1
As filed with Securities and Exchange Commission on
October 20, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-6
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
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
-------------------------
Flexible Premium Adjustable Variable Survivorship Life Insurance Policies
(Title and amount of securities being registered)
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.
2
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 NELICO's Distribution Agreement
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 Months
Conversion Right; Lapse and Reinstatement; Surrender;
Partial Surrender; Right to Return the Policy; Loan
Provision; Transfer Option; Premiums; Dollar Cost
Averaging; Asset Rebalancing
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; NELICO's
Distribution Agreement
13 Charges and Expenses; NELICO's Distribution Agreement;
NELICO's Income Taxes; Appendix A
14 Amount Provided for Investment Under the Policy; NELICO's
Distribution Agreement
15 Premiums
16 Investments of the Variable Account
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 The Variable Account; Net Investment Experience
19 Reports; NELICO's Distribution Agreement
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 Inapplicable
24 Limits to NELICO's Right to Challenge the Policy
25 NELICO
26 NELICO's Distribution Agreement
3
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- ----------- ---------------------
27 NELICO
28 Management
29 NELICO
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 NELICO's Distribution Agreement
35 NELICO
36 Inapplicable
37 Inapplicable
38 NELICO's Distribution Agreement
39 NELICO's Distribution Agreement
40 NELICO's Distribution Agreement
41(a) NELICO's Distribution Agreement
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 Months Conversion Right; Payment
Options; Policy Owner and
Beneficiary; Premiums; NELICO's Distribution Agreement
52 Rights Reserved by NELICO
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
4
ZENITH SURVIVORSHIP LIFE
Flexible Premium Adjustable
Variable Survivorship 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 adjustable variable
survivorship life insurance policies (the "Policies") issued by New England Life
Insurance Company ("NELICO").
The Policy provides premium flexibility and a death benefit that is payable at
the death of the second to die. In some cases you can choose a rider that
provides a death benefit guarantee as long as your total premiums paid meet
certain minimum requirements.
You may choose among five death benefit options. Three provide a fixed death
benefit equal to the Policy's face amount. Two provide 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
Back Bay Advisors Bond Income Series
Back Bay Advisors Managed Series
Back Bay Advisors Money Market Series
Capital Growth Series
Westpeak Growth and Income Series
Westpeak Stock Index Series
Loomis Sayles Balanced Series
Loomis Sayles Small Cap Series
Alger Equity Growth Series
Davis Venture Value Series
Goldman Sachs Midcap Value Series
Morgan Stanley International Magnum Equity Series
MFS Investors Series
MFS Research Managers Series
VARIABLE INSURANCE PRODUCTS FUND ("VIP")
Overseas Portfolio
Equity-Income Portfolio
High Income Portfolio
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
Asset Manager Portfolio
You may also allocate net premiums to a Fixed Account in most states. Limits
apply to transfers to and from the Fixed Account.
You may cancel the Policy during the "Right to Return the Policy" period. In
addition, replacing existing insurance with the Policy might not be to your
advantage.
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 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.
, 1999
5
TABLE OF CONTENTS
PAGE
----
GLOSSARY.................................................... A-4
INTRODUCTION TO THE POLICIES................................ A-5
The Policies............................................ A-5
Availability of the Policy.............................. A-6
Policy Charges.......................................... A-6
How the Policy Works.................................... A-7
Receipt of Communications and Payments at NELICO's Home
Office................................................. A-8
NELICO.................................................. A-8
POLICY VALUES AND BENEFITS.................................. A-9
Death Benefit........................................... A-9
Guaranteed Death Benefit Rider.......................... A-10
Expanded Death Benefit Rider............................ A-10
Change in Death Benefit Option.......................... A-11
Death Proceeds Payable.................................. A-11
Cash Value.............................................. A-11
Net Investment Experience............................... A-12
Allocation of Net Premiums.............................. A-12
Amount Provided for Investment under the Policy......... A-12
Right to Return the Policy.............................. A-13
CHARGES AND EXPENSES........................................ A-13
Deductions from Premiums................................ A-13
Surrender Charge........................................ A-14
Monthly Deduction from Cash Value....................... A-15
Charges Against the Eligible Funds...................... A-17
Group or Sponsored Arrangements......................... A-18
PREMIUMS.................................................... A-18
Flexible Premiums....................................... A-18
Lapse and Reinstatement................................. A-19
OTHER POLICY FEATURES....................................... A-20
Loan Provision.......................................... A-20
Surrender............................................... A-20
Partial Surrender....................................... A-20
Reduction in Face Amount................................ A-21
Investment Options...................................... A-21
Transfer Option......................................... A-22
Dollar Cost Averaging................................... A-22
Asset Rebalancing....................................... A-22
Payment of Proceeds..................................... A-23
24 Months Conversion Right.............................. A-23
Policy Split Rider...................................... A-24
Payment Options......................................... A-24
Additional Benefits by Rider............................ A-24
Policy Owner and Beneficiary............................ A-25
THE VARIABLE ACCOUNT........................................ A-25
Investments of the Variable Account..................... A-26
Investment Management................................... A-27
THE FIXED ACCOUNT........................................... A-28
General Description..................................... A-28
Values and Benefits..................................... A-28
Policy Transactions..................................... A-28
A-2
6
PAGE
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NELICO'S DISTRIBUTION AGREEMENT............................. A-29
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY............ A-29
Notification of First Death............................. A-29
Misstatement of Age or Sex.............................. A-30
Suicide................................................. A-30
TAX CONSIDERATIONS.......................................... A-30
Introduction............................................ A-30
Tax Status of the Policy................................ A-30
Tax Treatment of Policy Benefits........................ A-31
NELICO's Income Taxes................................... A-33
MANAGEMENT.................................................. A-33
VOTING RIGHTS............................................... A-35
RIGHTS RESERVED BY NELICO................................... A-36
TOLL-FREE NUMBERS........................................... A-36
REPORTS..................................................... A-36
ADVERTISING PRACTICES....................................... A-36
LEGAL MATTERS............................................... A-37
REGISTRATION STATEMENT...................................... A-37
EXPERTS..................................................... A-37
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS........ A-38
APPENDIX B: INVESTMENT EXPERIENCE INFORMATION............... A-43
APPENDIX C: LONG TERM MARKET TRENDS......................... A-58
APPENDIX D: USES OF SURVIVORSHIP LIFE INSURANCE............. A-59
APPENDIX E: TAX INFORMATION................................. A-60
APPENDIX F: CASH VALUE ACCUMULATION TEST AND GUIDELINE
PREMIUM TEST.............................................. A-61
FINANCIAL STATEMENTS........................................ F-1
A-3
7
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.
BENCHMARK PREMIUM. We use the Benchmark Premium to determine the amount of
Surrender Charge that may apply on a surrender, partial surrender, lapse or face
amount reduction. It is the same as the Target Premium for the base Policy only
and does not include amounts which riders contribute to the Policy's total
Target Premium.
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 our general
account as a result of the loan.
EXCESS POLICY LOAN. When Policy loans plus accrued interest exceed the Policy's
cash value less the applicable Surrender Charge.
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 latest of the date we receive a premium
payment for the Policy, the date each of the insureds has signed his/her Part II
of the Policy application and the Policy Date.
NET CASH VALUE. The amount you receive if you surrender the Policy. It is equal
to the Policy's cash value reduced by any applicable Surrender Charge and by any
outstanding Policy loan and accrued interest.
NET INVESTMENT EXPERIENCE. For any period, a sub-account's net investment
experience equals the investment experience of the underlying Eligible Fund's
shares for the same period, reduced by the amount of charges against the
sub-account for that period.
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you choose
to help meet your future goals under the Policy. The Planned Premium can be a
fixed amount or can vary over time and is subject to certain limits under the
Policy. Payments in addition to any Planned Premium are called unscheduled
payments in the Policy and can be paid at any time, subject to certain limits.
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 each of the insureds has signed his/her
Part II of the application 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 five days after issue.
TARGET PREMIUM. We use the Target Premium to determine the level of sales
charge that applies to your premium payments, and also sales commissions. The
Target Premium varies with (i) each $1,000 of face amount, (ii) the sex and
underwriting class of each insured and their average issue age, and (iii)
certain riders. The dollar amount of your Target Premium appears in Section 1 of
your Policy as the amount to which the maximum premium load applies.
YOU. "You" refers to the Policy Owner.
A-4
8
INTRODUCTION TO THE POLICIES
THE POLICIES
The Policies are designed to provide lifetime insurance coverage for two
insureds payable at the death of the second to die. They are not offered
primarily as an investment.
Here is a summary of the Policy's basic features. You should read the prospectus
for more complete information.
-- You can make premium payments under the Policy based on a schedule you
determine, subject to some limits. We can limit or prohibit unscheduled
payments in some situations, including cases where an insured is in a
substandard risk class. (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 cases
after an initial period in the Zenith 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, two bond funds, two managed funds, a balanced fund, and a
money market fund. You may allocate your Policy's cash value to a
maximum of nine accounts (including the Fixed Account) at any one time.
(See "Investments of the Variable Account".)
-- If the Fixed Account is available in your state, you may also allocate
funds to that account. We provide guarantees of Fixed Account principal
and Interest. SPECIAL LIMITS APPLY TO TRANSFERS OF CASH VALUE FROM THE
--------------------------------------------------------
FIXED ACCOUNT. We have the right to restrict 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 Surrender".)
-- 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 among five death benefit options under the Policy. The
three level options provide a death benefit equal to the Policy's face
amount. The two variable options provide a death benefit equal to 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
under each option could increase to satisfy tax law requirements if the
cash value reaches certain levels. One of the level and one of the
variable options provide for an enhanced increase. (See "Death
Benefit".)
-- If it is available to you and you elect the Guaranteed Death Benefit
Rider, then regardless of investment experience, the death benefit is
guaranteed not to be less than the Policy's face amount, as long as the
total amount of premiums paid less any partial surrenders and
outstanding Policy loan balance at least equals certain minimum amounts.
(See "Death Benefit" and "Minimum Guaranteed Death Benefit".)
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- Once we mail the confirmation of the first premium (in some states, 15
days after that) the Policy allows you to transfer cash value among the
sub-accounts and, generally, to the Fixed Account up to four times in a
Policy year (twelve times in a Policy year for Policies issued in New
York) without our consent. Currently we do not limit the number of
sub-account transfers you may make in a Policy year. Transfers and
allocations involving the Fixed Account are subject to some limits. (See
"Transfer Option" and "The Fixed Account-- Policy Transactions".)
-- A loan privilege and a partial surrender feature are available. (See
"Loan Provision" and "Partial Surrender".)
-- 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".)
-- 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
A-5
9
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 should generally not be taxable to you as long as
the Policy has not lapsed, been surrendered or terminated. (However, the
issue is not free from doubt and a tax adviser should be consulted about
such loans.) 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 Return the Policy" period you can return the Policy
for a refund. In some states we are required to refund premiums paid; in
other states, we refund an amount that reflects investment experience
and certain charges. (See "Right to Return the Policy".)
-- Within 24 months after a Policy's date of issue, you may exercise the
Policy's 24 Months Conversion Right. If you do, we allocate all or part
of your Policy's cash value and future premiums to the Fixed Account.
The purpose of the 24 Months Conversion Right is to offer you fixed
Policy values and benefits. (See "24 Months Conversion Right" for more
information on this provision and its variations under Policies issued
in Maryland and New Jersey.)
In many respects the Policies are similar to fixed-benefit survivorship
universal life insurance. Like survivorship universal life insurance, the
Policies provide for a death benefit upon the death of the second insured,
flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit survivorship 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 net cash 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 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
Survivorship Life Insurance".
AVAILABILITY OF THE POLICY
The Policies are available for insureds from the age of 20 to 85, and, if we
consent, to older or younger insureds. All persons must meet our underwriting
and other requirements. The minimum face amount available is $100,000 unless we
consent to a lower amount. The Policies are not available to employee benefit
plans qualified under Section 401 of the Internal Revenue Code, except with our
consent.
POLICY CHARGES
For a description of Policy charges, see "How the Policy Works" on the next page
and the section "Charges and Expenses" later in the prospectus.
A-6
10
HOW THE POLICY WORKS [HOW THE POLICY WORKS FLOW CHART]
PREMIUM PAYMENTS
- -Flexible
- -Planned premium options
- -Minimum premium (in first three Policy years)
- -Guaranteed Death Benefit Premium (to age 100 of younger insured) (a rider
benefit that is available only if you choose death benefit Option 4; not
available if you choose "Outside Term")
CHARGES FROM PREMIUM PAYMENTS
- -Sales Load:
- yr. 1: 26.5% up to Target Premium and 4% above Target
- yrs. 2-10: 11.5% (9% if face amount is at least $1 million) up to Target
Premium and 4% above Target
- yrs. 11+: 4% of premiums
- -State Premium Tax Charge: 2.5%
- -Charge for Federal Taxes: 1%
LOANS
- -After we mail the initial premium confirmation, you may borrow a portion of
your cash value
- -Loan interest charge is 4.35%. We transfer loaned funds out of the Eligible
Funds into the General Account where we credit them with 4.0% interest.
RETIREMENT BENEFIT
- -Fixed settlement options are available for policy proceeds
CASH VALUES
- -Net premium payments invested in your choice of Eligible Fund investments
(generally after an initial period during which net investment experience equal
to that of the Zenith Money Market Sub-Account may be credited) or the Fixed
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
currently transfer funds among investment options (and to the Fixed Account)
once we mail the initial premium confirmation (in some states, 15 days after
that). Currently we do not limit the number of sub-account transfers you can
make in a Policy year. We limit the timing, frequency and amount of transfers
from (and in some cases to) the Fixed Account
- -You may allocate your cash value among a maximum of nine accounts at any one
time
DEATH BENEFIT
- -Paid upon the 2nd death
- -Level or Variable Death Benefit Options apply until age 100 of the younger
insured
- -Guaranteed not to be less than face amount (less any loan balance) if
Guaranteed Death Benefit rider is in effect (available in certain circumstances)
- -Income tax free to named beneficiary
- -Death benefit will not be less than that required by federal tax law, using tax
law test you select (guideline premium or cash value accumulation).
- -If you add Survivorship Level Term Insurance coverage, you elect whether to
include it in the calculation of the base Policy death benefit or simply add the
term proceeds to the base Policy proceeds.
- -Death benefit on or after age 100 of the younger insured equals the cash value,
unless the Policy has an Expanded Death Benefit rider, or a Guaranteed Death
Benefit rider that was in effect at age 100 of the younger insured.
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 rated
classification) from the cash value each month
- -Any Rider Charges
- -Policy Fee: $10.50 (not to exceed $12.50) per month in years 1-3 and $3.50 (not
to exceed $5.50) per month thereafter
- -Mortality and Expense Risk Charge at an annual rate of .90% in the first 10
Policy years and .45% thereafter (applied against cash value in the Variable
Account and any cash value in the general account that represents a Policy loan)
- -Administrative Charge: $0.07 per $1000 of face amount (base Policy and
Survivorship Level Term Insurance) monthly (not to exceed $0.08 per $1000) in
first three Policy years; $0.05 per $1000 (not to exceed $0.06 per $1000)
thereafter ( if face amount is $1 million or more, $0.025 per $1000, not to
exceed $0.035 per $1000, thereafter). If either insured is in a class below
standard, we add $0.02 per $1000 to the current and guaranteed charges, in years
four through six (if only one insured is below standard), or years four through
nine (if both insureds are below standard).
- -Guaranteed Death Benefit Rider Charge (if rider selected): $.01 per $1000 of
face amount (base Policy and any joint or single life term rider) monthly.
SURRENDER CHARGE
- -Applies on lapse, surrender, face reduction or partial surrender that causes a
face reduction in the first 15 Policy years (or until age 100 of younger
insured, if earlier). Maximum charge occurs in first Policy year and equals 90%
of the lesser of: premiums paid and Benchmark Premium. (Percentage is lower for
insureds with average issue age above 52.) Charge reduces monthly over remainder
of surrender charge period.
LIVING BENEFITS
- -If policyholder has elected and qualified for benefits for disability of
covered insured who becomes totally disabled, we will provide specified premium
amounts or waive monthly charges, depending on the option selected, 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 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 seven years of
date of lapse if it has not been surrendered
A-7
11
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT NELICO'S HOME 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 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.
NELICO
NELICO was organized as a stock life insurance company in Delaware in 1980 and
is licensed to sell life insurance in all states, the District of Columbia and
Puerto Rico. 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 MetLife, a mutual life insurance company whose
principal office is One Madison Avenue, New York, NY 10010. MetLife then became
the parent of NELICO. 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 now at 501 Boylston
Street, Boston, Massachusetts 02116. NELICO's mailing address is: P.O. Box 9116,
Boston, Massachusetts 02117.
The following chart illustrates the relationship of NELICO, the Fixed Account,
the Variable Account and the Eligible Funds.
NELICO [NELICO FLOW CHART]
(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 and Unscheduled Payments
Fixed Account
VARIABLE ACCOUNT
Zenith Capital Growth Sub-Account
Zenith Bond Income Sub-Account
Zenith Money Market Sub-Account
Zenith Managed Sub-Account
Zenith Stock Index Sub-Account
Zenith Growth and Income Sub-Account
Zenith Small Cap Sub-Account
Zenith Balanced Sub-Account
Zenith Equity Growth Sub-Account
Zenith Venture Value Sub-Account
Zenith Midcap Value Sub-Account
Zenith International Magnum Equity Sub-Account
Zenith Investors Sub-Account
Zenith Research Managers Sub-Account
Equity-Income Sub-Account
Overseas Sub-Account
High Income Sub-Account
Asset Manager Sub-Account
Sub-accounts buy shares of the Eligible Funds.
NEW ENGLAND ZENITH FUND
Capital Growth Series
Back Bay Advisors Bond Income Series
Back Bay Advisors Money Market Series
Back Bay Advisors Managed Series
Westpeak Stock Index Series
Westpeak Growth and Income Series
Loomis Sayles Small Cap Series
Loomis Sayles Balanced Series
Alger Equity Growth Series
Davis Venture Value Series
Goldman Sachs Midcap Value Series
Morgan Stanley International Magnum Equity Series
MFS Investors Series
MFS Research Managers Series
VIP
Equity-Income Portfolio
Overseas Portfolio
High Income Portfolio
VIP II
Asset Manager Portfolio
Eligible Funds buy portfolio investments to support values and benefits of the
Policies.
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POLICY VALUES AND BENEFITS
DEATH BENEFIT
The death benefit is payable to the beneficiary at the death of the second
insured to die.
CHOICE OF TAX TEST. The Internal Revenue Code requires that the Policy's death
benefit (including any Survivorship Level Term Insurance rider) not be less than
certain amounts defined in the Code. When you apply for your Policy, you select
which tax law test will apply to the death benefit. You will choose between: (1)
the cash value accumulation test, and (2) the guideline premium test.
Under the CASH VALUE ACCUMULATION TEST, the death benefit will not be less than
the cash value (plus the portion of any Monthly Deduction to the date of death),
times the net single premium factor set by the Internal Revenue Code. The net
single premium factors are shown in the Policy based on the age of the younger
insured at the start of the Policy year. Net single premium factors vary based
on each insured's sex, underwriting class and age at issue, and the Policy year.
Sample net single premium factors appear in Appendix F.
If you select the guideline premium test, one of two death benefit "corridors"
will apply.
Under the basic IRS GUIDELINE PREMIUM TEST, the death benefit will not be less
than the cash value (plus the portion of any Monthly Deduction to the date of
death), times the corridor factor set by the Internal Revenue Code. The corridor
factors vary by and are shown based on the age of the younger insured at the
start of the Policy year. See Appendix F.
Under the GUIDELINE PREMIUM TEST WITH ENHANCED CORRIDOR, the death benefit will
not be less than the cash value (plus the portion of any Monthly Deduction to
the date of death), times a corridor factor. Until age 81 of the younger
insured, these corridor factors are the same as under the basic guideline
premium test. Beginning at age 81 of the younger insured, until age 100 of that
insured, we use an enhanced corridor factor. The enhanced corridor is greater
than under the basic IRS guideline premium test, resulting in a potentially
larger death benefit than required by tax law. See Appendix F.
DEATH BENEFIT OPTIONS--TO AGE 100. When you apply for a Policy you select among
five death benefit options. These options apply until age 100 of the younger
insured.
The OPTION 1 death benefit equals the greater of the FACE AMOUNT and the death
benefit required by the GUIDELINE PREMIUM TEST WITH THE ENHANCED CORRIDOR.
The OPTION 2 death benefit equals the greater of the FACE AMOUNT and the death
benefit required by the GUIDELINE PREMIUM TEST.
The OPTION 3 death benefit equals the greater of the FACE AMOUNT PLUS THE CASH
VALUE, and the death benefit required by the GUIDELINE PREMIUM TEST WITH THE
ENHANCED CORRIDOR.
The OPTION 4 death benefit equals the greater of the FACE AMOUNT and the death
benefit required by the CASH VALUE ACCUMULATION TEST.
The OPTION 5 death benefit equals the greater of the FACE AMOUNT PLUS THE CASH
VALUE, and the death benefit required by the CASH VALUE ACCUMULATION TEST.
THE GUARANTEED DEATH BENEFIT RIDER IS ONLY AVAILABLE IF YOU SELECT OPTION 4.
(SEE "GUARANTEED DEATH BENEFIT RIDER" BELOW.)
TERM RIDER "IN" OR "OUT". If you add a Survivorship Level Term Insurance Rider
to your Policy, you can have the face amount of the rider added to the face
amount of the base Policy for purposes of calculating the base Policy death
benefit under your chosen death benefit option. If you do not choose to do this,
then the face amount of the rider will simply be added to the Policy proceeds.
If you include the rider coverage in the calculation of the death benefit
("Inside Term"), the Policy may provide greater potential for the cash value to
grow relative to the death benefit. If you do not include the rider coverage in
the calculation of the death benefit ("Outside Term"), the Policy may provide
greater potential for the death benefit to grow relative to the cash value.
With our consent, you may change your choice at any time. However, to change
from Inside Term to Outside Term, we require satisfactory evidence of
insurability.
To have both the Guaranteed Death Benefit Rider and the Survivorship Level Term
Insurance Rider, you must elect "Inside Term". See "Guaranteed Death Benefit
Rider" below.
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AGE 100. If the death benefit is payable on or after age 100 of the younger
insured, it equals the cash value on the date of death. However, if at age 100
of the younger insured, the Policy has a Guaranteed Death Benefit Rider and that
benefit is in effect, the death benefit will equal the face amount if it exceeds
the cash value. In addition, if the Policy has an Expanded Death Benefit Rider,
the death benefit will equal the smallest face amount that was in effect since
age 80 of the younger insured (or since the Policy Date if the younger insured
was older than 80 on that date), if this amount is greater than the death
benefit that would otherwise be payable.
GUARANTEED DEATH BENEFIT RIDER
Subject to state availability, if you choose death benefit Option 4, you may
also choose at issue the Guaranteed Death Benefit Rider. (If you elect a
Survivorship Level Term Insurance Rider, you must elect "Inside Term" in order
to choose or keep the Guaranteed Death Benefit Rider.)
If you elect this benefit, we determine whether the "No Lapse Guarantee Benefit"
is in effect on the first day of each Policy month until the younger insured
reaches age 100. If the benefit is in effect, the Policy will not lapse even if
the net cash value is less than the Monthly Deduction for that month.
We determine if the benefit is in effect as follows. On the first day of a
Policy month, if the total premiums you have paid, less all partial surrenders,
less any Policy loan balance, and less any cash value paid to you to allow the
Policy to continue to qualify as life insurance under the tax law, are at least
equal to: the Guaranteed Death Benefit Fund value for the prior year (shown in
the rider), plus 1/12 of the Guaranteed Death Benefit premium (shown in Section
1 of your Policy) for each completed Policy month of the current Policy year,
then the No Lapse Guarantee Benefit will apply for that month.
We recalculate the Guaranteed Death Benefit Premium if:
-- you reduce the face amount
-- you make a partial surrender that reduces the face amount
-- you increase or decrease rider coverage
-- a correction is made in the insurance age of either insured
-- the underwriting class of the Policy and its riders is improved.
When testing whether the No Lapse Guarantee Benefit is in effect, we use the
Policy's original Guaranteed Death Benefit premium for the period of time it was
in effect, and each recalculated Guaranteed Death Benefit premium for the period
of time it was in effect.
If you elect this rider, the Monthly Deduction will include a charge for the
rider, even if the No Lapse Guarantee Benefit is not effective, until the Policy
anniversary when the younger insured reaches age 100, unless you request that
the rider terminate before then.
A change in death benefit option, addition of a Survivorship Level Term
Insurance Rider as "Outside Term", or a change under that rider from "Inside
Term" to "Outside Term", will terminate the Guaranteed Death Benefit Rider.
We can restrict any unplanned premium payment that would increase your Policy's
death benefit by more than it would increase cash value. (See "Flexible
Premiums".) This could prevent you from making unplanned premium payments that
are necessary to keep the No Lapse Guarantee Benefit in effect.
EXPANDED DEATH BENEFIT RIDER
Subject to state availability, you can purchase the Expanded Death Benefit
Rider. You may add the rider to your Policy at issue or at any time until the
insureds' average age reaches 90. (See "Surrender Charge" for the rules we use
when calculating an average age.)
If you choose this rider, then the death benefit on and after age 100 of the
younger insured will at least be equal to the lowest face amount that was in
effect since age 80 of the younger insured (or since the Policy Date, if the
younger insured was older than 80 on that date). See "Age 100" above for how we
determine the death benefit on and after age 100 of the younger insured.
If you elect this rider, the Monthly Deduction will include a charge for the
rider until the Policy anniversary when the younger insured reaches age 100,
unless you request that the rider terminate before then.
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CHANGE IN DEATH BENEFIT OPTION
After the first Policy year and before the younger insured's age 100, you may
change your death benefit option by written request to our Home Office. The
request will be effective on the first day of the Policy month on or after we
receive it. A change in death benefit option may have tax consequences. (See
"Tax Considerations".)
You can change among the three options that use a guideline premium test or
between the two that use the cash value accumulation test, but not between a
guideline premium test option and a cash value accumulation test option.
If you change from Option 1 or 2 (face amount options) to Option 3 (face amount
plus cash value option), or from Option 4 (face amount option) to Option 5 (face
amount plus cash value option), 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 $100,000 requires our consent. We may also decrease
any rider benefits under the Policy. A partial surrender of cash value may be
necessary to meet Federal tax law limits on the amount of premiums that you can
pay into the Policy. No Surrender Charge applies in that situation.
If you change from Option 3 (face amount plus cash value option) to Option 1 or
2 (face amount options), or from Option 5 (face amount plus cash value option)
to Option 4 (face amount option), we increase the Policy's face amount, if
necessary, so that the death benefit is the same immediately before and after
the change.
If you change from Option 1 or 3 (enhanced corridor options) to Option 2, in
most cases we reduce the Policy's death benefit amount if the enhanced corridor
increases are in effect; the death benefit usually remains the same if they are
not in effect.
Changes from Option 2 to Option 1 or 3 (enhanced corridor options) require
underwriting approval, and both insureds must be living if the amount at risk
under the Policy would increase.
DEATH PROCEEDS PAYABLE
The death proceeds we pay are equal to the death benefit on the date of the
second insured's death, reduced by any outstanding loan and accrued loan
interest on that date. If the death occurs during the grace period, we reduce
the proceeds by the Amount Due, to cover unpaid Monthly Deductions to the date
of death. (See "Lapse and Reinstatement".) We increase the death proceeds (1) by
any rider benefits payable that are not already included in the base Policy's
death benefit and (2) by any Monthly Deduction made for a period beyond the date
of the second insured's death.
We may adjust the death proceeds if either insured's age or sex was misstated in
the application, if death results from either 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".)
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 our general 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 general account for a Policy
loan
-- the death benefit option you choose
-- Policy charges
-- partial surrenders
-- transfers among the sub-accounts and Fixed Account
We pay you the NET cash value if you surrender the Policy. It equals the cash
value minus any outstanding Policy loan (plus interest) and any Surrender Charge
that applies. If you surrender during the grace period, we also deduct the
Amount Due to cover the Monthly Deduction to the date of surrender. (See "Loan
Provision", "Surrender Charge", "Monthly Deduction from Cash Value" and "Lapse
and Reinstatement".)
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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.
NET INVESTMENT EXPERIENCE
The net investment experience of the sub-accounts affects the Policy's cash
value and, in some cases, the death benefit. We determine the net investment
experience of each sub-account as of the close of regular trading on the New
York Stock Exchange on each day when the Exchange is open for trading.
A sub-account's net investment experience for any period is based on the
investment experience of the underlying Eligible Fund shares for the same
period.
The investment experience of the Eligible Fund shares for any period is the
increase or decrease in their net asset value for the period, increased by the
amount of any dividends or capital gains distributions on the shares during the
period. Dividends and capital gains distributions on Eligible Fund shares are
reinvested in additional shares of the Eligible Fund.
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 Zenith Money Market Sub-Account from the
investment start date until the day that we mail the confirmation for the
initial premium (in states that require a refund of premiums if you exercise the
Right to Return the Policy, until 15 days after we mail the initial premium
confirmation). (The "investment start date" is defined below.) Then, we allocate
the cash value to the sub-accounts as you choose. We allocate the amounts you
allocated to the Fixed Account as of the investment start date. You can allocate
to a maximum of nine accounts (including the Fixed Account) at any one time.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
INVESTMENT START DATE. The investment start date is the latest of: the date
when we first receive a premium payment for the Policy, the date each of the
insureds has signed his/her Part II of the Policy application 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 receipt 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 each of the insureds has
signed his/her Part II of the application and receipt of the premium payment. In
that case, the Policy Date and investment start date are the same. (Under our
administrative rules, a Policy which would be dated the 28th day or later in a
month will receive a Policy Date of the 28th.) The amount of premium paid with
the application must be at least 10% of the annual Planned Premium for the
Policy. You may only make one premium payment before the Policy is issued.
If you make a premium payment with the application, we will cover the insureds
under a temporary insurance agreement for a limited period that generally begins
when we receive the premium for the Policy (or, if later, on the date when each
of the insureds has signed his/her Part II of the application). The maximum
temporary coverage is the lesser of the amount of insurance applied for and
$500,000 when both insureds are standard risks ($250,000 for when at least one
insured is not a standard risk and $50,000 when both persons are determined to
be uninsurable). 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 usually five days after issue. The investment start date is
the later of the Policy Date and the date we received the premium. Monthly
Deductions begin on the Policy Date. We credit interest at a 4% net rate to the
Policy for any period between the Policy Date and the investment start date.
Insurance coverage under the Policy begins when we receive the Minimum Premium
(see "Premiums") due for the first quarter (or, on receipt of the number of
monthly payments due under NELICO's Master Service Account arrangement).
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. Backdating in some cases causes a higher Surrender Charge
if it results in the Surrender Charge being based on a lower age bracket. (See
"Surrender Charge".) For a backdated Policy, you must also pay the minimum
premium
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payable 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 and interest at a 4% net rate for that
period.
RIGHT TO RETURN THE POLICY
You may cancel the Policy within 10 days (more in some states) after you receive
the Policy. You may return the Policy to us 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 the cash
value of the Policy plus any sales and premium tax charges that were deducted
from the premiums you paid, or if required by state insurance law, any premiums
paid.
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
Deferred Sales 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, to help cover those expenses. We can profit from
certain Policy charges.
DEDUCTIONS FROM PREMIUMS
We deduct a sales charge from premiums. The sales charge is:
-- In Policy year 1: 26.5% of premiums paid up to a Target Premium, and 4%
of premiums paid above a Target Premium
-- In Policy years 2-10: 11.5% (9% for Policies with a base face amount of
at least $1 million) of premiums paid in each year up to the Target Premium, and
4% of premiums paid above the Target Premium in each year
-- In Policy years 11 and after: 4% of premiums paid
When we calculate the sales charge, we consider premiums we receive during the
twenty days prior to a Policy anniversary as paid in the next Policy year. (This
rule does not apply to premiums paid through our Master Service Account
arrangement, described in "Premiums".)
We indicate your Target Premium in Section 1 of your Policy and on your
personalized illustration.
During the first 15 Policy years (or until age 100 of the younger insured, if
earlier), if you surrender or lapse the Policy, make a partial surrender or
reduce the face amount, a Surrender Charge also applies. (See "Surrender Charge"
below.)
We may reduce sales charges for Policies sold to some group or sponsored
arrangements. We offer a program under which you may exchange certain
fixed-benefit life insurance policies that New England Mutual issued for the
Policies without a deduction for the sales charge from the amount of cash value
that you transfer to the Policy. Eligibility conditions apply. Your registered
representative can advise you regarding terms and availability of the program.
STATE PREMIUM TAX CHARGE. We deduct 2.5% from each premium for state premium
taxes and administrative expenses. These 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.
FEDERAL PREMIUM TAX CHARGE. We deduct 1% from each premium for our federal
income tax liability related to premiums.
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EXAMPLE: The following chart shows the net amount of premium that we would
allocate to the Variable Account assuming a premium payment of $3,000 and a
Target Premium of $2,000, for a Policy with a base face amount below $1 million.
POLICY YEAR 1
PREMIUM NET PREMIUM
------- -----------
$3,000 $2,000
- 600 (30% X 2,000 = total sales and premium tax charge up to
------ Target Premium)
$1,400
$1,000
- 75 (7.5% X 1,000 = total sales and premium tax charge on
--------- payments above Target Premium)
$ 925
$1,400
+925
---------
$2,325 Net Premium
======
POLICY YEAR 2
PREMIUM NET PREMIUM
------- -----------
$3,000 $2,000
- 300 (15% X 2,000 = total sales and premium tax charge up to
------ Target Premium)
$1,700
$1,000
- 75 (7.5% X 1,000 = total sales and premium tax charge on
--------- payments above Target Premium)
$ 925
$1,700
+925
---------
$2,625 Net Premium
======
SURRENDER CHARGE
We deduct a Surrender Charge from the cash value if you lapse, surrender, reduce
the face amount, or make a partial surrender of your Policy that reduces the
face amount during the first 15 Policy years (or until age 100 of the younger
insured, if earlier).
For insureds with an average issue age of 52 or less, the Surrender Charge in
the first Policy year is 90% of the lesser of: (1) premiums paid and (2) the
Benchmark Premium. When we calculate this amount, we do not count premiums that
we receive within 20 days before the first Policy anniversary, unless they are
paid through the Master Service Account arrangement.
The Surrender Charge is greatest in the first Policy year. After that, the
charge reduces monthly. To determine the Surrender Charge after the first Policy
year, we take the dollar amount of the charge that applied at the end of the
first Policy year and multiply it by a fraction. The fraction is based on the
number of months remaining in the Surrender Charge period at the end of the
first Policy year (168 months over the next 14 years, for a 15 year Surrender
Charge period) and the number of full months remaining in the Surrender Charge
period at the time of the surrender, lapse or face amount reduction.
For example, if the Surrender Charge was $1000 at the end of the first Policy
year, then in the first month of the second Policy year the Surrender Charge is
$1000 times 167/168, or $994.05.
For insureds with an average issue age above 52, the Surrender Charge percentage
applied to premiums paid in the first Policy year will be less than 90%. Your
Policy's schedule page shows the maximum dollar amount of the Surrender Charge
that will apply in the first Policy year and for the last Policy month of each
remaining year in the Surrender Charge period. (When we calculate the average
issue age for this purpose, we round down and limit the average to the age of
the younger insured plus five years.)
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Any Surrender Charge that we deduct on lapse is credited 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 on any date after reinstatement, we do not count the period that the
Policy was lapsed.
In the case of a reduction in face amount or partial surrender that reduces the
face amount, 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. 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.
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 No Lapse Guarantee
Benefit under the Guaranteed Death Benefit rider or the three year
Minimum Premium guarantee, we make the Monthly Deduction each month
unless the cash value equals zero. (See "Premiums".)
-- Otherwise, we make the Monthly Deduction as long as the net cash value
is large enough to cover the entire Monthly Deduction. If it is not
large enough, the Policy will be in default and may lapse. (See "Lapse
and Reinstatement".)
There is no Monthly Deduction on or after the Policy anniversary when the
younger insured reaches age 100 (or would have reached age 100, if that person
dies earlier).
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, unless
you choose a "Single Source Expense Fund". If you choose a Single Source Expense
Fund, we will take the Monthly Deduction from the Account that you choose until
the cash value there is gone. Then we will take the Monthly Deduction from your
remaining Accounts in proportion to the cash value in each. You may choose a
Sub-Account or the Fixed Account as your Single Source Expense Fund.
The Monthly Deduction includes the following charges:
POLICY FEE. The Policy fee is currently equal to $10.50 per month in the first
three Policy years (guaranteed not to exceed $12.50 per month) and $3.50 per
month thereafter (guaranteed not to exceed $5.50 per month).
ADMINISTRATIVE CHARGE. Currently the basic Administrative Charge (that is, the
charge that applies if both insureds are in a standard or better underwriting
class) is $0.07 per $1,000 of face amount in the first three Policy years and
---------------- -----------
$0.05 per $1,000 in Policy years four and after. If the base Policy face amount
- ---------------- --------------
is $1 million or greater, the current charge in Policy years four and after is
$0.025 (rather than $0.05) per $1,000.
The guaranteed maximum basic monthly Administrative Charge is $0.08 per $1,000
------------------ ----------------
in the first three Policy years and $0.06 per $1,000 in Policy years four and
------------------------ ----------------
after. If the base Policy face amount is $1 million or greater, the guaranteed
maximum basic charge in Policy years four and after is $0.035 (rather than
------
$0.06) per $1,000.
If either insured is in a class below standard, there is an extra charge that
- ----------------------------------------------
applies on both a current and guaranteed basis in addition to the basic charge
described above. The extra charge is $0.02 per $1,000. If only one insured is in
----------------
a class below standard, the extra charge applies in Policy years four through
------------
six. If both insureds are in a class below standard, the extra charge applies in
- ---
Policy years four through nine.
-----------------
The Administrative Charge applies to the base Policy face amount and to the face
amount of any Survivorship Level Term Insurance rider. Currently we intend to
apply the basic Administrative Charge to no more than $4 million of Policy face
amount beginning in the second Policy year. This means that the maximum
Administrative Charge currently deducted in the second Policy year, for example,
is $100 per month ($0.025 times 4,000) for two insureds who are each a standard
or better risk. However, we do not limit the Policy face amount to which we
apply the extra charge for risk classes below standard. For example, under a
Policy with a $5 million face amount and an insured in a risk class below
standard, the maximum charge deducted on a current basis in the fourth Policy
------------------
year would be $200 per month ($0.025 times 4,000 plus $0.02 times 5,000).
MORTALITY AND EXPENSE RISK CHARGE. We deduct a charge for the mortality and
expense risks that we assume. This charge is at an annual rate of 0.90% during
the first ten Policy years, and 0.45% thereafter. The charge is applied against
cash value in the Variable Account and against the amount of any cash value held
in the general account that represents a Policy loan. The mortality risk we
assume is that insureds may live for shorter periods of time than we estimated.
The expense risk we assume is that our costs of issuing and administering the
Policies may be more than we estimated.
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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. The amount at risk is the amount by which the death benefit
(discounted at the monthly equivalent of 4% per year) exceeds the Policy's cash
value. The cost of insurance rate for your Policy changes from month to month.
The guaranteed cost of insurance rates for a Policy depend on each insured's
-- underwriting class
-- 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
-- each insured's age at issue
-- the Policy year
-- the base Policy face amount (at issue).
We guarantee that the joint rates will not be higher than rates based on the
1980 Commissioners Standard Ordinary Mortality Tables with smoker/nonsmoker
modifications (the "1980 CSO Tables"). 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 and investment earnings. We review the adequacy
of our cost of insurance rates periodically and may adjust them. Any change will
apply prospectively.
We underwrite each insured person separately. The underwriting classes we use
are smoker standard, smoker rated, nonsmoker standard, nonsmoker preferred,
nonsmoker aggregate, and nonsmoker rated. Rated classes have higher cost of
insurance deductions. We base the guaranteed maximum mortality charges for rated
Policies on multiples of the 1980 CSO Tables.
The three standard nonsmoker classes are available as follows:
-- nonsmoker preferred and nonsmoker standard, for Policies with base face
amounts of $500,000 or more if the insured's issue age is 20 through 75.
-- nonsmoker aggregate, for Policies with base face amounts below $500,000
and for all insureds whose issue age is above 75.
Of the three standard nonsmoker classes, the nonsmoker preferred class generally
offers the best current cost of insurance rates and the nonsmoker standard class
generally offers the least favorable current cost of insurance rates.
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,
current cost of insurance rates are generally lower for insureds with lower
issue ages. Current cost of insurance rates will generally be lower for a
particular insured if the base Policy face amount at issue is at least $1
million. We offer Policies with cost of insurance rates (and Policy values and
benefits) that do not vary based on the sex of the insured where required by
state law and to some employee benefit plans.
The Survivorship Level Term Insurance Rider has its own cost of insurance rates
that may be different from those of the base Policy. Generally, the term rider
cost of insurance rates are less than or the same as those of the base Policy.
If you choose "Inside Term" (where the face amount of the term rider is included
with the face amount of the base Policy when we calculate the base Policy death
benefit), then the total net amount at risk equals the total death benefit (that
is, the base Policy death benefit calculated by including the term component)
minus the cash value. We allocate that total net amount at risk first to the
term insurance rider up to the face amount of the rider, and we allocate any
excess net amount at risk to the base Policy. This generally results in lower
combined total cost of insurance charges under the base Policy and term rider
than if you choose "Outside Term".
With "Outside Term" (where the term rider's face amount is not used in
calculating the base Policy death benefit and is instead simply added to the
base Policy's death proceeds), we calculate the net amount at risk and cost of
insurance charges separately for the term insurance rider and the base Policy.
The term rider's net amount at risk equals its face amount, and the base
Policy's net amount at risk equals the base Policy's death benefit (which is
calculated without the term rider component) minus the cash value.
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GUARANTEED DEATH BENEFIT RIDER CHARGE. The charge for the Guaranteed Death
Benefit rider is $0.01 per $1000 of face amount (including the base Policy and
any joint or single life term insurance rider).
CHARGES FOR ADDITIONAL RIDER BENEFITS AND SERVICES. We charge for the cost of
any additional rider benefits, including the Expanded Death Benefit rider, 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.
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 "Charge for NELICO's Income Taxes".)
CHARGES AGAINST THE ELIGIBLE FUNDS
The following table shows the annual operating expenses for each series, based
on actual expenses for 1998, after any applicable expense cap or expense
deferral arrangement.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY EXPENSE CAP)
BACK BACK
BAY BAY BACK WESTPEAK LOOMIS
ADVISORS ADVISORS BAY WESTPEAK GROWTH SAYLES
CAPITAL BOND MONEY ADVISORS STOCK AND SMALL
GROWTH INCOME MARKET MANAGED INDEX INCOME CAP
SERIES SERIES SERIES SERIES SERIES SERIES SERIES*
------- -------- -------- -------- -------- -------- -------
Management Fee........................ .63% .40% .35% .50% .25% .70% 1.00%
Other Expenses........................ .03% .08% .10% .08% .12% .08% --
--- --- --- --- --- --- ----
Total Series Operating
Expenses................... .66% .48% .45% .58% .37% .78% 1.00%
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER EXPENSE DEFERRAL)
GOLDMAN MORGAN
SACHS LOOMIS STANLEY DAVIS ALGER MFS
MIDCAP SAYLES INTERNATIONAL VENTURE EQUITY MFS RESEARCH
VALUE BALANCED MAGNUM VALUE GROWTH INVESTORS MANAGERS
SERIES SERIES EQUITY SERIES* SERIES SERIES SERIES* SERIES*
------- -------- -------------- ------- ------ --------- --------
Management Fee.......................... .75% .70% .90% .75% .75% .75% .75%
Other Expenses.......................... .15% .12% .40% .08% .08% .15% .15%
--- --- ---- --- --- --- ---
Total Series Operating
Expenses..................... .90% .82% 1.30% .83% .83% .90% .90%
- ---------------
* Without the applicable expense cap or expense deferral arrangement (described
below), Total Series Operating Expenses for the year ended December 31, 1998
would have been: Loomis Sayles Small Cap Series, 1.10%; and Morgan Stanley
International Magnum Equity Series, 1.40%. Without the expense deferral
arrangement, we estimate that Total Series Operating Expenses for the MFS
Investors Series and MFS Research Managers Series for the year ended December
31, 1999 would be 1.04%, each, on an annualized basis.
Our affiliate, New England Investment Management, Inc. (formerly known as TNE
Advisers, Inc.), advises the series of the Zenith Fund except for the Capital
Growth Series. New England Investment Management voluntarily limits the expenses
of these series with either an expense cap or expense deferral arrangement, as
shown in the chart above. Under the expense cap, New England Investment
Management bears expenses of a series (other than the management fee) that
exceed 0.15% of average daily net assets (in the case of the Loomis Sayles Small
Cap Series, expenses that exceed 1.00% of average daily net assets). Under the
expense deferral, New England Investment Management bears expenses of a series
(other than the management fee) that exceed a certain limit in the year the
series incurs them and charges those expenses to the series in a future year if
actual expenses of the series are below the limit. New England Investment
Management may end these expense limits at any time.
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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 certain other expenses. For the year ended December 31,
1998, the total operating expenses of the Portfolios, as a percentage of
Portfolio average net assets, were:
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
- --------- ---------- -------- ------------
VIP Equity-Income........................................... .49% .09% .58%*
VIP Overseas................................................ .74% .17% .91%*
VIP High Income............................................. .58% .12% .70%
VIP II Asset Manager........................................ .54% .10% .64%*
- ------------
* 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, .89% for VIP Overseas Portfolio, and .63% for VIP II
Asset Manager Portfolio.
Affiliates of FMR compensate NELICO and/or certain affiliates for
administrative, distribution, or other services relating to these Portfolios of
VIP and VIP II. This compensation is based on assets of the Portfolios
attributable to the Policies and certain other variable insurance products that
we and our affiliates issue.
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. An example of such an arrangement is a non-tax qualified deferred
compensation plan. 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.
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. 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 may be a fixed amount or a varying
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. You need our consent to increase your Planned Premium.
You cannot make an additional payment that increases the Policy's death benefit
by more than it increases the cash value except with our consent, and we may
require underwriting. No payment can be less than $25 ($10 for payments made
through the Master Service Account, described below, or certain other monthly
payment arrangements). We limit the total of Planned Premiums and other payments
to our published maximum. You cannot make any payments at and after age 100 of
the younger insured, except if the Policy is in the grace period.
You can pay Planned Premiums on an annual, semi-annual or quarterly schedule or,
with our consent, monthly. You need our consent to change your Planned Premium
schedule.
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 New England
Cash Management Trust account. (This is known as the Master Service Account
arrangement.)
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If any payments under the Policy exceed the "7-pay test" 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 test". 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. (See "Tax
Considerations".)
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 Home
Office".)
Unless you tell us otherwise in writing, we treat any payment that we receive in
response to an anniversary bill, and any payment we receive within 45 days after
an anniversary while you have an outstanding Policy loan, first as a Planned
Premium, second as payment of loan interest, and third as an unscheduled
payment. Otherwise, we treat the payment first as a Planned Premium and second
as an unscheduled payment.
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 three Policy years, and (2) until age 100 of the younger insured.
First three Policy years--In general, if you pay the three year Minimum Premium
- ------------------------
amount on time, the Policy will not lapse even if the net cash value is less
than the Monthly Deduction in any month. If (a) the total premiums you have
paid, less all partial surrenders and any outstanding Policy loan balance (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 monthly Minimum Premiums for the
Policy up to that Policy month, the Policy will not lapse. We recalculate the
three year Minimum Premium if (1) you reduce the face amount or make a partial
surrender that reduces the face amount, (2) you increase or decrease rider
coverage, (3) the rating classification for your Policy is improved, or (4) a
correction is made in the insurance age of either insured. We base the Minimum
Premium on your Policy's face amount, the age, sex (unless unisex rates apply),
and underwriting class of each insured, the current level of Policy charges and
any riders to the Policy.
To age 100 of the younger insured--In general, if you elect the Guaranteed Death
- ---------------------------------
Benefit rider and pay the Guaranteed Death Benefit Premium amounts on time, the
Policy will stay in force until age 100 of the younger insured. Your total
payments (less any partial surrenders, outstanding Policy loans 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 Guaranteed Death Benefit
premium following the same Policy transactions described above for a
recalculation of the three year Minimum Premium amount. The Guaranteed Death
Benefit premium amount (shown in your Policy) is based on the same factors as
the three year Minimum Premium, except that it is based on the guaranteed
maximum level of Policy charges.
- -------------------------------------------------------------------------------
LAPSE AND REINSTATEMENT
LAPSE. Unless your Policy is protected by the No Lapse Guarantee Benefit under
the Guaranteed Death Benefit rider or by the three year Minimum Premium
guarantee, any month that your Policy's net cash 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 the Amount Due. The Amount Due is the least
of: a premium large enough to permit the Monthly Deduction to be made; a premium
large enough to permit the No Lapse Guarantee Benefit to be in effect, if the
Policy has the Guaranteed Death Benefit rider; and a premium large enough to
meet the monthly three year Minimum Premium test. We will tell you the Amount
Due. You have insurance coverage during the grace period, but if the second
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
Amount Due by the end of the grace period, your Policy will lapse without value.
REINSTATEMENT. If your Policy has lapsed, you may reinstate it within seven
years after the date of lapse. If more than seven years have passed, or if you
have surrendered the Policy, 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, Policy fee, mortality and expense risk charge, administrative charge,
sales charge and rider charges, we do not count the amount of time that a Policy
was lapsed.
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OTHER POLICY FEATURES
LOAN PROVISION
You may borrow all or part of the Policy's "loan value" at any time after we
mail the confirmation for the initial premium (unless we consent to an earlier
date). We make the loan as of the date when we receive a loan request. (See
"Receipt of Communications and Payments at NELICO's Home Office".) You should
contact our Home Office or your registered representative for information on
loan procedures.
The Policy's loan value equals 90% (or more if required by state law) of: the
Policy's cash value minus the Surrender Charge. The loan value available is the
loan value reduced by any outstanding loan plus interest.
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 first to the sub-accounts of the Variable Account in proportion to the
cash value in each, and then the Fixed Account. We allocate loan repayments
first to the outstanding loan balance attributed to the Fixed Account and then,
unless you request otherwise, to the sub-accounts of the Variable Account in
proportion to the cash value in each.
The interest rate charged on Policy loans is an effective rate of 4.35% per
year, compounded daily. Interest accrues daily and is due on the Policy
anniversary. If not paid, we add the interest accrued to the loan amount, and we
deduct an amount equal to the unpaid interest from the Policy's cash value in
the sub-accounts and the Fixed Account in proportion to the amount in each. The
amount we take from the Policy's sub-accounts as a result of the loan earns
interest (compounded daily) at an effective rate of not less than 4% per year.
We credit this interest amount to the Policy's sub-accounts annually, in
proportion to the cash value in each.
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".)
If Policy loans plus accrued interest at any time exceed the Policy's cash value
less the Surrender Charge on the next Policy loan interest due date (or, if the
Surrender Charge would be greater, on the date the calculation is made), we will
notify you that the Policy is going to terminate. (This is called an "excess
Policy loan". We test for an excess Policy loan on each monthly processing date
and in connection with Policy processing transactions.) The Policy terminates
without value 62 days after we mail the notice unless you pay us the excess
Policy loan amount within that time. (See "Lapse and Reinstatement".) 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. 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 about such loans. (See "Tax
Considerations" below.)
Department of Labor ("DOL") regulations impose requirements for participant
loans under tax-qualified pension plans. Therefore, plan loan provisions may
differ from Policy loan provisions. (See "Tax Considerations".)
SURRENDER
You may surrender a Policy for its net cash value at any time while either
insured is living. We determine the net cash value of the surrendered Policy as
of the date when we receive a surrender request. The net cash value equals the
cash value reduced by any Policy loan and accrued interest and by any applicable
Surrender Charge. (See "Surrender Charge".) We increase the net cash value paid
to you by the portion of any Monthly Deduction made for the period beyond the
date of surrender. If you surrender the Policy during the grace period, we
deduct the Amount Due from your proceeds to cover the Monthly Deduction to the
date of surrender. (See "Lapse and Reinstatement".) You may apply all or part of
the net cash value to a payment option. (See "Payment Options".) A surrender may
result in adverse tax consequences. (See "Tax Considerations" below.)
PARTIAL SURRENDER
You may make a partial surrender of the Policy at any time after we mail the
confirmation for the initial premium, to receive a portion of its net cash
value. A partial surrender 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. Any reduction in the face amount causes a proportionate
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reduction in the Policy's Benchmark Premium, on which we base any future
Surrender Charges, and in the Target Premium, on which we base the level of the
sales charge. A partial surrender may also reduce rider benefits. We reserve the
right to decline a partial surrender request that would reduce the face amount
below the Policy's required minimum.
We have the right to limit partial surrenders in any one Policy year to 20% of
the Policy's net cash value on the date of the first partial surrender for the
Policy year or, if less, the Policy's available loan value. Currently, we permit
partial surrenders of up to 90% of the Policy's net cash value per year, if
there is sufficient available loan value.
We deduct any Surrender Charge that applies to the partial surrender from the
Policy's remaining cash value in an amount proportional to the amount of the
Policy's face amount surrendered. The Surrender Charge applied reduces any
remaining Surrender Charge under your Policy.
You may not reinvest cash value paid upon partial surrender in the Policy except
as premium payments, which are subject to the charges described under
"Deductions From Premiums".
A partial surrender first reduces the Policy's cash value in the sub-accounts of
the Variable Account, in proportion to the amount of cash value in each, and
then the Fixed Account, unless you request otherwise. We determine the amount of
net cash value paid upon partial surrender as of the date when we receive a
request. You can contact your registered representative or the Home Office for
information on partial surrender procedures.
A reduction in the death benefit as a result of a partial surrender may create a
"modified endowment contract" or have other adverse tax consequences. If you are
contemplating a partial surrender, you should consult your tax advisor 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. (This feature differs
from a partial surrender, which reduces the Policy's net cash value.)
If you decrease the face amount of your Policy, we also decrease the Benchmark
Premium, on which we base any future Surrender Charges, and the Target Premium,
on which we base the level of the sales charge. We deduct any Surrender Charge
that applies from the Policy's cash value in an amount proportional to the
amount of the face reduction.
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 deducted a
Surrender Charge from the cash value. A reduction in face amount in this
situation may not be advisable, because it will not reduce your death benefit or
cost of insurance charges and may result in a Surrender Charge.) We also may
decrease any rider benefits attached to the Policy. The face amount remaining
after a reduction must meet our minimum face amount requirements for issue,
except with our consent.
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, you may need to have a portion of the Policy's cash value paid to
you to comply with Federal tax law.
A face amount reduction takes effect as of the first day of the Policy month on
or after the date when we receive a request. You can contact your registered
representative or the Home Office for information on face reduction procedures.
A reduction in the face amount of a Policy may create a "modified endowment
contract". If you are contemplating a reduction in face amount, you should
consult your tax advisor regarding the tax consequences of the transaction. (See
"Tax Considerations".)
INVESTMENT OPTIONS
You can allocate your Policy's premiums among the sub-accounts of the Variable
Account and the Fixed Account in any combination, as long as you choose no more
than nine accounts (including the Fixed Account) at any one time. You may
allocate any whole percentage to a sub-account. You can allocate your Policy's
---
cash value among no more than nine accounts (including the Fixed Account) at any
one time.
You make the initial allocation when you apply for a Policy. 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 Home Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
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TRANSFER OPTION
Once we mail the confirmation for the initial premium (in some states, 15 days
after that) you may transfer your Policy's cash value between sub-accounts. We
reserve the right to limit sub-account transfers to four per Policy year (twelve
per Policy year for Policies issued in New York). Currently we do not limit the
number of transfers per Policy year. We reserve the right to make a charge for
transfers in excess of four in a Policy year. A transfer is effective as of the
date when we receive the transfer request. (See "Receipt of Communications and
Payments at NELICO's Home 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 advisors or
registered representatives acting under power(s) of attorney from one or more
Policy owners.
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 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.
DOLLAR COST AVERAGING
We plan to offer an automated transfer privilege called dollar cost averaging.
The same dollar amount is transferred to selected Sub-Accounts (and/or the Fixed
Account) periodically. 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 any selected business day of each period (or if not a day when
the New York Stock Exchange is open, the next such day), from any one
Sub-Account to one or more of the other Sub-Accounts (and/or the Fixed Account).
We limit your allocation of cash value to no more than nine accounts (including
the Fixed Account) at any one time. You must transfer a minimum of $100 to each
Sub-Account that you select under this feature. You can select a dollar cost
averaging program when you apply for the Policy or at a later date by contacting
our Home Office. You may participate in the dollar cost averaging program while
you are participating in the asset rebalancing program as long as the
Sub-Account from which you are transferring cash value under the dollar cost
averaging program is not included in the asset rebalancing program. (See "Asset
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.
Ask your registered representative about the availability of this feature.
ASSET REBALANCING
We plan to offer an asset rebalancing program for cash value. Cash value
allocated to the Sub-Accounts can be expected to increase or decrease at
different rates. An asset rebalancing program automatically reallocates your
cash value among the Sub-Accounts periodically to return the allocation to the
allocation percentages you specify. Asset rebalancing is intended to transfer
cash value from those Sub-Accounts that have increased in value to those that
have declined, or not increased as much, in value. Asset rebalancing does not
guarantee profits, nor does it assure that you will not have losses.
You can select an asset rebalancing program when you apply for the Policy or at
a later date by contacting our Home Office. You specify the percentage
allocations by which your cash value will be reallocated among the Sub-Accounts.
You may participate in the asset rebalancing program while you are participating
in the dollar cost averaging program as long as the Sub-Account from which you
are transferring cash value under the dollar cost averaging program is not
included in the asset rebalancing program. (See "Dollar Cost Averaging" above.)
On the last day of each period on which the New York Stock Exchange is open, we
will transfer cash value among the Sub-Accounts as necessary to return the
allocation to your specifications. Asset rebalancing will continue until you
notify us in writing or by telephone at our Home Office.
Ask your registered representative about the availability of this feature.
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PAYMENT OF PROCEEDS
We ordinarily pay any net cash value, loan value or death benefit proceeds
coming from the sub-accounts within seven days after we receive a request, or
satisfactory proof of death of an insured (and any other information we need to
pay the death proceeds). (See "Receipt of Communications and Payments at
NELICO's Home 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 trading on
the New York Stock Exchange is restricted, (ii) if the SEC 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.
The beneficiary can elect our Access Plus program for payment of death proceeds
at any time before we pay them. We establish an Access Plus account at a banking
institution at the time for payment. The Access Plus account gives convenient
access to the proceeds, which are maintained in our general account or that of
an affiliate, through checkbook privileges with the bank.
Normally we promptly make payments of net 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 MONTHS CONVERSION RIGHT
GENERAL RIGHT. Generally, during the first 24 months after the Policy's issue
date, you may convert the Policy, or a portion of it, to fixed benefit coverage
by transferring all or a portion of your Policy's cash value, and allocating all
or a portion of future premiums, to the Fixed Account. The request to convert to
fixed benefit coverage must be in written form satisfactory to us.
You may exercise this privilege only once within 24 months after issue.
Transfers into the Fixed Account pursuant to this right will not count toward
the limit on the number of cash value transfers permitted under the Policy each
year. Transfers of cash value back to one or more Sub-Accounts of the Variable
Account are subject to the Policy's general limits on transfers from the Fixed
Account (see "The Fixed Account").
The Policy permits us to limit allocations to the Fixed Account under some
circumstance. (See "The Fixed Account.") If we limit such allocations and you
then wish to exercise the 24 Months Conversion Right, you may continue to
allocate to the Fixed Account only the percentage of premiums that you allocated
to the Fixed Account pursuant to your exercise of the 24 Months Conversion
Right. In addition, if you have exercised this right, and we later limit such
allocations, then you may continue to allocate to the Fixed Account only the
lowest percentage of premiums that you allocated to the Fixed Account at any
time since your exercise of the 24 Months Conversion Right.
FOR POLICIES ISSUED IN MARYLAND AND NEW JERSEY. Under Policies issued in
Maryland and New Jersey, you can exchange the face amount of your Policy for a
fixed benefit survivorship life insurance policy provided that you repay any
policy loans and (1) the Policy has not lapsed and (2) the exchange is made
within 24 months after the Policy's issue date. 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, at your option, either the same death benefit or the same net
amount at risk 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 us or your registered representative for more specific information about
the 24 Months 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.
GROUP OR SPONSORED ARRANGEMENTS. For a Policy issued to some group or sponsored
arrangements, you may (if approved in your state) have 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. Contact us or your registered
representative for more information about this feature.
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POLICY SPLIT RIDER
Subject to state availability and our underwriting guidelines, we may issue or
amend your Policy with a split rider which allows you to "split" the Policy into
two new NELICO individual flexible premium adjustable variable life insurance
policies. The rider permits you to split the Policy in the event of divorce of
the insureds, if certain federal tax law changes occur, or if certain business
circumstances change (each, a "split event"). The rider lists the requirements
for a split event. If you exercise the split rider, this Policy will be
canceled, and we will transfer its cash value (in equal portions, unless we
agree otherwise) to two new individual policies issued on the effective date of
the split. A new Surrender Charge will apply to each individual policy. We will
issue each new policy with either a level or variable death benefit option in
effect, depending on which type of death benefit option you have under this
Policy at the time of the split.
For more information about the Policy split rider you should contact us or your
registered representative. You can request a prospectus and additional
information regarding the individual policies that are issued following a split.
For a discussion of the possible tax consequences of splitting the Policy, see
"Tax Considerations."
PAYMENT OPTIONS
We pay the Policy's death benefit and net cash 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 last death under the Policy. You
can contact your registered representative or the Home Office for the procedure
to follow. 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% a year, compounded yearly. Additional interest for any year
is added to the monthly payments for that year.
(ii) LIFE INCOME. We pay proceeds in equal monthly installments (i) during
the life of the payee, (ii) for the longer of the life of the payee or
10 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 unpaid
proceeds remaining either in one sum or in equal monthly installments
until we have paid the total proceeds.
(iv)INTEREST. We hold proceeds for the life of the payee or another agreed
upon period. We pay interest of at least 3% a year monthly or add it to
the principal annually. At the death of the payee, or at the end of the
period agreed to, we pay the balance of principal and any interest in
one sum.
(v) SPECIFIED AMOUNT OF INCOME. We pay proceeds plus accrued interest of at
least 3% a year in an amount and at a frequency elected until we have
paid total proceeds. We pay any amounts unpaid at the death of the payee
in one sum.
(vi)LIFE INCOME FOR TWO LIVES. We pay proceeds in equal monthly
installments (i) while either of two payees is living, (ii) for the
longer of the life of the surviving payee or 10 years, or (iii) 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.
You need our consent to use an option if the installment payments would be less
than $20.
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.
It may be to your economic advantage to include a significant portion of your
insurance coverage under a Survivorship Level Term Insurance rider.
Reductions in or elimination of term rider coverage does not trigger a surrender
charge, and use of a term rider generally reduces sales compensation. 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
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increase with the age of the covered individual. Your registered representative
can provide you more information on the uses of term rider coverage.
The following riders are available:
TERM RIDER--SURVIVORSHIP LEVEL TERM INSURANCE, which provides joint life
term insurance.
TERM RIDER--JOINT 4 YEAR TERM INSURANCE, which provides joint life term
insurance for four policy years.
TERM RIDER--LEVEL SINGLE LIFE TERM INSURANCE, which provides additional term
insurance on one of the insureds.
TERM RIDER--DECREASING SINGLE LIFE TERM INSURANCE, which provides additional
term insurance on one of the insureds in an amount that decreases each year to
zero over a coverage period of 10, 15 or 20 years.
WAIVER OF MONTHLY DEDUCTION, which provides for waiver of Monthly Deductions
upon the disability of the insured covered by the waiver.
WAIVER OF SPECIFIED PREMIUM, which provides for waiver of the cost of the
rider itself and for a premium benefit upon the disability of an insured covered
by the rider.
An Expanded Death Benefit, Guaranteed Death Benefit, and/or a Policy split rider
may also be available. (See "Expanded Death Benefit Rider", "Guaranteed Death
Benefit Rider", and "Policy Split Rider".) 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 second
insured.
The beneficiary is also named in the application. You may change the beneficiary
at any time before the death of the second insured. The beneficiary has no
rights under the Policy until the death of the second insured and must survive
the second insured in order to receive the death proceeds. If no named
beneficiary survives the second 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 the Home 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 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
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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 Back Bay Advisors Money Market Series. Its investment objective is
the highest possible 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.
The Zenith Back Bay Advisors Bond Income Series. Its investment objective is a
high level of current income consistent with protection of capital.
The Zenith Capital Growth Series. Its investment objective is the long-term
growth of capital through investment primarily in equity securities of companies
whose earnings are expected to grow at a faster rate than the United States
economy.
The Zenith Westpeak Stock Index Series. Its investment objective is investment
results that correspond to the composite price and yield performance of United
States publicly traded common stocks.
The Zenith Back Bay Advisors Managed Series. Its investment objective is a
favorable total return through investment in a diversified portfolio.
The Zenith Westpeak Growth and Income Series. Its investment objective is
long-term total return through investment in equity securities.
The Zenith Goldman Sachs Midcap 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 their equivalents.
The Zenith Loomis Sayles Balanced Series. Its investment objective is reasonable
long-term investment return from a combination of long-term capital appreciation
and moderate current income.
The Zenith Morgan Stanley International Magnum Equity Series. Its investment
objective is long-term capital appreciation through investment primarily in
international equity securities. In addition to the risks associated with equity
securities generally, foreign securities present additional risks.
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 Series. Its investment objective is reasonable current
income and long-term growth of capital and income.
The Zenith MFS Research Managers Series. 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 seeks a yield which
exceeds the composite yield on the 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.
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.
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The Zenith Fund is an open-end diversified management investment company, more
commonly known as a mutual fund. The Zenith Fund is an investment vehicle for
separate investment accounts of NELICO and of other life insurance companies.
VIP and VIP II are open-end, diversified management investment companies (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
The chart below shows the adviser and sub-adviser for each series of the Zenith
Fund. New England Investment Management, which is an indirect, wholly-owned
subsidiary of NELICO, CGM, and each of the sub-advisers are registered with the
SEC as investment advisers under the Investment Advisers Act of 1940.
SERIES ADVISER SUB-ADVISER
------ ------- -----------
Capital Growth Capital Growth Management Limited
Partnership ("CGM")
Back Bay Advisors Money Market New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Back Bay Advisors Bond Income New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Back Bay Advisors Managed New England Investment Management, Back Bay Advisors, L.P.*
Inc.
Westpeak Stock Index New England Investment Management, Westpeak Investment Advisors,
Inc. L.P.*
Westpeak Growth and Income New England Investment Management, Westpeak Investment Advisors,
Inc. L.P.*
Loomis Sayles Small Cap New England Investment Management, Loomis, Sayles & Company, L.P.*
Inc.
Loomis Sayles Balanced New England Investment Management, Loomis, Sayles & Company, L.P.*
Inc.
Morgan Stanley International New England Investment Management, Morgan Stanley Dean Witter
Magnum Equity Inc. Investment Management Inc.
Goldman Sachs Midcap Value New England Investment Management, Goldman Sachs Asset Management
Inc.
Davis Venture Value New England Investment Management, Davis Selected Advisers, L.P.**
Inc.
Alger Equity Growth New England Investment Management, Fred Alger Management, Inc.
Inc.
MFS Investors New England Investment Management, Massachusetts Financial Services
Inc. Company
MFS Research Managers New England Investment Management, Massachusetts Financial Services
Inc. Company
- ------------
* An affiliate of NELICO
** Davis Selected may also delegate any of its responsibilities to Davis
Selected Advisers--NY, Inc., a wholly-owned subsidiary of Davis Selected.
In the case of the Back Bay Advisors Money Market Series, Back Bay Advisors Bond
Income Series, Back Bay Advisors Managed Series, Westpeak Stock Index Series,
Westpeak Growth and Income Series, Goldman Sachs Midcap Value Series and Loomis
Sayles Small Cap Series, New England Investment Management (formerly TNE
Advisers, Inc.) became the adviser on May 1, 1995. The Morgan Stanley
International Magnum Equity Series' sub-adviser was Draycott Partners until May
1, 1997, when Morgan Stanley Dean Witter Investment Management (formerly Morgan
Stanley Asset Management) became the sub-adviser. The Goldman Sachs Midcap Value
Series' sub-adviser was Loomis, Sayles until May 1, 1998, when Goldman Sachs
Asset Management became the sub-adviser. For more information about the Series'
advisory agreements,
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see the Zenith Fund prospectus attached at the end of this prospectus and the
Zenith Fund's Statement of Additional Information.
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 Fidelity Management & Research Company, see the VIP and VIP II
prospectuses attached at the end of this prospectus and their Statements of
Additional Information.
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.
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 Fixed Account. Instead, we guarantee that the Fixed Account
will credit interest at an annual effective rate of at least 4%. 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.
We can change our Fixed Account interest crediting procedures. Currently, all
cash value in the Fixed Account on a Policy anniversary earns interest at the
declared annual rate in effect on the anniversary until the next Policy
anniversary, when it is credited with our current rate. (Although our current
practice is to credit your entire Fixed Account cash value on a Policy
anniversary with our current annual rate until the next anniversary, we can
select any portion, from 0% to 100%, of your Fixed Account cash value on a
Policy anniversary to earn interest at our current rate until the next Policy
anniversary, unless otherwise required by state law.) Any net premiums allocated
or cash value transferred to the Fixed Account on a date other than a Policy
anniversary earn interest at our current rate until the next Policy anniversary.
The effective interest rate is a weighted average of all the Fixed Account rates
for your Policy.
After the Policy has been in force for ten years, if we set an interest rate for
the Fixed Account that is higher than 4%, that rate will be increased for the
Policy by at least 0.45%.
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 surrenders 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 our
general account (but outside of the Fixed 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
We can restrict allocations and transfers to the Fixed Account if the effective
annual rate of interest on the amount would be 4%. Otherwise, the requirements
for Fixed Account and Variable Account allocations are the same. (See
"Allocation of Net Premiums".)
Except as described below, the Fixed Account has the same rights and limitations
about premium allocations, transfers, loans, surrenders and partial surrenders
as the Variable Account. (See "Other Policy Features".) The following special
rules apply to the Fixed Account.
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TRANSFERS FROM THE FIXED ACCOUNT TO THE VARIABLE ACCOUNT ARE ALLOWED ONLY ONCE
IN EACH POLICY YEAR. WE PROCESS A TRANSFER FROM THE FIXED ACCOUNT IF WE RECEIVE
THE TRANSFER REQUEST WITHIN 30 DAYS AFTER THE POLICY ANNIVERSARY. WE MAKE THE
TRANSFER AS OF THE DATE WE RECEIVE THE TRANSFER REQUEST AT OUR HOME OFFICE.
EXCEPT WITH OUR CONSENT, THE AMOUNT OF CASH VALUE YOU MAY TRANSFER FROM THE
FIXED ACCOUNT IS LIMITED TO THE GREATER OF 25% OF THE POLICY'S CASH VALUE IN THE
FIXED ACCOUNT ON THE TRANSFER DATE OR THE AMOUNT OF CASH VALUE TRANSFERRED FROM
THE FIXED ACCOUNT IN THE PRECEDING POLICY YEAR. Regardless of these limits, if a
transfer of cash value from the Fixed Account would reduce the remaining cash
value in the Fixed Account below $100, you may transfer the entire amount of
Fixed Account cash value. The total number of transfers among sub-accounts and
from the sub-accounts to the Fixed Account may not exceed four in one Policy
year without our consent. We currently do not limit the number of these
transfers in a Policy year.
Unless you request otherwise, a Policy loan reduces the Policy's cash value in
the sub-accounts and not the Fixed Account. If there is not enough cash value in
the Policy's sub-accounts for the loan, we take the balance from the Fixed
Account. We allocate all loan repayments first to the outstanding loan balance
attributable to the Fixed Account. The amount removed 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 4% per year, which we credit annually 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 surrenders only from the Policy's
sub-accounts and not the Fixed Account. If there is not enough cash value in the
Policy's sub-accounts for the partial surrender, we take the balance from the
Fixed Account.
We can delay transfers, surrenders, 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.
NELICO'S DISTRIBUTION AGREEMENT
We sell the Policies through licensed insurance agents. These agents are also
registered representatives of New England Securities Corporation ("New England
Securities"). 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 and is a member
of the National Association of Securities Dealers, Inc.
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 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.
We pay the following commissions and/or service fees to the selling agent: a
maximum of 50% of the Target Premium paid in the first Policy year; 5% in Policy
years two through ten; and 3% thereafter. Agents receive a commission of 3% of
each payment in excess of the Target Premium in any year. Agents may elect to
receive commissions equal to a maximum of .16% of cash value, instead of
premium-based compensation, beginning in Policy year 11. Agents who meet certain
NELICO productivity and persistency standards may be eligible for additional
compensation.
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. Under the agreements with those broker-dealers, commissions paid to
the broker-dealer on behalf of the registered representative will not exceed
. 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 also pay additional
compensation to the broker dealer and/or reimburse it for portions of Policy
sales expenses.
LIMITS TO NELICO'S RIGHT TO CHALLENGE THE POLICY
NOTIFICATION OF FIRST DEATH
Generally, we can challenge the validity of your Policy or a rider during either
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 either insured's lifetime)
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from the premium payment. However, if either 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 relating to that insured.
You should notify us immediately upon the first death of an insured under the
Policy. Even if premiums continue to be paid after the first death, we generally
can contest the Policy or limit benefits under the suicide provision (described
below) and terminate the Policy at any time, even beyond the two-year period, if
we were not notified of a death that occurred during the period of
contestability. Policies issued in New York are not contestable after they have
been in force for two years during the life of either insured.
MISSTATEMENT OF AGE OR SEX
If either insured's age or sex is misstated in the application, the Policy's
death benefit is the amount that the most recent Monthly Deduction which was
made would provide, based on the insureds' correct ages and, if the Policy is
sex-based, correct sexes.
SUICIDE
If either of the insureds dies by 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 policy loan balance and partial surrenders (more in some states).
The Policy will terminate as of the date of the first death by suicide.
An eligible insured, if age 75 or younger, can request a new single life
variable life insurance policy, with the same face amount as the original
Policy, within 60 days of the date of the suicide. An eligible insured over age
75 may request a single life ordinary (not variable) life policy. Contact us or
your registered representative for more information.
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income tax
considerations associated with the Policies 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 advisors 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 it is reasonable to
conclude that the Policies will satisfy the applicable requirements. If it is
subsequently determined that a Policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the Policy into compliance
with such 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 the
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
payments 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 Policies.
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.
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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 advisor
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. When distributions from a
Policy occur, or when loans are taken out 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 at any time below the
lowest level of death benefit provided during the first seven Policy years, for
example, as a result of a partial surrender, 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 advisor 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.
(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.
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.
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 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.
Before taking out a Policy loan, you should consult a tax adviser as to the tax
consequences.
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35
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.
TAX TREATMENT OF POLICY SPLIT. The policy split rider permits a Policy to be
split into two individual Policies. It is not clear whether exercising the
policy split rider will be treated as a taxable transaction or whether the
individual Policies that result would be classified as Modified Endowment
Contracts. A competent tax advisor should be consulted before exercising the
policy split rider.
OTHER POLICY OWNER TAX MATTERS. Federal and state estate, inheritance,
transfer, and other tax consequences depend on the individual circumstances of
each Policy Owner or beneficiary.
The tax consequences of continuing the Policy beyond the insured's 100th year
are unclear. You should consult a tax adviser if you intend to keep the Policy
in force beyond the insured's 100th year.
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 to, or the designation as a beneficiary of, 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. The
individual situation of each Policy Owner or beneficiary will determine the
extent, if any, to which federal, state, and local transfer and inheritance
taxes may be imposed and how ownership or receipt of Policy proceeds will be
treated for purposes of federal, state and local estate, inheritance, generation
skipping and other taxes.
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 (generally referred to as the "P.S. 58" 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 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 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.
We believe that Policies subject to Puerto Rican tax law will generally receive
treatment similar, with certain modifications, to that described above. Among
other differences, Policies governed by Puerto Rican tax law are not currently
subject to the rules described above regarding Modified Endowment Contracts. You
should consult your tax adviser with respect to Puerto Rican tax law governing
the Policies.
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.
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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 company Federal income taxes. (We do deduct a charge for
Federal taxes from premiums.) We reserve the right to charge the Variable
Account for any future Federal income taxes we may incur.
Under current laws 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.
MANAGEMENT
The directors and executive officers of NELICO and their principal business
experience during the past five years are:
DIRECTORS OF NELICO
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.;
President and Chief Operating Officer 1994-1996 of
Equitable Life Assurance Society.
Robert H. Benmosche............... Director of NELICO since 1998 and Chairman, President and
Metropolitan Life Insurance Co. Chief Executive Officer of Metropolitan Life Insurance
One Madison Avenue Company since 1998; formerly, Director, President and
New York, New York 10010 Chief Operating Officer 1997-1998; Executive Vice
President 1995-1997 of Metropolitan Life; Executive Vice
President 1989-1995 of Paine Webber.
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
RR Box 67-15 SLM Holdings since 1997; formerly, Director 1994-1996 of New
Harborside, ME 04642 England Mutual.
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
Howard, Smith & Levin LLP Howard, Smith & Levin LLP 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,
1345 Avenue of the Americas Inc.; Director and Executive Vice President 1993-1995 of
New York, NY 10105 Burlington Menswear Division.
Thomas J. May..................... Director of NELICO since 1996 and Chairman, President and
Boston Edison Company Chief Executive Officer of Boston Edison Company since 1994;
800 Boylston Street formerly, Director 1994-1996 of New England Mutual.
Boston, MA 02199
Stewart G. Nagler................. Director of NELICO since 1996 and Vice Chairman of Board and
Metropolitan Life Insurance Co. Chief Financial Officer of Metropolitan Life Insurance
One Madison Avenue Company since 1998; formerly, Senior Executive Vice
New York, NY 10010 President and Chief Financial Officer 1986-1998 of
Metropolitan Life Insurance Company.
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NAME AND PRINCIPAL PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS DURING THE PAST FIVE YEARS
------------------ -----------------------------
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 Insurance Company since 1999; formerly, Senior Executive
700 Quaker Lane Vice President 1998-1999; Executive Vice President
Warwick, RI 02887 1989-1998 of Metropolitan Life Insurance Company.
Rand N. Stowell................... Director of NELICO since 1996 and President of United Timber
P.O. Box 60 Corp. of Weld, Maine; formerly, Director 1990-1996 of New
Weld, ME 04285 England Mutual.
Alexander B. Trowbridge........... Director of NELICO since 1996 and President of Trowbridge
Trowbridge Partners Inc. Partners, Inc. in Washington, DC; formerly, Director
1317 F Street, NW, Suite 500 1983-1996 of New England Mutual.
Washington, D.C. 20004
EXECUTIVE OFFICERS OF NELICO
OTHER THAN DIRECTORS
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; formerly, Senior
Vice President 1994-1996 of New England Mutual.
A. Frank Beaz..................... Executive Vice President of NELICO since 1999; formerly,
Senior Vice President 1998-1999 of NELICO; Chief
Administrative Officer and Senior Vice President 1997-1998
of Equitable Distributors and Senior Vice President
1994-1997 of the Equitable Life Insurance Companies.
Pauline V. Belisle................ Senior Vice President of NELICO since 1996; formerly, Senior
Vice President 1994-1996 of New England Mutual.
Mary Ann Brown.................... President, New England Products and Services (a business
unit of NELICO) since 1998; 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 (a business unit of
NELICO) and Chief Information Officer since 1998; formerly,
Senior Vice President 1996-1998 of NELICO; Senior Vice
President 1995-1996 and Vice President 1994-1995 of New
England Mutual.
Anne Marie Faria.................. Senior Vice President of NELICO since 1996; formerly, Vice
President 1990-1996 of New England Mutual.
Thom A. Faria..................... President, Career Agency System (a business unit of NELICO)
since 1996; formerly, Executive Vice President in 1996,
Senior Vice President 1993-1996 of New England Mutual.
Anne M. Goggin.................... Senior Vice President and Associate General Counsel of
NELICO since 1997; formerly, Vice President and Counsel of
NELICO in 1996, Vice President and Counsel 1994-1996 of
New England Mutual.
Daniel D. Jordan.................. Second Vice President, Counsel, Secretary and Clerk since
1996; formerly, Counsel and Assistant Secretary 1990-1996 of
New England Mutual.
Alan C. Leland, Jr................ Senior Vice President of NELICO since 1996; formerly, Vice
President 1984-1996 of New England Mutual.
George J. Maloof.................. Senior Vice President of NELICO since 1996; formerly, Vice
President 1991-1996 of New England Mutual.
Kenneth D. Martinelli............. Senior Vice President of NELICO since 1999; formerly, Vice
President 1997-1999 of NELICO and Vice President 1994-1997
of The Equitable Life Assurance Company.
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; formerly, Vice
President 1994-1999 of Manufacturers Life Insurance Company
of North America.
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PRINCIPAL BUSINESS EXPERIENCE
NAME DURING THE PAST FIVE YEARS
---- -----------------------------
Stephen J. McLaughlin............. Senior Vice President of NELICO since 1999; formerly, Vice
President 1996-1999 of NELICO and Vice President 1994-1996
of New England Mutual.
Thomas W. Moore................... Senior Vice President of NELICO since 1996; formerly, Vice
President 1990-1996 of New England Mutual.
Richard A. Robinson............... Second Vice President and chief accounting officer of NELICO
since 1998; formerly, Second Vice President 1997-1998 of
NELICO; Manager of Life Insurance Accounting 1994-1997 of
Liberty Life Assurance Company.
David Y. Rogers................... Executive Vice President and Chief Financial Officer of
NELICO since 1999; formerly, Partner, Actuarial Consulting
1992-1999 of Price Waterhouse Coopers LLP.
John G. Small, Jr................. President, New England Services (a business unit of NELICO)
since 1997; formerly, Senior Vice President 1996-1997 of
NELICO and Senior Vice President 1990-1996 of New England
Mutual.
H. James Wilson................... Executive Vice President and General Counsel of NELICO since
1996; formerly, Executive Vice President and General Counsel
1993-1996 of New England Mutual.
John W. Wright.................... President, New England Financial Employee Benefits Group (a
business unit of NELICO) since 1996; formerly, President
1993-1996 of New England Employee Benefits Group (a
business unit of New England Mutual).
The principal business address for each of the directors and officers is the
same as NELICO's except where indicated.
Like all financial services providers, we utilize systems that may be affected
by Year 2000 transition issues and we rely on a number of third parties,
including banks and investment managers, that also may be affected. We and our
affiliates have developed, and are in the process of implementing, a Year 2000
transition plan. We are also confirming that service providers are also so
engaged. The resources being devoted to this effort are substantial. We cannot
predict whether the resources being devoted, or the outcome of these efforts,
will have any negative impact. If we or our service providers or the Eligible
Funds are not successful in the Year 2000 transition, computer systems could
fail or erroneous results or delays could occur when processing information
after December 31, 1999. However, as of the date of this prospectus, we do not
anticipate that you will experience negative effects on your investment, or on
the Policy services provided, as a result of Year 2000 transition
implementation. Currently we have converted our systems to be Year 2000
compliant and are conducting systems testing and compliance verification.
Service providers may not have anticipated every step necessary to avoid any
adverse effect on the Variable Account attributable to Year 2000 transition.
VOTING RIGHTS
We own the 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 all 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. 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. 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.
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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 invest sub-account assets as a substitute for Eligible Fund
shares, to close a sub-account, 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; and (5) to deregister the Variable Account under the Investment Company
Act of 1940. 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.
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 to request
current information about your Policy values, to change or update Policy
information such as your address, billing mode, beneficiary or ownership, or to
request Policy loans of less than $25,000. Requests must be in writing if the
Policy is owned by a corporation or a pension trust.
For all other Policy changes, please contact your registered representative.
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.
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 set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
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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 H. James Wilson, General Counsel of NELICO. Sutherland Asbill
& Brennan LLP, of Washington, D.C., has provided advice on certain matters
relating to the 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 Rodney J.
Chandler, 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.
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APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS,
CASH VALUES, NET CASH VALUES AND ACCUMULATED SCHEDULED PREMIUMS
The tables in Appendix A illustrate the way the Policies work. They show how the
death benefit, net cash 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
face amounts of $250,000 and $1,000,000 and the Option 1 death benefit for a
male and a female, both aged 55. The insureds are each assumed to be in the
nonsmoker aggregate risk classification for the $250,000 face amount and the
nonsmoker preferred risk classification for the $1,000,000 face amount. The
Tables assume no rider benefits. Values are first given based on current
mortality and other Policy charges and then based on guaranteed mortality and
other Policy charges.
The illustrated death benefits, net cash 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 surrender were made during the period of time
illustrated, if either or both insureds were 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, net cash values and cash values shown in the tables reflect:
(i) deductions from premiums for the sales charge and state and federal premium
tax charge; and (ii) a Monthly Deduction (consisting of a Policy fee, a
mortality and expense risk charge, an administrative charge, and a charge for
the cost of insurance) from the cash value on the first day of each Policy
month. The net cash values reflect a Surrender Charge that is deducted from the
cash value upon surrender, face reduction or lapse during the first 15 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 .76% of the average daily net assets of the Eligible Funds. This
average reflects voluntary expense cap and expense deferral arrangements between
New England Investment Management and the Zenith Fund that New England
Investment Management could terminate at any time.
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 -0.76%,
5.20%, and 11.15%, 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 net cash 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 net cash 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 insureds' age, sex, underwriting classification, and the death benefit
option and face amount or premium payment schedule requested. Where applicable,
we will also furnish on request an illustration for a Policy which is not
affected by the sex of the insureds.
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MALE AND FEMALE BOTH ISSUE AGE 55
$ ANNUAL PREMIUM FOR NON-SMOKER AGGREGATE UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
DEATH BENEFIT NET CASH 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 $
2
3
4
5
6
7
8
9
10
15
20
25
30
35
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH 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
2
3
4
5
6
7
8
9
10
15
20
25
30
35
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 NET
CASH 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-39
43
MALE AND FEMALE BOTH ISSUE AGE 55
$ ANNUAL PREMIUM FOR NON-SMOKER AGGREGATE UNDERWRITING RISK
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
DEATH BENEFIT NET CASH 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
2
3
4
5
6
7
8
9
10
15
20
25
30
35
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH 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 % % % % % %
2
3
4
5
6
7
8
9
10
15
20
25
30
35
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 NET
CASH 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-40
44
MALE AND FEMALE BOTH ISSUE AGE 55
$ ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
DEATH BENEFIT NET CASH 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...
2..
3..
4..
5..
6..
7..
8..
9..
10..
15..
20..
25..
30..
35..
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH 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... % % % % % %
2..
3..
4..
5..
6..
7..
8..
9..
10..
15..
20..
25..
30..
35..
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 NET
CASH 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-41
45
MALE AND FEMALE BOTH ISSUE AGE 55
$ ANNUAL PREMIUM FOR NON-SMOKER PREFERRED UNDERWRITING RISK
$1,000,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
DEATH BENEFIT NET CASH 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... $
2..
3..
4..
5..
6..
7..
8..
9..
10..
15..
20..
25..
30..
35..
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON NET CASH 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... % % % % % %
2..
3..
4..
5..
6..
7..
8..
9..
10..
15..
20..
25..
30..
35..
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 NET
CASH 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-42
46
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 January, 1994. The Zenith Fund and the Variable
Account commenced operations on August 26, 1983. The Westpeak Stock Index and
Back Bay Advisors Managed Series of the Zenith Fund commenced operations on May
1, 1987. The Westpeak Growth and Income Series and Goldman Sachs Midcap Value
Series of the Zenith Fund commenced operations on April 30, 1993. The Loomis
Sayles Small Cap Series commenced operations on May 2, 1994 and was made
available under the Policies on December 19, 1994. The remaining Zenith Fund
series shown in this Appendix commenced operations on October 31, 1994 and were
made available under the Policies in May 1996. The VIP Equity-Income Portfolio
and VIP Overseas Portfolio commenced operations on October 9, 1986 and January
28, 1987, respectively. 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 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-43
47
SUB-ACCOUNT INVESTING IN ZENITH FUND
ANNUAL NET RATE OF RETURN
-----------------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT ------------------------------------------------------------------------------------------------
- ----------- 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
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Capital Growth*......
Bond Income..........
Money Market.........
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
FOR ONE YEAR ENDING 8/26/83- 8/26/83-
SUB-ACCOUNT --------------------------------------------------------------- 12/31/98 12/31/98
- ----------- TOTAL EFFECTIVE
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- ---------
Capital Growth*......
Bond Income..........
Money Market.........
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
-------- -------- -------- -------- -------- -------- -------- -------- --------
Stock Index......................
Managed..........................
ANNUAL NET RATE OF RETURN
------------------------------
FOR ONE YEAR ENDING 5/1/87- 5/1/87-
SUB-ACCOUNT ------------------------------ 12/31/98 12/31/98
- ----------- TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 RETURN ANNUAL
-------- -------- -------- -------- ---------
Stock Index......................
Managed..........................
ANNUAL NET RATE OF RETURN
---------------------------------------------------------------
FOR ONE YEAR ENDING 4/30/93- 4/30/93-
SUB-ACCOUNT ---------------------------------------------------- 12/31/98 12/31/98
- ----------- 4/30/93- TOTAL EFFECTIVE
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- -------- ---------
Growth and Income.............
Midcap Value**................
ANNUAL NET RATE OF RETURN
----------------------------------------------------
FOR ONE YEAR ENDING 5/2/94- 5/2/94-
SUB-ACCOUNT ----------------------------------------- 12/31/98 12/31/98
- ----------- 5/2/94- TOTAL EFFECTIVE
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- ---------
Small Cap................................
ANNUAL NET RATE OF RETURN
-----------------------------------------------------
FOR ONE YEAR ENDING 10/31/94- 10/31/94-
SUB-ACCOUNT ----------------------------------------- 12/31/98 12/31/98
- ----------- 10/31/94- TOTAL EFFECTIVE
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
--------- -------- -------- -------- -------- --------- ---------
Equity Growth..........................
Balanced...............................
Venture Value..........................
International Magnum Equity***.........
- ------------
* Rates of return reflect the Capital Growth Series' former investment
advisory fee of .50% of average daily net assets for the period through
December 31, 1987 and its current advisory fee schedule thereafter.
** The Goldman Sachs Midcap Value Series' Sub-adviser was Loomis Sayles until
May 1, 1998, when Goldman Sachs Asset Management became the sub-adviser.
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.
*** The Morgan Stanley International Magnum Equity Series' sub-adviser was
Draycott Partners until May 1, 1997, when Morgan Stanley Dean Witter
Investment Management became sub-adviser.
SUB-ACCOUNTS INVESTING IN VIP
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
SUB-ACCOUNT -------------------------------------------------------------------------------------
- ----------- 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
-------- -------- -------- -------- -------- -------- -------- -------- --------
Equity-Income....................
ANNUAL NET RATE OF RETURN
-----------------------------------------
FOR ONE YEAR ENDING 10/9/86- 10/9/86-
SUB-ACCOUNT ----------------------------------------- 12/31/98 12/31/98
- ----------- TOTAL EFFECTIVE
12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
-------- -------- -------- -------- -------- ---------
Equity-Income....................
ANNUAL NET RATE OF RETURN
------------------------------------------------------------------------------------------------
FOR ONE YEAR ENDING
-------------------------------------------------------------------------------------
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.........................
ANNUAL NET RATE OF RETURN
------------------------------
FOR ONE YEAR ENDING 1/28/87- 1/28/87-
------------------------------ 12/31/98 12/31/98
TOTAL EFFECTIVE
12/31/96 12/31/97 12/31/98 RETURN ANNUAL
-------- -------- -------- -------- ---------
Overseas.........................
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
-------- -------- -------- -------- -------- -------- -------- -------- --------
High Income..............
ANNUAL RATE OF RETURN
----------------------------------------------------
FOR ONE YEAR ENDING 9/19/85- 9/19/85-
SUB-ACCOUNT ---------------------------------------------------- 12/31/98 12/31/98
- ----------- TOTAL EFFECTIVE
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
-------- -------- -------- -------- -------- -------- ---------
High Income..............
SUB-ACCOUNT INVESTING IN VIP II
ANNUAL NET RATE OF RETURN
--------------------------------------------------------------------------
FOR ONE YEAR ENDING
---------------------------------------------------------------
9/6/89-
SUB-ACCOUNT 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- -------- -------- -------- -------- -------- -------- --------
Asset Manager.....................
ANNUAL NET RATE OF RETURN
------------------------------
FOR ONE YEAR ENDING 9/6/89- 9/6/89-
------------------------------ 12/31/98 12/31/98
TOTAL EFFECTIVE
SUB-ACCOUNT 12/31/96 12/31/97 12/31/98 RETURN ANNUAL
- ----------- -------- -------- -------- -------- ---------
Asset Manager.....................
A-44
48
POLICY PERFORMANCE
The material below assumes a Policy was issued with (i) a $250,000 face amount
and (ii) a $1 million face amount and annual premiums of (i) $ and (ii)
$ paid on August 26 of each year (May 1 in the case of the Zenith Stock Index
and Managed Sub-Accounts; May 2 in the case of the Zenith Small Cap Sub-Account;
October 31 in the case of the Zenith Balanced, Zenith International Magnum
Equity, Zenith Venture Value and Zenith Equity Growth Sub-Accounts; October 9 in
the case of the Equity-Income Sub-Account, January 28 in the case of the
Oversees Sub-Account; April 30 in the case of the Zenith Growth and Income and
Zenith Midcap Value Sub-Accounts; September 19 in the case of the High Income
Sub-Account; September 6 in the case of the Asset Manager Sub-Account), to a
male and a female, both age 55 in (i) the nonsmoker aggregate risk category and
(ii) the nonsmoker preferred risk category. Both examples show an Option 1 death
benefit. 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. These illustrations of policy investment
experience also reflect all Policy charges based on NELICO's current rates. (See
Appendix A for the definition of the internal rate of return.)
$250,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
NONSMOKER AGGREGATE
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
August 26, 1983.......... $ -- --
December 31, 1983........ % --
December 31, 1984........ %
December 31, 1985........
December 31, 1986........
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-45
49
ZENITH BOND INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
August 26, 1983.......... $ -- --
December 31, 1983........ % --
December 31, 1984........ %
December 31, 1985........
December 31, 1986........
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
ZENITH MONEY MARKET SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
August 26, 1983.......... $ -- --
December 31, 1983........ % --
December 31, 1984........ %
December 31, 1985........
December 31, 1986........
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-46
50
ZENITH STOCK INDEX SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
May 1, 1987.............. $ -- --
December 31, 1987........ % --
December 31, 1988........ %
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
ZENITH MANAGED SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
May 1, 1987.............. $ -- --
December 31, 1987........ % --
December 31, 1988........ %
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
ZENITH GROWTH AND INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
April 30, 1993............ $ -- --
December 31, 1993......... % --
December 31, 1994......... %
December 31, 1995.........
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
A-47
51
ZENITH MIDCAP VALUE SUB-ACCOUNT**
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
April 30, 1993............ $ -- --
December 31, 1993......... % --
December 31, 1994......... %
December 31, 1995.........
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH SMALL CAP SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
May 2, 1994............... $ -- --
December 31, 1994......... % --
December 31, 1995......... %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH EQUITY GROWTH SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... -- --
December 31, 1995......... % %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH BALANCED SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... % --
December 31, 1995......... %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
A-48
52
ZENITH VENTURE VALUE SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... -- --
December 31, 1995......... % %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... % --
December 31, 1995......... %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
EQUITY-INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 9, 1986.......... $ -- --
December 31, 1986........ % --
December 31, 1987........ %
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-49
53
OVERSEAS SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
January 28, 1987......... $ -- --
December 31, 1987........ % --
December 31, 1988........ %
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
HIGH INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
September 19, 1985....... $ -- --
December 31, 1985........ % --
December 31, 1986........ %
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-50
54
ASSET MANAGER SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
September 6, 1989........ $ -- --
December 31, 1989........ % --
December 31, 1990........ %
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
- ------------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets for the period through April 30, 1998 and .75% thereafter.
$1,000,000 FACE AMOUNT
OPTION 1 DEATH BENEFIT
NONSMOKER PREFERRED
ZENITH CAPITAL GROWTH SUB-ACCOUNT*
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
August 26, 1983.......... $ -- --
December 31, 1983........ % --
December 31, 1984........ %
December 31, 1985........
December 31, 1986........
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-51
55
ZENITH BOND INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
August 26, 1983.......... $ -- --
December 31, 1983........ % --
December 31, 1984........ %
December 31, 1985........
December 31, 1986........
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
ZENITH MONEY MARKET SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
August 26, 1983.......... $ -- --
December 31, 1983........ % --
December 31, 1984........ %
December 31, 1985........
December 31, 1986........
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-52
56
ZENITH STOCK INDEX SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
May 1, 1987.............. $ -- --
December 31, 1987........ % --
December 31, 1988........ %
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
ZENITH MANAGED SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
May 1, 1987.............. $ -- --
December 31, 1987........ % --
December 31, 1988........ %
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
ZENITH GROWTH AND INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
April 30, 1993............ $ -- --
December 31, 1993......... % --
December 31, 1994......... %
December 31, 1995.........
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
A-53
57
ZENITH MIDCAP VALUE SUB-ACCOUNT**
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
April 30, 1993............ $ -- --
December 31, 1993......... % --
December 31, 1994......... %
December 31, 1995.........
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH SMALL CAP SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
May 2, 1994............... $ -- --
December 31, 1994......... % --
December 31, 1995......... %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH EQUITY GROWTH SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... -- --
December 31, 1995......... % %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH BALANCED SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... % --
December 31, 1995......... %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
A-54
58
ZENITH VENTURE VALUE SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... -- --
December 31, 1995......... % %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
ZENITH INTERNATIONAL MAGNUM EQUITY SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 31, 1994.......... $ -- --
December 31, 1994......... % --
December 31, 1995......... %
December 31, 1996.........
December 31, 1997.........
December 31, 1998.........
EQUITY-INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
October 9, 1986.......... $ -- --
December 31, 1986........ % --
December 31, 1987........ %
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-55
59
OVERSEAS SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
January 28, 1987......... $ -- --
December 31, 1987........ % --
December 31, 1988........ %
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
HIGH INCOME SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
September 19, 1985....... $ -- --
December 31, 1985........ % --
December 31, 1986........ %
December 31, 1987........
December 31, 1988........
December 31, 1989........
December 31, 1990........
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
A-56
60
ASSET MANAGER SUB-ACCOUNT
TOTAL MINIMUM VARIABLE INTERNAL RATE INTERNAL RATE
PREMIUMS DEATH DEATH CASH NET CASH OF RETURN ON OF RETURN ON
DATE PAID BENEFIT BENEFIT VALUE VALUE NET CASH VALUE DEATH BENEFIT
---- -------- -------- -------- ----- -------- -------------- -------------
September 6, 1989........ $ -- --
December 31, 1989........ % --
December 31, 1990........ %
December 31, 1991........
December 31, 1992........
December 31, 1993........
December 31, 1994........
December 31, 1995........
December 31, 1996........
December 31, 1997........
December 31, 1998........
- ------------
* Rates of return and Policy values and benefits shown reflect the Capital
Growth Series' investment advisory fee of .50% of average daily net assets
for the period through December 31, 1987 and its current advisory fee
schedule thereafter.
** Rates of return and Policy values and benefits shown reflect the Goldman
Sachs Midcap Value Series' investment advisory fee of .70% of average daily
net assets for the period through April 30, 1998 and .75% thereafter.
A-57
61
APPENDIX C
LONG TERM MARKET TRENDS
The information below compares of 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 54 20-year time periods beginning in 1926 and ending in 1998 (i.e.,
1926-1945, 1927-1946, and so on through 1979-1998):
- -- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 51 of the 54 periods.
- -- The average annual return of common stocks surpassed that of U.S. Treasury
bills in each of the 54 periods.
- -- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 54 periods.
Over the 44 30-year time periods beginning in 1926 and ending in 1998, 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 44 periods.
From 1926 through 1998 the average annual return for common stocks was 11.2%,
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)1999 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 1998.
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:
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................................. 27% 4% 11% 7% 11% 40%
5 years................................ 10% 14% 14% 31% 19% 12%
10 years............................... 3% 10% 33% 24% 28% 2%
20 years............................... 0% 6% 31% 54% 9% 0%
- ------------
Used with permission. (C)1999 Ibbotson Associates, Inc. All rights reserved.
[Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.]
A-58
62
APPENDIX D
USES OF SURVIVORSHIP LIFE INSURANCE
These are examples of ways the Policy can be used to address certain personal,
estate and business planning objectives.
ESTATE TAX PAYMENT
Federal estate taxes may be deferred for a married couple until the second
death. At that time, the estate tax liability may exceed 50% of a family's
estate. Survivorship life is especially suited to fund for this liability at the
second death.
EDUCATION AND SUPPORT OF CHILDREN
Often, parents will have enough insurance to provide for dependent children if
one of the parents dies but not enough to provide for them if both parents die.
Survivorship life can provide protection against extraordinary expenses if both
parents die while the children are dependent.
CHARITABLE GIVING
You can use life insurance to facilitate charitable giving, and survivorship
life is especially well suited for this purpose. Assets left to charity at death
can be deductible from a decedent's taxable estate. An individual may be
reluctant to give assets to charity if a surviving spouse may need support or if
the individual wants the children to receive the value of those assets.
Survivorship life can enable a client to defer the charitable gift until the
spouse dies. At the spouse's death, assets that otherwise would be subject to
estate tax can pass to charity. The policy's death benefit proceeds can pass
directly to the children, free of income and estate taxes, at the same time that
the assets in the spouse's estate pass to charity.
GIFTS TO GRANDCHILDREN
Grandparents can provide substantial gifts to grandchildren using survivorship
life. For very large estates, survivorship life can take advantage of exceptions
to the generation skipping tax to maximize the gifts grandchildren can receive.
BUSINESS USES
You can use survivorship life in business planning to provide benefits or
funding for replacement of key people, for buy-sell agreements and the like. The
policy can cover two owners, a parent and child active in the business, two
related or unrelated key executives, an executive and the executive's spouse,
etc. The policy can be used to accumulate cash to help fund a living buyout
under a buy-sell agreement or a deferred compensation plan for executives or for
directors.
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 net cash value to fund the
purpose for which you purchased the Policy. 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, surrenders or withdrawals, you should consult your tax
advisor about possible tax consequences. (See "Tax Considerations".)
A-59
63
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
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
Maximum Annual Distribution
Rules No No Yes Yes
Anti-discrimination Rules No No No Yes
- ------------
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-60
64
APPENDIX F
CASH VALUE ACCUMULATION TEST AND GUIDELINE PREMIUM 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 "cash value accumulation test" under Section 7702(a)(1) of the Internal
Revenue Code, or the "guideline premium test" under Section 7702(a)(2) of the
Internal Revenue Code, as selected by you when the Policy is issued. (See "Death
Benefit".)
For the cash value accumulation test, here are sample net single premium factors
for a male and female insured, both with an issue age of 55 and both in the
nonsmoker preferred risk class.
POLICY YEAR NET SINGLE PREMIUM FACTOR
----------- -------------------------
10........................................................
20........................................................
30........................................................
40........................................................
If the same insureds were both age 45 at issue, the net single premium factors
would be:
POLICY YEAR NET SINGLE PREMIUM FACTOR
----------- -------------------------
10........................................................
20........................................................
30........................................................
40........................................................
50........................................................
For the guideline premium test, here are the corridor factors.
TABLE I
AGE OF YOUNGER
INSURED AT START BASIC CORRIDOR ENHANCED CORRIDOR
OF THE POLICY YEAR FACTOR FACTOR
------------------ -------------- -----------------
20 through 40 2.50 2.50
41 2.43 2.43
42 2.36 2.36
43 2.29 2.29
44 2.22 2.22
45 2.15 2.15
46 2.09 2.09
47 2.03 2.03
48 1.97 1.97
49 1.91 1.91
50 1.85 1.85
51 1.78 1.78
52 1.71 1.71
53 1.64 1.64
54 1.57 1.57
55 1.50 1.50
56 1.46 1.46
57 1.42 1.42
58 1.38 1.38
59 1.34 1.34
60 1.30 1.30
61 1.28 1.28
62 1.26 1.26
63 1.24 1.24
64 1.22 1.22
65 1.20 1.20
66 1.19 1.19
67 1.18 1.18
68 1.17 1.17
69 1.16 1.16
70 1.15 1.15
AGE OF YOUNGER
INSURED AT START BASIC CORRIDOR ENHANCED CORRIDOR
OF THE POLICY YEAR FACTOR FACTOR
------------------ -------------- -----------------
71 1.13 1.13
72 1.11 1.11
73 1.09 1.09
74 1.07 1.07
75 1.05 1.05
76 1.05 1.05
77 1.05 1.05
78 1.05 1.05
79 1.05 1.05
80 1.05 1.05
81 1.05 1.10
82 1.05 1.15
83 1.05 1.20
84 1.05 1.25
85 1.05 1.30
86 1.05 1.35
87 1.05 1.40
88 1.05 1.45
89 1.05 1.50
90 1.05 1.50
91 1.04 1.50
92 1.03 1.50
93 1.02 1.50
94 1.01 1.50
95 1.01 1.50
96 1.01 1.40
97 1.01 1.30
98 1.01 1.20
99 1.01 1.10
100 1.00 1.00
A-61
65
NEW ENGLAND LIFE INSURANCE COMPANY
501 BOYLSTON STREET
BOSTON, MA 02116
RECEIPT
This is to acknowledge receipt of a Zenith Survivorship Life Prospectus dated
, 1999. This Variable Life Policy is offered by New England Life
Insurance Company.
- ----------------------------------------------------- -----------------------------------------------------
(Date) (Client's Signature)
66
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
67
REPRESENTATIONS
New England Life Insurance Company hereby represents that the fees and
charges deducted under the flexible premium adjustable variable survivorship
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:
The 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 62 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:
H. James Wilson, Esq. (see Exhibit 3(i) below)
(to be filed by amendment)
Rodney J. Chandler, F.S.A., M.A.A.A.
(see Exhibit 3(ii))(to be filed by amendment)
Sutherland Asbill & Brennan LLP
(see Exhibit 6 below)(to be filed by amendment)
Independent Auditor (see Exhibit 11 below)
(to be filed by amendment)
The following exhibits:
1.A. (1) January 31, 1983 resolution of the Board of
Directors of NEVLICO *
(2) None
(3)(a) Distribution Agreement between NEVLICO and NELESCO**
II - 2
68
(b)(i) Form of Contract between NELICO and its
General Agents *
(ii) Form of contract between NELICO and its
Agents **
(c) Commission Schedule for Policies (to be filed
by amendment)
(d) Form of contract among NES, NELICO and
other broker dealers ####
(4) None
(5) (a) Two Specimens of Policy, including
the Application
(b) Additional Application *
(b) Riders to Policy (to be filed by amendment)
(c) Split Option Rider ***
(6) (a) Amended and restated Articles of
Organization of NELICO ###
(b) Amended and restated By-Laws of NELICO ####
(c) Amendments to the Amended and restated
Articles of Organization +++
(7) None
(8) None
(9) None
2. See Exhibit 3(i)
3.(i) Opinion and Consent of H. James Wilson,
Esquire (to be filed by amendment)
(ii) Opinion and Consent of Rodney J. Chandler,
F.S.A., M.A.A.A. (to be filed by
amendment)
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
(to be filed by amendment)
7.(i) Powers of Attorney ###
(ii) Power of Attorney for James M. Benson, Robert
H. Benmosche and Catherine A. Rein +
(iii) Power of Attorney for David Y. Rogers and
Richard Robinson ++
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consent of Independent Auditor (to be filed by
amendment)
12. Schedule for computation of performance
quotations **
II - 3
69
13. (i) Consolidated memorandum describing certain
procedures, filed pursuant to Rule
6e-2(b)(12)(ii) and
Rule 6e-3(T)(b)(12)(iii) **
(ii) Addendum to Consolidated memorandum
describing certain procedures, filed
pursuant to Rule 6e-3(T)(b)(12)(iii) ##
(iii) Second Addendum to Consolidated Memorandum ++++
14. (i) Participation Agreement among
Variable Insurance Products Fund,
Fidelity Distributors Corporation and
New England Variable Life Insurance
Company **
(ii) Amendment No. 1 to Participation Agreement
among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New
England Variable Life Insurance Company #
(iii) Participation Agreement among Variable
Insurance Products Fund II, Fidelity
Distributors Corporation and New England
Variable Life Insurance Company #
-----------
# 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.
## Incorporated herein by reference to Post-Effective Amendment No. 6 to
the Variable Account's Form S-6 Registration Statement, File No.
33-66864, filed April 26, 1996.
### Incorporated herein by reference to the Variable Account's Form S-6
Registration Statement, File No. 333-21767, filed February 13, 1997.
#### Incorporated herein by reference to Pre-Effective Amendment No. 1 to
the Variable Account's Form S-6 Registration Statement, File No.
333-21767, filed July 16, 1997.
* 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.
** 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.
II - 4
70
*** Incorporated herein by reference to Post Effective Amendment No. 10 to
the Variable Account's Form S-6 Registration Statement, File No.
33-66864, filed April 30, 1998.
+ Incorporated herein by reference to Pre-Effective Amendment No. 1 to
the Variable Account's Form S-6 Registration Statement, File No.
333-46401, filed July 9, 1998.
++ 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.
+++ 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.
++++ 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.
II - 5
71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, New England Variable Life Separate Account, has duly caused this
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 20th day of
October, 1999.
New England Variable Life Separate Account
(Registrant)
By: New England Life Insurance Company
(Depositor)
By: /s/ H. James Wilson
--------------------------------------
H. James Wilson
Executive Vice President and
General Counsel
Attest:
/s/ Marie C. Swift
- ----------------------------------
Marie C. Swift
72
Pursuant to the requirements of the Securities Act of 1933, New England
Life Insurance Company has duly caused this 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 20th day of October, 1999.
New England Life Insurance Company
(Seal)
Attest: /s/ Marie C. Swift By: /s/ H. James Wilson
- ---------------------------------- -------------------------------------
Marie C. Swift H. James Wilson
Executive Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on October 20, 1999.
* Chairman, President and
- ------------------------------------- Chief Executive Officer
James M. Benson
* Director
- -------------------------------------
Robert H. Benmosche
* 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
73
* Director
- -------------------------------------
Catherine A. Rein
* Second Vice President and
- ------------------------------------- Chief Accounting Officer
Richard A. Robinson
* Executive Vice President and
- ------------------------------------- Chief Financial Officer
David Y. Rogers
* Director
- -------------------------------------
Rand N. Stowell
* Director
- -------------------------------------
Alexander B. Trowbridge
By: /s/ Anne M. Goggin
-------------------------
Anne M. Goggin, Esq.
Attorney-in-fact
* Executed by Anne M. Goggin, Esquire on behalf of those indicated pursuant to
powers of attorney filed with the Variable Account's Form S-6 Registration
Statement, File No. 333-21767, on February 13, 1997, Pre-Effective
Amendment No. 1 to the Variable Account's Form S-6 Registration Statement,
File No. 333-46401, on July 9, 1998, and Post-Effective Amendment No. 4 to
the Variable Account's Form S-6 Registration Statement, File No. 33-88082,
on January 20, 1999.
74
EXHIBIT LIST
SEQUENTIALLY
EXHIBIT NUMBER TITLE NUMBERED PAGE*
- -------------- ----- --------------
1.A.5.(a) Two Specimens of Policy,
including the Application
- ---------
* Page numbers inserted on manually-signed copy only.