-5
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
-----------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK TOTAL MIDCAP
GROWTH INCOME MARKET INDEX RETURN VALUE
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ---------- ---------- ------------ ------------ -----------
INCOME
Dividends......................... $ 14,861,966 $7,824,384 $3,437,775 $ 7,336,294 $ 13,736,454 $ 378,221
EXPENSE
Mortality and expense risk charge
(Note 3)......................... 5,409,982 639,637 495,268 528,534 436,823 481,741
------------- ---------- ---------- ------------ ------------ -----------
Net investment income (loss)...... 9,451,984 7,184,747 2,942,507 6,807,760 13,299,631 (103,520)
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net unrealized appreciation
(depreciation) on investments:
Beginning of period.............. 81,288,400 1,588,195 -- 44,833,445 5,621,175 3,374,127
End of period.................... (113,782,828) 1,880,119 -- -- (10,785,665) 20,021,825
------------- ---------- ---------- ------------ ------------ -----------
Net change in unrealized
appreciation (depreciation)...... (195,071,228) 291,924 -- (44,833,445) (16,406,840) 16,647,698
Net realized gain (loss) on
investments...................... (2,138,650) (7,181) -- 27,004,313 (18,326) 26,315
------------- ---------- ---------- ------------ ------------ -----------
Net realized and unrealized gain
(loss) on investments............ (197,209,878) 284,743 -- (17,829,132) (16,425,166) 16,674,013
------------- ---------- ---------- ------------ ------------ -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS........................ $(187,757,894) $7,469,490 $2,942,507 $(11,021,372) $ (3,125,535) $16,570,493
============= ========== ========== ============ ============ ===========
<Caption>
NEW ENGLAND ZENITH FUND
----------------------------------------
GROWTH
AND SMALL U.S.
INCOME CAP GOVERNMENT
SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ----------
INCOME
Dividends......................... $ 814,774 $ 10,644,439 $50,491
EXPENSE
Mortality and expense risk charge
(Note 3)......................... 591,043 900,016 7,530
------------ ------------ -------
Net investment income (loss)...... 223,731 9,744,423 42,961
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net unrealized appreciation
(depreciation) on investments:
Beginning of period.............. 1,010,940 30,103,161 19,698
End of period.................... (13,488,840) 6,326,103 23,858
------------ ------------ -------
Net change in unrealized
appreciation (depreciation)...... (14,499,780) (23,777,058) 4,160
Net realized gain (loss) on
investments...................... (100,512) (5,616) 86
------------ ------------ -------
Net realized and unrealized gain
(loss) on investments............ (14,600,292) (23,782,674) 4,246
------------ ------------ -------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS........................ $(14,376,561) $(14,038,251) $47,207
============ ============ =======
</Table>
See Notes to Financial Statements
AA-6
<Table>
<Caption>
METROPOLITAN SERIES FUND
- --------------------------------------------------------------------------------------- --------------------------
EQUITY BOND RESEARCH LARGE CAP
BALANCED GROWTH VENTURE OPPORTUNITIES INVESTORS MANAGERS MID CAP GROWTH
SUB- SUB- VALUE SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
----------- ------------ ------------ ------------- --------- ----------- ------------ -----------
$712,069 $ 17,711,821 $ 25,909,682 $ 93,555 $ 17,364 $ 129,228 $ -- $ --
120,816 1,827,854 1,680,747 10,518 24,863 81,648 161,569 36,744
----------- ------------ ------------ --------- --------- ----------- ------------ -----------
591,253 15,883,967 24,228,935 83,037 (7,499) 47,580 (161,569) (36,744)
(1,826,493) (556,076) 56,304,584 (88,187) (63) (1,124,252) (11,653,506) (1,227,677)
(3,290,308) (51,972,912) 526,357 (106,595) (702,733) (4,696,987) (22,954,319) (3,235,963)
----------- ------------ ------------ --------- --------- ----------- ------------ -----------
(1,463,815) (51,416,836) (55,778,227) (18,408) (702,670) (3,572,735) (11,300,813) (2,008,286)
(21,371) (3,900,025) (20,358) 340 (11,947) (277,116) (417,064) (249,945)
----------- ------------ ------------ --------- --------- ----------- ------------ -----------
(1,485,186) (55,316,861) (55,798,585) (18,068) (714,617) (3,849,851) (11,717,877) (2,258,231)
----------- ------------ ------------ --------- --------- ----------- ------------ -----------
$ (893,933) $(39,432,894) $(31,569,650) $ 64,969 $(722,116) $(3,802,271) $(11,879,446) $(2,294,975)
=========== ============ ============ ========= ========= =========== ============ ===========
<Caption>
METROPOLITAN SERIES FUND
- --- -------------------------
RUSSELL
2000 INTERNATIONAL
INDEX STOCK
SUB- SUB-
ACCOUNT ACCOUNT
--------- -------------
$ 10,030 $ 766,200
22,945 138,598
--------- -----------
(12,915) 627,602
(642,986) 585,388
(305,601) (4,428,172)
--------- -----------
337,385 (5,013,560)
(22,652) (115,753)
--------- -----------
314,733 (5,129,313)
--------- -----------
$ 301,818 $(4,501,711)
========= ===========
</Table>
See Notes to Financial Statements
AA-7
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
METROPOLITAN SERIES FUND
-----------------------------------------------------------------------------
AURORA AGGREGATE
SMALL CAP STOCK BOND EAFE MID CAP
VALUE INDEX INDEX INDEX STOCK INDEX GROWTH
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT* ACCOUNT** ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT*
--------- ------------ --------- -------- ----------- --------
INCOME
Dividends........................................ $ -- $ -- $ -- $ -- $ -- $ --
EXPENSE
Mortality and expense risk charge (Note 3)....... 33,101 767,826 6,116 591 1,777 1,591
-------- ------------ ------- ------- ------- --------
Net investment income (loss)..................... (33,101) (767,826) (6,116) (591) (1,777) (1,591)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net unrealized appreciation (depreciation) on
investments:
Beginning of period............................. -- -- -- -- -- --
End of period................................... 617,685 (14,675,924) 44,782 (4,182) 44,502 (39,685)
-------- ------------ ------- ------- ------- --------
Net change in unrealized appreciation
(depreciation).................................. 617,685 (14,675,924) 44,782 (4,182) 44,502 (39,685)
Net realized gain (loss) on investments.......... (9,118) (251,887) 822 16 26 (798)
-------- ------------ ------- ------- ------- --------
Net realized and unrealized gain (loss) on
investments..................................... 608,567 (14,927,811) 45,604 (4,166) 44,528 (40,483)
-------- ------------ ------- ------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $575,466 $(15,695,637) $39,488 $(4,757) $42,751 $(42,074)
======== ============ ======= ======= ======= ========
</Table>
* For the period May 1, 2001 (Commencement of Operations) through December 31,
2001.
** On April 27, 2001, the MetLife Stock Index Portfolio was substituted for the
Westpeak Stock Index Series, which is no longer available for investment
under the contracts.
See Notes to Financial Statements
AA-8
<Table>
<Caption>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
AMERICAN FUNDS INSURANCE SERIES PRODUCTS FUND FUND II
---------------------------------------- ----------------------------------------- ----------- -------------
GLOBAL
GROWTH- SMALL EQUITY- HIGH ASSET
GROWTH INCOME CAPITALIZATION INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
----------- --------- -------------- ------------ ------------ ----------- ----------- -------------
$ 703,326 $ 247,020 $ 19,030 $ 11,204,132 $ 24,381,084 $ 1,758,933 $ 849,491 $ 143,597,763
33,863 27,140 3,946 1,103,777 762,426 95,020 104,280 16,538,330
----------- --------- ----------- ------------ ------------ ----------- ----------- -------------
669,463 219,880 15,084 10,100,355 23,618,658 1,663,913 745,211 127,059,433
-- -- -- 42,499,466 (3,631,357) (6,007,940) (317,692) 240,152,350
(243,374) 158,373 130,865 22,318,813 (37,794,980) (8,913,158) (1,740,917) (241,069,861)
----------- --------- ----------- ------------ ------------ ----------- ----------- -------------
(243,374) 158,373 130,865 (20,180,653) (34,163,623) (2,905,218) (1,423,225) (481,222,211)
(5,360) (4,325) (4,543) (2,881) (23,051,827) (408,150) (35,169) (4,048,656)
----------- --------- ----------- ------------ ------------ ----------- ----------- -------------
(248,734) 154,048 126,322 (20,183,534) (57,215,450) (3,313,368) (1,458,394) (485,270,867)
----------- --------- ----------- ------------ ------------ ----------- ----------- -------------
$420,729 $ 373,928 $ 141,406 $(10,083,179) $(33,596,792) $(1,649,455) $ (713,183) $(358,211,434)
=========== ========= =========== ============ ============ =========== =========== =============
</Table>
See Notes to Financial Statements
AA-9
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK MID CAP AND
GROWTH INCOME MARKET INDEX MANAGED VALUE INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ---------- ------------ ----------- ----------- -----------
INCOME
Dividends..................... $ 6,825,924 $ -- $4,511,876 $ 149,711 $ 1,581,304 $ -- $ 2,499,909
EXPENSE
Mortality and expense risk
charge (Note 3).............. 6,877,345 511,944 500,145 1,351,047 448,504 259,625 659,437
------------ ----------- ---------- ------------ ----------- ----------- -----------
Net investment income
(loss)....................... (51,421) (511,944) 4,011,731 (1,201,336) 1,132,800 (259,625) 1,840,472
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net unrealized appreciation
(depreciation) on
investments:
Beginning of period.......... 144,771,302 (4,499,584) -- 63,685,270 9,600,369 (4,330,144) 8,566,144
End of period................ 81,288,400 1,588,195 -- 44,833,445 5,621,175 3,374,127 1,010,940
------------ ----------- ---------- ------------ ----------- ----------- -----------
Net change in unrealized
appreciation
(depreciation)............... (63,482,902) 6,087,779 -- (18,851,825) (3,979,194) 7,704,271 (7,555,204)
Net realized gain (loss) on
investments.................. 65,557 (36,738) -- (203,449) (42,829) (23,066) (18,902)
------------ ----------- ---------- ------------ ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments... (63,417,345) 6,051,041 -- (19,055,274) (4,022,023) 7,681,205 (7,574,106)
------------ ----------- ---------- ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................... $(63,468,766) $ 5,539,097 $4,011,731 $(20,256,610) $(2,889,223) $ 7,421,580 $(5,733,634)
============ =========== ========== ============ =========== =========== ===========
<Caption>
NEW ENGLAND ZENITH FUND
-----------------------------------------------------
SMALL U.S. EQUITY
CAP GOVERNMENT BALANCED GROWTH
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT
----------- ---------- ----------- ------------
INCOME
Dividends..................... $ 1,181,882 $ -- $ 5,904 $ 3,306,492
EXPENSE
Mortality and expense risk
charge (Note 3).............. 902,187 7,636 117,597 1,981,053
----------- -------- ----------- ------------
Net investment income
(loss)....................... 279,695 (7,636) (111,693) 1,325,439
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net unrealized appreciation
(depreciation) on
investments:
Beginning of period.......... 27,466,967 (56,822) (1,387,395) 52,277,058
End of period................ 30,103,161 19,698 (1,826,493) (556,076)
----------- -------- ----------- ------------
Net change in unrealized
appreciation
(depreciation)............... 2,636,194 76,520 (439,098) (52,833,134)
Net realized gain (loss) on
investments.................. 145,497 148 79,174 416,391
----------- -------- ----------- ------------
Net realized and unrealized
gain (loss) on investments... 2,781,691 76,668 (359,924) (52,416,743)
----------- -------- ----------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................... $ 3,061,386 $ 69,032 $ (471,617) $(51,091,304)
=========== ======== =========== ============
</Table>
+ For the period May 1, 2000 (Commencement of Operations) through December 31,
2000.
++ On December 1, 2000, the Putnam International Stock Portfolio was substituted
for the Morgan Stanley International Magnum Equity Series, which is no longer
available for investment under the contracts.
See Notes to Financial Statements
AA-10
<Table>
<Caption>
METROPOLITAN SERIES FUND
--------------------------------------------------------------------- -------------------------------------------------------
INTERNATIONAL RUSSELL
MAGNUM BOND RESEARCH LARGE CAP 2000+ INTERNATIONAL+
EQUITY++ VENTURE OPPORTUNITIES INVESTORS MANAGERS MID CAP+ GROWTH+ INDEX STOCK
SUB- VALUE SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------- ----------- ------------- --------- ----------- ------------ ----------- --------- --------------
$ 374,965 $ -- $ -- $ 966 $ 2,453 $ 1,356,774 $ -- $ 306,539 $ 679
128,687 1,440,887 10,241 13,612 41,150 62,269 10,822 5,829 17,583
----------- ----------- --------- -------- ----------- ------------ ----------- --------- --------
246,278 (1,440,887) (10,241) (12,646) (38,697) 1,294,505 (10,822) 300,710 (16,904)
3,645,897 38,403,888 (154,569) 20,670 138,291 -- -- -- --
(48,155) 56,304,584 (88,187) (63) (1,124,252) (11,653,506) (1,227,677) (642,986) 633,543
----------- ----------- --------- -------- ----------- ------------ ----------- --------- --------
(3,694,052) 17,900,696 66,382 (20,733) (1,262,543) (11,653,506) (1,227,677) (642,986) 633,543
(10,214) (178,858) 5,936 (1,002) 60,137 764,362 4,567 22,026 6,780
----------- ----------- --------- -------- ----------- ------------ ----------- --------- --------
(3,683,838) 17,721,838 72,318 (21,735) (1,202,406) (10,889,144) (1,223,110) (620,960) 640,323
----------- ----------- --------- -------- ----------- ------------ ----------- --------- --------
$(3,437,560) $16,280,951 $ 62,077 $(34,381) $(1,241,103) $ (9,594,639) $(1,233,932) $(320,250) $623,419
=========== =========== ========= ======== =========== ============ =========== ========= ========
<Caption>
VARIABLE
INSURANCE
PRODUCTS
VARIABLE INSURANCE PRODUCTS FUND FUND II
---------------------------------------- ----------- -------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
----------- ------------ ----------- ----------- -------------
$13,394,545 $ 16,105,748 $ 1,006,372 $ 1,452,323 $ 54,064,366
1,054,512 1,056,320 103,143 95,403 17,656,978
----------- ------------ ----------- ----------- -------------
12,340,033 15,049,428 903,229 1,356,920 36,407,388
42,410,113 51,864,228 (919,900) 1,757,628 433,259,411
42,499,466 (3,631,357) (6,007,940) (317,692) 240,152,350
----------- ------------ ----------- ----------- -------------
89,353 (55,495,585) (5,088,040) (2,075,320) (193,107,061)
(452,602) 27,078 261,479 16,825 928,725
----------- ------------ ----------- ----------- -------------
(363,249) (55,468,507) (4,826,561) (2,058,495) (192,178,336)
----------- ------------ ----------- ----------- -------------
$11,976,784 $(40,419,079) $(3,923,332) $ (701,575) $(155,770,948)
=========== ============ =========== =========== =============
</Table>
See Notes to Financial Statements
AA-11
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
NEW ENGLAND ZENITH FUND
---------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK MID CAP
GROWTH INCOME MARKET INDEX MANAGED VALUE
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ----------- ---------- ----------- ----------- -----------
INCOME
Dividends................................ $239,049,928 $ 5,475,221 $5,083,165 $ 4,154,533 $ 9,783,326 $ 459,624
EXPENSE
Mortality and expense risk charge (Note
3)..................................... 6,723,595 471,818 638,578 1,013,735 421,255 330,436
------------ ----------- ---------- ----------- ----------- -----------
Net investment income (loss)............. 232,326,333 5,003,403 4,444,587 3,140,798 9,362,071 129,188
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net unrealized appreciation
(depreciation) on investments:
Beginning of period.................... 215,969,495 1,209,273 -- 39,965,167 13,285,666 (3,807,527)
End of period.......................... 144,771,302 (4,499,584) -- 63,685,270 9,600,369 (4,330,144)
------------ ----------- ---------- ----------- ----------- -----------
Net change in unrealized appreciation
(depreciation)......................... (71,198,193) (5,708,857) -- 23,720,103 (3,685,297) (522,617)
Net realized gain (loss) on
investments............................ (572,298) 1,487 -- (52,322) (65,614) (9,202)
------------ ----------- ---------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments......................... (71,770,491) (5,707,370) -- 23,667,781 (3,750,911) (531,819)
------------ ----------- ---------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ $160,555,842 $ (703,967) $4,444,587 $26,808,579 $ 5,611,160 $ (402,631)
============ =========== ========== =========== =========== ===========
<Caption>
NEW ENGLAND ZENITH FUND
-------------------------
GROWTH
AND SMALL
INCOME CAP
SUB- SUB-
ACCOUNT ACCOUNT
----------- -----------
INCOME
Dividends................................ $12,174,462 $ 260,319
EXPENSE
Mortality and expense risk charge (Note
3)..................................... 578,297 538,571
----------- -----------
Net investment income (loss)............. 11,596,165 (278,252)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net unrealized appreciation
(depreciation) on investments:
Beginning of period.................... 13,616,695 3,516,783
End of period.......................... 8,566,144 27,466,967
----------- -----------
Net change in unrealized appreciation
(depreciation)......................... (5,050,551) 23,950,184
Net realized gain (loss) on
investments............................ (33,403) 2,146
----------- -----------
Net realized and unrealized gain (loss)
on investments......................... (5,083,954) 23,952,330
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ $ 6,512,211 $23,674,078
=========== ===========
</Table>
* For the period April 30, 1999 (Commencement of Operations) through December
31, 1999.
See Notes to Financial Statements
AA-12
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------
INTERNATIONAL
U.S. EQUITY MAGNUM VENTURE BOND RESEARCH
GOVERNMENT BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INVESTORS* MANAGERS*
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
---------- ----------- ----------- ------------- ----------- ------------- ---------- ---------
$ 46,383 $ 998,875 $26,651,028 $ 60,426 $ 3,101,039 $ 90,809 $ 1,921 $ --
10,668 126,629 1,069,420 119,372 961,922 24,177 533 1,540
-------- ----------- ----------- ---------- ----------- --------- ------- --------
35,715 872,246 25,581,608 (58,946) 2,139,117 66,632 1,388 (1,540)
15,209 1,036,991 30,707,168 194,954 20,008,648 (46,594) -- --
(56,822) (1,387,395) 52,277,058 3,645,897 38,403,888 (154,569) 20,670 138,291
-------- ----------- ----------- ---------- ----------- --------- ------- --------
(72,031) (2,424,386) 21,569,890 3,450,943 18,395,240 (107,975) 20,670 138,291
(1,634) (14,874) (116,438) (4,634) (47,139) 1,097 8,670 (34,566)
-------- ----------- ----------- ---------- ----------- --------- ------- --------
(73,665) (2,439,260) 21,453,452 3,446,309 18,348,101 (106,878) 29,340 103,725
-------- ----------- ----------- ---------- ----------- --------- ------- --------
$(37,950) $(1,567,014) $47,035,060 $3,387,363 $20,487,218 $ (40,246) $30,728 $102,185
======== =========== =========== ========== =========== ========= ======= ========
<Caption>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- --- -------------------------------------- ---------- ------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
----------- ----------- ---------- ---------- ------------
$ 7,478,140 $ 3,746,050 $1,147,254 $ 713,060 $320,475,563
1,005,310 681,381 87,077 74,260 14,878,574
----------- ----------- ---------- ---------- ------------
6,472,830 3,064,669 1,060,177 638,800 305,596,989
39,593,709 14,768,529 (611,552) 1,247,559 390,670,173
42,410,113 51,864,228 (919,900) 1,757,628 433,259,411
----------- ----------- ---------- ---------- ------------
2,816,404 37,095,699 (308,348) 510,069 42,589,238
(592,373) (370,244) 48,706 (3,669) (1,856,304)
----------- ----------- ---------- ---------- ------------
2,224,031 36,725,455 (259,642) 506,400 40,732,934
----------- ----------- ---------- ---------- ------------
$ 8,696,861 $39,790,124 $ 800,535 $1,145,200 $346,329,923
=========== =========== ========== ========== ============
</Table>
See Notes to Financial Statements
AA-13
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
----------------------------------------------------------------------
CAPITAL BOND MONEY STOCK
GROWTH INCOME MARKET INDEX
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT
-------------- ------------ ------------- -------------
FROM OPERATING ACTIVITIES
Net investment income (loss)...... $ 9,451,984 $ 7,184,747 $ 2,942,507 $ 6,807,760
Net realized and unrealized gain
(loss) on investments............ (197,209,878) 284,743 -- (17,829,132)
-------------- ------------ ------------- -------------
Net Increase (decrease) in net
assets resulting from
operations...................... (187,757,894) 7,469,490 2,942,507 (11,021,372)
FROM POLICY-RELATED TRANSACTIONS
Net premiums transferred from New
England Life Insurance Company
(Note 4)......................... 120,702,047 16,079,114 183,577,288 13,318,097
Net transfers (to) from other
sub-accounts..................... (43,536,243) 21,636,526 (144,125,333) 3,725,284
Net transfers (to) from New
England Life Insurance Company... (104,356,611) (17,084,744) (28,415,100) (183,028,543)
-------------- ------------ ------------- -------------
Net Increase in net assets
resulting from policy related
transactions.................... (27,190,807) 20,630,896 11,036,855 (165,985,162)
-------------- ------------ ------------- -------------
Net increase (decrease) in net
assets........................... (214,948,701) 28,100,386 13,979,362 (177,006,534)
NET ASSETS, AT BEGINNING OF THE
PERIOD............................ 1,023,284,312 74,236,713 73,661,213 177,006,534
-------------- ------------ ------------- -------------
NET ASSETS, AT END OF THE PERIOD... $ 808,335,611 $102,337,099 $ 87,640,575 $ --
============== ============ ============= =============
<Caption>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------
GROWTH
TOTAL MID CAP AND SMALL
RETURN VALUE INCOME CAP
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ------------ ------------
FROM OPERATING ACTIVITIES
Net investment income (loss)...... $ 13,299,631 $ (103,520) $ 223,731 $ 9,744,423
Net realized and unrealized gain
(loss) on investments............ (16,425,166) 16,674,013 (14,600,292) (23,782,674)
------------ ------------ ------------ ------------
Net Increase (decrease) in net
assets resulting from
operations...................... (3,125,535) 16,570,493 (14,376,561) (14,038,251)
FROM POLICY-RELATED TRANSACTIONS
Net premiums transferred from New
England Life Insurance Company
(Note 4)......................... 10,244,678 12,235,298 17,243,170 27,576,083
Net transfers (to) from other
sub-accounts..................... 3,235,428 34,392,616 (3,228,191) (897,800)
Net transfers (to) from New
England Life Insurance Company... (8,911,220) (15,070,924) (19,283,427) (19,407,100)
------------ ------------ ------------ ------------
Net Increase in net assets
resulting from policy related
transactions.................... 4,568,886 31,556,990 (5,268,448) 7,271,183
------------ ------------ ------------ ------------
Net increase (decrease) in net
assets........................... 1,443,351 48,127,483 (19,645,009) (6,767,068)
NET ASSETS, AT BEGINNING OF THE
PERIOD............................ 61,147,652 42,681,315 95,130,385 132,626,230
------------ ------------ ------------ ------------
NET ASSETS, AT END OF THE PERIOD... $ 62,591,003 $ 90,808,798 $ 75,485,376 $125,859,162
============ ============ ============ ============
</Table>
See Notes to Financial Statements
AA-14
<Table>
<Caption>
METROPOLITAN SERIES FUND
- ----------------------------------------------------------------------------------------------------- --------------------------
LARGE
U.S. EQUITY VENTURE BOND RESEARCH CAP
GOVERNMENT BALANCED GROWTH VALUE OPPORTUNITIES INVESTORS MANAGERS MID CAP GROWTH
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
---------- ----------- ------------ ------------ ------------- ---------- ----------- ------------ -----------
$42,961 $ 591,253 $ 15,883,967 $ 24,228,935 $ 83,037 $ (7,499) $ 47,580 $ (161,569) $ (36,744)
4,246 (1,485,186) (55,316,861) (55,798,585) (18,068) (714,617) (3,849,851) (11,717,877) (2,258,231)
-------- ----------- ------------ ------------ ---------- ---------- ----------- ------------ -----------
47,207 (893,933) (39,432,894) (31,569,650) 64,969 (722,116) (3,802,271) (11,879,446) (2,294,975)
3,491,442 64,300,826 54,072,478 -- 1,104,466 3,666,773 10,576,777 2,041,506
28,413 919,446 2,175,648 29,927,924 102,007 1,339,007 1,144,285 9,477,069 2,813,031
(4,106) (2,958,148) (59,744,572) (30,627,232) (33,833) (643,381) (1,306,512) (6,501,181) (818,657)
-------- ----------- ------------ ------------ ---------- ---------- ----------- ------------ -----------
24,307 1,452,740 6,731,902 53,373,170 68,174 1,800,092 3,504,546 13,552,665 4,035,880
-------- ----------- ------------ ------------ ---------- ---------- ----------- ------------ -----------
71,514 558,807 (32,700,992) 21,803,520 133,143 1,077,976 (297,725) 1,673,219 1,740,905
753,927 15,019,446 272,882,939 216,183,147 1,035,189 3,009,703 11,606,566 23,854,019 4,495,828
-------- ----------- ------------ ------------ ---------- ---------- ----------- ------------ -----------
$825,441 $15,578,253 $240,181,947 $237,986,667 $1,168,332 $4,087,679 $11,308,841 $ 25,527,238 $ 6,236,733
======== =========== ============ ============ ========== ========== =========== ============ ===========
<Caption>
METROPOLITAN SERIES FUND
- --- ---------------------------
RUSSELL INTERNATIONAL
2000 INDEX STOCK
SUB- SUB-
ACCOUNT ACCOUNT
----------- -------------
$ (12,915) $ 627,602
314,733 (5,129,313)
----------- -----------
301,818 (4,501,711)
1,367,109 5,579,942
2,704,989 5,403,726
(1,317,567) (3,651,972)
----------- -----------
2,754,531 7,331,696
----------- -----------
3,056,349 2,829,985
2,163,212 19,387,515
----------- -----------
$ 5,219,561 $22,217,500
=========== ===========
</Table>
See Notes to Financial Statements
AA-15
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
METROPOLITAN SERIES FUND
--------------------------------------------------------------------------
AURORA STOCK AGGREGATE
SMALL CAP INDEX BOND EAFE MID CAP
VALUE GROWTH INDEX INDEX STOCK GROWTH
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT*
----------- ------------ ---------- -------- --------- ---------
FROM OPERATING ACTIVITIES
Net investment income
(loss)...................... $ (33,101) $ (767,826) $ (6,116) $ (591) $ (1,777) $ (1,591)
Net realized and unrealized
gain (loss) on
investments................. 608,567 (14,927,811) 45,604 (4,166) 44,528 (40,483)
----------- ------------ ---------- -------- --------- ---------
Net Increase (decrease) in
net assets resulting from
operations................. 575,466 (15,695,637) 39,488 (4,757) 42,751 (42,074)
FROM POLICY-RELATED
TRANSACTIONS
Net premiums transferred from
New England Life Insurance
Company (Note 4)............ 1,478,099 26,483,557 384,578 68,580 158,146 64,937
Net transfers (to) from other
sub-accounts................ 15,717,971 11,516,630 4,188,650 333,025 944,550 940,157
Net transfers (to) from New
England Life Insurance
Company..................... (2,601,494) 155,954,869 (520,407) 40,420 (185,314) (173,933)
----------- ------------ ---------- -------- --------- ---------
Net Increase in net assets
resulting from policy
related transactions....... 14,594,576 193,955,056 4,052,821 442,025 917,382 831,161
----------- ------------ ---------- -------- --------- ---------
Net increase (decrease) in net
assets...................... 15,170,042 178,259,419 4,092,309 437,268 960,133 789,087
NET ASSETS, AT BEGINNING OF THE
PERIOD........................ -- -- -- -- -- --
----------- ------------ ---------- -------- --------- ---------
NET ASSETS, AT END OF THE
PERIOD........................ $15,170,042 $178,259,419 $4,092,309 $437,268 $ 960,133 $ 789,087
=========== ============ ========== ======== ========= =========
</Table>
* For the period May 1, 2001 (Commencement of Operations) through December 31,
2001.
** On April 27, 2001, the MetLife Stock Index Portfolio was substituted for the
Westpeak Stock Index Series, which is no longer available for investment
under the contracts.
See Notes to Financial Statements
AA-16
<Table>
<Caption>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
AMERICAN FUNDS INSURANCE SERIES PRODUCTS FUND FUND II
------------------------------------------ ----------------------------------------- ----------- --------------
GROWTH- GLOBAL SMALL EQUITY- HIGH ASSET
GROWTH INCOME CAPITALIZATION INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT* ACCOUNT* ACCOUNT* ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
----------- ----------- -------------- ------------ ------------ ----------- ----------- --------------
$ 669,463 $ 219,880 $ 15,084 $ 10,100,355 $ 23,618,658 $ 1,663,913 $ 745,211 $ 127,059,433
(248,734) 154,048 126,322 (20,183,534) (57,215,450) (3,313,368) (1,458,394) (485,270,867)
----------- ----------- ---------- ------------ ------------ ----------- ----------- --------------
420,729 373,928 141,406 (10,083,179) (33,596,792) (1,649,455) (713,183) (358,211,434)
1,979,441 1,528,344 199,909 23,566,426 22,864,761 3,376,955 3,516,423 632,847,250
19,367,339 13,853,685 2,120,530 1,729,692 (2,729,062) 3,183,382 1,595,619 --
(2,931,532) (2,537,897) (392,307) (19,935,729) (69,812,641) (3,232,956) (2,789,787) (452,283,538)
----------- ----------- ---------- ------------ ------------ ----------- ----------- --------------
18,415,248 12,844,132 1,928,132 5,360,389 (49,676,942) 3,327,381 2,322,255 180,563,712
----------- ----------- ---------- ------------ ------------ ----------- ----------- --------------
18,835,977 13,218,060 2,069,538 (4,722,790) (83,273,734) 1,677,926 1,609,072 (177,647,722)
-- -- -- 157,030,403 183,248,954 11,632,558 13,220,267 2,615,298,027
----------- ----------- ---------- ------------ ------------ ----------- ----------- --------------
$18,835,977 $13,218,060 $2,069,538 $152,307,613 $ 99,975,220 $13,310,484 $14,829,339 $2,437,650,305
=========== =========== ========== ============ ============ =========== =========== ==============
</Table>
See Notes to Financial Statements
AA-17
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
NEW ENGLAND ZENITH FUND
------------------------------------------------------------------------------------------------------
GROWTH
CAPITAL BOND MONEY STOCK MID CAP AND
GROWTH INCOME MARKET INDEX MANAGED VALUE INCOME
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
-------------- ------------ ------------- ------------ ----------- ----------- -----------
FROM OPERATING
ACTIVITIES
Net investment income
(loss)................ $ (51,421) $ (511,944) $ 4,011,731 $ (1,201,336) $ 1,132,800 $ (259,625) $ 1,840,472
Net realized and
unrealized gain (loss)
on investments........ (63,417,345) 6,051,041 -- (19,055,274) (4,022,023) 7,681,205 (7,574,106)
-------------- ------------ ------------- ------------ ----------- ----------- -----------
Net increase
(decrease) in net
assets resulting from
operations........... (63,468,766) 5,539,097 4,011,731 (20,256,610) (2,889,223) 7,421,580 (5,733,634)
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from New
England Life Insurance
Company (Note 4)...... 134,719,373 12,375,855 236,841,520 39,147,722 10,169,186 6,884,739 17,754,814
Net transfers (to) from
other sub-accounts.... (53,936,979) (1,050,289) (209,452,023) 21,601,786 (1,102,701) 19,759 71,181
Net transfers (to) from
New England Life
Insurance Company..... (140,732,696) (10,668,357) (94,509,898) (28,008,433) (9,199,841) (5,138,115) (2,072,288)
-------------- ------------ ------------- ------------ ----------- ----------- -----------
Net increase
(decrease) in net
assets resulting from
policy related
transactions......... (59,950,302) 657,209 (67,120,401) 32,741,075 (133,356) 1,766,383 15,753,707
-------------- ------------ ------------- ------------ ----------- ----------- -----------
Net increase (decrease)
in net assets......... (123,419,068) 6,196,306 (63,108,670) 12,484,465 (3,022,579) 9,187,963 10,020,073
NET ASSETS, AT BEGINNING
OF THE PERIOD.......... 1,146,703,380 68,040,407 136,769,883 164,522,069 64,170,231 33,493,352 85,110,312
-------------- ------------ ------------- ------------ ----------- ----------- -----------
NET ASSETS, AT END OF
THE PERIOD............. $1,023,284,312 $ 74,236,713 $ 73,661,213 $177,006,534 $61,147,652 $42,681,315 $95,130,385
============== ============ ============= ============ =========== =========== ===========
<Caption>
NEW ENGLAND ZENITH FUND
----------------------------------------------------------------------
INTERNATIONAL
SMALL U.S. EQUITY MAGNUM
CAP GOVERNMENT BALANCED GROWTH EQUITY++
SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ---------- ----------- ------------ -------------
FROM OPERATING
ACTIVITIES
Net investment income
(loss)................ $ 279,695 $ (7,636) $ (111,693) $ 1,325,439 $ 246,278
Net realized and
unrealized gain (loss)
on investments........ 2,781,691 76,668 (359,924) (52,416,743) (3,683,838)
------------ -------- ----------- ------------ ------------
Net increase
(decrease) in net
assets resulting from
operations........... 3,061,386 69,032 (471,617) (51,091,304) (3,437,560)
FROM POLICY-RELATED
TRANSACTIONS
Net premiums
transferred from New
England Life Insurance
Company (Note 4)...... 22,841,356 -- 3,706,077 62,510,597 3,782,500
Net transfers (to) from
other sub-accounts.... 37,692,753 (56,167) (718,221) 85,404,643 (16,563,486)
Net transfers (to) from
New England Life
Insurance Company..... (20,021,929) (16,248) (2,786,161) (22,586,575) --
------------ -------- ----------- ------------ ------------
Net increase
(decrease) in net
assets resulting from
policy related
transactions......... 40,512,180 (72,415) 201,695 125,328,665 (12,780,986)
------------ -------- ----------- ------------ ------------
Net increase (decrease)
in net assets......... 43,573,566 (3,383) (269,922) 74,237,361 (16,218,546)
NET ASSETS, AT BEGINNING
OF THE PERIOD.......... 89,052,664 757,310 15,289,368 198,645,578 16,218,546
------------ -------- ----------- ------------ ------------
NET ASSETS, AT END OF
THE PERIOD............. $132,626,230 $753,927 $15,019,446 $272,882,939 $ --
============ ======== =========== ============ ============
</Table>
+ For the period May 1, 2000 (Commencement of Operations) through December 31,
2000.
++ On December 1, 2000 the Putnam International Stock Portfolio was substituted
for the Morgan Stanley International Magnum Equity Series, which is no longer
available for investment under the contracts.
See Notes to Financial Statements
AA-18
<Table>
<Caption>
METROPOLITAN SERIES FUND
------------------------------------------------------- --------------------------------------------------------
LARGE RUSSELL
VENTURE BOND RESEARCH CAP 2000+ INTERNATIONAL+
VALUE OPPORTUNITIES INVESTORS MANAGERS MID CAP+ GROWTH+ INDEX STOCK
SUB- SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------------ ------------- ---------- ----------- ------------ ----------- ---------- --------------
$ (1,440,887) $ (10,241) $ (12,646) $ (38,697) $ 1,294,505 $ (10,822) $ 300,710 $ (16,904)
72,318 (21,735) (1,202,406) (10,889,144) (1,223,110) (620,960) 640,323
17,721,838
------------ ---------- ---------- ----------- ------------ ----------- ---------- -----------
16,280,951 62,077 (34,381) (1,241,103) (9,594,639) (1,233,932) (320,250) 623,419
43,590,651 -- 511,027 1,389,537 2,953,055 672,516 219,502 624,545
52,137,520 (76,915) 2,126,907 11,980,716 31,992,287 5,876,190 1,935,622 20,720,805
(42,296,007) (11,007) (286,688) (1,310,787) (1,496,684) (818,946) 328,338 (2,581,254)
------------ ---------- ---------- ----------- ------------ ----------- ---------- -----------
(87,922) 2,351,246 12,059,466 33,448,658 5,729,760 2,483,462 18,764,096
53,432,164
------------ ---------- ---------- ----------- ------------ ----------- ---------- -----------
69,713,115 (25,845) 2,316,865 10,818,363 23,854,019 4,495,828 2,163,212 19,387,515
146,470,032 1,061,034 692,838 788,203 -- -- -- --
------------ ---------- ---------- ----------- ------------ ----------- ---------- -----------
$216,183,147 $1,035,189 $3,009,703 $11,606,566 $ 23,854,019 $ 4,495,828 $2,163,212 $19,387,515
============ ========== ========== =========== ============ =========== ========== ===========
<Caption>
VARIABLE
INSURANCE
PRODUCTS
VARIABLE INSURANCE FUND FUND II
----------------------------------------- ----------- --------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
------------ ------------ ----------- ----------- --------------
$ 12,340,033 $ 15,049,428 $ 903,229 $ 1,356,920 $ 36,407,388
(363,249) (55,468,507) (4,826,561) (2,058,495) (192,178,336)
------------ ------------ ----------- ----------- --------------
11,976,784 (40,419,079) (3,923,332) (701,575) (155,770,948)
24,790,229 45,688,246 3,195,995 2,631,829 677,000,871
(10,695,232) 19,044,295 658,505 2,389,044 --
(21,100,288) 32,597,100 (1,779,533) (2,869,212) (377,365,509)
------------ ------------ ----------- ----------- --------------
(7,005,291) 97,329,641 2,074,967 2,151,661 299,635,362
------------ ------------ ----------- ----------- --------------
4,971,493 56,910,562 (1,848,365) 1,450,086 143,864,414
152,058,910 126,338,392 13,480,923 11,770,181 2,471,433,613
------------ ------------ ----------- ----------- --------------
$157,030,403 $183,248,954 $11,632,558 $13,220,267 $2,615,298,027
============ ============ =========== =========== ==============
</Table>
See Notes to Financial Statements
AA-19
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
---------------------------------------------------------------------------------------
CAPITAL BOND MONEY STOCK MID CAP
GROWTH INCOME MARKET INDEX MANAGED VALUE
SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
-------------- ----------- ------------- ------------ ----------- -----------
FROM OPERATING ACTIVITIES
Net investment income
(loss)...................... $ 232,326,333 $ 5,003,403 $ 4,444,587 $ 3,140,798 $ 9,362,071 $ 129,188
Net realized and unrealized
gain (loss) on
investments................. (71,770,491) (5,707,370) -- 23,667,781 (3,750,911) (531,819)
-------------- ----------- ------------- ------------ ----------- -----------
Net Increase (decrease) in
net assets resulting from
operations................. 160,555,842 (703,967) 4,444,587 26,808,579 5,611,160 (402,631)
FROM POLICY-RELATED
TRANSACTIONS
Net premiums transferred from
New England Life Insurance
Company (Note 4)............ 142,211,177 13,805,688 214,469,972 29,988,746 10,115,433 7,098,841
Net transfers (to) from other
sub-accounts................ (3,426,057) 5,993,183 (132,180,032) 28,975,401 3,130,211 (1,928,318)
Net transfers (to) from New
England Life Insurance
Company..................... (127,342,172) (8,870,541) (35,295,568) (21,960,448) (7,936,560) (3,985,601)
-------------- ----------- ------------- ------------ ----------- -----------
Net Increase in net assets
resulting from policy
related transactions....... 11,442,948 10,928,330 46,994,372 37,003,699 5,309,084 1,184,922
-------------- ----------- ------------- ------------ ----------- -----------
Net increase (decrease) in net
assets...................... 171,998,790 10,224,363 51,438,959 63,812,278 10,920,244 782,291
NET ASSETS, AT BEGINNING OF THE
PERIOD........................ 974,704,592 57,816,044 85,330,924 100,709,791 53,249,987 32,711,062
-------------- ----------- ------------- ------------ ----------- -----------
NET ASSETS, AT END OF THE
PERIOD........................ $1,146,703,382 $68,040,407 $ 136,769,883 $164,522,069 $64,170,231 $33,493,353
============== =========== ============= ============ =========== ===========
<Caption>
NEW ENGLAND ZENITH FUND
----------------------------------------
GROWTH
AND SMALL U.S.
INCOME CAP GOVERNMENT
SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT
------------ ------------ ----------
FROM OPERATING ACTIVITIES
Net investment income
(loss)...................... $ 11,596,165 $ (278,252) $ 35,715
Net realized and unrealized
gain (loss) on
investments................. (5,083,954) 23,952,330 (73,665)
------------ ------------ --------
Net Increase (decrease) in
net assets resulting from
operations................. 6,512,211 23,674,078 (37,950)
FROM POLICY-RELATED
TRANSACTIONS
Net premiums transferred from
New England Life Insurance
Company (Note 4)............ 15,769,644 16,994,060 --
Net transfers (to) from other
sub-accounts................ 14,513,514 (3,433,209) 79,255
Net transfers (to) from New
England Life Insurance
Company..................... (10,636,850) (11,981,152) 24,393
------------ ------------ --------
Net Increase in net assets
resulting from policy
related transactions....... 19,646,308 1,579,699 103,648
------------ ------------ --------
Net increase (decrease) in net
assets...................... 26,158,519 25,253,777 65,698
NET ASSETS, AT BEGINNING OF THE
PERIOD........................ 58,951,793 63,798,887 691,612
------------ ------------ --------
NET ASSETS, AT END OF THE
PERIOD........................ $ 85,110,312 $ 89,052,664 $757,310
============ ============ ========
</Table>
* For the period April 30, 1999 (Commencement of Operations) through December
31, 1999.
See Notes to Financial Statements
AA-20
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY MAGNUM VENTURE BOND RESEARCH
BALANCED GROWTH EQUITY VALUE OPPORTUNITIES INVESTORS* MANAGERS*
SUB- SUB- SUB- SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT
----------- ------------ ------------- ------------ ------------- ---------- ----------
$ 872,246 $ 25,581,608 $ (58,946) $ 2,139,117 $ 66,632 $ 1,388 $ (1,540)
(2,439,260) 21,453,452 3,446,309 18,348,101 (106,878) 29,340 103,725
----------- ------------ ----------- ------------ ---------- ---------- ----------
(1,567,014) 47,035,060 3,387,363 20,487,218 (40,246) 30,728 102,185
4,093,455 31,646,457 3,430,299 32,031,496 -- 75,935 86,667
1,865,860 59,949,102 1,463,742 22,546,367 1,100 684,756 763,549
(1,579,581) (30,858,890) (2,381,414) (23,867,517) 9,526 (98,581) (164,198)
----------- ------------ ----------- ------------ ---------- ---------- ----------
60,736,669 2,512,627 30,710,346 10,626 662,110 686,018
4,379,734
----------- ------------ ----------- ------------ ---------- ---------- ----------
2,812,720 107,771,729 5,899,990 51,197,564 (29,620) 692,838 788,203
12,476,648 90,873,849 10,318,556 95,272,468 1,090,654 -- --
----------- ------------ ----------- ------------ ---------- ---------- ----------
$15,289,368 $198,645,578 $16,218,546 $146,470,032 $1,061,034 $ 692,838 $ 788,203
=========== ============ =========== ============ ========== ========== ==========
<Caption>
VARIABLE
INSURANCE
VARIABLE INSURANCE PRODUCTS
PRODUCTS FUND FUND II
- --- ----------------------------------------- ----------- --------------
EQUITY- HIGH ASSET
INCOME OVERSEAS INCOME MANAGER
SUB- SUB- SUB- SUB-
ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
------------ ------------ ----------- ----------- --------------
$ 6,472,830 $ 3,064,669 $ 1,060,177 $ 638,800 $ 305,596,989
2,224,031 36,725,455 (259,642) 506,400 40,732,934
------------ ------------ ----------- ----------- --------------
8,696,861 39,790,124 800,535 1,145,200 346,329,923
26,649,674 17,254,614 3,727,099 2,393,210 571,842,467
(2,823,843) 1,086,949 1,354,057 1,384,413 --
(19,017,183) (16,067,097) (2,389,723) (1,339,833) (325,738,990)
------------ ------------ ----------- ----------- --------------
4,808,648 2,274,466 2,691,433 2,437,790 246,103,477
------------ ------------ ----------- ----------- --------------
13,505,509 42,064,590 3,491,968 3,582,990 592,433,400
138,553,401 84,273,799 9,988,955 8,187,191 1,879,000,213
------------ ------------ ----------- ----------- --------------
$152,058,910 $126,338,389 $13,480,923 $11,770,181 $2,471,433,613
============ ============ =========== =========== ==============
</Table>
See Notes to Financial Statements
AA-21
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS. New England Variable Life Separate Account (the
"Account") of New England Life Insurance Company ("NELICO") was established by
NELICO's Board of Directors on January 31, 1983 in accordance with the
regulations of the Delaware Insurance Department and is now operating in
accordance with the regulations of the Commonwealth of Massachusetts Division of
Insurance. The Account is registered as a unit investment trust under the
Investment Company Act of 1940. The assets of the Account are owned by NELICO.
The net assets of the Account are restricted from use in the ordinary business
of NELICO. NELICO is an indirect wholly-owned subsidiary of Metropolitan Life
Insurance Company.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. SUB-ACCOUNTS. The Account has thirty-two investment sub-accounts each of
which invest in the shares of one portfolio of the New England Zenith Fund
("Zenith Fund"), the Metropolitan Series Fund, Inc., the Variable Insurance
Products Fund, the Variable Insurance Products Fund II or American Funds
Insurance Series. The portfolios of the Zenith Fund, the Metropolitan Series
Fund, Inc., the Variable Insurance Products Fund, the Variable Insurance
Products Fund II and American Funds Insurance Series in which the sub-accounts
invest are referred to herein as the "Eligible Funds". The Zenith Fund,
Metropolitan Series Fund, Inc., the Variable Insurance Products Fund, the
Variable Insurance Products Fund II and American Funds Insurance Series are
open-end management investment companies. The Account purchases or redeems
shares of the Eligible Funds based on the amount of net premiums invested in the
Account, transfers among the sub-accounts, policy loans, surrender payments, and
death benefit payments. The values of the shares of the Eligible Funds are
determined as of the close of the New York Stock Exchange (normally 4:00 p.m.
EST) on each day the Exchange is open for trading. Realized gains and losses on
the sale of Eligible Funds' shares are computed on the basis of identified cost
on the trade date. Income from dividends is recorded on the ex-dividend date.
Charges for investment advisory fees and other expenses are reflected in the
carrying value of the assets of the Eligible Funds.
3. MORTALITY AND EXPENSE RISK CHARGES. NELICO charges the Account for the
mortality and expense risk NELICO assumes. The mortality risk assumed by NELICO
is the risk that insureds may live for shorter periods of time than NELICO
estimated when setting its cost of insurance charges. The expense risk assumed
by NELICO is the risk that the deductions for sales and administrative charges
may prove insufficient to cover actual cost. If these deductions are
insufficient to cover the cost of the mortality and expense risk assumed by
NELICO, NELICO absorbs the resulting losses and makes sufficient transfers to
the Fund from its general assets. Conversely, if those deductions are more than
sufficient after the establishment of any contingency reserves deemed prudent or
required by law, the excess is retained by NELICO. Under some versions of the
policies the charge is assessed daily against Account assets and under others it
is deducted monthly from policy cash values. The rate of the charge varies by
policy version.
4. NET PREMIUM TRANSFERS AND DEDUCTIONS FROM CASH VALUE. Certain deductions are
made from each premium payment paid to NELICO to arrive at a net premium that is
transferred to the Account. Certain deductions are made from cash value in the
sub-accounts. These deductions, depending on the policy, could include sales
load, administrative charges, premium tax charges, risk charges, cost of
insurance charges, and charges for rider benefits and special risk charges.
5. FEDERAL INCOME TAXES. For federal income tax purposes the Account's
operations are included with those of NELICO. NELICO intends to make appropriate
charges against the Account in the future if and when tax liabilities arise.
AA-22
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. INVESTMENT ADVISERS. MetLife Advisers, LLC (formerly, New England Investment
Management, LLC.) is the investment adviser for the series of the Zenith Fund.
The Chart below shows the sub-adviser for each series of the Zenith Fund.
MetLife Advisers, which is an affiliate of NELICO, and each of the sub-advisers
are registered with the Securities and Exchange Commission as investment
advisers under the Investment Advisers Act of 1940.
<Table>
<Caption>
SERIES SUB-ADVISER
------ ----------------------------------------------
Capital Growth Capital Growth Management Limited Partnership*
State Street Research Money Market State Street Research and Management Company**
State Street Research Bond Income State Street Research and Management Company**
MFS Total Return+ Massachusetts Financial Services Company**
Westpeak Growth and Income Westpeak Investment Advisors, L.P.
Harris Oakmark Mid Cap Value**** Harris Associates L.P.
Loomis Sayles Small Cap Loomis, Sayles & Company, L.P.
Balanced*** Wellington Management Company, LLP.
Davis Venture Value***** Davis Selected Advisers, L.P.
Alger Equity Growth Fred Alger Management, Inc.
Salomon Brothers U.S. Government Salomon Brothers Asset Management, Inc.
Salomon Brothers Strategic Bond Opportunities Salomon Brothers Asset Management, Inc.
MFS Investors Series Massachusetts Financial Services Company
MFS Research Managers Series Massachusetts Financial Services Company
</Table>
* Effective May 1, 2001, MetLife Advisers became the investment adviser to
the Capital Growth Series and Capital Growth Management Limited
Partnership became the sub-adviser.
** Prior to July 1, 2001, Back Bay Adviser, L.P. was the sub-adviser.
*** Prior to May 1, 2000, Loomis Sayles & Company was the sub-adviser.
**** Prior to May 1, 2000, Goldman Sachs Asset Management, a separate operating
division of Goldman Sachs & Co. was subadviser. Prior to May 1, 1998,
Loomis Sayles & Company, LLP was the sub-adviser.
***** Davis Selected may also delegate any of its responsibilities to Davis
Selected Advisers -- NY, Inc., a wholly-owned subsidiary of Davis
Selected.
+ Formerly, the Back Bay Advisers Managed Series.
The Putnam International Stock Portfolio was substituted for the Morgan Stanley
International Magnum Equity Series on December 1, 2000. The Morgan Stanley
International Magnum Equity Series is no longer available for investment under
the contracts. The Metlife Stock Index Portfolio was substituted for the
Westpeak Stock Index Series on April 27, 2001. The Westpeak Stock Index Series
is no longer available for investment under the contracts.
MetLife Advisers became investment manager for the Metropolitan Series Fund
Portfolios on May 1, 2001. Prior to that time, Metropolitan Life Insurance
Company was the investment manager. The following chart shows the sub-
investment manager for each portfolio of the Metropolitan Series Fund.
AA-23
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<Table>
<Caption>
PORTFOLIO SUB-INVESTMENT MANAGER
--------- ----------------------------------------------
Putnam Large Cap Growth Putnam Investment Management, LLC
Janus Mid Cap Janus Capital Corporation
Russell 2000 Index Metropolitan Life Insurance Company*
Putnam International Stock Putnam Investment Management, LLC
MetLife Stock Index Metropolitan Life Insurance Company*
MetLife Mid Cap Stock Index Metropolitan Life Insurance Company*
Morgan Stanley EAFE Index Metropolitan Life Insurance Company*
Lehman Brothers Aggregate Bond Index Metropolitan Life Insurance Company*
State Street Research Aurora Small Cap Value State Street Research and Management Company
Janus Growth Janus Capital Corporation
</Table>
* Metropolitan Life Insurance Company became sub-investment manager on May 1,
2001.
Capital Research and Management Company is the investment adviser for the
American Funds Insurance Series.
Fidelity Management & Research Company is the investment adviser for the
Variable Insurance Products Fund and Variable Insurance Products Fund II.
AA-24
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. INVESTMENT PURCHASES AND SALES. The following table shows the aggregate cost
of Eligible Fund shares purchased and proceeds from the sales of Eligible Fund
shares for each sub-account for the year ended December 31, 2001:
<Table>
<Caption>
PURCHASES SALES
------------ ------------
Capital Growth Series....................................... 187,210,262 234,291,654
State Street Research Money Market Series................... 297,971,187 291,611,817
State Street Research Bond Income Series.................... 55,805,111 31,541,078
MFS Total Return Series..................................... 25,517,356 20,713,998
Westpeak Stock Index Series................................. 29,577,087 20,705,826
Westpeak Growth and Income Series........................... 31,857,925 29,133,954
Harris Oakmark Mid Cap Value Series......................... 62,984,945 25,824,328
Loomis Sayles Small Cap Series.............................. 57,316,690 50,868,764
Balanced Series............................................. 7,921,255 6,114,641
Davis Venture Value Series.................................. 123,357,561 76,239,954
Alger Equity Growth Series.................................. 131,970,680 125,201,635
Salomon Bothers U.S. Government Series...................... 804,196 806,918
Salomon Bothers Strategic Bond Opportunities Series......... 580,430 539,862
MFS Investors Series........................................ 3,117,403 1,140,759
MFS Research Managers Series................................ 9,377,980 6,438,666
Putnam International Stock Portfolio........................ 17,224,713 8,533,291
Putnam Large Cap Growth Portfolio........................... 7,430,505 3,239,414
Janus Mid Cap Portfolio..................................... 29,528,499 12,124,400
Russell 2000 Index Portfolio................................ 5,834,503 2,132,644
MetLife Stock Index Portfolio+.............................. 66,613,299 46,652,727
MetLife Mid Cap Stock Index Portfolio+...................... 1,230,568 158,119
Morgan Stanley EAFE Index Portfolio+........................ 591,046 72,451
Lehman Brothers Aggregate Bond Index Portfolio+............. 4,940,823 497,645
State Street Research Aurora Small Cap Value Portfolio+..... 19,973,642 3,602,127
Janus Growth Portfolio...................................... 1,321,567 393,099
American Funds Growth Fund+................................. 23,605,545 2,844,769
American Funds Growth-Income Fund+.......................... 16,548,654 1,842,993
American Funds Global Small Capitalization Fund+............ 2,623,882 455,792
VIP Equity-Income Portfolio................................. 46,115,663 43,139,853
VIP Overseas Portfolio...................................... 68,636,230 128,028,513
VIP High Income Portfolio................................... 11,544,385 7,517,782
VIP II Asset Manager Portfolio.............................. 7,891,831 5,225,611
</Table>
+ For the period May 1, 2001 (Commencement of Sub-Account Operations) to
December 31, 2001.
8. NET INVESTMENT RETURNS. The following table shows the net investment return
of the Sub-Account for each type of variable life insurance policy investing in
the Account. The net investment return reflects the appropriate mortality and
expense risk charge against sub-account assets, where applicable, for each type
of variable life insurance policy shown. These figures do not reflect charges
deducted from premiums and the cash values of the policies. Such charges will
affect the actual cash values and benefits of the policies.
AA-25
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FIXED PREMIUM ("ZENITH LIFE") POLICIES
<Table>
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
---------------------------------------------------------------
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- --------
Capital Growth........ 53.45% (6.38)% 14.57% (7.39)% 37.55% 20.65%
Bond Income***........ 17.55% 7.80% 12.22% (3.70)% 20.78% 4.24%
Money Market***....... 5.84% 3.43% 2.61% 3.61% 5.33% 4.76%
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
----------------------------------------------------
1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- --------
Capital Growth........ 23.05% 33.63% 15.30% (4.98)% (16.72)%
Bond Income***........ 10.50% 8.66% (0.81)% 7.77% 8.43%
Money Market***....... 4.97% 4.90% 4.60% 5.85% 3.62%
</Table>
<Table>
<Caption>
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index****....... 29.98% 6.92% 9.34% 0.76% 36.44% 22.04% 32.03% 27.49% 19.96% (9.36)%
Total Return***....... 19.75% 6.33% 10.26% (1.46)% 30.81% 14.62% 26.12% 19.24% 9.59% (3.72)%
<Caption>
1/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Stock Index****....... (12.53)%
Total Return***....... (4.14)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mid Cap Value.................. 14.47% (0.62)% 29.90% 17.20% 16.91% (5.79)% 0.00% 20.01% 27.33%
Growth and Income.............. 13.97% (1.55)% 35.99% 17.68% 33.01% 24.02% 8.97% (5.48)% (14.23)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Equity-Income.................. 9.29% 6.69% 34.62% 13.88% 27.66% 11.24% 5.96% 8.04% (5.29)%
Overseas....................... 14.57% 1.37% 9.30% 12.82% 11.17% 12.36% 42.13% (19.39)% (21.44)%
</Table>
<Table>
<Caption>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Small Cap................................. (3.45)% 28.40% 30.22% 24.42% (2.04)% 31.29% 4.89% (9.15)%
</Table>
<Table>
<Caption>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
High Income............................... (0.58)% 20.18% 13.63% 17.26% (4.66)% 7.78% (22.74)% (12.04)%
Asset Manager............................. (4.41)% 16.55% 14.20% 20.23% 14.65% 10.70% (4.26)% (4.43)%
</Table>
<Table>
<Caption>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- --------
Equity Growth........................................ 24.84% 12.78% 25.19% 47.27% 33.66% (13.98)% (12.33)%
Balanced............................................. 13.75% 16.50% 15.77% 8.73% (5.39)% (2.26)% (4.78)%
International Stock**................................ 3.85% 6.30% (1.64)% 6.90% 24.18% (10.51)% (20.87)%
Venture Value........................................ 21.64% 25.40% 33.03% 14.02% 17.11% 9.11% (11.46)%
</Table>
<Table>
<Caption>
4/30/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- --------
Investors Trust............................................. 2.61% (0.49)% (16.23)%
Research Managers........................................... 19.52% (3.97)% (21.23)%
</Table>
<Table>
<Caption>
5/1/00- 1/1/01-
SUB-ACCOUNT 12/31/00 12/31/01
- ----------- -------- --------
Mid Cap..................................................... (28.30)% (37.54)%
Russell 2000(R) Index....................................... (6.56)% 0.51%
Large Cap Growth............................................ (27.17)% (31.07)%
</Table>
AA-26
<Table>
<Caption>
5/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Bond Index.................................................. 4.57%
Growth Fund................................................. (14.32)%
Growth and Income Fund...................................... (2.75)%
Janus Growth Portfolio...................................... (21.98)%
Global Small Cap............................................ (8.29)%
EAFE Index.................................................. (16.38)%
Small Cap Value............................................. (0.23)%
Mid Cap Stock Index......................................... (1.08)%
</Table>
* Based on a mortality and expense risk charge at an annual rate of .35%.
** On December 1, 2000 the Putnam International Stock Portfolio (which
commenced operations on May 1, 1991) was substituted for the Morgan Stanley
International Magnum Equity Series, which is no longer available for
investment under the contracts. Values on or before 12/1/00 reflect the
performance of the Morgan Stanley International Magnum Equity Series since
its inception on October 31, 1994.
*** Prior to July 1, 2001, Back Bay Advisors L.P. was the subadviser to the
State Street Research Money Market Series, the State Street Research Bond
Income Series, and the MFS Total Return Series. Effective July 1, 2001,
State Street Research and Management Company became the subadviser to the
State Street Research Money Market Series and the State Street Research
Bond Income Series, and Massachusetts Financial Services Company became the
subadviser to the MFS Total Return Series (formerly the Back Bay Advisors
Managed Series).
****On April 27, 2001, the MetLife Stock Index Portfolio (which commenced
operations on May 1, 1990) was substituted for the Westpeak Stock Index
Series, which is no longer available for investment under the policy.
Values on or before April 27, 2001 reflect performance of the Westpeak
Stock Index Series, since its inception on May 1, 1987.
AA-27
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SINGLE PREMIUM ("ZENITH LIFE ONE") POLICIES
<Table>
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
---------------------------------------------------------------
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- --------
Capital Growth........ 53.29% (6.47)% 14.46% (7.38)% 37.41% 20.53%
Bond Income***........ 17.43% 7.69% 12.10% (3.80)% 20.66% 4.14%
Money Market***....... 5.74% 3.33% 2.51% 3.35% 5.23% 4.65%
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
----------------------------------------------------
1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- --------
Capital Growth........ 22.92% 33.49% 15.18% (5.08)% (16.81)%
Bond Income***........ 10.39% 8.55% (0.91)% 7.66% 8.32%
Money Market***....... 4.87% 4.79% 4.49% 5.75% 3.51%
</Table>
<Table>
<Caption>
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index****...... 29.85% 6.81% 9.23% 0.66% 36.30% 21.91% 31.90% 27.36% 19.84% (9.45)%
Total Return***...... 19.63% 6.22% 10.15% (1.56)% 30.67% 14.51% 25.99% 19.12% 9.48% (3.81)%
<Caption>
1/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Stock Index****...... (12.62)%
Total Return***...... (4.24)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mid Cap Value................. 14.39% (0.72)% 29.77% 17.08% 16.80% (5.88)% (0.10)% 19.89% 27.20%
Growth and Income............. 13.90% (1.65)% 38.85% 17.56% 32.87% 23.89% 8.86% (5.58)% (14.31)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Equity Income.................. 9.22% 6.59% 34.49% 13.77% 27.53% 11.13% 5.85% 7.93% (5.38)%
Overseas....................... 14.49% 1.27% 9.19% 12.70% 11.05% 12.24% 41.99% (19.47)% (21.52)%
</Table>
<Table>
<Caption>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Small Cap................................. (3.52)% 28.27% 30.09% 24.29% (2.14)% 31.16% 4.78% (9.24)%
</Table>
<Table>
<Caption>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
High Income............................... (0.61)% 20.06% 13.52% 17.14% (4.76)% 7.67% (22.82)% (12.13)%
Asset Manager............................. (4.45)% 16.43% 14.09% 20.11% 14.53% 10.59% (4.36)% (4.52)%
</Table>
<Table>
<Caption>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- --------
Equity Growth........................................ 24.76% 12.66% 25.06% 47.12% 33.53% (14.07)% (12.42)%
Balanced............................................. 13.67% 16.39% 15.66% 8.62% (5.49)% (2.35)% (4.88)%
International Stock**................................ 3.79% 6.19% (1.74)% 6.79% 24.05% (10.60)% (20.95)%
Venture Value........................................ 21.56% 25.27% 32.90% 13.90% 16.99% 9.00% (11.55)%
</Table>
<Table>
<Caption>
4/30/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- --------
Investors Trust............................................. 2.54% (0.59)% (16.31)%
Research Managers........................................... 19.44% (4.07)% (21.31)%
</Table>
<Table>
<Caption>
5/1/00- 1/1/01-
SUB-ACCOUNT 12/31/00 12/31/01
- ----------- -------- --------
Mid Cap..................................................... (28.35)% (37.61)%
Russell 2000(R) Index....................................... (6.62)% 0.41%
Large Cap Growth............................................ (27.22)% (31.14)%
</Table>
AA-28
<Table>
<Caption>
5/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Bond Index.................................................. 4.49%
Growth Fund................................................. (14.38)%
Growth and Income Fund...................................... (2.81)%
Janus Growth Portfolio...................................... (22.04)%
Global Small Cap............................................ (8.35)%
EAFE Index.................................................. (16.44)%
Small Cap Value............................................. (0.30)%
Mid Cap Stock Index......................................... (1.15)%
</Table>
* Based on a mortality and expense risk charge at an annual rate of .45%.
** On December 1, 2000 the Putnam International Stock Portfolio (which
commenced operation on May 1, 1991) was substituted for the Morgan Stanley
International Magnum Equity Series, which is no longer available for
investment under the contracts. Values on or before 12/1/00 reflect the
performance of the Morgan Stanley International Magnum Equity Series since
its inception on October 31, 1994.
*** Prior to July 1, 2001, Back Bay Advisors L.P. was the subadviser to the
State Street Research Money Market Series, the State Street Research Bond
Income Series, and the MFS Total Return Series. Effective July 1, 2001,
State Street Research and Management Company became the subadviser to the
State Street Research Money Market Series and the State Street Research
Bond Income Series, and Massachusetts Financial Services Company became the
subadviser to the MFS Total Return Series (formerly the Back Bay Advisors
Managed Series).
****On April 27, 2001, the MetLife Stock Index Portfolio (which commenced
operations on May 1, 1990) was substituted for the Westpeak Stock Index
Series, which is no longer available for investment under this policy.
Values on or before April 27, 2001 reflect performance of the Westpeak
Stock Index Series since its inception on May 1, 1987.
AA-29
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
VARIABLE ORDINARY ("ZENITH LIFE PLUS", "ZENITH LIFE PLUS II" AND "ZENITH
VARIABLE WHOLE LIFE") AND LIMITED PAYMENT ("ZENITH LIFE EXECUTIVE 65") POLICIES
<Table>
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
---------------------------------------------------------------
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- --------
Capital Growth........ 53.06% (6.61)% 14.28% (7.62)% 37.21% 20.34%
Bond Income***........ 17.25% 7.53% 11.94% (3.94)% 20.47% 3.98%
Money Market***....... 5.58% 3.18% 2.36% 3.35% 5.07% 4.50%
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
----------------------------------------------------
1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- --------
Capital Growth........ 22.74% 33.29% 15.01% (5.22)% (16.93)%
Bond Income***........ 10.23% 8.39% (1.06)% 7.50% 8.15%
Money Market***....... 4.71% 4.63% 4.34% 5.59% 3.36%
</Table>
<Table>
<Caption>
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index****....... 29.65% 6.65% 9.07% 0.51% 36.10% 21.73% 31.70% 27.17% 19.66% (9.59)%
Total Return***....... 19.45% 6.06% 9.99% (1.70)% 30.48% 14.34% 25.81% 18.94% 9.31% (3.96)%
<Caption>
1/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Stock Index****....... (12.75)%
Total Return***....... (4.38)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mid Cap Value.................. 14.28% (0.87)% 29.57% 16.90% 16.62% (6.03)% (0.25)% 19.71% 27.01%
Growth and Income.............. 13.78% (1.80)% 35.65% 17.38% 32.67% 23.71% 8.70% (5.72)% (14.44)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Equity-Income.................. 9.11% 6.43% 34.29% 13.59% 27.34% 10.96% 5.69% 7.77% (5.53)%
Overseas....................... 14.38% 1.12% 9.02% 12.53% 10.89% 12.08% 41.77% (19.59)% (21.64)%
</Table>
<Table>
<Caption>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Small Cap................................. (3.61)% 28.08% 29.90% 24.11% (2.28)% 30.96% 4.62% (9.38)%
</Table>
<Table>
<Caption>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
High Income............................... (0.66)% 19.88% 13.35% 16.96% (4.90)% 7.51% (22.94)% (12.26)%
Asset Manager............................. (4.49)% 16.26% 13.91% 19.93% 14.36% 10.43% (4.50)% (4.67)%
</Table>
<Table>
<Caption>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- --------
Equity Growth........................................ 24.64% 12.49% 24.88% 46.90% 33.33% (14.20)% (12.55)%
Balanced............................................. 13.56% 16.21% 15.48% 8.46% (5.63)% (2.50)% (5.02)%
International Stock**................................ 3.68% 6.03% (1.89)% 6.63% 23.87% (10.73)% (21.07)%
Venture Value........................................ 21.44% 25.08% 32.70% 13.73% 16.81% 8.83% (11.68)%
</Table>
<Table>
<Caption>
4/30/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- --------
Investors Trust............................................. 2.44% (0.74)% (16.44)%
Research Managers........................................... 19.32% (4.21)% (21.43)%
</Table>
<Table>
<Caption>
5/1/00- 1/1/01-
SUB-ACCOUNT 12/31/00 12/31/01
- ----------- -------- --------
Mid Cap..................................................... (28.03)% (38.04)%
Russell 2000(R) Index....................................... (6.72)% 0.26%
Large Cap Growth............................................ (27.29)% (31.24)%
</Table>
AA-30
<Table>
<Caption>
5/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Bond Index.................................................. 4.39%
Growth Fund................................................. (14.47)%
Growth and Income Fund...................................... (3.30)%
Janus Growth Portfolio...................................... (22.12)%
Global Small Cap............................................ (8.44)%
EAFE Index.................................................. (16.52)%
Small Cap Value............................................. (0.40)%
Mid Cap Stock Index......................................... (1.25)%
</Table>
* Based on a mortality and expense risk charge at an annual rate of .60%.
** On December 1, 2000 the Putnam International Stock Portfolio (which
commenced operation on May 1, 1991) was substituted for the Morgan Stanley
International Magnum Equity Series which is no longer available for
investment under the contracts. Values on or before 12/1/00 reflect the
performance of the Morgan Stanley International Magnum Equity Series since
its inception on October 31, 1994.
*** Prior to July 1, 2001, Back Bay Advisors L.P. was the subadviser to the
State Street Research Money Market Series, the State Street Research Bond
Income Series, and the MFS Total Return Series. Effective July 1, 2001,
State Street Research and Management Company became the subadviser to the
State Street Research Money Market Series and the State Street Research
Bond Income Series, and Massachusetts Financial Services Company became the
subadviser to the MFS Total Return Series (formerly the Back Bay Advisors
Managed Series).
****On April 27, 2001, the MetLife Stock Index Portfolio (which commenced
operations on May 1, 1990) was substituted for the Westpeak Stock Index
Series, which is no longer available for investment under this policy.
Values on or before April 27, 2001 reflect performance of the Westpeak
Stock Index Series since its inception on May 1, 1987.
AA-31
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
VARIABLE SURVIVORSHIP ("ZENITH SURVIVORSHIP LIFE") POLICIES
<Table>
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
---------------------------------------------------------------
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- --------
Capital Growth........ 52.61% (6.90)% 13.94% (7.90)% 36.80% 19.98%
Bond Income***........ 16.90% 7.21% 11.60% (4.23)% 20.12% 3.67%
Money Market***....... 5.26% 2.87% 2.05% 3.04% 4.75% 4.18%
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
----------------------------------------------------
1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- --------
Capital Growth........ 22.37% 32.89% 14.67% (5.50)% (17.18)%
Bond Income***........ 9.90% 8.07% (1.36)% 7.18% 7.83%
Money Market***....... 4.39% 4.32% 4.03% 5.27% 3.04%
</Table>
<Table>
<Caption>
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index****....... 29.27% 6.33% 8.74% 0.21% 35.69% 21.36% 31.31% 26.79% 19.30% (9.86)%
Managed***............ 19.10% 5.74% 9.69% (2.00)% 30.09% 13.99% 25.43% 18.58% 8.98% (4.24)%
<Caption>
1/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Stock Index****....... (13.02)%
Managed***............ (4.67)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mid Cap Value.................. 14.05% (1.16)% 29.19% 16.55% 16.27% (6.31)% (0.55)% 19.36% 26.63%
Growth and Income.............. 13.55% (2.09)% 35.25% 17.03% 32.28% 23.34% 8.37% (6.00)% (14.70)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Equity-Income.................. 8.89% 6.11% 33.89% 13.25% 26.96% 10.63% 5.38% 7.45% (5.81)%
Overseas....................... 14.15% 0.82% 8.70% 12.19% 10.56% 11.74% 41.35% (19.83)% (21.88)%
</Table>
<Table>
<Caption>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Small Cap................................. (3.80)% 27.69% 29.50% 23.73% (2.58)% 30.57% 4.31% (9.65)%
</Table>
<Table>
<Caption>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
High Income............................... (0.76)% 19.53% 13.00% 16.61% (5.19)% 7.19% (23.17)% (12.53)%
Asset Manager............................. (4.59)% 15.91% 13.57% 19.57% 14.02% 10.10% (4.79)% (4.95)%
</Table>
<Table>
<Caption>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- --------
Equity Growth........................................ 24.39% 12.15% 24.50% 46.46% 32.93% (14.45)% (12.82)%
Balanced............................................. 13.33% 15.86% 15.14% 8.13% (5.91)% (2.79)% (5.31)%
International Stock**................................ 3.48% 5.71% (2.18)% 6.31% 23.50% (11.00)% (21.31)%
Venture Value........................................ 21.20% 24.71% 32.30% 13.39% 16.47% 8.51% (11.95)%
</Table>
<Table>
<Caption>
4/30/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- --------
Investors Trust............................................. 2.23% (1.04)% (16.69)%
Research Managers........................................... 19.08% (4.50)% (21.67)%
</Table>
<Table>
<Caption>
5/1/00- 1/1/01-
SUB-ACCOUNT 12/31/00 12/31/01
- ----------- -------- --------
Mid Cap..................................................... (28.17)% (38.23)%
Russell 2000(R) Index....................................... (6.90)% (0.04)%
Large Cap Growth............................................ (27.44)% (31.45)%
</Table>
AA-32
<Table>
<Caption>
5/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Bond Index.................................................. 4.18%
Growth Fund................................................. (14.64)%
Growth and Income Fund...................................... (3.11)%
Janus Growth Portfolio...................................... (22.27)%
Global Small Cap............................................ (8.63)%
EAFE Index.................................................. (16.69)%
Small Cap Value............................................. (0.60)%
Mid Cap Stock Index......................................... (1.45)%
</Table>
* Based on a mortality and expense risk charge at an annual rate of .90%.
Certain Zenith Survivorship Life Policies currently have a mortality and
expense risk charge at an annual rate of .75%.
** On December 1, 2000 The Putnam International Stock Portfolio (which
commenced operation on May 1, 1991) was substituted for the Morgan Stanley
International Magnum Equity Series, which is no longer available for
investment under the contracts. Values on or before 12/1/00 reflect the
performance of the Morgan Stanley International Magnum Equity Series since
its inception on October 31, 1994.
*** Prior to July 1, 2001, Back Bay Advisors, L.P. was the subadviser to the
State Street Research Money Market Series the State Street Research Bond
Income Series, and the MFS Total Return Series. Effective July 1, 2001,
State Street Research and Management Company became the subadviser to the
State Street Research Money Market and the State Street Research Bond
Income Series, and Massachusetts Financial Services Company became the
subadviser to the MFS Total Return Series (Formerly the Back Bay Advisors
Managed Series).
****On April 27, 2001 the MetLife Stock Index Portfolio Index Portfolio (which
commenced operations on May 1, 1990) was substituted for the Morgan Stanley
International Magnum Equity Series, which is no longer available for
investment under this policy. Values on or before April 27, 2001 reflect
performance of the Westpeak Stock Index Series since its inception on May
1, 1987.
AA-33
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FLEXIBLE PREMIUM ("ZENITH FLEXIBLE LIFE") POLICIES
<Table>
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
---------------------------------------------------------------
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- --------
Capital Growth....... 52.83% (6.75)% 14.11% (7.76)% 37.00% 20.16%
Bond Income***....... 17.08% 7.37% 11.77% (4.08)% 20.29% 3.82%
Money Market***...... 5.42% 3.02% 2.20% 3.20% 4.91% 4.34%
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
----------------------------------------------------
1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- --------
Capital Growth....... 22.56% 33.09% 14.84% (5.36)% (17.06)%
Bond Income***....... 10.06% 8.23% (1.21)% 7.34% 7.99%
Money Market***...... 4.55% 4.48% 4.18% 5.43% 3.20%
</Table>
<Table>
<Caption>
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index****...... 29.46% 6.49% 8.90% 0.36% 35.90% 21.55% 31.51% 26.98% 19.48% (9.72)%
Total Return***...... 19.28% 5.90% 9.82% (1.85)% 30.28% 14.16% 25.62% 18.76% 9.15% (4.10)%
<Caption>
1/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Stock Index****...... (12.89)%
Total Return***...... (4.53)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mid Cap Value.................. 14.16% (1.01)% 29.38% 16.72% 16.45% (6.17)% (0.40)% 19.54% 26.82%
Growth and Income.............. 13.67% (1.94)% 35.45% 17.21% 32.47% 23.52% 8.53% (5.86)% (14.57)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Equity-Income.................. 9.00% 6.27% 34.09% 13.42% 27.15% 10.79% 5.54% 7.61% (5.67)%
Overseas....................... 14.26% 0.97% 8.86% 12.36% 10.72% 11.91% 41.56% (19.71)% (21.76)%
</Table>
<Table>
<Caption>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Small Cap................................. (3.71)% 27.88% 29.70% 23.92% (2.43)% 30.77% 4.47% (9.51)%
</Table>
<Table>
<Caption>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
High Income............................... (0.71)% 19.71% 13.17% 16.79% (5.04)% 7.35% (23.05)% (12.40)%
Asset Manager............................. (4.54)% 16.08% 13.74% 19.75% 14.19% 10.26% (4.64)% (4.81)%
</Table>
<Table>
<Caption>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- --------
Equity Growth........................................ 24.51% 12.32% 24.69% 46.68% 33.13% (14.33)% (12.68)%
Balanced............................................. 13.44% 16.03% 15.31% 8.29% (5.77)% (2.64)% (5.17)%
International Stock**................................ 3.58% 5.87% (2.04)% 6.47% 23.68% (10.87)% (21.19)%
Venture Value........................................ 21.32% 24.89% 32.50% 13.56% 16.64% 8.67% (11.81)%
</Table>
<Table>
<Caption>
4/30/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- --------
Investors Trust............................................. 2.34% (0.89)% (16.56)%
Research Managers........................................... 19.20% (4.35)% (21.55)%
</Table>
<Table>
<Caption>
5/1/00- 1/1/01-
SUB-ACCOUNT 12/31/00 12/31/01
- ----------- -------- --------
Mid Cap..................................................... (28.10)% (38.14)%
Russell 2000(R) Index....................................... (6.81)% 0.11%
Large Cap Growth............................................ (27.36)% (31.34)%
</Table>
AA-34
<Table>
<Caption>
5/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Bond Index.................................................. 4.29%
Growth Fund................................................. (14.58)%
Growth and Income Fund...................................... (3.01)%
Janus Growth Portfolio...................................... (22.19)%
Global Small Cap............................................ (8.53)%
EAFE Index.................................................. (16.61)%
Small Cap Value............................................. (0.50)%
Mid Cap Stock Index......................................... (1.35)%
</Table>
* Based on a mortality and expense risk charge at an annual rate of .75%.
Certain Zenith Flexible Life Policies currently have a mortality and
expense risk charge at an annual rate of .60%.
** On December 1, 2000 the Putnam International Stock Portfolio (which
commenced operations on May 1, 1991) was substituted for the Morgan Stanley
International Magnum Equity Series, which is no longer available for
investment under the contracts. Values on or before 12/1/00 reflect the
performance of the Morgan Stanley International Magnum Equity Series since
its inception on October 31, 1994.
*** Prior to July 1, 2001, Back Bay Advisors, L.P. was the subadviser to the
State Street Research Money Market Series, the State Street Research Bond
Income Series, and the MFS Total Return Series. Effective July 1, 2001,
State Street Research and Management Company became the subadviser to the
State Street Research Money Market Series and the State Street Research
Bond Income Series, and Massachusetts Financial Services Company became the
subadviser to the MFS Total Return Series (formerly the Back Bay Advisors
Managed Series).
****On April 27, 2001, the MetLife Stock Index Portfolio (which commenced
operations on May 1, 1990) was substituted for the Westpeak Stock Index
Series, which is no longer available for investment under this policy.
Values on or before April 27, 2001 reflect performance of the Westpeak
Stock Index Series since its inception on May 1, 1987.
AA-35
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FLEXIBLE PREMIUM ("ZENITH EXECUTIVE ADVANTAGE PLUS", "ZENITH EXECUTIVE ADVANTAGE
2000", "ZENITH SURVIVORSHIP LIFE 2002" AND "ZENITH SURVIVORSHIP LIFE PLUS")
POLICIES
<Table>
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
---------------------------------------------------------------
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- --------
Capital Growth........ 53.98% (6.05)% 14.97% (7.07)% 38.03% 21.07%
Bond Income***........ 17.96% 8.18% 12.61% (3.36)% 21.20% 4.61%
Money Market***....... 6.21% 3.80% 2.97% 3.97% 5.70% 5.13%
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
----------------------------------------------------
1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- --------
Capital Growth........ 23.48% 34.09% 15.70% (4.65)% (16.43)%
Bond Income***........ 10.89% 9.04% (0.47)% 8.15% 8.81%
Money Market***....... 5.34% 5.26% 4.97% 6.22% 3.98%
</Table>
<Table>
<Caption>
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index****....... 30.43% 7.30% 9.72% 1.12% 36.92% 22.47% 32.50% 27.93% 20.38% (9.04)%
Total Return***....... 20.17% 6.70% 10.65% (1.11)% 31.26% 15.03% 26.56% 19.65% 9.97% (3.38)%
<Caption>
1/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Stock Index****....... (12.23)%
Total Return***....... (3.80)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mid Cap Value.................. 14.74% (0.27)% 30.35% 17.61% 17.32% (5.46)% 0.35% 20.43% 27.78%
Growth and Income.............. 14.24% (1.21)% 36.47% 18.10% 33.47% 24.45% 9.35% (5.15)% (13.93)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Equity-Income.................. 9.55% 6.93% 35.90% 13.75% 28.11% 11.63% 6.33% 8.42% (4.96)%
Overseas....................... 14.84% 1.21% 11.02% 12.43% 11.56% 12.75% 42.63% (19.11)% (21.17)%
</Table>
<Table>
<Caption>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Small Cap................................. (3.23)% 28.84% 30.68% 24.85% (1.69)% 31.75% 5.25% (8.83)%
</Table>
<Table>
<Caption>
8/31/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
High Income............................... (.37)% 20.79% 13.75% 17.67% (4.33)% 8.15% (22.47)% (11.73)%
Asset Manager............................. (4.65)% 17.68% 14.31% 20.65% 15.05% 11.09% (3.93)% (4.09)%
</Table>
<Table>
<Caption>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- --------
Equity Growth........................................ 25.13% 13.17% 25.63% 47.78% 34.13% (13.68)% (12.02)%
Balanced............................................. 14.01% 16.91% 16.18% 9.11% (5.06)% (1.91)% (4.45)%
International Stock**................................ 4.01% 6.67% (1.30)% 7.27% 24.61% (10.20)% (20.59)%
Venture Value........................................ 21.92% 25.84% 33.50% 14.41% 17.52% 9.49% (11.14)%
</Table>
<Table>
<Caption>
4/30/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- --------
Investors Trust............................................. 2.85% (0.15)% (15.93)%
Research Managers........................................... 19.80% (3.64)% (20.95)%
</Table>
<Table>
<Caption>
5/1/00- 1/1/01-
SUB-ACCOUNT 12/31/00 12/31/01
- ----------- -------- --------
Mid Cap..................................................... (27.74)% (37.67)%
Russell 2000(R) Index....................................... (6.35)% 0.87%
Large Cap Growth............................................ (27.00)% (30.82)%
</Table>
AA-36
<Table>
<Caption>
5/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Bond Index.................................................. 4.81%
Growth Fund................................................. (14.12)%
Growth and Income Fund...................................... (2.52)%
Janus Growth Portfolio...................................... (21.80)%
Global Small Cap............................................ (8.07)%
EAFE Index.................................................. (16.19)%
Small Cap Value............................................. 0.00%
Mid Cap Stock Index......................................... (0.85)%
</Table>
* For the flexible premium ("Zenith Executive Advantage Plus", "Zenith
Executive Advantage 2000", "Zenith Survivorship Life 2002" and "Zenith
Survivorship Life Plus") policies the mortality and expense risk charges
are not charged daily against the sub-account assets but are deducted from
the policy cash values monthly.
** On December 1, 2000 the Putnam International Stock Portfolio (which
commenced operations on May 1, 1991) was substituted for the Morgan Stanley
International Magnum Equity Series, which is no longer available for
investment under the contracts. Values on or before 12/1/00 reflect the
performance of the Morgan Stanley International Magnum Equity Series since
its inception on October 31, 1994.
*** Prior to July 1, 2001, Back Bay Advisors, L.P. was the subadviser to the
State Street Research Money Market Series, the State Street Research Bond
Income Series, and the MFS Total Return Series. Effective July 1, 2001,
State Street Research and Management Company became the subadviser to the
State Street Research Money Market Series and the State Street Research
Bond Income Series, and Massachusetts Financial Services Company became the
subadviser to the MFS Total Return Series (formerly the Back Bay Advisors
Managed Series).
****On April 27, 2001, the MetLife Stock Index Portfolio (which commenced
operations on May 1, 1990) was substituted for the Westpeak Stock Index
Series, which is no longer available for investment under this policy.
Values on or before April 27, 2001 reflect the performance of the Westpeak
Stock Index Series since its inception on May 1, 1987.
AA-37
NEW ENGLAND VARIABLE LIFE SEPARATE ACCOUNT OF
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
MODIFIED SINGLE PREMIUM ("AMERICAN GATEWAY") POLICIES
<Table>
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
---------------------------------------------------------------
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----------- -------- -------- -------- -------- -------- --------
Bond Income***........ 17.96% 8.18% 12.61% (3.36)% 21.20% 4.61%
Money Market***....... 6.21% 3.80% 2.97% 3.97% 5.70% 5.13%
<Caption>
NET INVESTMENT RETURN OF THE SUB-ACCOUNTS*
----------------------------------------------------
1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- --------
Bond Income***........ 10.89% 9.04% (0.47)% 8.15% 8.81%
Money Market***....... 5.34% 5.26% 4.97% 6.22% 3.98%
</Table>
<Table>
<Caption>
1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00-
SUB-ACCOUNT 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index****....... 30.43% 7.30% 9.72% 1.12% 36.92% 22.47% 32.50% 27.93% 20.38% (9.04)%
Total Return***....... 20.17% 6.70% 10.65% (1.11)% 31.26% 15.03% 26.56% 19.65% 9.97% (3.38)%
<Caption>
1/1/01-
SUB-ACCOUNT 12/31/01
- ----------- --------
Stock Index****....... (12.23)%
Total Return***....... (3.80)%
</Table>
<Table>
<Caption>
4/30/93- 1/1/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Mid Cap Value.................. 14.74% (0.27)% 30.35% 17.61% 17.32% (5.46)% 0.35% 20.43% 27.78%
Growth and Income.............. 14.24% (1.21)% 36.47% 18.10% 33.47% 24.45% 9.35% (5.15)% (13.93)%
</Table>
<Table>
<Caption>
5/2/94- 1/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- -------- --------
Small Cap................................. (3.23)% 28.84% 30.68% 24.85% (1.69)% 31.75% 5.25% (8.83)%
</Table>
<Table>
<Caption>
5/1/95- 1/1/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- -------- --------
Equity Growth........................................ 25.13% 13.17% 25.63% 47.78% 34.13% (13.68)% (12.02)%
Balanced............................................. 14.01% 16.91% 16.18% 9.11% (5.06)% (1.91)% (4.45)%
International Stock**................................ 4.01% 6.67% (1.30)% 7.27% 24.61% (10.20)% (20.59)%
Venture Value........................................ 21.92% 25.84% 33.50% 14.41% 17.52% 9.49% (11.14)%
</Table>
<Table>
<Caption>
6/28/96- 1/1/97- 1/1/98- 1/1/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- -------- -------- -------- --------
U.S. Government............................................. 4.55% 8.47% 7.61% 0.17% 10.45% 6.73%
Strategic Bond Opportunities................................ 8.46% 11.07% 2.04% 1.44% 7.22% 6.82%
</Table>
<Table>
<Caption>
4/30/99- 1/1/00- 1/1/01-
SUB-ACCOUNT 12/31/99 12/31/00 12/31/01
- ----------- -------- -------- --------
Investors Trust............................................. 2.85% (0.15)% (15.93)%
Research Managers........................................... 19.80% (3.64)% (20.95)%
</Table>
<Table>
<Caption>
5/1/00- 1/1/01-
SUB-ACCOUNT 12/31/00 12/31/01
- ----------- -------- --------
Large Cap Growth............................................ (27.00)% (30.82)%
</Table>
The net investment return of a sub-account is calculated by taking the
difference between the sub-account's ending value and the beginning value for
the period and dividing it by the beginning value for the period.
* For the modified single premium ("American Gateway") policies the
mortality and expense risk charge is not charged daily against the
sub-account assets but is deducted from the policy cash values monthly.
** On December 1, 2000 the Putnam International Stock Portfolio (which
commenced operation on May 1, 1990) was substituted for the Morgan Stanley
International Magnum Equity Series, which is no longer available for
investment under the contracts. Values on or before 12/1/00 reflect the
performance of the Morgan Stanley International Magnum Equity Series since
its inception on October 31, 1994.
*** Prior to July 1, 2001, Back Bay Advisors, L.P. was the subadviser to the
State Street Research Money Market Series, the State Street Research Bond
Income Series, and the MFS Total Return Series. Effective July 1, 2001,
State Street Research and Management Company became the subadviser to the
MFS Total Return Series (formerly the Back Bay Advisors Managed Series).
**** On April 27, 2001, the MetLife Stock Index Portfolio (which commenced
operations on May 1, 1990) was substituted for the Westpeak Stock Index
Series which is no longer available for investment under this policy.
Values on or before April 27, 2001 reflect performance of the Westpeak
Stock Index Series since its inception on May 1, 1987.
AA-38
NEW ENGLAND LIFE INSURANCE COMPANY
INDEPENDENT AUDITORS' REPORT
New England Life Insurance Company:
We have audited the accompanying consolidated balance sheets of New England Life
Insurance Company and subsidiaries (the "Company") as of December 31, 2001 and
2000, and the related consolidated statements of income and comprehensive
income, equity and cash flows for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of New England Life
Insurance Company and subsidiaries as of December 31, 2001 and 2000, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 22, 2002
AA-39
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(DOLLARS IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<Table>
<Caption>
2001 2000
------ ------
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value........ $ 344 $ 245
Equity securities, at fair value.......................... 27 24
Policy loans.............................................. 262 234
Other limited partnership interests....................... 20 13
Short-term investments.................................... -- 10
------ ------
Total investments................................... 653 526
Cash and cash equivalents................................... 222 114
Accrued investment income................................... 19 20
Premiums and other receivables.............................. 133 121
Deferred policy acquisition costs........................... 1,185 1,021
Other assets................................................ 113 110
Separate account assets..................................... 5,725 5,651
------ ------
TOTAL ASSETS........................................ $8,050 $7,563
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Future policy benefits...................................... $ 245 $ 190
Policyholder account balances............................... 661 412
Other policyholder funds.................................... 296 249
Policyholder dividends payable.............................. 2 2
Current income taxes payable................................ -- 3
Deferred income taxes payable............................... 68 20
Other liabilities........................................... 115 179
Separate account liabilities................................ 5,725 5,651
------ ------
TOTAL LIABILITIES................................... 7,112 6,706
------ ------
Commitments and contingencies (Notes 6 and 8)
STOCKHOLDER'S EQUITY:
Common stock, par value $125.00 per share; 50,000 shares
authorized; 20,000 shares issued and outstanding.......... 3 3
Preferred stock, no par value;1,000,000 shares authorized;
200,000 issued and outstanding............................ -- --
Additional paid-in capital.................................. 647 647
Retained earnings........................................... 284 216
Accumulated other comprehensive income (loss)............... 4 (9)
------ ------
TOTAL STOCKHOLDER'S EQUITY.......................... 938 857
------ ------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................. $8,050 $7,563
====== ======
</Table>
See accompanying notes to consolidated financial statements.
AA-40
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(DOLLARS IN MILLIONS)
<Table>
<Caption>
2001 2000 1999
---- ---- ----
REVENUES
Premiums.................................................... $117 $125 $124
Universal life and investment-type product policy fees...... 351 272 241
Net investment income....................................... 44 63 68
Other revenues.............................................. 221 283 215
Net investment (losses) gains............................... (1) (28) 3
---- ---- ----
TOTAL REVENUES...................................... 732 715 651
---- ---- ----
EXPENSES
Policyholder benefits and claims............................ 104 150 193
Interest credited to policyholder account balances.......... 24 20 11
Policyholder dividends...................................... 3 18 21
Other expenses.............................................. 483 490 351
---- ---- ----
TOTAL EXPENSES...................................... 614 678 576
---- ---- ----
Income before provision for income taxes.................... 118 37 75
Provision for income taxes.................................. 42 25 29
---- ---- ----
NET INCOME.................................................. $ 76 $ 12 $ 46
==== ==== ====
</Table>
See accompanying notes to consolidated financial statements.
AA-41
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(DOLLARS IN MILLIONS)
<Table>
<Caption>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME (LOSS) TOTAL
------ ----------- -------- ------------- -----
BALANCE AT JANUARY 1, 1999....................... $3 $647 $178 $ 17 $845
Dividends on preferred stock................... (9) (9)
Comprehensive income:
Net income................................... 46 46
Other comprehensive loss:
Unrealized investment losses, net of
related offsets, reclassification
adjustments and income taxes............. (28) (28)
----
Comprehensive income........................... 18
-- ---- ---- ---- ----
BALANCE AT DECEMBER 31, 1999..................... 3 647 215 (11) 854
Dividends on preferred stock................... (11) (11)
Comprehensive income:
Net income................................... 12 12
Other comprehensive income:
Unrealized investment gains, net of related
offsets, reclassification adjustments and
income taxes............................. 2 2
----
Comprehensive income........................... 14
-- ---- ---- ---- ----
BALANCE AT DECEMBER 31, 2000..................... 3 647 216 (9) 857
Dividends on preferred stock................... (8) (8)
Comprehensive income:
Net income................................... 76 76
Other comprehensive income:
Unrealized investment gains, net of related
offsets, reclassification adjustments and
income taxes............................. 13 13
----
Comprehensive income........................... 89
-- ---- ---- ---- ----
BALANCE AT DECEMBER 31, 2001..................... $3 $647 $284 $ 4 $938
== ==== ==== ==== ====
</Table>
See accompanying notes to consolidated financial statements.
AA-42
NEW ENGLAND LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(DOLLARS IN MILLIONS)
<Table>
<Caption>
2001 2000 1999
------- ------- -----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 76 $ 12 $ 46
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization expenses.................. 10 13 14
Gains (losses) from sale of investments and business,
net.................................................... 1 28 (3)
Interest credited to policyholder account balances...... 24 20 11
Universal life and investment-type product policy
fees................................................... (351) (272) (241)
Change in accrued investment income..................... 1 10 (8)
Change in premiums and other receivables................ (12) (2) 25
Change in deferred policy acquisition costs, net........ (153) (113) (186)
Change in insurance-related liabilities................. 102 (420) 113
Change in income taxes payable.......................... 40 (11) (27)
Change in other liabilities............................. (64) 26 58
Other, net................................................ (13) 18 19
------- ------- -----
Net cash used in operating activities....................... (339) (691) (179)
------- ------- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Sales, maturities and repayments of:
Fixed maturities........................................ 135 587 114
Equity securities....................................... -- 35 2
Purchases of:
Fixed maturities........................................ (226) (87) (158)
Equity securities....................................... (5) (9) (10)
Real estate and real estate joint ventures.............. -- -- (3)
Net change in short-term investments...................... 10 53 (10)
Net change in policy loans................................ (28) (52) (46)
Losses from sale of business, net......................... -- (54) --
Other, net................................................ (7) (3) 24
------- ------- -----
Net cash (used in) provided by investing activities......... (121) 470 (87)
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits................................................ 2,245 1,872 518
Withdrawals............................................. (1,669) (1,532) (222)
Financial reinsurance receivables......................... -- -- 33
Long-term debt repaid..................................... -- (77) (13)
Dividends on preferred stock.............................. (8) (11) (9)
------- ------- -----
Net cash provided by financing activities................... 568 252 307
Change in cash and cash equivalents......................... 108 30 41
Cash and cash equivalents, beginning of year................ 114 84 43
------- ------- -----
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 222 $ 114 $ 84
======= ======= =====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 2 $ 7 $ --
======= ======= =====
Income taxes............................................ $ 7 $ 22 $ 30
======= ======= =====
</Table>
See accompanying notes to consolidated financial statements.
AA-43
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
New England Life Insurance Company and its subsidiaries (the "Company" or
"NELICO") is a wholly owned stock life insurance subsidiary of Metropolitan Life
Insurance Company ("Metropolitan Life"). The Company is headquartered in Boston,
Massachusetts as a Massachusetts chartered company. The Company principally
provides variable life insurance and variable annuity contracts through a
network of general agencies and independent brokers located throughout the
United States. The Company also provides participating and non-participating
traditional life insurance, fixed annuity contracts, pension products, as well
as, group life, medical, and disability coverage. The Company also administers
certain business activities for Metropolitan Life.
The principal subsidiaries of which NELICO owns 100% of the outstanding common
stock are: New England Pension and Annuity Company ("NEPA") and Newbury
Insurance Company, Limited ("Newbury") for insurance operations and, through New
England Life Holdings, Inc. (a holding company for non-insurance operations) New
England Securities Corporation ("NES"), MetLife Advisers LLC ("Advisers"), and
NL Holding Corporation ("NL Holding") and its wholly owned subsidiaries Nathan
and Lewis Securities, Inc., Nathan and Lewis Associates, Inc. On November 5,
1999 New England Financial Distributors ("NEFD"), a Limited Liability
Corporation, was formed in which NELICO owns a majority interest. On October 31,
2000 Exeter Reassurance Co., Ltd, a Bermuda Corporation was sold to MetLife,
Inc. the ultimate parent company of NELICO. The principal business activities of
the subsidiaries are disclosed below.
NEPA was incorporated under the laws of the State of Delaware on September 12,
1980. NEPA holds licenses to sell annuity contracts in 22 states, but is
currently not actively engaged in the sale or distribution of insurance
products.
Newbury was incorporated in Bermuda on May 1, 1987, and is registered as a Class
2 insurer under The Insurance Act of 1978 (Bermuda). Newbury provides
professional liability and personal injury coverage to the agents of NELICO
through a facultative reinsurance agreement with Lexington Insurance Company.
Effective September 1, 2000, Newbury began providing errors and omissions
coverage to certain of the life insurance agents of MetLife through a
facultative reinsurance agreement with Fireman's Fund Insurance Company.
NES, a National Association of Securities Dealers ("NASD") registered
broker/dealer, conducts business as a wholesale distributor of investment
products through the sales force of NELICO. Established in 1968, NES offers a
range of investment products including mutual funds, investment partnerships,
and individual securities. In 1994, NES became a Registered Investment Advisor
with the Securities and Exchange Commission ("SEC"), and now offers individually
managed portfolios. NES is the national distributor for variable annuity and
variable life products issued by NELICO.
Advisers, which changed its name from New England Investment Management LLC in
May 2001, was incorporated on August 26, 1994, and is registered as an
investment adviser with the SEC, under the Investment Advisers Act of 1940.
Advisers was organized to serve as an investment adviser to certain series of
the New England Zenith Fund and certain other Metropolitan Life funds. Prior to
March 2000, Advisers was named TNE Advisers, Inc.
NL Holding engages in securities brokerage, dealer trading in fixed income
securities, over the counter stock, unit investment trusts, and the sale of
insurance related products and annuities, sold through licensed brokers and
independent agents. Nathan and Lewis Securities, Inc., a wholly owned subsidiary
of NL Holding, is a NASD registered broker/dealer. Nathan & Lewis Associates, a
wholly owned subsidiary of NL Holding, is a general insurance agent which sells
insurance policies and other insurance related products through its licensed
brokers and independent agents.
NEFD, was incorporated in Delaware on November 5, 1999. NEFD is licensed as an
insurance agency to facilitate the distribution of insurance and other financial
products, including securities.
AA-44
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
NELICO and its subsidiaries, and other limited partnerships in which the Company
has a majority voting interest or general partner interest with limited removal
rights by limited partners. Intercompany accounts and transactions have been
eliminated.
The Company uses the equity method to account for its investments in other
limited partnership interests in which it does not have a controlling interest,
but has more than a minimal interest.
Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform with the 2001 presentation.
INVESTMENTS
The Company's principal investments are in fixed maturities and policy loans,
all of which are exposed to three primary sources of investment risk: credit,
interest rate and market valuation. The financial statement risks are those
associated with the recognition of income and impairments, determination of fair
values. In addition, the earnings on certain investments are dependent upon
market conditions that could result in prepayments and changes in amounts to be
earned due to changing interest rates or equity markets.
The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of accumulated other comprehensive income, net of policyholder related amounts
and deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are recorded as realized losses on investments. Realized gains and
losses on sales of securities are determined on a specific identification basis.
All security transactions are recorded on a trade date basis.
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost, which approximates fair
value.
Other invested assets are reported at their estimated fair value.
CASH AND CASH EQUIVALENTS
The Company considers all investments purchased with an original maturity of
three months or less to be cash equivalents.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined using either the straight-line or sum-of-the-
years-digits method over the estimated useful lives of the assets. Estimated
lives range from four to seven years for leasehold improvements and three to 15
years for all other property and equipment. Accumulated depreciation of property
and equipment and accumulated amortization on leasehold improvements was $54
million and $53 million at December 31, 2001 and 2000, respectively. Related
depreciation and amortization expense was $1 million, $9 million and $12 million
for the years ended December 31, 2001, 2000 and 1999, respectively.
Computer Software, which is included in other assets, is stated at cost, less
accumulated amortization. Purchased software costs, as well as, internal and
external costs incurred to develop internal-use computer software during the
application development stage are capitalized. Such costs are amortized over a
three-year period using the straight-line method. Accumulated amortization of
capitalized software was $10 million and $1 million at December 31, 2001 and
2000, respectively. Related amortization expense was $8 million, and $2 million
for the years ended December 31, 2001, and 2000, respectfully.
AA-45
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business that vary with, and are primarily related
to, the production of new business are deferred. Such costs, which consist
principally of commissions, agency and policy issue expenses, are amortized with
interest over the expected life of the contract for participating traditional
life, variable life, universal life, investment-type products, and variable
annuities. Generally, deferred policy acquisition costs are amortized in
proportion to the present value of estimated gross margins or profits from
investments, mortality, expense margins and surrender charges. Actual gross
margins or profits can vary from management's estimates resulting in increases
or decreases in the rate of amortization. Management periodically updates these
estimates and evaluates the recoverability of deferred policy acquisition costs.
When appropriate, management revises its assumptions of the estimated gross
margins or profits of these contracts, and the cumulative amortization is
re-estimated and adjusted by a cumulative charge or credit to current
operations.
Deferred policy acquisition costs for non-medical health policies are amortized
over the estimated life of the policy in proportion to anticipated premiums.
Assumptions as to anticipated premiums are made at the date of policy issuance
and are consistently applied during the life of the contracts. Deviations from
estimated experience are reflected in operations when they occur.
Information regarding deferred policy acquisition costs is as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------
2001 2000 1999
------ ------ ----
(DOLLARS IN MILLIONS)
Balance at January 1........................................ $1,021 $ 931 $711
Capitalization of policy acquisition costs.................. 216 223 217
------ ------ ----
Total................................................... 1,237 1,154 928
------ ------ ----
Amortization allocated to:
Net realized investment gains (losses).................... -- 1 (1)
Unrealized investment (losses) gains...................... (11) 23 (33)
Other expenses............................................ 63 109 31
------ ------ ----
Total amortization...................................... 52 133 (3)
------ ------ ----
Balance at December 31...................................... $1,185 $1,021 $931
====== ====== ====
</Table>
Amortization of deferred policy acquisition costs is allocated to:
(1) investment gains and losses to provide consolidated statement of income
information regarding the impact of such gains and losses on the amount of the
amortization, (2) unrealized investment gains and losses to provide information
regarding the amount of deferred policy acquisition costs that would have been
amortized if such gains and losses had been recognized and (3) other expenses to
provide amounts related to the gross margins or profits originating from
transactions other than investment gains and losses.
Investment gains and losses that relate to certain products have a direct impact
on the amortization of deferred policy acquisition costs. Presenting investment
gains and losses net of related amortization of deferred policy acquisition
costs provides information useful in evaluating the operating performance of the
Company. This presentation may not be comparable to presentations made by other
insurers.
GOODWILL
The excess of cost over the fair value of net assets acquired ("goodwill") is
included in other assets. Goodwill is amortized on a straight-line basis over 10
years. The Company reviews goodwill to assess recoverability from future
operations using undiscounted cash flows. Impairments are recognized in
operating results if a permanent diminution in value is deemed to have occurred.
AA-46
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
Net balance at January 1.................................... $17 $19 $21
Amortization................................................ (2) (2) (2)
--- --- ---
Net balance at December 31.................................. $15 $17 $19
=== === ===
</Table>
<Table>
<Caption>
DECEMBER 31,
------------
2001 2000
---- ----
(DOLLARS IN
MILLIONS)
Accumulated amortization.................................... $8 $6
== ==
</Table>
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES
The Company also establishes liabilities for amounts payable under insurance
policies, including traditional life insurance, annuities and disabled lives.
Generally, amounts are payable over an extended period of time and the
profitability of the products is dependent on the pricing of the products.
Principal assumptions used in pricing policies and in the establishment of
liabilities for future policy benefits are mortality, morbidity, expenses,
persistency, investment returns and inflation. Differences between the actual
experience and assumptions used in pricing the policies and in the establishment
of liabilities result in variances in profit and could result in losses.
Future policy benefit liabilities for participating traditional life insurance
policies are equal to the aggregate of (a) net level premium reserves for death
and endowment policy benefits (calculated based upon the nonforfeiture interest
rate, ranging from 4% to 5%, and mortality rates guaranteed in calculating the
cash surrender values described in such contracts), (b) the liability for
terminal dividends and (c) premium deficiency reserves, which are established
when the liabilities for future policy benefits plus the present value of
expected future gross premiums are insufficient to provide for expected future
policy benefits and expenses after deferred policy acquisition costs are written
off.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and the
present value of expected future payments after annuitization. Interest rates
used in establishing such liability range from 4% to 7%.
Future policy benefit liabilities for non-medical health insurance are
calculated using the net level premium method and assumptions as to future
morbidity, withdrawals and interest, which provide a margin for adverse
deviation. Future policy benefit liabilities for disabled lives are estimated
using the present value of benefits method and experience assumptions as to
claim terminations, expenses and interest. The interest rates used in
establishing such liability range from 4% to 7%.
Policyholder account balances for variable life, universal life and
investment-type contracts are equal to the policy account values, which consist
of an accumulation of gross premium payments plus credited interest ranging from
4% to 8%, less expense and mortality charges and withdrawals.
The liability for unpaid claims represents the amount estimated for claims that
have been reported but not settled and claims incurred but not reported.
Liabilities for unpaid claims are estimated based upon the Company's historical
experience and other actuarial assumptions that consider the effects of current
developments, anticipated trends and risk management programs. Revisions of
these estimates are included in operations in the year such refinements are
made.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated lives of
the
AA-47
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
policies. When premiums are due over a significantly shorter period than the
period over which benefits are provided, any excess profit is deferred and
recognized into operations in a constant relationship to insurance in-force or,
for annuities, the amount of expected future policy benefit payments.
Premiums related to non-medical health contracts are recognized on a pro rata
basis over the applicable contract term.
Deposits related to universal life and investment-type products are credited to
policyholder account balances. Revenues from such contracts consist of amounts
assessed against policyholder account balances for mortality, policy
administration and surrender charges. Amounts that are charged to operations
include interest credited and benefit claims incurred in excess of related
policyholder account balances.
DIVIDENDS TO POLICYHOLDERS
Dividends to policyholders are determined annually by the board of directors.
The aggregate amount of policyholders' dividends is related to actual interest,
mortality, morbidity and expense experience for the year, as well as
management's judgment as to the appropriate level of statutory surplus to be
retained by the Company.
PARTICIPATING BUSINESS
Participating business represented approximately 3% of the Company's life
insurance in force, and 9% of the number of life insurance policies in force at
December 31, 2001 and 2000. Participating policies represented approximately 52%
and 67%, 55% and 65% and 57% and 62% of gross and net life insurance premiums
for the years ended December 31, 2001, 2000 and 1999, respectively.
INCOME TAXES
NELICO and its includable life insurance and non-life insurance subsidiaries
file a consolidated U.S. federal income tax return in accordance with the
Internal Revenue Code. Non-includable subsidiaries file either separate or
separate consolidated tax returns. Income tax expense has been calculated in
accordance with the provisions of the Internal Revenue Code, as amended. The
Company uses the liability method of accounting for income taxes. Income tax
provisions are based on income reported for financial statement purposes. The
future tax consequences of temporary differences between financial reporting and
tax basis of assets and liabilities are measured as of the balance sheet dates
and are recorded as deferred income tax assets or liabilities.
REINSURANCE
The Company has reinsured certain of its life insurance contracts with other
insurance companies under various agreements. Amounts due from reinsurers are
estimated based upon assumptions consistent with those used in establishing the
liabilities related to the underlying reinsured contracts. Policy and contract
liabilities are reported gross of reinsurance credits.
SEPARATE ACCOUNTS
Separate Accounts are established in conformity with the state insurance laws
and are generally not chargeable with liabilities that arise from any other
business of the Company. Separate Account assets are subject to general account
claims, only to the extent the value of such assets exceeds the Separate Account
liabilities. Investments held in the Separate Accounts (stated at estimated fair
market value) and liabilities of the Separate Accounts (including participants'
corresponding equity in the Separate Accounts) are reported separately as assets
and liabilities. Deposits to Separate Accounts, investment income, and realized
and unrealized gains and losses on the investments of the Separate Account
accrue directly to contract holders and, accordingly, are not reflected in the
Company's financial statements. Mortality, policy administration and surrender
charges to all Separate Accounts are included in revenues.
AA-48
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
APPLICATION OF ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133") as amended by SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities--an Amendment to FASB
Statement No. 133 ("SFAS 138"). SFAS 133 and SFAS 138 established new accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
cumulative effect of the adoption of SFAS 133 and SFAS 138, as of January 1,
2001, had no impact to either net income or comprehensive income, as the Company
has not entered into any derivative contracts.
Effective April 1, 2001, the Company adopted certain additional accounting and
reporting requirements of SFAS No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities--a replacement of FASB
Statement No. 125, relating to the derecognition of transferred assets and
extinguished liabilities and the reporting of servicing assets and liabilities.
The adoption of these requirements had no material impact on the Company's
consolidated financial statements.
Effective January 1, 2000, the Company adopted Statement of Position 98-7,
Accounting for Insurance and Reinsurance Contracts That Do Not Transfer
Insurance Risk ("SOP 98-7"). SOP 98-7 provides guidance on the method of
accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. SOP 98-7 classifies
insurance and reinsurance contracts for which the deposit method is appropriate
into those that (i) transfer only significant timing risk, (ii) transfer only
significant underwriting risk, (iii) transfer neither significant timing nor
underwriting risk and (iv) have an indeterminate risk. Adoption of SOP 98-7 did
not have a material effect on the Company's consolidated financial statements.
Effective April 1, 2001, the Company adopted Emerging Issues Task Force Issue
No. 99-20, Recognition of Interest Income and Impairment on Certain Investments
("EITF 99-20"). This pronouncement requires investors in certain asset-backed
securities to record changes in their estimated yield on a prospective basis and
to apply specific evaluation methods to these securities for an
other-than-temporary decline in value. The adoption of EITF 99-20 had no
material impact on the Company's consolidated financial statements.
In June 2001, the FASB issued SFAS No. 141, Business Combinations ("SFAS 141"),
and SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS No.
141, which was generally effective July 1, 2001, requires the purchase method of
accounting for all business combinations and separate recognition of intangible
assets apart from goodwill if such intangible assets meet certain criteria. SFAS
No. 142, effective for fiscal years beginning after December 15, 2001,
eliminates the systematic amortization and establishes criteria for measuring
the impairment of goodwill and certain other intangible assets by reporting
unit. Amortization of goodwill and other intangible assets was $2 million for
the years ended December 31, 2001, 2000 and 1999. These amounts are not
necessarily indicative of the amortization that will not be recorded in future
periods in accordance with SFAS 142. The Company is in the process of developing
a preliminary estimate of the impact of the adoption of SFAS 142 but has not yet
finalized the effect, if any, on its consolidated financial statements. The
Company has determined that there will be no significant reclassifications
between goodwill and other intangible asset balances and no significant
impairment of other intangible assets as of January 1, 2002. The Company will
complete the first step of the impairment test, the comparison of the reporting
units' fair value to carrying value, by June 30, 2002 and, if necessary, will
complete the second step, the estimate of goodwill impairment, by December 31,
2002.
Effective October 1, 2000, the Company adopted Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes
certain of the Securities and Exchange Commission's views in applying generally
accepted accounting principals to revenue recognition in financial statements.
The requirements of SAB 101 did not have a material effect on the Company's
consolidated financial statements.
In July 2001, the SEC released Staff Accounting Bulletin No. 102, Selected Loan
Loss Allowance and Documentation Issues ("SAB 102"). SAB 102 summarizes certain
of the SEC's views on the development, documentation and application of a
systematic methodology for determining allowances for loan and lease losses. The
application of SAB 102 by the Company did not have a material impact on the
Company's consolidated financial statements.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 provides a single model for
accounting for long-lived assets to be disposed of by superceding
AA-49
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of ("SFAS 121"), and the accounting and
reporting provisions of Accounting Principles Board Opinion No. 30, Reporting
the Results of Operations--Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions("APB 30"). Under SFAS 144, discontinued operations are measured at
the lower of carrying value or fair value less costs to sell rather than on a
net realizable value basis. Future operating losses relating to discontinued
operations also are no longer recognized before they occur. SFAS 144 broadens
the definition of a discontinued operation to include a component of an entity
(rather than a segment of a business). SFAS 144 also requires long-lived assets
to be disposed of other than by sale to be considered held and used until
disposed. SFAS 144 retains the basic provisions of (i) APB 30 regarding the
presentation of discontinued operations in the statements of income, (ii) SFAS
121 relating to recognition and measurement of impaired long-lived assets (other
than goodwill) and (iii) SFAS 121 relating to the measurement of long-lived
assets classified as held for sale. SFAS 144 must be adopted beginning January
1, 2002. The adoption of SFAS 144 by the Company is not expected to have a
material impact on the Company's consolidated financial statements at the date
of adoption.
2. INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
Fixed maturities and equity securities at December 31, 2001 were as follows:
<Table>
<Caption>
GROSS
COST OR UNREALIZED
AMORTIZED ------------ ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- ---- ---- ----------
(DOLLARS IN MILLIONS)
Fixed maturities:
U.S. Treasury Securities and obligations of U.S.
Government corporations and agencies.................... $ 21 $1 $-- $ 22
Foreign governments....................................... 2 -- -- 2
Corporate................................................. 181 6 3 184
Mortgage- and asset-backed securities..................... 86 -- -- 86
Other..................................................... 50 1 1 50
---- -- -- ----
Total fixed maturities.................................. $340 $8 $4 $344
==== == == ====
Equity securities:
Common stocks............................................. $ 30 $-- $3 $ 27
---- -- -- ----
Total equity securities................................. $ 30 $-- $3 $ 27
==== == == ====
</Table>
AA-50
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fixed maturities and equity securities at December 31, 2000 were as follows:
<Table>
<Caption>
GROSS
COST OR UNREALIZED
AMORTIZED ------------ ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- ---- ---- ----------
(DOLLARS IN MILLIONS)
Fixed maturities:
U.S. Treasury Securities and obligations of U.S.
Government corporations and agencies.................... $ 28 $-- $-- $ 28
Foreign governments....................................... 26 -- 1 25
Corporate................................................. 171 2 6 167
Mortgage- and asset-backed securities..................... 25 1 1 25
---- -- -- ----
Total fixed maturities.................................. $250 $3 $8 $245
==== == == ====
Equity securities:
Common stocks............................................. $ 26 $2 $4 $ 24
---- -- -- ----
Total equity securities................................. $ 26 $2 $4 $ 24
==== == == ====
</Table>
The cost or amortized cost and estimated fair value of bonds at December 31,
2001, by contractual maturity date are shown below:
<Table>
<Caption>
COST OR
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(DOLLARS IN MILLIONS)
Due in one year or less..................................... $ 19 $ 19
Due after one year through five years....................... 76 79
Due after five years through ten years...................... 107 108
Due after ten years......................................... 52 52
---- ----
Total................................................... 254 258
Mortgage- and asset-backed securities....................... 86 86
---- ----
Total fixed maturities.................................. $340 $344
==== ====
</Table>
Fixed maturities not due at a single maturity date have been included in the
above tables in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
Sale of securities classified available-for-sale as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------
2001 2000 1999
---- ---- ----
(DOLLARS IN MILLIONS)
Proceeds.................................................... $127 $119 $67
Gross realized gains........................................ 2 1 2
Gross realized losses....................................... 2 1 1
</Table>
Gross investment losses above exclude write-downs of $1 million recorded during
2001 for other than temporarily impaired available-for-sale securities of $1
million. There were no write-downs recorded for the years ended December 31,
2000 and 1999.
Excluding investments in U.S. Treasury securities and obligations of U.S.
government corporations and agencies, the Company is not exposed to any
significant concentration of credit risk in its fixed maturities portfolio.
AA-51
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ASSETS ON DEPOSIT
The Company had investment assets on deposit with regulatory agencies with a
fair market value of $6 million at December 31, 2001 and 2000.
NET INVESTMENT INCOME
The components of net investment income were as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------
2001 2000 1999
---- ---- ----
(DOLLARS IN MILLIONS)
Fixed maturities............................................ $23 $48 $54
Equity securities........................................... 1 2 14
Real estate and real estate joint ventures.................. -- -- 1
Policy loans................................................ 14 12 9
Other limited partnership interests......................... 5 2 (3)
Cash, cash equivalents and short-term investments........... -- -- 3
Other....................................................... 2 4 (4)
--- --- ---
Total................................................... 45 68 74
Less: Investment expenses................................... 1 5 6
--- --- ---
Net investment income................................... $44 $63 $68
=== === ===
</Table>
NET INVESTMENT (LOSSES) GAINS
Net investment (losses) gains were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------
2001 2000 1999
---- ---- ----
(DOLLARS IN MILLIONS)
Fixed maturities............................................ $-- $-- $ 1
Equity securities........................................... -- (28) --
Other....................................................... (1) (1) 3
--- ---- ---
Total................................................... (1) (29) 4
Amounts allocable to deferred policy costs.................. -- 1 (1)
--- ---- ---
Net investment (losses) gains........................... $(1) $(28) $ 3
=== ==== ===
</Table>
Investment (losses) gains have been reduced by deferred policy acquisition costs
amortization to the extent that such amortization results from realized
investment gains and losses. This presentation may not be comparable to
presentations made by other insurers.
AA-52
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NET UNREALIZED INVESTMENT GAINS (LOSSES)
The components of net unrealized investment gains (losses), included in
accumulated other comprehensive income (loss), were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------
2001 2000 1999
---- ---- ----
(DOLLARS IN MILLIONS)
Fixed maturities............................................ $4 $(5) $(35)
Equity securities........................................... (3) (2) 3
Other invested assets....................................... (2) -- --
-- --- ----
Total................................................... (1) (7) (32)
-- --- ----
Amounts allocable to
Deferred policy acquisition costs....................... 5 (6) 17
Deferred income taxes....................................... -- 4 4
-- --- ----
Total................................................... 5 (2) 21
-- --- ----
Net unrealized investment gains (losses)................ $4 $(9) $(11)
== === ====
</Table>
The changes in net unrealized investment gains (losses) were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------
2001 2000 1999
---- ---- ----
(DOLLARS IN MILLIONS)
Balance at January 1........................................ $(9) $(11) $ 17
Unrealized gains (losses) during the year................... 6 25 (74)
Unrealized gains (losses) relating to
Deferred policy acquisition costs....................... 11 (23) 33
Deferred income taxes....................................... (4) -- 13
--- ---- ----
Balance at December 31...................................... $ 4 $(9) $(11)
=== ==== ====
Net change in unrealized investment gains (losses).......... $13 $ 2 $(28)
=== ==== ====
</Table>
3. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments have been determined
by using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein may
not necessarily be indicative of amounts that could be realized in a current
market exchange. The use of different assumptions or valuation methodologies may
have a material effect on the estimated fair value amounts.
AA-53
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Amounts related to the Company's financial instruments were as follows:
<Table>
<Caption>
CARRYING ESTIMATED
VALUE FAIR VALUE
-------- ----------
(DOLLARS IN MILLIONS)
DECEMBER 31, 2001
Assets:
Fixed maturities.......................................... $344 $344
Equity securities......................................... 27 27
Policy loans.............................................. 262 262
Cash and cash equivalents................................. 222 222
Liabilities:
Policyholder account balances............................. 228 222
</Table>
<Table>
<Caption>
CARRYING ESTIMATED
VALUE FAIR VALUE
-------- ----------
(DOLLARS IN MILLIONS)
DECEMBER 31, 2000
Assets:
Fixed maturities.......................................... $245 $245
Equity securities......................................... 24 24
Policy loans.............................................. 234 234
Short-term investments.................................... 10 10
Cash and cash equivalents................................. 114 114
Liabilities:
Policyholder account balances............................. 101 99
</Table>
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
FIXED MATURITIES AND EQUITY SECURITIES
The fair value of fixed maturities and equity securities are based upon
quotations published by applicable stock exchanges or received from other
reliable sources. For securities for which the market values were not readily
available, fair values were estimated using quoted market prices of comparable
investments.
POLICY LOANS
The carrying value of policy loans approximate fair value.
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The carrying values for cash and cash equivalents and short-term investments
approximated fair market values due to the short-term maturities of these
instruments.
POLICYHOLDER ACCOUNT BALANCES
The fair value of policyholder account balances are estimated by discounting
expected future cash flows, based on interest rates currently being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued.
AA-54
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. EMPLOYEE BENEFIT PLANS
Effective January 1, 2001, the Company's employees became employees of
Metropolitan Life and in connection with this transition the New England Life
Insurance Company Retirement Plan and Trust ("NEF Retirement Plan") merged into
the Metropolitan Life Retirement Plan for United States Employees ("Retirement
Plan") and the New England 401K Plan and Trust ("NEF 401k Plan") merged into the
Savings and Investment Plan for Employees of Metropolitan Life and Participating
Affiliates ("SIP"). Retirement benefits are based primarily on years of service
and the employee's average salary.
<Table>
<Caption>
DECEMBER 31,
-----------------------------------
PENSION BENEFITS OTHER BENEFITS
----------------- --------------
2001 2000 2001 2000
------- ------ ----- -----
(DOLLARS IN MILLIONS)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year........... $ 286 $254 $ 45 $ 47
Service cost.............................................. -- 7 -- 1
Interest cost............................................. -- 20 1 3
Actuarial losses (gains).................................. -- 13 (1) (2)
Transfers out of controlled group......................... (286) -- (31) --
Benefits paid............................................. -- (8) (1) (4)
----- ---- ---- ----
Projected benefit obligation at end of year................. -- 286 13 45
----- ---- ---- ----
Change in plan assets:
Contract value of plan assets at beginning of year.......... 213 210 -- --
Actuarial return on plan assets........................... -- 6 -- --
Employer and participant contribution..................... -- 5 -- --
Transfers out of controlled group......................... (213) -- -- --
Benefits paid............................................. -- (8) -- --
----- ---- ---- ----
Contract value of plan assets at end of year................ -- 213 -- --
Under funded................................................ -- (73) (13) (45)
----- ---- ---- ----
Unrecognized net actuarial losses (gains)................... -- 32 (18) (21)
Unrecognized prior service cost............................. -- 15 -- --
----- ---- ---- ----
Accrued benefit cost........................................ $ -- $(26) $(31) $(66)
===== ==== ==== ====
Accrued liability pension cost.............................. $ -- $ (3)
Non-qualified plan accrued pension cost..................... -- (23)
----- ----
Accrued Liability........................................... $ -- $(26)
===== ====
</Table>
AA-55
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate projected benefit obligation and aggregate contract value of plan
assets for the pension plans were as follows:
<Table>
<Caption>
NON-QUALIFIED
QUALIFIED PLAN PLAN TOTAL
--------------- -------------- -------------
2001 2000 2001 2000 2001 2000
----- ------ ----- ----- ---- -----
(DOLLARS IN MILLIONS)
Aggregate projected benefit obligation........ $-- $(245) $-- $(41) $-- $(286)
Aggregate contract value of plan assets
(principally Company contracts)............. -- 213 -- -- -- 213
-- ----- -- ---- -- -----
Under funded.................................. $-- $ (32) $-- $(41) $-- $ (73)
== ===== == ==== == =====
</Table>
The assumptions used in determining the aggregate projected benefit obligation
and aggregate contract value for the pension and other benefits were as follows:
<Table>
<Caption>
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
2001 2000 2001 2000
------ ------ ----- -----
(DOLLARS IN MILLIONS)
Weighted average assumptions at December 31,
Discount rate............................................... N/A 7.75% 7.40% 7.50%
Expected rate of return on plan assets...................... N/A 9.00% N/A N/A
Rate of compensation increase............................... N/A 5.50% N/A N/A
</Table>
The assumed health care cost trend rate used in measuring the accumulated
non-pension post-retirement benefit obligation was generally 9.5% in 2001,
gradually decreasing to 5% in 2010 and generally 7% in 2000, gradually
decreasing to 5% over five years.
Assumed health care cost trend rates have a significant effect on the amounts
reported for health care plans. A one-percentage point change in assumed health
care cost trend rates would have no material effect on the health care plans.
The components of periodic benefit costs were as follows:
<Table>
<Caption>
PENSION BENEFITS OTHER BENEFITS
-------------------- --------------------
2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
Service cost....................... -- 7 8 -- 1 1
Interest cost...................... -- 20 18 1 3 3
Expected return on plan assets..... -- (19) (15) -- -- --
Amortization of prior actuarial
gains............................ -- 1 1 (1) (1) (1)
-- --- --- -- -- --
Net periodic benefit cost.......... -- 9 12 -- 3 3
== === === == == ==
</Table>
SAVINGS AND INVESTMENT PLANS
The Company sponsored savings and investment plans for substantially all
employees under which the Company matched a portion of employee contributions.
The Company contributed $2 million, for the years ended December 31, 2000 and
1999. As previously stated, the NEF 401K Plan was merged into Metropolitan
Life's SIP plan effective January 1, 2001. All contributions to the SIP plan are
made by Metropolitan Life.
AA-56
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. SEPARATE ACCOUNTS
Separate accounts reflect non-guaranteed separate accounts totaling $5,725
million and $5,651 million at December 31, 2001 and 2000, respectively, for
which the policyholder assumes the investment risk.
Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in the
Company's revenues as universal life and investment-type product policy fees and
totaled $48 million, $46 million and $37 million for the years ended December
31, 2001, 2000 and 1999, respectively.
6. COMMITMENTS AND CONTINGENCIES
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the losses. Most of these laws do provide, however, that an assessment may be
excused or deferred if it would threaten an insurer's solvency and further
provide annual limits on such assessments. A large part of the assessments paid
by the Company's insurance subsidiaries pursuant to these laws may be used as
credits for a portion of the Company's premium taxes. The Company paid guaranty
fund assessments of less than one million in 2001, 2000, and 1999.
Various litigation, claims and assessments against the Company, in addition to
those otherwise provided for in the Company's consolidated financial statements,
have arisen in the course of the Company's business, including, but not limited
to, in connection with its activities as an insurer, employer, investor,
investment advisor and taxpayer. Further, state insurance regulatory authorities
and other Federal and state authorities regularly make inquiries and conduct
investigations concerning the Company's compliance with applicable insurance and
other laws and regulations.
In some of the matters referred to above, large and/or indeterminate amounts,
including punitive damages and treble damages, are sought. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings or provide reasonable ranges of potential
losses, it is the opinion of the Company's management that their outcomes, after
consideration of available insurance and reinsurance and the provisions made in
the Company's consolidated financial statements, are not likely to have a
material adverse effect on the Company's consolidated financial position.
However, given the large and/or indeterminate amounts sought in certain of these
matters and the inherent unpredictability of litigation, it is possible that an
adverse outcome in certain matters could, from time to time, have a material
adverse effect on the Company's operating results or cash flows in particular
annual periods.
AA-57
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES
The provision for income tax expense in the consolidated statements of income is
shown below:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
Current:
Federal................................................... $(2) $ 36 $21
--- ---- ---
(2) 36 21
--- ---- ---
Deferred:
Federal................................................... 44 (12) 8
State and local........................................... -- 1 --
--- ---- ---
44 (11) 8
--- ---- ---
Provision for income taxes.................................. $42 $ 25 $29
=== ==== ===
</Table>
Reconciliations of the income tax provision at the U.S. statutory rate to the
provision for income taxes are as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
Tax provision at U.S. statutory rate........................ $42 $13 $26
Tax effect of:
Tax exempt investment income.............................. (2) -- --
Sale of Subsidiaries...................................... -- 10 --
Other, net................................................ 2 2 3
--- --- ---
Provision for income taxes.................................. $42 $25 $29
=== === ===
</Table>
AA-58
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes represent the tax effect of the differences between the
book and tax basis of assets and liabilities. Net deferred income tax
liabilities consisted of the following:
<Table>
<Caption>
DECEMBER 31,
----------------------
2001 2000
-------- --------
(DOLLARS IN MILLIONS)
Deferred income tax assets:
Policyholder liabilities and receivables.................. $284 $283
Tax loss carry-forwards................................... 10 10
Net unrealized investment losses.......................... -- 4
Other..................................................... 20 11
---- ----
314 308
---- ----
Less: valuation allowance................................. 10 10
---- ----
304 298
---- ----
Deferred income tax liabilities:
Investments............................................... 6 2
Deferred policy acquisition costs......................... 344 298
Other..................................................... 22 18
---- ----
372 318
---- ----
Net deferred tax liability.................................. $(68) $(20)
==== ====
</Table>
8. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
The Company assumes and cedes reinsurance with other insurance companies. The
company continually evaluates the financial condition of its reinsurers and
monitors concentration of credit risk in an effort to minimize its exposure to
significant losses from reinsurer insolvencies. The Company is contingently
liable with respect to ceded reinsurance should any reinsurer be unable to meet
its obligations under these agreements. The consolidated statements of income
are presented net of reinsurance ceded.
The effect of reinsurance on premiums earned is as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
-------------------------
2001 2000 1999
------ ------ -----
(DOLLARS IN MILLIONS)
Direct premiums............................................. $ 305 $ 221 $163
Reinsurance assumed......................................... (10) 11 58
Reinsurance ceded........................................... (178) (107) (97)
----- ----- ----
Net premiums................................................ $ 117 $ 125 $124
===== ===== ====
Reinsurance recoveries netted against policyholder
benefits.................................................. $ 102 $ 73 $ 52
===== ===== ====
</Table>
Reinsurance recoverables, included in premiums and other receivables, were $94
million and $80 million at December 31, 2001 and 2000 respectively.
AA-59
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following provides an analysis of the activity in the liability for benefits
relating to group accident and non-medical health policies and contracts:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
------------------------
2001 2000 1999
---- ---- ----
(DOLLARS IN MILLIONS)
BALANCE AT JANUARY 1........................................ $ 4 $ 4 $ 2
Reinsurance recoverables.................................. (3) (3) (1)
--- --- ---
NET BALANCE AT JANUARY 1.................................... 1 1 1
--- --- ---
Incurred related to:
Current year.............................................. 1 -- --
--- --- ---
1 -- --
--- --- ---
NET BALANCE AT DECEMBER 31.................................. 2 1 1
Add: Reinsurance recoverables............................. 5 3 3
--- --- ---
BALANCE AT DECEMBER 31...................................... $ 7 $ 4 $ 4
=== === ===
</Table>
9. OTHER EXPENSES
Other operating costs and expenses consisted of the following:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
Compensation................................................ $ 106 $ 92 $ 97
Commissions................................................. 224 234 195
Interest and debt issue costs............................... 2 6 5
Amortization of policy acquisition costs.................... 63 109 31
Capitalization of policy acquisition costs.................. (216) (223) (217)
Rent, net of sublease income................................ 20 48 6
Insurance taxes, licenses, and fees......................... 23 27 21
Other....................................................... 261 197 213
----- ----- -----
Total other expenses...................................... $ 483 $ 490 $ 351
===== ===== =====
</Table>
AA-60
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STATUTORY FINANCIAL INFORMATION
The reconciliation of statutory surplus and statutory net income, determined in
accordance with accounting practices prescribed or permitted by the
Massachusetts Department of Insurance with such amounts determined in conformity
with accounting principles generally accepted in the United States of America
were as follows:
<Table>
<Caption>
DECEMBER 31,
----------------------
2001 2000
--------- ---------
(DOLLARS IN MILLIONS)
Statutory capital and surplus............................... $ 364 $ 353
GAAP adjustments for:
Future policy benefits and policyholders account
balances................................................ (325) (338)
Deferred policy acquisition costs......................... 1,185 1,021
Deferred income taxes..................................... (88) (20)
Valuation of investments.................................. 2 (5)
Statutory asset valuation reserves........................ 12 16
Other, net................................................ (212) (170)
------ ------
Stockholder's Equity........................................ $ 938 $ 857
====== ======
</Table>
<Table>
<Caption>
DECEMBER 31,
----------------------
2001 2000 1999
---- ----- -----
(DOLLARS IN MILLIONS)
Net change in statutory capital and surplus................. $11 $ (11) $ (41)
GAAP adjustment for:
Future policy benefits and policyholders account
balances................................................ 26 (311) (296)
Deferred policy acquisition costs......................... 153 177 186
Deferred income taxes..................................... (44) 11 (8)
Valuation of investments.................................. 8 (61) 14
Other, net................................................ (78) 207 191
---- ----- -----
Net Income.................................................. $76 $ 12 $ 46
==== ===== =====
</Table>
In March 1998, the National Association of Insurance Commissioners ("NAIC")
adopted the Codification of Statutory Accounting Principles ("Codification").
Codification, which is intended to standardize regulatory accounting and
reporting to state insurance departments, became effective January 2001.
However, statutory accounting principles will continue to be established by
individual state laws and permitted practices. The Commonwealth of Massachusetts
Division of Insurance (the "Division") requires adoption of Codification, with
certain modifications, for the preparation of statutory financial statements
effective January 1, 2001. The adoption of the Codification, as modified by the
Division increased the Company's statutory capital and surplus by approximately
$32 million, as of January 1, 2001. Further modifications by state insurance
departments may impact the effect of the Codification on the Company's statutory
capital and surplus.
11. OTHER COMPREHENSIVE INCOME (LOSS)
The following table sets forth the reclassification adjustments required for the
years ended December 31, 2001, 2000 and 1999 to avoid double-counting in other
comprehensive income (loss) items that are included as part of
AA-61
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
net income for the current year that have been reported as a part of other
comprehensive income (loss) in the current or prior year:
<Table>
<Caption>
2001 2000 1999
----- ----- -----
(DOLLARS IN MILLIONS)
Holding gains (losses) on investments arising during the
year...................................................... $ 20 $ 23 $(72)
Income tax effect of holding gains or losses................ (5) 16 22
Reclassification adjustments:
Recognized holding losses (gains) included in current year
income.................................................. (12) -- (3)
Amortization of premium and discount on investments....... (1) -- --
Recognized holding (losses) gains allocated to other
policyholder amounts.................................... -- -- 1
Income tax effect......................................... 3 -- 1
Allocation of holding losses (gains) on investments relating
to other policyholder amounts............................. 11 (23) 33
Income tax effect of allocation of holding gains or losses
to other policyholder amounts............................. (3) (14) (10)
---- ---- ----
Net unrealized investment gains (losses).................... 13 2 (28)
---- ---- ----
Other comprehensive income (loss)........................... $ 13 $ 2 $(28)
==== ==== ====
</Table>
12. RELATED PARTY TRANSACTIONS
Effective 2001, Metropolitan Life and the Company entered into a Master Service
Agreement for Metropolitan Life to provide all administrative, accounting, legal
and similar services to the Company. This Agreement replaced the former
Administrative Services Agreement ("ASA") under which the Company provided such
services for certain Metropolitan Life life insurance and annuity contracts
defined in the ASA. Metropolitan Life charged the Company $73 million for
administrative services in 2001. The Company charged Metropolitan Life $164
million and $161 million for administrative services for 2000 and 1999,
respectively. In addition, $61 million and $9 million for 2000 and 1999,
respectively, were charged to Metropolitan Life by the Company for other
miscellaneous services. These services were charged based upon direct costs
incurred. Service fees charged to Metropolitan Life were recorded by NELICO as a
reduction in operating expenses. Management believes intercompany expenses are
calculated on a reasonable basis, however these costs may not necessarily be
indicative of the costs that would be incurred if the Company operated on a
standalone basis.
The Company has preferred stock outstanding of $200 million owned by MetLife
Credit Corporation. The Company paid $8 million, $11 million and $9 million of
dividends on the preferred stock in 2001, 2000 and 1999, respectively.
During 1998 the Company acquired NL Holding and entered into employment
agreements with key individuals of NL Holding. The Company paid $5 million in
2001, made no payments in 2000 and paid $3 million in 1999 under these
agreements, which expired in 2001.
Commissions earned by NES from sales of New England Funds ("NEF") shares, a
subsidiary of MetLife through October 2000, were $12 million in 2000 and 1999,
respectively. NES earned asset-based income of $10 million, and $11 million on
average assets under management with NEF of approximately $3,500 million and
$4,500 million in 2000 and 1999, respectively.
Stockholder dividends or other distributions proposed to be paid by NELICO must
be approved by the Massachusetts Commissioner of Insurance if such dividends or
distributions, together with other dividends or distributions made within the
preceding 12 months, exceeds the greater of (1) 10% of NELICO's statutory
surplus as regards policyholders as of the previous December 31, or (2) NELICO's
statutory net gain from operations for the 12 month period ending the previous
December 31.
AA-62
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Of the statutory profits earned by NELICO on participating policies and
contracts, the portion which shall inure to the benefit of NELICO's stockholder
shall not exceed the larger of (1) 10% of such statutory profits, or (2) fifty
cents per year per thousand dollars of participating life insurance other than
group term insurance in force at the end of the year.
13. BUSINESS SEGMENT INFORMATION
The Company provides insurance and financial services to customers primarily in
the United States. The Company's core businesses are divided into five segments:
Individual Life, Individual Annuity, Group Pension, Group Accident and Health,
and Corporate. These segments are managed separately because either they provide
different products and services, require different strategies, or have different
technology requirements.
Individual Life sells primarily variable life as well as traditional life
policies. Individual Annuity sells a variety of fixed annuity and variable
annuity contracts. Group Pension sells a variety of group annuity and pension
contracts to corporations and other institutions. Group Accident and Health
provides group life, medical, and disability contracts to corporations and small
businesses. Through its Corporate segment, the Company reports the operating
results of subsidiaries as well as items that are not allocated to any of the
business segments.
Set forth in the following tables is certain financial information with respect
to the Company's operating segments for the years ended December 31, 2001, 2000
and 1999. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates the performance of each operating segment based on profit or loss from
operations after income taxes. The Company does not allocate non-recurring items
to the segments.
Allocation of net investment income and net investment gains (losses) were based
on the amount of assets allocated to each segment. Other costs and operating
costs were allocated to each of the segments based on: (i) a review of the
nature of such costs, (ii) time studies analyzing the amount of employee
compensation costs incurred by each segment, and (iii) cost estimates included
in the Company's product pricing.
<Table>
<Caption>
CORPORATE
AT OR FOR THE YEAR ENDED INDIVIDUAL INDIVIDUAL GROUP GROUP AND
DECEMBER 31, 2001 LIFE ANNUITY PENSION LIFE, A&H SUBSIDIARIES TOTAL
- ------------------------ ---------- ---------- ------- --------- ------------ ------
(DOLLARS IN MILLIONS)
Premiums.................................. $ 73 $ 1 $ -- $42 $ 1 $ 117
Universal life and investment-type product
policy fees............................. 247 30 10 -- 64 351
Net investment income..................... (6) 3 3 1 43 44
Other revenues............................ 6 3 4 10 198 221
Net investment gains (losses)............. 2 -- -- -- (3) (1)
Policyholder benefits and claims.......... 69 2 (2) 32 3 104
Interest credited to policyholder......... 18 3 3 -- -- 24
Policyholders' Dividends.................. 3 -- -- -- -- 3
Other Expenses............................ 160 32 7 13 271 483
Income (loss) before provision for income
taxes................................... 72 -- 9 8 29 118
Provision (benefit) for income taxes...... 24 -- 3 3 12 42
Net income (loss)......................... 48 -- 6 5 17 76
Total assets.............................. 3,704 2,047 1,252 48 1,001 8,052
Deferred policy acquisition costs......... 1,062 101 11 5 6 1,185
Separate account assets................... 2,709 1,834 1,182 -- -- 5,725
Policyholder liabilities.................. 894 182 47 42 39 1,204
Separate account liabilities.............. 2,709 1,834 1,182 -- -- 5,725
</Table>
AA-63
NEW ENGLAND LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<Table>
<Caption>
CORPORATE
AT OR FOR THE YEAR ENDED INDIVIDUAL INDIVIDUAL GROUP GROUP AND
DECEMBER 31, 2000 LIFE ANNUITY PENSION LIFE, A&H SUBSIDIARIES TOTAL
- ------------------------ ---------- ---------- ------- --------- ------------ ------
(DOLLARS IN MILLIONS)
Premiums.................................. $ 70 $ -- $ -- $ 36 $ 19 $ 125
Universal life and investment-type product
policy fees............................. 210 25 7 -- 30 272
Net investment income..................... (13) (1) 1 -- 76 63
Other revenues............................ 11 10 7 8 247 283
Net investment gains (losses)............. 35 2 (2) -- (63) (28)
Policyholder benefits and claims.......... 83 6 -- 31 30 150
Interest credited to policyholder......... 13 2 3 -- 2 20
Policyholders' Dividends.................. 3 -- -- -- 15 18
Other Expenses............................ 153 33 8 13 283 490
Income (loss) before provision for income
taxes................................... 61 (5) 2 -- (21) 37
Provision (benefit) for income taxes...... 9 (3) 2 -- 17 25
Net income (loss)......................... 52 (2) -- -- (38) 12
Total assets.............................. 3,634 1,788 773 406 962 7,563
Deferred policy acquisition costs......... 915 83 11 12 -- 1,021
Separate account assets................... 2,879 1,704 726 342 -- 5,651
Policyholder liabilities.................. 676 70 38 58 11 853
Separate account liabilities.............. 2,879 1,704 726 342 -- 5,651
</Table>
<Table>
<Caption>
CORPORATE
AT OR FOR THE YEAR ENDED INDIVIDUAL INDIVIDUAL GROUP GROUP AND
DECEMBER 31, 1999 LIFE ANNUITY PENSION LIFE, A&H SUBSIDIARIES TOTAL
- ------------------------ ---------- ---------- ------- --------- ------------ ------
(DOLLARS IN MILLIONS)
Premiums.................................. $ 63 $ -- $ -- $ 29 $ 32 $ 124
Universal life and investment-type product
policy fees............................. 198 17 4 -- 22 241
Net investment income..................... (31) -- -- -- 99 68
Other revenues............................ 23 7 3 34 148 215
Net investment gains (losses)............. -- -- -- -- 3 3
Policyholder benefits and claims.......... 125 5 -- 24 39 193
Interest credited to policyholder......... 9 2 1 -- (1) 11
Policyholders' Dividends.................. 2 -- -- -- 19 21
Other Expenses............................ 123 22 6 36 164 351
Income (loss) before provision for income
taxes................................... (6) (5) -- 3 83 75
Provision (benefit) for income taxes...... 1 (2) -- 1 29 29
Net income (loss)......................... (7) (3) -- 2 54 46
Total assets.............................. 3,276 1,441 569 266 1,579 7,131
Deferred policy acquisition costs......... 772 63 10 9 77 931
Separate account assets................... 2,705 1,399 518 218 -- 4,840
Policyholder liabilities.................. 536 44 45 44 518 1,187
Separate account liabilities.............. 2,705 1,399 518 218 -- 4,840
</Table>
Revenues derived from any single customer do not exceed 10% of the total
consolidated revenues for the years presented. Revenues were predominantly
generated from United States activity. Activity from other geographic locations
did not exceed 10% for any geographic location.
AA-64
NEW ENGLAND LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MA 02116
RECEIPT
This is to acknowledge receipt of a Zenith Flexible Life 2002 Prospectus dated
May 1, 2002. This Variable Life Policy is offered by New England Life Insurance
Company.
<Table>
- ----------------------------------------------------- -----------------------------------------------------
(Date) (Client's Signature)
</Table>
Part II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15 (d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Section 9 of NELICO's By-Laws provides that NELICO shall, to the extent
legally permissible, indemnify its directors and officers against liabilities
and expenses relating to lawsuits and proceedings based on such persons' roles
as directors or officers. However, Section 9 further provides that no such
indemnification shall be made with respect to any matter as to which a director
or officer is adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the corporation. Section 9
also provides that in the event a matter is disposed of by a settlement payment
by a director or officer, indemnification will be provided only if the
settlement is approved as in the best interest of the corporation by (a) a
disinterested majority of the directors then in office, (b) a majority of the
disinterested directors then in office, or (c) the holders of a majority of
outstanding voting stock (exclusive of any stock owned by any interested
director or officer).
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
NELICO pursuant to the foregoing provisions, or otherwise, NELICO 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 payment by NELICO of expenses incurred or paid by a
director, officer, or controlling person of NELICO 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, NELICO
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.
II-1
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium adjustable variable life insurance
policies described in this registration statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by New England Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
Then facing sheet.
A reconciliation and tie-in of the information shown in the prospectus
with the items of Form N-8B-2.
The prospectus consisting of 142 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of
1933.
Representations.
The signatures.
Written consents of the following persons:
Anne M. Goggin, Esq. (see Exhibit 3(i) below)
James J. Reilly, Jr., F.S.A., M.A.A.A. (see Exhibit 3(ii) below)
Sutherland Asbill & Brennan LLP (see Exhibit 6 below)
Independent Auditor (see Exhibit 11 below)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of
Directors of NEVLICO 4
(2) None
(3) (a) Distribution Agreement between NEVLICO and
NELESCO 5
(b) (i) Form of Contract between NELICO and its
General Agents 4
II-2
(ii) Form of contract between NELICO and its Agents 5
(c) Commission Schedule for Policies
(d) Form of contract among NES, NELICO and other broker
dealers 3
(4) None
(5) (a) Specimen of Policy 13
(b) Specimen of Policy (final)
(c) Riders to the Policy 13
(d) Riders to the Policy (final)
(6) (a) Amended and restated Articles of Organization of NELICO 2
(b) Amended and restated By-Laws of NELICO 3
(c) Amendments to Amended and restated Articles of
Organization 7
(d) Amended and restated By-Laws of NELICO 11
(7) None
(8) None
(9) None
(10) (a) Specimen of Application for Policy 6
(b) Specimen of Application for Riders 13
2. See Exhibit 3(i)
3. (i) Opinion and Consent of Anne M. Goggin, Esquire
(ii) Opinion and Consent of James J. Reilly, Jr.,
F.S.A., M.A.A.A.
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
7 . Powers of Attorney 10
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditors
12. Schedule for computation of performance
quotations 5
13. (i) Consolidated memorandum describing certain
procedures, filed pursuant to Rule 6e-2(b)(12)(ii)
and Rule 6e-3(T)(b)(12)(iii) 5
II-3
(ii) Second Addendum to Consolidated Memorandum 8
14. (i) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and New England
Variable Life Insurance Company 5
(ii) Amendment No. 1 to Participation Agreement among Variable
Insurance Products Fund, Fidelity Distributors Corporation
and New England Variable Life Insurance Company 1
(iii) Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and New
England Variable Life Insurance Company 1
(iv) Participation Agreement among Metropolitan
Series Fund, Inc., Metropolitan Life Insurance
Company and New England Life Insurance Company 9
(v) Participation Agreement among New England Zenith Fund,
New England Investment Management, Inc., New England
Securities Corporation and New England Life
Insurance Company 9
(vi) Amendment No. 2 to Participation Agreement
among Variable Insurance Products Fund, Fidelity
Distributors Corporation and New England Life
Insurance Company 10
(vii) Amendment No. 1 to Participation Agreement
among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and New England
Life Insurance Company 10
(viii) Participation Agreement among Met Investors Series Trust,
Met Investors Advisory Corp., Met Investors Distribution
Company and New England Life Insurance Company 13
(ix) Participation Agreement among American Funds
Insurance Series, Capital Research and Management Company
and New England Life Insurance Company 12
1 Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Variable Account's Form S-6 Registration Statement, File No. 33-88082,
filed June 22, 1995.
2 Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
3 Incorporated herein by reference to the Pre-effective Amendment No. 1 to
the Variable Account's Form S-6 Registration Statement, File No. 333-21767,
filed July 16, 1997.
II-4
4 Incorporated herein by reference to Post-Effective Amendment No. 9 to
the Variable Account's Form S-6 Registration Statement, File No.
33-66864, filed February 25, 1998.
5 Incorporated herein by reference to Post-Effective Amendment No. 9 to
the Variable Account's Form S-6 Registration Statement, File No.
33-52050, filed April 24, 1998.
6 Incorporated herein by reference to Post-Effective Amendment No. 4 to
the Variable Account's Form S-6 Registration Statement, File No.
33-88082, filed January 20, 1999.
7 Incorporated herein by reference to the Post-Effective Amendment No. 4
to the variable Account's Form S-6 Registration Statement, File No.
33-65263, filed February 24, 1999.
8 Incorporated herein by reference to the Post-Effective Amendment No. 10
to the Variable Account's Form S-6 Registration Statement, File No.
33-52050, filed April 26, 1999.
9 Incorporated herein by reference to the Post-Effective Amendment No. 11
to the Variable Account's Form S-6 Registration Statement, File No.
33-88082, filed November 9, 2000.
10 Incorporated herein by reference to the Post-Effective Amendment No. 2
to the Variable Account's Form S-6 Registration Statement, File No.
333-89409, filed February 26, 2001.
11 Incorporated herein by reference to the Post-Effective Amendment No. 4
to the Variable Account's Form S-6 Registration Statement, File No.
333-21767, filed April 25, 2001.
12 Incorporated herein by reference to the Post-Effective Amendment No. 4
to the Variable Account's Form S-6 Registration Statement, File No.
333-89409, filed July 20, 2001.
13 Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-73676, filed November 19, 2001.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, New
England Variable Life Separate Account, has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
city of Boston, and the Commonwealth of Massachusetts, on the 29th day of
April, 2002.
New England Variable Life Separate
Account
(Registrant)
By: New England Life Insurance Company
(Depositor)
By: /s/ Anne M. Goggin
--------------------------
Anne M. Goggin
Senior Vice President and
General Counsel
Attest:
/s/ John E. Connolly, Jr.
- ----------------------------
John E. Connolly, Jr.
Counsel and Assistant
Secretary
Pursuant to the requirements of the Securities Act of 1933, New England Life
Insurance Company has duly caused this amended Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in the city of Boston, and the
Commonwealth of Massachusetts, on the 29th day of April, 2002.
New England Life Insurance Company
(Seal)
Attest: /s/ John E. Connolly, Jr. By: /s/ Anne M. Goggin
-------------------------- ----------------------------
John E. Connolly, Jr. Anne M. Goggin
Counsel and Assistant Senior Vice President
Secretary and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
amended Registration Statement has been signed below by the following persons
in the capacities indicated on April 29, 2002.
* Chairman, President and
- ------------------- Chief Executive Officer
James M. Benson
* Director
- -------------------
Susan C. Crampton
* Director
- -------------------
Edward A. Fox
* Director
- -------------------
George J. Goodman
* Director
- -------------------
Evelyn E. Handler
* Director
- -------------------
Philip K. Howard, Esq.
* Director
- -------------------
Bernard A. Leventhal
* Director
- -------------------
Thomas J. May
* Director
- -------------------
Stewart G. Nagler
* Director
- -------------------
Catherine A. Rein
* Executive Vice President,
- ------------------- Chief Financial Officer and
David Y . Rogers Chief Accounting Officer
* Director
- -------------------
Rand N. Stowell
* Director
- -------------------
Lisa M. Weber
By: /s/ Marie C. Swift
----------------------
Marie C. Swift, Esq.
Attorney-in-fact
* Executed by Marie C. Swift, Esquire on behalf of those indicated
pursuant to powers of attorney filed with Post-Effective Amendment No.
2 to the Variable Account's Form S-6 Registration Statement, File No.
333-89409, on February 26, 2001.
EXHIBIT LIST
Sequentially
Exhibit Number Title Numbered Page*
- -------------- ----- -------------
1.A.3(c) Commission Schedule
1.A.5(b) Specimen of Policy (final)
1.A.5(d) Riders to the Policy (final)
3. (i) Opinion and Consent of
Anne M. Goggin, Esq.
3. (ii) Opinion and Consent of James J.
Reilly, Jr. F.S.A., M.A.A.A.
6. Consent of Sutherland Asbill & Brennan LLP
11. Consent of the Independent Auditor
- ------------
* Page numbers inserted on manually-signed copy only.